DiaMedica Announces Formation of European Subsidiary

"As we prepare for the next stage of human clinical developmentwith DM-71, it is our goal to complete proof-of-conceptphase II human studies with DM-83 and DM-99 as expeditiouslyas possible, beginning with DM-83," stated Dr. Karl-GunnarHidinger, President of DiaMedica Inc. "The European Unionis recognized as an excellent environment for conductingclinical studies, and our European entity has been establishedas part of our strategy to move products into the clinicrapidly."

In early October, DiaMedica announced the preliminary resultsof its phase II human study with DM-71, which demonstratedthe ability of DM-71 to reduce HbA1c when compared to baseline,as well as demonstrating safety and tolerability of thedrug. In September, the Company announced that pre-clinicalstudies had demonstrated the ability of DM-83 to restoreinsulin sensitivity to pre-diabetic levels.

"The compelling phase II clinical trial results achievedwith our lead product DM-71, combined with positive pre-clinicalstudies with DM-83 continues to build support for our scienceand we are excited to move DM-83 into phase II human studiesin the European Union," stated Dr. Wayne Lautt, Chief ScientificOfficer of DiaMedica Inc.

About DM-83

DM-83 is a novel combination of two drugs with well establishedsafety profiles that are used to treat other unrelated humanconditions. Pre-clinical studies have shown that DM-83 iseffective at restoring insulin sensitivity to pre-diabeticlevels and restoring the dysfunctional nerve signal whichwe recognize as critical in the development of type 2 diabetes.

About DiaMedica

DiaMedica is developing novel treatments for various stagesof type 2 diabetes. Its lead product, DM-71, recently completeda successful phase II clinical trial and is preparing forthe next stage of human studies. The Company has two otherdrugs in its clinical pipeline, DM-83 and DM-99, which areboth progressing toward phase II human clinical studies.

Caution Regarding Forward-Looking Information

Certain statements contained in this press release constituteforward-looking information within the meaning of applicableCanadian provincial securities legislation (collectively,"forward-looking statements"). These forward-looking statementsrelate to, among other things, our objectives, goals, targets,strategies, intentions, plans, beliefs, estimates and outlook,including, without limitation, our anticipated future operatingresults, and can, in some cases, be identified by the useof words such as "believe," "anticipate," "expect," "intend,""plan," "will," "may" and other similar expressions. Inaddition, any statements that refer to expectations, projectionsor other characterizations of future events or circumstancesare forward-looking statements.

These statements reflect management's current beliefs andare based on information currently available to management.Certain material factors or assumptions are applied in makingforward-looking statements, and actual results may differmaterially from those expressed or implied in such statements.Important factors that could cause actual results to differmaterially from these expectations include, among otherthings: DiaMedica's early stage of development, lack ofproduct revenues and history of operating losses, uncertaintiesrelated to clinical trials and product development, rapidtechnological change, uncertainties related to forecasts,competition, potential product liability, additional financingrequirements and access to capital, unproven markets, supplyof raw materials, income tax matters, management of growth,partnerships for development and commercialization of technology,effects of insurers' willingness to pay for products, systemfailures, dependence on key personnel, foreign currencyrisk, risks related to regulatory matters and risks relatedto intellectual property and other risks detailed from timeto time in DiaMedica's filings with Canadian securitiesregulatory authorities, as well as DiaMedica's ability toanticipate and manage the risks associated with the foregoing.Additional information about these factors and about thematerial factors or assumptions underlying such forward-lookingstatements may be found in the body of this news release,as well as under the heading "Risk Factors" contained inDiaMedica's final long-form prospectus dated March 12, 2007.DiaMedica cautions that the foregoing list of importantfactors that may affect future results is not exhaustive.When relying on DiaMedica's forward-looking statements tomake decisions with respect to DiaMedica, investors andothers should carefully consider the foregoing factors andother uncertainties and potential events.

These risks and uncertainties should be considered carefullyand prospective investors should not place undue relianceon the forward-looking statements. Although the forward-lookingstatements contained in this press release are based uponwhat management believes to be reasonable assumptions, DiaMedicacannot provide assurance that actual results will be consistentwith these forward-looking statements. DiaMedica undertakesno obligation to update or revise any forward-looking statement.

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