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Circassia gets a double shot in the arm from US regulators

Two of its COPD drugs, Tudorza and Duaklir, have been given the thumbs-up from US regulators

Tudorza inhaler
The US is arguably the most important drugs market in the world

Circassia Pharmaceuticals PLC (LON:CIR) was given a double shot in the arm late on Friday after US regulators gave the green light for not one, but two of its chronic obstructive pulmonary disease (COPD) treatments.

The Food and Drug Administration approved Circassia’s Duaklir drug for use in the US, as well as giving the thumbs-up to a label extension for its Tudorza inhaler.

READ: Circassia set for pivotal week

By using data from a recent Phase IV study, Circassia was able to show the FDA that its Tudorza drug can reduce COPD exacerbations without increasing the likelihood of major cardiovascular events.

Cardiovascular disease is the most common and significant co-morbidity of COPD, with approximately 30% of COPD patients dying from cardiovascular conditions.

Tudorza is the only LAMA inhaler in the US with this cardiovascular safety data in its label.

In theory, that means doctors might be more likely to prescribe it to patients with both COPD and a heart condition as no other treatment boasts of this kind of safety data.

Tudorza only COPD drug with this safety data

“This approval adds unique new clinical data to Tudorza's label, which further differentiates this important COPD treatment option within the US$2bn US LAMA market,” said chief executive Steve Harris.

“Cardiovascular disease is a major co-morbidity of COPD, and the inclusion of comprehensive data demonstrating COPD exacerbation reductions and cardiovascular safety provides physicians with important new information, helping to further serve this significant patient group.”

He added: “Following our recent option exercise acquiring the full US commercial rights to Tudorza, and this subsequent label expansion, we look forward to implementing our strategy targeting product growth in this major market.”

Duaklir approved too

As for Duaklir, another COPD drug that Circassia acquired from AstraZeneca a couple of years ago, the FDA has approved that for use in the US.

Duaklir is a combination of the long-acting muscarinic antagonist (LAMA) aclidinium bromide and long-acting beta-agonist (LABA) formoterol fumarate.

It is the only twice-daily LAMA/LABA treatment in the US with COPD exacerbation data included in its label.

“With guidelines recommending combined LAMA and LABA therapy for a number of COPD patient groups, we believe Duaklir will make an important contribution to the treatment of this debilitating disease,” said Michael Asmus, Circassia’s vice president of US medical affairs.

CEO Harris added: “We are delighted with the FDA approval of Duaklir, which we believe will provide a valuable treatment option for the significant number of patients with COPD in the United States.”

Financing discussions underway

Under the terms of the deal, Circassia is to pay US$20mln to Astra within 30 days, with a final US$100mln consideration due by the end of June.

The company has confirmed it is in discussions with third-party lenders to fund all or part of the payments, although there is also the option for Astra to provide a vendor loan.

"As AZN is a major shareholder (c20%) in Circassia, we think there is therefore strong alignment of interests around the provision of the vendor loan," noted analysts at 'house'  broker Peel Hunt.

They added: “The details of the approval and funding of the associated milestones is fully consistent with Circassia’s previous guidance, and supports the top-line forecasts in our model that should see Circassia achieve EBITDA positivity in 2020.

“The stock trades at less than a third of our conservative estimate of fair value, an irrationally big discount in view of this significant de-risking event."

Peel Hunt reiterated a ‘buy’ rating and 90p price target on Circassia shares, which in afternoon trading on Monday were 17.9% higher at 33p.

US is a key market

The US is arguably the world’s most important and lucrative pharma industry, so the FDA's decisions are undoubtedly important.

There is plenty of competition in the US COPD market, but if Duaklir can secure even a slither of it, it would likely add tens of millions every year to Circassia’s top-line.

The inhaler already generates almost US$100mln a year for AstraZeneca PLC (LON:AZN), and that is obviously without any sales in the US, where COPD is the third biggest killer that affects more than 10mln people.

 -- Updates share price --

Quick facts: Circassia Group PLC

Price: 24.31 GBX

Market: LSE
Market Cap: £91.63 m

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