Q2 2022 DiaMedica Therapeutics Inc Earnings Call

Dr. Greuss led a comprehensive analysis of the differences between the two studies, evaluating everything from the drug itself...

to the procedures performed in preparing and delivering the first IV dose. As a result of this analysis, we believe that the likely cause of these hypotensive events was the effects on changing the type of IV bag used to administer the IV dose of DM-109.

The type of IV bag was changed due to lack of availability in the US of the polio-affordant IV bags used in Australia for the REMEDY 1 trial. After compatibility testing of a number of IV bags, the IV bag selected for REMEDY 2 trial was made from PVC.

PVC bags were the most compatible with DM-189 as there is no binding of the DM-189 protein to these bags. The bags used in the Remedy 1 trial were made from polyolefin, a material which does bind up or hold a portion of the DM-189 protein in the IV bag. The effect of changing IV bags was that all of the 1 microgram per kg dose of DM-189 was being delivered to patients in the Remedy 2 trial.

To put this another way and illustrate what we're talking about, with the IV bag used in Remedy 1, as much as half of the DM-189 protein was staying in the bag.

and half was being delivered to the patient.

In Remedy 2, all the drug is being delivered to the patient and none of the drug is staying in the ID bag.

To support this position, last week we completed an IV bag compatibility study.

which included the IV bags used in the REMEDY-1 trial. Results of the study determined that as much as half of the DM-19 protein binds to the IV bag made from polyolefin as used in the REMEDY-1 trial.

This study also reaffirmed that the DM-29 protein does not bind to the IV bag made from PVC.

as used in the Remedy 2 trial. With the results of the study, we believe that we have the data to provide to the FDA to support our rationale for the cause of the hypotensive events and the rationale for revising the IV dose level for the Remedy 2 trial.

Essentially, we will propose revising IV dose levels to match the actual IV dose given in the REMEDY 1 trial, in which DM-19 was well tolerated in 46 stroke patients in the DM-19 arm. Dear friends, we've seen in almost 50 patients, that there are never Monday

We're confident that the change will mitigate the risk for these clinically significant hypotensive events and hope that the FDA agrees.

As for next steps toward resuming enrollments, in the clinical hold letter from the FDA, they asked us to provide a review of the etiology of the three events and any suggested mitigating strategies.

to prevent such events and to also submit our proposed modifications to the protocol to address the significant risk of hypotension with administration of DM-189.

We plan to submit a response in September and the FDA will then have up to 30 days to review and respond.

With all that said, let me highlight a few things for further context.

First, everything to date points to this issue being driven by the change in the IV bag and not a problem with DM-99.

If anything, a blood pressure drop is consistent with the mechanism of action of this protein.

As such, it's potentially another clinical indicator that DM-189 is biologically active.

Second, there have been no similar hypotensive events reported with the subcutaneous dosing, further supporting our conclusion that the issue relates to the IV bag. Accordingly, we anticipate no changes to the subcutaneous dosing regimen.

Lastly, and most important, while clinically significant hypotension is a serious issue for stroke patients.

Blood pressure in these patients is continually monitored such that a problematic drop in blood pressure can be rapidly identified. In the three patients, their blood pressure returned to baseline levels within a few minutes of stopping the IV dose infusion and they suffered no ongoing adverse events.

Therefore, we believe that we can conduct this trial with adequate clinical monitoring of blood pressure and the fact that a drop in blood pressure was quickly reversible by stopping the infusion will reduce the risk to these patients. I would now like to bring on our CFO Scott Callan to go over our financial results.

Thank you, Rick. Good morning everyone. As Rick mentioned, we announced our second quarter financial results and filed our quarterly report on Form 10-Q yesterday afternoon. These documents are both available on either the Diametica or the SEC websites.

Starting with our balance sheet, as of June 30, 2022, our combined cash and investments totaled $38.4 million, down $2.6 million from $41 million as of the end of Q1 of 2022, and down $6.7 million from $45.1 million as of our prior year end.

Cash used in the current quarter was lower than planned due to the halting of enrollment in our Remedy 2 trial.

This should scale back up as we complete our response to the FDA and prepare for resuming enrollment. We also reiterate that our current cash will support the clinical development of DM-199 and our operations into early 2024.

Research and development expenses for the second quarter and year-to-date period were 2 million and 3.9 million respectively.

This compares to $2.2 million and $4.6 million for the corresponding periods in the prior year.

The overall year-to-date decrease was due to a number of factors.

including reduced costs incurred in the current year for the wrap-up of our REDUX Phase II CKD basket trial, for which enrollment was concluded at the end of 2021.

decreased non-clinical testing costs, which were incurred at greater levels in 2021 in preparation for our Remedy 2 trial, which initiated during 2021, and a decreased manufacturing process development costs.

These decreases were partially offset by current year costs incurred in conducting our Phase 2-3 Remedy 2 trial and increased personnel costs associated with adding staff to support R&D operations.

General and administrative expenses for the second quarter and year-to-date period were $1.4 million and $3 million respectively. This compares to $1.2 million and $2.4 million for the corresponding periods in the prior year.

The overall year-to-date increase was primarily due to increased directors and officers liability insurance

personnel costs and professional services costs to support our expanding clinical programs.

These increases were partially offset by a reduction in non-cash share-based compensation.

With that, let me turn the call back over to Rick.

Thank you, Scott. As you can see, we have made significant progress since our last announcement on July 6th, and we feel like we have as much clarity as possible at this stage. We plan to submit our analysis and proposed mitigation steps to the FDA in September .

to get that 30-day clock started. And of course, we hope to hear back from the agency in less than 30 days, and that their response is to lift the clinical hold.

When the clinical hold is lifted, we will provide further guidance on the next steps for our DM-189 program.

Finally, our balance sheet remains strong and we are well positioned to execute on the plans with a focus on a Remedy 2 trial.

With that, we'd like to open the call for questions.

Operator, if you could please introduce the first analyst.

At this time, I would like to remind everyone in order to ask a question, press star then the number one on your telephone keypad. Your first question comes from the line of Thomas Flatten from Lake Street Capital Markets. Your line is open.

Thank you. Good morning guys and appreciate all the insight into the Remedy 2 issue. Rick, you mentioned that up to 50% of the drug would be would hold. How variable was that? I'm trying to understand what the range is that you need to dose adjust and whether a single dose adjustment would be appropriate.

Yeah, so the difference is when we say up to, you know, it really is dependent on the body weight of the patient that the IV dose will be prepared for. So what are, we're just finalizing here the amounts, but what our intent right now would be to drop the dosing in half. So basically dropping it to 0.5 micrograms per kg.

for all patients.

Got it. And then, you know, during this hold, how have site activation discussions proceeded, or perhaps not?

Sure, Kirsten, do you want to take that one?

Sure. So we've been doing our best to keep the sites up to date in terms of our investigation and maintain communication with them. In addition, we can continue some of the pre-activation. So the looking at budgets and whether or not everyone has adequate staffing, we've been able to do while we've been undergoing this analysis.

Great, and then just one final one if I might. Prior to holding or halting enrollment, how was enrollment facing relative to the expectations you've shared with the stream?

Sure, so I think on past calls we've indicated that enrollment was definitely very slow. I think we were very encouraged, particularly in the month before the hold. We had a really nice uptick in patient recruitment. I think that's in part with it takes time to get these sites up. Also part of the work that Kirsten has done in terms of providing a memo to the sites is confirming some of the aspects of the protocol.

Again, I think we were very encouraged when we felt like things were kicking into gear this occurred. We have been taking this time during this hold as well. Kirsten and her team have been incredibly busy here, not just dealing with this hold, but also making a number of updates to the protocol so that we think that it's really going to be able to help us with future enrollment after we get off this hold. For more info on Powered by scenario 1 concerning something from users, visit aside for details for more information.

Appreciate it. Thank you guys.

Thank you Thomas.

Your next question comes from a line of Alex Nowak from Craig Hallam Capital Group. Your line is open.

Great. Good morning, everyone. I want to go back to when you were running the phase two Australian stroke study. Were you aware that the IV values at that time were causing the protein to bind to the bag and effectively lower the dose?

Yes, so that's when we did the, so before we actually did our phase one trial for the IV infusion, going back and looking at the reports, it was noted that there was binding, but the conclusion from our medical people at the time is that it was not significant.

So, then the PK work we did for both Phase 1 and then used for Phase 2 was based on this polyorphyrin bag where there was drugs sticking.

And Alex, if I could just quickly add, the issue is simply trapping protein in the bag. The bag is not affecting the performance of the drug in any way. Its activity, its clarity, its enzymatic activity in particular, is unimpacted by the polyolefin.

Okay, understood. That's helpful. And then maybe taking that commentary and taking the studies that were done internally on the bench after the phase two stroke began, and we had the assumptions around what that dose was. I guess just how does this

this information coming to light that the bag maybe is holding up to 50% of the protein, how much does that information change some of the internal studies being done around PK, whether it be for the stroke study, data that needs to go to the FDA for the pivotal there or even the CKD study.

Yes, so first off, this is only an issue with the IV infusion. So there's no bag issue or effect or concern with sub-Q studies that we've done.

The issue here is simply up to half the drug was sticking in the polyorphyrin bag and now that we've confirmed that percentage, we're simply going to be adjusting the current study to the appropriate amount so that we can match, basically very closely match our phase two data. And also I'll mention our phase one and phase two trial for stroke, we had based

A lot of that work also, not just on the PK that we believe are levels that are healthy subjects, but also it's important that we base it on the PK, the human urinary form of this protein that's being used in China. So we went back and looked and also note that.

the approved dosing of the urinary form, when that dose is doubled, efficacy was reported to be similar, but then these patients then do risk hypotension. So I think we're also encouraged that, you know, like this is very painful, but these adverse events are something that are anticipated at the higher dose level.

Okay, understood. That's helpful. And then just lastly, maybe speak to if there has been any FDA feedback or commentary on the clinical hold, and specifically just with the issues with the IV bags. Have they seen this before? And then also have the KOLs, you know, speaking to your advisory board, what have they commented around this issue?

Yeah, so in the prepared remarks, I basically summarized the feedback from the FDA. When that letter came in, I think we were encouraged. There wasn't anything really beyond basically summarizing what happened on these three patients. The FDA is looking for what our recommendation in terms of the plans going forward.

And Kirsten, maybe you want to touch the KOL question?

Yeah, so like I mentioned earlier, we've been keeping our...

KOL's aware of this, particularly our national lead stroke experts out of 10 and the DSMB medics and their responses have been quite supportive and said, oh yeah, who would have...

They said, who would have guessed that protein has more sticking to certain plastics than other plastics? So they've been quite supportive in terms of this is simply an unintended higher dose in remedy two, and you can adjust the dose back to what was given in remedy one that was very well tolerated and in the health of volunteer patients has a PK that increases. So, thank you.

pylocyanin levels well within the applications range that the heating and urinating form increases into.

Okay, understood. Yes, I definitely didn't think change the bags would have that effect either. So I appreciate the update. Thank you.

Thanks, August .

Your next question comes from the line of Elmer Piroz from Roth Capital Partners. Your line is open.

Yes, good morning. Rick, would you be able to tell us roughly how many patients have been enrolled up until this point in the stroke trial?

Yes, so we aren't providing updates on quarterly calls, but we will update on some milestones. And I think as we previously mentioned, enrollment was very slow at the start of the study. However, we were quite encouraged and felt that we had some strong momentum building, in particular in the months before we paused the enrollment.

Okay, so since the dose level in the previously dosed patients are approximately maybe twice as high, do you think that you would be able to use that data and test part of the package, or do you think you might have to exclude it?

No, at this point in time we do believe we'll be able to include it and we plan to confirm it with the FDA.

Okay, and last question. You referred to additional modifications to the protocol besides the dose. What some of those might be?

Yeah, so this is currently in draft, but there's a few aspects that we are looking, you know, in particular we're going to be starting off with a slow infusion. So for the first, you know, first 15 minutes or so slow infusion, this will give the medics a chance to monitor closely the patient's outcomes. And then the other piece that we're looking at is having a washout from ACE inhibitors.

So that all three of these patients that were hypotensive were also ACE inhibitors. And we believe that there is a potential interaction. So by having a 24-hour washout, we feel we're going to avoid that risk of interactions of ACE inhibitors that are involved in preventing the breakdown of kinins, whereas DM-189 is involved in making new kinins.

Okay, well thank you so much for taking my questions.

Thanks, Omar.

And your next question comes from the line of Francois Brisebois from Oppenheimer. Your line is open.

Thanks for taking the question. Just a couple here. Thanks for all the color on the situation. But I was just wondering, you know, I think Alex had asked about if the FDA had seen this or KOL is kind of feedback, but, you know, is there anything, you know, this was based off a shortage of material, I guess, or IV bags that you had used previously. Has there been any issues with other drugs noticing this or you haven't heard of anything?

So, I think it's interesting that when something like this occurs and you are talking to investors and you are talking to partnering discussions and related that we are having is that surprisingly a number of other people have told us that they have seen these types of situations. I don't have any specifics on top of my tongue here right now but this definitely is something that has occurred with other compounds. Okay, thank you for your attention. Thank you very much for answering that question.

Okay, and the 50% kind of sticking of the protein in the bag that happened in Remedy 1, is that like – I think Thomas had asked about the variability there, but is that like you guys have that data to show the FDA that's kind of proven or – and I guess when you tested that in the test, when the Australian trial, when the medical team had said they didn't think it was significant, did they use similar testing or they just kind of – Yes.

Figured from looking at the bag. Do you know how they came to the conclusion that this wasn't a problem in the past?

Yes, so the testing was a little different but similar. Basically the data that we recently completed is, first off, it took us some time to actually track down the exact same bags that we used in our phase two in Australia and part of it is these Fresenius bags were not available anywhere. So we went through a great length to track them down and basically what the data, this recent data from last week told us is that...

In a lower weight patient, 48% of the drug is sticking, and in a higher weight patient, there'll be a little less. But we feel that this definitely gives us the support. There's a comprehensive study with multiple bags.

And then we were also able to confirm that the PVC bags that we're currently using, there was no drug sticking. And maybe just to kind of touch upon your last question a little bit more is, for example, if you look at TPA, so really the only drug approved for stroke today, right on the label it says that use a PVC bag. So there likely may have been issues when they were running their trials earlier too.

That's interesting. And then, we'll get more color once you get news from the FDA and hopefully within that 30 days. And then, but can you just maybe outline potential outcomes that could happen? Do we have to redo a remedy one or is there some modeling that's doable to make sure that, look, it's the same PK, curves, this is the amount of drug that's going in. Any details there of potential outcomes from the FDA feedback?

Sure. I mean, we believe this simply is a bag issue.

adjust the dose, match the phase two, and then move on. Part of the piece here is that we're taking some additional time here in our preparation work for our filing for the FDA to make sure that it's very comprehensive and that we're including basically a strategy plan going forward so that ideally we can lay out a very clear path on the rationale of coming off hold.

Okay, that's it from me. Thank you.

Okay, thank you. Thank you, Frank.

And this concludes our question and answer session. I would like to turn the call back over to Rick Pauls for some closing remarks.

All right, again, we'd like to thank everybody for joining us this morning. We appreciate your interest in Diametica and your continued support. And with that, this concludes our call today.

This concludes today's conference call. Thank you for your participation. You may now disconnect.