Mr. Chris Seto reports

SPECTRAL MEDICAL ANNOUNCES FIRST QUARTER RESULTS AND PROVIDES CORPORATE UPDATE

Spectral Medical Inc. has released its financial results for the first quarter ended March 31, 2023, and provided a corporate update.

During the first quarter, the company implemented a number of business initiatives, as outlined in Spectral's investor update call held on April 6, 2023, that are targeted to enhance and accelerate Tigris enrolment. Management is pleased to report positive progress on these initiatives, including:

• Enrolled an additional five patients, three of whom were enrolled at the University of California San Francisco (UCSF), a site that was onboarded and started actively enrolling in March, 2023;
• Currently 58 patients enrolled to date and continue to close in on the company's interim target of 90 patients, an important milestone as Spectral's strategic commercial partner, Baxter, will have the opportunity to view the data as well as provide a second milestone payment to Spectral;
• Remain on track to have 25 active trial sites open by the end of September, 2023, with multiple new sites conducting site initiation visits (SIV) at the company's Tigris investigator meeting next week;
• New CRO (contract research organization) transition progressing on schedule, with full transition complete by end of June;
• Tigris investigator meeting set for May 17 and May 18 in Charlotte, N.C., including pipeline sites, with more than 20 sites to be represented;
• Clinician-focused PMX (Toraymyxin) media preproduction progressing well, with production crew attending and filming at the Tigris investigator meeting.

Dr. John Kellum, chief medical officer of Spectral Medical, stated: "We are witnessing an increase in enrolment as a result of onboarding additional trial sites, with three of the five enrolments since April coming from a new site -- UCSF. This is the fastest we've seen a new site enroll patients within a 40-day period. To further assist our efforts, we are conducting site initiation visits for two additional sites during the second quarter and expect to have a total of 19 sites onboarded by June. With the help of our new CRO, Beaufort, who brings a significant number of clinical field resources, we believe we are on an accelerated enrolment path, allowing us to more swiftly reach key enrolent milestones. Importantly, Tigris mortality data continues to exceed our expectations and has been consistent with our recent announcement of the EUPHAS-2 study results. The EUPHAS-2 data further validates our confidence in the outcome of Tigris and our potential for FDA [United States Food and Drug Administration] approval, which would bring a much-needed personalized therapy to those suffering from endotoxemic septic shock."

Chris Seto, chief executive officer of Spectral Medical, stated: "We are hosting an investigator meeting in mid-May and anticipate very robust attendance, including existing sites, new and pipeline sites, principal investigators, clinical research co-ordinators, our new CRO (Beaufort), our safety committee (ISAC), and our strategic commercial partner, Baxter. This is a very important event as we are bringing together key health care professionals for training on how to participate in the clinical trial, further assisting in the advancement of Tigris. Furthermore, we are developing educational tools, including videos, to assist in educating health care professionals, as well as patients and the public, on endotoxemic septic shock and our PMX therapy. We believe these materials will aid in supporting commercial adoption of PMX, assuming FDA approval. We are very proud of our progress and continue to execute on our strategy. While we are witnessing initial benefits of our efforts, we believe that we will realize the full impact of these initiatives over time. We look forward to reporting our progress as material developments unfold."

Corporate highlights during and subsequent to the first quarter ended March 31, 2023

Tigris:

• New contract research organization (CRO):
  • On March 23, 2023, the company engaged a new contract research organization, Beaufort. Beaufort has extensive experience with ICU (intensive care unit) clinical trials, and brings a strong regulatory group, experienced biostats personnel and additional clinical field resources. Transition activities are progressing well, with full change from the incumbent CRO expected by the end of the second quarter. As part of its engagement, Beaufort is reviewing and evaluating recruitment and enrolment processes on a site-by-site basis for Tigris sites.
• Patient enrolment:
  • Total of 58 patients randomized to date out of the 150 total patients to be enrolled in the Tigris trial. Patient screening activities at the sites are increasing and results to date of those enrolled in the study continue to exceed expectations. The company continues to close in on its interim target of 90 patients, an important milestone.
  • Last 12-month enrolment rate has stabilized at 0.182 patients per site per month. Through the previously announced initiatives to enhance Tigris enrolment, management is targeting an enrolment rate of 0.25 patients per site per month.
• Tigris sites:
  • There are currently 16 active Tigris sites. The company remains on schedule to onboard an additional nine new sites over the next two quarters, bringing the total sites to 25. Should suitable sites over and above the 25 be identified, FDA approval would be required to approve incremental sites. Management believes the FDA would be amenable to requests for additional Tigris sites, based on historical interactions.
• Timing:
  • The company continues to focus on finalizing the Tigris trial within the reasonably shortest timelines. The company targets reaching interim enrolment of 90 patients around the end of 2023.
• Investigator meeting:
  • A Tigris study investigator meeting (in-person) is scheduled for May 17 and May 18, 2023, in Charlotte, N.C. This represents the first in-person investigator meeting since August, 2019, with agenda set and attendance being confirmed. Robust attendance is expected with more than 65 key stakeholders of the Tigris trial and, including pipeline sites, more than 20 sites will be represented. Historically, patient enrolment increases postinvestigator meeting.
• EDEN observational study:
  • In March, 2022, the company launched an ancillary observational study, EDEN, to collect data on patients with sepsis, even if ineligible for Tigris. EDEN will capture much needed data on the full range of septic shock, and its relation to organ failure and endotoxin activity. These data will inform subsequent discussions with the FDA on labelling for PMX, as well as to provide the medical community and the company a better picture of the addressable population in the U.S. for PMX. Furthermore, patients enrolled in EDEN will also be considered for entry into the Tigris study, which provides another tool to support enrolment.
  • The company has onboarded four EDEN sites and enrolled 51 patients into the observational study.

EUPHAS-2

On April 6, 2023, the company reported positive results from the EUPHAS-2 clinical trial. This study included 50 critically ill endotoxemic septic shock patients assessed with Spectral's EAA (endotoxin activity assay) diagnostic and treatment with PMX. The study reported a 28-day mortality of just 36 per cent with the treated patients versus a predicted 75 per cent mortality utilizing the widely accepted SAPS (simplified acute physiology score) II mortality estimation tool. This represents more than a 50-per-cent estimated relative mortality reduction with the use of PMX. The patient population of the EUPHAS-2 study aligns with the patient population of the Tigris trial.

PMX commercialization:

• In anticipation of a positive Tigris trial outcome, the company has been working closely with Baxter, the company's strategic commercial partner, on postapproval marketing plans for PMX commercialization. This includes developing product branding, pricing and roll-out plans with numerous Baxter departments, including marketing, regulatory, clinical and reimbursement. Baxter has communicated its intention to undertake a broad marketing campaign on day 1 of FDA approval for PMX.
• The company is working with Baxter on a substudy to obtain FDA approval for hemoperfusion for Baxter's Prismax device -- the Prismax, with its leading installed base, is anticipated to be the primary device utilized for PMX treatments on commercial launch.
• May 5, 2023, Baxter announced a new chief executive officer of its proposed Kidney Care business. For more information, see the Baxter website.

Clinical team focused PMX media

The company commissioned a third party produced video focused on endotoxemic septic shock (ESS), PMX and positive patient outcomes. This video will be targeted at a number of Tigris study stakeholders, including CRCs, trial treatment staff and potential patients. The nature of the PMX video will be to inspire and increase the awareness of the PMX therapy. Management believes that the video can act as an enrolment catalyst by inspiring research staff and front-line providers, as well as improve patient/family awareness of ESS and PMX.

Financial review

Revenue for the three months ended March 31, 2023, was $530,000 compared with $484,000 for the same three-month period last year, representing an increase of $46,000, or 9.5 per cent. This increase was mainly due to an increase in proprietary biochemicals product revenue.

Operating expenses for the three months ended March 31, 2023, were $2,264,000, compared with $2.52-million for the same period in the preceding year, a decrease of $256,000, or 10 per cent. The reduction in operating expenses was primarily due to a reduction in stock-based compensation due to the issuance timing of annual grants, partially offset by an increase in professional services, supporting increased Tigris trial activity, and salaries and benefits.

Loss for the three months ended March 31, 2023, was $1,777,000, or one cent per share, compared with a loss of $2,685,000, or one cent per share, for the same quarter last year.

The company concluded the first quarter of 2023 with cash of $4,886,000 compared with $8,414,000 of cash on hand as of Dec. 31, 2022.

The total number of common shares outstanding for the company was 278,547,804 at March 31, 2023.

About Spectral Medical Inc.

Spectral is a phase 3 company seeking United States Food and Drug Administration 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 340,000 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. In July, 2022, the U.S. FDA granted breakthrough device designation for PMX for the treatment of endotoxemic septic shock. Approximately 330,000 patients are diagnosed with septic shock in North America each year.

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