Faron Pharma Regulatory News (FARN)

NOTICE OF faron pharmaceuticals LTD's ANNUAL GENERAL MEETING

Shareholders of Faron Pharmaceuticals Ltd are invited to attend the Annual General Meeting to be held on 26 May 2016 at 10 a.m. at the premises of the BioCity building, Mauno Conference Center, address Tykistökatu 6, 20520 Turku, Finland. The registration of attendees and the distribution of voting slips will commence at the meeting venue at 9 a.m.

A. MATTERS ON THE AGENDA OF THE ANNUAL GENERAL MEETING

1. Opening of the meeting

2. Calling the meeting to order

3. Election of persons to scrutinise the minutes and to supervise the counting of votes

4. Recording the legality of the meeting

5. Recording the attendance at the meeting and adoption of the list of votes

6. Presentation of the financial statements, the Report of the Board of Directors and the Auditor's Report for 2015

Review by the CEO

7. Adoption of the Financial Statements

8. Resolution on the use of the profit shown on the balance sheet and the payment of dividend

The Board of Directors proposes that no dividend for the financial year 2015 will be paid and that the losses of the Company for the financial year, amounting to EUR 6.2 million (IFRS), will be carried forward to reserve for invested unrestricted equity.

9. Resolution on the discharge of the members of the Board of Directors and the CEO of the Company from liability

10. Resolution on the remuneration of the members of the Board of Directors

The Board of Directors proposes, on the basis of the proposal of the Remuneration Committee, that the fees payable to the members and the Chairman of the Board will remain unchanged from 2015 and be as follows: an annual remuneration of EUR 35,000 will be paid to the Board members, in addition to which EUR 33,000 will be paid to the Chairman of the Board of Directors. In addition, it is proposed that a further annual remuneration of EUR 5,000 will be paid to Chairman of the Audit Committee, the Nomination Committee and the Remuneration Committee. Finally, it is proposed that all reasonable and properly documented expenses incurred in the performance of duties of the members of the Board of Directors would be compensated.

The Board of Directors also propose, on the basis of the proposal of the Remuneration Committee, that Markku Jalkanen as the Company's CEO and Yrjö Wichmann as the Company's CFO will not receive such remuneration as a member of the Board of Directors.

11. Resolution on the number of members of the Board of Directors

The Board of Directors proposes on the basis of the proposal of the Nomination Committee that eight (8) members be elected to the Board of Directors.

12. Election of members of the Board of Directors

The Board of Directors propose, on the basis of the proposal of the Nomination Committee, that Frank Armstrong, Markku Jalkanen, Juho Jalkanen, Jonathan Knowles, Matti Manner, Huaizheng Peng, Yrjö Wichmann and Leopoldo Zambeletti will be re-elected to the Board of Directors until the next Annual General Meeting.

The proposed Board members have informed the Company that in the event they are re-elected, they intend to elect Frank Armstrong as Chairman of the Board and Matti Manner as Deputy Chairman of the Board.

In addition, the proposed Board members have advised that the members of the Board committees would remain unchanged and would therefore be as follows: Leopoldo Zambeletti would be the Chairman and Frank Armstrong and Huaizheng Peng members to the Audit Committee, Frank Armstrong would be the Chairman and Leopoldo Zambeletti and Huaizheng Peng as members to the Remuneration Committee, and Matti Manner would be the Chairman and Frank Armstrong and Jonathan Knowles as members to the Nomination Committee.

13. Resolution on the remuneration of the Auditor

The Board of Directors propose to the Annual General Meeting, on the basis of the proposal of the Audit Committee, that the Auditor be remunerated in accordance with the invoice presented.

14. Election of the Auditor

The Board of Directors propose to the Annual General Meeting on the basis of the proposal of the Audit Committee that PricewaterhouseCoopers Oy, Authorised Public Accountants, continue to act as the Company's auditor.

PricewaterhouseCoopers Oy has informed the Company that it will appoint Kalle Laaksonen, Authorised Public Accountant, as the Auditor with principal responsibility for the completion of the Audit.

15. Resolution on the amendment of the option programme

The Board of Directors propose, on the basis of the proposal of the Remuneration Committee, that the Annual General Meeting would resolve to amend the option programme adopted by the Extraordinary General Meeting of the Company on 15 September 2015 in respect of the total of 150,000 A options that have remained unallocated and unsubscribed for, to confirm the validity of the said 150,000 A options and that they are available to be allocated to key management and personnel and that the said A options may be subscribed during a term ending on 9 June 2016. Otherwise the terms and conditions would remain unchanged and apply also to the said A options (Appendix 1). Following the amendment, any A options that have not been subscribed at the latest on 9 June 2016 will lapse.

16. Authorising the Board of Directors to decide on the issuance of shares

The Board of Directors propose that the Annual General Meeting would authorise the Board of Directors to resolve by one or several decisions on issuances of shares which authorisation contains the right to issue new shares or dispose of the shares in the possession of the Company. The authorisation would consist of up to 4,622,340 shares in the aggregate, which corresponds to approximately 20 per cent of the existing shares and votes in the Company.

The authorisation would not exclude the Board of Directors' right to decide on the issuance of shares in deviation from the shareholders' pre-emptive rights. The authorisation is proposed to be used for material arrangements from the Company's point of view, such as financing or implementing business arrangements, investments or for other such purposes determined by the Board of Directors in which case a weighty financial reason for issuing shares, and possibly deviating from the shareholders' pre-emptive rights would exist.

The Board of Directors would be authorised to resolve on all other terms and conditions of the issuance of shares.

The authorisation will be effective until 30 June 2017. The Board of Directors propose that the authorisation would supersede the authorisation granted by the Extraordinary General Meeting held on 15 September 2015.

17. Authorisation to make communication to shareholders in electronic form and to communicate by means of a website

The Board of Directors propose that in future the Company shall be permitted to fulfil its obligations in respect of communication to its shareholders (including the Company's annual accounts) through the use of the Electronic Communication methods as defined in the AIM Rules for Companies (as amended from time to time). Any such methods of communication will be established and operated in accordance with the requirements of the AIM Rules for Companies, the Company's articles of association and any legal requirements in its jurisdiction of incorporation, Finland.

18. Closing of the meeting

B. DOCUMENTS OF THE ANNUAL GENERAL MEETING

The above-mentioned proposals to the Annual General Meeting and this notice are available on Faron Pharmaceutical's website at www.faronpharmaceuticals.com under Investor Relations/Financial calendar. Faron Pharmaceutical's financial statements, the Report of the Board of Directors and the Auditor's report, are available on the front page of the Company's website and under Investor Relations/Results and will be posted to all shareholders shortly. The Board proposals and the other above-mentioned documents will also be available at the Annual General Meeting. Copies of these documents and of this notice will be sent to shareholders upon request. The minutes of the Annual General Meeting will be available to be viewed on the Company's website from 9 June 2016 at the latest.

C. INSTRUCTIONS FOR THE PARTICIPANTS

1. The right to participate and registration

Each shareholder who on the record date of the Annual General Meeting, being 16 May 2016, is registered in the Company's shareholders' register held by Euroclear Finland Ltd has the right to participate in the Annual General Meeting. A shareholder whose shares are registered on his/her personal book-entry account is registered in the Company's shareholders' register.

A shareholder who is registered in the Company's shareholders' register and who wants to participate in the Annual General Meeting should register for the meeting by no later than 4 p.m. (Finnish time) on Friday 20 May 2016 by giving a prior notice of participation:

• by completing the registration form on the Company's website www.faronpharmaceuticals.com under Investor Relations/ Financial calendar;

• by email to katja.wallenlind@faronpharmaceuticals.com; or

• by mail to Faron Pharmaceuticals Ltd, C/o Katja Wallenlind, Joukahaisenkatu 6, FI-20520 Turku, Finland.

When registering, a shareholder shall state his/her name, personal identification number / business identity code, address, telephone number and the name of a possible proxy representative or assistant and the personal identification number of the proxy representative. The personal data given by shareholders to Faron Pharmaceuticals is used only in connection with the Annual General Meeting and the necessary processing of related registrations.

The shareholder, his/her authorised representative or proxy representative should, when necessary, be able to prove his/her identity and/or right of representation.

2. Proxy representative and powers of attorney

A shareholder may participate in the Annual General Meeting and exercise his/her rights at the meeting by way of proxy representation. A proxy representative must present a dated power of attorney or other reliable proof of their authority to represent the shareholder.

A shareholder may participate in the Annual General Meeting by means of several proxy representatives, who represent the shareholder with shares held on different book-entry accounts. In such case, the shares represented by each proxy representative shall be identified when registering for the Annual General Meeting.

Possible proxy documents should be sent in originals to Faron Pharmaceuticals, Joukahaisenkatu 6, FI-20520 Turku, Finland, before the end of registration period.

3. Holder of nominee-registered shares (including depositary interest holders)

A holder of nominee-registered shares (including depositary interest holders) has the right to participate in the Annual General Meeting by virtue of such shares based on which the holder would be entitled to be registered in the Company's shareholders' register held by Euroclear Finland Ltd on the Annual General Meeting's record date of 16 May 2016.

Additionally, participation requires that the holder of nominee-registered shares is temporarily registered in the Company's shareholders' register held by Euroclear Finland Ltd by 10 a.m. Finnish time on Monday 23 May 2016. Temporary registration in the shareholders' register shall be deemed to be a registration for the Annual General Meeting.

Holders of nominee-registered shares are advised to request the necessary instructions regarding the temporary registration in the shareholders' register, the issuing of proxy documents and registration for the General Meeting from their custodian bank without delay. The account management organisation of the custodian bank shall notify a holder of nominee-registered shares, who wants to participate in the Annual General Meeting, to be temporarily entered into the Company's shareholders' register by the above-mentioned time.

4. Other instructions and information

Pursuant to Chapter 5, Section 25 of the Finnish Companies Act, shareholders who are present at the Annual General Meeting are entitled to request information regarding the matters addressed by the meeting.

On the date of this notice, 4 May 2016, the total number of shares and votes in Faron Pharmaceuticals is 23,111,704.

The Annual General Meeting shall be held in Finnish and in English.

Turku, 4 May 2016

FARON PHARMACEUTICALS LTD

Board of Directors

FOR MORE INFORMATION, PLEASE CONTACT:

Faron Pharmaceuticals Oy

Katja Wallenlind

Phone +358 (50) 577 4807

E-mail: katja.wallenlind@faronpharmaceuticals.com

Hume Brophy, PR

Mary Clark, Eva Haas, Hollie Vile

Phone: +44 207 862 6390

E-mail: faron@humebrophy.com

Cairn Financial Advisers LLP, Nominated Adviser

Emma Earl, Tony Rawlinson and Rebecca Anderson

Phone: +44 207 148 7900

Panmure Gordon (UK) Limited, Joint Broker

Freddy Crossley, Duncan Monteith (Corporate Finance)

Tom Salvesen (Corporate Broking)

Phone: +44 207 886 2500

Whitman Howard Limited, Joint Broker

Ranald McGregor-Smith, Francis North

Phone: +44 207 659 1234

About Faron Pharmaceuticals Ltd

Faron is a drug discovery and development company focused on creating novel treatments for medical conditions with significant unmet needs. The Company is based in Turku, Finland. The Company currently has a pipeline of clinical stage products focusing on acute organ traumas, cancer immunotherapy and vascular damage. The Company's lead candidate Traumakine®, has been developed to treat Acute Respiratory Distress Syndrome ("ARDS"), a rare, severe, life-threatening medical condition characterised by widespread inflammation in the lungs. Traumakine® is now in a pan-European pivotal Phase III study (INTEREST). Besides Traumakine®, Faron's pipeline consists of early stage assets including a pre-clinical anti-Clever-1 antibody named Clevegen®. Clevegen® is focused on converting the immune environment around a tumour from being immune suppressive to immune stimulating and represents a novel immuno-oncology approach. Faron Pharmaceuticals is listed on AIM under the ticker 'FARN'. Further information is available at www.faronpharmaceuticals.com