DiaMedica Therapeutics Inc.

Good morning, ladies and gentlemen, and welcome to the Diomedica Therapeutics third 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 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 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. Diomedica'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, November 11th, 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 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, Rick Pauls, Diomedica's President and Chief Executive Officer. Mr. Pauls, you may begin.

Thank you, Chris. Good morning, everyone. And thank you for joining us today. And welcome to our third quarter earnings and business update call. Yesterday after the market closed, we issued a press release summarizing our third quarter 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 diametica.com. I'm joined this morning by our Chief Financial Officer, Scott Kellen. and our Senior Vice President of Clinical Operations, Dr. Harry Alcorn. I'd like to begin today with an update on our lead program, DM-109, for the treatment of acute ischemic stroke. Today I'll refer to this as AIS. Our pivotal Remedy 2 clinical trial is a Phase 2-3 clinical study of DM-109 for the treatment of AIS. This is a randomized, double-blinded, placebo-controlled study that's going to be with up to approximately 350 patients. We will be having an interim analysis after approximately 40% or 140 participants have completed 90 days. This is our primary near-term focus. Let me start by noting that we have some very encouraging interactions with the FDA in the past few months. In September, the FDA approved our application and granted a fast track designation to DM-19 for the treatment of AIS. We believe this is an important milestone for the development of our product as it underscores the significant unmet medical need that exists among patients who suffer from a stroke, an area where there hasn't been a new or meaningful therapeutic advance in 25 years. With the FastTrack designation, we are eligible for more frequent interactions with the FDA, allowing us to discuss such things as our development plan, clinical trial design questions, the use of biomarkers, and the extensive data needed for potential approval. Fast-track designation may eventually qualify DM-109 for accelerated and priority review of a new drug approval application if certain criteria are met. Second, as we announced earlier this week, the FDA accepted our protocol amendment for the Remedy 2 trial elevating stroke recurrence as an additional independent primary endpoint. The trial has two independent primary endpoints focused on the two very important factors that patients who've had a stroke experience. That being the initial physical recovery from the stroke and second, avoiding a second or a recurrent stroke. Our rationale for elevating stroke recurrence to an independent primary endpoint is based upon results from our prior phase two stroke study and supporting mechanism of action. In our earlier Phase 2 trial of 91 participants, there was a statistically significant reduction in recurrent ischemic strokes of 13% on an absolute basis, or 100% reduction on a relative. This is based upon six recurrent strokes in the placebo group, while there was none in the DM-109 treatment group. We saw an even greater and also significant effect in the patients who did not receive mechanical thrombectomy prior to enrollment. This is the subgroup that most closely resembles the patients being studied in our Remedy 2 trial. Recurrent strokes make up about a quarter of all strokes today. There's a greater risk of occurring in the first few weeks in particular after an initial stroke, and are typically more disabling, more costly, and more fatal than an initial stroke. This has the potential to be a particularly significant benefit of DM-189 for patients. I'd also like to point out that the design of our Remedy 2 is powered to assess the efficacy of DMO9 in either or both independent primary endpoints. Additionally, the protocol amendment does not change the treatment, the inclusion-exclusion criteria, the duration, or the study population of the trial. We look forward to continuing to work with the FDA as we advance our stroke program. Turning to our progress with the study, we initiated the first site in the stroke trial, and we also are very pleased to announce that our first patient has also been enrolled. We are actively working with over 50 potential study sites who are at various stages in the evaluation from contracting to the IRB review and also the planning process. We have encountered some delays in the startup process. Sites are indicating that they remain understaffed and are having difficulty finding qualified research staff to hire. For the sites that are currently in process, we are experiencing delays and turnaround times for essential documents. Sites are attributing the staffing challenges to the summer surge in the COVID-19 infections driven by the Delta variant, which is not a surprise, and the impact is in part regional, based upon Delta levels across the country. We believe that we're a few months behind in our startup timelines. That said, our clinical team has been working with members of our scientific advisory board and other physicians in our network to reach out directly to the neurologists at key study sites to enlist their support in making Remedy2 a priority study for the institutions while working closely with our contract research organizations. This is now having a meaningful response. In terms of our expected timing, our projected study timelines is based upon a very conservative enrollment rate of one patient every four months at each site. This is based on historical stroke studies that have short treatment windows and often have associated with severe potential side effects. This leaves us some upside if the actual rates increase, increases by even a small amount. With our 24-hour treatment window, the excellent safety profile, and the potential to improve both the stroke recoveries, and importantly, also reducing the risk of stroke recurrences, and along with the lack of treatment options, we believe there is a good chance for us to achieve a higher enrollment rate. Our projected window for completion of the interim analysis is the first half of 2023. We'll keep you updated as we get more clarity on both the site activation and also on the enrollment rates. I'll turn now to our brief update on our Redux Phase 2 trial of DM-109 in chronic kidney disease. Last week at the Annual American Society of Nephrology Kidney Week Conference, we had the opportunity to present additional data from our Redux trial. Principally, the additional data was from the IgA nephropathy cohort, where we continue to see significant reductions in albinuria. In particular, at the 2 microgram per kg dose level, participants with moderate to severe baseline albinuria demonstrated an over 30% reduction in albinuria after 90 days treatment. Additionally, at the same dose level, participants demonstrated encouraging reductions in two key biomarkers for IgA nephropathy. Proliferation inducing ligand, or APRIL, which showed a 30% reduction, and IgA1 had a 20% reduction. Improvements in these biomarkers are early signals of potential disease-modifying effects of DM-19 in this patient population. Based upon this, we believe that the data generated to date for DM-19 in patients with IgA nephropathy suggest that DM-19 may offer clinically significant benefits to these patients, and something we believe with longer-term treatment the potential for improved efficacy for these patients. Also, briefly, we want to touch upon the DMA-9 for the hypertensive African-American cohorts, which demonstrated decreases in both systolic and diastolic blood pressure of 19 and 12 millimeters of mercury, respectively, at the 2 microgram per kg dose level. And more importantly, from a mechanism of action perspective, There's little blood pressure change in the normal-tensive patients, in particular those in the IgA nephropathy cohort. This offers further support for our stroke study, where reducing blood pressure may also contribute to reducing the risk of stroke recurrence. As high blood pressure following a stroke is a leading contributor to a recurrent stroke. Also, it's important to note for neurologists shouldn't have to worry about blood pressure drops in the normal-tensive patients and patients becoming hypotensive. This is another example of the selective activity of the DM-89 mechanism of action. We are pleased to see these positive signals from our REDUX study, which support future development of DM-89 for renal diseases. The observed improvements all point to improved physiological effect of DM-89 treatment and also provides additional support for our study of DM-89 in the treatment of stroke. While the positive signals observed from our REDUX study merit further development, our near-term focus remains on our stroke pivotal trial. I'll now ask Scott Kellen to take us through the financial results for the third quarter.

Thank you, Rick. Good morning, everyone. As Rick mentioned, we announced our third quarter financial results and filed the quarterly report yesterday afternoon. And again, these documents are both available on the Diametica and the SEC websites. Starting with our balance sheet, which we strengthened considerably in September with the completion of a $30 million private placement to 10 accredited investors. Net proceeds from this transaction were approximately $29.9 million, and as of September 30, 2021, our cash, cash equivalents, and marketable securities increased to $48.1 million, up from $27.5 million as of the end of December 2020. We believe our current cash will support the clinical development of DM-199 and our operations through the end of 2023. Now our research and development expenses for the third quarter increased slightly to $2.3 million, up from $2.2 million for the prior year period, while R&D expenses increased to $6.9 million for the nine months ended September 30, 2021, compared to $5.1 million for the nine months ended September 30, 2020, an increase of $1.8 million. The increase for the nine-month comparison was due to a number of factors, including the costs incurred for our Pivotal Remedy 2 clinical study, increased year-over-year costs related to manufacturing process development, and increased personnel costs associated with adding staff to support R&D operations. These increases were partially offset by decreased costs incurred for our Remedy Phase 2 stroke study, which completed in the prior year and our REDUX study as the number of enrollments declined in the later stages of the study. Our general and administrative expenses were $1.1 million for the third quarter, down from $1.2 million in the prior year period. G&A expenses increased to $3.5 million for the nine months ended September 30, 2021, up $0.2 million from $3.3 million for the nine months ended September 30, 2020. The increase for the nine-month comparison was primarily due to increased professional services costs and increased personnel costs to support our expanding clinical programs. These increases were partially offset by reduced non-cash share-based compensation costs. Our net cash used in operating activities for the nine months ended September 2021 was $9.4 million compared to $6.2 million for the nine months ended September 2020. These increases relate primarily to the increase in the current year net loss and were partially offset by the non-cash share-based compensation and the effects of changes in operating assets and liabilities. And to reiterate, we believe our current capital will support the clinical development of DM-199 and our operations through the end of 2023. Now let me turn the call back over to Rick. Thank you, Scott.