THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, THE REPUBLIC OF SOUTH AFRICA, SINGAPORE, HONG KONG OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE EU REGULATION 596/2014 ("MAR") AND ARTICLE 7 OF MAR AS INCORPORATED INTO UK DOMESTIC LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018 ("UK MAR").

MEMBERS OF THE PUBLIC ARE NOT ELIGIBLE TO SUBSCRIBE FOR, OTHERWISE ACQUIRE OR DISPOSE OF ANY SECURITIES IN FARON PHARMACEUTICALS OY ("FARON") PURSUANT TO THE PROPOSED TRANSACTION REFERRED TO IN THIS ANNOUNCEMENT. THIS ANNOUNCEMENT IS THEREFORE DIRECTED ONLY AT, IN A MEMBER STATE OF THE EUROPEAN ECONOMIC AREA, PERSONS WHO ARE "QUALIFIED INVESTORS" AS DEFINED IN ARTICLE 2(E) OF THE EU PROSPECTUS REGULATION (WHICH MEANS REGULATION (EU) 2017/1129) (THE "PROSPECTUS REGULATION"). THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND DOES NOT CONSTITUTE OR CONTAIN ANY INVITATION, SOLICITATION, RECOMMENDATION, OFFER OR ADVICE TO ANY PERSON TO SUBSCRIBE FOR, OTHERWISE ACQUIRE OR DISPOSE OF ANY SECURITIES IN FARON OR ANY OTHER ENTITY IN ANY JURISDICTION IN WHICH ANY SUCH OFFER WOULD BE UNLAWFUL.

IN ADDITION, IN THE UNITED KINGDOM, THIS ANNOUNCEMENT IS ONLY DIRECTED AT PERSONS IN THE UNITED KINGDOM THAT ARE QUALIFIED INVESTORS WITHIN THE MEANING OF ARTICLE 2(E) OF THE PROSPECTUS REGULATION AS INCORPORATED INTO UK DOMESTIC LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018 THAT ARE ALSO (I) INVESTMENT PROFESSIONALS FALLING WITHIN ARTICLE 19(5) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005 (THE "ORDER") AND/OR (II) HIGH NET WORTH ENTITIES, AND OTHER PERSONS TO WHOM IT MAY LAWFULLY BE COMMUNICATED, FALLING WITHIN ARTICLE 49(2)(A) TO (E) OF THE ORDER (EACH SUCH PERSON, TOGETHER WITH QUALIFIED INVESTORS AS DEFINED IN THE PROSPECTUS REGULATION, BEING REFERRED TO AS A "RELEVANT PERSON").

ACCORDINGLY, THIS ANNOUNCEMENT AND ITS CONTENTS MUST NOT BE ACTED ON OR RELIED ON BY PERSONS WHO ARE NOT RELEVANT PERSONS. ANY INVESTMENT OR INVESTMENT ACTIVITY TO WHICH THIS ANNOUNCEMENT RELATES IS AVAILABLE ONLY TO RELEVANT PERSONS AND WILL BE ENGAGED IN ONLY WITH RELEVANT PERSONS. PERSONS INTO WHOSE POSSESSION THIS ANNOUNCEMENT COMES ARE REQUIRED TO INFORM THEMSELVES ABOUT AND TO OBSERVE ANY SUCH RESTRICTIONS.

THE PROPOSED TRANSACTION REFERRED TO IN THIS ANNOUNCEMENT WOULD BE MADE PURSUANT TO A PRIVATE PLACEMENT EXEMPTION UNDER THE PROSPECTUS REGULATION FROM THE REQUIREMENTS TO PRODUCE A PROSPECTUS UNDER THE PROSPECTUS REGULATION FOR OFFERS OF SECURITIES. FARON HAS NOT TAKEN ANY ACTION, NOR WILL IT TAKE ANY ACTION, TO OFFER ANY OF THE PLACING SHARES THAT ARE TO BE SUBSCRIBED FOR PURSUANT TO THE TRANSACTION REFERRED TO IN THIS ANNOUNCEMENT OR ANY DOCUMENTS RELATING TO THE PLACING TO THE PUBLIC IN FINLAND, SWEDEN, NORWAY OR DENMARK, OR IN ANY OTHER JURISDICTION IN ANY FORM WHICH WOULD CONSTITUTE AN OFFER TO THE PUBLIC.

THE PLACING SHARES WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES, AND MAY NOT BE OFFERED, SOLD OR TRANSFERRED, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM THE UNITED STATES EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES. THE PLACING SHARES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE US SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY IN THE UNITED STATES, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THE PLACING OR THE ACCURACY OR ADEQUACY OF THIS ANNOUNCEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE IN THE UNITED STATES.

Faron Pharmaceuticals Ltd

("Faron" or the "Company")

Proposed Issue and Placing of Shares to raise a minimum of EUR 8 million

Company announcement, 30 September 2021 at 4:30 p.m. BST / 6:30 p.m. EEST

Inside information

TURKU, FINLAND / BOSTON, MA - Faron Pharmaceuticals Ltd (First North: FARON, AIM: FARN), the clinical stage biopharmaceutical company, today announces a proposed private placement of new ordinary shares ("Placing Shares") to raise a minimum of EUR 8 million before expenses to a limited number of institutional investors ("Placing"). Swedbank AB (publ), Finnish Branch ("Swedbank") is acting as sole bookrunner and financial adviser to the Company for the Placing in association with Kepler Cheuvreux S.A.

The Placing will be conducted in a private placement by way of an accelerated book-building process in which selected investors may submit bids for the Placing Shares (the "Bookbuild"). The subscription price per Placing Share is to be determined on the basis of the bids received in the Bookbuild. The Bookbuild is expected to commence immediately following this announcement and is expected to end by 9:00 a.m. EEST on 1 October 2021 at the latest. The Bookbuild may be discontinued at any time during the book-building process. Following the close of the Bookbuild, the Board of Directors of Faron (the "Board") will make the decision on the issue of the Placing Shares, including, as applicable, acceptance of the received bids, the number of Placing Shares to be issued and the subscription price per Placing Share (the "Issue Price"). The Company has received non-binding indications of interest from potential investors to subscribe for the Placing Shares under the Placing during a pre-marketing process. In addition, the Company and Swedbank have obtained from the European Innovation Council (EIC) Fund a binding and irrevocable pre-commitment to subscribe for one third (1/3) of the Placing Shares for an aggregate amount of maximum EUR five (5) million and minimum EUR 2 million. The EIC Fund pre-commitment is subject to certain customary conditions.

As soon as practicable after the close of the Bookbuild, and following receipt of binding commitments from investors, an announcement will be made on the final number of the Placing Shares to be issued and the Issue Price as well as the expected registration date of the Placing Shares. 

Further details on the terms and conditions of the Placing are set out below.

The Placing Shares are expected to be issued and admitted to trading on Nasdaq First North Growth Market Finland ("First North") and AIM ("AIM") in London as set out below.

KEY HIGHLIGHTS

·    A proposed private placement to raise a minimum of EUR 8 million conducted by way of an accelerated book-building, directed to a limited number of institutional and other investors, in which Swedbank uses reasonable endeavours to procure subscriptions for Placing Shares.

·    The EIC Fund has provided a binding and irrevocable pre-commitment to subscribe for one third (1/3) of the Placing Shares for an aggregate amount of maximum EUR 5 million and minimum EUR 2 million, subject to certain conditions

·    The net proceeds of the Placing would be primarily used for the expansion of the bexmarilimab clinical development programme and manufacturing. Some proceeds would also be used to support the clinical development of Traumakine and the manufacturing process of both drug candidates, and in strengthening the Company's balance sheet.

·    As disclosed in the Company's half year report on 26 August 2021 total cash and cash equivalents held by the Company as of 31 June 2021 was ca. EUR 7.0 million.

·    Net proceeds of the Placing of at least EUR 8 million, if subscribed, together with other currently confirmed funding, are expected to provide the Company with working capital into Q3 2022.

·    Swedbank acts as Lead Manager and Sole Bookrunner of the Placing and Financial Adviser to the Company in association with Kepler Cheuvreux.

"The updated MATINS data recently presented at ESMO strengthens our belief that bexmarilimab has the potential to help patients battling a variety of different cancer types by unlocking the myeloid cell produced "hide me" -signal," said Dr. Markku Jalkanen, Chief Executive Officer of Faron. "This fundraise will enable us to begin the MATINS Part III expansion cohorts, which we hope to convert to pivotal stage development for a regulatory submission, further our biomarker research to help us better understand which patients may benefit most from treatment with bexmarilimab and continue to support efforts to investigate bexmarilimab in additional clinical settings."

REASONS FOR THE PROPOSED PLACING

The development of both bexmarilimab and Traumakine (intravenous interferon beta-1a) have advanced significantly over the past 12 - 18 months and the further development of both assets provides an opportunity to build additional value for shareholders. The primary reason for conducting the Placing is to accelerate and expand the clinical development of these drug candidates.

Bexmarilimab

·    initiation of MATINS Part III expansion cohorts;

·    new studies to investigate bexmarilimab treatment in a neoadjuvant setting, in combination with a PD(L)-1 checkpoint inhibitor and in haematological malignancies; and

·    further analysis of biomarker data for potential patient selection purposes.

Traumakine

·    support ongoing phase II/III HIBISCUS study in the US; and

·    preparations to expand into additional clinical indications. 

General corporate

·    development of Faron's operational unit in the US;

·    investment in the manufacturing of both bexmarilimab and intravenous interferon beta; and

·    strengthening of the Company's balance sheet.

DETAILS OF THE PROPOSED PLACING AND ISSUE OF EQUITY

The proposed Placing is being carried out within the authorisation granted to the Board by shareholders at the Company's Annual General Meeting held on 23 April 2021 to issue up to a total of 10,000,000 ordinary shares in the Company in a directed share issue and in deviation from the shareholders' pre-emptive rights. As no shares have been issued within the outstanding authority, the Company may issue up to a maximum of 10,000,000 new ordinary shares pursuant to the Placing, which represents approximately 20 per cent of all the issued shares and votes in the Company immediately prior to the Placing.

The Placing, arranged by Swedbank in association with Kepler Cheuvreux, will be conducted in a private placement by way of the Bookbuild, which is an accelerated book-building process in which selected investors may submit bids for the Placing Shares. The Issue Price is to be determined on the basis of the bids received in the Bookbuild. The Bookbuild is expected to commence immediately following this announcement and is expected to end by 9:00 EEST a.m. on 1 October 2021 at the latest. The Bookbuild may be discontinued at any time during the book-building process. Following the close of the Bookbuild, the Board will make the decision on the issue of the Placing Shares, including, as applicable, acceptance of the received bids, the number of Placing Shares to be issued and the Issue Price. As soon as practicable after the close of the Bookbuild, receipt of binding commitments from investors and the Board having resolved on carrying out the Placing, an announcement will be made on the final outcome of the Bookbuild and, as applicable, the number of the Placing Shares to be issued and the Issue Price as well as the expected registration date of the Placing Shares.

In connection with the proposed Placing, the Company has entered into a placing agreement with Swedbank (the "Placing Agreement"). Pursuant to the terms of the Placing Agreement, Swedbank has agreed to use its reasonable endeavours to procure the subscription of Placing Shares. In addition, the Company and Swedbank have obtained a binding and irrevocable pre-commitment from the EIC Fund to subscribe for one third (1/3) of the total amount of the Placing Shares for an aggregate amount of maximum EUR 5 million and a minimum EUR 2 million. The pre-commitment from the EIC Fund is subject to certain customary conditions.

The Placing Agreement contains customary warranties and an indemnity from the Company in favour of Swedbank together with provisions which enable Swedbank to terminate the Placing Agreement in certain circumstances before the completion of the Bookbuild and the Board's resolution on carrying out the Placing, including where there has been a material breach of any of the warranties contained in the Placing Agreement or where there is a material adverse change, e.g., in the business or financial affairs of the Company. The Company has agreed to pay Swedbank certain commissions and fees in connection with the Placing. Pursuant to the terms of the Placing Agreement, Swedbank has agreed to a limited settlement underwriting covering payments of the subscription prices to be made by subscribers of the Placing Shares to the Company upon the Board having resolved on carrying out the Placing after the close of the Bookbuild, on the Issue Price, on approving the binding subscriptions received through the Bookbuild and on confirming such final number of the Placing Shares.

 The Placing is conditional upon, inter alia:

·     the Placing Agreement having become unconditional in all respects;

·     binding commitments being received from investors;

·     the Board resolving to carry out the Placing at the Issue Price and the Company and Swedbank entering into a separate pricing agreement confirming the Issue Price and the number of the Placing Shares; and

·     the Placing Shares being issued and being registered with the Finnish Trade Register.

In connection with the Placing, Faron has entered into a lock-up undertaking, under which it has, subject to certain exceptions, agreed not to issue or sell any shares in Faron for a period of ninety days after the closing of the Placing.

Subject to all conditions being met, the Placing Shares are expected to be entered in the Finnish Trade Register approximately on 1 October 2021.

ISSUE OF THE PLACING SHARES AND ADMISSION TO TRADING

Subject to all conditions being met and the Placing Shares being subscribed for, the Placing Shares are expected to be issued in one tranche. To the extent shares are subscribed for and subject to all conditions being met, application will then be made for the admission of the Placing Shares to trading on First North and AIM with said admission expected to become effective and trading to commence on or around 5 October 2021 (the "Admission"). The dates above may be subject to change.

A further announcement will be made to confirm the outcome of the Placing (subject to, inter alia, satisfaction of the above conditions) and to confirm the expected timing of issue of the Placing Shares and the Admission.

Upon registration with the Finnish Trade Register, the Placing Shares will rank pari passu in all respects with the existing shares of the Company.

For more information please contact:

Faron Pharmaceuticals Ltd

Dr Markku Jalkanen, Chief Executive Officer

investor.relations@faron.com

Swedbank AB (publ), Finnish Branch, Financial Adviser

Mika Karikoski (Corporate Finance)

Phone: +358 (0)40 741 6959

Cairn Financial Advisers LLP, Nomad

Sandy Jamieson, Jo Turner

Phone: + 44 207 213 0880

Sisu Partners Oy, Certified Adviser on Nasdaq First North

Juha Karttunen

Phone: +358 40 555 4727

Jukka Järvelä

Phone: +358 50 553 8990

Peel Hunt LLP, Broker 

Christopher Golden, James Steel

Phone: +44 (0) 20 7418 8900

Consilium Strategic Communications

Mary-Jane Elliott, David Daley, Lindsey Neville

Phone: +44 (0)20 3709 5700

faron@consilium-comms.com

Stern Investor Relations

Julie Seidel

Phone: +1 (212) 362-1200

julie.seidel@sternir.com  

About Faron Pharmaceuticals Ltd

Faron (AIM: FARN, First North: FARON) is a clinical stage biopharmaceutical company developing novel treatments for medical conditions with significant unmet needs caused by dysfunction of our immune system. The Company currently has a pipeline based on the receptors involved in regulation of immune response in oncology, organ damage and bone marrow regeneration. Bexmarilimab, a novel anti-Clever-1 humanized antibody, is its investigative precision immunotherapy with the potential to provide permanent immune stimulation for difficult-to-treat cancers through targeting myeloid function. Currently in Phase I/II clinical development as a potential therapy for patients with untreatable solid tumors, bexmarilimab has potential as a single-agent therapy or in combination with other standard treatments including immune checkpoint molecules. Traumakine is an investigational intravenous (IV) interferon beta-1a therapy for the treatment of acute respiratory distress syndrome (ARDS) and other ischemic or hyperinflammatory conditions. Traumakine is currently being evaluated in global trials as a potential treatment for hospitalized patients with COVID-19 and with the 59th Medical Wing of the US Air Force and the US Department of Defense for the prevention of multiple organ dysfunction syndrome (MODS) after ischemia-reperfusion injury caused by a major trauma.  Faron is based in Turku, Finland. Further information is available at www.faron.com.

About the European Innovation Council Fund 

Established in June 2020, the European Innovation Council Fund (EIC Fund) is a breakthrough initiative of the European Commission to make direct equity and quasi-equity investments (between €500.000 and €15 million) in European high impact and deep tech start-ups and scale ups. With a long-term perspective, the EIC Fund invests in companies from any sector, across all EU member states as well as in associated countries.

The EIC Fund aims to fill a critical financing gap and its main purpose is to support companies in the development and commercialization of disruptive technologies. This is achieved by crowding-in market players, and further sharing risk by building a large network of capital providers and strategic partners suitable for co-investments and follow-on funding.

IMPORTANT INFORMATION

Market Abuse Regulation

Market soundings, as defined in Regulation (EU) No 596/2014 ("MAR"), were taken in respect of the proposed Placing with the result that certain persons became aware of inside information, as permitted by MAR. That inside information in relation to the Placing is set out in this announcement and has been disclosed as soon as possible in accordance with paragraph 7 of article 17 of MAR. Therefore, those persons that received inside information in such market sounding are no longer in possession of inside information relating to the Company and its securities.

This announcement contains inside information for the purposes of Article 7 of MAR and Article 7 of UK MAR.

MiFID II

Solely for the purposes of the product governance requirements contained within: (a) EU Directive 2014/65/EU on markets in financial instruments, as amended ("MiFID II"); (b) Articles 9 and 10 of Commission Delegated Directive (EU) 2017/593 supplementing MiFID II; and (c) local implementing measures (together, the "MiFID II Product Governance Requirements"), and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any "manufacturer" (for the purposes of the MiFID II Product Governance Requirements) may otherwise have with respect thereto, the Placing Shares have been subject to a product approval process, which has determined that the Placing Shares are: (i) compatible with an end target market of: (a) retail investors, (b) investors who meet the criteria of professional clients and (c) eligible counterparties (each as defined in MiFID II); and (ii) eligible for distribution through all distribution channels as are permitted by MiFID II (the "Target Market Assessment"). Notwithstanding the Target Market Assessment, distributors should note that: the price of the Placing Shares may decline and investors could lose all or part of their investment; the Placing Shares offer no guaranteed income and no capital protection; and an investment in the Placing Shares is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom. The Target Market Assessment is without prejudice to the requirements of any contractual, legal or regulatory selling restrictions in relation to the offer.

Caution regarding forward-looking statements

Certain statements in this announcement are, or may be deemed to be, forward-looking statements. Forward-looking statements are identified by their use of terms and phrases such as ''believe'', ''could'', "should", "expect", ''envisage'', ''estimate'', ''intend'', ''may'', ''plan'', ''potentially'', ''will'' or the negative of those, variations or comparable expressions, including references to assumptions. These forward-looking statements are not based on historical facts but rather on the Directors' current expectations and assumptions regarding the Company's future growth, results of operations, performance, future capital and other expenditures (including the amount, nature and sources of funding thereof), competitive advantages, business prospects and opportunities. Such forward-looking statements reflect the Directors' current beliefs and assumptions and are based on information currently available to the Directors. 

A number of factors could cause actual results to differ materially from the results and expectations discussed in the forward-looking statements, many of which are beyond the control of the Company. In addition, other factors which could cause actual results to differ materially include the ability of the Company to successfully licence its programmes, risks associated with vulnerability to general economic and business conditions, competition, environmental and other regulatory changes, actions by governmental authorities, the availability of capital markets or other sources of funding, reliance on key personnel, uninsured and underinsured losses and other factors. Although any forward-looking statements contained in this announcement are based upon what the Directors believe to be reasonable assumptions, the Company cannot assure investors that actual results will be consistent with such forward-looking statements. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements. Subject to any continuing obligations under applicable law or any relevant AIM Rule requirements, in providing this information the Company does not undertake any obligation to publicly update or revise any of the forward-looking statements or to advise of any change in events, conditions or circumstances on which any such statement is based.