Diurnal (LON:DNL) is a commercial-stage specialty pharmaceutical company focused on diseases of the endocrine system. Its two lead products, Alkindi and Chronocort, are in late-stage clinical trials, with Alkindi already licensed in Europe. With the successful outcome of the Phase I trial with DITEST, an oral testosterone replacement formulation, DNL is building on its vision of becoming a leading speciality endocrinology company. The study showed that DITEST was safe, well tolerated and well absorbed in men affected by hypogonadism. DNL will engage with the regulators for the next trial stage, which is likely to be run with a partner.
- 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 aim, once Alkindi and Chronocort are established in Europe and the US, is to grow the product offering to other endocrine conditions.
- Trial outcome: DNL met both primary and secondary endpoints in the Phase I proof-of-concept trial with its testosterone replacement product, DITEST. The product has been shown to be safe, well tolerated, and potentially superior to current oral treatments; this was demonstrated in both fed and fasted states.
- Market need: Despite a number of testosterone products available in the market, there is still a strong unmet medical need for an oral medication that would allow safe and better compliance for the patient. DITEST will be an added-value product in the $4.8bn testosterone replacement market.
- Risks: Concerns about the US prospects for Chronocort have been allayed by the positive EMA Scientific Advice and the opportunity to revise its US Phase III protocol. However, this has added extra time to the US development process, delaying the point at which DNL should become cashflow-positive.
- Investment summary: Alkindi, a cortisol replacement therapy designed for children under 18 years of age, is DNL’s first product on the market. It is expected to be followed by Chronocort for adults – a larger market – which now has a clear pathway for regulatory approval in both Europe and the US. Despite this, the share price is still languishing well below valuations determined by peer group and DCF (202p) analyses, due possibly to the need for more capital during 2020.
