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Diurnal Group - Trading update ahead of R&D day

Diurnal has provided a trading update this morning to end December 2021, as the company moves to a calendar year-end from its previous end-June reporting period. Clearly, this makes comparisons more challenging particularly since Efmody will be the key to the future success of Diurnal's endocrinology franchise and we are still in the early launch phase here.

Nevertheless, despite our modest expectations for Alkindi generally and the continued impact of the pandemic on physician and patient visits, the release is notably upbeat with sales increasing by a laudable 46% (39% in core markets).

The main role of Alkindi for us has been the establishment of an endocrinologist focussed commercial infrastructure in Europe ahead of the launch of Efmody, Diurnal's flagship treatment for adrenal disorders caused by low cortisol.

In this regard, these are still early days in the launch phase of Efmody in Europe with only the UK, Germany and Austria contributing for now. Sales of Efmody reflect initial launch activities in the congenital adrenal hyperplasia (CAH) indication and are reassuringly in line with management expectations. Additionally, we note with keen anticipation the comment that "...sales are expected to accelerate significantly in the first half of calendar year 2022". The CAH addressable market for CAH in Europe is around $270m.

We have high hopes for Efmody given that it offers for the first time the prospect of a replacement therapy that best mimics the circadian production of cortisol. As a result, Efmody should facilitate better management of elevated overnight androgen levels at a lower dose than conventional glucocorticoid therapies. Indeed, we believe that Efmody possesses the attributes required by the CAH patient as they seek optimal treatment.

Additionally, we believe that the market has yet to fully appreciate the potential applicability of Efmody to other cortisol deficiency disorders such as adrenal insufficiency (AI). Efmody for AI could be on the market as early as 2024 and will open a further $1.8bn opportunity for Diurnal.

We look forward to the forthcoming R&D day on February 2nd to raise awareness of these opportunities as well as the prospects for other important pipeline programmes including DITEST, potentially the first native testosterone replacement therapy for the treatment of male hypogonadism.

We have a DCF derived valuation of 241p per share for Diurnal Group.

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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