KARO BIO ISSUES NEW SHARES TO ADVANCE PRODUCTS IN CLINICAL DEVELOPMENT

The Board of Directors of Karo Bio AB has decided to make a modification of the Company’s strategy. In addition to the current partnership based model, Karo Bio will bring selected compounds to late stage clinical development. Such compounds will potentially be launched by the Company in selected markets. To implement the strategy, Karo Bio’s Board has decided to issue new shares with preferential rights. Assuming full subscription, the rights issue will generate MSEK 280 to the Company before transaction costs.

The decision by the Board is subject to approval by a special general meeting to be held on October 14, 2005. Guarantees and statements of intent to subscribe have been received corresponding to 94 percent of the rights issue. “With this strategy we broaden our business opportunities and build shareholder value short and long term” says Per Olof Wallström, President and Chief Executive Officer of Karo Bio. “We intend to use the proceeds of the new share issue to bring four existing projects into clinical phase within the next two years.” 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; mobile +46 70 942 95 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.