UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark one)
For the quarterly period ended
or
For the transition period from ________________ to __________________.
Commission File Number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
Not Applicable (I.R.S. Employer Identification No.) |
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(Address of principal executive offices) (Zip Code)
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(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
Trading Symbol |
Name of each exchange on which registered |
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The |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer ☐ |
Accelerated filer ☐ |
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Smaller reporting company Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of August 9, 2022, there were
DiaMedica Therapeutics Inc.
FORM 10-Q
June 30, 2022
TABLE OF CONTENTS
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Description |
Page |
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS |
1 | |
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PART I. |
FINANCIAL INFORMATION |
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Item 1. |
Financial Statements |
2 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
14 |
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Item 3. |
Quantitative and Qualitative Disclosures about Market Risk |
20 |
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Item 4. |
Controls and Procedures |
20 |
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PART II. |
OTHER INFORMATION |
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Item 1. |
Legal Proceedings |
21 |
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Item 1A. |
Risk Factors |
21 |
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Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
21 |
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Item 3. |
Defaults Upon Senior Securities |
21 |
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Item 4. |
Mine Safety Disclosures |
21 |
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Item 5. |
Other Information |
21 |
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Item 6. |
Exhibits |
22 |
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SIGNATURE PAGE |
23 | |
This quarterly report on Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the United States Securities Act of 1933, as amended, and Section 21E of the United States Securities Exchange Act of 1934, as amended, that are subject to the safe harbor created by those sections. For more information, see “Cautionary Note Regarding Forward-Looking Statements.”
As used in this report, references to “DiaMedica,” the “Company,” “we,” “our” or “us,” unless the context otherwise requires, refer to DiaMedica Therapeutics Inc. and its subsidiaries, all of which are consolidated in DiaMedica’s condensed consolidated financial statements. References in this report to “common shares” mean our voting common shares, no par value per share.
We own various unregistered trademarks and service marks, including our corporate logo. Solely for convenience, the trademarks and trade names in this report are referred to without the ® and ™ symbols, but such references should not be construed as any indicator that the owner of such trademarks and trade names will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend the use or display of other companies’ trademarks and trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Statements in this report that are not descriptions of historical facts are forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 that are based on management’s current expectations and are subject to risks and uncertainties that could negatively affect our business, operating results, financial condition and share price. We have attempted to identify forward-looking statements by terminology including “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should,” “will,” “would,” the negative of these terms or other comparable terminology, and the use of future dates.
The forward-looking statements in this report are subject to risks and uncertainties and include, among other things:
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● |
our plans to develop, obtain regulatory approval for and commercialize our DM199 product candidate for the treatment of acute ischemic stroke (AIS) and chronic kidney disease (CKD) and our expectations regarding the benefits of our DM199 product candidate; |
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● |
our ability to conduct successful clinical testing of our DM199 product candidate for AIS and CKD and meet certain anticipated or target dates, site activations and enrollment numbers with respect to our clinical studies, especially in the light of the effects of novel strains of the coronavirus, or COVID-19, hospital and medical facility staffing shortages and concerns managing logistics and protocol compliance for patients discharged from the hospital to an intermediate care facility on site activations and enrollment in our ReMEDy2 clinical trial of DMI99 in AIS patients, and the clinical hold noted below; |
|
● |
our belief as to the cause of the hypotension events that led to the clinical hold by the United States Food and Drug Administration (FDA) on our ReMEDy2 trial and our response to prevent future events and the risk that we may not correctly identify the cause of the hypotension events or that our plan to resolve the issues and mitigate future events may not be successful or may be more costly than anticipated; our timing with respect to and our ability to successfully engage with the FDA and satisfactorily respond to their requests in connection with the clinical hold and the risk that we may not be able to address successfully their concerns identified in the clinical hold letter or that the FDA may require us to collect additional data or information beyond what we currently expect; the risk that the FDA may not remove the clinical hold on the ReMEDy2 trial in a timely manner or at all; and other risks and uncertainties relating to clinical testing and regulatory applications and related filing and approval timelines, including the possibility of additional future adverse events associated with, or unfavorable results, from the ReMEDy2 trial; |
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● |
the adaptive design of our ReMEDy2 trial, which is intended to enroll approximately 350 patients at 75 sites in the United States, and the possibility that these numbers and other aspects of the study could change depending upon certain factors, including additional input from the FDA and the blinded interim analysis; |
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● |
our expectations regarding the final results of our REDUX trial and timing of the release thereof; |
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● |
the perceived benefits of our DM199 product candidate over existing treatment options for AIS and CKD; |
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● |
the potential size of the markets for our DM199 product candidate for AIS and CKD and our ability to serve those markets, and the rate and degree of market acceptance of our DM199 product candidate for AIS and CKD both in the United States and internationally; |
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● |
our ability to partner with and generate revenue from biopharmaceutical or pharmaceutical partners to develop, obtain regulatory approval for and commercialize our DM199 product candidate for AIS and CKD; |
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● |
the success, cost and timing of planned clinical studies, as well as our reliance on collaboration with third parties to conduct our clinical studies; |
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● |
our expectations regarding the impact of the COVID-19 pandemic on our business, including in particular our progress with site activation and patient enrollment in our clinical studies and our ability to hire additional personnel; |
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● |
our commercialization, marketing and manufacturing capabilities and strategy; |
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● |
expectations regarding federal, state, and foreign regulatory requirements and developments, such as potential FDA regulation of our DM199 product candidate for AIS and CKD; |
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● |
our estimates regarding expenses, future revenue, capital requirements and needs for additional financing; |
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● |
our expectations regarding our ability to obtain and maintain intellectual property protection for our DM199 product candidate; |
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● |
expectations regarding competition and our ability to obtain data exclusivity for our DM199 product candidate for AIS and CKD; |
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● |
our ability to obtain funding for our operations, including funding necessary to complete planned clinical trials and obtain regulatory approvals for our DM199 product candidate for AIS and CKD; and |
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● |
our anticipated use of the net proceeds from our underwritten public offerings and September 2021 private placement. |
These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described under “Part I. Item 1A. Risk Factors” in our annual report on Form 10-K for the fiscal year ended December 31, 2021 and those described above and elsewhere in this report. Moreover, we operate in a very competitive and rapidly-changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Forward-looking statements should not be relied upon as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Except as required by law, including the securities laws of the United States, we do not intend to update any forward-looking statements to conform these statements to actual results or to changes in our expectations.
PART I - FINANCIAL INFORMATION
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ITEM 1. |
FINANCIAL STATEMENTS |
DiaMedica Therapeutics Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share amounts)
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June 30, 2022 |
December 31, 2021 |
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(unaudited) |
||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
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Cash and cash equivalents |
$ | $ | ||||||
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Marketable securities |
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Amounts receivable |
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Deposits |
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Prepaid expenses and other assets |
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Total current assets |
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| Non-current assets: | ||||||||
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Property and equipment, net |
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Operating lease right-of-use asset |
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Total non-current assets |
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Total assets |
$ | $ | ||||||
| LIABILITIES AND EQUITY | ||||||||
| Current liabilities: | ||||||||
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Accounts payable |
$ | $ | ||||||
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Accrued liabilities |
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Finance lease obligation |
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Operating lease obligation |
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Total current liabilities |
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| Non-current liabilities: | ||||||||
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Finance lease obligation, non-current |
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Total non-current liabilities |
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| Shareholders’ equity: | ||||||||
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Common shares, par value; ; |
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Paid-in capital |
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Accumulated other comprehensive loss |
( |
) | ( |
) | ||||
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Accumulated deficit |
( |
) | ( |
) | ||||
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Total shareholders’ equity |
||||||||
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Total liabilities and shareholders’ equity |
$ | $ | ||||||
See accompanying notes to the condensed consolidated financial statements.
DiaMedica Therapeutics Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except share and per share amounts)
(Unaudited)
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Three Months Ended June 30, |
Six Months Ended June 30, |
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2022 |
2021 |
2022 |
2021 |
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| Operating expenses: | ||||||||||||||||
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Research and development |
$ | $ | $ | $ | ||||||||||||
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General and administrative |
||||||||||||||||
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Operating loss |
( |
) | ( |
) | ( |
) |
( |
) |
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| Other income: | ||||||||||||||||
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Other income, net |
||||||||||||||||
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Loss before income tax expense |
( |
) | ( |
) |
( |
) |
( |
) |
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Income tax expense |
( |
) | ( |
) | ( |
) |
( |
) |
||||||||
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Net loss |
( |
) | ( |
) | ( |
) |
( |
) |
||||||||
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Other comprehensive income (loss) |
||||||||||||||||
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Unrealized gain (loss) on marketable securities |
( |
) |
( |
) |
( |
) | ||||||||||
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Net loss and comprehensive loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) |
$ | ( |
) |
||||
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Basic and diluted net loss per share |
$ | ( |
) | $ | ( |
) | $ | ( |
) |
$ | ( |
) |
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Weighted average shares outstanding – basic and diluted |
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See accompanying notes to the condensed consolidated financial statements.
DiaMedica Therapeutics Inc.
Condensed Consolidated Statements of Shareholders’ Equity
For the Six Months Ended June 30, 2022 and 2021
(In thousands, except share amounts)
(Unaudited)
|
Common Shares |
Paid-In Capital |
Accumulated Other Comprehensive Loss |
Accumulated Deficit |
Total Shareholders’ Equity |
||||||||||||||||
|
Balances at December 31, 2021 |
$ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||
|
Share-based compensation expense |
— | |||||||||||||||||||
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Unrealized loss on marketable securities |
— | ( |
) | ( |
) | |||||||||||||||
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Net loss |
— | ( |
) | ( |
) | |||||||||||||||
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Balances at March 31, 2022 |
$ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||
|
Share-based compensation expense |
— | |||||||||||||||||||
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Unrealized gain on marketable securities |
— | ( |
) | ( |
) | |||||||||||||||
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Net loss |
— | ( |
) | ( |
) | |||||||||||||||
|
Balances at June 30, 2022 |
$ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||
|
Common Shares |
Paid-In Capital |
Accumulated Other Comprehensive Income (Loss) |
Accumulated Deficit |
Total Shareholders’ Equity |
||||||||||||||||
|
Balances at December 31, 2020 |
$ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||
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Exercise of common stock options |
||||||||||||||||||||
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Share-based compensation expense |
— | |||||||||||||||||||
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Unrealized loss on marketable securities |
— | ( |
) | ( |
) | |||||||||||||||
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Net loss |
— | ( |
) | ( |
) | |||||||||||||||
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Balances at March 31, 2021 |
$ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||
|
Share-based compensation expense |
— | |||||||||||||||||||
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Unrealized gain on marketable securities |
— | |||||||||||||||||||
|
Net loss |
— | ( |
) | ( |
) | |||||||||||||||
|
Balances at June 30, 2021 |
$ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||
See accompanying notes to the condensed consolidated financial statements.
DiaMedica Therapeutics Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
|
Six Months Ended June 30, |
||||||||
|
2022 |
2021 |
|||||||
| Cash flows from operating activities: | ||||||||
|
Net loss |
$ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
|
Share-based compensation |
||||||||
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Amortization of premium on marketable securities |
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Non-cash lease expense |
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Depreciation |
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| Changes in operating assets and liabilities: | ||||||||
|
Amounts receivable |
||||||||
|
Deposits |
||||||||
|
Prepaid expenses and other assets |
( |
) | ( |
) | ||||
|
Accounts payable |
( |
) | ||||||
|
Accrued liabilities |
( |
) | ||||||
|
Net cash used in operating activities |
( |
) | ( |
) | ||||
| Cash flows from investing activities: | ||||||||
|
Purchase of marketable securities |
( |
) | ( |
) | ||||
|
Maturities of marketable securities |
||||||||
|
Purchases of property and equipment |
( |
) | ( |
) |
||||
|
Proceeds from disposition of property and equipment |
||||||||
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Net cash provided by investing activities |
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| Cash flows from financing activities: | ||||||||
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Proceeds from the exercise of stock options |
||||||||
|
Principal payments on finance lease obligations |
( |
) | ( |
) | ||||
|
Net cash provided by (used in) financing activities |
( |
) | ||||||
|
Net decrease in cash and cash equivalents |
( |
) | ( |
) | ||||
|
Cash and cash equivalents at beginning of period |
||||||||
|
Cash and cash equivalents at end of period |
$ | $ | ||||||
| Supplemental disclosure of non-cash transactions: | ||||||||
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Assets acquired under financing lease |
$ | $ | ||||||
See accompanying notes to the condensed consolidated financial statements.
DiaMedica Therapeutics Inc.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
|
1. |
Business |
DiaMedica Therapeutics Inc. and its wholly-owned subsidiaries, DiaMedica USA, Inc. and DiaMedica Australia Pty Ltd. (collectively we, us, our, DiaMedica and the Company), exists for the primary purpose of advancing the clinical and commercial development of our proprietary recombinant KLK1 protein, DM199, for the treatment of neurological and kidney diseases. Currently, our primary focus is on developing DM199, a proprietary recombinant form of the human tissue kallikrein-1 (KLK1) protein for the treatment of acute ischemic stroke (AIS) and chronic kidney disease (CKD). Our parent company is governed under British Columbia’s Business Corporations Act, and our common shares are publicly traded on The Nasdaq Capital Market under the symbol “DMAC.”
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2. |
Risks and Uncertainties |
DiaMedica operates in a highly regulated and competitive environment. The development, manufacturing and marketing of pharmaceutical products require approval from, and are subject to ongoing oversight by, the Food and Drug Administration (FDA) in the United States, the European Medicines Agency (EMA) in the European Union and comparable agencies in other countries. We are in the clinical stage of development of our initial product candidate, DM199, for the treatment of AIS and CKD. The Company has not completed the development of any product candidate and does not generate any revenues from the commercial sale of any product candidate. DM199 requires significant additional clinical testing and investment prior to seeking marketing approval and is not expected to be commercially available for at least three to four years, if at all.
On July 6, 2022, the Company announced that the FDA placed a clinical hold on the Company’s Phase 2/3 ReMEDy2 trial, which is an adaptive design, randomized, double-blind, placebo-controlled trial studying the use of DM199 to treat AIS patients. The clinical hold was issued following the Company voluntarily pausing patient enrollment in the trial to investigate three unexpected instances of clinically significant hypotension (low blood pressure) occurring shortly after initiation of the intravenous (IV) dose of DM199. The blood pressure levels of the three patients recovered back to their baseline blood pressure within minutes after IV infusion was stopped and the patients suffered no further adverse events. The Company may not enroll any additional patients in the ReMEDy2 trial until the Company provides the FDA with the Company’s analysis of the events leading to or causing the hypotension, its protocol modifications to address the mitigation of these events, its rationale and supporting data for the protocol modifications, and the FDA notifies the Company that it may resume enrollment in the clinical trial. Based on information received to date, the Company believes that the use of IV administration bags made from a different type of plastic in the ReMEDy2 study is responsible for the unexpected hypotension and that a proportionate reduction in the DM199 dose level for the initial IV dose will effectively mitigate the hypotension issue in future ReMEDy2 patients. The Company plans to submit a revised ReMEDy2 trial protocol with the supporting rationale and data to the FDA in September 2022. However, there can be no assurance that our belief as to the cause of the hypotension events or our response to prevent future events is correct, or that we will be able to fully respond to the FDA’s questions sufficiently for the FDA to lift the clinical hold. It is also possible that the FDA may subsequently make additional requests that we would need to fulfill prior to the lifting of the clinical hold, such as requiring us to complete additional clinical trials or imposing stricter approval conditions than we currently expect for our DM199 product candidate.
Prior to voluntarily halting enrollment, our Phase 2/3 ReMEDy2 trial has been adversely impacted by the COVID-19 pandemic and other factors. Specifically, we have experienced, and when we resume enrollment we may continue to experience, slower than expected site activations and enrollment in our ReMEDy2 trial. We believe this may be due to a number of factors, including the reduction or suspension of research activities at our current and targeted clinical study sites, as well as staffing shortages, due to COVID-19 and concerns managing logistics and protocol compliance for patients discharged from the hospital to an intermediate care facility during the three-week treatment period. While we are encouraged that COVID-19 related hospitalizations are down compared to prior periods and while we have taken and will continue to take certain actions to assist study sites in overcoming these issues, no assurances can be provided as to if and when these issues will resolve.
The Company’s future success is dependent upon the success of its development efforts, its ability to demonstrate clinical progress for its DM199 product candidate in the United States or other markets, its ability to obtain required governmental approvals of its product candidate, its ability to license or market and sell its DM199 product candidate and its ability to obtain additional financing to fund these efforts.
As of June 30, 2022, we have incurred losses of $
We expect that we will need substantial additional capital to further our research and development activities, complete the required clinical studies, regulatory activities and manufacturing development for our product candidate, DM199, or any future product candidates, to a point where they may be licensed or commercially sold. We expect our current cash, cash equivalents and marketable securities to fund our planned operations for at least the next twelve months from the date of issuance of these condensed consolidated financial statements. The amount and timing of our future funding requirements will depend on many factors, including the timing and results of our ongoing development efforts, including the duration of the current clinical hold, the rate of site activation and enrollment in our clinical studies, the potential expansion of our current development programs, potential new development programs, the effects of the COVID-19 pandemic, staffing shortages and other factors on our clinical trials and our operating expenses. We may require significant additional funds earlier than we currently expect and there is no assurance that we will not need or seek additional funding prior to such time, especially if market conditions for raising capital are favorable.
|
3. |
Summary of Significant Accounting Policies |
|
4. |
Marketable Securities |
The available-for-sale marketable securities are primarily comprised of investments in commercial paper, corporate bonds and government securities and consist of the following, measured at fair value on a recurring basis (in thousands):
|
Fair Value Measurements Using Inputs Considered as of: |
||||||||||||||||||||||||||||||||
|
June 30, 2022 |
December 31, 2021 |
|||||||||||||||||||||||||||||||
|
Total |
Level 1 |
Level 2 |
Level 3 |
Total |
Level 1 |
Level 2 |
Level 3 |
|||||||||||||||||||||||||
|
Government securities |
$ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
|
Commercial paper and corporate bonds |
||||||||||||||||||||||||||||||||
|
Total |
$ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Accrued interest receivable on available-for-sale securities is included in amounts receivable and was $
There were no transfers of assets between Level 1 and Level 2 of the fair value measurement hierarchy during the six months ended June 30, 2022.
Under the terms of the Company’s investment policy, purchases of marketable securities are limited to investment grade governmental and corporate obligations and bank certificates of deposit with a primary objective of principal preservation. Maturities of individual securities are less than one year and the amortized cost of all securities approximated fair value as of June 30, 2022 and December 31, 2021.
|
5. |
Amounts Receivable |
Amounts receivable consisted of accrued interest receivable on marketable securities of $
|
6. |
Deposits |
Deposits consisted of the following (in thousands):
|
June 30, 2022 |
December 31, 2021 |
|||||||
|
Advances to vendors, current |
$ | $ | ||||||
We periodically advance funds to vendors engaged to support the performance of our clinical trials and related supporting activities. The funds advanced are held, interest free, for varying periods of time and may be recovered by DiaMedica through full or partial reductions of ongoing invoices, application against final study/project invoices or refunded upon completion of services to be provided. Deposits are classified as current based upon their expected recovery time.
|
7. |
Property and Equipment |
Property and equipment consisted of the following (in thousands):
|
June 30, 2022 |
December 31, 2021 |
|||||||
|
Furniture and equipment |
$ | $ | ||||||
|
Computer equipment |
||||||||
|
Less accumulated depreciation |
( |
) | ( |
) | ||||
|
Property and equipment, net |
$ | $ | ||||||
|
8. |
Accrued Liabilities |
Accrued liabilities consisted of the following (in thousands):
|
June 30, 2022 |
December 31, 2021 |
|||||||
|
Accrued clinical trial costs |
$ | $ | ||||||
|
Accrued compensation |
||||||||
|
Accrued research and other professional fees |
||||||||
|
Other liabilities |
||||||||
|
Total accrued liabilities |
$ | $ | ||||||
|
9. |
Operating Lease |
We lease certain office space under a non-cancelable operating lease. This lease does not have significant rent escalation holidays, concessions, leasehold improvement incentives or other build-out clauses. Further this lease does not contain contingent rent provisions. This lease terminates on August 31, 2022 and we do not have an option to renew. This lease does include both lease (e.g., fixed rent) and non-lease components (e.g., common-area and other maintenance costs). The non-lease components are deemed to be executory costs and are therefore excluded from the minimum lease payments used to determine the present value of the operating lease obligation and related right-of-use asset.
Our operating lease cost and variable lease costs were $
Maturities of our operating lease obligation are as follows as of June 30, 2022 (in thousands):
|
2022 |
||||
|
Total lease payments |
$ | |||
|
Less interest portion |
||||
|
Present value of lease obligation |
$ |
New office lease
In June 2022, we entered into an agreement to lease approximately
|
10. |
Shareholders’ Equity |
Authorized capital stock
The Company has authorized share capital of an unlimited number of voting common shares and the shares do not have a stated par value.
Common shareholders are entitled to receive dividends as declared by the Company, if any, and are entitled to one vote per share at the Company's annual general meeting and any special meeting.
Equity issued during the six months ended June 30, 2022
During the six months ended June 30, 2022, we did issue any common shares.
Equity issued during the six months ended June 30, 2021
During the six months ended June 30, 2021,
Shares reserved
Common shares reserved for future issuance are as follows:
|
June 30, 2022 |
||||
|
Common shares issuable upon exercise of employee and non-employee stock options |
||||
|
Common shares issuable upon settlement of deferred stock units |
||||
|
Common shares issuable upon exercise of common share purchase warrants |
||||
|
Shares available for grant under the 2019 Omnibus Incentive Plan |
||||
|
Shares available for grant under the 2021 Employment Inducement Incentive Plan |
||||
|
Total |
||||
|
11. |
Net Loss Per Share |
We compute net loss per share by dividing our net loss (the numerator) by the weighted-average number of common shares outstanding (the denominator) during the period. Shares issued during the period and shares reacquired during the period, if any, are weighted for the portion of the period that they were outstanding. The computation of diluted earnings per share, or EPS, is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued. Our diluted EPS is the same as basic EPS due to common equivalent shares being excluded from the calculation, as their effect is anti-dilutive.
The following table summarizes our calculation of net loss per common share for the periods (in thousands, except share and per share data):
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
|
2022 |
2021 |
2022 |
2021 |
|||||||||||||
|
Net loss |
$ | ( |
) |
$ | ( |
) |
$ | ( |
) |
$ | ( |
) |
||||
|
Weighted average shares outstanding—basic and diluted |
||||||||||||||||
|
Basic and diluted net loss per share |
$ | ( |
) |
$ | ( |
) |
$ | ( |
) |
$ | ( |
) |
||||
The following outstanding potential common shares were not included in the diluted net loss per share calculations as their effects were not dilutive:
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
|
2022 |
2021 |
2022 |
2021 |
|||||||||||||
|
Employee and non-employee stock options |
||||||||||||||||
|
Common shares issuable under common share purchase warrants |
||||||||||||||||
|
Common shares issuable under deferred stock units |
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|
12. |
Share-Based Compensation |
Amended and Restated 2019 Omnibus Incentive Plan
At the 2022 Annual General Meeting of Shareholders on May 18, 2022, our shareholders, upon recommendation of our Board of Directors (Board), approved the DiaMedica Therapeutics Inc. Amended and Restated 2019 Omnibus Incentive Plan (the 2019 Plan). The Board approved the 2019 Plan, subject to approval by our shareholders, on March 10, 2022.
The 2019 Plan permits the Board, or a committee or subcommittee thereof, to grant to the Company’s eligible employees, non-employee directors and certain consultants non-statutory and incentive stock options, stock appreciation rights, restricted stock awards, restricted stock units, deferred stock units (DSUs), performance awards, non-employee director awards and other stock-based awards. We grant options to purchase common shares under the 2019 Plan at no less than the fair market value of the underlying common shares as of the date of grant. Options granted to employees and non-employee directors have a maximum term of years and generally vest over to years. Options granted to non-employees have a maximum term of years and generally vest over year. Subject to adjustment as provided in the 2019 Plan, the maximum number of the Company’s common shares authorized for issuance under the 2019 Plan is
2021 Employment Inducement Incentive Plan
On December 3, 2021, the Board adopted the DiaMedica Therapeutics Inc. 2021 Employment Inducement Incentive Plan (Inducement Plan) to facilitate the granting of equity awards as an inducement material to new employees joining the Company. The Inducement Plan is administered by the Compensation Committee of the Board of Directors. The Board reserved
Prior Stock Option Plan
The DiaMedica Therapeutics Inc. Stock Option Plan, Amended and Restated November 6, 2018 (Prior Plan), was terminated by the Board of Directors in conjunction with the shareholder approval of the 2019 Plan. Awards outstanding under the Prior Plan remain outstanding in accordance with and pursuant to the terms thereof. Options granted under the Prior Plan have terms similar to those used under the 2019 Plan. As of June 30, 2022, options to purchase an aggregate of
Prior Deferred Stock Unit Plan
The DiaMedica Therapeutics Inc. Amended and Restated Deferred Stock Unit Plan (Prior DSU Plan) was terminated by the Board of Directors in conjunction with the shareholder approval of the 2019 Plan. Awards outstanding under the Prior DSU Plan remain outstanding in accordance with and pursuant to the terms thereof. As of June 30, 2022, there were
Share-based compensation expense for each of the periods presented is as follows (in thousands):
|
Three Months Ended June 30 |
Six Months Ended June 30 |
|||||||||||||||
|
2022 |
2021 |
2022 |
2021 |
|||||||||||||
|
Research and development |
$ | $ | $ | $ | ||||||||||||
|
General and administrative |
||||||||||||||||
|
Total share-based compensation |
$ | $ | $ | $ | ||||||||||||
We recognize share-based compensation based on the fair value of each award as estimated using the Black-Scholes option valuation model. Ultimately, the actual expense recognized over the vesting period will only be for those shares that actually vest.
A summary of option activity is as follows (in thousands except share and per share amounts):
|
Shares Underlying Options Outstanding |
Weighted Average Exercise Price Per Share |
Aggregate Intrinsic Value |
||||||||||
|
Balances at December 31, 2021 |
$ | $ | ||||||||||
|
Granted |
||||||||||||
|
Exercised |
||||||||||||
|
Expired/cancelled |
( |
) | ||||||||||
|
Forfeited |
( |
) | ||||||||||
|
Balances at June 30, 2022 |
$ | $ | ||||||||||
Information about stock options outstanding, vested and expected to vest as of June 30, 2022, is as follows:
|
Outstanding, Vested and Expected to Vest |
Options Vested and Exercisable |
|||||||||||||||||||||
|
Per Share Exercise Price |
Shares |
Weighted Average Remaining Contractual Life (Years) |
Weighted Average Exercise Price |
Options Exercisable |
Weighted Average Remaining Contractual Life (Years) |
|||||||||||||||||
|
$ |
- | $ |
$ | |||||||||||||||||||
|
$ |
- | $ |
||||||||||||||||||||
|
$ |
- | $ |
||||||||||||||||||||
|
$ |
- | $ |
||||||||||||||||||||
|
$ |
- | $ |
||||||||||||||||||||
| $ | ||||||||||||||||||||||
|
ITEM 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon accounting principles generally accepted in the United States of America and discusses the financial condition and results of operations for DiaMedica Therapeutics Inc. and its subsidiaries for the three and six months ended June 30, 2022 and 2021.
This discussion should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this report and our Annual Report on Form 10-K for the year ended December 31, 2021. The following discussion contains forward-looking statements that involve numerous risks and uncertainties. Our actual results could differ materially from the forward-looking statements as a result of these risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements” for additional cautionary information.
Business Overview
We are a clinical stage biopharmaceutical company committed to improving the lives of people suffering from serious diseases. DiaMedica’s lead candidate, DM199, is the first pharmaceutically active recombinant (synthetic) form of the human tissue kallikrein-1 (KLK1) protein to be studied in patients. KLK1 is an established therapeutic modality for the treatment of acute ischemic stroke (AIS) and chronic kidney disease (CKD). Our goal is to use our patented and in-licensed technologies to establish our Company as a leader in the development and commercialization of therapeutic treatments from novel recombinant proteins. Our current focus is on the treatment of AIS and CKD. We plan to advance DM199 through required clinical trials to create shareholder value by establishing its clinical and commercial potential as a therapy for AIS and CKD.
KLK1 is a serine protease (protein) produced primarily in the kidneys, pancreas and salivary glands, which plays a critical role in the regulation of local blood flow and vasodilation (the widening of blood vessels which decreases vascular resistance) in the body, as well as an important role in inflammation and oxidative stress (an imbalance between potentially damaging reactive oxygen species, or free radicals, and antioxidants in your body). We believe DM199 has the potential to treat a variety of diseases where healthy functioning requires sufficient activity of KLK1 and its system, the kallikrein-kinin system.
Our product development pipeline is as follows:
Neuro: AIS Phase 2/3 ReMEDy2 Study of DM199
Our ReMEDy2 trial is an adaptive design, randomized, double-blind, placebo-controlled trial intended to enroll approximately 350 patients at 75 sites in the United States. Patients enrolled in the trial will be treated with either DM199 or placebo within 24 hours of the onset of AIS symptoms. The trial excludes patients treated with tissue plasminogen activator (tPA) and those with large vessel occlusions. The study population is representative of the approximately 80% of AIS patients who do not have treatment options today, primarily due to the limitations on treatment with tPA or mechanical thrombectomy. DiaMedica believes that the proposed trial has the potential to serve as a pivotal registration study of DM199 in this patient population.
On July 6, 2022, we announced that the FDA has placed a clinical hold on our Phase 2/3 ReMEDy2 trial studying the use of DM199 to treat AIS patients. The clinical hold was issued following the Company voluntarily pausing patient enrollment in the trial to investigate three unexpected instances of clinically significant hypotension (low blood pressure) occurring shortly after initiation of the intravenous (IV) dose of DM199. The blood pressure levels of the three patients recovered back to their baseline blood pressure within minutes after IV infusion was stopped and the patients suffered no further adverse events. We may not enroll any additional patients in the ReMEDy2 trial until we provide the FDA with our analysis of the events leading to or causing the hypotension, our protocol modifications to address the mitigation of these events, our rationale and supporting data for the protocol modifications, and the FDA notifies us that we may resume enrollment in the clinical trial. Based on information received to date, we believe that the use of IV administration bags made from a different type of plastic in the ReMEDy2 study is responsible for the unexpected hypotension and that a proportionate reduction in the DM199 dose level for the initial IV dose will effectively mitigate the hypotension issue in future ReMEDy2 patients. We plan to submit a revised ReMEDy2 trial protocol with the supporting rationale and data to the FDA in September 2022. However, there can be no assurance that our belief as to the cause of the hypotension events or our response to prevent future events is correct, or that we will be able to fully respond to the FDA’s questions sufficiently for the FDA to lift the clinical hold. It is also possible that the FDA may subsequently make additional requests that we would need to fulfill prior to the lifting of the clinical hold, such as requiring us to complete additional clinical trials or imposing stricter approval conditions than we currently expect for our DM199 product candidate.
Prior to voluntarily halting enrollment, we had experienced slower than expected site activations and enrollment in our ReMEDy2 trial and may continue to experience these conditions if and when we are able to resume enrollment. We believe this was due to a number of factors, including the reduction or suspension of research activities at our current and targeted clinical study sites as well as staffing shortages, due to COVID-19, and concerns managing logistics and protocol compliance for patients discharged from the hospital to an intermediate care facility. While we are encouraged that COVID-19 related hospitalizations are down compared to prior periods and while we are taking certain actions to assist study sites in overcoming these issues when the clinical hold is lifted and enrollment resumes, no assurances can be provided as to if and when these issues will resolve.
Renal: CKD Phase 2 REDUX Clinical Trial of DM199
As of December 31, 2021, we completed patient enrollment in our REDUX clinical trial for the treatment of CKD with a total of 79 patients enrolled and initiating treatment, including 21 African American patients into Cohort 1, 25 patients with IgAN into Cohort 2 and 33 patients with Type 2 diabetes in Cohort 3. As of March 31, 2022, all patients had completed their treatment periods. We are currently working towards finalizing the data and evaluating next steps for our CKD program.
Other: DM300
We have identified a potential novel new treatment for inflammatory diseases, DM300, currently in the preclinical stage of development.
Financial Overview
We have not generated any revenues from product sales. Since our inception, we have financed our operations from public and private sales of equity, the exercise of warrants and stock options, interest income on funds available for investment and government grants. We have incurred losses in each year since our inception. Our net losses were $6.9 million for each of the six month periods ended June, 2022 and 2021. As of June 30, 2022, we had an accumulated deficit of $89.4 million. Substantially all of our operating losses resulted from expenses incurred in connection with the development of our DM199 product candidate, our primary research and development (R&D) activities and general and administrative (G&A) support costs associated with our operations.
We expect to continue to incur significant expenses and increased operating losses for at least the next several years as we advance our clinical programs. In the near term, we anticipate that our expenses will increase as compared to prior periods as we:
|
● |
complete patient follow-up in our REDUX Phase 2 trial of DM199 for CKD; |
|
● |
expand our team to provide support for our operations; |
|
● |
maintain, expand and protect our intellectual property portfolio; and |
|
● |
provided the FDA lifts the clinical hold, continue site activations and enrollment of patients in our pivotal Phase 2/3 ReMEDy2 trial of DM199 for AIS. |
While we expect our rate of future negative cash flow per month will vary due to the timing of site activations and patient enrollment expenses, we expect our current cash resources will be sufficient to allow us to work with the FDA to lift the clinical hold and continue our Phase 2/3 ReMEDy2 trial in patients with AIS, complete patient follow-up in our REDUX Phase 2 trial in patients with CKD, and otherwise fund our planned operations for at least the next twelve months from the date of issuance of the condensed consolidated financial statements included in this report. However, the amount and timing of future funding requirements will depend on many factors, including the timing and results of our ongoing development efforts, site activations and enrollment in our clinical studies, the potential expansion of our current development programs, potential new development programs, related G&A support and the effects of the COVID-19 pandemic. We may require significant additional funds earlier than we currently expect and there is no assurance that we will not need or seek additional funding prior to such time, especially if market conditions for raising additional capital are favorable.
Overview of Expense Components
Research and Development Expenses
R&D expenses consist primarily of fees paid to external service providers such as contract research organizations; contractual obligations for clinical development including clinical sites, outside nursing services and laboratory testing, and preclinical trials; development of manufacturing processes, costs for production runs of DM199; salaries, benefits, and share-based compensation and other personnel costs.
At this time, due to the risks inherent in the clinical development process and the clinical stage of our product development programs, including our ability to address the FDA imposed clinical hold on our ReMEDy2 trial, we are unable to estimate with any certainty the costs we will incur in the continued development of DM199 or any of our preclinical development programs. Prior to voluntarily halting enrollment in the ReMEDy2 trial, we had experienced slower than expected site activations and enrollment. We believe this was due to a number of factors, including the reduction or suspension of research activities at our current and targeted clinical study sites due to COVID-19, as well as staffing shortages and concerns managing logistics and protocol compliance for patients discharged from the hospital to an intermediate care facility. While we are encouraged that COVID-19 related hospitalizations are down compared to prior periods and while we are taking certain actions to assist study sites in overcoming these issues when enrollment resumes, no assurances can be provided as to if and when these issues will resolve.
We expect that our R&D expenses will increase in the future if we are successful in advancing DM199, or any of our preclinical programs, through the required stages of clinical development. The process of conducting clinical trials necessary to obtain regulatory approval and manufacturing scale-up to support expanded development and potential future commercialization is costly and time consuming. Any failure by us or delay in completing clinical trials, such as the clinical hold currently imposed on our Phase 2/3 ReMEDy2 trial, manufacturing scale-up or in obtaining regulatory approvals could lead to increased R&D expenses and, in turn, have a material adverse effect on our results of operations.
General and Administrative Expenses
G&A expenses consist primarily of salaries and employee benefits, including share-based compensation related to our executive, finance, business development and support functions. G&A expenses also include insurance, including directors and officers liability coverage, rent and utilities, travel expenses, patent costs, professional fees, including for auditing, tax and legal services and milestone payments under our technology license agreement with Catalent Pharma Solutions, LLC.
Other Income
Other income, net, consists primarily of interest income and foreign currency exchange gains.
Results of Operations
Comparison of the Three and Six Months ended June 30, 2022 and 2021
The following table summarizes our unaudited results of operations for the three and six months ended June 30, 2022 and 2021 (in thousands):
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
|
2022 |
2021 |
2022 |
2021 |
|||||||||||||
|
Operating expenses: |
||||||||||||||||
|
Research and development |
$ | 1,955 | $ | 2,156 | $ | 3,929 | $ | 4,562 | ||||||||
|
General and administrative |
1,409 | 1,209 | 2,971 | 2,422 | ||||||||||||
Research and Development Expenses
R&D expenses decreased to $2.0 million for the three months ended June 30, 2022, down $0.2 million from $2.2 million for the three months ended June 30, 2021. R&D expenses decreased to $3.9 million for the six months ended June 30, 2022, down $0.7 million from $4.6 million for the six months ended June 30, 2021. The decrease for the six-month comparison was due to a number of factors, including reduced costs incurred during the wrap-up of our REDUX Phase 2 CKD trial, decreased non-clinical testing costs which were incurred in preparation for our Phase 2/3 ReMEDy2 trial which initiated during 2021 and decreased manufacturing process development costs. These decreases were partially offset by increased costs incurred in performing our Phase 2/3 ReMEDy2 trial and increased personnel costs associated with R&D operations.
General and Administrative Expenses
G&A expenses were $1.4 million for the three months ended June 30, 2022, up from $1.2 million for the three months ended June 30, 2021. G&A expenses were $3.0 million for the six months ended June 30, 2022, up from $2.4 million for the six months ended June 30, 2021. The increase for the six-month comparison was primarily due to increased directors’ and officers’ liability insurance, personnel and professional services costs to support our expanding clinical programs. The increases for the six-month comparison were partially offset by a reduction in non-cash share-based compensation.
Liquidity and Capital Resources
The following tables summarize our liquidity and capital resources as of June 30, 2022 and December 31, 2021, and our sources and uses of cash for each of the six month periods ended June 30, 2022 and 2021, and is intended to supplement the more detailed discussion that follows (in thousands):
|
Liquidity and Capital Resources |
June 30, 2022 |
December 31, 2021 |
||||||
|
Cash, cash equivalents and marketable securities |
$ | 38,443 | $ | 45,112 | ||||
|
Total assets |
39,258 | 45,551 | ||||||
|
Total current liabilities |
1,536 | 1,524 | ||||||
|
Total shareholders’ equity |
37,715 | 44,024 | ||||||
|
Working capital |
37,637 | 43,915 | ||||||
|
Six Months Ended June 30, |
||||||||
|
Cash Flow Data |
2022 |
2021 |
||||||
|
Cash flow provided by (used in): |
||||||||
|
Operating activities |
$ | (6,384 | ) | $ | (6,402 | ) | ||
|
Investing activities |
4,742 | 980 | ||||||
|
Financing activities |
(3 | ) | 241 | |||||
|
Net decrease in cash and cash equivalents |
$ | (1,645 | ) | $ | (5,181 | ) | ||
Working Capital
We had aggregate cash, cash equivalents and marketable securities of $38.4 million, current liabilities of $1.5 million and working capital of $37.6 million as of June 30, 2022, compared to aggregate cash, cash equivalents and marketable securities of $45.1 million, $1.5 million in current liabilities and $43.9 million in working capital as of December 31, 2021. The decreases in our combined cash, cash equivalents and marketable securities and in our working capital are due primarily to cash used to fund our operating activities during the six months ended June 30, 2022.
Cash Flows
Operating Activities
Net cash used in operating activities for each of the six months ended June 30, 2022 and June 30, 2021 was $6.4 million. Cash used in operating activities is driven primarily by our net loss, partially offset by non-cash share-based compensation and the effects of the changes in operating assets and liabilities.
Investing Activities
Investing activities consist primarily of purchases and maturities of marketable securities. Net cash provided by investing activities was $4.7 million and $1.0 million for the six months ended June 30, 2022 and 2021, respectively. The current year increase relates primarily to the timing of maturities of marketable securities.
Financing Activities
Net cash used in financing activities was $3,000 for the six months ended June 30, 2022 and consisted of principal payments on finance lease obligations, and net cash provided by financing activities was $241,000 for the six months ended June 30, 2021 and consisted of net proceeds from the exercise of stock options.
Capital Requirements
Since our inception, we have incurred losses while advancing the R&D of our DM199 product candidate. We have not generated any revenues from product sales and do not know when or if, we will generate any revenues from product sales of our DM199 product candidate or any future product candidate. We expect to continue to incur substantial operating losses until such time as any future product sales, royalty payments, licensing fees and/or milestone payments are sufficient to generate revenues to fund our continuing operations. We expect our operating losses to increase in the near term as compared to prior periods as we continue the research, development and clinical studies of our DM199 product candidate. In the long-term, subject to obtaining regulatory approval of our DM199 product candidate, or any future product candidate, the absence of the assistance of a strategic partner, would further require us to incur significant commercialization expenses for product sales, marketing, manufacturing and distribution.
Accordingly, we expect we will need substantial additional capital to further our R&D activities, planned clinical studies, regulatory activities and otherwise develop our product candidate, DM199, or any future product candidate, to a point where the product candidate may be licensed or commercially sold. Although we are striving to achieve these plans, there is no assurance that these and other strategies will be achieved, that additional funding will be required after licensing or that additional funding will be obtained on favorable terms or at all. We expect our rate of future negative cash flow per month will vary depending on our clinical activities and the timing of expenses incurred. We expect our current cash resources will be sufficient to allow us to work with the FDA to lift the clinical hold and once lifted continue our Phase 2/3 ReMEDy2 trial in patients with AIS, complete patient follow-up in our REDUX Phase 2 trial in patients with CKD, and otherwise fund our planned operations for at least the next twelve months from the date of issuance of the condensed consolidated financial statements included in this report. However, the amount and timing of our future funding requirements will depend on many factors, including the timing and results of our ongoing development efforts, and specifically the initiation of new sites and enrollment in our clinical studies, the potential expansion of our current development programs, potential new development programs, the effects of the COVID-19 pandemic, staffing shortages and other factors on our clinical programs and operations, and related G&A support. We may require significant additional funds earlier than we currently expect and there is no assurance that we will not need or seek additional funding prior to such time, especially if market conditions for raising additional capital are favorable.
Historically we have financed our operations primarily from sales of equity securities and the exercise of warrants and stock options, and we expect to continue this practice for the foreseeable future. We do not have any existing credit facilities under which we could borrow funds. We may seek to raise additional funds through various sources, such as equity or debt financings, or through strategic collaborations and license agreements. We can give no assurances that we will be able to secure additional sources of funds to support our operations, or if such funds are available to us, that such additional financing will be sufficient to meet our needs or on terms acceptable to us. This is particularly true if our clinical data is not positive or economic and market conditions deteriorate.
To the extent we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our shareholders will be diluted. Debt financing, if available, may involve agreements that include conversion discounts or covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through government or other third-party funding, marketing and distribution arrangements or other collaborations, or strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. The availability of financing will be affected by our clinical data and other results of scientific and clinical research; the ability to attain regulatory approvals; market acceptance of our product candidates; the state of the capital markets generally with particular reference to pharmaceutical, biotechnology and medical companies; the status of strategic alliance agreements; and other relevant commercial considerations.
If adequate funding is not available when needed, we may be required to scale back our operations by taking actions that may include, among other things, implementing cost reduction strategies, such as reducing use of outside professional service providers, reducing the number of our employees or employee compensation, modifying or delaying the development of our DM199 product candidate; licensing to third parties the rights to commercialize our DM199 product candidate for AIS, CKD or other indications that we would otherwise seek to pursue, or otherwise relinquishing significant rights to our technologies, future revenue streams, research programs or product candidates or granting licenses on terms that may not be favorable to us; and/or divesting assets or ceasing operations through a merger, sale, or liquidation of our company.
Critical Accounting Policies and Estimates
There have been no material changes to our critical accounting policies and estimates from the information provided in “Part II. Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies,” included in our annual report on Form 10-K for the fiscal year ended December 31, 2021.
|
ITEM 3. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
As a smaller reporting company, we are not required to provide disclosure pursuant to this item.
|
ITEM 4. |
CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the United States Securities Exchange Act of 1934, as amended (Exchange Act)) that are designed to provide reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered in this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of such period to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the three months ended June 30, 2022 that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.
|
PART II - |
OTHER INFORMATION |
|
ITEM 1. |
LEGAL PROCEEDINGS |
From time to time, we may be subject to various ongoing or threatened legal actions and proceedings, including those that arise in the ordinary course of business, which may include employment matters and breach of contract disputes. Such matters are subject to many uncertainties and to outcomes that are not predictable with assurance and that may not be known for extended periods of time. We are not currently engaged in or aware of any threatened legal actions which we believe could have a material adverse effect on our consolidated result of operations or financial position.
|
ITEM 1A. |
RISK FACTORS |
Although Item 1A. is inapplicable to us as a smaller reporting company, we hereby disclose the following new risk factor and revised risk factor.
It may take considerable time and expense to respond to the clinical hold that has been placed on our Phase 2/3 ReMEDy2 trial by the FDA, and no assurance can be given that the FDA will remove the clinical hold, in which case our business and prospects will likely suffer material adverse consequences.
On July 6, 2022, we announced that the FDA placed a clinical hold on our Phase 2/3 ReMEDy2 trial studying the use of DM199 to treat AIS patients. The clinical hold was issued following the Company voluntarily pausing patient enrollment in the trial to investigate three unexpected instances of clinically significant hypotension (low blood pressure) occurring shortly after initiation of the intravenous (IV) dose of DM199. It may take a considerable period of time, the length of which is not certain at this time, and expense for us to fully address the FDA’s concerns. Although we believe that these adverse hypotension events likely resulted from a changing to a new formulation of IV bag in the ReMEDy2 trial, as compared to the IV bag used in the ReMEDy1 trial, it is possible that our belief may be incorrect. In addition, our intent to propose modifications to the protocol for our ReMEDy2 trial to decrease the dose to be comparable to the dose that was well tolerated in the 46 patients in the previous ReMEDy1 trial may not sufficiently mitigate the risk of future hypotension events or resolve the issues raised in our clinical hold letter from the FDA. Therefore, there is no assurance that our belief as to the cause of the hypotension events or our response to prevent future events is correct, such that we would be able to convince the FDA to lift the clinical hold. There is also no assurance that we will be able to fully respond to the FDA’s questions. Even if our belief as to the cause of the hypotension events or our response to prevent future events is correct and we are able to fully respond to the FDA’s initial questions, the FDA may subsequently make additional requests that we would need to fulfill prior to the lifting of the clinical hold, such as requiring us to complete additional clinical trials or imposing stricter approval conditions than we currently expect for our DM199 product candidate. It is possible that we will be unable to fully address the FDA’s questions and as a result, the clinical hold may never be lifted and we may never be able to resume enrollment in our Phase 2/3 ReMEDy2 trial. At this time, the full extent of this event on our Phase 2/3 ReMEDy2 trial is unclear.
|
ITEM 2. |
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
We did not sell any unregistered equity securities of our Company during the quarter ended June 30, 2022.
|
ITEM 3. |
DEFAULTS UPON SENIOR SECURITIES |
Not applicable.
|
ITEM 4. |
MINE SAFETY DISCLOSURES |
Not applicable.
|
ITEM 5. |
OTHER INFORMATION |
Not applicable.
|
ITEM 6. |
EXHIBITS |
The following exhibits are being filed or furnished with this quarterly report on Form 10-Q:
|
Exhibit No. |
Description |
Manner of Filing |
||
|
3.1 |
Notice of Articles of DiaMedica Therapeutics Inc. dated May 31, 2019 |
|||
|
3.2 |
Articles of DiaMedica Therapeutics Inc. dated May 31, 2019 |
|||
|
10.1 |
DiaMedica Therapeutics Inc. Amended and Restated 2019 Omnibus Incentive Plan |
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|
10.2 |
Separation Agreement and Release dated as of May 23, 2022 by and between Harry Alcorn, Jr. Pharm.D. and DiaMedica USA, Inc. |
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|
10.3 |
Consulting Services Agreement dated as of May 23, 2022 by and between Harry Alcorn, Jr. Pharm.D. and DiaMedica USA, Inc. |
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10.4 |
301 Carlson Parkway Office Lease dated June 22, 2022 between Medica Services Company, LLC and DiaMedica USA Inc. |
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10.5 |
Lease Guaranty Agreement dated June 22, 2022 by DiaMedica Therapeutics Inc. |
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31.1 |
Filed herewith |
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31.2 |
Filed herewith |
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32.1 |
Furnished herewith |
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32.2 |
Furnished herewith |
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101 |
Financial statements from the quarterly report on Form 10-Q of DiaMedica Therapeutics Inc. for the quarter ended June 30, 2022, formatted in Inline XBRL: (i) the Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations and Comprehensive Loss, (iii) Condensed Consolidated Statements of Shareholders’ Equity, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to the Condensed Consolidated Financial Statements. |
Filed herewith |
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104 |
Cover Page Interactive Data File |
Embedded within the Inline XBRL document and contained in Exhibit 101 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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DIAMEDICA THERAPEUTICS INC. |
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Date: August 10, 2022 |
/s/ Rick Pauls |
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Rick Pauls President and Chief Executive Officer |
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(Principal Executive Officer) |
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Date: August 10, 2022 |
/s/ Scott Kellen |
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Scott Kellen Chief Financial Officer |
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(Principal Financial Officer and Principal Accounting Officer) |