Discovery Labs shares soar on word of no new Surfaxin trials

On Friday, the Food and Drug Administration asked the company for additional information on Surfaxin, which is designed to prevent repiratory distress syndrome in premature infants, thereby delaying approval. Discovery shares closed down 50 percent at market close on Friday.

However, in Monday midday trading, shares had recovered some of the earlier losses, gaining 49 cents, or 33.8 percent, to $1.94.

Discovery said Monday it believes it can file a response to the FDA in about six to eight weeks and once the resubmission is received, believes a decision will follow within 60 days.

Jefferies & Co. analyst Adam A. Walsh wrote Monday that while issues related to the Surfaxin appalication "appear resolvable in the near-term," he noted that Discovery's timing projection represents a best-case scenatrio. He has a $5 price target on shares.

Janney Montgomery Scott analyst Brian D. Rye was less sanguine about Discovery, citing uncertainty regarding Surfaxin's regulatory approval and the company's need for additional cash over the next year.

"Given the company's troubling regulatory track record thus far, we bluntly don't believe it is prudent for investors to accept management's description of the remaining steps at face value, particularly in light of the fact that the company still needs to meet with the agency to clarify these issues," he wrote Monday.

Rye has a "Neutral" rating on Discovery shares.