Diamyd Medical AB : Diamyd implements rights issue of approximately MSEK 21 to fund expanded diabetes portfolio

Background and reasoning
Due to the signing of a new exclusive licensing agreement between Diamyd Medical AB ("Diamyd" or "the Company") and the University of California (UCLA) relating to a patent portfolio for the therapeutic use of GABA (gamma-aminobutyric acid) for the treatment of diabetes and other inflammation-related conditions, the Board of Directors of Diamyd has decided to implement a share issue with preferential rights for the Company's shareholders.

"This is a proactive rights issue that enhances our opportunities to develop effective therapies against diabetes and to complete new out-licensing business transactions connected to our portfolio of intellectual property rights," says Peter Zerhouni, President and CEO of Diamyd Medical. "By expanding the portfolio we also reduce the risk in the Company."

Aside from being an important neurotransmitter in the central nervous system, GABA is believed to have an anti-inflammatory effect. GABA and GABA receptor agonists can thus potentially be used to treat several inflammation-related disorders, such as type 1 and type 2 diabetes, and metabolic syndrome and rheumatoid arthritis.

Research teams at several well-reputed universities, such as UCLA, Tufts University, the University of Toronto, Uppsala University, the Karolinska Institute and Lund University, have over the last few years independently demonstrated the important role of GABA in both type 1 diabetes and type 2 diabetes. GABA exerts both inhibiting and excitatory effects on the beta and alpha cells in the islets of Langerhans of the pancreas and thus modulates glucose homeostasis in the blood. GABA may also enhance the growth of insulin-producing beta cells and improve their survival. A researcher-initiated clinical study is under way independently of Diamyd Medical, in which GABA is administered to patients with newly diagnosed type 1 diabetes with the aim of preserving the endogenous insulin producing capacity.

Diamyd Medical's new licensing agreement with UCLA covers, for example, one patent application for a combination therapy including GABA and GAD, which is the active substance in the Company's diabetes vaccine, Diamyd®. Professors Tian and Kaufman at UCLA have shown that GABA in combination with GAD acts synergistically in an animal model of type 1 diabetes. The dominating hypothesis among diabetes researchers today is that the key to curing type 1 diabetes is to simultaneously tackle the disease on several fronts by combining various therapeutics or by providing treatment before onset of the disease. If the patent application and the combination therapy are approved, the license could indirectly extend the patent protection for GAD to approximately 2030 in the US, Europe and possibly other parts of the world.

To secure funding for the development of the new rights without encroaching on the existing development plan for the diabetes vaccine Diamyd®, the Board of Directors has decided to implement a rights issue of MSEK 20.7, corresponding to a maximum of MEUR 2.5. The principal owner of the Company, Anders Essen-Möller, has undertaken to subscribe for shares in the new issue corresponding to 21 percent of the issue amount, or about MSEK 4.3.

Diamyd in brief
Diamyd Medical is a diabetes company which, since 1994, has been engaged in the development of the diabetes vaccine Diamyd®and the active substance GAD, which has the potential to become a key piece of the puzzle in a future solution to prevent, treat or cure type 1 diabetes and other forms of autoimmune diabetes.

Diamyd has independently pursued the development of the diabetes vaccine to global Phase III trials, which led to one of Sweden's largest biotech agreements ever.

In connection with the restructuring of the former Parent Company Mertiva, formerly called Diamyd Medical and quoted on the NASDAQ OMX Small Cap list, the subsidiary Diamyd Therapeutics was spun off together with the diabetes operation and distributed to shareholders in April 2013. At the same time, this company took over the name Diamyd Medical. The company is capitalized at approximately MSEK 50.

The objective of the development of the Diamyd®diabetes vaccine and the active substance GAD is to prevent, delay or stop the autoimmune attack that causes type 1 diabetes and other forms of autoimmune diabetes to preserve the body's own ability to produce insulin. The goal is to commercialize Diamyd®and GAD so that they become part of the standard therapy against type 1 diabetes and other forms of autoimmune diabetes.

Two Swedish researcher-initiated Phase II studies with Diamyd®are ongoing. One study evaluates whether the diabetes vaccine can prevent type 1 diabetes in children who are at high risk of developing the disease, while the other study evaluates whether Diamyd®in combination with relatively high doses of vitamin D and ibuprofen can preserve the body's own ability to regulate the blood sugar level in children and adolescents newly diagnosed with type 1 diabetes.

In addition to the diabetes business and rights to the Diamyd®diabetes vaccine and GAD, the Company has a holding corresponding to 10 percent of the US gene therapy company Periphagen Holdings, Inc. The number of shares amount to 479,292 Series A shares and 9,380,419 Series B shares. The Series B share is listed on NASDAQ OMX First North.

Issue terms and conditions
Holders of existing shares have preferential rights to subscribe for new shares at a ratio determined by the number of shares owned on the record date of June 4, 2013. Holding of Series A shares entitles to subscribe for Series A shares and holding of Series B shares entitles to subscribe for Series B shares. Each existing share in Diamyd Medical entitles the holder to one (1) subscription right. One (1) subscription right carries entitlement to subscription for one (1) new share. The issue price has been set at SEK 2.10 per share. The total issue comprises a maximum of 9,859,711 new shares, of which 479,292 Series A shares and 9,380,419 Series B shares. The total issue proceeds will amount to approximately MSEK 20.7 before issue expenses. The subscription period will extend from June 5, 2013 until June 20, 2013.

Because the total issue amount is less than MEUR 2.5, no prospectus will be prepared or registered with the Swedish Financial Supervisory Authority.

Shares not taken up under preferential quota (with subscription rights) must first be offered to shareholders who have registered for subscription of shares without preferential rights, with the shares being distributed pro rata in relation to how many shares for which the respective shareholders have subscribed with the support of preferential rights; further to this, the public shall be offered to subscribe for shares without preferential rights.

Schedule for rights issue
Final day for trading in the B share with entitlement to participate in the rights issue: May 30, 2013

First day for trading in the B share without entitlement to participate in the rights issue: May 31, 2013

Record date for participation in the rights issue: June 4, 2013

Trading in subscription rights (for subscription of B shares): June 7 to June 17, 2013

Trading in BTAs (interim B shares): June 7, 2013 until the issue has been registered with the Swedish Companies Registration Office

Subscription period for new share issue: June 5 until June 20, 2013

Important notice
In certain jurisdictions, the publication or distribution of this press release may be subject to legal restrictions and persons in those jurisdictions where this press release has been published or distributed should inform themselves about and abide by such legal restrictions.

This press release may not be announced, published or distributed, directly or indirectly, in the United States, Canada, Japan, Australia, New Zealand, South Africa or any other country where such action is wholly or partially subject to legal restrictions.Nor may the information in this press release be forwarded, reproduced or disclosed in such a manner that contravenes such restrictions.Failure to comply with this instruction may result in a violation of the United States Securities Act of 1933 ("Securities Act") or laws applicable in other jurisdictions.

The subscription rights, the BTAs (interim shares) and the new shares will not be registered in accordance with the Securities Act or any provincial act in Canada and may not be transferred or offered for sale in the United States or Canada or to persons resident there, or on account of such persons other than in such exceptional cases that do not require registration in accordance with the Securities Act or any provincial act in Canada.

For further information, please contact:
Peter Zerhouni, President and CEO Diamyd Medical AB
Phone: +46 8 661 00 26. E-mail: press@diamyd.com

About Diamyd Medical
Diamyd Medical is a Swedish diabetes company. The Company was formerly called Diamyd Therapeutics and was spun off from Mertiva AB (formerly Diamyd Medical AB) in April 2013. The company's primary development project consists of the GAD-based diabetes vaccine Diamyd®for the treatment and prevention of autoimmune diabetes. Two Swedish researcher-initiated Phase II studies with Diamyd®are ongoing. One study evaluates whether the diabetes vaccine can prevent type 1 diabetes in children who are at high risk of developing the disease, while the other study evaluates whether Diamyd®in combination with relatively high doses of vitamin D and ibuprofen can preserve the body's own ability to regulate the blood sugar level in children and adolescents newly diagnosed with type 1 diabetes.

Diamyd Medical also has holdings in the gene therapy company Periphagen Holdings, Inc. (US).

Diamyd Medical's Series B share has been traded on NASDAQ OMX First North since May 20, 2013 under the ticker DMYD B. Remium Nordic AB is the company's certified adviser. Further information is available on the Company's website: www.diamyd.com.

Diamyd Medical AB (publ)
Kungsgatan 29, SE-111 56 Stockholm, Sweden. Phone: +46 8 661 00 26, Fax: +46 8 661 63 68
E-mail: info@diamyd.com. Reg. no.: 556242-3797.