In February, pSivida (NASDAQ:PSDV), an Australian-based company specializing in biomedical applications of nanotechnology, began trading on the Nasdaq as an American Depositary Receipt (ADR). In its first three months on Wall Street, it promptly fell from a high of $10 a share to just over $4.

Since that time, however, pSivida's stock has risen by more than 65%. It currently trades at around $7.

Will it continue to rise? I believe so, and I base that answer on three recent developments. The first occurred in late April, when the company announced that its BrachySil technology had been granted its first patent in China. BrachySil is an experimental treatment for liver cancer that uses a biochip to release predetermined doses of radioactive molecules to kill cancer cells. Because China has the highest incidence of liver cancer in the world, the patent could yield significant dividends -- provided the technology proves effective.

In the United States, the company is currently awaiting approval on BrachySil from the Food and Drug Administration, but the preliminary results been very promising.

The second positive development occurred last week, when pSivida reported that Jorg Schreiber, a former executive for Roche Diagnostics, has joined the board of directors at AION Diagnostics, one of pSivida's subsidiaries. Schreiber, a former vice president of R&D with Roche, has a great deal of experience in diagnostic-product development -- experience that could prove helpful in commercializing pSivida's BioSilicon technology.

BioSilicon is silicon manufactured with "nanopores" that can be loaded with drugs, genes, proteins, and other therapeutics or vaccines. It could prove useful in everything from drug delivery and brachytherapy to tissue engineering.

The third and most recent development -- as well as the most significant one -- happened on May 18, when pSivida announced that BioSilicon had delivered excellent results in releasing Melontan, a drug that stimulates the production of melanin and causes skin to tan without being exposed to any harmful UV rays. That news offered tangible proof that BioSilicon is capable of releasing a drug over a sustained period of time, and it bolsters the company's claim that BioSilicon could become a preferred delivery platform for a number of drugs.

So do these separate announcements suggest that pSivida has turned the corner? No, but the company is clearly moving in the right direction. It was an attractive stock at $10 a share, and I think it is even more attractive at $7.

A near-term upside could come if the still-secret Big Pharma company currently testing the BioSilicon technology announces positive results.

However, pSivida is the sort of stock that makes many an investor shiver. The company is not expecting profitability until 2008. It's a very risky investment for that reason, as well as for many others, including currency fluctuations, the firm's thinly traded nature, and the inherent uncertainty over FDA approval of BioSilicon.

This is also a very small company -- pSivida's market cap is $120 million. Tiny stocks carry big risks, including a predisposition to volatility. If you want to invest, tread carefully; limit orders are always a good idea in micro-cap land.

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Jack Uldrich has been thinking small since grade school. He is the president of the NanoVeritas Group and author of The Next Big Thing Is Really Small: How Nanotechnology Will Change the Future of Your Business and can be reached at jack@nanoveritas.com. He owns shares of pSivida. The Fool has a disclosure policy.