DSCO

[stockpicker]

This is a small company who is (currently) addressing a relatively
small market. The company developed precision-engineered lung
surfactant technology as Surfactant Replacement Therapies (SRT) for
respiratory diseases. Surfactants are substances that are produced
naturally in the lungs and are essential to the lungs' ability to
absorb oxygen and to maintain proper airflow through the respiratory
system. The absence or depletion of surfactants is involved in a
number of respiratory diseases.

Surfaxin, DSCO's leading product, treats neonatals who suffer from weak lungs. The company is running various clinical trials for other indications (that address
much larger markets) but I would suggest to focus ONLY on the Surfaxin.

According to the company, the neonatal mkt size is around 350,000
patients in the US which is valued at $500M-1 billion (I will mention
other markets later).

DSCO has succesfully completed 2 phase-3 trials of the Surfaxin and
received an APPROVABLE letter from the FDA. An approvable letter
means that the FDA approves the drug ONLY WHEN THE COMPANY ADDRESSES
VARIOUS ISSUES. It often happen that an approvable letter means that
a company has to do an additional clinical trial (this happened to
AMLN several years ago), however, the approvable clauses for DSCO
were regarding QC (Quality Control issues) in the manufacturing
procedures and report tracking - nothing CLINICAL.

Unfortunately for DSCO, this was (it happened in Jan 2005)the second
time that they have failed in the procedural process. Since the
company is small, the manufacturing is done by a third party and IT
IS VERY LIKELY THAT DSCO WILL FINALLY OVERCOME THIS HURDLE. They have
hired more people with experience in GMP (Good Manufacturing
Procedures) - I am sure that they can find many Teva people with this
experience.

In any case, the FDA will inspect the manufacturing facility in July
(next month) and if approved, DSCO will launch Surfaxin late this
year or early next year.

There are competitors in this not so big market which are animal-
derived surfactants (from pigs and cows). The main problems with the
animal derived products are that they are not homogenius enough (not
controlled) and that animal products increase risks associated with
transmission of infectious agents. Swine (pig) sources theorretically
can trasmit viral diseases and bovine (cow) sources can transmit BSE,
which has an incubation period of over 10 years.

Surfaxin has proven itself in clinical trials with decreased
morbidity and mortality, but has one more advantage - nebulization!
Current administration of surfactant is done by way of a liquid
bolus. The infant is first intubated with an endotracheal tube and
surfactant is poured into one lung, the patient is turned and another
aliquot is poured into the second lung. This technique is used
thousands of times a week and often it is not given a second thought,
but there are several risks involved with this process. The nebulized
form is currently in P2 studies and will likely become THE holy grail
of these treatments.


<<The Opportunity>>
Since Surfaxin showed excellent clinical results in comparison with
today's animal derived Survanta and Curosurf, it is likely that it
will capture at least 30% of the market pretty quickly which
represent annual revenue of around $200MM (in the US). It is likely
that DSCO will soon announce EU and Japan partnerships which will
possible double this revenue, so if I use a 7x revenue multiple, we
get a $3 billion mkt cap. However, I will be very conservative and
cut this number to $1 billion, which represents a pps of around $20.

DSCO is a very small company, so I think that if the big pharmas
continue their shopping of the small biotechs, it would make a lot of
sense for the company to be acquired for around $20 and the BP will
enjoy its economy of scale to maximize market share and minimize
costs.

If you look at DSCO's chart you can see the sharp drop following
January's FDA "approvable" letter. The company was running out of
money and had to do another PIPE a couple of months later at around
$6 pps. The main risk is that DSCO will fail another FDA procedural
inspection and will have to go to another PIPE (or more likely, will
be bought for cheap by a BP) - however, you got to be VERY dumb to
fail THREE times a procedural inspection.

Risk: moderate (downside: 25%)
Upside: x2 - x3 within 6 months

Technicals look nice but I am not the TA expert around this MB

good luck!

[stockpicker]

could one of you TA wizards analyze the recent price movements of DSCO. It seems that the FDA's re-inspection is due this month

TIA!

[eliteG]

thx for the analysis stockpicker, I'll pay with a chart.    What it shows is a channel and a closed up gap.  Nothing exciting from my point of view except it is following an uptrending channel.  Volume is quiet as well.  If it is poised to make a move I would have to say that the chart is not showing it, imo.

keep an eye 

[stockpicker]

the DSCO party continues!

[stockpicker]

up we go!

[jkotlicki]

Would anyone consider analyzing DSCO from a technical point of view?

Thanks,
Jacob

[sebfr]

Great TA :
You have an ascending triangle breakout friday withvolume grows up !!! A valid signal in TA and of course monday stock rises...
a lot of divergence in MACD? rsi AND roc
tARGET PRICE : 9.00
Good trade

[jkotlicki]

Thanks a- 1,000,000

[stockpicker]

BUTT!

With a fundamental reason - this company finally managed to submit the bureaucracy paperwork to the FDA. Remember, the FDA has approved the efficacy (and the safety) of DSCO's leading drug candidate (Surfaxin) -- so the road for the final approval is open (most likely within 5-6 months).

I am not a T/A expert, but even I can see that the chart looks bullish.

Thanks for anybody's comment

[sebfr]

Price is at 7.22

News :
Discovery Labs' Surfaxin Granted Orphan Drug Designation for the Treatment of Bronchopulmonary Dysplasia
10/28/05       

WARRINGTON, Pa., Oct 28, 2005 (PRIMEZONE via COMTEX) --
Discovery Laboratories, Inc. (Nasdaq:DSCO) today announced that the Office of Orphan Products Development of the United States Food and Drug Administration (FDA) has granted orphan drug designation to Discovery's lead product, Surfaxin(r), for the treatment of Bronchopulmonary Dysplasia (also known as Chronic Lung Disease, CLD) in premature infants. Surfaxin, a precision-engineered lung surfactant replacement therapy, has received an Approvable Letter from the U.S. FDA for the prevention of Respiratory Distress Syndrome (RDS) in premature infants and is pending approval.

CLD is a costly syndrome associated with surfactant and SP-B deficiency, and the prolonged use of mechanical ventilation and oxygen supplementation, usually associated with a premature infant being treated for RDS. Presently there are no approved drugs for the treatment of CLD. These babies suffer from abnormal lung development and typically have a need for respiratory assistance -- oftentimes, for many months, as well as comprehensive care that sometimes can span many years.

The U.S. Orphan Drug Act is intended to assist and encourage companies to develop safe and effective therapies for the treatment of rare diseases and disorders. Orphan drug designation in the United States is awarded to compounds that offer potential therapeutic value in the treatment of rare diseases, defined as those affecting fewer than 200,000 Americans. If the company complies with certain FDA specifications and should the drug receive marketing approval, orphan drug designation qualifies the sponsor for seven years of marketing exclusivity, exemption from the Prescription Drug User Fee Act (PDUFA) filing fees, and tax credits related to clinical research.

Robert J. Capetola, Ph.D. President and Chief Executive Officer of Discovery commented, "Market exclusivity under this designation would mean that Surfaxin, as a precision-engineered surfactant, has the potential to become the dominant engineered surfactant for the next decade. If Surfaxin is the first product to receive marketing authorization in the United States for the treatment of Bronchopulmonary Dysplasia, orphan status would block any future similar products for this indication throughout the United States market for a prolonged period of time."

Discovery is currently conducting a Phase 2 double-blind, controlled trial (that will enroll up to 210 very low birth weight premature infants born at risk for developing CLD) to determine the safety and tolerability of administering up to 5 total doses of Surfaxin in the first 10 days of life as a therapeutic approach for the prevention and treatment of CLD. This study is designed to determine whether such treatment can decrease the proportion of infants on mechanical ventilation or oxygen or the incidence of death or CLD.

Surfaxin is a precision-engineered, peptide-containing, synthetic surfactant that is designed to closely mimic the function of natural human lung surfactant. Discovery's Surfaxin has received an Approvable Letter from the FDA for the prevention of RDS in premature infants and is pending approval. Surfactants are substances that are produced naturally in the lungs and are essential to the lungs' ability to absorb oxygen and to maintain proper airflow through the respiratory system. Premature babies are born with a lack of natural surfactant in their lungs. Without surfactant, the air sacs in the lungs collapse and are unable to absorb sufficient oxygen resulting in RDS.


Technicals :
Stock is in an uptrend
Volume is high

[catrader]

down a bit on earnings i guess.  witht he talk of fda approval soon and maybe a takeover candidate and/or from graph, would you think a buy here?

[dennis67]

i did something stupid here maybe.  i bougt dsco at 2.94 this  morning only because i saw it going up. it has been droping until a few mins ago now its back to 2.87.  does this look risky to hold  now?  do you think it  over  sold  or maybe  the short sellers are covering? it looks like there are  still alot more buyers then sellers   thanks for any opinons  good or bad

[dennis67]

i feel better now  it looks like it stabilised and is going to drift higher. back up to 2.93. from the yahoo bord they think it over sold. i hope it holds at least in the 2.90 range then maybe it will gap up monday at the open, it did yestrday and today. im still looking for any opinons please.

[akclide]

DSCO a pure tech. play Chart looks good.May fall back to it's 50 dma of 2.37 before gets a bounce.if it does happen that way than it will probably look like G pattern.

[setravis]

"DSCO" Threads have been Merged.
Please use the search before starting new threads on a Stock Pick.
Chances are a thread already exist.
So why not post whatever you have to comment about on that pick to that thread.
"Simplicity" My fellow traders.                      
All history on a stock pick in 1 thread is awesome.                    
Just trying to get threads together,so we don't have a numerous amount floating around on the same stock.
Thank You....and good luck with all your trades....make some $$$