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
14, 2008
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 14, 2008, Discovery Laboratories, Inc. (the “Company”) issued a press
release announcing financial results for the fourth quarter ended December
31,
2007, and providing selected updates concerning the Company’s efforts to gain
approval of its New Drug Application (NDA) for Surfaxin® (lucinactant) for the
prevention of Respiratory Distress Syndrome (RDS) in premature infants. In
November 2007, the U.S. Food and Drug Administration (FDA) accepted Discovery
Labs’ Complete Response to the April 2006 Approvable Letter for
SurfaxinÒ (lucinactant),
for the prevention of RDS in premature infants. The FDA has established May
1,
2008 as its target date to complete its review of the Surfaxin NDA. The Company
also provided updates regarding the Phase 2 clinical trial for Surfaxin in
children up to the age of two with Acute Respiratory Failure (ARF). 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
February 14, 2008, the Company held a conference call to discuss the financial
results for the fourth quarter ended December 31, 2007. On the call, the Company
provided an estimate of the anticipated loss for the first quarter of 2008
of
$13.0 - $14.0 million, which includes certain non-cash charges, such as charges
associated with stock-based compensation in accordance with Financial Accounting
Standards No. 123R. The Company anticipates aggregate cash outflows from
operating and investing activities for the first fiscal quarter of 2008 of
approximately $12 million, representing an increase of approximately $2.5 -
$3.0
million from the guidance provided for the fourth quarter of 2007. The
anticipated increase in cash outflows is expected to be used primarily to
advance the development of Aerosurf™, the Company’s proprietary aerosolized SRT
(Surfactant Replacement Therapies) for the prevention and treatment of infants
at risk for respiratory failure, and establish its own U.S. commercial sales
and
marketing organization specialized in neonatal and pediatric
indications.
2
Item
9.01. Financial
Statements and Exhibits.
| (d) | Exhibits |
|
99.1
|
Press
release dated February 14, 2008
|
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.
3
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:
February 14, 2008
4
Exhibit
99.1
Discovery
Labs Reports Fourth Quarter 2007 Financial Results
Warrington,
PA — February 14, 2008 — Discovery Laboratories, Inc. (Nasdaq:
DSCO),
today
announced financial
results for the fourth quarter ended December 31, 2007. The Company will
host a
conference call today at 10:00 AM EST. The
call in number is 866-332-5218.
For
the
quarter ended December 31, 2007, the Company reported a net loss of $12.0
million (or $0.14 per share) on 88.5 million weighted average common shares
outstanding compared to a net loss of $7.8 million (or $0.12 per share)
on 66.2
million weighted average common shares outstanding for the same period
in 2006.
Included in the fourth quarter 2007 net loss is a charge of $1.8 million
associated with stock-based compensation per Financial Accounting Standards
No.
123R (“FAS 123(R)”), $0.6 million for the consolidation of operating activities
from California to the new laboratory recently completed in the Warrington,
PA
headquarters facility, and an adjustment to depreciation expense per a
change in
accounting estimates based on an evaluation of useful lives of the Company’s
fixed assets. The Company’s fourth quarter 2007 cash burn from operating
activities, capital expenditures and debt arrangements was $8.6 million.
As of
December 31, 2007, the Company had 96.6 million common shares
outstanding.
As
of
December 31, 2007, the Company had cash and marketable securities of $53.0
million and approximately 5.2 million shares available for issuance under
the
Company’s Committed Equity Financing Facility (CEFF) for future financings (not
to exceed $35.5 million). In the fourth quarter of 2007, the Company raised
$30
million associated with: (i) a registered direct offering to institutional
investors resulting in gross proceeds of $25.0 million ($23.6 million net)
from
the sale of 10.0 million shares of common stock and (ii) a financing pursuant
to
the CEFF resulting in proceeds of $5.0 million from the issuance of
approximately 1.9 million shares of common stock.
Select
Company Updates:
| · |
In
November 2007, the U.S. Food and Drug Administration (FDA) accepted
Discovery Labs’ Complete Response to the April 2006 Approvable Letter for
SurfaxinÒ (lucinactant),
for the prevention of Respiratory Distress Syndrome (RDS) in premature
infants. The FDA has established May 1, 2008 as its target date
to
complete its review of the Surfaxin New Drug Application (NDA).
The
Complete Response addressed the outstanding CMC (chemistry, manufacturing
and controls) matters identified in the Approvable Letter and included
six
month stability data on the Surfaxin process validation batches
which were
manufactured in January / February 2007. The Company has tested
and is
continuing to perform on-going stability analysis on these process
validation batches using a comprehensive stability testing protocol
that
complies with International Conference on Harmonization (ICH) guidelines.
The Company continues to be satisfied with the process validation
stability data generated to date.
|
Robert
J.
Capetola, Ph.D., President and Chief Executive Officer of Discovery Labs,
commented, “Surfaxin has the potential to raise the standard of care for
treatment of premature infants and, along with Aerosurf™,
is the
foundation 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.
Both Surfaxin and Aerosurf are based on the Company’s novel KL-4 surfactant
technology.
The
Company’s top priority is to gain FDA approval of Surfaxin. We also intend to
expand Surfaxin use through life-cycle management and continue the development
of Aerosurf into Phase 2 clinical trials. To prepare for the anticipated
approval of Surfaxin, the Company is planning to establish its own U.S.
commercial sales and marketing organization specialized in neonatal and
pediatric indications. The Company is also pursuing potential collaboration
arrangements with international partners to co-develop and/or co-commercialize
its neonatal and pediatric pipeline for Surfaxin and Aerosurf.”
| · |
The
Company is currently conducting a Phase 2 clinical trial evaluating
using
Surfaxin in children up to the age of two with Acute Respiratory
Failure
(ARF). The objective of the study is to evaluate the safety and
tolerability of Surfaxin administration and to assess whether such
treatment can decrease the duration of mechanical ventilation in
young
children with ARF. ARF occurs when lung tissue is significantly
damaged,
most commonly by a viral infection of the lung. This disorder is
largely
caused by a seasonal virus, such as influenza or Respiratory Syncitial
Virus (RSV). Currently, patient enrollment has been slower than
expected
and, as a result, the Company is extending the period for patient
enrollment through an additional viral season at already established
sites
in the southern hemisphere. The Company intends to provide an update
on
this clinical trial in the Company’s third quarter business update.
|
Fourth
Quarter 2007 Net Loss:
The
net
loss for the quarter ended December 31, 2007 was $12.0 million compared
to $7.8
million for the same period in 2006. The primary components of the $12.0
million
net loss, and the increase versus last year, included:
| · |
manufacturing
development expenses (included in research and development expenses)
of
$3.5 million, including: (i) continued investment in manufacturing,
quality assurance and analytical chemistry capabilities to ensure
compliance with current good manufacturing practices (cGMP) to
support the
production of clinical and anticipated commercial drug supply
for the
Company’s SRT pipeline; (ii) activities to develop additional formulations
of the Company’s SRT; and (iii) activities to develop aerosolization
systems, including the aerosol generating device, the disposable
dose
delivery packet and patient interface system necessary to administer
Aerosurf. These costs increased by $1.2 million compared to the
same
period last year.
|
| · |
research
and development expenses (excluding manufacturing development
activities)
of $4.3 million associated with internal development capabilities
(scientific management, clinical trial management, regulatory
compliance,
data management and biostatistics, and medical affairs) as well
as direct
program expenses to develop and advance the Company’s SRT pipeline,
primarily (i) Aerosurf,
the Company’s proprietary aerosolized SRT for the prevention and treatment
of infants at risk for respiratory failure and the potential
to obviate
the need for endotracheal intubation and conventional mechanical
ventilation, and
(ii) activities associated with the ongoing Phase 2 clinical
trial to
evaluate Surfaxin in
children up to two years of age with
ARF. These costs increased by $1.6 million compared to the same
period
last year.
|
| · |
general
and administrative expenses of $4.4 million, including costs
associated
with executive, financial and legal management, evaluation of
various
strategic business alternatives, and other administrative costs.
Also
included are pre-launch commercialization activities related
to the
Company’s plans to build its own specialty pulmonary United States sales
and marketing organization to focus on the commercial and medical
promise
of Surfaxin and Aerosurf to address respiratory therapies for
neonatal and
pediatric diseases. These costs increased by $1.4 million compared
to the
same period last year.
|
| · |
$1.8
million, included and classified in the amounts above as $0.6
million in
research and development and $1.2 million in general and administrative,
associated with stock-based employee compensation resulting from
FAS
123(R). These costs increased by $0.5 million compared to the
same period
last year.
|
| · |
The
Company reviews the estimated useful lives of its fixed assets
on an
ongoing basis and, as a result, changed its estimates of the
related
useful lives to better reflect the estimated periods during which
these
assets will remain in service. This resulted in a non-recurring
charge to
depreciation expense in the fourth quarter of 2007 of $0.4 million,
included and classified in the amounts above as $0.2 million
in research
and development and $0.2 million in general and
administrative.
|
Debt
Arrangements at December 31, 2007:
The
Company had $9.6 million outstanding under its long-term loan with PharmaBio
Development Inc., a strategic investment group of Quintiles Transnational
Corp.
The outstanding principal and all interest accrued 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 has a $12.5 million secured credit facility with Merrill Lynch
Capital
to finance capital expenditures, of which $9.0 million was made available
immediately and up to $3.5 million becomes available as the Company raises
new
capital through business development partnerships, equity and other similar
financings. In the fourth quarter of 2007, the Company raised an aggregate
of
$30 million through equity financings and an additional $3.0 million became
available for use under the credit facility. In the fourth quarter of 2007,
the
Company used $1.3 million under this facility, primarily to finance construction
of a new research and analytical laboratory in its Warrington, Pennsylvania
corporate headquarters. As of December 31, 2007, $5.6 million is outstanding
($2.6 million is classified as a current liability and $3.0 million is
classified as a long-term liability) and $5.1 million remained available
for use
under this facility.
Financial
Results for the Twelve Months Ended December 31, 2007:
For
the
twelve months ended December 31, 2007, the Company reported a net loss
of $40.0
million (or $0.49 per share) on 81.7 million weighted average common shares
outstanding compared to a net loss of $46.3 million (or $0.74 per share)
on 62.8
million weighted average common shares outstanding for the same period
in 2006.
Included in
the
net losses for the twelve months ended December 31, 2007 and 2006 are charges
of
$5.2 million (or $0.06 per share) and $5.5 million (or $0.09 per share),
respectively, associated with stock-based compensation per FAS 123(R).
Also,
included in the net loss for the twelve months ended December 31, 2006
is a
charge of $4.8 million (or $0.08 per share) associated with a corporate
restructuring following receipt of the 2006 Approvable Letter and the process
validation stability failure.
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 Labs’ technology produces a
precision-engineered surfactant that is designed to closely mimic the essential
properties of natural human lung surfactant.
Discovery
Labs’ 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 Labs’ 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 risk factors which could affect Discovery Labs actual results and could
cause results to differ from those contained in these forward-looking statements
are the risks that: Discovery Labs may be unable to profitably develop
and
market its products; financial market conditions may change; Discovery
Labs may
not be able to raise additional capital or enter into additional collaboration
agreements (including strategic alliances for development or commercialization
of SRT); Discovery Labs may not be able to attract or retain qualified
personnel
or timely provide for successful sales and marketing activities; Discovery
Labs’
research and development efforts may not progress; Discovery Labs may not
be
successful 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 accepting an application or may withhold,
delay
and/or limit marketing a drug product by indication or impose other label
limitations; Discovery Labs’ recently-submitted response to the Approvable
Letter may not satisfy the FDA; Discovery Labs or its third party manufacturers
and development partners may be unable to manufacture or provide adequate
supplies of drug substances and expertise to allow for completion of any
of
Discovery Labs clinical studies; Discovery Labs and its collaborators may
be
unable to develop, manufacture and successfully commercialize products
that
combine Discovery Labs drug products with innovative aerosolization
technologies; Discovery Labs may not be able to successfully manufacture
its
drug product candidates; Discovery Labs’ significant, time-consuming and costly
research, development, pre-clinical studies, clinical testing and efforts
to
gain regulatory approval for any products that it may develop (independently
or
in connection with collaboration arrangements) may not succeed; other companies
may develop competing therapies and/or technologies; reimbursement and
health
care reform may adversely affect Discovery Labs; and Discovery Labs may
become
involved in securities, product liability and other litigation. The foregoing
risks and others are further described in Discovery Labs 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 Statement of Operations
(in
thousands, except per share data)
|
Three
Months Ended
December
31,
|
Twelve
Months Ended
|
||||||||||||
|
(unaudited)
|
December
31,
|
||||||||||||
|
2007
|
2006
|
2007
|
2006
|
||||||||||
|
Revenue
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
|||||
|
Operating
expenses:
|
|||||||||||||
|
Research
and development (1)
|
7,800
|
4,988
|
26,200
|
23,716
|
|||||||||
|
General
and administrative (1)
|
4,381
|
2,957
|
13,747
|
18,386
|
|||||||||
|
Restructuring
charge
|
--
|
--
|
--
|
4,805
|
|||||||||
|
Total
expenses
|
12,181
|
7,945
|
39,947
|
46,907
|
|||||||||
|
Operating
loss
|
(12,181
|
)
|
(7,945
|
)
|
(39,947
|
)
|
(46,907
|
)
|
|||||
|
Other
income / (expense)
|
217
|
100
|
(58
|
)
|
574
|
||||||||
|
Net
loss
|
$
|
(
11,964
|
)
|
$
|
(7,845
|
)
|
$
|
(40,005
|
)
|
$
|
(46,333
|
)
|
|
|
Net
loss per common share
|
$
|
(0.14
|
)
|
$
|
(0.12
|
)
|
$
|
(0.49
|
)
|
$
|
(0.74
|
)
|
|
|
Weighted
average number of common shares outstanding
|
88,469
|
66,195
|
81,731
|
62,767
|
|||||||||
(1)
Expenses include a charge for stock-based employee compensation in accordance
with the provisions of FAS 123(R), which the Company adopted on January
1, 2006.
For the three and twelve months ended December 31, 2007, the charges
associated
with FAS 123(R) were $1.8 million ($0.6 million in R&D and $1.2 million in
G&A) and $5.2 million ($1.7 million in R&D and $3.5 million in G&A),
respectively. For the three and twelve months ended December 31, 2006,
the
charges associated with FAS 123(R) were $1.3 million ($0.4 million in
R&D
and $0.9 million in G&A) and $5.5 million ($1.7 million in R&D and $3.8
million in G&A), respectively.
Condensed
Consolidated Balance Sheets
(in
thousands)
|
December
31,
|
December
31,
|
||||||
|
ASSETS
|
2007
|
2006
|
|||||
|
Current
Assets:
|
|||||||
|
Cash
and marketable securities
|
$
|
53,007
|
$
|
26,402
|
|||
|
Prepaid
expenses and other current assets
|
611
|
565
|
|||||
|
Total
Current Assets
|
53,618
|
26,967
|
|||||
|
Property
and equipment, net
|
7,069
|
4,794
|
|||||
|
Restricted
Cash
|
600
|
600
|
|||||
|
Other
assets
|
1,457
|
2,039
|
|||||
|
Total
Assets
|
$
|
62,744
|
$
|
34,400
|
|||
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|||||||
|
Current
Liabilities:
|
|||||||
|
Accounts
payable and accrued expenses
|
$
|
7,844
|
$
|
5,953
|
|||
|
Capitalized
leases and other current liabilities
|
2,625
|
2,015
|
|||||
|
Total
Current Liabilities
|
10,469
|
7,968
|
|||||
|
Long-Term
Liabilities:
|
|||||||
|
Loan
payable, including accrued interest
|
9,633
|
8,907
|
|||||
|
Capitalized
leases and other liabilities
|
3,861
|
3,203
|
|||||
|
Total
Liabilities
|
23,963
|
20,078
|
|||||
|
Stockholders'
Equity
|
38,781
|
14,322
|
|||||
|
Total
Liabilities and Stockholders' Equity
|
$
|
62,744
|
$
|
34,400
|
|||