ISTA Pharmaceuticals Reports First Quarter 2011 Financial Results

IRVINE, CA, May 04 (MARKET WIRE) --
ISTA Pharmaceuticals, Inc. (NASDAQ: ISTA), today reported financial
results and progress on key milestones for the quarter ended March 31,
2011.

First Quarter 2011 Highlights

-- First quarter 2011 net revenues were $36.7 million, an increase of 30%
from the first quarter of 2010.
-- On an adjusted cash basis, and excluding expenses incurred in
connection with financing and due diligence activities to pursue an
uncompleted acquisition, ISTA had an adjusted cash net loss of
$5.6 million, or $0.17 per share, based on 34 million shares
outstanding. ISTA's management is introducing these non-GAAP financial
measures as they believe the numbers provide useful information for
investors to better evaluate the ongoing business performance.
-- ISTA's sales and marketing team successfully converted the majority of
ISTA's twice-daily XIBROM(TM) prescriptions to once-daily BROMDAY(TM)
and discontinued XIBROM in February 2011.
-- In April 2011, ISTA announced positive, topline results from its
Phase 2 study of bepotastine besilate nasal spray for allergic
rhinitis.
-- Enrollment in ISTA's Phase 3 efficacy and short-term safety studies for
REMURA(TM) for dry eye is on schedule, with topline results anticipated
by early in the second half of 2011.
-- Under accounting principles generally accepted in the United States
(GAAP), net loss for the first quarter ended March 31, 2011, was $84.1
million, or $2.49 per share, impacted primarily by a non-cash warrant
valuation adjustment of $72.2 million resulting from a 97% increase in
the Company's stock price in the quarter.

"Our results for the first quarter reflect strong product revenue
growth over the prior year quarter, driven by our success with the launch
and market acceptance of BROMDAY, our once-daily prescription eye drop
for the treatment of postoperative inflammation and reduction of ocular
pain in patients who have undergone cataract extractions, along with
BEPREVE(R), our ophthalmic solution for ocular itching associated with
allergic conjunctivitis," stated Vicente Anido, Jr., Ph.D., President and
Chief Executive Officer of ISTA Pharmaceuticals. "In terms of expenses,
we had multiple clinical trials underway and expenses for business
development activities related to an acquisition that did not come to
fruition. As we expected and guided, we had a loss for the first quarter,
but anticipate we will be profitable on an adjusted cash basis for the
full year 2011. Our business is growing and generates the cash we need to
fuel our product development, repay our debt and further expand our
business.

"The key highlight of the first quarter was the achievement of our first
2011 milestone -- the successful conversion of our twice-daily XIBROM
prescriptions to once-daily BROMDAY, our ophthalmic non-steroidal
anti-inflammatory (NSAID) eye drops. Since BROMDAY has market exclusivity
through October 2013 and is the only once-daily NSAID on the market, we
have the potential to gain additional market share. With the BROMDAY
conversion behind us, our sales force has increased its focus on promoting
BEPREVE as the spring allergy season advances. Based on current high
pollen counts in much of the U.S., it looks to be a robust allergy season,
and our new prescription (NRx) market share for BEPREVE has more than
doubled to 4.5% for March 2011 from the 2.0% share we had in March 2010. "

Dr. Anido concluded, "In terms of pipeline, two clinical milestones are
now complete, and we are making solid progress on our third milestone. We
are announcing today we initiated the low-concentration BROMDAY Phase 3
studies this week, which follow a similar design to the Phase 3 studies
conducted for the now approved once-daily BROMDAY. And last week, we
announced positive, topline results from our Phase 2 study of bepotastine
besilate nasal spray for allergic rhinitis. A next step in the
development plan for this drug candidate is to explore clinical study
designs for a bepotastine besilate/steroid combination nasal spray and,
after completing discussions with the FDA, we plan to initiate a Phase 2
study in Mountain Cedar pollen with our bepotastine besilate/steroid
combination nasal spray before the end of 2011. Finally, with enrollment
proceeding well, we are on track to report topline Phase 3 efficacy and
short-term safety results for REMURA(TM) for dry eye by early in the
second half of the year."

Financial Results

Net revenues for the first quarter ended March 31, 2011 were $36.7
million, or an increase of 30% over the same period in 2010. Net revenue
growth was driven primarily by strong demand for BROMDAY/XIBROM and
BEPREVE.

Net Revenues

(in millions, except percentage data)

Quarter Quarter
Ended Ended
March 31, March 31,
2011 2010 Change
---------- ---------- ----------
BROMDAY/XIBROM $ 23.0 $ 20.3 13%
BEPREVE 4.2 0.5 740%
ISTALOL 6.2 5.4 15%
VITRASE 3.3 2.1 57%
---------- ----------
Total net revenues $ 36.7 $ 28.3 30%
========== ==========

Gross margin for the first quarter ended March 31, 2010 was 75%, or
$27.5 million, as compared to 74%, or $21.0 million, for the same period
in 2010. The increase in gross margin for the first quarter of 2011 as
compared to prior year was due primarily to the continued growth in
revenues from our highest margin products, BROMDAY / XIBROM and BEPREVE.

Research and development (R&D) expenses for the first quarter ended March
31, 2011 were $10.3 million, as compared to $4.8 million during the
corresponding period of 2010. The increase over the prior-year period was
due primarily to the 2011 cost of on-going Phase 3 efficacy and short-term
safety studies related to REMURA(TM) for dry eye and Phase 2 Mountain
Cedar Pollen studies for bepotastine besilate nasal spray.

Selling, general, and administrative (SG&A) expenses for the first quarter
ended March 31, 2011 increased to $26.9 million from $20.9 million for the
corresponding period in 2010. The increase primarily reflects expenses of
$4.5 million in legal, professional and other fees incurred in connection
with financing and due diligence activities to pursue a potential
acquisition of a company with marketed products, for which the Company was
successful in securing a financing commitment but was unsuccessful in
concluding the acquisition.

Operating loss for the first quarter ended March 31, 2011 was $9.8
million, compared to an operating loss of $4.7 million in the
corresponding quarter of 2010, primarily due to expenses in connection
with financing and due diligence activities to pursue an uncompleted
acquisition.

Net loss for the first quarter ended March 31, 2011, was $84.1 million, or
$2.49 per basic and diluted share, including a non-cash warrant valuation
expense of $72.2 million, based on 34 million shares outstanding.
Excluding expenses incurred in connection with financing and due
diligence activities to pursue an uncompleted acquisition, the adjusted
cash net loss for the first quarter ended March 31, 2011, was $5.6
million, or $0.17 per share based on 34 million shares outstanding. The
non-cash warrant valuation adjustments are driven primarily by the change
in the Company's stock price over the quarter. Over the first quarter of
2011, ISTA's stock price increased 97%, from $5.13 to $10.12.

At March 31, 2011, ISTA had cash of $75.8 million, which included $13
million under ISTA's revolving line of credit with Silicon Valley Bank and
$27 million in accrued royalties on BROMDAY and XIBROM.

ISTA Reaffirms 2011 Financial Outlook, Adds Adjusted Cash Net Income and
EPS Guidance

ISTA expects 2011:

-- Net revenues of approximately $175 million to $190 million.
-- Gross margins of 75% to 77% of net revenues.
-- R&D expenses of 18% to 22% of net revenues.
-- SG&A expenses of 44% to 48% of net revenues.
-- Operating income of $13 million to $16 million.
-- Non-GAAP adjusted cash net income of $13 million to $16 million.
-- Non-GAAP adjusted cash earnings per diluted share of $0.26 to $0.32,
using 50 million fully diluted shares on a treasury basis calculated at
a stock price of $10. The Company defines "adjusted cash net income" as
the Company's net income adjusted for the non-cash mark-to-market
adjustments relating to warrants, plus non-cash interest expense and
non-cash stock-based compensation costs of approximately $7.5 million
to $8.5 million annually.
-- Year-end cash balance of at least $90 million. This amount is after
scheduled debt repayment and includes amounts drawn from our bank line
and the reserves for BROMDAY/XIBROM royalties.

Of note, one-third of our $65 million debt facility comes due in
September 2011. ISTA anticipates making the $21.5 million principal
repayment out of cash on hand, which was $75.8 million at the end of the
first quarter, March 31, 2011, and cash generated from operations.

Company Files Shelf Registration

Later today, ISTA plans to file a universal shelf registration statement
on Form S-3 with the U.S. Securities and Exchange Commission (SEC). The
Company's intent with respect to the registration statement is to provide
the Company with flexibility for financing future growth through
acquisitions and strategic transactions, and does not reflect a change in
its financing strategy. At present, the Company has no specific plans to
issue any form of securities under the registration.

When the registration statement is declared effective by the SEC, ISTA
will be able to offer and sell up to $150 million of any form of
securities including, but not limited to, equity, debt and other
securities as described in the registration statement. The terms of any
offering under the shelf registration statement will be determined at the
time of such offering. Proceeds from the sale of any securities will be
used for the purposes described in a prospectus supplement filed at the
time of such offering.

Conference Call

ISTA will host a conference call with a simultaneous webcast today, May 4,
2011, at 4:30 PM Eastern Time, to discuss its first quarter 2011 results.
To access the live conference call, U.S. and Canadian participants may
dial 866-761-0749; international participants may dial 617-614-2707. The
access code for the live call is 51591817. To access the 24-hour audio
replay, U.S. and Canadian participants may dial 888-286-8010;
international participants may dial 617-801-6888. The access code for the
replay is 59551940. This conference call also will be webcast live and
archived on ISTA's website for 30 days at http://www.istavision.com.

ABOUT ISTA PHARMACEUTICALS

ISTA Pharmaceuticals, Inc., is a fast growing and the fourth largest
branded prescription eye care business in the United States, with an
expanding focus on allergy therapeutics. ISTA currently markets four
products, including treatments for ocular inflammation and pain
post-cataract surgery, glaucoma and ocular itching associated with
allergic conjunctivitis. The Company's development pipeline contains
additional candidates in various stages of development to treat dry eye,
ocular inflammation and pain, and nasal allergies. Headquartered in
Irvine, California, ISTA generated revenues of $156.5 million in 2010. For
additional information about ISTA, please visit the corporate website at
www.istavision.com.

BROMDAY(TM) (bromfenac ophthalmic solution) 0.09%, XIBROM (bromfenac
ophthalmic solution)(R) 0.09%, ISTALOL(R) (timolol maleate ophthalmic
solution) 0.5%, VITRASE(R) (hyaluronidase injection) Ovine, 200 USP
Units/mL, BEPREVE(R) (bepotastine besilate ophthalmic solution) 1.5% and
REMURA(TM) (bromfenac ophthalmic solution for dry eye) are trademarks of
ISTA Pharmaceuticals, Inc.

Full prescribing information for BROMDAY is available on ISTA
Pharmaceuticals' website at
http://www.istavision.com/pdf/BROMDAYPI101008.pdf

Full prescribing information for ISTALOL is available on ISTA
Pharmaceuticals' website at
http://www.istavision.com/pdf/Istalol_Full_PI-ISL274.pdf

Full prescribing information for VITRASE is available on ISTA
Pharmaceuticals' website at
http://www.istavision.com/pdf/vitrase200_package_insert.pdf

Full prescribing information for BEPREVE is available on ISTA
Pharmaceuticals' website at
http://www.istavision.com/pdf/Bepreve_insert.pdf

FORWARD-LOOKING STATEMENTS

Any statements contained in this press release that refer to future events
or other non-historical matters are forward-looking statements. Without
limiting the foregoing, but by way of example, statements contained in
this press release related to ISTA's 2011 financial outlook and expected
financial results, market share growth for BROMDAY and BEPREVE, initiation
of new clinical trials, announcement of clinical trial results in 2011,
its plans to file a shelf registration statement and future issuance of
securities under the shelf registration are forward-looking statements.
Except as required by law, ISTA disclaims any intent or obligation to
update any forward-looking statements. These forward-looking statements
are based on ISTA's expectations as of the date of this press release and
are subject to risks and uncertainties that could cause actual results to
differ materially. Important factors that could cause actual results to
differ from current expectations include, among others, delays and
uncertainties related to the conduct and success of clinical trials, the
transition of prescribers from XIBROM to BROMDAY, the FDA or other
regulatory agency approval or actions, ISTA's ability to find and
successfully integrate acquisition candidates, the dispute with Senju
regarding XIBROM and BROMDAY royalties, and such other risks and
uncertainties as detailed from time to time in ISTA's public filings with
the U.S. Securities and Exchange Commission, including but not limited to
ISTA's Annual Report on Form 10-K for the year ended December 31, 2010.

ISTA PHARMACEUTICALS, INC.
Unaudited Statement of Operations
(in thousands, except per share data)

Three Months Ended
March 31,
--------------------------
2011 2010
------------ ------------
Revenues:
Product sales, net $ 36,720 $ 28,304
------------ ------------
Total revenues 36,720 28,304
Cost of products sold 9,216 7,284
------------ ------------
Gross profit margin 27,504 21,020
Costs and expenses:
Research and development 10,344 4,803
Selling, general and administrative 26,931 20,868
------------ ------------
Total costs and expenses 37,275 25,671
------------ ------------
Loss from operations (9,771) (4,651)

Other (expense) income:
Interest expense (2,072) (2,071)
Gain on derivative valuation - 7
(Loss) gain on warrant valuation (72,234) 7,191
Other, net 4 -
------------ ------------
Total other (expense) income (74,302) 5,127
------------ ------------
Net (loss) income $ (84,073) $ 476
============ ============
Net (loss) income per common share, basic and
diluted $ (2.49) $ 0.01
============ ============
Shares used in computing net (loss) income per
common share, basic 33,715 33,364
============ ============
Shares used in computing net (loss) income per
common share, diluted 33,715 43,895
============ ============

ISTA PHARMACEUTICALS INC.
Unaudited Summary of Balance Sheet Data
(in thousands)

March 31, December 31,
2011 2010
------------ ------------
Cash and cash equivalents $ 75,763 $ 78,777
Working capital 6,626 15,822
Total assets 131,725 134,240
Current portion of Facility Agreement 21,450 21,450
Facility Agreement, net of current portion and
unamortized discounts and derivatives 39,418 38,706
Warrant liability 138,419 66,185
Total liabilities 293,376 213,337
Total stockholders' deficit (161,650) (79,097)

Non-GAAP Financial Measures

ISTA believes the metric "adjusted cash net income (loss) and adjusted
cash EPS excluding non-cash interest expense, stock option expense and
non-cash warrant valuation adjustments," are useful financial measures
for investors in evaluating the Company's performance for the periods
presented. ISTA's management believes the presentation of these non-GAAP
financial measures provides useful information to investors regarding
ISTA's results of operations as these non-GAAP financial measures allow
investors to better evaluate ongoing business performance. These metrics,
however, are not a measure of financial performance under accounting
principles generally accepted in the United States (GAAP) and should not
be considered a substitute for net income (loss) or EPS in accordance
with GAAP and may not be comparable to similarly titled measures reported
by other companies. For a reconciliation of net income (loss) to adjusted
cash net loss, see the table below.

ISTA PHARMACEUTICALS, INC.
Reconciliation of GAAP Net Loss to Adjusted Cash Net Loss
(in thousands)

Three Months Ended
March 31,
--------------------------
2011 2010
------------ ------------
Net (loss) income $ (84,073) $ 476
Add:
Stock-based compensation costs 769 868
Amortization of deferred financing costs 267 270
Amortization of discounts on Facility Agreement 712 711
Change in value of warrants related to Facility
Agreement 72,234 (7,191)
Change in value of derivatives related to
Facility Agreement - (7)
------------ ------------
Cash net loss (10,091) (4,873)
Add:
Costs associated with uncompleted acquisition 4,506 -
------------ ------------
Adjusted cash net loss $ (5,585) $ (4,873)

Net (loss) income per share - basic $ (2.49) $ 0.01
============ ============
Net loss per share - diluted $ (2.49) $ 0.01
============ ============
Adjusted cash net loss per share - basic and
diluted $ (0.17) $ (0.11)
============ ============
Shares used in computing net loss per common
share, basic 33,715 33,364
============ ============
Shares used in computing net loss per common
share, diluted 33,715 43,895
============ ============

CONTACTS
For Investor Relations:
Lauren Silvernail
949-788-5302
lsilvernail@istavision.com

Jeanie Herbert
949-789-3159
jherbert@istavision.com

Juliane Snowden
Burns McClellan
212-213-0006
jsnowden@burnsmc.com

For General Media:
Justin Jackson
Burns McClellan
212-213-0006
jjackson@burnsmc.com

For Trade Media:
Tad Heitmann
BioComm Network
714-273-2937
theitmann@BioCommNetwork.com
Web Site: http://www.istavision.com

Copyright 2011, Market Wire, All rights reserved.

-0-