Just weeks after a phase 3 setback caused it to slash staff and R&D programs, Otonomy has bounced back with a positive late-stage trial for its lead candidate Otividex in Ménière’s disease.

In September, Otividex was effectively put on hold after it failed to show any activity in patients with Ménière’s, a debilitating inner ear disorder that affects balance and causes vertigo, tinnitus and hearing loss.

Fast forward to now, and a second phase 3 trial—which was largely complete and just awaiting data read-out—has delivered an unexpected win and a dramatic surge in the company’s share price. The company says it is now hoping to meet with the FDA early next year to discuss a possible filing for the drug, which is a new formulation of the steroid dexamethasone.

There are no FDA-approved treatments for Ménière’s disease, but more than 600,000 patients in the U.S. have been diagnosed with the condition, according to the National Institute on Deafness and Other Communication Disorders.

The new data "clearly demonstrates the treatment benefit that Otividex provides by significantly reducing the number of definitive vertigo days experienced by … patients," Otonomy president and CEO Dave Weber, Ph.D., told investors on a conference call.

The recent efforts to conserve capital, which include a one-third cut in the noncommercial workforce and a deferral in several clinical trials, continue but will be reviewed in light of the new data. A new plan will be drawn up in the coming months.

The latest trial, called AVERTS-2, involved 174 patients from six European countries who received a single injection of Otividex into the inner ear and followed the same treatment protocol as the negative U.S. trial AVERTS-1. Otonomy is now trying to establish why the results of the two studies came out so differently.

At baseline, patients had around nine definitive vertigo days—with at least one episode lasting 20 minutes—in the prior four-week period. Otividex reduced that by an average of 6.2 days after three months, which compared to a 2.5-day reduction in the placebo group and was a statistically significant difference (p=0.029).

The Otividex also showed a continued improvement over the three-month period, while the placebo response stayed pretty constant, according to Otonomy’s chief scientific officer Kathie Bishop, Ph.D., who said the results were consistent with its earlier phase 2b trial.

"We expect to provide a program update in the first quarter of 2018, and that will include the outline of our plan to complete the clinical development of Otividex to file the NDA," she added.

If Otonomy can right the Otividex ship and get it back on course, it should give the company the resources and confidence to bring forward other pipeline projects, including a crop of preclinical programs for hearing loss. And that needs that to happen, as sales of its only marketed drug—Otiprio (ciprofloxacin) for children getting tympanostomy tubes for otitis media—continue to underperform and were just $300,000 in the third quarter.

Otonomy is hoping Otiprio will gather momentum if it can claim an FDA approval for acute otitis externa next year.