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ISTA Pharmaceuticals, Inc. (ISTA) Reports First Quarter 2012 Financial Results


5/4/2012 8:17:06 AM

IRVINE, CA--(Marketwire - May 03, 2012) - ISTA Pharmaceuticals, Inc. (NASDAQ: ISTA), today reported on recent events and financial results for the quarter ended March 31, 2012.

Recent Events

  • On March 26, 2012, ISTA entered into a definitive merger agreement with Bausch + Lomb Incorporated, the global eye health company, pursuant to which Bausch + Lomb will acquire ISTA for $9.10 per share in cash, or a total of approximately $500 million. The transaction, which has been unanimously approved by the board of directors of both companies, is expected to close in the second quarter of 2012. The closing of the transaction is subject to customary closing conditions, including the approval of ISTA's stockholders.
  • ISTA and Senju Pharmaceuticals Co. Ltd (Senju) came to agreement on disputed royalty payments for XIBROM (bromfenac ophthalmic solution)® 0.09% and BROMDAY™ (bromfenac ophthalmic solution) 0.09%, both for the treatment of postoperative inflammation and reduction of ocular pain in patients who have undergone cataract extractions. The settlement resulted in a one-time payment of $24 million to Senju and a one-time decrease to ISTA's cost of products sold of $9.3 million for the first quarter of 2012. As part of the settlement, ISTA's royalty rates to be paid on BROMDAY in 2012 and 2013 were reduced.

First Quarter 2012 Financial Highlights

                                                                            
                                Net Revenues                                
                                                                            
                   (in millions, except percentage data)                    
                                                                            
                                   Quarter Ended    Quarter Ended           
                                     March 31,        March 31,             
                                        2012             2011        Change 
                                   -------------    -------------    ------ 
BROMDAY / XIBROM                   $        19.1    $        23.0       -17%
BEPREVE                                      6.1              4.2        45%
ISTALOL                                      5.8              6.2        -6%
VITRASE                                      3.0              3.3        -9%
                                   -------------    -------------           
Total net revenues                 $        34.0    $        36.7        -7%
                                   =============    =============           

Net revenues were approximately $34.0 million and $36.7 million for the three months ended March 31, 2012 and March 31, 2011, respectively. The decrease in revenues for the three months ended March 31, 2012 as compared to the three months ended March 31, 2011 is primarily due to lower sales of bromfenac products and higher rebates recorded due to higher utilization under our managed care contracts and higher return reserves for XIBROM™ in 2012 (approximately $1.1 million), offset by higher 2012 sales of BEPREVE®. The decrease in bromfenac product sales results from higher units shipped in 2011 as we had just launched BROMDAY and continued to ship XIBROM prior to discontinuing the product in February 2011.

Gross margin for the first quarter ended March 31, 2011 was 107%, or $36.3 million, as compared to 75%, or $27.5 million, for the same period in 2011. The increase in gross margin for the first quarter of 2012 as compared to prior year was due to the one-time decrease of $9.3 million in cost of products sold resulting from the Senju royalty settlement. Excluding the settlement, gross margin for the first quarter of 2012 would have been 79%, driven by lower royalty rates on BROMDAY and growth in revenues for BEPREVE.

Research and development (R&D) expenses for the first quarter ended March 31, 2012 were $9.5 million, as compared to $10.3 million during the corresponding period of 2011 primarily due to the timing associated with the initiation and completion of various clinical studies. Selling, general, and administrative (SG&A) expenses for the first quarter ended March 31, 2012 increased to $28.4 million from $26.9 million for the corresponding period in 2011. The increase primarily reflects higher marketing, litigation and stock-based compensation expenses. SG&A expenses include $3.9 million of costs associated with evaluation of our strategic options during the three months ended March 31, 2012 as compared to $4.5 million of costs incurred in 2011 in connection with financing and due diligence activities to pursue a potential acquisition of a company with marketed products.

Under accounting principles generally accepted in the United States (GAAP), the net loss for the first quarter ended March 31, 2012 was $17.8 million, or $0.43 per share, impacted primarily by a non-cash warrant valuation adjustment of $13 million resulting primarily from a 28% increase in the Company's stock price. On an adjusted cash net basis, excluding non-cash interest expense, stock-based compensation expenses, non-cash warrant and derivative valuation adjustments and other non-recurring items such as expenses incurred in connection with the evaluation of its strategic options, ISTA had adjusted cash net income of $3.1 million, or $0.06 per share, based on 50.9 million fully diluted shares outstanding.

At March 31, 2012, ISTA had cash of $54 million, which included $15 million under ISTA's revolving line of credit with Silicon Valley Bank. Cash decreased by $24 million due to payments made to Senju during the quarter.

Conference Call

ISTA will not hold a conference call regarding the results for the quarter ended March 31, 2012 and other matters referenced in this release because of the pending acquisition of ISTA by Bausch +Lomb.

ABOUT ISTA PHARMACEUTICALS

ISTA Pharmaceuticals, Inc. is the third largest branded prescription eye care business in the United States with an expanding focus on allergy therapeutics. ISTA currently markets four products, including treatments for ocular inflammation and pain post-cataract surgery, glaucoma and ocular itching associated with allergic conjunctivitis. The Company's development pipeline contains additional candidates in various stages of development to treat dry eye, ocular inflammation and pain, and nasal allergies. Headquartered in Irvine, California, ISTA generated revenues of $160 million in 2011. For additional information about ISTA, please visit the corporate website at www.istavision.com.

BROMDAY™ (bromfenac ophthalmic solution) 0.09%, XIBROM (bromfenac ophthalmic solution)® 0.09%, ISTALOL® (timolol maleate ophthalmic solution) 0.5%, VITRASE® (hyaluronidase injection) Ovine, 200 USP Units/mL, BEPREVE® (bepotastine besilate ophthalmic solution) 1.5%, PROLENSA™ (bromfenac ophthalmic solution), BEPOMAX™ (bepotastine besilate nasal spray) and BEPOSONE™ (bepotastine besilate/steroid combination nasal spray) are trademarks of ISTA Pharmaceuticals, Inc.

Full prescribing information for BROMDAY is available on ISTA Pharmaceuticals' website at http://www.istavision.com/pdf/BROMDAYPI101008.pdf

Full prescribing information for BEPREVE is available on ISTA Pharmaceuticals' website at http://www.istavision.com/pdf/Bepreve_insert.pdf

Full prescribing information for ISTALOL is available on ISTA Pharmaceuticals' website at http://www.istavision.com/pdf/Istalol_Full_PI-ISL274.pdf

Full prescribing information for VITRASE is available on ISTA Pharmaceuticals' website at http://www.istavision.com/pdf/vitrase200_package_insert.pdf

ADDITIONAL INFORMATION AND WHERE TO FIND IT

The proposed acquisition by Bausch +Lomb will be submitted to the stockholders of ISTA for their consideration. In connection with the proposed transaction, ISTA filed a preliminary proxy statement with the Securities and Exchange Commission (SEC) on April 23, 2012. ISTA and Bausch + Lomb plan to file with the SEC other documents regarding the proposed transaction. STOCKHOLDERS OF ISTA ARE URGED TO READ THE PRELIMINARY PROXY STATEMENT REGARDING THE PROPOSED TRANSACTION IN ITS ENTIRETY AND TO READ THE DEFINITIVE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. The definitive proxy statement will be mailed to ISTA's stockholders. You may obtain copies of all documents filed with the SEC concerning the proposed transaction, free of charge, at the SEC's website at www.sec.gov. In addition, stockholders may obtain free copies of the documents filed with the SEC by ISTA by contacting ISTA Investor Relations at 949-789-3159 or jherbert@istavision.com or by calling proxy solicitor Georgeson Inc. toll-free at 1-(888) 293-6812.

ISTA and its directors and executive officers may be deemed to be participants in the solicitation of proxies from ISTA's stockholders with respect to the transactions contemplated by the merger agreement. Information regarding ISTA's directors and executive officers is contained in ISTA's Annual Report on Form 10-K for the year ended December 31, 2011, its proxy statement for its 2011 annual meeting of stockholders dated November 1, 2011, and its Current Report on Form 8-K filed December 6, 2011, which are filed with the SEC. Additional information regarding persons who may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction is contained in the preliminary proxy statement filed by ISTA with the SEC on April 23, 2012. As of March 24, 2012, ISTA's directors and officers beneficially owned approximately 5,509,411 shares, or 13.15%, of ISTA's common stock.

FORWARD-LOOKING STATEMENTS

Any statements contained in this press release that refer to future events or other non-historical matters are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Reform Act of 1995. Without limiting the foregoing, but by way of example, statements contained in this press release related to the pending transaction between Bausch + Lomb and ISTA and the expected timetable for completing the transaction are forward-looking statements. Except as required by law, ISTA disclaims any intent or obligation to update any forward-looking statements. These forward-looking statements are based on ISTA's expectations as of the date of this press release and are subject to risks and uncertainties that could cause actual results to differ materially. Important factors that could cause actual results to differ from current expectations are detailed from time to time in ISTA's public filings with the U.S. Securities and Exchange Commission, including but not limited to ISTA's Annual Report on Form 10-K for the year ended December 31, 2011, as amended.

                                                                            
                         ISTA PHARMACEUTICALS, INC.                         
                     Unaudited Statement of Operations                      
                   (in thousands, except per share data)                    
                                                                            
                                               Three Months Ended March 31, 
                                               ---------------------------- 
                                                    2012           2011     
                                               -------------  ------------- 
Revenues:                                                                   
     Product sales, net                        $      34,012  $      36,720 
                                               -------------  ------------- 
Total revenues                                        34,012         36,720 
Cost of products sold (including one-time                                   
 adjustment of $9,312 for royalty settlement                                
 for the three months ended March 31, 2012)           (2,264)         9,216 
                                               -------------  ------------- 
Gross profit                                          36,276         27,504 
Costs and expenses:                                                         
     Research and development                          9,491         10,344 
     Selling, general and administrative              28,396         26,931 
                                               -------------  ------------- 
Total costs and expenses                              37,887         37,275 
                                               -------------  ------------- 
Loss from operations                                  (1,611)        (9,771)
Other expense :                                                             
     Interest expense                                 (1,440)        (2,068)
     Loss on derivative valuation                     (1,745)             - 
     Loss on warrant valuation                       (13,009)       (72,234)
                                               -------------  ------------- 
Total other expense                                  (16,194)       (74,302)
                                               -------------  ------------- 
Net loss                                       $     (17,805) $     (84,073)
                                               =============  ============= 
Net loss per common share, basic and diluted   $       (0.43) $       (2.49)
                                               =============  ============= 
Shares used in computing net loss per common                                
 share, basic and diluted                             41,786         33,715 
                                               =============  ============= 
                                                                            
                                                                            
                         ISTA PHARMACEUTICALS INC.                          
                  Unaudited Summary of Balance Sheet Data                   
                               (in thousands)                               
                                                                            
                                                 March 31,     December 31, 
                                                    2012           2011     
                                               -------------  ------------- 
Cash and cash equivalents                      $      53,692  $      71,593 
Working capital                                        2,154          2,265 
Total assets                                         124,736        153,091 
Current portion of Facility Agreement                 21,450         21,450 
Facility Agreement, net of current portion and                              
 unamortized discounts and derivatives                24,220         21,975 
Warrant Liability                                     53,139         40,130 
Total liabilities                                    189,571        202,164 
Total stockholders' deficit                          (64,835)       (49,073)

Non-GAAP Financial Measures

ISTA believes the metric "adjusted cash net income (loss) and adjusted cash EPS excluding non-cash interest expense, stock option expense, non-cash warrant and derivative valuation adjustments and other non-recurring items," are useful financial measures for investors in evaluating the Company's performance for the periods presented. ISTA's management believes the presentation of these non-GAAP financial measures provides useful information to the Company and to investors regarding ISTA's results of operations as these non-GAAP financial measures allow better evaluation of ongoing business performance. These metrics, however, are not a measure of financial performance under accounting principles generally accepted in the United States (GAAP) and should not be considered a substitute for net income (loss) or EPS in accordance with GAAP and may not be comparable to similarly titled measures reported by other companies. For a reconciliation of net loss to adjusted cash net income (loss), see the table below.

                                                                            
                         ISTA PHARMACEUTICALS, INC.                         
     Reconciliation of GAAP Net Loss to Adjusted Cash Net Income (Loss)     
                               (in thousands)                               
                                                                            
                                               Three Months Ended March 31, 
                                               ---------------------------- 
                                                    2012           2011     
                                               -------------  ------------- 
Net loss                                       $     (17,805) $     (84,073)
Add:                                                                        
Stock-based compensation costs                         1,534          1,017 
Amortization of deferred financing costs                 188            267 
Amortization of discounts on Facility                                       
 Agreement                                               500            712 
Change in value of warrants related to                                      
 Facility Agreement                                   13,009         72,234 
Change in value of derivative related to                                    
 Facility Agreement                                    1,745              - 
                                               -------------  ------------- 
Cash net loss                                           (829)        (9,843)
Add:                                                                        
Costs associated with strategic review process         3,934              - 
Costs associated with attempted acquisition                -          4,506 
                                               -------------  ------------- 
Adjusted cash net income (loss)                $       3,105  $      (5,537)
                                               =============  ============= 
                                                                            
                                                                            
Net loss per share - basic and diluted         $       (0.43) $       (2.49)
                                               =============  ============= 
Adjusted cash net income (loss) per share -                                 
 basic                                         $        0.07  $       (0.16)
                                               =============  ============= 
Adjusted cash net income (loss) per share -                                 
 diluted                                       $        0.06  $       (0.16)
                                               =============  ============= 
                                                                            
Shares used in computing adjusted cash net                                  
 loss per common share, basic                         41,786         33,715 
                                               =============  ============= 
Shares used in computing adjusted cash net                                  
 loss per common share, diluted                       50,899         33,715 
                                               =============  ============= 
                                                                            

For Investor Relations:
Lauren Silvernail
949-788-5302
lsilvernail@istavision.com

Jeanie Herbert
949-789-3159
jherbert@istavision.com

Kathy Galante
Burns McClellan
212-213-0006
kgalante@burnsmc.com

For General Media:
Justin Jackson
Burns McClellan
212-213-0006
jjackson@burnsmc.com

For Trade Media:
Tad Heitmann
BioComm Network
714-273-2937
theitmann@BioCommNetwork.com

Web Site: http://www.istavision.com


Read at BioSpace.com


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