KARO BIO ISSUES NEW SHARES TO CONTINUE DEVELOPMENT OF CLINICAL PROJECT PORTFOLIO

KARO BIO ISSUES NEW SHARES TO CONTINUE DEVELOPMENT OF CLINICAL PROJECT PORTFOLIO

The Board of Directors of Karo Bio AB (TICKER: KARO) decided on March 26, 2007
to issue new shares with preferential rights. Assuming full subscription, the
rights issue will generate MSEK 406 in new funds to the Company before
transaction costs.

The main purpose of the new share issue is to secure capital to continue the
clinical development of the drug candidate KB2115 in dyslipidemia as well as the
drug candidate KB3305 into clinical trials for the treatment of diabetes. The
proceeds from the new share issue will also enable Karo Bio to create a
scientific base for the outlicensing of the ER beta project in depression as
well as developing additional preclinical and clinical projects from the ER beta
platform.

The decision by the Board is subject to approval by a special general meeting to
be held on April 11, 2007. Guarantee commitments and statements of intent to
participate by major shareholders have been obtained corresponding to 95.8
percent of the rights issue.

”The strategy which was implemented in connection with the financing in 2005 and
the results we achieved in 2006 give us confidence for the future” says Per Olof
Wallström, President and Chief Executive Officer of Karo Bio.

”With this financing, Karo Bio takes another step towards our goal of developing
the Company into a sustainably profitable pharmaceutical company.”

Terms in brief
Terms in brief and time table for the share issue are presented below.
•	Every two existing shares entitle to subscribe for one new share
•	The subscription price is SEK 10.50 per share
•	Last date for trading in the Karo Bio share including rights to participate in
the share issue is April 13, 2007
•	Record date for participation in the rights issue is April 18, 2007
•	The subscription period is from April 24 to May 8, 2007
•	Trading in subscription rights will take place April 24 to May 3, 2007
•	Prospectus, subscription form and issue statement will be distributed to Karo
Bio's shareholders around April 23, 2007.

Background and reasons
Karo Bio is an innovative research-based pharmaceutical company focusing on the
development of novel pharmaceuticals mainly within the area of metabolic
diseases. Karo Bio has a leading position in nuclear receptors, which are
important drug targets for major diseases.

Karo Bio's operations are based on a business model where projects targeting
major patient populations in competitive market segments are outlicensed to
partners in preclinical or early clinical stages of development. In addition to
these partnerships, Karo Bio will develop selected compounds aimed at targeted
patient populations to the late clinical stage. Such compounds will potentially
be launched by the Company in selected markets.

Karo Bio has a project portfolio with three compounds in clinical trials, one of
which is developed internally. Two candidate drugs are entering clinical trials
and for one preclinical project the next milestone is the choice of a candidate
drug. Two of the Company's clinical projects are developed in collaboration with
large pharmaceutical companies.
Karo Bio will conclude a clinical phase IIa trial in dyslipidemia for the
compound KB2115 in the first half of 2007. After completing the phase II
program, the Company will consider different options for the future development
of KB2115. The compound may, dependent of the outcome of the data, be developed
by Karo Bio for a niche indication or potentially be outlicensed to a partner. 

Karo Bio also plans to advance its other drug candidate KB3305 for the treatment
of diabetes to clinical development in 2007, as soon as a stable pharmaceutical
formulation is in place.

Karo Bio's competence and attraction are validated through the Company's
collaborations with major pharmaceutical companies such as Merck & Co and Wyeth
Pharmaceuticals. These collaborations are focused on important clinical
indications and global markets. Karo Bio does not incur any costs for these
projects. Instead, Karo Bio, will receive payments for achieved milestones in
accordance with agreed goals in the collaborations, as well as royalty payments
on future potential revenues of drugs developed in these collaborations. Such
revenues assume that development goals are reached and drugs are launched on the
market. Both Merck and Wyeth entered clinical trials in the respective projects
in August, 2006.

Karo Bio has committed large resources on its dyslipidemia project with the
Thyroid Receptor (TR) as the target protein. The Company has chosen a candidate
drug (KB5359) during 2006. Karo Bio intends to initiate a collaboration with a
major pharmaceutical company in 2007 with this project.

During the autumn of 2005 Karo Bio raised MSEK 279 in a new share issue with the
purpose of advancing defined projects into the clinical stage. Since then one
internally developed project and two partnered projects have entered the clinic
and major progress has been achieved in other projects. Karo Bio's existing cash
position is expected to last at least one year with the current cost level.

The Company wants to continue the development of KB2115 to late clinical stage
to achieve 'proof of concept' (positive effect on patients) for KB3305, which
will enable a collaboration. Further, Karo Bio wants to create a financial base
for the outlicensing of the ER beta project for depression as well as launching
additional preclinical and clinical development projects from the ER beta
platform. Therefore, there is a need to raise further capital in order to secure
this development. The proceeds from the share issue are expected to sustain the
Company to 2010.

The rights issue
The Board of Directors decided on March 26, subject to the approval by the
special general meeting of the shareholders on April 11, 2007, on a new share
issue of no more than 38,706,397 shares, each with a ratio value of SEK 0.50,
with preferential rights for existing shareholders. Each two shares held entitle
to subscription of one new share at a price of SEK 10.50 per share.
If fully subscribed, the rights issue will raise MSEK 406 before transaction
costs. Assuming full subscription, the share capital will increase by no more
than SEK 19,353,198.50.

A number of larger shareholders, together representing 40.4 percent of the share
capital, have declared their intent to subscribe for their share of the rights
issue. In addition Stena AB, Catella Healthcare Investments AB, AMF Pension,
Third National Swedish Pension Fund, Bliwa Livförsäkring, Strand
Kapitalförvaltning AB on behalf of clients and Fonden Pecunia have issued
guarantee commitments to subscribe for shares corresponding to MSEK 225 of the
share issue. Hence, statements of intent and guarantee commitments amounting to
95.8 percent of the issue amount have been obtained.
Karo Bio intends to use the net proceeds from the offering according to the
following:
•	Develop KB2115 to late clinical stage for one or several indications.
•	Develop KB3305 through clinical phase II trials to ”proof of concept” in
patients suffering from type 2-diabetes. 
•	Develop KB5359 with the intent to sign a development and marketing agreement
during 2007. 
•	Continue development within the estrogen receptor (ER beta) area to the
clinical stage with focus on depression. The potential for ER beta within other
disease areas is also being evaluated.

Details on the offering will be presented in the prospectus on the new share
issue. The prospectus will be made public around April 13, 2007 and available on
Karo Bio's website from this date.

Special general meeting
The Board of Directors' decision on the rights issue is subject to approval by
the special general meeting on April 11, 2007. Notice for the special general
meeting will be announced on March 28 and be available on Karo Bio's web site at
www.karobio.com/sgm.

The Board of Directors
KARO BIO AB





For further information, please contact:
Per Olof Wallström, President & Chief Executive Officer 
Telephone: +46 8 608 60 20

Bertil Jungmar, Chief Financial Officer
Telephone: +46 8 608 60 52.

Facts about Karo Bio 
Karo Bio is an innovative drug discovery and development company specializing in
nuclear receptors for the development of novel pharmaceuticals with focus on
metabolic diseases. Karo Bio is listed on the Stockholm stock exchange (Reuters:
KARO.ST) since 1998.

The Company has expanded from being a drug discovery company by adding in-house
preclinical development resources and competence for development of drugs to
treat metabolic diseases. The Company has a strong project portfolio primarily
targeting diseases such as diabetes, obesity, atherosclerosis and dyslipidemia. 

In addition, Karo Bio has two strategic collaborations with international
pharmaceutical companies for development of innovative therapies for the
treatment of common diseases. 

This press release is also available online at: www.karobio.com and
www.waymaker.net.