INTERIM REPORT JANUARY-MARCH 2013

The January–March period 2013 in brief

• Net sales amounted to MSEK 8.1 (8.3)
• Net loss for the group was MSEK 10.7 (54.0)
• Loss per share was SEK 0.02 (0.14)
• Cash flow from operating activities was MSEK -9.9 (-41.6)
• Cash and cash equivalents and other short-term investments totaled
  MSEK 48.0 (117.0) at the end of the period
• The rights issue conducted in 2012 brought a total of MSEK 28.3 net after transaction costs, whereof MSEK 4.3 in the quarter
• The project portfolio advances according to plan

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 via a link on http://www.karobio.se/ or by telephone +46850556477 or +442033645372.

CEO COMMENTARY
Throughout 2013, I expect our main focus will be on increasing revenue from our projects. We have several opportunities to do so. Closest at hand is an extension of the agreement with Pfizer on RORgamma and a milestone in this project. The work on the project progressed well during the first quarter and the project is advancing at good speed. Because of our confidentiality agreement, regretfully I cannot provide further details than that I am very pleased with our performance in the project.

Within the field of ERbeta we work in parallel with several revenue opportunities. In oncology, opportunities for private and public grants are more favorable than in many other areas. Here, we work with several different alternatives.

As you know, the second track for ERbeta is MS. Here, we strive to better understand how ERbeta positively impacts the disease. We have previous findings that suggest that the impact consists of protection and repair of the tissue surrounding the nerve fibers in the brain. If this turns out to be the case also in patients, we are close to a completely new type of MS treatment, which is much sought after as current treatments lack efficacy in the progressive phase of the disease that follows the initial inflammatory phase. In the current quarter we will receive preclinical results that are expected to provide important complements to the picture we already have of the mechanism of action. To fund continued preclinical work and advance towards clinical trials, we are looking for an industrial partner. So far, different players active in the MS area have been hesitant to commit, but now we meet an increased interest in the project. By acquiring additional efficacy data and other knowledge we hope to get a partner to invest financially in the project. There are two reasons which warrant us to be positive about our chances. First, we are strengthening our offering by establishing new data. Second is the trend that major players in the MS field are increasingly interested in progressive MS, an interest that also extends to projects in preclinical phase.

Within NURR1 we continue target validation, which in short means that we ensure that we can do certain tests on a molecule of interest. Several factors are driving the interest in NURR1. Firstly, there are several different types of diseases that can be addressed through this receptor. Karo Bio has selected autoimmune disease as its focus for the work on NURR1. This is supported by data suggesting that NURR1 influences the formation of so-called regulatory T cells, and the interesting thing is that it has been shown in clinical trials with antibodies that these cells actually affect the condition of patients with autoimmune disease. One significant difference is that we work with small molecules that have many advantages over biologics. I would also like to touch upon a piece of news; that we since some time are working with Nur77, a receptor similar NURR1. There are significant synergies to take advantage of since the receptors are relatively similar. There is quite a lot that suggest that Nur77 and NURR1 may become commercially viable at an early development stage. Finally, I will also comment on our project GR inflammation, which advanced during the quarter. The nature of the project means that we need to develop it a bit further before we can seek external funding.

In addition to the work in our projects, we have devoted considerable time during the quarter in other future-oriented efforts. We have participated in several conferences and presented our projects to potential partners. It is clear that the name Karo Bio meets with respect for its knowledge in nuclear receptors, which helps to garner interest in our projects. We are also discussing internally how to best develop Karo Bio to create value for shareholders. The most important part in this effort right now is to generate revenue from our current projects. Another area in which we have achieved a great deal is costs where we continue to implement necessary savings and adaptations. Alongside this, we see several other possibilities and combinations of possibilities that can create value for shareholders. I hope to present our thoughts more concretely later on in the year.

CEO Per Bengtsson

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 7, 2013 at 8.30 a.m. CET.