Christmas cracker Diurnal races to a premium

It’s not the ideal backdrop for a stock market debut – the last day before the Christmas break. But Diurnal Group (LON:DNL) appears to have got it spot on with shares racing to a premium in early trade. The speciality pharma company, a spin out from IP Group (LON:IPO), raised around £30mln from the AIM listing and will be valued at a touch over £75mln. The stock was placed with institutions at 144p, which suggests those who took part in the City whip-round will be very pleased as the shares are now changing hands for 151p each, albeit on minimal volumes. As well as the placing proceeds, Diurnal has agreed a £4.7mln, five-year loan convertible at the placing price. The funding is being provided by IP2IPO, IP’s original name and now the Monica for one of the incubator’s subsidiaries. Anyway, Diurnal is an interesting addition to the ranks of the pharma and biotech sector. It is focused on finding treatments for chronic hormonal diseases. Its lead drug, Infacort, has been developed to combat a conditio called n adrenal insufficiency, which is more commonly known as Addison’s Disease. It symptoms include weight loss, fatigue and muscle weakness. The drug, which is being used to treat children under six, is undergoing phase III clinical trials in Europe. So if all goes to plan, it could be authorised by the third quarter of 2017. It is unusual to see a company list with a drug so far along the regulatory pathway. Usually, biotechs will tap the market at the start of the clinical study programme and hope to partner a drug by phase II. Its second drug candidate, Chronocort, for congenital adrenal hyperplasia, is set to enter its final-stage trial in the first quarter of next year. The new funds infusion will help with the continued development of its two potential products. Diurnal has spotted market opportunities in the specialist endocrinology market worth up to US$11bn a year. How long then before this one catches the eye of an ambitious drug giant looking to replenish a pipeline that has slowed to a dribble because of patent expiries?