DiaMedica Therapeutics Inc. — Form 10-Q Summary
Business Context and Reporting Period
DiaMedica Therapeutics is a clinical-stage biopharmaceutical company developing DM199, a recombinant human tissue kallikrein-1 protein, for acute ischemic stroke and chronic kidney disease. The filing covers the three months ended March 31, 2021. The company has not generated product revenue and has no commercialized products.
Financial Performance and Position
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $2.406 million | $1.349 million |
| General and administrative expense | $1.213 million | $1.055 million |
| Operating loss | $3.619 million | $2.404 million |
| Net loss | $3.622 million | $2.425 million |
| Net loss per share | $0.19 | $0.19 |
| Net cash used in operating activities | $4.313 million | $2.978 million |
Gross and operating margins are not meaningful because the company has no revenue. At March 31, 2021, cash and cash equivalents were $3.329 million, marketable securities were $20.072 million, working capital was $23.017 million, and shareholders’ equity was $23.145 million. Total liabilities were $1.211 million, consisting primarily of current operating obligations; the company reported no credit facilities or material debt beyond lease and finance lease obligations.
Cash, cash equivalents and marketable securities decreased from $27.507 million at December 31, 2020 to $23.401 million at March 31, 2021. The company had an accumulated deficit of $72.531 million. Shares outstanding increased to 18,786,157 from 18,746,157 at year-end, primarily from option exercises.
Material Changes Versus the Prior Comparable Period
- Research and development expense increased $1.057 million, or approximately 78%, primarily because of higher REDUX Phase 2 CKD study costs and preparation for the ReMEDy2 Phase 2/3 stroke study. This was partly offset by lower costs following completion of the prior ReMEDy Phase 2 stroke study.
- General and administrative expense increased $158,000, or approximately 15%, mainly because of higher directors’ and officers’ insurance, personnel costs and share-based compensation.
- Net loss increased $1.197 million, or approximately 49%, and operating cash use increased $1.335 million, or approximately 45%.
- Financing cash inflow declined to $242,000 from $7.696 million. The prior-year period included $7.682 million of net proceeds from a public offering; Q1 2021 included $244,000 from option exercises.
- Investing cash use declined to $9,000 from $5.301 million because purchases and maturities of marketable securities were substantially offset in Q1 2021.
Programs, Outlook, Risks and Unusual Items
- The company filed an IND for the planned ReMEDy2 Phase 2/3 acute ischemic stroke study and anticipated beginning enrollment in summer 2021. The FDA had agreed with key elements of the proposed adaptive design and primary endpoint.
- The REDUX Phase 2 CKD study targets approximately 90 participants across three cohorts. As of April 30, 2021, 70 subjects had been enrolled. Cohorts I and II experienced slower enrollment because of COVID-19-related site restrictions; completion was expected in the second half of 2021. Topline results for Cohort III were expected in Q2 2021.
- Management expects significant operating losses to continue for several years and does not expect product sales for at least three to five years, if ever. Future expenses are expected to increase as clinical trials, manufacturing process development, regulatory activities and intellectual-property efforts advance.
- Management stated that current cash, cash equivalents and marketable securities were expected to fund completion of the REDUX study, initiation of the ReMEDy2 study and planned operations for at least the next twelve months from the financial statement issuance date. Additional capital will likely be required, and there is no assurance that financing will be available on acceptable terms.
- COVID-19 continued to affect clinical-site activity and enrollment. Employees worked remotely during the quarter, and non-essential travel remained restricted.
- The company disclosed a related-party arrangement with a consulting firm owned by its Vice President of Regulatory Affairs. Charges were approximately $107,000 during Q1 2021, with approximately $52,000 outstanding at March 31, 2021.
- The company is pursuing litigation in the Netherlands against PRA Netherlands concerning disputed clinical-study records and alleged protocol and execution deficiencies. The outcome is uncertain.
- Available-for-sale marketable securities totaled $20.072 million, with no other-than-temporary unrealized losses reported. The company maintains significant cash balances with one financial institution, some of which exceed federally insured limits.
Important Facts for Investors to Verify
- Enrollment progress, safety and efficacy results from the REDUX CKD cohorts, including the expected Cohort III topline data.
- Timing of ReMEDy2 initiation, enrollment pace, trial costs and any subsequent FDA feedback.
- Cash burn and remaining liquidity relative to the company’s stated ability to fund operations for at least twelve months.
- Potential timing, size, structure and dilution of future equity, debt, collaboration or licensing financings.
- Impact of COVID-19 or other operational constraints on clinical enrollment and trial timelines.
- Development, manufacturing and regulatory risks affecting whether DM199 can obtain approval or generate commercial revenue.
- Status and potential financial impact of the PRA Netherlands litigation and the related-party consulting arrangement.