DIAMYD MEDICAL ANNUAL REPORT 08/09 A N N U A L REPORT

Transcription

1 ANNUAL REPORT 08/09

2 TABLE OF CONTENTS Diamyd in brief... 1 Important events during the fiscal year... 2 Important events after the end of the fiscal year... 2 CEO comments... 3 Diabetes a chronic disease... 4 Diabetes worldwide... 8 From research to results Diamyd s business model Development platforms Project portfolio Clinical trials A word from the researchers Organization, employees and sustainable development The Board Key executives Scientific and medical advisory board Administration report Group s consolidated income statement Group s consolidated balance sheet Change in shareholder s equity Group Parent company s income statement Parent company s balance sheet Change in shareholders equity parent Cash flow statement Accounting principles Notes Audit report Corporate governance report Diamyd on the stock exchange Key ratios, definitions Annual meeting of shareholders Sources cited... Inside of the back cover

3 Diamyd in brief Diamyd in brief Diamyd Medical is a Swedish public company focusing on the development of pharmaceuticals for the treatment of autoimmune diabetes and its complications. Diamyd currently has three clinical-phase products. Diamyd was founded in Since the mid-1990s several preclinical studies and four clinical trials have been conducted with the Diamyd diabetes vaccine, the most advanced of Diamyd s development projects. Today the top priorities are the completion of the ongoing, global Phase III program of the Diamyd diabetes vaccine, and preparations to apply for market approval. Diamyd employs an outsourcing model with low costs and an efficient organization, where some of its operations have been outsourced to qualified partners with expert qualifications. Diamyd has offices in Stockholm, Sweden and Pittsburgh USA. Diamyd is listed on the Nasdaq OMX Nordic Market Small Cap list, as well as the OTCQX in the US. BUSINESS CONCEPT, OBJECTIVE AND VISION Diamyd s business concept is to license diabetes-related candidate drugs and refine them through development. Diamyd s objective is to create a Small Pharma Company in the diabetes field. The vision is to be able to prevent and cure the autoimmune form of diabetes in the future. PROJECT PORTFOLIO Diamyd develops therapies from two independent technological platforms in the areas of diabetes and diabetes-related complications. One of the platforms originates from the GAD65 molecule and is the basis for the Diamyd diabetes vaccine, while the second platform NTDDS (Nerve Targeting Drug Delivery System), utilizes gene therapy to deliver medication directly to nerve cells. As a result of the cumulative research efforts, Diamyd now possesses a portfolio of three clinical-stage candidate drugs: Diamyd for type 1 diabetes (Phase III), Diamyd for LADA (Phase II) and the NTDDS product NP2 for chronic pain (Phase I). CLINICAL TRIALS Phase III studies of Diamyd for type 1 diabetes are currently under way in Europe and the US. Diamyd expects to be able to begin reporting clinical results in the spring of 2011, after which applications for market approval can be submitted to the relevant regulatory agencies during the year. There are also several studies of Diamyd initiated by research groups in progress, including a Swedish study where children at high risk of developing type 1 diabetes are vaccinated to try to prevent the disease from developing. In addition Diamyd is conducting a Phase I trial in the US of the NTDDS product NP2 in the area of chronic pain. PRODUCT STRATEGY Diamyd may pursue the completion of current and future studies, market approval applications and finally the market launch of its products independently to some extent, or in cooperation with other pharmaceutical companies. Diamyd s ambition is to manage the commercialization of Diamyd for type 1 diabetes independently in certain selected markets, while pursuing partnerships for other markets. Diamyd plans to out-license Diamyd for LADA and NP2. Diamyd s strategy for the NTDDS platform is to develop drugs related to diabetes complications on its own and out-license them after Phase II. Diamyd intends to out-license the application of the NTDDS technology for diseases other than diabetes at an early stage. annual report 08/09 1

4 Important events during the fiscal year Children from the age of 10 years were included and accelerated patient recruitment was initiated in the American Phase III study of the Diamyd diabetes vaccine. The first children were vaccinated in a prevention study with Diamyd intended to prevent type 1 diabetes in Swedish children at high risk of developing the disease. A study on Diamyd was published in Europe s leading scientific diabetes journal, Diabetologia. Subscription for new shares supported by subscription warrant DIAM TO 2B provided a cash injection of MSEK 28. The rights to a novel endomorphin technology which can be used to treat conditions such as diabetes pain were in-licensed. A European Phase III study of the Diamyd diabetes vaccine was approved in all nine countries. The Swedish Medical Products Agency approved a follow-up study designed to follow Swedish children who were part of the Phase II study of the Diamyd vaccine and confirm the long-term effect of the vaccine. A pioneering prevention study of the Diamyd vaccine was approved by the Norwegian Medicines Agency. The US FDA approved a combination study of the Diamyd vaccine with the purpose of restoring the ability to produce insulin in patients with type 1 diabetes. The results of a Phase II study of Diamyd were published in the prestigious medical journal, the New England Journal of Medicine. Important events after the end of the fiscal year The final patient was included in the European Phase III study of the Diamyd diabetes vaccine. The US Department of Veterans Affairs (VA) awarded a grant of MUSD 1.84 to support the development of Diamyd s Nerve Targeting Drug Delivery System (NTDDS) for Diabetic Neuropathic Pain. An oversubscribed preferential rights issue brought in just over MSEK 219 before issue expenses to Diamyd. Diamyd executed a settlement agreement with Apoteket AB regarding a clinical study in LADA patients, which was invalidated in As part of the settlement agreement, Diamyd received MSEK 11 in compensation for the deficiencies in Apoteket s procedures and documentation that caused Diamyd to invalidate the study. An agreement was signed with patient recruitment firm Inclinix Inc. to accelerate the recruitment of patients for the US Phase III study of the Diamyd diabetes vaccine. A four-year follow-up of type 1 diabetes patients who were part of the Phase II study of the Diamyd diabetes vaccine showed a clear positive trend. 2

5 CEO COMMENTS CEO COMMENTS After a very eventful year, Diamyd stands stronger than ever. The first of our Phase III studies of the Diamyd diabetes vaccine is fully recruited, and this fall s oversubscribed new share issue will allow us to focus on our operations until the European clinical results become available in the spring of But we certainly won t be twiddling our thumbs until then. We are making an all-out effort to quickly increase the number of recruiting clinics in the US, and to enroll all of the patients also in the US Phase III study. Once all of the new clinics are on board, we can better assess when recruitment for the study will end, and thus when we will be able to obtain the US clinical results. As it becomes possible to make more solid predictions concerning the future development of the Diamyd project, our ability to sign partnership agreements that reflect the full potential of this revolutionary treatment will increase. We are currently negotiating from a position of strength as a result of several events since autumn Our research has been met with great interest in the academic world, and has already resulted in several exciting studies initiated by research groups. We ve had the results of our Phase II studies in type 1 diabetes and LADA published in leading scientific journals, and the long-term follow-up of the participants of the Phase II study of children and adolescents with type 1 diabetes has shown promising results. We ve also reached a settlement agreement with Apoteket AB concerning the LADA study of 160 patients which was invalidated in Last but not least, we have financial stability after completing a new share issue, which means that we can decide on the timing and structure of a partnership agreement that is the best for our shareholders and for Diamyd. Going forward we will speed up the development of the NTDDS platform, which is being managed by our American subsidiary, Diamyd Inc. The NTDDS platform got put onto the back burner somewhat while the bulk of our resources was being focused on the Phase III studies of Diamyd. Despite the faster pace of development, we expect the NTDDS platform to be nearly self-supporting in the future thanks to the large outside grants and orders for contract research that Diamyd Inc s employees have landed. Moreover, in 2010 we expect the results from the Phase I study of our first NTDDS product, NP2, which may raise the entire platform to a new level. We have a great deal of work ahead of us preparing to apply for market approval and the accompanying market launch of the Diamyd diabetes vaccine. Therefore we ve already begun strengthening the organization so that we will be able to manage everything that needs to be done so that no time is lost on the market. It s a joy to relate how everyone who has encountered the project catches the Diamyd enthusiasm. We see an unbelievable spirit, both at the company and among our partners, which makes everyone deliver twice what we believed was possible. Now more and more researchers, doctors, patients and both private and institutional investors are having their eyes opened to Diamyd. Nevertheless we are still relatively unknown in Sweden and abroad. The attention we receive will probably only increase in the coming year, as new advances are reported and the Phase III results for the Diamyd vaccine approach. Perhaps ten years from now those of you reading this today will tell your audience of impressed listeners that you were there way back in 2009, before the rest of the world discovered Diamyd. Elisabeth Lindner President and CEO Diamyd Medical AB annual report 08/09 3

6 diabetes A CHRONIC DISEASE A CHRONIC DISEASE IN NEED OF NEW TREATMENT STRATEGIES Diabetes is a chronic disease. People with diabetes often develop serious complications resulting in great suffering and premature death. Diabetes is one of the most common diseases in the Western world, and every year 3.8 million people die as a result of it. Apart from individual suffering and lifelong medication, the disease has an enormous financial impact on health services as well as on society, through loss of working hours. In 2007, annual global healthcare expenses for diabetes amounted to 232 billion USD (including treatment of complications) 1). Diabetes is characterized by elevated blood sugar levels. Insulin is the hormone that regulates the level of sugar in the blood. In people with an autoimmune form of diabetes (type 1 diabetes or LADA), the body has stopped making insulin because the insulin-producing cells have been destroyed by the body s own immune system. In those people with type 2 diabetes, the body still produces insulin, but no longer responds to it. The result, in all types of diabetes, is that sugar remains in the bloodstream and is not made available to the cells, which has several damaging consequences. Both very high and very low blood sugar levels are extremely dangerous and can lead to rapid and potentially fatal loss of consciousness. Consistently raised blood sugar levels cause typical diabetes complications, including kidney, eye and nerve damage as well as impaired circulation and cardiovascular disease. DIFFERENT TYPES OF DIABETES There are several types of diabetes. The three most common are type 2 diabetes, type 1 diabetes and LADA (Latent Autoimmune Diabetes in Adults). Type 1 diabetes and LADA are similar in that they are both autoimmune forms of the disease. This means that the body s own immune system destroys the cells that make insulin, i.e. the beta cells of the pancreas. As the disease progresses, the patient will inevitably need to self-inject with industrially-manufactured insulin, as the patient s own beta cells will have been destroyed in the autoimmune attack. Type 2 diabetes, formerly known as adult-onset diabetes, is by far the most common form of diabetes and is rapidly increasing. In contrast to the autoimmune forms, type 2 diabetes is caused by impaired insulin sensitivity and is mainly related to age and lifestyle. Type 1 diabetes Type 1 diabetes, also known as juvenile diabetes, is an autoimmune form of diabetes that usually occurs in children and adolescents. Type 1 diabetes is the result of a deficiency of insulin caused by an autoimmune attack on the body s own blood sugar regulating beta cells in the pancreas. The beta cells are thought to be gradually destroyed over a period of time, varying from a few months to several years. Symptoms only appear when this destruction has been going on for some time. Children and adolescents with type 1 diabetes usually don t come into contact with the healthcare system until they become acutely ill. Usually by then, only percent of the beta cells are left 2). This is not enough to maintain blood sugar control. At this point, the patient s survival depends on starting insulin injections immediately. Even after the disease has been diagnosed, the autoimmune attack continues on the remaining beta cells, which in time will be completely destroyed. By then, the body will have no blood sugar control left. All of its insulin needs will have to be met by insulin injections or an insulin pump. Estimated distribution of the different types of diabetes in the Western world Type 1 diabetes LADA Type 2 diabetes 1) A complete list of sources cited appears on the inside of the back cover. 4

7 DIABETES The trigger for the autoimmune attack remains unknown, but there are theories about different environmental factors such as virus infections. People with type 1 diabetes also have a genetic predisposition for the disease, and genetic testing can be used to estimate the risk of a newborn baby developing the disease later in life. About five percent of children who have a parent or sibling with type 1 diabetes also develop this type of diabetes 2). An ongoing autoimmune attack can be detected even before the symptoms of diabetes have appeared. This is done by measuring the level of various biomarkers in the blood, including antibodies against insulin, GAD and IA-2. There are several ongoing studies aiming to identify children and adolescents with a high risk of developing type 1 diabetes. These crucial studies will help us gain a better understanding of the disease and enable us to offer preventive treatment preventing type 1 diabetes by blocking the autoimmune attack. LADA LADA (Latent Autoimmune Diabetes in Adults), also known as type 1.5 diabetes, is, like type 1 diabetes, also an autoimmune form of diabetes, but it strikes in adulthood. This disease is similar to type 1 diabetes in many respects and it, too, eventually leads to an absolute need for insulin treatment. However, the progress of the disease is slower than in type 1 diabetes. Because the disorder mainly affects adults and does not immediately require insulin treatment, LADA is often incorrectly diagnosed as type 2 diabetes. Diamyd estimates that about 10 percent of all those diagnosed with type 2 diabetes actually have LADA 3). LADA patients characteristically have antibodies against GAD, which is a sign of the ongoing autoimmune attack on the blood sugar controlling cells. This means that LADA can be diagnosed with an antibody test. In the early stages, people with LADA often have significantly better insulin production and blood sugar control than those with type 1 diabetes, and therefore they do not necessarily require insulin treatment immediately. However, after a few years, people with LADA usually need daily insulin injections to maintain acceptable blood sugar levels. And, like people with type 1 diabetes, those with LADA often develop diabetes-related complications. Living with type 1 diabetes Type 1 diabetes is a chronic disease that has a huge impact on the life of both child and family. Insulin must be injected, and the blood sugar must be checked several times a day. It is extremely important to manage the condition carefully in order to avoid both high and low blood sugar levels. Both can lead to lifethreatening coma. Prolonged elevation of the blood sugar also often leads to serious complications. Careful monitoring of blood sugar levels, combined with insulin treatment, reduces the risk of future diabetes complications. Nevertheless, many people with type 1 diabetes go on to develop serious complications affecting blood vessels, nerves, kidneys and other organs. The timing and composition of meals has to be regulated and balanced against the insulin dosage, which is especially difficult for small children. It is usually a traumatic experience for the whole family when a child develops type 1 diabetes. Type 2 diabetes Type 2 diabetes, formerly known as adult-onset diabetes, is by far the most common form of the disease. There is a global epidemic of diabetes, mainly caused by modern lifestyle. Type 2 diabetes is characterized by insulin resistance, which means that insulin loses its effect on the body. The exact cause of insulin resistance in this type of diabetes has yet to be identified. Cell insulin receptors appear defective in some patients, whilst the insulin signal mechanism seems impaired in others. However, these patients seem to have a functioning insulin production. Type 2 diabetes also progresses more slowly than type 1 diabetes and LADA. Type 2 diabetes is the result of a combination of many factors, including heredity, lifestyle and environment. Type 2 diabetes mainly affects older people, but an increasing number of children are now developing the disease. annual report 08/09 5

8 DIABETES COMPLICATIONS All types of diabetes can lead to associated diseases and complications. Diabetes has both acute and long-term complications, and they can affect several different organs. Researchers have established that the risk of complications can be reduced by percent in type 1 diabetes patients who still have some remaining insulin production of their own 4). This clearly demonstrates the importance of at least partially preserving the ability of patients with type 1 diabetes to control blood sugar levels. The Diamyd vaccine aims to do just that, and therefore it may be of crucial importance for people with type 1 diabetes, in whom it could reduce the risk of developing complications. Acute complications Hypoglycemia If the blood sugar level drops too low it can lead to acute hypoglycemic coma. The person becomes unconscious, and the body s functions come to a halt as the brain suffers an acute lack of nutrients. This condition can be reversed with an intravenous injection of glucose. Less severe hypoglycemic events can be aborted by quickly eating or drinking something sweet, which brings the blood sugar level back up to normal. Ketoacidosis Markedly elevated blood sugar levels can lead to ketoacidosis. This condition arises when the body begins to break down its own cells to obtain nutrients, thereby releasing ketones and acids into the bloodstream. This is an extremely acute, life-threatening condition that requires intensive care. Long-term complications Cardiovascular disease This is the most common cause of death in diabetes, and people with diabetes have a much elevated risk of developing heart disease such as heart attack as well as stroke and other forms of cerebrovascular disease 5). Impaired circulation in the legs and feet, i.e. peripheral vascular disease, can lead to leg ulcers and foot complications that may require amputation. A study carried out by the Karolinska Institute in Stockholm has shown that Swedes with type 1 diabetes run a risk of amputation 86 times greater than that of healthy people. 11% of women and 21% of men with type 1 diabetes have to undergo an amputation before the age of 65 6). Kidney damage Diabetic nephropathy, i.e. kidney damage caused by diabetes, is the main cause of kidney failure in the Western world, sometimes requiring dialysis or a kidney transplant. About a third of all patients with diabetes develop kidney damage 5). Nerve damage Diabetes affects the nervous system in several different ways. The most common are loss of sensation and severe pain characterized by a stabbing or burning sensation in the legs, feet and hands. The pain is caused by damage to the peripheral nervous system, neuropathy, as a result of diabetes. Diabetes pain leads to disturbed sleep, reduced mobility, and difficulty working and engaging in social activities. Eye damage People with diabetes may develop damage to the blood vessels in the retina. This can lead to retinopathy, with impaired vision, and in some cases even blindness. People with diabetes may also develop cataracts resulting in impaired vision. Nearly everybody with long-standing type 1 diabetes will eventually develop retinal damage to some degree 7). Eyes: Retinopathy Heart: Cardiac disease Kidney: Nephropathy Lower limbs: Peripheral vascular disease Brain: Cerebrovascular disease Peripheral nervous system: Neuropathy Feet: Ulceration and amputation 6

9 DIABETES annual report 08/09 7

10 DIABETES WORLDWIDE Diabetes is a common disease globally, today affecting an estimated total of 246 million people. This figure is expected to rise to 380 million by Type 2 diabetes is on the increase worldwide, accounting for percent of all cases 8). Several studies have shown that around 10% of all those diagnosed with type 2 diabetes actually have LADA, which translates into an estimated total of at least 20 million people with LADA worldwide 4). Type 1 diabetes is thought to account for about 5-10 percent of all cases of diabetes in the Western world 9). The prevalence of type 1 diabetes is highest in North America and the Nordic countries. Diamyd estimates that around people develop type 1 diabetes annually in the USA and Europe alone, and this represents the primary market for the Diamyd diabetes vaccine 10). In addition, new research shows that the number of children and adolescents that develop the disease in Europe is increasing by about 4% annually and that the age of onset of type 1 diabetes is falling 11). The reasons for this are unclear. 8

11 DIABETES Percentage of the population with type 1 diabetes worldwide 12) < 0.10 % % % % % > 0.50 % Region Percentage of the population with type 1 diabetes Australia % Canada % Central Africa < 0.1 % China < 0.1 % Europe % India < 0.1 % Japan < 0.1 % The Middle East % North Africa % Russian Federation % Scandinavia > 0.5 % South Africa % South America % South-East Asia < 0.1 % USA % annual report 08/09 9

12 FROM RESEARCH TO RESULTS The primary focus of Diamyd Medical s research is the development of pharmaceuticals for the treatment of autoimmune diabetes and its complications. Diamyd was founded in 1996 by former CEO, now Chairman of the Board, Anders Essen-Möller as a spin-off from the sale of his previous firm Synectics Medical AB to the American company Medtronic. The rights to GAD65, the active substance in Diamyd s most advanced project, the Diamyd diabetes vaccine, were licensed from the University of California Los Angeles (UCLA) in Several preclinical studies and four clinical trials of the Diamyd diabetes vaccine have been conducted since the mid-1990s. It has been demonstrated that Diamyd can slow or halt the progression of autoimmune diabetes. Today the top priorities are the completion of the global Phase III program currently in progress and preparations to apply for market approval. 10

13 FROM RESEARCH TO RESULTS In 1994 the rights to GAD65 are in-licensed, the active substance in the Diamyd diabetes vaccine. In the later 1990s a large number of preclinical studies are conducted to ensure the substance s safety and efficacy. Studies in models of autoimmune diabetes indicate that the substance is safe and can halt or prevent the immune system from attacking insulin-producing cells At the turn of the millennium, it is time to take the large step of testing the vaccine on human subjects. Within a few years, a Phase I safety study is conducted on healthy volunteers and a Phase II study is conducted on patients with LADA (Latent Autoimmune Diabetes in Adults), to see whether the vaccine is safe and to determine a suitable dosage for continued development. Both studies show positive and desirable results. In the years following Diamyd conducts two more Phase II studies, one on adult LADA patients and the other on children and adolescents with type 1 diabetes Diamyd successfully conducts its Phase II study in type 1 diabetes, and can demonstrate that two single injections of the vaccine have slowed the autoimmune attack in the children and adolescents who were part of the study. In 2005 Diamyd acquires Nurel Therapeutics Inc., an American company whose gene therapy research becomes the foundation for Diamyd Inc., a subsidiary of Diamyd Medical. In addition to research on the patented NTDDS platform, Diamyd Inc. is also managing the production of GAD At the end of 2007 company founder and CEO Anders Essen-Möller, who has been successfully running the company with a clear vision since its inception, takes over as the acting company Chairman, and Diamyd comes under new operational management. Elisabeth Lindner, with long-standing experience in the pharmaceutical industry, takes over as President and CEO Based on the results from the Phase II study in type 1 diabetes, in 2008 Diamyd receives approval from the US FDA (Food and Drug Administration) and several European regulatory agencies to begin the decisive Phase III studies in type 1 diabetes. Diamyd takes this opportunity to strengthen the organization in order to manage the extensive Phase III program. In the autumn of 2008 the prestigious scientific journal The New England Journal of Medicine publishes the 30-month results from the completed Phase II study of Diamyd for type 1 diabetes, accompanied by an editorial. The publication means a scientific validation of the clinical results and a tremendous breakthrough for Diamyd Work intensifies on the project of recruiting patients for the Phase III studies under way in Europe and the US. The European study is approved in the ninth and final European country, and the final patient is included at the end of the year. The US FDA approves lowering the minimum age for patients participating in the American study from 16 to 10 years, which was permitted in the European study from the outset. Two pioneering prevention studies of the Diamyd vaccine, one in Sweden and one in Norway, are approved this year by each country s respective Medical Products Agency. The Swedish study has already begun vaccinating healthy children at high risk of developing type 1 diabetes. In addition, the FDA approves a combination study of the Diamyd vaccine and two established drugs with the purpose of restoring the ability to produce insulin in patients with type 1 diabetes. TrialNet/NIDDK initiates an American study of Diamyd at 15 leading diabetes clinics in order to investigate the vaccine s mechanism of action in more detail. The research receives further validation through a publication in Diabetologia, the leading scientific diabetes journal in Europe. The article demonstrates that even after five years the Diamyd vaccine reduces the risk that patients with LADA will need treatment with insulin. In the spring Diamyd hires an American consulting firm that specializes in managing out-licensing processes to explore the level of interest in the Diamyd vaccine among the major international pharmaceutical companies through a structured process. A new share issue is completed in the fall, securing the financing for the next two years. TODAY With the Diamyd vaccine in Phase III and several NTDDS projects related to diabetes complications under development, Diamyd has evolved into a company focusing on diabetes with the object of becoming a market-oriented pharmaceutical company. Diamyd s opportunities and potential for growth have grown, and the business can expand in several different areas through new research as well as through acquisition and partnership agreements. By concentrating on the important Phase III studies while at the same time building a business focused company, Diamyd is taking care of both its product development and its future business. annual report 08/09 11

14 DIAMYD S BUSINESS MODEL Diamyd s vision is to be able to prevent and cure the autoimmune form of diabetes in the future. In order to achieve this vision, Diamyd employs a dynamic business model that can be adapted to different scenarios concerning current and future trial programs, the commercialization of Diamyd s products, financing of its business and partnerships and acquisitions. BUSINESS CONCEPT Diamyd s business concept is to license and refine diabetes-related candidate therapies, which are to be subsequently commercialized, either independently or with a partner, or out-licensed. VISION AND OBJECTIVE Diamyd s goal is to be able to treat children, adolescents and adults with diabetes and to vaccinate in order to prevent the disease from developing. Diamyd s objective is to create a Small Pharma Company in the diabetes field. Its vision is to be able to prevent and cure the autoimmune form of diabetes in the future. STRATEGY The primary focus of Diamyd s research is the development of pharmaceuticals for the treatment of autoimmune diabetes and its complications. Today the top priorities are the completion of the global Phase III program of the Diamyd diabetes vaccine currently in progress, and preparations to apply for market approval. Diamyd Medical is managed using an outsourcing model where some of its operations have been outsourced to qualified partners with expert qualifications, and a limited number of permanent employees manage, lead and implement projects in areas such as clinical and pre-clinical research, regulatory affairs and production. This model leads to lower operating expenses than building up the operation in-house, and enables Diamyd to develop in a costefficient and flexible manner while ensuring high quality with an emphasis on results as the projects move forward. In order to ensure that established targets are met and that Diamyd continually gets closer to its vision of being able to prevent and cure autoimmune diabetes, Diamyd works according to a strategic plan encompassing the areas of development and commercialization, financing and partnerships and acquisitions. The plan is a dynamic tool and the strategy is continuously evaluated as internal and external conditions evolve. and development Diamyd s outsourcing model Clinical research Regulatory Klinisk forskning affairs DIAMYD Pre-clinical research Preklinisk forskning and development Production Marknadsföring Marketing and sales Development and commercialization Diamyd may pursue the completion of current and future studies, market approval applications and finally the market launch of its products, in cooperation with other pharmaceutical companies or independently to some extent. The path Diamyd chooses depends primarily on which resources are required to drive the development and market launch, which terms that can be reached in a potential partnership agreement and the capital needs at the time. Out-licensing of development projects may be one way to finance and secure resources for the completion of trial programs or future market launches. 12

15 The BUSINESS MODEL In general the rule is that the further along a product is in the development process, the better the terms that can be obtained in a licensing agreement. The optimal development phase and structure for a licensing agreement depend on several factors. There is a great future potential for Diamyd and its shareholders in retaining certain markets for itself. This will enable Diamyd to develop into a market-oriented pharmaceutical company under its own power. The following is a summary strategic overview concerning the commercialization of Diamyd s products under development. Diamyd for type 1 diabetes In the Diamyd s view the prospects for taking the Diamyd for type 1 diabetes product through Phase III and potentially to market approval are good. Diamyd intends to manage the marketing and sales of the product itself, at least in the Nordic countries. This is possible because type 1 diabetes patients are treated by a very limited group of physicians, who primarily work at specialty clinics and university hospitals. As a result of the limited number of relevant physicians and hospitals, a smaller sales organization is sufficient to launch the Diamyd vaccine for type 1 diabetes in certain key markets. Diamyd for LADA The intention is to completely out-license Diamyd for LADA to other pharmaceutical companies. Unlike type 1 diabetes patients, LADA patients are predominantly treated by general practitioners, which significantly broadens the market and thus makes it more costly from a marketing perspective. NTDDS platform Diamyd s strategy for the NTDDS platform is to develop drugs related to diabetes complications on its own and license them out after Phase II. The target group for products developed in the NTDDS platform is primarily people suffering from chronic pain related to diabetes who are predominantly being treated by general practitioners. The intention is to out-license the application of the NTDDS technology for diseases other than diabetes at an early stage. The NTDDS technology is extremely broad, and there has been considerable interest in the platform from other companies with pharmaceutical substances that they would like to effectively deliver to neurons. The Phase I study in progress is validating the NTDDS platform as such. Other development projects Diamyd plans to either partially or entirely out-license products for therapeutic indications outside the area of diabetes to external parties at an early stage. The application of GAD65 for the treatment of Parkinson s disease has accordingly been out-licensed to the American company Neurologix, Inc. Financing Diamyd has several options for financing its business, for example through out-licensing of complete or partial development projects on selected markets or through various types of share issues. The development from preclinical studies to clinical Phase III studies, where Diamyd now finds itself, has been achieved at an extremely low cost by industry standards. Since its inception Diamyd has raised MSEK 463 in various share issues, which does not include the latest preferential rights issue of just over MSEK 219. Partnerships and acquisitions Partnerships with other pharmaceutical companies are a part of Diamyd s future evolution, and various potential partnerships are continuously under evaluation. Diamyd is also evaluating the acquisition of development projects and companies with promising products under development. Business discussions are held with international pharmaceutical companies concerning the outlicensing of several products in the research portfolio. The rights for the application of the GAD65 gene in the treatment of Parkinson s disease have previously been licensed out on a non-exclusive basis to the American company Neurologix, Inc. annual report 08/09 13

16 DEVELOPMENT PLATFORMS Diamyd s research and development projects are mainly focused on the treatment of autoimmune diabetes and related complications. The therapies in development are based on two independent technological platforms. One of the platforms originates from the GAD65 molecule and is the basis for the Diamyd diabetes vaccine, while the second platform, NTDDS (Nerve Targeting Drug Delivery System), uses gene therapy to deliver medication directly to nerve cells. THE GAD PLATFORM Diamyd s platform for research into autoimmune diabetes originates from the GAD65 molecule and forms the basis for the Diamyd diabetes vaccine. GAD65 (Glutamic acid decarboxylase isoform 65 kda), is the active substance in Diamyd. This is a human enzyme and an important autoantigen in autoimmune diabetes. GAD65 is found in the insulin-producing beta cells of the pancreas, although its function at this site is not yet fully understood. It is however clear that GAD65 is one of the most important targets when the immune system attacks the beta cells in autoimmune diabetes. The body s own GAD65 can be found in the beta cells of the pancreas as well as in nerve and brain tissue. In nerve cells, GAD catalyzes the transformation of the neurotransmitter glutamate to the neurotransmitter GABA. GAD65 is therefore thought to be an important drug candidate for several neurological diseases, e.g. Parkinson s disease, as well as for neuropathic pain. Treatment with the Diamyd vaccine is thought to induce tolerance to GAD65, thereby intervening in the autoimmune attack and preserving the capacity to control the blood sugar in patients with autoimmune diabetes, i.e. type 1 diabetes and LADA. The vaccine works by immunomodulation and is antigen-specific, which means that it specifically aims to induce tolerance in the autoimmune T cells that attack GAD65 in the beta cells, without impairing the immune system either wholly or in part. This is in contrast to immunosuppression, a different treatment strategy that temporarily disables T cells and so suppresses and weakens the immune system. This increases the likelihood that Diamyd treatment will not only prove effective but will also have few side effects. The safety profile is extremely important in the treatment of diabetes, as children and adolescents represent a significant proportion of people with type 1 diabetes. GAD platform patent protection Diamyd has secured exclusive patent licenses for the manufacturing and therapeutic use of GAD65 from the University of California, USA, and for the treatment of diabetes with GAD65 from the University of Florida, USA. The GAD65 gene and its protein also have potential therapeutic applications in neurological diseases such as Parkinson s disease. The licensed patents are believed to protect the use of GAD65 until 2021 in the USA and until 2016 in Europe. In addition, the Diamyd vaccine will receive further protection in Europe via data and market exclusivity for eight to eleven years after gaining marketing authorization by EMEA, the European Medicines Agency. Furthermore, Diamyd has submitted its own patent applications, which if approved, would further extend the patent protection for the diabetes vaccine. In addition to the exclusive rights to therapeutic use of GAD65, Diamyd also licenses non-exclusive rights to GAD-based diagnostic applications. 14

17 DEVELOPMENT PLATFORMS THE NTDDS PLATFORM NTDDS (Nerve Targeting Drug Delivery System) is Diamyd s second platform and currently consists of three products in preclinical and clinical development which are intended for the treatment of conditions that include chronic pain and cancer. Research and development based on the NTDDS platform is being carried out by the U.S. subsidiary, Diamyd Inc., in Pittsburgh, focused on the development of products and treatments for pain relief in e.g. diabetic neuropathy. NTDDS is a gene therapy delivery system, also known as a vector, which can deliver drugs directly to nerve cells, providing a direct effect in the cells targeted by the treatment. As the drug is delivered directly to the nervous system without first entering the bloodstream, side effects are likely to be fewer than with current treatments, such as morphine. The NTDDS vector, with a gene for a pain-relieving substance, e.g. enkephalin, is injected into the skin. The vector is then transported along the peripheral nerve pathways to the spinal cord where the gene can exert its effect by blocking pain signals to the brain. NTDDS can also be used in the treatment of cancer of the nervous system, glioma, where it can be used to transport cell-killing substances directly to the malignant tumor. The NTDDS vector is not integrated into the chromosomes of the host cell and it does not generate an immune reaction. This further reduces the risk of side effects compared to other gene therapy methods. NTTDS can also be used to treat several other diseases involving the peripheral and central nervous systems, e.g. peripheral neuropathy a serious condition affecting millions of people. There is currently no effective treatment for peripheral neuropathy. Local treatment using NTDDS with growth factors could become clinically very important if it can protect nerve cells and stimulate their regrowth. Erectile dysfunction (impotence) is one example of the consequences of neuropathy in men with diabetes or men who have had prostate surgery. NTDDS combined with GAD could also prove effective in the treatment of a number of other diseases. NTDDS platform patent protection Diamyd has been granted exclusive rights to the NTDDS gene therapy platform by the University of Pittsburgh in the USA. The licensed patents and patent applications protect the NTDDS technology, production methods and components, e.g. cell lines and vectors. Patent protection in the USA is considered valid until at least European patent applications are under review. An exclusive license for a novel endomorphin technology was acquired in This could potentially be used in the treatment of neuropathic pain, including diabetic neuropathy. This license includes a European patent. Patent applications for North America and Asia are under review. annual report 08/09 15

18 PROJECT PORTFOLIO Diamyd has a portfolio of three drug candidates in clinical development: Diamyd for type 1 diabetes in Phase III, Diamyd for LADA in Phase II and NP2 for chronic pain in Phase I. In addition to these, the NTDDS products NG2 and NC3 are in preclinical development. The following is a description of the products that Diamyd has under development. PRODUCT PRECLIN ICAL PHASE I PHASE II PHASE III Diamyd for type 1 Diamyd for LADA NP2 NG2 NC3 DIAMYD FOR TYPE 1 DIABETES The GAD-based vaccine Diamyd for type 1 diabetes represents the research project that has reached the most advanced stage of development. The purpose of the vaccine is to prevent, delay, or stop the autoimmune attack on beta cells in type 1 diabetes, thereby preserving the body s capacity to regulate blood sugar. This is very important, as there is no such treatment available today. A Phase II study of 70 children and adolescents with type 1 diabetes published in the highly respected medical journal the New England Journal of Medicine in the fall of 2008 showed that the Diamyd vaccine significantly slowed the course of the disease in subjects with newly-diagnosed type 1 diabetes for at least 30 months. The study also showed that the effect of the Diamyd vaccine is greatest in the early stages of the disease. It was recently announced that the fouryear follow-up of the study shows a clearly positive trend. The treatment, which consists of only two to four injections, each administered in the arm on separate occasions, does not require hospitalization and has been well received by patients, parents and physicians alike. The Diamyd vaccine has not been associated with any serious adverse effects in previous studies and is thought to have a uniquely favorable combination of efficacy and safety. Project status Two parallel Phase III studies of the Diamyd vaccine, one in Europe and the other in the USA and each with 320 participants, have been in progress since the fall of Recruitment to the European study has been completed and it is estimated that the first results will be announced in the spring of If the results are positive, an application for market authorization will be submitted to the relevant medicinal products agencies during 2011, which may allow a market launch in A three-year follow-up study to the completed Phase II study in patients with type 1 diabetes is being carried out with the aim of confirming the vaccine s long term effects. 16

19 PROJECT PORTFOLIO In an ongoing prevention study of Swedish children aged four and older, and another prevention study which is about to start in Norway, researchers are aiming to establish whether the Diamyd vaccine can prevent type 1 diabetes in individuals at high risk of developing the disease. Future market potential The market for Diamyd s diabetes products is global but primarily located in the Western world, where the prevalence of type 1 diabetes is at its highest. Diamyd Medical does not provide forecasts and therefore cannot speculate on the size of any future sales figures or profits. The initial target group for the product closest to authorization, Diamyd for type 1 diabetes, is newly-diagnosed patients. Estimates based on data from reports and articles about the number of people of different ages who develop type 1 diabetes, as well as on the rate of increase in different regions, show that in the USA and Europe alone about 80,000 people develop type 1 diabetes annually 10). At an assumed selling price of 15,000 USD per treatment, this market would be worth over a billion USD annually. Researchers have established that the risk of complications can be reduced by 60-80% in type 1 diabetes patients who still have some remaining beta cell function of their own 13). Based on this, together with information obtained from reports and publications about the prevalence and treatment costs of the different types of diabetes complications, Diamyd and its expert consultants estimate that there is a potential saving to society of more than 15,000 USD in treatment costs per patient if the rate of common complications in type 1 diabetes can be reduced 14). If additional complications are included in the calculation, this saving could be considerably greater. And this figure does not include the reduction in lost working hours or, indeed, individual suffering. Such health economic calculations will be used to justify the future pricing of the treatment. If, in the future, Diamyd for type 1 diabetes can be used for prevention, i.e. to prevent the disease in individuals at high risk of developing type 1 diabetes, as well as being used in those with already established disease, the estimated sales potential is significantly greater. Diamyd for type 1 diabetes competing products There is currently no product on the market addressing the autoimmune process that causes type 1 diabetes and LADA. Diamyd therefore defines its competitors as other diabetes treatments in development that aim to prevent or slow down the autoimmune attack on the blood sugar regulating beta cells. This is a very active area of research and development, but there are two other main treatment strategies for type 1 diabetes that can currently be regarded as competing with the Diamyd vaccine. These, like Diamyd, have succeeded in reaching Phase III in clinical development, within reach of market authorization. The two alternative competing strategies that are currently undergoing Phase III trials are the monoclonal anti-cd3 antibodies, specifically the drug candidates Otelixizumab and Teplizumab, and the synthetic peptide DiaPep277. Otelixizumab Tolerx Inc. is developing this monoclonal anti-cd3 antibody in collaboration with GlaxoSmithKline. Otelixizumab is an antibody to the CD3 receptor, which is present on all T cells. T cells are a sub-group of white blood cells called lymphocytes and represent an important part of our immune system. In type 1 diabetes, certain T cells, called effector T cells, mistakenly attack and destroy the beta cells of the pancreas. Treatment with an intravenous infusion of Otelixizumab temporarily destroys the T cells and suppresses the immune system, a process called immunosuppression, which can have side effects such as flu-like symptoms and Epstein-Barr virus reactivation. Teplizumab Macrogenics Inc. is developing this monoclonal anti- CD3 antibody in collaboration with Eli Lilly. Teplizumab also binds to the T cell CD3 receptor, just like Otelixizumab. Temporarily destroying the T cells can modify the pathological immune response that lies behind several different autoimmune diseases other than type 1 diabetes. Adverse effects such as fever, headache, joint pain, muscle aches and rashes have been reported in previous studies with Teplizumab. DiaPep277 Andromeda Biotech Ltd, jointly owned by Clal Biotechnology Industries and Teva Pharmaceutical Industries, is developing a synthetic immunomodulatory peptide, DiaPep277, for the treatment of type 1 diabetes. This product is based on an immunodominant epitope from the autoantigen heat shock protein 60 (hsp60). Like Diamyd s GAD65 molecule, this peptide modulates the immune system in type 1 diabetes, and could thereby reduce or prevent the destruction of the blood sugar regulating beta cells. No effect was observed in a Phase II clinical trial in children with type 1 diabetes. annual report 08/09 17

20 Diamyd slows the autoimmune process In type 1 diabetes, destruction of beta cells begins even before symptoms appear. For reasons that are unclear, the body s own immune system starts to destroy the beta cells that regulate blood sugar levels. The symptoms of diabetes only become apparent when just 10 to 20 percent of beta cell function remains. By this time, the body does not have enough beta cells left to maintain blood sugar control. Typical symptoms include increased urine volume and excessive thirst, along with increasing fatigue, weakness, hunger and rapid weight loss. Patients with type 1 diabetes don t usually see a doctor until they become acutely ill. The condition can deteriorate rapidly, and if affected individuals don t receive prompt medical care, they can lapse into a coma. The patient must have immediate insulin treatment and often has to stay in hospital for some time after diagnosis. Despite insulin treatment, the underlying process of beta cell destruction continues unabated until virtually all the cells have been destroyed and the body has no remaining capacity to regulate blood sugar levels. The Diamyd vaccine is intended to halt or slow the autoimmune attack and to save any remaining beta cells. The next step - prevention Studies have shown that the Diamyd vaccine is most effective when given early in the course of the disease in patients with newly-diagnosed type 1 diabetes. If these results can be confirmed by larger studies, the next logical step is to extend testing of the vaccine to individuals who are at high risk of developing diabetes, i.e. to carry out prevention studies to see if the disease process can be prevented before it manifests. One prevention study is already in progress, the aim of which is to evaluate the effect of the Diamyd vaccine in children at elevated risk of developing type 1 diabetes. Beta cell mass 100% 80% 60% 40% 20% 0% Beta cell mass 100% 80% 60% 40% 20% 0% Beta cell mass 100% 80% The autoimmune attack starts to destroy the beta cells Time Diagnosis of type 1 diabetes made The autoimmune attack destroys the insulin-producing beta cells. At the time of diagnosis only percent of the beta cells remain. The autoimmune attack starts to destroy the beta cells Time Diagnosis of type 1 diabetes made Treated with Diamyd Diamyd is given to stop the autoimmune attack, to preserve the remaining beta cells and the body s own insulin production. The earlier treatment can start, the greater the remaining own production of insulin. The autoimmune attack starts to destroy the beta cells Treated with Diamyd 60% 40% 20% 0% Time If Diamyd is given at an early stage, the autoimmune process may be halted before the disease manifests. This means that if Diamyd can be given as a preventive measure, it may be possible to completely prevent type 1 diabetes. 18

21 PROJECT PORTFOLIO Diamyd FOR LADA The GAD-based vaccine Diamyd for LADA aims to prevent, delay, or stop the autoimmune attack on the blood sugar regulating beta cells that occurs in LADA (Latent Autoimmune Diabetes in Adults), a less aggressive form of autoimmune diabetes that affects adults. Project status Diamyd for LADA has reached Phase II in clinical development, and in April 2009 the respected scientific journal Diabetologia published the results of a study that demonstrate that, even after 5 years, the Diamyd vaccine significantly reduces the need for insulin treatment in people with LADA. Only 14 percent of participants in the group that received 20 µg of Diamyd needed insulin after five years, compared to 64 percent in the placebo group. No serious adverse events related to the Diamyd treatment were reported. Future market potential Patients with LADA are a significant future target group for the Diamyd vaccine. Several studies and Diamyd s own clinical trials have shown that around 10 percent of all those diagnosed with type 2 diabetes actually have LADA 15). In 2007 it was estimated that worldwide around 246 million people have diabetes, of which percent have type 2 diabetes. This translates into an estimated total of over 20 million LADA-sufferers worldwide. The total number of people with diabetes is expected to rise dramatically to 380 million by ). NP2 The NTDDS product NP2 is a method of treating chronic pain with enkephalin a morphine-like substance. Preclinical studies show that a single dose of NP2 provides effective pain relief for several weeks. The treatment works locally and can be repeated several times without causing dependence or tolerance to enkephalin. The treatment has also been shown to be safe and to be free of serious side effects, in contrast to conventional treatment, e.g. morphine. Preclinical study results published in the scientific journal The Journal of Neuroscience in the fall of 2008 suggest that treatment with NP2 not only provides effective pain relief but could also potentially cure the pain, as it is partly due to inflammation caused by the pain itself. This means that in the future it may also be possible to administer local pain prevention. Project status Diamyd initiated a Phase I trial of NP2 in the USA in The aim is to establish the safety of the treatment in humans. The study encompasses 12 patients with severe cancer pain. The trial represents a safety study for the whole NTDDS platform and will form the basis for future studies of other substances and diseases. Future market potential The target group for NP2 is mainly people suffering from chronic pain, including pain related to diabetes and cancer. Current treatment regimens for chronic pain are generally associated with a number of adverse effects such as constipation, psychological disturbances and impaired breathing. In addition, problems with drug tolerance and dependence occur, and when all this is taken into account, there is a clear medical need for new forms of treatment. Drugs for diabetes-related pain are considered to have great market potential because diabetic neuropathy can occur in all forms of diabetes type 1, LADA and type 2. Cancer pain relief also represents a substantial market. About 30 percent of all cancer patients suffer from pain related to their disease. This figure rises to about 90 percent in patients with advanced cancer 17). NG2 The NTDDS product NG2 delivers GAD locally to nerve cells. In disease models it has been shown to be effective in the treatment of chronic neuropathic pain resulting from nerve damage, as in e.g. diabetes and spinal cord injury. Project status Preclinical studies are in progress. Clinical studies are being planned. Future market potential There is a clear medical need for new forms of treatment for neuropathic pain, with fewer side effects and avoiding the development of tolerance. About 4.7 million people suffer from neuropathic pain in the USA alone, and this populations is expected to increase to over 6.1 million by The American market for neuropathic pain relief is today estimated to be worth 2.6 billion USD, a figure that is expected to increase to 5.1 billion USD by ). NC3 The NTDDS product NC3 is for the treatment of glioma, a type of malignant brain tumor produced by cancerous glial cells from brain connective tissue. Malignant glioma is one of the most aggressive types of brain tumor and has low survival rates. NC3 can induce high levels of therapeutic cell-killing substances for up to a week. The NC3 vector and the cell-killing substances work together to eliminate cancer cells locally without damaging healthy cells nearby. Project status Preclinical toxicological studies have been carried out with NC3, financed by grants from the US National Institutes of Health (NIH). Future market potential In Sweden, the annual incidence (number of new cases) of malignant glioma is 4-6 per persons 19). The same incidence is thought to apply to the USA as well. The value of pharmaceutical sales for the treatment of glioma is expected to double to over 1.8 billion USD by 2017 in the USA, EU and Japan 20). annual report 08/09 19

22 CLINICAL TRIALS Diamyd currently has three products in clinical development. The most advanced of these is the GADbased vaccine Diamyd for type 1 diabetes which is undergoing Phase III trials in both the USA and Europe. In addition, Diamyd has initiated a clinical trial in the USA of the NTDDS technology within the field of chronic pain. Several externally funded and researcher-initiated studies of the Diamyd diabetes vaccine are in progress both in the USA and in Europe. DIAMYD S CURRENT AND RECENTLY COMPLETED CLINICAL STUDIES Diamyd has a large Phase III program of the Diamyd diabetes vaccine in type 1 diabetes in the USA and Europe, as well as a Phase I study of the NTTDS product NP2. Completed studies include a Phase II study of Diamyd for LADA and a Phase II study of Diamyd for type 1 diabetes. The latter has been extended by a further 3-year follow-up. Phase III program Diamyd for type 1 diabetes Two parallel Phase III studies of the Diamyd diabetes vaccine are now in progress in nine European countries and the USA. Both studies are randomized, double-blind and placebo controlled. Approximately 320 young patients with newly-diagnosed type 1 diabetes are included in each study. Recruitment for the European study has been completed. The aim of the Phase III studies is to confirm and evaluate the ability of the Diamyd vaccine to halt or slow the autoimmune destruction of the pancreatic beta cells, thereby preserving the body s own ability to control the blood sugar in people with type 1 diabetes. Each study includes three treatment arms in which one third of the patients are treated with two injections of Diamyd 20μg (days 1 and 30) and two placebo injections, one third are treated with four injections of Diamyd 20μg (days 1, 30, 90 and 270), and one third receive four placebo injections. The results of each study will be analyzed 15 months after all the participants have had their first injection. If the study results are positive, they will be used for market registration. The European study is led by Professor Johnny Ludvigsson of Linköping University Hospital in Sweden, whilst the US study is led by Professor Jerry Palmer of the University of Washington in Seattle, USA. Phase II study Diamyd for type 1 diabetes A completed 30-month randomized double-blind placebo-controlled Phase II trial of Diamyd encompassing 70 children and adolescents with type 1 diabetes. Significant long-term efficacy in slowing the destruction of beta cell function, i.e. the body s own ability to regulate blood sugar, was demonstrated. The treatment was well received by patients, their doctors, and family members. The results also strongly support the safety of the drug. No serious side effects related to the Diamyd treatment were reported in the study. The results were published in the fall of 2008 in the prestigious journal The New England Journal of Medicine. The study has now been extended by a further three years in order to monitor the participants and confirm the longterm effects of the Diamyd vaccine. Follow-up of Phase II study Diamyd for type 1 diabetes In February 2009, Diamyd received approval from the Swedish Medical Products Agency to follow up the children and adolescents with type 1 diabetes who participated in the Phase II trial of the Diamyd diabetes vaccine. An initial analysis of the new data shows that still four years after the injections were given, the patients who were newly-diagnosed at the start of the study and who received Diamyd vaccine, had significantly better diabetes status than the corresponding patients who received placebo. The safety data also continues to look promising, without any serious adverse effects associated with the treatment. The patients will also be followed with regard to quality of life and diabetes complications. The follow-up study will continue for three years, at which point the participants will have been monitored for a total of seven years. 20

23 CLINICAL TRIALS Change in meal-stimulated C-peptide, mean values Time since diagnosis at start of study: 0 18 months Change in meal-stimulated C-peptide, mean values Time since diagnosis at start of study: 0 3 months pmol/ml/2 hours pmol/ml/2 hours Diamyd n=35 Placebo n= Diamyd n=4 Placebo n=7-0.4 p= p= p=0.02 p= Diamyd injections Time in months Diamyd injections Time in months Diamyd has demonstrated efficacy in a Phase II study of 70 children and adolescents with type 1 diabetes*). Patients who received Diamyd lost significantly less of their meal-stimulated insulin-secreting capacity (as measured by C-peptide). C-peptide and insulin are produced in the body simultaneously and in the exact same quantities, and C-peptide is the best way to measure the body s remaining capacity to secrete insulin. In patients treated within three months of being diagnosed with type 1 diabetes, the Diamyd group on average even experienced an improvement in their insulin-secreting capacity over the first 15 months of the study. * ) Ludvigsson et al. N Engl J Med 2008;359: Phase II study Diamyd for LADA A completed randomized double-blind placebo-controlled Phase II study encompassing 47 LADA patients, where various doses of the vaccine were tested. Depending on their study arm, subjects received two injections, four weeks apart, of either 4, 20, 100 or 500 μg Diamyd or placebo. The study was unblinded after six months and the patients were followed for another four and a half years. The study results show that the most efficacious dose of Diamyd was 20 μg. A five year follow-up of the participants shows that the risk of a LADA patient having to start insulin therapy is reduced by Diamyd treatment. Only 14 percent of subjects in the group that received 20 µg of Diamyd and completed the study needed insulin treatment five years after the initial injection, compared to 64 percent in the placebo group. No serious adverse effects associated with the drug were reported during the five year period. The results were presented in September 2008 at a conference organized by the European Association for the Study of Diabetes (EASD) and were published in April 2009 in Diabetologia, the leading European scientific journal dedicated to diabetes. Dose Placebo 4 µg 20 µg 100 µg 500 µg Insulin-treated LADA patients 5 yrs after treatment with Diamyd * ) 64% 71% 14% 14% 63% * ) Agardh et al. Diabetologia 2009;52: Phase I study - NP2 for cancer pain A clinical Phase I study in progress in the USA to evaluate the safety of the NTTDS product NP2 in patients with severe cancer pain. The study is designed as a dose-escalating study in which various doses will be tested. annual report 08/09 21

24 CURRENT RESEARCHER-INITIATED CLINICAL STUDIES WITH THE DIAMYD VACCINE In addition to Diamyd s own clinical trials, a number of external studies of Diamyd, the GAD-based diabetes vaccine, are being conducted by independent researchers and research organizations. Diamyd has participated in the design of all of the external studies and has rights to the study results. Phase II intervention study Diamyd A study of 126 patients with newly-diagnosed type 1 diabetes now in progress. The aim is to assess whether injections of the Diamyd diabetes vaccine preserve the body s own beta cell function. In addition, the mechanism of action of the vaccine is being studied in detail, and its effect on the immune system is being analyzed. This study is being conducted by the American network TrialNet, funded by the NIH (National Institutes of Health) and the NIDDK (National Institute of Diabetes and Digestive and Kidney Diseases). Diamyd has designed the clinical study protocol in collaboration with TrialNet. Phase II combination study Diamyd An ongoing American combination study of Diamyd, with the aim of preserving and possibly restoring beta cell function in patients with newly-diagnosed type 1 diabetes. In this study the Diamyd vaccine is being tested in combination with drugs that are thought to stimulate the growth of new beta cells. The aim of this combination therapy is to try to restore the body s ability to regulate blood sugar levels in patients with type 1 diabetes. This study is being conducted and funded by the NIDDK, which is a part of the NIH in Washington D.C. in the USA. Diamyd has designed the clinical trial protocol in collaboration with researchers from the NIDDK. Phase II prevention study Diamyd An ongoing Swedish prevention study in children at high risk of developing type 1 diabetes. The study includes a total of 50 children aged four and older. Half of the children receive two injections of the Diamyd vaccine and half receive placebo. The aim is to evaluate whether vaccination with Diamyd can delay or halt the progress of the disease so that the children do not develop type 1 diabetes. The study is being conducted by a research group at Lund University, and is led by Dr Helena Elding Larsson, a pediatrician in Malmö and researcher at Lund University. Phase II prevention study Diamyd A soon to be launched Norwegian prevention study of the Diamyd diabetes vaccine aiming to investigate the disease process of type 1 diabetes before the disease becomes manifest, and to find out whether vaccination will halt the progress of the disease. This study includes 90 adult subjects who are at high risk of developing type 1 diabetes as well as a further 60 recently-diagnosed patients. The aim of this study is to understand the cause and mechanism of the pathological process that leads to type 1 diabetes and how it can be prevented. The study is being conducted by a diabetes research group at Oslo University Hospital (Oslo Universitetssykehus). It is being funded by the South-Eastern Norway Regional Health Authority, Oslo University Hospital and the University of Oslo. The trial protocol was developed in cooperation with Diamyd and Professor Johnny Ludvigsson of the Linköping University Hospital. The study is being led by Professor Knut Dahl-Jørgensen. List of Diamyd s clinical development programs Product Diamyd Phase & Country Skin prick test, Sweden 1995 Diamyd Phase I, UK 1999 Diamyd for LADA Diamyd for type 1 Diamyd for LADA Diamyd for type 1 Diamyd for type 1 Year initiated Participants Age, years Type 1 diabetes patients and healthy individuals Adolescents N=15 Healthy individuals N=24 Phase IIa, Sweden 2000 LADA patients N=47 Phase IIb, Sweden 2004 Type 1 diabetes patients N=70 Phase IIb, Sweden 2004 LADA patients N=160 Phase III, Europe 2008 Phase III, USA 2008 Type 1 diabetes patients N=320 Type 1 diabetes patients N=320 NP2 Phase I, USA 2008 Cancer patients Adults N=12 Follow up Diamyd of phase IIb, Type 1 diabetes for type 1 Sweden 2009 patients N=70 Number of patients Trial period Purpose Trial period: 28 days. Completed. Trial period:10 weeks. Completed. Trial period: 6 months. Follow-up: 5 years. Completed. Trial period: 15 months. Follow-up: 15 months. Completed. Trial period: 18 months. Follow-up: 12 months. Completed. Trial period: 15 months. Follow-up: 15 months. In progress. Trial period: 15 months. Follow-up: 15 months. In progress. Trial period: 4 months per dose group. In progress. Trial period: 36 months. in Phase IIb-study. In progress. Safety Safety and tolerability Dose-finding, safety and efficacy Safety and efficacy Safety Safety and efficacy Safety and efficacy Safety and efficacy Safety and efficacy 22

25 CLINICAL TRIALS Drug development Drug development is a very long and costly process. It is said that in general it costs one billion USD to take a drug from discovery to market. A candidate drug must get through a number of stages before it can reach the market. These stages can be separated into discovery, preclinical phase and clinical phase. After discovery, the drug undergoes preclinical testing in disease models. The drug is then tested in the clinical phase by carrying out clinical trials in human subjects. Clinical trials consist of four stages of which the first three Phases I, II and III take place prior to market launch. The following is a short description of each of the phases of drug development. Discovery phase The drug candidate is identified and protected by patents. The identification phase may rely on an understanding of the mechanism of a pathological process or on pharmacological knowledge about a particular substance. The identification phase may take several years. Preclinical phase In the preclinical phase, the candidate drug is tested in experimental systems and disease models to establish safety and efficacy. These studies are essential for obtaining the approval of the regulatory authorities to begin human trials. Phase I After successfully completing the preclinical phase, the drug can then be tested on a limited number of human volunteers in order to confirm the results of the preclinical studies, i.e. to confirm the safety of the drug, and to provide indications of any possible adverse effects. Phase II Phase II trials are carried out on a small number of patients with the actual disease that is to be treated, prevented or alleviated. The aim is to establish the optimal dosage of the drug, prove that it is efficacious, find out how it is distributed in the body, discover how the body affects the drug and establish its safety profile. Phase III The candidate drug is now tested in a larger group of patients in order to prove statistically that it is safe and efficacious. The effects on the disease are studied, and any possible side effects recorded. If the results in Phase III achieve the stated objectives, the company can apply to the regulatory authorities for market approval. Phase IV Phase IV studies are also carried out, after the drug has been introduced onto the market. The aim is to study the drug in everyday clinical use over an extended period of time, and to record any rare adverse effects that may later emerge. New patient groups may also be evaluated during Phase IV. annual report 08/09 23

26 A WORD FROM THE RESEARCHERS The story of GAD continues Åke Lernmark The first version of The Story of GAD was published back in It was written by the American journalist Robert Dinsmoor and began with a description of how, in the early seventies, the researchers Bottazzo and Doniach discovered the presence of antibodies against beta cells in newly-diagnosed patients with type 1 diabetes. This gave rise to the suspicion that type 1 diabetes was an autoimmune disease. Aided by a newly-discovered method of isolating beta cells, Steinunn Baekkeskov and I, along with several other colleagues (including Johnny Ludvigsson), managed in the late seventies to identify an autoantigen that seemed to drive the autoimmune process. It was named the 64K antigen after its molecular weight. Our results were published in Nature in 1982, as well as in other scientific journals. This launched an intensive search for the 64K antigen at a dozen universities worldwide. Mark Atkinson, who had been a guest researcher at my laboratory in Denmark, and Noel Mclaren concluded in the medical journal The Lancet in 1990 that antibodies against the 64K antigen were the best markers for type 1 diabetes and could be used as predictive markers for the development of the disease. Baekkeskov, now professor at the University of California in San Francisco and De Camilli of Yale University reported in Nature in 1990 that the 64K antigen had glutamic acid decarboxylase activity, i.e. the enzyme that is also present in nervous tissue and which has the important function of transforming glutamate to GABA. In 1991, Allan Karlsen, now professor at the University of Washington in Seattle, and I discovered that the glutamic acid decarboxylase present in human Islets of Langerhans was a previously undiscovered variant, GAD65, which is coded on chromosome 10. The cloning of GAD65 made it possible to produce recombinant GAD65 in large amounts, making it possible to investigate the protein in greater detail. In 1993, two articles were published simultaneously in Nature, which demonstrated that the GAD65 antigen, as previously and accurately postulated, could be used to prevent the very disease that the antigen itself helped to induce type 1 diabetes. Kaufman, Erlander, Tobin and Clare- Salzler from UCLA in Los Angeles, Atkinson and Mclaren from the University of Florida, and McDevitt and Tisch from Stanford University, all made invaluable contributions to GAD research and came to the same conclusions as Baekkeskov s and our own groups had simultaneously reached about how the GAD antigen could be used to prevent the appearance of type 1 diabetes. The development of the GAD-based product Diamyd began in 1994, with the aim of developing a vaccine against type 1 diabetes. Following initial preclinical and clinical safety studies, it became clear that a dose of 20 micrograms gave the best results in a study of adult patients with the LADA variant of autoimmune diabetes (Agardh et al 2005), therefore this dose was also chosen for the treatment of patients with type 1 diabetes. Ludvigsson and colleagues showed clearly that this treatment could affect the autoimmune process in type 1 diabetes (NEJM 2008), and several studies in patients with newly-diagnosed type 1 diabetes are now in full progress. And by now enough data have been collected to enable the next step to be taken: the vaccination against diabetes of healthy children at risk of developing the disease. We are now following 4,500 children in the Lund-Malmö region who at birth were considered to be at high risk of developing type 1 diabetes. They are being monitored regularly, and we can see how some develop biomarkers (antibodies) which suggest that the disease is likely to strike. As we firmly believe that the Diamyd vaccine could prevent or at least delay the onset of this disease, we felt ethically obliged to seek approval for giving the vaccine to these children as a preventive measure. We are now delighted to be able to offer this possibility to 50 children from Skåne. Will The Story of GAD end with preventive treatment for type 1 diabetes? Hardly. We want to cure as well! Åke Lernmark, Professor of Experimental Diabetes Research at Lund University/CRC at MAS University Hospital in Malmö, Sweden. 24

27 A WORD FROM THE RESEARCHERS CAN WE ELIMINATE TYPE 1 DIABETES? Johnny Ludvigsson We have, for over 30 years, been studying different treatments, hoping to intervene in the autoimmune process that leads to type 1 diabetes, and now, with the Diamyd vaccine, it looks as though we have finally found a simple, safe and effective treatment that can halt the disease! It is remarkable that the substance, later shown to be GAD65 the active substance in the Diamyd vaccine was discovered in the blood of our very own Linköping children. This discovery was made together with Professor Åke Lernmark and his then doctoral student Steinunn Baekkeskov in the late seventies. It takes a while to develop a new drug! In 2008, with the help of seven medical departments in Sweden, I completed a 30-month Phase II study of Diamyd in 70 children who had been diagnosed with type 1 diabetes within the previous 18 months and who had some remaining beta cell function. The aim was to see if two injections of Diamyd could modulate the immune system in such a way that the autoimmune attack on the remaining insulin-producing cells could be reduced. The results were impressive, especially in those patients who had had the disease for less than six months. The results of this successful Phase II study were published in the New England Journal of Medicine in 2008 and the study attracted a lot of attention worldwide. This was the first time that the progress of type 1 diabetes had been halted by autoantigen-specific therapy. The focus of development then shifted to the two currently ongoing Phase III studies in the USA and Europe, each including 320 patients. These patients, aged between 10 and 20, are included within three months of diagnosis of type 1 diabetes. In both these studies, which have three arms, two thirds of patients receive active vaccine and one third placebo. Injections of either Diamyd or placebo are given at four visits spread over nine months. The European study, which is being carried out at around 60 medical departments in nine countries, was fully recruited in November 2009, and as the study period is 15 months, the first results should be available by the spring of By the time patients are diagnosed with type 1 diabetes, the autoimmune process has already destroyed a large proportion of the insulin-producing beta cells. Treatment with the Diamyd vaccine aims to preserve the remaining beta cells. Even a small endogenous insulin production has great significance for the wellbeing of the patient in both the short and the long term. As the autoimmune destruction of beta cells precedes the diagnosis of type 1 diabetes by some time, the logical approach is to try to halt the autoimmune process before the disease becomes apparent. Plans are therefore in progress to initiate trials of Diamyd vaccination in healthy subjects at high risk of developing type 1 diabetes, and a pilot prevention study has been started in the Malmö-Lund region of Sweden. Type 1 diabetes is an increasingly common and serious disease that demands lifelong treatment and one that can have acute and long-term complications. Having an effective vaccine against the disease would be a tremendous breakthrough. If we could treat newly-diagnosed diabetes by preserving the remaining beta cells, living with the disease would be easier and the complications fewer. If we could completely halt the destructive autoimmune process and then increase the beta cell mass with the aid of transplantation, stem cells or regeneration, the disease could regress. Soon, perhaps, it will be possible to offer both prevention of type 1 diabetes and even cure many of those who have already been afflicted with the disease. Professor Johnny Ludvigsson, Linköping University Hospital, Linköping, Sweden. annual report 08/09 25

28 Diamyd studies in the United States Jerry Palmer As the Principal Investigator for the GAD (Diamyd ) registration study in the US, I am pleased to report that this and several other US clinical studies employing GAD vaccination are now gaining momentum. GAD-therapy may soon contribute to a paradigm shift when it comes to how to treat new onset type 1 diabetes. It will no longer be a matter of just giving daily insulin injections to replace what the destroyed beta cells used to produce in this autoimmune disease. The new paradigm will include giving a couple of GAD-shots in a vaccine-like fashion to stop the autoimmune attack and preserve beta cell function. Large studies (DCCT) have shown that type 1 diabetes patients that retain a small amount of their own ability to produce insulin and other beta cell hormones, will have easier and better controlled blood sugar levels, suffer less hypoglycemia and less long term complications such as retinopathy, neuropathy, nephropathy, and probably macrovascular disease including myocardial infarction and stroke. The importance of trying to save any surviving beta cells at the time of type 1 diabetes diagnosis can not be overemphasized. I am therefore extremely excited that we are now able to very actively recruit recent onset type 1 diabetes patients, aged 10-20, to the DiaPrevent type 1 diabetes registration study across the nation (see below), with exactly that in mind. DiaPrevent Now recruiting This nation wide study is recruiting 320 type 1 diabetes patients diagnosed within the last 90 days and between 10 and 20 years of age. Two thirds of the patients will receive active drug while one third will receive placebo (looks the same but with no GAD in it). The aim of the DiaPrevent study is to confirm and extend, via additional GAD injections, the results of a Swedish Phase II study, as reported 2008 in New England Journal of Medicine by Ludvigsson et al. Jerry Palmer MD, Professor of Medicine, University of Washington, Seattle, USA. TrialNet GAD intervention study Now recruiting Type 1 diabetes TrialNet is an international network of researchers who are studying the detection, prevention and early treatment of type 1 diabetes. TrialNet is pursuing a Phase II study with GAD in 126 patients. Diamyd has contributed the drug for the study which is sponsored by the National Institute of Diabetes and Digestive and Kidney Diseases (NIDDK) as well as the National Institute for Allergy and Infectious Diseases (NIAID), the National Institute for Child Health and Human Development (NICHD), the National Center for Research Resources (NCRR), the Juvenile Diabetes Research Foundation ( JDRF), and the American Diabetes Association (ADA). The primary purpose of this study, in addition to confirming safety and efficacy, is to better understand the immunologic mechanism responsible for the efficacy of GAD-vaccination. US NIDDK combination study Starting up This study is fully sponsored by the National Institute of Diabetes and Digestive and Kidney Diseases (NIDDK). In addition to GAD injections which are given to down regulate the autoimmunity, patients will receive a DPPIV-inhibitor which increases the GLP1 levels, and a proton pump inhibitor which increases secretion of gastrin into the blood. These so called incretins have been shown to induce regeneration of beta cells in some models and the study will investigate if combining GAD vaccination with incretin therapy will result in superior preservation of beta cell function. 26

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30 ORGANIZATION, EMPLOYEES AND SUSTAINABLE DEVELOPMENT The foundation of Diamyd s success is the strong desire to discover a treatment and a cure for diabetes. Achieving success in research, clinical trials and future market launches demands a highly qualified and committed staff with the desire to succeed. Diamyd s ambition is to preserve the small-company advantages of a flat organization and short decision paths as Diamyd grows. Board of Directors President and CEO Elisabeth Lindner Accounting and Finance Information and Marketing Scientific Advisory Board Legal Pre-clinical Clinical Production Business Development ORGANIZATION AND EMPLOYEES The Diamyd Group consists of the Parent Company Diamyd Medical AB (publ) and three wholly-owned subsidiaries, Diamyd Diagnostics AB (Sweden), Diamyd Therapeutics AB (Sweden) and Diamyd Inc., in Pittsburgh, USA. The head office is in Stockholm, Sweden. Diamyd is managed using an outsourcing model providing low costs and an efficient organization. Some of its operations have been outsourced to qualified partners with expert qualifications, and a limited number of permanent employees manage, lead and implement projects in areas such as clinical trials, regulatory issues and production. This enables Diamyd to pursue external research from the point of early discovery, conduct pre-clinical and clinical trials, and manage registration processes and future market launches. The model also contributes to a high degree of flexibility, where resources can be quickly reallocated among different projects as needed. As of August 31, 2009 the Group had twelve employees, with a healthy balance between men (6) and women (6) as well as a healthy age distribution. The level of qualifications among employees is high, with a large percentage having academic degrees, including several Ph.D.s. The CEO and Board of Directors have extensive experience in the pharmaceutical industry. In addition, Diamyd has access to expertise in its areas of research via a scientific and medical advisory board composed of leading scientists from the US, the Netherlands, England and Sweden. Highly qualified and loyal employees are an important factor for Diamyd s continued success and development. Diamyd continually invests in the development of its employees skills through both internal and external training initiatives, which are linked to each employee s individual goals. In addition to possibilities for professional growth as well as competitive salaries and pension agreements, Diamyd also offers employee options to key personnel yrs yrs University education Women Gender balance yrs Men Age distribution Level of education Doctorate yrs yrs Other education 28

31 ORGANIZATION The level of qualifications among employees is high, with a large percentage having academic degrees, including several Ph.D.s. HEALTH AND WORK ENVIRONMENT Diamyd shall provide a safe and healthy work environment. Diamyd observes established policies concerning issues such as ethics and the environment, work environment, quality and equality. Diamyd shall offer equal opportunity to all employees and applicants, regardless of gender, nationality, religion, age, disability or sexual orientation. Diamyd s outlook is that a good work environment aids workplace morale, reduces sick leave and supports the efforts of its employees. Work loads must be customized to the individual and make a healthy balance between work and leisure possible. Health awareness is encouraged through fitness subsidies and free fruit at the workplace. RESPONSIBILITY, ENVIRONMENT AND QUALITY CONTROL Diamyd s primary focus is the development of pharmaceuticals for autoimmune diabetes, a chronic disease in great need of new treatment regimens. The vision for the future is to be able to prevent the disease from manifesting and to cure patients who have already developed the disease. Diamyd s responsibility toward society and the patient is part of its business as a research pharmaceutical company, and influences its work in developing new pharmaceutical products and performing clinical trials. Diamyd s work has a great impact on people s lives and health, so it is of the utmost importance for Diamyd to not only follow applicable laws and regulations, but also to act in a manner that is responsible and ethically proper. Pre-clinical and clinical studies of Diamyd s substances or products are conducted in cooperation with partners, such as contract research firms or research groups associated with universities. The studies should always be designed in consultation between Diamyd and its partners, and approved by Diamyd. Diamyd s clinical trials are conducted in accordance with Good Clinical Practice (GCP), and they are managed in cooperation with well-established contract research firms. The performance and purchase of trial-related services are regulated according to special process descriptions, i.e. Standard Operating Procedures, as well as quality agreements, in order to ensure that Diamyd s trials are always conducted according to applicable practice and that laws and regulations are followed. Diamyd always strives to maintain a high level of environmental awareness throughout its entire business. Diamyd does not do any manufacturing itself, and its direct environmental impact is considered to be low. However like most other companies, its business causes a certain degree of impact on the environment, primarily through emissions for travel and shipments as well as energy consumption for its offices. In addition some environmental impact may occur in connection with the manufacture of Diamyd s products by external manufacturers, as well as from outsourced research activities. To ensure that Diamyd always strives for long-term environmental efforts with the smallest possible environmental impact, both in its operational activities and in cooperation with manufacturers, researchers and other partners, Diamyd pursues its work according to an established environmental policy. The policy is revised on an annual basis to consider how the environmental efforts can be improved. annual report 08/09 29

32 THE BOARD Anders Essen-Möller Chairman Born in M.Sc. Founder and former CEO of Diamyd Medical. Board member since 1996, Chairman since Anders Essen-Möller also founded Synectics Medical AB, which was sold to Medtronic Inc. in Other assignments: Member of the Armea AB board. Holdings in Diamyd as of August 31, 2009: 561,671 A shares; 231,902 B shares; and 10,000 employee options 2007/2010. Sam Lindgren Independent Board Member Born in MD, Ph.D., MBA. Sam Lindgren has been a Board member since More than 15 years experience from leading positions in the pharmaceutical industry, in the areas of diabetes (Novo Nordisk), CNS (Lundbeck) and asthma (Astra). Currently Senior Director of Gambro Lundia AB. Other assignments: None. Holdings in Diamyd as of August 31, 2009: 500 B shares. Lars Jonsson Independent Board member Born in B.Sc., Stanford Graduate Business School Senior Executive Program. Lars Jonsson has been a Board member since Chairman and CEO of Stellar Holdings. Swedish Honorary Consul in Seattle, founder and majority owner of the international group Stellar Holdings. Ambassador for Barndiabetesfonden (The Childhood Diabetes Foundation). Other assignments: None. Holdings in Diamyd as of August 31, 2009: 600 B shares. Henrik Bonde Independent Board Member Born in M.Sc. in Business Administration. Board member since Henrik Bonde represents the Östersjöstiftelsen. He is the Chief Investment Officer of the Östersjöstiftelsen and the Gålöstiftelsen. Other assignments: Member of the Boards of Morphic Technologies AB, Iris Holding AB and Spectracure AB. Holdings in Diamyd as of August 31, 2009: 400 B shares. 30

33 THE BOARD and KEY EXECUTIVES KEY EXECUTIVES Elisabeth Lindner President and CEO Born in M.Sc. and MBA, Stockholm and Uppsala. Long-standing experience with Pharmacia Corporation and Octapharma AG. Elisabeth Lindner has been Diamyd s President and CEO since Other assignments: Member of the Board of BioInvent International AB (publ) and SwedenBio, CEO and Board member of Biosource Europe AB, Member of the Board of the Royal Swedish Academy of Engineering Sciences (IVA) and European Framework 7, Advisory Group for Health Research. Holdings in Diamyd as of August 31, 2009: 9,100 B shares; 10,000 employee options 2007/2010; and 42,900 employee options 2008/2011. Peter Zerhouni Director of Business Development Born in M.Sc. in Biology and a B.Sc. in Economics & Business Administration from Lund University and UC Berkeley. From 1999 to 2006 Peter Zerhouni held various positions at ING Bank in Brussels and Amsterdam, most recently within Structured Finance. Peter Zerhouni joined Diamyd in Other assignments: None. Holdings in Diamyd as of August 31, 2009: 500 B shares; 10,000 employee options 2007/2010; and 16,500 employee options 2008/2011. Darren Wolfe CEO, Diamyd Inc., USA Born in Ph.D. in Molecular Biology and Biochemistry, Pennsylvania State University. Darren Wolfe was previously a Research Assistant Professor in the Department of Molecular Genetics and Biochemistry at the University of Pittsburgh. Darren Wolfe has worked for Diamyd since Other assignments: None. Holdings in Diamyd as of August 31, 2009: 2,500 B shares; 10,000 employee options 2007/2010; and 16,500 employee options 2008/2011. Erika Hillborg Director of Clinical Development Born in M.Sc. in Biomedicine from the Karolinska Institute in Stockholm, with a Science Journalism degree from Uppsala University. Erika Hillborg has worked for Diamyd since Other assignments: None. Holdings in Diamyd as of August 31, 2009: 8,850 B shares; 10,000 employee options 2007/2010; and 16,500 employee options 2008/2011. Natalie Jelveh Director of Business Control Born in M.Sc. in Economics and Applied Biotechnology from Södertörn University College. Since receiving her degree Natalie Jelveh has been involved with sales and finance issues. Natalie Jelveh joined Diamyd in Other assignments: None. Holdings in Diamyd as of August 31, 2009: 10,000 employee options 2007/2010; and 8,250 employee options 2008/2011. AUDITORS Diamyd s auditors are Öhrlings PricewaterhouseCoopers AB, domiciled at Stockholm. Liselott Stenudd is the principal auditor. Liselott Stenudd has been an authorized public accountant since Liselott Stenudd is a member of FAR, and has been Diamyd s principal auditor since January 21, The auditing firm was chosen in 2007 for a four-year period. annual report 08/09 31

34 SCIENTIFIC AND MEDICAL ADVISORY BOARD Diamyd has access to a Scientific and Medical Advisory Board composed of leading scientists from the US, the Netherlands, England and Sweden. The advisory board communicates and meets on a regular basis, discussing results that have been obtained, as well as research and development plans. The advisory board is an important information source for Diamyd, which often consults with individual members concerning medical and scientific questions that continually arise in Diamyd s activities. In addition, the members serve as Diamyd s ambassadors to researchers in academia and industry. The following individuals are members of the advisory board: THE GAD PLATFORM Professor Mark Atkinson, USA, Ph.D., is the American Diabetes Association Eminent Scholar in Diabetes Research at the University of Florida. Dr. Atkinson was part of one of the first groups of researchers to identify the value of measuring immune responses against GAD in persons with type 1 diabetes. Dr. Atkinson holds positions on a number of scientific advisory boards/research panels including the Juvenile Diabetes Research Foundation ( JDRF), the American Diabetes Association (ADA) and the National Institutes of Health (NIH) in the USA. His research efforts have resulted in him being one of the five most cited authors in diabetes research as well as his receipt of the highest awards for research accomplishments from the JDRF and ADA. Professor Atkinson s current research contributes to the understanding of the immunological mechanisms underlying the formation of diabetes, with his primary research goal involving the development of an effective method for preventing and reversing type 1 diabetes. Professor Atkinson has been a member of the Scientific and Medical Advisory Board since Professor Daniel Kaufman, USA, Ph.D., is Professor in the Department of Molecular and Medical Pharmacology at the UCLA School of Medicine in Los Angeles, California, USA. Professor Kaufman s current research is focused on GAD and its relation to diabetes. In a research paper in November 1993, Professor Kaufman demonstrated that the administration of GAD to mice that would otherwise develop type 1 diabetes prevented the outbreak of this disorder. Professor Kaufman was the first to clone a GAD gene, and his lab was the first to demonstrate that a GAD treatment could inhibit diabetes in mice with established autoimmune responses. Professor Kaufman was a member of the group associated with Professor Allan J. Tobin, which was the first to submit a patent application for the full cdna code for GAD, the patent portfolio that Diamyd Medical licenses. Dr. Kaufman has been a member of the Scientific and Medical Advisory Board since Professor Lars Klareskog, Sweden, M.D., Ph.D., is Professor of Rheumatology and Head of the Rheumatology Research Laboratory at the Center for Molecular Medicine at Karolinska University Hospital/ Karolinska Institute, Sweden. Professor Klareskog s research is specifically aimed at the origin and treatment of autoimmune disorders. Professor Klareskog has been a member of the Scientific and Medical Advisory Board since Professor Åke Lernmark, Sweden, Med. D., is Professor of Experimental Diabetes at Lund University in the Department of Clinical Sciences, at the University Hospital MAS in Malmö, Sweden. Professor Lernmark s research is focused on diabetes, and at an early stage he identified the antigen that later proved to be GAD65. He and his colleagues were the first to clone GAD65 from human islets of Langerhans using biochemical methods, and was thus the first to define antibodies against GAD65 in patients with type 1 diabetes. Professor Lernmark was also first to use molecular methods to identify HLA genes that are necessary, but not sufficient to develop the disorder. Professor Lernmark has been a member of the Scientific and Medical Advisory Board since Professor David Leslie, U.K., M.D., Ph.D., is Professor of Diabetes and Autoimmunity at the Royal London and St. Bartholomew s School of Medicine, University of London. He has been involved in diabetes research and clinical studies since Since 1982 Professor Leslie has been Director of the British Diabetic Twin Study, the world s largest twin study of its type, as well as Principal Investigator 32

35 SCIENTIFIC AND MEDICAL ADVISORY BOARD of the European Action LADA Consortium. By studying twins, Professor Leslie has been able to show the possibilities for predicting and preventing autoimmune diabetes. Professor Leslie has been a member of the Scientific and Medical Advisory Board since Professor Bart O. Roep, the Netherlands, M.D., Ph.D., is Associate Professor of Medicine and Director of the Division of Autoimmune Diseases at the Leiden University Medical Center in the Netherlands. He is also Director of the National Diabetes Expert Center for Immunoprotection. Professor Roep has focused on the role of autoreactive T cells in diabetes by assessing human cellular immune responses, autoantigen identification, islet allograft rejection and the design and immunological monitoring of immunointervention strategies in clinical type 1 diabetes. Professor Roep holds positions on a number of scientific advisory boards/research panels, including the Juvenile Diabetes Research Foundation International ( JDRF), the Dutch National Research Council, the European Union, the European Foundation for Diabetes Research (EFSD) and the National Institutes of Health (NIH) in the USA. Professor Roep is also the founder and chair of the National Diabetes TrialNet Platform in the Netherlands. He has been a member of the Scientific and Medical Advisory Board since Professor Allan J. Tobin, USA, PhD, is Senior Scientific Advisor to the CHD Foundation, a private not-for-profit research organization dedicated to finding therapies that slow the progression or delay the onset of Huntington s disease. Previously, Professor Tobin was Eleanor Leslie Chair of Neuroscience and Director of the Brain Research Institute at UCLA, Los Angeles, USA. Professor Tobin is also Scientific Director Emeritus of the Hereditary Disease Foundation, which organized the identification of the gene that causes Huntington s disease. Professor Tobin has specialized in the use of molecular methods for synthesis, function and breakdown of GABA, which serves as the major inhibitory signal in the brain and the pancreas. Professor Tobin has been a member of the Scientific and Medical Advisory Board since Professor Hans Wigzell, SSweden, MD, Ph.D., is emeritus professor of immunology of the Karolinska Institutet, with which he is still associated and where he was also the President from 1995 to In addition, Professor Wigzell was Chairman of the Nobel Assembly at Karolinska Institutet in 2000, and a scientific advisor to the Swedish government from 1999 to Dr. Wigzell also presently holds professorial chairs at the Ehime University in Japan and the University of Baltimore in the USA. He is currently the leader of the EU s major HIV vaccine research project (EUROPRISE). Dr. Wigzell is a Board member of Karolinska Development, Biovitrum AB, Raysearch AB, Probi AB and Intercell (Austria). He is a former member of the Diamyd Medical AB Board. NTDDS-platform Professor Joseph Glorioso, USA, Ph.D., is the McElroy Professor and Chairman of the Department of Molecular Genetics and Biochemistry at the University of Pittsburgh, Pennsylvania, USA. Dr. Glorioso is the founder and Director of the University of Pittsburgh Molecular Medicine Institute. Dr. Glorioso is a recognized expert on herpes simplex virus and gene therapy, and is the former president of the American Society for Gene Therapy. Dr. Glorioso is an inventor on several of the Diamyd NTDDS platform patents and was one of the founders of Nurel Therapeutics. Dr. Glorioso has been a member of the Scientific and Medical Advisory Board since Professor Richard J. Whitley, USA, M.D., is the Loeb Professor of Pediatrics; Professor of Pediatrics, Microbiology, Medicine, and Neurosurgery at the University of Alabama at Birmingham, Alabama, USA. Dr. Whitley was a co-founder of Aviron (acquired by Medimmune) and is a Scientific Advisory Board Member for Gilead. Dr. Whitley s primary research focus is on the molecular pathogenesis of herpes simplex virus infections. Dr. Whitley is also responsible for the National Institute of Allergy and Infectious Diseases Collaborative Antiviral Study Group, a multicenter collaboration to improve the treatment of human herpes simplex virus. Dr. Whitley has been a member of the Scientific and Medical Advisory Board since Paul Kornblith, USA, M.D. is a Director of Pennsylvania BIO (Western PA) and a consultant to the Pittsburgh Life Sciences Greenhouse. Dr. Kornblith is the Founder and Chairman Emeritus of Precision Therapeutics Inc. and the Chairman of Celsense Inc. Dr. Kornblith is an expert in neurology and neurooncology. He is the former Assistant Professor and Director of Neurooncology at Harvard University, the former Chief of Surgical Neurology at NIH-NIHDS/NCI and the former Vice Chairman and Professor of Neurosurgery at the University of Pittsburgh. Dr. Kornblith has been a member of the Scientific and Medical Advisory Board since annual report 08/09 33

36 34