DISCOVERY LABORATORIES: (DSCO) ..... an inexpensive SARS play with a good looking chart ... With 5000 dead and counting, fear of SARS is creating havoc in the Chinese economy. New estimates suggest that SARS could cost Asia $28 billion in lost economic output...
... our government, namely the House Committee on Energy and Commerce Subcommittee on Oversight, is on full alert with ongoing hearings as they set up programs to prepare our population for the worst... death rate is now reported by the BBC to be more than 40% for patients aged 60 or over - but just 13% for those under 60...
... Rarely does a small Pharmaceutical company have a drug [Surfaxin] in Three Phase III clinical trials - it's also in two Phase II trials.
Discovery Laboratories is a small (market-cap only $103 Million), development stage pharmaceutical company that is focused on developing compounds to treat respiratory diseases that affect the ability of the lungs to absorb oxygen. Their drug is Surfaxin and it is now being considered as a possible treatment aimed at maintaining or restoring lung function in hospitalized SARS patients. DSCO's President and CEO Robert J. Capetola, Ph.D, testified before the Congressional committee to that effect on Wednesday, May 7, 2003...
Severe Acute Respiratory Syndrome [SARS] is a highly contagious viral infection that leads to pneumonia, and in severe cases, progresses to life-threatening Acute Lung Injury, the most serious manifestation of which is Acute Respiratory Distress Syndrome (ARDS). A prominent characteristic of ARDS is the destruction of a patient's lung surfactant. Surfactants are produced naturally in the lungs and are essential for breathing. Should these surfactants degrade or be destroyed, millions of alveoli, (tiny air sacs in the lung) collapse. Airflow becomes constricted and the lungs do not absorb sufficient oxygen. Current therapy for SARS and ARDS patients remains entirely supportive and includes mechanical ventilation. It is widely understood that it may take years before any appropriate first response anti viral drugs or vaccines are developed and there is no guarantee that they will ever be available.
Not even considering SARS, the market for Surfaxin is huge: Infant [IRDS] and Adult Acute Respiratory Distress Syndrome [ARDS] and Acute Lung Injury in adult patients plus other respiratory conditions, such as asthma, acute and chronic bronchitis, and chronic obstructive pulmonary disease affect millions of patients a year. All of these conditions have high-mortality potential. Analyst's at Jesup and Lamont believes the market for critical care respiratory conditions excluding SARS, may exceed $1.5 billion a year. DSCO's initial Phase IIa results in a small number (22) of ARDS patients showed an excellent dose response curve with all patients receiving the highest dose surviving. A larger follow-up is currently underway. DSCO's product Surfaxin is intended to achieve the reestablishment of the lung's capacity to absorb oxygen. However, Respiratory Distress Syndrome [IRDS] in premature infants is the only respiratory disease being treated today with approved surfactants, which are principally animal derived. Importantly, DSCO's products are based on an engineered humanized surfactant, and they can be produced economically at scale, as a high quality pharmaceutical, without the risk of potential transmission of animal-borne diseases (e.g. Mad Cow disease) or adverse immunological reaction. DSCO and Quintiles Transnational Corp. a big (19,000 employees in 31 countries) product development company that provides a full range of integrated services solutions to the pharmaceutical, biotechnology and medical device industries, have signed a strategic alliance. Quintiles provided $3 million in cash, a line of credit for $10 million and up to $70 million in post launch funding following FDA approval.
DSCO also expanded on an alliance with Esteve S.A. for development through Europe and South America. Esteve made an equity investment of $4 million and a commitment for commercialization. The importance of these commercialization and development deals is that they will generate 60 to 70% of all sales revenue direct to DSCO as opposed to the 5 or 10% they would receive if they cut a deal with big Pharma. Manufacturing rights are held by DSCO. STURZA'S Medical Investment Letter has just an outstanding long-term track record and has recommended (DSCO). Their letter states, "We believe the studies [FDA trials] will validate Surfaxin's efficacy in treating Infant Respiratory Distress Syndrome, and base our opinions on the pathophysiology of IRDS and Surfaxin's biology - (notably its surfactant protein B activity, which we view as critical to the drugs ability to reduce surface tensions in the lungs.") Institutional ownership is 36%. No less than 28 funds are believers in this company - a real positive. Orbimed Advisors owns 3.2 million shares, Safeco Corp. 1.7 million and Hartland Value Fund has 1.87 million. In the last 3-month reporting period there was a net increase of 3.67 million shares held by institutions. As of 12-30-2002 (DSCO) had $19 million in cash and equivalents, with a line of credit of $7.5 million. DSCO's Surfaxin, has been granted both U.S. FDA Fast Track and FDA Orphan Drug designations due to the critical and compelling nature of the life-threatening respiratory disorders where there are few or no approved therapies available.
Caveat Emptor |
