DiaMedica Therapeutics Inc. — Q1 2023 Form 10-Q Summary
Business Context and Reporting Period
DiaMedica is a clinical-stage biopharmaceutical company developing DM199, a recombinant human tissue kallikrein-1 protein, for acute ischemic stroke (AIS) and chronic kidney disease (CKD). The report covers the three months ended March 31, 2023, and was filed May 15, 2023. The company has not generated product revenue and has not completed development of any product candidate.
Financial Performance and Position
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $3.6 million | $2.0 million |
| General and administrative expense | $1.9 million | $1.6 million |
| Operating loss | $5.5 million | $3.5 million |
| Other income, net | $0.3 million | $0.04 million |
| Net loss | $5.3 million | $3.5 million |
| Basic and diluted loss per share | $0.20 | $0.13 |
| Net cash used in operating activities | $5.1 million | $3.9 million |
- Net loss and operating expenses increased primarily because of higher clinical development, manufacturing and process-development costs, the in-use stability study addressing the FDA clinical hold, the Phase 1C study, expanded clinical personnel, recruiting costs and legal fees.
- No meaningful revenue or profit margin was reported because the company remains pre-commercial and has no product sales.
- Cash, cash equivalents and marketable securities totaled $28.7 million at March 31, 2023, down from $33.5 million at December 31, 2022.
- Working capital was $26.9 million and shareholders’ equity was $27.0 million at March 31, 2023.
- Cash provided by investing activities was $2.5 million, primarily reflecting marketable-securities maturities exceeding purchases. Financing cash flow was negative $1 thousand.
- The company had no existing credit facilities. Outstanding obligations consisted primarily of operating and finance lease liabilities; total lease obligations were approximately $0.5 million on an undiscounted basis.
Material Changes Versus the Prior Comparable Period
- R&D expense increased approximately $1.6 million, or about 83%, to $3.6 million.
- G&A expense increased approximately $0.3 million, or about 22%, to $1.9 million.
- Net loss increased approximately $1.8 million, or about 50%, to $5.3 million.
- Operating cash burn increased approximately $1.2 million, or about 31%, to $5.1 million.
- Cash and marketable securities declined approximately $4.8 million from year-end 2022, while current liabilities increased from $2.2 million to $2.8 million.
- Shares outstanding increased modestly to 26.5 million from 26.4 million, primarily from settlement of deferred share units and vesting of restricted stock units.
Guidance, Outlook, Risks, Contingencies and Unusual Items
- The FDA clinical hold on the IND for the Phase 2/3 ReMEDy2 AIS trial remained in effect. Enrollment cannot resume unless the FDA lifts the hold.
- The hold followed three unexpected clinically significant hypotension events after intravenous DM199 dosing. DiaMedica completed an additional in-use in-vitro stability study and planned to submit supporting data to the FDA. The filing states that there is no assurance the hold will be lifted timely or at all.
- DiaMedica initiated a Phase 1C open-label study in Australia to evaluate DM199 pharmacokinetics, safety and tolerability using the relevant IV bags. Enrollment began in March 2023; the third cohort was dosed in April 2023 with no significant DM199-related adverse events reported.
- The ReMEDy2 trial is designed to enroll approximately 350 patients at up to 75 U.S. sites, but prior site activation and enrollment were slower than expected. Staffing shortages, COVID-19-related effects and post-discharge logistics may continue to delay the trial.
- The company continued evaluating final data and next steps for its Phase 2 REDUX CKD program.
- Management expects current cash, cash equivalents and marketable securities to fund planned operations for at least the next 12 months from issuance of the financial statements. However, the company expects to require substantial additional capital and may need financing earlier than anticipated.
- Future financing may involve equity dilution, debt covenants or the surrender of rights through collaborations or licensing arrangements. If funding is unavailable, the company may reduce operations, delay development, license assets, divest assets or cease operations.
- The company disclosed banking-system and financial-institution liquidity risk. Cash balances may exceed federally insured limits, and a failure of a financial institution could restrict access to funds.
- DiaMedica reported litigation with ICON/PRA Netherlands concerning clinical-study records and related contractual obligations. A Dutch court judgment issued April 21, 2023 affirmed DiaMedica’s ownership of identified physical and digital records and ordered their surrender; ICON/PRA Netherlands had three months to appeal. Management stated that no known legal action was expected to have a material adverse effect on financial position or results of operations.
- On April 10, 2023, newly appointed Chief Business Officer David Wambeke purchased 468,750 shares for $750,000 and received an inducement option for 140,000 shares.
- Management concluded that disclosure controls and procedures were effective as of March 31, 2023, with no material change in internal control over financial reporting during the quarter.
Investor Verification Priorities
- Confirm whether and when the FDA lifts the ReMEDy2 clinical hold and whether additional testing, protocol changes or clinical requirements are imposed.
- Assess Phase 1C and ReMEDy2 safety, pharmacokinetic and efficacy data, including any further hypotension or other adverse events.
- Reconcile the projected cash runway with the $5.1 million quarterly operating cash burn and expected spending if ReMEDy2 enrollment resumes.
- Monitor the timing, terms and dilution associated with any future equity, debt, partnership or licensing financing.
- Track final analyses and strategic decisions for the REDUX CKD program.
- Follow the ICON/PRA Netherlands appeal period and any effect on access to clinical data, study audits or trial execution.
- Review the company’s concentration of cash and investments among financial institutions and the liquidity of its marketable securities.