Initiation of Phase II Clinical Study of Novel Ophthalmic Product

The investigator-sponsored trial will involve up to 45 patients inthe United States. pSivida will be supplying clinical trial materialfor this study and has filed a patent application on this productclass.

Elevated IOP may occur in patients receiving steroidal treatmentfor chronic eye diseases. The trial will investigate the use ofMifepristone as a means to prevent elevation of IOP from intraocularsteroid exposure. Mifepristone is a steroid receptor antagonist("steroid blocker") already approved by the FDA. This study representsa potential new use of an existing drug, made possible by a newdelivery system.

"We believe the trial of Mifepristone as a treatment for elevatedIOP is an important study for the steroidal treatment of chronic eyedisease," said Dr Roger Brimblecombe, Executive Chairman and CEO ofpSivida Limited. "This program highlights pSivida's focus on drugdelivery strategies to generate clinically significant advances andmove products rapidly through the regulatory pipeline. There are nowtwo FDA approved products, one in Phase III clinical trials and twomore in Phase II clinical trials all using our delivery technologies."

Retisert(TM) is the only FDA-approved sustained release back ofthe eye treatment for uveitis, a leading cause of blindness in theUnited States. Licensed to Bausch & Lomb, Retisert(TM) is marketed inthe United States and covered by Medicare and Medicaid.

A next generation product, Medidur(TM) is in Phase III clinicaltrials and is licensed to Alimera Sciences for the treatment ofdiabetic macular edema, the leading cause of blindness for peopleunder the age of 65 in the United States. Medidur(TM) differs fromRetisert(TM) in that it is 'injected' into the eye through a standardgauge needle in an office procedure rather than a surgical procedure.

NOTES TO EDITORS:

pSivida is a global bio-nanotech company committed to thebiomedical sector and the development of drug delivery products.Retisert(TM) is FDA approved for the treatment of uveitis.Vitrasert(R) is FDA approved for the treatment of AIDS-related CMVRetinitis. Bausch & Lomb own the trademarks Vitrasert(R) andRetisert(TM). pSivida has licensed the technologies underlying both ofthese products to Bausch & Lomb. The technology underlyingMedidur(TM), a treatment for diabetic macular edema, is licensed toAlimera Sciences and is in Phase III clinical trials.

pSivida owns the rights to develop and commercialize a modifiedform of silicon (porosified or nano-structured silicon) known asBioSilicon(TM), which has applications in drug delivery, woundhealing, orthopedics, and tissue engineering. pSivida's subsidiary,AION Diagnostics Limited is developing diagnostic products and thesubsidiary pSiNutria is developing food technology products both usingBioSilicon(TM).

pSivida's intellectual property portfolio consists of 70 patentfamilies, 74 granted patents and over 290 patent applications. pSividaconducts its operations from offices and facilities near Boston in theUnited States, Malvern in the United Kingdom, Perth in Australia andSingapore.

pSivida is listed on Nasdaq (PSDV), the Australian Stock Exchange(PSD) and on the Frankfurt Stock Exchange on the XETRA system (GermanSymbol: PSI. Securities Code (WKN) 358705). pSivida is a foundingmember of the NASDAQ Health Care Index and the Merrill LynchNanotechnology Index.

The Company's largest shareholder and a strategic partner isQinetiQ, a leading international defense, security and TechnologyCompany, formed in 2001 from the UK Government's Defence Evaluation &Research Agency (DERA). QinetiQ (QQ.) was instrumental in discoveringBioSilicon(TM) and pSivida's strong relationship with QinetiQ includesaccess to its cutting edge research and development facilities.

This document contains forward-looking statements that involverisks and uncertainties. The statements reference potential products,applications and regulatory approvals. Although we believe that theexpectations reflected in such forward-looking statements arereasonable at this time, we can give no assurance that suchexpectations will prove to be correct. Given these uncertainties,readers are cautioned not to place undue reliance on suchforward-looking statements. Actual results could differ materiallyfrom those anticipated in these forward-looking statements due to manyimportant factors including: our inability to raise additional fundsat favourable terms or any terms; our inability to repay the amendednotes; issues relating to share registration in the U.S. that maydelay our registration; our inability to develop proposed products,including without limitation, in the drug delivery, wound healing,orthopedics, and tissue engineering, diagnostics and food technologyfields; failure of our evaluation agreements to result in licenseagreements; failure to develop applications for BioSilicon(TM) due toregulatory, scientific or other issues; failure to completenegotiations for new centers for the BrachySil(TM) phase IIb clinicaltrial for inoperable primary liver cancer; failure of our discussionswith the FDA for BrachySil(TM) to continue or to lead to FDA approval;failure of the BrachySil(TM) phase IIb clinical trial for inoperableprimary liver cancer to determine the optimal dose, provide key safetydata or support future pivotal efficacy trials or product registrationor approval; failure of the BrachySil(TM) primary liver program thatis in phase IIb clinical trials to provide a valuable platform for thedevelopment and commercialization of BrachySil(TM) for pancreaticcancer and other indications; failure to commence phase IIaBrachySil(TM) trials for the treatment of pancreatic cancer; failureof the findings of the pancreatic cancer phase IIa trial to provide aplatform for further multicenter efficacy and safety trials; failureof there to be optimization and standardization between our twopancreatic cancer study centers; failure of the results of theRetisert(TM) for DME trial to be a good indicator of the results ofpSivida's ongoing phase III Medidur(TM) for DME trial; failure of theMedidur(TM) trials in DME to show a very similar improvement in visualacuity and diabetic retinopathy severity score as Retisert(TM) forDME; failure of Medidur(TM) to release fluocinolone acetonide at thesame rate as Retisert(TM); our inability to recruit patients for thephase III Medidur(TM) for DME trial. Other reasons are contained incautionary statements in the Annual Report on Form 20-F filed with theU.S. Securities and Exchange Commission, including, withoutlimitation, under Item 3.D, "Risk Factors" therein. We do notundertake to update any oral or written forward-looking statementsthat may be made by or on behalf of pSivida.