DiaMedica Therapeutics Inc. — Q1 2022 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 filing covers the three months ended March 31, 2022, and was filed May 4, 2022. The company has no commercial products and generated no product revenue.
- AIS: ReMEDy2 is an adaptive, randomized, double-blind, placebo-controlled Phase 2/3 trial planned for approximately 350 patients at 75 U.S. sites.
- CKD: REDUX enrollment was completed in 2021 with 79 patients; all patients had completed treatment by March 31, 2022, and the company was evaluating next steps.
- Other: DM300 remains in preclinical development for inflammatory diseases.
Financial and Operating Metrics
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $2.0 million | $2.4 million |
| General and administrative expense | $1.6 million | $1.2 million |
| Operating loss | $3.5 million | $3.6 million |
| Net loss | $3.5 million | $3.6 million |
| Net loss per share | $0.13 | $0.19 |
| Net cash used in operating activities | $3.9 million | $4.3 million |
- Liquidity: Cash and cash equivalents were $3.0 million and marketable securities were $38.0 million at March 31, 2022, for combined liquid resources of $41.0 million. Working capital was $40.7 million.
- Balance sheet: Total assets were $42.2 million, shareholders’ equity was $40.8 million, and current liabilities were $1.4 million.
- Debt and lease obligations: The company had no credit facility. Finance lease obligations totaled approximately $15,000, and the operating lease obligation was $28,000. The office lease terminates August 31, 2022, with no renewal option.
- Margins: Gross margin and operating margin are not meaningful because the company has no product revenue; operating activities remain loss-making.
- Marketable securities: Investments consisted primarily of government securities, commercial paper and corporate bonds. The company reported no other-than-temporary impairments.
Material Changes Versus the Prior Comparable Period
- R&D expense declined $0.4 million, primarily because of lower REDUX trial costs and reduced DM199 manufacturing-process development, partly offset by higher ReMEDy2 and clinical personnel costs.
- G&A expense increased $0.4 million due mainly to higher professional services, directors’ and officers’ insurance, and personnel costs.
- Net loss improved modestly by $0.1 million, while net loss per share improved from $0.19 to $0.13, primarily reflecting a larger share base.
- Operating cash use improved by $0.4 million to $3.9 million.
- Combined cash, cash equivalents and marketable securities decreased $4.1 million from December 31, 2021, largely reflecting operating cash use.
- No common shares were issued during Q1 2022. The March 31 share count was 26.4 million, compared with 18.8 million weighted-average shares in Q1 2021.
Guidance, Outlook, Risks and Unusual Items
- Management expects significant operating losses and negative cash flow to continue as clinical development advances.
- The company expects current cash, cash equivalents and marketable securities to fund planned operations for at least the next twelve months from the issuance of the financial statements, but states that substantial additional capital will eventually be required.
- Future financing may involve equity, debt, strategic collaborations or licensing arrangements. Additional equity or convertible financing could dilute shareholders; financing may not be available on acceptable terms or at all.
- ReMEDy2 has experienced slower-than-expected site activation and patient enrollment because of COVID-19-related reductions or suspensions in research activity, hospital staffing shortages, and logistical and compliance concerns for patients transferred to intermediate care facilities.
- COVID-19, global supply-chain constraints, clinical-trial delays, unfavorable clinical data, regulatory failure, manufacturing challenges, competition and intellectual-property risks could materially affect results.
- DM199 is not expected to be commercially available for at least three to four years, if at all, and requires substantial additional clinical testing, regulatory approval and investment.
- The company has incurred an accumulated deficit of $86.0 million since inception and has no current product sales or established recurring revenue source.
- Management reported effective disclosure controls and procedures as of March 31, 2022, with no material change in internal control over financial reporting during the quarter. The company reported no material legal proceedings.
Important Facts for Investors to Verify
- Actual ReMEDy2 site activation, enrollment pace, interim-analysis outcomes and any revised study design or timing.
- Results and strategic direction of the completed REDUX CKD trial.
- Cash burn, investment maturities and the duration of the stated liquidity runway as clinical activity changes.
- Timing, terms and potential dilution of any future financing or strategic transaction.
- Regulatory, manufacturing and intellectual-property milestones required before DM199 could be commercialized.
- Whether COVID-19, staffing shortages or supply-chain constraints continue to delay clinical development.