Aerocrine directs issue of new shares, convertible bonds to Novo A/S

“We appreciate the strong support from our existing major shareholders. The strengthening of Aerocrine's ownership group and the capital now being made available to the company will provide even better prerequisites for reaching our target of becoming a rapidly growing and commercially successful international company”

Aerocrine AB (STO:AEROB) today announces that on 15 September 2010 the Board, by virtue of authorization by the shareholders' meeting, decided to carry out a SEK 225 million directed issue of new shares and convertible bonds to Denmark-based Novo A/S, as well as a SEK 155.5 million new share issue with preferential rights to existing shareholders. The issue price and the conversion price of the convertible bonds are set at 13 and 41 per cent premium, respectively, to the closing share price on 15 September, 2010. The proceeds from the issue of new shares and convertible bonds will strengthen Aerocrine's financial position and enable the company to drive the commercialization of its products.

Over the past year Aerocrine has achieved several important, strategic objectives, including successful product and technology developments, initiation of private payer reimbursement in the U.S. and strengthening of the Company's patent portfolio. The issue of shares and convertibles is carried out to strengthen Aerocrine's financial position and to provide the company with a new strategic shareholder. The substantial bolstering of Aerocrine's financial position and the addition of Novo A/S, a strong specialist healthcare investor, as a major shareholder will enable Aerocrine to:

- Accelerate activities to achieve full reimbursement and generate additional revenues in the clinical market

- Exploit the Company's leading technology position and the previously announced Panasonic collaboration to further the adoption of exhaled nitric oxide monitoring as a routine clinical practice in the doctor's office setting and take preparatory steps towards exploring the potential for home use

- Capitalize on investments made in the development and enforcement of the Company's intellectual property portfolio

Directed issue of shares and convertible bonds

Aerocrine will issue 16,071,428 new shares at an issue price of SEK 7.00 through a directed issue to Novo A/S, corresponding to a capital infusion of SEK 112.5 million. In addition, Aerocrine will raise a convertible loan at the total amount of SEK 112.5 million through a directed issue of convertible bonds to Novo A/S. The convertible loan has a five year life and a fixed rate coupon of 8% per annum. Novo A/S has the right to convert the bond at a conversion price of SEK 8.75 per share, representing a 41 per cent premium to the closing price of Aerocrine's shares on 15th September 2010. Aerocrine has a corresponding right to call for conversion if the Company's share price exceeds SEK 13.10 during a qualified period.

The investment will be managed by the growth equity unit of Novo A/S, and brings Aerocrine a committed long-term shareholder with significant experience in the life-sciences sector.

"Aerocrine has developed a revolutionary technology from initial discovery to a unique product that has now been launched in a large number of markets. The Company is addressing a well-defined medical need in one of the world's most widespread diseases and has established the method of inflammation monitoring both scientifically and clinically. A market leading position, a valuable collaboration with Panasonic, strong intellectual property and a significant growth potential make this an attractive investment opportunity that fits well with the focus of Novo Growth Equity"said Ulrik Spork, Managing Partner, Novo Growth Equity.

Novo A/S' shareholding following the directed share issue will be dependent on the subscription rate in the rights issue described below. Upon full subscription of the rights issue, Novo A/S' shareholding will amount to 15 per cent, and upon subsequent conversion of the convertible bond, Novo A/S' shareholding will increase to 25 per cent. Further, the Company will call an extraordinary shareholders' meeting ("EGM") where it will be proposed that Scott Beardsley, a Senior Partner with Novo Growth Equity, will become a Director on Aerocrine's Board. This proposal is supported by Investor Growth Capital, HealthCap and Life Equity Sweden representing approximately 60 per cent of the votes.

Rights issue

In order to allow existing shareholders to invest on substantially the same terms as in the directed issue of shares, Aerocrine will also conduct a rights issue with preferential rights issued to all existing shareholders. The rights issue will raise equity capital of up to SEK 155.5 million, before costs, through the issue of up to 22,217,532 new shares. The subscription price is set to SEK 7.00 per share; the same issue price as in the directed share issue.

For each share in Aerocrine held as of the record date, September 22, 2010, shareholders will receive one (1) subscription right. Three (3) subscription rights entitle the subscription of one (1) new share. The subscription period runs from 27 September to 14 October and a prospectus will be made public on 22 September. Investor Growth Capital, HealthCap and Life Equity Sweden KB have announced their intention to at least subscribe for shares in the rights offering to offset their respective outstanding loans to the Company, corresponding to approximately SEK 50 million, including accrued interest.

Preliminary timetable for the preferential rights issue

In order to allow all existing shareholders sufficient time to trade subscription rights, the date for Aerocrine's January to September interim report is moved forward to November 12th, 2010.

"We appreciate the strong support from our existing major shareholders. The strengthening of Aerocrine's ownership group and the capital now being made available to the company will provide even better prerequisites for reaching our target of becoming a rapidly growing and commercially successful international company", said Paul de Potocki, CEO Aerocrine AB.

Financial targets

The Company's continued growth in the U.S. market will require substantial investment to achieve broad private payer reimbursement and successful market penetration. The Board also considers personalized inflammation monitoring in a home setting by asthma patients to be an opportunity with high priority and potential. One part of Aerocrine's strategic collaboration with Panasonic targets the development of an emerging home use market, and investments in clinical and health economy documentation will be required to access this market. Following the strengthening of the Company's financial position and the addition of Novo A/S as a major owner, the Company will accelerate investments in the areas described above and will revise its operational plan, and as a consequence, the previously communicated financial targets are no longer valid.

Swedbank Corporate Finance is managing the described transactions and Mannheimer Swartling Advokatbyrå is the legal advisor.