| SPECTRAL ANNOUNCES FIRST QUARTER RESULTS
AND PROVIDES CORPORATE UPDATE
TORONTO, Canada – May 14, 2021 – Spectral Medical Inc. (“Spectral” or the “Company”) (TSX: EDT), a late stage theranostic company advancing therapeutic options for sepsis and septic shock, as well as commercializing a new proprietary platform targeting the renal replacement therapy market through its wholly-owned subsidiary Dialco Medical Inc. (Dialco), today announced its financial results for the first quarter ended March 31, 2021, and provided a corporate update.
Chris Seto, CEO of Spectral, commented, “We are bullish on Spectral’s prospects for 2021, as we continue to progress both our Toraymyxin™ (“PMX”) platform. as well as both our SAMI and DIMI devices. Although we have faced headwinds in the Tigris trial related to the COVID-19 pandemic, we have initiated 11 trial sites and are making excellent progress towards initiating the remaining sites. Moreover, we are encouraged by the early results from the Tigris trial, as the mortality outcome data to date is in-line with expectations as far as efficacy and safety are concerned. We are working aggressively to complete the trial and look forward to reporting topline data in the first half of 2022, a key upcoming milestone for the Company. We continue to be extremely well positioned without any competition in a US$1.5 billion market, while septic shock remains a leading cause of death in ICUs and a major contributor to healthcare costs.”
Mr. Seto continued, “We are also making rapid progress advancing both our SAMI and DIMI devices to capture a significant share of the $10 billion dialysis market by simplifying the RRT procedures and removing barriers to a wider adoption of home dialysis. As previously announced, we recently obtained our Health Canada (HC) license for the DIMI RRT system. We were also granted Investigational Device Exemption (IDE) authorization by the United States Food and Drug Administration (FDA) to conduct a usability trial to demonstrate the safety and efficacy of DIMI for performing hemodialysis in the home environment. We expect to enroll 35 patients in this trial, which is designed to evaluate the safety and efficacy of DIMI in the home setting – an underserved market that is forecast to reach $2.9 billion by 2025. Towards this end, we recently entered into an expanded, long-term licensing agreement with Infomed SA for the DIMI hemodialysis system, extending Dialco’s exclusive rights in the United States and Canada through 2041. In terms of our SAMI device, which already has both FDA and Health Canada regulatory approvals, we are building our salesforce and commercial infrastructure to capitalize on the significant market opportunity.”
“Overall, we believe we have successfully navigated through many of the challenges presented by the ongoing pandemic and remain highly encouraged by the outlook for the business. We have strengthened our senior management team, including the appointment of Dr. John Kellum as Chief Medical Officer. We believe we have built an exceptional platform with unparalleled clinical and commercial experience in both the sepsis and RRT markets, which we believe will help drive our future success.”
Program Update
Tigris Trial and Regulatory Program Tigris trial patient enrollment and new trial site onboarding continue to be negatively impacted by the COVID-19 pandemic, with most trial site ICUs diverting their research resources and focus to conducting trials and treating COVID-19 positive patients since March 2020. While some Tigris sites have remained open to enrollment throughout the pandemic, patient enrollment has been low. However, the Company’s clinical team is in regular communication with trial site principal investigators and clinical staff. Based on these discussions, the Company anticipates a return to normalized recruitment activity levels, with all 11 trial sites indicating active screening status by early June. 15 patients have been randomized to-date (out of the 150 total patients to be enrolled in the Tigris trial). While current enrollment is below pre-pandemic expectations, the Company continues to be pleased by the early results from the Tigris trial.While the existing randomized patient sample size is limited, the mortality outcome data to date is inline with the Company’s Euphrates post-hoc experience. The Tigris trial currently has 11 sites initiated, with room to expand to 15 sites. In the Company’s fiscal 2020 year end disclosure, the Company targeted initiation of all 15 sites by the end of the third quarter 2021. The Company continues to focus on finalizing the Tigris trial within the reasonably shortest timelines.Despite the hurdles presented by the COVID-19 pandemic, the Company continues to drive for completion of the trial in H1 2022.
Dialco On February 23, 2021, Dialco was granted IDE authorization by the United States Food and Drug Administration FDA to conduct a usability trial to demonstrate the safety and efficacy of DIMI for performing hemodialysis in the home environment. The approved IDE usability trial is expected to enroll 35 patients and is designed to evaluate the safety and efficacy of DIMI in the home setting by analyzing delivered dialysis dose and potential adverse events occurring during six weeks of use at home compared to six weeks of use in the hospital setting on the same patients. The usability trial is the final regulatory step towards FDA clearance for in-home use of DIMI; and Dialco anticipates reporting topline data in the summer of 2022.
Throughout 2020, Dialco initiated clinical evaluations of SAMI at the University of Michigan in Ann Arbor and the Scarborough General Hospital (SGH) in Toronto. In the first quarter of 2021, SGH purchased three SAMI units after a successful clinical evaluation of the SAMI device. Although the initial SGH purchase is limited in order quantity, this transaction has qualified Dialco to become a Plexxus supplier of renal replacement devices. Plexxus is a leading health care supply chain organization, which delivers purchasing services to hospital networks throughout Ontario.
- Health Canada DIMI Approval
On March 31, 2021, the Company announced that Dialco received its license from HC for the DIMI RRT system. The HC license for DIMI is indicated for hemodialysis, hemodiafiltration and ultrafiltration for patients weighing 20 kgs or more, and can be used in hospitals, clinics and at home.
On April 8, 2021, Dialco announced that Dialco entered into an expanded, long-term licensing agreement with Infomed for the DIMI hemodialysis system, extending Dialco’s exclusive rights in the United States and Canada through 2041.
Spectral Transition of Senior Leadership Team
In March 2021, the Company announced the appointment of Chris Seto as Chief Executive Officer (effective April 1, 2020), and the appointment of Dr. John Kellum as Chief Medical Officer. Mr. Seto brings over 25 years of capital markets and financial management experience and will focus the Company on achieving regulatory milestones and product commercialization. Dr. Kellum is considered one of the world’s foremost experts on blood purification and acute kidney injury (AKI), and he will be integral in driving the Tigris trial to a successful completion and help guide the commercial rollout of Dialco’s SAMI and DIMI platforms targeting both the acute and chronic renal dialysis therapy markets. Dr. Paul Walker will remain on the Board of Directors, and will support Dr. Kellum’s leadership of the Tigris trial. Financial Review
Revenue for the three-months ended March 31, 2021 was $746,000 compared to $631,000 for the same three-month period last year. The majority of the increase is due to the timing of orders for products and revenue from the exclusive distribution agreement with Baxter International Inc. (“Baxter”).
Operating costs for the quarter ended March 31, 2021, were $2,391,000 compared to $4,056,000 for the corresponding period in 2020, representing a decrease of $1,665,000. The majority of the decrease relates to a non-recurring fee payable to a financial advisory services firm, which was incurred in the first quarter of 2020, relating to a legacy financial advisory agreement. In addition, clinical development and regulatory program expenses decreased approximately $291,000, as clinical activity was limited due to the impact of the COVID-19 pandemic on the Tigris trial. The Company also incurred approximately $275,000 in professional fees in connection with a withdrawn prospectus offering in early March 2020. Lastly, the Company received $250,000 under the Canada Emergency Wage Subsidy Program established to support businesses during the COVID-19 pandemic, which was offset against expenses incurred in the period.
While the Company maintains a low-cost operating structure for its base business operations, the Company anticipates its operating costs to increase throughout 2021. The Company expects its Tigris trial enrollment to increase significantly, combined with incremental costs associated with Dialco’s upcoming usability trial for DIMI and the increase in field resources for the marketing and commercialization activities of its RRT devices.
Loss for the quarter ended March 31, 2021 was $1,645,000 ($0.007 per share) compared to a loss of $3,425,000 ($0.015 per share) for the same quarter last year.
The Company concluded the first quarter of 2021 with cash of $5,203,000 compared to $5,807,000 cash on hand as of December 31, 2020.
The total number of common shares outstanding for the Company was 239,950,477 as at March 31, 2021.
Warrant Exercise
Subsequent to the year end, 7,407,330 warrants were exercised at a price of $0.45 per warrant. Accordingly, the Company received proceeds of $3,333,299. Of these 7,407,330 exercised warrants, 4,212,598 warrants were exercised subsequent to the quarter ended March 31, 2021.The Company issued share purchase warrants in connection with its financing that closed on April 23, 2018, which entitled each holder the right to purchase one common share of the Company at an exercise price of $0.45 per share for a three-year period ending April 20, 2021 (“April 2018 Warrants”).
U.S. Listing Update
The Company continues to prepare for a potential listing on a senior U.S. exchange. While management and the Board believe a senior U.S. listing aligns with the goals of the business and its stakeholders, timing is still to be determined. About Spectral Spectral is a Phase 3 company seeking U.S. FDA approval for its unique product for the treatment of patients with septic shock, Toraymyxin™ (“PMX”). PMX is a therapeutic hemoperfusion device that removes endotoxin, which can cause sepsis, from the bloodstream and is guided by the Company’s Endotoxin Activity Assay (EAA™), the only FDA cleared diagnostic for the risk of developing sepsis. PMX is approved for therapeutic use in Japan and Europe, and has been used safely and effectively on more than 300,000 patients to date. In March 2009, Spectral obtained the exclusive development and commercial rights in the U.S. for PMX, and in November 2010, signed an exclusive distribution agreement for this product in Canada. Approximately 330,000 patients are diagnosed with severe sepsis and septic shock in North America each year. Spectral, through its wholly owned subsidiary, Dialco Medical Inc., is also commercializing a new set of proprietary platforms addressing renal replacement therapy (RRT) across the dialysis spectrum. SAMI is targeting the acute RRT market, while DIMI is targeting the chronic RRT market. Dialco is currently pursuing regulatory approval for U.S. in-home use of DIMI, which is based on the same RRT platform as SAMI, but will be intended for home hemodialysis use. DIMI recently received its FDA 510k clearance for use in hospital and clinical settings, and obtained its Health Canada license for use within Canadian hospitals, clinics and in home. Spectral is listed on the Toronto Stock Exchange under the symbol EDT. For more information, please visit www.spectraldx.com.
Information in this news release that is not current or historical factual information may constitute forward-looking information within the meaning of securities laws. Implicit in this information, particularly in respect of the future outlook of Spectral and anticipated events or results, are assumptions based on beliefs of Spectral's senior management as well as information currently available to it. While these assumptions were considered reasonable by Spectral at the time of preparation, they may prove to be incorrect. Readers are cautioned that actual results are subject to a number of risks and uncertainties, including the availability of funds and resources to pursue R&D projects, the successful and timely completion of clinical studies, the ability of Spectral to take advantage of business opportunities in the biomedical industry, the granting of necessary approvals by regulatory authorities as well as general economic, market and business conditions, and could differ materially from what is currently expected.
The TSX has not reviewed and does not accept responsibility for the adequacy or accuracy of this statement.
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