Karo Pharma AB — Interim / Quarterly Report 2013

Feb 13, 2014

YEAR-END REPORT 2013

The full year 2013 and the fourth quarter in brief

• Net sales increased to MSEK 47.0 (33.2), whereof the fourth quarter MSEK 9.7 (8.6)
• Net loss for the group was reduced to MSEK 22.1 (98.3), whereof the fourth quarter MSEK 3.3 (9.0)
• Loss per share was SEK 0.04 (0.25), whereof the fourth quarter SEK 0.01 (0.02)
• Cash flow from operating activities was MSEK -33.4 (-127.8), whereof the fourth quarter MSEK -7.9 (-20.1)
• Cash and cash equivalents and other short-term investments totaled MSEK 22.8 (54.1) at the end of the period

Significant events after the end of the reporting period

• The Board of Directors proposes a rights issue with approx 70 MSEK in net proceeds. The share issue is guaranteed to 85 per cent.
• The Board of Directors also proposes a share issue to Anders Lönner of a maximum 15 million share, corresponding to approx. 7 MSEK.
• Anders Lönner will be nominated new Chairman of Karo Bio at the AGM. Göran Wessman will be nominated Director.
• In January 2014, Karo Bio reached a first milestone in the MS project's collaboration with MS Society, resulting in approximately half of the granted 0.5 MUSD was paid out.

Conference call / audiocast today at 9.30 a.m. CET

CEO Per Bengtsson will present the report today at 9.30 a.m. in an audiocast, held in Swedish. The audiocast and slides are available through the corporate website http://www.karobio.se/ or by telephone +46 8 505 564 87. Questions may be submitted over the internet or by telephone.

For further information, please contact Per Bengtsson, CEO Telephone: +46 8 608 6020 E-mail: per.bengtsson@karobio.se Henrik Palm, CFO Telephone: +46 8 608 6076 or +46 70 540 4014 E-mail: henrik.palm@karobio.se

Karo Bio AB (publ) Novum 141 57 Huddinge Sweden Telephone: +46 8 608 6000 Corp.reg.nr. 556309-3359 Website: www.karobio.com

The information in this report is such that Karo Bio is required to disclose under the Swedish Securities Market Act. The information was disclosed on February 13, 2014 at 8.30 a.m. CET.

Summary of key financial data

(MSEK)	October-December		January -December
	2013	2012	2013	2012
Net sales	9.7	8.6	47.0	33.2
Operating expenses	-13.1	-17.6	-69.3	-132.9
- of which R&D expenses	-11.8	-12.9	-52.5	-107.9
Net earnings for the period	-3.3	-9.0	-22.1	-98.3
Earnings per share (SEK)	-0.01	-0.02	-0.04	-0.25
Cash flow from operating activities	-7.9	-20.1	-33.4	-127.8
Cash and cash equivalents and other short term investments at the period end	22.8	54.1	22.8	54.1

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.

On the right track

The past year has shown that Karo Bio is on the right track. We have increased our sales by almost 50 per cent to 47 million kronor. Costs have continued to decrease gradually and amounted to 69 million kronor for the full year, half of costs in the previous year.

In the long term, our overall aim is naturally to achieve a profit, which requires larger revenue. The collaboration with Pfizer on RORgamma generated the majority of our revenue in the form of research funding and a milestone payment. This summer, the research agreement was extended one year further, and the next milestone is within reach during 2014. We are very pleased with how the project is advancing and it is important for me to point out that Karo Bio has had significant importance in the success of the project.

We aim to close further license agreements. I have shared that in 2012 already, we were close to reaching an agreement for our ERbeta projects in MS, but a change in strategy at our prospective partner thwarted those plans. We decided to take the project a step further and the data we have produced so far confirms the view that the project has good potential to become a new drug. We are in a strategic position since our project targets progressive MS that garner increasing interest among the leading MS companies. In the fall, this positive picture was also confirmed when we, after careful examination, was awarded 0.5 million dollar by the U.S. National MS Society for the continued development of our lead drug compound. We have now initiated discussions with a number of companies that are active in the MS field. It is, as always, hard to predict when and how these may be concluded.

As you all know, we conduct active and successful efforts to find alternative sources of funding. We are currently advancing three projects determinedly towards clinical studies. The developments of two of them are currently funded externally; Pfizer is funding RORgamma and ERbeta MS funded through with soft money.

Soft money is an option also for ERbeta cancer. During the year, we reached significant success in the form of data from experiments on human tumor tissue being studied in animal models. The effects we have seen are powerful and it appears possible to extend the use of a compound to several different tumor diseases. In order to continue to create value for shareholders, we have decided to pursue the project one step further before seeking a partner. This way, we form a portfolio of some scope and with a good balance between different types of risk and revenue opportunities.

There is quite a lot suggesting that Karo Bio relatively soon, in 2015, will have projects that are ready for the clinic. Until then, we also expect continued growth in revenues. In order to be in a position to create greater value, we turn to the stock market to strengthen our financing.

Karo Bio is in a position where the business is well placed to continue to create value for its shareholders, and also to clearly display it soon. In an environment where large companies are increasingly inclined to turn to innovative small research companies, time is benefitting Karo Bio.

CEO Per Bengtsson

PROJECT PORTFOLIO

ERbeta selective compounds – a platform with many opportunities

The estrogen receptor (ER) is activated by estrogen and regulates a number of functions in the body. Estrogen has several positive effects but its medical use has been limited by the associated increased risk for uterine and breast cancer as well as thrombosis. These risks are mainly linked to the estrogen receptor's ERalpha subtype, while ERbeta, which Karo Bio was involved in discovering in the 1990's, seems to account for many of the positive effects of estrogen without the side effects. For ERbeta selective compounds there are clinical opportunities within a number of fields.

Karo Bio's efforts in the field have resulted in a world-leading position and a platform with many promising ERbeta selective compounds. These have slightly different properties and may thus be suitable for different indications.

A collaboration with Merck (known as MSD outside the US and Canada) regarding an ER compound was discontinued in 2010 when in Phase II. As there have not been any safety related issues reported around the compound, Karo Bio is exploring the possibility to regain the rights to the compound for use in other areas.

ERbeta cancer

Karo Bio has collated preclinical data that suggest that ERbeta has a very interesting potential in the field of cancer. The first drug candidate within the program, KB9520, has shown good efficacy in preclinical models for several different forms of cancer. These effects can be assumed to have a general effect in several different forms of cancer tumors, provided they express ERbeta. Karo Bio is seeking financing to continue the development of ERbeta in the field of cancer.

ERbeta MS

Since 2011, Karo Bio has a development project for ERbeta focused on the autoimmune disease multiple sclerosis (MS). In preclinical models, ERbeta agonists have demonstrated protective and reparative effects on the myelin sheaths that surround nerve cells, which are very promising since damaged myelin is involved in the symptoms and disability in MS. If treatment with ERbeta agonists proves capable of repairing damaged myelin also in patients this will represent a significant breakthrough in the treatment of patients with progressive MS, since current therapies only aim at reducing inflammation at early stages of the disease.

To further investigate ERbeta agonists' therapeutic effect, Karo Bio performed additional studies in disease models in animals in the beginning of 2013. The new results indicate that ERbeta has positive effects by protecting and repairing nerve tissue. Karo Bio continues the preclinical development of the project and in September 2013 the U.S. National MS Society granted the project MUSD 0.5 in funding with conditional repayment.

RORgamma – a new opportunity to treat autoimmune diseases

Recent research reveals that the nuclear receptor RORgamma may play a critical role in the development of autoimmune disease, such as rheumatoid arthritis and psoriasis. In 2010, Karo Bio initiated a research program to develop and evaluate compounds that inhibit RORgamma activity, which may prove to be a novel concept for a potential new treatment alternative for autoimmune diseases. RORgamma has been shown to control the maturation of, and activity in, a certain type of immune cell, believed to drive inflammatory and debilitating processes in such diseases.

In December 2011, Karo Bio entered into a research collaboration with Pfizer for RORgamma to discover and develop new compounds for the treatment of autoimmune diseases. Pfizer has exclusive rights for products developed as a result of the collaboration, while Karo Bio has the right to royalties on sales.

Initially, Pfizer assumed responsibility to fully fund research for two years. In June 2013, Pfizer decided to extend the research funding agreement one year further until 2015. In September 2013, Karo Bio achieved a project milestone, triggering a compensation of MUSD 2. In 2013, Karo Bio recognized revenue from the project of in total MUSD 7, equivalent to MSEK 44. The project is advancing.

Research

Karo Bio also conducts research at earlier stages around certain receptors to determine whether drugs can be designed that qualify for individual projects. Ideas are gathered from academic research and other pharmaceutical research, usually around certain signaling pathways. By testing if these pathways can be influenced via nuclear receptors or in a similar manner, Karo Bio can use its expertise to create value. This is very early research where some ideas can be dismissed relatively quickly, while others can be evaluated over a longer or shorter period of time to when successful qualify as a development project. Work is underway on a small number of nuclear receptors.

In 2014, Karo Bio entered into collaboration with Dr. Jörg Distler and his company 4D Science GmbH surrounding fibrosis. Dr. Distlers research team has discovered that a specific nuclear receptor plays a key role in the pathogenesis of fibrotic diseases, which may have implications for the treatment of patients with this type of intractable diseases. The partnership initially focused on generating additional data to validate the nuclear receptor as a target in fibrosis and to demonstrate that it is possible to address it with a drug.

FINANCIAL REPORT

Consolidated earnings

Net sales for 2013 were MSEK 47.0 (33.2), whereof the fourth quarter MSEK 9.7 (8.6). Sales are in essence attributable to the collaboration with Pfizer on RORgamma. In the fourth quarter, revenue of MUSD 0.15 was recognized from the MUSD 0.5 awarded by U.S. National MS Society.

Operating expenses for the year decreased by 48 per cent MSEK 69.3 (132.9). Research and development expenses accounted for 76 per cent of the costs for the period, after a decrease to MSEK 52.5 (107.9), whereof the fourth quarter MSEK 11.8 (12.9). Of the total cost reduction in 2013 of MSEK 55.4, direct costs for eprotirome was attributable for MSEK 33.0 while the remaining MSEK 22.4 mainly resulted from the cost reduction program. Administrative costs for the year decreased to MSEK 20.4 (25.1), whereof the fourth quarter MSEK 5.1 (4.7).

The consolidated operating loss for the year decreased to MSEK 22.3 (99.7) The operating loss for the fourth quarter was MSEK 3.4 (9.0). In the fourth quarter, an acquisition contributed to decrease the operating loss with MSEK 3.6. The purpose of the acquisition was to finance operations, which was achieved by offsetting a portion of the Group's accumulated tax loss carryforwards against untaxed profits of the acquired company.

Financial net for the year amounted to MSEK 0.2 (1.5). Net loss for the year improved to MSEK 22.1 (98.3), whereof the fourth quarter MSEK 3.3 (9.0).

Capital investments and consolidated cash flow

Capital investments for the year amounted to MSEK 2.2 (0.6) and comprise mainly investments in laboratory and IT equipment and rebuilding of laboratories.

Cash flow from operating activities for the year amounted to MSEK -33.4 (-127.8), whereof the fourth quarter MSEK -7.9 (-20.1).

Financial position

Consolidated cash and cash equivalents amounted to MSEK 22.8 (28.0) at the end of the period. Including other short-term investments with durations exceeding 90 days, liquid assets amounted to MSEK 22.8 (54.1), which corresponds to a change in total cash position and other short-term investments of MSEK -31.3 (-104.4) in the year. Shortly after the turn of the year, the Group had a cash inflow of approximately MSEK 5, partly in form of a quarterly payment in the collaboration with Pfizer.

The option to use the credit facility expired in the fourth quarter.

Total shareholders' equity amounted to MSEK 23.8 (45.9) taking into account the period's earnings. In total, there were 495,947,369 shares outstanding, each with a par value of SEK 0.02.

Loss per share amounted to SEK 0.04 (0.25). The Group's equity ratio at the end of the period was 59 (59) per cent and equity per share, based on fully diluted number of shares at the end of the period, was SEK 0.05 (0.12).

Employees

At period end, Karo Bio had 39 (43) employees, of whom 34 (37) are engaged in research and development, 1 (1) in business development and intellectual property rights and 4 (5) in administrative roles.

		October-December	January -December
	2013	2012	2013	2012
Net sales	9,652	8,554	47,029	33,173
Operating expenses
Administration	-5,104	-4,709	-20,434	-25,116
Research and development	-11,832	-12,857	-52,529	-107,857
Other operating income/expenses	3,883	-28	3,676	51
	-13,053	-17,594	-69,287	-132,922
Operating profit/loss	-3,401	-9,040	-22,258	-99,749
Financial net	55	86	180	1,495
Earnings after financial items	-3,346	-8,954	-22,078	-98,254
Tax	-	-	-	-
NET EARNINGS FOR THE PERIOD	-3,346	-8,954	-22,078	-98,254
Net earnings for the period attributable to:
Shareholders of the parent company	-3,346	-8,954	-22,078	-98,254
Depreciation included in operating expenses	-418	-373	-1,434	-1,748
Earnings per share (SEK) 1)	-0.01	-0.02	-0.04	-0.25
Number of shares outstanding (000)	495,947	389,812	495,947	389,812

CONSOLIDATED INCOME STATEMENT SUMMARY (KSEK)

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (KSEK)

		October-December	January -December
	2013	2012	2013	2012
NET EARNINGS FOR THE PERIOD	-3,346	-8,954	-22,078	-98,254
Other comprehensive income for the year, net of tax	-	-	-	-
TOTAL COMPREHENSIVE INCOME FOR THE
PERIOD	-3,346	-8,954	-22,078	-98,254
Total comprehensive income attributable to:
Shareholders of the parent company	-3,346	-8,954	-22,078	-98,254

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

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (KSEK)
	December 31

	2013	2012
Assets
Equipment	4,500	3,771
Other current assets	12,992	19,893
Financial assets at fair value through profit or loss	-	26,049
Cash and cash equivalents	22,799	28,024
TOTAL ASSETS	40,291	77,737
Shareholders' equity and liabilities
Shareholders' equity	23,839	45,917
Current liabilities	16,452	31,820
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES	40,291	77,737

CONSOLIDATED STATEMENT OF CASH FLOWS (KSEK)

	October-December		January -December
	2013	2012	2013	2012
Operating activities
Operating income/loss before financial items	-3,401	-9,040	-22,258	-99,749
Depreciation	418	373	1,434	1,748
	-2,983	-8,667	-20,824	-98,001
Financial items received and paid	102	-8	133	1,907
Cash flow from operating activities before
changes in working capital	-2,881	-8,675	-20,691	-96,094
Changes in working capital	-4,979	-11,414	-12,698	-31,706
Cash flow from operating activities	-7,860	-20,089	-33,389	-127,800
Investing activities
Net investment in equipment	-1,460	98	-2,245	-184
Net investment in other short-term investments	-	19,067	26,096	88,319
Cash flow from investing activities	-1,460	19,165	23,851	88,135
Financing activities
Net proceeds from rights issue	-	25,000	7,665	25,000
Transaction costs rights issue 1)	-	-1,064	-3,352	-1,064
Cash flow from financing activities	-	23,936	4,313	23,936
Cash flow for the period	-9,320	23,012	-5,225	-15,729
Cash and cash equivalents at the beginning
of the period	32,119	5,012	28,024	43,753
Cash and cash equivalents at the end of the period	22,799	28,024	22,799	28,024

1) Comprises the portion of transaction related costs that have been paid in the period.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (KSEK)

Attributable to shareholders of the parent company	Share capital	Other contributed capital	Accumulated losses	Total
Amount at January 1, 2012	193,532	980,747	-1,058,357	115,922
Loss for the period	-	-	-98,254	-98,254
Reduction of share capital	-185,791	-	185,791	0
Current rights issue	-	28,249	-	28,249
Amount at December 31, 2012	7,741	1,008,996	-970,820	45,917
Amount at January 1, 2013	7,741	1,008,996	-970,820	45,917
Loss for the period	-	-	-22,078	-22,078
Current rights issue	2,178	-2,178	-	0
Amount at December 31, 2013	9,919	1,006,818	-992,898	23,839

KEY EQUITY DATA

	December 31
	2013	2012
Equity ratio	59.2%	59.1%
Equity per share at the end of period – basic, SEK	0.05	0.12
Equity per share at the end of period - diluted,
SEK	0.05	0.12

The Parent Company

Net sales for the Parent Company for the full year amounted to MSEK 47.0 (33.2), whereof the fourth quarter MSEK 9.7 (8.6). Loss after financial items for the Parent Company was MSEK 22.1 (98.6) for the full year, whereof the fourth quarter MSEK 3.3 (9.0).

The Parent Company's capital investments in equipment for the year amounted to MSEK 2.2 (0.6). Cash, cash equivalents and other short term investments for the Parent Company amounted to MSEK 22.6 (54.0) at the end of the period.

PARENT COMPANY INCOME STATEMENT SUMMARY (KSEK)

	October-December		January -December
	2013	2012	2013	2012
Net sales	9,652	8,554	47,029	33,173
Operating expenses
Administration	-5,104	-4,709	-20,434	-25,116
Research and development	-11,832	-12,856	-52,547	-108,207
Other operating income/expenses	324	-28	117	51
	-16,612	-17,593	-72,864	-133,272
Operating income/loss	-6,960	-9,039	-25,835	-100,099
Financial net	3,614	90	3,751	1,507
Earnings after financial items	-3,346	-8,949	-22,084	-98,592
Tax	-	-	-	-
NET EARNINGS FOR THE PERIOD	-3,346	-8,949	-22,084	-98,592
Depreciation included in operating expenses	-397	-344	-1,353	-1,515

PARENT COMPANY BALANCE SHEET SUMMARY (KSEK)
	December 31
	2013	2012
Assets
Equipment	4,316	3,509
Shares in group companies	150	150
Other current assets	12,861	19,893
Financial assets at fair value through profit or loss	-	26,049
Cash and cash equivalents	22,619	27,964
TOTAL ASSETS	39,946	77,565
Shareholders' equity and liabilities
Total restricted equity	9,919	9,919
Total non-restricted equity	13,929	36,013
Current liabilities	16,098	31,633
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES	39,946	77,565

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

OTHER INFORMATION

Going concern

Without additional funding or revenue, existing cash is expected to finance the current scope of operations until approximately the end of the second quarter 2014.Under these same conditions, deemed equity at the beginning of the second quarter 2014 may be less than 50 per cent of the registered share capital.

The company believes that there are opportunities for additional revenues in the coming quarters. Value creation in operations would nonetheless benefit from additional funding from shareholders. Therefore, the Board of Directors has therefore decided to call an Extraordinary General Meeting to resolve on a rights issue.

At full subscription, the proposed rights issue is expected to generate net proceeds of approximately MSEK 70. After such a rights issue, Karo Bio's liquid assets are assessed to provide a basis for continuing as a going concern for 12 months, even if no new licensing agreements are entered or other funding obtained.

Significant events after the end of the reporting period

The Board proposes a rights issue

The Board of Directors proposes a share issue to existing shareholders in order to provide the company with net proceeds of approximately MSEK 70. Of the total issue, 85 per cent is underwritten. To enable the share issue, the Board proposes that the Articles of Association be amended so that the number of shares should be at least 250 million and at most 1 000 million.

The Board of Directors also proposes a share issue of a maximum 15 million shares to Anders Lönner, corresponding to approximately MSEK 7. This share issue is proposed at the same subscription price as the rights issue to existing shareholders. The proposed share issue to Anders Lönner represents 2.2 per cent of share capital after both issues, which implies that Anders Lönner may become one of Karo Bio's five largest owners.

To resolve on the proposals, the Board has convened an Extraordinary General Meeting on March 17, 2014 at 16.00 in the restaurant Tango, Novum Research Park (level 5), Hälsovägen 7, Huddinge.

Anders Lönner to be nominated Chairman

The Nomination Committee intends to propose Anders Lönner as new Chairman of Karo Bio. Göran Wessman will be proposed to remain on the Board as Director.

Until 2013, Anders Lönner was CEO of Meda. Prior to that, in 1997, he was CEO of Karo Bio and before that he held senior positions in Astra.

Mark Farmery Director of Business Development

Mark Farmery assumed the position as Group Head of Business Development on February 10. Mark Farmery, who holds a BSc in protein chemistry and a PhD in microbiology, joins from AstraZeneca where he was working with business development. Lars Öhman remains in a new consulting role.

Other organizational changes

Maria Öhlander, Director of Clinical Development, is leaving Karo Bio on her own request on April 24, 2014 to take up a position as Research Director for a development-oriented nutrition company.

Dividend

In accordance with the dividend policy, the Board will propose to the AGM that there will be no dividend for the 2013 financial year.

Risk factors

There is no guarantee that Karo Bio's research and development will result in commercial success. 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 is no guarantee that Karo Bio will obtain approvals on its clinical trials applications or 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. It cannot be excluded that the approval process at regulatory level will involve requirements for increased documentation and thereby increased costs and delays in the projects or even discontinuation of projects. Increased total development costs and development time of a project could result in an increased project risk and reduce the product's potential to successfully reach the commercial stage or reduce the time from product launch to patent expiry.

There may be a need to turn to the capital market for additional funding 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 progress made in research and development projects undertaken. There is a risk that the required funding of the operations will not be available when needed or at a reasonable cost.

Accounting and valuation principles

This full year report has been prepared in accordance with International Accounting Standards (IAS) 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 2012. A number of new or updated accounting standards and interpretations are applicable for financial years beginning January 1, 2013 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.

For the Parent Company this full year report has been prepared in accordance with the Swedish Annual Accounts Act and compliance with RFR 2 Accounting for legal entities. The accounting principles applied for the parent company differ from those applied for the Group only regarding accounting of leasing agreements.

Amounts are expressed in KSEK, an abbreviation for 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.

Annual Report

Karo Bio's Annual Report for 2013 will be disclosed in March, 2014. Karo Bio has decided, for both environmental and cost reasons, to primarily distribute the Annual Report on the company website. The printed version of the Annual Report will in the future be available for order i.e. on the Company website.

Annual General Meeting

Karo Bio's Annual General Meeting will be held in Huddinge, Sweden on May 8, 2014 at 16.00 CET. Information on how proposals to the Nomination Committee and Annual General Meeting may be submitted and how to give notice to attend the Meeting, will be posted on the website www.karobio.com.

Financial calendar

Annual Report 2013	March 2014
Extra General Meeting	March 17, 2014
Annual General Meeting	May 8, 2014
Interim Report January-March 2014	May 8, 2014
Interim Report January-June 2014	July 11, 2014
Interim Report January-September 2014	October 29, 2014
Year-end report 2014	February 13, 2015

Financial reports, press releases and other financial 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.

Legal disclaimer

This financial report includes statements that are forward looking and actual future 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.

Auditor's review

This year-end report has not been subject to review by Karo Bio's auditors.

February 13, 2014

Per Bengtsson

CEO