9th Apr 2020 10:52
(Alliance News) - Circassia Pharma PLC on Thursday said it will terminate its development and commercialisation agreement with AstraZeneca PLC and instead transfer Tudorza and Duaklir US commercial rights to Astra in exchange for the settlement of debt.
Shares in Circassia were up 29% at 22.50 pence in London on Thursday. Astra's shares were down 0.6% at 6,932.00p.
At present, Circassia has two businesses: one is an asthma diagnostics and management business selling its NIOX platform, and the other is a COPD business. The latter was formed through its collaboration with Astra, under which Circassia promotes Tudorza and Duaklir - "two inhaled chronic obstructive pulmonary disease treatments" - in the US.
However, Circassia is now seeking to end this agreement with Astra and instead sell the US commercial rights to the two COPD drugs, as well as "certain ancillary rights and assets".
Circassia explained that the consideration for the two drugs "shall be equal to, and shall be satisfied by way of set-off against, the entirety of the loan amount outstanding from the company to AstraZeneca, together with accrued interest owed by the company to AstraZeneca, as at the date of completion of the transaction." At present, this amount totals approximately USD149.9 million.
Astra is to keep its 18.9% sake in Ciricassia, with the deal expected to complete within three months.
The proposed sale of Tudorza and Duaklir to Astra is fundamental change of businesses under AIM rule 15, meaning it requires shareholder approval.
Circassia urged shareholders to give their approval for the deal since it would otherwise have to consider other options for selling the COPD business and would probably need to raise further funds to do so with "no certainty as to the terms on which any such funding could be available, if at all".
"The board has assessed other options for the COPD business including significantly reducing the size and scale of it, which could potentially defer the need to raise additional capital for a period of time, but under any reasonable scenario that the board has assessed it has determined it is highly unlikely that the company would be able to refinance the loan, together with accrued interest thereon, owed to AstraZeneca," Circassia explained.
In 2019, the COPD business represented GP27.8 million of Circassia's total GBP62.4 million revenue.
Circassia Executive Chair Ian Johnson said: "As a board and management team, we conducted a strategic review of our business and its prospects, concluding that it would be in the best interests of both patients and our shareholders for us to terminate the development and commercialisation agreement between the company and AstraZeneca UK Ltd for the US commercial rights to Tudorza and Duaklir.
"As we look to move forwards with a primary focus on our Niox respiratory diagnostic platform, we are confident in our ability to drive long-term growth. Upon completion, this transaction will transform Circassia into a debt-free business with a strong revenue-generating business, with which we have the potential to expand into new territories and a commercial infrastructure that can in the medium term be further leveraged through broadening its range of products. This fundamental change in the business will place us in a strong position to deliver improved shareholder value."
In terms of outlook, Circassia said it cannot issue guidance for 2020 or 2021 during the Covid-19 pandemic, although this will be revisited later. Its cash on March 31 was GBP17.8 million and underlying cash was around GBP14 million.
By Anna Farley; [email protected]
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