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What: Shares of AcelRx Pharmaceuticals (NASDAQ:ACRX) sank by more than 30% on heavy volume today due to a regulatory setback for its pain drug/device known as Zalviso. According to the press release, the Food and Drug Administration (FDA) is requesting an additional study to assess the risk of inadvertent dispensing failures in previous studies of the pain treatment.
The Zalviso System was rejected by the FDA last July over concerns regarding proper use of the drug/device. Given that the agency is now requiring further clinical studies, AcelRx has decided to delay the resubmission of the drug/device's New Drug Application for the time being.
So what: What caught investors off guard was that the FDA appeared content with the protocol designs for the bench testing evaluating dispensing failures and the Human Factors studies evaluating inadvertent dispensing after the prior Complete Response Letter rejecting the drug/device. The agency didn't request any additional studies at the time, leading the company and its investors to believe that a resubmission would only require further clarification on how the device should be used in order to avoid issues such as system errors.
Now what: AcelRx is planning on meeting with the FDA soon to both discuss the necessity of another study and its potential design. That said, you shouldn't hold your breath about the agency changing its mind. AcelRx will most likely have to run another study prior to a resubmission.
As AcelRx lacks any significant product revenues at this point in its life-cycle and has other ongoing clinical studies, the cost of a new trial will probably have to come from a secondary offering, meaning that now is a good time to play it safe from the sidelines with this one.
George Budwell has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.