The Swedish life sciences company admitted yesterday that the Phase II clinical trial of its gene therapy had been botched following a mix up over which patients received the drug and which got placebo.
Diamyd has also said it may used an inappropriate test to measure how effective the vaccine - also called Diamyd - was as a treatment for Latent Autoimmune Diabetes in Adults (LADA).
However, it has vowed to push on with the trial in the hope that it can still yield some important safety information.
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We are really disappointed that we are unable to draw any useful conclusions from this study.
There is a chance that a mix up between Diamyd and placebo has been made at some point during the study," said Anders Essen-Möller, the Diamyd Medical CEO.
Diamyd is a vaccine based on GAD65, a major autoantigen in patients whose diabetes is caused by an autoimmune reaction.
The company designed the vaccine to reduce the need of insulin injections and prevent the destruction of beta cells that produce insulin in the pancreas.
Also, by protecting these cells, it may allow them to regenerate in a non-autoimmune environment, and possibly set the stage for a cure of the disease.
The enzyme also converts the excitatory neurotransmitter glutamate to the inhibitory transmitter GABA.
Therefore, drugs based on this target could also be useful in several central nervous system-related diseases.
The trial recruited 160 patients in two cohorts of 80.
A review of the preliminary data revealed significant inconsistencies in the efficacy data between the two groups of patients.
An independent audit of the pharmacy handling the drug discovered that the colour coding of the Diamyd and placebo vials has been made on two different occasions, corresponding to the first and second cohorts of patients.
Essen-Möller said: "Was the drug mixed up?
We do not know.
Could there be a mix up at some other times in the study?
Yes it is possible, but that is not certain."
The conclusion of the audit was that there was a significant risk the bottles had been mixed up and that it was impossible to guarantee the identity of their contents.
"We see no other alternative than to invalidate the study," said Essen-Möller.
"It would be wrong to draw any conclusion regarding efficacy from the study."
The lead investigator concurred: Professor Carl-David Agardh at the Malmo University Hospital in Sweden said that any conclusions would "amount only to speculation" .
The CEO of the auditor company, Bengt Agrell said he thought repeating the trial was the "only solution" .
However, after talks with the investigators, Diamyd are now keen to continue the trial, saying that it "can still bring valuable information" .
The reason to continue the study is to continue building the safety database for Diamyd.
No serious adverse event related to Diamyd-treatment has occurred in any study including the current LADA study.
However, this doesn't change the fact that a mistake has been made, an issue that Essen-Möller said "must be addressed forcefully and with determination" .
Wrong endpoint?
The second possible problem with the trial concerned how investigators measured how well the vaccine was working.
They used the common HbA1c measurement as the endpoint in the LADA study.
This long-term average blood sugar parameter was considered accurate when the trial was designed.
However, since then, Diamyd medical has helped pioneer a different efficacy measure.
This year, it was the first company to receive US Food and Drug Administration agreement to evaluate beta cell function using 'meal-stimulated insulin secretion', measured as stimulated C-peptide.
LADA patients are insulin resistant and so receive blood glucose reducing agents - or insulin sensitisers - as part of their treatment.
This can also bring HbA1c values to near normal, and an additional benefit through the vaccine to treat autoimmunity may be less pronounced in well treated patients, even though the insulin secretion capacity is improved.
Essen-Möller is determined not to let the mistake ruin the vaccine's progress towards approval.
Finishing the study will cost the company no extra money and said that he doesn't believe it will impact the timeline for it to reach market in a similar indication - that of Type I diabetes sufferers.
An earlier Phase II trial for this alternative indication showed 70 per cent of patients who received Diamyd had significantly higher meal-stimulated insulin levels than the placebo group.
In addition, the Diamyd patients showed a favourable immune response.
Diamyd Medical still plan to initiate a Phase III trial for the Type I diabetes indication around the end of the year.
Although the company are currently in partnering discussions with big pharma firms, Essen-Möller also said he believes that the invalidation of the trial will not adversely affect those ongoing meetings "in a major way" if the prospective partner is only interested in Type I diabetes, rather than LADA patients.
"We believe that once the phase III studies are ongoing for Type I diabetes, a small additional study in LADA patients may suffice to broaden the application for LADA-patients," he said.
"For that reason we will continue to work on both the Type I diabetes and the LADA indications."