InSite Vision Announces 2002 First Quarter Results; Company Implements Additional OcuGene Marketing Programs.

Business Editors & Health/Medical Writers

ALAMEDA, Calif.--(BW HealthWire)--May 14, 2002

InSite Vision Incorporated (AMEX: ISV) -- an ophthalmic therapeutic, diagnostic and drug-delivery company -- today reported financial results for the three months ended March 31, 2002.

Research and development (R&D) expenses for the first quarter of 2002 increased to $2.1 million, compared with $1.7 million for the first quarter of 2001. Higher R&D spending supported continued expansion and advancement of InSite Vision's product portfolio, including the licensing of the Optineurin gene and its mutations from the University of Connecticut Health Center (UCHC) and clinical trials for ISV-401. InSite Vision did not receive R&D expense reimbursement during the 2002 first quarter, whereas during the comparable prior-year quarter InSite Vision reported research expense reimbursement of $263,000. Selling, general and administrative expenses increased to $896,000 for the first quarter of 2002 from $830,000 for the first quarter of 2001. The increase is primarily related to added professionals, materials and other costs to support the sales and marketing activities for the introduction of OcuGene(TM).

InSite Vision reported a net loss for the first quarter of 2002 of $3.0 million, or $0.12 per share, compared with a net loss of $2.1 million, or $0.08 per share, for the first quarter of 2001. InSite Vision had cash and cash equivalents of $7.2 million at March 31, 2002, compared with $10.1 million at December 31, 2001.

"Our investment in the early launch activities for OcuGene is expected to serve the dual purposes of driving future product sales and building relationships with the ophthalmology community that will be invaluable as we continue to commercialize our broad portfolio of drug candidates and delivery vehicles," said S. Kumar Chandrasekaran, Ph.D., chief executive officer of InSite Vision. "While we are still in the initial launch of OcuGene, we are beginning to see the results of our efforts in this process as the test is now being used by several well-respected ophthalmology thought leaders for their patients at risk for glaucoma. We expect to see sales increases for OcuGene in the coming quarters as we continue implementing a comprehensive marketing campaign."

Among its marketing activities, InSite Vision announced the implementation of an active outreach program to students and teaching staffs at two of the largest optometry schools in California where OcuGene is being introduced into the genetic curriculum. This program is intended to be a model for other similar outreach programs.

InSite Vision has also expanded its OcuGene advertising campaign to include both ophthalmology and optometry journals. The focus of these advertisements is to emphasize to a broader array of eye care specialists the value of using OcuGene to test patients at risk for an aggressive form of glaucoma.

During the first quarter of 2002, InSite Vision announced the expansion of its glaucoma genetics programs by licensing the Optineurin gene and related mutations from the UCHC. The Optineurin gene and its mutations, which were discovered through an international collaborative research study led by Mansoor Sarfarazi, Ph.D., Professor of Human Genetics and Director of the Molecular Ophthalmic Genetics Laboratory, Surgical Research Center at UCHC, have been reported to be a cause of primary open-angle glaucoma (POAG), including a POAG subgroup known as normal-tension glaucoma (NTG).

According to a research paper by Dr. Sarfarazi, which was published in the February 8, 2002 issue of Science, 54 families with adult-onset POAG and 124 sporadic POAG patients, the majority of whom are NTG patients, were studied. Dr. Sarfarazi identified Optineurin, the POAG causative gene, on chromosome 10p14 and the study demonstrated that mutations in Optineurin may be responsible for approximately 17% of hereditary forms of NTG glaucoma with an additional risk factor of about 14% in both familial and sporadic cases.

"With a licensing agreement for Optineurin and its mutations in place, we currently expect to begin developing a genetic test that may be able to identify individuals with Optineurin mutations, which may allow physicians to begin treatment before permanent visual damage occurs," commented Dr. Chandrasekaran. "Our ultimate goal is to develop diagnostic tests that screen for the major genes and mutations associated with glaucoma in order to facilitate timely therapeutic intervention."

Commenting on its near-term business development goals, Dr. Chandrasekaran said, "We are actively moving forward with efforts to secure corporate partners for our late-stage drug products. Our focus is on developing relationships with companies that can help us complete clinical development and bring these products to market. We are pleased with our recent progress in this regard."

Therapeutics Program Update

ISV-401

In December 2001, after the successful completion of a Phase I clinical study, InSite Vision initiated a multi-site, doubled-masked Phase II clinical study for ISV-401 for the treatment of bacterial conjunctivitis. ISV-401 is a DuraSite(R) formulation of an antibiotic not currently used in ophthalmology. The DuraSite system is InSite Vision's patented polymer-based eye drop formulation that prolongs the duration of delivery of drug to the eye. Research involving ISV-401 was presented at the May 2002 Association for Research in Vision and Ophthalmology (ARVO) meeting. InSite Vision is continuing discussions with potential corporate partners for the ISV-401 program.

ISV-403

Preclinical studies completed in the fourth quarter of 2001 indicate that ISV-403, which contains a fourth-generation fluoroquinolone, is effective against bacteria that are resistant to the currently marketed fluoroquinolone products. Additionally, the dosing frequency of ISV-403 may be significantly lower than other comparable products due to the effect of DuraSite in the formulation. InSite Vision anticipates filing an IND application assuming the favorable outcome of preclinical and toxicology studies being conducted by both InSite Vision and its Japanese partner SSP Co. Ltd.

ISV-205

In keeping with its strategy to develop diagnostic and therapeutic products that complement one another, InSite Vision is developing ISV-205, a DuraSite formulation of the well-known non-steroidal anti-inflammatory drug diclofenac. This product candidate, designed for use in concert with OcuGene, is intended to treat a cause, rather than the symptoms, of glaucoma. Currently, InSite Vision holds all global development and commercialization rights to ISV-205. InSite Vision is continuing discussion with possible corporate partners for the ISV-205 program.

Device Program Update

ISV-014

Development of the ISV-014 drug-delivery device for clinical use is proceeding toward the goal of submitting a 510(k) application to the FDA. Therapeutic levels of short-acting steroids and sustained delivery of genes was accomplished in animal models through collaborations with academic researchers in 2001. ISV-014 was featured in presentations at the May 2002 ARVO meeting and at the September 2001 Foundation Fighting Blindness Meeting on Drug Delivery, as well as in the June 2001 issue of Genetic Engineering News.

InSite Vision has scheduled an investor conference call regarding this announcement to be held today, beginning at 10:30 a.m. Eastern Time. Joining management on this conference call will be Mark Abelson, MD, Associate Clinical Professor of Ophthalmology, Ophthalmology Department, Harvard Medical School and Clinical Senior Scientist, Schepens Eye Research Institute, to discuss developments with the ISV-401 program. To participate in the live call via telephone, please call 888/803-7286. A telephone replay will be available until 12:30 p.m. Eastern Time May 16, 2002 by dialing 800/642-1687, and entering reservation number 3827193.

Individuals interested in listening to the live conference call via the Internet may do so by visiting the investor relations section of InSite Vision's website at www.insitevision.com. A replay will be available on the investor relations section of the website for 14 days.

InSite Vision is an ophthalmic products company focused on glaucoma, ocular infections and retinal diseases. InSite Vision's glaucoma activities include genomic research, using TIGR and other genes, for its diagnosis, prognosis and disease management test OcuGene, as well as ISV-205, InSite Vision's novel glaucoma therapeutic. ISV-205 uses InSite Vision's proprietary DuraSite drug-delivery technology, which also is incorporated into InSite Vision's ocular anti-infection programs ISV-401 and ISV-403, and InSite Vision's retinal disease program.

This press release and the conference call referenced herein contain, among other things, certain statements of a forward-looking nature relating to future events or the future business performance of InSite Vision. Such statements entail a number of risks and uncertainties, including but not limited to, market acceptance of our products; our ability to maintain and develop additional collaborations and commercial agreements with corporate partners, including with respect to OcuGene, ISV-205 and ISV-401; our need for significant additional funding for our capital requirements; our reliance on third parties for the development, marketing and sale of our products; and the results of preclinical and clinical studies and determinations by the U.S. Food & Drug Administration, including those with respect to OcuGene, ISV-205 and ISV-401. Reference is made to the discussion of risk factors detailed in InSite Vision's filings with the Securities and Exchange Commission, including its annual report on Form 10-K and its quarterly reports on Form 10-Q. Any projections in this release or in the conference call are based on limited information, which is subject to change. Although any such projections and the factors influencing them will likely change, InSite Vision will not necessarily update the information since InSite Vision may only provide guidance at certain points during the year and we assume no obligation to update any such information. Such information speaks only as of the date of this release and conference call. Actual events or results could differ materially and no reader of this news release should assume later that the information provided in this release or in the conference call is still valid.

Note to Editors: OcuGene is written with a "small cap" G; if doing so is not possible, please use an upper case G. InSite Vision Incorporated, InSite Vision, DuraSite and OcuGene are trademarks of InSite Vision Incorporated. Other trademarks that may be mentioned in this advisory are the intellectual property of their respective owners.

                      InSite Vision Incorporated

            Condensed Consolidated Statements of Operations
          For the Three Months Ended March 31, 2002 and 2001
         (in thousands, except per share amounts; unaudited)

                                                 Three months ended
                                                      March 31,
                                                 2002          2001
----------------------------------------------------------------------
Revenues                                       $      9     $      2
Cost of goods sold                                   17           --
Operating expenses:
  Research and development                        2,081        1,727
  Cost reimbursement                                 --          263
  Research and development, net                   2,081        1,464
  Selling, general and administrative               896          830
                                               ----------   ----------
    Total                                         2,977        2,294
                                               ----------   ----------
Loss from operations                             (2,985)      (2,292)
Interest, other income and expense, net              28          233
                                               ----------   ----------
Net loss applicable to common stockholders     $ (2,957)    $ (2,059)
                                               ==========   ==========
Net loss per share basic and diluted:
Net loss before cumulative effect of
 accounting change                            $   (0.12)   $   (0.08)
                                              ==========    ==========
Shares used to calculate net loss per share
  basic and diluted                              24,930       24,873
                                              ==========    ==========



                 Condensed Consolidated Balance Sheets
                At March 31, 2002 and December 31, 2001
                       (in thousands; unaudited)
                                              March 31,   December 31,
                                                2002          2001
----------------------------------------------------------------------
Assets:
Cash and cash equivalents                  $      7,158    $  10,095
Prepaid expenses and other assets                   155          173
Property and equipment, net                         715          783
                                             ------------  -----------
  Total assets                             $      8,028    $  11,051
                                             ============  ===========

Liabilities and stockholders' equity:
Current liabilities                        $      1,402    $   1,521
Long-term liabilities                                36           45
Stockholders' equity                              6,590        9,485
                                             ------------  -----------
  Total liabilities and stockholders'
   equity                                      $  8,028    $  11,051
                                              ===========  ===========