KARO BIO ANNOUNCES RIGHTS ISSUE OF MSEK 38.7 AND CALLS AN EXTRAORDINARY GENERAL MEETING

Not for release, or for publication or distribution, directly or indirectly, in or into the United States, Australia, Canada, Hong Kong, Japan, New Zeeland, Singapore, South Africa or Switzerland, or within any other jurisdiction in which the distribution of this press release would not comply with applicable laws and regulations.

The Board of Directors of Karo Bio has decided to convene an Extraordinary General Meeting on November 19, 2012 and there present a proposal to implement a rights issue of approximately MSEK 38.7 with preferential rights for existing shareholders. The purpose of the issue is to secure funding that will allow the company to achieve a neutral cash flow, which is expected to be within reach in 2013. Three existing shares in Karo Bio entitle the holder to subscribe for one new share. The subscription price is SEK 0.30 per share, corresponding to an issue amount of up to MSEK 38.7 before transaction costs. The subscription period for the rights issue is between November 28 and December 12, 2012. There are subscription commitments and underwriting agreements for a total of MSEK 28.1 corresponding to 73 percent of the issue amount.

The notice of the extraordinary general meeting is attached. The Meeting will also include a second control meeting.

Background and rationale
Karo Bio is a research company focused on the development of innovative drugs acting through nuclear receptors. Karo Bio has previously conducted several clinical trials but has for some time had a strategy based on lower costs and reduced risk in the business. The aim is to reach agreements for the company’s projects in an early phase to thereby generate income and reduce risk in the company. Furthermore, the company is working actively to seek different types of financing. The Board assesses that Karo Bio has the potential to achieve a positive cash flow in 2013.

To finance operations until a neutral cash flow can be reached, the company needs to ensure further funding. The company assesses that the proposed rights issue of MSEK 38.7 will fund operations at least until the end of 2013 without obtaining additional licensing agreements or other financing.

Conditions for right issue
The rights issue means that Karo Bio’s share capital is increased by a maximum of SEK 2,580,426.48 by the issuance of a maximum of 129,021,324 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 November 26, 2012. Subscription shall take place during the period from November 28, 2012 until December 12, 2012. The subscription price has been set at SEK 0.30 per share, which means that the issue, if fully subscribed, will provide Karo Bio with SEK 38,706,397 before transaction costs.

Allotment option
In order to satisfy any over-subscription in the rights issue, the Board proposes that the Board be authorized to decide on the issuance of additional shares up to a maximum total of 33,350,000 shares at an issue price of SEK 0.30 per share in order to enable the company to raise additional proceeds of MSEK 10. Upon full subscription of the rights issue the over-allotment represents 6.5 percent of existing share capital.

The reason for the deviation from preferential rights for existing shareholders is to take advantage of the company’s capability to receive additional proceeds in the event of an over-subscription of the rights issue, if deemed desirable. The issue can be made with or without preferential rights for the company’s shareholders according to the same allocation principles as for the rights issue, however, the Board shall have the right to primarily accommodate any subscription interest from the underwriters included in underwriting guarantees.

Subscription and underwriting guarantees
Existing shareholders who together hold 50,881,820 shares in Karo Bio corresponding to 13.1 percent of the share capital have undertaken to subscribe in full for their shares, which is about MSEK 5.1 of the offering. In addition to subscription agreements an underwriting consortium has committed to subscribe for up to MSEK 23 of the offering. Overall, about MSEK 28.1 of the issue is guaranteed by subscription undertakings and underwriting, which represents 73 percent of the issue amount.

Participating in the consortium are Chairman, Göran Wessman, with MSEK 1 and the Board Members, Christer Fåhraeus and Per-Anders Johansson, with MSEK 4 and MSEK 5 respectively.

Preliminary time-plan for right issue
October 26, 2012                Notice for extraordinary general meeting
November 19, 2012             Extraordinary general meeting
November 22, 2012             First day of trading excluding rights to participate in the rights issue
November 26, 2012             Record date for participation in the rights issue
November 26, 2012             Expected date of publication of the prospectus
Nov 28 until Dec 12, 2012   Subscription Period
Nov 28 until Dec 7, 2012     Trading in subscription rights
December 17, 2012            Estimated date of publication of the outcome of the rights issue

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 the related mechanisms of action, are utilized as a foundation for developing novel, increasingly effective and safer pharmaceuticals. Karo Bio is active in preclinical development focused on the areas of neuropsychiatry, inflammation, autoimmune diseases, cancer and women’s health. The company has a number of strategic collaborations with big pharma. Karo Bio is based in Huddinge, Sweden. The company has around 44 employees and is listed on NASDAQ OMX Stockholm (Reuters: KARO.ST).

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 October 24, 2012, at 08:15 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. Aspiro 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.

This press release is also available at www.karobio.com and www.newsroom.cision.com