By Debbie Strickland

Associate Managing Editor

Ista Pharmaceuticals Inc. Tuesday became the 17th biotechnology company to begin trading on the Nasdaq exchange this month. The Irvine, Calif., eye therapeutics company raised $31.5 million in an offering of 3 million shares at $10.50 each.

Ista completed the offering after reducing the number of shares from 4.5 million and the share price from the $13 to $15 range anticipated in July. The company's shares (NASDAQ:ISTA) closed Tuesday at $10.750, up 2.3 percent in their debut trading session.

The U.S. markets may almost be satiated after supporting 29 biotech IPOs valued at more than $2.3 billion since July 1. August's biotech IPO tally now tops $1.1 billion, but the wave of new issues appears to be winding down as the decks are cleared of offerings first filed in the winter and spring.

This year has seen more than 50 biotech IPOs on U.S. markets so far, but now there are only about a dozen still pending. August has seen no new registrations, a further sign that the market may be slowing, even though three IPOs this month have broken the $100 million level (Lion Bioscience AG, Deltagen Inc. and Rosetta Inpharmatics Inc.).

Ista's offering represents about 20 percent of the company, based on the 14.7 million shares outstanding. (If adjusted for outstanding options, the offering represents about 17.5 percent.) The $28 million in net proceeds will boost Ista's cash level from $5.3 million as of June 30 to $33.3 million. The funds have been earmarked primarily for clinical trials.

CIBC World Markets Corp. acted as lead manager for the offering. Prudential Vector Healthcare Group and Thomas Weisel Partners LLC co-managed. The underwriters have a 30-day overallotment option for 450,000 shares.

Ista, formerly called Advanced Corneal Systems, has reached the Phase III stage of clinical testing with Vitrase, a hyaluronidase-based product for severe vitreous hemorrhage. According to the company, the 1 million cases of this kind of hemorrhage in the U.S., Europe and Japan represent a wide-open market opportunity, since there is currently no medical treatment option short of surgery. Half of those cases, Ista said in its IPO filing, could probably be treated with Vitrase, which is injected into the vitreous humor, causing the substance to liquefy and promoting clearance of the hemorrhage.

Looking ahead to a larger indication, the company has begun a pilot Phase IIa clinical trial of Vitrase in Mexico for diabetic retinopathy, the leading cause of blindness in adults in the U.S. Vitrase would be used to treat non-proliferative diabetic retinopathy, the first stage of the disease, which accounts for the majority of the 4 million to 6 million cases in the U.S. The goal of Vitrase treatment is to cause the separation of the vitreous humor from the retina, thereby limiting growth of abnormal blood vessels in the back of the eye.

In March, Ista landed nearby Allergan Inc., also of Irvine, as the marketing partner for Vitrase. The deal provides a 50-50 profit split in the United States and royalties on sales elsewhere. Allergan made a $10 million equity investment in Ista and agreed to milestone payments of up to $35 million. The agreement covers all markets except Mexico (until 2004) and Japan.

That same month, Ista acquired Visionex Pte. Ltd., a Singapore company owned by majority stockholders in Ista that has been conducting a Phase II trial of Vitrase in Singapore. The company made the acquisition with preferred stock convertible into 2.46 million shares.

Further back in the product development pipeline, Ista is developing Keratase, which targets corneal opacification, in which the cornea becomes cloudy and the amount of light entering it is diminished. The currently accepted treatment for the condition is a corneal transplant. Ista plans to begin a Phase IIb trial of Keratase in the second half of this year.

The company is also developing a treatment system called Keraform for keratoconus, a vision-impairing degenerative disease that involves thinning of the cornea with a cone-like malformation.

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