Interim Report for Diamyd Medical AB

September 1, 2005 -- November 30, 2005


STOCKHOLM, Sweden, Jan. 20, 2006 (PRIMEZONE) -- Diamyd Medical AB (Pink Sheets:DMYDF), a global biotechnology company focused on the treatment of diabetes and its complications, including chronic pain and neuropathy, today announced its financial results for the period ended November 30, 2005.



  -- Sales were SEK 218,000 compared to SEK 167,000 for the same
     period of the prior year
  -- Net loss was SEK 7.8 million compared to a net loss of SEK
     7.0 million for the same period of the prior year
  -- Liquid assets were SEK 110.4 million as of 30 November 2005
     compared to SEK 145.5 million for the same period of the
     prior year.  Management now expects these funds to support
     Company initiatives until July 2007
  -- Loss per share was SEK 0.9 compared to SEK 0.8 for the same
     period of the prior year
  -- Reports from a Phase II clinical beta cell prevention study
     with Diamyd in 70 children and adolescents with Type 1 diabetes
     are expected in August 2006
  -- Reports from a Phase II/III clinical trial in Type 2 diabetes
     is expected in June 2007
  -- An agreement was signed with regard to the acquisition of
     Nurel Therapeutics, Inc., a Pittsburgh, PA-based biotechnology
     company. Nurel focuses on diabetes and targeted gene delivery
     systems. The acquisition closed on December 19.  Nurel
     shareholders and financiers received a total of 317,173
     Diamyd class B-shares as payment.
  -- Decision was taken to initiate a Level 1 ADR program to
     enable trading of Diamyd Medical shares in the United States.
  -- After the Reporting Period, an agreement was signed with
     Protein Sciences, with regard to manufacture of Phase III
     drug. At the same time Diamyd Medical invested three million
     dollars in Protein Sciences' convertible notes.

CEO Comments

"This first quarter included significant accomplishments for Diamyd Medical," said Anders Essen-Moller, President and CEO of Diamyd Medical.



    - "Our clinical trials in both Type 1 and Type 2 diabetes with
 our diabetes drug, Diamyd, moved forward according to plan, and we
 will present results from the Phase II clinical study of 70 children
 and adolescents with Type 1 in August 2006.

    - "The signing of the manufacturing agreement with Protein
 Sciences and investment of US$3.0 million in the same company were
 important steps in the Diamyd Medical strategy to continue to
 strengthen the Company's presence in the U.S.  The deal we made
 with Protein Sciences not only ensures the manufacture of Diamyd
 for Phase III trials, but also presents the opportunity for us to
 invest in an exciting vaccine technology company,

    - "Another important step was the decision to acquire all the
 outstanding shares of Nurel Therapeutics, Inc. Nurel and Diamyd
 Medical focus on different aspects of diabetes, but we are both
 focused on the development on GAD-based pharmaceuticals. We differ
 in that the GAD is used for totally different and non-overlapping
 aspects of diabetes: (1) the treatment of the actual disease
 itself; and (2) the treatment of pain resulting from diabetes.
 The acquisition of Nurel brings synergy to the table, which made
 the deal very attractive to us.

    - "Together with the Bank of New York we initiated the
 establishment of a Level 1 American Depository Receipt (ADR)
 program that will enable trading of Diamyd Medical shares in the
 United States."

Financial Highlights

Sales - Group sales were SEK 218,000 compared to SEK 167,000 for the same period of the prior year and consisted mostly of Diamyd-related products. Sales of Diamyd Medical products fluctuate from quarter-to-quarter as the Company's products are primarily sold for various scientific research purposes. Sales include SEK 35,000 from the Company's U.S. subsidiary.

Costs - The Group's current costs were SEK 8.7 million compared to SEK 7.7 million for the same period of the prior year. The cost of research and development was SEK 4.4 million compared to SEK 3.8 million for the same period of the prior year. Costs increased as the Company initiated two clinical trials involving a total of 25 clinics throughout Sweden.

Net Loss - Net loss after financial income and expenses was SEK 7.8 million compared to a net loss of SEK 7.0 million for the same period of the prior year.

Financial Status and Liquidity - The Group's liquid assets were SEK 110.4 million as of 30 November 2005 compared to SEK 145.5 million for the same period of the prior year. Management now expects these funds to support the Company's initiatives until July 2007 instead of December 2007, which was reported previously. That is, the funds are expected to last until after the results of the Type 1 study are presented in August 2006 and after the results of the Type 2 study are put forward in June 2007.

Changes in Shareholders' Equity - Group shareholders' equity as of 30 November 2005 was SEK 107.6 million compared to SEK 144.5 million for the same period of the prior year, which gives an equity ratio of 92.3% versus 92.0%.

Parent Company - The net sales for the parent company were SEK 0 for the period since all sales take place in the subsidiaries. The net profit after financial income and expense was SEK 207,000 compared to SEK 101,000 for the same period of the prior year. Changes in liquid assets were SEK -8.5 million compared to SEK 0.7 million for the same period of the prior year.

Staff - The Group had a staff of 7 people as of 30 November 2005, of which 4 were men and 3 were women.

The Share and Stockmarket Value - As of 30 November 2005, the number of outstanding shares was 8,418,043 of which 471,200 were A-shares and 7,946,843 were B-shares. The Diamyd Medical total stock market value at the end of the period was SEK 412.9 million compared to SEK 327.5 million in the same period of the prior year. The share price at the close of the period was SEK 51.25 compared to SEK 38.90 for the same period of the prior year.

Warrants - The 917,655 warrants resulting from the new issuance in 1999 expire in August 2006. To enable trading of these options, the Company plans to list them on the OMX Stock Exchange O-list within the first half year of 2006.

Significant Events During the Reporting Period

Acquisition of Nurel Therapeutics Inc. - Diamyd Medical signed an agreement regarding the acquisition of Nurel Therapeutics Inc., a Pittsburgh, PA-based biotechnology company. The acquisition was paid with 223,204 Diamyd class B-shares. A further 93,969 Diamyd class B-shares were issued to the Nurel early financiers. Nurel has developed a new innovative gene platform, "Nerve-Targeted Gene Delivery System", that focuses on the treatment of, among other things, neuropathy caused by diabetes, spinal cord injury or cancer. Nurel and Diamyd both use GAD as a molecule of choice for treatment. Beyond diabetes and pain treatment, examples of diseases that may be considered for GAD-treatment with Nurel's patented Nerve-Target Gene Delivery System include Schizophrenia, Bi-Polar Disorders, Anorexia, ALS and Huntington's disease.

The acquisition of Nurel offers a wider reach for Diamyd Medical's exclusive patent rights for the GAD65-molecule. Nurel's Targeted Gene Delivery System is also suitable for targeted deliveries of third party proteins and may, therefore, be out-licensed to such parties as required.

The additional costs for Diamyd Medical to operate Nurel are estimated to be SEK 12 million per year for the next two-year period.

Level 1 American Depository Receipt (ADR) program - Recently, Diamyd Medical presented itself to several US investors. To enable US investors to trade with Diamyd Medical shares in the U.S., the company decided to initiate the establishment of a Level 1 Depositary Receipt Program. The Program is expected to take effect in January/February 2006.

Therapeutic Developments

Diamyd Medical continues to advance its development on treatments for both Type 1 and Type 2 diabetes (LADA). The Company is currently engaged in three clinical trials: (1) a Phase II clinical study of 70 subjects with Type 1 diabetes; a (2) a Phase II/III trial of 160 subjects with Type 2 diabetes; and (3) a follow-up Phase II clinical study of 47 subjects with Type 2 diabetes. Development of Diamyd for treatment of patients with recent onset Type 1 diabetes

Type 1 diabetes develops when the body's immune system attacks the insulin-producing pancreatic beta cells. At the onset of the disease patients generally have about 10% remaining beta cells. These few cells are incapable of producing enough insulin to maintain normal blood sugar levels and external insulin must be injected. After presentation of the disease, the autoimmune attack continues against the remaining beta cells, which eventually will be destroyed completely.

Our diabetes drug, Diamyd, is intended to prevent the destruction of beta cells and may, in a best case scenario, allow regeneration of beta cells without subsequent attacks from auto-reactive immune cells.

The Company is currently conducting a randomized, double blind Phase II clinical trial with Diamyd in 70 children and adolescents with recent onset Type 1 diabetes. The patients are divided into two groups - (1) the treatment group (35 subjects) receives two injections of 20ug Diamyd (GAD65 formulated in aluminum hydroxide); and (2) the placebo group (35 subjects) receives the same formulation without GAD65. The goal of this trial is to investigate whether the positive results obtained in a previous, smaller-scale Phase II clinical trial involving Type 2 diabetes adult patients with GAD antibodies (LADA patients) can be reproduced in patients with Type 1 diabetes. Professor Johnny Ludvigsson of Linkoping University is the principal investigator for the trial, which is being conducted at 8 clinics in Sweden. All patients are enrolled in the trial. The Company expects to report results from the study in August 2006.

Development of Diamyd for treatment of patients with Type 2 diabetes

Diamyd Medical is developing Diamyd as a treatment for autoimmune diabetes. Approximately 10% of all Type 2 diabetes patients have antibodies to GAD and, therefore, have a form of autoimmune diabetes known as LADA. These patients are easily identified through a routine blood sample analysis.

The Company previously conducted a successful small-scale Phase II clinical trial of 47 LADA patients. In addition, a large-scale Phase II/III clinical trial intended to be used for registration of Diamyd is currently underway with 160 LADA subjects. This is a randomized, double blind and placebo-controlled study. The test subjects are divided into two groups - (1) the treatment group (80 subjects) receives two injections of 20ug dose of Diamyd (GAD65 formulated in alum) over a 30-day period; and (2) the placebo group (80 subjects) receives the same formulation without GAD65. The goal of the trial is to confirm the positive results obtained during the previously mentioned Phase II trial in LADA patients. Professor Carl-David Agardh at the University Hospital MAS in Malmo is the principal investigator for the trial, which is being conducted at 17 clinics throughout Sweden. The Company expects to report the results of the trial in June 2007.

Market & Business Overview

Diabetes

The International Diabetes Foundation estimates that the number of persons with diabetes worldwide is nearly 200 million and that this number will increase to 330 million by 2025. The majority of the new cases of diabetes are expected to be Type 2 subjects. In addition, the number of individuals with heightened blood sugar levels (Impaired Glucose Tolerance or pre-diabetes) is estimated to be of a similar order.

The costs associated with diabetes in the western world is about 7% of total healthcare budgets, or more than US$100 billion in the US alone.

Neuropathic pain

Approximately 1% of the population (2.5 million people) in the U.S. suffers from moderate to severe pain associated with diabetes neuropathy, post herpetic neuralgia, HIV/AIDS neuropathy, spinal cord injury, phantom limb pain and/or cancer pain. The products Nurel Therapeutics is developing may become useful in treating a variety of these neuropathic pain indications. Recently, the interest in the neuropathic pain market by the pharmaceutical industry has grown exponentially. The U.S. neuropathic pain market, which was approximately $450 million in 2003, is expected to grow to $665 million by 2008 (13% compounded annual growth) because of the development of new products.

GAD and neurological diseases

GAD, which is an enzyme, converts the excitatory amino acid glutamate to the inhibitory neurotransmittor GABA. Several neurological and movement related disorders may be due to disturbances in the Glutamate-GABA balance. Therefore, GAD may come to play a major role as a component in future medications for treatment of such diseases.

Diamyd Medical is licensing limited exclusive therapeutic rights to the GAD65-gene for specific diseases. The Company also is engaged in third party discussions with regard to development of a medication for Parkinson's disease.

Significant Events Following the Reporting Period



  -- At the General Assembly Meeting for shareholders on December
     12, it was decided to re-elect Board Directors Anders
     Essen-Moller (President and CEO), Tord Lendau and Peter
     Rothschild. New Directors are Bjorn O. Nilsson, (Ph.D.),
     and Joseph Janes (lawyer). Leif Ek stepped down as a Director
     due to retirement.

  -- Shareholders at the General Assembly Meeting approved granting
     the Directors the right to at one or several occasions before
     the next Annual Meeting, issue a total of maximum 900,000
     shares of class B in order to enable acquisitions with Diamyd
     shares as payment. These shares can be issued with out regard
     to the preferential rights of the existing shareholders. If
     all 900,000 shares are issued, the dilution will be 9.7%
     after the issue.

  -- Shareholders at the General Assembly Meeting approved the
     acquisition of Nurel Therapeutics, Inc. The acquisition adds
     to the Company's product portfolio pipeline, which now
     includes candidate therapeutics for autoimmune diabetes as
     well as for diabetes neuropathy, pain and cancer. Nurel
     shareholders received 223,204 Diamyd class B-shares and a
     further 93,969 Diamyd class B-shares were issued to early
     Nurel financiers. Nurel's burn rate is estimated to be SEK
     12.0 million per year for the next two-year period.

  -- After the end of the reporting period, the Company reached an
     agreement with Protein Sciences Corporation (PSC) for the
     manufacture of Diamyd for Phase III trials. In addition, it
     was agreed that PSC would assist the Company in filing an
     Investigational New Drug Application (IND) with the U.S.
     Food & Drug Administration (FDA) during 2006. Diamyd Medical
     also participated in PSC's current financing with a
     U.S.$3 million investment. If this investment is converted
     into shares, the Diamyd Medical investment in Protein Sciences
     would be less than 5%.

     Protein Sciences (PSC) is a privately held biotechnology
     company based in Meriden, Connecticut, USA.  Its business is
     developing and manufacturing modern -- not egg based --
     vaccines, using recombinant DNA technology.

  -- Diamyd Medical has announced the successful results of a
     pre-clinical study demonstrating the safety and tolerability
     of a novel formulation of the GAD protein, specifically
     intended for intravenous use. This novel formulation, which
     was developed and patented (pending) by Diamyd, is intended
     for patients with diseases that may benefit from GAD65
     treatment such as certain movement disorders.
 
 Financial Results

 Group's Income Statement
 kSEK                                         
                                      3 months    3 months    12 months
                                      Sep-Nov     Sep-Nov     Sep-Aug
                                      2005-2006   2004-2005   2004-2005
 Operating Income
 Net sales (note 1)                      218         167         883
 Other income                              -           -          48
 Total Income                            218         167         931

 Operating Costs
 Raw materials and supplies             -377        -235        -775
 Research and development             -4,393      -3,771     -24,676
 Patents                                -279        -357      -1,719
 Personnel                            -2,259      -2,269      -8,698
 Other external costs                 -1,238        -849      -4,052
 Depreciation patents                   -162        -190        -751
 Depreciation equipment                  -28         -39        -150
 Total Operating Costs  
  (note 2)                            -8,736      -7,710     -40,821

 Operating Loss                       -8,518      -7,543     -39,890

 Financial Income and 
  Expense
 Dividend in associated 
  company                                  -           -         152
 Interest income                         676         564       3,195
 Interest expense                          -         -23         -26
 Total Financial Income and
  Expense                                676         541       3,321

 Loss after Financial Income          -7,842      -7,002     -36,569

 Taxes                                     -           -         -63

 Net Loss for the Year (note 3)       -7,842      -7,002     -36,632

 Earnings per share SEK                 -0.9        -0.8        -4.4
 Earnings per share after
  dilution SEK                          -0.9        -0.8        -4.4

 Number of shares                  8,418,043   8,418,043   8,418,043
 Average number of shares          8,418,043   8,388,212   8,410,787
 Number of shares after dilution   8,451,196   8,388,212   8,442,800

 Group's Balance Sheet
 kSEK
                                Nov 30     Nov 30     Aug 31
                                  2005       2004       2005
 Tillgangar

 Fixed Assets
 Intangible assets               1,147      1,870      1,309
 Tangible assets                   192        314        220
 Financial assets                  800        800        800
 Total Fixed Assets              2,139      2,984      2,329

 Current Assets
 Inventory                         109         44          8

 Current Receivables
 Customer receivables              134        292        450
 Other receivables               1,306      1,496      1,536
 Prepaid tax                       198        136        168
 Prepaid expenses and 
  accrued income                 2,385      1,183      5,447
 Total Current 
  Receivables                    4,023      3,107      7,601

 Short-term investments         76,687     92,672     91,374
 Cash and bank balances         33,685     52,875     24,161
 Total Current Assets          110,372    145,547    115,535

 Total Assets                  114,504    148,698    123,144

 Liabilities and 
  Shareholders' Equity         116,643    151,682    125,473
                       (note 4)

 Shareholders' Equity
 Capital stock                   8,418      8,148      8,418
 Not registered share 
  capital                          360          0        360
 Share premium reserve         141,193    158,046    141,193
 Loss carried forward          -34,480    -14,734      2,129
 Loss for the period            -7,842     -7,002    -36,632
 Total Shareholders' 
  Equity (note 3)              107,649    144,458    115,468

 Long-term Liabilities               -        768          -

 Current Liabilities
 Accounts payable                3,155      2,696      2,508
 Other liabilities               1,689        775      1,745
 Accrued expenses and 
  deferred income                4,150      2,715      5,752
 Total Current
  Liabilities                    8,994      6,186     10,005

 Total Liabilities and 
  Shareholders' Equity         116,643    151,412    125,473

 Change in Shareholders' Equity
 kSEK
                            Sep-Nov       Sep-Nov     Sep-Aug
                            2005-2006     2004-2005   2004-2005

 Opening Balance              115,468      151,598     151,598
 Translation difference(a)         23          132           2
 New share issue                    -            -         500
 Net loss                      -7,842       -7,002     -36,632
 Closing Balance              107,649      144,728     115,468

 (a) The transition to IFRS reporting requirements has affected
     the result positively with kSEK 56


 Cash Flow Analysis                 3 months    3 months    12 months
 kSEK                                Sep-Nov     Sep-Nov     Sep-Aug
                                    2005-2006   2004-2005   2004-2005
 Operations

 Operating loss                       -8,518      -7,543     -39,890
 Interest received                     2,840         383       4,162
 Interest paid                          -818         -23      -2,744
 Paid financial expense                 -144          --      -4,216
 Dividends received                       --          --         152
 Adjustments for items that are                            
   not part of the cash flow                               
  Depreciation                           190         229         898
  Changes in accrued interest         -1,662         181       3,693
  Amortization of premiums for                             
   short term investments                506          --       2,274
  Other items that are not part                            
   of the cash flow                       --          --          --
 Taxes paid                              -27         -24        -119
                                                           
 Cash Flow from Operations before                          
                                                           
 Changes in Working Capital           -7,633      -6,797     -35,790
                                                           
 Increase(-) decrease(+)                                   
  inventory                              -98          46          82
 Increase(-) decrease(+)                                   
  receivables                          3,623         154      -4,455
 Increase(+) decrease(-)                                   
  liabilities                         -1,072         841       3,892
                                                           
 Cash flow from Operations            -5,180      -5,756     -36,271
                                                           
 Investments                                               
                                                           
 Investments in tangible assets           --         -16         -30
                                                           
 Cash Flow from Investments               --         -16         -30
                                                           
 Financing                                                 
 Loans                                    --          --          --
 New share issues                         --          --         500
 Cash flow from financing                 --          --         500
                                                           
 The Period's Cash flow               -5,180      -5,772     -35,801
 Liquid funds at the beginning                             
   of the period                     115,535     151,338     151,338
 Translation gains/losses on                               
  consolidation                           17         -19          -2
 Liquid Assets at the End                                  
  of the Period                      110,372     145,547     115,535
                                                        
 ACCOUNTING PRINCIPLES

 As of September 1, 2005 Diamyd Medical began using IFRS for its group
 reporting. This means that Diamyd Medical in its group reporting from
 the first quarter 2005/2006 applies all IAS, IFRS, IFRIC and SIC
 regulations which are applicable.

 Notes

 Note 1 - Sales, kSEK             3 months     3 months     12 months
                                   Sep-Nov      Sep-Nov      Sep-Aug
                                  2005-2006    2004-2005    2004-2005
 Sales in Diamyd Diagnostics AB      179           97          610
 Sales in Diamyd, Inc.                35           65          263
 Invoiced freight                      4            5           42
 Other income                          -            -            9
 Total sales                         218          167          883

 Note 2 - Operating costs

 The exchange rate losses assigned to sales, inventory costs and other
 external costs amounted to SEK -26,000. The exchange rate profits
 assigned to sales, inventory costs and other external costs amounted
 to SEK 4,000.

 Note 3 - Balance for the period

 The business is making a loss. Deduction for losses in the Swedish
 company is valued at SEK 0 as a precaution.

 Note 4 - Shareholders' equity and liabilities All the Company's
 liabilities do not charge interest.

 Note 5 - Change to IFRS

 The change in accounting principles to IFRS has affected the results
 positively with SEK 56,000.

 Note 6 - Acquisition of Nurel

 Since no final analysis has been made in accordance with IFRS 3 of
 the acquisition of Nurel, the next report will provide a more
 detailed analysis of these effects.

 Key Ratios                       3 months    3 months    12 months
                                   Sep-Nov     Sep-Nov     Sep-Aug
                                  2005-2006   2004-2005   2004-2005
 Return on equity, %                  -7.0        -4.7       -27.4
 Return on capital employed, %        -7.0        -4.7       -27.3
 Return on total assets, %            -6.5        -4.5       -25.8
 Equity per share, SEK                12.8        17.3        13.7
 Equity per share after
  dilution, SEK                       12.7        17.3        13.7
 Cashflow per share, SEK              -0.6        -0.7        -4.3
 Solidity, %                          92.3        95.4        92.0

 Number of shares                8,418,043   8,418,043   8,418,043
 Average number of shares        8,418,043   8,388,212   8,410,787
 Number of shares
  after dilution                 8,451,196   8,388,212   8,442,800

 Stockholm, Sweden,  January 20,2006

 The Board of Diamyd Medical AB (publ)

 This report was not reviewed by the auditors of Diamyd Medical.

 UPCOMING REPORTS

 6-month report (December-February)          20th April 2006
 9-month report (March-May)                  28th July 2006
 Year End Report (September-August)          26th October 2006

 Diamyd Medical financial information is available at www.diamyd.com.

About Diamyd Medical

Diamyd Medical is registered on the Stockholm Stock Exchange O List (OMX: DIAM B). An application has been submitted to trade the shares in the U.S. via a Level 1 ADR Program. The Company conducts therapeutic development based on its GAD (glutamic acid decarboxylase) technology platform. GAD is an enzyme that converts the excitatory neurotransmittor glutamate to the inhibitory transmittor GABA. In this context GAD may have an important role in CNS- and movement related disorders. GAD is also a target pancreatic beta cell autoantigen in autoimmune diabetes such autoimmunity leading to development of insulin-dependence. Diamyd Medical's furthest developed project is Diamyd, which is currently employed in two ongoing clinical trials of both Type 2 and Type 1 diabetes, which are follow-ons of first successful dose finding Phase II trial. With the acquisition of Nurel Therapeutics additional development projects include gene-therapy for diabetes neuropathy pain and cancer.

To learn more about Diamyd Medical, visit the company's web site at www.diamyd.com

For further information contact: CEO Anders Essen-Moller Diamyd Medical AB (publ) (corporate. id. no. 556530-1420) Linnegatan 89B floor 5 SE-115 23 Stockholm Sweden. Tel: +46 (0)8-661 00 26 fax: +46 (0)8-661 63 68 or email: info@diamyd.com.

U.S. Investors: Kathy Price/Emmanuelle Ferrer, The Global Consulting Group, (646) 284-9430/ (646) 284-9421, kprice@hfgcg.com / eferrer@hfgcg.com.

This information includes statements concerning historical present and forward-looking items and is to the "best of knowledge" of the management of Diamyd Medical and the actual status and results achieved by the Company may differ materially from these statements. The Company assumes no obligation to update these statements to reflect actual results changes in assumptions or changes in other factors affecting such statements. The Company's Press Releases Quarterly Reports and Annual Reports ("Information") are translations from the Swedish originals. No guarantees are made that the translation is free from errors.



            

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