Chelsea Therapeutics International Ltd. (NASDAQ: CHTP) is on the leader board for percentage gains on Thursday, with a rise of 111% or so. It isn’t even on news of a buyout. The question to ask is whether the company can live up to its potential.

The driving force is news that the U.S. Food and Drug Administration’s (FDA) Cardiovascular and Renal Drugs Advisory Committee voted to recommend approval of Northera for the treatment of symptomatic neurogenic orthostatic hypotension in patients with primary autonomic failure (Parkinson’s disease, multiple system atrophy and pure autonomic failure), dopamine beta hydroxylase deficiency and non-diabetic autonomic neuropathy.

While the FDA formal approval committee does not always follow the advice of the FDA panels, a vote of 16 in favor and only one against is a solid recommendation. The PDUFA date for approval is set for February 14, 2014. Northera had previously been granted an orphan-drug designation and an FDA fast-track status.

Chelsea shares were trading for part of 2013 as though they were going to go belly up. Prior to that, its stock had been range-bound from $2 to $7. Deutsche Bank maintained a Hold rating on the stock, but raised its price target to $5.00 from $4.00. Needham and Ladenburg Thalmann have also reportedly raised their price targets on the news.

What really stands out here is that the company’s market value is around $350 million, even after the shares have doubled, and also that the stock hit a 52-week high of $5.78 in early morning trading on Wednesday, after opening at $5.77. Now the stock price is down near $4.84. That is a substantial gap-up sell-off.

Investors have been burned here before. Chelsea’s original approval was denied almost two years ago, with the FDA asking for more efficacy data to be resubmitted. This is not cheap for biotech companies. There was also believed to be a negative tone in the FDA briefing documents. The FDA panel had recommended approval in 2012 before the FDA rejection, but by a smaller margin.

Chelsea has no revenues, and the company lost $120 million in the years from 2010 to 2012. It lost another $11 million in the first three quarters of 2013. The company has been bleeding cash each quarter, and Chelsea had only about $21 million in cash at the end of the September quarter.

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