WARRINGTON, Pa., Nov. 6, 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 third
quarter ended September 30, 2014, as
well as recent business updates. The Company will host a conference
call today, November 6, 2014 at
9:00 AM ET to discuss the 2014 third
quarter financial results and other business updates.
Financial update
- Reported an operating loss of $10.3
million and net cash outflows before financing activities of
$10.6 million for the third quarter
of 2014;
- Ended the third quarter of 2014 with cash and cash equivalents
of $54.9 million; and
- Awarded $1.0 million of a Phase
II Small Business Innovation Research (SBIR) Grant valued at up to
$3.0 million from the National Heart,
Lung, and Blood Institute (NHLBI) of the National Institutes of
Health (NIH) to support the development of aerosolized KL4
surfactant as a medical countermeasure to mitigate acute and
chronic/late-phase radiation-induced lung injury.
SURFAXIN® (lucinactant) Intratracheal Suspension: SURFAXIN is
the liquid instillate dosage form of the Company's novel KL4
surfactant and is the first FDA-approved synthetic,
peptide-containing alternative to animal-derived
surfactants. Currently, the Company is focused on securing
formulary acceptance with hospitals that it considers to be
influential centers of influence with strong reputations in the
neonatal community, as well as affiliated and regional hospitals.
The Company achieved formulary acceptance or restricted use
allowance in 17 neonatal critical care facilities as of the end of
the third quarter, compared to 13 as of the end of the second
quarter.
AEROSURF®: AEROSURF, the Company's novel investigational
drug-device combination product being developed to deliver
aerosolized KL4 surfactant to premature infants with respiratory
distress syndrome (RDS), addresses a significant unmet medical
need. The phase 2 clinical program consists of an ongoing phase 2a
trial designed to assess safety and tolerability of aerosolized KL4
surfactant delivered through continuous positive airway pressure
(nCPAP), and a planned phase 2b trial intended to determine the
optimal dose and define the expected efficacy margin for a phase 3
clinical program. Based upon the Company's most recent assessment
of the clinical trial plan, the Company now anticipates phase 2a
data in the first quarter of 2015.
Strategic Collaboration: In October, the Company entered into a
strategic collaboration with Battelle Memorial Institute (Battelle)
intended to advance the design of its capillary aerosol generator
(CAG) and related components (the AEROSURF System) for use in the
planned phase 3 clinical program and, if approved, potential
commercial activities. The collaboration combines Battelle's
world-class capabilities in aerosol drug delivery device
development with Discovery Labs' expertise in synthetic surfactant
technology and neonatal RDS. Battelle and the Company generally
will share equally in the agreed costs of the device development
for the AEROSURF System; Battelle received 1.5 million warrants to
purchase the Company's common stock at an exercise price of
$5.00, exercisable upon the
achievement of certain milestones and, if the project is
successful, will be entitled to future royalties on AEROSURF sales
and license sales revenues.
"For decades, there have been no alternatives to animal derived
surfactants and limited therapeutic advancements in the management
of premature infants born at risk of RDS," commented John G. Cooper, President and Chief Executive
Officer at Discovery Labs. "We believe that our proprietary
synthetic KL4 surfactant represents the future of surfactant
therapy, beginning with SURFAXIN, which enables us to begin
building relationships with key hospitals in the U.S. Our AEROSURF
development program represents our commitment to further innovation
for the NICU, and has the potential to transform the way
neonatologists manage these fragile infants."
Summary Financial Results for the Third Quarter Ended
September 30, 2014
The Company reported a net loss of $11.3
million ($0.13 per basic
share) on 85.2 million weighted-average common shares outstanding
for the quarter ended September 30,
2014, compared to a net loss of $12.2 million ($0.22 per basic share) on 54.8 million
weighted-average common shares outstanding for the comparable
period in 2013. 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 income of
$0.2 million and non-cash expense of
$1.1 million for the quarters ended
September 30, 2014 and 2013,
respectively.
For the quarter ended September 30,
2014, the Company reported an operating loss of $10.3 million compared to $10.8 million for the comparable period in
2013.
During the third quarter of 2014, sales of SURFAXIN to the
Company's specialty distributor were approximately $219,000, compared to $114,000 in the second quarter of 2014. Demand
sales into hospitals grew approximately 60 percent during the third
quarter to $116,000, compared to
$72,000 in the second quarter of
2014. In accordance with the Company's revenue recognition policy,
for the third quarter of 2014, the Company recognized $106,000 in revenue for sales of SURFAXIN,
compared to $42,000 in recognized
revenue in the second quarter of 2014. The Company also recognized
$0.4 million in grant revenue under a
$1.9 million Fast Track SBIR Grant
from the NIH to provide support for the ongoing phase 2a clinical
trial for AEROSURF. The remaining $0.4
million available under the grant is expected to be received
by the end of 2014.
Operating expenses for the third quarter ended September 30, 2014 and 2013 were $10.9 million. Key investments in the third
quarter of 2014 were to support ongoing conduct of the AEROSURF
phase 2a clinical study and the initial manufacturing of
clinic-ready CAG devices for the planned AEROSURF phase 2b clinical
study. Key investments in the third quarter of 2013 were
related to activities in preparation for the AEROSURF phase 2a
clinical study including development of our clinic-ready CAG and
developing our lyophilized KL4 surfactant manufacturing process at
our contract manufacturer.
Other expense for the quarter ended September 30, 2014 was $1.2 million which represents interest expense
related to long-term debt. Of the $1.2
million, $0.7 million is cash
interest expense and $0.5 million is
non-cash amortization of the debt discount.
Net cash outflows before financing activities for the quarter
ended September 30, 2014 were
$10.6 million.
As of September 30, 2014, the
Company had cash and cash equivalents of $54.9 million. For the fourth quarter of 2014,
the Company anticipates operating cash outflows before financing
activities of approximately $11
million.
As of September 30, 2014, the
Company had $30 million of long-term
debt with principal payable in three equal annual installments
beginning in February 2017, subject
to a potential one-year deferral of all amounts due in each of 2017
and 2018 if certain financial milestones are achieved.
As of September 30, 2014, the
Company reported a common stock warrant liability of $3.0 million, related to five-year warrants
issued in February 2011. These
warrants are not subject to cash settlement, but 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 85.3 million and 84.6 million shares of common
stock outstanding as of September 30,
2014 and December 31, 2013,
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 Quarterly
Report on Form 10-Q for the quarter ended September 30, 2014 to be filed with the
Securities and Exchange Commission on or before November 10, 2014, which includes further detail
on the above-referenced transactions, including an update on the
Company's AEROSURF clinical program, and the Company's business
plans and operations, financial condition and results of
operations.
Conference Call and Audio Webcast Details
The Company
will host a live teleconference and webcast at 9:00 a.m.
Eastern Time today. During the conference call, Discovery Labs'
management will discuss the 2014 third quarter financial results
along with other business updates.
The press release and the live webcast of the conference call
will be available via Discovery Labs' corporate website at
www.discoverylabs.com. The webcast will be made available on the
events page. An archive will be available after the call at
the same address until Thursday, November
20, 2014.
To participate in the live conference call, please dial (888)
346-0767 (domestic) or (412) 902-4251 (international). After
placing the call, please ask to be joined into the Discovery Labs
conference call. The conference call replay number is (877)
344-7529 (domestic) or (412) 317-0088 (international); please use
10054486 as the replay passcode.
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 currently are not treated. Discovery Labs is
conducting a phase 2a clinical trial to evaluate the safety and
tolerability of aerosolized KL4 surfactant drug product
administered in escalating inhaled doses in premature infants 29 to
34 weeks gestational age who are receiving nasal continuous
positive airway pressure (nCPAP) for respiratory distress syndrome
(RDS), compared to infants receiving nCPAP alone.
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. 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, including AEROSURF®,
if approved, 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. SURFAXIN®
(lucinactant) Intratracheal Suspension, Discovery Labs' first KL4
surfactant-based product, is the only available synthetic
alternative to animal derived surfactants approved by the U.S. Food
and Drug Administration (FDA). Full prescribing information can be
found at http:///www.surfaxin.com.
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, or to access debt or equity financings, which
could result in substantial equity dilution, 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.; risks related to the AEROSURF
and other development programs, which may involve time-consuming
and expensive pre-clinical studies and clinical trials that 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 SURFAXIN, (2)
whether SURFAXIN will be approved by hospitals and will gain market
acceptance and be preferred by healthcare providers over current
products, and (3) whether SURFAXIN will generate revenues
sufficient to fund Discovery Labs' research and development
activities, pay its debt, and support its operations, and (4)
whether Discovery Labs will be successful in implementing its
long-term manufacturing strategy to assure continuity of SURFAXIN
commercial drug product supply, which may affect its ability to
maintain sufficient supplies of SURFAXIN commercial drug
product; 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, (4) other
companies' competing products, (5) legal proceedings, and (6)
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.
Discovery
Laboratories, Inc.
Condensed
Consolidated Statement of Operations
(in thousands, except
per share data)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
|
September
30,
|
|
September
30,
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Product
sales
|
|
$
106
|
|
$
–
|
|
$
176
|
|
$
–
|
|
Grant
revenue
|
|
421
|
|
60
|
|
1,475
|
|
315
|
|
Total
Revenue
|
|
527
|
|
60
|
|
1,651
|
|
315
|
|
|
|
|
|
|
|
|
|
Operating expenses:
(1)
|
|
|
|
|
|
|
|
|
|
Cost of product
sales
|
|
257
|
|
–
|
|
1,769
|
|
–
|
|
Research and
development
|
|
6,471
|
|
6,574
|
|
18,919
|
|
21,909
|
|
Selling, general and
administrative
|
|
4,126
|
|
4,299
|
|
12,995
|
|
12,648
|
|
Total
expenses
|
10,854
|
|
10,873
|
|
33,683
|
|
34,557
|
Operating
loss
|
|
(10,327)
|
|
(10,813)
|
|
(32,032)
|
|
(34,242)
|
|
Change in fair value
of common stock warrant liability (1)
|
|
173
|
|
(1,059)
|
|
1,999
|
|
1,627
|
|
Other
income/(expense), net
|
|
(1,170)
|
|
(352)
|
|
(3,390)
|
|
(871)
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
(11,324)
|
|
$ (12,224)
|
|
$
(33,423)
|
|
$
(33,486)
|
Net loss per common
share:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
(0.13)
|
|
$
(0.22)
|
|
$
(0.39)
|
|
$
(0.68)
|
|
Diluted
|
|
$
(0.13)
|
|
$
(0.22)
|
|
$
(0.41)
|
|
$
(0.69)
|
Weighted avg. common
shares outstanding:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
85,209
|
|
54,792
|
|
85,001
|
|
49,235
|
|
Diluted
|
|
85,209
|
|
54,792
|
|
86,121
|
|
50,377
|
|
|
|
|
(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
months ended September 30, 2014 and 2013, the charges for
depreciation and stock-based compensation were $1.1 million ($0.5
million in R&D and $0.6 million in S,G&A) and $0.8 million
($0.4 million in R&D and $0.4 million in S,G&A),
respectively. For the nine months ended September 30, 2014 and
2013, the charges for depreciation and stock-based compensation
were $2.9 million ($1.4 million in R&D and $1.5 million in
S,G&A) and $2.1 million ($1.1 million in R&D and $1.0
million in S,G&A), respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discovery
Laboratories, Inc.
Condensed
Consolidated Balance Sheet
(in thousands, except
per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30,
|
|
December
31,
|
|
|
|
|
|
|
|
2014
|
|
2013
|
|
|
ASSETS
|
|
|
|
(Unaudited)
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
|
$ 54,915
|
|
86,283
|
|
|
|
Accounts
receivable
|
|
|
|
22
|
|
67
|
|
|
|
Inventory
|
|
|
|
429
|
|
112
|
|
|
|
Prepaid expenses and
other current assets
|
|
|
|
357
|
|
777
|
|
|
|
Total current
assets
|
|
|
|
55,723
|
|
87,239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and
equipment, net
|
|
|
|
1,772
|
|
1,656
|
|
|
|
Restricted
cash
|
|
|
|
325
|
|
325
|
|
|
|
Other
assets
|
|
|
|
489
|
|
97
|
|
|
|
Total
Assets
|
|
|
|
58,309
|
|
89,317
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable and
accrued liabilities
|
|
|
|
6,207
|
|
6,218
|
|
|
|
Deferred
revenue
|
|
|
|
95
|
|
139
|
|
|
|
Common stock warrant
liability
|
|
|
|
3,049
|
|
5,425
|
|
|
|
Equipment loans,
current portion
|
|
|
|
76
|
|
73
|
|
|
|
Total Current
Liabilities
|
|
|
|
9,427
|
|
11,855
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term
Liabilities:
|
|
|
|
|
|
|
|
|
|
Long-term debt, net
of discount of $10,736 at June 30,
|
|
|
|
|
|
|
|
|
|
2014 and $11,646 at
December 31, 2013, respectively
|
|
|
|
19,768
|
|
18,354
|
|
|
|
Equipment loan,
non-current portion
|
|
|
|
7
|
|
69
|
|
|
|
Other
liabilities
|
|
|
|
142
|
|
538
|
|
|
|
Total
Liabilities
|
|
|
|
29,344
|
|
30,816
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity:
|
|
|
|
28,965
|
|
58,501
|
|
|
|
Total Liabilities and
Stockholders' Equity
|
|
|
|
58,309
|
|
89,317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SOURCE Discovery Laboratories, Inc.