DiaMedica Therapeutics Inc.

Good morning, ladies and gentlemen, and welcome to the Diomedica Therapeutics second quarter 2023 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, August 15, 2023. 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, sir.

Thank you, Paul. Hello, everyone, and welcome to our second quarter conference call. I am joined this morning by Scott Kellan, our Chief Financial Officer. Before we begin this morning, I want to take a moment to welcome Dr. Richard Kuntz to our Board of Directors. Dr. Kuntz recently retired from Medtronic. where he was the chief medical officer, chief scientific officer, and a member of the executive committee. Prior to that, he served as a senior vice president and president of neuromodulation of Medtronic. Before Medtronic, he was the founder and chief scientific officer of the Harvard Clinical Research Institute in Boston. He also served as an associate professor of medicine at Harvard Medical School, chief of the division of clinical biometrics, and as an interventional cardiologist in the Division of Cardiovascular Diseases at the Brigham and Women's Hospital in Boston. He also served as an advisor to multiple national and regional committees in the National Academy of Medicine and National Institutes of Health. Dr. Kunz has directed numerous multicenter clinical trials and has authored over 200 original publications. We are grateful to have Rick join our board. His experience complements and broadens the knowledge and skill set of our board. Turning back to our update, The second quarter saw two important milestones for Diametica and her shareholders. The FDA's lifting of the clinical hold on a Remedy 2 stroke trial and the completion of an at-the-market financing, raising gross proceeds of $37.5 million. Starting with the FDA, on June 21st, we announced that the FDA had fully lifted the clinical hold on a Remedy 2 Phase 2-3 clinical trial, studying DM-19 as a treatment for acute ischemic stroke, or AIS. With this decision, we immediately reengaged with our study support vendors and have selected a new contract research organization with strong current experience in the stroke space. As many of you know, there is a great deal of work involved with preparing for a pivotal registrational clinical trial. I can assure everyone that our entire team is excited and focused on working with our CRO, the supporting vendors, and key advisors for the resumption of the trial. Recall that we have a bit of a leg up as we have approximately a dozen sites already under contract from last year. Additionally, we are now also evaluating the addition of clinical sites outside of the U.S. to increase our enrollment rate in countries viewed as being able to enroll more quickly than their U.S. counterparts. Our goal is to deliver a complete and clean clinical data package to the FDA at the conclusion of the Remedy 2 trial, enabling the FDA to accept and approve DM-199. It has been with this objective in mind that we expanded our clinical team over the past year. As of today, all key vendors have been engaged and are actively pursuing preparations for the resumption of patient enrollment. The estimated timeline has not yet been finalized, but based upon discussions with our CRO and multiple others, we are optimistic that enrollment for the interim analysis can be completed before the end of 2024. The final timing will come down to the actual pace of enrollment. I want to stress that with our recent capital raise, which brought in significantly more capital than anticipated, we are able to pursue expanding the study globally in order to increase the enrollment rate with the intent to ultimately reach both the interim and final analysis more quickly. We expect to be able to provide more clarity on the overall timeline at our Q3 earnings call. On a related note, and as we've previously discussed, we are conducting a phase one C, open label single ascending IV dose study of DM-189 in healthy volunteers using the same PVC IV bags as in the Remedy 2 trial. The first part of the study demonstrated the safety of our planned 0.5 microgram per kg IV dose level to be used going forward in the Remedy 2 trial. It also demonstrated that this dose level achieved our targeted KLK1 blood concentration level, a level that we believe is the desired therapeutic range similar to our prior phase two stroke trial and the reported drug levels of the human urine-derived KLK1 protein widely used in China under the product name Calicang. We were able to report today that we also completed a fourth cohort in the phase one C study consisting of three hypertensive patients on ACE inhibitors. These patients received the 0.5 microgram per kg dose using the updated methods plan for the remedy two trial. We are pleased to see that all participants received the full IV dose and there were no instances of hypotension or large drops in blood pressure. We believe that the additional clinical data from these combined results will provide further assurance to current and potential physician investigators that the correct IV dose level has been identified and patients, including ACE patients, may be safely enrolled in the Remedy 2 trial. Turning to our second milestone, we also significantly strengthened their balance sheet during the past quarter. In June, we completed an offering of straight carbon shares, no warrant coverage, priced at the market. Gross proceeds from the offering were $37.5 million and net proceeds were $36.1 million, bringing our cash balance to over $60 million at the end of the quarter. The financing was led by existing investors who contributed a significant portion of this capital raise and who remain enthusiastic about DM-199 and its potential to offer a compelling new treatment option for stroke patients. We also had excellent participation from our management team and board who collectively invested $700,000. We are grateful to our investors who have put us in a position where we believe we can now drive our destiny. We believe that we now have the sufficient capital enabling us to complete the interim analysis with a remaining cash runway of approximately one year. We focus on the interim analysis as it has the potential to signal a beneficial impact of DM-19 to stroke patients, a patient set that has not seen a significant therapeutic development in over 25 years since the approval of TPA. Before I turn the call over to Scott, I also want to call your attention to a new video and slide in our corporate deck that had created which further illustrates the DM-189 mechanism of action as it applies to stroke patients. Specifically, DM-189's role in increasing collateral circulation. The key updated mechanism message is that in response to ischemic conditions caused by a stroke, the bradykinin-2 receptors expressed on the cell cells in the arteries of the brain are highly upregulated locally in the ischemic penumbra. This increase may be by as much as 40-fold higher based upon testing in animal models. By augmenting with DM-19, we believe a significantly greater number of the upregulated bradykin-2 receptors may be activated, causing the beneficial focal basal dilation in the affected area of the brain, the ischemic penumbra, to increase blood flow and oxygen. We believe this improved collateral circulation will salvage brain tissue in the penumbra and lead to improved patient outcomes. This video can be found on our website at www.diametica.com and scrolling down to the front page to the section titled Advancing Patient Care with Innovative Treatments. I would like to now turn the call to Scott Kellan to review the financial highlights.

Thanks, Rick, and good morning, everyone. As Rick mentioned, we strengthened our balance sheet considerably in June with the completion of a $37.5 million private placement with accredited investors. Net proceeds from the transaction were approximately $36.1 million. And also, when David Wombeck joined us as our chief business officer in April, he invested $750,000. As a result, Our June 30, 2023 total cash, cash equivalents, and marketable securities increased to $60.6 million, up from $33.5 million at the end of 2022. Our cash usage was $10.1 million for the six months ended June 30, 2023, compared to $6.4 million in the prior year period. The increase in our cash usage was due primarily to a combination of factors, including the completion of the in-use and the Phase 1c studies, ongoing manufacturing development work, our expanded management and clinical team to support the Remedy 2 trial, and our lawsuit with PRA. We believe that our current capital will support the clinical development of DM-199 and our operations into 2026. Our research and development expenses increased to $2.5 million for the three months end of June 30, 2023, up from $2 million in the prior year period. R&D expenses increased to $6.2 million for the six months end of June 30, 2023, compared to $3.9 million for the six months end of June 30, 2022. The increase for the six-month comparison was due primarily to costs incurred for the in-use study performed to address the recently lifted clinical hold on our Remedy 2 trial, and costs incurred for the Phase 1c study determining the DM-199 blood concentration levels achieved with the new IV dose of DM-199. Also contributing to the increase were increased manufacturing and process development costs, costs incurred to finalize the clinical data and perform the related analyses for the Redux trial, and increased personnel costs associated with expanding our clinical team. These increases were partially offset by decreased costs incurred for the Remedy 2 trial, which until late June had been on clinical hold. Our general and administrative expenses were $2.2 million for the three months ended June 30, 2023, up from $1.4 million for the three months ended June 30, 2022. G&A expenses were $4.1 million for the six months ended June 30, 2023, and this was up from $3 million for the six months ended June 30, 2022. The increase for the six-month comparison was primarily due to increased legal fees incurred in connection with our lawsuit against PRA Netherlands and increased personnel costs associated with expanding our management team. Increased professional service fees and non-cash share-based compensation also contributed to this increase. Now, before I turn you back over to Rick, let me also provide a brief update on our ongoing lawsuit against PRA Netherlands. As many of you will recall, in December of 2022, the Netherlands court, at our request, seized our study records from PRA. Then in April 2023, following a March 2023 hearing, the Netherlands court issued a ruling affirming our ownership of the study data and, importantly, stating that PRA had no legal basis for withholding the study data. Now, PRA appealed this decision in June, and while this appeal may take nine to 12 months to resolve, it is not holding up our main damages lawsuit. This hearing is currently scheduled for December 7th of this year and we look forward to presenting our case against PRA and providing our analysis of the damages caused by PRA's actions. It's also interesting to note that the same three-judge panel that oversaw the hearing on our ownership of the study data is scheduled to oversee the hearing for the main lawsuit. For more information regarding the background to this lawsuit, please see our SEC filings. Now, let me turn the call back over to Rick.