Alkindi US approval – another important milestone
Diurnal’s adrenal franchise has benefited significantly from a fast to market approach with its child-optimised preparation of hydrocortisone Alkindi. Sales in Europe are progressing well as new territories achieve reimbursement. The attraction of Eton Pharmaceuticals in the US provided external third-party validation with a highly appropriate partner. Securing US approval for Alkindi for the treatment of the orphan disorder, paediatric adrenal insufficiency, is an important milestone for both Alkindi and its licensor Eton Pharmaceuticals. US FDA approval provides an approved alternative to the unlicensed, and highly variable, compounded hydrocortisone preparations that have been used to date. Eton Pharmaceuticals has a focus on hospital-based products with a particular focus on paediatric rare diseases. Alkindi Sprinkle represents the lead paediatric drug for Eton Pharmaceuticals, and we note that previously it has suggested a peak sales potential of $100m. In addition to the upfront payments, Diurnal will receive an additional $2.5m on first commercial sales, which should be shortly after approval as well as double digit-high teens royalties on sales, and sales-based milestone payments of up to $45 million in total subject to sales thresholds.
All about the adrenal franchise for now
The approval of Alkindi Sprinkle in the US along with the European launches has allowed Diurnal to establish itself as a nascent player in the endocrinology field. This is a laudable achievement and provides the company with a solid foundation with several pipeline assets, which should further develop its adrenal franchise. While Alkindi has proven to be successful in providing a fast to market approach for Diurnal, we believe that significantly greater market potential lies with the adult hydrocortisone preparation Chronocort. Chronocort mimics the physiological release of cortisol in patients with low cortisol levels. The US Phase 3 CAH study is ready to go but requires the resource of an appropriate partner to risk share and provide funding. Sticking with the adrenal (low cortisol) franchise, the development of Chronocort for the larger adrenal insufficiency market looks like a relatively straightforward line extension. However, the US will inevitably be more involved and a partner will be key here.
Broader endocrinology pipeline emerging
Increasingly the pipeline is coming to the fore with positive data from the testosterone replacement therapy DITEST. This is a significant market opportunity with an unmet need for safer, more convenient alternatives with DITEST showing potential to provide a best in class addition. With a streamlined branded generic regulatory pathway on offer, we look forward to the attraction of a suitable partner to progress DITEST for classical male hypogonadism. Our Discounted Cash Flow valuation yields a fair value of 99p per share. Please see our initiation of coverage for more details on Diurnal Group.
Adrenal franchise sales (£m)
Source: Calvine Partners Research
Diurnal Group Income Statement (£m)
Source: Calvine Partners Research
Diurnal Group Cash Flow Statement (£m)
Source: Calvine Partners Research
Diurnal Group Balance Sheet (£m)
Source: Calvine Partners Research
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