Faron issues second tranche of bonds with an aggregated principal amount of EUR 10 million under its convertible bond arrangement

Faron Pharmaceuticals OyAnnouncement

11/12/2025 08:30

Faron Pharmaceuticals Ltd | Company announcement | December 11, 2025 at
10:30:00 EET

TURKU, FINLAND – Faron Pharmaceuticals Ltd. (AIM: FARN, First North: FARON,
“Faron” or the “Company”), a clinical-stage biopharmaceutical company
developing novel immunotherapies, announced on 3 April 2025 that the Company
has entered into a subscription agreement (the “Subscription Agreement”) with
an entity managed by Heights Capital Management, Inc. (“HCM”) regarding the
issuance and subscription of amortising senior unsecured convertible bonds
with an aggregated principal amount of EUR15 million (the “First Tranche
Bonds”) with an option to issue, subject to certain conditions, two additional
tranches of convertible bonds (the “Second Tranche Bonds” and “Third Tranche
Bonds”, respectively) with an aggregated principal amount of EUR10 million
each, convertible into new and/or existing shares in the Company (the
“Shares”) (the “Arrangement”).

The Company announced on 24 November 2025 that it intends to issue the Second
Tranche Bonds and had requested subscription by HCM of the Second Tranche
Bonds.

Pursuant to the Subscription Agreement, the Board of Directors of Faron (the
“Board”) has resolved upon the issuance of EUR10 million of Second Tranche
Bonds, due 2 December 2028, to HCM, convertible into new and/or existing
Shares in the Company.

The proceeds from the Second Tranche Bonds will be used for general corporate
purposes, extending the Company’s cash runway into Q2 2026, assuming that
amortisations and interest payments on the Second Tranche Bonds, as well as
the First Tranche Bonds, are made in Shares. The proceeds from the issuance of
the Second Tranche Bonds will strengthen the Company’s financial position and
give the Company financial flexibility to run its operations while conducting
the needed business activities ahead of the registrational study in HR MDS. In
addition, the proceeds from the Second Tranche Bonds will enable the Company
to continue evaluating further business transactions, such as licensing
agreements, with a stronger financial position.

The Board has conducted an overall assessment of the issuance of the Second
Tranche Bonds, considering its key terms and commercial merits, the reputable
standing of HCM as well as other explored financing alternatives potentially
available to the Company, and concluded that the directed issuance of the
Second Tranche Bonds, including the Special Rights (as defined below) to be
attached to the bonds, to HCM is in the best interest of the Company and all
of its shareholders, and that there is a weighty financial reason for the
Company to issue the Special Rights to HCM.

The Convertible Bonds

The Second Tranche Bonds consist of 100 bonds with a principal value of
EUR100,000 each. The Second Tranche Bonds will be issued at 92.5 per cent of
their principal amount and carry an interest rate of 7.5 per cent per annum,
payable every two months in arrears.

A holder of the Second Tranche Bonds shall be able to convert the outstanding
principal amount of a Second Tranche Bond or any instalment amount at any time
during the term of the Second Tranche Bonds. The initial conversion price (the
“Conversion Price”, as further defined in terms and conditions of the Second
Tranche Bonds, (the “Second Tranche Conditions”)) has been set at EUR 2.42256,
which equals a 20 per cent premium to the reference share price of EUR 2.0188
pursuant to the Second Tranche Conditions, being the EUR price per Share that
is the lowest of the six Volume Weighted Average Prices of a Share listed on
Nasdaq First North Growth Market Finland on each of the six consecutive
dealing days ending on (and including) 9 December 2025, being the date on
which the Second Tranche Bonds are issued (the “Issue Date”). The Conversion
Price is subject to adjustments in the event of certain corporate actions as
well as customary anti-dilution adjustments and certain price reset mechanisms
pursuant to the Second Tranche Conditions. As the Second Tranche Bonds are
issued on substantially the same terms as the First Tranche Bonds,
corresponding adjustments and price reset mechanisms are applied also to the
First Tranche Bonds.

The Second Tranche Bonds will amortise in 18 equal instalments every two
months during the term of the Second Tranche Bonds (each an “Amortisation
Payment Date”). Faron will have the option to elect, in its sole discretion,
to make amortisation and/or interest payments either in cash or by converting
the relevant amounts due into Shares (the “Share Settlement Option”). In case
the Company exercises its Share Settlement Option to amortise the principal
amount of the Second Tranche Bonds, the subscription price for the Shares will
be the lower of (a) the Conversion Price in effect at the time, and (b) 90 per
cent of the lowest of (i) the VWAP of a Share on the relevant payment date,
and (ii) the lowest of the VWAPs of a Share on each of the five consecutive
dealing days ending on (and including) the dealing day immediately preceding
the relevant payment date.

The Board has, in light of the frequent amortisations and need to secure
continuous adherence with the Market Abuse Regulation obligating the Company
to make payments in Shares in certain situations, resolved to make
amortisations and interest payments by exercising its Share Settlement Option,
unless it separately decides to make payments in cash. Pursuant to the Second
Tranche Conditions, the exercise of the Share Settlement Option is subject to
certain liquidity conditions and HCM’s (including its affiliates) or any other
bondholder’s ownership in the Company not exceeding 9.99 per cent of the
Shares at any time.

The Company will publish an announcement each time the number of outstanding
Shares in the Company increases following the issuance of Shares pursuant to
the Second Tranche Bonds.

In addition to the scheduled amortisation payments, HCM (or any future holders
of the majority of the Second Tranche Bonds) may, at any time between
scheduled amortisations, exercise their right to bring forward up to two (2)
additional amortisation payments (an “Accelerated Amortisation”) to be paid in
advance on a date specified in a notice sent to the Company, with a limit of
no more than nine (9) Accelerated Amortisations in the first year of the term
of the Second Tranche Bonds. Additionally, HCM (or any future holders of the
majority of the Second Tranche Bonds) will also have the right to defer any
upcoming amortisation payment to be paid on a later Amortisation Payment Date
specified in the notice sent to the Company.

The exercise of the bondholders’ right to convert the Second Tranche Bonds
into Shares as well as the exercise of the Company’s Share Settlement Option
will be effected by the bondholders exercising special rights entitling into
Shares, as referred to in Chapter 10 of the Finnish Companies Act (“Special
Rights”), issued in connection with the issuance of the Second Tranche Bonds.
The Special Rights will be attached to the Second Tranche Bonds, and the
subscription price for the Shares to be subscribed for pursuant to the Special
Rights (in accordance with the Second Tranche Conditions) will be paid by
setting off the Company’s debt to pay relevant amounts due under the Second
Tranche Bonds.

The Second Tranche Conditions include certain covenants and undertakings by
the Company, including a negative pledge provision and restrictions to the
incurrence of additional indebtedness as well as on the conduct of business by
the Company such that it may only carry on matters in the ordinary course of
business and not enter into certain transactions such as mergers, demergers or
reorganisations, or disposal of assets, except in relation to any partnering
or licensing arrangements related to development of its business, or on terms
approved by the majority bondholders.

Special Rights attached to the Second Tranche Bonds

In connection with the issuance of the Second Tranche Bonds, the Board has
resolved, based on the authorisation granted by the General Meeting held on 21
March 2025, to issue 9,234,100 Special Rights. The Special Rights are issued
in deviation from the shareholders’ pre-emptive rights (directed issue)
without consideration to HCM as the initial subscriber of the Second Tranche
Bonds. The Special Rights are attached to the Second Tranche Bonds and cannot
be separated from them. Should HCM use its right to transfer Second Tranche
Bonds, the Special Rights attached to the relevant bonds that have not been
exercised at the time of the transfer would be simultaneously transferred to
the new bondholder.

A total of 92,341 Special Rights will be attached to each Second Tranche Bond
with a principal value of EUR 100,000. Each Special Right entitles to one (1)
new or existing Share of the Company. Should all Second Tranche Bonds be
converted into Shares at the initial Conversion Price EUR 2.42256 (assuming no
amortisation and/or interest payments have been made), the number of new
Shares to be issued by the Company pursuant to the Special Rights would be
4,127,864 Shares, corresponding to approximately 3.5 per cent of the current
total amount of Shares in the Company. If the Conversion Price is adjusted, as
set out in the Second Tranche Conditions, the Company may be obligated to
issue further Special Rights in which case the Board will resolve upon said
issuance in accordance with the relevant provisions in the Finnish Companies
Act.

The Special Rights may only be exercised, and Shares may only be issued
pursuant to such exercised Special Rights, in accordance with the Second
Tranche Conditions.

Additionally, in order to prepare especially for any advanced amortisation
situations, the Company’s Board may separately resolve to issue treasury
shares to Faron itself without consideration. Such issuance, if resolved,
would be separately announced.

Reset of the Conversion Price of the First Tranche Bonds
In accordance with the First Tranche Bond conditions, the conversion price of
the First Tranche Bonds will be reset to be the same as the Conversion Price
for the Second Tranche Bonds. The adjusted conversion price for the First
Tranche Bonds will be EUR 2.42256.

For more information, please contact:

+-------------------------------------+--------------------------------------+
| IR Partners, Finland                |                                      |
| (Media)                             |                                      |
|                                     | +358 50 553 9535 / +44 7 469 766 223 |
| Kare Laukkanen                      | kare.laukkanen@irpartners.fi         |
+-------------------------------------+--------------------------------------+
| FINN Partners, US                   |                                      |
| (Media)                             |                                      |
| Alyssa Paldo                        | +1 847 791-8085                      |
|                                     | alyssa.paldo@finnpartners.com        |
+-------------------------------------+--------------------------------------+
| Cairn Financial Advisers LLP        |                                      |
| (Nominated Adviser and Broker)      |                                      |
| Sandy Jamieson, Jo Turner           | +44 (0) 207 213 0880                 |
+-------------------------------------+--------------------------------------+
| Sisu Partners Oy                    |                                      |
| (Certified Adviser on Nasdaq First  |                                      |
| North)                              | +358 (0)40 555 4727                  |
| Juha Karttunen                      | +358 (0)50 553 8990                  |
| Jukka Järvelä                       |                                      |
+-------------------------------------+--------------------------------------+

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 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 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. (http://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 Board’s 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 Board’s current beliefs and assumptions and are based on information
currently available to the Board.

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 Board 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