Diurnal Group Plc

Closely watching the regulators

17 Sep 2020 / Corporate research

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® is being rolled out throughout Europe, and recent approvals in Israel and Australia will open up more markets. Later this month, attention will focus on the FDA, with the approaching PDUFA date for Alkindi. Next year should see the first approval of Chronocort in Europe. Based on current assumptions and expectations, Diurnal has sufficient cash through to profitability.

  • 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.
  • Results: Considerable regulatory and commercial progress was made in fiscal 2020. Although product sales remain modest, at £2.4m, recent launches and regulatory approvals are expected to see strong growth in 2021. Planned cost control and a reduction in R&D reduced losses, and left Diurnal with £15.4m net cash at 30 June.
  • Regulation: In the short term, all attention is focused on the PDUFA date (29 September) for Alkindi Sprinkle in the US. In 1Q’21 (calendar), there is a high expectation that the EMA will approve Chronocort in Europe. Meanwhile, the US regulatory pathway for DITEST in the US has been clarified.
  • Risks: The company appears well positioned in relation to any risks associated with COVID-19 and Brexit. While there is always regulatory risk, dialogue with the relevant EU and US regulators appears positive. Diurnal needs a partner(s) to co-fund pivotal US trials of Chronocort and DITEST.
  • Investment summary: In the event that Alkindi is approved in the US, Diurnal would become only the third listed AIM company to reach this milestone. Alkindi has paved the way for supply chain and commercial infrastructure that can be shared by future products. Diurnal is well-funded and has a number of significant value inflection points coming up in the next six months. Meanwhile, the shares are trading well below our risk-adjusted DCF valuation (221p).
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