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A Short Wait for Discovery Labs?

By Brian Orelli, PhD - Updated Nov 11, 2016 at 6:37PM

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The company gets a third letter about Surfaxin, but should be able to satisfy the FDA soon.

The third time is apparently not the charm for Discovery Laboratories (Nasdaq: DSCO), but it's likely the fourth time will be.

Last week, the company received its third approvable letter from the Food and Drug Administration for Surfaxin, a drug it's hoping to get approved to prevent respiratory death syndrome (RDS) in premature infants. Monday morning, Discovery Labs gave a little more color about what it'll have to do to satisfy the agency.

The problems revolve mostly around quality-control issues. Company officials think they can be worked out in six to eight weeks. Furthermore, they believe that the FDA may classify the company's response as a class 1 resubmission. If it does, Discovery Labs could hear back from the FDA in less than 60 days.

Discovery Labs' press release on Friday was rather coy, but savvy investors should have noticed some hints that the delay could be rather short:

  • "This official notification sets forth the remaining conditions that must be satisfied to gain U.S. marketing approval." That makes it sound like the FDA didn't have any open-ended questions for the company.
  • The FDA "recently issued an Establishment Inspection Report (EIR) reflecting a successful inspection" of the manufacturing plant. Normally, that wouldn't be something to get excited about, but the previous approvable letter had to do with the company's production of the drug.
  • "Discovery Labs had finalized Surfaxin labeling discussions with the FDA."

That last point really should have given investors hope. Discussions about labeling issues usually happen only after the drug is likely to get approved. Late last year, Biomarin Pharmaceutical (Nasdaq: BMRN) said it was in final labeling discussions with the agency, and then its drug was approved a month later. The same thing happened to CV Therapeutics (Nasdaq: CVTX) in the past few months -- a delay with an announcement that it was in final labeling discussions, followed by an approval.

Investors should remember that if Discovery Labs' resubmission is designated as a class 1, a decision could come faster than the 60-day review target. Forest Laboratories (NYSE: FRX) and Mylan (NYSE: MYL) turned their approvable letter for beta-blocker Bystolic into an approved letter in little more than two weeks.

I've been wrong about whether Surfaxin would be approved before, but it looks to me like Discovery Labs will have an approved drug fairly soon.

CV Therapeutics and BioMarin Pharmaceutical are Motley Fool Rule Breakers recommendations. The newsletter is always on the hunt for hot drug stocks and other cutting-edge picks. See all of our latest discoveries with a free 30-day trial.

Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. The Fool has a disclosure policy.

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