Karo Bio acquires U.S. company Novalon

KARO BIO ACQUIRES U.S. COMPANY NOVALON

Karo Bio AB is acquiring the American biotechnology company Novalon
Pharmaceutical Corporation based in Durham, North Carolina through a non-
cash issue.

– Karo Bio consolidates its leading position in the field of nuclear
receptors.
– The acquisition supplements Karo Bio’s operations with state-of-the-art
technology for the development of genomics based therapeutics.
– Novalon shareholders will hold 20 percent of Karo Bio after the
acquisition.
– The combined company will maintain its research activities in Sweden
and in the United States

“The acquisition of Novalon will strengthen Karo Bio’s technology base
for the development of new drug substances that act upon nuclear
receptors, which will make it possible to start several new projects and
partnerships. It also provides Karo Bio with an opportunity to develop
research programmes in new areas such as the identification of
therapeutics that act upon new pharmaceutical targets derived from
discoveries coming from genomics research. The company will initially have
seven collaborative agreements with international life science companies.

With operations in Europe and the United States, Karo Bio will have better
exposure to future collaborative partners and institutional investors,”
says Mr Per-Olof Mårtensson, President and CEO of Karo Bio.

“By joining with Karo Bio, Novalon is gaining an opportunity to fully
exploit the technology platform the company has developed. The merging of
our technologies and research programs will greatly accelerate the pace
and scope of our joint drug development,” says Dr Dana Fowlkes, Chairman,
CEO and founder of Novalon.

The new Karo Bio will have collaborative agreements with the leading
“life science” companies Abbott Laboratories, Bristol-Myers Squibb,
Merck & Co. Inc., Bayer AG, Ares-Serono, Millennium Pharmaceuticals Inc.
and Novartis Research Foundation. The joint technology platforms encompass
both nuclear receptors and genomics.

The deal is conditional on Karo Bio’s shareholders approving a directed
new share issue at the Annual General Meeting on 26 April. In addition, at
that meeting and as a first step towards a stock exchange listing abroad,
the company shall propose a new share issue with a value of around SEK 200
million directed to institutional investors.

Further information will be available at the:
Press conference at 11.30 a.m. in the Redarsalen Operakällaren
To take part in the press conference by telephone:

Apply by telephoning Camilla Lindholm between 09.00 and 10.00 a.m. on 08-
696 12 41

Background

Karo Bio AB, a research-based pharmaceutical company in Huddinge, today
announces that agreement has been reached on the acquisition of Novalon, a
privately-held biotechnology company with premises located in the Research
Triangle area of North Carolina, United States. Karo Bio is acquiring
Novalon through a non-cash issue, where Novalon’s shareholders will hold
20 percent of the combined company. The boards of both companies have
approved the acquisition and the merger now awaits the approval of Karo
Bio’s shareholders, the fulfilment of certain criteria for the purchase
and necessary approvals from authorities and third parties.

Novalon was founded 1996 by the research scientists Dr Dana Fowlkes and Dr
Brian Kay. They have developed technology that is the subject of patent
applications based on the use of peptides or BioKeys (small proteins)
that can bind biologically active areas on proteins (e.g. nuclear
receptors) that are targets for drug development. These peptides or
BioKeys are key components in new high capacity screening systems for
identification of new pharmaceuticals. In addition, the technology makes
it possible to rapidly validate new proteins as targets for drug
discovery, which is one of the bottlenecks for the discovery of new
therapeutics based on information from genomics.

Novalon currently has several non-exclusive pilot collaborations with
companies such as Bayer AG, Ares-Serono, Millennium Pharmaceuticals, Inc.
and Novartis Research Foundation. Novalon has internal drug development
programmes in cancer and infectious diseases. Future collaborations based
on Novalon’s BioKey technology in “genomics” will be aimed at providing
Karo Bio with certain rights to new nuclear receptors.

Novalon has also enhanced the BioKey technology by developing a method
known as Molecular Braille , which is the subject of a patent application.
This technology makes it possible to quickly link the action of a
substance on a nuclear receptor to tissue-selective biological activities.
Lack of tissue selectivity is one of the problems with many drugs and
leads to various side effects. The Molecular Braille technology represents
a very valuable adjunct to Karo Bio’s technologies and will contribute
greatly to efficient development of new selective drugs with fewer side
effects.

The combination of the technologies of the two companies, Novalon’s BioKey
and Molecular Braille and Karo Bio’s expertise in the structural
determination of proteins, medicinal chemistry and structure-based drug
design, will result in a company with a broad technology base for the
development of new drugs. These technologies will strengthen Karo Bio’s
current projects as well as enable the initiation of new projects and
collaborations with major pharmaceutical companies. After the acquisition
Karo Bio will maintain and further develop its research activities in
Sweden and the United States.

Karo Bio’s Board has previously decided that Torben Jørgensen is to take
over as CEO at the Annual General Meeting on 26 April. Upon Karo Bio’s
shareholders approval of the acquisition Dr Dana Fowlkes will become Chief
Scientific Officer. The current CEO Per-Olof Mårtensson has been proposed
to become the Chairman of the Karo Bio Board.

For further information:

Per-Olof Mårtensson, President and CEO Karo Bio AB,
+ 46 8 608 60 20
Per-olof.martensson@karobio.se

Dana Fowlkes, Chairman and CEO Novalon Pharmaceutical Corporation
+ 46 8 608 60 27
dfowlkes@novalon.com

Karo Bio is a research-based pharmaceutical company developing tissue-
selective drug substances that act via nuclear receptors for the treatment
of common diseases such as diabetes, obesity, elevated cholesterol,
inflammatory disorders, cancer, cardiovascular diseases and certain
women’s health problems. Development takes place in collaboration with
international pharmaceutical companies and leading universities. The
company is currently collaborating with Abbott Laboratories, Bristol-Myers
Squibb Company and Merck &Co. Inc.

Please visit our websites: www.karobio.se and www.novalon.com

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