Woodford continues to back Circassia as stock falls 65%


Neil Woodford says he remains a committed shareholder of UK company Circassia after a failed vaccine trial caused its stock to plummet more than 65 per cent on Monday.

“It is the nature of the stock market to over-react to negative news, with the immediate reaction typically much greater than long-term fundamentals would justify,” Woodford says, adding: “That is almost certainly the case here.”

Woodford, who met with management on Monday, says the firm is well-financed with net cash of almost £140m on its balance sheet.

Circassa is the fourth largest holding in the Woodford Patient Capital trust, accounting for 4.1 per cent of the portfolio as of 31 May. It accounts for 0.8 per cent of the Woodford Equity Income fund.

The biotech company’s high-profile cat allergy vaccine was found to have almost the same effect as a placebo control in its stage III trials, with both improving symptoms around 60 per cent.

Despite the hit to the business, Woodford says Circassia is more than its allergy platform.

“As a result of acquisitions made last year, it has become a more diverse business with some very attractive respiratory products both in the market and under development,” Woodford says, adding its asthma management franchise in particular “offers considerable growth potential”.

Two mature stage trials for dust mite and birch allergies will continue to completion, but earlier-stage allergy trials will be halted until the company better understands the “placebo riddle” of cat allergy vaccine trial.

“It is highly unusual to see such a high placebo effect in a clinical study,” Woodford says.

Senior analyst at Hargreaves Lansdown Laith Khalaf says: “Failures of this kind are part and parcel of investing in early stage businesses.”

“Investors in Woodford Patient Capital are well diversified across a number of companies operating in this area, which highlights the benefit of investing in higher risk smaller companies via a fund like this one.”