Discovery Labs enter agreement for new investment from PharmaBio

Oct 13 2010

Discovery Laboratories, Inc. (Nasdaq:DSCO), a biotechnology company developing its novel synthetic surfactant and aerosol technologies for respiratory diseases, today announces that it has entered into an agreement for a new investment of $0.5 million from PharmaBio Development Inc. (PharmaBio), the former strategic investing subsidiary of Quintiles Transnational Corp. (Quintiles).

PharmaBio has agreed to purchase approximately 2.4 million shares of the Company's common stock and warrants to purchase approximately 1.2 million shares of common stock for gross proceeds of $0.5 million. Each common share, together with a related warrant to purchase one half of a share of common stock, was sold at a unit price of $0.21. The warrants have a five year term and are exercisable at an exercise price of $0.273 per share of common stock.  Should the dollar volume-weighted average price of the Company's common stock exceed $0.45 for any five out of seven consecutive trading days for which stated minimum trading volumes are also met, the Company is entitled to redeem the warrants upon 20 days written notice.

"While our primary focus remains obtaining FDA approval for Surfaxin^® for Respiratory Distress Syndrome in premature infants, this additional funding is intended to primarily support near-term regulatory and related development activities to progress Surfaxin LS™ and Aerosurf®," said John G. Cooper, President and Chief Financial Officer of Discovery Laboratories.

Discovery Labs and PharmaBio have a longstanding relationship and PharmaBio, before giving effect to the offering, owns approximately 5.6 million shares of the Company's common stock. In April 2010, Discovery restructured its $10.6 million loan with PharmaBio, with the final payment of $2.0 million occurring on September 30, 2010. Additionally, the two companies have agreed to continue evaluating a potential long-term strategic collaboration focused on the development of Surfaxin LS and/or Aerosurf, however, there can be no assurances that any such arrangements will be entered into.

The offering is being made solely to PharmaBio. The securities will be issued under a previously filed registration statement that was declared effective by the Securities and Exchange Commission on June 18, 2008.  The transaction is expected to close on or about October 14, 2010, subject to satisfaction of customary closing conditions. This press release shall not constitute an offer to sell or the solicitation of an offer to buy any securities of Discovery Laboratories, Inc. nor shall there be any sale of the securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

The description of the financing with PharmaBio is subject in its entirety to the definitive terms of the transaction documents, which are attached as exhibits to the Form 8-K to be filed by the Company with the Securities and Exchange Commission ("SEC").

Source: Discovery Laboratories, Inc.