InSite Vision Posts 3Q 2009 Financial Results

In a release on November 11, the Company noted that total revenue for the third quarter of 2009 was $2.2 million with a net loss of $3.1 million, or $0.03 per share.

"We completed the third quarter with a solid cash position and increased product revenues," said Louis Drapeau, InSite Vision's Chief Executive Officer. "AzaSite sales have been growing steadily through the efforts of our partner Inspire Pharmaceuticals, and beginning in the third quarter, our royalty rate on AzaSite increased by five percent to 25 percent. In addition, this year we have conserved fiscal resources, significantly reducing our costs as we evaluate strategic opportunities and execute our 2009 business objectives."

Recent Accomplishments and Events

- Prescriptions of AzaSite (azithromycin ophthalmic solution) 1 percent, InSite Vision's product for the treatment of bacterial conjunctivitis, increased by 50 percent over the third quarter 2008.

- Inspire Pharmaceuticals, InSite Vision's commercial partner for AzaSite in the U.S. and Canada, increased production of AzaSite in response to a temporary supply shortage of erythromycin ophthalmic ointment (0.5 percent). Erythromycin ophthalmic ointment is a macrolide antibiotic routinely used in neonates for prevention of ophthalmia neonatorum, a form of bacterial conjunctivitis that may be contracted by newborns during delivery. Inspire estimated that $1.0 - $1.5 million of third quarter AzaSite revenue resulted from the shortage.

- Beginning in August 2009, the royalty rate to InSite Vision on AzaSite sales increased from 20 percent to 25 percent per the terms of InSite's agreement with Inspire Pharmaceuticals.

- Besivance (besifloxacin ophthalmic suspension) 0.6 percent, the second commercial product to utilize InSite Vision's proprietary DuraSite drug delivery platform, is being marketed by InSite Vision's licensee, Bausch & Lomb and their partner, Pfizer Inc, for the treatment of bacterial conjunctivitis in patients one year and older. Beginning in November 2009, InSite Vision will receive a mid-single digit royalty from Bausch & Lomb on global net product sales of Besivance.

- Inspire Pharmaceuticals announced that enrollment is complete in one of two Phase 2 clinical trials of AzaSite for the treatment of blepharitis. Two randomized, placebo-controlled multi-center Phase 2 studies were initiated in May 2009 to evaluate the safety and efficacy of AzaSite for the treatment of blepharitis, an ocular disease characterized by inflammation of the eyelids. As of November 5, target enrollment of 300 patients had been reached in the four-week trial and 250 of 300 patients had been enrolled in the two-week trial. Inspire Pharmaceuticals is targeting completion of enrollment in the two-week trial in the first quarter of 2010.

- InSite Vision continued its work with Piper Jaffray & Co. to identify and evaluate strategic opportunities. A number of existing and more recent opportunities are under evaluation, and management will provide future updates, as appropriate.

Third Quarter 2009 Results Summary

Revenues for the quarter ended September 30, were $2.2 million compared to $1.0 million for the same period in 2008. Third quarter 2009 revenues included royalties from Inspire Pharmaceuticals of $2.2 million for sales of AzaSite compared to $0.9 million for the third quarter 2008. Royalties from Inspire Pharmaceuticals increased by $1.3 million compared to the same period in 2008 principally due to a 92 percent increase in AzaSite revenues recorded by Inspire.

Research and Development (R&D) expenses for the quarter ended September 30, were $1.0 million compared to $3.7 million in same period of 2008. Reduced R&D spending in the third quarter of 2009 was primarily driven by the completion of the first Phase 3 trial of ISV-502 in late 2008. In addition, the company incurred lower personnel-related expenses associated with the corporate restructurings which occurred in December 2008 and March 2009.

General and Administrative (G&A) expenses were $1.4 million in the third quarter of 2009, compared to $2.7 million for the same quarter in 2008. G&A expenses for the third quarter decreased primarily due to legal and other expenses related to the proxy contest in the third quarter of 2008. In addition, lower personnel-related expenses associated with the corporate restructurings were incurred.

InSite Vision had cash, cash equivalents and short-term investments of $26.7 million as of September 30. Total cash usage in the quarter ended September 30, was $1.7 million.

InSite Vision is committed to advancing new ophthalmologic products for unmet eye care needs.

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