InSite Vision & Merck Amend Payment Terms of AzaSite® License Agreement

Merck Will Pay Its Minimum Royalty to InSite Quarterly

InSite Vision & Merck Amend Payment Terms of AzaSite® License Agreement

InSite VisionLouis Drapeau, Chief Financial Officer, 510-747-1220orMedia and investor inquiries:BCC PartnersMichelle Corral, 415-794-8662Karen L. Bergman, 650-575-1509

InSite Vision Incorporated (OTCBB: INSV) (“InSite”) today announced that Merck & Co., Inc., through its subsidiary Inspire Pharmaceuticals, Inc. (“Merck”), has agreed to amend the payment terms of the existing AzaSite (azithromycin ophthalmic solution) 1% license agreement. On a quarterly basis, Merck will pay InSite the higher of the pro-rata annual minimum royalty or the earned royalty for 2012 and 2013. In addition, in August 2012, Merck will pay InSite a catch-up payment for the difference between the earned royalty already paid for the fourth quarter of 2011 and the first and second quarters of 2012, and the pro-rata annual minimum royalties for those quarters.

Under the terms of the AzaSite license agreement, the minimum royalties due to InSite in 2012 total $17 million. InSite expects to receive minimum royalties of $4.25 million for the fourth quarter of 2012. In addition, Merck will pay InSite a catch-up payment of about $7.2 million before August 15, 2012. The royalty payments received in August will allow InSite to pay all current and deferred interest on its AzaSite secured notes and make a principal payment on the notes of about $4.9 million. Minimum royalties for 2013 are $19 million, or $4.75 million per quarter.

“We applaud Merck’s willingness to amend our license agreement, and we thank them for their ongoing commitment to the commercial success of AzaSite in North America,” said Timothy Ruane, InSite’s Chief Executive Officer. “With this quarterly restructuring of the minimum royalty obligation, InSite Vision will be able to meet its quarterly obligations to its Note Holders through Q3 2013, and thus continue to collaborate with Merck in their ongoing efforts to bring AzaSite to the patients who seek relief from bacterial conjunctivitis.”

In 2007, InSite Vision entered into an agreement with Inspire Pharmaceuticals (subsequently acquired by Merck in May 2011) for the commercialization of AzaSite in North America. Under the terms of that agreement, InSite is eligible to receive payments of 25 percent on net sales, as well as minimum royalty payments that increase yearly through 2013. In February 2008, InSite Vision closed a private placement to institutional investors of $60 million in aggregate principal amount of non-convertible, non-recourse promissory notes secured by royalties to be paid from sales in the United States and Canada of AzaSite.

AzaSite (azithromycin ophthalmic solution) 1% is indicated for the treatment of bacterial conjunctivitis in patients one year and older caused by the following organisms: CDC coryneform group G,. AzaSite is formulated using InSite Vision’s proprietary DuraSite drug delivery technology that extends the duration of drug retention on the surface of the eye.

InSite Vision is advancing new ophthalmologic products for unmet eye care needs. The company’s product portfolio utilizes InSite Vision’s proven DuraSite bioadhesive polymer core technology, an innovative platform that extends the duration of drug retention on the surface of the eye, thereby reducing frequency of treatment and improving the efficacy of topically delivered drugs. The DuraSite platform is currently leveraged in two commercial products for the treatment of bacterial eye infections, AzaSite (azithromycin ophthalmic solution) 1%, marketed in the U.S. by Merck, and Besivance (besifloxacin ophthalmic suspension) 0.6%, marketed by Bausch + Lomb. InSite Vision’s clinical-stage ophthalmic product pipeline includes AzaSite Plus and DexaSite for the treatment of eye infections, BromSite for pain and inflammation associated with ocular surgery, and ISV-101 for the treatment of dry eye disease. For further information on InSite Vision, please visit .

This news release contains certain statements of a forward-looking nature relating to future events, including InSite’s potential receipt of future royalties and the statements in the quote from our Chief Executive Officer set forth above. Such statements entail a number of risks and uncertainties, including but not limited to: InSite's reliance on third parties for the commercialization of its products including Merck and the effectiveness of the efforts of these third parties; the ability of InSite to maintain its corporate collaborations, particularly with Merck; InSite's ability to compete effectively, either alone or through its partners, with other companies offering competing products or treatments; and InSite's ability to maintain and develop additional collaborations and commercial agreements with corporate partners, including those with respect to AzaSite. Reference is made to the discussion of these and other risk factors detailed in InSite Vision's filings with the Securities and Exchange Commission, including its annual report on Form 10-K and its quarterly reports on Form 10-Q, under the caption "Risk Factors" and elsewhere in such reports. Any forward-looking statements or projections are based on the limited information currently available to InSite Vision, which is subject to change. Although any such forward-looking statements or projections and the factors influencing them will likely change, InSite Vision undertakes no obligation to update the information. Such information speaks only as of the date of its release. Actual events or results could differ materially and one should not assume that the information provided in this release is still valid at any later date.