WINNIPEG, Manitoba – October 1, 2007 - DiaMedica Inc. (TSX-V:DMA), a drug discovery and development company focused on novel treatments for type 2 diabetes, is pleased to announce exciting results for DM-71 in its proof-of-concept phase II clinical study in type 2 diabetes. 

In the patients with moderate and higher elevation of HbA1c (≥ 8.0%), results showed a statistically significant and clinically meaningful reduction in HbA1c (0.55%, p=0.0063) following treatment with DM-71. HbA1c, or glycated hemoglobin, is a measure of the amount of sugar attached to hemoglobin in a patient’s red blood cells, expressed as a percentage.  This is representative of the amount of sugar in a person’s blood stream over the last several weeks and is a metric used for diabetes drug approvals.  

DM-71 acts through two converging mechanisms to potentiate the nerve signal which the Company believes is dysfunctional in type 2 diabetics.  The drug represents a potential first-in-class therapy.  DM-71 is a novel combination of two known drugs: bethanechol, a drug prescribed to treat urinary urgency; and n-acetyl cysteine, which is used clinically as a mucolytic and to treat acetaminophen poisoning. 

“This study marks an important milestone for DiaMedica as DM-71 has lived up to our expectations in reduction of HbA1c, the most relevant measure of a diabetes drug”, stated Dr. Karl-Gunnar Hidinger, President of DiaMedica Inc. “We will enthusiastically continue development of this drug which has the potential to provide benefit to the more than 150 million people world wide suffering with type 2 diabetes.”

“These findings encourage further development of DM-71, and provides human data that will facilitate the optimal design of future studies”, commented Dr. Alan Cherrington, Past-President, American Diabetes Association; Holder of the Turner Chair in Diabetes Research, Vanderbilt University Medical Center; and company scientific advisor.

Study Design:

The study evaluated the efficacy of DM-71 using standard metabolic markers of changes in glycated hemoglobin (HbA1c), triglycerides, fasting glucose and fasting insulin as primary endpoints.  The study was a proof-of-concept, single dose, single blinded, placebo controlled, 12 week trial, conducted at 12 sites across Canada. DM-71 was taken three times daily, one hour before each meal. Patients continued with their current therapy during the trial and there was no washout period.

Fifty-five of the sixty-four patients had no major protocol deviations and adhered to the protocol with at least 60% compliance at each visit and were therefore included in the evaluable population.  

Key Results:

In the evaluable population, DM-71 had an absolute reduction of 0.32% from baseline of mean HbA1c (p=0.0066).  The placebo group showed a non-clinically significant reduction from baseline (0.22%, p=0.1027).

Furthermore, in a pre-specified subgroup of patients with moderate and higher elevated HbA1c (≥ 8.0%), DM-71 had an absolute reduction of 0.55% from baseline of mean HbA1c (p=0.0063).  In this evaluation, placebo was not statistically different than baseline (increase 0.03%, p=0.9750).  

While no difference was seen in fasting glucose in the full evaluable population, DM-71 had a clinically meaningful absolute reduction of 1.54 mmol/L from baseline of mean fasting glucose (p=0.076) in a pre-specified subgroup of patients with elevated fasting glucose (≥ 10.0 mmol/L).  Neither fasting insulin nor triglycerides showed statistically or clinically relevant changes in the analysis.

The study had multiple secondary endpoints.  In secondary endpoint analysis, DM-71 was shown to have a statistically significant absolute weight reduction of 1.38 kg from baseline of mean weight per patient (p=0.0005).  There was no statistical difference from baseline of weight in the placebo group.  Weight loss is a highly attractive endpoint as weight gain is a common side effect of several existing diabetes drugs.

The two drugs making up DM-71 have a significant history of clinical use and well established safety profiles.  Expected side effects were facial flushing and mild nausea. This was confirmed in the study, where it was demonstrated that DM-71 was safe and well tolerated. There were no serious adverse events in the study.

As previously announced, DiaMedica will be presenting on Wednesday, October 3rd at BioContact Quebec 2007.

About DM-71

DM-71 has demonstrated the ability to restore insulin sensitivity in a type 2 diabetes animal model. The product is a novel combination of bethanechol and n-acetyl cysteine, drugs with well established safety profiles that are used to treat other unrelated human conditions. These two molecules act synergistically to address a new target in the treatment of diabetes.  As both components of DM-71 have been previously approved for human use, the Company has been able to enter the product directly into human trials.

About DiaMedica

DiaMedica is developing novel treatments for various stages of type 2 diabetes based on a mechanism involving nerve signaling to the liver. Rather than treating the symptoms, DiaMedica addresses the cause of type 2 diabetes with multiple points of intervention. Its lead product, DM-71, is currently in a phase II clinical trial. The Company has two other products in its clinical pipeline, DM-83 and DM-99.

For more information, please contact:

Kevin Richardson, Ph.D.
DiaMedica Inc.
Phone: 204.478.5605
Fax: 204.453.3745
krichardson@diamedica.com 
www.diamedica.com

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

Caution Regarding Forward-Looking Information

Certain statements contained in this press release constitute forward-looking information within the meaning of applicable Canadian provincial securities legislation (collectively, “forward-looking statements”).  These forward-looking statements relate to, among other things, our objectives, goals, targets, strategies, intentions, plans, beliefs, estimates and outlook, including, without limitation, our anticipated future operating results, and can, in some cases, be identified by the use of words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “will,” “may” and other similar expressions.  In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements.

These statements reflect management’s current beliefs and are based on information currently available to management.  Certain material factors or assumptions are applied in making forward-looking statements, and actual results may differ materially from those expressed or implied in such statements.  Important factors that could cause actual results to differ materially from these expectations include, among other things: DiaMedica’s early stage of development,  lack of product revenues and history of operating losses, uncertainties related to clinical trials and product development, rapid technological change, uncertainties related to forecasts, competition, potential product liability, additional financing requirements and access to capital, unproven markets, supply of raw materials, income tax matters, management of growth, partnerships for development and commercialization of technology, effects of insurers’ willingness to pay for products, system failures, dependence on key personnel, foreign currency risk, risks related to regulatory matters and risks related to intellectual property and other risks detailed from time to time in DiaMedica’s filings with Canadian securities regulatory authorities, as well as DiaMedica’s ability to anticipate and manage the risks associated with the foregoing.  Additional information about these factors and about the material factors or assumptions underlying such forward-looking statements may be found in the body of this news release, as well as under the heading “Risk Factors” contained in DiaMedica’s final long-form prospectus dated March 12, 2007.  DiaMedica cautions that the foregoing list of important factors that may affect future results is not exhaustive.  When relying on DiaMedica’s forward-looking statements to make decisions with respect to DiaMedica, investors and others should carefully consider the foregoing factors and other uncertainties and potential events.