UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-K

For the fiscal year ended June 30, 20132014

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, 2012,2013, the last trading day of the registrant’s most recently completed second fiscal quarter, was approximately $27,506,000.$106,135,000.

There were 26,791,56129,337,595 shares of the registrant’s common stock, $0.001 par value, outstanding as of September 23, 2013.8, 2014.

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 18, 2013,11, 2014, are incorporated by reference into Part III of this Annual Report onForm 10-K.

PSIVIDA CORP.

Form 10-K

For the Fiscal Year Ended June 30, 20132014

Table of Contents

PART I

Preliminary Note Regarding Forward-Looking Statements

This Form 10-K and our 20132014 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 or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning product research, development and commercialization timelines; any statements of expectations or belief; 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, sustained-release products designed to deliver drugs and biologics at a controlled and steady rate for weeks, months or years. UtilizingOur strategy is to use our core technology platforms, Durasert™ and BioSilicon™, weTethadur™ drug delivery technologies to independently develop products that deliver proven drugs and biologics, while continuing to leverage these technologies through collaboration and license agreements. We are focused on treatment of chronic diseases of the back of the eye and are also exploring applications outside ophthalmology. We have developedOur lead product candidate Medidur™ is in a pivotal Phase III clinical trial, our lead licensed product ILUVIEN^® has been approved in the European Union (EU) and is pending approval with the U.S. Food and Drug Administration (FDA), and our pipeline includes potential product candidates at earlier stages of development. Our Durasert technology is the basis of three of the four sustained-release products for treatment of retinal diseases currently approved in the U.S. or European Union (EU), and our lead product candidate began a Phase III clinical trial in June 2013. Our strategy includes developing products independently while continuing to leverage our technology platforms through collaboration and license agreements.EU.

ILUVIEN^®Medidur, our most recently approved product, is an injectable, sustained-release micro-insert that provides treatment of vision impairment associated with chronic diabetic macular edema (DME) considered insufficiently responsivedesigned to available therapies over a period of up to three years. ILUVIEN is licensed to and sold by Alimera Sciences, Inc. (Alimera), and we are entitled to a share of the net profits, as defined, from Alimera’s sales of ILUVIEN for DME. Alimera commenced the commercial launch of ILUVIEN for DME in the U.K. and Germany in the second quarter of 2013 and expects to launch in France in the first quarter of 2014. The International Diabetes Federation has estimated that approximately 19.0 million people have diabetes in the seven EU countries where ILUVIEN has received or been recommended for marketing authorization, of which Alimera has estimated that approximately 1.1 million people suffer from vision loss associated with DME. Alimera is also seeking marketing approval for ILUVIEN for DME in the U.S. In the second quarter of 2013, Alimera received a new Prescription Drug User Fee Act (PDUFA) goal date of October 17, 2013 after

resubmitting its New Drug Application (NDA) for ILUVIEN for DME. The resubmission responded to a second Complete Response Letter (CRL) received from the U.S. Food and Drug Administration (FDA) in November 2011.

Medidur™, our lead development product, commenced the first of our two planned Phase III clinical trials for the treatment oftreat chronic, non-infectious uveitis affecting the posterior segment of the eye (posterior uveitis) in June 2013.over a period up to three years. Medidur uses the same Durasert micro-insert used in ILUVIEN (same polymers, same drug and same dose) and delivers a lower dose of the same drug as our FDA-approved Retisert^® for posterior uveitis, which is licensed to Bausch & Lomb. Although we originally planned to seek FDA approval of Medidur based on two Phase III clinical trials, we now expect to seek approval based on safety and efficacy data from our single ongoing Phase III trial, with supplemental clinical data from a planned study of the safety and usability of our proprietary inserter, if ILUVIEN^® is approved by the FDA later this year. We plan to have a confirmatory meeting with the FDA with

respect to our regulatory strategy. If the FDA does not approve this regulatory strategy, we may be required to complete a second Phase III trial for Medidur in order to submit for FDA approval, which would increase the development time and cost of Medidur. We are developing Medidur independently.

ILUVIEN, our lead licensed product, is an injectable, sustained-release micro-insert that provides treatment over a period of up to three years of vision impairment associated with diabetic macular edema (DME). ILUVIEN is licensed to and sold by Alimera Sciences, Inc. (Alimera), and we are entitled to a share of the net profits (as defined) from Alimera’s sales of ILUVIEN on a country-by-country basis. We are also developingentitled to a bioerodible, injectable micro-insert delivering latanoprost (the Latanoprost Product)one-time $25.0 million milestone payment from Alimera if ILUVIEN is approved by the FDA.

ILUVIEN is commercially available in the United Kingdom (U.K.) and Germany for the treatment of chronic DME considered insufficiently responsive to treat glaucomaavailable therapies, and ocular hypertension. UnderAlimera expects to launch in France and Portugal in late 2014. ILUVIEN has marketing authorization in six other EU countries and is pending authorization in seven more EU countries.

Alimera is also seeking marketing approval of ILUVIEN for DME in the U.S. Alimera entered into labeling discussions with the FDA in December 2013 and refiled the New Drug Application (NDA) with the FDA in March 2014. The FDA set a Prescription Drug User Fee Act (PDUFA) goal date of September 26, 2014. The resubmission responded to issues raised in the FDA’s October 2013 Complete Response Letter (CRL).

Alimera also entered into an amended collaborationexclusive agreement Pfizer Inc. has an option, under certain circumstances, to license the developmentwith a third party for distribution, regulatory and commercializationreimbursement matters of the Latanoprost Product worldwide.ILUVIEN for DME in Australia and New Zealand.

We are engaged inOur pre-clinical research with respect to bothis primarily focused on our BioSiliconTethadur and Durasert technology platforms. The primary focusWe are seeking to develop products using Tethadur, part of our BioSiliconBioSilicon™ technology, research is theto provide sustained delivery of peptides, proteins, antibodies and other large biologic molecules using our Tethadur™ technology in both ophthalmic and non-ophthalmic applications. Our research programmolecules. We are also includesresearching the use of our Durasert technology, in orthopedic applicationssome instances in combination with our BioSilicon technology, to provide sustained delivery of therapeutic agents to treat wet and fordry Age-Related Macular Degeneration (AMD), osteoarthritis and glaucoma, as well as to provide systemic delivery of therapeutic agents.biologics.

Our FDA-approvedRetisert provides sustained release treatment of posterior uveitis for approximately two and a half years and is licensed to and sold by Bausch & Lomb. We receive royalties from these sales.

Durasert™, Medidur™, Tethadur™ and BioSilicon™ are our trademarks. Retisert^® and Vitrasert^® are Bausch & Lomb’s trademarks. ILUVIEN^® and FAME^® are Alimera’s trademarks. 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 and its regulatory and marketing status reflects information reportedpublicly disclosed by Alimera.

Fiscal 2014, fiscal 2013 and fiscal 2012 and fiscal 2011 mean the yearstwelve months ended June 30, 2014, 2013 2012 and 2011,2012, respectively.

Strategy

Our strategy is to use our proprietary Durasert and BioSiliconTethadur drug delivery technology platforms to independently develop new drug delivery products for already-approved drugs and biologics tothat will provide better treattreatment of diseases in the ophthalmic area and beyond, 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 severalmany already-approved drugs and biologics, resulting in improved therapeutic effectiveness and better patient compliance and

convenience, with reduced product development risk and cost of product development for us. We believe our proven track record of three approved products, all providing sustained release of previously approved drugs, demonstrates the effectiveness of this strategy.

sustained delivery technologies. By focusing on delivery of already-approved drugs and biologics, particularly those requiring shorter clinical trials, we believe we can minimize the risks and financial investments required for product approval.

Market Overview

Opportunity for Delivery of Drugs and Biologics Generally

We have developed and continue to develop products that 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 to, and reaction with, the targeted tissue and other tissues 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 tissue at an adequate concentration and maintained in the location, and with an appropriate concentration, for a sufficient period of time without causing adverse effects to other tissues. Accordingly, the manner in which a drug or biologic is delivered can be an important element of the ultimate therapeutic value of the treatment.

Drugs are frequently administered systemically by oral dosing, infusion or by injection and subsequently dispersed throughout the body via the circulatory system. In the case of many drugs, systemic administration does not deliver them to the intended site atwith an adequateappropriate concentration for a sufficient period of time or delivers them in a concentration that disperses too quickly, thereby not achieving the maximum potential therapeutic benefit. Because systemically delivered drugs disperse throughout the body, they often are administered at higher dosage levels to achieve sufficient concentrations at the intended sites. Some areas of the body, such as the eyes, joints, brain and nervous system, have natural barriers that impede the movement of drugs to those areas, requiring the administration of higher doses of systemically delivered drugs. These dosage levels can cause harmful side effects when the drugs interact with other tissues. In some cases,To avoid issues of systemic delivery, drugs may be administered locally to the targeted site, typically by injection. While this may avoid the issues of systemic delivery, problems ofHowever, maintaining a sufficient concentrations over timeconcentration at the targeted site remain. Timelyover time typically requires timely and repeated administration of systemically and locally delivered drugs is often necessary to maintain therapeutic drug levels over an extended period of time.drugs.

The administration of biologics is typically more difficult than small drug molecules.

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

Patients often do not getreceive drugs or biologics on the schedule prescribed, or at all, because they do not self-administer the products correctlythem or do not go to medical professionals for administration as required for administration.required. The risk of patient noncompliance increases due to various factors, such as requirements to receivetreatment with multiple products, complex or painful dosing regimens, patient age, cognitive impairment or serious illness, orand length and expense of treatment.

Repeated administration by injection or infusion can result in serious infections and other complications. Further,

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 administration byinjections. Significant ophthalmic biologics, such as Macugen^® (pegaptanib sodium), Lucentis^® (ranibizumab) and EYLEA^® (afilbercept), are injected into the eye as frequently as every four weeks. In addition to the issues of inconvenience, cost and noncompliance, repeated intravitreal injections have medical professionals is often expensive.risks, including intraocular infection, perforated sclera, vitreous hemorrhage and cataract formation.

Due to the drawbacks of traditional drug and biologic delivery, the development of methods to deliver themdrugs and biologics to patients in a more precise, controlled fashion over sustained periods of time is a medical goal. Methods for sustained drug delivery include oral and injectable controlled-release products and skin patches that seek to improve the consistency of the dosage over time and extend the duration of delivery. However, most of these methods cannot provide constant, controlled dosage or deliver drugs for a sufficiently longsufficient duration for many indications,of delivery, particularly in diseases that are chronic or require precise dosing. Moreover, skin patches and oral products still have issues of systemic delivery. There are currently very few approved sustained deliverysustained-delivery products for biologics.

Ophthalmic Drug Delivery

Treating retinal diseases is a significant challenge. 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 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. Examples include Macugen^® (pegaptanib sodium), Lucentis^® (ranibizumab) and EYLEA^® (afilbercept), 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.

Our Technology Systems and Products

Our two core technology platforms, Durasert and BioSilicon,Tethadur, have attributes that can address the following attributes:issues of sustained delivery for ophthalmic and other product candidates:

Durasert Technology System

TheOur three approved products, as well as Medidur, use different generations of our Durasert technology platform usesto 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, to provide sustained delivery of drugs. Drug release is controlled byand 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 alter both the rate and duration of release to meet different therapeutic needs. Our three approvedlater generation Durasert products as well as our two currentand product candidates in clinical trials, use differentare injected at the target site, while early generations of this technology system.were surgically implanted.

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

Medidur for Posterior Uveitis

Medidur, our lead development product, is an injectable, sustained-release micro-insert designed to treat posterior uveitis over a period of up to three years. Posterior uveitis is an inflammatory disease of one of the linings in the posterior of the eye, which can cause sudden or gradual vision loss. The Medidur micro-insert delivers fluocinolone acetonide (FAc), a corticosteroid currently used in Retisert. Medidur uses the same micro-insert delivering the same drug at the same rate with the same polymers as the micro-insert used in ILUVIEN for ChronicDME. In contrast, Retisert delivers a higher dose of the same drug and must be surgically inserted into the eye. Medidur will also use a different inserter with a smaller needle than ILUVIEN. We are developing Medidur independently and have not licensed the rights to Medidur for posterior uveitis to Alimera or any other third party.

In June 2013, we initiated a pivotal Phase III clinical trial of Medidur for the treatment of posterior uveitis. This trial includes clinical sites in the U.S., Europe, Israel and India and is expected to enroll 120 patients. The primary end-point is recurrence of posterior uveitis at 12 months. We currently anticipate that enrollment will be completed in the first calendar quarter of 2015. The FDA has confirmed that we will be able to reference much of the data, including the clinical safety data, from Alimera’s Phase III trials of ILUVIEN for DME, which we are permitted to do under our agreement with Alimera. If the results of our trial are positive, and if the FDA approves ILUVIEN, we believe we will be able to seek FDA approval on the basis of this one Phase III trial together with additional clinical data from a planned study of the use of our proprietary inserter. While we believe the FDA will permit us to pursue this regulatory strategy, we plan to have a confirmatory meeting with the FDA after the PDUFA date for ILUVIEN. If the FDA does not approve our regulatory strategy, we may be required to complete a second Phase III trial for Medidur in order to submit for FDA approval. We may conduct additional clinical studies to support regulatory filings outside the U.S.

Because Medidur delivers the same drug as our FDA-approved Retisert product for posterior uveitis, although at a lower dose, we are optimistic that Medidur will show efficacy comparable to Retisert. Further, as Medidur uses the same micro-insert as ILUVIEN, we expect to observe a side-effect profile in posterior uveitis patients that is superior to that observed for Retisert and comparable to ILUVIEN for DME. As a result, although we cannot be certain, we are optimistic that Medidur will be efficacious for posterior uveitis with a more favorable risk/benefit profile and fewer side effects than Retisert.

Early interim data from an investigator-sponsored study of Medidur are consistent with this hypothesis. This three-year study is evaluating the safety and efficacy of Medidur in up to 12 patients with posterior uveitis. Interim results were measured on the twelve-month anniversary of the start of enrollment. Through this period, none of the eyes receiving Medidur experienced a recurrence of posterior uveitis, and inflammation was reduced in all of these eyes. In contrast, all control (untreated) eyes had either a recurrence of posterior uveitis or a worsening of inflammation. Furthermore, at the last follow-up visit reported in the interim results, best corrected visual acuity (on the Early Treatment Diabetic Retinopathy Study eye chart) improved by an average of more

than nine letters in treated eyes, while untreated eyes declined by an average of one letter. Interim data showed that Medidur was well tolerated, and the observed safety profile was consistent with the short-term safety profile reported in clinical studies of ILUVIEN in DME eyes. Only one eye receiving Medidur experienced an increase in intraocular pressure (IOP) above the normal range; this eye ultimately required a surgical procedure to control elevated IOP.

Medidur is easier to administer than Retisert because it is injected in an office visit, while Retisert is implanted in a surgical procedure.

In the U.S., posterior uveitis has been estimated to affect approximately 175,000 people and be responsible for approximately 30,000 cases of blindness, making it the third largest cause of blindness in the U.S.

ILUVIEN for DME

ILUVIEN is an injectable, sustained-release micro-insert delivering fluocinolone acetonide (FAc)FAc over a period of up to 3 years for the treatment of DME. DME is a disease of diabetics where leaking capillaries result in swelling in the macula, the most sensitive part of the retina, and it is a leading cause of blindness in most developed countries in the working-age population.

ILUVIEN is licensed to Alimera. ILUVIEN is currently commercially available from Alimera in the U.K. and Germany for the treatment of vision impairment associated with chronic DME considered insufficiently responsive to available therapies.

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 has estimated that approximately 19.0 million people have diabetes in the six EU countries where ILUVIEN has been approved, and Under our arrangement with Alimera, estimates that approximately 1.1 million of those people suffer from vision loss associated with DME. There is currently no approved sustained release drug treatment for DME in the U.S. or (other than ILUVIEN) in the EU.

ILUVIEN is licensed to Alimera, which commenced the commercial launch of ILUVIEN for DME in the United Kingdom and Germany in the second quarter of 2013 and expects to launch in France in the first quarter of 2014. Alimera is also seeking marketing approval in the U.S. Wewe are entitled to share in net profits as defined,(as defined) on sales of ILUVIEN for DME by Alimera on a country-by-country basis. See “Strategic Collaborations—Alimera” below. Alimera has completed two 36-month Phase III clinical trials (the FAME^® Study), which involved 956 patients in sites in the U.S., Canada, Europe and India, to assess the efficacy and safety of ILUVIEN in the treatment of DME. Combined enrollment of 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.

The status of marketing approvals in the EU and the U.S. forcommercialization of ILUVIEN for DME and its commercial launch areis as follows:

European Union.Alimera has received marketing authorization forcommenced commercial sales of ILUVIEN for DME in the U.K., and Germany in the second quarter of 2013 and has reported plans to launch in France and Portugal in late 2014. ILUVIEN has marketing authorization in six additional EU countries: Austria, PortugalItaly, Spain, Norway, Denmark and Spain.Sweden. These approvalsmarketing authorizations followed a favorable determination of approvability for the treatment of vision impairment associated with chronic DME considered insufficiently responsive to available therapies under the EU’s Decentralized Procedure (DCP) and, as of June 2014, under the EU’s Mutual Recognition Procedure (MRP). MarketingILUVIEN is awaiting marketing authorization is pending in Italy, which participated in the DCP.national phase under the MRP in seven countries: Belgium, Czech Republic, Finland, Ireland, Luxembourg, Netherlands and Poland. As part of this approval process, Alimera has committed to conduct a five-year, post-authorization, open label registry study of ILUVIEN in 800 patients with chronic DME.the labeled indication.

In the second quarter ofNovember 2013, Alimera commercially launched ILUVIEN in Germany and the U.K. and expects to launch in France in the first quarter of 2014. Alimera does not currently plan to expand the commercialization of ILUVIEN for DME in the EU beyond those three countries until it achieves positive cash flows and sustainability in those countries. Alimera continues to pursue pricing and reimbursement in the EU countries and marketing authorization in Italy.

In Germany, the Federal Joint Committee indicated 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 allowed Alimera to launch ILUVIEN for DME in Germany without price restriction. Alimera is in the process of securing agreements for reimbursement with German statutory insurance funds so that German patients will not be required to submit individual funding requests for reimbursement.

In the U.K., ILUVIEN for DME is currently only available for private pay and privately insured patients as a result of final guidance from the U.K.’s National Institute for Health and Care Excellence (NICE). In April 2013, Alimera submitted in the U.K. recommended ILUVIEN as a Patient Access Scheme (PAS) to NICE to assess the likely impact of the PAS and to determine whether an update to NICE’s previously issued final guidance was warranted. In June 2013, the NICE Appraisal Committee published draft guidance recommending ILUVIENtreatment option for the treatment of pseudophakic patients (those who have undergone prior cataract surgery) with chronic DME considered insufficiently responsive to available therapies. If NICE amends its guidancetherapies who have previously undergone cataract surgery, subject to adopt this recommendation,a simple patient access scheme (PAS). As a result, ILUVIEN will also becomebecame available to pseudophakicthese patients under the U.K.’s National Health Service (NHS). Further, in February 2014, the U.K, which typically constitute a large subgroupScottish Medicines Consortium accepted ILUVIEN for use within the NHS Scotland for treatment of patients with chronic DME patients,considered insufficiently responsive to available therapies who have previously undergone cataract surgery and for certain retreatments, subject to a simple PAS.

In Germany, Alimera was able to launch ILUVIEN without price restrictions, but continues to work with the anticipation that it would be funded in England and Wales through the National Health Service.Germany’s statutory health insurance funds to streamline reimbursement.

In France, the Transparency Commission (Commission de la Transparence or CT) of the French National Health Authority (Haute AutoriteAutorité de Sante) hasSanté) issued a favorable opinion for the reimbursement and hospital listing

by the French National Health Insurance of ILUVIEN for the treatment of chronic DME considered insufficiently responsive to available therapies and despite optimized management of diabetes. In France, once Alimera agrees on a price with the French authorities, patients will be reimbursed for 100% of the cost of ILUVIEN under Affection de Longue Duree,Durée, a program for severe chronic disease, such as diabetes. Alimera has reported that it will move forward with the next step in the process, which is to determine the price and any reimbursement conditions for ILUVIEN in France.

United States.Alimera received a new PDUFA goal date of October 17, 2013 following its second resubmission ofresubmitted the NDA for ILUVIEN for DME to the FDA in March 2013. Using clinical data available2014, and the FDA set a PDUFA goal date of September 26, 2014.

The NDA was originally filed in June 2010 and resubmitted with revisions in May 2011 and April 2013 to address matters raised in the FDA’s first two CRLs. The most recently resubmitted NDA responded to the October 2013 third CRL from the previously completed FAME Study, this resubmission focused on the safety aspects of ILUVIEN and provided additional analyses as well as information to support that ILUVIEN is safe and effective in the treatment of the subgroup population of patients with chronic DME considered insufficiently responsive to available therapies, the same subgroup forFDA, which marketing authorization for ILUVIEN has been granted in six countries in the EU. Additionally, data was submitted from a completed physician utilization study for the ILUVIEN applicator and from a special reading center assessment of photographs of the fundus, or the interior surface of the eye, that were collected during the FAME study. If approved, Alimera intends to commercialize ILUVIEN directly to retina centers across the US.

Alimera has previously received two CRLs concludingstated that the NDA could not be approved in its then currentpresent form. The FDA identified clinical and statistical deficiencies and indicated that the benefits of ILUVIEN did not outweigh its risks. Further, the FDA indicated that results from a new clinical trial would need to be submitted, together with at least 12 months of follow-up data for all enrolled patients, to support certain indications previously discussed by Alimera originally submittedwith the FDA. In the third CRL, the FDA also referenced deficiencies in the methods and controls used for the drug product at the facility where ILUVIEN is manufactured.

In the third CRL, the FDA suggested that a meeting with the Dermatologic and Ophthalmic Drugs Advisory Committee, which was subsequently scheduled for January 2014, might be of assistance in addressing the deficiencies identified above and providing advice whether a patient population could be identified in which the benefits of the drug product might outweigh the risks. Alimera believes it clarified with the FDA that the purpose of the Advisory Committee meeting was to consider the benefits and risks of ILUVIEN based on existing data available from the completed FAME Study clinical trials. A meeting of Alimera and the FDA in preparation for the Advisory Committee meeting resulted in labeling discussions for ILUVIEN, and Alimera and the FDA agreed that the Advisory Committee meeting was no longer necessary.

Alimera’s March 2014 resubmission of the NDA for ILUVIEN included responses to questions raised in June 2010, largely based on analyses of clinical data through month 24 of the Phase III trials.third CRL, addressed deficiencies noted in the methods and controls used for the drug product at the facility where ILUVIEN is manufactured and provided a safety update, which included commercial experience with ILUVIEN in the EU. In December 2010,April 2014, Alimera received its first CRL, in whichwas notified by the FDA asked for analysesthat the resubmission of safety and efficacy data through month 36 of the Phase III trials. In May 2011, Alimera resubmitted theits NDA inqualified as a complete class 2 response to the 2010 CRL, including additional safetythird CRL. Alimera does not plan to conduct any new clinical trials in connection with the FDA’s review of this submission. FDA approval of ILUVIEN would entitle us to a one-time $25.0 million milestone payment from Alimera. In April 2014, Alimera entered into a $35.0 million term loan agreement with Hercules Technology Growth Capital (Hercules) under which Hercules will advance $25.0 million to fund the milestone payment obligation if the FDA approves ILUVIEN on or before October 31, 2014 and efficacy data through month 36certain other conditions are satisfied.

Australia and analyses of dataNew Zealand. In April 2014, Alimera entered into an exclusive agreement with Specialized Therapeutics Australia (STA) for the subgroup of chronic DME patients.

In a second CRL received in November 2011, the FDA concluded that the resubmitted 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 Phase III trials were significant and were not offset by the benefits demonstrated by ILUVIEN in those 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. In June 2012, Alimera met with the FDA to gain a better understanding of the regulatory path for ILUVIEN in the U.S. Alimera’s March 2013 resubmission responded to this CRL using data from the FAME Study.

Other Diseases.Under our agreement with Alimera, ILUVIEN is also being studied in two Phase II clinical trials for the treatment of the dry form of age-related macular degeneration (AMD) and retinal vein occlusion (RVO). A Phase II trial studying ILUVIEN in the treatment of the wet form of AMD has been terminated based on an interim analysis, due to the determination that the endpoint of reducing the number of anti-VEGF injections may not be appropriate to assess the benefitdistribution of ILUVIEN in that disease.

Medidur for Posterior Uveitis

Medidur is our lead development product for the treatment of posterior uveitis, an autoimmune condition characterized by inflammation of the posterior of the eye that can cause sudden or gradual vision loss. This product uses the same micro-insert used in ILUVIEN for DME, but is administered with a different inserter than the commercial inserter for ILUVIEN for DME. Medidur delivers FAc, the same drug as our FDA-approved Retisert for posterior uveitis, but at a lower dose,Australia and is expected to treat posterior uveitis on a sustained basis over a period of up to 3 years.

In June 2013, we initiated the first of two planned Phase III clinical trials of Medidur for the treatment of posterior uveitis. These trials are expected to include clinical sites in the U.S., Europe and Asia. The trials will have a primary end-point of recurrence of posterior uveitis at 12 months and are expected to enroll approximately 300 patients in total. If the results of the trials are positive, we plan to use the data to submit an NDA to the FDA. The FDA has permitted us to move directly to Phase III clinical trials and confirmed that we will be able to reference much of the data, including the clinical safety data, from Alimera’s FAME Study of ILUVIEN for DME. We are developing Medidur independently and have not licensed the rights to Medidur for posterior uveitis to Alimera or any other third party.

Because Medidur delivers FAc, the same drug as our FDA-approved Retisert product for posterior uveitis, although at a slower rate, we are optimistic that Medidur will show efficacy comparable to Retisert. Further, as Medidur uses the same micro-insert as ILUVIEN, we expect to observe a side-effect profile in posterior uveitis patients that is superior to that observed for Retisert for posterior uveitis and comparable to ILUVIEN for DME. As a result, we are optimistic that Medidur will be efficacious for posterior uveitis with a more favorable risk/benefit profile and fewer side effects than Retisert. Early interim data from an investigator-sponsored study is consistent with this hypothesis. Medidur is also easier to administer than Retisert because it is injected in an office visit, whereas Retisert is implanted in a surgical procedure.

In the U.S., posterior uveitis affects approximately 175,000 people andNew Zealand. STA is responsible for approximately 30,000 casesregulatory and commercial matters, including marketing approval and reimbursement, in those countries. The agreement between Alimera and STA includes a milestone payment to Alimera upon achievement of blindness, making ita public reimbursement listing, and royalties based on net sales, which will increase if a sales target is met. We are entitled to 20% of any royalties and 33% of any other payments received by Alimera, including any milestone payment.

Other Diseases. Alimera is not currently studying the third largest causeuse of blindness in the U.S.ILUVIEN to treat any ophthalmic diseases other than DME.

Retisert for Posterior Uveitis

Retisert is approved in the U.S. for the treatment of posterior uveitis. Retisert is surgically implanted through a 3-4 mm incision 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.S. and pays sales-based royalties to us.

Vitrasert for CMV Retinitis

Vitrasert, was our 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 delivery of the anti-viral drug ganciclovir for six to eight months. Vitrasert was originally licensed to and sold by Chiron Corporation and subsequently to and by Bausch & Lomb. During fiscal 2013, Bausch & Lomb discontinued sales of Vitrasert following patent expiration.

Glaucoma Latanoprost Product Candidate

In connection with our 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 intraocular pressure (IOP) in patients with ocular hypertension and glaucoma worldwide. This product candidate is based on a fourth generation of our Durasert technology system, and is also anticipated to utilize our BioSilicon technology. 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”.

BioSiliconTethadur Technology System

Our BioSiliconTethadur technology system utilizes BioSilicon, a fully-erodible, “honeycomb” structure of nano-porous,nanostructured elemental silicon, to provide sustained delivery of therapeutics. BioSilicon is biocompatible and biodegradable. Our primary focus is on Tethadur™, an application of our BioSilicon technology designed to provide sustained delivery of large biologic molecules, including peptides, proteins and antibodies. In this application, the sizesThe size of the pores inand surface area of the BioSilicon material areis manufactured using nanotechnology to accommodate a specific protein, peptide or antibody molecule. A suspension of the specific biologic loaded into BioSilicon in solution is injected into the patient. Over a pre-determined period, the BioSilicon erodes and the biologic molecules which are then released from the pores on a sustained basis over time. Ourbasis. We believe that by varying the pore size and surface area of Tethadur, the release rate of antibodies and other therapeutics loaded into Tethadur can be controlled, which could permit sustained delivery of antibodies and other therapeutics that currently must be delivered by frequent injections. The system is biocompatible and biodegradable. BioSilicon technology can also be designed to deliver smaller molecules.

EvaluationDevelopment Pipeline

Our pre-clinical research is focused on using our Tethadur and Durasert technology platforms, alone or in combination, to deliver therapeutic agents to treat wet and dry AMD, osteoarthritis and glaucoma, as well as to provide systemic delivery of biologics. A micro-insert delivering Latanoprost for the treatment of glaucoma and ocular hypertension is subject to an option by Pfizer.

Feasibility Study Agreements

We have evaluationentered into feasibility study agreements with various companies, some of which are funded, to evaluate our Durasert and Tethadur and other BioSilicon technology systems for the treatment of various ophthalmic and other diseases.

Strategic Collaborations

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

Alimera

In a February 2005 collaboration agreement, as amended and restated in March 2008, we granted Alimera an exclusive worldwide license to manufacture, develop, market and sell ILUVIEN for the treatment and prevention of human eye diseases other than uveitis. We also granted Alimera a worldwide non-exclusive license to manufacture, develop, market and sell certain additional Durasert-based products (1) to deliver a corticosteroid and no other active ingredient by a direct delivery method to the back of the eye solely for the treatment and prevention of eye diseases in humans other than uveitis or (2) to treat DME in humans by delivering a compound by a direct delivery method through an incision no smaller than that required for a 25-gauge or larger needle. The

non-exclusive license is limited to those products that amongstamong other things (i) have a drug core within a polymer layer (with certain limitations regarding chemically bonded combinations of active agents), and (ii) are approved, or designed to be approved, to deliver a corticosteroid and no other active ingredient by a direct delivery to the posterior portion of the eye, or to treat DME by delivering a compound by a direct delivery through an incision required for a 25-gauge or larger needle. We are not permitted to use, or grant a license to any third party to use, the licensed technologies to make or sell any products that are or would be subject to the non-exclusive license granted to Alimera. Following a March 2008 amendment,

Alimera assumedhas complete financial responsibility for the development of licensed products and regulatory submissions which had previously been shared.under the collaboration agreement.

Alimera has agreed to pay us a one-time $25.0 million milestone payment uponwithin 30 days following the first product to be approved by the FDA under the collaboration agreement andagreement. In addition, we are entitled to receive 20% of any net profits as defined,(as defined) on sales of ILUVIENeach licensed product (including ILUVIEN) by Alimera, measured on a quarter-by-quarter and country-by-country basis, subject to an offset ofbasis. Alimera may recover 20% of previously incurred and unapplied net losses as defined, incurred(as defined) for commercialization of each product in a country by Alimera

on a country-by-country basis.offsetting up to 4% of the net profits earned in that country for that product each quarter, effectively reducing the Company’s profit share to not less than 16% until those net losses are recouped. If Alimera sublicenses commercialization in any country, we are entitled to receive 20% of royalties and 33% of non-royalty consideration received by Alimera, less certain permitted deductions.

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

Pfizer

In April 2007, we entered into an exclusive worldwide Collaborative Research and License Agreement (the Original Pfizer Agreement) with Pfizer for the use of certain of our technologies in ophthalmic applications that were not licensed to others. Under this agreement, we engaged in a joint research program, and Pfizer had an exclusive license to market any products developed under the agreement.

InOur June 2011 we entered into an Amended and Restated Collaborative Research and License Agreement with Pfizer (the Restated Pfizer Agreement) to focus solely on the development of a sustained release bioerodible implant designed to deliver latanoprost by subconjunctival injection. Under the Restated Pfizer Agreement, we grantedprovides Pfizer an exclusive option, under various circumstances, to license the development and commercialization of the Latanoprost Producta sustained release bioerodible implant to deliver latanoprost by subconjunctival injection (the Latanprost Product) worldwide for human ophthalmic disease or conditions other than uveitis. If Pfizer were to exercise such option, we would be eligible to receive future consideration of up to $166.5 million plus royalties. In addition, we regained all rights to our intellectual property in ophthalmic applications previously included in the Original Pfizer Agreement other than pursuant to the Restated Pfizer Agreement and we have rights to develop and commercialize the Latanoprost Product if Pfizer does not exercise its option.

Under the Restated Pfizer Agreement, Pfizer paid us $2.3 million in cash as an upfront payment,at our discretion and expense, we agreed to use commercially reasonable efforts tocan develop the Latanoprost Product at our expense, and with technical assistance from Pfizer, for at least one year and thereafter, at our option, through completion of Phase II clinical trials, as defined. Upon completion oftrials. If we cease development, or if we commence and complete Phase II clinical trials, Pfizer has the option to acquire, upon payment of $20 million, an exclusive, worldwide license to develop and commercialize the Latanoprost Product for ophthalmic disease in humans other than uveitis. If Pfizer exercisesmay exercise its option it must use commercially reasonable efforts at its expense to developeither juncture in exchange for payments of prescribed, but different levels of, license fee and commercialize the Latanoprost Product, and we are eligible to receive development, regulatory and commercial milestone payments that could total up to $146.5 million and double-digit royalties based on net sales of the Latanoprost Product.potential future milestones plus royalties. If Pfizer does not exercise thisany such option, wethe Restated Pfizer Agreement will have the right to develop and commercialize the Latanoprost Product on our own or with a partner, with rights to Pfizer intellectual property necessary to develop and commercialize the Latanoprost Product. If we elect to cease development of the Latanoprost Product prior to completion of Phase II clinical trials, Pfizer also has an option to acquire, upon payment of a lesser option fee, an exclusive, worldwide license to develop and commercialize the Latanoprost Product for ophthalmic disease in humans other than uveitis at its expense. In this case, Pfizer must also use commercially reasonable efforts to develop and commercialize the Latanoprost Product, and we are eligible to receive lesser development, regulatory and commercial milestone payments and a lower royalty on net sales of the Latanoprost Product. If Pfizer does not exercise this option, we will have the right to develop and commercialize the Latanoprost Product on our own or with a partner, with rights to Pfizer intellectual property necessary to develop and commercialize the Latanaprost Product, following a one-year cessation of development activities.automatically be terminated.

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

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

Pfizer owned approximately 7.0%6.3% of our outstanding stock as of August 31, 2013.2014.

Bausch & Lomb

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

Intrinsiq

In January 2008, we granted an exclusive field-of-use license to Intrinsiq Materials Cayman Limited (Intrinsiq) for the development and commercialization of nutraceutical and food science applications of BioSilicon, under which we received aggregate license fee and minimum royalty payments of $1.7 million through June 2011. In February 2009, we entered into a 2-year supply agreement with Intrinsiq under which we leased certain equipment to Intrinsiq used in manufacturing BioSilicon material for total payments of $122,000. In July 2011, Intrinsiq terminated its field-of-use license agreement, we purchased the BioSilicon-related capital equipment and intellectual property assets of Intrinsiq for $223,000 and assumed four Intrinsiq employees.

Enigma Therapeutics

Under a December 2012 license agreement, amended and restated in March 2013, Enigma Therapeutics Limited (Enigma) acquired an exclusive, worldwide, royalty-bearing license for the development of BrachySil (now named OncoSil™), a BioSilicon product candidate for the treatment of pancreatic and other types of cancer. We received an upfront fee of $100,000 included in collaborative research and development revenue in fiscal 2013, and are entitled to an 8% sales-based royalty, 20% of sublicense consideration and milestones based on aggregate product sales. Enigma is obligated to pay an annual license maintenance fee of $100,000, creditable during each ensuing twelve month period against reimbursable patent maintenance costs and sales-based royalties. The first annual license maintenance fee of $100,000 was paid in January 2014. Enigma has the right to terminate its license upon 60 days prior written notice.

Research and Development

Our clinical and pre-clinical research programs primarily consist of ophthalmic applications of our technology systems. Our research and development expenses totaled $9.6 million in fiscal 2014, $7.0 million in fiscal 2013 and $7.0 million in fiscal 2012 and $6.92012. Of these amounts, $8.2 million in fiscal 2011. Of these amounts,2014, $5.4 million in fiscal 2013 and $4.2 million in fiscal 2012 and $3.2 million in fiscal 2011 were incurred for costs of research and development personnel, clinical and pre-clinical studies, contract services, testing and laboratory facilities. Fiscal 2011 costs were reduced by a one-time IRS grant award of $208,000. All such costs were charged to operations as incurred. The remaining expense of $1.4 million in fiscal 2014, $1.6 million in fiscal 2013 and $2.8 million in fiscal 2012 and $3.7 million in fiscal 2011 consisted of non-cash charges for amortization of intangible assets, depreciation of property, plant and equipment and stock-based compensation expense specifically allocated to research and development personnel. In addition, during fiscal 2012 we recorded a $14.8 million intangible asset impairment write-down, which is classified as a separate category of operating expenses in the consolidated statements of comprehensive loss.

Intellectual Property

Our intellectual property rights are crucial to our business. We hold or are licensed patents relating to our core technology systems in the United States and international markets.other countries. The following table provides general details relating to our owned and licensed patents (including both patents that have been issued and applications that have been accepted for issuance) and patent applications as of August 31, 2013:2014:

Employees

We had 2524 employees as of August 31, 2013.2014. None of our employees is covered by a collective bargaining agreement.

Sales and Marketing

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

Third Party Reimbursement and Pricing Controls

TheSales of pharmaceutical products are significantly dependent on the availability and extent of reimbursement to which reimbursementconsumers of the cost of the products and the related administration procedures is and will be available from third-party payors, such as government health administration authorities and plans, private health insurers and other organizations, andas well as the timing and complexity of obtaining those reimbursements, is important to the successful commercialization of those products.reimbursements. The Centers for Medicare and Medicaid Services designated Retisert as eligible for Medicare reimbursement at the rate of $19,345, with associated surgical fees reimbursed separately. Alimera has been engaged in regulatory proceedings and negotiations with respect to pricing andthe amount and/or process for reimbursement of ILUVIEN for chronic DME in various EU countries where it has received marketing authorization.

The passage of the Medicare Prescription Drug and Modernization Act of 2003 imposed requirements for the distribution and pricing of prescription drugs, which may affect the marketing of our products by us or expectsour licensees. The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act of 2010, collectively referred to receive marketing authorizations.as the ACA, is expected to significantly change the way healthcare is financed by both governmental and private insurers. The ACA may result in downward pressure on pharmaceutical reimbursement, which could negatively affect market acceptance of new products, and the rebates, discounts, taxes and other costs resulting from the ACA may have a significant effect on our profitability in the future. In addition, potential reductions of the per capita rate of growth in Medicare spending under the ACA could potentially limit access to certain treatments or mandate price controls for our products.

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

Competition

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

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

wholly-owned member of the Roche Group. Novartis has the right to market and sell Lucentis outside of the U.S. Regeneron Pharmaceuticals, Inc.’s product EYLEA (aflibercept) is approved in the U.S., EU and Australia for the treatment of neovascular wet AMD, marketing applications have been submitted in other countries and a Phase III clinical study for wet AMD is ongoing in China. EYLEA, like Lucentis and Avastin, is injected directly into the vitreous on a regular basis. Phase III clinical trials of EYLEA for DME are underway, and Regeneron has announced that it plans to file for approval in DME by the end of 2013. Regeneron maintains exclusive rights to EYLEA in the U.S., and Bayer HealthCare owns the exclusive marketing rights outside the U.S. Lucentis, EYLEA and Avastin are all injected into the back of the eye on a regular basis. Allergan, Inc. has announced that it has submitted marketing applications in the U.S. and Europe for’s Ozurdex® (dexamethasone intraveal implant), itsa bioerodible, extended release intravitreal implant, has been approved product for posterior uveitis and RVO,the treatment of DME in DME patients.eyes that have had, or are scheduled for, cataract surgery. It has a duration of therapy of several months. Other companies, including Genentech, are working on the development of product candidates and extended delivery devices for the potential treatment of DME, wet AMD and RVO, including those that act by blocking VEGF and VEGF receptors, as well as use of small interfering ribonucleic acids (siRNAs) that modulate gene expression. For example, in January 2012, Genentech submitted an IND for an extended delivery device to deliver Lucentis. Eyetech, Inc.’s product Macugen (pegaptanib sodium injection) is an anti-VEGF aptamer against VEGF 165. It has been approved in the U.S. for treatment of all subtypes of choroidal neovascularization in patients with AMD.

Many other companies, including GlaxoSmithKline plc, Thrombogenics NV and Novagali Pharma S.A., are seeking to develop drug therapies or sustained delivery platforms for the treatment of ocular diseases.

Revenues

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

Government Regulation

Federal Food, Drug, and Cosmetic Act and Comparable Foreign Laws.The FDA and comparable regulatory agencies in foreign countries impose substantial requirements upon the clinical development, manufacture and marketing of pharmaceutical products. These agencies regulate, among other things, the

research, development, testing, manufacture, quality control, labeling, storage, record-keeping, approval, distribution, advertising and promotion of drug products. The process required by the FDA under the new drug provisions of the Federal Food, Drug, and Cosmetic Act before our products may be marketed in the United States generally involves the following:

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

Pre-clinical tests include laboratory evaluation of the product, its chemistry, formulation and stability, as well as animal studies to assess the potential safety and efficacy of the product. The results of the pre-clinical tests, together with manufacturing information, analytical data and protocols for proposed human clinical trials, are submitted to the FDA as part of an IND, which must become effective before the IND sponsor may begin human clinical trials. The IND automatically becomes effective 30 days after receipt by the FDA unless the FDA, within the 30-day time period, raises concerns or questions about the conduct of the proposed clinical trials as outlined in the IND, and imposes a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before clinical trials can begin. There is no certainty that pre-clinical trials will result in the submission of an IND, or that submission of an IND will result in FDA authorization to commence clinical trials.

Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators. Clinical trials are conducted in accordance with protocols that detail the objectives of the study, the parameters to be used to monitor safety and any efficacy criteria to be evaluated.

Each protocol must be submitted to the FDA as part of the IND. Further, each clinical study must be conducted under the auspices of an independent institutional review boardInstitutional Review Board (IRB) at the institution where the study will be conducted.. The IRB will consider, among other things, ethical factors, safety of human subjects and possible liability of the institution. Some clinical trials, called “investigator-sponsored” clinical trials, are conducted by third-party investigators responsible for the regulatory obligations associated with sponsorship of a clinical trial. The results of these trials may be used as supporting data by a company in its application for FDA approval, provided that the company has contractual rights to use the results.

Human clinical trials are typically conducted in three sequential phases which may overlap:

In the case of products for life-threatening diseases such as cancer, or severe conditions such as blinding eye disease, or for products that require invasive delivery, initial human testing is often conducted in patients with the

disease rather than in healthy volunteers. Since these patients already have the targeted disease or condition, these studies may provide initial evidence of efficacy traditionally obtained in Phase II trials, and so these trials are frequently referred to as Phase I/II or IIa trials.

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

Once ana product approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks; or imposition of distribution or other restrictions under a Risk Evaluation and Mitigation Strategy (REMS) program. Other potential consequences include, among other things:

The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Drugs may be promoted only for the approved indications and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability.

The Food and Drug Administration Amendments Act of 2007 (FDAAA) is designed to provide the public with more easily accessible information about the safety and efficacy of marketed drugs and the FDA with increased authority to ensure drug safety. The FDAAA requires that we register each controlled clinical trial, aside from a Phase I trial, on a website (www.ClinicalTrials.gov) administered by National Institutes of Health (NIH), including descriptive information (e.g., a summary in lay terms of the study design, type and desired outcome), recruitment information (e.g., target number of participants and whether healthy volunteers are accepted), location and contact information and administrative data (e.g., FDA identification numbers). Within one year of a trial’s completion, information about the trial, including characteristics of the patient sample, primary and secondary outcomes, trial results written in lay and technical terms and the full trial protocol must be submitted to the website, unless the drug has not yet been approved. In that case the information is posted shortly after product approval has been obtained. The FDA requires certification of compliance with all relevant FDAAA clinical trials reporting requirements during product development.

The results of product development, pre-clinical studies and clinical studies are submitted to the FDA as part of an NDA for approval of the marketing and commercial shipment of the product. The FDA may deny an NDA if the applicable regulatory criteria are not satisfied, or may require additional clinical data. Even if the additional data are submitted, the FDA ultimately may decide that the NDA does not satisfy the criteria for approval. As a condition of approval, the FDA may require a sponsor to conduct additional clinical trials to confirm that the drug is safe and effective for its intended uses.

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

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

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

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

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

Some stateLaws and regulations have been enacted by various states to regulate the sales and marketing practices of pharmaceutical companies with marketed products. The laws and regulations generally limit financial interactions between manufacturers and health-care providers; require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S. federal government; and/or require disclosure to the government and public of financial interactions. Many of these laws and regulations contain ambiguous requirements or require administrative guidance for implementation. Given the lack of clarity in additionlaws and their implementation, any future reporting (if we obtain approval and/or reimbursement from federal healthcare programs for our product candidates) could be subject to requiring drug manufacturers to report information related to payments to physiciansthe penalty provisions of the pertinent laws and otherregulations.

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

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

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

Corporate Information

pSivida Corp. was organized as a Delaware corporation in March 2008. Its predecessor, pSivida Limited, was formed in December 2000 as an Australian company incorporated in Western Australia. On June 19, 2008, we reincorporated from Western Australia to the United States (the Reincorporation). Except as otherwise indicated, references in this Annual Report to “pSivida”, “the Company”, “we”, “us”, “our” or similar terms refer to pSivida Limited, a West Australia corporation, and its subsidiaries prior to June 19, 2008, and refer to pSivida Corp., a Delaware corporation, and its subsidiaries from such date. All share amounts and all information relating to options and warrants in this Annual Report have been retroactively adjusted to reflect the Reincorporation share exchange ratio, unless otherwise stated. Our principal executive office is located at 400480 Pleasant Street, Suite B300, Watertown, Massachusetts 02472 and our telephone number is (617) 926-5000.

Additional Information

Our website address is http://www.psivida.com. Information contained on, or connected to, our website is not incorporated by reference into this Annual Report on Form 10-K. Copies of our annual reports onForm 10-K, proxy statements, quarterly reports on Form 10-Q, current reports on Form 8-K and, if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, are available free of charge through our website under “SEC Filings” as soon as reasonably practicable after we electronically file these materials with, or otherwise furnish them to, the Securities and Exchange Commission (SEC).

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

ITEM 1A.

ITEM 1A.

RISK FACTORS

RISKS RELATED TO OUR COMPANY AND OUR BUSINESS

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

With the exception of net income in fiscal 2010 resulting from a non-recurring event, we have incurred operating losses since our inception in 2000. We do not currently have any assured sources of revenues. Although Alimera launchedis selling ILUVIEN commerciallyfor chronic DME in the U.K. and Germany, in the second quarter of 2013 and announced its intentionwith plans to launch in France and Portugal in the first quarter oflate 2014, and also has marketing authorization in 6 other EU countries, we do not know the timing and extent of any revenues we may receive from ILUVIEN for DME. Unless Alimera receives FDA approvalsales of ILUVIEN for chronic DME in the EU, if any. We do not know whether we will not be entitled to receive the one-time $25.0 million milestone payment thatto which we would be due on such an approval, and Alimera will not be able to sell,entitled if the FDA approves ILUVIEN, nor willthe timing or extent of revenues we earn any revenuesmight receive from sales of, ILUVIEN for DME in the U.S., if any. We will not receive any funding under our Restated Pfizer Agreement unless Pfizer exercises its option with respect to the Latanoprost Product, which becomes exercisable only if we complete Phase II clinical trials, which have not yet 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 Retisert royalty incomeroyalties from Bausch & Lomb isLomb’s sales of Retisert, but we do not expectedexpect those royalties to increase to a level sufficient to sustain our operations and they may decline. Further, we expect to significantly increase our research and development expense as a result of our independent development of Medidur for posterior uveitis. Our ability to achieve profitability is expected to depend, among other things, upon Alimera’s ability to achieve FDA approval of and to successfully commercialize ILUVIEN for DME and our or any other licensees’ ability to achieve regulatory approval and sufficient revenues from commercialization of one or more other products.

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 flowsWith the exception of net income in fiscal year 2010 resulting from operations unlessa non-recurring event, we have incurred operating losses each year since inception, and until ILUVIEN for DME achieves sufficient revenues from commercialization or one or moreat June 30, 2014, we had a total accumulated deficit of our product candidates achieves regulatory approval and sufficient revenues from commercialization.$277.0 million. During the past three fiscal years, we have financed our operations primarily from the proceedssales of offerings of our common stock and warrants and consideration receivedequity, as well as operating cash flows from our collaborative partners, including license fees, and research and development funding. We currently have no committed funding and royalty income from collaborativeour collaboration partners. We believe that our cash, cash equivalents and marketable securitiescapital resources of $10.3$18.3 million at June 30, 20132014, together with the $9.9 million of net proceeds from our July 2013 underwritten public offering of common stock, expected Retisert royalty income and other expected cash inflows under existing collaboration and technology evaluation agreements, willshould enable us to fund our current andoperations as currently planned operations through the third quarter of calendar year 2014.2015. This includes expected costs through that date of Phase III clinical trials of Medidur for posterior uveitis, but does not include anyeither the potential milestone or any net profits receiptspayments under the Alimera collaboration agreement. 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,ability to fund our planned operations beyond that date, including completion of clinical development of Medidur, is expected to depend on the amount and timing of cash receipts under our Alimera collaboration agreement, as well as proceeds from any such receipts is uncertain. Accordingly,future collaboration or other agreements and/or financing transactions. If we expect to need additionalreceive the one-time $25.0 million milestone payment from Alimera that would be due if the FDA approves ILUVIEN, we believe our capital resources toand other expected cash inflows will fund our operations as currently planned Phase III trials of Medidur for posterior uveitis and other research and development and operations. Our need forinto calendar 2017.

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

We may seek additional capital resources through possible salesbelieve that extending our cash position beyond the third quarter of equity or debt securities or new collaborative or licensing agreements and/or possible other agreements and transactions. Many factors relatingcalendar year 2015 depends significantly on receipt of the one-time $25.0 million milestone to our company, such as the status ofwhich we would be entitled on an FDA approval of ILUVIEN for DME,and the status ofsuccessful commercialization by Alimera of ILUVIEN for DME that would provide us with our share of net profits receipts. There is no assurance that ILUVIEN for DME will be approved by the FDA in the U.S. or that Alimera will be able to make the milestone payment if ILUVIEN is approved. In April 2014, Alimera entered into a term loan agreement with Hercules Technology Growth Capital (Hercules) under which Hercules agreed to advance $25.0 million to Alimera to fund the milestone payment obligation if the FDA approves ILUVIEN on or before October 31, 2014 and certain other conditions are satisfied. Alimera has reported that due to the limited revenue generated by ILUVIEN to date, it may not be able to maintain compliance with certain covenants under its loan agreement. There is no assurance that Alimera will have the funds to pay the milestone payment when due. Further, there is no assurance that ILUVIEN for chronic DME will achieve market acceptance in any country in the EU, andor, if ILUVIEN is approved in the status of development ofU.S., Australia or New Zealand, or that we will receive significant, if any, revenues from ILUVIEN.

If we determine that it is desirable or necessary to raise additional capital in the future, we do not know if it will be available when needed or on terms favorable to us or our product candidates, as well as thestockholders. 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 and 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.products. 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.

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

We recorded significant amounts of intangible assets in connection with earlier acquisitions. We took impairment charges of $3.1 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 had $3.4$2.8 million of intangible assets on our balance sheet as of June 30, 2013,2014, of which $2.4$1.9 million related to our Durasert technology and $1.0 million$912,000 related to our BioSilicon technology. We will continue to conduct impairment analyses of our intangible assets as required, and we would be required to take additional impairment charges in the future if any recoverability assessments of those assets reflect fair market values that 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, including, without limitation, adverse events with respect to clinical development, regulatory approval and success of commercialization of products using those technologies, and significant changes in our market capitalization. Further impairment charges on our intangible assets could have a material adverse effect on our results of operations.

Our operating results may fluctuate significantly from period to period.

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

Due to fluctuations in our operating results, quarterly comparisons of our financial results may not necessarily be meaningful, and investors should not rely upon such results as an indication of future performance. In addition, investors may react adversely if our reported operating results are less favorable than in a prior period or are less favorable than those anticipated by investors in the financial community, which may result in decreases in our stock price.

Our royalty income from Bausch & Lomb may decline.

We do not expect that our Retisert royalty income from Bausch & Lomb will grow materially, if at all, and it may decline. There is no assurance that Bausch & Lomb will continue to market Retisert, which received marketing approval in 2005. Bausch & Lomb no longer markets Vitrasert.

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

If the FDA does not approve ILUVIEN for DME, Alimera will be unable to commercialize the product in the U.S., and we will not receive the payments to which we would be entitled upon such approval and from successful commercialization, which could materially impair our financial prospects.

Alimera has received a 2010 CRLthree CRLs from the FDA with respect to its NDA for ILUVIEN for DME and the 2011 CRL in response to its first resubmission of the NDA. In both the 2010 and 2011 CRLs,which the FDA stated that it was unable to approve the NDA in each instance in its then current NDA.form. Although Alimera resubmittedagain refiled the NDA a second timein March 2014 following labeling discussions with the FDA in December 2013 and receivedthe FDA has set a new PDUFA goal date of October 17, 2013,September 26, 2014, there is no assurance that Alimera’s resubmission will demonstrate to the FDA that the benefits of ILUVIEN for DME outweigh its risks, that additional clinical trials will not be required, that the subgroup of patients with chronic DME considered insufficiently responsive to available therapies will be acceptable to the FDA or that Alimera will be able to obtain regulatoryFDA 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 U.S. commercialization, which would be materially adverse to our business. Further, studies of ILUVIEN for the treatment of three other eye diseases have been discontinued and 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 studiedincluded under Alimera’s agreement with us.

Sales of ILUVIEN for DME in the EU may be materially adversely affected by pricing and reimbursement decisions of regulatory bodies, insurers and others.

Prices, coverage and reimbursement to consumers of the price of ILUVIEN in EU countries are generally regulated with pricesby third-party payors, such as government health administration authorities and plans, private health

insurers and other organizations. Consumers are also affected by the timing and complexity of those reimbursements. Prices are generally lower and coverage and access to drugs more limited than in the U.S., which couldhas and is expected to continue to affect the amount ofour potential revenues from the commercialization of ILUVIEN for chronic DME in the EU. Alimera has been engaged in regulatory proceedings and negotiations with respect to pricing and reimbursement. 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.various EU countries. For example, there is no assurance that the patient population in the U.K. will expand beyond privately insured and private pay patients or what the level of permittedScotland, NHS reimbursement will be. There can be no assurance that NICE will accept the recommendation of the Appraisal Committee and amend its final guidanceis limited to provide ILUVIEN for the treatment of pseudophakic patients or that such patients will be reimbursed by the National Health Service.eyes. Similarly, there is no assurance that Alimera will achieve satisfactory agreements with statutory insurers in Germanyother countries to avoid individual reimbursement submissions. Alimera has reportedstreamline reimbursement. We do not know what levels of pricing will be approved in other EU countries, or what restrictions will be placed on the use or reuse of ILUVIEN. Further, if ILUVIEN were approved in the U.S., we do not know what restrictions will be put on its belief thatuse or what level of pricing will be reimbursed. Future sales of ILUVIEN for DME in Germany and the U.K. have been adversely affected, and future sales in

those and other EU countries may be adversely affected by pricing and reimbursement decisions, and such affectseffects may be material.

Alimera’s expansion of its commercial infrastructure in the EU is a significant undertaking that requires substantial financial and managerial resources, and Alimera may not be successful in its efforts, or it may encounter unexpected delays in connection with its continued expansion, which may negatively impact its efforts to market and sell ILUVIEN. Alimera also could fail to successfully manage its international operations, which could materially harm our business, operating results and financial condition.

Our financial results depend heavily on Alimera’s ability to successfully commercialize ILUVIEN in the EU. ILUVIEN for chronic DME has marketing authorization in ten EU countries and is pending authorization in seven more EU countries. Alimera launched ILUVIEN in the United Kingdom and Germany in April and May of 2013, respectively, and currently plans to launch ILUVIEN in Portugal and France in late 2014, but has not announced commercialization plans for the other EU countries where it has or has sought marketing approval. A commercial launch of this size is a significant undertaking that requires substantial financial and managerial resources. Alimera may not be able to maintain and expand its commercial operation in a cost-effective manner or realize a positive return on its investments, which could negatively impact its ability to market and sell ILUVIEN. Factors that may inhibit Alimera’s efforts to commercialize ILUVIEN include:

Additionally, Alimera may encounter unforeseen delays in expanding its commercial operations that delay the commercial launch in one or more EU countries in which ILUVIEN has received or been recommended for marketing authorization. These delays may increase the cost of and the resources required for successful commercialization of ILUVIEN in the EU. Alimera does not have experience in a commercial operation of this size in the EU or elsewhere. Alimera has limited international commercialization experience and international operations require significant management attention and financial resources. In addition, there are many risks inherent in international business activities, including, but not limited to:

In addition, compliance with foreign and U.S. laws and regulations that are applicable to Alimera’s international operations is complex and may increase Alimera’s cost of doing business in international jurisdictions, and Alimera’s international operations could expose Alimera to fines and penalties if Alimera fails to comply with these laws and regulations. These laws and regulations include import and export requirements and anti-bribery laws. Any violations of these laws or regulations could subject Alimera to civil or criminal penalties, including substantial fines or prohibitions on Alimera’s ability to offer ILUVIEN in one or more countries, which could materially and adversely harm our business and financial condition.

If Alimera does not develop an effective marketing strategy, or if it is not successful in recruiting and retaining personnel or in expanding its sales and marketing infrastructure and entering into additional collaboration arrangements with third parties, or if it encounters delays or other difficulties in commercializing ILUVIEN, it would adversely affect our business, operating results and financial condition.

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. Because we are entitled to a net profit participation on a country-by-country and quarter-by-quarter basis on sales of ILUVIEN where Alimera markets ILUVIEN directly and to a percentage of royalties and non-royalty consideration where Alimera sublicenses the marketing of ILUVIEN, the amount and timing of any revenues we receive will be affected by the manner in which Alimera determines to market ILUVIEN. We cannot project what the demand will be for ILUVIEN for DME or when, or if, it will achieve net profits in countries where Alimera markets it.

Alimera has announced its intention to market ILUVIEN directly in certain EU countries and, if approved by the FDA, in the EU.U.S. Although Alimera commercially launched ILUVIEN for chronic DME in the U.K. and Germany during the quarter ended June 2013, there were limited salesAlimera has reported that it has not achieved net profits in that quarter.either country. Alimera has announced its intention to launch ILUVIEN in France and Portugal in late 2014 and to launch in the first quarter of 2014,U.S. in early 2015 if the FDA approves ILUVIEN, but has not announced commercialization plans for the other EU countries where it has or has sought marketing approval. 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 EU or the U.S. or that it will have sufficient capital to do so. Further, because we are entitled

Alimera has signed a distribution agreement with STA for ILUVIEN in Australia and New Zealand. We do not know when or if STA will achieve a public reimbursement listing for ILUVIEN entitling Alimera to a net profit participation on sales of ILUVIEN wherever Alimera markets ILUVIEN directly and a percentage of royalties and non-royalty consideration wherever Alimera sublicenses the marketing of ILUVIEN, the amount and timing of any revenuesmilestone in which we receivewould share, or when or if there will be affected by the mannernet sales entitling Alimera to royalties in which Alimera determines to market ILUVIEN in other countries. Although Alimera has reported that it intends to seek marketing approval of ILUVIEN for DME in additional EU countries, there is no assurance that Alimera will apply for or obtain any such additional approvals. Further, we cannot project what the demand will be for ILUVIEN for DME in the EU countries where ILUVIEN is marketed.would share.

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

BothThe micro-insert for both ILUVIEN and Medidur for posterior uveitis deliverdelivers the non-proprietary corticosteroid FAc, which is associated with undesirableadverse side effects in the eye, such as cataract formation and elevated intraocular pressure,IOP, which may increase the risk of glaucoma and related surgery to manage those side effects. In the 2011 CRL,and 2013 CRLs, the FDA stated that the risks of adverse reactions shown for ILUVIEN for DME in the FAME Study were significant and were not offset by the benefits demonstrated by ILUVIEN for DME in those clinical trials. These side effects may affect the approvability of ILUVIEN for DME and the other eye conditions for which it is being studied.in certain jurisdictions. Although FDA-approved Retisert and our product candidate Medidur both deliver FAc to treat posterior uveitis, there is no assurance that Medidur will be safe and efficacious for the treatment of posterior uveitis in light of its expected side effects from FAc. Even if these product candidatesILUVIEN and Medidur are approved, these side effects may limit the population for which marketing authorization is granted or for which reimbursement is provided and/or adversely affect their successful marketing.sales of the product. For example, NHS reimbursement for ILUVIEN for chronic DME in the U.K. and Scotland is limited to eyes that have undergone cataract surgery.

There is no assurance that we will be able to seek FDA approval of Medidur based on one Phase III trial together with a utilization study, and if we are required to conduct an additional Phase III trial, the time and expense required to obtain U.S. regulatory approval would increase.

If the results of our current Phase III trial are positive, and if the FDA approves ILUVIEN for DME, we plan to seek FDA approval on the basis of this single Phase III trial together with additional clinical data from a planned open label study on use of our proprietary inserter. However, we may need to complete two Phase III trials to obtain FDA approval, which would extend the time for filing an NDA and, accordingly, any regulatory approval of Medidur, and would also increase the cost of its development prior to approval.

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

We are optimistic that Medidur will be as efficacious for posterior uveitis as Retisert is, but with a better side effect profile than Retisert, comparable to ILUVIEN. However, this is only a hypothesis, and there is no assurance that the ongoing Phase III program or investigator-sponsored study for Medidur will demonstrate these results. While early interim data from the investigator-sponsored study of Medidur are consistent with this hypothesis, that trial is not complete, involves only up to 12 patients and is not intended to be a clinical trial that can serve as the basis for approval of Medidur. Data from the Retisert and ILUVIEN trials and early data from this investigator-sponsored study may not accurately predict the results of our Medidur Phase III trial(s). There is no assurance that the clinical trial or trials for Medidur will provide the necessary evidence of safety and efficacy required for approval by the FDA and other regulatory authorities. Actions by the FDA and other regulatory authorities with respect to Retisert and ILUVIEN are not predictive of the FDA’s action with respect to Medidur.

There is no assurance that Pfizer will exercise its option with respect to the Latanoprost Product, or thatin 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 developmentDevelopment of the Latanoprost Product. Development of this productProduct through at least 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 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 Phase II clinical trials for the Latanoprost Product; that if completed, the trials will be successful; that Pfizer will, in any event, exercise its option; that if exercised, Pfizer will commence Phase III clinical trials; 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.

If we or our licensees are unable to or do not complete clinical trials for our product candidates or do not receive the necessary regulatory approvals, we or our licensees will be unable to commercialize our product candidates.

Our currentMarketing and future activities are and will bemanufacture of pharmaceutical products is subject to stringent regulation by applicable 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 any of our product candidates, approval from the FDA and/or foreign regulatory authorities is required to market in the applicable jurisdictions.authorities. Generally, in order to obtain these approvals,marketing approval, 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.

ILUVIEN for DME has completed pivotal clinical trials, which were conducted pursuant to our Alimera collaboration agreement, and a pivotal Phase III trial of Medidur for posterior uveitis has commenced the first of two pivotal Phase III clinical trials.is ongoing. All of our other product development is at earlier stages. An investigator-sponsored Phase I/II study of the Latanoprost Product is ongoing, but we have not commenced Phase II clinical trials, and BioSilicon and Tethadur product candidates are all in the pre-clinical stage. 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 to approved products. There is no assurance that evaluationany feasibility study agreements we have, or enter into, with third parties will result in any product candidates or licenses, or that we or our licensees will commence or continue clinical trials for any of our product candidates. If clinical trials conducted by or for us or our licensees for any of our product candidates do not provide the necessary evidence of safety and efficacy, those product candidates cannot be manufactured and sold, and will not generate revenues. Initial or subsequent clinical trials may not be initiated by or for us or our licensees for product candidates or may be delayed or fail due to many factors, including the following:

Results from pre-clinical testing and early clinical trials often do not accurately predict results of later clinical trials. 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, early 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.

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’ 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, which may reduce the size of, or otherwise limit the potential market for, the product.

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 have a limited ability to develop and market products ourselves. If we are unable 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 andor market products on our own.

Our strategy includes independently developing products, but we have limited product development capability and no marketing or sales staff. Developing products and achieving market acceptance for them can requirerequires extensive and substantial efforts by experienced personnel as well as expenditure of significant funds. We may not be able to establish or fund sufficient capabilities necessary to develop products and achieve market penetration ourselves.

Our business strategy also includes entering into collaborative and licensing arrangements for the development and commercialization of our product candidates, where appropriate, and we currently have collaboration and/or licensing arrangements with Alimera, Pfizer, Bausch & Lomb and Enigma.various companies. The curtailment or termination of any of these arrangements with Alimera or Bausch & Lomb could adversely affect our business, our ability to develop and commercialize our products, product candidates and proposed products and our ability to fund operations.

The success of these and future collaborative and licensing arrangements will depend heavily on the experience, resources, efforts and activities of our licensees. Our licensees have, 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 seek to independently manufacture, market and sell products or are unable to enter into future license agreements with marketing and sales partners where we deem appropriate, we would experience increased capital requirements to develop the ability to manufacture, market and sell future products. There can be no assurance that we will be able to manufacture, market or sell our products or future products independently.

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.

For example, PfizerAlimera may terminateabandon the Restated Pfizer Agreement with respect to the Latanoprost Product without penalty atdevelopment and commercialization of any timelicensed product, including ILUVIEN for DME, and for any reason upon 60 days’ written notice, Bausch & Lomb may terminate its license agreement with respect to Retisert without penalty at any time upon 90 days’ written notice and Alimera may abandon the development and commercialization of any licensed product, including ILUVIEN for DME, at any time.notice.

Any of our licensees may decide not to continue to develop, exercise options or commercialize products under their respective agreements, change strategic focus, or pursue alternative technologies instead ofalternatives to our technologies or develop competing products. While Pfizer and Bausch & Lomb havehas 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 our technologies.Retisert. Alimera has limited experience and limited financial resources, and ILUVIEN for DME is Alimera’s first and only commercial product. Actions, including breaches or termination of these agreements by our licensees, could delay, impair or stop the development or

commercialization of any of the products or product candidates licensed to them or require significant additional capital investment by us, which we may not have the resources to fund.

If 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, our products or product candidates may not be approved, may not achieve the sales we anticipate and could be rendered 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.

Many of our competitors and potential competitors have substantially greater financial, technological, research and development, marketing and personnel resources than we do. Our competitors may succeed in developing alternate technologies and products that, in comparison to the products we have and are seeking to develop:

Many of these competitors have greater experience in developing products, conducting clinical trials, obtaining regulatory approvals or clearances and manufacturing and marketing products than we do.

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

In both domestic and foreign markets, the commercial success of our products and product candidates will require not only obtaining regulatory approvals, but also obtaining market acceptance by retinal specialists and other doctors, patients, government health administration authorities and other third-party payors. 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 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 to our products and product candidates or our competitors’ products. Any such guidelines, recommendations or studies that reflect negatively on our products or product candidates could result in 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, 2013,2014, we had 212229 patents and 111115 pending patent applications, including patents and pending applications covering our Durasert, BioSilicon (including Tethadur)Tethadur and other technologies. Intellectual property protection of our technologies is uncertain. We expect to seek to patent and protect our proprietary technologies. However, there is no assurance that any additional patents will be issued to us as a result of our pending or future patent applications or that any of our patents will withstand challenges by others. In addition, we may not have sufficient funds to patent and protect our proprietary technologies to the extent that we would desire, or at all. If we were determined to be infringing any third-party patent, we could be required to pay damages, alter our products or processes, obtain licenses, pay royalties or cease certain operations. We may not be able to obtain any required licenses on commercially favorable terms, if at all. In addition, many foreign country laws may treat the protection of proprietary rights differently from, and may not protect our proprietary rights to the same extent as, laws in the United States 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 cost 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 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 our products and achieving a competitive position may depend on whether we can attract and retain additional qualified management and scientific personnel. There is strong competition for management and scientific personnel within the industry in which we operate, and we may not be

able to attract and retain such personnel. As we have a small number of employees and we believe our products are unique and highly specialized, the loss of the services of one or more of the principal members of our management or scientific staff, or the inability to attract and retain additional personnel and develop expertise as needed, could have a material adverse effect on our results of operations and financial condition.

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

The testing, manufacturing, 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 for the manufacture for each of (i) the ILUVIEN implant; (ii) the ILUVIEN applicator; (iii) ILUVIEN’s active pharmaceutical ingredient; and (iv) the quality release testing of ILUVIEN in the EU. If any of Alimera’s third-party manufacturers breach their agreements or are unable or unwilling to perform for any reason, Alimera may not be able to locate alternative acceptable manufacturers, enter into favorable agreements with respect tothem or get them approved by the applicable regulatory authorities in a timely manner. Furthermore, all of these manufacturers rely on additional third parties for the manufacture of componentscomponent parts. Any inability to acquire sufficient quantities of ILUVIEN. ILUVIEN implants, the ILUVIEN applicator or the active pharmaceutical ingredient in a timely manner from these third parties could delay commercial production of, and impact Alimera’s ability to fulfil any demand for, ILUVIEN, which, in turn, would impact our ability to receive our contractual share of net profits from the sales of ILUVIEN on a country-by-country basis.

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. In the 2013 CRL, the FDA cited deficiencies at the facility where ILUVIEN is manufactured. Although Alimera has responded to the FDA and reported that it does not believe those deficiencies will affect its European commercial supply, there is no assurance that the FDA will be satisfied.

We manufacture supplies in connection with pre-clinical or clinical studies conducted by us or our licensees. Our licensees have the exclusive rights to manufacture commercial quantities of products, once approved for marketing. Our and our licensees’ reliance on third-party manufacturers entails risks, including:

Problems associated with international business operations could affect our ability to manufacture and sell our products. If we encounter such problems, our 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:

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 health care 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 health care 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 may obtain regulatory approval; our ability to set a price that we believe is fair for our productsproducts; our ability to obtain coverage and reimbursement approval for a product; our 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 FDAAA granted the FDA enhanced authority over products already approved for sale, including authority to require post-marketing studies and clinical trials, labeling changes based on new safety information and compliance with risk evaluations and mitigation strategies approved by the FDA. The FDA’s exercise of this relatively new authority could result in delays and increased costs during product development, clinical trials and regulatory review and approval, increased costs following regulatory approval to assure compliance with new post-approval regulatory requirements, and potential restrictions on the sale or distribution of approved products following regulatory approval.

Changes in the regulatory approval policy during the development period, changes in or the enactment of additional regulations or statutes, or changes in regulatory review for each submitted product application, may cause delays in the approval or rejection of an application. For example, the July 9, 2012 reauthorization of the

PDUFA extended by two months the period in which the FDA is expected to review and approve certain NDAs. Although the FDA has recently stated that it expects to meet PDUFA’s updated timing goals, it has in the past provided its managers discretion to miss them due to heightened agency workload or understaffing in the review divisions. Accordingly, it remains unclear whether and to what extent the FDA will adhere to PDUFA timing goals in the future, which could delay approval and commercialization of our product candidates.

RISKS RELATED TO OUR COMMON STOCK

The price of our common stock may be volatile.

The price of our common stock (including common stock represented by CHESS Depositary Interests (CDIs)) may be affected by developments directly affecting our business, as well as by developments out of our control or not specific to us. The price of our common stock dropped significantly when the FDA issued itseach of the 2011 CRL and the 2013 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 CDIs to continue to be traded on those exchanges, respectively.

If the holders of our outstanding warrants and stock options exercise their warrants and options, ownership of our common stock holders may be diluted, and our stock price may decline.

As of August 31, 2013,2014, we had outstanding warrants and options to acquire approximately 5.15.4 million shares of our common stock, or approximately 16.1%15.5% 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.

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 23, 2013,8, 2014, the last reported sale price of our common stock on the NASDAQ Global Market was $4.03.$4.77. As of that date, we had approximately 2620 holders of record of our common stock and, according to our estimates, approximately 3,7505,700 beneficial owners of our common stock. In addition, as of that date, there were approximately 2,2502,140 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, 2013:2014:

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, 2013,2014, the number of shares issuable under the 2008 Incentive Plan was increased by 750,000 shares.

Issuer Repurchases of Equity Securities

None.

The selected historical financial data set forth below as of June 30, 2014, 2013, 2012, 2011 2010 and 20092010 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, 20132014 and 20122013 and for the years ended June 30, 2014, 2013 2012 and 20112012 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, sustained-release products designed to deliver drugs and biologics at a controlled and steady rate for weeks, months or years. UtilizingOur strategy is to use our core technology platforms, Durasert™ and BioSilicon™, weTethadur™ drug delivery technologies to independently develop products that deliver proven drugs and biologics, while continuing to leverage these technologies through collaboration and license agreements. We are focused on treatment of chronic diseases of the back of the eye and are also exploring applications outside ophthalmology. We have developedOur lead product candidate Medidur is in a pivotal Phase III clinical trial, our lead licensed product ILUVIEN^® has been approved in the European Union (EU) and is pending approval with the U.S. Food and Drug Administration (FDA), and our pipeline includes potential product candidates at earlier stages of development. Our Durasert technology is the basis of three of the four sustained-release products for treatment of retinal diseases currently approved in the U.S. or European Union (EU), and our lead product candidate began a Phase III clinical trial in June 2013. Our strategy includes developing products independently while continuing to leverage our technology platforms through collaboration and license agreements.EU.

ILUVIEN^®Medidur™, our most recently approved product, is an injectable, sustained-release micro-insert that provides treatment of vision impairment associated with chronic diabetic macular edema (DME) considered insufficiently responsivedesigned to available therapies over a period of up to three years. ILUVIEN is licensed to and sold by Alimera Sciences, Inc. (Alimera), and we are entitled to a share of the net profits, as defined, from Alimera’s sales of ILUVIEN for DME. Alimera commenced the commercial launch of ILUVIEN for DME in the U.K. and Germany in the second quarter of 2013 and expects to launch in France in the first quarter of 2014. The International Diabetes Federation has estimated that approximately 19.0 million people have diabetes in the seven EU countries where ILUVIEN has received or been recommended for marketing authorization, of which Alimera has estimated that approximately 1.1 million people suffer from vision loss associated with DME. Alimera is also seeking marketing approval for ILUVIEN for DME in the U.S. In the second quarter of 2013, Alimera received a new Prescription Drug User Fee Act (PDUFA) goal date of October 17, 2013 after resubmitting its New Drug Application (NDA) for ILUVIEN for DME. The resubmission responded to a second Complete Response Letter (CRL) received from the U.S. Food and Drug Administration (FDA) in November 2011.

Medidur™, our lead development product, commenced the first of our two planned Phase III clinical trials for the treatment oftreat chronic, non-infectious uveitis affecting the posterior segment of the eye (posterior uveitis) in June 2013.over a period up to three years. Medidur uses the same Durasert micro-insert used in ILUVIEN (same polymers, same drug and same dose) and delivers a lower dose of the same drug as our FDA-approved Retisert^® for posterior uveitis, which is licensed to Bausch & Lomb. We are developingAlthough we originally planned to seek FDA approval of Medidur independently.

We are also developingbased on two Phase III clinical trials, we now expect to seek approval based on safety and efficacy data from our single ongoing Phase III trial, with supplemental clinical data from a bioerodible, injectable micro-insert delivering latanoprost (the Latanoprost Product) to treat glaucoma and ocular hypertension. Under an amended collaboration agreement, Pfizer has an option, under certain circumstances, to license the development and commercializationplanned study of the Latanoprost Product worldwide.

safety and usability of our proprietary inserter, if ILUVIEN is approved by the FDA later this year. We are engaged in pre-clinical researchplan to have a confirmatory meeting with the FDA with respect to boththis regulatory strategy. If the FDA does not approve this regulatory strategy, we may be required to complete a second Phase III trial for Medidur in order to submit for FDA approval, which would increase the development time and cost of Medidur.

ILUVIEN, our BioSiliconlead licensed product, is an injectable, sustained-release micro-insert that provides treatment over a period of up to three years of vision impairment associated with diabetic macular edema (DME). ILUVIEN is licensed to and sold by Alimera Sciences, Inc. (Alimera), and we are entitled to a share of the net profits (as defined) from Alimera’s sales of ILUVIEN on a country-by-country basis and a $25.0 million milestone payment from Alimera if ILUVIEN is approved by the FDA.

ILUVIEN is commercially available in the United Kingdom (U.K.) and Germany for the treatment of chronic DME considered insufficiently responsive to available therapies, and Alimera expects to launch in France and Portugal in late 2014. ILUVIEN has marketing authorization in six other EU countries and is pending authorization in seven more EU countries.

Alimera is also seeking marketing approval of ILUVIEN for DME in the U.S. Alimera entered into labeling discussions with the FDA in December 2013 and refiled the New Drug Application (NDA) with the FDA in March 2014. The FDA set a Prescription Drug User Fee Act (PDUFA) goal date of September 26, 2014. The resubmission responded to issues raised in the FDA’s October 2013 Complete Response Letter (CRL).

Alimera also entered into an exclusive agreement with a third party for distribution, regulatory and reimbursement matters of ILUVIEN for DME in Australia and New Zealand.

Our pre-clinical research is primarily focused on our Tethadur and Durasert technology platforms. The primary focusWe are seeking to develop products using Tethadur, part of our BioSiliconBioSilicon™ technology, research is theto provide sustained delivery of peptides, proteins, antibodies and other large biologic molecules using our Tethadur™ technology in both ophthalmic and non-ophthalmic applications. Our research programmolecules. We are also includesresearching the use of our Durasert technology, in orthopedic applicationssome instances in combination with our BioSilicon technology, to provide sustained delivery of therapeutic agents to treat wet and fordry Age-Related Macular Degeneration, osteoarthritis and glaucoma, as well as to provide systemic delivery of therapeutic agents.biologics.

Our FDA-approvedRetisert provides sustained release treatment of posterior uveitis for approximately two and a half years and is licensed to and sold by Bausch & Lomb. We receive royalties from these sales.

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, granting of license rights, providing research and development services and manufacturing of clinical materials, participating on joint research committees) in exchange for consideration to us of some combination 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 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 customer 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, 2013,2014, we reported $780,000$2.2 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 to 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.

We concluded that our deliverables under the Restated Pfizer Agreement are conducting the research and development program for the Latanoprost Product through completion of Phase II clinical trials (the “R&D program”) and participation on a Joint Steering Committee (JSC)(“JSC”). We treat these as a single deliverable, having concluded that the JSC does not have standalone value separate from the R&D program. We concluded that the Pfizer exercise option for the worldwide exclusive license is not a deliverable of the arrangement, due to it being a substantive option and not being priced at a significant and incremental discount.

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. The remaining balance is being recognized as revenue using the proportional performance method over the estimated period of our performance obligations under the R&D program.

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 each of fiscal 2012, fiscal 2013 and fiscal 20132014 by 10%, or approximately $75,000, $37,000 and $37,000,$1,000, respectively. Application of the proportional performance method in any fiscal period would result in an increase or decrease in revenue recognized to the extent that the aggregate projected costs to conduct the R&D program decreases or increases, respectively, compared to the previous period.

Recognition of Expense in Outsourced Clinical Trial Agreements

We recognize research and development expense with respect to outsourced agreements for clinical trials to contract research organizations (“CROs”) as the services are provided, based on our assessment of the services performed. We make our assessments of the services performed based on various factors, including evaluation by the third-party CROs and our own internal review of the work performed during the period, measurements of progress by us or by the third-party providers, data analysis with respect to work completed and our management’s judgment. We have agreements with two CROs to conduct the Phase III clinical trial program for Medidur for posterior uveitis. Our financial obligations under the agreements are determined by the services that we request from time to time under the agreements. The actual amounts owed under the agreements and the timing of those obligations will depend on various factors, including the number of, and protocols for, the trials conducted, the number of patients and rate of patient enrollment and other factors relating to the clinical trials. We can change the protocol and/or services requested and thereby increase or decrease our obligations under the agreements from time to time. As of June 30, 2014, our CRO agreements provided for two Phase III clinical trials at an aggregate remaining cost of approximately $16.2 million. As we refine our clinical trial strategy for Medidur for posterior uveitis through continued dialogue with regulatory authorities, we expect to adjust the services under the CRO agreements accordingly. We can terminate the agreements at any time without penalty, and if terminated, we would be liable only for services through the termination date plus non-cancellable CRO obligations to third parties.

During fiscal 2014, we recognized approximately $4.1 million of research and development expense attributable to the initial Medidur Phase III clinical trial for posterior uveitis. Changes in our estimates or differences between the actual level of services performed and our estimates may result in changes to our research and development expenses in future periods.

Valuation of Intangible Assets

At December 31, 2011, we recorded a $11.7 million impairment of our BioSilicon intangible and a $3.1 million impairment of our Durasert intangible. The combination of the 2011 CRL and the subsequent significant decline in the Company’s market capitalization were determined to be impairment indicators of the Company’s finite-lived intangible assets. To assess the recoverability of the these assets (which had a carrying value of $19.4 million at December 31, 2011), we used both market-based and income-based valuation methodologies, and allocated the resulting fair value of the combined intangible assets to the individual assets based on values determined under the income-based approach.

We amortize our 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 $760,000$790,000 per year. We believe that the carrying value of our intangible assets will be recouped primarily through expected net cash flows from our existing or future collaboration agreements or through our own product development and commercialization.

We will continue to review our intangible assets for impairment whenever events or changes in business circumstances indicate that the asset carrying values may not be fully recoverable or that the useful lives of assets are 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 our 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, 2014 and 2013

Revenues

Collaborative research and development revenue increased to $2.2 million in fiscal 2014, a 176% increase from $780,000 in fiscal 2013, primarily due to recognition of $1.5 million of arrangement consideration upon resolution of a contingency associated with completion of a feasibility study agreement. Of the remaining deferred revenue balance of $5.7 million at June 30, 2014, $138,000 related to an ongoing feasibility study is expected to be recognized as revenue during fiscal 2015.

Royalty income, predominantly related to Retisert, decreased by $45,000, or 3%, to $1.3 million in fiscal 2014 compared to $1.4 million in fiscal 2013. We do not expect Retisert royalty income to increase significantly in the next fiscal year, and it may decline.

We are entitled to share in net profits, on a country-by-country basis, from sales by Alimera of ILUVIEN. Alimera launched ILUVIEN in the U.K. and Germany in the second quarter of calendar year 2013, and has reported plans to launch in France and Portugal in late calendar year 2014 and in the U.S. during the first quarter of calendar year 2015 if ILUVIEN is approved by the FDA. We do not know when and if we will receive net profit payments with respect to any country where Alimera sells ILUVIEN or payments with respect to countries where another entity sells ILUVIEN. We will be entitled to a milestone payment of $25.0 million from Alimera if the FDA approves ILUVIEN in the U.S. The PDUFA goal date for ILUVIEN is September 26, 2014.

Research and Development

Research and development totaled $9.6 million in fiscal 2014, an increase of $2.6 million, or 37%, compared to $7.0 million in fiscal 2013. A $3.3 million increase in CRO costs for the Medidur Phase III clinical trial was partially offset by a $665,000 decrease in personnel costs, including stock-based compensation. If we

are required to conduct an additional Phase III clinical trial for Medidur in order to submit for FDA approval, we expect our research and development expense could increase significantly in fiscal 2015.

General and Administrative

General and administrative increased by $300,000, or 4%, to $7.5 million for fiscal 2014 from $7.2 million for fiscal 2013, primarily attributable to increased stock-based compensation and professional fees.

Other Income

Other income totaled $5,000 in fiscal 2014 compared to $14,000 in fiscal 2013 due to lower average balances of marketable securities investments.

Income Tax Benefit

Income tax benefit, which consisted of foreign research and development tax credits, increased by $13,000, or 11%, to $130,000 in fiscal 2014 from $117,000 in fiscal 2013.

Years Ended June 30, 2013 and 2012