Circassia Pharma PLC (LON:CIR) has said it is to hand the US rights to two respiratory drugs back to AstraZeneca PLC (LON:AZN) and focus on diagnostics.
Astra will waive loans and interest of US$149.mln when it takes back the two drugs - Tudorza and Duaklir - though it will retain the 18.9% stake in AIM-listed Circassia that was part of the original deal.
In a statement, Circassia said it had carried out a strategic review of the business and the options for the two drugs and concluded it was ‘highly unlikely’ it would be able to refinance the loan from Astra.
Ian Johnson, Circassia's executive chairman said the primary focus going forward will be on the group's Niox respiratory diagnostic platform.
"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," he added.
In recognition of the change in direction, Circassia is dropping the Pharma part of its name.
NiOX is a tool that measures if a person suffers from asthma and, if they do, the severity of the condition.
By analysing the fractional exhaled nitric oxide (FeNo) present when people breathe out, it can give a readout in less a minute.
According to figures published in the release today, the NIOX segment, excluding the COPD activities delivered an operating loss of £0.5mln in 2019.
Circassia noted that the NIOX revenue growth during the period 2016-19 was 14% compound each year.
NIOX revenue in 2019 was £34.6mln and the company is targeting total cost savings of £6.7mln during 2020 of £6.7mln.
The market responded positively, with Circassia shares jumping 30% higher to 22.75p in early trading on Thursday.
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