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pSivida Corp. (NASDAQ:PSDV) Is A Discount Entry Opportunity

pSivida Corp. (NASDAQ:PSDV) Is A Discount Entry Opportunity
Written by
Chris Sandburg
Published on
June 14, 2017
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Sometimes in the biotechnology space, misinterpretation can serve up quick turnaround opportunities to draw a profit. Here at Insider Financial, we like to keep an eye out for any such opportunities and – when we spot them – alert our readers as to the opportunity in hand.Here's one we've just spotted.The company is pSivida Corp. (NASDAQ:PSDV) and the opportunity is rooted in some just released data related to the company's lead development asset.For those new to pSivida, the company is a development stage biotechnology play with a current focus on developing treatments targeting ocular conditions – that is, diseases that affect the eyes. In this instance, the drug in question is called Durasert, and the company was investigating safety and efficacy as part of a phase 3 trial in a target indication of posterior segment uveitis.To understand how the drug works (and in turn, to understand why there’s opportunity to go against the grain on this trade) it’s first important to understand the condition. The uvea, or sometimes called the uveal tract, is the middle section of the eye. The 3 parts of the uvea — the iris, ciliary body, and choroid — each perform separate but important functions. The iris lets light in and out, the ciliary body nourishes the eye with aqueous humor and the choroid performs a similar function to the ciliary body (nourishment) but for the inner parts of the eye. Segment uveitis is the inflammation of the uvea, and in the instance of posterior segment uveitis, it’s inflammation towards the back part of the uvea (primarily the ciliary and the choroid).With this being an inflammatory condition, then, intraocular presssure can be a symptom. The importance of this will become clear shortly.Current standard of care treatment in this indication is a small molecule drug, but it is often a chronic condition, and patients need to repeatedly go back for treatment as and when it flares up. With Durasert, pSivida has essentially taken the standard of care and put it into a little implant that steadily releases active compound over a period of three years. This negates the necessity for repeated treatment and could be a real game changer in the space if it picks up approval.So, the latest phase 3 data pointed toward strong efficacy and a relatively clean safety profile. Patients in the active arm of the study experienced a recurrence of the condition at a rate of 21% versus 53% for patients in control, stat-sig to a p-value of <0.001.That’s a strong hit.Despite the hit, and subsequent to an initial run north, the company closed down for the session to the tune of 16% on its pre-release capitalization.So what went wrong?Well, the data also detailed the fact that intraocular pressure elevation was slightly higher in the active group than it was in the control group (2.4 and 1.3 mm Hg (mean) at six months vs baseline respectively).Additionally, 41.6% of active arm patients needed IOP-lowering therapy in the first six months compared to 34.6% in the control. This isn't unusual; as we mentioned above, IOP can result as a symptom of this condition, whatever the treatment, and the therapy is nothing more than eye drops.Translation: patients treated with the drug had a slightly elevated IOP some of these (a slightly higher than those in control) needed a separate treatment (some self-admin eye drops) to help lower IOP. It's not ideal, but it is far from prohibitive to a regulatory approval when this one goes in front of the agencies. Importantly, and it's tough to understate how important this is, none of the patients needed surgery to reduce IOP. If they had, and at a higher rate in active than control, this would be a different story. They didn't, however, and it's not.Bottom line here is that the drug works and does so without inducing any particularly severe side effects, and as a result, it is a shoo-in for approval. Markets are clinging onto the IOP news as indicative of a near-term failed registration application, but as we see it, failure isn't really a possibility here. An entry at current levels, therefore, is a 16% discounted exposure to a $65 million market cap company that's nearing regulatory approval in a population that’s expected to very quickly bring in peak sales of $112 million.We will be updating our subscribers as soon as we know more. For the latest updates on PSDV, sign up below!Disclosure: We have no position in PSDV and have not been compensated for this article.

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