DiaMedica Therapeutics Inc. (DMAC) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the DiaMedica Therapeutics Conference Call to announce the interim results from the company's REDUX Phase II study of DM199 in the treatment of chronic kidney disease. An audio recording of the webcast will be available shortly after the call today on DiaMedica's website at www.diamedica.com in the Investor Relations section. Before the company proceeds with its remarks, please note that the company will be making forward-looking statements on today's call. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in these statements. For information, including factors that could cause actual results to differ from projected results appears in the section entitled Cautionary Note regarding forward-looking statements in the company's press release issued earlier today and under the heading Risk Factors in DiaMedica's most recent annual report on Form 10-K. DiaMedica's SEC filings are available at www.sec.gov on its website. Please also note that any comments made on today's call speak only as of today, June 29, 2021, and may no longer be accurate at the time of any replay or transcript rereading. DiaMedica disclaims any duty to update its forward-looking statements. [Operator Instructions] I would now like to introduce your host for today's call, Rick Pauls, DiaMedica's President and Chief Executive Officer. Mr. Pauls, you may begin.

Thank you, operator. Good morning, everyone, and thank you for joining us today. I'm very pleased to welcome you this morning to our conference call to discuss the interim results from our Phase II REDUX of DM199 in the treatment of patients with chronic kidney disease. Earlier today, we issued a press release summarizing the interim results, which can be found in the Investor Relations section of our website at diamedica.com and as an exhibit to the current report on Form 8-K filed with the SEC earlier today. I'm joined this morning by our Chief Medical Officer, Dr. Harry Alcorn. Following our prepared remarks, as the operator indicated, we'll be happy to take your questions. Let me start off by saying that the interim data from REDUX is very encouraging, and we believe we are seeing meaningful signals of activity in kidney function improvements and blood pressure control. These signals are consistent with the anticipated mechanism of action for DM199 and the clinical use of Porcine KLK1 in Asia. As noted in the press release, we are releasing the data from all 3 cohorts. With the COVID-related delays in our enrollment, we included all 3 cohorts in our analysis so that we could have a more complete picture of the results and so that we can start our review of the data for planning next steps for our chronic kidney disease, or CKD program. And given the positive signals that we are seeing, we thought that this is information that everyone would like to see. Without trying to steal Harry's thunder this morning, we are pleased to report that the data continues to indicate that DM199 is safe and well tolerated with over 1,500 new injections in REDUX. Additionally, seeing clinical improvements consistent with the DM199 mechanism of action across all cohorts gives us further confidence that DM199 is biologically active. Keep in mind that we're still dealing with a small sample size and enrollment continues in the hypertensive African-American and IgA nephropathy cohorts. So perhaps I should say that we're cautiously very optimistic. Let me also point out that we intend to submit for a late-breaking presentation at November American Society of Nephrology Conference, in which we plan to present a more full data sets. I would also like to point out that the biological activity we're seeing in REDUX gives us even more confidence in our upcoming study of DM199 in acute ischemic stroke to improve patient outcomes following a stroke and to reduce the risk of stroke recurrence. Our objectives for conducting REDUX study were to more broadly explore the potential therapeutic effect of DM199 for CKD and put ourselves in a position where data could drive our development program in CKD. Specifically, we were seeking data on the impact of DM199 on these causes of CKD, additional data on the dose levels and pharmacokinetics for DM199 and data on the overall safety profile in CKD patients. With respect to the 3 causes of CKD we are studying, they all represent high unmet medical needs with little to no available therapies today. For patients with IgA nephropathy, or IgAN, is a progressive autoimmune disease with no approved therapies. It's an orphan indication in the U.S. and Europe and also Asians are genetically predisposed to IgAN at a greater rate than other ethnic groups, and therefore, it's a much larger patient population in China and Japan. Up to half of IgAN patients are at risk of developing end-stage renal disease within 10 to 20 years. African-Americans are more disposed to hypertension, often attributed to being salt-sensitive. As we've discussed in the past, these individuals are at much higher risk of progressing to kidney failure and exhibit lower KLK1 levels. It has been reported that African-Americans are 3 to 4x more likely to develop kidney failure. Lastly, for diabetic patients, there are approved drugs used to manage their hypertension and diabetes, but these drugs generally only slow the rate of decline in their kidney function. Kidney function is primarily measured by the change in estimated glomerular filtration rate or eGFR. As we can see in the left-hand chart on this slide, on average, these patients will experience an annual decrease in their eGFRs of between 4 and 5 ml per year. In the context of the REDUX study, that would translate into an expected decline of approximately 1-plus ml per minute over 3 months and possibly greater during the COVID pandemic. In recent years, the FDA, in an attempt to encourage earlier access to new medications for patients, has shown a willingness to accept declining in albuminuria as a surrogate endpoint for conditionally approving rare CKD therapeutics. albuminuria, as measured by the urinary albumin to creatinine ratio, or UACR, is a key predictor of kidney disease progression. We are grateful to the FDA for this change, which we hope to benefit from. For full approval, therapeutics need to be based upon slowing the rate of decline in eGFR over approximately 2 years for rare forms of CKD. With this context, let me now turn over to Dr. Alcorn for a review of the interim data from our REDUX study.

Thank you, Rick, and good morning, everyone. As Rick mentioned, we are very pleased to be able to share these results with you this morning. Again, our Phase II REDUX study is focused on evaluating the effects of DM199 in 3 causes of CKD at doses levels of 2 and 5 micrograms per kilogram. This study is conducted in 3 cohorts: The first cohort includes hypertensive, nondiabetic African-Americans. The second cohort includes patients with IgA nephropathy, and the third cohort includes patients with hypertension, diabetic kidney disease, all of whom have elevated UACRs between 150 and 5,000. Note that we are allowing participants with mild albuminuria, UACR levels between 150 and 500, as we are interested in investigating the effects of DM199 in the mild as well as the moderate groups. However, IgAN studies typically exclude mild albuminuria. So we are prespecified an analysis of our results, both participants with moderate to severe albuminuria, meaning the UACRs are greater than 500 from comparability to competitive studies and have included that information in today's presentation. Participants in REDUX were treated with subcutaneous injections twice weekly for 95 days. Our primary efficacy endpoints looked at changes in kidney function based on albuminuria, EGFR and also the change in blood pressure. The study also gathered data on safety, tolerability and a number of additional pharmacodynamic and pharmacokinetic end points, which we hope to present in the scientific presentation at the American Society of Nephrology Conference this fall. Here is an overview of the patient disposition and baseline demographics for the data being presented today. To date, we have enrolled 58 participants, 6 have withdrawn, 2 per cohort, for reasons unrelated to DM199 and 6 are pending data. Of the 56 participants available for analysis, 64% are males, the mean age range from 51 to 57 to 68 in the 3 cohorts, and the ratio breakdowns were reasonably reflective of the underlying populations. Mean eGFR for the cohort was in the moderate category or stage 3 for CKD. Mean UACR averaged greater than 800 milligrams per gram for all cohorts, and the mean blood pressures were elevated in cohorts 1 and 3 and normotensive in Cohort 2, the IgAN participants. With 52 participants completing the study, data continues to indicate a strong safety and tolerability profile for DM199. There were no discontinuations related to DM199. There were no serious adverse events related to DM199. And one of the reasons for including the African-American cohort was to address the possible concern of this population with a higher risk for angioedema and that KLK1 therapy may contribute to angioedema. We're very pleased that we saw no drug-related angioedema, nor did we see any hypertension or any fluid overload events. The adverse events observed were mild to moderate site irritation at the injection sites, as most commonly reported adverse events. In Cohort 1, hypertensive African Americans, we have data on 12 participants. For this interim analysis and all metrics were positive, UACR was reduced, eGFR was increased and BP was decreased. Specifically, UACR decreased by 27% in the moderate albuminuria participants with those baselines of UACRs greater than 500. And what's additional is, is that the reduction was more significant in the 2-microgram per kilogram dose with a 52% reduction. In this cohort, EGFR increased by 2 ml per minute. And importantly, this patient group saw impressive blood pressure regulation, with systolic blood pressures decreasing by 8 millimeters of mercury and diastolic by 3 milligrams for mercury as well. These improvements were driven primarily by subjects receiving the 2-microgram per kilogram dose, as footnoted on the slide, and with the caveat, these were very small ends at this point. The data, however, is consistent with the mechanism of action for DM199 and the Asian data from the Porcine KLK1 showing that KLK1 decreases blood pressure in hypertensive patients. In Cohort 2, the IgAN patients, we had interim data on 16 participants. In these patients, UACR was reduced by 33% in the participants with moderate albuminuria participants, and this reduction was statistically significant with a p-value of 0.002 using a paired t-test. Again, this was prespecified analysis, so we could report data comparable with other IgAN studies. EGFR was stable with less than 1 point change, which is meaningful in the population as noted earlier, generally sees a steady decline over time. We're particularly pleased to see the stable blood pressure in this cohort as participants were normotensive. Remarkably stable blood pressure here without any hypotension is an on-target response for DM199, specifically in this IgAN patient population. Our DKD Cohort #3 has been fully enrolled and data available for 28 participants. In this group, eGFR was stable, and there was no change in UACR. The patients did have a significant reduction in their blood pressure, with a solid decrease of 5 millimeters of mercury in 33 participants with even a greater decrease of 10 millimeters of mercury at the 2-microgram per kilogram dose in 15 participants. Initially, we were very perplexed at the lack of UACR improvement given the significant decreases in blood pressure. But as our advisers have noted, DKD is a complex disease with many pathways being affected, many of which are still unclear today. The reduction of blood pressure in this population is notable, however, and future review of data is needed to better understand the potential effects of reduction in blood pressure on eGFR and UACR. With that, let me turn you back over to Rick at this time.

Thank you, Harry. So to recap Harry's discussion, we believe that we're seeing clinically relevant signals, in particular in the hypertensive African-Americans and the IgAN patients with corresponding 27% and 33% reductions in UACR, stable to increasing eGFR and blood pressure reductions of 5 to 8 plus ml of Mercury in the hypertensive subjects. Importantly, with no change in blood pressure in normotensive subjects or risk of hypotension. While these results are coming from small populations, they are consistent with the DM199 mechanism and as mentioned earlier, the data from Asia with the porcine forum. On top of this, we continue to build an excellent safety profile for DM199. With over 1,500 injections in REDUX to date, there have been no drug-related serious adverse events. And this is also consistent with the human urine now and porcine-derived forms of KLK1 used in Asia. This is excellent safety profile, is invaluable for both regulatory discussions and patient recruitment for our studies. Additionally, affirmation of the biological activity of DM199 and the confirmation of Asian data from the endogenous form of KLK1 in the treatment of stroke, which provides an additional confidence in the pivotal Phase II speciality trial in AIS we expect to initiate in the coming weeks. The reductions in blood pressure with DM199 also provides an interesting statement with respect to reducing the risk of stroke recurrence. High blood pressure is considered a key risk factor in these patients. Clearly, we now want to finish enrollment in the first 2 cohorts of the REDUX study. At the time, we'll be able to update our analysis based upon the full REDUX data set and be in a position to make important decisions on the full study. While this study enrollment completes, we'll use the time to consider regulatory paths for hypertension in African-Americans, which may include rare form causes of CKD. And, as we mentioned earlier, we intend to submit for a late-breaking presentation at the November American Society of Nephrology Meeting during Kidney Week. Lastly, the clear signals of biological activity that we're seeing in the REDUX interim data includes the on-target response in blood pressure, make us more optimistic about the REDUX 2 pivotal study in stroke to improve patient outcomes and reduce the risk of recurrent strokes. We now would like to open the call for discussion. Operator, if you could please introduce the first caller.

Our first question comes from the line of Etzer Darout from Guggenheim Securities.

Congrats on the update here. Just a quick question. Maybe more so in sort of the African-American and IgA nephropathy cohorts. Do you have any data yet sort of correlating sort of the response to sort of KLK1 level? Again, I guess, with the overall data being supportive of the hypothesis, I just wanted to get a sense of if there were kind of any meaningful conclusions you can draw in terms of that correlation.

Thanks, Etzer. So we're still looking at the data and look at the PK. So we're going to need a little more time. But we do know that there is a clear inverted U dose response curve with our drug, and it's actually the basis of one of our pending patents. We are seeing some signals at the lower dose, greater than at higher, but we need to spend some more time looking more closely, which we'll be doing over the next few weeks and months.

Got it. And then maybe just a quick second one. Thinking about sort of the data set, the full presentation at Kidney Week, would it be fair to assume sort of next steps would be, for example, IgA nephropathy study sort of similar to what we've seen with sort of Nefecon in terms of registration study? Is that a fair sort of assumption in terms of next steps for that program?

Yes. Right now we still see IgAN as the lead indication for -- in a very clear regulatory pathway, as you mentioned. While we do want to talk to the FDA and specifically looking at potential pathway for hypertensive African-Americans that may also include a rare path, so looking at the patients that have APOL1 gene mutation and also FSGS, which has a high level of African-American that are also hypertensive.

Our next question comes from Alex Nowak from Craig-Hallum.

Just want to clarify on the UACR commentary. So you mentioned the positive signals in the IgA in the African-American cohorts, but it looks like you are excluding the 1/3 or about half of the number of patients that are on that analysis. You said it was a subgroup analysis or a predefined endpoint to look at that. So when you set the study up originally going back about 18 months ago now, was it originally set to look at the over 500 UACR patients independently of the overall group?

Yes, Alex, it was. So as we look at the other IgAN protocols that are out there, they usually start around 500 and actually go to 800 for stratification as enrollment. So we just wanted to better understand what we would have with this lower group. Obviously, you're not going to see the greatest percentage change with numbers less than 500, especially if you closer to 200 than you will see above 500.

Okay. Got it. And then I remember the original promise with DM199 was to able to treat chronic kidney disease across all the spectrums. It really looks like no effect on CKD and certainly some effect on African Americans with IgA. So why do you think there is a divergence that you saw in outcomes?

Yes. Good question. We had this discussion with our Scientific Advisory Board. And DKD is diabetic kidney disease that is complex. It has multiple pathways that are very different than the IgAN in the African-American nondiabetics hypertensives. So due to the complexity, there's not a clear answer to your question. But I wouldn't say that there wasn't a response in the DKD group. There was in 30% of the patients that we did see a positive improvement. So we need to better understand why did that subgroup which we not preidentified, but there was definitely an improvement in the DKD group.

Yes. And Alex, let me -- I'll just jump in and add that in fact that we saw some very significant drops in blood pressure in the DKD patients. We typically would expect that UACR would follow. And so again, this data, we just started analyzing the last few days. So we're going to spend more time looking at more carefully and working with our scientific advisers to better understand. We see a clear path forward here looking at rare forms as we move forward.

The other thing to remember, Alex, too, is that with this blood pressure that we did see in Cohort 1 and 3, there was a definite improvement for these patients. And we also know that basically to hold their eGFR stable is also remarkable in this population. Basically, there are no drugs that can keep your eGFR stable, only change the slope of decline.

No, absolutely. That makes sense. Okay. And then just last question, just to actually on the stroke really, when would you start to -- expect to start the pivotal stroke study, an update there?

Yes. So we're still on track, Alex, this summer. So no change in the guidance.

Our next question comes from François Brisebois from Oppenheimer.

Congrats on the data. I just wanted to know the prespecified over 500 baseline. Why did you want to look at patients under 500? And I guess the follow-up there is, in the studies going forward, would you even look at patients under 500 or no point there?

Yes. Thanks, Frank. So the premise here is that this is the first Phase II trial in patients with chronic kidney disease. And we want to get a better understanding on which patients we see the greatest effect with this drug. So for that reason, we chose over the 150 and then prespecified the over 500. If we look at competing compounds in development, they typically have a baseline between 750 and 1,000 for IgAN. And so I think what we're seeing here is pretty clear that, going forward, we want to focus those patients that have moderate to severe, which is over 500.

Okay. Great. And for the African-American population, you had the 52% at the lower dose level. Anything there, maybe pharmacologically that would make sense that the lower dose hit that 52%?

Yes. So it's something that when we look at the mechanism of the drug and we go back to past studies, we see a very clear inverted U dose response curve. So if we get -- if we dose patients outside of the normal range, we believe that the [indiscernible] will deactivate downregulate the protein. And so we've seen this in a number of studies, we've seen this in preclinical studies. And as I mentioned, the basis of our pending patent right now. So we're going to spend some more time, and we need to look more carefully. But our whole [indiscernible] is if we can restore KLK1 to the normal range, we think we're going to see very encouraging improvements in all these markers, kidney function, blood pressure and stroke function. And if you go back and look at our stroke study that we spent a lot of time on narrowing the dose, we selected 3 micrograms per kg as the subcutaneous dose. So something that we want to spend some more time on and better understand.

And then on the p-value of 0.002 for the IgAN population, those was with 33%, 27% with African-Americas, there is no p-value. Harry, I think you made a comment about you could compare it to other studies here. What exactly does that p-value mean here? And why no p-value in African-Americans?

Yes. So basically, we've only included the p-values on those compounds -- on the markers that we are statistically significant, recognizing that these are still relatively small ends. When we do some comparisons, I mean, looking at other compounds and developments, typically, you see improvements in UACR in the mid-20% range with stable to slightly decreasing eGFR compared to placebo.

Okay. Great. And then if this is the interim look -- sorry, I'll sneak in the last one here. This is the interim look for, I get it for IgA nephropathy and African-American cohorts, but 28 is not totally full, I guess, on the DKD. Should we expect any more DKD in the full results? And when would we expect the full results for all cohorts here?

Yes, we'll have full results to be able to report out on that, and we anticipate that in the next few months. But the final analysis will be everything rolled out that will be presented when it's complete.

Our next question comes from Elemer Piros from ROTH Capital.

So my question is, how many additional patients do you plan to enroll in Cohort 1 and Cohort 2? And #2, would you focus on treating them with a low dose of DM199? And would you focus on the higher, above 500 albuminuria cut off values?

Sure. Thanks, Elemer. So great question. Those are exactly things that we're actively talking to our Scientific Advisory Board on right now in terms of how many patients do we need for to complete the analysis. I think if anything with this data today, this should be helpful and encouraging to encourage the sites and the patients to join the study. I mean we're seeing some very clear improvements in these patients' kidney function and blood pressure control. So we will do what we can here to get this completed, the enrollment. And as we mentioned, we plan to have a more complete analysis on all patients that have enrolled during Kidney Week in November.

And our next question comes from Thomas Flaten from Lake Street Capital.

Just to be more specific, Rick, what is the enrollment status in Cohorts 1 and 2 right now?

Yes. So for Cohort 1 with the African-American groups, we have 19 enrolled to date. For the IgAN, we have 22 enrolled to date for these 2 cohorts.

So is there -- from a pacing perspective, that's not a huge jump from where we were in early May. Is there -- are there lingering issues related to enrollment? How do you expect that to pace over the course of the coming months assuming you need to get another approximately 10 in each cohort to get to the 30?

Correct. So basically, screening had been basically reduced down to about 0 to 1 with a few of the sites we were working with. Screening has now picked back up at 7 of our key sites. We're averaging 2 to 3 screens a week, which we didn't have previously. So we anticipate that to pick up.

Great. And then just one final one. On the comments around the blood pressure improvement in the diabetic kidney patients, am I -- and you mentioned you wanted to look into that and what implications that might have for the other endpoints. Can I read into that, that you think there might be some lag in performance on the other end points? Or I'm just trying to make sure I can interpret that appropriately?

Yes. Sure. So I guess the first question we have for all 3 courts is that do we have an active drug? Is this biologically active? When we look at the blood pressure control, in particular, the 2-microgram in the DKD, it's very clear and actually it was statistically significant. All the caveats being a small end. And these are patients that are hypertensive and that cannot get their blood pressure under control. So first off, one of the main causes of kidney function is the impact of high blood pressure. And so we were surprised by the fact that we did see that reduction in blood pressure, but not the corresponding drop in UACR. We need to look at this more carefully and discuss this with our Scientific Advisory Board to get a better understanding of the data.

If you look at the [indiscernible] study that was done in the diabetic population, if you look at the first 12 months, basically, there was no improvement, actually or worst improvement in that population. And it wasn't until after 12 months that they actually saw an improvement with the DKD population. That being said is, there may be something of importance there for us to review to understand what is the length of time that's required for these patients that have diabetic kidney disease for this type of improvement.

Our next question comes from Jason McCarthy from Maxim Group.

This is [indiscernible] for Jason. I think this had been touched on already, but with respect to the African-American cohort and the UACR data point, it looks like there were only like -- only 6 patients that were valuable. I was just wondering what criteria -- like, what is the criteria used to determine whether or not patients are valuable -- was that the UACR cutoff outlined here in the press release over 500? Is that why it was only 6 patients as opposed to value closer to the whole 12 that were enrolled so far?

Absolutely correct.

Okay. Okay. Cool. And then I believe you mentioned, again, in response to another analyst question that improvements in UACR, the mid-20% range are typical. Was that specific to IgAN? Or is that something we kind of expect to see across all the cohorts?

Yes, great question. So yes, that's typically we look at other competing compounds in that mid-20. Probably a good recent example is Novartis just completed here, announced about 3 weeks ago Phase II results in IgAN. And over 3 months, they had a 23% reduction in UACR. They had stable eGFR versus placebo and then moving to pivotal trial based upon that. So a lot of other compounds are in that same range.

Okay. So then that is specific to the IgAN indication that wouldn't necessarily apply to, say, DKD or any of the other indications [indiscernible].

Yes. Yes specifically, IgAN, but other rare causes typically in that same range.

And that's what the agency is going to be looking at to is are you seeing an improvement with a reduction of 20% or greater.

Okay. Cool. And then in November, can we expect a more complete data readout from the African-American cohort, including patients that have a baseline UACR that's different from the over 500 outlined in the press release?

Yes, that's right.

No further questions. Mr. Pauls, please continue.

Thank you, operator. So again, we appreciate your time today and joining us this morning, and we appreciate your interest and your continued support. And with this, this concludes our call today. Bye-bye.

Thank you. This concludes today's conference call. Thank you for joining. You may now disconnect.