Alexza Pharmaceuticals Inc resubmitted the marketing application for its anti-agitation treatment earlier than expected, sending its shares up as much as 47 percent.
Alexza's Adasuve, which delivers an older antipsychotic drug called loxapine through the company's Staccato inhaler, was denied approval twice before, most recently in May.
"The market was not looking for (the resubmission) quite this early," JMP Securities analyst Charles Duncan said.
Early last month, when the U.S. Food and Drug Administration denied approval to Adasuve, the company had said that the issues raised by the agency were "readily addressable."
The FDA had found certain deficiencies at the company's Mountain View, California manufacturing facility during an inspection.
Three injectable drugs, Bristol-Myers Squibb's Abilify, Eli Lilly's Zyprexa and Pfizer Inc's Geodon, are already approved to calm down patients with schizophrenia or bipolar disorder, but Alexza's product would be the first to be inhaled.
The powder formulation used in Adasuve passes through the lungs and into the blood stream faster than a typical pill. Loxapine is also available as an oral drug for schizophrenia.
Schizophrenia causes delusions and hallucinations, while bipolar disorder prompts alternating bouts of depression and mania.
Alexza is now awaiting the FDA's decision on a potential review date for Adasuve.
Typically, the U.S. Food and Drug Administration classifies a resubmission as a class 1 or class 2 response, signifying a review time of 2 months and 6 months, respectively.
Alexza, which has partnered with Spanish company Grupo Ferrer International S.A. to market Adasuve in Europe, also underwent a European pre-approval inspection in May.
"There have been no deficiencies in their pre-approval inspection. That addresses a key point of concern regarding their manufacturing," the analyst said.
Besides Adasuve, the company is also developing treatments for several other indications like migraine headache, postoperative pain, acute panic attacks, insomnia and nicotine addiction.
The company's shares were up 34 percent to $3.67 in afternoon trade amid heavy volumes, making it the top percentage gainer on the Nasdaq. The shares touched a high of $4.10 earlier in the session.
About 1.8 million shares changed hands by 1227 ET, 12 times their 10-day average daily volume.
(Reporting by Balaji Sridharan and Prateek Kumar in Bangalore; Editing by Sreejiraj Eluvangal)