What happened

Shares of CorMedix (CRMD -8.61%) were crashing 40.4% as of 12:23 p.m. EST on Monday. The steep decline came after the company announced that the Food and Drug Administration isn't approving CorMedix's Defencath, an antibacterial/antifungal catheter lock, for preventing blood infections associated with the use of catheters in hemodialysis.

So what

Many investors were banking on Defencath receiving a thumbs-up from the FDA. The massive sell-off of the biotech stock today isn't a surprise considering the disappointing news.

FDA Not Approved stamp

Image source: Getty Images.

The FDA's Complete Response Letter (CRL) mentioned concerns at CorMedix's third-party manufacturing facility but didn't provide details. The agency is also requiring that the company conduct a manual extraction study to show that the volume on the label on vials can be consistently withdrawn from the vials.

There were some positives for CorMedix, though. The FDA didn't request any additional clinical data. It didn't point out any safety or efficacy issues with Defencath. Most important of all, the company still has a path to potential approval.

Now what

CorMedix hopes to meet with the FDA by mid-April. CEO Khoso Baluch said that the company "intends to work closely" with the agency to resolve any issues. It's possible that today's bad news will be only a temporary setback.