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
April
27, 2010
Date of
Report (Date of earliest event reported)
Discovery
Laboratories, Inc.
(Exact
name of registrant as specified in its charter)
|
Delaware
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000-26422
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94-3171943
|
|
(State
or other jurisdiction of
incorporation)
|
(Commission
File Number)
|
(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:
o Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
o Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o Pre-commencement communications
pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Item
2.02.
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Results
of Operations and Financial Condition.
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On April
27, 2010, Discovery Laboratories, Inc. (the “Company”) issued a press release
announcing financial results for the quarter ended March 31,
2010. 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 April 27, 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. | |||
|
|
By:
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/s/ W. Thomas Amick | |
| Name: | W. Thomas Amick | ||
| Title: |
Chairman
of the Board and
Chief
Executive Officer
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||
Date: April
28, 2010
3
Discovery
Labs Provides Updates on Surfaxin®, Other
Key Programs and First Quarter 2010 Financial Results
Conference
Call Wednesday, April 28, 2010 at 10:00 AM EDT
Warrington, PA —April 27, 2010 —
Discovery Laboratories, Inc. (Nasdaq: DSCO), a biotechnology company
developing its novel synthetic surfactant and aerosol technologies for
respiratory diseases, today provides an update on Surfaxin® and key
pipeline and business initiatives and reports financial results for
the first quarter ended March 31, 2010. The Company will host a conference call
on Wednesday, April 28, 2010, at 10:00 AM EDT. The call-in number is
866-332-5218.
Highlights,
discussed in greater detail below, include:
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·
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Progress
on addressing sole remaining issue to gain potential FDA approval in 2011
of Surfaxin for Respiratory Distress Syndrome (RDS) in premature
infants. Re-validation of the optimized fetal rabbit Biological
Activity Test (BAT) is 90% complete and currently meeting all
pre-specified acceptance criteria. Feedback from the FDA on
proposed Surfaxin preclinical program which employs the optimized and
revalidated BAT is expected this
May.
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·
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The
$10.6 million loan with PharmaBio Development Inc., the former strategic
investment subsidiary of Quintiles Transnational Corp., has been
restructured. PharmaBio has agreed to purchase common stock and
warrants for $2.2 million. Quintiles, PharmaBio and the Company
have also agreed to explore a potential strategic collaboration to develop
Surfaxin LS™ and/or Aerosurf®.
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·
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Enrollment
completed for Phase 2 clinical trial of Surfaxin for Acute Respiratory
Failure (ARF) with top-line results expected in June
2010.
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Update on
Surfaxin® for the prevention of
RDS
In
response to written guidance received in February 2010 from the U.S. Food and
Drug Administration (FDA), the Company is focused on performing specified
preclinical work as the way to potentially address the sole remaining issue
necessary for Surfaxin approval, the final validation of a fetal rabbit
Biological Activity Test (BAT, an important quality control release and
stability test). A key component of the preclinical program is to
first satisfactorily optimize and re-validate the BAT. The BAT has been
optimized in accordance with previous review and comment from the FDA.
Re-validation of the optimized BAT is approximately 90% complete and currently
meeting all pre-specified acceptance criteria. The Company anticipates
completing its efforts to revalidate the optimized BAT in May 2010.
Additionally,
the Company has been interacting with the FDA regarding important aspects of the
specified preclinical program, including its proposed study design and success
criteria. The program calls for a series of prospectively-designed, side-by-side
preclinical studies employing the optimized BAT and a well-established preterm
lamb model of RDS to address the sole remaining issue for Surfaxin
approval. The Company expects written response from the FDA to its
proposed program in May 2010.
Subject
to satisfactory BAT revalidation and FDA feedback on the proposed preclinical
program, the Company plans to promptly initiate the proposed preclinical
protocol to address the sole remaining issue for Surfaxin approval. The Company
believes it remains on track to complete the preclinical work and submit its
Complete Response to the FDA in the first quarter of 2011.
Financial
Update
For the
quarter ended March 31, 2010, the Company reported a net loss of $7.3 million
(or $0.05 per share) on 137.7 million weighted average common shares outstanding
compared to a net loss of $9.0 million (or $0.09 per share) on 102.1
million weighted average common shares outstanding for the same period in
2009. Net cash burn before financings for the first quarter of 2010
consisted of $5.4 million used for ongoing operating activities, a one-time
payment of $1.0 million to satisfy certain contractual severance obligations to
the Company’s former President and Chief Executive Officer, and $0.2 million
used for debt service. Also, in February 2010, the Company completed a public
offering of common stock and warrants resulting in net proceeds to the Company
of $15.1 million.
As of
March 31, 2010, the Company had cash and marketable securities of
$24.2 million. Additionally, the Company currently has two Committed Equity
Financing Facilities (CEFFs) that, subject to certain conditions, may allow the
Company to raise additional capital to support its business plans. As the
current market price of the Company’s common stock is below the minimum price
($0.60 and $1.15) required by the CEFFs, neither CEFF is currently available.
The Company had 154.0 million common shares outstanding as of March 31,
2010.
On April
27, 2010, the Company and PharmaBio Development Inc.
(PharmaBio), the former strategic investing subsidiary of Quintiles
Transnational Corp. (Quintiles), agreed to restructure the Company’s $10.6
million outstanding loan due April 30, 2010. The Company will
immediately pay PharmaBio $6.6 million of the loan in cash. The remaining $4.0
million balance of the loan will be due in payments of $2.0 million on each of
July 30th and
September 30th of
2010. PharmaBio has also agreed to the cancellation of warrants held
by it to purchase an aggregate of 2,393,612 shares of common stock.
Additionally,
on April 27, 2010, PharmaBio agreed to purchase approximately 4.1 million shares
of the Company’s common stock and warrants to purchase approximately 2.0 million
shares of common stock for gross proceeds of $2.2 million. Each
common share, together with a related warrant to purchase one half of a share of
common stock, was sold at a unit price of $0.5429. The offering is
being made solely to PharmaBio. The securities will be issued under a previously
filed registration statement that was declared effective by the Securities and
Exchange Commission on June 18, 2008. The warrants are exercisable
beginning on the date that is 181 days after the date of issuance until the
fifth anniversary of such date at an exercise price of $0.7058 per share of
common stock. The transaction is expected to close on or about April
30, 2010, subject to satisfaction of customary closing conditions. This press
release shall not constitute an offer to sell or the solicitation of an offer to
buy any securities of Discovery Laboratories, Inc. nor shall there be any sale
of the securities in any state or jurisdiction in which such offer, solicitation
or sale would be unlawful prior to registration or qualification under the
securities laws of any such state or jurisdiction.
Quintiles,
PharmaBio and the Company have also agreed to explore a long-term strategic
collaboration for the development of Surfaxin LS and Aerosurf. While
there can be no assurance regarding the terms of any such strategic
collaboration, PharmaBio has, for example, provided other pharmaceutical
companies with at-risk funding for product research, development, and
commercialization in exchange for anticipated future financial returns,
including fees based upon the attainment of success milestones or royalties on
net product sales. The companies plan to continue related discussions
and activities in connection with the above; however, there can be no assurances
that any such arrangements will be entered into.
W. Thomas
Amick, Chairman and interim Chief Executive Officer of Discovery Labs,
commented, “A key priority for the Company in 2010 is to strengthen our
long-term strategic and financial position and secure capital resources to
meaningfully advance our promising KL4 surfactant
pipeline programs and maximize shareholder value. We continue to engage in
discussions with potential strategic and financial partners that, if successful,
will provide the financial resources needed to potentially advance our
development programs.”
Although
a key priority for the Company is to secure strategic partners and capital to
support its ongoing research and development activities and assure its future
growth and financial stability, there can be no assurance that any strategic
alliance will be successfully identified or other financing alternatives will be
successfully concluded.
Other Key Pipeline
Programs
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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 now completed and top-line results are
expected to be available in June
2010.
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·
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Surfaxin
LS™ (lyophilized dry powder formulation of KL4
surfactant) and Aerosurf®
(aerosolized formulation of KL4
surfactant) 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 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 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.
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·
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The
Company is currently conducting important preclinical activities for both
Surfaxin LS and Aerosurf as well as advancing development of its capillary
aerosolization device to support regulatory requirements for its planned
clinical programs. The Company is preparing to further engage the FDA and
international regulatory agencies with respect to its planned Phase 3
clinical program for Surfaxin LS and Phase 2 clinical program for
Aerosurf. The Company intends to initiate these clinical programs upon
determining final regulatory strategy and after securing appropriate
strategic alliances and necessary
capital.
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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 is being
conducted at a leading research center, The University of North Carolina,
and is further supported by the Cystic Fibrosis Foundation. 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. Enrollment is approximately 70% complete and
top-line results are now expected in the third quarter of
2010.
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The
descriptions of the transactions agreed to with PharmBio are entirely modified
by the transaction documents, which are attached as exhibits to the Form 8-K to
be filed by the Company with the Securities and Exchange Commission
(“SEC”). Readers are referred to, and encouraged to read in their
entirety, the Form 8-K, including the exhibits attached thereto, and
the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010
to be filed with the SEC, which includes further detail on the Company’s
business plans and operations, financial condition and results of
operations.
Conference
Call Details
Discovery
Labs will hold a conference call on Wednesday, April 28, 2010 at 10:00 AM EDT to
further discuss the foregoing. The call in number is
866-332-5218. The international call in number is
706-679-3237. The replay number to hear the conference call is
800-642-1687 or 706-645-9291. The passcode is 71846778.
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 eventually result in delisting of
Discovery Labs’ common stock and 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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March
31,
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|||||||||
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(unaudited)
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|||||||||
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2010
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2009
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||||||||
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Revenue
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$ | - | $ | - | |||||
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Operating
expenses: (1)
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|||||||||
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Research
and development
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4,133 | 5,607 | |||||||
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General
and administrative
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2,932 | 3,096 | |||||||
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Total
expenses
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7,065 | 8,703 | |||||||
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Operating
loss
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(7,065 | ) | (8,703 | ) | |||||
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Other
income / (expense)
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(223 | ) | (297 | ) | |||||
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Net
loss
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$ | (7,288 | ) | $ | (9,000 | ) | |||
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Net
loss per common share
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$ | (0.05 | ) | $ | (0.09 | ) | |||
|
Wghtd.
Avg. number of common shares outstanding
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137,699 | 102,093 | |||||||
(1) Expenses
include a charge for stock-based compensation in accordance with ASC Topic
718. For the three months ended March 31, 2010 and 2009, the
charges associated with stock-based compensation were $0.4 million ($0.2 million
in R&D and $0.2 million in G&A) and $0.9 million ($0.2 million in
R&D and $0.7 million in G&A), respectively.
Condensed
Consolidated Balance Sheets
(in
thousands)
|
March
31,
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December
31,
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|||||||
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2010
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2009
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|||||||
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ASSETS
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(unaudited)
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|||||||
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Current
Assets:
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||||||||
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Cash
and marketable securities
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$ | 24,172 | $ | 15,741 | ||||
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Receivables,
prepaid expenses and other current assets
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270 | 233 | ||||||
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Total
Current Assets
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24,442 | 15,974 | ||||||
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Property
and equipment, net
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4,444 | 4,668 | ||||||
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Restricted
Cash
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400 | 400 | ||||||
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Other
assets
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223 | 361 | ||||||
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Total
Assets
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$ | 29,509 | $ | 21,403 | ||||
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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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$ | 1,147 | $ | 1,294 | ||||
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Accrued
expenses
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3,531 | 3,446 | ||||||
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Loan
payable, including accrued interest
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10,545 | 10,461 | ||||||
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Equipment
loan and other liabilities
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472 | 597 | ||||||
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Total
Current Liabilities
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15,695 | 15,798 | ||||||
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Long-Term
Liabilities:
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||||||||
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Equipment
loan and other liabilities
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1,078 | 1,118 | ||||||
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Total
Liabilities
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16,773 | 16,916 | ||||||
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Stockholders'
Equity
|
12,736 | 4,487 | ||||||
|
Total
Liabilities and Stockholders' Equity
|
$ | 29,509 | $ | 21,403 |