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(Alliance News) - Circassia Group PLC on Tuesday said revenue for its Niox business was significantly lower in 2020 as the Covid-19 pandemic led to restriction in routine medical testing.
Niox's fractional exhaled nitric oxide test, or FeNO test, is used to improve asthma diagnosis and management. However, amid the pandemic, routine FeNO testing has been restricted.
Consequently, Niox revenue for 2020 was around GBP23.9 million, a steep 31% drop from GBP34.6 million in 2019. Of the GBP23.9 million, GBP11.4 million was recorded in the first half of the year, while revenue improved in the second half to GBP12.5 million.
Revenue has been on "an upward trajectory" since it began recovering in the last few weeks of the first half, with fourth quarter revenue being around 86% of first quarter revenue in 2020.
"The global lockdown which commenced at the start of the second quarter significantly affected testing volumes in the Clinical business and delayed studies for our Research customers," Circassia explained.
In April, Circassia said it planned to terminate its development and commercialisation agreement with drug maker AstraZeneca PLC and instead transfer US commercial rights for chronic obstructive pulmonary disease drugs Tudorza and Duakli to Astra in exchange for the settlement of debt.
This transfer is set to completed at the end of March and the discontinued COPD business traded "resiliently and profitably" in the second half of 2020.
At the time of its half-year results, Circassia said its management was undertaking a major restructuring to focus on Niox, generating cost savings that would make the company profitable on an earnings before interest, tax, depreciation, and amortisation level when attaining its 2019 revenue of GBP34.6 million.
Additionally, it said that the annual cost base for the Niox business would be approximately GBP21 million, excluding around GBP1.8 million of head office costs.
Given current gross margins, the Ebitda breakeven point for Niox will be lower than had been expected, around GBP30 million of annualised revenue or GBP32 million for the group.
Circassia is expecting to post its annual 2020 results on March 24, with a further update on first quarter trading and growth strategy to be provided at that time.
Executive Chair Ian Johnson said: "One of the strengths of the business is the high level of recurring revenues from consumables. In a normal year these are typically 90% of total revenues and, whilst the Covid-19 pandemic impacted these by restricting patient testing, the recovery by the end of year to 86% of Q1 revenues is testimony to the resilience of the business.
"The company is now debt free and has net cash, and whilst we will still be living with the effects of Covid-19, the board believes that the actions taken will deliver greater shareholder value and that over the medium term the business will be profitable and cash generative."
Shares in Circassia were down 2.6% at 28.25 pence in London on Tuesday morning.
By Anna Farley; annafarley@alliancenews.com
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