Financial Statement 09/10

Year End Report, Stockholm, October 22, 2010
September 1, 2009 – August 31, 2010

Fourth quarter report for Diamyd Medical AB (publ.), fiscal year 2009/2010
(www.omxgroup.com ticker: DIAM B; www.otcqx.com ticker: DMYDY

Full year, September 1, 2009 – August 31, 2010

• Group net sales for the year was MSEK 113.0 (1.1)
• Loss before tax for the year was MSEK -0.3 (-81.8)
• Earnings per share after dilution for the year were SEK 0.0 (-3.7)
• The Group’s liquid assets amounted to MSEK 501.3 (37.3) as of August 31, 2010

Fourth quarter, June 1, 2010 – August 31, 2010

• Group net sales for the fourth quarter was MSEK 110.2 (0.0)
• Profit before tax for the fourth quarter was MSEK 75.0 (-29.8)
• Earnings per share after dilution for the fourth quarter were SEK 2.6 (-1.3)

Significant events during the reporting period June 1, 2010 – August 31, 2010

• Diamyd signed an agreement with Ortho-McNeil-Janssen Pharmaceuticals, Inc.,
  a Johnson & Johnson company, to develop and commercialize the Diamyd®
  diabetes therapy.
• Diamyd’s agreement with Ortho-McNeil-Janssen Pharmaceuticals, Inc.
  received antitrust clearance.
• Diamyd received an upfront payment of USD 45 million.

Significant events after the reporting period  

• Diamyd reported promising safety findings from Phase I study in chronic pain.
• Diamyd Trial in Chronic Pain showed Pain Relief

CEO COMMENTS
A great conclusion and an exciting beginning

The year just ended is the most important in Diamyd's history. Near the end of June we were able to announce that after almost a year of demanding negotiations with several big pharmaceutical companies, we signed an agreement with the American pharmaceutical company Ortho-McNeil-Janssen Pharmaceuticals, Inc. (OMJPI) for the global commercial rights to the candidate drug Diamyd®. With its global resources and ambitions in the diabetes area, OMJPI is an ideal partner for a future market launch. The partnership is off to a flying start, and our people are working closely with their counterparts at OMJPI. As part of the agreement, Diamyd received an upfront payment of USD 45 million during the summer, which we periodize until the 15-month-long study period in the European trial is finished.

Our NTDDS technology, which can deliver drugs focally directly to the peripheral nervous system, is the heart of the Company’s development efforts for the treatment of chronic pain. There have been no serious side effects related to the product in the Phase I study of NP2 Enkephalin in terminal cancer patients, which is important since the trial serves as a safety study for the entire NTDDS platform. The trial is not primarily designed to study efficacy, but substantial and sustained reduction in pain scores were reported by treated patients. Moreover, we have determined a suitable dosage for future studies.

In order to highlight our pain portfolio, we have decided to divide our operations into two business areas beginning with the new 2010/2011 fiscal year; Diabetes and Pain. We see a great medical need and an opportunity to quickly demonstrate the value of our pain portfolio by continuing our cancer pain program with NP2 Enkephalin. Diamyd currently has two more candidate drugs in business area Pain in addition to NP2 Enkephalin: NG2 GAD and NE2 Endomorphin, which are both promising for the treatment of different types of pain, including diabetes pain.

Diamyd has grown as our business has evolved, and with the Diamyd® partnership agreement in place and a healthy cash balance, we find ourselves standing on the threshold of a new era. We will expand our operations in the next year. We will be focusing strongly on in-licensing new candidate drugs and on continuing to develop our pain portfolio. Based on the positive Phase I observations of NP2 Enkephalin we plan to initiate a Phase II study in cancer patients with chronic pain.

I feel great confidence as I look forward to the coming year and what we are all waiting for – the first Phase III results for Diamyd®.

Stockholm, October 22, 2010

Elisabeth Lindner
President and CEO, Diamyd Medical AB

SIGNIFICANT EVENTS DURING THE REPORTING PERIOD
JUNE 1, 2010 – AUGUST 31, 2010

Diamyd signed an agreement with Ortho-McNeil-Janssen Pharmaceuticals, Inc. (OMJPI), to develop and commercialize the Diamyd® diabetes vaccine. Diamyd is receiving an upfront payment of USD 45 million, and according to the agreement Diamyd has the potential to receive additional development and sales milestone payments of up to USD 580 million, as well as tiered royalties on future sales. The parties will equally share costs for the development program until results from the ongoing EU Phase III study, expected in the first half of 2011. OMJPI has the right to fully assume responsibility for the development program upon reviewing the results. Following its strategy, Diamyd has secured exclusive rights for commercialization in the Nordic countries. Diamyd also retains the rights to therapeutic use of the GAD65 gene and to derivatives, fragments and variants of the GAD65 protein.

Diamyd’s agreement with Ortho-McNeil-Janssen Pharmaceuticals, Inc. (OMJPI) received antitrust clearance. The US Federal Trade Commission’s clearance under the Hart-Scott-Rodino Anti-Trust Improvements Act is regarding the agreement between Diamyd and OMJPI for development and world-wide commercialization of the GAD65 antigen-based therapy Diamyd® for the treatment and prevention of type 1 diabetes and associated conditions.

Diamyd received an upfront payment of USD 45 million. The upfront payment relates to the closing of the agreement between Diamyd and OMJPI for development and commercialization of the GAD65 antigen-based therapy Diamyd® for the treatment and prevention of type 1 diabetes and associated conditions.

SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD  

Diamyd reported promising safety findings from Phase I study in chronic pain. No drug related Serious Adverse Events have been reported by any patient included in Diamyd's Phase I clinical trial investigating NP2 as a potential therapy for chronic pain. Based upon the Phase I findings to date, the company is planning a multi-center, randomized, double-blind, placebo controlled Phase II clinical trial with NP2 in the United States.

Diamyd Trial in Chronic Pain showed Pain Relief Substantial and sustained reduction in pain scores were reported in the middle and high dose cohorts of Diamyd Medical's Phase I trial investigating NP2 Enkephalin as a potential therapy for chronic pain. The Phase I study is intended to test the safety of NP2 Enkephalin and the NTDDS platform. In addition to safety, measurements of pain relief and concomitant pain medications were collected. The clinical trial was designed as an open label, dose escalation study in patients with intractable pain due to cancer. Three dose levels were investigated and eight patients were evaluable at the four week time point.

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

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