Faron 2024 Half-Year Financial Results

Faron Pharmaceuticals Ltd.

(“Faron” or “the Company”)

Faron Reports Half-Year Financial Results, 1 January – 30 June 2024

Company Announcement, 27 August 2024

Summary Highlights  

·      Initial preliminary phase II data read-out from the BEXMAB trial confirmed earlier positive phase I findings in myelodysplastic syndrome (MDS) patients that have failed with hypomethylating agent (HMA) , reinforcing bexmarilimab’s potential to improve the therapeutic benefit for patients with aggressive hematological malignancies who do not respond to the current standard of care (SoC).   

·      The Company reported that there was a total of 14 HMA-failed MDS patients who had been treated in both the phase I and II arms of the BEXMAB trial with a combination of bexmarilimab and azacitidine, with an overall response rate (ORR) of 79% (11/14). For The BEXMAB Phase I MDS patients with prior HMA failure with adequate follow-up available the estimated median overall survival (mOS) was 13.4 months compared to the 5-6 months that would typically be expected under standard of care historically.

·      Dr. Juho Jalkanen was appointed as Faron’s new Chief Executive Officer, Mr. Tuomo Pätsi was elected as the Chair of the Board.

·      Faron founders and bexmarilimab developers, Dr. Markku Jalkanen and Dr. Sirpa Jalkanen, were selected as finalists for the European Inventor Award 2024.

·      Cash position was strengthened through a convertible loan issuance and two share placements successfully raising a total of EUR 35.5 million (gross).

·      Hybrid briefing and Q&A to be held tomorrow on 28 August 2024, at 8:00 am (EST) / 1:00 pm (BST) / 3:00 pm (EEST).

Post period events

·      The U.S. Food and Drug Administration ( FDA) granted bexmarilimab Fast Track Designation (FTD) for the treatment of relapsed or refractory myelodysplastic syndrome (r/r MDS) in combination with azacitidine.

·      The Company announced positive feedback from the FDA regarding the registrational clinical development plan for bexmarilimab for the treatment of higher-risk (HR) MDS, with a recommendation that the Company conducts a confirmatory phase III study in frontline HR MDS, without requiring a separate phase III in the relapsed / refractory setting, and accelerated approval for r/r MDS could be achieved with an interim read-out of the confirmatory phase III study .

·      Dr. Petri Bono was appointed Chief Medical Officer and Mr. Yrjö Wichmann was appointed as permanent Chief Financial Officer.

TURKU, FINLAND Faron Pharmaceuticals Ltd. (AIM: FARN, First North: FARON), a clinical-stage biopharmaceutical company focused on tackling cancers via novel immunotherapies, today announces unaudited half-year financial results for 1 January to 30 June 2024 (the period ).

“After a tough start we have ended the first half of 2024 in a very strong position ,” said Dr. Juho Jalkanen, Chief Executive Officer of Faron. “We’ve continued to make significant progress in the clinical development of bexmarilimab, our wholly owned immunotherapy asset, in hematological malignancies, building on the highly encouraging data and regulatory feedback reinforcing our belief in the potential of bexmarilimab to address a very important clinical need. Our meeting with the FDA to discuss the registrational clinical development plan for bexmarilimab was highly favorable, with a proposal that significantly reduces development costs and timelines to bring bexmarilimab therapy to all HR MDS patients in an accelerated fashion .”

“Despite some financial challenges earlier in the year, we have significantly strengthened our balance sheet and are now in a strong position.  Everything is progressing as planned and our focus is to ensure that we are armed with adequate resources to be able to meet our objectives of completing Phase II of the BEXMAB trial and optimizing the outcome of partnering with Phase II data.  There remains an urgent unmet medical need for new treatment options for MDS patients, and we are committed t o rapidly advancing bexmarilimab through clinical development, to bring it to patients as soon as possible.”

Pipeline Highlights

Bexmarilimab Faron’s wholly-owned, novel precision cancer immunotherapy candidate, in phase I/II development for difficult-to-treat hematological and solid tumor cancers.

·      The BEXMAB phase I results have already indicated a high ORR of 87.5% (7/8) amongst HMA-failed MDS patients treated with a combination of bexmarilimab and azacitidine, and the study progressed into Phase II in this population.

·      There was a total of 14 HMA-failed MDS patients treated in both phase I and II with this novel combination by May 2024.

·      The ORR in this otherwise untreatable population was 79% (11/14). The current true remission rate was 64% (9/14).

·      For The BEXMAB phase I MDS patients with prior HMA failure with adequate follow-up available the estimated mOS was 13.4 months compared to the 5-6 months that would typically be expected under standard of care historically.

·      Further analysis of the patient profiles of the BEXMAB trial showed that patients had experienced disease progression following previous treatment with azacitidine monotherapy or combinations of up to four therapies that included azacitidine or decitabine with magrolimab, venetoclax and sabatolimab.

Corporate Highlights

·      The cash position has been significantly strengthened through a combination of a convertible note issuance, private placements directed to institutional and other investors, a public offering to Finnish retail investors and an open offering to UK retail and institutional investors to raise a total of EUR 35.5 million.

·      Dr. Juho Jalkanen was appointed as the Company’s new Chief Executive Officer (CEO), taking over from Dr. Markku Jalkanen, who retired as CEO, but who is continuing as a member of the Board of Directors of Faron. Dr. Juho Jalkanen has worked at Faron in various roles since 2006, most recently serving as its Chief Operating Officer.

·      Mr. Tuomo Pätsi was elected as the Chair of the Board, following the departure of Dr. Frank Armstrong who did not stand for re-election. Mr. Pätsi was the President of the EMEA region and Worldwide Markets for Celgene Corporation, a global pharmaceutical company and currently wholly owned subsidiary of Bristol Myers Squibb, engaged primarily in the discovery, development, and commercialization of therapies for the treatment of cancer. He is an experienced biotech and pharmaceutical executive who was, until recently, the Executive Vice President for Seagen Inc., a US-based, cancer-focused biotechnology company.

·      Mr. Yrjö Wichmann was appointed as the Company’s interim Chief Financial Officer (CFO, Int.)  Mr. Wichmann previously served as the Company’s CFO between 2014 and 2019 and as Senior Vice President, Financing & IR from 2019 to April 2024. Mr. Wichmann is an accomplished biotech and financial executive with over 20 years’ experience in financing and investment banking. In August 2024, Mr. Wichmann was appointed as the Company’s permanent Chief Financial Officer.

·      Dr. Markku Jalkanen, co-founder, Board member and former CEO of Faron, and Dr. Sirpa Jalkanen, co-founder and member of Faron’s Scientific Advisory Board, were selected as finalists for the European Inventor Award 2024, in recognition of their research developing Faron’s wholly owned precision cancer immunotherapy candidate, bexmarilimab.

Financial highlights

·      On 19 February 2024 the Company announced that it was in breach of several undertakings agreed in the secured debt agreement dated 28 February 2022, between IPF Fund II SCA, SICAV-FIAR (“IPF”) as Lender and Faron Pharmaceuticals Ltd as Borrower and subsequent waiver letters provided by IPF, and was therefore in several events of default. Faron’s bank accounts are pledged to IPF and IPF notified Faron’s banks of the blocking of the pledged accounts due to the above-mentioned breaches. After successful funding arrangements, the bank accounts were released in the beginning of March 2024.

·      On 4 March 2024 the Company raised a total of   EUR 3.2 million through convertible loan instruments subscribed by a limited number of the Company’s existing shareholders. The Convertible loans and related interest and fees were converted into shares in the June offering.

·      On 4 April 2024 the Company conducted a private placement directed to a limited number of institutional and other investors to raise EUR 4.8 million which, together with the EUR 3.2 million convertible loan announced on 4 March 2024, secured the required short-term bridge financing totaling EUR 8 million.

·      On 4 June 2024 Faron announced an offering of approximately EUR 30.7 million in total by offering for subscription preliminarily a maximum of 30,714,592 new and/or treasury shares at a subscription price of EUR 1.00 per Offer Share. The Offering was conducted as a directed share issue by way of

i.      a public offering to private individuals and legal entities in Finland,

ii.     an institutional offering to institutional investors in the European Economic Area.

iii.    a separate open offer to qualifying holders of depositary interests in the United Kingdom and elsewhere and

iv.    a separate retail offer to retail investors in the United Kingdom on the “REX” platform.

The results of the offering were announced on 20 June 2024, and it attracted significant interest from both existing shareholders and new investors and was oversubscribed. T he Company raised a total of approximately   EUR 30.7 million, of which approximately   EUR 3.7 million  was paid by converting the convertible loan and related arrangement fees and interests into shares in the Company. As a result of the share offering, with the   gross proceeds of approximately   EUR 27 million   the Company believes it will have sufficient resources to execute its core business and deliver on its key milestones of the year 2024 under the current business plan and in compliance with the financial covenants of the IPF Fund. The Board of Directors of the Company decided to issue of a total of 30,709,056 newly issued treasury shares and new shares in the Company. As set out in the terms and conditions of the Offering, existing shareholders and DI (depositary interest) holders were given an allocation preference. Carnegie Investment Bank AB, Finland Branch (“Carnegie”) and Peel Hunt LLP (“Peel Hunt”) acted as lead managers (the “Lead Managers”) and bookrunners for the Offering. On 20 June 2024 the Company entered into 90-day lock-up agreement with Lead Managers.

Post period events

·      The FDA granted bexmarilimab a Fast Track Designation (FTD) for the treatment of relapsed or refractory myelodysplastic syndrome (r/r MDS) in combination with azacitidine.

·      Faron received positive feedback from its formal Type D Scientific Advice Meeting with the FDA regarding the registrational clinical development plan for bexmarilimab in the treatment of HR MDS. The FDA acknowledged the difficulties of running a randomized study with a comparator in the r/r setting and instead proposed that Faron conduct a confirmatory phase III study in frontline high-risk MDS (HR MDS), that would not require a separate phase III in r/r MDS. Accelerated approval for r/r MDS could possibly be obtained with the existing phase II trial in addition to an interim read-out from the confirmatory phase III trial as per the FDA’s Project FrontRunner.

·      Dr. Petri Bono was appointed as the Company’s Chief Medical Officer (CMO), succeeding Dr. Birge Berns, who will continue her role as part of Faron’s medical leadership team involved in developing bexmarilimab. Dr. Bono is an oncologist and has served as the CMO and member of the Group executive team of Terveystalo, the largest private healthcare service provider in Finland. Prior to joining Terveystalo he was the CMO at Helsinki University Hospital. He brings leading expertise in immunology, with his own research focusing on molecular and immunological oncology.

·      Mr. Yrjö Wichmann was appointed as the Company’s Chief Financial Officer (CFO), having served as Faron’s interim CFO since April 2024.

Half-Year Financial Results

·      Cash balances of EUR 30.0 million on June 30, 2024 (2023: EUR 6.3 million).

·      Operating loss of EUR 11.3 million for the six months ended June 30, 2024 (2023: EUR 12.8 million).

·      Net assets of EUR 1.4 million on June 30, 2024 (2023: EUR -9.5 million).

·      The cash position has been strengthened with a convertible loan issuance and two share placements successfully raising a total of EUR 35.5 million (gross)

·      On June 30, 2024, the Company had outstanding borrowings of EUR 8.9 million under a loan facility with IPF which is subject to financial covenants. The Company is required to satisfy these agreed covenants including the requirement to maintain a minimum cash balance of EUR 6.0 million while maintaining three months cash runway. On 30 June 2024, and 27 August 2024, the Company was in compliance with all covenants while holding cash balances of EUR 30.0 million. The cash held by the Group together with known receivables will be sufficient to support the current level of activities until the end of Q1 2025.

Consolidated key figures, IFRS

 EUR’000

Unaudited

Unaudited     

Audited

1-6/2024

1-6/2023

1-12/2023

6 months

6 months

                12 months

Revenue

0

0

0

Other operating income

0

0

0

Research and Development expenses

(6 662)

(8 518)

(19 542)

General and Administrative expenses

(4 628)

(4 294)

(9 026)

Loss for the period

(14 395)

(13 730)

(30 944)

Unaudited

Unaudited

Audited

1-6/2024

1-6/2023

1-12/2023

6 months

6 months

                12 months

Loss per share, EUR

(0.20)

(0.22)

(0.48)

Number of shares at end of period

104 624 864

66 161 373

68 786 699

Average number of shares

70 452 291

62 985 028

65 055 036

 EUR’000

Unaudited

Unaudited

Audited

30 Jun 2024

30 Jun 2023

31 Dec 2023

Cash and cash equivalents

29 979

6 315

6 875

Equity

1 379

(9 483)

(15 160)

Balance sheet total

35 460

12 836

10 220

Conference call information

A hybrid briefing and Q&A session for investors, analysts and media will be hosted by Dr. Juho Jalkanen, Chief Executive Officer, and Yrjö Wichmann, Chief Financial Officer, tomorrow 28 August 2024, at 8:00 am (EST) / 1:00 pm (BST) / 3:00 pm (EEST).

Webcast registration link: https://faron.videosync.fi/q2-2024

The half-year report, presentation, and a replay of the webcast will be available on the Company’s website at https://www.faron.com/investors .

For more information please contact:

Investor Contact
Faron Pharmaceuticals
E-mail:
investor.relations@faron.com

ICR Consilium
Mary-Jane Elliott, David Daley, Lindsey Neville
Phone: +44 (0)20 3709 5700
E-mail:  
faron@consilium-comms.com

Cairn Financial Advisers LLP, Nomad

Sandy Jamieson, Jo Turner

Phone: +44 (0) 207 213 0880

Peel Hunt LLP, Broker

Christopher Golden, James Steel

Phone: +44 (0) 20 7418 8900

Sisu Partners Oy, Certified Adviser on Nasdaq First North

Juha Karttunen

Phone: +358 (0)40 555 4727

Jukka Järvelä

Phone: +358 (0)50 553 8990

About Bexmarilimab

Bexmarilimab is Faron’s wholly owned, investigational immunotherapy designed to overcome resistance to existing treatments and optimize clinical outcomes, by targeting myeloid cell function and igniting the immune system. Bexmarilimab binds to Clever-1, an immunosuppressive receptor found on macrophages leading to tumor growth and metastases (i.e. helps cancer evade the immune system). By targeting the Clever-1 receptor on macrophages, bexmarilimab alters the tumor microenvironment, reprogramming macrophages from an immunosuppressive (M2) state to an immunostimulatory (M1) state, upregulating interferon production and priming the immune system to attack tumors and sensitizing cancer cells to standard of care.

About BEXMAB

The BEXMAB study is an open-label Phase I/II clinical trial investigating bexmarilimab in combination with standard of care (SoC) in the aggressive hematological malignancies of acute myeloid leukemia (AML) and myelodysplastic syndrome (MDS). The primary objective is to determine the safety and tolerability of bexmarilimab in combination with SoC (azacitidine) treatment. Directly targeting Clever-1 could limit the replication capacity of cancer cells, increase antigen presentation, ignite an immune response, and allow current treatments to be more effective. Clever-1 is highly expressed in both AML and MDS and associated with therapy resistance, limited T cell activation and poor outcomes.

About Faron Pharmaceuticals Ltd.

Faron (AIM: FARN, First North: FARON) is a global, clinical-stage biopharmaceutical company, focused on tackling cancers via novel immunotherapies. Its mission is to bring the promise of immunotherapy to a broader population by uncovering novel ways to control and harness the power of the immune system. The Company’s lead asset is bexmarilimab, a novel anti-Clever-1 humanized antibody, with the potential to remove immunosuppression of cancers through reprogramming myeloid cell function. Bexmarilimab is being investigated in Phase I/II clinical trials as a potential therapy for patients with hematological cancers in combination with other standard treatments. Further information is available at www.faron.com .

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 Company’s current expectations and assumptions regarding the completion and use of proceeds from the Offering, 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 Company’s current beliefs and assumptions and are based on information currently available to the Company.

A number of factors could cause actual results to differ materially from the results and expectations dis-cussed in the forward-looking statements, many of which are beyond the control of the Company. In addition, other factors which could cause actual results to differ materially include the ability of the Company to successfully licence its programmes, 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 or other sources of funding, 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 Company believes 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.

Chairman and Chief Executive Officer’s Review

Introduction

Following a challenging spring, Faron has ended the first half of 2024 in a very strong position, both financially and from a clinical development perspective. We’ve continued to see extremely encouraging data from our ongoing BEXMAB trial and now, with adequate resources secured, we can fully commit and concentrate on our most important task of progressing bexmarilimab through phase II trials in order to bring this important treatment to market, and to patients, as quickly as possible.

Bexmarilimab

Driving the clinical development of bexmarilimab continues to be Faron’s top priority. We reached a significant milestone in January this year when we dosed the first patient in phase II of the BEXMAB trial which is evaluating the safety and efficacy of bexmarilimab, in combination with SoC in patients with HMA r/r MDS, an aggressive myeloid leukemia with very few treatment options. We have continued to make good progress in the trial and in May this year, we announced initial positive phase II data, confirming our earlier positive phase I findings.

The BEXMAB phase I results had already indicated a high overall response rate (ORR) of 87.5% (7/8) amongst HMA-failed MDS patients treated with a combination of bexmarilimab + azacitidine. In May there were a total of 14 HMA-failed MDS patients treated in both phase 1 & 2 with this novel combination. The treatment has been well tolerated, without any dose-limiting toxicity. The ORR in this otherwise untreatable population is 79% (11/14). The current true remission rate is 64% (9/14). Similar size patient cohorts treated with existing alternatives have reported 0-20% ORR, without deep and durable remissions. For phase I patients with adequate follow-up available the estimated median overall survival (mOS) in May to be 13.4 months, which is still subject to change.

R/r MDS represents a significant therapeutic challenge and, based on the data gathered to date, we believe that bexmarilimab has the potential to fill a very important clinical gap and save and improve the lives of HMA-failed MDS patients.

Post period, we were particularly pleased to announce the outcome of our formal Type D Scientific Advice Meeting with the FDA regarding the registrational study plan for bexmarilimab in r/r HR MDS. Given the previously reported promising trial results, Faron had proposed to move into a randomized registrational phase III study for the treatment of r/r MDS using bexmarilimab + azacitidine against the investigator’s choice of a HMA. Instead, given the encouraging efficacy already seen in both frontline and r/r HR MDS and the well-established safety profile of bexmarilimab, the FDA proposed that after the ongoing phase II BEXMAB study in r/r MDS, Faron should move directly into a registrational blinded randomized frontline HR MDS study investigating bexmarilimab + azacitidine against placebo + azacitidine.

Subject to continued positive results, the FDA’s feedback means that a separate phase III in r/r MDS would not be required and Faron’s ongoing BEXMAB phase II study could be the registrational trial for patients with r/r MDS.  

This highly positive feedback exceeded our expectations, and we are now adjusting our development plan accordingly. The FDA’s proposal significantly reduces development costs and timelines to bring bexmarilimab therapy to all HR MDS patients, and underlines the high unmet need in HR MDS, a condition for which new treatment options are urgently needed.

We have made a number of changes to our leadership team and Board during the period, including the appointment of a new CEO and Chairman, and post-period CMO and CFO, building and strengthening the existing strong track record of the team, bringing leading expertise to support the Company’s continued progress. We would like to extend our deep gratitude to Dr. Markku Jalkanen, who retired as CEO earlier this year. Under his leadership, Faron has grown significantly, and we would like to acknowledge his efforts and commitment in progressing bexmarilimab through the clinic.

Financial review

Statement of comprehensive income

The operating loss for the six months ended 30 June 2024, was EUR 11.3 million (six months ended 30 June 2023: loss of EUR 12.8 million). No revenue was generated during the period or prior period. Research and development expenses decreased by EUR 1.8 million to EUR 6.7 million (2023: EUR 8.5 million). General and administrative expenses increased by EUR 0.3 million to EUR 4.6 million (2023: EUR 4.3 million).

The loss for the period was EUR 14.4 million (2023: loss of EUR 13.7 million) and the basic and diluted loss per share was EUR 0.20 (2023: loss per share of EUR 0.22).

Statement of financial position and cash flows

As of 30 June 2024, net assets amounted to EUR 1.4 million (30 June 2023: EUR -9.5 million). The net cash flow for the first six months in 2024 was EUR 23.1 million (2023: EUR -0.7 million). As of 30 June 2024, total cash and cash equivalents held were EUR 30.0 million (2023: EUR 6.3 million).

Corporate

Faron’s Annual General Meeting (AGM) was held on 5 April 2024 in Turku. The AGM adopted the financial statements of the Company and re-elected audit firm PricewaterhouseCoopers Oy (“PwC”) as the Company’s auditor. Additionally, the number of members of the Board was confirmed as five. Tuomo Pätsi, Markku Jalkanen, John Poulos, Marie-Louise Fjällskog and Christine Roth were re-elected to the Board for a term that ends at the end of the next AGM. The AGM also resolved to establish a Shareholders’ Nomination Board for the Company and its Charter as proposed by the Board was adopted. Authorization to the Board to decide on the issuance of twenty million shares, options or other special rights entitling to shares and conveyance of up to the same maximum number of treasury shares in the possession of the Company was granted to the Board. This authorization remains valid until 30 June 2025. In addition, the AGM authorized the Board to resolve on issuances of shares in connection with a larger share issuance, which authorization contains the right to issue new shares or dispose of the Company’s own shares in the possession of the Company in the amount on thirty million. This authorization was utilized in June when the Company organized a public offer of its shares.

Summary & outlook

During the remainder of 2024, our focus continues to be the progression of bexmarilimab through clinical development.  We are looking forward to reporting further data from the ongoing phase II part of the BEXMAB trial in H2.  We are also adjusting our clinical development plan for bexmarilimab following feedback from the FDA, and we will announce further details on that in due course. We are also actively continuing discussions with potential partners to take  bexmarilimab into phase III and approval.

On behalf of the Board, we would like to thank our shareholders, existing and new, for their support of Faron. We would also like to thank our employees for their continued commitment to our mission and the patients we serve. We look forward to updating the market on our progress throughout the course of the year.

Dr. Juho Jalkanen

Chief Executive Officer

Mr. Tuomo Pätsi

Chairman

Consolidated Income Statement, IFRS

EUR’000

Unaudited

1-6/2024

6 months

Unaudited

1-6/2023

6 months          

Audited

1-12/2023

12 months

Revenue

0

0

0

Other operating income

0

0

0

Research and development expenses

(6 662)

(8 518)

(19 542)

General and administrative expenses

(4 628)

(4 294)

(9 026)

Operating loss

(11 290)

( 12 812)

(28 568)

Financial income

1 292

0

233

Financial expense

(4 350)

(918)

(2 609)

Loss before tax

(14 349)

(13 730)

( 30 944)

Tax expense

-46

(0)

0

Loss for the period

(14 395)

(13 730)

(30 944)

Translation difference

11 

0

2

Comprehensive loss for the period attributable to the equity holders of the Parent company

(14 384)

(13 730)

(30 942)

Loss per ordinary share

Basic and diluted loss per share, EUR

(0.20)

(0.22)

(0.48)

Consolidated Balance Sheet, IFRS

EUR’000

Unaudited

Unaudited

Audited

31 Dec 2023

30 Jun 2024

30 Jun 2023

Assets

Non-current assets

Machinery and equipment

3

10

6

Right-of-use-assets

344

272

198

Intangible assets

1 086

1 127

1 088

Prepayments and other receivables

60

60

60

Total non-current assets

1 494

1 469

1 352

Current assets

Prepayments and other receivables

3 987

5 052

1 992

Cash and cash equivalents

29 979

6 315

6 875

Total current assets

33 966

11 367

8 868

Total assets

35 460

12 836

10 220

EUR’000

Unaudited

Unaudited

Audited

31 Dec 2023

30 Jun 2024

30 Jun 2023

Capital and reserves attributable to the equity holders of the Parent company

Share capital

2 691

2 691

2 691

Reserve for invested unrestricted equity

184 866

144 778

154 352

Accumulated deficit

(186 181)

(156 955)

(172 208)

Translation difference

3

2

4

Total equity

1 379

(9 483)

(15 160)

Provisions

Other provisions

0

0

0

Total provisions

0

0

0

Non-current liabilities

Borrowings

8 706

10 892

9 423

Lease liabilities

239

163

50

Other liabilities

1 643

702

895

Total non-current liabilities

10 588

11 757

10 369

Current liabilities

Borrowings

3 672

2 304

3 475

Lease liabilities

105

119

163

Trade payables

17 473

6 002

8 971

Accruals and other current liabilities

2 243

2 137

2 403

Total current liabilities

23 493

10 562

15 012

Total liabilities

34 081

22 319

25 380

Total equity and liabilities

35 460

12 836

10 220

Consolidated Statement of Changes in Equity, IFRS

EUR’000

Share capital

Reserve for invested unrestricted equity

Translation difference

Accumulated deficit

Total equity

Balance as at
31 December 2022 (Audited)

2 691

129 544

2

(143 713)

(11 476)

Comprehensive loss for the last six months 2023

0

0

0

(13 730)

(13 730)

Transactions with equity holders of the Parent company

Issue of ordinary shares

0

15 233

0

0

15 233

Share-based compensation

0

0

0

489

489

0

15 233

0

(13 241)

1 992

Balance as at 30 June 2023 (Unaudited)

2 691

144 778

2

(156 955)

(9 483)

Comprehensive loss for the year 2023

0

0

2

(30 944)

(30 942)

Transactions with equity holders of the Company

Issue of ordinary shares, net of transaction costs

0

24 808

0

0

24 808

Share-based compensation

0

0

0

2 450

2 450

0

24 808

2

(28 494)

(3 684)

Balance as at
31 December 2023 (Audited)

2 691

154 352

4

(172 208)

(15 160)

Comprehensive loss for the last six months 2024

0

0

11

(14 395)

(14 384)

Transactions with equity holders of the Company

Issue of ordinary shares, net of transaction costs

0

30 514

0

0

30 514

Share-based compensation

0

0

0

369

369

0

30 514

11

(14 026)

16 499

Balance as at 30 June 2024 (Unaudited)

2 691

184 866

15

(186 234)

1 338

Consolidated Cash Flow Statement, IFRS

€’000

Unaudited

1-6/2024

6 months

Unaudited

1-6/2023

6 months

    Audited

1-12/2023

12 months

Cash flow from operating activities

Loss before tax

(14 349)

(13 730)

(30 944)

Adjustments for:

Received grants

0

(0)

(33)

Depreciation and amortization

158

174

346

Change in provision

0

(158)

(158)

Financial items

3059

918

2376

Tax expense

0

0

0

Share-based compensation

369

489

2450

Adjusted loss from operations before changes in working capital

(10 764)

(12 308)

(25 963)

Change in net working capital:

Prepayments and other receivables (increase -)

(2 127)

1 028

300

Trade payables (increase +)

5 557

(8)

2 994

Other liabilities (increase +)

(593)

(272)

(50)

Cash used in operations

(7 926)

(11 561)

(22 719)

Income taxes paid

(150)

0

0

Transaction costs related to loans and borrowings

0

0

(0)

Interest received

0

0

243

Interest paid

(617)

(782)

(1 330)

Net cash used in operating activities

(8 693)

(12 343)

(23 806)

Cash flow from investing activities

Payments for intangible assets

(123)

(68)

(123)

Payments for tangible assets

0

0

(0)

Net cash used in investing activities

(123)

(68)

(123)

Cash flow from financing activities

Proceeds on issue of shares

35 500

12 077

26 031

Share issue transaction cost

(498)

(648)

(1 190)

Proceeds from borrowings

3 200

64

64

Repayment of borrowings

(5 314)

0

(861)

Transaction and structuring fees of borrowings

(750)

0

(400)

Proceeds from grants

(28)

382

481

Payment of lease liabilities

(337)

(84)

(142)

Net cash from financing activities

31 773

11 791

23 983

Net increase (+) / decrease (-) in cash and cash equivalents

23 103

(675)

(114)

Effect of exchange rate changes

(145)

(55)

(168)

Cash and cash equivalents at 1 January

6 876

6 990

6 990

Cash and cash equivalents at the end of period

29 979

6 315

6 876

Notes to the interim financial report

1.   Corporate information

Faron Pharmaceuticals Ltd (the “Company”) is a clinical stage biopharmaceutical company incorporated and domiciled in Finland, with its headquarters at Joukahaisenkatu 6, 20520 Turku, Finland. The Company currently has a pipeline based on the endothelial receptors involved in regulation of immune response, in oncology and organ damage.

The Company has been listed on the London Stock Exchange’s AIM market since November 17, 2015, with a ticker FARN, and since December 3, 2019, the Company has been listed on the Nasdaq First North Growth Market with a ticker FARON.

2.   Summary of significant accounting policies

 

2.1.   Basis of preparation

The unaudited H1 interim financial report has been prepared in accordance with the International Financial Reporting Standards of the International Accounting Standards Board (IASB) and as adopted by the European Union (IFRS) and the interpretations of the International Financial Reporting Standards Interpretations Committee (IFRIC) .


The principal accounting policies applied in the preparation of these interim financial report is set out below. The Company has consistently applied these policies to all the periods presented, unless otherwise stated. The areas of the report involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the interim financial report, are disclosed in note 2.21 of the Financial Statement of 2023 Annual Report. 


The unaudited interim financial report incorporates the parent company, Faron Pharmaceuticals Ltd, and all subsidiaries (the “Group”).


All amounts are presented in thousands of euros, unless otherwise indicated, rounded to the nearest euro thousand.

2.2.      Going concern

The Group has forecasted its estimated cash requirements over the next twelve months. To make these forecasts the Group has made a number of assumptions regarding the quantity and timing of future expenditure and income as well as other key factors. Though these estimates have been made with caution and care, they continue to contain a significant amount of uncertainty. The Group also has debt obligations which carry financial covenants that could adversely impact the Group’s liquidity and operating flexibility. Based on the forecast the Group believes that it has adequate financial resources to continue its operations until the year end of 2024.   

The Group has taken several actions to secure further financing. The Directors believe that the Group can gain access to further resources to sustain operations over the next 12 months. Therefore, this unaudited financial report has been prepared on a going concern basis. At this stage the Group cannot disclose any of these options.

Because the additional finance is not committed at the date of issuance of this H1 2024 report, these circumstances represent a material uncertainty that may cast significant doubt on the Group’s ability to continue as a going concern. Should the Group be unable to obtain further finance such that the going concern basis of preparation were no longer appropriate, adjustments would be required, including to reduce balance sheet values of assets to their recoverable amounts, to provide for further liabilities that might arise.

2.3.      Financial covenants

At 30 June 2024, the Company had outstanding borrowings of EUR 8.9 million under a loan facility with IPF Partners which is subject to financial covenants. The financial covenants are minimum cash covenant and gross gearing covenant. The cash covenant obliges the to maintain a minimum cash balance of EUR 6.0 million while maintaining three months cash burn rate, historically or on forward looking basis. In May 2024 the Company agreed in advance with IPF a deviation to the required level of the minimum cash covenant until the end of October 2024. The gross gearing covenant (which may not exceed 25 per cent at any time) is calculated as the ratio of borrowings to market capitalisation and when determining the “borrowings”, the aggregate principal amount of the financial indebtedness of the group will be taken into account save for any financial indebtedness owed by a member of the group to another member of the group or R&D loans to Business Finland. The level of the minimum cash covenant is linked to the level of the gross gearing covenant so that it is either the three-month or six-month cash burn. At 30 June 2024 the Company was in compliance with all covenants while holding cash balances of EUR 30.3 million. The cash held by the Group together with known receivables will be sufficient to support the current level of activities until the end of Q1 2025.

3.   Subsequent events

In its meeting on 26 August 2024, the Board of Directors of the Company approved the publishing of this interim financial report.

Financial Statement January 1 to December 31 2023

 

 

 

 

 

Faron Pharmaceuticals Ltd.

(“Faron” or “the Company”)

 

Faron’s Financial Statement Release January 1 to December 31, 2023

 

 

Financial statement release March 13, 2024 at 03:00 AM (EDT) / 07:00 AM (GMT) / 09:00 AM (EET)

 

TURKU, FINLAND / BOSTON, MA – Faron Pharmaceuticals Ltd. (AIM: FARN, First North: FARON), a clinical- stage biopharmaceutical company focused on tackling cancers via novel myeloid cell targeted immunotherapies, today announced audited full-year financial results for January 1 to December 31, 2023 (the “Period”) and provided an overview of recent corporate developments.

 

2023 Highlights

  • Data from the completed Phase I part of the BEXMAB study demonstrated significant overall response rates (ORR) in both previously hypomethylating agent (HMA)-failed (5 out of 5) and higher-risk myelodysplastic syndrome (MDS) patient (5 out of 5) populations. Most responses were deep and durable with 7 out of 10 MDS patients achieving complete remission/ marrow complete remission (CR/mCR) and two demonstrating partial remission (PR), one of whom moved on to receive a stem cell transplantation and the other, hematological improvement without remission (HI-P).
  • Further analysis of the patient profiles of those treated in the Phase I part of the BEXMAB trial showed that prior to responding to bexmarilimab in combination with standard of care (SoC), patients had experienced disease progression following treatment with all of the leading azacitidine combinations such as venetoclax, sabatolimab and magrolimab.
  • The Company made the decision to commence the Phase II part of the BEXMAB study based on guidance from the U.S. Food and Drug Administration (FDA), investigating bexmarilimab in combination with SoC in patients with HMA-refractory or-relapsed MDS.
  • The FDA granted bexmarilimab Orphan Drug Designation (ODD) for the treatment of acute myeloid leukemia (AML).
  • The first in human MATINS study was completed in advanced solid tumor patients. The study results were published in the journal Cell Reports Medicine. Bexmarilimab was well tolerated, showed activation of intratumoral immunity and reprogramming tumor associated macrophages, resulting in an increase in IFN-gamma signature and changes in the tumor microenvironment (TME), and providing significant clinical benefit.
  • The Company conducted three successful fundraising rounds in 2023, successfully raising EUR 25.7 million.
  • A virtual briefing and Q&A will be held today, March 13, 2024 at 8:00 AM (EDT) / 12:00 PM (GMT) / 2:00 PM (EET)

 

Subsequent events

  • In January 2024, Faron dosed the first patients in the Phase II part of its BEXMAB Study, to evaluate the safety and efficacy of bexmarilimab in combination with SoC, in HMA-refractory or relapsed MDS patients. This project Optimus part will provide the final dosing of bexmarilimab for the registrational part.
  • In February 2024, Faron announced that it was in breach of several undertakings agreed in the facilities agreement entered into on February 28, 2022 between IPF Fund II SCA, SICAV-FIAR (“IPF”) as Lender and Faron Pharmaceuticals Ltd as Borrower (“Facilities Agreement”) and subsequent waiver letters provided by IPF, and therefore was in several Events of Default, as defined in the Facilities Agreement.
  • In March 2024, Faron successfully raised a total of EUR 3.2 million in subordinated convertible loan arrangements with certain existing shareholders allowing the Company to make critical payments to third parties under agreed waivers with IPF. As at March 13, 2024, the Company is in compliance with all IPF financial covenants as agreed with the waiver letter. In accordance with the waiver letter, the Company shall issue to IPF additional special rights which entitle them to subscribe for new ordinary shares in the Company.
  • In March 2024, Faron announced that endeavors are continuing and it is in active discussions to secure short- and long-term funding.

 

 

“I am pleased to report that we have made strong progress in 2023 advancing our BEXMAB study of bexmarilimab, our wholly owned immunotherapy asset. Throughout the course of the year, we have reported highly encouraging data for bexmarilimab, showing a remarkable overall response rate in both higher-risk frontline MDS patients as well as HMA-failed MDS patients. These are highly significant findings, given the combinations of treatments these patients had previously failed on and the very limited options available for future therapy. They provide us with a path to market and only bolster our confidence in the potential of this novel immunotherapy to treat patients with aggressive hematological malignancies,” said Dr. Markku Jalkanen, Chief Executive Officer of Faron.

 

HIGHLIGHTS (including post period)

 

Pipeline Highlights

 

Bexmarilimab Faron’s wholly owned, novel precision cancer immunotherapy candidate, in Phase I/II development for difficult-to-treat hematological and solid tumor cancers.

 

Hematological cancer with standard of care (SoC) – BEXMAB

 

  • The Phase II part of the BEXMAB study commenced based on guidance from the U.S. Food and Drug Administration (FDA), investigating bexmarilimab in combination with SoC in patients with HMA-refractory or -relapsed MDS. The first patient was dosed in January 2024.
  • Data from the completed Phase I part of the BEXMAB study demonstrated significant ORR in both previously HMA-failed (5 out of 5) and higher-risk MDS patient (5 out of 5) populations. Most responses were deep and durable with 7 out of 10 MDS patients achieving CR/mCR and two demonstrating PR, one of whom moved on to receive a stem cell transplantation and the other, hematological improvement without remission (HI-P).
  • Further analysis of the patient profiles of those treated in the completed Phase I part of the BEXMAB trial showed that patients had experienced disease progression following previous treatment with azacitidine monotherapy or combinations of up to four therapies that included azacitidine or decitabine + magrolimab, venetoclax and sabatolimab. 3 of the 5 patients were refractory to previous HMA-therapy, with progressive disease (PD) or stable disease (SD) being the best responses achieved from that therapy. 2 patients had relapsed after treatment with azacitidine or an azacitidine+venetoclax combination.
  • The FDA granted ODD for bexmarilimab for the treatment of AML.
  • BEXMAB phase I/II clinical data were presented at key scientific conferences including the American Society of Hematology (ASH) Annual Meeting and the European Hematology Association Congress 2023.
  • Post period, In January 2024, Faron dosed the first patients in the Phase II part of its BEXMAB Study, to evaluate additional safety and efficacy data for bexmarilimab in combination with SoC, in HMA-refractory or relapsed MDS patients, to obtain regulatory feedback from the FDA on a final regulatory pathway for market application (BLA)

 

Single-agent safety and activity in advanced solid tumors – MATINS

  • The first in human MATINS study was completed and the full safety and anti-tumor efficacy results from the first-in-human Phase I/II MATINS trial of bexmarilimab in patients with treatment-refractory late-stage solid tumors was published in Cell Reports Medicine.
  • The Company presented two posters at the American Association for Cancer Research Annual Meeting 2023 on its Phase I/II MATINS study of bexmarilimab in solid tumors and published a manuscript in Cell Reports Medicine.
  • The findings from MATINS, which have established strong foundations for Faron’s ongoing development program, showed activation of intratumoral immunity and reprogramming tumor associated macrophages resulting in increase in IFN-gamma signature and changes in the tumor microevironment (TME), resulting in disease control and prolonged survival in late-stage cancer. Furthermore, targeting Clever-1 with bexmarilimab was well-tolerated.
  • A positive Phase I/II meeting with the FDA supported the potential to continue development of bexmarilimab in solid tumors both as a single agent and in combination with anti-PD-1.

 

Combination potential with PD-1 blockade – BEXCOMBO – and further expansion

  • Preparations are ongoing for the initiation of the Phase II BEXCOMBO trial evaluating bexmarilimab with PD-1 blockade, aimed at improving the clinical benefits from standard-of-care PD-1 blockade. The first proof-of-concept cohort under investigation will be head and neck cancer, followed by non-small cell lung cancers. Patient cohorts will comprise between 15 and 40 subjects, with the opportunity for subgroup enrichment.
  • Given the positive results to date, the Company is exploring bexmarilimab’s potential in frontline HR MDS, chronic myelomonocytic leukaemia (CMML) patients and considering further development and expansion opportunities with bexmarilimab in hematological cancers in the form of further partnerships.

 

 

Traumakine® – Faron’s investigational intravenous (IV) interferon beta-1a therapy, in development for hyperinflammatory conditions.

  • The Company is in collaboration with the Fred Hutchinson Cancer Research Center in Seattle, Washington, to further investigate the use of IV IFN beta-1a for the prevention of organ damage from cytokine release syndrome (CRS) and other CAR-T therapy side effects, such as neurotoxicity (ICANs).

 

 

Corporate Highlights

  • The balance sheet was strengthened through three private placements directed to institutional and other investors to raising EUR 25.7 million during 2023.
  • James O’Brien, CPA, MBA, joined as Chief Financial Officer. Mr. O’Brien is an accomplished biotech and financial executive with extensive experience in the US capital markets. Strengthening of the Board of Directors with the appointments of Dr. Marie-Louise Fjällskog, Ms. Christine Roth and Mr. Tuomo Pätsi, who joined the Board as Non-Executive Directors of the Company. Dr. Marie-Louise Fjällskog was previously the Chief Medical Officer at Faron. In her position as a Board member, she continues to play an integral role in the development of bexmarilimab, by providing her clinical and regulatory expertise to support the Company’s progress. Ms. Christine Roth is a pharmaceutical executive with over three decades of experience in the industry, with expertise across various therapy areas including Oncology, Cardiovascular, Metabolic, and Infectious Diseases. Mr. Pätsi is an experienced biotech and pharmaceutical executive who was until recently Executive Vice President for Seagen Inc., a US-based, cancer-focused biotechnology company.
  • Mr. Leopoldo Zambeletti, who joined Faron’s Board as a Non-Executive Director in September 2015, stepped down from the Board, to take on a business development consulting role within Faron. He is a highly respected figure within the life sciences and investment banking industries and, since 2013, has been an independent strategic advisor to life science companies on mergers and acquisitions, out-licensing deals, and financing strategy.
  • Dr. Birge Berns, MD, joined Faron as the Company’s interim Chief Medical Officer.  Dr. Berns is a seasoned senior pharmaceuticals executive with a background in oncology, clinical medicine, rheumatology and immunology. She brings more than 25 years’ experience from senior leadership roles in global pharmaceutical companies, including Sanofi Aventis and Johnson & Johnson.
  • Dr. Gregory B. Brown and Ms. Anne Whitaker stepped down from their positions as a Non-Executive Directors.

 

Full-year Financial Results

 

  • On December 31, 2023, Faron held cash balances of EUR 6,9 million (2022: EUR 7,0 million). 
  • Loss for the period for the financial year ended December 31, 2023, was EUR 30,9 million (2022: EUR 28,7 million).  
  • Net assets on December 31, 2023, were EUR -15,2 million (2022: EUR -11,5 million).
  • In January 2023 the Company successfully raised a total of EUR 12,0 million gross through the issuance of 3,692,308 ordinary shares to investors.
  • In June 2023, Faron conducted a placement of 2,601,510 newly issued treasury shares to investors to raise EUR 6,6 million gross.
  • In October 2023, the Company successfully raised EUR 7,1 million gross through the issuance of 2,491,998 ordinary shares to investors. 
  • The primary reason for conducting the placings were to accelerate and expand the clinical development of the Company’s main drug candidate, bexmarilimab, advance bexmarilimab’s commercial scale production, support general corporate purposes and other pipeline development, and to strengthen the Company’s balance sheet.
  • Post period, in February 2024, the Company announced that it is in breach of several undertakings agreed in the Facilities Agreement with IPF and subsequent waiver letters provided by IPF and is therefore in several events of default.
  • Post period, in March 2024, the Company successfully raised a total of EUR 3,2 million in convertible loans allowing the Company to secure short-term financing.  The company continues active endeavors to secure longer term funding.

 

 

 

 

Consolidated key figures, IFRS

 

EUR ’000

Unaudited

7-12/2023
6 months

Unaudited

7-12/2022
6 months

1-12/2023
12 months

1-12/2022
12 months

Other operating income

0

318

0

803

Research and Development expenses

(11,024)

(10,683)

(19,542)

(20,730)

General and Administrative expenses

(4,732)

(3,697)

(9,026)

(7,498)

Loss for the period

(15,756)

(14,062)

(28,568)

(28,730)

 

 

Unaudited

7-12/2023
6 months

Unaudited

7-12/2022
6 months

1-12/2023
12 months

1-12/2022
12 months

Loss per share EUR

(0.26)

(0.27)

(0.48)

(0.52)

Number of shares at end of period

68,786,699

59,805,383

68,786,699

59,805,383

Average number of shares

67,137,790

57,230,625

65,055,036

55,229,835

 

EUR ’000

Unaudited

30 June 2023

Unaudited

30 June 2022

31 December 2023

31 December 2022

Cash and cash equivalents

6,315

9,936

6,875

6,990

Equity

(9,483)

(5,194)

(15,160)

(11,476)

Balance Sheet total

12,836

16,729

10,220

11,271

 

Board of Directors’ Proposal on the Dividend

The Group’s comprehensive loss for the period was EUR 30,943,935 (2022: EUR 28,924,250). The Board of Directors proposes to the Annual General Meeting 2024 not to pay a dividend.

 

March 13, 2023

Faron Pharmaceuticals Oy

Board of Directors

 

 

 

 

Conference call information

A virtual briefing and Q&A session for investors, analysts and media will be hosted by Dr. Markku Jalkanen, Chief Executive Officer, and James O’Brien, Chief Financial Officer, today, March 13, 2024, at 8:00 AM (EDT) / 12:00 PM (GMT) / 2:00 PM (EET).

 

Webcast registration link: https://faron.videosync.fi/q4-2023

 

The full-year report, presentation, and a replay of the webcast will be available on the Company’s website at https://www.faron.com/investors.

 

 

For more information please contact:

 

Investor Contact

LifeSci Advisors

Daniel Ferry

Managing Director

daniel@lifesciadvisors.com

+1 (617) 430-7576

 

Media Contact

ICR Consilium

Mary-Jane Elliott, David Daley, Lindsey Neville

Phone: +44 (0)20 3709 5700

E-mail: faron@consilium-comms.com 

 

Cairn Financial Advisers LLP, Nomad

Sandy Jamieson, Jo Turner

Phone: +44 (0) 207 213 0880

 

Peel Hunt LLP, Broker

Christopher Golden, James Steel

Phone: +44 (0) 20 7418 8900

 

Sisu Partners Oy, Certified Adviser on Nasdaq First North

Juha Karttunen

Phone: +358 (0)40 555 4727

Jukka Järvelä

Phone: +358 (0)50 553 8990

Publication of financial information during year 2024

Faron’s financial statements for full year 2023 will be published today, March 13, 2024 and will also be available on Faron’s website at https://www.faron.com/investors/results. The half-year financial report for the period January 1 to June 30, 2024 is scheduled to be published on August 27, 2024. The Annual General Meeting is planned for April 5, 2024. A separate stock exchange notice will be issued by Faron’s Board of Directors to convene the meeting.

 

About bexmarilimab

Bexmarilimab is Faron’s wholly owned, investigational immunotherapy designed to overcome resistance to existing treatments and optimize clinical outcomes, by targeting myeloid cell function and igniting the immune system. Bexmarilimab binds to Clever-1, an immunosuppressive receptor found on macrophages leading to tumor growth and metastases (i.e. helps cancer evade the immune system). By targeting the Clever-1 receptor on macrophages, bexmarilimab alters the tumor microenvironment, reprogramming macrophages from an immunosuppressive (M2) state to an immunostimulatory (M1) one, upregulating interferon production and priming the immune system to attack tumors and sensitizing cancer cells to standard of care.

 

About BEXMAB

The BEXMAB study is an open-label Phase I/II clinical trial investigating bexmarilimab in combination with standard of care (SoC) in the aggressive hematological malignancies of acute myeloid leukemia (AML) and myelodysplastic syndrome (MDS). The primary objective is to determine the safety and tolerability of bexmarilimab in combination with SoC (azacitidine) treatment. Directly targeting Clever-1 could limit the replication capacity of cancer cells, increase antigen presentation, ignite an immune response, and allow current treatments to be more effective. Clever-1 is highly expressed in both AML and MDS and associated with therapy resistance, limited T cell activation and poor outcomes.

 

About Faron Pharmaceuticals Ltd.

Faron (AIM: FARN, First North: FARON) is a global, clinical-stage biopharmaceutical company, focused on tackling cancers via novel immunotherapies. Its mission is to bring the promise of immunotherapy to a broader population by uncovering novel ways to control and harness the power of the immune system. The Company’s lead asset is bexmarilimab, a novel anti-Clever-1 humanized antibody, with the potential to remove immunosuppression of cancers through reprogramming myeloid cell function. Bexmarilimab is being investigated in Phase I/II clinical trials as a potential therapy for patients with hematological cancers in combination with other standard treatments. Further information is available at www.faron.com.

 

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”, “hope”, “seek”, ”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 addition, other factors which could cause actual results to differ materially include the ability of the Company to successfully license its programs within the anticipated timeframe or at all, 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 or other sources of funding, 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.

 

 

CEO Statement

 

2023 was a year of significant progress for Faron with momentum building in our ambitious bexmarilimab development program and a continued laser focus on proving the potential of this novel myeloid cell re-programming immunotherapy to treat patients with aggressive hematological malignancies.

Initial promising results emerged early in 2023 from the first part of our Phase I/II BEXMAB study, investigating bexmarilimab in combination with standard of care (azacitidine and venetoclax) in relapsed/refractory acute myeloid leukemia (AML) and myelodysplastic syndromes (MDS) patients who had failed hypomethylating agents (HMAs). These early, positive responses in a very difficult to treat refractory setting were extremely exciting, given patients in the trial had failed standard of care and were left with few treatment options.

Throughout 2023 the trial delivered highly encouraging results which continued to improve over time. And by the time the first part of the trial had completed, the data was no less compelling. The bexmarilimab combination therapy had shown a strong overall response rate (ORR) in both higher-risk frontline MDS patients (5/5 patients) as well as HMA-failed MDS patients (5/5 patients). Observed responses were deep and durable with 7/10 MDS patients achieving complete remission/ marrow complete remission (CR/mCR), and two demonstrating partial remission (PR), one of whom moved on to receive a stem cell transplantation and the other, hematological improvement without remission (HI-P).

The combination continued to be well-tolerated and generated strong and durable leukemic blast eradication and immune responses. These were tremendous data, supporting bexmarilimab’s unique mechanism of action in the field of myeloid cell re-programming. And providing compelling evidence for us to continue development, at pace.

We rapidly initiated the second phase of the BEXMAB study in November, selecting HMA-refractory or -relapsed MDS as the initial indication, based on guidance from the U.S. Food and Drug Administration (FDA). MDS presents a considerable patient burden given the limited efficacy of the current standard of care, resulting in relatively low response rates and poor overall survival. Our data from the first part of the study underscored the potential of combining bexmarilimab with existing treatments to advance care for patients who so desperately need help. Post period, in January 2024, the first patients were dosed in the second phase of the study and the team secured additional trial sites to speed up its recruitment.

This is an incredibly important stage in bexmarilimab’s development as data from this phase of the trial will enable us to discuss a potential registrational study plan with the FDA.

We are thrilled with this progress and our absolute priority is to pursue an accelerated path to approval for bexmarilimab in its initial indication, where we know the need is so great. We also understand the broader opportunities for this immunotherapy. The FDA has granted Orphan Drug Designation (ODD) to bexmarilimab for the treatment of acute myeloid leukemia (AML), another hematological cancer with too few treatment options. Armed with the wealth of data generated so far in the BEXMAB study, we are exploring bexmarilimab’s potential in low risk MDS as well as chronic myelomonocytic leukaemia (CMML) patients. These are development and expansion opportunities that we will consider in the form of partnerships as our research continues.

Communicating to the broader healthcare community was an important aspect of our work in 2023 and I am delighted that the team was able to share and discuss the strong data emerging from the BEXMAB program at many of the leading scientific conferences, including the American Association for Cancer Research Annual Meeting, the European Hematology Association (EHA) 2023 Congress and the 65th American Society of Hematology (ASH) Annual Meeting. It was also a significant moment in December of 2023 when the leading scientific journal, Cell Reports Medicine, published the full safety and anti-tumor efficacy results from the Company’s first-in-human Phase I/II MATINS trial of bexmarilimab monotherapy in solid tumors. That trial achieved disease control and prolonged survival in a proportion of patients with very late-stage cancers who had exhausted all standard treatment options. It formed the bedrock of our understanding of the potential of bexmarilimab.

Alongside bexmarilimab’s significant advancements we have continued to strengthen the Company’s foundations. The appointment of Mr. James O’Brien, CPA, MBA, as Chief Financial Officer, supports our journey to becoming a global pharmaceutical company, given his extensive experience in the US capital markets and strong track record as an accomplished biotech and financial executive. When Dr. Marie-Louise Fjällskog stepped down as Faron’s Chief Medical Officer, we were delighted that she agreed to continue playing an integral role in the development of bexmarilimab, by providing clinical and regulatory expertise through her Non-Executive Director role on our Board. Dr. Birge Berns, who we appointed interim Chief Medical Officer, is a seasoned senior pharmaceuticals executive with a background in oncology, clinical medicine, rheumatology and immunology. She brings a wealth of global pharmaceutical experience that is critical to this business.

I am excited for the Company’s future in 2024. The latest stage of the BEXMAB trial will provide important data to support our continued discussions with the FDA and, we hope, provide us with a clear pathway to bringing bexmarilimab to patients. Our confidence grows in the potential of this novel therapy to provide better patient outcomes and improve the quality of life of those suffering from aggressive hematological cancers. The excellent BEXMAB data have intensified numerous ongoing partnering discussions, and we are looking forward to advancing these discussions over the coming year.

None of this work would be possible without the ongoing support from our shareholders, to whom I express my sincere thanks. And to my colleagues on the management team, and the wider Faron community, thank you for your continued commitment to making this Company’s vision a reality and bringing the promise of bexmarilimab to patients.

Markku Jalkanen

Chief Executive Officer

March 13, 2024
 

Chairman Statement

2023 has been another solid year of clinical trial progress for Faron. We continue to see bexmarilimab, our novel, wholly owned investigational immunotherapy candidate as the major value driver for Faron, and so our focus has been, and remains, to continue to advance bexmarilimab through clinical development.

We were pleased to conclude the MATINS trial, which provided a huge amount of information around the safety of bexmarilimab in a monotherapy setting and we were honoured to present and publish the data at several conferences and in important scientific Journals.   As we have said for a long time, we believe the future of cancer therapy for later-stage treatment is in the combination setting and we strongly believe, reinforced by the remarkable clinical data from the last year, that bexmarilimab will be part of the backbone of a combination setting.

Our most advanced program, and our main focus at Faron, is our Phase I/II BEXMAB trial investigating the safety, tolerability and preliminary efficacy of bexmarilimab in combination with standard of care therapies. Over the course of the year, we have seen very encouraging data from the BEXMAB trial with bexmarilimab continuing to show real clinical benefit in specific patient populations. We have consistently provided updates to the market and presented the data at several prestigious scientific conferences where we have had very positive feedback from key opinion leaders as well as from the clinicians in our trials.  This has given us continued confidence in the potential of bexmarilimab to provide better patient outcomes and improve the quality of life in patients suffering from these aggressive conditions.  We will continue to explore the best options to commercialize bexmarilimab in the combination setting and, as we move to next year, we are looking to have substantial interactions with the US FDA about the best path to market in our chosen indications.

We are very fortunate at Faron to have long-term supportive investors and so, despite the incredibly challenging funding environment seen this past year in both Europe and the US, we were pleased to raise additional capital throughout the period totalling EUR 25,7 million.  Amongst other things, these funds have allowed us to accelerate our bexmarilimab program, bringing this much needed potential treatment one step closer to patients.  We will look to strengthen our shareholder base as we move into 2024.

We had several Board and management changes over the course of the year. Dr. Gregory B. Brown and Ms. Anne Whitaker both stepped down from their positions as a Non-Executive Directors of the Company and Faron Board Member Mr. Leopoldo Zambeletti also stepped down to assume a transactional advisor role within the Company on business development opportunities.  We were pleased, however, to welcome Mr. Tuomo Pätsi and Ms. Christine Roth as Non-Executive Directors of the Company. Ms. Roth has played key roles in the development and launch of several therapies, including the first immune-oncology therapy and intentionally designed targeted therapy combinations.

Dr. Marie-Louise Fjällskog, moved from Chief Medical Officer to assume a Board position and we are very grateful that when she decided to retire, she had the confidence to continue with the Company in this role.  We also appointed a new Chief Financial Officer, Mr. James O’Brien, a very experienced US based CFO who has already made a big impact, and Dr. Birge Berns, MD as Interim Chief Medical Officer.

I would like to take this opportunity to thank our outgoing Board members for their service and guidance to Faron during their tenure and to Mr. Toni Hänninen, our previous CFO, for his service to Faron over the years.

As always, I would like to thank the whole management team, led by Dr. Markku Jalkanen, Chief Executive Officer, for their continued dedication and guidance, my colleagues on the Board for their commitment to the Company and our partner organisations and steering committee members for their support and expertise. I would also like to extend thanks to all the employees at Faron for their hard work and dedication.  Most importantly, I would like to thank all the patients on our clinical trials, their families, and our trial investigators without whom we would not be where we are today. 2024 is set to be a pivotal for Faron when BEXMAB will deliver key data giving us a clearer direction towards commercialization. I look forward to providing further updates as we continue to progress our innovative pipeline. 

Dr Frank Armstrong

Chairman

 

Financial Review

 

Despite continuing challenging market conditions in 2023, the Company was able to conduct three successful fundraising rounds. Combined, these financings raised EUR 25,7 million.  As a result of these fundraising efforts, the net cash from financing activities of EUR 23,9 million compared to EUR 23,5 million in 2022. Post period in March 2024, the Company successfully raised a total of EUR 3.2 million in subordinated convertible loan arrangements with existing shareholders.

Faron places a strategic emphasis on capital efficiency, a key element of efforts to extend our cash runway, without compromising the ability to advance our clinical development program. This capital efficiency has allowed us to achieve more with available resources, while focusing on clinical outcomes. During 2023, nearly 70% of cash expenses were spent directly in support of our bexmarilimab clinical development program including manufacturing. General and administrative expenses were flat in 2023 when compared to 2022 excluding one-time items and financing costs.

RESEARCH AND DEVELOPMENT EXPENSES 

R&D costs were EUR 19,5 million in 2023 compared to 20,7 million in 2022, a decrease of EUR 1,2 million. These costs are attributable to advancing our clinical programs including completion of BEXMAB Phase I and the initiation of Phase II. Clinical trial costs include the cost of patient and site enrollment, CRO service costs including monitoring, investigator fees, and compensation and benefits for personnel directly responsible for R&D activities, and product supply costs.  The costs of outsourced clinical trial services were EUR 4,0 million in 2023 compared to EUR 5,1 million in 2022. Compensation and benefits were EUR 3,2 million in 2023 and EUR 5,2 million in 2022 and included stock compensation expense of EUR 0,7 million and EUR 0,3 million in 2023 and 2022, respectively.

GENERAL AND ADMINISTRATION COSTS

G&A expenses were EUR 9,0 million in 2023 compared to EUR 7,5 million in 2022, an increase of EUR 1,5 million. The increase was mainly due to the recognition of the incremental fair value of amending the terms of 2015 option plan of EUR 1,2 million.  Compensation and benefits were EUR 5,7 million in 2023 and EUR 4,5 million in 2022 and included stock compensation expense of EUR 1,7 million and EUR 1,0 million in 2023 and 2022, respectively.

TAXATION

The Company’s tax credit for the fiscal year 2023 can be recorded only after the Finnish tax authorities have approved the tax report and confirmed the amount of tax-deductible expenses. The total amount of cumulative tax losses carried forward approved by tax authorities on December 31, 2023 was EUR 51,6 million (2022: EUR 47,1 million). The Company estimates that it can utilize most of these during the years 2024 to 2034 by offsetting them against potential future profits. In addition, the Company has EUR 95,2 million of R&D costs incurred in the financial years 2010 – 2023 that have not yet been deducted from taxation. This amount can be deducted over an indefinite period at the Company’s discretion.

LOSSES

Loss before income tax and total comprehensive income in 2023 was EUR 30,9 million compared to EUR 28,7 million in 2022, which represents a loss of EUR 0.48 per share and EUR 0.52 per share in 2023 and 2022, respectively.

CASH FLOWS

Net cash flow in each of the years ended December 31, 2023 and 2022 was essentially flat. Cash used for operating activities in 2023 was EUR 23,8 million compared to 2022 of EUR 23,0 million. Net cash inflow from financing activities in 2023 was EUR 24,0 million compared to 2022 of EUR 23,5 million.

FUNDRAISING

In January 2023 the Company successfully raised a total of EUR 12,0 million gross through the issuance of 3,692,308 ordinary shares to investors. In June 2023, Faron conducted a placement of 2,601,510 newly issued treasury shares to raise EUR 6.6 million gross. In October 2023, the Company successfully raised EUR 7,1 million gross through the issuance of 2,491,998 ordinary shares to investors. Post period, In March 2024, the Company successfully raised a total of EUR 3,2 million in subordinated convertible loan arrangements with certain existing shareholders.

 

FINANCIAL POSITION

As of 31 December 2023, total cash and cash equivalents held were EUR 6,9 million compared to 2022 of EUR 7,0 million.

GOING CONCERN

As part of their going concern review, the Directors have followed International Accounting Standard 1, Presentation of Financial Statements (IAS 1). The Company and its subsidiaries are subject to a number of risks similar to those of other development state pharmaceutical companies. These risks include, amongst others, generation of revenues in due course from the development portfolio and risks associated with research, development, testing and obtaining related regulatory approvals of its pipeline products. Ultimately, the attainment of profitable operations is dependent on future uncertain events which include obtaining adequate financing to fulfill the Group’s commercial and development activities and generate a level of revenue adequate to support the Group’s cost structure.

The Group generated a net loss of EUR30,9 million and recorded EUR 23,8 million cash outflow from operating activities during the year ended 31 December 2023. At the end of the financial year, it had total negative equity of EUR15,2 million including an accumulated deficit of EUR 172,2 million. As of that date, the group had cash and cash equivalents of EUR6,9 million.

The Directors have prepared detailed financial forecasts and cash flows looking beyond 12 months from the date of the approval of these financial statements. In developing these forecasts, the Directors have made assumptions based upon their view of the current and future economic conditions that are expected to prevail over the forecast period. The Director’s estimate that the cash held by the Group, together with known receivables will be sufficient to support the current level of activities into the second quarter of 2024. The Group also maintains loan agreements which include financial covenants related to minimum cash balance and thus loan amounts (EUR 9,4 million on December 31, 2023) become due if the Group is not able to maintain minimum cash balances or negotiate a waiver with the lender. The directors are continuing to explore sources of finance available to the Group and they believe that they have a reasonable expectation that they will be able to secure sufficient cash inflows for the Group to continue its activities for not less than 12 months from December 31, 2023; they have therefore prepared the financial statements on a going concern basis.

During the financial period ended 31, December 2023, the Group raised EUR 25.7 million in three successful fundraising rounds. . Subsequently, in March 2024, the Group received EUR 3,2 million Capital Loan to secure immediate short-term financing needs until the end of March 2024. The Capital Loan shall be governed by the provisions of Chapter 12 of the Finnish Companies Act (624/2006, as amended) (the “Finnish Companies Act”) concerning capital loans (in Finnish: pääomalaina).

The Loans shall be converted to new shares in the Company as a part of (and at the subscription price of) the next investment round where shares or other equity securities are issued by the Company to existing shareholders and/or new third- party investors, with a minimum size of EUR 8.0 million (“Investment Round”).

In the event that the subscription price in such Investment Round exceeds EUR 1.50 per share, an Investor shall have the right to postpone the conversion of the Loan until June 10, 2024 (“Due Date”). In the event that there is no Investment Round by the Due Date (or the subscription price of the Investment Round exceeds EUR 1.50 per share and the respective Investor has decided to postpone the conversion of the Loan) and the Loan has not been otherwise repaid prior to the Due Date (subject to a subordination agreement to be entered into between the Investors, the Company and IPF), then the Loan shall be at the request of the Investor converted into new shares in the Company in connection with the Due Date. In such case, the subscription price per share shall be EUR 1.50 per share. However, if then the Investor elects not to exercise its conversion right on the Due Date, (such option being only available if there has not been any Investment Round), the Due Date of the Loan will automatically be extended until December 31, 2024 (“Final Due Date”). On such Final Due Date, the Loan shall be either repaid in full in cash, subject to the terms of the subordination agreement, or converted into new shares in the Company with the subscription price of EUR 1.50 per share, subject to a valid share issue authorization being in place.

In case the Loan is converted before the Due Date, each Investor is entitled to an arrangement fee of 15% of its respective Loan amount. If conversion has not taken place prior to the Due Date, the arrangement fee will be 30% of the Investor’s respective Loan amount. No interest shall be payable on the Loan if a conversion takes place before May 30, 2024, and thereafter the interest will be 12% + 3-months Euribor and paid subject to the subordination agreement.

The Group is actively pursuing the following activities during 2024:

  • Securing approximately EUR5,0 million of short-term bridge financing to extend the Group’s cash runway until longer-term financing can be obtained.
  • Securing longer-term funding of approximately EUR 35.0 million in total. The Directors intend to propose to the Annual General Meeting on 5 April 2024 an authorization for a larger share issuance contemplated to be launched as a public offering (with planned allocation preferences to existing shareholders and bridge finance lenders, including the Investors to enable the conversion of the Capital Loan and in compliance with the relevant securities markets regulation) as soon as practicable once the required preparations and approvals are in place. The targeted size of the contemplated share issue is planned to be set accordingly, to meet cash runway needs for 2024.
  • Evaluating and negotiating several business development alternatives that may result in non-dilutive funding.
  • Evaluating new sources of financing from third parties on acceptable terms. With respect to the availability of additional funding from IPF, the respective term allowing the Group to draw on Tranche B and Tranche C has expired and the availability of Funds from IPF would be subject to further negotiations. The Group does not anticipate, at this time, having the ability to draw on Tranche B or Tranche C under favorable terms, in the near future. 
  • Because the additional finance is not committed at the date of issuance of these financial statements, these circumstances represent a material uncertainty that may cast significant doubt on the Group’s ability to continue as a going concern. Should the Group be unable to obtain further financing such that the going concern basis of preparation were no longer appropriate, adjustments would be required, including to reduce balance sheet values of assets to their recoverable amounts.

HEADCOUNT

Faron’s headcount at the end of year was 34 (2022: 40).

SHARES AND SHARE CAPITAL

During the period January 1 to December 31, 2023, the Company, using the share authorities granted at the Extraordinary General Meeting held on July 7, 2022, issued a total of 3,692,308 new ordinary shares at an issuance price of EUR 3.25 per share to investors. During the same period, the Company, using the share authorities granted at the Annual General Meeting held on March 24, 2023, issued a total of 2,601,510 shares at an issuance price of EUR 2.55 per share to investors. During the same period, the Company, using the share authorities granted at the Annual General Meeting held on March 24, 2023, issued a total of 2,491,998 new ordinary shares at an issuance price of EUR 2.85 to investors. The subscription price net of costs was credited in full to the Company’s reserve for invested unrestricted equity, and the share capital of the Company was not increased. The Company has no shares in treasury; therefore, at the end of 2023 the total number of voting rights was 68,786,699.

 

 

 

 

 

Consolidated Income Statement, IFRS

 EUR ’000

Unaudited

7-12/2023
6 months

Unaudited

7-12/2022
6 months

1-12/2023
12 months

1-12/2022
12 months

Other operating income

0

318

0

803

Research and development expenses

(11,024)

(10,683)

(19,542)

(20,730)

General and administrative expenses

(4,732)

(3,697)

(9,026)

(7,498)

Operating loss

(15,756)

(14,062)

(28,568)

(27,426)

Financial income

233

(596)

233

96

Financial expense

(1,691)

(970)

(2,609)

(1,400)

Loss before tax

(17,214)

(15,628)

(30,944)

(28,730)

Tax expense

0

19

0

0

Loss for the period

(17,214)

(15,609)

(30,944)

(28,730)

 

 

 

 

 

Other comprehensive gain/loss

2

6

2

17

Total comprehensive loss for the period

(17,212)

(15,603)

(30,942)

(28,713)

 

 

 

 

 

Loss per ordinary share

 

 

 

 

Basic and diluted loss per share, EUR

(0.26)

(0.27)

(0.48)

(0.52)

 

 

Consolidated Balance Sheet, IFRS

 

 

EUR ‘000

31 December 2023

31 December 2022

Assets

 

 

Non-current assets

 

 

Machinery and equipment

6

13

Right-of-use-assets

198

314

Intangible assets

1,088

1,154

Prepayments and other receivables

60

60

Total non-current assets

1,352

1,541

 

 

 

Current assets

 

 

Prepayments and other receivables

1,992

2,740

Cash and cash equivalents

6,875

6,990

Total current assets

8,868

9,730

 

 

 

Total assets

10,220

11,271

 

 

 

Equity and liabilities

 

 

 

 

 

Capital and reserves attributable to the equity holders of Faron

 

 

Share capital

2,691

2,691

Reserve for invested unrestricted equity

154,352

129,544

Accumulated deficit

(172,208)

(143,713)

Translation difference

4

2

Total equity

(15,160)

(11,476)

 

 

 

Provisions

 

 

Other provisions

0

158

Total provisions

0

158

 

 

 

Non-current liabilities

 

 

Borrowings

9,423

11,102

Lease liabilities

50

163

Other liabilities

895

853

Total non-current liabilities

10,369

12,118

 

 

 

Current liabilities

 

 

Borrowings

3,475

1,851

Lease liabilities

163

153

Trade payables

8,971

6,014

Accruals and other current liabilities

2,403

2,453

Total current liabilities

15,012

10,471

 

 

 

Total liabilities

25,380

22,748

 

 

 

Total equity and liabilities

10,220

11,271

 

 

 

 

 

 

Consolidated Statement of Changes in Equity, IFRS

EUR ‘000

Share capital

Reserve for invested unrestrict-
ed equity

Trans-
lation
difference

Accumu-lated deficit

Total equity

 

 

 

 

 

 

Balance as at 31 December 2021

2,691

116,507

(15)

(116,265)

2,919

 

 

 

 

 

 

Comprehensive loss for the year 2022

0

0

17

(28,730)

(28,713)

 

 

 

 

 

 

Transactions with equity holders of the Company

 

 

 

 

Issue of ordinary shares, net of transaction costs

0

13,037

0

0

13,037

Share-based compensation

0

0

 0

1,297

1,297

Other movements

 0

0

0

(16)

(16)

 

0

13,037

17

(27,448)

(14,395)

 

 

 

 

 

 

Balance as at 31 December 2022

2,691

129,544

2

(143,713)

(11,476)

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive loss for the year 2023

0

0

2

(30,944)

(30,942)

 

 

 

 

 

 

Transactions with equity holders of the Company

 

 

 

 

 

Issue of ordinary shares, net of transaction costs

0

24,808

0

0

24,808

Share-based compensation

0

0

0

2,450

2,450

 

0

24,808

2

(28,494)

(3,684)

 

 

 

 

 

 

Balance as at 31 December 2023

2,691

154,352

4

(172,208)

(15,160)

 

 

 

 

Consolidated Cash Flow Statement, IFRS

 

EUR ‘000

Unaudited

Unaudited

1-12.2023

1-12.2022

7-12.2023

7-12.2022

12 months

12 months

6 months

6 months

 

 

Cash flow from operating activities

 

 

 

 

Loss before tax

(17,214)

(15,628)

(30,944)

(28,730)

Adjustments for:

 

 

 

 

Received grant

(33)

(388)

(33)

(803)

Depreciation and amortization

172

149

346

300

Change in provision

0

(158)

(158)

(158)

Financial items

1,458

787

2,376

1,304

 

 

 

 

 

Tax expense

0

19

0

0

 

 

 

 

 

Share-based compensation

1,964

632

2,450

1,297

Adjusted loss from operations before changes in working capital

(13,653)

(14,587)

(25,963)

(26,790)

Change in net working capital:

 

 

 

 

Prepayments and other receivables

(728)

2,045

300

2,864

Trade payables

3,002

(657)

2,994

719

Other liabilities

223

2,197

(50)

1,183

Cash used in operations

(11,156)

(11,001)

(22,719)

(22,023)

 

 

 

 

 

Transaction costs related to loans and borrowings

0

0

0

(165)

Interest received

243

11

243

11

Interest paid

(548)

(708)

(1,330)

(816)

Net cash used in operating activities

(11,461)

(11,698)

(23,806)

(22,993)

 

 

 

 

 

Cash flow from investing activities

 

 

 

 

Payments for intangible assets

(56)

(218)

(123)

(385)

Payments for equipment

0

0

0

0

Net cash used in investing activities

(56)

(218)

(123)

(385)

 

 

 

 

 

Cash flow from financing activities

 

 

 

 

Proceeds from issue of shares

13,954

8,923

26,031

13,445

Share issue transaction cost

(542)

(174)

(1,190)

(365)

Proceeds from borrowings

0

(0)

64

10,389

Repayment of borrowings

(861)

0

(861)

(105)

Transaction and structuring fees of borrowings

(400)

0

(400)

0

Proceed from grants

99

231

481

231

Payment of lease liabilities

(58)

(20)

(142)

(116)

Net cash from financing activities

12,192

8,959

23,983

23,478

 

 

 

 

 

Net increase (+) / decrease (-) in cash and cash equivalents

560

(2,946)

(114)

137

Effect of exchange rate changes on cash and cash equivalents

(116)

11

(168)

37

 

 

 

 

 

Cash and cash equivalents at 1 January / 1 July

6,315

9,936

6,315

6,853

Cash and cash equivalents at 31 December

6,876

6,990

6,876

6,6990

 

Faron 2023 Half-Year Financial Results

Faron Pharmaceuticals Ltd.

(“Faron” or “the Company”)

 

Faron Reports Half-Year Financial Results, January 1 – June 30, 2023

 

Company Announcement, August 29, 2023

 

Summary Highlights (including post-period events)  

 

  • The US Food and Drug Administration (FDA) granted bexmarilimab Orphan Drug Designation (ODD) for the treatment of acute myeloid leukemia (AML).
  • The latest data from the Phase I/II BEXMAB study reinforces bexmarilimab’s potential to improve the therapeutic benefit for patients with aggressive hematological malignancies who do not respond to the current standard of care (SoC).   
  • Compelling data with objective responses were observed in three of five patients in the 6 mg/kg bexmarilimab + azacitidine doublet cohort.  
  • Eight of fifteen objective responses were observed across all three doublet dosing cohorts, with one patient still on treatment after 13 months. 
  • Continued efficacy signals with the prolonged duration of responses thus far support advancement to Phase II in Q4 2023 in relapsed/refractory AML and myelodysplastic syndromes (MDS) patients failing hypomethylating agents (HMAs). 
  • New biomarker data presented at the EHA2023 Congress indicates that bexmarilimab’s mode of action in AML/MDS is supported by durable Clever-1 target engagement in the bone marrow. This mechanism results in notable increases in T and NK cells, along with enhanced antigen presentation. 
  • The Phase II BEXCOMBO protocol has been approved by the FDA.
  • The Board was strengthened with the addition of Tuomo Pätsi, and the Leadership team was enhanced with the appointment of James O’Brien, CPA, MBA, as Chief Financial Officer. 
  • Mr. Leopoldo Zambeletti stepped down from the Board to assume a business development consulting role at Faron. 
  • Cash position was strengthened through two private placements directed to institutional and other investors, successfully raising EUR 18.6 million.
  • Virtual briefing and Q&A to be held today at 08:00 am (EDT) / 13:00 pm (BST) / 15:00 pm (EEST).

 

TURKU, FINLAND / BOSTON, MAFaron Pharmaceuticals Ltd. (AIM: FARN, First North: FARON), a clinical-stage biopharmaceutical company focused on tackling cancers via novel immunotherapies, today announces unaudited half-year financial results for January 1 to June 30, 2023 (the “period”).

 

“I am extremely proud of the progress we made in the first half of 2023,” said Dr. Markku Jalkanen, Chief Executive Officer of Faron. “We continued to execute on advancing our clinical Phase I/II BEXMAB study of bexmarilimab, our wholly-owned immunotherapy asset, in hematological malignancies. To date, we achieved strong objective responses across all three cohorts in relapsed/refractory to SoC patients, including objective responses in three of five patients receiving the high dose. Based on this compelling data, we are advancing into the Phase II portion of the study and actively preparing for regulatory submission in the first half of 2025. The recent  FDA Orphan Drug Designation for bexmarilimab in AML further reaffirms our program by offering important clinical development and commercialization benefits. We also strengthened our cash position and welcomed a former Board member as a transactional advisor. I am excited for what the future holds.”

 

Pipeline Highlights

 

Bexmarilimab Faron’s wholly-owned, novel precision cancer immunotherapy candidate, in Phase I/II development for relapsed/refractory AML and MDS.

 

  • The FDA has granted ODD for bexmarilimab for the treatment of AML.
  • Updated data from the Phase I/II BEXMAB study showed objective responses (OR) with complete remission of blasts in the bone marrow (mCR) in three of five patients in the 6 mg/kg bexmarilimab + azacitidine cohort. In addition, one of the three patients achieved complete recovery of blood counts i.e., complete remission (CR). 
  • Eight of fifteen ORs were observed across all three doublet dosing cohorts. 
  • Four of the eight patients across the three doublet dosing cohorts (1, 3, and 6 mg/kg) had failed prior SoC hypomethylating agents (HMAs). 
  • All three patients with MDS and prior HMA failure demonstrated ORs (partial response (PR), mCR, and CR) across the dosing cohorts. 
  • Four patients out of six in the triplet dosing cohort treated with azacitidine, venetoclax, and bexmarilimab have shown objective responses. 
  • The updated BEXMAB data supports advancement to Phase II in Q4 2023 in SoC relapsed/refractory AML and MDS patients failing hypomethylating agents (HMA). 
  • Biomarker data presented at the European Hematology Association 2023 Hybrid Congress showed bexmarilimab’s mode of action in AML/MDS is supported with durable Clever-1 target engagement in the bone marrow, with increases observed in T and NK cells, and antigen presentation. 
  • The Company presented two posters at the American Association for Cancer Research Annual Meeting 2023 on its Phase I/II MATINS study of bexmarilimab in solid tumors and published a manuscript via medRxiv. The findings from MATINS, which have established strong foundations for Faron’s ongoing development program, indicate that bexmarilimab monotherapy facilitates macrophage conversion, and induces changes in the tumor microenvironment resulting in disease control and prolonged survival in late-stage cancer. Furthermore,  targeting Clever-1 with bexmarilimab is well-tolerated. A positive Phase I/II meeting with the FDA supported bexmarilimab’s development in solid tumors. 
  • Preparations are ongoing for the initiation of the Phase II BEXCOMBO trial evaluating bexmarilimab with PD-1 blockade, aimed at improving the clinical benefits from standard-of-care PD-1 blockade.  The first, proof-of-concept cohort under the investigation will be in head and neck cancer, followed by bladder and non-small cell lung cancers. Patient cohorts will comprise between 15 and 40 subjects, with the opportunity for subgroup enrichment.  

 

Corporate Highlights

  • The cash position has been strengthened through two private placements directed to institutional and other investors to raise EUR 18.6 million in January 2023 (EUR 12.0 million) and in June 2023 (EUR 6.6 million), which settled in early July 2023.
  • James O’Brien, CPA, MBA, joined as Chief Financial Officer. Mr. O’Brien is an accomplished biotech and financial executive with extensive experience in the US capital markets. His appointment highlights Faron’s progression towards becoming a global biopharmaceutical company.
  • Mr. Tuomo Pätsi joined the Board as a Non-Executive Director of the Company. Dr. Gregory B. Brown stepped down from his position as a Non-Executive Director. Mr. Pätsi was the President of the EMEA region and Worldwide Markets for Celgene Corporation, a global pharmaceutical company and currently wholly owned subsidiary of Bristol Myers Squibb, engaged primarily in the discovery, development, and commercialization of therapies for the treatment of cancer. He is an experienced biotech and pharmaceutical executive who was until recently the Executive Vice President for Seagen Inc., a US-based, cancer-focused biotechnology company.
  • Mr. Leopoldo Zambeletti, who joined Faron’s Board as a Non-Executive Director in September 2015, stepped down to take on a business development consulting role within Faron. He is a highly respected figure within the life sciences and investment banking industries and, since 2013, has been an independent strategic advisor to life science companies on mergers and acquisitions, out-licensing deals, and financing strategy.
     

Half-Year Financial Results

  • Cash balances of EUR 6.3 million on June 30, 2023 (2022: EUR 9.9 million). The Company raised EUR 6.6 million at the end of June which had not been settled until July 2023. The Company entered the third quarter with EUR 12.8 million and has funds sufficient to support operations into Q4 2023.
  • Operating loss of EUR 12.8 million for the six months ended June 30, 2023 (2022: EUR 13.4 million).
  • Net assets of EUR -9.5 million on June 30, 2023 (2022: EUR -5.2 million).
  • The cash position has been strengthened by two private placements directed to institutional and other investors to raise EUR 18.6 million.
  • On June 30, 2023, the Company had outstanding borrowings of EUR 9.8 million under a loan facility with IPF Partners which is subject to financial covenants. The Company is required to satisfy these agreed covenants including the requirement to maintain a minimum cash balance of EUR 6.0 million while maintaining three months cash runway. On June 30, 2023, and August 28, 2023, the Company was in compliance with all covenants while holding cash balances of EUR 6.3 million and EUR 9.1 million, respectively. The cash held by the Group together with known receivables will be sufficient to support the current level of activities until the year end of 2023.

Consolidated key figures, IFRS

 EUR’000

Unaudited

Unaudited     

Audited

 

1-6/2023

1-6/2022

1-12/2022

6 months

6 months

                12 months

Revenue

0

0

0

Other operating income

0

485

803

Research and Development expenses

(8 518)

(10 047)

(20 730)

General and Administrative expenses

(4 294)

(3 801)

(7 498)

Loss for the period

(13 730)

(13 121)

(28 730)

 

 

 

 

 

Unaudited

Unaudited

Audited

1-6/2023

1-6/2022

1-12/2022

6 months

6 months

                12 months

Loss per share, EUR

(0.22)

(0.25)

(0.52)

Number of shares at end of period

66 161 373

56 575 453*

59 805 383

Average number of shares

62 985 028

53 235 643

55 229 835

 

 

 

 

 EUR’000

Unaudited

Unaudited

Audited

30 Jun 2023

30 Jun 2022

31 Dec 2022

Cash and cash equivalents

6 315

9 936

6 990

Equity

(9 483)

(5 194)

(11 476)

Balance sheet total

12 836

16 729

11 271

 

* of which 1,311,800 were held in treasury

 

August 29, 2023

Faron Pharmaceuticals

Board of Directors

 

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 (“MAR”).

 

Conference call information

A virtual briefing and Q&A session for investors, analysts and media will be hosted by Dr. Markku Jalkanen, Chief Executive Officer, and James O’Brien, Chief Financial Officer, today, August 29, 2023, at 8:00 am (EST) / 1:00 pm (BST) / 3:00 pm (EEST) on the day of results.

 

Webcast registration link: https://faron.videosync.fi/h1-2023

 

The half-year report, presentation, and a replay of the webcast will be available on the Company’s website at https://www.faron.com/investors.

For more information please contact:

 

Investor Contact

LifeSci Advisors

Daniel Ferry

Managing Director

daniel@lifesciadvisors.com

+1 (617) 430-7576

 

Media Contact

Faron Pharmaceuticals

Jennifer C. Smith-Parker

Head of Communications

Jennifer.Smith-Parker@faron.com

 

Cairn Financial Advisers LLP, Nomad

Sandy Jamieson, Jo Turner

Phone: +44 (0) 207 213 0880

 

Peel Hunt LLP, Broker

Christopher Golden, James Steel

Phone: +44 (0) 20 7418 8900

 

Sisu Partners Oy, Certified Adviser on Nasdaq First North

Juha Karttunen

Phone: +358 (0)40 555 4727

Jukka Järvelä

Phone: +358 (0)50 553 8990

About Bexmarilimab

Bexmarilimab is Faron’s wholly owned, investigational immunotherapy designed to overcome resistance to existing treatments and optimize clinical outcomes, by targeting myeloid cell function and igniting the immune system. Bexmarilimab binds to Clever-1, an immunosuppressive receptor found on macrophages leading to tumor growth and metastases (i.e., helps cancer evade the immune system). By targeting the Clever-1 receptor on macrophages, bexmarilimab alters the tumor microenvironment, reprogramming macrophages from an immunosuppressive (M2) state to an immunostimulatory (M1) one, upregulating interferon production and priming the immune system to attack tumors and sensitizing cancer cells to standard of care.  

About BEXMAB

The BEXMAB study is a first-in-human, open-label Phase I/II clinical trial investigating bexmarilimab in combination with standard of care (SoC) in the aggressive hematological malignancies of acute myeloid leukemia (AML) and myelodysplastic syndrome (MDS). The primary objective is to determine the safety and tolerability of bexmarilimab in combination with SoC (azacitidine) treatment and to identify the recommended Phase II dose. Directly targeting Clever-1 could limit the replication capacity of cancer cells, increase antigen presentation, ignite an immune response, and allow current treatments to be more effective. Clever-1 is highly expressed in both AML and MDS and associated with therapy resistance, limited T cell activation and poor outcomes.

About BEXCOMBO

The Phase BEXCOMBO study will be aimed at testing bexmarilimab with PD-1 blockade. The study’s purpose is to improve standard-of-care PD-1 response rates. The indications targeted are head and neck cancer as the first cohort to gain proof-of-concept data, followed by bladder cancer and non-small cell lung cancer. Patient cohorts will number between 15 and 40 subjects, with allowed enrichment of subgroups. We see development in this space as key to addressing an unmet medical need, as clinical data show that up to 80% of cancer patients do not respond to single agent PD-1 blockade. Planning continues for trial initiation.

About Faron Pharmaceuticals Ltd.

Faron (AIM: FARN, First North: FARON) is a global, clinical-stage biopharmaceutical company, focused on tackling cancers via novel immunotherapies. Its mission is to bring the promise of immunotherapy to a broader population by uncovering novel ways to control and harness the power of the immune system. The Company’s lead asset is bexmarilimab, a novel anti-Clever-1 humanized antibody, with the potential to remove immunosuppression of cancers through targeting myeloid cell function. Bexmarilimab is being investigated in Phase I/II clinical trial as a potential therapy for patients with hematological cancers in combination with other standard treatments. Further information is available at www.faron.com.

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”, “hope”, “seek”, ”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 addition,  other factors which could cause actual results to differ materially include the ability of the Company to successfully license its programs within the anticipated timeframe or at all, 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 or other sources of funding, 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.

Chairman and Chief Executive Officer’s Review

 

Introduction

The first half of 2023 has been a period of significant progress for Faron. Most notably, we continued to accelerate our ambitious bexmarilimab development program. The most recent data from the Phase I/II BEXMAB study in relapsed/refractory myeloid leukemia (AML) and myelodysplastic syndromes (MDS) patients builds upon earlier positive data. These findings set a clear trajectory for further bexmarilimab clinical and regulatory development, bringing the promise of treatment to patients who do not respond to currently approved standard-of-care treatments.

 

Bexmarilimab

Driving the clinical development of bexmarilimab continues to be Faron’s top priority. Since we recruited the first patient in our Phase I/II BEXMAB study in June 2022, we have continued to see positive data that indicates truly life-changing therapeutic potential for acute myeloid leukemia (AML) and myelodysplastic syndromes (MDS) patients refractory to standard of care (SoC).

 

Most recently, we reported compelling data of objective responses in three of five patients in the 6 mg/kg bexmarilimab + azacitidine doublet cohort, and eight of 15 objective responses observed in all three doublet dosing cohorts with patient still on treatment after 13 months. We intend to have additional Phase I data in Q4 2023. Yet even now, the updated data supports the advancement to the Phase II portion in the Q4 2023 focusing on SoC relapsed/refractory acute AML and MDS patients failing hypomethylating agents (HMA). Furthermore, we announced plans to file the Company’s first Biologics License Application (BLA) to the FDA in H1 2025.

 

This opportunity is so exciting because we know that certain blood cancer cells carry significant amounts of cell surface Clever-1, which may limit the body’s ability to mount an immune response. In fact, research has shown a clear survival benefit among certain blood cancer patients with low Clever-1 expression. By adding bexmarilimab to standard of care we expect to downregulate Clever-1 expression, thereby increasing antigen presentation and allowing the immune system to better identify and kill cancer cells. This could result in a deeper and more durable clinical benefit compared to what most patients experience with currently approved treatments.

 

The FDA has recognized the importance of addressing the unmet needs of this population and granted bexmarilimab ODD for the treatment of AML. AML is the most common leukemia among the adult population and accounts for about 80% of all cases.

 

As bexmarilimab advances and Faron expands into a global pharmaceutical company, we hired James O’Brien, CPA, MBA, as Chief Financial Officer (CFO). Mr. O’Brien is an accomplished biotech and financial executive with extensive experience in the US capital markets. Most recently, Mr. O’Brien served as the CFO of Cognition Therapeutics, Inc. (NASDAQ: CGTX), a clinical-stage biopharmaceutical company which successfully completed an IPO in October 2021, raising USD 52 million. He previously served as Executive Vice President of Finance with Enzo Biochem, Inc. (NYSE: ENZ). Earlier in his career, he held positions with increasing responsibilities at pharmaceutical companies including Actavis PLC (now AbbVie, Inc. (NYSE: ABBV)), the US subsidiary of Swiss company Nycomed, which has since been acquired by Takeda Pharmaceuticals, and Bristol Myers Squibb. 

 

In terms of other plans for bexmarilimab, we anticipate initiation of the Phase II BEXCOMBO trial evaluating bexmarilimab with PD-1 blockade. The trial is aimed at improving standard-of-care PD-1 response rates. Head and neck cancer would be the first cohort indication to gain proof-of-concept data, followed by bladder cancer and non-small cell lung cancer. Patient cohorts will number between 15 and 40 subjects, with allowed enrichment of subgroups. We see development in this space as key to addressing an unmet medical need, as clinical data show that up to 80% of cancer patients do not respond to single agent PD-1 blockade and evolving data suggest that promoting pro-inflammatory cytokines, such as IFN-gamma (ɣ), is necessary for effective responses to these agents. Because bexmarilimab induces IFN-ɣ upregulation, which is required for immune modulation in the tumor microenvironment, BEXCOMBO offers the potential to expand the population of PD-1 responders and provide meaningful benefit to more patients.  

 

 

Financial review Faron entered 2023 having completed a EUR 12.0 million equity financing in January 2023. In June, we completed our second equity financing, bringing the year-to-date total to EUR 18.6 million. The capital raised through the private placements is instrumental in advancing our bexmarilimab research and development program, accelerating the progress of our pipeline, and bringing us closer to delivering life-changing therapies to tackle aggressive hematological malignancies. Faron’s shareholders continue to be extremely supportive of our clinical development programs and achieving our objectives.

 

Faron’s recent financial performance has been marked by a strategic emphasis on capital efficiency, a key element of extending our cash runway, while having the strength and ability to advance our clinical development programs. This capital efficiency has allowed us to achieve more with our available resources, fostering a culture of innovation while maintaining a prudent financial approach. By allocating resources thoughtfully and embracing a culture of continuous improvement, we are dedicated to maximizing the impact of our efforts and achieving our mission. The balance between achieving clinical milestones and responsible fiscal management underscores our dedication to creating a sustainable, long-term value for all stakeholders.

 

During the period, nearly 70% of all spending was directly supportive of our bexmarilimab clinical development program. Faron maintained General and Administrative expenses at 2022 levels excluding one-time items and financing expenses.

 

Statement of comprehensive income

The operating loss for the six months ended June 30, 2023, was EUR 12.8 million (six months ended 30 June 2022: loss of EUR 13.4 million). No revenue was generated during the period or prior period. Research and development expenses decreased by EUR 1.5 million to EUR 8.5 million (2022: EUR 10.0 million). General and administrative expenses increased by EUR 0.5 million to EUR 4.3 million (2022: EUR 3.8 million).

 

The loss for the period was EUR 13.7 million (2022: loss of EUR 13.1 million) and the basic and diluted loss per share was EUR 0.22 (2022: loss per share of EUR 0.25).

 

Statement of financial position and cash flows

As of June 30, 2023, net assets amounted to EUR -9.5 million (June 30, 2022: EUR -5.2 million). The net cash flow for the first six months in 2023 was EUR -0.7 million (2022: EUR 3.1 million). As of June 30, 2023, total cash and cash equivalents held were EUR 6.3 million (2022: EUR 9.9 million).

 

Corporate

Faron’s Annual General Meeting (AGM) was held on March 24, 2023. The AGM adopted the financial statements of the Company and re-elected audit firm PricewaterhouseCoopers Oy (“PwC”) as the Company’s auditor. Additionally, the number of members of the Board was confirmed as seven. Frank Armstrong, John Poulos, Leopoldo Zambeletti, Markku Jalkanen, Anne Whitaker and Erik Ostrowski were re-elected to the Board and Tuomo Pätsi was elected as a new member to the Board for a term that ends at the end of the next AGM. In June 2023 Leopoldo Zambeletti stepped down from his position in Faron’s Board due to his appointment as the Company’s business development consultant.

 

 

Summary & outlook

Our focus for the remainder of 2023 continues to be the acceleration of bexmarilimab’s clinical development. Faron plans to seek FDA advice during Q3 2023 on bexmarilimab’s progress. The completion of dose escalation, readout of enrichment cohorts, and initiation of phase II BEXMAB part are expected in Q4 2023. We are committed to changing the treatment paradigm for those with limited treatment options.

 

On behalf of the Board, we would like to thank our shareholders, existing and new, for their support of Faron. We would also like to thank our employees for their continued commitment to our mission and the patients we serve. We look forward to updating the market on our progress throughout the course of the year.

 

Dr Markku Jalkanen

Chief Executive Officer

 

Dr Frank Armstrong

Chairman

 

Consolidated Income Statement, IFRS

EUR’000

Unaudited

1-6/2023

6 months

Unaudited

1-6/2022

6 months          

Audited

1-12/2022

12 months

Revenue

0

0

0

Other operating income

0

485

803

Research and development expenses

(8 518)

(10 047)

(20 730)

General and administrative expenses

(4 294)

(3 801)

(7 498)

Operating loss

(12 812)

(13 364)

(27 426)

Financial income

0

692

96

Financial expense

(918)

(430)

(1 400)

Loss before tax

(13 730)

(13 102)

(28 730)

Tax expense

0

(19)

0

Loss for the period

(13 730)

(13 121)

(28 730)

Translation difference

0 

11

17

Comprehensive loss for the period attributable to the equity holders of the Parent company

(13 730)

(13 110)

(28 713)

 

 

 

 

Loss per ordinary share

 

 

 

Basic and diluted loss per share, EUR

(0.22)

(0.25)

(0.52)

 

 

Consolidated Balance Sheet, IFRS

 

EUR’000

Unaudited

Unaudited

Audited

31 Dec 2022

30 Jun 2023

30 Jun 2022

Assets

 

 

 

Non-current assets

 

 

 

Machinery and equipment

10

17

13

Right-of-use-assets

272

98

314

Intangible assets

1 127

1 011

1 154

Prepayments and other receivables

60

53

60

Total non-current assets

1 469

1 179

1 541

 

 

 

 

Current assets

 

 

 

Prepayments and other receivables

5 052

5 614

2 740

Cash and cash equivalents

6 315

9 936

6 990

Total current assets

11 367

15 550

9 730

 

 

 

 

Total assets

12 836

16 729

11 271

 

 

 

 

 

 

 

 

 

 

 

 

EUR’000

Unaudited

Unaudited

Audited

31 Dec 2022

30 Jun 2023

30 Jun 2022

Capital and reserves attributable to the equity holders of the Parent company

 

Share capital

2 691

2 691

2 691

Reserve for invested unrestricted equity

144 778

120 839

129 544

Accumulated deficit

(156 955)

(128 726)

(143 713)

Translation difference

2

2

2

Total equity

(9 483)

(5 194)

(11 476)

 

 

 

 

Provisions

 

 

 

Other provisions

0

0

158

Total provisions

0

0

158

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

Borrowings

10 892

12 250

11 102

Lease liabilities

163

0

163

Other liabilities

702

539

853

Total non-current liabilities

11 757

12 789

12 118

 

 

 

 

Current liabilities

 

 

 

Borrowings

2 304

0

1 851

Lease liabilities

119

106

153

Trade payables

6 002

7 791

6 014

Accruals and other current liabilities

2 137

1 238

2 453

Total current liabilities

10 562

9 135

10 471

 

 

 

 

Total liabilities

22 319

21 924

22 748

 

 

 

 

Total equity and liabilities

12 836

16 729

11 271

Consolidated Statement of Changes in Equity, IFRS

 

EUR’000

 

Share capital

Reserve for invested unrestricted equity

Translation difference

Accumulated deficit

Total equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as at
31 December 2021 (Audited)

 

2 691

116 507

-15

-116 265

2 919

 

 

 

 

 

 

 

Comprehensive loss for the last six months 2022

0

0

11

-13 121

-13 110

 

 

 

 

 

 

 

Transactions with equity holders of the Parent company

 

 

 

 

 

Issue of ordinary shares

 

0

4 332

0

0

4 332

Share-based compensation

 

0

0

0

665

665

 

 

0

4 332

0

665

4 997

 

 

 

 

 

 

 

Balance as at 30 June 2022 (Unaudited)

 

2 691

120 839

2

-128 726

-5 194

 

 

 

 

 

 

 

Comprehensive loss for the year 2022

 

0

0

17

(28 730)

(28 713)

 

 

 

 

 

 

 

Transactions with equity holders of the Company

 

 

 

 

 

Issue of ordinary shares, net of transaction costs

0

13 037

0

0

13 037

Share-based compensation

 

0

0

0

1 297

1 297

Other movements

 

0

0

0

(16)

(16)

 

 

0

13 037

17

(27 448)

(14 395)

 

 

 

 

 

 

 

Balance as at
31 December 2022 (Audited)

 

2 691

129 544

2

(143 713)

(11 476)

 

 

 

 

 

 

 

Comprehensive loss for the last six months 2023

0

0

0

(13 730)

(13 730)

 

 

 

 

 

 

 

Transactions with equity holders of the Company

 

 

 

 

 

Issue of ordinary shares, net of transaction costs

0

15 233

0

0

15 233

Share-based compensation

 

0

0

0

489

489

 

 

0

15 233

0

(13 241)

1 992

 

 

 

 

 

 

 

Balance as at 30 June 2023 (Unaudited)

 

2 691

144 778

2

(156 955)

(9 483)

 

Consolidated Cash Flow Statement, IFRS

 

 

€’000

Unaudited

1-6/2023

6 months

Unaudited

1-6/2022

6 months

    Audited

1-12/2022

12 months

Cash flow from operating activities

 

 

 

Loss before tax

(13 730)

(13 102)

(28 730)

Adjustments for:

 

 

 

Received grants

0

(415)

(803)

Depreciation and amortization

174

151

300

Change in provision

(158)

0

(158)

Financial items

918

529

1 304

Tax expense

0

(19)

0

Share-based compensation

489

665

1 297

Adjusted loss from operations before changes in working capital

(12 308)

(12 191)

(26 790)

Change in net working capital:

 

 

 

Prepayments and other receivables (increase -)

1 028

819

2 864

Trade payables (increase +)

(8)

1 211

719

Other liabilities (increase +)

(272)

(1 014)

1 183

Cash used in operations

(11 561)

(11 175)

(22 023)

Income taxes paid

0

0

0

Transaction costs related to loans and borrowings

0

0

(165)

Interest received

0

0

11

Interest paid

(782)

(108)

(816)

Net cash used in operating activities

(12 343)

(11 283)

(22 993)

 

 

 

 

Cash flow from investing activities

 

 

 

Payments for intangible assets

(68)

(167)

(385)

Payments for tangible assets

0

0

(0)

Net cash used in investing activities

(68)

(167)

(385)

 

 

 

 

Cash flow from financing activities

 

 

 

Proceeds on issue of shares

12 077

4 331

13 445

Share issue transaction cost

(648)

0

(365)

Proceeds from borrowings

64

10 389

10 389

Repayment of borrowings

0

(108)

(105)

Proceeds from grants

382

0

231

Payment of lease liabilities

(84)

(96)

(116)

Net cash from financing activities

11 791

14 516

23 478

 

 

 

 

Net increase (+) / decrease (-) in cash and cash equivalents

(675)

3 083

137

Effect of exchange rate changes

(55)

17

37

 

 

 

 

Cash and cash equivalents at 1 January

6 990

6 853

6 853

Cash and cash equivalents at the end of period

6 315

9 936

6 990

 

Notes to the interim financial report

1.   Corporate information

Faron Pharmaceuticals Ltd (the “Company”) is a clinical stage biopharmaceutical company incorporated and domiciled in Finland, with its headquarters at Joukahaisenkatu 6, 20520 Turku, Finland. The Company currently has a pipeline based on the endothelial receptors involved in regulation of immune response, in oncology and organ damage.

 

The Company has been listed on the London Stock Exchange’s AIM market since November 17, 2015, with a ticker FARN, and since December 3, 2019, the Company has been listed on the Nasdaq First North Growth Market with a ticker FARON.

 

2.    Summary of significant accounting policies

2.1.    Basis of preparation

The unaudited H1 interim financial report has been prepared in accordance with the International Financial Reporting Standards of the International Accounting Standards Board (IASB) and as adopted by the European Union (IFRS) and the interpretations of the International Financial Reporting Standards Interpretations Committee (IFRIC).

The principal accounting policies applied in the preparation of these interim financial report is set out below. The Company has consistently applied these policies to all the periods presented, unless otherwise stated. The areas of the report involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the interim financial report, are disclosed in note 2.2.

The unaudited interim financial report incorporates the parent company, Faron Pharmaceuticals Ltd, and all subsidiaries (the “Group”).

All amounts are presented in thousands of euros, unless otherwise indicated, rounded to the nearest euro thousand.

 

2.2.         Going concern

The Group has forecasted its estimated cash requirements over the next twelve months. To make these forecasts the Group has made a number of assumptions regarding the quantity and timing of future expenditure and income as well as other key factors. Though these estimates have been made with caution and care, they continue to contain a significant amount of uncertainty. The Group also has debt obligations which carry financial covenants that could adversely impact the Group’s liquidity and operating flexibility. Based on the forecast the Group believes that it has adequate financial resources to continue its operations until the year end of 2023.  
 

The Group has taken several actions to secure further financing during the rest of the year 2023. The Directors believe that the Group can gain access to further resources to sustain operations over the next 12 months. Therefore, this unaudited financial report has been prepared on a going concern basis. At this stage the Group cannot disclose any of these options.

 

Because the additional finance is not committed at the date of issuance of this H1 2023 report, these circumstances represent a material uncertainty that may cast significant doubt on the Group’s ability to continue as a going concern. Should the Group be unable to obtain further finance such that the going concern basis of preparation were no longer appropriate, adjustments would be required, including to reduce balance sheet values of assets to their recoverable amounts, to provide for further liabilities that might arise.

 

2.3.         Financial covenants

At June 30, 2023, the Company had outstanding borrowings of EUR 9.8 million under a loan facility with IPF Partners which is subject to financial covenants. The Company is required to satisfy these agreed covenants including the requirement to maintain a minimum cash balance of EUR 6.0 million while maintaining three months cash runway. At June 30, 2023, and August 28, 2023, the Company is in compliance with all covenants while holding cash balances of EUR 6.3 million and EUR 9.1 million, respectively. The cash held by the Group together with known receivables will be sufficient to support the current level of activities until the year end of 2023.

 

3.    Subsequent events

The settlement of the second private placement during the period announced on June 29, 2023, was completed early July 2023.

In its meeting on August 28, 2023, the Board of Directors of the Company approved the publishing of this interim financial report.

Financial Statement January 1 to December 31 2022

Faron Pharmaceuticals Oy

 

Faron’s Financial Statement Release January 1 to December 31, 2022

 

Financial statement release March 3, 2023 at 09:00 AM (EET) / 07:00 AM (GMT) / 03:00 AM (EDT)  

TURKU, FINLAND / BOSTON, MA Faron Pharmaceuticals Oy (“Company”, AIM: FARN, First North: FARON) together with its subsidiaries (“Faron”), a clinical stage biopharmaceutical group focused on building the future of immunotherapy by harnessing the power of the immune system to tackle cancer and inflammation, today announced audited full-year financial results for January 1 to December 31, 2022 (the “period”) and H2 2022 and provided an overview of recent corporate developments.

 

2022 Highlights

      Faron reported that for the Phase I/II BEXMAB study of bexmarilimab, in combination with standard of care (SoC), in aggressive hematological malignancies including acute myeloid leukemia (AML) and myelodysplastic syndrome (MDS), that a partial responder achieved complete remission of blasts in blood and bone marrow followed by normalization of blood counts. A second patient showed reduced blast counts.

      Bexmarilimab has been evaluated as a single agent in the Phase I/II MATINS in more than 200 patients and found to be well-tolerated.

      In MATINS, median overall survival was 14.9 months for patients who achieved stabilization of disease from bexmarilimab compared to 4.4 months for those who did not, representing a 3.4-fold increase.

      Bexmarilimab ignites the immune system by inducing IFN-y production. A high baseline level of IFN-γ in the tumor indicates that the immune system is already set to attack cancer cells and seems required for PD-1 blockade to work. Thus, adding bexmarilimab to PD-1 blockade is anticipated to enhance efficacy.  

      The Company plans to initiate the Phase II BEXCOMBO study investigating bexmarilimab in metastatic or unresectable, recurrent HNSCC, locally advanced or metastatic UCC and metastatic NSCLC where first-line PD-1 blockade is approved SoC. 

      The Company conducted two successful fundraising rounds in 2022. Combined, they raised EUR 13.4 million gross and both rounds included new and existing investors. The Company also obtained up to EUR 30.0 million debt funding from IPF Partners, drew EUR 10.0 million upon signing in February 2022, further tranches possible under certain conditions

      Virtual briefing and Q&A to be held today at 8:00 AM (EDT) / 12:00 PM (GMT) / 2:00 PM (EET)

 

Major Events After the 2022 Financial Year

      Post period in January 2023, Faron reported that three out of five patients achieved objective responses in the first doublet cohort of the Phase I/II BEXMAB study evaluating the combination of azacitidine and bexmarilimab. Two of the three responders were refractory to standard of care (SoC) azacitidine monotherapy. The addition of bexmarilimab to standard of care was well-tolerated.

      Both the 1mg/kg and 3mg/kg doublet arms are fully enrolled, and the dose-escalation meeting is planned for Q1 2023.

      The Company successfully raised a total of EUR 12.0 million gross. This fundraising round was supported by long-only institutional investors, family offices, existing shareholders, and the Leukemia & Lymphoma Society® (LLS).

      Faron will support activities in preparation of a potential clinical trial with the Fred Hutchinson Cancer Center in Seattle, Washington, to investigate intravenous (IV) interferon beta in the prevention of cytokine release syndrome (CRS) and other CAR-T therapy side effects, such as neurotoxicity.

 

“I am extremely proud of the progress we made in 2022 for the bexmarilimab program and building our corporate infrastructure, both in the US and in Europe, to support the ambitious plans we have for 2023 and beyond,” said Dr. Markku Jalkanen, Chief Executive Officer of Faron. “Last year we accelerated the development of bexmarilimab in hematological malignancies and reported exciting early data that lays a solid trajectory. We also demonstrated compelling antitumor activity in heavily pretreated patients across multiple solid tumor types, setting the stage for a combination with standard of care in first-line solid tumors. We accomplished all of this while also strengthening our balance sheet, adding highly experienced team members and expanding our global footprint with a growing presence in the US.”

 

HIGHLIGHTS (including post period):

 

Pipeline Highlights

Bexmarilimab Faron’s wholly owned, novel precision cancer immunotherapy candidate, in Phase I/II development for difficult-to-treat cancers.

Hematological cancers

      Faron reported objective responses for three out of five patients enrolled in the first doublet cohort of the Phase I/II BEXMAB study investigating bexmarilimab and azacitidine in patients with hematological cancers. Notably, 2 of the 3 responders had been refractory to prior azicitidine therapy. No additional adverse events have been observed adding bexmarilimab to standard of care.

      BEXMAB’s 1mg/kg and 3mg/kg bexmarilimab doublet cohorts have fully enrolled. Faron anticipates sites in the US to be opened during Q1 2023 to speed up recruitment even further.

Advanced solid tumors

      Bexmarilimab has been evaluated as a single agent in the Phase I/II MATINS in more than 250 patients and found to be well-tolerated.

      Up to 36% of heavily pretreated patients achieved disease control in certain indications.

      Median overall survival was 14.9 months for patients who achieved stabilization of disease from bexmarilimab compared to 4.4 months for those who did not, representing a 3.4-fold increase.

      Bexmarilimab treatment in MATINS induced significant systemic interferon gamma (IFN-γ) increase, again showing the therapy’s capacity to activate immune response in cancer patients, especially in patients with immunologically “cold” tumors. As presented at ASCO2022 in Chicago, the higher baseline CLEVER-1 levels in the tumors were associated with clinical benefit and could become an essential component as a diagnostic tool for patient selection.

      An FDA meeting will take place in Q1 2023 for feedback on the recommended dosing regimen and study design for further development of single agent bexmarilimab.

 

Traumakine® – Faron’s investigational intravenous (IV) interferon beta-1a therapy, in development for the prevention of complications from cytokine release syndrome, and hyperinflammatory conditions.

 

      Faron has refocused its therapeutic strategy of Traumakine and closed its Phase II/III HIBISCUS trial investigating Traumakine in the treatment of hospitalized COVID-19 patients compared to corticosteroid treatment with dexamethasone.

      Data from the preclinical Salvage, Preservation, and Advanced Resuscitation through Endothelial Stabilization (SPARES) study was presented at the Military Health System Research Symposium (MHSRS) held in Orlando, Florida. The results further highlight the promise of IV interferon beta-1a (IFN beta-1a) therapy as a potential therapeutic for emergency and trauma patients, especially when given early on.

      The Company filed a patent to the US Patent Office and Trademark Office regarding a patient selection method in terms of steroid treatment with an identified gene mutation in the interferon beta receptor. It received positive feedback in 2022.  

      Scientific Reports published data from INFORAAA study showing Traumakine induced up-regulation of CD73 was associated with 100% survival in surgically operated ruptured abdominal aorta aneurysm (RAAA) patients. These patients are at high risk of ischemia-reperfusion injury, with expected mortality between 30-40%.

      Another patent has been filed on sequencing interferon beta and steroid treatments, so that steroids can be used once adequate levels of CD73 are reached using IV IFN beta-1a.

 

Haematokine® – An investigative AOC3 (amine oxidase copper containing 3) protein inhibitor targeting Vascular Adhesion Protein-1 (VAP-1) for the use in regenerative medicine for the expansion of hematopoietic stem cells and to treat supressed bone marrow and the production of new blood cells.

 

Corporate Highlights

      Balance sheet was strengthened by raising EUR 13.4 million gross through fundraising rounds. This included two private placements, which encompassed existing and new investors, including The Leukemia & Lymphoma Society® (LLS). In February 2022, Faron also announced a debt funding agreement with IPF Partners for up to EUR 30 million. EUR 10 million was accessed upon signing of the agreement with an additional EUR 20 million available in the future through additional tranches of EUR 5 million and EUR 15 million, subject to certain conditions being met. Post period in January 2023, Faron raised EUR 12.0 million gross from new and existing shareholders, including The Leukemia & Lymphoma Society® (LLS).

      Marie-Louise Fjällskog, M.D., Ph.D., joined Faron’s Global Management Team as Chief Medical Officer, bringing with her over 30 years of experience in clinical oncology, translational research, and drug development. Dr. Fjällskog joined Faron from Sensei Biotherapeutics (NASDAQ: SNSE). As Chief Medical Officer at Sensei, she was responsible for leading clinical and development strategy and operations. Previously, she served as Vice President, Clinical Development at Merus (NASDAQ: MRUS) and Infinity Pharmaceuticals (NASDAQ: INFI) where she led development of multiple small molecule and immuno-oncology clinical programs. She was also formerly Global Clinical Program Leader at the Novartis Institute for Biomedical Research.

      Maija Hollmén, Ph.D, joined Faron’s Global Management Team as Chief Scientific Officer. In her role, Dr. Hollmén oversees preclinical and support clinical development for Faron. Her priority will be the further development of bexmarilimab, Faron’s wholly owned, novel precision cancer immunotherapy candidate. Dr. Hollmén is the world-leading expert on CLEVER-1 biology and CLEVER-1-expressing tumor-associated macrophages. She is an Adjunct Professor of Tumor Immunology on the Faculty of Medicine at the University of Turku in Finland, as well as a Principal Investigator.

      Juho Jalkanen, M.D., Ph.D., joined Faron’s Global Management Team as as Chief Operating Officer. In his role, Dr. Jalkanen will lead business strategy and daily operations for Faron. This includes oversight of academic and industry partnerships, resource prioritization and allocation, chemistry, manufacturing and controls, supply chain and driving performance measures. Dr. Jalkanen joined Faron in 2018 as the Faron’s Chief Development Officer. He also served as Faron’s interim Chief Medical Officer in 2021 prior to the appointment of Dr. Marie-Louise Fjällskog.

      Vesa Karvonen, LL.M.  General Counsel and Juuso Vakkuri, MA, MSc, EMBA, Chief Human Resources Officer joined Faron’s Global Management Team.

      Faron appointed Erik Ostrowski as a Non-Executive Director of the Company. Mr. Ostrowski is an experienced biotech and financial executive who is currently the Chief Financial Officer of AVROBIO, Inc. (NASDAQ: AVRO). 
 

 Financial Highlights

      On December 31, 2022, Faron held cash balances of EUR 7.0 million (2021: EUR 6.9 million).

      Loss for the period for the financial year ended December 31, 2022 was EUR 28.7 million (2021: EUR 21.2 million).

      Net assets on December 31, 2022 were EUR -11.5 million (2021: EUR 2.9 million).  

      In June 2022, the Company successfully raised a total of EUR 5.0 million gross (EUR 4.8 million net) from new and existing shareholders, through issuance of a total of 3,318,421 new ordinary shares to itself without consideration. 2,006,621 of those shares were conveyed to investors. In October 2022, the Company successfully raised a total of EUR 8.4 million gross (EUR 8.2 million net) from new and existing shareholders, through issuance of a total of 3,229,930 new ordinary shares to itself. Those shares and the 1,311,800 existing treasury shares were conveyed to investors. Proceeds from both raises will be used to accelerate clinical development of Faron’s main drug candidate, continue the CMC process and US build-up and to strengthen the Company’s balance sheet.             

      In February 2022, the Company secured a debt funding agreement with IPF Partners for up to EUR 30 million. EUR 10 million was accessed upon signing of the agreement with an additional EUR 20 million available in the future though additional tranches of EUR 5 million and EUR 15 million, subject to certain conditions being met.

      Post period, in January 2023 the Company successfully raised a total of EUR 12.0 million gross through the issuance of 3,692,308 ordinary shares to itself without consideration which were conveyed to investors.

 

 

Consolidated key figures, IFRS

EUR ’000

Unaudited

7-12/2022
6 months

Unaudited

7-12/2021
6 months

1-12/2022
12 months

1-12/2021
12 months

Other operating income

318

4,927

803

6,137

Research and Development expenses

(10,683)

(8,361)

(20,730)

(17,369)

General and Administrative expenses

(3,697)

(7,250)

(7,498)

(9,876)

Loss for the period

(15,609)

(10,649)

(28,730)

(21,194)

 

 

Unaudited

7-12/2022
6 months

Unaudited

7-12/2021
6 months

1-12/2022
12 months

1-12/2021
12 months

Loss per share EUR

(0.27)

(0.21)

(0.52)

(0.42)

Number of shares at end of period

59,805,383

53,232,032

59,805,383

53,232,032

Average number of shares

57,230,625

51,836,953

55,229,835

50,723,964

 

EUR ’000

Unaudited

30 June 2022

Unaudited

30 June 2021

31 December 2022

31 December 2021

Cash and cash equivalents

9,936

6,967

6,990

6,853

Equity

(5,194)

2,813

(11,476)

2,919

Balance Sheet total

16,729

11,865

11,271

13,182

 

Board of Directors’ Proposal on the Dividend

The Company’s comprehensive loss for the period was EUR 28,924,250.82 (2021: EUR 21,270,235.71) . The Board of Directors proposes to the Annual General Meeting 2023 not to pay dividend.

March 2, 2023

Faron Pharmaceuticals Oy

Board of Directors

Webcast for investors, analysts and media

A live webcast and Q&A session for investors, analysts and media will be hosted by Dr. Markku Jalkanen, Chief Executive Officer of Faron, and Toni Hänninen, Chief Financial Officer of Faron, at 2:00 pm EET / 12:00 pm GMT / 8:00 am EDT today. The Full-year results release for 2022, presentation, webcast details, and Annual Report 2022 will be made available at www.faron.com/investors. A replay of the analyst briefing will be made available shortly afterwards.

 

Webcast link: https://faron.videosync.fi/2022-financial-statement

 

For more information please contact:

 

Media / Investor Contact

Faron Pharmaceuticals

Jennifer C. Smith-Parker

Head of Communications

Jennifer.Smith-Parker@faron.com

 

Cairn Financial Advisers LLP, Nomad

Sandy Jamieson, Jo Turner

Phone: +44 (0) 207 213 0880

 

Peel Hunt LLP, Broker

Christopher Golden, James Steel

Phone: +44 (0) 20 7418 8900

 

Sisu Partners Oy, Certified Adviser on Nasdaq First North

Juha Karttunen

Phone: +358 (0)40 555 4727

Jukka Järvelä

Phone: +358 (0)50 553 8990

 

Consilium Strategic Communications

Mary-Jane Elliott, David Daley, Lindsey Neville

faron@consilium-comms.com

Phone: +44 (0)20 3709 5700

 

Publication of financial information during year 2023

Faron’s financial statements for full year 2022 will be published today, March 3, 2023 and will also be available on Faron’s website at https://www.faron.com/investors/results. The half-year financial report for the period January 1 to June 30, 2023 is scheduled to be published on August 29, 2023. The Annual General Meeting is planned for March 24, 2023. A separate stock exchange notice will be issued by Faron’s Board of Directors to convene the meeting.

About Bexmarilimab

Bexmarilimab is Faron’s wholly owned, investigative precision immunotherapy with the potential to provide permanent immune stimulation for difficult-to-treat cancers through targeting myeloid cell function. A novel anti-CLEVER-1 humanised antibody, bexmarilimab targets CLEVER-1 positive (Common Lymphatic Endothelial and Vascular Endothelial Receptor 1) tumor-associated macrophages (TAMs) in the tumor microenvironment, converting these highly immunosuppressive M2 macrophages to immune stimulating M1 macrophages. In mouse models, bexmarilimab has successfully blocked or silenced CLEVER-1, activating antigen presentation and promoting interferon gamma secretion by leukocytes. Additional preclinical studies have proven that CLEVER-1, encoded by the Stabilin-1 or STAB-1 gene, is a major source of T cell exhaustion and involved in cancer growth and spread. Observations from clinical studies to date indicate that CLEVER-1 has the capacity to control T cell activation directly, suggesting that the inactivation of CLEVER-1 as an immune suppressive molecule could be more broadly applicable and more important than previously thought. As an immuno-oncology therapy, bexmarilimab has potential as a single-agent therapy or in combination with other standard treatments including immune checkpoint molecules.

About Faron

Faron Pharmaceuticals Oy (AIM: FARN, First North: FARON) together with its subsidiaries, is a clinical stage biopharmaceutical group focused on building the future of immunotherapy by harnessing the power of the immune system to tackle cancer and inflammation. Bexmarilimab, a novel anti-CLEVER-1 humanized antibody, is its investigative precision immunotherapy with the potential to provide permanent immune stimulation for difficult-to-treat cancers through targeting myeloid function. Currently in Phase I/II clinical development as a potential therapy for patients with hematological cancers and untreatable solid tumors, bexmarilimab has potential as a single-agent therapy or in combination with other standard treatments including immune checkpoint molecules. In terms of other pipeline assets, Traumakine® is an investigational intravenous (IV) interferon beta-1a therapy for the treatment of hyperinflammatory conditions. Faron is headquartered in Turku, Finland. Further information is available at www.faron.com.

 

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”, “hope”, “seek”, ”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  Faron’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 Faron. Other factors which could cause actual results to differ materially include the ability of the Faron to successfully license its programs within the anticipated timeframe or at all, 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 or other sources of funding, 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 Faron 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.

 

CEO Statement

The past year 2022 has been an incredible year of transformation for Faron, in terms of development of our key asset bexmarilimab, building up a new Global Management Team with five new C-level members and the initiation of a clinical/regulatory team for US-based activities. We are excited to go into 2023 with strong clinical data behind us and clear plans to move forward.

The year 2022 started with premium recruitment when Dr. Marie-Louise Fjällskog (M.D., PhD) came on board as Chief Medical Officer, bringing over 30 years of experience in clinical oncology, translational research, and drug development. She joined Dr. Juho Jalkanen (M.D., PhD), Chief Operating Officer, as well as our new General Counsel, Vesa Karvonen. We also welcomed Juuso Vakkuri as our Chief Human Resources Officer, and most recently, Dr. Maija Hollmén, PhD, as our Chief Scientific Officer. She will spearhead further inventions around bexmarilimab, Faron’s wholly owned, novel precision cancer immunotherapy candidate.

Our first, large Phase I/II MATINS study has provided us a proper dosing regimen for bexmarilimab and demonstrated a good safety profile. Initial efficacy data on advanced solid tumors allows us to identify biomarkers predicting extended survival of these hard-to-treat cancer patients. Our teams have worked hard to build a solid data package for the FDA on the next steps forward. This feedback will significantly impact our activities in 2023.

Importantly, we have found bexamarilimab is effective for patients who are refractory to PD-1 blockade. These patients have silent immune reaction as observed in low interferon gamma (IFN-gamma) levels. This is opposite to PD-1 blockers that are usually are active in cancer patients with high IFN-gamma levels. This is understandable as their mode of action is based on activating the existing T-cells, not to generate new T-cell populations. Thus, the combination of PD-1 blockade with bexmarilimab provides a unique opportunity to stimulate immune ignition and effective T-cells.

Bexmarilimab is being evaluated for safety and efficacy in the Phase I/II BEXMAB clinical trial, in combination with standard of care (SoC), in aggressive hematological malignancies including acute myeloid leukemia (AML) and myelodysplastic syndrome (MDS). This study is very exciting as now we have cancer cells which express the therapy target molecule CLEVER-1 on their surfaces. This means that wherever they travel in cancer patients, they carry this immunosuppressive element with them. In December, we reported in BEXMAB a partial responder achieving complete remission of blasts in blood and bone marrow followed by normalization of blood counts. A second patient showed reduced blast counts. This is particularly noteworthy considering the population targeted in BEXMAB, such as those having AML, have high mortality rates. Post period, we reported even more positive news: that three out of five patients achieved objective responses in the first doublet cohort of the Phase I/II BEXMAB study evaluating the combination of azacitidine and bexmarilimab. Two of the three responders were refractory to standard of care (SoC) azacitidine monotherapy.

We are thrilled with the progress and are pushing ahead in opening sites at US hematological centers.

We have also been successful in obtaining continued, long-term patent protection for bexmarilimab. During 2021 the United States Patent and Trademark Office and equivalent Japanese patent office approved protection, at least through 2037, for our humanized anti-CLEVER-1 antibody (bexmarilimab) sequence. During 2022 we obtained similarly patent coverage in Europe and other territories providing Faron excellent commercial opportunity in more than 90% of pharmaceutical markets. This fact has been recognised also by our partner candidates.

We have continued background work to advance both Traumakine® and Haematokine® programs to open clinical studies for both in 2023. We decided to close the HIBISCUS study using Traumakine due to lack of steroid-free patients. Our focus now is on opportunities where steroids cannot be used, and where ischemic conditions with vascular damage is the main reason for patient death. For the latter, we will continue to collaborate with the US Department of Defense (DoD). We also understand today the molecular basis of steroid interruption of IFN-beta signalling pathway and what role some genetic alterations may cause.

The third program in our pipeline, Haematokine, an investigational Vascular Adhesion Protein 1 (VAP-1) inhibitor, has preclinical studies continuing. We believe Haematokine could have broad applicability, not just in hematological malignancies, but across the field of regenerative medicine.

Our future looks bright, with the focus for 2023 to accelerate bexmarilimab’s clinical development, especially in BEXMAB. We also aim to initiate the Phase II BEXCOMBO study investigating bexmarilimab in metastatic or unresectable, recurrent HNSCC, locally advanced or metastatic UCC and metastatic NSCLC where first-line PD-1 blockade is approved standard of care. This combination regimen has the potential to change the future of cancer care. Future interactions with the FDA will guide our path forward.

I would like to thank our shareholders for their continued support of Faron and the management team. I would also like to express my profound gratitude to every Faron team member who come to work each day committed to disrupting the current treatment landscape and fundamentally improving patient outcomes.

Markku Jalkanen

Chief Executive Officer

March 2, 2023

 

Chairman Statement

During 2022, Faron has continued to focus on bexmarilimab, our novel, wholly owned novel precision cancer immunotherapy candidate, with exciting clinical data milestones anticipated for 2023. We have also grown the Company in the US and in Finland, bringing world-class expertise into Faron to advance bexmarilimab.

We have the ongoing Phase I/II MATINS clinical trial in pretreated, late-stage cancer, and as a result have delivered on our goals to understand monotherapy bexmarilimab efficacy and safety across multiple tumor types, as well as identify a dose and potential dosing regimens. We have also undertaken substantial work on biomarkers to develop enrichment strategies to identify patients who will best respond in future trials.

Faron has published data on bexmarilimab that consistently supports earlier positive results and continues to underscore that the mechanism of action demonstrates an effect on mortality in responders. The company will be presenting a data package to the US Food and Drug Administration in the first quarter of 2023.

Faron recognises the future of cancer treatment will be in combination therapies, and as such we have reported exciting data from the Phase I/II BEXMAB study in hematological malignancies. We also plan to initiate BEXCOMBO, a Phase II study of the combination therapy bexmarilimab plus PD-1 blockade in patients that have metastatic or unresectable, recurrent HNSCC, locally advanced or metastatic UCC and metastatic NSCLC where first-line PD-1 blockade is approved standard of care.  

We continue to see bexmarilimab as the major value driver for Faron, and our goal is to deliver worldwide approvals to allow bexmarilimab to be used by cancer physicians to treat patients.

Despite Faron’s focus on bexmarilimab, we have used partnerships to develop Traumakine®, Faron’s investigational intravenous (IV) interferon (IFN) beta-1a therapy, to prevent multiorgan dysfunction.

We recognise the funding environment for European companies has been extremely challenging and despite that, we have continued to raise capital to finance Faron’s activities. In 2022, we announced Faron had entered into a secured debt agreement with IPF Partners to advance and accelerate its pipeline programs. We had two equity financing rounds and are pleased we continue to have supportive shareholders in Finland and the rest of Scandinavia. In January 2023 we completed a further financing round of EUR 12 million to support the continued development of bexmarilimab. We are delighted that The Leukemia & Lymphoma Society participated in the previous round and in the January fundraise.

In terms of building the company, Dr. Juho Jalkanen was promoted to COO and we welcomed CMO Marie-Louise Fjällskog, based in Boston, as well as a Vesa Karvonen, our new general counsel based in Turku and Juuso Vakkuri as Chief Human Resources Officer. We have developed the US team in Boston, investing in clinical and regulatory personnel. Erik Ostrowski joined the Board of Directors. He brings substantial finance experience including as the CFO of a NASDAQ-listed company. We anticipate continuing to add employees in 2023.

I’d like to thank the staff of Faron, our partner organizations, study steering and advisory committee members investigators and patients that have participated in our clinical trials. I am indebted to CEO Dr. Markku Jalkanen, CFO Toni Hänninen, COO Juho Jalkanen, CMO Marie-Louise Fjällskog, General Counsel Vesa Karvonen and CHRO Juuso Vakkuri for their contributions to Faron in 2022. We look forward to great success in 2023.

Dr Frank Armstrong

Chairman

March 2, 2023

 

Financial Review

Despite continuing challenging market conditions, the Company was able to conduct two successful fundraising rounds in 2022. Combined, they raised EUR 13.4 million gross and both rounds included new and existing investors. In our fundraising round in June we were able to attract The Leukemia & Lymphoma Society® (LLS) to support our newest bexmarilimab trial, BEXMAB. Faron became part of LLS’ Therapy Acceleration Program® (TAP). In our October fundraise we were further able to attract reputable Finnish pension funds.

Additionally, in February 2022, the Company secured a debt funding agreement with IPF Partners, one of the leading alternative financing providers focused on the healthcare sector, for up to EUR 30 million. EUR 10 million was accessed upon signing of the agreement with an additional EUR 20 million available in the future, subject to certain conditions being met. This funding agreement strengthened our financial position and gives us the flexibility to access supplemental and inexpensive capital as we continue to accelerate the development of our pipeline assets.

As a result of these fundraising efforts, the net cash from financing activities of EUR 23.5 million exceeded the net cash used in operating activities of EU 23.0 million in 2022. We were able to accomplish this while also increasing R&D and reducing G&A expenditures, as per our plan, to focus on accelerating our pipeline.

Post period in January 2023, the Company successfully raised a total of EUR 12.0 million gross. This fundraising round was supported by long-only institutional investors, family offices, existing shareholders and the Leukemia & Lymphoma Society® (LLS).

 

Revenue and Other Operating Income

Faron’s revenue was nil for the year ended December 31, 2022 (2021: EUR nil). Faron recorded other income of EUR 0.8 million that consisted of grants from the European Union and Business Finland.

 

Research and Development Costs

R&D costs increased by EUR 3.4 million from EUR 17.4 million in 2021 to EUR 20.7 million in 2022. In total, almost 90% of the R&D costs are directly attributable to advancing our clinical programs, and Faron expects this to continue as we accelerate patient recruitment. The costs of outsourced clinical trial services were increased by EUR 1.6 million from EUR 3.5 to EUR 5.1 million. The cost of employee benefits increased by EUR 1.9 million from EUR 3.3 to EUR 5.2 million, mainly driven by additional headcount in the US.

 

General and Administration Costs

Administrative expenses decreased by EUR 2.4 million from EUR 9.9 million in 2021 to EUR 7.5 million in 2022. The decrease was mainly due to the EUR 3.5 million decrease of legal expenses, that consisted in 2021 of the arbitration with Rentschler Biopharma SE, resulting in Faron’s favor. Employee benefits increased by EUR 1.1 million from EUR 3.5 million to EUR 4.5 million due to additional headcount.

 

Taxation

The Company’s tax credit for the fiscal year 2022 can be recorded only after the Finnish tax authorities have approved the tax report and confirmed the amount of tax-deductible expenses. The total amount of cumulative tax losses carried forward approved by tax authorities on December 31, 2022 was EUR 47.1 million (2021: EUR 41.0 million). The Company estimates that it can utilize most of these during the years 2023 to 2033 by offsetting them against future profits.

In addition, the Company has EUR 91.8 million of R&D costs incurred in the financial years 2010 – 2022 that have not yet been deducted from taxation. This amount can be deducted over an indefinite period at the Company’s discretion.

 

Losses

Loss before income tax was EUR 28.7 million (2021: EUR 21.2 million). Comprehensive loss for the year was EUR 28.7 million (2021: EUR 21.2 million), representing a loss of EUR 0.52 per share (2021: EUR 0.42 per share).

 

Cash Flows

Net cash flow was EUR 0.1 million positive for the year ended December 31, 2022 (2021: EUR 2.7 million positive). Cash used for operating activities increased by EUR 0.8 million to EUR 23.0 million for the year, compared to EUR 22.2 million for the year ended December 31, 2021. This increase was mostly driven by an increase in R&D investments. Net cash inflow from financing activities was EUR 23.5 million (2021: EUR 25.6 million) mainly due to the successful equity placings completed in June 2022 and October 2022 as well as the proceeds from borrowings of the loan with IPF Partners.

 

Fundraising

In June 2022, the Company successfully raised a total of EUR 5.0 million gross (EUR 4.8 million net) from new and existing shareholders, through issuance of a total of 3,318,421 new ordinary shares to itself without consideration. 2,006,621 of those shares were conveyed to investors. In October 2022, the Company successfully raised a total of EUR 8.4 million gross (EUR 8.2 million net) from new and existing shareholders, through issuance of a total of 3,229,930 new ordinary shares to itself. Those shares and the 1,311,800 existing treasury shares were conveyed to investors. Proceeds from both raises were used to accelerate clinical development of the Company’s main drug candidate, continue the CMC process and US buildup and to strengthen the Company’s balance sheet. In February 2022, the Company secured a debt funding agreement with IPF Partners for up to EUR 30 million. EUR 10 million was accessed upon signing of the agreement with an additional EUR 20 million available in the future, subject to certain conditions being met.

Post period, in January 2023, the Company successfully raised a total of EUR 12.0 million gross through and issuance of 3,692,308 ordinary shares to itself without consideration which were conveyed to investors.

 

Financial Position

As of December 31, 2022, total cash and cash equivalents held were EUR 7.0 million (2021: EUR 6.9 million).

 

Going Concern

As part of their going concern review, the Directors have followed the Finnish Limited Liability Companies Act, the Finnish Accounting Act and the guidelines published by the Financial Reporting Council entitled “Guidance on the Going Concern Basis of Accounting and Reporting on Solvency and Liquidity Risks – Guidance for directors of companies that do not apply the UK Corporate Governance Code”. Faron is subject to a number of risks similar to those of other development stage pharmaceutical companies.

These risks include, amongst others, generation of revenues in due course from the development portfolio and risks associated with research, development, testing and obtaining related regulatory approvals of its pipeline products. Ultimately, the attainment of profitable operations is dependent on future uncertain events which include obtaining adequate financing to fulfil the Faron’s commercial and development activities and generating a level of revenue adequate to support Faron’s cost structure.

Faron made a net loss of EUR 28.7 million during the year ended December 31, 2022. It had a negative equity of EUR 11.4 million including an accumulated deficit of EUR 143.7 million. As of that date, Faron had cash and cash equivalents of EUR 7.0 million.

The Directors have prepared detailed financial forecasts and cash flows looking beyond 12 months from the date of the approval of these financial statements. In developing these forecasts, the Directors have made assumptions based upon their view of the current and future economic conditions that are expected to prevail over the forecast period. The Directors estimate that the cash held by Faron together with known receivables will be sufficient to support the current level of activities into the third quarter of 2023. The Directors are continuing to explore sources of finance available to Faron and they believe they have a reasonable expectation that they will be able to secure sufficient cash inflows for Faron to continue its activities for not less than 12 months from the date of approval of these financial statements; they have therefore prepared the financial statements on a going concern basis. Because the additional finance is not committed at the date of issuance of these financial statements, these circumstances represent a material uncertainty that may cast significant doubt on Faron’s ability to continue as going concern. Should Faron be unable to obtain further finance such that the going concern basis of preparation were no longer appropriate, adjustments would be required, including to reduce balance sheet values of assets to their recoverable amounts, to provide for further liabilities that might arise.

 Headcount

Faron’s headcount at the end of year was 40 (2021: 37).

 Shares and Share Capital

During the period January 1 to December 31, 2022, the Company, using the share authorities granted at the Annual General Meeting held on April 23, 2021, issued a total of 3,318,421 new ordinary shares to itself without consideration and conveyed 2,006,621 of those shares at an issuance price of EUR 2.49 per share to investors. During the same period, the Company, using the share authorities granted at the Extraordinary General Meeting held on July 7, 2022, issued a total of 3,229,932 new ordinary shares to itself without consideration. Those shares and the existing treasury shares were conveyed to investors at an issuance price of EUR 1.85 per share.

The subscription price net of costs was credited in full to the Company’s reserve for invested unrestricted equity, and the share capital of the Company was not increased. The Company has no shares in treasury; therefore at the end of 2022 the total number of voting rights was 59,805,383.  

Toni Hänninen

Chief Financial Officer

March 2, 2023

 

Consolidated Income Statement, IFRS

 EUR ’000

Unaudited

7-12/2022
6 months

Unaudited

7-12/2021
6 months

1-12/2022
12 months

1-12/2021
12 months

Other operating income

318

4,927

803

6,137

Research and development expenses

(10,683)

(8,361)

(20,730)

(17,369)

General and administrative expenses

(3,697)

(7,250)

(7,498)

(9,876)

Operating loss

(14,062)

(10,684)

(27,426)

(21,108)

Financial income

(596)

103

96

165

Financial expense

(970)

(44)

(1,400)

(235)

Loss before tax

(15,628)

(10,625)

(28,730)

(21,178)

Tax expense

19

(9)

0

(16)

Loss for the period

(15,609)

(10,634)

(28,730)

(21,194)

 

 

 

 

 

Other comprehensive gain/loss

6

(15)

17

(15)

Total comprehensive loss for the period

(15,603)

(10,649)

(28,713)

(21,209)

 

 

 

 

 

Loss per ordinary share

 

 

 

 

Basic and diluted loss per share, EUR

(0.27)

(0.21)

(0.52)

(0.42)

 
 

Consolidated Balance Sheet, IFRS

 

 

EUR ‘000

31 December 2022

31 December 2021

Assets

 

 

Non-current assets

 

 

Machinery and equipment

13

20

Right-of-use-assets

314

187

Intangible assets

1,154

899

Prepayments and other receivables

60

53

Total non-current assets

1,541

1,159

 

 

 

Current assets

 

 

Prepayments and other receivables

2,740

5,170

Cash and cash equivalents

6,990

6,853

Total current assets

9,730

12,023

 

 

 

Total assets

11,271

13,182

 

 

 

Equity and liabilities

 

 

 

 

 

Capital and reserves attributable to the equity holders of Faron

 

 

Share capital

2,691

2,691

Reserve for invested unrestricted equity

129,544

116,507

Accumulated deficit

(143,713)

(116,265)

Translation difference

2

(15)

Total equity

(11,476)

2,919

 

 

 

Provisions

 

 

Other provisions

158

0

Total provisions

158

0

 

 

 

Non-current liabilities

 

 

Borrowings

11,102

2,918

Lease liabilities

163

16

Other liabilities

853

151

Total non-current liabilities

12,118

3,085

 

 

 

Current liabilities

 

 

Borrowings

1,851

429

Lease liabilities

153

184

Trade payables

6,014

2,229

Accruals and other current liabilities

2,453

4,336

Total current liabilities

10,471

7,178

 

 

 

Total liabilities

22,748

10,263

 

 

 

Total equity and liabilities

11,271

13,182

 

Consolidated Statement of Changes in Equity, IFRS

EUR ‘000

Share capital

Reserve for invested unrestrict-
ed equity

Trans-
lation
difference

Accumu-lated deficit

Total equity

 

 

 

 

 

 

Balance as at 31 December 2020

2,691

92,015

2

(96,557)

(1,849)

 

 

 

 

 

 

Comprehensive loss for the year 2021

0

0

(15)

(21,194)

(21,209)

 

 

 

 

 

 

Transactions with equity holders of the Company

 

 

 

 

Issue of ordinary shares, net of transaction costs

0

24,492

0

0

24,492

Share-based compensation

0

0

 0

1,487

1,487

 

0

24,492

0

1,487

25,980

 

 

 

 

 

 

Balance as at 31 December 2021

2,691

116,507

(15)

(116,265)

2,919

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive loss for the year 2022

0

0

17

(28,730)

(28,713)

 

 

 

 

 

 

Transactions with equity holders of the Company

 

 

 

 

 

Issue of ordinary shares, net of transaction costs

0

13,037

0

0

13,037

Share-based compensation

0

0

0

1,297

1,297

Other movements

 0

0

0

(16)

(16)

 

0

13,037

17

(27,448)

(14,395)

 

 

 

 

 

 

Balance as at 31 December 2022

2,691

129,544

2

(143,713)

(11,476)

 

Consolidated Cash Flow Statement, IFRS

EUR ‘000

Unaudited

Unaudited

1-12.2022

1-12.2021

7-12.2022

7-12.2021

12 months

12 months

6 months

6 months

 

 

Cash flow from operating activities

 

 

 

 

Loss before tax

(15,628)

-10,64

(28,730)

(21,194)

Adjustments for:

 

 

 

 

Received grant

(388)

(745)

(803)

(1,387)

Depreciation and amortization

149

165

300

307

Change in provision

(158)

0

(158)

0

Financial items

787

 

1,304

0

Interest expense

0

128

0

216

Tax expense

19

6

0

16

Unrealized foreign exchange loss (gain), net

0

434

0

153

Share-based compensation

632

644

1,297

1,487

Adjusted loss from operations before changes in working capital

(14,587)

(10,008)

(26,790)

(20,402)

Change in net working capital:

 

 

 

 

Prepayments and other receivables

2,045

(-1259)

2,864

(1,919)

Trade payables

(657)

744

719

723

Other liabilities

2,197

24

1,183

(566)

Cash used in operations

(11,001)

(10,499)

(22,023)

(22,163)

Taxes paid

0

(1)

0

(16)

Transaction costs related to loans and borrowings

0

0

(165)

0

Interest received

11

0

11

0

Interest paid

(708)

(10)

(816)

(40)

Net cash used in operating activities

(11,698)

(10,508)

(22,993)

(22,218)

 

 

 

 

 

Cash flow from investing activities

 

 

 

 

Payments for intangible assets

(218)

(76)

(385)

(461)

Payments for equipment

0

(6)

(0)

(13)

Net cash used in investing activities

(218)

(81)

(385)

(473)

 

 

 

 

 

Cash flow from financing activities

 

 

 

 

Proceeds from issue of shares

8,923

10,515

13,445

25,559

Share issue transaction cost

(174)

(405)

(365)

(1,067)

Proceeds from borrowings

(0)

145

10,389

662

Repayment of borrowings

0

0

(105)

(122)

Proceed from grants

231

750

231

750

Payment of lease liabilities

(20)

(95)

(116)

(191)

Net cash from financing activities

8,959

10,910

23,478

25,590

 

 

 

 

 

Net increase (+) / decrease (-) in cash and cash equivalents

(2,946)

320

137

2,899

Effect of exchange rate changes on cash and cash equivalents

11

(434)

37

(153)

 

 

 

 

 

Cash and cash equivalents at 1 January / 1 July

9,936

6,967

6,853

4,108

Cash and cash equivalents at 31 December

6,990

6,853

6,990

6,853

 

 

 

 

 

 

Faron Reports 2022 Half-Year Financial Results

Faron Pharmaceuticals Oy

(“Faron” or “Company”)

 

Faron Reports Half-Year Financial Results, January 1 – June 30, 2022

 

August 25, 2022 at 2:00 am EDT / 7:00 am BST / 9:00 am EEST

 

Summary of January – June 2022

  • New data reinforces bexmarilimab’s potential to bring the promise of immunotherapy to cancer patients who are currently not benefiting from approved checkpoint inhibitors
  • Compelling 12-month survival data reported from Phase I/II MATINS study with 100% survival among checkpoint refractory melanoma and cholangiocarcinoma patients who benefited from bexmarilimab treatment
  • Biomarker data presented at AACR and ASCO Annual Meetings showed a clear biomarker profile (low baseline levels of inflammatory markers like IFN-gamma and TNF-alpha) among patients who experienced clinical benefit following bexmarilimab treatment – benefiting patients also showed a higher level of Clever-1 positive intra-tumoral macrophages
  • Biomarker profile of patients benefiting from bexmarilimab matches that of patients who are usually refractory to PD-1 blockade, which further validates anti-PD1 combination development strategy
  • First patient dosed in the Phase I/II BEXMAB study investigating bexmarilimab in combination with standard of care in myeloid hematological malignancies including acute myeloid leukemia (AML)
  • Significant worldwide expansion of bexmarilimab epitope patents which now cover more than 90% of pharmaceutical markets until at least 2037
  • Erik Ostrowski, joined the Faron Board of Directors, and the Leadership team was enhanced with the addition of Marie-Louise Fjällskog, M.D., Ph.D., as Chief Medical Officer and the appointment of Juho Jalkanen, M.D., Ph.D., as Chief Operating Officer
  • Cash position strengthened by debt funding agreement with IPF Partners for up to EUR 30 million and successful private placement including an investment from The Leukemia & Lymphoma Society Therapy Acceleration Program® (LLS TAP)
  • Virtual briefing and Q&A to be held today at 7:00 am EDT / 12:00 pm BST / 2:00 pm EEST

 

 

TURKU, FINLAND / BOSTON, MA Faron Pharmaceuticals Oy (AIM: FARN, First North: FARON), a clinical stage biopharmaceutical company focused on building the future of immunotherapy by harnessing the power of the immune system to tackle cancer and inflammation, today announced unaudited half-year financial results for January 1 to June 30, 2022 (the “period”).

 

“I am extremely proud of the progress we made over the first half of 2022,” said Dr. Markku Jalkanen, Chief Executive Officer of Faron. “We advanced our ambitious bexmarilimab development program, which beyond the MATINS trial includes combination studies in both solid tumors and hematologic malignancies, we presented data showing patients whose tumors express elevated levels of Clever-1 and low levels of PD-L1, a population that does not typically respond to or is ineligible for treatment with currently approved checkpoint inhibitors, are likely to experience clinical benefit and immune ignition following treatment with bexmarilimab, and we reported patients benefiting from bexmarilimab treatment experienced nearly a six-fold survival advantage over those who did not. We also strengthened our cash position and welcomed not just a new investor, The Leukemia & Lymphoma Society Therapy Acceleration Program® (LLS TAP), but in them a partner whose organization and network will help us further accelerate our development of bexmarilimab.”

 

Pipeline Highlights

 

Bexmarilimab Faron’s wholly-owned, novel precision cancer immunotherapy candidate, in Phase I/II development for difficult-to-treat cancers.

 

  • Updated survival data today show that 63% of patients who benefited from treatment with bexmarilimab were alive at 12-months compared to 9% of those who did not. The strongest survival benefit was seen in checkpoint refractory melanoma and cholangiocarcinoma, where 12-month survival was 100% among patients who benefited from bexmarilimab treatment and 6% for patients who did not benefit from treatment. The analysis included 134 heavily pre-treated, advanced disease patients across 10 solid tumor cohorts from Parts I and II of the MATINS study.  
  • Biomarker data presented at the American Association for Cancer Research (AACR) Annual Meeting 2022 showed patients with low baseline levels of serum interferon gamma (IFNy) and tumor necrosis factor alpha (TNFa) experienced significantly higher clinical benefit following bexmarilimab treatment. When used together, IFNy and TNFa are highly predictive of response to bexmarilimab.
  • Additional biomarker data presented at the American Society of Clinical Oncology Annual Meeting showed that that the tumors of patients benefiting from treatment with bexmarilimab had statistically significant higher levels of Clever-1 positive intra-tumoral cells and a trend towards low PD-L1 levels, a population that does not typically respond to or is ineligible for treatment with currently approved checkpoint inhibitors. These patients with immunologically cold tumors also exhibited an ignition of immune response, as indicated by increased levels of IFNy following therapy, which suggests bexmarilimab may serve as a catalyst for the immune system allowing initially checkpoint inhibitor resistant or ineligible patients to become responsive to PD-1 blockade.
  • The first patient was dosed in the Phase I/II BEXMAB study investigating bexmarilimab in combination with standard of care in multiple hematological malignancies. This marks the first time bexmarilimab is being assessed as part of a clinical study in hematologic malignancies. Based on initial safety data, there is potential for Phase II expansion and to include a first line triplet therapy of bexmarilimab, azacitidine and venetoclax in newly diagnosed acute myeloid leukemia (AML) patients who are not able to tolerate chemotherapy.
  • AACR journal Molecular Cancer Therapeutics published research examining the discovery and preclinical development of bexmarilimab. Reporting the humanization and nonclinical characterization steps used to determine the physicochemical properties, biological potency, and safety profile of bexmarilimab, the authors conclude that bexmarilimab could induce an immunostimulatory tumor microenvironment that leads to anti-tumor efficacy.
  • Data was presented at the European Hematology Association 2022 Congress showing Clever-1 is expressed in patient bone marrow blasts and monocytes in acute myeloid leukemia (AML) and myelodysplastic syndrome (MDS) and that blocking Clever-1 with bexmarilimab in these patients induced immune activation as observed through increased antigen presenting molecule, human leucocyte antigen DR (HLA-DR) expression and declined PD-1 expression.
  • The proprietary position of bexmarilimab was significantly increased with patents granted in Europe, China, South Korea and Mexico. With previously received patents in the US and Japan, bexmarilimab epitope patents now cover more than 90% of pharmaceutical markets until at least 2037.

 

Traumakine®Faron’s investigational intravenous (IV) interferon beta-1a therapy, in development for the treatment of ischemic or hyperinflammatory conditions.

 

  • Scientific Reports published data from Faron’s INFORAAA study showing Traumakine-induced up-regulation of CD73 prevents death after emergency open aortic surgery. Up-regulation of CD73 was associated with 100% survival compared to expected mortality between 30-40%.
  • Research was published identifying novel genetic factors that underly the interaction of corticosteroids with interferon beta signaling in acute respiratory distress syndrome (ARDS) and COVID-19. The research identified a deleterious effect of glucocorticosteroids when given together with intravenous IFN beta-1a therapy. The Company and its scientific collaborators found that patients receiving Traumakine carrying the single nucleotide polymorphism (SNP) rs9984273 (C/T) in subunit 2 of interferon receptor (INFAR2) showed a substantial reduction in mortality compared to patients without the gene mutation. The same SNP that was also associated with better outcome in COVID-19.
  • Phase II/III HIBISCUS trial assessing Traumakine (Intravenous Interferon beta-1a; IFN beta-1a) as a first-line treatment for hospitalized COVID-19 patients who require low flow oxygen support was closed due to low COVID-19 hospitalization rates and a shortage of patients not already receiving steroids. Study resources were re-focused on the development of bexmarilimab.
  • Development of Traumakine continues together in collaboration with the 59th Medical Wing of the US Air Force and Wake Forest University Medical School for ischemia-reperfusion injury and battlefield injuries that lead to polytrauma and systemic inflammation. The latest primate results will be presented at the annual Military Health System Research Symposium (MHSRS) on the 13th of September in Orlando, Florida. MHSRS is the biggest military research symposium in the USA.

 

Corporate Highlights

  • Secured a debt funding agreement with IPF Partners for up to EUR 30 million. The first tranche of EUR 10 million was accessed in February 2022, with an additional EUR 20 million available in the future, subject to certain conditions being met. As part of the arrangement relating to the debt funding, Faron grants IPF warrants entitling them to subscribe for ordinary shares of the Company against payment. In total 319,944 Warrants were issued to IPF in relation to the first tranche utilized.
  • Cash position strengthened with successful private placement totaling gross EUR 5.0 million, the final portion of which amounting to EUR 0.5 million settled in early July 2022. The placing included investment from The Leukemia & Lymphoma Society Therapy Acceleration Program® (LLS TAP), a funding initiative to accelerate innovative blood cancer therapeutics and change the standard of care in leukemia, lymphoma, and multiple myeloma. In total Faron raised EUR 5.0 million with the fundraise and 2,006,621 ordinary shares were issued to investors (of which 1,806,621 shares in June).
  • Erik Ostrowski, BS, MBA, veteran biotech and financial executive with significant fundraising and investment bank experience, joined the Faron Board of Directors in April 2022. He is currently the Chief Financial Officer and Treasurer of AVROBIO (Nasdaq: AVRO), a role he has served since joining the company in January 2019. Prior to joining AVROBIO, he served as CFO of Summit Therapeutics plc. (Nasdaq: SMMT) and vice president of finance at Organogenesis Inc. (Nasdaq: ORGO). He previously worked in investment banking, most recently as a director with Leerink Partners LLC., having begun his career as an accountant with Coopers & Lybrand (now PricewaterhouseCoopers).
  • Marie-Louise Fjällskog, M.D., Ph.D., joined Faron’s Global Management Team as Chief Medical Officer, bringing with her over 30 years of experience in clinical oncology, translational research, and drug development.
  • Juho Jalkanen, M.D., Ph.D., was appointed Chief Operating Officer. In this role, Dr. Jalkanen leads business strategy and daily operations for Faron including oversight of academic and industry partnerships, resource prioritization and allocation, chemistry, manufacturing and controls, supply chain and driving performance measures.
     

Half-Year Financial Results

  • Cash balances of EUR 9.9 million at 30 June 2022 (2021: EUR 7.0 million).
  • Operating loss of EUR 13.4 million for the six months ended 30 June 2022 (2021: EUR 10.4 million).
  • Net assets of EUR -5.2 million as at 30 June 2022 (2021: EUR 2.8 million).
  • Cash position strengthened by debt funding agreement with IPF Partners for EUR 10 million and successful private placement of EUR 5.0 million

 

Consolidated key figures, IFRS

 

 EUR’000

Unaudited

1-6/2022
6 months

Unaudited

1-6/2021
6 months

1-12/2021
12 months

Revenue

0

0

0

Other operating income

485

1 210

6 137

Research and Development expenses

(10 047)

(9 008)

(17 369)

General and Administrative expenses

(3 801)

(2 626)

(9 876)

Loss for the period

(13 121)

(10 560)

(21 194)

 

 

 

 

 

Unaudited

1-6/2022
6 months

Unaudited

 1-6/2021
6 months

1-12/2021
12 months

Loss per share, EUR

(0,25)

(0,21

-0,42

Number of shares at end of period

56,575,453*

50,457,874

46,799,747

Average number of shares

53,235,643

49,615,167

44,584,199

 

 

 

 

 

Unaudited

30 Jun 2022

Unaudited

30 Jun 2021

31 Decmber 2021

Cash and cash equivalents

9 936

6 967

6 853

Equity

(5 194)

2 813

2 919

Balance sheet total

16 729

11 865

13 182

 

* of which 1,311,800 are held in Treasury

 

24 August 2022

Faron Pharmaceuticals

Board of Directors

 

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 (“MAR”).

 

Conference call information

A virtual briefing and Q&A session for investors, analysts and media will be hosted by Dr. Markku Jalkanen, Chief Executive Officer, and Toni Hänninen, Chief Financial Officer, today, August 25, 2022 at 7:00 am (EDT) / 12:00 pm (BST) / 2:00 pm (EEST) on the day of results.

 

Webcast registration link: https://faron.videosync.fi/2022-halfyear-results

 

The half-year report, presentation, and a replay of the webcast will be available on the Company’s website at www.faron.com/investors.

 

 

For more information please contact:

 

Investor Contact

Faron Pharmaceuticals

Julia Balanova

VP, Investor Relations

julia.balanova@faron.com

investor.relations@faron.com

Phone: +1 (917) 306-6096

 

Media Contact

Faron Pharmaceuticals

Eric Van Zanten

VP, Communications

eric.vanzanten@faron.com

Phone: +1 (610) 529-6219

 

Cairn Financial Advisers LLP, Nomad

Sandy Jamieson, Jo Turner

Phone: +44 (0) 207 213 0880

 

Peel Hunt LLP, Broker

Christopher Golden, James Steel

Phone: +44 (0) 20 7418 8900

 

Sisu Partners Oy, Certified Adviser on Nasdaq First North

Juha Karttunen

Phone: +358 (0)40 555 4727

Jukka Järvelä

Phone: +358 (0)50 553 8990

 

Consilium Strategic Communications

Mary-Jane Elliott, David Daley, Lindsey Neville

faron@consilium-comms.com

Phone: +44 (0)20 3709 5700

 

About Bexmarilimab

Bexmarilimab is Faron’s wholly-owned, investigative precision immunotherapy with the potential to provide permanent immune stimulation for difficult-to-treat cancers through targeting myeloid cell function. A novel anti-Clever-1 humanised antibody, bexmarilimab targets Clever-1 positive (Common Lymphatic Endothelial and Vascular Endothelial Receptor 1) tumour associated macrophages (TAMs) in the tumour microenvironment, converting these highly immunosuppressive M2 macrophages to immune stimulating M1 macrophages. In mouse models, bexmarilimab has successfully blocked or silenced Clever-1, activating antigen presentation and promoting interferon gamma secretion by leukocytes. Additional pre-clinical studies have proven that Clever-1, encoded by the Stabilin-1 or STAB-1 gene, is a major source of T cell exhaustion and involved in cancer growth and spread. Observations from clinical studies to date indicate that Clever-1 has the capacity to control T cell activation directly, suggesting that the inactivation of Clever-1 as an immune suppressive molecule could be more broadly applicable and more important than previously thought. As an immuno-oncology therapy, bexmarilimab has potential as a single-agent therapy or in combination with other standard treatments including immune checkpoint molecules in both solid tumors and hematologic malignancies. Beyond immuno-oncology, it offers potential in infectious diseases, vaccine development and more.

 

About MATINS

The MATINS (Macrophage Antibody To INhibit immune Suppression) study is a first-in-human open label phase I/II clinical trial investigating the tolerability, safety and efficacy of bexmarilimab in ten different hard-to-treat metastatic or inoperable solid tumour cohorts – cholangiocarcinoma, colorectal cancer, cutaneous melanoma, ER+ breast cancer, gastric cancer, hepatocellular carcinoma, ovarian cancer, uveal melanoma, pancreatic cancer and anaplastic thyroid carcinoma – which are all known to host a significant number of Clever-1 positive tumour-associated macrophages (TAMs). The completed Part I of the trial dealt with tolerability, safety and dose escalation. The ongoing Part II is focused on identifying patients who show an increased number of Clever-1 positive TAMs and exploring safety and efficacy. Part III will be focused on assessing efficacy. Data from MATINS have shown that bexmarilimab has the potential to be the first macrophage immune checkpoint therapy. To date, the investigational therapy has been shown to be safe and well-tolerated, making it a low-risk candidate for combination with existing cancer therapies, and has demonstrated early signs of clinical benefit in patients who have exhausted all other treatment options.

 

About BEXMAB

The BEXMAB study is a first-in-human open label phase I/II clinical trial investigating bexmarilimab in combination with standard of care (SoC) in aggressive hematological malignancies including acute myeloid leukemia (AML) and myelodysplastic syndrome (MDS). The primary objective is to determine the safety and tolerability of bexmarilimab in combination with SoC (azacitidine) treatment and to identify the recommended Phase 2 dose. Based on initial safety data, there is potential for expansion to include a first line triplet therapy of bexmarilimab, azacitidine and venetoclax in newly diagnosed AML patients who are not able to tolerate chemotherapy. Clever-1 is highly expressed in both AML and MDS and associated with therapy resistance, limited T cell activation and poor outcomes. Directly targeting Clever-1 could limit the replication capacity of cancer cells, increase antigen presentation, ignite an immune response, and allow current chemotherapy treatments to be more effective.

 

About Faron Pharmaceuticals Ltd. 

Faron (AIM: FARN, First North: FARON) is a clinical stage biopharmaceutical company developing novel treatments for medical conditions with significant unmet needs caused by dysfunction of our immune system. The Company currently has a pipeline based on the receptors involved in regulation of immune response in oncology, organ damage and bone marrow regeneration. Bexmarilimab, a novel anti-Clever-1 humanized antibody, is its investigative precision immunotherapy with the potential to provide permanent immune stimulation for difficult-to-treat cancers through targeting myeloid function. Currently in Phase I/II clinical development as a potential therapy for patients with solid tumors and hematologic malignancies, bexmarilimab has potential as a single-agent therapy or in combination with other standard treatments including immune checkpoint molecules. Traumakine is an investigational intravenous (IV) interferon beta-1a therapy for the treatment of acute respiratory distress syndrome (ARDS) and other ischemic or hyperinflammatory conditions. Traumakine is currently being evaluated by the 59th Medical Wing of the US Air Force and the US Department of Defense for the prevention of multiple organ dysfunction syndrome (MODS) after ischemia-reperfusion injury caused by a major trauma.  Faron is based in Turku, Finland. Further information is available at www.faron.com.

 

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”, “hope”, “seek”, ”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 early data from initial patients in the MATINS trial may not be replicated in larger patient numbers and the outcome of clinical trials 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 the ability of the Company to successfully licence its programmes within the anticipated timeframe or at all, 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 or other sources of funding, 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.

 

 

Chairman and Chief Executive Officer’s Review

 

Introduction

The first half of 2022 has been a period of significant progress for Faron. Most notably, we continued to accelerate our ambitious bexmarilimab development program. Key to this is our advanced understanding of which patients are likely to respond to treatment and what happens in the tumor microenvironment when they do. These findings, in addition to the significant 12-month survival advantage experienced by patients who responded to treatment, further strengthen our belief that bexmarilimab has the potential to bring the promise of immunotherapy to a much broader patient population, both as a monotherapy and in combination with currently approved standard of care treatments.

 

Bexmarilimab

Driving the clinical development of bexmarilimab continues to be Faron’s top priority, which is why we recruited Marie-Louise Fjällskog, M.D., Ph.D. to join the Company as our new Chief Medical Officer. Dr. Fjällskog has over 30 years of experience in clinical oncology, translational research, and drug development. She joined us from Sensei Biotherapeutics (SNSE), where she served as Chief Medical Officer for the Nasdaq listed immuno-oncology focused biopharmaceutical company. Prior to her tenure at Sensei, she was Vice President, Clinical Development at both Merus (MRUS) and Infinity Pharmaceuticals (INFI) where she led development of multiple small molecule and immunotherapy clinical programs. Earlier in her career she spent time at the Novartis Institute for Biomedical Research as Global Clinical Program Leader responsible for the development of oncology treatments targeting CDK4/6, BCL-2, PD-1, CSF-1 and CD73.

 

Dr. Fjällskog has been instrumental in advancing our bexmarilimab development program, which is focused in three areas, monotherapy in late-stage solid tumors, combination with anti-PD-1 in first-line solid tumors, and combination with standard of care in hematologic malignancies. She has also significantly advanced our translational research efforts.

 

Data from the completed Part 1 and Part II of the MATINS trial continue to be analyzed, but we were able to report updated 12-month survival data in June. The further updated analysis shows that 63% of patients who benefited from treatment with bexmarilimab were alive at 12-months compared to 9% of patients who did not benefit from treatment. The strongest survival benefit was seen in checkpoint refractory melanoma and cholangiocarcinoma where 12-month survival was 100% among patients who benefited from bexmarilimab treatment and 6% for patients who did not benefit from treatment. The updated survival data is significant, especially when you consider these were heavily pre-treated patients with substantially advanced disease. It’s highly encouraging that an anti-tumor immune response was activated in these heavily compromised patients and that almost two-thirds of the patients who benefited from treatment had a durable response lasting at least 12-months.

 

We look forward to sharing this data and additional translational research with the FDA late this year or in early 2023. With their input, we will finalize a dose, frequency and design of the next step, which we anticipate will be a randomized study to confirm survival benefit against comparator (physician choice of chemo or potentially best supportive care).

 

We also plan to engage the FDA around the design of our planned trial investigating bexmarilimab in combination with anti-PD1 in first line solid tumors. We are extremely excited about this combination given the translational research we reported earlier this year at the American Association for Cancer Research and American Society of Clinical Oncology Annual Meetings. This data identified a clear biomarker profile among patients who responded to treatment with bexmarilimab. Notably, these patients, those with low baseline levels of inflammatory cytokines and tumors that expressed low levels of PD-L1, typically do not respond to or are ineligible for treatment with currently approved checkpoint inhibitors. This means that bexmarilimab works where anti-PD1 treatments do not. Patients with immunologically cold tumors also exhibited an ignition of immune response, as indicated by increased levels of IFN-y following therapy, which suggests bexmarilimab may serve as a catalyst for the immune system allowing initially checkpoint inhibitor resistant or ineligible patients to become responsive to PD-1 blockade.

 

In addition to solid tumors, we also believe bexmarilimab can become an important treatment option in hematologic malignancies. In June we enrolled the first patient in our Phase I/II BEXMAB study. The primary objective of BEXMAB is to determine the safety, tolerability and preliminary efficacy of bexmarilimab in combination with standard of care in patients with relapsed acute myeloid leukemia (AML), myelodysplastic syndrome (MDS), or chronic myelomonocytic leukemia (CMML). Based on initial safety data, there is potential for Phase II expansion and to include a first line triplet therapy of bexmarilimab, azacitidine and venetoclax in newly diagnosed AML patients who are not able to tolerate chemotherapy.

 

This opportunity is so exciting because we know that certain blood cancer cells carry significant amounts of cell surface Clever-1, which may limit the body’s ability to mount an immune response. In fact, research has shown a clear survival benefit among certain blood cancer patients with low Clever-1 expression. By adding bexmarilimab to standard of care we expect to downregulate Clever-1 expression, thereby increasing antigen presentation and allowing the immune system to better identify and kill cancer cells. This could provide a deeper and more durable clinical benefit compared to what most patients experience with currently approved treatments.

 

Patent progress

Building a global intellectual property (IP) portfolio around Clever-1 remains a key priority for Faron as it is critical for the future commercialization of bexmarilimab. We continued to make progress towards this goal over the first half of 2022 with patents granted in Europe, China, South Korea, and Mexico. These, in addition to the previously received patents mean that we now have bexmarilimab epitope patents covering more than 90% of pharmaceutical markets until at least 2037.

 

Traumakine and Haematokine

Beyond bexmarilimab, we continue to be excited about the potential of our two additional pipeline assets, Traumakine and Haematokine, even though we made the difficult decision in April to discontinue our Phase II/III HIBISCUS trial assessing Traumakine as a first-line treatment for hospitalized COVID-19 patients. The emergence of the less severe Omicron variant, widespread vaccinations, and the continued early use of steroids severely limited our potential patient pool and made it impossible for us to reach our enrollment targets.

 

Our near-term development focus for Traumakine has shifted to settings where steroid use is not as widespread. This includes major operations and polytrauma where patients are at high risk of ischemia-reperfusion injury, which is tissue damage caused when blood supply returns to tissue after a period of oxygen depletion. Data from our INFORAAA trail published earlier this year showed that Traumakine up-regulates CD73, a key organ protective endothelial enzyme that reduces inflammation and prevents vascular leakage. The data also showed up-regulation of CD73 was associated with 100% survival among surgically operated ruptured abdominal aorta aneurysm (RAAA) patients – a patient population with expected mortality between 30-40%.

 

The focus of our Haematokine development program was further validated this year with the publication of research in the multidisciplinary journal Cellular and Molecular Life Sciences showing the inhibition of Vascular Adhesion Protein1 (VAP-1) potentially supports the expansion of human hematopoietic stem cells (HSC). The research showed for the first time that VAP-1 serves as a check point-like inhibitor, restricting the expansion of hematopoietic stem cells. As a result, we believe that inhibiting the enzymatic activity of VAP-1 enables the expansion of hematopoietic stem cells, which are essential to the formation of new cells and that this approach could have broad applicability in the fields of regenerative medicine and the treatment of hematological malignancies.

 

Financial review

In February 2022, Faron entered into a secured debt agreement with IPF Partners, a leading alternative financing provider focused on the healthcare sector. This agreement allowed Faron to access EUR 10 million immediately and subject to certain conditions being met, Faron may have access to an additional EUR 20 million in funding. Not only did this agreement strengthen our financial position, but it also added flexibility to our funding strategy by adding a debt instrument into our funding tools. We were also able to complete a successful private placement totaling EUR 5.0 million, including investment from The Leukemia & Lymphoma Society Therapy Acceleration Program® (LLS TAP), a funding initiative to accelerate innovative blood cancer therapeutics and change the standard of care in leukemia, lymphoma, and multiple myeloma. We were delighted to receive this significant support from our existing and new investors, providing additional financial resources to allow the further acceleration of our development programs and significantly strengthening our balance sheet.

 

Statement of comprehensive income

The operating loss for the six months ended 30 June 2022 was EUR 13.4 million (six months ended 30 June 2021: loss of EUR 10.4 million). No revenue was generated during the period or prior period. Research and development expenses increased by EUR 1.0 million to EUR 10.0 million (2021: EUR 9.0 million). General and administrative expenses increased by EUR 1.2 million to EUR 3.8 million (2021: EUR 2.6 million).

 

The loss for the period was EUR 13.1 million (2021: loss of EUR 10.6 million) and the basic and diluted loss per share was EUR 0.25 (2021: loss per share of EUR 0.21).

 

Statement of financial position and cash flows

As of June 30, 2022 net assets amounted to EUR -5.2 million (June 30, 2021: EUR 2.8 million). The net cash flow for the first six months in 2022 was EUR 3.1 million (2021: EUR 2.8 million). As of June 30, 2022 total cash and cash equivalents held were EUR 9.9 million (2021: EUR 7.0 million).

 

Corporate

Faron’s Annual General Meeting (AGM) was held on April 22, 2021. The AGM adopted the financial statements of the Company and re-elected audit firm PricewaterhouseCoopers Oy (“PwC”) as the Company’s auditor. Additionally, the number of members of the Board was confirmed as seven. Frank Armstrong, Gregory Brown, John Poulos, Leopoldo Zambeletti, Markku Jalkanen and Anne Whitaker were re-elected to the Board and Erik Ostrowski was elected as a new member to the Board for a term that ends at the end of the next AGM.

 

Summary & outlook

Our focus for the remainder of 2022 continues to be the acceleration of bexmarilimab’s clinical development. Preparations for the pivotal expansion stage of the MATINS study, including confirmation of dosage, dose frequency and tumor type, are priorities for us. We also continue planning for the initiation of our Company sponsored trial investigating bexmarilimab in combination with anti-PD1 in first-line tumors and expect to see early data from BEXMAB by year-end. Alongside these activities, we will continue to explore the potential of Traumakine, with a focus on preventing multiple organ dysfunction syndrome after ischemia-reperfusion injury caused by a major trauma, and Haematokine.

 

On behalf of the Board, we would like to thank our shareholders, existing and new, for their support of Faron. We would also like to thank our employees for their continued commitment to our mission and the patients we serve. We look forward to updating the market on our progress throughout the course of the year.

 

Dr Markku Jalkanen

Chief Executive Officer

 

Dr Frank Armstrong

Chairman

 

 

 

 

 

 

 

 

Consolidated Income Statement, IFRS

EUR’000

Unaudited

1-6/2022

6 months

Unaudited
1-6/2021
6 months

1-12/2021
12 months

Revenue

0

0

0

Other operating income

485

1 210

6 137

Research and development expenses

(10 047)

(9 008)

(17 369)

General and administrative expenses

(3 801)

(2 626)

(9 876)

Operating loss

(13 364)

(10 424)

(21 108)

Financial expense

(430)

(191)

(235)

Financial income

692

61

165

Loss before tax

(13 102)

(10 554)

(21 179)

Tax expense

(19)

(6)

(15)

Loss for the period

(13 121)

(10 560)

(21 194)

Translation difference

11

 

(15)

Comprehensive loss for the period attributable to the equity holders of the Parent company

(13 110)

(10 560)

(21 209)

 

 

 

 

Loss per ordinary share

 

 

 

Basic and diluted loss per share, EUR

(0.25)

(0.21)

(0.42)

 

 

Consolidated Balance Sheet, IFRS

 

EUR’000

Unaudited
30 June 2022

Unaudited
30 June 2021

31 December 2021

Assets

 

 

 

Non-current assets

 

 

 

Machinery and equipment

17

19

20

Right-of-use-assets

98

273

187

Intangible assets

1 011

920

899

Prepayments and other receivables

53

53

53

Total non-current assets

1 179

1 265

1 159

 

 

 

 

Current assets

 

 

 

Prepayments and other receivables

5 614

3 634

5 170

Cash and cash equivalents

9 936

6 967

6 853

Total current assets

15 550

10 600

12 023

 

 

 

 

Total assets

16 729

11 865

13 182

 

 

 

 

 

Unaudited
30 June 2022

Unaudited
30 June 2021

31 December 2021

Capital and reserves attributable to the equity holders of the Parent company

 

 

 

Share capital

2 691

2 691

2 691

Reserve for invested unrestricted equity

120 839

106 396

116 507

Translation difference

2

(1)

(15)

Accumulated deficit

(128 726)

(106 274)

(116 265)

Total equity

(5 194)

2 813

2 919

 

 

 

 

Non-current liabilities

 

 

 

Borrowings

12 250

3 231

2 918

Lease liabilities

0

109

16

Other liabilities

539

146

151

Total non-current liabilities

12 789

3 486

3 085

 

 

 

 

Current liabilities

 

 

 

Borrowings

0

0

429

Lease liabilities

106

178

184

Trade payables

7 791

4 555

5 295

Other current liabilities

1 238

832

1 270

Total current liabilities

9 135

5 565

7 178

 

 

 

 

Total liabilities

21 924

9 052

10 263

 

 

 

 

Total equity and liabilities

16 729

11 865

13 182

 

 

Consolidated Statement of Changes in Equity, IFRS

 

 

EUR’000

Share capital

Reserve for invested unrestricted equity

Translation difference

Accumulated deficit

Total equity

Balance as at 31 December 2020

2 691

92 015

2

-96 557

-1 849

Comprehensive loss for the last six months 2021

0

 

(1)

(10 560)

(10 561)

 

 

 

 

 

 

Transactions with equity holders of the Parent company

 

 

 

 

 

Issue of ordinary shares

0

14 381

0

0

14 381

Share-based compensation

0

0

0

843

843

 

0

14 381

0

843

15 224

 

 

 

 

 

 

 

Balance as at 30 June 2021

2 691

106 396

(1)

(106 274)

2 813

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive loss for the year 2021

0

0

(15)

(21 194)

(21 209)

 

 

 

 

 

 

Transactions with equity holders of the Parent company

 

 

 

 

 

Issue of ordinary shares

0

24 492

 

0

24 492

Share-based compensation

0

0

 

1 487

1 487

 

0

24 492

0

1 487

25 980

 

 

 

 

 

 

 

Balance as at 31 December 2021

2 691

116 507

(15)

(116 265)

2 919

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive loss for the last six months 2022

0

0

11

(13 121)

(13 110)

 

 

 

 

 

 

Transactions with equity holders of the Parent company

 

 

 

 

 

Issue of ordinary shares

0

4 332

 

0

4 332

Share-based compensation

0

0

0

665

665

 

0

4 332

0

665

4 997

 

 

 

 

 

 

Balance as at 30 June 2022

2 691

120 839

2

(128 726)

(5 194)

 

 

Consolidated Cash Flow Statement, IFRS

€’000

Unaudited 1-6/2022 6 months

Unaudited 1-6/2021 6 months

1-12/2021
12 months

 

Cash flow from operating activities

 

 

 

Loss before tax

(13 102)

(10 554)

(21 194)

Adjustments for:

 

 

 

Received grant

(415)

(642)

(1 387)

Depreciation and amortisation

151

142

307

Interest expense

529

88

216

Tax expense

(19)

10

16

Unrealised foreign exchange loss (gain), net

(12)

(27)

153

Share-based compensation

665

843

1 487

Adjusted loss from operations before changes in working capital

(12 204)

(10 141)

(20 402)

Change in net working capital:

 

 

 

Prepayments and other receivables (increase -)

819

(660)

(1 919)

Trade payables (increase +)

1 211

(21)

723

Other liabilities

(1 014)

(337)

(566)

Cash used in operations

(11 187)

(11 158)

(22 163)

Taxes paid

0

(15)

(16)

Interest paid

(108)

(30)

(40)

Net cash used in operating activities

(11 295)

(11 204)

(22 218)

 

 

 

 

Cash flow from investing activities

 

 

 

Payments for intangible assets

(167)

(385)

(461)

Payments for equipment

0

(7)

(13)

Net cash used in investing activities

(167)

(392)

(473)

 

 

 

 

Cash flow from financing activities

 

 

 

Proceeds from issue of shares

4 331

14 382

24 492

Proceeds from borrowings

10 389

264

662

Repayment of borrowings

(108)

(122)

(122)

Proceeds from grants

0

0

750

Payment of lease liabilities

(96)

(96)

(191)

Net cash from financing activities

14 516

14 427

25 590

 

 

 

 

Net increase (+) / decrease (-) in cash and cash equivalents

3 054

2 831

2 899

Effect of exchange rate changes on cash and cash equivalents

28

27

(153)

 

 

 

 

Cash and cash equivalents at 1 January

6 853

4 108

4 108

Cash and cash equivalents at the end of period

9 936

6 967

6 853

 

 

 

 

 

Notes to the interim financial report

 

Faron Pharmaceuticals Ltd (the “Company”) is a clinical stage biopharmaceutical company incorporated and domiciled in Finland, with its headquarters at Joukahaisenkatu 6, 20520 Turku, Finland. The Company currently has a pipeline based on the endothelial receptors involved in regulation of immune response, in oncology and organ damage.

 

The Company has been listed on the London Stock Exchange’s AIM market since 17 November 2015, with a ticker FARN, and since 3 December 2019, the Company has been listed on the Nasdaq First North Growth Market list with a ticker FARON.

 

2.    Summary of significant accounting policies

 

2.1.    Basis of preparation

 

The unaudited H1 interim financial report has been prepared in accordance with the International Financial Reporting Standards of the International Accounting Standards Board (IASB) and as adopted by the European Union (IFRS) and the interpretations of the International Financial Reporting Standards Interpretations Committee (IFRIC).

The principal accounting policies applied in the preparation of these interim financial report is set out below. The Company has consistently applied these policies to all the periods presented, unless otherwise stated. The areas of the report involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the interim financial report, are disclosed in note 2.2.

The unaudited interim financial report incorporate the parent company, Faron Pharmaceuticals Ltd, and all subsidiaries (the “Group”).

All amounts are presented in thousands of euros, unless otherwise indicated, rounded to the nearest euro thousand.

 

2.2.         Going concern

 

The Group has forecasted its estimated cash requirements over the next twelve months. In order to make these forecasts the Group has made a number of assumptions regarding the quantity and timing of future expenditure and income as well as other key factors. Though these estimates have been made with caution and care, they continue to contain a significant amount of uncertainty. Based on the forecast the Group believes that it has adequate financial resources to continue its operations into Q1 2023 and therefore this unaudited financial report has been prepared on a going concern basis. In its meeting on 24 August 2022 the Board of Directors of the Company approved the publishing of this interim financial report.

 

The Group has taken several acts to secure further financing during the rest of the year 2022. The Directors believe that the Group can gain access to further resources to sustain operations over the next 12 months. At this stage the Group cannot disclose any of these options.

 

Because the additional finance is not committed at the date of issuance of these H1 reports, these circumstances represent a material uncertainty that may cast significant doubt on the Group’s ability to continue as a going concern. Should the Group be unable to obtain further finance such that the going concern basis of preparation were no longer appropriate, adjustments would be required, including to reduce balance sheet values of assets to their recoverable amounts, to provide for further liabilities that might arise.

 

 

Financial Statement January 1 to December 31 2021

Faron Pharmaceuticals Ltd.

(“Faron” or “Company”)

 

Faron Financial Statement Release January 1 to December 31, 2021

 

Financial statement release March 25, 2022 at 09:00 AM (EET) / 07:00 AM (GMT) / 03:00 AM (EDT) 

Inside information

 

2021 Highlights

  • Bexmarilimab shows compelling antitumor activity in multiple advanced treatment resistant solid tumor types as a monotherapy with strongest clinical benefit rate (partial response or stable disease) observed in five different tumor types – cutaneous melanoma (30%), gastric cancer (30%), cholangiocarcinoma (30%), hepatocellular carcinoma (40%) and breast cancer (40%)
  • Biomarker analysis showed patients with low baseline levels of inflammatory cytokines in blood achieved significantly higher clinical benefit following treatment with bexmarilimab monotherapy
  • First patient dosed in Phase II/III HIBISCUS trial assessing Traumakine® as a first-line treatment for hospitalized COVID-19 patients
  • Balance sheet strengthened by two successful share placings totaling EUR 25.6 million gross, both including investment from European Investment Council (EIC) Fund, a breakthrough initiative from the European Commission
  • Virtual briefing and Q&A to be held today at 8:00 AM (EDT) / 12:00 PM (GMT) / 2:00 PM (EET)

 

Major Events After the 2021 Financial Year

  • Landmark analysis estimates 70% nine-month overall survival rate (11 months from initiation of treatment) for Phase I/II MATINS study patients who benefited from treatment with bexmarilimab and 26% for patients who did not benefit from treatment
  • Secured a debt funding agreement with IPF Partners for up to EUR 30 million – EUR 10 million was accessed in February 2022, with an additional EUR 20 million available in the future, subject to certain conditions being met
  • Marie-Louise Fjällskog, M.D., Ph.D., joined Faron’s Global Management Team as Chief Medical Officer, bringing with her over 30 years of experience in clinical oncology, translational research, and drug development

 

 

TURKU, FINLAND / BOSTON, MA Faron Pharmaceuticals Ltd (AIM: FARN, First North: FARON), a clinical stage biopharmaceutical company focused on building the future of immunotherapy by harnessing the power of the immune system to tackle cancer and inflammation, today announced audited full-year financial results for January 1 to December 31, 2021 (the “period”) and H2 2021 and provided an overview of recent corporate developments.

 

“I am extremely proud of the progress we made in 2021 across each of our pipeline programs and building our corporate infrastructure to support the ambitious plans we have for 2022 and beyond,” said Dr. Markku Jalkanen, Chief Executive Officer of Faron. “Last year we accelerated the development of bexmarilimab as a monotherapy, where it has shown compelling antitumor activity in heavily pre-treated patients across multiple solid tumor types, while also progressing plans to study bexmarilimab in combination with standard of care in first-line solid tumors and in hematological malignancies. We also initiated a study of Traumakine as a first-line treatment for hospitalized COVID-19 patients without prior steroid treatment, which we believe could represent a significant step forward in the treatment of lung failure due to viral infections. We accomplished all of this while also strengthening our balance sheet, adding highly experienced team members and expanding our global footprint with a growing presence in the United States.”

 

HIGHLIGHTS (including post period):

 

Pipeline Highlights

 

Bexmarilimab Faron’s wholly-owned, novel precision cancer immunotherapy candidate, in Phase I/II development for difficult-to-treat cancers.

 

  • Compelling antitumor activity in multiple advanced solid tumor types was reported from patients enrolled in the completed Part I and ongoing Part II of the MATINS study, investigating bexmarilimab as a potential monotherapy in patients with solid tumors who have exhausted all treatment options. The strongest results were observed in cutaneous melanoma, gastric cancer, cholangiocarcinoma, hepatocellular carcinoma and breast cancer with a 30.0% — 40.0% clinical benefit rate (CBR) across these tumor types. 
  • Landmark analysis estimates 70% nine-month overall survival rate for MATINS patients who benefited from treatment with bexmarilimab and 26% for patients who did not benefit from treatment. Median overall survival has not yet been reached in the clinical benefit patient group.
  • Biomarker analysis shows patients with low interferon gamma (IFNy) and tumor necrosis factor alpha (TNFa) levels experienced significantly higher clinical benefit following treatment with bexmarilimab, which is opposite to what is usually seen with checkpoint inhibitors and other T cell activating agents, meaning bexmarilimab has the potential to bring the promise of immunotherapy to a much broader patient population compared to the relatively small percentage of cancer patients benefiting from checkpoint inhibitor therapies today.
  • A more than 100% increase in IFNy levels was seen after the first cycle of bexmarilimab treatment among patients who experienced clinical benefit. In certain patients, bexmarilimab is able to turn cold tumors into hot tumors and may serve as a catalyst for the immune system allowing initially checkpoint inhibitor resistant patients to become responsive to PD-1 blockade.
  • Further clinical trials are planned to start in 2022 to investigate bexmarilimab’s potential in additional clinical settings, including in combination with anti-PD-1 therapy in selected advanced solid tumors and in combination with standard of care in hematological malignancies.
  • A key patent with claims protecting the composition of matter of bexmarilimab was granted by the United States Patent and Trademark Office and equivalent Japanese patent office. This patent family covers bexmarilimab’s binding sequences and Clever-1’s corresponding epitope – specific elements of the antibody-antigen binding site – with an expected expiry date, not including any potential extensions, of 2037. The European Patent Office also issued an allowance letter, which means that more than 80% of pharmaceutical markets are now covered with this patent family.
  • A new role for soluble Clever-1 was identified, related to its capacity to control T cell activation. The scientific findings, from tests on MATINS patients’ plasma, suggest that their high levels of free, soluble Clever-1 can act as a direct inhibitor of T cell activation, providing a greater immunosuppressive effect than previously expected and indicating broader applicability for bexmarilimab. A new patent application has been filed seeking protection for these inventions and related applications.

 

TraumakineFaron’s investigational intravenous (IV) interferon beta-1a therapy, in development for the treatment of acute respiratory distress syndrome (ARDS) and other ischemic or hyperinflammatory conditions.

 

  • Dosing commenced in the Phase II/III HIBISCUS trial investigating Traumakine in the treatment of hospitalized COVID-19 patients compared to corticosteroid treatment with dexamethasone. The US Department of Defense (DoD) selected the HIBISCUS trial to receive $6.1 million of funding from the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
  • Building on Faron’s already strong IP portfolio for Traumakine, Faron signed a sub-license agreement covering a relevant manufacturing patent in the US. Faron also applied for patent protection relating to Traumakine’s induction of CD73 for organ protection, through the sequential use of IV interferon beta-1a followed by corticosteroids for the treatment of systemic inflammation.
  • Scientific Reports published data from INFORAAA study showing Traumakine induced up-regulation of CD73 was associated with 100% survival in surgically operated ruptured abdominal aorta aneurysm (RAAA) patients. These patients are at high risk of ischemia-reperfusion injury, with expected mortality between 30-40%.
  • Partnership established with the 59th Medical Wing of the U.S. Air Force and U.S. Army and U.S. Army Institute of Surgical Research to explore the use of Traumakine for organ protection in combat wounds leading to multi-organ failure from ischemia and reperfusion.
  • New manufacturing process is progressing as planned in collaboration with AGC Biologics.

 

HAEMATOKINEAn AOC3 (amine oxidase copper containing 3) protein inhibitor targeting Vascular Adhesion Protein-1 (VAP-1) in development for use in regenerative medicine and to treat hematological malignancies.

 

  • Faron acquired rights for this potential use of AOC3 inhibitors and will be responsible for the future development of Haematokine and for the management, prosecution, maintenance and filing of patent applications.
  • The multidisciplinary journal Cellular and Molecular Life Sciences published research showing the inhibition of VAP-1 potentially supports the expansion of human hematopoietic stem cells (HSC), which are essential to the formation of new cells within blood. This approach has the potential to benefit a variety of conditions where an expansion of HSC is needed. This includes bone marrow transplantation, where approximately 25% of transplants fail due to poor expansion of transplanted cells.

 

Corporate Highlights

  • Balance sheet was strengthened by raising EUR 25.6 million gross through private placements of new ordinary shares. This includes two placements, which encompassed existing and new investors, including the European Innovation Council Fund, a breakthrough initiative from the European Commission. In February 2022, Faron also announced a debt funding agreement with IPF Partners for up to EUR 30 million. EUR 10 million was accessed upon signing of the agreement with an additional EUR 20 million available in the future through additional tranches of EUR 5 million and EUR 15 million, subject to certain conditions being met.
  • Anne Whitaker joined the Faron Board of Directors, bringing more than 25 years of experience in the life science industry, including senior leadership roles with large pharmaceutical, biotech and specialty pharma companies. Anne is the current Chairman of the Board for Aerami Therapeutics Holdings, Inc. Anne previously served as Chief Executive Officer of Novoclem Therapeutics, Inc., Executive Vice President at Bausch Health, President and Chief Executive Officer of Synta Pharmaceuticals and as President, North America Pharmaceuticals at Sanofi.
  • Marie-Louise Fjällskog, M.D., Ph.D., joined Faron’s Global Management Team as Chief Medical Officer, bringing with her over 30 years of experience in clinical oncology, translational research, and drug development. Dr. Fjällskog joined Faron from Sensei Biotherapeutics (SNSE), a Nasdaq listed immuno-oncology company. As Chief Medical Officer at Sensei, she was responsible for leading clinical and development strategy and operations. Previously, she served as Vice President, Clinical Development at Merus (MRUS) and Infinity Pharmaceuticals (INFI) where she led development of multiple small molecule and immuno-oncology clinical programs. She was also formerly Global Clinical Program Leader at the Novartis Institute for Biomedical Research.
  • Faron hosted a virtual R&D Day in February 2022 presenting the Company’s plans to accelerate the development of bexmarilimab. The event was hosted by Dr. Markku Jalkanen, Chief Executive Officer, and members of the Global Management Team including Dr. Marie-Louise Fjällskog, Chief Medical Officer and Dr. Juho Jalkanen, Chief Operating Officer. External perspectives were provided by Dr. Tyler Curiel, Professor of Medicine and Microbiology, Immunology & Molecular Genetics at The University of Texas Health Science Center at San Antonio, United States and Dr. Maija Hollmén, Adjunct Professor of Tumour Immunology, Group Leader and Academy Research Fellow at the MediCity Research Laboratory, Institute of Biomedicine, University of Turku, Finland.

 

Impact of COVID-19

  • Despite the ongoing global pandemic, the Company was able to continue operations with limited disruptions. This included the successful planning and execution of its clinical trials, which proceeded as planned.
  • Additionally, Faron closely followed and strictly complied with the regulations and recommendations of the Finnish National Institute for Health and Welfare (THL) and other relevant local and international authorities to ensure the safety of its employees, study subjects and partners.

 

 Financial

  • On December 31, 2021, the Company held cash balances of EUR 6.9 million (2020: EUR 4.1 million).
  • Loss for the period for the financial year ended December 31, 2021 was EUR 21.2 million (2020: EUR 16.9 million).
  • Net assets on December 31, 2021 were EUR 2.9 million (2020: EUR -1.8 million).
  • In February 2021, the Company successfully raised a total of EUR 15.0 million gross (EUR 14.4 million net) from new and existing shareholders, through issuance of a total of 3,521,127 new ordinary shares. In September 2021, the Company successfully raised a total of EUR 10.6 million gross (EUR 10.1 million net) from new and existing shareholders, through issuance of a total of 2,763,158 new ordinary shares. Proceeds from both raises will be used to accelerate and expand the clinical development of the Company’s main drug candidates and to strengthen the Company’s balance sheet.
  • Post period, in February 2022, Faron secured a debt funding agreement with IPF Partners for up to EUR 30 million. EUR 10 million was accessed upon signing of the agreement with an additional EUR 20 million available in the future through additional tranches of EUR 5 million and EUR 15 million, subject to certain conditions being met.

 

 

Consolidated key figures, IFRS

 

EUR ’000

Unaudited

7-12/2021
6 months

Unaudited

7-12/2020
6 months

1-12/2021
12 months

1-12/2020
12 months

Revenue

0

0

0

0

Other operating income

4,927

1,379

6,137

2,122

Research and Development expenses

(8,361)

(8,345)

(17,369)

(13,879)

General and Administrative expenses

(7,250)

(2,543)

(9,876)

(4,897)

Loss for the period

(10,649)

(9,603)

(21,209)

(16,946)

 

 

Unaudited

7-12/2021
6 months

Unaudited

7-12/2020
6 months

1-12/2021
12 months

1-12/2020
12 months

 

 

 

 

 

Loss per share EUR

(0.21)

(0.22)

(0.42)

(0.37)

Number of shares at end of period

53,232,032

46,896,747

53,232,032

46,896,747

Average number of shares

51,836,953

44,606,204

50,723,964

45,712,111

 

 

 

EUR ’000

Unaudited

30 June 2021

Unaudited

30 June 2020

31 December 2021

31 December 2020

Cash and cash equivalents

6,967

11,627

6,853

4,108

Equity

2,813

7,313

2,919

(1,849)

Balance Sheet total

11,865

14,343

13,182

8,367

 

 

Board of Directors’ Proposal on the Dividend

The Group’s loss for the accounting period was EUR 21,208,864.89  (2020: EUR 16,946,261.84).

The Board of Directors does not recommend the payment of a dividend (2020: nil).

 

24 March 2022

Faron Pharmaceuticals Ltd

Board of Directors

 

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 (“MAR”).

 

Webcast for investors, analysts and media

A live webcast and Q&A session for investors, analysts and media will be hosted by Dr. Markku Jalkanen, Chief Executive Officer of Faron, and Toni Hänninen, Chief Financial Officer of Faron, at 2:00 pm EET / 12:00 pm GMT / 8:00 am EDT today. The Full-year results release for 2021, presentation, webcast details, and Annual Report 2021 will be made available at www.faron.com/investors. A replay of the analyst briefing will be made available shortly afterwards.

 

Webcast link: https://faron.videosync.fi/2021-results

 

 

For more information please contact:

 

Media / Investor Contact

Faron Pharmaceuticals

Eric Van Zanten

Head of Communications

eric.vanzanten@faron.com

investor.relations@faron.com

Phone: +1 (610) 529-6219

 

Cairn Financial Advisers LLP, Nomad

Sandy Jamieson, Jo Turner

Phone: +44 (0) 207 213 0880

 

Peel Hunt LLP, Broker

Christopher Golden, James Steel

Phone: +44 (0) 20 7418 8900

 

Sisu Partners Oy, Certified Adviser on Nasdaq First North

Juha Karttunen

Phone: +358 (0)40 555 4727

Jukka Järvelä

Phone: +358 (0)50 553 8990

 

Consilium Strategic Communications

Mary-Jane Elliott, David Daley, Lindsey Neville

faron@consilium-comms.com

Phone: +44 (0)20 3709 5700

 

 

Publication of financial information during year 2022

Faron’s financial statements for full year 2021 will be published today, 25 March 2022 and will also be available on the Company’s website at https://www.faron.com/investors/results. The half-year financial report for the period 1 January to 30 June 2022 is scheduled to be published on 25 August 2022. The Annual General Meeting is planned for 22 April 2022. A separate stock exchange notice will be issued by Faron’s Board of Directors to convene the meeting.

 

 

About Bexmarilimab

Bexmarilimab is Faron’s wholly-owned, investigative precision immunotherapy with the potential to provide permanent immune stimulation for difficult-to-treat cancers through targeting myeloid cell function. A novel anti-Clever-1 humanised antibody, bexmarilimab targets Clever-1 positive (Common Lymphatic Endothelial and Vascular Endothelial Receptor 1) tumour associated macrophages (TAMs) in the tumour microenvironment, converting these highly immunosuppressive M2 macrophages to immune stimulating M1 macrophages. In mouse models, bexmarilimab has successfully blocked or silenced Clever-1, activating antigen presentation and promoting interferon gamma secretion by leukocytes. Additional pre-clinical studies have proven that Clever-1, encoded by the Stabilin-1 or STAB-1 gene, is a major source of T cell exhaustion and involved in cancer growth and spread. Observations from clinical studies to date indicate that Clever-1 has the capacity to control T cell activation directly, suggesting that the inactivation of Clever-1 as an immune suppressive molecule could be more broadly applicable and more important than previously thought. As an immuno-oncology therapy, bexmarilimab has potential as a single-agent therapy or in combination with other standard treatments including immune checkpoint molecules. Beyond immuno-oncology, it offers potential in infectious diseases, vaccine development and more.

 

About MATINS

The MATINS (Macrophage Antibody To INhibit immune Suppression) study is a first-in-human open label phase I/II clinical trial investigating the tolerability, safety and efficacy of bexmarilimab in ten different hard-to-treat metastatic or inoperable solid tumour cohorts – cholangiocarcinoma, colorectal cancer, cutaneous melanoma, ER+ breast cancer, gastric cancer, hepatocellular carcinoma, ovarian cancer, uveal melanoma, pancreatic cancer and anaplastic thyroid carcinoma – which are all known to host a significant number of Clever-1 positive tumour-associated macrophages (TAMs). The completed Part I of the trial dealt with tolerability, safety and dose escalation. The ongoing Part II is focused on identifying patients who show an increased number of Clever-1 positive TAMs and exploring safety and efficacy. Part III will be focused on assessing efficacy. Data from MATINS have shown that bexmarilimab has the potential to be the first macrophage immune checkpoint therapy. To date, the investigational therapy has been shown to be safe and well-tolerated, making it a low-risk candidate for combination with existing cancer therapies, and has demonstrated early signs of clinical benefit in patients who have exhausted all other treatment options.

 

About Faron Pharmaceuticals Ltd

Faron (AIM: FARN, First North: FARON) is a clinical stage biopharmaceutical company developing novel treatments for medical conditions with significant unmet needs caused by dysfunction of our immune system. The Company currently has a pipeline based on the receptors involved in regulation of immune response in oncology, organ damage and bone marrow regeneration. Bexmarilimab, a novel anti-Clever-1 humanized antibody, is its investigative precision immunotherapy with the potential to provide permanent immune stimulation for difficult-to-treat cancers through targeting myeloid function. Currently in Phase I/II clinical development as a potential therapy for patients with untreatable solid tumors, bexmarilimab has potential as a single-agent therapy or in combination with other standard treatments including immune checkpoint molecules. Traumakine is an investigational intravenous (IV) interferon beta-1a therapy for the treatment of acute respiratory distress syndrome (ARDS) and other ischemic or hyperinflammatory conditions. Traumakine is currently being evaluated in global trials as a potential treatment for hospitalized patients with COVID-19 and with the 59th Medical Wing of the US Air Force and the US Department of Defense for the prevention of multiple organ dysfunction syndrome (MODS) after ischemia-reperfusion injury caused by a major trauma. Faron is based in Turku, Finland. Further information is available at www.faron.com.

 

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”, “hope”, “seek”, ”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 early data from initial patients in the MATINS trial may not be replicated in larger patient numbers and the outcome of clinical trials 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 the ability of the Company to successfully licence its programmes within the anticipated timeframe or at all, 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 or other sources of funding, 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.

 

 

Chairman’s Statement

During 2021, Faron has continued to make significant progress across the business. It has maintained its focus on pipeline delivery, including the initiation of clinical trials and generation of further clinical data. The Company has developed the management team with new hires and raised funds during the period, all of which has been achieved against the continued challenges of COVID-19.

 

A key priority for Faron has been to continue to advance its wholly-owned novel precision cancer immunotherapy candidate, bexmarilimab, through the Phase I/II MATINS clinical trial. Over the course of the year the Company has generated and presented further clinical data showing that heavily pre-treated, late-stage cancer patients who receive clinical benefit from bexmarilimab can achieve long term survival. Through the multiple cohorts tested to date, bexmarilimab has generated compelling efficacy data and has continually been shown to be safe and well-tolerated. Faron is continuing to analyze biomarker data from the trial to better understand which patients are most likely to respond.

 

The Company will continue to accelerate bexmarilimab through clinical development and is planning to study bexmarilimab in combination with other checkpoint inhibitors and as a treatment for hematological malignancies, in addition to the ongoing MATINS trial. The evolving data generated to date suggest bexmarilimab is an active drug with a novel mechanism of action which, I believe, has the potential to play a significant role in the future treatment of cancer patients.

 

2021 saw the COVID-19 pandemic continue to evolve. With the global call for research to identify potential therapies being widely answered by life science companies, including Faron, there has been unprecedented innovation in this space. Despite this, there is still a need for new therapeutic options to treat the serious complications of COVID-19, including acute respiratory distress syndrome (ARDS). As such, Faron was pleased to initiate the Phase II/III HIBISCUS trial, investigating Traumakine, Faron’s investigational intravenous (IV) interferon (IFN) beta-1a therapy, in hospitalized COVID-19 patients.

 

Faron has generated a wealth of data on the potential of Traumakine during its clinical development and we were pleased to publish data from the completed Phase II INFORAAA trial showing the up-regulation of CD73 in surgically operated ruptured abdominal aorta aneurysm (RAAA) patients. The results show the role of CD73 in organ protection and its ability to benefit patients undergoing major surgery, and we remain confident that Traumakine has potential beyond ARDS, across multiple indications, where there continues to be significant unmet medical need.

 

Despite the difficult funding environment due to COVID-19, Faron has successfully secured further investment over the period to progress its pipeline. This is testament not only to the potential of our product candidates but also to the expertise and credibility of the management team. The Board meets regularly to discuss the Company’s performance, review the clinical programs, discuss ongoing business strategy and assess the Company’s financial situation in order to continue to progress the pipeline and deliver value for shareholders.

 

On behalf of the Board, I would like to take this opportunity to thank all the staff at Faron, without whom we would not have achieved so much this year; my colleagues on the Board for their commitment to the Company; our partner organisations and steering committee members for their support and expertise; Faron’s investors for showing continued confidence in the Company and, importantly, the health professionals and patients across our trial network. I would also like to extend a warm welcome to Dr. Marie-Louise Fjällskog, our new Chief Medical Officer. Her knowledge and network will be invaluable to Faron as we continue to accelerate bexmarilimab through clinical development whilst progressing our other product candidates.

 

Finally, I would also like to thank the management team, particularly Dr. Markku Jalkanen, Chief Executive Officer, Toni Hänninen, Chief Financial Officer, and Dr. Juho Jalkanen, Chief Operating Officer, who also acted as interim Chief Medical Officer in 2021, for their leadership. Under their expert guidance, we are looking forward to another year of continued progress during 2022.

 

Dr. Frank Armstrong

Chairman

24 March 2022

 

 

Chief Executive Officer’s Review

Despite the ongoing challenges presented by a global pandemic, 2021 was another year of significant progress for our Company. Each of our pipeline assets moved forward and our quest to harness the power of the immune system to tackle cancer and inflammation is closer to being realized. We believe strongly that all three of our programs, bexmarilimab, Traumakine and Haematokine, have the potential to fundamentally change treatment paradigms and meaningfully improve patient outcomes.

 

Since Faron was founded, our focus has been to challenge the status quo and accelerate innovation. Incremental progress is not good enough. We exist to address areas of significant unmet need; areas where there are no currently approved treatment options, or, in the case of cancer, where far too many patients are not benefiting from recent advances.

 

Bexmarilimab has the potential to bring the promise of immunotherapy to many more patients and in 2021 we significantly advanced its development. Our Phase I/II MATINS (Macrophage Antibody To INhibit immune Suppression) study investigating the safety and efficacy of bexmarilimab showed that patients across five different tumor types experienced disease control rates between 30% and 40%. The data also showed that heavily pre-treated, late-stage cancer patients who receive clinical benefit from bexmarilimab can achieve long term survival. These results are important, and the global community took notice when we presented the data at international cancer meetings including ESMO, ESMO-IO and ASCO.

 

We also learned a great deal in 2021 about which cancer patients are most likely to benefit from treatment with bexmarilimab and what happens in the tumor microenvironment when patients respond to treatment. Biomarkers, which are proteins or other substances that are made at higher amounts by cancer cells than normal cells, are a critical missing link in attempting to identify appropriate candidates for immunotherapy and tailoring immunotherapy treatment regimens. The biomarker analysis we conducted showed clearly that patients with low baseline levels of serum interferon gamma (IFNy) and tumor necrosis factor alpha (TNFa) were more likely to experience clinical benefit following treatment with bexmarilimab. Patients with low levels of pro-inflammatory cytokines experiencing higher clinical benefit is opposite to what is usually seen with currently approved checkpoint inhibitors and other T-cell activating agents.

 

Our analysis also showed that among patients who experienced clinical benefit, IFNy levels increased over 100% after the first cycle of bexmarilimab treatment. Interferon gamma is a marker for inflammation which suggests bexmarilimab may amplify an immune response and serve as a catalyst for the immune system allowing initially checkpoint inhibitor resistant patients to become responsive to PD-1 blockade.

 

This enhanced understanding of who is most likely to respond to treatment with bexmarilimab and what happens in the tumor microenvironment allowed us to refocus and accelerate our development plan in 2021. In addition to the ongoing MATINS trial, we progressed plans to study bexmarilimab in combination with other checkpoint inhibitors and as a treatment for hematological malignancies. We are undertaking an ambitious strategy but given the data we have seen to date and our evolving understanding of which biomarkers will predict response to treatment, we believe bexmarilimab has the potential to broadly impact cancer care.

 

We have also been successful in obtaining long term patent protection for bexmarilimab. During 2021 the United States Patent and Trademark Office and equivalent Japanese patent office approved protection, at least through 2037, for our humanized anti-Clever-1 antibody (bexmarilimab) sequence and the counter binding site of this antibody on Clever-1. Faron has also received an allowance letter from the European Patent Office, which now means that more than 80% of pharmaceutical markets are covered with this patent family.

 

Leading our bexmarilimab development efforts moving forward will be Dr. Marie-Louise Fjällskog, who joined Faron in January 2022 as our new Chief Medical Officer. We were thrilled to add someone of Marie-Louise’s caliber to our team. She has over 30 years of experience in clinical oncology, translational research, and drug development and has held senior R&D roles at several clinical stage biotech companies. She was also formerly Global Clinical Program Leader at the Novartis Institute for Biomedical Research where she led global development of oncology treatments targeting CDK4/6, BCL-2, PD-1, CSF-1 and CD73. 

 

In addition to bexmarilimab, 2021 proved to be an important year for Traumakine as well. Traumakine is our investigational intravenous interferon beta-1a therapy, which we are developing for the treatment of acute respiratory distress syndrome (ARDS) and other ischemic or hyperinflammatory conditions. Traumakine works by up-regulating CD73, a critical enzyme which yields anti-inflammatory adenosine and can prevent fluid from building up in and around organs.

 

In August, dosing commenced in the Phase II/III HIBISCUS trial investigating Traumakine in the treatment of hospitalized COVID-19 patients. While hospitalizations and severity of disease have decreased since the initiation of this study, we continue to believe that Traumakine has the potential to become a powerful treatment option for patients who are at risk of developing ARDS as a consequence of a viral infection, such as COVID-19. This trial is supported the US Department of Defense through funding from the Coronavirus Aid, Relief, and Economic Security Act.

 

Additionally, research highlighting results from our Phase II INFORAAA clinical trial, which examined the effect of Traumakine on mortality of surgically operated ruptured abdominal aorta aneurysm (RAAA) patients, was published in the multidisciplinary journal Scientific Reports. Analysis showed that up-regulation of CD73 following treatment with Traumakine was associated with 100% survival compared to the expected mortality rate for operated RAAA patients, which is between 30-40%. Ischemia-reperfusion injury, tissue damage caused when blood supply returns to tissue after a period of oxygen depletion, is the main cause of death for operated RAAA patients. We believe Traumakine has the potential to prevent acute organ injury following major surgery and polytrauma by reducing inflammation and preventing vascular leakage. This could represent a significant advancement in patient care given there are currently no drugs approved for this condition.

 

Similar to the patent advancements we made with bexmarilimab, our intellectual property (IP) portfolio for Traumakine was also strengthened in 2021 by signing a sub-license agreement covering a relevant manufacturing patent in the US. In addition, we applied for patent protection relating to Traumakine’s induction of CD73 for organ protection, through the sequential use of IV interferon beta-1a followed by corticosteroids for the treatment of systemic inflammation. Adding these patent protections to our already strong IP portfolio will ensure we are able to move each of the potential indications forward with the ultimate goal of making this innovative drug available to patients in the coming years.

 

The third program in our pipeline is Haematokine, an investigational Vascular Adhesion Protein1 (VAP-1) inhibitor. Haematokine blocks VAP-1 enzymatic activity, which supports the expansion of human hematopoietic stem cells. This has the potential to benefit a variety of conditions where an expansion of hematopoietic stem cells is needed. Most notably, this includes bone marrow transplantation, where approximately 25% of transplants fail due to poor expansion of transplanted cells.

 

In November, the multidisciplinary journal Cellular and Molecular Life Sciences published research that aligns with our pre-clinical findings. Pre-clinical studies are continuing, and we believe Haematokine could have broad applicability, not just in hematological malignancies, but across the field of regenerative medicine.

 

Our focus for 2022 will be to accelerate bexmarilimab’s clinical development, which in addition to the ongoing MATINS trial will include the initiation of trials investigating bexmarilimab in a first line setting in combination with other checkpoint inhibitors and as a treatment for hematological malignancies. We have a responsibility to the millions of cancer patients across the globe currently not benefiting from existing treatment options to move this novel asset forward as quickly as possible. We will move with urgency because patients can’t wait.

 

I would like to thank our shareholders for their continued support of our Company and the management team. I would also like to express my profound gratitude to every Faronial, which is what we call our team members. They come to work each day committed to disrupting the current treatment landscape and fundamentally improving patient outcomes.

 

As critical as 2021 was, there is no doubt that 2022 will be the most important year in the history of our Company. There is also no doubt that with the team we have in place and with your continued support, we are positioned to exceed even our most ambitious goals.

 

Dr. Markku Jalkanen

Chief Executive Officer

24 March 2022

 

Financial Review

Despite challenging market conditions, we were able to conduct two successful fundraising rounds in 2021. Combined, they raised EUR 25.6 million gross and both rounds included new investors. Both also included investments by the European Investment Council (EIC) Fund, which is focused on investing in companies across Europe developing breakthrough and disruptive technologies. We were proud to become the first publicly listed company to receive an investment from the EIC Fund.

 

As a result of these fundraising efforts, the Company’s net cash flow in 2021 showed EUR 2.9 million positive. We were able to accomplish this while also increasing R&D and G&A expenditures.

 

Post period, in February 2022, Faron secured a debt funding agreement with IPF Partners, one of the leading alternative financing providers focused on the healthcare sector, for up to EUR 30 million. EUR 10 million was accessed upon signing of the agreement with an additional EUR 20 million available in the future, subject to certain conditions being met. This non-dilutive funding agreement strengthened our financial position and gives us the flexibility to access supplemental and inexpensive capital as we continue to accelerate the development of our pipeline assets.

 

Revenue and Other Operating Income

The Company’s revenue was EUR 0.0 million for the year ended 31 December 2021 (2020: EUR nil).

The Company recorded EUR 6.1 million (2020: EUR 2.1 million) of other operating income. This consisted of mainly of the result of the arbitration ruling in favor of Faron in its case against Rentschler Biopharma SE (EUR 3.8 million) and the rest consists of government grant and loan.

 

Research and Development Costs

R&D costs increased by EUR 3.5 million from EUR 13.9 million in 2020 to EUR 17.4 million in 2021. The costs of outsourced clinical trial services were decreased by EUR 0.9 million from EUR 4.4 to EUR 3.5 million. The cost of employee benefits was increased by EUR 0.4 million from EUR 2.9 to EUR 3.3 million, mainly driven by additional headcount.

 

General and Administration Costs

Administrative expenses increased by EUR 5.0 million from EUR 4.9 million in 2020 to EUR 9.9 million in 2021. The increase was mainly due to the EUR 3.1 million increase in other G&A costs, mainly driven by legal expenses, which were offset by other income. Further, employee benefits increased by EUR 1.0 million mainly driven by additional headcount.

 

Taxation

The Company’s tax credit for the fiscal year 2021 can be recorded only after the Finnish tax authorities have approved the tax report and confirmed the amount of tax-deductible expenses. The total amount of cumulative tax losses carried forward approved by tax authorities on 31 December 2021 was EUR 42.6 million (2020: EUR 38.2 million). The Company estimates that it can utilise most of these during the years 2020 to 2021 by offsetting them against future profits. In addition, Faron has EUR 70.1 million of

R&D costs incurred in the financial years 2010 – 2020 that have not yet been deducted from taxation. This amount can be deducted over an indefinite period at the Company’s discretion.

 

Losses

Loss before income tax was EUR 21.2 million (2020: EUR 16.9 million). Net loss for the year was EUR 21.2 million (2020: EUR 16.9 million), representing a loss of EUR 0.42 per share (2020: EUR 0.37 per share) (adjusted for the changes in number of issued shares).

 

Cash Flows

Net cash flow was EUR 2.9 million positive for the year ended 31 December 2021 (2020: EUR 2.8 million negative). Cash used for operating activities increased by EUR 4.7 million to EUR 22.2 million for the year, compared to EUR 17.5 million for the year ended 31 December 2020. This increase was mostly driven by an increase in R&D investments. Net cash inflow from financing activities was EUR 25.6 million (2020: EUR 14.8 million) mainly due to the successful equity placings completed in February 2021 and September 2021.

 

Fundraising

In February 2021, the Company successfully raised a total of EUR 15.0 million gross (EUR 14.4 million net) from new and existing shareholders, through issuance of a total of 3,521,127 new ordinary shares. In September 2021, the Company successfully raised a total of EUR 10.6 million gross (EUR 10.1 million net) from new and existing shareholders, through issuance of a total of 2,763,158 new ordinary shares. Proceeds from both raises will be used to accelerate and expand the clinical development of the Company’s main drug candidates and to strengthen the Company’s balance sheet. Post period, in February 2022, Faron secured a debt funding agreement with IPF Partners for up to EUR 30 million. EUR 10 million was accessed upon signing of the agreement with an additional EUR 20 million available in the future, subject to certain conditions being met.

 

Financial Position

As at 31 December 2021, total cash and cash equivalents held were EUR 6.9 million (2019: EUR 4.1 million).

 

Going Concern

As part of their going concern review, the Directors have followed the Finnish Limited Liability Companies Act, the Finnish Accounting Act and the guidelines published by the Financial Reporting Council entitled “Guidance on the Going Concern Basis of Accounting and Reporting on Solvency and Liquidity Risks – Guidance for directors of companies that do not apply the UK Corporate Governance Code”. The Company and its subsidiaries (the “Group”) are subject to a number of risks similar to those

of other development stage pharmaceutical companies.

 

These risks include, amongst others, generation of revenues in due course from the development portfolio and risks associated with research, development, testing and obtaining related regulatory approvals of its pipeline products. Ultimately, the attainment of profitable operations is dependent on future uncertain events which include obtaining adequate financing to fulfil the Group’s commercial and development activities and generating a level of revenue adequate to support the Group’s cost structure.

The Group made a net loss of EUR 21.2 million during the year ended 31 December 2021. It had a positive equity of EUR 2.9 million including an accumulated deficit of EUR 116.265 million. As at that date, the Group had cash and cash equivalents of EUR 6.9 million.

 

The Directors have prepared detailed financial forecasts and cash flows looking beyond 12 months from the date of the approval of these financial statements. In developing these forecasts, the Directors have made assumptions based upon their view of the current and future economic conditions that are expected to prevail over the forecast period. The Directors estimate that the cash held by the Group together with known receivables will be sufficient to support the current level of activities into the fourth quarter of 2022. The Directors are continuing to explore sources of finance available to the Group and they believe they have a reasonable expectation that they will be able to secure sufficient cash inflows for the Group to continue its activities for not less than 12 months from the date of approval of these financial statements; they have therefore prepared the financial statements on a going concern basis. Because the additional finance is not committed at the date of issuance of these financial statements, these circumstances represent a material uncertainty that may cast significant doubt on the Company’s ability to continue as going concern. Should the Group be unable to obtain further finance such that the going concern basis of preparation were no longer appropriate, adjustments would be required, including to reduce balance sheet values of assets to their recoverable amounts, to provide for further liabilities that might arise.

 

Headcount

Headcount of the Company at the end of year was 37 (2020: 30).

 

Shares and Share Capital

During the period 1 January to 31 December 2021, the Company, using the share authorities granted at the Annual General Meeting held on 18 May 2020, issued a total of 3,521,127 new ordinary shares at an issuance price of EUR 4.26 per share. During the same period, the Company, using the share authorities granted at the Annual General Meeting held on 23 April 2021, issued a total of 2,763,158 new ordinary shares at an issuance price of EUR 3.80 per share.

 

The subscription price net of costs was credited in full to the Company’s reserve for invested unrestricted equity, and the share capital of the Company was not increased.

 

The Company has no shares in treasury; therefore at the end of 2021 the total number of voting rights was 53,232,032.

 

Legal Proceedings

As announced by the Company on 9 November 2021, the arbitration tribunal appointed by the Arbitration Institute of the Stockholm Chamber of Commerce (SCC) ruled in favor of Faron in its case against Rentschler Biopharma SE (“Rentschler”). Faron was seeking damages from Rentschler for unfounded termination of an agreement concerning the manufacturing process for Traumakine. As a result of the favorable arbitration award, Rentschler was ordered to pay Faron EUR 3.8 million in damages. The parties were jointly and severally liable towards the arbitral tribunal and the SCC for the fees and expenses of the arbitral tribunal and the fees of the SCC, which were paid in equal shares. In addition, each party carried its own legal costs. A third-party recovery services provider funded the proceedings for Faron. The funder received compensation from Faron in accordance with the litigation funding agreement. 

 

Toni Hänninen

Chief Financial Officer

24 March 2022

 

 

 

Consolidated Income Statement, IFRS

 EUR ’000

Unaudited

7-12/2021
6 months

Unaudited

7-12/2020
6 months

1-12/2021
12 months

1-12/2020
12 months

Revenue

0

0

0

0

Other operating income

4,927

1,379

6,137

2,122

Research and development expenses

(8,361)

(8,345)

(17,369)

(13,879)

General and administrative expenses

(7,250)

(2,543)

(9,876)

(4,897)

Operating loss

(10,684)

(9,509)

(21,108)

(16,654)

Financial expense

(44)

(160)

(235)

(389)

Financial income

103

76

165

109

Loss before tax

(10,625)

(9,593)

(21,178)

(16,934)

Tax expense

(9)

(10)

(16)

(10)

Loss for the period

(10,634)

(9,603)

(21,194)

(16,944)

 

 

 

 

 

 

Other comprehensive loss

(15)

 

(15)

2

Total comprehensive loss for the period

(10,649)

(9,603)

(21,209)

(16,946)

 

 

 

 

 

Loss per ordinary share

 

 

 

 

Basic and diluted loss per share, EUR

(0.21)

(0.22)

(0.42)

(0.37)

 

 

Consolidated Balance Sheet, IFRS

EUR ’000

31 December 2021

31 December 2020

Assets

 

 

Non-current assets

 

 

Machinery and equipment

20

14

Right-of-use-assets

187

361

Intangible assets

899

565

Prepayments and other receivables

53

56

Total non-current assets

1,159

996

 

 

 

Current assets

 

 

Prepayments and other receivables

5,170

3,263

Cash and cash equivalents

6,853

4,108

Total current assets

12,023

7,371

 

 

 

Total assets

13,182

8,367

 

 

 

Equity and liabilities

 

 

 

 

 

Capital and reserves attributable to the equity holders of the Company

 

 

Share capital

2,691

2,691

Reserve for invested unrestricted equity

116,507

92,015

Accumulated deficit

(116,265)

(96,557)

Translation difference

(15)

2

Total equity

2,919

(1,849)

 

 

 

Non-current liabilities

 

 

Borrowings

2,918

2,728

Lease liabilities

16

199

Other liabilities

151

786

Total non-current liabilities

3,085

3,713

 

 

 

Current liabilities

 

 

Borrowings

429

122

Lease liabilities

184

176

Trade payables

2,229

2,115

Accruals and other current liabilities

4,336

4,090

Total current liabilities

7,178

6,503

 

 

 

Total liabilities

10,263

10,216

 

 

 

Total equity and liabilities

13,182

8,367

 

Consolidated Statement of Changes in Equity, IFRS

EUR ’000

Share capital

Reserve for invested unrestricted equity

Translation difference

Accumulated deficit

Total equity

Balance as at 31 December 2019

2,691

78,916

(79,997)

1,610

 

 

 

 

 

 

Comprehensive loss for the period

2

(16,946)

(16,944)

 

 

 

 

 

 

Transactions with equity holders of the Company

 

 

 

 

 

Issue of ordinary shares, net of transaction costs EUR 1,004 thousand

13,098

13,098

Share-based compensation

386

386

 

13,098

386

13,484

 

 

 

 

 

 

Balance as at 31 December 2020

2,691

92,015

2

(96,557)

(1,849)

 

 

 

 

 

 

Comprehensive loss for the period

(15)

(21,194)

(21,209)

 

 

 

 

 

 

Transactions with equity holders of the Company

 

 

 

 

 

Issue of ordinary shares, net of transaction costs EUR 1,067 thousand

24,492

24,492

Share-based compensation

1,487

1,487

 

24,492

1,487

25,980

Balance as at 31 December 2021

2,691

116,507

(15)

(116,265)

2,919

 

Consolidated Cash Flow Statement, IFRS

EUR ’000

Unaudited

7-12/2021
6 months

Unaudited

7-12/2020
6 months

1-12/2021
12 months

1-12/2020
12 months

Cash flow from operating activities

 

 

 

 

Loss before tax

(10,640)

(9,593)

(21,194)

(16,936)

Adjustments for:

 

 

 

 

Received grant

(745)

(587)

(1,387)

(587)

Depreciation and amortisation

165

153

307

283

Interest expense

128

56

216

149

Tax expense

6

10

16

10

Unrealised foreign exchange loss (gain), net

434

242

153

117

Share-based compensation

644

386

1,487

386

Adjusted loss from operations before changes in working capital

(10,008)

(9,333)

(20,402)

(16,578)

Change in net working capital:

 

 

 

 

Prepayments and other receivables

(-1259)

(1,631)

(1,919)

(1,097)

Trade payables

744

1,878

723

1,641

Other liabilities

24

(83)

(565)

(1,416)

Cash used in operations

(10,499)

(9,169)

(22,163)

(17,450)

Taxes paid

(1)

(1)

(16)

(1)

Interest paid

(10)

1

(40)

(28)

Net cash used in operating activities

(10,508)

(9,169)

(22,218)

(17,479)

 

 

 

 

 

Cash flow from investing activities

 

 

 

 

Payments for intangible assets

(76)

(60)

(461)

(137)

Payments for equipment

(6)

(3)

(13)

(5)

Net cash used in investing activities

(81)

(63)

(473)

(142)

 

 

 

 

 

Cash flow from financing activities

 

 

 

 

Proceeds from issue of shares

10,515

106

25,559

14,103

Share issue transaction cost

(405)

(52)

(1,067)

(1,004)

Proceeds from borrowings

145

630

662

630

Repayment of borrowings

(122)

(122)

Proceed from grants

750

1,375

750

1,375

Payment of lease liabilities

(95)

(104)

(191)

(195)

Net cash from financing activities

10,910

1,955

25,590

14,787

 

 

 

 

 

Net increase (+) / decrease (-) in cash and cash equivalents

320

(7,277)

2,899

(2,834)

Effect of exchange rate changes on cash and cash equivalents

(434)

(242)

(153)

(117)

 

 

 

 

 

Cash and cash equivalents at 1 January

6,967

11,627

4,108

7,059

Cash and cash equivalents at 31 December

6,853

4,108

6,853

4,108

 

 

Half-Year Financials, January 1 – June 30 2021

Faron Pharmaceuticals Oy

(“Faron”)

Faron Reports Half-Year Financials, January 1 – June 30, 2021

Significant progress made in H1 2021 including acceleration of most advanced pipeline assets – Bexmarilimab and TraumakineÒ

August 26, 2021 at 7:00 am BST / 9:00 am EEST

January – June 2021 in short/ Summary of January – June 2021

  • Bexmarilimab shows compelling antitumor activity in multiple advanced solid tumor types as a monotherapy with strongest disease control rate, DCR (30.0% – 40.0%), observed in cutaneous melanoma, gastric cancer, cholangiocarcinoma and hepatocellular carcinoma patients
  • Median overall survival (OS) not yet reached in DCR patient group
  • Initiation of pivotal stage (Part III) of bexmarilimab’s MATINS study on track for Q4 2021 alongside clinical expansion into neoadjuvant setting, hematological malignancies and first line lung cancer in combination with anti-PD-1
  • Secured key US patents for both bexmarilimab and TraumakineÒ
  • Received $6.1 million commitment from the US Department of Defense (DoD) to support the Traumakine HIBISCUS trial as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act
  • Balance sheet strengthened by successful share placing of €15 million gross including investment from European Investment Council (EIC) Fund, a breakthrough initiative from the European Commission
  • Virtual briefing and Q&A to be held today at 12:00 pm BST / 2:00 pm EEST / 7:00 am EDT

TURKU, FINLAND / BOSTON, MA – Faron Pharmaceuticals Oy (AIM: FARN, First North: FARON), a clinical stage biopharmaceutical company focused on building the future of immunotherapy by harnessing the power of the immune system to tackle cancer and inflammation, today announced unaudited half-year financial results for January 1 to June 30, 2021 (the “period”) and provided an overview of recent corporate developments.

“I am extremely proud of the progress we made over the first half of 2021,” said Dr. Markku Jalkanen, Chief Executive Officer of Faron. “We progressed our most advanced pipeline assets with bexmarilimab showing compelling antitumor activity as a monotherapy in heavily pre-treated patients across multiple solid tumor types and the initiation of the HIBISCUS trial assessing Traumakine as a first-line treatment for hospitalized COVID-19 patients, which we believe will represent a significant step forward in the treatment of lung failure due to viral infections. We also strengthened our balance sheet, which will allow us to continue investing in our pipeline and further our goal of developing new treatments for patients battling life-threatening diseases.”

HIGHLIGHTS (including post period):

Pipeline Highlights

Bexmarilimab Faron’s wholly-owned, novel precision cancer immunotherapy candidate, in Phase I/II development for difficult-to-treat cancers.

  • Compelling antitumor activity in multiple advanced solid tumor types was reported from patients enrolled in the completed Part I and ongoing Part II of the MATINS study, investigating bexmarilimab as a potential monotherapy in patients with solid tumors who have exhausted all treatment options. The strongest results were observed in cutaneous melanoma, gastric cancer, cholangiocarcinoma, and hepatocellular carcinoma, with a 30.0% — 40.0% disease control rate across these tumor types. Additional MATINS data was accepted as a late-breaking abstract and will be presented at the European Society for Medical Oncology (ESMO) Congress 2021 in mid-September.  
  • Further clinical trials are planned to start in Q4 2021 to investigate bexmarilimab’s potential in additional clinical settings, including in combination with standard of care as a first-line therapy in selected advanced solid tumors and as a monotherapy in hematological malignancies. Additionally, trials will also investigate bexmarilimab as a standalone neoadjuvant therapy for patients with early-stage colorectal cancer and renal cell carcinoma.
  • A key US patent with claims protecting the composition of matter of bexmarilimab was granted by the United States Patent and Trademark Office. The patent covers bexmarilimab’s binding sequences and Clever-1’s corresponding epitope – specific elements of the antibody-antigen binding site – with an expected expiry date, not including any potential extensions, of 2037. This patent was also granted in Japan.
  • A new role for soluble Clever-1 was identified, related to its capacity to control T cell activation. The scientific findings, from tests on MATINS patients’ plasma, suggest that their high levels of free, soluble Clever-1 can act as a direct inhibitor of T cell activation, providing a greater immunosuppressive effect than previously expected and indicating broader applicability for bexmarilimab. A new patent application has been filed seeking protection for these inventions and related applications.
  • Clinical Cancer Research, a journal of the American Association for Cancer Research, published research on the mode of action of bexmarilimab, exploring the systemic immune signatures induced by bexmarilimab in advanced cancer patients with solid tumors and providing a mechanistic understanding of how a macrophage-targeted approach can promote robust activation of T cells (Clin Cancer Res 2021: 27: 4205-20), and also highlighted by the Editors.
  • Companion diagnostic for Clever-1 detection in histological samples developed and validated with Laboratory Corporation of America (“Labcorp”). The staining antibody developed can be used by Labcorp and other diagnostic service providers across the globe and will allow for efficient analysis of tumor biopsies.

Traumakine®Faron’s investigational intravenous (IV) interferon beta-1a therapy, in development for the treatment of acute respiratory distress syndrome (ARDS) and other ischemic or hyperinflammatory conditions.

  • Dosing commenced in the Phase II/III HIBISCUS trial investigating Traumakine in the treatment of hospitalized COVID-19 patients compared to corticosteroid treatment with dexamethasone. HIBISCUS will be conducted in approximately 10 – 15 study sites across the US, enrolling 140 patients who require low flow oxygen support, but not mechanical ventilation. The US Department of Defense (DoD) selected the HIBISCUS trial to receive $6.1 million of funding from the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
  • Building on Faron’s already strong IP portfolio for Traumakine, Faron signed a sub-license agreement covering a relevant manufacturing patent in the US. Faron also applied for patent protection relating to Traumakine’s induction of CD73 for organ protection, through the sequential use of IV interferon beta-1a followed by corticosteroids for the treatment of systemic inflammation.
  • Partnership established with the 59th Medical Wing of the U.S. Air Force and U.S. Army and U.S. Army Institute of Surgical Research to explore the use of Traumakine for organ protection in combat wounds leading to multi-organ failure from ischemia and reperfusion.
  • New manufacturing process is progressing as planned in collaboration with AGC Biologics.

Corporate Highlights

  • Balance sheet was strengthened by raising EUR 15 million gross through a private placement of new ordinary shares. This placement encompassed existing and new investors, including the European Innovation Council Fund, a breakthrough initiative from the European Commission.
  • Anne Whitaker joined the Faron Board of Directors, bringing more than 25 years of experience in the life science industry, including senior leadership roles with large pharmaceutical, biotech and specialty pharma companies. Anne is the current Chairman of the Board for Aerami Therapeutics Holdings, Inc. Prior to taking the role of Chairman at Aerami, Anne served as the Aerami’s Chief Executive Officer and a Director. Anne previously served as Chief Executive Officer of Novoclem Therapeutics, Inc., Executive Vice President at Bausch Health, President and Chief Executive Officer of Synta Pharmaceuticals and as President, North America Pharmaceuticals at Sanofi.

Half-Year Financial Results

  • Cash balances of €7.0 million at 30 June 2021 (2020: €11.6 million).
  • Operating loss of €10.4 million for the six months ended 30 June 2021 (2020: €7.1 million).
  • Net assets of €2.8 million as at 30 June 2021 (2020: €7.3 million).
  • In February 2021, Faron raised €15 million gross (€14.4 million net) from new and existing shareholders through an issuance of 3,521,127 new ordinary shares.

Consolidated key figures, IFRS

€’000 Unaudited 1-6/2021
6 months
Unaudited 1-6/20
6 months
1-12/2020
12 months
Revenue 0 0 0
Other operating income 1,210 743 2,122
Research and Development expenses (9,008) (5,534) (13,879)
General and Administrative expenses (2,626) (2,354) (4,897)
Loss for the period (10,560) (7,343) (16,946)
Unaudited 1-6/2021
6 months
                Unaudited 1-6/2020
6 months
1-12/2020
12 months
Loss per share EUR (0.21) (0.16) (0.37)
Number of shares at end of period 50,457,874 46,799,747 46,896,747
Average number of shares 49,615,167 44,584,199 45,712,111
€’000 Unaudited              30 Jun 2021 Unaudited 30 Jun 2020 31 Dec 2020
Cash and cash equivalents 6,967 11,627 4,108
Equity 2,813 7,313 (1,849)
Balance sheet total 11,865 14,343 8,367

 

25 August 2021

Faron Pharmaceuticals

Board of Directors

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 (“MAR”).

Conference call information

A virtual briefing and Q&A session for analysts will be hosted by Dr. Markku Jalkanen, Chief Executive Officer, and Toni Hänninen, Chief Financial Officer, at 12:00 pm BST / 2:00 pm EEST / 8:00 am EDT on the day of results. A presentation, webcast details will be made available at www.faron.com/investors.

A replay of the analyst briefing will be made available shortly afterwards. 

Webcast link: https://www.lsegissuerservices.com/spark/FaronPharmaceuticalsOy/events/9b3b55bd-b730-43bf-8509-c1ec3e510415

For more information please contact:

Media Contact

Faron Pharmaceuticals

Eric Van Zanten

Head of Communications

eric.vanzanten@faron.com

Investor.relations@faron.com

+1 (610) 529-6219

Investor Contact

Stern Investor Relations

Julie Seidel

julie.seidel@sternir.com

Phone: +1 (212) 362-1200

Cairn Financial Advisers LLP, Nomad

Sandy Jamieson, Jo Turner, Mark Rogers

Phone: +44 (0) 207 213 0880

Peel Hunt LLP, Broker

Christopher Golden, James Steel

Phone: +44 (0) 20 7418 8900

Sisu Partners Oy, Certified Adviser on Nasdaq First North

Juha Karttunen

Phone: +358 (0)40 555 4727

Jukka Järvelä

Phone: +358 (0)50 553 8990

Consilium Strategic Communications

Mary-Jane Elliott, David Daley, Lindsey Neville

Phone: +44 (0)20 3709 5700

E-mail: faron@consilium-comms.com

About Faron Pharmaceuticals Ltd

Faron (AIM: FARN, First North: FARON) is a clinical stage biopharmaceutical company developing novel treatments for medical conditions with significant unmet needs caused by dysfunction of our immune system. The Company currently has a pipeline based on the receptors involved in regulation of immune response in oncology, organ damage and bone marrow regeneration. Bexmarilimab, a novel anti-Clever-1 humanized antibody, is its investigative precision immunotherapy with the potential to provide permanent immune stimulation for difficult-to-treat cancers through targeting myeloid function. Currently in Phase I/II clinical development as a potential therapy for patients with untreatable solid tumors, bexmarilimab has potential as a single-agent therapy or in combination with other standard treatments including immune checkpoint molecules. Traumakine is an investigational intravenous (IV) interferon beta-1a therapy for the treatment of acute respiratory distress syndrome (ARDS) and other ischemic or hyperinflammatory conditions. Traumakine is currently being evaluated in global trials as a potential treatment for hospitalized patients with COVID-19 and with the 59th Medical Wing of the US Air Force and the US Department of Defense for the prevention of multiple organ dysfunction syndrome (MODS) after ischemia-reperfusion injury caused by a major trauma.  Faron is based in Turku, Finland. Further information is available at www.faron.com.

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”, “hope”, “seek”, ”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 early data from initial patients in the MATINS trial may not be replicated in larger patient numbers and the outcome of clinical trials 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 the ability of the Company to successfully licence its programmes within the anticipated timeframe or at all, 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 or other sources of funding, 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.

Chairman and Chief Executive Officer’s Review

Introduction

To date, 2021 has been a year of significant accomplishments for Faron; most notably, we have been able to accelerate our lead pipeline programs and secure further funding to allow continued execution of key priorities. The latest data signaling the ability of bexmarilimab to increase survival in cancer patients who have exhausted all treatment options is compelling and it clearly demonstrated the importance of targeting myeloid cell control in the development of next generation immunotherapies. Additionally, the potential of Traumakine, Faron’s intravenous interferon-beta 1a, to treat hospitalized COVID-19 patients, continued to be explored in the phase II/III HIBISCUS study, which is being co-funded by the US Department of Defense. We also conducted a successful fundraising round that raised EUR 15 million and included several new high-quality Continental European institutional investors. The largest of the new investors was the European Investment Council Fund (EIC) and their investment in Faron was the first time that the EIC invested in a publicly listed company. In this report we are pleased to provide further information on the progress we made in the first half of 2021 and insights into our plans for the second half of the year.

Bexmarilimab – Headline data from MATINS indicates compelling anti-tumor activity in multiple advanced solid tumors

Driving the clinical development of bexmarilimab continues to be Faron’s top priority and in the first six months of the year we made considerable progress, generating compelling clinical data and furthering our understanding of the science behind this novel asset. Bexmarilimab is our wholly-owned, novel precision cancer immunotherapy candidate, which causes conversion of the immune environment around a tumor from immune-suppressive to immune-stimulating, by targeting Clever-1, a receptor known to be expressed on immunosuppressive macrophages in the tumor microenvironment. Bexmarilimab is differentiated from other immunotherapies as it specifically targets M2 tumor-associated macrophages (TAMs), which facilitate tumor growth. Through myeloid cell plasticity, bexmarilimab can convert these M2 TAMs to M1s, leaving existing M1 TAMs intact and allowing both to support immune activation against tumors. We believe it has the potential to function as a novel macrophage checkpoint immunotherapy, both as a monotherapy and in combination with other immuno-oncology therapies or standard-of-care treatments.

The ongoing MATINS (Macrophage Antibody To INhibit immune Suppression) study, our first-in-human, open label phase I/II clinical trial with an adaptive design, is investigating the safety and efficacy of bexmarilimab monotherapy in selected metastatic or inoperable solid tumors. The completed Part I of the MATINS trial, primarily intended to investigate safety and tolerability, has shown that bexmarilimab promoted immune activation in all dosed patients and can downregulate a range of major inhibitory immune checkpoints (like PD-1, CTLA-4, etc.) that current immuno-oncology therapies aim to suppress. Bexmarilimab has also been well tolerated, showing no significant adverse events even at the highest dosing levels.

Data continued to be generated in 2021 on the strength of bexmarilimab’s clinical efficacy across the ten different hard-to-treat solid tumor cohorts under investigation – cholangiocarcinoma, colorectal cancer, cutaneous melanoma, ER+ breast cancer, gastric cancer, hepatocellular carcinoma, ovarian cancer, uveal melanoma, pancreatic cancer and anaplastic thyroid carcinoma. Patients in the MATINS trial were all heavily pre-treated and their cancer at the time of treatment with bexmarilimab was significantly advanced.

To date, the strongest results have been observed in four tumor types, with a disease control rate, or DCR (partial response + stable disease rate), of 30.0% — 40.0% across the cutaneous melanoma, gastric cancer, cholangiocarcinoma and hepatocellular carcinoma cohorts. Our progress in the MATINS trial, generating clinical efficacy data, is helping us determine which patients may benefit most from treatment with bexmarilimab. The tumor types that yielded the best responses are now primary candidates to become expansion cohorts for Part III of the MATINS study. Together with the additional work underway investigating higher and more frequent dosing, biomarkers of efficacy and the potential for combinations in earlier lines of therapy, we are building a clear path towards the next, pivotal stage of our development program.

A striking scientific observation from the MATINS study was the discovery earlier this year of an abundant amount of free, soluble Clever-1 in the plasma of MATINS patients. Further experimental testing of isolated Clever-1 has indicated that this soluble form is a direct inhibitor of T cells and could be having an immunosuppressive effect in all locations of the body, therefore controlling the general immune capacity of patients. This would represent a broader immunosuppressive effect than previously expected. It follows that inactivation of Clever-1 with bexmarilimab has the potential to be more universally applicable, by improving patients’ immune response and therefore enabling them to benefit from immuno-oncology therapeutics which have previously been ineffective. Following this observation, we filed a new patent application seeking protection for these inventions and related applications.

Building a global intellectual property (IP) portfolio around Clever-1 is a key priority for Faron and important for the future commercialization of bexmarilimab. In June 2021, the United States Patent and Trademark Office granted a new US Patent, No. 11,046,761, with claims protecting the composition of matter of bexmarilimab through 2037. This patent is a welcome addition to our existing global IP portfolio for targeting Clever-1, covering bexmarilimab’s binding sequences and Clever-1’s corresponding epitope – specific elements of the antibody-antigen binding site. We were granted a similar patent in Japan.

Also in June, Clinical Cancer Research, a journal of the American Association for Cancer Research, published a paper analyzing the mode of action of bexmarilimab, both in vitro and in patients from Part I of the MATINS study. Authored by Dr. Maija Hollmén and colleagues at the University of Turku, Finland – part of Faron’s scientific network – and supported by investigators from the MATINS study, the paper explores the systemic immune signatures induced by bexmarilimab in advanced cancer patients with solid tumors and provides a mechanistic understanding of how a macrophage-targeted approach can promote robust activation of T cells.

The remainder of 2021 will be a critical time for bexmarilimab’s development program as we move towards the pivotal expansion stage (Part III) of the MATINS study and the presentation of additional data at the European Society for Medical Oncology (ESMO) Congress, which will take place September 16 – 21, 2021. Following confirmation of the cancer cohorts that we intend to take into Part III, along with recommendations on dosage and dose frequency, we intend to meet with the FDA ahead of patient recruitment, which is expected to begin in H1 2022. Clinical expansion of the program will also commence in H2 2021 investigating bexmarilimab’s potential in additional clinical settings – in combination with standard of care (SOC) as a first-line therapy in selected advanced solid tumors, as a standalone neoadjuvant therapy for patients with early-stage colorectal cancer and renal cell carcinoma, and as a potential treatment for patients with hematological malignancies.

Traumakine – Lung protection and anti-COVID-19 in one treatment under development

Faron continues to explore the potential of Traumakine, our investigational intravenous (IV) interferon (IFN) beta-1a therapy, as a treatment for acute respiratory distress syndrome (ARDS), acute kidney injury, cardiac protection, prevention of solid organ transplant failure and ischemia reperfusion injury. We believe intravenous IFN beta-1a has the potential to become a powerful treatment option for patients who are at risk of developing ARDS because of a viral infection, such as COVID-19.

Despite the progress that has been made with COVID vaccinations, there remains a critical need to identify effective treatment options for hospitalized COVID-19 patients. For over a decade, Faron has been engaged in research to identify new treatments for patients who are at risk of developing acute respiratory distress syndrome because of a viral infection. We are proud to add the weight of our experience to the ongoing global response to COVID-19 and feel strongly that Traumakine could play a significant role in the treatment of hospitalized COVID-19 patients.

One of the body’s main first lines of defense against viral infection is endogenous IFN-beta production, but recent findings have shown that seriously ill COVID-19 patients have compromised interferon responses. We believe Traumakine treatment can further strengthen the body’s natural defenses. Specifically, the intravenous dosing of Faron’s IFN beta-1a provides the lung vasculature with optimal exposure to IFN, which we believe is a critical aspect of Traumakine’s potential to increase protection against serious lung complications.

In August, the Phase II/III HIBISCUS trial assessing Traumakine as a first-line treatment for hospitalized COVID-19 patients began in the US. The study is being conducted in approximately 10-15 study sites across the US and will enroll 140 patients who require low flow oxygen support, but not mechanical ventilation. The safety and efficacy of Traumakine will be compared to corticosteroid treatment with dexamethasone. Subject to data from HIBISCUS supporting Traumakine’s profile, we will work alongside regulatory authorities and other parties to identify the best path to ensure its future availability to patients.

As part of the HIBISCUS trial’s protocol, concomitant corticosteroid treatment is not possible but will be enabled in a sequenced manner following treatment with Traumakine. This approach reflects feedback from the FDA, together with learnings from the earlier development of Traumakine, that further studies with our IV IFN beta-1a should exclude the use of concomitant corticosteroids since they are likely to block its desired therapeutic effect. Faron believes the sequential use of Traumakine followed by corticosteroids could be the optimal approach to provide the best patient benefit from both therapies. In light of this, Faron applied for new patent protection relating to Traumakine’s induction of CD73 – the cell surface protein – for organ protection, followed by the use of corticosteroids for the treatment of systemic inflammation.

Financially, we have seen strong support for this program. In January 2021, the US Department of Defense (DoD) selected the HIBISCUS trial to receive $6.1 million of funding from the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Faron has an existing working relationship with the DoD’s designated military unit, the 59th Medical Wing of the US Air Force, and the US Army Institute of Surgical Research, to explore the use of Traumakine for organ protection in combat wounds leading to multi-organ failure from ischemia and reperfusion. The support for HIBISCUS from the DoD is further validation of the promise this potential therapy holds for severe COVID-19 patients.

Financial review

In February 2021, Faron raised EUR 15.0 million gross (EUR 14.4 million net) from new and existing shareholders through an issuance of 3,521,127 new ordinary shares. Several new high-quality Continental European institutional investors participated in the share placing, expanding our investor base, along with existing investors. The European Investment Council (EIC) Fund, a breakthrough initiative from the European Commission, was the largest of the new investors. Faron is the first publicly-listed company that the EIC Fund has invested in. We were delighted to receive this significant support from our existing and new investors, providing additional financial resources to allow the further acceleration of our development programs and significantly strengthening our balance sheet.

Statement of comprehensive income

The loss from operations for the six months ended 30 June 2021 was EUR 10.4 million (six months ended 30 June 2020: loss of EUR 7.1 million). No revenue was generated during the period or prior revenue. Research and development expenditure increased by EUR 3.5 million to EUR 9.0 million (2020: EUR 5.5 million). Administrative expenses increased by EUR 0.3 million to EUR 2.6 million (2020: EUR 2.4million).

The loss after tax for the period was EUR 10.6 million (2020: loss of EUR 7.3 million) and the basic loss per share was EUR 0.21 (2020: loss per share of EUR 0.16).

Statement of financial position and cash flows

As of June 30, 2021 net assets amounted to EUR 2.8 million (June 30, 2020: EUR 7.3 million). The net cash flow for the first six months in 2021 was EUR 2.9 million (2020: EUR 4.4 million). As of June 30, 2021 total cash and cash equivalents held were EUR 7.0 million (2020: EUR 11.6 million).

Corporate

Faron’s Annual General Meeting (AGM) was held on April 23, 2021. The AGM approved all the proposals of the Board of Directors and its committees set out in the notice of the AGM published March 25, 2021. The number of members of the Board was confirmed as seven. Frank Armstrong, Markku Jalkanen, Matti Manner, Leopoldo Zambeletti, Gregory Brown and John Poulos were re-elected to the Board and Anne Whitaker was elected as a new member to the Board for a term that ends at the end of the next AGM. Additionally, Faron announced on March 29, 2021 that Peel Hunt LLP had been appointed as their sole Broker.

In June, 2021 Faron opened both a new office in Cambridge, MA and employed our first US-based employee. We expect our presence in the US to grow in the second half of 2021 or early 2022 as we add additional resources to support the acceleration of the bexmarilimab development program.  

Impact of COVID-19 

During the pandemic our ability to secure funding and remote working operations to our portfolio companies is key to continued success. Even during exceptional circumstances, we were able to continue to operate our business almost normally and the development of our clinical trials proceeded as planned. 

Additionally, Faron closely followed and strictly complied with the regulations and recommendations of the Finnish National Institute for Health and Welfare (THL) and other relevant authorities to ensure the safety for its employees, study subjects and partners.

Legal proceedings

As previously announced, Faron has an ongoing arbitration against Rentschler Biopharma SE relating to an agreement concerning the Traumakine API manufacturing. The arbitration is funded by a third-party recovery services provider. The final arbitration decision is expected to be issued by the arbitration tribunal in autumn 2021.

Summary & outlook

Our focus for the remainder of 2021 is the acceleration of bexmarilimab’s clinical development. Preparations for the pivotal expansion stage (Part III) of the MATINS study, including confirmation of dosage and dose frequency, are priorities for us, ahead of patient recruitment, which is expected to begin in H1 2022 following an advice meeting with the US Food & Drug Administration. In H2 2021 we also expect trials to commence investigating the potential of bexmarilimab in combination with standard of care (SOC) as a first-line therapy in selected advanced solid tumors, as a standalone neoadjuvant therapy in multiple indications and as a potential monotherapy in patients with hematological malignancies. Alongside this activity, we will continue patient recruitment in the HIBISCUS trial, investigating the potential of Traumakine in hospitalized COVID-19 patients. On behalf of the Board, we would like to thank our shareholders, existing and new, for their support of Faron. We would also like to thank our employees for their continued commitment to our mission and the patients we serve. We look forward to updating the market on our progress throughout the course of the year.

Dr Markku Jalkanen

Chief Executive Officer

Dr Frank Armstrong

Chairman

Consolidated Income Statement, IFRS

€’000 Unaudited 1-6/2021
6 months
Unaudited 1-6/2020
6 months
1-12/2020
12 months
Revenue 0 0
Other operating income 1,210 743 2,122
Research and development expenses (9,008) (5,534) (13,879)
General and administrative expenses (2,626) (2,354) (4,897)
Operating loss (10,424) (7,145) (16,654)
Financial expense (191) (230) (389)
Financial income 61 31 107
Loss before tax (10,554) (7,343) (16,936)
Tax expense (6) 0 (10)
Loss for the period (10,560) (7,343) (16,946)
Other comprehensive income
Total comprehensive loss for the period (10,560) (7,343) (16,946)
Loss per ordinary share
Basic and diluted loss per share, EUR (0.21) (0.16) (0.37)
Consolidated Balance Sheet, IFRS€’000  Unaudited30 June 2021 Unaudited30 June 2020 31 December 2020
Assets
Non-current assets
Machinery and equipment 19 13 14
Right-of-use-assets 273 456 361
Intangible assets 920 560 565
Prepayments and other receivables 53 80 56
Total non-current assets 1,265 1,109 996
Current assets
Prepayments and other receivables 3,634 1,607 3,263
Cash and cash equivalents 6,967 11,627 4,108
Total current assets 10,600 13,234 7,371
Total assets 11,865 14,343 8,367
Equity and liabilities
Capital and reserves attributable to the equity holders of the Company
Share capital 2,691 2,691 2,691
Reserve for invested unrestricted equity 106,396 91,960 92,015
Accumulated deficit (106,274) (87,339) (96,557)
Translation difference (1) 1 2
Total equity 2,813 7,313 (1,849)
Non-current liabilities
Borrowings 3,231 2,303 2,728
Lease liabilities 109 288 199
Other liabilities 146 0 786
Total non-current liabilities 3,486 2,591 3,713
Current liabilities
Borrowings 0 0 122
Lease liabilities 178 181 176
Trade payables 4,555 2,729 4,608
Other current liabilities 832 1,529 1,597
Total current liabilities 5,565 4,439 6,503
Total liabilities 9,052 7,030 10,216
Total equity and liabilities 11,865 14,343 8,367

 

Consolidated Statement of Changes in Equity, IFRS

’000

Share capital Reserve for invested unrestricted equity Translation difference Accumulated deficit Total equity
Balance as at 1 January 2020 2,691 78,916 (79,997) 1,610
Comprehensive loss for the first six months 2020 1 (7,343) (7,342)
Transactions with equity holders of the Company
Issue of ordinary shares, net of transaction costs EUR 952 thousand 13,044 13,044
Share-based compensation
13,044 13,044
Balance as at 30 June 2020 2,691 91,960 1 (87,339) 7,313
Comprehensive loss for the last six months 2020 1 (9,603) (9,602)
Transactions with equity holders of the Company
Issue of ordinary shares, net of transaction costs EUR 52 thousand 54 54
Share-based compensation 386 386
54 386 440
Balance as at 31 December 2020 2,691 92,015 2 (96,557) (1,849)
Comprehensive loss for the first six months 2021 (1) (10,560) (10,561)
Transactions with equity holders of the Company
Issue of ordinary shares, net of transaction costs EUR 662 thousand 14,381 14,381
Share-based compensation 843 843
14,381 843 15,224
Balance as at 30 June 2021 2,691 106,396 (1) (106,274) 2,813

Consolidated Cash Flow Statement, IFRS

€’000 Unaudited 1-6/2021
6 months
Unaudited 1-6/2020
6 months
1-12/2020
12 months
Cash flow from operating activities
Loss before tax (10,554) (7,343) (16,936)
Adjustments for:
Received grant (642) 0 (587)
Depreciation and amortisation 142 130 283
Interest expense 88 93 149
Tax expense 10 0 10
Unrealised foreign exchange loss (gain), net (27) (125) 117
Share-based compensation 843 0 386
Adjusted loss from operations before changes in working capital (10,141) (7,245) (16,578)
Change in net working capital:
Prepayments and other receivables (660) 534 (1,097)
Trade payables (21) (237) 1,641
Other liabilities (337) (1,333) (1,416)
Cash used in operations (11,158) (8,281) (17,450)
Taxes paid (15) 0 (1)
Interest paid (30) (29) (28)
Net cash used in operating activities (11,204) (8,310) (17,479)
Cash flow from investing activities
Payments for intangible assets (385) (77) (137)
Payments for equipment (7) (2) (5)
Net cash used in investing activities (392) (79) (142)
Cash flow from financing activities
Proceeds from issue of shares 15,044 13,997 14,103
Share issue transaction cost (662) (952) (1,004)
Proceeds from borrowings 264 0 630
Repayment of borrowings (122) (122) (122)
Proceed from grants 0 0 1,375
Payment of lease liabilities (96) (91) (195)
Net cash from financing activities 14,427 12,832 14,787
Net increase (+) / decrease (-) in cash and cash equivalents 2,831 4,443 (2,834)
Effect of exchange rate changes on cash and cash equivalents 27 125 (117)
Cash and cash equivalents at 1 January 4,108 7,059 7,059
Cash and cash equivalents at the end of period 6,967 11,627 4,108

Notes to the financial statements

  1. Corporate information

Faron Pharmaceuticals Ltd (the “Company”) is a clinical stage biopharmaceutical company incorporated and domiciled in Finland, with its headquarters at Joukahaisenkatu 6, 20520 Turku, Finland. The Company currently has a pipeline based on the endothelial receptors involved in regulation of immune response, in oncology and organ damage.

The Company has been listed on the London Stock Exchange’s AIM market since 17 November 2015, with a ticker FARN, and since 3 December 2019, the Company has been listed on the Nasdaq First North Growth Market list with a ticker FARON.

 

  1. Summary of significant accounting policies

    1. Basis of preparation

The unaudited H1 report has been prepared in accordance with the International Financial Reporting Standards of the International Accounting Standards Board (IASB) and as adopted by the European Union (IFRS) and the interpretations of the International Financial Reporting Standards Interpretations Committee (IFRS IC). The financial statements have been prepared on a historical cost basis, unless otherwise stated.

 

The principal accounting policies applied in the preparation of these interim financial statements are set out below. The Company has consistently applied these policies to all the periods presented, unless otherwise stated. The areas of the financial statements involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 2.2.

The unaudited consolidated financial statements incorporate the parent company, Faron Pharmaceuticals Ltd, and all subsidiaries in which it holds over 50% of the voting rights (the “Group”).

 

All amounts are presented in thousands of euros, unless otherwise indicated, rounded to the nearest euro thousand.

    1. Going concern

The Company has forecasted its estimated cash requirements over the next twelve months. In order to make these forecasts the Company has made a number of assumptions regarding the quantity and timing of future expenditure and income as well as other key factors. Though these estimates have been made with caution and care, they continue to contain a significant amount of uncertainty. Based on the forecast the Company believes that it has adequate financial resources to continue its operations into Q4 2021 and therefore these unaudited financial statements have been prepared on a going concern basis. In its meeting on 25 August 2021 the Board of Directors of the Company approved the publishing of these interim financial statements.

The Company has taken several acts to secure further financing during the rest of the year 2021. The Directors believe that the Company can gain access to further resources to sustain operations over the next 12 months. At this stage the Company cannot disclose any of these options.

Because the additional finance is not committed at the date of issuance of these H1 reports, these circumstances represent a material uncertainty that may cast significant doubt on the Company’s ability to continue as a going concern. Should the Group be unable to obtain further finance such that the going concern basis of preparation were no longer appropriate, adjustments would be required, including to reduce balance sheet values of assets to their recoverable amounts, to provide for further liabilities that might arise.

Financial statement January 1 to December 31 2020

Faron Pharmaceuticals Oy

(“Faron” or the “Company”)

Financial statement release January 1 to December 31, 2020

 

  • Clevegen® (bexmarilimab) Phase I/II MATINS study has shown early clinical benefits in six hard-to-treat solid cancers with further combination studies planned

  • Intravenous interferon beta-1a Traumakine®, for organ damage protection, now also investigated as potential COVID-19 treatment
  • Company’s balance sheet strengthened by successful share placings of €14 million and €15 million (post period)
  • Additional grants of €3.3 million and €4.6 million loans and loan guarantees awarded to drive R&D and CMC programmes

 

Financial statement release, 25 March 2021 at 9.00 AM (EET)

Inside information
 

TURKU – FINLAND – Faron Pharmaceuticals Oy (AIM: FARN, First North: FARON), the clinical stage biopharmaceutical company, today reports its financial statements for the year ended 31 December 2020 and H2 2020.
HIGHLIGHTS

Operational (including post period):

Clevegen® (bexmarilimab) Faron’s wholly-owned, novel precision cancer immunotherapy candidate, in Phase I/II development for difficult-to-treat cancers.

  • Strong patient recruitment continues in Part II of the Phase I/II MATINS trial, investigating the potential of bexmarilimab in patients with solid tumours who have exhausted all treatment options. 10 cancer types – cutaneous melanoma, uveal melanoma, ovarian cancer, colorectal cancer (CRC), hepatocellular cancer, ER+ breast cancer, pancreatic cancer, gastric cancer, cholangiocarcinoma, anaplastic thyroid carcinoma – are currently under investigation.

  • Clinical benefits have been observed across six cancer types to date – CRC, ovarian cancer, cutaneous melanoma, hepatocellular cancer, cholangiocarcinoma and gastric cancer. These are primary candidates to become expansion cohorts for Part III of the study.
  • More frequent dosing, beyond the original three week dosing interval, is being explored in  all six cohort types showing early signs of clinical benefit in order to confirm the optimum dosing regimen for pivotal studies, following analysis of key pharmacokinetic and pharmacodynamic biomarkers indicating the potential for increased bexmarilimab efficacy.
  • Clinical expansion trials will investigate bexmarilimab’s potential in additional clinical settings, with trials expected to start later in 2021 – in combination with standard of care (SOC) as a first-line therapy in selected advanced solid tumours and haematological malignancies. Additionally, trials will also investigate bexmarilimab as a standalone neoadjuvant therapy for patients with early stage CRC and and clear cell renal cell carcinoma.
  • Established soluble Clever-1 as potential inhibitor of T cell activation through the testing of MATINS patients’ plasma. New findings suggest that their high levels of free, soluble Clever-1 can act as a direct inhibitor of T cell activation, thereby providing a broader immunosuppressive effect than previously expected. This suggests that the inactivation of Clever-1 could be more broadly applicable, potentially enabling patients to benefit from immuno-oncology therapies which have previously been ineffective. A new patent application has been filed seeking global protection for these findings and related applications.
  • Commercial scale manufacturing contract for the development and manufacturing of bexmarilimab was established with AGC Biologics.

  • €3.3 million grants to support the development of bexmarilimab were received in 2020 from the European Innovation Council (EIC) Accelerator pilot scheme (€2.5 million) and the Finnish Cancer IO consortium (€0.8 million).
  • Scientific learnings on bexmarilimab were shared at key global conferences including the virtual American Society of Clinical Oncology (ASCO20) Annual Meeting, the European Society of Medical Oncology (ESMO) Virtual Congress and ESMO’s Immuno-Oncology Virtual Congress 2020.

Traumakine® Faron’s investigational intravenous (IV) interferon beta-1a therapy is in development for the treatment of acute respiratory distress syndrome (ARDS) and other ischemic or hyperinflammatory conditions.

  • Supported the global search for potential treatments for COVID-19, with Traumakine’s inclusion in two global initiatives in 2020 – the global REMAP-CAP (Randomized, Embedded, Multifactorial Adaptive Platform Trial for Community-Acquired Pneumonia), which is ongoing across more than 200 sites and 19 countries, and the WHO’s Solidarity trial. The WHO trial determined in October 2020 that subcutaneous IFN beta-1a was ineffective in reducing overall mortality in hospitalised COVID-19 patients. At the time of analysis, too few patients had received an IV formulation of IFN beta to enable interpretation of the data and to draw any conclusions on its effect. WHO has yet to provide the Company with detailed dosing and safety information which is a normal regulatory requirement for drug testing and use.

  • On track to initiate a Faron-sponsored trial investigating the potential of Traumakine to treat COVID-19. The Phase II/III HIBISCUS (Human intravenous Interferon Beta-Ia Safety and preliminary efficacy in hospitalised subjects with CoronavirUS) study will be conducted in approximately 5-10 study sites across the US in hospitalised patients with COVID-19, who do not yet require mechanical ventilation, but maximally low flow oxygen support. Use of corticosteroids concomitantly with Traumakine is not possible in the study setting but enabled in a sequenced manner, following Traumakine treatment. Post period the Company received $6.1 million of funding from the Coronavirus Aid, Relief, and Economic Security (CARES) Act, granted by the US Department of Defense, to support HIBISCUS.
  • Building on Faron’s already strong IP portfolio for Traumakine, the Company applied for additional patent protection for Traumakine relating to the induction of CD73 for organ protection, followed by the use of corticosteroids for the treatment of systemic inflammation. In this sequence, the best effects of both drugs are optimised in a sequence for patient benefit. This order is strongly supported by molecular analysis of IFN-beta signaling pathways in many published articles over recent months.
  • Partnership established with the 59th Medical Wing of the U.S. Air Force and U.S. Army and U.S. Army Institute of Surgical Research to explore the use of Traumakine for organ protection in combat wounds leading to multi-organ failure from ischemia and reperfusion.
  • To support Traumakine’s potential future commercial use, AGC Biologics was selected to be the new manufacturing house for commercial scale production. A €2.1 million low interest rate loan from Business Finland and a €2.5 million loan guarantee from Finnvera, the official Export Credit Agency of Finland, are supporting the establishment of a new cell line for the manufacturing process.
  • Detailed analyses into the deleterious effects of glucocorticoids on Traumakine activity, undertaken following the INTEREST trial results in 2018, were published in Intensive Care Medicine, a world-leading journal in the field of critical care, in May 2020.

Haematokine® An AOC3 (amine oxidase copper containing 3) protein inhibitor in development for use in regenerative medicine and to treat hematological malignancies.

  • Faron acquired rights for this potential use of AOC3 inhibitors in March 2020 and will be responsible for the future development of Haematokine and for the management, prosecution, maintenance and filing of patent applications.

  • IND-enabling studies for this programme are continuing and, following a first review by the Finnish patent office, the Company believes global patent protection could be possible for the Haematokine project.

Corporate

  • Faron hosted a virtual R&D Day presenting the Company’s R&D strategy and insights into its two clinical stage programmes. Alongside Dr Markku Jalkanen, Chief Executive Officer, and members of the Executive Leadership and senior management teams, external perspectives were provided by Prof. Alberto Mantovani, Humanitas University, Milan, Italy; Ass. Prof. Maija Hollmén, MediCity, Turku University, Finland and Dr. Petri Bono, Terveystalo, Helsinki, Finland.

Impact of COVID-19

  • During the pandemic the Company’s ability to secure funding and remote working operations has been key to continued success. Even during exceptional circumstances, Faron has been able to continue to operate its business almost normally and the development of its clinical trials proceeded as planned.

  • Additionally, Faron closely followed and strictly complied with the regulations and recommendations of the Finnish National Institute for Health and Welfare (THL) and other relevant authorities to ensure the safety for its employees, study subjects and partners.

Financial

  • On 31 December 2020, the Company held cash balances of €4.1 million (2019: €7.1 million).

  • Loss for the period for the financial year ended 31 December 2020 was €16.9 million (2019: €13.3 million).
  • Net assets on 31 December 2020 were €-1.8 million (2019: €1.6 million).
  • In April 2020, the Company successfully raised a total of €14.0 million gross (€13.0 million net) from new and existing shareholders, through issuance of total of 3,500,000 new ordinary shares. The majority of these proceeds are being used to expand Clevegen in additional targets in the MATINS trial, support Traumakine in the ongoing REMAP-CAP trial and to strengthen the Company’s balance sheet.
  • The Company received a combination of grants, loans and loan guarantees totalling €7.9 million from Business Finland (May 2020: Grant €0.8 million, June 2020: Loan €2.1 million), The European Innovation Council (June 2020: Grant €2.5 million), Finnvera (Aug 2020: Loan guarantee €2.5 million). A total of €2.2 million of these funds were received during the period and the rest will continue to be received post period.
  • Post period in February 2021, the Company raised €15 million gross (approximately €14.4 million net) from new and existing shareholders through an issuance of 3,521,127 new ordinary shares.

 

Consolidated key figures, IFRS

€’000

Unaudited 7-12/2020
6 months
Unaudited 7-12/2019
6 months
1-12/2020
12 months
1-12/2019
12 months
Revenue 0 0 0 0
Other operating income 1,379 185 2,122 185
Research and Development expenses (8,345) (5,255) (13,879) (10,237)
General and Administrative expenses (2,543) (1,688) (4,897) (3,049)
Loss for the period (9,603) (6,850) (16,946) (13,262)

Unaudited 7-12/2020
6 months

Unaudited 7-12/2019
6 months
1-12/2020
12 months
1-12/2019
12 months
Loss per share EUR (0.22) (0.18) (0.37) (0.36)
Number of shares at end of period 46,896,747 43,290,747 46,896,747 43,290,747
Average number of shares 44,606,204 38,551,293 45,712,111 36,850,577

€’000

Unaudited 30 Jun 2020 Unaudited 30 Jun 2019 31 Dec 2020 31 Dec 2019
Cash and cash equivalents 11,627 2,892 4,108 7,059
Equity 7,313 (1,761) (1,849) 1,610
Balance sheet total 14,343 5,103 8,367 10,209

 

Commenting on the results, Dr Markku Jalkanen, CEO of Faron, said: “The past year has been one of the most significant in Faron’s history, with rapid expansion of our clinical development programme for bexmarilimab, our novel Clever-1 targeting precision immunotherapy. Seeing the latest data from the MATINS trial, showing clinical benefit across six different tumour types, has been highly rewarding and gives us great confidence in the future of this next-generation immunotherapy. Our growing understanding of Clever-1 as an immune suppressive molecule and its role in the systemic inhibition of T-cells only adds to our confidence in bexmarilimab and its potential as a breakthrough therapy with broad application for patients with hard-to-treat cancers or those who no longer respond to current immunotherapies. 

“I am very pleased that we have been able to support ongoing global research efforts to find the much needed, effective treatments for COVID-19 patients. The science behind Traumakine, our intravenous interferon (IFN) beta-1a, and its potential to prevent multi-organ failure by upregulating the key endothelial enzyme CD73, is compelling. We continue to believe that an intravenous formulation of IFN beta-1a is what patients need, to strengthen the body’s own IFN beta signaling – the first line of defence against viral infection – and provide optimal exposure to the lung vasculature. With evidence emerging of increased interferon resistance among COVID-19 variants, suggesting the virus is evolving with new ways to evade our innate immune defences, research into the potential of exogenous interferon to reduce severe disease and mortality in COVID-10 patients remains critical.

”The Company’s successful fundraising in 2020 and, post period, in February this year, puts us in a strong position to continue the progress of our pipeline and brings us closer to our goal of developing ground-breaking new treatments from our unique scientific discoveries. I’d like to thank our shareholders for their continued support and the entire team at Faron for their exceptional efforts during a challenging year.”

 

Board of Directors’ Proposal on the Dividend

The Group’s loss for the accounting period was 16,946,261.84 euro (2019: 13,261,911.93 euro).

The Board of Directors does not recommend the payment of a dividend (2019: nil).

 

24 March 2021

Faron Pharmaceuticals

Board of Directors

 

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 (“MAR”). 
 

Conference call information A virtual briefing and Q&A session for analysts will be hosted by Dr. Markku Jalkanen, Chief Executive Officer, and Toni Hänninen, Chief Financial Officer, at 12:00 pm GMT / 2:00 pm EET / 8:00 am EST on the day of results. The Full-year results release for 2020, presentation, webcast details, and Annual Report 2020 will be made available at www.faron.com/investors. A replay of the analyst briefing will be made available shortly afterwards.  

Webcast link: https://www.lsegissuerservices.com/spark/FaronPharmaceuticalsOy/events/04110470-3c65-4dad-ba56-54b27e83f27f

 

For more information please contact:

Faron Pharmaceuticals Oy

Dr Markku Jalkanen, Chief Executive Officer

investor.relations@faron.com

 

Cairn Financial Advisers LLP, Nomad

Sandy Jamieson, Jo Turner,  Mark Rogers

Phone. +44 (0)20 7213 0880

 

Panmure Gordon (UK) Limited, Broker

Rupert Dearden

Phone: +44 207 886 2500

 

Sisu Partners Oy, Certified Adviser on Nasdaq First North

Juha Karttunen

Phone: +358 (0)40 555 4727

Jukka Järvelä

Phone: +358 (0)50 55 38 990

 

Consilium Strategic Communications

Mary-Jane Elliott, David Daley, Lindsey Neville

Phone: +44 (0)20 3709 5700

E-mail: faron@consilium-comms.com

 

Stern Investor Relations

Julie Seidel

Phone: +1 212 362 1200

Email: julie.seidel@sternir.com

 

Publication of financial information during year 2021

The half-year financial report for the period 1 January to 30 June 2021 is scheduled to be published on 26 August 2021. Faron’s financial statements for full year 2020 will be published on 25 March 2021 and will also be available on the Company’s website at https://www.faron.com/investors/results.

The Annual General Meeting is planned for 23 April 2021. A separate stock exchange notice will be issued by Faron’s Board of Directors to convene the meeting.

 

About Faron Pharmaceuticals Ltd  

Faron (AIM: FARN, First North: FARON) is a clinical stage biopharmaceutical company developing novel treatments for medical conditions with significant unmet needs caused by dysfunction of our immune system. The Company currently has a pipeline based on the receptors involved in regulation of immune response in oncology, organ damage and bone marrow regeneration. Bexmarilimab, a novel anti-Clever-1 humanised antibody, is its investigative precision immunotherapy with the potential to provide permanent immune stimulation for difficult-to-treat cancers through targeting myeloid function. Currently in phase I/II clinical development as a potential therapy for patients with untreatable solid tumours, bexmarilimab has potential as a single-agent therapy or in combination with other standard treatments including immune checkpoint molecules. Traumakine is an investigational intravenous (IV) interferon beta-1a therapy for the treatment of acute respiratory distress syndrome (ARDS) and other ischemic or hyperinflammatory conditions. Traumakine is currently being evaluated in global trials as a potential treatment for hospitalised patients with COVID-19 and with the 59th Medical Wing of the US Air Force and the US Department of Defense for the prevention of multiple organ dysfunction syndrome (MODS) after ischemia-reperfusion injury caused by a major trauma.  Faron is based in Turku, Finland. Further information is available at www.faron.com  

 

Caution regarding forward looking statementsCertain 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”, “hope”, “seek”, ”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 early data from initial patients in the MATINS trial may not be replicated in larger patient numbers and the outcome of clinical trials 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 the ability of the Company to successfully licence its programmes within the anticipated timeframe or at all, 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 or other sources of funding, 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.
 

Chairman’s statement

2020 was a year of significant activity for Faron. Despite the challenges that the global pandemic presented to business continuity and clinical trials across the life sciences sector, the Company’s focus on pipeline delivery continued unabated and delivered impressive results.

The development programme for bexmarilimab, Faron’s wholly-owned novel precision cancer immunotherapy candidate, made important clinical progress in 2020 following completion of the dose-finding Part I of the MATINS clinical trial. While intended to investigate safety and tolerability, this part of the trial also delivered exciting data on the potential of this therapy to promote immune activation, and early signs of clinical benefit. With ten different hard-to-treat cancers now under investigation in the second part of the trial, the Company is gaining greater insights into the future clinical use and commercial potential of this unique Clever-1 targeting therapy, with a clear focus on patient populations whose cancers are known to demonstrate significant levels of the Clever-1 receptor.

The Faron team’s analyses of data from the trial, alongside the broader scientific community’s growing understanding of the role of Clever-1 as an immune suppressive molecule, have provided a much clearer understanding of the next steps required for bexmarilimab’s clinical development and support its potential as a breakthrough therapy for the future. Harnessing the immune system to fight cancer using immunotherapy has, undoubtedly, been one of the most exciting breakthroughs in modern science and the first wave of pioneering treatments changed the face of cancer treatment. We know these therapies do not work for everyone and many patients who initially respond will eventually relapse. Combining immunotherapies with complementary approaches is becoming increasingly important in cancer treatment and bexmarilimab’s expanded clinical development programme, investigating its combination with existing treatments, will provide important evidence of its potential use as a future combination therapy.

The emergence of COVID-19 and its serious complications, including acute respiratory distress syndrome (ARDS), mobilised medical and scientific communities in 2020. I was very pleased that Faron answered the global call for potential therapies that might contribute to the fight against the pandemic, by providing Traumakine, Faron’s intravenous (IV) interferon (IFN) beta-1a, to two global initiatives investigating multiple therapies to treat severe COVID-19 patients – the REMAP-CAP (Randomized, Embedded, Multifactorial Adaptive Platform Trial for Community-Acquired Pneumonia) and the World Health Organization’s (WHO) Solidarity trial.

Faron has generated a wealth of data to support the hypothesis that Traumakine can strengthen the body’snatural defences and provide increased protection against serious lung complications. Sadly, the first global initiative to report data –WHO’s Solidarity trial – did not generate supportive results, with too few patients receiving an IV formulation of IFN beta to enable interpretation of the data and to draw any conclusions on the effect of IV IFN beta.

Faron’s earlier observations from Traumakine’s development programme in ARDS patients, that corticosteroid use interferes with Traumakine’s efficacy, are a significant consideration in trialling the potential of this therapy in COVID-19 patients. A third trial investigating Traumakine in COVID-19 patients, the Company’s US phase II/III HIBISCUS trial, in which the use of corticosteroids is only possible following treatment with Traumakine, will yield important results. Interest in IFN beta as a COVID-19 therapy continues to be strong and I am proud that Faron remains actively involved in research to further build the treatment armamentarium against COVID-19.

Through 2020, as the world adapted to life during a pandemic, Faron as a company showed remarkable resilience in the face of such unexpected pressures. Thanks to the strength shown by everyone across the Company, who quickly responded to a very different working environment, all business operations were maintained, clinical progress accelerated and engagement with the scientific community continued at a number of virtual congresses.

Faron’s successful financing, both the capital fundraising and securing non-dilutive funding, was a major undertaking, particularly in a virtual world. It puts the Company in a strong financial position to progress its clinical programmes and related business activities, as well as to explore further scientific opportunities within the Faron pipeline.

On behalf of the Board, I would like to thank everyone who has contributed to Faron maintaining its momentum in a difficult year – each and every member of staff and my colleagues on the Board for their commitment to the Company; our partner organisations and steering committee members for their support and expertise; Faron’s investors for showing continued confidence in the Company and, importantly, the clinicians and patients across our trial network. Particular thanks must also go to our Chief Executive Officer, Markku Jalkanen, and Chief Financial Officer, Toni Hänninen, for their leadership throughout 2020.We look forward to continued progress in 2021.

Dr Frank Armstrong

Chairman

24 March 2021

 

Chief Executive Officer’s Review 

Overview

Faron has three assets (Clevegen®bexmariliumab; Traumakine® and Haematokine®), all focusing on harnessing our immune system. We believe that the three target molecules Clever-1, CD73 and AOC3 provide new medical treatment options either to activate, suppress or maintain the power of our immune system. Our goal is to save lives by developing unique scientific discoveries into ground-breaking new treatments for hard-to-treat and rare diseases. Our work is rooted in two scientific principles. First, a deep knowledge of the pharmacology of our drug candidates. And second, understanding the science of the targeted conditions at the molecular level, to most effectively influence their underlying causes.

Our focus for 2020 has been to continue to progress our wholly-owned novel precision cancer immunotherapy candidate, bexmarilimab, through the first-in-human clinical study, MATINS, in selected metastatic or inoperable solid tumours. We have also been working closely with the regulatory authorities to finalize the HIBISCUS study protocol for Traumakine in acute respiratory distress syndrome (ARDS) and organ failures, and were pleased to provide Traumakine to global initiatives investigating multiple therapies to treat severe COVID-19 patients, although our focus to protect central organ provides significant wider application potential. The third asset around AOC3, Haematokine, could help to recover lost renewal of blood cells and activate our immune defence and other vital blood functions.

Bexmarilimab (Clevegen)

During 2020, we have continued to make strong progress in accelerating the clinical development of bexmarilimab despite the challenges of COVID-19. Bexmarilimab is our wholly-owned novel precision cancer immunotherapy candidate, which causes conversion of the immune environment around a tumour from immune-suppressive to immune-stimulating by reducing the number and function of tumour-associated macrophages (TAMs) by inactivating the function of CLEVER-1 receptor. Bexmarilimab is differentiated from other immunotherapies through its specific targeting of M2 TAMs, which facilitate tumour growth. Through myeloid cell plasticity, bexmarilimab can convert these M2 TAMs to M1s, leaving existing M1 TAMs intact and allowing both to support immune activation against tumours. We believe it has the potential to function as a novel macrophage checkpoint immunotherapy, both as a monotherapy and in combination with other immuno-oncology therapies or standard of care treatments.

MATINS study

The ongoing Phase I/II MATINS (Macrophage Antibody To INhibit immune Suppression) study is a first-in-human open label Phase I/II clinical trial with an adaptive design to investigate the safety and efficacy of bexmarilimab in selected metastatic or inoperable solid tumours.

The completed Part I of the MATINS trial, primarily intended to investigate safety and tolerability, has already shown that bexmarilimab administration promoted immune activation in MATINS patients, with data also indicating that bexmarilimab can down regulate a range of major inhibitory immune checkpoints (like PD-1, CTLA-4, etc.) that current immuno-oncology therapies aim to suppress. Bexmarilimab has also been well tolerated, showing no significant adverse events even at the highest dosing levels.

Clinical progress accelerated early in 2020 and today six out of 10 test cohorts have demonstrated early clinical benefits, being currently primary candidates to become expansion cohorts for Part III of the MATINS study as a monotherapy in patients who have exhausted all treatment options. All these solid cancer types (colorectal cancer, ovarian cancer, cutaneous melanoma, hepatocellular cancer, cholangiocarcinoma – also known as bile duct cancer – and gastric cancer) require additional treatment options and therefore present a significant commercial opportunity.

As a result of key pharmacokinetic and pharmacodynamic biomarkers indicating that more frequent dosing could potentially increase bexmarilimab treatment efficacy, compared to the original dosing interval of every three weeks, the regulatory authorities approved an expansion of MATINS to include two additional CRC cohorts receiving 1 mg/kg dosed at either weekly or two week intervals, which are on-going currently. The aim is to reach enough data to finalise dosing regimen for bexmarilimab prior entering pivotal studies. Recently the MATINS study data monitoring committee (DMC) also proposed to study more frequent dosing  and higher doses across all six cohort types showing early signs of clinical benefit and plans for this are underway.

An additional post period important finding was the discovery of an abundant amount of free, soluble Clever-1 in the plasma of MATINS study patients. Further experimental testing of isolated Clever-1 has indicated that this soluble form is a direct inhibitor of T cell activation and its inactivation could potentially result in an improved immune response and therefore enable patients to benefit from immuno-oncology therapeutics which have previously been ineffective. A new patent application has been filed seeking global protection for these findings and related applications.

Clinical expansion

Many findings support bexmarilimab combination with negative immune check point inhibitors: i) synergistic effect has been observed in animal models, ii) human tumours with high Clever-1 transcript are resistant to current immuno-oncology therapies and iii) bexmarilimab administration can down regulate these inhibitors. These facts have led Faron to design bexmarilimab combination studies with standard of care, as a first-line therapy in selected advanced solid tumours and haematological malignancies, and as a standalone neoadjuvant therapy for patients with early stage colon cancer, all of which Company hopes to start in 2021.

Alongside bexmarilimab’s clinical progress in 2020, the Company has undertaken further work to prepare for its future, by appointing global contract development and manufacturing organisation, AGC Biologics, as the commercial scale manufacturer. AGC Biologics has decades of experience in manufacturing of biotechnological products, including commercial market supplies of FDA (US), PDMA (Japan), MHRA (UK) and EMA (continental Europe) approved products. 

Traumakine

Faron is encouraged by recent vaccine developments to curb the spread of COVID-19 but the need for effective treatment options to reduce intensive care need and mortality for COVID-19 and other virally infected (e.g. influenza) patients remains critical. As such, the Company remains involved in international efforts supported by the global scientific community to explore the therapeutic and antiviral effects of the Company’s intravenous (IV) interferon (IFN) beta-1a, Traumakine, and to continue to develop the asset as a future treatment for acute respiratory distress syndrome (ARDS).

Having demonstrated a compelling argument as one of the body’s main first lines of defence against viral infection, recent findings have also shown that seriously ill COVID-19 patients have compromised interferon responses (Feulliet et al. 2021). These findings continue to drive confidence that treatment with Traumakine can strengthen the body’s natural defences if administered intravenously. Specifically, the intravenous dosing of Faron’s IFN beta-1a provides the lung vasculature with optimal exposure to IFN, which we believe is a critical aspect of Traumakine’s potential to increase protection against serious lung complications.

In 2020, we joined two global initiatives investigating the potential of multiple therapies to treat COVID-19, by providing supplies of Traumakine to the REMAP-CAP programme and the World Health Organization’s (WHO) Solidarity trial. The data readout from the WHO Solidarity trial was announced in October 2020 and concluded that subcutaneous IFN beta-1a was ineffective in treating hospitalised COVID-19 patients. Interestingly, the use of concomitant steroids had no impact on this outcome, confirming again that subcutaneous dosing has limited exposure to the lungs and should not be practiced. Traumakine continues to be investigated as part of the ongoing global REMAP-CAP programme, which is evaluating potential treatments for community-acquired pneumonia, including in COVID-19 patients, and is currently ongoing across more than 200 sites and 19 countries.

Faron is also initiating a third trial investigating the potential of Traumakine to treat COVID-19 – the US Human intravenous Interferon Beta-ISafety and preliminary efficacy in hospitalised subjects with CoronavirUS (HIBISCUS) trial – which, in January 2021, received $6.1 million from the US Department of Defense (DOD) as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The HIBISCUS trial is a phase II/III study to evaluate the potential of Traumakine to treat COVID-19 and will be conducted in approximately 5-10 study sites across the US in hospitalised patients with COVID-19, who do not yet require mechanical ventilation, but maximally low flow oxygen support. Use of corticosteroids concomitantly with Traumakine is not possible in the study setting but enabled in a sequenced manner after Traumakine. Supporting this protocol, a detailed analysis into the effects of glucocorticoids on IV IFN beta-1a activity, which arose following the INTEREST trial in 2018, was published in Intensive Care Medicine, a world leading journal in the field of critical care, in May 2020. The results showed that the desired mechanism of action of IV IFN beta-1a in the lung vasculature – the upregulation of CD73 – is blocked by the administration of glucocorticoids, and co-administration of glucocorticoids with IV IFN beta-1a increases mortality in patients with ARDS compared to patients administered with IV IFN beta-1a alone.

Subject to data from these trials supporting Traumakine’s profile, the Company will work with regulatory authorities and other parties to identify the best path to ensure its future availability to patients.

To progress Traumakine manufacturing and support its potential future commercial use, in August 2020 Faron announced plans to initiate a new state-of-the-art process for Traumakine manufacturing with a €2.1 million low interest rate loan from Business Finland, the governmental innovation financing agency of Finland. This will be used to develop and select a new cell line that can be used for future commercial scale production of Traumakine. The Company subsequently received a loan guarantee from Finnvera for €2.5 million to expand the commercial scale manufacturing.

Haematokine

In March 2020, Faron announced it had acquired rights for the potential new use of AOC3 inhibitors. The AOC3 enzymatic domain, a semicarbazide-sensitive amine oxidase, is known to produce hydrogen peroxide, a potent inflammatory mediator. AOC3 in vivo, ex vivo and in vitro studies have revealed that ACO3’s enzymatic end product hydrogen peroxide (H2O2) controls expansion of hematopoietic stem cells. Hematopoietic Stem Cell Transplantation (HSCT) is today the standard of care in all haematological malignancies. This is due to the fact that transplant failure is a lethal complication and a result of poor expansion of transplanted cells, which can occur in up to 30 per cent of patients. In addition, secondary transplantation and treatments to revive failing transplants are expensive and often unsuccessful. With Haematokine, we believe we can expand stem cells by regulating AOC3 activity.

Pre-clinical studies with humanised AOC3 mice and with ex vivo human cells are currently ongoing and further information will be provided later in the year.

Corporate

In June 2020, we hosted a virtual R&D Day presenting the Company’s R&D strategy and insights into our clinical stage programmes. In addition to Faron’s management, external perspectives were provided by Prof. Alberto Mantovani, Humanitas University, Milan, Italy; Ass. Prof. Maija Hollmén, MediCity, Turku University, Finland and Dr. Petri Bono, Terveystalo, Helsinki, Finland.

At the Annual General Meeting held on 18 May 2020, the number of members of the Board was confirmed as six. Frank Armstrong, Markku Jalkanen, Matti Manner, Leopoldo Zambeletti, Gregory Brown and John Poulos were re-elected to the Board for a term that ends at the end of the next AGM.

The Company also announced in July 2020 that Cairn Financial Advisers LLP had been appointed as Nominated Adviser to the Company with immediate effect with Panmure Gordon (UK) Limited continuing to act as the Company’s Broker.

Financial

During the period, the Company successfully raised approximately €14.0 million (gross), €13.0 million (net) from new and existing shareholders. Additionally, the Company was also awarded grants and loans from Business Finland and from the European Innovation Council (EIC) Accelerator pilot scheme and a Finnvera loan guarantee in total of €7.9 million.

Post period in February 2021, the Company raised €15.0 million gross (approximately €14.4 million net)  from new and existing shareholders through an issuance of 3,521,127 new ordinary shares.

Outlook

Our focus for 2021 will be to continue to progress bexmarilimab’s clinical development through Part II and Part III of the MATINS trial and new combination studies, to further develop our understanding of its potential future clinical use and commercial potential. We are excited to commence the HIBISCUS trial for Traumakine in the US and will continue to provide assistance with global efforts in fighting COVID-19. We are continuing to make progress with potential partners regarding both Clevegen and Traumakine, whilst also exploring funding opportunities to ensure we can continue to progress both products. I would like to thank our shareholders for their continued belief in the Company and the management team and all the employees at Faron for their hard-work and dedication during this challenging year and look forward to updating the market on our progress throughout the course of 2021.

The Board anticipates the following pipeline progress and catalysts during 2021:

Clevegen:

  • Summary of data from MATINS Part I

  • Final CLEVER-1 occupancy data
  • Top line data from MATINS Part II
  • First patient in neoadjuvant CRC and RCC
  • Final dosage and dose frequency decision 
  • Selection of first pivotal cohort from MATINS trial
  • First patient in NSCLC PD(L)1 combination
  • First patient in haematological malignancies
  • Pre-clinical evaluation in multiple new tumour types

Traumakine:

  • Initiation of HIBISCUS

  • Anticipated REMAP-CAP interim read out
  • Formation of a Traumakine Scientific Advisory Board
  • Interim analysis from HIBISCUS
  • Preclinical work on solid organ transplant
  • Partnering update during 2021

AOC3 Antagonist Platform Technology:

  • Additional information from pre-clinical studies with humanised AOC3 mice and with ex vivo human cells during 2021

 

Dr Markku Jalkanen

Chief Executive Officer

24 March 2021

 

Financial review

KEY PERFORMANCE INDICATOR

As a clinical stage drug development company, Faron’s primary interconnected KPIs are cash burn and cashposition. The Company conducted a successful fundraise during 2020. The Company’s net cash flow showed €2.8 million negative due to an increase of R&D and G&A expenditure, partially offset by other income. The Board will consider the appropriateness of monitoring additional KPIs as the Company’s operations advance.

REVENUE AND OTHER OPERATING INCOME

The Company’s revenue was €0.0 million for the year ended 31 December 2020 (2019: €nil).The Company recorded €2.1 million (2019: €0.2 million) of other operating income. This consisted of thereimbursement of already occurred legal expenses by the third-party recovery services provider as announced by the Company on 30 December 2019.

RESEARCH AND DEVELOPMENT COSTS

The R&D costs increased by €3.6 million from €10.2 million in 2019 to €13.9 million in 2020. The costs of outsourced clinical trial services were increased by by €2.5 million from €1.9 to €4.4 million. The cost of employee benefits in the R&D was increased by €0.8 million from €2.1 to €2.9 million, mainly driven by additional headcount.

GENERAL AND ADMINISTRATION COSTS

Administrative expenses increased by €1.9 million from €3.0 million in 2019 to €4.9 million in 2020. The increase was mainly due to the €1.2 million increase in other G&A costs, mainly driven by legal expenses, which were offsed by other income. Futher, employee benefits increased by €0.5 million mainly driven by additonal headcount.

TAXATION

The Company’s tax credit for the fiscal year 2020 can be recorded only after the Finnish tax authorities haveapproved the tax report and confirmed the amount of tax-deductible. The total amount of cumulative taxlosses carried forward approved by tax authorities on 31 December 2020 was €38.2 million (2019: €16.1 million). The Company estimates that it can utilise most of these during the years 2020 to 2021 by offsetting them against future profits. In addition, Faron has €55.0 million of R&D costs incurred in the financial years 2010 – 2020 that have not yet been deducted in its taxation. This amount can be deducted over an indefinite period at the Company’s discretion.

LOSSES

Loss before income tax was €16.9 million (2019: €13.3 million). Net loss for the year was €16.9 million (2019: €13.3 million), representing a loss of €0.37 per share (2019: €0.36 per share) (adjusted for the changes in number of issued shares).

CASH FLOWS

Net cash flow was €2.8 million negative for the year ended 31 December 2020 (2019: €3.0 million positive). Cash used for operating activities increased by €6.0 million to €17.5 million for the year, compared to €11.5 million for the year ended 31 December 2019. This increase was mostly driven by a increase in R&D investments. Net cash inflow from financing activities was €14.8 million (2019: €14.6 million) mainly due to the successful equity placing completed in April 2020.

FUNDRAISING

In April 2020, the Company successfully raised a total of €14.0 million gross (€13.0 million net) through a fundraise from new and existing shareholders. The majority of these proceeds are being used to commence expansion of Clevegen through the MATINS trial, to support Traumakine in the ongoing REMAP-CAP trial and to strengthen the Companys balance sheet.

Post period in February 2021, the Company raised €15.0 million gross (approximately €14.4 million net)  from new and existing shareholders through an issuance of 3,521,127 new ordinary shares.

FINANCIAL POSITION

As at 31 December 2020, total cash and cash equivalents held were €4.1 million (2019: €7.1 million).

GOING CONCERN

As part of their going concern review, the Directors have followed the Finnish Limited Liability Companies Act, the Finnish Accounting Act and the guidelines published by the Financial Reporting Council entitled “Guidance on the Going Concern Basis of Accounting and Reporting on Solvency and Liquidity Risks – Guidance for directors of companies that do not apply the UK Corporate Governance Code”. TheCompany and its subsidiaries (the “Group”) are subject to a number of risks similar to those of other development stage pharmaceutical companies. These risks include, amongst others, generation of revenues in due course from the development portfolio and risks associated with research, development, testing and obtaining related regulatory approvals of its pipeline products. Ultimately, the attainment of profitable operations is dependent on future uncertain events which include obtaining adequate financing to fulfil the Group’s commercial and development activities and generating a level of revenue adequate to support the Group’s cost structure.

The Group made a net loss of €16.9 million during the year ended 31 December 2020. It had a negative equity of €1.8 million including an accumulated deficit of €96.6 million. As at that date, the Group had cash and cash equivalents of €4.1 million.

The Directors have prepared detailed financial forecasts and cash flows looking beyond 12 months from the date of the approval of these financial statements. In developing these forecasts, the Directors have made assumptions based upon their view of the current and future economic conditions that are expected to prevail over the forecast period. The Directors estimate that the cash held by the Group together with known receivables will be sufficient to support the current level of activities into the fourth quarter of 2021. The Directors are continuing to explore sources of finance available to the Group and they believe they have a reasonable expectation that they will be able to secure sufficient cash inflows for the Group to continueits activities for not less than 12 months from the date of approval of these financial statements; they have therefore prepared the financial statements on a going concern basis.

Because the additional finance is not committed at the date of issuance of these financial statements, these circumstances represent a material uncertainty that may cast significant doubt on the Company’s ability to continue as going concern. Should the Group be unable to obtain further finance such that the going concern basis of preparation were no longer appropriate, adjustments would be required, including to reduce balance sheet values of assets to their recoverable amounts, to provide for further liabilities that might arise.

HEADCOUNT

Average headcount of the Company for the year was 30 (2019: 24).

SHARES AND SHARE CAPITAL

During the period 1 January to 31 December 2020, the Company, using the share authorities granted at the Extraordinary General Meetings held on 25 October 2019, issued a total of 3,500,000 new ordinary shares at an issuace price of €4.00 (£3.48) per share. The subscription price net of costs was credited in full to the Company’s reserve for invested unrestricted equity, and the share capital of the Company was not increased.

The Company has no shares in treasury; therefore at the end of 2020 the total number of voting rights was46,896,747.

LEGAL PROCEEDINGS

As announced by the Company on 2 October 2019 and 30 December 2019, the Company has received a letter from Rentschler Biopharma SE in which Rentschler stated that it terminates the agreement concerning the Traumakine API manufacturing. The Company considers that this statement is without merit and has filed a request for arbitration to seek damages. To fund the proceedings, the Company has entered into a litigation funding agreement with a third-party recovery services provider which, in the event of success, would receive a typical portion of any damages awarded. The arbitration is ongoing and the finalarbitration award is expected to be issued by the arbitration tribunal during the autumn 2021.

Toni Hänninen

Chief Financial Officer

24 March 2021

 

Consolidated Income Statement, IFRS

€’000

Unaudited 7-12/2020
6 months
Unaudited 7-12/2019
6 months
1-12/2020
12 months
1-12/2019
12 months
Revenue 0 0 0 0
Other operating income 1,379 185 2,122 185
Research and development expenses (8,345) (5,255) (13,879) (10,237)
General and administrative expenses (2,543) (1,688) (4,897) (3,049)
Operating loss (9,509) (6,758) (16,654) (13,101)
Financial expense (160) (151) (389) (224)
Financial income 76 69 107 74
Loss before tax (9,593) (6,840) (16,936) (13,251)
Tax expense (10) (10) (10) (11)
Loss for the period (9,603) (6,850) (16,946) (13,262)
Other comprehensive income
Total comprehensive loss for the period (9,603) (6,850) (16,946) (13,262)
Loss per ordinary share
Basic and diluted loss per share, EUR (0.22) (0.16) (0.37) (0.36)

Consolidated Balance Sheet, IFRS

€’000

31 December 2020 31 December 2019
Assets
Non-current assets
Machinery and equipment 14 13
Right-of-use-assets 361 386
Intangible assets 565 529
Prepayments and other receivables 56 77
Total non-current assets 996 1,005
Current assets
Prepayments and other receivables 3,263 2,145
Cash and cash equivalents 4,108 7,059
Total current assets 7,371 9,204
Total assets 8,367 10,209
Equity and liabilities
Capital and reserves attributable to the equity holders of the Company
Share capital 2,691 2,691
Reserve for invested unrestricted equity 92,015 78,916
Accumulated deficit (96,557) (79,997)
Translation difference 2
Total equity (1,849) 1,610
Non-current liabilities
Borrowings 2,728 2,263
Lease liabilities 199 261
Other liabilities 786 0
Total non-current liabilities 3,713 2,524
Current liabilities
Borrowings 122 163
Lease liabilities 176 135
Trade payables 4,608 2,967
Other current liabilities 1,597 2,810
Total current liabilities 6,503 6,075
Total liabilities 10,216 8,599
Total equity and liabilities 8,367 10,209

Consolidated Statement of Changes in Equity, IFRS

€’000

Share capital Reserve for invested unrestricted equity Translation difference Accumulated deficit Total equity
Balance as at 31 December 2018 2,691 64,464 (66,786) 369
Comprehensive loss for the period (13,262) (13,262)
Transactions with equity holders of the Company
Issue of ordinary shares, net of transaction costs EUR 1,149 thousand 14,452 14,452
Share-based compensation 51 51
14,452 51 14,503
Balance as at 31 December 2019 2,691 78,916 (79,997) 1,610
Comprehensive loss for the period 2 (16,946) (16,944)
Transactions with equity holders of the Company
Issue of ordinary shares, net of transaction costs EUR 1,004 thousand 13,098 13,098
Share-based compensation 386 386
13,098 386 13,484
Balance as at 31 December 2020 2,691 92,015 2 (96,557) (1,849)

Consolidated Cash Flow Statement, IFRS

€’000

Unaudited 7-12/2020
6 months
Unaudited 7-12/2019
6 months
1-12/2020
12 months
1-12/2019
12 months
Cash flow from operating activities
Loss before tax (9,593) (6,840) (16,936) (13,251)
Adjustments for:
Received grant (587) (587)
Depreciation and amortisation 153 190 283 238
Interest expense 56 119 149 158
Tax expense 10 11 10 11
Unrealised foreign exchange loss (gain), net 242 (36) 117 (7)
Share-based compensation 386 386 51
Adjusted loss from operations before changes in working capital (9,333) (6,556) (16,578) (12,800)
Change in net working capital:
Prepayments and other receivables (1,631) (547) (1,097) 1,173
Trade payables 1,878 99 1,641 (567)
Other liabilities (83) 1,081 (1,416) 731
Cash used in operations (9,169) (5,923) (17,450) (11,463)
Taxes paid (1) (9) (1) (9)
Interest paid 1 (25) (28) (51)
Net cash used in operating activities (9,169) (5,957) (17,479) (11,523)
Cash flow from investing activities
Payments for intangible assets (60) (59) (137) (100)
Payments for equipment (3) (5)
Net cash used in investing activities (63) (59) (142) (100)
Cash flow from financing activities
Proceeds from issue of shares 106 11,166 14,103 15,627
Share issue transaction cost (52) (944) (1,004) (1,175)
Proceeds from borrowings 630 76 630 307
Repayment of borrowings (122)
Proceed from grants 1,375 1,375
Payment of lease liabilities (104) (151) (195) (151)
Net cash from financing activities 1,955 10,147 14,787 14,608
Net increase (+) / decrease (-) in cash and cash equivalents (7,277) 4,131 (2,834) 2,985
Effect of exchange rate changes on cash and cash equivalents (242) 36 (117) 7
Cash and cash equivalents at 1 January 11,627 2,892 7,059 4,067
Cash and cash equivalents at 31 December 4,108 7,059 4,108 7,059

Half-year Report

Faron Pharmaceuticals Oy

(“Faron” or the “Company”)

Half-year report 1 January to 30 June 2020 (unaudited)

–     Development of novel cancer immunotherapy Clevegen® (bexmarilimab) continues in Phase I/II MATINS trial across 10 tumour types

–     IV interferon beta-1a, Traumakine®, being investigated as potential COVID-19 treatment in two ongoing global trials with preparations for US trial underway

–     Successful €14 million placing in April strengthens Company’s balance sheet

–     Additional grants of €3.3 million and €4.6 million loans awarded to drive R&D and CMC programmes

Half-year report, 24 September 2020 at 9.00 AM (EEST)

TURKU, FINLAND – Faron Pharmaceuticals Oy (AIM: FARN, First North: FARON), the clinical stage biopharmaceutical company, today announces its unaudited half-year report for 1 January to 30 June 2020 (the “period”).

HIGHLIGHTS

Operational (including post period):

Clevegen® (bexmarilimab) – Regulator of major inhibitory immune checkpoints and wholly-owned novel cancer immunotherapy in development

Clinical Development Updates:

·      Dosing of Part II of the ongoing MATINS trial commenced in February, with strong patient recruitment across 10 cancer types (ER-positive breast cancer, cholangiocarcinoma (bile duct cancer) and gall bladder cancer, colorectal cancer, gastric cancer, hepatocellular carcinoma, cutaneous melanoma, uveal melanoma, ovarian cancer, pancreatic ductal adenocarcinoma and anaplastic thyroid cancer). This basket trial also has three dosing levels for colorectal cancer (CRC) at 0.3, 1.0 and 3.0 mg/kg.

·      A comprehensive review and analysis of data from the completed Part I (dose finding) stage of the trial was completed by the data monitoring committee (“DMC”) with a recommendation from the DMC to rapidly expand into additional tumour types. As of today, and based on early clinical benefits, four cancer types (colorectal, ovarian, cutaneous melanoma and uveal melanoma) have been selected as the candidate expansion cancer types for Part III.

·      The World Health Organization (WHO) approved bexmarilimab as the International Nonproprietary Name (INN) for Clevegen.

·      Further detail was provided on clinical expansion plans for bexmarilimab, which will include the investigation of alternative dosing cycles, as pharmacodynamic (PD) markers may indicate a need for shorter frequencies, as well as further studies in additional clinical settings – in combination with standard of care (SOC) as a first-line therapy in selected advanced solid tumours and as a standalone neoadjuvant therapy for patients with early stage colon cancer.

·      The Company expects to announce topline data from its first expansion cohorts of the MATINS trial in the fourth quarter of 2020 and determine the final dosage, and dosing frequency for the expansion cohorts, in the first quarter of 2021.

Data Presentations:

·      Previously announced safety and efficacy data from Part I of the MATINS trial were presented at the virtual American Society of Clinical Oncology (ASCO20) Annual Meeting, showing that bexmarilimab was well tolerated without dose-limiting toxicities; CLEVER-1 inhibition led to immune cell activation and downregulation of several checkpoint molecules; and interferon gamma and chemokine CXCL10 responses were associated with clinical responses observed in target or non-target lesions.

·      Data from Part I of the trial were also presented at the European Society of Medical Oncology (ESMO) Virtual Congress 2020, including key pharmacokinetics and Clever-1 occupancy data, evidence of very good tolerability across all dosing levels, immune activation in all subjects, promising clinical anti-tumour activity and the conversion of immunologically non-inflamed (cold) tumours into inflamed (hot) tumours in patients traditionally not responsive to currently available checkpoint inhibitors.

Business Development and Manufacturing:

·      AGC Biologics, a global contract development and manufacturing organization, was selected as the commercial scale manufacturer of bexmarilimab. The commercial scale manufacturing process established by AGC Biologics will also provide a dossier to support future regulatory filings in Europe and the US.

·      A €2,500,000 grant from the European Innovation Council (EIC) Accelerator pilot scheme was awarded to the Company to progress the MATINS trial and related business activities. The EIC Accelerator pilot scheme supports top-class innovators, entrepreneurs, small companies and scientists with funding opportunities to support developing and bringing to the market new breakthrough products, services and business models that would become future drivers of economic growth for Europe.

·      Faron joined the Finnish Cancer IO consortium, a new cancer immunotherapy-focused €10 million top-level collaborative research and innovation project within Business Finland’s Personalized Health Program, and was awarded a €800,000 grant from Business Finland to conduct a detailed, state-of-the-art characterization of the immunological responses seen in cancer patients in the MATINS trial. Bexmarilimab will be studied in experimental combinations with anti-cancer molecules from other consortium members.

Traumakine® – in development for the treatment of organ failures

Clinical Development:

·       Faron’s intravenous (IV) interferon (IFN) beta-1a, Traumakine, was selected to be part of the two global trials investigating potential treatments for COVID-19.

·       WHO’s global Solidarity trial began in April 2020 investigating four treatment options against SOC to assess their relative effectiveness against COVID-19 – remdesivir; lopinavir/ritonavir; lopinavir/ritonavir with IFN beta-1a; and chloroquine or hydroxychloroquine. In July, WHO removed the hydroxychloroquine and lopinavir/ritonavir treatment arms from the trial due to insufficient evidence of benefit leaving IFN beta-1a and remdesivir as the only two drugs remaining in the trial, subject to WHO announcing further new compounds for inclusion. IFN beta-1a now remains as a monotherapy. The WHO expects to provide a readout from the SOLIDARITY trial in the fourth quarter of 2020.

·       The global REMAP-CAP (Randomized, Embedded, Multifactorial Adaptive Platform Trial for Community-Acquired Pneumonia) investigating potential treatments for patients with community acquired pneumonia, including COVID-19 patients, introduced a new treatment arm to include Faron’s IV IFN beta-1a. The study is directly comparing the treatment effect of Traumakine, hydrocortisone treatments, and other study treatment options on the clinical outcomes of COVID-19 patients and those with other causes of pneumonia requiring intensive care unit (ICU) care. 

·       Faron announced that a third trial will investigate the potential of Traumakine to treat COVID-19. HIBISCUS (Human Interferon Beta In Severe CoronavirUS) will be an investigator-initiated study at the Harvard Medical School’s Beth Israel Deaconess Medical Center (BIDMC), focused on ICU patients with ARDS caused by viral infection (e.g. COVID-19, influenza). Commencement of the phase II/III pivotal, randomized, placebo controlled study, which aims to recruit 350 patients, remains subject to finalisation of funding arrangements and regulatory approval. Faron expects to initiate this study in the fourth quarter of 2020.

·       Detailed analyses into the effects of glucocorticoids on IV IFN beta-1a activity, which arose following the INTEREST trial in 2018, were published in Intensive Care Medicine, a world leading journal in the field of critical care. The results showed that the desired mechanism of action of IV IFN beta-1a in the lung vasculature – the upregulation of CD73 – is blocked by the administration of glucocorticoids, and co-administration of glucocorticoids with IV IFN beta-1a increases mortality in patients with acute respiratory distress syndrome (ARDS) compared to patients administered with IV IFN beta-1a alone.

Business Development and Manufacturing:

·       Faron announced plans to initiate a new state-of-the-art process for Traumakine manufacturing and was awarded a €2,100,000 low interest rate loan from Business Finland, the governmental innovation financing agency of Finland, which will be used to develop and select a new cell line that can be used for future commercial scale production of the Company’s IV IFN beta-1a. The Company subsequently received a loan guarantee from Finnvera (official Export Credit Agency of Finland) for €2,500,000 loan to expand the commercial scale manufacturing.

AOC3 Antagonist Platform Technology (HaematokineTM)

·        In March 2020, Faron acquired rights for the potential new use of AOC3 inhibitors. Faron will be responsible for the future development of the AOC3 protein inhibitor and for the management, prosecution, maintenance and filing of patent applications. The project is now named HaematokineTM as the Company believes that the use of AOC3 inhibitors could regulate the expansion of hematopoietic stem cells and could become a life saving treatment for patients who have lost their bone morrow for various reasons such as hematological cancers. The Company is continuing IND-enabling studies for this program, however, the recent first review by the Finnish patent office has made the Company believe that global patent protection could be possible for the HaematokineTM project.

Corporate

·      Faron hosted a virtual R&D Day presenting the Company’s R&D strategy and insights into its two clinical stage programmes. In addition to Faron Management, three external experts provided additional perspectives on both programmes. Alongside Markku Jalkanen, Chief Executive Officer, and members of the Executive Leadership and senior management teams, external perspectives were provided by Prof. Alberto Mantovani, Humanitas University, Milan, Italy; Ass. Prof. Maija Hollmén, MediCity, Turku University, Finland and Dr. Petri Bono, Terveystalo, Helsinki, Finland.

·       The Company’s Annual general meeting (AGM) was held on 18 May 2020. The AGM approved all the proposals of the board of directors and its committees set out in the notice of the AGM published on 14 April 2020. The number of members of the Board was confirmed as six. Frank Armstrong, Markku Jalkanen, Matti Manner, Leopoldo Zambeletti, Gregory Brown and John Poulos were re-elected to the Board for a term that ends at the end of the next AGM.

·       Faron announced on 27 July 2020 that Cairn Financial Advisers LLP had been appointed as Nominated Adviser to the Company with immediate effect. Panmure Gordon (UK) Limited continues to act as the Company’s Broker.

Impact of COVID-19

During the pandemic our ability to secure funding and remote working operations to our portfolio companies is key to continued success. Even during exceptional circumstances, we were able to continue to operate our business almost normally and the development of our clinical trials proceeded as planned.

Additionally, Faron closely followed and strictly complied to the regulations and recommendations of the Finnish National Institute for Health and Welfare (THL) and other relevant authorities to ensure the safety for its employees, study subjects and partners.

Financial

·       Cash balances of €11.6 million at 30 June 2020 (2019: €2.9 million).

·       Operating loss of €7.1 million for the six months ended 30 June 2020 (2019: €6.3 million).

·       Net assets of €7.3 million as at 30 June 2020 (2019: €-1.8 million).

·       In April 2020 the Company raised a total of €14 million gross (€13 million net) in a share placing, effected via a private placement of new Ordinary Shares to a limited number of institutional investors in the Nordic region and a concurrent proposed private placement of new Ordinary Shares to UK institutional investors.

·       Additional grants of €3.3 million, loan of €2.1 million and a loan guarantee for €2.5 million were awarded in H1 and partially post period. Those non-diluting funds (in total of €7.9 million) funds will be dispersed to the Company in H2 and thereafter, and thus are not included in H1 cash balances.

Consolidated key figures, IFRS

€’000

Unaudited

1-6/2020
6 months

Unaudited

1-6/2019
6 months

1-12/2019
12 months

Revenue

0

0

0

Research and Development expenses

(5,534)

(4,982)

(10,237)

General and Administrative expenses

(2,354)

(1,361)

(3,049)

Loss for the period

(7,343)

(6,412)

(13,262)

Unaudited

1-6/2020
6 months

Unaudited

1-6/2019
6 months

1-12/2019
12 months

Loss per share EUR

(0.16)

(0.19*)

(0.36)

Number of shares at end of period

46,799,747

37,233,894

43,290,747

Average number of shares

44,584,199

33,819,699

36,850,577

€’000

Unaudited 30 Jun 2020

Unaudited

30 Jun 2019

31 Dec 2019

Cash and cash equivalents

11,627

2,892

7,059

Equity

7,313

(1,761)

1,610

Balance sheet total

14,343

5,103

10,209

*correction to interim results announced on 23 September 2019, the Loss per share is EUR 0.19 instead of EUR 0.17

Commenting on the results, Dr Markku Jalkanen, CEO of Faron, said: “I am delighted to report the significant progress we have made so far in 2020, advancing the Faron pipeline and investing to secure the future of our clinical programmes. Our novel precision cancer immunotherapy, bexmarilimab, continues to deliver very promising results in a development programme that has rapidly expanded this year and our confidence in this novel therapy has been strengthened by the MATINS Part I data, showing that bexmarilimab has led to CLEVER-1 inhibition with immune cell activation and downregulation of several checkpoint molecules.  With the MATINS trial now advancing across ten cancer cohorts we stand to learn much more about the potential of this novel therapy in the coming months and we look forward to continuing our discussions with regulators about the future development plan of this program.

“As the scientific community has rallied in 2020 to identify therapies for COVID-19 patients, I am proud that Faron has been able to support two global initiatives and a planned US trial, to investigate the potential of Traumakine for the treatment of ARDS and COVID-19. We look forward to the upcoming WHO SOLIDARITY trial data in fourth quarter of this year and expect to initiate our HIBISCUS US study with Harvard University in the fourth quarter of this year.

“The Company’s successful fundraise in April and a number of additional non-dilutive funds put the Company in a strong financial position to progress our clinical programmes and I would like to thank all our shareholders for their continued support.”

September 24, 2020

Faron Pharmaceuticals

Board of Directors

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 (“MAR”).

Conference call information

Faron will host a webcast and conference call for analysts to provide an update on the results, followed by a Q&A session, at 7.30am EST / 12:30pm BST / 2:30pm EEST. A presentation to accompany the call will be available on the Faron website (https://www.faron.com/investors/results) at 7.00am EST / 12.00pm BST / 2.00pm EEST

The webcast can be accessed here https://www.lsegissuerservices.com/spark/FaronPharmaceuticalsOy/events/f2025553-c840-4c5c-9f34-d6e3b6d58fa3 

Dial-in details are:

UK: 0800 028 8438

Finland: 0931 583 827

US: (918) 922-6506
Conference ID: 5946048

For more information please contact:

Faron Pharmaceuticals Oy

Dr Markku Jalkanen, Chief Executive Officer

investor.relations@faron.com

Cairn Financial Advisers LLP, Nomad

Sandy Jamieson, Jo Turner,  Mark Rogers

Phone. +44 207 213 0880     

Panmure Gordon (UK) Limited, Broker

Rupert Dearden

Phone: +44 207 886 2500     

Sisu Partners Oy, Certified Adviser on Nasdaq First North

Juha Karttunen, Jussi Majamaa

Phone: +358 (0)40 555 4727

Consilium Strategic Communications

Mary-Jane Elliott, David Daley, Lindsey Neville

Phone: +44 (0)20 3709 5700

E-mail: faron@consilium-comms.com 

Stern Investor Relations, Inc.

Julie Seidel

Phone: +(1)212 362 1200

Email: Julie.Seidel@sternir.com

About Faron Pharmaceuticals Ltd  

Faron (AIM: FARN, First North: FARON) is a clinical stage biopharmaceutical company developing novel treatments for medical conditions with significant unmet needs. The Company currently has a pipeline based on the receptors involved in regulation of immune response in oncology and organ damage. Clevegen, its precision immunotherapy, is a novel anti-Clever-1 antibody with the ability to switch immune suppression to immune activation in various conditions, with potential across oncology, infectious disease and vaccine development. Currently in phase I/II clinical development as a novel macrophage checkpoint immunotherapy for patients with untreatable solid tumours, Clevegen has potential as a single-agent therapy or in combination with other standard treatments including immune checkpoint molecules. Traumakine, the Company’s pipeline candidate to prevent vascular leakage and organ failures, has completed a phase III clinical trial in Acute Respiratory Distress Syndrome (ARDS). Plans for its future development are being finalised to avoid interfering steroid use together with Traumakine. 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”, “hope”, “seek”, ”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 early data from initial patients in the MATINS trial may not be replicated in larger patient numbers and the outcome of clinical trials 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 the ability of the Company to successfully licence its programmes within the anticipated timeframe or at all, 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 or other sources of funding, 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.

Chairman’s and Chief Executive Officer’s Review

Introduction

The first half of 2020 has continued to build further excitement around Faron’s pipeline, which we saw gain momentum in 2019. Clevegen® (bexmarilimab), by providing significant immune activation for cancer patients, has delivered solid achievements against our objectives for the period. Traumakine® (intravenous interferon-beta 1a) in turn has become a key candidate as a potential COVID-19 treatment due to its ability to act as an anti-viral and lung function supportive agent. We also announced a new pre-clinical project, now called HaematokineTM, a treatment involving the regeneration of haematopoietic stem cells. Faron also attracted a total of 22 million in new funding, which includes a significant amount of non-dilutive funds (7.9 million). In this report we are pleased to provide further information on our H1 2020 progress and also give insights into our plans and intended progress for the second half of the year.

Clevegen (bexmarilimab) – Commencement of Part II of MATINS study with strong patient recruitment and encouraging Part I results

Driving the clinical development of Clevegen has been Faron’s priority and in the first six months of the year we have delivered strong results, with the programme continuing apace. Bexmarilimab is our wholly-owned novel precision cancer immunotherapy candidate, which causes conversion of the immune environment around a tumour from immune-suppressive to immune-stimulating by reducing the number and function of immune suppressive tumour-associated macrophages (TAMs) by inactivating the function of CLEVER-1 receptor. Bexmarilimab is differentiated from other immunotherapies through its specific targeting of M2 TAMs, which facilitate tumour growth. Through myeloid cell plasticity, bexmarilimab can convert these M2 TAMs to M1s, leaving existing M1 TAMs intact and allowing both to support immune activation against tumours. We believe it has the potential to function as a novel macrophage checkpoint immunotherapy, both as a monotherapy and in combination with other immuno-oncology therapies or standard of care treatments.

The ongoing MATINS trial, our first-in-human open label phase I/II clinical trial with an adaptive design, is investigating the safety and efficacy of bexmarilimab in selected metastatic or inoperable solid tumours. The completed Part I of the MATINS trial, primarily intended to investigate safety and tolerability, has already shown that bexmarilimab administration promoted immune activation in all dosed patients, with data also indicating that bexmarilimab can down regulate a range of major inhibitory immune checkpoints (like PD-1, CTLA-4, etc.) that current immuno-oncology therapies aim to suppress. Bexmarilimab has also been well tolerated, showing no significant adverse events even at the highest dosing levels.

Clinical progress accelerated early in 2020 when the MATINS trial’s data monitoring committee (DMC) approved the first expansion cohort for Part II of the trial in patients suffering from late-stage colorectal cancer (CRC). A second expansion cohort, in patients with ovarian cancer, quickly followed. Ovarian cancer is a tumour type known to host a significant number of Clever-1 positive TAMs and it presents a high unmet medical need with few available treatments for patients. As of today, additional clinical benefits have been observed in cutaneous melanoma and uveal melanoma. All these four cancer types are primary candidates to become expansion cohorts for the Part III of the MATINS study.

In March 2020, a comprehensive review and analysis of data from the completed Part I stage of the trial was undertaken by the DMC. Key findings presented to the committee included evidence of immune activation in all subjects (except those receiving the lowest 0.1 mg/kg dose) following treatment with bexmarilimab and emerging evidence of clinical responses. According to the RECIST response evaluation criteria, bexmarilimab treatment showed a clinical effect of two partial responses and seven cases of stable disease, which equated to a response rate in Part I of 36 per cent (9/25) among 0.3-10 mg/kg dose levels.

In light of these findings, the DMC recommended a rapid expansion of the study to include all cancer cohorts in the study protocol, beyond the CRC and ovarian cancer cohorts previously selected. The committee also recommended that patient recruitment for the expansion cohorts should follow standard of care for each cancer type and enable subjects with less compromised immune systems to be enrolled to the trial (i.e. earlier treatment lines whenever possible, according to the study protocol).

In total, bexmarilimab is now being investigated in ten cancer cohorts: ER-positive breast cancer, cholangiocarcinoma (bile duct cancer) and gall bladder cancer, colorectal cancer, gastric cancer, hepatocellular carcinoma, cutaneous melanoma, uveal melanoma, ovarian cancer, pancreatic ductal adenocarcinoma and anaplastic thyroid cancer.

At a time when health systems have been stretched to their limits by the ongoing global COVID-19 pandemic, we have been particularly pleased that patient recruitment into the MATINS trial has not been affected and we look forward to learning more about bexmarilimab’s potential as the trial progresses. Our confidence in bexmarilimab has only strengthened this year. Despite the MATINS trial patients’ very advanced stage of disease and several lines of previous therapies, including PD-1 and CTLA-4 inhibitors, we remain very encouraged by the evidence emerging of this candidate’s single agent efficacy. That is why we also announced this year that clinical expansion plans for bexmarilimab will include the investigation of alternative dosing cycles, as pharmacodynamics markers may indicate a need for shorter frequencies, as well as further studies in additional clinical settings. The Company also intends to investigate bexmarilimab in combination with standard of care, as a first-line therapy in selected advanced solid tumours, and as a standalone neoadjuvant therapy for patients with early stage colon cancer.

Patient recruitment for the several cohorts has already completed and the rest are expected to follow in the next few months. The data from these cohorts will allow the Company to obtain advice from regulatory authorities for the continuation into Part III of the study. Patient recruitment for a small number of additional cohorts is expected to complete around early Q4 2020 and discussions with the FDA likely to follow in early 2021.

Alongside bexmarilimab’s clinical progress in 2020, the Company has undertaken further work to prepare for its future, by appointing global contract development and manufacturing organisation, AGC Biologics, as the commercial scale manufacturer. This is a significant milestone in our bexmarilimab programme. AGC Biologics has decades of experience in manufacturing of biotechnological products, including commercial market supplies of FDA, PDMA and EMA approved products. The commercial scale manufacturing process it establishes for bexmarilimab will provide a dossier to support future regulatory filings in Europe and the US.

We have also continued our partnering discussions with third parties, including leading pharmaceutical companies, with the aim of supporting expansion of clinical development and exploring the potential of bexmarilimab in combination with existing immunotherapies and other cancer therapies. While these remain important to our strategy, Faron’s strong financial position does provide the Company with greater flexibility to independently advance this candidate further in its development programme.

Traumakine – Lung protection and anti-COVID-19 in one treatment under development

Traumakine is currently involved in three major clinical studies sponsored by the global scientific community in its search for therapies against COVID-19. These explore the potential of the Company’s intravenous (IV) interferon (IFN) beta-1a, Traumakine, to reduce intensive care need and mortality for COVID-19 patients but also as a future treatment for acute respiratory distress syndrome (ARDS) and one that could have significant impact on the intensive-care burden from COVID-19. This is well justified, and our greater understanding from previous trials on the interference from corticosteroids on the efficacy of our investigational IV IFN beta-1a has enabled us to refocus our efforts on this asset, which we continue to believe holds great potential as a future treatment for ARDS. Alongside the acceleration of bexmarilimab’s development programme, Faron began 2020 continuing to work with regulatory authorities to determine the next steps in Traumakine’s future development pathway. We were pleased therefore, when in March the U.S. Food and Drug Administration (FDA) accepted the Company’s proposed protocol design for the next Traumakine study in ARDS patients. That trial protocol reflected the feedback and conclusions from the FDA that further studies with our IV IFN beta-1a should exclude the use of concomitant glucocorticoids since they are likely to block its desired therapeutic effect, and may have a potentially deleterious impact on patient survival. Since March, the FDA has indicated that a separate arm in this study is required, to test a separate effect of a corticosteroid called dexamethasone. This study called HIBISCUS has now been designed together with Harvard University in the US. The Company expects approval of this study in due course and for recruitment to start during Q4 2020.

In April we joined two global initiatives investigating the potential of multiple therapies to treat COVID-19, by providing supplies of Traumakine to REMAP-CAP, the Randomized, Embedded, Multifactorial Adaptive Platform Trial for Community-Acquired Pneumonia program, and the World Health Organization’s (WHO’s) Solidarity trial.

One of the body’s main first lines of defence against viral infection is endogenous IFN-beta production, but recent findings have shown that seriously ill COVID-19 patients have compromised interferon responses. We believe Traumakine treatment can further strengthen the body’s natural defences. Specifically, the intravenous dosing of Faron’s IFN beta-1a provides the lung vasculature with optimal exposure to IFN, which we believe is a critical aspect of Traumakine’s potential to increase protection against serious lung complications.

While both global initiatives are ongoing, Faron is also supporting a third trial to investigate the potential of the Company’s IV IFN beta-1a to treat COVID-19. HIBISCUS (Human Interferon Beta In Severe CoronavirUS), will be an investigator initiated study at Harvard Medical School’s Beth Israel Deaconess Medical Center (BIDMC), focused on ICU patients with ARDS caused by viral infection (e.g. COVID-19, influenza). Commencement of this Phase II/III pivotal, randomized, placebo-controlled study, remains subject to finalisation of funding arrangements and regulatory approval. The study will test Traumakine against both placebo and dexamethasone, which is now a part of the standard of care in the US.

Subject to data from these trials supporting Traumakine’s profile, the Company will work with regulatory authorities and other parties to identify the best path to ensure its future availability to patients. 

As a sign of our continued commitment to the Traumakine programme and looking ahead to its future, the Company announced (August, post-period) that AGC Biologics, the commercial scale manufacturer of bexmarilimab, will be the new manufacturing house for the commercial scale production of Traumakine’s active pharmaceutical ingredient – interferon beta-1a. 

HaematokineTM – Hematopoietic stem cell expansion

In March the Company acquired rights for the potential new use of AOC3 inhibitors. The AOC3 enzymatic domain, a semicarbazide-sensitive amine oxidase, is known to produce hydrogen peroxide, a potent inflammatory mediator. AOC3 in vivo, ex vivo and in vitro studies have revealed that ACO3 enzymatic end product hydrogen peroxide (H2O2) controls expansion of hematopoietic stem cells. Hematopoietic Stem Cell Transplantation (HSCT) is today the standard of care in all haematological malignancies. This is due to the fact that transplant failure is a lethal complication and a result of poor expansion of transplanted cells, which can occur in up to 30 per cent of patients. In addition, secondary transplantation and treatments reviving failing transplants are expensive and often unsuccessful. With Haematokine, the Company believes, we can expand stem cells by regulating AOC3 activity.

Financial review

In April the Company successfully raised approximately €14 million (£12.9 million) through a private placement of new ordinary shares to institutional investors in the UK and the Nordic region. The majority of these proceeds are being used to advance our bexmarilimab clinical programme and expand manufacturing, while also significantly strengthening the Company’s balance sheet to support other ongoing activities.

During the period the Company was awarded two grants to support its activities: An €0.8 million grant from Business Finland to conduct detailed, state-of-the-art characterization of the immunological responses seen in cancer patients in the bexmarilimab MATINS trial and a €2.5 million grant from the European Innovation Council (EIC) Accelerator pilot scheme to progress the MATINS trial and related business activities.

The Company was also awarded a €2.1 million low interest rate loan from Business Finland, which is being used to develop and select a new cell line for use in the future commercial scale production of Traumakine. Additionally, post period, the Company received a loan guarantee for a €2.5 million loan, which will be used to further expand that cell line. The Company has partnered with Danske Bank A/S Finland Branch for the loan arrangement.

These grants and loans, totalling €7.9 million, are non-dilutive. Proceeds of these grants and loans are not included in the H1 cash balances as the proceeds will be dispersed to the Company post period.

Statement of comprehensive income

The loss from operations for the six months ended 30 June 2020 was EUR 7.1 million (six months ended 30 June 2019: loss of EUR 6.3 million). No revenue was generated during the period or prior revenue. Research and development expenditure increased by EUR 0.5 million to EUR 5.5 million (2019: EUR 5.0 million). Administrative expenses increased by EUR 1.0 million to EUR 2.4 million (2019: EUR 1.4 million).

The loss after tax for the period was EUR 7.3 million (2019: loss of EUR  6.4 million) and the basic loss per share was EUR 0.16 (2019: loss per share of  EUR 0.19).

Statement of financial position and cash flows

At 30 June 2020, net assets amounted to EUR 7.3 million (30 June 2019: EUR−1.8 million). The net cash flow for the first six months in 2020 was EUR 4.4 million (2019: EUR −1.1 million). As at 30 June 2020, total cash and cash equivalents held were EUR 11.6 million (2019: EUR 2.9 million).

Legal proceedings

As announced by the Company on 2 October 2019 and 30 December 2019, the Company has received a letter from Rentschler Biopharma SE in which Rentschler stated that it was terminating the agreement concerning Traumakine API manufacturing. The Company considers that this statement is without merit and that Rentschler has breached the agreement. Faron has filed a request for arbitration to seek damages. The arbitration proceeding is ongoing and the final arbitration award is expected to be issued by the arbitration tribunal during mid year 2021. To fund the proceedings, the Company has entered into a litigation funding agreement with a third-party recovery services provider offering non-recourse financing services which, subject to final quantum, is expected to cover both the Company’s and the adverse party’s legal expenses and which, in the event of success, would receive a typical portion of any damages awarded.

Corporate

On 16 June 2020, the Company hosted a virtual R&D Day presenting its R&D strategy and insights into the Clevegen and Traumakine programmes. Faron management representatives were joined by Prof. Alberto Mantovani, Humanitas University, Milan, Italy; Ass. Prof. Maija Hollmén, MediCity, Turku University, Finland, and Dr. Petri Bono, Terveystalo, Helsinki, Finland, who provided additional perspectives on both programmes. The event, well attended, was an opportunity for the Company to showcase the strength of its clinical programmes and plans for the future. 

The Company’s Annual general meeting (AGM), held on 18 May 2020, approved all the proposals of the board of directors and its committees set out in the notice of the AGM published on 14 April 2020. The number of members of the Board was confirmed as six. Frank Armstrong, Markku Jalkanen, Matti Manner, Leopoldo Zambeletti, Gregory Brown and John Poulos were re-elected to the Board for a term that ends at the end of the next AGM.

Summary & outlook

Our focus for H2 2020 will be the expedition of Clevegen’s clinical development through Parts II and III of the MATINS trial and to report these data to regulatory authorities. We will also continue to support the ongoing COVID-19 research initiatives investigating the potential of the Company’s IV IFN beta-1a, Traumakine. The successful financing undertaken in H1 and post period 2020 puts the Company in a strong financial position to progress both clinical programmes and related business activities, while partnering discussions continue.

On behalf of the Board we would like to thank the whole Faron team for their commitment, resilience and agility during the challenging times of 2020. Their response has enabled the Company to make significant achievements against its objectives and has secured a strong position for the second half of 2020.

We look forward to updating the market on our progress throughout the course of the year.

 

Consolidated Income Statement, IFRS

 €’000

Unaudited

1-6/2020
6 months

Unaudited

1-6/2019
6 months

1-12/2019
12 months

Revenue

0

0

0

Other operating income

743

0

185

Research and development expenses

(5,534)

(4,982)

(10,237)

General and administrative expenses

(2,354)

(1,361)

(3,049)

Operating loss

(7,145)

(6,343)

(13,101)

Financial expense

(230)

(73)

(224)

Financial income

31

5

74

Loss before tax

(7,343)

(6,411)

(13,251)

Tax expense

0

(0)

(11)

Loss for the period

(7,343)

(6,412)

(13,262)

Other comprehensive income

Total comprehensive loss for the period

(7,343)

(6,412)

(13,262)

Loss per ordinary share

Basic and diluted loss per share, EUR

(0.16)

(0.19*)

(0.36)

 

Consolidated Balance Sheet, IFRS

€’000

 Unaudited

 30 June
2020

Unaudited

30 June
 2019

31 December 2019

Assets

Non-current assets

Machinery and equipment

13

14

13

Right-of-use-assets

456

0

386

Intangible assets

560

522

529

Prepayments and other receivables

80

595

77

Total non-current assets

1,109

1,131

1,005

Current assets

Prepayments and other receivables

1,607

1,080

2,145

Cash and cash equivalents

11,627

2,892

7,059

Total current assets

13,234

3,972

9,204

Total assets

14,343

5,103

10,209

Equity and liabilities

Capital and reserves attributable to the equity holders of the Company

Share capital

2,691

2,691

2,691

Reserve for invested unrestricted equity

91,960

68,695

78,916

Accumulated deficit

(87,339)

(73,146)

(79,997)

Translation difference

1

0

Total equity

7,313

(1,761)

1,610

Non-current liabilities

Borrowings

2,303

2,363

2,263

Lease liabilities

288

0

261

Total non-current liabilities

2,591

2,363

2,524

Current liabilities

Borrowings

0

0

163

Lease liabilities

181

0

135

Trade payables

2,729

2,868

2,967

Other current liabilities

1,529

1,633

2,810

Total current liabilities

4,439

4,501

6,075

Total liabilities

7,030

6,864

8,599

Total equity and liabilities

14,343

5,103

10,209

 

Consolidated Statement of Changes in Equity, IFRS

‘000

Share capital

Reserve for invested unrestricted equity

Translation difference

Accumulated deficit

Total equity

Balance as at 1 January 2019

2,691

64,464

(66,786)

369

Comprehensive loss for the first six months 2019

(6,412)

(6,412)

Transactions with equity holders of the Company

Issue of ordinary shares, net of transaction costs EUR 230 thousand

4,230

4,230

Share-based compensation

51

51

4,230

51

4,281

Balance as at 30 June 2019

2,691

68,695

(73,146)

(1,761)

Comprehensive loss for the last six months 2019

(6,850)

(6,850)

Transactions with equity holders of the Company

Issue of ordinary shares, net of transaction costs EUR 919 thousand

10,222

10,222

Share-based compensation

Balance as at 31 December 2019

2,691

78,916

(79,997)

1,610

Comprehensive loss for the first six months 2020

1

(7,343)

(7,342)

Transactions with equity holders of the Company

Issue of ordinary shares, net of transaction costs EUR 952 thousand

13,044

13,044

Share-based compensation

13,044

0

13,044

Balance as at 30 June 2020

2,691

91,960

1

(87,339)

7,313

 

Consolidated Cash Flow Statement, IFRS

€’000

Unaudited

1-6/2020
6 months

Unaudited

1-6/2019
6 months

1-12/2019
12 months

Cash flow from operating activities

Loss before tax

(7,343)

(6,411)

(13,251)

Adjustments for:

Depreciation and amortisation

130

48

238

Interest expense

93

39

158

Tax expense

0

11

Unrealised foreign exchange loss (gain), net

(125)

29

(7)

Share-based compensation

0

51

51

Adjusted loss from operations before changes in working capital

(7,245)

(6,245)

(12,800)

Change in net working capital:

Prepayments and other receivables

534

1,679

1,173

Trade payables

(237)

(641)

(567)

Other liabilities

(1,333)

(334)

731

Cash used in operations

(8,281)

(5,541)

(11,463)

Taxes paid

0

0

(9)

Interest paid

(29)

(26)

(51)

Net cash used in operating activities

(8,310)

(5,567)

(11,523)

Cash flow from investing activities

Payments for intangible assets

(77)

(41)

(100)

Payments for equipment

(2)

(0)

Net cash used in investing activities

(79)

(41)

(100)

Cash flow from financing activities

Proceeds from issue of shares

13,997

4,461

15,627

Share issue transaction cost

(952)

(230)

(1,175)

Proceeds from borrowings

0

231

307

Repayment of borrowings

(122)

(0)

Payment of lease liabilities

(91)

(151)

Net cash from financing activities

12,832

 4,461

14,608

Net increase (+) / decrease (-) in cash and cash equivalents

4,443

(1,147)

2,985

Effect of exchange rate changes on cash and cash equivalents

125

(29)

7

Cash and cash equivalents at 1 January

7,059

4,067

4,067

Cash and cash equivalents at the end of period

11,627

2,892

7,059

Notes to the financial statements

1.  Corporate information

 

Faron Pharmaceuticals Ltd (the “Company”) is a clinical stage biopharmaceutical company incorporated and domiciled in Finland, with its headquarters at Joukahaisenkatu 6, 20520 Turku, Finland. The Company currently has a pipeline based on the endothelial receptors involved in regulation of immune response, in oncology and organ damage. 

The Company has been listed on the London Stock Exchange’s AIM market since 17 November 2015, with a ticker FARN, and since 3 December 2019, the Company has been listed on the Nasdaq First North Growth Market list with a ticker FARON.

2.  Summary of significant accounting policies

 

2.1.  Basis of preparation

The unaudited H1 report have been prepared in accordance with the International Financial Reporting Standards of the International Accounting Standards Board (IASB) and as adopted by the European Union (IFRS) and the interpretations of the International Financial Reporting Standards Interpretations Committee (IFRS IC). The financial statements have been prepared on a historical cost basis, unless otherwise stated.

The H1 report has been prepared on the basis of a full retrospective application of IFRS 15, Revenue from Contracts with Customers, with the adoption date as of 1 January 2017.

The principal accounting policies applied in the preparation of these interim financial statements are set out below. The Company has consistently applied these policies to all the periods presented, unless otherwise stated. The areas of the financial statements involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 2.2.

The unaudited consolidated financial statements incorporate the parent company, Faron Pharmaceuticals Ltd, and all subsidiaries in which it holds over 50% of the voting rights (the “Group”).

All amounts are presented in thousands of euros, unless otherwise indicated, rounded to the nearest euro thousand.

2.2.    Going concern

The Company has forecasted its estimated cash requirements over the next twelve months. In order to make these forecasts the Company has made a number of assumptions regarding the quantity and timing of future expenditure and income as well as other key factors. Though these estimates have been made with caution and care, they continue to contain a significant amount of uncertainty. Based on the forecast the Company believes that it has adequate financial resources to continue its operations into Q1 2021 and therefore these unaudited financial statements have been prepared on a going concern basis. In its meeting on 23 September 2020 the Board of Directors of the Company approved the publishing of these interim financial statements.

Company has taken several acts to secure further financing during rest of the year 2020. The Directors believe that the Company can gain access to further resources to sustain operations over the next 12 months. At this stage the Company can not disclose any of these options.

Because the additional finance is not committed at the date of issuance of these H1 reports, these circumstances represent a material uncertainty that may cast significant doubt on the Company’s ability to continue as going concern. Should the Group be unable to obtain further finance such that the going concern basis of preparation were no longer appropriate, adjustments would be required, including to reduce balance sheet values of assets to their recoverable amounts, to provide for further liabilities that might arise.

AIM Rules for Companies disclosure

Frank Armstrong, Chairman of the Company, was Chairman of Redx Pharma plc from 1 September 2014 until his resignation on 20 April 2017. On 24 May 2017, Redx Pharma plc was put into administration by Liverpool City Council as a result of non-payment of an outstanding loan of £2 million and the ordinary shares in Redx Pharma plc were suspended from trading on AIM. On 3 November 2017, Redx Pharma plc exited administration with all creditors paid and trading in the shares of Redx Pharma plc resumed on AIM.

Final Results for the year ended December 31, 2019

Faron Pharmaceuticals Oy

(“Faron” or the “Company”)

Financial statement release January 1 to December 31, 2019

Financial statement release, Turku, 20 March 2019 at 9.00 AM (EET)

Inside information

TURKU, FINLAND – Faron Pharmaceuticals Oy (AIM: FARN, First North: FARON), the clinical stage biopharmaceutical company, today reports its financial statements for the year ended 31 December 2019 and H2 2019.

HIGHLIGHTS

Operational (including post period):

Clevegen® – Regulator of major inhibitory immune checkpoints and wholly-owned novel cancer immunotherapy in development

•      Part I of the open label phase I/II MATINS trial, initiated across multiple sites through Europe and primarily intended to investigate safety and tolerability, was completed with dose escalation reaching its planned maximum level of 10mg/kg. Clevegen demonstrated good tolerability at all dosing levels (0.1 to 10 mg/kg) without dose limiting toxicity.

•      Clevegen promoted immune activation in all dosed patients, measured following treatment with Clevegen and observed as increased circulating CD8+ T cells and CD8+/CD4+ ratio, decreased regulatory T-cells (T-regs) or a substantial increase in mobile natural killer (NK) cells in the blood.

•      Partial responses were observed in two patients. The first, a colorectal cancer (CRC) patient, showed a continuation of lung and lymph node metastasis shrinkage and their tumour load biochemical marker, carcinoembryonic antigen (CEA), also normalised. The second, a heavily pre-treated melanoma patient, showed a reduction in the size of the target lesion tumour (a lung metastasis) by 44 percent and other non-target lesions stabilized. Their biochemical tumour load marker also declined and clearance of pleura fluid was observed.

•      Data showing Clevegen’s potential early efficacy and good tolerability were presented at the European Society of Medical Oncology (ESMO) 2019 Congress in Barcelona, Spain. At the Society’s subsequent Immuno-Oncology Congress 2019 in Geneva, Switzerland, more detailed cell surface biomarker data were presented for the first time showing Clevegen’s potential to downregulate a range of inhibitory immune checkpoints commonly targeted by current immuno-oncology (IO) therapies.

•      The US Food and Drug Administration (FDA) approved Faron’s Investigational New Drug (IND) application for Clevegen, enabling expansion of the MATINS trial into the US.

•      CRC and ovarian cancer were selected by the MATINS data monitoring committee as the first and second expansion cohorts in part II of the study. Both cancer types are known to host a significant number of Clever-1 positive tumour-associated macrophages (TAM) which correlates with increased mortality rates.

•      New experimental data supporting the immunotherapeutic blockade of Clever-1 as an alternative to, or in combination with PD-1 checkpoint inhibition to reactivate immunity against immunosuppressive tumours were published in Clinical Cancer Research, a journal of the American Association for Cancer Research.

•      Several new patent filings were carried out during the period to further strengthen the existing IP around Clevegen use in conditions where harmful immune suppression causes serious diseases.

•      bexmarilimab is under consideration by the World Health Organization as the Proposed International Nonproprietary Name.

•      Manufacturing was established to supply drug product for cohort expansions in part II of the MATINS study.

•      Partnering discussions continued with the aim of supporting expansion of clinical development and exploring the potential of Clevegen in combination with existing immunotherapies and other cancer therapies.

Traumakine® – in development for the treatment of organ failures

•        Faron remains focused on developing Traumakine as a treatment for acute respiratory distress syndrome (ARDS) taking into account the high levels of concomitant corticosteroids used as a standard of care for ARDS and some ruptured abdominal aorta aneurysm (RAAA) patients.

•        Following feedback from the FDA regarding trial design, Faron submitted an amended protocol to the FDA, reflecting the FDA’s feedback that further studies with interferon-beta (IFN-beta) should exclude the use of overlapping corticosteroids since they are likely to block the desired therapeutic effect of Traumakine and may have a potentially deleterious impact on patient outcomes.

•        The FDA accepted Faron’s proposed study protocol for the new Traumakine trial, which excludes the use of concomitant corticosteroids and which will be split in two steps. The first step will commence with INTEGRITY, a pilot randomised and placebo controlled study, which will serve as final adjustment for adequate statistical powering and sample size justification for the pivotal second step, CALIBER.

•        The Company envisages that further Traumakine trials are likely to be funded through a third party.

•        Top-line data from the phase III ARDS trial with Japanese partner Maruishi Pharmaceutical Co., Ltd were, as expected, consistent with the INTEREST study results, showing that treatment with Traumakine did not result in reduced mortality or an increased number of ventilator-free survival days when compared to placebo. In the study, very high concomitant corticosteroids use (77%) was observed.

•        A phase I study in healthy volunteers (pharmacokinetic/dynamic YODA study), examining the administration and concomitant use of corticosteroids with Traumakine, confirmed observations previously seen in the INTEREST study. Traumakine produced the expected levels of bioactivity, suggesting drug formulation was not a factor in the outcome of that trial and that concomitant corticosteroids use interferes in the desired IFN-beta effect on CD73.

•        Interim results from the phase II INFORAAA study examining the effect of Traumakine on mortality (predominantly for multi-organ failure, MOF) and on pharmacodynamic biomarkers in surgically operated RAAA patients, showed biomarker (MxA and CD73) responses indicating a good IFN-beta response from Traumakine. A trend towards reduction of mortality was seen in patients increasing their CD73 plasma levels.

•        Based on the advice from the INFORAAA independent data monitoring committee and investigators, the Company decided to close the INFORAAA trial, as unexpected high use of concomitant corticosteroids prevent the scientific implementation of the INFORAAA protocol.

•        Faron filed a request for arbitration with the Arbitration Institute of the Stockholm Chamber of Commerce seeking damages from Rentschler Biopharma SE for terminating the API manufacturing process for Traumakine.

•        It is the understanding of the Company that the current API manufacturing process used to manufacture Traumakine requires significant upgrading to secure MAA/BLA approval. Various options for manufacturing are currently being explored.

AOC3 Antagonist Platform Technology

•        In March 2020, Faron acquired rights for the potential new use of AOC3 inhibitors. Faron will be responsible for the future development of the AOC3 protein inhibitor and for the management, prosecution, maintenance and filing of patent applications.

Corporate

•        Yrjö Wichmann took up the new position of Vice President, Financing and Investor Relations and Toni Hänninen was appointed as Faron’s new Chief Financial Officer.

•        Faron’s shares were listed on Nasdaq First North Growth Market Helsinki as of 3 December 2019.

Financial

•        On 31 December 2019, the Company held cash balances of €7.1 million (2018: €4.1 million).

•        Loss for the period for the financial year ended 31 December 2019 was €13.3 million (2018: €20.1 million loss).

•        Net assets on 31 December 2019 were €1.6 million (2018: €0.4 million).

•        During the period, in November, August, May and March 2019, the Company successfully raised a total of €15.6 million gross (€14.5 million net) from new and existing shareholders, employees and Company Directors through issuance of a total of 12,262,853 new ordinary shares. The majority of these proceeds are being used to advance Clevegen through the MATINS trial, further Traumakine development through the design and preparation of the next clinical trials and advance partnering discussions in respect of both Traumakine and Clevegen.

FINANCIAL

Consolidated key figures, IFRS

€’000

Unaudited

7-12/2019
6 months

Unaudited

7-12/2018
6 months

1-12/2019
12 months

1-12/2018
12 months

Revenue

0

(1)

0

19

Research and Development expenses

(5,255)

(4,762)

(10,237)

(16,463)

General and Administrative expenses

(1,688)

(1,378)

(3,049)

(3,750)

Loss for the period

(6,850)

(6,026)

(13,262)

(20,086)

Unaudited

7-12/2019
6 months

Unaudited

7-12/2018
6 months

1-12/2019
12 months

1-12/2018
12 months

Loss per share EUR

(0.16)

(0.19)

(0.31)

(0.65)

Number of shares at end of period

43,290,747

31,027,894

43,290,747

31,027,894

Average number of shares

35,533,179

30,749,648

35,533,179

30,749,648

€’000

Unaudited 30 Jun 2019

Unaudited

30 Jun 2018

31 Dec 2019

31 Dec 2018

Cash and cash equivalents

2,892

11,168

7,059

4,067

Equity

(1,761)

6,722

1,610

369

Balance sheet total

5,103

16,716

10,209

8,002

Commenting on the results, Dr Markku Jalkanen, CEO of Faron, said: “Our priority in 2019 was to rapidly accelerate our immunotherapy candidate, Clevegen, through the clinic. With the continued progression of the phase I/II MATINS trial, we are very encouraged by its results so far. Clevegen is clearly exhibiting exciting properties as a potential immunotherapy capable of down regulating a range of major inhibitory immune checkpoints (PD-1, PD-L1, CTLA-4) across several cancers. With our two cohort expansions in colorectal and ovarian cancer, we will continue to rapidly progress the development of Clevegen in patients with limited effective treatment options.   

“We are also pleased that, following feedback from the FDA, we have agreed the trial design for the continued clinical development of Traumakine, which we continue to believe holds great potential as a future treatment for ARDS, regardless of the underlying condition.

“We are very pleased to also have secured a further EUR 8 million through our series of fundraises in late 2019, further supporting the progress of our pipeline. I would like to thank our new and existing shareholders, and the entire team at Faron, for their continued support.”

Board of Directors’ Proposal on the Dividend

The Group’s loss for the accounting period was 13,261,911.93 euro (2018: 20,086,402.60 euro).

The Board of Directors does not recommend the payment of a dividend (2018: nil).

March 19, 2020

Faron Pharmaceuticals

Board of Directors

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 (“MAR”).

Conference call information

Faron will host a conference call for analysts to provide an update on the results followed by a Q&A session at 09:30 GMT / 11:30 EET. A presentation to accompany the call will be available on the Faron website (https://www.faron.com/investors/results) at 09:00 GMT / 11:00 EET

Dial-in details are:

International: +44 (0) 20 7192 8000

Finland: (09) 4245 0806
Conference ID: 7377079

For more information please contact:

Faron Pharmaceuticals Oy

Dr Markku Jalkanen, Chief Executive Officer

investor.relations@faron.com

Panmure Gordon (UK) Limited, Nomad and Broker

Emma Earl, Freddy Crossley (Corporate Finance)

James Stearns (Corporate Broking)

Phone: +44 207 886 2500

Sisu Partners Oy, Certified Adviser on Nasdaq First North

Juha Karttunen, Jussi Majamaa

Phone: +358 (0)40 555 4727

Consilium Strategic Communications

Mary-Jane Elliott, David Daley, Lindsey Neville

Phone: +44 (0)20 3709 5700

E-mail: faron@consilium-comms.com 

Publication of financial information during year 2020

The half-year financial report for the period 1 January to 30 June 2020 is scheduled to be published on 24 September 2020. Faron’s financial statements for full year 2019 will be published on 25 March and will also be available on the Company’s website at https://www.faron.com/investors/results.

The Annual General Meeting is planned for 15 April 2020. A separate stock exchange notice will be issued by Faron’s Board of Directors to convene the meeting.

About Faron Pharmaceuticals Ltd

Faron (AIM:FARN, First North: FARON) is a clinical stage biopharmaceutical company developing novel treatments for medical conditions with significant unmet needs. The Company currently has a pipeline based on the receptors involved in regulation of immune response in oncology and organ damage. Clevegen, its precision immunotherapy, is a novel anti-Clever-1 antibody with the ability to switch immune suppression to immune activation in various conditions, with potential across oncology, infectious disease and vaccine development. Currently in phase I/II clinical development as a novel macrophage checkpoint immunotherapy for patients with untreatable solid tumours, Clevegen has potential as a single-agent therapy or in combination with other immune checkpoint molecules or standard of care therapies. Traumakine, the Company’s pipeline candidate to prevent vascular leakage and organ failures, has completed a phase III clinical trial in Acute Respiratory Distress Syndrome (ARDS). Plans for its future development are being finalised to avoid interfering steroid use together with Traumakine. 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”, “hope”, “seek”, ”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 early data from initial patients in the MATINS trial may not be replicated in larger patient numbers and the outcome of clinical trials 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 the ability of the Company to successfully licence its programmes within the anticipated timeframe or at all, 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 or other sources of funding, 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.

Chairman’s statement

2019 was a significant year for Faron. The highly experienced management team made significant progress executing the Company’s strategy and maintaining momentum in the delivery of its novel pipeline.

The development programme for Faron’s wholly-owned novel precision cancer immunotherapy candidate, Clevegen, has accelerated rapidly. Promising early clinical data continued to give us confidence in the potential of Clevegen as a next-generation immuno-oncology therapy and one that could potentially be used in combination therapy. The strength of the early clinical data generated in 2019 enabled the Clevegen team to quickly identify a group of patients thought most likely to respond to treatment. Selection of the first expansion cohort in colorectal cancer was a significant achievement and is testament to the focus Faron has placed on Clevegen’s development this year. The US Food and Drug Administration (FDA) approval of the Company’s Investigational New Drug (IND) application for Clevegen was a major development milestone enabling expansion of Clevegen’s clinical development in the US.

Harnessing the immune system to fight cancer has transformed the way patients are treated and scientists continue to make new discoveries in the field of immune-oncology every day. It is exciting to see the Clevegen programme generating such interest in this field, from the scientific community and commercial organisations. The wealth of data generated in 2019 strengthens Faron’s confidence in the programme’s future.

Alongside Clevegen’s development progress in 2019, the Company continued to build on its understanding of the results from Traumakine’s INTEREST trial. Data from a late-stage trial undertaken by our Japanese partner Maruishi were consistent with our study results a year earlier and supported our observation that corticosteroid use interferes with Traumakine efficacy. This observation has since been confirmed by the FDA who, following discussions about the future development path for Traumakine, advised that further studies should exclude the concomitant use of steroids. The body of evidence generated during Traumakine’s development programme is clearly a matter of interest for opinion leaders involved in the treatment of acute respiratory distress syndrome (ARDS) patients and the debate around whether corticosteroids have any beneficial role in ARDS patients continues.

Recent guidance from the World Health Organization (WHO) on the clinical management of severe acute respiratory infection related to the novel coronavirus that emerged in China at the end of 2019 advises against the routine use of corticosteroids. The emergence of this novel virus, and the risk of ARDS among infected patients, is a reminder of the need for new treatments to tackle this potentially fatal condition.

During the year our fundraising activities and our listing on the Nasdaq First North Growth Market in Finland received strong shareholder support enabling us to build a more secure financial position for the Company and give the pipeline its greatest chances of success. It was also encouraging to see the Company’s share price performance in 2019, its growth reflecting the progress of the business and the strength of Faron’s pipeline potential.

On behalf of the Board, I would like to thank all those who have played a part in Faron’s progress in 2019 – the management team, staff and Board for their hard work and commitment, our partners and steering committee members for their support and expertise, and the investigators and patients involved in our clinical trials. I would also like to pay particular thanks to our CEO, Markku Jalkanen who, while guiding Faron through difficult circumstances, has successfully led its transition to becoming a leading immunotherapy company.

We look forward to continued progress with our pipeline products Clevegen and Traumakine in 2020.

Dr Frank Armstrong

Chairman

March 19, 2020

Chief Executive Officer’s Review 

Overview

Faron is focused on immuno-oncology, organ trauma and vascular damage. Our goal is to save lives by developing unique scientific discoveries into ground-breaking new treatments for hard-to-treat and rare diseases. Our work is rooted in two scientific principles. First, a deep knowledge of the pharmacology of our drug candidates. And second, understanding the science of the targeted conditions at the molecular level, to most effectively influence their underlying causes.

Our focus for 2019 has been to continue to progress our wholly-owned novel precision cancer immunotherapy candidate, Clevegen, through the first-in-human clinical study, MATINS, in selected metastatic or inoperable solid tumours. We have also been working closely with the regulatory authorities to determine the future development pathway for Traumakine in ARDS and organ failures.

Clevegen Development

We have made significant, and exciting, clinical progress with Clevegen during 2019. Clevegen is our wholly-owned novel precision cancer immunotherapy candidate, which causes conversion of the immune environment around a tumour from immune-suppressive to immune-stimulating by reducing the number and function of tumour-associated macrophages (TAMs). Clevegen is differentiated from other immunotherapies through its specific targeting of M2 TAMs which facilitate tumour growth. Through myeloid cell plasticity, Clevegen can convert these M2 TAMs to M1s, leaving existing M1 TAMs intact and allowing both to support immune activation against tumours. We believe it has the potential to function as a novel macrophage checkpoint immunotherapy both as a monotherapy and in combination with other immuno-oncology therapies or standard of care treatments.

MATINS Trial

The MATINS (Macrophage Antibody To INhibit immune Suppression) study is a first-in-human open label phase I/II clinical trial with an adaptive design to investigate the safety and efficacy of Clevegen in selected metastatic or inoperable solid tumours. The selected tumours under investigation are cutaneous melanoma, hepatobiliary/hepatocellular, pancreatic, ovarian and colorectal cancer, all known to host a significant number of Clever-1 positive TAMs. Together these five target groups consist of approximately 2 million annual cases worldwide. Cancer patients with high Clever-1 expression are identified with a simple blood myeloid cell staining with Clevegen (“liquid biopsy”).

Part I of the MATINS study was conducted to establish tolerability, safety and dose escalation to optimize dosing. Subjects in Part I of the study received doses of 0.1 mg/ kg, 0.3 mg/kg, 1.0 mg/kg, 3.0 mg/kg and 10 mg/kg. All dose levels tested showed good tolerability with no dose limiting toxicity signals and all subjects dosed in the study experienced a switch in their immune cell profiles following treatment with Clevegen towards increased immune activation, observed as increased circulating CD8+ T cells and CD8+/CD4+ ratio, decreased regulatory T-cells (T-regs) or a substantial increase in mobile natural killer (NK) cells in the blood.

Based on results from the initial part of the MATINS trial, Faron announced in April 2019 that late-stage colorectal cancer (CRC) had been chosen for the first expansion cohort for the second part of the trial. Following the successful conclusion of the dose escalation in Part I, and with approval from the MATINS trial’s data monitoring committee (DMC), Faron initiated this first expansion cohort, Part II, in January 2020. A total of 10 late-stage CRC patients are expected to be dosed at the approved initial dose level of 0.3 mg/kg cohort, including two patients who had previously received this dose in the earlier Part I of the study. Furthermore, in January 2020, we announced that ovarian cancer has been selected as the second expansion cohort in the trial. Both these tumour types are known to host a significant number of Clever-1 positive TAMs which correlates with increased mortality rates among these patients.

In November 2019, the FDA approved the Company’s Investigational New Drug (IND) application for Clevegen (FP-1305), enabling expansion of the MATINS trial into the US. We anticipate opening the first site in mid-2020. In due course, we also plan to file applications for Breakthrough Therapy status in the US and PRIME status in Europe, further facilitating regulatory interactions during the development of Clevegen.

Clevegen’s ability to down regulate a range of major inhibitory checkpoints reaffirms our belief in its potential as a master regulator of immunity and a highly effective immunotherapy. It indicates that Clevegen treatment could potentially allow increased efficacy of other immuno-oncology therapies through the biomarker analysis of patient’s blood cells post Clevegen induced immune activation, finally offering a biological rationale to guide combination therapies. Due to high interest in the potential for new combination therapies in the immuno-oncology field, we are currently engaged in partnering discussions with several parties and hope for a positive outcome from these negotiations during 2020.

Traumakine Development

With no currently approved pharmacological treatments available, acute respiratory distress syndrome (ARDS) remains a significant problem for patients and healthcare systems. During 2019, the Company has continued to further understand the correlation between the combined use of corticosteroids and IFN-beta and has been working closely with the regulatory authorities in order to determine the next steps in Traumakine’s future development pathway.

In April 2019, Faron announced top-line data from the Phase III trial with Japanese partner Maruishi Pharmaceutical Co., Ltd. Results from this trial were in line with the Company’s expectations, and previously announced results observed in the INTEREST trial, showing that treatment with Traumakine did not result in reduced mortality or an increased number of ventilator free survival days when compared to placebo. In order to further examine the effects of concomitant steroid use and Traumakine, as seen in both the INTEREST trial and the Japanese study, Faron conducted the pharmacokinetic/dynamic YODA study in healthy volunteers. Results from this study, announced in June 2019, were consistent with the INTEREST data, supporting the conclusion that coadministration of steroids with Traumakine in patients inhibits IFN-beta action.

Also, in June 2019, Faron announced interim results from the Phase II INFORAAA study, which examined the effect of Traumakine on mortality (predominantly for multi-organ failure, MOF) and pharmacodynamic biomarkers of surgically operated ruptured abdominal aorta aneurysm (RAAA) patients. Based on the advice from the INFORAAA independent data monitoring committee and investigators, the Company decided to close the INFORAAA trial, as unexpected high use of concomitant corticosteroids was preventing the scientific implementation of the INFORAAA protocol.

Interestingly, in January 2020, the World Health Organization (WHO) published a recommendation recognising the risk of using corticosteroids on patients with coronavirus. This recommendation aligns with our findings from the post-hoc analysis of the INTEREST study and strengthens our belief that the whole medical community should be more diligent with regard to the combined use of corticosteroids and type I interferons. Faron’s scientific network has also confirmed this interaction at a molecular level in lung endothelial cells.

The Company remains committed to progressing Traumakine for the treatment of ARDS and, following the Company’s revised protocol submission in February 2020, the FDA have now accepted the protocol design for the next Traumkine study. The study design reflects the feedback and conclusions from the FDA that further studies with IFN beta should exclude the use of concomitant glucocorticoids since they are likely to block the desired therapeutic effect of Traumakine and may have a potentially deleterious impact on patient survival. We are planning to split the clinical development of Traumakine in ARDS into two steps, commencing with INTEGRITY, a pilot randomised and placebo controlled study with approximately 60 patients. The INTEGRITY data will then serve as final adjustment for adequate statistical powering and sample size justification for the pivotal CALIBER study, subjected for FDA review. We expect that the sample size of the CALIBER study will not exceed 200 patients based on the post hoc analysis of the INTEREST trial data. We envisage that future Traumakine trials (including INTEGRITY and CALIBER) are likely to be funded through a third party or parties.

AOC3 Antagonist Platform Technology

In March 2020, Faron announced it had acquired rights for the potential new use of AOC3 inhibitors covered by a recently filed patent application. The AOC3 enzymatic domain, a semicarbazide-sensitive amine oxidase, is known to produce hydrogen peroxide, a potent inflammatory mediator. Being expressed by many inflamed vascular endothelial cells, the AOC3 overexpression has been connected with many vascular diseases.

Faron will be responsible for future development of the invention and for the management, prosecution and maintenance of any patent applications as well as for the filing of new patent applications for the AOC3 protein inhibitor. Pre-clinical studies with humanized AOC3 mice and with ex vivo human cells in relation to the Invention are currently ongoing and further information will be provided later in the year.

Corporate

On 3 December 2019, Faron started trading on Nasdaq First North Growth Market (“Nasdaq First North”), a multilateral trading facility operated by Nasdaq Helsinki Ltd. The ISIN code of Faron’s ordinary shares is FI4000153309 and the trading code on Nasdaq First North is FARON. This is in addition to Faron’s listing, since November 2015, on AIM.

In October 2019, Faron received a letter from Rentschler Biopharma SE (“Rentschler”) in which Rentschler stated that it was terminating the agreement concerning the API manufacturing for Traumakine. Following a detailed investigation by Faron into the circumstances around manufacturing arrangements, the Company has since concluded that, in its view, Rentschler was in breach of the underlying agreement between the parties. Faron has filed a request for arbitration, funded by a third party on a non-recourse basis, with the Arbitration Institute of the Stockholm Chamber of Commerce seeking damages.

In May 2019, Yrjö Wichmann left his role as the Company’s Chief Financial Officer to take up the new position of Vice President, Financing and Investor Relations. Mr Wichmann remains a member of the senior management team but stepped down from the Board with effect from 28 May 2019. We were delighted to welcome Mr Toni Hänninen as Faron’s new CFO, effective from 1 June 2019, being responsible for both internal and external reporting.

The Annual General Meeting held on 28 May 2019 resolved the number of members of the Board as six. Frank Armstrong, Markku Jalkanen, Matti Manner, Leopoldo Zambeletti, Gregory Brown and John Poulos were re-elected to the Board for a term that ends at the end of the next AGM.

Financial

During the period, the Company successfully raised approximately EUR 15.6 million (gross), EUR 14.5 million (net) from new and existing shareholders, employees and Company Directors. The majority of these proceeds are being used to advance Clevegen through the MATINS trial, further Traumakine development through the design and preparation of the next clinical trials and advance partnering discussions in respect of both Traumakine and Clevegen.

Outlook

Our focus for 2020 will be to continue to expedite Clevegen’s clinical development through part II and part III of the MATINS trial and to report these data to regulatory authorities. We will also continue to work in close collaboration with the regulatory authorities in order to progress the INTEGRITY and CALIBER clinical trials and secure Traumakine’s future development pathway. We are continuing to make progress with potential partners regarding both Clevegen and Traumakine, whilst also exploring funding opportunities to ensure we can continue to progress both products. I would like to thank our shareholders for their continued belief in the Company and the management team for their hard-work and dedication and look forward to updating the market on our progress throughout the course of the year.

The Board anticipates the following pipeline progress and catalysts during 2020:

Clevegen:

•        Completion of all biomarker analyses from MATINS Part I patients to guide Clevegen dosing

•        Initiation of the second expansion cohort, ovarian cancer, during H1-2020

•        Initial data from the first expansion cohort (CRC) expected in Q2-2020

•        Expansion of the MATINS trial to leading cancer centres in France and Spain in Q2-2020

•        Opening of US study sites to facilitate rapid expansion of the MATINS trial in Q2-2020

•        Partnering update during 2020

Traumakine:

•        Further updates in relation to INTEGRITY and CALIBER during 2020

•        Continuation plans to be announced in H2-2020

AOC3 Antagonist Platform Technology:

•        Additional information from pre-clinical studies with humanized AOC3 mice and with ex vivo human cells during 2020

Dr Markku Jalkanen

Chief Executive Officer

March 19, 2020

Financial review

Key Performance Indicator

As a clinical stage drug development company, Faron’s primary interconnected KPIs are cash burn and cash position. The Company conducted several successful fundraises during 2019. The Company’s net cash flow showed €3.0 million positive due to a reduction in expenses and said fundraises. The Board will consider the appropriateness of monitoring additional KPIs as the Company’s operations advance.

Revenue and Other Operating Income

The Company’s revenue was €0.0 million for the year ended 31 December 2019 (2018: €nil).

The Company recorded €0.2 million (2018: €0.2 million) of other operating income. This consisted of the reimbursement of already occurred legal expenses by the third-party recovery services provider as announced by the Company on 30 December 2019.

Research and development costs

The R&D costs decreased by €6.3 million from €16.5 million in 2018 to €10.2 million in 2019. The costs of outsourced clinical trial services were reduced by €3.4 million from €5.3 to €1.9 million. The cost of materials and services used in the R&D was reduced by €1.7 million from €7.3 to €5.6 million.

General and administration costs

Administrative expenses decreased by €0.8 million from €3.8 million in 2018 to €3.0 million in 2019. The decrease was mainly due to the €1.4 million decrease in external costs related to the development of internal financial and reporting processes during 2018, but this was partially offset by an increase of €0.7 million in the other administrative expenses.

Taxation

The Company’s tax credit for the fiscal year 2019 can be recorded only after the Finnish tax authorities have approved the tax report and confirmed the amount of tax-deductible. The total amount of cumulative tax losses carried forward approved by tax authorities on 31 December 2019 was €16.1 million (2018: €11.2 million). The Company estimates that it can utilise most of these during the years 2020 to 2028 by offsetting them against future profits. In addition, Faron has €58.6 million of R&D costs incurred in the financial years 2010 – 2019 that have not yet been deducted in its taxation. This amount can be deducted over an indefinite period at the Company’s discretion.

Losses

Loss before income tax was €13.3 million (2018: €20.1 million). Net loss for the year was €13.3 million (2018: €20.1 million), representing a loss of €0.31 per share (2018: €0.65 per share) (adjusted for the changes in number of issued shares).

Cash Flows

Net cash flow was €3.0 million positive for the year ended 31 December 2019 (2018: €5.3 million negative). Cash used for operating activities decreased by €9.0 million to €11.5 million for the year, compared to €20.5 million for the year ended 31 December 2018. This decrease was mostly driven by a decrease in R&D investments.

Net cash inflow from financing activities was €14.5 million (2018: €15.5 million) due to the successful equity placings completed in during 2019.

Fundraising

During the period, 1 January to 31 December 2019, the Company successfully raised a total of €15.6 million gross (€14.5 million net) across several fundraises from new and existing shareholders, employees and Company Directors. The majority of these proceeds are being used to advance Clevegen through the MATINS trial, further Traumakine development through the design and preparation of the next clinical trials and advance partnering discussions in respect of both Traumakine and Clevegen.

•        In March 2019, €3.1 million gross (€2.9 net) through issuance of new ordinary shares.

•        In May 2019, €1.3 million gross (€1.3 net) through issuance of new ordinary shares.

•        In August 2019, €2.5 gross (€2.2 net) million through issuance of new ordinary shares.

•        In November 2019, €8.7 million gross (€8.0 net) through issuance of new ordinary shares.

Financial Position 

As at 31 December 2019, total cash and cash equivalents held were €7.1 million (2018: €4.1 million). The Company continues to exercise tight cost control to keep the cash burn as low as possible for preservation of existing resources.

Going Concern

As part of their going concern review, the Directors have followed the Finnish Limited Liability Companies Act, the Finnish Accounting Act and the guidelines published by the Financial Reporting Council entitled “Guidance on the Going Concern Basis of Accounting and Reporting on Solvency and Liquidity Risks – Guidance for directors of companies that do not apply the UK Corporate Governance Code”. The Company and its subsidiaries (the “Group”) are subject to a number of risks similar to those of other development stage pharmaceutical companies. These risks include, amongst others, generation of revenues in due course from the development portfolio and risks associated with research, development, testing and obtaining related regulatory approvals of its pipeline products. Ultimately, the attainment of profitable operations is dependent on future uncertain events which include obtaining adequate financing to fulfil the Group’s commercial and development activities and generating a level of revenue adequate to support the Group’s cost structure.

The Group made a net loss of €13.3 million during the year ended 31 December 2019. It had total equity of €1.6 million including an accumulated deficit of €80.0 million. As at that date, the Group had cash and cash equivalents of €7.1 million.

The Directors have prepared detailed financial forecasts and cash flows looking beyond 12 months from the date of the approval of these financial statements. In developing these forecasts, the Directors have made assumptions based upon their view of the current and future economic conditions that are expected to prevail over the forecast period. The Directors estimate that the cash held by the Group together with known receivables will be sufficient to support the current level of activities into the fourth quarter of 2020. The Directors are continuing to explore sources of finance available to the Group and they believe they have a reasonable expectation that they will be able to secure sufficient cash inflows for the Group to continue its activities for not less than 12 months from the date of approval of these financial statements; they have therefore prepared the financial statements on a going concern basis.

Because the additional finance is not committed at the date of issuance of these financial statements, these circumstances represent a material uncertainty that may cast significant doubt on the Company’s ability to continue as going concern. Should the Group be unable to obtain further finance such that the going concern basis of preparation were no longer appropriate, adjustments would be required, including to reduce balance sheet values of assets to their recoverable amounts, to provide for further liabilities that might arise.

Headcount

Average headcount of the Company for the year was 24 (2018: 25).

Shares and Share Capital

During the period 1 January to 31 December 2019, the Company, using the share authorities granted at the Annual General Meetings held on 31 May 2018 and on 28 May 2019, as well as at an Extraordinary General Meeting held on 25 October 2019, issued a total of 12,262,853 new ordinary shares.

•    On 28 March 2019, 4,448,625 shares at an issuance price of € 0.7020 (£0.60) per share.

•    On 13 May 2019, 1,757,375 shares at an issuance price of € 0.7598 (£0.65) per share.

•    On 5 August 2019, 941,840 shares at an issuance price of € 1.1900 (£1.06) per share.

•    On 27 August 2019, 1,179,513 shares at an issuance price of € 1.1900 (£1.06) per share.

•    On 12 November 2019, 3,935,500 shares at an issuance price of €2.1980 (£1.90) per share.

The subscription price net of costs was credited in full to the Company’s reserve for invested unrestricted equity, and the share capital of the Company was not increased.

The Company has no shares in treasury; therefore at the end of 2019 the total number of voting rights was 43,290,747.

Legal proceedings

As announced by the Company on 2 October 2019 and 30 December 2019, the Company has received a letter from Rentschler Biopharma SE in which Rentschler stated that it terminates the agreement concerning the Traumakine API manufacturing. The Company considers that this statement is without merit and has filed a request for arbitration to seek damages. To fund the proceedings, the Company has entered into a litigation funding agreement with a third-party recovery services provider which, in the event of success, would receive a typical portion of any damages awarded.

Toni Hänninen

Chief Financial Officer

March 19, 2020

 

Consolidated Income Statement, IFRS

 €’000

Unaudited

7-12/2019
6 months

Unaudited

7-12/2018
6 months

1-12/2019
12 months

1-12/2018
12 months

Revenue

0

(1)

0

 19 

Other operating income

185

191

185

 205

Research and development expenses

(5,255)

(4,762)

(10,237)

(16,463)

General and administrative expenses

(1,688)

(1,378)

(3,049)

(3,750)

Operating loss

(6,758)

(5,951)

(13,101)

(19,989)

Financial expense

(151)

(70)

(224)

(397)

Financial income

69

(3)

74

302

Loss before tax

(6,840)

(6,024)

(13,251)

(20,084)

Tax expense

(10)

(2)

(11)

(2)

Loss for the period

(6,850)

(6,026)

(13,262)

(20,086)

Other comprehensive income

Total comprehensive loss for the period

(6,850)

(6,026)

(13,262)

(20,086)

Loss per ordinary share

Basic and diluted loss per share, EUR

(0.16)

(0.19)

(0.31)

(0.65)

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