KARO BIO ANNOUNCES A FULLY UNDERWRITTEN RIGHTS ISSUE OF APPROX. SEK 166 MILLION

KARO BIO ANNOUNCES A FULLY UNDERWRITTEN RIGHTS ISSUE OF APPROX. SEK 166 MILLION

Not for release, publication or distribution in Australia, Canada, Japan or the
United States. This announcement does not constitute an offer to sell or the
solicitation of an offer to buy the securities of Karo Bio AB (publ) (the
“Securities”) in Australia, Canada, Japan or the United States or in any other
jurisdiction. Securities may not be offered or sold in the United States absent
registration or an exemption from registration under the U.S. Securities Act of
1933, as amended. The issuer of the Securities has not registered, and does not
intend to register, any portion of the offering in the United States, and does
not intend to conduct a public offering of the Securities in the United States.

STOCKHOLM, October 26, 2009. Karo Bio AB (publ) (Reuters: KARO.ST) today
announced that the company's Board of Directors decided, after the closing of
trading at NASDAQ OMX Stockholm on Friday, October 23, 2009, to undertake a
preferential rights issue, subject to approval at the general meeting.
Shareholders in Karo Bio have preferential rights to subscribe for one (1) new
share for every three (3) existing shares. The subscription price is SEK 4.30
per share, which will result in total proceeds of approx. SEK 166m before
transaction costs. 

The purpose of the rights issue is to enable Karo Bio, from a position of
financial strength, to continue discussions with potential collaboration
partners regarding continued clinical development and commercialization of its
lead development program eprotirome, developed for the treatment of dyslipidemia
(high blood lipids), and to  continue the development of prioritized compounds
from the ER-beta platform and the collaboration with Zydus Cadila. The company
has obtained underwriting agreements and subscription undertakings corresponding
to 100 percent of the proceeds of the rights issue from, among others, Farstorps
Gård AB and Farstorp Invest AB. Farstorp is the investment vehicle of one of the
company's largest shareholders and board member, Bo Håkansson.

Eprotirome has completed three successful clinical phase II studies. Karo Bio's
goal is to initiate clinical phase III trials within the framework of a
partnership. 

“It is of great importance for us to have a strong financial position when we
now continue the discussions with potential partners with a view to secure a
potential agreement that will safeguard the short-term interest and the
long-term interest of Karo Bio and its shareholders in the best possible way.
Our intention is to develop our ER-beta compounds into commercially attractive
outlicensing opportunities within the next 18 months”, says Per Olof Wallström,
President of Karo Bio.



Issue with preferential rights for shareholders
For every share in Karo Bio, the holder is entitled to one (1) subscription
right. Three (3) subscription rights entitle the holder to subscribe for one (1)
new share. The subscription price is SEK 4.30 per share, which means that the
rights issue will raise a maximum of approx. SEK 166m before transaction costs
through the issuance of a maximum of 38,706,397 new shares, or the higher amount
and higher number of shares that may follow from the exercise of outstanding
warrants.

The decision to issue new shares requires approval at an extraordinary general
meeting, expected to be held on November 10, 2009 (a separate notification will
be published today and be available at Karo Bio's website. The notification will
also be published in Svenska Dagbladet and in Post- och Inrikes Tidningar as of
tomorrow, October 27, 2009). 

The record date for determining which persons are entitled to participate in the
rights issue will be November 17, 2009 and the subscription period will take
place during the period from and including November 18, 2009 up to and including
December 2, 2009, or such later date decided by the Board of Directors. When
issued and fully paid, the newly issued shares will rank equally in all respects
with the current shares. 

One of the single largest shareholders of the company, Bo Håkansson (through
Farstorps Gård AB), who is also a non-executive board member of Karo Bio,
together with other members of the board and the management team have undertaken
to subscribe for shares in relation to their respective holdings in Karo Bio,
which represent in aggregate approximately 3.1 percent of the rights issue.
Moreover, the company has also received underwriting agreements from Bo
Håkansson through Farstorp Invest AB, as well as a consortium of external
investors, to subscribe for shares corresponding to in total approx. SEK 161m,
such that 100 percent of the offering is guaranteed through subscription
undertakings and underwriting agreements.

A more detailed description regarding the rights issue will be made available in
the prospectus to be issued in connection with the offering, which will be
published on or about November 11, 2009, and will be available on Karo Bio's
website as of this day.

ABG Sundal Collier and Piper Jaffray are acting as financial advisors to Karo
Bio in connection with the rights issue.

Preliminary time plan
•	Extraordinary general meeting: November 10, 2009
•	Publication of prospectus: On or about November 11, 2009
•	Record date: November 17, 2009
•	Subscription period: November 18 - December 2, 2009
•	Trading in subscription rights: November 18 - November 27, 2009
•	Announcement of preliminary outcome of the rights issue: On or about December
7, 2009.

For more information please contact:
Per Olof Wallström, President
Tel: +46 8 608 60 20
E-mail: p.o.wallstrom@karobio.se

Erika Söderberg Johnson, CFO and responsible for Investor Relations
Tel: +46 8 608 60 52
E-mail: erika.soderberg.johnson@karobio.se

About Karo Bio
Karo Bio is a drug discovery and development company specializing in
endocrinology and targeting nuclear receptors as target proteins for the
development of novel pharmaceuticals. The company has a project portfolio with
innovative molecules that primarily target dyslipidemia, CNS-disorders,
inflammation, and women's health. In these areas, there are significant market
opportunities and a clear need for pharmaceuticals with new mechanisms of
action. Karo Bio develops compounds aimed at treating broad patient populations
up to clinical proof of concept before out-licensing. In therapeutic niche
areas, Karo Bio has the capacity to bring selected compounds into late stage
clinical development and, potentially, to the market. In addition to the
proprietary projects, Karo Bio has three strategic collaborations with
international pharmaceutical companies for development of innovative therapies
for the treatment of common diseases. Karo Bio is listed on NASDAQ OMX Stockholm
since 1998 (Reuters: KARO.ST).

Karo Bio publishes this information in accordance with the Swedish Securities
Markets Act and/or the Swedish Financial Instruments Trading Act. The
information was published on October 26, 2009 at 08:30.

This press release is also available online at: www.karobio.com and
www.newsroom.cision.com

Notice to UK residents. This announcement is only being distributed to, and is
only directed at, persons in the United Kingdom that are qualified investors as
that term is defined in the Prospectus Directive that are also (i) “investment
professionals” falling within article 19(5) of the Financial Service and Markets
Act 2000 (Financial Promotion) Order 2005 (the “Order”) or (ii)“high net worth
entities” and other persons to whom it may lawfully be communicated, falling
within the meaning of Article 49(2)(a) to (d) of the Order (all such persons
being “relevant persons”). The offered shares of Karo Bio AB are only available
to relevant persons and any invitation, offer or agreement to subscribe,
purchase or otherwise acquire such offered shares will be engaged in only with
relevant persons. Any person who is not a relevant person should not act or rely
on this document or any of its content.