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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’. Following regulatory approval, DNL will launch Alkindi in key European markets in 2018 through its own commercial infrastructure. Meanwhile, the company is pushing forward with Alkindi and Chronocort clinical trials in the US. To maintain this positive momentum, DNL has announced a Placing to raise gross new capital of up to £11m and, concomitantly, converting its debt into equity.

  • Strategy: Diurnal’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. Once Alkindi and Chronocort are established in EU and the US, the long-term vision is to expand its product offering to other related conditions.
  • Interims: Results were in line with expectations, with planned increases in marketing and R&D, to give an underlying EBIT of -£7.4m (-£5.3m). More important was management’s update on the commercial plans for Alkindi in Europe and progress with its EU and US clinical trial programme for Chronocort.
  • Placing: Just after the interims, DNL announced a conditional Placing to raise up to £11m gross (£10.4m net) to fund its development programmes and to support the launch of Alkindi. Simultaneously, IP Group will convert its outstanding convertible loan into equity, leaving DNL with net cash of ca.£20.0m today.
  • Risks: While there is a risk with all drugs in development, Diurnal has been considered to have unusually low risk because its products are formulation variants of well-established drugs. This has been validated with the European approval of Alkindi. The main risk now is that of commercial execution.
  • Investment summary: Alkindi, a cortisol replacement therapy designed for babies and children, will be Diurnal‘s first product on the market. It will be followed soon by Chronocort for adults. The cortisol replacement market is for conditions that need life-long treatments and has a potential value of $3.5bn. DNL will hit a number of valuation inflection points during 2018 with its upcoming newsflow.
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