Washington Editor

Drug manufacturing issues caused investors to dump shares of Discovery Laboratories Inc., dropping the company's stock price by 22 percent Tuesday.

The firm disclosed that the FDA found concerns at Laureate Pharma Inc., Discovery's contract manufacturer for Surfaxin. That product is under review by the agency, which conducted an inspection of Laureate's facility in the process of evaluating Discovery's new drug application. Surfaxin has been developed for the prevention of respiratory distress syndrome in premature infants.

"We remain very confident that Surfaxin will be approved," Discovery President and CEO Robert Capetola said during a conference call, "and we will continue to work closely with the FDA to ensure just that fact.

"We're pretty happy with the way things have gone so far," he added, "with the exception of one issue related to manufacturing, and that's highly correctable."

He was so upbeat during the call that he even joked about the Eagles' chances in this weekend's Super Bowl.

A Form 483 was issued to Laureate, which bears ultimate responsibility for rectifying problems. The FDA cited inspection observations relating to compliance with current Good Manufacturing Practices (cGMPs) and other processes to be used for commercial production of the product. The issues are not related to the manufacturing process itself, but, instead, deal with inadequate measures to detect and correct problems, should they occur in the future.

"The issue is primarily associated with making sure that proper quality systems are in place," said John Cooper, Discovery's executive vice president and chief financial officer, "and documents regarding that process."

In response, Laureate and Discovery, of Warrington, Pa., submitted a cGMP action plan outlining measures intended to address the agency's concerns. The companies formed a joint committee to oversee any corrections in the shortest possible time, and said they are expected to be completed by July.

Cooper told BioWorld Today that there are two components to the response plan: corrective action to deal with the FDA's immediate concerns, as well as a more comprehensive approach to cover any issues that could surface in the agency's re-inspection. He added that the partners plan to work in parallel with the FDA as it moves through the issues.

Discovery said the inspection observations do not relate to any clinical material produced to date. The company added that the raw materials contained in Surfaxin are purchased from third-party vendors that already have been inspected by the FDA without incident. Also, Discovery employs its own manufacturing equipment with its process on Laureate's premises in Totowa, N.J., and lastly, there are no safety issues with Surfaxin that has been manufactured and shipped from Laureate to Discovery's clinical trial sites for use in ongoing trials.

The company added that it believes that clinical data contained within its submission are sufficient for approval and does not expect to conduct additional trials, as the FDA's inspections of those data and clinical study sites have been favorable. Phase III findings showed that the drug demonstrated a highly significant reduction in respiratory distress syndrome-related mortality and an improvement in survival of infants without bronchopulmonary dysplasia.

Nevertheless, the event is a setback for Discovery's commercialization plans. The company had been forecasting a second-quarter launch of Surfaxin, shortly after a PDUFA date scheduled for Feb. 13. It now expects to receive a PDUFA letter constituting a Class 2 response to allow the agency up to six months to review Discovery's NDA response and conduct a re-inspection of Laureate's facility.

Surfaxin's commercial launch now is expected to occur in the fourth quarter, should it receive FDA approval, though Cooper conceded that such plans could be further waylaid if the manufacturing concerns are not addressed by July.

Discovery recently regained full commercialization rights to Surfaxin following a rearranged deal with Quintiles Transnational Corp., of Research Triangle Park, N.C. Discovery Labs filed its new drug application last spring. (See BioWorld Today, April 15, 2004, and Nov. 5, 2004.)

Aside from Surfaxin, but in related news, the company also noted that its other ongoing clinical programs, focused on acute respiratory distress syndrome in adults, bronchopulmonary dysplasia in premature infants and aerosolized surfactant for neonatal respiratory failures in premature infants, are not affected by the FDA's facility concerns and remain on track. But Discovery cautioned that if the inspection observations are not resolved by July, those programs could be delayed, as corresponding products also are manufactured by Laureate.

In the event the manufacturing concerns persist, Cooper said Discovery has discussed the possibility of contracting with other companies for production, though "we're not thinking that way," he said.

On Tuesday, Discovery's shares (NASDAQ:DSCO) fell $1.72 to close at $6.07.

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