Faron collected EUR 6.6 million in a directed issue

Translation: Original comment published in Finnish on 6/30/2023 at 7:54 am.

Faron announced an expected directed issue to institutional and other investors on Thursday. The collected EUR 6.6 million is mainly used to promote the BEXMAB blood cancer study. According to the company, the collected funds cover the working capital need into Q4'23. We will update our research to include the smallish share issue in connection with our H1 pre-comment.

Issue to BEXMAB promote blood cancer study

Faron announced that it will use the funds to promote the BEXMAB blood cancer study, scale production of bexmarilimab and for other costs. The issue also helps the company to meet the conditions of the loan facility that requires a minimum cash balance of EUR 6.0 million while maintaining three months cash runway Faron had previously announced the need for an issue, so the news did not come as a surprise to us. The number of shares increased by 2.6 million, which corresponds to an increase of 4.1% in the number of shares. The subscription price per share is EUR 2.55, which corresponds to a discount of around 11.8% on Wednesday's closing price. The discount is at the same level as in Faron's previous issues. Trading in new shares is expected to begin on July 3.

Issue was expected and additional funding will be needed towards the end of the year

Faron has entered into a debt arrangement of EUR 30 million with IPF Partners, of which EUR 10 million has been raised so far. The company previously reported it will start negotiations on the utilization of the second EUR 5.0 million tranche. According to the release, no agreement on the second tranche has been reached so far.

Full funding of Faron’s clinical development program will require substantial funding of several tens of millions of euros. We do not believe that it would be in the interest of shareholders to finance the whole program with equity. We expect the company seeks to negotiate a development and commercialization agreement with a larger pharmaceutical company that would provide necessary resources for Faron's drug development. However, we believe that investors should continue to be prepared for possible future share issues.