Year-End Report, October 3, 2018

Dear Shareholders and Readers

With a focus on the patient, Diamyd Medical is developing drugs to slow, stop and reverse the progression of type 1 diabetes. There is currently no cure for this disease and it brings with it great human suffering and significant costs for society. Over the past year, and particularly in the last few weeks, we have achieved key milestones that have advanced the company toward meeting these goals. The potential of our drug portfolio can be seen in the positive results from DIAGNODE-1 with the intralymphatically administered diabetes vaccine Diamyd® and in the initiation of clinical phase development with the GABA-based candidate drug Remygen®.

On September 11 the 15-month results were presented from DIAGNODE-1, a pilot trial whereby the diabetes vaccine Diamyd® is administered directly into the lymph node in patients recently diagnosed with type 1 diabetes, with the aim of slowing or stopping the autoimmune destruction of insulin-producing cells. The results were highly encouraging. A clinically relevant effect was shown on preserving the production of insulin and on the clinical course. DIAGNODE-1 is an open trial that comprises only a few patients, but we can nevertheless conclude that the results are very positive and are to date the strongest results that have ever been shown with Diamyd®. The results showed a significantly lower degree (46-65%) of decline in insulin production compared with untreated patients of the same age. Insulin production increased in three patients over 15 months. This is remarkable and supports the notion that intralymphatic treatment with Diamyd® actually can help reversing progression of the disease.

A disease-modifying type 1 diabetes drug should show an effect on parameters that impact the clinical course and be of importance to preventing future late complications. The results of Diamyd® administered in the lymph node show that at 15 months HbA1c, a measure of the trial participant’s long-term blood sugar level, decreased by 18% compared with an expected increase of 15%. The reduction in HbA1c was achieved through an average increase of insulin doses of only 6% compared with the expected average increase of 50% for untreated patients (reflected in the 15% expected increase in HbA1c). Intralymphatic treatment with Diamyd® was also shown to have a very good tolerability profile, comparable with subcutaneous administration of Diamyd® in earlier trials. Immunological data from DIAGNODE-1 will be available in the autumn. This enables us to use our patent-pending biomarkers to study in more detail how the treatment affects the disease, whether an additional Diamyd® injection should be administered and how the treatment can be tailored to various patient groups.

With positive 15-month results from DIAGNODE-1, patient enrollment for the Phase IIb trial DIAGNODE-2 is now underway and will be extended from 80 to a total of 106 patients. This extension will strengthen the statistical power and the overall safety database. The objective is for the results of DIAGNODE-2 and DIAGNODE-1, along with the data from more than 1,000 patients who participated in previous trials, to form a sufficient basis for submitting an application for marketing authorization. The conditions for entering the market prior to a Phase III program being carried out are to show convincing Phase II results and the regulatory authorities seeing the clear benefit of a treatment like Diamyd® being made available to patients as soon as possible. Life expectancy for people diagnosed with type 1 diabetes before they reach the age of ten is significantly shortened (by 18 years for girls and 14 years for boys), mainly due to diabetes-related complications (severe cardiovascular diseases). However, research shows that maintaining even a small amount of endogenous insulin production considerably reduces the risk of complications from the disease later in life. No treatment currently exists that saves the body’s own insulin production – this is where Diamyd® comes in.

We had MSEK 44 in cash at the start of the fiscal year. Upon full exercise of the warrants in November, the company will receive an additional almost MSEK 60. The aim is to, well in advance of the results from DIAGNODE-2, have established partnership with one or more potential partners with whom we are holding discussions with so as to give Diamyd® the best conditions for benefiting society. I would like to thank all shareholders, collaboration partners and employees for your great commitment and for a successful fiscal year.

Stockholm, October 3, 2018
Ulf Hannelius
President and CEO, Diamyd Medical AB (publ)

The results from DIAGNODE-1 are very positive and are to date the strongest results that have ever been shown with Diamyd®.
Ulf Hannelius, President and CEO