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InSite Vision’s Third Quarter 2008 Financial Results out; bye bye to S. Kumar Chandrasekaran with $1.3M

By Amarendra Bhushan for CEOWORLD Magazine Updated:November 6, 2008

InSite Vision Incorporated (AMEX:ISV) today announced that Louis Drapeau, the company’s Vice President and Chief Financial Officer, has been appointed interim Chief Executive Officer. S. Kumar Chandrasekaran, Ph.D., will step down as Chief Executive Officer, effective immediately. Mr. Drapeau will lead the day-to-day operations of the company while retaining his current CFO responsibilities. An active CEO search has been initiated. In addition, Evan Melrose, M.D., Managing Director of PTV Sciences has been named Chairman of the Board.

“On behalf of the Board, I would like to thank Dr. Chandrasekaran for his many years of leadership and dedication to InSite Vision, building a legacy of valuable technology, product applications and intellectual property,” said Dr. Melrose, Chairman of the Board, InSite Vision . “Mr. Drapeau brings extensive biotechnology senior management experience, having previously held leadership positions with Nektar Therapeutics and BioMarin Pharmaceuticals. This background, plus his knowledge of InSite Vision, will ensure a smooth transition and enable him to provide strong guidance for the company in the coming months. The Board and I look forward to working with Lou to execute on strategic priorities that will position this company for future growth and drive value for patients and shareholders.”

“InSite Vision is in a position to deliver new and valuable ophthalmic products to patients,” stated Louis Drapeau, InSite’s interim CEO. “I am excited about the opportunity to work closely with Evan, the Board and the employees of InSite to build on what is a strong foundation in ophthalmic care.”

S. Kumar Chandrasekaran, Ph.D.
Chairman of the Board, President, Chief Executive Officer

S. Kumar Chandrasekaran joined us in September 1987 as Vice President, Development. From 1988 to 1989, Dr. Chandrasekaran served as Vice President, Research and Development. From 1989 to 1993, he served as President and Chief Operating Officer. Since August 1993, Dr. Chandrasekaran has served as Chairman of the Board of Directors, President, and Chief Executive Officer. Dr. Chandrasekaran holds a Ph.D. in Chemical Engineering from the University of California, Berkeley.

Louis Drapeau
Vice President and Chief Financial Officer

Louis Drapeau joined InSite Vision in October 2007. Prior to InSite Vision, he served as Chief Financial Officer, Senior Vice President, Finance, at Nektar Therapeutics, a biopharmaceutical company headquartered in San Carlos, California. Prior to Nektar, he served as Acting Chief Executive Officer from August 2004 to May 2005 and as Senior Vice President and Chief Financial Officer from August 2002 to August 2005 for BioMarin Pharmaceutical Inc. Previously, Drapeau spent 30 years at Arthur Andersen including 19 years as an Audit Partner in Arthur Andersen’s Northern California Audit and Business Consulting practice which included 12 years as Managing Partner.

Drapeau received both his undergraduate degree in mechanical engineering and a Masters in Business Administration from Stanford University. He serves as a Director of Bio-Rad Laboratories, InterMune, Inc., BioNovo Inc. and Inflazyme Pharmaceuticals Ltd.

Dr. Evan Melrose

Dr. Melrose has served as Managing Director at PTV Sciences, a healthcare venture capital firm, since January 2003. From January 2000 to January 2003, Dr. Melrose was a Director with Burrill & Company, a San Francisco-based life sciences venture capital firm. Prior, Dr. Melrose was involved in health care startups in Philadelphia and clinical private practice. Over the course of his healthcare investment career he has been directly involved in multiple initial public offerings, several acquisitions, and several dozen private healthcare investments. Dr. Melrose has held faculty appointments at the University of California, San Francisco, the University of Pennsylvania and Baylor College of Medicine. He currently serves on the Board of Bioform Medical, Inc.

Dr. Melrose received his B.A. from the University of Pennsylvania, his M.D. from Indiana University and his M.B.A. from the Wharton School of the University of Pennsylvania.

About InSite Vision

InSite Vision develops novel ocular pharmaceutical products using its DuraSite(R) bioadhesive polymer core technology to enable topical delivery and sustained release of existing drug molecules for reduced frequency of treatment and improved efficacy. By formulating the well-established antibiotic azithromycin in DuraSite, InSite developed the lowest-dosing ocular antibiotic available to the United States ophthalmic market, AzaSite(R) (azithromycin ophthalmic solution) 1%, launched by Inspire Pharmaceuticals in the United States for the treatment of bacterial conjunctivitis (pink eye). In addition, InSite has signed licensing and distribution agreements with Shin Poong Pharm in South Korea; Bioceutica, Inc. for four countries in South America; Biem, for Turkey; and Essex for China; and is seeking other international partners for commercialization and distribution of AzaSite.

Recent Highlights

InSite Vision announced yesterday that Louis Drapeau, the company’s Vice President and Chief Financial Officer, has been appointed interim Chief Executive Officer. Mr. Drapeau is replacing Dr. S. Kumar Chandrasekaran who stepped down recently as CEO. Mr. Drapeau has served as InSite’s Chief Financial Officer since October of 2007. Previously, he held leadership positions with Nektar Therapeutics and BioMarin Pharmaceuticals where he served as interim CEO. He will lead the day-to-day operations of the company while retaining his current CFO responsibilities. An active search has been initiated for a permanent CEO. In addition, Evan Melrose, M.D., Managing Director of PTV Sciences, has been named Chairman of the Board.

InSite Vision announced today that patient dosing in the first of two pivotal Phase 3 clinical trials for ISV-502 is complete. ISV-502, formulated in InSite’s patented DuraSite(R) sustained delivery vehicle, is a topical combination antibiotic/corticosteroid product that is being developed to provide simultaneous antimicrobial and anti-inflammatory treatments. ISV-502 is directed at blepharoconjunctivitis, a chronic inflammatory disease of the inside and outside of the eyelid, as well as the white part of the eye, for which there is no approved drug therapy. ISV-502 is targeted at meeting this unmet need by conveniently treating both the infection and inflammation associated with blepharoconjunctivitis with one easy-to-use product.

Revenue for the third quarter 2008 included royalty revenue from Inspire Pharmaceuticals of $944,000 for sales of AzaSite(R) (azithromycin ophthalmic solution) 1%, or an increase of 16% over the second quarter of 2008; and 147% over the first quarter of 2008.

In September, following the annual shareholder meeting, six new members were elected to the InSite Vision Board of Directors.

The Board of Directors and InSite Vision’s senior management team are working closely to update the company’s strategic plans to capitalize on InSite Vision’s valuable technology and intellectual property based on a careful analysis of corporate assets.

Third Quarter 2008 Financial Results

The company reported total revenue for the three months ended September 30, 2008 of $1.0 million, compared to $8.3 million in the third quarter ended September 30, 2007.

The net loss for the third quarter ended September 30, 2008 was $8.0 million, or $(0.08) per share, compared to net income of $3.6 million, or $0.04 per share, for the third quarter of 2007.

The differences in revenue and net income between the third quarter of 2008 and third quarter of 2007 were attributed mainly to the decrease in revenue from the non-cash amortization of the upfront license fee and milestone payment received in 2007 under the company’s license agreement with Inspire Pharmaceuticals. The amortization of the upfront license fee and milestone payment ended in the second quarter of 2008.

In addition, the company incurred higher research and development (R&D) expenses for the third quarter 2008 largely due to the Phase 3 pivotal trial expenses for the ISV-502 product candidate. Research and development expenses increased to $3.7 million in the third quarter 2008, compared to $2.7 million in the third quarter 2007.

General and administrative (G&A) expenses were $2.7 million in the third quarter 2008, compared to $1.5 million in the third quarter 2007. The increase was largely due to expenses associated with the proxy contest over the election of the Board of Directors on September 23, 2008.

InSite Vision had cash and cash equivalents and restricted cash and short-term investments of $45.7 million as of September 30, 2008, compared to $53.0 million as of June 30, 2008. Cash usage included increased operating expenses due to the ISV-502 pivotal Phase 3 trials, an interest payment on the non-recourse notes issued in the first quarter 2008, and expenditures associated with the proxy contest.

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