Chelsea Therapeutics International Ltd said U.S. health regulators recommended an additional trial for its rejected hypotension drug Northera, further delaying the launch of the treatment and sending its shares down 52 percent.
Chelsea's stock has taken a beating after Northera was rejected by the U.S. Food and Drug Administration in March, and the company's rheumatoid arthritis drug failed a mid-stage trial in May.
Another trial would require Chelsea to raise additional cash and find a partner, according to Wedbush Securities analyst Liana Moussatos.
Chelsea ended the January-March quarter with $51.7 million in cash and cash equivalents, and Moussatos expects this cash to run out by the second quarter of 2013.
"After talking with management, I am less negative about the potential delay for resubmitting the Northera application," Moussatos said.
Chelsea was hoping to pitch a modified proposal using data from an ongoing trial, named Study 306B, to support the resubmission of its marketing application. However, the FDA on Tuesday deemed the revised proposal insufficient.
Analyst Moussatos, who earlier estimated that a new trial would push back resubmission by two years, said Chelsea could save time by modifying the design of the ongoing 306B trial and proposing a new trial to be conducted post-approval.
However, Roth Capital Partners analyst Scott Henry delayed his expectation for the drug's launch by a year to 2015, and cut his price target on the stock to $2.25 from $3.50 per share.
Chelsea's shares fell 53 percent in early trade to a low of 70 cents, their steepest single-day percentage drop in about three years.
The stock, which was trading at 87 cents around midday, last traded below the $1 level in the first few months after it was listed on the Nasdaq.
Nothera is the most advanced clinical candidate of Chelsea, which does not have any approved products.
Officers of the company last month agreed to take a cut in their compensation to contain costs to pitch the drug for approval again, underscoring Northera's importance for the company.
The drug is designed to treat symptomatic neurogenic orthostatic hypotension, or a chronic drop in blood pressure on standing up that is most often associated with Parkinson's disease.
FDA, in a letter to the company, said that it could not be entirely sure that the analysis of Study 306B was not influenced by the original study on the drug.
"The FDA therefore believes that as presently planned, Study 306B is unlikely to provide sufficient confirmatory evidence to support a Northera marketing application," Chelsea said in a statement.
The company added that it is "currently evaluating several scenarios that may provide the supportive data the FDA is seeking."
The FDA had granted Northera an orphan drug status in 2007 and a priority review in November 2011.
(Reporting by Zeba Siddiqui in Bangalore; Editing by Roshni Menon)