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

Thanks, operator. Good morning, everyone, and thanks for joining our call covering the full year 2024. With me this morning are Scott Kellen, who serves as our Chief Financial Officer, and Dr. Lorianne Masuoka, our Chief Medical Officer. We're glad to be with you today to bring you up to speed on how our 2 main clinical development programs are progressing. Since the next clinical milestone we expect relates to our preeclampsia study, I'll turn things over to Lorianne for an update on that preeclampsia program first, and after that we'll move on to our stroke study.

Thanks, Rick. To kick things off with preeclampsia, we're really happy with how this clinical program is going. Under 12 months back, the initial version of the protocol was handed in by our collaborators to the Ethics Board at Tygerberg Hospital. From that point, we've secured ethics approval, gotten the green light from the South African Health Products Regulatory Authority — that's South Africa's counterpart to the U.S. FDA — and started administering doses to mothers with preeclampsia. This is the very first time DM199 has been studied in a condition tied to pregnancy, a fragile situation in which the mother and the fetus are both treated as patients; it's our belief that these major milestones achieved so quickly highlight what DM199 might offer as a therapy for this severe condition. Every bit of this became reality because of the robust partnerships we've established with top KOLs and trialists. Our colleagues at the University of Melbourne and Stellenbosch University were instantly enthusiastic about DM199 because of its encouraging safety profile, its capacity to generate nitric oxide and its potential for bringing blood pressure down. What stands out most is that DM199 is a protein whose molecular size is large enough that crossing the placental barrier isn't anticipated, which delivers an important safety edge for the fetus as it develops; by contrast, antihypertensives that are small molecules pass through the placental barrier by passive diffusion and certain ones are contraindicated during pregnancy since they harm the fetus. We've shown time and again that DM199 is capable of reducing blood pressure in people and feel this backs the theory that DM199 can bring blood pressure down in pregnant women. When you look at other therapeutic areas such as oncology, which have moved ahead faster in recent years, pregnancy complication treatment is still stuck in the past. There are no FDA-approved therapies for preeclampsia even though this disease's burden keeps growing. As far as we know, DM199 is the sole novel agent presently being dosed in pregnant women who have preeclampsia. The blood pressure drugs already in use for preeclampsia don't boost nitric oxide signaling, which is severely compromised, resulting in less blood flow reaching the fetus, and they also don't fix preeclamptic endothelial dysfunction — they only keep symptoms in check. Preeclampsia progresses over time, and these antiquated treatments stop working or lose their effectiveness eventually. Through enhancing nitric oxide signaling, our hope is that DM199 will both lower blood pressure and address the endothelial dysfunction underneath it, providing advantages like better blood flow to the fetus and a decrease in the mother's dangerously elevated blood pressure, moving past mere symptom control; for a sense of how limited current hypertension therapies are, the PRESERVE-1 study of early onset preeclampsia in the United States discovered that roughly 50% of women gave birth within 5 to 6 days of enrolling in the study because of refractory or uncontrolled hypertension even though they got maximal intervention. On average, those participants delivered prior to 30 weeks of gestation, which put the baby at substantial risk. This underscores how aggressive and progressive preeclampsia is and points to the pressing need for treatments that can effectively control symptoms and, beyond that, ultimately aim at the underlying endothelial dysfunction. At these early gestational ages, each extra day that pregnancy is prolonged matters enormously. Now shifting to our investigator-sponsored Phase II trial. Right now, we're in the process of giving doses to women in Part 1A, which is the dose escalation part of the trial. Every dose cohort is made up of 3 patients. Assuming nothing concerning on the safety side comes up, we move on to the following cohort at a higher dose. Part 1A could involve as many as 10 cohorts, with the smallest IV dose beginning at 0.1 microgram per kilogram and the largest at 2.5 microgram per kilogram; as a point of comparison, the IV dose we use in the stroke program is 0.5 micrograms per kilogram. After a dose is found in Part 1A that produces clinically meaningful blood pressure reductions while not triggering hypotension, we'll move forward to Part 1B, an expansion cohort of 30 additional patients intended to verify the optimal dose; we're happy to say that several dosing cohorts in Part 1A have now been finished, with DM199 seeming well tolerated and no serious adverse events or indications of pathological hypotension having been reported. We're eager to present results from Part 1A, which we expect during the second quarter. Moving on to our stroke program. We're glad to report that 30 clinical sites have been activated, which we think of as our critical mass for producing a steadier flow of enrollments. Raising overall activity levels and increasing communication among sites matters for fostering that healthy, professional competition that keeps our study top of mind with our study sites. I'd add that most of these sites are running under our newest protocol, version 5.0. Among other things, this version of the protocol permits DM199 to be kept at refrigerated temperature and widens the eligible population to cover patients who don't respond to thrombolytic treatment. Refrigerated storage makes it possible for the study drug to travel with the participant when they exit the hospital, which could ease the logistics of the participant getting their subcutaneous injections across the full 3-week treatment period. And for patients who haven't gotten better for at least 6 hours following thrombolytic treatment, as long as the remaining enrollment criteria are satisfied, they can be enrolled in our trial. Along with boosting the number of potential patients for ReMEDy2, this change brings in a patient population that could be a strong group for evaluation in our trial. In our earlier stroke trial, ReMEDy1 post-hoc analysis of comparable participants demonstrated the most favorable improvement in the rate of full or nearly full recovery. The protocol also permits enrollment of patients who have occlusions of the M2 segment of the middle cerebral artery and the posterior arteries. That's a very significant change given the recent negative results of 3 mechanical thrombectomy of middle-sized vessel occlusion studies announced at the IST conference last month. I can tell you that sites are very positive about version 5.0 of the protocol. Building on this, our clinical and medical affairs teams keep working to make sure that, once activated, study sites feel comfortable and well supported to enroll participants. Specifically, they must feel assured that everyone they sign up will be able to get therapy across the 3-week dosing window while that person transitions out of the hospital into whatever intermediate care facility is involved and, finally, to their own residence. Building that sense of assurance calls for a lot of one-on-one interaction involving our clinical team and the study sites. As of the close of last year, we had assembled a broad array of tools ready to deliver whatever support a site could need, plus clear channels of communication so sites know those choices exist. Alongside that work, our medical affairs team has devoted time to in-person meetings with study teams, talking over what DM199 might offer and why the ReMEDy2 trial matters. This happens in a lunch-and-learn setup, which lets as many site personnel as possible listen to us and take part in discussion about the trial. The team has additionally been arranging peer-to-peer calls among study coordinators, giving these professionals a way to tell one another directly about the approaches that succeed and those that fail when guiding participants through the study. Senior management personnel have likewise been dropping in on the sites expected to enroll the highest numbers.

Thinking back on everything we've accomplished so far, one thing stands out: getting sites all the way through engagement, planning, and setup has taken, and continues to take, far more time than expected, even when the physician investigators are deeply committed. Our sense is that this ties back to reduced staffing in research units now that we're in a post-COVID era. Looking back, we had assumed that bringing research support back up to study size would have ranked higher on the priority list. Ultimately, though, the start-up timeline needed turned out to be greater than we had anticipated. As I mentioned, we've stepped up our engagement efforts to address these problems; and while the rise in enrollments during 2025 has been very encouraging, our expectations for the interim analysis have now shifted to the first half of 2026; once we reach 25% enrollment, we'll come back with another update. On other fronts related to ReMEDy2, our experience at the February 2025 International Stroke Conference was excellent. It took place in Los Angeles, our booth drew a lot of interest, and we held a reception for both current and prospective study sites that had a strong turnout. During that conference, findings from 3 studies covering mechanical thrombectomy and medium vessel occlusions were presented. Success was not reported in any of those studies; because these patients qualify for our trial, those results could end up helping ReMEDy2 enrollment. The European Stroke Conference is set for May, and we're eager for another chance to raise awareness about DM199 and the ReMEDy2 trial. And as we shared yesterday, the scheduled safety review covering the new IV dosing rates put in place when our trial resumed wrapped up in January. A thorough examination of safety data from all participants enrolled at that point was carried out by our independent Data Safety Monitoring Board, and nothing concerning on the safety front came to light. They concluded that the ReMEDy2 trial ought to move forward unchanged. February also brought the release of a paper analyzing DM199's mechanism of action and its possible advantages for AIS patients, which ran in a peer-reviewed publication titled Recombinant Human Tissue Kallikrein-1 for treating acute ischemic stroke and preventing recurrence. That publication can now be found online and appeared in the February 2025, Issue of Stroke. It offers scientific understanding of how DM199 boosts collateral circulation and rescues brain tissue put at risk of infarction after an AIS. I'll hand the call back over to Rick now.

Thank you, Lorianne. I'd like to use a moment here to express our appreciation to Mr. Dan O'Connor, who joined our Board not long ago. In biotech, and especially when it comes to company building, he is an extremely accomplished leader. Having his insight and direction as we push DiaMedica and DM199 ahead is something we feel fortunate about, and any chance to gain from what he has achieved before is one we will seize. Prior to passing things to Scott, let me mention that everyone on our team genuinely holds the belief that DM199 is going to prove an effective therapy for patients dealing with both stroke and preeclampsia. I also want to give credit to our team for its dedication and the things it has achieved during the last year, and I'm eager to keep collaborating with them as our clinical programs move forward. Please know that our commitment to advancing both of those clinical programs is complete, since we have a significant chance to deliver choices for patients who, as things stand, possess no therapeutic treatment options at all; at this point I'd like to give the floor to Scott Kellen so he can go over the financial results for this quarter.

Rick, thanks, and good morning to all of you. As our operator noted, yesterday we released our full year '24 financial results and submitted our annual report on Form 10-K; you can find both documents on the DiaMedica website or the SEC's. At December 31, 2024, our reported total combined cash and investments came to $44.1 million, with current liabilities of $5.4 million and working capital of $39.2 million. That's against total combined cash and investments of $52.9 million, $2.8 million in current liabilities and $50.9 million in working capital at the end of December 31, 2023. The declines in combined cash and investments and in working capital stemmed mainly from cash spent funding our operations, partly offset by net proceeds from the roughly $12 million private placement that closed in June of 2024. Net cash used in operating activities across the full year '24 totaled $22.1 million, versus $18.7 million across the full year $23 million. The rise in cash used in operating activities came from combining our larger net loss with deposit funds advanced to vendors supporting our ReMEDy2 trial during 2024; those were partly offset by shifts in operating assets and liabilities during 2024, especially the growth in accrued liabilities tied to our ReMEDy2 trial and ongoing manufacturing development activities as of December 31, 2024; we anticipate that our current cash and investments give us a runway into Q3 of 2026. Now to the income statement. Research and development expenses climbed to $19.1 million for the year ended December 31, 2024, versus $13.1 million the prior year. That growth came mainly from cost increases driven by the continuation of the ReMEDy2 clinical trial, the expansion of the clinical team and increased manufacturing and development activity. Partly offsetting those increases were cost reductions related to the completion of prior clinical and nonclinical trial work in 2023. We expect R&D expenses to rise moderately relative to recent prior periods as the company expands ReMEDy2 globally and continues our site activation enrollment activities, and as we continue to pursue our DM199 clinical development program into preeclampsia. General and administrative expenses were $7.6 million for the full year of 2024, down from $8.2 million for the full year 2023. That decrease was driven primarily by the combination of decreased legal fees incurred in connection with our lawsuit against PRA Netherlands, and reductions in directors' and officers' liability insurance premiums; those decreases were partly offset by increased personnel costs associated with expanding our team and increased noncash share-based compensation costs. DiaMedica expects G&A expenses to remain steady compared to prior periods. For the entire 2024 year, net other income came in at $2.3 million, versus $1.9 million during 2023. The gain stemmed from recognizing more interest income, which reflected larger average marketable security balances in 2024 than in the year before. With that said, I'll have the operator open up the lines so we can take questions.

Lorianne, I have a few questions about ReMEDy2. Out of those 30 sites that have been activated, what number belongs to the 15 top sites you mentioned before? Also, among the 30, how many are actually enrolling patients as opposed to just being activated?

Let me clarify — of the 30 sites we've identified and activated, roughly 13 of them make up the top 15. So nearly all of the top 15 are activated, and a good number of those are enrolling right now.

Understood. Now regarding that DSMB review you mentioned — if I recall correctly, you stated it wrapped up in January. What volume of information did they possess regarding those individuals? Was it only from the extremely early stage? Or were they able to examine a complete course of treatment for safety purposes?

They actually had access to the whole database, so every piece of information that had been recorded for those individuals was on hand for the DSMB. Our approach involves setting a cutoff date; following that cutoff date, we then examine all the information pertaining to that individual. Thus, it is the complete journey they have undergone right up to that cutoff date.

Apologies in advance if this means going over anything you've already covered, but could you walk us through a few of the inputs behind that first-half '26 interim assessment — perhaps in relation to the most recent updates we've gotten? Specifically, how are you thinking about enrollment rates; and when it comes to those 30 centers, what's your eventual expectation for how many trial sites get activated?

Lorianne, over to you.

Right now, 30 sites are up and running in the United States. But keep in mind, we also have 5 centers in Georgia that are very active. In the coming weeks, sites will be opening in Canada, and we're expanding into Australia and Europe as well. So the total will end up beyond 30 sites. What we're looking for from the interim analysis is the opportunity. The reason our sample size went from 144 to 200 was the chance to bring down the overall number of patients needed. To illustrate, at first we were considering a 14% improvement over placebo, and with the 364 patient population, with the 200 interim analysis, there's a possibility that if we observe that same efficacy rate, we'd need only 300 patients. So our expectation is that the interim analysis, even though it's delayed relative to the original interim analysis — largely because we increased the sample size for the interim analysis — could ultimately save us both time and money by cutting down the sample size.

When it comes to the total site count, what sort of ceiling do you foresee from here? Then regarding the enrollment pace, could you walk us through how we ought to model it, given the sites already up and running and your track record of getting these ramped, specifically what bridges us to that interim readout in the first half of '26?