Circassia is now focussed on NIOX, a gold standard device for diagnosing and managing asthma patients. It is the global market leader in FeNO testing and has regulatory approval and agreed reimbursement in all major territories. A new management team has rapidly addressed legacy issues, eliminating a substantial debt overhang, rightsizing the cost base and optimising routes to market. Whilst the Covid-19 pandemic has impacted revenues, we see scope for a rapid recovery as activity normalises. The medium term organic growth opportunity is substantial given only ~5% of asthma patients are regularly FeNO tested. We initiate coverage with cautious forecasts, assuming a 16% CAGR in revenues (from a depressed FY20) and an EBITDA breakeven position in FY22E. Beyond that, the real prize is growing revenues to £50m+ which, with a high level of recurring revenues and margin potential, would lead to material value accretion. Whilst not in our formal forecasts, we see scope for that to be achieved on a 3-5 year view.
