Faron Pharmaceuticals: From financing crossroads towards share issue

Translation: Original published in Finnish on 2/10/2026 at 8:00 am EET.

Faron Pharmaceuticals announced on Monday that it is planning a rights offering of around 40 MEUR. The significant financing is intended to cover, in particular, the first part of bexmarilimab's registration trial (Phase II) in the treatment of high-risk MDS. We are modeling the offering into our forecasts with a significant discount to the current share price and raising our required rate of return due to increased financial risks. As a result of these changes, we lower our target price to EUR 1.5 and our recommendation to Reduce (was Accumulate) in accordance with the DCF model.

A partnership agreement was among the company's goals and market expectations

Faron's significant financing need to carry out the Phase II/III registrational trial has been well known. In our view, the company had two key options for securing financing: a partnership agreement with a larger pharmaceutical company or a share issue. Faron has been negotiating a partnership agreement for several years, but the negotiations have not resulted in a definitive agreement. In our view, the market has been expecting a partnership agreement, and we estimate that the news of the share issue will come as a disappointment to the market and lead to a share price decline. Depending on the terms, a partnership agreement could have reduced uncertainty and created additional value. The equity offering route, in principle, allows Faron to enter into a more valuable partnership agreement later if the results of the first part of the trial indicate clear efficacy. However, the flip side is an increasing number of shares and growing financial risk. Due to the uncertainty of financing options, for now we have not included either of the key alternatives, a partnership agreement or a share issue, as such in our forecasts.

The 40 MEUR issue is a significant financing effort

Faron aims to raise 40 MEUR through the offering. The share issue is directed at existing shareholders, and the company is seeking authorization from an extraordinary general meeting for 80 million new shares. If successful, the funds should be sufficient to carry out the first part (Phase II) of the Phase II/III registrational trial. The trial will have a randomized and blinded design, meaning it will provide higher quality data on the efficacy of the bexmarilimab in first-line high-risk MDS than the previous Phase I/II trial. Regarding tolerability and safety, the results have previously appeared sufficiently good. Faron will hold a press conference regarding the offering on Wednesday, February 11 at 3 pm EET. You can watch the webcast here.

We are adding the issue to our forecasts and raising our required return

The offering is large relative to Faron's market capitalization, so we expect a significant subscription discount compared to the current share price. We model the issue at a price of EUR 0.8 per share, based on the expectation of a pre-issue share price decline and a discounted subscription price. If realized, this would mean 50 million new shares, representing a 42% increase in the number of shares.  The share issue also increases the likelihood that convertible bond conversions will have to be made at a lower share price than previously anticipated. This will put additional pressure on the share count growth in the coming years. Due to the large size of the share issue, we believe the company's financing risk increases, which is why we are raising our required rate of return (WACC) to 13% (was 12%).

The issue weakens the outlook for stock returns

Our DCF model gives the share a value of EUR 1.5 after the share issue discount, an increased required return, and minor forecast revisions. In our view, the risk/reward ratio remains unsatisfactory.