DMAC - NASDAQ

Good morning ladies and gentlemen and welcome to the DiaMedica Therapeutics Second Quarter 2024 Conference Call. An audio recording of the webcast will be available shortly after the call today on DiaMedica's website at www.diamedica.com in the Investor Relations Section. Before DiaMedica proceeds with its remarks, please note that the company will be making ford 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. For information, including factors that could cause actual results to differ from projected results appears in the section entitled Cautionary Statement Note regarding forward-looking statements in 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 the second quarter report on Form 10-Q. 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, August 8, 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, operator. Hello, everyone and welcome to our second quarter conference call. I am joined this morning by Dr. Lorianne Masuoka, our Chief Medical Officer; and Scott Kellen, our Chief Financial Officer. We continue to make progress on our ReMEDy2 trial and we believe we're on track for the interim analysis. The level of interest from sites and potential investigators remains high and we will likely have to turn down some of the sites. I am grateful to our entire team. Everyone is working tirelessly to engage the highest quality research sites and facilitate their participation in the ReMEDy2 trial. Let me turn you over to Lorianne for a brief update on our stroke program.

Thanks, Rick. Let me start by echoing Rick's comments. We are making solid progress with our site activation activities and we are gaining a much welcome momentum for the ReMEDy2 trial. Moving sites to the start-up process continues to be very challenging. We believe this is due to the effects of continued staffing shortages at research hospitals. We believe that much of the momentum gain is related to increasingly using our people to lead direct communications with the study sites. Many sites have already noted their appreciation for the responsiveness and clarity in being able to deal directly with DiaMedica personnel. As a result, we're seeing more rapid responses from both existing sites and sites working through the start-up process. As part of building this momentum, we have identified 15 sites which we believe have the highest potential to rapidly enroll, meaning the ability to enroll multiple participants each month. We have prioritized recruiting and engaging these 15 sites. By the end of this quarter, we expect to have at least 9 of those 15 sites active. For perspective, just 15 sites enrolling 1.6 participants each month would get us to our interim analysis enrollment within 6 months. As part of our ongoing engagement with study sites, we held a meeting of principal investigators and study coordinators on July 18. The purpose of the meeting was to begin to establish a dialogue amongst the study teams and compare notes on their experiences and built some friendly competition between the study teams. At this meeting, we had a tremendous dialogue with our clinical research teams, getting their thoughts on a variety of sticking points in both the site activation and participant enrollment processes. We continue to work on mitigating or eliminating impediments to increase efficiencies and ensure that study sites feel well supported. I will now turn the call back over to Rick.

Thank you, Lorianne. Our focus with respect to the ReMEDy2 trial remains centered on building momentum with high-quality research institutions. Based upon the progress of the team, we believe that we'll be able to achieve full enrollment for the 144 patients, for the interim analysis by the end of the first quarter of 2025. This quarter, we were also very excited to announce our next indication and begin discussing the significant benefits that DM-199 may bring to preeclampsia patients, a severe hypertensive disorder pregnancy which currently has no approved therapeutic options in the U.S. or Europe. We believe that DM-199 is uniquely suited in this patient population. Last month, we also had the opportunity to introduce our highly respected preeclampsia research team during a key opinion leader call, where they were able to provide their insights and excitement for DM199 first-hand to treat preeclampsia. We are incredibly fortunate to be working with this team and being able to support them in the conduct of the study without distracting our clinical operations team from a ReMEDy2 stroke trial. I'd like to ask Lorianne to speak a little bit more about the preeclampsia program. Lorianne?

Thanks, Rick. I won't reiterate the information in the press release. If you have specific questions, I'll be happy to answer them during the Q&A. I do however want to point out how excited we are to be working with Professor Stephen Tong, MD PhD from the University of Melbourne, Professor Catherine Cluver, MD-PhD from Stellenbosch University and Professor Susan Walker, MD PhD from the University of Melbourne. Globally, this team has one of the highest levels of experience in studying preeclampsia and trialing various potential therapeutics. We are very fortunate to be able to work with them. They graciously participated in a KOL call for us last month. As was discussed at that call, treatment options for preeclampsia are very limited due to risks associated with therapeutics that cross the placental barrier and adversely affect the baby. ACE inhibitors and ARBs, first-line treatments for hypertension are contraindicated for this very reason. The only recent new treatment to show some potential to lower blood pressure in these women with sildenafil which augments the nitric oxide signaling pathway. Unfortunately, because it's a small molecule drug, it passes the placental barrier and cause serious issues for the babies. Our research team is highly interested in DM199 as it has demonstrated the ability to increase production of nitric oxide and other beneficial molecules, including prostacyclin and endothelium-derived hyperpolarizing factors. Given that DM199 is a large molecule, it is highly unlikely to cross the placental barrier, something confirmed in nonclinical testing. Preeclampsia is usually marked by a rapid spike in blood pressure potentially causing seizures, stroke, multiple organ failure and even death of the mother or baby. As of today, the only way to stop disease progression is to deliver the baby which is oftentimes done prematurely. Preeclampsia and related hypertensive disorders of pregnancy affects 5% to 8% of all births in the U.S. impacting approximately 180,000 to 300,000 patients annually and it is growing. Clearly, as we saw 2 years ago in the ReMEDy2 trial, DM199 has the ability to rapidly reduce blood pressure and we're optimistic that DM199 can reduce blood pressure in this population group as well. We also aim to demonstrate that DM199 dilates the intrauterine arteries and improves blood flow to the placenta. If proven, this would suggest that DM199 has the potential to be a disease-modifying therapy and enhanced fetal growth. We believe DM199 has first-in-class and best-in-class potential for preeclampsia, with the ability to improve outcomes for both the fetus and the mother. And of course, we don't have to wait long for our initial signals. We expect Professor Cluver to begin enrolling in the fourth quarter of this year with top line results available sometime in the first half of 2025. After having experienced my own battle with severe preeclampsia, I'm very excited to be part of developing a potential treatment for this potentially life-threatening condition.

Thank you, Lorianne. It's also important to highlight the efficiency of this trial. From a data standpoint, we'll gain valuable insights into DM199's potential to lower blood pressure and dilate the intrauterine arteries in preeclampsia patients, with results in the first half of 2025. Moreover, with our research collaborators conducting the trial, it keeps our clinical operations group focused on the ReMEDy2 trial. Now, I'd like to hand the call over to Scott Kellen to review this quarter's financial results.

Thanks, Rick and good morning, everyone and thank you for being part of today's call. We topped up our balance sheet considerably in June with the completion of an $11.8 million private placement with accredited investors, effectively extending our cash runway into Q3 of 2026. Net proceeds from this transaction were approximately $11.7 million. With this financing, our June 30, 2024 combined cash, cash equivalents and investments increased to $54.1 million, up from $52.9 million as of the end of 2023. Net cash used in operating activities for the 6 months ended June 30, 2024, was $11.2 million compared to $10.1 million in the same period of the prior year. The increase in cash used in operating activities was driven primarily by the advance of deposit funds to vendors supporting our ReMEDy2 clinical trial during the current year period. Our research and development expenses increased to $3.9 million for the 3 months ended June 30, 2024, up from $2.5 million in the prior year period. R&D expenses increased to $7.6 million for the 6 months ended June 30, 2024, compared to $6.2 million for the 6 months ended June 30, 2023. These increases related to the continuation of our ReMEDy2 clinical trial and increased staffing costs driven by the expansion of our clinical team. These increases were partially offset by cost reductions related to clinical trial work completed in 2023, specifically our Phase 1C and REDUX trials. And the completion in 2023 of the in-use study work performed to address the clinical hold on our ReMEDy2 trial. We expect our R&D expenses to increase moderately relative to recent prior periods, as we globally expand the ReMEDy2 trial and site activations and participant enrollment continue. Our general and administrative expenses were $1.7 million for the 3 months ended June 30, 2024, down from $2.2 million for the 3 months ended June 30, 2023. G&A expenses were $3.8 million for the 6 months ended June 30, 2024, down from $4.1 million for the 6 months ended June 30, 2023. These decreases resulted from the combination of a reduction in the cost of directors and officers liability insurance premiums and decreased legal fees incurred in connection with our lawsuit against PRA Netherlands, partially offset by increased personnel costs, related to the expanding of our team and an increased noncash share-based compensation costs. We expect our G&A expenses to remain steady as compared to recent prior periods. Other income net was $526,000 and $1.1 million for the 3 and 6 months ended June 30, 2024, respectively, compared to $271,000 and $527,000 for the 3 and 6 months ended June 30, 2023, respectively. These increases were driven by increased interest income recognized during the current year periods, related to higher 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.

[Operator Instructions] First question comes from Thomas Flaten with Lake Street.

Rick, just to clarify or perhaps Lorianne, at the end -- during your first quarter results call, you indicated that there were 8 sites that were active and I know you're focused on the 15, how many are active and enrolling as we speak?

Lorianne, do you want to take that one?

Certainly. So as you may have seen on clinicaltrials.gov, it lists 8 sites. There is always a lag between actuals and what is on the clinicaltrials.gov website. We currently have 13 sites activated.

And is there enrollment pacing the way at least as good as your conservative estimate for the enrollment? Or are they more high enroller type sites?

It's a combination of high enroller sites and sites that we feel are not quite as high enrolling. We believe we'll have 9 out of the 15 high enrolling, top 15 high enrolling sites up and running by the end of Q3. So does that answer your question?

Yes, that's super helpful. And with respect to the preeclampsia study, you guys are in the regulatory process in South Africa right now. Is that being led by you guys or Dr. Cluver and her team and -- is it a dynamic process? Do you have any sense of how that's going?

Yes. That's being led by Dr. Cluver and her team and it appears to be going extremely well.

Our next question comes from Chase Knickerbocker with Craig Hallum.

It's Jacob [ph] on for Chase. So, just one question for me. Do you feel good about the screening criteria you have in place, anything causing screening failures that has surprised you?

We do feel good about our screening process. We are always looking for ways to improve our enrollment rate. And so there will be some future developments coming down the pipe. But at the moment, we feel that we are enrolling a population for whom there is very little or nothing actually, that can be done to help them. So this is a very large patient population with no other treatment option.

And we do not have any further questions at this time. Mr. Pauls, I will turn the call over to you for closing comments.

All right. Thank you. So we'd like to thank everyone for joining us this morning and for your continued support. We look forward to the next update. And with that, this concludes our call today. Thank you.