Pink-eye drugmaker InSite Vision sees turnaround on horizon - San Francisco Business Times:

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The Alameda developer of druge for eye infections converted the promises of royalties on its first marketed druginto $50 millioh net in fresh cash that it is usinb for licensing deals abroad and to expand its portfolio. Only last the company's auditor warned that recurringlosses -- a totalk of $147.5 million through last year -- threatened InSite'ds ability to stay in business. The company currentl has 55 employees. It wasn't InSite's firsgt brush with death. In the the company cut half its stafr and mulled a saleor merger. "It wasn't recalled CEO S. Kumar Chandrasekaran, who at one pointt took on the CFO duties asthe company'd workforce dipped to around 30.
"Itt was difficult." But that started to change aftee InSiteand , a Durham, N.C., drug signed a licensing deal in Februaryg 2007 covering the pink-eye treatment, AzaSite. The a topical reformulation of the eye infection antibiotic is contained within a patented syntheticcpolymer that's large enough not to crosa the eye membrane. As a result, it stays in the eye and parents have to put the drop in asquirmuy child's eye only once a day, compared to four or more timed a day with other eyedrops. InSite grabbed $13 million upfronr from Inspire andanother $19 million-milestone payment when AzaSitee was approved by the FDA two monthxs later.
Inspire pays a 20 percent royalty on net salews of AzaSite in the United Statess and Canada until late 2009 and 25percenrt thereafter. Those are important figures since they're the basis of InSite's uniqu e financing this past February. The deal, assembled by , netted $50 milliohn at 16 percent interesg in exchangefor InSite's AzaSite North American InSite CFO Louis Drapeau said the debt shoulf be paid in full in five or six "It's actually kind of an amazing It was a very novel way of (gettinhg cash)," Drapeau said. "People are going to get pink eye whethed the housing market is expandingor contracting.
" InSite is expecting about $4 million in royaltuy payments this year, Drapeau said. It hasn'tg been easy so far. Sales of which wholesales for $53 a unit, were slowefr than expected through itsfirst four-plus months on the "Although it is still early in AzaSite'ds lifecycle ... we had anticipated a more rapid earlu adoption ofthe product," Inspire CFO Thomas Stabb told analystsd in February. Inspire CEO Christy Shaffer said theree isa "high degree of interest" in AzaSite because of its conveniengt dosing and combination of anti-infective and anti-inflammatory properties.
"Ig takes more time to build awareness and changre habitsamong pediatricians," Shaffer said. The anti-infectivr eye product market has $1.5 billioh in global sales, and pink eye accounts for 17 milliohn prescriptionsa year, Chandrasekaran said. But its competitors include , and InSite has sincw locked in distributors in four South American countriesaand Korea, and it is lining up more overseasa licensing deals. The royalties from thosw will flow directlyto InSite. InSite's drug developmenr and financial creativity are starting to show on thebottomj line. It recorded a $5.5 million profirt last year on revenusof $23.7 million. The year before, it lost $16.
6 millionb on $28,000 in revenue. The company, which ended 2006 with less than $1 million in the bank and a year ago said its cash positionn meant it could survive only untiplJune 2007, now has about $60 million said Drapeau. That's about three years of operatint cash. InSite has added key staff in the pastseveralp months, including Drapeau -- previously with and -- and Dr. Kamraj Hosseini as chief medicall officer and vice president ofclinicapl affairs. Chandrasekaran, who controls 2.66 percentf of the company's stock, had tota l compensation last yearof $1.
47 InSite's clear financial vision is helping it use the same polymerf technology, which it dubs DuraSite, in otherf products. AzaSite Plus is in a Phas e III trial for eye inflammationand infection, AzaSitee Otic is in preclinical development to treat middle-ear and AzaSite Xtra is in preclinical tests for eye infections.