Clarity for Chronocort regulatory pathway

Diurnal (DNL) is a commercial-stage specialty pharmaceutical company focused on diseases of the endocrine system. Its two lead products are targeting rare conditions where medical need is currently unmet, with the aim of building a long-term ‘Adrenal Franchise’. The first product, Alkindi®, is being launched in key EU markets, and this was expected to be followed by the adult version, Chronocort®. After unexpected Phase III results, positive feedback from the EMA has cleared the path for regulatory submission of Chronocort for adult CAH in Europe before the end of 2019, and allowed DNL to revise the primary endpoint in the protocol for the US Phase III trial.

• Strategy: DNL’s goal is to create a valuable ‘Adrenal Franchise’ that can treat patients with chronic cortisol deficiency diseases from birth and for the rest of their lives. The long-term vision, once Alkindi and Chronocort are established in Europe and the US, is to expand the product offering to other endocrine conditions.
• Interims: The focus during 1H’19 has been to build-up the launch of Alkindi in Europe and establish commercial partners in other key territories. Sales during 1H’19 were in line with forecasts at £0.19m. Events around Chronocort caused some volatility in R&D spend, which left net cash of £6.9m at 31 December 2018.
• EMA feedback: Following a Scientific Advice meeting with EMA representatives to discuss the Phase III Chronocort results in CAH patients, the EMA has confirmed that the MAA for Chronocort can be submitted with no further trials needed; DNL expects to submit this in 4Q’19.
• Risks: Concerns about the US prospects for Chronocort have been allayed by the positive EMA outcome, which has allowed DNL to change the US Phase III protocol. However, it has added extra time into the US development process and delayed the point at which DNL is expected to become cashflow-positive.
• Investment summary: Alkindi, a cortisol replacement therapy designed for children under 18 years of age, is DNL’s first product on the market. It is expected to be followed by Chronocort for adults – a larger market – which now has a clear pathway for regulatory approval in both Europe and the US. Despite this, the share price is still languishing well below valuations determined by peer group and DCF (225p) analyses, possibly due to the need for more capital later in 2019.