Quarterly Report 3, June 27, 2018

Dear Shareholders and Readers

Two weeks ago, Diamyd Medical had another drug enter clinical development phase, when the Swedish Medical Products Agency approved our GABA-based Remygen™ for clinical trials. I would like to clearly highlight the importance of having two drugs — Diamyd® and Remygen™ — in clinical development phase. Both of our clinical development drugs focus on the underlying disease mechanisms in diabetes with the goal of slowing, stopping and ultimately reversing the progression of the disease. Intralymphatic administration of Diamyd® continues to show strong results in the ongoing clinical program, and Remygen™ can cite a large and growing base of research indicating the potential of GABA, the active component in Remygen™, in diabetes.

Our manufacture of GABA clinical development drug began in order to maintain control of product development and rights associated with GABA. Remygen™, which is the result of this venture and our own formulation of GABA, was approved in June for use in a clinical trial, ReGenerate-1, which will be conducted by Uppsala University Hospital. The trial will evaluate both the safety and the effects of Remygen™ in stimulating growth of insulin-producing cells in patients who have had type 1 diabetes for more than five years. In parallel with this trial, a placebo-controlled trial is ongoing at the University of Alabama at Birmingham, in the United States, in which GABA is being evaluated as a food supplement in patients with newly diagnosed type 1 diabetes. Together, ReGenerate-1 and the Alabama trial constitute great value for Diamyd Medical, providing us with the basis for decisions on how a GABA-based medical treatment can be optimized and brought to market.

Last year, through the successful rights issue, we gained the trust from our shareholders to take the intralymphatic administration of Diamyd® into clinical phase IIb. Today, one year later, the open trial DIAGNODE-1 has generated results and the placebo-controlled European DIAGNODE-2 trial is in full swing with more than 50 of the estimated 80 patients included in the trial. The immunological results from DIAGNODE-1, the investigator-initiated pilot trial that paved the way for DIAGNODE-2, were published in May. In the May-publication it is reported that patients who have been treated with intralymphatic administration show a considerably stronger immune response, and earlier it has been shown that the patients’ need of external insulin, as well as blood sugar levels are significantly improved compared with subcutaneous administration. We have the technique of administering Diamyd® intralymphatically to type 1 diabetes patent pending and our patent application also covers other antigen-specific treatments and autoimmune diseases. With the results we have today, this certainly looks like a promising technique for both type 1 diabetes and hopefully for other autoimmune diseases.

In September, 15-month clinical results from all patients in the DIAGNODE-1 pilot trial will be presented. An important milestone that gives us a complete picture of how the clinical course has evolved over the same period of time (15 months) as patients will be followed up in DIAGNODE-2.

Together with ongoing business development and clinical trials with both Diamyd® and Remygen™, we are in an intensive period. With two drugs in clinical development that complement and strengthen each other, the likelihood increases of making meaningful differences for those who live with diabetes, and I look forward to reporting further progress in the coming months.

Stockholm, June 27, 2018
Ulf Hannelius
President and CEO, Diamyd Medical AB (publ)

With two drugs in clinical development that complement and strengthen each other, the likelihood increases of making meaningful differences for those who live with diabetes.
Ulf Hannelius, President and CEO