Filing summary
Entity and period: The supplied filing is pSivida Corp.’s Form 10-K for the fiscal year ended June 30, 2012, not an Eyepoint, Inc. filing. The requested “2011 Q4” period also does not match the filing; the report includes FY2012 results and comparative FY2011 figures. Financial amounts below are in U.S. dollars.
Business context and reporting period
pSivida developed sustained-release drug-delivery technologies, principally Durasert and BioSilicon, focused on chronic eye diseases. It reported three approved products and two principal candidates in development. Revenue came primarily from collaboration and research arrangements and royalties; the company had no sales or marketing staff and relied on partners.
ILUVIEN, licensed to Alimera, had marketing authorization in five EU countries for certain chronic diabetic macular edema (DME) patients; approvals in Italy and Spain were pending. The FDA had not approved it in the United States. pSivida’s other key programs included a posterior-uveitis micro-insert and a latanoprost implant for glaucoma and ocular hypertension.
Financial performance
| Metric | FY2012 | FY2011 |
|---|---|---|
| Revenue | $3.526 million | $4.965 million |
| Research and development expense | $7.039 million | $6.864 million |
| General and administrative expense | $6.868 million | $8.104 million |
| Intangible-asset impairment | $14.830 million | None |
| Operating loss | $25.211 million | $10.003 million |
| Net loss | $24.835 million | $8.628 million |
| Net loss per share, basic and diluted | $1.19 | $0.44 |
| Operating cash flow | $(9.001) million | $(3.170) million |
FY2012 revenue included $2.080 million of collaborative research and development revenue and $1.446 million of royalty income. The filing does not report a gross margin; it is not a conventional product-sales business. The reported impairment was a major non-cash operating charge.
For the quarter ended June 30, 2012, revenue was $699,000, operating loss was $2.310 million, and net loss was $2.262 million. In the comparable FY2011 quarter, revenue was $3.715 million, operating loss was $308,000, and net loss was $140,000.
Liquidity, assets and obligations
- At June 30, 2012, cash and cash equivalents were $4.625 million and marketable securities were $9.946 million, totaling $14.571 million. Current assets were $15.959 million and current liabilities were $3.178 million.
- Total assets were $20.597 million; total liabilities were $6.961 million; stockholders’ equity was $13.636 million. The balance sheet reports no interest-bearing debt. Deferred revenue totaled $5.959 million.
- Cash and cash equivalents declined from $12.912 million at June 30, 2011. The company used $9.001 million in operating cash flow in FY2012.
- In August 2012, after year-end, pSivida raised approximately $4.7 million net through a registered offering of shares and warrants. Management said available resources, the offering proceeds and expected royalties should fund current and planned operations through calendar 2013.
- Minimum contractual obligations as of June 30, 2012 were $1.135 million, consisting of $830,000 in operating leases and $305,000 in purchase obligations.
Material changes versus the prior comparable period
- Revenue fell 29% year over year, principally because collaborative research and development revenue declined; FY2011 included a significant revenue recognition related to the Pfizer agreement.
- Net loss widened to $24.835 million from $8.628 million, mainly because of the $14.830 million impairment and lower revenue. The impairment followed the FDA’s November 2011 Complete Response Letter for ILUVIEN and a sharp decline in pSivida’s market capitalization.
- Royalty income rose to $1.446 million from $1.353 million, predominantly from Retisert sales, but management did not expect Bausch & Lomb royalties to become a material source of revenue.
- Operating cash use increased to $9.001 million from $3.170 million. General and administrative expense decreased, while research and development expense was broadly stable.
Outlook, commentary and risks
- Alimera planned to resubmit the U.S. ILUVIEN NDA in early 2013, based on additional analyses of the existing FAME trial data and a narrower patient population. The FDA’s 2011 letter said the submitted evidence did not adequately establish safety and efficacy and indicated two additional trials might be needed. Approval and timing remained uncertain.
- Alimera planned to launch in Germany, the U.K. and France during 2013, subject to commercialization, pricing and reimbursement conditions. U.K. NICE draft guidance did not recommend ILUVIEN, and final guidance was pending.
- The FDA had cleared pSivida to proceed to two Phase III trials for posterior uveitis, but the pivotal trials had not begun. The latanoprost program was in an investigator-sponsored Phase I/II study; Pfizer’s option and potential future payments were contingent and uncertain.
- Management anticipated potentially higher R&D expense in FY2013 depending on initiation of internally funded trials. The filing provides no earnings or revenue guidance.
- Management expected negative operating cash flow absent sufficient product or royalty revenue and stated that additional capital would be needed to complete planned development beyond the estimated runway. Financing might be unavailable or dilutive; reduced funding could force delays or cuts to research and operations.
- Key risks include clinical and regulatory setbacks, FAc-related eye side effects, uncertain EU reimbursement and commercialization, dependence on partners, competition, patent protection, and the possibility of further intangible-asset impairment. The company reported no material litigation and no off-balance-sheet arrangements.
Important facts for investors to verify
- Confirm the issuer and period: this is pSivida Corp.’s FY2012 10-K, not an Eyepoint, Inc. filing or a 2011 Q4 report.
- Check subsequent FDA actions and whether Alimera resubmitted the ILUVIEN NDA, obtained U.S. approval, or faced additional-trial requirements.
- Verify actual EU launches, national approvals, pricing and reimbursement outcomes, including the final U.K. NICE guidance and Alimera’s financing and commercial execution.
- Reassess cash runway against actual operating cash use, trial spending, the August 2012 offering proceeds and subsequent financing or partnering activity.
- Track enrollment, timing, safety and results for the posterior-uveitis and latanoprost programs, as well as Pfizer’s option status.
- Review the assumptions underlying the $14.830 million impairment and the remaining $4.226 million intangible-asset balance for subsequent impairment indicators.