DiaMedica Therapeutics Inc. 2021 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2021. The filing is an annual report, not a standalone fourth-quarter filing. DiaMedica is a clinical-stage biopharmaceutical company focused primarily on DM199, a recombinant human KLK1 protein candidate for acute ischemic stroke (AIS) and chronic kidney disease (CKD). DM300 remains in preclinical development.
Business Context and Development Status
- ReMEDy2, an adaptive Phase 2/3 AIS trial, was initiated in September 2021, and the first patient was enrolled in November 2021. The trial is intended to enroll approximately 350 patients at 75 U.S. sites and evaluates treatment within 24 hours of AIS onset.
- The FDA accepted the ReMEDy2 IND, granted Fast Track Designation for DM199 in certain AIS patients, and accepted an amended protocol adding ischemic-stroke recurrence as a second independent primary endpoint.
- Enrollment in the Phase 2 REDUX CKD trial was completed with 79 subjects: 21 African American subjects, 25 IgA nephropathy subjects and 33 diabetic kidney disease subjects. Final follow-up and data analysis were expected by mid-2022.
- The Company had 15 employees as of December 31, 2021, including 14 full-time employees, and relies on contract manufacturers and third parties for clinical development and manufacturing.
Financial Performance and Liquidity
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Product revenue | $0 | $0 | No product sales |
| Research and development expense | $8.765 million | $8.205 million | Up $0.560 million |
| General and administrative expense | $4.881 million | $4.494 million | Up $0.387 million |
| Total operating expenses | $13.646 million | $12.699 million | Up $0.947 million |
| Other income, net | $0.082 million | $0.434 million | Down $0.352 million |
| Net loss | $13.592 million | $12.292 million | Loss increased $1.300 million |
| Net loss per share | $0.65 | $0.78 | Improved due primarily to higher share count |
| Operating cash flow | $(12.252) million | $(9.185) million | Greater cash use |
| Cash, cash equivalents and marketable securities | $45.112 million | $27.507 million | Up $17.605 million |
| Working capital | $43.915 million | $25.893 million | Up $18.022 million |
| Total shareholders’ equity | $44.024 million | $26.014 million | Up $18.010 million |
- Cash and cash equivalents were $4.707 million, while marketable securities were $40.405 million at year-end.
- Financing activities generated $30.087 million in cash, primarily from the September 2021 private placement. DiaMedica issued 7,653,060 common shares at $3.92 per share, generating $29.849 million of net proceeds.
- Investing activities used $20.537 million, primarily reflecting purchases of marketable securities. The Company had no existing credit facilities.
- Total liabilities were approximately $1.527 million, consisting primarily of accounts payable, accrued liabilities and lease obligations; the filing does not identify material debt financing.
- The Company incurred a $185,000 Catalent milestone payment upon initiation of ReMEDy2. One additional $185,000 milestone remains payable upon the first regulatory approval of DM199 for commercial sale. Future royalties are expected to be less than 1% of net sales after product launch.
Material Changes Versus the Prior Comparable Period
- R&D spending increased as ReMEDy2 began and personnel costs rose, partly offset by lower costs for the completed ReMEDy1 trial and the nearly completed REDUX trial.
- G&A spending increased due to professional services, higher directors’ and officers’ insurance costs, personnel expansion and the Catalent milestone payment. Lower share-based compensation partially offset these increases.
- Other income declined because Australian research incentives associated with ReMEDy1 were no longer earned and interest income decreased.
- The net loss increased from $12.292 million to $13.592 million, and operating cash use increased from $9.185 million to $12.252 million.
- Liquidity improved materially because of the $29.8 million net private-placement proceeds, despite increased operating cash burn.
- Shares outstanding increased from 18.746 million at December 31, 2020 to 26.443 million at December 31, 2021, creating dilution for existing shareholders.
Clinical Results, Outlook and Risks
- In the prior ReMEDy1 AIS trial, recurrent ischemic stroke occurred in 0% of DM199-treated patients versus 13% of placebo patients, with a reported p-value of 0.012. The filing cautions that selected physical-recovery subsets were small and not statistically significant.
- Interim REDUX data showed reductions in albuminuria in selected African American and IgA nephropathy cohorts, stable eGFR in reported cohorts, and blood-pressure reductions in hypertensive subjects. The diabetic kidney disease cohort did not show an overall UACR treatment effect.
- Management expects expenses and operating losses to increase as ReMEDy2 site activation and enrollment progress, REDUX follow-up is completed, personnel are added and intellectual-property activities continue.
- Management stated that year-end cash, cash equivalents and marketable securities were expected to fund planned operations for at least the next twelve months from issuance of the financial statements, while also stating that substantial additional capital will be required.
- Outstanding commitments were estimated at approximately $6.0 million over the next 12 months and $6.9 million in the following 12 months, including cancellable clinical, manufacturing and development contracts. Remaining operating lease commitments were approximately $45,000.
- Key risks include clinical-trial failure or delay, the adaptive design potentially requiring more patients, COVID-19-related site and enrollment disruptions, regulatory uncertainty, dependence on Catalent and other third parties, limited manufacturing and commercial capabilities, competition, intellectual-property challenges and the need for additional financing.
- The Company expects no product-sales revenue for at least three to five years, if ever, and may need equity or debt financing, strategic collaborations or licensing transactions. Additional equity financing could dilute shareholders.
- The Company is defending a legal claim against PRA Netherlands relating to alleged clinical-study execution errors and incomplete study records. The filing does not provide a clear estimate of potential recovery or exposure.
Most Important Facts for Investors to Verify
- Current ReMEDy2 enrollment, site activation pace, adaptive-design requirements, interim analyses and any changes to primary endpoints or trial size.
- Final REDUX results, particularly durability of albuminuria, eGFR and blood-pressure effects and outcomes in the diabetic kidney disease cohort.
- Updated cash runway, quarterly operating cash burn, clinical commitments and timing of any additional financing.
- Regulatory interactions with the FDA, the continued status and practical benefit of Fast Track Designation, and the expected approval pathway for DM199.
- Manufacturing scale-up, Catalent supply arrangements, milestone obligations and the ability to produce DM199 under applicable good manufacturing practices.
- Potential dilution from future financings and outstanding options, warrants and deferred stock units representing approximately 2.229 million potential shares at year-end.
- Resolution and financial implications of the PRA litigation, as well as any other material contingencies.