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Discovery Laboratories, Inc. (DSCO - Snapshot Report) announced that the U.S. Food and Drug Administration (FDA) has approved product specifications update related to Surfaxin, intratracheal suspension. The company expects to launch the drug in the fourth quarter of 2013. Investors reacted positively to the news with shares prices going up by more than 37%.

Background

We remind investors that the FDA had approved Surfaxin for the prevention of respiratory distress syndrome (RDS) in premature infants who are at high risk of the disease in Mar 2012. Discovery Labs had then planned to launch Surfaxin in late 2012.

However, in the third quarter of 2012, the company delayed the launch of Surfaxin based on a review of an analytical testing and quality control process of the drug. It was found that an improvement was required in one of the analytical chemistry methods used to assess Surfaxin and an update to product specifications related to Surfaxin was warranted.

Consequently, Discovery Labs submitted updated product specifications to the FDA after improving and revalidating the analytical chemistry method. In Apr 2013, the FDA requested clarification related to updated product specifications for Surfaxin. The company submitted its response in Jun 2013.

Our Take    

We believe that Surfaxin has the potential to boost the top line significantly given that it is the first FDA-approved synthetic, peptide-containing surfactant available for the prevention of RDS in premature infants. Currently, only animal-derived surfactants are available in the market.

Currently approved animal-derived surfactants include AbbVie Inc.'s (ABBV - Analyst Report) Survanta for the prevention and treatment of RDS in premature infants.

Discovery Labs currently carries a Zacks Rank #2 (Buy). At present, companies like Ironwood Pharmaceuticals, Inc. (IRWD - Analyst Report) and Actelion Ltd. (ALIOF) look more attractive with a Zacks Rank #1 (Strong Buy).

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