Year End Report, Stockholm, October 26, 2006
Year End Report for Diamyd Medical AB (publ)
(SWEDEN NOMX: DIAM B U.S.A ADR: DMYDY)
September 1, 2005 – August 31, 2006
Diamyd Medical AB, a company focused on therapies for autoimmune diabetes, announces today its results for the fiscal year ending August 31, 2006.
· Results from a Phase II clinical trial in 70 patients with type 1 diabetes were reported, demonstrating significant efficacy with Diamyd® (rhGAD65) therapy.
· A Phase II/III trial in 160 patients with autoimmune type 2 diabetes was fully recruited. Release of the results is planned for June 2007.
· Execution of a non-exclusive license permitting Neurologix Inc., New Jersey, U.S.A to use the GAD65 gene for the treatment of Parkinson’s disease. A down payment of US$ 500,000 (SEK 3.6 million) was received.
· A contract was concluded for the manufacturing of clinical grade Diamyd® drug for Phase III studies.
· An investment in convertible bonds of US$ 3 million (SEK 21.7 million) was made in the US company Protein Science Corporation, Connecticut.
· Broadened the product pipeline with the acquisition of Nurel Therapeutics, Pennsylvania, U.S.A.
· An ADR level 1 program was launched for US investors under the symbol DMYDY.
· Sales were US$ 103,500 (SEK 750,000) compared to US$ 127,000 (SEK 881,000) for the prior year.
· Earnings were US$ -5.0 million (SEK -36.0 million), compared to US$ -5.0 million (SEK -36.6 million) for the prior year.
· Liquid assets were US$ 8.2 million (SEK 59.4 million) as of August 31, 2006. This is to be compared with US$ 15.9 million (SEK 115.5 million) for the prior year. Additionally, about US$ 7 million (SEK 49.2 million) in liquid assets were received on Sept 6, 2006, as outstanding warrants were exercised.
· Earnings per share were US$ -0.58 (SEK -4.2) compared to US$ -0.61 (SEK -4.4) for the prior year.
COMMENTS FROM THE CEO
This past year marked a major and very positive turning point in the evolution of Diamyd Medical. In August 2006, perhaps the most significant event in the Company’s history occurred. Our Phase II study using Diamyd® to treat children and adolescent type 1 diabetes patients demonstrated significant efficacy. The slowing of ongoing autoimmune destruction of insulin-producing pancreatic beta cells was shown. Additionally, it was confirmed that the two doses of Diamyd® given over 30 days were very well received by patients, their parents and the investigators. Based upon these results, and the other trials reported to date, we believe Diamyd® to be safe and effective for the treatment of autoimmune diabetes.
With regard to our ongoing study with 160 patients with autoimmune type 2 diabetes (LADA), it is a pleasure to report that all patients have been recruited and treated. The outcome of this study is expected in June 2007.
To facilitate future clinical studies in the U.S.A., we have transferred manufacturing of Diamyd® to Protein Sciences Corporation, CT, U.S.A. This company specializes in the manufacture of vaccines using next-generation technologies. A US$ 3 million investment in convertible bonds was also made in this company
The GAD65 molecule, exclusively licensed by us, is important not only in diabetes but also in various CNS diseases. This view was strengthened by the licensing of the GAD65 gene for treatment of Parkinson’s disease to Neurologix, Inc., NJ, U.S.A. The deal included an execution fee of US$ 500,000, as well as annual fees and future royalties on sales. Neurologix has recently reported a successful Phase I trial using GAD65 in patients with Parkinson’s disease.
Our presence in the U.S.A was further enhanced through the acquisition of Nurel Therapeutics in Pittsburgh, PA, U.S.A, (now Diamyd, Inc.). Diamyd, Inc., an emerging and exciting gene therapy company, focuses on diabetes complications such as pain and nerve damage. Hence, our product pipeline has broadened.
Diamyd Medical ended its fiscal year in good financial condition; as, outstanding warrants were exercised resulting in proceeds to the Company of approximately US$ 7 million.
US investors can now purchase shares of Diamyd Medical directly in the U.S.A via a Level 1 ADR program under the symbol DMYDY.
Our focus continues to be building shareholder value. With our strong clinical results at hand, partnership discussions with large pharmaceutical companies regarding commercialization of Diamyd® are ongoing. The product pipeline has also been broadened. In addition, other applications for GAD65 have been outlicensed to third party biotech companies. At the same time preparations are underway to take Diamyd® into Phase III studies necessary for market approval.
Anders Essen-Möller, CEO and President of Diamyd Medical AB.
SIGNIFICANT EVENTS – SEPTEMBER 1, 2005 TO AUGUST 31, 2006
CLINICAL TRIALS: TYPE 1 DIABETES
In August and September 2006 Diamyd Medical announced positive results from a randomized, double blind, placebo-controlled multi-centre Phase II trial in 70 children and adolescents with type 1 diabetes. At 15 months, significant efficacy was demonstrated in preserving beta cell function: The group of 35 patients that received Diamyd® produced approximately twice as much meal stimulated insulin, as measured by C-peptide levels (AUC) 15 months after the first treatment as compared to the placebo group. C-peptide levels in both groups experienced a decline; however, the decline was significantly inhibited in the Diamyd® treated group (p=0.01). The subgroup of Diamyd® treated patients, with a disease duration shorter than 3 months (since diagnosis), indicated an improved endogenous insulin production. In addition, the results also strongly support the safety of Diamyd® administration. There were no serious adverse events reported that were related to the Diamyd® treatment.
The trial is now in a follow-up stage of additional 15 months.
CLINICAL TRIALS: TYPE 2 DIABETES (LADA)
Diamyd Medical’s previously reported trial, the Phase II dose finding trial, encompassing 47 patients with autoimmune type 2-diabetes (LADA), continues in its follow-up phase. Patients were treated with doses of 0, 4, 20, 100 and 500 µg Diamyd®. Significant improved levels of both C-peptide and HbA1c were demonstrated at two years for the group that received 20 µg Diamyd®.
Diamyd Medical’s second trial in autoimmune type 2-diabetes (LADA), a Phase II/III clinical trial encompassing 160 patients, is proceeding according to plan. All patients were recruited and have received their treatments. Results from this trial are planned for June 2007.
Manufacturing of Diamyd® transferred to the U.S.A.
In December 2005, Diamyd Medical executed a manufacturing agreement with Protein Sciences Corporation, CT, U.S.A. to produce clinical grade materials for Phase III-clinical trials in the U.S.A. Protein Sciences is focused on the development and manufacture of vaccines based on an advanced new technology.
Convertible bond investment in Protein Sciences Corporation
In December 2005, Diamyd Medical made a US$ 3 million investment in convertible bonds in Protein Sciences Corp., CT, U.S.A.
Gene therapy company acquired
In December 2005 Diamyd Medical acquired Nurel Therapeutics, Inc., (now Diamyd, Inc.), an emerging gene therapy company based in Pittsburgh, PA, U.S.A. Products under development focus on diabetes complications and include use of a proprietary Nerve-Targeting Drug Delivery System (NTDDS). This new technology is applicable to numerous product developments including those for the treatment of acute and chronic pain, nerve damage, and the potential for additional applications in CNS diseases.
American Depositary Receipts Level 1 Program launched
Consistent with the Company’s strategy to increase its presence in the U.S.A, a Level 1 ADR-program (American Depositary Receipt) was activated in April 2006 with the Bank of New York. The ADR program enables investors in the U.S.A to trade Diamyd Medical shares through their local broker. The Diamyd Medical ADR is traded under the symbol “DMYDY”.
Therapeutic rights for GAD65 treatment of Parkinson’s disease out-licensed
In August 2006 Diamyd Medical and Neurologix Inc., Fort Lee, NJ, U.S.A. (OTCBB: NRGX) signed a license agreement. Neurologix obtained non-exclusive rights to develop and commercialize the use of GAD65 as a therapeutic treatment for Parkinson’s disease. Neurologix was first in the world to successfully use GAD-gene therapy in human clinical trials for Parkinson’s disease and has recently reported positive results from a Phase I study in 12 patients.
Warrants exercised
Participants in the 1999 Right’s Issue obtained warrants expiring by August 31 2006. Virtually all warrants were exercised, resulting in the capital contribution of approximately US$ 7 million (SEK 49.4 million) to Diamyd Medical (September 6, 2006). The total number of shares in the Company after the exercise of the warrants is 9,647,478 (September 2006).
EVENTS SUBSEQUENT TO CLOSE OF THE PERIOD
Hans Wigzell proposed as new member of the Board
In September 2006 the Company announced that Professor Hans Wigzell MD, Ph.D. has agreed, pending shareholder approval, to serve as a Director of the Board at Diamyd Medical AB. The appointment of Professor Wigzell brings another experienced board member to the Company. His appointment greatly enhances Diamyd Medical’s network and knowledge base within the life sciences and its businesses.
MARKET & BUSINESS OVERVIEW
Diabetes
The International Diabetes Foundation estimates that the number of persons with diabetes worldwide is nearly 200 million and that this number will increase to 330 million by 2025. According to the United States National Institutes of Health, more than 20 million people in the United States suffered from diabetes in 2005. One to two million of these patients (5-10 %) have type 1 diabetes and it is estimated that up to an additional 10 % (2 million patients) have autoimmune type 2 diabetes (LADA). The type 1 diabetes and the LADA patients represent the groups where Diamyd Medical believes that its Diamyd® therapy may prove to be an effective therapy. The costs associated with diabetes in the western world are about 7 % of total healthcare budgets, or more than US$ 200 billion on a global basis.
Human recombinant Glutamic Acid Decarboxylase isoform 65 kDa (rhGAD65)
Diamyd Medical develops a product, Diamyd®, for treatment of autoimmune diabetes that comprises both type 1 diabetes and autoimmune type 2 diabetes (LADA). The disease develops when the body’s immune system attacks the patient’s own insulin-producing pancreatic beta cells. Diamyd® is based on the 65 kDa isoform of recombinant human glutamic acid decarboxylase protein (rhGAD65). Endogenous GAD65 is present in both insulin-producing beta cells, as well as in nerve and brain tissues. Its role in the beta cells is not fully understood; however, in nerve cells GAD65 catalyzes the conversion of the amino acid glutamate to GABA, a neurotransmittor. Thus GAD65 is considered an important candidate drug in several neurological diseases including Parkinson’s, epilepsy and pain.
As GAD65 is a major autoantigen in autoimmune diabetes, the Diamyd® candidate therapeutic is intended to induce immune tolerization in patients with autoimmune diabetes, or risk thereof, in order to prevent the destruction of pancreatic beta cells and maintain natural insulin production.
Nerve Targeting Drug Delivery System (NTDDS)
Through its acquisition of Nurel Therapeutics, Diamyd Medical obtained exclusive rights and licenses to the Nerve Targeted Drug Delivery System (NTDDS). NTDDS is based on a replication deficient HSV backbone that has natural affinity for nerve cells. Upon introducing the therapies into the nerve cells, the NTDDS remains stable for several weeks during which it expresses therapeutic biologics from inserted genes. In the case of the proposed pain therapies using GAD or enkephalin, the product is produced in the sensory nerves and released into the synapses in the dorsal root ganglia, where it acts to block pain transmission to the brain. A key advantage of the NTDDS lies in the fact that the localized therapy will not circulate throughout the body and, therefore, will be less likely to produce any systemic side effects that are common in current pain and CNS disease therapies. Additionally, the NTDDS does not integrate into a host cell’s chromosome which also reduces such a risk of side effects.
FINANCIAL HIGHLIGHTS
Sales – Group sales were US$ 103,500 (SEK 750,000) compared to US$ 127,000 (SEK 881,000) for the same period of the prior year and consisted mostly of Diamyd-related products. Sales of Diamyd Medical products fluctuate from quarter-to-quarter as the Company’s products are primarily sold for various scientific research purposes.
Other income – A license payment of US$ 500,000 (SEK 3.6 million) was received from Neurologix, Inc., NJ, U.S.A for a license.
Costs - The Group’s current costs were US$ 5.8 million (SEK 42.3 million) compared to US$ 5.6 million (SEK 40.8 million) for the same period the prior year. The cost of research and development was US$ 1.1 million (SEK 8.2 million).
Net Loss – Net loss after financial income and expenses was US$ -5.0 million (SEK -36.0 million) compared to a net loss of US$ -5.0 million (SEK -36.6 million) for the same period of the prior year.
Financial Status and Liquidity – Liquid assets for the Group were US$ 8.2 million (SEK 59.4 million) as of August 31, 2006 and increased to US$ 15.0 million (SEK 108.6 million) by September 6, 2006 after the exercise of the warrants. This is to be compared with US$ 15.9 million (SEK 115.5 million) for the prior year.
Investments – No significant investments were made during the financial year.
Staff – The Group had a staff of 9 people as of August 31, 2006, of which 6 were men and 3 were women.
Share – The total number of shares in the Company after the exercise of the warrants in September 2006 is 9,647,478.
Parent Company – The net sales for the parent company were SEK 0 since all sales are made in subsidiaries. Net loss after financial income and expenses was US$ -0.7 million. Investments for the period were 0.
Conversion rate – the conversion rate used in this report is US$ 1 = SEK 7.245
Shareholders' General Meeting
The Annual General Shareholders’ Meeting for Diamyd Medical AB will be held on December 11, 2006 at 3 pm. Location: Strindbergssalen, BERNS, Berzelii Park, Stockholm.
Annual Report
The Company’s Annual Report is expected to be published on the Company’s web site on or before December 4, 2006. To cut costs and reduce the impact on the environment, only the English version will be printed. Printed and digital Annual Reports will be distributed upon request.
To read the complete report, please see attached pdf.