FDA rejects Alimera eye drug again, seeks more trials

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(Global Markets) - U.S. health regulators declined to approve Alimera Sciences Inc's (ALIM.O) experimental drug to treat retinal swelling for the second time citing safety issues, and asked the biopharmaceutical company to conduct two more trials.

The regulatory decision signaled a setback for the cash-strapped company and wiped out about three-fourths of the company's market value.

"We view this as the worst-case scenario for Alimera, since this news translates into a multi-year delay, and a very significant investment of capital that the company does not currently have at hand," Cowen & Co analyst Simos Simeonidis said.

Alimera, which focuses on diseases affecting the back of the eye, or retina, had about $38.6 million in cash as of September 30.

The company was relying on the drug Iluvien to start bringing in revenue from early 2012.

Alimera, which is pursuing approval for the drug in Europe, said it had necessary funds.

In a complete response letter to the company, the U.S. Food and Drug Administration said Iluvien's benefits did not offset the risks of adverse reactions.

Iluvien, which Alimera is co-developing with pSivida Corp (PSDV.O), is an intravitreal insert designed to provide a therapeutic effect of up to 36 months by delivering sustained release of a drug.

Shares of pSivida lost over half of their value, and fell as much as 65 percent to $1.40 -- their lowest in more than two years.

In the event of Iluvien's commercialization, pSivida gets 20 percent of net profits from the product's sales.

Alimera said it would request a meeting with the FDA to clarify the next steps.

The drug aims to treat diabetic macular edema -- the most prevalent cause of moderate vision loss in patients with diabetes.

In December, the health regulator had rejected Iluvien, citing deficiencies in current good manufacturing practices (cGMP) during facility inspections of two of Alimera's third-party manufacturers.

Shares of the Alpharetta, Georgia-based company were down 73 percent at $1.99 in afternoon trading. They touched a lifetime low of $1.71 earlier in the session.

(Reporting by Esha Dey and Shailesh Kuber in Bangalore; Editing by Maju Samuel and Sriraj Kalluvila)