WARRINGTON, Pa., March 13, 2014 /PRNewswire/ -- Discovery
Laboratories, Inc. (Nasdaq: DSCO), a specialty biotechnology
company dedicated to advancing a new standard in respiratory
critical care, today announced financial results for the fourth
quarter ended December 31, 2013, as
well as recent business updates. The Company will host a conference
call today, March 13, 2014 at
10:00 AM ET. Conference call
details are below.
Key highlights include:
- Financial Update: For the fourth quarter of 2013, the
Company reported an operating loss of $10.3
million and net cash outflows before financings of
$10.4 million. As of December 31, 2013, the Company had cash and cash
equivalents of $86.3 million. During
the quarter, the Company received an advance of $20 million under its secured loan with Deerfield
Management Co., L.P. (Deerfield).
As of December 31, 2013, the amount
due Deerfield was $30 million, payable in three equal annual
installments beginning in 2017, subject to deferral of the first
two payments if certain financial milestones are achieved.
- SURFAXIN®: In November, 2013, the Company
initiated the U.S. commercial launch of SURFAXIN (lucinactant)
Intratracheal Suspension for the prevention of respiratory distress
syndrome (RDS) in premature infants at high risk for RDS.
SURFAXIN is the first FDA-approved synthetic, peptide-containing
surfactant and the only alternative to animal-derived surfactants
available in the U.S.
- AEROSURF®: The Company currently is conducting
its AEROSURF phase 2 clinical program beginning with a phase 2a
clinical study. The phase 2a study is an open label, single-dose
study with the primary goal of evaluating the safety and
tolerability of aerosolized KL4 surfactant drug product
administered in escalating inhaled doses in premature infants 29 to
32 weeks gestational age who are receiving nasal continuous
positive airway pressure (nCPAP) for respiratory distress syndrome
(RDS), compared to infants receiving nCPAP alone. Results
from the phase 2a study are expected in the third quarter of
2014.
"The fourth quarter of 2013 marked the beginning of a potential
transformation in the management of RDS in premature infants,"
commented John G. Cooper, President
and Chief Executive Officer at Discovery Labs. "We initiated
the AEROSURF phase 2 clinical program, the first-ever with an
aerosolized surfactant intended to support registration in the U.S.
and potentially in other markets. AEROSURF has the potential to
enable the treatment of a significantly greater number of premature
infants who could benefit from surfactant therapy without the need
for invasive endotracheal intubation. In addition, we
introduced SURFAXIN in the U.S., representing the first step in
achieving our vision of advancing a new standard of care for
premature infants with RDS."
Summary Financial Results for the Fourth Quarter ended
December 31, 2013
The Company reported a net loss of $11.7
million ($0.16 per share) on
73.1 million weighted-average common shares outstanding for the
quarter ended December 31, 2013,
compared to a net loss of $6.8 million ($0.16 per share) on 43.5 million weighted-average
common shares outstanding for the comparable period in 2012.
Included in the net loss is the change in fair value of certain
common stock warrants that are classified as derivative
liabilities, resulting in non-cash expense of $0.9 million and non-cash income of $5.6 million for the quarters ended December 31, 2013 and 2012, respectively.
For the quarter ended December 31,
2013, the Company reported an operating loss of $10.3 million compared to $12.4 million for the comparable period in
2012. During the fourth quarter of 2013, the Company shipped
approximately $140,000 of SURFAXIN to
its specialty distributor. The Company currently uses the
sell-through method for revenue recognition, which means revenue is
deferred until its specialty distributor ships product to a
hospital and all revenue recognition criteria are met. For the
fourth quarter of 2013, all SURFAXIN sales have been deferred in
accordance with the Company's revenue recognition policy. The
operating loss in the fourth quarter of 2013 includes (i)
investments to support the initiation of the AEROSURF Phase 2a
clinical trial; and, (ii) costs associated with the initiation of
the launch of SURFAXIN.
Other income / expense for the quarter end December 31, 2013 was $0.6
million expense and represents interest related to the
Deerfield loan. Of the
$0.6 million, $0.4 million is cash interest expense and
$0.2 million is non-cash amortization
of the debt discount.
Net cash outflows before financing activities for the quarter
ended December 31, 2013 were
$10.4 million.
As of December 31, 2013, the
Company had cash and cash equivalents of $86.3 million. In November
2013, the Company completed a public offering of 28.75
million shares of common stock at a price of $2.00 per share, resulting in net proceeds to the
Company (after underwriting discount and expenses) of approximately
$54 million.
Additionally, with the commercial introduction of SURFAXIN, the
Company became eligible under its $30
million secured loan with Deerfield to receive the final $20 million advance, which was received in
December 2013. In connection
with the $20 million advance,
Deerfield received a cash
transaction fee equal to 1.5% of the advance and warrants to
purchase approximately 4.7 million shares of common stock at an
exercise price of $2.81 per share. As
of December 31, 2013, the Company had
$30 million of long-term debt due to
Deerfield with principal payable
in three equal annual installments beginning in February 2017, subject to deferral of the amounts
due in 2017 and 2018 if certain financial milestones are
achieved.
In October 2013, the Company
initiated an offering under its at-the-market (ATM) program with
Stifel, Nicolaus & Company, Incorporated and issued 713,920
shares of common stock at an average price per share of
$2.75, resulting in net proceeds
(after a 3% commission) of approximately $1.8 million. Following this offering,
approximately $23.0 million remains
available under the Company's ATM program.
For the first quarter of 2014, the Company anticipates operating
cash outflows before financing activities of approximately
$11 million.
As of December 31, 2013, the
Company reported a common stock warrant liability of $5.4 million, predominantly related to five-year
warrants issued in February 2011. These warrants are not
subject to cash settlement; however, they have been classified as
derivative liabilities in accordance with generally accepted
accounting principles because they contain anti-dilution provisions
that adjust the exercise price of the warrants in certain
circumstances.
The Company had 84.6 million and 43.7 million shares of common
stock outstanding as of December 31,
2013 and 2012, respectively.
Readers are referred to, and encouraged to read in their
entirety, the Forms 8-K regarding the matters referred to herein,
including any exhibits attached thereto, and the Company's Annual
Report on Form 10-K for the year ended December 31, 2013 to be filed with the Securities
and Exchange Commission, which includes further detail on the
above-referenced transactions and the Company's business plans and
operations, financial condition and results of operations.
Conference Call and Audio Webcast Details
Discovery
Labs will hold a conference call and audio webcast today at
10:00 AM ET to discuss the foregoing.
To access the conference call and participate in the
question-and-answer session, the number for domestic callers is
(877) 870-4263 and for international callers (412) 317-0790.
The conference call passcode is 10041838. The conference call
replay number is (877) 344-7529 or (412) 317-0088 using the same
conference call password listed above.
The live audio webcast of the conference call will be available
at http://bit.ly/1ctWW8L and on the Discovery Labs website at
www.discoverylabs.com. It is recommended that participants
log onto the audio webcast at least 15 minutes prior to the
call. A replay of the audio webcast will be available
after the call at the Company's website.
About SURFAXIN®
The U.S. Food and Drug
Administration (FDA) approved SURFAXIN® (lucinactant)
Intratracheal Suspension for the prevention of RDS in premature
infants who are at high risk for RDS. SURFAXIN is the first
synthetic, peptide-containing surfactant approved by the FDA and
the only alternative to animal derived surfactants.
IMPORTANT SAFETY INFORMATION
SURFAXIN is intended for
intratracheal use only. The administration of exogenous
surfactants, including SURFAXIN, can rapidly affect oxygenation and
lung compliance. SURFAXIN should be administered only by
clinicians trained and experienced with intubation, ventilator
management, and general care of premature infants in a highly
supervised clinical setting. Infants receiving SURFAXIN
should receive frequent clinical assessments so that oxygen and
ventilatory support can be modified to respond to changes in
respiratory status.
Most common adverse reactions associated with the use of
SURFAXIN are endotracheal tube reflux, pallor, endotracheal tube
obstruction, and need for dose interruption. During SURFAXIN
administration, if bradycardia, oxygen desaturation, endotracheal
tube reflux, or airway obstruction occurs, administration should be
interrupted and the infant's clinical condition assessed and
stabilized.
SURFAXIN is not indicated for use in acute respiratory distress
syndrome (ARDS).
For more information about SURFAXIN, please visit
www.surfaxin.com.
About AEROSURF®
AEROSURF is a novel
investigational drug-device combination product being developed to
deliver Discovery Labs' KL4 surfactant in aerosolized form to
premature infants with respiratory distress syndrome (RDS).
AEROSURF could potentially allow for the administration of KL4
surfactant to premature infants without invasive endotracheal
intubation, and may enable the treatment of a significantly greater
number of premature infants who could benefit from surfactant
therapy but are currently not treated.
About Discovery Labs
Discovery Laboratories, Inc. is
a specialty biotechnology company focused on advancing a new
standard in respiratory critical care. Discovery Labs'
technology platform includes its novel proprietary KL4 surfactant,
a synthetic, peptide-containing surfactant that is structurally
similar to pulmonary surfactant, and its proprietary drug delivery
technologies being developed to enable efficient delivery of
aerosolized KL4 surfactant and other inhaled therapies.
Discovery Labs' strategy is initially focused on neonatology
and improving the management of respiratory distress syndrome (RDS)
in premature infants. Discovery Labs believes that its RDS product
portfolio has the potential to become the new standard of care for
RDS and, over time, enable the treatment of a significantly greater
number of premature infants who could benefit from surfactant
therapy but are currently not treated.
For more information, please visit the Company's 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, including projections of future cash balances and
anticipated cash outflows, to differ materially from the statements
made. Examples of such risks and uncertainties include: risks
that Discovery Labs will be unable to secure significant additional
capital as needed, and may be unable in a timely manner, if at all,
to identify potential strategic partners to support product
development and, if approved, commercialize products in markets
outside the U.S., or to access debt or equity financings, which
could result in substantial equity dilution; risks related to
development programs, including in particular the AEROSURF
development program, including time-consuming and expensive
pre-clinical studies and clinical trials, which may be subject to
potentially significant delays or regulatory holds, or fail; risks
relating to efforts to commercialize SURFAXIN, including
(1) whether Discovery Labs' commercial and medical affairs
organizations will succeed in introducing the products, (2) whether
the products will be approved by hospitals and will gain market
acceptance and be preferred by healthcare providers over current
products, (3) whether the products will generate revenues
sufficient to fund Discovery Labs' research and development
activities and support its operations, and (4) whether Discovery
Labs will successfully develop a planned second vial size for
SURFAXIN; risks related to technology transfers to contract
manufacturers and problems or delays encountered by Discovery Labs,
contract manufacturers or suppliers in manufacturing drug products,
drug substances, aerosol-conducting airway connectors, CAG devices
and other materials on a timely basis and in sufficient amounts;
risks relating to rigorous regulatory requirements, including that:
(i) the FDA or other regulatory authorities may not agree with
Discovery Labs on matters raised during regulatory reviews, may
require significant additional activities, or may not accept or may
withhold or delay consideration of applications, or may not approve
or may limit approval of Discovery Labs' products,
and (ii) changes in the national or international
political and regulatory environment may make it more difficult to
gain regulatory approvals; and other risks, including those related
to (1) continued compliance with The Nasdaq Capital Market
listing requirements, (2) Discovery Labs' efforts to maintain and
protect the patents and licenses related to its products, (3)
whether it or its strategic partners will be able to attract and
retain qualified personnel, (3) other companies' competing
products, (3) legal proceedings, and (4) 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
|
|
Twelve Months
Ended
|
|
|
|
December
31,
|
|
December
31
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
Grant
revenue
|
|
$
74
|
|
$
195
|
|
$
388
|
|
$
195
|
|
Operating expenses:
(1)
|
|
|
|
|
|
|
|
|
|
Cost of product
sales
|
|
517
|
|
–
|
|
517
|
|
–
|
|
Research and
development
|
|
5,752
|
|
6,088
|
|
27,661
|
|
21,570
|
|
Selling, general and
administrative
|
|
4,070
|
|
6,532
|
|
16,718
|
|
16,444
|
|
Total
expenses
|
10,339
|
|
12,620
|
|
44,896
|
|
38,014
|
|
Operating
loss
|
|
(10,265)
|
|
(12,425)
|
|
(44,508)
|
|
(37,819)
|
|
Change in fair value
of common stock warrant liability (1)
|
|
(867)
|
|
5,618
|
|
761
|
|
555
|
|
Other income /
(expense), net
|
|
(597)
|
|
(8)
|
|
(1,468)
|
|
(51)
|
|
Net loss
|
|
$
(11,729)
|
|
$
(6,815)
|
|
$
(45,215)
|
|
$
(37,315)
|
|
Net loss per common
share
|
|
$
(0.16)
|
|
$
(0.16)
|
|
$
(0.82)
|
|
$
(0.95)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted avg. common
shares outstanding
|
|
73,129
|
|
43,521
|
|
55,258
|
|
39,396
|
|
(1) Material non-cash items
include the change in fair value of certain outstanding warrants
accounted for as derivative liabilities, and in operating expenses,
depreciation and stock-based compensation. For the three and
twelve months ended December 31, 2013, the charges for depreciation
and stock-based compensation were $0.8 million ($0.4 million in
R&D and $0.4 in S,G&A) and $2.9 million ($1.4 million in
R&D and $1.5 million in S,G&A), respectively. For the
three and twelve months ended December 31, 2012, the charges for
depreciation and stock-based compensation were $1.1 million ($0.1
million in R&D and $1.0 million in S,G&A) and $2.4 million
($0.5 million in R&D and $1.9 million in S,G&A),
respectively. Included in non-cash charges for the three and
twelve months ended December 31, 2012 are one-time charges of $0.8
million associated with stock based compensation modification
charges related to the severance agreement with its former
CEO.
|
Condensed
Consolidated Balance Sheets (in thousands)
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
December
31,
|
|
|
|
2013
|
|
2012
|
ASSETS
|
|
|
(Unaudited)
|
|
|
Current
Assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
$
86,283
|
|
$
26,892
|
Accounts
receivable
|
|
|
67
|
|
–
|
Inventory,
net
|
|
|
112
|
|
195
|
Prepaid expenses and
other current assets
|
|
|
777
|
|
719
|
Total current
assets
|
|
|
87,239
|
|
27,806
|
Property and
equipment, net
|
|
|
1,656
|
|
1,737
|
Restricted
cash
|
|
|
325
|
|
400
|
Other
assets
|
|
|
97
|
|
–
|
Total
Assets
|
|
|
$
89,317
|
|
$
29,943
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
Accounts
payable
|
|
|
$
1,433
|
|
$
1,166
|
Accrued
expenses
|
|
|
4,785
|
|
4,159
|
Deferred
revenue
|
|
|
139
|
|
–
|
Common stock warrant
liability
|
|
|
5,425
|
|
6,305
|
Equipment loan and
capitalized leases, current portion
|
|
|
73
|
|
69
|
Total Current
Liabilities
|
|
|
11,855
|
|
11,699
|
|
|
|
|
|
|
Long-term debt, net
of discount of $11,646 at December 31, 2013 and $0 at December 31,
2012
|
|
|
18,354
|
|
–
|
Equipment loans,
non-current portion
|
|
|
69
|
|
148
|
Other
liabilities
|
|
|
538
|
|
443
|
|
|
|
|
|
|
Stockholders'
Equity
|
|
|
58,501
|
|
17,653
|
Total Liabilities and
Stockholders' Equity
|
|
|
$
89,317
|
|
$
29,943
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SOURCE Discovery Laboratories, Inc.