Faron Pharmaceuticals Ltd

("Faron" or the "Company")

Inside Information: Faron publishes the final result of the fully subscribed EUR 30.7 million share offering

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, NEW ZEALAND OR THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH THE DISTRIBUTION OR RELEASE WOULD BE UNLAWFUL.

THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND DOES NOT CONSTITUTE OR CONTAIN ANY INVITATION, SOLICITATION, RECOMMENDATION, OFFER OR ADVICE TO ANY PERSON TO ACQUIRE ANY SECURITIES. PLEASE SEE THE IMPORTANT NOTICES AT THE END OF THIS ANNOUNCEMENT.

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

Company announcement, 20 June 2024 at 9:00 (EEST) / 7:00 (BST) / 2:00 AM (EDT)

Key Highlights

·    The share offering attracted significant interest from both existing shareholders and new investors and was oversubscribed.

·    Through the share offering, the Company raised a total of approximately EUR 30.7 million, of which approximately EUR 3.7 million will be paid by converting the Company's Capital Loans (as defined below) and related arrangement fees and interests into shares in the Company.

·    As a result of the share offering, with the gross proceeds of approximately EUR 27 million the Company believes it will have sufficient resources to execute its core business and deliver on its key milestones of the year 2024 under the current business plan and in compliance with the financial covenants of the IPF Fund II SCA, SICAV-FIAR's ("IPF") Facilities Agreement until the latter half of March 2025.

·    The Company believes that the proceeds allow the completion of the Phase II of the Company's BEXMAB clinical trial and allow the Company to pursue readiness to move to Phase III in drug development. The Company will also seek advice from the FDA regarding next steps for drug development and pursue negotiating a licensing or partnership agreement for bexmarilimab.

·    The Board of Directors of the Company has decided on the completion of the share offering and the issuance of a total of 30,709,056 newly issued treasury shares and new shares in the Company in the share offering (including the shares issued in the UK Offering (as defined below), the "Offering"), corresponding to approximately 29.9 percent of the Company's outstanding shares and votes after completion of the Offering.

·    The subscription price was EUR 1.00 per share (the "Subscription Price").

·    As set out in the terms and conditions of the Offering, allocation preference has been given to qualifying shareholders and DI (depositary interest) holders in the Offering.

TURKU, FINLAND - Faron Pharmaceuticals Ltd (AIM: FARN, First North: FARON), a clinical-stage biopharmaceutical company pursuing a CLEVER-1 receptor targeting approach to reprogramming myeloid cells to activate anti-tumor immunity in hematological and solid tumor microenvironments, today announces the results of the Offering announced by the Company on 4 June 2024. The Board of Directors of the Company has decided on the completion of the Offering and the issuance of a total of 30,709,056 newly issued treasury shares and new shares in the Company (the "Offer Shares", including the shares issued in the UK Offering (as defined below)) in the Offering, corresponding to approximately 29.9 per cent of the Company's shares and votes after the completion of the Offering. The Subscription Price was EUR 1.00 per share, and the Company will receive gross cash proceeds of approximately EUR 27 million from the Offering before deducting the costs related to the Offering.

The Offering was conducted as a directed share issue by way of (i) a public offering to private individuals and legal entities in Finland (the "Public Offering") and (ii) an institutional offering to institutional investors in the European Economic Area and, in accordance with applicable laws, internationally (the "Institutional Offering"). In addition, the Company conducted separately (a) an open offer of Offer Shares to qualifying holders of depositary interests ("DIs") in the United Kingdom and elsewhere (the "UK Open Offer"), and (b) an offer of Offer Shares to retail investors in the United Kingdom through intermediaries using Peel Hunt LLP's Retail Capital Markets Platform (the "REX Retail Offer" and together with the UK Open Offer, the "UK Offering"), through which a part of the amount of proceeds sought by the Company in the Offering were raised. The subscription price for shares in the UK Offering was GBP 0.85 per share, equivalent to the EUR 1.00 Subscription Price of the Offering based on an exchange rate of 1.1714 on 31 May 2024.

The Offering attracted significant demand from both existing shareholders and new investors, both institutional and retail, with more than 3,000 total subscribers in the Offering. In the Offering, 7,872,794 Offer Shares will be allocated to private individuals and legal entities in Finland in the Public Offering and 16,676,648 Offer Shares will be allocated to institutional investors in the European Economic Area and, in accordance with applicable laws, internationally in the Institutional Offering. Separately, the lenders of the convertible capital loans (the "Capital Loans") have subscribed for 3,709,056 Offer Shares in the aggregate by way of setting off the principal, any accrued interest and any unpaid arrangement fees relating to Capital Loans in the aggregate amount of EUR 3.7 million. In addition, 1,955,764 Offer Shares will be allocated to holders of DIs in the UK Open Offer and 494,794 Offer Shares will be allocated to retail investors in the United Kingdom in the REX Retail Offer.

Allocation of Offer Shares has been made in accordance with the terms and conditions of the Offering. The subscriptions made by investors with allocation preferences (including qualifying shareholders in the Public Offering) have been accepted and will be met in full, in accordance with the allocation preferences described in the prospectus published for the Offering. New investors have been allocated a partial fill on equal terms on a pro-rata basis. The Company received valid acceptances, including excess applications, for 1,955,764 Offer Shares under the UK Open Offer and, as a result, all subscriptions by qualifying DI holders in the UK Open Offer will be met in full. The REX Retail Offer will result in the issue of a total of 494,794 Offer Shares. In the event there would be discrepancies in allocation, the Company has reserved the right to make technical corrections and take measures to correct the situation.

The Offering was conditional upon the Company raising at least EUR 15 million in gross proceeds. The Company had obtained binding subscription commitments in the aggregate amount of approximately EUR 6.2 million (the "Subscription Commitments") and binding subscription guarantee undertakings whereby the subscription guarantors had undertaken to subscribe for any Offer Shares of the Company not subscribed for in the Offering in an aggregate amount of up to EUR 8.8 million (the "Subscription Guarantee Undertakings"). The Subscription Guarantee Undertakings were limited to cover any unsubscribed Offer Shares up to the minimum gross proceeds of the Offering of EUR 15 million. The subscription guarantors will be paid guarantee fees of EUR 1.1 million in the aggregate for the Subscription Guarantee Undertakings. Certain subscription guarantors have decided that they will convert the fee in whole in new shares in the Company at the Subscription Price. The total amount of new shares to be issued to the subscription guarantors at the Subscription Price, to be set off against the guarantee fee, is 308,158 (the "Guarantee Fee Shares").

The Company had committed to issue investors who participated in the private placement announced on 4 April 2024 new shares primarily through a free issue ("Free Shares"), so that the subscription price of the private placement (EUR 1.50 per share) would be equal to the subscription price of a public offer or other share issue that may have been completed with a lower subscription price (or that it will make a corresponding compensation in another way). As the Subscription Price in the Offering was EUR 1.00 per Offer Share, the Company will issue 1,600,153 Free Shares in total.

The Company believes the net proceeds of the Offering allow the completion of the Phase II of the BEXMAB clinical trial with patients suffering from MDS which has relapsed or failed on previous treatment, and enable the Company to seek advice for market access from the United States Food and Drug Administration (the "FDA") and pursue readiness to move to Phase III in drug development. Simultaneously, negotiations for achieving a licensing or partnership agreement can be carried out.

Dr. Juho Jalkanen, CEO of Faron, comments:

"This financing round has been highly successful. It has secured adequate resources to get to the next major value inflection point: completion of Phase II of the BEXMAB trial in patients suffering from relapsed/refractory myelodysplastic syndrome and partnering bexmarilimab with Phase II data. I wish to express my sincere and deep gratitude to everyone who participated in the Offering, both big and small, as well as new and old investors. This has been a highly complex Offering and tremendous group effort among multiple parties. Huge thank you goes to everyone involved. After a challenging spring, we believe Faron is now financially well positioned and we can fully commit and concentrate on our most important task, taking bexmarilimab through Phase II. We will continue the work we have begun to be as cost efficient as possible and maintain our focus on rigorous allocation of capital."

Tuomo Pätsi, Chairman of the Board of Faron, comments:

"The funds raised in the Offering are crucial in providing sufficient runway to meet our objectives of completing Phase II, obtaining regulatory feedback from the FDA and signing a significant commercial partnership agreement. The preliminary results from the Phase II study of our bexmarilimab drug candidate have been excellent and confirmed the previous positive Phase I results. Now, our goal is to bring bexmarilimab to market as quickly as possible, as patients are waiting for such new treatment options."

Edouard Guillet, Partner at IPF Partners, comments:

"We are encouraged by the recent clinical results and progress in fundraising. We congratulate Faron on this successful fundraise and remain as excited as everybody to see the program go forward."

To implement the Offering, the Board of Directors of the Company has decided to issue 20,727,359 shares to Faron itself without consideration ("Treasury Shares") and, subject to the registration of the Treasury Shares, further convey such Treasury Shares as the Offer Shares under the Institutional Offering and

the UK Offering and as Free Shares to the relevant investors. In addition, the Board of Directors of the Company has decided to issue 11,890,008 new shares to the relevant investors in the Public Offering, to lenders of the Capital Loans in the conversion of the Capital Loans, and to subscription guarantors (the new shares together with the Treasury Shares, the "New Shares").

The Treasury Shares have been registered in the Trade Register maintained by the Patent and Registration Office on 20 June 2024. The remaining New Shares will be registered in the Trade Register maintained by the Patent and Registration Office on or about 20 June 2024. Following the registration of all the New Shares, the total number of issued shares in the Company will be 104,624,864. The New Shares account for approximately 45.3 per cent of the Company's outstanding shares and votes prior to the Offering and 31.2 per cent following the Offering.

The New Shares will be recorded on investors' book-entry accounts on or about 24 June 2024. A part of the New Shares will be registered first as Treasury Shares of the Company and recorded upon their conveyance on investors' book-entry accounts (delivery against payment) and, as applicable, settled as DIs in the UK Open Offer and the REX Retail Offer on or about 24 June 2024.

Applications will be made for the admission to trading of the New Shares on the Nasdaq First North Growth Market Finland ("First North") maintained by Nasdaq Helsinki Ltd ("Nasdaq Helsinki") under the current trading code "FARON", and on AIM ("AIM"), the market of that name operated by London Stock Exchange plc (the "LSE") under the trading code "FARN". Trading in the New Shares is expected to commence on or around 10:00 a.m. EEST / 8:00 a.m. BST on 24 June 2024 subject to the admission of the New Shares to trading on First North and AIM.

Total Voting Rights and Admission of the New Shares

It is expected that the admission of the New Shares to trading on First North and AIM will become effective at 10:00 a.m. EEST / 8:00 a.m. BST on 24 June 2024. Following admission, the Company will have 104,624,864 shares in issue each with equal voting rights. No shares will be held in treasury. Therefore, the number of voting rights in the Company will be 104,624,864.

The above figure may be used by shareholders as the denominator for the calculations by which they will determine whether they are required to notify an interest in, or a change to their interest in, the Company.

A confirmation regarding the approval of commitments and allocation of the Offer Shares in the Public Offering will be sent out as soon as possible and on or about 24 June 2024 at the latest to all investors who have submitted their commitments in the Public Offering. Investors who have submitted their commitments as Nordnet Bank AB's ("Nordnet") customers through Nordnet's online service, will see their commitments as well as allocation of Offer Shares on the transaction page of Nordnet's online service. Any excess payments made in connection with the commitments will be refunded to the person who made the commitment to the Finnish bank account stated in the commitment approximately five (5) business days after the completion decision (i.e. on or about 28 June 2024). If an investor's bank account is in a different bank than the subscription place, the refund will be paid to a Finnish bank account in accordance with the payment schedule of the financial institutions, approximately no later than two (2) banking days thereafter. If an investor is a client of Nordnet and the commitment is submitted via Nordnet, the refund will be paid only to a cash account at Nordnet.  

Carnegie Investment Bank AB, Finland Branch ("Carnegie") and Peel Hunt LLP ("Peel Hunt") are acting as lead managers (the "Lead Managers") and bookrunners for the Offering. Carnegie is not participating in arranging the UK Open Offer or the REX Retail Offer and Peel Hunt is not participating in arranging the UK Open Offer.

Issuance of Warrants to IPF

As disclosed by the Company on 8 April 2024 and 17 May 2024, the Company has committed to issue new additional warrants to IPF to adjust the total number of warrants to be equal to EUR 1,500,000 divided by the Subscription Price used in the Offering. Therefore, the Company has issued in total 499,601 new warrants to IPF. The strike price of all warrants is adjusted to EUR 1.00. In total IPF holds 1,819,944 warrants as at the date of this announcement.

Related Party Transactions and PDMR filings

As announced on 4 June 2024, Christine Roth, a director of the Company, has subscribed for 46,075 Offer Shares. Her interests in the issued shares and votes of the Company are set out below:

The participation of Christine Roth in the Offering constitutes a related party transaction for the purposes of the AIM Rules, the First North Rulebook and the Finnish Limited Liability Companies Act. The independent directors for the purpose of Christine Roth's participation in the Offering, being all other members of the Board, having consulted with Cairn Financial Advisers LLP, the Company's nominated adviser for the purposes of the AIM Rules, consider the terms of Christine Roth's participation in the Offering to be fair and reasonable insofar as shareholders are concerned.

In addition, Markku Jalkanen and Tuomo Pätsi, directors of the Company, as well as Scientific Advisor Sirpa Jalkanen and interim CFO Yrjö Wichmann have subscribed for 16,667, 6,667, 16,667 and 2,333 Free Shares respectively, pursuant to the private placement announced on 4 April 2024. Their beneficial interests in the issued shares and votes of the Company are set out below:

The subscriptions of Free Shares by Markku Jalkanen, and Tuomo Pätsi constitute related party transactions for the purposes of the AIM Rules. The independent directors for the purpose of their subscription of Free Shares, being John Poulos, Christine Roth, and Marie-Louise Fjällskog, having consulted with Cairn Financial Advisers LLP, the Company's nominated adviser for the purposes of the AIM Rules, consider the terms of their subscription of Free Shares to be fair and reasonable insofar as shareholders are concerned.

In addition, Timo Syrjälä, an existing shareholder in the Company, has subscribed for and been allocated 3,695,449 Offer Shares in aggregate (subscribed for by himself and through Acme Investments SPF Sarl ("Acme"), an entity wholly owned by Mr. Syrjälä, through the Institutional Offering), for an aggregate subscription value of approximately EUR 3,695,449 at the Subscription Price, as well as 66,667 Free Shares pursuant to the private placement announced on 4 April 2024. Based on the information received by Company, following the completion of the Offering, Mr. Syrjälä's total holding in the Company's shares, which includes his indirect holding through Acme, will increase from 12,261,907 shares to 16,024,023 shares, representing 15.32 per cent of the issued shares and votes of the Company following the Offering. Mr Syrjälä is a "Substantial Shareholder" in the Company for the purposes of the AIM Rules. His subscription of Offer Shares pursuant to the Offering and of the Free Shares constitute a related party transaction for the purposes of the AIM Rules. The Board of Directors of the Company, all of whom are independent of Mr Syrjälä, having consulted with Cairn Financial Advisers LLP, the Company's nominated adviser for the purposes of the AIM Rules, consider the terms of the participation by Mr. Syrjälä in the Offering and his subscription of the Free Shares to be fair and reasonable insofar as shareholders are concerned.

For the purposes of MAR and UK MAR, the person responsible for arranging for the release of this

announcement on behalf of Faron is Juho Jalkanen, Chief Executive Officer.

Faron Pharmaceuticals Ltd

For more information please contact:

ICR Consilium
Mary-Jane Elliott, David Daley, Lindsey Neville
Phone: +44 (0)20 3709 5700
E-mail: [email protected]

Cairn Financial Advisers LLP, Nomad

Sandy Jamieson, Jo Turner

Phone: +44 (0) 207 213 0880

Peel Hunt LLP, Broker

Christopher Golden, James Steel

Phone: +44 (0) 20 7418 8900

Sisu Partners Oy, Certified Adviser on Nasdaq First North

Juha Karttunen

Phone: +358 (0)40 555 4727

Jukka Järvelä

Phone: +358 (0)50 553 8990

About BEXMAB

The BEXMAB study is an open-label Phase I/II clinical trial investigating bexmarilimab in combination with standard of care (SoC) in the aggressive hematological malignancies of acute myeloid leukemia (AML) and myelodysplastic syndrome (MDS). The primary objective is to determine the safety and tolerability of bexmarilimab in combination with SoC (azacitidine) treatment. Directly targeting Clever-1 could limit the replication capacity of cancer cells, increase antigen presentation, ignite an immune response, and allow current treatments to be more effective. Clever-1 is highly expressed in both AML and MDS and associated with therapy resistance, limited T cell activation and poor outcomes.

About bexmarilimab

Bexmarilimab is Faron's wholly owned, investigational immunotherapy designed to overcome resistance to existing treatments and optimize clinical outcomes, by targeting myeloid cell function and igniting the immune system. Bexmarilimab binds to Clever-1, an immunosuppressive receptor found on macrophages leading to tumor growth and metastases (i.e. helps cancer evade the immune system). By targeting the Clever-1 receptor on macrophages, bexmarilimab alters the tumor microenvironment, reprogramming macrophages from an immunosuppressive (M2) state to an immunostimulatory (M1) state, upregulating interferon production and priming the immune system to attack tumors and sensitizing cancer cells to standard of care.

About Faron Pharmaceuticals Ltd

Faron (AIM: FARN, First North: FARON) is a global, clinical-stage biopharmaceutical company, focused on tackling cancers via novel immunotherapies. Its mission is to bring the promise of immunotherapy to a broader population by uncovering novel ways to control and harness the power of the immune system. The Company's lead asset is bexmarilimab, a novel anti-Clever-1 humanized antibody, with the potential to remove immunosuppression of cancers through reprogramming myeloid cell function. Bexmarilimab is being investigated in Phase I/II clinical trials as a potential therapy for patients with hematological cancers in combination with other standard treatments. Further information is available at www.faron.com.

Important notice

This announcement is not an offer of securities for sale into the United States. The Offer Shares have not been and 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. There is no intention to register the Offer Shares in the United States or to make a public offering in the United States. Any sale of the Offer Shares in the United States will be made solely to a limited number of "qualified institutional buyers" or accredited investors, each as defined in Rule 144A in reliance on an exemption from the registration requirements of the Securities Act.

The distribution of this release may be restricted by law and persons into whose possession any document or other information referred to herein comes should inform themselves about and observe any such relevant legal restrictions. The information contained herein is not for publication or distribution, directly or indirectly, in or into the United States, Australia, Canada, Japan, New Zealand or the Republic of South Africa. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such aforementioned jurisdiction. This release is not directed to, and is not intended for distribution to or use by, any person or entity that is a citizen, resident or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would violate law or regulation or which would require any registration or licensing within such jurisdiction.

In any European Economic Area Member State, other than Finland, this release is only addressed to and is only directed at "qualified investors" in that Member State within the meaning of Article 2(e) of Regulation (EU) 2017/1129 (the "Prospectus Regulation").

In the United Kingdom, this release is only being distributed to and is only directed at "qualified investors" within the meaning of Article 2(e) of the Prospectus Regulation as it forms part of domestic law in the United Kingdom by virtue of the European Union (Withdrawal) Act 2018 (the "UK Prospectus Regulation") who are (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order") or (ii) high net worth companies, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as "UK Relevant Persons"). Any investment activities to which this announcement relates will only be available to and will only be engaged in with UK Relevant Persons. Any person who is not a UK Relevant Person should not act or rely on this release or any of its contents.

This release does not constitute a prospectus as defined in either the Prospectus Regulation or the UK Prospectus Regulation and, as such, it does not constitute or form part of, and should not be construed as, an offer to sell, or a solicitation or invitation of any offer to buy, acquire or subscribe for, any securities or an inducement to enter into investment activity in relation to any securities.

No part of this release, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. The information contained in this release has not been independently verified. No representation, warranty or undertaking, expressed or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein. The Company or any of its respective affiliates, advisors or representatives or any other person, shall have no liability whatsoever (in negligence or otherwise) for any loss, however arising from any use of this release or its contents or otherwise arising in connection with this release. Each person must rely on their own examination and analysis of the Company, its subsidiaries, its securities and the transactions, including the merits and risks involved.

The Lead Managers are acting exclusively for the Company and no one else in connection with the Offering. They will not regard any other person as their respective client in relation to the Offering. The Lead Managers will not be responsible to anyone other than the Company for providing the duties afforded to their respective clients, nor for giving advice in relation to the Offering or any transaction or arrangement referred to herein.

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 Company's current expectations and assumptions regarding the completion and use of proceeds from the Offering, 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 Company's current beliefs and assumptions and are based on information currently available to the Company.

A number of factors could cause actual results to differ materially from the results and expectations dis-cussed 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 Company believes 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.