Diamyd Medical’s diabetes vaccine and regenerative medicine in synergy

Diamyd Medical (Nasdaq Stockholm First North, DMYD B) is the largest shareholder
in Cellaviva AB, which is Sweden’s first biobank for private family preservation
of, and research on, stem cells from the umbilical cord. In conjunction with the
election of Anders Essen-Möller, Diamyd Medical’s principal owner, as the new
Chairman of the Board for Cellaviva, clarification is provided herein of Diamyd
Medical’s views on the synergies between the companies.
Diamyd Medical is dedicated to finding a cure for type 1 diabetes. The strategy
is in part to use Antigen Based Therapy (ABT), such as the diabetes vaccine
Diamyd®, to halt the autoimmune attack on insulin-producing beta cells, and in
part to restore beta-cell function through measures including e.g.
transplantation of autologous umbilical cord mesenchymal stem cells.

“Patients with type 1-diabetes have killer cells that destroy insulin producing
cells. This is true for both transplanted islets or celltherapy with insulin
producing stem cells – the killer cells do their job,” says Professor Åke
Lernmark, Lund University, Sweden, and scientific adviser to Diamyd Medical.“A
combination treatment is necessary. The first step is to induce immune tolerance
with Antigen Based Therapy. When tolerance is established, for example for the
GAD-molecule, the next step is to administrate insulin producing stem cells. It
should be valuable to save stem cells from the umbilical cord to enable this
form of combination therapy with the patient’s own (autologous) cells”.

“Diamyd Medical’s interest in Cellaviva stems from the conviction that
autologous stem cells will be of decisive significance in curing type 1
diabetes, as well as many other injuries and disorders,” says Anders Essen
-Möller, President and CEO of Diamyd Medical. “With investments into Cellaviva
we want to reach out and together with the society support and bringt this type
of research forward. To enable that young and autologous stem cells can be used
for treatment of the respective individual or perhaps a sibling, Cellaviva is
offering the preservation of stem cells from the umbilical cord as a service. It
is the hope of Diamyd Medical that this – perhaps gradually for certain risk
groups – eventually will become an improved regimen within the Swedish health
care system,

Within the wide general scope of applications in which stem cells can be
expected to be utilized, in this press release we have limited ourselves to
analyzing a few questions that apply to type 1 diabetes”.

a)       Can mesenchymal stem cells cure type 1 diabetes?

b)       Are autologous stem cells better than other sources of stem cells
(allogenic)?

c)       Are early umbilical cord mesenchymal stem cells better than older bone
marrow derived mesenchymal stem cells?

d)       Does it make financial sense to preserve umbilical cord stem cells in
families with type 1 diabetes?

A. CAN MESENCHYMAL STEM CELLS CURE TYPE 1 DIABETES?

Professor Per-Ola Carlsson, Uppsala, Sweden, showed that treatment with
autologous stem cells is a promising method for retaining the insulin-producing
function of beta-cells in patients with newly onset type 1 diabetes (Diabetes
2015). Twenty adult patients were randomly assigned to either an active group,
receiving autologous mesenchymal stem cells taken from the bone marrow, or to a
control group. After a period of one year, the beta-cell function in the group
receiving active treatment had either improved or been maintained, but had
declined in the control group. The conclusion following the clinical trial was
that treatment with autologous mesenchymal stem cells comprises a safe and
promising strategy for intervention in the disease process and the preservation
of beta-cell function in patients recently diagnosed with type 1 diabetes.

Jianxia Hu, M.D., Qingdao, China, reported positive results from a study in
which patients with newly onset type 1 diabetes were treated with mesenchymal
stem cells from umbilical cord tissue known as Wharton’s jelly (Endocrine
Journal, 2013). Twenty-nine patients were randomly assigned to either an active
group or to a control group. Two years after treatment, both HbA1c and C peptide
in the active group were significantly better than pre-treatment as well as
compared with the control group post-treatment. The conclusion was drawn that
the transplantation of Wharton’s jelly derived mesenchymal stem cells can
restore beta-cell function over a longer time period and that this could be an
effective method for treatment of type1 diabetes.

Ilona Kalaszczynska, Assistant Professor, Warsaw, Poland, reviews the role of
Wharton's jelly derived mesenchymal stem
cells, (http://www.ncbi.nlm.nih.gov/pubmed/25861624) and notes that mesenchymal
stem cells in general can differentiate not only into cells with mesodermal
origin such as bone, cartilage, fat, cardiomyocytes, muscle fibers, renal
tubular cells, but can also break germ layer commitment and differentiate into
cells of ectodermal origin such as neurons, and of endodermal origin such as
hepatocytes and pancreatic islet cells (Biomed Res
Int. (http://www.ncbi.nlm.nih.gov/pubmed/?term=Kalaszczynska%2C+Biomed+Res+Int.%
2 
C+2015) 2015). The majority of the following references were gathered from
Kalaszczynska’s comprehensive review, in which a large volume of information
from different research scientists has been compiled.

B. ARE AUTOLOGOUS STEM CELLS BETTER THAN OTHER SOURCES OF STEM CELLS
(ALLOGENIC)?

Although Weiss (Stem Cells, 2008) reported that Wharton's jelly derived
mesenchymal stem cells may be used in allogeneic transplantations without prior
HLA matching , the question remains whether this is valid also after
differentiation intotissue specific cells intended for use in regenerative
therapy. Huang (Circulation, 2014) reported increased immunogenicity of bone
marrow mesenchymal stem cells upon endothelial and myogenic differentiation with
a shift in the expression of the transplantation antigens MHC-I and MHC-II.

Ingham (Journal of Tissue Engineering, 2014), reported from preclinical studies
that stem cells used in therapeutic applications where tissue or organ
regeneration are involved, require mesenchymal stem cells that are
differentiated into tissue-specific cells. However, differentiation has been
reported to lead to the loss of both immunosuppressive properties and
immunoprivileged status, and this would be a major concern for clinical
applications. See further references here below.

Technau (Cytotherapy 2011). Adipose tissue-derived stem cells show both
immunogenic and immunosuppressive properties after chondrogenic differentiation.

Chen (Stem Cells, 2007). Chondrogenic differentiation alters the
immunosuppressive property of bone marrow-derived mesenchymal stem cells, and
the effect is partially due to the upregulated expression of B7 molecules.

C. ARE EARLY UMBILICAL CORD MESENCHYMAL STEM CELLS BETTER THAN OLDER BONE MARROW
STEM CELLS?

Song Wu (Nature, 2016), showed that environmental factors cause 70-90 percent of
cancer mutations, which means that umbilical cord mesenchymal stem cells, which
have not had time to divide as many times, are preferable to older bone marrow
stem cells in stem cell treatment.

Kalaszczynska et al concludes that the lifelong perseverance of adult
mesenchymal stem cells in the body makes them particularly susceptible to the
accumulation of cellular damage, which can lead to cell death, senescence, or
loss of regenerative function and in extreme cases to neoplastic transformation.
In contrast, neonatal mesenchymal stem cells such as Wharton's jelly derived
mesenchymal stem cells in their short, prenatal life are spared from proaging
factors. Taken together, the clinical implication of oxidative stress, telomere
length, DNA damage and disease is impaired therapeutic potential of mesenchymal
stem cells isolated from aged patients; make Wharton’s jelly an ideal source of
mesenchymal stem cells and a promising therapeutic agent in regenerative
medicine (Biomed Res Int, 2015).

Ting (Stem Cells and Development, 2014), reported that early mesenchymal stem
cells have better myogenic potential and engraftment properties than bone marrow
derived mesenchymal stem cells.

Bustos (The American Journal of Respiratory and Critical Care Medicine, 2014),
reported that mesenchymal stem cells from aged bone marrow lack the anti
-inflammatory effect indicating an age-related decline in immunomodulatory
activity.

Elevated Free Fatty Acid levels in obese individuals may lead to irreversible
changes in mesenchymal stem cells from bone marrow and adipose tissue (Park,
Tissue Engineering and Regenerative Medicine, 2013).

Not applying to Wharton’s jelly derived MSC, exposure of adult mesenchymal stem
cells during the lifetime to intrinsic (e.g., inflammatory mediators) and
extrinsic factors, for example, nonsteroidal anti-inflammatory drugs (NSAIDs)
may greatly inflect their viability or plasticity (Muller, Cell biology
International, 2011).

Fan (Rejuvenation Research, 2010), showed that the regenerative capacity of
human mesenchymal stem cells from 1-5 year olds outperformed mesenchymal stem
cells from 50–70 olds.

Hermann (Cytotherapy, 2010), reported that unlike mesenchymal stem cells from
young individuals, mesenchymal stem cells from elderly individuals could not be
differentiated into neuro-ectodermal cells. This makes adult bone marrow derived
stem cells unsuitable for autologous cell replacement for neurologic diseases in
elderly patients.

Stenderup (Bone, 2003); Huang (Zhongguo Shi Yan Xue Ye Xue Za Zhi, 2005) and
Stolzing (Mechanisms of Ageing and Development, 2008), separately reported that
age of donor tissue affects several properties of mesenchymal stem cells. As
older mesenchymal stem cells may have accumulated cellular damages, leading to
cell death, senescence, loss of regenerative function, and neoplastic
transformation, neonatal mesenchymal stem cells such as from Wharton’s jelly are
spared from proaging factors.

D. DOES IT MAKE FINANCIAL SENSE TO SAVE UMBILICAL CORD STEM CELLS WHEN RELATIVES
HAVE TYPE 1 DIABETES?

Umbilical cord stem cells can be used for the treatment of several disorders and
injuries. However, for now, we will only look at type 1 diabetes. Let us also
assume that Diamyd Medical’s development approach is correct, i.e. that one can
cure type 1 diabetes by using umbilical cord stem cells together with Antigen
Based Therapy (ABT). If so, does it make financial sense to save umbilical cord
stem cells where, for instance, the father has type 1 diabetes?

In Sweden, the risk of a child developing type 1 diabetes is about 1.5 percent.
If the mother has type 1 diabetes, the risk of a child developing type 1
diabetes is about 3 percent. If the father has type 1 diabetes, the risk
increases to about 5 percent. In a family with two children, where one child
develops type 1 diabetes, the risk is 8 percent that the second child will also
develop type 1 diabetes (Ake Lernmark, verbal communication). If a father with
type 1 diabetes has two children, the risk that at least one child will develop
type 1 diabetes is about 10 percent. Since siblings have at least 25 percent and
at most 100 percent common transplantation antigens – i.e. antigens that can
cause rejection of foreign tissue – and since stem cells in themselves have
immuno-modulating effects, it is anticipated in this example that umbilical cord
stem cells is primarily saved from one child per family.

The cost for storing umbilical cord stem cells, during twenty years, from one
child from ten different families where the fathers have type 1 diabetes is
about SEK 400,000. If each family has two children and saves the umbilical cord
from one child, and the risk is 10 percent that a minimum of one child will
develop type 1 diabetes, it is expected that among these 10 families at least
one child will develop type 1 diabetes. In the above scenario, it would cost the
healthcare system SEK 400,000 to keep stem cells available for those in this
risk group that develop type 1 diabetes.

Curing a type 1 diabetes patient in this risk group requires a further sum of
about SEK 150,000 in costs for Antigen Based Therapy (ABT) with, for example,
Diamyd® or an equivalent (that stops the autoimmune process), and a possible
further cost of about SEK 300,000 in conjunction with the transplantation of
stem cells (to restore the mass of insulin-producing cells). This means that it
could cost a total of SEK 850,000 to cure a patient with type 1 diabetes in this
risk group. In comparison, the current cost of treating other serious disorders,
often exceeds SEK 1 million – per year.

About Cellaviva AB
Cellaviva is Sweden’s first biobank for family preservation of and research on
stem cells from the umbilical cord. Stem cells from the umbilical cord are
collected at birth, analyzed, frozen, and saved for possible future use. Every
cell in the body is stemming from stem cells that have unique properties, which
make them attractive from a medical perspective. The operations work under
approval from the Swedish Health and Social Care Inspectorate (IVO). Read more
at www.cellaviva.se.

About Diamyd Medical
Diamyd Medical is dedicated to finding a cure for autoimmune diabetes through
pharmaceutical development and investments in stem cell and medical technology.

Diamyd Medical develops the diabetes vaccine Diamyd®, an Antigen Based Therapy
(ABT) based on the exclusively licensed GAD-molecule. The Company’s licensed
technologies for GABA and Gliadin have also potential to become key pieces of
the puzzle of a future solution to prevent, treat or cure autoimmune diabetes,
and also certain inflammatory diseases. At this time six clinical studies are
ongoing with Diamyd®. Diamyd Medical is with its holdings of 39% one of the
major shareholders in the stem cell company Cellaviva AB. Stem cells can be
expected to be used in Personalized Regenerative Medicine (PRM), for example for
restoration of beta cell mass in diabetes patients where the autoimmune
component of the disease has been arrested. Diamyd Medical also has holdings in
the medtech company Companion Medical, Inc., San Diego, USA and in the gene
therapy company Periphagen, Inc., Pittsburgh, USA.

Diamyd Medical’s B-share is traded on Nasdaq Stockholm First North under the
ticker DMYD B. Remium Nordic AB is the Company’s Certified Adviser.
For further information, please contact:
Anders Essen-Möller, President and CEO
Phone: +46 70 55 10 679. E-mail: anders.essen-moller@diamyd.com
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. Website: www.diamyd.com.