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
August 5, 2004
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 Main Street, Suite 307
Doylestown, Pennsylvania 18901
(Address of principal executive offices)
(215) 340-4699
(Registrant's telephone number, including area code)
(Former name or former address, if changed since last report)
Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits
(c) Exhibits:
99.1 The 2004 Second Quarter Financial Results News Release (as
defined in Item 12 below).
Item 12. Results of Operations and Financial Condition
On August 5, 2004, Discovery Laboratories, Inc. (the "Registrant"), issued
a news release announcing financial results for the quarter ended June 30, 2004,
and providing selected updates on the Registrant's progress since the end of its
first fiscal quarter in 2004 (the "2004 Second Quarter Financial Results News
Release"). The full text of the press release is set forth in Exhibit 99.1
hereto. The information in this Form 8-K and the exhibit attached hereto shall
not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), or otherwise subject to the
liabilities of that section, nor shall it be deemed incorporated by reference in
any filing under the Securities Act of 1933, as amended, or the Exchange Act,
except as expressly set forth by specific reference in any such filings.
2
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.
By: /s/ Robert J. Capetola,
------------------------------------
Name: Robert J. Capetola, Ph.D.
Title: President and Chief Executive
Officer
Date: August 5, 2004
Exhibit 99.1
[LOGO OF DISCOVERY LABORATORIES]
DISCOVERY LABORATORIES REPORTS SECOND QUARTER 2004 FINANCIAL RESULTS
DOYLESTOWN, PA -- AUGUST 5, 2004 -- DISCOVERY LABORATORIES, INC. (NASDAQ: DSCO),
today announced financial results for the second quarter of 2004. The Company
will host a conference call today at 10:30 AM EDT. The call in number is
800-665-0669.
For the quarter ended June 30, 2004, the Company reported a net loss of $8.9
million, or $0.19 per share, on approximately 46.7 million weighted average
common shares outstanding, compared to a net loss of $4.8 million, or $0.14 per
share, on approximately 33.5 million weighted average common shares outstanding
for the same period in 2003. For the six months ended June 30, 2004, the Company
reported a net loss of $17.8 million, or $0.39 per share, on approximately 45.0
million weighted average common shares outstanding, compared to a net loss of
$9.4 million, or $0.28 per share, on approximately 33.2 million weighted average
common shares outstanding for the same six-month period in 2003.
As of June 30, 2004, the Company had cash and marketable securities of
approximately $41.3 million, an increase of approximately $17.7 million from the
previous quarter. Included in this change in cash and marketable securities are
net proceeds of $22.8 million from an underwritten public offering of 2,200,000
shares of common stock in April 2004. Excluding this financing, cash decreased
from the previous quarter by $5.1 million due to the use of approximately $8.9
million for operating and investing activities offset by $2.1 million of net
proceeds from the use of existing credit and capital lease facilities and $2.0
million received from the exercise of certain options and warrants. In addition,
as of June 30, 2004, approximately $1.7 million was outstanding under the
Company's $4 million capital lease financing arrangement with General Electric
Capital Corporation and approximately $4.8 million was outstanding under the
Company's secured revolving credit facility of $8.5 to $10 million with
PharmaBio Development Inc.
Additionally, in July 2004, the Company entered into a Committed Equity
Financing Facility Agreement (CEFF) with Kingsbridge Capital Limited
(Kingsbridge) in which Kingsbridge committed to finance up to $75 million of
capital to support the Company's future growth. Subject to certain terms and
conditions, the CEFF allows the Company to raise capital as required, at the
time, price and in amounts deemed suitable to the Company, during a three-year
period once a registration statement is filed by the Company and declared
effective by the Securities and Exchange Commission.
Robert J. Capetola, Ph.D., President and Chief Executive Officer of Discovery,
commented, "Discovery now is focusing on preparing for the commercialization of
Surfaxin(R) for Respiratory Distress Syndrome (RDS), if approved. We are also
advancing our franchise of Surfactant Replacement Therapies (SRT) that are
intended to address the range of respiratory disorders treated in the Neonatal
Intensive Care Unit (NICU), critical care and hospital settings.
We have made great progress in our Phase 2 clinical program for Acute
Respiratory Distress Syndrome (ARDS) in adults. We remain confident that our SRT
lavage, or lung wash, technique is the most scientifically sound approach to the
treatment of ARDS. During the second half of this year, we will focus also on
advancing our aerosol SRT clinical programs. We are extremely enthusiastic that
non-invasive aerosol SRT will provide significant therapeutic benefits to both
children and adults suffering from respiratory diseases. Now, with potential
financial resources of approximately $120 million, we can focus on executing our
Surfaxin RDS commercialization strategy and advancing our broad SRT pipeline,"
continued Dr. Capetola.
The net loss increased by $4.0 million to $8.9 million, and $8.4 million to
$17.8 million, respectively, for the three and six months ended June 30, 2004,
as compared to the same periods last year, primarily due to:
(i) manufacturing activities (which are included in research and
development), of which $1.9 million and $3.7 million, respectively, was
incurred for the three and six months ended June 30, 2004 to support
the production of clinical and commercial drug supply of the Company's
Surfactant Replacement Therapies (including Surfaxin) in conformance
with current Good Manufacturing Practices (cGMPs). For the comparable
periods last year, no such costs were incurred;
(ii) pre-launch commercialization activities for Surfaxin (which are
included in general and administrative expenses) of $1.1 million and
$2.0 million, respectively, for the three and six months ended June 30,
2004. The majority of such costs were financed through the Company's
secured, revolving credit facility with PharmaBio;
(iii) non-cash compensation and non-recurring charges (which are included in
general and administrative expenses) totaling approximately $700,000 in
general and administrative expenses in the second quarter primarily
consisting of a milestone payment to Johnson & Johnson, Inc., payable
upon submission of the Company's New Drug Application (NDA) related to
the Company's Surfaxin sublicense, a listing fee paid to NASDAQ upon
acceptance of the Company's application to trade its common stock on
the National Market (previously listed on the NASDAQ SmallCap Market),
and non-cash charges related to stock options granted to employees and
consultants under our Amended and Restated 1998 Stock Option Plan; and
(iv) research and development activities related to the advancement of the
Company's SRT pipeline, including its lead product Surfaxin.
Selected updates on the Company's programs and progress:
SRT IN THE NICU
o SURFAXIN FOR RESPIRATORY DISTRESS SYNDROME (RDS) IN PREMATURE INFANTS
On June 15, 2004, the United States Food and Drug Administration (FDA)
accepted the Company's NDA filing for Surfaxin for the prevention of
RDS in premature infants. The FDA has established a target date of
February 13, 2005 for completion of review of the Surfaxin NDA.
The Company is also preparing a Marketing Authorization Application
(MAA) to be filed with the European Medicines Evaluation Agency (EMEA)
in the second half of 2004 for Surfaxin for the prevention and
treatment of RDS. In June, the Committee for Orphan Medicinal Products
(COMP) of the EMEA adopted a positive opinion recommending the granting
of orphan medicinal product designation for Surfaxin for the prevention
and treatment of RDS. In making its assessment the COMP concluded that
although satisfactory methods of prevention and treatment of RDS have
been authorized in Europe, justifications have been provided that
Surfaxin may be of significant benefit to those at risk of developing
or affected by the condition.
Effective June 22, 2004, Quintiles completed a written assessment and
report of the Company's Surfaxin NDA. Based on the quality of the
clinical data and documentation comprising the NDA, Quintiles
determined that such NDA was deemed "approvable" by the FDA. This
determination allows the Company to access the remaining amounts
available under the secured revolving credit facility of $8.5 to $10
million with PharmaBio Development Inc.
o AEROSOLIZED SURFACTANT IN COMBINATION WITH NASAL CONTINUOUS POSITIVE
AIRWAY PRESSURE (NCPAP) FOR NEONATAL PULMONARY DISORDERS
To further the Company's commitment to potentially address the range of
neonatal pulmonary disorders in the NICU, we are preparing a Phase 2
clinical trial using our aerosolized SRT in combination with nCPAP. We
believe that this approach represents a non-invasive surfactant-based
therapy for premature infants and has the potential to reduce the need
for and complications from mechanical ventilation, including lowering
the risk of infection. We anticipate initiating such trial in the
United States in late 2004.
SRT FOR CRITICAL CARE AND HOSPITAL
o SURFACTANT REPLACEMENT THERAPY FOR ACUTE RESPIRATORY DISTRESS SYNDROME
(ARDS) IN ADULTS
The Company's manufacturing capability, through its arrangements with
Laureate Pharma, L.P., have now provided adequate Surfaxin ARDS product
to supply all participating clinical sites in order to complete Part B
of the Phase 2 study. We expect to complete this trial in the fourth
quarter of 2004.
o DSC-104 FOR ASTHMA
The Company convened its Asthma Scientific Advisory Board, comprised of
leading international experts in asthma, to establish a Phase 2
clinical trial strategy for patients with moderate to severe asthma.
The Company anticipates initiating this trial in the fourth quarter of
2004.
ABOUT DISCOVERY LABORATORIES
Discovery Laboratories, Inc. is a biopharmaceutical company developing its
proprietary surfactant technology as Surfactant Replacement Therapies for
respiratory diseases. Surfactants are compositions produced naturally in the
lungs and essential for breathing. Discovery's technology produces an engineered
version of natural human lung surfactant that is designed to closely mimic the
essential properties of human lung surfactant. Discovery believes that through
its technology, pulmonary surfactants have the potential, for the first time, to
be developed into a series of respiratory therapies for critical care and other
hospitalized patients where there are few or no approved therapies available.
Discovery has filed a New Drug Application with the FDA for clearance to market
Surfaxin, the Company's lead product, for the prevention of Respiratory Distress
Syndrome in premature infants. Discovery is currently conducting a Phase 2
clinical trial for Acute Respiratory Distress Syndrome in adults, and Phase 3
and Phase 2 clinical trials for Meconium Aspiration Syndrome in full-term
infants. With aerosolized surfactant formulations, Discovery is preparing to
initiate a Phase 2 trial for asthma (development name DSC-104) and a Phase 2
trial for Respiratory Dysfunction in premature infants.
More information about Discovery is available on the Company's Web site at
www.DiscoveryLabs.com.
To the extent that statements in this press release are not strictly historical,
including statements as to business strategy, outlook, objectives, future
milestones, plans, intentions, goals, future financial conditions, future
collaboration agreements, the success of the Company's product development,
events conditioned on stockholder or other approval, or otherwise as to future
events, such statements are forward-looking, and are made pursuant to the safe
harbor provisions of the Private 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, the risk that the Company will not be able to raise additional
capital or enter into additional collaboration agreements (including strategic
alliances for our aerosol and Surfactant Replacement Therapies), risk of delay
in the Company's preparation and filing of applications for regulatory approval,
risk of delay in the FDA's or other health regulatory authorities' approval of
any applications filed by the Company, risks that any such regulatory authority
will not approve the marketing and sale of a drug product even after acceptance
of an application filed by the Company for any such drug product, risks relating
to the ability of the Company's third party contract manufacturers to provide
the Company with adequate supplies of drug substance and drug products for
completion of any of the Company's clinical studies, other risks relating to the
lack of adequate supplies of drug substance and drug product for completion of
any of the Company's clinical studies, and risks relating to the development of
competing therapies and/or technologies by other companies. Companies in the
pharmaceutical and biotechnology industries have suffered significant setbacks
in advanced clinical trials, even after obtaining promising earlier trial
results. Data obtained from tests are susceptible to varying interpretations,
which may delay, limit or prevent regulatory approval. Those associated risks
and others are further described in the Company's 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.
COMPANY CONTACTS:
John G. Cooper, EVP and CFO
Kori Beer, IR & Communications
215-340-4699
DISCOVERY LABORATORIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share data)
(unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 2004 JUNE 30, 2004
-------------------- --------------------
2004 2003 2004 2003
-------- -------- -------- --------
Revenues from collaborative agreements $ 697 $ 263 $ 839 $ 657
Operating expenses:
Research and Development 6,123 4,011 12,833 7,855
General and Administrative 3,425 1,137 5,706 2,304
-------- -------- -------- --------
Total expenses 9,548 5,148 18,539 10,159
Operating loss (8,851) (4,885) (17,700) (9,502)
Other income and expense (46) 36 (69) 148
-------- -------- -------- --------
Net loss $ (8,897) $ (4,849) $(17,769) $ (9,354)
======== ======== ======== ========
Net loss per common share $ (0.19) $ (0.14) $ (0.39) $ (0.28)
Weighted average number of common shares
outstanding 46,683 33,487 45,003 33,172
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
JUNE 30, DECEMBER 31,
2004 2003
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ASSETS
Current assets:
Cash, cash equivalents, and
marketable securities $ 41,309 $ 29,422
Prepaid expenses and other current assets 1,271 668
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Total current assets 42,580 30,090
Property and equipment, net of
depreciation 2,922 2,414
Other assets 210 211
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Total assets $ 45,712 $ 32,715
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Credit facility with corporate partner $ 4,811 $ 2,436
Other current liabilities 5,211 4,593
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Total current liabilities 10,022 7,029
Deferred revenue 403 672
Capitalized lease 1,187 711
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Total liabilities 11,612 8,412
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Stockholders' equity 34,100 24,303
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Total liabilities and stockholders' equity $ 45,712 $ 32,715
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