Firm is conducting preclinical tests to resolve CMC problem with Surfaxin.

Discovery Laboratories secured a committed equity financing facility (CEFF) with Kingsbridge Capital for up to $35 million over a three-year period through the purchase of up to approximately 31.6 million newly issued shares. The funding comes a week after the company received written guidance from the FDA stating the need to resolve a chemistry, manufacturing, and control (CMC) issue before Surfaxin® can be sanctioned for the prevention of respiratory distress syndrome (RDS) in premature infants.

In connection with the CEFF, the company issued a warrant to Kingsbridge to purchase up to 1,250,000 shares of common stock at an exercise price of $0.4459 per share.

“The facility provides a competitive cost of capital and flexible structure,” notes John G. Cooper, evp and CFO of Discovery Labs, “and should further strengthen our position as we work to resolve the sole remaining issue necessary to potentially gain FDA approval for Surfaxin for the prevention of respiratory distress syndrome in 2011 and advance the development of Surfaxin LS™ and Aerosurf®, which we believe hold the promise to significantly advance neonatal respiratory medicine.”

The safety and efficacy of Surfaxin for neonatal RDS had previously been demonstrated in a Phase III program. Discovery Labs believes it remains on track to complete the preclinical program to resolve the CMC matter and submit the additional data to the FDA during the first quarter of 2011.

Discovery Labs is now conducting a series of prospectively designed preclinical studies employing both a newly optimized and revalidated fetal rabbit biological activity test (BAT) and the well-established preterm lamb model of RDS. Multiple Surfaxin batches will be employed in side-by-side preclinical studies to assess the short-term physiologic response following Surfaxin administration (via measurement of respiratory compliance) in both the preterm lamb model and the optimized BAT.

The resulting data will be examined to evaluate the relative changes in biologic activity of Surfaxin at several different time points over the intended shelf life to determine the degree of comparability between the optimized BAT and the preterm lamb model. FDA has indicated that to satisfactorily establish comparability between the optimized BAT and the preterm lamb model, data must demonstrate the same relative changes in respiratory compliance between both models over time.

These studies are intended to also satisfy the FDA regarding the ability of the BAT to adequately discriminate biologically active from inactive Surfaxin drug product and establish Surfaxin final acceptance criteria for release and ongoing stability.
Surfactants are produced naturally in the lungs and are essential for breathing. Discovery Labs’ technology produces a synthetic, peptide-containing surfactant that is structurally similar to pulmonary surfactant. If approved, Surfaxin would be the first synthetic, peptide-containing surfactant for commercial use in neonatal medicine.

Discovery Labs is developing liquid, aerosol, and lyophilized formulations. The company says that its capillary aerosolization technology produces a dense aerosol, with a defined particle size that is capable of potentially delivering aerosolized KL4 surfactant to the deep lung without the complications currently associated with liquid surfactant administration.

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