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Expert Financial Analysis and Reporting

InSite Vision: An Over-looked Company with Two Interesting Drug Candidates and a Big Upcoming Catalyst (INSV.OB, $0.31)

Results of the Important DOUBle Trial Are Imminent

During the May 8th quarterly conference call, management said that enrollment in the phase III DOUBle trial had completed and topline results should be available in late 2Q, 2013. This trial is evaluating AzaSite Plus, AzaSite, DexaSite and DuraSite in blepharitis. If AzaSite Plus wins in this trial, it could be a home run as it would be the first drug ever approved for blepharitis-but there are uncertainties. This trial is based on the hypothesis that the steroid component (dexamethasone) of AzaSite Plus will provide short term control while the antibiotic component (azithromycin) will provide long term control. This hypothesis was not tested and confirmed in a phase III trial.

In the DOUBle trial, there are various possible outcomes as it pertains to AzaSite Plus. Let's hope that it wins and we will all be very happy. Even if it doesn't win in DOUBle it might still provide encouraging data that would help design a second phase III trial which could be the basis for subsequent approval. It is not a totally binary situation as there could be a path forward even if AzaSite Plus does not meet its primary endpoint. Also in the DOUBle trial, DexaSite which is based only on the steroid dexamethasone is being compared to the DuraSite drug delivery vehicle. Regardless of what happens to AzaSite Plus, there is a high probability that DexaSite will gain approval. While no steroids are approved for blepharitis, they are routinely and effectively used off label.


BromSite Could Be an Important Drug for InSite

Moving on to another important drug, the results of the first phase III BromSite trial were very encouraging. It indicated that 65% of patients reached the primary endpoint of clearance of inflammatory cells 14 days after cataract surgery. The clinical significance of this endpoint is that inflammatory cells are linked to the rare occurrence of cystoid macular edema, which carries the risk of blindness. The current market leader is Bausch & Lomb's BromDay and Bausch is just launching Prolenza, the presumed successor to Bromday. On the same endpoint used by BromSite, only 45% of patients in their trials reached the same endpoint. Each of these products uses the same active ingredient, the anti-inflammatory agent bromfenac. The difference in efficacy is attributable to the drug delivery vehicle used.

The second phase III trial of BromSite is scheduled to complete late this year. If successful, the NDA could be filed and US approval received in early 2015. There is a high probability of success in the second phase III trial given that it uses the same trial design as used in the first phase III. The Company will shortly start a pharmacokinetic study comparing BromSite and Prolenza with the objective of showing that BromSite delivers more bromfenac to the back of the eye. This would be further evidence that BromSite is more effective than Prolenza. Assuming that the second phase III trial shows comparable results to the first and the PK study shows marked superiority for BromSite, I think that doctors would move rapidly to replace most of the BromDay/ Prolenza usage with BromSite. I estimate that sales of BromDay are over $100 million in the US.


Financial Issues

The Company ended 1Q, 2013 with $4.5 million of cash. However, in April management completed a royalty deal for Besivance that brought in $15 million bringing the current cash balance to just under $20 million. This should fund the Company into mid-2014. I think that the Company might also be looking to partner BromSite and DexaSite which could bring in additional capital.


Investment Thesis

I think that the economic opportunity for BromSite is not well reflected in the current stock price as most of whatever focus there is on the Company is on DOUBle trial and AzaSite. I believe that the potential for BromSite aided by some contribution from DexaSite justifies much of the current stock price. If this is correct, investors have a free option on the possibility of success for AzaSite Plus in DOUBle and as I previously said, this would be a homerun opportunity. This is the basis for my buy on the stock.

Tagged as + Categorized as Smith On Stocks Blog


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