DiaMedica Therapeutics Q4 2022 Earnings Call Transcript

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March 29, 2023

There are 7 speakers on the call.

Operator

Good morning, ladies and gentlemen, and welcome to the DiaMedica Therapeutics Remedy 2 Update 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 And 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 and 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 ks. DiaMedica's NTC filings are available at www.sec.gov and on its website.

Operator

Please also note that any comments made on today's call speak only as of today, March 20 9th, 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 is President and Chief Executive Officer.

Operator

Mr. Pauls, you may begin, sir.

Speaker 1

Thanks, Paul. Hello, everyone, and welcome to our Q4 conference call. I'm joined this morning by Kirsten Grouss, our Chief Medical Officer and Scott Kellen, our Chief Financial Officer. I'd like to start off today's call by updating everyone on the status of our work to remove the clinical hold On our REMEDY 2 Phase twothree pivotal trial and our communications with the FDA as we approach what we believe will be the final resolution of the clinical hold. Recall that the hold was not caused by any issue with our drug product candidate DM199, that was caused by the effects of switching to a new IV bag formulation in our REMEDY 2 trial.

Speaker 1

In our prior REMEDY 1 Phase 2 trial, the IV bag made from polyolefin retained up to half of the DM199 drug. In our pivotal Phase twothree REMEDY 2 trial, we switched to the new PVC IV bag formulation, which does not retain any of the DM199, effectively delivering up to twice as much DM199 to study participants. We believe that this is what caused the transient clinically significant blood pressure drops or hypertension in those 3 participants. In our initial safety studies, we identified hypotension as a dose limiting tolerability for DM199. As a result, drops in blood pressure are consistent with the mechanism of action for DM199 and we believe that the hypotensive events At least indicate that DM199 is clearly active in patients.

Speaker 1

In the FDA's October continue full clinical hold letter, their most significant request was to expand our ID bag compatibility study to stimulate real world usage, which is referred to as an in use study. We had originally expected that we would need to request a Type A meeting with the FDA to discuss the requirements for the study. However, in December, we received written communication from the FDA, which provided their expectations for our INU study. Since we're only entitled to 1 the Type A meeting, we are pleased that this written communication saved us from having to use our Type A meeting for a discussion on the in use study requirements. We incorporated the FDA's feedback into the study protocol and submitted the updated protocol to the FDA with a request for confirmation that the protocol would satisfy the requirements.

Speaker 1

Last month, we received a follow-up notification indicating that the FDA believed that our in use study protocol was reasonable. The in use study is being conducted in 2 parts. Part 1 simulates actual use In the hospital with IV bag and the tubing using a pump to administer DM199. Part 2 tests worst case scenarios Such as varying storage, duration, temperatures and light. The first part of the INU study is complete and we believe that the data from this part confirms the conclusion we reached in our prior testing.

Speaker 1

Specifically, it confirmed that up to approximately 50% of the DM199 was retained And the IV bags used in the REMEDY 1 as compared to the IV bags used in the REMEDY 2 and supports our earlier proposed revision to the IV dose from REMEDY 2 from 1 to 0.5 micrograms per kg. These results have been submitted to the FDA along with the request for feedback and confirmation that we now have addressed all issues of the clinical hold once the Part 2 of the INU study is submitted. We are currently conducting Part 2 of the INU study and the results once complete will be submitted to the FDA, which we anticipate occurring in April. Note that part 2 of the INU study, what we learned will likely only affect handling procedures for the IV dosing and not the dose rates. Late last year early this year, while we were awaiting feedback from the FDA on the INU study protocol and preparing to run the INU study, We developed a more sensitive assay for measuring KLK1 levels and enhance the consistency in our assay that measures the activity levels of KLK1.

Speaker 1

We chose to do this as the FDA had posed a question about our existing assay methods. While we believe our existing assays were reasonable, we decided to be prudent and ultimately less time consuming to complete this work and eliminate a risk that the FDA might have additional questions and further delay the resumption of a REMEDY-two trial. The FDA had also asked whether trypsin could be a potential cause or contributor to the hypertensive events in REMEDY 2. This question likely stems from the use of trypsin in the manufacturing of the DM199 substance And trypsin by itself can cause drops in blood pressure. Early in 2022, as part of our ongoing manufacturing development program, We had initiated testing to that trypsin was fully removed from the DM199 during the manufacturing process.

Speaker 1

This testing confirmed that there is no or at least not detectable residue trypsin in DM199. In February, we submitted reports to the FDA confirming that trypsin was so, not measurable in DM199 and provided the update validated methods assays to the FDA for review. We recently received their feedback that the assays developed appear appropriate and our assessment of trypsin levels is also acceptable. At this point, I'm pleased to say that we believe we have a good ongoing dialogue with the FDA. We appreciate their engagement and we are confident that an end is in sight to our clinical hold.

Speaker 1

Note that the FDA has up to 30 days to review and respond to our complete response letter requesting the lifting of the clinical hold. Once we receive the response, we will provide an update on expected timing for getting REMEDY 2 restarted. Today, we also announced that we have initiated a Phase 1c open label single ascending dose study of the IV dosing of DM199 in the IV bags made from PBC used in the REMEDY-two trial. This was not requested by the FDA, but as a proactive measure on our part We chose to do so for 2 primary reasons. First, if for some reason the FDA is not satisfied that the results of the INU study provided sufficient basis for adjusting the IV dose levels going forward in REMEDY 2, then the results of the Phase 1c study will conclusively demonstrate the serum concentration levels of DM199 achieved with our proposed IV dose.

Speaker 1

The second reason has to do with driving confidence in the physician investigators. This study demonstrates our commitment to the patient safety I mean, I hope that will help us start strong when we resume enrollment in REMEDY 2. Enrollment in Phase 1c study began last week And the first three cohorts, which gets us to 0.5 micrograms per kg dose level, we propose to use going forward, should be complete in April with preliminary data available in May. I would like to also recognize and give a special thank you to our clinical team for getting this study designed, planned and initiated in a remarkably short period of time. We've learned a lot through this process and as a result, DiaMedica will come out stronger and better prepared to resume trial activities once cleared by the FDA to do so.

Speaker 1

This is also due in no small part to some key additions to our management team in 2022. Doctor. Kirsten Groos, our Chief Medical Officer is a Board certified neurologist with extensive experience in medical practice and drug development in bringing several drugs through FDA approval. Kiersten has also been instrumental in leading the response to the FDA and managing our FDA communications. Dominic Kundari, our Chief Commercial Officer, you will recall he managed the TPA franchise at And came out of retirement to join DiaMedica because of his passion for the stroke community and the potential benefits of DM199.

Speaker 1

We also added significant late phase clinical operation expertise with Julie Daves, our Senior Vice President of Clinical Development operations bring vast experience in clinical trial planning and execution and has a reputation for completing trials on time and under budget. In addition, at the Board level, we recently announced that Tonya Lewis has joined us. Tonya has extensive global regulatory expertise. This includes positions as Chief Development Officer, Chief Regulatory Officer and Chief Quality Officer. She has been involved with other clinical hold situations and has been responsible for several products making their way through the regulatory approval process with the FDA.

Speaker 1

It's a privilege to work with these individuals and entire DiaMedica team. As you can tell here this morning, we look forward to getting out from under this clinical hold And resuming the development of DM199 to bring this important treatment to stroke patients. We see a bright horizon with the team we have built And we will continue to grow as we move forward. One additional point that I'd like to make this morning, an important rationale for developing DM199, a synthetic form of the KLK1 protein is the current usage of the KLK1 protein in China. As many of you know, in China, a form of the ALK1 protein is isolated from human urine.

Speaker 1

That product is called Calakang and has been treating patients for over a decade now. In 2019, KalaKang was added to the National Reimbursement Medicines List. This spurred a dramatic increase in usage in China. There were more than 600,000 patients treated for stroke in 2021 alone. To put this into perspective, that's approximately 15% of the estimated 4,000,000 annual strokes per year in China.

Speaker 1

This gives us extensive knowledge of the KLK1's clinical use and even more confidence that our recombinant form of the KLK1 therapy can bring this much needed treatment to the U. S. And the rest of the world for patients who today do not have a treatment option. I would like to now turn over the call to Scott Kellen to review the financial highlights.

Speaker 2

Thanks, Rick, and good morning, everyone. As Rick mentioned, we announced our full year 2022 financial results filed our annual report on Form 10 ks yesterday afternoon. These documents are both available on either the DiaMedica or the SEC websites. Starting with our balance sheet, as of December 31, 2022, our combined cash and investments totaled $33,500,000 $2,600,000 from $36,100,000 as of the end of Q3 2022 and down $11,600,000 from $45,100,000 as of our prior year end. Our 2022 cash usage was $11,600,000 compared to $12,300,000 in the prior year And our cash usage was lower than planned due primarily to the halting of the enrollment in our REMEDY 2 trial.

Speaker 2

This should scale back up as we complete our response to the FDA and prepare for resuming enrollment, as Rick mentioned, we intend to provide an update on the timing for the resumption of the trial in the near future, we also reiterate that we believe our current cash will support the clinical development of DM199 our operations into the Q4 of 2024. Our research and development expenses decreased to 7 $8,000,000 for the year ended December 31, 2022, down from $8,800,000 for the full year of 2021. This decrease was driven primarily by reduced costs incurred during 2022 for the wrap up of our redox Phase 2 CKD trial and decreased non clinical testing costs, a significant amount of which were incurred during 2021 in preparation for initiating the Phase the Phase 3 REMEDY 2 trial in 2022. These decreases were partially offset by increased personnel costs associated with expanding our R and D operations and increased manufacturing process development activities. Our general and administrative expenses were $6,200,000 $4,900,000 for the years ended December 31, 2022 and 2021 respectively.

Speaker 2

This increase was primarily driven by increased directors and officers liability insurance, Increased personnel and professional services costs to support our expanding clinical programs and increased legal fees for our lawsuit against PRA. These increases were partially offset by reduced non cash share based compensation costs. With that, let me turn the call back over to Rick.

Speaker 1

Thanks, Scott. With that, we'd like to open the call for questions. Paul, If you could please introduce the first analyst.

Operator

Now, you'll be placed into the queue in the order received. Please be prepared to ask your question when prompted. And our first question comes from Thomas Flaten of Lake Street Capital. Your line is open.

Speaker 3

Good morning. Thanks guys for taking

Speaker 2

the questions. Just a quick couple of questions

Speaker 3

on the Phase 1c study. Was that protocol developed in conjunction with FDA or is this something you did completely independently as kind of

Speaker 4

a back pocket backup data set.

Speaker 5

Hi. So I'll take that question. This is Kirsten. We developed it independently, the protocol in our what Was your last response to have in our back pocket, but we explained our situation to the site and the local ethics board in terms of what we wanted to measure in that study.

Speaker 1

And then Frank, then we can with our previous Phase 1 trial we did that we did using the polyolefin bag, we basically are going to be able to compare that data with this new data And just confirm that we have the right dose range.

Speaker 3

Got it. And is there any Risk that a normotensive patient would suffer a significant blood pressure drop outside of what you might see In a stroke patient?

Speaker 5

No, we wouldn't expect that because the prior Phase 1 was done with the polyolefin bags that Rick mentioned. There were no problems with healthy volunteers who were normal pensive having lowering of their blood pressure.

Speaker 3

And then one final one, Rick, you mentioned that FDA has 30 days to respond to your final response. And if I'm reading the press release correctly, that response will go in April. So May would be the timeline for a response on whether or not You've satisfied their outstanding question?

Speaker 1

Yes. As soon as we have the Part 2 of the INU study And we're that's already initiated. It's a few weeks for that study to be completed. So as soon as we have that completed, we'll And the FDA will have then have up to 30 days. I think we're encouraged by the fact that over the last few months, we've had a good dialogue.

Speaker 1

We've been able to submit data along the way and then getting positive feedback. So I think this will be helpful

Operator

Thank you. Our next question comes from Alex Nowak from Craig Hallum Capital Group. Your line is open.

Speaker 4

Okay. Good morning, everyone. I think last call we had, I think there was, I think some strong confidence at the time that we weren't going to need another safety study in patient and now we're lost in the Phase 1C study. So, was there something that you saw in the end use study anything in the FDA commentary that ultimately led you to say we want to have this in our back pocket? Like what's changed here from the last call we And in October.

Speaker 1

It's just for additional level of confidence, Alex. So we initiated the Phase 1c. We started planning this well Or even starting the INU study. And so part of also the rationale is that when we were looking at some different scenarios, We actually were able to find a clinical site in Australia that had a slot open, that allowed us to get this study up and going quickly. So at this point here, we anticipate to ideally having the results in early May.

Speaker 1

And while we didn't want to be in a situation that we run the ANU study and for some reason we see something unexpected and then we would have to go back and run a Phase 1c trial that could then put this out until this fall. So I think it was an important step here to giving us some comfort backup plan. And then importantly also helps with just providing some confidence for the sites that we're taking patient safety very, very importantly And will give us just some additional data here to support this trial. And I think it's going to help with enrollment after the trial is up and running.

Speaker 4

Okay. That all makes sense. A question that I think still sits out there is, did we know the correct dosage going into patients for the Phase 2 stroke study done in Australia going back a couple of years ago. So I mean, I know we don't I have a clear answer on that, but what's the risk of the FDA even when you provide all this information back to them, they say, okay, fine, We'd like you to do another Phase 2 study before relaunching this Phase 2Phase 3 study.

Speaker 1

Sure. So the initial Phase 1 study we did to support the Phase 2 for stroke, that study was really designed on the IV portion was to match the drug level. So the PK profile to what's been shown with the calikang, the human urinary form. So we did that, with the polyolefin bag and then we went to our Phase 2 trial and we used the same bag. And so then what we discovered here is that close to half the drug was sticking.

Speaker 1

We went pivoted to the Phase twothree With the PVC bag and effectively we're overdosing by 2 fold. So we've now is now in 2 studies, the IV bag study we did last fall and then now with the INU study. So we feel that for us patient safety, we think we've identified the right range, but we're going to also have this data here in really matter of weeks on from this additional Phase 1 trial that's ongoing.

Speaker 4

Okay. And walking through it like that, I think that makes sense. I think that should be a good argument to the FDA. Final question here, once the clinical hold is maybe it's in the May ish timeframe. How quickly can you reactivate sites and start enrolling patients?

Speaker 4

Are you really starting square 1 there or can these sites activate or reactivate relatively quickly?

Speaker 1

Yes. I mean before we had the clinical hold, I mean if you're looking at Clinical trials like that, we had 15 sites. Really, we're going to do all we can to get that up and going. I think importantly, with having Kirsten and Julia joining our team since last year. I think we're going to be in a lot better position here to get this study up.

Speaker 1

It's going to take a little bit of time. But I think importantly, after we get it up and running, we've been doing a lot of work since then and just getting all of our documents and materials cleaned up and in really good shape. So as soon as we get off after we get off the clinical hold, we'll provide an update here on terms of some of the timings.

Speaker 4

Okay. Appreciate the update. Thank you. Thanks, Alex.

Operator

Thank you. And our final question comes from Francois Brisebois of Oppenheimer. Your line is open.

Speaker 6

Hi, guys. This is Dan on for Frank. Thanks for taking my question. Just a follow-up from the other 2 on the Phase 1 study that's ongoing. Could you share some color on the doses that you're going to be using in the single ascending dose study, I believe the original Phase 2 the original plan for the REMEDY 2 was to use both 1 microgram per kilogram and 3 microgram per kilogram.

Speaker 6

So, just in terms of what's the maximum dose that you're testing in this study. Thanks.

Speaker 1

Sure. So there's 2 doses. So the first is the IV dose, that's being tested in the Phase 1c. So, maybe just step back for a moment. So when a patient has a stroke, they come into the hospital and they will get the IV dose of DM199.

Speaker 1

So so in our Phase 1c, we're planning 3 initial doses of 0.1, 0.25 and 0.5 micrograms per kg. We believe the 0.5 will be the dose that we're using based upon the in use data, the IV bag study and our previous work. And then that's followed in clinically with subcu dosing and that's at 3 micrograms per kg And there's no change in that. So the subcu dosing occurs twice a week for 3 weeks, then I'll be at 3 micrograms and there's no impact on that dosing with this hold.

Speaker 6

Great. That makes sense. Thanks for taking my questions.

Speaker 1

Thank you, Dan. Thank you.

Operator

And we have no further questions in queue. I'll turn the call back over to our host.

Speaker 1

All right. Again, we'd like to thank everyone for joining us this morning and for your continued support. The goal of bringing this important treatment to stroke patients as quickly as possible. We appreciate your interest in DiaMedica and your continued support. And this concludes our call today.

Speaker 1

Thank you.

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