What happened

Shares of Antares Pharma (NASDAQ:ATRS) are down 38% at 2:36 p.m. EDT after the company said -- in not so many words -- that it expects the Food and Drug Administration to reject the marketing application for its testosterone replacement therapy Xyosted.

So what

Technically, Antares only said that it received a letter from the Food and Drug Administration that said there are "deficiencies that preclude the continuation of the discussion of labeling and postmarketing requirements/commitments at this time."

But investors who understand the regulatory process know that a rejection is coming. As the FDA wraps up its review of a marketing application and believes it'll approve a drug, the agency starts talking to the company about the drug's label as well as any requirements that the agency may request the company agree to complete after the drug is approved. If the deficiency is so substantial that the FDA doesn't want to talk about labeling and postmarketing requirements, it's clearly going to turn down the marketing application.

Unfortunately, the FDA didn't tell Antares what the deficiencies are, so the company and investors are in the dark. The only good news is the agency has a goal of completing its review by Oct. 20, so Antares and investors will only have to wait a week or less to find out.

Man in suit with head in the sand

Image source: Getty Images.

Now what

Disclosing the news is the right thing for Antares to do. Some companies come out and say they expect a rejection -- referred to as a complete response letter -- from the FDA, but I'm not going to chastise Antares for just stating the facts and letting investors come to their own conclusion. The stock price decline today shows that investors understand what the FDA plans to do.

Whether today's move lower was too extreme, not extreme enough, or just right won't be known until investors get more information on what Antares will need to do to fix the deficiencies. Investing today is kind of like playing poker without ever looking at your cards. It can be done, but it's impossible to know how things are going to turn out.