DiaMedica Therapeutics Inc (DMAC) 2021 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the DiaMedica Therapeutics First Quarter 2021 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 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 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 also note that any comments made on today's call speak only as of today, May 6, 2021, 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. (Operator Instructions)

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, Erica. Good morning, everyone, and thank you for joining us today. Welcome to our first quarter earnings and business update call. Yesterday, after the markets closed, we issued a press release summarizing our Q1 2021 financial results and providing a general update. At that time, we also filed our quarterly reports on Form 10-Q. Both documents can be found in the Investor Relations section of our website at diamedica.com. I'm joined this morning by our Chief Financial Officer, Scott Kellen; and our Chief Medical Officer, Dr. Harry Alcorn. Since our last call was just 1.5 month ago, we'll provide a brief update today before taking your questions.

Let's begin with our acute ischemic stroke program. We’re pleased to be moving forward with a Phase II/III study of DM199 in acute ischemic stroke patients. We submitted the IND for the study on April 16, a bit behind our end of March goal, but we used the additional time to ensure that we have the right study plan and the proper statistical analysis to support our proposed adaptive design.

The IND submission is not the pacing item for initiating this study, and we have confidence in our current time lines. The FDA 30-day review period concludes the end of next week. As of yesterday, we have not received any communication from the FDA other than that they're acknowledging receipts of the IND. Based upon the feedback we received from the FDA last December, we don't anticipate any significant additional questions on the study protocol.

As proposed, this Phase II/III trial will be a double blinded, placebo controlled, randomized study of approximately 350 participants. Based upon a 90% powering for statistical significance on the primary end point of the modified Rankin Scale at day 90. Secondary end points will include stroke recurrence, mRS shift, NIHSS and the Barthel Index, along with deaths, safety and tolerability measures and biomarkers related to KLK1. In addition to preparing for the Phase II/III study, we also expect to engage the FDA in a discussion regarding stroke recurrence as a clinically significant end point. Recall that in our ReMEDy Phase II study, we observed a statistically significant reduction in recurrent severe strokes.

Specifically, we saw an 86% reduction in the overall study, 1 patient in the DM199 group compared with 7 in the control group, 4 of which were actually fatal. We believe this provides a strong signal of the potential for DM199 to improve the physical recoveries for stroke victims and additionally reduce stroke recurrence and associated with a mechanism which we believe stabilized plaque. Recurrent strokes tend to be more costly, disabling and also fatal.

Anything that can be done to reduce the level of recurrence would greatly benefit patients and their health care system. We also intend to submit an application for Fast Track designation for DM199 as part of initiating this discussion. Dr. Alcorn led a comprehensive process to finalize the study protocol, bringing together a number of key opinion leaders, our scientific advisory board as well as clinical and regulatory experts. We have engaged a contract research organization to provide us with the resources to identify, qualify and engage up to 75 clinical sites.

Concurrently, our team is focused on getting key operational procedures and services for the study. They are prioritizing time-sensitive needs to assure a timely, accurate and efficient study in anticipation for initiating the trial this summer, subject to FDA authorization.

Turning to our chronic kidney disease program and our REDUX trial. The key item that we've been waiting for is the preliminary top line data from the diabetic kidney disease cohorts. The data is currently being compiled. We remain on track to provide this data readout during this quarter and look forward to sharing these results for you in the near term. Overall, enrollment in the REDUX study has reached 70 participants. This includes the full enrollment of the diabetic kidney disease cohorts with 32 participants. The IgA Nephropathy cohort has reached 70% completion or 21 participants, and enrollment in the African-American cohorts has reached approximately 60% or 17 participants.

Enrollments in the IgA Nephropathy and the African-American cohorts has continued at a slower pace, still being impacted with COVID. We also have 2 additional sites identified and qualified that will be activated very shortly. With the significant declines in new COVID cases and recent availability of vaccines and these new study sites, we still anticipate completion of both of these cohorts in the second half of 2021.

Now I'll ask Scott Kellen to take us through the financial results for the first quarter.

Thank you, Rick. Good morning, everyone. And as Rick mentioned, we announced the first quarter financials and filed our quarterly report on Form 10-Q yesterday afternoon. If you haven't had a chance to review these documents, they are both available on either the DiaMedica or the SEC websites.

Our net loss for the first quarter of 2021 was $3.6 million or $0.19 per share. This compares to a net loss of $2.4 million or $0.19 per share for the same period in the prior year. Our research and development expenses were $2.4 million for the 3 months ended March 31, 2021, an increase of $1 million from $1.4 million for the 3 months ended March 31, 2020. The increase was due to a number of factors, including year-over-year increases in costs incurred for the REDUX Phase II CKD study and costs associated with an increase in staff levels, consulting services and nonclinical testing required to support our preparation for the ReMEDy II Phase II/III stroke study.

Now these increases were partially offset by a year-over-year decrease in costs incurred for the ReMEDy Phase II stroke study, which completed during 2020. Our general and administrative expenses were $1.2 million for the 3 months ended March 31, 2021, up slightly from $1.1 million for the prior year period. The increase in G&A expenses resulted primarily from increased director and officer liability insurance premiums, increased personnel and noncash share-based compensation costs.

On the balance sheet, we finished the first quarter of '21 with cash, cash equivalents and marketable securities of $23.4 million. Current liabilities were $1.2 million and working capital was $23 million. This compares to $27.5 million in cash, cash equivalents and marketable securities, $2 million in current liabilities and $25.9 million in working capital as of the end of 2020.

The decreases in combined cash resources and in working capital are due primarily to clinical study costs related to the REDUX Phase II CKD study and costs associated with preparing for our ReMEDy 2 Phase II/III stroke study. Our current capital position should allow us to complete all 3 cohorts, the REDUX Phase II clinical study, initiate the Phase II/III study in acute ischemic stroke and fund our planned operations through mid-2022.

Now let me turn the call back over to Rick.

Thank you, Scott. We'd like to open the call for questions. Operator, if you could please introduce the first analyst.

(Operator Instructions) Your first question comes from the line of Alex Nowak with Craig-Hallum Capital.

Just wanted to touch base on the breakthrough of the Fast Track designation. So just to be clear, that has not been submitted. Have you had any communication with the FDA or HHS on that front? And then just current time lines or what -- remind us the pathway there to hear back on whether or not you get that designation?

Sure. Yes. So after getting the green light to proceed with this study, our plan is to submit to the FDA for Fast Track designation.

Okay. And that's a 60-day review, correct?

Yes. That's right.

Okay. That's great. Anything that -- it doesn't sound like you're too worried about the IND. Is there anything to really note that might be in the IND submission that's going to give some pause at the FDA? Or would you expect a pretty vanilla review here?

Yes. I think the short answer, we're very confident. But as you know, there's always a chance the FDA will come back with new questions or concerns. It was very helpful for us the fact that we did get written feedback from the FDA in December, and we're following their guidance and comments. And yes, we're optimistic that this will be -- the feedback will be positive.

Okay. Understood. And then maybe could you set some guideposts on how to think about the kidney readout DKD? The data that we have out there to compare is we got, obviously, your Phase Ib that you've done, the Chinese kidney studies and then there's other CKD drugs under development. So what would you like to see from eGFR and a UACR standpoint to call out as success?

Yes. So again, this is a 3-month study. We have 2 different doses, and we're measuring this versus baseline. And so ideally, if we could see a decrease in the UACR proteinuria, while seeing a stable increase in eGFR, we'd be very pleased.

Okay. Understood. And then just last question. The enrollment for DKD was completed in December and just 90 days puts us into March. So what else is needed on your end to review and cleanup the data for ultimately publishing it? And then the second question, I guess, to that is, would you expect a similar time line to the other 2 cohorts later this year? Because the press release mentioned completing the enrollment in the second half of 2021. Does that include a readout in the second half of 2021? Or just finishing the enrollment?

Alex, as it relates to the REDUX CKD cohort 3 DKD, you are correct. Currently, the laboratory batches some of their assays. So even though the patients are complete, we have to wait for the results to come through. We're following a process to ensure the accuracy of the data, and we anticipate the data to have to be reported out early June for DKD. as it relates to the other 2 cohorts, 1 and 2, respectively, they will be reported out by the end of the year.

Your next question comes from the line of Etzer Darout with Guggenheim Securities.

Just first question for me, I guess, have you gotten anything maybe anecdotal on patient disposition as they exit the cohorts for the DKD trial?

We don't like to look at the data individually. We want to make sure that we have a complete set to fully understand and analyze the data. And so at this point, we're unable to answer that question until we see a final report.

Got it. And then I guess maybe this may be a similar answer, but I guess in terms of sort of the sense of sort of the number of patients and the trial that are on SGLT2 inhibitors, and I guess really asking, not only for the data readout itself, but thinking about sort of the implications for Phase III design, as you would expect, maybe more patients to sort of now be getting sort of SGLT2 inhibitors and sort of the DKD cohort, just your thoughts around that.

Yes. So I think the first of the plan is we'll follow the data, based upon the 3 cohorts. What we anticipate is the more likely pathway here is for IgA Nephropathy. We think that is a -- I think is very clear pathway in terms of a rare disease where the potential to have conditional approval after 6 months based on proteinuria, full approval, 2 years in eGFR.

And then longer term, we see the opportunity for the diabetic kidney disease, [adding that] mechanism of action of DM199 is really improving vasculature versus the SGLT2s are about excreting glucose via the urine. So we think it's a different mechanism that ultimately could be complementary, but that's something that we'll have to look at close -- more closely as we analyze our data.

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

Just a couple here. In terms of the stroke recurrence strategy, can you just talk about a little bit the timing there of approaching the FDA? And what could be the outcomes here? Would this be a secondary outcome, a co-primary outcome, a whole new study? Just any thoughts there. And then just to complete that answer, can you just explain a little bit more on the mechanism of action of stabilizing plaque and how that would make a lot of sense for a stroke recurrence?

Sure. So what our plans here is after we get the okay to proceed with the current study as proposed, we're currently looking at a number of different pathways for stroke recurrence. This could be a sub study within the Phase II/III. We're also looking at the potential for co-primary end points, but not both required and -- or also the possibility for a separate study.

And so when we look at the Phase II data, although again, small study, we talked about earlier how for severe recurrent strokes, we had 7 on placebo, one on drug. When we look at ischemic recurrent strokes, we had 6 on placebo, 0 on drug. And so if you look at the mechanism of action, and we went through a lot of the detail on this on our recent KOL events, we do believe the potential for KLK1 and DM199 to actually stabilize plaque.

And we feel that this is something that could be applicable for both small vessel, medium vessel and large vessel occlusions. And so this is something that's very important to us that we're looking at further. At a very minimum though, the ability to reduce stroke recurrence should also be very important and part of the rationale and the data that we've seen with our protein and the data that's been reported with the urinary form in Asia today.

Okay. Great. And then if I can sneak in a couple more here. The -- once the DKD data reads out, any read-through here? You talked about what you'd like to see on eGFR side. Obviously, it's just 3 months here in proteinuria. But any read-through that we can think about for the IgA Nephropathy data? And then on that data, what would be the importance of maybe seeing some important biomarkers on the IgG and the IgA side?

Yes. So the purpose of the study is looking at it as a basket approach. So we've got 3 different cohorts. And we want to -- we feel overall that DM199 will improve kidney function across different causes of kidney disease, but we really would like to see, are there differences amongst the cohorts. And again, as you mentioned, one of the aspects that, I think, I'm most excited about the IgA is the potential for the (inaudible) to be disease modifying.

And part of that rationale, some of our preclinical work that we've conducted in a type 1 animal model, we did see a significant increase in Tregs and also halting the autoimmune attack. So if that's the case, we think that the potential for our drug to not just improve kidney function, but potentially to halt the autoimmune attack, I think, could have a greater impact and a greater differentiator from other compounds that are in development today.

Okay. Great. And then just last one here on the stroke study in 2022, I guess. You've talked about an interim result here, can you just help us understand, is that still blinded? Is there -- what goes into that result that without necessarily seeing the efficacy that we can read-through here on the interim one in 2022?

Sure. So the plan is after approximately 40% of the patients have completed and [stalled] up, we'll have the DSMB. We'll have an interim analysis. DiaMedica will remain blinded, and there's really 3 potential outcomes. So one is to continue to study as planned. So if the data is coming in as anticipated, we've powered the study for a 15% absolute improvement in excellent outcomes.

If the data is coming less than anticipated, call it, between 5% and 10%, we would have the opportunity to increase the study size. And if there's no effect with the drug or little effects, so if the outcome are less than 4 or 5 excellent outcomes, then we would terminate the study. So I think it should give us a good indication in terms of is the drug efficacy coming in as anticipated?

Your next question comes from the line of Thomas Flaten with Lake Street Capital.

Rick, I just want to follow-up on a comment you made a couple of questions ago about the recurrence study. You mentioned an idea of going after co-primary end points. I just want to confirm, co-primary in the sense that you have to get both for study success? Or did you mean 2 primary end points that are discrete?

So it would be -- we would not want to have 2 -- we would not want to have dual end points. They would be independent. So if we had hit significance on either, then it would be a success. So it's still early and -- but this is something that we are talking to some of the experts with our consultants and advisers. And we want to understand, is this something that we should proceed with or not? At a very minimum, this will be an important secondary end point that could also be as part of a separate study.

And then just in the -- with the assumption of the IND clearance, where are you at in terms of activating or identifying the overall number of study sites? I think you mentioned 75. Have you identified all of those? Or can you just give us a sense of where you are quantitatively or qualitatively however you like?

Yes. So we are planning up to 75 sites. We've already identified a number -- a fair number of the sites already, both with Harry's network and also with our CRO. And so this has been something we’ve been started a while back, and we're just going through the process here right now and getting -- working on getting those sites up and running so that we can start the study this summer.

And then finally, on the other 2 cohorts in the kidney disease study, IgA and African-Americans, is there anything you're seeing in terms of where these patients are coming from? I know it's been a slog since the turn of the year. Is there anything specific in where you're seeing these patients? Or how are you -- how did you determine where those new sites were going to be that you were going to bring online? Is there -- just curious if you can give us some color on that cohort.

Sure. In the CKD space, these sites are primarily specializing either in DKD or in IgA, or if they have a strong African-American hypertensive group. And so we want to look at their database respectively and do an analysis that they actually have the patients that they can recruit and screen for our study before we would engage even qualifying the site beyond that.

So we've been very specific about the demographics, where they're located, not only from the database perspective for the patients that they can actually screen and recruit, but also in the fact of COVID, are their clinics physically open 100%? What's their feeling of the patient population? Are they willing to come to the clinic? And making sure that we've addressed those other, I would say, social needs to ensure the accuracy of bringing the patients in to be screened.

Great. And then -- sorry, just one follow-up on that. And I believe you said earlier that you would readout the other 2 cohorts by the end of the year. So by implication, you would have to have those last patients in by what, like, July, August? Is that about right to give yourself the 3 months plus some time for database lock and readout or compilation, et cetera?

Correct.

Your next question comes from the line of Elemer Piros with ROTH Capital Partners.

I just have one question related to DM199. How many doses of the drug do you have available at hand -- on hand for the study? And what is the shelf life of DM199, please?

So the amount of drug that we have on hand is double what is currently required for the study today. So we have ample amount of drug on hand. Obviously, the expiration dating is on a rolling basis. And right now, our expiration date goes out an additional 2 years.

So no concerns from our end in terms of having to complete another manufacturing run while we run these studies.

Your next question comes from the line of Jason McCarthy with Maxim Group.

So assuming everything goes to plan with respect to IND approval for the Phase II/III stroke study, when can we expect an initial data readout? And then my second question is, do you expect to utilize clinical trial sites outside the U.S. and potentially work with ex-U.S. regulators?

Yes. Thank you, Jason. So we're planning 75 sites. We're currently working with our CRO and the sites in terms of estimating recruitment rates. Based upon a recruitment rate of one patient every 3 months per site, we'd be looking at interim results in next year in 2022 and then to complete the study in 2023. The 75 sites are all going to be in the U.S. and as we get this up and running, we're also looking at expanding this into the EU.

And there are no further questions at this time. At this time, I'll turn the call back over to the speakers for any closing remarks.

All right. Again, we'd like to thank everyone for joining us this morning. We appreciate your interest and your continued support. Please stay safe in these challenging times. And this concludes our call today. Thank you.

Thank you for participating. You may disconnect at this time.