Discovery Labs cuts staff by 34%, reorganizes management in response to Surfaxin delay

New York, May 4 - Discovery Laboratories, Inc. said it is cutting its workforce by 55 employees or 34% and reorganizing its corporate management in order to cut costs and align operations with its business properties.

The actions come after the company warned late last month that it expects a "significant" delay in approval of its Surfaxin for the prevention of respiratory distress syndrome in premature infants.

"Based on recent events, we have taken steps to control costs and maintain the human and capital resources to focus on the programs that potentially allow patients to experience the benefit of this important new class of respiratory medicine," said Robert Capetola, president and chief executive officer, in a news release.

"Our highest priority is the actions necessary to gain Surfaxin regulatory approval. We are focused on investigating and remediating the Surfaxin manufacturing issues and maintaining the clinical and commercial manufacturing infrastructure for Surfaxin and our SRT pipeline.

"Just as important is the development of our pipeline of SRT products, primarily our potentially revolutionary aerosolized SRT, Aerosurf for neonatal respiratory disorders, as well as exploring opportunities for strategic partnerships."

Discovery said the staff cuts are across all functions of the company but with a primary emphasis on the commercial infrastructure which is no longer in Discovery's near-term plans. It now has 105 employees.

The actions will save $8 million a year. It will also avoid sales and marketing expenses, which totaled $5 million over the past two quarters.

For the restructuring, Discovery will take a one-time charge of $4.5 to $5 million in the second quarter.

Three senior executives will leave the company: Christopher J. Schaber, executive vice president and chief operating officer; Deni M. Zodda, senior vice president of business development; and Mark G. Osterman, senior vice president of sales and marketing.

As previously announced, in April Discovery received a second approvable letter from the Food and Drug Administration for its New Drug Application for Surfaxin.

The letter focused on the chemistry, manufacturing and controls section of the application and product labeling.

Discovery also announced that it anticipated a potentially significant delay in Surfaxin approval due to the failure of certain stability parameters for process validation batches that were previously manufactured as a requirement for regulatory approval.

Discovery is a biotechnology company developing surfactant technology for respiratory diseases and is located in Warrington, Pa.

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