Anticipating the FDA's nod on Surfaxin, its drug for respiratory distress syndrome in premature infants, in the first half of next year, Discovery Laboratories Inc. padded its bank account with a $25 million registered direct offering.

Those funds, according to the firm's prospectus, are expected to support activities in preparation of Surfaxin's launch, including establishing a sales force and marketing organization specialized in neonatal and pediatric indications, as well as pursuing potential collaboration deals with international partners to co-develop or co-market Surfaxin. Money also will go toward further clinical development of Surfaxin in other indications and development of its second pipeline product, Aerosurf.

Under the terms of the financing, Warrington, Pa.-based Discovery Labs agreed to sell 10 million shares of common stock for $2.50 each, marking an 18 percent discount from Thursday's closing price of $3.04.

Shares (NASDAQ:DSCO) closed at $2.76 Friday, down 28 cents.

It's the third financing this year for Discovery Labs, which raised $30 million in an April registered direct offering and entered a $12.5 million secured credit facility with Merrill Lynch Capital in May. The firm, which posted a net loss of $9.3 million, or 11 cents per share, for the third quarter, had cash and equivalents totaling $18.8 million as of Sept. 30.

Overall, the company has struggled during the last couple of years amid a series of setbacks with Surfaxin, which included a second approvable letter in April 2006 citing manufacturing and controls, and later, stability problems with the process-validation batch. But the last few months have brought some good news, with Discovery Labs reporting in late September that it had achieved manufacturing stability with Surfaxin and the FDA accepting the firm's complete response last month. The agency set a new target review date of May 1. (See BioWorld Today, April 6, 2006, and April 26, 2006.)

Surfaxin (lucinactant), which is designed to mimic the function of natural human lung surfactant, also is in ongoing Phase II studies in acute respiratory failure and is expected to move into Phase II/III trials in the prevention of bronchopulmonary dysplasia.

Earlier in its pipeline, Discovery is developing Aerosurf, an aerosolized product that also mimics surfactant. The company reported preclinical data last week showing that the product improved lung function and reduced inflammation associated with lung injury and chronic lung disease in a preterm lamb model.

Jefferies & Co. Inc. acted as placement agent for the financing.

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