Shares in Circassia Pharmaceuticals PLC (LON:CIR) shot up as it announced a collaboration with drugs giant AstraZeneca PLC (LON:AZN).
The little and large combo will work together to secure certain US commercial rights to two of Astra's treatments of chronic obstructive pulmonary disease (COPD): Tudorza and Dualkir.
Tudorza is approved in the United States and around 60 other countries. AstraZeneca's revenues related to worldwide sales of the product were US$170 million in 2016, of which US$80 million was in the United States.
Duaklir is in phase III development in the United States for the treatment of COPD; it was initially approved in the European Union in 2014 and is approved in some 50 countries.
Circassia will pay Astra an initial consideration of US$50mln, to be satisfied in Circassia shares, with another US$100mln to follow on approval of Duaklir by the US Food and Drug Administration (FDA), or by 30 June 2019 – whichever is earlier.
Circassia will also have the option to pay up to US$80mln to pay for further commercial rights and economic benefits of Tudorza in the USA.
Circassia will initially enter into a commercial collaboration and profit share arrangement with AstraZeneca for Tudorza in the United States.
It will pay royalties to AstraZeneca on sales of Duaklir in the United States, following potential approval and make research & development (R&D) contributions to Astra of up to US$62.5mln.
Broker Cantor Fitzgerald called it a “bold strategic move” by Circassia.
The shares, which more than halved last June after its cat allergy treatment bombed out in phase III studies, surged more than 20% to 106.22p.
“Having suffered a significant setback with its lead immunotherapy programme last year we see this as a positive step for Circassia as it seeks to exploit the commercial infrastructure it has in place in the US respiratory market,” Cantor said.
Steve Harris, chief executive of Circassia, said: "This proposed transaction is an ideal fit with Circassia's strategy and respiratory focus. It represents a transformational opportunity for the company, doubling the number of marketed products in our portfolio, with the potential to triple the current number within two years.
“Through an initial commercial collaboration with AstraZeneca, we plan to double our US sales force to promote Tudorza as our priority, as well as our existing NIOX products, transforming Circassia into a world-class respiratory business positioned for future in-licensing and M&A,” Harris said.
“In addition, the transaction structure is highly attractive, allowing us to fund the consideration without further investment anticipated from shareholders, while at the same time welcoming AstraZeneca to our share register," Harris concluded.
Mark Mallon, executive vice product of global product & portfolio strategy at Astra said the collaboration would support the commercialisation of Tudorza and Dualkir in the USA.
“Circassia will be an important strategic partner for AstraZeneca in the US and we look forward to working closely together,” Mallon said.