Bloomberg News

Alimera, Psivida Plummet After U.S. FDA Rejects Eye Drug

November 16, 2011

(Updates share prices in sixth paragraph.)

Nov. 11 (Bloomberg) -- Alimera Sciences Inc. plunged 73 percent and Psivida Corp. fell the most in almost seven years after U.S. regulators rejected the companies’ eye treatment for people with diabetes.

The Food and Drug Administration asked Alimera to conduct two more clinical trials to prove the drug, called Iluvien, is safe and effective for diabetic macular edema, or DME, a retinal disease that can lead to vision loss, the company said today in a statement. Alimera licenses the drug from Psivida.

“We view this as the worst-case scenario for Alimera,” Simos Simeonidis, an analyst at Cowen & Co. in New York, said today in a note to investors. The FDA ruling will cause a “multiyear delay” if Alimera proceeds with the new trials, and will require a “very significant investment of capital that the company does not currently have at hand,” Simeonidis said.

Iluvien, a tiny tube implanted into the eyeball, would be Alpharetta, Georgia-based Alimera’s first marketed product. The implant releases low daily doses of the steroid fluocinolone acetonide for as long as three years. Peak sales of Iluvien, if it gains FDA approval, may surpass $900 million, Bret Holley, an Oppenheimer & Co. analyst in New York, said Nov. 6 in a note to clients.

‘Surprised’ by Decision

“We are surprised and disappointed with the FDA’s decision on our application to market Iluvien in the U.S. to patients with this devastating disease,” Dan Myers, president and chief executive officer of Alimera, said in the statement. “We are committed to, and have the funds for, pursuing approval in Europe and for evaluating our options in the U.S.”

Alimera declined 73 percent to $1.96 at the close in New York, the biggest decline since April 22, 2010, when the company first offered shares to the public. Psivida, of Watertown, Massachusetts, fell 48 percent to $2.03 in the biggest loss since Jan. 28, 2005.

The FDA notified Alimera in December that the drug application’s 24 months of safety and efficacy data wasn’t enough to support Iluvien’s approval. Alimera resubmitted its application in May with an additional 12 months of clinical trial data requested by the agency.

After 36 months, as many as 29 percent of patients treated with Iluvien correctly identified at least 15 more letters on an eye chart than they were able to read before they started the drug, Alimera said last month in a statement.

The FDA concluded that the risks of side effects “were significant and were not offset by the benefits” of Iluvien in the 36-month trials, Alimera said in today’s statement.

‘Extensive Research’

“Based on extensive research with U.S. retinal physicians, we have learned that Iluvien’s long-term sustained delivery treatment benefit is desired and that Iluvien has a manageable risk to benefit ratio,” Myers said. “We continue to believe in Iluvien as a long-term effective treatment option for DME.”

Alimera estimates that almost 1 million people in the U.S. have DME, and 300,000 new cases occur each year. The disease causes blood vessels in the retina to leak, leading to swelling and vision loss. The market for treating DME is estimated to be “anywhere from $1.5 billion to $4 billion annually,” Psivida Chief Executive Officer Paul Ashton said Sept. 12 on an earnings call.

The current standard of care for DME is laser treatment to stop or slow the leaks, according to the Mayo Clinic in Rochester, Minnesota. The laser procedure has “undesirable side effects including partial loss of peripheral and night vision,” according to Alimera’s website.

The FDA evaluated Iluvien under a six-month priority review and aimed to make a decision by Nov. 12. While the agency typically takes at least 10 months to rule on drug applications, it grants priority status to therapies that may provide major advances in treatment.

FDA approval of the drug would entitle Psivida to a $25 million milestone payment from Alimera. Psivida also would share 20 percent of the profits, offset by certain commercialization costs, the company said Sept. 30 in a regulatory filing.

--Editor: Andrew Pollack, Adriel Bettelheim

To contact the reporter on this story: Molly Peterson in Washington at mpeterson9@bloomberg.net

To contact the editor responsible for this story: Adriel Bettelheim at abettelheim@bloomberg.net


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