|
PROSPECTUS
SUPPLEMENT
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Filed
pursuant to Rule 424(b)(5)
|
|
(To
Prospectus dated October 24, 2005)
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relating
to Registration No. 333-128929
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3,030,304
Shares
Common
Stock
Discovery
Laboratories, Inc. is offering up to 3,030,304 shares of common stock. In
connection with this offering, we will pay fees to SG Cowen & Co., LLC, as
exclusive placement agent. See “Plan of Distribution” beginning on page S-4 of
this prospectus supplement for more information regarding this
arrangement.
Our
common stock is quoted on the Nasdaq National Market under the symbol “DSCO.” On
December 13, 2005, the last reported sale price of our common stock as quoted
on
the Nasdaq National Market was $7.35 per share.
Investing
in our common stock involves significant risks. See “Risks Related to Our
Business” set forth in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2004, and “Risk Factors” beginning on page S-2 of this prospectus
supplement and page 6 of the accompanying prospectus for a discussion of
some
important risks you should consider before buying our common
stock.
Neither
the Securities and Exchange Commission nor any other regulatory body has
approved or disapproved of these securities, or passed upon the accuracy
or
adequacy of this prospectus supplement or the accompanying prospectus. Any
representation to the contrary is a criminal offense.
______________________________
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Per
Share
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Maximum
Offering
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||||||
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Public
offering price
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$
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6.60
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$
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20,000,000
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|||
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Placement
agent fee
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$
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0.31
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$
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950,000
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|||
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Proceeds
to Discovery Laboratories, Inc. (before expenses)
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$
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6.29
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$
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19,050,000
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|||
We
estimate the total expenses of this offering, excluding the placement agent
fee,
will be approximately $100,000. In addition, we have agreed to pay the fees
and
expenses of counsel for the placement agent in an amount not to exceed $35,000
in the aggregate. The placement agent is not required to sell any specific
number or dollar amount of the shares of common stock offered by this offering,
but will use its commercially reasonable efforts to sell the shares of common
stock offered. Pursuant to an escrow agreement among us, the placement agent
and
an escrow agent, certain funds received in payment for the shares sold in
this
offering will be deposited into an interest-bearing escrow account and held
until we and the placement agent notify the escrow agent that the offering
has
closed, indicating the date on which the shares are to be delivered to the
purchasers and the proceeds are to be delivered to us. Because there is no
minimum offering amount required as a condition to closing in this offering,
the
actual public offering amount, placement agent fee and net proceeds to us,
if
any, in this offering are not presently determinable and may be substantially
less than the maximum offering amounts set forth above.
______________________________
SG
Cowen & Co.
December
13, 2005
TABLE
OF CONTENTS
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Prospectus
Supplement
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Page
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Prospectus
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Page
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About
this Prospectus Supplement
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S-1
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About
This Prospectus
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1
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Forward-Looking
Statements
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S-1
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About
Discovery
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1
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|
Risk
Factors
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S-2
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Risk
Factors
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6
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Dilution
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S-3
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Forward-Looking
Statements
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18
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|
Plan
of Distribution
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S-4
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Use
of Proceeds
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20
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|
Legal
Matters
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S-5
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Ratio
of Earnings to Fixed Charges
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20
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Where
You Can Find More Information
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S-5
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Description
of Debt Securities
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21
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Description
of Preferred Stock
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28
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||
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Description
of Common Stock
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29
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||
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Plan
of Distribution
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32
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||
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Experts
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33
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||
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Legal
Matters
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34
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||
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Interests
of Named Experts and Counsel
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34
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||
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Where
You Can Find More Information
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34
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||
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Information
Incorporated by Reference
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34
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_____________________
You
should rely only on the information contained in this prospectus supplement,
the
accompanying prospectus and the documents incorporated by reference herein
or
therein. We have not authorized anyone to provide you with information different
from that contained in any of these documents. The information contained
in
these documents is accurate only as of the date of each document, as the
case
may be, regardless of the time of delivery of this prospectus supplement
and
accompanying prospectus or of any sale of common stock. Our business, financial
condition, results of operations and prospects may change after the date
set
forth in each document in which the information is
presented.
We
are making offers to sell and seeking offers to buy shares of common stock
only
in jurisdictions where offers and sales are permitted. You should not consider
this prospectus supplement and the accompanying prospectus to be an offer
to
sell, or a solicitation of an offer to buy, shares of common stock if the
person
making the offer or solicitation is not qualified to do so or if it is unlawful
for you to receive the offer or solicitation.
References
in the prospectus supplement, the accompanying prospectus and the documents
incorporated by reference herein and therein to “we,”“our,”“us” and the
“company” refer to Discovery Laboratories, Inc. and its subsidiary, unless the
context requires otherwise.
i
This
prospectus supplement and the accompanying prospectus are part of a “shelf”
registration statement on Form S-3 that we filed with the Securities and
Exchange Commission on October 11, 2005. This prospectus supplement describes
the specific details regarding this offering, including the price, the amount
of
common stock being offered and the risks of investing in our common stock.
The
accompanying prospectus provides more general information, some of which
may not
apply to our common stock. You should read both this prospectus supplement
and
the accompanying prospectus together with the additional information about
us
described in the section entitled “Where You Can Find More
Information.”
If
information contained in this prospectus supplement is inconsistent with
the
accompanying prospectus, you should rely on this prospectus
supplement.
FORWARD-LOOKING
STATEMENTS
The
statements set forth in this prospectus supplement, the accompanying prospectus
and the documents incorporated by reference herein and therein, including
in
“Risk Factors,” which are not historical, including, without limitation,
statements concerning our research and development programs and clinical
trials,
the possibility, timing and outcome of submissions of regulatory filings
for our
products under development, the seeking of collaboration arrangements with
pharmaceutical companies or others to develop, manufacture and market products,
the research and development of particular compounds and technologies and
the
period of time for which our existing resources will enable us to fund our
operations, constitute “Forward-Looking Statements” within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. We intend that all forward-looking statements be subject
to the safe-harbor provisions of the Private Securities Litigation Reform
Act of
1995. These forward-looking statements are only predictions and reflect our
views as of the date they are made with respect to future events and financial
performance. Forward-looking statements are subject to many risks and
uncertainties which could cause our actual results to differ materially from
any
future results expressed or implied by the forward-looking
statements.
Examples
of the risks and uncertainties include, but are not limited to: risk that
financial conditions may change; risks relating to the progress of our research
and development (including the results of clinical trials being conducted
by us
and the risk that our lead product candidate, Surfaxin®, or other drug
candidates will not prove to be safe or useful for the treatment of certain
indications); the risk that we will not be able to raise additional capital
or
enter into additional collaboration agreements (including strategic alliances
for our aerosol and Surfactant Replacement Therapies); risk that we will
not be
able to develop a successful sales and marketing organization in a timely
manner, if at all; risk that our internal sales and marketing organization
will
not succeed in developing market awareness of our products; risk that our
internal sales and marketing organization will not be able to attract or
maintain qualified personnel; delays in the FDA’s or other health regulatory
authorities’ approval or potential rejection of any applications we file,
including the New Drug Application (NDA) we filed in April 2004 and the
Marketing Approval Application (MAA) we submitted in October 2004; risks
that
any such regulatory authority will not approve the marketing and sale of
a drug
product even after acceptance of an application we file for any such drug
product; risks relating to the ability of our third party contract manufacturers
and development partners to provide us with adequate supplies of drug substance,
drug products and expertise for completion of any of our clinical studies;
risks
relating to our ability, together with our 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; risks
relating to the development of competing therapies and/or technologies by
other
companies; and the other risks and uncertainties detailed under the heading
“Risk Factors” and in the documents incorporated by reference in this report.
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.
The
forward-looking statements contained in this prospectus supplement, the
accompanying prospectus or the documents incorporated by reference herein
or
therein speak only of their respective dates. Except to the extent required
by
applicable laws, rules and regulations, we do not undertake any obligation
or
duty to publicly update or revise any forward-looking statements in this
prospectus supplement, the accompanying prospectus or the documents incorporated
by reference herein or therein, whether as a result of new information, future
events or otherwise.
S-1
Investing
in our common stock involves a high degree of risk. You should consider the
following risk factors, as well as other information contained or incorporated
by reference in this prospectus supplement and the accompanying prospectus,
before deciding to purchase any shares of our common stock. The risks and
uncertainties described below are not the only ones we face. Additional risks
and uncertainties not presently known to us or that we currently deem immaterial
also may become important factors that affect us. If any of these risks occur,
our business could suffer, the market price of our common stock could decline
and you could lose all or part of your investment in our common
stock.
Risks
Related to This Offering
A
substantial number of shares may be sold in the market following this offering,
which may depress the market price for our common stock.
Sales
of
a substantial number of shares of our common stock in the public market
following this offering could cause the market price of our common stock
to
decline. Upon completion of this offering, we will have outstanding an aggregate
of 60,991,431 shares of common stock, assuming no exercise of outstanding
options or warrants. A substantial majority of the outstanding shares of
our
common stock are, and all of the shares sold in this offering upon issuance
will
be, freely tradable without restriction or further registration under the
Securities Act of 1933 unless these shares are purchased by affiliates. In
addition, as of December 13, 2005, 10,750,541 shares of our common stock
are
issuable upon exercise of outstanding options and warrants granted by us,
which
also have been registered for resale on registration statements filed with
the
Securities and Exchange Commission.
Our
management will have broad discretion with respect to the use of the proceeds
of
this offering.
We
have
not designated the amount of net proceeds we will receive from this offering
for
any particular purpose. Accordingly, our management will have broad discretion
as to the application of these net proceeds and could use them for purposes
other than those contemplated at the time of this offering. Our stockholders
may
not agree with the manner in which our management chooses to allocate and
spend
the net proceeds.
You
will experience immediate dilution in the book value per share of the common
stock you purchase.
Because
the price per share of our common stock being offered hereby is substantially
higher than the book value per share of our common stock, you will suffer
substantial dilution in the net tangible book value of the common stock you
purchase in this offering. Based on the public offering price of $6.60 per
share
in this offering, if you purchase shares of common stock in this offering,
you
will suffer immediate and substantial dilution of $5.66 per share in the
net
tangible book value of the common stock. See “Dilution” on page S-3 for a more
detailed discussion of the dilution you will incur in this
offering.
S-2
The
net
tangible book value of our common stock on September 30, 2005, was approximately
$37.4 million, or approximately $0.66 per share. Net tangible book value
per
share is equal to the amount of our total tangible assets, less total
liabilities, divided by the aggregate number of shares of common stock
outstanding. Dilution in net tangible book value per share represents the
difference between the amount per share paid by purchasers of shares of our
common stock in this offering and the net tangible book value per share of
our
common stock immediately after this offering. After giving effect to the
sale of
3,030,304 shares of our common stock in this offering at an offering price
equal
to $6.60 per share, and after deducting the estimated placement agent fee
and
the estimated offering expenses, our net tangible book value at September
30,
2005, would have been approximately $56.3 million, or approximately $0.94
per
share. This represents an immediate increase in the net tangible book value
per
share equal to $0.28 per share to existing shareholders and an immediate
dilution equal to $5.66 per share to new investors purchasing shares of common
stock in this offering. The following table illustrates this dilution:
|
Offering
price per share
|
$6.60
|
|
|
Net
tangible book value per share as of September 30, 2005
|
$0.66
|
|
|
Increase
per share after the offering
|
$0.28
|
|
|
Net
tangible book value per share as of September 30, 2005, after giving
effect to this offering
|
$0.94
|
|
|
Dilution
per share to new investors
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$5.66
|
The
foregoing table does not take into account further dilution to new investors
that could occur upon the exercise of outstanding options and warrants having
a
per share exercise price less than the per share offering price to the public
in
this offering. As of September 30, 2005, there were 56,791,243 shares of
common
stock outstanding, which does not include:
| · |
8,201,573
shares of common stock issuable upon exercise of options outstanding
as of
September 30, 2005, at a weighted average exercise price of $6.26
per
share; and
|
| · |
2,463,770
shares of common stock issuable upon exercise of warrants outstanding
as
of September 30, 2005, at a weighted average exercise price of $7.55.
|
S-3
We
have
entered into a placement agent agreement, dated as of December 13, 2005,
with SG
Cowen & Co., LLC. We are offering the shares of our common stock through SG
Cowen & Co., LLC, as our placement agent. Subject to the terms and
conditions contained in the placement agent agreement, SG Cowen & Co., LLC
has agreed to act as the placement agent for the sale of up to 3,030,304
shares
of our common stock. SG Cowen & Co., LLC is not purchasing or selling any
shares by this prospectus supplement or accompanying prospectus, nor is it
required to arrange the purchase or sale of any specific number or dollar
amount
of shares, but has agreed to use commercially reasonable efforts to arrange
for
the sale of all 3,030,304 shares.
The
placement agent agreement provides that the obligations of the placement
agent
and the investors are subject to certain conditions precedent, including
the
absence of any material adverse change in our business and the receipt of
certain opinions, letters and certificates from our counsel, our independent
auditors and us.
Confirmations
and definitive prospectuses will be distributed or otherwise made available
to
all investors who agree to purchase shares of the common stock, informing
investors of the closing date as to such shares. We currently anticipate
that
the closing of the sale of 3,030,304 shares of common stock will take place
on
or about December 19, 2005. Investors will also be informed of the date and
manner in which they must transmit the purchase price for their shares.
On
the
scheduled closing date, the following will occur:
|
•
|
we
anticipate receipt of funds in the amount of the aggregate purchase
price;
and
|
|
•
|
SG
Cowen & Co., LLC will receive the placement agent fee in accordance
with the terms of the placement agent agreement.
|
We
will
pay SG Cowen & Co., LLC an aggregate commission equal to 4.75% of the gross
proceeds of the sale of shares of common stock in the offering. We will also
pay
the fees and expenses of counsel for SG Cowen & Co., LLC in an amount not to
exceed $35,000 in the aggregate. In no event will the total amount of
compensation paid to SG Cowen & Co., LLC and other securities brokers and
dealers upon completion of this offering exceed 8% of the maximum gross proceeds
of the offering. The estimated offering expenses payable by us, in addition
to
SG Cowen & Co., LLC’s fee as placement agent, are approximately $135,000,
which includes $100,000 in legal, accounting and printing costs and various
other fees associated with registering and listing the shares of common stock
and also includes up to $35,000 for the fees and expenses of counsel for
SG
Cowen & Co., LLC. After deducting certain fees due to SG Cowen & Co.,
LLC and our estimated offering expenses, we expect the net proceeds from
this
offering will be approximately $18,915,000.
We
have
agreed to indemnify SG Cowen & Co., LLC against certain liabilities,
including liabilities under the Securities Act of 1933, and liabilities arising
from breaches of representations and warranties contained in the placement
agent
agreement. We have also agreed to contribute to payments SG Cowen & Co., LLC
may be required to make in respect of such liabilities.
We,
along
with certain of our executive officers and directors who have beneficial
ownership of approximately 6,799,571 shares of our common stock (including
any
outstanding options or warrants held by such persons), have agreed to certain
lock-up provisions with regard to future sales of our common stock for a
period
of 90 days after the offering as set forth in the placement agent agreement.
The
placement agent agreement with SG Cowen & Co., LLC is included as an exhibit
to our Current Report on Form 8-K that will be filed with the Securities
and
Exchange Commission in connection with the entry into such agreement.
The
transfer agent for our common stock is Continental Stock Transfer & Trust
Company.
Our
common stock is traded on the Nasdaq National Market under the symbol
“DSCO.”
S-4
LEGAL
MATTERS
The
validity of the issuance of the shares of common stock offered hereby will
be
passed upon by Dickstein Shapiro Morin & Oshinsky LLP, New York, New York.
Brown Raysman Millstein Felder & Steiner LLP, New York, New York, is acting
as counsel for the placement agent in connection with various legal matters
relating to the shares of common stock offered hereby.
WHERE
YOU CAN FIND MORE INFORMATION
We
file
annual, quarterly and periodic reports, proxy statements and other information
with the SEC. You may read and copy any materials that we file with the SEC
at
the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549.
You may obtain information on the operation of the Public Reference Room
by
calling the SEC at 1-800-SEC-0330. Many of our SEC filings are also available
to
the public from the SEC’s Website at “http://www.sec.gov.” We make available
free of charge our annual, quarterly and current reports, proxy statements
and
other information upon request. To request such materials, please send an
e-mail
to ir@DiscoveryLabs.com or contact John G. Cooper, our Executive Vice President,
Chief Financial Officer, at our address as set forth in the accompanying
prospectus.
We
maintain a Website at “http://www.DiscoveryLabs.com” (this is not a hyperlink,
you must visit this website through an Internet browser). Our Website and
the
information contained therein or connected thereto are not incorporated into
this registration statement.
We
have
filed with the Securities and Exchange Commission a registration statement
on
Form S-3 under the Securities Act relating to the common stock we are offering
by this prospectus supplement. This prospectus supplement does not contain
all
of the information set forth in the registration statement, the exhibits,
schedules and the prospectus attached thereto. Please refer to the registration
statement, the exhibits, schedules and the prospectus attached thereto for
further information with respect to us and the common stock offered hereby.
Statements contained in this prospectus supplement as to the contents of
any
contract or other document are not necessarily complete and, in each instance,
we refer you to the copy of that contract or document filed as an exhibit
to the
registration statement. You may read and obtain a copy of the registration
statement and its exhibits and schedules from the Securities and Exchange
Commission, as described in the preceding paragraph.
S-5
3,030,304
Shares
Common
Stock
_____________________________
PROSPECTUS
SUPPLEMENT
_____________________________
SG
Cowen & Co.
December
13, 2005