turnaround situation perhaps

Watertown-based eye treatment drug company pSivida Corp. has found partnerships key to survival in the past years, leading to a major rebound and reincorporation.

PSivida develops miniaturized, injectable drug delivery systems for eye patients. For the past several years, the 8-year-old company has been reinventing itself, slimming down its focus and its work force, relocating, and making strategic partnerships. This past month, it appointed company board member Paul Ashton as its new president and CEO. It also announced its second quarter results, in which it disclosed a net loss of $870,000 — down from $5.8 million in the same quarter in 2007.

The company is now debt free and expanding, a condition made possible by forming a research and licensing partnership with Pfizer Inc., which also invested $11.5 million to become an equity partner. Pfizer was interested in pSivida’s core Medidur technology, an advanced miniature drug delivery device. It enables doctors to do a single injection in the eye that will allow a drug to dose the patient in the long term, avoiding the need for regular reinjections. The technology allows for a “huge wealth of opportunity to partner,” said Ashton. “It helps to have a big partner.”

Originally based in Australia, pSivida Ltd., a nano-drug maker, in 2005 paid $104 million for Watertown-based Control Delivery Systems Inc. (CDS), which manufactured implantable medical systems. Ashton had founded CDS in 1992 and was serving as CEO.

However, after the companies merged, pSivida’s finances took a turn for the worse due to a convertible note that left it $20 million in crippling debt, explained Ashton. In 2007, he became managing director and began work on the cleanup. Key to the turnaround was getting Pfizer on board, he said, and in April 2007 it inked a deal that could be worth $165 million to pSivida. The company also had to reduce its work force by half and last June it reincorporated as a Nasdaq-listed company.

The company also refocused on its core business, selling off a diagnostic business and a nutraceutical company. Currently, the company makes royalties from the sale of its Vitrasert and Retisert applications (sold by licensee Bausch & Lomb Inc.), which treat chronic eye disease. It hopes to expand its business, particularly with a new application called Iluvien, which will treat diabetic macular edema. Its partner, biopharmaceutical company Alimera Sciences Inc., based in Georgia, plans to file a New Drug Application for Iluvien with the U.S. Food and Drug Administration in 2010.

Such a turnaround like this is “relatively rare” and can largely be attributed to Pfizer’s intervention, noted Ian Sanderson, analyst at research firm Cowen and Co. LLC in Boston. However, other biotechs may also see similar rescues down the line as “big pharma goes shopping".