Discovery shares plunge on delay for key drug candidate

The drug candidate, Surfaxin, faced a prior delay in the regulatory process because of manufacturing issues. Surfaxin is aimed at treating premature infant respiratory distress syndrome.

The stock fell $1.36, or 47 percent, to $1.54 in afternoon trading. It hit its lowest point in nearly two years earlier in the trading session, falling to $1.29.

The FDA wants more information on the drug candidate in order to consider it for approval. The company did not specify what information the agency wanted. Approvable letters from the FDA can range from simple requests for more data to more costly additional studies.

Discovery said the FDA already completed its pre-approval inspection tour of the Totowa, N.J. manufacturing facility and added the inspection was successful. Still, Wall Street took a cautious view on the stock because of the delay. The company does not have a product on the market and posted no revenue in both 2007 and 2006.

"While we are encouraged by both the successful facility inspection, which had been a gating issue in the past, as well as the finalized labeling discussions, at this point we have no clarity on the required actions and timing to gain Surfaxin approval," said Jefferies & Co. analyst Dr. Adam A. Walsh, in a note to investors.

Walsh suspended his rating on the company, saying a best-case scenario would be a six-month delay, but further delays are possible.