DiaMedica Therapeutics Inc. (NASDAQ:DMAC) Q1 2023 Earnings Call Transcript May 16, 2023
DiaMedica Therapeutics Inc. misses on earnings expectations. Reported EPS is $-0.2 EPS, expectations were $-0.16.
Operator: Good morning, ladies and gentlemen, and welcome to the DiaMedica Therapeutics First Quarter 2023 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 and subsequent quarterly report on Form 10-Q.
DiaMedica’s SEC filings are available at SECs website www.sec.gov and on its website. Please also note that any comments made on today’s call speak only as of today, May 16th, 2023, 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, sir.
Rick Pauls: Thank you, operator. Hello, everyone, and welcome to our Q1 2023 conference call. I am joined this morning with Dr. Kirsten Gruis, our Chief Medical Officer and Scott Kellen, our Chief Financial Officer. I am happy to report this morning that our complete response requesting the lifting of our clinical hold is being finalized as we speak and we plan to submit to the FDA this week. Much hard work has been performed to get us here. The FDA requested a new study was completed in April. This was performed at an independent laboratory and consisted of two parts. Part one simulated actual use in the hospital of drug being administered. And part two evaluated worst case scenarios such as varying storage durations, temperature and light exposure.
We believe that the data from part one confirmed our conclusions that the effects of the change in the IV bag material was the cause of the hypotensive events leading to our halting of enrollment in the study. Results from part two of the in-use study were substantially consistent with part one, which means that there were likely be no new special handling instructions required for the IV administration of DM199. I would also point out that part one results were consistent with results of the IV bag testing we completed in the fall of last year, where we proposed revising the IV dose to 0.5 micrograms per kg to match our Phase 2 stroke trial IV dosing levels. We hope that this consistency will contribute to a favorable decision by the FDA. And just to remind everyone, there are no proposed changes to the ensuing three weeks subcutaneous dosing under the study protocol.
Photo by National Cancer Institute on Unsplash
I’m also very pleased to report that we have recently completed a Phase 1C in healthy volunteers trial even though the FDA did not request or suggest human testing, we planned and initiated a Phase 1C open label single ascending dose study of DM199 administered using the PVC IV bags planned to be used in the ReMEDy2 trial at 0.1, 0.025 and 0.5 microgram per kg. This study was conducted in Australia. The results is confirmed to with human data that are proposed revised IV dose of DM199 of 0.5 micrograms per kg would be generally safe, well tolerated and achieved a blood concentration level that reached the desired therapeutic range as seen in our prior Phase 2 acute ischemic stroke trial. The results from this Phase 1C study give us further confidence that have proposed DM199, IV dose revision to 0.5 micrograms per kg for ReMEDy2 will minimize the risk for clinically significant hypertension and reach the targeted range.
These results will be included as additional supporting data and our clinical hold response. We also believe that this study and the resulting data will demonstrate our commitment to patient safety and provide greater comfort for our prior and new principal investigators and study sites to engage in and support the ReMEDy2 trial. As a result of all this work, we are optimistic that we have fully identified the cause for last year’s unexpected hypotensive events and will be providing the FDA with adequate data to support our analysis of the cause of the prior hypertensive events. We believe the results of the Phase 1C study further support our proposed revision to the IV dose of 0.5 micrograms per kg and demonstrate the safety and tolerability of DM199.
All in, we are cautiously optimistic that this will allow the FDA to lift the clinical hold. With the expansion of our team this past year, I’m confident that we have the right team in place to execute the ReMEDy2 trial, which we believe will be a pivotal trial. Once we hear back from the FDA, if the response is positive, we will provide an update on the next steps and expected timing for relaunching the ReMEDy2 trial. We have also recently expanded our management team with the addition of David Wambeke as our Chief Business Officer. Dave brings over 15-years of relevant life sciences, capital markets, M&A and Investor Relations experience to DiaMedica. He was actually the lead banker on our 2018 initial public offering on NASDAQ and has been one of my most reliable and trusted outside advisors over the past five years.
And as well, he has an extensive understanding of our DM199 programs. He also brings key relationships across the biotech and investment communities. David is committed to advancing DM199 as you can tell with his recent purchase of $750,000 of DiaMedica common stock. We’re grateful to have him part of our team. I would like to now turn the call to Scott Kellen to review the financial highlights.
Scott Kellen: Thanks, Rick, and good morning, everyone. As Rick mentioned, we announced our first quarter 2023 financial results and filed our quarterly report on Form 10-Q yesterday afternoon. These documents are both available on either the DiaMedica or the SEC websites. Starting with our balance sheet as of March 31, 2023, our combined cash and investments totaled $28.7 million, down from $33.5 million as of the end of 2022. Our first quarter 2023 cash usage was $5.1 million, compared to $3.9 million in the prior year period. The increase in our cash usage was due primarily to the in-use in the Phase 1C studies. We believe that our current cash will support the clinical development of DM199 and our operations into the fourth quarter of next year.
Our research and development expenses increased to $3.6 million for the three months ended March 31, 2023, up $1.6 million from $2 million for the first three months ended March 31, 2022. The increased costs were driven by a number of factors, including increased manufacturing and process development costs, costs for the in-use and the Phase 1C studies and increased personnel costs associated with the expansion of the clinic team. These increases were partially offset by decreased costs incurred in the Phase 2/3 ReMEDy2 stroke trial, due to the clinical hold. Our general and administrative expenses were $1.9 million for the three months ended March 31, 2023, up from $1.6 million for the same period in the prior year. The increase was primarily due to recruiting costs incurred in conjunction with the expansion of the company’s team and increased legal fees incurred in connection with the company’s lawsuit against PRA, Netherlands.
Speaking of which, let me provide a quick update on our ongoing lawsuit against PRA, Netherlands, which as of July 1, 2021 was acquired by ICON plc. Last month, the Netherlands Commercial Court issued its ruling on the matter of our ownership of the study data and records from the trial that PRA/Icon grant for us in 2013 and 2014. In that ruling, the court declared that DiaMedica was the rightful owner of study records, both paper and electronic as stipulated in the original study agreement. Court ordered PRA/Icon to “allow and tolerate” the DiaMedica exercise its right as owner of documents and to cooperate with the surrender of both the physical documents and the digital data. The court further ruled that PRA/Icon had no legal basis for withholding the study documents.
After all these years, that ruling was quite the vindication. We now look forward to obtaining the records in conducting a proper audit of the study and to evaluate the inconsistent messaging from PRA. We are currently taking steps to enforce the court’s ruling and to get access to the study documents. PRA, however does have a right to appeal this decision. This right lasts until mid-July of this year. At that time, we’ll be able to provide some clarity on timing for the next steps through the Netherlands legal system. So thank you. And with that, let me turn the call back over to Rick.
Rick Pauls: Thanks, Scott. With that, we’d like to open the call for questions. Operator, if you could please introduce the first analyst.
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