Spectral Announces Third Quarter Results and Provides Corporate Update

Reports early patient mortality data in Tigris Trial on target with expectations

TORONTO, Nov. 12, 2021 (GLOBE NEWSWIRE) -- 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 third quarter ended September 30, 2021, and provided a corporate update.

Chris Seto, CEO of Spectral, commented, “We are pleased to report progress on the clinical development of Toraymyxin™ (“PMX”), though the direct impact of covid outbreaks continue to correlate to decreased enrollment. As we entered Q3 2021, enrollment activity ramped up significantly following our June investigator meeting – increasing approximately 40% over a three month period as several of our clinical sites experienced a more ‘normalized’ clinical trial environment. However, the rapid emergence of the delta variant at the tail end of the quarter effectively halted Tigris patient enrollment as many trial site ICUs once again refocused their efforts and resources on addressing the COVID-19 pandemic. We view the summer enrollment rates somewhat as a proxy for the velocity of patient enrollment once the impact of COVID recedes. We continue to move forward with trial activities, including onboarding of new trial sites, and we have a high degree of confidence that the full fifteen sites will be screening and open for enrollment by the end of November 2021. Although the sample size data are limited, we are encouraged by initial patient mortality data, which is in line with our expectations.”

Dr. John Kellum, Chief Medical Officer of Spectral, commented, “We remain focused on the start of our DIMI usability trial for home use of this exciting new device aimed at a $5.3 billion U.S. home dialysis market. We had anticipated first patient enrollment into the DIMI usability trial at the beginning of Q4 2021, but now expect to begin the trial in Q1 2022, as our potential clinical site trial partners address labor shortages and attrition within dialysis clinics, making it difficult to participate in the usability trial until that time. In the meantime, we have submitted an amendment for the DIMI IDE protocol with the FDA, which, if approved, would allow study patients to continue to utilize the device at home until the FDA provides clearance for in-home use. We have also refined our protocol to be minimally intrusive on the dialysis clinics staff. We believe the steps we are taking will help us achieve our target of enrolling 35 patients into the study within the shortest timeframe possible.”

The Company also announced that Chris Seto, CEO of Spectral, has been appointed to the Board of Directors, increasing the number of board members to seven. Mr. Seto concluded, “In addition to my current role as CEO, I am honored to join the board of directors at this important inflection point for the Company. We remain focused on executing our clinical programs as efficiently as possible. We look forward to a number of key upcoming milestones, that we believe will drive significant shareholder value.”

Program Update

Tigris Trial

• Number of Tigris Sites
  Despite a challenging clinical environment due to COVID-19, Spectral has had success in adding new trial sites with 12 trial sites open for enrollment and now actively screening patients, as well as another 3 clinical sites with investigator agreements in place. The Company is in the process of onboarding the remaining clinical trial sites, with a high degree of visibility that all 15 trial sites are anticipated to be screening patients by the end of November 2021.
  

• Tigris Enrollment
  Tigris currently has a total of 25 patients randomized to-date out of the 150 total to be enrolled. Although the sample size and data are limited, we are encouraged by preliminary patient mortality data, which is in line with our expectations.
  

Dialco

• DIMI Usability Trial
  Commencement of the DIMI IDE trial was postponed to the end of the first quarter of 2022, due in large part to the impact of the COVID-19, pandemic, as the Company awaits final commitments from its trial site partners to initiate the clinical trial.
  
  On November 5, 2021 Dialco submitted an IDE protocol amendment for the DIMI IDE Trial, which, if approved, would allow study patients to continue to utilize the device at home until the FDA provides clearance for in-home use. The IDE protocol amendment would also allow changes to patient flow procedures that are intended to simplify protocols, making the trial easier to administer for both patients and clinical staff, as well as the Company. Dialco anticipates FDA authorization of the amendment in early December 2021.

• DIMI Commercialization
  In order to support commercial expansion, and in anticipation to the start-up of the DIMI usability trial, Dialco is expanding its field force for sales training and technical support. Dialco currently has field representatives in Ontario, as well as California, Pennsylvania, Florida and Michigan, with recruitment initiatives underway for further expansion.
  

• SAMI Commercialization
  SAMI continues to be launched in Canada and the U.S. with successful clinical evaluations ongoing in key hemodialysis centres, as well as expansion of the commercial sales pipeline. As hospitals are experiencing a significant shortage of CRRT machines in COVID-19 affected ICUs, there has been increased activity with respect to the use of SAMI in the treatment of COVID-19 positive patients. The Company has successfully developed remote installation, and set-up on-line training for SAMI.
  

Financial Review

Revenue for the three-months ended September 30, 2021 was $230,000 compared to $418,000 for the same three-month period last year. For the nine-months ended September 30, 2021, revenue was $1,535,000 compared to $1,566,000 for the same nine-month period in 2020. Royalty revenue has been negatively impacted by the decreased usage of the Company’s IP from one customer. Product revenue has fluctuated for the three and nine-months ended due to the timing of orders from customers. Revenue continues to be recognised from the exclusive distribution agreement with Baxter International Inc. (“Baxter”).

Operating costs for the quarter ended September 30, 2021, were $2,297,000 compared to $1,995,000 for the corresponding period in 2020, representing an increase of $302,000. Operating costs for the nine-months ended September 30, 2021 were $7,768,000, a decrease of $749,000 from $8,517,000 for the nine-month period ended September 30, 2020. 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. Clinical development and regulatory program expenses has remained consistent in the nine-months ended September 30, 2021 as compared to the same nine-month period in the prior year. Clinical activity has been negatively impacted by 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 $378,000 and $628,000 for the three and nine-months ended September 30, 2021, primarily under the Canada Emergency Wage Subsidy Program established to support businesses during the COVID-19 pandemic. The government assistance was used to offset the expenses incurred in the periods.

While the Company maintains a low-cost operating structure for its base business operations, the Company anticipates its operating costs to increase for the remainder of 2021. The Company expects its Tigris trial enrollment to increase, combined with incremental costs associated with Dialco’s upcoming usability trial for DIMI, product development and the increase in field resources for the marketing and commercialization activities of its RRT devices.

Loss for the quarter ended September 30, 2021 was $2,067,000 ($0.008 per share) compared to a loss of $1,577,000 ($0.007 per share) for the same quarter last year. Loss for the nine-months ended September 30, 2021 was $6,233,000 ($0.025 loss per share) compared to a loss of $6,951,000 ($0.030 loss per share) for the same period last year.

The Company ended the third quarter of 2021 with cash of $10,923,000 compared to $5,807,000 cash on hand as of December 31, 2020.

The total number of common shares outstanding for the Company was 267,886,408 as of September 30, 2021.

Bought Deal Offering

On July 27, 2021, the Company closed a bought deal offering (“Offering”) resulting in the issuance of 23,530,000 units (“Units”), at a price of $0.425 per Unit. Aggregate gross proceeds of the Offering were approximately $10.0 million. Each Unit consists of one share of the Company and one-half of one share purchase warrant (each whole share purchase warrant a “Warrant”), with each Warrant entitling the holder to acquire one share at a price of $0.50, with an expiry date of July 27, 2024.

U.S. Listing Update

Management and the Board believe a senior U.S. listing aligns with the goals of the business and its stakeholders, and the Company continues to prepare for a potential listing on a senior U.S. exchange.

Corporate Update Conference Call

The Company plans to host an investor conference call on December 2, 2021 to discuss to discuss the Company’s corporate progress and other developments, as well as financial results for the fiscal 2021 third quarter ended September 30, 2021. Additional details will be provided in advance of the conference call.

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.

Forward-looking statement

Informationinthisnewsreleasethatisnotcurrentorhistoricalfactualinformationmayconstituteforward-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 managementaswellasinformationcurrentlyavailabletoit.Whiletheseassumptionswereconsideredreasonable by Spectral at the time of preparation, they may prove to be incorrect. Readers are cautioned that actual results aresubjecttoanumberofrisksanduncertainties,includingtheavailabilityoffundsandresourcestopursueR&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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