What happened

Shares of Immunomedics (NASDAQ:IMMU) are down 26% at 1:07 p.m. EST after the Food and Drug Administration issued a complete response letter (CRL) for the biotech's breast cancer drug sacituzumab govitecan.

A CRL is the FDA's euphemism for a rejection. Like a caring parent, rather than saying no, the agency kindly points out that it has completed its review of the marketing application and that the company will need to do more work before it can get the drug approved.

Maybe the agency is more like a sarcastic try-harder-next-time parent.

Doctor looking at a mammogram on a computer.

Image source: Getty Images.

So what

The good news is that the issues addressed by the FDA strictly pertain to the Chemistry, Manufacturing and Control section of the application. The section covers the manufacturing of drugs as well as quality-control tests used to make sure there's limited variation between the different manufacturing runs.

Immunomedics' management noted that the FDA doesn't want any new clinical data, which could have required years of additional work if the company was required to run a new trial.

The bad news is that the company wasn't forthcoming about exactly what the issues were and how long it was going to take to resolve them. The company wants to wait until it meets with the FDA before letting investors know the next steps it plans to take.

On the conference call this morning, Immunomedics CEO Michael Pehl noted that the CRL was completely unexpected and that the company thought the issues that the FDA brought up during the review had been answered sufficiently.

While the company may be holding back information from investors, it seemed more like management just wasn't exactly sure what the next steps might be.

I'm not sure that should make investors feel any better.

Now what

Management hopes that, since sacituzumab govitecan has Breakthrough Designation, the FDA will set up a meeting quickly, but the company wasn't willing to put a time frame on when investors might hear more about what will be required to resubmit the marketing application. Once that happens, depending on how complex the answers to the issues are, the FDA could respond quickly or take up to six months.

With the unknowns, investing in Immunomedics today is more akin to gambling than investing. At some valuation, the potential reward justifies the unknown risk, but it's hard to know if today's decline does so.

Check out the latest Immunomedics earnings call transcript.

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