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                                                                   EXHIBIT 10.43
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                           INSITE VISION INCORPORATED
                                       AND
                              PHARMACIA & UPJOHN AB

                            STOCK PURCHASE AGREEMENT



                                NOVEMBER 11, 1999






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                            STOCK PURCHASE AGREEMENT


THIS STOCK PURCHASE AGREEMENT is made as of November 11, 1999 (the "Agreement"),
by and between INSITE VISION INCORPORATED, a Delaware corporation with its
principal office at 965 Atlantic Avenue, Alameda, California 94501 (the
"Company"), and PHARMACIA & UPJOHN AB, a Swedish corporation with a principal
office at Lindhagensgatan 133,112 87 Stockholm, Sweden ("P&U").

                                    RECITALS

        WHEREAS, the Company and P&U have entered into an ISV-900 Project
Agreement of even date herewith (the "ISV-900 Project Agreement"); and

        WHEREAS, in connection with the ISV-900 Project Agreement, the Company
desires to sell to P&U and P&U desires to purchase from the Company shares of
common stock, par value $.01 per share, of the Company ("Common Stock"), on the
terms and subject to the conditions set forth in this Agreement.

        NOW, THEREFORE, in consideration of the following mutual covenants and
agreements, the parties agree as follows:


                                    ARTICLE 1
                            PURCHASES OF COMMON STOCK

        SECTION 1.1 PURCHASE OF COMMON STOCK. Subject to the terms and
conditions of this Agreement, and in reliance on the representations and
warranties contained in this Agreement, the Company agrees to sell to P&U and
P&U agrees to purchase from the Company, at the Closing (as defined below), that
number of shares of InSite Common Stock equal to Two Million U.S. Dollars
($2,000,000) divided by the average weighted closing share price of the InSite
Common Stock for the twenty (20) trading days immediately prior to the Closing
Date for an aggregate consideration of Two Million U.S. Dollars ($2,000,000.00).

                                    ARTICLE 2
                             CLOSING DATE; DELIVERY

        SECTION 2.1 CLOSING; CLOSING DATE. Subject to the terms of Article 5,
the closing of the sale and purchase of shares of Common Stock under Section 1.1
of this Agreement (the "Closing") shall be held at 10:00 a.m. (Eastern Time) on
the closing date at the offices of P&U, or at such other time and place as the
Company and P&U may agree. The date of the Closing ("Closing Date") shall be the
forty-fifth (45th) business day following the date first written above, or, on
such other date as the Company and P&U shall agree in writing.



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        SECTION 2.2 DELIVERY. At the Closing, subject to the terms and
conditions of this Agreement, the Company will deliver to P&U a stock
certificate, in the name of P&U, as applicable, representing, respectively, the
shares of Common Stock deliverable at such closing, dated as of the Closing Date
against payment of the purchase price therefor by wire transfer of immediately
available funds, unless P&U and the Company agree upon other means of payment.

                                    ARTICLE 3

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

        Subject to and except as disclosed by the Company in the Schedule of
Exceptions attached hereto as Exhibit A, the Company represents and warrants to
P&U, on the date hereof and on the Closing Date, as follows:

        SECTION 3.1 AUTHORIZATION. All corporate action on the part of the
Company, its officers, directors and stockholders necessary for the
authorization, execution and delivery of this Agreement has been taken or will
be taken prior to or as of the Closing Date. The Company has the requisite
corporate power to enter into this Agreement and carry out and perform its
obligations under the terms of this Agreement. This Agreement has been duly
authorized, executed and delivered by the Company and, upon due execution and
delivery by P&U, this Agreement will be a valid and binding agreement of the
Company, except as limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws of general application affecting creditors' rights generally or
as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies.

        SECTION 3.2 NO CONFLICT WITH OTHER INSTRUMENTS. The execution, delivery
and performance of this Agreement will not result in any violation of, be in
conflict with, or constitute a default under, with or without the passage of
time or the giving of notice: (a) any provision of the Company's Certificate of
Incorporation or Bylaws as either are currently in effect; (b) any provision of
any judgment, decree or order to which the Company is a party or by which it is
bound; (c) any material contract, obligation or commitment to which the Company
is a party or by which it is bound; or (d) to the Company's knowledge, any
statute, rule or governmental regulation applicable to the Company.

        SECTION 3.3 CERTIFICATE OF INCORPORATION; BY-LAWS. Attached hereto as
Exhibits B and C, respectively, are true, correct and complete copies of the
Certificate of Incorporation and Bylaws of the Company, as in effect on the date
hereof.

        SECTION 3.4 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to carry on its business as now conducted and as proposed to be
conducted. The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure so to qualify would have a
material adverse effect on its business or properties.



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        SECTION 3.5 DISCLOSURE DOCUMENTS. The Company's Form 10-K for the fiscal
year ended December 31, 1998 and Forms 10-Q for the fiscal quarters ended March
31, and June 30, 1999, did not, when filed with the Securities and Exchange
Commission, contain any untrue statements of material fact or omit to state any
material fact necessary in order to make the statements therein, in light of the
circumstances in which they were made, not misleading.

        SECTION 3.6   CAPITALIZATION.

               (a) The authorized capital stock of the Company consists of
        30,000,000 shares of Common Stock, of which 20,275,870 shares are issued
        and outstanding on the date hereof, and 5,000,000 shares of Preferred
        Stock, of which 0 shares of Series A Convertible Preferred Stock, par
        value $.01 per share ("Series A Preferred Stock"), are issued and
        outstanding on the date hereof. All such issued and outstanding shares
        have been duly authorized and validly issued, and are fully paid and
        nonassessable. The rights and designations of the Series A Preferred
        Stock are as set forth in the Certificate of Designation included within
        the Certificate of Incorporation.

               (b) The Company has outstanding options to purchase 2,218,723
        shares of Common Stock, outstanding warrants to purchase 317,308 shares
        of Common Stock and outstanding warrants to purchase 70 shares of Series
        A Preferred Stock as of the date hereof. Except as otherwise set forth
        herein or in the Company's Restated Certificate of Incorporation, as
        amended, or Certificate of Designations, Preferences and Rights of
        Series A Convertible Preferred Stock, as corrected, there are no
        preemptive or other outstanding rights, options, warrants, conversion
        rights or Agreements for the purchase or acquisition from the Company of
        any shares of its capital stock or other securities of the Company.

        SECTION 3.7 SUBSIDIARIES. The Company does not presently own or control,
directly or indirectly (other than investments in money market funds), and has
no stock or other interest as owner or principal in, any other corporation or
partnership, joint venture, association or other business venture or entity
except for its wholly-owned subsidiary, InSite Vision Limited.

        SECTION 3.8 VALID ISSUANCE OF SHARES. The shares of Common Stock which
will be purchased by P&U under this Agreement, when issued, sold and delivered
in accordance with the terms of and for the consideration expressed in this
Agreement, will be duly and validly authorized and issued, fully paid and
nonassessable and, based in part upon the representations of P&U in Section 4.3
of this Agreement, will be issued in compliance with all applicable federal and
state securities laws.

        SECTION 3.9 LITIGATION, VALIDITY OF AGREEMENT. There is no action, suit,
proceeding or, to the best of the Company's knowledge, any claim or
investigation pending or currently threatened against the Company, nor, to the
best of the Company's knowledge, is there any basis therefor, which might
result, either individually or in the aggregate, in any material adverse change
in the assets, condition, affairs or prospects of the Company, financial or
otherwise. The foregoing includes, without limitation, any action, suit,
proceeding or investigation, pending or



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threatened, that questions the validity of this Agreement or any other agreement
contemplated hereby or the right of the Company to enter into such agreements.

        SECTION 3.10 GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state, local or provincial governmental authority on
the part of the Company is required in connection with the consummation of the
transactions contemplated by this Agreement, except for notices, qualifications
or filings required or permitted to be filed with certain state or federal
securities commissions or self-regulatory organizations, which notices,
qualifications, or filings will be filed on a timely basis.

        SECTION 3.11 COMPLIANCE WITH LAWS. The Company has complied and is in
compliance in all material respects with all governmental laws, orders, decrees,
rules or regulations applicable to the Company, its assets and business,
employment practices and procedures, employees or operations (except where the
failure to so comply would not have a material adverse effect on the Company,
its business and operations, or the subject matter of the ISV-900 Project
Agreement), including the rules and regulations of the Securities and Exchange
Commission and any exchange or automated inter-dealer quotation system on which
the Common Stock is traded and then current Good Clinical Practices and then
current Good Manufacturing Practices.

        SECTION 3.12 NO BROKERS. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement.

                                    ARTICLE 4
                      REPRESENTATIONS AND WARRANTIES OF P&U

        P&U hereby represents and warrants to the Company, on the date hereof
and on the Closing Date, as follows:

        SECTION 4.1 LEGAL POWER. All corporate action on the part of P&U, its
officers, directors and stockholders necessary for the authorization, execution
and delivery of this Agreement has been taken. P&U has the requisite corporate
power to enter into this Agreement, to carry out and perform its obligations
under the terms of this Agreement and, at the Closing, will have the requisite
corporate power to purchase the shares of Common Stock to be purchased at such
Closing.

        SECTION 4.2 DUE EXECUTION. This Agreement has been duly authorized,
executed and delivered by P&U and, upon due execution and delivery by the
Company, this Agreement will be a valid and binding agreement of P&U, except as
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws of
general application affecting creditors' rights generally or as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies.



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        SECTION 4.3 INVESTMENT REPRESENTATIONS. In connection with the purchase
and sale of shares under this Agreement, P&U makes the following
representations:

               (a) P&U is acquiring the shares of Common Stock under this
        Agreement for its own account, not as nominee or agent, for investment
        and not with a view to the resale or distribution or public offering
        thereof within the meaning of the Securities Act of 1933, as amended
        (the "Securities Act"). P&U has no present intention of selling,
        granting any participation in, or otherwise distributing the Common
        Stock acquired hereunder and has not entered into any agreement or
        arrangement with any person with respect to such activities.

               (b) P&U understands that (i) the shares of Common Stock to be
        purchased under this Agreement have not been registered under the
        Securities Act by reason of a specific exemption therefrom, that such
        securities are therefore "Restricted Securities" under the Securities
        Act and must be held by P&U, and that P&U must bear the economic risk of
        such investment, until a subsequent disposition thereof is registered
        under the Securities Act or is exempt from such registration; (ii) each
        certificate representing such shares will be endorsed with the following
        legend:

               THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
               THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER THE
               SECURITIES LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO
               RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE
               TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE
               APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR
               EXEMPTION THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE
               AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE
               ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN
               COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

        and (iii) the Company will instruct any transfer agent not to register
        or effect the transfer of the shares of Common Stock unless the
        conditions specified in the foregoing legends are satisfied, until such
        time as a transfer is made, pursuant to the terms of this Agreement, and
        in compliance with Rule 144 or pursuant to a registration statement or,
        if the opinion of counsel referred to above is to the further effect
        that such legend is not required in order to establish compliance with
        any provisions of the Securities Act or this Agreement.

               (c) P&U has such knowledge and experience in financial and
        business matters that it is capable of evaluating the merits and risks
        of the investment in the shares of Common Stock purchased hereunder and
        is financially able to bear the risks thereof.



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               (d) P&U is an "accredited investor" as such term is defined in
        Rule 501 (a) of Regulation D of the General Rules and Regulations
        prescribed by the Securities and Exchange Commission pursuant to the
        Securities Act.

               (e) P&U has had an opportunity to ask questions and receive
        answers from the Company regarding the Company and the terms and
        conditions of the offering of the Common Stock and to obtain additional
        information necessary to verify the accuracy of the information given to
        P&U. P&U has received information that it considers necessary or
        appropriate for deciding whether to purchase the Common Stock.

               (f) P&U is not a party to any agreement or instrument, or subject
        to any charter or other corporate restriction or any judgment, order,
        decree, law, ordinance, regulation or other governmental restriction
        which would prevent or impede, or be breached or violated by, the
        transactions contemplated in this Agreement.

        SECTION 4.4 NO BROKERS. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement.

        SECTION 4.5 ORGANIZATION, GOOD STANDING AND QUALIFICATION. P&U is a
corporation duly organized, validly existing and in good standing under the laws
of Sweden, and has all requisite corporate power and authority to carry on their
business as now conducted and as proposed to be conducted. P&U is duly qualified
to transact business and is in good standing in each jurisdiction in which the
failure so to qualify would have a material adverse effect on its business or
properties.

        SECTION 4.6 VALIDITY OF AGREEMENT. No action, suit, proceeding or
investigation is pending or threatened that questions the validity of this
Agreement or any other agreement contemplated hereby or the right of P&U to
enter into such agreements.

        SECTION 4.7 GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state, local or provincial governmental authority on
the part of P&U is required in connection with the consummation of the
transactions contemplated by this Agreement, except for notices, qualifications
or filings required or permitted to be filed with certain state or federal
securities commissions or self-regulatory organizations, which notices,
qualifications, or filings will be filed on a timely basis.

                                    ARTICLE 5
                              CONDITIONS TO CLOSING

        SECTION 5.1 CONDITIONS TO OBLIGATIONS OF P&U AT CLOSING. P&U's
obligation to purchase the shares of the Company's Common Stock at the Closing
is subject to the fulfillment to P&U's satisfaction, on or prior to the Closing,
of each of the following conditions, any of which may be waived by P&U:



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               (a) Representations and Warranties/Performance of Obligations.
        The representations and warranties made by the Company in Article 3
        hereof and in the ISV-900 Project Agreement shall be true and correct in
        all material respects on the Closing Date with the same force and effect
        as if they had been made on and as of that date, and the Company shall
        have performed and complied in all material respects with all material
        obligations and conditions required under this Agreement to be performed
        or complied with by it on or prior to the Closing, and a Certificate of
        the Company, certifying the foregoing, shall be delivered to P&U at the
        Closing.

               (b) Proceedings and Documents. All corporate and other
        proceedings in connection with the transactions contemplated at the
        Closing and all documents and instruments incident to such actions shall
        be reasonably satisfactory in substance and form to counsel to P&U, and
        counsel to P&U shall have received all such counterpart originals or
        certified or other copies of such documents as they may reasonably
        require.

               (c) Qualifications, Legal Investment. All authorizations,
        approvals, or permits, if any, of any governmental authority or
        regulatory body of the United States or of any state that are required
        in connection with the lawful sale and issuance of the shares of Common
        Stock to be sold and issued pursuant to this Agreement shall have been
        duly obtained and shall be effective on and as of the Closing. No stop
        order or other order enjoining the sale of the shares to be sold at the
        Closing shall have been issued and no proceedings for such purpose shall
        be pending or, to the knowledge of the Company, threatened by the
        Securities and Exchange Commission, or any commissioner of corporations
        or similar officer of any state having jurisdiction over such
        transaction. At the time of the Closing, the sale and issuance of the
        shares of Common Stock to be issued and sold at the Closing shall be
        legally permitted by all laws and regulations to which P&U and the
        Company are subject.

               (d) Opinion of Counsel to the Company. In connection with any
        sale of shares hereunder, P&U shall have received from counsel to the
        Company, an opinion letter addressed to them, dated the date of the
        Closing in substantially the form attached hereto as Exhibit D.

               (e) No Material Adverse Change. The Company shall not have
        suffered a material adverse change to its business taken as a whole
        through the Closing Date.

               (f) No Material Default or Notice of Termination under the
        ISV-900 Project Agreement. In addition to the conditions set forth
        above, P&U's obligation to purchase the shares of the Company's Common
        Stock, as applicable, at the Closing shall also be subject to the
        condition that the Company is not in material default under the ISV-900
        Project Agreement or that a notice of termination of the ISV-900 Project
        Agreement shall not have been duly given by either party under the terms
        of such ISV-900 Project Agreement.



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               (g) Shares Available. The Company has available under its
        Certificate of Incorporation as in effect on the date hereof, and shall
        have available under its Certificate of Incorporation as in effect at
        the Closing Date, sufficient authorized but unissued shares of its
        Common Stock to issue and sell to P&U all of the shares of Common Stock
        to be issued at Closing.

        SECTION 5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY AT CLOSING. The
Company's obligation to issue and sell the shares of its Common Stock to be sold
at the Closing, is subject to the fulfillment to the Company's satisfaction, on
or prior to the Closing of each of the following conditions, any of which may be
waived by the Company:

               (a) Representations and Warranties/Performance of Obligations.
        The representations and warranties made by P&U in Article 4 hereof and
        in the ISV-900 Project Agreement shall be true and correct in all
        material respects on the Closing Date, with the same force and effect as
        if they had been made on and as of that date, and P&U shall have
        performed and complied in all material respects with all material
        obligations and conditions required under this Agreement to be performed
        or complied with by it on or prior to the Closing, and a certificate
        duly executed by an officer of P&U, certifying the foregoing, shall be
        delivered to the Company at the Closing.

               (b) Qualifications, Legal Investment. All authorizations,
        approvals, or permits, if any, of any governmental authority or
        regulatory body of the United States or of any state that are required
        in connection with the lawful sale and issuance of the shares of Common
        Stock to be sold and issued pursuant to this Agreement shall have been
        duly obtained and shall be effective on and as of the Closing. No stop
        order or other order enjoining the sale of the shares to be sold at the
        Closing shall have been issued and no proceedings for such purpose shall
        be pending or, to the knowledge of the Company, threatened by the
        Securities and Exchange Commission, or any commissioner of corporations
        or similar officer of any state having jurisdiction over such
        transaction. At the time of the Closing, the sale and issuance of the
        shares of Common Stock to be sold and issued at such closing shall be
        legally permitted by all laws and regulations to which P&U and the
        Company are subject.

               (c) No Material Default or Notice of Termination under the
        License ISV-900 Project Agreement. In addition to the conditions set
        forth above, the Company's obligation to sell the shares of the
        Company's Common Stock at the Closing shall also be subject to the
        condition that P&U is not in material default under the ISV-900 Project
        Agreement or that a notice of termination of the ISV-900 Project
        Agreement shall not have been duly given by either party under the terms
        of such ISV-900 Project Agreement.



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                                    ARTICLE 6
                            COVENANTS OF THE COMPANY

        SECTION 6.1 AFFIRMATIVE COVENANTS OF THE COMPANY. The Company agrees
that it shall do the following for so long as P&U, together with its affiliates,
owns at least five percent (5%) of the Company's outstanding Common Stock.

               (a) Preserve and maintain its corporate existence and good
        standing in the State of Delaware, and qualify and remain qualified as a
        foreign corporation in each jurisdiction in which the failure to so
        qualify would have a material adverse effect on its business or
        properties.

               (b) Keep adequate (i) records and books of account reflecting all
        financial transactions of the Company's business, (ii) minute books
        containing accurate records of all meetings and accurately reflecting
        all corporate action of its stockholders and its board of directors, and
        (iii) stock books and ledgers correctly recording all transfers and
        issuances of all capital stock.

               (c) Maintain, keep and preserve all the material assets owned,
        leased or used in the Company's business in reasonable operating
        condition and repair, ordinary wear and tear excepted, and discharge and
        pay in full when due, except those disputed in good faith, all material
        obligations of the Company.

               (d) Engage in the Company's research and development and business
        in the ordinary course and use reasonable commercial efforts to preserve
        its business and the goodwill of customers, suppliers and others having
        business relations with the Company.

               (e) Comply with all material terms and conditions of the ISV-900
        Project Agreement.

               (f) Maintain insurance on the assets of the Company comparable to
        that which the Company has customarily maintained in the past.

               (g) Comply in all material respects with all governmental laws,
        orders, decrees, rules or regulations applicable to the Company, its
        assets and business, employment practices and procedures, employees or
        operations, including the rules and regulations of the Securities and
        Exchange Commission and any exchange or automated inter-dealer quotation
        system on which the Common Stock is traded and then current Good
        Clinical Practices and then current Good Manufacturing Practices, except
        where the failure to so comply will not have a material adverse effect
        on the Company, its business and operations, or the Company's ability to
        comply with the terms of the ISV-900 Project Agreement.

               (h) Timely file, all tax returns that are required to be filed
        by it and pay on or before the date they are required to be paid all
        taxes due pursuant to those tax returns or



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        any assessment received by it or otherwise required to be paid, except
        taxes being contested in good faith by appropriate proceedings, if
        applicable.

        SECTION 6.2 NEGATIVE COVENANTS OF THE COMPANY. The Company agrees that,
so long as P&U, individually or collectively with its affiliates owns at least
five percent (5%) of the Company's outstanding Common Stock, it shall not do,
without P&U's prior written approval (which approval shall not be unreasonably
withheld), any of the following:

               (a) Amend its Certificate of Incorporation or its by-laws in any
        manner that would materially and adversely affect the ability of the
        Company to consummate the transactions contemplated by this Agreement or
        the ISV-900 Project Agreement.

               (b) Directly or indirectly sell, lease, or otherwise dispose of
        (other than through a license) any of the assets related to the ISV-900
        Project other than in a merger or sale of the entire Company or all or
        substantially all of the assets. Any successor of InSite pursuant to a
        merger or otherwise shall be bound by all of the obligations of InSite
        as contained herein. However, the Company may license its other products
        to third parties, provided that the Company notifies P&U of any such
        license before that license becomes effective.

               (c) Transfer any of the Company's material assets used in its
        business to any person and thereafter directly or indirectly lease back
        the same or similar property.

               (d) Make any significant change in its accounting policies,
        except for any change required by GAAP or otherwise in the opinion of
        the Company's independent public accountants.

        SECTION 6.3   DEMAND REGISTRATION.

               (a) At any time that P&U owns any Common Stock of the Company,
        P&U shall have the right to cause the Company to register such
        Registrable Shares (as defined below) with the Securities and Exchange
        Commission and qualify such shares with such state securities
        commissions as P&U shall reasonably request in order to allow P&U to
        sell such shares, provided that the Company shall not be required to
        qualify such shares in any state where such qualification would require
        the Company to consent to personal jurisdiction in such state (the
        "Demand Registration Right"). P&U shall be entitled to a total of *
        Demand Registration *. As used in Sections 6.4 through 6.9 and 7.2, the
        term "Registrable Shares" shall mean all Common Stock issued to P&U
        pursuant to this Agreement.

               (b) If, any offering pursuant to the P&U Demand Registration
        Right, involves an underwriting and any other person has piggy-back
        registration rights with respect to such registration, and the managing
        underwriter shall impose a limitation on the number of shares which may
        be included in the registration statement because, in its judgment, such
        limitation is necessary to effect an orderly public distribution or
        because in its

* Indicates that material has been omitted and confidential treatment has
  been requested therefor. All such omitted material has been filed separately
  with the Commission pursuant to Rule 24b-2.

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        judgment the inclusion of shares being sold by persons other than P&U
        would adversely affect the offering, then the Company shall not be
        obligated to include in such registration statement any portion of
        shares of any other person or P&U as provided in 6.3(c) below.

               (c) Notwithstanding any other provision of this Section 6.3, if
        the underwriter, in its reasonable judgment, advises the Company in
        writing that marketing factors require a limitation of the number of
        shares to be underwritten, then the Company shall so advise P&U, and any
        other holders of registrable securities which would otherwise be
        underwritten pursuant to such registration statement, and the number of
        shares of registrable securities that may be included in the
        underwriting shall be allocated among all such persons, including P&U,
        first to P&U, and any other persons making such demand together with P&U
        and then to all other persons, and in each case, in proportion (as
        nearly as practicable) to the amount of registrable securities of the
        Company owned by each such person.

               (d) Notwithstanding the foregoing, if the Company shall furnish
        to P&U a certificate signed by the Chief Executive Officer of the
        Company stating that, in the good faith judgment of the Board of
        Directors of the Company, it would be seriously detrimental to the
        Company and its stockholders for such registration statement to be filed
        and it is therefore essential to defer the filing of such registration
        statement, the Company shall have the right to defer taking action with
        respect to such filing for a period of not more than ninety (90) days
        after receipt of the demand of P&U; provided that the Company may not
        utilize this right more than once in any twelve-month period.

        SECTION 6.4   PIGGY-BACK REGISTRATION.

               (a) If the Company shall determine at any time to register for
        its own account or the account of others under the Securities Act any of
        its equity securities, other than on Form S-4 or Form S-8 or their then
        equivalents or otherwise relating to shares of Common Stock to be issued
        in connection with any acquisition of any entity or business or shares
        of Common Stock issuable under stock option or other employee benefit
        plans, it shall send to P&U written notice of such determination and, if
        within five (5) business days after receipt of such notice, P&U shall so
        request in writing, the Company shall use its best efforts to include in
        such registration statement all or any part of the Registrable Shares
        that P&U requests to be registered.

               (b) If, in connection with any offering involving an
        underwriting, the managing underwriter shall impose a limitation of the
        number of shares which may be included in the registration statement
        because, in its judgment, such limitation is necessary to affect an
        orderly public distribution or because in its judgment the inclusion of
        shares being sold by persons other than the Company would adversely
        effect the offering, then the Company shall be obligated to include in
        such registration statement only such limited portion (which may be
        none) of the Registrable Shares with respect to which P&U has requested
        inclusion pursuant hereto as may reasonably be determined by the
        managing underwriter. Any inclusion of Registrable Shares in an
        offering, when the



                                       11
<PAGE>   13

        managing underwriter has so limited the number of shares that may be
        included in such offering, shall be allocated pro rata among the holders
        of similar "piggyback" registration rights granted by the Company
        seeking to include their shares, in proportion to the number of shares
        (whether or not such shares are sought to be included in such offering)
        held by such persons. The Company shall have the right to delay or
        withdraw any registration initiated by it pursuant to Section 6.4
        hereof.

        SECTION 6.5 EFFECTIVENESS. The Company will use its best efforts to
maintain the effectiveness for up to 90 days, (or such shorter period of time as
the underwriters need to complete the distribution of a registered offering or
until the securities are actually sold) of any registration statement pursuant
to which any of the Registrable Shares are being offered, and from time to time
will amend or supplement such registration statement and the prospectus
contained therein to the extent necessary to comply with the Securities Act and
any applicable state securities laws or regulations.

        SECTION 6.6   INDEMNIFICATION.

               (a) In the event that the Company registers any of the
        Registrable Shares under the Securities Act, the Company will indemnify
        and hold harmless P&U and each underwriter of Registrable Shares
        (including their officers, directors, affiliates and partners and
        including any broker or dealer through whom Registrable Shares may be
        sold in such registration) and each person, if any, who controls P&U or
        any such underwriter within the meaning of Section 15 of the Securities
        Act from and against any and all losses, claims, damages, expenses or
        liabilities, joint or several, to which they or any of them become
        subject under the Securities Act, applicable state securities laws or
        under any other statute or at common law or otherwise, as incurred, and,
        except as hereinafter provided, will reimburse P&U, each such
        underwriter and each such controlling person, if any, for any legal or
        other expenses reasonably incurred by them or any of them in connection
        with investigating or defending any actions whether or not resulting in
        any liability, as incurred, insofar as such losses, claims, damages,
        expenses, liabilities or actions arise out of or are based upon any
        untrue statement or alleged untrue statement of a material fact
        contained in the registration statement, in any preliminary or amended
        preliminary prospectus or in the final prospectus (or the registration
        statement or prospectus as from time to time amended or supplemented by
        the Company) or arise out of or are based upon the omission or alleged
        omission to state therein a material fact required to be stated therein
        or necessary in order to make the statements therein not misleading, or
        any violation by the Company of any rule or regulation promulgated under
        the Securities Act or any state securities laws applicable to the
        Company and relating to action or inaction required of the Company in
        connection with such registration, unless (i) such untrue statement or
        alleged untrue statement or omission or alleged omission was made in
        such registration statement, preliminary or amended preliminary
        prospectus or final prospectus in reliance upon and in conformity with
        information furnished in writing to the Company in connection therewith
        by P&U or any such underwriter expressly for use therein, or unless (ii)
        in the case of a sale directly by P&U (including a sale of Registrable
        Shares through any underwriter retained by P&U to engage in a
        distribution



                                       12
<PAGE>   14

        solely on behalf of P&U), such untrue statement or alleged untrue
        statement or omission or alleged omission was contained in a preliminary
        prospectus and corrected in a final or amended prospectus copies of
        which were delivered to P&U or such underwriter on a timely basis, and
        P&U or such underwriter failed to deliver a copy of the final or amended
        prospectus at or prior to the confirmation of the sale of the
        Registrable Shares to the person asserting any such loss, claim, damage
        or liability in any case where such delivery is required by the
        Securities Act; provided, however, that the indemnity agreement
        contained in this subsection 6.6(a) shall not apply to amounts paid in
        settlement of any such loss, claim, damage, expense, liability or action
        if such settlement is effected without the consent of the Company, which
        consent shall not be unreasonably withheld.

               (b) P&U will indemnify and hold harmless the Company, each
        underwriter of Registrable Shares and any other persons selling
        securities in such registration statement (including their officers,
        directors, affiliates and partners and including any broker or dealer
        through whom Registrable Shares may be sold in such registration) and
        each person, if any, who controls the Company, any such underwriter or
        other such person selling securities in such registration statement
        within the meaning of Section 15 of the Securities Act from and against
        any and all losses, claims, damages, expenses or liabilities, joint or
        several, to which they or any of them may become subject, under the
        Securities Act, applicable state securities laws or under any other
        statutes or at common law or otherwise, as incurred, insofar as such
        losses, claims, damages, expenses or liabilities (or actions in the
        respect thereto) arise out of are based upon any untrue statement or
        alleged untrue statement of a material fact contained in the
        registration statement, in any preliminary or amended preliminary
        prospectus or in the final prospectus (or the registration statement or
        prospectus as from time to time amended or supplemented by the Company)
        or arise out of or are based upon the omission or alleged omission to
        state therein a material fact required to be stated therein or necessary
        in order to make the statements therein not misleading, or any violation
        by the Company of any rule or regulation promulgated under the
        Securities Act or any state securities laws applicable to the Company
        and relating to action or inaction required of the Company in connection
        with such registration, in each case to the extent (and only to the
        extent) that such untrue statement, alleged untrue statement, alleged
        omission, omission or violation occurs in reliance upon and in
        conformity with written information furnished by or on behalf of P&U
        expressly for use in connection with such registration; and P&U will
        reimburse, as incurred, the Company, each such underwriter, each such
        other person selling securities in such registration statement and each
        such controlling person, if any, for any legal or other expenses
        reasonably incurred by them or any of them in connection with
        investigating or defending any such loss, claim, damage, liability or
        action, whether or not resulting in any liability; provided, however,
        that the indemnity agreement contained in this subsection 6.6(b) shall
        not apply to amounts paid in settlement of any such loss, claim, damage,
        expense, liability or action if such settlement is effected without the
        consent of P&U, which consent shall not be unreasonably withheld. In any
        event, except in the case of willful misconduct or fraudulent
        misrepresentations, the liability of P&U under the indemnity provisions
        of this Agreement shall be limited to an



                                       13
<PAGE>   15

        amount equal to the gross proceeds received by P&U from the sale of
        shares in any transaction to which such indemnification relates.

               (c) Promptly after receipt by an indemnified person under this
        Section 6.6 of notice of the commencement or threat of any action in
        respect of which indemnity may be sought against the indemnifying party,
        such indemnified person shall notify the indemnifying party in writing
        of the commencement thereof (provided, that failure to so notify the
        indemnifying party shall not relieve the indemnifying party from any
        liability it may have hereunder, except to the extent prejudiced by such
        failure) and, subject to the provisions hereinafter stated, the
        indemnifying party shall be entitled to assume the defense of such
        action (including the employment of counsel) and the payment of expenses
        insofar as such action shall relate to any alleged liability in respect
        of which indemnity may be sought against the indemnifying party.

               (d) An indemnified person under this Section 6.6 shall have the
        right to employ separate counsel in any such action and to participate
        in the defense thereof but the fees and expenses of such counsel
        subsequent to any assumption of the defense by the indemnifying party
        shall not be at the expense of the indemnifying party (but shall be at
        the sole expense of the indemnified person) unless the employment of
        such counsel has been specifically authorized in writing by the
        indemnifying party; provided, however, that, if the defendants in any
        such action include both the indemnified person and the indemnifying
        party and the indemnified person shall have reasonably concluded that
        there may be reasonable defenses available to it which are different
        from or additional to those available to the indemnifying party or if
        the interests of the indemnified person reasonably may be deemed to
        conflict with the interests of the indemnifying party, the indemnified
        person shall have the right to select a separate counsel and to assume
        such legal defenses and otherwise to participate in the defense of such
        action, with the expenses and fees of such separate counsel and other
        expenses related to such participation to be reimbursed by the
        indemnifying party as incurred. At any time, an indemnified person may
        select separate counsel and assume its own legal defense with the
        expenses and fees of such separate counsel and other expenses related to
        such separate counsel to be borne by such indemnified person. An
        indemnifying party shall not be liable to an indemnified person for any
        settlement of any such action effected without the indemnifying party's
        written consent (which consent shall not be unreasonably withheld or
        delayed). An indemnifying party shall not, except with the approval of
        each party being indemnified under this Section 6.6 (which approval
        shall not be unreasonably withheld or delayed), consent to entry of any
        judgment or enter into any settlement which does not include as an
        unconditional term thereof the giving by the claimant or plaintiff to
        the parties being so indemnified of a release from all liability in
        respect to such claim or litigation.

               (e) In order to provide for just and equitable contribution to
       joint liability under the Securities Act in any case in which an
       indemnified person makes a claim for indemnification pursuant to this
       Section 6.6 but indemnification is unavailable to or insufficient to hold
       harmless an indemnified person, or it is judicially determined (by the



                                       14
<PAGE>   16

       entry of a final judgment or decree by a court of competent jurisdiction
       and the expiration of time to appeal or the denial of the last right of
       appeal) that such indemnification may not be enforced in such case
       notwithstanding the fact that this Section 6.6 provides for
       indemnification in such case, then the indemnifying party and the
       indemnified person will contribute to the aggregate losses, claims,
       damages or liabilities to which they may be subject (after contribution
       from others) in such proportion as is appropriate to reflect the relative
       fault of the indemnifying party on the one hand and of the indemnified
       person on the other hand in connection with the statements or omissions
       which resulted in such losses, claims, damages or liabilities, as well as
       any other relevant equitable considerations. The relative fault of the
       indemnifying party on the one hand and of indemnified person on the other
       hand shall be determined by reference to, among other things, whether the
       untrue or alleged untrue statement of a material fact or omission or
       alleged omission to state a material fact relates to information supplied
       by the Company on the one hand or by P&U on the other hand, and each
       party's relative intent, knowledge, access to information and opportunity
       to correct or prevent such statement or omission; provided, however,
       that, in any such case, (A) except in the case of willful misconduct or
       fraudulent misrepresentations, P&U will not be required to contribute any
       amount in excess of the public offering price of all Registrable Shares
       offered by it pursuant to such registration statement; and (B) no person
       or entity guilty of fraudulent misrepresentation (within the meaning of
       Section 11(f) of the Securities Act) will be entitled to contribution
       from any person or entity who was not guilty of such fraudulent
       misrepresentation.

        SECTION 6.7 FURTHER OBLIGATIONS OF THE COMPANY. Whenever under the
preceding Sections of this Article 6, the Company is required to register
Registrable Shares, the Company agrees that it shall also do the following:

               (a) Furnish to P&U such copies of each preliminary and final
        prospectus and such other documents as P&U may reasonable request to
        facilitate the public offerings of the Registrable Shares;

               (b) Use its best efforts to register or qualify the Registrable
        Shares covered by the registration statement under the applicable
        securities or "blue sky" laws of such jurisdictions as P&U may
        reasonably request;

               (c) Permit P&U or its counsel or other representatives to inspect
        and copy such corporate documents and records as may reasonably be
        requested by them, after reasonable advance notice, during normal
        business hours and without undue interference with the operation of the
        Company's business;

               (d) Furnish to P&U a copy of all documents filed with and all
        correspondence from or to the Securities and Exchange Commission in
        connection with any such offering of securities;



                                       15
<PAGE>   17

               (e) Otherwise use its best efforts to comply with all applicable
        rules and regulations of the Securities and Exchange Commission, and (to
        the extent required) make available to its security holders, as soon as
        reasonably practicable, an earning statement covering the period of at
        least twelve months, but not more than eighteen months, beginning with
        the first month after the effective date of the registration statement
        covering a public offering, which earning statement shall satisfy the
        provisions of Section 11(a) of the Securities Act and Rule 158
        thereunder.

        SECTION 6.8 EXPENSES. In the case of each registration effected under
Sections 6.3, 6.4 and 6.7, * shall bear * reasonable costs and expenses of each
such registration *, including, but not limited to, * printing, legal and
accounting fees and expenses, Securities and Exchange Commission and NASD or
AMEX (as applicable) filing fees and "blue sky" fees and expenses; provided,
however, that * shall have no obligation to pay or otherwise bear any portion of
*, or the fees and expenses of counsel for P&U in connection with the
registration of the Registrable Shares.

        SECTION 6.9 TERMINATION OF REGISTRATION RIGHTS. No holder of Registrable
Shares shall be entitled to exercise any right provided for in, and the Company
shall have no obligation pursuant to, Sections 6.3, 6.4, 6.5 or 6.7 hereof after
such time as all Registrable Shares held by a holder may be sold pursuant to
Rule 144 promulgated under the Securities Act during a given ninety-day period;
provided, however, if the Company fails to comply with SEC Rule 144(c)(1), the
Company's obligations pursuant to Section 6.3, 6.4, 6.5 and 6.7 hereof shall be
reinstated for so long as such failure to comply shall continue.

                                    ARTICLE 7
                                COVENANTS OF P&U

SECTION 7.1 STANDSTILL AGREEMENT. Other than shares of Common Stock which it is
purchasing pursuant to this Agreement or that it may become obligated to
purchase under that certain Stock Purchase Agreement dated January 28, 1999, by
and among the Company and Pharmacia & Upjohn AB and Pharmacia and Upjohn SA, P&U
hereby covenants and agrees that it will not, nor will it permit any of its
affiliates (including parents, subsidiaries or other related entities) to
purchase or otherwise acquire, directly or indirectly, any equity securities of
the Company (or any securities convertible, exercisable or exchangeable for any
such securities) without the prior written approval of the Company. This
provision shall terminate and be of no further force or effect thirty (30)
months from the date hereof or such earlier date as shall be agreed to in
writing by the Company; provided, that the restrictions of this Section 7.1
shall automatically terminate upon the occurrence of any of the following
events: (a) the filing with the Securities and Exchange Commission of a Schedule
13D by any person or entity other than P&U or its affiliates or any other party
holding ten percent (10%) or more (or five percent (5%) or more in the case of
subpart (y) below) of any class of the Company's voting equity securities as of
the date hereof indicating that such person or entity has acquired beneficial
ownership of (x) more than 9.99% of any class of the Company's voting equity
securities, or (y) has acquired at least 5% of any class of the Company's voting
equity securities which Schedule 13D expresses

* Indicates that material has been omitted and confidential treatment has
  been requested therefor. All such omitted material has been filed separately
  with the Commission pursuant to Rule 24b-2.

                                       16
<PAGE>   18

the filing party's intention to assume control of the Company, whether by tender
offer, merger, proxy contest or otherwise; (b) the commencement of a tender
offer by any person or entity to acquire beneficial ownership of 9.99% or more
of the Company's outstanding voting equity securities; or (c) the solicitation
of proxies by any party other than the Company to which Rule 14(a) of the rules
and regulations under the Securities and Exchange Act of 1934, as amended,
applies and is intended to effect a change in the majority of members of the
Company's Board of Directors.

        SECTION 7.2 REGISTRATION. Whenever under the preceding Sections of
Article 6, P&U is registering Registrable Shares pursuant to any registration
statement, (i) P&U agrees to timely provide to the Company, at its request, such
information and materials as it may reasonably request in order to effect the
registration of such Registrable Shares and (ii) if the offering is
underwritten, the Company and P&U agrees to execute an underwriting agreement
containing customary terms and conditions.

        SECTION 7.3 VOTING AGREEMENT. P&U agrees that it shall, so long as it
holds shares of Common Stock, vote such shares with respect to any proposed
merger or combination or sale of all or substantially all of the assets of the
Company, with or to any other entity in the same proportion as the shares of the
Company's equity securities voted in favor of such transaction by other parties
who are not themselves a party to any such merger, combination or asset sale;
provided, however, that the foregoing voting requirement shall not apply to P&U
in any transaction which is not approved by the Company's Board of Directors or
in the event of a proposed merger or combination or sale of substantially all of
the assets of the Company to a competitor of P&U.

        SECTION 7.4 LIMITATION ON SECURITIES ISSUED PURSUANT TO THIS AGREEMENT.
Unless permitted by the applicable rules and regulations of the American Stock
Exchange, in no event shall the total number of shares of Common Stock issued
pursuant to this Agreement exceed the maximum number of shares of Common Stock
that the Company can so issue pursuant to Rule 713(a) of the American Stock
Exchange (or any successor rule or comparable rule of an applicable exchange or
automated quotation system) which, as of the date of this Agreement shall be
19.99% of shares outstanding on the date of this Agreement.

                                    ARTICLE 8
                                  MISCELLANEOUS

        SECTION 8.1 GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the substantive laws of the State of New York and
the United States of America, without regard to choice of law rules thereof.

        SECTION 8.2 PUBLIC STATEMENTS. Any statement to the public regarding
this Agreement or any aspect of this Agreement shall be made subject to and in
accordance with the terms of the ISV-900 Project Agreement.



                                       17
<PAGE>   19

        SECTION 8.3 ASSIGNMENT. The rights and obligations under this Agreement
may not be assigned by either the Company or P&U without the prior written
consent of the other party; provided, however, that the Company may, without the
prior consent of P&U, assign the rights and obligations under this Agreement to
the acquiring company or any of its affiliates in connection with a merger,
combination or sale of all or substantially all of the assets of the Company.

        SECTION 8.4 SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein, the provisions of this Agreement shall inure to the benefit of,
and be binding upon, the successors, and permitted assigns of the Company and
P&U.

        SECTION 8.5 ENTIRE AGREEMENT. This Agreement and the ISV-900 Project
Agreement (and all of their exhibits and appendices (collectively, the
"Agreements")) set forth all of the covenants, promises, agreements, warranties,
representations, conditions, and understandings between the Company and P&U and
supersede and terminate all prior agreements and understandings between these
parties with respect to the subject matter hereof and thereof. There are no
covenants, promises, agreements, warranties, representations, conditions or
understandings, either oral or written, between the Company and P&U other than
as set forth in the Agreement, the ISV-900 Project Agreement (and all of their
exhibits and appendices). The Agreements are intended to define the full extent
of the legally enforceable undertakings of the Company and P&U and no promise or
representation, whether written or oral, which is not set forth explicitly
herein or therein is intended by either party to be legally binding. The Company
and P&U acknowledges that, in deciding to enter into this Agreement and to
consummate the transactions contemplated under this Agreement, neither has
relied upon any statement or representation, written or oral, other than those
explicitly set forth in this Agreement.

        SECTION 8.6 SEVERABILITY. Whenever possible, each provision of the
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of the Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of the Agreement. In the event of such invalidity, the parties shall seek to
agree on an alternative enforceable provision that preserves the original
purpose of this Agreement.

        SECTION 8.7 AMENDMENT AND WAIVER. Except as otherwise provided herein,
any term of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance, either
retroactively or prospectively, and either for a specified period of time or
indefinitely), with the written consent of the Company and P&U. No amendment to
this Agreement shall be binding upon the parties unless reduced to writing and
signed by the respective authorized officers of the parties. Any amendment or
waiver effected in accordance with this Section shall be binding upon any holder
of any securities purchased under this Agreement (including securities into
which such securities have been converted), each future holder of all such
securities, and the Company.



                                       18
<PAGE>   20

        SECTION 8.8 NOTICES. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed effectively given
and received (a) upon personal delivery, (b) on the fifth day following mailing
by registered or certified mail return receipt requested postage prepaid,
addressed to the Company or P&U at their respective addresses listed below (or
at such other address for a party as shall be specified by like notice;
provided, that notices of a change of address shall be effective only upon
receipt thereof), (c) upon transmission by facsimile (with telephonic notice),
or (d) upon confirmed delivery by overnight commercial courier service:

        If to the Company, address to:      InSite Vision Incorporated
                                            Attention:  Chief Executive Officer
                                            965 Atlantic Avenue
                                            Alameda, CA  94501

        with a copy to:                     Brobeck, Phleger & Harrison LLP
                                            Attention:  Timothy R. Curry
                                            Two Embarcadero Place
                                            2200 Geng Road
                                            Palo Alto, CA  94303

        If to P&U, address to:              Pharmacia & Upjohn
                                            Attention: Vice President, Licensing
                                            100 Route 206 North
                                            Peapack, NJ  07977

        with a copy to:                     Pharmacia & Upjohn
                                            Attention:  Vice President,
                                            Corporate Law
                                            100 Route 206 North
                                            Peapack, NJ  07977

        SECTION 8.9 FEES AND EXPENSES. Except as otherwise provided herein, the
Company and P&U shall bear their own expenses and legal fees incurred on their
behalf with respect to this Agreement and the transactions contemplated hereby.

        SECTION 8.10 TITLES AND SUBTITLES. The titles of the sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.

        SECTION 8.11 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.



                                       19
<PAGE>   21

        IN WITNESS WHEREOF, this Agreement is executed and delivered by the
parties as of the date first above written.

                                            INSITE VISION INCORPORATED


                                            By: /s/ S. KUMAR CHANDRASEKARAN
                                                --------------------------------
                                                Name: S. Kumar Chandrasekaran
                                                Title: CEO

                                            PHARMACIA & UPJOHN AB


                                            By: /s/ HAKAN ASTROM
                                                --------------------------------
                                                Name: Hakan Astrom
                                                Title: Sr. VP Corp. Strategy &
                                                       Investor Relations

                                            By: /s/ MATS PETTERSSON
                                                --------------------------------
                                                Name: Mats Pettersson
                                                Title: Senior Vice President



                                       20
<PAGE>   22
                                    EXHIBIT A

                             SCHEDULE OF EXCEPTIONS


                                      None



                                      A-1
<PAGE>   23


                                    EXHIBIT B

                          CERTIFICATE OF INCORPORATION


                                      B-1
<PAGE>   24


                                    EXHIBIT C

                                     BYLAWS


                                      C-1
<PAGE>   25


                                    EXHIBIT D

                               OPINION OF COUNSEL


Pharmacia & Upjohn AB
c/o Pharmacia & Upjohn Company
100 Route 206 North
Peapack, New Jersey 07977

               Re: InSite Vision Incorporated

Ladies and Gentlemen:

               We have acted as counsel to InSite Vision Incorporated, a
Delaware corporation (the "Company") in connection with the transactions set
forth and contemplated by the Stock Purchase Agreement to be entered into
contemporaneously herewith by and between Pharmacia & Upjohn AB and the Company
(the "Stock Purchase Agreement"). This opinion is furnished to you pursuant to
Section 5.1(d) of the Stock Purchase Agreement.

               In rendering the opinions expressed below, we have examined and
are familiar with originals or copies of the Company's Certificate of
Incorporation, and all amendments thereto, as certified by the Delaware
Secretary of State (the "Certificate"), the Company's Bylaws, a Certificate of
Good Standing for the Company issued by the Delaware Secretary of State and such
other agreements, instruments and documents as we have deemed necessary as a
basis for such opinions.

               In rendering the opinions set forth herein, we have assumed (i)
the genuineness of all signatures on all documents submitted to us, (ii) the
capacity and competence of each natural person who executed any of these
documents, (iii) the authenticity of all documents submitted to us as originals
and of the originals of all documents submitted to us as copies, (iv) the
conformity with the original documents of all documents submitted to us as
copies and (v) the filing by the Company of all legal forms and documents
required to be filed by the Company, and such filings being made in conformity
with law.

               Based on the foregoing and subject to the qualifications and
limitations set forth herein, we are of the opinion that:

               1. InSite Vision Incorporated is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and is qualified and in good standing as a foreign corporation in each
jurisdiction in which such qualification is required or necessary.

               2. The authorized capital of the Company is as set forth in the
Certificate as certified by the Delaware Secretary of State on the date hereof.


                                       D-1
<PAGE>   26



               3. The Company has full corporate power and authority to execute
and deliver the Stock Purchase Agreement and all agreements related thereto, and
to carry out the transactions contemplated thereby.

               4. The Stock Purchase Agreement and all agreements related
thereto, have been duly authorized and approved by such directors and officers
that are legally required therefor, have been duly executed and delivered by the
Company.

               5. The execution and delivery of the Stock Purchase Agreement and
all other agreements or instruments entered into or delivered in connection with
the transactions contemplated thereby and the performance by the Company of
their terms (i) do not conflict with or result in a violation of the Company's
Certificate or Bylaws or any judgment, order or decree of any court or agency to
which the Company or its assets is subject and (ii) do not conflict with and
will not, with or without notice or lapse of time, constitute a material breach
or default of or result in any lien under any material contract, undertaking,
indenture or other agreement or instrument by which the Company is bound or to
which it is a party.

               6. No notice, consent, authorization, approval or order is
required to be given or obtained by the Company of any court or governmental
agency or body for the consummation by the Company of the transactions
contemplated by the Stock Purchase Agreement or any of the other agreements
related thereto.

               7. There is no suit, action, or legal, administrative,
arbitration, or other proceeding pending, or threatened against the Company
pertaining to the transactions contemplated by the Stock Purchase Agreement.

               The opinions expressed herein are solely for benefit of, and may
be relied upon by, the addressee hereof. The opinions may not be relied upon for
any other purpose or relied upon by any other person, firm or entity for any
purpose. The opinions expressed herein are as of the date hereof.

                                Very truly yours,



                                BROBECK PHLEGER & HARRISION



                                       D-2