Cereno Scientific

Background and rationale for the Financing Agreement

Cereno Scientific is progressing a pipeline of three innovative drugs; lead candidate CS1, a histone deacetylase (HDAC) inhibitor that acts as an epigenetic modulator in Phase II development as a disease-modifying treatment for the serious and life-threatening rare disease Pulmonary Arterial Hypertension (PAH); Phase I candidate CS014, a novel HDAC inhibitor with epigenetic effects being developed as a disease-modifying treatment for Idiopathic Pulmonary Fibrosis (IPF) and preclinical candidate CS585, an oral, highly potent and selective prostacyclin (IP) receptor agonist that has demonstrated the potential to significantly improve disease mechanisms relevant to cardiovascular disease. A target indication for CS585 is currently being evaluated and rare diseases with high unmet medical needs are being considered.

During the past year, Cereno Scientific has met several significant milestones including raising 73.6 MSEK via the TO3 warrant program, subscribed to 99.6%, initiating a Phase I, first in human, trial of CS014, selecting IPF as initial target indication for the further development of CS014 as well as delivered positive Phase IIa trial results of CS1 in PAH. At the heels of the positive Phase IIa results, and with two drugs now in the clinic, Cereno Scientific's Board of Directors has decided to enter into the Financing Agreement with the Financiers. The injected capital ensures the Company's ability to pursue the development of its three innovative drug candidates toward key milestones. Additionally, it establishes favorable conditions for conducting business development activities, especially discussions concerning partnerships for the Company's development programs.

The proceeds from the Financing Agreement are primarily intended for:

• Advancing CS1 through regulatory FDA approval for a Phase IIb trial or a pivotal Phase IIb/III trial in PAH
• Completion of CS014 Phase I trial
• Progressing the Expanded Access Program (EAP) investigating long-term clinical use of CS1 in PAH
• Regulatory approval for a CS014 Phase II trial in IPF

"We are happy to announce this new financing, which secures our pipeline's advancement into 2026. With this financial runway, we are well-positioned to reach critical development milestones, including regulatory approval for the next trial of CS1 in PAH as well as Phase I results and Phase II trial approval for CS014 in IPF. We are very pleased to expand our collaborative journey with our long-time partner, Fenja Capital, and excited to welcome Arena Investors as new partners to Cereno Scientific", said Sten R. Sörensen, CEO, Cereno Scientific

"Our renewed partnership with Fenja Capital and our new collaboration with Arena Investors, a U.S.-based investor, marks a pivotal step forward for Cereno Scientific. This strengthened capital foundation provides us with ample time to establish optimal strategic partnerships for the company and our current shareholders. For our shareholders, this development reinforces our financial stability and positions us to pursue key milestones with full momentum ahead and minimal dilution", said Joakim Söderström, Chairman of the Board, Cereno Scientific

Main terms of the Financing Agreement

The Financing Agreement is divided into three components: (i) a cash loan in two tranches totaling 175 MSEK (the "Loan"), (ii) the issue of convertible loans of 75 MSEK to the Financiers (the "Convertibles"), and (iii) the issue without consideration of 5,749,017 warrants to the Financiers (the "Warrants").

The Loan is divided into two tranches where Tranche 1 consists of a cash loan of 125 MSEK which is paid out in connection with signing of the Financing Agreement. Tranche 2 consists of a cash loan of 50 MSEK and is conditional upon the Company having received approval by the FDA regarding CS1 for a phase IIB study or a pivotal study for phase III as well as certain additional financial conditions being fulfilled. The Loan is subject to a customary setup fee amounting to approximately 3,87 per cent of the funding under the Financing Agreement. Parts of Tranche 1 of the Loan will be used to repay the currently outstanding loan to Fenja of approximately 91 MSEK. Repayment of the Loan (both Tranches, if applicable) shall be made on 30 April 2026.

The Convertibles are issued by the Board of Directors of Cereno Scientific pursuant to the authorization granted by the general meeting on 16 April 2024. The Convertibles will be due for repayment on 30 April 2026 and could be converted into B-shares in the company to a conversion price fixed at 6.09 SEK, only subject to customary recalculation principles. Conversion of the Convertibles can be done during the whole term of the Convertibles.

The Warrants are also issued by the Board of Directors of Cereno Scientific pursuant to the abovementioned authorization. Each Warrant is eligible for subscription of one (1) new B-share in the company until 30 April 2029 at a subscription price per B-share of 6.82 SEK, only subject to customary recalculation principles. Exercise of the Warrants can be done during the whole term of the Warrants. Upon full exercise of the Warrants, the company will receive additional issue proceeds of approximately 39.2 MSEK. The Warrants and Convertibles will be registered with the Swedish Companies Registration Office and delivered to the Financiers as soon as possible.

The Loan and the abovementioned share-related instruments issued under the Financing Agreement are distributed between the Financiers as follows: Arena Investors 55 per cent and Fenja Capital 45 per cent. The Loan (Tranche 1) and the Convertibles will in total result in net cash proceeds to Cereno Scientific amounting to approximately 99 MSEK.

Further about the Convertibles and the Warrants

Presuming full conversion of the Convertibles the number of shares in Cereno Scientific will increase by 12,315,270 B-shares and the share capital will increase by SEK 1,231,527 corresponding to a dilution effect of approximately 4.19 per cent of the currently outstanding shares in the company and approximately 4.10 per cent of the currently outstanding votes in the company.

Presuming full exercise of the Warrants, the number of shares in Cereno Scientific will increase by 5,749,017 B-shares and the share capital will increase by SEK 574,901.70 corresponding to a dilution effect of approximately 2.00 per cent of the currently outstanding shares in the company and 1.96 per cent of the currently outstanding votes in the company.

The Board of Directors has weighed the advantages and disadvantages of deviating from the main rule of the shareholders' pre-emption rights in connection with the issue of Convertibles and Warrants to the Financiers. The Board of Directors has hereby concluded that a rights issue of such instruments:

(i)                  would be significantly more time-consuming, which may risk that the company misses out on potential growth opportunities,

(ii)                 would lead to significantly higher costs for the company, mainly attributable to the necessary procurement of an underwriting consortium and legal costs,

(iii)               would expose the company to higher market volatility, especially given the current market conditions, and

(iv)               would most likely had to be carried out at less favorable terms for the company, resulting in a higher dilution, which would have been to the detriment of all shareholders.

Furthermore, the Convertibles and the Warrants in combination with the Financing Agreement would contribute to improving the company's capital structure and risk level by providing the company with financing with increased flexibility compared to a customary new issue of shares. In this respect, the Board of Directors has particularly considered the importance of being able to carry out the capital raising in a way that ensures that the company obtains sufficient working capital at a proportionate cost. In view of the above and after careful consideration, it is the Board of Directors' assessment that the Financing Agreement and the issue of the Convertibles and the Warrants is the most favorable financing alternative for the company, and in the interest of both the shareholders and the company, and therefore also justifies a deviation from the main rule of the shareholders' pre-emption rights.

About Fenja Capital

Fenja Capital is an independent specialized asset manager and the leading capital partner for small and midsized listed companies in the Nordics. Fenja Capital manages two investment funds with a focus on innovative companies; mainly within technology, biotech and healthcare, and have invested 10bn SEK in these segments since inception in 2015.

About Arena Investors

Arena Investors, LP is an institutional asset manager founded in partnership with The Westaim Corporation (TSXV: WED). With approximately 4bn USD of invested and committed assets under management as of October 1st, 2024, and a team of over 180 employees in offices globally, Arena provides creative solutions for those seeking capital in special situations, alongside operational capabilities to manage and improve businesses. The firm brings individuals with decades of experience, a track record of comfort with complexity, the ability to deliver within time constraints, and the flexibility to engage in transactions and business operations that cannot be addressed by banks and other conventional financial institutions. See www.arenaco.com for more information.

Advisers

MAQS Advokatbyrå has been the legal adviser to the Company and Baker & McKenzie Advokatbyrå has been the legal adviser to the Financiers in connection with the Financing Agreement.

For further information, please contact:

Henrik Westdahl, Director IR & Communications

Email: henrik.westdahl@cerenoscientific.com  

Phone: +46 70-817 59 96

Sten R. Sörensen, CEO

Email: sten.sorensen@cerenoscientific.com

Phone: +46 73-374 03 74

This information is information that Cereno Scientific AB is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, at 07:25 (CET) on November 11, 2024.

About Cereno Scientific AB

Cereno Scientific develops innovative treatments for diseases with high unmet medical needs. Lead drug candidate, CS1, is an HDAC inhibitor that acts as an epigenetic modulator, with pressure-reducing, reverse-remodeling, anti-fibrotic, anti-inflammatory and anti-thrombotic properties. CS1 is being developed as a disease-modifying treatment for the serious and life-threatening rare disease Pulmonary Arterial Hypertension (PAH). A Phase IIa trial evaluating CS1's safety, tolerability, and exploratory efficacy in patients with PAH demonstrated that CS1 was safe, well-tolerated and showed a positive impact on exploratory clinical efficacy parameters. CS1 study data, together with preclinical information, is consistent with reversing pathological remodeling. A collaboration agreement with global healthcare company Abbott allowed Cereno to use their cutting-edge technology CardioMEMS HF System in the trial. An Expanded Access Program enables patients that have completed the Phase IIa trial to gain access to CS1 when no comparable alternative therapy options are available. CS1 holds orphan drug designations in both the US and EU. HDAC inhibitor CS014, in Phase I development, is a new chemical entity being developed as a disease-modifying treatment for rare disease Idiopathic Pulmonary Fibrosis (IPF). Preclinical studies of HDAC inhibitors show that these drugs can reverse fibrosis in models of IPF. Studies also show that these drugs prevent the pathological remodeling of pulmonary vessels that ultimately leads to pulmonary hypertension in many IPF patients. Preclinical studies of CS014 have demonstrated an effect on reversal of fibrosis and a dose-dependent beneficial effect on pathological vascular remodeling in an established model of PAH. Together, these findings indicate that CS014 has the potential to address the underlying pathophysiology behind the development of IPF. CS014 has demonstrated, in preclinical studies, the ability to regulate platelet activity, local fibrinolysis, and clot stability, helping to prevent thrombosis without increasing the risk of bleeding. This supports CS014's potential to address key unmet needs in IPF patients. Preclinical candidate CS585 is an oral, highly potent and selective prostacyclin (IP) receptor agonist that has demonstrated the potential to significantly improve disease mechanisms relevant to cardiovascular disease. While CS585 has not yet been assigned a specific indication for clinical development, preclinical data indicates that it could potentially be used in indications like thrombosis prevention without increased risk of bleeding and Pulmonary Hypertension. A target indication for CS585 is currently being evaluated; rare diseases with high unmet medical needs are being considered. CS014 and CS585 are developed through research collaborations with the University of Michigan. CS585 was in-licensed from the University of Michigan in 2023. The Company is headquartered in GoCo Health Innovation City, in Gothenburg, Sweden, and has a US subsidiary; Cereno Scientific Inc. Based in Kendall Square, Boston, Massachusetts, US. Cereno Scientific is listed on the Nasdaq First North Growth Market (CRNO B). The Certified Adviser is Carnegie Investment Bank AB, certifiedadviser@carnegie.se. More information is on www.cerenoscientific.com.