Unexpected Phase III trial outcome

Diurnal (DNL) is a commercial-stage specialty pharmaceutical company focused on diseases of the endocrine system. Its two lead products target rare conditions where medical needs are currently unmet, with the aim of building a long-term ‘Adrenal Franchise’. Alkindi is being launched in key EU markets, and this was expected to be followed by Chronocort. However, DNL has received the headline data from its European Phase III trial in CAH, which showed that Chronocort was not superior to standard-of-care, thereby failing to meet its primary end-point. Given the strong Phase II data, this outcome was unexpected. The full data set is now being analysed.

• Strategy: DNL’s strategic goal is to create a valuable ‘Adrenal Franchise’ that can treat patients with chronic cortisol deficiency diseases from birth through to old age. The long-term vision, once Alkindi and Chronocort are established in the EU and the US, is to expand the product offering to other related conditions.
• Phase III results: Headline data indicated that Chronocort did not meet its primary end-point – superiority over the standard-of-care – in 122 CAH patients enrolled in a European Phase III trial. This was due to the level of androgens being well-controlled in the control arm of the study.
• Full analysis: Chronocort did, however, show better control of morning androgen levels compared with standard-of-care and provided the natural overnight cortisol release together with some additional benefits. DNL is reviewing the full data set, alongside interim data from a long-term study for discussion with the regulators.
• Risks: While there is a risk with all drugs in development that they might fail clinical trials or not be approved by the regulators, DNL has been considered to have unusually low risk, as its products are formulation variants of well-established drugs. Having been validated with Alkindi, the Chronocort outcome was unexpected.
• Investment summary: Alkindi, a cortisol replacement therapy designed for babies and children, is DNL’s first product on the market. It had been expected to be followed by Chronocort for adults – a much larger market. The fall in the share price following this unpredictable Chronocort outcome looks overdone, but the price is likely to languish until there is clarity about how to move Chronocort forward from here – probably by adapting the protocol for the US Phase III trial.