SOURCE: ISTA Pharmaceuticals

December 16, 2011 10:26 ET

ISTA's Board of Directors Confirms Rejection of Unsolicited, Non-Binding Proposal From Valeant; Board Will Review Strategic Options to Maximize Shareholder Value

IRVINE, CA--(Marketwire - Dec 16, 2011) - ISTA Pharmaceuticals, Inc. (NASDAQ: ISTA)

  • Grossly Inadequate Proposal for $6.50 Per Share Significantly Undervalues ISTA
  • ISTA to Host 2012 Guidance and Pipeline Update Webcast/Call for Its Shareholders on January 4, 2012

ISTA Pharmaceuticals, Inc. (NASDAQ: ISTA) confirmed today that it had received a letter on November 23, 2011 from Valeant Pharmaceuticals International, Inc. (NYSE: VRX) outlining an unsolicited, non-binding proposal to acquire all of the outstanding shares of ISTA for $6.50 per share in cash, subject to due diligence. ISTA also confirmed receipt of a letter from Valeant dated December 16, 2011 reaffirming its non-binding proposal.

After careful deliberation, with the assistance of its financial and legal advisors, ISTA's Board of Directors had previously determined on December 13, 2011 that the non-binding proposal was grossly inadequate and not in the best interests of ISTA shareholders. Vicente Anido, Jr., Ph.D., President and Chief Executive Officer of ISTA, sent a letter dated December 14, 2011 to that effect to Valeant on behalf of the Board of Directors of ISTA. The full text of that letter is set out below, as is the text of a letter sent to Valeant on December 2, 2011.

The ISTA Board is committed to maximizing long-term shareholder value. Due to the fact that Valeant has attempted to revive its previously rejected proposal, ISTA's Board announced that it will commence a review of all strategic options available to ISTA in the context of its fiduciary responsibilities and the Company's strategic plans. ISTA also announced that it will be holding its 2012 Guidance and Pipeline Update webcast and call on January 4, 2012, during which it will discuss guidance for 2012, pipeline developments and key upcoming events.

Greenhill & Co. is acting as financial advisor to ISTA. Stradling Yocca Carlson & Rauth and WilmerHale LLP are acting as legal advisors to ISTA.

Text of letter dated December 14, 2011

J. Michael Pearson
Chairman and Chief Executive Officer
Valeant Pharmaceuticals International, Inc.
14 Main Street, Suite 140
Madison, NJ 07940

Dear Mike,

I am writing to formally respond to your letter dated November 23, 2011 outlining Valeant's unsolicited, non-binding proposal to acquire 100% of the outstanding shares of ISTA for $6.50 per share in cash (the "Non-Binding Proposal"). As I indicated to you in my letter dated December 2nd, upon receipt of your letter, the ISTA Board of Directors commenced a thorough review of your Non-Binding Proposal with our financial and legal advisors in the context of fulfilling our fiduciary responsibilities and maximizing long-term value for shareholders. Having now completed this review, our Board has unanimously rejected your Non-Binding Proposal as grossly inadequate.

Our Board believes your Non-Binding Proposal significantly undervalues ISTA. The Board does recognize that volatile markets since July 2011 have put pressure on ISTA's stock price as well as the stock prices of other specialty pharmaceutical companies. That said, we are now ending a pivotal year for our Company, which featured the important conversion from XIBROM to BROMDAY and strong market share growth for BEPREVE due to its advantages over competitive products. As a result, ISTA is poised to demonstrate significant revenue growth in 2012 and beyond from existing core products that are gaining market share. In addition, we have continued to strengthen and advance the business while also achieving important milestones in our pipeline to drive future growth, which we believe is not reflected in your Non-Binding Proposal.

In summary, after careful review, the ISTA Board does not believe that pursuing your Non-Binding Proposal is in the best interests of our shareholders.

We have handled your proposal in a confidential manner and trust that you will do the same.

Vicente Anido, Jr., Ph.D.
President and Chief Executive Officer

Text of letter dated December 2, 2011

J. Michael Pearson
Chairman and Chief Executive Officer
Valeant Pharmaceuticals International, Inc.
14 Main Street, Suite 140
Madison, NJ 07940

Dear Mike,

We have received your letter dated November 23, 2011 outlining Valeant's unsolicited, non-binding offer to acquire 100% of the outstanding shares of ISTA (the "Non-Binding Proposal"). Your Non-Binding Proposal is an acknowledgement of ISTA's accomplishments to date as well as confirmation of the unique nature of our ophthalmic and allergy platform in the U.S. The Non-Binding Proposal was promptly shared with all the ISTA directors and has been the subject of significant discussions through the holiday weekend and continuing this week.

I can assure you that the ISTA Board takes very seriously its fiduciary responsibilities to shareholders, especially in the context of any and all such proposals. We are analyzing the Non-Binding Proposal very carefully through the lens of maximizing long-term value for our shareholders.

As you are aware, Valeant first expressed an interest in acquiring ISTA in late September when Valeant Board member Robert A. Ingram called ISTA Board member Dean Mitchell and you simultaneously contacted me. The discussions over the ensuing period were non-structured and included the potential for a collaborative alternative involving your ophthalmic assets. Despite not receiving any formal indication of value from you, the ISTA Board was continuously updated on these conversations and, as you were informed, considered providing non-public information and entering into more formal discussions. This consideration was based on your and Robert Ingram's verbal indication on multiple occasions that Valeant would be prepared to pay up to a 100% premium to our stock price which was as high as $4.29 on October 27th when the message was reiterated. This clearly suggests an offer price significantly higher than the $6.50 per share referred to in your Non-Binding Proposal. The Board also took into consideration your threat, repeated by your financial advisors, to move unilaterally and make an offer directly to our shareholders -- a move which could obviously be destabilizing to our employees and our business. The Board ultimately decided that it did not have enough information or justification to proceed or to provide you with non-public information at that time.

In your Non-Binding Proposal, you specified a deadline of December 2nd for a response. At the end of each year, the ISTA management team takes great effort and care to provide and discuss with our Board a detailed budget for the following year as well as an updated longer term business plan. While the Board intends to respond in an expeditious manner, we will not be able to do so until we complete the ongoing analysis of your Non-Binding Proposal relative to the long-term value creation implied by our budget and long term plan.

Our Board takes your Non-Binding Proposal and its fiduciary responsibilities very seriously. We will respond formally to you by mid-December after careful consideration, including a thorough review with our outside financial and legal advisors.


Vicente Anido, Jr., Ph.D.
President and Chief Executive Officer
ISTA Pharmaceuticals, Inc.

Investor Webcast / Conference Call
ISTA will host a 2012 Guidance and Pipeline Update Webcast/Conference Call for ISTA shareholders on January 4, 2012 at 4:30 p.m. ET.

Webcast and Conference call access:
Domestic dial-in: 866-270-6057
International dial-in: 617-213-8891
Passcode: 58694464

The webcast/conference call will be webcast live and archived on ISTA's website until February 1, 2012.

To access the 24-hour audio replay, U.S. and Canadian participants may dial 1-888 286-8010; international participants may dial 1-617-801-6888. The access code for the replay is 75601206.

ISTA Pharmaceuticals, Inc. is a fast growing and the third largest branded prescription eye care business in the United States, with an expanding focus on allergy therapeutics. ISTA currently markets four products, including treatments for ocular inflammation and pain post-cataract surgery, glaucoma and ocular itching associated with allergic conjunctivitis. The Company's development pipeline contains additional candidates in various stages of development to treat dry eye, ocular inflammation and pain, and nasal allergies. Headquartered in Irvine, California, ISTA generated revenues of $156.5 million in 2010. For additional information about ISTA, please visit the corporate website at

Any statements contained in this press release that refer to future events or other non-historical matters are forward-looking statements. Without limiting the foregoing, but by way of example, statements contained in this press release related to: the review of strategic options and the future value of ISTA are forward-looking statements. Except as required by law, ISTA disclaims any intent or obligation to update any forward-looking statements. These forward-looking statements are based on ISTA's expectations as of the date of this press release and are subject to risks and uncertainties that could cause actual results to differ materially. Important factors that could cause actual results to differ from current expectations are detailed from time to time in ISTA's public filings with the U.S. Securities and Exchange Commission, including but not limited to ISTA's Annual Report on Form 10-K for the year ended December 31, 2010, and its Quarterly Report on Forms 10-Q for the quarters ended March 31, June 30 and September 30, 2011.

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