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Diurnal Group - Efmody's commercialisation

Diurnal will launch Efmody in Europe shortly. As its most important product to date, commercial progress is likely to be a crucial near-term share price driver. Accordingly, we publish a report today detailing Efmody's prospects in Congenital Adrenal Hyperplasia (CAH) and beyond.

Individual European countries are free to set medicines' prices and decide on the treatments they wish to reimburse. Therefore, the rollout will be gradual, and it can take over 12 months to complete reimbursement discussions. The important Northern regions will be watched closely.

Alkindi has been available in Europe since 2018. It targets a small market and consequently our sales forecast remain small. However, Alkindi provides a commercial platform for Efmody, which should ease the launch. The pandemic tempered Alkindi sales growth, but the strength of the sales capability is highlighted as most newborns in key territories are now treated with Alkindi. Efmody will be able to capitalise on this success, targeting the same small number of endocrinology centres. Diurnal should see meaningful operating leverage with more product going through the existing infrastructure and a similar cost base. While it was disappointing that Efmody failed to achieve orphan status, our pricing assumptions were conservative and therefore remain unchanged.

Competition in development for CAH and advocacy groups have increased awareness of the disorder and should help to enlarge the market. Efmody is the first and only glucocorticoid based treatment able to mimic human physiological circadian release. Efmody's ability to replace cortisol will allow it to co-exist with CRF1 inhibitors should they reach the market. The CRF1 inhibitors aim to reduce supranormal levels of overnight androgens and do not replace cortisol.

Beyond CAH, Adrenal Insufficiency (AI) is a much bigger opportunity for Efmody. As a line extension, clinical development should be relatively straightforward. The clinical study, which will start later this year, will compare Efmody against Plenadren, an existing modified-release hydrocortisone product. A successful result should provide Efmody with a prime position in the $1.8bn European AI market.

Diurnal's discussions with the FDA have confirmed that pipeline asset DITEST, a differentiated testosterone replacement therapy (TRT), can use the branded generic regulatory pathway (505(b)(2)). Therefore, Diurnal will be able to take advantage of data already provided by other testosterone-based products, and this should allow a faster and lower-cost route to market. We believe that DITEST could be a blockbuster product, delivering sales over $1bn per annum. We look forward to further details on DITEST later this year.

Diurnal's recent trading update highlighted the considerable progress management has made over the last 12 months, most notably the marketing approval of Efmody which significantly de-risks the investment case. The share price fails to reflect the success and at 60p offers enormous upside to our 241p per share DCF derived valuation.

See our research note here.

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Diurnal Group is a client of Calvine Partners, and as such, this publication is not independent and should be considered a marketing communication under FCA Rules. None of the information contained in this publication should be considered as any form of advice.



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