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DMA.V: What Does the Shanghai Pharma Acquisition Mean to DiaMedica?

By Grant Zeng, CFA


The Techpool Purchase:

On May 21, 2018, Shanghai Pharmaceuticals Holding Co., Ltd. (601607.SH, 2607.HK) announced that the Company entered into a Share Purchase Agreement with Takeda  Pharma AG. Pursuant to the agreement, Shanghai Pharma, through its Hong Kong subsidiary Shanghai Pharmaceuticals (HK), will acquire 100% equity interest of a wholly-owned subsidiary of  Takeda  AG with a consideration of US$144 million, resulting in its indirect acquisition of 26.34% shares of  Techpool Bio-pharma Co., Ltd. (Techpool). Upon completion of the Proposed Acquisition, the shareholding in Techpool  by Shanghai Pharma will be increased from 40.80% to 67.14% and Shanghai Pharma would achieve absolute control of Techpool. The transaction values Techpool at $550M USD.

Techpool is a global leader in human urine protein bio-pharmaceuticals with two main products that consists of Kailikang (Human Urinary KLK1 for Injection) for acute ischemic stroke (AIS) and Tianpuluoan (Human Urinary ulinastatin for acute pancreatitis). Kailkang provides a treatment option post-acute ischemic stroke of 24-48 hours where there are currently no treatment options today in the west. KLK1 sourced from human urine (Kailikang) and synthetically produced (DM199) boosts KLK1 levels to release physiological levels of BK when and where needed, generating beneficial nitric oxide and prostacyclin, thereby increasing blood flow, reducing inflammation, fibrosis, oxidative stress & regulates neurogenesis.

Shanghai Pharma is the largest Chinese pharmaceutical firm and was previously a minority shareholder of Techpool. Shanghai Pharma acquired a controlling interest in Techpool to what appears to capitalize on the positive clinical efficacy and to greatly expand sales by tapping into the large infrastructure of Shanghai Pharma. According to Shanghai Pharma, “the acquisition of Techpool will allow Shanghai Pharma to optimize its manufacturing segment, while Shanghai Pharma will work with Techpool to pioneer new ground and unleash the growth potential of its core product through targeted access to market, marketing management systems, nationwide distribution network, products and other resources, so as to create new momentum to maintain sustainable growth for Techpool.”  

The Shanghai Pharma’s investment provides a controlling interest in Techpool, valuing the Company at $550M USD. Provides further validation of the current use of the human urinary KLK1 protein. DiaMedica estimates over 500,000 patients have already been treated with Kailikang in Asia. DM199’s recombinant KLK1 protein profile has potential to improved efficacy, safety and convenience of delivery compared to Kailikang and importantly provides a new potential treatment option for worldwide use.

View Chart I Here

DiaMedica and Its Lead Drug Candidate DM199

DiaMedica Therapeutics (TSX: DMA.V) is a clinical-stage biopharmaceutical company that is developing innovative treatments for significant unmet clinical need with a focus on neurological and kidney diseases.

The company’s lead drug candidate is DM199, a recombinant (synthetic) human tissue kallikrein (KLK1).
The Company is positing DM199 for the treatment of chronic kidney disease and post-insult treatment from acute ischemic stroke (AIS). There are no approved FDA therapeutic treatments for chronic kidney disease and the only FDA approved treatment for AIS is limited to only 3-4 hours after a stroke.

View Chart II

Update on DM199 Clinical Development

In September 2017, DiaMedica initiated a Phase II REMEDY clinical trial of DM199 (recombinant human KLK1) in patients suffering from acute ischemic stroke (AIS).

In February 2018, DiaMedica enrolled the first patient in the REMEDY trial at the Royal Melbourne Hospital, Melbourne Australia.

The Principal Investigator of the study is Bruce Campbell, MD, MBBS(Hons) BMedSc PhD, FRACP, a neurologist and Head of Hyperacute Stroke in the Department of Neurology, Royal Melbourne Hospital.

The Phase II REMEDY trial is a multi-center, double-blind, randomized, placebo-controlled clinical trial which will assess the efficacy and safety of DM199 in patients with a moderate to moderately severe acute ischemic stroke (AIS). DiaMedica intends to enroll approximately 60 patients with AIS. The patients will be randomized to two groups receiving either DM199 or placebo, which will be administered intravenously (within 24 hours of stroke symptom onset) followed by subcutaneous injections for 21 days.

Safety and tolerability are the primary end points. Secondary endpoints include drug exposure monitoring and a few tests including plasma-based biomarkers and standard functional stroke measures assessed at 90 days post-stroke to assess DM199’s other therapeutic potential.

View Chart III

We think the initiation of the Phase II REMEDY trial is a significant step for the development of DM199 for the treatment of AIS.

DiaMedica intends to seek worldwide approval for DM199 as a novel therapy for acute ischemic stroke (AIS). The company will also position DM199 in China as an improved product over the urine-sourced KLK1 protein currently approved for use. The real potential is having an effective treatment that can be initiated up to 24 hours after the first sign of symptoms. DiaMedica may fill a large unmet need for stroke patients who missed the tPA treatment window of 4 hours, benefiting millions of people around the world who have limited treatment options.

A Huge Market of AIS for DM199

A stroke is the rapidly developing loss of brain function due to disturbance in the blood supply to the brain. As a result, the affected area of the brain becomes inactive and eventually dies. Strokes can be classified into two major categories: acute ischemic stroke (AIS) and hemorrhagic stroke. AIS are those that are caused by interruption of the blood supply by a blood clot (ischemia), while hemorrhagic strokes result from rupture of a blood vessel or an abnormal vascular structure. About 87% of strokes are acute ischemic strokes, with the remainder classified as hemorrhagic and 1 in 6 people will have a stroke in their lifetime according to the World Stroke Organization.

According to the World Heart Federation (WHF), each year approximately 15 million people worldwide suffer a stroke of which 6 million will die and 5 million will be permanently disabled. Worldwide, stroke is the leading cause of adult disability and the second leading cause of death in developed countries.

Each year in the US, approximately 800,000 people experience a new or recurrent stroke (ischemic or hemorrhagic). Approximately 610,000 of these are first events and 185,000 are recurrent stroke events.

Stroke represents an area of tremendous unmet medical need.

Currently, the only FDA approved therapeutic-based treatment is tissue plasminogen activator (tPA, also known as Activase® and Altapase), a protein involved in the breakdown of blood clots (thrombolysis) to re-establish normal blood flow (recanalization). However, tPA is only effective if administered within 3-4.5 hours (preferably closer to within the 3-hour timepoint) of an acute ischemic stroke, as outside this therapeutic window tPA is not only ineffective but its use leads to a greater risk of hemorrhage (bleeding in the brain). As such, only 5-7% of AIS patients are treated with tPA.

View Chart IV

Therefore, a clear unmet therapeutic need exists for most stroke patients who do not receive tPA. New therapeutic options in development include tissue protection focused therapies (hours to days after the stroke) that preserve and protect brain cells beyond the tPA therapeutic window and are especially targeted toward preserving viable cells in the penumbra hours after a stroke. This represents a potential $10+ billion market opportunity for a drug that can successfully obtain approval of a therapy outside of the tPA 4.5-hour therapeutic window.

DM199 has advantages over Kailikang:

• Improved profile delivery: subcutaneous administration every 3 days for 21 days; superior PK profile to Kailikang’s IV administration;
• Improved efficacy: potential to improve efficacy with maintaining KLK1 levels elevated during treatment period;
• Improved safety: synthetic protein has a consistent profile with every dose and avoids risk of contaminations/etc of urine-based protein.

The acquisition of Techpool by Shanghai Pharma further validates DiaMedica’s opportunity in China and to bring DM199 to the rest of the world. 

We estimate DM199 could be approved in China in 2020 and in the US in 2021. With a $10+ billion AIS market, a conservative 10 to 20% peak market penetration of DM199 implies a $1+ billion sales if approved.


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