Quarterly Report III 15/16

September 2015 – May 2016, Diamyd Medical AB (publ), Fiscal year 2015/2016
Reporting period, Mar 1, 2016 – May 31, 2016

  · Net result amounted to MSEK -18.2 (-7.3), of which impairment of holding in
associated company amounted to MSEK -13.5 (0)
  · Net result per share amounted to SEK -0.8 (-0.3)
  · Cash flow from operating activities amounted to MSEK -4.3 (-4.8)
  · Liquid assets and short term investments amounted at the end of the period
to MSEK 36.5 (34.2)

September 1, 2015 – May 31, 2016

  · Net result amounted to MSEK -27.2 (-17.2), of which impairment of holding in
associated company amounted to MSEK -13.5 (0)
  · Net result per share amounted to SEK -1.0 (-0.7)
  · Cash flow from operating activities amounted to MSEK -13.7 (-14.6)

Significant events during the reporting period

  · Diamyd® in combination with etanercept and vitamin D shows safety in a first
preliminary interim report
  · Study where Diamyd® is administered directly into lymph nodes, DIAGNODE-1,
is approved for expansion and inclusion of children from 12 years of age.
Interim results indicate clear and desired re-balancing of the immune system
  · Diamyd Medical is engaged in discussions regarding an extension of
GABA/Diamyd® trial in Birmingham, Alabama
  · Diamyd Medical appoints new CEO who also buys shares in the Company
  · Diamyd Medical increases investment in the stem cell company Cellaviva

Significant events after the reporting period

  · The associated company Cellaviva withdraws new share issue. Diamyd Medical
makes an impairment of its previous holding of MSEK 13.5. Cellaviva is
refinanced and intends to increase its focus on the development of therapeutic
stem cell products

CEO comments

Dear Shareholders,

It was with great pride and humility that I took over the role of CEO of Diamyd
Medical nearly two months ago. This has been an intense period and I recently
returned from the American Diabetes Association’s (ADA) 76th Scientific Sessions
in New Orleans, the world’s largest diabetes conference, with more than 16,000
delegates. The principal message for the type 1 diabetes field was clear:
combination therapy and innovative studies are the key to preventing and curing
the disease. Government players in the US are showing increasing commitment to
curing and preventing diabetes and we have also seen at other conferences we
attended earlier in the spring a clear and intensified interest in Diamyd
Medical from regional pharmaceutical companies. This is extremely positive for
Diamyd Medical. With six ongoing researcher-initiated phase II studies, in which
the diabetes vaccine Diamyd® is combined with other substances, we are ahead of
our time. During the period, we reported that the innovative open DIAGNODE
study, led by Professor Johnny Ludvigsson at Linköping University, demonstrated
good safety and promising immunological responses in a first preliminary interim
evaluation of data from four patients in the study. It is the first study of its
kind in which the concept of intralymphatic administration of an antigen is used
in an autoimmune disease, a concept that has been demonstrated to be highly
effective in the allergy field. We had a rewarding meeting with the Swedish
Medical Products Agency regarding a potential Diamyd® and GABA study that is
being planned together with Professor Per-Ola Carlsson at Uppsala University
Hospital, and there is interest in further studies among researchers around the
world. Discussions are also in progress regarding a possible extension of the
ongoing and highly interesting Diamyd® and GABA combination study at the
University of Alabama at Birmingham, USA.

Regarding Diamyd Medical’s holdings, it is positive that Cellaviva has received
MSEK 8 in refinancing and that the operation is being broadened as a result of a
new department being created within Cellaviva for development of stem cells for
immunomodulating and regenerative medicine. Diamyd Medical’s shareholding is
reduced from approximately 45% to approximately 22%. For the sake of clarity,
Diamyd Medical has chosen to impair the previous value of the holding in its
entirety. As far as our other holdings are concerned, at ADA I met Sean Saint
who is President of Companion Medical, in which Diamyd Medical owns 8.5% of the
shares. Companion is developing an insulin pen that is linked to a smartphone
application, and its 510k application to the FDA is on schedule.

Recently published articles and conference abstracts on ADA strengthen GAD’s and
GABA’s key roles in diabetes. In the journal Diabetes (Phelps et al.), new
research shows that an immunogenic variant of GAD in type 1 diabetes accumulates
in damaged or stressed beta cells, with the hypothesis that this is the cause of
the autoimmune disease. An abstract by Professor Qinghua Wang of the University
of Toronto and also a member of our Scientific Advisory Board, shows that in an
animal model GABA increases the metabolism in fatty tissue. Earlier studies have
demonstrated GABA’s anti-inflammatory effects and function as a neurotransmitter
substance in the pancreas, where it promotes the production of insulin, inhibits
glucagon secretion and has potentially favorable effects on beta cell survival
and growth. There is continued strong interest in further development involving
Diamyd Medical’s patented substances in the type 1 diabetes field and new
research findings are also opening the way for GABA as a potential component in
the treatment of, for example, type 2 diabetes.

I am convinced that Diamyd Medical is at the very leading edge of the type 1
diabetes field, with clinical studies that are in line with what leading experts
see as the future of this area. Out-licensing is top of the agenda. We have
excellent relations with large pharmaceutical companies and, as mentioned above,
there is clear interest from regional pharmaceutical companies. My task as CEO
is to refine the strengths and core assets of the company and capitalize on the
fact that we have the wind in our sales to ensure that Diamyd Medical grows and
becomes a profitable diabetes company, with clarity in how we relate to our
cooperative partners and to you, our shareholders. And most important of all, we
will do our utmost to prevent and cure type 1 diabetes, one of the most serious
diseases that is affecting increasing numbers of children in the world.

Stockholm, June 29, 2016
Ulf Hannelius
President and CEO of Diamyd Medical AB (publ)

Significant events during the reporting period

Diamyd® in combination with etanercept and vitamin D shows safety in a first
preliminary interim report
A first six-month interim report comprising five patients in EDCR IIa, a pilot
researcher-initiated clinical study in which the diabetes vaccine Diamyd® is
combined with two other already approved agents, the immunosuppressive drug
etanercept and vitamin D, preliminary shows the treatment is safe and tolerable.
No serious side effects have been reported. This is the first time that this
combination of agents is tested against the complex autoimmune process that
causes type 1 diabetes.

Study where Diamyd® is administered directly into lymph nodes, DIAGNODE-1, is
approved for expansion and inclusion of children from 12 years of age. Interim
results indicate clear and desired re-balancing of the immune system
DIAGNODE-1, an open-label clinical pilot study in which the diabetes vaccine
Diamyd® is administered directly into lymph nodes, has been approved by the
Swedish Medical Products Agency and the Ethics Review Board to be expanded from
five to nine patients and to include children from 12 years of age. Professor
Johnny Ludvigsson presents preliminary evaluation of data from the first four
patients in the study at the diabetes meeting SSSD in Reykjavik on April 21-22,
2016. The interim results indicate that administration of a low dose of the
diabetes vaccine Diamyd® in lymph glands clearly re-balances the immune system
towards a desired so called Th2 response. As previously reported, the treatment
appears to be safe and tolerable and the clinical progression seems positive.

Diamyd Medical is engaged in discussions regarding an extension of GABA/Diamyd®
trial in Birmingham, Alabama
Diamyd Medical is engaged in discussions regarding an extension of the ongoing
GABA/Diamyd® trial in Birmingham, Alabama. The Company also announced that the
associated company Companion Medical, Inc. has submitted a 510(k) Premarket
Notification in the US as well as a CE-mark application in Europe.

Diamyd Medical appoints new CEO who also buys shares in the Company
Ulf Hannelius (40), PhD in molecular biology from Karolinska Institute and with
an MBA from Stockholm School of Economics is appointed to, and assumes as of
April 11, the position as CEO of Diamyd Medical. Ulf Hannelius buys 20,000 B
-shares in Diamyd Medical.

Diamyd Medical increases investment in the stem cell company Cellaviva
Within the framework of a convertible loan of SEK 2.7 million mainly directed at
existing shareholders, Diamyd Medical increases its investment in the associated
company Cellaviva AB with an additional MSEK 1.3.

Significant events after the reporting period

Diamyd Medical’s associated company Cellaviva withdraws new share issue. Diamyd
Medical makes an impairment of its previous shareholding. Cellaviva is
refinanced and intends to increase its focus on the development of therapeutic
stem cell products
Diamyd Medical’s associated company Cellaviva withdraws a new share issue due to
low participation in the issue. Cellaviva is refinanced by approximately MSEK
8.2 through the exercise of a convertible loan of about MSEK 2.7 and a capital
contribution of approximately MSEK 5.5, of which Diamyd Medical’s shares amount
to MSEK 1.3 and MSEK 1, respectively. Cellaviva intends to increase its focus on
the development of therapeutic stem cell products. Diamyd Medical announces
concurrently in its quarterly report that an impairment is made of the previous
holding of approximately MSEK 13.5.

*** To read the complete report, please visit www.diamyd.com, or see attached
PDF ***
For more information, please contact:
Ulf Hannelius, President and CEO, phone: +46 736 35 42 41
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.