Here's Why Ocular Therapeutix Inc Rose 25.6% Today

What happened

Tiny biopharma Ocular Therapeutix (NASDAQ: OCUL) rose as much as 26% today after announcing that it had submitted an amendment to its existing New Drug Application, or NDA, for lead drug candidate Dextenza. The amendment contains information regarding manufacturing equipment changes and follows feedback provided by the U.S. Food and Drug Administration (FDA) after site inspections conducted earlier this year.

This move was expected by investors, and is the first step needed to begin heading in the right direction -- and toward potential marketing approval for Dextenza -- following several regulatory setbacks. As of 2:55 p.m. EDT, the stock had settled to a 17.6% gain.

So what

Ocular Therapeutix has completed three phase 3 trials for Dextenza, a small medical device that's inserted into the small opening of the eyelid following eye surgery. It releases a full dose of postoperative steroid therapy to treat pain and inflammation for 30 days before dissolving. The company submitted an NDA in February 2017, which was accepted by the FDA, for inserting the device and treating postoperative pain. That set a regulatory decision date of July 19, 2017.

However, following reinspection of manufacturing facilities, the FDA issued a Form 483 to the biopharma in May 2017. It discovered certain manufacturing processes were acting as sources of contamination for Dextenza, specifically introducing particulate into the formulation. The presence of foreign materials and contamination is obviously unacceptable for a drug that will be released onto the surface of a patient's eye.

That brings investors to today. Ocular Therapeutix responded to each issue raised in the Form 483 and submitted an amendment to the NDA from February. Not only that, it requested that the FDA extend the review date for an additional three months, since July 19 would not allow enough time to review the new information. If accepted, it's a big win for the company and investors.

Now what

Investors simply have to wait for the FDA's response to the company's request. There are no guarantees that the manufacturing changes from Ocular Therapeutix will bring operations back into compliance, but problems with particulate contamination have arisen many times before in the industry.

Once the proper sources of contamination are identified, it's relatively simple to address with the proper protocols. Although investors have to wait, this is a good sign for potentially gaining marketing approval for Dextenza -- and finally generating meaningful revenue.

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Maxx Chatsko has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.