Insiders Bet on Discovery Drug Approval

Tired of your stocks fluctuating wildly on the whims of sentiment relating to the credit crisis and commodity prices? Why not diversify into a stock that fluctuates wildly to a different drummer -- the U.S. Food and Drug Administration (FDA)?

Discovery Laboratories (DSCO Quote) is a high-risk biotech prospect for sure. But then, based on recent volatility metrics, so are many supposedly defensive stocks. You might as well consider a volatile stock that at least has identifiable catalysts to provide high returns -- catalysts that may start playing out as soon as this Friday, Oct. 31.

Discovery expects to hear back from the FDA on that date about whether its latest response supporting its long-pending application to market Surfaxin will be given Class 1 or Class 2 status. If the former, then Discovery can expect to get a ruling on its Surfaxin application within 60 days. If it is designated Class 2, a six-month vigil will be necessary.

Surfaxin is the brand name for Discovery's KL4 compound, a synthetic peptide that mimics the properties of lung surfactants that allow proper breathing. Surfaxin shows promise for treating prematurely born infants suffering from respiratory distress syndrome (RDS). Discovery is also developing a version of the drug in aerosol form called Aerosurf.

For years, Discovery Labs' shares have risen and fallen on the promise and -- so far -- the disappointment of pronouncements from the FDA regarding the marketability of Surfaxin. Although the FDA appears satisfied with the clinical trials that show Surfaxin as beneficial for the treatment of premature infants suffering from RDS, Discovery Labs ran into manufacturing and labeling issues years ago that continue to impede Surfaxin's commercial launch.