INTERIM REPORT JANUARY-MARCH 2014

The January–March period 2014 in brief

  · Net sales amounted to MSEK 6.4 (8.1), first quarter last year included
amortized upfront fees of MSEK 2,5
  · Net loss for the group was MSEK 13.4 (10.7)
  · Loss per share was SEK 0.03 (0.02)
  · Cash flow from operating activities was MSEK -13.1 (-9.9)
  · Cash and cash equivalents and other short-term investments totaled
MSEK 8.6 (48.0) at the end of the period
  · Financing of MSEK 1 granted by Vinnova for ERbeta cancer project

Significant events after the end of the reporting period

  · Net proceeds of MSEK 77 from equity issues

Conference call / audiocast today at 9.30 a.m. CET
CEO Per Bengtsson will present the report today at 9.30 a.m. in an audiocast,
held in Swedish. The audiocast and slides are available through the corporate
website http://www.karobio.se/ or by telephone +468 51 999 365 (audio only).
Questions may be submitted over the internet or by telephone.


CEO COMMENTARY
Strong program advancing towards the clinic

In the first quarter, all of our three main projects advanced their positions.
That Karo Bio currently is engaged in several major projects in parallel in a
cost efficient manner, illustrates how the company’s risk profile has improved.
Furthermore, prospects are good for one or more of our projects to be in
clinical phase already next year.

After completing the equity issues in April, we have the financial resources in
place to run operations until the start of clinical trials regardless if we
succeed in creating additional revenue or not. I am delighted with the
confidence shareholders have shown us with their strong interest in the rights
issue. My colleagues and I will do our best to manage that trust well.

Within ERbeta cancer, continued studies with KB9520 have strengthened our
conviction that this is a compound that has an interesting potential in the
field of cancer. In the first quarter, we also received funding from Vinnova to
conduct toxicity and safety pharmacological studies, both necessary for clinical
studies.

Within ERbeta MS, we also performed well during the first quarter. We do not aim
to counteract inflammation which is the traditional way to treat MS, but to
protect and repair the sheaths surrounding the nerve fibers that carries signals
within the brain. Both key opinion leaders in MS and potential licensees show
great interest in what we do. I am pleased to note that we have reached a point
where several companies are entering a qualified dialogue in order to examine
our project in further detail. Meanwhile, we continue the preclinical
development that is heading towards the selection of a drug candidate. This work
is funded by the U.S. National MS Society.

Due to confidentiality undertakings with our partner Pfizer, I am unable to
communicate what we currently are working on in the RORgamma project, but it is
important for me to convey that the project continues to perform well and
according to the timetable.

Parallel to these three main projects, we continue to work with new ideas in
order to create the next generation of projects. By combining active business
intelligence and a broad network of contacts with some studies of our own, we
identify and evaluate new project ideas. Of importance here is that we work in a
structured way and evaluate different options against each other in a systematic
way. A future new project should both have great potential and a reasonable risk
profile from a scientific, medical and commercial point of view.

Overall, I believe we are in a good position as we now take off into a future of
new possibilities and opportunities.

CEO Per Bengtsson

For further information, please contact
Per Bengtsson, CEO
Telephone: +46 8 608 6020
E-mail: per.bengtsson@karobio.se
Henrik Palm, CFO
Telephone: +46 8 608 6076 or +46 70 540 40 14
E-mail: henrik.palm@karobio.se

Karo Bio AB (publ)
Novum
141 57 Huddinge
Sweden
Telephone: +46 8 608 60 00
Corp.reg.nr. 556309-3359
Website: www.karobio.comwww.karobio.com

The information in this report is such that Karo Bio is required to disclose
under the Swedish Securities Market Act. The information was disclosed on May 8,
2014 at 8.30 a.m. CET.