Discovery Laboratories, Inc. (Nasdaq:DSCO) today announced that it has filed a Certificate of Amendment to its Amended and Restated Certificate of Incorporation (the "Amendment") to effect a 1-for-15 share consolidation, or reverse stock split ("reverse split"), effective at 12:01 a.m. on December 28, 2010 (the "Effective Time"). In addition, the Amendment reduces the number of shares of common stock, par value $0.001 per share, authorized under the Certificate of Incorporation from 380 million to 50 million. Because the Amendment does not reduce the number of authorized shares of common stock in the same proportion as the reverse split, the effect of the Amendment is to increase the number of shares of common stock available for issuance relative to the number of shares issued and outstanding. The stockholders of Discovery Labs approved proposals authorizing the Board of Directors, in its discretion, to implement the reverse split and reduce the number of authorized shares of common stock at the Annual Meeting of Stockholders held on December 21, 2010.
The Board of Directors of Discovery Labs has determined to implement the reverse split at this time to enable the market price per-share of its common stock to close above $1.00, which is a continued listing requirement of The NASDAQ Capital Market® ("Nasdaq"). On November 30, 2010, Discovery Labs received a Staff Determination letter from Nasdaq indicating that it had not established compliance with Nasdaq Listing Rule 5550(a)(2) ("Minimum Bid Price Rule") because its common stock had not closed above $1.00 per share over a period of 10 consecutive business days ending on or prior to November 29, 2010, and that its stock is subject to delisting. Discovery Labs has requested a hearing with Nasdaq to review the Staff Determination and believes that implementation of the reverse split will support its continued listing on Nasdaq. Discovery Labs believes that continued listing on Nasdaq, combined with the increase in shares available for issuance, will enhance its ability to secure necessary capital from potential strategic partners and prospective investors to achieve its key business objectives, including potentially gaining U.S. Food and Drug Administration (FDA) approval for its lead product, Surfaxin®, for the prevention of respiratory distress syndrome (RDS) in premature infants.
Details of the Reverse Split
At the Effective Time, immediately and without further action by Discovery Labs' stockholders, every 15 shares of Discovery Labs' pre-split common stock, par value $0.001 per share, will automatically be converted into one share of post-split common stock, par value $0.001 per share. In lieu of fractional shares, stockholders will receive cash in an amount equal to the product obtained by multiplying (i) the closing sale price per share on the business day immediately preceding the Effective Time as reported on Nasdaq by (ii) the number of shares of common stock held by the stockholder that would otherwise have been exchanged for the fractional share interest.
The immediate effect of the reverse split will be to reduce the number of shares of Discovery Labs' common stock that are issued and outstanding to approximately 13.8 million shares (excluding shares reserved for stock options and unexercised warrants), adjusted for fractional interests. The reverse split will affect all stockholders uniformly and will have no effect on the proportionate holdings of any individual stockholder, with the exception of adjustments related to fractional shares. There will be no change in the number of stockholders of record as a result of the reverse split. Following the reverse split, all shares will remain fully paid and non-assessable.
To inform the market of the reverse split, Discovery Labs expects that Nasdaq will append a suffix character, "D," to the Company's trading symbol (DSCO) for approximately 20 days after the Effective Time. After the ~20 trading-day period, the ticker symbol will revert to "DSCO". In addition, Discovery Labs' common stock will also trade under a new CUSIP number beginning on December 28, 2010.
Additional information can be found in Discovery Labs' definitive proxy statement, which was filed with the SEC on November 15, 2010 and is available on the Company's website at www.Discoverylabs.com.
Discovery Labs is developing its novel, fully synthetic KL4 Surfactant platform with the intent to create a completely new therapeutic approach for the treatment of respiratory disease.
Product introduction begins with anticipated US FDA approval of SURFAXIN® (lucinactant), a liquid instillate formulation of KL4 Surfactant, for Respiratory Distress Syndrome (RDS) in premature infants.
Discovery Labs is developing multiple product solutions for RDS, supporting KL4 Surfactant delivery through a variety of dosage forms, including SURFAXIN LS™, a lyophilized formulation of KL4 Surfactant as well as AEROSURF®, aerosolized KL4 Surfactant. AEROSURF® represents a transformational approach toward neonatal respiratory critical care by potentially reducing or eliminating complications associated with mechanical ventilation.
Additional Respiratory Applications
Discovery Labs is also advancing KL4 Surfactant development in other respiratory disease areas. Key areas of interest include Mucociliary Clearance Dysfunction, a condition which is common to many respiratory diseases; Respiratory Critical Care Spectrum disorders, which include Acute Respiratory Failure (ARF), Acute Lung Injury (ALI) and Acute Respiratory Distress Syndrome (ARDS); and the use of our KL4 Surfactant as an aerosol liposomal system enabling a novel Drug Delivery mechanism for complex pharmaceutical compounds.