GlobeNewswire Inc | Aug 10, 2020 08:00AM EDT

August 10, 2020

CHARLOTTESVILLE, Va., Aug. 10, 2020 (GLOBE NEWSWIRE) -- Diffusion Pharmaceuticals Inc. (Nasdaq: DFFN) (Diffusion or the Company), a cutting-edge biotechnology company developing new treatments for life-threatening medical conditions by improving the bodys ability to deliver oxygen to the areas where it is needed most, today reported financial results for the three and six months ended June 30, 2020 and provided a business update.

Highlights from the second quarter of 2020 and recent weeks include:

-- Initiation of an international clinical development program in hospitalized patients with COVID-19. Low oxygen levels occur as a consequence of damage to the lungs from COVID-19, often resulting in mechanical ventilation and, if that is ineffective, multiple organ failure the leading cause of death from COVID-19. Diffusion believes that the oxygen-enhancing mechanism of action of TSC could benefit such patients. -- The TSC/Covid-19 clinical development program will begin with an open-label lead-in trial which, if successful, will be followed by one or more randomized double-blinded clinical trials. The lead-in trial will test TSC in 24 hospitalized COVID-19 patients at the Romanian National Institute of Infectious Diseases (NIID). Diffusion expects to begin dosing in this study in the third quarter, with data read-out in the fourth quarter of 2020. In addition to safety, the lead-in trial will collect data on possible increased oxygenation, thereby helping the Company determine TSC dosing for follow-on studies. -- Following the recent successful completion of the 19-patient open-label, dose-escalation lead-in safety portion of the trial, the Company has continued pursuit of partnership efforts for its Phase 3 INTACT (INvestigating Tsc Against Cancerous Tumors) program with TSC plus standard of care (SOC) for patients newly diagnosed with inoperable glioblastoma multiforme (GBM). -- The Companys Phase 2 160-patient on-ambulance clinical trial testing TSC for the treatment of acute stroke continues, but on a limited basis because of the on-going pandemic. This program, featuring the PHAST-TSC (Pre-Hospital Administration of Stroke Therapy-TSC) trial, will ultimately involve a total of 23 hospitals across urban, suburban and rural areas in Los Angeles County and Central Virginia when conditions permit more robust operations. -- On May 29, 2020 the Company) announced that it received written notice from the Nasdaq Listing Qualifications Staff of the NASDAQ Stock Market LLC (Nasdaq) stating that the Company regained compliance with the applicable Nasdaq minimum bid price continued listing standard and the matter was now closed. -- During the quarter, the Company sold common stock raising $10.3 million and also raised $7.6 million from the exercise of outstanding warrants, for net proceeds of $17.9 million during the reporting period.

This is an exciting time for Diffusion as we prepare for first enrollment in our global clinical trial program using TSC for the treatment of hospitalized COVID-19 patients, said David Kalergis, chairman and chief executive officer of Diffusion. Given the severity of the worldwide pandemic, regulatory authorities in the U.S. and Europe have put in place measures to expedite the testing of therapeutics and have been generous in their guidance in light of emerging knowledge. Protocol changes based on this guidance have been incorporated into the development program so that data from any patient, wherever located, can be included to help support planned future regulatory filings in both the U.S. and Europe.

We also raised funds during the quarter, which will largely be used to advance our TSC clinical development plan, with an emphasis on the COVID-19 program, Mr. Kalergis continued. At quarter-close we had more than $25 million in cash, the largest cash balance on hand since becoming a public company. In addition, to better help our investors, potential partners and the public stay informed, we are currently revamping our website to reflect the impact of our COVID-19 program on TSCs development, with the revised website launch targeted for later this quarter.

Second Quarter Financial Results

Research and development expenses were $2.2 million for the second quarter of 2020, compared with $1.5 million for second quarter of 2019. The increase was attributable to a $0.6 million increase in costs associated with follow on work for our 19 patient run-in Phase 3 trial for GBM, a $0.3 million increase in expense related to our open-label Phase 1b lead-in trial for TSC in COVID-19 patients, and a $0.3 million increase in associated manufacturing costs as we ramp up the trial. These increases were offset in part by a $0.5 million decrease in costs associated with the delay in our Phase 2 stroke trial due to the COVID-19 pandemic

General and administrative expenses were $1.5 million for the second quarter of 2020, compared with $1.1 million for the second quarter of 2019. The increase was mainly due to higher professional fees, salaries and wages.

Diffusion had cash and cash equivalents of $25.6 million as of June 30, 2020, compared with $14.2 million as of December 31, 2019. During the second quarter the Company completed an offering of 11.4 million shares of common stock for net proceeds of $10.3 million. In addition, the Company received proceeds of $7.6 million from the exercise of 13.0 million warrants and the exchange and exercise of a further 5.0 million warrants. Diffusion believes its cash and cash equivalents as of June 30, 2020 are sufficient to fund operating expenses and capital expenditures, including clinical trials, into the fourth quarter of 2021.

About Diffusion Pharmaceuticals Inc.

Diffusion Pharmaceuticals Inc. is an innovative biotechnology company developing new treatments that improve the bodys ability to deliver oxygen to the areas where it is needed most, offering new hope for the treatment of life-threatening medical conditions. Diffusions lead drug trans sodium crocetinate (TSC) was originally developed in conjunction with the U.S. Office of Naval Research, which was seeking a way to treat multiple organ failure and its resulting mortality caused by low oxygen levels from blood loss on the battlefield. Evolutions in research have led to Diffusions focus today on addressing some of medicines most intractable and difficult-to-treat diseases, including multiple organ failure from respiratory distress, stroke and glioblastoma multiforme (GBM) brain cancer. In each of these diseases, lack of available oxygen presents a significant obstacle for medical providers and is the target for TSCs novel mechanism. The Company is currently partnering with both U.S. and European-based institutions in an expedited research program to develop TSC as a treatment for the low oxygen levels and associated multiple organ failure in COVID-19 patients.

In 2019, the Company reported favorable safety data in a 19-patient dose-escalation run-in to its Phase 3 INTACT program using TSC to target inoperable GBM. That trial is currently paused while the Company searches for a partner and prioritizes its resources to address COVID-19. Diffusions in-ambulance PHAST-TSC trial for acute stroke began enrolling patients last year. Given the responsibilities of the Companys participating emergency medical services providers, enrollment in this trial, while not officially paused, is expected to be minimal until the COVID-19 pandemic abates.

Preclinical data support the potential for TSC as a treatment for other conditions where low oxygen availability plays an important role, such as myocardial infarction, peripheral artery disease, and neurodegenerative conditions such as Alzheimers and Parkinsons disease. In addition to the development of TSC, RES-529, the Companys PI3K/AKT/mTOR pathway inhibitor that dissociates the mTORC1 and mTORC2 complexes, is in preclinical testing for GBM.

Diffusion is headquartered in Charlottesville, Virginia a hub of advancement in the life science and biopharmaceutical industries and is led by CEO David Kalergis, a 30-year industry veteran and company co-founder.

Forward-Looking Statements

To the extent any statements made in this news release deal with information that is not historical, these are forward-looking statements under the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about the company's plans, objectives, expectations and intentions with respect to future operations and products, the potential of the company's technology and product candidates, and other statements that are not historical in nature, particularly those that utilize terminology such as "would," "will," "plans," "possibility," "potential," "future," "expects," "anticipates," "believes," "intends," "continue," "expects," other words of similar meaning, derivations of such words and the use of future dates. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Uncertainties and risks may cause the Diffusions actual results to be materially different than those expressed in or implied by such forward-looking statements. Particular uncertainties and risks include: the uncertainty as to whether the FDA will approve the IND submission for commencement of a trial in the U.S.; or that the FDA will not require significant changes that might take significant time to implement, if at all, or that any such required changes will be financially feasible; there can be no assurance as to when the program in the U.S. might be able to commence, if at all; the uncertainty that as of yet the FDA has not approved a trial evaluating TSC for the treatment of ARDS, or if approved, such a trial possibly entailing significant additional time, effort and expense, particularly in light of the difficulty of doing business during the COVID-19 pandemic; the uncertainty as to whether the protocol for the Romanian trial will be ultimately acceptable to the Romanian healthcare regulatory authorities and local ethics committees or that such regulators will not require significant changes that might take significant time to implement, if at all, or that any such required changes will be financially feasible; moreover, if this or a revised protocol is acceptable to the Romanian regulators, there can be no assurance as to when they might provide such guidance or when the program might be able to commence, if at all; the uncertainty that as of yet the Romanian regulators have not approved a trial evaluating TSC for the treatment of ARDS, or if approved, such a trial possibly entailing significant additional time, effort and expense, particularly in light of the difficulty of doing business during the COVID-19 pandemic; whether addressing regulatory guidance now, while working within the parameters of current regulatory processes, will enhance the prospect of regulatory approvals upon program completion; whether Diffusion can enroll and complete the trials and provide data on the timelines indicated; whether Diffusion can efficiently transition from the Romanian lead-in trial to the larger global trial; whether the data from the Romanian trials can be combined with data generated in any U.S. trials; whether Diffusion has sufficient funding to complete the trials described; Diffusions ability to maintain its Nasdaq listing, market conditions, the difficulty of developing pharmaceutical products, obtaining regulatory and other approvals and achieving market acceptance; general business and economic conditions; the company's need for and ability to obtain additional financing or partnering arrangements; and the various risk factors (many of which are beyond Diffusions control) as described under the heading Risk Factors in Diffusions filings with the United States Securities and Exchange Commission. All forward-looking statements in this news release speak only as of the date of this news release and are based on management's current beliefs and expectations. Diffusion undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Contacts:David Kalergis, CEODiffusion Pharmaceuticals Inc.(434) 220-0718dkalergis@diffusionpharma.com

LHA Investor RelationsKim Sutton Golodetz(212) 838-3777kgolodetz@lhai.com

(Tables to follow)

Diffusion Pharmaceuticals Inc.Consolidated Balance Sheet(unaudited) June 30, 2020 December 31, 2019Assets Current assets: Cash and cash equivalents $ 25,561,599 $ 14,177,349 Prepaid expenses, deposits and other current 1,147,174 472,464 assetsTotal current assets 26,708,773 14,649,813 Property and equipment, net 198,325 252,366 Intangible asset 8,639,000 8,639,000 Right of use asset 194,879 247,043 Other assets 252,149 322,301 Total assets $ 35,993,126 $ 24,110,523 Liabilities and Stockholders? Equity Current liabilities: Accounts payable $ 1,354,948 $ 1,251,412 Accrued expenses and other current liabilities 317,075 358,532 Current operating lease liability 109,808 111,477 Total current liabilities 1,781,831 1,721,421 Deferred income taxes 1,249,569 2,119,274 Noncurrent operating lease liability 85,071 135,566 Total liabilities 3,116,471 3,976,261 Stockholders? Equity: Common stock, $0.001 par value: 1,000,000,000 shares authorized; 63,998,298 and33,480,365 issued and outstanding at June 30, 63,999 33,481 2020 and December 31, 2019, respectivelyAdditional paid-in capital 130,220,772 111,824,859 Accumulated deficit (97,408,116 ) (91,724,078 )Total stockholders' equity 32,876,655 20,134,262 Total liabilities and stockholders' equity $ 35,993,126 $ 24,110,523

Diffusion Pharmaceuticals Inc.Consolidated Statement of Operations(unaudited) Three Months ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 Operating expenses:Research and $ 2,173,183 $ 1,518,381 $ 3,707,650 $ 3,218,226 developmentGeneral and 1,458,257 1,068,452 2,852,065 2,269,180 administrativeDepreciation 27,021 34,390 54,041 52,662 Loss from 3,658,461 2,621,223 6,613,756 5,540,068 operationsOther income: Interest (25,913 ) (16,921 ) (60,013 ) (37,605 )incomeLoss fromoperations (3,632,548 ) (2,604,302 ) (6,553,743 ) (5,502,463 )before incometax benefitIncome tax (507,325 ) (108,904 ) (869,705 ) (259,256 )benefitNet loss $ (3,125,223 ) $ (2,495,398 ) $ (5,684,038 ) $ (5,243,207 )Deemeddividendarising from (1,950,378 ) ? (1,950,378 ) ? warrantexchangeNet lossattributable $ (5,075,601 ) $ (2,495,398 ) $ (7,634,416 ) $ (5,243,207 )to commonstockholdersPer share information:Net loss pershare ofcommon stock, $ (0.10 ) $ (0.63 ) $ (0.18 ) $ (1.43 )basic anddilutedWeightedaverage sharesoutstanding, 51,978,286 3,940,684 43,242,891 3,658,457 basic anddiluted