And then there were three

Diurnal is a commercial-stage specialty pharmaceutical company focused on diseases of the endocrine system. Its products are targeting rare conditions where medical need is currently unmet, with the long-term aim of building an “Adrenal Franchise”. Alkindi® was approved by the European regulators in September 2018, and has been launched in 10 countries. Now it has been approved for the US market, with Diurnal receiving formal approval from the FDA. This is an important value-inflection milestone that only two other AIM-listed companies have reached. Marketing partner, Eton Pharmaceuticals (Eton), has high US sales expectations.

• Strategy: Diurnal’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: Alkindi, or Alkindi Sprinkle, as it will be known in the US, is an immediate-release hydrocortisone preparation for the control of adrenal insufficiency (AI), including congenital adrenal hyperplasia (CAH), in children aged up to 18 years of age. It is currently being sold in 10 countries across Europe.
• FDA approval: Diurnal submitted a New Drug Application (NDA) with the US Food and Drug Administration (FDA) for Alkindi Sprinkle in November 2019, which was accepted for review in February 2020. The FDA formally approved the drug for commercialisation on its PDUFA date, 29 September 2020.
• Commercialisation: FDA approval has de-risked the drug. Diurnal signed an exclusive US licensing deal for the commercialisation of Alkindi Sprinkle with Eton on 27 March 2020. Sales should start in early 2021, at which point a $2.5m milestone will be triggered. Eton is forecasting peak sales in excess of $100m.
• Investment summary: Diurnal has become only the third listed AIM company to obtain FDA approval for a drug. Since signing the commercial deal, Eton has been readying itself to add Alkindi into its existing supply chain and commercial infrastructure, so that first sales can occur shortly after approval. Diurnal has other significant value-inflection points in the next six months. Meanwhile, the shares are trading well below our updated risk-adjusted DCF valuation (223p).