KARO BIO ANNOUCES MERCK HAS ENTERED CLINICAL DEVELOPMENT WITH ESTROGEN RECEPTOR COMPOUND

September 12, 2006 -- Karo Bio announced today that an estrogen receptor compound discovered as part of its research collaboration with Merck & Co., Inc. has entered Phase I clinical development.

The collaboration with Merck began in November 1997 with the objective of developing new treatments targeting estrogen receptors. Such treatments are particularly relevant in women's healthcare, but have the potential for application in other major clinical areas. The joint drug discovery phase of the collaboration with Merck was completed in 2002 and resulted in the discovery of a number of selective and potent compounds. In 2004, Karo Bio received a Phase I milestone payment from Merck for a compound whose development was subsequently discontinued. The entry of this latest compound into clinical development does not trigger a milestone payment for Karo Bio. Under the terms of the collaboration agreement, Merck has exclusive worldwide rights to all compounds identified during the collaboration and is responsible for their further preclinical and clinical development. Karo Bio has rights to milestone payments from Merck based upon selection of new drug candidates as well as the successful clinical development of the compounds and final drug approval. Karo Bio also has rights to royalties on future drug sales. ''We are pleased about the entry of our compound into clinical development and with the collaborative spirit that the Karo Bio and Merck teams have developed in working together on this important research,” says Per Olof Wallström, President & CEO of Karo Bio. KARO BIO AB For further information, please contact: Per Olof Wallström, President & Chief Executive Officer Telephone: +46 8 608 60 20 Per Otteskog, Senior Vice President Telephone: +46 8 608 60 18 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.