When Chelsea Therapeutics International Ltd. (NASDAQ: CHTP) announced that the U.S. Food & Drug Administration was going to allow the company to submit its market approval application for Northera using the existing study data, it was obviously going to be a great day. Shares gapped up higher, but they kept going. Usually when you see a stock, particularly in biotech, up this much it is on buyout news of some sort.

Chelsea’s management telegraphed that Northera’s approval application will be filed during the second quarter. The company also said that it expects to hear official word from the FDA panel by the end of this year. Northera was designed to treat a condition known as neurogenic orthostatic hypotension, which in street terms is when your blood pressure drops massively upon standing up. Chelsea has its future bet on this drug as it is the furthest under development and the company has no products nor significant revenues.

The basis for the change of heart was short-term improvements in treating dizziness and off-balance falls in Parkinson’s Disease patients. The prior report from the FDA was that Northera study results did not show enough evidence for approval. It was only about two months ago that Chelsea said Northera was more effective than placebo only to reverse course a week or so later by saying the results were not statistically significant. The FDA had asked the company almost a year ago to conduct another study.

After such large gains, investors need to understand that there is a risk here outside of the formal approval or non-approval. The company could still have to conduct longer-term studies to show long-term benefits for patients, although we have no knowledge of whether or not that will be the case. We would also note that many different drugs for various new treatments are given approval to begin marketing and after-market studies are often mandated by the FDA or other regulatory agencies elsewhere.

After closing at $0.77 on Tuesday, the stock opened up 67% at $1.29. The stock is generally too small to cover, but shares ticked up almost in a stair-step action all day and are now up 165% at $2.00 on almost 29 million shares shortly;y before the close.

Chelsea Therapeutics shares trade less than 1 million shares per day and the 52-week range is $0.70 to $4.40 for this stock.

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