DISCOVERY REPORTS FIRST QTR '03 NET LOSS OF $4.5 MILLION.

Discovery Laboratories, Inc. (Nasdaq: DSCO), Doylestown, Pa. a late-stage specialty biopharmaceutical company developing its proprietary surfactant technology as Surfactant Replacement Therapies for respiratory diseases, has announced financial results for the first quarter of 2003.

For the quarter ended March 31, 2003, the company reported a net loss of $4.5 million, or $0.14 per share, on approximately 32.9 million weighted average common shares outstanding, compared to a net loss of $3.37 million, or $0.13 per share, on approximately 25.8 million weighted average common shares outstanding for the same period in 2002.

The increase in the net loss primarily reflects clinical trial costs incurred for the company's lead product, Surfaxin (which is currently in three Phase 3 trials and two Phase 2 trials for critical care patients with life threatening respiratory disorders), as well as activities related to the development of the company's inhalable aerosol surfactant programs to potentially treat a variety of respiratory conditions. The results also include a charge of $198,000 for pre-launch commercialization activities for Surfaxin for which funding has been provided by a secured, revolving credit facility pursuant to a collaboration arrangement with Quintiles Transnational Corp.

The increase in the weighted average number of shares outstanding is primarily due to approximately 822,000 common shares issued in connection with the March 2002 expansion of the strategic alliance with Laboratorios del Dr. Esteve and approximately 6.4 million common shares issued to selected institutional and accredited investors in a private offering in November 2002. As of March 31, 2003 and March 31, 2002, there were approximately 32.9 million and 26.4 million common shares issued and outstanding, respectively.

As of March 31, 2003, the company had cash and investments of approximately $14.2 million. In addition the company has a secured revolving credit facility of $8.5 million to $10.0 million with Quintiles. The company may use this credit facility for general working capital purposes but is obligated to use a majority of the funds borrowed under this facility for pre-launch marketing of Surfaxin. This credit facility is available for use through December 10, 2004, and monies become available in three tranches upon satisfying certain conditions. We have satisfied the conditions for availability of the first two tranches and as of March 31, 2003, $5.7 million was available for borrowing and $1.65 million was outstanding under the credit facility. The company has a capital lease financing arrangement with the Life Science and Technology Finance Division of General Electric Capital Corporation that provides, subject to certain conditions, for up to $1.0 million in financing for capital purchases. As of March 31, 2003, the company has used approximately $475,000 of this financing arrangement. Our currently available financial resources will be adequate to satisfy our capital needs into the second quarter of 2004.

For more information, visit http://www.discoverylabs.com or call 215-340-4699.