# DiaMedica Therapeutics Inc.: Form 10-Q for the period ended Mar 31, 2022

- Company: [DiaMedica Therapeutics Inc.](/companies/dmac.md) (CIK 1401040)
- Form: 10-Q
- Filed: 2022-05-04
- Accepted by EDGAR: May 4, 2022, 16:44 ET
- Period: 2022-03-31
- Accession: 0001437749-22-010876
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1401040/000143774922010876/dmtp20220331_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1401040/000143774922010876/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Research and development | 3 months, 2022-01-01 to 2022-03-31 | $2.0m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2022-01-01 to 2022-03-31 | −$3.5m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2022-01-01 to 2022-03-31 | $7.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2022-01-01 to 2022-03-31 | −$3.5m | us-gaap:NetIncomeLoss |
| Basic EPS | 3 months, 2022-01-01 to 2022-03-31 | −$0.13 | us-gaap:EarningsPerShareBasic |
| Operating cash flow | 3 months, 2022-01-01 to 2022-03-31 | −$3.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2022-01-01 to 2022-03-31 | $0 | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2022-03-31 | $3.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2022-03-31 | $42.1m | us-gaap:AssetsCurrent |
| Total assets | at 2022-03-31 | $42.2m | us-gaap:Assets |
| Current liabilities | at 2022-03-31 | $1.4m | us-gaap:LiabilitiesCurrent |
| Shareholders' equity | at 2022-03-31 | $40.8m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 20,030 characters.

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 months ended March 31, 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 and chronic kidney disease. 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 acute ischemic stroke (AIS) and chronic kidney disease (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.

We have experienced and 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 due to COVID-19, as well as staffing shortages and concerns managing logistics and 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, 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 have completed their treatment periods. We are currently 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. Historically, we have financed our operations from the sales of equity securities and the exercise of warrants and stock options. We have incurred losses in each year since our inception. Our net losses were $3.5 million and $3.6 million for the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022, we had an accumulated deficit of $86.0 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 generally increased operating losses compared to prior periods as we advance our clinical programs. In the near term, we anticipate that our expenses will increase as compared to prior periods as we:

- continue site activations and enrollment of patients in our pivotal ReMEDy2 Phase 2/3 trial of DM199 for AIS;
- complete patient follow-up in our REDUX Phase 2 trial of DM199 for CKD;
- expand our team to provide support for our operations; and
- maintain, expand and protect our intellectual property portfolio.

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 continue our ReMEDy2 Phase 2/3 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, including 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, 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. We have experienced and 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 due to COVID-19, as well as staffing shortages and concerns managing logistics and 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, 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, into advanced 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, 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 Months ended March 31, 2022 and 2021

The following table summarizes our unaudited results of operations for the three months ended March 31, 2022 and 2021 (in thousands):

| Operating expenses: | Three Months Ended March 31, 2022 | 2021 |
| --- | ---: | ---: |
| Research and development | $1,974 | $2,406 |
| General and administrative | 1,562 | 1,213 |

15

#### Research and Development Expenses

R&D expenses were $2.0 million for the three months ended March 31, 2022, compared with $2.4 million for the three months ended March 31, 2021, a decrease of $0.4 million. This decrease was driven mainly by a reduction in costs related to our REDUX CKD trial and a lower level of DM199 manufacturing process development work in the current year quarter as compared to the prior year quarter. These decreases were partially offset by increased costs incurred in our ReMEDy2 AIS trial and higher personnel costs related to the expansion of our clinical team in the current year period.

#### General and Administrative Expenses

G&A expenses were $1.6 million for the three months ended March 31, 2022, up from $1.2 million for the three months ended March 31, 2021. This $0.4 million increase resulted mainly from a combination of increased professional services costs, directors’ and officers’ liability insurance and personnel costs incurred in support of expanding our operations and clinical programs.

### Liquidity and Capital Resources

The following tables summarize our liquidity and capital resources as of March 31, 2022 and December 31, 2021, and our sources and uses of cash for each of the three month periods ended March 31, 2022 and 2021, and are intended to supplement the more detailed discussion that follows (in thousands):

| Liquidity and Capital Resources | March 31, 2022 | December 31, 2021 |
| --- | ---: | ---: |
| Cash, cash equivalents and marketable securities | $41,047 | $45,112 |
| Total assets | 42,211 | 45,551 |
| Total current liabilities | 1,434 | 1,524 |
| Total shareholders’ equity | 40,768 | 44,024 |
| Working capital | 40,680 | 43,915 |

| Cash Flow Data Cash flow provided by (used in): | Three Months Ended March 31, 2022 | 2021 |
| --- | ---: | ---: |
| Operating activities | $(3,888) | $(4,313) |
| Investing activities | 2,214 | (9) |
| Financing activities | (1) | 242 |
| Net decrease in cash | $(1,675) | $(4,080) |

### Working Capital

We had cash and cash equivalents of $3.0 million, marketable securities of $38.0 million, current liabilities of $1.4 million and working capital of $40.7 million as of March 31, 2022, compared to $4.7 million in cash and cash equivalents, marketable securities of $40.4 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 quarter ended March 31, 2022.

### Cash Flows

#### Operating Activities

Net cash used in operating activities for the three months ended March 31, 2022 was $3.9 million compared to $4.3 million for the three months ended March 31, 2021. This decrease relates primarily to 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 $2.2 million for the three months ended March 31, 2022 compared to a net use of $9,000 for the three months ended March 31, 2021. This year-over-year change was due to the transfer of proceeds from investment maturities to our operating accounts to fund operating activities.

#### Financing Activities

Financing activities in the current quarter consist of principal payments on finance lease obligations. The prior year period includes 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 continue our ReMEDy2 Phase 2/3 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.

## Controls and procedures

As filed, 1,958 characters.

### 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 March 31, 2022 that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.

Filed May 4, 2022.
Source: SEC EDGAR, the filing index for accession 0001437749-22-010876. Last ingested by Listed: Oct 24, 2026, 15:09 ET. No prices; not investment advice.