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Diamedica Therapeutics, Inc.

DMAC / NasdaqGS / $9.91

April 12, 2021

 

Business Overview

 

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Diamedica Therapeutics, Inc. (the Company) is a clinical stage biopharmaceutical company developing and commercializing DM199, a synthetic form of naturally occurring human KLK1 proteins that act in the blood vessels and kidneys to improve circulation and overall function. The initial targets are (i) preservation and restoration of circulation to damaged tissues from acute ischemic stroke (AIS) and (ii) improvement of kidney function for those with kidney disease.

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DM199, when administered within 24 hours of the onset of a stroke, is designed to promote microcirculation at the site of the clot and improve the balancing of the blood supply and brain activity, thus protecting neurons and glia by promoting vascular integrity and inhibiting apoptosis and inflammation.

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In the case of kidney disease, DM199 aims to improve kidney function by boosting microvascularization, oxygen, and nutrient delivery, while regulating the epithelial sodium channel, and modulating salt and water retention. Management also expects DM199 to reduce inflammation, oxidative stress, and fibrosis, while preventing thickening of the glomerular wall. The initial targets are (i) IgA Nethropathy (IgAN), a progressive autoimmune disease that results in chronic inflammation of the kidney; (ii) African Americans with chronic kidney disease; and (iii) diabetic kidney disease.

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The potential markets are substantial. There are approximately 15 million strokes per year worldwide, with 87% of the being AISs. An estimated 90% of AIS patients have no direct treatment options. Chronic kidney disease afflicts some 37 million people in the U.S., and more than 20% of the U.S. Medicare budget is spent on kidney treatments.

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Clinical trials to date have shown that DM199 has been safe and well tolerated. There have been no treatment-related serious adverse events.

 

 

The AIS Studies

 

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Results of the recently completed ReMEDy Phase 2 study in AIS was quite encouraging. Details were disclosed in the December 10, 2020 press release by the Company.

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In March 2021, the Company announced that the FDA had accepted a request for a Type B Pre-IND meeting regarding the development plan for product candidate DM199 for the treatment of AIS., Management is proceeding to prepare an IND submission to initiate a Phase 2/3 adaptive trial, with an objective of commencing enrollment of 350 subjects in mid-year 2021.

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The competitive landscape for DM199 for treatment of AIS looks promising. Shanghai Pharma has marketed KLK1, primarily derived from human urine, since 2005 for the treatment of AIS. Management believes that its product candidate could better positioned because they could have more stable drug level exposure, an absence of supply constraints, and an ability meet the manufacturing standards required by regulatory agencies.

 

 

The Chronic Kidney Disease Studies

 

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In December 2020, the Company enrolled its last of 30 participants in an open-label Phase 2 REDUX chronic kidney disease study, and that enrollment had reached 50% in the IgA Nephropathy and African American cohorts. Management has stated that it believes topline results for the chronic kidney disease study would be available in first-half 2021.

 

 

Leadership

 

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Rick Pauls, President & CEO since July 2009, and a Director. He was previously co-founder and managing director of a life sciences venture capital fund (2002-2010), and before that an analyst for another VC fund (2000-2002).

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Harry Alcorn Jr., Pharm.D., Chief Medical Officer & VP/Clinical Affairs since 2018. From 1997 to July 2018, he served as Chief Scientific Officer of a clinical research facility.

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Scott Kellen, CFO since April 2018. During the years 2015 until April 2018, he served as VP and CFO of a publicly traded drug development company.

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Sydney Gilman, Ph.D., VP/Regulatory Affairs since November 2019. He has more than 30 years of pharma industry experience in regulatory affairs and drug development.

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Edward G. Calamai, Ph.D., Consulting Head of Manufacturing since January 2020. Dr. Calamai has more than 30 years of experience with multiple products.

 

 

Board of Directors

 

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Richard Pilnik, Director since 2009 and presently Chairman. He has decades of experience with a mid-tier CRO, Eli Lilly and Company, and Quintiles Transnational Corp. He also serves on several other Boards.

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Michael Giuffre, MD, Director since 2010. Dr. Giuffre has since 2009 served as a Clinical Professor of Cardiac Sciences and Pediatrics at the University of Calgary.

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James Parsons, Director since 2015. He has been a CFO in the life sciences industry since 2000.

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Rick Pauls, Director since 2005 and Chairman from 2008 to July 2014.

 

 

Financials

 

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Income Statements (12 months through 12/31/20 vs. 12/31/20)

 

R&D expense: 8,310,000 vs. 7,900,000

G&A expense: 4,389,000 vs. 3,693,000

Operating income (loss): (12,699,000) vs. (11,593,000)

Other income (expense): (434,000) vs. (975,000)

Pretax income (loss): (12,265,000) vs. (10,618,000)

Net loss and comprehensive loss: (12,296,000) vs. (10,647,000)

Earnings (loss) per diluted common share: (0.78) vs. (0.89)

Weighted average shares outstanding: 15,680,320 vs. 11,987,696

 

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Balance Sheet (12/31/20)

 

Cash & equivalents: 7,409,000

Marketable securities: 20,098,000

Total current assets: 27,921,000

Total assets: 28,095,000

Current liabilities: 2,028,000

Non-current liabilities: 53,000

Equity held by shareholders: 26,014,000

Number of common shares outstanding (03/08/21): 18,776,157

Number of options outstanding (12/31/20): 1,389,564 at a weighted average price of $5.24

 

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On March 10, 2021, the Company filed a preliminary prospectus to sell up to $100 million of common shares, warrants, and/or units.

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In August 2020, the Company sold 4,600,000 common shares in a public offering at an offering price of $5.00 per share. Net proceeds were $21.2 million.

 

 

Valuation Considerations

 

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Large potential markets, with a need for treatment options.

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Ongoing clinical trials.

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A rising level of expenses if the Company progresses to advanced stages of clinical development. Management believes that it has sufficient working capital for completion of all three cohorts in the REDUX Phase II study in patients with CKD and to otherwise fund planned operations into 2022. The Company may require additional funds earlier than expected and may elect to raise funds even before it needs them.

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The continuing impact from COVID-19 remains an uncertainty. The Diamedica website and SEC filings detail various other risks and matters, and these are hereby incorporated by reference.

 

 

Contacts

 

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Website: http://www.diamedica.com

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Executive offices: 2 Carlson Parkway, Suite 260, Minneapolis, MN 55447

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Investor contact: Scott Kellen, Chief Financial Officer; skellen@diamedica.com; 763.496.5118

 

 

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