UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-K

For the fiscal year ended June 30, 20152016

or

For the transition period from                    to                    

Commission File Number 000-51122

PSIVIDA CORP.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (617) 926-5000

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

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 Act).    Yes  ¨    No  x

The aggregate market value of the common stock held by non-affiliates of the registrant, computed by reference to the closing price of the common stock on the NASDAQ Global Market on December 31, 2014,2015, the last trading day of the registrant’s most recently completed second fiscal quarter, was approximately $118,606,000.$140,134,000.

There were 29,417,36534,176,999 shares of the registrant’s common stock, $0.001 par value, outstanding as of September 4, 2015.6, 2016.

DOCUMENTS INCORPORATED BY REFERENCE

Specified portions of the registrant’s definitive proxy statement, to be filed in connection with the Annual Meeting of Stockholders to be held on December 3, 2015,12, 2016, are incorporated by reference into Part III of this Annual Report on Form 10-K.

PSIVIDA CORP.

Form 10-K

For the Fiscal Year Ended June 30, 20152016

Table of Contents

PART I

Preliminary Note Regarding Forward-Looking Statements

This Form 10-K and our 20152016 Annual Report contain 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). Forward-looking statements are inherently subject to risks, uncertainties and potentially inaccurate assumptions. Such statements give our current expectations or forecasts of future events; they do not relate strictly to historical or current facts. All statements other than statements of historical fact could be deemed forward-looking statements, including, without limitation, any expectations of revenue, expenses, cash flows, earnings or losses from operations, capital, liquidity or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning product and technology research, development, trials, trial results, regulatory requirements and approvals, reimbursement and commercialization; any other statements of expectations, estimations 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 the following: “likely”, “expect”, “intend”, “anticipate”, “believe”, “estimate”, “plan”, “project”, “forecast” and “outlook”.

We cannot guarantee that the results and other expectations expressed, anticipated or implied in any forward-looking statement will be realized. The risks set forth under Item 1A of this Form 10-K describe major risks to our business, and you should read and interpret any forward-looking statements together with these risks. A variety of factors, including these risks, could cause our actual results and other expectations to differ materially from the anticipated results or other expectations expressed, anticipated or implied in our forward-looking statements. Should known or unknown risks materialize, or should our 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 dates on which they are made. We do not undertake any obligation to update any forward-looking statement, whether to reflect new information, future events or otherwise. You are advised, however, to consult any further disclosures we may make in our future reports to the SEC,Securities and Exchange Commission (SEC), on our website, www.psivida.com, or otherwise.

Introduction

Our Business

We are a leader indevelop sustained-release drug delivery products primarily for the developmenttreatment of sustained-release drug-delivery products for treatingchronic eye diseases. Our products deliver drugs at a controlled and steady rate for months or years. We have developed three of only four sustained-release products approved by the U.S.United States (U.S.) Food and Drug Administration (FDA) for treatment of back-of-the-eye diseases. The most recentMedidur™ for posterior segment uveitis, our lead product candidate, is in pivotal Phase 3 clinical trials, and ILUVIEN^® for diabetic macular edema (DME), sold by our licenseelead licensed product, is sold in the U.S. and three European Union (EU) countries. Our lead development product Medidur™ for posterior uveitis, is in pivotal phase III clinical trials. Our pre-clinical development program is focused primarily on utilizing our two core technology platforms to deliver drugs and biologics to treat chronic diseases. Our strategy includes developing products for chronic ophthalmic diseases utilizingindependently while continuing to leverage our core technology platforms.platforms through collaborations and license agreements as appropriate.

Medidur, our most advanced development product, is designed to treat chronic non-infectious uveitis affecting the posterior segment of the eye (posterior segment uveitis) for three years from a single injection. Injected into the eye in an office visit, Medidur is a tiny micro-insert that delivers a micro-dose of a corticosteroid to the back of the eye on a sustained basis. We are developing Medidur independently.

The first of Medidur’s two Phase 3 trials met its primary efficacy endpoint of prevention of recurrence of disease through six months with high statistical significance (p less than 0.00000001; intent to treat analysis) and achieved encouraging safety results. The same high statistical significance for efficacy and encouraging safety results were maintained through 12 months of follow-up. Due to the high level of statistical significance

achieved, we plan to file our EU marketing approval application (MAA) based on data from the first Phase 3 trial, rather than two trials. The MAA is planned for the first quarter of 2017. Enrollment in the second Phase 3 trial is expected to be completed in October 2016. Assuming favorable results, we plan to file a new drug application (NDA) with the FDA in the third quarter of 2017. A utilization study of our new Medidur inserter with a smaller diameter needle, which is required for both our MAA and NDA, met its primary endpoint, ease of intravitreal administration.

ILUVIEN, our most recently approved product, is an injectable, sustained-release micro-insert that provides three years of treatment of DME for three years from a single administration.injection. ILUVIEN is licensed tosubstantially the same design as Medidur and delivers the same steroid, although it is injected using a larger diameter inserter. ILUVIEN was developed in collaboration with Alimera Sciences, Inc. (Alimera), and weis licensed to and sold by Alimera. We are entitled to a share of the net profits (as defined in our agreement with Alimera)defined) from Alimera’s sales of ILUVIEN. ILUVIEN was launched in late February 2015on a quarter-by-quarter, country-by-country basis. ILUVIEN has been sold in the U.S., since 2015, where 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.pressure (IOP). ILUVIEN has been commercially availablesold in the United Kingdom (U.K.) and Germany since June 2013 and in Portugal since January 2015. ILUVIEN has marketing approvals in these and 14 other EUEuropean countries for the treatment of chronic DME considered insufficiently responsive to available therapies. Alimera sublicensed distribution, regulatory and reimbursement matters for ILUVIEN for DME in Australia and New Zealand in April 2014, in Canada in July 2015 and in Italy in August 2015.

Medidur, our lead development product, is an injectable, micro-insert designed to treat chronic non-infectious uveitis affecting the posterior segment of the eye (posterior uveitis) for three years from a single administration. Medidur, which is the same micro-insert as ILUVIEN, is in Phase III clinical trials, with the filing of a new drug application (NDA) anticipated in the first half of 2017. We are developing Medidur independently.

Our FDA-approved Retisert^® is an implant that provides sustained release treatment of posterior segment uveitis for approximately two and30 months. Implanted in a half years. It is licensed tosurgical procedure, Retisert delivers the same corticosteroid as Medidur but in a larger dose. Retisert was co-developed with Bausch & Lomb, and weto which it is licensed. We receive royalties from itsRetisert sales.

Our pre-clinical development program is focused on developingWe are seeking to develop products usingthat use our core platform technologies, Durasert™ and Tethadur™, technology platforms to deliver drugs orand biologics to treat wet and dry age-related macular degeneration (AMD), glaucoma, osteoarthritis and other diseases. The sustained release, surgical implant to treat pain associated with severe knee osteoarthritis (OA) we developed in collaboration with Hospital for Special Surgery (HSS) is in an investigator-sponsored pilot study. We recently commenced the first of two investigational new drug (IND)-enabling studies of an injectable, bioerodible micro-insert we developed to provide sustained delivery of a tyrosine kinase inhibitor (TKI) to treat wet AMD.

Durasert™, Medidur™, and Tethadur™ and BioSilicon™ are our trademarks. Retisert^® and Vitrasert^® are Bausch & Lomb’s trademarks. ILUVIEN^® is Alimera’s trademark. This Annual Report also contains trademarks, trade names and service marks of other companies, which are the property of their respective owners.

Information with respect to ILUVIEN, including regulatory and marketing information, and Alimera’s plans and intentions, reflects information publicly disclosed by Alimera.

Fiscal 2016, fiscal 2015 and fiscal 2014 and fiscal 2013 mean the twelve months ended June 30, 2016, 2015 and 2014, respectively, and 2013, respectively.fiscal 2017 means the twelve months ending June 30, 2017.

Strategy

Our strategy is to use our proprietary Durasert and Tethadur drug delivery technology platforms to independently develop new drug delivery products forthat use already-approved drugs and biologics that will provideto better treatment oftreat ophthalmic and other diseases, while continuing to leverage our technology platforms through collaborations and licenses with leading pharmaceutical and biopharmaceutical companies, institutions and others. We believe our technologies can provide sustained, targeted delivery of many already-approved therapeutic agents, resulting in improved therapeutic effectiveness, safer administration and better patient compliance and convenience, with reduced product development risk and cost for us. We believe ourcost. Our proven track record of three approved products, all providing sustained release of previously approved drugs, demonstratesreflects the potentialbenefits of this strategy.

platforms to develop products that deliver off-patent and generic drugs and biologics with a significant market opportunity, where less frequent dosing through sustained delivery and/or targeted delivery at the treatment site would materially improve the effectiveness, safety or convenience of the original drugs or biologics. By focusing on delivery of already-approved drugs and biologics, particularly those requiring potentially shorter clinical development programs, we believe we can minimize the risks and financial investment required for product approval.

Market Opportunity for Delivery of Drugs and Biologics

We develop products to address issues inherent in the delivery of drugs and biologics. The efficacy of a therapeutic agent (small drug molecule or biologic) depends on its distribution to, and reaction with, the targeted tissue and other tissues in the body, the duration of treatment and clearance from the body. In an ideal treatment, the appropriate amount of drug or biologic is delivered to the intended tissue at an adequateappropriate concentration and that concentration is maintained inat the location with an appropriate concentrationtissue for a sufficient period of time to provide effective treatment without causing adverse effects to other tissues. Accordingly, the delivery of a drug or biologic can be an important element of its ultimate therapeutic value.

Drugs are frequently administered systemically by oral dosing, infusion or injection and subsequently dispersed throughout the body via the circulatory system. In the case of many drugs, systemic administration does not deliver them to the intended site with an appropriate concentration for a sufficient duration or the appropriate concentration disperses too quickly or unevenly, thereby failing to achieve the maximum potential therapeutic benefit. Because systemically delivered drugs disperse throughout the body, they often are administered at higher dosage levels to achieve sufficient concentrations at the intended sites. This is particularly true for the eyes, joints, brain and nervous system, which have natural barriers that impede the movement of drugs to those areas. These higher dosage levels can cause harmful side effects to the tissues beyond the intended site. To avoid these issues, drugs may be administered locally to the targeted site, typically by injection. However, maintaining a sufficient concentration at the targeted site over time typically requires timely and repeated administration of systemically and locally delivered drugs. The delivery methods themselves can have risks. Repeated administration by injection or infusion can result in serious infections and other complications.

Biologics generally cannot be administered orally, but instead are administered by injection or infusion and require repeated injections or infusions to maintain appropriate levels over the course of treatment. Due to their molecular size and complexity, it has been difficult to develop sustained-release formulations for biologics.

Drugs or biologics are often not administered on the optimal schedule or at all, because patients do notself-administer them as prescribed or do not get medical professional administration as required. The risk of patient noncompliance increases when treatment involves multiple products or complex or painful dosing regimens, as patients age or if they suffer cognitive impairment or serious illness, or when the treatment is lengthy or expensive.

Treating retinal diseases is a significant challenge for drug delivery. Due to the effectiveness of the blood-eye barrier, it is difficult for systemically administered drugs to reach the retina in sufficient quantities to have a beneficial effect without causing adverse side effects to other parts of the body. Injecting drugs or biologics in solution directly into the back of the eye can achieve effective, but often transient, dosage levels in the eye, requiring repeated injections. Ophthalmic biologics, such as Macugen^® (pegaptanib sodium), Lucentis^® (ranibizumab) and EYLEA^® (afilbercept), require injection into the eye as frequently as every four weeks. In addition to the issues of inconvenience, cost and noncompliance, repeated intravitreal injections have medical risks, including intraocular infection, perforated sclera and vitreous hemorrhage.

Due to the drawbacks of traditional delivery, the development of methods to deliver drugs and biologics to patients in a more precise, controlled fashion over sustained periods of time has been a medical goal. Methods for sustained drug delivery include oral and injectable controlled-release products and skin patches that seek to improve the consistency of the dosage over time and extend the duration of delivery. However, most of these methods cannot provide constant, controlled dosage or sufficient duration of delivery, particularly in diseases that

are chronic or require precise dosing. Moreover, skin patches and oral products still have issues of systemic delivery. There are currently very few approved sustained-delivery products for biologics.

As a result of the issues with traditional delivery of drugs and biologics, there is significant market opportunity for delivery of these products on a sustained, controlled basis over an extended period directly to the targeted site.

Our Technology Systems and Products

Our two core technology platforms, Durasert and Tethadur, have attributesare designed to address the issues of sustained delivery for ophthalmic and other product candidates:

Durasert Technology System

Our three approved products, as well as our lead developmentlate stage product Medidur,candidate for posterior segment uveitis and earlier stage product candidates for knee OA and AMD, use different generations of our Durasert technology platform to provide sustained, localized delivery of small molecule drugs to the back of the eye.eye or the joint. In our Durasert products, a drug core is surrounded with one or more polymer layers, and the permeability of those layers and other design aspects of the design of the product control the rate and duration of the drug release. By changing elements of the design, we can alter both the rate and duration of release to meet different therapeutic needs. Our later generation ILUVIEN is, and Medidur productsour ophthalmic product candidates are designed to be, injected at the target site in an office visit, while early generationearlier ophthalmic products Retisert and Vitrasert are surgically implanted. Our osteoarthritis product candidate is surgically implanted in the joint.

The portfolio of our Durasert approved products and late-stage product candidate includes:candidates include:

Development Product: Medidur for Posterior Segment Uveitis

Medidur, our lead development product, is an injectable, sustained-release micro-insert designed to treat chronic, noninfectious posterior uveitis, intermediate uveitis and panuveitis affecting the posterior segment of the eye for three years from a single injection. Injected in an office visit, Medidur provides sustained release of 0.18 mg of the off-patent corticosteroid fluocinolone acetonide (FAc) at a controlled rate directly to the back of the eye over three years. Medidur is injected with our proprietary inserter that uses a 27-gauge needle. We are developing Medidur independently and have not licensed the rights to Medidur for posterior segment uveitis to Alimera or any other third party.

Posterior segment uveitis is a chronic, non-infectious inflammatory disease affecting the posterior segment of the eye, often involving the retina, and is a leading cause of blindness in the developed countries. It afflicts people of all ages, producing swelling and destroying eye tissues, which can lead to severe vision loss and blindness. In the U.S., posterior segment uveitis is estimated to affect approximately 175,000 people, resulting in approximately 30,000 cases of blindness and making it the third leading cause of blindness in the U.S. Patients with posterior segment uveitis are typically treated with systemic steroids, but frequently develop serious side effects over time that can limit effective dosing. Patients then often progress to steroid-sparing therapy with systemic immune suppressants or biologics, which themselves can have severe side effects including an increased risk of cancer.

Medidur Phase 3 Trials

We are currently conducting two Phase 3 trials to assess the safety and efficacy of Medidur for the treatment of posterior segment uveitis. These are randomized, sham injection-controlled, double-masked trials. The primary endpoint of both trials is recurrence of disease at six months, with patients followed for three years. Our first Phase 3 Medidur trial enrolled 129 patients in 16 centers in the U.S. and 17 centers outside the U.S, with 87 eyes treated with Medidur and 42 eyes randomized to control and receiving sham injections. We expect to complete enrollment of our second Phase 3 trial of approximately 150 patients in 15 centers in India in October 2016.

Our first Phase 3 trial met its primary efficacy endpoint of prevention of recurrence of disease at six months with high statistical significance (p less than 0.00000001; intent to treat analysis) (recurrence of 18.4% for

Medidur versus 78.6% for control). The trial continued to meet its primary efficacy endpoint with the same high statistical significance through 12 months of follow up (p less than 0.00000001) (27.6% Medidur versus 85.7% control). Medidur was generally well tolerated through the latest follow-up visit reported (minimum 12 months, maximum 30 months, average 18 months). The incremental risk of elevated IOP for Medidur-treated eyes compared to control eyes was lower through the last follow up than through six months for over 21mmHg (8.3% versus 10.9%) as well as for the more serious elevation over 25mmHg (5.1% versus 11.3%). Elevated IOP was generally well treated with eye drops. Through the last follow-up, the percentage of eyes requiring incisional surgery was essentially the same in Medidur-treated and control eyes (4.6% versus 4.8%). Of the 64 study eyes with a natural lens at baseline, 45.2% of Medidur-treated eyes compared to 9.5% of control eyes required cataract surgery through the last follow-up visit. Cataracts are both a side effect of treatment with steroids and a natural consequence of posterior segment uveitis.

Our multi-center, randomized, controlled, single-masked study of the safety and utilization of our new proprietary 27-gauge inserter for Medidur met its primary endpoint, ease of intravitreal administration, showing that it facilitated the administration of Medidur compared to the larger diameter, 25-gauge inserter. These study results will form part of our anticipated MAA and NDA filings for Medidur for posterior segment uveitis.

Medidur Regulatory Strategy

In the EU, we plan to submit an MAA to the European Medicines Agency (EMA) in the first quarter of 2017 for Medidur for treatment of posterior segment uveitis. The submission is planned using the Centralized Procedure, which allows submission of a single application that, when approved, authorizes marketing in all EU member states and European Free Trade Association countries rather than requiring separate national approvals. As a result of the high statistical significance achieved in the first Phase 3 trial, we plan to base our MAA on data from only one rather than two Phase 3 trials. The U.K. Medicines and Healthcare Products Regulatory Agency (MHRA) advised us that, consistent with the published Points to Consider (PtC) of the European Agency for Evaluation of Medicinal Products, an application for a product treating a condition like posterior segment uveitis could be based on statistically compelling and clinically relevant results from just one pivotal trial. The submission will also be based on data from our inserter study and ILUVIEN for DME trials.

The European Commission (EC) designated Medidur as an orphan medicinal product. Orphan drug designation provides up to 10 years of market exclusivity in Europe following marketing approval, access to the Centralized Procedure and other regulatory and financial incentives.

In the U.S., we plan to submit an NDA to the FDA seeking approval of the marketing of Medidur for the treatment of posterior segment uveitis. We plan to base the NDA on data from our two Phase 3 trials and the inserter utilization study, as well as data referenced from the ILUVIEN for DME trials. Pending favorable results in our second Phase 3 trial, we expect to file an NDA in the third quarter of 2017. We have not obtained orphan designation for Medidur for posterior segment uveitis in the U.S. and may not do so.

Medidur Marketing Strategy

To be prepared for the potential marketing approvals of Medidur, we have begun the process of evaluating how we could best commercialize Medidur and maximize its value to us. We do not currently have any sales or marketing staff or any in-house expertise on product commercialization, and our resources are limited. We will be reviewing all of our potential options with respect to Medidur commercialization, including whether we should have different approaches in different jurisdictions.

Approved Product:Product: ILUVIEN for DME

ILUVIEN is an injectable, sustained-release micro-insert delivering 0.19 mg of FAc to the off-patent corticosteroid fluocinolone acetonide (FAc)back of the eye for treatment of DME. It is substantially the same micro-insert as Medidur. Injected in an office visit using a

larger diameter 25-gauge inserter, ILUVIEN delivers 36 months of continuous, low-dose corticosteroid therapy with a single injection. ILUVIEN is approved in the U.S. for the treatment of DME in patients who have been previously treated with a course of corticosteroids and did not have a clinically significant rise in intraocular pressure (IOP).IOP. In the 17 EU countries where ILUVIEN has been approved, it is indicated for the treatment of vision impairment associated with chronic DME considered insufficiently responsive to available therapies. DME is a disease suffered by diabetics where leaking capillaries cause swelling in the macula, the most sensitive part of the retina. DME is a leading cause of blindness in the working-age population in most developed countries in the working-age population.

We licensed ILUVIEN is licensed to Alimera, with which launchedwe co-developed the product. Alimera has sold ILUVIEN in the U.K. and Germany in the second quarter ofsince 2013 and in Portugal and the U.S. in the first quarter ofsince 2015. ILUVIEN has marketing authorizations in 14 additional EU countries. We are entitled to a 20% share in net profits on sales of ILUVIEN by Alimera on a quarter-by-quarter, country-by-country basis. See “Strategic Collaborations—Alimera” below.

Alimera has engaged in regulatory proceedings and negotiations with respect to the amount and/or process for reimbursement ofsublicensed ILUVIEN in various EU countries. In October 2013, the U.K.’s National Institute for Health and Care Excellence (NICE) issued a positive Final Appraisal Determination recommending ILUVIEN funding, utilizing a simple patient access scheme (PAS), for the treatment of pseudophakic eyes (eyes with an artificial lens) in chronic DME patients considered insufficiently responsive to available therapies. In February 2014, the Scottish Medicines Consortium, after completing its assessment and review of a similar simple PAS, announced its acceptance of ILUVIEN for restricted use within the National Health Service (NHS) Scotland. In July 2014, Alimera reached agreement with INFARMED, the marketing authorization body of the Portuguese Ministry of Health, for the pricing and reimbursement of ILUVIEN for the public sector in Portugal.

Approved Product: Retisert for Posterior Segment Uveitis

Retisert is approved in the U.S.a sustained-release implant for the treatment of posterior segment uveitis. Retisert is surgicallySurgically implanted, init delivers 0.59 mg of FAc to the back of the eye and delivers sustained levels of FAc for approximately 30 months. Retisert is licensed to Bausch & Lomb, with which we co-developed the product. Approved in the U.S., Bausch & Lomb sells the product in the U.S. and pays sales-based royalties to us. Retisert is eligible for Medicare reimbursement.

Approved Product: Vitrasert for CMV Retinitis

Vitrasert, ourOur first product Vitrasert was approved in the U.S. and the EUa sustained-release implant for the treatment of CMV retinitis, a blinding eye disease that occurs in individuals with advanced AIDS. Surgically implanted, Vitrasert which is surgically implanted, providesprovided sustained delivery of the anti-viral drug ganciclovir for six to eight months. Approved in the U.S. and EU, Vitrasert was licensed to Bausch & Lomb, which discontinued sales in fiscal 2013 following patent expiration.

Development Product: Medidur for Posterior Uveitis

Medidur, our lead development product, is an injectable, sustained-release micro-insert designed to treat posterior uveitis for three years. Medidur uses the same micro-insert as ILUVIEN for DME (same drug, same release rate, same polymer, same design), but we have redesigned the inserter to utilize a smaller gauge needle typically used for intra-ocular injections. Like ILUVIEN, Medidur also delivers a lower dose of FA, the same drug delivered by Retisert for posterior uveitis. However, Medidur is easier to administer than Retisert because it is injected in an office visit, while Retisert is implanted in a surgical procedure. We are developing Medidur independently and have not licensed the rights to Medidur for posterior uveitis to Alimera or any other third party.

Posterior uveitis is a chronic, non-infectious inflammatory disease affecting the posterior segment of the eye, often involving the retina, which is a leading cause of blindness in the developed countries. It afflicts people of all ages, producing swelling and destroying eye tissues, which can lead to severe vision loss and blindness. In the U.S., posterior uveitis is estimated to affect approximately 175,000 people, resulting in approximately 30,000 cases of blindness and making it the third leading cause of blindness in the U.S. Patients with posterior uveitis are typically treated with systemic steroids, but frequently develop serious side effects over time that can limit effective dosing. Patients then often progress to steroid-sparing therapy with systemic immune suppressants or biologics, which themselves can have severe side effects including an increased risk of cancer.

Medidur Phase III Trials. We are currently conducting two Phase III trials to assess the safety and efficacy of Medidur for the treatment of posterior uveitis. These are randomized, sham-controlled, double-masked trials.

The primary endpoint of both trials is recurrence of posterior uveitis, with patients in both trials followed for three years. The first Phase III Medidur trial is fully enrolled with 129 patients in 16 centers in the U.S. and 17 centers outside the U.S. The primary endpoint of this trial is recurrence of uveitis at 12 months and the last patient is scheduled to have their 12-month follow-up visit in March 2016, with top-line data expected in the second quarter of 2016. The second trial will enroll up to 150 patients in approximately 15 centers in India with a primary endpoint for the NDA filing of recurrence of disease at 6 months. We plan to seek FDA approval of Medidur based on 12-month data from the first Phase III trial, six-month data from the second Phase III trial and data from a short-duration utilization study of our redesigned proprietary inserter, together with data referenced from the Phase III trials of ILUVIEN for DME. Pending favorable results in our ongoing clinical trials and concurrence from the FDA regarding filing with the data package described, we expect to file an NDA in the first half of 2017.

In our ongoing assessment of masked safety data from our first Phase III trial, we compared elevated IOP (over 21 mm Hg) at three months of follow-up in study eyes (2/3’s of which received Medidur) to fellow non-study eyes (none of which received Medidur). At that time, for all 129 enrolled patients, only 5% more study eyes experienced elevated IOP than the fellow non-study eyes. Initial IOP elevation is an indication of the likelihood of subsequent clinically significant IOP increases. We believe that the minimal difference observed in elevated IOP in our assessment suggests favorable results for a key safety measure of the trials, the number of eyes that develop clinically significant increases in IOP after receiving Medidur relative to control eyes.

Investigator-Sponsored Study of Medidur. In July 2015, Dr. Glenn J. Jaffe, Robert Machemer Professor of Ophthalmology at Duke University School of Medicine in Durham, NC (who is also a principal investigator in our first Phase III trial), reported positive top-line results from his investigator-sponsored study of Medidur, reporting a statistically significant reduction in recurrence of uveitis and a statistically significant improvement in visual acuity in eyes treated with Medidur. In the three-year, ongoing study, patients with recurrent non-infectious intermediate, posterior or pan uveitis were randomized to receive either a low dose or a high-dose of Medidur (our Phase III trials are studying only the low dose and only in patients with posterior uveitis). One eye received Medidur (which for subjects with disease in both eyes, was the eye with the worse disease) and fellow diseased eyes were treated with standard of care, which included steroid eye drops. At the most recent follow-up visit reported, 11 of the 13 participants had been followed for between 12 and 24 months. Dr. Jaffe reported that through the last follow-up visit reported, none of the eyes treated with Medidur had any recurrence of uveitis, while fellow eyes treated with standard of care averaged 2.33 recurrences. The difference between treatment with Medidur and standard of care was statistically significant (p=0.014). Eyes treated with Medidur experienced a significant improvement in visual acuity, gaining an average of 17 letters from baseline at 12 months on the Snellen eye chart (p=0.014 at 12 months). At the last follow-up visit reported, the average gain from baseline in Medidur-treated eyes was over 20 letters, while eyes treated with standard of care declined an average of 10 letters. The most common adverse event in study eyes was elevated IOP. Through the last follow-up visit reported, three study eyes developed elevated IOP and were treated with eye drops, with filtering procedures subsequently performed in two of these eyes. However, those two eyes still gained an average of over 25 letters from baseline at the last observation. Because the study remains masked as to the dosage, results cannot yet be separated for the low and high doses of Medidur.

Based on the ongoing IOP assessment from our first Phase III trial and the top-line results from the investigator-sponsored study, we are optimistic that the Phase III trials for Medidur will show it to be as efficacious as Retisert was shown to be in treating posterior uveitis, but with IOP safety results that could be even better than those shown in the ILUVIEN and Retisert Phase III trials.

Tethadur Technology System

Our Tethadur technology system, utilizes BioSilicon, a fully-erodible, nanostructured elemental silicon,currently in pre-clinical development, is designed to provide sustained delivery of large biologic molecules, including peptides, proteins and antibodies. The sizeTethadur utilizes a tunable, biodegradable, biocompatible matrix of the pores and surface area of the BioSilicon is manufactured using nanotechnology to accommodate a

specific protein, peptide or antibody molecule. A suspension of the specific biologicnanostructured silica. Biologics are loaded into BioSilicon in solution is injected into the subject. The BioSilicon erodesmatrix and are then released over a predetermined duration, andtime as the biologic molecules are released from the pores on a sustained basis.matrix dissolves. We believe that by varying the pore size and surface area of Tethadur, the release rate of antibodies and other therapeuticsbiologics loaded into the Tethadur matrix can be controlled, which could permitcontrolled. Our goal with Tethadur is to provide sustained delivery of antibodies and other therapeuticsbiologics that currently must be delivered by frequent injections. The system is biocompatible and biodegradable. BioSilicon canTethadur matrix could also be designed to deliver smaller molecules.

Development Pipeline

Our pre-clinical research is focused on using our Tethadur and Durasert technology platformsplatform and developing our Tethadur delivery platform to deliver therapeutic agents to treat wet and dry AMD, glaucoma and osteoarthritis, as well as to provide systemic delivery of biologics.

Development Product: Severe Knee Osteoarthritis Implant.

We expect that an IND will shortly be filed in the U.S. to commence an investigator-sponsored study ofhave developed an implant utilizing our Durasert technology to treatfor the treatment of pain associated with severe osteoarthritis of the knee. We have been collaboratingknee OA in collaboration with Hospital for Special Surgery, a leading specialty hospital for orthopedics and rheumatology, on the development of this product. It will be surgically implantedHSS. This implant is being studied in the knee to provide approximately six months of sustained deliveryan investigator-sponsored, pilot study. The implant is composed of a corticosteroidspecially manufactured, surgical screw-like device with an embedded Durasert system that delivers dexamethasone directly to the joint. The productjoint on a sustained basis. Dexamethasone is an off-patent corticosteroid that is frequently used for the treatment of OA. Implanted in the non-articulating area of the knee in an outpatient procedure, the implant is designed to offerprovide long-term pain relief and tothereby delay or eliminate the need for knee replacement surgery. This implant represents the first use of our Durasert technology outside of ophthalmology. We believe this design, if successful, could be adapted for severe OA in other joints.

Knee OA is a degenerative joint disease that results from breakdown of joint cartilage and underlying bone, with joint pain and stiffness the most common symptoms. More than 10 million people have knee OA. No cure exists, but pain and movement restriction associated with the disease are currently treated with oral analgesics, non-steroidal anti-inflammatory drugs, corticosteroids taken orally or injected into the knee, or hyaluronic acid injected into the knee. With degeneration, damage and pain from knee OA can become severe, making it the leading cause of total knee replacement surgery. More than 700,000 of these surgeries were performed last year in the U.S. alone, and the number is expected to grow.

Development Product: TKI Insert for Wet AMD.We are developing an injectable, bioerodible, sustained-release Durasert insert delivering a TKI for treatment of wet AMD. AMD, the leading cause of vision loss in people over 65, is most commonly treated with intravitreal injections of biologics that block vascular endothelial growth factor (VEGF) molecules. FDA-approved Lucentis and Eylea and off-label use of the anti-cancer Avastin^®, all of which block only VEGF, are the leading treatments for wet AMD. These biologics must be injected into the eye as frequently as monthly and typically lose efficacy over time, resulting in vision loss and return of the disease.

Although the exact cause of AMD is unknown, other growth factors in addition to VEGF such as platelet-derived growth factor (PDGF) are thought to be involved in AMD. Approved for the treatment of cancer, some TKIs, including the one we propose to use in our insert, are known to inhibit PDGF as well as VEGF. In cancer therapy, TKIs are taken orally, but their toxicity prevents their systemic use to treat AMD. By using our Durasert technology, we plan to deliver a TKI directly to the back of the eye with a total dose that is significantly lower than is used in a course of cancer therapy.

Our goal is to provide sustained treatment of wet AMD for six months with a single injection, targeting both VEGF and PDGF while avoiding the toxic systemic side effects of TKIs and the frequent injections of current AMD anti-VEGF biologics. Our completed pre-clinical study data demonstrated that a TKI delivered by a sustained release insert was comparably efficacious to a commercially available biologic indicated for wet AMD delivered by injection in both preventing choroidal neovascularization and reducing vascular leakage. On the basis of these studies, we have commenced the first of two IND-enabling studies.

Feasibility Study Agreements

We have enteredenter into numerous feasibility study agreements (some of which are funded)funded by third parties) to evaluate our Durasert and Tethadur (including BioSilicon) technology systems for the treatment of various ophthalmic and other diseases.

Strategic Collaborations

We have entered into a number of collaboration/license agreements to develop and commercialize our product candidates and technologies. In all of ourthese collaboration agreements, we retainhave retained the right to use and develop the underlying technologies outside of the scope of the exclusive licenses granted.

Alimera

In a February 2005 collaboration agreement, as amended and restated in March 2008, we granted Alimera an exclusive worldwide license to manufacture, develop, market and sell ILUVIEN for the treatment and prevention of human eye diseases other than uveitis. We also granted Alimera a worldwide non-exclusive license to manufacture, develop, market and sell certain additional Durasert-based products (1) to deliver a corticosteroid and no other active ingredient by a direct delivery method to the back of the eye solely for the treatment and prevention of eye diseases in humans other than uveitis or (2) to treat DME in humans by delivering a compound by a direct delivery method through an incision no smaller than that required for a 25-gauge or larger needle. The non-exclusive license is limited to those products that, among other things, (i) have a drug core within a polymer layer (with certain limitations regarding chemically bonded combinations of active agents) and (ii) are approved,

or designed to be approved, to deliver a corticosteroid and no other active ingredient by a direct delivery to the posterior portion of the eye, or to treat DME by delivering a compound by a direct delivery through an incision required for a 25-gauge or larger needle. We are not permitted to use, or grant a license to any third party to use, the licensed technologies to make or sell any products that are or would be subject to the non-exclusive license granted to Alimera.

Alimera has complete financial responsibility for the development of licensed products and regulatory submissions under the collaboration agreement.

In October 2014, Alimera paid us a one-time $25.0 million milestone upon FDA approval of ILUVIEN as provided in our collaboration agreement. We are entitled to receive 20% of any net profits (as defined) on sales by Alimera of each licensed product (including ILUVIEN), 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 by offsetting up to 4% of the net profits earned in that country for that product each quarter, effectively reducing pSivida’sour profit share to not less than 16% until those net losses are recouped. If Alimera sublicenses commercialization in any country, we are entitled to 20% of royalties and 33% of non-royalty consideration received by Alimera, less certain permitted deductions.

Either party may terminate the collaboration agreement for the other party’s uncured material breach under various conditions and upon various bankruptcy events. We may terminate the collaboration agreement with respect to a particular product if Alimera notifies us that it is abandoning or has abandoned such product, in which case the agreement provides for specific, exclusive remedies.

Bausch & Lomb

Under a 2003 amended license agreement, Bausch & Lomb has a worldwide exclusive license to make and sell our first-generationRetisert and other first generation products (which, as defined in the agreement includes Retisert) in return for royalties based on sales. We agreed with Bausch & Lomb not to develop, license or commercialize a product designed to receive regulatory approval to treat uveitis, but only for so long as (i) Bausch & Lomb is actively commercializing a product the net sales of which bear the base royalty payable to us that is not subject to any royalty reduction or offset and (ii) Bausch & Lomb has not developed or commercialized a uveitis product that does not bear such royalties. This agreement also covered Vitrasert prior to patent expiration. Bausch & Lomb can terminate its agreement with us without penalty at any time upon 90 days’ written notice.

Pfizer

Our June 2011 Amended and Restated Collaborative Research and License Agreement with Pfizer (the Restated Pfizer Agreement) provides Pfizer an exclusive option, under various circumstances, to license the development and commercialization of a sustained release bioerodible implant to deliver latanoprost by subconjunctival injection (the Latanoprost Product) worldwide for human ophthalmic disease or conditions other than uveitis. Under the Restated Pfizer Agreement, at our discretion and expense, we can develop the Latanoprost Product through Phase II2 clinical trials. If we cease development, or if we commence and complete Phase II2 clinical trials, Pfizer may exercise its option at either juncture in exchange for payments of prescribed, but different levels of, license fee and potential future milestones plus royalties. If Pfizer does not exercise any such option, the Restated Pfizer Agreement will automatically be terminated.

Either Pfizer or we may terminate the Restated Pfizer Agreement for various reasons, including in the event of aother party’s uncured material breach of this agreement that is not cured within the applicable cure period or if the other party enters intoupon various bankruptcy or similar proceedings.events. Pfizer may terminate this agreement at its sole discretion on 60 days’ notice. In the event Pfizer so terminates, or if we terminate for Pfizer’s material breach, we have the right to develop and commercialize the Latanoprost Product.

The Restated Pfizer Agreement replaces all of the rights and obligations under a 2007 Research and License Agreement, except for confidentiality and indemnification provisions. We regained all rights to our intellectual property in ophthalmic applications previously included in the original Pfizer agreement other than pursuant to the Restated Pfizer Agreement.

Pfizer owned approximately 6.3%5.4% of our outstanding stock as of August 31, 2015.2016.

Enigma Therapeutics

Under aOur December 2012 license agreement, amended and restated in March 2013, with Enigma Therapeutics Limited (Enigma) acquiredprovides Enigma with an exclusive, worldwide, royalty-bearing license for the development of BrachySil

(now (now named OncoSil™), a BioSilicon product candidate for the treatment of pancreatic and other types of cancer.cancers. We

received an upfront fee of $100,000 and are entitled to an 8% sales-based royalty, 20% of sublicense consideration and milestones based on aggregate product sales. Enigma is obligated to pay an annual license maintenance fee of $100,000, creditable during each ensuing twelve-month period against reimbursable patent maintenance costs and sales-based royalties. Annual license maintenance fees of $100,000 were paid in January 2014, January 2015 and JanuaryDecember 2015. Enigma has the right to terminate itsthis license upon 60 daysdays’ prior written notice.

Research and Development

Our clinical and pre-clinical research programs primarily consist offocus on ophthalmic applications of our technology systems. Our research and development expenses totaled $14.4 million in fiscal 2016, $12.1 million in fiscal 2015 and $9.6 million in fiscal 2014 and $7.02014. Of these amounts, $12.8 million in fiscal 2013. Of these amounts,2016, $10.6 million in fiscal 2015 and $8.2 million in fiscal 2014 and $5.4 million in fiscal 2013 were incurred for costs of research and development personnel, clinical and pre-clinical studies, contract services, testing and laboratory facilities. The remaining expense of $1.6 million in fiscal 2016, $1.5 million in fiscal 2015 and $1.4 million in fiscal 2014 and $1.6 million in fiscal 2013 consisted of non-cash charges for amortization of intangible assets, depreciation of property, plant and equipment and stock-based compensation expense specifically allocated to research and development personnel.

During the first quarter of fiscal 2017, we consolidated all of our research and development operations in our facility in Watertown, Massachusetts. We closed our research facility in Malvern, U.K. and have terminated the employment of all of our employees in that location.

Intellectual Property

Our intellectual property rights are crucial to our business. We holdown or are licensedlicense patents relating to our core technology systems in the United StatesU.S. and other countries. Our patents generally cover the design, formulation, manufacturing methods and use of our sustained release therapeutics, devices and technologies. Patents for individual products extend for varying periods according to the date of patent filing or grant and legal term of patents in the various countries where patent protection is obtained. The actual protection afforded by a patent, which can vary from country to country, depends upon the type of patent, the scope of its coverage and the availability of legal remedies in the country. Patent term extension may be available in various countries to compensate for a patent office delay or a regulatory delay in approval of the product.

The U.S. patent with which Retisert is marked expires in March 2019. The latest expiring patent covering ILUVIEN and Medidur expires in August 2027 in the U.S. and in October 2024 in the EU, although extensions have been obtained or applied for through May 2027 in various EU countries.

The following table provides general details relating to our owned and licensed patents (including both patents that have been issued and applications that have been accepted for issuance) and patent applications as of August 31, 2015:2016:

Employees

We had 2620 employees as of August 31, 2015.2016. None of our employees is covered by a collective bargaining agreement.

Manufacturing

We currently manufacture our product candidates for pre-clinical studies and clinical trials. We purchase raw materials necessary to manufacture Medidur and our other product candidates in the ordinary course of business, and they are available from multiple sources. The manufacture of Retisert and ILUVIEN is the responsibility of our licensees. We do not own or operate manufacturing facilities for the production of commercial quantities of our product candidates. If Medidur is approved, we may perform initial commercial manufacture in our current facility, but we expect to arrange for long-term manufacture by contract manufacturers or licensees.

Sales and Marketing

We have no marketing or sales staff. We currently depend on collaborative partners to market our products. Significant additional expenditures would be required for us to develop an independent sales and marketing organization.

Third PartyThird-Party Reimbursement and Pricing Controls

SalesIn both domestic and foreign markets, sales of pharmaceutical products are significantly dependentdepend, in part, on the availability and extentamount of reimbursement to consumers of the cost of the products fromby third-party payors, such as government health administration authoritiespayers, including governments and plans, private health insurers and other organizations, as well as on the timing and complexity of obtaining those reimbursements.

The passage of the Medicare Prescription Drug and Modernization Act of 2003 imposed requirements for the distribution andplans. Governments may regulate coverage, reimbursement and/or pricing of prescription drugs, whichpharmaceutical products or require discounts. Private health plans may also seek to manage cost and utilization by implementing coverage and reimbursement limitations.

U.S. and foreign governments regularly consider reform measures that affect health care coverage and costs. Such reforms may include changes to the marketingcoverage and reimbursement of our products by us or our

licensees. Thepharmaceutical products. For example, in the U.S., the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act of(Healthcare Reform Law), was enacted in 2010 collectively referred to as the ACA, is expected to significantly changeand substantially changed the way healthcare is financed by both governmental and private insurers. The ACAIn the EU, governments may result in downward pressure on pharmaceutical reimbursement, which could negatively affect market acceptance of new products,set prices or otherwise regulate pricing. Negotiating prices with governmental authorities can delay commercialization. In recent years, EU governments have considered or implemented various cost-containment measures, such as price freezes, increased price cuts and themandatory rebates, discounts, taxesand EU governments likely will continue to use these and other costs resulting from the ACA may havecost-containment measures, including value-based pricing and reference pricing (i.e., referencing prices in other countries and using those reference prices to set a significant effect on our results of operations in the future. In addition, potential reductions of the per capita rate of growth in Medicare spending under the ACA could potentially limit access to certain treatments or mandate price controls for our products.

In many foreign markets, including countries in the EU, pricing of pharmaceutical products is subject to governmental control. In the U.S., there have been, and there will likely continue to be, federal and state proposals to implement similar governmental pricing control.price).

Competition

The market for products treating back-of-the-eye diseases is highly competitive and is characterized by extensive research efforts and rapid technological progress. We face substantial competition for our products and product candidates. Pharmaceutical, drug delivery and biotechnology companies, as well as research organizations, governmental entities, universities, hospitals, other nonprofit organizations and individual scientists, have developed and are seeking to develop drugs, therapies and novel delivery methods to treat diseases targeted by our targeted diseases.products and product candidates. Most of our competitors and potential competitors are larger, better established, more experienced and have substantially more resources than we or our partners have. Competitors may reach the market earlier, may have obtained or could obtain patent protection that dominates or adversely affects our products and potential products, and may offer products with greater efficacy, lesser or fewer side effects and/or other competitive advantages. We believe that competition for treatments of back-of-the-eye diseases is based upon the effectiveness of the treatment, side effects, time to market, reimbursement and price, reliability, ease of administration, availability, patent position, and other factors.

Many companies have or are pursuing products to treat back-of-the-eye diseases that are or would be competitive with our products and product candidates.ILUVIEN or Medidur. Some of these products and potential products include the following:

Avastin® is approved to treat various cancers, but is used off-label for treatment of diabetic retinopathy. Studies are ongoing on the use of Avastin in back-of-the-eye diseases. Genentech is a wholly-owned member of the Roche Group. Novartis AG has the right to market and sell Lucentis outside of the U.S. Regeneron maintains exclusive rights to EYLEA in the U.S., and Bayer HealthCare owns the exclusive marketing rights outside the U.S. Lucentis, EYLEA and Avastin are all injected into the back of the eye on a regular basis. Allergan, Inc.’s Ozurdex® (dexamethasone intravitreal implant), a bioerodible, extended release intravitreal implant, has been approved for the treatment of DME in eyes that have had, or are scheduled for, cataract surgery. It has a duration of therapy of several months. Other companies, including Genentech, are working on the development of product candidates and extended delivery devices for the potential treatment of DME, including those that act by blocking VEGF and VEGF receptors, as well as use of small interfering ribonucleic acids (siRNAs) that modulate gene expression.

Revenues

We operate in one business segment. The following table summarizes our revenues by type and by geographical location. Revenue is allocated geographically by the location of the subsidiary that earns the revenue. For more detailed information regarding our operations, see our Consolidated Financial Statementsconsolidated financial statements commencing on page F-1.

Government Regulation

Federal Food, Drug, and Cosmetic Act and Comparable Foreign Laws.The FDA and comparable regulatory agencies in foreign countries impose substantial requirements upon the clinical development, manufacture and marketing of pharmaceutical products. These agencies regulate, among other things, the research, development, testing, manufacture, quality control, labeling, storage, record-keeping, approval, distribution, import, export, advertising and promotion of drug products.

Drug Development, Approval, and Regulation in the U.S.The processsteps required by the FDA under the new drug provisions of the Federal Food, Drug, and Cosmetic Act before our productsa drug may be marketedapproved for marketing in the United StatesU.S. generally involvesinclude the following:

The testing and approval process requires substantial time, effort and financial resources, and varies substantially based upon the type, complexity and novelty of the product. We cannot be certain that any approval will be granted on a timely basis, if at all.

Pre-clinical tests include laboratory evaluation of the product candidate, its chemistry, formulation and stability, as well as animal studies to assess the potential safety and efficacy of the product.product candidate. Pre-clinical tests intended for submission to the FDA must be conducted in compliance with FDA’s current Good Laboratory Practice (GLP) regulations and the U.S.Department of Agriculture’s Animal Welfare Act. The results of the pre-clinical tests, together with manufacturing information, analytical data and protocols for proposed human clinical trials, are submitted to the FDA as part of an IND, which must become effective before the IND sponsor may begin human clinical trials. The IND automatically becomes effective 30 days after receipt by the FDA unless the FDA, within the 30-day time period, raises concerns or questions about the conduct of the proposed clinical trials as outlined in the IND, and imposes a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before clinical trials can begin. There is no certainty that pre-clinicalPre-clinical trials willdo not necessarily result in the submission of an IND or thatand submission of an IND willdoes not necessarily result in FDA authorization to commence clinical trials.

Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators. The conduct of clinical trials is subject to extensive regulation, including compliance with the FDA’s bioresearch monitoring regulations and Good Clinical Practice (GCP) requirements, which establish standards for conducting, recording data from, and reporting the results of, clinical trials and are intended to assure that the data and reported results are credible and accurate, and that the rights, safety, and well-being of study participants are protected. Clinical trials aremust be conducted in accordance with protocols that detail the objectives of the study, the parameterscriteria for determining subject eligibility, the dosing plan, patient monitoring requirements, timely reporting of adverse events, and other elements necessary to be used to monitorensure patient safety, and any efficacy criteria to be evaluated. Each protocol must be submitted to the FDA as part of the IND. Further, each clinical study must be reviewed, approved, and conducted under the auspices of an independent Institutional Review Board (IRB) or Ethics Committee (EC)(EComm). The IRB/EC will consider,EComm’s role is to protect the rights and welfare of human subjects involved in clinical studies by evaluating, among other things, ethical factors,the potential risks and benefits to subjects, processes for obtaining informed consent, monitoring of data to ensure subject safety, and provisions to protect the subjects’ privacy. Foreign studies conducted under an IND application must meet the same requirements that apply to studies being conducted in the U.S. Data from a foreign study not conducted under an IND may be submitted in support of human subjectsan NDA if the study was conducted in accordance with GCP and possible liability of the institution. FDA is able to validate the data.

Some clinical trials, called “investigator-sponsored” clinical trials, are conducted by third-party investigators responsible for the regulatory obligations associated with sponsorship of a clinical trial. The results of these trials may be used as supporting data by a company in itsan application for FDA approval, if appropriate, provided that the companyapplicant has contractual rights to use the results.

Human clinical trials are typically conducted in three sequential phases, whichbut the phases may overlap:overlap and different trials may be initiated with the same drug candidate within the same phase of development in similar or differing patient populations:

In the case of products for life-threatening diseases, such as cancer, or severe conditions such as blinding eye disease, or for products that require invasive delivery, initial human testing is often conducted in patients with the disease rather than in healthy volunteers. Since these patients already have the targeted disease or condition, these studies may provide initialpreliminary evidence of efficacy traditionally obtained in Phase II2 trials, and so these trials are frequently referred to as Phase I/II1/2 or IIa2a trials.

WeClinical trials may be suspended by the sponsor or our collaborative partners may not successfully complete Phase I, Phase II or Phase III testing of our product candidates within any specific time period, if at all. Furthermore, we, our collaborative partners,by the FDA the IRBs/ECs, foreign regulatory authorities or the sponsor, if any, may suspend clinical trialsIRB/EComm at any time on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk.

The results of pre-clinical studies and clinical trials, together with other detailed information, including information on the manufacture and composition and proposed labeling of the product candidate are submitted to the FDA as part of an NDA for approval of the marketing and commercial shipment of the product for a proposed indication. The fees payable to the FDA for reviewing an NDA, as well as annual fees for commercial manufacturing establishments and for approved products, can be substantial. The FDA has a statutorily mandated goal of responding to standard review NDAs within ten months after the 60-day filing review period, but this timeframe is often extended. The first indication of the FDA’s review progress is provided at the mid-cycle review. This typically occurs approximately five months after the NDA is submitted. However, the review process is often significantly extended by FDA requests for additional information or clarification. The FDA may refer the application to an advisory committee for review, evaluation and recommendation as to whether the application should be approved. The FDA is not bound by the recommendation of an advisory committee, but it generally follows such recommendations. The FDA may deny an NDA if the applicable regulatory criteria are not satisfied, or may require additional clinical data. Even if the additional data are submitted, the FDA ultimately may decide that the NDA does not satisfy the criteria for approval.

Satisfaction of FDA new drug approval requirements typically takes several years or more, and varies substantially. The FDA may delay approval of product candidates for a considerable period of time or fail to grant approval at all, and may require additional trials or other costly procedures in order to obtain regulatory approval, which delay or render impossible or impractical obtaining FDA approval. The time and expense required to obtain FDA approval for regulated products can exceed the time and expense of the research and development initially required to create the product.. Even if a product receives regulatory approval, the FDA may limit the indications for use or place other conditions on any approvals that could restrict the commercial application of the product. In addition, as a condition of approval, the FDA may require a sponsor to conduct additional post-approval clinical trials to confirm that the drug is safe and effective for its intended uses. The FDA may also require surveillance programs to monitor approved products or changes in labeling. The FDA has the authority to prevent or limit further marketing of a product based on the results of these post-approval programs. FDA approval may also be subject to the manufacturers’ continued adherence to a Risk Evaluation Mitigation Strategies (REMS) program. REMS, which are tailored to specifically address the risks of a given drug, may contain elements that restrict distribution of the drug to certain physicians, pharmacists and patients, or that require the use of communication tools such as letters to healthcare providers and patients detailing the risks associated with the drug.

After approval, certain changes to the approved drug, such as adding new indications, manufacturing changes, or additional labeling claims are subject to further FDA review and approval. Depending on the nature of the change proposed, an NDA supplement must be filed and approved before the change may be implemented.

For many proposed post-approval changes to an NDA, but excluding efficacy supplements to an NDA, the FDA has up to 180 days to review the application. As with new NDAs, the review process is often significantly extended by the FDA and requests for additional information or clarification.

Once a product approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if safety problems occurare identified after the product reaches the market. LaterWhere a withdrawal may not be appropriate, later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may expose us to product liability claims and result in other consequences, including

Any drug product manufactured or distributed under FDA approval is subject to pervasive and continuing regulation. All manufacturers must comply with regulations related to requirements for record-keeping and reporting adverse experiences with the product. Commercial drug manufacturers and their subcontractors are required to register their establishments with the FDA and certain state agencies. Drug manufacturers and their subcontractors are also subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with ongoing regulatory requirements, including current good manufacturing practices (cGMP), which impose procedural and documentation requirements. Failure to comply with the statutory and regulatory requirements can subject a manufacturer to possible legal or regulatory action, such as warning letters, suspension of manufacturing, seizure of product, injunctive action or possible civil penalties. The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Drugs may be promoted only for the approved indications and in accordance with the provisions of the

approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability.

Foreign Regulation of Drug Development, Approval, and Marketing.Countries outside the U.S. also have regulatory requirements governing human clinical trials conducted in and marketing approval for pharmaceutical products sold in their countries. The Foodrequirements governing the conduct of clinical trials, product licensing, pricing and Drug Administration Amendments Actreimbursement vary widely by country. Whether or not FDA approval is obtained, requisite approvals from regulatory authorities in foreign countries must be obtained prior to the commencement of 2007 (FDAAA) is designedclinical studies or marketing of a product in those countries. Certain countries outside of the U.S. have a similar process that requires the submission of a clinical study application much like the IND prior to provide the public with more easily accessible information about the safety and efficacycommencement of marketed drugshuman clinical studies.

The drug approval process varies from country to country, can involve additional testing beyond that required by FDA, and the time required for these approvals may be substantially longer or shorter than that required for FDA with increased authority to ensure drug safety. The FDAAA requires that we register each controlled clinical trial, aside from a Phase I trial, on a website (www.ClinicalTrials.gov) administeredapproval. Clinical trials conducted in one country may not be accepted by National Institutes of Health (NIH), including descriptive information (e.g., a summaryother countries, and approval in lay termsone country does not assure approval in any other country.

Under the EU regulatory system, marketing authorizations are submitted under either the centralized procedure or one of the study design,national authorization procedures.

Similar to the U.S., both marketing authorization holders and manufacturers of medicinal products are subject to comprehensive regulatory oversight by the EMA and the competent authorities of the individual EU member states both before and after grant of the manufacturing and marketing authorizations. This includes control of compliance by the entities with EU cGMP rules, which govern quality control of manufacturing processes, methods and equipment and require documentation policies and procedures. Failure by authorization holders, suppliers, manufacturers and distributors to comply with EU laws, the related national laws of individual EU member states or the laws of other foreign regulatory authorities governing the research, development, testing, manufacture, labeling, storage, record-keeping, approval, distribution, import, export, advertising or promotion of our drug products may result in administrative, civil, or criminal penalties. These penalties could include delays in or refusal to authorize the conduct of clinical trials or to grant marketing authorization, product withdrawals and recalls, product seizures, suspension, or variation of the marketing authorization, total or partial suspension of production, distribution, manufacturing, or clinical trials, operating restrictions, injunctions, suspension of licenses, fines and criminal penalties.

Orphan Drug Designation. Under the Orphan Drug Act, the FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition, which generally is a disease or condition that affects fewer than 200,000 individuals in the U.S., or more than 200,000 individuals in the U.S., but for which there is no reasonable expectation that the cost of developing and making a drug product available in the U.S. for this type of disease or condition will be recovered from sales of the product. Orphan drug designation must be requested before submitting an NDA or supplemental NDA. After the FDA grants orphan drug designation, the identity of

the therapeutic agent and desired outcome), recruitment information (e.g., target numberits potential orphan use are publicly disclosed by the FDA. Orphan drug designation does not convey any advantage in, or shorten the duration of, participantsthe regulatory review and whether healthy volunteersapproval process. If a product which has an orphan drug designation subsequently receives the first FDA approval for the indication for which it has such designation, the product is entitled to an orphan exclusivity period. Orphan exclusivity prevents FDA from approving any other applications to market the same drug for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan exclusivity. This exclusivity does not prevent a competitor from obtaining approval to market a different product that treats the same disease or condition or the same product to treat a different disease or condition.

Medicinal products are accepted), location and contact information and administrative data (e.g., FDA identification numbers). Within one yeareligible for orphan designation in the EU if they meet each of the following requirements:

The application for orphan designation must be submitted to the website, unlessEMA and approved before an application is made for marketing authorization for the drug hasproduct. Once authorized, orphan medicinal products are entitled to ten years of market exclusivity during which competent authorities of the EU member states, the EMA and the EC are not yet been approved. In that casepermitted to accept applications or grant marketing authorization for other similar medicinal products with the informationsame indication. However, marketing authorization may be granted to a similar medicinal product with the same orphan indication during the ten-year exclusivity period if the manufacturer of the original orphan medicinal product is posted shortly afterunable to supply sufficient quantities or if the latter product approval has been obtained. The FDA requires certification of compliance with all relevant FDAAA clinical trials reporting requirements during product development.

The results of product development, pre-clinical studies and clinical studies are submittedis safer, more effective or otherwise clinically superior to the FDA as partoriginal orphan medicinal product. The period of an NDA for approvalmarket exclusivity may also be reduced to six years if, at the end of the marketing and commercial shipment oforphan product’s fifth year on the product. The FDA may deny an NDA if the applicable regulatory criteria are not satisfied, or may require additional clinical data. Even if the additional data are submitted, the FDA ultimately may decidemarket, it can be demonstrated that the NDA doesproduct is sufficiently profitable so as not satisfy the criteria for approval. As a conditionto justify maintenance of approval, the FDA may require a sponsor to conduct additional clinical trials to confirm that the drug is safe and effective for its intended uses.

Satisfaction of FDA requirements or similar requirements of foreign regulatory agencies typically takes several years or more, and varies substantially. Regulatory authorities may delay marketing of potential products for a considerable period of time or prevent it entirely, and may require costly procedures in order to obtain regulatory approval. The time and expense required to obtain FDA or foreign regulatory clearance or approval for regulated products can frequently exceed the time and expense of the research and development initially required to create the product. Success in pre-clinical or early stage clinical trials does not assure success in later stage clinical trials. Data from pre-clinical and clinical activities may not be conclusive, and may be susceptible to varying interpretations, which could delay or prevent regulatory approval. Even if a product receives regulatory approval, the approval may be subject to significant limitations based on data from pre-clinical and clinical activities. The FDA or foreign regulatory authorities may also require surveillance programs to monitor approved products which have been commercialized and may require changes in labeling.

Once issued, the FDA or foreign regulatory authorities may withdraw product approval for non-compliance with regulatory requirements or if safety or efficacy problems occur or are demonstrated in subsequent studies after the product reaches the market. Any product manufactured or distributed under FDA or foreign regulatory approval is subject to pervasive and continuing regulation. All manufacturers must comply with regulations related to requirements for record-keeping and reporting adverse experiences with the product, and the FDA may also require surveillance programs to monitor approved products that have been commercialized. The FDA has the power to require changes in product labeling or to prevent further marketing of a product based on the results of these post-marketing programs. Even after initial FDA or other foreign regulatory approval has been obtained, we or our collaborative partners could be required to conduct further studies to provide additional data on safety or efficacy or, should we desire, to gain approval for the use of a product as a treatment for additional clinical indications. In addition, use of a product during testing and after marketing approval has been obtained could reveal side effects which, if serious, could limit uses, or in the most serious cases, result in a market withdrawal of the product or expose us to product liability claims. For certain drugs that the FDA determines pose risks that outweigh the benefits, FDA approval may be subject to the manufacturers’ continued adherence to a REMS program. REMS, which are tailored to specifically address the risks of a given drug, may contain elements that restrict distribution of the drug to certain physicians, pharmacists and patients, or that require the use of

communication tools such as letters to healthcare providers and patients detailing the risks associated with the drug. Foreign regulatory authorities also regulate post-approval activities.

Commercial drug manufacturers and their subcontractors are required to register with the FDA and state agencies. Drug manufacturers and their subcontractors are also subject to periodic unannounced inspections by the FDA and state agencies for compliance with current good manufacturing practices (cGMP), which impose procedural and documentation requirements upon us and our third-party manufacturers.exclusivity.

Healthcare Law and Regulation.Healthcare providers, including physicians, and third-party payorspayers play a primary role in the recommendation and prescription of drug products that are granted marketing approval. Arrangements with healthcare providers, third-party payorspayers and other healthcare customers are subject to broadly applicable fraud and abuse and other healthcare laws and regulations in the U.S. and in other countries and jurisdictions. Within the U.S., these laws generally apply to pharmaceutical companies once the companies have marketed products or marketed products reimbursable by federal healthcare programs such as Medicare and Medicaid. For the laws with such applicability, we could be subject to the laws if any of our product candidates in the future receive marketing approval and/or coverage under federal healthcare programs. Although the specific provisions of these laws vary, their scope is generally broad and there may not be regulations, guidance or court decisions that apply the laws to particular industry practices. Such U.S. federal healthcare laws and regulations include the following:

Within the U.S., analogous state laws and regulations, such as anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by governmental as well as non-governmental third-party payors,payers, including private insurers. Foreign laws may also seek to prevent fraud and abuse.

Laws and regulations have been enacted by various states to regulate the sales and marketing practices of pharmaceutical companies with marketed products. The laws and regulations generally limit financial interactions between manufacturers and health-care providers;healthcare providers, require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S. federal government;government and/or require disclosure to the government and public of financial interactions. Many of these laws and regulations contain ambiguous requirements or require administrative guidance for implementation. Given the lack of clarity in laws and their implementation, any future reporting (if

we obtain approval and/or reimbursement from federal healthcare programs for our product candidates) could be subject to the penalty provisions of the pertinent laws and regulations.

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and its implementing regulations, also imposes obligations on certain health care providers, health plans, and health carehealthcare clearinghouses (which are entities that processorprocess or facilitate the processing of nonstandard data elements of health information into standard data elements, or vice versa) and certain of their contractors with respect to safeguarding the privacy, security and transmission of individually identifiable health information. State and foreign laws also govern the privacy and security of health information in some circumstances, manycircumstances. Many of whichthese laws differ from each other in significant ways and they often are not preempted by HIPAA, thus complicating compliance efforts.

Other Laws.We are also subject to numerous other federal, state and local laws relating to such matters as safe working conditions, manufacturing practices, environmental protection, fire hazard control and disposal of hazardous or potentially hazardous substances. We may incur significant costs to comply with such laws and regulations now or in the future. In addition, we cannot predict what adverse governmental regulations may arise from future U.S. or foreign governmental action.

Foreign Laws.We and our collaborative partners are also subject to regulatory requirements governing human clinical trials and marketing approval for pharmaceutical products sold in foreign countries. The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary widely by country. Whether or not FDA approval is obtained, we or our collaborative partners must obtain approval of a product by the comparable regulatory authorities of foreign countries before manufacturing or marketing the product in those countries. The approval process varies from country to country, and the time required for these approvals may differ substantially from that required for FDA approval. There is no assurance that clinical trials conducted in one country will be accepted by other countries, or that approval in one country will result in approval in any other country. For clinical trials conducted outside the U.S., the clinical stages generally are comparable to the phases of clinical development established by the FDA.

Corporate Information

pSivida Corp. was organized as a Delaware corporation in March 2008. Its predecessor, pSivida Limited, was formed in December 2000 as an Australian company incorporated in Western Australia. Our principal executive office is located at 480 Pleasant Street, Suite B300, Watertown, Massachusetts 02472 and our telephone number is (617) 926-5000.

Additional Information

Our website address is http://www.psivida.com. Information contained on, or connected to, our website is not incorporated by reference into this Annual Report on Form 10-K. Copies of our annual reports onForm 10-K, proxy statements, quarterly reports on Form 10-Q, current reports on Form 8-K and, if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, are available free of charge through our website under “SEC Filings” as soon as reasonably practicable after we electronically file these materials with, or otherwise furnish them to, the SecuritiesSEC. Further, a copy of this Annual Report on Form 10-K is located at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Information on the operation of the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and Exchange Commission (SEC)information statements and other information regarding issuers that file electronically with the SEC atwww.sec.gov.

Information with respect to ILUVIEN has been derived from public disclosures by Alimera.

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 June 30, 2015, we had a total accumulated deficit of $270.7 million. During the past three fiscal years, we financedwill need additional capital to fund our operations, from license fees, milestone payments,including completing Medidur clinical development and obtaining regulatory approvals and continuing our research and development funding and royalty income from our collaboration partners and sales of equity securities. We do not 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 ourprogram for other product candidates. In addition, if we decide to commercialize Medidur or any of these product candidates achieve regulatory approvalourselves, we would incur significant expenses related to product manufacturing, marketing, sales, distribution and provide us sufficient revenues.other commercialization costs. We believe that our capital resources of $28.5$29.0 million at June 30, 20152016, together with expected revenues from existing collaborations, should enable us to fund our operations as currently planned (including our Medidur clinical trials) into early calendarthe second quarter of fiscal year 2017.2018. This estimate excludes any potential net profits receipts from sales of ILUVIEN.ILUVIEN or other receipts under the Alimera collaboration agreement. We expect thatbelieve our ability to fund our planned operations beyond thenthat time, including completion of clinical development of Medidur, will depend onrequire additional capital from the amount and timingcommercialization of those payments, as well as proceeds from anyILUVIEN, future collaboration or other agreements and/or financing transactions.

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

If we determine that it is desirable or necessary to raise additional capital in the future, weWe do not know if itadditional capital will be available to us when needed or on terms favorable to us or our stockholders. Collaboration, licensing or other agreements may not be available on favorable terms, or at all. We have ando not know when or if we will receive any substantial funds from the commercialization of ILUVIEN. If we seek to sell shares under our at-the-market (ATM) facility butor in another offering, we do not know whether and to what extent we will seek to sell shares pursuant to that program and, if we arebe able to do so, or on what terms. TheFurther, the rules and regulations of the Australian Securities Exchange (ASX) and the NASDAQ Global Market (NASDAQ) require us to obtain shareholder approval for sales of common stock under certain circumstances, which could delay or prevent us from raising additional capital from such sales. Also, 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 or 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 dilutivedilute our existing stockholders’ 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 adequate financing is not available if and when needed, we may delay, reduce the

scope of, or eliminate research or development programs, potential independent commercialization of Medidur or other new products, if any, postpone or cancel the pursuit of product candidates, including pre-clinical and clinical trials and new business opportunities, reduce staff and operating costs, or otherwise significantly curtail our operations to reduce our cash requirements and extend our capital.

IfWe have incurred significant losses and may never achieve profitability from operations.

We have a history of operating losses, and at June 30, 2016, we had a total accumulated deficit of $292.2 million. Since inception, we have financed our operations primarily from payments under collaboration agreements and sales of our equity securities. We do not have any assured sources of revenue. To become and remain profitable, we and/or our licensees must succeed in developing and commercializing products that generate significant revenue. This will require us or our licensees to be successful in a range of challenging activities, including completing pre-clinical testing and clinical trials of our product candidates, discovering additional product candidates, obtaining regulatory approval for these product candidates, manufacturing, marketing and selling any products for which we may obtain regulatory approval, satisfying any post-marketing requirements and obtaining reimbursement for our products from private insurance or government payers. To date, none of our approved licensed products, including Retisert and ILUVIEN, has generated significant revenues to us from sales. Of our product candidates, only Medidur is in late-stage clinical trials. We may never succeed in these activities and, even if we do, may never generate revenues significant enough to achieve profitability. Because of the recordednumerous risks and uncertainties associated with pharmaceutical product development and commercialization, we are unable to accurately project when or if we will be able to achieve profitability from operations. Even if we do so, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would depress the value of our intangible assets under GAAPcompany and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify our product offerings or even continue our operations.

There is further impaired,no assurance our financial results could be materially adversely affected.Retisert royalty income will continue at current levels or at all.

At June 30, 2015, we had $1.9Our Retisert royalty income has ranged between $1.2 million of intangible assets relating to our Durasert and BioSilicon (including Tethadur) technologies on our balance sheet following impairment charges of $14.8$1.4 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 assessmenteach of the recoverability of the fair market value of those assets. Adverse events relatinglast five fiscal years. We do not expect Retisert royalty income to these technologies, including the clinical development, regulatory approvalgrow materially, if at all, and success of commercialization of products using them,it may decline or cease. The patent with which Retisert is marked expires in March 2019, and significant changes in our market capitalization could result in impairment charges. Further impairment chargeswe may not receive any Retisert royalty income after that time. Bausch & Lomb ceased selling Vitrasert on our intangible assets could have a material adverse effect on our results of operations in the quarter of the impairment.its patent expiration.

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:

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.

ThereIf the recorded value of our intangible assets under GAAP is no assuranceimpaired, our Retisert royalty income will continue at current levels or at all.financial results could be materially adversely affected.

Retisert royalty income, which totaled between $1.3At June 30, 2016, we had $1.1 million of intangible assets relating to our Durasert and $1.4 millionTethadur technologies on our balance sheet. We conduct impairment analyses of our intangible assets as required under U.S. Generally Accepted Accounting Principles (U.S. GAAP) and could take impairment charges in eachthe future if the recorded values for our intangible assets were to exceed our assessment of the fiscal 2012, fiscal 2013recoverability of the fair market value of those assets. Adverse events relating to these technologies, including the clinical development, regulatory approval and fiscal 2014, declined to $1.2 millionsuccess of commercialization of products using them, and significant changes in fiscal 2015. We do not expect Retisert royalty income to grow materially, if at all, and it may continue to decline. There is no assurance that Bausch & Lomb will continue toour market Retisert, which received marketing approvalcapitalization could result in 2005, and accordingly that we will continue to receive royalties fromimpairment charges. Impairment charges on our intangible assets could have a material adverse effect on our results of operations in the salequarter of Retisert. Bausch & Lomb no longer markets Vitrasert.the impairment.

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

Our success is dependent on our ability to complete clinical development of, obtain marketing approvals for and successfully commercialize Medidur for posterior segment uveitis. If we are unable to do so, either alone or through a collaboration, or experience significant delays in doing so, our business could be materially harmed.

We have invested a significant portion of our efforts and financial resources in the development of Medidur for posterior segment uveitis. Our prospects are substantially dependent on our ability to obtain marketing approval for and successfully commercialize Medidur. Successful commercialization of Medidur will depend on various factors, including:

If, as a result of failure to achieve any of these or other factors, we are unable to receive marketing approval for or successfully commercialize Medidur, or experience significant delays in doing so, our business could be materially harmed.

If our CROs, vendors and investigators do not successfully carry out their responsibilities or if we lose our relationships with them, our development efforts with respect to our product candidates could be delayed.

We are dependent on CROs, vendors and investigators for pre-clinical testing and clinical trials related to our product development programs. These parties are not our employees, and we cannot control the amount or timing of resources that they devote to our programs. If they do not timely fulfill their responsibilities or if their performance is inadequate, the development and commercialization of our product candidates could be delayed. The parties with which we contract for execution of clinical trials play a significant role in the conduct of the trials and the subsequent collection and analysis of data. Their failure to meet their obligations could adversely affect clinical development of our product candidates. If we lose our relationship with any one or more of these parties, we could experience a significant delay in identifying another comparable provider and contracting for its services. We may be unable to retain an alternative provider on reasonable terms, if at all. Even if we locate an alternative provider, this provider may need additional time to respond to our needs and may not provide the same type or level of service as the original provider. In addition, any provider that we retain will be subject to GLP and similar foreign standards, and we do not have control over compliance with these regulations by these providers. Consequently, if these practices and standards are not adhered to by these providers, the development and commercialization of our product candidates could be delayed.

There is no assurance that we will be able to file our MAA or NDA for Medidur for posterior segment uveitis on the schedule we have planned, which could delay the potential marketing approvals and commercialization of Medidur.

We are dependent on third parties to collect and analyze the data from our Medidur Phase 3 trials and Medidur inserter utilization study, and we cannot assure that they will provide the data in time for us to meet the planned filings of our MAA and NDA. Further, we need the results of our second Phase 3 trial, which requires completion of enrollment and six-month final visits with patients. There is no assurance that we will reach the six-month primary endpoint of that trial on the schedule required to meet our planned filing schedule. Failure to file for our applications for marketing approvals on our planned schedule could delay the potential receipt of those approvals and the commercialization of Medidur.

There is no assurance that data we plan to submit in support of our planned MAA and NDA for Medidur for posterior segment uveitis will be acceptable to the EMA or the FDA and accordingly that Medidur’s European or U.S. marketing authorization will be granted.

We plan to file our MAA for Medidur for posterior segment uveitis based on data from our first Phase 3 trial rather than two Phase 3 trials as a result of the high statistical significance of the top-line results achieved in our first trial. The MHRA advised us that, consistent with the published PtC of the European Agency for Evaluation of Medicinal Products, an application for a product treating a condition like posterior segment uveitis could be based on statistically compelling and clinically relevant results from just one pivotal trial. The MHRA provided this advice without reviewing the results of our first Phase 3 trial, which had not been completed at the time. There can be no assurance that the results from our first Phase 3 trial will satisfy the standards of the PtC or provide the data necessary for marketing approval in Europe, and data from our second Phase 3 trial or other data could be required.

We plan to file our NDA for Medidur for posterior segment uveitis on results from our two Phase 3 trials. While our first Phase 3 trial of Medidur for posterior segment uveitis met its primary efficacy endpoint with high statistical significance and showed encouraging safety results, there is no assurance that the second trial will achieve the same or comparable results to the first trial or provide the evidence of safety and efficacy required to file an NDA for approval of Medidur by the FDA or other regulatory authorities. Further, we are conducting our second Phase 3 trial of Medidur in India. In general, the FDA accepts data from clinical trials conducted outside the U.S.; however, acceptance of this data is subject to, among other things, the clinical trials being conducted and performed by qualified investigators in accordance with GCP principles, the trial population must also

adequately represent the U.S. population, and the data must be applicable to the U.S. population and U.S. medical practice in ways that the FDA deems clinically meaningful. In addition, while our second Phase 3 clinical trial is subject to applicable local laws, FDA acceptance of the data from the trial will depend on its determination that it also was conducted in accordance with all applicable U.S. laws and regulations.

We plan to submit data from our new inserter utilization study in support of both our MAA and NDA. The EMA or the FDA may require an additional study of our inserter.

The FDA has significant discretion in determining whether to accept an NDA for review and what data to require for review, and there is no assurance that the FDA will find the design of our clinical trials or the data we include in an NDA to be sufficient to accept the NDA for review or to approve the NDA. The EMA has comparable discretion with respect to MAAs. The refusal of the FDA or the EMA to accept our marketing applications for review or their requirements for additional data or trials could delay the timing, increase the expense or render impractical continued pursuit of potential marketing approval of Medidur for posterior segment uveitis. Delay in or inability to obtain marketing approvals for Medidur could materially and adversely affect our business and the price of our common stock.

We may not maintain our European orphan product designation for Medidur for posterior segment uveitis or obtain orphan designation in the U.S. and as a result, may not have the benefits of that designation.

Medidur has been designated as an orphan medicinal product in Europe. However, at the time we apply for marketing authorization, we must also submit a request for maintenance of the orphan designation to determine whether Medidur will maintain its status as an orphan medicine and receive market exclusivity and other benefits. Review of the maintenance of orphan designation is based on data on the then current prevalence of posterior segment uveitis; the then current life-threatening or debilitating nature of posterior segment uveitis; other methods for its diagnosis, prevention or treatment; and if applicable, a justification of Medidur’s significant benefit. This review is carried out independently of, but in parallel to, the evaluation of the marketing authorization application. There is no assurance that Medidur will maintain its orphan medicinal status in Europe. Further, our ability to obtain orphan status for Medidur in the U.S. in uncertain, and there is no assurance we will be able to do so.

Off-label sales of ILUVIEN to treat posterior segment uveitis may adversely affect sales of Medidur, if approved.

The micro-inserts that comprise ILUVIEN and Medidur have substantially the same design, polymers and release rate, and both deliver the corticosteroid FAc. Although Medidur is administered with a smaller gauge needle and delivers a somewhat lower dose of FAc than ILUVIEN, ILUVIEN is already approved and marketed. It is possible that physicians will prescribe ILUVIEN for the treatment of posterior segment uveitis on an off-label basis, which could adversely affect the sales of Medidur, if approved.

There is no assurance that Alimera will successfully commercialize ILUVIEN for DME or that we will receive any significant revenues from its commercialization. If Alimera does not 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 future 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 and to a percentage of royalties and non-royalty consideration where Alimera sublicenses the marketing of ILUVIEN. 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 itsAlimera’s first and only commercial product. WhileAlimera’s sales of ILUVIEN have not been significant to date, Alimera believes thathas continued to incur operating losses, and it has sufficient funds available to fund its operations for the continued commercialization of ILUVIENviolated and in the U.S., Germany, Portugal andfuture may violate the United Kingdom, Alimera has reported thatfinancial covenants of its negative cash flows from operations and accumulated deficit raise substantial doubt about its ability to continue as a going concern. Alimera may seek to raise additional financing to fund its working capital needs for the commercialization of ILUVIEN.loan agreement. We do not know whether Alimeraif, when, or to what extent we will be successful in generating adequate cash flows, obtaining adequate capital or achieving additional marketing approvals for, obtaining adequate pricing and reimbursement for, successfully commercializing and achieving market acceptancereceive future revenues from the commercialization of and generating revenues to pSivida from, ILUVIEN for DME. Commercialization by Alimera in the U.S., Germany, PortugalThe amount and the U.K, including the transitioning from an outside providertiming of sales and marketing services in the U.K. and Germany and the provision of extended payment terms in the U.S., has required a significant expansion of Alimera’s commercial infrastructure and significant financial investments. Delays in the commercial launch in other EU countries where ILUVIEN has received marketing authorization could result in withdrawal of marketing or regulatory authorization for ILUVIEN in one or more of those jurisdictions. Alimera’s efforts to commercialize ILUVIEN successfullyany revenues we receive will be affected among other things, by:by many factors including:

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.

Alimera needs alternative financing to replace its $35.0 million debt facility or additional capital to maintain compliance with the financial covenants under its loan agreement, which Alimera may be unable to obtain, and Alimera’s continued losses and financial condition may cast doubt on its ability to continue to operate as a going concern.

Although Alimera launched ILUVIEN in Germany and the U.K. in the second quarter of 2013 and in the U.S. and Portugal in the first quarter of 2015, Alimera had accumulated a deficit of $361.9 million through June 30, 2016.��Alimera has not generated revenues that cover its actual or anticipated expenses and cannot project the extent of its future losses. Alimera expects to continue to incur substantial losses, and as a result, is unable to predict when or if it will achieve or sustain profitability. Alimera’s ability to achieve profitability and generate net profit payments to us is dependent on its ability to successfully market and sell ILUVIEN.

Alimera failed to meet a revenue threshold in January 2016 and a liquidity threshold as of June 30, 2016 under the financial covenants of its loan agreement. While these failures were subsequently waived by the lender, Alimera was required to pay substantial amounts and grant concessions in connection with these waivers. Alimera reported that based on its financial forecast for the remainder of 2016, it must obtain additional or alternative financing or it is probable that Alimera will not be able to comply with the modified financial covenants under its loan agreement. Alimera is pursuing alternative or additional debt financing (including a recently completed common stock offering raising $25.1 million in net proceeds, which Alimera reported would be used to fund the commercialization of ILUVIEN and other corporate purposes), and has an at-the-market offering in place for possible sales of its common stock. If Alimera is not successful in raising the capital it requires and defaults on its obligations under its loan agreement, its lender may call the loan, which could require Alimera to pay back the entire amount owed and pay an early termination fee, or if the lender does not call the loan, Alimera may have to pay an increased rate of interest, pay additional monetary amounts in exchange for a waiver or modification of the loan agreement, or grant additional equity or warrant coverage and agree to further restrictions on its operations that could hinder it in the future. Alimera’s failure to comply with the covenants under the loan agreement could create substantial doubt about Alimera’s ability to continue as a going concern and to market and sell ILUVIEN. The termination provisions of our agreement with Alimera include various bankruptcy events.

Further, due to the limited revenue generated by ILUVIEN to date, even if Alimera is able to refinance its loan agreement and maintain compliance with its covenants, Alimera will need to raise additional capital to fund the continued commercialization of ILUVIEN. If Alimera is unable to raise sufficient additional financing, it may need to adjust its commercial plans, which likely would adversely affect Alimera’s ability to market ILUVIEN and make any potential payments to us.

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,payers, 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. 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 where ILUVIEN is not currently sold. In the U.S., Alimera has offered extended customer payment terms. 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 hasis associated with certain adverse side effects in the eye, which may affect the success of this micro-insert for treatment of DME and posterior segment uveitis.

The micro-insert for both ILUVIEN and Medidur delivers the non-proprietary corticosteroid FAc, which is associated with cataract formation and elevated IOP and may increase the risk of glaucoma and related surgery to manage those side effects. Although Retisert, which also delivers FAcThese side effects shown in the Phase 3 trials for ILUVIEN resulted in limitations to treat posterior uveitis,the approved indications of ILUVIEN, and sales of ILUVIEN for DME have both been approvedmay be adversely affected by the FDA,potential side effects from FAc relative to other treatments for DME. The extent of ILUVIEN’s long-term side-effect profile beyond month 36 is not yet known. Alimera is conducting a five-year post-authorization, open label registry study of the safety of ILUVIEN in 800 patients treated with the European labeled indication, which was a condition of European approval. Data from this study or other commercial experience could result in the withdrawal of ILUVIEN’s marketing approval in one or more jurisdictions. Further, delay in the commercial launch of ILUVIEN could result in the withdrawal of marketing or regulatory authorization for ILUVIEN in jurisdictions where ILUVIEN has already received marketing authorization. In addition, the perception by physicians of this benefit of efficacy versus the side-effect profile could adversely affect sales of ILUVIEN.

Medidur achieved encouraging safety results through the last follow-up visit in its first Phase 3 trial. However, there is no assurance that encouraging safety results will continue in that trial, or that the second Phase 3 trial will yield encouraging safety results. There is also no assurance that the overall risk-benefit profile for Medidur will be favorable or that Medidur will be determined to be safe for the treatment of posterior segment uveitis in light of its expectedpotential 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.approved.

There is no assurance that Medidurpayment of ILUVIEN net profits to us for 2014 as the result of an independent audit will be foundupheld or that we will receive any future payments of ILUVIEN net profits to be safe and effective for the treatment of posterior uveitis.which we believe we are entitled without future independent audits or at all.

While we are optimisticthe independent audit firm that audited Alimera’s commercialization reporting for 2014 concluded that Alimera over-reported commercialization expenses and accordingly under-reported net profits payable to us, Alimera has sought to challenge those findings in arbitration, and if that challenge is allowed to go forward, may prevail in its efforts to overturn all or part of the Phase III trials for Medidur will show it to be as efficacious as Retisert was shown to be in treating posterior uveitis, but with IOP safety results that could be even better than those shown inaudit firm’s conclusions. Depending upon the ILUVIEN and Retisert Phase III trials, this is only a hypothesis, and there is no assurance thatoutcome of the ongoing Medidur Phase III clinical trials will demonstrate these results. Data from our ongoing IOP assessment fromarbitration, conclusions of the Medidur Phase III trials and top-line results from the Medidur 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 to file an NDA or for approval by the FDA and other regulatory authorities if an NDA is filed. Approvals of Retisert and ILUVIEN by the FDA and other regulatory authorities are not predictive of actions they may takeindependent audit firm with respect to Medidur.

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

Filing an NDA for Medidur will require positive results from our two Phase III trials. Based on our most recent meeting with the FDA, we plan to seek approval of Medidur based on 12-month data from our first Phase III trial, six-month data from our second Phase III trial and data from a short-duration utilization study of our redesigned proprietary inserter, together with data referenced from the Phase III trials of ILUVIEN for DME. We will be filing an amendment with the Indian regulatory authority requesting to change the primary endpoint in the protocol of our second Phase III trial in India from twelve to six months consistent with the primary endpoint for filing the NDA in the U.S., although there is no assurance they will accept the amendment. Further, although enrollment is complete in our first Phase III trial, we do not expect enrollment to be completed in our second Phase III trial until the end of the second quarter of 2016. Many factors could2014 may also affect the timing of filing any NDA for Medidur, including completion of enrollment in the second trial in the time frame we anticipate, utilizing the data on which we currently plan to base the NDA, analyzing the data in the time frame we anticipate, requirements from regulators that would affect our timing, and the actual results from the trials.other periods. As a result, there is no assurance that an NDA for Medidurwe will be filed on the basis of the data we currently planreceive net profits payments to use or that it will be filed in the first half of 2017, if at all.

Even if we file an NDA for Medidur, there is no assurance that the FDA will accept the NDA for review. Whilewhich we believe we are entitled in accordance with the FDA will accept the filing of an NDA for Medidur based on the dataAlimera Agreement. Moreover, we currently plan to utilize, the FDA has significant discretion in determining whether to accept an NDA for review and there is no assurance that the FDA will find the design of our clinical trials or the 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 the FDA’s refusal to accept the NDA for review could materially and adversely affect our business and the price of our common stock.

We are currently conducting, and may in the future conduct, clinical trials for product candidates at sites outsidechallenge Alimera’s reporting under the United States,Alimera Agreement, which may result in future independent audits and arbitration, the FDAoutcome of which may or may not accept data from trials conducted in such locations.

We are currently conducting a Phase III trial of Medidur in India, and may in the future choosebe favorable to conduct one or more of our clinical trials outside the United States.

In general, the FDA accepts data from clinical trials conducted outside the United States; however, acceptance of this data is subject to, among other things, the clinical trials being conducted and performed by qualified investigators in accordance with Good Clinical Practice principles. The trial population must also adequately represent the U.S. population, and the data must be applicable to the U.S. population and U.S. medical practice in ways that the FDA deems clinically meaningful. In addition, while these clinical trials are subject to applicable locals laws, FDA acceptance of the data will depend on its determination that the trials also complied with all applicable U.S. laws and regulations. If the FDA does not accept the data from any trial that we conduct outside the United States, it would likely result in the need for additional trials, which would be costly and time-consuming and delay or permanently halt our development of the applicable product candidates.us.

There is no assurance that Pfizer will exercise its option with respect to the Latanoprost Product if we initiate and complete Phase II2 trials or cease development, in which case we will not receive any further financial consideration under the Restated Pfizer Agreement.

Pfizer has an option for an exclusive, worldwide license to develop and commercialize the Latanoprost Product upon our completion ofif we complete Phase II2 clinical trials, which are at our option and expense, or upon our cessation ofwe cease 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 II2 clinical trials for the Latanoprost Product; that, if completed, the trials will be successful; that Pfizer will in any event, exercise its option;option whether we complete Phase 2 trials or cease development; that, if exercised, Pfizer will commence or complete Phase III3 clinical trials; or that the Latanoprost Product will achieve successful Phase III3 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 have continued to make advances in our development of Tethadur and are optimistic that our Tethadur technology platform can provide sustained delivery of proteins (including antibodies) and peptides, and our data from an in vitro study has shown that the long-term sustained release of antibodies such as Avastin is achievable using Tethadur, our research iscontinues to be at an early stage, and we face challenges. Development of any product candidates utilizing Tethadur is expected to require significant additional research.research and funding. There is no assurance that we will continue our development of Tethadur, that subsequent research will be successful or that we will be able to develop product candidates or approved products using Tethadur to deliver proteins and peptides.

During the first quarter of fiscal year 2017, we consolidated all of our research and development work in our U.S. laboratory facility, closed our U.K. research facility, where much of our Tethadur research was previously conducted, and have terminated the employment of our U.K.-based employees who performed much of the pre-clinical research of Tethadur. There is no assurance that we will successfully transition the research and development of Tethadur to the U.S. or that we will not experience delays as a result of this consolidation.

We do not know if our product candidate for severe knee osteoarthritis in collaboration with HSS will be safe and effective, will ever enter pivotal clinical trials or will become an approved product or be commercialized.

Our product candidate for severe knee osteoarthritis in collaboration with HSS is the subject of an investigator-sponsored, open-label, one-dose, safety and tolerability study. We do not know what the results of that study will be, whether we will be able to develop a product candidate for this indication to eventually enter pivotal Phase 3 trials, whether we will commence or successfully complete any such trials or whether we will obtain regulatory approvals for a product for this indication. Although we believe we will be able to do so, there is no assurance that we will be able to design a product with a longer treatment duration than six months, that we will be able to create a refillable implant or that the product, even if successful for severe knee osteoarthritis, can be extended to treat osteoarthritis of any other joint. In addition, the study for this product candidate is being conducted by an investigator, and we do not control that trial as we would if we were conducting the trial ourselves. We have no agreement with HSS to develop this product beyond the completion of this study, and there is no assurance that we will reach such an agreement. If we do not do so, there is a risk that the intellectual property of HSS and joint intellectual property developed in the course of our collaboration with HSS or future actions by HSS will interfere with our ability to develop and market an OA implant.

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 segment uveitis, for which is in pivotal Phase III3 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. For example, although we have completed favorable pre-clinical tests of a TKI to treat wet AMD, there is additional pre-clinical research to be completed and there is no assurance that we will develop a TKI product to advance to clinical trials. There is no assurance that any feasibility study agreements we have, or enter into, with third parties, or our own research and development programs and collaborations 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:

Results from pre-clinical testing, early clinical trials, investigator-sponsored studies and other data and indications often do not accurately predict final pivotal clinical trial results. In addition, data from one pivotal clinical trial may not be predictive of the results of other pivotal clinical trials for the same product candidate, even if the trial designs are the same or similar. 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, other 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. There is no assurance, for example, that the Durasert product candidate to treat pain associated with severe knee osteoarthritis will advance to Phase III trials or will be safe or effective.

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 product’s 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 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. There is no assurance that we will have the financial resources to develop the capacity to, or be able to, successfully market and sell Medidur for posterior segment uveitis or any other products if we seek to do so.

Our strategy includes independently developing and commercializing products. We do not know when or if we will seek to directly commercialize any products ourselves. We currently have no marketing and sales staffcapability, our approved products are commercialized by others, and we have no experience in commercializing products. We face the decision of how to commercialize Medidur for posterior segment uveitis, if approved. We do not know if we will decide to directly commercialize Medidur or any other products ourselves. Direct commercialization would require us to develop sales and marketing capability and to make a significant financial investment. If we decide to independently and directly commercialize a product in one or more countries, there is no assurance we will be able to hire and manage a successful sales and marketing capability or have the financial resources necessary to fund independent commercialization of any products.products in any country.

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:

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.decline. Although we believe potential revenues from ILUVIEN for DME are important to our future results of operations and financial condition, Alimera has limited experience and limited financial resources, and ILUVIEN for DME is Alimera’s first and only commercial product. Alimera has reported that its negative cash flows from operations and accumulated deficit may raise substantial doubt about its ability to continue as a going concern. Further, due to the limited revenue generated by Alimera to date, Alimera may not be able to maintain compliance with covenants under its loan agreement and, in the event of a default, we do not know whether Alimera will be able to obtain amendments or waivers of those covenants. We do not know if Alimera will be able to raise additional financing if and when required.

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, our products or product candidates 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:

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.payers. 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 and determinations of government and other third-party payors.payers. In particular, if governmentgovernments, private insurers, governmental insurers and other third-party payorspayers 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 or limit the frequency of administration, the market acceptance of our products and product candidates will be limited. Both governmentGovernments, governmental insurers, private insurers and other third-party payorspayers 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 August 31, 2015,2016, we had 238233 patents and 116107 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-operationCooperation 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 partythird-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 costs 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 have entered into many agreements that limit our or the third parties’ rights with respect to our intellectual property, including rights to use, options on rights to use, or prohibitions on rights to use (including noncompetition obligations) our or jointly developed intellectual property. Those rights could adversely affect our rights to develop and commercialize products utilizing our intellectual property.

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, 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.

We do not own or operate manufacturing facilities for the production of commercial quantities of our product candidates, including Medidur. If Medidur or any other of our product candidates is approved, we do not intend to build our own commercial manufacturing facilities and would need to arrange for manufacture by contract manufacturers. There is no assurance that we will be able to arrange for the manufacture of Medidur or any other product on satisfactory terms or that any contract manufacturer will supply any such products on a timely manner and in compliance with applicable regulations.

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:

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 ourOur 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:

Economic conditions and regulatory changes leading up to and following the U.K.’s likely exit from the EU could have a material adverse effect on our business and results of operations.

In June 2016, the U.K. held a non-binding referendum in which voters approved an exit from the EU (commonly referred to as “Brexit”), the announcement of which caused significant volatility in global stock markets and currency exchange rate fluctuations that resulted in the strengthening of the U.S. dollar against the Pound Sterling currency in which we conduct certain business activity. As a result of the referendum, it is expected that the U.K. government will begin negotiating the terms of the U.K.’s withdrawal from the EU, which may amplify the adverse effects experienced to date.

Given the lack of comparable precedent, it is unclear what financial, trade and legal implications the withdrawal of the U.K. from the EU may have and how such withdrawal may affect us. Potential volatility of the U.S. dollar relative to the Pound Sterling or other currencies may adversely affect our operating results and expose us to gains and losses on non-U.S. currency transactions. The announcement of Brexit and the withdrawal of the U.K. from the EU may create economic uncertainty, which may reduce sales of our licensed products. A U.K. withdrawal from the EU may, among other things, increase regulatory complexities, disrupt the free movement of goods, services and people between the U.K. and the EU, undermine bilateral cooperation in key policy areas and significantly disrupt trade between the U.K. and the EU. In addition, Brexit could lead to legal uncertainty and potentially divergent national laws and regulations in Europe, as the U.K. determines which EU laws to replace or replicate. It raises uncertainty, for example, as to the regulatory path for marketing approval of Medidur in the U.K.

If the U.K. were to significantly alter its laws or regulations affecting the biotechnology or pharmaceutical industries, we could face significant new costs and uncertainties Altered regulations could add time and expense to the process by which our product candidates receive regulatory approval in the U.K. and the EU. Similarly, it is unclear at this time what impact Brexit will have on our intellectual property rights and the process for obtaining and defending such rights.

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 payorspayers of healthcare services to contain or reduce costs of healthcare may adversely affect the demand for any products for which we or our licensees may obtain regulatory approval; our or our licensees’ ability to set a price that we or they believe is fair for our products; our or our licensees’ ability to obtain coverage and reimbursement approval for a product; our or our licensees’ 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 PDUFAPrescription Drug User Fee Act (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:

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),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 August 31, 2015,2016, we had outstanding warrants and options to acquire approximately 6.16.6 million shares of our common stock, or approximately 17.1%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 1B.

UNRESOLVED STAFF COMMENTS

None.

We do not own any real property. We lease the following:

None.

Not applicable.

PART II

Market Information, Holders and Dividends

Our common stock is traded on the NASDAQ Global Market under the trading symbol “PSDV”. The following table sets forth the high and low prices per share of our common stock as reported on the NASDAQ Global Market for the periods indicated:

On August 31, 2015,2016, the last reported sale price of our common stock on the NASDAQ Global Market was $3.75.$3.87. As of that date, we had approximately 20 holders of record of our common stock and, according to our estimates, approximately 4,9604,888 beneficial owners of our common stock. In addition, as of that date, there were approximately 2,0101,943 beneficial owners of our CDIs.

We have never paid cash dividends, and we do not anticipate paying cash dividends in the foreseeable future.

Equity Compensation Plan Information

The following table provides information about the securities authorized for issuance under the Company’s equity compensation plans as of June 30, 2015:2016:

On the first day of each fiscal year until July 1, 2017, the number of shares reserved for issuance under the Company’s 2008 Incentive Plan will be increased by the least of (i) 750,000 shares; (ii) 4% of the then outstanding shares of common stock; and (iii) any such lesser number of shares as is determined by the Compensation Committee of the Board of Directors. On July 1, 2015,2016, the number of shares issuable under the 2008 Incentive Plan was increased by 750,000 shares.

Recent Sales of Unregistered Securities

None.

Issuer Repurchases of Equity Securities

None.

The selected historical financial data set forth below as of June 30, 2016, 2015, 2014, 2013 2012 and 20112012 and for each of the years then ended have been derived from our audited consolidated financial statements, of which the financial statements as of June 30, 20152016 and 20142015 and for the years ended June 30, 2016 2015 2014 and 20132014 are included elsewhere in this Annual Report on Form 10-K.

The information set forth below should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and the audited consolidated financial statements,Consolidated Financial Statements, and the notesNotes thereto, and other financial information included elsewhere herein. Our historical financial information may not be indicative of our future results of operations or financial position.

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of financial condition and results of operations should be read in conjunction with our audited consolidated financial statementsConsolidated Financial Statements and related notesNotes beginning on page F-1 of this Annual Report on Form 10-K. This discussion contains forward-looking statements, based on current expectations and related to future events and our future financial performance, that involve risks and uncertainties. Our actual results may differ significantly from those anticipated or implied in these forward-looking statements as a result of many important factors, including, but not limited to, those set forth under Item 1A, “Risk Factors”, and elsewhere in this report.

Overview

We are a leader indevelop sustained-release drug delivery products primarily for the developmenttreatment of sustained-release drug-delivery products for treatingchronic eye diseases. Our products deliver drugs at a controlled and steady rate for months or years. We have developed three of only four sustained-release products approved by the U.S.United States (U.S.) Food and Drug Administration (FDA) for treatment of back-of-the-eye diseases. The most recentMedidur™ for posterior segment uveitis, our lead product candidate, is in pivotal Phase 3 clinical trials, and ILUVIEN^® for diabetic macular edema (DME), sold by our licenseelead licensed product, is sold in the U.S. and three European Union (EU) countries. Our lead development product Medidur™ for posterior uveitis, is in pivotal phase III clinical trials. Our pre-clinical development program is focused primarily focused on utilizing our two core technology platforms to deliver drugs and biologics to treat chronic diseases. Our strategy includes developing products for chronic ophthalmic diseases utilizingindependently while continuing to leverage our core technology platforms.platforms through collaborations and license agreements as appropriate.

Medidur, our most advanced development product, is designed to treat chronic non-infectious uveitis affecting the posterior segment of the eye (posterior segment uveitis) for three years from a single injection. Injected into the eye in an office visit, Medidur is a tiny micro-insert that delivers a micro-dose of a corticosteroid to the back of the eye on a sustained basis. We are developing Medidur independently.

The first of Medidur’s two Phase 3 trials met its primary efficacy endpoint of prevention of recurrence of disease through six months with high statistical significance (p less than 0.00000001; intent to treat analysis) and achieved encouraging safety results. The same high statistical significance for efficacy and encouraging safety results were maintained through 12 months of follow-up. Due to the high level of statistical significance achieved, we plan to file our EU marketing approval application (MAA) based on data from the first Phase 3 trial, rather than two trials. The MAA is planned for the first quarter of 2017. Enrollment in the second Phase 3 trial is expected to be completed in October 2016. Assuming favorable results, we plan to file a new drug application (NDA) with the FDA in the third quarter of 2017. A utilization study of our new smaller diameter 27-gauge Medidur inserter, which is required for both our MAA and NDA, met its primary endpoint, ease of intravitreal administration.

ILUVIEN, our most recently approved product, is an injectable, sustained-release micro-insert that provides three years of treatment of DME for three years from a single administration.injection. ILUVIEN is licensed tosubstantially the same design as Medidur and delivers the same steroid, although it is injected using a 25-gauge inserter. ILUVIEN was developed in collaboration with Alimera Sciences, Inc. (Alimera), and weis licensed to and sold by Alimera. We are entitled to a share of the net profits (as defined in our agreement with Alimera)defined) from Alimera’s sales of ILUVIEN. ILUVIEN was launched in late February 2015on a quarter-by-quarter, country-by-country basis. ILUVIEN has been sold in the U.S., since 2015, where 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.pressure (IOP). ILUVIEN has been commercially availablesold in the United Kingdom (U.K.) and Germany since June 2013 and in Portugal since January 2015. ILUVIEN has marketing approvals in these and 14 other EUEuropean countries for the treatment of chronic DME considered insufficiently responsive to available therapies. Alimera has sublicensed distribution, regulatory and reimbursement matters for ILUVIEN for DME in Australia and New Zealand in April 2014, in Canada in July 2015 and in Italy in August 2015.

Medidur, our lead development product, is an injectable, micro-insert designed to treat chronic non-infectious uveitis affecting the posterior segment of the eye (posterior uveitis) for three years from a single administration. Medidur, which is the same micro-insert as ILUVIEN, is in Phase III clinical trials, with the filing of a new drug application (NDA) anticipated in the first half of 2017. We are developing Medidur independently.

Our FDA-approved Retisert^® is an implant that provides sustained release treatment of posterior segment uveitis for approximately two and30 months. Implanted in a half years. It is licensed tosurgical procedure, Retisert delivers the same corticosteroid as Medidur but in a larger dose. Retisert was co-developed with Bausch & Lomb and weto which it is licensed. We receive royalties from itsRetisert sales.

Our pre-clinical development program is focused on developing

We are seeking to develop products usingthat use our core platform technologies, Durasert™ and Tethadur™, technology platforms to deliver drugs orand biologics to treat wet and dry age-related macular degeneration (AMD), glaucoma, osteoarthritis and other diseases. A sustained release, surgical implant to treat pain associated with severe knee osteoarthritis (OA) we developed in collaboration with Hospital for Special Surgery is in an investigator-sponsored pilot study. We recently commenced the first of two investigational new drug (IND)-enabling studies of an injectable, bioerodible micro-insert we developed to provide sustained delivery of a tyrosine kinase inhibitor (TKI) to treat wet AMD.

In the first quarter of fiscal 2017, we consolidated all of our research and product development activities in our facility in the U.S. We have terminated the employment of all of our U.K. employees and expect to vacate our research facility in Malvern, U.K. at the end of October. We estimate that this consolidation will reduce pre-tax operating expenses by approximately $900,000 annually, beginning in the second quarter of fiscal 2017. We expect to incur approximately $710,000 in total pre-tax charges, of which approximately $590,000 are cash outlays, as a result of the consolidation. Of these charges, $218,000 was expensed in the fourth quarter of fiscal 2016. See Note 9 of Notes to Consolidated Financial Statements for more information.

Summary of Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with United StatesU.S. generally accepted accounting principles, or U.S. GAAP. The preparation of these financial statements requires that we make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. We base

our estimates on historical experience, anticipated results and trends and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily available from other sources. By their nature, these estimates, judgments and assumptions are subject to an inherent degree of uncertainty, and management evaluates them on an ongoing basis for changes in facts and circumstances. Changes in estimates are recorded in the period in which they become known. Actual results may differ from our estimates under different assumptions or conditions.

While our significant accounting policies are more fully described in Note 2 to the accompanying consolidated financial statements, we believe that the following accounting policies are critical to understanding the judgments and estimates used in the preparation of our financial statements. It is important that the discussion of our operating results that follows be read in conjunction with the critical accounting policies discussed below.

Revenue Recognition

Our business strategy includes entering into collaborative license and development agreements for the development and commercialization of product candidates utilizing our technology systems. The terms of these arrangements typically include multiple deliverables by us (such as granting of license rights, providing research and development services, manufacturing of clinical materials and participating on joint research committees) in exchange for consideration to us of some combination of one or more of non-refundable license fees, funding of research and development activities, payments based upon achievement of clinical development, regulatory and sales milestones and/or royalties in the form of a designated percentage of product sales or participation in profits.

Revenue arrangements with multiple deliverables are divided into separate units of accounting if certain criteria are met, including whether the delivered element has stand-alone value to the collaborative partner and based on the selling price of the deliverables. When deliverables are separable, consideration received is allocated to the separate units of accounting based on the relative selling price method using management’s best estimate of the standalone selling price of deliverables when vendor-specific objective evidence or third-party evidence of selling price is not available. Allocated consideration is recognized as revenue upon application of the appropriate revenue recognition principles to each unit.

The assessment of multiple deliverable arrangements requires judgment in order to determine the appropriate units of accounting, the estimated selling price of each unit of accounting, and the points in time that, or periods over which, revenue should be recognized.

For the yearyears ended June 30, 2016 and 2015, we reported $398,000 and $25.4 million, respectively, of collaborative research and development revenue. Revenue is recognized when there is persuasive evidence that an arrangement exists, delivery has occurred, the price is fixed and determinable and collection is reasonably assured.

We concluded thatIn the fiscal year ended June 20, 2011, we restated our deliverables underagreement with Pfizer. The balance of the Restated Pfizer Agreement are conducting the research and development program for the Latanoprost Product through completion of Phase II clinical trials (the “R&D program”) and participation on a Joint Steering Committee (“JSC”). We treat these as a single deliverable, having concluded that the JSC does not have standalone value separate from the R&D program.

The total arrangement consideration of the Restated Pfizer Agreement totaled $10.05 million, which consistedthat was not recognized at the time of $7.75 million ofthe restatement was recorded as deferred revenue on our balance sheet at the effective date plus the $2.3 million upfront payment. The difference between the total arrangement consideration and the estimated selling price of the combined deliverables, or $3.3 million, was recognized as collaborative research and development revenue in the quarter ended June 30, 2011, the period of the modification. The remaining balance is being recognized as revenue using the proportional performance method over the estimated period of our performance obligations under the R&D program. Application ofresearch and development program provided in the proportional performance methodagreement. Revenue is recognized in any fiscal period would result in an increase or decrease in revenue recognized to the extent that we incur costs for the research and development program relative to the aggregate projected costs to conductfor the R&D program decreases or increases, respectively, compared to the previous period.program.

Recognition of Expense in Outsourced Clinical Trial Agreements

We recognize research and development expense with respect to outsourced agreements for clinical trials with contract research organizations (“CROs”)(CROs) as the services are provided, based on our assessment of the services performed. We make our assessments of the services performed based on various factors, including evaluation by the third-party CROs and our own internal review of the work performed during the period, measurements of progress by us or by the third-party CROs, data analysis with respect to work completed and our management’s judgment. We have agreements with two CROs to conduct the Phase III3 clinical trial program for Medidur for posterior segment uveitis. Our financial obligations under the agreements are determined by the services that we request from time to time under the agreements. The actual amounts owed under the agreements and the timing of those obligations will depend on various factors, including changes to the protocols and/or services requested, the number of patients to be enrolled and the rate of patient enrollment, achievement of pre-defined direct cost milestone events and other factors relating to the clinical trials. As of June 30, 2015,2016, our CRO agreements provided for two Phase III3 clinical trials and a utilization study of our proprietary inserter at an aggregate remaining cost of approximately $16.4 million.$13.5 million, which we expect to increase as a result of pending and contemplated change orders. We can terminate the agreements at any time without penalty, and if terminated, we would be liable only for services through the termination date plus non-cancellable CRO obligations to third parties.

During fiscal 2015,2016, we recognized approximately $6.1$7.3 million of research and development expense attributable to our Medidur Phase III3 clinical trial program. Changes in our estimates or differences between the actual level of services performed and our estimates may result in changes to our research and development expenses in future periods.

Results of Operations

Years Ended June 30, 20152016 and 20142015

		Year Ended June 30,								Change
		2016				2015				Amounts				%
		(In thousands except percentages)
Revenues:
Collaborative research and development		$	398			$	25,411			$	(25,013	)			(98	)%
Royalty income			1,222				1,154				68				6	%
Total revenues			1,620				26,565				(24,945	)			(94	)%
Operating expenses:
Research and development			14,381				12,088				2,293				19	%
General and administrative			9,013				8,056				957				12	%
Total operating expenses			23,394				20,144				3,250				16	%
Operating (loss) income			(21,774	)			6,421				(28,195	)			(439	)%
Interest and other income, net			72				22				50				227	%
(Loss) income before income taxes			(21,702	)			6,443				(28,145	)			(437	)%
Income tax benefit (expense)			155				(96	)			251				261	%
Net (loss) income		$	(21,547	)		$	6,347			$	(27,894	)			(439	)%

Revenues

Collaborative research and development revenue totaled $398,000 in fiscal 2016 compared to $25.4 million in fiscal 2015 compared to $2.2 million in fiscal 2014.2015. This increasedecrease was primarily attributable to recognition of the one-time $25.0 million FDA approvalFDA-approval milestone earned for ILUVIEN partially offset by a $1.8 million reduction in revenues from funded technology evaluation agreements.September 2014.

Retisert royalty income decreasedincreased by $164,000,$68,000, or 12%6%, to $1.2$1.22 million in fiscal 20152016 compared to $1.3$1.15 million in fiscal 2014.2015. We do not expect Retisert royalty income to increase significantly in the next fiscal year, and it may decline further.decline.

We are entitled to share in net profits, on a country-by-country basis, from sales of ILUVIEN by Alimera. Alimera initiated commercial sales of ILUVIEN in the U.K. and Germany in the fourth quarter of fiscal 2013 and in the U.S. and Portugal in the third quarter of fiscal 2015. We receivedearned $0 and $43,000 of ILUVIEN net profits during fiscal 2016 and 2015, and none inrespectively. In addition, during fiscal 2014.2016 we received $157,000 from Alimera attributable to a sublicense arrangement. We do not know when and if we will receive future net profit payments with respect to any country where Alimera sells ILUVIEN or payments with respect to countries where Alimera sublicenses the sale of ILUVIEN. See Note 14 of Notes to Consolidated Financial Statements with respect to a dispute relating to the computation of ILUVIEN net profits for 2014, which may have implications for other years.

Research and Development

Research and development totaled $14.4 million in fiscal 2016, an increase of $2.3 million, or 19%, compared to $12.1 million in fiscal 2015. This increase was primarily attributable to a $1.4 million increase in CRO and other costs for the Medidur Phase 3 clinical development and regulatory submissions, $475,000 of personnel-related costs, including incentive compensation and contractual severance obligations and $320,000 of pre-clinical studies and other third-party research costs. We currently expect fiscal 2017 research and development expense to increase by approximately 10-15% compared to fiscal 2016, primarily due to our planned regulatory submissions for Medidur, studies of our wet AMD product candidate and increased personnel costs.

General and Administrative

General and administrative totaled $9.0 million in fiscal 2016, an increase of $957,000, or 12%, compared to $8.1 million in fiscal 2015. This increase was primarily attributable to a $564,000 increase in personnel costs, primarily higher incentive compensation accruals and stock-based compensation, and a $302,000 increase in professional fees.

Interest and Other Income

Interest and other income totaled $72,000 in fiscal 2016 compared to $22,000 in fiscal 2015, primarily due to a combination of higher average balances of marketable security investments and improved yields to maturity and higher money market interest rates.

Income Tax Benefit (Expense)

Income tax benefit of $155,000 in fiscal 2016 compared to income tax expense of $96,000 in fiscal 2015. We incurred $4,000 in fiscal 2016 and $263,000 in fiscal 2015 of federal alternative minimum tax expense based on U.S. taxable income for calendar year 2014 primarily attributable to the $25.0 million ILUVIEN FDA-approval milestone. Refundable foreign research and development tax credits totaled $159,000 in fiscal 2016 compared to $167,000 in fiscal 2015.

Years Ended June 30, 2015 and 2014