Washington Editor

Shares of Discovery Laboratories Inc. dropped Monday, after the company acknowledged that its recent letter to the FDA has not adequately addressed questions raised in an approvable letter the agency issued six months ago for Surfaxin (lucinactant).

"This is not what we were expecting, but it is what it is," said John Cooper, Discovery Labs' executive vice president and chief financial officer. "But we have a really good relationship with the agency, so we will work as judiciously as possible to find out what the issues are and then respond to them."

The company defended its initial response as comprehensive and is optimistic that remaining issues will center on a few items that can be quickly addressed. Cooper said it primarily involved chemistry, manufacturing and labeling matters that had been raised in the approvable letter.

The stock (NASDAQ:DSCO) fell 67 cents Monday to close at $6.35 on 4.1 million shares, more than 11 times its average trading volume. That's a swing in the other direction for Discovery Labs, as earlier this year shares gained about 11 percent to $6.42 on news of the approvable letter for Surfaxin, a pulmonary product that the company has filed for approval to prevent respiratory distress syndrome in premature infants. (See BioWorld Today, Feb. 15, 2005.)

"Most importantly, that approvable letter indicated that we do not need any additional clinical trials," Cooper said. "We start with that assumption."

The FDA's preliminary assessment said the response letter, which was submitted at the end of last month, is not considered complete. The agency said it would provide later this week a more thorough and written communication on issues that might require additional information, after which the company expects to have greater clarity. And upon hearing back from the FDA, Discovery Labs plans to hold a conference call on this latest slowdown in getting Surfaxin to the market.

"Until then," Cooper said, "anything would be speculation."

Two weeks before receiving the approvable letter, the company disclosed that the FDA found concerns at Laureate Pharma Inc., Discovery Labs' contract manufacturer for the product, which is delivered by way of an endotracheal bolus into a baby's lungs. That news sent its shares tumbling by 22 percent to $6.07. A re-inspection of that site remains on hold until the FDA accepts Discovery Labs' response to the approvable letter. (See BioWorld Today, Feb. 2, 2005.)

"We thought the prudent thing to do would be to provide the FDA disclosure to shareholders," Cooper said. "As a result of that, the [review] clock has stopped."

Surfaxin's new drug application was filed last spring. (See BioWorld Today, April 15, 2004.)

The product also is being investigated in a range of other pulmonary programs, none of which have been affected by the regulatory back-and-forth on the respiratory distress syndrome NDA.

Next month, the company expects to report data from a Phase II pilot study of an aerosolized surfactant used with nasal CPAP for premature infants with respiratory distress syndrome. Another Phase II trial, which is testing Surfaxin in low-birth-weight premature babies at risk of developing bronchopulmonary dysplasia, should produce findings in the first quarter of next year. Lastly, another Phase II study of Surfaxin adults with acute respiratory distress syndrome should generate data in the same time frame.

"To our knowledge, all of those programs at the moment remain on track," Cooper said, "and most importantly, we'll see what the FDA lets us know in their response and from there, we'll determine what the company's next moves need to be."

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