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 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. 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.

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 FOR OFFERS OF SECURITIES. FARON 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.

THE PLACING 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 PUBLIC OFFERING OF THE PLACING SHARES IN THE UNITED STATES, THE UNITED KINGDOM OR ELSEWHERE. NO REPRESENTATION IS BEING MADE AS TO THE AVAILABILITY OF ANY EXEMPTION UNDER THE SECURITIES ACT FOR THE REOFFER, RESALE, PLEDGE OR TRANSFER OF THE PLACING SHARES. 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

("Faron" or the "Company")

Proposed Placing and Subscription to raise up to £15.0 million

New funding to expedite commercialisation strategy and pipeline

TURKU - FINLAND, 16 February 2018 - Faron Pharmaceuticals Oy ("Faron") (AIM: FARN), the clinical stage biopharmaceutical company, is pleased to announce a proposed placing of up to 1,729,350 new ordinary shares in the capital of the Company (the "Placing Shares") and a proposed subscription of up to 134,000 new ordinary shares in the capital of the Company (the "Subscription Shares") at a price of 805 pence per share (the "Issue Price") to raise, in aggregate, up to approximately £15.0 million before expenses.

KEY HIGHLIGHTS

· Proposed conditional placing of up to 1,729,350 Placing Shares with institutional and other investors ("Placing") and conditional subscription of up to 134,000 Subscription Shares ("Subscription"), each intending to invest at the Issue Price, in order to raise, in aggregate, up to approximately £15.0 million before expenses

· The Placing Shares and Subscription Shares if subscribed for in full will represent, in aggregate, approximately 6.0% of the Company's registered number of shares as enlarged by the Placing and Subscription

· The Issue Price of 805 pence per share represents the closing mid-market price of 805 pence on 15 February 2018, being the last practicable date prior to this announcement

· The net proceeds of the proposed Placing and Subscription (of approximately £14.1 million if fully subscribed) would be used to:

o accelerate Traumakine commercial investment to prepare for market launches ahead of expedited regulatory filings in the US and Europe

o advance, expand and accelerate the Clevegen clinical development program, the MATINS trial, through to Phase IIb

· Cash balance as at 31 December 2017 is c.€9.31 million

· 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. As soon as practicable after the Placing and Subscription have been finalised, a further announcement will be made containing details of the final number of Placing Shares and Subscription Shares to be issued at the Issue Price by the Company (together with the approximate gross proceeds of the Placing and Subscription). Further terms of the proposed Placing and Subscription are set out below

· Panmure Gordon (UK) Limited ("Panmure Gordon") is acting as Nominated Adviser, Sole Bookrunner and Corporate Broker to the Company

Commenting on the proposed Placing and Subscription Dr Markku Jalkanen, CEO of Faron, said: "Ahead of data from the INTEREST trial, which we continue to expect in early Q2 2018, Faron is advancing preparation for Traumakine commercialisation in collaboration with our chosen Contract Commercial Organisation. This fundraise will allow us to accelerate the build out of medical sales and supply chain logistics ahead of Traumakine's anticipated US and European launches in 2019. Furthermore, following recent positive FDA advice which expedites Traumakine's potential route to the US market, we want to ensure we have a strong US sales and marketing base and logistics network in place to ensure prompt market entry pending potential regulatory approval. In addition, we plan to initiate the Clevegen Phase I/II MATINS clinical trial program in several solid tumours and this funding will allow us to expedite the planned expansion of Clevegen's clinical program to achieve Phase IIb data. 2018 is set to be a pivotal year for Faron and we are looking forward to moving both our novel products to the next stage."

REASONS FOR THE PROPOSED PLACING AND SUBSCRIPTION

Support the Company's preparation for the commercialisation of Traumakine

· Traumakine®, the Company's lead product, could be the first ever drug for Acute Respiratory Distress Syndrome (ARDS) upon approval with blockbuster potential.

· The Company is planning to advance regulatory approvals in the US and Europe once data become available, with Fast Track Designation already granted in the US in addition to Promising Innovative Medicines (PIM) designation from the MHRA.

· In preparation for the Traumakine global launch, the Company wishes to raise capital to accelerate the build out of medical sales and supply chain logistics.

· In particular, the Company intends to build a strong US sales and marketing base in Boston and create a logistics network to enhance US market entrance including an early access program.

· This will allow the Company to initiate the alternative of a direct sales model in the US and EU as a route to market, with the opportunity to retain more profits, in addition to out-licensing.

Advance the clinical development of Clevegen® in several indications

· Faron intends to expedite the expansion of its planned Clevegen clinical development program, the MATINS trial, in several solid tumours (liver, pancreas, ovarian and melanoma) in order to obtain accelerated safety and clinical data read-outs.

· The Directors believe that Clevegen's ability to remove local immune suppression by targeting pro-tumoural type-2 macrophages, while leaving intact the type-1 macrophages that support immune activation against tumours, could help the human body's own immune system to combat cancer.

DETAILS OF THE PROPOSED PLACING AND SUBSCRIPTION AND ISSUE OF EQUITY

Subject to the Placing Shares and Subscription Shares being subscribed for in full, they will 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, as approved by shareholders at the Company's last annual general meeting which was held on 16 May 2017. 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 (the "Placing Agreement"). Pursuant to the terms of the Placing Agreement, Panmure Gordon has agreed to use its reasonable endeavours to procure placees for the Placing Shares at the Issue Price. 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").

The Placing is being implemented through a private placement with a limited number of institutional and other investors. The Placing Agreement contains customary warranties and an indemnity from the Company in favour of Panmure Gordon together with provisions which enable Panmure Gordon to terminate the Placing Agreement in certain circumstances before satisfaction of the Issue Condition in respect of each stage of the Placing, including where there has been a material breach of any of the warranties contained in the Placing Agreement (in the reasonable opinion of Panmure Gordon) or where there is a material adverse change in the business or financial affairs of the Company. The Company has agreed to pay Panmure Gordon certain commissions and fees in connection with the Placing. In order to comply with local securities law in Finland, the Issue Condition will be satisfied prior to Admission. Accordingly, pursuant to the terms of the Placing Agreement, Panmure Gordon has agreed to underwrite the subscription for and payment to the Company of the Issue Price for the Placing Shares upon satisfaction of the Placee Condition.

Assuming that the Placing Shares and Subscription Shares ("New Shares") are subscribed for in full, the Placing and Subscription is expected to be effected in two stages in anticipation of allowing investments made by certain venture capital trust and enterprise investment scheme funds, (the "EIS/VCT Investors") in order to qualify under Venture Capital Trust and Enterprise Investment Scheme rules. The Placing Shares issued to the EIS/VCT Investors are expected to be allotted and issued first, followed by certain further Placing Shares and Subscription Shares issued to non-EIS/VCT Investors. An application will then be made for the admission of all such Placing Shares (the "First Issue Shares") to trading on AIM ("Admission") and with Admission becoming effective and dealings in the First Issue Shares commencing on or around 8.00 a.m. on 23 February 2018. A further announcement will be made to confirm the outcome of the Placing and Subscription (subject to, inter alia, satisfaction of the Issue Condition and Admission) and that the application has been made to AIM for the Admission of the First Issue Shares in due course, but with such announcement being made by no later than 5.00 p.m. on 22 February 2018.

Immediately following Admission of the First Issue Shares, the remaining Placing Shares and Subscription Shares are then expected to be issued (the "Second Issue Shares") and with an application being made for Admission of the Second Issue Shares. It is expected that Admission of the Second Issue Shares will become effective and that dealings in the Second Issue Shares will commence on or around 8.00 a.m. on 28 February 2018. The issue and allotment of the Second Issue Shares is conditional upon, inter alia, Admission of the First Issue Shares taking place, the Issue Condition relating to the Second Issue Shares being satisfied and the Placing Agreement otherwise remaining in full force and no material breach of its terms having occurred. A further announcement will be made to confirm Admission of the First Issue Shares and to confirm the application has been made to AIM for the Admission of the Second Issue Shares.

MARKET ABUSE REGULATION

Market Soundings, as defined in the Market Abuse Regulation ("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.

Panmure Gordon (UK) Limited, which is regulated in the UK by the Financial Conduct Authority, is acting as Nominated Adviser, Sole Bookrunner and Corporate Broker 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.

For more information please contact:

Faron Pharmaceuticals Oy

Dr Markku Jalkanen, Chief Executive Officer

investor.relations@faron.com 

Consilium Strategic Communications

Mary-Jane Elliott, Philippa Gardner, Matthew Neal, Lindsey Neville

Phone: +44 (0)20 3709 5700

E-mail: faron@consilium-comms.com

Panmure Gordon (UK) Limited, Nomad and Broker

Freddy Crossley, Ryan McCarthy (Corporate Finance)

Tom Salvesen, Amy Sarra (Corporate Broking)

Phone: +44 207 886 2500

Westwicke Partners, IR (US)

Chris Brinzey

Phone: 01 339 970 2843

E-Mail: chris.brinzey@westwicke.com

About Faron Pharmaceuticals Oy

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 focusing on acute organ traumas, vascular damage and cancer immunotherapy. The Company's lead candidate Traumakine, to prevent vascular leakage and organ failures, could be the first ever drug for Acute Respiratory Distress Syndrome ("ARDS") undergoing Phase III clinical trials and in 2017 received advice from US FDA that it may proceed directly to BLA submission following successful completion of EU and Japanese Phase III studies. There is currently no approved pharmaceutical treatment for ARDS. An additional European Phase II Traumakine trial is underway for the Rupture of Abdominal Aorta Aneurysm ("RAAA"). Faron's second candidate Clevegen is a ground breaking pre-clinical anti-Clever-1 antibody. Clevegen has the ability to switch immune suppression to immune activation in various conditions, with potential across oncology, infectious disease and vaccine development. This novel macrophage-directed immuno-oncology switch called Tumour Immunity Enabling Technology ("TIET") may be used alone or in combination with other immune checkpoint molecules for the treatment of cancer patients. 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 outcome of clinical trials (including, but not limited to the Company's INTEREST trial) 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 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, 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.