DSCO Windtree Therapeutics Com

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

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FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

February 1, 2016

Date of Report (Date of earliest event reported)

Discovery Laboratories, Inc.

(Exact name of registrant as specified in its charter)

2600 Kelly Road, Suite 100

Warrington, Pennsylvania 18976

(Address of principal executive offices)

(215) 488-9300

(Registrant's telephone number, including area code)

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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Item 3.02.

Unregistered Sales of Equity Securities.

The disclosure in Item 5.02 of this Current Report on Form 8-K regarding the issuance of an inducement award in the form of an option to purchase shares of the Discovery Laboratories, Inc. (the “Company”) common stock, par value $0.001 (“Common Stock”) to Craig Fraser is incorporated by reference into this Item.  The Company believes that the inducement grant is exempt from the registration requirements of the Securities Act of 1933 by virtue of Section 4(a)(2) thereof and/or Regulation D promulgated thereunder.

Item 5.02.

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

 

On February 1, 2016, the Company issued a press release announcing the appointment of Craig Fraser, 51, to serve as the Company’s President and Chief Executive Officer, effective February 1, 2016.  Upon recommendation of the Nomination and Governance Committee of the Company’s Board of Directors (the “Board”), the Board also appointed Mr. Fraser to serve as a member of the Board, effective immediately.  A copy of the press release is attached to this Current Report on Form 8-K as Exhibit 99.1 and is incorporated herein.

Prior to joining the Company, Mr. Fraser most recently served as Chief Operating Officer at Aegerion Pharmaceuticals, Inc. (2014 – 2015), having previously served as its President, U.S. International & Global Manufacturing & Supply (2011 – 2014).  Prior to joining Aegerion, he served as Vice President, Global Disease Areas at Pfizer (2009 – 2011) and previously held leadership positions at Wyeth, Johnson & Johnson and Centocor.  He received his Bachelor of Science in Public Administration from Slippery Rock University of Pennsylvania.  Prior to his appointment to the Board, Mr. Fraser was not a related person to the Company and there was no transaction or other arrangement involving the Company in which Mr. Fraser or any related person to Mr. Fraser has or will have a direct or indirect material interest.  He has no family relationship with any director or executive officer of the Company.  Mr. Fraser does not serve on any other public company boards.  Mr. Fraser was appointed to serve until the next Annual Meeting of Stockholders and until his successor is duly appointed and qualified.

Mr. Fraser entered into an employment agreement with the Company effective as of February 1, 2016 (the “Fraser Agreement”).  The following are the key terms of the Fraser Agreement (the defined terms in the description below have the meaning ascribed in the agreement):

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Compensation.  Mr. Fraser’s initial base salary is $415,000.  He also will be eligible for year-end bonuses, paid in either cash or equity, or both (each an “Annual Bonus”), with a target of 50% of base salary (the “Target Bonus”), as may be awarded, if at all, at the sole discretion of the compensation committee of the Board (the “Compensation Committee”).  In addition, Mr. Fraser will be eligible for annual equity grants as may be awarded, if at all, at the sole discretion of the Compensation Committee.  Other than the incentive grant discussed below, any equity grants will be governed by the Company’s 2011 Long-Term Incentive Plan (together with any successor plan in effect at any time, “2011 Plan,”) and the related award agreement(s).  The Fraser Agreement is effective until terminated and includes a 12-month post-employment non-competition agreement, and a separate agreement (the “Employee Confidentiality Agreement”) providing for non-competition and non-solicitation, as well as obligations of confidentiality and the assignment to the Company of all intellectual property.  The Fraser Agreement and Employee Confidentiality Agreement are attached to this Form 8-K as Exhibits 10.1 and 10.2.

 

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Termination of Employment.  Under the Fraser Agreement, Mr. Fraser will be entitled to specified benefits upon termination of his employment by the Company without Cause, by Mr. Fraser for Good Reason, or in the event of a Change in Control (in each case as defined in the Fraser Agreement), on the condition that he enters into a separation agreement containing a plenary release of claims in a form acceptable to the Company, and the release shall have become final.  In addition to any benefits that may become due under any of the Company’s vested plans or other policy, upon termination by the Company without Cause or by Mr. Fraser for Good Reason, Mr. Fraser will be entitled to: (i) a pro rata bonus equal to a percentage of his Target Bonus determined by dividing the aggregate bonuses paid to other contract executives for the year in which the termination occurs by the aggregate target bonuses of such other contract executives for that year, and further prorated for the number of days Mr. Fraser was employed in the year of termination, payable at the time that other contract executives are paid bonuses with respect to the year of termination; and (ii) a severance amount equal to the sum of Mr. Fraser’s base salary then in effect (determined without regard to any reduction constituting Good Reason) and his Target Bonus amount, payable in equal installments from the date of termination to the date that is 12 months after the date of termination (the “Severance Period”).  In addition, during the Severance Period, if Mr. Fraser elects to continue medical benefits through the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), the Company will continue to pay the Company’s costs of such benefits as in effect on the date of termination and as such benefits are provided to active employees.  If COBRA coverage is unavailable at any time, the Company will reimburse Mr. Fraser an amount which, after taxes, is sufficient to purchase medical and dental coverage substantially equivalent to that which Mr. Fraser and his dependents were receiving immediately prior to the date of termination and that is available to comparable active employees, reduced by the amount that would be paid by comparable active employees for such coverage under the Company’s plans, and provided further, that the Company’s obligation to provide benefits will cease or be reduced to the extent that a subsequent employer provides substantially similar coverages.

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Upon termination in connection with a Change of Control, in addition to the benefits that arise upon a Change of Control and any benefits that are due to Mr. Fraser under any vested plans or other policies, he will be entitled to: (i) a pro rata bonus equal to a percentage of his Target Bonus based upon the number of days Mr. Fraser was employed in the year of termination, payable in a lump sum within 10 days after the date of termination; (ii) a severance amount equal to 1.5 times the sum of Mr. Fraser’s base salary then in effect (determined without regard to any reduction constituting Good Reason) and his Target Bonus amount, payable in a lump sum within 10 days after the date of termination except in certain circumstances; and (iii) all of his  outstanding equity awards will accelerate and become fully vested, any restrictions under restricted stock agreements will be lifted and all stock options will continue to be exercisable for the remainder of their stated terms.  In addition, Mr. Fraser will be entitled to continuation of benefits, as described above under termination without Cause or upon the executive for Good Reason, for a period of 18 months after termination of employment, provided that the Company’s obligation to provide benefits shall cease or be reduced to the extent that a subsequent employer provides substantially similar coverages.  If the foregoing payments are subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties with respect to such excise tax, they will be automatically be reduced to the extent and in the manner provided in the Executive Agreement.

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Change of Control.  Upon a Change of Control (as defined in the Fraser Agreement) and assuming that Mr. Fraser remains employed as President and Chief Executive Officer, (i) the term of the Fraser Agreement (if shorter) will be automatically extended until the second anniversary of the date of the Change of Control; and (ii) during the remaining term of the Fraser Agreement (as extended), and provided that Mr. Fraser is employed on the last day of a fiscal year ending in that period, Mr. Fraser will be entitled to an Annual Bonus at least equal to his Target Bonus, payable no later than March 15 in the next succeeding fiscal year.  Notwithstanding any provision to the contrary in any of the Company’s long-term incentive plans or in any stock option or restricted stock agreement between the Company and Mr. Fraser, all vested and unvested options will be assumed by the successor entity; and, if the Company is not the successor entity, Mr. Fraser will be entitled to receive in exchange therefor the economic equivalent, as provided in the Fraser Agreement.

In accordance with Nasdaq Listing Rule 5635(c)(4), on February 1, 2016, the Compensation Committee granted to Mr. Fraser an option to purchase 204,863 shares of the Common Stock, representing 2.5% of the Company’s outstanding shares of Common Stock, at an exercise price of $2.33 per share,  which was the closing price on February 2, 2016 and the price next determined after approval of the grant.  Subject to Mr. Fraser’s continued employment with the Company, one-third of the options will vest and become exercisable on each of the next three anniversary dates of the grant, such that the options will be exercisable in full on the third anniversary of the date of grant.  The option has a term of 10 years.  The award was issued outside the 2011 Plan, but will be subject to terms and conditions generally consistent with those in the 2011 Plan and the form of option agreement in effect under the 2011 Plan.  A copy of the inducement grant award agreement is attached to this Form 8-K as Exhibit 10.3.

The foregoing summary of the Fraser Agreement is qualified in its entirety by the full text of the agreement, which is filed as Exhibit 10.1 to this Current Report on Form 8-K, and is incorporated herein by reference.

 

In connection with the foregoing, the Employment Agreement dated April 1, 2013, as amended December 29, 2014, between the Company and John G. Cooper, President and Chief Executive Officer, was terminated effective February 1, 2016.  Under the terms of his Employment Agreement, Mr. Cooper will be entitled, in addition to any benefits that are due under the Company’s vested plans or other policy, and on the condition that he enter into a separation agreement with the Company containing a plenary release of claims in a form acceptable to the Company and that such plenary release has become final (the “Separation Agreement”), to the following payments and benefits in connection with a termination without Cause (as defined therein): (i) a pro rata bonus equal to a percentage of his Annual Bonus Amount determined by dividing the aggregate bonuses paid to other contract executives for the year 2016 by the aggregate target bonuses of such other contract executives for 2016, and further prorated for the number of days Mr. Cooper was employed during 2016, payable at the time that other contract executives are paid bonuses with respect to 2016; (ii) a severance amount equal to the sum of Mr. Cooper’s base salary then in effect and his Annual Bonus Amount, payable in equal installments in accordance with the Company’s regular payroll schedule, from the date of termination to the date that is 18 months from the date of termination (the “Severance Period”); (iii) during the Severance Period, if Mr. Cooper elects benefits through COBRA, the Company will continue to pay the Company’s costs of such benefits as in effect on the date of termination and as such benefits are provided to active employees.  If COBRA coverage is unavailable at any time, the Company will reimburse Mr. Cooper in an amount that, after taxes, is sufficient to purchase medical and dental coverage substantially equivalent to that which Mr. Cooper and his dependents were receiving immediately prior to the date of termination and that is available to comparable active employees, reduced by the amount that would be paid by comparable active employees for such coverage under the Company’s plans, and provided further, that the Company’s obligation to provide benefits will cease or be reduced to the extent that a subsequent employer provides substantially similar coverages; and (iv) all stock options held by Mr. Cooper shall continue to vest during the Severance Period, and all vested stock options held by Mr. Cooper will continue to be exercisable for up to 36 months after the date of termination.  From and after the end of the Severance Period, Mr. Cooper will forfeit all of his unvested stock options in accordance with the terms of the 2011 Plan.  Mr. Cooper also is subject to non-competition and non-solicitation restrictions for 12 months and 18 months, respectively, after the date of termination under a separate confidentiality agreement.  All of the Company’s obligations under the Employment Agreement will cease if at any time during the Severance Period Mr. Cooper engages in a material breach of the Employment Agreement and fails to cure such breach within five business days after receipt from the Company of notice of such breach.  In addition, Mr. Cooper has agreed to cooperate in the transition of his duties and responsibilities as may be reasonably requested by the Company, and cooperate in other matters in which his cooperation may be reasonably requested for up to 10 hours per month during the Severance Period.  The Company has agreed, with certain exceptions, to pay Mr. Cooper an hourly rate of $300 per hour for his time incurred in excess of 10 hours per month during the Severance Period.

The foregoing summary of Mr. Cooper’s benefits is qualified in its entirety by the full text of the Employment Agreement, which was filed with the Securities and Exchange Commission on April 2, 2013 as Exhibit 10.1 to Discovery’s Current Report on Form 8-K, and (for the Amendment dated December 29, 2014) on March 16, 2015 as Exhibit 10.16 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014, and is incorporated herein by reference.

On February 1, 2016, the Compensation Committee approved adjustments to base salary, cash bonus and equity awards for the Company’s current named executive officers, including the Company’s former President and Chief Executive Officer, John G. Cooper, its Senior Vice President and Chief Financial Officer, John Tattory, and its Senior Vice President and Chief Development Officer, Steven G. Simonson, M.D.

Mr. Cooper was awarded a cash bonus of $150,000; Mr. Tattory’s base salary was increased to $290,000 from $267,800, he was awarded a cash bonus of $77,000 and was granted a stock option to purchase 23,214 shares of the Company’s Common Stock; and Dr. Simonson’s base salary was increased to $330,000 from $320,000, he was awarded a cash bonus of $100,000 and was granted a stock option to purchase 35,714 shares of the Company’s Common Stock.  The exercise price for the options is the closing price of the Company’s Common Stock on February 2, 2016, which is the next determined closing price after approval of the grant, or $2.33 per share.  The options will vest in equal installments over the next three anniversary dates of the grant and have a term of 10 years.

 

In granting the foregoing benefits, the Compensation Committee emphasized the importance of both retaining and providing incentives to management and key employees to advance the goals and objectives of the Company throughout 2016, in particular with respect to the AEROSURF^® phase 2 clinical development program, and indicated that it expected to consider additional potentially comparable stock option grants during 2016 based on the Company’s progress in meeting its key performance objectives.

The Company has recently updated its form of indemnification agreement between the Company and its directors and officers.  Beginning on January 29, 2016, the Company has entered into such agreements with each of its directors and officers, including Mr. Fraser.  A copy of the form of indemnification agreement is attached to this Current Report on Form 8-K as Exhibit 10.4 and is incorporated herein.

Item 8.01.

Other Events.

The Company issued a press release on February 1, 2016 that included an update on the AEROSURF phase 2 clinical development program.  The Company also announced that as of December 31, 2015, the Company had cash and cash equivalents of $38.7 million, an amount which the Company anticipates is sufficient to support the AEROSURF phase 2 clinical program and fund operations through the first quarter of 2017.  The press release, which is attached to this Current Report on Form 8-K as Exhibit 99.1 is incorporated in this Item.

Item 9.01.

Financial Statements and Exhibits.

(d)

Exhibits

Cautionary Note Regarding Forward-looking Statements:

To the extent that statements in this Current Report on Form 8-K are not strictly historical, including statements as to business strategy, outlook, objectives, future milestones, plans, intentions, goals, future financial conditions, future collaboration agreements, the success of the Company’s product development, cash flows, future revenues, the timing of planned clinical trials or otherwise as to future events, such statements are forward-looking, and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements contained in this Current Report are subject to certain risks and uncertainties that could cause actual results to differ materially from the statements made. Such risks and others are further described in the Company's filings with the Securities and Exchange Commission including the most recent reports on Forms 10-K, 10-Q and 8-K, and any amendments thereto.  Any forward-looking statement made by the Company in this Current Report on Form 8-K is based only on information currently available to the Company and speaks only as of the date on which it is made. The Company undertakes no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

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Exhibit 10.1

 

 

By:	/s/ Kathryn A. Cole		/s/ Craig Fraser
Name:	Kathryn A. Cole		Craig Fraser
Title:	Senior Vice President, Human Resources

			Discovery Laboratories, Inc.
/s/ Craig Fraser			By:	/s/ Kathryn Cole
Name:	Craig Fraser		Name:	Kathryn Cole
Date:			Title:	Senior Vice President,
				Human Resources

Name:

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Exhibit 10.3

 

DISCOVERY LABORATORIES, INC.

A.           The option to purchase common stock of  Discovery Laboratories, Inc. (the "Company")  reflected by this Stock Option Agreement (“Award Agreement”) is being granted as an “inducement” award under the NASDAQ Marketplace Rules. Accordingly, such non-qualified option has been granted outside of the Company’s existing equity compensation plans. However, the option will be governed in all respects as if issued under the Company’s 2011 Long-Term Incentive Plan (the “Plan”), as currently in effect and as may be amended hereafter from time to time.

B.            The Optionee is an newly hired Employee who will render valuable Services to the Company (or Subsidiary), and this Award Agreement is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the Company's grant of an option to the Optionee.  The Option shall hereinafter be referred to as the Participant, notwithstanding the fact that the such option is granted as an inducement grant outside of the Company's equity compensation plans.

C.            All capitalized terms in this Award Agreement shall have the meaning assigned to them in the Plan.  For convenience, relevant portions of certain of the Plan definitions and certain additional definitions relating to this Award Agreement are included in the Appendix.  This Award Agreement, including the Notice of Grant, is subject to the terms of the Plan, which are incorporated in this Award Agreement by reference.  If there is a conflict between the terms of the Plan and this Award Agreement or the Notice of Grant, the terms of the Plan shall prevail.

NOW, THEREFORE, it is hereby agreed as follows:

1.           Award of Option.  The Company hereby grants to Participant, as of the Award Date, a non-qualified stock option to purchase up to the number of Option Shares specified in the Notice of Grant.  The option granted pursuant to this Award Agreement is not intended to be an incentive stock option within the meaning of section 422 of the Code. The Option Shares shall be purchasable from time to time as specified in Paragraph 4 during the option term specified in Paragraph 2 at the Option Price set forth in the Notice of Grant.

2.           Option Term.  This option shall have a term commencing on the Award Date and ending on the Expiration Date set forth in the Notice of Grant.  The option shall expire at the close of business on the Expiration Date, unless sooner terminated in accordance with Paragraph 5 or 6.

3.           Limited Transferability.  The option granted under this Award Agreement shall not be assignable, alienable, saleable, or transferable by Participant other than by will or by the laws of descent and distribution; provided, however, that, if a procedure shall be adopted by the Committee at any time, Participant may designate a beneficiary or beneficiaries to exercise the rights of Participant with respect to this option upon Participant’s death.  The option granted under this Award Agreement shall be exercisable during Participant’s lifetime only by Participant or, if permissible under applicable law, by Participant’s guardian or legal representative.  This option may not be pledged, alienated, attached, or otherwise encumbered, and any purported pledge, alienation, attachment, or encumbrance thereof shall be void and unenforceable against the Company or any affiliate of the Company.  Notwithstanding the foregoing, if this option is designated a Non-Qualified Stock Option in the Notice of Grant, then this option may, in connection with Participant's estate plan, be assigned, in whole or in part, during Participant's lifetime to one or more members of Participant's immediate family or to a trust established for the exclusive benefit of one or more such family members.  The assigned portion shall be exercisable only by the person or persons who acquire a proprietary interest in the option pursuant to such assignment.  The terms applicable to the assigned portion shall be the same as those in effect for this option immediately prior to such assignment and shall be set forth in such documents issued to the assignee as the Committee may deem appropriate.

4.           Dates of Exercise.  This option shall vest and become exercisable for the Option Shares in one or more installments as specified in the Notice of Grant.  As the option becomes exercisable for such installments, those installments shall accumulate, and the option shall remain exercisable for the accumulated installments until the Expiration Date or sooner termination of the option term under Paragraph 5 or 6.

 

5.           Termination of Service.  The option term and this option shall expire and cease to be exercisable prior to the Expiration Date should any of the following provisions become applicable:

  (a)           If Participant's Service is terminated for any reason other than death, Disability or for Cause, then Participant shall have the right to exercise, in whole or in part, that portion of this option that was vested and exercisable on the date of termination of Service until the earlier of (i) three (3) months after termination of Service or (ii) the Expiration Date; and, to the extent that any portion of this option was not exercisable on the date of termination of Service, it will immediately terminate.

  (b)           If Participant's Service is terminated on account of death or Disability, then Participant or Participant's Beneficiary (as applicable) shall have the right to exercise, in whole or in part, that portion of this option that was vested and exercisable on the date of termination of Service until the earlier of (i) one (1) year after Participant’s termination of Service or (ii) the Expiration Date; and, to the extent that any portion of this option was not exercisable on the date of termination of Service, it will immediately terminate.

  (c)           If Participant's Service is terminated for Cause or if Participant shall breach any post-Service duties to the Company or any post-Service covenants or agreements, including any confidentiality or non-competition and non-solicitation agreement, any unexercised portion of this option shall terminate immediately. Solely for the purposes of this Award Agreement, notwithstanding any notice period or cure period provided in any employment or other applicable agreement, if Participant is terminated for Cause, the date of termination shall be deemed to be the date on which the Company issues a notice of termination to Participant (subject to any right that the Participant may have to cure).  The right to exercise any vested and unexercised portion of this option shall be suspended during any such notice or cure period.  Should the Company revoke any notice of termination based on Participant’s satisfactory cure under an employment or other applicable agreement, the Committee may reinstate the right to exercise this option under the original terms of this Award Agreement.

6.           Special Acceleration of Option.  Except as otherwise expressly provided in a Participant’s employment or other applicable agreement, which shall supersede the provisions of this Paragraph 6 solely to the extent that the rights and privileges under such agreement, as determined by the Committee, in its discretion, are not reasonably likely to significantly diminish the rights and benefits that would otherwise be provided under this paragraph 6:

  (a)           In the event of a Change in Control, vesting under this option shall automatically accelerate so that, immediately prior to the effective date of the Change in Control, but subject to the occurrence of the Change in Control, this option shall become exercisable with respect to the total number of Option Shares at the time subject to this option and may be exercised for any or all of those Option Shares.  However, vesting under this option shall not so accelerate if and to the extent: (i) this option is, in connection with the Change in Control, either to be assumed by the successor corporation (or parent thereof) or to be replaced with a comparable option to purchase shares of the capital stock of the successor corporation (or parent thereof),  or (ii) this option is to be replaced with a cash incentive program of the successor corporation which preserves the spread existing on any unvested Option Shares at the time of the Change in Control (the excess of the Fair Market Value of those Option Shares over the aggregate Option Price payable for such Option Shares) and provides for subsequent pay-out in accordance with the same option vesting schedule set forth in the Notice of Grant.  The determination of comparability under clause (i) above shall be made by the Committee, and its determination shall be final, binding and conclusive.  Notwithstanding the foregoing, the Committee shall have the discretion, exercisable at any time during the option term, to provide for the automatic acceleration of all or a portion of this option upon the occurrence of a Change in Control, whether or not this option is to be assumed or replaced in the Change in Control.

  (b)           Upon the occurrence of the termination of Participant's Service by reason of an Involuntary Termination (as defined below) within eighteen (18) months following the effective date of a Change in Control, vesting under this option shall accelerate automatically and this option shall become exercisable with respect to the total number of Option Shares at the time subject to this option and shall remain exercisable until the earlier of (i) one year after the effective date of the Involuntary Termination, or (ii) the Expiration Date.  Involuntary Termination shall mean the termination of the Service of any individual which occurs by reason of:

 

  (i)            such individual’s involuntary dismissal or discharge by the Company for reasons other than Cause, or

  (ii)           such individual’s voluntary resignation following (A) a change in his or her position with the Company (or Subsidiary employing such individual) which materially reduces such individual’s duties and responsibilities or the level of management to which such individual reports, (B) a reduction in such individual’s level of compensation (including base salary, fringe benefits and target bonus under any corporate performance-based bonus or incentive programs) by more than fifteen percent (15%) or (C) a relocation of such individual’s place of employment by more than fifty (50) miles, and farther from the Participant’s residence than prior to the relocation; provided and only if such change, reduction or relocation is effected by the Company without such individual’s consent; provided that such voluntary resignation shall not be an Involuntary Termination unless the Participant gives the Company written notice of the Participant’s intent to resign as a result of the existence of a specified condition described in (A), (B) or (C) within 90 days of the initial existence of such condition, provides the Company 30 days to cure such condition, and actually resigns no more than 10 days after the lapse of such 30-day cure period if the condition is not cured.

  (c)           This Award Agreement shall not in any way affect the right of the Company to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

7.           Repurchase Right.  If at any time Participant’s Service is terminated for Cause or if Participant shall breach any covenants set forth in any written agreement between Participant and the Company, the Company may, in its discretion, for a period of one (1) year after the termination for Cause or upon the actual discovery by the Company of the breach, whether or not within such 1-year period, as the case may be, and upon 10 (ten) days’ notice to Participant, (i) repurchase all or any portion of any Shares acquired by Participant upon Participant’s exercise of this option, and/or (ii) require Participant to repay to the Company the amount of any profits realized by Participant upon the sale or other disposition during the preceding three (3) years of any Shares acquired by Participant upon Participant’s exercise of this option.  The purchase price for any Shares repurchased by the Company pursuant to clause (i) of this Paragraph 7 shall be the lesser of the price paid by Participant to acquire such Shares and the Fair Market Value thereof on the date of such repurchase by the Company.  In addition, the Company shall have repurchase rights in accordance with the terms of any repurchase policy as may be in effect from time to time.

8.           Adjustment in Option Shares.  Should any change be made to the Shares of the Company by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Shares as a class without the Company's receipt of consideration, appropriate adjustments shall be made to (i) the total number and/or class of securities subject to this option and (ii) the Option Price in order to reflect such change and thereby preclude a dilution or enlargement of benefits hereunder.

9.           Stockholder Rights.  The holder of this option shall not have any stockholder rights with respect to the Option Shares until such person shall have exercised the option, paid the Option Price and become a holder of record of the purchased Shares.

10.         Manner of Exercising Option.

  (a)           In order to exercise this option with respect to all or any part of the Option Shares for which this option is at the time exercisable, Participant (or any other person or persons exercising the option) must take the following actions:

 

  (i)            Execute and deliver to the Company a Notice of Exercise for the Option Shares for which the option is exercised.

  (ii)           Pay the aggregate Option Price for the purchased Shares in one or more of the following forms:

  (A)           cash or check made payable to the Company;

  (B)           Shares held by Participant (or any other person or persons exercising the option) for the requisite period necessary to avoid a charge to the Company's earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date; or

  (C)           provided that no restrictions against trading in the Shares are then in effect, as contemplated by Paragraph 11, (I) through a “net exercise” arrangement to the extent permitted by applicable law, or (II) through a special sale and remittance procedure pursuant to which Participant (or any other person or persons exercising the option) shall concurrently provide irrevocable instructions (x) to a Company-approved brokerage firm to effect the immediate sale of the purchased Shares and remit to the Company, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate Option Price payable for the purchased Shares plus all applicable income and employment taxes required to be withheld by the Company by reason of such exercise and (y) to the Company to deliver the certificates for or other evidence of the purchased Shares directly to such brokerage firm in order to complete the sale.

Except to the extent the net exercise or the sale and remittance procedure is utilized in connection with the option exercise, payment of the Option Price must accompany the Notice of Exercise delivered to the Company in connection with the option exercise.

 

  (iii)           Furnish to the Company appropriate documentation that the person or persons exercising the option (if other than Participant) have the right to exercise this option.  

 

  (iv)          Make appropriate arrangements with the Company (or Parent or Subsidiary employing or retaining Participant) for the satisfaction of all income and employment tax withholding requirements applicable to the option exercise.

 

  (b)           As soon as practical after the Exercise Date, the Company shall deliver to or on behalf of Participant (or any other person or persons exercising this option) a certificate for the purchased Option Shares, with the appropriate legends affixed thereto, shall effect book-entry registration in the Participant’s (or such other person’s) name.

  (c)           In no event may this option be exercised for any fractional shares.

11.         Compliance with Laws and Regulations.

  (a)           The exercise of this option and the delivery of the Shares upon such exercise shall be subject to compliance by the Company and Participant with all applicable requirements of law relating thereto and with all applicable regulations of any stock exchange on which the Shares may be listed for trading at the time of such exercise and delivery.

  (b)           The inability of the Company to obtain approval from any regulatory body having authority deemed by the Company to be necessary to the lawful issuance or delivery and sale of any Shares pursuant to this option shall relieve the Company of any liability with respect to the non-issuance, non-delivery or sale of the Shares as to which such approval shall not have been obtained.  The Company, however, shall use its best efforts to obtain all such approvals.

 

12.         Successors and Assigns.  Except to the extent otherwise provided in Paragraphs 3 and 6, the provisions of this Award Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns and Participant and Participant's assigns and Beneficiaries.

13.         Notices.  Any notice required to be given or delivered to the Company under the terms of this Award Agreement shall be in writing and addressed to the Company at its principal corporate offices.  Any notice required to be given or delivered to Participant shall be in writing and addressed to Participant at the address indicated below Participant's signature line on the Notice of Grant.  All notices shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, postage prepaid and properly addressed to the party to be notified.

14.         Construction.  All decisions of the Committee with respect to any question or issue arising under the Plan or this Award Agreement shall be conclusive and binding on all persons having an interest in this option.

15.         Governing Law.  The interpretation, performance and enforcement of this Award Agreement shall be governed by the laws of the State of Delaware without resort to that State's conflict-of-laws rules.

16.         Excess Shares.  If the Option Shares covered by this Award Agreement exceed, as of the Award Date, the number of Shares which may without stockholder approval be delivered under the Plan, then this option shall be void with respect to those excess Shares, unless stockholder approval of an amendment sufficiently increasing the number of Shares issuable under the Plan is obtained in accordance with the provisions of the Plan.

17.         Leave of Absence.  The following provisions shall apply upon Participant's commencement of an authorized leave of absence:

  (a)           The exercise schedule in effect under the Notice of Grant shall be frozen as of the first day of the authorized leave, and this option shall not become exercisable for any additional installments of the Option Shares during the period Participant remains on such leave.

  (b)           Should Participant resume active Employee status within sixty (60) days after the start date of the authorized leave, Participant shall, for purposes of the exercise schedule set forth in the Notice of Grant, receive Service credit for the entire period of such leave.  If Participant does not resume active Employee status within such sixty (60)-day period, then no Service credit shall be given for the period of such leave.

  (c)           If this option is designated as an Incentive Stock Option in the Notice of Grant, then the following additional provision shall apply:

  (i)            If the leave of absence continues for more than ninety (90) days, then this option shall automatically convert to a Non-Qualified Stock Option at the end of the three (3)-month period measured from the ninety-first (91st) day of such leave, unless Participant's reemployment rights are guaranteed by statute or by written agreement.  Following any such conversion of this option, all subsequent exercises of this option, whether effected before or after Participant's return to active Employee status, shall result in an immediate taxable event, and the Company shall be required to collect from Participant the income and employment withholding taxes applicable to such exercise.

  (ii)           In no event shall this option become exercisable for any additional Option Shares or otherwise remain outstanding if Participant does not resume Employee status prior to the Expiration Date.

 

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EXHIBIT I

NOTICE OF EXERCISE

I hereby notify Discovery Laboratories, Inc. (the "Company") that I elect to purchase ________ Shares (the "Purchased Shares") at the Option Price of $ _________ per share pursuant to that certain non-qualified stock option (the "Option") granted to me under on ______________, ____.

Concurrently with the delivery of this Exercise Notice to the Company, I shall hereby pay to the Company the Option Price for the Purchased Shares in accordance with the provisions of my Notice of Grant and Award Agreement with the Company (or other documents) evidencing the Option and shall deliver whatever additional documents may be required by such agreement as a condition for exercise.  Alternatively, if I am eligible I may utilize the net exercise or the special broker-dealer sale and remittance procedure specified in my agreement to effect payment of the Option Price.

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The following definitions shall be in effect under the Award Agreement:

Award Date shall mean the effective date of grant of the option as specified in the Notice of Grant.

Award Agreement shall mean this Stock Option Agreement and the associated Notice of Grant pursuant to which the Option is granted.

Beneficiary shall mean, in the event the Committee implements a beneficiary designation procedure, the person designated by Participant, pursuant to such procedure, to succeed to such person's rights under any outstanding awards held by Participant at the time of death.  In the absence of such procedure or designation, the Beneficiary shall be Participant’s personal representative or the person or persons to whom this Option is transferred by will or the laws of descent and distribution.

Board shall mean the Company's Board of Directors.

Cause, with respect to any Employee or Consultant of the Company or a Subsidiary, shall have the meaning set forth in such person’s employment, consulting or other applicable agreement, or, in the absence of any such agreement or if such term is not defined in any such agreement, shall mean any one or more of the following, as determined by the Committee:

(i)

willful misconduct or gross negligence in the performance of such person’s duties;

(ii)

willful and continued failure or refusal to perform satisfactorily any duties reasonably requested in the course of such person’s employment by, or service to, the Company (other than a failure resulting from such person’s disability); or

(iii)

fraudulent, dishonest or other improper conduct engaged in by such person that causes, or has the potential to cause, harm to the Company or any of its Subsidiaries, or its or their business or reputation, including, without limitation, such person’s violation of any policies of the Company applicable to the such person, such person’s violation of laws, rules or regulations applicable to such person, criminal activity, habitual drunkenness or use of illegal drugs.

 

Change in Control shall have the meaning, if any, set forth in a Participant’s employment, consulting or other applicable agreement, or, if such term is not defined in any such agreement, shall mean the first to occur of the following:

(i)

any Person (other than (1) the Company, or (2) any trustee or other fiduciary under an employee benefit plan of the Company), is or becomes the beneficial owner (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of securities of the Participant’s Employer (as defined below) by reason of having acquired such securities during the 12-month period ending on the date of the most recent acquisition (not including any securities acquired directly from the Company or its Affiliates) representing thirty percent (30%) or more of the total voting power of the Participant’s Employer’s then outstanding voting securities;

(ii)

the majority of members of the board of directors of the Participant’s Employer is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the board of directors of the Participant’s Employer before the date of the appointment;

(iii)

there is consummated a merger or consolidation of the Participant’s Employer or any subsidiary thereof with any other corporation or other entity, resulting in a change described in clauses (i), (ii), (iv) or (v) of this definition, other than (1) a merger or consolidation that would result in the voting securities of the Participant’s Employer outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving or parent entity) more than sixty percent (60%) of the total voting power of the voting securities of the Participant’s Employer or such surviving or parent entity outstanding immediately after such merger or consolidation or (2) a merger or consolidation effected to implement a recapitalization of the Company or the Participant’s Employer (or similar transaction) in which no Person, directly or indirectly, acquired forty percent (40%) or more of the total voting power of the then outstanding securities of the Participant’s Employer (not including any securities acquired directly from the Company or its Affiliates);

 

(iv)

a liquidation of the Participant’s Employer involving the sale to any Person of at least forty percent (40%) of the total gross fair market value of all of the assets of the Participant’s Employer immediately before the liquidation; or

(v)

the sale or disposition by the Participant’s Employer or any direct or indirect subsidiary of the Participant’s Employer to any Person (other than any Subsidiary) of assets that have a total fair market value equal to forty percent (40%) or more of the total gross fair market value of all of the assets of the Participant’s Employer and its subsidiaries (taken as a whole) immediately before such sale or disposition (or any transaction or related series of transactions having a similar effect), other than a sale or disposition by the Company or the Participant’s Employer or any direct or indirect subsidiary of either to an entity at least sixty percent (60%) of the total voting power of the voting securities of which is beneficially owned by Stockholders of the Company or the Participant’s Employer in substantially the same proportions as their beneficial ownership of the Company or the Participant’s Employer immediately prior to such sale.

For purposes of this definition, “Participant’s Employer” shall mean (1) the Company or a Subsidiary corporation for which the Participant directly provides services or (2) a corporation that is a majority stockholder of the Company or a Subsidiary, or any corporation in a chain of corporations each of which is a majority stockholder of another corporation in the chain, ending with the corporation described in (1).

Code shall mean the Internal Revenue Code of 1986, as a mended from time to time.  A reference to a section of the Code shall be deemed to include any successor sections of the Code.

Committee shall mean a committee of the Board, acting in accordance with the provisions of Section 3 of the Plan, designated by the Board to administer the Plan.  To the extent the Committee has delegated authority, the term “Committee” shall refer to such delegate.

Company shall mean Discovery Laboratories, Inc. and any Subsidiary to which Participant may render Services.

 Disability for each respective Participant shall have the meaning set forth in the Participant’s employment agreement; provided, that if such term is not defined in any such agreement then “Disability” shall mean (i) with respect to any Incentive Stock Option, a permanent and total disability, within the meaning of Section 22(e)(3) of the Code, and (ii) for any other purpose, “disability” as defined in the Company’s long term disability program applicable to the Participant (or that would be applicable to the Participant if the Participant elected coverage).

Employee shall mean any person treated as an employee (including officers and directors) in the records of the Company or any Subsidiary and who is subject to the control and direction of the Company or any Subsidiary with regard to both the work to be performed and the manner and method of performance.

Exercise Date shall mean the date on which the option shall have been exercised in accordance with Paragraph 10 of this Award Agreement.

Expiration Date shall mean the date on which the option expires as specified in the Notice of Grant.

 

Fair Market Value of a Share on any date of reference shall be determined by the Committee, in its sole discretion, and may be different for different purposes.  Unless the Committee determines otherwise,

(i)

if the Shares are listed or admitted for trading on any United States national securities exchange, or if actual transactions are otherwise reported on a consolidated transaction reporting system, the last reported sale price of a Share on such exchange or reporting system, as reported in any newspaper of general circulation, or

(ii)

if clause (i) is not applicable, the mean of the high bid and low asked quotations for a Share as reported by the National Quotation Bureau, Incorporated if at least two securities dealers have inserted both bid and asked quotations for the Shares on at least five of the 10 preceding trading days; or

(iii)

if clauses (i) and (ii) above are not applicable to the Company (e.g., if the Shares are not then publicly traded or quoted), then the “Fair Market Value” of a Share shall be the fair market value (i.e., the price at which a willing seller would sell a Share to a willing buyer when neither is acting under compulsion and when both have reasonable knowledge of all relevant facts) of a Share on such date as the Committee in its sole and absolute discretion shall determine in a fair and uniform manner.

Incentive Stock Option shall mean an option that is intended to meet the requirements of Section 422 of the Code.

Non-Qualified Stock Option shall mean an option granted under this Award Agreement that is not intended to be an Incentive Stock Option.

Notice of Exercise shall mean the notice of exercise in the form attached hereto as Exhibit I.

Notice of Grant shall mean the Notice of Grant of Stock Options accompanying the Award Agreement, pursuant to which Participant has been informed of the basic terms of the option evidenced hereby.

Option Price shall mean the purchase price payable for Option Shares under this option, as specified in the Notice of Grant.

Option Shares shall mean the number of Shares subject to the option as specified in the Notice of Grant.

Participant shall mean the person to whom the option is granted as specified in the Notice of Grant.

Plan shall mean the Company's 2011 Long-Term Incentive Plan, as amended from time to time.

Service shall mean Participant's performance of services for the Company (or any Subsidiary) in the capacity of Employee, non-employee director or consultant.

Shares shall mean the common shares of the Company and such other securities as may become the subject of this Option pursuant to an adjustment made under Section 4(b) of the Plan.

Subsidiary shall mean a subsidiary company as defined in Section 424(f) of the Code (with the Company being treated as the employer corporation for purposes of this definition).

 

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Exhibit 10.4

 

Form of Indemnification Agreement between Discovery Laboratories, Inc.

and each of its directors and officers

 

INDEMNIFICATION AGREEMENT (“Agreement”) effective as of [Date], between DISCOVERY LABORATORIES, INC., a Delaware corporation (the “Company”), and [Indemnitee name] (“Indemnitee”).

WHEREAS, the Company desires to attract and retain the services of highly qualified individuals, such as Indemnitee, to serve the Company and to do so free from undue concerns for claims or damages arising out of or related to such service to the Company;

WHEREAS, the Company and Indemnitee recognize the substantial increase in corporate litigation in general, subjecting directors, officers, employees, agents and fiduciaries to expensive litigation risks at the same time as the availability and coverage of liability insurance has been severely limited;

WHEREAS, in recognition of the need to provide Indemnitee with substantial protection against personal liability, in order to procure Indemnitee's continued service as a [director/officer] of the Company and to enhance Indemnitee's ability to serve the Company in an effective manner, and in order to provide such protection pursuant to express contract rights, the Company wishes to provide for indemnification of, and the advancement of related expenses to, Indemnitee to the maximum extent permitted by law and to track recent developments under Delaware corporate law;

WHEREAS, Section 145 of the General Corporation Law of the State of Delaware (the “DGCL”) empowers the Company to indemnify its directors, officers, employees and agents by agreement and to indemnify persons who serve, at the request of the Company, as the directors, officers, employees or agents of other corporations or enterprises, and expressly provides that the indemnification provided by Section 145 is not exclusive; and

WHEREAS, the Board of Directors of the Company has determined that not only is it reasonable and prudent but necessary to promote the best interests of the Company and its stockholders that Indemnitee be indemnified and advanced expenses as set forth herein.

NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:

Section  1.        Certain Definitions.

b.       “Board” shall mean the Board of Directors of the Company.

 

 

 

 

 

Such Independent Legal Counsel, among other things, shall render its written opinion to the Company and Indemnitee as to whether and to what extent Indemnitee is entitled to be indemnified under the Operative Materials, and the Company hereby agrees to abide by such opinion.  The Company agrees to pay the reasonable fees and expenses of the Independent Legal Counsel referred to above and to indemnify fully such Independent Legal Counsel against any and all reasonable expenses (including reasonable attorneys’ fees), claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.  Notwithstanding any other provision of this Agreement, the Company shall not be required to pay the fees and expenses of more than one Independent Legal Counsel in connection with all matters concerning a single Indemnitee, and such Independent Legal Counsel shall be the Independent Legal Counsel for any or all other Indemnitees unless (i) the selection of separate counsel by one or more Indemnitees has been previously authorized by the Company in writing, or (ii) an Indemnitee shall have provided to the Company a written statement that such Indemnitee has reasonably concluded in good faith that there may be a conflict of interest between such Indemnitee and the other Indemnitees with respect to the matters arising under this Agreement.

 

 

 

 

 

 

 

 

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Indemnification Agreement as of the date first above written.

 

EXHIBIT A

FORM OF UNDERTAKING TO REPAY ADVANCEMENT OF EXPENSES

[DATE]

[OFFICER(S) TO WHOM NOTICE IS DELIVERED]

[COMPANY]

[ADDRESS]

[CITY], [STATE] [ZIP CODE]

Re: Undertaking to Repay Advancement of Expenses.

[Ladies and Gentlemen/Dear [ADDRESSEE]]:

This undertaking is being provided pursuant to that certain Indemnification Agreement, dated [DATE], by and between Discovery Laboratories, Inc., a Delaware corporation (the "Company"), and the undersigned as Indemnitee (the "Indemnification Agreement"). Terms used herein and not otherwise defined shall have the meanings ascribed to them in the Indemnification Agreement. Pursuant to the Indemnification Agreement, among other things, I am entitled to the advancement of Expenses paid or incurred in connection with Claims relating to Indemnifiable Events.

I have become subject to [DESCRIPTION OF PROCEEDING] (the Proceeding) based on [my status as [an officer/[TITLE OF OFFICER]/a director] of the Company/alleged actions or failures to act in my capacity as [an officer/[TITLE OF OFFICER]/a director] of the Company. [This undertaking also constitutes notice to the Company of the Proceeding pursuant to Section 4(b) of the Indemnification Agreement].] The following is a brief description of the [current status of the] Proceeding:

[DESCRIPTION OF PROCEEDING]

[Pursuant to Section Section 4(b) of the Indemnification Agreement, the Company can (a) pay such Expenses on my behalf, (b) advance funds in an amount sufficient to pay such Expenses, or (c) reimburse me for such Expenses. Pursuant to Section 4(b) of the Indemnification Agreement, I hereby request an Expense Advance in connection with the Proceeding. The Expenses for which advances are requested are as follows:]

[DESCRIPTION OF EXPENSES]

[In connection with the request for Expense Advances [set out above/delivered to the Company separately on [DATE]],] I hereby undertake to repay any amounts paid, advanced or reimbursed by the Company for such Expense Advances to the extent that it is ultimately determined that I am not entitled to indemnification [under the Indemnification Agreement].

 

This undertaking shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the principles of conflicts of laws thereof.

 

 

[SIGNATURE PAGE FOLLOWS]

 

 

[cc: [ADD PARTY NAME AND ADDRESS AS REQUIRED]]

 

 

11

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Exhibit 99.1

 

Discovery Labs Announces Appointment of New Chief Executive Officer and Provides an Update on AEROSURF® Phase 2 Program

Warrington, PA — February 1, 2016 — Discovery Laboratories, Inc. (NASDAQ: DSCO), a biotechnology company focused on developing aerosolized KL4 surfactant therapies for respiratory diseases, today announced the appointment of a new Chief Executive Officer and has provided an update on its AEROSURF phase 2 program.

Craig Fraser has been appointed as the Company’s President and Chief Executive Officer, effective immediately.  Mr. Fraser has also been elected to the Company’s board of directors.  Mr. Fraser succeeds John G. Cooper who is leaving the Company to pursue other interests.

“Craig is a proven leader with deep commercial, operational, business and drug development experience,” commented John R. Leone, Chairman of the Board of Discovery Labs. “With strong leadership skills, success as a Chief Operating Officer for a publicly held biotechnology company and an impressive track record of driving performance, we believe that Craig is the right person to lead Discovery Labs and capitalize on the tremendous opportunity that exists with the Company’s KL4 surfactant and aerosol delivery technologies to address a range of respiratory diseases beginning with AEROSURF for premature infants with respiratory distress syndrome.”

Mr. Fraser brings to Discovery Labs over 25 years of progressive leadership experience, as well as expertise in advancing pipeline products and building global brands and businesses.  Prior to joining Discovery Labs, Mr. Fraser held a number of leadership positions at several biotechnology and pharmaceutical companies, most recently as Chief Operating Officer at Aegerion Pharmaceuticals, Inc.  At Aegerion, Mr. Fraser had worldwide responsibility for commercial operations, manufacturing and supply chain, as well as corporate initiatives, including strategic development for growth and sustainability.  Mr. Fraser has also held senior management positions at Wyeth / Pfizer Inc., Johnson & Johnson (J&J) and Centocor. In these positions, he had responsibility for sales and marketing, including the commercialization of multiple hospital-based products, business and commercial development, and multiple drug development programs.

“Discovery Labs is committed to building a robust business that is founded on its novel KL4 surfactant and aerosol delivery technologies with the expressed goal of bringing transformational change to neonatal respiratory critical care,” said Mr. Fraser.  “I am very excited to have the opportunity to join a very talented team at Discovery Labs and guide the Company through the next phase of its growth while driving long-term stockholder value.”

Mr. Cooper has been with Discovery Labs for 14 years, serving as its President, Chief Executive Officer and director since January 2013.  Prior to that, Mr. Cooper served as President and Chief Financial Officer from 2011 to 2012 and as its Executive Vice President and Chief Financial Officer from 2001 to 2010.

 

“I want to thank John for his many years of dedicated service to Discovery Labs and his steadfast and passionate commitment to achieving the Company’s goal of applying its technologies to improve the care of fragile premature infants with respiratory distress syndrome.  We wish John well in his future endeavors,” commented Mr. Leone.

•

In the fourth quarter of 2015, the Company announced top-line results of its previously completed AEROSURF phase 2a clinical program in 80 premature infants 29 to 34 week gestational age (GA) receiving nasal continuous positive airway pressure (nCPAP) for respiratory distress syndrome (RDS).  The program consisted of two multicenter, randomized, open-label, controlled studies that were designed to evaluate the safety and tolerability of aerosolized KL4 surfactant administered in five dose groups (15, 30, 45, 60 and 90 minutes), compared to infants receiving nCPAP alone.  Key objectives of the program were achieved, including:

 

–

Overall, the safety and tolerability profile of the AEROSURF-treated groups was generally comparable to the control group.  All reported adverse events and serious adverse events were those that are common and expected among premature infants with RDS.

 

–

Data suggest that AEROSURF may be reducing the incidence of nCPAP failure (the need for intubation and delayed surfactant therapy).

 

•

Also in the fourth quarter of 2015, the Company initiated a phase 2a clinical trial in 32 premature infants 26 to 28 week GA receiving nCPAP for RDS. This clinical trial is a multicenter, randomized, open-label, controlled study that is designed to evaluate the safety and tolerability of aerosolized KL4 surfactant (including with potential repeat doses) administered in two dose groups (30 and 45 minutes), compared to infants receiving nCPAP alone.  The start-up activities for the trial have taken longer than anticipated at some clinical sites, due primarily to administrative matters and, with fewer sites initiated, enrollments are accruing more slowly than anticipated.  As a result, the Company anticipates completing enrollment of this phase 2a trial in the second quarter of 2016 and releasing top-line results shortly thereafter in the third quarter of 2016.

 

•

Based on the safety and tolerability profile observed to date in the phase 2a clinical program, the Company has initiated the AEROSURF phase 2b clinical trial in premature infants 26 to 32 weeks GA receiving nCPAP for RDS.  The trial is a multicenter, randomized, controlled study with masked treatment assignment in approximately 240 premature infants and is designed to evaluate the safety and tolerability of aerosolized KL4 surfactant (including with potential repeat doses) administered in two dose groups (25 and 50 minutes), compared to infants receiving nCPAP alone.  The following endpoints will be evaluated: time to nCPAP failure (the need for intubation and delayed surfactant therapy), incidence of nCPAP failure and physiological parameters indicating the effectiveness of lung function.  The trial is expected to be conducted in up to 60 clinical sites in the United States, Canada, Europe and Latin America.  Enrollment is beginning with premature infants 29 to 32 weeks GA, and will include premature infants 26 to 28 weeks GA after completion of the ongoing phase 2a clinical trial in this age group.  The Company anticipates completing enrollment for the phase 2b clinical trial by the end of 2016 and releasing top-line results in the first quarter of 2017.

As of December 31, 2015, the Company had cash and cash equivalents of $38.7 million, an amount  the Company anticipates is sufficient to support the AEROSURF phase 2 clinical program and fund operations through the first quarter of 2017.

 

About AEROSURF^®

Premature infants with severe RDS currently are treated with surfactants that can only be administered by endotracheal intubation supported with mechanical ventilation, invasive procedures that may each result in serious respiratory conditions and other complications.  To avoid such complications, many neonatologists treat infants with less severe RDS by less invasive means, typically nCPAP.  Unfortunately, a significant number of premature infants on nCPAP will respond poorly (an outcome referred to as nCPAP failure) and may require delayed surfactant therapy.  Since neonatologists currently cannot predict which infants will experience nCPAP failure, they are faced with difficult choices in treating infants with less severe RDS.  This is because the medical outcomes for those infants who experience nCPAP failure and receive delayed surfactant therapy may be less favorable than the outcomes for infants who received surfactant therapy in the first hours of life.

AEROSURF is a novel, investigational drug/device product that combines the Company’s proprietary KL4 surfactant and its aerosolization technologies.  AEROSURF is being developed to potentially reduce or eliminate the need for endotracheal intubation and mechanical ventilation in the treatment of premature infants with respiratory distress syndrome (RDS).  With AEROSURF, neonatologists may potentially administer aerosolized KL4 surfactant to premature infants supported by nCPAP, without subjecting them to invasive endotracheal intubation and mechanical ventilation (each of which can result in serious respiratory conditions and other complications), which are currently required to administer surfactant therapy to premature infants.  By enabling delivery of aerosolized KL4 surfactant using less invasive procedures, AEROSURF, if approved, has the potential to address a serious unmet medical need, provide transformative clinical and pharmacoeconomic benefits, and enable the treatment of a significantly greater number of premature infants with RDS who could benefit from surfactant therapy but are currently not treated.

The Company estimates that there are currently approximately 120,000 to 150,000 premature infants in the U.S. who could benefit from surfactant therapy.  However, due to the risks associated with endotracheal intubation and mechanical ventilation, only approximately 50,000 to 60,000 of these infants currently are treated with surfactants as the initial therapy for severe RDS.  The remaining infants with less severe RDS are usually supported with nCPAP alone.  However, a large percentage of these infants are not adequately supported with nCPAP alone (an outcome referred to as nCPAP failure) and thereafter may require delayed surfactant therapy administered by endotracheal intubation and mechanical ventilation

About Discovery Labs

Discovery Laboratories, Inc. is a biotechnology company focused on developing aerosolized KL4 surfactant therapies for respiratory diseases.  Surfactants are produced naturally in the lung and are essential for normal respiratory function and survival.  If surfactant deficiency or degradation occurs, the air sacs in the lungs can collapse, resulting in severe respiratory diseases and disorders.  Discovery Labs’ technology platform includes a novel synthetic peptide-containing (KL4) surfactant, that is structurally similar to pulmonary surfactant, and proprietary drug delivery technologies being developed to enable efficient delivery of aerosolized KL4 surfactant.  Discovery Labs believes that its proprietary technology platform makes it possible, for the first time, to develop a significant pipeline of aerosolized surfactant products to address a variety of respiratory diseases for which there frequently are few or no approved therapies.

 

Forward-Looking Statements

To the extent that statements in this press release are not strictly historical, all such statements are forward-looking, and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from the statements made.  Examples of such risks and uncertainties, including those affecting Discovery Labs’ ability successfully to complete its development programs, secure regulatory approvals for its product candidates in the U.S. and abroad, and realize the potential value and benefits of its RDS product portfolio, are described in Discovery Labs’ filings with the Securities and Exchange Commission, including its most recent reports on Forms 10-K, 10-Q and 8-K, and any amendments thereto. Any forward-looking statement in this release speaks only as of the date on which it is made. Discovery Labs assumes no obligation to update or revise any forward-looking statements.

Contact Information:

 

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