THIS COMMON STOCK AND WARRANT PURCHASE AGREEMENT (this "Agreement") is

dated and entered into as of December 10, 2001, by and between DISCOVERY

LABORATORIES, INC., a Delaware corporation (the "Company"), and PHARMABIO

DEVELOPMENT INC., a North Carolina corporation ("Purchaser").



      WHEREAS, the Company and Purchaser have entered into an Investment and

Commission Agreement and a Loan Agreement, both dated as of the date hereof, and

the Company and Quintiles Transnational Corp., an Affiliate of the Purchaser,

have entered into a Commercialization Agreement also dated as of the date hereof

(together with this Agreement, and the Warrants, collectively, the "Transaction

Agreements"); and



      WHEREAS, in connection with the foregoing, Purchaser desires to acquire

and the Company is willing to issue and sell to Purchaser: shares of common

stock, $.001 par value per share, of the Company (the "Common Stock"); and

warrants to purchase shares of Common Stock as described herein, subject to the

terms and conditions specified herein;



      NOW, THEREFORE, for good and valuable consideration, the receipt and

sufficiency of which are hereby acknowledged by the parties, the parties agree

as follows:



                                    ARTICLE I

                                   DEFINITIONS



      1.01 Definitions. For purposes of this Agreement, in addition to the terms

defined elsewhere herein, the following terms shall have the meanings set forth

below:



      "Affiliate" shall mean, as to any person or entity, any corporation or

business entity controlled by, controlling, or under common control with such

party or entity. For this purpose, "control" shall mean direct or indirect

beneficial ownership of at least fifty percent (50%) of the voting stock or

income interest in such corporation or other business entity.



      "beneficial ownership" or "beneficially own" shall have the meaning given

under Rule 13d-3 promulgated under the Exchange Act.



      "Business Day" shall mean any day other than a Saturday, Sunday or legal

holiday on which banks in North Carolina and New York are open for the conduct

of their banking business.



{PAGE}



      "Closing" shall have the meaning specified in Section 2.02(a) herein.



      "Closing Date" shall have the meaning specified in Section 2.02(a) herein



      "Event of Default" shall have the meaning given such term in the Loan

Agreement.



      "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.



      "FFDCA" shall mean the United States Federal Food, Drug and Cosmetic Act,

as amended from time to time, and all regulations promulgated thereunder.



      "Five-Day Average Trading Price" of the Common Stock on any date shall

mean the average of the closing sales prices quoted on the Nasdaq SmallCap

Market for the five (5) trading days prior to such date.



      "knowledge" shall mean, when used with respect to the Company, the

knowledge of the executive officers and directors of the Company.



      "Loan Agreement" shall mean the Loan Agreement dated as of the date hereof

between the Company and Purchaser, as amended, modified or supplemented from

time to time.



      "Registrable Securities" shall mean (i) the Shares, (ii) the Warrant

Shares, and (iii) any Common Stock issued as a dividend or other distribution

with respect to, or in exchange for or in replacement of, such above-described

securities; provided however, that "Registrable Securities" shall not include

any securities sold by a person either pursuant to a registration statement or

Rule 144.



      "Rule 144" shall mean Rule 144 as promulgated by the SEC under the

Securities Act, as such Rule may be amended from time to time, or any similar

successor rule that may be promulgated by the SEC.



      "Securities Act" shall mean the Securities Act of 1933, as amended.



      "SEC" shall mean the Securities and Exchange Commission.



      "Shares" shall mean all shares of Common Stock of the Company issued at

the Closing.



      "Thirty-Day Average Trading Price" of the Common Stock on any date shall

mean the average of the closing sales prices quoted on the Nasdaq SmallCap

Market for the thirty (30) trading days prior to such date.



      "Warrants" shall mean the Class G and Class H Warrants described in

Section 2.01.





                                      -2-

{PAGE}



      "Warrant Shares" shall mean the shares issuable by the Company upon the

exercise of the Warrants.



                                   ARTICLE II

                         PURCHASE AND SALE OF THE SHARES



      2.01 Issuance of the Shares and Warrants.



            (a) Shares and Class G Warrant. Subject to the terms and conditions

of this Agreement, at the Closing, the Company agrees to issue and sell to

Purchaser, and Purchaser agrees to purchase from the Company for an aggregate

purchase price of $3,000,000:



                  (1) a number of shares of Common Stock equal to $3,000,000

divided by the higher of (x) 125% of the Thirty-Day Average Trading Price, and

(y) the Five-Day Average Trading Price, with any fractional share amount rounded

to the nearest whole share and with 0.5 shares or more rounded up; and



                  (2) a warrant to purchase 357,143 shares of Common Stock with

an initial exercise price equal to the higher of (x) 115% of the Thirty-Day

Average Trading Price, and (y) the Five-Day Average Trading Price, in form and

substance satisfactory to the parties (the "Class G Warrant").



            (b) Class H Warrant. Subject to the terms and conditions of this

Agreement, at the Closing, the Company agrees to issue to Purchaser a warrant to

purchase 320,000 shares of Common Stock with an initial exercise price equal to

the higher of (x) the Thirty-Day Average Trading Price, and (y) the Five-Day

Average Trading Price and a vesting schedule and otherwise in form and substance

satisfactory to the parties (the "Class H Warrant").



      2.02 Closing; Delivery of the Shares.



            (a) Closing.



                  (i) The purchase and sale of the Shares and Warrants shall

take place at a closing (the "Closing") to be held at the offices of Smith,

Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P., 2500 First Union Capitol

Center, Raleigh, NC 27601 at 10:00 a.m. Eastern Time on the date of this

Agreement, or at such other location, time and date as may be mutually agreed

upon by the parties (the "Closing Date"). The Closing shall take place

contemporaneously with the execution and delivery of this Agreement and the

other Transaction Agreements by the parties thereto.



                  (ii) At the Closing, subject to the terms and conditions

contained in this Agreement, in payment of the full purchase price for the

Shares and the Warrants, Purchaser shall provide a wire transfer of immediately

available funds to the Company in an amount equal to Three Million Dollars

($3,000,000) using the following wire transfer instructions:





                                      -3-

{PAGE}



                     Bank Name:        First Union National Bank

                                       Roanoke, Virginia (USA)

                     ABA No.:          051400549

                     Beneficiary:      First Clearing Corporation

                     Account No.:

                     To further credit Discovery Laboratories, Inc., Account No.



            (b) Delivery of Shares and Warrants. At the Closing, the Company

shall deliver the Class G Warrant and the Class H Warrant, and as soon as

reasonably practicable after the Closing the Company shall deliver a stock

certificate evidencing the Shares, all issued in the name of Purchaser and dated

as of the Closing Date.

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