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Discovery Labs shares soar after respiratory drug clears final hurdle

(Reuters) - A new drug to treat a breathing disorder that is the leading cause of death of premature babies cleared a regulatory hurdle, allowing Discovery Laboratories Inc to release it in the United States before the end of the year.

Discovery, whose shares rose 55 percent on Friday, is entitled to about $20 million in loans from Deerfield Management Co LP if it launches the drug, Surfaxin, this year.

The drug was approved by the U.S. Food and Drug Administration in March last year to treat respiratory distress syndrome (RDS) in newborns but Discovery delayed its launch, pending the resolution of an issue with its quality test.

The FDA agreed to an updated product specification for Surfaxin on Friday.

Roth Capital analyst Scott Henry said that though the product is entering an entrenched market, it had unique attributes.

Surfaxin, a liquid medication intended to be administered via the trachea, will compete with four approved drugs, including AbbVie Inc's Survanta, Chiesi Farmaceutici SpA's Curosurf and ONY Inc's Infasurf.

"We look for a modest initial ramp that gains momentum over time, and not necessarily strong out of the gate," Henry wrote in a note.

RDS occurs in babies whose lungs have not fully developed, and makes it hard for them to breathe. The condition accounts for 20 percent of the deaths in newborns, according to health information website WebMD.

Discovery's shares rose to a one year-high of $3.05. They were up 40 percent at $2.75 in afternoon trading on the Nasdaq.

(Reporting by Zeba Siddiqui in Bangalore; Editing by Don Sebastian)

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