InSite Vision first quarter total revenues decrease to $2.3 million

InSite Vision Incorporated (OTCBB:INSV) today reported financial results for the quarter ended March 31, 2012. Total revenues for the first quarter of 2012 were $2.3 million, a decrease of $0.8 million from the same quarter of 2011. InSite Vision had cash, cash equivalents and short-term investments of $22.3 million as of March 31, 2012, reflecting cash usage of $4.1 million in the quarter. During the first quarter of 2012, $2.1 million of cash was used for the AzaSite Plus^™ and DexaSite^™ Phase 3 DOUBle clinical trial.    

"The first quarter was one of progress against our product development objectives to advance innovative ophthalmic therapeutics that we believe will provide a meaningful benefit to patients," said Timothy Ruane, InSite's Chief Executive Officer. "Enrollment in the Phase 3 DOUBle clinical study of AzaSite Plus and DexaSite for the treatment of blepharitis continues to go smoothly. We have recently conducted highly productive meetings with the Food and Drug Administration to discuss the regulatory path forward for both BromSite and DexaSite, which we expect will move forward into Phase 3 clinical trials later this year. However, we continue to be disappointed in Merck's commercialization results for AzaSite as our royalties are down significantly from a year ago. We are in communications with Merck to identify and develop a strategy designed to restore AzaSite prescription growth as soon as possible."

Corporate and Commercial Highlights

• AzaSite^® (azithromycin ophthalmic solution) 1% royalties for the first quarter of 2012 were $1.9 million compared to $2.7 million in same period of 2011. The decline in the AzaSite royalties is due to a continuing reduction in prescriptions for AzaSite in the United States since the acquisition of Inspire Pharmaceuticals by Merck in May 2011. AzaSite is approved for the treatment of bacterial conjunctivitis.
• InSite recorded approximately $400 thousand in royalty revenues associated with Besivance^® (besifloxacin ophthalmic suspension) 0.6%, compared to $200 thousand in same period of 2011. Besivance is marketed globally by Bausch + Lomb for the treatment of bacterial conjunctivitis.
• Enrollment continues on track in InSite's Dual Ophthalmic agents Used in Blepharitis (DOUBle) Phase 3 pivotal trial to evaluate AzaSite Plus and DexaSite simultaneously for the treatment of blepharitis. As of April 26, 2012, InSite had enrolled 515 patients in the DOUBle study and expects to complete the trial and announce top-line results in late 2012 or early 2013. The DOUBle study seeks to enroll approximately 900 patients suffering from moderate-to-severe blepharitis in a four-arm trial designed to evaluate the efficacy and safety of both product candidates. InSite Vision obtained a Special Protocol Assessment from the U.S. Food and Drug Administration (FDA) in May 2011 for the design of the DOUBle pivotal trial.
• In February, InSite announced that following a discussion with the FDA, the company will conduct a Phase 3 study of DexaSite against the DuraSite vehicle to confirm DexaSite's efficacy against belpharitis. The DexaSite study will be conducted in parallel with the ongoing DOUBle study. InSite plans to begin this trial in the second half of this year.
• In February, InSite completed an end-of-Phase 2 meeting with the FDA to discuss the Phase 3 protocol for BromSite™ (ISV-303), InSite's product candidate for the treatment of post-surgical ocular inflammation. The company plans to initiate a Phase 3 program evaluating BromSite against the DuraSite vehicle this year with results expected in early 2013.
• In January 2012, the University of California, San Francisco (UCSF) filed an appeal of the judgment in favor of InSite by the United States Patent and Trademark Office (USPTO), which confirmed inventorship of InSite's U.S. Patent Nos. 6,239,113 and 6,569,443 protecting AzaSite. InSite will continue to defend its patents vigorously and believes that the UCSF appeal is without merit.

First Quarter 2012 Results Summary

Total revenues decreased by $0.8 million to $2.3 million for the first quarter of 2012 compared to $3.1 million in the same period in 2011. The decrease was primarily due to a 30 percent decrease in AzaSite royalties from Merck compared to the same period last year. The decrease was partially offset by a $0.2 million increase in royalties from net sales of Besivance.

Research and development expenses for the first quarter of 2012 were $4.0 million compared to $1.2 million in the same period in 2011. The increase was primarily related to the DOUBle Phase 3 clinical trial. General and administrative expenses for the first quarter of 2012 were $1.4 million compared to $1.2 million in the same period in 2011. The difference was primarily related to slightly higher personnel-related costs due to an increase in headcount to support InSite's late-stage clinical development activity. The change in fair value of warrant liability resulted in income of $1.0 million in the first quarter of 2012. The income resulted from a decrease in the fair value warrant liability, which was due to a decrease in the company's stock price.

Net loss for the first quarter of 2012 was $4.8 million, or $0.04 per share, compared to a net loss of $2.4 million, or $0.03 per share, in the first quarter of 2011.