DIAMYD™ DIABETES DRUG SHOWS EFFICACY IN A PHASE II TYPE 1-DIABETES TRIAL

Press Release, Stockholm, Sweden – August 22, 2006 – Diamyd Medical AB (SWEDEN OMXS: DIAM B; USA ADR: DMYDY)

Diamyd Medical announces that its lead drug candidate, Diamyd™, has demonstrated overall statistically significant efficacy in preserving insulin production in a Phase II clinical trial in 70 children and adolescents with type 1-diabetes. No serious adverse events associated with the therapy were observed. The Principal Investigator found that the treatment is easy to give and that the study outcomes are of clinical importance for the treatment of type 1-diabetes. The Diamyd™ Phase IIb results will be commented on during a live web-cast (www.diamyd.com) press conference at the Stockholm Stock Exchange on Wednesday, August 23rd at 11:00 a.m. Central European Time. The results from the Diamyd™ study demonstrate that the group of 35 recently diagnosed type 1-diabetes patients that received Diamyd™ produced approximately twice as much meal stimulated insulin (as measured by C-peptide) 15 months after the first treatment as compared to the placebo group (p ~ 0.01). Preserving insulin-production is crucial for delaying the complications associated with long-term diabetes which cost billions of dollars to treat. The ability of the beta cells to produce insulin in response to a meal is considered to be the key factor when it comes to assessing beta cell function. As insulin and C-peptide are produced in equal amounts and C-peptide is easier to measure, meal stimulated C-peptide levels are the most important parameter to follow in a type 1-diabetes study where the aim is to preserve beta cell function. The C-peptide production in both groups experienced a decline but the decline was significantly inhibited in the Diamyd™ group. There were no significant differences in fasting C-peptide levels between the two groups. The treatment itself consisted of two injections of 20 mg Diamyd™, one at day one and one at day 30. “This is a breakthrough”, states Johnny Ludvigsson, M.D. Professor of Pediatrics at the University Hospital, Linköping University, Sweden and the Principle Investigator of the study that was carried out at 8 hospitals in Sweden. “This clearly offers the potential to improve treatment of type 1-diabetes. Endogenous insulin production is very important as it helps patients to better control their disease and reduce complications. The demonstrated effect is of clinical importance. The treatment is very easy to give, only two injections in total and it was very well received by patients, parents and doctors. In this trial, safety was not an issue.” ”Although preliminary, the results of this trial constitute a major landmark in Diamyd Medical’s history”, says Anders Essen-Möller, CEO of Diamyd Medical. “Our goal is to bring novel therapies to the millions of patients who suffer from diabetes, a growing, worldwide health crisis. It is encouraging that the Diamyd™ drug now has shown statistically significant efficacy in both type 1-diabetes and in the autoimmune form of type 2-diabetes (LADA). The Company will now evaluate and execute its strategies on how to bring Diamyd™ to the market. This may include taking Diamyd™ to the market ourselves, aggressively seeking high-value international pharmaceutical partnerships for the co-development of Diamyd™, or a mixture of both.” “That Diamyd™ demonstrated the ability to preserve the function of pancreatic beta cells in type 1-diabetes patients is a very encouraging trial result”, states Professor Mark Atkinson, Sebastian Family Eminent Scholar for Diabetes Research at the University of Florida, from which Diamyd Medical has licensed the rights to use GAD65 for treatment of diabetes. “Major studies such as the ‘UK Prospective Diabetes Study’ and ‘the Diabetes Control and Complications Trial’ indicate that maintenance of endogenous insulin secretion is associated with better metabolic control, as well as a lower risk for hypoglycemia and chronic complications. As Diamyd administration preserved metabolic function, this would suggest that significant short and long term benefits might be associated with the use of this drug as a treatment for type 1-diabetes. Those benefits would not only include an improved quality of life for those with type 1-diabetes but in addition, therapies that preserve beta cell function should provide a tremendous cost saving tool as a majority of the expenses associated with the disorder are, in fact, related to the treatment of complications.” “I'd like to congratulate Diamyd Medical regarding these positive results” says Professor Jerry Palmer, Director at Diabetes Endocrinology Research Center and Professor of Medicine at University of Washington. “With statistically significant better endogenous C-peptide production in the Diamyd™-treated group over placebo the drug seems clearly to be effective. This is an important breakthrough for autoantigen specific therapy. I look forward as the US Lead Investigator to contributing to the success of future clinical studies with the hope that Diamyd may help patients to achieve better control of their diabetes and to experience less long term complications”. “This is brilliant. These positive results are more striking than any of the other studies reported to date” says David Leslie, Professor of Diabetes and Autoimmunity at the Royal London and St. Bartholomew’s School of Medicine, University of London. “It’s tremendously satisfying to see our work go from the lab to a clinical application with the potential to help so many people”, says Daniel Kaufman, Ph.D., Professor, UCLA Department of Molecular and Medical Pharmacology, whose research team first developed and tested the vaccine in diabetes-prone mice. ”With these positive results in the type 1-diabetes study the likelihood that our ongoing LADA study will be successful has increased dramatically” says Professor Carl-David Agardh, Malmo University Hospital, Malmo Sweden, Principal Investigator of the on-going 160-patient LADA study. “Type 1-diabetes is known to be a more aggressive disease than LADA so we are optimistic that Diamyd™ will continue to show effectiveness also in this slower-developing form of diabetes”, continues Professor Agardh. Diamyd Medical’s research program was preceded by studies from the early 1980s where Professors Johnny Ludvigsson, Ake Lernmark, and Steinun Baekkskov discovered the autoantigen that later proved to be GAD65, the active ingredient in the Diamyd™ therapeutic. The GAD genes were subsequently isolated by Dr. Allan Tobin’s laboratory at UCLA. In 1996, Drs. Daniel Kaufman and Jide Tian, (UCLA) demonstrated that GAD-specific autoantigen therapy could effectively prevent type 1-diabetes-prone mice, providing a proof-of principle for subsequent clinical trials. The study results reported in this press release are preliminary and provisional. Conclusions may be up-dated when detailed analyses become more complete. A scientific and in depth presentation of the study results will be presented on September 17, by Professor Johnny Ludvigsson at the European Diabetes Congress, EASD, in Copenhagen.