FULL YEAR REPORT 2004 QUARTERLY REPORT OCTOBER-DECEMBER 2004

• Clinical trials have been initiated for the most advanced compound in the drug discovery and development collaboration with Merck & Co. This was announced in January 2005 and is associated with a significant milestone payment to Karo Bio.

• Preclinical development of the KB3305 compound for treatment of type 2 diabetes has progressed during 2004. The goal is to file an application in 2005 to initiate clinical trials.

• The collaboration project with Wyeth Pharmaceuticals on atherosclerosis advanced to predevelopment status in June 2004, yielding a milestone payment to Karo Bio. Research terms extended with one year through August 2005.

• Bristol-Myers Squibb decided to return project rights, including lead compound KB2115, to Karo Bio in April 2004.

• Karo Bio is now preparing for additional multi dose studies for KB2115 addressing safety as well as efficacy. The first successful single dose phase I study conducted by Bristol-Myers Squibb with KB2115 appeared to be safe and well tolerated.

• Cost savings initiatives, including a staff reduction, have been implemented to re-allocate resources to drug development activities.

• Successful new share issue completed in October 2004, generating in total MSEK 119.6 before transaction costs.

• Net sales for the full year amounted to MSEK 39.0 (85.1) and to MSEK 6.0 (11.0) for the fourth quarter.

• The loss for the year amounted to MSEK 107.2 (208.7) and to MSEK 23.8 (56.0) for the fourth quarter.

• Cash flows from operating activities for the full year amounted to MSEK -111.7 (-128.6) and MSEK -32.8 (-50.2) for the fourth quarter.

• Cash and bank balances and short-term investments amounted to MSEK 181.0 (184.0) at the end of the year.

• Loss per share for the full year amounted to SEK 4.82 (11.77) and SEK 0.80 (2.84) for the fourth quarter.

For further information, please contact
Björn O. Nilsson, President & CEO tel. +46 8 608 60 20,
Bertil Jungmar, Chief Financial Officer, tel. +46 8 608 60 52.