PSIVIDA CORP. (NASDAQ: PSDV)Visibility this December. Initiating...

PSIVIDA CORP. (NASDAQ: PSDV)
Visibility this December. Initiating Coverage with a BUY Rating and $9.00 Price Target.
Investment Rating BUY
Price Target $9.00
Price (November 17, 2009) $3.28
52 Week Range $0.60 - $6.25
Shares Outstanding 18.3 MM
Market Capitalization $60.0 MM
Cash (September 30, 2009) $6.0 MM
Enterprise Value $54.0 MM
Avg. Volume 104,794
S&P 500 Index (11/17/09) 1,110.3
NASDAQ Composite (11/17/09) 2,203.8
FY (Jun 30) 2008A 2009A 2010E
Revs. (Mil) $3.5 $12.2 $11.4
Net Inc. (Mil) ($75.7) ($2.5) ($5.1)
EPS ($4.17) ($0.14) ($0.28)
EPS (Qtr.) Sept Dec Mar Jun
2009A ($0.03) ($0.05) ($0.03) ($0.03)
2010E ($0.09)A ($0.02) ($0.19) $0.02
Company Description
PSDV is a drug delivery biopharmaceutical
company, primarily focused in the design,
discovery, and development of therapeutics
for the treatment of back of the eye
diseases.
.
Juan Sanchez. M.D.
212.891.5203
[email protected]
Industry: Pharmaceuticals
Initiating Coverage
November 17, 2009
BUY
Highlights
Our pSivida investment thesis focuses on PSDV’s lead product in development, Iluvien™, a
3.5 mm injectable intraocular implant containing fluocinolone acetonide (FA), currently in
Phase III trials for the treatment of diabetic macular edema (DME).
We believe Iluvien will likely become the first product approved by the FDA for the treatment
of diabetic macular edema (DME). There are approximately 1 million Americans with DME,
and with no drugs approved by the FDA in the indication, patients currently are not
receiving adequate therapies.
Iluvien Phase III top-line results expected in December 2009. The Iluvien Phase III
program is evaluating approximately 956 subjects randomized to two doses of Iluvien (0.23
mcg and 0.45 mcg) or sham treatment, with all groups allowed to receive laser
photocoagulation (the current standard-of-care) as background therapy.
The primary endpoint of the study is the difference versus sham treatment in the
percentage of patients who obtain a ≥15 letter improvement (three lines) in the visual acuity
test (VAT) at 24 months. We believe both Iluvien dose groups are likely to show efficacy
superior to sham treatment. If results are positive, we expect a NDA filing by mid-2010 for a
potential FDA approval late 2010 or early 2011.
In our view, the primary safety concern with the use of FA in the eye (and any other steroid)
is the propensity for elevation of intra ocular pressure (IOP) that requires surgical
intervention (trabeculectomy). We believe the 0.45 mcg dose arm of Iluvien is likely to
report elevated rates of IOP+trabeculectomy within acceptable limits given the high rates
seen with intravitreal injections of triamcinolone and the existing medical need.
Iluvien market potential. We believe Iluvien has the potential to become a $250-$450
million product in the US and a $450-$600 million product worldwide in DME alone before
off-label considerations and potential approvals in other indications.
Alimera Sciences, Inc. (a private company) is responsible for the development and
commercialization of Iluvien and PSDV is entitled to a 20% share of profits (on a countryby-
country basis). We estimate, assuming a 4-7% market penetration, PSDV could collect
$40-$65 million in profit share payments when the product reaches peak sales in the U.S.
PSDV’s balance sheet. PSDV ended 1Q 2010 (September 30, 2009) with $6.0 million in
cash. We expect PSDV to end CY 2009 with approximately $4.5 million in cash. In
addition, Alimera owes PSDV a $15 million promissory note (interest at 8%).
Initiating coverage with a BUY rating and a price target of $9.00. We recommend
investors to BUY shares of PSDV in anticipation of what we believe are likely to be positive
Iluvien Phase III results in December 2009.