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

Thanks, Julie. Morning, everybody, and thanks for joining our Q1 2022 conference call. It's a pleasure to be able to talk with all of you today. With me is Dr. Kirsten Gruis, who serves as our Chief Medical Officer; our CFO, Scott Kellen, is unwell today and isn't able to be here. I'd like to begin this morning by discussing how things are moving along in our ReMEDy2 stroke trial, where we're looking at whether DM199 can help acute ischemic stroke patients — those with no existing treatment choices apart from supportive care — recover physically better and reduce how often strokes recur. Keep in mind, that population equals roughly 0.5 million patients within the U.S. by itself. In under 2 months, counting from our prior call on March 15, we're delighted to report substantial headway, and I'd like Kirsten to give us a clinical update.

Thanks, Rick, and good morning to all. We've kept making steady headway when it comes to engaging and activating sites, and that's going to be essential if we want to wrap up this trial on time and without wasting effort. When we held our previous call, 4 hospital sites had been activated, meaning they could recruit and enroll patients. At present, 9 sites are activated, and we expect to hit roughly 17 activated sites by June, which lines up with the goal our corporation has set. Just as crucial is acknowledging that a lot of hospitals haven't managed to bring their research teams back up to where they stood before the pandemic. When a study team operates with fewer staff than it needs, those teams realize we worry about whether their personnel are sufficient and whether they can properly look after a study patient once that person has left the hospital. That could create added doubt about whether a patient can complete the entire 3-week course of study treatment, and it can stop a site from enrolling someone they'd ordinarily have signed up. To tackle this, we've just engaged a clinical support service firm with national recognition to help us work with the study sites that stand to gain when we supply extra staffing resources, supporting both patient recruitment and oversight of each patient's participation as they move out of the hospital, into an intermediate care facility, and finally back to their own home. Based on the numerous conversations we've held with study sites, our advisers and other parties, we've come to understand that the staffing situation at the study site ranks as the #1 problem people cite as holding research back. By offering this help, this added staff, our aim is to reduce the administrative load on the physician, the study site coordinator, and everyone else on the study team.

Thank you, Kirsten. We're quite happy to be establishing a steady cadence of onboarding hospitals, and our clinical group is taking initiative in crafting inventive approaches to boost enrollment for the stroke study, all while sites continue to grapple with personnel shortages. During our previous call, we talked about how we're giving priority to study locations with the greatest capacity to enroll patients, ideally those capable of bringing in at least one participant each month. I'm eager to find out whether the staffing approach we've devised can assist sites in reaching that level of enrollment; therefore, we remain firmly dedicated to pushing DM199 forward, which is the initial pharmaceutically-active synthetic version of the KLK1 protein being tested in patients. DM199 offers a novel therapeutic mechanism of action that could give stroke sufferers the possibility of better recoveries and a lower chance of experiencing another stroke; and I'd like to emphasize that the urine-derived version of KLK1 protein, which is approved throughout Asia, has been sold there and has been given to hundreds of thousands of patients starting in 2005. Findings from our initial ReMEDy1 aligned with what had been reported for the urinary KLK1. That's the reason we hold such an optimistic view of DM199. Let me restate that the duration of patient treatment in ReMEDy2 is fairly brief compared with other studies. Each stroke patient receives treatment for 3 weeks, with the last follow-up occurring at 90 days; we still anticipate finishing the interim analysis for ReMEDy2 at some point in 2023; once the timing becomes clearer, we'll share additional direction on that. Now a quick word on our chronic — our CKD, or chronic kidney disease, initiative. We hold a strong conviction about DM199's distinctive capacity to enhance kidney function among CKD patients as well as to manage blood pressure in those with hypertension by bringing low KLK1 levels back up. During our prior call, we noted that our attention is on gathering the last of the data and getting the subsequent steps ready, which includes choosing the primary cause of CKD that might deliver a greatly needed treatment to patients. We anticipate that the concluding analysis of the complete data set will keep showing robust signals for IgA nephropathy as well as among the hypertensive African-American group. Although stroke currently represents our primary emphasis, we're putting together a strategy to advance the CKD program. At this point I'd like to walk through our financials. Yesterday, after the market shut, we reported results for the first quarter and submitted our quarterly report on Form 10-Q. You can find these documents on the DiaMedica or SEC websites. I'll begin with the balance sheet. As of March 31, 2022, our cash and investments combined came to $41 million, a decline of $4.1 million compared with $45.1 million on December 31, 2021. Given this solid position on our balance sheet, we think the cash we hold will fund both the clinical development of DM199 and our operations into early 2024. Spending on research and development during the opening 3 months of 2022 came to $2 million, versus $2.4 million across the same stretch of 2021 — a drop of $400,000. That decline came mostly from lower costs tied to the REDUX CKD trial, which finished enrolling patients in December 2021, plus reduced DM199 manufacturing process development activity this quarter relative to the year-earlier quarter. Those savings were offset only in part by greater spending on a ReMEDy2 stroke trial and by higher staffing expenses stemming from growth of our clinical team during the current period. General and administration costs reached $1.6 million in the first 3 months of 2022, rising from $1.2 million in the first 3 months of 2021; that $400,000 rise came from a mix of greater professional service fees, directors and officers' liability insurance, and personnel expenses incurred to support the expansion of our operations and clinical programs. As you can see, our first quarter was highly productive. We keep achieving meaningful progress in our lead AIS program. We added 2 key people to our management team and keep growing the number of sites capable of enrolling patients in the ReMEDy2 trial. Lastly, our balance sheet is still strong, and we believe we are well positioned to carry out the plans we walked you through today. With that, we'd like to open the call to questions. Operator, if you could please introduce the first analyst.

From those locations you've already gotten up and running with patients joining, can you give us any indication of what the enrollment rates are shaping up to be? Is there anything you could share on that front, simply so we understand how much these sites are capable of producing?

Sure. Thomas, we're still at an early stage. We're only now working through bringing these sites online. What we've aimed for in our projections — for the interim analysis, which comes next year — is reaching an enrollment rate of 0.25 per site each month. In other words, a single patient at each site every 4 months. So it remains somewhat premature. That said, I believe in the months ahead, we ought to gain a clearer picture regarding that enrollment rate. And we brought that up during our prepared remarks too. What we're truly focusing on are those sites we believe are capable of delivering one plus site per month.

To clear up the interim analysis point — in the prepared remarks you mentioned 2023, and I believe you just said early '23. Does the target remain the first half of '23?

Correct. Our guidance is 2023, and our hope continues to be that it lands in the first half of the year.

Understood. Then I have just one additional brief question. Regarding how long the cash will last, what does that assume about CKD development? Does that projection of the cash runway include any investment in CKD?

Very minimal. Our money and the attention we devote internally are essentially centered on the stroke study.

I'm just wondering, at what point did the support service become available for the stroke study? And after that, what does it cost incrementally within the study to include that format?

Honestly, it has only been throughout the past few weeks that we've been getting things operational and underway. So that cost is truly going to begin ramping up over the coming months. And it's going to be several hundred thousand dollars, yet nothing that will — this falls under — this was incorporated into our existing budget and regarding our anticipated cash outlay continuing into early 2024.

All right, that sounds positive. Now regarding the increase in locations, plus the active sites currently signing people up, would you say this mainly happened because you've spent a couple of months already in discussions with those locations, and as COVID is sort of fading away around here, they're simply going after additional trials more aggressively? Could you give us a bit more information about what you're discussing with those locations?

Sure. I'd say those two things are both at play. Setting up a trial location, you know, might take as much as 6 to 9 months quite easily, whether it's an academic center or merely a smaller hospital; therefore, I believe it genuinely comes down to a mix of the effort we've put in across the past 6, 9 months. And obviously, as COVID infections have dropped, hospitals now have beds open, plus somewhat more staff and supplies, our view is that this too is driving the rise in insights.

Got it. Then you've made a number of really solid personnel investments. You're bringing the support service in. When it comes to further investments required to prepare for stroke, whether from the angle of enrolling in trials or preparing for commercialization down the road, how should we be thinking about that?

Yes. So we'll keep looking to grow our team, though a very — a massive jump in staff isn't something we foresee. All of this is essentially already accounted for within our present budget. Thus for us, especially for our clinical group, what matters most at this moment is really the balance regarding the staffing we possess in-house alongside the CRO we're working with to assist with the study. Regarding the commercial side — and then when it comes to the commercial aspect, I mean, in January this year, we brought on Dom Cundari, our new Chief Commercial Officer, and really just helping to lay out what are those key things that we need to be thinking about a couple of years ahead of a product launch. So that's all going forward; and it's really — it's a balance in terms of the amount of cash we commit to that now versus as we get closer to the potential launch.