What happened

Ocular Therapeutix (NASDAQ:OCUL) is down 20.5% at 12:55 p.m. EDT after receiving a complete response letter (CRL) from the Food and Drug Administration (FDA) for its eye-pain treatment Dextenza.

So what

A CRL is the FDA's euphemism for a rejection of a marketing application. It lays out what Ocular Therapeutix has to do to get Dextenza approved. Eventually. Hopefully.

This is the second CRL for Dextenza, after all. The first one, received about a year ago, had to do with "deficiencies in manufacturing process and controls" that were identified during an inspection of the company's manufacturing facility. Not much has changed, since the company's newest press release cites "deficiencies in manufacturing processes and analytical testing related to manufacture of drug product" as the reason for the CRL.

Doctor performing an eye exam.

Image source: Getty Images.

A reinspection of the facility in May cleared up the issues identified in the first inspection, according to management, but it was done by a different FDA inspector who found additional issues. Ocular Therapeutix responded within 15 days and followed up with a close-out response on Monday, which included a request to change manufacturing equipment. In that response, the company requested an extension of the review of its marketing application since the FDA was scheduled to make a decision by next Wednesday. Unfortunately, the FDA didn't bother looking at the close-out response and issued the CRL.

Now what

Not getting an extension could cost Ocular Therapeutics a few months because the FDA gets more time to review most CRL responses than it gets for an extension. Of course, those are only goals set by the agency, and it can give a response early, or even go past the goal. As a result, the difference may not cost Ocular Therapeutix any more time than it takes for it to format the follow-up response into a CRL response.

Of course, that assumes Ocular Theapeutix can fix the issues on its third attempt. As I previously pointed out, manufacturing is a black box for investors, and unfortunately, the company hasn't shone any light inside. We don't know if its response will satisfy the FDA, or if the agency will want another inspection, and whether that might identify even more issues. Shares are on sale today, but for good reason.

Brian Orelli and The Motley Fool have no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.