Lori Freedman - VP of Corporate Affairs and General Counsel Paul Ashton - President and CEO Len Ross - VP of Finance.

Suraj Kalia - Northland Securities Juan Sanchez - Ladenburg Thalmann Securities.

Good day ladies and gentlemen, and welcome to the pSivida Q1 2014 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. (Operator Instructions). As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference, Ms. Lori Freedman, Vice President of Corporate Affairs and General Counsel. You may begin your conference..

Thank you, Nicolas. Good afternoon everyone and thank you for joining us. After the market closed today, we released our first quarter financial results for fiscal 2014. A copy of the release is available in the Investor section of our website at www.psivida.com. On the call with me today is Dr.

Paul Ashton, President and Chief Executive Officer; and Len Ross, Vice President, Finance. Before I hand the call over to Paul, I need to remind everyone that some of our prepared remarks are and answers to your questions may be forward-looking in nature. Forward-looking statements are inherently subject to risks and uncertainties.

All statements other than statements of historical facts are forward-looking statements, and we cannot guarantee that the results and other expectations expressed, anticipated, or implied will be realized. Actual results could differ materially from those anticipated, estimated or projected in the forward-looking statements.

For a more detailed discussion of risk factors that could impact our future results and financial condition, I refer you to our filings with the SEC including our annual report on Form 10-K for the fiscal year ended June 30, 2013.

We undertake no obligation to update any forward-looking statement in order to reflect events or circumstances that may arise after this conference call. With that, I’d like to turn the call over to Paul..

Great. Thank you, Lori, and welcome everyone as we discuss the results of our first quarter of fiscal 2014. We made excellent progress this quarter in advancing our own pipeline of products and in enhancing our capital with the completion of a $10.8 million public offering of our common stock.

Our lead development product Medidur for the treatment of posterior uveitis is now in the first of two planned pivotal Phase III clinical trials which continues on schedule. Although not a hash hold name posterior uveitis is the third largest cause of blindness in the U.S. and a disease with limited treatment options.

As we’ve previously said we expect that Medidur will treat posterior uveitis with an efficacy profile comparable to Retisert our current FDA approved implant for posterior uveitis and with a superior side effect profile. The interim data we previously reported from an investigator sponsored Phase I/II study were consistent with this hypothesis.

We look forward to continued growth and acceptance in sales in Europe of one of our license products ILUVIEN for diabetic macular edema. Our men have just reported that total revenues from sales ILUVIEN in the third quarter increased over 300% to 758,000 compared to the prior quarter.

ILUVIEN is being sold in the UK and Germany and [slated] to launch in France next year. We expect the availability of ILUVIEN in the U.K. will expand significantly with the decisions by UK’s National Institute of Health and Care Excellence, NICE.

To reverse its original views and issue final draft guidance recommending ILUVIEN as a treatment option for the subject of chronic DME patients who have previously undergone cataract surgery.

Our issuance of final guidance is expected this month UK’s National Health Service will provide reimbursements on the patient access gain for this typically large so group of chronic DME patients.

Now there is a lot of future opportunity in the EU, ILUVIEN is also approved in Austria, Portugal and Spain, approval is pending in Italy and ten additional EU country approvals have been applied for. As a result we are optimistic with sales of ILUVIEN in the EU. In the U.S.

however, we are very disappointed the Alimera received a complete response letter from the FDA October 17, 2013 regarding ILUVIEN for DME. The FDA concluded that for the indication thought treatment of vision impairment associated with chronic diabetic macular edema considered insufficiently responsive to available therapy.

For that indication the risk of ILUVIEN outlaid the benefits. Interestingly at the same time the FDA issued the completed response letter, it was also convened an advisory committee meeting for January 27th. We expect to learn more about the potential for approval in the U.S. during that meeting.

Turning back to our product pipeline, we continue to be encouraged by the preclinical testing of potential products using Tethadur. Tethadur is our technology platform that’s designed to deliver peptides, proteins and antibodies on a sustained basis.

We believe we can use this platform to deliver drugs, both through a particular location in the body such as the eye, as well as systemically. Sustained delivery of biologics is a very exciting opportunity. Patent for biologic products with annual sales totaling over $50 billion are expiring over the next five to ten years.

Sustained delivery could be keys of the BioSimilars and BioBetters for these products. The biggest drugs in ophthalmology right now are biologics, which while effective require regular injections into the eye, typically 82 injections per year.

We believe Tethadur could be extremely important in creating the next wave of product to deliver these biologics to the eye on a sustained basis. The use of Tethadur in certain ophthalmic applications is being evaluated under funded evaluation agreement with a leading global biopharmaceutical company.

Other major pharmaceutical companies are evaluating our technology platforms in other ophthalmic indications under funded agreements. We are continuing to invest in collaborations and partnerships as part of our strategy. Even as we move to a specialty pharma model developing our own products. There are several reasons for this.

First, collaborations provide us with leverage. It can be preferable for a small company like us to team up with a large potential big pharma partner to take on another big pharma competitor no matter how good our technology maybe. Second partners can help us diversify and develop products in therapeutic areas outside of ophthalmology.

I would go with the loan strategy would force us to focus on one or very few products. And finally partnering can provide critical financing for development. Partnerships typically provide upfront payments milestone payments and ultimately royalties and other revenues from product sales.

So far for example we've received over $30 million from our Alimera Sciences collaboration and that should increase our sales in the EU progress with of course the potential for a $25 million milestone payments if ILUVIEN were to be approved in the U.S. Now I'll turn the call over to Len to take us through the financials..

Thank you Paul and good afternoon everyone. I will briefly revenue our first quarter fiscal 2014 results starting with our financial position.

At September 30, 2013, we had cash, cash equivalents and marketable securities of $16.5 million, the net increase of $6.2 million during the first quarter reflected $10 million of net proceeds from our July 2013 underwritten public offering of common stock.

This was partially offset by a $3.8 million of net cash used in operations including approximately $1.1 million of incentive compensation awards for fiscal 2013 and fiscal 2012, both of which were recorded in fiscal 2013 as a result of performance conditions achieved during that fiscal year.

We anticipate that the combination of our existing capital resources together with expected Retisert royalty income and other expected cash inflows under existing collaboration and evaluation agreements will enable us to fund our current and planned operations through calendar year 2014.

This includes expected cost through that date of our Phase III clinical trials of Medidur for posterior uveitis; the first of which commenced in June 2013, but excludes any potential receipts of net profits consideration under our Alimera collaboration agreement.

Funding of our operations beyond calendar 2014 will depend on the amount and timing of payments we may receive under our collaboration agreement with Alimera. And other existing and any future collaboration evaluation or other agreements and/or financing transactions in which we may engage.

Although Alimera has commenced sales of ILUVIEN for DME in Germany and the UK and announced its plans for 2014 launch in France, we cannot yet project if or when Alimera will achieve net profits as defined in any of these countries or the resulting amounts that we might receive.

Alimera has reported that it does not plan to commercialize ILUVIEN in other EU countries for which marketing authorization has been or maybe received until such time as it is generating positive cash flows from sales in the first three EU countries.

Turning now to our first quarter fiscal 2014 results, revenues totaled $597,000 for the current quarter compared to $553,000 for the same period last year, with the increase attributable to higher Retisert royalty income.

Research and development expense was $2.5 million for the quarter ended September 2013 compared to $1.5 million in the prior year quarter. The increase was primarily attributable to approximately $1.2 million of outsourced contract research organization cost for the Medidur Phase III clinical trial.

General and administrative expense increased by $191,000 to $1.8 million for the first quarter of fiscal 2014 from $1.6 million in the prior fiscal year period. This increase was primarily attributable to increased professional fees.

Net loss for the quarter ended September 2013 was $3.7 million or $0.14 per share compared to a net loss of $2.6 million or $0.11 per share for the prior year quarter. I will now turn the call back over to Paul..

Great. Thanks Len. Just to sum up, this quarter we continue to make excellent progress advancing our own products including Medidur for posterior uveitis and our preclinical product development. We bolstered our cash position with over $10 million equity financing.

Our quarterly cash burn we expect it will continue to show some variability due to the timing of clinical trial costs and payments from collaborating companies. This quarter also saw Alimera made progress in rolling out ILUVIEN for DME in Europe.

And we’ll learn more about the potential for approval of the ILUVIEN for DME in the US at the outcome at the end of January. So at this point we would happy to take your questions.

Operator, would you please initiate the Q&A portion of the call?.

Certainly. (Operator Instructions) Our first question comes from the line of Suraj Kalia with Northland Securities. Your line is now open..

Hi Paul, can you hear me okay?.

Yes. Thank you, Suraj..

So Paul, a few questions and forgive me I jumped a couple of minutes late on the call.

Did you talk about the number of patients who are being currently enrolled in the first Phase III uveitis trial?.

No, we did not. The trial we expect to enroll approximately 120 patients. And it will take approximately one year to enroll that number moving exactly on schedule..

And when was the enrolment started?.

Just at the end of last quarter..

Okay.

So you probably have 30, 35 patients enrolled roughly, okay?.

You shouldn’t assume, Suraj because it takes a lot to clinical centers up and running..

Okay. Fair enough..

With these things you tend to start slowly and accelerate more clinical trials and just go online..

Understood.

Paul for the, and again maybe this was an unfair question at stage of the game, but for the investigator sponsored Medidur trial, the Phase I/II for the 12 patients were there any after 12 months follow-up the time period, were there any cases of high [IOP] and or glaucoma based on your interim read out, I think, we have specifically talked about the recurrence of uveitis and inflammation.

Is it too early to be looking at IOP and deriving any signals from that? Would love to get some color on this adverse event?.

It is very early to be making to read too much into the data that we've seen or that we've reported thus far. However, we did have one patient who developed significantly elevated IOP and indeed required a [shunt] which is a second operation to lower the IOP.

Now that particular patient will not have met the entry criteria for the Phase III that we're doing, because they had pre-existing glaucoma. So in that particular case, they were entered into the investigator-sponsored IND more on a compassionate use basis.

They had some other medical issues going on really maybe very difficult for them to be receiving to start a treatment with Humera and I believe is the drug they were on. So, on a compassionate used basis they entered that trial. I’m sure that’s a subsequently have an exacerbation of the elevated pressure they already had that was the end of patient.

But again it's really a bit early to read too much into that..

Fair enough. Recall again, I'll just have one final question and forgive me if this is also a little tangent shale. So let's say we have the AdCom meeting at the end of January. And if you assume a simple extrapolation you said that AdCom rejects the ILUVIEN based on existing dataset and on evaluation of the safety benefit profile.

Does it preclude pSivida from regaining the rights to ILUVIEN in all other conditions other than uveitis back from Alimera specifically for the U.S.

or forget even all the other conditions, for DME specifically can you envision a scenario where you say hey Alimera please give us the rights back to the U.S., let us play around with the [senti] what we can do?.

Well, I really think it’s very premature to make any projections as to what may happen at the ASCO meeting. Regarding a hypothetical situation for whatever reason Alimera chose not to continue to advance developments of ILUVIEN in the U.S. for DME.

I will need to check what effects has on the ILUVIEN as long as the commercializing and trying very hard to commercialize the product in Europe so much at least will satisfy most of the requirements of ILUVIEN..

Okay. Paul, those are all my questions. I do appreciate you taking that..

Thank you. Our next question comes from the line of Juan Sanchez with Ladenburg. Your line is now open..

My question on the efficacy of Medidur relative to Retisert, your level of confidence, they may have seen that efficacy comes from the open label study or there are other data points you can point for you to have that confidence?.

It really comes from all the data points, specifically and I apologize if anyone on the line if it gets a little scientific. The side effect profile that one sees with any intraocular steroid, specifically the increase in IOP is driven by the concentration of drugs in the anterior chamber, either front of the eye.

While the therapeutic effect and things like DME or uveitis will be driven by the concentration of drug in the back of the eye. And the ratio we estimate based on pre-clinical data is in excess of 10 to one eye vision, likely to be more than 10 times as much drug in the back of the eye as well as in front of the eye, okay, I bet on that.

When Alimera recently published the data concerning Retisert and ILUVIEN, they look at the anterior concentrations of the drugs similar following either Retisert or ILUVIEN plantation and they found that the concentration of the drug in the front of the eye with ILUVIEN, concentration at the front of the eye, is that equivalent the 50% of the binding efficiency of a steroid in the back of the eye, close to the eye.

The expectation that where is the concentration at the back is 10 times higher than that which is well over the actually 90. So that’s the sort of scientific rationale and that was further substantiated by the clinical data that we subsequently have seen..

Good.

And then can you comment on Tethadur since this material has never been approved by the FDA, what are the physical and biological properties of this compound that makes you believe (inaudible) is going to be a safe one?.

Obviously one needs to do all the appropriate safety checks first before one would being too confident, but nevertheless Tethadur is in essence a collection of very small sponges. So it’s the surface of which is silica, the sponge like articles are in the sort of five to ten micron range. Of course holes in those sponges are much smaller.

The material itself is bioerodible and will erode to form sourcing acid which is a common product in the body, most of it have got couple of grams of silicon in our bodies in the form of (inaudible) acid.

The material has been used by ourselves in a oncology program but it was injected directly into patients with either liver cancer or pancreatic cancer and we saw no clinical evidence of any toxicity.

And it’s also been reported to have been injected I think different forms of material have been injected into many different preclinical models (inaudible) research of porous silicon injected into animal models and maybe the few people we see in today’s applications. So there is a lot body of literature indicating that it should be safe..

Okay. Thank you, Paul..

(Operator Instructions). I’m not showing any further questions at this time. I’d now like to turn the call back over to Dr. Ashton for any additional remarks..

Great. Then I would like to thank you all for joining us today. And I look forward to speaking with you again next quarter. In the mean time if you have any additional questions, please feel free to contact us. Thank you..

Ladies and gentlemen, this does conclude the program. Thank you for attending and you may all disconnect. Have a great day, everyone..