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ISTA Pharmaceuticals (ISTA) |
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WIKI ANALYSIS
Ista Pharmaceuticals Inc. (NASDAQ: ISTA) is the fastest growing U.S.-branded ophthalmic pharmaceutical company. The company’s products focus on treating diseases of the eye and allergies, and include therapies for ocular inflammation and pain, glaucoma, dry eye, and ocular and nasal allergies.[1] The Company has four products available for sale in the United States and Puerto Rico: Xibrom, Bepreve, Istalol and Vitrase. Ista's other products include XiDay, T-Pred, Bromfenac lower concentration, Ecabet Sodium and Bepotastine Nasal.[1]
Although it is conducting research and clinical trials on its own to obtain FDA New Drug Application (NDA) for its products, Ista essentially markets products under license agreements with Japanese drug manufacturers.
Company Overview
Business and Financial Metrics
Second Quarter 2010 Results (ended June 30, 2010)[2]
During the second quarter of 2010, Ista Pharmaceuticals reported net revenues of $35.1 million, an increase of 46% from the second quarter of 2009. Net income for the second quarter was $26.2 million, or $0.61 per diluted share, compared to a net loss of $36.6 million, or $1.10 per diluted share, for the second quarter ended June 30, 2009. A non-cash warrant valuation gain of $26.3 million and a non-cash warrant valuation loss of $34.0 million were included in net income (loss) for the second quarters ended June 30, 2010 and 2009, respectively.
Products
Xibrom (73% of 2009 revenue)[1]
Xibrom is a twice-daily topical non-steroidal anti-inflammatory formulation of bromfenac for the treatment of ocular inflammation and pain following cataract surgery. For the year ended December 31, 2009, sales of Xibrom accounted for 73% of its total net revenues. In December 2009, ISTA expanded the marketing rights to include not only the United States and its possessions, but also Canada and Mexico.
Bepreve[1]
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, ISTA received approval from the food and drug administration (FDA) to launch in the United States.
Istalol[1]
Istalol is the Company’s once-daily eye drop solution of timolol, a beta-blocking agent for the treatment of glaucoma. Istalol was developed by Senju in Japan.
Vitrase[1]
Vitrase, formulation of ovine hyaluronidase, is used as a spreading agent. The term hyaluronidase describes a group of naturally occurring enzymes that can digest 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.
XiDay[1]
ISTA is developing a once-daily version of Xibrom or XiDay, for the treatment of ocular inflammation and pain following cataract surgery. In August 2009, ISTA announced positive preliminary Phase III results from its XiDay Phase III confirmatory clinical study.
T-Pred[1]
T-Pred is the Company’s formulation of a fixed combination product of tobramycin 0.3% and prednisolone acetate 1%. T-Pred is being developed for the treatment of steroid-responsive inflammatory ocular conditions, where risk of bacterial infection exists.
Bromfenac[1]
ISTA is developing a lower concentration of bromfenac for the treatment of dry eye syndrome. In June 2009, ISTA announced positive results from a proof-of-concept Phase II clinical study in subjects with dry eye disease. The Company focuses on initiating Phase III studies with bromfenac for the treatment of dry eye syndrome.
Ecabet sodium[1]
ISTA is developing ecabet sodium as a prescription eye drop for the treatment of dry eye syndrome. Ecabet sodium represents a class of molecules that increases the quantity of mucin produced by conjunctival goblet cells and corneal epithelia. Ecabet sodium is marketed in Japan as an oral agent for treatment of gastric ulcers and gastritis. In January 2009, the Company announced positive results from its Phase II study.
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Trends and Forces
Regulation by the Food & Drug Administration
In March 2010, the U.S. Food and Drug Administration (FDA) issued a warning letter to ISTA Pharmaceuticals stating that sales ads for Xibrom (bromfenac ophthalmic solution, 0.09%) are “misleading,” the FDA said on its Web site. In the letter, the FDA said the Xibrom ads suggest that the drug, a non-steroidal anti-inflammatory drug indicated for the treatment of inflammation and pain after cataract extraction, is “safer and more effective than has been demonstrated.” The FDA letter also said the Xibrom ad presents “unsubstantiated superiority claims” over other drugs in the class and “omits and minimizes important risk information for the drug.” In addition, the FDA said the ad presented “misleading patient preference claims” in which it is suggested that Xibrom is the preferred choice of NSAIDs among patients[3]
Pipeline risks and opportunities
As with any pharmaceutical company, Ista is exposed to the risk of its R&D not being fully satisfying. Ista's products are niche-drugs with narrow markets meaning potential profits will remain limited but this seems in phase with the company's overall strategy. However given the fact that some of Ista's products have already been approved for commercial use in other countries (Japan), the risks of a refusal from the FDA are lessened. The four most advanced products in the pipeline would target markets with size between $300 million and $400 million[4] in the US. Lately the two most advanced products have raised concerns from the FDA about their inefficacy and will require deeper clinical trials.
Generic drugmakers threat
In 2009 Ista lost its exclusivity rights on Xibrom meaning generic manufacturers could enter the market at any moment. Ista has been seeking an extension of its patents but the FDA seems to have rejected. Ista claims that no generic product would enter the market before the end of 2010 but this remains highly uncertain. Xibrom is currently the major source of revenue for Ista, generic drugs would do greatly impact its chance of survival. Besides exclusivity rights on Vitrase, Ista's other marketed product, could expire soon since it was granted a 5-year protection starting in 2004.
Partnering opportunities and constraints
Most of Ista's products patents have bought from external companies, mainly Senju from Japan. While this provides some certainty about the potential of the products being bought, it also introduces a constraint on Ista. Milestones payments and royalties must be paid and thus lower the ability for the company to make profits. But these license agreements also present the risk of being ended by the other contracting company.
Pace of growth, debt, cash and financing options
As a biotech company with significant R&D expenses, Ista has taken on a lot of debt. So far it doesn't seem to have any financing problem and cash flow from operations are getting closer to be positive. The management team has followed a strategy to keep high level of cash which preserves the company's ability to stay in the business through the current economic crisis.
Suppliers/Customers
Ista has obtained some of its raw material and products from sole suppliers which greatly concentrates risks. While Ista has taken actions to diversify its sources of basic materials, it might not be able to find other suppliers. On the other side, Ista commercializes its products mainly through three drug wholesalers that account for 91% of Ista's revenues. This high concentration of customers also draws concerns in case of the withdrawal of any of those customers.
Competition
Given the very diverse nature of ophthalmic diseases and conditions, one will find it quite difficult to find direct competitors and furthermore financial metrics in those markets, especially since ophthalmic products only represent a small portion of the revenues of large drug manufacturers.
- Alcon (NYSE:ACL) major eye-care company and biggest direct competitor to Ista. Their products compete directly with Ista's in glaucoma treatment as well as allergies. One of Ista's goals for new product Bepreve is to outpace Alcon's share of voice and cut their market share. Alcon is a multinational company with net income over $2 billion and great marker power.
- Inspire Pharmaceuticals (NASDAQ:ISPH): leading biotechnology company specialized in ophthalmic and pulmonary diseases. Their ophthalmic products are direct competitors to Ista's in eye allergies, dry eye conditions and conjunctivitis. Ista also aims at surpassing Inspire's share of voice in the short term with its Bepreve.
- Akorn (NASDAQ:AKRX): Akorn distributes several ophthalmic products, mainly for hospital uses. This biotech could be a distant competitor to Ista.
- Pfizer (NYSE:PFE): the world's leader drug manufacturer has operations in the ophthalmic market with a focus on glaucoma disease. Given its size and its scope, it could be a major threat to Ista as well as a potential licensing partner.
- Opko Health Inc (OPK) (AMEX:OPK): small biotechnology focused on ophthalmic diseases and diagnostic systems for the detection of eye conditions. It is currently conducting research on dry eye diseases but has no marketed products on this market.
References
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