Second Look: Why This Time Is Different For Discovery Labs (DSCO)

News of the FDA approving the lung drug from Discovery Laboratories, Inc. (NASDAQ: DSCO) may be a game changing event.  The company’ Surfaxin for lung development in premature births has tried to get approved four times before, and the fifth was the charm.  Shares are up over 20% at $4.52 on more than 20 million shares.  There are a couple of things to consider here besides just recapping the news.

For starters, Discovery had a lot riding on this.  Even though there is competition, four attempts to get approval is costly by any count.

The company has a market capitalization rate of only about $110 million, and some have signaled that this could have the potential of being a blockbuster drug if the best case scenarios play out.

Discovery Laboratories probably needs to raise capital, and a 20% gain to $4.50 probably makes that easier on the heels of an FDA approval.

The company plans a late-2012 launch for the drug, on its own here and it is looking for international partners.  The approval is also on the heels of its device Afectair being prepared for launch this year after it was approved.

Surfaxin will be the first synthetic surfactant approved for the prevention of respiratory distress syndrome.

The company has two other surfactant trials in its pipeline, both of which are said to be mid-stage.

Shares are up 20% at $4.50 today, but the stock did trade over $5.00 earlier and the prior 52-week trading range was $1.44 to $4.57.

JON C. OGG