There's never really a good time for a biotech company to disappoint investors, but now is definitely not the time. And when Nastech Pharmaceutical (NASDAQ:NSTK) announced yesterday that the FDA had rejected its application for a osteoporosis nasal spray, the market did its best Queen of Hearts impersonation ("off with her head!") and took about 15% out of the market cap.

What the FDA rejected was a nasal formulation of calcitonin-salmon -- a generic form of Novartis' (NYSE:NVS) Miacalcin drug. Though not a particularly significant drug (Miacalcin takes in about $365 million a year), nor a big opportunity for Nastech (it will be splitting profits with Par Pharmaceuticals (NYSE:PRX)), it nevertheless constitutes a disappointment and potential loss of revenue.

Personally, I find the FDA's gripe(s) to be interesting. Apparently it was worried about the possibility of allergic reaction in patients because of some interaction between the drug and its preservative. What makes that interesting is that none of the trials Nastech has done to date has shown an allergic response, but the FDA seems to be in a more aggressive safety-first sort of mood these days. All that said, the application is not necessarily dead, but who knows if, when, or how the drug will eventually get approved.

Given that the generic spray was never going to matter much in terms of profitability or cash flow, I think this decline could be a gift for aggressive investors. I've followed Nastech for quite a while and have thought about taking a nibble from time to time. After all, there's an agreement with Procter & Gamble (NYSE:PG) for a nasal formulation of parathyroid hormone (PTH) for osteoporosis that could be worth hundreds of millions of dollars. There's also an experimental inhaled drug for obesity, an agreement with Amylin (NASDAQ:AMLN) to develop a nasal formulation of the highly effective and popular (but annoying-to-use) Byetta, and a pretty deep roster of pre-clinical possibilities.

Experienced biotech investors realize that ideas like Nastech are often binary outcomes -- it's either going to be a big winner or a total flop, and odds say they'll probably fail in the vast majority of their drugs. Still, if the PTH drug works out and/or other ventures like intranasal insulin pan out, this could turn out to be a golden ticket.

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Fool contributor Stephen Simpson owns shares of Amylin but has no financial interest in any other stocks mentioned (that means he's neither long nor short the shares).