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
2, 2005
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
of
incorporation)
|
(Commission
File Number)
|
(IRS
Employer
Identification
Number)
|
2600
Kelly Road, Suite 100
Warrington,
Pennsylvania 18976
(Address
of principal executive offices)
(215)
488-9300
(Registrant's
telephone number, including area code)
(Former
name or former address, if changed since last report)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
o Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
o Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item
2.02. Results
of Operations and Financial Condition
On
August
2, 2005, Discovery Laboratories, Inc. (the “Company”) issued a press release
announcing financial results for the quarter ended June 30, 2005, and providing
selected updates on the Company’s progress since the end of first fiscal quarter
in 2005. The full text of the press release is set forth in Exhibit 99.1
hereto.
Item
9.01. Financial
Statements and Exhibits
(c) Exhibits:
|
99.1
|
Press
release dated August 2, 2005.
|
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 3, 2005 | ||
3
Exhibit
99.1
Discovery
Labs Reports Second Quarter 2005 Financial Results
and
Business Progress
Warrington,
PA, August 2, 2005 — Discovery Laboratories, Inc. (Nasdaq: DSCO), today
announced financial results for the three and six months ended June 30, 2005.
The Company will host a conference call today at 10:00 AM EDT. The
call
in number is 866-332-5218.
For
the
quarter ended June 30, 2005, the Company reported a net loss of $9.8 million,
or
$0.18 per share, on 53.6 million weighted average common shares outstanding,
compared to a net loss of $8.9 million, or $0.19 per share, on 46.7 million
weighted average shares outstanding for the same period in 2004. For the six
months ended June 30, 2005, the Company reported a net loss of $19.1 million,
or
$0.37 per share, on 52.0 million weighted average common shares outstanding,
compared to a net loss of $17.8 million, or $0.39 per share, on 45.0 million
weighted average shares outstanding for the same period in 2004. The Company
currently has 53.7 million shares outstanding.
As
of
June 30, 2005, the Company had cash and marketable securities of $42.9 million,
a decrease of $8.9 million from the prior quarter. Cash used in operating and
investing activities during the quarter was $9.3 million, offset by $0.4 million
received in proceeds from the exercise of stock options.
As
of
June 30, 2005, the Company had $67.8 million available under the Committed
Equity Financing Facility (CEFF), subject to certain conditions. During the
three and six months ended June 30, 2005, the Company did not raise capital
under the CEFF. Additionally, the Company has a $9.0 million capital lease
financing arrangement with General Electric Capital Corporation, of which $5.5
remains available for use and $2.5 million is outstanding. The Company’s $8.5
million credit facility with PharmaBio Development Inc., Quintiles strategic
investment group, is fully outstanding and repayment is due in December 2006.
Robert
J.
Capetola, Ph.D., President and Chief Executive Officer of Discovery, commented,
“Surfaxin®
is the
cornerstone of our precision-engineered
Surfactant Replacement Therapy pipeline that holds the promise to revolutionize
the treatment of respiratory diseases prevalent in the neonatal intensive care
unit, critical care, and hospital settings. With the recent submission of our
Response to the FDA Approvable Letter for Surfaxin, we are prepared for the
FDA
to complete its review of our NDA within the next six months. We believe that
we
are well positioned as a company based on the potential U.S. launch and European
approval of Surfaxin in the first quarter of 2006, collaborative
commercialization opportunities in Europe and Japan, potential financial
resources of approximately $110 million and a broad pipeline centered upon
our
SRT technology that, to date, has achieved significant milestones.”
1
Review
of
Financial Results - Three and Six Months ended June 30, 2005
The
Company reported a net loss of $9.8 million and $19.1 million for the three
and
six months ended June 30, 2005, respectively, an increase of $0.9 million and
$1.4 million compared to the same prior year periods. The change in the net
loss
is primarily due to:
| (i) |
the
Company building its own specialty pulmonary United States sales
and
marketing organization to focus initially on the commercial and medical
promise of its Surfactant Replacement Therapy (SRT) to address respiratory
therapies for the Neonatal Intensive Care Unit (NICU). Investments
include
pre-launch commercialization activities (included in general and
administrative expenses) to support the potential approval and launch
of
Surfaxin for Respiratory Distress Syndrome (RDS) including, without
limitation, sales, marketing and medical affairs management as well
as
medical science liaisons. For the three and six months ended June
30,
2005, costs associated with pre-launch commercialization activities
were
$2.1 million and $4.5 million, respectively, an increase of $1.0
million
and $2.5 million compared to the same prior year period;
|
| (ii) |
manufacturing
activities (included in research and development) to support the
production of clinical and commercial drug supply for the Company’s SRT
programs, including Surfaxin, in conformance with current Good
Manufacturing Practices (cGMPs). For the three and six months ended
June
30, 2005, costs associated with these manufacturing activities were
$2.7
million and $4.0 million, respectively, an increase of $0.8 million
and
$0.5 million compared to the same prior year period;
|
| (iii) |
research
and development activities related to the advancement of the Company’s SRT
pipeline. For the three and six months ended June 30, 2005, costs
associated with these activities, excluding manufacturing activities,
were
$3.2 million and $6.9 million, respectively, a decrease of $1.3 million
and $2.6 million compared to the same prior year period. The decrease
is
primarily due to costs in 2004 associated with clinical and regulatory
activities for Surfaxin for RDS, principally the NDA filing, a related
milestone payment for the license of Surfaxin, and follow-up clinical
activity for the related two Phase 3 clinical trials. For the three
and
six months ended June 30, 2005, research and development activities
primarily reflect regulatory activities associated with Surfaxin
for RDS
(specifically the U.S. FDA Approvable Letter and the Marketing
Authorization Application with the European Medicines Evaluation
Agency)
and clinical activities related to the Phase 2 clinical trials for
ARDS in
adults, BPD in premature infants, and aerosolized SRT administered
through
nasal nCPAP for Neonatal Respiratory
Failures;
|
| (iv) |
general
and administrative activities including financial and information
technology capabilities in preparation for the potential approval
and
launch of Surfaxin for RDS, executive management and support
infrastructure, legal activities related to the preparation and filing
of
patents in connection with the expansion of our SRT pipeline, facilities
related costs to accommodate current and prepare for future growth,
and
corporate governance initiatives to comply with the Sarbanes-Oxley
Act.
For the three and six months ended June 30, 2005, costs associated
with
these related activities were $2.0
million
and $3.9 million respectively, a decrease of $0.1 million and an
increase
of $0.4 million compared to the same period the prior year;
and
|
2
| (v) |
the
Company restructuring in December 2004 its strategic alliance with
Laboratories del Dr. Esteve, S.A. to develop, market and sell Surfaxin
in
Southern Europe. For the three and six months ended June 30, 2005,
revenues from this strategic alliance were $24,000 and $85,000,
respectively, a decrease of $0.7 million and $0.8 million, compared
to the
same prior year period.
|
About
Discovery Labs
Discovery
Laboratories, Inc. is a biotechnology company developing its proprietary
surfactant technology as Surfactant Replacement Therapies (SRT) for respiratory
diseases. Surfactants are produced naturally in the lungs and are essential
for
breathing. Discovery’s technology produces a precision-engineered surfactant
that is designed to closely mimic the essential properties of natural 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 patients in the neonatal intensive care
unit, critical care unit and other hospital settings, where there are few or
no
approved therapies available.
Discovery
has received an Approvable Letter from the FDA for Surfaxin, the Company’s lead
product, for the prevention of Respiratory Distress Syndrome (RDS) in premature
infants, and has filed a Marketing Authorization Application with the EMEA
for
clearance to market Surfaxin in Europe. Discovery is also conducting various
clinical programs to address Acute Respiratory Distress Syndrome (ARDS) in
adults, Bronchopulmonary Dysplasia (BPD) in premature infants, Neonatal
Respiratory Disorders in premature infants, severe asthma in adults, and
Meconium Aspiration Syndrome (MAS) in full-term 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 Discovery’s product development, events
conditioned on stockholder or other approval, or otherwise as to future events,
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. Among
the factors which could affect Discovery’s actual results and could cause
results to differ from those contained in these forward-looking statements
are
the risk that financial conditions may change, risks relating to the progress
of
Discovery’s research and development, the risk that Discovery 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 that Discovery will not be able to develop a successful sales
and marketing organization in a timely manner, if at all, risk that Discovery’s
internal sales and marketing organization will not succeed in developing market
awareness of Discovery’s products, risk that Discovery’s internal sales and
marketing organization will not be able to attract or maintain qualified
personnel, risk of delay in the FDA’s or other health regulatory authorities’
approval of any applications filed by Discovery, 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 Discovery for any such drug product,
risks
relating to the ability of Discovery’s third party contract manufacturers to
provide Discovery with adequate supplies of drug substance and drug products
for
completion of any of Discovery’s clinical studies, other risks relating to the
lack of adequate supplies of drug substance and drug product for completion
of
any of Discovery’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 Discovery’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.
3
Company
Contacts:
John
G.
Cooper, EVP and CFO
215-488-9490
Lisa
Caperelli, Investor Relations
215-488-9413
4
|
Condensed
Consolidated Statement of Operations
(in
thousands, except per share data)
|
||||||||||||||||
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
|
June
30,
|
June
30,
|
|||||||||||||||
|
(unaudited)
|
(unaudited)
|
|||||||||||||||
|
2005
|
2004
|
2005
|
2004
|
|||||||||||||
|
Revenues
from collaborative agreements
|
$
|
24
|
$
|
697
|
$
|
85
|
$
|
839
|
||||||||
|
Operating
expenses:
|
||||||||||||||||
|
Research
and development
|
5,864
|
6,373
|
10,984
|
13,083
|
||||||||||||
|
General
and administrative
|
4,095
|
3,175
|
8,365
|
5,456
|
||||||||||||
|
Total
expenses
|
9,959
|
9,548
|
19,349
|
18,539
|
||||||||||||
|
Operating
loss
|
(9,935
|
)
|
(8,851
|
)
|
(19,264
|
)
|
(17,700
|
)
|
||||||||
|
Other
income / (expense)
|
109
|
(46
|
)
|
122
|
(69
|
)
|
||||||||||
|
Net
loss
|
$
|
(9,826
|
)
|
$
|
(8,897
|
)
|
$
|
(19,142
|
)
|
$
|
(17,769
|
)
|
||||
|
Net
loss per common share
|
$
|
(0.18
|
)
|
$
|
(0.19
|
)
|
$
|
(0.37
|
)
|
$
|
(0.39
|
)
|
||||
|
Weighted
average number of common shares outstanding
|
53,587
|
46,683
|
52,029
|
45,003
|
||||||||||||
5
|
Condensed
Consolidated Balance Sheets
(in
thousands)
|
|||||||
|
June
30,
|
|||||||
|
2005
|
December
31,
|
||||||
|
(unaudited)
|
2004
|
||||||
|
ASSETS
|
|||||||
|
Current
Assets:
|
|||||||
|
Cash
and marketable securities
|
$
|
42,946
|
$
|
32,654
|
|||
|
Prepaid
expenses and other current assets
|
784
|
688
|
|||||
|
Total
Current Assets
|
43,730
|
33,342
|
|||||
|
Property
and equipment, net
|
4,076
|
4,063
|
|||||
|
Other
assets
|
220
|
232
|
|||||
|
Total
Assets
|
$
|
48,026
|
$
|
37,637
|
|||
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|||||||
|
Current
Liabilities
|
$
|
7,697
|
$
|
8,823
|
|||
|
Long-Term
Liabilities:
|
|||||||
|
Credit
facility
|
8,500
|
5,929
|
|||||
|
Capitalized
leases and other long-term liabilities
|
1,632
|
1,788
|
|||||
|
Total
Liabilities
|
17,829
|
16,540
|
|||||
|
Stockholders'
Equity
|
30,197
|
21,097
|
|||||
|
Total
Liabilities and Stockholders' Equity
|
$
|
48,026
|
$
|
37,637
|
|||
6