Faron Pharmaceuticals Oy Interim Results (9082P)

TIDMFARN

RNS Number : 9082P

Faron Pharmaceuticals Oy

06 September 2017

Faron Pharmaceuticals Ltd

("Faron" or the "Company")

Interim Results for the six months ended 30 June 2017

- INTEREST Phase III Traumakine(R) trial patient recruitment to complete in Q4 2017 and FDA advice received regarding advancement to BLA

   -       Traumakine clinical development broadened to include organ protection opportunities 
   -       Clevegen(R) advancing towards clinic 

TURKU - FINLAND, 6 September 2017 - Faron Pharmaceuticals Ltd ("Faron") (LON: FARN), the clinical stage biopharmaceutical company, today announces its unaudited Interim Results for the six months ended 30 June 2017 (the "Period").

HIGHLIGHTS

Operational (including post period-end)

-- Pipeline progress with portfolio of products focused on acute organ traumas, vascular damage and cancer immunotherapy

-- Traumakine - lead product in late Phase III with opportunity to become world's only approved ARDS treatment

o Pivotal, pan-European, Phase III INTEREST trial with Faron's lead product Traumakine for the treatment of Acute Respiratory Distress Syndrome ("ARDS") continues as planned and is expected to complete recruitment of the targeted 300 patients during the fourth quarter of 2017.

o Faron announced plans to initiate a program for compassionate use of Traumakine treatment once the trial is closed to new patients.

o FDA proposal to proceed directly to BLA submission for Traumakine(R) upon completion of European and Japanese Phase III studies following successful discussions with the Agency as announced 4 September 2017.

o Collaboration was initiated with INC Research/inVentiv Health - a global biopharmaceutical solutions organization with end-to-end clinical development and commercialization capabilities - to develop the pre-launch commercialization strategy for Traumakine.

o Japanese partner Maruishi continues to progress their pivotal Phase III ARDS trial in Japan and has received two IDMC recommendations to continue the trial as planned. Maruishi anticipates completion of recruitment in this 120 patient study during H1 2018.

o Formulation patent granted in Finland and filed in the US and PCT for Faron's IV dose form of interferon-beta.

o First patient enrolled in February in the Phase II INFORAAA clinical trial of Traumakine for the treatment of Multi-Organ Failure (MOF) and mortality prevention of surgically operated Ruptured Abdominal Aorta Aneurysm (RAAA).

o INFORAAA program open at five sites in Finland with three to four more planned in Estonia and Lithuania in the near future; filing in progress to open three to four sites in the UK.

   --      Clevegen - wholly-owned novel cancer immunotherapy in development 

o Preclinical toxicity studies commenced as planned following successful production of technical batches of Clevegen by manufacturing partner Abzena.

o Agreement signed with the University of Birmingham Medical School, UK, to initiate a liver cancer clinical trial program, focused on the protocol design for a Phase I/II trial.

o Initiated protocol design to treat melanoma, pancreas and ovarian cancer with Clevegen and to be submitted to the Finnish regulatory authority, FIMEA, later this year.

Financial

-- Raised approximately GBP5.0 million before expenses through a placing of 1,422,340 Ordinary Shares at an issue price of 350 pence per share in March 2017.

-- Cash balances of EUR10.3 million (2016: EUR8.9 million) at 30 June 2017 aided by prudent cost control.

-- Operating loss of EUR7.2 million (2016: EUR3.0 million) for the six months ended 30 June 2017.

   --      Net assets of EUR9.5 million (2016: EUR7.7 million) on 30 June 2017. 

Corporate

-- Dr Juho Jalkanen was appointed as Vice President of Business Development in April and stepped down from the Board in May.

-- Two new Board members, Dr Gregory Brown and Mr John Poulos, with significant global networks, were appointed as Non-Executive Directors in May.

Commenting on the results, Dr Markku Jalkanen, CEO of Faron, said: "Our aim is to build Faron into a global business dedicated to addressing areas of significant unmet need, utilising the opportunities contained within our wholly owned pipeline of novel drug candidates. The Truamakine Phase III INTEREST study for ARDS completed two further independent safety reviews and is approaching completion of recruitment in Q4 2017. We are looking forward to the data readout, which if favourable, will pave the way for our first commercial launch of Traumakine. We were further encouraged by the FDA's recent proposal to allow Traumakine to proceed directly to BLA submission upon completion of the European and Japanese trials and which will likely result in a faster and cheaper route to market in the US in the event of positive data.

"Beyond ARDS, we believe that Traumakine has excellent potential for application in other areas of organ protection. Impairment of endothelial barrier can be a reason for many organ dysfunctions. We are currently exploring its efficacy in addressing Multi-Organ Failure and mortality in patients with surgically operated Ruptured Abdominal Aorta Aneurysm (RAAA) through a Phase II trial.

"We are also pleased to have made substantial progress with our novel cancer immunotherapy candidate Clevegen, which works to remove immune suppression around tumours caused by tumour associated type-2 macrophages (TAM). Following the development of our new TIET platform and the commencement of preclinical toxicity studies we are now preparing to embark upon an extensive clinical program to investigate this promising candidate. In addition to its potential application in oncology, we are excited by Clevegen's potential application in a broader range of indications including chronic infections and vaccination enhancement."

For more information please contact:

Faron Pharmaceuticals Ltd

Dr Markku Jalkanen, Chief Executive Officer

[e-mail]

Consilium Strategic Communications

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

Phone: [phone]

E-mail: [e-mail]

Westwicke Partners, IR (US)

Chris Brinzey

Phone: [phone]

E-Mail: [e-mail]

Cairn Financial Advisers LLP, Nominated Adviser

Emma Earl, Tony Rawlinson

Phone: [phone]

Panmure Gordon (UK) Limited, Joint Broker

Freddy Crossley, Duncan Monteith (Corporate Finance)

Tom Salvesen (Corporate Broking)

Phone: [phone]

Whitman Howard Limited, Nominated Broker

Ranald McGregor-Smith, Francis North

Phone: [phone]

About Faron Pharmaceuticals Ltd

Faron (AIM:FARN) is a clinical stage biopharmaceutical company developing novel treatments for medical conditions with significant unmet needs. The Company currently has a pipeline focusing on acute organ traumas, vascular damage and cancer immunotherapy. The Company's lead candidate Traumakine, to prevent vascular leakage and organ failures, is currently the only treatment for Acute Respiratory Distress Syndrome (ARDS) undergoing Phase III clinical trials. There is currently no approved pharmaceutical treatment for ARDS. An additional European Phase II Traumakine trial is underway for the Rupture of Abdominal Aorta Aneurysm ("RAAA"). Faron's second candidate Clevegen is a ground breaking pre-clinical anti-Clever-1 antibody. Clevegen has the ability to switch immune suppression to immune activation in various conditions, with potential across oncology, infectious disease and vaccine development. This novel macrophage-directed immuno-oncology switch called Tumour Immunity Enabling Technology ("TIET") may be used alone or in combination with other immune checkpoint molecules for the treatment of cancer patients. Faron is based in Turku, Finland. Further information is available at www.faron.com

Chairman's and Chief Executive Officer's Review

Introduction

We are pleased to report on the progress of Faron Pharmaceuticals during the six months ended 30 June 2017, a period which has seen the Company make significant progress in the development of its most advanced drug candidates Traumakine and Clevegen. We believe that the Company is now well placed to move into its next stage of development as a commercial entity as we anticipate the outcome of data from the INTEREST trial. As such, during the period we established a collaboration with a biopharmaceutical solutions organization to prepare a commercialization strategy for Traumakine for execution in the event of a positive INTEREST trial outcome. In addition, we believe that in time Faron could become the world's leading company around organ protection in cardiovascular surgery, transplantation, and other ischemic-reperfusion injuries of vital central organs.

Traumakine - progressing towards completion of Phase III recruitment in Q4 2017

Faron's lead candidate Traumakine continues to progress through the clinic and we anticipate that INTEREST, the pivotal, pan-European, Phase III trial for the treatment of Acute Respiratory Distress Syndrome ("ARDS") will complete recruitment of the targeted 300 patients during the fourth quarter of 2017. In August, Faron announced plans to initiate an early access program for compassionate use of Traumakine once the trial is closed to new patients following the fifth meeting of the trial's Independent Data Monitoring Committee (IDMC) which recommended continuation of the study as planned. The early access programme will allow compassionate use of Traumakine in eligible named patients at European ICU hospitals, who may benefit from Traumakine treatment ahead of the product's potential regulatory approval.

Following successful pre-IND discussions, we are pleased to report that the FDA has proposed that Faron can proceed directly to Biologics License Application (BLA) submission pending positive results from the two on-going Phase III trials in Europe and Japan. In the letter received on 1 September 2017, the FDA proposed that, subject to the FDA being satisfied with data from the trials, the BLA application for Traumakine can be filed purely with data obtained from the ongoing trials outside of the US. In the event of positive outcomes of the ongoing trials this FDA feedback is therefore expected to shorten the time for approval of Traumakine in US.

Faron has decided to discuss this new important feedback with its US experts, who have been involved in planning the development of Traumakine in the US. Based on the outcome of these discussions the Company will refine its strategy to build its US presence based on the recent FDA feedback.

In preparation, we are in the process of recruiting a clinical/regulatory head for our Boston office to coordinate US Traumakine development. The US will be a key market for Faron, as demonstrated by the FDA's Office of Orphan Products Development (OOPD), which has estimated that US annual diagnoses for ALI/ARDS totals 300,000 cases, based on information in the national inpatient sample (NIS) and national hospital discharge survey (NHDS) databases. This is a larger market than previously estimated, which makes Traumakine ineligible for Orphan Drug Designation in the US.

Our partner Maruishi continues to progress its pivotal Phase III trial in Japan and two IDMC recommendations to continue the trial as planned have been received. Maruishi expects to complete recruitment in the first half of 2018. The Company believes that in Korea and Greater China, where commercial partnerships have already been established, further clinical studies may not be needed to secure approval in the event of a positive outcome from the INTEREST trial.

While the Company's primary focus is on gaining approval for Traumakine in the treatment of ARDS, we also believe that the product has the potential for application in additional disease areas. In February, the first patient was enrolled in the Phase II INFORAAA clinical trial of Traumakine, for the treatment of Multi-Organ Failure (MOF) and mortality prevention of surgically operated Ruptured Abdominal Aorta Aneurysm (RAAA).

Ruptured Abdominal Aortic Aneurysm (RAAA) is a surgical emergency with an overall mortality of 70 to 80% and requires immediate surgery and aortic repair. The main cause of death for these patients is multiple organ failure following a post-operative reperfusion injury of ischemic organs including kidneys, liver, brain and intestines. We believe that Traumakine has the potential to offer significantly improved outcomes for patients following surgery for RAAA. Furthermore, there is the possibility that a positive INFORAAA outcome could be supported by data from the INTEREST trial towards regulatory filings. We also believe that the clinical data from the INFORAAA trial could also provide us with valuable information on the recovery of ischemic single organ injuries and are planning further trials to treat these injuries. The INFORAAA program now has six sites open in Finland with three to four more expected to open in Estonia and Lithuania in the near future. Applications to open three to four sites in the UK are also in progress.

Clevegen - novel cancer immunotherapy approaching start of first Phase I/II trials

Faron's second product, its pre-clinical immunotherapy candidate, Clevegen, 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). Recent developments in the exciting field of cancer immunotherapy have been well documented with a number of important indications of clinical success. We believe that Clevegen is differentiated from other immunotherapies through its specific targeting of M2 TAMs which facilitate tumour growth, while leaving intact the M1 TAMs that support immune activation against tumours.

Preclinical toxicity studies of Clevegen have commenced as planned, following successful production of technical batches by our manufacturing partner Abzena. In April the Company signed an agreement with the University of Birmingham Medical School, UK, to initiate a liver cancer clinical trial program, focused on the protocol design for a Phase I/II trial, TIETALC, (Tumour Immunity Enabling Technology Against Liver Cancer). We expect to receive regulatory feedback for the Phase I/II liver cancer protocol from the UK regulatory authority (MHRA) during the second half of 2017. In addition, feedback on the protocol for other solid tumours (melanoma, ovarian and pancreas cancers) from the Finnish regulatory authority (FIMEA) is also expected during the second half of 2017.

Faron also continues a close collaboration with the MediCity unit of Turku University Medical School, where Faron has sponsored a set of Clevegen related preclinical experiments. Data reported at the international Juselius Symposium (June 2017, Helsinki, Finland) demonstrated how genetic depletion of macrophage Clever-1 resulted in tumour growth resistance and prevented the spread of Lewis lung cancer in preclinical models. Furthermore, signs of strong immune activation were observed, as evidenced by CD8 positive T-cells at the tumour site, in line with the expected effect of Clevegen.

Financial Review

During the period, Faron continued to maintain its focused and cost-conscious financial strategy, without compromising the intensity of the development work. The Company raised approximately GBP5.0 million before expenses through the Placing of 1,422,340 Ordinary Shares at a premium to the Company's share price, which indicates the level of confidence our investors, both new and established, have in our products, our strategy and the ability of our management team to deliver. The R&D expenses increased significantly but less than anticipated resulting to an operating loss of EUR7.2 million. The loss combined with the placing during the period, resulted in a fairly modest cash outflow. Thus the cash balances at the end of the period stood at EUR10.3 million and were stronger than anticipated. No operating income from the EU FP7 grant was recorded during the period as the report for the period ended in May 2017 has not yet been approved by EU. After the EU FP7 grant has been fully utilised, the Company will continue its proven active and successful strategy to utilise various forms of public funding - both grants and loans.

Summary & Outlook

Faron is on track to complete recruitment in the pivotal Phase III INTEREST trial in the fourth quarter of 2017. If the data are favourable this will represent a significant milestone for the Company and will pave the way for the launch of our first commercial product Traumakine, for the treatment ARDS, an area of genuine unmet medical need with poor patient prognosis. We are preparing for potential commercialisation in Europe and plan to make Traumakine available to patients on a compassionate use basis ahead of potential approval. We continue to explore additional opportunities for Traumakine to protect organs beyond the lung in order to maximise the opportunity for our lead asset. We also look forward to making significant progress with our exciting immuno-oncology candidate, Clevegen, now in primate toxicological studies. The Board is confident that both Traumakine and Clevegen position Faron well for the future and looks forward to the coming period with great confidence.

Caution regarding forward looking statements

Certain statements in this announcement, are, or may be deemed to be, forward looking statements. Forward looking statements are identified by their use of terms and phrases such as "believe", "could", "should", "expect", "envisage", "estimate", "intend", "may", "plan", "potentially", "will" or the negative of those, variations or comparable expressions, including references to assumptions. These forward looking statements are not based on historical facts but rather on the Directors' current expectations and assumptions regarding the Company's future growth, results of operations, performance, future capital and other expenditures (including the amount, nature and sources of funding thereof), competitive advantages, business prospects and opportunities. Such forward looking statements reflect the Directors' current beliefs and assumptions and are based on information currently available to the Directors.

A number of factors could cause actual results to differ materially from the results and expectations discussed in the forward looking statements, many of which are beyond the control of the Company. In particular, the outcome of clinical trials (including, but not limited to the Company's INTEREST trial) may not be favourable or clinical trials over and above those currently planned may be required before the Company is able to apply for marketing approval for a product. In addition, other factors which could cause actual results to differ materially include risks associated with vulnerability to general economic and business conditions, competition, environmental and other regulatory changes, actions by governmental authorities, the availability of capital markets, reliance on key personnel, uninsured and underinsured losses and other factors. Although any forward looking statements contained in this announcement are based upon what the Directors believe to be reasonable assumptions, the Company cannot assure investors that actual results will be consistent with such forward looking statements. Accordingly, readers are cautioned not to place undue reliance on forward looking statements. Subject to any continuing obligations under applicable law or any relevant AIM Rule requirements, in providing this information the Company does not undertake any obligation to publicly update or revise any of the forward looking statements or to

advise of any change in events, conditions or circumstances on which any such statement is based.

 
 Statement of comprehensive               Note       Unaudited     Unaudited    Year 
  income (Stated in 1,000                           six months     six months    ended 
  euros)                                               ended         ended       31 Dec 
                                                      30 Jun         30 Jun      2016 
                                                       2017           2016 
                                                                      (1) 
 
 Revenue                                2                     7           419      1 153 
 Cost of sales                                                -             -          - 
 Gross profit                                                 7           419      1 153 
 Other operating income                 3, 4                103           968      1 742 
 Administrative expenses                                (1 320)         (974)    (2 161) 
 Research and development 
  expenses                                              (5 709)       (3 795)    (9 592) 
 Operating result                                       (6 919)       (3 382)    (8 858) 
 
 Financial income                                             6             0 
 Financial expenses                                       (299)         (305)      (361) 
 
 Net financial costs                                      (293)         (305)      (361) 
 
 
 Loss before income taxes                               (7 212)       (3 686)    (9 219) 
 
 Income tax expense                                         (1)             -       (75) 
 Total comprehensive income 
  for the period                                        (7 213)       (3 686)    (9 294) 
 Total comprehensive income, 
  attributable to: 
 Equity holders of the Company                          (7 213)       (3 686)    (9 294) 
 
 Loss per share attributable 
  to equity holders of the 
  Company 
 Basic and diluted loss 
  per share, euro                       5                (0,26)        (0,16)     (0,39) 
                                        Unaudited                   Unaudited 
                                                                       30 Jun 
 Balance sheet (Stated                     30 Jun                        2016     31 Dec 
  in 1,000 euros)                Note        2017                         (1)       2016 
 
 Assets 
 Non-current assets 
 Propertly, plant and 
  equipment                                    18                          24         21 
 Intangible assets                            897                         926        933 
                                              915                         950        954 
 Current assets 
 Inventories                                 1503                       1 021      1 451 
 Trade and other receivables                3 333                       3 161      3 404 
 Cash and cash equivalents                 10 333                       8 862     11 478 
                                           15 169                      13 044     16 333 
 
 Total assets                              16 084                      13 994     17 287 
 
 Equity and liabilities 
 Capital and reserves 
  attributable to equity 
  holders of the Company 
 Share capital                              2 691                       2 691      2 691 
 Reserve for invested 
  non-restricted equity                    39 815                      25 244     34 006 
 Retained earnings                       (33 027)                    (20 206)   (25 814) 
 Total equity                               9 480                       7 729     10 884 
 
 Non-current liabilities 
 Interest-bearing financial 
  liabilities                     4         2 434                       2 057      2 033 
                                            2 434                       2 057      2 033 
 Current liabilities 
 Interest-bearing financial 
  liabilities                                  65                          93         93 
 Non-interest-bearing 
  financial liabilities                     2 011                       1 009      1 874 
 Other current liabilities                  2 094                       3 105      2 403 
                                            4 170                       4 207      4 371 
 
 Total liabilities                          6 604                       6 265      6 404 
 
 Total equity and liabilities              16 084                      13 994     17 287 
 
   (1) Restated to reflect that EUR0.75m of revenue 
   (relating to the signing fee paid by PharmBio) 
   was reclassified from revenue to a current liability 
   in the balance sheet in the year ended 31 December 
   2016. Accordingly, to provide comparability with 
   the prior period, the same reclassification has 
   been applied for the 6 months ended 30 June 2016 
   above. The impact of this on associated taxes has 
   also been restated. 
 
 
 
 
 Statement of changes in          Share         Reserve       Retained     Total 
  equity                          capital     for invested     earnings    equity 
  (Stated in 1,000 euros)                    non-restricted 
                                                 equity 
==============================  ---------  ----------------  ----------  -------- 
 
 Balance at 31 December                                                        11 
  2015                              2 691            24 533    (16 046)       178 
                                =========  ================  ==========  ======== 
 
 Total comprehensive income 
  for the first six months 
  2016                                                          (2 580)   (2 580) 
                                                                                - 
 Transactions with equity 
  holders of 
  the Company                                                                   - 
    Share base payment                                              237       237 
   Increase of share capital                              -           -         - 
   Transaction costs on share 
    capital issued                                                              - 
   Conversion of convertible 
    notes                                                             -         - 
                                =========  ================  ==========  ======== 
                                        -                 -     (2 342)   (2 342) 
 
 Balance at 30 June 2016            2 691            24 533    (18 389)     8 836 
                                =========  ================  ==========  ======== 
 
 Total comprehensive income 
  for the last six months 
  2016                                                          (6 714)   (6 714) 
                                                                                - 
 Transactions with equity 
  holders of 
  the Company                                                                   - 
    Share base payment                                              243       243 
   Increase of share capital                          9 330           -     9 330 
   Transaction costs on share 
    capital issued                                    (811)                 (811) 
   Conversion of convertible 
    notes                                                             -         - 
                                =========  ================  ==========  ======== 
                                        -             8 519     (6 471)     2 048 
 
 Balance at 31 December                                                        10 
  2016                              2 691            33 052    (24 860)       884 
                                =========  ================  ==========  ======== 
 
 Total comprehensive income 
  for the first six months 
  2017                                                          (7 213)   (7 213) 
 Transactions with equity 
  holders of 
  the Company                                                                   - 
    Share base payment                                                          - 
   Increase of share capital                          6 197           -     6 197 
                                ========= 
   Transaction costs on share 
    capital issued                                    (388)                 (388) 
   Conversion of convertible 
    notes                                                             -         - 
                                           ================  ==========  ======== 
                                        -             5 809     (7 213)   (1 404) 
 Balance at 30 June 2017            2 691            38 861    (32 073)     9 480 
                                =========  ================  ==========  ======== 
 
 
 Statements of cash flows                  Unaudited   Unaudited   1 Jan 
  (Stated in 1,000 euros)                      1 Jan       1 Jan    - 31 
                                            - 30 Jun        - 30     Dec 
                                                2017         Jun    2016 
                                                            2016 
 Cash flow from operating activities 
 Loss(-) / profit(+) attributable                                     (9 
  to equity holders of the Company           (7 213)     (3 686)    294) 
 Adjustments for 
 Depreciation and amortization                    80          79     168 
   Financial items                               293         305     361 
   Income taxes                                    1           -      75 
   Expensed R&D                                    -           -       - 
   Non-cash items (options granted)                -         237     480 
   Change in net working capital: 
                                                                      (1 
 Trade and other receivables                      71     (1 086)    330) 
   Inventories                                  (52)       (728)   (802) 

                                               (173)       2 162   2 325 
   Interest and other financial costs 
    paid                                       (299)       (305)   (361) 
 Interest and other financial income 
  received                                         6           0       0 
 Income taxes paid                               (1)           -    (75) 
                                          ----------  ----------  ------ 
 Net cash used in / from operating                                    (8 
  activities (A)                             (7 287)     (2 666)    452) 
 
 Cash flow from investment activities 
 Investments in machinery and equipment 
  and intangible assets                         (41)           -    (92) 
                                          ----------  ----------  ------ 
 Net cash from/used in investing 
  activities (B)                                (41)           -    (92) 
 
 Cash flow from financing activities                           - 
 Proceeds from issue of share capital 
  issue, net                                   5 809           -   8 519 
 Proceeds from issue of convertible 
  notes                                            -           - 
 Proceeds from current borrowings                  -           -   (151) 
 Proceeds from non-current borrowings            401         611     587 
 Repayment of current borrowings                (28)       (151)       - 
                                          ----------  ----------  ------ 
 Net cash used in financing activities 
  (C)                                          6 182         460   8 955 
 
 Net increase(+) / decrease (-) in 
  cash and cash equivalents (A+B+C)          (1 145)     (2 206)     410 
                                                              11      11 
 Cash and cash equivalents at 1 January       11 478         068     068 
                                          ----------  ----------  ------ 
 Cash and cash equivalents at end                                     11 
  of period                                   10 333       8 862     478 
 

Note 1 Basis of Preparation

Corporate information

Faron Pharmaceuticals Ltd. (hereafter "Faron" or "Company") is a Finnish private limited liability company organized under the laws of Finland and domiciled in Turku, Finland. The Company's registered address is Joukahaisenkatu 6 B, 20520 Turku, Finland. Faron Pharmaceuticals Ltd. is a clinical stage drug discovery and development company. Currently Faron has three major drug development projects focusing on: acute trauma, inflammatory diseases; and cancer growth and spread.

Basis of accounting

The unaudited interim financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (and as published by the International Accounting Standards Board (IASB) and in force as at 30 June 2017. In the EU IFRS are standards and their interpretations adopted in accordance with the procedure laid down in regulation (EC) No 1606/2002 of the European Parliament and of the Council. These policies are consistent with those used in the financial statements for the year ended 31 December 2016 and with those that the Company expects to apply in its financial statements for the year ending 31 December 2017.

The interim financial statements do not include all of the information required for full annual financial statements and do not comply with all the disclosures in IAS 34 "Interim Financial Reporting". Additionally though the interim financial statements have been prepared in accordance with IFRS, they are not in full compliance with IFRS.

Going Concern

The Company has prepared forecasts to estimate the Company's 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 for the foreseeable future (at least twelve months from the date of this report) and therefore these interim financial statements have been prepared on a going concern basis.

In its meeting on 5 September 2017 the Board of Directors of Faron Pharmaceuticals Ltd. approved the publishing of interim financial statements.

Note 2 Revenue

The revenue for the first six months in 2017 EUR 7,463 euro. This consisted of payment of INF-beta production.

Note 3 Other operating income

Other operating income of EUR 103 097 consists of the grant component of government subsidized loan. In accordance with IFRS 39 below-market level government loans must be divided into Fair-value -component and Grant component. Thus, the Tekes -loan drawn down during 2016 and 2017 have been decomposed and the grant component is recorded in Other operating income.

Note 4 Tekes loans

During H1 2017 Faron drew down a fourth instalment of EUR 452,908 of the Tekes loan for the Clevegen development work, bringing the total amount of the third Tekes loan to EUR 1,228,080 and the total amount of all Tekes loans drawn down to EUR 2,890,660. The third loan has also a maturity of 10 years from the first instalment, of which the first five years are free of repayment. The interest rate for all Tekes loans is currently one per cent. Loans are unsecured and if the projects fall short of their goals and results cannot be commercialised, part of the loans may be converted into a grant.

 
 Note 5 Loss per share                                   H1 2017    H1 2016       2016 
                                                        EUR '000    EUR '000    EUR '000 
 Basic 
 Basic loss per share 
  is calculated by dividing 
  the loss attributable 
  to equity holders of 
  the Company by the weighted 
  average number of ordinary 
  shares in issue during 
  the year. 
 
 Loss attributable to 
  equity holders of the 
  Company 
  (EUR 1,000)                                            (7 213)      (3 686)    (9 294) 
 Weighted average number 
  of ordinary shares in                                                23 111     23 979 
  issue                                               27 290 736          704        650 
 Basic (and dilutive) 
  loss per share, EUR                                     (0,26)       (0,16)     (0,39) 
 
 Issued ordinary shares                                                23 111     23 111 
  at 1 January                                        23 111 704          704        704 
 Effect of shares issued                               4 179 032            -    867 946 
 Weighted-average number 
  of ordinary shares at                                                23 111     23 979 
  end of period                                       27 290 736          704        650 
 
 Diluted 
 Diluted loss per share 
  is calculated by adjusting 
  the weighted average 
  number of ordinary shares 
  outstanding to assume 
  conversion of all dilutive 
  potential ordinary shares. 
 
 Loss attributable to 
  equity holders of the 
  Company 
  (EUR 1,000)                                            (7 213)      (3 686)    (9 294) 
 Interest adjustment                                                        - 
 Diluted weighted average 
  number of ordinary shares                                            23 164     23 979 
  in issue                                            27 593 783          610        650 
 Basic loss per share, 
  EUR                                                     (0,26)       (0,16)     (0,39) 
 
 Weighted-average number 
  of ordinary shares 
 Issued ordinary shares                                                           23 111 
  at 1 January                                        23 111 704   23 111 704        704 
 Effect of shares issued                               4 179 032            0    867 946 
 Weighted-average number 
  of ordinary shares at                                                23 111     23 979 
  end of period                                       27 290 736          704        650 
 Dilution effect of convertible 
  loans                                                                                - 
 
   Dilution effect of outstanding 
   options                                               303 047       52 906          - 
 Diluted weighted-average 
  number of ord. shares                                                           23 979 
  at end of period                                    27 593 783   23 164 610        650 
 

FURTHER INFORMATION TO SHAREHOLDERS

   AIM:                                                           FARN 
   Company number:                 (ISIN) FI4000153309 
   Investor website:                    http://www.faron.com/investor-relations 
   Registered office:                   Joukahaisenkatu 6, 20900 Turku, FINLAND 
   Directors:                              Frank Armstrong (Non-Executive Chairman) 

Matti Manner (Non-Executive Vice-Chairman)

Gregory B. Brown (Non-Executive Director)

Markku Jalkanen (CEO)

Jonathan Knowles (Non-Executive Director)

Huaizheng Peng (Non-Executive Director)

John Poulos (Non-Executive Director)

Leopoldo Zambeletti (Non-Executive Director)

Yrjö Wichmann (CFO)

This information is provided by RNS

The company news service from the London Stock Exchange

END

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September 06, 2017 02:00 ET (06:00 GMT)