UPDATE 1-US delays approval for Discovery Labs' Surfaxin

Fri May 2, 2008 8:02am EDT

(Adds details, shares, background)

NEW YORK May 2 (Reuters) - The U.S. Food and Drug Administration declined to immediately approve Discovery Laboratories Inc's (DSCO.O) drug to help prevent respiratory distress syndrome in premature babies, the company said on Friday, sending shares down 41 percent.

The small biotechnology company said it received a so-called "approvable letter" from the FDA about the drug, Surfaxin.

Discovery Laboratories is assessing the agency's comments and plans to contact the FDA within a few days. It expects by early next week to be able to provide further details about the timeline to address the agency's concerns.

Approvable letters generally mean a company must satisfy certain conditions before the FDA will approve its drug.

The FDA has completed its pre-approval inspection of the company's manufacturing plant in Totowa, New Jersey, and recently issued a report reflecting a successful inspection, the company said.

Babies born too early -- less than the normal 38 to 42 weeks -- can suffer from underdeveloped lungs. The resulting breathing difficulty is known as respiratory distress syndrome.

While normal lungs produce a liquid coating called surfactant to help keep them open, premature babies do not, and fight hard against lung collapse, struggling to breathe and eventually dying from exhaustion.

Pennsylvania-based Discover Labs specializes in developing surfactant replacement therapies for respiratory diseases.

The company is also studying Surfaxin as a treatment for bronchopulmonary dysplasia, also known as chronic lung disease, and other respiratory conditions.

Discovery Laboratories shares fell to $1.70 in premarket electronic trading from its Thursday close of $2.90 on Nasdaq. (Reporting by Lewis Krauskopf, additional reporting by Susan Heavey in Washington; Editing by Derek Caney/Jeffrey Benkoe)

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