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.

Faron Pharmaceuticals Ltd

(“Faron” or the “Company”)

Issue of Equity

TURKU – FINLAND, 26 February 2018 – Faron Pharmaceuticals Ltd (“Faron”) (AIM: FARN), the clinical stage biopharmaceutical company, is pleased to announce the registration and issue of the Second Issue Shares in relation to the Placing and Subscription announced on 16 February 2018.

The Second Issue Shares, being 892,150 Placing Shares and 41,000 Subscription Shares, are credited as fully paid and rank pari passu with the existing Ordinary Shares in issue in all respects, including the right to receive all dividends or other distributions declared, made or paid by the Company.

Application has been made to the London Stock Exchange for admission to trading on AIM of the 933,150 Second Issue Shares (“Admission“), and 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. (GMT) on 28 February 2018.

Faron’s enlarged issued number of shares immediately following registration and Admission of the Second Issue Shares will be 31,027,894 Ordinary Shares with voting rights attached. The Company has no shares in Treasury; therefore upon, and subject to, registration, the total number of voting rights in Faron will be 31,027,894 (the “Enlarged Number of Shares and Votes“). This figure may be used by shareholders as the denominator for the calculations by which they will determine whether they are required to notify an interest in, or a change to their interest in, the Enlarged Number of Shares and Votes of the Company.

The information contained within this announcement constitutes inside information stipulated under the Market Abuse Regulation (EU) No. 596/2014.

All capitalised terms in this announcement are made with reference to the announcement made by Faron at 7.00 a.m. (GMT) on 16 February 2018. 

ENDS

For more information please contact:

Faron Pharmaceuticals Ltd

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 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 focusing on acute organ traumas, vascular damage and cancer immunotherapy. The Company’s lead candidate Traumakine, to prevent vascular leakage and organ failures, is currently the only treatment for Acute Respiratory Distress Syndrome (“ARDS”) undergoing Phase III clinical trials and in 2017 received advice from US FDA to proceed directly to BLA submission following 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.

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.

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 (“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 £10.0 million

TURKU – FINLAND, 7.00 A.M. GMT, 5 October 2017 – Faron Pharmaceuticals Oy (“Faron” or “Company“) (LON: FARN), the clinical stage biopharmaceutical company, is pleased to announce a proposed placing of up to 1,123,750 new ordinary shares in the capital of the Company (the “Placing Shares“) and a proposed subscription of up to 126,250 new ordinary shares in the capital of the Company (the “Subscription Shares“) at a price of 800 pence per share (the “Issue Price“) to raise, in aggregate, up to approximately £10.0 million before expenses.

KEY HIGHLIGHTS

·      Proposed conditional placing of up to 1,123,750 Placing Shares with institutional and other investors (“Placing“) and conditional subscription of up to 126,250 Subscription Shares with certain Scandinavian based investors and a Director (“Subscription“), each intending to invest at the Issue Price, in order to raise, in aggregate, up to approximately £10.0 million before expenses

·      The Placing Shares and Subscription Shares if subscribed for in full will represent, in aggregate, approximately 4.3% of the Company’s registered number of shares as enlarged by the Placing and Subscription

·      The Issue Price of 800 pence per share represents a discount of 2.1% to the closing mid-market price of 817.5 pence on 4 October 2017, being the last practicable date prior to this announcement

·      The net proceeds of the proposed Placing and Subscription (of approximately £9.4 million if fully subscribed) would be used to fund:

o  the Company’s Traumakine commercialisation preparations and support the launch of an expanded access program for Traumakine on the successful conclusion of the INTEREST trial

o  the expedited expansion of the Clevegen clinical development program and manufacturing of Clevegen GMP material

·      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 Sole 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:

“Given the recent positive advice from the FDA, Faron is now rapidly preparing to become a commercialisation-stage company moving its focus for Traumakine towards the market. This funding round will help us to commence commercialisation preparations ahead of read-out from the INTEREST trial and expedite our clinical development activities for Clevegen®. We are very excited about the value inflection horizon for Faron and are determined to bring our important and life-changing products to patients as quickly as possible.”

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.

·      In anticipation of the pivotal clinical results for its INTEREST Phase III study for Traumakine for the treatment of ARDS, and following advice from the FDA that Faron can proceed directly to Biologics License Application (BLA) submission pending positive results from its two on-going Phase III trials, the Company wishes to accelerate the preparation for the commercialisation of Traumakine by raising capital to support the outsourcing costs related to preparation of the BLA for FDA and the Marketing Authorisation Application (MAA) for EMA in collaboration with a global commercial service house.

o  Faron anticipates that recruitment of the targeted 300 patients to the INTEREST Phase III trial will complete during the fourth quarter of 2017. Subject to positive results, the Company will submit its conditional MAA filing. Any requirement for a second Phase III trial will be determined by the EMA following analysis of the primary endpoint of the INTEREST Phase III trial, and would likely include an interim stop for early efficacy if the trial is required.

·      Faron plans to initiate an expanded access program for Traumakine to start once the INTEREST trial is closed to new patients, and will utilise additional working capital from the Placing and Subscription to create the infrastructure for this expanded access program and support the supply of Traumakine to its participants. This will allow compassionate use of Traumakine in eligible named patients at European and North-America intensive care unit (ICU) hospitals who may benefit from Traumakine treatment ahead of the product’s potential regulatory approval, in addition to generating late phase data on the benefit of the treatment outside a clinical trial.

Advance the clinical development of Clevegen^® in several indications

·      In advance of the Company’s first clinical trial program in cancer patients for Clevegen^®, its novel immune switch antibody, which is expected to commence in 2018, the Directors require additional capital in order to undertake the first full scale GMP production of Clevegen.

·      Faron intends to expedite the expansion of its planned Clevegen clinical development program in several solid tumours (liver, pancreas, ovarian and melanoma) in order to obtain accelerated safety and clinical data read-outs, with the protocol design to be submitted to the UK regulatory authorities MHRA later this year.

·      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 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, 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 and a Director 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“). 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 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 in respect of each stage of the Placing, 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. The Company has agreed to pay Panmure Gordon and Cairn certain commissions and fees for their respective appointments 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 “VCT Investors” and the “EIS Investors” respectively) to qualify under VCT and EIS legislation. Certain of the Placing Shares, including those to be issued to the VCT Investors and the EIS Investors, and certain of the Subscription Shares are expected to be issued (the “First Issue Shares“) and an application made for admission of the First Issue Shares to trading on AIM (“Admission“). It is expected that Admission of the First Issue Shares will become effective and that dealings in the First Issue Shares will commence on or around 8.00 a.m. on 11 October 2017. 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 to confirm the application has been made to AIM for the Admission of the First Issue Shares in due course, but by no later than 4.30 p.m. on 9 October 2017.

Immediately following Admission of the First Issue Shares, the remaining Placing Shares and Subscription Shares are expected to be issued (the “Second Issue Shares“) and an application will be 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 13 October 2017. 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.

The Board believes this fundraise will enhance working capital to support the Company’s corporate strategy to maximise shareholder value in the longer term, and accordingly will continue to evaluate funding options over the medium term.

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 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.

Cairn Financial Advisers LLP, which is regulated in the UK by the Financial Conduct Authority, is acting as nominated adviser for 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.

ENDS

For more information please contact:

Faron Pharmaceuticals Oy

Dr Markku Jalkanen, Chief Executive Officer

E-mail: investor.relations@faron.com

Consilium Strategic Communications

Mary-Jane Elliott, Chris Welsh, Philippa Gardner, Lindsey Neville

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

Phone: +44 207 213 0880

Panmure Gordon (UK) Limited, Sole 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 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 focusing on acute organ traumas, vascular damage and cancer immunotherapy. The Company’s lead candidate Traumakine, to prevent vascular leakage and organ failures, is currently the only treatment for Acute Respiratory Distress Syndrome (ARDS) undergoing Phase III clinical trials.  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.

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 4807
E-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. 

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 OF AMERICA (INCLUDING ITS TERRITORIES AND POSSESSIONS, ANY STATE OF THE UNITED STATES AND THE DISTRICT OF COLUMBIA) (THE “UNITED STATES”), AUSTRALIA, CANADA, JAPAN, THE REPUBLIC OF SOUTH AFRICA, THE REPUBLIC OF IRELAND OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL

Faron Pharmaceuticals Oy

(“Faron” or the “Company”)

Admission to AIM and first day of dealings

 £10 million fundraise to progress Phase III clinical trial

17 November 2015 – Faron Pharmaceuticals Oy (“Faron”), the clinical stage biopharmaceutical company, is pleased to announce the commencement of dealings in its Ordinary Shares on the AIM market of the London Stock Exchange with effect from 8.00 a.m. today under the ticker FARN and the ISIN number FI4000153309.  This follows a successful placing and subscription for 3,846,154 new Ordinary Shares, raising £10.0 million at a price of 260p per ordinary share (the “Fundraising”).

Dr Markku Jalkanen, CEO of Faron, said: “Faron’s fundraising and admission to AIM is an important landmark for the Company. We believe that the support shown by both new and existing shareholders demonstrates a strong understanding of the value of our late stage product Traumakine®, in development for the treatment of acute respiratory distress syndrome (ARDS). Currently there are no approved pharmacological treatments for this life threatening medical condition.

“Admission to AIM provides a great opportunity to strengthen our business and support our objective of progressing our lead programme through a pan-European Phase III trial, and the development of our pre-clinical cancer immunotherapy candidate, Clevegen. We look forward to reporting on the Company’s continuing progress as an AIM-quoted company and would like to welcome and thank our investors for their involvement.”

Admission and Fundraising Statistics

Cairn Financial Advisers LLP is acting as Nominated Adviser to the Company. Whitman Howard Limited is acting as broker and bookrunner to the Company. Rx Securities Limited is acting as equity adviser to the Company.

Unless the context otherwise requires, defined terms shall have the meaning ascribed to them in the Admission Document available on the Company’s website: www.faronpharmaceuticals.com

For more information contact:

Faron Pharmaceuticals Oy

Katja Wallenlind

Phone +358 (50) 577 4807
E-mail: katja.wallenlind@faronpharmaceuticals.com

Cairn Financial Advisers LLP, Nominated Adviser

Emma Earl, Tony Rawlinson and Rebecca Anderson

Phone: +44 207 148 7900

Whitman Howard Limited, Nominated Broker

Niall Devins, Francis North

Phone: +44 207 659 1234

Hume Brophy, Financial PR

Mary Clark, Supriya Mathur, Hollie Vile

Phone: +44 203 440 5654

E-mail: faron@humebrophy.com

Background Information

Company Highlights

Late stage product Traumakine® targeting significant unmet medical need

·      Faron’s lead drug Traumakine® is in Phase III development for treatment of acute respiratory distress syndrome (“ARDS”).

·      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 approved pharmacological treatments for ARDS, an orphan disease, with a mortality rate of approximately 30 – 45 per cent.

·      Faron completed a Phase I/II trial in respect of Traumakine® in 2011 where treatment with Traumakine® was associated with an 81 per cent. reduction in the 28 day mortality rate in patients with ARDS. These data were published in The Lancet Respiratory Medicine, a leading medical journal.

·      Pivotal initial pan-European Phase III trial for Traumakine® (called INTEREST) with first patient recruitment expected to commence in Q4 2015.

·      A consortium coordinated by Faron has been granted approximately €6 million pursuant to a European FP7 Grant for the development of Traumakine®.

Strong market position with clear regulatory pathway

·      Traumakine® has been granted Orphan Drug Designation in Europe which allows a period of 10 years market exclusivity following regulatory marketing approval.

·      Patents granted in several major markets.

Agreements with leading pharmaceutical companies in Japan and the Greater China Area

·      Faron entered into an agreement with a Japanese pharmaceutical company, Maruishi Pharmaceutical Co., Ltd, in 2011 to develop and commercialise Traumakine® in Japan.

·      In May 2015, Faron entered into license and asset transfer agreements with A&B (HK) Company Limited and CMS Pharma Co. Ltd in mainland China, Hong Kong, Macau and Taiwan (the “Greater China Area”).

·      Agreements provide for a combination of upfront payments, milestone payments, ongoing royalty payments and supply pricing.

·      Faron retains rights in all other territories.

Pipeline includes novel cancer immunotherapy

·      Pre-clinical immunotherapy candidate Clevegen is targeting conversion of the immune environment around a tumour from being immune suppressive to immune stimulating, by reducing the number of tumour-associated macrophages (TAMs).

·      The Directors believe that Clevegen is well differentiated from competing immunotherapy products through its specific targeting of M2 tumour-associated macrophages (“TAMs”) which facilitate tumour growth, while leaving intact the M1 TAMs which support immune activation against tumours.

·      Faron has recently entered into an agreement with Swiss-based Selexis SA to facilitate the continued preclinical development of Clevegen as it moves towards clinical development. Under the agreement. Faron will have access to the Selexis SUREtechnology Platform™ and SURE CHO-M Cell Line™ for the production of high-expressing and stable clonal cell lines for use in the development and production of Clevegen (“Selexis Project”).

Experienced leadership team

·      Faron is led by an experienced management team with a proven track record in the drug development industry.

·      Between 1996 and 2002, CEO of Faron, Dr Markku Jalkanen was the founding CEO and President of BioTie Therapies Corp which has since become the first publically traded Finnish biotech company to have listed on NASDAQ New York.

·      Strong international board led by Dr Frank Armstrong, who has a long standing career in the industry having held Chief Executive roles with five biotechnology companies (public and private).

Use of Proceeds

The net proceeds of the Placing and Subscription of £8.3 million (“Net Proceeds”) will be used primarily to fund the Company’s initial pan-European Phase III clinical trial in respect of Traumakine®.

The clinical site activations are ongoing and the Company expects to have recruited the first patients during Q4 2015. The planned recruitment time for 300 patients is expected to be approximately 12 to 18 months from first patient treatment.

The Net Proceeds will also enable the Company to begin to advance the Clevegen Selexis Project (although further funding will likely be required to complete the project). The Company will consider all options available to it to advance the clinical development of its products, including the continued development Clevegen. This may include raising further equity investments or may be in the form of licensing deals or grant funding.

Board of Directors

Dr Frank Armstrong – Non-executive Chairman, aged 58

Dr Armstrong has held Chief Executive roles with five biotechnology companies (both public and private) including Fulcrum Pharma PLC (AIM). He led Medical Science and Innovation at Merck Serono and was previously Executive Vice President of Product Development at Bayer and Senior Vice President of Medical Research and Communications at Zeneca. Dr Armstrong is currently the Chairman of Xceleron Inc, Summit Therapeutics (AIM and NASDAQ) and Redx Pharma (AIM) and a Non-executive Director of Actino Pharma, Juniper Therapeutics (NASDAQ) and Mereo Pharma.

Dr Armstrong is a physician and a Fellow of the Royal College of Physicians (Edinburgh). He is also a member of the Scientific Advisory Board of Healthcare Royalty Partners. He was appointed as a Non-executive Director of the Company in September 2015.

Matti Manner LL.M. – Non-executive Vice-Chairman, aged 62

Mr Manner was appointed as a partner of Brander & Manner Attorneys Ltd in 1980 having previously sat as a junior judge at Turku Appeal Courts. Mr Manner has significant experience in national and international business deals, corporate law and mergers and acquisitions having held a number of board memberships throughout his career. Mr Manner joined the board of the Company as Chairman in 2007 having previously been the Chairman of Faron Ventures Oy from 2002. He is currently Chairman of Turun Osuuskauppa and Ruissalo Foundation and a member of the board of Marva Media Ltd, Satatuote Ltd, YH VS-Rakennuttaja Ltd and Kauppakeskus Mylly Ltd.

Mr Manner has experience of several trustee posts including the Presidency of the Finnish Bar (Lawyers) Association during the period of 1998 to 2004. Mr Manner obtained a Master of Laws from the University of Turku. He became an honorary Chief Justice in Finland in 2013.

Dr Markku Jalkanen – Chief Executive Officer, aged 60

Dr Jalkanen has more than 25 years of experience within biomedical research, biotech development and the biopharmaceutical industry. He was a founding member of the Company and is the Company’s CEO. In addition to his role as CEO of the Company, Dr Jalkanen is an advisor for the only active Finnish life sciences fund – Inveni Capital.  Between 1996 and 2002, Dr Jalkanen was the founding CEO and President of BioTie Therapies Corp which has since become the first publically traded Finnish biotech company to have listed on NASDAQ.

Dr Jalkanen has published over 130 peer reviewed scientific publications in various highly ranked international journals.

Dr Jalkanen has held several board memberships for both public and private companies including Inveni Capital Management, Meddia Ltd and Priaxon AG.

Dr Jalkanen obtained a Masters in Medical Biochemistry from the University of Kuopio and subsequently received a PhD in Medical Biochemistry from the University of Turku. He completed a side-laudatur examination in Molecular Biology from the University of Turku and completed his post-doctoral training at Stanford University, California between 1983 and 1986. Dr Jalkanen obtained the position of docent in Biochemistry from the University of Helsinki and the same qualification in Molecular and Cell Biology from the University of Turku. He became a Professor at the University of Turku in 1992.

Yrjö E K Wichmann M.Sc (econ.) – Chief Financial Officer, aged 57 

Mr Wichmann has a career spanning over 20 years in financing and investment banking. He was appointed as Chief Financial Officer of the Company in March 2014. Prior to his appointment at the Company, Mr Wichmann has held a number of senior positions within the life sciences and biotechnology sector, most recently at IP Finland Oy, Biohit Oyj (NASDAQ OMX Helsinki), Capman Oyj, FibroGen Europe Oyj (NASDAQ) and D. Carnegies & Co AB. Whilst carrying out these roles Mr Wichmann has participated in healthcare IPOs on the London, Stockholm and Helsinki stock exchanges as both an investment banker and as a member of the board.

Mr Wichmann is a member of the Investment Committee at Dasos Timberland Fund I and II and a member of the Innovation Board of Helsinki University, which advises the rector and the board of the university in research commercialisation. The Innovation Board also oversees the venture capital portfolio of Helsinki University Funds valued at approximately €30 million. Mr Wichmann is also a member of the board of Bioretec Oy.

Mr Wichmann obtained a Masters in Economics from Helsinki University. He was appointed as an Executive Director of the Company in September 2015.

Dr Huaizheng Peng – Non-executive Director, aged 52

Dr Peng is a General Manager of China Medical System Holdings, a specialty pharmaceutical company listed on the Hong Kong Stock Exchange. He is in charge of international operations for the Company, including pharmaceutical asset acquisition/product licensing-in/out, international business development, outbound investment and asset management among others. Dr Peng served as an independent Non-executive Director of China Medical System Holdings Ltd for three years, and the Company was admitted to trading on AIM (between 2007 and 2010).

Dr Peng was a partner of Northland Bancorp, a private equity firm. Before that, he worked as a head of life sciences and as a director of corporate finance at Seymour Pierce, a London-based investment bank and stockbroker. In addition, he was a Non-executive Director of China Medstar, an AIM listed medical device company. Earlier in his career Dr Peng was a senior portfolio manager, specialising in global life science and Asian technology investment at Reabourne Technology Investment Management Limited.

Dr Peng received his Bachelor’s degree in medicine from Hunan Medical College (now Central South University Siangya School of Medicine) in Changsha, Hunan Province, China and he subsequently obtained a Master’s degree in medicine from Hunan Medical College. Dr Peng was awarded his PhD in molecular pathology from University College London (UCL) Medical School and subsequently practiced as a clinical lecturer there. Dr Peng was appointed as a Non-executive Director of the Company in September 2015.

Dr Jonathan Knowles – Non-executive Director, aged 67

Dr Jonathan Knowles has a career spanning over 40 years in the biotech industry. Dr Knowles held a number of research and teaching positions in the early part of his career before founding the molecular biology group within the Biotechnical Laboratory, Helsinki in 1980.

Dr Jonathan Knowles is currently the Chairman of Adaptimmune Therapeutics PLC (NASDAQ) and Immunocore Ltd and serves on the boards of a number of biotech companies in Europe and the USA.  He is a trustee of CRUK and Chairman of the Genomics England Access committee. Jonathan Knowles is a visiting Professor at the University of Oxford, a Research Director at FIMM University of Helsinki (20010-2014 FiDiPro Distinguished Professor), and Professor Emeritus at EPFL, Lausanne. He is a member of EMBO and a member of the Board of A*Star in Singapore.

Dr Knowles was appointed as the President of Global Research at F. Hoffman-La Roche Ltd and subsequently the President of Group Research. He was a member of the Genentech Board for 12 years and a member of the Chugai Board for seven years. He was also the Chairman of the Corporate Governance Committee of Genentech. Under his leadership, the company developed and implemented a strategy of highly effective therapies based on personalised healthcare. Dr Knowles retired from his position at F. Hoffman-La Roche Ltd at the end of 2009. Prior to joining Roche, Dr Knowles was the Head of the Glaxo Institute for Molecular Biology in Geneva and subsequently the Research Director for Glaxo Wellcome Europe.

Dr Knowles was, for 5 years, the Chairman of the Hever Group and the Chairman of the Research Directors’ Group of EFPIA (European Federation of Pharmaceutical Industry Associations) and was the first Chairman of the Board of the Innovative Medicines Initiative, a unique public-private partnership between 28 pharmaceutical companies and the European Commission with the participation of over 200 academic institutions in Europe with a budget of more than 5 billion euros over ten years.

Dr Knowles obtained a Bachelor of Science in Biological Sciences from the University of East Anglia, Norwich in 1969 and subsequently received a PhD in Mitochondrial Genetics from the University of Edinburgh in 1973. Dr Knowles was appointed as a Non-executive Director of the Company in September 2015.

Dr Juho Jalkanen – Non-executive Director, aged 37 

Dr Jalkanen is currently a consultant in vascular surgery at Turku University Hospital, having previously held positions as Resident in Surgery at the Hospital District of Southwest Finland, General Hospitals of Raisio and Salo and at Turku University Hospital.

For the period 2009 to 2012 Dr Jalkanen was a board member of Duodecim Medical Association of Southwest Finland and subsequently joined the board of the Company in 2013.

Dr Jalkanen obtains degrees from both business and medicine. He has a Master´s degree in Economics, a Medical Doctor´s degree from the University of Turku and subsequently became a fully licensed General Practitioner. At the moment Dr Jalkanen is conducting his PhD on the molecular mechanisms of atherosclerosis. He has published six articles in various publications including the International Journal of Biotechnology and Circulation Research.

Leopoldo Zambeletti – Non-executive Director, aged 47 

During a 19 year career as an investment banker, Mr Zambeletti led the European Healthcare Investment team at JP Morgan for eight years before taking up the same position at Credit Suisse for a further five years. Since 2013 he has been an independent strategic advisor to life science companies on merger and acquisitions, out-licensing deals and financing strategy. He is a Non-executive Director at Advanced Accelerator Applications, Qardio, Summit Therapeutics PLC (NASDAQ and AIM) and Nogra Pharma. Mr Zambeletti started his career at KPMG as an auditor.

Mr Zambeletti received a BA in Business from Bocconi University in Milan, Italy. He serves as a trustee to Barts and the London Charity, which helps to fund the hospitals of the Barts NHS Trust including St Bartholomew, the Royal London and the London Chest Hospitals. He is the founder of the cultural initiative 5×15 Italy. Mr Zambeletti was appointed as a Non-executive Director of the Company in September 2015.

NOTES TO EDITORS

About Faron Pharmaceuticals Oy

Faron is a drug discovery and development company focused on creating novel treatments for medical conditions with significant unmet needs. The Company is based in Turku, Finland. The Company currently has a pipeline of clinical stage products focusing on acute organ traumas, cancer immunotherapy and vascular damage. The Company’s lead candidate Traumakine®, has been developed to treat acute respiratory distress syndrome (“ARDS”), a rare, severe, life threatening medical condition characterised by widespread inflammation in the lungs. There is currently no approved pharmaceutical treatment for ARDS. Traumakine® is now in a pan-European pivotal Phase III study (INTEREST). Besides Traumakine®, Faron’s pipeline consists of early stage assets including a pre-clinical anti-Clever-1 antibody named Clevegen. Clevegen is focused on converting the immune environment around a tumour from being immune suppressive to immune stimulating. Further information is available at www.faronpharmaceuticals.com.

Important Notice

Cairn Financial Advisers LLP and Whitman Howard Limited, which are both regulated in the United Kingdom by the Financial Conduct Authority, are acting exclusively for the Company and no-one else in connection with this announcement and the proposed Placing and Subscription. Cairn Financial Advisers LLP and Whitman Howard Limited will not regard any other person as their client in relation to the matters described in this announcement and will not be responsible to anyone other than the Company for providing the protections afforded to its clients, nor for providing advice in relation to the proposed Placing and Subscription, the contents of this announcement or any transaction, arrangement or other matter referred to herein.

No representation or warranty, express or implied, is given by or on behalf of the Company, Cairn Financial Advisers, LLP, Whitman Howard Limited or any of their respective directors, partners, officers, employees, advisers or any other persons as to the accuracy, fairness or sufficiency of the information or opinions contained in this announcement and none of the information contained in this announcement has been independently verified. The information in this announcement is subject to change.