The big news today out of the biotechnology sector is that Valeant Pharmaceuticals International, Inc. (NYSE:VRX) has announced that the U.S. Food and Drug Administration (FDA) confirmed it intends to issue a Voluntary Action Indicated (VAI) inspection classification for its Bausch + Lomb manufacturing facility in Tampa. At first glance, this doesn’t seem like a particularly big deal, but when taken against a backdrop of recent trends at the facility, it’s a real upside driver for both Valeant and another company, which we’ll mention in a bit more detail shortly.

So what does this mean exactly?

A VAI classification refers to a type of classification used by the FDA to note that objectionable conditions were found at a particular facility but the problems do not justify further regulatory action. That is, the investigator (which, in this case, is Valeant) is free to make any changes it feels are necessary to rectify the issues that the FDA raised, but the agency won’t use any of the issues against Valeant or any other entity manufacturing out of the space if no changes are made; that is, assuming the issues don’t translate to any potential safety issues on manufacturing of a commercial asset.

This is a problem that has been hanging over Valeant for some time. The company makes use of the facility to manufacture a number of its portfolio assets and the inspection that raised the objections has put some pressure on the company’s share price purely because there was speculation that it may lead to some degree of delay in production/manufacture etc.

With the VAI status now in place, no such delays are likely and the pressure that the situation put on Valeant’s market cap is lifted. As such, and as expected, the company is gaining strength on the back of the news. During standard trading hours on Wednesday, the company gained a couple percentage points. After hours, another 1.2% was added to the company’s share price and Valeant will open the session on Thursday at a 3% premium to its pre-announcement market capitalization.

As noted above, this news also impacts a few other companies, most notably from a public market perspective, Aerie Pharmaceuticals Inc (NASDAQ:AERI). Why? Because Aerie also uses the facility to manufacture its development assets. One drug in particular, a drug called Rhopressa, is made at the Bausch + Lomb facility, and the NDA for the drug is currently with the FDA and awaiting a regulatory green or red light. Aerie is trying to get the drug approved in a target indication of glaucoma, which is a big market in the US and, as such, an approval could make a real difference to Aerie’s top line as and when it comes in. If the FDA had decided that the issues raised at the manufacturing facility were not classifiable as VAI, there’s a good chance that the agency would have declined the NDA based on that fact alone. It doesn’t matter if a drug is safe and seems to work (as Aerie has managed to show with the development program that underpins the Rhopressa NDA), if the company that’s developing it isn’t able to show the FDA that it can manufacture it at commercial scale safely and consistently, the agency will issue a Complete Response Letter (CRL).

Another big mover heading into the session on Thursday is Seattle Genetics, Inc. (NASDAQ:SGEN). Seattle is trying to get a drug called ADCETRIS (brentuximab vedotin) approved as a therapy for patients with cutaneous T-cell lymphoma (CTCL) in the US. This is a large unmet need and – just as with Aerie’s Rhopressa – the drug can really make a difference not just to the developer’s top line but also to the target patient population. It’s already approved in another oncology indication, but an approval in CTCL would widen the target population and lay the groundwork for further expansion going forward.

Seattle submitted a supplemental Biologics License Application (sBLA) to the FDA earlier this year and – as per the most recent news – the agency in the US has granted a priority review for the submission. This speeds up the time to review, meaning the company has a near term PDUFA of December 16, 2017.