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
August 12, 2003
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 (Commission File Number) (IRS Employer
of incorporation) Identification Number)
350 Main Street, Suite 307
Doylestown, Pennsylvania 18901
(Address of principal executive offices)
(215) 340-4699
(Registrant's telephone number, including area code)
(Former name or former address, if changed since last report)
Item 5. Other Events and Regulation FD Disclosure
On August 12, 2003, Discovery Laboratories, Inc. (the "Company"),
issued a news release announcing financial results for the second quarter ended
June 30, 2003, and providing selected updates on the Registrant's progress since
the end of the first quarter (the "2003 Second Quarter Financial Results and
Trial Update News Release"). Such updates included the transferring of the
Company's Surfaxin(R) manufacturing capabilities to a new contract facility in
connection with implementing the initial phase of its long-term manufacturing
strategy. No delay is expected regarding the planned completion of the Company's
ongoing pivotal Phase 3 clinical trial for Respiratory Distress Syndrome (RDS)
in premature infants, however, as a result, the timeline for the completion of
the Company's Phase 2 clinical trial for Acute Respiratory Distress Syndrome in
adults is being adjusted from the fourth quarter of 2003 to the second quarter
of 2004.
In order to implement its long-term manufacturing strategy, the
Company is currently negotiating the final terms and conditions of an agreement
pursuant to which Laureate Pharma, L.P. ("Laureate Pharma"), would become the
Company's contract manufacturer for Surfaxin(R). Until the execution of said
agreement, Laureate Pharma is not obligated to manufacture any drug products for
the Company. There can be no assurance that the Company and Laureate Pharma will
ultimately execute such agreement nor that such agreement ultimately will be on
terms favorable to the Company. If the agreement is not executed, the Company
may pursue alternative manufacturing arrangements, which may delay or impair its
ability to obtain regulatory approval for its products or be available only on
terms that are not favorable to the Company.
The full text of the 2003 Second Quarter Financial Results and Trial
Update News Release is set forth in Exhibit 99.1 hereto and except for the
reference to the Company's website is incorporated in this Report as if fully
set forth herein.
Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits
(c) Exhibits:
99.1 The 2003 Second Quarter Financial Results and Trial Update News
Release (as defined in Item 5 above).
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 12, 2003
3
Exhibit 99.1
[LOGO]
DISCOVERY LABORATORIES, INC.
Discovery Laboratories Reports Second Quarter Financial Results
Implements Initial Phase of Long-Term Manufacturing Strategy
ARDS Phase 2 Completion Date Adjusted to Second Quarter 2004
Doylestown, PA -- August 12, 2003 -- Discovery Laboratories, Inc. (Nasdaq:
DSCO), a late-stage biopharmaceutical company developing its proprietary
surfactant technology as Surfactant Replacement Therapies for respiratory
diseases, today announced financial results for the second quarter ended June
30, 2003. The Company also announced that it is transferring its Surfaxin
manufacturing capabilities to a new contract facility in connection with
implementing the initial phase of its long-term manufacturing strategy. No delay
is expected regarding the planned completion of the Company's ongoing pivotal
Phase 3 clinical trial for Respiratory Distress Syndrome in premature infants,
however, the timeline for the completion of the Company's Phase 2 clinical trial
for Acute Respiratory Distress Syndrome in adults is being adjusted from the
fourth quarter of 2003 to the second quarter of 2004.
For the second quarter ended June 30, 2003, the Company reported a net loss of
$4.85 million, or $0.14 per share, on approximately 33.5 million weighted
average common shares outstanding, compared to a net loss of $4.29 million, or
$0.16 per share, on approximately 26.4 million weighted average common shares
outstanding for the same period in 2002. For the six months ended June 30, 2003,
the Company reported a net loss of $9.35 million, or $0.28 per share on
approximately 33.2 million weighted average common shares outstanding, compared
to a net loss of $7.66 million, or $0.29 per share on approximately 26.1 million
weighted average common shares outstanding for the same period in 2002.
As of June 30, 2003, the Company had cash and investments of approximately $35.5
million. In addition, during June and July of 2003, the Company's Common Stock
attained certain exchange-related price performance thresholds permitting the
Company to redeem (and thereby effectively compel the exercise of) three of its
outstanding classes of warrants to purchase Common Stock. The Class I, Class F
and Class C warrants were previously issued by the Company in connection with
certain private placement financings that occurred in November 2002, October
2001 and April 1999, respectively. The maximum number of shares of Common Stock
issuable upon exercise of the three classes of warrants at the time of
redemption was approximately 3.6 million. As of August 12, 2003, 2.8 million of
the total 3.6 million warrants have been exercised with approximately 2.6
million shares of Common Stock issued and aggregate cash proceeds of $5.7
million received by the Company.
Robert J. Capetola, Ph.D., President and CEO of the Company, stated, "We believe
that our humanized surfactant technology is the only one capable of producing
high quality surfactants with the potential to address a broad range of
life-threatening respiratory disorders and large pharmaceutical markets. The
positive clinical data from our recently completed Phase 3 supportive trial of
Surfaxin for Respiratory Distress Syndrome in premature infants, the encouraging
results of Part A of our Phase 2 trial of Surfaxin for Acute Respiratory
Distress Syndrome in adults, and the development of our engineered surfactant as
an inhalable aerosol all provide compelling validation of our surfactant
technology platform. In June 2003, the financial community responded positively
to these results and created the opportunity for us to significantly strengthen
our financial position by completing a private financing of approximately $27.5
million."
"For the remainder of this year, our primary focus is on driving our late-stage
clinical programs and implementing our long-term business strategy. The
completion of our pivotal Phase 3 trial for Surfaxin for Respiratory Distress
Syndrome in premature infants is our number one priority and the announcement of
data remains on schedule for the fourth quarter of this year. Additionally, Part
B of our Phase 2 clinical trial for Surfaxin in Acute Respiratory Distress
Syndrome in adults, a disease for which no approved treatment currently exists,
is ongoing and enrollment continues. In line with our continued confidence in
these lead programs, we are implementing the first stages of an improved
long-term manufacturing program and we are increasing our Surfaxin pre-launch
commercialization activities with our collaborative partners," further commented
Dr. Capetola.
The Company is implementing its long-term manufacturing strategy through the
recent selection of Laureate Pharma, L.P., to become its current contract
manufacturer. Laureate Pharma will replace the Company's previous contract
manufacturer, Akorn, Inc. who has been experiencing operational and financial
difficulties. Laureate Pharma has cGMP-compliant manufacturing facilities in
Princeton and Totowa, New Jersey and a successful history of producing sterile
pharmaceutical and biopharmaceutical products. In connection with the first
phase of the implementation plan with Laureate Pharma, the Company has
transferred its existing manufacturing equipment from Akorn. Plans include
having Laureate Pharma produce clinical material by the fourth quarter of 2003.
This arrangement also encompasses plans for manufacturing scale-up and
enhancements, including additional equipment to support commercial-scale RDS
requirements and ARDS late-stage, clinical-scale production of Surfaxin.
Selected updates on the Company's programs and progress since the end of the
first quarter:
o Phase 3 Clinical Trials for Respiratory Distress Syndrome (RDS) in
Premature Infants - The Company's landmark, pivotal, multinational Phase 3
clinical trial for Respiratory Distress Syndrome (RDS) is ongoing with
enrollment nearing completion and the expectation that this trial will be
completed with data announced early in the fourth quarter of 2003. This
trial is intended to provide the basis for New Drug Applications with the
FDA and other worldwide regulatory authorities. The establishment of the
Laureate Pharma manufacturing capability of Surfaxin is not expected to
delay the completion of the RDS Phase 3 trial.
In June 2003, the Company announced positive results of key endpoints of
its supportive Phase 3 multinational clinical trial of Surfaxin for RDS.
This supportive trial was designed as a non-
inferiority study comparing Discovery's humanized Surfaxin to Curosurf(R),
an approved pig-lung extract. Preliminary analysis of the trial's primary
endpoint showed Surfaxin to be statistically equivalent to Curosurf, with
a relative difference in favor of Surfaxin. Curosurf is considered by many
of the world's leading neonatologists to be the best surfactant currently
approved. Further analyses of secondary endpoints and safety parameters
are being completed, and a detailed presentation of the results of the
trial will be made at the European Society for Pediatric Research (ESPR)
meeting in Bilbao, Spain on September 27 - 30, 2003.
o Part B, Phase 2 Clinical Trial for Acute Respiratory Distress Syndrome
(ARDS) in Adults - Akorn has been the Company's contract manufacturer for
Surfaxin for this trial. Although Akorn's operating difficulties have been
unrelated to the Company's proprietary Surfaxin manufacturing process and
equipment, Akorn's continuing difficulties with its sterile production
facilities has caused it to be unable to return to operational status on a
consistent basis. The Company believes that it can no longer rely on Akorn
as a viable source of Surfaxin clinical supply for the remainder of this
trial or a potential Phase 3 trial. Although the Company plans to have
Surfaxin clinical material available from its Laureate Pharma
manufacturing program in the fourth quarter of 2003, these events have
extended the anticipated completion of this trial from the fourth quarter
of 2003 to the second quarter of 2004.
o Private Placement Financing - In June 2003, the Company completed the sale
of securities in a private placement to selected institutional and
accredited investors for gross proceeds of approximately $27.5 million.
Under the terms of the financing, the Company sold approximately 5.0
million newly issued shares of Common Stock at a purchase price of $5.50
per share and warrants exercisable for approximately 1.0 million shares of
common stock with an exercise price of $6.875 per share.
Additional key financial results:
o The change in the net loss for the quarter and six months ended June 30,
2003, primarily reflects increased R&D expenses for clinical trial costs
for the Company's lead product, Surfaxin, currently in Phase 3 and Phase 2
clinical trials for critical care patients with various life-threatening
respiratory disorders, as well as activities related to the development of
the Company's inhalable aerosol surfactant programs to potentially treat a
variety of respiratory conditions.
o The change in net loss also includes decreased revenues related to (i) the
conclusion of work associated with the Company's Small Business Innovative
Research (SBIR) grant for research in Acute Lung Injury/Acute Respiratory
Distress Syndrome (ALI/ARDS) in adults and its Orphan Products Development
grant to develop Surfaxin for Meconium Aspiration Syndrome (MAS) in
full-term infants; and (ii) the extension of the amortization period and
related revenue recognition of the funding previously provided to the
Company in connection with its strategic alliance with Laboratorios del
Dr. Esteve, S.A., which now reflects the planned fourth quarter 2003
completion of the Company's Phase 3 pivotal clinical trial for Surfaxin
for Respiratory Distress Syndrome (RDS) in premature infants.
o As of June 30, 2003 and June 30, 2002, there were approximately 38.5
million and 26.4 million common shares issued and outstanding,
respectively. The increase in the number of shares outstanding is
primarily due to approximately 6.4 million and approximately 5.0 million
common shares issued in private offerings to selected institutional and
accredited investors in November 2002 and June 2003, respectively.
o The Company has a secured revolving credit facility of $8.5 million to
$10.0 million with PharmaBio Development Inc., a subsidiary of Quintiles
Transnational Corp., that is available for use through December 10, 2004.
As of June 30, 2003, $5.7 million was available for borrowing and $1.8
million was outstanding under the credit facility. The Company also has a
capital lease financing arrangement with the Life Science and Technology
Finance Division of General Electric Capital Corporation that provides,
subject to certain conditions, for up to $1.0 million in financing for
capital purchases. As of June 30, 2003, the Company has used approximately
$475,000 of this financing arrangement.
About Discovery Laboratories
Discovery Laboratories, Inc. is a late-stage biopharmaceutical company
developing its proprietary surfactant technology as Surfactant Replacement
Therapies for respiratory diseases including Respiratory Distress Syndromes,
Acute Lung Injury (ALI), asthma, Chronic Obstructive Pulmonary Disease (COPD),
and upper airway disorders. Discovery's surfactant technology produces an
engineered version of natural human lung surfactant that is designed to
precisely mimic the essential properties of human lung surfactant. Discovery
believes that through its surfactant technology, pulmonary surfactants have the
potential, for the first time, to be developed into a series of respiratory
therapies for hospitalized and ambulatory patients. Surfaxin, Discovery's lead
product, is in Phase 3 and Phase 2 clinical trials for critical care patients
with various life-threatening respiratory disorders where there are few or no
approved therapies available. Discovery's first aerosol surfactant product is
positioned to enter clinical trials for hospital patients with severe asthma or
Acute Lung Injury. Discovery has a commercialization alliance with Quintiles
Transnational Corp. and a strategic alliance with Laboratorios del Dr. Esteve
S.A.
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 the Company's product development,
events conditioned on stockholder or other approval, 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 release 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 the company's
actual results and could cause results to differ from those contained in the
forward-looking statements contained herein are the risk that financial
conditions may change, risks relating to the progress of the company's research
and development, the risk that the Company will not be able to raise additional
capital or enter into additional collaboration agreements (including strategic
alliances for our aerosol and Surfactant Replacement Therapies), risks relating
to the progress of the Company's research and development, risks relating to the
ability of the Company's third party contract manufacturers to provide the
Company with sufficient amounts of drug products for completion of any of the
Company's clinical studies, other risks relating to the lack of sufficient drug
product for completion of any of the Company's clinical studies, and risks
relating to the development of competing therapies and/or technologies by other
companies. Those associated 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-KSB, 8-K, 10-Q
and 10-QSB, and amendments thereto.
Company Contact: Investor Contact:
John G. Cooper Harvey Goralnick
SVP/CFO FOCUS Partners LLC
215-340-4699 212-752-9445
Info@discoverylabs.com dsco@focuspartners.com
(tables to follow)
Discovery Laboratories, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
---------------------- ----------------------
Revenues from collaborative agreements $ 263 $ 783 $ 657 $ 1,020
Operating expenses
Research and Development 4,011 3,721 7,855 6,326
General and Administrative 1,137 1,538 2,304 2,670
---------------------- ----------------------
Total expenses 5,148 5,259 10,159 8,996
---------------------- ----------------------
Operating loss (4,885) (4,476) (9,502) (7,976)
Other income and expense 36 189 148 319
---------------------- ----------------------
Net loss $ (4,849) $ (4,287) $ (9,354) $ (7,657)
====================== ======================
Net loss per common share $ (0.14) $ (0.16) $ (0.28) $ (0.29)
Weighted average number of common shares
outstanding 33,487 26,394 33,172 26,114
Condensed Consolidated Balance Sheets
(in thousands)
June 30, December 31,
2003 2002
-------- ------------
(unaudited)
ASSETS
Current assets:
Cash, cash equivalents and available-for-sale marketable securities $35,513 $19,190
Prepaid expenses and other current assets 473 327
---------------------
Total current assets 35,986 19,517
Property and equipment, net of depreciation 1,433 1,231
Other assets 289 314
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Total assets $37,708 $21,062
=====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities $ 2,925 $ 3,202
Deferred revenue 1,032 1,393
Credit facility with corporate partner 1,758 1,450
Capitalized lease 290 256
---------------------
Total liabilities 6,005 6,301
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Stockholders' equity 31,703 14,761
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Total liabilities and stockholders' equity $37,708 $21,062
=====================