It’s an understatement to say recent developments have been a crushing blow for Orphazyme A/S (NASDAQ:ORPH) stock.

Due to the hype surrounding it, shares, which previously were trading near penny stock levels, hit highs topping $77 per share.

But, when the FDA said, “no dice?” It didn’t take long for it to hit single-digit price levels once again.

Following this setback, what’s next? The good news is that Orphazyme may be down, but it’s not completely out. It could still get approval for its flagship candidate in Europe. A second go at getting FDA approval is still on the table as well.

The bad news is it’s going to take time, and a lot more money than the company currently has. Dilutive capital raises are likely in its future. That doesn’t necessarily mean this is a stock to avoid ahead of subsequent declines, though

On the flip side of its long road to commercializing arimoclomol, and its dilution risks, is its status as a “short squeeze” stock.

Reddit speculators may be cooling their jets now about squeezing heavily-shorted stocks “to the moon.”

Yet, it won’t take much to shift sentiment for this name from negative back to positive. In short, this may be a situation where the bears will end up scrambling to cover their positions.

ORPH Stock, the FDA Rejection, and What Lies Ahead

How bad is the FDA decision for Orphazyme’s prospects? To some, like a Seeking Alpha commentator who opined on it following the news, it may be “game over” for the stock.

That is, with the hopes dashed this treatment gets approved to treat NPC, along with other “orphan diseases” like amyotrophic lateral sclerosis, things will continue to get worse, not better.

There are legitimate concerns about shareholder dilution that could be coming as a result of the clinical-stage company needing to replenish its cash reserves.

By pointing out the difficulty in shorting this stock, the commentator may have pointed to a way ORPH stock could rebound, following the more than 90% drop from its highs.

With its short borrowing fee still high, and bears piling in following the FDA news, things may be setting themselves up for a squeeze.

In recent weeks, I’ve been skeptical about short squeeze plays, particularly the ones the Reddit trading community is trying to instigate.

But, in this situation? There’s more than just the potential for a “Reddit raid” that could leave the short-side scrambling. After its recent big setbacks, it could be all uphill from here with regards to future developments.

It Won’t Take Much for Sentiment to Shift

Orphazyme may have its work cut for it, when it comes to getting arimoclomol approved, but, the situation may not be as dire as its bears make it out to be.

As InvestorPlace’s Chris MacDonald broke it down last month, the company quickly followed its negative developments with some positive ones.

First, its recent presentation of interim results from one of the trials for its flagship candidate.

The positive findings may signal that it could succeed if it attempts to get FDA approval once again.

Second, by materially reducing its operating costs as Orphazyme’s restructuring plan calls far,  fears of dilution may be overblown.

That’s not to say it won’t have to raise more money only that the dilution could end up lower than previously anticipated. This may minimize the downside risk with ORPH stock.

Also, don’t forget these new developments are on top of it possibly obtaining European regulatory approval for arimoclomol later this year.

In short, with plenty that could flip, it won’t take much to renew confidence once again. Given that so many bears have been betting against it, a 180 shift in sentiment may be enough to fuel an epic squeeze.

Bottom Line: There’s Still Opportunity With ORPH Stock

Some may believe it’s “game over” for this clinical-stage biotech firm, following the FDA’s recent rejection of its flagship candidate, but the company’s not out of the running just yet.

Subsequent trial data could help it eventually obtain FDA approval. This same data may bode well for its chances of getting European regulatory approval later this year. This may be a Reddit favorite where a squeeze has a shot of happening.

How far could ORPH stock climb if it gets squeezed? Maybe not back above $77 per share, but a move back to $15-$20 per share could be attainable.

For investors with a healthy risk appetite, and a stomach for volatility, consider it a buy at today’s prices (around $7.25 per share).

On the date of publication, Thomas Niel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Thomas Niel, a contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.