What happened

Heron Therapeutics (NASDAQ:HRTX) and Pacira BioSciences (NASDAQ:PCRX) are moving in polar opposite directions today. As of 11:40 a.m EDT, Heron's stock was down by 14.7%, whereas Pacira's shares were up by 15.5%.  

These two mid-cap biotech stocks are both responding to the news that the Food and Drug Administration (FDA) issued a Complete Response Letter (CRL) for Heron's experimental post-operative pain medication HTX-011. The agency reportedly cited the need for additional Chemistry, Manufacturing and Controls data, as well as other nonclinical information, as the reason for the CRL. On the plus side, Heron's management noted in a conference call this morning that the FDA didn't base its decision on any outstanding clinical or safety issue, meaning that more time-consuming clinical studies probably won't be required to get the drug approved.

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Image source: Getty Images.

So what

Heron's extended release pain medication is slated to compete directly against Pacira's Exparel in several key market segments. The two drugs share a common component (bupivacaine), but Heron's formulation of the pain reliever seems to be superior at reducing the need for opioid use in the post-operative setting. Thus, HTX-011 should have a decent shot at cutting deeply into Exparel's share of the market following approval. So, with this major competitive threat delayed for a little while longer, it's easy to see why Pacira's shareholders are cheering this news today. 

Now what

If the FDA isn't going to require another trial, Heron should be able to get this regulatory filing back to the agency within a matter of months. So while this CRL is certainly unwelcome news, it shouldn't turn out to be a showstopper. Bargain hunters, in turn, might want to take advantage of this hefty drop by picking up some shares of this beaten-down biotech stock soon.

On the flip side, investors may want to take a cautious approach toward Pacira's stock following this double-digit rally. Although the regulatory delay does provide some much-needed breathing room for Pacira, it in no way eliminates the competitive threat emanating from HTX-011. Pacira's stock, therefore, may have trouble holding on to these sizable gains.