W. Thomas Amick, Chairman and interim Chief Executive Officer of Discovery Labs, commented, "A key priority for the Company in 2010 is to strengthen our long-term strategic and financial position and secure capital resources to meaningfully advance our promising KL4 surfactant pipeline programs and maximize shareholder value. We continue to engage in discussions with potential strategic and financial partners that, if successful, will provide the financial resources needed to potentially advance our development programs."

Although a key priority for the Company is to secure strategic partners and capital to support its ongoing research and development activities and assure its future growth and financial stability, there can be no assurance that any strategic alliance will be successfully identified or other financing alternatives will be successfully concluded.

Other Key Pipeline Programs

Discovery Labs is conducting a Phase 2 clinical trial to determine whether Surfaxin improves lung function and reduces the duration and related risk-exposure of mechanical ventilation in children up to two years of age diagnosed with Acute Respiratory Failure (ARF). ARF is a severe respiratory disorder associated with lung injury, often entailing surfactant dysfunction. ARF occurs after patients have been exposed to serious respiratory infections, such as influenza (including the type A serotype referred to as H1N1) or respiratory syncytial virus (RSV). Hospitalization following influenza or other viral infection is associated with high morbidity and significant healthcare costs. Enrollment is now completed and top-line results are expected to be available in June 2010.  Surfaxin LS?„? (lyophilized dry powder formulation of KL4 surfactant) and Aerosurf?® (aerosolized formulation of KL4 surfactant) have the potential to greatly improve the management of RDS and represent the opportunity, over time, to expand the current RDS estimated worldwide annual market of $200 million to a $1 billion opportunity. Surfaxin LS is intended to improve product ease of use for healthcare practitioners, eliminate the need for cold-chain storage, and potentially further improve product clinical performance.  Aerosurf holds the promise to significantly expand the use of surfactant therapy in pediatric respiratory medicine by providing neonatologists with a means of delivering KL4 surfactant while potentially avoiding the risks associated with invasive endotracheal intubation and mechanical ventilation.

The Company is currently conducting important preclinical activities for both Surfaxin LS and Aerosurf as well as advancing development of its capillary aerosolization device to support regulatory requirements for its planned clinical programs. The Company is preparing to further engage the FDA and international regulatory agencies with respect to its planned Phase 3 clinical program for Surfaxin LS and Phase 2 clinical program for Aerosurf. The Company intends to initiate these clinical programs upon determining final regulatory strategy and after securing appropriate strategic alliances and necessary capital.

Aerosolized KL4 surfactant is being evaluated in an investigator-initiated Phase 2a clinical trial in Cystic Fibrosis (CF) patients. The trial is being conducted at a leading research center, The University of North Carolina, and is further supported by the Cystic Fibrosis Foundation. The trial has been designed to assess the safety, tolerability and short-term effectiveness (via improvement in mucociliary clearance) of aerosolized KL4 surfactant in CF patients. Enrollment is approximately 70% complete and top-line results are now expected in the third quarter of 2010.

SOURCE Discovery Laboratories, Inc.