Discovery Laboratories, Inc. (Nasdaq:DSCO), a
biotechnology company developing its novel, synthetic,
peptide-containing surfactant and related aerosolization
technologies as first in class therapies for severe respiratory
diseases, today provides an update on key pipeline and business
initiatives and reports financial results for the second quarter
ended June 30, 2010. The Company will host a conference call this
morning at 8:45 AM EDT.
The call-in number is
866-332-5218.
Highlights and upcoming milestones, discussed further below,
include:
- Surfaxin® – Discovery Labs continues to advance its program to
gain regulatory approval for Surfaxin for the prevention of
respiratory distress syndrome (RDS) in premature infants. Discovery
has taken into account recently-received guidance from the U.S. FDA
in the conduct of its ongoing comprehensive preclinical program,
continues to interact with the FDA, and believes it remains on
track for the potential filing of a complete response in the first
quarter of 2011.
- Surfaxin LS™ (next-generation, lyophilized formulation of
Surfaxin) – Discovery Labs is preparing the Surfaxin LS program for
planned clinical activities. Fourth quarter 2010 milestones include
establishing a commercial-scale Surfaxin LS manufacturing
capability at a cGMP-compliant contract manufacturer with expertise
in lyophilized formulations; producing necessary process validation
batches. Additionally, Discovery Labs is intending to seek
regulatory and scientific guidance with respect to its planned
Surfaxin LS development program, first with the FDA in the fourth
quarter of 2010 and then with the European Medicines Agency (EMA)
in the first quarter of 2011.
- Aerosurf® (drug/device combination for noninvasive
administration of aerosolized KL4 surfactant to address neonatal
RDS) – Discovery Labs and industry-leading engineers are optimizing
the design of the novel capillary aerosolization device to
potentially reduce development risk and satisfy the regulatory and
clinical requirements for Aerosurf. First half 2011 milestones
include finalizing Aerosurf clinical device design, producing a
sufficient number of devices to conduct design verification
testing, and seeking regulatory guidance from the FDA and EMA for
the planned Aerosurf development program.
- Phase 2a trial assessing safety and tolerability of aerosolized
KL4 surfactant for cystic fibrosis – Top-line results anticipated
to be available in the third quarter of 2010.
- Discovery Labs ended the second quarter of 2010 with $23.3
million in cash and marketable securities and a new Committed
Equity Financing Facility which, subject to certain conditions,
could allow the Company to raise up to $35 million in additional
capital. Second quarter 2010 cash burn from operations (before
financings and debt service) was $5.3 million. For the second
half of 2010, Discovery Labs is providing guidance of projected
cash burn from operations (before financings and debt service) of
$12.0 million which includes investments to advance the Surfaxin,
Surfaxin LS and Aerosurf programs.
W. Thomas Amick, Chairman and interim Chief Executive Officer of
Discovery Labs, commented, "Discovery's ongoing
program to gain potential Surfaxin approval in 2011 continues to
benefit from the FDA's direction and willingness to continue to
interact with our team. While remaining focused on Surfaxin,
we are advancing our Surfaxin LS and Aerosurf programs in a
resource-effective way intended to reduce development risk for
these promising, high-value programs.
Discovery Labs has made progress in securing additional capital
while exploring potential strategic alliances to adequately support
our promising pipeline programs. On the financial front, we
have streamlined our operating plans, significantly reduced debt
and secured additional financial resources intended to advance
Surfaxin to approval and move Surfaxin LS and Aerosurf towards
clinical trials. Additionally, we are continuing discussions
with several potential strategic alliance partners that clearly
recognize the medical and commercial opportunity that Surfaxin,
Surfaxin LS and Aerosurf may represent as a valuable RDS
franchise. We believe that success in entering into meaningful
strategic alliances will likely parallel success in advancing
Surfaxin towards a complete response and positioning Surfaxin LS
and Aerosurf for initiation of clinical trials."
Although a key priority for Discovery Labs is to secure
strategic partners to support ongoing research and development
activities and future progress, there can be no assurances that any
strategic alliance will be successfully identified or
concluded.
Selected Updates on KL4 Surfactant Pipeline
Development
Surfaxin® for neonatal RDS: The safety and
efficacy of Surfaxin for neonatal RDS has been previously
demonstrated in a large, multinational Phase 3 clinical
program. Discovery Labs believes that the last remaining step
necessary to potentially gain FDA marketing approval for Surfaxin
for the prevention of RDS is to satisfy the FDA as to the final
validation of an important quality control release and stability
test for Surfaxin, the fetal rabbit biological activity test
(BAT). Discovery Labs is currently conducting a comprehensive
preclinical program that is intended to satisfy the FDA in this
respect. If approved, Surfaxin would be the first synthetic,
peptide-containing surfactant for commercial use in neonatal
medicine.
The ongoing comprehensive preclinical program has involved the
optimization and revalidation of the BAT which is now being
employed in a series of prospectively-designed, side-by-side
preclinical studies with the well-established preterm lamb model of
RDS. In June 2010, Discovery Labs received written guidance
from the FDA regarding the comprehensive preclinical program that
is consistent with its ongoing program. Also in June 2010,
Discovery Labs submitted data and analysis from its program to
optimize and revalidate the BAT.
In July 2010, Discovery Labs took the opportunity to further
interact with the FDA via a conference call regarding several
important aspects of the ongoing comprehensive preclinical
program. The FDA's comments support the activities undertaken
by Discovery Labs to optimize and revalidate the BAT. Also
during the meeting, the FDA requested that Discovery Labs provide
additional data and analysis regarding the revalidation of the BAT
intended to aid the FDA in its final determination of whether the
BAT is appropriately validated for use as an ongoing quality
control release and stability test for Surfaxin, if
approved. Discovery Labs also obtained further FDA guidance
regarding certain aspects of the ongoing side-by-side preclinical
studies involving the BAT and preterm lamb model of RDS.
Discovery Labs has taken into account the FDA's guidance into
ongoing activities, including the planned submission of the
additional BAT-related data and analysis requested by the
FDA. During the July teleconference, the FDA reiterated its
willingness to provide continued guidance on plans to gain Surfaxin
approval. Since then, Discovery Labs has continued
interactions with the FDA intended to ensure that the comprehensive
preclinical program satisfies the FDA as to the final validation of
the BAT and its ultimate appropriateness as a release and stability
test for Surfaxin, upon potential approval. However, future
interactions with the FDA could affect the ultimate timing, conduct
and outcomes of remaining steps necessary to gain Surfaxin
approval, including the potential filing of the complete
response. Discovery Labs believes it can provide the data and
analysis requested by the FDA and remain on track to submit a
complete response to the FDA in the first quarter of 2011,
potentially leading to Surfaxin approval that year.
Surfaxin LS™ for neonatal RDS: Discovery
Labs' development strategy for Surfaxin LS is to build upon the
Surfaxin clinical experience to create a best-in-class surfactant
therapy with improved preparation and administration flexibility
and the potential to further improve clinical
performance. Data presented at the May 2010 Pediatric Academic
Societies Meeting indicate that Surfaxin LS, when compared to
currently marketed, animal-derived surfactant products, favorably
improved lung function and oxygenation while attenuating lung
inflammation in an animal model of RDS.
To support plans for finalizing the intended development pathway
for Surfaxin LS, the Company is currently conducting a series of
key chemistry, manufacturing and control (CMC) activities. The
Company has determined that clinical and commercial manufacturing
requirements for Surfaxin LS would be most efficiently met by
collaborating with a world-class contract manufacturing
organization (CMO) with a successful, multi-national regulatory
track record and established expertise in current good
manufacturing practices (cGMP) and lyophilized
formulations. In that regard, Discovery Labs has contracted
with a leading pharmaceutical CMO to establish a cGMP-compliant
clinical and commercial Surfaxin LS manufacturing
capability. The production of required process validation
batches is anticipated to be initiated in the fourth quarter of
2010.
Additionally, the Company intends to seek regulatory and
scientific guidance with respect to its planned development
program, first with the FDA in the fourth quarter of 2010 and then
with the EMA in the first quarter of 2011.
Aerosurf® for neonatal RDS: Aerosurf is a
novel drug/device combination therapy incorporating Discovery Labs'
synthetic surfactant and unique capillary aerosolization technology
to allow early administration of aerosolized surfactant to prevent
neonatal RDS. Aerosurf holds the promise to significantly
expand the use of surfactant therapy by providing neonatologists
with a less-invasive means of delivering KL4 surfactant without the
current requirement of invasive endotracheal intubation and
mechanical ventilation.
Through the conduct of the Aerosurf program, the Company's
aerosol engineers and scientists have meaningfully improved the
design of the capillary aerosolization device and patient interface
for neonatal application, employing a flexible design strategy to
support potential downstream applications of aerosolized
KL4surfactant in other respiratory disorders. The Company has
recently engaged a leading global technology company with expertise
in biomedical devices to assist in incorporating design
improvements into the capillary aerosolization device. The
design of the capillary aerosolization device is being optimized to
potentially reduce development risk and satisfy regulatory and
clinical requirements for Aerosurf. The Company anticipates
finalizing the clinical Aerosurf device design and producing a
sufficient number of Aerosurf devices to complete required design
verification testing in the first half of 2011.
Additionally, the Company is preparing to engage the FDA and EMA
in the first half of 2011 for regulatory and scientific guidance
with respect to the planned Aerosurf clinical development
program. In preparation, the Company is currently conducting
important CMC activities for Aerosurf, including dose-ranging
experiments conducted in a well-established animal model of RDS and
comprehensive aerosol characterization studies.
Phase 2a trial for cystic fibrosis: Aerosolized
KL4 surfactant is being evaluated in an investigator-initiated
Phase 2a clinical trial as a single center, pilot study to evaluate
the effects of aerosolized KL4 surfactant in patients with mild to
moderate cystic fibrosis (CF). The study is designed to
assess the safety, tolerability and potential effect on mucociliary
clearance from short term administration of aerosolized KL4
surfactant. Enrollment has been completed and top-line
results are expected to be available in the third quarter of
2010.
Surfaxin, Surfaxin LS and Aerosurf are investigational products
and are not approved by the FDA or any other world health
regulatory authority for use in humans.
Selected Financial Results for the Quarter Ended June
30, 2010
For the quarter ended June 30, 2010, the Company reported a net
loss of $6.3 million (or $0.04 per share) on 160.4 million weighted
average common shares outstanding compared to a net loss of $7.9
million (or $0.07 per share) on 112.7 million weighted average
common shares outstanding for the same period in 2009. As of
June 30, 2010, the Company had 194.1 million common shares
outstanding.
As of June 30, 2010, the Company had cash and marketable
securities of $23.3 million. Additionally in June, the
Company secured a new Committed Equity Financing Facility (CEFF)
with Kingsbridge Capital Limited, a private investment group, in
which Kingsbridge has committed to provide up to $35 million of
capital over a three-year period through the purchase of up to
approximately 31.6 million newly-issued shares of Discovery Labs'
common stock. Under the terms of the CEFF agreement, Discovery
Labs will be able determine the exact timing and amount of any
financings, subject to certain conditions and limitations
(including price and share limitations). In connection with
the CEFF, Discovery Labs issued a five-year warrant to Kingsbridge
to purchase up to 1,250,000 shares of common stock at an exercise
price of $0.4459 per share.
On June 22, 2010, the Company completed a public offering of
common stock and warrants resulting in gross proceeds of $10.0
million from the issuance of 35.7 million shares of common stock,
17.9 million five-year warrants and 17.9 million short-term
(9-month) warrants. The shares and warrants were priced at
$0.28 per unit. The five-year warrants have an exercise price
of $0.40 per share and the short-term warrants have an exercise
price of $0.28 per share. Net proceeds from the offering,
after underwriting discounts and commissions and other fees and
expenses, were $9.1 million. The Company could realize up to
an additional $5.0 million in proceeds by March 22, 2011, from the
potential exercise of the short-term warrants.
Net cash burn from ongoing operating activities (before
financing and debt service activities) for the second quarter of
2010 was $5.3 million. The Company anticipates that its net
cash burn for operating activities (before any financing and debt
service activities) for the second half of 2010 will be
approximately $12.0 million.
In April 2010, the Company restructured its $10.6 million loan
with PharmaBio Development Inc. (PharmaBio), the former strategic
investment subsidiary of Quintiles Transnational Corp. (Quintiles).
The Company satisfied $6.6 million of the loan in cash.
As of June 30, 2010, $4.0 million remained as the short-term
outstanding balance of the loan. On July 30, 2010, $2.0 of the
loan was paid and the remaining balance of $2.0 million is due on
September 30, 2010. Additionally, contemporaneously with
the restructuring, PharmaBio purchased Discovery Labs common stock
and warrants resulting in net proceeds of $2.1 million to Discovery
Labs. Quintiles, PharmaBio and the Company have also agreed to
explore a long-term strategic collaboration for the development of
Surfaxin LS and Aerosurf, however, there can be no assurance that
any such arrangements will be achieved.
The descriptions of the transactions referred to herein with
respect to Kingsbridge, the recently completed public offering and
the PharmaBio loan restructuring and the PharmaBio investment in
Discovery Labs' common stock are entirely qualified by reference to
the transaction documents, which are attached as exhibits to each
related Form 8-K filed by the Company with the Securities and
Exchange Commission ("SEC"). Readers are referred to, and
encouraged to read in their entirety, the Forms 8-K, including the
exhibits attached thereto, and the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 2010 to be filed with
the SEC, which includes further detail on the Company's business
plans and operations, financial condition and results of
operations.
Conference Call Details
Discovery Labs will hold a conference call on Wednesday,
August 4, 2010 at 8:45 AM EDT to further discuss the
foregoing. The call in number is 866-332-5218. The
international call in number is 706-679-3237. This audio
webcast will be available through a live broadcast on the Internet
at http://intercallus.stream57.com/DiscoveryLaboratories_080410 and
www.discoverylabs.com. The replay number to hear the
conference call is 800-642-1687 or 706-645-9291. The passcode
is 89526041.
About Discovery Labs
Discovery Laboratories, Inc. is a biotechnology company
developing surfactant therapies for respiratory diseases.
Surfactants are produced naturally in the lungs and are essential
for breathing. Discovery Labs' novel proprietary KL4
surfactant technology produces a synthetic, peptide-containing
surfactant that is structurally similar to pulmonary surfactant and
is being developed in liquid, aerosol or lyophilized
formulations. In addition, Discovery Labs' proprietary
capillary aerosolization technology produces a dense aerosol, with
a defined particle size that is capable of potentially delivering
aerosolized KL4 surfactant to the lung without the complications
currently associated with liquid surfactant
administration. Discovery Labs believes that its proprietary
technology platform makes it possible, for the first time, to
develop a significant pipeline of surfactant products to address a
variety of respiratory diseases for which there frequently are few
or no approved therapies. For more information, please visit our
website at www.Discoverylabs.com.
Forward-Looking Statements
To the extent that statements in this press release are not
strictly historical, all such statements are forward-looking, and
are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. These
forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially
from the statements made. Examples of such risks and
uncertainties are: risks relating to the rigorous regulatory
requirements required for approval of any drug or drug-device
combination products that Discovery Labs may develop, including
that: (a) Discovery Labs and the U.S. Food and Drug Administration
(FDA) or other regulatory authorities will not be able to agree on
the matters raised during regulatory reviews, or Discovery Labs may
be required to conduct significant additional activities to
potentially gain approval of its product candidates, if ever,
(b) the FDA or other regulatory authorities may not accept or
may withhold or delay consideration of any of Discovery Labs'
applications, or may not approve or may limit approval of Discovery
Labs' products to particular indications or impose unanticipated
label limitations, and (c) changes in the national or
international political and regulatory environment may make it more
difficult to gain FDA or other regulatory approval; risks relating
to Discovery Labs' research and development activities, including
(i) time-consuming and expensive pre-clinical studies,
clinical trials and other efforts, which may be subject to
potentially significant delays or regulatory holds, or fail, and
(ii) the need for sophisticated and extensive analytical
methodologies, including an acceptable biological activity test, if
required, as well as other quality control release and stability
tests to satisfy the requirements of the regulatory authorities;
risks relating to Discovery Labs' ability to develop and
manufacture drug products and capillary aerosolization systems for
clinical studies, and, if approved, for commercialization of drug
and combination drug-device products, including risks of technology
transfers to contract manufacturers and problems or delays
encountered by Discovery Labs, its contract manufacturers or
suppliers in manufacturing drug products, drug substances and
capillary aerosolization systems on a timely basis or in an amount
sufficient to support Discovery Labs' development efforts and, if
approved, commercialization; the risk that Discovery Labs may be
unable to identify potential strategic partners or collaborators to
develop and commercialize its products, if approved, in a timely
manner, if at all; the risk that Discovery Labs will not be able in
a changing financial market to raise additional capital or enter
into strategic alliances or collaboration agreements, or that the
ongoing credit crisis will adversely affect the ability of
Discovery Labs to fund its activities, or that additional
financings could result in substantial equity dilution; the risk
that Discovery Labs will not be able to access credit from its
committed equity financing facilities (CEFFs), or that the minimum
share price at which Discovery Labs may access the CEFFs from time
to time will prevent Discovery Labs from accessing the full dollar
amount potentially available under the CEFFs; the risk that
Discovery Labs or its strategic partners or collaborators will not
be able to retain, or attract, qualified personnel; the risk that
Discovery Labs will be unable to regain compliance with The Nasdaq
Capital Market listing requirements prior to the expiration of the
additional grace period currently in effect, which could cause the
price of Discovery Labs' common stock to decline; the risk that
recurring losses, negative cash flows and the inability to raise
additional capital could threaten Discovery Labs' ability to
continue as a going concern; the risks that Discovery Labs may be
unable to maintain and protect the patents and licenses related to
its products, or other companies may develop competing therapies
and/or technologies, or health care reform may adversely affect
Discovery Labs; risks of legal proceedings, including securities
actions and product liability claims; risks relating to health care
reform; and other risks and uncertainties described in Discovery
Labs' filings with the Securities and Exchange Commission including
the most recent reports on Forms 10-K, 10-Q and 8-K, and any
amendments thereto.
|
Condensed Consolidated
Statement of Operations (in thousands, except per share
data) |
|
|
Three Months Ended June
30, (unaudited) |
Six Months Ended June 30,
(unaudited) |
|
2010 |
2009 |
2010 |
2009 |
|
|
|
|
|
Revenue |
$ -- |
$ -- |
$ -- |
$ -- |
Operating expenses: (1) |
|
|
|
|
Research and development |
4,363 |
5,052 |
8,496 |
10,659 |
General and administrative |
1,865 |
2,592 |
4,797 |
5,688 |
Total expenses |
6,228 |
7,644 |
13,293 |
16,347 |
Operating loss |
(6,228) |
(7,644) |
(13,293) |
(16,347) |
Other income / (expense) |
(84) |
(264) |
(307) |
(561) |
Net loss |
$ (6,312) |
$ (7,908) |
$ (13,600) |
$ (16,908) |
Net loss per common share |
$ (0.04) |
$ (0.07) |
$ (0.09) |
$ (0.16) |
|
|
|
|
|
Weighted average number of common shares
outstanding |
160,425 |
112,712 |
149,133 |
107,433 |
(1) Expenses include
a charge for stock-based compensation in accordance with ASC Topic
718. For the three and six months ended June 30, 2010, the
charges associated with stock-based compensation were $0.4 million
($0.1 million in R&D and $0.3 million in G&A) and $0.8
million ($0.3 million in R&D and $0.5 million in G&A),
respectively. For the three and six months ended June 30,
2009, the charges associated with stock-based compensation were
$1.0 million ($0.3 million in R&D and $0.7 million in G&A)
and $1.8 million ($0.4 million in R&D and $1.4 million in
G&A), respectively. |
|
|
Condensed Consolidated
Balance Sheets (in thousands) |
|
|
|
|
June 30, 2010 |
December 31, 2009 |
ASSETS |
(unaudited) |
|
Current Assets: |
|
|
Cash and marketable securities |
$ 23,320 |
$ 15,741 |
Receivables, prepaid expenses and other
current assets |
383 |
233 |
Total Current Assets |
23,703 |
15,974 |
Property and equipment, net |
4,116 |
4,668 |
Restricted Cash |
400 |
400 |
Other assets |
184 |
361 |
Total Assets |
$ 28,403 |
$ 21,403 |
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY |
|
|
Current Liabilities: |
|
|
Accounts payable |
$ 1,235 |
$ 1,294 |
Accrued expenses |
3,766 |
3,446 |
Loan payable, including accrued
interest |
4,000 |
10,461 |
Equipment loan and other liabilities |
331 |
597 |
Total Current Liabilities |
9,332 |
15,798 |
Long-Term Liabilities: |
|
|
Equipment loan and other
liabilities |
1,022 |
1,118 |
Total Liabilities |
10,354 |
16,916 |
Stockholders' Equity |
18,049 |
4,487 |
Total Liabilities and Stockholders'
Equity |
$ 28,403 |
$ 21,403 |
CONTACT: Discovery Laboratories, Inc.
John G. Cooper, EVP and Chief Financial Officer
215-488-9300
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