SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
November 13, 1998
Date of Report (Date of earliest event reported)
DISCOVERY LABORATORIES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 000-26422 94-3171943
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification Number)
350 South Main Street
Doylestown, Pennsylvania 18901
(Address of principal executive offices)
(212) 340-4699
(Registrant's telephone number, including area code)
Item 5. Other Events
Attached as Exhibit 99.1 hereto is Discovery's November 1998 Interim
Report to Shareholders.
Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits
(c) Exhibits:
99.1 Interim Report to Shareholders.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DISCOVERY LABORATORIES, INC.
Date: November 13, 1998
By: /s/ Robert J. Capetola, Ph.D.
-------------------------------------
Name: Robert J. Capetola, Ph.D.
Title: President and Chief Executive Officer
Exhibit Index
Exhibit Number Description
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99.1 Interim Report to Shareholders.
EXHIBIT 99.1
Interim Report to Shareholders
November 1998
Dear Discovery Laboratories, Inc. Investor:
1998 was a year of rapid progress for Discovery. We believe that the late stage
clinical trials, initiated this year, will build the foundation for substantial
growth in shareholder value over the years to come. In addition, FDA orphan drug
designation and fast track status for Surfaxin(TM), our principal product in
development, indicates the critical need for this groundbreaking therapy.
A Dedicated and Experienced Development Team
Discovery is led by a highly experienced drug development team, focused on
reaching our ambitious goals. The management group was hand picked from among
the best people that I have been acquainted with at Johnson & Johnson (J&J) and
Ohmeda. We have all been involved in the discovery and successful clinical
development of a variety of drugs on the market. We are driven by the belief
that Surfaxin(TM) will one day save many lives.
As an indication of our faith in the future of our company, members of the
management and the board of Discovery have invested a significant amount of
their own money towards open market purchases of Discovery common stock.
A High Tech Drug with a Simple, Common Sense Approach
Discovery's lead product is Surfaxin(TM) (formerly known as KL(4)-Surfactant), a
novel, peptide-containing synthetic lung surfactant. Lung Surfactant is the
substance that lines the lungs and helps to keep them expanded. Surfaxin(TM) was
invented at The Scripps Research Institute and initially developed by J&J. The
novel peptide, KL4, is a 21-amino acid peptide modeled by Scripps' scientists
after human surfactant protein B (SP-B). SP-B is considered to be the most
important and functional protein of the human surfactant system.
Since licensing Surfaxin(TM) from J&J, the Discovery drug development team has
added significant value to its existing proprietary base by developing a novel
lavage technique. This technique can be best described as a "lung wash," and is
designed to remove inflammatory and infectious infiltrates from patients' lungs,
restoring their vital surfactant levels. In addition, Dr. Harry Brittain,
Discovery's AACP-honored VP of Chemical Development, has developed a simple way
to improve the viscosity of the original J&J formulation, rendering it more
efficacious and easier to deliver.
Indications for Surfaxin(TM)
There are three disease states that are characterized by a lack of surfactant:
1. Meconium Aspiration Syndrome affecting full-term babies;
2. Idiopathic Respiratory Distress Syndrome affecting premature
infants; and
3. Acute Respiratory Distress Syndrome/Acute Lung Injury affecting
children and adults.
In addition, Surfaxin(TM) is being studied in a pivotal Phase 2/3 clinical trial
in the US for the treatment of acute respiratory distress syndrome/acute lung
injury (ARDS/ALI). ARDS/ALI afflicts approximately 220,000 patients annually.
The company believes that it represents a $1.8 billion market opportunity in the
US alone (with a market of similar size in Europe). There are currently no drugs
approved to treat ARDS/ALI, which has a mortality rate of approximately 50%.
Discovery has the capability to produce Surfaxin(TM) in the commercial
quantities required for the adult market.
Discovery is planning a Phase 3 trial in idiopathic respiratory distress
syndrome (IRDS), which occurs in approximately 40,000 infants in the US each
year who are born prematurely, prior to the development of the
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lung's natural surfactant. Proof of concept for Surfaxin(TM) in IRDS has already
been demonstrated by J&J in a 47-patient Phase 2 clinical trial.
Meconium aspiration syndrome (MAS) is a condition afflicting approximately
25,000 newborns per year in the US. MAS results from the release of meconium, a
greenish, pasty constituent of the fetal bowel, into the amniotic fluid. When
present in the amniotic fluid, babies can inhale meconium into their lungs,
which can lead to pneumonitis and subsequent degradation of the lung surfactant.
Discovery has recently completed a Phase 2a clinical trial in MAS.
FDA status of Surfaxin(TM)
Currently, there are no FDA-approved drugs for either MAS or ARDS/ALI. Both
indications are therefore unmet market needs, and the FDA has granted
Surfaxin(TM) fast track status and orphan drug designation for these
indications. Fast track status facilitates the development and expedites the
review of new drugs intended for the treatment of life-threatening conditions
for which there is presently no medical option. In addition, the FDA Office of
Orphan Products Development has awarded Discovery a renewable Orphan Products
Development Grant, ranging from $194,390 for the first year to $583,170 over
three years, to finance the Company's MAS clinical trials currently in progress.
FDA status of SuperVent(TM)
Discovery is also developing its aerosolized product, SuperVent(TM), for cystic
fibrosis (CF). We recently completed a successful Phase 1 clinical trial in
SuperVent(TM) for use of treating CF and are preparing for a Phase 2 trial in
this indication. The current stage of development for Discovery compounds is
summarized below:
An Aggressive Program for Development
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COMPOUND INDICATION STAGE OF DEVELOPMENT
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Surfaxin(TM) ARDS/ALI Phase 2/3 pivotal underway
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Surfaxin(TM) MAS Phase 2a data under analysis
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Surfaxin(TM) IRDS Phase 3 under development
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SuperVent(TM) CF Phase 2 under development
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Potential Product Markets
The following table summarizes our current views about the potential revenue
stream from Surfaxin(TM). These views are, of course, dependent on the projected
sale prices set forth in the table, which in turn are subject to variation based
on numerous factors (such as competition from animal-derived surfactant
replacement therapies and any other competing therapies that may be developed).
Nevertheless, we believe that under any realistic scenario, the potential market
size for Surfaxin(TM) is very substantial.
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PROJECTED PATIENTS/YEAR PATIENTS/YEAR POTENTIAL
INDICATION SALES PRICE UNITED STATES REST OF WORLD MARKET SIZE
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MAS $1,700 25,000 30,000 $93,500,000
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IRDS $1,000 40,000 50,000 $90,000,000
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ARDS/ALI $8,500 220,000 260,000 $4,080,000,000
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Total Potential Annual Market: $4,263,500,000
The numbers above represent the annual sales of the total potential Surfaxin(TM)
market. Discovery's management is evaluating what penetration it might expect in
these markets post approval.
Discovery's management continues to believe strongly that the value of
Discovery's products under development is not reflected in its current market
capitalization of roughly $20 million. As I have noted in the past, the equity
markets have often proven to be inaccurate and inadequate predictors of the
intrinsic value of the clinical products under development by biotechnology
companies. But with the help of our outside advisors, Mr. Fred Frank, Vice
Chairman of Lehman Brothers and Dr. Marc Ostro of KPMG Health Sciences division,
we are working hard to steadily increase the profile of Discovery within the
investment community.
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In conclusion, I would like to thank you on behalf of myself, the Board of
Directors, the management and the employees of Discovery, for your past and
continued support. I want to assure you that the Board and management of
Discovery feel confident that the next year will be a fruitful one. I look
forward to reporting to you on the progress that we make in moving Surfaxin(TM)
closer to a New Drug Application and, ultimately, final FDA approval.
Sincerely,
/s/ Robert Capetola, Ph.D.
Robert Capetola, Ph.D.
President and Chief Executive Officer
To the extent that statements in this letter are not strictly historical,
including statements as to future financial conditions or otherwise as to future
events, such statements are forward-looking, and are made pursuant to the safe
harbor provisions of the Securities Litigation Reform Act of 1995. The
forward-looking statements contained in this release are subject to certain
risks and uncertainties that could cause actual results to differ materially
from the statements made. Among the factors which could affect the company's
actual results and could cause results to differ from those contained in the
forward-looking statements contained herein are the risk that financial
conditions may change, risks relating to the progress of the company's research
and development and the development of competing therapies and/or technologies
by other companies. Those associated risks and others are further described in
the company's filings with the Securities and Exchange Commission.
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