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Expert Financial Analysis and Reporting

InSite Vision: Initiating Coverage on a Promising Company with a Robust Late Stage Product Portfolio

I have just published a new report and initiated coverage of InSite Vision (INSV, $0.30) with a Buy. The core technology of InSite Vision is its DuraSite drug delivery system that delivers drugs more effectively to the eye. The continual blinking of the eye can quickly wash out topical formulations and in order to retain effective drug levels in eye tissue, most drugs have to be given four to eight times per day. It is often difficult for patients to comply with this difficult schedule and missed doses can lead to reduced effectiveness or ineffectiveness of the drug. DuraSite enables twice a day and sometimes once a day dosing.


The company’s technology has already led to the approval and commercialization of two drugs for bacterial conjunctivitis: Merck’s AzaSite and Bausch & Lomb’s Besivance. The company is now conducting a phase III trial in blepharitis called DOUBle that could set the stage for approval of two new drugs, AzaSite Plus and DexaSite for blepharitis and possibly extend the indication of AzaSite to include blepharitis. There are currently no products approved for blepharitis, which I believe has the potential to be a $500+ million market opportunity in the US. With first to market advantage, AzaSite Plus, in particular, could be a very big product with US sales potential of $150+ million five years after introduction. All of this hinges on the outcome of the DOUBle trial whose topline results are likely to be released in late 2012 or early 2013. I think it likely that a second trial might be required by FDA to verify the results of DOUBle so that ultimate approval might not come until 2015. Phase III results for BromSite for the treatment of inflammation and pain following cataract surgery are due around the same time as DOUBle, late 2012 or early 2013. I see modest sales potential for BromSite.


Success in the DOUBle trial could lead to a doubling or tripling in the stock price in my opinion. Failure would be a devastating blow that would wipe out most of the stock price. I think that the upside for the stock could be as much as $0.90 per share and far outweighs the downside which I peg at about $0.10 if the trial fails, but remember that the downside involves losing most of your investment. I think that DOUBle is elegantly designed and has a good chance of success. However, seasoned biotechnology investors recognize that there is no such thing as a sure thing when it comes to clinical trials and like everyone else, I will be holding my breath around the end of the year waiting for the DOUBle results.

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