Annual Report, November 3, 2016

Dear Shareholders

We will continue to develop Diamyd Medical into a company with a broader project portfolio. Emphasis lies on our flagship, the diabetes vaccine Diamyd® while, at the same time, we focus on the endogenous substance GABA in two of the major pharmaceutical markets: type 2 diabetes and rheumatoid arthritis.

It has been an exciting and intensive fiscal year with news, activities and results that have strengthened our licensing package and demonstrated the potential of our diabetes vaccine Diamyd®. During the current fiscal year, a number of milestones will be achieved. Two out of six of our investigator-initiated clinical trials: DIAPREV-IT 1 solely with Diamyd® and DIABGAD-1 in combination with other substances, are expected to report results in the first quarter of 2017. At the same time, we focus on the endogenous substance GABA in two of the largest pharmaceutical markets: type 2 diabetes and rheumatoid arthritis. Work is currently ongoing with preclinical trials and our own pharmaceutical production.

Expansion with great potential
We are implementing a strategic expansion of our operations by developing a proprietary GABA drug product. This will diversify the risk by growing the licensing portfolio and expanding the market potential. Competition is intense in the type 2 diabetes and rheumatoid arthritis markets while, at the same time, the need and the market for new drug candidates is growing. GABA offers a new category of drug candidates in these disease areas. Both the preclinical and clinical research indicate that GABA has potential to complement and strengthen the efficacy of existing pharmaceuticals. Our announcement during the summer that JDRF, a leading international organization that finances research in type 1 diabetes, and Janssen Research & Development, part of the pharmaceutical company Johnson & Johnson, are investing in the ongoing GABA study in Alabama, confirms the timeliness of our commitment. This autumn we have started manufacturing of a proprietary GABA drug product and in parallel we have initiated preclinical studies that will focus on establishing dosages and formulations.

Cost-effective operations
The broadened activities highlight the importance of resource prioritization. Our way of working builds on a defined strategy, where we can quickly review and allocate resources to drive development forward. In terms of industry standards, Diamyd Medical has a very cost-effective operational model that is based on the network, brand and capabilities that have been built over the years. CFO Anna Styrud, explains how we work to optimize value creation in the company. You can read her interview on pages 16–17.

Strengthened licensing package
At the end of the fiscal year, we reported a significant milestone — in a comprehensive analysis published in the journal Diabetologia — a team of highly respected type 1 diabetes researchers demonstrated that the diabetes vaccine Diamyd® with a high probability yields a positive biological effect with regards to preserved C-peptide, a measure of the body’s own insulin production, compared to placebo. Results from two previous Phase II trials and a Phase III trial were included in the analysis. The authors point out that these results, together with the positive safety profile of the vaccine, justify continued development of Diamyd®. With six ongoing clinical trials, each one representing a possible route-to-market, and a preclinical study that investigates the possibility of developing the next generation diabetes vaccine, Diamyd Medical has a strengthened licensing offering that is supported by independent research.

I would like to use this opportunity to showcase our employees and our network of clinics and researchers that do fantastic work and give us the innovative strength and passion to break new ground and endeavor to change daily life for those suffering from diabetes and other serious inflammatory disorders. I would also like to thank our shareholders, both old and new, for their support during the year. Without you this would not be possible. I look forward to a very exciting year.

Stockholm, November 2, 2016
Ulf Hannelius
President and CEO, Diamyd Medical AB (publ)

We are growing the licensing portfolio and expanding market potential.
Ulf Hannelius, President and CEO

Annual Report

  November 3, 2016