Circassia is a specialty pharmaceutical company with a primary focus on respiratory diseases. We were originally introduced to the business by Imperial Innovations (now part of IP Group) – a company founded by ICL to help commercialise the intellectual property emanating from it and other leading UK universities. We first invested in the business in 2008, when the company was still private. In March 2014, Circassia successfully listed on the London Stock Exchange.

In June 2016, the company announced that a late-stage study of its cat allergy vaccine had failed, due to a placebo effect that had broadly the same impact on symptoms. Circassia’s current portfolio of assets includes on-market asthma management products as well as treatments that are being progressed through the pipeline.

Investment case summary

The failure of Circassia’s allergy platform was a disappointing outcome which led its share price to decline by approximately two-thirds. However, our response has been disciplined and rational – we have remained focused on its long-term fundamentals, acknowledging the disappointing failure of its allergy platform but recognising that there is more to the business.

For example, in 2015 Circassia made a strategic acquisition which created a more diversified business. Aerocrine brought an asthma diagnosis device, Niox, which represented Circassia’s first approved product in the respiratory sector. Niox is already on-market and provides commercial infrastructure in major markets for the entire company portfolio.

Additionally, in 2017 Circassia entered into a collaboration with AstraZeneca to acquire the rights to develop and commercialise two further respiratory assets (Tudorza and Duaklir) in the US. Tudorza is already approved in the US and benefits from a brand name which will enable Circassia to focus its product promotion strategy on key drug prescribers. Over time, this should result in more sales of Tudorza. Meanwhile, in March 2019, Duaklir received regulatory approval in the United States as a treatment for COPD.

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Fund exposure
Equity Income Fund 0.55%

As at 30 April 2019

Geography United Kingdom
Industry Health Care
Themes Healthcare innovation

Source: Woodford

Share Price

Market Quotes by TradingView


Regulatory approvals

Circassia has today received two very positive pieces of regulatory news. The US Food and Drug Administration (FDA) has confirmed that regulatory approval has been granted for Circassia’s Duaklir Pressair for use in Chronic Obstructive Pulmonary Disease (COPD). The FDA has also approved a supplemental new drug application (NDA) for Tudorza Pressair, showing evidence of COPD exacerbation reduction with no increase in major cardiovascular events.

Duaklir Pressair is a dry powder inhaler comprising two agents (LAMA & LABA*) that work by dilating airways in the lung. US commercial rights were obtained from AstraZeneca in early 2017, when the companies entered a strategic collaboration. Duaklir will be entering a competitive but fast-growing market, and this new therapy will benefit from a differentiated label, being the only twice-daily LAMA / LABA in the United States that is effective at reducing COPD exacerbations. Circassia is on track launch in the US later this year via its existing dedicated COPD sales force. That said, sales are unlikely to ramp much before 2020 because formulary coverage decisions take time. Nevertheless, this approval will allow the company to better leverage its commercial infrastructure with minimal additional spend.

Meanwhile, Tudorza Pressair is a monotherapy dry powder inhaler containing just the LAMA agent. The product is already approved, but the supplemental NDA allows for the inclusion of unique new clinical data in the product’s label. Tudorza is currently indicated for the maintenance treatment of COPD but the expanded label now includes data from the Phase IV Ascent study, which was conducted in patients with moderate-to-very-severe COPD and cardiovascular disease and / or significant cardiovascular risk factors. The study demonstrated that Tudorza is effective at reducing COPD exacerbations with no increase in major cardiovascular events, and at reducing hospitalisations due to COPD exacerbations, in this at-risk population. Tudorza is the only LAMA in the United States with these data in its label.

In combination, today’s regulatory news may well be the most positive and important development for Circassia since the business listed in 2014. In a recent meeting with Circassia, we asked what it would take to reach $1bn in terms of market capitalisation. It would not be unreasonable to value a business of this type on 15-20x earnings. Working backwards, this multiple would require $50-65m earnings and, for this business to deliver that level of earnings, it would probably need to generate c. $160m in revenues. Duaklir could deliver just that on its own. Bearing in mind that Circassia’s market cap at the time of writing is c. $150m, it should be no surprise that we have been keen to add to the position as its share price has declined.

*LAMA = long acting muscarinic antagonist, LABA = long acting beta agonist

Lucinda Crabtree
29 March 2019

Positive pipeline news

Today the US Food and Drug Administration (FDA) announced that it has accepted a New Drug Application (NDA) for Circassia’s Duaklir as a potential treatment for Chronic Obstructive Pulmonary Disease (COPD). This could be the third on-market product for Circassia, the other two being Niox and Tudorza. Duaklir is already approved outside the US and it is generating decent sales for AstraZeneca, which owns the ex-US rights for the commercialisation of the treatment.

A supplemental NDA was also accepted for Tudorza, which will include the latest clinical data on the drug’s performance, demonstrating its safety in treating COPD. We believe that the acceptance of the Duaklir and Tudorza filings is an important milestone for Circassia, and we look forward to the outcome of the FDA’s reviews in the coming months.

Saku Saha
13 August 2018

Woodford Investment Management Ltd is authorised and regulated by the Financial Conduct Authority (firm reference number 745433). Incorporated in England and Wales, company number 10118169. Registered address 9400 Garsington Road, Oxford OX4 2HN.

Woodford Patient Capital Trust plc is incorporated in England and Wales, company number 09405653. Registered as an investment company under section 833 of the Companies Act 2006. Registered address Beaufort House, 51 New North Road, Exeter, EX4 4EP.

© 2019 Woodford Investment Management Ltd.
All rights reserved.

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