`
`Form 10-K
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`10-K 1 d275317d10k.htm FORM 10-K
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`Table of Contents
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`
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`UNITED STATES
`SECURITIES AND EXCHANGE COMMISSION
`Washington, D.C. 20549
`
`Form 10-K
`
`x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
`EXCHANGE ACT OF 1934
`
`
`
`
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`For Fiscal Year Ended December 31, 2011
`
`or
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`
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`¤ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
`EXCHANGE ACT OF 1934
`
`From the transition period from to
`
`Commission File Number 001-35396
`
`ISTA PHARMACEUTICALS, INC.
`
`(Exact name of registrant as specified in its charter)
`
`
`Delaware
`(State or other jurisdiction of
`incorporation or organization)
`
`
`
`
`
`33-0511729
`(I.R.S. Employer
`Identification No.)
`
`50 Technology Drive, Irvine, California 92618
`(Address of principal executive offices)
`
`(949) 788-6000
`(Registrant’s telephone number)
`
`Securities registered pursuant to Section 12(b) of the Act:
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`
`
`Title of Each Class
`Common Stock, $0.001 par value
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`
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`Name of Each Exchange on Which Registered
`The NASDAQ Stock Market LLC
`
`
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`Securities registered pursuant to Section 12(g) of the Act:
`None
`
`Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
`Act. Yes ¤ No x
`
`Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
`Act. Yes ¤ No x
`
`Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
`Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required
`to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¤
`
`Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any,
`every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
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`SENJU EXHIBIT 2199
`LUPIN v. SENJU
`IPR2015-01097
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`4/44 7/77 2015
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`Form 10-K
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`chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
`files). Yes x No ¤
`
`Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this
`chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or
`information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K x
`
`Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a
`smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting
`company” in Rule 12b-2 of the Exchange Act.
`
`Large accelerated filer ¤
`
` Accelerated filer
`
` ¤
`
`Non-accelerated filer ¤ (Do not check if a smaller reporting company)
`
` Smaller reporting company x
`
`Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the
`Act). Yes ¤ No x
`
`As of June 30, 2011, the aggregate market value of the Registrant’s voting stock held by non-affiliates was
`approximately $218,696,417.
`
`As of January 31, 2012 there were 41,772,441 shares of Common Stock outstanding.
`
`DOCUMENTS INCORPORATED BY REFERENCE
`None.
`
`
`
`
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`Form 10-K
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`TABLE OF CONTENTS
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`PART I
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`Table of Contents
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`
`
`
` Business
`Item 1:
`Item 1A: Risk Factors
`Item 1B: Unresolved Staff Comments
`Item 2:
` Properties
` Legal Proceedings
`Item 3:
`Item 4:
` Mine Safety Disclosures
`
`PART II
`
`Item 5:
`
`Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
`Securities
`
` Selected Financial Data
`Item 6:
` Management’s Discussion and Analysis of Financial Condition and Results of Operations
`Item 7:
`Item 7A: Quantitative and Qualitative Disclosures about Market Risk
`Item 8:
` Financial Statements and Supplementary Data
` Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
`Item 9:
`Item 9A: Controls and Procedures
`Item 9B: Other Information
`
`PART III
`
`Item 10: Directors, Executive Officers and Corporate Governance
`Item 11: Executive Compensation
`Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
`Item 13: Certain Relationships and Related Transactions, and Director Independence
`Item 14. Principal Accounting Fees and Services
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`PART IV
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`Item 15: Exhibits and Financial Statement Schedules
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`ISTA PHARMACEUTICALS, INC.
`
`PART I
`
`References in this Annual Report on Form 10-K to “ISTA”, “we”, “our”, “us”, or the “Company” refer to ISTA
`Pharmaceuticals, Inc. This Annual Report on Form 10-K contains forward-looking statements based on expectations,
`estimates and projections as of the date of this filing. Actual results may differ materially from those expressed in forward-
`looking statements. See Item 7 of Part II – “Management’s Discussion and Analysis of Financial Condition and Results of
`Operations.” ISTA Pharmaceuticals, Inc. was incorporated as Advanced Corneal Systems, Inc. in California in February 1992
`to discover, develop and market new remedies for diseases and conditions of the eye. In March 2000, we changed our name to
`ISTA Pharmaceuticals, Inc., and we reincorporated in Delaware in August 2000. BROMDAY™, BEPREVE , ISTALOL ,
`®
`®
`VITRASE , XIBROM (bromfenac ophthalmic solution) , XIBROM™, T-PRED™, PROLENSA™, BEPOSONE™,
`®
`®
`BEPOMAX™, ISTA , ISTA Pharmaceuticals, Inc. and the ISTA logo are our trademarks, either owned or under license.
`®
`®
`
`We obtained the market data and industry information contained in this Annual Report on Form 10-K from internal
`surveys, estimates, reports and studies, as appropriate, as well as from market research, publicly available information and
`industry publications. Although we believe our internal surveys, estimates, reports, studies and market research, as well as
`industry publications are reliable, we have not independently verified such information, and as such, we do not make any
`representation as to its accuracy.
`
`Item 1:
`
`Business.
`
`Overview
`
`We are a rapidly growing commercial-stage, multi-specialty pharmaceutical company developing, marketing and
`selling our own products in the United States, or the U.S., and Puerto Rico. We are the third largest branded prescription eye
`care business in the U.S. and have a growing allergy drug franchise. We have had success in obtaining product approvals for
`five prescription drugs in six years. We manufacture our finished good products through third-party contracts, and we in-
`license or acquire new products and technologies to add to our internal development efforts from time to time. Our products
`and product candidates seek to treat allergy and serious diseases of the eye and include therapies for ocular inflammation and
`pain, glaucoma, dry eye and ocular and nasal allergies. The U.S. prescription markets for 2011, which our therapies seek to
`address, include key segments of the $7.5 billion ophthalmic pharmaceutical market and the $2.5 billion nasal allergy
`market.
`
`We currently have four products available for sale in the U.S. and Puerto Rico: once-daily BROMDAY (bromfenac
`ophthalmic solution) 0.09%, for the treatment of postoperative inflammation and reduction of ocular pain in patients who
`have undergone cataract extractions, BEPREVE (bepotastine besilate ophthalmic solution) 1.5%, for the treatment of ocular
`itching associated with allergic conjunctivitis, ISTALOL (timolol maleate ophthalmic solution) 0.05%, for the treatment of
`glaucoma, and VITRASE (hyaluronidase injection) ovine, 200 USP units/ml, for use as a spreading agent. At the beginning of
`2011, we had one additional product available for sale, twice-daily XIBROM (bromfenac ophthalmic solution) 0.09%, a
`topical non-steroidal anti-inflammatory formulation of bromfenac for the treatment of ocular inflammation and pain
`following cataract surgery, or XIBROM. Due to the rapid adoption of BROMDAY, we stopped shipping XIBROM in
`February 2011. At that time, we anticipated wholesalers would continue to sell XIBROM to pharmacies until their
`inventories were depleted. As of December 31, 2011, the wholesalers’ inventories were depleted. We believe that the
`conversion of XIBROM to BROMDAY has been well accepted by the markets. In addition, we have several eye and allergy
`product candidates in various stages of development, including treatments for dry eye, ocular inflammation and pain and
`nasal allergies.
`
`We have incurred losses since inception and have a stockholders’ deficit of approximately $49.1 million at
`December 31, 2011.
`
`Recent Business Developments
`
`On December 16, 2011, we announced that our Board of Directors, or our Board, had rejected an unsolicited proposal by
`Valeant Pharmaceuticals International, Inc., or Valeant, to acquire our company for $6.50 per share in cash, a decision that we
`reiterated on January 4, 2012, after careful consideration and with the assistance of our financial and legal advisors. On
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`December 16, 2011, we also announced that our Board would commence a review of all strategic options available to us in
`the context of the Board’s fiduciary responsibilities and our strategic plans. On January 11, 2012, we received a revised non-
`binding proposal from Valeant to acquire our company for $7.50 per share in cash with a target price of $8.50 per share in
`cash, subject to due diligence, which increased proposal Valeant confirmed in a letter to us on January 16, 2012. Valeant
`withdrew its proposal on January 30, 2012. Our process for review of strategic options is advancing as planned and in an
`expeditious manner, consistent with our Board’s fiduciary responsibilities and our commitment to maximizing shareholder
`value. Through December 31, 2011, we have incurred $1.1 million in legal and banking fees to evaluate and respond to
`Valeant’s proposal.
`
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`Our Products and Pipeline
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`The following is a summary of our key products and product candidates:
`
`
`Product
`
`Currently marketed products
`
`BROMDAY
`
`BEPREVE
`
`ISTALOL
`
`VITRASE
`
`Products under development
`
`OTC tear products
`
`PROLENSA
`
`T-PRED
`
`BEPOMAX
`
`BEPOSONE
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`Bromfenac Adjunct for AMD
`
`Commercial Products
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`BROMDAY
`
`
`
`
`
`
`
`
`
` Indication
`
`Postoperative inflammation and
`reduction of ocular pain after cataract
`extractions
`
`Ocular itching associated with allergic
`conjunctivitis
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`
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`
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`
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` Development Status
`
`Marketed
`
`Marketed
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` Glaucoma
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` Spreading agent
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` Marketed
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` Marketed
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`
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`Dry eyes
`
`Postoperative inflammation and
`reduction of ocular pain after cataract
`extractions
`
`Steroid-responsive inflammation where
`a risk of bacterial infection exists
`
`Allergic rhinitis
`
`Allergic rhinitis
`
`Age-related macular degeneration, or
`AMD
`
`
`
`
`
`
`
`
`
`
`
`
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`
`
`Expect to launch first over-the-
`counter, or OTC artificial tear product
`in the second half of 2012.
`
`Expect to file an NDA with the FDA in
`the first half of 2012 with approval
`anticipated in 2013
`
`Expect to initiate Phase 3 clinical
`trials in the second half of 2012
`
`Completed Phase 2 clinical study with
`positive results reported in April 2011
`
`Initiated Phase 2 clinical study and
`completed enrollment, both in early
`2012. Expect to announce results in
`the first half of 2012.
`
`Proof of concept completed;
`discussing clinical path forward with
`FDA
`
`BROMDAY™ (bromfenac ophthalmic solution) 0.09%, or BROMDAY, is a once-daily topical non-steroidal anti-
`inflammatory formulation of bromfenac for the treatment of postoperative inflammation and reduction of ocular pain in
`patients who have undergone cataract extractions. In October 2010, we received approval from the U.S. Food and Drug
`Administration, or FDA, and were granted three years of marketing exclusivity for BROMDAY under the Drug Price
`Competition and Patent Term Restoration Act, commonly known as the Hatch-Waxman Act. We promote BROMDAY
`through our own sales force to ophthalmologists.
`
`Senju Pharmaceuticals, Co. Ltd., or Senju, first developed bromfenac in Japan in 2000. We acquired U.S. ophthalmic
`rights to bromfenac in May 2002 under a license from Senju. In December 2009, we expanded the territory to include not
`only the U.S. and its possessions, but also Canada and Mexico. From 2005 to February 2011, we marketed twice-daily
`XIBROM in the U.S. for the treatment of postoperative inflammation and the reduction of ocular pain in patients who have
`undergone cataract surgery.
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`In 2010, we launched BROMDAY in the U.S., when we focused our sales and marketing efforts on encouraging
`physicians to transition from prescribing XIBROM to prescribing BROMDAY.
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`In February 2011, we stopped shipping XIBROM. At that time, we anticipated wholesalers would continue to sell XIBROM
`to pharmacies until their inventories were depleted. As of December 31, 2011, the wholesalers’ inventories of XIBROM were
`depleted. We believe that the conversion of XIBROM to BROMDAY has been well accepted by the markets. During the third
`quarter of 2011, we launched a twin-pack size of BROMDAY. This new packaging configuration will allow us to offer
`BROMDAY to our customers in an alternative pack configuration for cataract surgeries for both eyes.
`
`Based on 2011 data from IMS Health, BROMDAY achieved the number one position in total prescription dollars in
`September 2011. Also, based upon 2011 data from IMS Health, we estimate that 2011 sales in the U.S. topical ophthalmic
`non-steroidal anti-inflammatory market were approximately $370 million, with total prescriptions over three million. From
`2010 to 2011, the U.S. topical ophthalmic non-steroidal anti-inflammatory market grew approximately 6% in total dollars.
`Other non-steroid treatments currently available must be dosed two, three or four times a day as compared to BROMDAY’s
`once-daily dosing. BROMDAY, including the twin-pack configuration, has achieved in excess of $85 million in net product
`revenues in the first full year after launch.
`
`For the year ended December 31, 2011, BROMDAY accounted for approximately 54% of our total net revenues. On a
`combined basis, BROMDAY and XIBROM accounted for approximately 55% of our total net revenues.
`
`BEPREVE
`
`BEPREVE (bepotastine besilate ophthalmic solution) 1.5%, or BEPREVE, is a twice-daily prescription treatment for
`ocular itching associated with allergic conjunctivitis in patients two years of age and older. In September 2009, we received
`approval from the FDA for, and launched, BEPREVE in the U.S. We promote BEPREVE through our own sales force to
`ophthalmologists, optometrists and allergists.
`
`BEPREVE was first approved in Japan for use as a systemic drug in the treatment of allergic rhinitis and urticaria and
`pruritus in July 2000 and January 2002, respectively, and is marketed by Mitsubishi Tanabe Pharma Corporation (formerly
`Tanabe Seiyaku Co., Ltd.), or Mitsubishi Tanabe, under the brand name TALION . TALION was co-developed by Tanabe
`®
`Seiyaku and Ube Industries, Ltd., or Tanabe Seiyaku. In 2001, Tanabe Seiyaku granted Senju exclusive worldwide rights,
`with the exception of certain Asian countries, to develop, manufacture and market bepotastine for ophthalmic use. In 2006,
`we licensed the exclusive North American ophthalmic rights to bepotastine from Senju. In 2007, we licensed exclusive North
`American rights to nasal dosage forms of bepotastine from Tanabe Seiyaku and obtained a future right to negotiate for a
`North American license to oral dosage forms of bepotastine.
`
`Based upon 2011 data from IMS Health, we estimate that 2011 sales in the U.S. prescription ocular allergy market were
`approximately $786 million, with total prescriptions over seven million. From 2010 to 2011, the U.S. ocular allergy market
`grew approximately 18% in total prescription dollars and 3% in total prescriptions. For the year ended December 31, 2011,
`BEPREVE accounted for approximately 18% of our total net revenues.
`
`ISTALOL
`
`ISTALOL (timolol maleate ophthalmic solution) 0.05%, or ISTALOL, is a once-daily eye drop solution of timolol, a
`beta-blocking agent for the treatment of glaucoma. ISTALOL was developed by Senju in Japan. In May 2002, we acquired
`rights to ISTALOL in the U.S. under a license agreement with Senju. ISTALOL has patent protection through 2018. We
`received FDA approval to market ISTALOL in the U.S. in 2004. We promote ISTALOL through our own sales force to
`ophthalmologists.
`
`According to the Glaucoma Research Foundation, four million people in the U.S. suffer from the disease, with 120,000
`new cases documented annually. Based on 2011 data from IMS Health, we estimate that the U.S. pharmaceutical market for
`the treatment of glaucoma exceeds $2.3 billion per year. Of this amount, the ophthalmic beta-blocker market was
`approximately $184 million in 2011 primarily at generic prices, with over four million prescriptions written in 2011. For the
`year ended December 31, 2011, ISTALOL accounted for 18% of our total net revenues.
`
`VITRASE
`
`We launched VITRASE (hyaluronidase injection) ovine, 200 USP units/ml, or VITRASE, our proprietary formulation of
`ovine hyaluronidase, for use as a spreading agent in 2004. Hyaluronidase is a naturally occurring enzyme that digests certain
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`forms of carbohydrate molecules called proteoglycans. VITRASE, when used as a spreading agent, is injected into connective
`tissue, where it modifies the permeability of such tissues and promotes diffusion of injected drugs, thus accelerating their
`absorption.
`
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`3
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`In October 2004, the FDA informed us that VITRASE for use as a spreading agent was entitled to five-year new chemical
`market exclusivity under the Federal Food, Drug and Cosmetic Act. In December 2004, the FDA approved our supplemental
`New Drug Application, or sNDA, for VITRASE for use as a spreading agent at a concentration of 200 USP units/mL in sterile
`solution. We promote our 200 USP units/mL vial of VITRASE through our own sales force to ophthalmologists.
`
`Since late 2010, VITRASE revenues have grown, primarily due to manufacturing issues faced by competitors’ products.
`One of the competitors’ product reentered the market in late 2011. The other competitor’s product is not expected to be back
`on the market until late 2012 or beyond. For the year ended December 31, 2011, VITRASE accounted for 9% of our total net
`revenues.
`
`Products under development
`
`Over-The-Counter (OTC) Artificial Tear Products
`
`We are developing new OTC products to treat dry eye and other ocular conditions. The formulas in these products are
`similar to the placebo in the Phase 3 dry eye syndrome clinical trials during 2011. The placebo in these trials proved to be
`effective in treating dry eye syndrome. As a result, we expect to launch our first OTC tear product in the second half of 2012.
`
`Based on 52 rolling week data from March 2010 made available to us by Information Resources, Inc., a third party
`information provider, we estimate the U.S. OTC tear products market to be approximately $239 million in sales.
`
`PROLENSA
`
`We have developed a lower concentration new formulation of bromfenac, or PROLENSA, for post-operative
`inflammation and reduction of ocular pain in patients who have undergone cataract extractions. We completed and reported
`statistically significant results from our Phase 3 clinical program for PROLENSA in October of 2011.
`
`The new, optimized formulation used for PROLENSA enhances the penetration of the drug into ocular tissues, allowing
`us to lower the concentration of the active ingredient, bromfenac, while maintaining the convenience of once-daily use of
`BROMDAY. In both Phase 3 studies, PROLENSA was statistically significantly better than placebo and met the primary
`efficacy endpoint of absence of ocular inflammation 14 days following surgery and the secondary efficacy endpoint of
`elimination of ocular pain one day post-surgery. There were no serious drug-related ocular or systemic adverse events, and
`PROLENSA’s safety profile was found to be consistent with BROMDAY. The two clinical studies had the lowest number of
`adverse events (greater than 2%) than any of our bromfenac clinical trials for cataract surgery to date, and, to the best of our
`knowledge, PROLENSA contains the lowest concentration of bromfenac currently under investigation in any clinical trials
`for inflammation and pain associated with cataract surgery.
`
`The claims in a patent covering the formulation of PROLENSA were allowed by the U.S. Patent and Trademark Office in
`late 2011. We anticipate this allowed patent will be issued by the U.S. Patent and Trademark Office during the first half of
`2012.
`
`We plan to file a New Drug Application, or NDA, with the FDA for PROLENSA in the first half of 2012. Assuming
`approval by the FDA, our experience in the successful conversion of XIBROM to BROMDAY should help us prepare for a
`similar conversion of BROMDAY to PROLENSA, when we initiate a commercial launch planned for early 2013.
`
`Based upon 2011 data from IMS Health, we estimate that 2011 sales in the U.S. topical ophthalmic non-steroidal anti-
`inflammatory market were approximately $370 million.
`
`T-PRED
`
`T-PRED is a proprietary formulation of a combination product of tobramycin 0.3% and prednisolone acetate 1.0%. T-
`PRED is being developed for the treatment of steroid responsive inflammation where the risk of bacterial infection exists. We
`plan to initiate Phase 3 studies in the second half of 2012.
`
`We have discussed the study results with the FDA and have established a path forward for T-PRED. The FDA advised us
`to conduct several studies: two uveitis Phase 3 studies to show that prednisolone acetate in combination is as effective as the
`reference product; two Phase 3 allergic conjunctivitis studies demonstrating superiority to placebo; and an in-vitro antibiotic
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`kill rate study to show the combination formulation does not affect the tobramycin kill rate as compared to the reference
`product, when tested against a panel of micro-organisms. We expect to initiate these studies in the second half of 2012 and,
`assuming timely approval by the FDA, launch the product in 2014.
`
`
`4
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`Based upon 2011 data from IMS Health, the combination antibiotic and steroid segment of the ophthalmic anti-
`inflammatory market had approximately a 29% share of the prescriptions, or $334 million in prescription dollars.
`
`BEPOMAX
`
`We are developing a proprietary single agent nasal antihistamine formulation of bepotastine for the treatment of
`seasonal allergic rhinitis, or BEPOMAX. In September 2007, we obtained exclusive North American rights to nasal dosage
`forms of bepotastine, an investigational product for the treatment of allergy symptoms, from Mitsubishi Tanabe. The active
`ingredient in this product candidate is patented through 2017, with additional pending patents through 2031.
`
`In October 2010, we announced positive preliminary results from a Phase 1/2 clinical study of bepotastine besilate nasal
`spray conducted in Canada for the treatment of symptoms associated with seasonal allergic rhinitis, the inflammation of the
`nasal passages caused by allergies. The findings demonstrated two of the three bepotastine besilate concentrations tested
`were effective in relieving patients’ nasal symptoms after exposure to seasonal allergens. The safety data showed the drug to
`be well-tolerated, with adverse events consistent with those observed with other antihistamine nasal sprays and generally
`rated as mild. As a result of these positive outcomes, in December 2010, we initiated a Phase 2 clinical study of bepotastine
`besilate nasal spray for the treatment of symptoms associated with seasonal allergic rhinitis, which was completed in 2011.
`The randomized, placebo-controlled, parallel-group environmental study evaluated the safety and efficacy of bepotastine
`besilate, dosed twice daily, in patients presenting with allergic rhinitis caused by one of the most potent seasonal allergy
`triggers, Mountain Cedar pollen. We enrolled approximately 600 patients who were treated with either bepotastine besilate
`nasal spray or placebo for two weeks. Patients graded both individual nasal and ocular symptoms on a daily basis. In April
`2011, we announced positive, topline results from our Phase 2 dose-ranging, environmental clinical trial.
`
`According to the trial findings, each of three concentrations of bepotastine besilate nasal spray showed statistically
`significant improvements compared to placebo in patients’ nasal symptoms following exposure to Mountain Cedar pollen
`during the peak season for this allergen. These improvements were seen on day one of therapy and were sustained through the
`two-week treatment period. Further, safety data demonstrated bepotastine besilate was well-tolerated as a nasal spray, with an
`adverse event profile similar to placebo and consistent with those observed with bepotastine besilate dosed as a nasal spray
`in prior clinical trials and with other antihistamine nasal sprays. We expect to conduct additional Phase 2 and Phase 3 trials
`before we can file an NDA for BEPOMAX.
`
`Upon approval by the FDA, we expect to launch both BEPOMAX and BEPOSONE. We are considering commercial
`partnerships for the launches of both BEPOMAX and BEPOSONE to accelerate growth and provide access to the primary care
`physician market.
`
`Based upon 2011 data from IMS Health, we estimate the U.S. nasal antihistamine market to be approximately $344
`million in sales, comprising about 14% of all allergic rhinitis prescription dollars.
`
`BEPOSONE
`
`In addition to BEPOMAX, we are developing a combination antihistamine / steroid nasal spray, with bepotastine as the
`antihistamine component, for the treatment of seasonal allergic rhinitis, or BEPOSONE. We filed an Investigational New
`Drug application, or IND, with the FDA for BEPOSONE in October 2011.
`
`In early 2012, we initiated a four-armed Phase 2 study with BEPOSONE to treat allergic rhinitis resulting from the
`exposure to Mountain Cedar pollen. We have completed the enrollment for the study and expect to report preliminary results
`in the first half of 2012. We expect to conduct additional Phase 2 and Phase 3 trials before we can file an NDA for
`BEPOSONE.
`
`Upon approval by the FDA, we expect to launch both BEPOMAX and BEPOSONE. We are considering commercial
`partnerships for the launches of both BEPOMAX and BEPOSONE, to accelerate growth and gain access to the primary care
`physician market.
`
`Based on 2011 data from IMS Health, we estimate the U. S. seasonal allergic rhinitis to be approximately $2.5 billion in
`sales, with the nasal steroid component comprising about 86% of all prescription dollars.
`
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`Form 10-K
`
`Bromfenac Adjunct for AMD
`
`We intend to initiate a development program for bromfenac as an adjunct therapy to be used with Lucentis or Avastin
`®
`(trademarks of Genentech Inc., a member of the Roche Group), for the treatment of AMD. A proof of concept study was
`completed by a physician investigator, who published results in the second half of 2011. We are determining a path forward
`with the FDA for the use of a new patent allowed formulation of bromfenac for AMD.
`
`
`®
`
`5
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`Form 10-K
`
`Table of Contents
`
`According to the results published in the issue of RETINA, The Journal of Retinal and Vitreous Diseases, the pilot study
`suggested that the topical non-steroidal anti-inflammatory drug, or NSAID, eye drop of XIBROM administered twice-daily
`may have an additive effect when used with intravitreal LUCENTIS (ranibizumab injection) in reducing retinal thickness in
`®
`neovascular age-related macular degeneration, or NV AMD. AMD robs the patient of all but the outermost, peripheral vision,
`leaving only dim images or black holes at the center of vision, and is the leading cause of vision loss and blindness among
`Americans who are aged 65 and older. Retinal specialists believe reducing the macular thickness (the width of the central
`retina) may help preserve or improve patients’ vision over the long term. Thirty eyes were tested consecutively and were
`randomized in a 2:1 ratio of combination therapy (intravitreal LUCENTIS and topical XIBROM) and LUCENTIS alone. All
`patients received LUCENTIS therapy monthly for four months, then as needed on a monthly basis in accordance with
`standard of care. Patients receiving XIBROM self-administered one drop twice a day for 12 months. Three-quarters of subjects
`enrolled had pre-existing minimally classic or occult NV AMD and a history of LUCENTIS use. Endpoints included adverse
`events, mean change in visual acuity, change in macular thickness, number of subjects with a 50um (micrometer) or more
`reduction in macular thickness and mean number of LUCENTIS injections over the 12-month period. This is the second
`independent study suggesting that use of XIBROM may be safe and effective as an adjunct therapy for AMD, and it is the
`longest performed to date with XIBROM dosing (12 months).
`
`Based upon 2011 data from IMS Health, we estimate that 2011 sales in the U.S. topical ophthalmic non-steroidal anti-
`inflammatory and AMD markets were approximately $2 billion.
`
`Other Product Candidates and Development Activities
`
`In addition to the products presently in human clinical trials, we have a number of products that may be ready for late
`stage clinical study initiation in the future. These include iganidipine, to enhance ocular nerve blood flow; new formulation
`of latanoprost, a prostaglandin, for the treatment of glaucoma; and ecabet sodium for the treatment of dry eye.
`
`We continually evaluate opportunities for late-stage or currently-marketed complementary products and for expansion
`of our existing ophthalmology, optometry, and allergy product franchises. We plan to continue to pursue such opportunities
`through further licensing arrangements, collaborations and product acquisitions, along with related development activities.
`Our ability to execute on such opportunities in some circumstances may be dependent upon our ability to raise additional
`capital on commercially reasonable terms.
`
`Product Licensing Agreements
`
`BROMDAY, BEPREVE, ISTALOL, XIBROM, Ecabet Sodium, Prostaglandins and Iganidipine Agreements with
`Senju
`
`In May 2002, we acquired certain of the assets of AcSentient, Inc., or AcSentient, which included exclus