Financial Statement 10/11

Year End Report, Stockholm, October 13, 2011
September 1, 2010 – August 31, 2011

Fourth quarter report for Diamyd Medical AB (publ.), fiscal year 2010/2011
(www.omxgroup.com ticker: DIAM B; www.otcqx.com ticker: DMYDY)

Fourth quarter, June 1, 2011 – August 31, 2011

• Group net sales for the fourth quarter were MSEK 2.2 (110.2)
• Loss before tax for the fourth quarter was MSEK -26.5 (75.0)
• Earnings per share after dilution for the fourth quarter were SEK -0.9 (2.6)
• The Group’s liquid assets and short term investments amounted to MSEK 435.6 (501.3) as of August 31, 2011

Full year, September 1, 2010 – August 31, 2011

• Group net sales for the year were MSEK 280.8 (113.0)
• Profit before tax for the year was MSEK 101.8 (-0.3)
• Earnings per share after dilution for the year were SEK 3.5 (-0.0)

Significant events during the reporting period June 1, 2011 – August 31, 2011

• Diamyd Medical regained all rights and thereby the control of the diabetes therapy Diamyd®after Ortho-McNeil-Janssen Pharmaceuticals, Inc. (OMJPI) terminated collaboration agreement
• Diamyd Medical closed European Phase III study and initiated closure of US Phase III study with Diamyd®
• TrialNet presented results from a study with Diamyd®, which did not show a statistically significant effect of the study drug
• Diamyd Medical presented detailed results of European Phase III study with Diamyd®
• Diamyd Medical increased shareholding in Protein Sciences Corporation
• Diamyd Medical appointed Peter Zerhouni as President
• Diamyd Medical put focus on pain projects and reduced costs

Significant events after the reporting period

• Diamyd Medical was awarded three million dollar grant and expanded the NTDDS portfolio
  
  

CEO COMMENTS

After the setback this spring, in which the results of the Company’s European Phase III study with the diabetes vaccine did not meet expectations, we have shifted the focus of the Company and reduced costs. The cash of more than SEK 400 million is carefully managed while the work of shaping future strategies and business plans is underway. Our resources are now mainly directed towards the development projects based on the Company’s patented NTDDS platform. NTDDS (Nerve Targeting Drug Delivery System) is an innovative technology for delivering drugs directly to the nervous system, providing a local effect in the cells targeted by the treatment, without affecting the rest of the body. The technology has potential to be used for the treatment of chronic pain as well as many other indications in the nervous system.

The top priority right now is the Company’s ongoing US Phase II study with the NTDDS-based drug candidate NP2 Enkephalin for the treatment of pain caused by cancer. Intensive recruitment efforts are underway to enroll the remaining third of the participants to the study; several new clinics have been contracted and additional resources have been allocated to the recruitment campaign. Recruitment rates have varied considerably over time, making it difficult to provide a forecast of when the recruitment of the study will be completed. Results from the study are estimated to be reported sometime between January and June 2012. The Company plans to begin clinical studies with the next NTDDS-based drug candidate for the treatment of pain, NG2 GAD, after evaluation of the study results with NP2 Enkephalin.

Recently Diamyd Medical was, together with the University of Michigan, awarded a three million dollar grant from the US National Institutes of Health (NIH) to develop another drug candidate from the NTDDS platform, NN1 Neurotrophin. This drug candidate is being developed for prevention of nerve damage caused by chemotherapy, i.e. chemotherapy induced peripheral neuropathy, which many cancer patients are afflicted by. It is positive that a highly respected institution such as the NIH has decided to contribute to the development of this drug candidate.

The negotiations are advancing with the University of Florida, which filed a lawsuit against the Company for a part of the upfront payment received under the license agreement with Ortho-McNeil-Janssen Pharmaceuticals, Inc., regarding the diabetes vaccine. With regard to the claims the Company has chosen to reserve the equivalent of two million dollars in the financial accounts as per August 31, 2011.

Several researcher-initiated studies with the diabetes vaccine are still ongoing. The Swedish study, aiming to prevent type 1 diabetes in children at high risk of developing the disease, is particularly exciting to follow.

In September Diamyd Medical participated in an international seminar in Lisbon, Portugal, where the question of how to successfully counteract type 1 diabetes was in focus. The meeting gathered many of the foremost researchers and companies within the field. There was a great interest in the Company’s research and how the active substance in the diabetes vaccine, GAD65, may contribute to an efficient therapy for type 1 diabetes. We continue to work with our worldwide network within diabetes to be able to identify new possibilities for the diabetes vaccine, which has shown a good safety profile in extensive clinical studies.

Stockholm, October 13, 2011

Peter Zerhouni

President and CEO Diamyd Medical AB

SIGNIFICANT EVENTS DURING THE REPORTING PERIOD
JUNE 1, 2011 – AUGUST 31, 2011

Diamyd Medical regained all rights and thereby the control of the diabetes therapy Diamyd® after Ortho-McNeil-Janssen Pharmaceuticals, Inc. (OMJPI) terminated collaboration agreement.
Ortho-McNeil-Janssen Pharmaceuticals, Inc. elected to terminate the agreement that was signed in June 2010 to develop and commercialize Diamyd®, and Diamyd Medical regained all rights to the diabetes therapy. The termination of the agreement followed the evaluation of the results of the European Phase III study, reported on May 9, 2011.

Diamyd Medical closed European Phase III study and initiated closure of US Phase III study with Diamyd®.
The company decided not to complete the follow-up period of the European Phase III study of the antigen-based diabetes therapy Diamyd®, which did not meet the primary efficacy endpoint. Following consultation with the US Food and Drug Administration (FDA), Diamyd Medical also decided to suspend dosing in the Company’s parallel US Phase III study and to initiate closure of the study.

TrialNet presented results from a study with Diamyd® which did not show a statistically significant effect of the study drug.
The results of a study with Diamyd Medical’s antigen-based diabetes therapy Diamyd®, conducted by the research consortium Type 1 Diabetes TrialNet, did not show a statistically significant effect of the study drug.

Diamyd Medical presented detailed results of European Phase III study with Diamyd®.
The Company reported detailed results from the European Phase III study of the antigen-based diabetes therapy Diamyd®, which did not meet the primary efficacy endpoint. Patients treated with Diamyd® had on average 16.4 percent more remaining C-peptide at 15 months compared to those who received placebo. The p-value of the primary endpoint was 0.10.

Diamyd Medical increased shareholding in Protein Sciences Corporation.
Diamyd Medical’s convertible promissory note in the US vaccine company Protein Sciences Corporation was converted into shares. The promissory note was accounted for as an investment of SEK 6.4 million as of November 30, 2007. After conversion, the Company holds about 8 percent of the Protein Sciences Corporation shares.

Diamyd Medical appointed Peter Zerhouni as President.
The Board of the Company appointed the former Acting President of Diamyd Medical AB, Peter Zerhouni, as President of the Company. Peter Zerhouni has been involved in all aspects of the Company since 2006. He assumed his position as President and CEO on July 4, 2011.

Diamyd Medical put focus on pain projects and reduced costs.
Diamyd Medical announced that the Company has chosen to concentrate its resources on the Company’s drug candidates for the treatment of pain and diseases of the nervous system. The termination of the Phase III program with the diabetes therapy Diamyd® means significantly lower costs for the Company which creates strategic leeway.

SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD

Diamyd was awarded three million dollar grant and expanded the NTDDS portfolio.
Diamyd Medical with collaborators received a three million dollar grant from the US National Institutes of Health to develop the Company’s patented Nerve Targeting Drug Delivery System (NTDDS) for prevention of Chemotherapy Induced Peripheral Neuropathy. The grant allows Diamyd Medical to expand the NTDDS technology to also target neuropathy, in addition to the Company’s development portfolio for the treatment of pain.

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

About Diamyd Medical
Diamyd Medical is a Swedish pharmaceutical company focusing on the development of pharmaceuticals for the treatment of pain, neuropathy and autoimmune diabetes. The portfolio of development projects for treatment of chronic pain and neuropathy uses the Company’s patented NTDDS (Nerve Targeting Drug Delivery System) platform to administer drugs directly to the nervous system. Development projects within the area of diabetes originates from the protein GAD65 for the treatment and prevention of autoimmune diabetes.

This information is disclosed in accordance with the Swedish Securities Markets Act, the Swedish Financial Instruments Trading Act, or the requirements stated in the listing agreements.

For more information, please contact:
Peter Zerhouni, President and CEO, + 46 8 661 0026

The document contains certain statements about the Company’s operating environment and future performance. These statements should only be seen as reflective of prevailing interpretations. No guarantees can be made that these statements are free from errors.

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