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Recently, Discovery Laboratories (NASDAQ:DSCO) made an announcement that the company has received a United States patent for providing coverage for a method for promoting mucus clearance in patients with pulmonary conditions. Some conditions that would require mucus clearance include cystic fibrosis (NYSE:CF), chronic obstructive pulmonary disease (COPD), and bronchietasis. The patent gives Discovery Laboratories the green light to go ahead and pursue testing their newly FDA approved product KL4 surfactant on other respiratory diseases.

Surfaxin is Discovery Laboratories' newly approved drug to treat Respiratory Distress Syndrome (RDS). It is a synthetic form of surfactant, a lipoprotein, that is necessary in everyone's lungs to prevent atelectasis, also known as alveolar collapse. Surfaxin is set to begin being marketed in the U.S. this year.

If the company finds that Surfaxin is effective both to treat Respiratory Distress Syndrome and Cystic Fibrosis, Discovery Laboratories could find themselves marketing to a whole new consumer base. Annually it is already projected that Surfaxin could treat as many as 90,000-130,000 infants born with RDS. However, if Surfaxin was going to be used for CF treatment as well, Discovery Laboratories could find themselves providing treatment to another 30,000 patients in the U.S. alone. This is all a big "if," because there's a chance that Surfaxin might not be a suitable treatment for any of these diseases, but it is nice to see patents being issued and new attempts being made.

Better days are ahead for Discovery Laboratories, and the upcoming earnings on August 1st will be something to keep an eye on. The next earnings update and conference call hopefully will provide investors with a sense of direction on how the company is doing marketing Surfaxin and Affectair. Discovery Laboratories needs to start showing that they can increase their revenues and actually have a positive operating income. As they stand right now, 2011 net sales and revenues were next to nothing; however, that was all due to Discovery Laboratories pushing hard to gain approval for their two products. Now that the two products are set to hit the market, revenue streams should change rapidly. Earnings estimates for quarter 2 are -0.21 cents per share. Remember, Discovery Laboratories is a speculative play on biotechnology, so please tread carefully.

2011
12/31/11
2010
12/31/10
2009
12/31/09
2008
12/31/08
NET SALES OR REVENUES582004,600
Depreciation, Depletion And Amortization1,2341,5491,9922,215
Depreciation700--1,4001,600
Amortization of Intangibles534--592615
GROSS INCOME(652)(1,549)(1,992)2,385
Selling, General & Admin Expenses23,46023,97926,60540,779
Research and Development Expense17,23017,13618,87726,566
OPERATING INCOME(24,112)(25,528)(28,597)(38,394)
Extraordinary Credit - Pretax3,5606,4223690
Extraordinary Charge - Pretax(400)0(600)0
Non-Operating Interest Income131348802
Other Income/Expenses - Net(6)2755100
Interest Expense On Debt203571,0961,614
PRETAX INCOME(20,965)(19,175)(29,871)(39,106)
NET INCOME BEFORE EXTRA ITEMS/PREFERRED DIVIDENDS(20,965)(19,175)(29,871)(39,106)
NET INCOME USED TO CALCULATE BASIC EARNINGS PER SHARE(20,965)(19,175)(29,871)(39,106)
Shares used in computing earnings per share - Fully Diluted22,66011,6027,6806,541
Earning per Common Share - Basic(0.93)(1.65)(0.60)(1.35)
Earning per Common Share - Fully Diluted(0.93)(1.65)(0.60)(1.35)

Other notable biotech companies focusing on drug pipelines set to report earnings soon include:

July 24 - Biogen Idec Inc. (NASDAQ:BIIB)

July 26 - Amgen Inc. (NASDAQ:AMGN), Gilead Sciences Inc. (NASDAQ:GILD), Celgene Corp. (NASDAQ:CELG)

Disclosure: I am long DSCO.

Source: Discovery Laboratories: Company Update