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

Thanks, operator. Good morning, everybody, and thanks for joining our Q2 conference call. With me today are Dr. Lorianne Masuoka, who serves as our Chief Medical Officer, and Scott Kellen, our Chief Financial Officer. Progress continues on the ReMEDy2 trial, and we feel we are on schedule for the interim analysis. Interest from sites and prospective investigators is still elevated, and it's likely we'll need to decline a portion of those sites. My thanks go out to the whole team. Each person is putting in relentless effort to bring aboard the best possible research sites and help them take part in the ReMEDy2 trial. I'll now hand things over to Lorianne, who will give a short update on the stroke program.

Thanks, Rick. I'll begin by agreeing with what Rick said; our site activation work is going well, and we're picking up some very welcome momentum for the ReMEDy2 trial. Getting sites into the start-up process remains quite difficult; we attribute that to ongoing staffing shortages at research hospitals. We think a big part of the momentum we've gained comes from relying more and more on our own team to handle direct communication with the study sites. A number of sites have told us they value how responsive and clear it is to work directly with DiaMedica staff. Because of that, we're getting faster replies from sites already running as well as those still moving through start-up. To help build this momentum, we've pinpointed 15 sites that we think have the greatest chance to enroll quickly, which means being able to sign up several participants every month. Recruiting and engaging those 15 sites has been made a priority. Before this quarter ends, we anticipate having no fewer than 9 of those 15 sites up and running. To put that in perspective, if only 15 sites each enrolled 1.6 participants per month, we would reach our interim analysis enrollment in 6 months. As part of our continued work with study sites, we convened a meeting of principal investigators and study coordinators on July 18. That meeting was meant to start a dialogue among the study teams, let them swap notes about what they've experienced, and create some friendly competition among the teams. During the meeting, we had an excellent discussion with our clinical research teams, gathering their views on numerous sticking points in both site activation and participant enrollment. We keep working to reduce or remove obstacles so we can boost efficiency and make sure study sites feel properly supported. I'll hand the call back to Rick now.

Appreciate that, Lorianne. When it comes to ReMEDy2, we're still concentrating on generating traction among top-tier research sites. Given how the team has been performing, we're confident that we can get all 144 patients enrolled for the interim analysis before the first quarter of 2025 wraps up. During this quarter, we were also thrilled to share news of our subsequent indication and start talking about the meaningful advantages DM-199 could offer people dealing with preeclampsia, a serious hypertensive condition during pregnancy that right now lacks any cleared treatment choices across the U.S. and Europe. In our view, DM-199 is especially well matched to this group of patients. Last month, we got the chance as well to present our greatly admired preeclampsia research team on a key opinion leader call, and there they offered their perspectives and enthusiasm about DM199 for treating preeclampsia directly. It's a real privilege to collaborate with these individuals and to back them as they carry out the study, all while keeping our clinical operations group free from distraction on the ReMEDy2 stroke trial. I want to turn things over to Lorianne so she can share a bit more regarding the preeclampsia program. Lorianne?

Thank you, Rick. I'm not going to go back over what's already in the press release. Should you have particular questions, I'd be glad to address those in the Q&A. What I would like to highlight, though, is our enthusiasm about collaborating with Professor Stephen Tong, MD PhD of the University of Melbourne, Professor Catherine Cluver, MD-PhD of Stellenbosch University, and Professor Susan Walker, MD PhD of the University of Melbourne. When it comes to researching preeclampsia and running trials on different possible therapeutics, this group ranks among the most experienced anywhere in the world; we feel extremely lucky to have the chance to collaborate with them. Last month, they kindly took part in a KOL call with us. During that call, it was noted that therapeutic choices for preeclampsia remain extremely constrained, since treatments carry dangers when they traverse the placental barrier and harm the infant. For precisely this reason, ACE inhibitors and ARBs, which serve as first-line hypertension treatments, are contraindicated. The sole newer therapy recently showing any promise for bringing down blood pressure among these women is sildenafil, which boosts the nitric oxide signaling pathway. Sadly, since sildenafil is a small molecule drug, it crosses the placental barrier and leads to severe problems for the infants. Our research group holds strong interest in DM199, because it has shown it can boost generation of nitric oxide along with other helpful molecules, such as prostacyclin and endothelium-derived hyperpolarizing factors. Because DM199 is a large molecule, crossing the placental barrier is very improbable, a point verified through nonclinical testing. Typically, preeclampsia involves a swift surge in blood pressure that may bring on seizures, stroke, failure of multiple organs, and even the death of the mother or the baby. Today, delivering the baby — frequently prematurely — remains the sole method for halting disease progression. Preeclampsia and associated hypertensive disorders of pregnancy impact 5% to 8% of all births in the U.S., affecting roughly 180,000 to 300,000 patients each year, and that figure is rising. As we clearly witnessed 2 years ago in the ReMEDy2 trial, DM199 can bring blood pressure down quickly, and we're hopeful DM199 will likewise lower blood pressure within this patient population. We also intend to show that DM199 dilates the intrauterine arteries and enhances blood flow to the placenta. Should that be proven, it would imply DM199 may work as a disease-modifying therapy and boost fetal growth; we think DM199 holds first-in-class and best-in-class potential for preeclampsia, capable of improving outcomes for the fetus as well as the mother. And naturally, we won't be waiting long for our first signals. We anticipate Professor Cluver will start enrolling during the fourth quarter of this year, with top line results expected at some point in the first half of 2025. Having gone through my own fight with severe preeclampsia, I'm thrilled to play a role in developing a possible treatment for this condition that can threaten lives.

Thanks, Lorianne. I also want to emphasize how efficiently this study is being run. Looking at it from the data side, we'll learn a great deal about whether DM199 can bring blood pressure down and widen the intrauterine arteries in people with preeclampsia, and we expect findings during the first half of 2025. On top of that, because our research partners are the ones running the trial, our clinical operations team can stay concentrated on ReMEDy2. At this point, I'll pass things to Scott Kellen so he can go over the financial results for the quarter.

Thanks, Rick, and good morning to all of you, and I appreciate your joining today's call. We strengthened our balance sheet substantially during June by completing an $11.8 million private placement with accredited investors, which effectively pushes our cash runway out into Q3 of 2026. We received net proceeds from that transaction of roughly $11.7 million. As a result of this financing, our combined cash, cash equivalents, and investments stood at $54.1 million as of June 30, 2024, which is an increase from $52.9 million at the close of 2023. For the 6 months ended June 30, 2024, net cash used in operating activities came to $11.2 million, versus $10.1 million during the comparable period a year earlier. The rise in cash consumed by operating activities was mainly attributable to advancing deposit funds to vendors that support our ReMEDy2 clinical trial in the current year period. Our research and development expenses rose to $3.9 million for the 3 months ended June 30, 2024, compared with $2.5 million in the prior year period. For the 6 months ended June 30, 2024, R&D expenses grew to $7.6 million, versus $6.2 million for the 6 months ended June 30, 2023. Those increases were tied to continuing our ReMEDy2 clinical trial and higher staffing costs stemming from growth of our clinical team. Partially offsetting those increases were cost reductions tied to clinical trial work finished in 2023, specifically our Phase 1C and REDUX trials. Also offsetting them was the 2023 completion of the in-use study work done to resolve the clinical hold on our ReMEDy2 trial. Relative to recent prior periods, we anticipate our R&D expenses will rise moderately, as we expand the ReMEDy2 trial globally and site activations and participant enrollment carry on. Our general and administrative expenses came in at $1.7 million for the 3 months ended June 30, 2024, a decline from $2.2 million for the 3 months ended June 30, 2023. For the 6 months ended June 30, 2024, G&A expenses were $3.8 million, a decline from $4.1 million for the 6 months ended June 30, 2023. Those decreases came from a combination of lower costs for directors and officers liability insurance premiums and reduced legal fees incurred in connection with our lawsuit against PRA Netherlands, partially offset by higher personnel costs tied to expanding our team and increased noncash share-based compensation costs; compared with recent prior periods, we expect our G&A expenses to hold steady. Other income net was $526,000 and $1.1 million for the 3 and 6 months ended June 30, 2024, respectively, versus $271,000 and $527,000 for the 3 and 6 months ended June 30, 2023, respectively; those increases were driven by higher interest income recognized during the current year periods, related to larger marketable securities balances during the current year periods as compared to the same periods in the prior year. With that, let me ask the operator to open the lines for questions.

Rick, maybe this is one for Lorianne — I just want to get some clarity on something you said at the close of your call about the first quarter's results. At that point, you mentioned 8 sites being active, and I realize the 15 are where your attention is. So how many of them are currently active and enrolling patients right now?

Lorianne, would you like to handle that question?

Sure, so what you'll notice if you check clinicaltrials.gov is that 8 sites are listed there. The thing is, there's invariably some delay before what's actually happening gets reflected on that clinicaltrials.gov site. Right now, the number of sites we've got up and running is 13.