Open Briefing Interview with Managing Director, Dr Paul Ashton - pSivida reincorporation in the US
Title: Open Briefing®. pSivida. Reincorporation of pSivida to US
Record of interview:
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pSivida Ltd. (NASDAQ:PSDVV, ASX:PVA, FSE:PSI) has implemented the
Scheme of Arrangement for pSivida’s reincorporation in the US, which was
approved by shareholders on June 6, 2008 and the Australian Federal Court on
June 12, 2008. Can you explain the strategic rationale behind the reincorporation?
MD Paul Ashton
The reincorporation is designed to make the company a more attractive investment
for shareholders by increasing the potential scope and depth of the company
shareholder base and liquidity while maintaining strong ties with the Australian
investor base. A significant percentage of our shareholders are resident in the US,
and prior to the reincorporation, have experienced significant transactional costs in
depositary fees to trade American Depository Shares (ADSs) on NASDAQ. With
this move to a NASDAQ listing of our common stock, these additional costs have
been eliminated, which we hope will expand interest in owning our company's
stock. Furthermore, this move to the US is the next key step in our long-standing
strategy of building a global drug delivery company, by focusing growth and
development in the US. The US is where the company has achieved its recent
significant business successes, and the US reincorporation will reduce ongoing
compliance costs and enable us to continue the engagement of Deloitte Touche
Tohmatsu, the company's independent auditor.
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What does this move mean for your Australian shareholders? Is this a sign to
shareholders that you intend to move away from the Australian capital market?
MD Paul Ashton
We continue to believe that the Australian capital market is very important to the
success of the company. As a result, we structured the reincorporation to continue
strong connections with the Australian investor community and minimize the
reincorporation’s impact on those investors. We listed the new Delaware company
on the ASX, and trading of our CHESS depositary interests (CDIs) commenced on
the ASX on June 12, 2008. Shares that formerly traded under the share code PSD
(ASX) were exchanged for CDIs, which are now trading under the symbol PVA.
ADSs that were traded under the symbol PSDV (NASDAQ) were exchanged for
shares of our common stock that now temporarily trades under the symbol PSDVV
and will then trade under the symbol PSDV. Holders of ordinary shares and ADSs
maintained the same proportionate interest in our company following the
reincorporation.
While the major focus for the company has shifted to the US consistent with our strategy of concentrating its presence in the US to better access business opportunities in the world’s largest healthcare market, the Australian capital market is extremely important to us, as a large proportion of our shareholder base will remain in Australia. The US is the largest investment market, particularly for biotech companies, and we hope to attract increased shareholder interest through this reincorporation.
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Following the reincorporation in the US, you have received one CHESS
Depository Interests (CDIs) in the new US corporation for each 40 ordinary shares
of the predecessor Australian corporation you held, and one share of common
stock in the new US company for each four American Depository Shares (ADSs)
you held. This equates to a 1-to-40 share exchange ratio of the approximately 730
million shares on issue previously. Can you explain the basis of this ratio?
MD Paul Ashton
When establishing pSivida Corp as a US based company, we needed to determine
how many shares the new company would have. We were advised about the level
of outstanding common stock that would be appropriate for a company at our stage
of development and set our exchange ratio to meet that level. Our Board also had
in mind the minimum price requirements of NASDAQ and ASX and maintaining
the important listings on those exchanges.
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Will this move lead to a negative impact on the liquidity of your shares?
MD Paul Ashton
Clearly, there are now fewer shares on issue, but our outstanding capitalization is
very typical for well-traded companies. In recent days, the securities of pSivida
Corp. (‘PVA’ on the ASX and ‘PSDVV’ on NASDAQ) have traded on a deferred
settlement basis. Going forward, ordinary trading will commence following the
Implementation Date on June 19.
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Will the change to ASX listed CDIs from the ASX-listed shares mean any change
in your continuous disclosure obligations? How will you seek to provide timely
disclosure of information to Australian investors?
MD Paul Ashton
As an ASX listed company, we will continue to comply with the continuous
disclosure requirements of ASX. As a US company, we will also have to comply
with the US disclosure requirements.
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Net cash provided by operating activities was US$8.5 million for the quarter ended
March 31, 2008. During that quarter gross cash outflows from operations were
US$4.6 million compared with US$6.4 million the previous quarter. How do you
see your cash burn for the remainder of the year following reincorporation?
MD Paul Ashton
The primary influence to our ongoing gross cash outflows is the recent amendment
to our licensing agreement with Alimera Sciences valued at US$78 million,
whereby Alimera is now funding the full cost of our Phase III Medidur trial for the
treatment of diabetic macular edema (DME) through to expected FDA approval.
Payments of Medidur development costs decreased approximately US$1.8 million
from the prior quarter, representing the savings in cash outflows from operations.
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Previously you indicated that you will be commencing Phase IIb trials of
BrachySil for pancreatic cancer. Is it your intention to conduct the trials
independently?
MD Paul Ashton
We plan to fund the upcoming Phase IIb trials for BrachySil. However, we’re also
seeking licensing opportunities for our technologies at the appropriate time,
including BrachySil. We will continue to fund BrachySil up until the time that we
feel there is an attractive licensing deal for this technology.
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What are your operational priorities for the rest of the year?
MD Paul Ashton
We’ll continue to work on development of our BrachySil product candidate for
pancreatic cancer and continue R&D work with respect to new product
development in ophthalmology in collaboration with our licensing partners, Pfizer
and Alimera Sciences. We have a fully funded and fully recruited Phase III clinical
trial in Medidur for the treatment of DME with the results of the trial expected in
September 2009 and a New Drug Application (NDA) submission to the FDA
aimed in the first quarter of 2010. There are currently no FDA approved treatments
for DME in a market that has been estimated to be $1.5 to $3 billion in the US
alone. Given the size of this market, this is our single biggest and most tangible
opportunity as our agreement provides for us to receive 20 percent of net profits
plus a substantial milestone payment.
Other goals for the year are new technology evaluation agreements, and possible new licensing agreements.
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Thank you Paul.
For more information about pSivida, visit www.psivida.com.au or email Brian
Leedman, Vice President, Investor Relations on brianl@psivida.com
For previous Open Briefings by pSivida, or to receive future Open Briefings by
email, visit www.corporatefile.com.au.
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PSIVIDA LIMITED DISCLAIMER: SAFE HARBOR STATEMENTS UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: Various statements made in this release are forwardlooking and involve a number of risks and uncertainties. All statements that address activities, events or developments that we intend, expect or believe may occur in the future are forward-looking statements. The following are some of the factors that could cause actual results to differ materially from the forward-looking statements: achievement of milestones and other contingent contractual payment events; failure to prove efficacy for BrachySil; inability to raise capital; continued losses and lack of profitability; inability to develop or obtain regulatory approval for new products; inability to protect intellectual property or infringement of others’ intellectual property; inability to obtain partners to develop and market products; termination of license agreements; competition; inability to pay any registration penalties; costs of international business operations; manufacturing problems; insufficient third-party reimbursement for products; failure to retain key personnel; product liability; inability to manage change; failure to comply with laws; failure to achieve and maintain effective internal control over financial reporting; amortization or impairment of intangibles; issues relating to Australian incorporation; potential delisting from ASX or NASDAQ; possible dilution through exercise of outstanding warrants and stock options or future stock issuances; potential restrictions from capital raises; possible influence by Pfizer; and other factors that may be described in our filings with the Securities and Exchange Commission. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. We do not undertake to publicly update or revise our forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied in such statements will not be realized.
