This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the Company's obligations under Article 17 of MAR.  The persons taking responsibility for this announcement are the Company contacts named below.

CIRCASSIA GROUP PLC

("Circassia" or the "Company" and, together with its subsidiaries, the "Group")

PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2021

Oxford, UK - 22 March 2022: Circassia Group plc ("Circassia" or "the Group"; AIM: CIR), a medical device company focused on point of care asthma diagnosis and management, today announces its audited results for the year ended 31 December 2021.

Financial highlights

·      Revenues were up 17% to £27.9 million (20% on a constant currency basis), approximately 84% being recurring consumable revenues

·      Group adjusted EBITDA positive for the first time at £0.6 million, ahead of upgraded consensus estimates

·      Profit for the financial year £3.6 million after a deferred tax credit of £4.4 million (2020: loss of £33.5 million)

·      Net cash £12.6 million (31 December 2020: £7.4 million)

Financial progress

Operational highlights

·      Solid recovery in revenues despite continuing Covid-19 disruption

·      Ongoing transition to distributor-led business model with new arrangements in the USA and China expected to drive scalable revenue growth

·      Transition period for COPD business complete

·      Global Health & Pharma Awards named Circassia as Global Leaders in FeNO testing in 2021

·      Updated American Thoracic Society guidelines recommend FeNO testing for diagnosis and ongoing management of asthma

Ian Johnson, Circassia's Executive Chairman, said: "The Group passed some significant milestones in 2021, achieving positive adjusted EBITDA and a profit after tax for the first time, as well as generating positive cash flow from our operating activities. The Group is debt free and has the cash resources to continue implementing its business strategy of accessing a large and underserved population of patients suffering from asthma.

We anticipate the global pandemic will continue to have some impact on our markets, however, the much-reduced cost base, high levels of recurring revenues and high gross margins will continue to provide a considerable degree of resilience going forward. The business has made a positive start to 2022 with NIOX® clinical revenues up 24% in the first two months of the year on the equivalent period in 2021 and has continued to generate positive operating cash flow. The Board believes that the ongoing transition to a distributor led business model will drive top line growth and deliver further shareholder value over the medium term."

Contacts

Circassia

Ian Johnson, Executive Chairman                                               via Singer Capital Markets

Michael Roller, Chief Financial Officer

Singer Capital Markets (Nominated Adviser and Broker)

Aubrey Powell/ Jen Boorer                                                         Tel: +44 (0) 20 7496 3000

About Circassia

Our ambition is to improve the quality of life of millions of people suffering from asthma. Circassia is a medical device company focused on point of care asthma diagnosis and management. Our market-leading NIOX® products are used by physicians around the world to improve asthma diagnosis and management and also by leading research organisations conducting clinical studies on behalf of pharmaceutical companies.  At present, Circassia provides products and services in around 50 countries. For more information please visit www.circassia.com.

Forward-looking statements

This press release contains certain projections and other forward-looking statements with respect to the financial condition, results of operations, businesses and prospects of Circassia.  The use of terms such as "may", "will", "should", "expect", "anticipate", "project", "estimate", "intend", "continue", "target" or "believe" and similar expressions (or the negatives thereof) are generally intended to identify forward-looking statements.  These statements are based on current expectations and involve risk and uncertainty because they relate to events and depend upon circumstances that may or may not occur in the future.  There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements.  Any of the assumptions underlying these forward-looking statements could prove inaccurate or incorrect and therefore any results contemplated in the forward-looking statements may not actually be achieved.  Nothing contained in this press release should be construed as a profit forecast or profit estimate.  Investors or other recipients are cautioned not to place undue reliance on any forward-looking statements contained herein.  Circassia undertakes no obligation to update or revise (publicly or otherwise) any forward-looking statement, whether as a result of new information, future events or other circumstances.

Executive Chairman's statement

A year of significant progress

Following the wide-ranging business and management changes in 2020, 2021 saw both the continued implementation of the strategy to focus on the Group's market-leading NIOX® business and the final hand back of the COPD business to AstraZeneca in line with the agreement signed in April 2020.

The NIOX® business was significantly affected by the impact of the Covid-19 pandemic in Q2 2020, however, although revenues have built back steadily since then, they have not yet recovered to the levels achieved in 2019, thanks to ongoing disruption associated with the pandemic. Despite this, the restructuring of the cost base and associated restructuring of the sales model has permitted the achievement of profitability at the adjusted EBITDA level for the Group as a whole. As the effects of the pandemic wane, and the new distribution arrangements put in place in the US and China begin to take effect, we envisage consistent sales growth without the need to add significant fixed costs.

Management continues to focus on building a profitable business around its NIOX® products and has a clear strategy to grow the business.  The Company intends to drive revenues in its core medical and clinical trials markets with the VERO® device and is examining the possibility of launching additional products for patients to self-test at home.

Equity financing

On 24 March 2021, the Company announced it had raised an additional £5 million by way of a subscription for new ordinary shares, by three major shareholders at a price of 25 pence per share to strengthen its balance sheet. Given the successful reduction of costs and close ongoing controls on operating expenditure, the Company is well financed for its anticipated needs.

NIOX® business

Revenues for the continuing NIOX® business for the year ended 31 December 2021 were up 17% to £27.9 million (2020: £23.9 million), and up 20% on a constant currency basis.  H1 revenues were £14.6 million, benefitting from a one-off revenue item of £0.6 million in China and a strong Q1 for research sales driven by the start of clinical trials that were delayed in 2020 due to Covid-19, with H2 revenues of £13.3 million.  Given the geographically diverse nature of the NIOX® business, different markets suffered disruption from lockdowns and other pandemic effects at different times during the year.

After reducing the cost base significantly in 2020, further cost reductions were effected in the current year, principally in the area of sales and marketing costs.  This was mostly the result of the move to a distributor led model for sales.  Group headcount, which started the year at 156, ended the year at 111.  While management will remain alert to the possibility of further cost reductions where these can be identified, the bulk of the cost savings have now been achieved.

Discontinued operations

The transfer of the COPD products back to AstraZeneca completed on 31 March 2021. In the first three months of 2021, this business made an operating profit / EBITDA of £1.3 million.  Circassia retains legal liability for rebates payable to third parties (primarily Medicare) for the period during which it operated the COPD business.  £4.2 million of rebates have been paid since 31 March 2021 and an accrual for additional rebates of £3.7 million remains in the Group's balance sheet at 31 December 2021.  Rebate claims totalling £0.8 million have been received since 31 December 2021.

Circassia also retains legal liability for returns of product sold during the period when it operated the COPD business.  An accrual of £1.9 million has been included to cover this eventuality in the Group's balance sheet at 31 December 2021.  The value of returns to date has been very low, but this liability remains with Circassia until late 2023.

Russia and Ukraine

Circassia has no operations in Russia and generates no revenue in Russia.  In 2021, revenues derived from Ukraine were less than 1% of Group revenues.

BeyondAir

On 26 May 2021 we announced that our dispute with Beyond Air Inc. relating to the Group's rights to their LungFit® product had been settled. Upon FDA approval of the product, which to date has not been received, a total of $10.5 million is payable to Circassia in stage payments and up to a further $6 million in royalties on future sales.

Employees

On behalf of the Board, I would like to thank all employees within the Group for their hard work and commitment during what has been another difficult year for everyone.  For a second consecutive year, I would like to offer particular thanks to those employees who continued to attend our offices and logistics facilities to ensure the continued smooth operation of the business during periods of lockdown.

Summary and outlook 

The Group passed some significant milestones in 2021, achieving positive EBITDA and a profit after tax for the first time, as well as generating positive cash flow from our operating activities. The Group is debt free and has the cash resources to continue implementing its business strategy of accessing a large and underserved population of patients suffering from asthma.

We anticipate the global pandemic will continue to have some impact on our markets, however, the much-reduced cost base, high levels of recurring revenues and high gross margins will continue to provide a considerable degree of resilience going forward. The business has made a positive start to 2022 with NIOX® clinical revenues up 24% in the first two months of the year on the equivalent period in 2021 and has continued to generate positive operating cash flow. The Board believes that the ongoing transition to a distributor led business model will drive top line growth and deliver further shareholder value over the medium term.

OPERATING REVIEW

Key strategic drivers of the Group

The opportunity

Asthma affects over 340 million people worldwide with a further 100 million estimated to be affected by 2025. There are an estimated 1,000 deaths globally due to asthma every day. In some 50% of cases, asthma is either not diagnosed or misdiagnosed, which leads to a delay in asthma patients receiving the care that they need. Following a diagnosis of asthma, it is important to be able to regularly monitor the condition and ensure the correct medication is taken.

FeNO

Asthma is a condition that is characterised by inflammation of the airways and lungs. Nitric oxide is produced by inflammatory cells and can be precisely measured in exhaled breath, this is known as FeNO (fraction of exhaled nitric oxide). Measuring FeNO helps understand the level of inflammation in the lungs of an asthmatic and is a precise biomarker of type 2 airway inflammation. Clinicians use FeNO measurements to diagnose and manage asthma in order to improve quality of life of asthma sufferers.

The American Thoracic Society (ATS) recommended that FeNO testing should be part of the ongoing care of asthmatics as well as being used as a tool for diagnosing asthma.  This is the latest example from an increasing body of highly credible, influential evidence based medical guidelines around the world that have recommended the use of FeNO testing as a routine part of diagnosing and managing asthma.  The guidelines are based on a substantial body of published clinical trials that demonstrate the benefits of FeNO testing.

Further impetus is coming from a new class of biologic anti-inflammatory medicines for the treatment of type 2 inflammatory asthma.  These medicines have the potential to replace or reduce the use of inhaled steroids, which have long been the standard of care for inflammatory asthma.  Biologic medicines are targeted at asthmatics with increased inflammation and therefore elevated FeNO.  The cost of these new medicines is significant.  This means that some pharmaceutical companies are investing resources to raise the awareness and usage of FeNO testing in order to identify the patients that are most likely to respond to treatment as they seek to establish this new class of drugs as an effective line of therapy.

Our products

The Company's NIOX VERO® is the market leading device for measuring FeNO. This is a non-invasive, point-of-care system which accurately measures the patient's FeNO level. It is quick, easy to use and reliable. The system comprises a small portable device and test kits containing sensors and individual disposable mouthpieces. The quality and innovation of NIOX VERO® has been recognised with several awards over recent years, most recently the Global Health & Pharma Awards, where Circassia was named as Global Leaders in FeNO Testing 2021.   

NIOX® is registered and reimbursed in all major markets and available in more than 50 countries via Circassia's international network of distribution partners.

Our business

The NIOX VERO® dominates FeNO testing currently with approximately 17,000 devices and with over 40 million FeNO tests sold to date.

NIOX® revenues in 2021 for medical diagnosis and management of asthma were £23.4 million (2020: £21.5 million). Approximately 90% of these revenues are from recurring sales of consumables (test kits) used for routine testing.

In addition to routine use by clinicians, the NIOX VERO® is almost exclusively specified as the device of choice by clinical research organisations (CROs) who manage clinical trials on behalf of large pharma. Our principal CRO customer established a number of new trials in the early part of the year, after a slowdown in sales in 2020 during the early stages of the pandemic.

Revenues in 2021 from CROs were £4.5 million (2020: £2.4 million).  Approximately 55% of these revenues are from sales of consumables (test kits) driven by the length of the trial and the number of patients recruited and are not classified as recurring.

Principal challenges

Today around 5% of eligible asthmatics receive a FeNO test, meaning that there is a huge untapped potential in the FeNO testing market. The primary challenge the NIOX® business faces is to increase the awareness and usage of FeNO testing, particularly in the medical community that treat asthma on a day to day basis (e.g. primary care or general practice). The customer base is inherently conservative, and their adoption of new technology or techniques tends to reflect this.

The Company continues to engage with respiratory professionals to promote the use of FeNO tests in new and under-served customer segments such as primary care settings and pharmacies.  Use by CROs also raises the profile of FeNO testing and NIOX® in particular.

Management intends to expand the number of distribution partners in our major markets, such as the US and China, to further raise awareness and levels of education regarding the benefits of FeNO testing and to make NIOX® more easily available.

Covid-19 impact

During 2021 the impact of the Covid-19 pandemic was less severe than 2020, however, it continued to affect our major markets in varying degrees. The overall effect has been to disrupt routine testing of asthma patients, with revenues for the year reaching approximately 85% of pre-pandemic levels. As time passes our sales patterns indicate that different healthcare systems are developing strategies to reduce the level of disruption to routine healthcare services.

Conclusion

Our ambition is to improve the quality of life of millions of people suffering from asthma. The Group has a robust strategy in place to expand the business and generate profitable growth from this large underserved market; this includes the ongoing evaluation of a product for home use.

FINANCIAL REVIEW

This has been a significant year for Circassia. Despite the performance of the NIOX® business still being affected by the impact of the Covid-19 pandemic on the level of FeNO testing carried out by our customers, the Group achieved positive adjusted EBITDA for the first time. The continuing activities of the Group also generated £1.3 million in cash.

On 27 May 2020, the Group handed back the rights to its COPD products to AstraZeneca, and as such the results of the COPD business are classified as a discontinued operation in the table below. The NIOX® business represents the continuing operations of the Group.

¹ Earnings before interest, tax, depreciation, amortisation, impairment and share option charge.

Revenue

NIOX® revenue for the year was £27.9 million (2020: £23.9 million) which includes clinical revenue of £23.4 million (2020: £21.5 million) and research revenue of £4.5 million (2020: £2.4 million). NIOX® clinical revenue represents sales to physicians and hospitals for use in clinical practice and to the Company's distributors, while research revenue is from pharmaceutical companies and contract research organisations (CROs) for use in clinical studies.

The increase in NIOX® revenue was due to the recovery following the Covid-19 pandemic, combined with the implementation of the Company's business strategy to focus efforts entirely on the NIOX® product.

Gross profit

Gross profit on NIOX® revenue was £19.0 million (2020: £16.3 million), with a gross margin of 68% (2020: 68%). Gross margin was in line with prior year. A higher proportion of relatively high margin revenue in China was largely offset by a higher proportion of lower margin research revenue.

Research and development

Research and development costs decreased to £4.6 million (2020: £6.8 million). Included in this category are £1.2 million of Device Development costs (2020: £1.5 million), £0.6 million of Quality costs (2020: £1.3 million), £0.4 million of Medical Affairs costs (2020: £0.6 million), £0.3 million of Regulatory costs (2020: £0.5 million) and £2.1 million of depreciation, amortisation and impairment (2020: £2.9 million).

The prior year costs include a £0.9 million impairment charge against internal device development costs due to a change in the strategic roadmap for product development. Excluding depreciation, amortisation and impairment, research and development costs decreased to £2.5 million (2020: £3.9 million) which is mainly due to lower headcount.

Sales and marketing

Sales and marketing costs decreased markedly to £11.9 million (2020: £16.6 million) which was mainly due to a reduction in the number of dedicated NIOX® sales representatives across the Group as a result of the switch to a distributor led sales model, in particular in the US and China, combined with lower third-party marketing costs incurred during the Covid-19 pandemic. Given that the full impact of the headcount reductions did not impact 2021, but will impact 2022, we expect sales and marketing costs in the aggregate to continue to fall in 2022, notwithstanding a modest increase in third-party marketing costs as the impact of the Covid-19 pandemic eases.

Administrative expenditure

Administrative expenditure, which includes overheads relating to corporate functions, centrally managed support functions and corporate costs, decreased to £6.8 million (2020: £10.2 million). This was mainly due to lower salary costs as a result of lower headcount.

Other income

Other income includes a £0.7 million grant received from the US government under the Payment Protection Program (2020: £nil). There are no contingencies or conditions attaching to this grant, and the amounts are not repayable.

Taxation

Taxation for the year was a credit of £4.4 million (2020: £8.4 million charge) which arose due to an increase in the amount of recognised carried-forward tax losses in the Group generated in Sweden by Circassia AB.

Earnings per share

Basic and diluted profit per share for the year was 1p (2020: 9p loss) reflecting a profit of £3.6 million (2020: £33.5 million loss), with the increase mainly as a result of the reduction in the cost base of the Group. Basic and diluted profit per share from continuing operations was 1p (2020: 7p loss) reflecting a profit for the financial year of £2.3 million (2020: £26.8 million loss).

Profit/(loss) from discontinued operations

Profit from discontinued operations was £1.3 million (2020: £6.7 million loss).

The transitional run-off period of the discontinued COPD business ended in March 2021, during which time minimal operating expenditure was incurred. The prior period includes several one-off items including the AstraZeneca loan write-off, offset by the associated impairment charge of the COPD licence assets.

Other comprehensive income/(expense)

The Group's other comprehensive expense of £7.8 million (2020: £7.8 million income) relates to exchange differences on the translation of foreign operations into British pound sterling.

The current year expense is mainly due to the strengthening of the British pound against the Swedish krona. The expense consists of a £3.7 million loss (2020: £4.3 million gain) on the translation of intangible assets, a £3.6 million loss (2020: £3.0 million gain) on the translation of overseas subsidiaries' net assets, and a £0.5 million loss (2020: £0.5 million gain) on the translation of goodwill.

Statement of financial position

The Group's net assets at 31 December 2021 were £66.8 million (2020: £66.1 million).

Current liabilities at the end of the year were £10.8 million (2020: £26.7 million). The decrease is mainly due to lower trade payables, in particular lower rebate accruals relating to the discontinued COPD business.

Cash flow

The Group's cash position (including cash and cash equivalents) increased from £7.4 million at 31 December 2020 to £12.6 million at 31 December 2021.

Cash generated from operations during the year aggregated £1.5 million, of which £0.2 million was generated in the COPD discontinued operations.

Cash generated from/(used in) operations in the year by business unit was as follows:

Non-operating cash movements aggregated £3.7 million (2020: £4.3 million):

Michael Roller

Chief Financial Officer

22 March 2022

Consolidated statement of comprehensive income

for the year ended 31 December 2021

Earnings per share attributable to owners of the parent during the year (expressed in £ per share)

The notes below are an integral part of these financial statements.
 

Consolidated statement of financial position

as at 31 December 2021

The notes below are an integral part of these financial statements.

Ian Johnson                                                                             Michael Roller

Executive Chairman                                                                   Chief Financial Officer
Circassia Group plc                                                                   Circassia Group plc

Registered number: 05822706

Consolidated statement of cash flows

for the year ended 31 December 2021

The notes below are an integral part of these financial statements.

Consolidated statement of changes in equity

for the year ended 31 December 2021

¹ Other reserves include share option reserve, translation reserve, treasury shares reserve, and transactions with NCI reserve.

The notes below are an integral part of these financial statements.

Notes to the financial statements

1.             General information

Basis of preparation

The consolidated financial statements of Circassia Group plc have been prepared on the going concern basis and in accordance with EU adopted International Financial Reporting Standards (IFRS), IFRIC interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention.

The financial information set out in this preliminary announcement does not constitute the Company's statutory financial statements for the years ended 31 December 2021 or 2020 but is derived from those financial statements. Statutory financial statements for 2020 have been delivered to the registrar of companies and those for 2021 will be delivered in due course. The auditors have reported on those financial statements; their reports were (i) unqualified (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

The preliminary announcement will be published on the Company's website. The maintenance and integrity of the website is the responsibility of the directors. The work carried out by the auditors does not involve consideration of these matters. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

2.             Operating segments

The chief operating decision-maker, the Executive Chairman, examines the Group's performance from a product perspective, and has identified two reportable segments of the business:

-       NIOX® relates to the portfolio of products used to improve asthma diagnosis and management by measuring fractional exhaled nitric oxide (FeNO); and

-       COPD relates to the Tudorza® and Duaklir® Pressair® products marketed in the United States, where they are indicated for the maintenance treatment of patients with COPD.

The COPD business has been classified as a discontinued operation. Information about the results of this segment is provided in note 6; information regarding its assets is presented below.

The table below presents operating loss information regarding the Group's operating segments for the years ended 31 December 2021 and 2020. Only the results for the Group's continuing activities are included in order to aid comparison.

 Segment operating loss

Assets by segment

3.             Employees and directors

Average number of people employed

Average headcount includes 1 (2020: 44) sales and marketing and 1 (2020: 4) research and development person employed solely for the discontinued operation.

The Group's total headcount at 31 December 2021 was 111 (2020: 156).

Employee benefit costs

Key management personnel

Key management personnel during the year included directors (Executive and Non-Executive), Regional VP APAC, Regional VP Americas, VP Product Development, VP Supply Chain and Technical Operations, Regional VP EMEA, VP Research Business and Senior VP Global Human Resources. Key management personnel in the prior year also included the VP Global Marketing. The compensation paid or payable to key management is set out below.

4.             Breakdown of expenses by nature 

5.             Finance costs and income

6.             Discontinued operations

On 9 April 2020, Circassia signed an agreement to hand back the Tudorza® and Duaklir® licences to AstraZeneca and as such, the results of the COPD operating segment are reported as a discontinued operation. There were no assets or liabilities classified as held for sale in relation to the discontinued operation.

Other gains and losses includes a £nil (2020: £123.1 million) gain relating to the forgiveness of the AstraZeneca loan and accrued interest, £nil (2020: £8.3 million) loss on foreign exchange, and £0.3 million (2020: £nil) gain on the change in fair value of the contingent royalty consideration.

Finance costs include £nil (2020: £3.0 million) of interest charged on the loan from AstraZeneca, and £nil (2020: £0.2 million) relating to the unwinding of discounts on amounts payable to AstraZeneca.

7.             Taxation

The tax credit (2020: charge) for the year is lower (2020: higher) than the standard rate of corporation tax in the UK of 19.00% (2020: 19.00%). The differences are explained below:

At 31 December 2021, the Group has tax losses to be carried forward of approximately £541.7 million (2020: £513.7 million). These can be utilised against future taxable profits. A proportion of these tax losses have been recognised as a deferred tax asset.

At 31 December 2021, Circassia Group plc and Circassia Limited had tax losses to be carried forward of approximately £166.3 million (2020: £162.6 million). These losses have no expiry date, however, the utilisation of these losses will be restricted to 50% of profits generated in the United Kingdom.

8.             Earnings per share

The earnings used in calculating basic and diluted earnings per share is the same.

As net losses are recorded in the previous financial year, there are no dilutive potential shares in that year.

9.             Goodwill

Following the cessation of the run-off period on 31 March 2021, the fully impaired COPD goodwill assets have been disposed of.

The carrying value of goodwill is allocated to the NIOX® CGU and was generated in June 2015 on the acquisition of Aerocrine. The recoverable amount of a CGU is assessed using a value in use model. The value in use for the NIOX® CGU was calculated over a five-year period using a discount factor of 11.5% (being a weighted average cost of capital rate for the CGU). The calculations use post-tax cash flow projections. Cash flows over five years have been considered appropriate based on the product lifecycle. Cash flows beyond the five-year period were extrapolated using the estimated terminal growth rate stated below. The growth rate does not exceed the long-term average growth rate for the business. The discount rate used is post-tax and reflects specific risks relating to the Group and uncertainties surrounding the cash flow projections.

The key assumptions used for the valuation of the NIOX® CGU are as follows:

Impact of possible changes in key assumptions - NIOX® CGU

If the budgeted NIOX® sales in the value in use calculation had been 25% lower than management's estimates at 31 December 2021, the Group would have had to recognise an impairment against the carrying amount of goodwill and intangible assets of £3.8 million. This steep hypothetical reduction in sales represents a slower recovery post the Covid-19 pandemic.

10.          Intangible assets

The amortisation charge of £4.1 million (2020: £7.9 million) is included on the face of the statement of comprehensive income. £2.0 million (2020: £2.0 million) is included within research and development costs, £1.8 million (2020: £1.8 million) is included within sales and marketing costs, £0.3 million (2020: £0.4 million) is included within administrative expenses and £nil (2020: £3.7 million) is included within profit/(loss) from discontinued operations. 

The Group tests at least annually whether intangible assets have suffered any impairment. Key assumptions and sensitivities used in the impairment review at a CGU level are disclosed in note 9.

Currently marketed products ("CMP")

CMP comprises the Tudorza® and Duaklir® products. The CMP assets were partially impaired in 2019 following an underperformance in sales of Tudorza® and Duaklir®, and subsequently fully impaired in the 2020 financial year as the licences were handed back to AstraZeneca on 27 May 2020. Following the cessation of the run-off period on 31 March 2021, the fully impaired assets have been disposed of.

Customer relationships

Customer relationships represent the existing customers as at June 2015, being the date of the acquisition of Aerocrine, that are expected to continue to support the NIOX® business. A remaining useful life of 18 years was determined at acquisition. Amortisation has been calculated on a straight-line basis over this period from the date of acquisition.

Technology

Aerocrine developed its technology to measure fractional exhaled nitric oxide ("FeNO") in the mid-1990s. The company was the first to develop an instrument for the measurement of FeNO as a valuable tool in the management of airway inflammation. This technology is used by the Group in its NIOX® devices. The valuation of the Technology was based on a pre-determined hypothetical royalty rate attributable to the use of the Technology. A remaining useful life of 15 years was determined at acquisition in June 2015. Amortisation has been calculated on a straight-line basis over this period from the date of acquisition.

Intellectual property

Intellectual property comprises the LungFit® licence which was acquired from Beyond Air Inc. in 2019. The asset was initially valued at £44.0 million, being the fair value of consideration. This includes £8.0 million paid upfront in the form of shares and contingent milestone and royalty payments valued at £36.0 million.

The intellectual property was fully impaired following an announcement made by Beyond Air Inc. in December 2019 purporting to terminate the agreement for the commercial licence of LungFit®. During the year, Circassia settled its contractual dispute with Beyond Air Inc and surrendered its right to the LungFit® product in exchange for consideration and therefore the fully impaired asset was disposed of.

Other

Other intangible assets relate to software and internally generated capitalised device development costs. Amortisation on the ERP software has been calculated on a straight-line basis over the period from which the software was fully developed and operational. An impairment loss of £0.8 million was recognised in the prior year against the capitalised device development costs following a change in the strategic roadmap for product development.

11.          Trade and other payables

Trade payables are unsecured and are usually paid within 30 days of recognition.

The carrying amounts of trade and other payables are considered to be the same as their fair values, due to their short-term nature.

12.          Other reserves

Treasury shares

Treasury shares are shares in Circassia Group plc that are held by the Circassia Pharmaceuticals plc Employee Benefit Trust for the purpose of issuing shares under the various employee share schemes. Shares issued to employees are recognised on a first in, first out basis.

The number of shares acquired by the Trust is as follows:

The shares to satisfy the DSBP 2018 scheme were allotted as new ordinary shares in Circassia Group plc, rather than being purchased by the Trust.

13.          Cash generated from/(used in) operations

Reconciliation of profit/(loss) before tax to net cash used in operations:

14.          Related party transactions

There is no ultimate controlling party of the Group as ownership is split between the Company's shareholders. The most significant shareholders as at 31 December 2021 and 2020 are as follows:

On 24 March 2021, the Company executed a Subscription for a total of £5 million in additional equity finance at a price of 25.0p per share with three of its major institutional shareholders, being North Atlantic Smaller Companies Investment Trust plc (to which Harwood Capital LLP acts as investment adviser/manager), Richard Griffiths and Lombard Odier Asset Management (Europe) Limited.  Each of the investments by Harwood Capital LLP and Richard Griffiths constituted a related party transaction under the AIM Rules for Companies and was disclosed as such at the time.

On 2 June 2020, the Company executed an equity financing facility for up to £5 million of additional equity finance at a price of 24.6p per share with two of its major institutional shareholders, being North Atlantic Small Companies Investment Trust plc (to which Harwood Capital LLP acts as investment adviser/manager) and Richard Griffiths, to provide the Company with access to additional liquidity should it be required. On 17 September 2020 the Board decided to draw down this equity financing. The foregoing equity financing facility constitutes a related party transaction under the AIM Rules for Companies.

Employee benefit trust

In 2014 the Company set up an employee benefit trust for the purposes of buying and selling shares on the employees' behalf. Nothing was paid into the Trust by the Company during the year ended 31 December 2021 and 2020.

No shares were purchased by the Trust during the years ended 31 December 2021 and 31 December 2020. No shares were allotted to the Trust (2020: 412,706) during the year ended 31 December 2021.

15.          Events occurring after the reporting date

No events occurred after the reporting date.