$52.5m US deal strengthens balance sheet further

Diurnal 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’. Alkindi® is currently being rolled out through key European markets and has been submitted to the FDA for approval, with a PDUFA date set at 29 September 2020. Meanwhile, Diurnal has signed an exclusive US commercial deal with Eton Pharmaceuticals, a specialty pharma company focused on hospital and paediatric products. This, together with the recent Placing, has strengthened the balance sheet.

• 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.
• Alkindi: Diurnal has announced an exclusive US licensing agreement with Eton Pharmaceuticals (Eton) for the commercialisation of Alkindi Sprinkle, as it will be known. Eton is paying Diurnal $5m upfront, in cash and shares, and pre-set milestones worth up to $47.5m in total, plus royalties on net sales.
• Placing: This deal comes shortly after Diurnal concluded a successful Placing of 34.89m new Ordinary shares at 32p per share to raise gross funds of £11.2m (£10.7m net) to strengthen its balance sheet. These funds will be used predominantly to progress the commercialisation of Alkindi and Chronocort.
• Risks: Ideally, Diurnal would have liked to sign a deal that also included rights to Chronocort. Given the deal with Eton, this is now going to be a two-stage process and Diurnal will continue to seek a partner for the US development and commercialisation of Chronocort. This could be with Eton or another party.
• Investment summary: The shares have been languishing for three reasons: global macroeconomics denting general market conditions; poor sentiment towards UK biotech; and the market’s knowledge that Diurnal needed to strengthen its balance sheet. The recent Placing together with the Eton licensing deal have greatly strengthened its balance sheet and with several further announcements likely, the market should become more appreciative of the opportunity.