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
February
23, 2006
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:
[
] Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[
] Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[
] Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
[
] 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
February 23, 2006, Discovery Laboratories, Inc. (the “Company”) issued a press
release announcing financial results for the fourth quarter and year ended
December 31, 2005, and providing selected updates on the Company’s progress
since the end of the third fiscal quarter in 2005. The full text of the press
release is set forth in Exhibit 99.1 hereto.
Item
8.01. Other
Events.
The
Company has received the Day 180 List of Outstanding Issues from the Committee
for Medicinal Products for Human Use (“CHMP”) in relation to the Company’s
European Marketing Authorization Application for Surfaxin®
for the
prevention and rescue treatment of Respiratory Distress Syndrome in premature
infants. The Company plans to submit a written response to all of the CHMP’s
outstanding issues in early April 2006 with a possible Oral Explanation before
the CHMP in late June 2006. According to standard CHMP procedures, the Committee
is expected to make a recommendation on whether to grant a Marketing
Authorization for Surfaxin and issue a formal Opinion in late July
2006.
Cautionary
Note Regarding Forward-looking Statements:
To
the
extent that statements in this Current Report on Form 8-K 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 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 Current
Report are subject to certain risks and uncertainties that could cause actual
results to differ materially from the statements made. Such 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.
Item
9.01. Financial
Statements and Exhibits.
| (d) | Exhibits: |
|
99.1
|
Press
release dated February 23,
2006.
|
The
information in Item 2.02 of this Current Report on 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: March 1, 2006 | ||
3
Exhibit
99.1
Discovery
Labs Reports Fourth Quarter 2005 Financial Results
and
Business Progress
Warrington,
PA — February 23, 2006 — Discovery Laboratories, Inc. (Nasdaq:
DSCO),
today
announced financial
results for the fourth quarter and year ended December 31, 2005. The Company
will host a conference call Friday, February 24th
at 10:00
AM EST. The
call in number is 866-332-5218.
For
the
quarter ended December 31, 2005, the Company reported a net loss of $29.4
million, or $0.51 per share, on 57.8 million weighted average common shares
outstanding, compared to a net loss of $20.1 million, or $0.42 per share, on
47.2 million weighted average shares outstanding for the same period in 2004.
For
the
twelve months ended December 31, 2005, the Company reported a net loss of $58.9
million, or $1.09 per share, on 54.1 million weighted average shares
outstanding, compared to a net loss of $46.2 million, or $1.00 per share, on
46.2 million weighted average shares outstanding for the same period in 2004.
As
of
December 31, 2005, the Company had 61.0 million shares outstanding.
In
December 2005, the Company purchased the manufacturing operations of Laureate
Pharma, Inc. (Laureate) in Totowa, NJ for $16.0 million and incurred additional
related expenses of $0.8 million. Included in the fourth quarter 2005 net loss
is a charge, classified as in-process research and development, of $16.8 million
or $0.29 per share related to the manufacturing purchase. Included in the fourth
quarter 2004 net loss is a charge, classified as corporate partnership
restructuring, of $8.1 million, or $0.17 per share, associated with the
restructuring of strategic collaborations with Quintiles Transnational Corp.
(Quintiles) and Laboratorios del Dr. Esteve S.A. (Esteve).
Excluding
these charges, the net loss for the fourth quarter 2005 was $12.6 million,
or
$0.22 per share, compared to a net loss of $11.9 million, or $0.25 per share
for
the same period in 2004 and, for the twelve months ended December 31, 2005,
the
net loss was $42.1 million, or $0.78 per share, compared to a net loss of $38.1
million, or $0.82 per share, for the same period in 2004.
As
of
December 31, 2005, the Company had cash and marketable securities of $50.9
million, a net increase of $0.6 million from the previous quarter. Aggregate
cash outflows for the fourth quarter were $28.6 million, which consisted of
$12.6 million used in operating and investing activities and $16.0 million
for
the purchase of the manufacturing operations of Laureate. These cash outflows
were offset by aggregate cash inflows of $29.2 million, which consisted of
(i) a
registered direct public offering resulting in net proceeds of $18.9 million;
(ii) a registered direct public offering to Esteve, resulting in net proceeds
of
$4.5 million; (iii) a financing pursuant to the Company’s Committed Equity
Financing Facility (CEFF) resulting in net proceeds of $3.2 million; and (iv)
$2.6 million, of which $2.4 million was associated with financing the
manufacturing purchase, from the use of the capital lease financing arrangement
with General Electric Capital Corporation (GECC).
As
of
December 31, 2005, the Company had $47.6 million available under the CEFF,
subject to certain conditions. Additionally, under the Company’s $9.0 million
capital lease financing arrangement with GECC, $4.9 million is outstanding
($1.6
million classified as current liabilities and $3.3 million as long-term
liabilities) and $2.6 million remains available for use. The Company’s $8.5
million credit facility with Quintiles is fully outstanding, due in December
2006 and now classified as a current liability.
Robert
J.
Capetola, Ph.D., President and Chief Executive Officer of Discovery, commented,
“This past quarter, we believe we have significantly strengthened our Company,
both financially and operationally in preparation for the potential FDA approval
in April 2006 and U.S. commercial launch in the second quarter of 2006 of our
lead product, Surfaxin®.
We have
raised $29.0 million in capital, secured our own manufacturing operation --
a
key strategic asset for Surfaxin and our pipeline, and are now in the final
stage of building our specialty neonatal U.S. commercial capability. Important
to the development of our surfactant replacement therapy (SRT) pipeline, we
established a strategic alliance with Chrysalis Technologies (a division of
Philip Morris USA) where we acquired rights to a novel aerosol generating
technology being developed to enable the delivery of SRT to the deep lung.
The
successful application of our SRT and Chrysalis’ aerosol technology holds the
promise, for the first time, of producing surfactant-based therapies that may
revolutionize the treatment of serious respiratory conditions such as neonatal
respiratory failure, acute lung injury, chronic obstructive pulmonary disorder,
asthma, cystic fibrosis and others.”
Review
of Operating Results - Three and Twelve Months Ended December 31,
2005
The
Company reported a net loss of $29.4 million and $58.9 million for the three
and
twelve months ended December 31, 2005, respectively. Excluding the $16.8 million
charge in the fourth quarter of 2005 for the purchase of the manufacturing
operation and the $8.1 million charge in the fourth quarter of 2004 for the
restructuring of strategic collaborations, the net loss increased by $0.7
million and $4.0 million for the three and twelve months ended December 31,
2005, respectively, as compared to the same periods in 2004. The change in
the
net loss is primarily due to:
| (i) |
manufacturing
activities (included in research and development expenses) 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 twelve months ended
December 31, 2005, costs associated with these manufacturing activities
were $4.4 million and $11.4 million, respectively, an increase of $2.0
million and $4.4 million compared to the same periods in 2004.
Expenditures in 2005 for manufacturing activities include, but are
not
limited to, the implementation of enhancements to quality controls,
process assurances and documentation requirements that support the
production process predominantly at Laureate’s Totowa, NJ operation (the
Company’s contract manufacturer at that time) in response to the FDA 483
inspectional observations. Additionally, the increase in expenses in
the
fourth quarter of 2005 were due to enhancements to Laureate’s Totowa, NJ
operations and facility for the production of Surfaxin, SRT formulations
and aerosol development capabilities. In December 2005, the Company
purchased the manufacturing operation of Laureate in Totowa, NJ;
|
| (ii) |
research
and development activities related to the advancement of the Company’s SRT
pipeline. For the three and twelve months ended December 31, 2005,
costs
associated with these activities, excluding manufacturing activities,
were
$3.1 million and $12.7 million, respectively, a decrease of $1.6 million
and $6.1 million compared to the same periods in 2004. 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 pertaining to the two Phase 3 clinical trials. For the three
and
twelve months ended December 31, 2005, research and development activities
primarily reflect regulatory activities associated with Surfaxin for
RDS
(specifically the U.S. FDA Approvable Letter and the EMEA Marketing
Authorization Application) and clinical activities related to the Phase
2
clinical trials for Acute Respiratory Distress Syndrome (ARDS) in adults,
Bronchopulmonary Dysplasia (BPD, also known as Chronic Lung Disease)
in
premature infants, and Aerosurf™ for Neonatal Respiratory
Failure;
|
| (iii) |
pre-launch
commercialization activities (included in general and administrative
expenses) related to the Company building its own specialty pulmonary
United States commercial organization to focus initially on the commercial
and medical promise of its SRT to address respiratory therapies for
the
Neonatal Intensive Care Unit (NICU). Expenditures are for sales, marketing
and medical affairs activities in anticipation of the potential approval
and launch of Surfaxin for Respiratory Distress Syndrome (RDS) in the
second quarter of 2006. For the three and twelve months ended December
31,
2005, costs associated with pre-launch commercialization activities
were
$2.9 million and $10.1 million, respectively, an increase of $0.3 million
and $4.2 million compared to the same prior year periods;
|
| (iv) |
general
and administrative activities in preparation for managing a
fully-integrated commercial biotechnology organization. For the three
and
twelve months ended December 31, 2005, costs associated with these
activities, excluding pre-launch commercialization activities, were
$2.4
million
and $8.4 million respectively, with no change compared to the three
months
ended December 31, 2004 and an increase of $1.0 million compared to
the
twelve months ended December 31, 2004. These expenditures include building
management and systems for financial and information technology
capabilities, business development activities related to potential
strategic collaborations, legal activities related to the preparation
and
filing of patents in connection with the expansion of our SRT pipeline,
facilities expansion activities to accommodate existing and future
growth,
and corporate governance initiatives to comply with the Sarbanes-Oxley
Act; and
|
| (v) |
the
restructuring, in December 2004, of our strategic alliance with Esteve
to
develop, market and sell Surfaxin in Southern Europe. Revenues from
this
alliance decreased by $0.1 million and $1.1 million for the three and
twelve months ended December 31, 2005, respectively, compared to the
same
prior year periods.
|
Selective
Updates on Discovery’s Business in Q4 2005
| · |
In
October, the U.S. Food and Drug Administration (FDA) accepted the
Company’s response to the Approvable Letter for Surfaxin for the
prevention of RDS in premature infants. The FDA has established April
2006
as its target to complete its review of the Surfaxin NDA.
|
| · |
In
December, the Company entered into a strategic alliance with Chrysalis
Technologies, a division of Philip Morris USA Inc., for the Company
to
develop and commercialize aerosolized surfactant replacement therapies
(aSRT) to address a broad range of serious respiratory conditions.
This
alliance focuses on therapies for hospitalized patients, including
those
in the NICU, pediatric intensive care unit and the adult intensive
care
unit, and can be expanded into other hospital applications and ambulatory
settings. The
Company and Chrysalis will utilize their respective capabilities and
resources to support and fund the design and development of integrated
drug-device systems that can be uniquely customized to address specific
respiratory diseases and patient populations. Chrysalis is responsible
for
developing the design for the aerosol device platform, patient interface
and disposable dose packets. The Company is responsible for aSRT drug
formulations, clinical and regulatory activities, and the manufacturing
and commercialization of the drug-device products. The Company has
exclusive rights to Chrysalis’ aerosolization technology for use with
pulmonary surfactants for all respiratory diseases and conditions in
hospital and ambulatory settings. Chrysalis receives from the Company
a
tiered royalty, the base royalty applies to aggregate net sales of
less
than $500 million, increases on aggregate net sales in excess of $500
million, and increases again on aggregate net sales of alliance products
in excess of $1 billion.
|
| · |
In
December, the Company acquired the manufacturing operation of Laureate
in
Totowa, NJ for $16.0 million. The acquisition is intended to provide
the
Company with operational control and improved economics for the potential
commercial and clinical production of Surfaxin and its SRT products.
The
Company’s manufacturing operation is located in approximately 21,000
square feet of leased pharmaceutical manufacturing and development
space
that is specifically designed for the production of sterile
pharmaceuticals in compliance with cGMP
requirements.
|
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 Labs’ technology produces a precision-engineered surfactant
that is designed to closely mimic the essential properties of natural human
lung
surfactant. Discovery Labs believes that through its technology, pulmonary
surfactants have the potential, for the first time, to address respiratory
diseases where there are few or no approved therapies available.
Discovery
Labs’ SRT pipeline is initially focused on the most significant respiratory
conditions prevalent in the neonatal intensive care unit. The Company’s lead
product, Surfaxin®,
for the
prevention of Respiratory Distress Syndrome (RDS) in premature infants, has
received an Approvable Letter from the FDA and is under review for approval
in
Europe by the EMEA. Surfaxin is also being developed for the prevention and
treatment of Bronchopulmonary Dysplasia (BPD, also known as Chronic Lung
Disease) in premature infants. Discovery Labs is preparing to conduct multiple
Phase 2 pilot studies with Aerosurf™, aerosolized SRT administered through nasal
continuous positive airway pressure (nCPAP), for the treatment of neonatal
respiratory failure.
To
address the various respiratory conditions affecting pediatric, young adult
and
adult patients in the critical care and other hospital settings, Discovery
Labs
is conducting a Phase 2 clinical trial to address Acute Respiratory Distress
Syndrome (ARDS) in adults, and is also developing aerosol formulations of SRT
to
address Acute Lung Injury (ALI), asthma, COPD, and other respiratory
conditions.
For
more
information, please visit our corporate website 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 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 and
development partners to provide Discovery with adequate supplies of drug
substance, drug products and expertise for completion of any of Discovery’s
clinical studies, risks relating to drug manufacturing by Discovery, risks
relating to the integration of manufacturing operations into Discovery’s
existing operations, other risks relating to the lack of adequate supplies
of
drug substance and drug product for completion of any of Discovery’s clinical
studies, risks relating to the ability of the Company and its collaborators
to
develop and successfully commercialize products that will combine our drug
products with innovative aerosolization technologies, risks relating to the
significant, time-consuming and costly research, development, pre-clinical
studies, clinical testing and regulatory approval for any products that we
may
develop independently or in connection with our collaboration arrangements,
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.
Company
Contacts:
John
G.
Cooper, EVP and CFO
215-488-9490
Lisa
Caperelli, Manager, Investor Relations
215-488-9413
|
Condensed
Consolidated Statement of Operations
(in
thousands, except per share data)
|
||||||||||||||||
|
Three
Months Ended
|
||||||||||||||||
|
December
31,
|
Year
Ended
|
|||||||||||||||
|
(unaudited)
|
December
31,
|
|||||||||||||||
|
2005
|
2004
|
2005
|
2004
|
|||||||||||||
|
Revenues
from collaborative agreements
|
$
|
29
|
$
|
134
|
$
|
134
|
$
|
1,209
|
||||||||
|
Operating
expenses:
|
||||||||||||||||
|
Research
and development
|
7,477
|
7,037
|
24,137
|
25,793
|
||||||||||||
|
General
and administrative
|
5,323
|
4,958
|
18,505
|
13,322
|
||||||||||||
|
In-process
research & development
|
16,787
|
-
|
16,787
|
-
|
||||||||||||
|
Corporate
partnership restructuring
|
-
|
8,126
|
-
|
8,126
|
||||||||||||
|
Total
expenses
|
29,587
|
20,121
|
59,429
|
47,241
|
||||||||||||
|
Operating
loss
|
(29,558
|
)
|
(19,987
|
)
|
(59,295
|
)
|
(46,032
|
)
|
||||||||
|
Other
income / (expense)
|
202
|
(65
|
)
|
391
|
(171
|
)
|
||||||||||
|
Net
loss
|
$
|
(29,356
|
)
|
$
|
(20,052
|
)
|
$
|
(58,904
|
)
|
$
|
(46,203
|
)
|
||||
|
Net
loss per common share
|
$
|
(0.51
|
)
|
$
|
(0.42
|
)
|
$
|
(1.09
|
)
|
$
|
(1.00
|
)
|
||||
|
Weighted
average number of common shares outstanding
|
57,843
|
47,236
|
54,094
|
46,179
|
||||||||||||
|
|
||||||||||||||||
|
Condensed
Consolidated Balance Sheets
(in
thousands)
|
|||||||
|
|
December
31,
|
December
31,
|
|||||
|
|
2005
|
2004
|
|||||
|
ASSETS
|
|
|
|||||
|
Current
Assets:
|
|
|
|||||
|
Cash
and marketable securities
|
$
|
50,908
|
$
|
32,654
|
|||
|
Prepaid
expenses and other current assets
|
560
|
688
|
|||||
|
Total
Current Assets
|
51,468
|
33,342
|
|||||
|
Property
and equipment, net
|
4,322
|
4,063
|
|||||
|
Other
assets
|
218
|
232
|
|||||
|
Total
Assets
|
$
|
56,008
|
$
|
37,637
|
|||
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|||||||
|
Current
Liabilities:
|
|||||||
|
Accounts
payable and accrued expenses
|
$
|
7,540
|
$
|
7,969
|
|||
|
Credit
facility
|
8,500
|
-
|
|||||
|
Capitalized
leases and other liabilities, current portion
|
1,568
|
854
|
|||||
|
Total
Current Liabilities
|
17,608
|
8,823
|
|||||
|
Long-Term
Liabilities:
|
|||||||
|
Credit
facility
|
-
|
5,929
|
|
Capitalized
leases and other liabilities, long-term portion
|
3,562
|
1,788
|
|||||
|
Total
Liabilities
|
21,170
|
16,540
|
|||||
|
Stockholders'
Equity
|
34,838
|
21,097
|
|||||
|
Total
Liabilities and Stockholders' Equity
|
$
|
56,008
|
$
|
37,637
|
|||
|
|