Diamyd Medical AB (publ) ($DMYDB)

Hello, and welcome to DNB Carnegie. My name is Maria Karlsson Osipova, and I'm a health care analyst here at the bank. Today with me in studio, I have Ulf Hannelius, CEO of Diamyd Medical, and we also have Dr. Joshua Vieth, Senior Director of Research at Breakthrough T1D and Mark Atkinson, Board member of Diamyd Medical, a PhD and Professor of Diabetes Research at Florida, University of Florida. As you can guess, we're going to talk about Diamyd Medical and the interim results that you have posted on Friday and also an add-on on Sunday.

So could you just briefly walk us through what you posted and what were the results of?

Yes. So we first announced late Friday evening, Sweden time, the high level of the interim readout, which -- so this was a prespecified interim readout in the ongoing Phase III trial with our Retogatein investigational therapy. And the interim readout in this case, very surprisingly, and we will go into that, showed not only that it was statistically significant, but it was actually showed futility, meaning that it was below the threshold or what's considered a futile trial, meaning that the -- given the interim data that was from 174 patients followed for 15 months, given those data, there's a very low likelihood that the full readout coming summer '27 with all 321 patients would be positive. And this is obviously very surprising that we can go into, like all the previous data and findings from this. But that's what we announced Friday evening, and then we have an update on Sunday evening with a bit more details where we also talked a bit about the results when we have looked at the results, very high level and which very surprisingly, again, show basically no effect at all in the full population or in any prespecified subgroup, which is completely not aligned with any of the previous findings from previous trials or analysis. So that's what we have told so far and the -- what is now ongoing -- has been ongoing during the weekend is to really try to find out the reason behind these findings, and we are doing it in different steps now. But that's like briefly what we have announced.

And before we jump in and try to dig in the data and try to ask you questions like what could have went wrong. I'd like to maybe ask Dr. Vieth and Mark Atkinson, actually about how did DIAGNODE-3 came to be because there was a lot of data that has been gathered from before that you've mentioned and how -- what have been your roles with Diamyd Medical in the past. Mark, if you want to start, we'll start with you.

Sure. Yes. I thought you'll go over to Josh, but I'll be happy to take that. So in the mid-1970s, so if you want to go way back, people found that persons had a disorder that we now call type 1 diabetes. And it was this different from a disease that we now call type 2 diabetes. Type 1 diabetes is a disease where, for reasons that are still unknown, the body makes mounts an immune response against the insulin-producing cells in the pancreas. And over time, months to years to even decades, a number of beta cells will be destroyed and then the person becomes dependent on insulin for the rest of their life. Long term, on insulin, it keeps the patient alive, but in reality, it's hard to manage their diabetes. So they suffer from eye disorders, heart disease, kidney problems and then foot problems. So what happened though in the '70s was people found out that type 1 is an autoimmune disease. And the way they found that was through the development of tests where they found autoantibodies and about 10 years after that initial finding came out that one of the major autoantibodies in type 1 diabetes with GAD. And in the early '90s, our CEO formed a company. And since that time, has been working through clinical trials, very carefully performed well designed, international and scope of quality to try and identify a drug that would either prevent the development of diabetes or provide benefit from the loss of C-peptide which we can go into later in those with recent onset disease. So many, many aspects of the -- in the years of history that led to the formation of this Phase III trial.

Dr. Vieth, do you have anything to add on to that?

Well, certainly, our role at Breakthrough T1D is to fund research that leads to therapy and cures for those living with or at risk of type 1 diabetes. Main pillar of our research program is disease-modifying therapies, those that aim to rebalance the immune system, as Mark talked about, type 1 diabetes being an autoimmune disease and to support and preserve somebody's own beta cells. To that regard, we became involved not only in the past research with Diamyd, but with this current Phase III trial as a really first-in-class precision approach toward modifying the course of disease of those living with type 1 diabetes.

And between you three now on this call, there's an immense experience, decades of experience in diabetes and you have all mentioned that these are very surprising results. So I would like to jump back into the press releases. The biggest question is, what went wrong? Could it be data handling? What are the potential scenarios that you see in front of you?

Obviously, there are many potential scenarios. I think as a company, we should refrain from speculating too much. We need to sort of do this work in a very systematic stepwise approach, but also it should go as swiftly as possible without cutting any corners. I mean, first thing to do is obviously make sure that the analysis has been done in the correct way with the correct data. I mean that's the first initial part to do. And after that, considering that all of that is done, then you dig deeper, look into the data to see that like has the treatment work as expected from an immunological perspective, for example, a functional perspective, looking at like the protocol and treatments like doing a lot of different tests from all different kinds of angles to really try to do a root cause analysis because I think that's the most important thing right now. I mean, before we can take clear next steps, we need to understand these data? Are they true? And if they are true, why do they show basically a complete lack of efficacy when previous trials and data analysis have shown clear trends or significant effects, specifically in these genetics like subgroup that we are treating now. So that's really key at this moment for us as a company and I think for a wider field as well.

And you have mentioned in the press releases that the DIAGNODE-3 is going on as is until you have more information. But how should we interpret the fact that continuation criteria were not meant -- were not met? Is it -- will it be eventually then stopped? How long time will it take paused or how do you thinking...

Yes. Well, right now, obviously, we need to always keep -- patient safety is the most important thing always. So right now, I mean, we need to make sure we do these first steps of the analysis that should be relatively quick to just understand were the analysis done in the right way with the right data. If in case that would happen, that's not the case, we need to redo the analysis with the right data. And in that case, we don't want to have already stopped the trial and sort of basically destroyed the whole value of the trial by doing that. So we need to take that in steps. The next step could be that if we see that, well, these data are true, obviously, there's an obvious step, then the trial should be discontinued and unblind all the data to really get access to everything to understand the data we have then in detail. But we should be careful not to unblind ourselves too early because that really compromises the integrity of the trial. It can be very difficult to say the trial after that has been done. There's a big value, obviously, in looking at the data, but it can be used from a, let's say, registrational purpose at that point.

And you -- important not to unblind the data, but you have seen some data from now? And have you seen any difference across subgroups? There's a question here in the chat. It goes as, is it non-difference as in 0 increase of C-peptide compared to placebo, even for super responders?

Yes. And again, in the press release, we mentioned -- obviously, it's a very high level, but we said that we don't see any observable effect anywhere, including in prespecified subgroups, which also includes the potential super responder group. And this is -- again, these findings are what makes this especially surprising given all the previous data and experience.

Mark and Dr. Vieth, do you have anything to add here? What were your initial reactions when you got the data?

So shock, it has been 3 days of that or since Friday night came through because again, just to emphasize a point that Ulf made earlier. This was a first-in-class precision-based medicine meaning when you -- I mentioned earlier on that we've been identifying these auto-antigens, the self components of beta cells. People have tried to use them and the results have been mixed, but Diamyd came with a unique approach of essentially identifying individuals with the highest probability of responding. And so in its study design, we refer to it as precision medicine based, which only adds to the shock in terms of seeing the results, and this will certainly be looked at as why this trial didn't verify what the other ones did. But there's one other point I want to make is sometimes Phase III trials are paused or issues are raised around safety. And I want to make sure to everybody who's either an investor or a patient in the trial, this is not -- this is not an issue of safety that we're talking about here. Diamyd has been administered to uppers of 1,000 individuals with safety concerns that never precluded it from being used in a trial. So this is not like some trials where there's questions around safety, this is a very safe drug. Josh?

First and foremost, Breakthrough T1D is a patient advocacy organization, and we share the shock with the results and are surprised as both Mark and the Diamyd team are. What really stands out here is the inconsistency with prior data. And obviously, for those that are living with or at risk of type 1 diabetes, this is an understandably disappointing result. But in particular, Breakthrough T1D, we don't look at trials in isolation. We work toward building sort of a cumulative understanding across studies. And if we take these current results into context from our perspective, the most important next step is really rigorous analysis of the data before considering the next strategic move forward.

And are there any alternative development pathways for Retogatein?

Well, it's quite specific for type -- autoimmune type 1 diabetes, obviously, this -- what the Phase III is in what's called Stage 3, basically newly diagnosed -- clinically diagnosed patients with type 1 diabetes specifically with this genetic profile. We have some data and experience and a small trial ongoing in Sweden in what's called Stage 1 and Stage 2. These are individuals then that have very high risk of getting clinically diagnosed eventually with the disease. So they already have an autoimmune disease ongoing, but they have no symptoms of the disease, so basically feel like health individuals. And there you go then early on to treat in a more preventive fashion to delay in the best case like make sure that they never go as far as clinical diagnosis. So that could be one future step, obviously, given that we already have some experience from there with the convenience and safety of the drug. But very critical that we first understand these results before we take any decisions in moving forward regarding that then there could be a -- I know there's been public information. In theory, there could be some other applications in this more neurological disorders where patients have GAD autoantibodies as well like autoimmune neurological disorders, again, that's only on a -- I would say, still on a theoretical basis, there are some nonclinical potential evidence around that one. But I would say that it's quite limited to this since the protein is very specific for autoimmune type 1 diabetes and some of these very rare neurological disorders.

There are some questions that echo the same -- basically the same idea. And what additional information can we expect from you in updates over the coming period? People are asking here what information can we accept on a week basis, in a month and yes. So short-term basis.

Yes, of course, I can't promise anything. What I can promise is that we will try to be as transparent and communicative as possible in these times. And the first step now in the analysis is a way to make sure that the analysis has been done in a correct manner with the right data. And that, obviously, will -- once we have certainty around that part will communicate. And then depending on that outcome, we go into the next steps and try again to be as transparent as possible, but we also need to be careful in -- especially as a public company when you communicate, you need to give enough and correct information, not to give like only parts of information that might change later on, and we create more confusion in the market than we should, but we will definitely aspire to be as transparent as possible and try to do these analysis as swiftly as possible, but again, not do any rash decisions or decisions will come to regret later on.

And this is -- yes, please Mark.

I'd just say that was a well-put answer by Ulf. But one thing to make sure is that it's not just one individual or a handful of individuals that's going to be taking a look at this. We have, again, every potential source of this outcome will be looked at from -- Diamyd has a very active external scientific advisory board with people from the United States, from Sweden, from the United Kingdom, They'll all be looking at -- into this and asking what medically scientifically could have contributed to this. Management -- the management team at Diamyd will be pouring through this data, working with the CRO to try and identify and again, make sure that there were no sources of error in terms of this. We have the production facility in Umea that I'm sure will be contributing to look at the source material, making sure that there were no issues there. And then you have the Board of Directors that will work together with funders and take a special effort to make sure that the investors in the company that they -- that their rights and interest both in the past and moving forward, continue and in the most professional way.

Thank you, Mark. And there's a question here, which is mostly directed to you, Ulf. It's about the cash position. How long do you expect the cash to last and the share issue that has been announced last week, does it have any conditions that could prevent it from going through? Or has it already gone through?

So our cash -- I mean, we very recently published our quarterly report. So in U.S. dollars, it's around USD 20 million. And then we recently then conducted this equity investment of USD 25 million, and that has gone through. So the current cash position is around USD 40 million, something like this or in Swedish, SEK 400 million. And -- well, with current activities, and obviously, these current activities can change quite significantly depending on next steps and the analysis ongoing. But with the current burn rate, we have a run rate of around 18 to 24 months. So that's quite considerable. Obviously, now the most important thing is that we use our cash position and everything we are doing in the best possible way. I mean the -- it sounds maybe, I wouldn't say naive, but maybe offensively even to say that obviously, we need to maximize shareholder value here. And that's also why it's so critical now that the next steps that we are doing is that we do the right next steps don't rush into anything, but we can't let things take forever as well, given this, but there -- I mean, it was share-- I mean, no conditions apply to that one.

And a lot of questions here in the chat now are incoming about. I think people just want to discuss scientific rationale and some ideas. One of those questions is how large were samples of previous analysis for specific subgroups, could it be an unlucky case of honeymoon effect during all previous studies?

I mean you never know. I mean we hopefully will come to the root cause of this. But I mean, thinking about previous trials and if we specifically think about the this [indiscernible] subgroup, which is roughly half of all the patients we have previously treated. So let's say, we've done some meta-analysis with more than 600 individuals, so around 300 of those had the right genetic profile, and you can see a clearly statistically significant treatment effect in those. And we have also -- when you look at the single trial basis, for example, the original Phase II that was run in Sweden, and then there's the Phase III that was run in Europe and a trial at Phase II in the U.S., you see in this genetic subgroup that there's a very clear treatment effect. And then so -- and now we had 174 patients with the right genetic profile treated for 15 months or followed up for 15 months, and we see nothing. So that's in stark contrast to all these previous trials and data that I mentioned. So that it would be a honeymoon effect. I mean you never know. I mean you can have like this free lock that just happened this time or even lower likelihood that all the previous trials were just random findings. But you never -- I mean, we need to really get to the bottom of this before we can answer these questions.

And another question, which is a little bit on the same topic of like thinking about, okay, what is the rationale and the history? Could it be that anti-GAD response is not enough to cover the autoimmune repertoire that may be in play with stage 3 patients given the diversity of known islet autoantigens.

That could definitely be. I mean, again, there is a rationale, like we are -- the hypothesis that we are aiming at here is to -- with individuals with this specific genetic profile, the DR3-DQ2 HLA haplotype. It's known that, that associates with GAD autoantibody first disease, and then we treat with GAD, so they potentially have a GAD driven autoimmune disease then there will be epitope spreading, meaning that the -- once you are clinical diagnosed, you usually have multiple autoantibodies against different ones. But maybe in the base case, GAD was the initiating -- sort of what initiated that autoimmune attack. And maybe that's then the driver behind that individual's disease. If you would add additional autoantigens into the mix, potentially it could work even better. That's why we also have like patents around using insulin as an antigen for the other big HLA subgroup and maybe a combination of both antigens for those who are heterozygous who have both -- but again, given these results, we really need to investigate this data to understand what happened if there's anything that went wrong? Or is this the truth to revisit that hypothesis? But again, these data don't -- they don't mean that all the previous data aren't true, but we need to understand this current case now before we can answer more. But maybe Josh and Mark, regarding the -- I mean, immunologies obviously, it's a difficult area, and there are different answers always depending on who you ask, but it's a valid question. And so I want to have Josh and Mark to...

Would you like to chime in?

Go ahead, Josh.

Yes. I think what this result reinforces is that immune interventions in type 1 diabetes are complex and highly complex and perhaps even stage dependent. So I think rather than casting out broadly a precision approach in general. This just really highlights the importance of understanding the mechanism, the timing of intervention and the stage of intervention more precisely.

Right. Now I'll add is that I hope that this is just -- but we'll look on back on one day as a very short-term disappointment for what will eventually be a long-term benefit for patients with type 1 diabetes or those that are going to risk the disease. One of the key things that Diamyd has going forward. And again, Josh had mentioned Breakthrough T1D's emphasis on disease-modifying therapies is that many news reports go out talking about various other forms of therapies that have the ability to either restore insulin production or retain it. And the vast majority of those therapies involve something that we refer to as immunosuppression. Now even those are getting better, but there's been a long-held concerns about using immunosuppressive drugs, not all of them are. But this one would avoid all of that -- the Diamyd that I'm speaking of, through its antigen specificity. So we cannot, as a community that cares about those with diabetes, give up on antigen-specific therapies. It's turning out as Josh said earlier, a difficult field. But one day -- I'm confident we'll figure it out one day.

And this is another question from -- thank you, Mark, thank you, Dr. Vieth. Another question from the chat here. It's regarding the data again, and I know that you have said that you haven't seen much of the data, but the question goes, were the test patients housed or were they simply tested outpatient? Were there any difference -- were there any regional differences between the tests?

Regarding tests now to understand -- is it how the injections have been done. I mean -- yes, I mean it's all like the same intranodal injections, have been done in the same way. Obviously, there are many different clinics in total. We have 57 clinics, Europe and U.S. but they've all been done by a very competent personnel who know how to do this. And again, it's a relatively simple procedure. It is outpatient procedure. You don't need to be hospitalized, which is also important here, ultrasound guided as I understand, all the individuals who do the injection, they keep also like a log or like a [ diary ] where they write the success if -- so there's no indications that we have received that there would be like a large amount of injections that have like failed, but we will be able to look to some extent on that kind of information as well where we have the antibody data because we know when we inject with GAD so our protein, you do get elevated GAD auto-antibodies and the placebo arm doesn't get anything. So that's an important -- one of those important checks to make sure that everyone who was injected actually got this antibody responses well and placebo didn't. So there's a lot to look into, but there's nothing as we know, as of yet indicating that there would be any differences. And again, on the subgroups, prespecified subgroups, there's to some extent, some like you do a stratification on regions, for example, Europe versus U.S. So again, there's nothing that we're going to see that worked in 1 place and they work in the other place, surprisingly flat across the board, nothing.

And regarding scenarios, again, what would need to happen for this program to remain viable? And what would need to happen for it to be effectively terminated?

To be viable, I mean, obviously, let's -- if we talk about this specific trial right now that is ongoing. That would mean that we can see in this first stage of analysis that there was something in the analysis that was done wrong. We can repeat the analysis, let's say, the right data files or there was something statistical programming or something like this. If that would be -- and you can repeat the analysis and see you get a different outcome in that case, you can then continue the trial because, again, we are very -- on a very limited basis unblinded currently. We have at really, on purpose, dug deeper. But that would be -- that would mean that the trial can continue. The other one would be, if we see that everything has been done correctly, or the results that we see now are the truth. Why they look, we still need to figure out. But in that case, we most likely will then take the decision to discontinue the trial in a very controlled manner again, you need to do the safety follow-ups for patients. And so wind it down in a very controlled manner and in discussions with regulatory agencies. And then in parallel do all of the analysis to understand the data at hand because that will then inform the next steps regarding the development of the investigational drug.

So to sum this up a little bit, I have a last question for all three of you here. It's been a turbulent weekend, very surprising results that you've gotten, but do you have any message you would like to convey to diabetes patients, your shareholders or the market? If we start with you, Ulf?

Yes. Well, obviously, a big disappointment for -- I'm not sure which camera I should be looking at here. But -- yes, the middle one, #3. A big disappointment for us. I understand for shareholders, for patients, for clinics. We obviously hope that we come to the root cause of this to really understand. We, obviously, as a company, believe in this, and I know there are many others who believe in this, but we have to be honest as well that we need to come to we need to understand the data before we can sort of take next steps here. From a shareholder perspective, I completely understand. I mean the share is doing terrible currently, understandably so, it's our job now to try to sort of get back the trust from shareholders by doing the best possible work right now in figuring out the current data and also working in parallel with strategic options, to again, in the best way possible, I mean, increase share value here, which again, I'm saying I understand, 80%, 90% down in share in a single day. It's difficult to stand here as a CEO and talk about shareholder value. But I feel it personally. I know there are others out there that feel it even much more from an investment perspective. So we try to do our best, and that's the only thing we can do.

Josh?

I would just say one question I was asked this weekend is how big of a setback is this for the field. And I would say this is certainly a setback for this particular trial, but not for the field overall. These moments are difficult, but they sharpen our understanding and they accelerate the better designed approaches and more targeted application of therapies that are currently in development. I would say that the field is stronger today than it was even a few years ago. We have clear staging of disease. We have an increasing focus on precision medicine approaches. And there remains a need for an unmet need for safe, effective therapies that are able to rebalance the immune system in type 1 diabetes. Diamyd is a pioneering approach for precision medicine in this space, and the analysis that needs to come over the next few weeks will be critical not only for determining the next steps for Diamyd, but for using the insights gained to hone precision medicine approaches in type 1 diabetes overall, and we are committed to work with the Diamyd team as they go through this process.

And I'll say the Board and management of diabetes, many of them either have type 1 or have loved ones with them. So this is -- this remains and is always a focus that we're doing efforts that not only help the community, the global community. Type 1 diabetes is a global disease, but we're also doing it to help our loved ones. And so there's no question that this group is passioned about where it's going. And we will just continue on this journey.

Thank you very much, Ulf, thank you very much, Mark and Dr. Vieth for taking the time to talk to us. And thank you, everyone, for watching. We will be waiting further updates from you.

Thank you.

Thank you.

Thank you.

Thank you.