Karo Bio Acquires U.S. Company Novalon.

Business Editors

STOCKHOLM, Sweden--(BUSINESS WIRE)--March 27, 2000

Karo Bio AB is acquiring the American biotechnology company Novalon Pharmaceutical Corporation based in Durham, North Carolina through a non- cash issue.

-- Karo Bio consolidates its leading position in the field of

nuclear receptors.

-- The acquisition supplements Karo Bio's operations with

state-of-the-art technology for the development of genomics

based therapeutics.

-- Novalon shareholders will hold 20 percent of Karo Bio after

the acquisition.

-- The combined company will maintain its research activities in

Sweden and in the United States 

"The acquisition of Novalon will strengthen Karo Bio's technology base for the development of new drug substances that act upon nuclear receptors, which will make it possible to start several new projects and partnerships. It also provides Karo Bio with an opportunity to develop research programs in new areas such as the identification of therapeutics that act upon new pharmaceutical targets derived from discoveries coming from genomics research. The company will initially have seven collaborative agreements with international life science companies.

With operations in Europe and the United States, Karo Bio will have better exposure to future collaborative partners and institutional investors," says Mr. Per-Olof Martensson, President and CEO of Karo Bio.

"By joining with Karo Bio, Novalon is gaining an opportunity to fully exploit the technology platform the company has developed. The merging of our technologies and research programs will greatly accelerate the pace and scope of our joint drug development," says Dr. Dana Fowlkes, Chairman, CEO and founder of Novalon.

The new Karo Bio will have collaborative agreements with the leading "life science" companies Abbott Laboratories, Bristol-Myers Squibb, Merck & Co. Inc., Bayer AG, Ares-Serono, Millennium Pharmaceuticals Inc. and Novartis Research Foundation. The joint technology platforms encompass both nuclear receptors and genomics.

The deal is conditional on Karo Bio's shareholders approving a directed new share issue at the Annual General Meeting on 26 April. In addition, at that meeting and as a first step towards a stock exchange listing abroad, the company shall propose a new share issue with a value of around SEK 200 million directed to institutional investors.

Further information will be available at the: Press conference at 11.30 a.m. in the Redarsalen Operakallaren. To take part in the press conference by telephone: Apply by telephoning Camilla Lindholm between 9:00 and 10:00 a.m. on 08- 696 12 41.

Background

Karo Bio AB, a research-based pharmaceutical company in Huddinge, today announces that agreement has been reached on the acquisition of Novalon, a privately-held biotechnology company with premises located in the Research Triangle area of North Carolina, United States. Karo Bio is acquiring Novalon through a non-cash issue, where Novalon's shareholders will hold 20 percent of the combined company. The boards of both companies have approved the acquisition and the merger now awaits the approval of Karo Bio's shareholders, the fulfilment of certain criteria for the purchase and necessary approvals from authorities and third parties.

Novalon was founded 1996 by the research scientists Dr. Dana Fowlkes and Dr. Brian Kay. They have developed technology that is the subject of patent applications based on the use of peptides or BioKeys (small proteins) that can bind biologically active areas on proteins (e.g. nuclear receptors) that are targets for drug development. These peptides or BioKeys are key components in new high capacity screening systems for identification of new pharmaceuticals. In addition, the technology makes it possible to rapidly validate new proteins as targets for drug discovery, which is one of the bottlenecks for the discovery of new therapeutics based on information from genomics.

Novalon currently has several non-exclusive pilot collaborations with companies such as Bayer AG, Ares-Serono, Millennium Pharmaceuticals, Inc. and Novartis Research Foundation. Novalon has internal drug development programs in cancer and infectious diseases. Future collaborations based on Novalon's BioKey technology in "genomics" will be aimed at providing Karo Bio with certain rights to new nuclear receptors.

Novalon has also enhanced the BioKey technology by developing a method known as Molecular Braille , which is the subject of a patent application. This technology makes it possible to quickly link the action of a substance on a nuclear receptor to tissue-selective biological activities. Lack of tissue selectivity is one of the problems with many drugs and leads to various side effects. The Molecular Braille technology represents a very valuable adjunct to Karo Bio's technologies and will contribute greatly to efficient development of new selective drugs with fewer side effects.

The combination of the technologies of the two companies, Novalon's BioKey and Molecular Braille and Karo Bio's expertise in the structural determination of proteins, medicinal chemistry and structure-based drug design, will result in a company with a broad technology base for the development of new drugs. These technologies will strengthen Karo Bio's current projects as well as enable the initiation of new projects and collaborations with major pharmaceutical companies. After the acquisition Karo Bio will maintain and further develop its research activities in Sweden and the United States.

Karo Bio's Board has previously decided that Torben Jorgensen is to take over as CEO at the Annual General Meeting on 26 April. Upon Karo Bio's shareholders approval of the acquisition Dr. Dana Fowlkes will become Chief Scientific Officer. The current CEO Per-Olof Martensson has been proposed to become the Chairman of the Karo Bio Board.

Karo Bio is a research-based pharmaceutical company developing tissue-selective drug substances that act via nuclear receptors for the treatment of common diseases such as diabetes, obesity, elevated cholesterol, inflammatory disorders, cancer, cardiovascular diseases and certain women's health problems. Development takes place in collaboration with international pharmaceutical companies and leading universities. The company is currently collaborating with Abbott Laboratories, Bristol-Myers Squibb Company and Merck &Co. Inc.

Please visit our websites: www.karobio.se and www.novalon.com

------------------------- Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/2000/03/27/20000327BIT00260/bit0001.doc http://www.bit.se/bitonline/2000/03/27/20000327BIT00260/bit0002.pdf