Karo Bio Implements A rights issue of MSEK 77.7 and a directed issue of MSEK 7.0 to Anders Lönner

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LAWS AND REGULATIONS.
STOCKHOLM, SWEDEN, February 13, 2014 – The Board of Directors of Karo Bio has
decided to implement a rights issue. According to the terms of the issue, three
(3) existing shares in Karo Bio entitle the holder to subscribe for one (1) new
share at SEK 0.47. The subscription period for the rights issue is between March
24 and April 7, 2014. Fully subscribed, the rights issue will raise MSEK 77.7.
There are subscription commitments and underwriting agreements corresponding to
85 per cent of the rights issue.

In addition, the Board of Directors has decided to implement a directed issue of
15 000 000 shares at SEK 0.47 per share, raising MSEK 7.0. The directed issue
will be subscribed by Anders Lönner.

In total, the share issues will raise MSEK 84.7 before transaction costs.

The decision of the Board to issue shares is conditional upon approval by an
extraordinary general meeting to be held on March 17, 2014. Notice to the
extraordinary general meeting will be published separately.

Background and rationale
During the last year, Karo Bio has had a positive development in several of its
projects, which may enable the company to have one or more projects in clinical
phase next year. Furthermore, there is a strong interest in the company’s
projects among potential industrial partners and Karo Bio deems that there are
good prospects to enter into a license deal.

The bulk of Karo Bio’s resources are currently being focused to three projects.
These projects are RORgamma, ERbeta MS and ERbeta Cancer. For RORgamma, Karo Bio
has a well-functioning cooperation with Pfizer, which generated about MSEK 44 in
revenues in 2013.

Within both ERbeta MS and ERbeta Cancer, important pre-clinical results have
been generated during the last year, which further strengthens the potential of
the projects as well as increases their commercial value. Karo Bio has also
entered into a collaboration within the fibrosis field that will investigate a
potential new treatment principle for these hard to treat diseases.

To finance the development of ERbeta MS and ERbeta Cancer towards clinical
trials and to strengthen the long term prospects of operations as well as Karo
Bios position in commercial discussions, there is a need to raise additional
capital. The Board assesses that the net proceeds from the share issues will be
sufficient to finance the company for the coming twelve months, also without any
additional license agreements or additional financing.

Anders Lönner has declared his intentions to become a long term and active owner
in Karo Bio. The Board of Directors deems that Anders Lönner’s experience from
the pharmaceutical industry and competence within business development is of
strategic importance to the company and that it will improve Karo Bio’s
potential to create value for all shareholders. To the annual general meeting
2014, Karo Bio’s nomination committee has nominated Anders Lönner to the
position as Chairman of the Board. The complete proposal from the nomination
committee is available in a separate press release.

Terms for the rights issue
The rights issue means that Karo Bio’s share capital is increased by a maximum
of SEK 3,306,279.35 by the issuance of a maximum of 165,315,790 shares. Existing
shareholders have preferential rights to subscribe for new shares in proportion
to the number of shares already held. Those who on the record date are
registered as shareholders in Karo Bio are entitled to subscribe for one (1) new
share for every three (3) existing shares in the company.

If not all subscription rights are exercised for subscription with preferential
right, the Board shall resolve on allotment of shares without preferential right
up to the maximum amount of the rights issue. Such allotment will firstly be
made to those who have subscribed for shares by the exercise of subscription
rights and who wish to subscribe for additional shares, pro rata in proportion
to the number of shares subscribed for using subscription rights, secondly to
other parties who have expressed an interest to subscribe for shares without the
exercise of subscription rights, pro rata in proportion to their declared
interest, and thirdly to those who have provided guarantees for the subscription
of shares.

The record date for participation in the issue is March 20, 2014. Subscription
shall take place during the period from March 24 until April 7, 2014. The
subscription price has been set at SEK 0.47 per share. If fully subscribed, the
rights issue will provide Karo Bio with SEK 77,698,421 before transaction costs.

Subscription and underwriting guarantees
Existing shareholders, who together represent 4.0 percent of the share capital
in Karo Bio, have undertaken to subscribe in full for their pro rata share in
the rights issue, which amount to around MSEK 3.1. In addition to subscription
agreements, an underwriting consortium has committed to subscribe for up to MSEK
63 in the rights issue. In total, about MSEK 66.1 of the rights issue is
guaranteed by subscription undertakings and underwriting commitments, which
represents 85 per cent of the issue amount.

Preliminary time-plan for the rights issue
February 17, 2014              Notice for extraordinary general meeting
March 17, 2014                  Extraordinary general meeting
March 18, 2014                  First day of trading excluding rights to
participate in the rights issue
March 20, 2014                  Record date for participation in the rights
issue
March 21, 2014                  Expected date of publication of the prospectus
March 24 – April 7, 2014     Subscription Period
March 24 – April 2, 2014     Trading in subscription rights
April 10, 2014                     Estimated date of publication of the outcome
of the rights issue

Terms and time-plan for the directed issue
In the directed share issue, the share capital will be increased with SEK
299,996.69 through the issuance of 15 000 000 new shares. The issue will be
subscribed without preferential rights by Anders Lönner in accordance with
subscription undertaking. The price in the directed issue is SEK 0.47 per share.
The shares shall be subscribed on March 16, 2014 the latest and paid within the
subscription period in the rights issue.

Extraordinary general meeting
The shareholders in Karo Bio are convened to an extraordinary general meeting
Monday March 17, 2014 at 16.00 in Restaurant Tango, Novum Science Park (level
5), Hälsovägen 7 in Huddinge. The notice of the extraordinary general meeting is
available in a separate press release.

Advisors
Redeye is financial advisor and Mannheimer Swartling legal advisor to the
company in connection with the rights issue.

For further information, please contact:
Per Bengtsson, CEO, mobile phone +46 76 002 6020 or e-mail
per.bengtsson@karobio.se
Henrik Palm, CFO, mobile phone +46 70-540 40 14 or e-mail henrik.palm@karobio.se

About Karo Bio
Karo Bio is a research and development company focused on innovative drugs for
important medical needs. The world-leading knowledge of nuclear receptors as
target proteins for the development of pharmaceuticals and their related
mechanisms of action, are utilized for developing novel, more effective and
safer pharmaceuticals. Karo Bio is active in preclinical development focused on
the areas of neuropsychiatry, inflammation, autoimmune diseases and cancer. Karo
Bio is based in Huddinge, Sweden. The company has around 39 employees and is
listed on NASDAQ OMX Stockholm.

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 February 13, 2014 at 08:30 am CET.

IMPORTANT INFORMATION
This press release is not an offer or solicitation to acquire shares in Karo
Bio. A prospectus relating to the rights issue referred to in this press release
will be filed with the Swedish Financial Supervisory Authority. After approval
and registration of the prospectus by the Swedish Financial Supervisory
Authority, the prospectus will be published and made available on Karo Bio’s
website.

This press release does not constitute or form part of an offer or solicitation
to purchase or subscribe for securities in the United States. The securities
referred to herein may not be sold in the United States absent registration or
an exemption from registration under the US Securities Act of 1933, as amended.
Karo Bio does not intend to register any portion of the offering of the
securities in the United States or to conduct a public offering of the
securities in the United States. The information in this press release may not
be announced, published or distributed, directly or indirectly, to the United
States, Australia, Canada, Hong Kong, Japan, New Zeeland, Singapore, South
Africa or Switzerland, or in any other jurisdiction where the announcement,
publication or distribution of the information would not comply with applicable
laws and regulations.

No subscription rights, interim shares or shares has been, and will not be
registered under the United States Securities Act of 1933 (" Securities Act") or
the securities laws of any state or other jurisdiction of the United States and
may not be offered, subscribed, exercised, pledged, sold, resold, delivered or
transferred, directly or indirectly, within the United States, except with the
prior written consent of Karo Bio and pursuant to an applicable exemption from
the registration requirements of the Securities Act and in compliance with the
securities laws of the relevant state or other jurisdiction of the United
States. Securities are being offered outside the United States pursuant to
Regulation S under the Securities Act. There will not be implemented any public
offering in the United States. Any offer of securities in the United States will
only be provided to a limited number of existing shareholders who (i) Karo Bio
at its own discretion, finds to be qualified enough to be offered securities
without the risk of triggering the registration requirements under the
Securities Act and (ii) has signed and sent a so-called investor letter to Karo
Bio.

This press release may contain certain forward-looking statements that reflect
Karo Bio's current views of future events and financial and operational
performance. Words such as "intends", "anticipates", "expects", "may", "plan ",
"anticipate" or similar expressions regarding indications or predictions of
future developments or trends, and are not based on historical facts, constitute
forward-looking information. Forward-looking information is inherently
associated with both known and unknown risks and uncertainties because it is
dependent on future events and circumstances. Forward-looking statements are not
guarantees regarding future results or developments and actual results may
differ materially from those set forth in forward-looking information.