InSite Vision second quarter total revenues decrease to $1.8 million

InSite Vision IncorporatedJul 31 2012

InSite Vision Incorporated (OTCBB:INSV) today reported financial results for the quarter ended June 30, 2012. Total revenues for the second quarter of 2012 were $1.8 million, a decrease of $1.3 million from the same quarter of 2011. InSite Vision had cash, cash equivalents and short-term investments of $17.6 million as of June 30, 2012, reflecting cash usage of $4.7 million in the quarter, which included $2.2 million for the AzaSite Plus^™ and DexaSite^™ Phase 3 DOUBle clinical trial.

"The first half of this year has been focused on clinical development execution," said Tim Ruane, InSite's Chief Executive Officer. "The Phase 3 DOUBle clinical study of AzaSite Plus and DexaSite for the treatment of blepharitis is accruing ahead of schedule and we are preparing to initiate our Phase 3 clinical trial of BromSite for post-surgical pain and inflammation. We anticipate a busy second half of the year as our late-stage pipeline programs advance through pivotal studies."

Corporate and Commercial Highlights

• 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 July 24, 2012, InSite had enrolled 826 patients in the DOUBle study and expects to complete the trial and announce top-line results in late 2012 or early 2013.
  
  InSite's blepharitis product candidates utilize the company's proprietary DuraSite platform to extend the residence time of the drug beyond conventional eye drops. AzaSite Plus is a fixed-dose combination of an antibiotic (1.0% azithromycin) and an anti-inflammatory steroid (0.1% dexamethasone), and DexaSite is a DuraSite formulation of 0.1% dexamethasone. 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 the second quarter, InSite continued preparations for the Phase 3 clinical study of BromSite™ (bromfenac ophthalmic solution 0.075%) for the treatment of post-surgical ocular inflammation. The company selected Pharm-Olam International to serve as the contract research organization for the study and completed manufacturing all clinical trial supplies. The Phase 3 pivotal trial will evaluate BromSite against the DuraSite vehicle for reducing post-surgical pain and inflammation with results expected in late 2012 or early 2013.
• InSite decided in the second quarter to delay the initiation of its planned Phase 3 study of DexaSite until further notice in order to conserve fiscal resources and focus on the execution of the Phase 3 DOUBLe and BromSite clinical trials.
• AzaSite^® (azithromycin ophthalmic solution) 1% royalties for the second quarter of 2012 were $1.3 million compared to $2.6 million in same period of 2011. AzaSite is marketed in North America by Merck for the treatment of bacterial conjunctivitis. 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. The $1.3 million in AzaSite royalties is not sufficient for our subsidiary to fully make the interest payments due to the holders of the AzaSite Notes on August 15, 2012. We could make-up this shortfall with our own cash resources, but we have not yet made a decision to do so.
• In the second quarter of 2012, InSite recorded $0.5 million in royalty revenues associated with Besivance^® (besifloxacin ophthalmic suspension) 0.6%, compared to $0.3 million in same period of 2011. Besivance is marketed globally by Bausch + Lomb for the treatment of bacterial conjunctivitis.

Second Quarter 2012 Results Summary

Total revenues decreased to $1.8 million for the second quarter of 2012 compared to $3.1 million in the same period in 2011. The decrease was primarily due to a 50 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 second quarter of 2012 were $4.8 million compared to $1.4 million in the same period in 2011. The increase was primarily related to the DOUBle Phase 3 clinical trial and preparation for the BromSite Phase 3 clinical trial. General and administrative expenses for the second quarter of 2012 were $1.4 million compared to $1.5 million in the same period in 2011. The difference is primarily due to legal expenses pertaining to patent litigation that were incurred in 2011. The change in fair value of the warrant liability resulted in non-cash income of $0.2 million in the second 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 second quarter of 2012 was $6.8 million, or $0.05 per share, compared to a net loss of $2.8 million, or $0.03 per share, in the second quarter of 2011.