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
May
1, 2007
Date
of
Report (Date of earliest event reported)
Discovery
Laboratories, Inc.
(Exact
name of registrant as specified in its charter)
|
Delaware
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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
May 2,
2007, Discovery Laboratories, Inc. (the “Company”) issued a press release
announcing financial results for the first quarter ended March 31, 2007,
providing selected updates on the progress of regulatory and manufacturing
activities associated with the Company’s lead product, Surfaxin® (lucinactant)
for the prevention of Respiratory Distress Syndrome (RDS) in premature infants
and discussing the appointment of W. Thomas Amick as Chairman of the Company’s
Board of Directors in March. The press release is attached as Exhibit 99.1
hereto.
In
accordance with General Instruction B.2 of Form 8-K, the information in Item
2.02 of this Current Report on Form 8-K and Exhibit 99.1 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.
Item
8.01. Other
Events.
On
May 1,
2007, the United States District Court for the Eastern District of Pennsylvania
dismissed, without prejudice, the consolidated shareholder derivative complaints
initially filed in May and June 2006 and amended on December 29,
2006 against the Company and certain of its executive officers and
directors. The plaintiffs were granted leave to file an amended complaint by
May
15, 2007.
On
May 3,
2007, the Company held a conference call to discuss the financial results for
the first quarter. During the conference call, John G. Cooper, the Company’s
Executive Vice President and Chief Financial Officer provided an estimate of
aggregate cash outflows from operating and investing activities for the second
quarter of approximately $9.0 million to $9.5 million. This estimate represents
an increase of approximately $0.5 million from the guidance provided for the
first quarter of 2007, primarily as a result of activities associated with
the
development of Aerosurf™, the Company’s aerosolized surfactant
platform.
Item
9.01. Financial
Statements and Exhibits.
(d) Exhibits
|
99.1
|
Press
release dated May 2, 2007
|
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.
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|
|
Title:
President and Chief Executive
Officer
|
Date:
May
3, 2007
3
Exhibit
99.1
Discovery
Labs Reports First Quarter 2007 Financial Results
Warrington,
PA — May 2, 2007 — Discovery Laboratories, Inc. (Nasdaq:
DSCO),
today
announced financial
results for the first quarter ended March 31, 2007. The Company will host a
conference call on May 3, 2007 at 9:00 AM EDT. The
call in number is 866-332-5218.
For
the
quarter ended March 31, 2007, the Company reported a net loss of $8.3 million
(or $0.12 per share) on 70.0 million weighted average common shares outstanding
compared to a net loss of $15.8 million (or $0.26 per share) on 61.2 million
weighted average common shares outstanding for the same period in
2006.
As
of
March 31, 2007, the Company had cash and marketable securities of $20.7 million.
On April 5, 2007, the Company completed a registered direct offering to
institutional investors resulting in gross proceeds of $30.2 million ($28.2
million net) from the issuance of 14,050,000 shares of common stock at $2.15
per
share. Additionally, under its existing Committed Equity Financing Facility
(CEFF), the Company may issue up to approximately 7.1 million shares (not to
exceed $40.5 million in aggregate proceeds) in future financings. During the
first quarter of 2007, the Company’s cash and marketable securities decreased by
$6.3 million primarily due to $8.3 million used in operating activities and
debt
payments, offset by proceeds of $2.0 million from a financing pursuant to the
CEFF.
Selected
highlights include:
| · |
At
the Company’s clarification meeting with the U.S. Food and Drug
Administration (FDA), the Company obtained guidance regarding the
steps
necessary to potentially gain approval of Surfaxin®
for the prevention of Respiratory Distress Syndrome (RDS) in premature
infants. This guidance provided the clarity needed to address key
remaining issues identified in the April 2006 FDA Approvable Letter,
which
focused on the Chemistry, Manufacturing and Controls portion of
the
Company’s New Drug Application (NDA). Consistent with the guidance
obtained from the FDA and based on the progress made by the Company
in its
comprehensive investigation and manufacturing remediation activities
related to the April 2006 process validation stability failure,
the
Company manufactured new Surfaxin process validation batches. The
Company
plans to file its formal response to the Surfaxin Approvable Letter
in
September or October 2007, followed by an anticipated six-month
review
cycle by the FDA for potential approval of the Surfaxin NDA.
|
| · |
In
March, W. Thomas Amick was appointed Chairman of the Company’s Board of
Directors. Mr. Amick brings extensive pharmaceutical, strategic
and
operational leadership to Discovery Labs as the Company prepares
for the
potential FDA approval of SurfaxinÒ
and advances its pipeline of Surfactant Replacement Therapies (SRT)
for
the treatment of various respiratory diseases. Mr. Amick enjoyed
a highly
successful 30-year career with Johnson & Johnson (J&J) where he
led the launch of Procrit®
(Epoetin alfa) and built J&J’s oncology franchise into one of the most
successful businesses in J&J history with annual revenues exceeding
$2.5 billion.
|
Robert
J.
Capetola, Ph.D., President and Chief Executive Officer of Discovery, commented,
“We
believe, with the clarity gained from the FDA meeting, with the continuing
enhancements to our quality and manufacturing operations, and through strategic
improvements to our financial position, we have significantly strengthened
our
Company over the last two quarters. Surfaxin potentially
represents an opportunity to improve the standard of care for premature infants
and is a base on which we plan to build an important respiratory
franchise.
Aerosurf™, our aerosolized SRT delivered through non-invasive methods, holds the
promise to significantly expand the use of surfactants in neonatal and pediatric
medicine. The Company’s
top
priority is to gain FDA approval of Surfaxin while advancing Aerosurf
into Phase 2 clinical trials later this year.”
First
Quarter 2007 Operating Expenses:
Total
operating expenses for the quarter ended March 31, 2007 were $8.2 million
compared to $16.3 million for the same period in 2006. The decrease in this
quarter compared to the same period last year is primarily due to costs incurred
in 2006 in anticipation of the potential approval and commercial launch of
Surfaxin for the prevention of RDS in premature infants. After the April
2006
Surfaxin process validation stability failure, the Company took immediate
steps
to lower its costs and suspended pre-launch commercial activities, reduced
personnel and reorganized corporate management. For the first quarter of
2007,
the components of the $8.2 million operating expense include:
| · |
manufacturing
development expenses (included in research and development expenses)
of
$2.3 million, including: (i) costs associated with operating the
Company’s
manufacturing facility to support the production of clinical and
anticipated commercial drug supply for the Company’s SRT programs; (ii)
continued investment in the Company’s quality assurance and analytical
chemistry capabilities to ensure compliance with current good
manufacturing practices (cGMP); (iii) activities associated with
developing data and other information necessary for the Company’s formal
response to the Surfaxin Approvable Letter; and (iv) activities
to develop
improved formulations of the Company’s
SRT.
|
| · |
research
and development expenses (excluding manufacturing development activities)
of $3.1 million, including: (i) costs associated with developing
data and
other information necessary for the Company’s formal response to the
Surfaxin Approvable Letter; (ii) development activities related
to
Aerosurf™,
the Company’s proprietary SRT in aerosolized form administered through
nasal continuous positive airway pressure (nCPAP), to address premature
infants at risk for respiratory failure; and (iii) activities
to develop Surfaxin and aerosol SRT to address pediatric and adult
patients with respiratory disorders.
|
| · |
general
and administrative expenses of $2.8 million, including costs associated
with executive management, the defense of the securities class
action and
derivative proceedings (which have been dismissed), evaluation
of various
strategic business alternatives, financial and legal management
and other
administrative costs.
|
| · |
$0.6
million (classified in the amounts above as $0.2 million in research
and
development and $0.4 million in general and administrative) associated
with stock-based employee compensation resulting from Financial
Accounting
Standards No. 123(R).
|
Debt
Arrangements at March 31, 2007:
The
Company had $9.1 million outstanding under its long-term loan with PharmaBio
Development Inc., a strategic investment group of Quintiles Transnational
Corp.
The outstanding principal, together with all accrued interest from July 1,
2006,
is due and payable on April 30, 2010. The Company may repay this loan in
whole
or in part at any time prior to April 2010 without prepayment penalty or
premium.
The
Company had $4.2 million outstanding under a capital lease financing arrangement
with General Electric Capital Corporation (GECC), of which $2.0 million was
classified as a current liability and $2.2 million as a long-term liability.
About
Discovery Labs
Discovery
Laboratories, Inc. is a biotechnology company developing 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 its
proprietary SRT pipeline has the potential to advance respiratory medicine
and
address a variety of respiratory diseases affecting neonatal, pediatric and
adult patients.
Discovery’s
lead product candidate, Surfaxin®,
is the
subject of an Approvable Letter from the FDA for the prevention of Respiratory
Distress Syndrome in premature infants. Surfaxin is also being developed
for
other neonatal and pediatric indications. Aerosurf™, Discovery’s aerosolized
SRT, is being developed to potentially obviate the need for intubation and
conventional mechanical ventilation and holds
the
promise to significantly expand the use of surfactants in respiratory medicine.
For
more
information, please visit our website at www.Discoverylabs.com.
To
the extent that statements in this press release are not strictly historical,
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 Discovery may not profitably develop and market its products,
the
risk that financial market conditions may change, the risk that Discovery
will
not be able to raise additional capital or enter into additional collaboration
agreements, the risk that Discovery will not be able to attract or retain
qualified personnel or timely provide for a successful sales and marketing
organization, risks relating to the progress of Discovery’s research and
development,, risks in the FDA or other regulatory agency review process
generally, including that such regulatory authority will not approve the
marketing and sale of a drug product even after acceptance of an application
or
that approval by such regulatory agency may be withheld, delayed and/or limited
by indications or other label limitations, risks that the Chemical,
Manufacturing and Controls section of Discovery’s New Drug Application will not
satisfy the FDA, risks relating to the ability of Discovery or Discovery’s third
party manufacturers and development partners to manufacture or provide Discovery
with adequate supplies of drug substances and expertise for completion of
any of
Discovery’s clinical studies, risks related to the ability of Discovery and its
collaborators to develop, manufacture and successfully commercialize products
that combine Discovery’s drug products with innovative aerosolization
technologies, risks relating to drug manufacturing by Discovery, risks relating
to the significant, time-consuming and costly research, development,
pre-clinical studies, clinical testing and regulatory approval process for
any
products that Discovery may develop independently or with Discovery’s
collaboration arrangements, risks relating to the development by other companies
of competing therapies and/or technologies, risks relating to reimbursement
and
health care reform, and risks relating to securities, product liability and
other litigation. 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
Contact:
Lisa
Caperelli, Investor Relations
215-488-9413
Condensed
Consolidated Statements of Operations
(in
thousands, except per share data)
|
Three
Months Ended March
31, |
|||||||
|
2007
|
2006
|
||||||
|
Revenue
|
$
|
--
|
$
|
--
|
|||
|
Operating
expenses (1) :
|
|||||||
|
Research
and development
|
5,422
|
7,613
|
|||||
|
General
and administrative
|
2,754
|
8,682
|
|||||
|
Total
operating expenses
|
8,176
|
16,295
|
|||||
|
Operating
loss
|
(8,176
|
)
|
(16,295
|
)
|
|||
|
Other
income / (expense)
|
(134
|
)
|
500
|
||||
|
Net
loss
|
$
|
(8,310
|
)
|
$
|
(15,795
|
)
|
|
|
Net
loss per common share
|
$
|
(0.12
|
)
|
$
|
(0.26
|
)
|
|
|
Weighted
average number of common shares outstanding
|
69,989
|
61,170
|
|||||
(1)
Included in expenses for the three months ended March 31, 2007 and 2006
are
charges of $0.6 million ($0.2 million classified as research and development
and
$0.4 million classified as general and administrative) and $1.7 million
($0.4
million classified as research and development and $1.3 million classified
as
general and administrative), respectively, associated with stock-based
employee
compensation in accordance with the provisions of FAS No. 123(R), which
the
Company adopted on January 1, 2006.
Condensed
Consolidated Balance Sheets
(in
thousands)
|
March
31,
2007
|
December
31,
2006
|
||||||
|
ASSETS
|
|||||||
|
Current
Assets:
|
|||||||
|
Cash
and marketable securities
|
$
|
20,748
|
$
|
27,002
|
|||
|
Prepaid
expenses and other current assets
|
216
|
565
|
|||||
|
Total
Current Assets
|
20,964
|
27,567
|
|||||
|
Property
and equipment, net
|
4,831
|
4,794
|
|||||
|
Other
assets
|
1,902
|
2,039
|
|||||
|
Total
Assets
|
$
|
27,697
|
$
|
34,400
|
|||
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|||||||
|
Current
Liabilities:
|
|||||||
|
Accounts
payable and accrued expenses
|
$
|
5,119
|
$
|
5,953
|
|||
|
Capitalized
leases and other liabilities
|
1,970
|
2,015
|
|||||
|
Total
Current Liabilities
|
7,089
|
7,968
|
|||||
|
Long-Term
Liabilities:
|
|||||||
|
Loan
payable, including accrued interest
|
9,086
|
8,907
|
|||||
|
Capitalized
leases and other liabilities
|
2,754
|
3,203
|
|||||
|
Total
Liabilities
|
18,929
|
20,078
|
|||||
|
Stockholders'
Equity
|
8,768
|
14,322
|
|||||
|
Total
Liabilities and Stockholders' Equity
|
$
|
27,697
|
$
|
34,400
|
|||