Quarterly Report II 14/15

September 2014 – February 2015, Diamyd Medical AB (publ), Fiscal year 2014/2015

Reporting period, December 1, 2014 – February 28, 2015

• Net result amounted to MSEK -4.1 (-4.4)
• Net result per share amounted to SEK -0.2 (-0.2)
• Cash flow from operating activities amounted to MSEK -3.8 (-5.1)
• Liquid assets and short term investments amounted to MSEK 25.9 (55.9) at the end of the period

First half year, September 1, 2014 – February 28, 2015

• Net result amounted to MSEK -9.9 (-9.2)
• Result per share amounted to SEK -0.5 (-0.5)
• Cash flow from operating activities amounted to MSEK -9.6 (-9.4)

Significant events during the reporting period

• New UCLA-patent gives protection in the US until 2032
• New Bayesian analyses by international diabetes expertise provide strong support for the diabetes vaccine Diamyd®
• Diamyd Medical launces search for new CEO
• DIAGNODE. First patient enrolled in new study where the diabetes vaccine Diamyd® is administered directly into lymph nodes

Significant events after the reporting period

• DIAMYD®/GABA. First patient included in US Diamyd® and GABA diabetes study
• DiAPREVIT 2. The diabetes vaccine Diamyd® in new study to stop type 1 diabetes in children
• DIABGAD. Immunological results from a study with the diabetes vaccine Diamyd® will be presented in April
• Diamyd Medical receives SEK 15 million in a direct issue

CEO comments
After many years as Chairman – back as the CEO! Peter Zerhouni our former CEO did an excellent job for Diamyd Medical during his just over eight years at the Company, and we wish all the best in his continued career as he progresses in the industry. I have accepted the challenge of filling his shoes while we search for his replacement.

Diamyd Medical faces an exciting future where the focus is on developing a new drug for autoimmune diabetes. Autoimmune diabetes, which includes type 1 diabetes and LADA, is characterized by the body’s immune system attacking the insulin-producing beta cells, which means that insulin must be provided from an external source for the patient to survive. There is currently no approved treatment in the market that can interrupt or prevent the autoimmune process. By using the diabetes vaccine Diamyd®, we want to stop the immune system’s attack on the insulin-producing beta cells to preserve the body’s vital capacity to produce insulin.

Currently, some 380 million people worldwide suffer from diabetes. Ten to 15 percent of these, about 50 million people, are estimated as having autoimmune diabetes. Of these, we estimate that at least three million are in the US. The American Diabetes Association states that total costs for diabetes in the US are estimated at USD 245 billion for 2012. We estimate that at least USD 30 billion of this amount are attributable to autoimmune diabetes in the US.

Back to the future

What do we mean by “Back”?
Let us just remind ourselves of the results from Diamyd Medical’s European Phase III study that included 334 children and adolescents with type 1 diabetes. The diabetes vaccine Diamyd® showed a total efficacy of 16.4 percent (p=0.10) with regard to preserving the body’s capacity to produce insulin 15 months after treatment with Diamyd® compared to placebo.

The participants received either two or four doses of the diabetes vaccine Diamyd® or placebo. In the same year as most of the patients in the study were treated, there was an unforeseen mass vaccination against swine flu, which may have impacted the study results. It is also interesting that the group of patients that started treatment with Diamyd® in the spring produced more than 50 percent more insulin than those who received placebo during the same period. This could, for example, be due to seasonal variations in the immune system where, for example, infections, other vaccines and vitamin D levels in the blood have an impact. There were also other sub-groups, such as boys and participants in the study from countries outside the Nordic region, that posted statistically significant efficacy compared to placebo.

We now hope to be able to enhance the effect by combining the diabetes vaccine Diamyd® with other substances.

What do we mean by “the Future”?
The future is analyzing the five ongoing, soon six, studies with the diabetes vaccine Diamyd®. Next up is a presentation, focusing on immunological markers, of the six-month results from the DIABGAD study with Diamyd® in combination with vitamin D and ibuprofen. The immunological markers are important to follow since they can provide an early indication of how the treatment impacts the disease progression. The immunological results will be presented at the Immunology of Diabetes Society’s (IDS) International Congress being held from April 12 to 16 in Munich. The metabolic results, such as the treatment’s effect on the ability to produce insulin, are expected to be ready for presentation at the end of 2015, when all patients have completed their 15-month follow-up.

The future, means analyzing the five-year results at the end of 2016 of the first prevention study, DiAPREV-IT 1, with Diamyd® in 50 children with a very high risk of developing type 1 diabetes.

The future, means analyzing the results of the Diamyd®/GABA intervention and combination study in Alabama, USA, which is currently enrolling patients. This also applies for the new prevention study started this year, DiAPREV-IT 2, in Malmö, and DIAGNODE in Linköping where Diamyd® is administered directly into lymph nodes in five adults recently diagnosed with type 1 diabetes, in combination with treatment with vitamin D.

The future is also to initiate and analyze the open EDCR combination study with 20 children and adolescents who have recently been diagnosed with type 1 diabetes, where Diamyd® is combined with vitamin D and etanercept.

It is notable that Craig Beam, Professor of Epidemiology and Biostatistics at Western Michigan University Homer Stryker M.D. School of Medicine in Kalamazoo, USA, reanalyzed these three studies with the Diamyd® diabetes vaccine on his own initiative and used Bayesian statistical methods. The findings were that the probability that the diabetes vaccine Diamyd® is effective in preserving insulin production was 99 percent in Diamyd Medical’s previous Phase II study, 69 percent in TrialNet’s Phase II study and 97 percent in Diamyd Medical’s European Phase III study. The prominent diabetes research scientists that are co-authors to Beam’s analytical results include Jerry Palmer, Diane Wherrett, Kevin Herold, Johnny Ludvigsson, Colleen MacCallum and research scientists in the Type 1 Diabetes TrialNet Study Group.

Will we form a partnership? The future will tell. We are working on it. We received a little help recently from the granting of a new patent in the US that until 2032 protects our diabetes vaccine Diamyd®, which is considered the furthest developed Antigen Based Therapy (ABT) for autoimmune diabetes in the world.

Stockholm, April 1, 2015

Anders Essen-Möller

President and CEO Diamyd Medical AB (publ)

Significant events during the reporting period

Diamyd Medical’s patent protection extended to 2032 in pivotal decision
The Regents of the University of California on behalf of its Los Angeles Campus (UCLA) has been granted another key US patent for its GAD65 technology on which the diabetes vaccine Diamyd® is based. The term of the new patent runs into 2032, which is approximately ten years longer than current US patents. Diamyd Medical is the exclusive licensee to the new patent.

New analyses by international diabetes expertise provide strong support for the diabetes vaccine Diamyd®
Internationally leading researchers within the field of type 1 diabetes, independently of Diamyd Medical, has reanalyzed results from previous clinical studies with the diabetes vaccine Diamyd® using alternative statistical methods, termed Bayesian analysis. In an abstract submitted to a scientific meeting the authors conclude that the GAD-based diabetes vaccine Diamyd®, with very high probability preserves patients’ insulin producing capacity and that the continued development should aim to enhance the efficacy.

Diamyd Medical launches search for new CEO
President and CEO Peter Zerhouni will move on to a position as CEO with another company active in drug development. The Company’s Chairman will take over as Acting President and CEO from March 1, 2015.

First patient enrolled in new study where the diabetes vaccine Diamyd® is administered directly into lymph nodes
The first patient has been enrolled in the DIAGNODE study. In the study a new way to administer the diabetes vaccine Diamyd® is tested, directly into inguinal lymph nodes.

Significant events after the reporting period

First patient included in US Diamyd® and GABA diabetes study
The first patient has been randomized and dosed in a pioneering study combining the diabetes vaccine Diamyd® with GABA in children with new onset type 1 diabetes. The aim of the combination therapy is to preserve the body’s residual capacity to produce insulin.

The diabetes vaccine Diamyd® in new study to stop type 1 diabetes in children
DiAPREV-IT 2 has started. In this new study, the second of its kind, the diabetes vaccine Diamyd® is tested to prevent or delay the onset of type 1 diabetes in children at very high risk of presenting with the disease.

Immunological results from a study with Diamyd® will be presented in April
Immunological results from DIABGAD, one of five ongoing studies with the diabetes vaccine Diamyd®, will be presented at an international diabetes congress (IDS) held in Munich on April 12 to 16, 2015.

Diamyd Medical receives SEK 15 million in a direct issue
Diamyd Medical has accepted an offer from a group of international institutional investors, previously not shareholders in Diamyd Medical, to issue 2,000,000 new B shares in a direct placement at 7.50 SEK per share. Total proceeds to the Company amount to SEK 15 million.

About the diabetes vaccine Diamyd®

Diamyd® is being developed with the objective of preventing, delaying or stopping the autoimmune attack on beta cells in type 1 diabetes and other forms of autoimmune diabetes and thus preserve the body’s own ability to produce insulin. Ongoing development work is aimed at enhancing the efficacy of the treatment by combining Diamyd® with other agents and to treat earlier in the disease process. New approaches are being evaluated in several clinical studies together with different teams of researchers. Five researcher-initiated clinical studies with Diamyd® are ongoing and one additional is being launched.

• DIABGAD-1. A placebo-controlled study, where Diamyd® is being tested in combination with ibuprofen and vitamin D. The study comprises a total of 64 patients between the ages of 10 and 18 recently diagnosed with type 1 diabetes, and will continue for a total of 30 months. The aim of the combination treatment is to preserve the body’s residual capacity to produce insulin. All of the participants have been enrolled in the study and the initial six-month results, focusing on immunological markers, are expected to be presented in the spring of 2015. The study runs at nine clinics in Sweden and is led by Professor Johnny Ludvigsson at Linköping University.

• DiAPREV-IT. A placebo-controlled study, where Diamyd® is being tested in children with very high risk of developing type 1 diabetes, meaning that they have been found to have an ongoing autoimmune process but do not yet have any clinical symptoms of diabetes. A total of 50 participants from the age of four have been enrolled in the study, which will last for five years. The aim of the study is to evaluate whether Diamyd® can delay or prevent the participants from presenting with type 1 diabetes. The study is taking place in Sweden led by Dr. Helena Elding Larsson at Lund University. Results are expected at the end of 2016.

• DIAGNODE. An open label study, where Diamyd® is administered directly into lymph nodes in combination with treatment with vitamin D. The study will comprise five patients between the ages of 18 and 30 who have been newly diagnosed with type 1 diabetes, and will continue for a total of 30 months. The aim of the study is to evaluate the safety of the combination treatment and the effect on the immune system and the patients’ insulin producing capacity. The study is taking place in Sweden led by Professor Johnny Ludvigsson and enrolled the first patient in February 2015.

• DIAMYD®/GABA. A placebo-controlled study, where Diamyd® is being tested in combination with GABA. The study will comprise 75 patients between the ages of 4 and 18 recently diagnosed with type 1 diabetes, and will continue for a total of 12 months. The aim of the combination treatment is to preserve the body’s residual capacity to produce insulin. The study is taking place in the US led by Professor Kenneth McCormick at the University of Alabama at Birmingham. The first patient was included in March 2015.

• DiAPREV-IT 2. A placebo-controlled study, where Diamyd® is being tested in combination with vitamin D in children with very high risk of developing type 1 diabetes, meaning that they have been found to have an ongoing autoimmune process but do not yet have any clinical symptoms of diabetes. A total of 80 participants between the ages of 4 and 18 will be enrolled in the study, which will last for five years. The aim of the study is to evaluate whether Diamyd® can delay or prevent the participants from presenting with type 1 diabetes. The study is taking place in Sweden led by Dr. Helena Elding Larsson. The first patient was included in the study in March 2015.

• EDCR IIa. An open label study, where Diamyd® is combined with etanercept and vitamin D. The study will comprise 20 patients between the ages of 8 and 18 who have been newly diagnosed with type 1 diabetes, and will continue for a total of 30 months. The aim of the study is to evaluate the safety of the combination treatment and the effect on the immune system and the patients’ insulin producing capacity. The study is taking place in Sweden led by Professor Johnny Ludvigsson and is in the start-up phase.

*** To read the complete report, please visit www.diamyd.com, or see attached PDF ***

For more information please contact:
Anders Essen-Möller, President and CEO Diamyd Medical AB (publ). Phone: +46 8 661 00 26

Diamyd Medical AB (publ), Kungsgatan 29, SE-111 56 Stockholm, Sweden
Phone: +46 8 661 00 26 Fax: +46 8 661 63 68 E-mail: info@diamyd.com Reg no: 556242-3797

Note: This document has been prepared in both Swedish and English. The Swedish version shall govern in case of differences between the two documents. The document contains certain statements about the Company’s operating environment and future performance. These statements should only be regarded as reflective of prevailing interpretations. No guarantees can be made that these statements are free from errors.

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