Earnings Call Transcript - DMAC Q1 2026

Operator, Operator

Good morning, ladies and gentlemen, and welcome to the DiaMedica Therapeutics First Quarter 2026 Earnings Conference Call. An audio recording of this webcast will be made available shortly after the call today on DiaMedica's website at www.diamedica.com in the Investor Relations section. Before the company proceeds with its remarks, please note that the company will be making forward-looking statements on today's call. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in these statements. More information, including factors that could cause actual results to differ from projected results appear in the sections entitled Cautionary Statement Notes regarding Forward-Looking Statements in the company's press release issued yesterday under the heading Risk Factors in DiaMedica's most recent annual report on Form 10-K and most recent quarterly report on Form 10-Q. DiaMedica's SEC filings are available at www.sec.gov and on its website. Please note that any comments made on today's call speak only as of today, May 7, 2026, and may no longer be accurate at the time of any replay or transcript rereading. Following management's remarks, we will open the phone lines for questions. I would now like to introduce your host for today's call, Rick Pauls, DiaMedica's President and Chief Executive Officer. Mr. Pauls, you may begin.

Rick Pauls, President and Chief Executive Officer

Thank you, operator, and thank you all for joining us today. With me this morning are Dr. Julie Krop, our Chief Medical Officer; and Scott Kellen, our Chief Financial Officer. Given that our last call was only 5 weeks ago, we'll try to keep our remarks short. We are pleased with the progress we've made so far in 2026 as we continue to advance DM199 across both our preeclampsia and acute ischemic stroke programs. Most importantly, for our shareholders, we're poised to deliver multiple clinical milestones between now and the end of 2027, all of which could provide significant validation of the value of DM199. We also weigh the risks and advantages of providing interim updates as clinically meaningful data emerges ahead of formal readouts. We're particularly interested in completing the interim analysis for our stroke program. We've been working diligently on the ReMEDy2 stroke trial for a long time, battling through some significant challenges emanating from the COVID pandemic. With enrollment having surpassed 70%, we expect that the interim analysis will validate all of the hard work that has gone into the program. I now turn the call over to Julie to provide additional detail on our preeclampsia and stroke programs.

Julie Krop, M.D., Chief Medical Officer

Thank you, Rick. In the Phase II investigator-sponsored trial, enrollment is near completion in the extension cohort for the Part 1a dose escalation study in late-onset preeclampsia patients. Late-onset patients are planned to deliver within 72 hours. This cohort will allow us to detect the dose or doses we plan to use for the upcoming cohorts of the IST. We expect to complete this cohort and provide a data update later this quarter. As you may recall, the interim results from this study demonstrated DM199's potential to reduce blood pressure and improve placental perfusion without crossing the placental barrier. While we only have data in a relatively small number of patients, the results we observed were highly consistent and encouraging. We look forward to sharing the data from the extension cohort to further support the interim results. Additionally, learnings from Part 1a are guiding protocol amendments for the two remaining preeclampsia study groups. The first group, referred to as Part 1b, is an expansion study with up to 30 additional late-onset preeclampsia patients who will receive DM199 as a continuous IV infusion until delivery. In this cohort, we hope to learn more about the ability of doctors to use DM199 to effectively support blood pressure control management at this late stage of the disease. The second part, referred to as Part 2, will study up to 30 early onset preeclampsia patients. Three doses will be evaluated to support dosing for a Phase III trial and an optimal dose level to extend the time the mother is able to carry the baby, increasing the gestational age at delivery. As you've seen in our investor presentations, the medical complications for the baby are expected to decrease significantly the longer the mother carries the baby. With the potential for DM199 to help manage blood pressure and improve blood flow to the placenta, we believe DM199 has a chance to be a transformative therapy for preeclampsia. Initiation of these two preeclampsia cohorts, which will recruit concurrently, is expected to begin after the completion of the ongoing Part 1a extension cohort. The IST also includes a study in women experiencing fetal growth restriction. In this group, we will be evaluating the effects of DM199 on fetal growth restriction in patients without preeclampsia. FGR is a condition with diminished fetal growth due to a poorly functioning placenta, the life support system of the unborn child. FGR is the leading cause of stillbirth and for infants that survive the FGR pregnancy, it is associated with enduring adverse health effects over the child's lifespan. In this cohort, we will evaluate the potential for DM199 to increase placental perfusion and improve fetal development. Enrollment of the first patient for this study is expected in the current quarter. In parallel with the IST, we are advancing our global Phase II study in early onset preeclampsia. We intend to conduct this study in North America, both the United States and Canada, and the United Kingdom. In March 2026, we received approval from Health Canada to initiate this study and study sites have been selected. We are working to initiate enrollment in Canada by the end of this year. We expect to file a clinical trial application in the U.K. in the current quarter. With respect to the status of the IND submission in the United States, as we discussed previously, the FDA requested an additional nonclinical 10-day modified embryo fetal development and pre- and postnatal development study in a rabbit model. Results of a non-GLP dose-ranging study in rabbit suggest that the animals developed an adverse immune response to DM199, preventing us from completing the requested modified pre- and postnatal development study in a rabbit model. We have proposed to the FDA performing this study in a second rodent model and are awaiting their response. That said, I would highlight for everyone that we are moving forward in parallel with the study in Canada and are planning to add U.K. sites while we complete any additional preclinical work requested by the FDA. This study will evaluate three dose groups of DM199 in patients with early onset preeclampsia to further establish safety, pharmacokinetics and pharmacodynamics in a more ethnically diverse patient group prior to initiating a registration study. Turning now to our stroke program. We are encouraged by the continued progress on the ReMEDy2 trial. Enrollment has now surpassed 70% of the target required for the interim analysis. Site activations and enrollments have recently commenced in Europe as well. In addition to the United States, Canada and the U.K., we've added six additional European countries and now have approximately 70 sites activated. In April, we sponsored an investigator meeting for our European study team that was well attended and had many productive sessions and discussions, which we believe are the key to getting the study teams excited about and focused on patient enrollment. And we are reiterating our intention to complete the interim analysis by the end of 2026. As a reminder, in the Phase II ReMEDy1 stroke study, treatment with DM199 was associated with clinically meaningful improvements in functional outcomes for the patient group that most closely resembles the patients enrolling in our ReMEDy2 trial. In the subset of patients that did not undergo a thrombectomy, we observed a 15% absolute increase over placebo in the proportion of patients achieving favorable recovery as measured by a score of 0 or 1 on the modified Rankin Scale. Furthermore, ReMEDy2 is enrolling patients presenting with moderate stroke severity defined as an NIHSS score between 5 and 15. Looking at that subgroup in the ReMEDy1 study, there was a 19% absolute improvement over placebo in functional outcomes. There was also a 50% reduction in the number of patient deaths and a 13.3% reduction in recurrent strokes compared to placebo. These data inform the design and powering assumptions for the ongoing ReMEDy2 trial. I think you can understand why we are eagerly awaiting the results of the interim analysis. Let me now turn the call back to Rick.

Rick Pauls, President and Chief Executive Officer

Thanks, Julie. I'd like to now ask Scott to review the financial results for the quarter.

Scott Kellen, Chief Financial Officer

Thank you, Rick, and good morning, everyone. We announced our first quarter 2026 financial results and filed our quarterly report on Form 10-Q yesterday after the markets closed. As of March 31, 2026, our cash, cash equivalents and short-term investments were $51.3 million, current liabilities were $5.7 million and working capital was $46.6 million compared to cash and investments of $59.9 million, current liabilities of $5.1 million and working capital of $55.5 million as of December 31, 2025. We anticipate that our current cash and investments will be sufficient to fund our planned clinical studies and operations through 2027. Net cash used in operating activities for the first quarter of '26 was $9.1 million compared to $7.1 million for the first quarter of 2025. The increase in cash used in operating activities resulted primarily from the increased net loss for the current year period, partially offset by changes in operating assets and liabilities during the current year quarter. Turning to the income statement. Our research and development expenses increased to $8 million for the three months ended March 31, 2026, up from $5.7 million for the same period in the prior year. The increase is due primarily to the increased costs resulting from the continuation of our ReMEDy2 clinical trial and its global expansion, the expansion of our clinical team and costs related to additional reproductive toxicity testing being performed in support of our preeclampsia program in the United States. These increases were partially offset by net cost reductions in manufacturing development activity related to work performed and completed in the prior year period. We expect that our R&D expenses will moderately increase in future periods relative to recent prior periods as we continue our ReMEDy2 trial and continue to advance our DM199 clinical development program into preeclampsia. Our general and administrative expenses were $2.5 million for the three months ended March 31, 2026, and 2025. While small changes occurred within a number of expense categories, the differences were not material individually or in the aggregate and the overall net changes offset each other. We expect G&A expenses to remain relatively consistent in future periods as compared to recent prior periods. With that, let me ask the operator to open the lines for questions.

Operator, Operator

Your first question is from the line of Josh Schimmer with Cantor.

Joshua Schimmer, Analyst, Cantor

The preeclampsia data updates that we'll get this quarter for the late onset cohort, what incremental observations should we be looking for beyond blood pressure control? Obviously, preeclampsia can affect urine output, kidney function, liver function, platelets and biomarkers like sFlt. At what point will you have data to share on those parameters?

Rick Pauls, President and Chief Executive Officer

Yes, thanks, Josh. The expansion cohort that we're running is going to be 12 additional patients. We're almost completing that now. It's going to be at the cohort 10 from Part 1a. It will give us additional clarification, particularly on blood pressure and dilation of the intrauterine arteries. At this point, we're not expecting changes in some of the biomarkers like sFlt because these patients only received two doses. We believe that having the drug on board for ideally a week or two is when we would see some of those biomarkers improve.

Joshua Schimmer, Analyst, Cantor

Okay. Got it. So I think at one point, the lead investigators suggested that there was an improvement in edema at the very least, maybe something that might improve within a short period of time. Is that something you're looking for?

Rick Pauls, President and Chief Executive Officer

Yes, that's something that, if there is an improvement in endothelial health, is something that Dr. Cathy Cluver clearly saw in some of these patients: that the edema did resolve even within 12 to 24 hours of getting DM199, which is encouraging. It's a small number of patients, but we'll be looking to see if there are any additional insights there as well.

Joshua Schimmer, Analyst, Cantor

Just a couple of other quick questions, if I may. What are the steps to start initiating enrollment in the early onset preeclampsia study? Why is that not going to occur until later this year?

Rick Pauls, President and Chief Executive Officer

Julie, do you want to take that one?

Julie Krop, M.D., Chief Medical Officer

Are you referring to the IST cohort or to our sponsored trial?

Joshua Schimmer, Analyst, Cantor

Sponsored trial.

Julie Krop, M.D., Chief Medical Officer

We are in the midst of getting our dosing data from the IST study before we select our final doses for that protocol, as well as getting sites contracted up and running and completing our CRO selection process. Once those items are completed, we'll be initiating. So it's a combination of factors, but we should be in Canada later this year.

Joshua Schimmer, Analyst, Cantor

And then last, sorry...

Rick Pauls, President and Chief Executive Officer

If I can add: we have selected two sites in Canada and one site in particular is already in our stroke trial. We're looking forward to leveraging the relationships and the existing contracts to expedite activation and get those sites up and running as soon as possible.

Joshua Schimmer, Analyst, Cantor

Got it. And then last question, timelines for completing the second animal toxicology study and then ultimately reengaging with the FDA for the IND?

Rick Pauls, President and Chief Executive Officer

It will depend on the feedback we get from the FDA. We proposed a rat study. If they agree to that, it is a matter of a few months, probably three to four months to complete. While that's happening, we'll be running the Phase II in Canada and then expanding to the U.K.

Operator, Operator

Your next question is from the line of Stacy Ku with TD Cowen.

Stacy Ku, Analyst, TD Cowen

We have a couple of questions. First, when could you expect to hear from the FDA on the rat study? Is there a possibility the FDA could ask for another animal model? How are you looking to prepare for these scenarios? The rat study sounds straightforward, but help us understand how you view the next two necessary steps. Also, to clarify: you are expecting potential study initiation of the global Phase II by year-end, correct? We're looking forward to the updated preeclampsia results in Q2. As we think about the early onset preeclampsia or fetal growth restriction subgroups of the IST, could we think about any potential low-dose updates by year-end for either of these groups? And Julie, what is the timing of potentially starting the early onset preeclampsia IST? Lastly, what's the go/no-go decision framework on the interim results for stroke?

Rick Pauls, President and Chief Executive Officer

We submitted to the FDA over a month ago and are waiting for feedback. We'll provide an update as soon as we get clarity. We've looked at alternative backup plans in case they request something different, but we have a strong rationale for the proposed rat study. It's encouraging that Health Canada has approved us to start the trial in Canada. With the preeclampsia trial, if we have a cohort completed and see compelling data, we would consider a press release or presenting at a late-breaking conference. Regarding the interim analysis for the stroke program, first we'll do a futility analysis. If there's no drug effect, we'll terminate. Otherwise, there will be a resample size, which could be between 300 and 700 patients. We believe if we see a drug effect comparable to our Phase II results, we would look at completing enrollment in the following quarter after the interim analysis.

Operator, Operator

Your next question is from the line of Thomas Flaten with Lake Street.

Thomas Flaten, Analyst, Lake Street

Rick, following up on that last response, to clarify: given that you've got 70-plus sites and 70% enrolled, when you said completing enrollment in the following quarter, do you mean Q1 of 2027 or which quarter were you referring to for full enrollment?

Rick Pauls, President and Chief Executive Officer

Assuming the interim analysis occurs at the end of this year, we would anticipate completing enrollment the following quarter, so Q1 of next year.

Thomas Flaten, Analyst, Lake Street

Does that assume an upsize in the total population? Because it's only May. By year-end, when the interim analysis reads out, you should be pretty close to full enrollment on the original study size, right?

Rick Pauls, President and Chief Executive Officer

We will be. After patient 200 is dosed, there will be a 90-day window for the primary endpoint and then approximately four weeks for the interim analysis. During that four-month period, we'll continue to enroll. We'll be getting closer to the 300 patient number during that time.

Thomas Flaten, Analyst, Lake Street

Got it. And to clarify a prior response: once you get the Part 1a expansion data out this quarter, is it reasonable to assume you would start Part 1b and Part 2 in the third quarter, or should we expect a fourth quarter start?

Rick Pauls, President and Chief Executive Officer

No, those should be starting this summer. We've finalized the dosing that will go into those cohorts. We'll be doing three doses at 5, 10 and 15 micrograms per kilogram subcutaneously every three days until delivery. These cohorts should be starting very soon. We've had some site challenges in Cape Town, South Africa with staffing, but they've added new staff and been very active recently in the Part 1a expansion study. We feel very good that the study will be enrolling soon.

Operator, Operator

Your next question is from the line of Chase Knickerbocker with Craig-Hallum Capital Group.

Chase Knickerbocker, Analyst, Craig-Hallum Capital Group

One for Scott. I appreciate your comments on forward R&D, but maybe just a little bit more color there. You said kind of modest increase. I would imagine enrollment is still picking up on an absolute number for stroke. Can you give us an idea of the magnitude of that increase you expect sequentially in stroke and then the incremental costs you expect for preeclampsia through the year?

Scott Kellen, Chief Financial Officer

Sure, Chase. With respect to stroke, modest increases will be driven by enrollment rates. It also depends on whether those patients are enrolled in the U.S. or Europe—the U.S. is probably the most expensive followed by the U.K., Canada and Europe. Regarding the incremental cost for preeclampsia, we're still working on the estimates for the Phase II trial. The financial support we provide for the IST is modest. So again, modest to moderate increases, nothing order-of-magnitude.

Chase Knickerbocker, Analyst, Craig-Hallum Capital Group

Could you define modest or moderate for us? And one for Rick: as we think about the resample, should we expect to receive the number on the resample or anything else at that point that we'll be able to digest?

Rick Pauls, President and Chief Executive Officer

For the interim analysis, we'll provide an update on the expected timelines to complete enrollments.

Scott Kellen, Chief Financial Officer

Chase, it's hard to give a specific number because there is movement across many expense categories. I wouldn't expect it to go up more than 10% a quarter.

Operator, Operator

I will now hand today's call over to Rick Pauls for any closing remarks.

Rick Pauls, President and Chief Executive Officer

All right. Well, thank you all for joining us today. We greatly appreciate your interest in DiaMedica and hope that you enjoy the rest of the day. This concludes our call today. Thank you.

Operator, Operator

Thank you for joining. You may now disconnect your lines.