Quarterly report Stockholm July 1, 2008

3rd Quarterly Report for Diamyd Medical AB (publ), Fiscal Year 2007/2008
www.omxgroup.com ticker: DIAM B; www.otcqx.com ticker: DMYDY)

• Financial position strengthened as fully subscribed direct placement brings in MSEK 72.3 before issue expenses combined with warrants for an additional MSEK 99.1, if fully exercised.
• Phase III studies with type 1 diabetes patients approved and initiated in Europe and the US.
• Warrants are listed for trading at First North, after the reporting period.
• Great interest in Diamyd at the American Diabetes Association (ADA) Conference in San Francisco (after reporting period).
• Third quarter net sales amounted to kSEK 128 compared to kSEK 241 for the same period last year.
• Third quarter net loss was MSEK -10.0 compared to MSEK -13.7 for the same period last year.
• Liquid assets amounted to MSEK 96.1 as of May 31, 2008, compared to MSEK 21.8 as of May 31, 2007.
• Result per share after dilution was SEK -1.0 compared to SEK -1.4 for the same period last year.

CEO OVERVIEW
In the month of March, the US Food and Drug Administration (FDA) and the Swedish Medical Products Agency (MPA) approved our Phase III studies with Diamyd® for treating type 1 diabetes. We see this as proof that the manufacturing process and previous clinical studies with Diamyd® are solid and that the governing agencies believe our Phase III studies has the potential to succeed.

At this time, patient enrollment for the Phase III Diamyd® study in Sweden is ongoing. We are also expecting approval in additional European countries in August and September. First US institutional ethics committee approvals have been received.

I cannot help but emphasize how extremely fast this big project has moved forward. Our goal is for the last patient to be included before mid-2009 so we can report the results in the fall of 2010. We are working with many clinics in parallel to minimize the recruitment period.

Since we are now in Phase III, we also re-evaluated our business model during the spring. It is no longer apparent that we should accomplish a global partnership agreement with a big pharma company for Diamyd® for type 1 diabetes, since we have already assumed the majority of development costs. Our current strategy, as previously communicated, is rather to retain certain markets that are important to us and out-license other markets. Type 1 diabetes is a niche indication with medical specialists as customers who can be reached with a highly limited marketing organization. We are gradually building a pharma company in the area of diabetes.

In June, we were represented at the ADA Conference in San Francisco, the world’s largest diabetes conference. There was significant interest in Diamyd® and an additional 20 or so clinics requested information to participate in our US study. Diamyd® was named in numerous scientific presentations in the conference. As an example, the Chair of TrialNet, a diabetes organization sponsored by the US National Institutes of Health, confirmed during a presentation that in addition to the type 1 diabetes therapeutic clinical trial we have announced earlier ; they also intend to initiate a study which purpose will be to prevent type 1 diabetes using Diamyd®. Such a study would be of great value to Diamyd Medical and would bring Diamyd Medical yet another large step closer to our ultimate goal of curing type 1 diabetes.

On April 18, our direct placement was fully subscribed, and we can note that 50% of the investors, who heard our presentation, chose to invest in Diamyd Medical.
We have made great progress this spring. We are incredibly proud and very happy about the continued confidence of our shareholders and we would also like to take this opportunity to welcome our new shareholders to Diamyd Medical.

Elisabeth Lindner, President and CEO Diamyd Medical

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