ADMA Biologics Inc (NASDAQ:ADMA) just picked up a complete response letter (CRL) from the FDA, and the company is down more than 31% after hours on Friday. The decline comes after ADMA’s market cap rose close to 10% during regular hours, and marks a real setback for the company and its shareholders. Here’s a look at what’s next.

The drug in question is called RI-002, and it’s targeting a condition called primary immunodeficiency disease (PIDD). People who have PIDD are born without certain elements of the immune system’s natural defenses, and this leads to tem having a higher susceptibility to infection.

RI-002’s MOA is pretty simple. It’s essentially a cocktail of what are called polyclonal antibodies, which are the things in our body that help to neutralize infection. ADMA developed a technology that’s capable of identifying people that have high levels of certain polyclonal antibodies in their blood plasma, and on identification, extracts plasma and creates the drug (technically it’s a biologic, but we’ll use the word drug here for simplicity’s sake). It then introduces the drug to the PIDD patient by way of intravenous administration, and let’s the immunes system incorporate the new PAs.

So what went wrong? Well, the phase III data that the Biologics Licensing Application was based on had a primary endpoint of less than or equal to one serious bacterial infection (SBI), per patient, per year. The endpoint was met, with no patients reporting any SBIs across the full twelve-month test period, and the drug was well tolerated at the given dose. In short, it seemed to work perfectly. This presented it as a shoo in for approval, and the company has been ramping up towards commercialization for the pats six months. It raised some cash and expanded its plasma center in anticipation of a late summer rollout.

Unfortunately, things didn’t go to plan. The FDA issued a CRL, citing manufacturing issues. Here’s what the agency said:

“The FDA identified in the CRL certain outstanding inspection issues and deficiencies at ADMA’s third-party contract manufacturers, including its contract drug substance and product manufacturer, its contract fill and finisher and compliance issues with a third-party contract testing laboratory”

According to ADMA, the company is working with the suppliers at fault to try and sort the issues out, and will submit a reapplication to the FDA as soon as they get a resolution.

The long and short of it is that ADMA’s manufacturers and suppliers are the problem, and this might serve up something of an opportunity to get in at a discount in anticipation of the application getting back on track. In development stage biotech, this sort of thing happens all the time. Markets buy into expectations of an approval, a company gains ahead of the decision day, and then the FDA issues a CRL. Shareholders see the headline, rush to sell before markets beat the stock down too much, and cause this kind of decline. More often than not, a CRL with manufacturing issues as the primary concern will get resolved. Two things happen – the company works with their supplier to fix the issues (and the FDA will have given specifics to work on, it’s just not revealed them publicly) or the company switches supplier. Depending on the issues, the first one is normally quicker, and given the ADMA management response, it looks as though this is what they are going to go for.

We know that the drug doesn’t have any safety or efficacy issues, as the FDA would have addressed them in this CRL, so its really just a matter of when, not if; the closest you’ll get to a sure thing in development stage biotech.

So, the opportunity here is to get in on the decline, and ride out the path to resolution in anticipation of an approval. It could come as soon as the end of the year, or it might take longer – it’s tough to tell without specifics – but it should come, and we already known that markets value an approval at least 30% higher than the company’s current market capitalization.