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AGB Live Trade: Discovery Laboratories, Inc (DSCOD) May See a Rebound

Jan. 04, 2011 9:47 AM ET
Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.
Discovery Laboratories, Inc. is a biotechnology company developing surfactant therapies to treat respiratory disorders and diseases.
DSCOD recently did a 15-1 reverse split and its share price dropped from $5.25 to current $3.46 in just one week. I agree with the common market sentiment that trading will become less active and the risk of dilution will become higher, but DSCOD maybe oversold after 40% decline.

As we see from the chart, the buying interests started from mid December last year, and the key factor related to the buying interests has not change yet: people are still waiting for DSCOD’s follow-up to FDA’s complete response letter regarding its
Surfaxin, the lead drug candidate of DSCOD for the prevention of RDS in premature infants.
DSCOD recently announced in a press release that it had completed studies proposed to the FDA relating to Surfaxin and was on track to submit a Complete Response to the FDA in the first quarter of 2011.
Adam Feuerstein, the senior writer of thestreet.com predicted that DSCOD would finally received FDA approval for Surfaxin in 2011. I am not making any prediction here, but explaining my reason to buy DSCOD at this price: the dust has not yet settled and DSCOD still has huge potential.
As of September 30, 2010, DSCOD had cash and cash equivalents of $14.7 million. The cash reserve should be sufficient to fund the company’s operation for several quarters according to its current burn rate. DSCOD expected its net cash burn for the fourth quarter of 2010 to be around $4.0 million in the last quarterly report.

DSCOD only has a market cap about $48 millions. The company’s share price may rebound from here.

Conclusion: AGB just started a position on DSCOD.
Disclaimer: The author is not a licensed analyst and the purpose of his posts is NOT recommendation for any stock buying and selling activity but information sharing and discussion only.  Please do your own due diligence before making any trading decision.

Disclosure: I am long DSCO.

Additional disclosure: DSCO is currently changed to DSCOD

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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