Business Context and Reporting Period
DiaMedica Therapeutics Inc. 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 Form 10-Q covers the three and nine months ended September 30, 2022; financial statements are unaudited.
- ReMEDy2: Phase 2/3 AIS trial intended to enroll approximately 350 patients at 75 U.S. sites.
- REDUX: Phase 2 CKD trial completed treatment periods for all 79 enrolled patients; the company was finalizing data and evaluating next steps.
- DM300: Potential treatment for inflammatory diseases in preclinical development.
Financial Condition and Results
| Metric | Q3 2022 | Q3 2021 | 9M 2022 | 9M 2021 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development expense | $1.6 million | $2.3 million | $5.6 million | $6.9 million |
| General and administrative expense | $1.5 million | $1.1 million | $4.5 million | $3.5 million |
| Operating loss | $3.1 million | $3.4 million | $10.0 million | $10.4 million |
| Net loss | $3.1 million | $3.5 million | $9.9 million | $10.3 million |
| Net loss per share | $0.12 | $0.18 | $0.38 | $0.55 |
| Net cash used in operating activities | Not provided for the quarter | Not provided for the quarter | $8.7 million | $9.4 million |
The company has not generated revenue from commercial product sales and has incurred losses since inception. No meaningful operating margin is reported because the company has no revenue and remains in development.
| Balance-sheet metric | September 30, 2022 | December 31, 2021 |
|---|---|---|
| Cash and cash equivalents | $2.8 million | $4.7 million |
| Marketable securities | $33.3 million | $40.4 million |
| Cash, cash equivalents and marketable securities | $36.1 million | $45.1 million |
| Working capital | $34.9 million | $43.9 million |
| Total shareholders’ equity | $35.1 million | $44.0 million |
| Current liabilities | $1.5 million | $1.5 million |
The filing reports no credit facilities or material conventional debt. Lease obligations totaled approximately $449,000 for the new operating lease at September 30, 2022, plus approximately $12,000 of finance lease obligations.
Material Changes Versus the Prior Comparable Period
- Nine-month R&D expense declined $1.3 million, primarily because of lower REDUX trial wrap-up costs and lower non-clinical testing and manufacturing development costs, partly offset by ReMEDy2 and personnel costs.
- Nine-month G&A expense increased $1.0 million, mainly due to higher directors’ and officers’ insurance, personnel, and professional services costs; lower share-based compensation partly offset the increase.
- Nine-month net loss improved by $421,000, while net loss per share improved from $0.55 to $0.38, principally reflecting lower operating expenses and a higher share count.
- Operating cash use decreased by $703,000 year over year. Investing activities provided $6.8 million in 2022, compared with $11.8 million used in 2021, reflecting the timing of marketable-security purchases and maturities.
- No equity securities were issued during the first nine months of 2022. The prior-year period included approximately $29.9 million of net proceeds from a September 2021 private placement.
- The company entered into a new 65-month Minneapolis office lease beginning September 1, 2022, recognizing a $446,000 right-of-use asset and lease obligation.
Guidance, Outlook, Risks and Unusual Items
- On July 6, 2022, the FDA placed a clinical hold on ReMEDy2 after three clinically significant hypotension events following initiation of the intravenous DM199 dose. Enrollment cannot resume until the FDA lifts the hold.
- DiaMedica believes the events may have resulted from DM199 binding differences associated with a changed IV bag type, which may have increased the administered dose. The FDA continued the hold and requested additional in-use in-vitro stability testing involving the IV tubing and mechanical infusion pump.
- Management planned to request a Type A FDA meeting and proposed reducing the initial IV dose. The filing states that the FDA may require additional data, clinical testing, or stricter conditions, and may not lift the hold.
- Before the hold, ReMEDy2 experienced slower-than-expected site activation and enrollment, attributed in part to COVID-19-related disruptions, staffing shortages, and patient-discharge logistics.
- Management expects significant operating losses and negative cash flow to continue. Current cash, cash equivalents, and marketable securities are expected to fund planned operations for at least the next twelve months from issuance of the financial statements, but additional capital will likely be required to advance development programs.
- Potential funding sources include equity or debt financing, strategic collaborations, licensing arrangements, or other third-party funding. Financing may be unavailable or dilutive, and the company has no existing borrowing facility.
- If sufficient funding is unavailable, the company may reduce personnel or outside services, delay or modify DM199 development, license rights on unfavorable terms, divest assets, or cease operations through a transaction or liquidation.
- Accumulated deficit was $92.4 million as of September 30, 2022. The filing identifies no material pending legal proceedings.
Important Facts for Investors to Verify
- Whether and when the FDA lifts the ReMEDy2 clinical hold and whether additional testing or clinical requirements are imposed.
- The results of the requested in-use in-vitro stability study and the company’s conclusion regarding the cause of the hypotension events.
- ReMEDy2 site activation, enrollment, trial-cost trajectory, and any revised study timeline.
- Final REDUX results and management’s decision regarding the CKD development program.
- Monthly cash burn, remaining marketable securities, and the timing and terms of any future financing.
- Potential dilution from future equity financing and outstanding options, deferred stock units, and warrants.