FOR EARLIER DISEASE DETECTION

ANNUAL REPORT - 2008

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JanuaryInitiation of a project to develop a biomarker for the early diagnosis of Parkinson’s disease. The project is funded by the Michael J. Fox Foundation and is carried out in co-operation with Brigham and Women’s Hospital and Harvard Medical School.

February

Results from the interim analysis of the breast cancer study in India are presented in New Delhi at the 51st All India Congress of Obstetrics and Gynaecology. The results confirm that the diagnostic strength of the gene signature was maintained from Europe to India and that this was independent of the patient’s age.

March

DiaGenic presents scientific data at the 5th International Pharmaco-economic Conference on Alzheimer’s Disease (IPECAD) in Newark, USA. DiaGenic presents new data that shows that the Alzheimer’s prototype gives the same accuracy irrespective of the degree of the disease.

April DiaGenic receive notice of allowance for its patents for the diagnosis of Alzheimer’s disease using blood samples and the analysis of gene expression for 19 European countries.

May

DiaGenic completes a private placing of 8 million shares with aggregate gross proceeds of NOK 44.8 million.

DiaGenic signs a distribution agreement with SRL Ranbaxy Ltd for the distribution of the breast cancer test in India. The test will be marketed and sold in the Indian market by Super Religare Laboratories (SRL), which is the largest laboratory chain in south-east Asia.

June

July

DiaGenic completes the multi-centre study on breast cancer in India. The study documents high accuracy for different breast cancer forms in younger women. Current diagnostic pro-cedures such as mammography are shown to have low accuracy levels in this group.

DiaGenic receive notice of allowance for a patent in Japan for the diagnosis of, among other things, Alzheimer’s disease and various forms of cancer including breast cancer using blood samples and the analysis of gene expression.

August

EU approves funding of SPIDIA, a European research project where DiaGenic participates. SPIDIA is an integrated joint project to improve, standardise and quality assure the handling of biological samples, including blood, to achieve high quality and consistent test results. DiaGenic will as a participant in the programme receive research support of approximately EUR 580 thousand spread over four years.

September

October

DiaGenic signs a service agreement with DNAVision as the first European service laboratory for BCtect® and ADtect®. DNAVision is a leading supplier of molecular biological tests and services.

The results from the Indian BCtect® multi-centre study are presented at the International Society of Oncology and Biomarkers conference in Tokyo.

NovemberDiaGenic and Super Religare Laboratories (SRL) launch the breast cancer test BCtect® in the Indian market. The launch takes place on 8 November at the Norwegian Embassy in Delhi. This represents the first product launch for DiaGenic.

December Results from the Indian BCtect® multi-centre study are presented at the 31st Annual San Antonio Breast Cancer Symposium, the world’s leading scientific breast cancer congress.

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Foreword from the CEO 4-5

Business Review 6-14

Directors’ Report 2008 15-22

Financial Statements and Notes for 2008 23-46

Auditor’s Report 47

Statement from the Board of Director’s 48

Corporate Governance 49-52

Share and Shareholder Information 53-55

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2008 was a year of very high activity for DiaGenic with focus on completing it’s first two products, marketing them, and on securing distribution contracts for them. As a result of these activities, the first diagnostic test, BCtect®, was launched by SRL Diagnostics in New Delhi, India in November. Europe is our next target and extensive efforts are being devoted to prepare for products and sales channels for launch in 2009.

During its 10 year life, DiaGenic’s primary function and goal has been to develope new diagnostic tests using gene expression in blood. This patented method provides exciting opportunities for entirely new tools for use in clinical medicine and in developing new pharma-ceuticals. The technology has moved from home-made tools to commercial produced techniques, some of which have approval for medicinal use. DiaGenic has chosen to use commercially available products instead of beginning a capital intensive instrument development cycle. DiaGenic focuses on applications (diagnostic tests) for such instruments. During 2008 we demonstrated our position as a preferred partner for major international firms in the sector with an EU project headed by Qiagen and profiling from Applied Biosystems as the first firm with diagnostic use of its PC technologies. This recognition shows that DiaGenic is a world leader in the diagnostic use of gene expres-sion in blood.

Based on long established research cooperation with hospitals in Europe and the USA, it was possible to obtain all necessary clinical blood samples needed for CE marking completion of our first two tests. In order to increase our product development capacity we strengthened the organisation’s laboratory manage-ment and statistical gene analysis. As Chief Executive it is reassuring to see that DiaGenic is an attrac-

tive workplace for highly skilled people recruited from public and private enterprises. DiaGenic is well equipped to complete the CE marked products in the first half of 2009.

Preparations for the sale of these products in Europe have continued throughout the year. Building rela-tionships with potential distributors and customers has been an important element together with the establishment of our business model. Contrary to tra-ditional product sales to many laboratories, we offer a service with central analysis and sales directed at users of the tests - the clinical doctors. This model reduces the need for investments in hospital laboratories and secures high analytical quality in all countries. Key to this concept is the cooperation we have established with the Belgian firm DNAVision during 2008. They will undertake all analytical work after the launch of products to customers throughout Europe. This labo-ratory was operational for DiaGenic at the end of 2008 and has been used for CE marking of tests.

After several years of clinical studies in India, an agreement was reached with SRL Ranbaxy, the largest laboratory chain in south-east Asia, to market our

After 10 years of research, well on the way to commercialisation

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breast cancer test in India. Our above-mentioned sales model has been used there and has provided DiaGenic with valuable experience before the commercial launch in Europe.

The establishment of new medical concepts always takes time; in India and elsewhere in the world. It follows well known phases before widespread use can be expected. The medical world can be conservative - new concepts must first be anchored with recognised opinion leaders. Thereafter, general practitioners then bring new methods into use. Such anchoring takes place through the building-up of experience by means of clinical studies and documentation in leading medical periodicals. Following the launch of the Dia-Genic’s products, such activities will be given priority in both India and Europe.

Throughout 2008, the company has maintained an active dialogue with leading international pharmaceu-tical companies, both regarding the use of our products and our expertise in developing new pharmaceuticals. Strategic cooperation with such firms will first take place after an extensive review of our research results and our commercial rights and patents. Following the end of the year we obtained confirmation in the form of a signed term sheet with a leading pharmaceutical company that DiaGenic is a qualified and preferred

firm. This business area will be an important element in DiaGenic’s future development and the effort will be further strengthened by CE marked products.

We have, therefore, entered an exciting new year and new period in DiaGenic’s history. Our products will be taken to market and we will begin to fulfil our mission of offering patient-friendly diagnostic tests for the early detection of disease, improving the quality of patient’s lives. We work with especially serious diseases that sincerely need improved diagnostics to be correctly treated. DiaGenic has a real opportunity to improve the quality of life of many people. The organisation is now focused on the market, and our commercial efforts have been strengthened with the appointment of an experienced Business Development Director, Morten Sten Johansen.

As Chief Executive I have a skilled and motivated team with a clear common goal: to develop DiaGenic as a leading diagnostic firm within blood-based gene expression tests.

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Chief Executive Erik Christensen (1956) started as Chief Executive of DiaGenic on 1 January 2007. He is a Medical Doctor from Odense and Oslo University. From 1983-1996 he practised as doctor, from 1993 he was head of clinical chemistry at Ullevål Univer-sity hospital in Oslo. From 1996 to 2006 he held several management positions in Abbott Norway AS, the last as Country Manager for the diagnostic division.

International Business DirectorMorten Sten Johansen (1975) is International Business Director in DiaGenic ASA with responsibility for sales and business development. He is educated as a bioen-gineer and has several years’ experience from leading IVD companies. He joined bioMérieux in 1999 where he was Business Manager for the Nordic countries within the segments molecular biology, clinical chemistry and virology. From 2003 he led Ventana Medical Systems (Roche) in the Nordic region with a focus on business development and organisational structure. He joined DiaGenic in January 2009.

Figure 1. Composition of competence and gender

Description of the companyDiaGenic in briefDiaGenic was incorporated in 1998 and is listed on the Oslo Stock Exchange (ticker: DIAG). The company develops patient-friendly tests for the early detection of serious diseases. The company’s concept is based on the identifica-tion and clinical documentation of disease specific gene expression measured using normal blood samples. The company has patented methods that can be used to in the diagnosis of several important diseases. The first product candidates from DiaGenic are ADtect® and BCtect® which are tests for the early diagnosis of Alzheimer’s disease and breast cancer respectively.

Vision and missionDiaGenic ‘s vision is to be a leading provider of molecular diagnostics for the early diagnosis of disease. DiaGenic’s mission is to offer patient-friendly diagnostic tools for the early detection of diseases in order to contribute to improved quality of life for patients and lower costs for society.

Business concept and strategy DiaGenic is a leader in the development of tests for the early detection of diseases through the analysis of gene expression in normal blood samples. The company takes product candidates from exploratory research through the entire product development cycle up to the establish-ment of sales and marketing channels for its tests. Sales and marketing is undertaken in cooperation with partners. DiaGenic uses a differentiated strategy for the various product candidates within different geographic areas. India’s largest laboratory chain, Super Religare Labora-tories (SRL) has been chosen as distributor of the breast cancer test BCtect® in India, in order to secure the broad-est possible market access. In Europe, where the CE mark is necessary before the products can be marketed and sold, the company is undertaking its own studies in order to declare conformity with the IVD Directive, while studies for regulatory approval in the USA (FDA approval) will be commenced once financing of the necessary studies is in place. DiaGenic’s goal is to establish a distribution network for selected markets in Europe once the products have received the CE mark.

In the future DiaGenic will direct its focus on opportunities for cooperation with pharmaceutical companies. Primarily it will focus on cooperation in the development of biomar-kers for use in pharmaceutical companies’ clinical trials. Such strategic focus means that DiaGenic’s market strategy will consist of two segments: Molecular Diagnostics and Biomarkers for use in pharmaceutical companies’ clinical studies.

recently at the Norwegian Institute for Forest Research. He joined DiaGenic in 2000 and served as Managing Director from 2005 to 2006.

PersonnelThe employees represent an important part of DiaGenic’s success. The company therefore endeavours to create the conditions that encourage effective and flexible working

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Reseach DirectorAnders Lönneborg (1956), is a co-founder of DiaGenic. He holds a doctorate in molecular plant physiology from Umeå University, 1986, and undertook post doctorate studies at Michigan State University. Lönneborg has extensive experience in management of research groups and as a professor. He has held a number of research/research manage-ment positions in universities and research institutes, most

Technology Director Praveen Sharma (1964) is a co-founder of DiaGenic. He studied first at university in India and holds a BSc from Oslo University, 1990, as well as a doctorate in molecular biology from NLH, 1995. Sharma has held several research positions, most recently at the Norwegian Institute for Forest Research. He became employed in DiaGenic in 2000 and has been a board member since 1998.

processes. DiaGenic has an organisation of 22 employ-ees with expertise within the technical areas medicine, medicinal diagnostics, biochemistry, molecular biology, bioinformatics, patents, sales, marketing and finance. Erik Christensen was appointed Chief Executive with effect from 1 January 2007 and brought to the company more than 20 years’ experience within medical diagnostics and interna-tional industry. The organisation has subsequently been further strengthened with the appointment of employees with an industry background within sales, product develop-ment and finance.

Technology and product development Core know-how and technologyDiaGenic’s technology is based on the concept that a disease located at one place in the body will produce secondary characteristic responses in other parts of the body. These responses can be measured in normal blood samples, where the blood cells reflect the response with disease-specific gene expression in blood. Changes in gene activity of the selected genes are measured using gene expression technology. DiaGenic was engaged at a very early stage in studies that showed that this was possible and patented the concept as early as 1997. Since then DiaGenic has been one of the innovators in the use of gene expression pattern for diagnostic purposes. The company uses commercially available, quality assured and robust platforms that are suitable for diagnostic use in clinical medicine. DiaGenic’s core expertise is concentrated around the identification of gene expression patterns in blood that are characteristic for defined diseases. Further develop-ment of the relevant technology platforms for commercial diagnostic use is undertaken by international platform suppliers.

DiaGenic’s diagnostic method is general and might be further developed for use in the diagnosis of many seri-ous diseases. Based on commercial potential and medical needs DiaGenic’s main focus has been on the development of products for the early diagnosis of Alzheimer’s and Par-kinson’s diseases and breast cancer.

Breast cancerBreast cancer -- the most frequent form of cancer among womenBreast cancer is the most frequent form of cancer among women. Annually around 1.3 million cases of breast cancer are diagnosed worldwide (Global Cancer Statistics 2002). The disease is most common in Western countries and is growing rapidly in non-Western countries where large population groups are changing their lifestyle in a western direction with a consequential increase in the risk of breast cancer. The need to carry out breast cancer diagnosis is present at all stages of the disease and early diagnosis increases the chances of survival.

Limitations with current diagnostic methodsThe diagnostic methods used today vary but they all have limitations. The most common method of diagnosis is mammography that involves an x-ray of the breasts. A weakness of mammography is its ability to detect cancer in women with high density breast tissue which is typical for younger women. Mammography also has significant weak-nesses with regards to the identification of small tumours and distinguishing between malignant and benign tumours. MRI (magnetic resonance imaging) is used in the diagnosis of breast cancer and has been documented as having good capacity to detect breast cancer also among women with high density breast tissue. The challenge with MRI is that a large number of the findings are not tumours but benign densities in the breasts. This leads to a large number of unnecessary biopsies and worries for those involved.

Possibilities with new methods of diagnosis Research in recent years has led to a number of new tools that potentially can improve the early detection of breast cancer. Diagnostic biomarkers represent a very interest-ing alternative. The diagnostic biomarker is based on a substance, most often a substance that is found in body fluids such as blood, which is produced as a response to the presence of the tumour. Diagnostic biomarkers include everything from traditional protein markers to new types of markers such as for example RNA markers. Promising research results must be tested and transferred to tools that provide clinical benefits and are suitable for commer-cial use.

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Marketing DirectorDag Christian Christiansen (1954) was employed as Marketing Director in DiaGenic in 2005. He holds a BSc in biochemistry from Bergen University, 1983, and an MBA from the Oslo Business School, 1992. He has over 20 years’ experience in sales and marketing of chemicals and diagnostics nationally and internationally. Christiansen previously worked for, among others, Dyno Particles and joined from a position in Axis-Shield, where he was responsible for cardiovascular diagnostics.

Head of LaboratoryEdith Rian (1966) is responsible for laboratory ope-rations in DiaGenic. She studied at the University in Oslo and has a MSc from NTNU, 1990, and PhD in Molecular Biology from Oslo University, 1999. Rian was employed at the Norwegian Radium Hospital in the period 1998 to 2008 and held research and project management positions. She joined DiaGenic in 2008.

CompetitionDiaGenic’s BCtect® is a blood-based gene expression test for the early detection of breast cancer. Compared with other gene expression tests that are commercially available BCtect® uses blood as the sample material. Tissue-based gene expression tests that are on the market are prognos-tic tests that are used to help evaluate a patient’s risk of a relapse in the treatment of breast cancer. These tests are not directly competitors of BCtect® and can be viewed as complementing our test. There are no approved blood based tests for detection of breast cancer available on the market today.

Early diagnosis is essential for good survival prospectsBCtect® which is under development uses blood as the sample material, detects cancer at an early stage and has the potential to distinguish between benign and malignant tumours. The test will first be launched as a supplement to mammography. The individual prognosis will depend on the type of breast cancer but a common feature of all forms of breast cancer is that early diagnosis and subse-quent treatment is essential for good survival prospects.

Progress in product development of BCtect® in 2008In 2008 DiaGenic completed a large multi-centre study in India. The study consisted of blood samples from 741 women from nine different centres from different geo-graphic locations in India. The study showed that BCtect® has high accuracy among younger women and can give clinical benefits where today’s diagnosis has limitations, and can be a supplement to existing diagnostics. Prelimi-nary results from the study were presented at the Inter-national 51st All India Congress of Obstetrics and Gynae-cology in New Delhi, India, the International Society of Oncology and Biomarkers conference in Tokyo, Japan and at the 31st annual San Antonio Breast Cancer symposium in San Antonio, USA. This study provided the documenta-tion which formed the basis for the company’s first product launch that took place in New Delhi, India in November 2008. BCtect® thereby became commercially available in India.

Scientific Advisory Board for Breast CancerProfessor Anne-Lise Børresen-Dale is Head of the Depart-ment of Genetics at the Norwegian Radium Hospital in Oslo She is president of the European Association for Cancer Research (EARC) and on The Board of Directors of European CanCer Organization (ECCO). Her research centres on breast and ovarian cancer and the identification of geno-types and gene expression profiles contributing to elevated cancer risk, radiation sensitivity, tumour aggres-siveness and therapy resistance.

Dr Alan Hollingsworth is Medical Director of Mercy Women’s Center and Mercy Cancer Center in Oklahoma City. His professional area is diagnosis and risk assessment for breast cancer. Dr. Hollingsworth heads one of the USA’s leading clinics for monitoring and following up high-risk breast cancer patients.

Dr Martine Piccart is Professor of Oncology at the Uni-versité Libre de Bruxelles and Head of the Department of Medicine at the Jules Bordet Institute. She is currently President of the European Organisation for Research and Treatment of Cancer (EORTC). In 1996, Piccart founded the Breast International Group (BIG), of which she is now chair. Piccart is a member of the American Society of Clinical Oncology (ASCO).

Dr Christos Sotiriou Assistant Professor at the Medical Oncology Unit and also Head of the Functional Genomics & Translational Research Unit at the Jules Bordet Institute in the Université Libre de Bruxelles. His research focuses on molecular biology in breast cancer. He is also a member of TRANSBIG, a “sister” network of the Breast International Group

Alzheimer’s diseaseAlzheimer’s disease - 15 million people are affected today and incidence is increasingAlzheimer’s disease is the most common form of dementia and is characterised by the failure of cognitive functions. Alzheimer’s disease is a fatal disease and is one of the lead-ing causes of death in the USA. The disease mainly affects people over the age of 50 and its incidence is expected to increase further as this age group expands. By 2030 it

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Financial ControllerRuben Ekbråten (1976) is responsible for finance in DiaGenic ASA. He has an MBA from Heriot Watt University, and a BBA from Norwegian School of Management. He has worked as stockbroker, and has held finance positions in GE Healthcare in Norway and internationally. Before beginning in DiaGenic in 2007 he was Finance Manager for Japan and Central Costs in GE Healthcare.

is expected that in US alone some 20-30 million people will be living with the disease. Society spends substantial amounts on patients not able to care for themselves. For example around 16% of the US health budget, or more than USD 100 billion, is spent on the care and medication of this patient group.Early diagnosis is important for improved patient managementEarly diagnosis of the disease is essential if new drugs are to have the desired effect and thereby reduce significantly the costs for society. For the individual patient early and correct treatment could have big advantages in the form of more years in their normal surroundings with func-tioning cognitive capacity. The development of disease modifying drugs for Alzheimer’s disease depends on early and accurate diagnosis, both to improve the efficiency of clinical studies and subsequently to identify the appropri-ate patients for use of the drugs. A large number of new drugs are under development and new treatment methods are expected to be approved within a few years. DiaGenic therefore sees significant market potential for a diagnostic product for the early detection of Alzheimer’s disease.

Current diagnosis is time consuming and difficult It is very difficult and laborious to diagnose the disease today and it can only with certainty be diagnosed using a biopsy after the patient’s death. Current diagnostic meth-ods involve questionnaires, neuro-psychiatric tests, images of the brain and in certain countries samples of spinal fluid. For most of these methods the results must be interpreted by specialists and diagnosis thus becomes very expensive. Even with today’s special investigations diagnostic accuracy is considerably lower than desired, particularly in the early phases of the disease where the treatment gain is great-est. Because of the uncertainty the clinical diagnosis today is for probable Alzheimer’s disease. Clinicians believe that there is a great need today for a better and simpler method of diagnosis in order to be able to prescribe relevant medi-cines and make practical arrangements for the patient.

Possibilities with new methods of diagnosis Research in recent years has produced a number of new tools that potentially can improve early detection of Alzhe-imer’s disease. Diagnostic biomarkers represent a very exciting alternative. A diagnostic biomarker is based on a

substance that is most often found in a body fluid such as blood and which is produced as a response to the presence of the disease. Diagnostic biomarkers include everything from traditional protein markers to new types of markers such as example RNA markers. Promising research results are to be trialed and converted to tools that provide clinical benefits and are suitable for commercial use

Competing diagnostic methodsDiaGenic’s ADtect® is a blood-based gene expression test for the early detection of probable Alzheimer’s disease. There are currently no stand-alone diagnostic tests for Alzheimer’s disease on the market. Currently diagnosis is based on an extensive clinical review of the patient that includes a number of different tests. This is an expensive and time-consuming process and accuracy is around 80 - 85% in most cases. In certain countries such as, for exam-ple, Sweden biomarkers based on proteins from spinal fluid (CSF) are used to a certain extent. It is considered, how-ever, that the challenges and risk relating to taking a spinal fluid sample will limit the clinical use of such tests.

ADtect® for early detection of Alzheimer’s diseaseADtect® which is under development uses blood as a sample material, identifies probable Alzheimer’s disease at an early stage. The test has potential to distinguish between different forms of dementia such as, for example,

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between Alzheimer’s disease and Parkinson’s dementia. ADtect® will be launched as a supplement to current meth-ods of diagnosis in order to secure more rapid and better diagnosis. Early diagnosis and subsequent treatment is critical to the progress of the disease, as treatment options in the near future is expected to slow the development of the disease. ADtect® will be a useful tool for early diagno-sis.

Progress for product development of ADtect® in 2008Within product development DiaGenic has focused on activities that will provide the necessary documentation to declare conformity with the IVD Directive and thus obtain a CE mark for ADtect®. In 2008 a large number of blood sam-ples and associated clinical documentation were collected that will be included in studies with the overall goal of a CE mark. Scientific data that shows that our Alzheimer’s proto-type gives the same accuracy irrespective of the degree of the disease and can be a very useful tool in the detection of mild to moderate Alzheimer’s, and possibly also earlier forms of the disease (MCI). This data have been presented at the 5th International Pharmaco-economic Conference on Alzheimer’s disease (IPECAD) in Newark, USA and the International Conference on Alzheimer’s disease (ICAD) in Chicago USA.

In 2008 DiaGenic completed the FUGE (FUnctional GEnomic) project for Alzheimer’s disease. This project was awarded NOK 9.8 million from the Norwegian Research Council in 2006 for the project period 2006 -2008. The objective of the project was to develop a blood-based gene expression test for Alzheimer’s disease, with particular focus on early diagnosis. Patients with symptoms of possi-ble early stages of Alzheimer’s (mild cognitive impairment) will be followed up over three years - this is of particular interest since future medical treatment will be focused on this group. The project partners are the Norwegian Univer-

sity of Life Sciences (UMB) for statistics and bioinformatics support and a number of hospitals that have contributed to the collection of sample material and provide medical guidance.

Scientific Advisory Board for Alzheimer’s diseaseSamuel Gandy is Sinai Professor of Alzheimer’s Disease Research, Professor of Neurology and Psychiatry, and Associate Director of the Mount Sinai Alzheimer’s Dis-ease Research Center, and Chair of National Medical and Scientific Advisory Council of the Alzheimer’s Association. Dr. Gandy is an international expert in the metabolism of the sticky substance called amyloid that clogs the brain in patients with Alzheimer’s. In 1989, Gandy and his team discovered the first drugs that could lower formation of amyloid. Dr. Gandy has written more than 150 original papers, chapters and reviews on this topic.

Professor Khalid Iqbal is Head of the Department of Neurochemistry, at the New York State Institute for Basic Research in Staten Island, New York and, along with Win-blad, a founder of the biennial International Conferences on Alzheimer’s Disease & Related Disorders, (ICAD). Dr. Iqbal has authored over 200 scientific papers in prestigious American and international scientific journals and edited eight books on Alzheimer’s Disease. Bengt Winblad is Professor of Geriatric Medicine at the Karolinska Institute and Chief Physician at the Karolinska University Hospital. He is the Director of the Karolinska Institute’s Alzheimer’s Disease Research Centre and the programme Swedish Brain Power. Professor Winblad has authored more than 800 original publications in gerontol-ogy, geriatrics, and dementia research, and is a member of the editorial boards of more than 10 international scientific journals. He has been a member of the Nobel Assembly for the Prize of Medicine and Physiology at the Karolin-ska Institute since 1988 and was elected Chairman of the Medical Scientific Advisory Panel for Alzheimer’s Disease International (ADI) in 1995.

Dag Aarsland is Professor of Geriatric Psychiatry, Univer-sity of Bergen, School of Medicine, Institute of Psychiatry and Head of the Centre for Neuropsychiatric Research, Stavanger. In 2001 Professor Aarsland received the Leon Jarner prize for his research on Alzheimer’s disease. Pro-fessor Aarsland is also member of the editorial board of International Psychogeriatrics.

Parkinson’s diseaseParkinson’s Disease -- a large and growing problemParkinson’s disease is a chronic neurological disease of the brain. The disease generally occurs in people over the age of 50 but in relation to Alzheimer’s a larger number of younger patients are also affected. It is estimated that approximately 1% of everyone over the age of 65 gets this disease. The extent of the disease is expected to increase

Study Platform Population

Whole Genome

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Prototype

ADtect® Assay

ABI 1700 platform >32 000 gene probes

ABI 7900 platform TaqMan® 384 format

ABI 7900 platformTaqMan® 96 format

ABI 7900 platformTaqMan® 96 format

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Figure 2. Developement of ADtect®

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in line with growth in this age group.

Early diagnosis is the key to better treatmentCurrent treatment is exclusively symptomatic, i.e. it works on the progression of the disease. It is only when 70% of the dopaminergic neurons in Substantia Nigra, a part of the brain, has been destroyed that the symptoms of the disease become apparent. Today’s medicines only help for a brief period until too many neurons have died. The objective of new medicines is to be able to start disease-modifying treatment as early as possible and thereby influ-ence the development of the disease within the patient. The early treatment of patients requires a diagnostic that discovers the disease at an early stage is needed.

Limitations on present diagnosisThe classic early apparent symptoms such as shaking, muscle stiffness and slow movements are uncharacteristic and reduce the accuracy of current diagnosis. Extensive studies from England have shown accuracy down to 53% among general practitioners rising to 64% among neurolo-gists (Clarke, 2007). Only a few experts within the field have more than a 90% accuracy. Improved methods of diagnosis are necessary both for correct diagnosis and for the development of disease modifying medical treatment.

New diagnostic possibilities and competing biomarkersDiaGenic is not aware of other biomarkers that are com-mercially available for the early detection of Parkinson’s disease. Current diagnosis is often made on the basis of a set of tests based on motor functions. Image handling techniques such as SPECT are used in some cases to sup-port a diagnosis but their use is relatively limited.

Important events for PDtect® in 2008DiaGenic initiated a project to develop a biomarker for the early detection of Parkinson’s disease in 2008. The project is funded by the Michael J. Fox Foundation and is carried out in cooperation with Brigham Women’s Hospital and Harvard Medical School development work has started on a biomarker for the early detection of Parkinson’s disease. Biomarkers are necessary for the development of effective disease-modifying medical treatment which is the main goal of the Michael J. Fox Foundation. Both DiaGenic and the group from Brigham Women’s Hospital have in pilot trials identified a number of genes whose activity poten-tially can be used to diagnose Parkinson’s disease. DiaGenic will use patient samples collected by Harvard, and its own experience and expertise to select among the potential useful genes the ones most suitable in a commercial test. Following the year end the company has received financial support from the Norwegian Research Council for a four-year project that will build on the work from the Michael J. Fox Foundation project. The objective of the project is to develop a regulatory approved diagnostic test, with the name PDtect®, for clinical use in Europe.

Brief summary of the projectsDiaGenic was active at an early stage in research and development of disease specific gene expression and the concept was patented as early as 1997. Since then DiaGenic has been one of the innovators in the use of gene expression for diagnostic purposes. Based on commercially available technology platforms DiaGenic identifies disease specific gene expressions that are suitable for diagnostic use in clinical medicine. As the summary below shows the company has several product candidates under development.

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Market In order to succeed with the launch of BCtect® and ADtect® it is important to take one step at a time and to take such steps in the right sequence. No markets are the same and therefore each launch must be adapted to the individual market. Common to all markets is the fact that a successful launch requires targeted and structured measures.

Since BCtect®and ADtect® are based on a new and unique diagnostic concept the initial phase following product launch will require a considerable degree of scientific mar-keting. This is necessary to build confidence in the method and subsequently to achieve its acceptance. At the start focus will initially be directed on contact with opinion lead-

ers and particularly the opinion leaders most likely to bring new technology into use. Once they have seen the clinical benefit and perhaps themselves have also contributed to documentation through small studies, the markets are likely to become more mature. In the introductory phase in marketing BCtect®and ADtect® DiaGenic has chosen to focus on two different segments in the market: molecular diagnostics and the market for biomarkers for the pharma-ceutical industry.

Molecular diagnostics DiaGenic will work together with partners in the individual markets on the sale and marketing of BCtect® and ADtect®. The tests must fulfill the regulatory requirements for each

Oncology Neurology Neurology

BCtect® ADtect® PDtect®

Diagnostic purpose:Detect early forms of breast cancer

Diagnostic purpose:Detect early forms of probable Alzhe-imer’s disease and possible precursors of the disease such as MCI.

Diagnostic purpose:Early forms of Parkinson’s disease

Competitive advantages:Patient friendly test• Simple to use• Detects cancer early• Detects both ductal and lobular • breast cancerConsistent high accuracy among • younger women with greater breast tissue density

Competitive advantages:Simple to use• Does not require a specialist setting• Gives an objective answer yes/no• Improved accuracy in early • detection compared with current diagnosis

Competitive advantages: PDtect® is at an early phase in its development and it is yet too early to determine what competitive advan-tages it will have.

Project data:First study for breast cancer after proof of concept commenced in 2003. Since then more than 1600 patient samples have been analysed in a number of studies.

Project data:Pilot study completed in 2005 and Whole Genome study in 2006. From the Whole Genome study in 2006 until today around 1000 blood sam-ples have been analysed.

Project data:Work to develop a diagnostic test for Parkinson’s disease was approved at the end of 2007 and commenced at the beginning of 2008.

Partners and research support:The Norwegian Radium Hospital has worked closely with DiaGenic in the development of the breast cancer test. Cooperation with Norwegian University of Life Sciences on bioinfor-matics (UMB). A number of national and international hospitals have contributed with blood samples and clinical information. The company has received support from both the Nor-wegian Research Council and Innova-tion Norway to develop a diagnostic test for breast cancer.

Partners and research support: The Norwegian University of Life Sci-ences has cooperated within bioinfor-matics. In addition a number of hos-pitals nationally and internationally have contributed blood samples and clinical information. The company has received support from both the Nor-wegian Research Council and Innova-tion Norway in the development of a diagnostic test for Alzheimer’s disease.

Partners and research support: Brigham and Women’s Hospital and Harvard Medical School have worked on the development of a biomarker for identifying Parkinson’s disease. This project has been supported by the Michael J. Fox Foundation. In 2009 the company received research fund-ing from Norwegian Research Council for the development of a blood based gene expression test for Parkinson’s and in cooperation with UMB.

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market - for Europe, for example, it will be necessary to comply with the IVD Directive. For most markets initial focus will be directed towards the private payer segment since it will take longer to get in place the necessary docu-mentation for reimbursement in each market. It will take some time for the necessary documentation for refunds to be established and for the tests to be included in routine screening on a large scale. In the introductory phase fol-lowing launch market take-up is likely to be modest. It is important to obtain sufficient confidence among opinion leaders before being marketed for more general use. To attempt to jump over any step in the process is likely to destroy future success.

Products in the marketIn November the breast cancer test BCtect® was launched in New Delhi, India. This was the company’s first product launch after 10 years of research. BCtect® is marketed and sold in India by Super Religare Laboratories which is southeast Asia’s largest pathological laboratory. India is an exciting market with strong growth and great potential. In the introductory phase work is proceeding, in similar fash-ion as with other markets, starting with opinion leaders in order to build confidence in the method. One must there-fore expect that it will take some time before the tests are included in routine screening on a large scale.

Future marketsThe company envisages a gradual market entry process that takes account, among other things, of regulatory requirements, market sizes and reimbursement schemes. DiaGenic is working to put in place the necessary sales channels in Europe for the breast cancer test BCtect® and

the Alzheimer’s test ADtect®. The most immediate markets will be selected markets in Europe and then subsequently other attractive markets outside Europe that can be based on regulatory studies from Europe. Other large and attrac-tive markets such as the USA and Japan are further in the future since they will require extensive and expensive clini-cal studies.

Biomarkers for the pharmaceutical industry DiaGenic is in a leading position with regard to the identification of biomarkers based on gene expression technology with blood as the sample material. The development of biomarkers for use in connection with

drug development is very exciting and the company sees it as natural to use the know-how, expertise and patent rights that it has built up to support pharma-ceutical companies in the drug development. The company is working in a targeted manner to establish an agreement with a pharmaceutical company that may be the first step towards developing a new business segment. A final agreement here is likely to trigger further discussions with other pharmaceutical companies. In the longer term a connection between biomarkers and drugs represents a very exciting and interesting market.

Figure 3 Market penetration strategy

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Patents overview DiaGenic has an active patent strategy and seeks to build up a patent portfolio that secures good protection of its products within the diagnostic use of gene expression in blood samples. DiaGenic’s patent portfolio consists of three patent families. A patent family is a collection of patents and patent applications of a regional and national charac-ter that include one or more inventions.

The company obtained several patents in 2008. In patent family 1 the company received a patent in Europe (19 countries) and Hong Kong that covers the method of diag-

nosing Alzheimer’s disease using blood samples and gene expression analysis. DiaGenic also received a patent in Japan for diagnosing disease using blood samples and gene expression technology where the blood sample is taken at a location remote from the area of the disease. In patent family 2 patents have been awarded in India, Australia and New Zealand. Patent family 2 covers gene sequences for the detection of disease, including Alzheimer’s disease and breast cancer, using blood samples and gene expression analysis. In 2008 the first application in patent family 3 was approved in South Africa. Patent family 3 covers important gene families for the diagnosis of cancer including breast cancer.

DiaGenic has several applications under consideration with patent authorities in the most important markets for the com-pany’s future prod-ucts. The recently approved patents show the breadth of the company’s patent portfolio. - a patent portfolio that supports DiaGenic ‘s position as a leader in the field of molecular diagnostics using blood samples and gene expression analysis

Patent overview6. April 2009

Family 1 Family 2 Family 3(WO 98/49342) (WO 2004/046382) (WO 2005/118851)

Expiry year 2017 2023 2024

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US 1 0 2 0 0 1 0 0 1Europe* 2 0 1 0 0 0 0 0 0Europe** 0 0 0 0 0 1 0 0 1Norway 1 1 0 0 0 1 0 0 1Japan 1 0 0 0 0 1 0 0 1Canada 0 0 0 0 0 1 0 0 1Hong Kong 1 1 0 0 0 1 0 0 1China 0 0 0 0 0 1 0 0 1Australia 0 0 0 1 0 0 0 0 1New Zealand 0 0 0 1 0 0 0 0 1India 0 0 0 0 1 1 0 0 1South Africa 0 0 0 1 0 0 1 0 0ARIPO* 0 0 0 0 0 1 0 0 1

G Number of patents grantedA Number of patents accepted by examinerP Number of patents in progress

Europe*Designated countriesAustria, Belgium, Switzerland, Cyprus, Germany Denmark, Spain, Finland, France, United Kingdom Greece, Ireland, Italy, Liechtenstein, Luxembourg, Monaco, Netherlands, Portugal and Sweden

Europe**Designated countriesAustria, Belgium, Switzerland, Cyprus, Germany Denmark, Spain, Finland, France, United Kingdom Greece, Ireland, Italy, Liechtenstein, Luxembourg, Monaco, Netherlands, Portugal, Romania, Sweden, Slovenia, Slovakia and Turkey

ARIPO* (African Regional Intellectual Property Organiza� on)Designated countriesBotswana, Gambia, Ghana, Kenya, Lesotho, Malawi, Mozambique, Namibia, Sierra Leone, Sudan, Swaziland, Tanzania, Uganda, Zambia and Zimbabwe

List of granted patents/allowed patent applica� ons (a� er 2007 in green)US 6720138; EP 0979308; EP 1323728; NO 317247; NO 20040371; JP 4163758; HK 1026003; HK 03109502.9; AU 2003286262; NZ 540750; IN 2701/DELNP/2005; ZA 2005/03797; ZA 2006/10644

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TECHNOLOGY, PRODUCTS AND MARKETDiaGenic is an innovative biotechnology company which has recently launched its first commercial product BCtect® (a diagnostic test for breast cancer) in India and plans to launch soon BCtect® and ADtect® (a diagnostic test for Alzheimer’s disease) in Europe. The company has completed 10 years of research and development, and is in the process of establishing a network for the sale and marketing of its first diagnostic products in Europe.

Recently the company has signed a term sheet with a leading pharmaceutical company for the development of a blood-based biomarker for use in clinical studies. This opens a market for DiaGenic for biomarker discovery for the pharmaceutical industry where a particularly high need is anticipated within Alzheimer’s disease, Parkin-

son’s disease and other neurological diseases.

In 2008 DiaGenic indicated that its resources, particu-larly given the prevailing financial conditions, should be focused on its core activities. The company is now in the favourable position that its first product has been launched. For the first time in the company’s 10-year history there is also no longer uncertainty with regard to whether the company will bring its first product to the market. As a natural consequence of this position core activities have been defined as activities that support sales. The company’s commercial business is now divided into the areas Biomarker discovery and Molecular Diag-nostics. Within both these areas DiaGenic uses blood as a sample material which distinguishes it from most other participants in the market that use tissue samples (biopsies) for gene expression analysis.

HIGHLIGHTS OF 2008

First product launched, distribution agreement and launch of BCtect® in India. The Indian multi-centre study for breast cancer was completed and a distribution agreement was signed with Super Religare Laboratories (SRL) for the breast cancer test. The product was launched in New Delhi in November 2008.

Clinical studies and product development.In 2008 most of the blood samples needed for the studies for CE marking of BCtect® and ADtect® were collected. A substantial effort was also made for software development. DiaGenic’s first meetings with the FDA (Food and Drug Administration) were held, and following these meetings ADtect® is chosen as the first candidate for FDA approval.

Agreement with DNA Vision as the main laboratory in Europe. Through this agreement DiaGenic has secured the necessary analytical capacity for BCtect® and ADtect® in Europe.

Development commenced of a biomarker for Parkinson’s disease. Financing from the Michael J. Fox Foundation and co-operation with Harvard Medical School represents important acceptance of DiaGenic’s concept.

New patents.A European patent has been granted for Alzheimer’s disease. New patents were also granted in India, Japan, New Zealand and Hong Kong.

Research financing awarded from the EU commission SPIDIA programme. DiaGenic will receive approximately NOK 6 million from the EU SPIDIA programme to develop further the pre-analytical process for the analysis of blood-based gene expression.

Highlights after year end:

Signed term sheet with a pharmaceutical company. In March 2009 DiaGenic signed a term sheet with a pharmaceutical company for development of a new biomarker.

Parkinson’s disease. An important contribution to the financing of further development of PDtect® was a grant from the Research Council of NOK 6.5 million in 2009.

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MOLECULAR DIAGNOSTICS (MDx)DiaGenic’s objective in 2008 was to prepare for CE-mark-ing of the first two diagnostic tests, BCtect® and ADtect®, and to prepare for their sale in Europe.

Preparations to establish a distribution network in Europe were commenced in 2008. Negotiations have been held with selected distributors covering, among other countries, the Nordic region, Germany, Belgium and southern Europe. Evaluation of the market potential in the private paying segment and completion of the product specifications for the CE studies will be the main elements in further progress. Both BCtect® and ADtect® are new, innovative tests that will require targeted marketing in order to achieve acceptance in the various markets.

More than 1100 samples have been analysed in the studies for the CE-marking in order to document the clinical and technical performance of the tests. On com-pletion of the statistical data analysis and preparation of the necessary documents DiaGenic will declare conform-ity with CE.

In the autumn of 2008 DiaGenic signed a service agreement with the Belgian company DNAVision SA in order to offer blood-based gene expression tests for breast cancer and Alzheimer’s disease. DNAVision is

a leading provider of gene expression based diagnos-tic tests and services. Using this laboratory service and following CE-marking DiaGenic will offer BCtect® and ADtect® to health operators and patients in Europe with a certified quality. The choice of DNAVision as the main laboratory has been well received by our partners and potential distributors. DNAVision has already completed extensive work for DiaGenic including analysis of samples that form part of the CE studies for ADtect®.

In the case of BCtect® India DiaGenic has a corresponding agreement with LabIndia Ltd which also carried out ana-lytical work in connection with the Indian multi-centre study in 2007/2008.

BCtect®At the start of 2008 DiaGenic was well under way with a large clinical study for the diagnosis of breast cancer in India. This study was completed during the year, and involved the collection of blood samples from a total of 742 women from 9 different hospitals. The study confirmed that genes selected based on studies using blood samples from females in Europe and the USA retained its diagnostic capacity in India with different ethnic populations. It also confirmed that BCtect® can detect both early and advanced forms of cancer in all age groups. Through the study in India DiaGenic has, for the first time, transferred the entire diagnostic procedure to another country. This shows that gene expression analysis

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of RNA can be standardised and quality assured with the chosen technology. It has also documented that the informative genes can be used in the Indian population, where there is substantial ethnic variation. A separate study in which samples from Europe were sent to India for analysis showed correspondingly good accuracy for women with invasive lobular cancer (ILC). This is a more unusual type of cancer that is difficult to discover with normal mammography.

In the spring of 2008 a distribution agreement was signed with Super Religare Laboratories (SRL) for the breast cancer test. SRL is India’s largest laboratory chain with almost 1000 collection points. The agreement with SRL applies for an initial period of three years with opportuni-ties for extension. The agreement contains provisions for minimum volumes in years two and three (2010 and 2011) in order for SRL to retain their exclusivity. On achieving the minimum volumes BCtect® India might become an important source of income to DiaGenic within one to two years.

BCtect® was launched in New Delhi in November 2008. During the subsequent months SRL has mainly worked on securing acceptance among opinion leaders (doctors) in the Delhi area. After the first months it is reported that only a few tests have been sold in India which DiaGenic considers to be disappointing. Feedback indicates that there is some scepticism regarding the test because it has not been brought into use in other markets than India and because it has not yet been documented through scientific articles, CE-marking, FDA approval or similar. Experience shows that the sale of such an advanced and innovative test requires both considerable training of the sales team and the availability of a competent second line support network. DiaGenic has now taken measures to contribute more effectively the company’s expertise in selling the test in India. Once the test has a sufficient anchoring among opinion leaders in the Delhi area, SRL will launch the test in the other major cities in the country.

ADtect®For Alzheimer’s disease there are no simple and objective diagnostic tools currently available. The current regime consists mainly of cognitive tests and investigation of patients over several months before a diagnosis can be made, and then with varying degrees of accuracy. In addition, feedback from the FDA confirms that there is a great need for new diagnostics in Alzheimer’s disease (and other neurodegenerative diseases). There is currently a need to distinguish Alzheimer’s disease from other forms of dementia because incorrect diagnosis leads to incorrect medication and the patient is thus exposed to possible side effects. Furthermore an incorrect Alzheim-er’s diagnosis means that the patient is not investigated for alternative diseases (such as Parkinson’s disease) and

similarly will not receive the correct treatment as early as possible.

Today’s medicines for Alzheimer’s disease have been documented to have an effect, at least on certain patient groups. In general current Alzheimer’s medicines work to slow the disease without stopping or reversing the devel-opment. Considerable hope has been attached to several new medicines that are now undergoing clinical trials as to whether these can halt or even reverse progression of the disease. In order for the medicines to be as effective as possible it is important to detect the disease as early as possible. ADtect® with its use of analysis of gene expression is particularly well suited to discovering the disease as early as possible. In clinical studies that have been carried out during development of the test it has also been shown that blood based gene expression test distinguishes out Alzheimer’s disease from other neuro-degenerative diseases such as Parkinson’s disease.

Based on available statistics in published reports it is now possible to determine market sizes and estimate annual demand for the respective segments.

By the end of 2008 DiaGenic had performed the collec-tion of approximately 450 blood samples for the multi-center study for CE-marking of ADtect®.

BIOMARKER DISCOVERYIn 2008 the product prototype that was developed for the diagnosis of Alzheimer’s disease was presented to a few pharmaceutical companies. Most of the major pharma-ceutical firms required further validation and expressed the need for new and independent studies. Such studies have been carried out during 2008 and the first half of 2009 as part of clinical studies in connection with the CE marking of the test, and the results will now be commu-nicated to the industry.

One pharmaceutical company has evaluated DiaGenic expertise and intellectual property portfolio for the development of biomarkers. There has been a good dialogue with this company throughout 2008 and after year end a term sheet was signed for the development of a new biomarker, representing an important valida-tion for DiaGenic. A final agreement awaits the pharma-ceutical company’s decision, which is dependent on the outcome of its ongoing studies, and thus associated with substantial risk.

RESEARCH AND DEVELOPMENT The company’s portfolio of intellectual property rights covers a number of diseases in addition to breast cancer and Alzheimer’s disease. The company therefore intends to maintain some capacity within research and develop-

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ment (R&D) in order to be able to secure future value added from the patent portfolio. The Board has, however, decided that such activity (R&D) will for the time being have to be financed externally - for example through partners and grants from public or private financing sources.

Parkinson’s diseaseThe company has shown that it has been possible to obtain such external financing in significant amounts, for example financing of Parkinson’s disease from Michael J. Fox Foundation and the Research Council for a total of more than NOK 10 million. The aim of the project is to develop a biomarker for Parkinson’s disease for use in pharmaceutical development. Early diagnosis is essential to start early treatment, which again is important to reduce the loss of brain cells and retain the functional-ity of the patient. The lack of diagnostic tools hinders development of new drugs, and there is a need for an objective biomarker.

In 2008 DiaGenic has performed analysis of blood samples from Harvard using gene cards from Applied Biosystems, and initiated a multi centre study with university hospitals in Norway and Sweden for collection of clinical samples.

SPIDIAAnother example of important research support is the SPIDIA project, where DiaGenic is receiving around NOK 6 million from the EU as a participant in a European research consortium that has been awarded a major research and development grant. DiaGenic participates here in extensive research work led by Qiagen GmbH consisting of 4 biotech companies, 6 universities and research institutions as well as the official European Standardisation Organisation (CEN). The title of the contract is “Standardisation and improvement of generic pre-analytical tools and procedures for in vitro diagnos-tics” under the acronym “SPIDIA”. The project is an inte-grated project that includes several medical specialisa-tions and is supported by a total of EUR 9 million (NOK 72 million) over 4 years. The aim is to improve, standardise and quality assure the molecular diagnostic techniques within blood and tissue-based testing, with a focus on processes for sample-taking, transportation and prepa-ration for analysis. DiaGenic is responsible, among other things, for the development of blood-based diagnostic methods. This project supports DiaGenic’s development of new, and improvement of existing, diagnostic tests, as well as securing a close dialogue with important partici-pants in this field.

USA and studies for FDA approvalDiaGenic’s first meetings with the FDA were held in 2008 and following these meetings ADtect® is chosen as the first candidate for FDA approval.

PATENTS In April 2008 DiaGenic received a notification from the European Patents Office that it would approve the patent application for the diagnosis of Alzheimer’s disease based on the use on blood samples and analysis of gene expression. The patent will be valid in 19 European countries. The method for probe selection is general and is no longer restricted to a specific method of selecting probes. DiaGenic has previously received approval for a European patent (EP 0979308) that only covers the use of non-sequence based methods. The new European patent for the diagnosis of Alzheimer’s disease is an important milestone that strengthens our position in this region. The company will now have equivalent patent coverage in Europe as in the USA.

DiaGenic was also granted patents in Japan in 2008. The patents include, among others, Alzheimer’s disease and various forms of cancer including breast cancer. The method of probe selection is also general here and is not limited to a specific method for selecting probes.

DiaGenic was also notified in 2008 of the acceptance of patent claims by Indian, Australian and New Zealand patent authorities. These cover the use of important gene sequences for discovering several diseases including breast cancer and Alzheimer’s disease (main application PCT/GB03/005102).

The growing patent portfolio reflects our active patents strategy and confirms DiaGenic’s role as a leader within molecular diagnostics using blood-based tests. The new patents also mean that DiaGenic is an attractive long-term partner since commercial agreements are typically established for a period that corresponds to the life of the patents.

STRATEGY The company is a leader in the development of applica-tions based on the analysis of gene expression for the diagnosis of disease, with blood as the sample material. The strategy is to use modern technology developed by internationally leading suppliers to analyse blood samples. With its first products in the market the company has a unique opportunity to capture an important position in this market for molecular diagnostics.

DiaGenic’s concept of using sample material taken remote from the site of the disease (blood samples) and analysis of gene expression is central to the company’s patent strategy. The company base its diagnostic applications on protection through a portfolio of patents and patent applications. This portfolio of intellectual property rights covers a number of diseases in addition to breast cancer and Alzheimer’s disease with the products BCtect® and ADtect®.

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DiaGenic has chosen a strategy that involves the company itself developing the tests through to the point in the value chain of approval by the authorities. In this manner DiaGenic can retain the greater part of the value and can maintain control over product development and launch in the respective markets. DiaGenic will continue to work to establish commercial agreements with one or more of the major companies for the marketing and sale of diagnostic products. These will in practice be IVD companies and laboratory chains. Agreements with such companies can provide global market coverage. The fact that DiaGenic is now able to take its product candidates through to a finished product provides the opportunity to achieve better terms in negotiations with this type of commercial partner.

The use of commercial platforms for development work and external service laboratories results in relatively low development costs and considerable flexibility. In using platforms from major suppliers such as Applied Biosys-tems (Life Sciences after the merger with Invitrogen) there is no risk of scaling products, even with the sale of a very large number of tests. The agreement to work together with Applied Biosystems (AB) which was signed in 2005 has been a success in that AB’s platform has now developed both biomarkers (Research Use Only) and the first diagnostic tests BCtect® and ADtect®.

ORGANISATION AND ENVIRONMENT, STAFF AND MANAGEMENTDiaGenic is established in modern premises at Helsfyr in Oslo. The premises include both offices and a labora-tory and are flexible with regard to adaptation to future requirements.

During the last year substantial changes have taken place in the organisation. The company has completed the research phase for its first two products and entered a phase involving product development and commerciali-sation. In this connection several people with industrial experience have been recruited to lead the company in this new phase. DiaGenic depends on skilled, experienced

and qualified managers and employees. The company’s objective is to offer equal opportunities for both women and men. The company considers diversity in the form of differences in education, experience, gender and nation-ality/ethnic background to be positive for the develop-ment of a creative environment.

11 of the company’s 22 employees are women of whom one heads the laboratory and another acts as a project manager. Three of the six board members are women.

The company’s founders still have leading positions in the company as Research Director and Technology Director respectively. The Chairman of the Board is contracted to the company through a consultancy agreement and is actively engaged mainly on finance and strategy.

In addition several consultants have been engaged and services in areas such as finance, accounting, legal, quality systems and patenting are purchased from external advisers.

The working environment in the company is considered to be good. No accidents or injuries were recorded in 2008. Sick leave in 2008 was 1.8% of working days against 1.6% of working days in the corresponding period in 2007.

The company has established cooperation arrangements with several internationally renowned scientific advisers.

The company does not pollute the external environ-ment.

The company makes some use of share options to incen-tivise and tie employees to the company on a long-term basis. All such incentive schemes are based on subscrip-tion prices at the time of award not being lower than the market price.

CORPORATE GOVERNANCE The core element in the company’s corporate governance is equal treatment of all shareholders. The company only has one share class and all shareholders have equal rights. The company’s shares are listed and freely tradeable. As

Executive ChairmanHåkon Sæterøy (1958), holds an MBA from the Norwegian School of Business, Bergen, 1981. Sæterøy is Chairman of DiaGenic and has been responsible for equity financing since 2000. He has over 20 years’ experience from investment busines-ses and corporate finance, most recently specialising within life science. From the listing of DiaGenic in 2004 until October 2007 Sæterøy was also responsi-ble for Investor Relations. Håkon Sæterøy is a board member in Oslo Cancer Cluster Foundation and Chairman of the board of Epitarget AS and Kezzler AS.

Deputy ChairmanGustav Ingemar Kihlström (1952), has a doctorate in physiology from Uppsala University and has more than 15 years’ experience with Astra and Pharmacia in Sweden and other countries. From 1996 to 2004 he worked as a financial analyst, latterly as head of the health sector team at ABG Securities in Stockholm. Today he is an indepen-dent consultant within the field of science and financing of life science companies. He is Chairman of Artimplant AB, Karocell AB, Med Cap AB and a board member of several listed and unlisted companies.

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a listed company DiaGenic fulfils the requirements on equal treatment, transparency and reporting of both financial and other information.

In 2008 the General Meeting decided that the company shall have a Nomination Committee. The following members were elected to the nomination committee:

Siri Fürst (Leader)Ulrica Slåne (representative of AP3, Third Swedish National Pension Fund, Diagenic’s largest shareholder)Stein H. AnnexstadPraveen Sharma

For further details see the section on Corporate Govern-ance in this annual report.

SHARE CAPITAL AND SHAREHOLDERS At the end of 2008 the company had 1 585 sharehold-ers.

In May 2008 the company made a placing pursuant to which 8 million new shares were issued at a price of NOK 5.60. The issue generated net proceeds (after deducting issue costs) of NOK 41.5 million.

The company has a market-making agreement with a broking firm and is thereby secured a listing on the Oslo Stock Exchange’s second most liquid list, “OB Match”.

The company gives priority to further work on investor relations and is working to increase familiarity with the share in both Norway and abroad. The shareholder list contains a large number of Nordic institutional investors. International specialist health care investors have increased their holdings in the company during the financial crisis.

With its current cost levels the company is financed for a period of less than one year. It is expected that the contri-bution from sales revenues will not be sufficient to cover the financing requirement for the next 12 months. Work is therefore proceeding on several different financing

alternatives including debt finance, equity finance and research finance. The Board is of the opinion that efforts to secure further funding can be accomplished.

The Board confirms on this basis that the going concern assumption has been met and the annual accounts have been prepared on such assumption.

FINANCEProfit and LossIncome and research grants DiaGenic has had no operating revenues in 2008 (NOK 56 thousand in 2007). Research grants are entered net in the accounts (as a reduction in operating expenses). In 2008 research grants amounted to NOK 6 225 thousand (2007: NOK 7 231 thousand). In 2008 research support consisted of NOK 3.8 million from the Research Council’s FUGE fund, NOK 1 million in Skattefunn financing, NOK 0.1 million from SPIDIA (EU) and NOK 1.3 million from the Michael J. Fox Foundation.

Operating expenses Total operating expenses after deducting public grants amounted to NOK 36 384 thousand (NOK 29 073 thousand) in 2008. The main reason for the increase in operating costs is a high level of activity in product devel-opment pursuant to which more studies are being under-taken. More than 30 studies are being carried out as part of the process to claim regulatory conformity in Europe (CE mark). The number of employees has increased from 16 at the end of 2007 to 21 at the end of 2008 and this is the reason for the increase in salaries and personnel costs.

Net financial income has increased from NOK 892 thousand in 2007 to NOK 1 802 thousand in 2008.

The annual result for 2008 was a loss of NOK 34.6 million against a loss of NOK 28.1 million in 2007. It is proposed that the loss for the year of NOK 34.6 million is covered by a transfer from paid-in other equity and from the share premium reserve.

Board memberAnna Malm Bernsten (1961), holds an MSc in chemical engineering from KTH in Stockholm. Until 2006 she was President & CEO of Carmeda AB, and works today as Chief Marketing Officer in GE Healthcare Life Sciences. With previous responsi-bilities in Assa Abloy AB and for Medivir AB, she has broad management experience from Swedish listed companies. She has also held positions in international marketing in the Pharmacia group for some 10 years. She today holds board positions in Fagerhult and Artimplant AB.

Board memberIngrid Alfheim (1946), holds a civil engineering degree from NTH, 1969, and a doctorate in environmental toxicology from Oslo University, 1984. Alfheim is currently Managing Director in Biomedisinsk Inno-vasjon AS and previously was Research Director in Axis-Shield ASA. Before that she managed her own firm within international technology broking and was also employed in both the Norwegian Research Council and the Norwegian Centre for Industrial Research. Alfheim has been a board member in several biotechnology companies.

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Balance sheet Total assets amounted to NOK 38.9 million (NOK 30.1 million) on 31 December 2008 of which current assets amounted to NOK 35.3 million (NOK 26.5 million). Liquid assets comprise the greater part of current assets and at the end of December 2008 totalled NOK 27 958 thousand (NOK 19 666 thousand). Stocks of consumables in India totalled NOK 1 445 thousand (NOK 0) as at 31 December 2008. Leasing of equipment to the company’s laboratory in the fourth quarter of 2006 resulted in long-term debt being recorded in DiaGenic’s balance sheet. The amount was NOK 1.1 million as at 31 December 2008.Equity totalled NOK 28 412 thousand at 31 December 2008 (NOK 21 053 thousand). Short-term liabilities at the end of December totalled NOK 7 473 thousand (NOK 6 068 thousand), an increase which is mainly due to changes in debt to suppliers. Long-term liabilities and the provision for commitments amounted at the end of the fourth quarter of 2008 to NOK 3 015 thousand (NOK 3 023 thousand) and relate to the leasing of equipment for the company’s laboratory and pension liabilities.

The company has no free equity as at 31.12.2008.

DiaGenic has not recognised deferred tax asset since there is uncertainty as to the extent to which the company will be able to utilise the deferred tax asset. The company has not capitalised research and development costs in 2008.

Cash flow The company’s liquid assets are placed with 3 different banks with a high rating. Total liquid assets amounted to NOK 27 958 thousand (NOK 19 666 thousand) at the end of December 2008.

The net change in liquid assets amounted to NOK 8 292 thousand (NOK -5 902 thousand) for the year 2008. Cash flow from operations in 2008 amounted to NOK -31 959 thousand (NOK -29 230 thousand). The increase is mainly due to a greater loss before tax. Net cash flow from financing was NOK 41 145 thousand (NOK 24 003 thousand) in 2008. This change is mainly due to an increase in net proceeds (after deducting issue costs) as

the issue in 2008 raised NOK 41.5 million in net proceeds, while the issue in 2007 raised NOK 24.3 million in net proceeds.Financing and equityIn May 2008 the company issued 8 million shares at a subscription price of NOK 5.60 per share which raised the total number of shares to 51 736 520. The issue proceeds amounted to NOK 44.8 million and involved an increase in share capital of NOK 400 thousand to NOK 2 587 thousand.

RISKProduct development risk There is risk relating to the development of diagnostic tests. The risk relates to the entire development phase even after approval from the authorities has been obtained and may be occasioned by problems relating to clinical efficiency as well as patient security considera-tions.

Market riskThere are risks associated with the marketing and sale of new products. This relates to regulatory matters as well as uncertainty regarding market conditions.

Financial risk The company carries out transactions in foreign cur-rencies and costs may therefore vary with changes in exchange rates. Until now the company has been exposed to foreign currencies only to a limited extent, but it evaluates an ongoing basis the need to hedge foreign currency transactions.

Credit riskThe company’s liquid assets are placed in banks that are considered to represent a low risk. The company has not provided credit to customers or other connections so the company’s credit risk is considered to be low.

Liquidity risk The company is in a development phase where costs exceed revenues. The company is therefore dependent

Board memberMarie Skarbøvik Buchman (1952), holds a doctorate in medicine from Oslo University, where she has been employed as a research fellow. She has spe-cialised in medical biochemistry and pharmacology, with her main education from the Norwegian National Hospital. She is today Medical Director at Fürst Medical Laboratory. She has previously been head of medicine in Axis Biochemicals ASA (now Axis-Shield) and senior Medical Advisor in Nycomed Imaging AS.

Board member and Technology DirectorPraveen Sharma (1964) is a Director and founder of DiaGenic. He studied first at university in India and holds a BSc from Oslo University, 1990, as well as a doctorate in molecular biology from NLH, 1995. Sharma has held several research positions, most recently at the Norwegian Institute for Forest Research. He has been employed in DiaGenic since 2000 and has been a board member since 1998.

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on sufficient capital for future operations until revenues from operations can cover operating costs. In turbulent financial markets there is a higher liquidity risk.

Risk and risk managementDiaGenic’s operations involve exposure to many forms of risk. The company works actively to reduce this type of risk through identification, analysis and measures.

FUTURE PROSPECTS

Once the CE mark has been achieved DiaGenic will launch BCtect® and the ADtect® in Europe, where the • company is building a network of distributors. Experience from opinion leaders’ initial reception of BCtect® in India has been very useful for planning the launch of the test in European countries. DiaGenic will now allocate resources so that the company’s expertise can support distributors actively in selling in Europe from the first day.

In Parkinson’s disease a diagnostic test PDtect® is under development. The test is to be further developed into • a biomarker for use in pharmaceuticals development.

In biomarkers the company states a targeted commitment towards the pharmaceutical industry particularly • within neurodegenerative diseases: MCI (mild cognitive impairment, the early stages of dementia) and Alzhe-imer’s and Parkinson’s disease.

DiaGenic has chosen the very robust, but also relatively expensive gene card Taqman® as the basis for our first • generation of diagnostic tests. The next generation of tests will use technology that is significantly cheaper in operation and is automated for high volume loads. There are a number of suppliers developing new technol-ogy in this area and DiaGenic will start evaluation of the available technology as soon as capacity is released in the organisation following the CE-marking of BCtect® and ADtect®.

DiaGenic seeks partners and external financing as conditions prior to commencing clinical studies in the USA. • Such studies would form the basis for a subsequent application to the FDA for approval of ADtect®

Håkon SæterøyChairman

Gustav Ingemar KihlsrömDeputy Chairman

Ingrid AlfheimBoard member

Anna Malm Bernsten Board member

Marie Skarbøvik BuchmannBoard member

Pravee SharmaBoard member

Erik ChristensenManaging Director

Oslo, 30 April 2009

22

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FINANCIAL STATEMENTS

DiaGenic ASAOrg. nr. 979 938 799

2008

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Profit and Loss Account (NOK)

OPERATING INCOME AND OPERATING EXPENSES NOTE 2008 2007 2006

Operating income 0 55,998 60,000Total operating income 0 55,998 60,000

Salaries and personnel expenses 3, 7, 8 16,964,506 13,859,831 9,725,626Depreciation and amortisation 4,5,6 859,822 766,699 508,047Write down of fixed assets 5 0 0 455,784Other operating expenses 3,10,20 18,559,215 14,446,543 12,683,932Total operating expenses 36,383,543 29,073,074 23,373,389Operating loss -36,383,543 -29,017,076 -23,313,389

FINANCIAL INCOME AND FINANCIAL EXPENSES

Interest income 1,922,875 1,049,540 657,223Other financial income 53,115 37,136 12,056Interest expense 86,779 157,756 25,119Other financial expenses 87,522 36,883 31,903Net financial items 1,801,690 892,038 612,257Loss before tax -34,581,853 -28,125,038 -22,701,132Tax for the year 9 0 0 0Net loss -34,581,853 -28,125,038 -22,701,132

Net loss -34,581,853 -28,125,038 -22,701,132

TRANSFER AND ALLOCATIONSTransferred from share premium reserve -34,149,604 -27,470,802 -22,417,324Transferred from other reserves -432,249 -654,236 -283,808Total transfer and allocations -34,581,853 -28,125,038 -22,701,132

Earnings per share 14 -0.71 -0.66 -0.59Diluted earnings per share 14 -0.71 -0.66 -0.59

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Balance Sheet as of 31 December (NOK)

ASSETS NOTE 2008 2007

Fixed assetsIntangible assets Goodwill 4 572,437 572,437

Total intangible assets 572,437 572,437

Tangible assetsMachinery, equipment, fixtures and fittings etc. 5.6 3,057,750 3,023,107

Total tangible assets 3,057,750 3,023,107

Total fixed assets 3,630,187 3,595,544

Current assetsInventories 21 1,445,437 0

ReceivablesAccounts receivable 0 0Other receivables 20 5,866,427 6,882,780

Total receivables 5,866,427 6,882,780

Cash and cash equivalents 15 27,957,864 19,665,705Total current assets 35,269,727 26,548,485

TOTAL ASSETS 38,899,914 30,144,029

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Balance Sheet as of 31 December (NOK)

EQUITY AND LIABILITIES NOTE 2008 2007

EquityPaid in capitalShare capital 2,586,826 2,186,826Share premium reserve 25,825,158 18,866,541

Total paid in capital 28,411,984 21,053,367

Total equity 28,411,984 21,053,367

LiabilitiesProvisionsPension liabilities 8 1,961,528 1,606,228

Total provisions 1,961,528 1,606,228

Long term debtOther long term debt 20 1,053,789 1,416,695

Total long term debt 1,053,789 1,416,695

Current liabilitiesAccounts payable 3,472,327 1,736,640Public duties payable 1,229,739 1,030,596Other current liabilities 20 2,770,547 3,300,503

Total current liabilities 7,472,613 6,067,739

Total liabilities 10,487,930 9,090,662

TOTAL EQUITY AND LIABILITIES 38,899,914 30,144,029

Håkon SæterøyChairman

Gustav Ingemar KihlsrömDeputy Chairman

Ingrid AlfheimBoard member

Anna Malm Bernsten Board member

Marie Skarbøvik BuchmannBoard member

Pravee SharmaBoard member

Erik ChristensenManaging Director

Oslo, 30 April 2009

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Cash Flow Statement (NOK)

CASH FLOWS FROM OPERATING ACTIVITIES 2008 2007

Loss before tax -34,581,853 -28,125,038Taxes paid 0 0Depreciation and amortisation 859,822 766,699Write-downs of tangible fixed assets 0 0Loss from sale of tangible fixed assets 0 0Fair value granted option rights 432,249 654,236Difference between pension expenses and payments to the pension plan 355,300 234,931Change in inventories -1,445,437 0Change in trade payable 1,735,688 -2,499,143Changes in other current assets and other liabilities 685,539 -261,891

Net cash flow from operating activities -31,958,691 -29,230,205

CASH FLOWS FROM INVESTMENT ACTIVITIES

Proceeds from sale of tangible fixed assets 0 0Investment in tangible fixed assets -894,466 -674,829

Net cash flow from investment activities -894,466 -674,829

CASH FLOWS FROM FINANCING ACTIVITIES

Net cash flow from share issue 41,508,221 24,256,700Payment of long term debt -362,907 -253,576

Net cash flow from financing activities 41,145,314 24,003,124

Net change in cash and cash equivalents 8,292,158 -5,901,909Cash balance as of January 1st 19,665,705 25,567,614

Cash balance as of 31 December 27,957,864 19,665,705

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Changes in Equity (NOK)

Number ofshares

Sharecapital

Share prem.reserve

Otherreserve

Otherequity

Totalequity

Share issue - May 2007 3,970,000 198,500 24,058,200 0 0 24,256,700Fair value granted options 0 0 0 654,236 0 654,236Net loss 2007 0 0 0 0 -28,125,038 -28,125,038Allocation of net loss 2007 0 0 -27,470,802 -654,236 28,125,038 -0

Equity as of 31 December 2007 43,736,520 2,186,826 18,866,541 0 0 21,053,367

Share issue - May 2008 8,000,000 400,000 41,108,221 0 0 41,508,221Fair value granted options 0 0 0 432,249 0 432,249Net loss 2008 0 0 0 0 -34,581,853 -34,581,853Allocation of net loss 2008 0 0 -34,149,604 -432,249 34,581,853 0

Equity as of 31 December 2008 51,736,520 2,586,826 25,825,158 0 0 28,411,984

Costs related to share issue in May 2007 are booked as a reduction of share premium reserve at the amount of NOK 1,548,300.Costs related to share issue in May 2008 are booked as a reduction of share premium reserve at the amount of NOK 3,291,779.

28

Note

NOTE 1 Company information

DiaGenic ASA (org. no 979 938 799) is a Norwegian public limited company listed on the Oslo Stock Exchange. It was formed in 1998. The company's head office is in Grenseveien 92, NO-0663 Oslo, Norway.

DiaGenic ASA develops diagnostic tests for the early detection of breast cancer, Alzheimer's disease and Parkinson's disease based on gene expression signatures in blood samples.

NOTE 2 Accounting principles and estimates

Basis for the preparation of the annual accountsThe company's annual accounts have been prepared in accordance with International Financial Reporting Standards (IFRS) which are approved by EU.

The accounts have been prepared on a historical cost basis.

The annual accounts are presented in NOK unless otherwise specified.

The annual accounts were approved by the Board of Directors on 30 April 2009.

The use of estimatesThe preparation of financial statements in accordance with IFRS requires management to make assessments and to pre-pare estimates and assumptions that influence amounts recognised in the accounts for assets and obligations, revenues and expenses. Estimates and related assumptions are based on the best of the management's knowledge of historical and relevant events, experience and other factors that seem reasonable in the circumstances. The actual results may deviate from such assumptions. Estimates and underlying assumptions are subject to continuous assessment. Critical accounting estimates for DiaGenic are as follows:

Pensions:The present value of the pension obligation depends on the actuarial company-specific and financial assumptions. All changes in the assumptions will influence the calculated pension obligation and the future costs. Calculations of pension liabilities is done according to IFRS (IAS 19 Employee Benefits), and the Norwegian Actuary Association standard for actuary technical calculations. The assumptions are according to the Guidance of pension assumptions (Nov. 2008) from the Norwe-gian Accounting Institution.

Share-based remuneration:The fair value of employee options is calculated on their grant date. The fair value is calculated using Black & Scholes. All variables included in this model are stipulated on the issue date for the options. Significant factors include the time that elapses from the grant date to the first possible exercise date, the share's volatility, the risk-free interest rate, the share price on the issue date, the exercise price and the lifetime of the option. Costs relating to share-based remuneration are expensed over the vesting period. In connection with the accrual of costs, estimates will be made with respect to the future retire-ment rate. These estimates will be updated on each balance sheet date. Changes in estimates will influence costs relating to share-based remuneration in the period in question.

Accounting treatment of the deferred tax asset:DiaGenic provides for expected tax obligations on the basis of estimates. When the final outcome deviates from the esti-mates that are basis for the origianl provisjon, the deviations will affect the tax expense and the provision for deferred tax in the period in which the decision is made. The deferred tax asset of loss carry forwards is included when it is probable that the loss carry forward can be utilised. Historical earnings and expected future earnings will be used as the basis for assessing probability in this context.

Goodwill:In accordance with IFRS the company tests annually whether it is necessary to write down capitalised goodwill. The value of the cash generating unit will be stipulated as the recoverable amount, which is the higher of net sales value and utility value. The estimated recoverable amount is calculated on the basis of the present value of budgeted cash flows. The calculation requires the use of estimates relating to future cash flows. Uncertainty will normally attach to budgeted cash flows. Events, changes in assumptions and management assessments will all affect the evaluation of write-downs in the relevant period.

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Sales revenuesRevenue is recognized when it is likely that transactions will generate future economic benefits that will accrue to the company, and when the amount and size can be estimated reliably. Sale of products are recognized at delivery time, ie when both the control and risk is mainly transferred to buyer. Revenue from services rendered is recognized in the the income statement in the period the service is performed. License revenues are recognized in line with the licensee sales of licensed products.

Research and developmentResearch-related costs are entered as they are incurred. Research activities are defined as activities whose purpose is to generate new technological understanding or knowledge.

Costs relating to clearly defined development projects that are considered technically feasible and for which sufficient resources are available are capitalised when it is substantiated that there is a connection between the incurred costs and future earnings. Sufficient substantiation is deemed to exist when necessary regulatory approvals for sales and marketing are in place, and when future economic benefits are supported through estimates. Research and development costs consist of costs relating to the company's own research and laboratory department, costs relating to the purchase of external labo-ratory- and research services and clinical studies.

Capitalised development costs are recognised at cost price after the deduction of accumulated depreciation and write-downs. The capitalised value is amortised over the period of expected future earnings from the related project.

Gains and losses that arise on the sale of an intangible asset are measured as the difference between the net proceeds of the sale and the book value on the transaction date.

GoodwillAcquisitions of businesses are recognised at fair value. Goodwill is the excess value of the difference between the acquisition cost on acquisition and the fair value of the net identifiable assets relating to the acquisition, including intangible assets and obligations that arise as a result of the transaction. Goodwill is recognised in the balance sheet at acquisition cost less any accumulated losses resulting from a fall in value. Goodwill is allocated to cash generating unit and is not depreciated, but tested annually for impairment.

Government grantsGovernment grants are recognized in the income statement when there is reasonable assurance that the grant will be received and that the terms that are related to the grant are met. Contributions are classified as a cost reduction and is rec-ognized at the same time with the cost to reduce.

PensionsThe company offers its employees pensions that are defined as a defined benefit pension scheme.The pension scheme is calculated annually by an actuary. The pension obligations and pension expenses are calculated using a straight-line earnings model which calculates the cost for the year of the employees' pension entitlements earned during the period.

The pension obligation is calculated as the present value of the defined benefit obligation on the balance sheet date minus the fair value of the scheme's assets, adjusted for any gains or losses and costs relating to previous periods' pension earn-ings. The defined benefit obligation is calculated by an independent actuary and is measured as the present value of the estimated pension payments. Providing the pension benefits is charged to income so that the regular costs are spread over the employees' expected period of service.

The discount rate, expected return on pension assets, wage adjustments, regulation of the National Insurance basic amount and personnel turnover are stipulated on the balance sheet date.

The company has changed accounting principle regarding accounting for actuarial gains and losses from 1 January 2006. This change in accounting principle imply that accumulated impact of actuarial gains and losses and changes in presumptions below 10% of the largest of pension liabilities and pension assets will not be accounted for in the Profit and Loss Account. When the accumulated impact exceeds 10% it will be accounted for in the Profit and Loss Account over the employees' expected average remaining period of service.

Net pension expense is classified as Salaries and personnel expenses.

30

Note

TaxThe tax expense in the income statement comprises the tax payable for the period and the change in deferred tax. Deferred tax is calculated at a rate of 28% on the basis of temporary differences that exist between accounting and tax values, as well as any tax loss carry forward at the end of the financial year.

The deferred tax asset is recognised if it is probable that the company will have a sufficient tax profit to be able to utilise the tax asset. On each balance sheet date, the company will review any deferred tax asset not recognised in the income state-ment. The company recognises deferred tax assets not previously recognised in the accounts insofar as it has become prob-able that the company can utilise the deferred tax asset. Similarly, the company will reduce the deferred tax asset insofar as it can no longer utilise it.

Deferred tax and the deferred tax asset are calculated on the basis of expected future tax rates if temporary differences have arisen.

Deferred tax and the deferred tax asset are recognised at their nominal value and are classified as financial fixed assets or long-term liabilities in the balance sheet.

Unused loss carry forwards from before a business was acquired are recognised as deferred tax assets when it is expected that the loss can be utilised. Subsequent recognition in the balance sheet will entail a reduction in identified goodwill.

Tangible assetsTangible assets are recognised at cost price after deduction for accumulated depreciation and any write-downs. The assets are depreciated using the straight-line method over the expected useful life of the asset. Costs of direct maintenance on the operating assets are expensed as they are incurred under Operating expenses, while additional spending or improvements are added to the asset's cost price and depreciated in step with depreciation of the asset.

The depreciation period and method are assessed annually to ensure that the method and period used are in accordance with the economic realities of the asset. The same applies correspondingly to the residual value.

ReceivablesReceivables are recognised at amortised cost. The interest element is ignored if it is insignificant.

Borrowing costsBorrowing cost are interest and other costs incurred by an entity in connection with the borrowing of funds and the borrow-ing costs are recognised as an expense in the period in which they are incurred.

Cash and cash equivalentsCash and cash equivalents are classified as current assets.

Impairment of assetsFinancial assets valued at amortised cost are written down if it is probable that the company will not recover on all amounts, depending on contractual conditions for loans and receivables. The amount of impairment loss will be recognised in the income statement. The reversal of previous impairment loss is recognised when a reduced need for a write-down can be related to an event after the impairment loss has been recognised. An increase in the carrying amount is only recognised insofar as it does not exceed what the amortised cost would have been if the write-down had not been made.

An assessment of impairment loss on other assets is made when there is an indication of fall in value. Independent on whether there are indications of a fall in value, goodwill shall be tested annually against the recoverable amount. If an asset's carrying amount is greater than the recoverable amount, an impairment loss will be recognised in the income state-ment. The recoverable amount is the greater of the net sales price and the discounted cash flow from continued use. The net sales price is the amount that can be obtained on sale to an independent third party minus sales costs. The recoverable amount is stipulated separately for all assets, but if this is not possible, together with the unit to which the asset belongs.

With the exception of goodwill, impairment loss recognised in the income statement in previous periods will be reversed when information exists to indicate that the write-down is no longer necessary or that the need is no longer as great. Write-downs as a result of falls in value are only reversed insofar as the carrying amount of the asset does not exceed the carrying amount that would have been stipulated net after depreciation or amortisation if no loss as a result of a fall in value had been recognised previously.

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Presentation CurrencyThe accounts are presented in Norwegian kroner, which is also the functional currency for the company. Transactions in for-eign currencies are converted into functional currency (NOK) for the exchange rate at the time of the transaction. Monetary items in foreign currencies are converted after the official exchange rate on the balance sheet date. Losses and gains arising from different exchange rate at the transaction date and settlement date, and amount of unsettled monetary items in for-eign currency is recognised in the income statement.

Earnings per shareEarnings per share are calculated by dividing the profit/loss for the year by the corresponding weighted average of the number of outstanding shares during the reporting period.

The key figure 'diluted earnings per share' is based on the same calculation as for earnings per share, but it also takes into account all potential shares that have been outstanding during the period, and which will have a diluting effect. Potential shares relate to agreements that confer the right to issue shares in future. When the company reports a negative result, the effect of potential shares is disregarded so that the calculation is the same as for earnings per share.

Objectives, policies and processes for managing capitalDiaGenic’s objective is to manage the capital structure to safeguard the company’s ability to continue as a going concern, so that it can provide returns for shareholders and benefits for other shareholders.

DiaGenic sets the size of capital in proportion to the size of risk. The company manages the capital structure and makes adjustments to it in the light of changes in economic conditions, perceived risk associated with product development and risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, DiaGenic may adjust the amount of new share issue, dividends paid to shareholders, return capital to shareholders, sell assets to reduce debt or increase the debt by taking up loans.

DiaGenic monitors capital on the basis of total equity to adjusted liability ratio. Total equity is total equity as shown in the balance sheet. Adjusted liability ratio is total liabilities less pension liabilities.

Provision, conditional obligations and assetsBy conditional obligations is meant:

possible obligations as a result of previous events where the existence of the obligation depends on future events.I. obligations not recognised in the accounts because it is not probable that they will lead to an outflow of resources.II. obligations that cannot be measured with sufficient reliability. III.

Contingent liabilities are not recognised in the annual accounts with the exception of contingent liabilities taken over in a business acquisition. Information is provided about material contingent liabilities with the exception of contingent liabilities for which the probability is low.

A conditional asset is not recognised in the annual accounts, but information is provided about it if there is a certain pos-sibility that an advantage will accrue to the company.

A provision is recognised in the accounts when, and only when, the company has a valid obligation (legal or assumed) as a result of events that have occurred and it can be substantiated (more probable than not) that a financial settlement will take place as a result of the obligation and that the size of the amount can be reliably measured. Provisions are reviewed on every balance sheet date and their level reflects the best estimate of the obligation. When the time effect is immaterial, the provision will be equal to the size of the payment required to fulfil the commitment. When the time effect is material, the provision will be equal to the present value of future disbursements required to fulfil the commitment. Any increase in the provision as a result of the time factor will be presented as an interest expense.

Events after the balance sheet dateNew information about the company's positions on the balance sheet date is taken into account in the annual accounts. Information is provided about events after the balance sheet date that do not affect the company's position on the balance sheet date, but which will affect the company's future position if this is material information.

Segment reportingThe company has not defined segments since the company is in a phase of its development. As the company enters a phase with clearly defined development projects, expedient segment reporting will be defined.

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Note

Share-based remunerationOption rights granted to employees are calculated at fair value on the grant date. The fair value of option rights is recognised in the income statement over the period from their issue until the first possible exercise date. Provisions for social security tax related to the intrinsic value of the options are calculated on the basis of the listed share price on the balance sheet date. Employer's National Insurance contributions are accrued over the period from issue until the first possible exercise date. Estimated provision for social security tax is updated at each reporting date.

Fair value is calculated using Black & Scholes option pricing model. The valuation is based on assumptions about the volatil-ity of the DiaGenic share, expectations of future exercising of the option and risk-free interest. Volatility is estimated by observing historical fluctuations in the share price.

When assessing the future useful life of the options, it has been assumed that the board members will exercise their options late.

LeasingLeasing contracts are classified as financial or operational following a separate review of each individual contract. Opera-tional leasing contracts are expensed using the straight-line method over the contract period. Operating assets financed by financial leasing are capitalised and depreciated using the straight-line method over their expected useful life. The leasing debt is deemed to be a long-term liability and the liability is reduced through repayment of the leasing contract.

DiaGenic may use operational leasing when there are financial or operational benefits.

Recently published accounting standards and statementsIFRS is constantly developing and recently published accounting standards and statements have been reviewed and assessed. They are not expected to have a significant effect on the company's annual accounts in the implementation period.

The following accounting standards and interpretations have been published, but not effective and implemented in the annual report for 2008:

Amendment to IFRS 2 Shared-based Payment -IFRS 3 (revised) - Business Combinations -IAS 1 (revised) - Presentation of Financial Statements -IFRS 8 - Operating Segments -

Cash flow statementThe company uses the indirect method for the presentation of the cash flow statement.

InventoryInventory valued at the lower of cost and net selling price. Inventory valued on the FIFO principle.

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NOTE 3 Salaries and personnel expenses, number of employees, remuneration - figures in NOK

Salaries and personnel expenses: 2008 2007

Salaries 12,187,329 10,229,428Grants, cf. note 10 -278,935 -400,000Accrued social security tax 1,960,569 1,627,972Pension expense 1,855,532 1,504,226Fair value of granted options 432,249 654,236Other payroll expenses 807,761 243,969

Total 16,964,506 13,859,831

Average number of employees 19 16

Remuneration of leading personnel 2007 Salary

Pension expense 1)

Remunera-tion of the

BoardOther re-

muneration

Numbers of Share option/

Subscription rights

Value Share options/

Subscription rights

Management team:Eric Christensen, CEO 1,348,748 143,369 6,749 500,000 148,513Erik Anders Lönneborg, Research Director 856,756 166,143 4,749 0 0Dag Christian Christiansen, Market-ing Director 803,723 141,859 16,694 200,000 31,836Praveen Sharma, Director, Tech. & Prod. Dev. 855,256 134,449 9,216 0 0Håkon Sæterøy, IR-Director 1,172,682 130,448 6,420 0 0

The Board:Gustav Ingemar Kihlström 2) 60,000 245,298 150,000 32,868Ingrid Alfheim 60,000 0 150,000 32,868Anna Malm Bernsten 3) 60,000 75,474 100,000 21,912Praveen Sharma, Director, Tech. & Prod. Dev. 0 0 0 0Marie Skarbøvik Buchmann 60,000 0 100,000 21,912Håkon Sæterøy, Chairman 4) 80,000 525,000 350,000 76,693

1)The pension expense consists of the premium paid for the year with the addition of 14.1% accrued social security tax2)Other payments to Ingemar Kihlström AB, repr. by Gustav Ingemar Kihlström are payments for consultancy services. 3)Other payments to Bernsten AB, repr. by Anna Malm Bernsten, are payments for consultancy services.4)Other payments to Investor Corporate/Partners AS, repr. by Håkon Sæterøy, are payments for consultancy services.

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Remuneration of leading personnel 2008 SalaryPension

expense 1)

Re-muner-ation of

the Board

Other re-munera-

tion

Numbers of Share option/

Subscrip-tion rights

Value Share

options/ Subscrip-

tion rights

Management team:Eric Christensen, CEO 1,450,670 139,612 19,191 500,000 148,513Eric Christensen, compensation 399,456Erik Anders Lönneborg, Research Director 903,065 193,138 11,939 0 0Dag Christian Christiansen, Marketing Director 897,086 158,001 20,048 200,000 74,689Praveen Sharma, Director, Tech. & Prod. Dev. 901,565 149,773 16,936 0 0Håkon Sæterøy, IR-Director 121,065 0 6,000 0 0

The Board:Gustav Ingemar Kihlström 2) 50,000 480,009 150,000 32,868Ingrid Alfheim 50,000 0 150,000 32,868Anna Malm Bernsten 4) 40,000 52,344 100,000 21,912Praveen Sharma, Director, Tech. & Prod. Dev. 0 0 0 0Marie Skarbøvik Buchmann 45,000 0 100,000 21,912Håkon Sæterøy, Chairman 5) 70,000 2,010,000 350,000 76,693

1)The pension expense consists of the premium paid for the year with the addition of 14.1% accrued socialsecurity tax2)Other payments to Ingemar Kihlström AB, repr. by Gustav Ingemar Kihlström are payments for consultancy services. 3)Other payments to Bernsten AB, repr. by Anna Malm Bernsten, are payments for consultancy services.4)Other payments to Investor Corporate/Partners AS, repr. by Håkon Sæterøy, are payments for consultancy services.5)Compensation to fulfil the accrued pension liabilities in accordance with the employment agreement.

Guidelines for remuneration of the Managing Director and the company's managment teamLeading employees is in this regard defined as the DiaGenic Managment Team. From 1 January 2007 Erik Christensen took over the position as Managing Director after Anders Lönneborg. Håkon Sæterøy is no longer an employee, but is hired in as a consultant.

The aim with the remuneration system for leading employees is to stimulate to a goal focused culture, and thereby fair share values. Total remuneration for leading employees consists of a market based fixed salary, a few standard fringe benefits and subscription rights to all leaders with the exception of Håkon Sæterøy and the two founders Praveen Sharma and Anders Lönneborg. Except for the subscription rights there is no other variable remuneration based on personal or common achievements.

In Extraordinary General Meeting 16 November 2006 an incentive scheme for all employees was approved. This incentive scheme includes all employees, except Praveen Sharma, Anders Lönneborg and Håkon Sæterøy. The scheme is a subscrip-tion rights scheme, whereof 500,000 subscription rights have been allocated to the Managing Director.

The Managing Director and the other leading employees are members of the collective pension and insurance that applies to all employees. Term of resignation notice is 3 months for all employees, including the CEO. If dismissed by the Board of Directors the CEO is entitled to 12 months salary post term or notice. No other employees are entitled to salary post term of resignation.

Subscription rights programIn the company's general meeting on June 12. 2008, it was decided to replace the warrant scheme with a new warrant scheme, where the management team and other employees participate. There are warrants issued under this program pr. 31.12.2008. See note 11

Loans and security furnished to leading personnel, shareholders etc.No loans have been granted nor security furnished to leading personnel or shareholders.

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Auditor

Fees to the auditor - Ernst & Young AS 2008 2007

Statutory auditing services 109,447 113,500Attestation services 20,300 0Tax advice 233,644 0Non-auditing services 42,000 8,500

Sum 405,391 122,000

Amounts are exclusive VAT.

NOTE 4 Intangible assets - figures in NOK

Goodwill TotalAcquisition cost at 01.01.2007 572,437 572,437Additions 0 0Disposals 0 0

Acquisition cost 31.12.2007 572,437 572,437Additions 0 0Disposals 0 0

Acquisition cost 31.12.2008 572,437 572,437

Accumulated depreciation at 01.01.2007 0 0The year's write-downs 0 0

Accumulated write-downs at 31.12.2007 0 0

Carrying amount at 31.12.2007 572,437 572,437The year's write-downs 0 0

Accumulated write-downs at 31.12.2008 0 0

Carrying amount at 31.12.2008 572,437 572,437

The goodwill recognised in the balance sheet relates to the merger between DiaGenic ASA and Mefjorden ASA in 2004. On the merger date, goodwill after the valuation of intangible assets amounted to NOK 572.437. At 31st of December 2008 the book value of goodwill was assessed and there are no indications of a fall in value.

Testing the value of goodwill is based on utility, and is made of discounted cash flows based on budget and future expecta-tions. Based on a calculation of utility, where it is used discounting of cash flow from financial budgets. The expected cash flow is based on the company's strategy plan. The strategicplan is approved by the Board and management in DiaGenic. The discounted cash flow is calculated based on a period of 10 years, and not 5 years as the standard requires. The reason for this is that the company is in a start-up phase. Being in a start-up phase means that the first 5 years will not represent a normal cash flow.

The value of the cash generating unit is determined to recoverable amount that is the highest of net selling price and utility value. It is used at 9.50% discount rate and cash flow over a decade period. There is no assessment made against a termi-nal value.

Estimates and pertaining assumptions are made to the best of the management's knowledge of historical and current events, experience and other factors that are deemed reasonable in the circumstances.

36

Note

NOTE 5 Tangible fixed assets - figures in NOK

Other equipment

Lab equipment

Office machines

Fixt. & fittings Computers Software*

Lab equip-

ment** TOTAL

Acquisition cost at 01.01.2007 136,916 2,055,257 87,163 882,323 672,791 0 1,733,880 5,568,330Additions 302,936 175,800 0 107,935 88,158 0 0 674,829Disposals 0 0 0 0 0 0 0 0

Acquisition cost at 31.12.2007 439,852 2,231,057 87,163 990,258 760,949 0 1,733,880 6,243,159

Additions 25,350 25,465 16,145 261,816 114,453 451,237 0 894,466Disposals 0 0 0 0 0 0 0 0

Acquisition cost at 31.12.2008 465,202 2,256,522 103,308 1,252,074 875,402 451,237 1,733,880 7,137,625

Accumulated depreciation at 01.01.2007 -110,897 -1,796,405 -4,358 -43,690 -449,532 0 -48,471 -2,453,354Depreciation for the year -37,697 -119,789 -17,435 -96,548 -107,641 0 -387,589 -766,700Loss due to fall in value 0 0 0 0 0 0 0 0Reversal of loss due to fall in value 0 0 0 0 0 0 0 0

Accumulated depreciation at 31.12.2007 -148,594 -1,916,194 -21,793 -140,239 -557,174 0 -436,060 -3,220,053

Carrying amount at 31.12.2007 291,258 314,863 65,370 850,020 203,775 0 1,297,820 3,023,107Depreciation for the year -91,533 -123,957 -18,778 -112,685 -125,280 0 -387,590 -859,823Write-down 0 0 0 0 0 0 0 0Loss due to fall in value 0 0 0 0 0 0 0 0Reversal of loss due to fall in value 0 0 0 0 0 0 0 0

Accumulated depreciation at 31.12.2008 -240,127 -2,040,151 -40,571 -252,924 -682,454 0 -823,650 -4,079,876

Carrying amount at 31.12.2008 225,076 216,371 62,738 999,151 192,947 451,237 910,230 3,057,750

Useful life 3 years 3-8 years 5 years 10 years 3 years 5 years 4-5 yearsDepreciation plan

Straight-line

Straight-line

Straight-line

Straight-line

Straight-line

Straight-line

Straight-line

* Depreciation of software will begin when it's taken in use. ** Financial leasing. See note 6.

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NOTE 6 Financial leasing - figures in NOK

The Company has two leases for one with a calculation basis for NOK 817,360 and NOK 916,250. The lease is non-termina-ble for both parties in the rental period. The agreement will run automatically on expiry of lease period. If such an exten-sion agreement can it be terminated by 3 months notice. Rents can be regulated by changes in the general interest rates. There are no restrictions imposed by lease arrangement.

Net present value of remaining lease payments by due date

Due date 2009 479,232Due date 2010-2011 690,560

Total 1,169,792

NOTE 7 Share capital and shareholders - figures in NOK

At 31.12.2008 the company's share capital was NOK 2,586,826 divided between 51,736,520 shares each with a nominal value of NOK 0.05. The company has only one share class and no special regulations relating to the shares. One share thus confers one vote.

Ownership structure at 31.12.2008: Number of shares Holding

Tredje AP-fonden 3,344,000.00 6.46%Nordea Bank Sweden AB (PUBL) 3,202,000.00 6.19%Erik Anders Lønneborg 2,890,000.00 5.59%JPMorgan Luxembourg 2,800,000.00 5.41%Praveen Sharma 2,510,000.00 4.85%A/S Skarv 1,914,000.00 3.70%Holberg Norden 1,444,870.00 2.79%Nordea Bank Plc Finland NIFC 1,401,670.00 2.71%Skagen Vekst 1,400,000.00 2.71%Holberg Norge 1,097,387.00 2.12%Livsforsikringsselskapet Nordea 1,003,100.00 1.94%Håkon Sæterøy 868,478.00 1.68%Amfibien AS 828,000.00 1.60%Karl Wilhelm Haavind 824,000.00 1.59%Verdipapirfondet Nordea SMB 783,300.00 1.51%Dag Storhaug 650,378.00 1.26%DnB NOR Markets, Aksjehand/Analyse Egenhandelskonto 536,000.00 1.04%Sanden A/S 476,100.00 0.92%Kjell-Ivar Brynildsen 412,000.00 0.80%Kikut AS 410,000.00 0.79%

Total, 20 largest shareholders 28,795,283 55.66%

Total others 22,941,237 43.55%

Total number of shares 51,736,520 100.00%

38

Note

Shares and options owned by board members Office Options Number of

sharesForward

contractsTotal of

shares

Håkon Sæterøy *) Chair of Board 350,000 1,068,478 235,000 1,303,478Gustav Ingemar Kihlström **) Board member 150,000 95,000 0 95,000Ingrid Alfheim Board member 150,000 6,545 0 6,545Anna Malm Bernsten Board member 100,000 0 0 0Marie Skarbøvik Buchmann Board member 100,000 0 0 0Praveen Sharma Board member 0 2,510,000 660,000 3,170,000

Shares and forward contracts by the CEOSubscription

rights Number of

sharesForward

contractsTotal of

shares

Erik Christensen CEO 500,000 80,000 50,000 130,000

*) The shares are owned directly and indirectly through and Investor Corporate AS (100%).**) The shares are owned directly and indirectly through Ingemar Kihlström AB (100%).

The company's option schemes are described in more detail in note 11.

There were no dividends paid out in 2007 or 2008.

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Note 8 Pension costs, assets and obligations - figures in NOK

The company is obliged to have a pension by the law. The company's pension plan meets the requirements in this Act.

The company has pension schemes that cover a total of 20 persons. The schemes confer a right to defined future benefits. They are largely dependent on the number of years of service, salary level on reaching retirement age and the size of ben-efits form the National Insurance scheme. The obligations are covered through Nordea Liv.

The capitalised net pension obligation has been calculated as follows: 2008 2007Estimated present value of accrued pension obligations at 31.12. 6,852,510 5,632,797Estimated pension assets at 31.12. -4,250,109 -3,286,458Net pension obligations at 31.12. 2,602,401 2,346,339Accrued social security tax 366,939 330,834Actuarial gains and losses not accounted for -1,007,812 -1,070,945

Capitalised net pension obligation at 31.12. 1,961,528 1,606,228

The year's net pension expense is calculated as follows: 2008 2007Present value of pensions earned during the period 1,457,498 1,213,112Capital cost of previously earned pensions 253,476 154,465Expected return on pension assets -217,110 -148,422Administration costs 104,640 99,185Accrued social security tax 225,389 185,886Estimate deviations 31,639 0

Pension expense for the year 1,855,532 1,504,226

The year's change in the net pension obligation is calculated as follows: 2008 2007Net pension obligation at 01.01. 1,606,228 1,371,297Pension expense for the year 1,855,532 1,504,226The year's premium paid, incl. accrued social security tax -1,500,232 -1,269,295

Net pension obligation at 31.12. 1,961,528 1,606,228

The year's change in the present value of the pension obligation: 2008 2007Present value of the pension obligation at 01.01. 5,632,797 3,559,790Present value of pensions earned during the period 1,457,498 1,213,112Actuarial gains and losses 0 -8,870Capital cost of previously earned pensions 253,476 154,465Variance (change in assumption/experience) -491,261 714,300

Present value of pension obligations at 31.12. 6,852,510 5,632,797

The year's change in the fair value of pension assets: 2008 2007Fair value of pension assets at 01.01. 3,286,458 2,307,527Expected return on pension assets 217,110 148,422Administrative costs -104,640 -99,185Premium paid for year 1,314,840 1,112,440Actuarial gains and losses -0 -185,495Variance (change in assumption/experience) -463,658 2,749

Fair value of pension assets at 31.12. 4,250,109 3,286,458

Economic assumptions:Discount rate 4.30 % 4.50 %Expected return on pension assets 6.30 % 5.50 %Wage growth 4.50 % 4.50 %Pension adjustments 2.80 % 2.50 %Adjustment of National Insurance basic amount 4.25 % 4.25 %Turnover 3.63 % 3.00 %

40

Note

Commonly used assumptions in the insurance industry have been used as actuarial assumptions for demographic fac-tors and retirement rates. The tables used in the actuarial assumptions for death and disablement pension are K2005 and K1963. Premium payments for 2009 are estimated to be NOK 1,397,675.

NOTE 9 Tax expense - figures in NOK

The year's taxable income: 2008 2007

Pre-tax profit -34,581,853 -28,125,038Permanent differences -2,601,605 -2,239,577Change in temporary differences 240,359 -123,563

The year's taxable income -36,943,099 -30,488,178

Nominal tax rate 28% 28%

Non-booked increase in deferred tax benefit -10,411,368 -8,502,092

The year's tax expense is calculated as follows:28% of loss before tax -9,682,919 -7,875,01128% of permanent differences -728,449 -627,082Non-booked increase in deferred tax benefit 10,411,368 8,502,092

Tax expense 0 0

The year's tax payable:Tax payable on the year's profit/loss 0 0

Tax payable 0 0

Specification of temporary differences:Receivables 0 0Tangible fixed assets, incl. goodwill -333,615 -448,556Net pension obligation -1,961,528 -1,606,228Loss carryforward -156,936,738 -119,993,638

Basis for deferred tax asset -159,231,881 -122,048,422

Deferred tax asset = Deferred tax asset not recognised in the accounts -44,584,927 -34,173,558

The deferred tax asset is for the most part related to the tax loss carry forward. As of 31.12.2008 it is deemed not probable that it can be utilised because there is uncertainty with respect to whether the company will generate an adequate tax profit in future which would allow the deferred tax asset to be utilised.

NOTE 10 Public grants - figures in NOK

Public grants: 2008 2007Norwegian research council - Alzheimer 3,823,960 5,586,040Treasure trove 1,023,423 1,600,000

Total public grants 4,847,383 7,186,040

Public grants are recognised in the accounts as a deduction from operating expenses.

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NOTE 11 Options and subscription rights held by employees and board members - figures in NOK

The company's option schemes cover the company's employees and board members.

The General Meeting adopted 31. May 2007 an option program that includes all of the Board with the exception of board member Praveen Sharma, who is one of the founders of the company. The options must be exercised within 2 years after the general meeting date, the exercise period is equal to the authorization period and the issue price is set to NOK 9.50 per share. One option gives the right to subscribe for one share. There are no requirements for the exercise of stock options except with in the redemption date.

At an extraordinary general meeting 16th of November 2006, the subscription right scheme for the CEO was adopted. The scheme is divided into 4 tran processions with different subscription and redemption period, as shown in the table below:

TranProportion of

allocated warrants Redemption period Subscription rate per share (NOK)

1 40 %From 1 year to 5 year after the

General Meeting adopt.6.22

2 20 %From 2 year to 5 year after the

General Meeting adopt.6.22

3 20 %From 3 year to 5 year after the

General Meeting adopt.The average price last 30 days before the

previous vesting date, however, not lower than 6.22

4 20 %From 4 year to 5 year after the

General Meeting adopt.The average price last 30 days before the

previous vesting date, however, not lower than 6.22

Subscriptions rights must be exercised within 5 years after the General Meeting time. Redemption of the subscription rights requires that the employee on the redemption date is employed in a 100% position. One warrant gives the right to subscribe for one share.

At the General Meeting 12th of June 2008 was the subscriptions rights scheme for employees with the exception of the CEO and founders adopted. The scheme is divided into 4 tran processions with different subscription and redemption period, as shown in the table below:

TranProportion of

allocated warrants Redemption period Subscription rate per share (NOK)

1 25 %From 1 year to 5 year after the

General Meeting adopt.6.50

2 25 %From 2 year to 5 year after the

General Meeting adopt.9.00

3 25 %From 3 year to 5 year after the

General Meeting adopt.The average price last 30 days before the

previous vesting date, however, not lower than 9.00

4 25 %From 4 year to 5 year after the

General Meeting adopt.The average price last 30 days before the

previous vesting date, however, not lower than 9.00

Subscriptions rights must be exercised within 5 years after the General Meeting time. Redemption of the subscription rights requires that the employee on the redemption date is employed in a 100% position. One warrant gives the right to subscribe for one share.

Payment method is in equity and there is no possibility for cash settlement. Fair value is calculated on the grant date and accrued in accordance with the exercise date. Black & Scholes' option pricing model is used for the valuation of the options.

42

Note

The following parameters have been used in the valuation of employee options:

*Grant date 22.10.2007

*Grant date 25.10.2007

**Grant date 19.12.2008

Volatility of the share 0.34 0.35 0.77Share price on the grant date 6.47 6.55 2.70Average life of options (years) 3.50 2.00 3.50Risk-free interest rate see point * and point **

* The share's volatility is based on daily historic final prices, and the calculated volatility value is annualised. For the grants, the period from 01.01.2007 until the grant date is used in the calculation. As a risk-free rate it is used Treasury bill rate 3, 9 and 12 months interest rates, and 3-year government bond rate on the grant date, respectively, 5.01%, 5.13%, 5.14% and 4.79%.

** The share's volatility is based on daily historic final prices, and the calculated volatility value is annualised. For the grants, the period from 19.12.2008 until the grant date is used in the calculation. As a risk-free rate it is used Treasury bill rate 6 months interest rates and 3-year government bond rate on the grant date, respectively, 2,64% and 2,68%.

The Board has with approval from the General Meeting issued 1,270,000 subscription rights to employees.

Grant date Exercise period Exercise priceNumber of

options

Board options, cf. note 7 25.10.200731.05.2007 -

31.05.2009 9.50 850,000

Employees subscriptions rights 19.12.200812.06.2009 -

12.06.2014 6,5(25%)/9(75%) 1,270,000

General manager subscriptions rights 27.09.200617.11.2006 -

16.11.2010 6.22 500,000

Total options and subscription rights at 31.12.2008 2,620,000

The option and subscription rights cost relating to the above granting of options had a negative effect on the result in the amount of NOK 432.249 in 2008. However, the cost has no effect on equity since the cost and allocation of profit do not have an overall effect on equity. Nor did the year's calculated cost have any liquidity effect for the company.

Board Employees Exercise priceNumber of

options

Number of issued share options 1 Janu-ary 2007 850,000 500,000 1,350,000Issued October 2007 840,000 10,00/14,00 840,000Issued October 2007 850,000 9.50 850,000Expired, not exercised -850,000 8.00 -850,000

Number of issued share options 1 Janu-ary 2008 850,000 1,340,000 2,190,000Expired, not exercised -840,000 10,00/14,00 -840,000Issued December 2008 1,270,000 6,50/9,00 1,270,000

Number of issued share options 31 December 2008 850,000 1,770,000 2,620,000

43

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NOTE 12 Financial market risk - figures in NOK

Financial risk:The company does not use financial instruments in connection with the management of financial risk.

Currency risk:The company's transactions mainly take place in NOK. A modest number of transactions take place in SEK, EUR, INR, GBP and USD. No contracts have been entered into in order to hedge currency because of the modest extent of transactions in foreign currencies.Interest rate risk: The company has no interest-bearing loans, but have entered into financial lease agreements, which imply futurepayments of interest and instalments. The company has not entered into any fixed interest rate agreement. See note 6.

Credit risk:Credit risk is the potential loss that may occur if a counterparty's ability or willingness to meet its obligations to fail, when it is due for payment. New customers are credit checked prior to contract conclusion. DiaGenic consider the credit risk to be relatively low, when the claims are mainly against various research institutions. Other receivables is mainly prepaid expenses.

Liquidity risk:At the General Meeting on 12th of June 2008 the Board of Directors was given power of attorney to increase share capital by NOK 250,000 with nominal value of NOK 0.05 per share.

NOTE 13 Large individual transactions - figures in NOK

2007:In May 2007 the company carried out a share issue for the gross amount of NOK 25,805,000: In that connection 3,790,000 shares were issued each with a nominal value of NOK 0.05, corresponding to an increase in the company's share capital of NOK 198,500. The remainder of the issue amount was added to the company's share premium reserve.

2008In May 2008 the company carried out a share issue for the gross amount of NOK 44,800,000: In that connection 8,000,000 shares were issued each with a nominal value of NOK 0.05, corresponding to an increase in the company's share capital of NOK 400,000. The remainder of the issue amount was added to the company's share premium reserve.

NOTE 14 Earnings per share - figures in NOK

Earnings per share: 2008 2007

Profit/loss for the year -34,581,853 -28,125,038Average number of shares 48,894,990 42,311,671

Earnings per share -0.71 -0.66

The key figure 'diluted earnings per share' is based on the same calculation as for earnings per share, but it also takes account of all potential shares that have been outstanding in the period, and which will have a diluting effect. Potential shares are related to agreements that confer entitlements to issue shares in future. When the company reports negative earnings, the effect of potential shares is disregarded so that the calculation is thesame as for earnings per share.

NOTE 15 Cash and cash equivalents - figures in NOK

Of the company's cash and cash equivalents, NOK 920,161 is restricted in the form of tax withholdings and deposit.

44

Note

NOTE 16 Lease commitments - figures in NOK

The company has entered into the following lease agreements of significance:

Lease agreements: Lease period Within 1 year Within 1-5 years Over 5 years

Grenseveien 92, 0663 Oslo 9/2006 - 8/2011 2,778,000 4,630,000 0Siemens Financial Services 12/2006 - 11/2010 288,000 264,000 0Siemens Financial Services 12/2006 - 11/2011 255,600 489,900 0

The rent for 2008 amounted to NOK 2,672,743.

NOTE 17 Research and development - figures in NOK

Expensed research costs: 2008 2007Research (gross before deduction of public grants) 19,844,261 17,832,817

Pursuant to IFRS all costs relating to research are expensed.

Of the above amount, NOK 12,700,353 concerns payroll expenses and NOK 6,954,009 relates to operation of the com-pany's laboratory, fees paid to external research institutions and patent costs. In the income statement these expenses are presented as payroll expenses and other operating expenses, respectively.

The above amount does not include R&D overheads relating to rent for the laboratory and depreciation of laboratory equipment.

It is for 2008 not capitalized expenses related to the development.

NOTE 18 Related parties

All transactions and agreements are made on commercial terms from the market for goods and services. Transactions with related parties parties see note 3.

NOTE 19 Events after the balance sheet date

In January 2009 DiaGenic was awarded up to NOK 6,5 million in public support for the period from 2009-2013 under the BIA (user innovation arena) funds. These funds will be used to develop a diagnostic test for Parkinson's disease. The project will build on the ongoing project that is supportedby Michael J. Fox Foundation.

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NOTE 20 Specification of accounting items - figures in NOK

Specification of other operating expenses: 2008 2007

Office premises etc. 2,813,041 2,261,887Administrative costs 5,488,844 2,590,189Professional fees 8,093,287 4,531,901Patent costs 1,044,566 978,917Travel expenses 2,504,075 1,624,930Research fees 518,717 2,974,601Research grants -6,225,041 -5,630,740Laboratory costs 4,321,726 5,114,859

Total other operating expenses 18,559,215 14,446,543

Specification of other receivables: 2008 2007

Skattefunn scheme 1,023,423 1,600,000Prepaid expenses 1,956,924 1,778,974Miscellaneous receivables 2,886,080 3,503,806

Total other receivables 5,866,427 6,882,780

Specification of other current liabilities: 2008 2007

Provision for employer's National Insurance contributions on granted options 0 0Provisions for costs 1,318,804 2,027,954Provision for holiday pay and remuneration of the Board of Directors 1,451,743 1,272,548

Total other current liabilities 2,770,547 3,300,503

Specification of other long term debt: 2008 2007

Fincancial leasing 1,053,789 1,416,965

Total other long term debt 1,053,789 1,416,965

NOTE 21 Inventory - figures in NOK

2008 2007Ferdigvarer 1,445,437 0

Inventory is valued at lower of cost and net selling price. Inventory is valued to cost.

NOTE 22 Going concernThese financial statements are presented on the going concern assumption under International Financial Reporting Standards. Accordingly, the financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts, the amounts and classification of liabilities, or any other adjustments that might result should the Company be unable to continue as going concern.

Given the current cost level the Company is funded only for a period shorter than one year. It is expected that proceeds from sales revenue not will be adequate in order to cover the necessary funding requirement the comming twelve months. The company is therefore pursuing a number of alternatives in order to provide additional financing. Currently such financing arrangement is not in place. However the Company is of the opinion that such financing will be seccured. Conse-quently, the managment believes that the going concern assumption is valid.

46

Au

ditor’s Rep

ort47

Stat

emen

t fr

om t

he

Boa

rd

Håkon SæterøyChairman

Gustav Ingemar KihlsrömDeputy Chairman

Ingrid AlfheimBoard member

Anna Malm Bernsten Board member

Marie Skarbøvik BuchmannBoard member

Pravee SharmaBoard member

Erik ChristensenManaging Director

Statement from the Board of Directors“We confirm that the financial statements for the period 1 January up to and including 31 December 2008, to the best of our knowledge, have been prepared in accordance with applicable accounting standards and give a true and fair view of the assets, liabilities, financial position and profit or loss of the company, and that the manage-ment report includes a fair review of the development and performance of the business and the position of the company and the group taken as a whole, together with a description of the principal risks and uncertainties that they face.”

Oslo, 30 April 2009

48

Corporate G

overnan

ce

CORPORATE GOVERNANCE 1. REPORT ON CORPORATE GOVERNANCEThe Norwegian recommendations on good corporate governance are intended to strengthen confidence in listed companies and thereby contribute to the best possible value creation over time - to the benefit of shareholders, employees and other stakeholders. Observance of the recommendations is based on the principle ”comply or explain”. Set out below are comments on DiaGenic’s compliance with the princi-ples.

DiaGenic’s Board and management are concerned to maintain a high standard of ethics, as well as good corporate governance.

2. BUSINESSThe objects clause in the Articles of Association provides: The company’s business is to develop, patent and sell products, technology and expertise for the diagnosis of ailments and diseases in people, animals and plants.

The company’s goal is the development and commer-cialisation of diagnostic products, with a view to maxi-mizing shareholder value.

3. CAPITAL AND DIVIDENDSDiaGenic has not yet generated a positive cash flow from its operations. The business is financed through equity and government grants. Particular emphasis is placed on securing financing through the stock market until the company generates a positive cash flow from operations.

The company’s shareholders will not receive a dividend before the financial situation permits.

The Board will be authorised during periods by the General Meeting to issue shares to ensure the necessary financing of the future operation of the company. Board authorisations are normally given for a period of up to 2 years.

4. EQUAL TREATMENT OF SHAREHOLDERS AND TRANSACTIONS WITH CONNECTED PARTIESThe core of the company’s corporate governance is equal treatment of all shareholders. All shares in DiaGenic carry one vote and the shares are freely transferable. The company has only one share class and all shareholders have equal rights.

The Board will report in the Annual Report any transac-tions with connected parties.

5. FREE TRANSFERABILITYThe company’s shares are listed and freely transfer-able.

6. GENERAL MEETINGShareholders can exercise their rights in the General Meeting and the company wishes that the General Meeting should be a place for shareholders and the company’s Board to meet. Meeting documents will be sufficiently detailed and sent to shareholders at least two weeks before the General Meeting. The company endeavours to ensure that meeting documents are sufficiently detailed to enable shareholders to take a view on all matters to be considered. The deadline for notice of attendance at General Meetings is set as close to the meeting as possible. Shareholders who are unable themselves to participate may vote by proxy.

The company will encourage Board members to attend General Meetings. In 2008 the Chairman of the Board and a board member attended the General Meeting.

The minutes of the General Meeting are published through a notice to the stock exchange and are also made available on the company’s website.

7. NOMINATION COMMITTEEAt the company’s Annual General Meeting in 2008 it was resolved to establish an election committee and to incorporate such an arrangement in the Articles. The election committee is elected by the General Meeting and according to the Articles is to consist of three to four members. The election committee shall prepare and propose the election of Board members to the General Meeting, and give recommendations on Board fees. The General Meeting elected the following members of the Election Committee:

Siri Fürst (Chairman)Ulrica Slåne-SensStein H. AnnexstadPraveen Sharma

8. CORPORATE ASSEMBLY AND BOARD, COMPOSITION AND INDEPENDENCEDiaGenic has chosen not to have a corporate assembly due to the limited size of the company and the small number of employees. The functions of the corporate assembly have been transferred to the General Meeting and Board.

The Board and Chairman is elected by the General Meeting and is composed with a view to covering in the best possible manner the interests of all share-

49

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over

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ce

holders and the company’s need for expertise and capacity. Board members have backgrounds within finance, molecular biology, chemistry and physiology, as well as experience from listed companies and com-mercialisation of products in the health sector within diagnostics, biotechnology and pharmaceuticals. The main information illustrating the Board members’ expertise is set out in the Annual Report.

The Board is elected for only one year at a time and Board members may stand for re-election. The Chief Executive is not a member of the Board.

The Board has six members, with an equal number of women and men. The Board’s members proceed on the basis that they do not have more board appointments than give each of them sufficient time to undertake their work for DiaGenic in a proper manner. The Board is composed of individuals who have the willingness and ability to work together.

The Board members Ingemar Kihlström, Anna Malm Bernsten, Ingrid Alfheim and Marie Skarbøvik Buchmann are considered to be independent from the company’s management, important business con-nections and the company’s main shareholders. These Board members are considered to be independent in spite of the fact that certain of them has carried out to a limited extent extended board work (which has been remunerated on market terms), and in spite of the fact that together they hold 500,000 share options in the company at a price of NOK 9.50 per share (see the notes to the Accounts).

4 of the 6 Board members are considered to be inde-pendent, which ensures that the Board does not act as individual representatives for certain shareholders or other interest groups. The Board may evaluate the management and important agreements signed by the company on an independent basis. The Board is also considered to have sufficient qualifications to take care of the interests of all shareholders by undertaking independent assessments of the management’s case handling and the company’s business, and to ensure that the senior management is not too dominant in relation to shareholders as a whole.

The Board member Ingemar Kihlström owns 95,000 shares and the Board member Ingrid Alfheim owns 6,545 shares in the company. Two of the Board’s members are major shareholders in the company: (i) Praveen Sharma owned at the end of 2008 4.85% of the share capital and forward contracts to purchase 1.28% of the share capital. Sharma is Technology and Product Development Director and a founder

of the company. (ii) Håkon Sæterøy is the Executive Chairman and owned at the end of 2008 2.07% of the share capital through direct and indirect holdings and forward transactions to purchase 0.45% of the share capital. The company’s Chairman has also been awarded 350,000 options to acquire shares at a price of NOK 9.50 per share.

The Chairman is engaged in DiaGenic through a con-sultancy agreement with prime focus on financing and strategy. The consultancy agreement with the Chairman has been approved by the rest of the Board, and the main content is presented to the Annual General Meeting for approval.

9. THE BOARD’S WORKEmphasis is placed on the Board functioning well as a collegiate body. In addition to the ordinary Board members, a strategy seminar is held annually to go into greater detail on the main challenges and opportunities for the company. The Board leads the company’s strategic planning and regularly evaluates the strategy.

A plan for the Board’s work is prepared each year.

The Board has adopted board instructions for its work and for the company’s management. The instructions include an allocation of responsibilities and tasks in important areas. The Board ensures that the business is organised in a proper manner and plans and budgets are prepared for the company’s business. The board plan and instructions ensure that the Board is kept informed about the company’s financial position and that the business, asset management and accounts are subject to control.

The Chairman ensures that the Board functions well and fulfils its obligations. The Chairman leads Board meetings and prepares Board cases in cooperation with the Chief Executive Officer. The Chairman maintains minutes from Board meetings and the minutes are approved and signed by all Board members. Emphasis is placed on updates relevant to the company’s business at strategy meetings and at the ordinary Board meetings.

The Board appoints a Deputy Chairman who can act when the Chairman either cannot or should not lead the Board’s deliberations. This is particularly relevant as the Chairman participates actively in the manage-ment of the company.

The Board has not used formal board committees but groups of experts from the Board, for example, work

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on strategic assessments and evaluation of company-critical agreements. Financial reporting and remunera-tion to senior management is subject to thorough and independent consideration without the use of board committees, as cases are considered by the whole Board, where 4 of the 6 members are considered inde-pendent of the management.

The Board evaluates the Board’s composition and Board work at least once a year. The evaluation also covers the manner in which the Board functions, both individually and as a group in relation to the objectives that have been set for its work.

10. RISK MANAGEMENT AND INTERNAL CONTROLDiaGenic has developed procedures for internal control for the entire business. Work to obtain the approval of the authorities for DiaGenic’s products has intensi-fied. This has involved a total review of quality control systems through the entire value chain.

Requirements as to risk management and internal control have been evaluated by the management and Board, and a set of appropriate systems estab-lished. In this connection, emphasis is also placed on ensuring that the company operates within accepted ethical guidelines and values, including guidelines on how employees may communicate matters relating to illegal or unethical behaviour by the company to the Board.

The Board receives monthly status reports from the Chief Executive.

The company purchases services for financial reporting from external suppliers.

As a listed company, there is a special responsibility

in connection with requirements relating to insider trading rules, the provision of information and share trading. DiaGenic has guidelines that ensure that Board members, senior employees and other insiders follow relevant legislation and rules with regard to insider trading in the company’s shares.

11. REMUNERATION OF THE BOARDAt the company’s Annual General Meeting in 2008 it was resolved to establish an election committee. The election committee will give recommendations on Board remuneration to the company’s Annual General Meeting. Remuneration of the Board should reflect the Board’s responsibility, expertise, time spent and the business’s complexity and the fact that it is a listed company. Remuneration of the Board is not dependent on results obtained, but the Board’s members have together 850,000 options, which are set out in detail in the Annual Report. This scheme was introduced to give Board members an extra incentive to prioritise work for DiaGenic in the important phase the company has now entered. The board members are expected to be important resource persons in this process. Since DiaGenic is a company in a growth phase and financed by equity, the Board considers it appropriate to maintain such option scheme as long as it is limited to a moderate number of shares and the subscription price is in line with the issue price from 2006, is higher than the current market price and 70% higher than the issue placed on 7 May 2008. The arrangement should also be viewed in light of the relatively modest original remuneration for Board members. The Board considers that this does not weaken its independence.

Certain Board members in DiaGenic may, in addition to their normal Board duties, carry out work of minor financial significance at the request of the Chairman.

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The Board is aware of the diligence requirements this involves in relation to information to the General Meeting and any agreements between the company and the company’s Board members are approved by the whole Board. Reference is made in this connection also to the evaluation of independent Board members and the Chairman under point 8 above. Information on all remuneration to each Board member and the Chairman is included in the Annual Report.

12. REMUNERATION OF SENIOR EMPLOYEESThe Board sets guidelines and has evaluated the remu-neration of the senior employees in the company.

The Board sets the salary and other remuneration of the Chief Executive in its Board meeting.

The terms of incentive schemes for employees are set out in the notice of General Meeting and the Annual Report. Guidelines and elements of the remuneration of the Chief Executive and other senior employees are also set out in the Annual Report.

The company’s General Meeting approved an incentive scheme which includes all employees with the exception of the founders Praveen Sharma and Anders Lönneborg. The scheme involves subscription rights, split between 500,000 subscription rights to the Chief Executive and a total of 1,270,000 subscription rights to other employees. The incentive scheme rep-resents approximately 3% of outstanding shares in the company at 31.12.2008.

The Chairman works actively in the in the company, mainly within financing and strategy. The remunera-tion is based on a yearly consultancy agreement, which has been approved by the Board. The Chairman will invoice NOK 15.000 per day for 2,5 days per week (in average), and a maximum of 130 days for the 12 months period.

The Board considers that the remuneration of senior employees is at market levels and that there are no unreasonable elements, such as in connection with resignation or termination of the employment rela-tionship. The incentive scheme for employees has been drawn up with a view to retaining people in the company on a long-term basis and establishing a com-munality of interest with shareholders, and so as not to lead to short-term dispositions that may be harmful to the company.

13. INFORMATION AND COMMUNICATIONThe company is listed and will therefore comply with requirements on equal treatment, transparency and

reporting of both financial and other information. The listing also involves publication of the company’s financial calendar on an annual basis. The company uses its website actively for updates and also provides for ordinary presentations to be published on the Internet in the form of “webcasts,” including, among others, its quarterly presentations.

The ability to give information about the company in addition to the published reports will be limited in accordance with the stock exchange regulations. Any inside information will only be given to persons other than primary insiders in cases where the company considers it necessary, and then on the basis of insider declarations and the listing of insiders. The insider lists are maintained by the Chief Executive.

The company endeavours to ensure that information on the company should be available in both Norwegian and English, but so far has not prepared all communi-cations in both languages.

Relevant information is given in the form of press releases and notices to the stock exchange, is published on the company’s website and sent to all shareholders when required. DiaGenic wishes to maintain a good, open dialogue with its shareholders, analysts and the stock market in general.

The company holds regular presentations for investors, analysts and shareholders. The company’s Chief Executive is responsible for information and investor relations. The Chief Executive and Chairman of the Board may both speak on behalf of the company and delegate such authority as appropriate in relevant cases.

The dates of important events are published on the company’s and the Oslo Stock Exchange’s websites.

14. COMPANY TAKEOVERSIn the event of a takeover process, the company will endeavour to ensure that shareholders are treated equally and given time to reach a decision on a bid. The Board will evaluate the bid and endeavour to provide a recommendation to shareholders. In addition, such a situation will be governed by the provisions applicable to listed companies.

15. AUDITORThe auditor attends the Board meeting that considers the annual accounts. The Board has also held a meeting with the auditor without the Chief Executive or other members of senior management being present.

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Ownership structure at 31.12.2008: Number of shares Holding

Tredje AP-fonden 3,344,000.00 6.46%Nordea Bank Sweden AB (PUBL) 3,202,000.00 6.19%Erik Anders Lønneborg 2,890,000.00 5.59%JPMorgan Luxembourg 2,800,000.00 5.41%Praveen Sharma 2,510,000.00 4.85%A/S Skarv 1,914,000.00 3.70%Holberg Norden 1,444,870.00 2.79%Nordea Bank Plc Finland NIFC 1,401,670.00 2.71%Skagen Vekst 1,400,000.00 2.71%Holberg Norge 1,097,387.00 2.12%Livsforsikringsselskapet Nordea 1,003,100.00 1.94%Håkon Sæterøy 868,478.00 1.68%Amfibien AS 828,000.00 1.60%Karl Wilhelm Haavind 824,000.00 1.59%Verdipapirfondet Nordea SMB 783,300.00 1.51%Dag Storhaug 650,378.00 1.26%DnB NOR Markets, Aksjehand/Analyse Egenhandelskonto 536,000.00 1.04%Sanden A/S 476,100.00 0.92%Kjell-Ivar Brynildsen 412,000.00 0.80%Kikut AS 410,000.00 0.79%

Total, 20 largest shareholders 28,795,283 55.66%

Total others 22,941,237 43.55%

Total number of shares 51,736,520 100.00%

Ownership and shareholder policyDiaGenic is listed on the Oslo Stock Exchange (Ticker: DIAG) and the shareholder list contains a large number of Nordic institutional investors. DiaGenic’s operations have been financed from equity and government grants. The company has not yet generated sufficient income to cover costs and achieve a positive cash flow from operations. Therefore DiaGenic is committed to raising capital from equity markets by developing the company to be a steadily more attractive investment for both Norwegian and international investors so that financial flexibility is secured. The company will not give consideration to the payment of dividend before long-term profitability is confirmed. The company has a single share class and no special restrictions on the shares. One share thus carries one vote.

Figure 5. 20 largest shareholders

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n Development in share price and trading volumeIn 2008 the closing price of the DiaGenic share fluctuated between NOK 2.40 and 6.80. At the start of 2008 the closing price was 5.75 and at the end 2.75, a decrease of 52 %. In comparison the Oslo Stock Exchange Small Cap Index (OSESX) fell 58 % in the same period. Based on the closing price at the year end the company was valued at NOK 142 million. The company’s shares have the benefit of a market-making agreement and are listed on the Oslo Stock Exchange OB Match list. This contributes to increased turnover in the share. The average turnover per day in 2008 was 125,000 shares against 68,000 shares in 2007. DiaGenic continues to work to increase interest and turnover in the share, with a view to making it a steadily more attractive investment.

Figure 6. Share price developement in 2008

Figure 7. Share turnovervolume in 2008

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Month/Year EventNumber

of sharesTotal number

of shares Share capital (NOK)Par value

per share (NOK)

Jun. 1998 Incorporation 1,000,000 1,000,000 50,000 0.05 Oct. 1999 Share issue 500,000 1,500,000 75,000 0.05 Sep. 2000 Share issue 240,000 1,740,000 87,000 0.05 Nov. 2000 Share issue 497,000 2,237,000 111,850 0.05 Mar. 2001 Share issue 504,500 2,741,500 137,075 0.05 Sep. 2001 Share issue 6,400 2,747,900 137,395 0.05 Oct. 2001 Share issue 200,000 2,947,900 147,395 0.05 Jan. 2002 Share issue 220,368 3,168,268 158,413 0.05 Apr. 2002 Share issue 61,048 3,229,316 161,466 0.05 May 2002 Share issue 3,000 3,232,316 161,616 0.05 Oct. 2003 Share issue 1,000,000 4,232,316 211,616 0.05

Apr. 2004Issue from funds 16,929,264 21,161,580 1,058,079 0.05

May 2004 Share issue 1,315,406 22,476,986 1,123,849 0.05 Jun. 2004 Merger 10,110,150 32,587,136 1,629,357 0.05 Apr. 2005 Share issue 3,129,384 35,716,520 1,785,826 0.05

Jul. 2005Excercise of option 10,000 35,726,520 1,786,326 0.05

Aug. 2005Excercise of option 10,000 35,736,520 1,786,826 0.05

Mar. 2006 Share issue 3,500,000 39,236,520 1,961,826 0.05

Sep. 2006Excercise of option 45,000 39,281,520 1,964,076 0.05

Nov. 2006 Share issue 80,000 39,361,520 1,968,076 0.05

Nov. 2006Excercise of option 405,000 39,766,520 1,988,326 0.05

May 2007 Share issue 3,970,000 43,736,520 2,186,826 0.05 May 2008 Share issue 8,000,000 51,736,520 2,586,826 0.05

Development in share capitalSince its listing in 2004 the company has completed four placings that have raised a total of NOK 120 million in equity capital. The most recent issue injected NOK 45 million and was completed on 7 May 2008. The company’s share capital at the end of December amounted to NOK 2,586,826 divided into 51,736,520 shares of NOK 0.05 par value.

Subscription rights and optionsDiaGenic has used subscription rights and options for board members and employees as a means to retain them in the company on a long-term basis. All such schemes are based on the exercise price not being lower than the share price at the time of the award. Board members have been allocated options giving them the right to subscribe 850,000 shares at a price of NOK 9.50 per share. The Chief Executive has been allocated options giving him the right to subscribe 500,000 shares at a price of not less than NOK 6.22 per share. Other employees have been allocated options giving them the right to subscribe 1,270,000 shares at a price of not less than NOK 6.50 per share.

Figure 8. Developement of share capital

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DiaGeinc ASAGrenseveien 92

N - 0663 Oslo

Phone: 23 24 89 50

Fax: 23 24 89 59

Homepagee: www.diagenic.com

E-mail: diagenic@diagenic.com