Chelsea Therapeutics International, Ltd. (NASDAQ:CHTP) continued its way up on Friday with a large jump up in both price and volume. It looks like the biotechnology stock is climbing up recently on the failure of some competitors.Chelsea_Therapeutics.jpg

A day after the latest press release by the company, the trading volume for CHTP exploded. Over 3.1 million shares were traded, more than ten times the previous day’s volume and the average volume for the stock. On Thursday, the company announced a new Phase II clinical study focused on chronic fatigue syndrome for its lead product candidate Droxidopa. The positive reaction of the market resulted in a 13.09% jump up in the share price, which closed the market at $4.09.

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Though, it seems that CHTP got on the buy list of investors in the beginning of last week. Then, the FDA announced a proposition to pull Midodrine, currently the only FDA-approved drug for the treatment of Orthostatic Hypotension, from the market due to the lack of proven evidence on the drug’s benefit. Thus, the expected losses of the other pharmaceutical companies selling Midodrine and versions of it may eventually turn into huge profits for CHTP on the long run. For the stock, however, the profits are already now to be seen.

CHTP is still in the development stage and has no revenues yet. Droxidopa, the most advanced product candidate of the company, is primarily developed for the treatment of symptomatic neurogenic orthostatic hypotension (NOH) and is approved for that indication in Japan. After some of the studies for the USA approval failed in September last year, the Phase III clinical trials continued under changed conditions.

But even if approval is received, CHTP does not expect the drug to be launched before 2012, while the research and development expenses will continue to grow.

Investors should therefore not ignore the high dilution risks. Last July the company declared its intentions to raise additional capital through selling 3 million shares of common stock. A controlled equity offering sales agreement was then announced in the beginning of last month, according to which the new shares shall be sold through an agent in ordinary brokers’ transactions at market prices.

Previously, in March this year, the company raised $18.2 million through the sale of another 6.7 million common shares plus warrants to purchase 2.3 million additional shares.