DiaMedica Therapeutics Inc.

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.

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.

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.