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A bitter pill for Circassia as cat allergy treatment fails

The long-awaited results from the biotech group's cat allergy trial were not what the company or investors were hoping for
June 21, 2016

A dramatic share price drop made clear the extent to which investor hopes for Circassia (CIR) were pinned on its potential cat allergy product, Cat-SPIRE. As the group announced final trials for the treatment had failed, the stock fell more than two-thirds - a torrid day for the group, which in March 2014 became the UK's biggest ever biotech initial public offering.

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Unusually, the failure of the trial related to the outperformance of the placebo group rather than poor efficacy of the treatment. Cat-SPIRE actually beat chief executive Steve Harris's expectations but the improvement in cat allergy symptoms of just under 60 per cent was matched by those taking the placebo thus rendering the trial a failure.

"It's not necessarily the end of the road for Cat-SPIRE," Mr Harris said hopefully, claiming the group may have just been "unlucky". But with a trial population of 1,400, it is pretty unlikely the data has been skewed by luck. Worryingly, this specific result calls into question the chances of success for other allergy products, so the group has decided to terminate all funding in that division for now.

There is one silver lining though. Without the hefty allergy trial costs, Circassia will be able to turn its £139m of net cash towards its asthma and respiratory businesses, which both have some exciting assets. Furthermore Woodford Investment Management and Imperial Innovations - which hold 21 per cent and 9 per cent of Circassia shares respectively - still see hope for the company, with Neil Woodford commenting in his blog that "we continue to see long-term value in the shares".