Quarterly Report II 09/10

Quarterly report, Stockholm, April 28, 2010 September 1, 2009 - February 28, 2010 Second quarter report for Diamyd Medical AB (publ), fiscal year 2009/2010 (www.omxgroup.com ticker: DIAM B; www.otcqx.com ticker: DMYDY Second quarter December 1, 2009 – February 28, 2010 - Group net sales for the second quarter was MSEK 0.2 (0.8) - Loss before tax for the second quarter was MSEK -26.6 (-15.4) - Earnings per share after dilution for the second quarter were SEK -0.2 (-0.7) First half year September 1, 2009 – February 28, 2010 - Group net sales for the first half year was MSEK 1.4 (0.9) - Loss before tax for the first half year was MSEK -44.4 (-25.8) - The Group’s liquid assets amounted to MSEK 200.1 (50.4) as of February 28, 2010 - Earnings per share after dilution for the first half year were SEK -1.7 (-1.2) Significant events during the reporting period December 1, 2009 – February 28, 2010 - A 2:1 division of shares (a split) was executed. - The Diamyd® vaccine was approved for studies in children down to three years of age in the US. - The Annual Meeting of Shareholders was held on December 11, 2009. - Diamyd announced that the Company’s partnership negotiations are at an advanced stage. Significant events after the reporting period - Fund invested 35 MSEK in Diamyd. - Diamyd granted Orphan Drug Designation in the US. - Diamyd announced that the Company’s US Phase III study has included 100 study participants at 33 diabetes centers. - Liquidity provider agreement for the Diamyd share was terminated. CEO COMMENTS Hard work pays off After a long and very busy winter it is time for the second quarterly report of the year. It is very gratifying to see the development in the company and how the important Phase III studies are approaching their final stage. In a year from now we’ll get the results from the European study and thanks to our effort to add more American pediatric sites together with the approval to include younger children, we can now add about one new patient per day in the American study. We are also noticing a considerable interest from the US media, and almost every week there is an article or a TV spot about the study and the potential of the diabetes vaccine. In addition, we recently received a long awaited decision when the FDA granted Diamyd® Orphan Drug Designation. Currently everyone is awaiting the results from the Phase III studies – we, the market, the doctors and, above all, the children and adolescents participating in the studies. If the Phase III results confirm the results from the Phase II study, i.e. that Diamyd® can stop or delay the disease process in type 1 diabetes, it heralds a significant medical breakthrough. Our main priority is the Phase III studies with Diamyd®. At the same time we are working on the next step; to complete the product supply chain, in order to be ready for the anticipated market launch. This takes time and money which is why the process is initiated already now. Our long-term strategy is to build a Nordic specialty pharmaceutical company. As we build up resources and knowledge, we will gradually expand our operations. We are following the development of new diabetes therapies with keen interest and have today the potential to license promising new projects that supplement our product portfolio. The direct placement in March, for a total of SEK 35 million, gives us the possibility to act fast if the right opportunity presents itself. The partnership discussions regarding out-licensing of Diamyd® are continuing, and we are working diligently to complete the negotiations. I am proud of how far we have already reached and I am looking forward to the next quarter and the exciting times ahead of us. Stockholm, April 28, 2010 Elisabeth Lindner SIGNIFICANT EVENTS DURING THE PERIOD DECEMBER 1, 2009 – FEBRUARY 28, 2010 A 2:1 division of shares (a split) was executed. As authorized by the Annual Meeting of Shareholders in December 2009, Diamyd resolved to execute a division of the Company's shares, meaning that each share was divided into two shares of the same class. The record date for the split was January 28, 2010. The last day of trading in the shares before the division was January 25, 2010 and the first day of trading in divided shares was January 26, 2010. The Diamyd® vaccine was approved for studies in children down to three years of age in the US. The US FDA approved the experimental use of the Diamyd® vaccine in children as young as 3 years of age in the TrialNet GAD study, enrolling 126 new onset type 1 diabetes patients in North America. The study, which is being conducted by an international network of leading endocrinologists and immunologists, had previously received approval to recruit recent-onset type 1 diabetes patients between the ages of 16 and 45. Annual Meeting of Shareholders, December 11, 2009. At the Annual Meeting of Shareholders, Diamyd Medical's President and CEO Elisabeth Lindner gave a retrospective view of and summarized the important events during and after the past fiscal year. The Company’s income statement and balance sheet were adopted, and the board and CEO were discharged from liability for the 2008/2009 fiscal year. Anders Essen-Möller was reelected as Chairman of the Board, and Lars Jonsson, Sam Lindgren and Henrik Bonde were reelected to the Board. Maria-Teresa Essen-Möller and Göran Pettersson were elected as new Board members. The annual meeting approved the Board’s proposed guidelines for compensation and terms of employment for the CEO and other key executives. The meeting approved the Board's proposal to amendments to the Articles of Incorporation concerning an execution of a 2:1 division of shares (i.e. a split), meaning that each share is divided into two shares, and that the summons to the shareholders' meeting is adjusted to the new regulations expected to come into force in 2010. In addition, the meeting approved the Board's proposal that the provisions concerning prior application to and right to attend shareholders' meeting are adjusted to the Companies Act. The meeting mandated the Board to decide on new share issues of a maximum total of 10 percent of the number of shares on one or more occasions before the next Annual General Meeting. In addition, the meeting approved the Board's proposal to institute an employee option program. Diamyd announced that the Company’s partnership negotiations are at an advanced stage. Diamyd Medical announced that its previously announced partnership negotiations on the out-licensing of marketing rights for the Diamyd® portfolio were at an advanced stage. Business negotiations of this type entail a large number of issues and complex relationships, so the Company cannot forecast when an agreement may be reached. SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD Fund invested 35 MSEK in Diamyd. Diamyd Medical accepted an offer from an investment fund managed from New York by a Swedish-American team to issue 291,667 new B shares in a direct placement at 120 SEK per share. The issue price corresponded to the average market price of the past 30 trading days. Total proceeds for Diamyd amounted to 35 MSEK. The new shares represent 1.0 % of the capital and 0.7 % of the votes. The Board of Diamyd decided on the new issue based on the authorization given by the Annual General Meeting on December 11, 2009. Diamyd granted Orphan Drug Designation in the US. The FDA has granted Orphan Drug Designation of Diamyd Medical’s lead drug candidate Diamyd® in the USA. The Orphan Drug Designation is granted for rhGAD65, the active ingredient of Diamyd®, for the treatment of type 1 diabetes with residual beta cell function. Orphan drugs qualify for seven years of market exclusivity from the date of US marketing approval, tax credits for clinical research and a waiver for FDA user fees. Diamyd announced that the Company’s US Phase III study is well under way. Diamyd Medical’s ongoing US Phase III study was announced to have included one hundred study participants at 33 diabetes centers in the USA and more sites will be added. The global Phase III program with the Company's lead drug candidate Diamyd® has thereby enrolled more than 430 children newly diagnosed with type 1 diabetes in Europe and the USA. Liquidity provider agreement for the Diamyd share was terminated. Due to increased turnover in Diamyd Medical’s B share, the Company’s liquidity provider agreement with Mangold Fondkommission AB expired on March 5, 2010. A new liquidity provider has not been appointed. -- To read the complete report, please see attached PDF, or visit www.diamyd.com --

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