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 £8.0 million

TURKU - FINLAND, 20 September 2016 - Faron Pharmaceuticals Oy ("Faron" or "Company") (LON: FARN), the clinical stage biopharmaceutical company, is pleased to announce a proposed placing of up to 2,868,000 new ordinary shares in the capital of the Company (the "Placing Shares") and a proposed subscription of up to 332,000 new ordinary shares in the capital of the Company (the "Subscription Shares") at a price of 250 pence per share (the "Issue Price") to raise, in aggregate, up to approximately £8.0 million before expenses.

KEY HIGHLIGHTS

· Proposed conditional placing of up to 2,868,000 Placing Shares at the Issue Price ("Placing") and conditional subscription of up to 332,000 Subscription Shares at the Issue Price ("Subscription"), to raise up to approximately £8.0 million before expenses

· The Placing Shares and Subscription Shares if subscribed for in full will represent, in aggregate, approximately 13.8% of the Company's existing issued share capital

· The Issue Price of 250 pence per share is equal to the closing mid-market price of 250 pence on 19 September 2016, being the last practicable date prior to this announcement

· The net proceeds of the proposed Placing and Subscription (approximately £7.4 million if fully subscribed) would be used to fund:

o Safety trials for the US development of its lead product Traumakine for the treatment of Acute Respiratory Distress Syndrome ("ARDS")

o Pre-clinical and clinical development of Clevegen, the Company's novel cancer immunotherapy checkpoint antibody, to Phase I/II

o European clinical development to Phase I/II of Traumakine for the treatment of patients with Rupture of Abdominal Aorta Aneurysm ("RAAA")

o Further R&D and operational expenses

· The proposed Placing and Subscription builds on the significant progress made by Faron since its admission to AIM in November 2015 and delivery on its key strategic aims, including the continued progress of the Company's Traumakine product through its pivotal pan-European Phase III INTEREST trial

· The Company has received advance assurance from HM Revenue and Customs that it continues to be a qualifying holding for the purposes of the Venture Capital Trust rules and a qualifying company for the purposes of the Enterprise Investment Scheme

· 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 Joint Broker, Whitman Howard Limited (Whitman Howard") as Joint Broker 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:

"The new funding would enable us to continue to deliver on our business objectives as we advance our exciting pipeline over the next two-to-three years. Given the positive data collected to date, we believe Traumakine presents a significant opportunity for several hundred thousand patients globally suffering from ARDS, a severe, life threatening medical condition with a mortality rate of approximately 30-45%, for which there is currently no approved pharmaceutical treatment. The US represents a large opportunity to Faron for Traumakine, and the funding would allow us to take the first step in its development and FDA registration process.

"We have made substantial progress with our immunotherapy candidate Clevegen and expanded the development strategy to focus on chronic infections and vaccination enhancement. We expect to create significant shareholder value by progressing Clevegen into clinical development through the application of the funding."

BACKGROUND TO AND REASONS FOR THE PROPOSED PLACING AND SUBSCRIPTION, AND USE OF PROCEEDS

Advance development of Traumakine® for ARDS - US safety trial

· Funding would be used to commence the preliminary US safety trial (FCPLI005) for Traumakine allowing biologics license application (BLA) filing in US

· ARDS is a severe, life threatening medical condition characterised by widespread capillary leakage and inflammation in the lungs, most often as a result of sepsis, pneumonia or significant trauma

· Currently there are no pharmacological treatments for ARDS, an orphan disease with a high (30-45%) mortality rate. ARDS incidence per annum is approximately 295,000 in US and Europe

· Traumakine shown to significantly reduce prospect of mortality and reverse disease progression. Phase I/II data were highly encouraging, where treatment with Traumakine was associated with an 81% reduction in the odds of 28 day mortality rate in patients with ARDS, with positive secondary endpoints. These data were published in The Lancet Respiratory Medicine, a leading medical journal

· Traumakine is currently in pivotal development stage in Europe and Japan, with the pivotal pan-European Phase III INTEREST trial for Traumakine ongoing with results expected H2 2017, and with patient recruitment expected to be initiated in H2 2016 for the Japanese Phase III trial

· Third party validation through partnership agreements with Maruishi Pharmaceutical Co., Ltd. ("Maruishi") in Japan, Pharmbio Korea Inc. ("Pharmbio") in Korea and CMS in Greater China ("CMS")

Progress pre-clinical and clinical development of Clevegen®

· Faron intends to advance the pre-clinical and clinical development of Clevegen, its novel cancer immunotherapy checkpoint antibody, to Phase I/II (FPCLI011)

· Clevegen offers further long-term upside with potential immunotherapy products across oncology, infectious disease, and vaccination by removing local immune suppression maintained by type-2 macrophages

· Clevegen revolves around Clever-1, a cell surface receptor on endothelial cells and macrophages involved in cancer growth and spread

· The Directors believe that Clevegen's ability to convert pro-tumoural M2 macrophages to pro-inflammatory M1 macrophages could help the human body's own immune system to combat cancer and significantly differentiates it from competing products

Traumakine® for the treatment of patients with RAAA

· Faron is planning preliminary evaluations of safety, PK and efficacy in RAAA (Rupture of Abdominal Aorta Aneurysm) in a European Phase I/II trail (FPCLI006)

· RAAA patients often die from multi organ failure, similar to ARDS patients, with 50% mortality 5-10 days post-surgery

· Currently there are an estimated 20,000 US and European patients per annum eligible for treatment

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, Whitman Howard and Cairn Financial (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 and Whitman Howard have 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 21 September 2016. 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 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 will be 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 23 September 2016. 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 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

Katja Wallenlind

Phone +358 (50) 577 4807E-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, 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, Nominated 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 a pan-European pivotal Phase III study (INTEREST). 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.