Faron Pharma Regulatory News (FARN)

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.

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 PHARMACEUTICALS OY ("FARON") OR ANY OTHER ENTITY IN ANY JURISDICTION IN WHICH ANY SUCH OFFER WOULD BE UNLAWFUL.

FARON HAS NOT TAKEN ANY ACTION, NOR WILL IT TAKE ANY ACTION, TO OFFER ANY OF THE PLACING SHARES 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. THERE IS NO PUBLIC OFFERING IN THE UNITED STATES, THE UNITED KINGDOM OR ELSEWHERE. 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 Oy

Proposed Placing of Shares and Appointment of Financial Adviser

TURKU - FINLAND, 7 November 2019 - Faron Pharmaceuticals Oy (AIM: FARN) ("Company"), the clinical stage biopharmaceutical company, today announces a proposed private placement to a limited number of institutional investors and certain members of the management and of the Board of Directors of Faron ("Placing") of new shares in the Company, to issue a minimum number of 3,935,500 ordinary shares in the Company ("Placing Shares").

The Placing, arranged by Carnegie Investment Bank AB ("Carnegie"), 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 EET on 8 November 2019 at the latest. Carnegie reserves the right to close the Bookbuild earlier or later without further notice. The Bookbuild may also 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"). 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.

KEY HIGHLIGHTS

·; A private placement conducted by way of an accelerated book-building, directed to a limited number of institutional investors and certain members of the management and of the Board, in which Carnegie uses reasonable endeavours to procure subscriptions for the Placing Shares, which would correspond to a minimum of approximately 10.0 per cent. of all of the issued shares and votes in the Company immediately prior to the Placing.

·; The net proceeds of the Placing would be primarily used to advance the clinical development of Clevegen® in several indications and to help advance the seamless continuation of Clevegen® development to optimise the value of the asset in advance of any partnership deal.

·; The cash balance held by the Company as at 30 September 2019 was c. €2.38 million.

Carnegie acts as Lead Manager and Sole Bookrunner of the Placing and Financial Adviser to the Company.

REASONS FOR THE PROPOSED PLACING

Advance the clinical development of Clevegen® in several indications

·; Faron intends to initiate the cohort expansion (part II) of the MATINS trial in colorectal cancer after the dose optimisation (details of which were announced 9 October 2019) has been completed. Once the cohort expansion reaches meaningful size the Company plans to share the data with the US Food and Drug Administration ("FDA") for discussions of the content of a biologics licence application; and

·; The Company also expects further analysis of patient data from part I of the MATINS trial to aid the selection of additional cohort expansions among the non-treatable and advanced solid cancers as indicated in the clinical pipeline available on the Company's website and based on the substantial appearance of Clever-1 positive myeloid cells in these cancer types.

Advance seamless continuation of Clevegen® development to optimise value creation

·; The Company has during the course of the MATINS trial to date learned that Clevegen has been shown to promote immune activation in all of the dosed patients. This would potentially make Clevegen a new and effective macrophage immune checkpoint drug for cancer patients, who frequently suffer from supressed immune capacity toward tumour elimination;

·; Clevegen has also been shown to be safe and well tolerated, which the Company believes to make it a low-risk candidate to be used together with existing cancer therapies;

·; The recent analysis of the MATINS data has also confirmed that lower doses may potentially induce a stronger immune response than higher doses, which forms the basis for additional dose optimisation to secure the best possible outcome of the ongoing clinical development under way currently; and

·; Combined, this MATINS data suggests there may be an increased value to a Clevegen partnership with a wider number of partners. As announced on 1 November 2019, the Company is working hard to optimise the structure to capture the most value from any potential deal with the best possible partner which is likely to result in discussions continuing into 2020.

Traumakine® program

·; The Company will have a face-to-face meeting with the FDA in early December 2019, which is expected to result in a written opinion of the FDA on the Company's clinical development plan for Traumakine.

Dr Markku Jalkanen, Chief Executive Officer of Faron, said: "Over the last couple of months we have come to realise the significance of the data generated to date from the MATINS study, which has confirmed three important points: i) In Clevegen, we potentially have the first macrophage immune checkpoint drug which has promoted immune activation of all dosed patients to date, ii) Clevegen is safe and well tolerated, making it a low-risk candidate for combination with existing cancer therapies, and iii) Clevegen has shown early clinical benefits in patients who have exhausted all other options. These results open multiple new opportunities for Clevegen in combination with existing cancer therapies. The possibility to expand the Clevegen platform outside single-agent treatment has also widened Faron's approach to its commercialisation strategy for Clevegen either alone or with a partner. This proposed private placement will not only strengthen the Company's resources but also strengthen its position in partnership negotiations as it explores the best outcome for the Company and its shareholders."

DETAILS OF THE PROPOSED PLACING AND ISSUE OF EQUITY

The proposed Placing is carried out on the basis of the authorisation granted to the Board by the Company's Extraordinary General Meeting held on 25 October 2019 to issue a total of 7,871,00 ordinary shares in the Company in a directed share issue and in deviation from the shareholders' pre-emptive rights.

If the minimum number of 3,935,500 Placing Shares are fully subscribed for, the number of Placing Shares corresponds to approximately 10.0 per cent. of all of the issued shares and votes in the Company immediately prior to the Placing. The Company may in its discretion resolve on the final number of the Placing Shares up to a total of 7,871,000 ordinary shares, depending on the demand in the Bookbuild.

The Placing, arranged by Carnegie, 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 EET on 8 November 2019 at the latest. Carnegie reserves the right to close the Bookbuild earlier or later without further notice. The Bookbuild may also 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 Carnegie (the "Placing Agreement"). Pursuant to the terms of the Placing Agreement, Carnegie has agreed to use its reasonable endeavours to procure the subscription of Placing Shares.

The Placing Agreement contains customary warranties and an indemnity from the Company in favour of Carnegie together with provisions which enable Carnegie 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 Carnegie certain commissions and fees in connection with the Placing. Pursuant to the terms of the Placing Agreement, Carnegie 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. Provided that the Board decides on issuing the Placing Shares, an application will then be made for the admission of all Placing Shares to trading on AIM market of the London Stock Exchange ("Admission").

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 Carnegie 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 180 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 12 November 2019. It is expected that Admission will become effective and that dealings in the Placing Shares (in the form of depositary interests) will commence at 10:00 Finnish time, 8:00 a.m. UK time, on or around 14 November 2019. As noted above, further update announcements will be made in due course. Upon registration with the Finnish Trade Register, the Placing Shares will rank pari passu in all respects with the existing shares of the Company.

As announced on 1 November 2019, the Company has been and is investigating various options to facilitate easier trading on the Company's shares especially for Finnish investors, including possibility to dual list its shares on Nasdaq First North Growth Market. No decisions regarding a dual listing or otherwise have been made in this respect.

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.

Carnegie, a public limited company duly incorporated and validly existing under the laws of Sweden, is acting as Financial Adviser to the Company and no one else in connection with the Placing. Accordingly, it will not be responsible to any person other than the Company for providing the regulatory and legal protections afforded to its clients nor for providing advice in relation to the contents of this announcement or any matter, transaction or arrangement referred to in it.

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

For more information please contact:

Faron Pharmaceuticals Oy

Dr Markku Jalkanen, Chief Executive Officer

investor.relations@faron.com 

Carnegie Investment Bank AB, Financial Adviser

Mika Karikoski (Corporate Finance)

Phone: +358 9 6187 1295

Panmure Gordon (UK) Limited, Nomad and Broker

Emma Earl, Freddy Crossley (Corporate Finance)

James Stearns (Corporate Broking)

Phone: +44 207 886 2500

Consilium Strategic Communications

Mary-Jane Elliott, David Daley, Lindsey Neville

Phone: +44 (0)20 3709 5700

E-mail: faron@consilium-comms.com

Westwicke Partners, IR (US)

Chris Brinzey

Phone: 01 339 970 2843

E-mail: chris.brinzey@westwicke.com

About Faron Pharmaceuticals Ltd

Faron (AIM:FARN) is a clinical stage biopharmaceutical company developing novel treatments for medical conditions with significant unmet needs. The Company currently has a pipeline based on the endothelial receptors involved in regulation of immune response, in oncology and organ damage. Clevegen, its precision immunotherapy, is a novel anti-Clever-1 antibody with the ability to switch immune suppression to immune activation in various conditions, with potential across oncology, infectious disease and vaccine development. Currently in phase I/II clinical development as a novel macrophage checkpoint immunotherapy for patients with untreatable solid tumours, Clevegen has potential as a single-agent therapy or in combination with other immune checkpoint molecules or other cancer standard cares. Traumakine, the Company's pipeline candidate to prevent vascular leakage and organ failures, has completed a phase III clinical trial in Acute Respiratory Distress Syndrome (ARDS). Plans for its future development are being finalised to avoid interfering steroid use together with Traumakine. Faron is based in Turku, Finland. Further information is available at www.faron.com.

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 particular, the early data from initial patients in the MATINS trial may not be replicated in larger patient numbers and the outcome of clinical trials may not be favourable or clinical trials over and above those currently planned may be required before the Company is able to apply for marketing approval for a product. 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.