Earnings Call Transcript - DMAC Q4 2025

Operator, Operator

Good morning, ladies and gentlemen, and welcome to the DiaMedica Therapeutics Full Year 2025 Earnings Conference Call. An audio recording of this webcast will be 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 the 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 section entitled Cautionary Statement Note regarding Forward-Looking Statements in the company's press release issued yesterday and under the heading Risk Factors in DiaMedica's most recent annual report on Form 10-K. DiaMedica's SEC filings are available at www.sec.gov and on its website. Please also note that any comments made on today's call speak only as of today, March 31, 2026, and may no longer be accurate at the time of any replay or transcript rereading. DiaMedica disclaims any duty to update its forward-looking statements. Following the prepared 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.

Dietrich Pauls, President and Chief Executive Officer

Thank you, Morgan, and thank you all for joining us for our fiscal year 2025 earnings call. With me this morning are Dr. Julie Krop, our Chief Medical Officer; and Scott Kellen, our Chief Financial Officer. Looking back for a moment, 2025 is a year in which we made significant progress across our pipeline, achieving a number of key milestones. As most of you know, our lead candidate, DM199, is a recombinant form of the naturally occurring KLK1 protein, a serum protease that acts through the bradykinin 2 receptors in the walls or endothelium of our blood vessels to increase the level of nitric oxide, prostacyclin and endothelial-derived hyperpolarizing factor. The combination of these factors has the potential to more effectively enhance blood flow and vascular health than any single factor given by itself. We believe that this mechanism is why DM199 is so well suited to improve patient outcomes for preeclampsia, fetal growth restriction, acute ischemic stroke and other indications associated with vascular pathology. I'll now turn the call over to Julie to provide an update on our preeclampsia and stroke programs.

Julie Krop, Chief Medical Officer

Thanks, Rick, and good morning, everyone. Starting with our preeclampsia program, 2025 marked a very strong year of progress. In July, we announced positive interim results from Part 1a, the ascending dose portion of our investigator-sponsored Phase II trial being conducted in South Africa. These results showed that DM199 produced statistically significant reductions in blood pressure and in the uterine artery pulsatility index, consistent with reductions in vascular resistance that suggest a potential improvement in blood flow to the placenta. Importantly, the interim data demonstrated that DM199 did not cross the placental barrier. These interim results were observed in hypertensive women expected to deliver within the next 72 hours. We believe these results demonstrate an on-target mechanistic response, which supports DM199's potential to be a first-in-class disease-modifying therapy for preeclampsia. Key findings from the interim analysis of Part 1a, specifically from Cohorts 6 through 9 in pregnant women with preeclampsia planned for delivery within 72 hours include the following: First, blood pressure data demonstrated clear dose-dependent and statistically significant sustained reductions in both systolic and diastolic blood pressure, underscoring DM199's potential to control maternal hypertension associated with preeclampsia. Second, DM199 significantly reduced the uterine artery pulsatility index, a Doppler-based measure of arterial resistance that suggests improved uteroplacental perfusion. Third and most importantly, DM199 did not cross the placental barrier, placing it in a unique position with respect to safety and reduced fetal risk in this highly vulnerable patient population. Through additional analysis, we have also demonstrated that DM199 does not pass to babies through breast milk, further reinforcing its confinement to the maternal circulation. This advantageous safety profile combined with DM199's novel mechanism of action may enable earlier initiation and longer treatment duration, which has the potential to drive meaningful prolongation of pregnancy without added safety burden. We believe the observed improvements in vascular resistance reflect restoration of normal endothelial function, consistent with an on-target mechanistic response to DM199 therapy. By improving endothelial health, DM199 has the potential to address the underlying vascular dysfunction driving the disease that should result in stabilization of maternal vascular pathology and prolonged pregnancy as opposed to current therapies that simply manage symptoms. Taken together, the ability to reduce blood pressure, improve uterine placental perfusion and restore endothelial function reinforces our belief in DM199's potential to be a first-in-class disease-modifying therapy for this life-threatening condition for which there are currently no approved treatment options. During the fourth quarter, under the leadership of Professor Cluver, enrollment continued in the Part 1a expansion cohort, which will include up to 12 additional patients to provide us with a more comprehensive data set. We anticipate completion of this cohort in the first half of 2026. Protocol amendments are being finalized for Part 1b and 2 of the study. Part 1b will enroll up to 30 hypertensive women with late-stage preeclampsia expected to deliver within 72 hours to further confirm the Part 1a results. These participants will receive continuous IV administration of DM199 that will be titrated to maintain blood pressure in the targeted range. Part 2 will enroll up to 30 women with early onset preeclampsia, who are candidates for expectant management where the therapeutic goal is to prolong the pregnancy as long as possible while also providing increased blood flow to promote larger, healthier babies. These protocol amendments represent refinements to the previous treatment regimens based upon learnings from Part 1a. The fetal growth restriction cohort will be enrolling patients without preeclampsia, but with impaired placental function, further expanding the potential application of DM199 across placental vascular disorders. The first patient in that cohort is anticipated to be dosed in Q2 2026. Importantly, we have also recently received regulatory clearance from Health Canada to initiate a global Phase II clinical trial of DM199 in early onset preeclampsia. This is an important regulatory milestone for our PE program. We are currently finalizing plans to commence site activation in the second half of the year. We intend this trial to be a global Phase II study. It is an open-label dose-finding trial designed to enroll approximately 30 participants with early onset preeclampsia between 24 and 32 weeks of gestation. This expectant management population represents patients with the greatest unmet medical need where safely prolonging pregnancy can have the most meaningful maternal and neonatal impact. The study will evaluate the safety, tolerability and preliminary efficacy of DM199 with dosing anticipated to continue until delivery. We are assessing three dose levels to inform dose selection of the optimal regimen for Phase III. Primary study endpoints include maternal pharmacokinetics and further confirmation that DM199 does not cross the placental barrier, an important safety consideration for both regulatory review and patient acceptance. In addition, we will evaluate clinical and biomarker outcomes, including prolongation of pregnancy, blood pressure control, uterine artery blood flow, circulating pathogenic biomarkers and renal function. We are also preparing to seek approval to expand the study to include sites in the U.K. With respect to the additional reproductive toxicology study in rabbits requested by the FDA, preliminary results from a dose-range finding study in rabbits suggests that rabbits may not be a suitable animal model for reproductive toxicology studies with DM199. This is likely due to an unusual immune response to the recombinant human protein unique to rabbits that has not been seen in rats, monkeys or humans thus far. Most importantly, from our perspective, there were no teratogenic effects observed in the approximately 200 pups produced in a prior study. This included no external, visceral or skeletal malformations. We are currently evaluating an alternative animal model to address the FDA's request, and we will work with FDA to find a solution in parallel to initiating the Phase II trial in Canada and other potential jurisdictions. Turning to our ReMEDy2 trial, 2025 was also a good year for our stroke program. Over the past several months, we have intensified our engagement with study sites to share best practices and build friendly competition. We've also added additional resources to support sites through the enrollment and follow-up process, and we continue to work on additional ways to support our study sites. These activities, along with increased site activations globally have resulted in encouraging enrollment momentum over the last few months. At present, I'm very pleased to report that with these additional efforts in the United States and Canada, along with expansion into the U.K. and Europe, we have achieved almost 70% of the required enrollment of 200 participants for the interim analysis. We currently have close to 61 active sites, including four in the U.K. and an additional 12 across Europe, and approximately 25 more sites are expected to activate in the coming quarter. With our recent progress, we are reiterating our guidance to complete the interim analysis by the second half of 2026. Since the last earnings call, an independent Data Safety Monitoring Board meeting was conducted after the enrollment of 100 patients. Following review of the safety data from these participants, the independent DSMB unanimously recommended that enrollment continue without modification. I will now turn the call back to Rick.

Dietrich Pauls, President and Chief Executive Officer

Thanks, Julie. We're also pleased to note the paper titled Endothelial Triple Pathway Basal Relaxation as an adjuvant strategy in resistant hypertension was recently published in the Journal of Hypertension. The article authors included Dr. Luke Laffin, a recognized key opinion leader in the treatment of resistant hypertension. This publication underscores the need for new treatment approaches to lower blood pressure in patients with chronic kidney disease. It also highlights findings from our prior Phase II REDUX trial, which demonstrated DM199's ability to significantly reduce blood pressure in patients with elevated levels over a three-month treatment period. DM199 was also observed to lower serum potassium levels in patients whose potassium levels were elevated, placing these patients at risk of developing hyperkalemia. We look forward to sharing more on the potential use of DM199 to control blood pressure in patients with chronic kidney disease in the future. I would 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 full year financial results for 2025 and filed our annual report on Form 10-K yesterday. As of December 31, 2025, our cash, cash equivalents and short-term investments were $59.9 million. Current liabilities were $5.1 million and working capital of $55.5 million compared to cash and investments of $44.1 million, current liabilities of $5.4 million and working capital of $39.2 million as of December 31, 2024. The increase in cash and short-term investments is due to the net proceeds received from the sale of common shares in the company's July 2025 private placement and under its at-the-market offering program. We feel confident about our cash position and anticipate it will fund our planned clinical studies and corporate operations through the end of 2027. Net cash used in operating activities for the full year 2025 was $29.1 million compared to $22.1 million for the full year of 2024. This increase is primarily a result of the increase in net loss for the full year of 2025 as compared to the prior year period. Turning to the income statement. Our research and development expenses increased to $24.6 million for the year ended December 31, 2025, up from $19.1 million for the prior year. This $5.5 million increase is driven by a combination of factors, including the continuation of our ReMEDy2 clinical trial and its global expansion, the expansion of our clinical team in both the prior and current year periods and increased noncash share-based compensation costs. These increases were partially offset by cost reductions related to manufacturing process development work performed and completed in the prior year period. Our general and administrative expenses were $9.8 million for the full year 2025, up from $7.6 million for the full year 2024. G&A expenses increased by $2.2 million due to a number of factors, including increased noncash share-based compensation expense, increased personnel costs, increased investor relations expenses and increased patent prosecution costs. With that, let me ask the operator to open the lines for questions.

Operator, Operator

Your first question comes from Stacy Ku with TD Cowen.

Stacy Ku, Analyst, TD Cowen

We have a couple of questions. If we could stay with preeclampsia for now, the first is an update on the rabbit preclinical trials for the U.S. IND approval. Can you share your early thoughts on using an alternative species with the FDA? What other preclinical models are best for reproductive toxicology studies? Please elaborate. As we think about the ISP and the many promising signals we'll continue to see, what key learnings do you hope to carry into the early-onset preeclampsia cohort for Part 2 and Part 3, including fetal growth? Is there any chance we could get an update later this year on timing? And, ahead of the U.S. trial, Julia, we heard about the high-level preparations, but how are conversations progressing? What criteria is the team using to select preeclampsia study investigators? Finally, a small question on CKD: when can we expect a detailed plan for pursuing DM199 in treatment-resistant hypertension in CKD patients?

Dietrich Pauls, President and Chief Executive Officer

So I'll start off maybe with the CKD, the fourth question is that we're very excited about the opportunity for our drug to lower blood pressure. We've clearly seen it in numerous trials. I think there's a huge clinical need, in particular in patients with chronic kidney disease as many of these patients have elevated levels of potassium that puts these patients at risk of hyperkalemia. So I think first, we can treat these patients, control their blood pressure when they frankly don't have a lot of options and what we did see in our previous trial, the ability to lower potassium levels, which could be a very exciting opportunity. Right now, really the focus though is on our preeclampsia and stroke program. And at the appropriate time, we'll look at potentially advancing into CKD. But right now, we want to make sure we're really focused here near term on our other two programs. And then maybe I'll hand it off to Julie.

Julie Krop, Chief Medical Officer

Yes, Stacy, all very good questions. I think it's premature right now to say exactly which species we're going to focus on. First, we submitted a package to the FDA and are having discussions with them about appropriate models. There are several appropriate models we're considering, but we'll hold off until we provide an update after those discussions. Regarding what we've learned from previous cohorts, we understand the PK better after running the initial studies. One of the lessons we're taking forward is to use subcutaneous dosing only for our early onset studies and probably reserve IV for later onset, as we've done previously. On site selection, we are highly focused on choosing sites that have experience with preeclampsia studies and practices well suited for early onset expectant management. Some sites are very adept at this while others are more conservative about when to deliver patients. It's a balance between the mother's health and the baby's health, and we want centers that are comfortable keeping the mother despite potential severe complications and that feel they can stabilize her enough to prolong the pregnancy. Those are the considerations we're focused on.

Operator, Operator

Your next question comes from Josh Schimmer with Cantor.

Joshua Schimmer, Analyst, Cantor

Two quick ones. For the evaluation of DM199 in earlier onset preeclampsia, how do you think about the potential risk of the protein crossing the placental barrier at that stage? And what evidence do you have to suggest that it in that setting as well will not cross in any meaningful extent to the placenta? And then for the interim analysis for the Phase II/III stroke program, what are the potential outcomes there? Are there stopping criteria either positive or negative or resizing criteria? Maybe you can share a little bit more about what you expect the interim to inform?

Dietrich Pauls, President and Chief Executive Officer

Sure. Thanks, Josh. So starting off with the early onset and crossing of the placenta. We don't think it will happen. I mean we've done now over 35-plus patients with more late onset preeclampsia where we didn't see this crossing. To cross the placental barrier the size to cross will be about 500 daltons, whereas our protein is about 26 kilodaltons, so roughly 50 times larger. So it would be very surprising if it did occur. We also did an earlier study in the rat model, and we did not see it there either. So it's another check-the-box, but we feel very good that in the South African patient population, we didn't see placental crossing. With regards to your second question, the ongoing Phase II/III stroke program, for the interim analysis, first off, if we're not seeing a drug effect, we will terminate the study for lack of efficacy. Otherwise, there will be a resample size and the sample size could range from 300 to 728. How we designed this trial, and we believe a base case that if we're seeing a drug effect comparable to our Phase II, which is comparable to the many studies that have been shown with the human urinary form of the study in China, looking at the modified Rankin score of 0 to 1 as the primary endpoint, we're anticipating that if we see a drug effect comparable, we'll be looking at something ideally in the 300 to 350 range. If we need to go above 500 patients, we'll have to really evaluate the next steps for the program in light of the high prospects we think as well for the preeclampsia program.

Operator, Operator

Your next question comes from Thomas Flaten with Lake Street.

Thomas Flaten, Analyst, Lake Street

Just a question on the Part 1a expansion cohort. It strikes me that it's taking a bit longer than I might have thought in my mind given how many patients Dr. Cluver sees on a weekly basis. Is this a slow and deliberate approach she's taking? Or has something else been going on there? Just some additional color on that expansion cohort would be great?

Dietrich Pauls, President and Chief Executive Officer

Sure. Yes, it's a good question. It really has been a result of some staffing challenges that Professor Cluver has had at her site. We've recently provided some additional financial support. And with the hiring of a couple of new nurses just in the last few weeks, we anticipate that enrollment is going to pick up again.

Thomas Flaten, Analyst, Lake Street

And then following on from that, if I understood the press release and your commentary correctly, are Parts 2 and 3, sorry I mean Parts 1b and 2, dependent on the completion of the expansion cohort? Or will they begin prior to the full completion of that cohort?

Dietrich Pauls, President and Chief Executive Officer

For those cohorts, we have made a few protocol amendments that are going through shortly. We anticipate that those two cohorts will initiate later in Q2. The Part 1a expansion study is ongoing and will also be completed in Q2.

Thomas Flaten, Analyst, Lake Street

Got it. Understood. And then just a quick one on ReMEDy2. You mentioned some acceleration or some momentum building. I was wondering if you could just give us a sense of in the first quarter of this year, how many patients did you enroll compared to what you did in the fourth quarter of last year, just to give us some kind of scope and scale of that momentum?

Dietrich Pauls, President and Chief Executive Officer

Yes. I would just say at a high level, the enrollment increase really has been more so this year. So even going into the end of 2025, it was still relatively slow, but it really has picked up substantially in the last month, last two months. But really, the more recent months is where we've seen the big uptick. And that also correlates to where we've had the increase in sites and all the work that Julie and her team have been doing has been wonderful. And I think we're now starting to see the benefits of all that work.

Operator, Operator

Your next question comes from Matthew Caufield with H.C. Wainwright.

Matthew Caufield, Analyst, H.C. Wainwright

For the ReMEDy2 trial, there had been some prior discussion of some challenges with stroke enrollment formally being slower in the U.S. due to initial triage in the community hospitals. Kind of thinking bigger picture, do you ultimately foresee any limitations for real-world access if or when DM199 could ultimately be approved for the AIS indication?

Dietrich Pauls, President and Chief Executive Officer

Yes. Good question. So I think there's a difference between the challenges that we had been seeing with enrolling at more of these hub-and-spoke hospitals. But ultimately, for commercialization, the positive thing about our drug is the safety profile should be great in being able to be used very broadly at small community hospitals and big academic centers. So I think that the previous challenge we're having is really more with enrolling patients at the large academic centers. But in terms of commercialization, I think it will be a broadly usable drug because of that safety profile.

Operator, Operator

Your next question comes from Chase Knickerbocker with Craig-Hallum.

Chase Knickerbocker, Analyst, Craig-Hallum

I was just hoping to work one more in on the nonclinical side here. Can you just maybe walk us through kind of the differences in your prior nonclinical rabbit study that you had kind of mentioned where you didn't see any toxicity in this one? Was there kind of a different gestational age used? Or maybe just kind of your biological rationale as to why this antibody response arose?

Dietrich Pauls, President and Chief Executive Officer

Yes, Julie, can you take that one?

Julie Krop, Chief Medical Officer

Yes. So that's a very good question. The first study was a different gestational age time period for the pre- and postnatal rabbit study. We studied a slightly different gestational age as well as a slightly different duration of treatment and different doses. So it's hard to explain. We did see maternal toxicity in that study as well, although it wasn't as significant. But I think the difference here and the issue really with the FDA is not related to concern on the part of the pups. The pups really did not show any increase in malformations or teratogenicity from the control group in either study. I think the FDA's concern is finding a NOAEL dose where they don't see any adverse effects and the maternal toxicity that we saw, which we believe is due to immunogenicity, is not uncommon to see in rabbits that mount immune responses quickly to human proteins. So I think really it was in both studies we had some maternal toxicity. The gestational ages were different and the FDA wanted us to dose primarily after the first trimester, after the early development of the fetus, because that's closer to the way we're going to dose humans. It just turns out that rabbits may not be a good species, and we're going to have to do it in a different species.

Chase Knickerbocker, Analyst, Craig-Hallum

Got it. And then just maybe a little bit on timelines as far as when you'd expect to get that feedback that you need to continue with the different species or just kind of color from FDA on what they would like to move forward. Do you have a meeting scheduled in Q2? Maybe just walk us through timelines there.

Julie Krop, Chief Medical Officer

So we will provide an update as soon as we have something to update. I don't think we're giving a forecast yet until we understand and get alignment from the FDA on the path forward.

Chase Knickerbocker, Analyst, Craig-Hallum

Understood. And then just last for me, Rick, on the stroke timing, could you just give us a little bit more color as to kind of what you're seeing from an enrollment rate perspective? I mean, is it kind of being driven by kind of breadth increasing? Or is that depth really kind of increasing as we thought it would to kind of drive this acceleration in enrollment in the stroke study?

Dietrich Pauls, President and Chief Executive Officer

Yes. It's a combination. In particular over the last few months we've seen an increase in the enrollment rate per site and also a greater number of sites. Being at about 61 sites now has given many centers a chance to be in the trial and understand some of the challenges and opportunities of running the trial. We also have a number of sites that are on the verge of coming on board in the coming weeks. So given all that, we feel good about reiterating our guidance for this year.

Operator, Operator

That concludes our question-and-answer session. I would like to now turn the conference back over to Rick Pauls, DiaMedica's President and Chief Executive Officer, for closing remarks.

Dietrich Pauls, President and Chief Executive Officer

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

Operator, Operator

This concludes today's call. Thank you so much for attending. You may now disconnect, and have a wonderful rest of your day.