SEC Filing Summary: pSivida Corp. Form 10-Q
Period: Three months ended September 30, 2016 (the first quarter of fiscal 2017), compared with the three months ended September 30, 2015. The request metadata identifies Eyepoint, Inc. and 2016 Q1, but the supplied filing is for pSivida Corp. and reports the quarter ended September 30, 2016.
Business context
pSivida develops sustained-release drug products, primarily for chronic eye diseases. Its lead candidate, Durasert three-year uveitis, was in Phase 3 trials. ILUVIEN for diabetic macular edema and Retisert for posterior-segment uveitis were licensed to partners; pSivida received a share of certain ILUVIEN proceeds and royalties on Retisert sales.
Financial results and liquidity
| Metric | Q1 FY2017 | Q1 FY2016 |
|---|---|---|
| Total revenue | $277,000 | $466,000 |
| Operating expenses | $7.463 million | $5.450 million |
| Operating loss | $7.186 million | $4.984 million |
| Net loss | $7.162 million | $4.933 million |
| Net loss per share, basic and diluted | $0.21 | $0.17 |
| Cash used in operating activities | $6.486 million | $4.493 million |
- Revenue fell 41%. Collaborative R&D revenue declined to $34,000 from $180,000, mainly because the prior-year quarter included $157,000 of Alimera sublicense consideration. Royalty income decreased 15% to $243,000.
- R&D expense rose 20% to $4.178 million; general and administrative expense rose 67% to $3.285 million. The filing attributes increases to clinical-development spending, U.K. restructuring, and CEO-transition costs and related expenses.
- At September 30, cash and cash equivalents were $14.308 million and marketable securities were $8.238 million, totaling $22.546 million. Total assets were $24.933 million; total liabilities were $10.485 million; stockholders’ equity was $14.448 million.
- The company reported no borrowings or credit facilities. Management estimated available resources and expected collaboration inflows could fund current plans through Q1 FY2018; expense reductions could extend funding into Q2 FY2018. This estimate excluded potential Alimera receipts.
- There is no clear gross-margin figure in the filing, and operating margins are not meaningful for this low-revenue, development-stage business.
Material changes and unusual items
- Net loss increased $2.229 million year over year, reflecting lower revenue and higher operating expenses.
- Cash used in operations increased by $1.993 million. Investing activities provided $5.480 million, principally because marketable-security maturities exceeded purchases; cash decreased by $1.005 million during the quarter.
- The company recorded $436,000 of U.K. restructuring costs after deciding to consolidate R&D in the United States and close its U.K. research facility. It expected another $30,000–$40,000 of charges in the quarter ending December 31, 2016.
- CEO-transition-related severance, professional fees, and stock-based compensation contributed approximately $1.1 million to higher G&A expense. Total stock-based compensation was $734,000, versus $405,000 a year earlier.
- Alimera disputed an audit finding concerning $136,000 of 2014 net-profit-share underpayment and sought repayment of $354,000 previously remitted, including interest and audit-cost reimbursement. Pending arbitration, $136,000 was deferred revenue and $218,000 was accrued expenses.
- After quarter-end, on October 25, 2016, pSivida notified Pfizer that it had discontinued the latanoprost product’s development. Pfizer received a 60-day option to license it for $10 million, plus potential royalties and milestone payments. If Pfizer does not exercise, the agreement terminates and approximately $5.6 million of deferred revenue is expected to be recognized in the quarter ending December 31, 2016.
Outlook, commentary, and risks
- The first Durasert Phase 3 trial met its primary endpoint with high statistical significance, and efficacy and safety results remained encouraging through 12 months. The second trial completed enrollment of 150 patients in September 2016; top-line results were expected by the end of the first half of 2017.
- Management planned to file an EU marketing application in the first half of 2017 based on the first trial, and, assuming favorable second-trial results, an FDA application in the second half of 2017. These were forward-looking plans, not assured outcomes.
- Management expected significant Durasert development expense to continue. Funding beyond the stated runway depends on ILUVIEN commercialization receipts, new collaborations, or financing; the company cautioned that these sources may not be available or sufficient. Equity financing could dilute shareholders.
- Key risks include clinical-trial and regulatory outcomes, ability to raise capital, dependence on Alimera and its commercialization of ILUVIEN, the Alimera dispute, potential Retisert royalty declines, product safety and acceptance, and development and intellectual-property risks.
Important facts for investors to verify
- Confirm the issuer and reporting period: this is pSivida Corp.’s quarter ended September 30, 2016, not a filing identified as Eyepoint, Inc. 2016 Q1.
- Check subsequent Durasert Phase 3 results, regulatory filing progress, and actual timing and costs of development.
- Track cash burn and liquidity against management’s runway estimate, including any cost reductions or financing.
- Review Alimera’s ILUVIEN sales, pSivida’s realized profit-share receipts, and the outcome of the arbitration.
- Confirm whether Pfizer exercised its option and whether the deferred revenue was recognized after the quarter.
- Assess the final restructuring costs and any effects of the U.K. consolidation on development operations.