Quarterly Report I 15/16

September 2015 – November 2015
Diamyd Medical AB (publ), Fiscal year 2015/2016
Reporting period, September 1, 2015 – November 30, 2015

  · Net result amounted to MSEK -4.3 (-5.9)
  · Net result per share amounted to SEK -0.2 (-0.3)
  · Cash flow from operating activities amounted to MSEK -4.8 (-5.8)
  · Liquid assets and short term investments amounted at the end of the period
to MSEK 24.9 (29.8)

Significant events after the reporting period

  · Preliminary 15-month results from DIABGAD, a 30-month pilot study with the
diabetes vaccine Diamyd® in combination with vitamin D and ibuprofen, were
reported

  · Diamyd Medical plans first interim report from open label pilot study EDCR
IIa with the diabetes vaccine Diamyd® in the first quarter of 2016

CEO comments

Dear Shareholders,

We take great pleasure in reporting that Diamyd Medical continues to strengthen
its position as a world leader in the development of Antigen Based Therapy for
type 1 diabetes. A positive trend for the Diamyd® therapy could be reported from
the end of the first 15-month period of the ongoing 30-month DIABGAD study.
Limited six-month findings from the EDCR study will soon be available, as well
as limited six-month findings from the DIAGNODE study. Particularly pleasing is
the growing interest shown by the pharmaceutical industry in our approach to
combining GABA with antigen-based therapy for autoimmune diseases, not limited
to type 1 diabetes, and for certain inflammatory disorders.

A complete cure for type 1 diabetes could be expected to include: A)
manipulation of the immune response to facilitate susceptibility to tolerance
induction; B) introduction of immunological tolerance to the specific antigens
exposed to the autoimmune attack, and C) increasing the functional beta cell
mass to enable sufficient endogenous insulin secretion.

A possible scenario is that, while several companies may develop A and C
components, Diamyd Medical will be first to market with a B component, and then
continue to further improve on its antigen-specific therapy.

We are very excited about being the leading company in terms of component B
development, i.e. the induction of tolerance to specific beta cell antigens.
Several clinical trials have been carried out with GAD65 as the beta cell
antigen. In a Phase III trial, the diabetes vaccine Diamyd® (GAD in alum)
demonstrated 16 percent (p=0.1) higher efficacy than a placebo in terms of the
ability to produce insulin after 15 months. Diamyd® has demonstrated a good
safety profile in trials with more than 1,000 patients.

We believe that our B medication component (the diabetes vaccine Diamyd®) can be
granted market approval as soon as the tolerance-inducing effect of the diabetes
vaccine can be enhanced, preferably through a combination with an existing and
market-approved A component. Think cancer – a combination of medications usually
provides the best treatment outcomes.

There is a steadily growing stream of possible A and C medications that through
non-specific mechanisms could enhance the tolerance-inducing ability of antigen
-specific therapy for type 1 diabetes. Most of these could in principle be used
in combination with the diabetes vaccine Diamyd®. Examples of such molecules
include GLP-1 analogues, DPP4 inhibitors, metformin, granulocyte colony
stimulating factor (GCSF), antithymocyte globulin (ATG), abatacept, alefacept,
demethylation agents, the IL-10 cytokine, ustekinumab (Stelara) and antibodies
against T and B blood cells. We have chosen to study Diamyd® in combination with
some A components, such as ibuprofen, etanercept, vitamin D and GABA (the last
-mentioned for which, as previously reported by Diamyd Medical, interesting pre
-clinical proof of concept has been shown, see the figure below).

Although our antigen-specific drug candidate, Diamyd®, is the leader in its
class, and could be approved as a separate medication in combination with a
suitable A component, a potential Diamyd 2.0 is currently under development, in
where additional antigens such as gliadin and/or proinsulin may be introduced to
broaden the patient population, in which Diamyd®, can possibly stop the
autoimmune attack on beta cells.

We are also studying the effect of various administration methods for the
diabetes vaccine Diamyd®, such as subcutaneous injection in the arm,
subcutaneous injection in the abdomen (closer to the pancreatic draining lymph
nodes) and directly into lymph nodes. Pre-clinical testing is ongoing with the
ex-vivo co-culturing of antigens and tolerant antigen-presenting cells (APCs),
with the goal of gradually injecting them back into patients (cell therapy).

Once the autoimmune attack has been overcome, the beta cell mass must be
increased so that individuals with type 1 diabetes can produce enough insulin on
their own. There are several strategies for such C components: transplantation
of insulin-producing cells combined with immunosuppression to prevent rejection;
transplantation of insulin-producing cells that are encapsulated to avoid being
recognized as foreign tissue; autologous transplantation of stem cell-derived
beta cells, and administration of beta cell regeneration components, such as
e.g. GABA molecules.

Current development pipeline - Pre-clinical proof-of-concept

Combination therapy using GABA and antigen (GAD65) SELECTED RESULTS
GABA + GAD/alum combination therapy shows significant synergistic effects on
normoglycemia in NOD mice

[image]

REFERENCES: Tian, Jide, Hoa Dang, and Daniel L. Kaufman. "Combining Antigen
-Based Therapy with GABA Treatment Synergistically Prolongs Survival of
Transplanted ß-Cells in Diabetic NOD Mice." PLoS ONE, 2011.

Current development pipeline - Pre-clinical proof-of-concept

Combination therapy using GABA and antigen (Proinsulin) SELECTED RESULTS
GABA + Proinsulin/alum combination therapy shows significant synergistic effects
on normoglycemia in NOD mice

[image]

REFERENCES: Tian, J., H. Dang, A. V. Nguyen, Z. Chen, and D. L. Kaufman.
"Combined Therapy With GABA and Proinsulin/Alum Acts Synergistically to Restore
Long-term Normoglycemia by Modulating T-Cell Autoimmunity and Promoting -Cell
Replication in Newly Diabetic NOD Mice." Diabetes, 2014, 3128-134.

Significant events after the reporting period

Preliminary 15-month results from DIABGAD – a 30-month pilot study with the
diabetes vaccine Diamyd® in combination with vitamin D and ibuprofen
Diamyd Medical announced from a clinical investigator-initiated pilot study,
DIABGAD-1, that the diabetes vaccine Diamyd® in combination with vitamin D and
ibuprofen after 15 months has a good safety profile with no reported serious
side effects related to the treatment. The data shows that after the initial
phase (referred to partial remission or the honeymoon phase), the group
receiving placebo (non-active substance) lost their ability to produce insulin
at a rate that was 2-3 times faster during the last 9 months of the 15-month
period, compared with the groups receiving active treatment with Diamyd®.
However, viewed over the entire 15-month period no difference between the groups
is observed, but if the more rapid decrease continues in the placebo group until
the end of the study at 30 months, a trend deviation in insulin production may
be observable throughout the full measurement period, that is, including the
remission period.

Diamyd Medical plans first interim report from open label pilot study EDCR IIa
with the diabetes vaccine Diamyd® in the first quarter of 2016
Diamyd Medical announced that a first six month interim report comprising five
patients treated with etanercept and the diabetes vaccine Diamyd® is intended to
be presented during the first quarter of 2016. The study is open labeled,
meaning not placebo-controlled, and is conducted at nine pediatric diabetes
clinics in Sweden. Professor Johnny Ludvigsson, Linköping University is
principal investigator and sponsor of the study.

Antigen Based Therapy (ABT) and combination trials

Type 1 diabetes is a devastating disease which requires daily treatment with
insulin to sustain life. The importance of finding a cure should not be
underestimated. The diabetes vaccine Diamyd® has been used in clinical studies
with more than 1,000 patients and has shown a good safety profile. In a European
Phase III trial Diamyd® showed good clinical effect in several subgroups, and a
limited overall 16% efficacy (p=0.10) in preserving endogenous insulin
secretion. Subsequent development is focused on combination trials to enhance
efficacy. Diamyd® is easy to administer in any clinical setting. The potential
annual market is estimated to several billion dollars per year.

Six researcher initiated clinical trials are ongoing combining Diamyd® with
various other immunomodulatory compounds; etanercept, ibuprofen, vitamin D and
GABA.

  · DIABGAD- 1 – COMBINING DIAMYD® WITH IBUPROFEN AND VITAMIN D

INTERVENTION TRIAL

A placebo-controlled trial, where Diamyd® is being tested in combination with
ibuprofen and vitamin D. The trial comprises a total of 64 patients between the
ages of 10 and 18, recently diagnosed with type 1 diabetes, and will continue
for a total of 30 months. The aim of the combination treatment is to preserve
the body’s own capacity to produce insulin. The trial runs at nine clinics in
Sweden and is led by Professor Johnny Ludvigsson at Linköping University,
Sweden. 30 month results from the trial are due during the first half year of
2017.

  · DIAGNODE -1 –DIAMYD® IN LYMPH GLANDS IN COMBINATION WITH VITAMIN D

INTERVENTION TRIAL

An open label trial, where Diamyd® is administered directly into lymph nodes in
combination with treatment with vitamin D. The trial comprises five patients
between the ages of 18 and 30 newly diagnosed with type 1 diabetes, and will
continue for a total of 30 months. The aim of the trial is to evaluate the
safety of the combination treatment and the effect on the immune system and the
patients’ insulin producing capacity. The trial is led by Professor Johnny
Ludvigsson at Linköping University, Sweden. The first patient was included in
the trial in February 2015. A first interim report is planned in the first
quarter of 2016.

  · GABA/ DIAMYD® – COMBINING DIAMYD® WITH GABA

INTERVENTION TRIAL

A placebo-controlled trial, where Diamyd® is being tested in combination with
GABA. The trial comprises 75 patients between the ages of 4 and 18 recently
diagnosed with type 1 diabetes, and will continue for a total of 12 months. The
aim of the combination treatment is to preserve the body’s residual capacity to
produce insulin. The trial is led by Professor Kenneth McCormick at the
University of Alabama at Birmingham, USA. The first patient was included in the
trial in March 2015.

  · EDCR IIa – COMBINING DIAMYD® WITH ETANERCEPT AND VITAMIN D

INTERVENTION TRIAL

An open label trial, where Diamyd® is combined with etanercept and vitamin D.
The trial comprises 20 patients between the ages of 8 and 18 who have been newly
diagnosed with type 1 diabetes, and will continue for a total of 30 months. The
aim of the trial is to evaluate the safety of the combination treatment and the
effect on the immune system and the patients’ insulin producing capacity. The
trial is led by Professor Johnny Ludvigsson at Linköping University, Sweden. The
first patient was included in May 2015. A first interim report is planned in the
first quarter of 2016.

  · DiAPREV-IT 1– DIAMYD®

PREVENTION TRIAL

A placebo-controlled trial, where Diamyd® is being tested in children at high
risk of developing type 1 diabetes, meaning that they have been found to have an
ongoing autoimmune process but do not yet have any clinical symptoms of
diabetes. A total of 50 participants from the age of four have been enrolled in
the trial, which will last for five years. The aim of the trial is to evaluate
whether Diamyd® can delay or prevent the participants from presenting with type
1 diabetes. The trial is led by Dr. Helena Elding Larsson at Lund University,
Sweden. Five year results are expected at the end of 2016.

  · DiAPREV-IT 2 – COMBINING DIAMYD® WITH VITAMIN D

PREVENTION TRIAL

A placebo-controlled trial, where Diamyd® is being tested in combination with
vitamin D in children at high risk of developing type 1 diabetes, meaning that
they have been found to have an ongoing autoimmune process but do not yet have
any clinical symptoms of diabetes. A total of 80 participants between the ages
of 4 and 18 will be enrolled in the trial, which will last for five years. The
aim of the trial is to evaluate whether Diamyd® can delay or prevent the
participants from presenting with type 1 diabetes. The trial is led by Dr.
Helena Elding Larsson at Lund University, Sweden. The first patient was included
in March 2015.

*** The above is an excerpt from the report. To read the complete report, please
visit www.diamyd.com, or see attached PDF ***
For more information please contact:
Anders Essen-Möller, President and CEO, phone: +46 70 55 10 679
Diamyd Medical AB (publ), Kungsgatan 29, SE-111 56 Stockholm, Sweden
Phone: +46 8 661 00 26 Fax: +46 8 661 63 68 E-mail: info@diamyd.com Reg. no:
556242-3797

Note: This document has been prepared in both Swedish and English. The Swedish
version shall govern in case of differences between the two documents. The
document contains certain statements about the Company’s operating environment
and future performance. These statements should only be regarded as reflective
of prevailing interpretations. No guarantees can be made that these statements
are free from errors.