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

Good morning, ladies and gentlemen, and welcome to the DiaMedica Therapeutics Business Update discussing its clinical expansion in preeclampsia. An audio recording of the webcast will be available shortly after the call today on the 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. More information, including factors that could cause actual results to differ from projected results appear in the section entitled Cautionary Statement Note regarding forward-looking statements and the company's press release issued yesterday and under the heading Risk Factors in DiaMedica's most recent annual report on Form 10-K and recent quarterly report on Form 10-Q. The DiaMedica's SEC filings are available at www.sec.gov and on its website. Please also note that any comments made on today's call speak only as of today, July -- June 27, 2024, 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. Following the prepared remarks, we will open the phone lines for questions. I would now like to introduce your host for today's call, Mr. Rick Pauls, DiaMedica's President and Chief Executive Officer. Mr. Pauls, you may begin.

Thank you, Ludy. Welcome, everyone. I'm joined this morning by Dr. Lorianne Masuoka, our Chief Medical Officer; and Dave Lambeck, our Chief Business Officer. We're very excited to speak with you today to discuss plans to expand the clinical development of DM199 into Preeclampsia or PE. PE is a severe condition with no approved treatments. The only treatment option today is the delivery of the baby, often very prematurely. We believe DM199 could make an incredibly impactful difference in the lives of mothers and their babies, and we'll share that reasoning this morning. This new indication will expand the opportunity of DM199 with minimal investments and minimal distraction from our stroke program. Before we begin, let me highlight the standard reminder regarding forward-looking statements to be made on today's call. On today's call, I'll start with a short company overview and update. Dave is going to describe the significant unmet medical need and the mechanism of action of DM199 for preeclampsia. Lorianne, will share a personal story with preeclampsia and an overview of our Phase II clinical trial design, and then we'll conclude with Q&A. With the launch of preeclampsia indication, I would like to introduce our new mission statement, which is to develop life-transforming therapy to patients with severe ischemic disease. We believe we can significantly improve outcomes for patients with acute ischemic stroke and preeclampsia through our blood flow enhancing biologic therapy. Both of the patient populations, are large unmet medical needs with no currently approved FDA therapeutics. DM199 has the potential to be a disease-modifying therapy for preeclampsia, a severe life-threatening hypotensive disorder of pregnancy. Launching collaborations with leading academics and trialists in the preeclampsia field from the University of Stellenbosch and the University of Melbourne. These are amazing clinicians who are excited to conduct this study. Importantly, as a physician-sponsored trial, the trial won't distract our clinical team from a ReMEDy2 stroke trial. And we see a very rapid path to proof of concept in preeclampsia. We are targeting patient enrollment in Q4 of this year and proof-of-concept data in the first half of 2025 with the goal of the trial answering 3 key questions: the first being, does DM199 lower blood pressure? 2, does DM199 dilate intrauterine arteries? And 3, does DM199 cross the placental barrier. Preeclampsia ticks several key boxes for a new indication, starting with the scientific rationale. We know that DM199 very clearly lowers blood pressure. We've seen this now during multiple clinical trials. Initial discovery actually of the KLK1 protein was the lowering of blood pressure. DM199 also has the potential to be disease modifying for this disease. When dealing with pregnant mothers and their babies, safety is absolutely paramount. We are dosing a recombinant form of a naturally occurring protein with DM199. Importantly, as a large molecule, we don't expect DM199 to cross the placental barrier, which is a very important safety profile. For perspective, 2 of the main antihypertensive medications, ACE inhibitors and ARBs are small molecules that are contraindicated for preeclampsia as they pass the placenta and cause harm to the baby. Turning to the large unmet need. There are no FDA-approved therapies. Delivery is the only treatment option today. Our upcoming Phase II study will be very capital efficient. The full study will cost up to $1.5 million for 120 patients with initial proof-of-concept costing $600,000. PE is also an acute care setting and thus we see a lot of synergy with our stroke program and future commercial use. I think it's important to connect the dots of these two diseases. If you look at our lead indication for stroke, preeclampsia isn't the first expansion opportunity that comes to mind. However, if you go on one layer deeper, you can see how DM199 can improve both diseases by increasing blood flow and perfusing ischemic tissue. The target of DM199 is the same for both the diseases The bradykinin 2 receptor expressed on endothelial cells. With the same target, it has different modes of actions. In stroke, we increased collateral circulation specifically in ischemic penumbra. Whereas for preeclampsia, we should lower blood pressure and increase maternal organ and placental perfusion. One of the key reasons for the different modes of action is the receptor density. Stroke is a local phenomenon, and as a compensatory mechanism where the body hyper upregulates the bradykinin 2 receptor of the ischemic sites. Preeclampsia isn't a local disease. It has systemic effects -- so we expect benefits from the systemic activation. Here's an update on our pipeline. We're going to focus today's call on preeclampsia and we'll provide more detailed update on our stroke trial progress at our next earnings call in August. I would like to point out that we are confirming our last guidance of interim enrollment of participant 144 in March of 2025. Our company's focus remains on the stroke program as we expand into preeclampsia. Also mentioned that our longer-term plans include our DM300 program currently in preclinical development for severe acute pancreatitis. This is another hospital-based treatment with limited treatment options today. We also announced yesterday the completion of a $12 million capital raise. The raise is conducted at $2.50 per share, which was approximately 10% above the market price and was a straight up common share offering with no warrants. Thus, our pro forma cash is $58 million. The capital raise extends our cash runway to 2-plus years and into Q3, 2026. It will cover key milestones. First, the interim analysis for our pivotal stroke trial; and 2, our Phase II preclinical trial along with corporate operations. I would now like to turn the call over to Dave Lambeck, to discuss the unmet medical need of preeclampsia.

There is a bonafide unmet need in preeclampsia with no FDA-approved therapies, life-threatening hypertensive disorder of pregnancy. Occurs after 20 weeks of gestation, characterized by a sunrise in blood pressure, followed by organ damage, often affecting the kidneys and leading to increased protein levels in the urine. This preeclampsia can lead to stroke? There are babies, after disease progression is deliver the fetus and placenta often prematurely, lifelong disabilities or death. Preeclampsia cannot take ACE inhibitors or ARBs as they cross the placental barrier and harm the fetus. Typically involves combination alpha beta blockers and calcium channel blockers adequate for long-term blood pressure control and do not reverse the disease progression. Need for preeclampsia is large. And related hypertensive disorders of pregnancy impact 5% to 8% of all pregnancies, 300,000 cases annually in the United States, Subtype is preterm preeclampsia in women less than 34 weeks gestation. It is critical to maintain the pregnancy longer to allow the fetus to develop. 1,000 patients in the U.S. with preterm preeclampsia, filed for orphan drug designation with the FDA. Total population we will target to expansion into the broader preeclampsia market. That DM199 can dilate intrauterine arteries, it could benefit women with fetal growth restriction or FGR, except 10% of pregnancies with no current FDA-approved treatments. Cohort of 30 FGR patients, if we confirm intrauterine dilation in part 1 of the preeclampsia study. Really eye opening, has the highest maternal mortality rate among high-income nations, is higher than our peers in Europe. The impacted group in the U.S. is black women. Maternal mortality rate more than 7x higher than the average. Movement to address disparities in women's health by additional federal spending to enhance innovation. The Union Address, President Biden called on Congress to authorize a $12 billion funding initiative health in the United States. Over to Lorianne Masuoka, DiaMedica's Chief Medical Officer, personal experience with severe preeclampsia.

Thanks, Dave. I am very, very passionate about the treatment for preeclampsia, because with the birth of my first daughter, I experienced severe preeclampsia. At 28 weeks, my blood pressure had already reached 160 over 95, and I had already been put into the hospital for strict bed rest. There were very few options available to me in terms of treatment. I was given drugs that were literally developed in the 1950s and the 1960s. I couldn't take any of the modern medications because they would harm the baby. My doctors urged me to deliver at 28 weeks, but as a neurologist, I knew that my baby would be at risk for significant neurological deficit and lung disorder. And so I was really scared that she would be significantly impaired by being delivered at 28 weeks. So we took the chance and kept me at expected management for as long as possible. And it was very hard for me to hear the doctors say on almost a daily basis by taking your pregnancy out longer, you might suffer a stroke. There could be a placental abruption, which is where the placenta shares off the wall and it could cause the baby to die from bleeding. And so I had to make the decision on a daily basis, whether we kept the baby inside to try and develop as long as possible or whether we should deliver the baby to get rid of the preeclampsia with an incredibly scary high-pressure time. I kept the baby in until 33 weeks, at which point my blood pressure reached a very dangerous 220 over 120. The amniotic fluid had reduced by 50% overnight. And because this is a progressive disease, no matter what you do with the antihypertensive drugs, the progression of the disease continues onward. The blood pressure keeps going up, the risk keeps going up and you just have to make a decision at one point to deliver the baby even though you know that it's going to be born prematurely. So my daughter was born at 33 weeks, 7 weeks early. And although she was quite healthy, she had to spend 3.5 weeks in the NICU, which was a very scary time. It was very sad to watch her in the NICU undergoing invasive painful procedures for those 3.5 weeks. And I am incredibly grateful for the treatment that I did receive, but it was always a push-pull between keeping the baby safe inside as long as possible versus having to deliver in order to make sure that none of the terrible outcomes would occur. So it was the precarious position to be in and one that I hope that we can actually resolve with the treatment such as DM199. Dave?

Discuss the mechanism of action in more detail. DM199 has the potential to modify preeclampsia several pathophysiological mechanisms. DM199 is safe for both the mother and fetus, important when two lives are at stake. It is not likely to cross the placental barrier in most studies. These results with Professor Stephen Tong [indiscernible] by trying to walk through a wall, going to happen, helps illustrate the size of DM199 relative to placental barrier. It does not cross the placental barrier, no exposure to the agent, improving safety and suggest DM199 can lower blood pressure. Phase II REDUX CKD trial showed highly statistically significant reductions in blood pressure. Factor for DM199 is orthostatic hypotension pressure. We inadvertently increase the IV dose, which caused significant pressure decreases and resolved quickly upon stopping the IV. Observation, DM199 can rapidly impact the blood pressure. For preeclampsia is reduced bioavailability of nitric oxide. It was that KLK1 can increase endothelial nitric oxide signaling, but that augments the nitric oxide pathway showed promising initial results in treating preeclampsia found across the placental barrier and harm the fetus. DM199 offers a comprehensive approach to treating preeclampsia with potential benefits on 3 crucial levels. Lower blood pressure, organ perfusion, endothelial health been it's mode of action to understand the pathogenesis of preeclampsia is ultimately caused by a placenta that does not attach properly to the wall of the uterus, the central hypoxia flow. Placenta then releases harmful factors into the mother's bloodstream, endothelial cells, inner lining of the blood vessel, as endothelial dysfunction, pressure, perfusion to key organs, dysfunctional endothelial cells, regulatory pathways are depressed. [Technical Difficulty] derived hyperpolarizing factors that of DM199 it's all 3 pathways. The contribution of these pathways size and function play a primary role in radial uterine arteries side predominates in larger uterine arteries. All 3 pathways provides that unsustained reductions in blood pressure, dilation of the intrauterine arteries. Intrauterine arteries can modify the disease by increasing blood flow to the placenta, preeclampsia's root cause [indiscernible] flow to the placenta enhances oxygen reaches the fetus development. The nitric oxide pathway is believed to improve endothelial health, crosstalk with the VEGF pathway, neogenesis and cellular repair. Also believe to impact endothelial health by reducing oxidated stress. DM199's multifaceted approach has the potential for best-in-class efficacy for preeclampsia. Presented data from our REDUX Phase II CKD study, transfer study in rats. On the left, significant reductions in blood pressure among patients with elevated baseline pressure were more pronounced, the higher the baseline levels were. Group with 100 -- baseline levels greater than 150, a 20-point decrease in systolic blood pressure over 95 days. In part 1 of the study in preeclampsia, we enrolled will have systolic blood pressure We presented our placental transfer study, study where we dosed in rats, pregnant rats and measured DM199 [Technical Difficulty] exposure to fetal rodents that DM199 does not cross the placenta barrier? Dr. Masuoka to go through the study design.

Thanks, Dave. We're very honored and excited to be working with such leading scientists in the field of preeclampsia. Dr. Cath Cluver has run more PE studies than anyone in the world and is known for her rapid recruitment. She works in partnership with Dr. Stephen Tang and Dr. Sue Walker, who are both preeminent experts in Melbourne. They designed this study protocol in its very comprehensive and cutting edge. The study will be conducted at Tiger Burg Hospital in South Africa, the only hospital in Cape Town that treats women with PE. The study is conducted in 2 parts. Part 1 enrolled women who will be delivered within 72 hours of admission and Part 2 enrolls women who will be undergoing inpatient expectant management. Part 1 enrolls women who are 27 to 42 weeks gestation and who have a systolic blood pressure greater than 150. Up to 30 patients will be enrolled into the Ia study in which escalating doses of DM199 will be administered in groups of 3 until the dose is identified that is safe and associated with the drop in blood pressure to 140 over 100 or lower. Patients who received a single IV dose followed by a single subcutaneous dose. Another 30 women will be enrolled into the Ib part of the study. These women will be treated at the dose identified in Part 1a of the study that was shown to lower blood pressure to the target level. The endpoints include safety and tolerability, blood pressure reduction, change in the diameter of the intrauterine arteries by doppler, cord blood sampling for DM199 to demonstrate that DM199 does not cross the placental barrier, uterine contractions, exploratory endpoints such as glomerular filtration rate and urine albumin creatinine ratio, which are measures of kidney function, which is greatly impaired in PE. Enrollment into this part of the study is expected to go fast as Dr. Cluver sees roughly 5 women per day in her practice, who would meet entry criteria. Part 2 of the study enrolls women who will undergo expected management. That means that they are relatively early in pregnancy and do not need emergency delivery. They will be hospitalized, put on bedrest, carefully monitored and treated for hypertension and any other end organ abnormalities. These women will be at 27 to 33 weeks gestation. They will be treated with a single dose of DM199 intravenously followed by DM199 given subcutaneously every 3 days until delivery. The outcome measures for this part of the study include prolongation of days of pregnancy, 1 week change in UACR compared to baseline, need to adjust dose of antihypertensive medications, incidence of treatment-emergent adverse events and cord blood levels of DM199 to demonstrate lack of placental transfer. Other endpoints include change in maternal blood pressure, doppler measurements and exploratory biomarkers of PE. Preterm PE is somewhat less common and therefore, enrollment into Part 2 of the study may take a bit longer. These investigators are also quite excited about the potential for DM199 to treat preterm fetal growth restrictions. We will await further data before embarking upon that part of the study. We are very excited to start this study later this year. As Rick and Dave have mentioned, DM199 checks all the boxes for a potentially efficacious therapy to treat PE with its intended beneficial effect on high blood pressure, placental ischemia and for endothelial health. I'll now turn the call back over to Rick.

Thank you, Lorianne. Rudy, if you could please open the line for questions.

[Operator Instructions] And your first question comes from the line of Thomas Flaten with Lake Street.

I was wondering, if you could comment on the doses that you will test in Part 1a and how those might relate to what we've seen previously with CKD and stroke?

Lorianne, do you want to take that one?

Sure. So we're going to be starting very conservatively because obviously, the health of the mother is very, very important to us. So we'll be starting at 1/5 the dose of at 1 microgram per kilogram IV, which is 1/5 the dose that we use in the stroke trial. By cohort 4, we will be at -- we will be at the stroke dose and it by cohort 6 will be at double the stroke dose. So there are 10 dose levels that we could potentially reach. But we're pretty confident that we're going to hit the target dose hitting the target blood pressure prior to going to all 10 cohorts.

Got it. And then in Part Ia, the women who are coming in are expected to give birth within 72 hours. How do you think about the timing of giving an IV dose and then following that up with a subcu dose? Is there a 24-hour window between those that you have to hit? How should we think about them?

So we'll be giving the subcutaneous dose 2 hours after the IV dose, so it's well before the time of delivery.

Got it. Okay, that quick. And then finally, if you could comment on -- I think there was some mentioned in the deck you put out yesterday that the focus for the company will be on preterm preeclampsia versus term. Could you just comment on that and strategically how that makes sense?

Lorianne?

So we'll be focusing on preterm preeclampsia because this has -- this is the indication that has the most potential for morbidity and mortality, and also, there will be subcutaneous doses given every 3 days until delivery. So there'll be a lot more doses being given, which obviously has an impact on things like cost and that sort of thing.

And your next question comes from the line of Chase Knickerbocker with Craig-Hallum.

Just kind of to start, I know you kind of touched on it briefly -- but I kind of missed a piece of it, there apologies. Any literature in the past from other investigational programs that you would point investors to that kind of give you confidence in your mechanism, specifically here and kind of point to kind of up-signaling for nitric oxide is really going to kind of drive a differentiated profile for DM199?

Yes, sure, So I can start that one off. So first off, a number of years ago, PDE5 inhibitors, basically VIAGRA was used for preeclampsia, and was able to extend gestational days by 4 to 5. And as Lorianne touched upon earlier, I mean, every day makes a difference for the development of these babies, in particularly the neurological related. And so there's a lot of excitement at the time for these PDE5 inhibitors. The challenge though is that later, it was discovered that these are small molecules, and it passes the placenta, and actually end up causing pulmonary hypertension. So because of that, they're not used today. So what I'd say what our collaborators are very excited about is that we have a protein that produces nitric oxides. But because of its size, we'll be shocked if it actually passed through the placenta. So -- and because of that, in a ideal treatment option for these patients.

If we think about what a registrational study would look like far down the road, what's the endpoint we should be looking at? Is it extension of gestational days? And then if we think about what PDE5 inhibitors have shown would 4 to 5 days be something that would be very exciting for you guys to see down the line when we get to Part 2 of the study? When we see extension of gestational days, just kind of benchmark us there, I guess.

Yes. So we would see extension of gestational days as the pivotal endpoint for FDA approval. And again, if we saw 4 to 5 days, that would be wonderful. Our collaborators, and we're looking forward to having our KOL call at the end of July, but they'll also talk about even if we can just control blood pressure, there could be a real opportunity here for this therapy for preeclampsia patients.

And then just help us a little bit with kind of the unmet need. I mean, I know that you some beta blockers and CCBs to kind of try to control blood pressure today. Just kind of help us with the unmet needs there. And then these therapies, do they just simply fail to have any meaningful impact on kind of resolution of the hypertension? Or is it the duration of kind of effect issue? Just kind of help us.

Sure. Lorianne?

Yes. So the problem with these older drugs, is they just don't work very well. They contemporize the blood pressure for a little while, and they don't bring down the blood pressure typically to normal levels, and they have to be given intravenously sometimes. When I had preeclampsia, I was getting Labetalol by intravenous infusion. And despite that, despite maximal therapy with alpha blockers, beta blockers and calcium channel blockers, they eventually fail. That's why these babies are born so prematurely. If the blood pressure could be controlled with these older medications, no baby would have to be born prematurely. So it's a progressive disease and eventually, all of these medications fail.

On that, Lorianne, sorry. So basically, the -- if it wasn't for this kind of uncontrollable hypertension, that would extend gestational days in on of itself. So that's a key early finding here that you're looking for in the first 2 cohorts.

That's right. The way I see hypertension is that it's a symptom of an underlying process that's happening at the level of the endothelium. And so if you can treat the cause of the disease, everything will get better because while the hypertension is ongoing, the woman is very -- has a lot of edema. It can lead to pulmonary edema. She is at risk for stroke. She's at risk for abruption, for kidneys. My kidneys were failing during the whole preeclampsia situation. So if you can address the underlying cause of the disease like we believe that DM199 will do, it will not only reduce the hypertension, but it will fix the other end organ disorders.

Your next question comes from the line of François Brisebois from Oppenheimer.

This is Ken on for Frank. Just quickly regarding the Phase II. Could you talk about if currently there is any difference in management of these patient populations that you're targeting differently between partner 1, 2 and 3? And do you anticipate one of them to be harder to recruit?

Lorianne?

Sure. So in terms of treatment, the difference is that in Part 1, the patients are being delivered in 3 days. So they're hospitalized for a very short period of time before the baby is born. In Part 2 of the study, the patients are undergoing expected management until about 34 weeks. So if they're 28 weeks or so, they would potentially be in a hospital on bedrest for 6 weeks or so, assuming the baby and the mother can make it that far. So the treatment difference, it has to do with the amount of time that they're going to be hospitalized. And also the treatment with DM199 is different in that the patients, who are being delivered at 72 hours in Part 1 are only getting one subcutaneous dose, whereas those that are in Part 2 will be getting a subcutaneous dose every 3 days until delivery.

Great. And as the last part of my question, do you anticipate any changes in the recruitment rate for the 3 groups?

I'm sorry, that's right. Yes. So the first group is in women, who are at terms who develop preeclampsia. And that's a very -- it's a much more common disorder. And so Dr. Cluver sees 5 or 6 of these patients in her clinic every day. So that -- the recruitment of Part 1 of the study should go extremely quickly. It is a little bit less common to have preterm preeclampsia there. So that part may take a little bit longer to enroll as compared to Part 1.

There are no further questions at this time. I would like to turn it back to Rick Pauls for closing remarks.

All right. Well, we'd like to thank everyone for joining us this morning. As we mentioned, we're very excited about our preeclampsia program and the potential to make a real difference in the lives of mothers with preeclampsia and their babies. Please mark your calendars for July 29 at 4 p.m. Central as we'll be hosting a KOL events with our preeclampsia collaborators. In July, we'll also be sharing new DM199 preeclampsia white paper prepared by our collaborators. So we look forward to keeping you updated with our progress. And with that, we conclude today's call. Thank you.

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you all for participating. You may now disconnect.