EyePoint Pharmaceuticals, Inc. - FORM 10-Q

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EXCEL - IDEA: XBRL DOCUMENT - EyePoint Pharmaceuticals, Inc.	Financial_Report.xls
EX-32.1 - EX-32.1 - EyePoint Pharmaceuticals, Inc.	d911428dex321.htm
EX-31.1 - EX-31.1 - EyePoint Pharmaceuticals, Inc.	d911428dex311.htm
EX-32.2 - EX-32.2 - EyePoint Pharmaceuticals, Inc.	d911428dex322.htm
EX-31.2 - EX-31.2 - EyePoint Pharmaceuticals, Inc.	d911428dex312.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2015

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

COMMISSION FILE NUMBER 000-51122

pSivida Corp.

(Exact name of registrant as specified in its charter)


Delaware		26-2774444
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

480 Pleasant Street Watertown, MA		02472
(Address of principal executive offices)		(Zip Code)

(617) 926-5000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

There were 29,412,365 shares of the registrant’s common stock, $0.001 par value, outstanding as of May 6, 2015.

PSIVIDA CORP. AND SUBSIDIARIES

INDEX TO FORM 10-Q


		Page

PART I:	FINANCIAL INFORMATION

Item 1.	Unaudited Financial Statements

	Condensed Consolidated Balance Sheets – March 31, 2015 and June 30, 2014		3

	Condensed Consolidated Statements of Comprehensive (Loss) Income – Three and Nine Months Ended March 31, 2015 and 2014		4

	Condensed Consolidated Statement of Stockholders’ Equity – Nine Months Ended March 31, 2015		5

	Condensed Consolidated Statements of Cash Flows – Nine Months Ended March 31, 2015 and 2014		6

	Notes to Condensed Consolidated Financial Statements		7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		16

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		22

Item 4.	Controls and Procedures		22

PART II:	OTHER INFORMATION

Item 1A.	Risk Factors		23

Item 6.	Exhibits		35

Signatures			36

Certifications

PART I. FINANCIAL INFORMATION

Item 1.

Unaudited Financial Statements

PSIVIDA CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share amounts)


	March 31, 2015			June 30, 2014

Assets
Current assets:
Cash and cash equivalents	$	23,007		$	15,334
Marketable securities		8,651			2,944
Accounts and other receivables		430			517
Prepaid expenses and other current assets		989			547


Total current assets		33,077			19,342
Property and equipment, net		280			297
Intangible assets, net		2,080			2,765
Other assets		115			117
Restricted cash		150			150


Total assets	$	35,702		$	22,671


Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	812		$	464
Accrued expenses		1,371			1,524
Deferred revenue		35			138


Total current liabilities		2,218			2,126
Deferred revenue		5,584			5,584
Deferred rent		53			37


Total liabilities		7,855			7,747


Commitments and contingencies

Stockholders’ equity:
Preferred stock, $.001 par value, 5,000,000 shares authorized, none issued and outstanding		—			—
Common stock, $.001 par value, 60,000,000 shares authorized, 29,412,365 and 29,298,558 shares issued and outstanding at March 31, 2015 and June 30, 2014, respectively		29			29
Additional paid-in capital		292,439			290,864
Accumulated deficit		(265,520	)		(277,013	)
Accumulated other comprehensive income		899			1,044


Total stockholders’ equity		27,847			14,924


Total liabilities and stockholders’ equity	$	35,702		$	22,671

See notes to condensed consolidated financial statements

PSIVIDA CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Unaudited)

(In thousands, except per share amounts)


	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2015			2014			2015			2014

Revenues:
Collaborative research and development	$	110		$	1,676		$	25,355		$	2,149
Royalty income		218			316			801			1,032


Total revenues		328			1,992			26,156			3,181


Operating expenses:
Research and development		3,339			2,269			8,890			7,267
General and administrative		2,041			1,946			5,645			5,468
Gain on sale of property and equipment		—			(4	)		—			(76	)


Total operating expenses		5,380			4,211			14,535			12,659


(Loss) income from operations		(5,052	)		(2,219	)		11,621			(9,478	)


Other income:
Interest income		6			1			12			3
Other income, net		4			—			4			—


Total other income		10			1			16			3


(Loss) income before income taxes		(5,042	)		(2,218	)		11,637			(9,475	)
Income tax benefit (expense)		44			31			(144	)		87


Net (loss) income	$	(4,998	)	$	(2,187	)	$	11,493		$	(9,388	)


Net (loss) income per common share:

Basic	$	(0.17	)	$	(0.08	)	$	0.39		$	(0.35	)


Diluted	$	(0.17	)	$	(0.08	)	$	0.38		$	(0.35	)


Weighted average common shares:

Basic		29,412			27,672			29,367			26,842


Diluted		29,412			27,672			30,612			26,842


Net (loss) income	$	(4,998	)	$	(2,187	)	$	11,493		$	(9,388	)


Other comprehensive (loss) income:
Foreign currency translation adjustments		(45	)		5			(141	)		100
Net unrealized gain (loss) on marketable securities		1			(1	)		(4	)		(1	)


Other comprehensive (loss) income		(44	)		4			(145	)		99


Comprehensive (loss) income	$	(5,042	)	$	(2,183	)	$	11,348		$	(9,289	)

See notes to condensed consolidated financial statements

PSIVIDA CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(Unaudited)

(In thousands, except share amounts)


	Common Stock				Additional					Accumulated Other			Total
	Number of Shares		Par Value Amount		Paid-In Capital		Accumulated Deficit			Comprehensive Income			Stockholders’ Equity

Balance at July 1, 2014		29,298,558	$	29	$	290,864	$	(277,013	)	$	1,044		$	14,924

Net income		—		—		—		11,493			—			11,493
Other comprehensive loss		—		—		—		—			(145	)		(145	)
Exercise of stock options		113,807		—		235		—			—			235
Stock-based compensation		—		—		1,340		—			—			1,340


Balance at March 31, 2015		29,412,365	$	29	$	292,439	$	(265,520	)	$	899		$	27,847

See notes to condensed consolidated financial statements

PSIVIDA CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)


	Nine Months Ended March 31,
	2015			2014

Cash flows from operating activities:
Net income (loss)	$	11,493		$	(9,388	)

Adjustments to reconcile net income (loss) to cash flows from operating activities:
Amortization of intangible assets		579			582
Depreciation of property and equipment		79			103
Stock-based compensation expense		1,340			963
Amortization of bond premium on marketable securities		66			26
Gain on sale of property and equipment		—			(76	)
Changes in operating assets and liabilities:
Accounts receivable and other current assets		(388	)		1,016
Accounts payable and accrued expenses		221			(833	)
Deferred revenue		(103	)		(290	)
Deferred rent		16			11


Net cash provided by (used in) operating activities		13,303			(7,886	)


Cash flows from investing activities:
Purchases of marketable securities		(8,677	)		(2,714	)
Maturities of marketable securities		2,900			3,350
Purchases of property and equipment		(71	)		(75	)
Proceeds from sale of property and equipment		—			76
Change in restricted cash		—			(150	)


Net cash (used in) provided by investing activities		(5,848	)		487


Cash flows from financing activities:
Proceeds from issuance of stock, net of issuance costs		—			18,149
Exercise of stock options		235			909


Net cash provided by financing activities		235			19,058


Effect of foreign exchange rate changes on cash and cash equivalents		(17	)		(3	)


Net increase in cash and cash equivalents		7,673			11,656
Cash and cash equivalents at beginning of period		15,334			6,899


Cash and cash equivalents at end of period	$	23,007		$	18,555


Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	263		$	—

Supplemental disclosure of non-cash investing and financing activities:
Purchase of property and equipment		—			141

Stock issuance costs		—			86

PSIVIDA CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.	Operations and Basis of Presentation

The accompanying condensed consolidated financial statements of pSivida Corp. and subsidiaries (the “Company”) as of March 31, 2015 and for the three and nine months ended March 31, 2015 and 2014 are unaudited. Certain information in the footnote disclosures of these financial statements has been condensed or omitted in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”). These financial statements should be read in conjunction with the Company’s audited consolidated financial statements and footnotes included in its Annual Report on Form 10-K for the fiscal year ended June 30, 2014. In the opinion of management, these statements have been prepared on the same basis as the audited consolidated financial statements as of and for the year ended June 30, 2014, and include all adjustments, consisting only of normal recurring adjustments, that are necessary for the fair presentation of the Company’s financial position, results of operations, comprehensive (loss) income and cash flows for the periods indicated. The preparation of financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) requires management to make assumptions and estimates that affect, among other things, (i) reported amounts of assets and liabilities; (ii) disclosure of contingent assets and liabilities at the date of the consolidated financial statements; and (iii) reported amounts of revenues and expenses during the reporting period. The results of operations for the three and nine months ended March 31, 2015 are not necessarily indicative of the results that may be expected for the entire fiscal year or any future period.

The Company is a leader in the development of sustained-release pharmaceutical products for treating eye diseases. Its approved products deliver drugs at a controlled and steady rate for months or years. The Company has developed three of the four approved sustained-release products for treating retinal diseases. The Company’s lead product candidate Medidur™ for posterior uveitis is in pivotal clinical trials. Marketing of its lead licensed product ILUVIEN® for diabetic macular edema (“DME”) commenced in the U.S. in the fiscal 2015 third quarter. The Company’s pre-clinical development program is focused on developing products for chronic retinal diseases utilizing our core technology platforms. The Company’s strategy includes developing products independently while continuing to leverage our technology platforms through collaborations and license agreements.

Medidur, the Company’s lead development product, is an injectable, micro-insert designed to treat posterior uveitis, a blinding eye disease, on a sustained basis for 36 months. Medidur uses the same micro-insert used in ILUVIEN for DME (same design, same drug, same polymers, same release rate) and delivers a lower dose of the same drug as Retisert^®, the Company’s approved implant for posterior uveitis. The Company is developing Medidur independently.

In recent meetings, the Company reached agreement with the U.S. Food and Drug Administration (“FDA”) on a regulatory path for Medidur that should allow a new drug application (“NDA”) to be filed in the first half of 2017. The FDA indicated that, pending clinical trial results, it would accept an NDA based on data from the ongoing Medidur Phase III trial (which has a 12-month primary endpoint), data from a second Phase III trial with a shorter six-month primary endpoint and data referenced from the already completed Phase III ILUVIEN trials. The ongoing Phase III trial for Medidur completed enrollment with 129 patients in the fiscal 2015 third quarter. The last 12-month follow-up visit is scheduled in March 2016, and the Company expects top-line data in the second calendar quarter of 2016. The Company has already initiated a second Phase III Medidur trial, which will recruit up to 150 patients in India. Both trials will follow participants for three years.

The Company had previously planned to file an NDA with data from only the first Phase III trial and data referenced from the ILUVIEN studies, subject to FDA confirmation. Because of the shorter six-month primary endpoint permitted for the second trial, the Company expects that the new regulatory path will allow it to file the Medidur NDA with only a several month delay from the time frame anticipated with one Phase III trial. The Company had budgeted for a second Phase III trial, pending FDA guidance, so the second trial does not affect the Company’s liquidity projections.

The Company plans to commercialize Medidur with a newly designed, proprietary inserter that uses a standard 27 gauge needle routinely used in intraocular injections. As a result of the new design, the Company will conduct a utilization study on the new inserter, with data to be submitted as part of the Medidur NDA. Data from this study is expected to be available before data from the other trials and should not delay the NDA submission.

ILUVIEN, the Company’s most recently approved product, is an injectable, sustained-release micro-insert that provides treatment of DME for three years from a single administration. ILUVIEN is licensed to and sold by Alimera Sciences, Inc. (“Alimera”), and the Company is entitled to a share of the net profits (as defined) from Alimera’s sales of ILUVIEN on a country-by-country basis. ILUVIEN was launched in the U.S. in late February 2015 and is now widely available to physicians in the U.S. It is indicated for the treatment of DME in patients previously treated with a course of corticosteroids without a clinically significant rise in intraocular pressure.

ILUVIEN was also launched in Portugal in January 2015, and has been commercially available in the United Kingdom and Germany since June 2013. ILUVIEN has marketing approvals in 17 EU countries for the treatment of chronic DME considered insufficiently responsive to available therapies.

Distribution, regulatory and reimbursement matters for ILUVIEN for DME in Australia and New Zealand have been sublicensed. The Company is entitled to 20% of any royalties and 33% of all other payments received by our licensee, including any milestone payments.

The Company’s pre-clinical research is primarily focused on developing pharmaceutical products to provide targeted and systemic sustained delivery of drugs and large biologic molecules for treatment of various conditions, and to provide sustained delivery of therapeutic agents to treat wet and dry age-related macular degeneration, glaucoma and osteoarthritis.

The Company has a history of operating losses and has financed its operations primarily from the receipt of license fees, milestone payments, research and development funding and royalty income from its collaboration partners and from proceeds of sales of its equity securities. The Company believes that its cash, cash equivalents and marketable securities of $31.7 million at March 31, 2015 will enable the Company to maintain its current and planned operations (including its two Medidur trials) into calendar year 2017. This estimate excludes any potential net profits receipts from sales of ILUVIEN.

New accounting pronouncements are issued periodically by the Financial Accounting Standards Board (“FASB”) and are adopted by the Company as of the specified effective dates. Unless otherwise disclosed below, the Company believes that recently issued and adopted pronouncements will not have a material impact on the Company’s financial position, results of operations and cash flows or do not apply to the Company’s operations.

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which requires an entity to recognize revenue in an amount that reflects the consideration to which the entity expects to be entitled in exchange for the transfer of promised goods or services to customers. The standard will replace most existing revenue recognition guidance in U.S. GAAP. In April 2015, the FASB tentatively deferred the effective date of ASU 2014-09, while also tentatively permitting early adoption. If such deferral is ratified, ASU 2014-09 will become effective on July 1, 2018. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the impact this standard will have on its financial statements.

2.	License and Collaboration Agreements

Alimera

Under the collaboration agreement with Alimera, as amended in March 2008 (the “Alimera Agreement”), the Company licensed to Alimera the rights to develop, market and sell certain product candidates, including ILUVIEN, and Alimera assumed all financial responsibility for the development of licensed products. In September 2014, the Company earned a $25.0 million milestone from Alimera as a result of the FDA approval of ILUVIEN, which was recorded as revenue in the quarter ended September 30, 2014 and received in October 2014. In addition, the Company is entitled to receive 20% of any net profits (as defined) on sales of each licensed product (including ILUVIEN) by Alimera, measured on a quarter-by-quarter and country-by-country basis. Alimera may recover 20% of previously incurred and unapplied net losses (as defined) for commercialization of each product in a country, but only by an offset of up to 4% of the net profits earned in that country each quarter, reducing the Company’s net profit share to 16% in each country until those net losses are recouped. In the event that Alimera sublicenses commercialization in any country, the Company is entitled to 20% of royalties and 33% of non-royalty consideration received by Alimera, less certain permitted deductions. The Company is also entitled to reimbursement of certain patent maintenance costs with respect to the patents licensed to Alimera.

The Company’s performance obligations ended on December 31, 2009 and, accordingly, all amounts received thereafter under the Alimera Agreement are recognized as revenue upon receipt or at such earlier date, if applicable, on which any such amounts are both fixed and determinable and reasonably assured of collectability.

Revenue under the Alimera Agreement totaled $70,000 and $47,000 for the three months ended March 31, 2015 and 2014, respectively, and $25.1 million and $95,000 for the nine months ended March 31, 2015 and 2014, respectively.

Pfizer

In June 2011, the Company and Pfizer entered into an Amended and Restated Collaborative Research and License Agreement (the “Restated Pfizer Agreement”) to focus solely on the development of a sustained-release bioerodible micro-insert designed to deliver latanoprost for human ophthalmic disease or conditions other than uveitis (the “Latanoprost Product”). Pfizer made an upfront payment of $2.3 million and the Company agreed to use commercially reasonable efforts to fund the development for at least one year, including assumption of an investigator-sponsored Phase I/II dose-escalation study. The Company may, at its option, conduct Phase II clinical trials, which have not been initiated, for the purpose of demonstrating Proof-of-Concept (“POC”). If the Company were to issue a final report demonstrating POC, Pfizer would have a 90-day exercise option for an exclusive, worldwide license to develop and commercialize the Latanoprost Product in return for a $20.0 million payment and potential double-digit sales-based royalties and prescribed development, regulatory and sales performance milestone payments. If the Company elects to cease development of the Latanoprost Product prior to POC, Pfizer could exercise its option for the same worldwide license upon payment of a lesser option fee, with comparable reductions in any future milestones and royalties. If Pfizer does not exercise its option when available, the Restated Pfizer Agreement will automatically terminate, with any remaining deferred revenue balance recorded as revenue at that time, provided, however, that the Company would retain the right to develop and commercialize the Latanoprost Product.

As a result of the material modification of the Pfizer arrangement, the estimated selling price of the combined deliverables under the Restated Pfizer Agreement of $6.7 million is being recognized as collaborative research and development revenue over the expected performance period using the proportional performance method. The Company recorded no revenue and $9,000 for the three months ended March 31, 2015 and 2014, respectively, and no revenue and $65,000 for the nine months ended March 31, 2015 and 2014, respectively. As of March 31, 2015, the Company continues to evaluate the Latanoprost Product and, consequently, the Company cannot currently estimate the remaining performance period. As a result, total deferred revenue of approximately $5.6 million at each of March 31, 2015 and June 30, 2014 was classified as noncurrent. Costs associated with developing the Latanoprost Product are reflected in operating expenses in the period in which they are incurred.

Pfizer owned approximately 6.3% of the Company’s outstanding common stock at March 31, 2015.

Bausch & Lomb

Pursuant to a licensing and development agreement, as amended, Bausch & Lomb has a worldwide exclusive license to make and sell Retisert in return for royalties based on sales. Bausch & Lomb was also licensed to make and sell Vitrasert, an implant for sustained treatment of CMV retinitis, but discontinued sales in the second quarter of fiscal 2013 following patent expiration.

Royalty income from Bausch & Lomb totaled $218,000 and $316,000 for the three months ended March 31, 2015 and 2014, respectively, and $801,000 and $1.0 million for the nine months ended March 31, 2015 and 2014, respectively. Accounts receivable from Bausch & Lomb totaled $223,000 at March 31, 2015 and $302,000 at June 30, 2014.

Enigma Therapeutics

The Company entered into an exclusive, worldwide royalty-bearing license agreement in December 2012, amended and restated in March 2013, with Enigma Therapeutics Limited (“Enigma”) for the development of BrachySil, the Company’s BioSilicon™ product candidate for the treatment of pancreatic and other types of cancer. The Company received an upfront fee of $100,000 and is entitled to 8% sales-based royalties, 20% of sublicense consideration and milestone payments based on aggregate product sales. Enigma is obligated to pay an annual license maintenance fee of $100,000 by the end of each calendar year. For each calendar year commencing with 2014, the Company is entitled to receive reimbursement of any patent maintenance costs, sales-based royalties and

sublicensee sales-based royalties earned, but only to the extent such amounts, in the aggregate, exceed the $100,000 annual license maintenance fee. The Company has no consequential performance obligations under the Enigma license agreement and, accordingly, any amounts to which the Company is entitled under the agreement are recognized as revenue on the earlier of receipt or when collectability is reasonably assured. There was no revenue related to the Enigma agreement in the three month periods ended March 31, 2015 and 2014 and $100,000 and $102,000 of revenues for the nine month periods ended March 31, 2015 and 2014, respectively. As of March 31, 2015, no deferred revenue was recorded for this agreement.

Evaluation Agreements

The Company from time to time enters into funded agreements to evaluate the potential use of its technology systems for sustained release of third party drug candidates in the treatment of various diseases. Consideration received is generally recognized as revenue over the term of the feasibility study agreement. Revenue recognition for consideration, if any, related to a license option right is assessed based on the terms of any such future license agreement or is otherwise recognized at the completion of the evaluation agreement. Revenues under evaluation agreements totaled $35,000 and $1.6 million for the three months ended March 31, 2015 and 2014, respectively, and $104,000 and $1.9 million for the nine months ended March 31, 2015 and 2014, respectively.

3.	Intangible Assets

The reconciliation of intangible assets for the nine months ended March 31, 2015 and for the year ended June 30, 2014 was as follows (in thousands):


	Nine Months Ended March 31, 2015			Year Ended June 30, 2014

Patented technologies
Gross carrying amount at beginning of period	$	41,689		$	38,941
Foreign currency translation adjustments		(3,313	)		2,748


Gross carrying amount at end of period		38,376			41,689


Accumulated amortization at beginning of period		(38,924	)		(35,511	)
Amortization expense		(579	)		(778	)
Foreign currency translation adjustments		3,207			(2,635	)


Accumulated amortization at end of period		(36,296	)		(38,924	)


Net book value at end of period	$	2,080		$	2,765

The Company amortizes its intangible assets with finite lives on a straight-line basis over their respective estimated useful lives. Amortization of intangible assets totaled $190,000 and $196,000 for the three months ended March 31, 2015 and 2014, respectively, and $579,000 and $582,000 for the nine months ended March 31, 2015 and 2014, respectively. The carrying value of intangible assets at March 31, 2015 of $2.1 million (approximately $1.5 million attributable to the Durasert™ technology and $0.6 million attributable to the BioSilicon technology (including Tethadur™)) is expected to be amortized on a straight-line basis over the remaining estimated useful life of 2.75 years, or approximately $756,000 per year.

4.	Marketable Securities

The amortized cost, unrealized loss and fair value of the Company’s available-for-sale marketable securities at March 31, 2015 and June 30, 2014 were as follows (in thousands):


	March 31, 2015
	Amortized Cost		Unrealized Loss			Fair Value

Corporate bonds	$	8,656	$	(5	)	$	8,651


	June 30, 2014
	Amortized Cost		Unrealized Loss			Fair Value

Corporate bonds	$	2,446	$	(1	)	$	2,445
Commercial paper		499		—			499


Total marketable securities	$	2,945	$	(1	)	$	2,944

During the nine months ended March 31, 2015, $8.7 million of marketable securities were purchased and $2.9 million of such securities matured. At March 31, 2015, the marketable securities had maturities ranging from 38 days to 11 months, with a weighted average maturity of 7.1 months.

5.	Fair Value Measurements

The Company accounts for certain assets and liabilities at fair value. The hierarchy below lists three levels of fair value based on the extent to which inputs used in measuring fair value are observable in the market. The Company categorizes each of its fair value measurements in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety. These levels are:

•

Level 1 – Inputs are quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets and liabilities.

•

Level 2 – Inputs are directly or indirectly observable in the marketplace, such as quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities with insufficient volume or infrequent transaction (less active markets).

•

Level 3 – Inputs are unobservable estimates that are supported by little or no market activity and require the Company to develop its own assumptions about how market participants would price the assets or liabilities.

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents and marketable securities. At March 31, 2015 and June 30, 2014, substantially all of the Company’s interest-bearing cash equivalent balances were concentrated in one institutional money market fund that has investments consisting primarily of certificates of deposit, commercial paper, time deposits, U.S. government agencies, treasury bills and treasury repurchase agreements. Generally, these deposits may be redeemed upon demand and, therefore, bear minimal risk.

The Company’s cash equivalents and marketable securities are classified within Level 1 or Level 2 on the basis of valuations using quoted market prices or alternative pricing sources and models utilizing market observable inputs, respectively. Certain of the Company’s corporate debt securities were valued based on quoted prices for the specific securities in an active market and were therefore classified as Level 1. The remaining marketable securities have been valued on the basis of valuations provided by third-party pricing services, as derived from such services’ pricing models. Inputs to the models may include, but are not limited to, reported trades, executable bid and ask prices, broker/dealer quotations, prices or yields of securities with similar characteristics, benchmark curves or information pertaining to the issuer, as well as industry and economic events. The pricing services may use a matrix approach, which considers information regarding securities with similar characteristics to determine the valuation for a security, and have been classified as Level 2. The following tables summarize the Company’s assets carried at fair value measured on a recurring basis at March 31, 2015 and June 30, 2014 by valuation hierarchy (in thousands):


	March 31, 2015
	Total carrying value		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)

Assets:
Cash equivalents	$	17,205	$	17,205	$	—	$	—
Marketable securities
Corporate bonds		8,651		8,651		—		—


	$	25,856	$	25,856	$	—	$	—


	June 30, 2014
	Total carrying value		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)

Assets:
Cash equivalents	$	14,260	$	14,260	$	—	$	—
Marketable securities
Corporate bonds		2,444		1,936		508		—
Commercial paper		500		—		500		—


	$	17,204	$	16,196	$	1,008	$	—

6.	Accrued Expenses

Accrued expenses consisted of the following at March 31, 2015 and June 30, 2014 (in thousands):


	March 31, 2015		June 30, 2014

Personnel costs	$	618	$	952
Professional fees		286		249
Clinical		418		316
Other		49		7


	$	1,371	$	1,524

7.	Stockholders’ Equity

In March 2014, the Company sold 1,700,000 shares of its common stock in a registered direct offering to a single institutional investor at a price of $4.11 per share for gross proceeds of $7.0 million. Placement agent fees and other share issue costs approximated $191,000.

In December 2013, the Company entered into an at-the-market (“ATM”) program pursuant to which the Company may, at its option, offer and sell shares of its common stock from time to time for an aggregate offering price of up to $19.2 million, representing the then remaining balance of the Company’s shelf registration statement. In connection with execution of the ATM program, the Company incurred transaction costs of $153,000. In addition, the Company pays the sales agent a commission of up to 3.0% of the gross proceeds from the sale of such shares. During the three and nine month periods ended March 31, 2015, the Company did not sell any shares under this program. During the three and nine months ended March 31, 2014, the Company sold 57,770 and 381,562 common shares, respectively, for net proceeds of $224,000 and $1.5 million, respectively, reflecting a weighted-average gross selling price of $3.98 per share.

In July 2013, the Company sold 3,494,550 shares of its common stock in an underwritten public offering at a price of $3.10 per share for gross proceeds of $10.8 million. Underwriting commissions and other share issue costs approximated $890,000.

Warrants to Purchase Common Shares

During each of the nine month periods ended March 31, 2015 and 2014, there were a total of 1,176,105 outstanding and exercisable warrants to purchase common shares at a weighted-average exercise price of $3.67. At March 31, 2015, the remaining term of these warrants ranged from 0.8 to 2.4 years, representing a weighted average period of 1.6 years.

Incentive Plan

The Company’s 2008 Incentive Plan (the “2008 Plan”) provides for the issuance of stock options and other stock awards to directors, employees and consultants. At March 31, 2015, a total of 6,341,255 shares of common stock were authorized for issuance under the 2008 Plan, of which 1,080,817 were available for grant of future awards. The total number of shares issuable under the 2008 Plan is subject to annual increases pursuant to the terms of the plan. The following table provides a reconciliation of stock option activity under the 2008 Plan for the nine months ended March 31, 2015:


	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value
						(in years)		(in thousands)

Outstanding at July 1, 2014		3,791,001		$	3.08
Granted		831,200			4.48
Exercised		(113,807	)		2.07
Forfeited		(17,445	)		3.88


Outstanding at March 31, 2015		4,490,949		$	3.36		6.43	$	3,653


Outstanding at March 31, 2015 - vested or unvested and expected to vest		4,407,364		$	3.35		6.39	$	3,623


Exercisable at March 31, 2015		2,931,157		$	3.04		5.28	$	3,143

Option grants for the nine months ended March 31, 2015 consisted of 701,200 options to employees with ratable annual vesting over 4 years, 90,000 options to non-executive directors with 1-year cliff vesting and 40,000 options to a newly appointed non-executive director with ratable annual vesting over 3 years. All option grants have a 10-year contractual life. The weighted-average grant date fair value of these option grants was $3.33 per share. A total of 579,408 options vested during the nine months ended March 31, 2015. In determining the grant date fair value of options, the Company uses the Black-Scholes option pricing model. The Company calculated the Black-Scholes value of options awarded during the nine months ended March 31, 2015 based on the following key assumptions:


Option life (in years)		5.50 - 6.25
Stock volatility		79% - 93%
Risk-free interest rate		1.70% - 2.00%
Expected dividends		0%

Stock-Based Compensation Expense

The Company’s statements of comprehensive (loss) income included total compensation expense from stock-based payment awards for the three and nine months ended March 31, 2015 and 2014, as follows (in thousands):


	Three Months Ended March 31,				Nine Months Ended March 31,
	2015		2014		2015		2014

Compensation expense included in:
Research and development	$	182	$	142	$	492	$	373
General and administrative		432		299		848		590


	$	614	$	441	$	1,340	$	963

At March 31, 2015, there was approximately $2.3 million of unrecognized compensation expense related to unvested options under the 2008 Plan, which is expected to be recognized as expense over a weighted-average period of approximately 1.8 years.

8.	Income Taxes

The Company recognizes deferred tax assets and liabilities for estimated future tax consequences of events that have been recognized in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using the enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is established if, based on management’s review of both positive and negative evidence, it is more likely than not that all or a portion of the deferred tax assets will not be realized. Because of its historical losses from operations, the Company established a valuation allowance for the net deferred tax assets. The Company recorded an income tax benefit of $44,000 for the three months ended March 31, 2015 and an income tax expense of $144,000 for the nine months ended March 31, 2015. The Company recorded an income tax benefit of $31,000 and $87,000 for the three and nine months ended March 31, 2014, respectively. The current year-to-date income tax expense predominantly reflects $263,000 of federal alternative minimum tax payments based upon taxable income for the tax year ended December 31, 2014, which was primarily attributable to receipt of the $25.0 million FDA approval milestone. The tax benefits in each period predominantly represented earned foreign research and development tax credits.

For the three and nine months ended March 31, 2015 and 2014, the Company had no significant unrecognized tax benefits. At March 31, 2015 and June 30, 2014, the Company had no accrued penalties or interest related to uncertain tax positions.

9.	Commitments and Contingencies

The Company’s lease for its U.S. office and laboratory space in Watertown, Massachusetts extends through April 2019, with a five-year renewal option at market rates. In addition to base rent, the Company is obligated to pay its proportionate share of building operating expenses and real estate taxes in excess of base year amounts. The Company’s obligations under the lease are secured by a cash-collateralized $150,000 irrevocable standby letter of credit.

At March 31, 2015, the Company was subject to various routine legal proceedings and claims incidental to its business, which management believes will not have a material effect on the Company’s financial position, results of operations or cash flows.

10.

Net (Loss) Income per Share

Basic net (loss) income per share is computed by dividing the net (loss) income by the weighted average number of common shares outstanding during the period. For periods in which the Company reports net income, diluted net income per share is determined by adding to the basic weighted average number of common shares outstanding the total number of dilutive common equivalent shares using the treasury stock method, unless the effect is anti-dilutive.

The following table reconciles the number of shares used to compute basic and diluted net (loss) income per share:


	Three Months Ended March 31,				Nine Months Ended March 31,
	2015		2014		2015		2014

Number of common shares - basic		29,412,365		27,672,327		29,366,919		26,841,623
Effect of dilutive securities:
Stock options		—		—		989,990		—
Warrants		—		—		255,301		—


Number of common shares - diluted		29,412,365		27,672,327		30,612,210		26,841,623

Potential common stock equivalents excluded from the calculation of diluted earnings per share because the effect would have been anti-dilutive were as follows:


	Three Months Ended March 31,				Nine Months Ended March 31,
	2015		2014		2015		2014

Options outstanding		4,490,949		3,893,739		1,881,524		3,893,739
Warrants outstanding		1,176,105		1,176,105		552,500		1,176,105


		5,667,054		5,069,844		2,434,024		5,069,844

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Note Regarding Forward-Looking Statements

Various statements made in this Quarterly Report on Form 10-Q are forward-looking and involve risks and uncertainties. All statements that address activities, events or developments that we intend, expect or believe may occur in the future are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). Such statements give our current expectations or forecasts of future events and are not statements of historical or current facts. All statements other than statements of current or historical facts are forward-looking statements, including, without limitation, any expectations of revenues, expenses, cash flows, earnings or losses from operations, cash required to maintain current and planned operations, capital or other financial items; any statements of the plans, strategies and objectives of management for future operations; any plans or expectations with respect to product research, development and commercialization, including regulatory approvals; any other statements of expectations, plans, intentions or beliefs; and any statements of assumptions underlying any of the foregoing. We often, although not always, identify forward-looking statements by using words or phrases such as “likely”, “expect”, “intend”, “anticipate”, “believe”, “estimate”, “plan”, “project”, “forecast” and “outlook”.

The following are some of the factors that could cause actual results to differ materially from the anticipated results or other expectations expressed, anticipated or implied in our forward-looking statements: uncertainties with respect to: ability to achieve profitable operations and access to capital; fluctuations in operating results; further impairment of intangible assets; decline in Retisert royalties; successful commercialization of, and receipt of revenues from, ILUVIEN for DME; effects of pricing and reimbursement decisions on sales of ILUVIEN for DME; consequences of fluocinolone acetonide side effects; safety and efficacy of Medidur; cost of clinical trials and data necessary to support an NDA for, timing of filing the NDA for, FDA acceptance of NDA for, and regulatory approval and successful commercialization of Medidur; development of the Latanoprost Product and any exercise by Pfizer of its option; ability of Tethadur to successfully deliver large biologic molecules and development of products; ability to successfully develop product candidates, complete clinical trials and receive regulatory approvals; ability to market and sell products; success of current and future license agreements; termination of license agreements; effects of competition and other developments affecting sales of products; market acceptance of products; effects of guidelines, recommendations and studies; protection of intellectual property and avoiding intellectual property infringement; retention of key personnel; product liability; industry consolidation; compliance with environmental laws; manufacturing risks; risks and costs of international business operations; legislative or regulatory changes; volatility of stock price; possible dilution; absence of dividends; and other factors described in this Quarterly Report on Form 10-Q, including the Risk Factors set forth in Part II, Item 1A of this Form 10-Q. You should read and interpret any forward-looking statements together with these risks. Should known or unknown risks materialize, or should underlying assumptions prove inaccurate, actual results could differ materially from past results and those anticipated, estimated or projected in the forward-looking statements. You should bear this in mind as you consider any forward-looking statements.

Our forward-looking statements speak only as of the date on which they are made. We do not undertake any obligation to publicly update or revise our forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied in such statements will not be realized.

Our Business

We are a leader in the development of sustained-release pharmaceutical products for treating eye diseases. Our approved products deliver drugs at a controlled and steady rate for months or years. We have developed three of the four approved sustained-release products for treating retinal diseases. Our lead product candidate Medidur™ for posterior uveitis is in pivotal clinical trials. Marketing of our lead licensed product ILUVIEN® for diabetic macular edema (“DME”) commenced in the U.S. in the fiscal 2015 third quarter. Our pre-clinical development program is focused on developing products for chronic retinal diseases utilizing our core technology platforms. Our strategy includes developing products independently while continuing to leverage our technology platforms through collaborations and license agreements.

Medidur, our lead development product, is an injectable, micro-insert designed to treat posterior uveitis, a blinding eye disease, on a sustained basis for 36 months. Medidur uses the same micro-insert used in ILUVIEN for DME (same design, same drug, same polymers, same release rate) and delivers a lower dose of the same drug as Retisert^®, our approved implant for posterior uveitis. We are developing Medidur independently.

In recent meetings, we reached agreement with the U.S. Food and Drug Administration (“FDA”) on a regulatory path for Medidur that should allow a new drug application (“NDA”) to be filed in the first half of 2017. The FDA indicated that, pending clinical trial results, it would accept an NDA based on data from the ongoing Medidur Phase III trial (which has a 12-month primary endpoint), data from a second Phase III trial with a shorter six-month primary endpoint and data referenced from the already completed Phase III ILUVIEN trials. The ongoing Phase III trial for Medidur completed enrollment with 129 patients in our fiscal 2015 third quarter. The last 12-month follow-up visit is scheduled in March 2016, and we expect top-line data in the second calendar quarter of 2016. We have already initiated a second Phase III Medidur trial, which will recruit up to 150 patients in India. Both trials will follow participants for three years.

We had previously planned to file an NDA with data from only the first Phase III trial and data referenced from the ILUVIEN studies, subject to FDA confirmation. Because of the shorter six-month primary endpoint permitted for the second trial, we expect that the new regulatory path will allow us to file the Medidur NDA with only a several month delay from the time frame we anticipated with one Phase III trial. We had budgeted for a second Phase III trial, pending FDA guidance, so the second trial does not affect our liquidity projections.

We plan to commercialize Medidur with a newly designed, proprietary inserter that uses a standard 27 gauge needle routinely used in intraocular injections. As a result of the new design, we will conduct a utilization study on the new inserter, with data to be submitted as part of the Medidur NDA. Data from this study is expected to be available before data from the other trials and should not delay the NDA submission.

ILUVIEN, our most recently approved product, is an injectable, sustained-release micro-insert that provides treatment of DME for three years from a single administration. ILUVIEN is licensed to and sold by Alimera Sciences, Inc. (“Alimera”), and we are entitled to a share of the net profits (as defined) from Alimera’s sales of ILUVIEN on a country-by-country basis. ILUVIEN was launched in the U.S. in late February 2015 and is now widely available to physicians in the U.S. It is indicated for the treatment of DME in patients previously treated with a course of corticosteroids without a clinically significant rise in intraocular pressure.

Distribution, regulatory and reimbursement matters for ILUVIEN for DME in Australia and New Zealand have been sublicensed. We are entitled to 20% of any royalties and 33% of all other payments received by our licensee, including any milestone payments.

Our pre-clinical research is primarily focused on developing pharmaceutical products to provide targeted and systemic sustained delivery of drugs and large biologic molecules for treatment of various conditions, and to provide sustained delivery of therapeutic agents to treat wet and dry age-related macular degeneration, glaucoma and osteoarthritis.

Durasert™, Medidur™, BioSilicon™ and Tethadur™ are our trademarks, Retisert® is Bausch & Lomb’s trademark, and ILUVIEN® is Alimera’s trademark.

All information in this Form 10-Q with respect to ILUVIEN, including regulatory and marketing information, and Alimera’s plans and intentions, reflects information reported by Alimera.

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements in conformity with GAAP requires that we make certain estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. We base our estimates, judgments and assumptions on historical experience, anticipated results and trends, and on various other factors that we believe are reasonable under the circumstances at the time. By their nature, these estimates, judgments and assumptions are subject to an inherent degree of uncertainty. Actual results may differ from our estimates under different assumptions or conditions. In our Annual Report on Form 10-K for the year ended June 30, 2014 (“fiscal year 2014”), we set forth our critical accounting policies and estimates, which included revenue recognition, recognition of expense in outsourced clinical trial agreements and valuation of intangible assets. There have been no material changes to our critical accounting policies from the information provided in our Annual Report on Form 10-K for fiscal year 2014.

Results of Operations

Three Months Ended March 31, 2015 Compared to Three Months Ended March 31, 2014:


	Three Months Ended March 31,						Change
	2015			2014			Amounts			%
	(In thousands except percentages)

Revenues
Collaborative research and development	$	110		$	1,676		$	(1,566	)		(93	)%
Royalty income		218			316			(98	)		(31	)%


Total revenues		328			1,992			(1,664	)		(84	)%


Operating expenses:
Research and development		3,339			2,269			1,070			47	%
General and administrative		2,041			1,946			95			5	%
Gain on sale of property and equipment		—			(4	)		4			na


Total operating expenses		5,380			4,211			1,169			28	%


Loss from operations		(5,052	)		(2,219	)		(2,833	)		(128	)%

Other income:
Interest income		6			1			5			500	%
Other income, net		4			—			4			na


Total other income		10			1			9			900	%


Loss before income taxes		(5,042	)		(2,218	)		(2,824	)		(127	)%
Income tax benefit		44			31			13			42	%


Net loss	$	(4,998	)	$	(2,187	)	$	(2,811	)		(129	)%

Revenues

Collaborative research and development revenues totaled $110,000 for the three months ended March 31, 2015 compared to $1.7 million for the three months ended March 31, 2014. This decrease was primarily attributable to the prior year recognition of $1.5 million of contingent consideration under a completed feasibility study agreement.

We are entitled to share in net profits, on a quarter-by-quarter and country-by-country basis, from sales of ILUVIEN by our licensee. ILUVIEN for DME has been sold in the U.S. since late February 2015, in Portugal since January 2015 and in the U.K. and Germany since the quarter ended June 2013. We received $31,000 of net profits in the fiscal 2015 third quarter. We do not know when or if sales of ILUVIEN will result in any future net profits in countries where it is sold, entitling us to our net profits share, or how much we will be entitled to receive.

Royalty income decreased by $98,000, or 31%, to $218,000 for the three months ended March 31, 2015 compared to $316,000 for the three months ended March 31, 2014.

Research and Development

Research and development increased by $1.1 million, or 47%, to $3.3 million for the three months ended March 31, 2015 from $2.3 million for the same quarter a year earlier, primarily reflecting increased CRO costs for the clinical development of Medidur for posterior uveitis. We expect to continue to incur significant research and development expense for Medidur during the remainder of fiscal year 2015 and in future periods until completion of Medidur clinical development.

General and Administrative

General and administrative increased by $95,000, or 5%, to $2.0 million for the three months ended March 31, 2015 from $1.9 million for the same period in the prior year, primarily attributable to higher stock-based compensation expense.

Income Tax Benefit

Income tax benefit was $44,000 for the three months ended March 31, 2015 compared to $31,000 for the three months ended March 31, 2014, and consisted predominantly of refundable foreign research and development tax credits.

Nine Months Ended March 31, 2015 Compared to Nine Months Ended March 31, 2014:


	Nine Months Ended March 31,						Change
	2015			2014			Amounts			%
	(In thousands except percentages)

Revenues
Collaborative research and development	$	25,355		$	2,149		$	23,206				**
Royalty income		801			1,032			(231	)		(22	)%


Total revenues		26,156			3,181			22,975				**


Operating expenses:
Research and development		8,890			7,267			1,623			22	%
General and administrative		5,645			5,468			177			3	%
Gain on sale of property and equipment		—			(76	)		76			na


Total operating expenses		14,535			12,659			1,876			15	%


Income (loss) from operations		11,621			(9,478	)		21,099			223	%


Other income:
Interest income		12			3			9			300	%
Other income, net		4			—			4			na


Total other income		16			3			13			433	%


Income (loss) before income taxes		11,637			(9,475	)		21,112			223	%
Income tax (expense) benefit		(144	)		87			(231	)		(266	)%


Net income (loss)	$	11,493		$	(9,388	)	$	20,881			222	%

**	percentages not meaningful due to the effect of the $25.0 million non-recurring revenue in the current year-to-date period

Revenues

Collaborative research and development revenues totaled $25.4 million for the nine months ended March 31, 2015 compared to $2.1 million for the nine months ended March 31, 2014. This increase was primarily attributable to recognition of the $25.0 million FDA approval milestone earned for ILUVIEN, partially offset by a $1.8 million reduction in revenues from funded technology evaluation agreements. We received $43,000 of ILUVIEN net profits during the nine months ended March 31, 2015.

Royalty income decreased by $231,000, or 22%, to $801,000 for the nine months ended March 31, 2015 compared to $1.0 million for the nine months ended March 31, 2014.

Research and Development

Research and development increased by approximately $1.6 million, or 22%, to $8.9 million for the nine months ended March 31, 2015 from $7.3 million for the prior year-to-date period, primarily reflecting a $1.3 million increase in CRO costs for the clinical development of Medidur for posterior uveitis, as well as higher personnel-related expenses and pre-clinical study costs.

General and Administrative

General and administrative increased by $177,000, or 3%, to $5.6 million for the nine months ended March 31, 2015 from $5.5 million for the same period in the prior year, primarily attributable to increased stock-based compensation, partially offset by lower facility costs.

Income Tax (Expense) Benefit

Income tax expense of $144,000 for the nine months ended March 31, 2015 primarily reflected payment of $263,000 of federal alternative minimum taxes based upon taxable income for the tax year ended December 31, 2014. In addition, refundable foreign research and development tax credits totaled $119,000 and $87,000 for the nine months ended March 31, 2015 and 2014, respectively.

Liquidity and Capital Resources

During the years ended June 30, 2014 and 2013 and the nine months ended March 31, 2015, we financed our operations from the receipt of license fees, milestone payments, research and development funding and royalty income from our collaboration partners and from proceeds of sales of equity securities. At March 31, 2015, our principal sources of liquidity were cash, cash equivalents and marketable securities that totaled $31.7 million.

We have a history of operating losses and, at March 31, 2015, we had a total accumulated deficit of $265.5 million. We do not currently have any assured sources of future revenue, and we expect negative cash flows from operations on a quarterly basis until such time as we receive sufficient revenues from commercialization of ILUVIEN or one or more of our other product candidates achieve regulatory approval and provide us sufficient revenues. We believe that our capital resources at March 31, 2015 will enable us to fund our current and planned operations (including our two Medidur trials) into calendar year 2017. This estimate excludes any potential receipts of net profits under our Alimera collaboration agreement. Our ability to fund our planned operations beyond then is expected to depend on cash receipts from ILUVIEN or other products and from any future collaboration or other agreements and/or any financing transactions. There is no assurance that we will receive significant, if any, revenues from sales of ILUVIEN or cash from any other sources.

Whether we will require, or desire, to raise additional capital will be influenced by many factors, including, but not limited to:

•

whether, when and to what extent we receive revenues with respect to commercialization of ILUVIEN;

•

the timing and cost of development, approval and marketing of Medidur for posterior uveitis;

•

whether and to what extent we internally fund, whether and when we initiate, and how we conduct other product development programs;

•

the amount of Retisert royalties and other payments we receive under collaboration agreements;

•

whether and when we initiate Phase II clinical trials for the Latanoprost Product and whether and when Pfizer exercises its option;

•

whether and when we are able to enter into strategic arrangements for our product candidates and the nature of those arrangements;

•

timely and successful development, regulatory approval and commercialization of our products and product candidates;

•

the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing any patent claims;

•

changes in our operating plan, resulting in increases or decreases in our need for capital; and

•

our views on the availability, timing and desirability of raising capital.

If we determine that it is desirable or necessary to raise additional capital in the future, we do not know if it will be available when needed or on terms favorable to us or our stockholders. Our existing ATM facility permits us to sell shares of common stock with an aggregate offering price of up to $10.7 million at March 31, 2015, but we do not know whether and to what extent we will seek to sell shares pursuant to that program and, if we are able to do so, on what terms. The state of the economy and the financial and credit markets at the time or times we seek any additional financing may make it more difficult and more expensive to obtain. If available, additional equity financing may be dilutive to stockholders, debt financing may involve restrictive covenants or other unfavorable terms and potential dilutive equity, and funding through collaboration agreements may be on unfavorable terms, including requiring us to relinquish rights to certain of our technologies or products.

Our consolidated statements of historical cash flows are summarized as follows (in thousands):


	Nine Months Ended March 31,
	2015			2014			Change

Net income (loss):	$	11,493		$	(9,388	)	$	20,881
Changes in operating assets and liabilities		(254	)		(96	)		(158	)
Other adjustments to reconcile net income (loss) to cash flows from operating activities		2,064			1,598			466


Net cash provided by (used in) operating activities	$	13,303		$	(7,886	)	$	21,189


Net cash (used in) provided by investing activities	$	(5,848	)	$	487		$	(6,335	)


Net cash provided by financing activities	$	235		$	19,058		$	(18,823	)

Net cash provided by operating activities was $13.3 million for the nine months ended March 31, 2015 compared to net cash used in operating activities of $7.9 million in the prior year period, representing a favorable net change of $21.2 million. Collaborative research and development and royalty income cash inflows increased by $23.2 million, primarily the result of the $25.0 million FDA milestone payment received in October 2014, partially offset by lower cash inflows from technology evaluation agreements and Retisert royalties. Operating cash outflows increased by approximately $2.0 million on a comparative basis and consisted primarily of an approximate $2.3 million increase in CRO payments associated with our Medidur clinical development program and $263,000 of federal alternative minimum taxes, partially offset by decreases of approximate $560,000 principally related to incentive compensation awards, professional fees and facility costs.

Net cash used by investing activities consisted principally of $5.8 million of purchases of marketable securities, net of maturities, during the nine months ended March 31, 2015. This compared to net cash provided by investing activities in the prior year period, which consisted primarily of $636,000 of maturities of marketable securities, net of purchases.

Net cash provided by financing activities for the nine months ended March 31, 2015 consisted of $235,000 of proceeds from the exercise of stock options. Net cash provided by financing activities for the nine months ended March 31, 2014 consisted of $16.7 million of aggregate net proceeds from a March 2014 registered direct offering and a July 2013 underwritten public offering of common shares, $1.5 million of net proceeds from sales of common shares under the ATM facility and $909,000 of proceeds from the exercise of stock options.

We had no borrowings or line of credit facilities as of March 31, 2015.

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements as of March 31, 2015 that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that would be material to investors.

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Foreign Currency Exchange Rates

We conduct operations in two principal currencies, the U.S. dollar and the Pound Sterling (£). The U.S. dollar is the functional currency for our U.S. operations, and the Pound Sterling is the functional currency for our U.K. operations. Changes in the foreign exchange rate of the U.S. dollar and Pound Sterling impact the net operating expenses of our U.K. operations. The strengthening of the U.S. dollar during the three months ended March 31, 2015 compared to the prior year’s quarter resulted in a net decrease in research and development expenses of $42,000. For every incremental 5% strengthening or weakening of the weighted average exchange rate of the U.S. dollar in relation to the Pound Sterling, our research and development expense for the three months ended March 31, 2015 would have decreased or increased by $23,000, respectively. All cash and cash equivalents, and most other asset and liability balances, are denominated in each entity’s functional currency and, accordingly, we do not consider our statement of comprehensive (loss) income exposure to realized and unrealized foreign currency gains and losses to be significant.

Changes in the foreign exchange rate of the Pound Sterling to the U.S. dollar also impacted total stockholders’ equity. As reported in the statement of comprehensive (loss) income, the relative strengthening of the U.S. dollar in relation to the Pound Sterling at March 31, 2015 compared to June 30, 2014 resulted in $141,000 of other comprehensive loss for the nine months ended March 31, 2015 due to the translation of £569,000 of net assets of our U.K. operations, predominantly the BioSilicon (including Tethadur) technology intangible asset, into U.S. dollars. For every incremental 5% strengthening or weakening of the U.S. dollar at March 31, 2015 in relation to the Pound Sterling, our stockholders’ equity at March 31, 2015 would have decreased or increased, respectively, by $42,000.

Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2015. The term “disclosure controls and procedures”, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure, particularly during the period in which this Quarterly Report on Form 10-Q was being prepared. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their desired objectives, and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of March 31, 2015, our principal executive officer and principal financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

During the period covered by this report, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II: OTHER INFORMATION

The following description of risk factors includes any material changes to, and supersedes, the risk factors previously disclosed in Part I, “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended June 30, 2014 filed with the Securities and Exchange Commission (the “SEC”) on September 11, 2014.

Item 1A. Risk Factors

RISKS RELATED TO OUR COMPANY AND OUR BUSINESS

We do not know if or when we will achieve profitable operations from product sales, royalties and net profits participations and we may need additional capital to fund our operations, which may not be available on favorable terms or at all.

We have a history of operating losses, and at March 31, 2015, we had a total accumulated deficit of $265.5 million. During the past three fiscal years, we financed our operations primarily from sales of equity, as well as license fees, research and development funding and royalty income from our collaboration partners. We do not currently have any assured sources of revenue and we expect negative cash flows from operations in subsequent quarters until we receive sufficient revenues from commercialization of ILUVIEN or one or more of our other product candidates achieve regulatory approval and provide us sufficient revenues. We believe that our capital resources of $31.7 million at March 31, 2015 should enable us to fund our operations as currently planned (including our two Medidur Phase III trials) into calendar year 2017. This estimate excludes any potential net profits receipts from sales of ILUVIEN. We expect our ability to fund our planned operations beyond then will depend on the amount and timing of those payments, as well as proceeds from any future collaboration or other agreements and/or financing transactions.

Whether we will require, or desire, to raise additional capital will be influenced by many factors, including, but not limited to:

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whether, when and to what extent we receive revenues with respect to the commercialization of ILUVIEN;

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the timing and cost of development, approval and marketing of Medidur for posterior uveitis;

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whether and to what extent we internally fund, whether and when we initiate, and how we conduct other product development programs;

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the amount of Retisert royalties and other payments we receive under collaboration agreements;

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whether and when we initiate Phase II clinical trials for the Latanoprost Product and whether and when Pfizer exercises its option;

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whether and when we are able to enter into strategic arrangements for our product candidates and the nature of those arrangements;

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timely and successful development, regulatory approval and commercialization of our products and product candidates;

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the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing any patent claims;

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changes in our operating plan, resulting in increases or decreases in our need for capital; and

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our views on the availability, timing and desirability of raising capital.

may be dilutive to stockholders, debt financing may involve restrictive covenants or other unfavorable terms and potential dilutive equity, and funding through collaboration agreements may be on unfavorable terms, including requiring us to relinquish rights to certain of our technologies or products.

If the recorded value of our intangible assets under GAAP is further impaired, our financial results could be materially adversely affected.

At March 31, 2015, we had $2.1 million of intangible assets relating to our Durasert and BioSilicon (including Tethadur) technologies on our balance sheet following impairment charges of $14.8 million as of December 31, 2011. We conduct impairment analyses of our intangible assets as required under GAAP and could take additional impairment charges in the future if the recorded values for our intangible assets were to exceed our assessment of the recoverability of the fair market value of those assets. Adverse events relating to the clinical development, regulatory approval and success of commercialization of products using those technologies and significant changes in our market capitalization could result in impairment charges. Further impairment charges on our intangible assets could have a material adverse effect on our results of operations in the quarter of the impairment.

Our operating results may fluctuate significantly from period to period.

Our operating results have fluctuated significantly from period to period in the past and may continue to do so in the future due to many factors, including:

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developments with respect to our products and product candidates, including pre-clinical and clinical trial results, regulatory developments and marketing and sales results;

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timing, receipt and amount of revenues, including receipt and recognition of collaborative research and development, milestone, royalty, net profit and other payments;

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announcement, execution, amendment and termination of collaboration agreements;

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scope, duration and success of collaboration agreements;

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costs of internally funded research and development costs, including pre-clinical studies and clinical trials;

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general and industry-specific adverse economic conditions that may affect, among other things, our and our collaborators’ operations and financial results; and

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changes in accounting estimates, policies or principles and intangible asset impairments.

Due to fluctuations in our operating results, quarterly comparisons of our financial results may not necessarily be meaningful, and investors should not rely upon such results as an indication of future performance. In addition, investors may react adversely if our reported operating results are less favorable than in a prior period or are less favorable than those anticipated by investors in the financial community, which may result in decreases in our stock price.

There is no assurance our Retisert royalty income will continue at current levels or at all.

Retisert royalty income has declined significantly. We do not expect that it will grow materially, if at all, and it may continue to decline. There is no assurance that Bausch & Lomb will continue to market Retisert, which received marketing approval in 2005, and accordingly that we will continue to receive royalties from the sale of Retisert. Bausch & Lomb no longer markets Vitrasert.

RISKS RELATED TO THE DEVELOPMENT AND COMMERCIALIZATION OF OUR PRODUCTS AND PRODUCT CANDIDATES

There is no assurance that our licensee will be successful in commercializing ILUVIEN for DME or if or when we will receive revenues from its commercialization of ILUVIEN for DME or the extent of those revenues. If our licensee is unable to successfully commercialize ILUVIEN for DME, it would adversely affect our future results of operations and financial position.

Our future financial results depend heavily on Alimera’s ability to successfully commercialize ILUVIEN for

DME. We do not know if, when, or to what extent we will receive revenues from the commercialization of ILUVIEN for DME. We are entitled to a net profit participation on a country-by-country and quarter-by-quarter basis on sales of ILUVIEN where Alimera markets ILUVIEN directly, such as the EU and U.S., and to a percentage of royalties and non-royalty consideration where Alimera sublicenses the marketing of ILUVIEN, such as Australia and New Zealand. The amount and timing of any revenues we receive will be affected, among other things, by the manner in which Alimera markets ILUVIEN, the amounts and timing of sales of ILUVIEN, commercialization costs incurred by Alimera’s direct marketing efforts, and the terms of sublicense agreements.

The commercialization of ILUVIEN is a significant undertaking by Alimera, and ILUVIEN for DME is its first and only product. We do not know whether Alimera will be successful in financing, achieving additional marketing approvals for, obtaining adequate pricing and reimbursement for, successfully commercializing and achieving market acceptance of, and generating revenues to pSivida from, ILUVIEN for DME. Marketing in the U.S. and in additional countries in the EU will require further expansion of Alimera’s commercial infrastructure. Alimera’s efforts to commercialize ILUVIEN successfully will be affected, among other things, by:

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Alimera’s ability to recruit, manage and retain personnel, expand its sales, marketing and other infrastructure, and manage its growth;

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Alimera’s ability to effectively market ILUVIEN, including accessing and persuading adequate numbers of ophthalmologists to prescribe ILUVIEN;

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the lack of other products to be offered by Alimera’s sales personnel, which may put Alimera at a competitive disadvantage relative to companies with more extensive product lines;

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Alimera’s ability to obtain regulatory approvals to market ILUVIEN and appropriate labeling, and to expand its marketing into countries where it has obtained approvals;

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Alimera’s ability to obtain desirable pricing, insurance coverage and reimbursement for ILUVIEN;

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potential delays in the commercial launch in one or more countries;

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manufacturing or supply issues;

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risks related to operating in international jurisdictions; and

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Alimera’s ability to generate adequate financial resources.

If Alimera is not successful in commercializing ILUVIEN for DME and generating payments to us, it would adversely affect our business, operating results and financial condition.

Sales of ILUVIEN for DME may be materially adversely affected by pricing and reimbursement decisions of regulatory bodies, insurers and others.

Prices, coverage and reimbursement to consumers of ILUVIEN for DME, like other drugs, are generally regulated by third-party payors, such as government health administration authorities and plans, private health insurers and other organizations and affect ILUVIEN’s sales. The timing and complexity of those reimbursements also affect sales. Prices in the EU are generally lower and coverage and access to drugs more limited than in the U.S. For example, in the U.K. and Scotland, National Health Service coverage is limited to the treatment of the eyes of chronic DME patients unresponsive to existing therapies that have undergone cataract surgery, subject to simple patient access schemes. Alimera may not achieve satisfactory agreements with statutory or other insurers. In Germany, although ILUVIEN is sold without price restriction, physicians must submit individual funding requests for each patient. We do not know what levels of pricing will be approved or reimbursed for ILUVIEN, or what restrictions will be placed on its use or reuse in countries other than the U.K. and Germany. Alimera has delayed the launch of ILUVIEN in France until satisfactory agreement is reached on pricing with the French authorities. In the U.S., Alimera is offering extended payment terms to physicians in the launch year to accommodate expected time lags in the processing of reimbursement claims. Future sales of ILUVIEN and, accordingly, our net profits share may be adversely affected by pricing and reimbursement decisions, and such effects may be material.

The micro-insert for ILUVIEN and Medidur delivers FAc, a corticosteroid that has certain adverse side effects in the eye, which may affect the success of this micro-insert for treatment of DME and posterior uveitis.

The micro-insert for both ILUVIEN and Medidur delivers the non-proprietary corticosteroid fluocinolone

acetonide (FAc), which is associated with cataract formation and elevated intraocular pressure and may increase the risk of glaucoma and related surgery to manage those side effects. Although Retisert, which delivers FAc to treat posterior uveitis, and ILUVIEN for DME have both been approved by the FDA, there is no assurance that Medidur will be safe and efficacious for the treatment of posterior uveitis in light of its expected side effects from FAc. These side effects may limit the population for which marketing authorization is granted or for which reimbursement is provided in one or more jurisdictions and/or adversely affect sales of Medidur, if approved, and/or ILUVIEN.

There is no assurance that Medidur will be found to be safe and effective for the treatment of posterior uveitis.

We are optimistic that Medidur will be as efficacious for the treatment of posterior uveitis, but with a better side effect profile than Retisert, comparable to ILUVIEN. However, this is only a hypothesis, and there is no assurance that the ongoing Phase III program for Medidur will demonstrate these results. While early interim data from an investigator-sponsored study of Medidur are consistent with this hypothesis, the results of that trial have not been published, the study involves only 11 patients and it is not intended to be a clinical trial that can serve as the basis for approval of Medidur. Data from the Retisert and ILUVIEN trials and early data from this investigator-sponsored study may not accurately predict the results of our Medidur Phase III program. There is no assurance that the Phase III program for Medidur will provide the necessary evidence of safety and efficacy required for approval by the FDA and other regulatory authorities. Actions by the FDA and other regulatory authorities with respect to Retisert and ILUVIEN are not predictive of the FDA’s action with respect to Medidur.

There is no assurance that we will be able to file an NDA for Medidur in the first half of 2017, or that, if filed FDA will accept the NDA for review.

Filing an NDA for Medidur will require positive results from our two Phase III trials. We have only recently initiated the second trial. Among other things, there is no assurance that enrollment in the second trial will be completed in the time frame we anticipate, that there will not be further regulatory requirements from U.S. or Indian regulators that would affect our timing, that we will be able to analyze the data from the two trials in the time frame that we anticipate, or that the data will be favorable. As a result, there is no assurance that an NDA will be filed for Medidur in the first half of 2017.

Even if we file an NDA for Medidur, there is no assurance that FDA will accept the NDA for review. While we believe we have agreement with FDA regarding the clinical trials and other data required for FDA to accept the Medidur NDA for review, FDA has significant discretion in determining whether to accept an NDA for review and there is no assurance that FDA will find the design of our clinical trials or the other data we include in an NDA to be sufficient to accept the NDA for review. Any delay in the filing of an NDA for Medidur or FDA’s refusal to accept the NDA for review could materially and adversely affect our business and the price of our common stock.

There is no assurance that Pfizer will exercise its option with respect to the Latanoprost Product, in which case we will not receive any further financial consideration under the Restated Pfizer Agreement.

Development of the Latanoprost Product through at least Phase II clinical trials is at our option and expense. Pfizer has an option for an exclusive, worldwide license to develop and commercialize the Latanoprost Product upon our completion of Phase II clinical trials or upon our cessation of development of the Latanoprost Product at any time prior to completion of those trials. There is no assurance that we will commence or complete Phase II clinical trials for the Latanoprost Product; that, if completed, the trials will be successful; that Pfizer will, in any event, exercise its option; that, if exercised, Pfizer will commence Phase III clinical trials; or that the Latanoprost Product will achieve successful Phase III trial results, regulatory approvals or commercial success. As a result, there is no assurance that we will receive any further licensing, milestone or royalty payments under the Restated Pfizer Agreement.

We do not know if we will be able to deliver proteins (including antibodies) and peptides with our Tethadur technology or that we will be able to develop product candidates or approved products using this technology.

Although we are optimistic that our Tethadur technology platform can provide sustained delivery of proteins (including antibodies) and peptides, and our data from in vitro studies have shown that the long-term sustained release of antibodies such as Avastin is achievable using Tethadur, our research is at an early stage. There is no assurance that our subsequent research will sustain these results or that we will be able to develop product candidates or approved products using Tethadur to deliver proteins and peptides.

Product development is very uncertain. If we do not develop product candidates to enter clinical trials, if we or any licensees do not initiate or complete clinical trials for our product candidates or if our product candidates do not receive the necessary regulatory approvals, neither we nor any licensees will be able to commercialize those product candidates and generate revenues for us.

Other than Medidur for posterior uveitis, for which pivotal Phase III trials are ongoing, all of our product

development is at earlier stages. Product development at all stages involves a high degree of risk, and only a small proportion of research and development programs result in product candidates that advance to pivotal clinical trials or result in approved products. There is no assurance that any feasibility study agreements we have, or enter into, with third parties, or our own research and development programs will result in any new product candidates, or that we or any licensees will commence clinical trials for any new product candidates or continue clinical trials once commenced. If clinical trials conducted by or for us or any licensees for any product candidates do not provide the necessary evidence of safety and efficacy, those product candidates will not receive the necessary regulatory approvals, cannot be sold, and will not generate revenues for us. Initial or subsequent clinical trials may not be initiated by or for us or any licensees for product candidates or may be delayed, terminated or fail due to many factors, including the following:

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decisions not to pursue development of product candidates due to pre-clinical or clinical trial results;

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lack of sufficient funding;

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inability to attract clinical investigators for trials;

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inability to recruit patients in sufficient numbers or at the expected rate;

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decisions by licensees not to exercise options for products or not to pursue products licensed to them;

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adverse side effects;

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failure of trials to demonstrate a product candidate’s safety and efficacy;

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failure to meet FDA or other regulatory agency requirements for clinical trial design, or inadequate clinical trial design;

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inability to follow patients adequately after treatment;

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changes in the design or manufacture of a product;

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failures by, changes in our (or our licensees’) relationship with, or other issues at, contract research organizations (CROs), third-party vendors and investigators responsible for pre-clinical testing and clinical trials;

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inability to manufacture sufficient quantities of materials for use in clinical trials;

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stability issues with clinical materials;

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failure to comply with current good laboratory practices (GLP), good clinical practices (GCP), good manufacturing practices (cGMP) or similar foreign regulatory requirements that affect the conduct of pre-clinical and clinical studies and the manufacturing of products;

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requests by regulatory authorities for additional data or clinical trials;

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governmental or regulatory agency assessments of pre-clinical or clinical testing that differ from our (or our licensees’) interpretations or conclusions;

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governmental or regulatory delays, or changes in approval policies or regulations; and

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developments, clinical trial results and other factors with respect to competitive products and treatments.

Results from pre-clinical testing and early clinical trials often do not accurately predict results of later clinical trials. Data obtained from pre-clinical and clinical activities are susceptible to varying interpretations, which may delay, limit or prevent regulatory approval. Data from pre-clinical studies, early clinical trials and interim periods in multi-year trials are preliminary and may change, and final data from pivotal trials for such products may differ significantly. Adverse side effects may develop that delay, limit or prevent the regulatory approval of products, or cause such regulatory approvals to be limited or even rescinded. Additional trials necessary for approval may not be undertaken or may ultimately fail to establish the safety and efficacy of our product candidates.

The FDA or other relevant regulatory agencies may not approve our product candidates for manufacture and sale, and any approval by the FDA does not ensure approval by other regulatory agencies or vice versa (which could require us to comply with numerous and varying regulatory requirements, possibly including additional clinical testing). Any product approvals we or our licensees achieve could also be withdrawn for failure to comply with

regulatory standards or due to unforeseen problems after the products’ marketing approval. In either case, marketing efforts with respect to the affected product would have to cease. In addition, the FDA or other regulatory agencies may impose limitations on the indicated uses for which a product may be marketed. The imposition by the FDA or other relevant regulatory organizations of any such limitations on the indicated uses for which any of our products may be marketed would reduce the size of, or otherwise limit, the potential market for the product subject to such limitations.

In addition to testing, regulatory agencies impose various requirements on manufacturers and sellers of products under their jurisdiction, such as packaging, labeling, manufacturing practices, record keeping and reporting. Regulatory agencies may also require post-marketing testing and surveillance programs to monitor a product’s effects. Furthermore, changes in existing regulations or the adoption of new regulations could prevent us from obtaining, or affect the timing of, future regulatory approvals.

We do not currently have sales and marketing capacity, and there is no assurance that we will be able to develop the capacity to successfully market and sell any products we independently develop.

Our strategy includes independently developing products and marketing and selling them ourselves. Successfully commercializing products requires substantial efforts by experienced, skillful personnel as well as significant expenditure of funds. However, we currently have no marketing or sales staff and no experience in commercializing products. We may not be able to hire and manage a successful sales and marketing capability or have the resources necessary to fund the development of this capability for the independent commercialization of our products.

The success of our current and possible future collaborative and licensing arrangements depends and will depend heavily on the experience, resources, efforts and activities of our licensees, and if they are not successful in developing and marketing our products, it will adversely affect our revenues, if any, from those products.

Our business strategy includes continuing to leverage our technology platforms by entering into collaborative and licensing arrangements for the development and commercialization of our product candidates, where appropriate. The success of current and future collaborative and licensing arrangements do and will depend heavily on the experience, resources, skill, efforts and activities of our licensees. Our licensees have had, and are expected to have, significant discretion in making decisions related to the development of product candidates and the commercialization of products under these collaboration agreements. Risks that we face in connection with our collaboration and licensing strategy include the following:

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our collaborative and licensing arrangements are, and are expected to be, subject to termination under various circumstances, including on short notice and without cause;

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we are required, and expect to be required, under our collaborative and licensing arrangements, not to conduct specified types of research and development in the field that is the subject of the arrangement or not to sell products in such field, limiting the areas of research, development and commercialization that we can pursue;

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our licensees may develop and commercialize, either alone or with others, products that are similar to or competitive with our products;

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our licensees may change the focus of their development and commercialization efforts or decrease or fail to increase spending related to our products or product candidates, thereby limiting the ability of these products to reach their potential;

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our licensees may lack the funding, personnel or experience to develop and commercialize our products successfully or may otherwise fail to do so; and

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our licensees may not perform their obligations, in whole or in part.

We currently have collaboration and licensing arrangements with various companies, most significantly Alimera and Bausch & Lomb. While Bausch & Lomb has significant experience in the ophthalmic field and substantial resources, there is no assurance whether, and to what extent, that experience and those resources will be devoted to Retisert, and we do not expect revenues from Retisert to increase materially and they may decline further. Although we believe potential revenues from ILUVIEN for DME are important to our future results of operation and

financial condition, Alimera has limited experience and limited financial resources, and ILUVIEN for DME is Alimera’s first and only commercial product. If our current and future licensees are not successful in developing and marketing our products, it will adversely affect our revenues, if any, from those products.

Our current licensees may terminate their agreements with us at any time or fail to fulfill their obligations under those agreements, and, if they do, we will lose the benefits of those agreements.

Our licensees have rights of termination under our agreements with them and could terminate those agreements without cause on short notice. Further, our licensees may fail to fulfill their obligations under their agreements, or we may disagree with them over the rights and obligations under those agreements, which could result in breach of the agreements and/or termination. Exercise of termination rights by one or more of our licensees or by us may leave us without the financial benefits and development, marketing or sales resources provided under the terminated agreement. It could be necessary for us to replace, or seek to provide ourselves, the services provided by the licensee, and there is no assurance we would be successful in doing so. It could delay, impair or stop the development or commercialization of products or product candidates licensed to them or require significant additional capital investment by us, which we may not have the resources to fund. If any of our licensees do not perform their obligations under our agreements or if any of those agreements are terminated, it could have an adverse effect on our business, financial condition and results of operations

If competitive products receive regulatory approval or reach the market earlier, are more effective, have fewer side effects, are more effectively marketed or cost less than our products or product candidates, they may not be approved, may not achieve the sales we anticipate and could be rendered noncompetitive or obsolete.

We believe that pharmaceutical, drug delivery and biotechnology companies, research organizations, governmental entities, universities, hospitals, other nonprofit organizations and individual scientists are seeking to develop drugs, therapies, products, approaches or methods to treat our targeted diseases or their underlying causes. For our targeted diseases, competitors have alternate therapies that are already commercialized or are in various stages of development, ranging from discovery to advanced clinical trials. Any of these drugs, therapies, products, approaches or methods may receive government approval or gain market acceptance more rapidly than our products and product candidates, may offer therapeutic or cost advantages, or may more effectively treat our targeted diseases or their underlying causes, which could result in our product candidates not being approved, reduce demand for our products and product candidates or render them noncompetitive or obsolete.

Many of our competitors and potential competitors have substantially greater financial, technological, research and development, marketing and personnel resources than we do. Our competitors may succeed in developing alternate technologies and products that, in comparison to the products we have and are seeking to develop:

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are more effective and easier to use;

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are more economical;

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have fewer side effects;

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offer other benefits; or

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may otherwise render our products less competitive or obsolete.

Many of these competitors have greater experience in developing products, conducting clinical trials, obtaining regulatory approvals or clearances and manufacturing and marketing products than we do.

Our products and product candidates may not achieve and maintain market acceptance and may never generate significant revenues.

In both domestic and foreign markets, the commercial success of our products and product candidates will require not only obtaining regulatory approvals, but also obtaining market acceptance by retinal specialists and other doctors, patients, government health administration authorities and other third-party payors. Whether and to what extent our products and product candidates achieve and maintain market acceptance will depend on a number of factors, including demonstrated safety and efficacy, cost-effectiveness, potential advantages over other therapies, our and our collaborative partners’ marketing and distribution efforts and the reimbursement policies of government and other third-party payors. In particular, if government and other third-party payors do not recommend our

products and product candidates, limit the indications for which they are recommended, or do not provide adequate and timely coverage and reimbursement levels for our products, the market acceptance of our products and product candidates will be limited. Both government and other third-party payors attempt to contain healthcare costs by limiting coverage and the level of reimbursement for products and, accordingly, they may challenge the price and cost-effectiveness of our products, or refuse to provide coverage for our products. If our products and product candidates fail to achieve and maintain market acceptance, they may fail to generate significant revenues and our business may be significantly harmed.

Guidelines, recommendations and studies published by various organizations could reduce the use of our products and potential use of product candidates.

Government agencies, professional societies, practice management groups, private health and science foundations and organizations focused on various diseases may publish guidelines, recommendations or studies that affect our or our competitors’ products and product candidates. Any such guidelines, recommendations or studies that reflect negatively on our products or product candidates, either directly or relative to our competitive products, could result in current or potential decreased use, sales of, and revenues from one or more of our products and product candidates. Furthermore, our success depends in part on our and our partners’ ability to educate healthcare providers and patients about our products and product candidates, and these education efforts could be rendered ineffective by, among other things, third-parties’ guidelines, recommendations or studies.

RISKS RELATED TO OUR INTELLECTUAL PROPERTY

We rely heavily upon patents and trade secrets to protect our proprietary technologies. If we fail to protect our intellectual property or infringe on others’ technologies, our ability to develop and market our products and product candidates may be compromised.

Our success is dependent on whether we can obtain patents, defend our existing patents and operate without infringing on the proprietary rights of third parties. As of April 30, 2015, we had 234 patents and 116 pending patent applications, including patents and pending applications covering our Durasert, Tethadur and other technologies. Intellectual property protection of our technologies is uncertain. We expect to seek to patent and protect our proprietary technologies. However, there is no assurance that any additional patents will be issued to us as a result of our pending or future patent applications or that any of our patents will withstand challenges by others. In addition, we may not have sufficient funds to patent and protect our proprietary technologies to the extent that we would desire, or at all. If we were determined to be infringing any third-party patent, we could be required to pay damages, alter our products or processes, obtain licenses, pay royalties or cease certain operations. We may not be able to obtain any required licenses on commercially favorable terms, if at all. In addition, many foreign country laws may treat the protection of proprietary rights differently from, and may not protect our proprietary rights to the same extent as, laws in the U.S. and Patent Co-operation Treaty countries.

Prior art may reduce the scope or protection of, or invalidate, our patents. Previously conducted research or published discoveries may prevent our patents from being granted, invalidate issued patents or narrow the scope of any protection obtained. Reduction in scope of protection or invalidation of our licensed or owned patents, or our inability to obtain patents, may enable other companies to develop products that compete with our products and product candidates on the basis of the same or similar technology. As a result, our patents and those of our licensors may not provide any, or sufficient, protection against competitors. While we have not been, and are not currently, involved in any litigation over intellectual property, such litigation may be necessary to enforce any patents issued or licensed to us or to determine the scope and validity of third party proprietary rights. We may also be sued by one or more third parties alleging that we infringe their intellectual property rights. Any intellectual property litigation would likely result in substantial costs to us and diversion of our efforts, and could prevent or delay our discovery or development of product candidates. If our competitors claim technology also claimed by us, and if they prepare and file patent applications in the U.S. or other jurisdictions, we may have to participate in interference proceedings declared by the U.S. Patent and Trademark Office or the appropriate foreign patent office to determine priority of invention, which could result in substantial cost to us and diversion of our efforts. Any such litigation or interference proceedings, regardless of the outcome, could be expensive and time consuming. Litigation could subject us to significant liabilities to third parties, requiring disputed rights to be licensed from third parties and/or requiring us to cease using certain technologies.

We also rely on trade secrets, know-how and technology that are not protected by patents to maintain our competitive position. We try to protect this information by entering into confidentiality agreements with parties that have access to it, such as our corporate partners, collaborators, employees, and consultants. Any of these parties could breach these agreements and disclose our confidential information, or our competitors may learn of the information in some other way. If any material trade secret, know-how or other technology not protected by a patent were to be disclosed to or independently developed by a competitor, our competitive position could be materially harmed.

RISKS RELATED TO OUR BUSINESS, INDUSTRY, STRATEGY AND OPERATIONS

If we fail to retain key personnel, our business could suffer.

We are dependent upon the principal members of our management and scientific staff. In addition, we believe that our future success in developing and marketing our products will depend on whether we can attract and retain additional qualified management and scientific personnel as well as a sales and marketing staff. There is strong competition for qualified personnel within the industry in which we operate, and we may not be able to attract and retain such personnel. As we have a small number of employees and we believe our products are unique and highly specialized, the loss of the services of one or more of the principal members of our management or scientific staff, or the inability to attract and retain additional personnel and develop expertise as needed, could have a material adverse effect on our results of operations and financial condition.

If we are subject to product liability suits, we may not have sufficient insurance to cover damages.

The testing, manufacturing, and marketing and sale of the products utilizing our technologies involve risks that product liability claims may be asserted against us and/or our licensees. Our current clinical trial and product liability insurance may not be adequate to cover damages resulting from product liability claims. Regardless of their merit or eventual outcome, product liability claims could require us to spend significant time, money and other resources to defend such claims, could result in decreased demand for our products and product candidates, or result in reputational harm, and could result in the payment of a significant damage award. Our product liability insurance coverage is subject to deductibles and coverage limitations and may not be adequate in scope to protect us in the event of a successful product liability claim. Further, we may not be able to acquire sufficient clinical trial or product liability insurance in the future on reasonable commercial terms, if at all.

Consolidation in the pharmaceutical and biotechnology industries may adversely affect us.

There has been consolidation in the pharmaceutical and biotechnology industries. Consolidation could result in the remaining companies having greater financial resources and technological capabilities, thus intensifying competition, and fewer potential collaboration partners or licensees for our product candidates. In addition, if a consolidating company is already doing business with any of our competitors, we could lose existing or potential future licensees or collaboration partners as a result of such consolidation.

If we or our licensees fail to comply with environmental laws and regulations, our or their ability to manufacture and commercialize products may be adversely affected.

Medical and biopharmaceutical research and development involves the controlled use of hazardous materials, such as radioactive compounds and chemical solvents. We and our licensees are subject to federal, state and local laws and regulations in the U.S. and abroad governing the use, manufacture, storage, handling and disposal of such materials and waste products. We and they could be subject to both criminal liability and civil damages in the event of an improper or unauthorized release of, or exposure of individuals to, hazardous materials. In addition, claimants may sue us or them for resulting injury or contamination, and the liability may exceed our or their ability to pay. Compliance with environmental laws and regulations is expensive, and current or future environmental regulations may impair the research, development or production efforts of our company or our licensees and harm our operating results.

If we or our licensees encounter problems with product manufacturing, there could be delays in product development or commercialization, which would adversely affect our future profitability.

Our ability and that of our licensees to conduct timely pre-clinical and clinical research and development

programs, obtain regulatory approvals, and develop and commercialize our product candidates will depend, in part, upon our and our licensees’ ability to manufacture our products and product candidates, either directly or through third parties, in accordance with FDA and other regulatory requirements. The manufacture, packaging and testing of our products and product candidates are regulated by the FDA and similar foreign regulatory entities and must be conducted in accordance with applicable cGMP and comparable foreign requirements. Any change in a manufacturing process or procedure used for one of our products or product candidates, including a change in the location at which a product or product candidate is being manufactured or in the third-party manufacturer being used, may require the FDA’s and similar foreign regulatory entities’ prior review and/or approval in accordance with applicable cGMP or other regulations. Additionally, the FDA and similar foreign regulatory entities may implement new standards, or change their interpretation and enforcement of existing standards, for the manufacture, packaging and testing of products at any time.

There are a limited number of manufacturers that operate under cGMP and other foreign regulations that are both capable of manufacturing our products and product candidates and are willing to do so. Alimera has contracted with individual third-party manufacturers for the manufacture of ILUVIEN and its components. If any of Alimera’s third-party manufacturers breach their agreements or are unable or unwilling to perform for any reason or fail to comply with cGMP and comparable foreign requirements, Alimera may not be able to locate alternative acceptable manufacturers, enter into favorable agreements with them or get them approved by the applicable regulatory authorities in a timely manner. Delays in the commercial production of ILUVIEN could delay or impair Alimera’s marketing of ILUVIEN, which, in turn, could adversely affect Alimera’s generation of net profits for us.

Failure by us, our collaborative partners, or our or their third-party manufacturers, to comply with applicable manufacturing requirements could result in sanctions being imposed on us or our collaborative partners, including fines, injunctions, civil penalties, failure of regulatory authorities to grant marketing approval of our product candidates, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product, operating restrictions and criminal prosecutions. In addition, we or our collaborative partners may not be able to manufacture our product candidates successfully or have a third party manufacture them in a cost-effective manner. If we or our collaborative partners are unable to develop our own manufacturing facilities or to obtain or retain third-party manufacturing on acceptable terms, we may not be able to conduct certain future pre-clinical and clinical testing or to supply commercial quantities of our products. We manufacture supplies in connection with pre-clinical or clinical studies conducted by us and our licensees. Our licensees have the exclusive rights to manufacture commercial quantities of products, once approved for marketing. Our and our licensees’ reliance on third-party manufacturers entails risks, including:

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failure of third parties to comply with cGMP and other applicable U.S. and foreign regulations and to employ adequate quality assurance practices;

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inability to obtain the materials necessary to produce a product or to formulate the active pharmaceutical ingredient on commercially reasonable terms, if at all;

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supply disruption, deterioration in product quality or breach of a manufacturing or license agreement by the third party because of factors beyond our or our licensees’ control;

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termination or non-renewal of a manufacturing or licensing agreement with a third party at a time that is costly or difficult; and

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inability to identify or qualify an alternative manufacturer in a timely manner, even if contractually permitted to do so.

Problems associated with international business operations could affect our or our licensees’ ability to manufacture and sell our products. If we encounter such problems, our or their costs could increase and development of products could be delayed.

We currently maintain offices and research and development facilities in the U.S. and the U.K., and our goal is to develop products for sale by us and our licensees in major world healthcare markets. Manufacturing of pharmaceutical products requires us or our licensees to comply with regulations regarding safety and quality and to obtain country and jurisdiction-specific regulatory approvals and clearances. We or our licensees may not be able to comply with such regulations or obtain or maintain needed regulatory approvals and clearances, or may be required to incur significant costs in doing so. In addition, our operations and future revenues may be subject to a number of risks associated with foreign commerce, including the following:

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staffing and managing foreign operations;

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political and economic instability;

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foreign currency exchange fluctuations;

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foreign tax laws, tariffs and freight rates and charges;

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timing and availability of export licenses;

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inadequate protection of intellectual property rights in some countries; and

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obtaining required government approvals.

Legislative or regulatory changes may adversely affect our business, operations and financial results.

Our industry is highly regulated and new laws, regulations and judicial decisions, and new interpretations of existing laws, regulations and judicial decisions, may adversely affect our business, operations and financial results.

U.S. federal and state governments continue to propose and pass legislation designed to reduce the cost of healthcare. The Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010 (PPACA), represents one of the most significant healthcare reform measures in decades. The PPACA is intended to expand U.S. healthcare coverage primarily through the imposition of health insurance mandates on employers and individuals and expansion of the Medicaid program. Several provisions of the PPACA could significantly reduce payments from Medicare and Medicaid for any product candidates that obtain marketing approval in the future. Federal and state legislatures within the U.S. and foreign governments will likely continue to consider changes in existing healthcare legislation. We cannot predict the reform initiatives that may be adopted in the future or whether initiatives that have been adopted will be repealed or modified. The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare may adversely affect the demand for any products for which we may obtain regulatory approval; our ability to set a price that we believe is fair for our products; our ability to obtain coverage and reimbursement approval for a product; our ability to generate revenues and achieve or maintain profitability; or the level of taxes that we are required to pay.

In addition, other legislative changes have been proposed and adopted since PPACA. The Budget Control Act (BCA) of 2011 includes provisions to reduce the federal deficit. The BCA, as amended, resulted in the imposition of 2% reductions in Medicare payments to providers beginning in 2013. More recent legislation extends reductions through 2024. Any significant spending reductions affecting Medicare, Medicaid or other publicly funded or subsidized health programs that may be implemented, and/or any significant taxes or fees that may be imposed on us, as part of any broader deficit reduction effort or legislative replacement to the BCA, could have an adverse impact on our anticipated product revenues.

The FDAAA granted the FDA enhanced authority over products already approved for sale, including authority to require post-marketing studies and clinical trials, labeling changes based on new safety information and compliance with risk evaluations and mitigation strategies approved by the FDA. The FDA’s exercise of this relatively new authority could result in delays and increased costs during product development, clinical trials and regulatory review and approval, increased costs following regulatory approval to assure compliance with new post-approval regulatory requirements, and potential restrictions on the sale or distribution of approved products following regulatory approval.

Changes in the regulatory approval policy during the development period, changes in or the enactment of additional regulations or statutes, or changes in regulatory review for each submitted product application, may cause delays in the approval or rejection of an application. For example, the July 9, 2012 reauthorization of the PDUFA extended by two months the period in which the FDA is expected to review and approve certain NDAs. Although the FDA has recently stated that it expects to meet PDUFA’s updated timing goals, it has in the past provided its managers discretion to miss them due to heightened agency workload or understaffing in the review divisions. Accordingly, it remains unclear whether and to what extent the FDA will adhere to PDUFA timing goals in the future, which could delay approval and commercialization of our product candidates.

RISKS RELATED TO OUR COMMON STOCK

The price of our common stock may be volatile.

The price of our common stock (including common stock represented by CHESS Depositary Interests (CDIs)) may be affected by developments directly affecting our business, as well as by developments out of our control or not specific to us. The biotechnology sector, in particular, and the stock market generally are vulnerable to abrupt changes in investor sentiment. Prices of securities and trading volumes of companies in the biotechnology industry, including ours, can swing dramatically in ways unrelated to, or that bear a disproportionate relationship to, our performance. The price of our common stock (and CDIs) and their trading volumes may fluctuate based on a number of factors including, but not limited to:

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clinical trials and their results, and other product and technological developments and innovations;

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FDA and other domestic and international governmental regulatory actions, receipt and timing of approvals of our product candidates, and any denials and withdrawal of approvals;

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competitive factors, including the commercialization of new products in our markets by our competitors;

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advancements with respect to treatment of the diseases targeted by our product candidates;

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developments relating to, and actions by, our collaborative partners, including execution, amendment and termination of agreements, achievement of milestones and receipt of payments;

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the success of our collaborative partners in marketing any approved products and the amount and timing of payments to us;

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availability and cost of capital and our financial and operating results;

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actions with respect to pricing, reimbursement and coverage, and changes in reimbursement policies or other practices relating to our products or the pharmaceutical industry generally;

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meeting, exceeding or failing to meet analysts’ or investors’ expectations, and changes in evaluations and recommendations by securities analysts;

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economic, industry and market conditions, changes or trends; and

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other factors unrelated to us or the biotechnology industry.

In addition, low trading volume in our common stock or our CDIs may increase their price volatility. Holders of our common stock and CDIs may not be able to liquidate their positions at the desired time or price. Finally, we will need to continue to meet the listing requirements of the NASDAQ Global Market, including the minimum stock price, and the Australian Securities Exchange (ASX), for our stock and CDIs to continue to be traded on those exchanges, respectively.

If the holders of our outstanding warrants and stock options exercise their warrants and options, ownership of our common stock holders may be diluted, and our stock price may decline.

As of March 31, 2015, we had outstanding warrants and options to acquire approximately 5.7 million shares of our common stock, or approximately 16.2% of our shares on a fully diluted basis. The issuance of shares of our common stock upon exercise of these warrants and stock options could result in dilution to the interests of other holders of our common stock and could adversely affect our stock price.

We do not currently intend to pay dividends on our common stock, and any return to investors is expected to come, if at all, only from potential increases in the price of our common stock.

At the present time, we intend to use available funds to finance our operations. Accordingly, while payment of dividends rests within the discretion of our board of directors, no cash dividends on our common shares have been declared or paid by us and we have no intention of paying any such dividends in the foreseeable future.

Item 6.

Exhibits


31.1		Certification of Principal Executive Officer required by Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Principal Financial Officer required by Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101		The following materials from pSivida Corp.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets; (ii) Condensed Consolidated Statements of Comprehensive (Loss) Income; (iii) Condensed Consolidated Statement of Stockholders’ Equity; (iv) Condensed Consolidated Statements of Cash Flows; and (v) Notes to Condensed Consolidated Financial Statements

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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