WINDTREE THERAPEUTICS INC /DE/ - Annual Report: 2011 (Form 10-K)

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x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

 

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Title of each class		Name of each exchange on which registered
Common Stock, $0.001 par value		The Nasdaq Capital Market
Preferred Stock Purchase Rights

 

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Large accelerated filer o	Accelerated filer  o
Non-accelerated filer o	Smaller reporting company x

 

Unless the context otherwise requires, all references to “we,” “us,” “our,” and the “Company” include Discovery Laboratories, Inc., and its wholly-owned, presently inactive subsidiary, Acute Therapeutics, Inc.

 

 

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the risk that, if we are unable for any reason to introduce, or, if there is a significant delay in the commercial introduction of, SURFAXIN® and AFECTAIR® in the United States and other markets as planned, we may have difficulty securing additional capital to sustain our operations, which could have a material adverse effect on our ability to continue our marketing and distribution efforts, research and development programs and operations;

 

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the risk that we may be unable to enter into strategic alliances or collaboration agreements to support the development of our KL4 surfactant pipeline products,  beginning with SURFAXIN LS™ and AEROSURF®, and, if approved, commercialization of these products in markets outside the United States;

 

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risks relating to our lack of marketing and distribution capabilities, which we will have to develop internally and secure through third-party strategic alliances and/or marketing alliances and/or distribution arrangements, that could require us to give up rights to our drug products, drug product candidates and drug delivery technologies;

 

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risks relating to our ability to develop a successful sales and marketing organization to market SURFAXIN® and AFECTAIR® and our other product candidates, if approved, in a timely manner, if at all, and that we or our marketing and advertising consultants will not succeed in developing market awareness of our products or that our product candidates will not gain market acceptance by physicians, patients, healthcare payers and others in the medical community;

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risks relating to our ability to develop and manufacture drug products based on our KL4 surfactant technology, drug-device combination products that use our capillary aerosol generator (CAG) technology, and medical devices, including our CAG devices and novel ventilator circuit / patient interface connectors, for commercialization of our approved products and for preclinical and clinical studies of our product candidates;

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risks relating to the transfer of our manufacturing technology to third-party contract manufacturers and assemblers;

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the risk that we, our contract manufacturers or any of our third-party suppliers may encounter problems or delays in manufacturing drug product substances, our drug products, CAG devices and ventilator circuit / patient interface connectors and related componentry, and other materials on a timely basis or in an amount sufficient to support the commercial introduction of SURFAXIN® and the AFECTAIR® devices, as well as our research and development activities for our other product candidates;

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risks relating to the rigorous regulatory approval processes, including pre-filing activities, required for approval of any drug, combination drug-device product or medical device that we may develop, whether independently, with strategic development partners or pursuant to collaboration arrangements;

 

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risks related to our efforts to gain regulatory approval, in the United States and elsewhere, for our drug product and medical device candidates, including (i) drug and drug-device combination products that we are developing to address RDS in premature infants: SURFAXIN LS™ (our lyophilized (freeze-dried) dosage form of SURFAXIN®, and AEROSURF® (our initial aerosolized KL4 surfactant using our CAG technology); and (ii) AFECTAIR®, a series of our novel ventilator circuit / patient interface connectors that we plan to introduce commercially in fourth quarter of 2012;

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the risk that we and the FDA or other regulatory authorities will not be able to agree on matters raised during the regulatory review process, or that we may be required to conduct significant additional activities to potentially gain approval of our product candidates, if ever;

 

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the risk that the FDA or other regulatory authorities may not accept, or may withhold or delay consideration of, any applications that we may file, or may not approve our applications or may limit approval of our products to particular indications or impose unanticipated label limitations;

 

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risks relating to our research and development activities, which involve time-consuming and expensive preclinical studies and other efforts, and potentially multiple clinical trials, which may be subject to potentially significant delays or regulatory holds, or fail, and which must be conducted using sophisticated and extensive analytical methodologies and quality control release and stability tests to satisfy the requirements of the regulatory authorities;

 

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the risk that we may be unable to identify potential strategic partners or collaborators with whom we can develop and, if approved, commercialize our products in a timely manner, if at;

 

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the risk that we or our strategic partners or collaborators will not be able to attract or maintain qualified personnel;

 

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the risk that market conditions, the competitive landscape or other factors may make it difficult to launch and profitably sell our products;

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risks that reimbursement and health care reform may adversely affect us or that our products will not be accepted by physicians and others in the medical community;

 

 

 

PART I
ITEM 1.	BUSINESS	1
ITEM 1A.	RISK FACTORS	32
ITEM 1B.	UNRESOLVED STAFF COMMENTS	56
ITEM 2.	PROPERTIES	56
ITEM 3.	LEGAL PROCEEDINGS	57
ITEM 4.	MINE SAFETY DISCLOSURE	57
PART II
ITEM 5.	MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER     MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	57
ITEM 6.	SELECTED FINANCIAL DATA	58
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	58
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	77
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	77
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	77
ITEM 9A.	CONTROLS AND PROCEDURES	77
ITEM 9B.	OTHER INFORMATION	78
PART III
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	78
ITEM 11.	EXECUTIVE COMPENSATION	78
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	78
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	78
ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	78
PART IV
ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	79
SIGNATURES		80

 

ITEM 1.

BUSINESS.

 

In major markets outside the United States, an important priority is to secure the strategic resources to support the continued development and commercial introduction of our RDS products.  A key goal for us in 2012 is to secure one or more strategic alliances and/or collaboration arrangements potentially to share research and development expenses for our SURFAXIN LS and AEROSURF development programs, and, if approved, to support the commercial introduction of these products in Europe and elsewhere.  We may also seek strategic alliances and/or collaboration arrangements to support the potential commercial introduction of SURFAXIN in countries where regulatory marketing authorization is facilitated by the recent approval of SURFAXIN by the FDA.  We are engaged in discussions with potential strategic partners who could provide development and commercial expertise as well as financial resources (potentially in the form of upfront payments, milestone payments, commercialization royalties and a sharing of research and development expenses).  There can be no assurance, however, that we will be successful in concluding any strategic alliance, collaboration or other similar transaction.

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In 2012, we plan to focus on the commercial introduction of SURFAXIN in the United States and the initial AFECTAIR device in the United States and potentially in the European Union.  If successful, we also believe that we will be in a position to introduce the second AFECTAIR device, AFECTAIR DUO in both the United States and European Union in mid-2013.

 

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For the launch  of SURFAXIN in the United States, we plan to build our own in-house, specialty respiratory critical care commercial and medical affairs organization that will specialize in neonatal indications, beginning with SURFAXIN, and, if approved, our other KL4 surfactant products for RDS, SURFAXIN LS and AEROSURF.  Our strategy will focus primarily on hospitals with NICUs that we believe currently represent a significant portion of the surfactant market in the United States.  To execute this strategy, we expect to incur annual expenses of approximately $12 - 13 million for commercial and medical affairs capabilities.  We believe that this strategy will provide us direct control over our U.S. sales and marketing activities, permit us to establish a strong presence in NICUs nationwide, and potentially optimize the economics of our business.

 

 

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We expect that our commercial and medical affairs organization will also support the planned commercial introduction of AFECTAIR in the United States.  Many hospitals, including those that have adult ICUs, PICUs and critical care centers, as well as NICUs, will use AFECTAIR devices to benefit critical care patients.  Accordingly, we plan to further support the launch of AFECTAIR in the United States and the European Union through arrangements with third-party distributors experienced in introducing respiratory medical products into hospitals.  We expect that our commercial organization will work in a coordinated manner with our third-party distributors to assure that all hospitals with critical care facilities are aware of, and have access to, our AFECTAIR devices.  We believe that AFECTAIR has the potential to become the standard of care for delivery of inhaled therapies and, after an up-take period following introduction, revenues in the U.S. and the five largest countries in the European Union (EU5) could potentially be between $50 million and $75 million in the fourth full year of sales, which could occur as early as 2016.

 

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We plan to support our network of AFECTAIR distributors with an in-house medical affairs staff that will be focused on medical education activities, publications and congresses.  We have and will continue to conduct and sponsor studies evaluating the potential utility of AFECTAIR, including a series of studies with several inhaled therapies that have been or will be presented at medical congresses and medical meetings.  We are pleased with the results of our early studies, and believe that AFECTAIR has the potential to address a considerable unmet medical need and become a new standard of care for the delivery of inhaled therapies to patients requiring ventilatory support.

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We plan to continue to focus our drug research and development activities on the management of RDS in premature infants.  We believe that the RDS market represents a significant opportunity from both a medical and a business perspective.  We further believe that our neonatal programs, SURFAXIN, SURFAXIN LS and AEROSURF, have the potential to greatly improve the management of RDS and, collectively, represent the opportunity, over time, to expand the current RDS estimated worldwide annual market of $200 million to a $1 billion market opportunity.

 

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SURFAXIN LS is our lyophilized (freeze-dried) dosage form of SURFAXIN that is stored as a powder and resuspended to liquid form prior to use.  We are developing SURFAXIN LS 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.  In recent years, we slowed the pace of this program as we focused our efforts on securing regulatory approval for SURFAXIN in the United States and until we are able to secure the required capital to advance our program.  In 2012, we plan to continue our preclinical work and expect to advance the ongoing technology transfer of our SURFAXIN LS manufacturing process  to a contract manufacturer that manufactures in accordance with current good manufacturing practices (cGMP) established by the FDA and other international regulatory authorities, and that has expertise in lyophilized dosage forms.  We plan to implement a regulatory plan intended to gain marketing authorization for SURFAXIN LS in the United States, European Union and other major markets worldwide.  We have discussed with the FDA a proposed development program and expect to engage in further discussions with the FDA after we have received regulatory guidance with respect to our planned development program in Europe.  We believe, but need to confirm with the European Medicines Agency (EMA) and other relevant regulatory bodies, that we will have to conduct a Phase 3 clinical trial in Europe and will work with the FDA and EMA potentially to develop a single trial design that will support approval for SURFAXIN LS in the United States and the European Union.  We believe that, over time, SURFAXIN and SURFAXIN LS, if approved, collectively have the potential to displace the use of animal-derived surfactants in all major markets throughout the world.

 

 

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AEROSURF, our lead aerosolized KL4 surfactant program, is a drug-device combination product that produces our KL4 surfactant in aerosolized form using our CAG device and AFECTAIR ventilator circuit / patient interface connectors.  In recent years, we also slowed the pace of this program as we focused our efforts on securing regulatory approval for SURFAXIN in the United States and until we are able to secure the required capital to advance our program.  AEROSURF holds the promise to significantly expand the use of surfactant therapy in premature infants by providing neonatologists with a means of administering aerosolized KL4 surfactant without the risks associated with the current method of administering surfactant by invasive endotracheal intubation and mechanical ventilation.  In 2012, we plan to continue advancing our preclinical development activities for AEROSURF and, with the assistance of our own and third-party medical device engineers, we plan to optimize the design of the CAG device for use in our anticipated clinical program and, if approved, commercially.  We also plan to seek regulatory guidance to inform our regulatory plan for the AEROSURF development and clinical programs.

 

We believe that the pipeline of SURFAXIN, SURFAXIN LS and particularly AEROSURF could significantly advance the treatment of RDS and make it possible for many more infants with or at risk for RDS to be treated with surfactant therapy.

 

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An important priority for us is to manage and strengthen our long-term strategic and financial position to support the introduction of our approved products, advance our research and development programs, and maximize stockholder value.

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We have managed, and plan to continue closely managing our expenditures in 2012, while focusing our resources on the initiatives outlined above.  We are engaged in discussions with potential strategic partners who could provide development and commercial expertise as well as financial resources (potentially in the form of upfront payments, milestone payments, commercialization royalties and a sharing of research and development expenses) to support development and introduction of our products in various markets.  There can be no assurance, however, that we will be successful in concluding any strategic alliance, collaboration or other financing transaction.

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We recently completed a public offering of 16,071,429 shares of our common stock, at a price to the public of $2.80 per share for gross proceeds of $45.0 million, and net proceeds to us of $42.1 million, after transaction-related fees and expenses, and before taking into account a 30-day option granted to the underwriters to purchase up to an additional 2,410,714 shares of common stock to cover over-allotments, if any.

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We have, and will continue to, invest in maintaining and enforcing our potential competitive position by protecting our exclusive rights in and to our KL4 surfactant technology, pipeline products and our drug delivery technologies, including our CAG and ventilator circuit / patient interface connectors, through patents, patent extensions, trademarks, trade secrets and regulatory exclusivity designations, including potential orphan drug and new drug product and supplemental exclusivities.  We believe that our development programs may also provide opportunities for new patent filings, which potentially may extend our exclusivity rights into the future.

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We have, and will continue to evaluate, and invest in, our quality systems and manufacturing capabilities, including at our drug manufacturing operations in Totowa, New Jersey, and our analytical and medical device development laboratories in Warrington, Pennsylvania.  We plan to manufacture sufficient amounts of SURFAXIN drug product to meet our anticipated commercial requirements and to support SURFAXIN-related preclinical, clinical and formulation development activities for our other KL4 surfactant product candidates.  For AFECTAIR, we have entered into a Manufacturing and Supply Agreement with Lacey Manufacturing, a unit of Precision Engineered Products, LLC to manufacture and supply AFECTAIR devices for commercial sale.  With respect to SURFAXIN LS, we are conducting a technology transfer of our lyophilized manufacturing process to a cGMP-compliant, third-party contract manufacturer with expertise in such dosage forms.  For AEROSURF, we plan to collaborate with engineering device experts and use contract manufacturers to produce CAG devices and related components to meet our manufacturing requirements.

 

 

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While we are focused on advancing our lead KL4 surfactant and drug delivery technologies to treat critical care patients with respiratory disease, beginning with RDS, we believe that our KL4 surfactant technology has the potential to be developed into a broad product pipeline to address a variety of debilitating respiratory conditions and diseases.  As our resources permit, we are conducting research and preclinical development activities potentially to address acute lung injury (ALI), and may in the future seek to address other diseases associated with inflammation of the lung, such as asthma and chronic obstructive pulmonary disease (COPD).  In 2010, an investigator-initiated Phase 2a clinical trial assessing the safety, tolerability and short-term effectiveness (via improvement in mucociliary clearance) of our aerosolized KL4 surfactant in patients with cystic fibrosis (CF) concluded.  We will consider supporting such independent initiatives that explore the utility of applying our KL4 surfactant to address CF and other respiratory diseases.  See, “– Surfactant Replacement Therapy for Respiratory Medicine – Cystic Fibrosis.”

 

 

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In October 2011, an AEROSURF® study was presented at the 2011 European Society for Paediatric Research Annual Meeting (ESPR).  These data were initially presented at the 2011 Pediatric Academic Societies Annual Congress (PAS) in May 2011.  This preclinical study was conducted to determine which dose of AEROSURF would produce the optimal physiologic response and demonstrated that AEROSURF significantly improved gas exchange (p < 0.05), pulmonary mechanics (p < 0.05) and lung structure integrity (p < 0.05), and reduced levels of inflammatory mediators in the lung (p < 0.05), in a dose-dependent manner, in the well-recognized preterm lamb model of RDS.  The data also suggest that of the doses tested, AEROSURF delivered during a 20 to 30 minute dosing interval results in the most desirable overall dosing strategy.

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Also at the 2011 ESPR, data were presented from a study demonstrating that treatment with either bolus or aerosolized KL4 surfactant resulted in a significant improvement in lung function and survival when treating ALI in a preclinical model of ALI.  These data were initially presented at the 2011 PAS.  The objective of this study was to evaluate aerosolized KL4 surfactant in a piglet model with lung injury and subsequent reduced pulmonary function consistent with what is observed in humans with ALI.  Piglets were randomized to receive either endotracheal bolus KL4 surfactant with extubation to continuous positive airway pressure (CPAP), aerosolized KL4 surfactant while on CPAP, or CPAP alone (control).  Relative to control piglets on CPAP alone, treatment with either bolus or aerosolized KL4 surfactant resulted in a significant improvement in both oxygenation response  (p < 0.001) and overall survival (p < 0.05) throughout the evaluation period, with the most robust response observed in the aerosolized KL4 surfactant treatment group.  Piglets treated with aerosolized KL4 surfactant had reduced tissue levels of interleukin–8 (IL-8), a key marker of lung inflammation, compared with control piglets (p < 0.03).

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In December 2010, data were presented at the 2010 Annual Hot Topics in Neonatology Congress (Hot Topics) in Washington, DC demonstrating that AEROSURF meaningfully improved lung function and lung structural integrity and reduced lung tissue inflammatory marker levels in a preclinical study using the well-established preterm lamb model of RDS.  In this preclinical study, preterm lambs were randomized to receive CPAP alone or CPAP plus either 10, 20, 30, or 90 minutes of AEROSURF exposure.  The results demonstrated that treatment with AEROSURF resulted in a dose-dependent improvement in lung function and a decrease in IL-8, with marked differences following 20 minutes of AEROSURF exposure and no further improvement following 30 and 90 minutes of exposure.  Additionally, improvement in oxygenation was observed to a greater degree in the 10, 20, and 30-minute dosing groups compared with CPAP alone or the 90-minute dosing group and AEROSURF preserved lung structural integrity in all exposure groups.

 

 

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In May 2010, data were presented at the 2010 American Thoracic Society International Conference from a preclinical study using KL4 surfactant in an established porcine model of lung transplantation.  The objective of this study was to assess the potential protective role of KL4 surfactant in reducing ischemia-reperfusion injury by administering KL4 surfactant to donor lungs prior to harvest and transplantation in an experimental pig lung transplant model.  In transplanted donor lungs that were treated with KL4 surfactant prior to lung harvest and transplantation, a significant improvement in oxygenation (p < 0.05) was observed, as well as preservation of lung surfactant composition (p < 0.05) and a significant reduction in oxidative damage (p < 0.05) compared with animals receiving untreated transplanted lungs.  The study demonstrated a potentially important protective role in a newly transplanted lung, reducing ischemia-reperfusion injury often seen after lung transplantation, and suggesting that KL4 surfactant may play an important protective role in minimizing lung damage triggered by ischemia-reperfusion injury following lung transplantation.

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In May 2010, preclinical data were presented at PAS that demonstrate that our initial lyophilized KL4 surfactant, SURFAXIN LS™, improves lung function and oxygenation while attenuating lung inflammation in the preterm lamb model of RDS.  In one study, lyophilized KL4 surfactant was compared to commercially available animal-derived surfactants to assess improvements in pulmonary function (lung compliance, functional residual capacity and ventilator support requirements), integrity of lung tissue structure, and the potential impact on inflammatory mediators in preterm lambs with RDS.  This study demonstrated that treatment with lyophilized KL4 surfactant,  compared with untreated controls, resulted in significant improvements in pulmonary function (p < 0.05), significantly better microscopic lung tissue structure (p < 0.05), and a significant reduction in two potent inflammatory mediators: IL-8 and myeloperoxidase (p < 0.05).  Significant improvements in pulmonary function were observed in lambs treated with the animal-derived surfactants, Survanta® (beractant, a surfactant derived from cow lung and the most prescribed surfactant in the United States) and Curosurf® (poractant alfa, a surfactant derived from pig lung and the most prescribed surfactant in Europe), compared with controls (p < 0.05); however, oxygenation was significantly improved in lambs treated with lyophilized KL4 surfactant compared with those treated with comparator animal-derived surfactants (p < 0.05).

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In another preclinical study presented at the 2010 PAS, the effects of lyophilized KL4 surfactant on pulmonary function and peri-dosing associated effects of surfactant administration in preterm lambs with RDS were compared to those of Curosurf.  Both surfactants significantly improved pulmonary function (p < 0.05).  However, lambs treated with lyophilized KL4 surfactant required significantly lower mechanical ventilator pressures to maintain pulmonary function compared with Curosurf-treated lambs (p < 0.05).  Additionally, lambs treated with Curosurf experienced significant reductions in heart rate and rapidly increased brain oxygenation during the peri-dosing period (p < 0.05), in contrast to lambs treated with lyophilized KL4 surfactant.  The study investigators concluded that lyophilized KL4 surfactant may enable ventilation at lower mean airway pressures which may reduce the incidence of chronic lung disease.

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In December 2009, research was published in the Proceedings of the National Academy of Sciences indicating that a naturally occurring phospholipid in pulmonary surfactant, palmitoyl-oleoyl-phosphatidylglycerol (POPG), suppresses respiratory syncytial virus (RSV) infection and associated inflammation in both in vitro and in vivo models (Numata et al, Proc Nat Acad of Sci, Dec 09).  The research demonstrates that POPG inhibits the spreading of RSV infection in mice exposed to RSV.  We believe that our KL4 surfactant, which contains POPG, is the only exogenous surfactant in which POPG is a specified active pharmaceutical ingredient.  This study further supports our belief that our KL4 surfactant may play a unique role in addressing several debilitating respiratory disorders.

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In May 2009, data from a preclinical study was presented at the PAS 2009 Annual Meeting, that compared SURFAXIN®, at a dose of 5.8 mL/kg (the dose used in the SURFAXIN Phase 3 clinical trials for RDS), with Curosurf at a dose of 2.5 mL/kg (the dose prescribed in its label), in the well-established preterm lamb model.  The purpose of the study was to test the hypothesis that a larger dose volume of surfactant could potentially result in more homogeneous distribution of surfactant throughout the lungs and may ultimately result in improved pulmonary and clinical outcomes.  The data showed that both surfactants significantly increased pulmonary compliance and tidal volume in this preterm lamb model of RDS without adversely affecting heart rate, blood pressure, or cerebral blood flow, irrespective of the dose volume employed.  However, significantly more homogeneous lung distribution of SURFAXIN (p < 0.001) was observed compared with Curosurf, as measured by pulmonary distribution of a mix of gold-labeled microspheres and surfactant.

 

 

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Also at the 2009 PAS, data from a preclinical study was presented that demonstrated a favorable physiologic benefit and subsequent survival impact on treating ALI in an animal model for this severe respiratory condition.  The objective of the study was to examine the effectiveness of KL4 surfactant in treating newborn piglets with severe ALI.  The results demonstrated that piglets treated with KL4 surfactant experienced a statistically significant improvement in oxygenation (p < 0.001), as well as better structural integrity of the lung tissue (p < 0.05) and improved survival (p < 0.05).

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A preclinical study that assessed the impact of exogenous surfactants, including SURFAXIN, on hyperoxic-induced lung injury in an in-vitro cell-culture model was published in Pediatric Research, a prominent peer-reviewed journal in July 2008 and concluded that our KL4 surfactant reduced inflammation and cell injury in this model, resulting in improved cell survival and function compared with both a saline control and Survanta.

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In May 2008 at PAS, data were presented from animal preclinical study that assessed the effect of SURFAXIN on biomarkers of lung inflammation and lung structure as compared to those treated with Survanta, Curosurf, or no surfactant replacement therapy.  The chosen animal model, the preterm lamb, was selected because it closely resembles RDS in human lungs and is regarded as the most relevant system to study the pathophysiology and treatment of RDS.  The results of the study showed that animals treated with SURFAXIN had better lung function compared with those treated with Survanta, Curosurf, or no surfactant replacement.  In addition, animals treated with SURFAXIN had better structural integrity, as assessed by evaluation of lung tissue, and lower levels of lung tissue and blood inflammatory mediators, compared with animals treated with Survanta or no surfactant replacement therapy.

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An in vitro study presented at the PAS in May 2008 investigated the antimicrobial properties of SURFAXIN.  In that study, gram-positive and gram-negative bacteria-containing broth was mixed with SURFAXIN and Survanta, as well as with saline, a negative control, and ciprofloxacin, an antibiotic that served as a positive control.  While both SURFAXIN and Survanta suppressed gram-positive bacterial growth, only SURFAXIN suppressed gram-negative bacterial growth.

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Also at PAS in May 2008, a preclinical study was presented that assessed the potential for KL4 to induce an immune response known as anaphylaxis in a well-established animal model.  Anaphylaxis, a potentially life-threatening allergic reaction, can occur in humans after exposure to medications that contain a foreign protein.  In this study, a well-established animal model was used to test whether KL4 would trigger anaphylaxis.  Supporting our belief that our KL4 surfactant has nonimmunogenic properties, this study concluded that KL4 did not induce active or passive anaphylaxis in this animal model, even when the immune system was potentiated and sensitized.

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In May 2007, a preclinical study was presented at PAS, the objective of which was to determine the impact of SURFAXIN on cytokine-driven lung inflammation and focused specifically on the transforming growth factor-beta (TGF-beta) superfamily.  In this study, SURFAXIN suppressed two central members of the TGF-beta superfamily (BMP10 and BMP15), which could have implications in reducing inflammation and fibrosis (scarring) of the lung in a variety of pulmonary diseases.  Members of the TGF-beta superfamily are known to induce fibrosis (scar tissue formation) in the lung.  These results support our developing our KL4 surfactant technology to potentially treat diseases in which respiratory inflammation plays an integral part, such as acute lung injury.

 

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In 2011, the Journal of Neonatal-Perinatal Medicine (Volume 4, Number 2, 2011) published a post-hoc analysis of data from our pivotal SELECT and STAR Phase 3 clinical trials for SURFAXIN titled “Reintubation and risk of morbidity and mortality in preterm infants after surfactant replacement therapy.”  The article evaluated the consequences of reintubation and the potential effect of the choice of surfactant on reintubation rates and subsequent clinical outcomes in premature infants.  The analysis indicates that, for preterm infants at risk for RDS who received prophylactic surfactant therapy and were extubated, infants who were reintubated had significantly higher rates of six major complications of prematurity, including bronchopulmonary dysplasia (BPD, a chronic lung condition), necrotizing enterocolitis (a severe intestinal condition often requiring surgery and loss of bowel), sepsis, and intraventricular hemorrhage (bleeding into the brain)  is a highly predictive risk factor for mortality and major complications of prematurity.  The analysis also indicates that infants treated with SURFAXIN had a significantly lower incidence of reintubation and a significantly higher incidence of survival without reintubation, compared with infants who received animal-derived surfactants Survanta and Curosurf, the current standard of care.

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In May 2010, results from a Phase 2a feasibility study that we previously conducted as part of our AEROSURF development program for the prevention of RDS in premature infants were published in the Journal of Aerosol Medicine and Pulmonary Drug Delivery.  In this feasibility study, aerosolized KL4 surfactant was administered to seventeen infants within 30 minutes of birth using a commercially available aerosolization device via nasal CPAP (nCPAP) over a three-hour duration.  Aerosolized KL4 surfactant was generally safe and well tolerated with twelve (71%) of the infants requiring a single dose or aerosolized KL4 surfactant.  In addition, all infants survived through the assessment period (day 28 of life), fifteen  (88%) infants survived with no evidence of BPD at day 28 of life, and five (29%) infants required intubation and mechanical ventilation (commonly known as CPAP failure).  The study investigators concluded that our aerosolized KL4 surfactant can be safely administered via nCPAP to preterm infants at risk for RDS and may provide an alternative to surfactant administration via an endotracheal tube.

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In April 2009, we presented a pharmacoeconomic analysis of data from our pivotal SELECT and STAR Phase 3 clinical trials for SURFAXIN at the 2009 International Congress on Clinical Pharmacy (ICCP).  The analysis shows that in-hospital costs are higher for infants who require reintubation after surfactant administration and successful extubation, when compared with infants who do not require reintubation.  The presentation also included previously-reported data demonstrating that infants treated with SURFAXIN in the SELECT and STAR trials required less reintubation compared with infants treated with currently available animal-derived surfactants.

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Our Phase 3 pivotal clinical study, SELECT, has demonstrated that SURFAXIN is safe and efficacious when used for the prevention of RDS in premature infants.  Data taken together from our SELECT and STAR (a supportive Phase 3 trial) studies demonstrate that SURFAXIN improved survival (continuing through at least one year of life) and other outcomes versus the animal-derived comparator surfactants.  The SELECT and STAR trials, including follow-on neonatal patient assessment through the first year of life, have been presented at several international medical meetings and trial results were published in Pediatrics, the Official Journal of the American Academy of Pediatrics and a premier medical journal for pediatric healthcare practitioners.

 

 

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In 2010, we concluded and reported results from a Phase 2 clinical trial evaluating the safety and tolerability of intratracheal administration of SURFAXIN (as a liquid bolus) and assessing whether SURFAXIN treatment could decrease the duration of mechanical ventilation in children with acute respiratory failure (ARF).  Data from the trial demonstrate that, based on patient stratification by severity of lung injury, SURFAXIN treatment significantly reduced time on mechanical ventilation in the least severe patient segment (p < 0.01).  Additionally, SURFAXIN intervention reduced the need for a second dose (p < 0.05), suggesting a decrease in disease severity following surfactant treatment.  ARF is a critical pediatric respiratory condition with a similar presentation to ALI that is often caused by severe respiratory infections.  We believe the results from the ARF trial suggest the rationale for an early-intervention strategy, prior to disease progression to a severe state requiring intubation, for our aerosolized KL4 surfactant as a potentially effective preventive measure for patients at risk for ALI.

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In 2009, results of our Phase 2 clinical trial for SURFAXIN for the prevention of BPD, which was designed as an estimation study to evaluate the safety and potential efficacy of SURFAXIN in infants at risk for BPD, were published in Pediatrics.  In the clinical trial, infants were randomized to receive, in addition to standard of care, either a SURFAXIN standard or low dose or sham air as a control.  Observations from this pilot estimation study included that infants treated with the SURFAXIN standard dose, as compared to those in the control group experienced a lower incidence of death or BPD (58% vs. 66%), a higher survival rate through 36 weeks post-menstrual age (89% vs. 84%), and fewer days on mechanical ventilation.  BPD, also known as chronic lung disease, affects premature infants and is associated with surfactant deficiency and the prolonged use of mechanical ventilation and oxygen supplementation.  We believe that the results of our estimation trial suggest that our KL4 surfactant may potentially represent a novel therapeutic option for infants at risk for BPD.

●

In October 2010, results from an investigator-initiated Phase 2a clinical trial of aerosolized KL4 surfactant in patients with CF was presented at the North American Cystic Fibrosis Conference.  The trial demonstrated that aerosolized KL4 surfactant delivery to CF patients was feasible, generally safe and well tolerated and was not associated with serious adverse events.  Both aerosolized KL4 surfactant and the active comparator, aerosolized saline control, produced a marked, significant (p < 0.01) increase from patient baseline in mucociliary clearance measured one hour after the last dose in both whole lung and peripheral lung compartments.  We believe these results support further scientific assessment of a potential complementary therapeutic role for aerosolized KL4 surfactant specifically targeting airway mucus adhesions.

●

improved ease of use for healthcare practitioners, including

o

shortened preparation time due to potential elimination of drug product warming process prior to use; and

o

potential elimination or reduction of continuous cold chain storage and refrigeration requirements;

 

 

●

potential improved product stability and extended shelf life; and

●

relatively lower viscosity, which may aid and/or improve the distribution of KL4 surfactant throughout the lung and potentially reduce the frequency of transient peri-dosing events typically observed during administration of surfactants;

 

●

full retention of the surface-tension lowering properties of a functioning surfactant necessary to restore lung function and maintain patency of the conducting airways;

 

●

full retention of the surfactant composition upon aerosolization; and

 

●

drug particle size believed to be suitable for deposition into the lung.

●

In December 2011, data from an in vitro study were presented at the 2011 Hot Topics.  The study was designed to compare the performance of the neonatal AFECTAIR device with a current SoC ventilator system in the delivery of nitric oxide under simulated neonatal ventilator conditions.  The simulated breathing pattern was maintained within narrow ranges and the delivery of oxygen was not different between the study conditions.  The investigators observed a 50 to 70 percent decrease in nitric oxide utilization requirements to achieve desired inhaled nitric oxide dose with the AFECTAIR device, compared with SoC (p < 0.001).  The study investigators concluded that AFECTAIR significantly decreased the nitric oxide utilization requirements to achieve the desired inhaled nitric oxide concentration and that results of the study support further investigation of AFECTAIR in the delivery of other medical gases and with other ventilation methods.

●

In November 2011, data from an in vitro study were presented at the American Association for Respiratory Care (AARC) Congress 2011.  The objective of this study was to compare the dose of aerosolized albuterol sulfate delivered to lung simulator under various neonatal ventilator settings using the neonatal AFECTAIR device versus the current standard of care (SoC) delivery system.  The investigators observed that use of AFECTAIR resulted in a statistically significant 6-to-14 fold increase (p < 0.05) in the delivery of aerosolized albuterol when compared with SoC, and concluded that potential clinical use of AFECTAIR may result in increased delivery of aerosolized medication to neonates receiving positive pressure ventilatory support.

 

 

●

Also in November 2011, data were presented at AARC from a second in vitro study, the objective of which was to determine the particle size distribution (PSD) using the neonatal AFECTAIR device versus SoC delivery system to deliver aerosolized albuterol in a neonatal ventilatory circuit.  PSD is an important determination for effective aerosolized medication delivery, where the ‘optimal PSD’ spans the human respirable range of 2-5 microns.  The investigators observed PSD at or below the lower end of the respirable range when using the SoC delivery system.  In contrast, the PSD observed using the AFECTAIR connector spanned the entire respirable range.  These observations suggest that the potential clinical use of AFECTAIR may result in increased delivery and retention of aerosolized medication in the lung.

●

Also in November 2011, data were presented at AARC from a third in vitro study, the objective of which was to determine if the neonatal AFECTAIR device impacts respiratory system resistance in a ventilator circuit, compared with SoC connectors currently used in ventilator circuits.  The investigators observed that resistance measurements were similar between AFECTAIR and the SoC delivery system and concluded that AFECTAIR may be a comparably safe alternative to SoC in ventilator circuits.

●

In May 2011, data from a study were presented at the 2011 PAS.  This data was also presented in June 2011 at the 2011 International Society for Aerosols in Medicine (ISAM) Annual Meeting.  The objective of this study was to assess our novel ventilator circuit / patient interface connectors.  The data from this study suggests that the neonatal AFECTAIR device reduces gas dilution when administered during CPAP respiratory support without increasing flow resistance, potentially improving efficiency of aerosolized medications delivery to preterm neonates receiving positive pressure ventilator support.

 

 

●

retains the surface-tension lowering properties of a functioning surfactant;

 

●

retains the surfactant composition of our liquid KL4 surfactant;

 

●

has a drug particle size believed to be suitable for deposition into the lung;

 

●

is produced at rates that can deliver therapeutic dosages in a reasonable period of time, with consistent reproducible output.  Preclinical studies presented at the 2007 PAS comparing our CAG technology to commercially-available aerosol devices indicated that our CAG device generated as much as a 10-fold higher aerosol output rate compared with the other devices studied; and

 

●

produces in vivo evidence of uniform lung distribution and superior physiologic outcomes versus nCPAP alone in an animal model of RDS.

 

 

 

 

 

 

 

 

●

physicians with expertise in pediatric and pulmonary medicine and extensive contacts in the neonatal medical community;

●

expertise in the design and implementation of preclinical experiments and studies to support drug development.  We conduct certain development-related experiments and bench studies in-house and also engage professional research laboratories as well as academic and education centers to conduct animal studies and experiments requiring specialized equipment and expertise;

●

expertise in the design, development and management of clinical trials.  Our own expertise includes scientific, medical, biostatistics, and trial and data management capabilities.  We analyze and report on our clinical trial data, supported by third-party technology systems and independent consultants.  We rely on scientific advisory committees and other medical and consulting experts to assist in the design and monitoring of clinical trials that we may conduct.  We also plan to rely on contract research organizations (CROs) to support operations of our planned multi-center trials in certain countries;

●

regulatory personnel with expertise in FDA regulatory matters.  We also consult extensively with independent FDA and international regulatory experts, including former senior scientific staff of the FDA;

●

engineering expertise to support development of our CAG and aerosol delivery technologies.  In addition to our own design engineering team, we plan to work with consulting design engineers, medical device experts and other third-party collaborators to advance the development of our CAG for use in our AEROSURF clinical trials and, if approved, commercial application;

●

quality operations capabilities to assure compliance with applicable regulations;

●

manufacturing capabilities to manufacture SURFAXIN® and our liquid KL4 surfactant for use in preclinical studies.  We also plan to rely on contract manufacturing organizations (CMOs) to produce our lyophilized dosage form of our KL4 surfactant and to manufacture and assemble our AFECTAIR devices.  We plan to rely on third-party manufacturers to manufacture and assemble our CAG systems and related components; and

●

our own analytical and testing laboratories, research and medical device development laboratory, and KL4 surfactant manufacturing facilities and related capabilities.  We also rely on a number of third-party analytical and testing laboratories to support our research activities and provide certain laboratory services.

 

 

 

 

 

 

 

 

 

 

 

 

 

●

product listing and establishment registration, which helps facilitate FDA inspections and other regulatory action;

●

Quality System Regulation (“QSR”), which is the medical device term for good manufacturing practices, requires manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the manufacturing process;

●

labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or off-label use or indication;

 

 

●

clearance of product modifications that could significantly affect safety or efficacy or that would constitute a significant change in the safety or efficacy of our cleared devices;

●

medical device reporting regulations, which require that manufacturers comply with FDA requirements to report if their device may have caused or contributed to a death or serious injury, or has malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction of the device or a similar device were to recur;

●

post-approval or post-clearance restrictions or conditions, including post-approval or post-clearance study commitments;

●

post-market surveillance regulations, which apply when necessary to protect the public health or to provide additional safety and effectiveness data for the device; and

●

the FDA’s recall authority, whereby it can ask, or under certain conditions order, device manufacturers to recall from the market a product that is in violation of governing laws and regulations.

 

ITEM 1A.

RISK FACTORS.

 

 

●

our distributors or collaborators may require that we transfer to them important rights to our products and/or drug product candidates;

●

we may not be able to control the amount and timing of resources that our distributors or collaborators devote to the commercialization of our products;

●

if our distributors or collaborators fail to perform their obligations under our arrangements to our satisfaction, we may not achieve our projected sales and our revenues would suffer.  We also may incur additional expense to terminate such arrangements and to identify and enter into arrangements with replacement distributors or collaborators;

●

our distributors or collaborators may experience financial difficulties; and

●

business combinations or significant changes in a collaborator’s business strategy may adversely affect a collaborator’s willingness or ability to perform its obligations under any arrangement, which would adversely affect our business.

 

●

the perceived safety and efficacy of our products;

●

the potential advantages over alternative treatments;

●

the prevalence and severity of any side effects;

●

the relative convenience and ease of administration;

●

cost effectiveness;

●

our ability to gain access to the entire market through our distributor arrangements;

●

the rate of preterm births;

●

the willingness of the target patient population to try new products and of physicians to prescribe our products;

●

the willingness of the target hospitals to accept and employ the WARMING CRADLE

●

the effectiveness of our marketing strategy and distribution support; and

●

the sufficiency of coverage or reimbursement by third parties.

 

 

●

complete our preclinical and clinical trials of our KL4 surfactant product candidates with scientific results that are sufficient to support further development and regulatory approval;

●

receive the necessary regulatory approvals;

●

obtain adequate supplies of surfactant active drug substances, manufactured to our specifications and on commercially reasonable terms;

●

perform under agreements to supply drug substances, medical devices and related components and related services necessary to manufacture our KL4 surfactant product candidates;

●

provide for sufficient manufacturing capabilities, at our manufacturing operations in Totowa and with third-party contract manufacturers, to produce sufficient drug product, including for SURFAXIN-related studies, SURFAXIN LS and AEROSURF, and CAG devices and related materials to meet our preclinical and clinical development requirements;

●

obtain the capital necessary to fund our research and development efforts, including our business administration, preclinical and clinical organizations, and our quality and manufacturing operations.

●

slow patient enrollment;

●

long treatment time required to demonstrate effectiveness;

●

lack of sufficient clinical supplies and material;

●

adverse medical events or side effects in treated patients;

●

lack of compatibility with complementary technologies;

●

failure of a drug product candidate to demonstrate effectiveness; and

●

lack of sufficient funds.

●

the number of clinical sites;

●

the size of the patient population;

●

the proximity of patients to the clinical sites;

●

the eligibility and enrollment criteria for the study;

●

the willingness of patients or their parents or guardians to participate in the clinical trial;

●

the existence of competing clinical trials;

●

the existence of alternative available products; and

●

geographical and geopolitical considerations.

 

 

●

We may not successfully develop a CAG device that is suitable for use in a clinical environment, if at all, on a timely basis and such inability may delay or prevent initiation of our planned clinical trials.

●

We will require access to sophisticated engineering capabilities.  We have medical device engineering staff with industry experience in developing medical devices, and plan to work with leading medical device development engineers and medical device design experts that have a successful track record of developing innovative devices for the medical and pharmaceutical industries.  If we are unable to identify design engineers and medical device experts to support our development efforts, including for a clinic-ready CAG system for use in our planned clinical trials and, potentially, for later versions of the CAG systems, it would impair our ability to commercialize or develop AEROSURF or other aerosolized KL4 surfactant products.

 

 

●

We will also require additional capital to advance our development activities and plan to seek a potential strategic partner or third-party collaborator to provide financial support and potentially medical device development expertise.  There can be no assurance, however, that we will successfully identify or be able to enter into agreements with such potential partners or collaborators on terms and conditions that are favorable to us.  If we are unable to secure the necessary medical device development expertise to support our development program, this could impair our ability to commercialize or develop AEROSURF or other aerosolized KL4 surfactant products.

●

the need to make necessary modifications to qualify and validate a facility;

●

difficulties with production and yields, including manufacturing and completing all required release testing on a timely basis to meet demand;

●

availability of raw materials and supplies;

●

quality control and assurance;

●

casualty damage to a facility; and

●

shortages of qualified personnel.

 

●

equipment malfunctions or failures;

●

technology malfunctions;

●

work stoppages or slowdowns;

●

damage to or destruction of the facility;

●

regional power shortages; and

●

product tampering.

 

●

We may be unable to identify manufacturers with whom we might establish appropriate arrangements on acceptable terms, if at all, because the number of potential manufacturers is limited and the FDA must approve any replacement contractor.  This approval would require new testing and compliance inspections.  In addition, a new manufacturer would have to be educated in, or develop substantially equivalent processes for, production of our products after receipt of FDA approval, if any;

●

Third-party manufacturers might be unable to manufacture our products in the volume and to our specifications to meet our clinical needs and, if approved, commercial needs;

●

Contract manufacturers may not perform as agreed or may not remain in the contract manufacturing business for the time required to supply our clinical trials or to successfully produce, store and distribute our products;

●

Product manufacturers are subject to ongoing periodic unannounced inspection by the FDA, the Drug Enforcement Administration, and corresponding state agencies to ensure strict compliance with cGMP and / or quality system regulations (QSR) and other government regulations and corresponding foreign standards.  We do not have control over third-party manufacturers’ compliance with these regulations and standards;

●

If any third-party manufacturer makes improvements in the manufacturing process for our products, we may not own, or may have to share, the intellectual property rights to any such innovation.  We may be required to pay fees or other costs for access to such improvements;

●

Each of these risks could delay our development programs, the approval, if any, of our product candidates by the FDA or the commercialization of our product candidates or result in higher costs or deprive us of potential product revenues;

 

 

 

 

●

announcements of the results of clinical trials by us or our competitors;

●

patient adverse reactions to drug products;

●

governmental approvals, delays in expected governmental approvals or withdrawals of any prior governmental approvals or public or regulatory agency concerns regarding the safety or effectiveness of our products;

●

changes in the United States or foreign regulatory policy during the period of product development;

●

changes in the United States or foreign political environment and the passage of laws, including tax, environmental or other laws, affecting the product development business;

●

developments in patent or other proprietary rights, including any third-party challenges of our intellectual property rights;

●

announcements of technological innovations by us or our competitors;

●

announcements of new products or new contracts by us or our competitors;

●

actual or anticipated variations in our operating results due to the level of development expenses and other factors;

●

changes in financial estimates by securities analysts and whether our earnings meet or exceed the estimates;

 

 

●

conditions and trends in the pharmaceutical and other industries;

●

new accounting standards; and

●

the occurrence of any of the risks described in these “Risk Factors” or elsewhere in this Annual Report on Form 10-K or our other public filings.

 

●

safe, effective and medically necessary;

●

appropriate for the specific patient;

●

cost-effective; and

●

neither experimental nor investigational.

 

 

 

●

developing products;

●

undertaking preclinical testing and human clinical trials;

●

obtaining FDA and other regulatory approvals or products; and

●

manufacturing and marketing products.

 

 

●

agreements may be breached;

●

agreements may not provide adequate remedies for the applicable type of breach;

●

our trade secrets or proprietary know-how may otherwise become known;

●

our competitors may independently develop similar technology; or

●

our competitors may independently discover our proprietary information and trade secrets.

●

uninsured expenses related to defense or payment of substantial monetary awards to claimants;

●

a decrease in demand for our drug product candidates;

●

damage to our reputation; and

●

an inability to complete clinical trial programs or to commercialize our drug product candidates, if approved.

 

ITEM 1B.

UNRESOLVED STAFF COMMENTS.

ITEM 2.

PROPERTIES.

 

ITEM 3.

LEGAL PROCEEDINGS.

ITEM 4.

MINE SAFETY DISCLOSURE.

 

 

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

 

		Low				High
First Quarter 2010		$	7.35			$	12.58
Second Quarter 2010		$	2.70			$	9.30
Third Quarter 2010		$	2.56			$	5.10
Fourth Quarter 2010		$	2.52			$	5.40
First Quarter 2011		$	1.71			$	4.18
Second Quarter 2011		$	1.79			$	2.95
Third Quarter 2011		$	1.93			$	2.70
Fourth Quarter 2011		$	1.44			$	2.01

ITEM 6.

SELECTED FINANCIAL DATA.

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

●

Company Overview and Business Strategy:  this section provides a general description of our company and business plans.

 

●

Critical Accounting Policies:  this section contains a discussion of the accounting policies that we believe are important to our financial condition and results of operations and that require the exercise of judgment and use of estimates on the part of management in their application.  In addition, all of our significant accounting policies, including the critical accounting policies and estimates, are discussed in Note 3 to the accompanying consolidated financial statements.

 

 

●

Results of Operations:  this section provides an analysis of our results of operations presented in the accompanying consolidated statements of operations, including comparisons of the results for the years ended December 31, 2011 and 2010.

 

●

Liquidity and Capital Resources:  this section provides a discussion of our capital resources, future capital requirements, cash flows, committed equity financing facilities, historical financing transactions, outstanding debt arrangements and commitments.

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 inhaled therapies, including our aerosolized KL4 surfactant.  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.

 

On March 6, 2012, the U.S. Food and Drug Administration (FDA) granted us marketing approval for SURFAXIN® (lucinactant) for the prevention of respiratory distress syndrome (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.  We are implementing a plan that, if successful, is intended to result in the commercial introduction of SURFAXIN in the United States in fourth quarter of 2012.

 

 

 

 

 

AFECTAIR, a series of disposable ventilator circuit / patient interface connectors, was initially developed for use in NICUs as part of our AEROSURF development program.  AFECTAIR devices simplify the delivery of inhaled therapies (including our aerosolized KL4 surfactant) to critical-care patients requiring ventilatory support by introducing the inhaled therapy directly at the patient interface and minimizing the number of connections in the ventilator circuit.  We initially developed a ventilator circuit / patient interface connector to be used with our CAG in the NICU.  To benefit all critical care patients who require inhaled therapies and who are receiving ventilatory support, we are developing AFECTAIR devices in different sizes for use in NICUs, pediatric intensive care units (PICUs) and adult intensive care units (ICUs), and to be compatible with a variety of aerosol generating devices.  In February 2012, we successfully registered our initial AFECTAIR device, which is intended for use with jet nebulizers and other aerosol generators, in the United States as a Class I, exempt medical device.  We believe that AFECTAIR has the potential to become a new standard of care for the delivery of inhaled therapies to critical care patients.  We are implementing a regulatory and manufacturing plan that, if successful, is intended to result in the commercial introduction of the initial AFECTAIR device in the United States and the European Union in the fourth quarter of 2012, and a second AFECTAIR device, AFECTAIR DUO, in mid-2013.