AEROCRINE AB strengthens its financial position by a rights issue of approximately SEK 445 million

SOLNA, Sweden - Aerocrine AB (NASDAQ Stockholm: AERO) launches a rights issue of approximately SEK 445 million in order to strengthen the company’s financial position and accomplish its key objectives.

• Aerocrine’s Board of Directors has resolved, subject to the approval by an Extraordinary General Meeting, to launch a rights issue of approximately SEK 445 million with preferential rights for Aerocrine’s shareholders. The Extraordinary General Meeting is planned to be held on 7 January 2015.
• The rights issue is underwritten by inter alia Aerocrine’s largest shareholder Novo A/S and the largest Danish public pension fund, Arbejdsmarkedets Tillægspension (“ATP”). In total, subscription undertakings and underwriting commitments correspond to more than 75 percent of the full rights issue amount under certain conditions.
• The proceeds from the rights issue will be used to fund ongoing commercial operations including the launch of NIOX VERO in the US for Health Care Professionals use. Aerocrine recently received FDA-approval for this portable, easy to use device for FeNO monitoring. In addition, the company will leverage the VERO product and software platform to finalize development of a home-treatment monitoring device in accordance with the recently published guidelines for home medical devices by the FDA. This will allow the company to realize its growth plans and reach profitability, and thereby create additional shareholder value.
• The shareholders of the company have preferential rights to subscribe for the new shares, whereby two (2) existing share entitles the subscription of seven (7) new shares.
• The subscription price is SEK 0.82 per share. Subject to the approval of the rights issue by an Extraordinary General Meeting, the subscription period will run from 14 January up to and including 28 January 2015.

“As we have renewed our short, mid and long term planning for Aerocrine, we took into account the funding that would be needed to grow our topline and enable continued progress toward profitability and value creation for our shareholders. With strong consecutive quarters in Q2 and Q3 this year, the FDA approval for NIOX VERO sales in the US in early November, and an anticipated approval of NIOX VERO in both China and Japan in early/mid 2015, we believe that we have created a strong foundation for our continued growth that we intend to support through the upcoming rights offering in the amount of approximately SEK 445 million, before transaction costs”, says Scott Myers, President and CEO of Aerocrine.

Background and reasons

Aerocrine has, until 2011, focused extensively on research, product development and preparations for the future broadening of the commercial operations. Since the end of 2011, Aerocrine has been undergoing a transition resulting in an increased corporate focus on sales and marketing execution, and the company has invested intensively in preparing and growing its US market presence. In order to further strengthen the position for growth in the US market, the company thoroughly reviewed its US commercial organization during 2013 and changes were made to the selling model, including improved targeting and messaging, introduction of a device evaluation program, and multiple pricing options. Upon implementation of these changes, sales initially slowed during the first half of 2014 but rebounded in the last half of the second quarter and showed solid growth in the third quarter. Other geographic markets are also showing healthy growth.

Looking forward, Aerocrine is on a trend to achieve record sales for the full year 2014. The company received approval for NIOX VERO sales in the US in early November and expects that the dynamics and interest around this new device will continue to propel growth in the US market. The company is anticipating approval of NIOX VERO in both China and Japan in early/mid 2015 and expects good growth related to the introduction also in those markets, especially in China where sales have been constrained due to the required re-registration of the NIOX MINO device. This growth is expected to be achieved while the company is continuing to focus on overall expense control and selectively pursue growth opportunities with targeted funding. However, based on current forecasts, and absent a strategic collaboration or larger than expected growth in revenue, existing cash is sufficient to finance the current scope of operations until approximately the end of the second quarter 2015; and sufficient cash to meet the conditions of the credit agreement at least until the end of December 2014.

The Board of Directors believes that additional value can be created for the company’s shareholders by continuing to fund the company’s operations and growth initiatives. Proceeds from the rights offering will be used to invest in four strategic growth pillars and enable the company to achieve several very valuable inflection points such as: (i) establish FeNO as the standard of care, (ii) drive penetration in the defined US professional segment to commercial success, (ii) reach overall profitability, and (iv) finalize home device product and business model. There are no plans to alter the company’s current capital structure by paying off debt at this point in time. Based on the proposed rights issue, and assuming it will be fully subscribed, liquidity is expected to be sufficient to continue the planned operations and attain positive cash flow without additional financing.

Consequently, the Board of Directors has resolved, subject to the approval by an Extraordinary General Meeting, to launch a rights issue of approximately SEK 445 million before issue costs with preferential rights for Aerocrine’s shareholders.

Terms and conditions for the rights issue

On 27 November 2014, the Board of Directors of Aerocrine resolved, subject to approval by an Extraordinary General Meeting, to increase the company's share capital with not more than SEK 271,360,533.50 (from SEK 77,531,581.00 to not more than SEK 348,892,114.50) through issue of not more than 542,721,067 new shares (from 155,063,162 shares to not more than 697,784,229 shares). The subscription price is SEK 0.82 per share, whereby Aerocrine will be provided with approximately SEK 445 million at full subscription, before issue costs.

Shareholders in Aerocrine will have preferential rights to subscribe for new shares in proportion to their holdings. Each existing share will entitle to seven (7) subscription rights. Two (2) subscription rights will entitle to subscription for one (1) new share. The record date at Euroclear Sweden AB for participation in the rights issue is 12 January 2015. The subscription period (subscription through payment) will run from 14 January up to and including 28 January 2015, or such later date as decided by the Board of Directors. Trading in subscription rights is expected to take place from 14 January up to and including 26 January 2015.

The decision on the rights issue is subject to approval by an Extraordinary General Meeting that is planned to take place on Wednesday 7 January 2015. Shareholders, including Novo A/S, with an aggregate holding of approximately 28 percent of the shares and votes in the company have committed to vote in favor of the rights issue at the Extraordinary General Meeting. Notice of the Extraordinary General Meeting will be published through a separate press release on or about 2 December 2014. The Board of Directors will also propose amendments to Aerocrine’s Articles of Association (the share capital limits and the authorized number of shares) in order enable the rights issue.

A prospectus relating to the rights issue will be made public before the commencement of the subscription period.

Rights issue subscription undertakings and underwriting commitments

Shareholders in Aerocrine, including Novo A/S, with an aggregated holding of 28 percent of the shares and votes, have committed to subscribe for their respective pro rata shares in the rights issue. In addition, Aerocrine has received underwriting commitments from inter alia Novo A/S and ATP subject to customary conditions. No underwriting fee has been requested by or paid to the underwriters. In total, subscription undertakings and underwriting commitments correspond to more than 75 percent of the full rights issue amount under certain conditions.

The subscription undertaking from Novo A/S and ATP is subject to Novo A/S being granted an exemption from the mandatory bid rules by the Swedish Securities Council (Swe. Aktiemarknadsnämnden) should their ownership exceed 30 percent following a fulfilment of their subscription and underwriting commitment in the rights issue. Novo A/S has applied for such exemption.

Indicative timetable for the rights issue

Financial and legal advisors

ABG Sundal Collier is acting as financial advisors and Mannheimer Swartling Advokatbyrå is acting as legal advisor to Aerocrine in connection with the rights issue.

For more information, please contact:

Scott Myers, Chief Executive Officer, Aerocrine AB, Phone: +1 970 368 0336 or +46 768 788 379

Marshall Woodworth, Chief Financial Officer, Aerocrine AB: +1 919 749 8748 or +46 709 695 219

Or visit www.aerocrine.com

About Aerocrine

Aerocrine AB is a medical products company focused on the improved management and care of patients with inflammatory airway diseases. As the pioneer and leader in technology to monitor and manage airway inflammation, Aerocrine markets NIOX MINO® and NIOX VERO®. Both products enable fast and reliable management of airway inflammation and may therefore play a critical role in more effective diagnosis, treatment and follow-up of patients with inflammatory airway diseases such as asthma. Aerocrine is based in Sweden with subsidiaries in the U.S., Germany, Switzerland and the U.K. Aerocrine shares were listed on the Stockholm Stock Exchange in 2007.

Important information

The information in this press release does not contain or constitute an offer to acquire, subscribe or otherwise trade in shares, subscription rights or other securities in Aerocrine. Any invitation to the persons concerned to subscribe for shares in Aerocrine will only be made through the prospectus that Aerocrine estimates to publish on or around 12 January 2015.

This press release may not be released, published or distributed, directly or indirectly, in or into Australia, Hong Kong, Japan, Canada, Singapore, South Africa, the United States or any other jurisdiction where such action is wholly or partially subject to legal restrictions or where such action would require additional prospectuses, registrations or other actions in addition to what follows from Swedish law. Nor may the information in this press release be forwarded, reproduced or disclosed in a manner that contravenes such restrictions or would entail such requirements. Failure to comply with this instruction may result in a violation of applicable securities laws.

No subscription rights, BTAs (interim shares) or new shares have or will be registered under the United States Securities Act of 1933 (“Securities Act”) or securities legislation in any state or other jurisdiction in the United States and may not be offered, subscribed, sold or transferred, directly or indirectly, within the United States, other than pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in accordance with securities laws in relevant state or other jurisdiction in the United States.

This press release may contain forward-looking statements which reflect Aerocrine’s current view on future events and financial and operational development. Words such as “intend”, “expect”, “anticipate”, “may”, “believe”, “plan”, “estimate” and other expressions which imply indications or predictions of future development or trends, and which are not based on historical facts, are intended to identify forward-looking statements. Forward-looking statements inherently involve both known and unknown risks and uncertainties as they depend on future events and circumstances. Forward-looking statements do not guarantee future results or development and the actual outcome could differ materially from