PRESS RELEASE

KARO BIO ANNOUNCES THE IND FILING BY PARTNER BRISTOL-MYERS SQUIBB TO INITIATE CLINICAL TRIALS OF JOINTLY DEVELOPED OBESITY DRUG CANDIDATE

Press release August 31, 2001

Karo Bio and Bristol-Myers Squibb (BMS) have jointly discovered a novel anti-obesity drug candidate that targets the thyroid hormone receptor. BMS has now filed an Investigational New Drug (IND) application with the US Food and Drug Administration (FDA) to initiate clinical trials in man with the drug candidate.

"The IND filing by BMS is an important milestone event for the obesity project", says Björn Nilsson, President of Karo Bio, "taking a drug candidate to the clinic. We are very pleased with the productive collaboration with BMS, a world leading company in the field of metabolic disorders and drug development".

Although thyroid hormone increases metabolism, it also has stimulatory effects on heart rate and consequently, that latter activity prevents the use of native thyroid hormone for the treatment of obesity. However, Karo Bio and BMS have successfully developed a selective compound that maintains the stimulatory effects on metabolism while eliminating the cardiac side effects. Extensive testing of this compound in relevant animal models has shown very positive results with significant weight-lowering and demonstrating a broad therapeutic window.

Obesity is the most serious health problem in the western world and often leads to life threatening diseases such as cardiovascular disease and diabetes. Since the medical need for developing treatments for obesity in the western world is largely unmet, the Karo Bio/BMS drug candidate has significant block-buster market potential. For its part in this alliance, BMS has been responsible for all animal studies and will be responsible for clinical development.

In addition to the first generation compound entering the clinic, the companies continue to collaborate on the development of second-generation compounds which may expand the possible indications attributed to this class of novel thyroid hormone receptor agonists.

KARO BIO AB (publ)

For further information contact:

Karo Bio AB

Björn Nilsson, President

Direct telephone: +46-8-608 6020

Mobile telephone: +46-70-218-1500

Per Otteskog, Senior Vice President Investor Relations

Direct telephone: +46-8-608 6018

Mobile telephone: +46-70-632 7527

Background

Karo Bio has operations in the United States and Sweden. The Company employs 130 people and has 250 patent cases including 100 approved patents.

Karo Bio has been listed on the Stockholm stock exchange (Reuters: KARO.ST) since 1998 and maintains a leading position in the field of drug discovery focused upon nuclear receptors. Nuclear receptors are validated drug targets for a number of clinical indications and the Company uses proprietary technologies for the development of novel and improved therapies for major markets.

Karo Bio has drug discovery programs in several therapeutic areas including women’s health care, metabolic disorders such as obesity, cardiovascular disease, diabetes, dermatology, ophthalmology and infectious disease.

Karo Bio collaborates with major pharmaceutical companies for development of products and marketing. In these partnerships Karo Bio receives upfront payments, R&D funding and royalties on net sales when products reach the market.

Karo Bio’s has strategic pharmaceutical drug discovery partnerships with Abbott Laboratories, Bristol-Myers Squibb, Merck & Co., and Aventis.