Diurnal Group (LON: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’. Alkindi is being launched in key EU markets, and this was expected to be followed by Chronocort; however, headline data from its EU Phase III trial in CAH did not show superiority over standard-of-care, thereby failing to meet its primary end-point. DNL is seeking ‘Scientific Advice’ from the EMA about how to proceed, which should be available in 2Q’19, with a view to filing for market authorisation in Europe.
Strategy: DNL’s strategic 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.
Phase III results: The full data set has now been analysed and despite not meeting its primary end-point of superiority, Chronocort was seen as efficacious and conferring many advantages over standard-of-care, such as improved androgen control in the critical morning period and lower levels of androgen over 24 hours.
EMA Scientific Advice: A briefing package for Chronocort requesting ‘Scientific Advice’ has been submitted to the EMA. It includes additional analysis from the trial and the Phase III safety extension currently running, showing the benefits of Chronocort. The meeting is expected to take place in 1Q’19, with feedback in 2Q’19.
Risks: While there is a risk with all drugs in development that they might fail clinical trials or not be approved, DNL had been considered to have unusually low risk, as its products are formulations of well-established drugs. Following Alkindi’s approval in Europe, the Chronocort outcome was unexpected.
Investment summary: Alkindi, a cortisol replacement therapy designed for babies and children, is DNL’s first product on the market. It had been expected to be followed by Chronocort for adults – a much larger market. The fall in the share price following this unpredictable outcome looks overdone, but the price is likely to languish in the short term until there is clarity from the regulators about how to move Chronocort forward (in 2Q’19).