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Discovery Labs Reports Fourth Quarter 2015 Financial Results and Provides Business Updates

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Company Remains on Track to Deliver Key AEROSURF® Phase 2 Program Milestones

WARRINGTON, Pa., March 24, 2016 /PRNewswire/ -- Discovery Laboratories, Inc. (Nasdaq: DSCO), a biotechnology company focused on developing aerosolized KL4 surfactant therapies for respiratory diseases, today provided financial results for the fourth quarter ended December 31, 2015 and key business updates. The Company will host a conference call today at 8:00 a.m. EDT.

Key Business Updates

  • In February 2016, Craig Fraser was appointed as the Company's President and Chief Executive Officer, and was also elected to the board of directors.
  • In the fourth quarter of 2015, the Company completed enrollment in the AEROSURF® phase 2a clinical program in 80 premature infants 29 to 34 week gestational age (GA) receiving nasal continuous positive airway pressure (nCPAP) for respiratory distress syndrome (RDS).  Overall, the safety and tolerability profile of the AEROSURF-treated groups was generally comparable to the control group.  In addition, data suggest that AEROSURF may be reducing the incidence of nCPAP failure (the need for intubation and delayed surfactant therapy). 
  • In the fourth quarter of 2015, the Company initiated the AEROSURF phase 2a clinical trial in 32 premature infants 26 to 28 week GA receiving nCPAP for RDS. Enrollment is on-going and the Company is on track to complete this trial in the second quarter of 2016 and release top-line results shortly thereafter in the third quarter of 2016.
  • The Company has also initiated the AEROSURF phase 2b clinical trial in up to 240 premature infants 26 to 32 week GA receiving nCPAP for RDS.  In addition to continuing to assess safety and tolerability, the trial is designed to evaluate the following endpoints: time to nCPAP failure (the need for intubation and delayed surfactant therapy), incidence of nCPAP failure and physiological parameters indicating the effectiveness of lung function. The 2b trial is a global trial with site initiation in North America proceeding as expected, while sites in Europe and Latin America are anticipated to be initiated early in the second quarter of 2016. The Company remains on track to complete enrollment in this trial by the end of 2016 and release top-line results in the first quarter of 2017.
  • As of December 31, 2015, the Company had cash and cash equivalents of $38.7 million.

"Discovery Labs has a significant opportunity to create value by applying our novel KL4 surfactant and breakthrough aerosol delivery technology beginning with a focus on transformational change to neonatal respiratory critical care," commented Mr. Fraser. "Our driving objective for 2016 is the rigorous and timely execution of the AEROSURF phase 2 program while effectively managing existing cash resources. We look forward to sharing the results of these efforts."

Select Financial Results for the Fourth Quarter ended December 31, 2015

For the quarter ended December 31, 2015, the Company reported an operating loss of $9.8 million compared to $11.2 million for the fourth quarter of 2014.

Grant revenue for the fourth quarter of 2015 was $0.7 million compared to $1.0 million for the fourth quarter of 2014. The 2015 grant revenue was from a Small Business Innovation Research (SBIR) Grant from the National Institutes of Health (NIH) to study the Company's aerosolized KL4 surfactant as a medical countermeasure to mitigate acute and chronic/late-phase radiation-induced lung injury.  The grant revenue in 2014 was from a SBIR grant from the National Heart, Lung, and Blood Institute (NHLBI) of the NIH to support the AEROSURF phase 2a clinical trial in premature infants 29 to 34 week GA. 

Research and development expenses were $8.2 million for the fourth quarter of 2015, compared to $7.8 million for the fourth quarter of 2014. The increase was primarily due to a $1.5 million increase in AEROSURF direct program costs partially offset by a reduction in workforce related to manufacturing development and medical affairs capabilities due to the Company's decision in the first quarter of 2015 to voluntarily cease commercial and manufacturing activities for SURFAXIN® (lucinactant) Intratracheal Suspension.

Selling, general and administrative expenses for the fourth quarter of 2015 were $2.2 million, compared to $3.7 million for the fourth quarter of 2014. The decrease was primarily due to the Company's decision in the first quarter of 2015 to voluntarily cease commercial and manufacturing activities for SURFAXIN, resulting in reduction in workforce related to commercial infrastructure. 

Interest expense for the fourth quarter of 2015 was $0.6 million, compared to $1.2 million for the fourth quarter of 2014. The decrease in interest expense was due to the July 2015 restructuring of our long-term debt with affiliates of Deerfield Management Company, L.P. (Deerfield) which resulted in the write-off of capitalized debt discount costs which were previously being amortized to interest expense.

The Company reported a net loss of $10.1 million ($1.26 per basic share) on 8.1 million weighted-average common shares outstanding for the quarter ended December 31, 2015, compared to a net loss of $10.6 million ($1.68 per basic share) on 6.1 million weighted average common shares outstanding for the comparable period in 2014.

Net cash outflows before financing activities for the fourth quarter of 2015 were $7.6 million. As of December 31, 2015, the Company had cash and cash equivalents of $38.7 million, an amount the Company anticipates is sufficient to support the completion of the AEROSURF phase 2b clinical program and fund operations through the first quarter of 2017. In addition, as of December 31, 2015, the Company reported accounts payable and accrued expenses of $10.8 million and long-term debt with Deerfield of $25 million. The debt is payable in two equal installments of $12.5 million in each of February 2018 and 2019. The payment due in February 2018 can be deferred subject to certain conditions.

Readers are referred to, and encouraged to read in its entirety, the Company's Annual Report on Form 10-K for the year ended December 31, 2015 which is expected to be filed with the Securities and Exchange Commission on or before March 30, 2016, which includes discussion about the Company's business plans and operations, financial condition and results of operations.

Conference Call and Webcast Details
The Company will also host a live teleconference and webcast, including a slide presentation, today at 8:00 a.m. EDT to discuss the 2015 fourth quarter financial results along with providing other business updates. The live webcast and archive of the conference call can be accessed at http://discoverylabs.investorroom.com/events.

For "listen-only" participants and those who wish to take part in the question and answer portion of the call, dial (888) 346-0767 (domestic) or (412) 902-4251 (international). After placing the call, request to be joined into the Discovery Labs conference call.  A replay of the conference call will be accessible one hour after completion through March 31, 2016 by dialing (877) 344-7529 (domestic) or (412) 317-0088 (international) and referencing conference ID number 10082877.

About AEROSURF®
Premature infants with severe RDS are frequently treated with surfactants that can only be administered by invasive endotracheal intubation supported with mechanical ventilation, procedures that may each result in serious respiratory conditions and other complications.  To avoid such complications, many neonatologists often initially treat premature infants with less invasive means, typically nCPAP.  Unfortunately, a significant number of premature infants on nCPAP will respond poorly (an outcome referred to as nCPAP failure) and may require delayed surfactant therapy.  Since neonatologists currently cannot predict which infants will experience nCPAP failure, neonatologists are faced with difficult choices in treating infants with RDS. 

AEROSURF is a novel, investigational drug/device product that combines the Company's proprietary KL4 surfactant and its aerosol delivery technologies.  AEROSURF is being developed to potentially reduce or eliminate the need for endotracheal intubation and mechanical ventilation in the treatment of premature infants with respiratory distress syndrome (RDS).  With AEROSURF, neonatologists may potentially administer aerosolized KL4 surfactant to premature infants supported by nCPAP, without subjecting them to invasive endotracheal intubation and mechanical ventilation.  By enabling noninvasive delivery of aerosolized KL4 surfactant, AEROSURF, if approved,  has the potential to address a serious unmet medical need, provide transformative clinical and pharmacoeconomic benefits, and enable the treatment of a significantly greater number of premature infants with RDS who could benefit from surfactant therapy but are currently not treated. 

Currently in the U.S., the Company estimates that approximately 120,000 to 150,000 premature infants could benefit from surfactant therapy, but, due to the risks associated with endotracheal intubation and mechanical ventilation, only approximately 50,000 to 60,000 of these infants currently are treated with surfactants as the initial therapy.  The remaining infants with RDS are usually supported with nCPAP alone.  However, a large percentage of these infants are not adequately supported with nCPAP alone (an outcome referred to as nCPAP failure) and thereafter may require delayed surfactant therapy administered by endotracheal intubation and mechanical ventilation

About Discovery Labs
Discovery Laboratories, Inc. is a biotechnology company focused on developing aerosolized KL4 surfactant therapies for respiratory diseases.  Surfactants are produced naturally in the lung and are essential for normal respiratory function and survival.  If surfactant deficiency or degradation occurs, the air sacs in the lungs can collapse, resulting in severe respiratory diseases and disorders.  Discovery Labs' technology platform includes a novel synthetic peptide-containing (KL4) surfactant that is structurally similar to pulmonary surfactant, and proprietary drug delivery technologies being developed to enable noninvasive administration of aerosolized KL4 surfactant.  Discovery Labs believes that its proprietary technology platform makes it possible to develop a significant pipeline of aerosolized surfactant products to address a variety of respiratory diseases for which there frequently are few or no approved therapies.

For more information, please visit the Company's website at www.Discoverylabs.com.

Forward-Looking Statements
To the extent that statements in this press release are not strictly historical, all such statements are forward-looking, and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements are subject to certain risks and uncertainties that could cause actual results, including projections of future cash balances and anticipated cash outflows, to differ materially from the statements made.  Examples of such risks and uncertainties include: risks related to Discovery Labs'  AEROSURF development program and other development programs that we may undertake in the future, which may involve time-consuming and expensive pre-clinical studies and clinical trials, which may be subject to potentially significant delays or regulatory holds, or fail; risks related to technology transfers to contract manufacturers and problems or delays encountered by Discovery Labs, contract manufacturers or suppliers in manufacturing drug products, drug substances, aerosol delivery systems (ADS) and other materials on a timely basis and in sufficient amounts; risks relating to rigorous regulatory requirements, including that: (i) the FDA or other regulatory authorities may not agree with Discovery Labs on matters raised during regulatory reviews, may require significant additional activities, or may not accept or may withhold or delay consideration of applications, or may not approve or may limit approval of Discovery Labs' products, and (ii) changes in the national or international political and regulatory environment may make it more difficult to gain regulatory approvals; risks that Discovery Labs will be unable to secure significant additional capital as needed, and may be unable in a timely manner, if at all, to identify potential strategic transactions (including strategic partnerships and other transactions) that would provide funding and support product development, regulatory and, if approved, commercialize our products, or to access debt or equity financings, which could result in substantial equity dilution; risks related to maintaining continued compliance with The Nasdaq Capital Market listing requirements; risks related to Discovery Labs' efforts to maintain and protect the patents and licenses related to its products; and other risks and uncertainties described in Discovery Labs' filings with the Securities and Exchange Commission including the most recent reports on Forms 10-K, 10-Q and 8-K, and any amendments thereto.

 




Discovery Laboratories, Inc.




Condensed Consolidated Statement of Operations




(in thousands, except per share data)














Three Months Ended


Twelve Months Ended




December 31,


December 31,




(unaudited)


(unaudited)




2015


2014


2015


2014

Revenues:










Product sales

$               –


$            136


$               7


$            312


Grant revenue

655


1,048


980


2,523




655


1,184


987


2,835

Operating expenses: (1)









Cost of product sales


902


929


2,671


Research and development

8,225


7,771


28,888


26,690


Selling, general and administrative

2,211


3,737


11,004


16,732



Total expenses

10,436


12,410


40,821


46,093

Operating loss

(9,781)


(11,226)


(39,834)


(43,258)












Change in fair value of common stock warrant









liability

274


1,792


851


3,791


Loss on debt extinguishment



(11,758)



Interest expense

(604)


(1,201)


(4,579)


(4,591)


Other income / (expense), net

2



150


Net loss

$    (10,109)


$    (10,635)


$    (55,170)


$    (44,058)

Net loss per common share:








Basic

$        (1.26)


$        (1.68)


$        (7.98)


$        (7.28)

Diluted

$        (1.26)


$        (2.10)


$        (7.98)


$        (7.84)

Weighted avg. common shares outstanding:








Basic

8,050


6,097


6,967


6,078

Diluted

8,050


6,111


6,967


6,145











(1) For the three months ended December 31, 2015 and 2014, non-cash charges for depreciation and stock-based compensation were $0.4 million ($0.2 million in R&D and $0.2 million in S, G & A) and $0.8 million ($0.4 million in R&D and $0.4 million in S,G & A), respectively. For the twelve months ended December 31, 2015 and 2014, non-cash charges for depreciation and stock-based compensation were $2.2 million ($1.1 million in R&D and $1.1 million in S, G & A) and $3.7 million ($1.7 million in R&D and $2.0 million in S, G & A), respectively.

 

 

 

Discovery Laboratories, Inc.

Condensed Consolidated Balance Sheets

(in thousands)






December 31,


December 31,






2015


2014

ASSETS


(Unaudited)



Current Assets:






Cash and cash equivalents


$              38,722


$              44,711


Inventory



27


Prepaid interest, current portion


1,710



Prepaid expenses and other current assets


362


821




Total current assets


40,794


45,559









Property and equipment, net


1,039


1,637

Restricted cash


225


225

Prepaid interest, non-current portion


2,319


Other assets



78



Total Assets


$              44,377


$              47,499









LIABILITIES AND STOCKHOLDERS' EQUITY





Current Liabilities:






Accounts payable and accrued expenses


$                10,845


$                6,466


Deferred revenue



43


Common stock warrant liability


223


1,258


Equipment loans, current portion



62




Total current liabilities


11,068


7,829









Long-term debt, $25,000 at December 31, 2015 and $30,000 net of discount of
$9,698 at December 31, 2014


25,000


20,302

Other liabilities


43


169

Stockholders' Equity


8,266


19,199



Total Liabilities and Stockholders' Equity


$              44,377


$              47,499

Note: All share and per share amounts related to common stock have been adjusted to reflect the 1-for-14 reverse stock split made effective on January 22, 2016.

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/discovery-labs-reports-fourth-quarter-2015-financial-results-and-provides-business-updates-300240855.html

SOURCE Discovery Laboratories, Inc.

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