JURY TRIAL DEMANDED Defendants

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF PENNSYLVANIA _________________________________________ _ ) MICHAEL DUNOVICH, Individually and On ) Behalf of All Others Similarly Situated, ) CIVIL ACTION NO. ) Plaintiff, ) ) vs. ) CLASS ACTION COMPLAINT ) DISCOVERY LABORATORIES, INC. and ) ROBERT J. CAPETOLA ) ) JURY TRIAL DEMANDED Defendants. ) _________________________________________ _ Plaintiff, Michael Dunovich, (“Plaintiff”), alleges the following based upon the investigation of Plaintiff =s counsel, which included, among other things, a review of the defendants = public documents, conference calls and announcements made by defendants, United States Securities and Exchange Commission (“SEC”) filings, wire and press releases published by and regarding Discovery Laboratories, Inc. (“Discovery” or the “Company”) securities analysts = reports and advisories about the Company, and information readily obtainable on the Internet. NATURE OF THE ACTION AND OVERVIEW 1. This is a federal class action on behalf of purchasers of the publicly traded securities of Discovery between December 28, 2005 and April 25, 2006, inclusive (the AClass Period @), seeking to pursue remedies under the Securities Exchange Act of 1934 (the AExchange Act @). 2. Discovery is a biotechnology company that develops proprietary surfactant technology as Surfactant Replacement Therapies (“SRT”) for respiratory diseases. Surfaxin, the Company’s lead product, is the first precision-engineered, protein B-based agent that mimics the surface-active 1 properties of human surfactant. 3. On December 28, 2005, Discovery announced that it had entered into an agreement to acquire the manufacturing operations of Laureate Pharma, Inc. in Totowa, New Jersey. The Company stated that the acquisition was “intended to provide Discovery with operational control and improved economics for the potential commercial and clinical production of Discovery’s lead product, Surfaxin, and its pipeline of precision engineered SRT products.” 4. On January 26, 2006, Discovery stated that Surfaxin had received an Approvable Letter from the U.S. Food & Drug Administration (“FDA”), and the Company anticipated potential approval of Surfaxin in April 2006. 5. On April 5, 2006, Discovery announced that it had received a second Approvable Letter from the FDA for Surfaxin. The FDA, however, asked Discovery for more information concerning the chemistry, manufacturing, and controls (“CMC”) of the drug. 6. On this news, shares of Discovery shed $2.07, or 29.2 percent, to close, on April 5, 2006, at $5.02 per share on heavy trading volume. 7. Throughout the Class Period, the defendants repeatedly asserted that they anticipated Surfaxin would receive regulatory approval in April 2006. 8. Then, on April 24, 2006, Discovery shocked the investment community when the Company announced that U.S. regulatory approval of Surfaxin was being delayed over manufacturing problems. Specifically, Discovery reported that Surfaxin’s ability to be stored for extended periods of time without change in its efficacy or chemical profile, or stability, had not been achieved. As a result of this failure, the U.S. regulatory process would be significantly delayed. The 2 Company acknowledged that stability had never been achieved for the drug. 9. On this news, shares of Discovery dropped $2.49, or 53 percent, to close, on April 25, 2006, at $2.20 per share. JURISDICTION AND VENUE 10. The claims asserted herein arise under and pursuant to Sections 10(b) and 20(a) of the Exchange Act, (15 U.S.C. '' 78j(b) and 78t(a)), and Rule 10b-5 promulgated thereunder (17 C.F.R. '240.10b-5). 11. This Court has jurisdiction over the subject matter of this action pursuant to '27 of the Exchange Act (15 U.S.C. '78aa) and 28 U.S.C. ' 1331. 12. Venue is proper in this Judicial District pursuant to '27 of the Exchange Act, 15 U.S.C. ' 78aa and 28 U.S.C. ' 1391(b). Many of the acts and transactions alleged herein occurred in substantial part in this Judicial District. Additionally, the Company maintained an executive office in this Judicial District during the Class Period. 13. In connection with the acts, conduct and other wrongs alleged in this complaint, defendants, directly or indirectly, used the means and instrumentalities of interstate commerce, including but not limited to, the United States mails, interstate telephone communications and the facilities of the national securities exchange. PARTIES 14. Plaintiff, Michael Dunovich, as set forth in the accompanying certification, incorporated by reference herein, purchased Discovery securities at artificially inflated prices during the Class Period and has been damaged thereby. 3 15. Defendant Discovery is a Delaware corporation with its principal executive offices located at 2600 Kelly Road, Suite 100, Warrington, Pennsylvania 18976. 16. Defendant Robert J. Capetola (“Capetola”) was, at all relevant times, the Company’s President and Chief Executive Officer. 17. Defendant Capetola is referred to hereinafter as the Individual Defendant. The Individual Defendant, because of his position with the Company, possessed the power and authority to control the contents of Discovery =s quarterly reports, press releases and presentations to securities analysts, money and portfolio managers and institutional investors, i.e., the market. The Individual Defendant was provided with copies of the Company =s reports and press releases alleged herein to be misleading prior to or shortly after their issuance and had the ability and opportunity to prevent their issuance or cause them to be corrected. Because of his position and access to material non-public information available to him, the Individual Defendant knew that the adverse facts specified herein had not been disclosed to and were being concealed from the public and that the positive representations which were being made were then materially false and misleading. The Individual Defendant is liable for the false statements pleaded herein, as those statements were each Agroup-published @ information, the result of the collective actions of the defendants. SUBSTANTIVE ALLEGATIONS Background 18. Discovery is a biotechnology company that develops proprietary surfactant technology as SRTs for respiratory diseases. Surfaxin, the Company’s lead product, is the first precision- engineered, protein B-based agent that mimics the surface-active properties of human surfactant. 4 Materially False And Misleading Statements Issued During The Class Period 19. The Class Period commences on December 28, 2005. At that time, Discovery announced that it had entered into an agreement to acquire the manufacturing operations of Laureate Pharma, Inc. in Totowa, New Jersey. The Company stated that the acquisition was “intended to provide Discovery with operational control and improved economics for the potential commercial and clinical production of Discovery’s lead product, Surfaxin, and its pipeline of precision engineered SRT products.” 20. Commenting on this acquisition, defendant Capetola stated: We are preparing our organization for the anticipated approval of Surfaxin in April 2006 and its commercial launch in the second quarter. We believe our Surfactant Replacement Therapy pipeline, with Surfaxin as the cornerstone, holds the promise to revolutionize the treatment of respiratory diseases and it is strategically important to control key operations of a pharmaceutical business – from the conduct of clinical trials to the quality of manufacturing to commercializing our products. We have an established development, clinical and regulatory infrastructure and we expect to complete the build of our United States commercial sales organization by the second quarter of 2006. With this manufacturing acquisition, we believe we will have secured the key strategic operations for Discovery to become a fully-integrated biotechnology company. 21. On January 26, 2006, Discovery stated: “Surfaxin has already received an Approvable Letter from the FDA for the prevention of RDS in premature infants and anticipates potential approval in April 2006.” 22. On February 23, 2006, Discovery announced financial results for the fourth quarter and year ended December 31, 2005. With respect to Surfaxin, defendant Capetola stated: This past quarter, we believe we have significantly strengthened our Company, both financially and operationally in preparation for the 5 potential FDA approval in April 2006 and U.S. commercial launch in the second quarter of 2006 of our lead product, Surfaxin. We have raised $29.0 million in capital, secured our own manufacturing operation – a key strategic asset for Surfaxin and our pipeline, and are now in the final stage of building our specialty neonatal U.S. commercial capability. Important to the development of our SRT pipeline, we established a strategic alliance with Chrysalis Technology (a division of Philip Morris USA) where we acquired rights to a novel aerosol generating technology being developed to enable the delivery of SRT to the deep lung. The successful application of our SRT and Chrysalis’ aerosol technology holds the promise, for the first time, of producing surfactant-based therapies that may revolutionize the treatment of serious respiratory conditions such as neonatal respiratory failure, acute lung injury, chronic obstructive pulmonary disorder, asthma, cystic fibrosis and others. 23. On March 16, 2006, Discovery filed its annual report with the SEC on Form 10-K for the year ended December 31, 2005. The Company’s Form 10-K was signed by defendant

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