Annual Report 18/19, October 31, 2019

Dear Shareholders and Readers

Diamyd Medical is spearheading an important change in the treatment of autoimmune diabetes - we develop a new class of tailored therapies that intervene early in the disease progression. The change is important and urgent. Although new assistive technologies are increasingly being adopted by patients, there has so far been limited real world impact on patient outcomes. At the same time, there is an unsustainable increase in the pricing of chronic maintenance treatments, especially regarding the pricing of insulin. Accordingly, there is a great unmet medical and social need.

The diabetes vaccine Diamyd® is a so-called antigen specific immunotherapy, specifically adapted for patients diagnosed with autoimmune diabetes. The purpose is to preserve the patient's own insulin production by safely and specifically reprogramming the body's immune system. These forms of tailored treatments, compared to more broad acting therapies that block entire immunological pathways, have for a long time been the holy grail of immunotherapy. But translating preclinical success into robust clinical effects in humans has until recently proven elusive.

During the past few years, results from the clinical trial DIAGNODE-1, based on administering small doses of Diamyd® in a superficial lymph node, have given us the reason to strongly believe we have finally bridged this gap. The clinical trial DIAGNODE-2, where results are expected in the third quarter of 2020, is a Phase 2b trial that is designed to confirm the results we have at hand today.

In addition, we are excited about the recently communicated collaboration with the Norwegian University of Science and Technology, to evaluate the same approach in LADA (Latent Autoimmune Diabetes in Adults) patients. LADA is a patient population that seems especially suited to immunotherapy with the antigen GAD that Diamyd® is based on. Consequently, this collaboration gives us the possibility to broaden our concept based on intralymphatic administration of Diamyd® towards a very large patient population.

We are also encouraged by the first clinical results in type 1 diabetes with GABA, the active component that our second study drug Remygen® is based on, that were presented during the EASD conference in Barcelona, Spain. The results showed that GABA could decrease the otherwise elevated glucagon levels in type 1 diabetes. Importantly, this has provided the first proof that a GABA-based therapy can be translated from a preclinical to clinical setting, and importantly that there are no safety concerns that could make further development difficult. We will use these insights together with the results expected from the clinic trial at Uppsala University where our formulation of GABA, Remygen®, is being evaluated to define the first therapeutic approach that will be advanced towards market.

We recently announced that we may be changing manufacturer for our GAD drug substance and that discussions regarding this are ongoing with our current manufacturer. For the ongoing trials and the planned LADA trial we use already formulated Diamyd® that lasts until 2021, and discussions are ongoing with our current manufacturer to find the best possible future solution.

We diligently focus on advancing treatments that are safe, accessible and that intercept the disease early before complications begin to manifest. Recent successes with immunotherapy in later stage clinical trials together with the significant unmet need have helped raised the attention for our novel approache that has the potential to change the treatment paradigm in type 1 diabetes and LADA in general. The field is experiencing a tailwind. We will make sure to use this to our advantage.

Stockholm, October 31, 2019
Ulf Hannelius
President and CEO, Diamyd Medical AB (publ)

We diligently focus on advancing treatments that are safe, accessible and that intercept the disease early before complications begin to manifest.
Ulf Hannelius, President and CEO

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