Bolstering its cash reserves in anticipation of closing a pair of drug development agreements, ISTA Pharmaceuticals Inc. raised $13.3 million in gross proceeds through a common stock offering.

The ophthalmic drug company, which is selling all the shares from a shelf registration, said it would use net proceeds for general corporate purposes, such as the two business development opportunities.

"The reason behind the [fund raising], and why we brought in such a limited amount of money, is because that's all we need in order to finalize our deal to hopefully get back [all] U.S. rights to Vitrase," ISTA CEO Vicente Anido told BioWorld Today. "And we've told The Street before that we'd like to add at least one more late-stage compound to our pipeline this year. Both of those negotiations are ongoing right now, and we feel that they're far enough down the path that we needed to bring in a little extra money."

ISTA on Friday agreed to sell institutional investors almost 1.6 million shares at $8.50 apiece. The per-share price represented a discount of about 12.5 percent relative to the stock's prior-day closing value, and on Friday, the shares slipped. The stock (NASDAQ:ISTA) fell 12 percent, dropping $1.16 to close at $8.55.

Irvine, Calif.-based ISTA had $35.5 million in cash, cash equivalents and short-term investments as of June 30. ISTA also had about 17.5 million shares outstanding through that date, and recorded an $8.3 million net loss in the preceding three-month period.

But going forward, the company expects revenue to grow as it begins marketing a pair of products that recently received FDA approval.

Istalol, a once-a-day liquid formulation of timolol, was launched last month in the U.S. for glaucoma, with internal marketing led by a recently hired sales staff at ISTA. Two months prior, Vitrase (hyaluronidase for injection; lyophilized, ovine) was approved for use as a spreading agent to facilitate the dispersion and absorption of other drugs.

Vitrase is partnered with Allergan Inc., which has rights to uses in the back of the eye, such as vitreous hemorrhage and diabetic retinopathy. A new drug application for the vitreous hemorrhage indication has produced an approvable letter from the FDA that asked ISTA to further analyze existing data and possibly conduct a confirmatory trial. (See BioWorld Today, April 8, 2003.)

"We've been in discussions about how to acquire those U.S. rights back," Anido said, adding that the Irvine-based partner has global rights to the drug's back-of-the-eye indications, except in Japan.

The FDA also is reviewing ISTA's new drug application for Xibrom (bromfenac sodium ophthalmic solution) 0.1 percent, a product for ocular inflammation, eye pain and photophobia following cataract surgery. The application was submitted in May, and following the FDA's recent acceptance of the filing, Anido said a PDUFA action date is scheduled in late March.

ISTA also plans to internally market that drug.

"Over the last two years," Anido said, "we have changed the strategy of the company from being a development-stage company with one product and one technology, and out-licensing things that came out of that technology, to more of a specialty pharmaceutical model with a focus on ophthalmology. So we acquired rights to three late-stage compounds in the U.S. to supplement Vitrase that we had already. And now that we've set up commercial activities, as well as having clinical and regulatory development in-house anyway, it makes more sense for us to try to have more products in our bag."

Two of its products, Xibrom and Caprogel (aminocaproic acid), came on board through ISTA's 2002 acquisition of AcSentient Inc., of Research Triangle Park, N.C. Caprogel is being developed for hyphema - bleeding in front of the eye - though ISTA is in the process of reformulating the compound into an easier-to-deliver product before moving it into a pivotal study.

AcSentient gained U.S. rights to both Xibrom and Caprogel from Senju Pharmaceuticals Co. Ltd., of Osaka, Japan.

"We raised some money toward the end of last year," Anido said. "At the time, we told investors that we felt that would be sufficient to go commercial and start selling product, and we've been able to get the sales force off the ground. So that money is still moving us forward through most of next year. But we also told them that if we needed extra cash for business development, we would go back out."

The latest transaction's placement agents are Banc of America Securities LLC in New York; Thomas Weisel Partners LLC in San Francisco; Lazard Freres & Co. LLC in New York; and C.E. Unterberg, Towbin LLC in Denver. The shelf registration from which the shares were pulled was originally worth $75 million.

ISTA expects the deal to close on or about Wednesday, subject to customary closing conditions.