Good morning, ladies and gentlemen, and welcome to the DiaMedica Therapeutics First Quarter 2022 Conference Call. An audio recording of the webcast would be available shortly after the call today on 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 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.

DiaMedica's SEC filings are available at www.sec.gov and on its website. Please note that any comments made on today's call speak only as of today May 5, 2022, 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 Rick Pauls, DiaMedica's President and Chief Executive Officer. Mr. Pauls, you may begin..

Thank you, Julie. Good morning, everyone, and welcome to our first quarter 2022 conference call. I'm happy to be able to speak with you this morning. I'm joined by Dr. Kirsten Gruis, our Chief Medical Officer; our CFO, Scott Kellen is sick today and won't be joining us.

I want to start off today addressing the progress in our ReMEDy2 stroke trial in which we are studying DM199 potential to improve the physical recoveries and the rate of stroke recurrence in acute ischemic stroke patients, who have no current treatment options other than supportive care.

Remember, this group represents about a half a million patients in the U.S. alone. Less than two months since our last call, on March 15, we are pleased to share that we have made considerable progress, and I'd like to ask Kirsten to provide a clinical update..

Thank you, Rick, and good morning, everyone. We've continued to make solid progress on site engagement and activation, which will be key to finishing this trial timely and efficiently. As of our last call, we had four hospital sites activated, meaning able to recruit and enroll patients.

Today, we have nine sites activated and are on target to have approximately 17 sites activated by June, which is aligned with our corporate target. Equally as important is recognizing that many hospitals have not been able to restore their research teams to pre-pandemic levels.

In a situation where the study team is running below staffing capacity, they understandably have concerns over the adequacy of their staff and their ability to manage the study patient after the patient leaves the hospital.

This may result in further uncertainty over the patient being able to receive the full three-week study treatment and can be a barrier to the site enrolling a patient that they would otherwise normally recruit.

To address this, we've recently brought on a nationally recognized clinical support service firm to assist us in engaging with those study sites that can benefit from us providing supplemental staff resources, to support both the recruitment of patients and the management of the patient's participation in the study as they transition from the hospital to an intermediate care facility and ultimately to their home.

From the many discussions we've had with study sites, our advisors and others, we understand that staffing at the study site is the number one issue reported as inhibiting research.

In providing assistance with additional staff, we intend to minimize the administrative burden on the physician, the study site coordinator and the rest of the study team..

Thank you, Kirsten. So we are very pleased to be getting into a rhythm of bringing hospitals on board and with the clinical team proactively developing creative solutions to drive enrollment in our stroke trial, even as clinical sites continue to deal with staffing issues.

As we discussed in our last call, we are prioritizing clinical study sites that have the highest enrollment potential, ideally those that can enroll one plus patient per month. I'm very interested to see if our staffing solution can help sites achieve this type of enrollment rates.

So we are deeply committed to advancing DM199, the first pharmaceutically active synthetic form of KLK1 protein in patients. DM199 represents a new therapeutic mechanism of action with the potential to offer stroke patients the prospect of improving recoveries and reducing the risk of recurrence.

And I want to stress that the urine-derived form of the KLK1 protein approved in Asia has been on the market, where has treated several hundred thousand patients since 2005. The results from our first study ReMEDy1 were consistent with the reported results of the urinary KLK1. This is why we are still bullish on DM199.

So let me reiterate that the patient treatment period in our ReMEDy2 trial is quite short relative to other trials. Patients are treated for three weeks and the final follow-up is at 90 days for each stroke patient. We continue to expect that we will complete the interim analysis for ReMEDy2 during 2023.

We will provide more guidance on exactly when we get closer. Turning briefly to our chronics, our CKD or our chronic kidney disease program. We strongly believe in the unique ability of DM199 to both improve kidney function in patients with CKD and in controlling blood pressure in hypertensive patients by restoring low levels of KLK1.

As we mentioned on our last call, we are focused on collecting final data and preparing next steps, including selection of lead cause of CKD that could bring a much needed therapy to patients.

We expect the final analysis of the full dataset will continue to demonstrate strong signals for the IG nephropathy and in the hypertensive African-American population. While stoke is our main focus right now, we are developing a plan to move forward with the CKD program. I would like to now provide a review of our financials.

We announced our first quarter financial results and filed our quarterly reports on Form 10-Q yesterday after the market closed. These documents are available on either DiaMedica or SEC website. Let me start with the balance sheet.

As of March 31, 2022, our combined cash and investments totaled $41 million, down $4.1 million from $45.1 million at December 31, 2021. With the strength in our balance sheet, we believe our cash balance will support the clinical development of DM199 and our operations into early 2024.

Research and development expenses for the first three months of 2022 were $2 million compared with $2.4 million for the first three months of 2021, a decrease of $400,000.

This decrease was driven mainly by a reduction in costs related to the REDUX CKD trial, which completed patient enrollment in December 2021 and a lower level of DM199 manufacturing process development work in the current year quarter as compared to the prior year quarter.

These decreases were only partially offset by increased costs incurred in the ReMEDy2 stroke trial and higher personnel costs related to the expansion of our clinical team in the current year period. General and administrative expenses were $1.6 million for the first three months of 2022, up from $1.2 million for the first three months of 2021.

This $400,000 increase resulted from a combination of increased professional services costs, directors’ and officers’ liability insurance and personnel costs incurred in support of expanding our operations and clinical programs. As you can see, we have made very productive first quarter.

We continue to make significant progress in our lead AIS program. We brought on two key members to our management team and continue to expand the sites able to enroll patients in the ReMEDy2 trial. Finally, our balance sheet remains strong and we believe we are well positioned to execute on the plans we reviewed for you today.

With that, we'd like to open the calls to questions. Operator, if you could please introduce the first analyst..

Thank you. Your first question comes from Thomas Flaten from Lake Street Capital Markets. Please go ahead..

Thanks. Good morning, guys.

From the sites that you already have activated and enrolling, do you have some sense of what enrollment rates look like there? Or anything you can comment on there just to give us a sense of how productive these sites can be?.

Yes. Thomas, it’s still a little bit early. We're just getting through – getting these sites up. Our target has been for our projections for the interim analysis next year is to get to a 0.25 enrollment rate per site per month, so basically one patient per site every four months.

So it's still a little bit early, but I think over the coming months, we should be able to get more clarity on that enrollment rate. And as part of our prepared remarks, we mentioned that as well, we're really targeting here, those sites that we think that have the ability to achieve one plus site per month..

And then just to clarify on the interim analysis and on the prepared remarks, you said in 2023, and I think you just said in early 2023, is it still the goal to have first half 2023?.

Yes. So our guidance is 2023 and we're still hoping that that'll be the first half of the year..

Got it. And then just one more quick question.

With respect to the cash runway, what is that contemplate with respect to CKD development? Is there any CKD investment in that cash runaway projection?.

Very little. Our cash and our internal focus is really on this stroke trial..

Great. Appreciate it. Thanks guys..

Thanks, Thomas..

Your next question comes from Alex Nowak from Craig-Hallum Capital Group. Please go ahead..

Good morning, everyone.

Just curious, when did the support service go live for the stroke study and then what's the incremental cost in the study for adding that [indiscernible]?.

So it's really just been the last few weeks, getting things up and started so that expense will really start kicking in here over the next few months. And it'll be several hundred thousand dollars, but nothing that will – this is part of – this was built into our current budget and in terms of our expected cash out still into early 2024..

Okay. That's good.

And then the pickup in sites and active sites that are enrolling now, was this really just a function of – you've been talking to these sites for a couple months now and with COVID kind of waning here, they're just actively pursuing more studies, maybe just a little more detail on the conversation you're having with the sites?.

Yes. I think it's a combination of both. To get a study site up, I mean, it can easily take six to nine months depending if it's an academic or just a smaller hospital. So I think it really is a combination of the work that we've been doing over the last six, nine months.

And then clearly, I think with the reduction in COVID cases and the hospitals having beds available and a little more resources, we think that this is also contributing to the uptick in insights..

Understood. And then you've made some very good personnel investments.

You're adding the support service in, how should we think about additional investments that need to be made to get ready for stroke from a trial enrollment standpoint, or getting ready for eventual commercialization here?.

Yes. So we'll continue to looking to expand our team, but we don't see a very huge increase in terms of the staff. We have this all kind of built into our current budget. So for us, in particular, for our clinical team is really most important right now.

It's the balance in terms of the staffing that we have internally with the CRO that we're using to help with this study.

In terms of the commercial part, yes – and then in terms of the commercial part, I mean, in January this year, we brought on Dom Cundari, our new Chief Commercial Officer, and really just helping to lay out, what are those key things that we need to be thinking about a couple years ahead of a product launch. So that's all going forward.

And it's really – it's a balance in terms of the amount of cash we commit to that now versus as we get closer to potential launch..

Excellent. Appreciate the update. Thank you..

Thanks Alex..

Your next question comes from Francois Brisebois from Oppenheimer. Please go ahead..

All right. Thanks for taking the question.

So I was just wondering, just to reiterate, I'm sorry if you mentioned this, but is the total target – total number of sites still expected to be around 75 or has that changed?.

Yes. So our plan is up to 75 and what we're really focusing on near-term with, there's a lot of activity happening right now. And so it's really focusing on those sites near-term that we think can be higher enrollers.

And then throughout remaining of the year, we'll continue to be adding on sites ideally at a nice pace so that we can get to that interim analysis next year, and then we can then be able to complete the study after..

And the interim, is that still supposed to be around 140 patients?.

Yes..

Okay. And then last quarter you mentioned, about 10 sites, I believe that were under contract and greater than 70% that were engaged in startup phase.

Is this – everything still on track here or just to really make sure that these – the issues related to the pandemic and the staffing has not delayed things additionally here?.

Yes. The two key variables here are, the first one is, the site activation. And so from the time of contracting to getting the site activated, that can still be another six weeks or so. And so in Portland, in our last con call, seven weeks ago now, we were at four sites that were active, we're at nine today.

And our internal target is to be at 17 in June and then continuing this pace here until the end of the year. And then the second component is the enrollment rates, the patient rate that's coming in per patient per month, that's 0.25. And there's always upside here. So if that rate can come in higher, that would be great.

But importantly, our clinical team has been very active in understanding the challenges of running clinical trial today in particular and with the staffing challenges that we're having at the hospital and bringing in a consulting company to help us to provide those additional resources when these hospitals need is I think is really going to help in terms of getting sites on board and having these sites recruit the new patients for us..

Okay. Great.

And then lastly, did you mention that maybe a few months from now, we would start – we would have a better idea of how that 0.25 patients per site per month enrollment is going and maybe even color on the sites that you're focusing to do one patient per month?.

Yes. I think over the coming months, we should get some better color here in terms of that enrollment rate. And then as part of that is the additional work specifically with having this home nursing company helping us with support. So we should hopefully over the coming months get more clarity..

All right. Thank you..

Thanks, Frank..

Your next question comes from Elemer Piros from ROTH Capital Partners. Please go ahead..

Yes. Good morning, Rick. I think I know the answer to this question, but I would like to ask it anyway.

Do you see any competing programs at the sites that you identified that may actually interfere with your enrollment?.

No, we're really not. I think more of the studies that are ongoing today that we're seeing are companies that are doing mechanical thrombectomy. And then there's also some studies for connected plays, which is really more targeting four and a half hour window, but really for this treatment window that has not seemed to be an issue..

Okay. Thank you.

And of the kidney programs, which one do you think considering the current landscape is most promising as a partnering to candidate?.

Yes. So we still – we set an opportunity for both our IG nephropathy and also in our hypertensive African-American patients. If we look at our phase, our basket study and the data we have today, we look at the drops in albuminuria in hypertensive African-Americans 50%, 60% over three months. We look at the very large drops in blood pressure.

We feel that patient population, and maybe more specifically patients that one of the things we're looking at is hypertensive nephrosclerosis. So these are patients that are often salt sensitive, which we think is a key part of our mechanism.

So while we're very focused here on the stroke program, quietly behind the scenes here where we're getting some additional feedback on which cause of CKD to move forward. But clearly we see there's a real need for patients with kidney disease. And we think that key aspect here is that these kidney patients have levels of KLK1.

So if we can restore the levels, we think we could potentially have a real treatment option for these patients in great need today..

Thank you very much, Rick..

Thank you, Elemer..

And there are no further questions at this time. I will turn the call back over to the presenters for closing remarks..

All right. Again, we'd like to thank everyone for joining us this morning. We appreciate your interest in DiaMedica and your continued support. And with that, this concludes our call today..

This concludes today’s conference call. You may now disconnect. Thank you..