T-Pred™

Tobramycin and Prednisolone Acetate for Ocular Inflammation.

In April 2005, ISTA filed an investigational new drug application (IND) to initiate Phase III studies for a new eye drop for the prescription treatment of steroid-responsive ocular inflammation where risk of bacterial infection exists.  We have developed a proprietary formulation that is a fixed combination product of tobramycin and prednisolone acetate.  Based upon management estimates and 2006 prescription data compiled by IMS Health, ISTA estimates that 2006 sales in the U.S. topical ophthalmic anti-inflammatory market were approximately $500 million, with total prescriptions of 9.1 million.

Clinical/Regulatory Status:
In May 2007, we announced we had received a not approvable letter from the U.S. Food and Drug Administration (FDA) relating to our New Drug Application (NDA) for T-Pred™ (prednisolone acetate 1.0% and tobramycin 0.3% ophthalmic suspension).

In the fourth quarter of 2005, we completed our U.S. Phase III clinical study of T-Pred. The study was designed as a multi-center, randomized, double-blind study to determine the bioequivalence of prednisolone concentrations between T-Pred (prednisolone acetate 1.0% and tobramycin 0.3% ophthalmic suspension) and PredForte® (prednisolone acetate 1.0%). We believe our study demonstrated T-Pred achieved or exceeded this goal both in the intent-to-treat and the per-protocol patient populations. In addition, the Company believes its studies showed T-Pred to have antimicrobial activity equivalent to other combination products approved for this indication.

The FDA assessed the Company's clinical data as not showing sufficient equivalence between the prednisolone component in T-Pred and PredForte at least at one of the time points measured nor equivalence in the kill time between the tobramycin components in T-Pred and Tobrex®, although it showed equivalence versus Zylet® and Tobradex®. We do not agree with this assessment and plan to request a meeting with the FDA as quickly as possible.