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spk00: Good morning, ladies and gentlemen, and welcome to the Diomedica Therapeutics second quarter 2021 conference call. An audio recording of the webcast will be available shortly after the call today on Diomedica's website at www.diomedica.com in the investor relations session. 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 session entitled Cautionary Statement Note Regarding Forward-Looking Statements in the company's press release issued yesterday and under the heading Risk Factors in Diomedica's Most Recent Annual Report on Form 10-K, and the subsequent quarterly reports on Form 10-Q. Diomedical's SEC filings are available on the SEC's website 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 12, 2021, and may no longer be accurate at the time of any replay or transcript rereading. Diomedica disclaims any duty to update its forward-looking statement. Following the prepared remarks, we will open the phone lines for questions. To ask a question during a session, you will need to press star 1 on your telephone. I would now like to introduce your host for today's call, Rick Pauls, Diomedica's President and Chief Executive Officer. Mr. Pauls, you may begin.
spk03: Thank you, operator. Good morning, everyone, and thank you for joining us today. Welcome to our second quarter of 2021 earnings and business call update. Yesterday, after the markets closed, we issued a press release with a business update and a summary of our Q2 2021 financial results. At that time, we also filed our quarterly report on Form 10Q. Both documents can be found in the investor relations section of our website at diamantica.com. I'm joined this morning by our Chief Financial Officer, Scott Kellen, and our Senior Vice President of Clinical Operations, Dr. Harry Alcorn. Since we held a clinical update call at the end of June, we'll keep our prepared remarks today brief before opening the call for your questions. I'll begin by highlighting the positive interim data from our Redux Phase II chronic kidney disease study we announced at the end of June. Our Redux study was designed as a signal-finding study in three different causes of chronic kidney disease. And remember, kidney function in chronic kidney disease patients declines over time. It does not improve on its own, and there are no therapies that restore kidney function today. As a result, current treatments focus on reducing the rate of decline. The primary signal or signals that we are looking for from a redox is an absolute decrease in the UACR, a measure of albinuria, and stable to increasing EGFR. which would suggest to us the potential to maintain or improve kidney function, which would be completely new in the treatment for patients suffering from chronic kidney disease or CKD. In addition, we're also looking for signals that further demonstrate the mechanism of action for DM-189, for example, blood pressure reductions in hypertensive patients along with kidney biomarkers. Such mechanisms may be either part of the improvement in kidney function or provide additional clinical benefit of value to CKD patients. For example, again, reducing blood pressure may reduce the risk for cardiovascular disease or heart attacks and also strokes. As we reported in June, interim data from Redux provided what we believe are meaningful signals of stable to improving kidney function and mechanistically blood pressure control. These signals are consistent with both the hypothesized mechanism of action for DM-109 and the data from our Phase 1b study in CKD patients and the clinical use of porcine KLK1 in Asia today. The interim results also continue to confirm the excellent safety and tolerability profile of DM-109 in the CKD patient population. We were particularly encouraged by the data observed in the IgA nephropathy cohort. In this group, DM-19 demonstrated a statistically significant decrease in the urinary albumin to creatinine ratio, or UACR, and stabilizing of the estimated glomerular filtration rate, or EGFR. The average decrease in UACR was 33% in patients with moderate to severe albinuria, with a statistically significant p-value of 0.002. which basically tells us that almost all of the participants thus far in this group experienced an improvement in their UHCR levels. In addition, the EGFR levels were stable. We believe DM-109 may be the first compound to reach the FDA's rare CKD guidelines for conditional approval in IgA nephropathy, a rare cause of CKD, which is a 30% plus reduction in UHCR over six plus months. One additional note for color. We received requests from three patients in the IGAM cohort to continue treatment for compassionate use. As these patients' vitals not only improved, but they also felt better with DM-19 treatment. It's not often in a study of the size there's feedback directly from multiple patients on how they feel better or the impact of treatment has improved their quality of life. But hearing this from these patients, help us to make all the challenges of developing a new treatment for patients worthwhile. In total, we saw clinical improvements consistent with the DMA-9 mechanism of action across all study cohorts, which we believe is a clear signal that DMA-9 is biologically active, including in the diabetic kidney disease cohorts with hypertension, where patients had a statistically significant decrease in blood pressure. We believe that the combination of these signals, mechanistic validation, and biologic activity are building a compelling data set for DMO9 if the final Redux data remains consistent. Then Redux will achieve our objective and affirm our strategy of pursuing rare forms causes of chronic kidney disease with the lead focus remaining with IgA nephropathy. As a reminder, we expect additional data from the study, including kidney function, blood pressure control, and IgM biomarkers, along with dosing-level details to be presented at the American Society of Symphrology annual meeting in November of this year. Turning to our lead program in acute ischemic stroke, our lead near-term focus, our IMD application to the FDA for an adaptive Phase 2-3 clinical trial of DMY9 was accepted by the FDA earlier this year in mid-May. Initiation of the trial is on track, and we still expect the first study sites to be initiated and open for enrollment by the end of the summer. It's also important to note that the biological activity and mechanistic signals, including blood pressure reductions in hypertensive patients, and the interim data from the REDUX trial gives us even more confidence in the potential for DM-19 to improve patient outcomes following a stroke and to reduce the risk of stroke recurrence. Our Remedy 2 Phase 2-3 trial is a double-blinded, placebo-controlled, randomized study of approximately 350 participants. Based on a 90% powering for statistical significance on the primary endpoint of excellent outcomes, with the modified Rankin scale at day 90. After consultations with a number of regulatory and statistical experts, along with vascular neurologists, we are adding the prevention of stroke recurrence as an independent co-primary endpoint for the study. Note, this does not change anything about the design or execution of this study. Importantly, it gives us a second endpoint, which could also be the basis for approval of DM-09 as a second separate use. Stroke reoccurrence represents 25% of acute ischemic strokes today. These strokes are more disabling, costly, and fatal. If you recall, in our Remedy 2 Phase 2 trial, there was a statistically significant reduction in severe stroke reoccurrence. This was a 13% reduction on an absolute basis or an 86% reduction on a relative basis. To put this into perspective, today approximately 25 strokes are recurrent. So out of 100 stroke patients, you would anticipate 25 out of 100 to have a second stroke. Based upon the reduction rate observed in a remedy phase two trial, that number would drop from 25 out of 100 down to four of 100. Given the tendency of recurrent strokes to have a more adverse impact on people inflicted with a stroke, this is a particularly significant potential benefit of DM-19. And I think you can understand why we wish to move stroke reoccurrence up to an independent co-primary endpoint for the study. We're also preparing to publish a more comprehensive rationale for DM-19 and stroke reoccurrence. And this is going to include plaque stabilization, endothelial, and blood pressure improvements. Secondary endpoints for the Remedy 2 study will include MRS shift, the NIHSS scale, the Barthel index scores, death, safety, tolerability measures, and biomarkers related to KLK1. The Remedy study will be targeting up to 80% of acute ischemic stroke patients who do not have a treatment option today. These are patients who are not eligible or do not receive TPA or mechanical thrombectomy. We believe that Remedy2 has the potential to serve as a pivotal study of DM-19 in this patient population. We are preparing for up to 75 sites in the US. With Remedy2, we have a sense of the site activation and enrollment pace. We will provide an update on expected timing for the interim analysis being planned for after approximately 40% of patients have completed the study. We've also filed an application with the FDA for a fast-track designation for DM-19. This application was submitted in July, and as much as we believe it should be granted, I remind you that it's not a certainty that it will be issued. Now, I'll ask Scott Kellan to take us through the financial results for the first quarter.
spk05: Thank you, Rick. Good morning, everyone. As Rick mentioned, we announced our second 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 Diametica or the SEC websites. Our research and development expenses for the quarter increased to $2.2 million. This is up from $1.6 million for the three months ended June 30 of 2020. For the six months ended June 30 of 2021, our ID expenses increased to $4.6 million compared to $2.9 million for the prior year period. The increase for the six-month period was primarily due to a number of factors, including costs incurred for our Remedy 2 clinical study, increased year-over-year costs related to manufacturing process development in our Redux Phase 2 CKD study, as well as increased personnel costs associated with additional staff added to support R&D operations. These increases were partially offset by decreased costs incurred for our Remedy Phase in the prior year. General and administrative expenses were $1.2 million for the second quarter, up from $1.1 million for the prior year period. For the six months ended June 30, 2021, G&A expenses increased to $2.4 million, up $.2 million from $2.2 million for the six months ended June 30, 2020. The increase for the six-month comparison was primarily due to increased professional service costs and increased personnel costs to support our expanding clinical programs. Turning to the balance sheet, we had cash, cash equivalents, and marketable securities of $21.3 million. Our current liabilities were $1.4 million, with the resulting working capital amount of $20.2 million as of June 30, 2021. This compared to $27.5 million in cash and securities, $2.0 million in current liabilities, and $25.9 million in working capital as of the end of December 31, 2020. The decreases in combined cash, cash equivalents, and marketable securities and in working capital are due primarily to the increased clinical study costs associated with preparing for our pivotal Remedy 2 Phase 2-3 Stroke Study, costs related to our Redux Phase 2 CKD Study, and increased costs related to manufacturing development. Net cash used in operating activities for the six months ended June 30, 2021 was 6.4 million compared to 3.8 million for the six months ended June 30, 2020. This increase relates primarily to the increase in the net loss partially offset by non-cash share-based compensation and the effects of changes in operating assets and liabilities. Looking forward, if we continue our operations as currently planned, our cash would get us into the third quarter of 2021, I'm sorry, of 2022. And as I'm sure you expect, we have options to remove or defer spending that doesn't directly contribute to the advancement of the Remedy 2 pivotal trial to extend this runway closer to the end of 2022 to minimize the additional capital required to get us through the interim analysis for the remedy trial and give us more time to focus on regional partnerships. Now let me turn the call back over to Riff.
spk03: Thank you, Scott. We'd like to open the call for questions. Operator, if you could please introduce the first analyst.
spk00: Your first question comes from the line of ExcerptDareRoute with Guggenheim Securities. Your line is open.
spk02: Great. Thank you. Thanks for taking the questions. Just a first one for me is just a point of clarification. Rick, for DM-199, the fast track was this for stroke specifically, and I guess, you know, wondered if you had any interactions with regulators on the CKD data since the disclosure at the end of June, and if not, you know, how you're thinking about maybe timing of these interactions, particularly, you know, for IgA nephropathy and the hypertensive African-American cohorts. Thanks.
spk03: Sure, sure. Thanks, Esther. Yeah, so the fast track designation was specifically for stroke outcomes, so for the excellent outcomes. With regards to your second questions, we're just going through the interim results from the REDx study and looking at potential options moving forward while we get a more complete completion of the study. At this point, we still believe that the IgA nephropathy is our lead indication and cause moving forward. While talking to our SAB members specifically, they're also very encouraged with some of the early data from the hypertensive African Americans. So we're continuing to look at the data, and while we complete the study, it gives us an opportunity to start planning for next steps moving forward for the kidney program.
spk02: Got it. Great. Thank you.
spk00: Your next question comes from the line of Alex Nowak with Craig Halem Capital. Your line is open.
spk06: Great. Good morning, everyone. Rick, maybe to expand off the next steps, can you maybe expand on What those next steps could entail based on the data you're sitting with IGAN, sitting with African Americans today? Do you think a larger study within those cohorts would be necessary before moving into a pivotal, or do you think at this stage a pivotal could certainly be likely?
spk03: Yeah, that's a great question, Alex. So that's exactly what we're looking at, and we're exploring some different options moving forward and looking at potentially – you know, a path forward. So we definitely see a path forward for kidney disease, but we have some time here now as we finish up the study to determine what that will be. And so specifically, it's going to be looking at a phase 2B or a phase 3, but also making sure that our focus right now is on our acute ischemic stroke pivotal trial.
spk06: Okay, I hope that makes sense. And then... how many sites do you expect to be live on the Stroke Pivotal this summer? And then just Scott's point about regional partnerships, can you maybe expand on that, conversations you're having both on stroke and kidney?
spk04: So for the number of sites that we're looking at for the stroke study is right now we're working with Covance as our CRO, and we're looking up to potentially 20 sites to be initiated by the end of the year for the stroke study.
spk05: And, Alex, with respect to partnering, as you recall, we were forced to terminate the relationship with A-Home, the Chinese pharmaceutical company, a couple years ago when they tried to compel us to provide them the manufacturing technology. And at the time, we talked about wanting to see the IGAN data results before we went too much farther down that path because of the importance of IGAN as an indication in China, you know, recall. Over there, it's 2 million people a year versus 140,000 here in the U.S. And so now we have that data in hand, and we're feeling very good about being able to have those conversations. So I think the best way I can answer your question is to say yes, that we're open to partnering. It's our preferred source for additional capital, and that we don't have anything that we can disclose publicly at this time.
spk06: I understand, and I appreciate the commentary on the site, Terry. And maybe just one other question, just on your starting the study, what sort of additional personnel buildup or, I guess, infrastructure buildup does the company need to undertake here before starting the pivotal wave this summer?
spk03: Yeah, great question, Alex. So right now we are looking at hiring a couple new support people for Harry's clinical team, but we're using a CRO and everything's on track here.
spk06: That's great. Appreciate the update. Thank you.
spk00: Your next question comes from the line of Thomas Blanton with Lake Street Capital. Your line is open.
spk07: Morning, guys. Thanks for taking the question. Rick, I just wanted to clarify on the co-primary endpoint. I know you said it was independent and co-primary, which is kind of an unusual word choice for me. So they are completely independent, meaning that if you succeed on the old primary endpoint, regardless of the outcome of the recurrence study, the study could still be successful, right? Is that correct?
spk03: Yes, that's right. So most importantly, adding in stroke recurrence as a co-primary independent endpoint, it's not going to jeopardize the powering of the excellent outcomes in MRS. And then for the publication for Kidney Week, can you just talk a little bit more about what we can expect to see in that?
spk07: Will there be data from all the cohorts? You know, how many patients do you think will be included in that data set that are fully completed out of the study?
spk03: Yeah, so the plan is that we'll have as complete as possible data set in terms of the number of patients. We'll have further clarity on data by dosing and also looking at the kidney markers, blood pressure, and some of the IgA and biomarkers.
spk07: Great. And then just one final one. With respect to the IGAN and African-American cohorts, is the goal now to continue towards, you know, full enrollment of 30 patients, or is there an opportunity to cut enrollment and use the data that you already have in hand?
spk03: Yeah, great question. So we're currently, as we analyze the data, you know, the fact already for the IGAN group, we have seen a statistically significant improvement with just 11 patients. We are currently exploring the possibility of cutting off the study early. as we look at the data further.
spk07: Excellent. Thanks for taking the questions.
spk00: Your next question comes from the line of Francois Brisbois with Oppenheimer. Your line is open.
spk01: Sorry, thanks for taking the questions. Okay, so I guess on the IGAN side, We're basically saying here that there might not be a full data readout based on what we've seen already in the interim look. Is that a fair assumption?
spk03: Yeah, I'd say we're very encouraged already with the interim results, the fact that we did see a greater than 30% reduction. If we look at the FDA's guidelines for rare CKD, And specifically for conditional approval, the bars and the target is to have a 30-plus percent reduction in the albinuria, the UACR, over six-plus months. And so I think we're very encouraged. We're already seeing those type of levels already at three months. And, you know, we anticipate when we go to longer, you know, six-plus months, we think the data will get even better.
spk01: Okay, great. And on the stroke side, He's talking about, I guess, what if you hit the prevention of stroke recurrence and not the other endpoint, and has the FDA signed off on any of this stroke recurrence, or is this more of an SAB and makes sense based on the previous data?
spk03: Yeah, so this is really following some of the FDA's guidance. and specifically from a statistical analysis plan using what's called the Bonferroni-Hochberg procedure. So the premise is that if we first hit statistical significance p-value of less than 0.05 on the MRS excellent outcomes, it's a win. If we also hit the statistical significance on the stroke recurrence of 0.05, it's a win on both endpoints. If we miss on the MRS, so the T is greater than 0.05, but then on the stroke recurrence, the T value is less than 0.025, there will be alpha splitting, but it would be a win. Our next steps are we do plan to go talk to the FDA and specifically a Type C meeting to discuss having two independent endpoints with no alpha sharing. what the premise is that we believe that these are two separate ultimate labels on the product.
spk01: Okay. Okay. That makes a lot of sense. And then just lastly here on the interim look of AIS, I know there's a lot there. There's three different outcomes that are possible. And you had mentioned before 2022. When you talk about giving more guidance on timing, is that – based off in 2022 when that would be, or are we not sure if the interim would still be a 2022 event now? Yeah.
spk03: So at this point we want to, before we have formal guidance, we just want to get some clarity here on where the initial enrollment is going to come in. So we're still very optimistic. And in particular, we feel adding in the stroke recurrence, it's just one more important reason why we think patients should really consider joining, joining, joining the study. we just want to make sure before we have formal guidance that we have a bit of clarity on how the initial enrollment is coming in understood okay but this is is it fair to say that the impact of the lingering pandemic uh might not be as as bad for stroke as it is uh for their kidney disease or yes absolutely that's definitely the case i mean these are patients that you know they've had a stroke They come into the hospital. They have to make a decision within 24 hours of stroke symptoms to decide whether they should join the study. This isn't like a kidney study or an oncology study where the patient has some time and tries to decide whether or not they should join the study. And we think importantly for these patients, first and foremost, we think this is going to be a safe treatment option And if they could, on top of that, potentially improve the stroke outcomes, reduce the risk of stroke recurrence, we think there should be a very compelling rationale for why they should immediately join this study.
spk01: Understood. Thank you very much.
spk00: I would now like to turn the call back over to Rick Pauls for closing remarks.
spk03: Thank you, Operator. And in closing, let me reiterate how excited we are to be at the threshold for initiating a pivotal trial for stroke. Our optimism for this trial and for patients has also been buoyed tremendously by the clear signals of mechanism and biologic activity observed in the recent interim data from our REDUX study. We also look forward to the next steps with the CKD program with our promising therapy for patients. We'd like to thank everyone for joining us this morning. We appreciate your interest and continued support. And this concludes our call.
spk00: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
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