Translation: Original published in Finnish on 03/05/2026 at 08:46 am EET

Faron's main focus for 2025 was the completion of the BEXMAB study. The study results support advancement in high-risk myelodysplastic syndrome (HR-MDS). The expected partnership agreement to finance the next study has not yet materialized, so the company is planning a 40 MEUR rights issue. The success of the issue is the next critically important step for the investment case. We lower our target price to EUR 0.65 (was EUR 1.5) and reiterate our Reduce recommendation based on our updated assessment of the probability of study progress and the outcome of the financing round. The risk is that the issue will be undersubscribed or carried out at a low share price, which would dilute the share capital more than our estimate.

The main role of the research pipeline is in high-risk MDS

Faron completed the Phase I/II BEXMAB study last year. Based on the results, the combination of bexmarilimab and the standard drug azacitidine is well tolerated and, in our assessment, sufficiently safe. Initial positive signals were seen in terms of efficacy.

Next, Faron plans to conduct the first part of the HR-MDS registration study (Phase II), which should be completed by late 2027. There is uncertainty about the timeline, as recruitment of 21 patients for BEXMAB and obtaining key results took about a year. The new study will recruit 90 patients, so the timeline may be longer compared to BEXMAB. The first part is expected to include 30 patients per group, which is still a relatively low number from a statistical power perspective. Based on this, we cut our probability estimate for receiving marketing authorization by 5 percentage points to 28%. In the best-case scenario, the first part may suffice for submitting a marketing authorization application, but we estimate that the application will most likely be relevant after the second part is completed, which is expected in 2030.

Financing arrangements increase share capital and risk

Faron's most important milestone in the near future is the planned rights issue of 40 MEUR. In connection with this, the EGM decided on Monday on an authorization to issue 80 million shares. The market expected Faron to finance the next study phase through a partnership agreement. Equity financing has been a heavy disappointment for the market, which has significantly weighed on the share price.

The upcoming share issue is large, and there are clear risks associated with its full implementation. We expect the subscription price per share to be EUR 0.5, which corresponds to a discount of around 30% on Wednesday's closing price (EUR 0.70). If realized, this would mean raising net funds of around 37-38 MEUR. Together with the convertible bond conversions, we estimate the number of shares to increase to about 255 million shares in 2028.

In a positive financing scenario, the company will fully succeed in the offering with a subscription price higher than our estimate, and the study timelines will hold. In this case, the increase in the number of shares would be lower than our estimate, and the financing would be sufficient for the readout. The conclusion of a partnership agreement or an acquisition are also still possible, but in our opinion, these are low-probability options at this time. In a negative scenario, the issue price would be lower than our estimate, and the issue would not be fully subscribed, leading to a larger-than-expected increase in the number of shares, continued uncertainty, and a deterioration of per-share figures.

We do not feel the valuation compensates for the high financing risk

Based on our DCF model, the share value is EUR 0.65. The significantly decreased fair value view is due to a considerably larger increase in the number of shares than previously assumed, as well as pricing in the financing risk. Successful financing is crucial for ensuring the quality and execution timeline of the upcoming study, as well as for limiting share dilution.