Circassia strikes deal with AstraZeneca for respiratory drugs

[March 17, 2017] By Paul Sandle

LONDON (Reuters) - Britain's Circassia has secured the U.S. rights from AstraZeneca for two drugs to treat chronic obstructive pulmonary disease (COPD), a progressive lung condition affecting millions of people, for up to $230 million.

Shares in Circassia jumped as much as 30 percent on Friday on news of the deal, which is its first since the failure of its cat allergy treatment in June.

Circassia's Chief Executive Steve Harris said Tudorza, a bronchodilator which generated sales of $170 million in 2016, and Duaklir, a combination drug which is in late stage development in the United States, could transform the company into a world-class respiratory business.

"We have got 100 reps in the U.S. selling to respiratory experts, and essentially this is what AstraZeneca wanted to access," he said.

"It is initially a collaboration whereby we will sell the product on behalf of AstraZeneca and share the profit 50:50, then we will acquire the product in around two years' time."

Harris said the company planned to double the size of its salesforce to promote Tudorza and its existing products that assist asthma management.

COPD, which includes emphysema and chronic bronchitis, mainly affects older people, particularly smokers.

Circassia said the market was large and growing, and current estimates suggest the global market would be worth more then $13 billion by 2022.

Analysts at Cantor Fitzgerald said it was "bold strategic move" for Circassia, which Harris said "will get the follow-up product that is currently in Phase 3 and is expected to be approved in around two years time".

"Having suffered a significant setback with its lead immunotherapy program 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 U.S. respiratory market," Cantor Fitzgerald's analysts said.

AstraZeneca said the tie-up would let it sharpen its focus on its other respiratory drugs, including blockbuster Symbicort.

Circassia's shareholders, which include Invesco and Neil Woodford's investment management company, saw the value of their holdings slump in June when its big hope in developing allergy treatments flopped. They are not expected to have to contribute any funding, Harris said.

AstraZeneca will receive a $50 million stake in Circassia, and a $100 million payment in June 2019 or when U.S. regulators approve Duaklir. Circassia could also pay up to $80 million for the rights for additional indications for the drugs.

Separately on Friday, AstraZeneca received another setback from U.S. regulators for its drug to treat high potassium levels.

(Editing by Alexander Smith)

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