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Ista Revises Public-Stock Offering Downward

Pharmaceuticals: Irvine maker of eye-condition remedies seeks $35 million, not $57 million.


Ista Pharmaceuticals Inc., an Irvine company developing treatments for eye afflictions, has scaled back its initial public-stock offering, which would reduce the money it expects to raise for clinical trials and research.

The eight-year-old company, which has Irvine-based Allergan Inc. as an investor, had previously indicated it hoped to raise more than $57 million when it went public. But now Ista would generate net proceeds of about $35 million under its revised IPO, according to a report filed Thursday with the Securities and Exchange Commission.

"I don't see this as a positive sign," said Richard Peterson, a market strategist for Thomson Financial Securities Data in Newark, N.J. "It may indicate a lack of demand from institutional investors, money managers and mutual funds."

Ista said it expects to offer 3 million shares of common stock at $12 to $14 per share. Previously, the company said it planned to offer 4.5 million shares with a target price of $13 to $15.

The SEC document gave no reason for the revision, and Ista officials declined to comment.

Of the 340 companies that have gone public this year, 73, or about 21%, lowered their original filing price before trading, while 92, or 27%, raised it, Peterson said.

Companies with scaled-back offerings tend to perform worse initially than those with higher asking prices, Peterson said. Whereas the average new issue this year jumped 65% in the first day of trading, those with lower asking prices increased by only 25%, he said.

Ista's actions are not surprising, given the IPO market's volatility, said Tom Madden of IPO Monitor.

The company plans to use the proceeds from its offering to fund clinical trials and research, for possible acquisitions of similar businesses and for general corporate purposes, according to SEC documents. Ista would have nearly 14.5 million shares outstanding after the offering.

Ista is working on remedies for several serious eye conditions. The company's leading product candidate is Vitrase, a treatment for diabetic retinopathy, the leading cause of adult blindness in the United States, and vitreous hemorrhage, a sight-threatening condition.

But the company, which was founded in 1992, currently has no products to market. It has lost $34.6 million over the last five years, and said it expects "significant operating losses" over the next several years, according to the SEC filing.

Allergan, an eye products and specialty pharmaceutical firm, has invested $10 million in Ista and has agreed to market, sell and distribute Vitrase in the United States and most international markets. Allergan would pay Ista a royalty on Vitrase foreign sales and split profits from domestic sales.

Ista expects its shares to trade on the Nasdaq market under the symbol ISTA.

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