DiaMedica Therapeutics(DMAC) - 2022 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's analysis for DiaMedica Therapeutics Inc Financial Statements Unaudited condensed consolidated financial statements as of June 30, 2022, report a $6.9 million net loss for the first six months, with total assets at $39.3 million and shareholders' equity at $37.7 million Condensed Consolidated Balance Sheets As of June 30, 2022, total assets decreased to $39.3 million from $45.6 million, primarily due to reduced cash and marketable securities, while shareholders' equity declined to $37.7 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $3,062 | $4,707 | | Marketable securities | $35,381 | $40,405 | | Total current assets | $39,173 | $45,439 | | Total assets | $39,258 | $45,551 | | Liabilities & Equity | | | | Total current liabilities | $1,536 | $1,524 | | Total shareholders' equity | $37,715 | $44,024 | | Total liabilities and shareholders' equity | $39,258 | $45,551 | Condensed Consolidated Statements of Operations and Comprehensive Loss Net losses for the three and six months ended June 30, 2022, were $3.4 million and $6.9 million respectively, driven by R&D and G&A expenses, with no revenue generated Statement of Operations Summary (in thousands, except per share data) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $1,955 | $2,156 | $3,929 | $4,562 | | General and administrative | $1,409 | $1,209 | $2,971 | $2,422 | | Operating loss | ($3,364) | ($3,365) | ($6,900) | ($6,984) | | Net loss | ($3,358) | ($3,274) | ($6,866) | ($6,896) | | Basic and diluted net loss per share | ($0.13) | ($0.17) | ($0.26) | ($0.37) | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities was $6.4 million for the six months ended June 30, 2022, with a net decrease in cash and cash equivalents of $1.6 million Cash Flow Summary for Six Months Ended June 30 (in thousands) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($6,384) | ($6,402) | | Net cash provided by investing activities | $4,742 | $980 | | Net cash provided by (used in) financing activities | ($3) | $241 | | Net decrease in cash and cash equivalents | ($1,645) | ($5,181) | Notes to the Condensed Consolidated Financial Statements Notes detail DM199 development, the FDA clinical hold on the ReMEDy2 trial, sufficient cash for the next twelve months, and accounting policies - The company's primary focus is developing DM199, a proprietary recombinant form of human tissue kallikrein-1 (KLK1) protein, for treating acute ischemic stroke (AIS) and chronic kidney disease (CKD)[29] - On July 6, 2022, the FDA placed a clinical hold on the Phase 2/3 ReMEDy2 trial for AIS after three patients experienced significant hypotension, with the company planning to submit a revised protocol in September 2022[31] - As of June 30, 2022, the company had $38.4 million in cash, cash equivalents, and marketable securities, expected to fund planned operations for at least the next twelve months[35][36] - In June 2022, the company entered into a new 65-month lease for approximately 6,000 square feet of office space in Minneapolis, MN, commencing September 1, 2022[58] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the clinical-stage biopharmaceutical focus on DM199, the FDA clinical hold on ReMEDy2, and financial performance, reporting a $6.9 million net loss for the first half of 2022 Business and Clinical Pipeline Overview DiaMedica is a clinical-stage biopharmaceutical company developing DM199 for AIS and CKD, with the ReMEDy2 trial on FDA clinical hold and REDUX trial data being finalized - The Phase 2/3 ReMEDy2 trial for AIS is on an FDA clinical hold issued July 6, 2022, following a voluntary pause due to three instances of hypotension, with a revised protocol planned for submission in September 2022[82] - The REDUX Phase 2 clinical trial for CKD has completed patient treatment as of March 31, 2022, and the company is finalizing data and evaluating next steps[84] Results of Operations For the six months ended June 30, 2022, R&D expenses decreased by $0.7 million to $3.9 million, while G&A expenses increased by $0.6 million to $3.0 million Comparison of Operating Expenses (in thousands) | Expense Category | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | Change | | :--- | :--- | :--- | :--- | | Research and development | $3,929 | $4,562 | ($633) | | General and administrative | $2,971 | $2,422 | $549 | - The decrease in R&D expenses for the six-month period was attributed to reduced costs from the wrap-up of the REDUX Phase 2 CKD trial and lower non-clinical testing and manufacturing development costs[97] - The increase in G&A expenses was primarily due to higher directors' and officers' liability insurance, personnel, and professional services costs to support expanding clinical programs[98] Liquidity and Capital Resources As of June 30, 2022, the company held $38.4 million in cash and marketable securities, sufficient for the next twelve months, but substantial additional capital is required for long-term development Liquidity and Capital Resources Summary (in thousands) | Metric | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash, cash equivalents and marketable securities | $38,443 | $45,112 | | Working capital | $37,637 | $43,915 | - The company expects its current cash resources to be sufficient to fund operations for at least the next twelve months from the report's issuance date[106] - Future funding needs are substantial, and the company may seek additional capital through equity or debt financings or strategic collaborations, with the ability to raise funds dependent on clinical results, regulatory approvals, and market conditions[108][109] Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, DiaMedica Therapeutics Inc. is exempt from providing this disclosure - The company is not required to provide disclosure for this item as it qualifies as a smaller reporting company[112] Controls and Procedures Management concluded disclosure controls and procedures were effective as of June 30, 2022, with no material changes in internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[113] - No changes occurred in the company's internal control over financial reporting during the three months ended June 30, 2022, that materially affected or are reasonably likely to materially affect it[114] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, and other disclosures for DiaMedica Therapeutics Inc Legal Proceedings The company reports no current or threatened legal actions expected to have a material adverse effect on its financial position or operations - The company reports no current or threatened legal proceedings that are expected to have a material adverse effect[116] Risk Factors A new risk factor highlights the uncertainty and potential adverse impact of the FDA clinical hold on the Phase 2/3 ReMEDy2 trial - A new risk factor highlights the uncertainty surrounding the FDA clinical hold on the ReMEDy2 trial, noting it may take considerable time and expense to resolve[117] - There is no assurance that the company's proposed protocol modifications will be sufficient to convince the FDA to lift the clinical hold, and the FDA may require additional trials or impose stricter conditions[118] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered equity securities were sold during the quarter ended June 30, 2022 - No unregistered equity securities were sold during the quarter ended June 30, 2022[119] Defaults Upon Senior Securities This item is not applicable to the company - This item is not applicable[120] Mine Safety Disclosures This item is not applicable to the company - This item is not applicable[121] Other Information This item is not applicable to the company - This item is not applicable[122] Exhibits This section lists exhibits filed with the Form 10-Q, including corporate articles, incentive plans, agreements, and CEO/CFO certifications - Exhibits filed include the Amended and Restated 2019 Omnibus Incentive Plan, a new office lease agreement, and CEO/CFO certifications[124][125][126]