A Bidding War Propels Insite Vision Inc. (OTCMKTS:INSV) To Record Highs

Back in early June the stock of Insite Vision Inc. (OTCMKTS:INSV) was trading at 14 cents per share. Yesterday the company closed at a new 52-week high of $0.355 per share. As a whole the ticker has gained over 153% in less than three months. A truly impressive performance but what caused investors to change their sentiment towards the stock so drastically?

It is true that INSV is far from the typical pennystock. The company is developing ophthalmic products for unmet eye care needs and has two commercial products – AzaSite and Besivance. They have also filed an NDA for BromSite (0.075% bromfenac) for the treatment of inflammation and prevention of pain associated with cataract surgery. INSV‘s financials are not that bad either. For the quarter ended June 30 they reported the following results:

• $1.75 million cash
• $3.2 million total current assets
• $17.4 million total current liabilities
• $392 thousand total revenues
• $6.6 million net loss

It is clear that with such a massive working capital deficit and equally as alarming net loss the reason for the stock’s ascent up the chart must lie elsewhere.

And indeed – on June 8 INSV announced that they had entered into a definite agreement with QLT Inc. (NASDAQ:QLTI) under the terms of which QLT is going to acquire InSite for $0.178 per share in an all-share transaction. Then, however, an unnamed “multinational pharma” stepped in with a new offer – 25 cents per share but this time paid in cash.

QLT were not ready to give up and they improved the terms of their stock deal agreeing to adjust the exchange ratio to a minimum of $0.25 per share and a maximum of $0.30. Not a bad deal but in the end QLT were simply outbidded – on September 3 INSV received a second offer from a global pharmaceutical company, yesterday it was finally revealed that the company is Sun Pharmaceutical Industries Ltd., who were ready to buy all of the outstanding shares at a price of $0.35 each. Understandably INSV decided to go with this offer. The $2.6 million termination fee they owed to QLT was handled by Sun Pharmaceuticals. The acquisition is currently expected to be closed in the fourth quarter of 2015.

With the current terms of the deal pricing INSV at $0.35 per share the stock could find moving higher up the chart to be rather difficult.