Quarterly Report III 16/17

September 2016 – May 2017, Diamyd Medical AB (publ), Fiscal year 2016/2017

Reporting period, March 1, 2017 – May 31, 2017

• Net result amounted to MSEK -8.3 (-18.2)
• Net result per share amounted to SEK -0.3 (-0.8)
• Cash flow from operating activities amounted to MSEK -5.4(-4.3)
• Liquid assets and short term investments amounted at the end of the period to MSEK 12.2 (36.5)

Nine months, September 1, 2016 – May 31, 2017

• Net result amounted to MSEK -19.0 (-27.2)
• Net result per share amounted to SEK -0.6 (-1.0)
• Cash flow from operating activities amounted to MSEK -16.0 (-13.7)

Significant events during the reporting period

• The rights issue is oversubscribed. After the reporting period Diamyd Medical receives proceedings of MSEK 88.8 before issue expenses
• Application for the Phase II trial DIAGNODE-2 trial is submitted to the Medical Products Agency
• Diamyd® in combination with etanercept and vitamin D shows safety after six months
• Increased patent protection for GABA and Diamyd®
• Major owners and key executives fully subscribe in rights issue
• Agreement with global CRO for the DIAGNODE-2 trial
• PGVinvest AB invests in Diamyd Medical
• Swine influenza vaccination might have had an impact on treatment with Diamyd® in Phase III clinical trial
• 30 month results from DIABGAD-1 support effect after partial remission phase
• Diamyd Medical invests MSEK 0.6 in NextCell Pharma ahead of listing issue

Significant events after the reporting period

• The Swedish Medical Products Agency approves conduction of the DIAGNODE-2 trial
• Two doses of Diamyd® show safety in 5-year prevention trial in children at high risk for type 1 diabetes
• Third interim report for Diamyd® directly into lymph node indicates continued positive clinical course
•  Diamyd Medical subscribes MSEK 1.9 in NextCell Pharma’s listing issue  
• First intralymphatic trial with Diamyd® fully recruited

CEO comments

Dear Shareholders and Readers,
The oversubscribed rights issue means Diamyd Medical has a solid base ahead of this autumn’s focus on DIAGNODE-2, a placebo-controlled trial in which the diabetes vaccine is administered into the lymph nodes of children and young adults that have recently been diagnosed with type 1 diabetes. The Swedish Medical Products Agency has approved the study, and together with TFS, our chosen Contract Research Organization, we are continuing preparations for the forthcoming enrollment of patients.

The DIAGNODE-1 trial, whereby Diamyd® is administered to the lymph nodes, is now fully enrolled and the patients will continue to be followed for 15 months. A third interim report was recently presented from the trial, in which a further three patients had been followed over six months and the disease progression continues to be positive in terms of the remaining capacity to produce insulin and the reduction of long-term blood sugar and insulin dose. These results and the upcoming start of the follow-up trial, DIAGNODE-2, aroused considerable interest among major pharmaceutical companies at our meetings during the ADA diabetes conference in San Diego. We have also noted interest from research scientists and expect additional researcher-initiated trials to start in which the diabetes vaccine Diamyd®, will be evaluated using different combinations or methods of administration.

The quarter did not comprise only positive news. The findings from one of the two researcher-initiated prevention studies, DIAPREViT-1 whereby, for preventive purposes, the diabetes vaccine is administered subcutaneously (under the skin) to children with a high risk of developing type 1 diabetes, did not show any significant difference in preventing a diagnosis. However, the treatment provided an immunological response that will be further analyzed and demonstrated very high safety during the five-year follow-up in the study. The findings are in alignment with what has been demonstrated in other studies with recently diagnosed patients, in which a few doses of subcutaneously administered Diamyd® alone do not have the effect required to demonstrate significant differences in terms of influencing the autoimmune process.

The manufacture of a GABA study drug is continuing as planned. Different formulations have been prepared and are being evaluated prior to selection of the final study drug. A smaller clinical trial with the GABA study drug is planned for the first quarter of 2018 with a primary focus on investigating the possibility of regenerating insulin-producing cells. The researcher-initiated trial at the University of Alabama at Birmingham, which combines Diamyd® and GABA, is building additional knowledge around GABA’s potential immunomodulatory and metabolic properties as well as its synergistic efficacy with the Diamyd® vaccine for recently diagnosed type 1 diabetes. Together, these trials are expected to generate valuable data and, here, we have also noted increased interest from larger pharmaceutical companies with partnership potential.

Finally, our holdings in NextCell Pharma (NCP) and Companion Medical have trended positively During the fiscal year. We invested a total of SEK 2.9 million in NCP, of which MSEK 1.9 in the company's listing issue NCP will be listed on Aktietorget in July and this will provide a more transparent value of our holding, which will be slightly less than 14%. We see good opportunities for NCP to develop a pharmaceutical based on stem cells from umbilical cord tissue. Companion Medical exhibited at the American Diabetes Association(ADA) conference in San Diego this year, and the company plans to be able to have the FDA-approved insulin pen available in the US later this year.

Stockholm, June 28, 2017
Ulf Hannelius
President and CEO of Diamyd Medical AB (publ)

About Diamyd Medical
Diamyd Medical is dedicated to finding a cure for diabetes and other serious inflammatory diseases through pharmaceutical development and investments in stem cell and medical technology.

Diamyd Medical develops the diabetes vaccine Diamyd®, for antigen-specific immunotherapy based on the exclusively licensed GAD-molecule. Four clinical studies are ongoing with Diamyd®. The Company's trial DIAGNODE-2, where the diabetes vaccine is administered directly into the lymphatic node, is expected to start recruiting patients in the fall. An exclusive license for GABA for the treatment of diabetes and inflammatory diseases constitutes alongside with the diabetes vaccine a key asset in Diamyd Medical and the Company uses its GABA in-licensed technology to develop a GABA drug product. Diamyd Medical is one of the major shareholders in the stem cell company NextCell Pharma AB. Diamyd Medical also has holdings in the medtech company Companion Medical, Inc., San Diego, USA and in the gene therapy company Periphagen, Inc., Pittsburgh, USA.

Diamyd Medical’s B-share is traded on Nasdaq First North under the ticker DMYD B. FNCA Sweden AB is the Company’s Certified Adviser. Further information is available on the Company’s website: www.diamyd.com.

Significant events during the reporting period

Diamyd Medical’s rights issue oversubscribed
The Company's new issue is subscribed to 129 % and subscription from the underwriting consortium is therefore not used. In total, in addition to compensation to underwriters and financial advisor, 25 375 993 units are subscribed for, of which 18 271 908 with preferential rights and 7 104 085 without preferential rights. Due to the oversubscription, the Board decides to utilize the available over-allotment of MSEK 20 in its entirety through a separate direct issue of 5 714 286 units. In total, Diamyd Medical receives, after the reporting period proceeds of SEK 88.8 million before issue expenses.

Diamyd Medical submits application to the Medical Products Agency for the Phase II trial DIAGNODE-2
Application is submitted to the Swedish Medical Products Agency to conduct DIAGNODE-2, a pivotal follow-up clinical trial in children and adolescents recently diagnosed with type 1 diabetes. The placebo-controlled Phase II trial, where the diabetes vaccine Diamyd® is administered directly into the lymph nodes will be conducted in Sweden, Spain and the Czech Republic.

Diamyd® in combination with etanercept and vitamin D shows safety after six months
A first six-month interim report from EDCR IIa, a clinical researcher-initiated pilot trial in which the diabetes vaccine Diamyd®is combined with the immunosuppressive drug etanercept and vitamin D, when all 20 patients have been followed for six months, preliminary shows that the treatment is safe and tolerable. No serious side effects have been reported.

Diamyd Medical receives increased patent protection for GABA and Diamyd
Another Diamyd Medical licensed UCLA patent application will be granted. The patent includes protection for treating type 1 diabetes with the combination GABA and the diabetes vaccine Diamyd®and has a maturity until September 27, 2031. Previously, a patent within the same patent family has been granted covering diabetes treatment with GABA and preproinsulin or an immunogenic fragment thereof.

Major owners and key executive fully subscribe for their shares in rights issue
Diamyd Medical’s major owners, Bertil Lindkvist and Anders Essen-Möller, announces that they inted to fully subscribe for their shares, corresponding to a total of approximately SEK 19.9 million or approximately 29% of the rights issue totaling SEK 68.8 million. Key executives also intend to fully subscribe for their shares.

Diamyd Medical enters agreement with global CRO for the DIAGNODE-2 trial
Diamyd Medical has contracted the global contract research company (CRO) TFS Trial Form Support International for the conduction of DIAGNODE-2, a clinical trial in children and young adults recently diagnosed with type 1 diabetes. The placebo-controlled Phase II trial is a pivotal follow-up trial with an innovative and patent-pending concept where the diabetes vaccine Diamyd® is administered directly into the lymph node. The trial is expected to start recruiting patients this fall.

PGVinvest AB invests in Diamyd Medical
The investment company PGVinvest AB acquires 953,333 series B unit rights in Diamyd Medical from Anders Essen-Möller, major owner of Diamyd Medical. All unit rights and shares were taken from an endowment insurance, meaning that the holding specified for Essen-Möller in the published prospectus remains unchanged.

Swine influenza vaccination might have had an impact on treatment with the diabetes vaccine Diamyd® in Phase III clinical trial
A scientific article published in Diabetologia supports the notion that vaccination against influenza A (H1N1) 2009, commonly known as the Swine flu, might have had a negative impact on the outcome of the treatment with the diabetes vaccine Diamyd® in the European Phase III clinical trial conducted in 2008-2011. In the patient group receiving two doses of Diamyd®, there was greater preservation of residual insulin production when there was at least 150 days between the Swine flu vaccination and the first injection of Diamyd®.

30 month results from DIABGAD-1 support effect after partial remission phase
Results after 30 months of the investigator initiated pilot trial DIABGAD-1 show that treatment with the diabetes vaccine Diamyd® in combination with Vitamin D and ibuprofen has a good safety profile and no serious related side effects. With the entire trial period taken into account, no significant difference in the ability to produce insulin was seen between the patient groups receiving active and placebo treatment. However, after the initial period, (partial remission phase or honeymoon period), a significant positive clinical effect was seen in the group receiving active treatment compared with placebo, and the effect was largest in the group receiving a double dose of Diamyd®.

Diamyd Medical invests MSEK 1.5 in NextCell Pharma for development of stem cell therapies
Diamyd Medical announces that the Company intends to invest approximately MSEK 1.5 in NextCell Pharma AB. The investment will be made in two steps, an immediate investment of MSEK 0.6, and MSEK 0.9 during a planned initial public offering of NextCell Pharma.

Significant events after the reporting period

Diamyd Medical receives approval from the Swedish Medical Products Agency for DIAGNODE-2
The Swedish Medical Products Agency approves the conduction of DIAGNODE-2. Submission of applications to the respective Competent Authorities in Spain and the Czech Republic are ongoing, as well as to the relevant Ethics Committees.

Two doses of Diamyd® show safety in 5-year prevention trial in children at high risk for type 1 diabetes
Final results from DiAPREV-IT 1, a placebo-controlled clinical pilot trial led by Associate Professor MD Helena Elding Larsson, Lund University, where the diabetes vaccine Diamyd®for the first time is given to a group of individuals at high risk of developing type 1 diabetes. Overall, the results show that the treatment was safe and tolerable, and that fewer subjects than expected, 16 out of 50 compared to expected 25 out of 50, had developed type 1 diabetes in the 5-year follow-up of the trial. However, no significant difference was seen between children receiving placebo and those who received the active substance. The trial results were presented by Associate Professor Elding Larsson at the Diabetes Conference of the American Diabetes Associations (ADA) 77th Scientific Sessions in San Diego, USA.

Interim report for Diamyd® directly into the lymph node indicates continued positive clinical course
A third interim report from DIAGNODE-1, an open clinical pilot trial where the diabetes vaccine Diamyd®is administered directly into the lymph node, when nine patients have been followed for 6 months, preliminarily shows that the treatment appears to be safe and tolerable. The clinical progression in the patients is positive in terms of the body’s own capacity to produce insulin, as well as long-term blood sugar and insulin dose. Two of the three patients that now have been followed for 6 months are children (12–18 years of age).

Diamyd Medical subscribes for an additional SEK 1 million in NextCell Pharma’s new issue ahead of IPO
The Company subscribes for an additional SEK 1 million in the new issue in NextCell Pharma AB ahead of their planned IPO in July on Aktietorget. In total, Diamyd Medical invests MSEK 1.9 in the listing issue.

First intralymphatic trial with Diamyd® fully recruited 
The open trial DIAGNODE-1 is fully recruited after 12 patients. Diamyd Medical, together with Professor Johnny Ludvigsson at Linköping University, Principal investigator and Sponsor, decides to close the recruitment of patients in the DIAGNODE-1 trial to begin the follow-up of patients already now and focus on the larger follow-up trial DIAGNODE-2.

On-going clinical trials with Diamyd® 

Type 1 diabetes is a devastating disease which requires daily treatment with insulin to sustain life. The importance of finding a cure should not be underestimated. The diabetes vaccine Diamyd® has been used in clinical studies with more than 1,000 patients and has shown a good safety profile. Subsequent development is focused on combination trials to enhance efficacy. Diamyd® is easy to administer in any clinical setting. The potential annual market is estimated to several billion dollars per year. Four researcher-initiated clinical trials are ongoing combining Diamyd® with various other immunomodulatory compounds; etanercept, vitamin D and GABA.

• DIAGNODE -1 – DIAMYD® IN LYMPH GLANDS IN COMBINATION WITH VITAMIN D

An open label trial, where Diamyd® is administered directly into lymph nodes in combination with treatment with vitamin D. The trial comprises fifteen patients between the ages of 12 and 30 newly diagnosed with type 1 diabetes, and will continue for a total of 30 months. The aim of the trial is to evaluate the safety of the combination treatment and the effect on the immune system and the patients’ insulin producing capacity. The trial is led by Professor Johnny Ludvigsson at Linköping University, Sweden. The first patient was included in the trial in February 2015.

• GABA/ DIAMYD® – COMBINING DIAMYD® WITH GABA

A placebo-controlled trial, where Diamyd®is being tested in combination with GABA. In accordance with agreement with Jansen Research & Development and JDRF the trial has expanded to comprise 95 patients between the ages of 4 and 18 recently diagnosed with type 1 diabetes. The trial 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 trial is led by Dr. Alexandra Martin at the University of Alabama at Birmingham, USA. The first patient was included in the trial in March 2015.

• EDCR IIa – COMBINING DIAMYD® WITH ETANERCEPT AND VITAMIN D

An open label trial, where Diamyd®is combined with etanercept and vitamin D. The trial comprises 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 trial is to evaluate the safety of the combination treatment and the effect on the immune system and the patients’ insulin producing capacity. The trial is led by Professor Johnny Ludvigsson at Linköping University, Sweden. All patients were included in September 2016. 15 month results are expected during the first quarter of 2018.

• DiAPREV-IT 2 – COMBINING DIAMYD® WITH VITAMIN D

A placebo-controlled trial, where Diamyd® is being tested in combination with vitamin D in children at 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 trial, which will last for five years. The aim of the trial is to evaluate whether Diamyd® can delay or prevent the participants from presenting with type 1 diabetes. The trial is led by Dr. Helena Elding Larsson at Lund University, Sweden. The first patient was included in March 2015.

*** The above is an excerpt from the report. To read the complete report, please visit www.diamyd.com, or see attached PDF ***

For more information, please contact:
Ulf Hannelius, President and CEO, phone: +46 736 35 42 41
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

This information is information that Diamyd Medical AB is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the contact person set out above, at 08.30 CET on June 28, 2017.

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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