By Aja Carmichael
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Shares of Discover Laboratories Inc. (DSCO) plunged as much as 56% in premarket trading Monday after the biotech company said it received a response letter from the U.S. Food and Drug Administration, calling for "certain aspects" of its lead drug Surfaxin to be addressed before the company's application can be approved.
In recent premarket trading, shares of Discover Laboratories fell 51% to 87 cents. Shares of the company have fallen 60% in the last three months.
The company said it believes that it has already submitted data necessary to respond to the FDA's questions. It also said its new drug application is sufficient to gain marketing approval of Surfaxin, which treats a breathing problem in premature infants.
The company said, at this time, there weren't any questions regarding Discovery Labs' Phase III clinical trials, nor were there any comments regarding drug-substance impurities. There also aren't any issues related to manufacturing process for Surfaxin.
Discover Laboratories plans to seek an end of review meeting with the FDA. If the meeting is successful, the company expects that Surfaxin may be approved within this year.
Last week, Discover Laboratories shares declined as investors appeared to be getting skittish about a the FDA's tentative decision. But before that, the stock had surged in recent weeks in an apparent bet the company will finally see a positive end to the more-than-four-year approval process stymieing the drug.
-By Aja Carmichael, Dow Jones Newswires; 201-938-5218; aja.carmichael@dowjones.com
(Updates with analyst comments and additional details throughout.)
By Aja Carmichael and Jennifer Hoyt
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Shares of Discovery Laboratories Inc. (DSCO) were recently down 50% after the Food and Drug Administration withheld approval for the biotechnology company's lead drug, Surfaxin, for a fourth time.
Shares of Discovery had surged in recent weeks as investors gambled the FDA might finally give approval for Surfaxin, putting an end to more than four years of a regulatory process stymieing the drug designed to treat a breathing problem in premature infants.
But Discovery said that on Friday it received a complete response letter from the FDA that said "certain aspects" of Surfaxin needed to be addressed before the drug could be approved.
Prior to the latest letter, the agency had issued three approvable letters on Surfaxin. These letters mean the FDA may give final approval, but only after evaluating for more information. Under a new policy begun last July, the agency stopped issuing approvable letters, and instead either approves a drug or releases a complete-response letter, describing deficiencies in the application.
Discovery couldn't immediately be reached for comment.
Despite Monday's stock decline, analysts had predicted that failure to get approval in the latest round would cause a much more severe drop in the share price.
Wedbush Morgan analyst Kimberly Lee had estimated that Discovery shares could fall as low as 32 cents - or to cash levels - if the drug didn't receive approval in the latest round. However, shares were recently trading at 91 cents.
Lee told Dow Jones Newswires Monday that the not-as-drastic-as-expected share decline could be an indication that investors think Discovery will be able to quickly resolve the latest issues with the FDA.
Discovery said the FDA's latest concern is whether a biological activity test - one of the measures used to determine the quality and stability of the drug - can adequately distinguish a change in Surfaxin over time. The FDA also wanted assurance that the drug being manufactured by Discovery is comparable to the drug that was used in trials, Discovery said.
Discovery said it believes it has already addressed these issues, adding that there weren't any questions regarding its Phase III clinical trials, nor were there any comments regarding drug-substance impurities.
Discovery plans to seek an end-of-review meeting with the FDA, and if the meeting is successful, the company expects that Surfaxin may be approved this year. However, the FDA could require additional information from Discovery, which could lead to an additional 60-day or 6-month review period.
Brean Murray Carret & Co. analyst Jonathan Aschoff cut his investment rating on Discovery shares Monday to hold from buy, citing the uncertainties regarding the timeline and regulatory pathways going forward. However, Aschoff said he continues to believe the drug's clinical data makes it worthy of approval and noted that the biological activity test "appears to be the last hurdle before approval."
Meanwhile, in a note Monday, Wedbush Morgan's Lee maintained her hold rating on Discovery shares, but said she was pushing back her estimate for Surfaxin's expected launch date to the end of this year from her previous estimate for the third quarter.
"We suggest investors continue to remain on the sidelines until resolution of all regulatory issues," Lee wrote.
Discovery has other opportunities in its pipeline, including Surfaxin for the treatment of bronchopulmonary dysplasia - or chronic lung disease - which affects premature infants, and an aerosolized version of the company's Surfactant Replacement Therapies. These products, however, are in earlier stages than the version of Surfaxin currently up for FDA approval.
-By Aja Carmichael, Dow Jones Newswires; 201-938-5218; aja.carmichael@dowjones.com
-By Jennifer Hoyt, Dow Jones Newswires; 201-938-2474; jennifer.hoyt@dowjones.com
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