Circassia Pharma’s four years on the main London Stock Exchange is coming to an end, after it has proved unable to meet the financial criteria to retain its listing.
The drug developer is planning to move to the AIM after failing to get its ‘free float’ – shares held by investors independent of the company – above the LSE’s required level of 25%. In simple terms, companies with a smaller free float are likely to see more share price volatility as it takes fewer trades to move the stock.
As of May, Circassia’s free float was around 11%, and after trying and failing to meet the threshold level it has now decided the best recourse is to ask investors to vote on a shift to the AIM where the requirements for listing are less stringent. If investors don’t back the move its shares will be de-listed.
Circassia’s £200m IPO on the LSE four years ago was taken as evidence that London could rival the Nasdaq in the US when it came to fund-raising for biotechs, so Circassia’s failure to stay on the main exchange undermines that view at a time when US biotech IPOs are running at their highest level for many years.
Since its IPO, Circassia has suffered a string of defeats in its attempt to bring immunotherapies for various types of allergy to market, officially calling time on that endeavour last year and switching its focus to respiratory medicines.
The UK biotech insists there are benefits to moving to the AIM, including “lower transactional costs and more rapid execution, enabling more efficient implementation of the company’s strategy,” although it also warns investors the greater volatility on the junior exchange means there could be more variability in its share price. It expects the switch to occur early February 2019.
While it may lead to some negative sentiment, the shift in stock exchange doesn’t really affect the operation of the biotech, and in a ‘business as usual’ move Circassia followed news of the switch with a licensing deal to add another product to its pipeline.
The Oxford-based company is buying US commercial rights to AstraZeneca’s chronic obstructive pulmonary disease (COPD) medicine Tudorza (aclidinium bromide), a drug that the two companies have partnered since 2017.
The deal – which involves a $5m payment to AZ – gives Circassia full ownership of the product, which is one of two covered by the two firm’s agreement alongside combination product Duaklir (aclidinium/formoterol) which is under regulatory review in the US with a verdict due by the end of March.
Chief executive Steve Harris said the takeover will give Circassia “significantly more control of the product’s commercialisation strategy” as it sets up a new CIPD salesforce to promote the drug and prepare for Duaklir’s expected approval.
Steve Harris, CEO, Circassia
The move comes after a prolonged period in which US sales of Tudorza have been low, a situation which analysts suggest has been due to the product’s lesser priority among AZ’s portfolio. AZ’s booked sales for Tudorza fell more than 50% to $18m in the third quarter.
The agreement between Circassia and AZ also includes a deferred Tudorza option payment of $20m payable upon approval of Duaklir, plus a deferred consideration of $100m.
“With both the Tudorza® option exercise and Duaklir regulatory review process anticipated to complete in the coming months, we look forward to 2019 with significant optimism,” said Harris.