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Chelsea Therapeutics International Ltd. (NASDAQ: CHTP)

Chelsea Therapeutics International Ltd. (CHTP) is a development-stage pharmaceutical company that focuses on acquiring and developing products for the treatment of a variety of human diseases. As of December 31, 2008, the Company focused its drug development resources on two clinical-stage development projects: Droxidopa for symptomatic neurogenic orthostatic hypotension and other indications and its portfolio of non-metabolized antifolate compounds for the treatment of rheumatoid arthritis. It is developing Droxidopa, an orally active synthetic precursor of norepinephrine and its investigational product candidate, for the treatment of neurogenic orthostatic hypotension (NOH). In addition to Droxidopa, the Company is developing a portfolio of molecules for the treatment of various autoimmune/inflammatory diseases, including two clinical-stage product candidates: CH-1504 and CH-4051.

Chelsea Therapeutics International Ltd. was founded in 2002 and is headquartered in Charlotte, North Carolina.

Share Statistics (14-Dec-09)			FY 2007	FY 2008	% Chg	Q3 2008	Q3 2009	% Chg
Symbol	CHTP	Revenue, $Mn	0.0	0.0	0.0%	0.0	0.0	0.0%
Current price	$2.41	Gross marg.	n/a	n/a	n/a	n/a	n/a	n/a
52wk Range:	$1.13-7.51	Oper. margin	-n/m	-n/m	n/a	-n/m	-n/m	n/a
Avg Vol (3m):	1,918,300	Net margin	-n/m	-n/m	n/a	-n/m	-n/m	n/a
Market Cap.	80.7M
Dil. Shares Outst.	33.5M	EPS, $	-0.66	-1.17	77.3%	n/a	-0.22	n/a

Source: Reuters.com, SEC Filings.

Financial Summary

CHTP reported a net loss for the three months ended September 30, 2009, of $7.1 million or ($0.22) per share versus a net loss of $10.1 million or ($0.34) per share for the same period in 2008. The net loss for the third quarter of 2008 included an impairment charge of $2.1 million, or ($0.07) per share related to student loan backed auction rate securities (ARS), excluding this 2008 impairment charge and on a non-GAAP basis, net loss of $7.1 million for the third quarter of 2009 compares to a net loss of $8.0 million or ($0.27) per share for the comparable prior year period.

For the first nine months of 2009, CHTP reported a net loss of $19.8 million or ($0.64) per share compared to a net loss of $26.1 million or ($0.87) per share for the first half of 2008. Excluding the 2008 ARS impairment charges and the associated gain in 2009, CHTP’s net loss, on a non-GAAP basis, of $24.2 million for the first nine months of 2009 increased by approximately $1.8 million from the net loss of $22.4 million for the prior-year period.

Research and development expenses for the third quarter 2009 were $5.4 million, compared to $7.0 million for the same period in 2008. Total research and development expenses decreased primarily as a result of decreased clinical activity resulting from our phase III program in neurogenic orthostatic hypotension nearing conclusion, the completion of CHTP’s phase II trial of Droxidopa in intradialytic hypotension, phase II evaluation of CH-1504 versus methotrexate in rheumatoid arthritis, and phase I trial of CH-4051. For the nine months ended September 30, 2009, research and development expenses of $20.0 million were in line $19.9 million for the comparable period in 2008.

Selling, general and administrative expenses of $1.7 million for the three months ended September 30, 2009, were up from $1.2 million in the third quarter 2008. Similarly, for the nine months ended September 30, 2009, selling, general and administrative expenses of $4.4 million increased $0.4 million over the $4.0 million reported for the first nine months of 2008.

CHTP ended the quarter with $30.1 million in cash and cash equivalents after using $22.6 million to fund operations through the first nine months of the year. This reflects a net increase of $8.5 million from December 31, 2008, resulting from the favorable ARS settlements and proceeds from a registered direct offering completed in July 2009, which, after deducting related expenses, resulted in gross proceeds of $12.4 million.

Financial Strength (14-Dec-2009)	Company	Industry	Sector	S&P 500
Quick Ratio (MRQ)	1.76	2.73	2.58	0.92
Current Ratio (MRQ)	1.76	3.20	3.08	1.90
Long-Term Debt to Equity (MRQ)	0.00	11.86	26.15	124.46
Total Debt to Equity (MRQ)	62.32	14.92	33.69	185.43

Source: Reuters.com, SEC Filings.

Analyst Consensus

Buy

Outperform

Hold

Underperform

Sell

No Opinion

This is the consensus forecast among 5 polled investment analysts. Against the Chelsea Therapeutics International Ltd. company.

Analyst Detail	Buy	Outperform	Hold	Underperform	Sell	No Opinion
Latest	4	0	1	0	0	0
4 weeks ago	4	0	1	0	0	0
2 months ago	4	0	1	0	0	0
3 months ago	4	0	1	0	0	0
Last year	4	0	1	0	0	0

The 4 analysts offering 12-month price targets for CHTP have a median target of 5.00, with a high estimate of 9.00 and a low estimate of 4.00. The median estimate represents a 118.34% increase from the last price of 2.29.

Source: www.ft.com

Consensus Estimates Analysis

	# of Estimates	Mean	High	Low	1 Year Ago
SALES (in millions)
Quarter Ending Dec-09	5	0.00	0.00	0.00	–
Year Ending Dec-09	5	0.00	0.00	0.00	0.00
Year Ending Dec-10	5	1.87	4.60	0.00	10.35
EARNINGS (per share)
Quarter Ending Dec-09	5	-0.23	-0.20	-0.25	–
Year Ending Dec-09	5	-0.90	-0.85	-1.03	-0.93
Year Ending Dec-10	4	-1.01	-0.84	-1.22	-1.07

Source: http://www.reuters.com/finance/stocks/financialHighlights?symbol=CHTP.W

Investment Highlights

CHTP yesterday announced that the FDA has agreed to allow the Company to modify the primary endpoint and enroll an additional 24 patients in Study 301, a pivotal phase III study of Droxidopa for the treatment of symptomatic neurogenic orthostatic hypotension (NOH).

The primary endpoint of the trial will now be the relative mean change in the Orthostatic Hypotension Questionnaire (OHQ) composite score between Droxidopa and placebo. The OHQ composite score is a single endpoint that reflects the average of the composite orthostatic hypotension symptom assessment (OHSA) score and the composite orthostatic hypotension daily activities scale (OHDAS) score. The FDA agreed that the revised primary endpoint reflects a more comprehensive global assessment of the clinical benefit of Droxidopa for the treatment of symptomatic NOH in primary autonomic failure, a heterogeneous population consisting of patients suffering from Parkinson’s Disease (PD), multiple system atrophy (MSA) and pure autonomic failure (PAF) and would therefore be suitable for supporting a symptomatic claim. To further de-risk the study and maximize the potential significance of the outcome, CHTP has decided to increase the power of the study to greater than 80% by randomizing an additional 24 patients into Study 301. The Company plans to reopen enrollment at select North American centers. Based on discussions with study investigators, historical rates of recruitment and the total patient requirement, CHTP anticipates that Study 301 will complete enrollment by the end of the second quarter 2010, allowing for top-line study data in the third quarter of 2010. The FDA confirmed that while Study 302, which failed to achieve statistical significance using only item 1 of the OHSA as a primary endpoint, and so could not be used as a pivotal study, it did provide valuable information about the benefits of Droxidopa. Both the safety and efficacy data from this study will be considered to be a supportive part of future regulatory filings. Further, the agency indicated that the number of patients already enrolled in CHTP’s pivotal program would be sufficient to support an NDA in this indication. Based on these recommendations, CHTP will to initiate a new clinical trial, Study 306, early in 2010. While final study protocols are still being finalized, the Company anticipates that a prospective study would seek to evaluate the efficacy of Droxidopa in approximately 35-45 PD patients with symptomatic NOH using the OHQ score as the primary endpoint. The Company anticipates that a trial of this scope could be completed by the end of 2010, allowing for an NDA filing in early 2011.

CHTP also recently announced that new data from a subgroup analysis of the 44 Parkinson’s disease (PD) patients enrolled in Study 302, a phase III withdrawal study of Droxidopa for the treatment of symptomatic neurogenic orthostatic hypotension (NOH), demonstrated a more robust response compared to the overall study population. Study investigators presented these data during a symposium at the XVIII WFN World Congress on Parkinson’s disease and Related Disorders in Miami.

Study 302 evaluated the efficacy and safety of Droxidopa, a pro-drug that results in increased body stores of norepinephrine, in 101 patients with symptomatic NOH. All patients in Study 302 were evaluated for functional and symptomatic improvement through multiple endpoints including the orthostatic hypotension questionnaire (OHQ). The OHQ is a global measure of disease activity consisting of a two-part questionnaire that includes the six-item orthostatic hypotension symptom assessment scale (OHSA) and the four-item orthostatic hypotension daily activities scale (OHDAS), along with corresponding OHSA, OHDAS and OHQ composite scores. Results from this subgroup analysis demonstrate that PD patients, all of whom were on concomitant Levodopa/dopa-decarboxylase inhibitors, showed the strongest therapeutic response to Droxidopa. PD patients receiving Droxidopa showed improvement over placebo on nine of the 10 individual items of the OHQ as well as all three composite measures.

On the four question OHDAS, the 44 PD patients on Droxidopa demonstrated a statistically significant improvement in their ability to perform activities of daily living that require standing for a short period of time (p<0.05), standing for a long time (p<0.01), and walking for a short time (p<0.05). This compares to the 101 total patients that only reported statistically significant improvements in activities that require standing for a short time (p<0.05) and standing for a long time (p<0.05). The marked improvements observed across each of the individual OHDAS variables resulted in a highly significant benefit as measured by both the OHDAS composite (p<0.005) and the OHQ composite (p=0.005) scores for PD patients receiving Droxidopa in Study 302.

Source: http://www.chelseatherapeutics.com/index.php

Technical Analysis

Source: http://stockcharts.com

CHTP is below its 50-day moving average. This bearish sign is even more significant because the moving average is also trending lower.

CHTP is trading within its Bollinger Bands. This is a normal condition and suggests that the stock is neither overbought nor oversold relative to the recent price action.

CHTP’s MACD is currently indicating a weak bullish signal. Although the MACD is trending above the signal line, the indicator is still below 0, which suggests that the underlying moving averages are bearish.

Comparative Analysis

Company Name	Ticker	Price per	Mrkt. Cap.	P/E		P/S
Nov-11-2009	symbol	Share, $	$ Mn	2009	2010	2009	2010
Abbott Laboratories	ABT	54.06	83.63B	14.65	n/a	2.78	n/a
Amgen Inc	AMGN	56.29	56.97B	12.28	n/a	3.95	n/a
Incyte Corp.	INCY	8.17	969.66M	n/a	n/a	287.38	n/a
Drug Manufacturers Median			47.18B	13.46	n/a	97.03	n/a
Chelsea Therapeutics Int’l Inc	CHTP	2.41	80.70M	n/a	n/a	n/a	n/a

Source: Thomson Financial

Insider Trading Activity

NET SHARES PURCHASE ACTIVITY Inside Purchases – Last 6 Months
	Shares	Transaction
Purchases	1,273,020	19
Sales	n/a	0
Net Shares Purchased (Sold)	1,273,020	19
Total Insider Shares Held	10.41M	n/a
% Net Shares Purchased (Sold)	13.9%	n/a

Net Institutional Purchases — Prior Qtr to Latest Qtr
	Shares
Net Shares Purchased (Sold)	(7,175,860)
% Change in Institutional Shares Held	(244.0%)

Source: Yahoo Finance

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