Placing to raise £1,375,000

Fusion Antibodies plc (AIM: FAB), specialists in pre-clinical antibody discovery, engineering and supply for both therapeutic drug and diagnostic applications, announces that it has conditionally raised £1,375,000 (before expenses) by way of a placing (the "Placing") of 34,375,000 new ordinary shares of 4p each in the capital of the Company ("Placing Shares") at a price of 4 pence per new ordinary share (the "Issue Price").

Allenby Capital Limited ("Allenby Capital") is acting as broker in connection with the Placing. Shard Capital Partners LLP ("Shard") is acting as sub-placing agent to Allenby Capital. The Placing is not being underwritten by either Allenby Capital or Shard. The Company also announces the appointment of Shard as joint broker to Fusion with immediate effect.

Key Highlights

• Placing to conditionally raise c. £1,375,000 (before expenses) through the issue of 34,375,000 Placing Shares at the Issue Price.
• The Issue Price represents a discount of approximately 5.88 per cent. to the closing mid-market price of an ordinary share in the Company ("Ordinary Share") on 13 February 2024, being the latest practicable date prior to the publication of this announcement.
• The issue and allotment of the Placing Shares is conditional, inter alia, upon the passing of resolutions to authorise such issues and allotments and disapply pre-emption rights (the "Resolutions") to be put to holders of Ordinary Shares ("Shareholders") at a general meeting of the Company (the "General Meeting").
• The General Meeting is to be held at the offices of Fusion Antibodies at 1 Springbank Road, Springbank Industrial Estate, Dunmurry, Belfast BT17 0QL at 10.00 a.m. on 5 March 2024 and a circular, including a notice of General Meeting, will be sent to Shareholders on 15 February 2024.
• The Company intends to issue 1,536,850 new Ordinary Shares (the "Director Shares") to certain of the directors of the Company at a deemed subscription price that is equal to the Issue Price in lieu of or in satisfaction of salary and fees due to them and which shall be issued immediately following publication of this announcement pursuant to the authorities previously granted at the Company's annual general meeting held on 27 October 2023.
• As an incentivisation, the Company intends to grant a total of up to 3,790,700 new share options in the Company pursuant to the Fusion EMI and Unapproved Employee Share Option Scheme to staff and senior management immediately following the publication of this announcement.
• The Placing is not being underwritten.

Fusion Antibodies CEO, Adrian Kinkaid, said: "We are very pleased to have been able to complete this fundraise in challenging market conditions. We decided to go ahead with this Placing following the various agreements we signed in 2023 which are laid out below. The net proceeds of this Placing will provide the Company with increased resources to target additional industry conferences and customers, generate supporting data for its key platforms and extend its working capital runway.

"We look forward to further updating our Shareholders in due course and would like to thank them for their continued support."

Further details of the Placing, the proposed issuance of the Director Shares and proposed grant of the share options are set out below.

Background to and reasons for the Placing

The Company has seen a significant increase in pipeline opportunities following attendance and marketing activities at certain key industry conferences and the targeting of new sectors including diagnostics and veterinary medicine. The Company has been encouraged by the improvement in the opportunities pipeline despite limited resources following the cost cutting exercise taken in 2023. The board of Fusion (the "Board" or the "Directors") considers that it is in the best interest of the Company and its Shareholders to conduct the Placing in order to provide the Company with increased resources to target additional industry conferences and customers, generate supporting data for its key platforms and extend its working capital runway.

The Company's prospects have been improved further by the entry into of an agreement with the National Cancer Institute ("NCI"), part of the National Institutes of Health (NIH) in the USA, to validate the OptiMAL® platform, as announced on 28th November 2023. The NCI is a highly prestigious organisation and recognises the potential value OptiMAL® offers in therapeutic antibody discovery, which is potentially very helpful in gaining access to prospective clients especially in the USA, the Company's biggest single geographic market. The Company also announced the first customer for its AI/ML-AbTM platform, demonstrating positive initial traction and a US$650,000 follow-on project from a US based biotech company. The Directors believe that this follow on project provides an indicator of the benefits of Fusion's Integrated Therapeutic Antibody Service (ITAS), having successfully developed a lead antibody for that client utilising the Company's proprietary affinity maturation platform, RAMPTM in the initial scope of work.

In addition, the Company is pleased to announce that it has recently signed a master services agreement (the "MSA") with a leading global provider of diagnostics solutions (the "Partner"). The MSA provides a framework under which it is anticipated that Fusion would provide antibody discovery, engineering and supply services to the Partner for diagnostic purposes. The Partner is a blue-chip company in the diagnostics sector, an industry which the Directors consider has significant potential for Fusion's growth prospects. Any work undertaken under the MSA will be subject to the receipt of separate purchase orders from the Partner.

Current trading and prospects

On 4 December 2023, the Company announced its interims results for the six months ended 30 September 2023. In that announcement the Company stated that the Board anticipated that the Company's results to 31 March 2024 ("FY 2024") would be significantly weighted towards the second half of the year. Since then, the Board has been regularly reviewing progress against revenue targets and is encouraged by the following positive indications:

• the substantial growth in the sales opportunities pipeline over the past nine months, specifically;

o the total of the opportunities values assigned by the Company to the pipeline increased threefold during Q3; and

o the combined value of quotes sent to clients and considered by the Company to be "live" exceeded £3m as of 12th January 2024

• progress being made in identifying sales opportunities in the identified markets, especially diagnostics and veterinary medicine:

o three discrete projects for diagnostics were underway in December/January; and

o one project for Veterinary Medicine was actively being processed in December/January

• the willingness of clients to engage and progress projects through initiation to completion.

Based on the Company's recorded revenue for FY 2024 to date, along with contracted work in progress, the Board has visibility over approximately £1.15 million of revenue for the full year. The Board considers the sales opportunity pipeline to be robust and provides sufficient opportunities for the Company to achieve revenues for FY 2024 in line with current market expectations. However, the Board recognises that this will be dependent on the conversion of certain pipeline prospects into contracted work in an appropriate timeframe.

Use of proceeds

The net proceeds receivable by the Company pursuant to the Placing are approximately £1.24 million. The Company intends to use the proceeds for general working capital purposes and to invest in the Company's commercial activities, focusing on increasing its presence in key geographic markets, such as North America, and industry verticals, such as diagnostic and veterinary medicine. These markets will be targeted through various marketing activities including attendance at key industry conferences and follow on sales trips. Based on the Company's internal estimations, the net proceeds of the Placing are expected to provide a cash runway into Q2 2025 and the Company will be seeking to achieve cash neutrality during that timeframe.

Details of the Placing

The Placing will result in the issue of a total of 34,375,000 Placing Shares at the Issue Price. The Placing has conditionally raised £1,375,000 before expenses for the Company. The Placing Shares will be issued conditional, inter alia, on the passing of the Resolutions at the General Meeting.

Allenby Capital has entered into a Placing Agreement with the Company pursuant to which Allenby Capital has, on the terms and subject to the conditions set out therein, undertaken to use its reasonable endeavours to procure subscribers for the Placing Shares at the Issue Price. The Placing Agreement contains certain warranties and indemnities from the Company in favour of Allenby Capital. The Placing is not being underwritten by Allenby Capital, Shard or any other person.

Proposed Issue of Ordinary Shares to Directors

As disclosed in the Company's annual report and accounts for the year ended 31 March 2023 (as announced on 29 September 2023), as part of the cost savings implemented following the Company's fundraise in May 2023, certain of the Company's executive directors (being Adrian Kinkaid, CEO and Richard Buick, CSO) agreed to certain changes in their remuneration structure (which included taking shares in lieu of cash remuneration) and, as a result, 20% of their salaries for the eight months commencing 1 July 2023 were deferred. In addition, the Company's non-executive directors agreed to forgo all remuneration that they were entitled to with effect from 1 May 2023.

Immediately following the publication of this announcement, the Company intends to issue and allot new Ordinary Shares to certain of the executive directors at a deemed issue price equal to the Issue Price representing 50% of the amounts of their deferred salary, with the balance (totalling £20,224) to be paid in cash conditional on completion of the Placing. In addition, due to their ongoing commitments to the Company, the remuneration committee intends to align the non-executive directors with these executive directors and pay them their forgone fees in part in new Ordinary Shares at a deemed issue price equal to the Issue Price, with the remainder of their foregone fees (totalling £31,250) being paid in cash conditional on completion of the Placing.

As a result of the above arrangements, it is anticipated that 1,536,850 new Ordinary Shares (the "Director Shares") will be issued and allotted to certain of the directors at a deemed issue price equal to the Issue Price and pursuant to the authorities previously granted at the Company's annual general meeting held on 27 October 2023, as follows:

1 Based on the enlarged share capital of the Company following the issue of the Director Shares but prior to the issue of the Placing Shares.

2 Excludes Ordinary Shares held by relatives of Simon Douglas.

3Includes 600,000 Ordinary Shares held by Walsh Strategic Management Limited, a company controlled by Colin Walsh and 1,400,000 Ordinary Shares held by Hamniv (GP) Limited, a subsidiary of Crescent Capital NI Limited ("Crescent Capital"). Colin Walsh is the Chief Executive and founder of Crescent Capital.

A further announcement will be provided following the issue and allotment of the shares.

Proposed grants of new share options

In order to incentivise and retain staff and senior management, the Company intends to grant up to 3,760,700 new share options in the Company (the "New Options") pursuant to the Fusion EMI and Unapproved Employee Share Option Scheme (the "Option Schemes") to staff and senior management immediately following the publication of this announcement. Up to 730,700 of the New Options will be granted conditional on the surrender of the same number of existing share options in the Company by option holders. The New Options are expected to have an exercise price of 4.25p, being the closing mid-market price of an Ordinary Share on 13 February 2024, the day prior to the grant. A further announcement will be made following the grant of the New Options.

Admission to trading on AIM

Following the issue and allotment of the Director Shares, application will be made to the London Stock Exchange plc for the Director Shares to be admitted to trading on AIM ("First Admission"). It is currently anticipated that First Admission will become effective and that dealings in the Director Shares will commence on AIM at 8.00 a.m. on or around 19 February 2024.

Subject to, inter alia, the approval of the Resolutions, application will be made to the London Stock Exchange plc for the Placing Shares to be admitted to trading on AIM ("Second Admission"). Assuming the Resolutions are passed at the General Meeting, it is anticipated that that Second Admission will become effective and that dealings in the Placing Shares will commence on AIM at 8.00 a.m. on or around 7 March 2024.

Notice of General Meeting

A circular including a notice convening a General Meeting of the Company, to be held at the Company's offices at 1 Springbank Road, Springbank Industrial Estate, Dunmurry, Belfast BT17 0QL at 10.00 a.m. on 5 March 2024 is expected to be sent to Shareholders on 15 February 2024. At the General Meeting, Shareholders will be asked to consider resolutions which, if approved, will provide the Directors with the authority and power to allot and disapply statutory pre-emption rights in relation to each of the Placing Shares.

Notice to Distributors

Notice to overseas persons

General

Shard, which is authorised and regulated by the FCA in the United Kingdom, is acting as sub-placing agent to Allenby Capital in connection with the Placing. Shard will not be responsible to any person other than the Company for providing the protections afforded to clients of Shard or for providing advice to any other person in connection with the Placing. Shard has not authorised the contents of, or any part of, this announcement, and no liability whatsoever is accepted by Shard for the accuracy of any information or opinions contained in this announcement or for the omission of any material information, save that nothing shall limit the liability of Shard for its own fraud.