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Biotech Stock Mailbag: Discovery Labs

BOSTON ( TheStreet) -- This week's Biotech Stock Mailbag opens with an email from Jack W., who wonders about the future of Discovery Labs (DSCO - Get Report).

"I listened to Discovery Labs' conference call, and the CEO made it sound like the company was in a strong position to partner its drugs. Does this sound right to you? The stock looks cheap."

I listened to the conference call Wednesday, too, and I was gobsmacked by two things: first, that CEO Robert Capetola didn't use the call to announce his resignation. How is this incompetent CEO, a decimator of shareholder value, still in charge of Discovery?

Second, Capetola and his minions must be living in a fantasy world. How else to explain all the talk about Discovery's "revolutionary technology," "manufacturing expertise" and record of clinical success.

Really? Discovery has tried and failed three or four times to convince the FDA to approve its infant lung drug Surfaxin -- a record of futility that is unmatched.

This ignominious achievement has destroyed the company's stock price. The company has $23.5 million in the bank and will burn through $13 million in the second half of this year. On top of that, Discovery has a $10 million loan that comes due in April.

Yet, Capetola thinks potential partners are going to be knocking on his door eager to throw money at the company in exchange for rights to his lung surfactant technology?

Why wouldn't a partner, if any existed, simply wait until next year for Discovery to go bankrupt, at which point the company's assets can be picked up for nothing? It's not like Disovery has any negotiating leverage. The company is circling the drain!
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SYM TRADE IT LAST %CHG
CTIC $1.57 3.97%
BCRX $11.21 2.09%
BDSI $6.64 3.03%
DSCO $0.37 2.76%
INO $6.98 2.65%

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Chart of I:DJI
DOW 16,654.77 +369.26 2.27%
S&P 500 1,987.66 +47.15 2.43%
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