DiaMedica Therapeutics Inc.

Good morning, ladies and gentlemen, and welcome to the Diomedica Therapeutics second quarter 2022 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 and Form 10-Qs. 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, August 11, 2022, 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, Mr. Rick Pauls, Diomedica's president and chief executive officer. Mr. Pauls, you may begin. Thank you, operator.

Hello, everyone, and welcome to our second quarter 2022 conference call. We would like to focus today on addressing the enrollment pause in our Remedy 2 stroke trial. As you know, on July 6th, we issued a press release in which we announced that the FDA imposed a clinical hold on our trial. This came after we voluntarily paused enrollment in the Remedy 2 trial to investigate three unexpected incidents of clinically significant hypotension or decrease in blood pressure. These incidents occurred shortly after initiating intravenous or IV infusion of DM-109, which is the first administration of DM-109 for each patient. I want to emphasize that in all three patients, the hypotension was transient meaning their blood pressure returned to pre-dosing levels within a few minutes after stopping the IV dosing, and they did not experience any further adverse events. The most salient factor driving us to pause the trial was that we did not have any similar events reported in our prior Phase II Remedy 1 stroke trial. In Remedy 1, DM-189 was well-tolerated in all of the 46 patients who received DM-189. Considering that prior experience, we were concerned that something had changed between the two studies, and we made the decision to pause enrollment while we investigated the cause of these events. Dr. Gruss led a comprehensive analysis of the differences between the two studies, evaluating everything from the drug itself to the procedures performed in preparing and delivering the first IV dose. As a result of this analysis, we believe that the likely cause of these hypotensive events was the effects on changing the type of IV bag used to administer the IV dose of DM-109. The type of IV bag was changed due to a lack of availability in the U.S. of the polio-affirming IV bags used in Australia for the Remedy 1 trial. After compatibility testing of a number of IV bags, the IV bag selected for Remedy 2 trial was made from PVC. PVC bags were the most compatible with DM-109 as there is no binding of the DM-189 protein to these bags. The bags used in the Remedy 1 trial were made from polyolefin, a material which does bind up or hold a portion of the DM-189 protein in the IV bag. The effect of changing IV bags was that all of the one microgram per kg dose of DM-189 was being delivered to patients in the Remedy 2 trial. To put this another way and illustrate what we're talking about, With the IV bag used in remedy one, as much as half of the DM-189 protein was staying in the bag and half was being delivered to the patient. In remedy two, all the drug is being delivered to the patient and none of the drug is staying in the IV bag. To support this position, last week we completed an IV bag compatibility study, which included the IV bags used in the remedy one trial. Results of the study determined that as much as half of the DM-189 protein binds to the IV bag made from polyolefin as used in the Remedy 1 trial. This study also reaffirmed that the DM-199 protein does not bind to the IV bag made from PVC as used in the Remedy 2 trial. With the results of the study, we believe that we have the data to provide to the FDA to support our rationale for the cause of the hypotensive events and the rationale for revising the IV dose level for the Remedy 2 trial. Essentially, we will propose revising IV dose levels to match the actual IV dose given in the Remedy 1 trial, in which DM-109 was well tolerated in 46 stroke patients in the DM-109 arm. We're confident that the change will mitigate the risk for these clinically significant hypotensive events and hope that the FDA agrees. As for next steps toward resuming enrollments, in the clinical hold letter from the FDA, they asked us to provide a review of the etiology of the three events and any suggested mitigating strategies to prevent such events and to also submit our proposed modifications to the protocol to address the significant risk of hypotension with administration of DM-189. We plan to submit a response in September and the FDA will then have up to 30 days to review and respond. With all that said, let me highlight a few things for further context. First, everything to date points to this issue being driven by the change in the IV bag and not a problem with DM-109. If anything, a blood pressure drop is consistent with the mechanism of action of this protein. As such, it's potentially another clinical indicator that DM-109 is biologically active. Second, there have been no similar hypotensive events reported with the subcutaneous dosing, further supporting our conclusion that the issue relates to the IV bag. Accordingly, we anticipate no changes to the subcutaneous dosing regimen. Lastly, and most important, while clinically significant hypotension is a serious issue for stroke patients, blood pressure in these patients is continually monitored such that a problematic drop in blood pressure can be rapidly identified. In the three patients, their blood pressure returned to baseline levels within a few minutes of stopping the IV dose infusion, and they suffered no ongoing adverse events. Therefore, we believe that we can conduct this trial with adequate clinical monitoring of blood pressure and the fact that a drop in blood pressure was quickly reversible by stopping the infusion will reduce the risk to these patients. I would now like to bring on our CFO, Scott Kellen, to go over our financial results.

Thank you, Rick. Good morning, everyone. As Rick mentioned, we announced our second quarter financial results and filed our quarterly report on Form 10-Q yesterday afternoon. These documents are both available on either the Diametica or the SEC websites. Starting with our balance sheet, as of June 30, 2022, our combined cash and investments totaled $38.4 million, down $2.6 million from $41 million as of the end of Q1 of 2022, and down $6.7 million from $45.1 million as of our prior year end. Cash used in the current quarter was lower than planned due to the halting of enrollment in our Remedy 2 trial. This should scale back up as we complete our response to the FDA and prepare for resuming enrollment. We also reiterate that our current cash will support the clinical development of DM-199 and our operations into early 2024. Research and development expenses for the second quarter and year-to-date period were $2 million and $3.9 million, respectively. This compares to $2.2 million and $4.6 million for the corresponding periods in the prior year. The overall year-to-date decrease was due to a number of factors, including reduced costs incurred in the current year for the wrap-up of our Redux Phase II CKD basket trial, for which enrollment was concluded at the end of 2021, decreased non-clinical testing costs, which were incurred at greater levels in 2021 in preparation for our Remedy 2 trial, which initiated during 2021, and a decreased manufacturing process development cost. These decreases were partially offset by current year costs incurred in conducting our Phase 2-3 Remedy 2 trial and increased personnel costs associated with adding staff to support R&D operations. General and administrative expenses for the second quarter and year-to-date period were $1.4 million and $3 million respectively. This compares to $1.2 million and $2.4 million for the corresponding periods in the prior year. The overall year-to-date increase was primarily due to increased directors' and officers' liability insurance, personnel costs, and professional services costs to support our expanding clinical programs. These increases were partially offset by a reduction in non-cash share-based compensation. With that, let me turn the call back over to Rick.