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Discovery Labs' nightmare ends as lawsuit dismissed

By Emilie Reymond , 22-Mar-2007

Discovery Laboratories has announced that a shareholder lawsuit filed against the company was dismissed by a Pennsylvania court, marking the end of its two-year manufacturing nightmare.

The biotech company, based in Warrington, said that the US District Court for the Eastern District of Pennsylvania has dismissed a consolidated stockholders' complaint against the firm and two of its executive officers filed last November.

 

 

 

Discovery Labs said it does not know whether the plaintiffs plan to file an appeal.

 

 

 

The complaint, which accused Discovery Labs of violating federal laws in connection with various public statements by retaining information about the company's manufacturing problems, is the second one to be dismissed in the last few months.

 

 

 

The first one filed in August was also subsequently dismissed.

 

 

 

The flood of shareholder suits started last April when Discovery announced that one of the process validation batches for its lead respiratory drug Surfaxin had failed a stability test, delaying the drug's approval by at least a year.

 

 

 

Shareholder suits are a common effect of companies announcing unexpected problems that have a negative impact on the value of stock shares. In the Discovery case, suing shareholders claimed that the company and its managers were hiding information about the manufacturing problems the firm was experiencing.

 

 

 

It is the latest chapter in Discovery's manufacturing saga, which started in February 2005 when the drugmaker was looking forward to a Prescription Drug User Fee Act (PDUFA) date for reviewing Surfaxin's New Drug Application (NDA).

 

 

 

But two weeks before the PDUFA date, Laureate Pharma, the contract manufacturer of Surfaxin, received a "483 form" from the FDA alerting it to issues regarding the quality assurance systems, documentation and controls in the manufacturing of the drug.

 

 

 

Determined to take the situation in its own hands, Discovery then ended its contract manufacturing agreement with Laureate and bought the New Jersey facility where Laureate was producing Surfaxin for $16m (€13.5m).

 

 

 

The company finally met with the FDA last December to clarify the remaining issues and anticipates potential approval of its NDA for Surfaxin to happen mid-2008.

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