pSivida to raise $29m to fund clinical trials

Perth headquartered bio-nanotech company pSivida Ltd is looking to raise $29 million through a non-renounceable rights issue to fund clinical trials for two of its treatments.

The capital raised will primarily be used to fund the phase III clinical trials of Medidur for the treatment of Diabetic Macular Edema (DME), and phase IIa clinical trials of its lead BioSilicon product, BrachySil which is being developed for the treatment of inoperable pancreatic cancer.

The issue offers one new ordinary share for every eight shares held at 22nd May at an issue price of 60 cents per share.

The issue price represents an approximately 18 per cent discount to the 30 days volume weighted average closing price on the ASX up to 1st May being the last trading day and a 7 per cent discount to the 5 day VWAP.

At market close, shares in pSivida were up 2 cents to 59 cents.

Below is the announcement:

Global bio-nanotech company pSivida Limited has announced details of a Non-Renounceable Rights Issue offering one new ordinary share for every eight shares held at 22nd May ("the Record Date") at an issue price of AU$0.60 per share.

The issue price represents an approximately 18% discount to the 30 days volume weighted average closing price (VWAP) on the ASX up to 1st May being the last trading day and a 7% discount to the 5 day VWAP. If fully subscribed, and excluding the effect of vested options which may be exercised prior to the Record Date, it will result in the issue of up to approximately 48.25 million new ordinary shares, raising net proceeds of approximately AU$29 million (US$22m).

The Rights Issue has an incorporated top-up facility whereby eligible shareholders may apply for additional new ordinary shares in excess of their entitlement at the same price. The Rights Issue is not being registered in the U.S. under the U.S. Securities Act of 1933, as amended (the "Act"), or any U.S. state securities laws, and rights and shares will not and may not be issued, offered, sold or transferred in the U.S. or to any U.S. persons unless (i) they are registered under the Act or an exemption from the registration requirements of the Act is available, or (ii) the offer, sale or transfer is performed in accordance with regulations under the Act.

The Rights Issue is not underwritten but pSivida will seek to place any shortfall with institutional and sophisticated investor clients of Janney Montgomery Scott LLC, our U.S. based Lead Manager appointed for this issue. Any ordinary shares issued in the U.S. in connection with the Rights Issue as a result of any shortfall will be issued in an unregistered action. These shares will not be registered under the Act and may not be offered or sold in the U.S. absent registration or an applicable exemption from registration requirements.

Capital raised from this Rights Issue will primarily fund the phase III clinical trials of MedidurTM for the treatment of Diabetic Macular Edema (DME), and phase IIa clinical trials of our lead BioSiliconTM product, BrachySilTM which is being developed for the treatment of inoperable pancreatic cancer. pSivida expects to receive a significantly greater return by funding the MedidurTM trials under the Co-Development Agreement to receive a profit share with Alimera Sciences rather than a straight royalty which would be payable if we did not co-fund the trials.

"The Directors wish to ensure that existing shareholders have the opportunity to maintain
their level of ownership in the lead-up to the potential approval and registration of these late stage products," said Gavin Rezos, CEO of pSivida Limited.

pSivida has developed and receives royalties from the sale of the only two FDA approved sustained release back of the eye treatments for chronic eye disease - RetisertTM and Vitrasert®. Both products are manufactured and sold by global ophthalmology company, Bausch & Lomb Incorporated. RetisertTM is approved for the treatment of Uveitis, a sight threatening disease that affects approximately 175,000 patients in the U.S. RetisertTM releases the drug fluocinolone acetonide (FA) with a duration of up to 30 months. Priced at US$18,250, RetisertTM is covered by U.S. Medicare and co-promoted in the U.S. by Bausch & Lomb and Novartis Ophthalmic, a business unit of Novartis Pharmaceuticals.

MedidurTM is the next generation product to RetisertTM, and is licensed to Alimera Sciences under a co-development agreement for the treatment of Diabetic Macular Edema (DME), a leading cause of vision loss in the U.S. for people under the age of 65 for which there are no approved drug treatments. MedidurTM differs from RetisertTM in that it is injected into the eye in an office procedure, compared to the surgical insertion of RetisertTM.

Clinical trials on RetisertTM for the treatment of DME demonstrated that, compared to those receiving standard of care, more patients experienced a significant improvement in their visual acuity (of three lines on an eye chart) after three years. This level of improvement is considered by the FDA as necessary for regulatory approval. As RetisertTM and MedidurTM can deliver the same drug (FA) at a similar rate, to the back of the eye, we believe the Medidur™ trials in DME will show a very similar improvement in visual acuity to that shown in the Retisert™ DME trial. In our view, the data therefore reduces the approval risk of the Medidur™ product.

pSivida also owns the rights to develop and commercialize a modified form (porosified or nano-structured) of silicon known as BioSilicon™. Our lead BioSilicon™ product in pivotal phase IIb clinical trials is BrachySilTM, which is being developed for the treatment of inoperable primary liver cancer. Phase IIa clinical trials of BrachySil™ for patients with advanced, inoperable primary liver cancer were concluded in early 2005. BrachySil™ was found to be both safe and tolerable and all patients had significant reductions in the size of their tumours.

Phase IIa BrachySilTM trials for the treatment of pancreatic cancer are due to commence this quarter at hospitals in London and Singapore. Pancreatic cancer represents a further important clinical indication for BrachySilTM with a high unmet need. Pancreatic cancer has one of the lowest cancer survival rates and there is no approved treatment.
pSivida has a licensing agreement with Beijing Med-Pharm Corporation for the clinical development, marketing and distribution of BrachySil™ in China, and evaluation agreements for the Company's drug delivery technologies with multiple global Pharmaceutical and Medical Device companies.

The Record Date for the Rights Issue is 22nd of May. It is expected that New Shares issued under the Entitlement Offer to eligible shareholders will be quoted on a deferred settlement basis on 8th June with normal trading for all New Shares issued under the Offer expected to commence as soon as practicable after that date. Further details on the proposed timetable for the Rights Issue will be set out in the prospectus. Any ordinary shares issued in the U.S.in connection with the Rights Issue will be issued in an unregistered transaction. Applications are expected to close on the 7th June. A prospectus for the Rights Issue will be made available when the New Shares are offered and applicants under the Rights Issue wishing to apply for New Shares will need to complete the application form that will be in or will accompany the prospectus.