Discovery Laboratories, Inc. (Nasdaq: DSCO), a specialty biotechnology company dedicated to advancing a new standard in respiratory critical care, today announced financial results for the fourth quarter ended December 31, 2013, as well as recent business updates. The Company will host a conference call today, March 13, 2014 at 10:00 AM ET. Conference call details are below.
Key highlights include:
Financial Update: For the fourth quarter of 2013, the Company reported an operating loss of $10.3 million and net cash outflows before financings of $10.4 million. As of December 31, 2013, the Company had cash and cash equivalents of $86.3 million. During the quarter, the Company received an advance of $20 million under its secured loan with Deerfield Management Co., L.P. (Deerfield). As of December 31, 2013, the amount due Deerfield was $30 million, payable in three equal annual installments beginning in 2017, subject to deferral of the first two payments if certain financial milestones are achieved.
SURFAXIN®: In November, 2013, the Company initiated the U.S. commercial launch of SURFAXIN (lucinactant) Intratracheal Suspension for the prevention of respiratory distress syndrome (RDS) in premature infants at high risk for RDS. SURFAXIN is the first FDA-approved synthetic, peptide-containing surfactant and the only alternative to animal-derived surfactants available in the U.S.
AEROSURF®: The Company currently is conducting its AEROSURF phase 2 clinical program beginning with a phase 2a clinical study. The phase 2a study is an open label, single-dose study with the primary goal of evaluating the safety and tolerability of aerosolized KL4 surfactant drug product administered in escalating inhaled doses in premature infants 29 to 32 weeks gestational age who are receiving nasal continuous positive airway pressure (nCPAP) for respiratory distress syndrome (RDS), compared to infants receiving nCPAP alone. Results from the phase 2a study are expected in the third quarter of 2014.
"The fourth quarter of 2013 marked the beginning of a potential transformation in the management of RDS in premature infants," commented John G. Cooper, President and Chief Executive Officer at Discovery Labs. "We initiated the AEROSURF phase 2 clinical program, the first-ever with an aerosolized surfactant intended to support registration in the U.S. and potentially in other markets. AEROSURF has the potential to enable the treatment of a significantly greater number of premature infants who could benefit from surfactant therapy without the need for invasive endotracheal intubation. In addition, we introduced SURFAXIN in the U.S., representing the first step in achieving our vision of advancing a new standard of care for premature infants with RDS."
Summary Financial Results for the Fourth Quarter ended December 31, 2013
The Company reported a net loss of $11.7 million ($0.16 per share) on 73.1 million weighted-average common shares outstanding for the quarter ended December 31, 2013, compared to a net loss of $6.8 million ($0.16 per share) on 43.5 million weighted-average common shares outstanding for the comparable period in 2012. Included in the net loss is the change in fair value of certain common stock warrants that are classified as derivative liabilities, resulting in non-cash expense of $0.9 million and non-cash income of $5.6 million for the quarters ended December 31, 2013 and 2012, respectively.
For the quarter ended December 31, 2013, the Company reported an operating loss of $10.3 million compared to $12.4 million for the comparable period in 2012. During the fourth quarter of 2013, the Company shipped approximately $140,000 of SURFAXIN to its specialty distributor. The Company currently uses the sell-through method for revenue recognition, which means revenue is deferred until its specialty distributor ships product to a hospital and all revenue recognition criteria are met. For the fourth quarter of 2013, all SURFAXIN sales have been deferred in accordance with the Company's revenue recognition policy. The operating loss in the fourth quarter of 2013 includes (i) investments to support the initiation of the AEROSURF Phase 2a clinical trial; and, (ii) costs associated with the initiation of the launch of SURFAXIN.
Other income / expense for the quarter end December 31, 2013 was $0.6 million expense and represents interest related to the Deerfield loan. Of the $0.6 million, $0.4 million is cash interest expense and $0.2 million is non-cash amortization of the debt discount.
Net cash outflows before financing activities for the quarter ended December 31, 2013 were $10.4 million.
As of December 31, 2013, the Company had cash and cash equivalents of $86.3 million. In November 2013, the Company completed a public offering of 28.75 million shares of common stock at a price of $2.00 per share, resulting in net proceeds to the Company (after underwriting discount and expenses) of approximately $54 million.
Additionally, with the commercial introduction of SURFAXIN, the Company became eligible under its $30 million secured loan with Deerfield to receive the final $20 million advance, which was received in December 2013. In connection with the $20 million advance, Deerfield received a cash transaction fee equal to 1.5% of the advance and warrants to purchase approximately 4.7 million shares of common stock at an exercise price of $2.81 per share. As of December 31, 2013, the Company had $30 million of long-term debt due to Deerfield with principal payable in three equal annual installments beginning in February 2017, subject to deferral of the amounts due in 2017 and 2018 if certain financial milestones are achieved.
In October 2013, the Company initiated an offering under its at-the-market (ATM) program with Stifel, Nicolaus & Company, Incorporated and issued 713,920 shares of common stock at an average price per share of $2.75, resulting in net proceeds (after a 3% commission) of approximately $1.8 million. Following this offering, approximately $23.0 million remains available under the Company's ATM program.
For the first quarter of 2014, the Company anticipates operating cash outflows before financing activities of approximately $11 million.
As of December 31, 2013, the Company reported a common stock warrant liability of $5.4 million, predominantly related to five-year warrants issued in February 2011. These warrants are not subject to cash settlement; however, they have been classified as derivative liabilities in accordance with generally accepted accounting principles because they contain anti-dilution provisions that adjust the exercise price of the warrants in certain circumstances.
The Company had 84.6 million and 43.7 million shares of common stock outstanding as of December 31, 2013 and 2012, respectively.
Discovery Laboratories, Inc.