Revenues Decline at Discovery Labs in Q4, Shares Down - Analyst Blog

Discovery Laboratories, Inc. DSCO reported fourth quarter 2013 loss (excluding change in fair value of common stock warrant liability) of 15 cents per share, narrower than the Zacks Estimate of a loss of 16 cents per share. The loss (excluding change in fair value of common stock warrant liability) in the year-ago quarter was approximately 29 cents.

The company reported revenues of $74,000 in the final quarter of 2013, down 62%. Discovery Labs stated that revenues worth $140,000 from its approved drug Surfaxin were deferred in accordance with the revenue recognition policy followed by the company. Surfaxin, an intratracheal suspension, has been cleared by the U.S. Food and Drug Administration (FDA) for the prevention of respiratory distress syndrome (RDS) in premature infants who are at high risk of being affected by the disease.

Surfaxin is the first FDA-approved synthetic, peptide-containing surfactant available for the prevention of RDS in premature infants. Before Surfaxin, only animal-derived surfactants like AbbVie Inc.'s ABBV Survanta were available in the market.

Discovery Labs reported research & development (R&D) costs of $5.8 million in the final quarter of 2013 as against $6.1 million in the year-ago quarter. Selling, general & administrative (SG&A) costs declined 37% to $4.1 million in the final quarter of 2013.

For full year 2013, revenues jumped 99% to $388,000. The Zacks Consensus Estimate was $1 million. Loss for 2013 (excluding change in fair value of common stock warrant liability) narrowed to 83 cents per share from 96 cents incurred in 2012. The Zacks Consensus Estimate hinted at a loss of 84 cents per share.

Apart from releasing financial results, Discovery Labs provided an update on RDS candidate, Aerosurf. The company is evaluating the candidate in a phase IIa open label, single-dose study. Discovery Labs expects to report results from the study in the third quarter of this year.

Shares Down on Withdrawal of Surfaxin 2014 Sales Outlook

Shares of Discovery Labs tumbled in excess of 11% primarily due to the company's decision to withdraw the previously announced guidance of $8 million–$10 million for Surfaxin sales. The company said that it is of the opinion that the time needed to have the drug reviewed by hospital committees, accepted on hospital formulary, purchased by the hospital pharmacy and used in the neonatal intensive care unit is longer than what it had assumed while issuing the previous short-term revenue guidance for the drug. The company believes that it needs more actual experience pertaining to Surfaxin product cycle time to effectively project short-term sales of the drug,.

Discovery Labs carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the sector include Alexion Pharmaceuticals, Inc. ALXN and Alkermes ALKS. Both stocks carry a Zacks Rank #1 (Strong Buy).