4 years after mega IPO, Circassia set for small-cap exchange

Four years ago, Circassia looked to have ushered in a new era for biotech IPOs on the London Stock Exchange when it raised £200 million ($252 million) to finance development of anti-allergy drugs. Today, Circassia is set to limp away from the main London stock exchange to take up a spot on the AIM sub-market having failed to live up to expectations as a company or as a harbinger of change. 

Circassia has teetered on the cusp of an enforced move to AIM for some time. The company slipped below the minimum free float—the number of shares available to the public—when it struck a deal with AstraZeneca last year but gained an exemption that bought it time to address the problem.    

Now, Circassia has run out of time. With Circassia failing to increase its free float from 11% to the required 25%, management has asked investors to vote in favor of a plan to delist from the main London exchange and relist on AIM. If investors vote down the plan, Circassia thinks the U.K. financial regulator could cancel the company’s listing, leaving it without an exchange on which its shares can be bought and sold.

The move to AIM will have concrete effects on Circassia, plus less-tangible effects on the prestige of a company that was once the great hope of the U.K. biopharma industry. In practical terms, AIM will lessen the regulatory requirements on Circassia but also expose investors to the risks posed by the more volatile market. 

Less tangibly, the move to AIM highlights a fall from grace for Circassia and the passing of a time when the London Stock Exchange was briefly a viable option for biotechs in need of large sums of money. 

Circassia’s IPO made a big splash in 2014, both because it followed a prolonged drought in biotech listings in London and because of the sheer size of the offering. The IPO class of 2018 has redefined what represents a "big" offering, but £200 million—$332 million at the 2014 exchange rate—remains a significant haul. In 2014, $332 million was an earthshaking amount that the U.K. hoped marked the awakening of public markets from a long, trauma-induced slumber.

Having helped to create those hopes, Circassia also took a starring role in the dashing of them. The dream ended in June 2016 when Circassia revealed its cat allergy immunotherapy had failed to beat placebo in a phase 2 trial. That setback marked the beginning of the end for Circassia’s anti-allergy pipeline—it now sells and develops inhaled drugs—and cemented the souring of investor sentiment that was evident late in 2015 when Shield Therapeutics and Acacia Pharma pulled the plug on IPOs intended to raise £260 million. 

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