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Organization and Business
3 Months Ended
Mar. 31, 2013
Organization and Business (MBT to update) [Abstract]  
Organization and Business (MBT to update)
Note 1 – Organization and Business

Discovery Laboratories, Inc. (referred to as "we," "us," or the "Company") is a specialty biotechnology company focused on creating life-saving products for critical care patients with respiratory disease and improving the standard of care in pulmonary medicine. Our proprietary drug technology produces a synthetic, peptide-containing surfactant (KL4 surfactant) that is structurally similar to pulmonary surfactant, a substance produced naturally in the lung and essential for normal respiratory function and survival. We are developing our KL4 surfactant in liquid, lyophilized and aerosolized dosage forms. We are also developing novel drug delivery technologies potentially to enable efficient delivery of aerosolized drugs, including our aerosolized KL4 surfactant, and other inhaled therapies. We believe that our proprietary technologies make it possible, for the first time, to develop a significant pipeline of products to address a variety of respiratory diseases for which there frequently are few or no approved therapies.

Our initial strategy is to develop our KL4 surfactant and drug delivery technologies to improve the management of respiratory distress syndrome (RDS) in premature infants. RDS is a serious respiratory condition caused by insufficient surfactant production in underdeveloped lungs of premature infants, and the most prevalent respiratory disease in the Neonatal Intensive Care Unit (NICU). RDS can result in long-term respiratory problems, developmental delay and death. Mortality and morbidity rates associated with RDS have not meaningfully improved over the last decade. We believe that the RDS market is presently underserved, and that our RDS programs have the potential to greatly improve the management of RDS and, collectively over time, to become a new standard of care for premature infants with RDS.

In March 2012, the United States (U.S.) Food and Drug Administration (FDA) granted us marketing approval for SURFAXIN® (lucinactant) for the prevention of RDS in premature infants at high risk for RDS. SURFAXIN is the first synthetic, peptide-containing surfactant approved for use in neonatal medicine and provides healthcare practitioners with an alternative to the animal-derived surfactants that today are the standard of care to manage RDS in premature infants. In the third quarter of 2012, during a routine review of our processes related to analytical testing and quality control of SURFAXIN drug product, we determined that one analytical chemistry method used to assess SURFAXIN drug product required improvement and that an update to SURFAXIN product specifications was needed. We promptly communicated with the FDA, improved and revalidated the analytical chemistry method, and submitted updated product specifications to the FDA. As a result, we estimated that the commercial availability of SURFAXIN drug product would be delayed until the second quarter 2013. We did not believe that the delay would have a material impact on our plans. However, in April 2013, the FDA requested information and provided recommendations intended to clarify certain aspects of the updated product specifications and our revalidated analytical chemistry method, including recommendations regarding how the product specifications should be documented and notated; a specific recommendation for the upper limit of a single product specification, which we can readily accept; a request for two existing documents related to the improved analytical chemistry method; and a request for supporting data from the improved and revalidated analytical chemistry method used on recent SURFAXIN batches. We believe that we will be able to respond to the FDA by early June. Based on the FDA's guidelines, which provide for four months for a review of our type of submission, we anticipate that, if we are successful and our submission is timely confirmed by the FDA, we will be able to proceed with the commercial introduction of SURFAXIN in the fourth quarter of 2013. There can be no assurance, however, that the FDA will respond within the time line set forth in its guidelines or accept our proposed updated product specifications. Any extended delay in the commercial availability of SURFAXIN could have a material adverse effect on our ability to fund our operations and our development programs.

AEROSURF® is a drug/device combination product that combines our KL4 surfactant with our proprietary capillary aerosol generator (CAG). We are developing AEROSURF for premature infants with or at risk for developing RDS. Premature infants with RDS currently are treated with surfactants that can only be administered by endotracheal intubation supported with mechanical ventilation, both invasive procedures that frequently result in serious respiratory conditions and complications. Consequently, neonatologists generally will not treat infants who could benefit from surfactant therapy unless they determine that the potential benefits of surfactant therapy outweigh the risks associated with such invasive administration procedures. AEROSURF potentially will provide practitioners with the ability to deliver surfactant therapy using a less-invasive method. For this reason, we believe that AEROSURF, if approved, potentially may enable the treatment of a significantly greater number of premature infants at risk for RDS who could benefit from surfactant therapy but are currently not treated.

We are developing a lyophilized (freeze-dried) dosage form of our KL4 surfactant that is stored as a powder and resuspended to liquid form prior to use with the objective of improving ease of use for healthcare practitioners, as well as potentially to prolong shelf life and eliminate the need for cold-chain storage. We are engaged in a technology transfer of our lyophilized KL4 surfactant manufacturing process to a contract manufacturing organization (CMO) that has expertise in lyophilized products, and we expect that it will manufacture drug product for use in our preclinical and clinical development activities. This development plan is intended initially to support the use of our lyophilized KL4 surfactant in our AEROSURF development program. We are also assessing a potential development plan intended to gain marketing authorization for SURFAXIN LS™, a lyophilized dosage form of SURFAXIN, in the U.S. and potentially in other major markets.

AFECTAIR® devices are our novel disposable aerosol-conducting airway connectors that simplify the delivery of aerosolized medications (including our aerosolized KL4 surfactant) and other inhaled therapies to critical-care patients requiring ventilatory support by introducing the aerosolized medication directly at the patient interface and minimizing the number of connections in the ventilator circuit. In February 2012, we registered our AFECTAIR device in the U.S. as a Class I, exempt medical device. Our initial device is AFECTAIR aerosol-conducting airway connector for infants receiving aerosolized medication in neonatal or pediatric intensive care units (NICUs and PICUs, respectively). We are conducting a user experience program in select U.S. critical care centers representing approximately ten percent (10%) of our target institutions. This program is intended to facilitate peer-to-peer exchange among physicians and respiratory therapists and enable discussion about the potential advantages and proper utilization of this novel device, and is expected to be conducted through the first half of 2013. We believe that AFECTAIR aerosol-conducting airway connectors have the potential to become a new standard of care for the delivery of aerosolized medications and inhaled therapies to infants receiving aerosolized medication in the NICU and PICU.

We expect that we will be able to leverage the information, data and know-how that we gain from our development efforts with AEROSURF for RDS and the AFECTAIR device for infants to support development of a product pipeline intended to address serious critical care respiratory conditions of larger children and adults in PICUs and intensive care units (ICUs). However, we are delaying these efforts as we focus our resources on advancing the development of AEROSURF to phase 2 clinical trials and the commercial introduction of SURFAXIN and the AFECTAIR device for infants. If we are able to achieve these 2013 objectives, we believe we will be in a better position to assess the potential of developing products based on our CAG and aerosol-conductor airway connector technologies to address the critical care needs of patients in the PICU and ICU.

In the U.S., we have established our own specialty respiratory critical care commercial and medical affairs organizations that are experienced in neonatal/pediatric respiratory critical care and will focus on neonatal indications, beginning with SURFAXIN and the AFECTAIR device for infants. These organizations will be primarily responsible to effect the commercial introduction of SURFAXIN. With our established relationships and contacts in the neonatal community, we believe that we also will be able to use our commercial and medical affairs organizations to effectively introduce the AFECTAIR device for infants in the U.S. We also expect that, in the future, these teams will be able to leverage the experience and relationships that we gain with the introduction of SURFAXIN and the AFECTAIR device for infants to efficiently support the introductions of AEROSURF and potentially SURFAXIN LS, if approved.

An important priority for us is to secure strategic and financial resources to support our operations and to advance our KL4 surfactant and device development programs and the commercial introduction of our RDS products. We currently expect that the delay in commercial availability of SURFAXIN will most likely be for a period of up to six months and, accordingly, have decided to maintain our investments in commercial and medical affairs capabilities and development activities necessary to advance our AEROSURF development program potentially to initiate the planned phase 2 clinical program in the fourth quarter of 2013. We otherwise plan to slow the pace of our investments and manage our cash resources while we seek to secure the necessary capital from various potential sources, including debt and equity financings, strategic partnerships and collaboration arrangements and other transactions. The recent delay in the commercial availability of SURFAXIN has delayed access to a $20 million advance, which is payable upon the first commercial sale of SURFAXIN, under a loan facility (Deerfield Facility) with affiliates of Deerfield Management Company, L.P. (Deerfield). If for any reason, we are unable to complete the first commercial sale of SURFAXIN by December 31, 2013, our ability to access the $20 million under the Deerfield Facility will expire. See, Note 6 – "Long-Term Debt – Loan Facility with Deerfield."

For our development programs, while we currently intend to retain all rights and commercialize our approved products in the U.S., we are focused on identifying potential strategic alliances to assist us in markets outside the U.S. We seek strategic partners that have broad experience in the designated markets, including regulatory and product development expertise as well as, if our products are approved, an ability to commercialize our products. In addition to development and commercial support, such alliances typically also would provide us with financial resources to support our activities, potentially in the form of upfront payments, milestone payments, commercialization royalties and a sharing of research and development expenses. In 2013, we are focused on securing a significant strategic alliance predominantly focused on the European Union (EU). To date, the primary focus of our discussions has been on AEROSURF. We may also seek strategic alliances and/or collaboration arrangements to support the potential commercial introduction of SURFAXIN and, if approved, SURFAXIN LS in countries where regulatory marketing authorization is facilitated by the information contained in our SURFAXIN new drug application (NDA) approved by the FDA.
 
There can be no assurance that we will be successful in concluding any strategic alliance, collaboration or other similar transaction. See, Note 2 – Liquidity Risks and Management's Plans.