Circassia Pharmaceuticals : Issue of Equity - AstraZeneca

24 April 2018

CIRCASSIA PHARMACEUTICALS PLC

ASTRAZENECA TO SUBSCRIBE FOR ADDITIONAL SHARES IN CIRCASSIA; AMENDMENT OF DEVELOPMENT AND COMMERCIALISATION AGREEMENT

On 17 March 2017, Circassia Pharmaceuticals plc (Circassia) entered into a development and commercialisation agreement (the DCA) with AstraZeneca, which resulted in AstraZeneca becoming a substantial shareholder of Circassia. AstraZeneca currently holds 14.2% of Circassia's issued share capital. Circassia today announces that Circassia and AstraZeneca have agreed to amend certain terms of the DCA, including the points set out below.

In addition to the amendments to the DCA, AstraZeneca has agreed to subscribe in cash for further shares in Circassia (the NewShares). The number of New Shares will result in AstraZeneca holding up to 19.9% in number of the aggregate of Circassia shares, including the New Shares (the EquityThreshold).

It is anticipated that AstraZeneca will subscribe for the New Shares shortly after Shareholder Approval is obtained (the IssueDate). The subscription amount received by Circassia will be applied towards the outstanding deferred R&D activity costs payable by Circassia to AstraZeneca under the DCA at the end of 2018 and 2019, which total US$45 million. Additionally, any outstanding R&D activity costs not satisfied by the subscription amount and not settled by 31 December 2019 will be addressed via the previously agreed DCA vendor loan facility, in the event other sources of funding are unavailable.

The number of New Shares to be allotted and issued by Circassia to AstraZeneca will be calculated by dividing the aggregate subscription amount by the relevant share price of Ordinary Shares. The aggregate subscription amount to be paid by AstraZeneca for the New Shares will be capped to ensure that its maximum amount shall be such that AstraZeneca and its affiliates do not hold Circassia Shares above the Equity Threshold, or that the aggregate amount totals US$45 million, whichever is lower. The price per share that AstraZeneca will pay will be the lower of (i) US$1.2414, being the US$ denominated volume-weighted average share price for the trading of Circassia shares over the 20 (twenty) trading days up to and including the trading day immediately prior to the date of this announcement and (ii) the US$ denominated volume-weighted average share price for the trading of Circassia shares over the 20 (twenty) trading days up to (and including) the trading day immediately prior to the Issue Date (the latter price being itself subject to a floor price of US$1.05).

The subscription of the New Shares by AstraZeneca is conditional on a number of conditions being satisfied including, among others, Circassia obtaining the relevant shareholder approval (the ShareholderApproval) and Circassia not being in an Offer Period as defined in the City Code on Takeovers and Mergers.

Circassia and AstraZeneca have agreed to amend the terms of the loan amount under the DCA (including extending the repayment period from 3 years to 5 years). The loan will remain on customary terms assuming the amendments are approved by shareholders.

Circassia and AstraZeneca have agreed to amend certain provisions relating to Circassia's option to secure the exclusive commercial rights to Tudorza® in the inhaled administration for all respiratory indications in the United States (the Tudorza® Option) to give Circassia further flexibility in relation to the exercise of the Tudorza® Option.

Circassia will announce the date of the shareholder general meeting to seek the Shareholder Approval in due course.

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