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

Thanks, operator. Good morning, everyone, and thanks for joining our Q1 conference call. With me today are Dr. Lorianne Masuoka, who serves as our Chief Medical Officer, and Scott Kellen, our Chief Financial Officer. Although just 6 weeks have passed since we last spoke, we've been hard at work ramping up activation of sites and enrollment of participants. On top of that, we've bolstered our clinical team by bringing on 3 seasoned clinical operations staff members, who will help us handle the substantial wave of new site activations anticipated across the coming 6 months, along with the trial's expansion worldwide. We're also heartened by recent news that Kailikang's usage momentum in China keeps growing. As we now understand it, upwards of 1 million patients received treatment with Kailikang, the human urine-derived version of KLK1, in China during 2023. To put that in perspective, it exceeds the total number of stroke events recorded in the United States in 2023. For sites weighing whether to take part in our trial, the extensive use of human-derived KLK1 should offer reassurance regarding the safety of KLK1 therapy. At this point, I'd like to turn things over to Lorianne for an update on our ReMEDy2 trial. Lorianne?

Hello, everyone. We're happy to share the news that, after our ReMEDy2 trial got back underway, the first participant has now been dosed. Getting that first person enrolled is especially hard, and it marks a vital step when you're resuming after a clinical hold tied to a safety event. The hypotension we saw earlier, when someone accidentally got a higher dose, went away on its own and cleared up fast, and our Phase Ic trial results plainly showed that the correct IV amount of DM199 doesn't bring on hypotension — even so, we understand people are often hesitant about being the very first to sign up once things restart. The investigator who dosed this participant gave very encouraging feedback, with no hypotension seen. That said, we don't know if this participant got the drug or a placebo. One win leads to another, and we're hopeful that other investigators will report a similarly good safety experience when they dose their first participant on DM199, which would push them to enroll additional participants. I'd like to stress that these stroke patients have no other treatment option and can't get any standard of care, whether that's TPA or mechanical thrombectomy. Investigators envision a future in which every patient has something available to treat them. So as more safety data comes in, we anticipate momentum will pick up fast. Based on what sites have told us, we think a critical turning point comes once the first 10 participants are enrolled — for them, that's a meaningful sample size. We'll keep our active sites informed about participant enrollment, and going forward we'll also distribute a monthly newsletter, hoping to spark a bit of friendly rivalry among the study sites. Now let me go over some details on site activation. Right now, 8 sites are activated. 2 of them are large sites: the University of Pennsylvania, tied to our National Principal Investigator, Dr. Scott Kasner, and Tampa General Hospital, a major stroke center. While activating these 2 sites, we found a common software coordination problem that we had to resolve so pharmacy orders could be processed through each site's investigational drug management platform. We collaborated closely with these 2 sites to fix it, and both can now screen for potential participants. We're actively working hand in hand with all the other sites waiting in line for activation, so we can head off similar delays and make sure their internal systems — such as their pharmacy investigational drug management platform — are completely up and running before activation, letting them start screening participants right away with no interruption. That's just one illustration of how we take best practices learned along the way and use them to improve operations at every site moving forward. We're a bit behind our near-term activation goals, but we still expect most sites to be activated this year, with a big bolus of U.S. sites in Q2 and Q3. Given how much interest we're seeing from high-quality stroke sites, we're looking at raising the target number of U.S. sites past the 40 we originally planned. What matters at this point is that we concentrate solely on those quality sites recognized as high enrollers. A significant point is that a large number of the biggest stroke-enrolling hospitals in the U.S. have now reached the start-up phase and are working toward joining our trial over the next few months. Such sites have played a major role in stroke trials conducted recently, which bodes well for our study. We expect that once they take part, this could foster competition between study sites and additionally help raise the enrollment rate for each site; we further believe that their backing reflects the promise of DM199 and, specifically, our differentiated mechanism of action, which selectively increases cerebral blood flow. Beyond the U.S., progress is solid. In Canada, backed officially by the Canadian Stroke Consortium, we have pinpointed 6 quality sites and are completing our regulatory submissions to Health Canada; a response is expected near the end of June. The Australian Stroke Alliance has just given its formal endorsement of our protocol, and we are currently choosing study sites and starting regulatory filing activities. Our plan is to collaborate with many of the same highly engaged centers that we partner with in our ReMEDy1 trial, along with new sites put forward by the network. Another thing I am excited to share is that our clinical operations team keeps getting stronger. Earlier this year, we announced that Rebekah Fries had joined as our VP of Clinical Operations; this marks the third company where Rebekah has come aboard with me to carry out clinical trials. Rebekah first came to DiaMedica as a consultant in January and has already achieved considerable progress in making our operations more efficient, both internally and externally with our numerous vendors, which we believe will produce momentum building and site activation. The other seasoned clinical operations staff referenced earlier had also worked previously with Rebekah and me at 2 prior companies. These additions matter for supporting the global expansion of our trial. At this point I will hand the call back to Rick.

I appreciate that, Lorianne. Like Lorianne mentioned, the teams handling our clinical operations have put in relentless effort backing the physician investigators along with the clinical study sites. Our confidence stays high that this work is going to generate substantial momentum when it comes to activating sites and enrolling patients, and that includes a large number of top-tier stroke sites with strong enrollment numbers joining the trial. Every one of the new top-tier stroke centers entering our study has a considerable number of sponsors reaching out to them. What led them to choose our DM199 stroke trial is that they've stated plainly their strong interest in the encouraging mechanism of action behind DM199, in particular its potential to boost blood flow selectively within collateral circulation by way of vasodilation in ischemic Penumbra after a stroke. On top of that, they value the mechanistic backing that our Phase II stroke results offer. Since the previous call, we've additionally been out visiting the recruiting hospitals so we can learn directly what investigators need, trying to figure out how we might collaborate with those hospitals to give them the best possible support, especially around enrolling participants. We see this as a key component of forging a solid relationship with the clinical sites. Our attention stays fixed on maintaining that momentum and carrying on with thorough site selection, contracting, and relationship-building work with medical institutions. We continue to feel at ease that, assuming nothing unforeseen comes up, we expect the 144th participant for our interim analysis will be enrolled during Q1 2025; we'll keep giving updates on the next conference call. At this point I'd like to hand the call over to Scott Kellen so he can go over the financial results for this quarter.

Thanks, Rick, and good morning, everyone — I'm glad you could be with us today. As Rick mentioned, we put out our financial results yesterday and filed our Form 10-Q for the quarter that ended March 31, 2024. Both documents are available on the DiaMedica site as well as the SEC's. As of March 31, 2024, our combined cash and investments totaled $46.5 million, with current liabilities at $2.6 million and working capital of $44.9 million. For comparison, at December 31, 2023, combined cash and investments stood at $52.9 million, current liabilities were $2.8 million, and working capital came to $50.9 million. The reduction we saw in both total cash and investments, as well as in working capital, was driven by two things: the net cash we spent to fund operations, and the deposit funds advanced to vendors who are backing our ReMEDy2 clinical trial in the current quarter. For the 3 months ended March 31, 2024, net cash used in operating activities reached $6.7 million, compared with $5.1 million in the same period a year earlier. That increase in net cash used was primarily the result of advancing deposit funds to vendors supporting the ReMEDy2 clinical trial. Based on our current cash and investments, we believe our cash runway extends into 2026. For the three months that concluded on March 31, 2024, our R&D spending reached $3.7 million, compared with $3.6 million during 2023's first quarter. Several factors pushed in opposite directions to shape that change. Greater expenses related to keeping our ReMEDy2 clinical trial going were partially balanced out by savings from trial activity that wrapped up during 2023. To be specific, that includes the company's Phase Ic and REDUX trials, as well as the in-use study work completed in 2023 that was done to resolve the earlier clinical hold placed on our ReMEDy2 trial; looking ahead, as the ReMEDy2 trial's global expansion proceeds, with sites starting up again and participants enrolling once more, we anticipate R&D expenses will climb at a moderate pace compared with recent prior periods. Management anticipates that the clinical trial efforts and additional studies wrapped up during 2023 will temper those projected gains. For the three-month period that concluded on March 31, 2024, general and administrative costs climbed by $0.2 million, reaching $2.1 million, compared with $1.9 million during the first quarter of 2023. The main factor behind this rise was increased spending on personnel tied to growing our workforce, though this was partly counterbalanced by lower premiums for directors and officers liability insurance. DiaMedica anticipates that G&A expenses will hold flat relative to earlier periods. Net other income came in at $597,000 across the three months that closed on March 31, 2024. For the same stretch ending March 31, 2023, that figure stood at $256,000. Higher interest income recorded in Q1 2024 fueled this gain, and it stemmed from larger marketable securities balances held during this year's period versus last year's. Before we move into Q&A, I'd like to mention that we plan to contest the latest decision in the matter we filed against PRA. Because our counsel agreed to capped and contingent fee structures, the potential cost of pursuing that appeal remains at a manageable level. Having said that, operator, please go ahead and open the lines for questions.

I'd like to explore a little further some of the underlying assumptions regarding enrollment and site activations; so, looking at it, I believe you'd mentioned before roughly 20 to 25 sites possibly within the U.S. that could be activated by the close of Q2, or just working through what was said earlier about your expectations across Q3. Do you still anticipate that same pace during Q2? Or what would you expect to be left in June from additional site activations within the U.S.?

Lorianne, would you like to handle that one?

Okay, thank you. What's encouraging here is that this comes down to scheduling, not any lack of interest from the sites. We've seen longer timelines around finalizing contracts and getting sites up and running, which is delaying activations by roughly one month. Our expectation is still that a substantial number of sites will be activated in Q2, and most of the U.S. sites should be activated before Q3 wraps up. Enrollment for the interim analysis is still anticipated to complete by the close of Q1 2025. So we do expect that enrollment of the interim analysis will be done by the end of Q1 2025. We're monitoring how quickly sites are being activated very carefully, and we'll continue to update you as things move forward.

Understood. You mentioned that the expectation for U.S. sites is now above 40. And looking at — you just restated the expectation for the interim readout in 1Q. Does that still assume 1 patient every 4 months for that interim readout?

Correct. So right now we're focused on sites with strong enrollment that can bring in 6 subjects per year. That's a bit higher than the figure you gave. With those high-enrolling sites added, we expect the enrollment rate to get better. I want to be very clear: when we discussed the interim analysis being fully enrolled by the end of Q1 of 2025, that is not when the readout happens — it's when the last patient gets enrolled.

Yes, got it. Then, in terms of whether you've noticed any greater activity at sites after the first patient was dosed — like beginning to enroll people at sites that are activated, or simply a bit more urgency among sites that are still in the pipeline to get activated.

Yes, an increase is definitely something we're seeing.

Please proceed, Lorianne.

As we move toward bringing more sites online, we are certainly observing growing momentum in upcoming activities; enthusiasm is high, and patients — pardon me, investigators are growing quite keen on getting people into this study. Therefore, we expect a notable acceleration in site activations at the close of Q2 and the start of Q3.

Understood. One final thing from me before I rejoin the queue. Could you give us a broad sense of how you expect the split to look between U.S. patients and those outside the U.S. in that interim readout, given what appears to be the activation timeline for ex-U.S. sites? When we consider how fast enrollment has gone here in the U.S., is your assumption that patients outside the U.S. will be enrolled — pardon me, that patients will be enrolled at ex-U.S. sites more rapidly, with a still sizable share coming from there in the interim? Or could you simply take us through what you're expecting on that front.

The bulk of patients in the interim analysis are going to be from the U.S., since those are the ones enrolling from now through Q1 of 2025. We expect sites outside the U.S. to begin enrolling by Q4 of 2024. As a result, their contribution of patients to the interim analysis will be somewhat smaller than what the U.S. sites provide.