Wednesday, December 07, 2005

DSCO Update - by Ilene

We like DSCO as a still unknown bird flu play, but we like it even more for its potential to bring to market blockbuster $1B+ treatments for respiratory illnesses.

Discovery Labs (DSCO) has some significant events coming up in the near future. We're hoping for final approval of Surfaxin for Respiratory Distress Syndrome in infants in April, 2006. The results of the phase II trial of Surfaxin in Acute Respiratory Distress Syndrome (ARDS) should also become available early next year. With DSCO trading at around $7, the market cap is around $400M. The company's synthetic surfactant products, already shown to be effective in infant RDS, are being clinically tested for numerous indications, and if effective, may expand the current annual surfactant market to over $1.5 billion.

There's a tremendous need for treatment for ARDS, regardless of avian flu pandemics and our speculation of it's potential usefulness. ARDS in adults is a life-threatening disorder for which no approved therapies exist. It can be caused by a variety of insults to the lungs, including illnesses such as pneumonia and septic shock (a toxic condition caused by infection), and events such as smoke inhalation, near drowning, industrial accidents.

Background on Natural Lung Surfactants (from the website)

Surfactants are protein/lipid compositions that are produced naturally in the lungs and are critical to the lungs’ ability to absorb oxygen. They cover the entire alveolar surface of the lungs and the terminal conducting airways leading to the alveoli. Surfactants facilitate respiration by continually modifying the surface tension of the fluid normally present within the alveoli. In the absence of sufficient surfactant, or should the surfactant degrade, the alveoli tend to collapse and the lungs do not absorb sufficient oxygen.

By lowering the surface tension of the terminal conducting airways, surfactant maintains patency — keeps airways open. Loss of patency leads to compromised pulmonary function.

Pulmonary surfactant has additional properties, such as:

1. Physical barrier to inhaled particles and noxious agents
2. Enhancement of particle clearance
3. Host defense against infection
4. Anti-inflammatory properties

LINKS:

For a summary of the conference call, go to yahoo's dsco message board: . The poster, md4neon8s, has been called "the most knowledgeable neonatologist that he (a physician) knows (personally)," by Tom Bishop, the editor of BI Research. In a note to his subscribers, Tom referenced a conversation I started with md4neon8s, which Allan provided a link to.

For a complete update, listen to today's conference call.

For a complete description of the company, visit their website.

4 comments:

Ray Santopietro said...

Thanks for the tip, Allen. Will look into it. Another potential cheap play at this point is MCU (Medicure) with positive results in a phase two heart attack and stroke drug. Big run up on the news, drawdown and shorting is complete, and stock is moving upward.

Ronny said...

Allan,there were a lot of buybacks in the last 2 days.We are up to 25,with 19 winners.This gives us a 76% success rate.The average return for all 25 is +1.3%.What do you think?
Ron

Allan said...

What do you think?

I think those numbers are impressive. Can you break down the avg win versus avg loss?

A

Ronny said...

Average gain was 1.9%, average loss was .6%.