RLM.L Regulatory News (RLM)

The 'Proposed Placing to raise £19.3 million ($26 million) and Notice of General Meeting' announcement for Realm Therapeutics plc released last night, 21 September 2017 at 18:01, RNS number '4972R' has been re-released in the interest of market clarity. The announcement text is reproduced in full below.

THIS ANNOUNCEMENT IS NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO OR FROM THE UNITED STATES OR ANY OTHER JURISDICTION IN WHICH SUCH PUBLICATION, RELEASE OR DISTRIBUTION WOULD BE UNLAWFUL. THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND DOES NOT CONSTITUTE AN OFFER OR AN INVITATION TO ACQUIRE OR DISPOSE OF ANY SECURITIES. ATTENTION IS ALSO DRAWN TO THE IMPORTANT NOTICE AT THE END OF THIS ANNOUNCEMENT.

Realm Therapeutics plc

("Realm Therapeutics", "Realm" or the "Company")

Proposed Placing to raise £19.3 million ($26 million) and Notice of General Meeting

Capitalised terms in this announcement have the same meaning as in the Circular being published in conjunction with the proposed placing (unless otherwise indicated) and such terms are also defined below.

21 September 2017 - Realm Therapeutics plc (AIM: RLM), a clinical stage biopharmaceutical company focused on leveraging its proprietary immunomodulatory technology, is pleased to announce today that it has successfully secured funding commitments to raise gross proceeds of approximately £19.3 million ($26 million) through a proposed placing (the "Placing") with new and existing investors, including several healthcare specialist funds based in the US and UK. The Placing is conditional upon shareholder approval and a circular setting out details of the Placing (the "Circular") and to convene a general meeting to seek approval for the transaction (the "General Meeting") will be available on the Company's website shortly and is expected to be posted to Shareholders later today.

Highlights

· Net proceeds of the Placing, approximately £17.6 million ($23.8 million) will be used primarily to advance the Company's drug development programmes and for general corporate purposes including:

o Further advancing our PR022 atopic dermatitis clinical programme beyond Phase IIa, but results of initial trials in PR022 and PR013 will drive prioritisation among these two lead indications

o Conducting a Phase II proof of concept study in Acne Vulgaris, with PR023 a topical formulation in early development

o Further evaluating the Company's high concentration hypochlorous acid formulations for application in potential pipeline candidates, including psoriasis and dry eye

· Participating in the Placing are US and UK healthcare specialist funds, and new shareholders to Realm, including OrbiMed, BVF Partners LP, RA Capital Management, Abingworth BioEquities Master Fund Ltd and Polar Capital

· Charles Spicer, Non-Executive Chairman of the Company, and Alex Martin, CEO of the Company, will both participate in the Placing

Alex Martin, Chief Executive Officer of Realm Therapeutics, said: 

"We are extremely pleased with the £19.3 million ($26 million) investment commitment from some of the world's leading healthcare investors to advance our lead programmes in Atopic Dermatitis and Allergic Conjunctivitis and our additional pipeline. Their interest is a strong vote of confidence in our plans, our programmes, and our team, and we look forward to updating the market upon successfully closing the financing."

Charles Spicer, Non-Executive Chairman of Realm Therapeutics added:

"The Board would like to thank both the proposed new and our existing shareholders for their support of Realm. This impressive syndicate of sector specialists in the financing attests to the potential value of our programmes. Realm remains focused on developing our two lead candidates while also seeking to prioritise further indications in which our proprietary technology may offer promising potential treatment to patients."

The Placing, which was oversubscribed prior to allocation, will raise gross proceeds of approximately £19.3million ($26 million) through the issue of approximately 66.4 million Units at a price of 29 pence per Unit (each comprising one Placing Share and one Warrant to subscribe for 0.4 ordinary shares). The Placing Price represents the average closing bid price of an Ordinary Share during the five trading days to 19 September 2017, being the last practicable date prior to investors signing their binding Placing commitments. Each Warrant carries an exercise price per Warrant Share of 58 pence, being 200% of the Issue Price and a term of 2.5 years. The Placing Shares are expected to be admitted to trading on AIM at 8.00 am. on 10 October 2017 (with Warrant certificates delivered on or around 17 October 2017).

MTS Securities, LLC is acting as the US placement agent and N+1 Singer is acting as the UK broker and nominated adviser in connection with the Placing.

The Placing is conditional upon, amongst other things, approval by existing shareholders at the General Meeting expected to be held at 10.00 am on 9 October 2017 at the offices of CMS Cameron McKenna Nabarro Olswang LLP, Cannon Place, 78 Cannon Street, London EC4N 6AF. An extract from the Circular to Shareholders is set out below and the full Circular will be available at the Company's website: www.realmtx.com shortly and is expected to be posted to Shareholders later today. This announcement should be read in conjunction with the Circular in its entirety, which will contain further details on the terms of the Placing and related matters.

Additionally, the Company is proposing to adopt new Articles to facilitate the potential issue of American Depositary Shares (ADSs), in the event that the Company pursues a US listing at some point in the future, and to reflect certain updates in applicable law and changes to best practice.

Enquiries:

This announcement is released by Realm Therapeutics plc and contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 ("MAR"), encompassing information relating to a proposed placing described herein, and is disclosed in accordance with the Company's obligations under Article 17 of MAR.

For the purposes of MAR and Article 2 of Commission Implementing Regulation (EU) 2016/1055, this announcement is being made on behalf of the Company by Alex Martin, Chief Executive Officer, and Marella Thorell, Chief Financial Officer and Chief Operating Officer.

About Realm Therapeutics

Realm Therapeutics is a clinical-stage biopharmaceutical company focused on developing novel immunomodulatory therapies to protect and improve the lives of adults and children. The Company has initiated drug development programmes, based on its proprietary hypochlorous acid technology at high concentrations. The Company believes its formulations have novel immunomodulatory activity with potential application for the treatment of diseases in a number of therapeutic areas, including Dermatology and Ophthalmology.

About Atopic Dermatitis (AD)

AD, a serious form of eczema, is a chronic, relapsing, inflammatory disease characterised by itchy, inflamed skin, which poses a significant burden on patients' quality of life and on the overall health care system. Patients with AD have impaired function of their skin barrier, and this, combined with skin damage as a result of the intense itching and scratching associated with the disease, makes them at risk for secondary infections due to colonisation with pathogenic bacteria (particularly Staphylococcus aureus) and changes in the skin microbiome. AD affects up to 20% of children and up to 3% of adults and prevalence numbers continue to increase. 

About Allergic Conjunctivitis (AC)

AC is an inflammatory disease of the conjunctiva, the membrane covering the white part of the eye, caused primarily from a reaction to an allergen such as pollen, or pet dander, or other environmental antigens, and affects up to 40% of the United States population and up to 20% of the population of Europe and Japan, including children. This inflammation results in redness, acute itching, tearing and associated nasal symptoms. Approximately 30% of AC patients do not adequately respond to the current standard of care.

About Acne Vulgaris

Acne vulgaris is the most common chronic skin condition in the U.S., affecting approximately 45 million people, or 14% of the population. The disease can range from mild to severe cystic acne and is associated with significant physical and psychosocial effects on quality of life, including permanent scarring, depression and anxiety. The two main factors involved in the development of acne are clogged pores and/or the presence of bacteria, leading to irritation, lesions and inflammation.

Certain statements made in this announcement are forward-looking statements. These forward-looking statements are not historical facts but rather are based on the Company's current expectations, estimates, and projections about its industry; its beliefs; and assumptions. Words such as 'anticipates,' 'expects,' 'intends,' 'plans,' 'believes,' 'seeks,' 'estimates,' and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties, and other factors, some of which are beyond the Company's control, are difficult to predict, and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. The Company cautions shareholders and prospective shareholders not to place undue reliance on these forward-looking statements, which reflect the view of the Company only as of the date of this announcement. The forward-looking statements made in this announcement relate only to events as of the date on which the statements are made. The Company will not undertake any obligation to release publicly any revisions or updates to these forward-looking statements to reflect events, circumstances, or unanticipated events occurring after the date of this announcement except as required by law or by any appropriate regulatory authority.

IMPORTANT INFORMATION

The Circular is not an offer of securities for sale in the United States. The securities being offered by the Company may not be offered or sold in the United States absent registration or an exemption from registration. The offering of securities described in the Circular has not been and will not be registered under the United States Securities Act of 1933, and accordingly, any offer or sale of the securities may be made only in a transaction exempt from the registration requirements of the Securities Act.

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

NOTES

(1) References to time in the Circular are to London time unless otherwise stated.

(2) Each of the times and dates in the above timetable are subject to change. If any of the above times and/or dates change, the revised times and/or dates will be notified to Shareholders by announcement through a Regulatory Information Service.

(3) All of the events listed in the above timetable subsequent to the General Meeting are conditional on the approval of the Resolutions at the General Meeting.

(4) The Warrants will not be separately admitted to trading on AIM, but the Warrant Shares which will arise following any valid exercise of Warrants will be admitted to trading as part of the Company's single class of shares admitted to trading on AIM or the relevant exchange on which the Company's shares are traded at the time the Warrants are exercised.

KEY STATISTICS

NOTES

(1) As at 20 September 2017, being the latest practicable date prior to the publication of the Circular.

(2) Net proceeds are stated after deduction of estimated total expenses of approximately £1.6 million.

(3) Assumes all Warrants are exercised and no further issue of shares between Admission and the date of exercise. The percentage of the Enlarged Share Capital represented by the Warrant Shares arising will be lower than the maximum to the extent that the Company issues additional Ordinary Shares in the future and to the extent that the Warrants are not exercised.

EXCHANGE RATES

The rates of exchange used throughout the Circular, unless otherwise stated, are US$1.35: £1.00 and £0.74: US$1.00 being the closing rates on 19 September 2017, the latest practicable date prior to the publication of the Circular.

LETTER FROM THE CHAIRMAN

Introduction

The Company announced today that it has raised, subject to certain conditions, £19.3 million ($26 million) (before expenses), by way of a placing of 66,396,485 Units at a placing price of 29 pence per Unit. Each Unit comprises one Placing Share and one Warrant.

The Placing comprises a UK Placing and a US Placing. The US Placing is being directed primarily at US Purchasers but also includes some non-US participants, and the Placing Shares to be issued thereunder will be admitted to trading on AIM on Admission. N+1 Singer is acting as UK broker for the Company and MTS Securities, LLC is acting as US placement agent. Charles Spicer, Non-Executive Chairman of the Company, and Alex Martin, CEO of the Company, are both participating in the Placing, which is not underwritten.

The net proceeds of the Placing will be used primarily to advance the Company's drug development programmes and for general corporate purposes. The Company's initial development focus is on PR022 for Atopic Dermatitis (AD) and PR013 for Allergic Conjunctivitis (AC). The intent is to utilise the proceeds to enter the next stage clinical trial for AD (a Phase IIb trial) and to complete a Phase II proof of concept study in Acne Vulgaris, with PR023, a topical formulation in early development. A portion of the proceeds is also expected to be utilised to further evaluate the Company's high concentration hypochlorous acid formulation for application in potential pipeline candidates, which may include psoriasis and dry eye.

Each Warrant will be exercisable into 0.40 of a Warrant Share (rounded up to the nearest whole share for the purposes of determining the number of Warrant Shares issuable upon exercise), at an exercise price per Warrant Share of 58 pence, being 200% of the Issue Price. Further particulars of the Warrants including the conditions under which they may be exercised are provided at paragraph 5 of this Part I and in paragraph 5 of Part III of the Circular. The Warrants will not be separately admitted to trading on AIM, but the new Warrant Shares will, following valid exercise of the Warrants in accordance with the terms of the Warrant Instrument, be admitted to trading as part of the single class of shares admitted to trading on AIM or the relevant exchange on which the Company's shares are traded at the time of issuance.

The UK Placing and the US Placing are conditional, inter alia, upon the passing by the Shareholders of the Resolutions at the General Meeting, including special resolutions which will give the Company the required authority to dis-apply statutory pre-emption rights in respect of the allotment of the New Shares and to authorise the adoption of the New Articles, conditional on Admission. Subject to all relevant conditions being satisfied (or, if applicable, waived), it is expected that the Placing Shares will be admitted to trading on AIM on or around 10 October 2017 (with Warrant certificates delivered on or around 17 October 2017).

The purpose of this letter is to outline the reasons for the Placing and to explain why the Board considers the proposals described in the Circular to be in the best interests of the Company and Shareholders as a whole, and why the Directors recommend that you vote in favour of the Resolutions, as they intend to do in respect of the Ordinary Shares owned by them, in order to give effect to the Placing.

Background to and Reasons for the Placing

As part of a comprehensive strategic review, the Company worked with a leading pharmaceutical consulting firm and influential key opinion leaders to assess unmet medical needs with considerable commercial value suitable for the development of a product pipeline based on its proprietary immunomodulatory technology. This review led to the Company embarking on a new strategic focus, repositioning itself as a biopharmaceutical company. In early 2016, the Group confirmed its drug development programmes, based on its proprietary technology for generating hypochlorous acid at high concentrations, were initially focused in Dermatology and Ophthalmology. Realm's two lead candidates are PR022, for the treatment of Atopic Dermatitis (AD), and PR013, for the treatment of Allergic Conjunctivitis (AC). The development programme for each lead candidate is reviewed below.

Atopic Dermatitis

In early 2017, the Company filed an Investigational New Drug (IND) application with the US Food and Drug Administration (FDA) for PR022. PR022 is the first candidate in a new class of anti-inflammatory / immunomodulatory topical gels for the treatment of AD, containing a high, stable concentration of hypochlorous acid as the active ingredient.

The FDA has allowed the Company's IND application for a Phase II clinical trial with PR022 for AD to proceed. The trial will be a randomised, double-blind, vehicle-controlled, multicentre, parallel-group study to assess the safety and efficacy of multiple doses of PR022 in 120 adult patients with mild-to-moderate AD and will be conducted in the US. The Company expects to begin the trial in Q4 of this year, with the high-level readout on the study expected in mid-2018.

Based on current timelines and plans, the Company has sufficient cash to fund the initial Phase II study in AD. Pending results of this study, the clinical development plan involves a Phase IIb study similar in size and scope to the initial Phase II study to include adolescents, which is expected to be funded with a portion of the proceeds of the Placing.

The Company has demonstrated that PR022 is associated with a statistically significant therapeutic effect in pre-clinical models of AD, including down modulation of key pro-inflammatory cytokines and reduced expression of Th2 cytokines, IL- 4, IL- 13 and IL- 31, as well as TARC (thymus and activation regulated chemokine) and TSLP (thymic stromal lymphopoietin), which are all linked to the signs and symptoms of the disease. Importantly, these results are delivered without the typical negative effects of commonly used AD immunomodulatory or immunosuppressant drugs, including corticosteroids, suggesting an advantageous safety profile for PR022. Another study addressed the significant anti-itch properties of PR022, including a possible neuronal effect, as demonstrated in pre-clinical models of AD through research conducted by Dr. Wolfgang Bäumer at North Carolina State University. Another study further elucidates the molecule's unique mechanism of action as an NF-κB inhibitor via IκBα as shown by in vitro studies conducted by Realm's scientific team.

If successful in subsequent Phase II and pivotal clinical trials, and subject to receiving regulatory approval, Realm believes that peak year sales for PR022 could potentially reach or exceed $1.0 billion in the US market alone, based on market analysis and Company estimates. This includes use of the product in the treatment of both adult and paediatric patients with mild-to-moderate disease.

Allergic Conjunctivitis

In August of this year, the Company submitted an IND application to the FDA for PR013, a novel potential treatment for AC. In September, the Company announced that the FDA had permitted Realm's IND application for PR013 to proceed into a Phase II clinical trial for patients aged 10 years and older with AC. Based on current timelines and plans, the Company has sufficient cash to fund this initial Phase II study. The Phase II AC trial will be a multi-centre, double-blind, randomised evaluation of the effectiveness of PR013 topical ophthalmic drops compared to vehicle for the treatment of AC using a modified Conjunctival Allergen Challenge Model (Ora- CAC®) in approximately 90 patients conducted in the US. For the past three decades, the Ora- CAC® model has been the accepted standard for the successful development of novel treatments for AC in the US. The majority of FDA approved treatments for AC used the Ora- CAC® model as the basis for their approval. If a certain level of clinical efficacy is demonstrated in the Phase II trial, it could become one of the Company's two pivotal trials needed for approval. Estimated peak annual sales potential in this indication is approximately $400 million in the US, based on market analysis and data from pre-clinical models.

PR013 is a proprietary topical formulation, in which the active moiety is a patented high concentration of hypochlorous acid, offering a differentiated mechanism of action for the treatment of a significant disease. As previously announced, the Company has shown that PR013 is associated with a statistically significant therapeutic effect on hyperemia (ocular redness) in pre-clinical models of AC, superior to olopatadine (0.1%) and similar to prednisolone (1%). The Company has also shown that the active moiety in PR013 (which is the same active moiety in PR022) is associated with a statistically significant down modulation of key pro-inflammatory cytokines and reduced expression of Th2 cytokines, IL- 4, IL- 13, as well as IL- 31 and TSLP, which are associated with itch as AC and AD have similar etiology.

Acne Vulgaris and Other Pipeline Candidates

In addition to AD and AC, the Company believes there may be potential application for its high-concentration hypochlorous acid formulations in other areas of Dermatology and Ophthalmology. While current resources are focused on the AD and AC programmes, a portion of the Placing net proceeds would be used to further elucidate these potential pipeline applications.

Pending the completion of the Placing, an initial proof of concept trial is planned in Acne Vulgaris. Acne Vulgaris is the most common chronic skin condition in the US, affecting approximately 45 million people, or 14% of the population. The disease can range from mild to severe cystic acne and is associated with significant physical and psychosocial effects on quality of life, including permanent scarring, depression and anxiety. The two main factors involved in the development of Acne Vulgaris are clogged pores and/or the presence of bacteria, leading to irritation, lesions and inflammation. As a result of the anti-inflammatory and anti-bacterial elements of hypocholorus acid, the Company believes it may offer a promising treatment for Acne Vulgaris. PR023, a topical formulation intended for the Acne Vulgaris trial, is in early development. It is expected that the PR022 IND, which has been cleared by the FDA to enter the clinic in Phase II, can be leveraged and therefore the Company intends to file an IND for PR023 in late 2018 and enter the clinic shortly thereafter, pending FDA clearance.

Reasons for the Placing

Whilst the Company has sufficient resources to fund its initial Phase II studies in AD and AC, without further capital, Realm would not be able to advance its lead programmes beyond their currently funded horizon or further develop its pipeline. Having considered a variety of options for funding, the Board believes that the Placing is in the best interests of Shareholders in order to provide further cash resources to advance its lead programmes and other potential applications of the Company's hypochlorous acid formulations. Having capital at the time of data readouts on its initial AD and AC trials will allow the Board greater flexibility when considering options for the Company's clinical development programmes, pending the results of the studies, and to determine the best route to creating potentially significant additional value for Shareholders - which may be through advancing development of current or additional pipeline candidates or potentially partnering some or all of them. Furthermore, the introduction of new investors into the Company via the Placing, in particular US and UK specialist healthcare funds such as OrbiMed, which is the lead US Purchaser, BVF Partners LP and RA Capital Management, as well as international investment groups with a focus on the healthcare sector such as Abingworth BioEquities Master Fund Ltd, and Polar Capital, is expected to provide additional opportunities for further investment. In addition, these investors with international experience will facilitate continued discussions as to the best exchange or exchanges on which to trade the Company's shares and access capital to fund future clinical development.

Use of Proceeds

The net proceeds of the Placing are expected to be £17.6 million (US$23.8 million). The results of the initial Phase II trials in AD and AC will ultimately inform the prioritisation of further investments in these programmes. However, the Company currently intends to utilise the funds to support a Phase IIb study in AD and a proof of concept study in Acne Vulgaris. Furthermore, a portion of the proceeds are expected to be used for general Research and Development work related to formulations and manufacturing enhancements along with further evaluation and development of the Company's pipeline candidates through additional scientific and other research and for general operating purposes.

Principal Terms of the Placing

The Company has conditionally raised a total of approximately £19.3 million ($26 million) (before expenses) by the Placing of 66,396,485 Units at the Issue Price to the Placees. Each Unit comprises one Placing Share and one Warrant over 0.40 of a Warrant Share. Further details of the Warrants are provided in paragraph 5 of this Part I.

The US Placing is conditional, inter alia, upon (including certain customary conditions for a transaction of this nature):

(i) the passing of the Resolutions (except for Resolution 5);

(ii) the receipt of a certificate from the Company signed by its Chief Executive Officer confirming that the representations and warranties of the Company in the Purchase Agreement are true and correct in all material respects (except those that are qualified by materiality, which shall be true and correct in all respects) as of the date of the Purchase Agreement and as of Admission (except for representation and warranties that speak as of a specific date, which shall be true and correct in all material respects (or all respects, as the case may be) as of such date), and that all obligations, covenants and agreements of the Company or any of its subsidiaries required to be performed prior to Admission have been performed;

(iii) the Company and each of the US Purchasers signing the Registration Rights Agreement;

(iv) the Company and OrbiMed signing the Relationship Agreement; and

(v) Admission.

If any of the above US conditions are not satisfied or waived (where capable of waiver), the US Units will not be issued and all relevant monies received from the investors in the US Placing will be returned to them (at the risk of these investors and without interest) as soon as possible thereafter.

The UK Placing is conditional, inter alia, upon:

(i) the passing of the Resolutions;

(ii) the Placing Agreement not having been terminated in accordance with its terms prior to Admission;

(iii) written confirmation from the Company that, as far as it is aware (having made reasonable enquiries of the Directors), there is no fact, matter or circumstance existing which would allow the US Purchasers to terminate the Purchase Agreement; and

(iv) Admission.

If any of the above UK conditions are not satisfied or waived (where capable of waiver), the UK Units will not be issued and all relevant monies received from the investors in the UK Placing will be returned to them (at the risk of these investors and without interest) as soon as possible thereafter.

The Company has agreed not to issue any Ordinary Shares and the Directors and Dr. Christian Peters, the Company's Chief Medical Officer, have agreed not to sell any Ordinary Shares, in each case for 180 days from Admission, subject to customary exceptions, including in the case of the Company the issue of Ordinary Shares to satisfy share options and the Square 1 Warrant.

The New Shares when issued will be issued free of all liens, charges and encumbrances and will, when issued and fully paid, rank pari passu in all respects with the Existing Ordinary Shares.

Application will be made to the London Stock Exchange for the admission of the Placing Shares to trading on AIM. It is expected that Admission will occur and that dealings in the Placing Shares will commence at 8.00 am on 10 October 2017, at which time it is also expected that the Placing Shares will be enabled for settlement in CREST. Upon Admission a block listing application will be made in respect of the Warrant Shares, up to the maximum permitted to be block listed under AIM rules and the Company's existing blocklistings, for the purpose of admitting Warrant Shares to trading on AIM in due course.

Shareholders in the Company who are not participating in the Placing or are not participating in the Placing proportionate to their existing shareholding will have their interest in the Company significantly diluted as a consequence of the issue of the New Shares.

Further information relating to the Placing Agreement, the Purchase Agreement and the Placement Agent Agreement is provided in paragraphs 3, 4 and 6 of Part III of the Circular.

Warrants

Each Warrant will be exercisable into 0.40 of a Warrant Share, at an exercise price per Warrant Share of 58 pence, being 200% of the Issue Price. No Placee will be issued with a Warrant to acquire a fraction of a Warrant Share. Instead Warrants will be rounded up to the nearest whole Warrant Share.

Each Warrant is exercisable during the period commencing on Admission and ending on 9 April 2020. The Warrants shall be exercised in cash. It is expected that the proceeds of such exercise payable to the Company will be further utilised for the development programmes of the Company from time to time and for general corporate purposes.

The terms of the Warrants include adjustment provisions should the Company undertake certain transactions such as share subdivisions or consolidations as well as dividends or other distributions payable in Ordinary Shares. In addition, if the Company is acquired there are obligations on the acquirer to provide appropriate alternate warrants determined in accordance with a Black-Scholes valuation provision. Under certain circumstances, Warrantholders can require that the acquirer of the Company makes a cash payment to the Warrantholders in lieu of alternate warrants based on a Black-Scholes valuation of the Warrants at the time of the Acquisition.

A block listing application will be made to the London Stock Exchange for that portion of the 26,558,600 Warrant Shares that is permitted to be blocklisted under the AIM Rules and the Company's current block listing, to be admitted to AIM in connection with the prospective issue of the Warrant Shares. Once applied for, these new Ordinary Shares will be issued from time to time pursuant to the valid exercise of the Warrants.

Further information relating to the Warrants and the Warrant Instrument is provided in paragraph 5 of Part III of the Circular.

OrbiMed Relationship Agreement

Immediately upon Admission, OrbiMed is expected to own 21.9% of the Enlarged Share Capital and to hold Warrants over 10,214,844 Warrant Shares. The Company and N+1 Singer will therefore enter into the Relationship Agreement with OrbiMed to regulate its relationships with this investor from Admission and to limit its influence over the Group's corporate actions and activities and the outcome of general matters pertaining to the Group. The obligations and restrictions on OrbiMed will terminate upon OrbiMed (or any of its associates) ceasing to control at least 15% of the Ordinary Shares or the Ordinary Shares ceasing to admitted to AIM. Further information relating to the Relationship Agreement is provided in paragraph 8 of Part III of the Circular. The Relationship Agreement will become effective on Admission.

New Articles

In order to facilitate a US Registration, if the Directors decide to do so in the future, it is proposed that the Company will adopt the New Articles at the General Meeting conditional upon the relevant special resolution being passed. The New Articles add provisions facilitating arrangements in connection with the potential issue of American Depositary Shares (ADSs).

The Company's articles of association were last updated in 2010. The opportunity is now being taken to also amend the articles of association in order to reflect certain updates in applicable law and changes to best practice.

Details of the principal changes being proposed are set out in paragraph 9 of Part III of the Circular.

A copy of the New Articles is available on the Company's website at www.realmtx.com. Hard copies of the New Articles (and a comparison of changes to the existing articles of association) are available at the Company's registered office from today until the close of the General Meeting.

Current Trading and Prospects

The Company today issued a clinical development update and announced its interim financial results for the six months ended 30 June 2017. As at 30 June 2017, cash and cash equivalents were $15.6 million (as at 31 December 2016: $21.4m) and the Company had no debt.

Total cash used by the Group during the six months ended 30 June 2017 was $5.9 million, primarily driven by investments in Research and Development, the pay-down of $1.8 million in liabilities related to the sale of the Supermarket Retail business, which was completed in October 2016, and general operations. During H1 2017, Research and Development spend was focused on formulation and clinical development related to the manufacturing development of PR022 and PR013 and toxicology and other studies to support the Company's two IND submissions. During H1 2016, Realm used $2.7 million of cash comprising $2.2 million for Continuing Operations (driven by the Company's investment in Research and Development) and the balance for Supermarket Retail/Discontinued Operations.

Royalty revenue increased to $0.6 million (H1 2016: $0.3m) due to higher sales and contract minimums from a distribution arrangement for the Company's Wound Care product. Other revenue was nil in H1 2017 (H1 2016: $0.1m). Operating expenses for the Continuing Operations* increased to $4.6 million (H1 2016: $3.1m). This was driven by increased investments in research, formulation and clinical development and regulatory activities in support of the Company's two INDs of $3.0 million (H1 2016: $1.6m) and flat spending in General and Administrative expenses of $1.6 million (H1 2016: $1.5m). EBITDA** loss for the Continuing Operations* for H1 2017 was $3.8 million (H1 2016 loss: $2.5m) following increased investments in Research and Development.

The Company's Supermarket Retail business, presented as Discontinued Operations, was sold on 7 October 2016. For the six months ended 30 June 2016, Supermarket Retail revenue was $10.8 million, operating expenses were $3.5 million and EBITDA** profit was $1.5 million.

The Company intends to use the net proceeds of the Placing to advance its drug development programmes and for general corporate purposes.

* Continuing Operations comprise the Group's drug development activities, Wound Care business and the costs of operating the Company. As at 30 June 2016 and 31 December 2016, the Company's Supermarket Retail business was presented in the financial statements as Discontinued Operations.

** Earnings before interest, tax, depreciation, and share based payment expense (EBITDA).

Conditional Registration Rights

If, at its sole discretion, the Company opts to list Ordinary Shares or ADSs for trading on a Trading Market in the United States, the Company has agreed in the Registration Rights Agreement to (i) file a registration statement with the US Securities and Exchange Commission (SEC) covering the resale of the New Shares (together, and as may be reduced by securities sold in a registered offering or those sold or saleable pursuant to an exemption from registration without volume or manner-of-sale restrictions, the "Registrable Securities") pursuant to a registration statement under the Securities Act (a "Registration Statement") within 30 days of the later of such listing or expiration or termination of the lockup period for any firm commitment registered public offering of such securities undertaken in conjunction with such listing (if applicable), (ii) use its commercially reasonable efforts to have such Registration Statement declared effective as promptly as practicable thereafter and in any case not later than 45 days following the filing thereof (or 75 days if the SEC reviews the Registration Statement), (iii) maintain the effectiveness of the Registration Statement until the earlier of all securities registered thereby ceasing to constitute Registrable Securities or the third anniversary of the effective date of the Registration Statement and (iv) satisfy the current public information requirement pursuant to Rule 144(c)(1) under the Securities Act. The Company has agreed to pay liquidated damages to holders of Registrable Securities in the event that it fails to satisfy the aforementioned obligations in amount up to 5% of the value thereof paid by such holder.

Further information relating to the Registration Rights Agreement is provided in paragraph 7 of Part III of the Circular.

Share Options

The Company currently operates the Realm Therapeutics plc Executive Omnibus Incentive Plan 2006 and the Realm Therapeutics plc Executive Omnibus Incentive Plan 2016 (the "Plans"). As permitted under the terms of the Plans and as approved by the Directors, the number of Ordinary Shares currently under option will be increased by a total of approximately 5,087,675 Ordinary Shares such that each optionholder's percentage of the Enlarged Share Capital would be the same as it is in respect of the current Ordinary Share capital of the Company. Option exercise prices, vesting terms and expiry dates would remain unchanged.

In light of the new technology development focus of the Company, the Board intends to undertake a review, within the next six months, of equity compensation plans and practices for employees and Directors of the Company, benchmarking against similar stage companies in the sector in which the Company operates. Particular focus will be on target equity incentive levels and equity plan limits with input sought from the Company's major Shareholders. Recommendations for changes to the Company's equity plans, if any, will be considered in due course.

Risk Factors and Additional Information

The attention of Shareholders is drawn to the risk factors set out in Part II and the additional information set out in Part III of the Circular. Shareholders are advised to read the whole of the Circular and not rely solely on the summary information presented in this letter.

General Meeting

The Directors do not currently have authority to allot all of the New Shares and, accordingly, the Board is seeking the approval of Shareholders to allot such shares at the General Meeting.

A notice convening the General Meeting, which is to be held at the offices of CMS Cameron McKenna Nabarro Olswang LLP at Cannon Place, 78 Cannon Street London EC4N 6AF at 10.00 am on 9 October 2017, is set out at the end of the Circular. At the General Meeting, the following Resolutions will be proposed:

• Resolution 1 which is an ordinary resolution to authorise the Directors to allot Ordinary Shares up to an aggregate nominal amount of £19,254,981, being equal to 66,396,485 Placing Shares (i.e. the maximum number of Placing Shares available under the Placing).

• Resolution 2 which is an ordinary resolution to authorise the Directors to issue Warrants to subscribe for Ordinary Shares up to an aggregate nominal amount of £2,655,860, being equal to 26,558,601 Ordinary Shares (i.e. the maximum number of Ordinary Shares that could be allotted pursuant to the exercise of the Warrants).

• Resolution 3 which is conditional on the passing of resolution 1 and is a special resolution to authorise the Directors to allot and issue 66,396,485 Placing Shares pursuant to the Placing on a non pre-emptive basis.

• Resolution 4 which is conditional on the passing of resolution 2 and is a special resolution to authorise the Directors to allot and issue Warrants to subscribe for 26,558,601 Ordinary Shares on a non pre-emptive basis.

• Resolution 5 which is a special resolution to adopt the New Articles.

The authorities to be granted pursuant to resolutions 1, 2, 3 and 4 shall expire at the conclusion of the Annual General Meeting of the Company to be held in 2018 (unless renewed, varied or revoked by the Company prior to or on that date) and shall be in addition to the Directors' authorities to allot relevant securities and disapply statutory pre-emption rights granted at the Company's Annual General Meeting held on 6 June 2017.

Action to be Taken in Respect of the General Meeting

Enclosed with the Circular is a Form of Proxy for use by Shareholders at the General Meeting. Whether or not you intend to be present, you are requested to complete and return the Form of Proxy in accordance with the instructions printed thereon and either (a) deposit the completed Form of Proxy at the Company's registrars, Equiniti, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA, (b) lodge the completed Form of Proxy using the CREST Proxy Voting Service or (c) lodge the completed Form of Proxy electronically by visiting www.sharevote.co.uk, in each case so that it is received no later than 10.00 am on 5 October 2017. For further details please see the notes to the notice of General Meeting set out at the end of the Circular. The appointment of a proxy will not preclude you from attending the General Meeting and voting in person if you wish to do so (and you are so entitled).

Related Party Matters

The following Directors and current Shareholder, who is a related party as a result of owning more than 10% of the Company's outstanding share capital, have agreed to participate in the Placing:

• Charles Spicer has agreed to subscribe for 86,207 Units pursuant to the Placing. Following Admission, Mr Spicer will have a shareholding of 273,930 Ordinary Shares, representing 0.24% of the Enlarged Share Capital.

• Alex Martin has agreed to subscribe for 148,115 Units pursuant to the Placing. Following Admission, Mr Martin will have a shareholding of 248,115 Ordinary Shares, representing 0.21% of the Enlarged Share Capital.

• Sussex Trading Company Limited has agreed to subscribe for 827,586 Units pursuant to the Placing. Following Admission, Sussex Trading Company Limited will have a shareholding of 5,923,880 Ordinary Shares, representing 5.08% of the Enlarged Share Capital.

The participation of each of Charles Spicer, Alex Martin and Sussex Trading Company Limited in the Placing is in each case a related party transaction under AIM Rule 13 requiring consideration by the Independent Directors having consulted with the Company's nominated adviser.

The Independent Directors, having consulted with N+1 Singer, consider the terms of the participation of each of Charles Spicer, Alex Martin and Sussex Trading Company Limited to be fair and reasonable insofar as Shareholders are concerned.

Directors' Recommendations and Voting Intentions

The Board considers the Placing to be in the best interests of Shareholders as a whole and accordingly recommends that Shareholders vote in favour of the Resolutions to be proposed at the General Meeting. All the Directors with beneficial interests in the Ordinary Shares of the Company intend to vote in favour of the Resolutions in respect of their own beneficial holdings, amounting to an aggregate of approximately 6.3 million Ordinary Shares representing approximately 12.6% of the issued Ordinary Share capital of the Company. In addition, Shareholders who are not Directors, who in aggregate own approximately 27.5 million Ordinary Shares representing approximately 54.8% of the issued Ordinary Share capital of the Company have expressed their support for the Placing and are therefore expected to vote in favour of the Resolutions.

Yours faithfully,

Charles SpicerChairman

DEFINITIONS

All references in the Circular to "£", "pence" or "p" are to the lawful currency of the United Kingdom, all references to "US$" or "$" are to the lawful currency of the United States.