DiaMedica Cleared to Initiate Its Second Phase II Clinical Trial of DM-71 in Patients With Type 2 Diabetes

  DiaMedica Inc. (TSX VENTURE: DMA), a drug discovery and clinical development company focused on a novel approach to treating type 2 diabetes, today announced that it has received a No Objection Letter from Health Canada to initiate the second planned Phase II clinical trial investigating DM-71 in patients with type 2 diabetes. In the first Phase II trial, DM-71 showed statistically significant declines in HbA1c, fructosamine and weight with an excellent safety profile in humans.

This second trial is a randomized, cross-over, open-label study to test the effect of DM-71 on two metabolic markers, glucose and insulin, in a meal tolerance test and will enroll approximately 40 patients in Canada who have been diagnosed with type 2 diabetes. The entire study is expected to take approximately 16 weeks from enrollment of entry of first subject until last subject out following which data on the two primary endpoints will be reported.

"This trial is in follow-up to the positive phase II study that demonstrated the ability of DM-71 to reduce HbA1c levels in humans," stated Dr. Wayne Lautt, co-founder of DiaMedica. "A single dose of Bethanechol and NAC was taken together one hour prior to a meal in the previous phase II proof-of-concept study. The upcoming phase II trial will include multiple doses and measure the efficacy of DM-71 when taken with a meal."

"Preclinical data has shown that DM-71 works equally well, whether taken one hour or just before a meal. This trial is designed to confirm our preclinical findings in a human population, allowing us the opportunity to improve compliance and optimizing dosing in upcoming pivotal trials with the expectation of improving efficacy." stated Rick Pauls, President and CEO of DiaMedica.

Diabetes is a widespread and rapidly growing disease, affecting over 180 million people world wide. Over 90% of people with diabetes are being diagnosed with the type 2 form of the disease. According to the World Health Organization, this number is expected to double during the next 15 years while the American Diabetes Association has estimated the annual economic cost in 2007 to the United States to be $174 billion. Global sales of oral diabetes drugs total $8 billion today and are expected to climb to $12 billion by 2011.

About DM-71

DM-71 is an oral combination of Bethanechol and N-Acetylcysteine (NAC). Bethanechol is a muscarinic agonist which is structurally and pharmacologically related to the endogenous cholinergic agonist, acetylcholine. It acts on the parasympathetic nervous system and has been used for over 60 years as a treatment of acute postoperative and postpartum non-obstructive urinary retention. NAC is a readily available over the counter naturally occurring metabolite of the amino acid L-cysteine. It is converted in the body into metabolites capable of stimulating glutathione synthesis, promoting detoxification and acting directly as free radical scavengers. It was introduced over 50 years ago as a mucolytic agent for chronic pulmonary diseases and has been used extensively to treat acetaminophen (aspirin) poisoning. Loss of insulin sensitivity is the hallmark of type 2 diabetes. Preclinical studies have shown that NAC has no effect at restoring insulin sensitivity while Bethanechol is able to restore it to about 40% of control levels. However, when used in combination, these two compounds have a unique synergistic effect that restores insulin sensitivity to 90% of control levels. DiaMedica has been issued two US patents for DM-71, due to its novel mechanism of action, which may designate this drug as first-in-class. Results from a phase IIa proof-of-concept trial revealed that DM-71 is effective at reducing HbA1c by 0.55% over 12 weeks in patients whose diabetes was considered moderate to severe (greater than 8.0% HbA1c). The entire population had statistically significant weight loss over this 12 the same week period (3 pounds; p=0.0005) with a 10-fold decrease in fructosamine levels when compared to placebo. This decrease in fructosamine suggests that a longer treatment period should produce a greater decrease in HbA1c.

About DiaMedica

DiaMedica is developing novel treatments for type 2 diabetes based on a newly discovered 'nerve reflex' mechanism for which the Company has been issued two U.S. patents. DiaMedica completed a successful phase II trial with its lead product, DM-71, which demonstrated the ability to reduce HbA1c (blood sugar) levels and weight in humans. DiaMedica also completed a successful phase II trial with its second compound, DM-83, designed to measure changes in insulin and glucose. The success of this clinical trial was highly significant as DiaMedica believes it validates the novel 'nerve reflex' mechanism that would designate the Company's drugs as first-in-class. The Company's third drug in clinical development, DM-99, will complete a phase II trial in Q1 2009. Preclinical results from Vanderbilt University have shown that DM-99 is able to cause tissue to increase its uptake of sugar from the blood by over 40% (p less than 0.001) during the first 60 minutes of treatment. DM-199, a 40x more biologically active version of DM-99, has been created with the expectation that it will be developed into a once-a-week injection. DiaMedica has been recognized as one of the Top Ten(TM) Life Science companies in Canada for the past two years by the Ottawa Centre for Research and Innovation.

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.

These risks and uncertainties should be considered carefully and prospective investors should not place undue reliance on the forward-looking statements. Although the forward-looking statements contained in this press release are based upon what management believes to be reasonable assumptions, DiaMedica cannot provide assurance that actual results will be consistent with these forward-looking statements. DiaMedica undertakes no obligation to update or revise any forward-looking statement.

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

Contacts: DiaMedica Inc. Kevin Richardson, Ph.D. [phone] [phone] (FAX) Email: [e-mail] Website: www.diamedica.com