Press release April 24th, 2008

INTERIM REPORT JANUARY–MARCH 2008

The quarter in brief

Net sales for the period amounted to MSEK 1.7 (2.0)
Net loss for the period amounted to MSEK 51.8 (51.4)
Loss per share amounted to SEK 0.45 (0.56)
Cash flow from operating activities for the period amounted to MSEK -56.0 (-56.4). Cash, cash equivalents and other short-term investments totaled MSEK 375.7 (173.4) at the end of the period
The phase IIb study with eprotirome as an add-on to statin treatment in dyslipidemia patients is progressing according to plan and will be reported in August 2008
A new phase IIb study with eprotirome as an add-on to ezetimibe has been initiated. The results from this study are expected in the fourth quarter of 2008
Positive results achieved in the first clinical phase I study with the diabetes compound KB3305
Collaboration with Zydus Cadila initiated with the aim to develop novel and improved anti-inflammatory compounds
All rights to out licensed SARM compounds have been re-acquired from Radius

Significant events after the end of the reporting period

• Karo Bio has granted a non-exclusive license to certain intellectual property rights to a not disclosed company. A license fee of MEUR 0.4 has been received after the end of the reporting period

For further information, please contact:

Per Olof Wallström, President, tel. +46 8 608 60 20 Per Otteskog, Senior Vice President Investor Relations, tel. +46 8 608 60 18 Erika Johnson, Chief Financial Officer, tel. +46 8 608 60 52

Selected financial information in summary

(MSEK)	January-March		January-December
	2008	2007	2007
Net sales	1.7	2.0	7.5
Operating expenses	-58.2	-55.0	-223.4
- whereof of R&D expenses	-50.3	-45.5	-190.8
Profit / loss for the period	-51.8	-51.4	-203.4
Profit / loss per share (SEK)	-0.45	-0.56	-1.92
Cash flow from operating activities	-56.0	-56.4	-178.3
Cash, cash equivalents and other short term investments at end of period	375.7	173.4	432.3
Equity ratio (%)	85.6	82.4	86.9
Numbers of shares outstanding ('000)
- weighted average during the period	116,119	91,587	105,897
- at the end of the period, basic	116,119	91,587	116,119
- at the end of the period, fully diluted	117,315	92,787	117,315

About Karo Bio

Karo Bio is a drug discovery and development company specializing in nuclear receptors for the development of novel pharmaceuticals.

The Company has a strong project portfolio with innovative molecules that primarily target metabolic diseases such as diabetes, atherosclerosis and dyslipidemia. In all of these areas there are significant market opportunities and a need for pharmaceuticals with new mechanisms of action. Karo Bio intends to bring selected compounds within niche therapeutic areas into late stage clinical development and, potentially, to the market. In addition to pursuing niche opportunities, Karo Bio continues to develop compounds aimed at treatment of broad patient populations to clinical proof of concept before out licensing.

In addition to the proprietary projects, Karo Bio has three strategic collaborations with international pharmaceutical companies for development of innovative therapies for the treatment of common diseases.

Karo Bio is listed on the OMX Nordic Exchange Stockholm since 1998 (Reuters: KARO.ST).

PROJECT	EXPLORATORY RESEARCH	DRUG DISCOVERY	PRECLINICAL DEVELOPMENT	PHASE I	PHASE II	PHASE III	NDA
Eprotirome (KB2115), TR Dyslipidemia
KB3305, GR Type 2 diabetes
Selective ERbeta Agonists Depression, Cancer, Inflammation
Karo Bio/Wyeth, LXR Atherosclerosis
Karo Bio/Merck, ER Women's Health
Karo Bio/Zydus Cadila, GR Inflammation

Project portfolio

Karo Bio AB Novum, 141 57 Huddinge, Sweden Telephone +46 8 608 60 00 Facsimile: +46 8 774 82 61 www.karobio.com

CEO'S COMMENTS ON THE FIRST QUARTER OF 2008

The first quarter has been eventful and overall we are making good progress.

Good progress in clinical development of eprotirome

Eprotirome, our most advanced compound in clinical development, is an innovative and first in class compound with a new mechanism of action and a unique efficacy profile for treatment of dyslipidemia. Preclinical and clinical phase I and IIa studies have shown that eprotirome has a promising efficacy and safety profile. We are now advancing eprotirome in phase IIb clinical studies which are proceeding according to plan. Data from the first of these studies will be available in August 2008. With this phase II program we are positioning eprotirome for partnership negotiations and start up of phase III clinical studies.

KB3305 shows good exposure and pharmacokinetics in first clinical study

KB3305 for treatment of type 2 diabetes is our second compound in clinical development. KB3305 is an innovative compound with a unique mechanism of action that has shown excellent efficacy and safety in several preclinical models. KB3305 combines the potential to lower both blood glucose and lipids, which are important risk factors for patients with type 2 diabetes.

KB3305 shows good exposure and robust and predictable pharmacokinetics in the phase I single ascending dose study. We intend to continue the program with a multiple ascending dose study and later this year we are looking forward to results from a study in a small group of diabetes patients where we will look at effects on glucose lowering.

Partnership events and progress in exploratory research

Our strategy is to broaden the pipeline and increase the chance for success in development through establishment of partnerships. Early in 2008 we initiated a research collaboration with Zydus Cadila. Together we will develop selective compounds that target the glucocorticoid receptor with the purpose to treat inflammatory disorders. There are great opportunities in this field and there is a very good match between our companies. The ideas and the tools are in place and the first results are being generated.

We have also made progress in our discovery program with improvement of the bioavailability of compounds specifically targeting the ERbeta receptor. Apart from depression there are other clinical opportunities in this field being evaluated. We are aiming to select a candidate drug in 2008.

Per Olof Wallström President and CEO

SIGNIFICANT EVENTS AFTER THE END OF THE REPORTING PERIOD

Karo Bio has granted a non-exclusive license to certain intellectual property rights to a not disclosed company. A license fee of MEUR 0.4 has been received after the end of the reporting period.

RESEARCH AND DEVELOPMENT

Eprotirome (KB2115) – Dyslipidemia

Karo Bio's compound eprotirome is a novel, selective, thyroid hormone agonist for treatment of dyslipidemia. In the first phase II study, eprotirome significantly reduced LDL-cholesterol and other risk factors for development of cardiovascular disease such as triglycerides and lipoprotein (a), and was well tolerated.

Currently eprotirome is being used along with statin treatment (simvastatin or atorvastatin) in a phase IIb dose ranging study in 180 patients. The study is progressing according to plan and is expected to be completed in June. Key data will be available in August 2008.

During the period, Karo Bio initiated a second clinical phase IIb study with eprotirome. This study is a placebo controlled, parallel group, double blind, 10 week dose ranging study in 100 patients, where eprotirome is given once daily in doses of 25, 50, or 100 µg in addition to 10 mg per day of the cholesterol absorption inhibitor ezetimibe.

The purpose of the second phase IIb dose ranging study is to expand the clinical and commercial potential for eprotirome in dyslipidemia treatment by exploring whether eprotirome in combination with ezetimibe can serve as an alternative to statin treatment. The results of the study are expected in the fourth quarter of 2008.

In a recent study, eprotirome has also shown efficacy in a preclinical model for type 2 diabetes. Further studies will be performed to investigate the potential for eprotirome within this area.

KB3305 – Type 2 diabetes

Fasting blood glucose levels are elevated in type 2 diabetic patients due to excessive hepatic glucose production, which is regulated by the glucocorticoid receptor. KB3305 is a liver selective glucocorticoid antagonist that suppresses hepatic glucose production. This novel mechanism of action for improvement of glycemic control has the potential to become an important contribution to the treatment of type 2 diabetes.

In preclinical studies, KB3305 has shown to be both efficacious and safe. In addition to glucose lowering, KB3305 also lowers other important risk factors for type 2 diabetics such as triglyceride and free fatty acid levels in plasma.

New and improved pharmaceutical formulations have been developed and a clinical phase I/IIa program was initiated in December 2007. The program is conducted in three parts. In the first study, single ascending doses have been given to healthy volunteers. The compound shows robust and predictable pharmacokinetics and the subjects are well exposed. No serious adverse events have been recorded.

The single ascending dose study will be followed by a multiple ascending dose study. In the third part of the program, the compound will be given repeatedly to patients with type 2 diabetes. The entire phase I/IIa study is anticipated to be completed during 2008.

ERbeta selective compounds – Depression, cancer, inflammation

Karo Bio has shown that ERbeta selective compounds are effective in preclinical models indicative for CNS effects. Potential clinical applications for ERbeta in inflammatory conditions and in cancer are being evaluated. Highly selective compounds have been developed and the bioavailability has been significantly improved during the period. The goal is to select a candidate drug in 2008.

Atherosclerosis – Wyeth Pharmaceuticals

The collaboration with Wyeth Pharmaceuticals, initiated in 2001, is aimed at new treatments of atherosclerosis with the liver X receptor (LXR) as a target. Preclinical studies have shown that compounds which stimulate LXR have anti-atherogenic effects. In 2007 the collaboration was extended until August 31, 2008. Other clinical opportunities for LXR agonists will also be explored.

Estrogen Receptors – Merck & Co., Inc.

Estrogen receptors are important targets for several diseases in the field of women's health. The collaboration with Merck was initiated in 1997. The joint drug discovery phase in the collaboration with Merck was concluded in 2002, with Merck responsible for development of selected compounds. The candidate compound from the collaboration that entered phase I clinical development in 2006 was discontinued in 2007 due to an unsuitable profile. A back-up compound is in preclinical development.

Inflammatory diseases - Zydus Cadila

In February, Karo Bio and Zydus Cadila, one of India's leading healthcare companies, have initiated a three year research collaboration with the purpose to discover and develop novel, selective glucocorticoid receptor (GR) modulators for the treatment of inflammatory diseases.

Karo Bio will leverage its expertise in nuclear receptor drug discovery including structural biology, drug design and compound characterization. Zydus Cadila will carry out a focused drug discovery and development program, undertaking pre-clinical studies and performing clinical trials. Both parties will equally share risk and rewards for the collaboration program.

SARMs - Radius Health, Inc.

In September 2006 Karo Bio and Radius announced a licensing agreement in which Radius acquired the exclusive worldwide rights to a new class of selective androgen receptor modulators (SARMs) developed by Karo Bio. Karo Bio has now reacquired the full rights to these compounds.

RESULT AND FINANCIAL POSITION

The operations of the Group are mainly conducted in the parent company. The parent company holds only one subsidiary with assets of MSEK 0.1 (0.1), liabilities of MSEK 0.0 (0.0) and shareholders' equity of 0.1 (0.1). The subsidiary has had no revenue or expenses. The Group's accounts correspond, in all material respects, with that of the parent company why this is not separately disclosed.

Revenue

Net sales for the quarter decreased to MSEK 1.7 as compared to MSEK 2.0 for the same period last year. The reported net sales for the period consist of research payment from collaborations.

Expenses

Operating expenses for the quarter increased by MSEK 3.2 to MSEK 58.2 (55.0). The MSEK 4.8 increase in research and development expenses, which reflects the advancement of the project pipeline, was partly offset by a MSEK 1.4 decrease in administrative expenses. The latter reflects an overall reduction of the Company's internal cost base that was initiated in the fourth quarter of 2007.

Profit/loss

Operating loss for the quarter amounted to MSEK 56.4 (53.0). The MSEK 3.4 increase is mainly due to the increase in operating expenses. Financial net for the quarter amounted to MSEK 4.6 (1.5). The reported loss for the quarter increased with MSEK 0.4 to MSEK 51.8 (51.4).

Capital investments

Capital investments in equipment for the quarter amounted to MSEK 3.6 (0.8) and comprise mainly laboratory equipment financed with capital leases.

Cash flow

Cash flow from operating activities for the quarter amounted to MSEK -56.0 (-56.4).

Financial position

Cash and cash equivalents amounted to MSEK 85.3 (61.2) at the end of the period. Including other short-term investments with duration exceeding 90 days, these assets amounted to MSEK 375.7 (173.4), which corresponds to a change in total cash position of MSEK -56.5 during the period.

Shareholders equity and per share data

The share capital at the end of the period amounted to MSEK 58.1. The total number of shares amounted to 116,119,192 shares with a ratio value of SEK 0.50. Total consolidated shareholders' equity amounted to MSEK 342.4 after taking into account the loss for the period.

Loss per share for the quarter, based on the weighted average number of shares outstanding, amounted to SEK 0.45 (0.56). The Group's equity ratio at the end of the period was 85.6 per cent (82.4) and equity per share, based on fully diluted number of shares at the end of the period, was SEK 2.92 (1.71).

Organization

At the end of the period, Karo Bio had 61 (75) employees, of which 55 (67) are engaged in research and development.

Risk factors

There is no guarantee that Karo Bio's research and development will result in commercial success.

There is no guarantee that the clinical trials conducted by Karo Bio, whether independently or in collaboration with its partners, can demonstrate sufficient safety and efficacy to obtain the necessary approvals from regulatory authorities, or that they will result in marketable products.

There can be no guarantee that Karo Bio will develop products that can be patented, that granted patents can be retained, that future inventions will lead to patents, or that granted patents will be sufficient to protect Karo Bio's rights.

There may be a need to turn to the capital market in the future. Both the size and the timing of the Company's potential future capital requirements are dependent on a number of factors, including opportunities to enter into collaboration or licensing agreements and the possibility of achieving success in research and development projects undertaken.

CONDENSED CONSOLIDATED INCOME STATEMENTS (KSEK)

	January-March		January-December
	2008	2007	2007
Net sales	1,749	1,974	7,534
Operating expenses
Administrative expenses	-8,008	-9,386	-33,320
Research and development expenses	-50,259	-45,496	-190,754
Other operating income and expenses	93	-74	712
	-58,174	-54,956	-223,362
Operating profit / loss	-56,425	-52,982	-215,828
Financial net	4,580	1,543	12,393
Profit / loss after financial items	-51,845	-51,439	-203,435
Tax	-	-	-
PROFIT / LOSS FOR THE PERIOD	-51,845	-51,439	-203,435
Depreciation included in operating expenses	-1,446	-1,220	-5,531
Profit / loss per share (SEK) *) - based on weighted average number of shares outstanding, basic and diluted	-0.45	-0.56	-1.92
Number of shares outstanding (000)
- weighted average during the period	116,119	91,587	105,897
- at end of period, basic	116,119	91,587	116,119
- at end of period, fully diluted	117,315	92,787	117,315

*) The outstanding warrants lead to no dilution of loss per share, as a conversion to shares would lead to a reduced reported loss per share

CONDENSED CONSOLIDATED BALANCE SHEETS (KSEK)

	March 31		December 31
	2008	2007	2007
Assets
Licenses and similar rights	2,563	-	2,851
Equipment	8,346	7,995	5,884
Other current assets	13,294	11,520	12,580
Other short-term investments	290,383	112,220	233,093
Cash and cash equivalents	85,326	61,220	199,164
TOTAL ASSETS	399,912	192,955	453,572

Shareholders' equity and liabilities
Shareholders' equity	342,424	159,072	394,263
Non-current liabilities	2,720	592	225
Current liabilities	54,768	33,291	59,084
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES	399,912	192,955	453,572

	January-March		January-December
	2008	2007	2007
Operating activities
Operating profit / loss before financial items	-56,425	-52,982	-215,828
Depreciation	1,446	1,220	5,531
Other items not affecting cash flows	59	35	154
	-54,920	-51,727	-210,143
Financial items received and paid	2,445	795	16,029
Cash flow from operating activities before changes in working capital	-52,475	-50,932	-194,114
Changes in working capital	-3,517	-5,435	15,818
Cash flow from operating activities	-55,992	-56,367	-178,296
Investing activities
Investment in licenses and similar rights	-	-	-3,460
Net investment in equipment	-329	-828	-3,087
Net investment in other short-term investments	-57,517	24,636	-96,933
Cash flow from investing activities	-57,846	23,808	-103,480
Financing activities
Proceeds from new share issues	-	-	387,161
Cash flow from financing activities	-	-	387,161
Cash flow for the period	-113,838	-32,559	105,385
Cash and cash equivalents at the end of the period	85,326	61,220	199,164

CONDENSED CONSOLIDATED CASH FLOW STATEMENTS (KSEK)

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (KSEK)

		January-March	January-December
	2008	2007	2007
Equity at the beginning of the period	394,263	210,503	210,503
Employee stock option program - value of employee services	6	8	34
Share issuances	-	-	387,161
Profit / loss for the period	-51,845	-51,439	-203,435
Equity at the end of the period	342,424	159,072	394,263

EQUITY DATA

	March 31		December 31
	2008	2007	2007
Equity ratio	85.6%	82.4%	86.9%
Equity per share at the end of period – basic, SEK	2.95	1.74	3.40
Equity per share at the end of period - diluted, SEK	2.92	1.71	3.36

Accounting and valuation principles

This interim report has been prepared in accordance with International Accounting Standards 34 for interim reports and International Financial Reporting Standards IFRS as adopted by the EU. The accounting and valuation principles applied are unchanged compared to those applied in the Annual Report for 2007. A number of new or updated accounting standards and interpretations are applicable for financial years beginning January 1, 2008 or later. These accounting standards and interpretations are deemed not to have a significant impact on the consolidated financial statements other than presentational or disclosures presented in the reports. In addition, there are certain accounting standards and interpretations that are not relevant to Karo Bio.

Amounts are expressed in KSEK (thousands of Swedish Kronor) unless otherwise indicated. MSEK is an abbreviation for millions of Swedish Kronor. Amounts or figures in parentheses indicate comparative figures for the corresponding period last year.

Scheduled releases of financial information

•	Interim report April - June 2008	August 5, 2008
•	Interim report July - September 2008	October 23, 2008

• Year-end report 2008 February 6, 2009

Financial reports, press releases and other information are available on Karo Bio's web site www.karobio.com. It is also possible to download and subscribe to Karo Bio's financial reports and press releases on the web site at www.karobio.com/finance. Financial reports are available on the web site upon release.

Legal disclaimer

This financial report includes statements that are forward looking and actual results may differ materially from those stated. In addition to the factors discussed, among other factors that may affect results are development within research programs, including development in preclinical and clinical trials, the impact of competing research programs, the effect of economic conditions, the effectiveness of the Company's intellectual property rights and preclusions of potential third party's intellectual property rights, technological development, exchange rate and interest rate fluctuations, and political risks.

Huddinge April 24th, 2008

Per Olof Wallström President

This report has not been subject to review by the Company's auditors.

Analyst coverage

ABG Sundal Collier, Stockholm Alexander Lindström

Danske Markets, Stockholm Mattias Häggblom

D. Carnegie, Stockholm Camilla Oxhamre

Handelsbanken Capital Markets, Stockholm Erik Hultgård

Kaupthing Bank, Stockholm Benjamin Nordin

Redeye, Stockholm Björn Andersson

Independent analyst Stefan Wikholm

Karo Bio AB (publ.), Novum, 141 57 Huddinge, Sweden Telephone: +48 8 608 60 00 Facsimile: +46 8 774 82 61 Corporate registration number 556309-3359 Website: www.karobio.com

The information is of a nature which Karo Bio shall need to disclose according to the Exchange and Clearings Operations Act and/or the law covering trade with financial instruments. The information was disclosed April 24, 2008, 08:30 am