UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-K

For the fiscal year ended June 30, 20122015

or

For the transition period from                     to                    

Commission File Number 000-51122

PSIVIDA CORP.

(Exact name of registrant as specified in Itsits 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, 2011,2014, the last trading day of the registrant’s most recently completed second fiscal quarter, was approximately $20,408,000.$118,606,000.

There were 23,297,01129,417,365 shares of the registrant’s common stock, $0.001 par value, outstanding as of September 24, 2012.4, 2015.

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 14, 2012,3, 2015, 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, 20122015

Table of Contents

PART I

Preliminary Note Regarding Forward-Looking Statements

This Form 10-K and our 20122015 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 commercialization timelines;approvals, reimbursement and commercialization; any other statements of expectations, estimations or belief;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, on our website, www.psivida.com, or otherwise.

Introduction

We develop tiny,are a leader in the development of sustained-release drug deliverydrug-delivery products designed tofor treating eye diseases. Our products deliver drugs at a controlled and steady rate for months or years. We are focused onhave developed three of only four sustained-release products approved by the U.S. Food and Drug Administration (FDA) for treatment of back-of-the-eye diseases. The most recent is ILUVIEN^® for diabetic macular edema (DME), sold by our licensee 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 developing products for chronic ophthalmic diseases of the back of the eye utilizing our core technology platforms, Durasert™ and BioSilicon™. We currently have three approved products and two principal product candidates under development, which represent successive generations of our Durasert technology platform. We have developed three of the four sustained release devices for treatment of retinal diseases currently approved in the U.S. or the European Union (EU).platforms.

ILUVIEN.Our most recently approved product, ILUVIEN^®, is an injectable, sustained-release micro-insert deliveringthat provides treatment of DME for three years from a single administration. ILUVIEN is licensed to Alimera Sciences, Inc. (Alimera), and we are entitled to a share of the corticosteroid fluocinolone acetonide (FAc) over a periodnet profits (as defined in our agreement with Alimera) from Alimera’s sales of up to 3 yearsILUVIEN. ILUVIEN was launched in late February 2015 in the U.S., where it is indicated for the treatment of vision impairment associatedDME in patients previously treated with a course of corticosteroids without a clinically significant rise in intraocular pressure. ILUVIEN has been commercially available 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 EU countries for the treatment of chronic diabetic macular edema (DME)DME considered insufficiently responsive to available therapies. ILUVIEN is being developed by our licensee Alimera Sciences, Inc. (Alimera).

ILUVIEN has received marketing authorization in the United Kingdom, Austria, France, Germanysublicensed distribution, regulatory and Portugal, and marketing authorization is pending in Italy and Spain. The International Diabetes Federation has estimated that approximately 19.1 million people in these seven countries have diabetes, of which Alimera has estimated that approximately 1.1 million suffer from vision loss associated with DME. Alimera has announced its intention to proceed with the direct commercialization of ILUVIEN in Germany, the U.K. and France in 2013.

To date, Alimera has not received marketing approval for ILUVIEN in the U.S. Following receipt of a Complete Response Letter in November 2011 (2011 CRL) from the U.S. Food and Drug Administration (FDA), and based on a meeting with the FDA in June 2012, Alimera has reported that it intends to resubmit its New Drug Application (NDA)reimbursement matters for ILUVIEN for DME in early 2013. Alimera further reported that it intendsAustralia 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 include additional analysis of the benefits and risks of ILUVIEN based upon the clinical data from its two previously completed pivotal Phase III clinical trials (FAME™ Study) and to focus on the population of patients for which regulatory approval has been granted in the various EU countries.

Product Development. We are pursuing the treatment oftreat chronic non-infectious uveitis affecting the posterior segment of the eye (posterior uveitis) as another indication for three years from a single administration. Medidur, which is the same injectable micro-insert usedas ILUVIEN, is in ILUVIEN. We did not license this indication to Alimera. The FDA has cleared our Investigational New Drug application (IND), permitting us to move directly to two Phase III trials for this indication without the necessity of first conducting Phase I or Phase II trials. The FDA has agreed that the primary end point in these trials will be recurrence of uveitis within 12 months and that we can reference much of the data, including the clinical safety data, from the clinical trials, for ILUVIEN for DME.with the filing of a new drug application (NDA) anticipated in the first half of 2017. We plan to enroll a total of approximately 300 patients in our clinical trials and to utilize an inserter with a different design and a smaller gauge needle than the planned commercial inserter for ILUVIEN for DME. Because this micro-insert delivers the same drug as our approvedare developing Medidur independently.

Our FDA-approved Retisert^® product for posterior uveitis, we expect these trials will show efficacy. Further, as the same micro-insert was used in the ILUVIEN trials, we expect to observe a side-effect profile in uveitis patients comparable to that seen in DME patients. As a result, we are optimistic that this micro-insert will be efficacious for posterior uveitis with a favorable risk/benefit profile and fewer side effects compared to Retisert. An investigator-sponsored Phase I/II study of the safety and efficacy of this micro-insert for the treatment of posterior uveitis is ongoing.

We are also developing a bioerodible, injectable micro-insert delivering latanoprost (the Latanoprost Product) to treat glaucoma and ocular hypertension. An investigator-sponsored Phase I/II dose-escalation study is ongoing to assess the safety and efficacy of this micro-insert in patients with elevated intraocular pressure (IOP). We have granted Pfizer, Inc. an exclusive option under various circumstances to license the worldwide development and commercialization of the Latanoprost Product for the treatment of human ophthalmic disease or conditions other than uveitis.

We are investigating the use of Durasert technology for the treatment of orthopedic diseases.

BioSilicon.The second key technology platform we are targeting is BioSilicon, which uses fully-erodible, nanostructured, porous material for sustained drug delivery. Our primary focus is on Tethadur™, an application of BioSilicon technology designed to provide sustained delivery of large biologic molecules, including proteins, antibodies and peptides. The sizes of the pores in the BioSilicon material are manufactured using nanotechnology to accommodate specific protein, peptide or antibody molecules that are then released on a sustained basis over time as the material bioerodes. Our BioSilicon technology can also be designed to deliver smaller molecules. We are investigating the use of BioSilicon in our Latanoprost Product and the use of Tethadur in other ophthalmic applications.

FDA-Approved Products.Our two FDA-approved products utilize two earlier generations of our Durasert technology system and are surgically implanted. Second-generation Retisert delivers FAc to provideprovides sustained release treatment of posterior uveitis for approximately two and a half years, and first-generation Vitrasert^® delivers ganciclovir to provide sustained release treatment of AIDS-related cytomegalovirus (CMV) retinitis for six to nine months. Weyears. It is licensed both of these products to Bausch & Lomb.Lomb, and we receive royalties from its sales.

Our pre-clinical development program is focused on developing products using our core platform technologies, Durasert™ and Tethadur™, to deliver drugs or biologics to treat wet and dry age-related macular degeneration (AMD), glaucoma, osteoarthritis and other diseases.

Durasert™, Tethadur™Medidur™, BioSilicon™Tethadur™ and CODRUG™BioSilicon™ are our trademarks. Retisert^® and Vitrasert^® are Bausch & Lomb’s trademarks. ILUVIEN^® and FAME™ areis Alimera’s trademarks.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 2015, fiscal 2014 and fiscal 2013 mean the twelve months ended June 30, 2015, 2014 and 2013, respectively.

Strategy

Our strategy is to use our proprietary Durasert and Tethadur drug delivery technology platforms to independently develop new drug delivery products for already-approved drugs and biologics that will provide better treatment of 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 and better patient compliance and convenience, with reduced product development risk and cost for us. We believe our proven track record of three approved products, all providing sustained release of previously approved drugs, demonstrates the potential of this strategy.

Market OverviewOpportunity for Delivery of Drugs and Biologics

Drug Delivery Generally

We develop products to address issues inherent in the delivery of drugs and biologics. The therapeutic valueefficacy of a therapeutic agent (small drug molecule or biologic) depends on its distribution throughout the body,to, and reaction with, the targeted site, reaction withtissue and other tissues and organs in the body, duration of treatment and clearance from the body. In an ideal treatment, the appropriate amount of drug or biologic is delivered to the intended sitetissue at an adequate concentration and is maintained therein the location with an appropriate concentration for a sufficient period of time to provide effective treatment without causing adverse effecteffects to other tissues and organs.tissues. Accordingly, the manner in whichdelivery of a drug is deliveredor biologic can be asan important to theelement of its ultimate therapeutic value of the treatment as the intrinsic properties of the drug itself.value.

Drugs are typicallyfrequently administered systemically by oral dosing, infusion or by injection and are subsequently dispersed throughout the body via the circulatory system. In the case of many cases,drugs, systemic administration does not deliver drugsthem to the intended site atwith an adequateappropriate concentration for a sufficient period of timeduration or failsthe 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 must beare administered at highhigher dosage levels in order to achieve sufficient concentrations at the intended site. Some areas of the body, such assites. 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, requiring the administration of evenareas. These higher systemic doses. These high dosage levels can cause harmful side effects whento the drug interacts with other tissues and organs.

Timelybeyond 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 drugs is often necessarysystemically 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 therapeutic drugappropriate levels over an extended periodthe course of time. However,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 often fail to take drugsdo not self-administer them as prescribed or fail to attend follow-up visits and, as a result, they do not receive the potential therapeutic benefit.get medical professional administration as required. The risk of patient noncompliance increases ifwhen treatment involves multiple drugs are required, if theproducts or complex or painful dosing regimen is complicatedregimens, as patients age or if they suffer cognitive impairment or serious illness, or when the patienttreatment is elderlylengthy or cognitively impaired.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 systemic drug delivery, the development of methods to deliver drugs and biologics to patients in a more precise, controlled fashion over sustained periods of time has becomebeen a multi-billion dollar industry. Such methodsmedical goal. Methods for sustained drug delivery include oral and injectable controlled-release products and skin patches. These methodspatches that seek to improve the consistency of the dosage over time and extend the duration of delivery. However, most of these methods still cannot provide constant, controlled dosage or deliver drugs for a sufficiently long duration. This reduces their effectiveness forsufficient duration of delivery, particularly in diseases that

are chronic or require precise dosing. In addition, mostMoreover, skin patches and oral products still have issues of these methods still deliver drugs systemically and, as a result, can still cause adverse side effects throughout the body.

Ophthalmic Drug Delivery

Delivery of drugs to treat back-of-the-eye diseases is a significant issue in ophthalmology. Due to the effectiveness of the blood/eye barrier, it is difficult for systemically administered drugs to reach the eye in sufficient quantities to have a beneficial effect without adverse side effects to other parts of the body.systemic delivery. There is a need for drug delivery inside the eye in a manner that is safe, effective and practical for long-term use. While there are currently many approaches to delivering medications to the eye, most do not achieve sufficient and consistent concentrations within the eyevery few approved sustained-delivery products for the appropriate period of time.biologics.

Injecting drugs in solution directly into the back of the eye can achieve effective, but often transient, drug levels in the eye, requiring repeated injections. Examples include Macugen^® (pegaptanib sodium) and Lucentis^® (ranibizumab), which are injected into the eye as frequently as approximately every four to eight weeks. Apart from inconvenience and cost, repeated intravitreal injections carry risks, including intraocular infection, perforated sclera, vitreous hemorrhage and cataract formation.

TechnologiesOur Technology Systems and Products

Our primarytwo core technology systems areplatforms, Durasert and BioSilicon.

Durasert Technology System

ILUVIEN, Retisert and Vitrasert, as well as our glaucoma and posterior uveitis product candidates, use different generations of our proprietary Durasert technology system, which delivers specific quantities of drugs directly to a target site in the body at controlled rates for predetermined periods of time ranging from weeks to years. The Durasert technology system is designed to provide the benefits of direct delivery of appropriate quantities of drug over an extended period, while addressing the drawbacks of systemic drug delivery, including adverse side effects characteristic of high dosing levels and reduced treatment benefits due to variations in drug levels at the target site. The Durasert technology system has three principalTethadur, have attributes designed to deliver these advantages:address the issues of sustained delivery for ophthalmic and other product candidates:

The

Durasert Technology System

Our three approved products, as well as our lead development product Medidur, use different generations of our Durasert technology system consistsplatform to provide sustained, localized delivery of drugs to the back of the eye. In our Durasert products, a drug core is surrounded with one or more surrounding polymer layers. Drug release is controlled bylayers, and the permeability of those layers and other aspects of the polymer layers.design of the product control the rate and duration of the drug release. By changing elements of the design, we can controlalter both the rate and duration of release to meet different therapeutic needs. We believe thatOur later generation ILUVIEN and Medidur products are injected at the Durasert technology system can be used to deliver a wide variety of different drugs.target site in an office visit, while early generation Retisert and Vitrasert are surgically implanted.

The portfolio of our Durasert approved products and late-stage product candidates being developed by us alone or in partnership with otherscandidate includes:

Approved Product:ILUVIEN for DME

ILUVIEN licensed to Alimera, has received marketing approvalis an injectable, sustained-release micro-insert delivering the off-patent corticosteroid fluocinolone acetonide (FAc) for treatment of DME. Injected in five EU countries to treat chronic DME considered insufficiently responsive to available therapies, and Alimera has reported that it intends to focus resubmissionan office visit, ILUVIEN delivers 36 months of its NDA seeking marketing approvalcontinuous, low-dose corticosteroid therapy with a single injection. ILUVIEN is approved in the U.S. for this indication. DME causes swelling in the macula, the most sensitive part of the retina, and is a leading cause of blindness in most developed countries in the working-age population. The International Diabetes Federation estimated that approximately 19.0 million people have diabetes in the U.K., France, Germany, Austria, Portugal, Italy and Spain, and Alimera estimates that approximately 1.1 million of those people suffer from vision loss associated with DME. In addition, DME has been estimated to affect over 1.0 million people in the United States. ILUVIEN, which is inserted via a 25-gauge, transconjunctival delivery system to the back of the eye in an in-office procedure, is designed to deliver FAc on a sustained basis for up to 36 months. There is currently no sustained release drug treatment for DME in the U.S. or the EU. We are entitled to share in net profits, as defined, on sales of ILUVIEN for DME by Alimera on a country-by-country basis.

Under our agreement with Alimera, ILUVIEN is being studied in three Phase II clinical trials with respect to other chronic eye diseases. One trial is designed to assess the safety and efficacy of ILUVIEN in conjunction with Lucentis in patients with wet AMD to provide information on the potential of ILUVIEN to maintain the efficacy of Lucentis while reducing the overall number of Lucentis treatments. The second trial is designed to assess the safety and efficacy of ILUVIEN in patients with bilateral geographic atrophy secondary to dry AMD. The third trial is designed to assess the safety and efficacy of ILUVIEN in patients with macular edema secondary to RVO.

Development Program for ILUVIEN for the Treatment of DME

Alimera completed the 36-month FAME Study for ILUVIEN involving 956 patients in sites across the United States, Canada, Europe and India to assess the efficacy and safety of ILUVIEN in the treatment of DME. Combined enrollmentDME in patients who have been previously treated with a course of corticosteroids and did not have a clinically significant rise in intraocular pressure (IOP). In the FAME Study was completed in October 2007, the 24-month clinical readout was received in December 2009, and 36-month follow-up was completed in October 2010.

European Union.Alimera received marketing authorization for17 EU countries where ILUVIEN in Austria, France, Germany, Portugal and the U.K.has been approved, it is indicated for the treatment of vision impairment associated with chronic DME considered insufficiently responsive to available therapies. These approvals followedDME is a favorable determination of approvability under the EU’s Decentralized Procedure (DCP). Italy and Spain also participateddisease suffered by diabetics where leaking capillaries cause swelling in the DCP, and marketing authorization in these countries is pending. Asmacula, the most sensitive part of the approvalretina. DME is a leading cause of blindness in most developed countries in the working-age population.

ILUVIEN is licensed to Alimera, which launched ILUVIEN in the U.K. and Germany in the second quarter of 2013 and in Portugal and the U.S. in the first quarter of 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 in these countries, Alimera reported it has committed to conduct a five-year, post-authorization, open label registry studyfor reimbursement of ILUVIEN in patients with chronic DME.

Alimera has reported that in the first half of 2013 it intends to use the Mutual Recognition Procedure (MRP) to pursue marketing authorizations for ILUVIEN for DME in othervarious EU countries, prioritizing its efforts based on the size of the available diabetic population and the anticipated ease or complexity of obtaining adequate pricing and reimbursement. Alimera indicated that its initial targets are likely to be the Netherlands, Belgium, Sweden, Denmark and Finland.

Alimera reported that it plans to launch ILUVIEN in Germany, the United Kingdom and France in 2013, and is pursuing pricing and reimbursement in those countries. In July 2012, Alimera reported that it received a letter from Germany’s Federal Joint Committee indicating that the obligation to submit a dossier on ILUVIEN for DME, per the Arzneimittelmarkt-Neuordnungsgesetz law, would not be necessary, and that a benefit assessment would not be required, which allows Alimera to launch ILUVIEN for DME in Germany without price restriction. In August 2012,October 2013, the U.K.’s National Institute for Health and ClinicalCare Excellence (NICE) issued draft guidance thata positive Final Appraisal Determination recommending ILUVIEN is not recommendedfunding, utilizing a simple patient access scheme (PAS), for the treatment of pseudophakic eyes (eyes with an artificial lens) in chronic DME based on the assessment of its Independent Appraisal Committee that Alimera’s economic models underestimated the incremental cost-effectiveness ratio, and that the evidence submitted by Alimera did not accurately reflect current clinical practice.

In September 2012, Alimera reported that as part of its comments on the draft guidance, NICE has accepted for review additional data relating to the pseudophakic subgroup of patients with chronic DME (those patients who already had cataract surgery and received an artificial lens when they entered the FAME Study). Alimera reported that it determined that ILUVIEN was more cost-effective in this subgroup because patients with artificial lenses cannot develop another cataract in the treated eyes and therefore cannot experience a transient reduction in visual acuity as the result of cataract development nor incur the costs associated with cataract surgery. NICE has not yet issued final guidance to the U.K. National Health Service, and its draft recommendations may change. NICE has reported that final guidance is likely to be published in November 2012.

Alimera reported that it plans to launch ILUVIEN for DME on its own in Germany during the first quarter of 2013 and in the U.K. and France later in 2013. Alimera further reported that it has agreements for a $40.0 million equity financing, subject to certain closing conditions, including the approval of the holders of a majority of the outstanding shares of common stock of Alimera, to provide capital to launch ILUVIEN in the EU. Stockholders holding approximately 56% of Alimera’s common stock as of July 17, 2012 were reported as having agreed to vote their shares in favor of the financing transaction.

United States.In June 2010, Alimera submitted an NDA for ILUVIEN in the U.S., largely based on analyses of clinical data through month 24 of the FAME Study. In December 2010, Alimera received a Complete Response Letter (2010 CRL) in which the FDA communicated its decision that the ILUVIEN NDA could not be approved in its current form. In the 2010 CRL, the FDA asked for analyses of safety and efficacy data through month 36 of the FAME Study, including exploratory analyses in addition to those previously submitted in the NDA, to further assess the relative benefits and risks of ILUVIEN. In May 2011, Alimera submitted its response to the 2010 CRL to the FDA, including additional safety and efficacy data through month 36 of the FAME Study. Additionally, Alimera reported analyses of data from the FAME Study for the subgroup of patients who had been diagnosed with DME for three or more years at entry of the FAME Study.

In November 2011, the FDA issued the 2011 CRL to communicate that the resubmitted NDA could not be approved in its current form, stating that the NDA did not provide sufficient data to support that ILUVIEN is safe and effective in the treatment of patients with DME. The FDA stated that the risks of adverse reactions shown for ILUVIEN in the FAME Study were significant and were not offset by the benefits demonstrated by ILUVIEN in these clinical trials. The FDA further indicated that Alimera would need to conduct two additional clinical trials to demonstrate that the product is safe and effective for the proposed indication. Alimera reported that in June 2012 it met with the FDA to gain a better understanding of the regulatory path for ILUVIEN in the U.S. and, based on that meeting, it plans to resubmit its NDA for ILUVIEN for DME in early 2013. Alimera reported that it intends to include additional analysis of the benefits and risks of ILUVIEN based upon clinical data from the FAME Study and to focus on the population of patients with chronic DME considered insufficiently responsive to available therapies,therapies. In February 2014, the same indication for which regulatory approval has been granted in various EU countries. The resubmission is expected to address the issues raised in the 2011 CRLScottish Medicines Consortium, after completing its assessment and in Alimera’s June 2012 meeting with the FDA. Alimera also reported that it expects to continue enrollmentreview of patients in the physician utilization study, suspended after issuance of the 2011 CRL, that is evaluating the safety and utility of the commercial version of the inserter for ILUVIEN in a targeted 100 patient eyes. Results of this study will be required for any approvalsimilar simple PAS, announced its acceptance of ILUVIEN for DMErestricted 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 the U.S.Portugal.

Approved Product: Retisert for Posterior Uveitis

Retisert is approved in the U.S. for the treatment of chronic non-infectious uveitis affecting the posterior segment of the eye, an autoimmune condition characterized by inflammation of the posterior of the eye that can cause sudden or gradual vision loss.uveitis. Retisert is surgically implanted through a 3-4 mm incisionin the eye and delivers sustained levels of FAc for approximately 30 months. Retisert was approved as an orphan drug in 2005, which provided for seven-year exclusive marketing rights. Retisert is licensed to Bausch & Lomb, which sells the product in the U.SU.S. and pays sales-based royalties to us. Retisert is eligible for Medicare reimbursement.

Approved Product: Vitrasert for CMV Retinitis

Vitrasert, isour first product, was approved in the U.S. and the EU for the treatment of CMV retinitis, a blinding eye disease that occurs in individuals with advanced AIDS. Vitrasert, which is surgically implanted, through a 5-6 mm incision, provides sustained treatment for six to eight months through the intravitreal delivery of the anti-viral drug ganciclovir. Studies have shown thatganciclovir for six to eight months. Vitrasert is one of the most effective approved treatments for CMV retinitis. Vitrasert has been sold since 1996, first by Chiron Corporation and subsequently bywas licensed to Bausch & Lomb. Although CMV retinitis was relatively commonLomb, which discontinued sales in AIDS patients in the early 1990s, improvements in the treatment of AIDS/HIV have since significantly decreased the incidence of the disease in more developed countries. Accordingly, sales of Vitrasert, and associated royalty income to us, are not material.fiscal 2013 following patent expiration.

Other DurasertDevelopment Product Candidates: Medidur for Posterior Uveitis

Posterior Uveitis Product Candidate

We are pursuing the use ofMedidur, 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 used inas ILUVIEN for DME (same drug, same release rate, same polymer, same design), but we have redesigned the treatmentinserter 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 same indication forposterior segment of the eye, often involving the retina, which Retisert is approved. We did not license Alimeraa leading cause of blindness in the rightdeveloped countries. It afflicts people of all ages, producing swelling and destroying eye tissues, which can lead to use our technology, including this micro-insert, for development of a product to treat uveitis.severe vision loss and blindness. In the U.S., posterior uveitis affectsis estimated to affect approximately 175,000 people, and is responsible forresulting in approximately 30,000 cases of blindness and making it the third largestleading cause of blindness.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.

The FDA has cleared our IND for this indication, permitting us to move directly toMedidur Phase III Trials. We are currently conducting two Phase III trials with a primary endpoint of recurrence of uveitis within 12 months, without the necessity to first conduct Phase I or Phase II trials. We currently plan to enroll a total of approximately 300 patients and to utilize an inserter with a different design and a smaller gauge needle than the commercial inserter to be used by Alimera for ILUVIEN for DME in the EU. The FDA will permit us to reference much of the data, including clinical safety data, from the ILUVIEN NDA for DME. Because this micro-insert delivers the same drug as our approved Retisert product for posterior uveitis, we expect these trials will show efficacy. Further, as the same micro-insert was used in the ILUVIEN trials, we expect to observe a comparable side-effect profile in posterior uveitis patients as was seen in DME patients. As a result, we are optimistic that this micro-insert will be efficacious for posterior uveitis with a favorable risk/benefit profile and fewer side effects compared to Retisert.

An investigator-sponsored Phase I/II dose-ranging study of the safety and efficacy of this micro-insert for the treatment of posterior uveitis is ongoing. To date, three out of a projected six patients have been enrolled in this study.

Glaucoma Latanoprost Product Candidate.

In connection with our June 2011 amended Pfizer collaboration, we are developing an injectable, bioerodible drug delivery micro-insert for the treatment of glaucoma and ocular hypertension. The Latanoprost Product is designed to provide long-term, sustained delivery of latanoprost, currently the most commonly prescribed agent for the reduction of IOP in patients with ocular hypertension and glaucoma worldwide. This product candidate is based on a fourth generation of our Durasert technology system. The micro-insert is designed to be injected under the conjunctiva into the sclera by an eye care professional in a minimally invasive, outpatient procedure. This product is subject to an option by Pfizer described below under “Strategic Collaborations—Pfizer”.

This Durasert implant is being evaluated in an investigator-sponsored Phase I/II dose-escalating study designed to assess the safety and efficacy of Medidur for the implanttreatment 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. WeThrough 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 currently developing a prototype of this implantoptimistic that contains BioSiliconthe Phase III trials for Medidur will show it to assistbe 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 delivery of latanoprost. A pre-clinical study is ongoing to evaluate the new prototype design. If successful, we plan to advance the new prototype into a multi-centerILUVIEN and Retisert Phase II trial.

We have a history of operating losses, and expect to continue to incur losses for the foreseeable future.

With the exceptionat June 30, 2015, we had a total accumulated deficit of fiscal 2010, we have incurred operating losses since our inception in 2000, and our fiscal 2010 net income resulted from a one-time event. We do not currently have any assured sources of revenues. We do not know the timing and extent of any revenues we may receive from ILUVIEN for DME. Although ILUVIEN has been approved in five EU countries for the treatment of vision impairment associated with chronic DME considered insufficiently responsive to available therapies, we do not know when Alimera will receive marketing authorization in two remaining EU countries or complete pricing and reimbursement discussions, whether those pricing and reimbursement discussions will be satisfactory, whether Alimera will be successful in directly commercializing ILUVIEN for DME, and if and when, and to what extent, we will earn revenues from the commercialization of ILUVIEN for DME in the EU. Unless and until Alimera receives FDA approval of ILUVIEN for DME, we will not be entitled to receive the $25.0 million milestone payment that would be due on such an approval, nor will we earn any revenues from sales of ILUVIEN for DME by Alimera in the U.S. We will receive funding under our Restated Pfizer Agreement only if Pfizer exercises its option with respect to the Latanoprost Product, which becomes exercisable only if we complete Phase II clinical trials, which have yet not been initiated, or if we cease development of the Latanoprost Product prior to completion of those trials. There is no assurance that Pfizer will exercise its option. Our royalty income from Bausch & Lomb is not expected to increase to a level sufficient to sustain our operations and may decline. Our ability to achieve profitability will depend upon Alimera’s ability to commercialize ILUVIEN for DME and our or any other licensees’ ability to achieve regulatory approval and sufficient revenues from commercialization of one or more of our product candidates.

We expect to need additional capital resources to fund our operations, and our ability to obtain them is uncertain.

We expect to continue to generate negative cash flows from operations unless and until ILUVIEN for DME achieves sufficient revenues from commercialization or one or more of our product candidates achieves regulatory approval and sufficient revenues from commercialization.$270.7 million. During the past three fiscal years, we have financed our operations primarily from consideration received from our collaborative partners, including license fees, milestone payments, research and development funding and contingent note payments,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 the proceedsoperations in subsequent quarters until we receive sufficient revenues from commercialization of offeringsILUVIEN or one or more of our common stockother product candidates achieve regulatory approval and warrants. We currently have no committed funding from collaborative partners.provide us sufficient revenues. We believe that our cash, cash equivalents and marketable securitiescapital resources of $14.6$28.5 million at June 30, 2012 together with the $4.7 million net proceeds of an August 2012 offering of common stock and warrants and expected royalty income from Bausch & Lomb2015 should enable us to maintainfund our current andoperations as currently planned (including our Medidur clinical trials) into early calendar year 2017. This estimate excludes any potential net profits receipts from sales of ILUVIEN. We expect that our ability to fund our planned operations through calendar year 2013. Our capital resources would be enhanced if Alimera successfully commercializes ILUVIEN for DME in the EU and if ILUVIEN for DME were approved and successfully commercialized in the U.S., although even so,beyond then will depend on the amount and timing of our receipt ofthose payments, as well as proceeds from any revenues from such activities is uncertain. Accordingly,future collaboration or other agreements and/or financing transactions.

Whether we expectwill require, or desire, to needraise additional resources to complete our planned Phase III trials for our posterior uveitis micro-insert and to fund our operations. Our need for additional capital resources will be influenced by the followingmany factors, among others:including, but not limited to:

We may seekIf we determine that it is desirable or necessary to raise additional capital resources through possible new collaborative or licensing agreements and/or possible other agreements and transactions (which may include sales of assets or securities). Many factors relating to our company, such as the 2011 CRL and the status of FDA approval with respect to ILUVIEN for DME, the status of commercialization of ILUVIEN for DME in the EU,future, we do not know if it will be available when needed or on terms favorable to us or our stockholders. We have an at-the-market (ATM) facility, but we do not know whether and the status of development of our product candidates, as well as theto what extent we will seek to sell shares pursuant to that program and, if we are able to do so, on what terms. The state of the economy and the financial and credit markets at the time or times we seek any additional financing may make our ability to secure additional capital resourcesit more difficult or more expensive to obtain or result in less favorable terms.obtain. If available, additional equity financing may be dilutive to stockholders, debt financing may involve restrictive covenants or other unfavorable terms and potential dilutive equity, and funding through collaboration licensing or other agreements may be on unfavorable terms, including requiring us to relinquish rights to certain of our technologies or products, additional equity financing may be dilutive to stockholders, and debt financing may involve restrictive covenants or other unfavorable terms and potential dilutive equity. If adequate financing is not available if and when needed, we may be required to delay, reduce the scope of or eliminate research or development programs, 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.products.

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

We recorded significant amountsAt June 30, 2015, we had $1.9 million of intangible assets in connection with earlier acquisitions. We tookrelating to our Durasert and BioSilicon (including Tethadur) technologies on our balance sheet following impairment charges of $3.1$14.8 million with respect to the value of our Durasert intangible asset and $11.7 million with respect to the value of our BioSilicon intangible asset as of December 31, 2011. We have $4.2 million of intangible assets on our balance sheet as of June 30, 2012, of which $2.9 million relates to our Durasert technology and $1.3 million relates to our BioSilicon technology. We will continue to conduct impairment analyses of our intangible assets as required under GAAP and we would be required tocould take additional impairment charges in the future if anythe recorded values for our intangible assets were to exceed our assessment of the recoverability assessmentsof the fair market value of those assets reflect fair market values which are less than our recorded values, and such charges could be significant. The carrying values of our Durasert and BioSilicon technology systems could be impaired if there is a future triggering event,assets. Adverse events relating to these technologies, including without limitation, adverse events with respect to the timing and status of clinical development, regulatory approval and success of commercialization of products using those technologies,them, and significant changes in our market capitalization.capitalization could result in impairment charges. Further impairment charges on our intangible assets could have a material adverse effect on our results of operations which could, in turn, adversely affect the pricequarter of our securities.the impairment.

Our operating results may fluctuate significantly from period to period.

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

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 further decreases in our stock price.

OurThere is no assurance our Retisert royalty income from Bausch & Lomb may decline.will continue at current levels or at all.

Our royalties from Bausch & Lomb for Retisert royalty income, which totaled between $1.3 million and Vitrasert$1.4 million in each of the fiscal 2012, fiscal 2013 and fiscal 2014, declined to $1.2 million 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 to market either or bothRetisert, which received marketing approval in 2005, and accordingly that we will continue to receive royalties from the sale of these products. We do not expect that our royalty income fromRetisert. Bausch & Lomb for these products will ever become a material source of revenue for us.no longer markets Vitrasert.

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

Without FDA regulatory approval for ILUVIEN for DME, Alimera will be unable to commercialize the product in the U.S. and we will not receive payments to which we would be entitled upon such approval and from successful commercialization, which could materially impair our financial prospects.

Alimera received a 2010 CRL from the FDA with respect to its NDA for ILUVIEN for DME, which included 24 month data from the FAME Study, and received the 2011 CRL in response to the resubmitted NDA, which responded to the 2010 CRL and included 36 month data. In the 2011 CRL, the FDA stated that it was unable to approve the NDA because it did not provide sufficient data to support that ILUVIEN is safe and effective in the treatment of patients with DME, that the risks of adverse reactions shown for ILUVIEN in the FAME Study were significant and were not offset by the benefits demonstrated by ILUVIEN in these clinical trials and that Alimera will need to conduct two additional clinical trials to demonstrate that the product is safe and effective for the proposed indication. Based on a recent meeting with the FDA, Alimera has indicated its intention to resubmit its NDA for ILUVIEN for DME to the FDA in early 2013 using data from the FAME Study and to focus on the population of patients with chronic DME considered insufficiently responsive to available therapies, the same indication for which regulatory approval has been granted in various EU countries. There is no assurance when or if Alimera will resubmit its application or that Alimera will be able to demonstrate to the FDA that the benefits outweigh the risks of ILUVIEN for DME using data from the FAME Study, that additional clinical trials will not be required, that the population of chronic DME patients will be acceptable to the FDA or that Alimera will be able to obtain regulatory approval for ILUVIEN for DME in the U.S. Accordingly, ILUVIEN for DME may never be approved and marketed in the U.S., in which case we would not receive the milestone payment to which we would be entitled on FDA approval, or any revenues from commercialization, which would be materially adverse to our business. Further, we do not know whether Alimera will continue to seek to develop, or receive approval from the FDA or other regulatory agencies for, ILUVIEN for the treatment of other eye conditions currently being studied under Alimera’s agreement with us.

We do not know if and when we will receive revenues from any commercialization of ILUVIEN for DME in the EU and the extent of those revenues.

There is no assurance if and when, and to what extent, we will receive revenues from the commercialization of ILUVIEN for DME in the EU. To date, Alimera has received marketing authorization from Austria, France, Germany, Portugal and the U.K., but still must obtain separate national licenses in Italy and Spain, and there is no assurance that Alimera will receive those licenses, what the terms of the licenses will be and whether their issuances will be delayed beyond Alimera’s expectations, which could delay Alimera’s commercialization of

ILUVIEN for DME in Italy and Spain. There is no assurance as to what level of governmental pricing and reimbursement will be permitted, particularly in light of the ongoing budget crises faced by a number of countries in the EU. NICE, for example, has issued draft guidance that ILUVIEN is not recommended for the treatment of chronic DME in the U.K. Prices of drugs in the EU are regulated and are generally lower than those in the United States, which could affect the amount of any revenues from the commercialization of ILUVIEN for DME in the EU. Alimera has announced its intention to proceed with the direct commercialization of ILUVIEN in Germany, the U.K. and France in 2013 and also announced that it has arranged $40 million in equity financing, subject to satisfaction of certain closing conditions, to provide capital to launch ILUVIEN in the EU. There is no assurance that Alimera will consummate that financing. Alimera has no prior experience in commercializing products. There is no assurance that Alimera will be able to build and manage a successful commercial operation in the EUsuccessfully 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 have sufficient capital to do so. Further, because wereceive 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 ifwhere Alimera markets ILUVIEN directly and to a percentage of royalties and non-royalty consideration ifwhere Alimera sublicenses the marketing of ILUVIEN, theILUVIEN. The amount and timing of any revenues we receive will be affected, among other things, by the manner in which Alimera determinesmarkets ILUVIEN, the amounts and timing of sales of ILUVIEN, commercialization costs incurred by Alimera’s direct marketing efforts, and the terms of sublicense agreements.

The commercialization of ILUVIEN is a significant undertaking by Alimera, and ILUVIEN for DME is its first and only product. While Alimera believes that it has sufficient funds available to fund its operations for the continued commercialization of ILUVIEN in the U.S., Germany, Portugal and the United Kingdom, Alimera has reported that 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. We do not know whether Alimera 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 acceptance of, and generating revenues to pSivida from, ILUVIEN for DME. Commercialization by Alimera in the U.S., Germany, Portugal and the U.K, including the transitioning from an outside provider 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 successfully will be affected, among other things, by:

If Alimera has reported thatis not successful in commercializing ILUVIEN for DME and generating payments to us, it intends to seek marketing approvalwould adversely affect our business, operating results and financial condition.

Sales of ILUVIEN for DME in additional EU countries, there is no assurance that Alimera will apply for or obtain any additional approvals. Further, we cannot project what the demand willmay be formaterially adversely affected by pricing and reimbursement decisions of regulatory bodies, insurers and others.

Prices, coverage and reimbursement to consumers of ILUVIEN for DME, if marketedlike other drugs, are generally regulated by third-party payors, such as government health administration authorities and plans, private health

insurers and other organizations and affect ILUVIEN’s sales. The timing and complexity of those reimbursements also affect sales. Prices in the EU.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.

BothThe micro-insert for ILUVIEN and our micro-insert for posterior uveitis deliverMedidur delivers FAc, a corticosteroid that has demonstrated undesirablecertain adverse side effects in the eye, which may affect the approvability and success of these micro-insertsthis micro-insert for treatment of DME and posterior uveitis and other eye diseases.uveitis.

BothThe micro-insert for both ILUVIEN and our micro-insert for posterior uveitis of the same design deliverMedidur delivers the non-proprietary corticosteroid FAc, which is associated with undesirable side effects in the eye, such as cataract formation and elevated intraocular pressure, whichIOP and may increase the risk of glaucoma and related surgery to manage those side effects. In the 2011 CRL, the FDA stated that the risks of adverse reactions shown forAlthough Retisert, which also delivers FAc to treat posterior uveitis, and ILUVIEN for DME in the FAME Study were significant and were not offsethave both been approved by the benefits demonstrated by ILUVIEN for DME in those clinical trials. To date, Austria, France, Germany, Portugal and the U.K. have granted marketing authorization to ILUVIEN for the treatment of vision impairment associated with chronic DME considered insufficiently responsive to available therapies, butFDA, there is no assurance that ILUVIEN for DME will receive marketing authorization from the Italian and Spanish or any other regulators. These side effects may affect the approvability of ILUVIEN for the other eye conditions for which it is being studied, and even if approved, these side effects may adversely affect the successful marketing of ILUVIEN. Although our approved Retisert product for posterior uveitis and our product candidate for the same condition both deliver FAc, there is no assurance that our micro-insert of the same design as ILUVIEN for the treatment of posterior uveitisMedidur will be abledetermined to demonstrate that it isbe safe and efficacious for the treatment of posterior uveitis in light of its expected side effects from FAc. These side effects may limit the population for which marketing authorization is granted or for which reimbursement is provided in one or more jurisdictions and/or adversely affect sales of Medidur, if approved, and/or ILUVIEN.

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

While 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, this is only a hypothesis, and there is no assurance that the ongoing Medidur Phase III clinical trials will demonstrate these results. Data from our ongoing IOP assessment from 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 take with respect to Medidur.

There is no assurance that we will be able to file an NDA 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 could 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. As a result, there is no assurance that an NDA for Medidur will be filed on the basis of the data we currently plan 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. While we believe the FDA will accept the filing of an NDA for Medidur based on the data 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 outside the United States, and the FDA 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 choose 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.

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

In June 2011, we amended our Collaborative Research and License Agreement with Pfizer to focus solely on the development of the Latanoprost Product. Development of this product through Phase II clinical trials is at our own expense. Pfizer has an option for an exclusive, worldwide license to develop and commercialize the Latanoprost Product upon our completion of Phase II clinical trials, which are at our option and expense, or if we ceaseupon our cessation of development of the Latanoprost Product at any time prior to completion of those trials. There is no assurance that we will commence or complete the Phase II clinical trials for the Latanoprost Product,Product; that, if completed, the trials will be successful,successful; that Pfizer will, in any event, exercise its option oroption; that, if exercised, that Pfizer will commence Phase III clinical trialstrials; or that the Latanoprost Product will achieve successful Phase III trial results, regulatory approvals or commercial success. As a result, there is no assurance that we will receive any further licensing, milestone or royalty payments under the Restated Pfizer Agreement.

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

Although we are optimistic that our Tethadur technology platform can provide sustained delivery of proteins (including antibodies) and peptides, and our data from an in vitro study has shown that the long-term sustained release of antibodies such as Avastin is achievable using Tethadur, our research is at an early stage and we face challenges. Development of any product candidates is expected to require significant additional research. There is no assurance that our 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.

Product development is very uncertain. If we or our licensees are unable to or 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 or ournor any licensees will be unableable to commercialize ourthose product candidates.candidates and generate revenues for us.

Our current and future activitiesOther than Medidur for posterior uveitis, for which pivotal Phase III trials are and will be subject to stringent regulation by governmental authorities both in the U.S. and other countries in which our products are marketed. Before we or our licensees can manufacture, market and sell anyongoing, all of our product candidates, approval from the FDA and/or foreign regulatory authoritiesdevelopment is required to market in the applicable jurisdictions. Generally, in order to obtain these approvals, pre-clinical studies and clinical trials must demonstrate that a product candidate is safe for human use and effective for its targeted disease or condition.

Other than ILUVIEN for DME, none of our product candidates has completed or is in pivotal clinical trials. An investigator-sponsored Phase I/II study of the Latanoprost Product is ongoing, but we have not commenced Phase II clinical trials; the FDA has cleared our IND to treat posterior uveitis with our injectable sustained-release micro-insert and we are now permitted to move directly to two Phase III trials to treat patients with posterior uveitis, but we have not commenced pivotal trials; and we have no ongoing pre-clinical or clinical studies with respect to BioSilicon product candidates.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 toresult in approved products. There is no assurance that evaluationany 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 licenses, or that we or ourany licensees will commence clinical trials for any new product candidates or continue clinical trials for any of our product candidates.once commenced. If clinical trials conducted by or for us or ourany licensees for any of our product candidates do not provide the necessary evidence of safety and efficacy, those product candidates will not receive the necessary regulatory approvals, cannot be manufactured and sold, and will not generate revenues.revenues for us. Initial or subsequent clinical trials may not be initiated by or for us or ourany licensees for product candidates or may be delayed, terminated or fail due to many factors, including the following:

Results from pre-clinical testing, and early clinical trials, investigator-sponsored studies and other data and indications often do not accurately predict results of laterfinal pivotal clinical trials.trial results. 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, earlyother 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 products’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 which maywould reduce the size of, or otherwise limit, the potential market for the product.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 a limited abilitysales and marketing capacity. There is no assurance that we will have the financial resources to develop and market products ourselves. If we are unablethe capacity to, find development or marketing partners, or our development or marketing partners do not successfully develop or market our products, we may be unable to effectively develop and market products on our own.

We have limited product development capability and no marketing or sales staff. Developing products and achieving market acceptance for them can require extensive and substantial efforts by experienced personnel as well as expenditure of significant funds. We may not be able to, establish sufficient capabilitiessuccessfully market and sell 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 staff and no experience in commercializing products. 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, 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 developfund independent commercialization of any products.

The success of our current and possible future collaborative and licensing arrangements depends and will depend heavily on the experience, resources, efforts and activities of our licensees, and if they are not successful in developing and marketing our products, and achieve market penetration ourselves.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, and we currently have collaboration and licensing arrangements with Alimera, Pfizer and Bausch & Lomb. The curtailment or termination of any of these arrangements could adversely affect our business, our ability to develop and commercialize our products, product candidates and proposed products and our ability to fund operations.

where appropriate. The success of thesecurrent 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:

To the extent that we choose not to, or we are unable to, enter into future license agreementsWe currently have collaboration and licensing arrangements with marketingvarious companies, most significantly Alimera and sales partners and, alternatively, seek to market and sell products ourselves, we would experience increased capital requirements to develop the ability to manufacture, market and sell future products. We may not be able to manufacture, market or sell our products or future products independently in the absence of such agreements.

Our current licensees may terminate their agreements with us at any time, and if they do, we will lose the benefits of those agreements and may not be able to develop and sell products currently licensed to them.

Our licensees have rights of termination under our agreements with them. Exercise of termination rights by one or more of our licensees may leave us without the financial benefits and development, marketing or sales resources provided under the terminated agreement, which may have an adverse effect on our business, financial condition and results of operations. Additionally, our interests may not continue to coincide with those of our partners, and our partners may develop, independently or with third parties, products or technologies that could compete with our products. Further, we may disagree with our partners over the rights and obligations under those agreements, including ownership of technologies or other proprietary interests, noncompetition, payments or other issues, which could result in breach of the agreements including related damages or injunctive relief or termination.

Pfizer may terminate the Restated Pfizer Agreement with respect to the Latanoprost Product without penalty at any time and for any reason upon 60 days’ written notice. We have exclusively licensed our technology underlying Vitrasert and Retisert toBausch & Lomb. While Bausch & Lomb which can terminate its agreement with us without penalty at any time upon 90 days’ written notice. We have exclusively licensed the technology underlying ILUVIEN for DME and certain ophthalmic applications to Alimera. Alimera has financial responsibility for the development of ILUVIEN and any other licensed products developed under our collaboration agreement, along with sole responsibility for the commercialization of such licensed products. Alimera may abandon the development and commercialization of any licensed product at any time.

Any of Pfizer, Alimera or Bausch & Lomb may decide not to continue to develop, exercise options or commercialize products under their respective agreements, change strategic focus, or pursue alternative technologies instead of our technologies or develop competing products. While Pfizer and Bausch & Lomb have significant experience in the ophthalmic field and have substantial resources, there is no assurance whether, and to what extent, that experience and those resources will be devoted to Retisert, and we do not expect revenues from Retisert to increase materially and they may decline further. Although we believe potential revenues from ILUVIEN for DME are important to our technologies.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. BecauseAlimera has reported that its negative cash flows from operations and accumulated deficit 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 currently have sufficient fundingknow whether Alimera will be able to obtain amendments or internal capabilitieswaivers of those covenants. We do not know if Alimera will be able to developraise additional financing if and commercializewhen 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, product candidates, decisions, actions,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 these agreementsour licensees or by Pfizer, Bausch & Lombus may leave us without the financial benefits and development, marketing or Alimerasales 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 any of the products or product candidates licensed to such entities.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 of our competitors 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 many of 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. For example, Lucentis has been approved to treat patients with DME in the U.S. and EU, and Bayer HealthCare and Regeneron have instituted Phase III studies of EYLEA, already approved in the U.S. and Australia to treat wet AMD, to treat DME. 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. For example, sales of Vitrasert for the treatment of CMV retinitis, a disease that affects people with late-stage AIDS, declined significantly with advances in the treatment of AIDS.

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.products than we do.

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

In both domestic and foreign markets, the commercial success of our products and product candidates will require not only obtaining regulatory approvals, but also obtaining market acceptance by retinal specialists and other doctors, patients, government health administration authorities and other third-party payors. Whether and to what extent our products and product candidates achieve and maintain market acceptance will depend on a number of factors, including demonstrated safety and efficacy, cost-effectiveness, potential advantages over other therapies, our and our collaborative partners’ marketing and distribution efforts and the reimbursement policies of government and other third-party payors. In particular, if government and other third-party payors do not recommend our products and product candidates, limit the indications for which they are recommended, or do not provide adequate and timely coverage and reimbursement levels for or recommend our products, and product candidates, the market acceptance of our products and product candidates will be limited. Both government and other third-party payors attempt to contain healthcare costs by limiting coverage and the level of reimbursement for products

and, accordingly, they mightmay 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 related tothat affect our or our competitors’ products and product candidates or our competitors’ products.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, 2012,2015, we had 199238 patents and 136116 pending

patent applications, including patents and pending applications covering our Durasert, Tethadur BioSilicon and CODRUGother 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 partythird-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 United StatesU.S. and Patent Co-operation Treaty countries.

Prior art may reduce the scope or protection of, or invalidate, our patents. Previously conducted research or published discoveries may prevent our patents from being granted, invalidate issued patents or narrow the scope of any protection obtained. Reduction in scope of protection or invalidation of our licensed or owned patents, or our inability to obtain patents, may enable other companies to develop products that compete with our products and product candidates on the basis of the same or similar technology. As a result, our patents and those of our licensors may not provide any, or sufficient, protection against competitors. While we have not been, and are not currently, involved in any litigation over intellectual property, such litigation may be necessary to enforce any patents issued or licensed to us or to determine the scope and validity of third party proprietary rights. We may also be sued by one or more third parties alleging that we infringe their intellectual property rights. Any intellectual property litigation would be likely to 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 costcosts 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 and achieving a competitive position maywill depend on whether we can attract and retain additional qualified management and scientific personnel.personnel as well as a sales and marketing staff. There is strong competition for management and scientificqualified 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 senior management or scientific staff, or the inability to attract and retain additional personnel and develop expertise as needed, could have a material adverse effect on our results of operations and financial condition.

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

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

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

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

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

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

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

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

There are a limited number of manufacturers that operate under cGMP and other foreign regulations that are both capable of manufacturing our products and product candidates and are willing to do so. Alimera has contracted

with individual third-party manufacturers with respect tofor the manufacture of componentsILUVIEN and its components. If any of ILUVIEN. Alimera’s third-party manufacturers breach their agreements or are unable or unwilling to perform for any reason or fail to comply with cGMP and comparable foreign requirements, Alimera may not be able to locate alternative acceptable manufacturers, enter into favorable agreements with them or get them approved by the applicable regulatory authorities in a timely manner. Delays in the commercial production of ILUVIEN could delay or impair Alimera’s marketing of ILUVIEN, which, in turn, could adversely affect Alimera’s generation of net profits for us.

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

We manufacture supplies in connection with pre-clinical or clinical studies conducted by us orand our collaboration partners. Under our collaboration agreements with Alimera, Pfizer and Bausch & Lomb, welicensees. Our licensees have provided our licensees 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 our development of products could be delayed.

We currently maintain offices and research and development facilities in the U.S. and the U.K., and our goal is to develop products for sale by us and our licensees in most 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 to 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:

Credit and financial market conditions may exacerbate certain risks affecting our business.

Sales of our products are, and if approved, our product candidates will, depend on the availability and extent of reimbursement from government and other third-party payors. Difficult credit and financial market conditions may increase the risk that government and other third-party payors will reduce the availability or extent of reimbursement for our products, and the risk that third-party payors will delay or default on reimbursement obligations.

Development and sales of our products and product candidates also heavily depend on collaborative partners and third-party suppliers. Difficult credit and financial market conditions may increase the risk that there are delays, disruptions or defaults in the performance of these third parties’ obligations to us.

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 our products and any product candidates whichthat obtain marketing approval overin the next 10 years.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 PPACA’s effects cannot be fully known until its provisions are implemented, andcontinuing efforts of the Centers for Medicare & Medicaid Services,government, insurance companies, managed care organizations and other federal and state agencies, issue applicable regulationspayors of healthcare services to contain or guidance. Proposed U.S. statereduce costs of healthcare reforms, andmay adversely affect the demand for any foreign healthcare reforms, also could alter the availability, methods and rates of reimbursements from the government and other third-party payorsproducts 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 productsproducts; 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 candidates which obtain approval, and could adversely affect our business strategy, operations and financial results.revenues.

The Food and Drug Administration Amendments Act of 2007FDAAA 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 Prescription Drug User Fee Act (PDUFA)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,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 price of our common stock dropped significantly when the FDA issued its 2011 CRL with respect to ILUVIEN for DME. The biotechnology sector, in particular, and the stock market generally are vulnerable to abrupt changes in investor sentiment. Prices of securities and trading volumevolumes 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), for our stock and CHESS Depositary InterestsCDIs 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, 2012,2015, we had outstanding warrants and options to acquire approximately 4.66.1 million shares of our common stock, or approximately 16.6%17.1% 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. The overhang of outstanding warrants and options may adversely affect our stock price.

Pfizer owns a significant percentage of our common stock and is a collaborative partner and therefore may be able to influence our business in ways that are not beneficial to you.

Pfizer owned approximately 8.0% of our outstanding shares as of August 31, 2012 and is a collaborative partner. As a result, Pfizer may be able to exert significant influence over our board of directors and how we operate our business. The concentration of ownership may also have the effect of delaying or preventing a change in control of our company.

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.

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 September 21, 2012,August 31, 2015, the last reported sale price of our common stock on the NASDAQ Global Market was $1.62.$3.75. As of that date, we had approximately 2320 holders of record of our common stock and, according to our estimates, approximately 3,5004,960 beneficial owners of our common stock. In addition, as of that date, there were approximately 2,370 registered2,010 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, 2012:2015:

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, 2012,2015, the number of shares issuable under the 2008 Incentive Plan was increased by 750,000 shares.

Recent Sales of Unregistered Securities; Uses of Proceeds from Registered Securities; Issuer Repurchases of Equity Securities

None.

ITEM 6.

SELECTED FINANCIAL DATA

The selected historical financial data set forth below as of June 30, 2015, 2014, 2013, 2012 2011, 2010, 2009 and 20082011 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, 20122015 and 20112014 and for the years ended June 30, 2012, 20112015, 2014 and 20102013 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, and the notes 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 statements and related notes 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 develop tiny,are a leader in the development of sustained-release drug deliverydrug-delivery products designed tofor treating eye diseases. Our products deliver drugs at a controlled and steady rate for months or years. We arehave developed three of only four sustained-release products approved by the U.S. Food and Drug Administration (FDA) for treatment of back-of-the-eye diseases. The most recent is ILUVIEN^® for diabetic macular edema (DME), sold by our licensee 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 primarily focused on treatment ofdeveloping products for chronic ophthalmic diseases of the back of the eye utilizing our core technology platforms, Durasert™ and BioSilicon™. We currently have three approved products and two principal product candidates under development, which represent successive generations of our Durasert technology platform. We have developed three of the four sustained release devices for treatment of retinal diseases currently approved in the U.S. or the European Union (EU).platforms.

ILUVIEN.Our most recently approved product ILUVIEN^® is an injectable, sustained-release micro-insert deliveringthat provides treatment of DME for three years from a single administration. ILUVIEN is licensed to Alimera Sciences, Inc. (Alimera), and we are entitled to a share of the corticosteroid fluocinolone acetonide (FAc) over a periodnet profits (as defined in our agreement with Alimera) from Alimera’s sales of up to 3 yearsILUVIEN. ILUVIEN was launched in late February 2015 in the U.S., where it is indicated for the treatment of vision impairment associatedDME in patients previously treated with a course of corticosteroids without a clinically significant rise in intraocular pressure. ILUVIEN has been commercially available 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 EU countries for the treatment of chronic diabetic macular edema (DME)DME considered insufficiently responsive to available therapies. ILUVIEN is being developed by our licensee Alimera Sciences, Inc. (Alimera).

ILUVIEN has received marketing authorization in the United Kingdom, Austria, France, Germany and Portugal, and marketing authorization is pending in Italy and Spain. The International Diabetes Federation has estimated that approximately 19.1 million people in these seven countries have diabetes, of which Alimera has estimated that approximately 1.1 million suffer from vision loss associated with DME. Alimera has announced its intention to proceed with the direct commercialization of ILUVIEN in Germany, the U.K.sublicensed distribution, regulatory and France in 2013.

To date, Alimera has not received marketing approval for ILUVIEN in the U.S. Following receipt of a Complete Response Letter in November 2011 (2011 CRL) from the U.S. Food and Drug Administration (FDA), and based on a meeting with the FDA in June 2012, Alimera has reported that it intends to resubmit its New Drug Application (NDA)reimbursement matters for ILUVIEN for DME in early 2013. Alimera further reported that it intendsAustralia 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 include additional analysis of the benefits and risks of ILUVIEN based upon the clinical data from its two previously completed pivotal Phase III clinical trials (FAME™ Study) and to focus on the population of patients for which regulatory approval has been granted in the various EU countries.

Product Development. We are pursuing the treatment oftreat chronic non-infectious uveitis affecting the posterior segment of the eye (posterior uveitis) as another indication for three years from a single administration. Medidur, which is the same injectable micro-insert usedas ILUVIEN, is in ILUVIEN. We did not license this indication to Alimera. The FDA has cleared our Investigational New Drug application (IND), permitting us to move directly to two Phase III trials for this indication without the necessity of first conducting Phase I or Phase II trials. The FDA has agreed that the primary end point in these trials will be recurrence of uveitis within 12 months and that we can reference much of the data, including the clinical safety data, from the clinical trials, for ILUVIEN for DME.with the filing of a new drug application (NDA) anticipated in the first half of 2017. We plan to enroll a total of approximately 300 patients in our clinical trials and to utilize an inserter with a different design and a smaller gauge needle than the planned commercial inserter for ILUVIEN for DME. Because this micro-insert delivers the same drug as our approvedare developing Medidur independently.

Our FDA-approved Retisert^® product for posterior uveitis, we expect these trials will show efficacy. Further, as the same micro-insert was used in the ILUVIEN trials, we expect to observe a side-effect profile in uveitis patients comparable to that seen in DME patients. As a result, we are optimistic that this micro-insert will be efficacious for posterior uveitis with a favorable risk/benefit profile and fewer side effects compared to Retisert. An investigator-sponsored Phase I/II study of the safety and efficacy of this micro-insert for the treatment of posterior uveitis is ongoing.

We are developing a bioerodible, injectable micro-insert delivering latanoprost (the Latanoprost Product) to treat glaucoma and ocular hypertension. An investigator-sponsored Phase I/II dose-escalation study has been initiated to assess the safety and efficacy of this micro-insert in patients with elevated intraocular pressure (IOP). We have granted to Pfizer, Inc. an exclusive option under various circumstances to license the worldwide development and commercialization of the Latanoprost Product for the treatment of human ophthalmic disease or conditions other than uveitis.

We are investigating the use of Durasert technology for the treatment of orthopedic diseases.

BioSilicon.The second key technology platform we are targeting is BioSilicon, which uses fully-erodible, nanostructured, porous material for sustained drug delivery. Our primary focus is on Tethadur™, an application of BioSilicon technology designed to provide sustained delivery of large biologic molecules, including proteins, antibodies and peptides. The sizes of the pores in the BioSilicon material are manufactured using nanotechnology to accommodate specific protein, peptide or antibody molecules that are then released on a sustained basis over time as the material bioerodes. Our BioSilicon technology can also be designed to deliver smaller molecules. We are investigating the use of BioSilicon in our Latanoprost Product and the use of Tethadur in other ophthalmic applications.

FDA Approved Products.Our two FDA-approved products utilize two earlier generations of our Durasert technology system and are surgically implanted. Second-generation Retisert delivers FAc to provideprovides sustained release treatment of posterior uveitis for approximately two and a half years, and first-generation Vitrasert^® delivers ganciclovir to provide sustained release treatment of AIDS-related cytomegalovirus (CMV) retinitis for six to nine months. Weyears. It is licensed both of these products to Bausch & Lomb.Lomb, and we receive royalties from its sales.

Our pre-clinical development program is focused on developing products using our core platform technologies, Durasert™ and Tethadur™, to deliver drugs or biologics to treat wet and dry age-related macular degeneration (AMD), glaucoma, osteoarthritis and other diseases.

Summary of Critical Accounting Policies and Estimates

OurThe 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 States 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 (for example,(such as granting of license rights, providing research and development services, and manufacturing of clinical materials and participating on joint research committee)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 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 customercollaborative 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 elements andstandalone 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 are applied 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 year ended June 30, 2012,2015, we reported $2.1$25.4 million 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 prospectively adopted the provisions of ASU No. 2009-13, Revenue Recognition (Topic 605):Multiple-Deliverable Revenue Arrangements (“ASU 2009-13”) for new and materially modified arrangements originating on or after July 1, 2010. ASU 2009-13 requires a vendor to allocate revenue to each unit of accounting in arrangements involving multiple deliverables. It changes the level of evidence of standalone selling price required to separate deliverables by allowing a vendor to make its best estimate of the standalone selling price of deliverables when vendor-specific objective evidence or third-party evidence of selling price is not available.

As discussed further in Note 3 toconcluded that our consolidated financial statements, adoption of this accounting pronouncement in fiscal 2011 resulted in the recognition of revenue in connection with our 2007 Collaborative Research and License Agreement with Pfizer that became subject to the new accounting pronouncement after a material modification to the agreement occurred. As a result of the adoption of ASU 2009-13, deferred revenues associated with this Pfizer agreement will be recognized as revenues earlier than would otherwise have occurred.

Our deliverables under the Restated Pfizer Agreement includeare 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)(“JSC”). We concluded that the Pfizer exercise option for the worldwide exclusive license is nottreat these as a single deliverable, of the arrangement, due to it being a substantive option and not being priced at a significant and incremental discount. We determinedhaving concluded that the JSC does not have standalone value separate from the R&D program and therefore we combined these deliverables into a single unit of accounting.program.

The total arrangement consideration of the Restated Pfizer Agreement totaled $10.05 million, which consisted of the $7.75 million of 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. To determine the estimated selling price of the combined deliverable, we applied an estimated margin to our cost projections for the combined deliverable. A change in the estimated margin or our cost projections would have directly impacted the amount of revenue recognized during fiscal 2011. An increase of 10% in our estimated selling price of the combined deliverables would have reduced revenue recognized in fiscal 2011 by $670,000 and would have increased the amount of deferred revenue recognized in fiscal 2012 by 10%, or $75,000.

Valuation of Intangible Assets

At December 31, 2011, we recorded a $14.8 million intangible asset impairment write-down of our Durasert and BioSilicon technology systems. Following the November 2011 public announcement of the 2011 CRL, there

was a significant decline in the Company’s share price, resulting in a decrease of the Company’s market capitalization from $82.0 million to $23.1 million at December 31, 2011. The combination of the 2011 CRL and the decline in the Company’s share price were determined to be impairment indicators of the Company’s finite-lived intangible assets. To assess the recoverability of the combined intangible assets (which had a carrying value of $19.4 million at December 31, 2011), we used a combination of market-based and income-based valuation methodologies. Using the market-based approach as the primary indicator of fair value, an enterprise value of $4.4 million (market capitalization less existing capital resources) was adjusted for an estimated control premium and for other working capital items to derive an implied fair value of the intangible assets of $4.6 million. Under the income-based approach, the forecasted cash flows expected for the intangible assets were discounted using after-tax cost of capital rates taking into account Company-specific risks. The resulting fair value under this approach supported the conclusions of the market-based approach. Based on these analyses, the fair value of the combined intangible assets was allocated to each intangible based on values determined under the income-based approach, resulting in an $11.7 million write-down of the BioSilicon intangible and a $3.1 million write-down of the Durasert intangible.

At June 30, 2012, we reported $4.2 million of intangible assets, net of accumulated amortization, which consisted of $2.9 million related to Durasert and $1.3 million related to BioSilicon. We amortize these intangible assets using the straight-line method over their estimated economic lives, which currently extend through calendar year 2017 and is expected to result in a charge to operations of approximately $770,000 per year. We believe that the carrying value of our intangible assets will be recouped primarily through expected net cash flows from our existing collaboration agreements described under License and Collaboration Agreements above or through other licensing or commercialization.

We will continue to review our intangible assets for impairment whenever events or changes in business circumstances indicate that the asset carrying value may not be fully recoverable or that the useful life of the asset is no longer appropriate. Factors that could trigger an impairment review include the following:

If an impairment trigger is identified, we determine recoverability of an intangible asset by comparing projected undiscounted net cash flows to be generated by the asset to its carrying value. If the carrying value is not recoverable, an impairment charge is recorded equal to the excess of the asset’s carrying value over its fair value, and the carrying value is adjusted. Estimated future undiscounted cash flows, which relate to existing contractual agreements as well as projected cash flows from future research and development collaboration agreements utilizing the underlying technology systems, require management’s judgment regarding future events and probabilities. Actual results could vary from these estimates. Future adverse changes or other unforeseeable factors could result in an impairment charge with respect to some or all of the carrying value of our intangible assets. Such an impairment charge could materially impact future results of operations and financial position in the reporting period identified.

A significant change in the estimation of the projected undiscounted net cash flows for the products and product candidates utilizing the Durasert or BioSilicon technology systems, among other things, could result in the further impairment of the carrying value of the respective assets.

Results of Operations

Years Ended June 30, 2012 and 2011