Preliminary Note Regarding Forward-Looking StatementsSPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-K and our 2016 Annual Report containAmendment contains or incorporates certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, (Securities Act),or the Securities Act, and Section 21E of the Securities Exchange ActAct. Statements contained in this report that are not statements of 1934,historical fact may be deemed to be forward-looking statements. Words or phrases such as amended (Exchange Act). Forward-looking“may,” “will,” “could,” “should,” “potential,” “continue,” “expect,” “intend,” “plan,” “estimate,” “anticipate,” “believe,” “project,” “likely,” “outlook,” or similar words or expressions or the negatives of such words or expressions are intended to identify forward-looking statements. We base these statements on our beliefs as well as assumptions we made using information currently available to us. Such 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,assumptions, including without limitation, any expectations of revenue, expenses, cash flows, earnings or losses from operations, capital, liquidity or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning product and technology research, development, trials, trial results, regulatory requirements and approvals, reimbursement and commercialization; any other statements of expectations, estimations or beliefs; and any statements of assumptions underlying any of the foregoing. We often, although not always, identify forward-looking statements by using words or phrases such as the following: “likely”, “expect”, “intend”, “anticipate”, “believe”, “estimate”, “plan”, “project”, “forecast” and “outlook”.

We cannot guarantee that the results and other expectations expressed, anticipated or impliedthose identified in any forward-looking statement will be realized. The risks set forth under Item 1A of this“Risk Factors” in the Initial Form10-K, describe major risks as well as other matters not yet known to our business, and you should read and interpret any forward-looking statements together with these risks. A varietyus or not currently considered material by us. Should one or more 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 risksuncertainties materialize, or should our underlying assumptions prove inaccurate,incorrect, actual results could differmay vary materially from past results and those anticipated, estimated or projected in theprojected. Given these risks and uncertainties, prospective investors are cautioned not to place undue reliance on such forward-looking statements. YouForward-looking statements do not guarantee future performance and should bearnot be considered as statements of fact. All information set forth in this in mind as you consider any forward-looking statements.

Our forward-looking statements speak onlyAmendment is as of the dates on which they are made. We dodate of filing this Amendment and should not undertakebe relied upon as representing our estimate as of any subsequent date. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to update any forward-looking statement, whetherdo so to reflect new information, future eventsactual results, changes in assumptions or otherwise. You are advised, however, to consult any further disclosures we may makechanges in our future reports to the Securities and Exchange Commission (SEC), on our website, www.psivida.com, or otherwise.

Introduction

Our Business

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

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

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

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

ILUVIEN, our most recently approved product, is an injectable, sustained-release micro-insert that provides three years of treatment of DME from a single injection. ILUVIEN is substantially the same design as Medidur and delivers the same steroid, although it is injected using a larger diameter inserter. ILUVIEN was developed in collaboration with Alimera Sciences, Inc. (Alimera) and is licensed to and sold by Alimera. We are entitled to a share of the net profits (as defined) from Alimera’s sales of ILUVIEN on a quarter-by-quarter, country-by-country basis. ILUVIEN has been sold in the U.S. since 2015, where it is indicated for the treatment of DME in patients previously treated with a course of corticosteroids without a clinically significant rise in intraocular pressure (IOP). ILUVIEN has been sold in the United Kingdom (U.K.) and Germany since 2013 and in Portugal since 2015. ILUVIEN has marketing approvals in these and 14 other European countries for the treatment of chronic DME considered insufficiently responsive to available therapies.

FDA-approved Retisert^® is an implant that provides sustained treatment of posterior segment uveitis for 30 months. Implanted in a surgical procedure, Retisert delivers the same corticosteroid as Medidur but in a larger dose. Retisert was co-developed with Bausch & Lomb, to which it is licensed. We receive royalties from Retisert sales.

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

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

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

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

Strategy

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

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

Employees

We had 20 employees as of August 31, 2016. None of our employees is covered by a collective bargaining agreement.

Manufacturing

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

Sales and Marketing

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

Third-Party Reimbursement and Pricing Controls

In both domestic and foreign markets, sales of pharmaceutical products depend, in part, on the availability and amount of reimbursement by third-party payers, including governments and private health plans. Governments may regulate coverage, reimbursement and/or pricing of pharmaceutical products or require discounts. Private health plans may also seek to manage cost and utilization by implementing coverage and reimbursement limitations.

U.S. and foreign governments regularly consider reform measures that affect health care coverage and costs. Such reforms may include changes to the coverage and reimbursement of pharmaceutical products. For example, in the U.S., the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (Healthcare Reform Law), was enacted in 2010 and substantially changed the way healthcare is financed by both governmental and private insurers. In the EU, governments may set prices or otherwise regulate pricing. Negotiating prices with governmental authorities can delay commercialization. In recent years, EU governments have considered or implemented various cost-containment measures, such as price freezes, increased price cuts and mandatory rebates, and EU governments likely will continue to use these and other cost-containment measures, including value-based pricing and reference pricing (i.e., referencing prices in other countries and using those reference prices to set a price).

Competition

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

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

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

RevenuesDirectors

We operate in one business segment.Our Board of Directors, or the Board, consists of nine (9) members. The following table summarizesterm of each director expires each year at our revenues by type and by geographical location. Revenue is allocated geographically by the locationAnnual Meeting 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

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, labeling, storage, record-keeping, approval, distribution, import, export, advertising and promotion of drug products.

Drug Development, Approval, and Regulation in the U.S.The steps required by the FDA under the Federal Food, Drug, and Cosmetic Act before a drug may be approved for marketing in the U.S. generally include 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. Pre-clinical tests include laboratory evaluation of the product candidate, its chemistry, formulation and stability, as well as animal studies to assess the potential safety and efficacy of the product candidate. Pre-clinical tests intended for submission to the FDA must be conducted in compliance with FDA’s current Good Laboratory Practice (GLP) regulations and the U.S.Department of Agriculture’s Animal Welfare Act. The results of the pre-clinical tests, together with manufacturing information, analytical data and protocols for proposed human clinical trials, are submitted to the FDA as part of an IND, which must become effective before the IND sponsor may begin human clinical trials. The IND automatically becomes effective 30 days after receipt by the FDA unless the FDA, within the 30-day time period, raises concerns or questions about the conduct of the proposed clinical trials as outlined in the IND, and imposes a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before clinical trials can begin. Pre-clinical trials do not necessarily result in the submission of an IND and submission of an IND does not necessarily result in FDA authorization to commence clinical trials.

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

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

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

•

Phase 3: Phase 3 trials are typically conducted when Phase 2 clinical trials demonstrate that a dose range of the product candidate is effective and has an acceptable safety profile. Phase 3 clinical trials are commonly referred to as “pivotal” studies, which typically denotes a study that presents the data that the FDA or other relevant regulatory agency will use to determine whether or not to approve the product candidate. Phase 3 clinical trials are generally undertaken with larger numbers of patients to further evaluate dosage, to provide substantial evidence of clinical efficacy and to further test for safety in an expanded and diverse patient population at multiple, geographically-dispersed clinical trial sites.

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 preliminary evidence of efficacy traditionally obtained in Phase 2 trials, and so these trials are frequently referred to as Phase 1/2 or 2a trials.

Clinical trials may be suspended by the sponsor or by the FDA or IRB/EComm at any time on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk.

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

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

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

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

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

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

Foreign Regulation of Drug Development, Approval, and Marketing.Countries outside the U.S. also have regulatory requirements governing human clinical trials conducted in and marketing approval for pharmaceutical products sold in their countries. The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary widely by country. Whether or not FDA approval is obtained, requisite approvals from regulatory authorities in foreign countries must be obtained prior to the commencement of clinical studies or marketing of a product in those countries. Certain countries outside of the U.S. have a similar process that requires the submission of a clinical study application much like the IND prior to the commencement of human clinical studies.

The drug approval process varies from country to country, can involve additional testing beyond that required by FDA, and the time required for these approvals may be substantially longer or shorter than that required for FDA approval. Clinical trials conducted in one country may not be accepted by other countries, and approval in one country does not assure approval in any other country.

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

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

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

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

Medicinal products are eligible for orphan designation in the EU if they meet each of the following requirements:

The application for orphan designation must be submitted to the EMA and approved before an application is made for marketing authorization for the product. Once authorized, orphan medicinal products are entitled to ten years of market exclusivity during which competent authorities of the EU member states, the EMA and the EC are not permitted to accept applications or grant marketing authorization for other similar medicinal products with the same indication. However, marketing authorization may be granted to a similar medicinal product with the same orphan indication during the ten-year exclusivity period if the manufacturer of the original orphan medicinal product is unable to supply sufficient quantities or if the latter product is safer, more effective or otherwise clinically superior to the original orphan medicinal product. The period of market exclusivity may also be reduced to six years if, at the end of the orphan product’s fifth year on the market, it can be demonstrated that the product is sufficiently profitable so as not to justify maintenance of market exclusivity.

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

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

Laws and regulations have been enacted by various states to regulate the sales and marketing practices of pharmaceutical companies with marketed products. The laws and regulations generally limit financial interactions between manufacturers and healthcare providers, require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S. federal government 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.

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 healthcare clearinghouses (which are entities that process or facilitate the processing of nonstandard data elements of health information into standard data elements, or vice versa) and certain of their contractors with respect to safeguarding the privacy, security and transmission of individually identifiable health information. State and foreign laws also govern the privacy and security of health information in some circumstances. Many of these laws differ from each other in significant ways and they often are not preempted by HIPAA, thus complicating compliance efforts.

Other Laws.We are also subject to numerous other federal, state and local laws relating to such matters as safe working conditions, manufacturing practices, environmental protection, fire hazard control and disposal of hazardous or potentially hazardous substances.

Corporate Information

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

Additional Information

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

ITEM 1A.

RISK FACTORS

RISKS RELATED TO OUR COMPANY AND OUR BUSINESS

We will need additional capital to fund our operations, which may not be available on favorable terms or at all.

We will need additional capital to fund our operations, including completing Medidur clinical development and obtaining regulatory approvals and continuing our research and development program for other product candidates. In addition, if we decide to commercialize Medidur or any of these product candidates ourselves, we would incur significant expenses related to product manufacturing, marketing, sales, distribution and other commercialization costs. We believe that our capital resources of $29.0 million at June 30, 2016, together with expected revenues from existing collaborations, should enable us to fund our operations as currently planned into the second quarter of fiscal year 2018. This estimate excludes any potential net profits receipts from sales of ILUVIEN or other receipts under the Alimera collaboration agreement. We believe our ability to fund our planned operations beyond that time, including completion of clinical development of Medidur, will require additional capital from the commercialization of ILUVIEN, future collaboration or other agreements and/or financing transactions.

The additional capital we will require will be influenced by many factors, including, but not limited to:

We do not know if additional capital will be available to us when needed or on terms favorable to us or our stockholders. Collaboration, licensing or other agreements may not be available on favorable terms, or at all. We do not know when or if we will receive any substantial funds from the commercialization of ILUVIEN. If we seek to sell shares under our at-the-market (ATM) facility or in another offering, we do not know whether and to what extent we will be able to do so, or on what terms. Further, the rules and regulations of the Australian Securities Exchange (ASX) and the NASDAQ Global Market (NASDAQ) require us to obtain shareholder approval for sales of common stock under certain circumstances, which could delay or prevent us from raising additional capital from such sales. Also, the state of the economy and financial and credit markets at the time or times we seek any additional financing may make it more difficult or more expensive to obtain. If available, additional equity financing may be dilutive to stockholders, debt financing may involve restrictive covenants or other unfavorable terms and dilute our existing stockholders’ equity, and funding through collaboration agreements may be on unfavorable terms, including requiring us to relinquish rights to certain of our technologies or products. If adequate financing is not available if and when needed, we may delay, reduce the

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

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

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

There is no assurance our Retisert royalty income will continue at current levels or at all.

Our Retisert royalty income has ranged between $1.2 million and $1.4 million for each of the last five fiscal years. We do not expect Retisert royalty income to grow materially, if at all, and it may decline or cease. The patent with which Retisert is marked expires in March 2019, and we may not receive any Retisert royalty income after that time. Bausch & Lomb ceased selling Vitrasert on its patent expiration.

Our operating results may fluctuate significantly from period to period.

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

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

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

At June 30, 2016, we had $1.1 million of intangible assets relating to our Durasert and Tethadur technologies on our balance sheet. We conduct impairment analyses of our intangible assets as required under U.S. Generally Accepted Accounting Principles (U.S. GAAP) and could take impairment charges in the future if the recorded values for our intangible assets were to exceed our assessment of the recoverability of the fair market value of those assets. Adverse events relating to these technologies, including the clinical development, regulatory approval and success of commercialization of products using them, and significant changes in our market capitalization could result in impairment charges. Impairment charges on our intangible assets could have a material adverse effect on our results of operations in the quarter of the impairment.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

There is no assurance that Alimera will successfully commercialize ILUVIEN for DME or that we will receive any significant revenues from its commercialization.

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 commercialization of ILUVIEN is a significant undertaking by Alimera, and ILUVIEN for DME is Alimera’s first and only commercial product. Alimera’s sales of ILUVIEN have not been significant to date, Alimera has continued to incur operating losses, and it has violated and in the future may violate the financial covenants of its loan agreement. We do not know if, when, or to what extent we will receive future revenues from the commercialization of ILUVIEN for DME. The amount and timing of any revenues we receive will be affected by many factors including:

If Alimera is not successful in commercializing ILUVIEN for DME, it would adversely affect our business, operating results and financial condition.

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

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

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

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

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

Prices, coverage and reimbursement to consumers of ILUVIEN for DME, like other drugs, are generally regulated by third-party payers, such as government health administration authorities and plans, private health insurers and other organizations and affect ILUVIEN’s sales. The timing and complexity of those reimbursements also affect sales. Prices in the EU are generally lower and coverage and access to drugs more limited than in the U.S. For example, in the U.K. and Scotland, National Health Service coverage is limited to the treatment of the eyes of chronic DME patients unresponsive to existing therapies that have undergone cataract surgery, subject to simple patient access schemes. Alimera may not achieve satisfactory agreements with statutory or other insurers. We do not know what levels of pricing will be approved or reimbursed for ILUVIEN, or what restrictions will be placed on its use or reuse in countries where ILUVIEN is not currently sold. In the U.S., Alimera has offered extended customer payment terms. Future sales of ILUVIEN and, accordingly, our net profits share, may be adversely affected by pricing and reimbursement decisions, and such effects may be material.

The micro-insert for ILUVIEN and Medidur delivers FAc, a corticosteroid that is associated with certain adverse side effects in the eye, which may affect the success of this micro-insert for treatment of DME and posterior segment uveitis.

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

Medidur achieved encouraging safety results through the last follow-up visit in its first Phase 3 trial. However, there is no assurance that encouraging safety results will continue in that trial, or that the second Phase 3 trial will yield encouraging safety results. There is also no assurance that the overall risk-benefit profile for Medidur will be favorable or that Medidur will be determined to be safe for the treatment of posterior segment uveitis in light of potential side effects from FAc. These side effects may limit the population for which marketing authorization is granted or for which reimbursement is provided in one or more jurisdictions and/or adversely affect sales of Medidur, if approved.

There is no assurance that payment of ILUVIEN net profits to us for 2014 as the result of an independent audit will be upheld or that we will receive any future payments of ILUVIEN net profits to which we believe we are entitled without future independent audits or at all.

While the independent audit firm that audited Alimera’s commercialization reporting for 2014 concluded that Alimera over-reported commercialization expenses and accordingly under-reported net profits payable to us, Alimera has sought to challenge those findings in arbitration, and if that challenge is allowed to go forward, may prevail in its efforts to overturn all or part of the audit firm’s conclusions. Depending upon the outcome of the arbitration, conclusions of the independent audit firm with respect to some commercialization expenses for 2014 may also affect other periods. As a result, there is no assurance that we will receive net profits payments to

which we believe we are entitled in accordance with the Alimera Agreement. Moreover, we may in the future challenge Alimera’s reporting under the Alimera Agreement, which may result in future independent audits and arbitration, the outcome of which may or may not be favorable to us.

There is no assurance that Pfizer will exercise its option with respect to the Latanoprost Product if we initiate and complete Phase 2 trials or cease development, in which case we will not receive any further financial consideration under the Restated Pfizer Agreement.

Pfizer has an option for an exclusive, worldwide license to develop and commercialize the Latanoprost Product if we complete Phase 2 clinical trials, which are at our option and expense, or we cease development at any time prior to completion of those trials. There is no assurance that we will commence or complete Phase 2 clinical trials for the Latanoprost Product; that, if completed, the trials will be successful; that Pfizer will exercise its option whether we complete Phase 2 trials or cease development; that, if exercised, Pfizer will commence or complete Phase 3 clinical trials; or that the Latanoprost Product will achieve successful Phase 3 trial results, regulatory approvals or commercial success. As a result, there is no assurance that we will receive any further licensing, milestone or royalty payments under the Restated Pfizer Agreement.

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

Although we have continued to make advances in our development of Tethadur and are optimistic that our Tethadur technology platform can provide sustained delivery of proteins (including antibodies) and peptides, our research continues to be at an early stage, and we face challenges. Development of any product candidates utilizing Tethadur is expected to require significant additional research and funding. There is no assurance that we will continue our development of Tethadur, that subsequent research will be successful or that we will be able to develop product candidates or approved products using Tethadur to deliver proteins and peptides.

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

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

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

Product development is very uncertain. If we do not develop product candidates to enter clinical trials, if we or any licensees do not initiate or complete clinical trials for our product candidates or if our product candidates do not receive the necessary regulatory approvals, neither we nor any licensees will be able to commercialize those product candidates and generate revenues for us.

Other than Medidur for posterior segment uveitis, which is in pivotal Phase 3 trials, all of our product development is at earlier stages. Product development at all stages involves a high degree of risk, and only a small proportion of research and development programs result in product candidates that advance to pivotal clinical trials or result in approved products. For example, although we have completed favorable pre-clinical tests of a TKI to treat wet AMD, there is additional pre-clinical research to be completed and there is no assurance that we will develop a TKI product to advance to clinical trials. There is no assurance that any feasibility study agreements we have, or enter into, with third parties, or our own research and development programs and collaborations will result in any new product candidates, or that we or any licensees will commence clinical trials for any new product candidates or continue clinical trials once commenced. If clinical trials conducted by or for us or any licensees for any product candidates do not provide the necessary evidence of safety and efficacy, those product candidates will not receive the necessary regulatory approvals, cannot be sold, and will not generate revenues for us. Initial or subsequent clinical trials may not be initiated by or for us or any licensees for product candidates or may be delayed, terminated or fail due to many factors, including the following:

Results from pre-clinical testing, early clinical trials, investigator-sponsored studies and other data and indications often do not accurately predict final pivotal clinical trial results. In addition, data from one pivotal clinical trial may not be predictive of the results of other pivotal clinical trials for the same product candidate, even if the trial designs are the same or similar. Data obtained from pre-clinical and clinical activities are susceptible to varying interpretations, which may delay, limit or prevent regulatory approval. Data from pre-clinical studies, other clinical trials and interim periods in multi-year trials are preliminary and may change, and final data from pivotal trials for such products may differ significantly. Adverse side effects may develop that delay, limit or prevent the regulatory approval of products, or cause such regulatory approvals to be limited or even rescinded. Additional trials necessary for approval may not be undertaken or may ultimately fail to establish the safety and efficacy of our product candidates.

The FDA or other relevant regulatory agencies may not approve our product candidates for manufacture and sale, and any approval by the FDA does not ensure approval by other regulatory agencies or vice versa (which could require us to comply with numerous and varying regulatory requirements, possibly including additional clinical testing). Any product approvals we or our licensees achieve could also be withdrawn for failure to comply with regulatory standards or due to unforeseen problems after the product’s marketing approval. In either case, marketing efforts with respect to the affected product would have to cease. In addition, the FDA or other regulatory agencies may impose limitations on the indicated uses for which a product may be marketed. The imposition by the FDA or other regulatory organizations of any such limitations on the indicated uses for which any of our products may be marketed would reduce the size of, or otherwise limit, the potential market for the product subject to such limitations.

In addition to testing, regulatory agencies impose various requirements on manufacturers and sellers of products under their jurisdiction, such as packaging, labeling, manufacturing practices, record keeping and reporting. Regulatory agencies may also require post-marketing testing and surveillance programs to monitor a product’s effects. Furthermore, changes in existing regulations or the adoption of new regulations could prevent us from obtaining, or affect the timing of, future regulatory approvals.

We do not currently have sales and marketing capacity. There is no assurance that we will have the financial resources to develop the capacity to, or be able to, successfully market and sell Medidur for posterior segment uveitis or any other products if we seek to do so.

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

The success of our current and possible future collaborative and licensing arrangements depends and will depend heavily on the experience, resources, efforts and activities of our licensees, and if they are not successful in developing and marketing our products, it will adversely affect our revenues, if any, from those products.

Our business strategy includes continuing to leverage our technology platforms by entering into collaborative and licensing arrangements for the development and commercialization of our product candidates, where appropriate. The success of current and future collaborative and licensing arrangements do and will depend heavily on the experience, resources, skill, efforts and activities of our licensees. Our licensees have had, and are expected to have, significant discretion in making decisions related to the development of product

candidates and the commercialization of products under these collaboration agreements. Risks that we face in connection with our collaboration and licensing strategy include the following:

We currently have collaboration and licensing arrangements with various companies, most significantly Alimera and Bausch & Lomb. While Bausch & Lomb has significant experience in the ophthalmic field and substantial resources, there is no assurance whether, and to what extent, that experience and those resources will be devoted to Retisert, and we do not expect revenues from Retisert to increase materially, and they may decline. Although we believe potential revenues from ILUVIEN for DME are important to our future results of operations and financial condition, Alimera has limited experience and limited financial resources, and ILUVIEN for DME is Alimera’s first and only commercial product. Alimera has reported that its negative cash flows from operations and accumulated deficit may raise substantial doubt about its ability to continue as a going concern. Further, due to the limited revenue generated by Alimera to date, Alimera may not be able to maintain compliance with covenants under its loan agreement and, in the event of a default, we do not know whether Alimera will be able to obtain amendments or waivers of those covenants. We do not know if Alimera will be able to raise additional financing if and when required.

If our current and future licensees are not successful in developing and marketing our products, it will adversely affect our revenues, if any, from those products.

Our current licensees may terminate their agreements with us at any time or fail to fulfill their obligations under those agreements, and, if they do, we will lose the benefits of those agreements.

Our licensees have rights of termination under our agreements with them and could terminate those agreements without cause on short notice. Further, our licensees may fail to fulfill their obligations under their agreements, or we may disagree with them over the rights and obligations under those agreements, which could result in breach of the agreements and/or termination. Exercise of termination rights by one or more of our licensees or by us may leave us without the financial benefits and development, marketing or sales resources provided under the terminated agreement. It could be necessary for us to replace, or seek to provide ourselves, the services provided by the licensee, and there is no assurance we would be successful in doing so. It could delay, impair or stop the development or commercialization of products or product candidates licensed to them or require significant additional capital investment by us, which we may not have the resources to fund. If any of our licensees do not perform their obligations under our agreements or if any of those agreements are terminated, it could have an adverse effect on our business, financial condition and results of operations.

If competitive products receive regulatory approval or reach the market earlier, are more effective, have fewer side effects, are more effectively marketed or cost less than our products or product candidates, our products or product candidates may not be approved, may not achieve the sales we anticipate and could be rendered noncompetitive or obsolete.

We believe that pharmaceutical, drug delivery and biotechnology companies, research organizations, governmental entities, universities, hospitals, other nonprofit organizations and individual scientists are seeking to develop drugs, therapies, products, approaches or methods to treat our targeted diseases or their underlying causes. For our targeted diseases, competitors have alternate therapies that are already commercialized or are in various stages of development, ranging from discovery to advanced clinical trials. Any of these drugs, therapies, products, approaches or methods may receive government approval or gain market acceptance more rapidly than our products and product candidates, may offer therapeutic or cost advantages, or may more effectively treat our targeted diseases or their underlying causes, which could result in our product candidates not being approved, reduce demand for our products and product candidates or render them noncompetitive or obsolete.

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

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

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

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

Guidelines, recommendations and studies published by various organizations could reduce the use of our products and potential use of product candidates.

Government agencies, professional societies, practice management groups, private health and science foundations and organizations focused on various diseases may publish guidelines, recommendations or studies

that affect our or our competitors’ products and product candidates. Any such guidelines, recommendations or studies that reflect negatively on our products or product candidates, either directly or relative to our competitive products, could result in current or potential decreased use, sales of, and revenues from one or more of our products and product candidates. Furthermore, our success depends in part on our and our partners’ ability to educate healthcare providers and patients about our products and product candidates, and these education efforts could be rendered ineffective by, among other things, third-parties’ guidelines, recommendations or studies.

RISKS RELATED TO OUR INTELLECTUAL PROPERTY

We rely heavily upon patents and trade secrets to protect our proprietary technologies. If we fail to protect our intellectual property or infringe on others’ technologies, our ability to develop and market our products and product candidates may be compromised.

Our success is dependent on whether we can obtain patents, defend our existing patents and operate without infringing on the proprietary rights of third parties. As of August 31, 2016, we had 233 patents and 107 pending patent applications, including patents and pending applications covering our Durasert, Tethadur and other technologies. Intellectual property protection of our technologies is uncertain. We expect to seek to patent and protect our proprietary technologies. However, there is no assurance that any additional patents will be issued to us as a result of our pending or future patent applications or that any of our patents will withstand challenges by others. In addition, we may not have sufficient funds to patent and protect our proprietary technologies to the extent that we would desire, or at all. If we were determined to be infringing any third-party patent, we could be required to pay damages, alter our products or processes, obtain licenses, pay royalties or cease certain operations. We may not be able to obtain any required licenses on commercially favorable terms, if at all. In addition, many foreign country laws may treat the protection of proprietary rights differently from, and may not protect our proprietary rights to the same extent as, laws in the U.S. and Patent Cooperation 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 likely result in substantial costs to us and diversion of our efforts, and could prevent or delay our discovery or development of product candidates. If our competitors claim technology also claimed by us, and if they prepare and file patent applications in the U.S. or other jurisdictions, we may have to participate in interference proceedings declared by the U.S. Patent and Trademark Office or the appropriate foreign patent office to determine priority of invention, which could result in substantial costs to us and diversion of our efforts. Any such litigation or interference proceedings, regardless of the outcome, could be expensive and time consuming. Litigation could subject us to significant liabilities to third parties, requiring disputed rights to be licensed from third parties and/or requiring us to cease using certain technologies.

We have entered into many agreements that limit our or the third parties’ rights with respect to our intellectual property, including rights to use, options on rights to use, or prohibitions on rights to use (including noncompetition obligations) our or jointly developed intellectual property. Those rights could adversely affect our rights to develop and commercialize products utilizing our intellectual property.

We also rely on trade secrets, know-how and technology that are not protected by patents to maintain our competitive position. We try to protect this information by entering into confidentiality agreements with parties that have access to it, such as our corporate partners, collaborators, employees, and consultants. Any of these

parties could breach these agreements and disclose our confidential information, or our competitors may learn of the information in some other way. If any material trade secret, know-how or other technology not protected by a patent were to be disclosed to or independently developed by a competitor, our competitive position could be materially harmed.

RISKS RELATED TO OUR BUSINESS, INDUSTRY, STRATEGY AND OPERATIONS

If we fail to retain key personnel, our business could suffer.

We are dependent upon the principal members of our management and scientific staff. In addition, we believe that our future success in developing and marketing our products will depend on whether we can attract and retain additional qualified management and scientific personnel as well as a sales and marketing staff. There is strong competition for qualified personnel within the industry in which we operate, and we may not be able to attract and retain such personnel. As we have a small number of employees and we believe our products are unique and highly specialized, the loss of the services of one or more of the principal members of our management or scientific staff, or the inability to attract and retain additional personnel and develop expertise as needed, could have a material adverse effect on our results of operations and financial condition.

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

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

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

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

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

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

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

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

There are a limited number of manufacturers that operate under cGMP and other foreign regulations that are both capable of manufacturing our products and product candidates and are willing to do so. Alimera has contracted with individual third-party manufacturers for the manufacture of ILUVIEN and its components. If any of Alimera’s third-party manufacturers breach their agreements or are unable or unwilling to perform for any reason or fail to comply with cGMP and comparable foreign requirements, Alimera may not be able to locate alternative acceptable manufacturers, enter into favorable agreements with them or get them approved by the applicable regulatory authorities in a timely manner. Delays in the commercial production of ILUVIEN could delay or impair Alimera’s marketing of ILUVIEN, which, in turn, could adversely affect Alimera’s generation of net profits for us.

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

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

Problems associated with international business operations could affect our or our licensees’ ability to manufacture and sell our products. If we encounter such problems, our or their costs could increase and development of products could be delayed.

Our goal is to develop products for sale by us and our licensees in major world healthcare markets. Manufacturing of pharmaceutical products requires us or our licensees to comply with regulations regarding safety and quality and to obtain country and jurisdiction-specific regulatory approvals and clearances. We or our licensees may not be able to comply with such regulations or obtain or maintain needed regulatory approvals and clearances, or may be required to incur significant costs in doing so. In addition, our operations and future revenues may be subject to a number of risks associated with foreign commerce, including the following:

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

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

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

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

Legislative or regulatory changes may adversely affect our business, operations and financial results.

Our industry is highly regulated and new laws, regulations and judicial decisions, and new interpretations of existing laws, regulations and judicial decisions, may adversely affect our business, operations and financial results.

U.S. federal and state governments continue to propose and pass legislation designed to reduce the cost of healthcare. The Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010 (PPACA), represents one of the most significant healthcare reform measures in decades. The PPACA is intended to expand U.S. healthcare coverage primarily through the imposition of health insurance mandates on employers and individuals and expansion of the Medicaid program. Several provisions of the PPACA could significantly reduce payments from Medicare and Medicaid for any product candidates that obtain marketing approval in the future. Federal and state legislatures within the U.S. and foreign governments will likely continue to consider changes in existing healthcare legislation. We cannot predict the reform initiatives that may be adopted in the future or whether initiatives that have been adopted will be repealed or modified. The continuing efforts of the government, insurance companies, managed care organizations and other payers of healthcare services to contain or reduce costs of healthcare may adversely affect the demand for any products for which we or our licensees may obtain regulatory approval; our or our licensees’ ability to set a price that we or they believe is fair for our products; our or our licensees’ ability to obtain coverage and reimbursement approval for a product; our or our licensees’ ability to generate revenues and achieve or maintain profitability; or the level of taxes that we are required to pay.

In addition, other legislative changes have been proposed and adopted since PPACA. The Budget Control Act (BCA) of 2011 includes provisions to reduce the federal deficit. The BCA, as amended, resulted in the imposition of 2% reductions in Medicare payments to providers beginning in 2013. More recent legislation extends reductions through 2024. Any significant spending reductions affecting Medicare, Medicaid or other publicly funded or subsidized health programs that may be implemented, and/or any significant taxes or fees that may be imposed on us, as part of any broader deficit reduction effort or legislative replacement to the BCA, could have an adverse impact on our anticipated product revenues.

The FDAAA granted the FDA enhanced authority over products already approved for sale, including authority to require post-marketing studies and clinical trials, labeling changes based on new safety information and compliance with risk evaluations and mitigation strategies approved by the FDA. The FDA’s exercise of this relatively new authority could result in delays and increased costs during product development, clinical trials and regulatory review and approval, increased costs following regulatory approval to assure compliance with new post-approval regulatory requirements, and potential restrictions on the sale or distribution of approved products following regulatory approval.

Changes in the regulatory approval policy during the development period, changes in or the enactment of additional regulations or statutes, or changes in regulatory review for each submitted product application, may cause delays in the approval or rejection of an application. For example, the July 9, 2012 reauthorization of the Prescription Drug User Fee Act (PDUFA) extended by two months the period in which the FDA is expected to review and approve certain NDAs. Although the FDA has recently stated that it expects to meet PDUFA’s updated timing goals, it has in the past provided its managers discretion to miss them due to heightened agency workload or understaffing in the review divisions. Accordingly, it remains unclear whether and to what extent the FDA will adhere to PDUFA timing goals in the future, which could delay approval and commercialization of our product candidates.

RISKS RELATED TO OUR COMMON STOCK

The price of our common stock may be volatile.

The price of our common stock (including common stock represented by CHESS Depositary Interests (CDIs)) may be affected by developments directly affecting our business, as well as by developments out of our

control or not specific to us. The biotechnology sector, in particular, and the stock market generally are vulnerable to abrupt changes in investor sentiment. Prices of securities and trading volumes of companies in the biotechnology industry, including ours, can swing dramatically in ways unrelated to, or that bear a disproportionate relationship to, our performance. The price of our common stock (and CDIs) and their trading volumes may fluctuate based on a number of factors including, but not limited to:

In addition, low trading volume in our common stock or our CDIs may increase their price volatility. Holders of our common stock and CDIs may not be able to liquidate their positions at the desired time or price. Finally, we will need to continue to meet the listing requirements of NASDAQ, including the minimum stock price, and 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, 2016, we had outstanding warrants and options to acquire approximately 6.6 million shares of our common stock, or approximately 16.2% of our shares on a fully diluted basis. The issuance of shares of our common stock upon exercise of these warrants and stock options could result in dilution to the interests of other holders of our common stock and could adversely affect our stock price.

We do not currently intend to pay dividends on our common stock, and any return to investors is expected to come, if at all, only from potential increases in the price of our common stock.

At the present time, we intend to use available funds to finance our operations. Accordingly, while payment of dividends rests within the discretion of our board of directors, no cash dividends on our common shares have been declared or paid by us and we have no intention of paying any such dividends in the foreseeable future.

None.

ITEM 2.

PROPERTIES

We do not own any real property. We lease 1,750 square feet of laboratory space, 1,000 square feet of clean room space and 10,900 square feet of office space in Watertown, Massachusetts under a lease agreement that expires in April 2019. Our lease of 1,250 square feet of laboratory space and 1,665 square feet of office space in Malvern, U.K. expired in August 2016, but was extended through October 2016 to facilitate closure of the research facility. We believe our leased Watertown facility is adequate for the Company’s present needs.

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”.removed. The following table sets forth the highname, age, director service period and low prices per shareposition of each of our common stockcurrent directors, as reported on the NASDAQ Global Market for the periods indicated:of October 29, 2018:

On August 31, 2016, the last reported sale priceSet forth below for each current director is a list of Board Committee memberships and a description of his or her business experience, qualifications, education and skills that led our Board to conclude that such individual should serve as a member of our common stock onBoard:

Göran Ando, M.D.

Chairman of the NASDAQ Global Market was $3.87. AsBoard and member of the Science Committee

Dr. Göran Ando has had a distinguished career in the global pharmaceutical industry that date, we had approximately 20 holdershas spanned nearly four decades. He began his career at Pfizer, Inc., where he held several senior clinical positions both in the U.S. and in Europe. Dr. Ando also served as President of the Astra Research Centre. He held various senior appointments at GlaxoSmithKline plc, including Research and Development Director for Glaxo Group Research. Dr. Ando then joined Pharmacia AB in 1995 as Executive Vice President and Deputy Chief Executive Officer to lead Research and Development with additional responsibilities for manufacturing, information technology, business development and M&A. During his nine-year tenure as Head of Research and Development at Pharmacia/Pharmacia & Upjohn, 17 new drugs were approved by the FDA prior to Pharmacia’s acquisition by Pfizer for $60 billion. Dr. Ando is the retired Chairman of Novo Nordisk A/S and previously served as the Chief Executive Officer of Cell Tech Group PLC. He has also served as Chairman of the Board for several European-based biopharmaceutical companies and he currently serves as a Board member of biopharmaceutical companies in Europe, U.S. and Singapore. He is a Senior Advisor at EW Healthcare Partners. Dr. Ando received his Bachelor of Arts degree from Uppsala University in Sweden and Doctor of Medicine degree from Linköping University in Sweden.

We believe Dr. Ando is qualified to serve as Chair of our Board because his strong record of leadership as an executive officer and director in the life sciences industry affords him a deep understanding of the industry and corporate setting in which we operate and allows him to impart his substantial expertise in the fields of manufacturing, information technology, business development and commercialization to the Board and our common stockcompany.

1

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 and member of the Audit Committee and the Science Committee

Dr. Mazzo has been the Chief Executive Officer and a director of Caladrius Biosciences, Inc., a Nasdaq Stock Market LLC, or Nasdaq, listed company, since January 2015. Caladrius is a cell therapeutics development company with a focus on applications in cardiovascular and autoimmune diseases. Prior to joining Caladrius, Dr. Mazzo served from August 2008 to October 2014 as Chief Executive Officer and as a member of the board of directors of Regado Biosciences, Inc., a Nasdaq-listed biopharmaceutical company focused on the development of novel antithrombotic drug systems for acuteand sub-acute cardiovascular indications. Prior to his leading Regado, from March 2007 to April 2008, Dr. Mazzo was President, Chief Executive Officer and a director of Æterna Zentaris, Inc., a publicly held international biopharmaceutical companyco-listed on Nasdaq and the Toronto Stock Exchange. From 2003 until 2007, Dr. Mazzo served as President, Chief Executive Officer and a director of Chugai Pharma USA, LLC, a biopharmaceutical company which was the U.S. subsidiary of Chugai Pharmaceutical Co., Ltd. of Japan. Dr. Mazzo has also held senior management and executive positions in research and development and/or directorships with the Essex Chimie European subsidiary at Schering-Plough Corporation, a publicly held pharmaceutical company that was subsequently acquired by Merck & Co., Inc.; Hoechst Marion Roussel, Inc., the U.S. subsidiary of Hoechst AG, which was subsequently acquired by Sanofi, a multinational pharmaceuticals company; and Rhone-Poulenc Rorer, Inc., a subsidiary of Rhone-Poulene SA, a French pharmaceuticals company, which was subsequently acquired by Hoechst AG. He also previously served on the board of directors of Avanir Pharmaceuticals, Inc., a specialty pharmaceutical company, from 2005 until Avanir was sold to Otsuka Holdings in 2015. Dr. Mazzo earned a B.A. in the Honors Program (Interdisciplinary Humanities) and a B.S. in Chemistry from Villanova University. In addition, Dr. Mazzo received his M.S. in chemistry and his Ph.D. degree in analytical chemistry from the University of Massachusetts, Amherst. He was also a research fellow at the Ecole Polytechnique Federale de Lausanne, Switzerland.

We believe Dr. Mazzo is qualified to serve on our Board because his extensive experience as an executive officer and director in the life sciences industry, his understanding of Directors. On July 1, 2016, the numberstrategic and regulatory environment in which we conduct our business, his lengthy track record in global product development, his Ph.D. in analytical chemistry and his broad scientific and managerial background provide him expertise in the oversight of shares issuable undercompanies in this sector and the 2008 Incentive Plan was increased by 750,000 shares.

Recent Sales of Unregistered Securities

None.

Issuer Repurchases of Equity Securities

None.ability to guide such companies through varying operating climates.

The selected historical financial data set forth below as of June 30, 2016, 2015, 2014, 2013 and 2012 and for each2

		As of June 30,
		2016				2015				2014				2013				2012
		(In thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents		$	15,313			$	19,121			$	15,334			$	6,899			$	4,625
Marketable securities			13,679				9,414				2,944				3,374				9,946
Total assets			31,619				32,367				22,671				16,249				20,597
Total deferred revenue—current and long-term			5,732				5,629				5,722				5,984				5,959
Total stockholders’ equity			20,881				23,368				14,924				7,700				13,636

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 beginninga public company traded 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,Nasdaq, 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 sustained-release drug delivery products primarilydevelops cell-based therapies for the treatment of chronic eye diseases. Our products deliver drugsliver disease, from May 2013 to October 2018.

We believe Mr. Godshall is qualified to serve on our Board because his managerial experience at public, life sciences companies provides him insights as a controlledsuccessful life sciences entrepreneurwith in-depth knowledge of medical product strategy and steady ratedevelopment.

Jay Duker, M.D.

Chairman of the Science Committee and member of the Governance and Nominating Committee

Dr. Duker is the Director of the New England Eye Center, where he has served in various capacities since 1992. He is also Professor and Chairman of Ophthalmology at Tufts Medical Center and Tufts University School of Medicine. He has published more than 200 journal articles related to ophthalmology andis co-author of Yanoff and Duker’s Ophthalmology, a best-selling ophthalmic text. Dr. Dukeris co-founder of three companies, including Hemera Biosciences, Inc., a privately held company seeking to develop anti-compliment gene-based therapies for months or years. We have developed three of only four sustained-release products approved by

3

Revenues

Collaborative research and development revenue totaled $398,000 in fiscal 2016 compared to $25.4 million in fiscal 2015. This decrease was primarily attributable to recognition of the one-time $25.0 million FDA-approval milestone earned for ILUVIEN in September 2014.

Retisert royalty income increased by $68,000, or 6%, to $1.22 million in fiscal 2016 compared to $1.15 million in fiscal 2015. 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 of ILUVIEN by Alimera. Alimera initiated commercial sales of ILUVIEN in the U.K. and Germany in the fourth quarter of fiscal 2013 and in the U.S. and Portugal in the third quarter of fiscal 2015. We earned $0 and $43,000 of ILUVIEN net profits during fiscal 2016 and 2015, respectively. In addition, during fiscal 2016 we received $157,000 from Alimera attributable to a sublicense arrangement. We do not know when and if we will receive future net profit payments with respect to any country where Alimera sells ILUVIEN or payments with respect to countries where Alimera sublicenses the sale of ILUVIEN. See Note 14 of Notes to Consolidated Financial Statements with respect to a dispute relating to the computation of ILUVIEN net profits for 2014, which may have implications for other years.

Research and Development

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

General and Administrative

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

Interest and Other Income

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

Income Tax Benefit (Expense)

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

Years Ended June 30, 2015 and 2014

Revenues

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

Retisert royalty income decreased by $164,000, or 12%, to $1.2 million in fiscal 2015 compared to $1.3 million in fiscal 2014.

We received $43,000 of ILUVIEN net profits during fiscal 2015 and none in fiscal 2014.

Research and Development

Research and development totaled $12.1 million in fiscal 2015, an increase of $2.5 million, or 26%, compared to $9.6 million in fiscal 2014. This increase was primarily attributable to a $2.0 million increase in CRO costs for the Medidur Phase 3 clinical development program and $240,000 of personnel related costs, including stock-based compensation.

General and Administrative

General and administrative increased by $588,000, or 8%, to $8.1 million for fiscal 2015 from $7.5 million for fiscal 2014, primarily attributable to a $530,000 increase in professional fees and a $390,000 increase in stock-based compensation.

Interest and Other Income

Interest and other income totaled $22,000 in fiscal 2015 compared to $5,000 in fiscal 2014, primarily due to interest income on higher average balances of marketable securities investments.

Income Tax (Expense) Benefit

Income tax expense of $96,000 in fiscal 2015 compared to an income tax benefit of $130,000 in fiscal 2014. During fiscal 2015, we paid $263,000 of federal alternative minimum taxes primarily based upon U.S. taxable income for calendar year 2014, which was primarily attributable to the $25.0 million ILUVIEN FDA-approval milestone. Refundable foreign research and development tax credits totaled $167,000 in fiscal 2015 compared to $130,000 in fiscal 2014.

Inflation and Seasonality

Our management believes inflation has not had a material impact on our operations or financial condition and that our operations are not currently subject to seasonal influences.

Recently Adopted and Recently Issued Accounting Pronouncements

New accounting pronouncements are issued periodically by the Financial Accounting Standards Board (FASB) and are adopted by us as of the specified effective dates. Unless otherwise disclosed below, we believe that the impact of recently issued and adopted pronouncements will not have a material impact on our financial position, results of operations and cash flows or do not apply to our operations.

In May 2014, the FASB issued Accounting Standards Update No. 2014-09,Revenue from Contracts with Customers(Topic 606) (ASU 2014-09), which requires an entity to recognize revenue in an amount that reflects the consideration to which the entity expects to be entitled in exchange for the transfer of promised goods or services to customers. The standard will replace most existing revenue recognition guidance in U.S. GAAP. In August 2015, the FASB issued ASU 2015-14, which officially deferred the effective date of ASU 2014-09 by one year, while also permitting early adoption. As a result, ASU 2014-09 will become effective on July 1, 2018, with early adoption permitted on July 1, 2017. The standard permits the use of either the retrospective or cumulative effect transition method. We are evaluating the impact this standard will have on our consolidated financial statements.

In August 2014, the FASB issued ASU 2014-15,Presentation of Financial Statements—Going Concern. ASU 2014-15 provides guidance around management’s responsibility to evaluate whether there is substantial

doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. As a result, ASU 2014-15 will become effective on July 1, 2017, with early adoption permitted. We are evaluating the potential impact of adopting this standard on our consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02,Leases. The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. As a result, ASU 2016-02 will become effective on July 1, 2019. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. We are currently evaluating the impact of the pending adoption of the new standard on our consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09,Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 intends to simplify various aspects of how share-based payments are accounted for and presented in the financial statements. The main provisions include: all tax effects related to stock awards will now be recorded through the statement of operations instead of through equity, all tax-related cash flows resulting from stock awards will be reported as operating activities on the cash flow statement, and entities can make an accounting policy election to either estimate forfeitures or account for forfeitures as they occur. The amendments in ASU 2016-09 are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years, and may be applied prospectively with earlier adoption permitted. As a result, ASU 2016-09 will become effective on July 1, 2017. We are currently evaluating the impact of this guidance on our consolidated financial statements.

Liquidity and Capital Resources

From fiscal 2012 through fiscal 2016, we financed our operations primarily from sales of our equity securities and the receipt of license fees, milestone payments, research and development funding and royalty income from our collaboration partners. At June 30, 2016, our principal sources of liquidity consisted of cash, cash equivalents and marketable securities totaling $29.0 million. Our cash equivalents are primarily invested in an institutional money market fund, and our marketable securities are invested in investment-grade corporate debt and commercial paper with short-term maturities.

With the exception of net income in fiscal 2015 resulting from the $25.0 million ILUVIEN FDA-approval milestone, we have generally incurred operating losses since inception and, at June 30, 2016, we had a total accumulated deficit of $292.2 million. We do not currently have any assured sources of future revenue, and we generally expect negative cash flows from operations on a quarterly basis unless and until such time as we receive sufficient revenues from ILUVIEN for DME or one or more of our other product candidates achieve regulatory approval and provide us sufficient revenues. We believe that our capital resources of $29.0 million at June 30, 2016, together with expected cash inflows under existing collaboration agreements, will enable us to fund our operations as currently planned into the second quarter of fiscal year 2018. This estimate excludes any potential receipts under our Alimera collaboration agreement. We believe our ability to fund our planned operations beyond that time, including completion of clinical development of Medidur, will require additional capital from the commercialization of ILUVIEN, future collaboration or other agreements and/or financing transactions.

The additional capital we will require will be influenced by many factors, including, but not limited to:

We do not know if additional capital will be available when needed or on terms favorable to us or our stockholders. Collaboration, licensing or other agreements may not be available on favorable terms, or at all. We do not know when or if we will receive any substantial funds from the commercialization of ILUVIEN. If we seek to sell shares under our at-the-market (ATM) facility or in another offering, we do not know whether and to what extent we will be able to do so, or on what terms. Further, the rules and regulations of the Australian Securities Exchange (ASX) and the NASDAQ Global Market require us to obtain shareholder approval for sales of common stock under certain circumstances,, which could delay or prevent us from raising additional capital from such sales. Also, the state of the economy and financial and credit markets at the time or times we seek any additional financing may make it more difficult or expensive to obtain. If available, additional equity financing may be dilutive to stockholders, debt financing may involve restrictive covenants or other unfavorable terms and dilute our existing stockholders’ equity, and funding through collaboration agreements may be on unfavorable terms, including requiring us to relinquish rights to certain of our technologies or products. If adequate financing is not available if and when needed, we may delay, reduce the scope of, or eliminate research or development programs, potential independent commercialization of Medidur or other new products, if any, and 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.

Our consolidated statements of historical cash flows are summarized as follows:

Sources and uses of operating cash flows for the years ended June 30, 2016, 2015 and 2014 are summarized as follows:

Operating cash inflows for each year consisted primarily of payments received pursuant to license and collaboration agreements. As a percentage of total license and collaboration cash inflows, amounts attributable to Alimera represented 72.4% in fiscal 2016, 99.3% in fiscal 2015 and 5.8% in fiscal 2014, amounts attributable to Enigma represented 19.7% in fiscal 2016, 0.4% in fiscal 2015 and 6.9% in fiscal 2014 and amounts attributable to various feasibility study agreements represented 0.2% in fiscal 2015 and 86.6% in fiscal 2014.

Operating cash outflows increased by $2.1 million, or 13.1%, from fiscal 2015 to fiscal 2016, primarily as a result of increases of: (a) $1.5 million in Medidur clinical development; (b) $376,000 of professional fees; (c) $367,000 of pre-clinical studies and other third-party research and development costs; and (d) $277,000 of personnel and benefit costs, partially offset by decreases of (x) $260,000 of federal alternative minimum taxes attributable to calendar year 2014 U.S. taxable income; and (y) $230,000 in cash incentive compensation awards. Operating cash outflows increased by $2.2 million, or 15.3%, from fiscal 2014 to fiscal 2015, primarily as a result of increases of (a) $2.1 million in Medidur clinical development; (b) $263,000 of federal alternative minimum taxes attributable to calendar year 2014 U.S. taxable income; and (c) a $370,000 increase in professional fees, partially offset by decreases of $255,000 in incentive compensation awards and $230,000 in facility costs.

Cash flows from investing activities were primarily attributable to purchases of marketable securities, net of maturities, of $4.3 million for fiscal 2016 and $6.6 million for fiscal 2015 and maturities of marketable securities, net of purchases, of $386,000 for fiscal 2014. Purchases of property and equipment totaled $113,000 in fiscal 2016, $161,000 in fiscal 2015 and $248,000 in fiscal 2014.

Cash flows from financing activities in fiscal 2016 were primarily attributable to an underwritten public offering in January 2016 for gross proceeds of $17.8 million, net of $1.3 million of share issue costs. Cash flows from financing activities in fiscal 2014 were primarily attributable to an underwritten public offering in July 2013, a registered direct offering in March 2014 and sale of shares pursuant to an ATM facility consummated in December 2013, resulting in aggregate gross proceeds of $19.3 million, net of $1.2 million of share issue costs. In addition, cash flows from financing activities included proceeds from the exercise of stock options totaling $490,000 in fiscal 2016, $235,000 in fiscal 2015 and $987,000 in fiscal 2014.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that would be material to investors.

Tabular Disclosure of Contractual Obligations

The following table summarizes our minimum contractual obligations as of June 30, 2016:

Our operating lease obligations consist predominantly of office and lab space in Watertown, Massachusetts. Our purchase obligations consist of non-cancellable purchase orders for supplies and services.

We have agreements with two CROs to conduct the clinical development program for Medidur for posterior segment uveitis. Our financial obligations under the agreements are determined by the services that we request from time to time under the agreements. The actual amounts owed under the agreements and the timing of those obligations will depend on various factors, including the number of patients and rate of patient enrollment, any protocol amendments and other factors relating to the clinical trials. We can change the services requested and thereby increase or decrease our obligations under the agreements from time to time. As of June 30, 2016, our CRO agreements provided for two Phase 3 clinical trials and a utilization study of the newly designed proprietary inserter at an aggregate remaining cost of approximately $13.5 million, which we expect to increase as a result of pending and contemplated change orders. We can terminate the agreements at any time without penalty.

We also have employment agreements with three executive officers that would require us to make severance payments to them if we terminate their employment without cause or the executives resign for good cause. These payments are contingent upon the occurrence of various future events, and the amounts payable under these provisions depend upon the level of compensation at the time of termination of employment, are therefore not calculable at this time, and, as a result, we have not included any such amounts in the table above.

Foreign Currency Exchange Rates

We have conducted operations in two principal currencies, the U.S. dollar ($) and the Pound Sterling (£). The U.S. dollar is the functional currency for our U.S. operations, and the Pound Sterling is the functional currency for our U.K. operations.

Changes in the foreign exchange rate of the Pound Sterling to the U.S. dollar impacted the net operating expenses of our U.K. operations. The strengthening of the U.S. dollar relative to the Pound Sterling in fiscal 2016 compared to fiscal 2015 resulted in a net decrease in research and development expense of approximately $133,000. For every incremental 5% strengthening or weakening of the weighted average exchange rate of the U.S. dollar in relation to the Pound Sterling, our research and development expense in fiscal 2016 would have decreased or increased by $101,000, respectively. All cash and cash equivalents, and most other asset and liability balances, are denominated in each entity’s functional currency and, accordingly, we do not consider our statement of comprehensive (loss) income exposure to realized and unrealized foreign currency gains and losses to be significant.

Changes in the foreign exchange rate of the Pound Sterling to the U.S. dollar also impacted total stockholders’ equity. As reported in the statement of comprehensive (loss) income, the relative strengthening of the U.S. dollar in relation to the Pound Sterling at June 30, 2016 compared to June 30, 2015 resulted in $96,000 of other comprehensive loss due to the translation of £204,000 of net assets of our U.K. operations, predominantly the Tethadur technology intangible asset, into U.S. dollars. For every incremental 5% strengthening or weakening of the U.S. dollar at June 30, 2016 in relation to the Pound Sterling, our stockholders’ equity at June 30, 2016 would have decreased or increased, respectively, by approximately $14,000.

The information required by this item may be found on pages F-1 through F-25 of this Annual Report.

None.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2016. The term “disclosure controls and procedures”, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their desired objectives, and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of June 30, 2016, our principal executive officer and principal financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) or 15d-15(f) of the Exchange Act, as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our board of directors managementfrom 2011 until his departure in 2017. Dr. Landis previously served as Senior Vice President,

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