Discovery Labs Initiates Phase 2 Clinical Trial in Children with Acute Respiratory Failure

Trial Expands the Potential Application of Surfaxin to Pediatric Critical Care Conference Call Today at 10:00 A.M. EDT

WARRINGTON, PA, USA | June 7, 2007 |
Discovery Laboratories, Inc. (Nasdaq: DSCO) today announced the initiation of a Phase 2 clinical trial evaluating the use of Surfaxin® (lucinactant) inchildren up to two years of age suffering from Acute Respiratory Failure (ARF). Surfactantdysfunction is a key component of ARF. This new trial will explore the expanded application ofsurfactant therapy to pediatric critical care medicine. Surfaxin, the first peptide-containing (KL-4) synthetic surfactant, has received an Approvable Letter from the FDA for the prevention ofRespiratory Distress Syndrome (RDS) in premature infants. In addition, a reduction in morbiditywas observed with Surfaxin in a Phase 2 clinical trial for premature infants at risk forBronchopulmonary Dysplasia (BPD).

Discovery Labs will hold a conference call today at 10:00 AM EDT to further discuss theforegoing. The call in number is 866-332-5218. Further details are provided below.

Acute Respiratory Failure occurs when lung tissue is significantly damaged, leading to animpairment in lung function and the requirement for endotracheal intubation and mechanicalventilation (the current standard of care). The most common cause of respiratory failure in thesechildren is viral infection of the lung, particularly influenza and respiratory syncytial virus(RSV). Acute Respiratory Failure affects approximately 15,000 children under two years of agein the United States with an estimated 30,000 – 40,000 children afflicted in developed countrieseach year, depending on severity of the viral season. Presently there are no approved drugs forthe management of ARF.

Adrienne G. Randolph, M.D., M.Sc., Associate Professor of Anaesthesia, Harvard MedicalSchool and Senior Associate in Critical Care at Boston Children’s Hospital, commented, “AcuteRespiratory Failure is a major cause for the admission of children into the intensive care unit.There is a clear unmet medical need for better therapeutic options to help these children. A newmedical therapy that reduces the duration of mechanical ventilation for patients with AcuteRespiratory Failure would be considered clinically important.”

Children with Acute Respiratory Failure have reduced levels of functional surfactant. Damage tothe lung that causes ARF usually leads to surfactant dysfunction and decreased surfactantproduction. When there is insufficient functional surfactant in the lung, the air sacs collapse andare unable to support sufficient oxygenation. Discovery Labs is conducting a clinical program todetermine if restoration of surfactant with Surfaxin will improve lung function and result in ashorter duration of mechanical ventilation and Pediatric Intensive Care Unit (PICU) stay forchildren with Acute Respiratory Failure.

Discovery Labs’ Phase 2 clinical trial is a multicenter, randomized, masked, placebo-controlledtrial that will compare Surfaxin to standard of care with sham air control. Approximately 180children under the age of two with ARF will receive standard of care and be randomized toreceive either Surfaxin at 5.8 mL/kg of body weight (expected weight range up to 15 kg) or shamair control. The trial will be conducted at approximately 20 sites throughout the United States,Chile, and Europe. The objective of the study is to evaluate the safety and tolerability ofSurfaxin administration and to assess whether such treatment can decrease the duration ofmechanical ventilation in young children with ARF. The trial is expected to be completed bymid-year 2008.

Robert Segal, M.D., Senior Vice President & Chief Medical Officer of Discovery Labs,commented, “This Phase 2 clinical trial begins the expansion of our Surfactant ReplacementTherapy pipeline into pediatric critical care medicine. Our Scientific Advisory Board, consistingof leading pediatric critical care experts, has strongly supported a clinical program usingSurfaxin to help treat these young children. Published data with animal-derived surfactantssuggest that surfactant therapy holds promise in treating children with Acute Respiratory Failure.We believe that Surfaxin, our peptide-containing synthetic surfactant with anti-inflammatoryproperties, is ideally suited to address ARF. To date, Surfaxin has demonstrated a robust clinicalprofile in our Phase 3 neonatal RDS program and encouraging results in a recently completedBPD Phase 2 clinical trial. We look forward to advancing Surfactant Replacement Therapy intothe PICU.”

Discovery Lab’s Proprietary KL-4 Surfactant Technology: Product Candidate Surfaxin®
KL-4 is a 21 amino acid peptide that is designed to closely mimic the essential attributes ofhuman surfactant protein B (SP-B). SP-B is the most important surfactant protein for the properfunctioning of the respiratory system, and is essential for survival. KL-4 surfactant has thepotential to be precisely formulated, either as a liquid instillate, aerosolized liquid or dry powder,to address various respiratory diseases affecting premature infants, children and adults.

Surfaxin, is a precision-engineered version of natural human lung surfactant and containsDiscovery Lab’s novel KL-4 peptide. Surfaxin, administered as a liquid-instillate, represents apotential alternative to the commercially available animal-derived surfactants. Data fromDiscovery Lab’s pivotal, multinational SELECT study demonstrate that Surfaxin is significantlymore effective in the prevention of RDS and results in improved survival (continuing through atleast one year of life) and other outcomes versus comparator surfactants. The SELECT andSTAR (a supportive Phase 3 study) trials, as well as a pooled Phase 3 analysis, have beenpresented at several international medical meetings and the results from the two studies werepublished in Pediatrics. In addition, top-line results from Discovery Lab’s Phase 2 clinical trialfor the prevention and treatment of BPD suggested that infants treated with up to fiveincremental standard doses of Surfaxin tended to have a lower incidence of death or BPD, ahigher survival rate through 36 weeks post-menstrual age, and fewer days on mechanicalventilation.

About Discovery Labs
Discovery Laboratories, Inc. is a biotechnology company developing Surfactant ReplacementTherapies (SRT) for respiratory diseases. Surfactants are produced naturally in the lungs and areessential for breathing. Discovery Labs technology produces a precision-engineered surfactantthat is designed to closely mimic the essential properties of natural human lung surfactant.Discovery Labs believes that its proprietary SRT pipeline has the potential to advance respiratorymedicine and address a variety of respiratory diseases affecting neonatal, pediatric and adultpatients.Discovery Labs lead product candidate, Surfaxin®, is the subject of an Approvable Letter fromthe FDA for the prevention of Respiratory Distress Syndrome in premature infants. Surfaxin isalso being developed for other neonatal and pediatric indications. Aerosurf™, Discovery Labsaerosolized SRT, is being developed to potentially obviate the need for intubation andconventional mechanical ventilation and holds the promise to significantly expand the use ofsurfactants in respiratory medicine. For more information, please visit our website atwww.Discoverylabs.com.

To the extent that statements in this press release are not strictly historical, all such statements are forward-looking,and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Theseforward-looking statements are subject to certain risks and uncertainties that could cause actual results to differmaterially from the statements made. Among the factors which could affect Discovery Labs actual results and couldcause results to differ from those contained in these forward-looking statements are the risk that Discovery Labsmay not profitably develop and market its products, the risk that financial market conditions may change, the riskthat Discovery Labs will not be able to raise additional capital or enter into additional collaboration agreements,the risk that Discovery Labs will not be able to attract or retain qualified personnel or timely provide for asuccessful sales and marketing organization, risks relating to the progress of Discovery Labs research anddevelopment,, risks in the FDA or other regulatory agency review process generally, including that such regulatoryauthority will not approve the marketing and sale of a drug product even after acceptance of an application or thatapproval by such regulatory agency may be withheld, delayed and/or limited by indications or other labellimitations, risks that the Chemical, Manufacturing and Controls section of Discovery Labs New Drug Applicationwill not satisfy the FDA, risks relating to the ability of Discovery Labs or Discovery Labs third party manufacturersand development partners to manufacture or provide Discovery Labs with adequate supplies of drug substances andexpertise for completion of any of Discovery Labs clinical studies, risks related to the ability of Discovery Labs andits collaborators to develop, manufacture and successfully commercialize products that combine Discovery Labsdrug products with innovative aerosolization technologies, risks relating to drug manufacturing by Discovery Labs,risks relating to the significant, time-consuming and costly research, development, pre-clinical studies, clinicaltesting and regulatory approval process for any products that Discovery Labs may develop independently or withDiscovery Labs collaboration arrangements, risks relating to the development by other companies of competingtherapies and/or technologies, risks relating to reimbursement and health care reform, and risks relating tosecurities, product liability and other litigation. Companies in the pharmaceutical and biotechnology industrieshave suffered significant setbacks in advanced clinical trials, even after obtaining promising earlier trial results.Data obtained from tests are susceptible to varying interpretations, which may delay, limit or prevent regulatoryapproval. Those associated risks and others are further described in Discovery Labs filings with the Securities andExchange Commission including the most recent reports on Forms 10-K, 10-Q and 8-K, and any amendmentsthereto.

SOURCE: Discovery Laboratories, Inc.

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