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
March
10, 2010
Date of
Report (Date of earliest event reported)
Discovery
Laboratories, Inc.
(Exact
name of registrant as specified in its charter)
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Delaware
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000-26422
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94-3171943
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(State
or other jurisdiction
of
incorporation)
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(Commission
File Number)
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(IRS
Employer
Identification
Number)
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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:
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o
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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o
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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o
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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o
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Pre-commencement communications
pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Item
2.02.
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Results
of Operations and Financial Condition.
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On March
10, 2010, Discovery Laboratories, Inc. (the “Company”) issued a press release
announcing financial results for the year and quarter ended December 31,
2009. 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.
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Item
9.01.
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Financial Statements
and Exhibits.
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(d)
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Exhibits
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99.1
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Press
release dated March 10, 2010
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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. | |||
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By:
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/s/ W. Thomas Amick | |
| Name: W. Thomas Amick | |||
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Title:
Chairman of the Board and interim
Chief Executive Officer
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|||
Date: March
12, 2010
3
Discovery
Labs Reports Fourth Quarter 2009 Financial Results and
Provides
Business Update
Warrington, PA — March 10, 2010 —
Discovery Laboratories, Inc. (Nasdaq: DSCO) today announces financial results for
the fourth quarter ended December 31, 2009 and provides a business
update.
For the
quarter ended December 31, 2009, the Company reported a net loss of $6.1 million
(or $0.05 per share) on 125.6 million weighted average common shares outstanding
compared to a net loss of $8.5 million (or $0.08 per share) on 100.5
million weighted average common shares outstanding for the same period in 2008.
Net cash burn for the fourth quarter of 2009 was $1.9 million as a result of
$6.0 million used for operating activities and $0.2 million used for debt
service, partially offset by aggregate proceeds of $4.3 million from the
issuance of 4.6 million shares of common stock pursuant to financings under the
Company’s Committed Equity Financing Facilities (CEFFs).
For the
year ended December 31, 2009, the Company reported a net loss of $30.2 million
(or $0.26 per share) on 115.2 million weighted average common shares outstanding
compared to a net loss of $39.1 million (or $0.40 per share) on 98.1
million weighted average common shares outstanding for the same period in
2008.
As of
December 31, 2009, the Company had cash and marketable securities of
$15.7 million. In February 2010 the Company completed a public
offering of common stock and warrants resulting in net proceeds of $15.1
million. Additionally, the Company currently has two CEFFs that, subject to
certain conditions, including price and volume limitations, may allow the
Company in the future to raise additional capital to support its business
plans. Relevant details regarding the recent financing and the CEFF
arrangements are included in the “Additional Financial Information” section of
this release. The Company had 126.4 and 153.9 million common shares outstanding
as of December 31, 2009 and March 10, 2010 respectively.
W. Thomas
Amick, the Company’s Chairman and interim Chief Executive Officer, commented,
“We believe that our proprietary KL4 surfactant
technology has the potential to significantly improve the medical outcomes of
patients, from premature infants to adults, suffering from debilitating
respiratory disorders. Our near term priorities are to satisfy the FDA’s
remaining requirements and potentially gain approval of Surfaxin for RDS in
2011, advance the development of Aerosurf®, which
we believe holds the promise to significantly advance neonatal respiratory
medicine, and continue to strengthen the long-term financial position of our
company. We continue to be engaged in discussions with potential strategic and
financial partners that, if successful, will provide the financial resources
needed to potentially advance the development our KL4 surfactant
pipeline and maximize shareholder value.”
Selected key initiatives and
anticipated milestones include:
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·
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Surfaxin
for RDS: In response to written guidance recently received from
the U.S. Food and Drug Administration (FDA), the Company will now focus on
a pathway that would entail solely performing additional preclinical work
to potentially address the sole remaining Chemistry, Manufacturing &
Control issue regarding the final validation of a fetal rabbit Biological
Activity Test (BAT, an important quality control release and stability
test) necessary for Surfaxin approval. A key component of this
approach is to first satisfactorily optimize and revalidate the BAT and
those efforts are currently underway and presently meeting all
pre-specified acceptance criteria. The Company believes that
the optimization and revalidation of the BAT will be completed in the
second quarter of 2010. Upon successful completion, the Company
anticipates conducting a series of prospectively-designed, side-by-side
preclinical studies employing the optimized BAT and a well-established
preterm lamb model of RDS. The Company plans to seek FDA advice regarding
important aspects of the preclinical program, including study design and
appropriate success criteria. We believe a Complete Response could be
submitted to the FDA in the first quarter of
2011.
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·
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Our
neonatal pipeline programs, Surfaxin®,
Surfaxin LS™ and Aerosurf®,
have the potential to greatly improve the management of RDS and represent
the opportunity, over time, to expand the current RDS estimated worldwide
annual market of $200 million to a $1 billion opportunity. Surfaxin LS is
a lyophilized (dry powder) formulation of KL4
surfactant intended to improve product ease of use for healthcare
practitioners, eliminate the need for cold-chain storage, and potentially
further improve product clinical performance. Aerosurf, our aerosolized
KL4
surfactant, holds the promise to significantly expand the use of
surfactant therapy in pediatric respiratory medicine by providing
neonatologists with a means of delivering KL4
surfactant while potentially avoiding the risks associated with
invasive endotracheal intubation and mechanical ventilation. The Company
is currently advancing its preclinical development activities and
preparing to further engage the FDA and foreign regulators with respect to
a planned Phase 3 clinical program for Surfaxin LS and a Phase 2 clinical
program for Aerosurf and intends to initiate these programs upon final
determination of the regulatory strategy and after securing appropriate
strategic alliances and necessary
capital.
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·
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Discovery
Labs is conducting a Phase 2 clinical trial to determine whether Surfaxin
improves lung function and reduces the duration and related risk-exposure
of mechanical ventilation in children up to two years of age diagnosed
with Acute Respiratory Failure (ARF). ARF is a severe respiratory disorder
associated with lung injury, often entailing surfactant dysfunction. ARF
occurs after patients have been exposed to serious respiratory infections,
such as influenza (including the type A serotype referred to as H1N1) or
respiratory syncytial virus (RSV). Hospitalization following
influenza or other viral infection is associated with high morbidity and
significant healthcare costs. Enrollment is expected to be
complete in March 2010 with top-line results becoming available in the
second quarter of 2010.
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·
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Aerosolized
KL4
surfactant is being evaluated in an investigator-initiated Phase 2a
clinical trial in Cystic Fibrosis (CF) patients. The trial has been
designed to assess the safety, tolerability and short-term effectiveness
(via improvement in mucociliary clearance) of aerosolized KL4
surfactant in CF patients. The trial is being conducted at The University
of North Carolina and supported by the Cystic Fibrosis
Foundation. Results are anticipated in the second quarter of
2010.
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·
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An
important business initiative for the Company in 2010 is to strengthen its
long-term strategic and financial position in order to meaningfully
advance its promising KL4
surfactant pipeline and maximize shareholder value. The Company
continues to assess various strategic and financial alternatives to secure
the necessary resources to potentially advance its development programs.
Although a key priority for the Company is to secure strategic partners
and capital to potentially support its ongoing research and development
activities and its future financial condition, there can be no assurance
that any strategic alliance or other financing alternatives will be
successfully concluded.
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Additionally,
as of December 31, 2009 the Company had $10.5 million outstanding under
its loan with Quintiles (formerly Novaquest). The outstanding principal
and all accrued interest is due and payable on April 30,
2010. The Company’s plans include pursuing a potential
strategic restructuring of this loan with Quintiles and assessing
alternative means of financing its payment; however, there can be no
assurance that any such restructuring will occur or financing alternatives
will be obtained.
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Readers
are referred to, and encouraged to read in its entirety, the Company’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2009, which includes
full details on the Company’s business plans and operations, financial condition
and results of operations. The Company’s audited financial statements
for the year ending December 31, 2009, are accompanied by an unqualified audit
opinion from Ernst & Young LLP, the Company’s independent public accounting
firm, which includes a “going concern” explanatory statement. The
Company is providing this information to comply with Nasdaq Marketplace Rule
4350(b)(1)(B), which requires an issuer that receives an audit report containing
a going concern explanatory statement to make a public announcement through the
news media disclosing the receipt of such statement.
Additional Selected
Financial Information
On
February 23, 2010, the Company completed a public offering of common stock and
warrants resulting in gross proceeds of $16,500,000 from the issuance of
27,500,000 shares of common stock and warrants to purchase 13,750,000 shares.
The shares and warrants were priced at $0.60 per unit and the warrants are
exercisable for cash, except in certain circumstances provided therein, for a
period of five years at an exercise price of $0.85 per share of common stock.
Net proceeds, after underwriting discounts and commissions and other fees and
expenses, were $15.1 million.
The
Company currently has two CEFFs that (subject to certain conditions, including
price and volume limitations) may allow the Company to raise additional capital
to support its business plans. Under the December 2008 CEFF,
currently there are approximately 7.1 million shares (not to exceed an aggregate
$17.7 million) available for issuance, provided that the volume-weighted average
price per share on each trading day in the draw-down period must be at least
equal to the greater of $0.60 or 90% of the closing market price on the trading
day immediately preceding the draw-down period. The expiration date of the
December 2008 CEFF is February 2011. Under the May 2008 CEFF, currently there
are approximately 12.8 million shares (not to exceed an aggregate of $51.7
million) available for issuance, provided that the average price on each trading
day in the draw-down period must be at least equal to the greater of $1.15 or
90% of the closing market price on the trading day immediately preceding the
draw-down period. The expiration date of the May 2008 CEFF is June
2011.
About
Discovery Labs
Discovery
Laboratories, Inc. is a biotechnology company developing Surfactant Therapies
for respiratory diseases. Surfactants are produced naturally in the lungs
and are essential for breathing. Discovery Labs’ novel proprietary KL4 Surfactant
Technology produces a synthetic, peptide-containing surfactant that is
structurally similar to pulmonary surfactant and is being developed in liquid,
aerosol or lyophilized formulations. In addition, Discovery Labs’
proprietary Capillary Aerosolization Technology produces a dense aerosol, with a
defined particle size that is capable of potentially delivering aerosolized
KL4
surfactant to the deep lung without the complications currently associated with
liquid surfactant administration. Discovery Labs believes that its
proprietary technology platform makes it possible, for the first time, to
develop a significant pipeline of surfactant products to address a variety of
respiratory diseases for which there frequently are few or no approved
therapies. For more information, please visit our website at www.Discoverylabs.com.
Forward-Looking
Statements
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. Examples of such risks and uncertainties are: risks relating to
the rigorous regulatory requirements required for approval of any drug or
drug-device combination products that Discovery Labs may develop, including
that: (a) Discovery Labs and the U.S. Food and Drug Administration (FDA) or
other regulatory authorities will not be able to agree on the matters raised
during regulatory reviews, or Discovery Labs may be required to conduct
significant additional activities to potentially gain approval of its product
candidates, if ever, (b) the FDA or other regulatory authorities may not
accept or may withhold or delay consideration of any of Discovery Labs’
applications, or may not approve or may limit approval of Discovery Labs’
products to particular indications or impose unanticipated label
limitations, and (c) changes in the national or
international political and regulatory environment may make it more difficult to
gain FDA or other regulatory approval; risks relating to Discovery Labs’
research and development activities, including (i) time-consuming and
expensive pre-clinical studies, clinical trials and other efforts, which may be
subject to potentially significant delays or regulatory holds, or fail, and (ii)
the need for sophisticated and extensive analytical methodologies, including an
acceptable biological activity test, if required, as well as other quality
control release and stability tests to satisfy the requirements of the
regulatory authorities; risks relating to Discovery Labs’ ability to develop and
manufacture drug products and capillary aerosolization systems for clinical
studies, and, if approved, for commercialization of drug and combination
drug-device products, including risks of technology transfers to contract
manufacturers and problems or delays encountered by Discovery Labs, its contract
manufacturers or suppliers in manufacturing drug products, drug substances and
capillary aerosolization systems on a timely basis or in an amount sufficient to
support Discovery Labs’ development efforts and, if approved, commercialization;
the risk that Discovery Labs may be unable to identify potential strategic
partners or collaborators to develop and commercialize its products, if
approved, in a timely manner, if at all; the risk that Discovery Labs will not
be able in a changing financial market to raise additional capital or enter into
strategic alliances or collaboration agreements, or that the ongoing credit
crisis will adversely affect the ability of Discovery Labs to fund its
activities, or that additional financings could result in substantial equity
dilution; the risk that Discovery Labs will not be able to access credit from
its committed equity financing facilities (CEFFs), or that the minimum share
price at which Discovery Labs may access the CEFFs from time to time will
prevent Discovery Labs from accessing the full dollar amount potentially
available under the CEFFs; the risk that Discovery Labs or its strategic
partners or collaborators will not be able to retain, or attract, qualified
personnel; the risk that Discovery Labs will be unable to regain compliance with
The Nasdaq Global Market listing requirements prior to the expiration of the
grace period currently in effect, which could cause the price of Discovery Labs’
common stock to decline; the risk that recurring losses, negative cash flows and
the inability to raise additional capital could threaten Discovery Labs’ ability
to continue as a going concern; the risks that Discovery Labs may be unable to
maintain and protect the patents and licenses related to its products, or other
companies may develop competing therapies and/or technologies, or health care
reform may adversely affect Discovery Labs; risks of legal proceedings,
including securities actions and product liability claims; risks relating to
health care reform; and other risks and uncertainties 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.
Contact
Information:
John G.
Cooper, EVP and Chief Financial Officer
215-488-9300
Condensed
Consolidated Statement of Operations
(in
thousands, except per share data)
|
Three
Months Ended
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||||||||||||||||
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December
31,
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Twelve
Months Ended
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|||||||||||||||
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(unaudited)
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December
31,
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|||||||||||||||
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2009
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2008
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2009
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2008
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|||||||||||||
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Revenue
from collaborative arrangement and grants
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$ | - | $ | - | $ | - | $ | 4,600 | ||||||||
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Operating
expenses: (1)
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||||||||||||||||
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Research
and development
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3,888 | 5,170 | 19,077 | 26,566 | ||||||||||||
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General
and administrative
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2,015 | 3,121 | 10,120 | 16,428 | ||||||||||||
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Total
expenses
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5,903 | 8,291 | 29,197 | 42,994 | ||||||||||||
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Operating
loss
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(5,903 | ) | (8,291 | ) | (29,197 | ) | (38,394 | ) | ||||||||
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Other
income / (expense)
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(238 | ) | (246 | ) | (1,043 | ) | (712 | ) | ||||||||
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Net
loss
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$ | (6,141 | ) | $ | (8,537 | ) | $ | (30,240 | ) | $ | (39,106 | ) | ||||
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Net
loss per common share
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$ | (0.05 | ) | $ | (0.08 | ) | $ | (0.26 | ) | $ | (0.40 | ) | ||||
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Wghtd.
Avg. number of common shares outstanding
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125,638 | 100,474 | 115,200 | 98,116 | ||||||||||||
(1) Expenses
include a charge for stock-based employee compensation in accordance with ASC
Topic 718. For the three and twelve months ended December 31,
2009, the charges associated with ASC Topic 718 were $0.7 million
($0.2 million in R&D and $0.5 million in G&A) and $2.7 million ($0.7
million in R&D and $2.0 million in G&A), respectively. For
the three and twelve months ended December 31, 2008, the charges associated with
ASC Topic 718 were $1.2 million ($0.4 million in R&D and $0.8
million in G&A) and $4.6 million ($1.5 million in R&D and $3.1 million
in G&A), respectively
Condensed
Consolidated Balance Sheets
(in
thousands)
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December
31,
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December
31,
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|||||||
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2009
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2008
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|||||||
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ASSETS
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||||||||
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Current
Assets:
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||||||||
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Cash
and marketable securities
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$ | 15,741 | $ | 24,792 | ||||
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Receivables,
prepaid expenses and other current assets
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233 | 625 | ||||||
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Total
Current Assets
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15,974 | 25,417 | ||||||
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Property
and equipment, net
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4,668 | 5,965 | ||||||
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Restricted
Cash
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400 | 600 | ||||||
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Other
assets
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361 | 907 | ||||||
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Total
Assets
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$ | 21,403 | $ | 32,889 | ||||
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LIABILITIES AND
STOCKHOLDERS’ EQUITY
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||||||||
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Current
Liabilities:
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||||||||
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Accounts
payable
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$ | 1,294 | $ | 2,111 | ||||
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Accrued
expenses
|
3,446 | 5,313 | ||||||
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Loan
payable, including accrued interest
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10,461 | - | ||||||
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Equipment
loan and other liabilities
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597 | 2,442 | ||||||
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Total
Current Liabilities
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15,798 | 9,866 | ||||||
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Long-Term
Liabilities:
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||||||||
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Loan
payable, including accrued interest
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- | 10,128 | ||||||
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Equipment
loan and other liabilities
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1,118 | 1,962 | ||||||
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Total
Liabilities
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16,916 | 21,956 | ||||||
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Stockholders'
Equity
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4,487 | 10,933 | ||||||
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Total
Liabilities and Stockholders' Equity
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$ | 21,403 | $ | 32,889 | ||||