Slide continues for pSivida, Alimera after FDA rejection

Iluvien

Shares of pSivida Corp. (NSDQ:PSDV) and Alimera Sciences (NSDQ:ALIM) slid today on an FDA rejection of their Iluvien drug-device combination.

The federal watchdog agency said it couldn’t approve Iluvien, a back-of-the-eye implant designed to treat diabetic macular edema, because Alimera hadn’t proven that its benefits outweigh its safety risks. The FDA wants Alimera, which licenses the device from pSivida, to conduct two more clinical studies for Iluvien for DME.

pSivida shares fell 12.0 percent today to $1.40, hitting a 52-week low of $1.36 along the way and adding to the nearly 50 percent lost Friday, after the FDA decision was announced.*

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“I can only reiterate how surprised and disappointed we were by this news. We have had two other back-of-the-eye products previously approved by the FDA and we were optimistic that the FDA would approve Iluvien for DME,” pSivida CEO Dr. Paul Ashton told analysts on a conference call. “Because we have licensed Iluvien to Alimera, the next steps for Iluvien development in DME in the US will be decided by Alimera, not us. We don’t participate in running the clinical trials or developing the regulatory strategy for the DME program.”

ALIM shares suffered as well, dropping 276 percent Friday and another 5.2 percent today, hitting it’s own 52-week low of $1.39 on the way to a $1.50 close.

Alimera has asked the FDA for a meeting to discuss next steps and is suspending a clinical trial the FDA asked for until at least until that meeting, Alimera CEO Daniel Myers told analysts during a separate call.

“Overall, we were surprised and disappointed with the FDA’s decision,” Myers said. “We are committed to and, with approximately $39 million in cash as of Sept. 30, have the funds for evaluating our options in the U.S. and pursuing approval in Europe.”

Alimera has applied for approval from the U.K., Austria, France, Germany, Italy, Portugal and Spain and expects to hear from EU regulatory authorities in the first half of 2012, Myers said.

pSivida’s Ashton said European approval doesn’t trigger a payment, as with the $25 million it would have been due with an FDA green light. But, like the U.S. deal, EU approval does come with 20 percent royalties on European sales and 33 percent of non-royalty payments from any third-party distribution deals.

The company had $21.3 million in net cash as of Sept. 30, he added, “sufficient to support our clinical and planned operations into at least calendar 2013. As those of you who follow us know, now we are a very frugal company.”

And then there’s a second indication for the Iluvien implant to consider: posterior uveitis. Ashton said the FDA decision on DME doesn’t preclude U.S. approval for the uveitis indication, because the two diseases are so different.

“We will be having a meeting with the FDA shortly to better understand what they will need to see for approval for this insert of posterior uveitis and how the FDA’s decision on DME would affect an application in uveitis,” he said during the call. “Now just to reiterate, we don’t believe that the recent decision on the Iluvien in DME will affect our ability to reference the data directed by Alimera in its DME development program. These data include clinical, non-clinical data, manufacturing and stability data and offers the substantial savings in cost and time and if we proceed to offer this for uveitis. However, we certainly plan to discuss the most efficient use of these data with the FDA if we decide to move forward in uveitis.”

pSivida is also co-developing, along with pFizer (NYSE:PFE), a biodegradable insert designed to treat glaucoma and high intraocular pressure, Ashton added.

“So this product is a different insert, as you are looking at different drugs for a different disease than Iluvien for DME,” he said.

*Correction, Nov. 16, 2011: This article originally mis-stated the percentage value lost by PSDV shares between Nov. 10 and Nov. 11. Return to the corrected sentence.

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