The Company, Basis of Presentation and Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2013

Organization, Consolidation and Presentation Of Financial Statements [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block]

1. The Company, Basis of Presentation and Summary of Significant Accounting Policies

The Company

Chelsea Therapeutics International, Ltd. (“Chelsea Ltd.” or the “Company”) is a development stage pharmaceutical company focused on the acquisition, development and commercialization of innovative pharmaceutical products. Specifically, the Company is developing Northera™ (droxidopa), a novel therapeutic agent for the treatment of symptomatic neurogenic orthostatic hypotension, or Neurogenic OH, in patients with primary autonomic failure, dopamine ß-hydroxylase, or DBH, deficiency and non-diabetic autonomic neuropathy. The Company also has an interest in evaluating other conditions and diseases in which it is hypothesized norepinephrine may play a role, including intradialytic hypotension, fibromyalgia and adult attention deficit hyperactivity disorder. The Company has also devoted resources to the development of pharmaceuticals for multiple autoimmune disorders, including rheumatoid arthritis, psoriasis, inflammatory bowel disease and cancer.

On February 18, 2014, the FDA granted accelerated approval of Northera for the treatment of symptomatic Neurogenic OH. Northera is the first and only therapy approved by the FDA which demonstrates symptomatic benefit in patients with Neurogenic OH. We anticipate that Northera sales will begin in the second half of 2014, at the earliest, and that it will be made available in 100 mg, 200 mg and 300 mg doses. The Northera approval was granted under the FDA’s accelerated approval program, which allows for conditional approval of a medicine that fills a serious unmet medical need, provided additional confirmatory studies are conducted. To this end, a large, multi-center, placebo-controlled, randomized withdrawal study, which includes a 4-week randomized withdrawal phase preceded by a three month open label run-in phase, designed with the goal of definitively establishing the durability of the clinical benefits of Northera, has been preliminarily agreed to with the FDA. The FDA has also agreed that a period of seven years to complete the study is acceptable, given the size of the study and orphan treatment population.

The Company’s operating subsidiary, Chelsea Therapeutics, Inc. (“Chelsea Inc.”), was incorporated in the State of Delaware on April 3, 2002 as Aspen Therapeutics, Inc., with the name changed in July 2004. In February 2005, Chelsea Inc. merged with a wholly-owned subsidiary of Chelsea Ltd.’s predecessor company, Ivory Capital Corporation (“Ivory”), a Colorado public company with no operations (the “Merger”). The Company reincorporated into the State of Delaware in July 2005, changing its name to Chelsea Therapeutics International, Ltd.

As a result of the Merger of Ivory and Chelsea Inc. in February 2005, and the reincorporation in Delaware in July 2005, Chelsea Ltd. is the reporting company and is the 100% owner of Chelsea Inc. The separate existence of Ivory ceased in connection with the Delaware reincorporation in July 2005. Except where the context provides otherwise, references to the “Company” and similar terms mean Ivory, Chelsea Ltd. and Chelsea Inc.

Basis of Presentation

Since inception, the Company has focused primarily on organizing and staffing, negotiating in-licensing agreements with partners, acquiring, developing and securing its proprietary technology, participating in regulatory discussions with the United States Food and Drug Administration, or FDA, the European Medicines Agency, or EMA and other regulatory agencies, undertaking preclinical trials and clinical trials of product candidates and raising capital. In addition, during late 2011 and early 2012, the Company conducted activities in preparation for the planned commercial launch of Northera but, upon receipt of the complete response letter, or CRL, from the FDA in March 2012, brought such activities to a close. In February 2014, upon the approval of Northera in the United States, the Company re-initiated such activities to support the commercial launch of Northera that is currently estimated to occur, at the earliest, in the second half of 2014. The Company is a development stage company and has generated no revenue since inception.

The Company has sustained operating losses since its inception and expects that such losses could continue for the foreseeable future. The Company remains focused on evaluating potential strategic opportunities that could include partnerships, out-licensing or the potential sale of the company. If successful in completing such an arrangement, the Company would not anticipate that capital resources in excess of those available at December 31, 2013 would be needed during 2014, if ever, recognizing that, depending on the nature of the strategic arrangement, its operations as an independent entity might cease. If the Company is unable to successfully complete a strategic transaction, additional sources of capital would need to be evaluated to pursue an independent launch of Northera. If the Company is unable to obtain additional sources of capital, the launch of Northera would need to be delayed or reduced in scope in order to extend its capital resources into early 2015.

Regardless of the successful completion of a potential strategic arrangement, the approval of Northera requires significant incremental spending in 2014 including a milestone payment made upon approval to the Company’s partner DSP, commencement of the post-approval confirmatory study as required by the FDA and building adequate infrastructure to support regulatory compliance requirements. In addition, the Company plans to manufacture an adequate commercial supply of Northera.

Additional sources of capital might include equity issuances, debt arrangements, strategic alliances or other arrangements of a collaborative nature. If adequate funds are not available, the Company may be required to delay, reduce the scope of, or eliminate one or more of its research or development programs, delay or scale back certain activities including its commercialization program, or limit or cease operations in which event its business, financial condition and results of operations would be materially harmed.

For presentation purposes, the Company has restated all information, where applicable, contained in this report related to shares authorized, issued and outstanding and related disclosures of weighted average shares and loss per share to reflect the results of the Delaware reincorporation in July 2005 as if the Delaware reincorporation had occurred at the beginning of each of the periods presented.

	For the years ended December 31,
	2013		2012		2011
Weighted-average risk-free interest rate	0.69	%	0.74	%	1.83	%
Weighted-average expected life of options	4.4 years		5 years		5 years
Expected dividend yield	0	%	0	%	0	%
Weighted-average expected volatility	105.48	%	89.73	%	87.82	%

The table below summarizes the compensation expense recorded by the Company for the years ended December 31, 2013, 2012 and 2011 in conjunction with option grants made to employees and non-employee directors:

	For the year ended December 31,
	2013		2012		2011
Stock-based compensation expense recorded during period	$	1,847,076	$	1,828,203	$	2,648,741
Total unrecognized compensation expense remaining	$	2,952,464	$	4,173,830	$	5,724,738
Remaining average recognition period (in years)		1.88		2.81		1.95

As a result of the Company’s restructuring activities, stock-based compensation recorded for the year ended December 31, 2012 reflects the reversal of stock compensation expense for unvested options that were forfeited during the period and the impact of option modifications made for former executives and former Board members as a component of their resignations. The expected future amortization expense for unrecognized compensation expense for stock option grants to employees and non-employee directors at December 31, 2013 is as follows:

Year ending December 31, 2014	$	1,731,814
Year ending December 31, 2015		876,035
Year ending December 31, 2016		290,407
Year ending December 31, 2017		54,208
	$	2,952,464

Although no such grants have been made by the Company since 2005 (none of which remain outstanding as of December 31, 2013), option awards to consultants, advisors or other independent contractors are granted with an exercise price equal to the market price of the Company’s stock at the date of the grant, have 10-year contractual terms and vest dependent upon the completion of performance commitments. As such, the value of stock options is measured at the then-current market value as of financial reporting dates and compensation cost is recognized for the net change in the fair value of the options for the reporting period, until such performance commitments are met. Once each commitment is met, the options that vest in association with that commitment are adjusted, for the last time, to the then-current fair value and compensation cost is recognized accordingly. No expense related to third-party grants were recognized during 2013, 2012 or 2011.

In determining the fair value of options granted to consultants, advisors and other independent contractors, the Company uses the Black-Scholes closed-form option valuation model in a manner consistent with its use in determining the fair value of options granted to employees and directors. However, the expected life of the options is based on the contractual lives as defined in agreements with the third parties.

	For the years ended December 31,
	2013		2012		2011
Weighted-average risk-free interest rate	0.69	%	0.74	%	1.83	%
Weighted-average expected life of options	4.4 years		5 years		5 years
Expected dividend yield	0	%	0	%	0	%
Weighted-average expected volatility	105.48	%	89.73	%	87.82	%

The table below summarizes the compensation expense recorded by the Company for the years ended December 31, 2013, 2012 and 2011 in conjunction with option grants made to employees and non-employee directors:

	For the year ended December 31,
	2013		2012		2011
Stock-based compensation expense recorded during period	$	1,847,076	$	1,828,203	$	2,648,741
Total unrecognized compensation expense remaining	$	2,952,464	$	4,173,830	$	5,724,738
Remaining average recognition period (in years)		1.88		2.81		1.95

As a result of the Company’s restructuring activities, stock-based compensation recorded for the year ended December 31, 2012 reflects the reversal of stock compensation expense for unvested options that were forfeited during the period and the impact of option modifications made for former executives and former Board members as a component of their resignations. The expected future amortization expense for unrecognized compensation expense for stock option grants to employees and non-employee directors at December 31, 2013 is as follows:

Year ending December 31, 2014	$	1,731,814
Year ending December 31, 2015		876,035
Year ending December 31, 2016		290,407
Year ending December 31, 2017		54,208
	$	2,952,464

Although no such grants have been made by the Company since 2005 (none of which remain outstanding as of December 31, 2013), option awards to consultants, advisors or other independent contractors are granted with an exercise price equal to the market price of the Company’s stock at the date of the grant, have 10-year contractual terms and vest dependent upon the completion of performance commitments. As such, the value of stock options is measured at the then-current market value as of financial reporting dates and compensation cost is recognized for the net change in the fair value of the options for the reporting period, until such performance commitments are met. Once each commitment is met, the options that vest in association with that commitment are adjusted, for the last time, to the then-current fair value and compensation cost is recognized accordingly. No expense related to third-party grants were recognized during 2013, 2012 or 2011.

In determining the fair value of options granted to consultants, advisors and other independent contractors, the Company uses the Black-Scholes closed-form option valuation model in a manner consistent with its use in determining the fair value of options granted to employees and directors. However, the expected life of the options is based on the contractual lives as defined in agreements with the third parties.

	For the years ended December 31,
	2013		2012		2011
Weighted-average risk-free interest rate	0.69	%	0.74	%	1.83	%
Weighted-average expected life of options	4.4 years		5 years		5 years
Expected dividend yield	0	%	0	%	0	%
Weighted-average expected volatility	105.48	%	89.73	%	87.82	%

The table below summarizes the compensation expense recorded by the Company for the years ended December 31, 2013, 2012 and 2011 in conjunction with option grants made to employees and non-employee directors:

	For the year ended December 31,
	2013		2012		2011
Stock-based compensation expense recorded during period	$	1,847,076	$	1,828,203	$	2,648,741
Total unrecognized compensation expense remaining	$	2,952,464	$	4,173,830	$	5,724,738
Remaining average recognition period (in years)		1.88		2.81		1.95

As a result of the Company’s restructuring activities, stock-based compensation recorded for the year ended December 31, 2012 reflects the reversal of stock compensation expense for unvested options that were forfeited during the period and the impact of option modifications made for former executives and former Board members as a component of their resignations. The expected future amortization expense for unrecognized compensation expense for stock option grants to employees and non-employee directors at December 31, 2013 is as follows:

Year ending December 31, 2014	$	1,731,814
Year ending December 31, 2015		876,035
Year ending December 31, 2016		290,407
Year ending December 31, 2017		54,208
	$	2,952,464

Although no such grants have been made by the Company since 2005 (none of which remain outstanding as of December 31, 2013), option awards to consultants, advisors or other independent contractors are granted with an exercise price equal to the market price of the Company’s stock at the date of the grant, have 10-year contractual terms and vest dependent upon the completion of performance commitments. As such, the value of stock options is measured at the then-current market value as of financial reporting dates and compensation cost is recognized for the net change in the fair value of the options for the reporting period, until such performance commitments are met. Once each commitment is met, the options that vest in association with that commitment are adjusted, for the last time, to the then-current fair value and compensation cost is recognized accordingly. No expense related to third-party grants were recognized during 2013, 2012 or 2011.

In determining the fair value of options granted to consultants, advisors and other independent contractors, the Company uses the Black-Scholes closed-form option valuation model in a manner consistent with its use in determining the fair value of options granted to employees and directors. However, the expected life of the options is based on the contractual lives as defined in agreements with the third parties.

	For the years ended December 31,
	2013		2012		2011
Weighted-average risk-free interest rate	0.69	%	0.74	%	1.83	%
Weighted-average expected life of options	4.4 years		5 years		5 years
Expected dividend yield	0	%	0	%	0	%
Weighted-average expected volatility	105.48	%	89.73	%	87.82	%

The table below summarizes the compensation expense recorded by the Company for the years ended December 31, 2013, 2012 and 2011 in conjunction with option grants made to employees and non-employee directors:

	For the year ended December 31,
	2013		2012		2011
Stock-based compensation expense recorded during period	$	1,847,076	$	1,828,203	$	2,648,741
Total unrecognized compensation expense remaining	$	2,952,464	$	4,173,830	$	5,724,738
Remaining average recognition period (in years)		1.88		2.81		1.95

As a result of the Company’s restructuring activities, stock-based compensation recorded for the year ended December 31, 2012 reflects the reversal of stock compensation expense for unvested options that were forfeited during the period and the impact of option modifications made for former executives and former Board members as a component of their resignations. The expected future amortization expense for unrecognized compensation expense for stock option grants to employees and non-employee directors at December 31, 2013 is as follows:

Year ending December 31, 2014	$	1,731,814
Year ending December 31, 2015		876,035
Year ending December 31, 2016		290,407
Year ending December 31, 2017		54,208
	$	2,952,464

Although no such grants have been made by the Company since 2005 (none of which remain outstanding as of December 31, 2013), option awards to consultants, advisors or other independent contractors are granted with an exercise price equal to the market price of the Company’s stock at the date of the grant, have 10-year contractual terms and vest dependent upon the completion of performance commitments. As such, the value of stock options is measured at the then-current market value as of financial reporting dates and compensation cost is recognized for the net change in the fair value of the options for the reporting period, until such performance commitments are met. Once each commitment is met, the options that vest in association with that commitment are adjusted, for the last time, to the then-current fair value and compensation cost is recognized accordingly. No expense related to third-party grants were recognized during 2013, 2012 or 2011.

In determining the fair value of options granted to consultants, advisors and other independent contractors, the Company uses the Black-Scholes closed-form option valuation model in a manner consistent with its use in determining the fair value of options granted to employees and directors. However, the expected life of the options is based on the contractual lives as defined in agreements with the third parties.