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Discovery Laboratories Inc. regained ground on word of an approvable letter from the FDA, which signals an open door for Surfaxin, a prophylaxis therapy for respiratory distress syndrome in premature infants, once some previously noted "highly correctable" manufacturing issues are fixed and labeling issues are resolved, the company said.

"We are starting at a not too disadvantaged spot at the moment" with regard to labeling, Robert Capetola, president and CEO of Warrington, Pa.-based Discovery, told investors during a conference call.

Wall Street agreed. The company's stock (NASDAQ:DSCO) closed Monday at $6.42, up 63 cents, or 10.9 percent.

An official response by Discovery to the FDA's concerns is expected to be finished in June or July, Capetola said. The agency then has six months to answer back.

"If we assume they take the entire six months to do it, we anticipate approval and launch in the first quarter of 2006," he said, adding that the company hopes for a more interactive relationship that might make the process quicker. Marketing clearance could be gained as early as the fourth quarter.

"We have not gone public with everything we asked for in the label," Capetola said. "We'd rather not get into that," he said, but the firm is in "a better position than anticipated."

Share value fell 22 percent two weeks ago when Discovery made public the FDA's concerns that arose after an inspection of Laureate Pharma Inc., of Totowa, N.J., the manufacturer for Surfaxin, a synthetic compound containing the peptide sinapultide that mimics natural surfactant and allows oxygen absorption. (See BioWorld Today, Feb. 2, 2005.)

Matters to be ironed out have to do with measures to detect any manufacturing problems that might occur in the future, and the FDA found no existing difficulties. Steps are ongoing at Laureate to bring systems in line.

Christopher Schaber, chief operating officer for Discovery, said that "if the corrective actions with regard to Laureate go past that June-July time frame, then it might have an impact on our other clinical programs," but such a scenario is not anticipated.

The financial picture for Discovery is unchanged from two weeks ago, when the firm last provided guidance, said John Cooper, chief financial officer.

Burn rate is expected to be $8.5 million to $9.5 million per quarter for the next two quarters, and Discovery aims to raise between $20 million and $25 million "to support the overall financial position of the company," Cooper said.

Surfaxin also is being investigated as a therapy for low-birth-weight premature babies at risk of developing bronchopulmonary dysplasia. Two Phase II trials in that indication began in January. Other Phase II trials are under way with Surfaxin for meconium aspiration syndrome in full-term infants and for acute respiratory distress syndrome in adults.

About 75,000 infants are treated with surfactants - mainly from bovine and pig sources - each year, and Discovery has shown in pivotal trials that Surfaxin is more effective, improving survival and other outcomes.

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