Alimera, pSivida plummet after FDA rejects eye drug yet again

The FDA has once more rejected Alimera Sciences ($ALIM) and pSivida's ($PSDV) drug-device combo for diabetic vision loss, roughly halving the companies' stock value and casting further doubt on a treatment plagued by years of failure.

The agency wants a new clinical trial for Iluvien, a back-of-the-eye implant that administers fluocinolone to treat sight problems tied to diabetic macular edema, saying the combo treatment's risk-benefit profile made it unapprovable in its current form. The FDA is recommending Alimera consult with the Dermatologic and Ophthalmic Drugs Advisory Committee to address Iluvien's deficiencies and shape its next study. The panel's next meeting is in January.

This is the third FDA rejection for Iluvien, following the agency's 2011 request for two more studies to demonstrate the drug's benefits. Since then, Alimera and pSivida have secured approvals across Europe, and, without giving up on the FDA, the two are focused on expanding their market share overseas, Alimera CEO Dan Myers said.

"The FDA's decision not to approve Iluvien at this time is disappointing not only to us, but also to retinal specialists and DME patients in the U.S., but we will continue to work with the FDA, through the advisory committee, to determine whether there is a path forward in the U.S. for Iluvien," Myers said in a statement. "We remain excited about Europe, however, where we have aligned our energy and resources to support the expansion of our business there."

But it'll take more than intercontinental excitement to undo the rejection's damage. The pre-market announcement sent Alimera's shares down 42% to $1.55 early Friday, and pSivida tanked 55% to $1.71.

- read Alimera's statement