Karo Bio raises $30M to acquire late-phase development programs

Karo Bio (STO:KARO) has raised SEK 250 million ($30 million) by issuing stock to existing shareholders. The haul, which could swell by 12% if an overallotment is taken up, will give Karo the means to pursue plans to acquire products that are nearing commercialization while continuing to fund its pipeline prospects.

Karo Bio Executive Chairman Anders Lönner

Huddinge, Sweden-based Karo is presenting the fundraising as a final push toward profitability, after which it will use revenue from its portfolio of approved products to bankroll its research activities. Karo spent 2015 working toward this ambition, acquiring fellow Nordic companies Apropharm, DnE Sverige, Swereco Group and MedCore in the process. The financial refueling will allow Karo to carry on in this vein. Karo has installed "innovative projects with low development risk and short time to market" at the top of its M&A wish list, followed by "established operations" with "stable earnings."

The focus on products that are in late-phase development or already approved represents a shift in strategy for Karo, which previously resembled a more traditional biotech. Last year, the company's description of itself went from emphasizing its focus on developing "innovative drugs for important medical needs" to playing up the "broadening [of] its activities to cover projects and products closer to market." In the process, Per Bengtsson stepped down as CEO, with board member Anders Lönner taking up the post of executive chairman to drive the company toward commercialization.

Karo is backing away from the topsy-turvy life of a pure biotech despite having achieved some success in recent years. In 2011, Pfizer ($PFE) signed up to collaborate with Karo on RORgamma inhibitors for the treatment of autoimmune diseases, leading to the Big Pharma taking over the program last year. While the deal positioned Karo to pull in $200 million in milestones, it left its researchers underused, prompting the company to reorganize its business. Now, with Pfizer picking up RORgamma, Karo is left with a smaller research operation and three programs.

One of the programs, an estrogen receptor-focused initiative, has been the subject of mooted deals for years, but Karo has yet to get a company to put pen to paper. Recent talks "have not yet resulted in adequate offers," Karo wrote in its year-end report. "The process to find potential partners for a licensing agreement continues."

- read the release
- and the year-end report (PDF)

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