Why Discovery Laboratories Inc. Shares Tumbled

Discovery Labs fell after reporting its fourth-quarter results. Is this dip a buying opportunity or a cue to keep your distance?

Mar 13, 2014 at 1:19PM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Discovery Laboratories (NASDAQ:DSCO), a biopharmaceutical company focused on developing therapies to treat respiratory diseases, lost as much as 11% after reporting its fourth quarter results before the opening bell.

So what: For the quarter, Discovery Labs reported gross revenue of $74,000, but noted that sales of Surfaxin ($140,000), its newly approved drug for the prevention of respiratory distress syndrome (RDS) in infants at high risk for RDS, were deferred in accordance with its revenue recognition policy. Net loss grew 72% to $11.7 million, or $0.16 per share loss. Comparatively speaking, the loss matched Wall Street's estimates, but revenue of $360,000 had been expected.

More so than its earnings report, Discovery Labs' 8-K filing appears to be harming its share price. Within that 8-K, Discovery Labs removed its short-term revenue guidance from Surfaxin for 2014 noting:

Experience to date indicates that the cycle time required to have SURFAXIN reviewed by hospital committees, accepted on hospital formulary, purchased by the hospital pharmacy, and ultimately used in the neonatal intensive care unit ("NICU") is considerably longer than the Company assumed in its previous guidance for 2014. The Company believes that, to effectively forecast revenue in the short term, it will require more actual experience with the SURFAXIN product cycle time. Until that time, the Company will not be in a position to provide informative short-term revenue guidance.

Now what: Usually investors are willing to give biopharmaceutical companies that are launching new products a reprieve for a couple quarters, but its 8-K filing, which demonstrates that it may not understand how marketable Surfaxin is, or how to best approach physicians to get its drug sold. That is a bit concerning. Discovery Labs has plenty of cash now after completing a stock offering during the quarter, but it appears unlikely that it will be delivering profits to shareholders anytime soon. Nowadays half the battle is getting a drug approved by the Food and Drug Administration, but the other half is in successfully launching a new drug. Surfaxin is still very wet around the ears and probably needs time to develop through physician education -- but that also means there's probably little reason for you to chase Discovery Labs shares at the moment, either.

Surfaxin may offer Discovery Labs' shareholders a lot of potential -- but even it may struggle to keep up with this top stock moving forward
There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

The Motley Fool has no position in any companies mentioned in this article. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers