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, THE REPUBLIC OF IRELAND, NEW ZEALAND OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION 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 SUBSCRIBE FOR, OTHERWISE ACQUIRE OR DISPOSE OF ANY SECURITIES IN FARON PHARMACEUTICALS OY OR ANY OTHER ENTITY IN ANY JURISDICTION. NEITHER THIS ANNOUNCEMENT NOR THE FACT OF ITS DISTRIBUTION, SHALL FORM THE BASIS OF, OR BE RELIED ON IN CONNECTION WITH ANY INVESTMENT DECISION IN RESPECT OF FARON PHARMACEUTICALS.

THE PROPOSED TRANSACTION REFERRED TO IN THIS ANNOUNCEMENT WOULD BE MADE PURSUANT TO A PRIVATE PLACEMENT EXEMPTION UNDER THE EUROPEAN DIRECTIVE 2003/71/EC (AND AMENDMENTS THERETO (THE "PROSPECTUS DIRECTIVE"), AS IMPLEMENTED IN THE MEMBER STATES OF THE EUROPEAN ECONOMIC AREA, FROM THE REQUIREMENTS TO PRODUCE A PROSPECTUS UNDER THE PROSPECTUS DIRECTIVE (AND AMENDMENTS THERETO) FOR OFFERS OF SECURITIES. FARON PHARMACEUTICALS HAS NOT TAKEN ANY ACTION, NOR WILL IT TAKE ANY ACTION, TO OFFER ANY SECURITIES OR ANY OTHER DOCUMENTS RELATING TO THE PROPOSED TRANSACTION 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.

Faron Pharmaceuticals Oy

("Faron" or the "Company")

Proposed Placing and Subscription to raise up to £5.0 million

TURKU - FINLAND, 7.00 A.M. GMT, 28 February 2017 - Faron Pharmaceuticals Oy ("Faron" or "Company") (LON: FARN), the clinical stage biopharmaceutical company, is pleased to announce a proposed placing of up to 1,362,340 new ordinary shares in the capital of the Company (the "Placing Shares") and a proposed subscription of up to 60,000 new ordinary shares in the capital of the Company (the "Subscription Shares") at a price of 350 pence per share (the "Issue Price") to raise, in aggregate, up to approximately £5.0 million before expenses.

KEY HIGHLIGHTS

· Proposed conditional placing of up to 1,362,340 Placing Shares at the Issue Price ("Placing") and conditional subscription of up to 60,000 Subscription Shares at the Issue Price ("Subscription") to raise, in aggregate, up to approximately £5.0 million before expenses

· The Placing Shares and Subscription Shares if subscribed for in full will represent, in aggregate, approximately 5.4% of the Company's total number of existing issued shares

· The Issue Price of 350 pence per share represents a premium of 0.7% to the closing mid-market price of 347.5 pence on 27 February 2017, being the last practicable date prior to this announcement

· The net proceeds of the proposed Placing and Subscription (of approximately £4.7 million if fully subscribed) would be used to fund:

o The expansion of the pre-clinical and planned early-stage clinical development of Clevegen, the Company's novel cancer immune switch antibody, to other Clever-1 positive solid tumours (ovarian, pancreas, melanoma)

o Further strengthen the Company's balance sheet as it explores strategic partnering negotiations

· The proposed Placing and Subscription is to be implemented through a private placement with a limited number of institutional and other investors. It is expected that finalisation of the proposed Placing and Subscription will commence immediately following this announcement. Further terms of the proposed Placing and Subscription are set out below

· Panmure Gordon (UK) Limited ("Panmure Gordon") is acting as Lead Bookrunner and Corporate Broker to the Company and Cairn Financial Advisers LLP ("Cairn") as Nominated Adviser to the Company

Commenting on the proposed Placing and Subscription, Dr Markku Jalkanen, CEO of Faron, said:

"2017 is set to be a pivotal year for Faron as we prepare to get data from our Phase III INTEREST trial in the second half of the year. We are also continuing our development program for Clevegen and this proposed placing should assist us in expanding its pre-clinical and planned early-stage clinical development to Phase I/II trials in other Clever-1 positive solid tumours (ovarian, pancreas, melanoma). We believe that Clevegen's ability to remove immune suppressision around tumours will be the next important step in the fight against tumour growth and spread, and could lead to complete cancer remission as well as providing long term vaccination against future tumours from the patient's own immune system. We would like to thank our existing and new institutional investors for their support and for their continued committment to our programmes."

REASONS FOR THE PROPOSED PLACING AND SUBSCRIPTION

Expansion of the pre-clinical and clinical development of Clevegen®

· Faron intends to expand the pre-clinical and planned early-stage clinical development of Clevegen, its novel cancer immune switch antibody, to Phase I/II trials in other solid tumours (ovarian, pancreas, melanoma) known to reside high numbers of Clever-1 positive immune suppressive macrophages

· The Directors believe that Clevegen's ability to remove local immune suppression by targeting pro-tumoural type-2 macrophages could help the human body's own immune system to combat cancer

Further strengthen Faron's balance sheet as it explores commercialisation opportunities

· In addition to its in-house development of its own programmes, Faron continues to explore out-licensing and partnering opportunities of its technologies and/or products with a number of companies, including those in the immuno-oncology field

· The Company continually assesses business opportunities to produce maximum value for shareholders, and a strong balance sheet should be beneficial to securing favourable terms from these opportunities

DETAILS OF THE PROPOSED PLACING AND SUBSCRIPTION AND ISSUE OF EQUITY

Subject to the Placing Shares and Subscription Shares being subscribed in full, they are to be issued by the Company pursuant to the Directors' existing authority to allot ordinary shares in the capital of the Company ("Ordinary Shares") for cash on a non-pre-emptive basis approved by shareholders at the Company's annual general meeting held on 26 May 2016. The Company has received non-binding indications of interest from potential institutional investors for the Placing and Subscription during a pre-marketing process.

In connection with the proposed Placing, the Company has entered into a placing agreement with Panmure Gordon and Cairn (together the "Placing Advisers") (the "Placing Agreement"). The Placing is conditional upon, inter alia:

· the Placing Agreement having become unconditional in all respects;

· the Company having performed, in all material respects, its obligations under the Placing Agreement and not being in material breach of the Placing Agreement;

· legally binding commitments being received in respect of all of the Placing Shares and the Subscription Shares (the "Placee Condition"); and

· the Placing Shares and the Subscription Shares being issued and being registered at the Finnish Trade Registry (the "Issue Condition").

Pursuant to the terms of the Placing Agreement, Panmure Gordon has agreed to use reasonable endeavours to procure placees for the Placing Shares at the Issue Price. The Placing is being implemented through a private placement with a limited number of institutional and other investors. A further announcement will be made to confirm its completion in due course, but by no later than 4.30 p.m. on 1 March 2017. The Placing Agreement contains customary warranties and an indemnity from the Company in favour of the Placing Advisers together with provisions which enable the Placing Advisers to terminate the Placing Agreement in certain circumstances before satisfaction of the Issue Condition, including where there has been a material breach of any of the warranties in the reasonable opinion of any Placing Adviser or where there is a material adverse change in the business or financial affairs of the Company. In order to satisfy the Issue Condition prior to Admission, pursuant to the terms of the Placing Agreement, Panmure Gordon has agreed to underwrite the subscription for and payment to the Company of the gross total of the Issue Price for the Placing Shares upon satisfaction of the Placee Condition.

Assuming that the Placing Shares and Subscription Shares are fully subscribed for, an application has been made for admission of the Placing Shares and Subscription Shares to trading on AIM ("Admission") and it is expected that Admission will become effective and that dealings in the Placing Shares and Subscription Shares will commence on or around 8.00 a.m. on 3 March 2017. As noted above, a further update announcement will be made in due course. 

MARKET ABUSE REGULATION

The Market Abuse Regulation ("MAR") became effective from 3 July 2016. Market Soundings, as defined in MAR, were taken in respect of the proposed Placing and Subscription with the result that certain persons became aware of inside information, as permitted by MAR. That inside information in relation to the Placing and Subscription 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 a Market Sounding are no longer in possession of inside information relating to the Company and its securities.

ENDS

For more information please contact:

Faron Pharmaceuticals Oy

Dr Markku Jalkanen, Chief Executive Officer

E-mail: investor.relations@faronpharmaceuticals.com

Consilium Strategic Communications

Mary-Jane Elliott, Chris Welsh, Lindsey Neville, Rosie Phillips

Phone: +44 203 709 5700

E-Mail: Faron@consilium-comms.com

Westwicke Partners, IR (US)

Chris Brinzey

Phone: +1 339 970 2843

E-Mail: chris.brinzey@westwicke.com

Cairn Financial Advisers LLP, Nominated Adviser

Emma Earl, Tony Rawlinson, Rebecca Anderson

Phone: +44 207 213 0880

Panmure Gordon (UK) Limited, Lead Bookrunner and Corporate Broker

Freddy Crossley, Duncan Monteith (Corporate Finance)

Tom Salvesen (Corporate Broking)

Phone: +44 207 886 2500

Whitman Howard Limited, Joint Corporate Broker

Ranald McGregor-Smith, Francis North

Phone: +44 207 659 1234

About Faron Pharmaceuticals Oy

Faron is a clinical stage biopharmaceutical company developing novel treatments for medical conditions with significant unmet needs. The Company currently has a pipeline focusing on acute organ traumas, cancer immunotherapy and vascular damage. The pipeline is built on Faron's scientific knowledge and control of the endothelial barrier, the membrane of cells lining blood and lymphatic vessels to separate blood content from tissues. The Company's lead candidate Traumakine is in development for the treatment of Acute Respiratory Distress Syndrome ("ARDS"), a rare, severe, life-threatening medical condition characterised by widespread inflammation in the lungs. Traumakine is currently in pan-European (INTEREST) and Japanese pivotal Phase III studies, and is commencing a European Phase II trial for the Rupture of Abdominal Aorta Aneurysm ("RAAA"). Additionally, Faron is developing Clevegen® a ground breaking pre-clinical anti-Clever-1 antibody. Clevegen has the ability to convert the immune environment around a tumour from being immune suppressive to immune stimulating. This novel macrophage-directed immuno-oncology approach is called Tumour Immunity Enabling Technology ("TIET") and can be used alone or in combination with other immune checkpoint molecules for the treatment of cancer patients. New application opportunities related to TIET cover chronic infections and inefficient vaccination. Based in Turku, Finland, Faron Pharmaceuticals is listed on AIM under the ticker 'FARN'. Further information is available at www.faronpharmaceuticals.com

Forward Looking Statements

Certain statements included herein express Faron Pharmaceutical's expectations or estimates of future performance and constitute "Forward-looking Statements". Forward-looking Statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by Faron Pharmaceuticals are inherently subject to significant business, economic and competitive uncertainties and contingencies. Such Forward-looking Statements involve known and unknown risks, uncertainties and other factors that may cause the actual financial results, performance or achievements to be materially different from estimated future results, performance or achievements expressed or implied by those Forward-looking Statements and, as such, the Forward-looking Statements are not guarantees of future performance.