<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
November 25, 1997
Date of Report (Date of earliest event reported)
DISCOVERY LABORATORIES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 000-26422 94-3171943
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification Number)
509 Madison Avenue, 14th Floor
New York, New York 10022
(Address of principal executive offices)
(212) 223-9504
(Registrant's telephone number, including area code)
<PAGE>
Item 5. Other Events
Effective 5:00 p.m. (Eastern Daylight Time) on November 25, 1997, pursuant
to an Agreement and Plan of Merger (the "Merger Agreement") dated as of July 16,
1997, between Ansan Pharmaceuticals, Inc., a Delaware corporation (the
"Company"), and Discovery Laboratories, Inc., a Delaware corporation ("Old
Discovery"), Old Discovery merged with and into the Company (the "Merger"). In
connection with the Merger, the Company changed its name to Discovery
Laboratories, Inc. Concurrently with the effectiveness of the Merger, the
Company effected a 1-for-3 reverse split (the "Reverse Split") of its
outstanding Common Stock, par value $0.001 per share (the "Company Common
Stock"), and its outstanding Class A and Class B Warrants.
As a consequence of the Merger and the Reverse Split, each share of Common
Stock of Old Discovery will be exchanged for 0.389157 shares of new Company
Common Stock and each share of Series A Convertible Preferred Stock of Old
Discovery (each of which was convertible into 4 shares of the Common Stock of
Old Discovery) will be exchanged for one share of Series B Convertible Preferred
Stock of the Company. Each share of Series B Convertible Preferred Stock of the
Company will be convertible into 1.556628 shares of new Company Common Stock.
Cash will be paid in lieu of fractional shares of new Company Common Stock.
As a consequence of the Reverse Split, each share of Company Common Stock
outstanding immediately prior to the Merger will be exchanged for 1/3 of a share
of new Company Common Stock. Cash will be paid in lieu of fractional shares of
new Company Common Stock. Each Class A Warrant outstanding immediately prior to
the Merger will be exchanged for 1/3 of a new Class A Warrant and each Class B
Warrant outstanding at such time will be exchanged for 1/3 of a new Class B
Warrant. Each new Class A Warrant will be exercisable for one share of new
Company Common Stock and one new Class B Warrant at an exercise price of $19.50
per new Class A Warrant. Each new Class B Warrant will be exercisable for one
share of new Company Common Stock at an exercise price of $26.25 per Class B
Warrant.
Continental Stock Transfer & Trust Company ("Continental") has been
retained by the Company to serve as exchange agent in connection with the Merger
and the Reverse Split. As soon as reasonably practicable, the Company will mail
transmittal letters to stockholders of record of Old Discovery at the effective
time of the Merger and will cause Continental to mail transmittal letters to
stockholders and warrantholders of record of the Company at the effective time
of the Merger. The transmittal letters will contain instructions for use in
effecting the surrender of securities for exchange (and for payment in lieu of
fractional shares of new Company Common Stock) pursuant to the Merger and the
Reverse Split.
As of the effective time of the Merger, Louis R. Bucalo, Lindsay A.
Rosenwald, M.D. and Ilan Cohen resigned from the Board of Directors of the
Company, the size of the Board was increased to ten directors and Steve H.
Kanzer, C.P.A., Esq., James S. Kuo, M.D., Evan Myrianthopoulos, Jeurg F. Geigy,
Esq., Max Link, Ph.D., Herbert H. McDade, Jr., and Marc C. Rogers, M.D., former
directors of Old Discovery, were elected to the Board of Directors of the
Company, thereby fulfilling the requirements of the Merger Agreement regarding
the size and composition of the Board immediately following the Merger.
The foregoing description of and references to the above-referenced
agreements and transactions are qualified in their entirety by reference to the
complete text of the Merger Agreement (which is incorporated by reference to
Exhibit 2.1 to the Company's Registration Statement on Form S-4 filed August 25,
1997 (Registration No. 333-34337) (the "Registration Statement") and the press
release issued by the Company on November 26, 1997 with respect to the
effectiveness of the Merger and the Reverse Split, which press release is
attached hereto as Exhibit 99.3 and is incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits
-----------------------------------------------------------------
(a) Financial Statements of Business Acquired
It is impracticable to provide certain of the required financial
statements for Old Discovery at the date hereof. The Company
undertakes to file such required financial statements by means
of an amendment to this Current Report on Form 8-K as soon as
practicable, but in no event later than February 6, 1998. The
Company incorporates herein by reference the financial
statements of Old Discovery set forth on pages F-23 through F-34
of Part I of Amendment No. 2 to the Registration Statement filed
on October 24, 1997, copies of which financial statements are
included as Exhibit 99.1 hereto.
<PAGE>
(b) Pro Forma Financial Information
Attached hereto as Exhibit 99.2 is certain pro forma financial
information which the Company is required to file on or before
November 30, 1997 pursuant to a temporary exemption received by
the Company from The NASDAQ Stock Market, Inc. during July 1997
with respect to the requirements for listing the Company's
securities on the NASDAQ SmallCap Market.
It is impracticable to provide certain of the pro forma
financial information required pursuant to Article 11 of
Regulation S-X at the date hereof. The Company undertakes to
file such required pro forma financial information by means of
an amendment to this Current Report on Form 8-K as soon as
practicable, but in no event later than February 6, 1998. The
Company incorporates by reference the pro forma financial
statement set forth on p. 58 of Part I of Amendment No. 2 to the
Registration Statement, a copy of which pro forma financial
statement is included in Exhibit 99.2 hereto.
(c) Exhibits:
2.1 Agreement and Plan of Reorganization and Merger dated as
of July 16, 1997, between the Company and Old Discovery filed as
Exhibit 2.1 to the Company's Registration Statement is
incorporated herein by reference.
23.1 Consent of Richard A. Eisner & Company, LLP, Independent
Auditors.
99.1 Financial Statements of Business Acquired.
99.2 Pro Forma Financial Information.
99.3 Press Release dated November 26, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
DISCOVERY LABORATORIES, INC.
Date: November 26, 1997
By: /s/ James S. Kuo
-----------------------------
Name: James S. Kuo, M.D.
Title: Chief Executive Officer
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
-------------- -----------
2.1 Agreement and Plan of Reorganization and
Merger dated as of July 16, 1997,
between the Company and Old Discovery
filed as Exhibit 2.1 to the Registration
Statement is incorporated herein by
reference.
23.1 Consent of Richard A. Eisner & Company,
LLP, Independent Auditors.
99.1 Financial Statements of Business
Acquired.
99.2 Pro Forma Financial Information.
99.3 Press Release dated November 26, 1997.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use in Amendment No. 2 to the Ansan Pharmaceuticals,
Inc. Registration Statement on Form S-4 dated October 24, 1997 of our report
dated February 12, 1997, on our audit of the financial statements of Discovery
Laboratories, Inc. and to the reference to our firm under the caption "Experts"
in the Registration Statement.
Richard A. Eisner & Company, LLP
New York, New York
November 26, 1997
<PAGE>
EXHIBIT 99.1
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Discovery Laboratories, Inc.
New York, New York
We have audited the accompanying consolidated balance sheet of Discovery
Laboratories, Inc. and subsidiary (a development stage company) as at December
31, 1996, and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for the two years ended December 31, 1996,
and the period from May 18, 1993 (inception) to December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements enumerated above
present fairly, in all material respects, the financial position of Discovery
Laboratories, Inc. and subsidiary at December 31, 1996 and the results of
their operations and their cash flows for the two years ended December 31,
1996, and the period from May 18, 1993 (inception) to December 31, 1996 in
conformity with generally accepted accounting principles.
Richard A. Eisner & Company, LLP
New York, New York
February 12, 1997
<PAGE>
DISCOVERY LABORATORIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents...................................... $ 4,336,000 $ 1,478,000
Investments in United States government obligations............ 13,064,000 13,319,000
Prepaid expenses............................................... 19,000 35,000
----------- -----------
Total current assets......................................... 17,419,000 14,832,000
Computer equipment, net of depreciation (Note B)................. 69,000 115,000
Licenses, net of amortization (Note E)........................... 701,000
----------- -----------
TOTAL........................................................ $18,189,000 $14,947,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Liabilities:
Accrued expenses............................................... $ 231,000 $ 296,000
----------- -----------
Minority interest in preferred stock of subsidiary (Note G)...... 2,200,000 2,200,000
----------- -----------
Commitments and contingencies (Notes E and G)
Stockholders' equity (Notes F, H and I):
Series A convertible preferred stock, $.001 par value;
7,000,000 shares authorized; 2,200,256 shares issued and
outstanding (liquidation preference $29,703,000).............. 2,000 2,000
Other preferred stock, $.001 par value; 3,000,000 shares
authorized; none issued and outstanding.......................
Common stock, $.001 par value, 50,000,000 shares authorized,
6,712,256 shares issued and outstanding....................... 7,000 7,000
Additional paid-in capital..................................... 19,003,000 18,992,000
Deficit accumulated during the development stage............... (3,254,000) (6,550,000)
----------- -----------
Total stockholders' equity................................... 15,758,000 12,451,000
----------- -----------
TOTAL........................................................ $18,189,000 $14,947,000
=========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
DISCOVERY LABORATORIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
MAY 18, 1993 MAY 18,
YEAR ENDED (INCEPTION) SIX MONTHS ENDED 1993
DECEMBER 31, TO JUNE 30, (INCEPTION)
---------------------- DECEMBER 31, ---------------------- TO JUNE 30,
1995 1996 1996 1996 1997 1997
--------- ----------- ------------ --------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Interest income......... $ $ 205,000 $ 205,000 $ $ 306,000 $ 511,000
--------- ----------- ----------- --------- ----------- -----------
Expenses:
Research and
development.......... 2,740,000 2,740,000 22,000 2,257,000 4,997,000
General and
administrative....... 17,000 692,000 710,000 9,000 1,345,000 2,055,000
Interest.............. 11,000 11,000 2,000 11,000
--------- ----------- ----------- --------- ----------- -----------
Total expenses...... 17,000 3,443,000 3,461,000 33,000 3,602,000 7,063,000
--------- ----------- ----------- --------- ----------- -----------
(17,000) (3,238,000) (3,256,000) (33,000) (3,296,000) (6,552,000)
Minority interest in net
loss of subsidiary..... 2,000 2,000 2,000
--------- ----------- ----------- --------- ----------- -----------
NET (LOSS).............. $ (17,000) $(3,236,000) $(3,254,000) $ (33,000) $(3,296,000) $(6,550,000)
========= =========== =========== ========= =========== ===========
Pro forma net (loss) per
share.................. $ (.01) $ (.65) $ (.01) $ (.42)
========= =========== ========= ===========
Pro forma weighted
average common shares
outstanding............ 1,714,766 4,943,768 3,028,329 7,836,363
========= =========== ========= ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
DISCOVERY LABORATORIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
COMMON STOCK PREFERRED STOCK STOCK ADDITIONAL DURING THE
---------------- ---------------- SUBSCRIPTIONS PAID-IN DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT RECEIVABLE CAPITAL STAGE TOTAL
--------- ------ --------- ------ ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of common
shares, May 1993....... 1,132,500 $1,000 $ $(2,000) $ 1,000 $ $ 0
Net loss................ (1,000) (1,000)
Expenses paid on behalf
of the Company......... 1,000 1,000
--------- ------ --------- ------ ------- ----------- ----------- -----------
Balance--December 31,
1993................... 1,132,500 1,000 (1,000) 1,000 (1,000) 0
Net loss................ 0 0
Expenses paid on behalf
of the Company......... 0 0
--------- ------ --------- ------ ------- ----------- ----------- -----------
Balance--December 31,
1994................... 1,132,500 1,000 (1,000) 1,000 (1,000) 0
Issuance of common
shares, February 1995.. 367,500 1,000 (1,000) 0
Net loss................ (17,000) (17,000)
Payment on stock
subscriptions.......... 2,000 2,000
Expenses paid on behalf
of the Company......... 18,000 18,000
--------- ------ --------- ------ ------- ----------- ----------- -----------
Balance--December 31,
1995................... 1,500,000 2,000 0 19,000 (18,000) 3,000
Issuance of common
shares, March 1996..... 2,750,000 3,000 3,000 6,000
Issuance of private
placement units August,
October and November
1996................... 2,200,256 2,000 2,200,256 2,000 18,932,000 18,936,000
Issuance of common
shares for cash and
compensation, September
1996................... 212,000 42,000 42,000
Exercise of Stock
Options, July and
October 1996........... 50,000 7,000 7,000
Net loss................ (3,236,000) (3,236,000)
--------- ------ --------- ------ ------- ----------- ----------- -----------
Balance--December 31,
1996................... 6,712,256 7,000 2,200,256 2,000 0 19,003,000 (3,254,000) 15,758,000
Private placement
expenses............... (11,000) (11,000)
Net loss................ (3,296,000) (3,296,000)
--------- ------ --------- ------ ------- ----------- ----------- -----------
BALANCE--JUNE 30, 1997
(UNAUDITED)............ 6,712,256 $7,000 2,200,256 $2,000 $ 0 $18,992,000 $(6,550,000) $12,451,000
========= ====== ========= ====== ======= =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
DISCOVERY LABORATORIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
MAY 18, 1993 MAY 18, 1993
YEAR ENDED (INCEPTION) SIX MONTHS ENDED (INCEPTION)
DECEMBER 31, TO JUNE 30, TO
---------------------- DECEMBER 31, ---------------------- JUNE 30,
1995 1996 1996 1996 1997 1997
-------- ------------ ------------ --------- ----------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net loss............... $(17,000) $ (3,236,000) $ (3,254,000) $ (33,000) $(3,296,000) $ (6,550,000)
Adjustments to
reconcile net loss to
net cash (used in)
operating activities:
Write-off of acquired
research and
development supplies.. 2,200,000 2,200,000 2,200,000
Write-off of licenses.. 683,000 683,000
Depreciation and
amortization.......... 24,000 24,000 24,000 48,000
(Increase) in prepaid
expenses.............. (18,000) (18,000) (16,000) (35,000)
Increase in accrued
expenses.............. 230,000 230,000 65,000 296,000
Expenses paid on behalf
of company............ 17,000 18,000 18,000
Employee stock
compensation.......... 42,000 42,000 42,000
-------- ------------ ------------ --------- ----------- ------------
Net cash (used in)
operating activities. 0 (758,000) (758,000) (33,000) (2,540,000) (3,298,000)
-------- ------------ ------------ --------- ----------- ------------
Cash flows from
investing activities:
Acquisition of computer
equipment.............. (83,000) (83,000) (52,000) (135,000)
Acquisition of license. (711,000) (711,000) (111,000) (711,000)
Purchase of investments
in United States
government
obligations........... (13,064,000) (13,064,000) (2,613,000) (15,677,000)
Redemption of
investments in United
States government
obligations........... 2,358,000 2,358,000
-------- ------------ ------------ --------- ----------- ------------
Net cash (used in)
investing activities. (13,858,000) (13,858,000) (111,000) (307,000) (14,165,000)
-------- ------------ ------------ --------- ----------- ------------
Cash flows from
financing activities:
Private placement of
units, net of
expenses.............. 18,936,000 18,936,000 (11,000) 18,925,000
Payment on stock
subscriptions and
proceeds on issuance
of common stock....... 3,000 13,000 16,000 5,000 16,000
Short-term borrowings.. 150,000
-------- ------------ ------------ --------- ----------- ------------
Net cash provided by
(used in) financing
activities........... 3,000 18,949,000 18,952,000 155,000 (11,000) 18,941,000
-------- ------------ ------------ --------- ----------- ------------
NET INCREASE (DECREASE)
IN CASH AND CASH
EQUIVALENTS............ 3,000 4,333,000 4,336,000 11,000 (2,858,000) 1,478,000
Cash and cash
equivalents--beginning
of period.............. 0 3,000 0 3,000 4,336,000 0
-------- ------------ ------------ --------- ----------- ------------
CASH AND CASH
EQUIVALENTS--END OF
PERIOD................. $ 3,000 $ 4,336,000 $ 4,336,000 $ 14,000 $ 1,478,000 $ 1,478,000
======== ============ ============ ========= =========== ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
DISCOVERY LABORATORIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED WITH RESPECT TO INFORMATION AS OF JUNE 30, 1997 AND FOR THE SIX-
MONTH PERIODS ENDED JUNE 30, 1997 AND JUNE 30, 1996)
(NOTE A)--THE COMPANY AND BASIS OF PRESENTATION:
Discovery Laboratories, Inc. (the "Company") was incorporated in Delaware on
May 18, 1993 as MicroBio, Inc. The Company is a development stage company
formed to license and develop pharmaceutical products to treat a variety of
human diseases. The consolidated financial statements include the accounts of
the Company and its 75% owned subsidiary Acute Therapeutics, Inc. (see Note
G). Intercompany balances and transactions have been eliminated. No allocation
of the subsidiary's net loss has been attributed to the minority interest
since the accumulated losses exceed the minorities' common equity interest.
In November 1996 the Company completed a private placement of its securities
and received aggregate net proceeds of approximately $19,000,000 (see Note F).
(NOTE B)--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
[1] Cash and cash equivalents:
The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents.
[2] Investments in United States Government obligations:
The investments in United States Government obligations are comprised of
securities which are available for sale and are recorded at fair value with
any appreciation/depreciation recorded in the statement of operations.
[3] Computer equipment:
Computer equipment is recorded at cost. Depreciation is computed using the
straight-line method over the useful lives of the assets (five years).
[4] Licenses:
Through March 1997 licenses were capitalized and were being amortized on a
straight-line basis over their respective terms of 15 to 17 years. During the
quarter ended June 30, 1997, the Company determined that since they will not
pursue any alternative uses for the licenses, that all license costs would be
written off as research and development costs.
[5] Research and development:
Research and development costs are charged to operations as incurred.
[6] Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
[7] Long-lived assets:
In accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of", the Company records impairment losses
<PAGE>
DISCOVERY LABORATORIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
on long-lived assets used in operations, including intangible assets, when
events and circumstances indicate that the assets might be impaired and the
undiscounted cash flows estimated to be generated by those assets are less
than the carrying amounts of those assets. No such losses have been recorded.
[8] Stock-based compensation:
During 1996, the Company adopted Statement of Financial Accounting
Standards, No. 123, "Accounting for Stock-Based Compensation" ("SFAS No.
123"). The provisions of SFAS No. 123 allow companies to either expense the
estimated fair value of stock options or to continue to follow the intrinsic
value method set forth in APB Opinion 25, "Accounting for Stock Issued to
Employees" ("APB 25") but disclose the pro forma effects on net income (loss)
had the fair value of the options been expensed. The Company has elected to
continue to apply APB 25 in accounting for its employee stock option incentive
plans. See Note H to the financial statements for further information.
[9] Net loss per share:
Pro forma net loss per share is computed based on the weighted average
number of common shares outstanding for the periods adjusted to reflect the
number of shares of Ansan Pharmaceuticals, Inc. common stock issuable to the
common stockholders of the Company upon consummation of the merger (Note J).
Common stock equivalents are not included in the calculation of net loss per
share as the effect would be anti-dilutive.
[10] Interim financial statements:
In the opinion of management, the interim financial statements include all
adjustments, consisting of normal recurring accruals, necessary for a fair
presentation of the Company's financial position at June 30, 1997 and results
of operations and cash flows for the six-month period ended June 30, 1997. The
financial statements as of June 30, 1997 and for the six months ended June 30,
1997 are not necessarily indicative of the results that may be expected for
the year ending December 31, 1997.
[11] Recent accounting pronouncements:
Recently issued accounting pronouncements concerning disclosure of
information about capital structure, reporting comprehensive income and
disclosure about segments of an enterprise and related information are not
expected to have a material effect on the presentation of the Company's
financial statements, the recent pronouncement on earnings per share provides
a simplified method for computing loss per share and will require retroactive
restatement when effective.
(NOTE C)--EMPLOYMENT AGREEMENTS:
An employment agreement with the Company's president provides for an annual
salary of $175,000 through April 1999. Employment agreements with two
executive officers provide for aggregate annual salaries of $295,000 through
December 1999, subject to certain increases.
(NOTE D)--INCOME TAXES:
At June 30, 1997, the Company has available for federal income tax purposes
net operating loss carryforwards of approximately $1,600,000 expiring through
2011, that may be used to offset future taxable income.
<PAGE>
DISCOVERY LABORATORIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The principal difference between the deficit accumulated during the
development stage for financial reporting purposes and the net operating loss
carryforward for tax purposes is primarily due to the write-off of the
acquired research and development supplies and to certain general and
administrative costs which are not currently deductible for tax purposes. The
Company has provided a valuation reserve against the full amount of the
deferred tax asset of $2,590,000 arising from net operating loss benefit of
approximately $640,000, the research and development write-off of
approximately $1,130,000 and general and administrative costs of approximately
$820,000 since the likelihood of realization cannot be determined. The
valuation reserve increased by approximately $1,223,000 and $7,000 for the
years ended December 31, 1996 and December 31, 1995, respectively and
approximately $1,360,000 for the six months ended June 30, 1997. Pursuant to
Section 382 of the Internal Revenue Code, the utilization of this carryforward
may be limited due to ownership changes which have occurred or may occur.
(NOTE E)--LICENSE AGREEMENTS:
[1] The Company entered into a license agreement with the Charlotte-
Mecklenburg Hospital Authority for the use of the active compound in
SuperVent, a therapy which the Company is clinically testing. The Company paid
a license issue fee of $86,400 and has agreed to pay royalties on future sales
and to pay future patent- related costs. The license expires upon expiration
of the underlying patents.
[2] The Company entered into a license agreement with the Wisconsin Alumni
Research Foundation ("WARF") for the use of the patented compound ST-630 in
the treatment of post-menopausal osteoporosis. The Company paid WARF an option
fee of $25,000 in June 1996 and a license issue fee of $400,000 in October
1996 and is obligated to make future milestone payments aggregating $3,095,000
and pay royalties on future sales. The license expires upon expiration of the
underlying patents.
[3] See Note G[1] with respect to a sublicense agreement with Johnson &
Johnson, Inc.
(NOTE F)--PRIVATE PLACEMENT:
Pursuant to a private placement memorandum, the Company offered for sale
units, each unit consisting of 50,000 shares of Series A convertible preferred
stock and 50,000 shares of common stock. Preferred stockholders have voting
rights based upon the number of shares of common stock issuable upon
conversion of the preferred shares. Each share of preferred stock is initially
convertible at the option of the holders thereof into four shares of common
stock of the Company. The conversion rate will be adjusted under certain
circumstances as described in the private placement memorandum. From August
1996 through November 1996, the Company received net proceeds of approximately
$19,000,000 for the sale of approximately 44 units.
Paramount Capital, Inc. ("Paramount") acted as the placement agent for the
offering and received a 9% commission plus a 4% nonaccountable expense
allowance aggregating $2,860,332. The Company also issued to Paramount
warrants to acquire 220,026 shares of Series A preferred stock at a price of
$11 per share, through November 8, 2006 and warrants to acquire 220,026 shares
of common stock at a price of $.25 per share, through November 8, 2006. The
warrants contain certain anti-dilution provisions and may be exercised on a
"net exercise" basis pursuant to a provision that does not require the payment
of any cash to the Company.
<PAGE>
DISCOVERY LABORATORIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(NOTE G)--INVESTMENT IN ACUTE THERAPEUTICS, INC.:
[1] Formation of Acute Therapeutics, Inc.:
On October 28, 1996, the Company invested $7.5 million in a newly formed
subsidiary, Acute Therapeutics, Inc. ("ATI"), in exchange for 600,000 shares
of Series A convertible preferred stock of ATI, representing 75% of the
outstanding voting securities of ATI following such transaction.
Concurrently with the Company's investment in ATI, Johnson & Johnson, Inc.
("J & J"), Ortho Pharmaceuticals, Inc. (a wholly-owned subsidiary of J & J),
and ATI entered into an agreement (the "J & J License Agreement") granting an
exclusive license of KL4-Surfactant technology to ATI in exchange for certain
license fees ($200,000 of which was paid in November 1996), milestone payments
aggregating $2,750,000, royalties and 40,000 shares of ATI common stock. J & J
contributed its KL4-Surfactant raw material inventory and manufacturing
equipment to ATI in exchange for 2,200 shares of nonvoting Series B preferred
stock of ATI having a $2.2 million liquidation preference and a $100 per share
cumulative dividend. The inventory and equipment were valued at $2,200,000
(the value of the preferred shares issued to J & J) and were charged to
expense as their intended use is for research and development activities. The
Scripps Research Institute received 40,000 shares of common stock of ATI in
exchange for its consent to the J & J License Agreement.
The founders of ATI purchased an aggregate of 120,000 shares of ATI common
stock for $.01 per share and were granted options to purchase an aggregate of
44,800 shares of common stock of ATI at an exercise price of $.01 per share
vesting after a five-year term, subject to acceleration and 40,000 shares of
common stock of ATI at an exercise price of $.32 per share vesting in April
1997.
[2] Commitments:
ATI entered into a four-year employment agreement with its President, Chief
Executive Officer and Chairman of the Board of Directors providing for a base
salary of $225,000 per year plus an initial sign-on bonus of $50,000 to be
paid the first week of January 1997, plus certain incentive bonuses.
ATI also entered into a three year employment agreement with an officer
providing for an annual salary of $200,000 and various two-year consulting
agreements providing for aggregate annual fees of $300,000 plus royalties on
net commercial sales of licensed products sold by ATI or its sublicensees and
an 18-month consulting agreement providing for monthly fees of $7,500.
ATI leases its office and laboratory space pursuant to an operating lease
requiring aggregate annual payments of approximately $67,000 through November
2001.
[3] ATI stock option plan:
ATI adopted the 1996 Stock Option/Stock Issuance Plan (the "ATI Plan")
consisting of a Discretionary Option Grant program for employees and an
Automatic Option Grant Program under which option grants will automatically be
made at periodic intervals to eligible nonemployee directors to purchase
shares of common stock, in either case at an exercise price equal to at least
85% of the fair market value of the common stock on the grant date. Under the
Discretionary Option Grant program, options will be granted to employees
either as incentive stock options or nonstatutory options and will vest over a
specified period of time (generally three to five years) as determined by the
ATI Board of Directors. ATI has reserved 234,800 shares of common stock for
issuance under these plans. Options for 173,800 shares of common stock have
been granted through January 1997.
<PAGE>
DISCOVERY LABORATORIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(NOTE H)--STOCK OPTIONS:
In November 1996, the Company adopted its 1996 Stock Option/Stock Issuance
Plan which includes three equity programs (the "Discovery Plan"). Under the
Discretionary Option Grant Program, options to acquire shares of the Company's
common stock may be granted to eligible persons who are employees, nonemployee
directors, consultants and other independent advisors. Pursuant to the Stock
Issuance Program, such eligible persons may be issued shares of the Company's
common stock directly and under the Automatic Option Grant Program, eligible
directors will automatically receive option grants at periodic intervals. The
maximum number of shares of common stock which maybe issued over the term of
plan shall not exceed 1,250,000.
In July and August, 1996, options to purchase 100,000 shares of the
Company's common stock were granted (all of which were immediately
exercisable), with a weighted average exercise price of $.125 per share.
Options to purchase 25,000 shares at $.10 per share were exercised in July
1996 and options to purchase 25,000 shares at $.20 per share were exercised in
November 1996.
The Company applies APB 25 in accounting for the Discovery Plan and the ATI
Plan and, accordingly, recognizes compensation expense for the difference
between the fair value of the underlying common stock and the exercise price
of the option at the date of grant. The effect of applying SFAS No. 123 on pro
forma net loss is not necessarily representative of the effects on reported
net income or loss for future years due to, among other things, (1) the
vesting period of the stock options and the (2) fair value of additional stock
options in future years. Had compensation cost for the Company's stock option
plans been determined based upon the fair value of the options at the grant
date of awards under the plans consistent with the methodology prescribed
under SFAS No. 123, the Company's net loss for the year ended December 31,
1996 and the six months ended June 30, 1997 would have been approximately
$3,248,000 or $.77 per share and $2,688,000 or $.40 per share, respectively.
The fair value of the options granted are estimated as $.06 and $.07 per share
for the Discovery Plan and the ATI Plan, respectively for the year ended
December 31, 1996 and $.10 per share for the six months ended June 30, 1997,
on the date of grant using the Black-Scholes option-pricing model with the
following weighted average assumptions: dividend yield 0%, volatility of 0%,
risk-free interest rate of 6.7% for 1996 and 7% for 1997, and expected life of
ten years.
Additional information with respect to the Discovery Plan stock option
activity is summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED- WEIGHTED-
AVERAGE AVERAGE
EXERCISE CONTRACTUAL
SHARES PRICE LIFE
------- --------- -----------
<S> <C> <C> <C>
Outstanding at January 1, 1996........... 0
Options granted........................ 100,000 $.125 10 years
Options exercised...................... (50,000) .15 10 years
-------
Outstanding December 31, 1996............ 50,000 .10 9.1 years
Options granted........................ 651,917 .20 10 years
-------
Outstanding June 30, 1997................ 701,917 .20 9.7 years
=======
Options exercisable at June 30, 1997... 468,917 .20 9.7 years
=======
</TABLE>
<PAGE>
DISCOVERY LABORATORIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Additional information with respect to the ATI Plan stock option activity is
summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED- WEIGHTED-
AVERAGE AVERAGE
EXERCISE CONTRACTUAL
SHARES PRICE LIFE
------- --------- -----------
<S> <C> <C> <C>
Outstanding at January 1, 1996............. 0
Options granted.......................... 168,800 $.25 10 years
-------
Outstanding December 31, 1996.............. 168,800 .25 9.8 years
Options granted.......................... 28,000 .68 10 years
Options exercised........................ (2,000) .32 10 years
-------
Outstanding June 30, 1997.................. 194,800 .32 9.4 years
=======
Options exercisable at June 30, 1997..... 53,250 .50 9.8 years
=======
</TABLE>
(NOTE I)--STOCKHOLDERS' EQUITY:
Common shares reserved for issuance:
The Company has reserved shares of common stock for issuance upon conversion
of preferred stock and exercise of options as follows:
<TABLE>
<C> <S> <C>
(i) Preferred stock (Note F) (1)............................ 17,602,048
(ii) Stock option plan--Discovery Plan....................... 1,200,000
(iii) Placement agent warrants (Note F):
Conversion of preferred stock........................... 880,103
Common stock............................................ 220,026
</TABLE>
- --------
(1) Number of shares issuable assuming maximum conversion rate adjustment.
<PAGE>
DISCOVERY LABORATORIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(NOTE J)--SUBSEQUENT EVENT:
On July 16, 1997 the Company entered into an agreement and plan of
reorganization and merger with Ansan Pharmaceuticals, Inc. ("Ansan"). Upon
completion of the merger, which is subject to various conditions, including
the approval of the stockholders of both companies, the Company's stockholders
will own approximately 90% of the combined entity. The merger will be
accounted for as a reverse acquisition with the Company as the acquirer for
financial reporting purposes. There is no assurance that the merger will be
consummated. Also on July 16, 1997 the Company purchased 13,000 shares of
Series A convertible preferred stock of Ansan for $1,300,000 which amount was
used by Ansan to repay certain debt owed to its principal stockholder. Ansan's
assets at June 30, 1997 consisted primarily of cash and short-term
investments.
The following pro forma unaudited financial information gives effect to the
merger as if it had occurred at the beginning of the respective periods. A
nonrecurring charge of $2,434,000 for in-process research and development
which will be recorded by the Company in the historical financial statements
upon consummation of the merger has not been considered in the pro forma
results.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1996 1997
------------ -----------
<S> <C> <C>
Interest income.................................. $ 363,000 $ 346,000
----------- -----------
Expenses:
Research and development....................... 3,921,000 2,884,000
General and administrative..................... 1,949,000 1,874,000
Interest....................................... 11,000
----------- -----------
Total expenses............................... 5,881,000 4,758,000
Minority interest in net loss of subsidiary...... 2,000
----------- -----------
Net (loss)....................................... $(5,516,000) $(4,412,000)
=========== ===========
Net (loss) per common share...................... $ (.83) $ (.46)
=========== ===========
</TABLE>
<PAGE>
EXHIBIT 99.2
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements
give effect to the merger of the Company and Old Discovery pursuant to the
Merger Agreement. The unaudited pro forma condensed consolidated balance sheet
gives effect to the Merger as if it occurred on October 31, 1997. The unaudited
pro forma condensed consolidated statements of operations gives effect to the
Merger as if it occurred on January 1, 1996 and January 1, 1997, respectively.
The pro forma condensed consolidated financial statements are based on the
historical financial statements of the Company and Old Discovery. They give
effect to the Merger under the purchase method of accounting and apply the
assumptions and adjustments as discussed in the accompanying notes to the pro
forma condensed consolidated financial statements. The pro forma condensed
consolidated financial statements for the year ended December 31, 1996 have been
prepared based upon the audited financial statements of the Company and the
audited financial statements of Old Discovery for the year then ended. The pro
forma condensed consolidated financial statements as of and for the ten months
ended October 31, 1997 have been prepared based upon the unaudited condensed
financial statements of the Company and the unaudited condensed consolidated
financial statements of Old Discovery as of October 31, 1997 and for the ten
months then ended.
The Merger will be accounted for using the purchase method of accounting.
Although the Company was the surviving corporate entity, Old Discovery's former
stockholders own approximately 92% of the merged entity. Accordingly, the
transaction will be accounted for as an acquisition of the Company by Old
Discovery. The unaudited pro forma condensed consolidated financial statements
have been prepared on the basis of assumptions described in the notes thereto
and include assumptions relating to the allocation of the consideration paid for
the assets and liabilities of the Company based on preliminary estimates of
their fair value. The actual allocation of such consideration may differ from
that reflected in the unaudited pro forma condensed consolidated financial
statements after final valuation procedures are completed following the closing
of the Merger. The final allocations of the aggregate purchase price for the
Merger is not expected to differ materially from the preliminary allocations. In
the opinion of the Company, all adjustments necessary to present fairly the
unaudited pro forma condensed consolidated financial statements have been made
based on the proposed terms and structure of the Merger.
The pro forma information is presented for illustrative purpose only and is
not necessarily indicative of the operating results or financial position that
would have occurred if the Merger had been consummated on January 1, 1996,
January 1, 1997 or October 31, 1997, respectively, nor is it necessarily
indicative of future operating results or financial position.
The pro forma condensed consolidated financial statements should be read in
conjunction with the historical financial statements and the related noted
thereto of the Company and Old Discovery in the Amendment No. 2 to the Ansan
Pharmaceuticals, Inc. Form S-4 dated October 24, 1997, portions of which are
incorporated herein by reference, and Managment's Discussion and Analysis of
Financial Condition and Plan of Operations included therein.
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED
BALANCE SHEET
October 31, 1997
(in thousands)
<TABLE>
<CAPTION> Pro Forma
Ansan Discovery Pro Forma Combined
Pharmaceuticals Laboratories Adjustments Reflecting Merg
--------------- ------------ ----------- ---------------
<S> <C> <C> <C> <C>
ASSETS
------
Current assets
Cash and Cash equivalents $ 681 $ 368 $1049
$(1246)(A)
Short-term investments 1600 12,744 (1300)(D) 11,798
Prepaid expenses and
other current assets 43 32 ---- 75
------ ------ -------- ------
Total current assets 2324 13,144 (2546) 12,922
Furniture and equipment net 76 125 201
Other assets 30 30
Deferred merger costs 386 327 (713)(C) ------
------ ------ -------- ------
$2786 $13,626 $(3259) $13,153
------ ------- ------- -------
LIABILITIES AND STOCKHOLDERS
EQUITY
Current liabilities
Accounts payable and accrued
expenses $264 $528 $412(C) $1204
Payable to Titan Pharmaceuticals, Inc. 246 --- (246)(A) ---
Other accrued liabilities 14 --- --- 14
Debenture payable to Titan
Pharmaceuticals Inc. 1,000 --- (1,000)(A) ---
----- --------
Total current liabilities 1524 528 (834) 1218
Commitments
Minority Interest --- 2,200 --- 2,200
Stockholders' Equity
Preferred Stock 1300 2 (1300)(D) 2
Common Stock 3 7 (6)(E) 3
(1)(D)
Additional paid-in capital 10,697 19,001 (10,697)(B) 21,464
2457(B)
6(E)
Deficit accumulated during the
development stage (10,738) (8112) 10,738 (11,734)
------ ------ (3622)(B) ------
-------
Total stockholders' equity 1262 13098 (2425) 11,935
----- ----- ------ -----
$2786 $13626 $(3259) $13153
===== ===== ====== =====
</TABLE>
- ---------------
(A) Reflects the repayment of obligations to Titan Pharmaceuticals, Inc. in
connection with the Merger.
(B) Reflects the allocation of the estimated purchase price of approximately
$2.9 million to the historical Ansan balance sheet. The adjustment includes
approximately $3.6 million of purchased in-process research and
development. Also reflects the elimination of Ansan's stockholders' equity
accounts.
(C) Reflects the estimated costs incurred by Ansan and discovery to complete
the Merger.
(D) Reflects the elimination of Discovery's investment in Ansan Series A
preferred stock
(E) To reflect the 1-for-3 reverse stock split:
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENT OF OPERATIONS
Ten Months Ended October 31, 1997
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION> Pro Forma
Ansan Discovery Pro Forma Combined
Pharmaceuticals Laboratories Adjustments Reflecting Merg
--------------- ------------ ----------- ---------------
<S> <C> <C> <C> <C>
Costs and expenses
Research and development $ 836 $ 3742 ____ $4578
General and administrative 840 1711 ____ 2551
--- ---- ----
Loss from operations (1676) (5453) ____ (7129)
Other income/expenses)
Interest income 85 595 (42)(F) 638
Interest expense (67) ____ 67(F) ___
--------------- ------------ ----------- ---------------
Net Loss (1658) (4858) $25 $(6491)
=============== ============ =========== ===============
Net loss per share $1.97 $1.85 $2.04
Shares used in computing net loss per share 840,856 2,629,772 3,176,203
</TABLE>
_______
(F) Reflects the net reduction of interest expense as a result of the repayment
of the Titan Debenture in connection with the Merger
<PAGE>
UNAUDITED PRO FORMA COMBINED
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
ANSAN DISCOVERY PRO FORMA COMBINED
PHARMACEUTICALS LABORATORIES ADJUSTMENTS REFLECTING MERGER
--------------- ------------ ----------- -----------------
<S> <C> <C> <C> <C>
Costs and expenses
Research and
development.......... $ 1,181 $ 2,740 $-- $ 3,921
General and
administrative....... 1,257 692 -- 1,949
---------- ---------- ---- ----------
Loss from operations.... (2,438) (3,432) -- (5,870)
Other income/(expenses)
Interest income....... 157 205 -- 362
Interest expense...... (11) -- (11)
---------- ---------- ---- ----------
Loss before minority
interest............... (2,281) (3,238) -- (5,519)
Minority interest in
loss of subsidiary..... -- 2 -- 2
---------- ---------- ---- ----------
Net loss................ $ (2,281) $ (3,236) $-- $ (5,517)
========== ========== ==== ==========
Net loss per share...... $ (0.94) $ (0.65) $ (0.84)
========== ========== ==========
Shares used in computing
net loss............... 2,431,447 4,943,768 6,583,068
========== ========== ==========
</TABLE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS
Note 1
The unaudited pro forma condensed combined balance sheet of the Company and
Old Discovery has been prepared as if the Merger was completed as of October 31,
1997. The Merger will be accounted for as a purchase of the Company by Old
Discovery, as Old Discovery's former stockholders own approximately 92% of the
merged entity notwithstanding that the Company survived the Merger. The total
cost of the proposed merger is estimated to be approximately $2.9 million,
including transaction costs incurred by Old Discovery of approximately $400,000
which includes financial advisory, legal, and accounting fees.
The purchase cost of the Company has been determined based on the estimated
fair market value of Company stock at the time of the announcement of the
Merger. The estimated purchase price consists of the following (in thousands):
Estimated value of Common Stock to be held by pre-existing
current Company stockholders following the Merger
(1,639,300 shares of Common stock at $1.50 per
share) $2459
Estimated transaction costs to be incurred by
Old Discovery 400
-----
(Net of prior Old Discovery investment
in the Company) $2859
=====
Based on a preliminary analysis of tangible and intangible assets the
allocation of the purchase price is as follows:
Tangible assets of the Company $1100
In-process research & development 3622
Liabilities of the Company assumed
(including transaction costs) (1863)
------
$ 2859
======
The in-process research and development will be charged against earnings.
Such charge has not been reflected in the pro forma condensed statement of
operations as such charge is a non-recurring charge directly attributable to the
Merger.
The pro forma adjustments include accrued liabilities of $1,125,000 to
reflect the estimated costs incurred by both the Company and Old Discovery to
complete the Merger.
The pro forma adjustments include the repayment of approximately $1,200,000
in debt owned to Titan.
No pro forma adjustment has been included to reflect the Titan Sublicense
Agreement as there is no effect on the pro forma periods presented.
Note 2
The unaudited pro forma condensed consolidated statements of operations of
the Company and Old Discovery have been prepared as if the Merger was completed
as of January 1, 1996 and January 1, 1997, respectively. The condensed
consolidated statement of operations for the ten months ended October 31, 1997,
includes an adjustment to reduce interest expense to reflect the repayment of
Titan indebtedness in connection with the Merger.
Note 3
Combined pro forma net loss per share for the year ended December 31, 1996
and the ten-month period ended October 31, 1997 is computed using the historical
weighted average number of Old Discovery Common Stock outstanding, adjusted for
the exchange ratio applicable to Common Stock in the Merger plus the
shares of the Company Common Stock outstanding following the cancellation of
Titan's holding in the Company. In addition, combined pro forma net loss per
share for the ten-month period ended October 31, 1997 has been adjusted for the
reverse stock split. Preferred stock and other common stock equivalents issued
in the Merger are not included, as their effect is antidilutive.
<PAGE>
EXHBIT 99.3
DISCOVERY LABORATORIES, INC
FOR IMMEDIATE RELEASE
- ---------------------
Contact:
James S. Kuo, M.D.
President and Chief Executive Officer
Discovery Laboratories, Inc.
(212) 223-9504
Dian Griesel, Ph.D.
The Investor Relations Group, Inc.
(212) 664-8489
DISCOVERY LABORATORIES, INC. ANNOUNCES COMPLETION OF MERGER WITH ANSAN
PHARMACEUTICALS, INC.
New York, New York, November 25, 1997 - Discovery Laboratories, Inc. announced
today that it has completed its merger with Ansan Pharmaceuticals, Inc. (Nasdaq:
ANSN). Shareholders of Discovery will be issued securities representing
approximately 92% of the stock of the combined entity on a fully diluted basis
(exclusive of certain outstanding warrants). The newly formed company will
assume the name Discovery Laboratories, Inc. As of October 31, 1997, Discovery,
Acute Therapeutics, Inc. (a majority-owned subsidiary of Discovery) and Ansan
had cash on hand of approximately $13 million. The new Nasdaq stock symbol,
which is expected to be effective as of Monday, December 1, 1997 will be DSCO.
Following the closing of the merger, the combined company effected a 1-for-3
reverse split of its common stock and warrants.
Dr. James S. Kuo, President and CEO of the combined company stated, "We are
tremendously excited about the strengthening of our product portfolio through
this merger with Ansan. We are continuing to review the development programs on
the technologies we have acquired from Ansan, namely, Apafant Injection for
acute pancreatitis and AN10 Topical for chemotherapy induced hair loss." Dr.
Kuo further stated, "We remain positive about our existing programs and will
continue developing them either alone or with partners. Presently, an IND has
been filed to permit the initiation of a Phase I clinical trial for ST-630, a
novel vitamin D analog for post-menopausal osteoporosis. ST-630 is also the
subject of a Phase II equivalent trial in Japan by two Japanese pharmaceutical
companies. Surfaxin(TM) is presently in a Phase Ib trial for adult respiratory
distress syndrome and a Phase II trial for meconium aspiration syndrome, and had
a Phase II trial completed in infant respiratory distress syndrome by Johnson &
Johnson prior to the licensure of the technology. SuperVent(TM), an aerosolized
therapy for cystic fibrosis, is currently in a Phase I/II trial."
Vaughan Shalson, formerly President and CEO of Ansan, has been named to the
Board of Directors of the combined company. Commenting on the merger, Mr.
Shalson noted that both Ansan and Discovery have focused on adding value in the
clinical development of drugs, rather than in early research. "In combining the
pipeline of drug products of the two companies," said Mr. Shalson, "we hope to
mitigate some of the risks inherent in drug development. Moreover, with the
combination of corporate infrastructure, management and financial resources, we
expect to achieve measurable economies of scale and operational efficiencies."
Discovery Laboratories, Inc. is a New York based development stage
pharmaceutical company that is clinically developing proprietary pharmaceuticals
to treat post-menopausal osteoporosis, adult respiratory distress syndrome,
meconium aspiration syndrome and cystic fibrosis. Discovery's strategy is to
accelerate and lower the risk of drug development by acquiring and developing
proprietary pharmaceuticals for which significant animal or human testing has
already been completed. In addition, Discovery seeks to minimize the cost of
drug development by outsourcing preclinical development and manufacturing.
Hospital based pharmaceuticals are developed at Discovery's majority-owned
privately held subsidiary, Acute Therapeutics, Inc., located in Doylestown, PA.
More information about Discovery is available on the company's web site at"
ww.discoverylabs.com.
To the extent that statements in this press release are not strictly historical,
including statements as to future financial conditions, events conditioned on
stockholder or other approval, or otherwise as to future events, such statements
are forward-looking, and are made pursuant tot he safe harbor provisions of the
Securities Litigation Reform Act of 1995. The forward-looking statements
contained in this release are subject to certain risks and uncertainties that
could cause actual results to differ materially from the statements made. Among
the factors which could affect the company's actual results and could cause
results to differ from those contained in the forward-looking statements
contained herein are the risk that financial conditions may change, risks
relating to the progress of the Company's research and development and the
development of competing therapies and/or technologies by other companies.
Those associated risks and others are further described in the Company's filings
with the Securities and Exchange Commission.
