UNITED
STATES
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
April
28, 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 18976-3622
(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
1.02. Termination
of a Material Definitive Agreement
On
May 4,
2006, Discovery Laboratories, Inc. (the "Company") issued a press release
announcing
that, in connection with the recent delay in U.S. regulatory approval
and
commercial launch of Surfaxin(R), it has undertaken a reduction of its
workforce,
including certain executives, in order to lower its cost structure and
appropriately align the Company's operations with its business priorities.
In
late
April and early May 2006, the Company reduced its workforce by 55 employees,
representing approximately 34% of its total workforce, from 160 to 105
employees. The reduction is across all functions of the Company but with
a
primary
emphasis on the commercial infrastructure which is no longer in the Company's
near-term plans.
In
connection with the restructuring, employment agreements between the Company
and
Christopher J. Schaber, Ph.D., Executive Vice President and Chief Operating
Officer;
Mark G. Osterman, Senior Vice President of Sales & Marketing; and Deni
Zodda,
Ph.D., Senior Vice President of Business Development, were terminated
effective
May 12, 2006, April 28, 2006 and May 12, 2006, respectively. Such agreements
provide for certain severance benefits, including that cash payments
in
an
aggregate amount of $1,090,000 be paid by Company to such senior executives
within 10 days of the effective termination date.
The
full
text of the press release is set forth in Exhibit 99.1 to this Current
Report
on
Form 8-K.
Item
5.02. Departure of
Directors or Principal Officers; Election of Directors; Appointment of Principal
Officers
On
April
28, 2006, the employment of Christopher J. Schaber, Executive Vice President
and Chief Operating Officer, was terminated effective May 12,
2006.
Item
9.01. Financial
Statements and Exhibits
| (d) |
Exhibits:
|
|
99.1
|
Press
Release dated May 4, 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.
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: May 4, 2006
3
Exhibit
99.1
Discovery
Labs Announces Corporate Reorganization and Personnel Reduction
Warrington,
PA — May 4, 2006 — Discovery Laboratories, Inc. (Nasdaq:
DSCO),
today
announced that it has reduced the number of employees and reorganized corporate
management in order to lower its cost structure and appropriately align
Discovery’s operations with business priorities. Discovery is taking these
actions based upon its current expectations of the financial impact of a delay
in the regulatory approval and commercial launch of Surfaxin®
for
Respiratory Distress Syndrome (RDS) in premature infants. The Company is
reducing its workforce by 55 employees which represents approximately 34% of
its
workforce. The reduction is across all functions of the Company but with a
primary emphasis on the commercial infrastructure which is no longer in
Discovery’s near-term plans.
In
April
2006, Discovery received a second Approvable Letter from the FDA relating to
its
NDA for Surfaxin for RDS. Issues contained in the second Approvable Letter
primarily focused on the Chemistry, Manufacturing and Controls (CMC) section
of
the NDA and product labeling. In April, Discovery also announced that it
anticipates a potentially significant delay in Surfaxin U.S. regulatory approval
due to the failure of certain stability parameters for process validation
batches that were previously manufactured as a requirement for regulatory
approval. This delay does not arise out of any issues related to the clinical
data from our multinational SELECT Study, which demonstrates that Surfaxin
was
significantly more effective in the prevention of RDS and also improved survival
(continuing through at least one year of life) and other outcomes versus
comparator surfactants.
Robert
J.
Capetola, Ph.D., President and Chief Executive Officer of Discovery, commented,
“Based on recent events, we have taken steps to control costs and maintain the
human and capital resources to focus on the programs that potentially allow
patients to experience the benefit of this important new class of respiratory
medicine. Our highest priority is the actions necessary to gain Surfaxin
regulatory approval. We are focused on investigating and remediating the
Surfaxin manufacturing issues and maintaining the clinical and commercial
manufacturing infrastructure for Surfaxin and our SRT pipeline. Just as
important is the development of our pipeline of SRT products, primarily our
potentially revolutionary aerosolized SRT, Aerosurf™ for neonatal respiratory
disorders, as well as exploring opportunities for strategic
partnerships.”
Discovery
recently reduced its personnel from 160 to 105 employees. Affected employees
are
eligible for certain severance payments and continuation of benefits. The
Company expects to realize annual expense savings of approximately $8.0 million
from the reduction in work force and related operating expenses. Additionally,
sales and marketing program expenses totaled approximately $5.0 million over
the
past two fiscal quarters (Q4 ’05 and Q1 ’06), and these expenses will no longer
be incurred. The Company expects to take a one-time restructuring charge of
approximately $4.5 to $5.0 million in the second quarter ending June 30, 2006
related to the staff reductions and the wind down of certain commercial
programs.
In
connection with the reorganization, which includes the discontinuance of the
commercial infrastructure, three senior executives will be leaving Discovery:
Christopher J. Schaber, Ph.D., Executive Vice President and Chief Operating
Officer; Deni M. Zodda, Ph.D., Senior
Vice President of Business Development;
and Mark
G. Osterman, Senior Vice President of Sales and Marketing.
Dr.
Capetola added, “We wish our departing colleagues the best in their future
endeavors. Our departing colleagues are highly talented and dedicated people,
but this restructuring was necessary. We have an attractive SRT pipeline, an
adaptable business model, and this reorganization reduces our cost structure
while maintaining the outstanding capabilities of the
organization.”
Dr.
Capetola will now have the direct responsibility for the following additional
functions. Supporting Dr. Capetola will be:
| · |
Manufacturing
-- Charles F. Katzer, Senior Vice President of Manufacturing Operations.
Mr. Katzer joined Discovery in January 2006 and brings over 30 years
of
broad functional experience in all aspects of manufacturing operations
with major pharmaceutical companies. Most recently he was Vice President
of Manufacturing at Medimmune Vaccines, Inc. where he was responsible
for
worldwide vaccine manufacturing operations.
|
| · |
Regulatory
-- Marjorie Hurley, Pharm.D., Vice President of Regulatory Affairs.
Dr.
Hurley joined Discovery in 2006 and has over 20 years of regulatory
experience in the biotechnology and pharmaceutical
industry.
|
| · |
Clinical
and Medical -- Robert Segal, MD, FACP, is the Company’s Senior Vice
President and Chief Medical Officer has been with Discovery since 2000.
Previously Dr. Segal was Director of Clinical Research at Merck Research
Laboratories. Supporting the Company’s research and development are Dr.
Russell Clayton, Thomas Hoffman, MD, Ph.D., Jan Mazela, MD, Ph.D.,
Carlos
Guardia, MD, and Timothy Gregory, Ph.D. This team has a wealth of medical
experience in neonatology, pediatrics, pulmonology, aerosolization,
and
respiratory care.
|
| · |
Aerosolization
Development -- the Company’s California operations are managed by Mark
Johnson, Ph.D. Dr. Johnson has been with the Company for over two years
and received his Ph.D. in chemical engineering from Massachusetts
Institute of Technology.
|
| · |
Quality
Assurance -- Gerald J. Orehostky, Vice President of Quality Operations.
Mr. Orehostky joined Discovery in 2005 and brings over 19 years of
diverse
technical and regulatory compliance experience with global pharmaceutical,
biopharmaceutical and medical device companies.
|
| · |
Business
Development -- The role of business development will be shared amongst
Dr.
Capetola, John Cooper, Executive Vice President and Chief Financial
Officer and David Lopez, CPA, Esq., Executive Vice President and General
Counsel.
|
Surfaxin
and Respiratory Distress Syndrome (RDS)
Surfaxin
is a precision-engineered, peptide-containing, synthetic surfactant that is
designed to closely mimic the function of natural human lung surfactant and
represents a potential alternative to animal-derived surfactants. Data from
Discovery’s pivotal, multinational SELECT study demonstrates that Surfaxin was
significantly more effective in the prevention of RDS and improved survival
(continuing through at least one year of life) and other outcomes versus
comparator surfactants. The SELECT
and STAR (a supportive Phase 3 study) trials, as well as a pooled Phase 3
analysis, have been presented at several international medical meetings and
the
results from the two studies were published in Pediatrics.
RDS
is a
life-threatening and costly breathing disorder that strikes tens of thousands
of
premature infants in the United States each year, with a global at-risk
population in excess of 500,000 infants. Approximately 75,000 infants are
treated with surfactants in the United States annually. Current surfactant
treatment options are limited to animal-derived surfactants harvested from
bovine (cow) and porcine (pig) sources.
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 address respiratory
diseases where there are few or no approved therapies available.
Discovery’s
SRT pipeline is focused on significant respiratory conditions prevalent in
the
neonatal intensive care unit, critical care and other hospital settings.
Discovery’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 is preparing to conduct Phase 2 pilot
studies with Aerosurf, aerosolized SRT administered through nasal continuous
positive airway pressure (nCPAP), for the treatment of neonatal respiratory
disorders. Discovery has completed a Phase 2 clinical trial to address Acute
Respiratory Distress Syndrome (ARDS) in adults, and is developing aerosol
formulations of SRT to address Acute Lung Injury (ALI), cystic fibrosis 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 that approval by the FDA or other health regulatory authorities
of any applications filed by Discovery may be withheld, delayed and/or limited
by indications or other label limitations, 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
that Discovery’s CMC will not satisfy the FDA, risk in the FDA review process
generally, 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, CFO
215-488-9490
Lisa
Caperelli, Investor Relations
215-488-9413