What happened

AcelRx Pharmaceuticals (NASDAQ:ACRX) is down 57% at 12:41 p.m. EDT after the Food and Drug Administration rejected the company's pain medication Dsuvia. As I said earlier this month when the stock was running up in anticipation of an approval, nothing is certain when it comes to the FDA.

So what

The FDA wants additional data on at least 50 patients to determine the safety of the drug when given at the maximum dose. At this point, AcelRx doesn't know if it can just send in data it already has on patients from its previous clinical trials, or if it'll need to run a new trial to collect the data the FDA wants.

The agency also wants changes to the Directions for Use instructions that come with the drug to address issues such as dropped tablets that have to be disposed of. The new instructions will have to be validated in a human factors study, but those tend to be straightforward and fairly quick.

Rejected stamp

Image source: Getty Images.

AcelRx still needs to talk to the FDA to get clarification on exactly what the FDA needs, so CEO Vincent Angotti wasn't willing to set a timetable for when the issues might be resolved and the company can resubmit its application. Back of the envelope, figure it'll take a few months at a minimum with the possibility of it taking longer if AcelRx has to run a separate trial to get the safety data on the 50 patients. And then the FDA will likely take six months to review the resubmission.

Now what

Given the unknowns, it's understandable that investors are substantially discounting AcelRx. Today's price factors in the possibility that the FDA's request for additional safety data is a warning sign that the agency sees a potential problem that could end up keeping the drug off the market forever. If that turns out not to be the case, today's price will end up being a steal.

Unfortunately, without more information, handicapping the two possibilities is difficult, so all but the most risk-tolerant investors should sit on the sidelines until AcelRx offers more clarity on the situation.

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