Discovery Labs Reports Third Quarter 2013 Financial Results

         Discovery Labs Reports Third Quarter 2013 Financial Results

Conference Call Wednesday, November 13, 2013 at 10:00 a.m. ET

PR Newswire

WARRINGTON, Pa., Nov. 12, 2013

WARRINGTON, Pa., Nov. 12, 2013 /PRNewswire/ --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 third quarter ended September 30, 2013, as well as recent business
updates. The Company will host a conference call Wednesday morning, November
13, 2013 at 10:00 AM ET. Conference call details are below.

Key updates include:

  oSURFAXIN^®: On October 4, 2013, the U.S. Food and Drug Administration
    (FDA) agreed to the Company's updated product specifications for SURFAXIN
    (lucinactant) Intratracheal Suspension. SURFAXIN is the first
    FDA-approved synthetic, peptide containing surfactant available for the
    prevention of respiratory distress syndrome (RDS) in premature infants and
    the only approved alternative to animal-derived surfactants currently
    available today in the U.S. On November 8, 2013, the Company announced
    that it has initiated the commercial introduction of SURFAXIN in the U.S.
  oAEROSURF^®: In October 2013, the Company submitted an investigational new
    drug (IND) application to the FDA to initiate its AEROSURF phase 2
    clinical program. The FDA has completed its review and cleared the IND,
    and the Company can now proceed with its phase 2 clinical program.
    AEROSURF is a novel investigational drug-device combination product being
    developed to deliver the Company's KL4 surfactant in aerosolized form to
    premature infants with RDS. AEROSURF could potentially provide
    neonatologists with the ability to avoid invasive procedures and thereby
    enable the treatment of a significantly greater number of premature
    infants who could benefit from surfactant therapy and currently are not
    treated. The Company anticipates results from the first phase of its
    AEROSURF phase 2 clinical program in mid-2014.
  oFinancial Update: As of September 30, 2013, the Company reported cash and
    cash equivalents of $21.2 million. In November 2013, the Company
    completed a public offering of its common stock that resulted in net
    proceeds, including amounts expected from an over-allotment recently
    exercised by the underwriters, of approximately $54 million.
    Additionally, with the initiation of the commercial launch of SURFAXIN,
    the Company became eligible under its secured loan facility with Deerfield
    Management Co., L.P. (Deerfield) to receive an additional advance of $20
    million, which is expected in early December 2013.

"With the commercial introduction of SURFAXIN, initiation of our clinical
program for AEROSURF and our strengthened financial position, we are a much
stronger company and better positioned to implement our business plan and
achieve our vision of advancing a new standard of care for premature infants
with RDS," commented John G. Cooper, President and Chief Executive Officer at
Discovery Labs.

Summary Financial Results for the Third Quarter Ended September 30, 2013

For the quarter ended September 30, 2013, the Company reported a net loss of
$12.2 million ($0.22 basic net loss per share) on 54.8 million
weighted-average common shares outstanding, compared to a net loss of
$13.3million ($0.31 basic net loss per share) on 43.4 million
weighted-average common shares outstanding for the same 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 a
non-cash loss of $1.1 million and $3.3 million in 2013 and 2012, respectively.

The Company reported an operating loss of $10.8 million for the quarter ended
September 30, 2013 compared to an operating loss of $10.0 million for the same
period in 2012. Net cash outflows before financing activities for the quarter
ended September 30, 2013 were $10.1million compared to $9.9 million for the
same period in 2012. The operating loss for the quarter ended September 30,
2013 includes a $1.3 million investment to prepare for the AEROSURF phase 2
clinical trials.

As of September 30, 2013, the Company had cash and cash equivalents of $21.2
million. On November 5, 2013, the Company completed a public offering of 25
million shares of common stock at a price of $2.00 per share, resulting in net
proceeds to the Company (after underwriting discount and anticipated expenses)
of approximately $46.8 million. The Company also granted the underwriters a
30-day option to purchase up to an additional 3.75 million shares of common
stock at an offering price of $2.00 to cover over-allotments, if any. On
November 8, 2013, the underwriter notified the Company that it has exercised
its over-allotment option to purchase 3.75 million additional shares of common
stock. The exercise of the option is expected to close on or about November
14, 2013 and result in net proceeds (after underwriting discount) of
approximately $7.1 million.

Additionally, with the commercial introduction of SURFAXIN, the Company became
eligible under its $30 million secured loan facility with Deerfield to
receive the final $20 million advance, which is expected on or about December
3, 2013. The initial $10 million was advanced in February 2013 upon execution
of the facility agreement. In connection with the $20 million advance,
Deerfield will receive a 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.

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 $1.9 million. Following
this offering, approximately $23.1 million remains available under the
Company's ATM Program.

For the fourth quarter of 2013, the Company anticipates operating cash
outflows before financing activities of $10.5 million, and approximately $85
million in cash and cash equivalents at December 31, 2013.

As of September 30, 2013, the Company reported a common stock warrant
liability of $4.7 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 54.9 and 43.7 million shares of common stock outstanding as of
September 30, 2013 and December 31, 2012, respectively. The Company currently
has 80.7 million shares of common stock outstanding, not including 3.75
million shares to be issued upon closing of underwriters' over-allotment
option.

Readers are referred to, and encouraged to read in their entirety the
Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
2013 filed with the Securities and Exchange Commission, which includes further
detail on the above-referenced transactions and the Company's business plans
and operations, financial condition and results of operations.

Conference Call and Audio Webcast Details
Discovery Labs will hold a conference call and audio webcast on Wednesday,
November 13, 2013 at 10:00 AM ET to discuss the foregoing. To access the
conference call and participate in the question-and-answer session, the number
for domestic callers is (877) 870-4263 and for international callers (412)
317-0790. The conference call replay number is (877) 344-7529 or (412)
317-0088. The passcode for the replay is 10036729.

The audio webcast of the conference call will be available at
http://bit.ly/1962IVM and the Discovery Labs website at
www.discoverylabs.com. It is recommended that participants log onto the audio
webcast at least 15 minutes prior to the call. A replay of the audio webcast
will be available after the call at the Company's website.

About SURFAXIN^®
The U.S. Food and Drug Administration (FDA) approved SURFAXIN^® (lucinactant)
Intratracheal Suspension for the prevention of RDS in premature infants who
are at high risk for RDS. SURFAXIN is the first synthetic, peptide-containing
surfactant approved by the FDA and the only alternative to animal derived
surfactants.

IMPORTANT SAFETY INFORMATION
SURFAXIN is intended for intratracheal use only. The administration of
exogenous surfactants, including SURFAXIN, can rapidly affect oxygenation and
lung compliance. SURFAXIN should be administered only by clinicians trained
and experienced with intubation, ventilator management, and general care of
premature infants in a highly supervised clinical setting. Infants receiving
SURFAXIN should receive frequent clinical assessments so that oxygen and
ventilatory support can be modified to respond to changes in respiratory
status.

Most common adverse reactions associated with the use of SURFAXIN are
endotracheal tube reflux, pallor, endotracheal tube obstruction, and need for
dose interruption. During SURFAXIN administration, if bradycardia, oxygen
desaturation, endotracheal tube reflux, or airway obstruction occurs,
administration should be interrupted and the infant's clinical condition
assessed and stabilized.

SURFAXIN is not indicated for use in acute respiratory distress syndrome
(ARDS).

For more information about SURFAXIN, please visit www.surfaxin.com.

About AEROSURF^®
AEROSURF is a novel investigational drug-device combination product being
developed to deliver Discovery Labs' KL4 surfactant in aerosolized form to
premature infants with respiratory distress syndrome (RDS). AEROSURF could
potentially allow for the administration of KL4 surfactant to premature
infants without invasive endotracheal intubation, and may enable the treatment
of a significantly greater number of premature infants who could benefit from
surfactant therapy but are currently not treated.

About Discovery Labs
Discovery Laboratories, Inc. is a specialty biotechnology company focused on
advancing a new standard in respiratory critical care. Discovery Labs'
technology platform includes its novel proprietary KL4 surfactant, a
synthetic, peptide-containing surfactant that is structurally similar to
pulmonary surfactant, and its proprietary drug delivery technologies being
developed to enable efficient delivery of aerosolized KL4 surfactant and other
inhaled therapies. Discovery Labs' strategy is initially focused on
neonatology and improving the management of respiratory distress syndrome
(RDS) in premature infants. Discovery Labs believes that its RDS product
portfolio has the potential to become the new standard of care for RDS and,
over time, enable the treatment of a significantly greater number of premature
infants who could benefit from surfactant therapy but are currently not
treated.

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
relating to efforts to commercialize SURFAXIN and AFECTAIR, including
(1)whether Discovery Labs' commercial and medical affairs organizations will
succeed in introducing the products, (2) whether the products will be approved
by hospitals and will gain market acceptance and be preferred by healthcare
providers over current products, (3)whether the products will generate
revenues sufficient to fund Discovery Labs' research and development
activities and support its operations, and (4) whether Discovery Labs will
successfully develop a planned second vial size for SURFAXIN and follow-on
AFECTAIR devices; risks related to development programs, including in
particular the AEROSURF development program, including time-consuming and
expensive pre-clinical studies and clinical trials, which may be subject to
potentially significant delays or regulatory holds, or fail; 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 partners to support product development and, if approved,
commercialize products in markets outside the U.S., or to access debt or
equity financings, which could result in substantial equity dilution; 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-conducting airway
connectors, CAG devices 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; other risks, including those related to (1)continued
compliance with The Nasdaq Capital Market listing requirements, (2) Discovery
Labs' efforts to maintain and protect the patents and licenses related to its
products, (3) whether it or its strategic partners will be able to attract and
retain qualified personnel, (3) other companies' competing products, (3) legal
proceedings, and (4) health care reform; 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.





Condensed Consolidated Statement of Operations
(in thousands, except per share data)
                        Three Months Ended         Nine Months Ended
                        September 30,              September 30
                        (unaudited)                (unaudited)
                        2013         2012          2013         2012
 Revenue from           $       $        $       $      
 collaborative             60         –       315       –
 arrangement and grants
 Operating expenses:
 ^(1)
 Research and           6,574        5,743         21,909       15,482
 development
 Selling, general and   4,299        4,255         12,648       9,912
 administrative
 Total expenses         10,873       9,998         34,557       25,394
 Operating loss         (10,813)     (9,998)       (34,242)     (25,394)
 

 Change in fair value   (1,059)      (3,309)       1,627        (5,063)
 of common stock
 warrant liability
 Interest and other
 income / (expense),    (352)        (39)          (871)        (43)
 net
 Net loss               $        $        $       $     
                        (12,224)     (13,346)      (33,486)     (30,500)
 Net loss per common
 share:
  Basic   $       $        $       $      
                         (0.22)      (0.31)      (0.68)   (0.80)
  Diluted $       $        $       $      
                         (0.22)      (0.31)      (0.69)   (0.80)
 Weighted avg. common
 shares outstanding:
  Basic   54,792       43,444        49,235       38,061
  Diluted 54,792       43,444        50,377       38,061

    Includes non-cash charges for depreciation and stock-based compensation of
    $0.8 million ($0.4million in R&D and $0.4 million in SG&A) for each of
(1) the three months ended September 30, 2013 and 2012; and for the nine
    months ended September 30, 2013 and 2012, $2.1 million ($1.1 million in
    R&D and $1.0 million in SG&A) and $2.1 million ($1.2 million in R&D and
    $0.9 million in SG&A), respectively.







Discovery Laboratories, Inc
Condensed Consolidated Balance Sheets
(in thousands)
                                          September 30,      December 31,
                                          2013               2012
ASSETS                                    (Unaudited)
Current Assets:
Cash and cash equivalents                 $             $      
                                          21,177            26,892
Inventory                                 117                195
Prepaid expenses and other current assets 418                719
Total current assets                      21,712             27,806
Property and equipment, net               1,417              1,737
Restricted cash and other assets          502                400
 Total Assets                       $             $      
                                          23,631            29,943
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
 Accounts payable                    $           $      
                                          1,489               1,166
 Accrued expenses                    5,071              4,159
 Common stock warrant liability      4,678              6,305
 Equipment loan and capitalized      72                 69
leases, current portion
Total Current Liabilities                 11,310             11,699
Long-Term Liabilities:
Long-term debt, net of discount of $3.7
million at September 30, 2013 and $0 at   6,326              –
December 31, 2012, respectively
Equipment loan, non-current portion &     520                591
other liabilities
Total Liabilities                         18,156             12,290
Stockholders' Equity:                     5,475              17,653
Total Liabilities and Stockholders'       $             $      
Equity                                    23,631            29,943



SOURCE Discovery Laboratories, Inc.

Website: http://www.discoverylabs.com
Contact: John Tattory, Vice President, Finance: 215.488.9418 or
jtattory@discoverylabs.com; or Investor Relations, Michael Rice, LifeSci
Advisors: 646.597.6979 or mrice@lifesciadvisors.com; or Media Relations:
Michael Parks, Pitch360: 484.356.7105 or Michael@pitch360inc.com
 
Press spacebar to pause and continue. Press esc to stop.