Karolinska Development AB (publ) – Interim Report January – March 2015

STOCKHOLM - May 6, 2015. Karolinska Development AB (publ) (STO: KDEV) announces publication of its Interim Report January-March, 2015. A conference call will be held today at 14.00 CET. Participant access numbers: SE: +46 (0) 8 505 564 74, UK: +44 (0) 20 336 453 74, or US: +1 855 753 22 30. The full report and a link to the webcast are available on the company’s website.

Jim Van heusden, CEO, comments: “During my first two months as CEO at Karolinska Development I started to evaluate our portfolio assets in more detail and I continue to be impressed by the high-quality science. That said, I also see some challenges in translating that science into a real investment case for some of our portfolio companies, which is essential to generate superior returns on invested capital. As a consequence, we have taken and will need to take further difficult decisions in order to focus our resources on those companies that have the greatest potential to generate attractive returns to our shareholders.

One of the things I would like to improve is the transparency of the way we work. Together with my team we are fully committed to strengthen our corporate communication which should become evident in the months to come. We will provide more openness into our financial reporting. The valuation of our portfolio companies is a key financial metric in evaluating progress in our portfolio. We are looking into alternatives that are more transparent and less sensitive to incidental variations that have a high impact on valuation. We also need to strengthen our internal organizational structures and team, and are in the process of strengthening our portfolio companies on both the management and board level.

One of the priorities in our investment strategy is to attract new investments from experienced international life sciences investors. As such we are able to share the risks and gain access to other investors’ network and expertise. We are currently in discussions with co-investors for a number of our portfolio companies. Besides fundraising, we are also exploring other options such as licensing, M&A or other creative solutions. An example of the latter is the sale of Axelar to Östersjöstiftelsen (The Foundation for Baltic and East European Studies) where the company can continue its development efforts and we retain potential upside via an earn-out agreement without requiring further investments from us. Unfortunately, we also need to let companies go where we don’t see any further value despite extensive efforts in relation to financing, licensing and M&A to find a solution for them. This was the case for example for the opportunistic companies Pergamum, Umecrine Mood and NeoDynamics which we recently announced to write-off completely. While such outcomes in our portfolio are not satisfactory, we also realize this is a risk that all investors within this sector are faced with.

We are now focusing on the portfolio companies that have the highest potential to generate attractive returns. We look forward to the continued development in Aprea, as the company presented the first preliminary results from its Phase I/II clinical trial in ovarian cancer in April. Dilaforette is in final preparation to initiate their Phase II trial in sickle-cell disease where patients regularly suffer from painful crises that require intensive-care treatment. We will continue to report progress in our portfolio companies to the market, but need to point out that given the early stage nature of the companies we have invested in, we also need to have patience in order to be able to unlock their full value potential.”

Summary of significant events during the first quarter 2015

Karolinska Development
• Karolinska Development finalized the company’s financing through the issue of convertibles by an additional subscription of SEK 39 million and the confirmation of full payment of SEK 100 million from Thai Charoen Pokphand Group (CP Group)
• Jim Van heusden appointed CEO of Karolinska Development
• Karolinska Development sold its stake in Axelar to Östersjöstiftelsen (The Foundation for Baltic and East European Studies)

The Portfolio
• Dilaforette announced co-development agreement with Ergomed
• Dilaforette received Orphan Drug Designation by the U.S. FDA for sevuparin in sickle-cell disease
• Clanotech granted Orphan Drug Designation by the U.S. FDA

Summary of significant events after the first quarter 2015
• Aprea presented preliminary Phase Ib/II results in ovarian cancer with APR-246 at the American Association for Cancer Research (AACR) Annual Meeting
• Karolinska Development announced fair value decrease included in the first quarter results amounting to SEK -225.2 million mainly due to write-offs of three opportunistic portfolio companies

Financial summary

For further information, please contact:
Jim Van heusden, CEO, Karolinska Development AB
Phone: +46 72 858 32 09, e-mail: jim.van.heusden@karolinskadevelopment.com
Christian Tange, CFO, Karolinska Development AB
Phone: +46 73 712 14 30, e-mail: christian.tange@karolinskadevelopment.com

TO THE EDITORS
About Karolinska Development AB
Karolinska Development aims to create value for patients, researchers, investors and society by developing innovations from world class science into differentiated products that can be partnered. The business model is to: SELECT the most commercially attractive medical innovations that can potentially satisfy unmet medical needs; DEVELOP innovations to the stage where the greatest return on investment can be achieved; and COMMERCIALIZE the innovations through the sale of companies or out-licensing of products. An exclusive deal flow agreement with Karolinska Institutet Innovations AB, along with other cooperation agreements with leading universities, delivers a continuous flow of innovations. For more information, please visit www.karolinskadevelopment.com.

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