`Ista Pharmaceuticals, Inc. Form 10K
`10K 1 d10k.htm ISTA PHARMACEUTICALS, INC. FORM 10K
`
`Table of Contents
`
`
`UNITED STATES
`SECURITIES AND EXCHANGE COMMISSION
`Washington, D.C. 20549
`
`Form 10K
`
` ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
`EXCHANGE ACT OF 1934
`
`
`
`
`
`For Fiscal Year Ended December 31, 2010
`
`or
`
` 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 00031255
`
`
`ISTA PHARMACEUTICALS, INC.
`
`
`
`
`
`
`
`
`
`
`
`
`
`(Exact name of registrant as specified in its charter)
`
`
`
`330511729
`(I.R.S. Employer
`Identification No.)
`
`Delaware
`(State or other jurisdiction of
`incorporation or organization)
`
`50 Technology Drive, Irvine, California 92618
`(Address of principal executive offices)
`(949) 7886000
`(Registrant’s telephone number)
`
`Securities registered pursuant to Section 12(b) of the Act:
`Title of Each Class
`Name of Each Exchange on Which Registered
`
`Common Stock, $0.001 par value
`The NASDAQ Stock Market LLC
`
`Securities registered pursuant to Section 12(g) of the Act: None
`
`Indicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities
`Act. Yes No
`
`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
`
`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 No
`
`Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any,
`
`http://www.sec.gov/Archives/edgar/data/930553/000119312511047560/d10k.htm
`
`1/130
`
`
`
`Ista Pharmaceuticals, Inc. Form 10K
`3/15/2016
`every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation ST (§232.405 of this
`chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
`files). Yes No
`
`Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK 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 10K or any amendment to this Form 10K
`
`Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, or a
`smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting
`company: in Rule 12b2 of the Exchange Act. (Check one):
`
` Accelerated filer
`Large accelerated filer
`
` Smaller reporting company
`Nonaccelerated filer (Do not check if a smaller reporting company)
`Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b2 of the Act). Yes No
`
`As of June 30, 2010, the aggregate market value of the Registrant’s voting stock held by nonaffiliates was
`approximately $44,319,486.
`
`As of January 31, 2011 there were 33,631,328 shares of Common Stock outstanding.
`
`DOCUMENTS INCORPORATED BY REFERENCE
`None.
`
`
`
`
`
`http://www.sec.gov/Archives/edgar/data/930553/000119312511047560/d10k.htm
`
`2/130
`
`Page 2
`
`
`
`3/15/2016
`
`Ista Pharmaceuticals, Inc. Form 10K
`
`Table of Contents
`
`
`
`
`
`Item 1:
`
`Item 1A:
`Item 1B:
`Item 2:
`
`Item 3:
`
`
`
`Business
`Risk Factors
`Unresolved Staff Comments
`Properties
`Legal Proceedings
`
`TABLE OF CONTENTS
`
`PART I
`
`Item 5:
`
`PART II
`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:
`Quantitative and Qualitative Disclosures about Market Risk
`Item 7A:
`Item 8:
`Financial Statements and Supplementary Data
`
`Item 9:
`Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
`
`Item 9A:
`Controls and Procedures
`Item 9B:
`Other Information
`
`PART III
`Directors, Executive Officers and Corporate Governance
`Executive Compensation
`Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
`Certain Relationships and Related Transactions, and Director Independence
`Principal Accounting Fees and Services
`
`Exhibits and Financial Statement Schedules
`
`PART IV
`
`Item 10:
`Item 11:
`Item 12:
`Item 13:
`Item 14.
`
`Item 15:
`
`
`Page
` 1
` 12
` 26
` 26
` 27
`
`
` 28
` 29
` 30
` 40
` 41
` 41
` 41
` 43
`
` 43
` 43
` 43
` 43
` 43
`
` 44
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`http://www.sec.gov/Archives/edgar/data/930553/000119312511047560/d10k.htm
`
`3/130
`
`Page 3
`
`
`
`3/15/2016
`
`Ista Pharmaceuticals, Inc. Form 10K
`
`Table of Contents
`
`ISTA PHARMACEUTICALS, INC.
`
`PART I
`
`References in this Annual Report on Form 10K to “ISTA”, “we”, “our”, “us”, or the “Company” refer to ISTA
`Pharmaceuticals, Inc. This Annual Report on Form 10K contains forwardlooking 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 – ForwardLooking Statements.” BROMDAY™, BEPREVE , ISTALOL , VITRASE , XIBROM (bromfenac
`®,
`®
`®
`ophthalmic solution) , XIBROM™, REMURA™, TPRED™, ISTA , ISTA Pharmaceuticals, Inc. and the ISTA logo are our
`®
`®
`®
`trademarks, either owned or under license.
`
`Business.
`
`We obtained the market data and industry information contained in this Annual Report on Form 10K 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:
`Overview
`We are a rapidly growing commercialstage, multispecialty pharmaceutical company developing, marketing and selling
`our own products in the U.S. and Puerto Rico. We are the fourth largest branded prescription eye care business in the U.S. and
`have an emerging allergy drug franchise. We manufacture our finished good products through thirdparty contracts, and we
`inlicense 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 United States, or U.S., prescription markets for
`2010 which our therapies seek to address include key segments of the $6.5 billion ophthalmic pharmaceutical market and the
`$2.5 billion nasal allergy market.
`
`We currently have five products available for sale in the U.S. and Puerto Rico: 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, VITRASE (hyaluronidase injection) ovine, 200 USP units/ml for use as a spreading agent and XIBROM
`(bromfenac ophthalmic solution) 0.09% for the treatment of inflammation and pain following cataract surgery. 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 $79.1 million (including
`noncash valuation warrant adjustments of $59.6 million) through December 31, 2010.
`
`Our Products and Pipeline
`The following is a summary of our key products and product candidates:
`
`
`Product/Product Candidate
`BROMDAY (Oncedaily)
`
`BEPREVE
`
`ISTALOL
`
`
`
`
`
`Indication
`Postoperative inflammation and
`reduction of ocular pain after cataract
`extractions
`Ocular itching associated with allergic
`conjunctivitis
`
` Glaucoma
`
`Development Status
`
`Marketed
`
`
`
`
`
`Marketed
`
`
` Marketed
`
`http://www.sec.gov/Archives/edgar/data/930553/000119312511047560/d10k.htm
`
`4/130
`
`Page 4
`
`
`
`3/15/2016
`VITRASE
`XIBROM (Twicedaily)
`
`BROMDAY (lower concentration)
`
`REMURA (bromfenac)
`
`
`
`
`
`Ista Pharmaceuticals, Inc. Form 10K
` Spreading agent
`Ocular inflammation and pain
`following cataract surgery
`Postoperative inflammation and
`reduction of ocular pain after cataract
`extractions
`Dry eye syndrome
`
`
`
`
`
`1
`
` Marketed
`Marketed, plan to stop product
`shipments in the first quarter of 2011
`To initiate Phase 3 study 1st half of
`2011
`
`
`
`
`
`
`
`Initiated Phase 3 efficacy and short
`term safety studies; results expected in
`2 half of 2011
`nd
`
`http://www.sec.gov/Archives/edgar/data/930553/000119312511047560/d10k.htm
`
`5/130
`
`Page 5
`
`
`
`3/15/2016
`
`Ista Pharmaceuticals, Inc. Form 10K
`
`Table of Contents
`
`Product/Product Candidate
`Bepotastine nasal
`
`Bepotastine nasal combination
`
`Bromfenac Adjunct for AMD
`
`TPRED
`
`Strong steroid
`
`Allergic rhinitis
`
`Indication
`
`Allergic rhinitis
`
`
`
`
`
`
`
`
`
`Agerelated macular degeneration, or
`AMD
`Steroid responsive inflammation and
`allergic conjunctivitis
`
` Ocular inflammation
`
`Development Status
`Initiated Phase 2 clinical study, results
`expected in 1 half of 2011
`st
`Plan to initiate Phase 2 study in 2
`half of 2011
`Proof of concept completed
`
`nd
`
`
`
`
`
`
`
`
`
`Phase 3 ready
`
`
` Phase 1/2 ready
`
`BROMDAY (bromfenac ophthalmic solution) 0.09% – oncedaily
`TM
`BROMDAY is a oncedaily topical nonsteroidal antiinflammatory formulation of bromfenac for the treatment of
`postoperative inflammation and reduction of ocular pain in patients who have undergone cataract extractions. We received
`approval from the U.S. Food and Drug Administration, or FDA, for BROMDAY in October 2010. We launched BROMDAY in
`the U.S. in the fourth quarter of 2010. Starting in November 2010, we focused our sales and marketing efforts on encouraging
`physicians to transition from prescribing twicedaily XIBROM to prescribing oncedaily BROMDAY. See “XIBROM
`(bromfenac ophthalmic solution) 0.09% twicedaily” below for further information. We promote BROMDAY through our
`own sales force to ophthalmologists.
`
`In October 2010, we were granted three years of marketing exclusivity for BROMDAY under the Drug Price Competition
`and Patent Term Restoration Act, commonly known as the HatchWaxman Act.
`
`Based upon 2010 data from IMS Health, we estimate that 2010 sales in the U.S. topical ophthalmic nonsteroidal anti
`inflammatory market were approximately $349 million, with total prescriptions of 2.7 million. From 2009 to 2010, the U.S.
`topical ophthalmic nonsteroidal antiinflammatory market grew approximately 7% in total dollars. Other nonsteroid
`treatments currently available must be dosed two, three or four times a day as compared to BROMDAY’s oncedaily dosing.
`
`For the year ended December 31, 2010, sales of BROMDAY accounted for 6% of our total net revenues. On a combined
`basis, sales of BROMDAY and XIBROM accounted for 68% of our total net revenues.
`
`
`2
`
`http://www.sec.gov/Archives/edgar/data/930553/000119312511047560/d10k.htm
`
`6/130
`
`Page 6
`
`
`
`3/15/2016
`
`Ista Pharmaceuticals, Inc. Form 10K
`
`Table of Contents
`
`XIBROM (bromfenac ophthalmic solution) 0.09% – twicedaily
`XIBROM is a twicedaily topical nonsteroidal antiinflammatory formulation of bromfenac for the treatment of ocular
`inflammation and pain following cataract surgery. In March 2005, we received approval from the FDA for XIBROM for the
`treatment of ocular inflammation following cataract surgery. We launched XIBROM in the U.S. in the second quarter of 2005.
`In January 2006, we received FDA approval of an expanded indication of XIBROM to include the treatment of pain
`following cataract surgery.
`
`For the year ended December 31, 2010, sales of XIBROM accounted for 62% of our total net revenues. Due to the rapid
`adoption of BROMDAY, we announced we would stop shipping XIBROM effective February 28, 2011. See “BROMDAY
`(bromfenac ophthalmic solution) 0.09% oncedaily” above for further information.
`
`XIBROM was first developed by Senju Pharmaceuticals, Co. Ltd., or Senju, and launched in Japan in 2000. In May
`2002, we acquired rights for XIBROM in the U.S. under a license agreement with Senju. In December 2009, we expanded the
`territory to include not only the U.S. and its possessions, but also Canada and Mexico.
`
`In January 2009, the patent on XIBROM expired, exposing us to potential future generic competition. Most companies
`that manufacture drug substances file a Drug Master File, or DMF, with the FDA. These DMFs contain information on the
`manufacture and quality control of those drug substances. Most companies that file abbreviated New Drug Applications, or
`ANDAs, to gain approval to market a generic version of a previously patented pharmaceutical product will reference a DMF
`for the drug substance contained in the product. Since the XIBROM patent expiration in January 2009, three DMFs have
`been filed for bromfenac. In addition, we believe a bromfenac ANDA was filed in May 2010. Based upon publicly available
`information that show a two year or longer average FDA review time for ANDAs, we do not anticipate that a generic form of
`bromfenac will receive FDA approval by a competitor until approximately 2012.
`
`BEPREVE (bepotastine besilate ophthalmic solution) 1.5%
`BEPREVE is a twicedaily 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/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 codeveloped by
`®
`Tanabe Seiyaku and Ube Industries, Ltd. 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 2010 data from IMS Health, we estimate that 2010 sales in the U.S. prescription ocular allergy market were
`approximately $665 million, with total prescriptions of 6.7 million. From 2009 to 2010, the U.S. ocular allergy market grew
`approximately 12% in total prescription dollars and 3% in total prescriptions.
`
`ISTALOL (timolol maleate ophthalmic solution) 0.05%
`ISTALOL is a oncedaily eye drop solution of timolol, a betablocking 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.
`
`We received FDA approval to market ISTALOL in the U.S. in 2004 for the treatment of glaucoma. 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 2010 data from IMS Health, we estimate that the U.S. pharmaceutical market for
`the treatment of glaucoma exceeds $2.2 billion per year. Of this amount, the ophthalmic betablocker market was
`
`http://www.sec.gov/Archives/edgar/data/930553/000119312511047560/d10k.htm
`
`7/130
`
`Page 7
`
`
`
`Ista Pharmaceuticals, Inc. Form 10K
`3/15/2016
`approximately $182 million in 2010 primarily at generic prices, with over 4.3 million prescriptions written in 2010.
`
`
`3
`
`http://www.sec.gov/Archives/edgar/data/930553/000119312511047560/d10k.htm
`
`8/130
`
`Page 8
`
`
`
`3/15/2016
`
`Ista Pharmaceuticals, Inc. Form 10K
`
`Table of Contents
`
`VITRASE (hyaluronidase injection) ovine, 200 USP units/ml
`We launched VITRASE, our proprietary formulation of ovine hyaluronidase, for use as a spreading agent in 2004.
`Hyaluronidase is a naturally occurring enzyme that digests certain 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.
`
`In May 2004, the FDA approved our New Drug Application, or NDA, for VITRASE in a lyophilized 6,200 USP units
`multipurpose vial, for use as a spreading agent to facilitate the absorption and dispersion of other injected drugs. In October
`2004, the FDA informed us that VITRASE for use as a spreading agent was entitled to fiveyear new chemical market
`exclusivity under the federal Food, Drug and Cosmetic Act. In September 2009, we announced the discontinuation of
`VITRASE, lyophilized 6,200 USP units multipurpose vial.
`
`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.
`
`BROMDAY Lower concentration
`We are developing a new formulation, lower concentration BROMDAY for postoperative inflammation and reduction of
`ocular pain in patients who have undergone cataract extractions. We plan to initiate a Phase 3 study in the first half of 2011
`and, assuming timely completion of the study, report preliminary results in the second half of 2011.
`
`Based upon 2010 data from IMS Health, we estimate that 2010 sales in the U.S. topical ophthalmic nonsteroidal anti
`inflammatory market were approximately $349 million, with total prescriptions of 2.7 million.
`
`REMURA (bromfenac ophthalmic solution for dry eye)
`We are developing a lower concentration of bromfenac for the treatment of dry eye syndrome. According to the National
`Eye Institute, dry eye syndrome, which is also referred to as keratoconjunctivities sicca, or KCS, is defined as a disorder of the
`tear film due to the tear deficiency or excessive tear evaporation which causes damage to the interpalpebral, or the exposed
`area between the upper and lower eye lids, ocular surface and is associated with symptoms of ocular discomfort. Dry eye
`syndrome has been linked with a number of factors, including age, hormonal changes, ocular disease, medications that
`disrupt tear secretion or blinking, and autoimmune diseases such as lupus and rheumatoid arthritis. In severe cases of dry eye
`syndrome, scarring develops that may lead to blindness. Based on data compiled from various publicly available sources, we
`estimate that annual sales in the U.S. prescription dry eye market were approximately $620 million in 2010, with total
`prescriptions of approximately 2.7 million.
`
`In June 2009, we announced positive results from a proofofconcept Phase 2 clinical study in subjects with dry eye
`disease. The study achieved statistical significance in the primary endpoint of the objective sign of conjunctival staining as
`compared to baseline. The study also achieved statistical significance on the objective sign of corneal staining as compared
`to baseline. Patients also achieved statistically significant improvements in subjective symptoms measured by the Ocular
`Surface Disease Index and improvements in patients’ most bothersome ocular symptoms.
`
`We initiated two Phase 3 efficacy and shortterm safety studies in 2010. These Phase 3 studies are being conducted
`under a Special Protocol Assessment, or SPA, agreed upon with the FDA. We plan to report preliminary results in the second
`half of 2011.
`
`Bepotastine nasal
`We are developing a proprietary nasal formulation of bepotastine for the treatment of allergic rhinitis. 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. Based upon 2010 data from IMS Health, we estimate the U.S. allergic
`rhinitis market to be approximately $2.5 billion in sales, with the nasal antihistamine component comprising about 14% of
`all prescriptions.
`
`http://www.sec.gov/Archives/edgar/data/930553/000119312511047560/d10k.htm
`
`9/130
`
`Page 9
`
`
`
`Ista Pharmaceuticals, Inc. Form 10K
`3/15/2016
`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 welltolerated, 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. The randomized, placebo
`controlled, parallelgroup environmental study is evaluating 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 expect to enroll approximately 600 patients who will be treated with either bepotastine besilate nasal spray or
`placebo for two weeks. Patients will grade both individual nasal and ocular symptoms on a daily basis. We plan to report
`preliminary results in the first half of 2011.
`
`
`4
`
`http://www.sec.gov/Archives/edgar/data/930553/000119312511047560/d10k.htm
`
`10/130
`
`Page 10
`
`
`
`3/15/2016
`
`Ista Pharmaceuticals, Inc. Form 10K
`
`Table of Contents
`
`Bepotastine nasal combination
`In addition to the bepotastine nasal spray, we are developing a combination antihistamine / steroid nasal spray, with
`bepotastine as the antihistamine component, for the treatment of allergic rhinitis. Based on 2010 data from IMS Health, we
`estimate the U. S. allergic rhinitis market to be approximately $2.5 billion in sales, with the nasal steroid component
`comprising about 34% of all prescriptions.
`
`We plan to initiate a followon Phase 2 study to the bepotastine nasal study for Mountain Cedar pollen, with the
`combination formulation in the second half of 2011 and report preliminary results in the first half of 2012.
`
`Bromfenac Adjunct for AMD
`We intend to initiate a development program for bromfenac as an adjunct therapy to be used with Lucentis ® or Avastin
`®, for the treatment of AMD. A proof of concept study was completed by a physician investigator with results expected to
`publish in the first half of 2011.
`
`TPRED (tobramycin and prednisolone acetate combination product)
`TPRED is a proprietary formulation of a fixed combination product of tobramycin 0.3% and prednisolone acetate
`1.0%. TPRED is being developed for the treatment of steroid responsive inflammation and allergic conjunctivitis. We
`plan to initiate Phase 3 studies in 2012 or later.
`
`TPRED, if approved by the FDA, will compete in the antibiotic/steroid combination segment of the U.S. topical
`ophthalmic antiinflammatory market. Based upon management estimates and 2010 prescription data compiled by IMS
`Health, we estimate that 2010 sales in the U.S. topical ophthalmic antiinflammatory market were approximately $848
`million, with total prescriptions of 11.5 million. In 2010, the combination antibiotic and steroid segment of the ophthalmic
`antiinflammatory market had approximately a 36% share of the prescriptions or $302 million in prescription dollars and
`about 4 million prescriptions according to data compiled by IMS Health.
`
`In February 2006, we announced positive results from our Phase 3 bioequivalence study of TPRED for the treatment of
`steroidresponsive inflammatory ocular conditions where risk of bacterial infection exists. In July 2006, we submitted to the
`FDA an NDA for TPRED for the treatment of steroidresponsive inflammatory ocular conditions where risk of bacterial
`infection exists.
`
`In May 2007, we received a not approvable letter from the FDA. The FDA assessed our clinical data and found that it did
`not show sufficient equivalence between the prednisolone component in TPRED and PredForte at least at one of the time
`points measured. In addition, the FDA found that our clinical data did not show sufficient equivalence in the kill time
`between the tobramycin components in TPRED and Tobrex , although it did show equivalence versus Zylet and
`®
`®
`Tobradex . After further discussions with the FDA, we initiated an additional clinical study and in vitro work to address the
`®
`issues raised by the FDA.
`
`In September 2009 we announced the preliminary results from two completed studies. In the first study, we evaluated the
`antimicrobial equivalence between TPRED and a tobramycincontaining reference product. We successfully demonstrated
`the antimicrobial bioequivalence of TPRED to the reference product in each of the 26 required tests. The second study was a
`Phase 3 clinical study designed to determine the bioequivalence of prednisolone concentrations between TPRED and a
`reference product containing prednisolone acetate 1.0%. Although TPRED’s prednisolone concentrations in this study were
`similar to those of the reference product, bioequivalence was not demonstrated. We believe differences in the prednisolone
`reference product, which included a higher drug concentration in the formulation and a recent change in the commercial
`product delivery dose of the reference product, may have contributed to the variations in study results between the two
`products. We discussed the study results with the FDA to determine the best path forward for TPRED.
`
`Strong Steroid
`We intend to pursue development of a strong steroid to treat ocular inflammation. The U. S. topical / plain steroid
`segment of the antiinflammatory market, based on 2010 data from IMS Health, is estimated to be $186 million in sales. We
`plan to initiate Phase 1/2 studies in 2012 or later.
`
`http://www.sec.gov/Archives/edgar/data/930553/000119312511047560/d10k.htm
`
`11/130
`
`Page 11
`
`
`
`Ista Pharmaceuticals, Inc. Form 10K
`3/15/2016
`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 eyes.
`
`
`5
`
`http://www.sec.gov/Archives/edgar/data/930553/000119312511047560/d10k.htm
`
`12/130
`
`Page 12
`
`
`
`3/15/2016
`
`Ista Pharmaceuticals, Inc. Form 10K
`
`Table of Contents
`
`We continually evaluate opportunities for latestage or currentlymarketed 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 exclusive U.S.
`development, manufacturing and marketing rights for ISTALOL and XIBROM. ISTALOL and XIBROM were originally
`licensed by AcSentient from Senju.
`
`In November 2004, we entered into another license agreement with Senju under which Senju granted to us exclusive
`U.S. ophthalmic rights to ecabet sodium.
`
`In 2006, we entered into three additional license agreements with Senju under which Senju has granted us exclusive
`North American ophthalmic rights for BEPREVE, various prostaglandin products and iganidipine.
`
`In December 2009, we renegotiated with Senju our bromfenac rights to include, among other things, the expansion of
`our territory to include Canada and Mexico.
`
`Generally, under the terms of our agreements with Senju, we are responsible for all costs associated with developing
`products covered by the licensed rights in ophthalmology for the U. S. and, with respect to XIBROM (and now BROMDAY),
`BEPREVE, prostaglandins and iganidipine, North America, including clinical trials, regulatory filings, manufacturing, and, if
`the product is approved, marketing and sales activities.
`
`We have paid to Senju nonrefundable milestone payments of $4 million, in the aggregate, relating to the development
`process and regulatory approval of both ISTALOL and XIBROM and are required to pay royalties on the sales of products
`that are covered by Senju’s patent rights.
`
`We have paid to Senju nonrefundable milestone payments of $4 million, in the aggregate, relating to the development
`process and regulatory approval of BEPREVE and are required to pay royalties on the sales for the products that are covered
`by Senju’s patent rights.
`
`We will be required to pay to Senju nonrefundable milestone payments of up to $3 million, in the aggregate, if all such
`milestones relating to the development process and regulatory approval of ecabet sodium are accomplished, and royalties on
`future product sales covered by Senju’s patent rights.
`
`We will be required to pay Senju nonrefundable milestone payments of approximately $8 million, in the aggregate, if
`all such milestones relating to the development process and regulatory approval of iganidipine are accomplished, and
`royalties on future sales of products covered by Senju’s patent rights.
`
`We will be required to pay Senju nonrefundable milestone payments of approximately $8 million, in the aggregate,
`some of which have been paid, if all such milestones relating to the development process and regulatory approval of a
`prostaglandin product are accomplished, and royalties on future sales of products covered by Senju’s patent rights.
`
`We initiated legal action in April 2010, against Senju, seeking a declaratory judgment with regard to our XIBROM
`royalty obligations to Senju and a recovery of overpaid royalties and other damages from Senju. The only U.S. patent
`applicable to XIBROM expired in January 2009 and, according to U.S. case law and the terms of our agreement with Senju,
`we believe no XIBROM royalties are due after patent expiration. In August 2010, the U.S. District Court for the Central
`District of California stayed our action against Senju, and in September 2010, Senju initiated an arbitration proceeding
`regarding the same dispute with the International Chamber of Commerce, or ICC. The order staying our action against Senju
`will not become appealable until after the arbitration is concluded, and a judgment is entered in the court case. A declaratory
`
`http://www.sec.gov/Archives/edgar/data/930553/000119312511047560/d10k.htm
`
`13/130
`
`Page 13
`
`
`
`Ista Pharmaceuticals, Inc. Form 10K
`3/15/2016
`judgment that we were seeking from the court in regard to royalty obligations to Senju may apply not only to XIBROM, but
`also to BROMDAY, which was approved by the FDA in October 2010. The arbitration proceeding is in its early stages.
`
`
`6
`
`http://www.sec.gov/Archives/edgar/data/930553/000119312511047560/d10k.htm
`
`14/130
`
`Page 14
`
`
`
`3/15/2016
`
`Ista Pharmaceuticals, Inc. Form 10K
`
`Table of Cont