What happened

Shares of antibacterial-drug specialist Achaogen (NASDAQ: AKAO) soared 17% higher today after the company announced that a manufacturing facility capable of producing its lead drug candidate, plazomicin, cleared a key regulatory hurdle with the U.S. Food and Drug Administration (FDA).

The drug successfully completed a large phase 3 trial and proved a safe and effective treatment option for complicated urinary tract infections. A second, smaller phase 3 trial provided additional data demonstrating the drug's effectiveness against certain antibiotic-resistant infections, which further supports approval. Achaogen is awaiting its regulatory review with the FDA scheduled for June 25, and expects to file for regulatory approval in Europe sometime this year.

The recent update moves the company one step closer to commercial readiness if and when plazomicin is approved. As of 1:06 p.m. EST, the stock had settled to a 16.6% gain.

A businessman holding out his hands stacked with coins and a green chart showing a positive slope.

Image source: Getty Images.

So what

After previously noting unacceptable conditions at Pfizer's Mcpherson, Kansas manufacturing facility -- the one that will produce plazomicin -- the FDA updated the status to Voluntary Action Indicated (VAI) following a fourth-quarter 2017 reinspection. The regulatory agency provides the following description for VAI status: "Objectionable conditions were found but the problems do not justify further regulatory action. Any corrective action is left to the investigator to take voluntarily."

In other words, Achaogen has removed a key piece of uncertainty regarding its ability to take advantage of potential market approval later this year. While approval seems relatively likely, successful commercialization and market traction after launch is not guaranteed. But seeing as the company currently generates no product revenue, anything will be better than nothing. 

Now what

Achaogen stock slid through most of 2017, as the company dragged its feet applying for marketing approval (the phase 3 trial for plazomicin ended in December 2016). The company's grant revenue dropped precipitously, too, which resulted in mounting losses as the year progressed. That said, today's update regarding the manufacturing facility, although relatively small, marks an important milestone -- especially when it comes to Mr. Market's confidence and interest in the stock going forward.