Statement by the Board of Directors of Aerocrine in relation to Circassia’s public cash offer

The Board of Directors of Aerocrine unanimously recommends Aerocrine’s
shareholders to accept the offer by Circassia.
NOT FOR PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE
UNITED STATES (INCLUDING ITS TERRITORIES AND POSSESSIONS, ANY STATE OF THE
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DISTRIBUTION WOULD BE UNLAWFUL.

Background

This statement is made by the Board of Directors of Aerocrine AB (the “Board”)
pursuant to Section II.19 of Nasdaq Stockholm’s Takeover Rules (the “Takeover
Rules”).

Circassia Pharmaceuticals plc has today announced a public cash offer to
Aerocrine’s shareholders to sell their Aerocrine shares to Circassia (the
“Offer”). Circassia is offering SEK 2.55 per Aerocrine share (the “Offer
Price”).

The total value of the Offer, based on 698,766,052 shares in Aerocrine, amounts
to SEK
1,781,853,433.[1] (http://file///H:/EDRI/Press%20releases/1.%20Board%20recommend
a 
tion/ENG/Board%20recommendation.DOCX#_ftn1) The Offer Price corresponds to a
premium of:

85 per cent to Aerocrine’s undisturbed closing price on April 22, 2015, and
premiums of 92 per cent and 99 per cent to the three month and six month volume
-weighted average prices preceding April 22, 2015. The Offer represents a
multiple of 8.7x EV/LTM
sales.[2] (http://file///H:/EDRI/Press%20releases/1.%20Board%20recommendation/EN
G 
/Board%20recommendation.DOCX#_ftn2)

The acceptance period of the Offer is expected to commence on May 19, 2015 and
expire on June 11, 2015, subject to any extensions.

The completion of the Offer is conditional upon, amongst other things, being
accepted to such an extent that Circassia becomes the owner of more than 90 per
cent of the total number of shares in Aerocrine, approval of the transaction and
the equity financing by Circassia’s shareholders and the receipt of all
necessary regulatory, governmental or similar clearances, approvals and
decisions, including from competition authorities, in each case on terms which,
in Circassia’s opinion, are acceptable. Circassia has reserved the right to
waive these and other conditions for completion of the Offer.

The Board has, at the written request of Circassia, permitted Circassia to carry
out a confirmatory due diligence review of Aerocrine in connection with the
preparation of the Offer. In connection with such due diligence review Circassia
has received information concerning Aerocrine’s financial results with respect
to the first quarter 2015. Aerocrine’s report for the first quarter 2015 was
announced on May 12, 2015. Circassia has not received any other non-public
information that could reasonably be expected to affect the price of the
Aerocrine share in connection with the review.

Novo A/S and Investor AB, Aerocrine’s largest shareholders, with shareholdings
representing approximately 50% of the total number of shares and votes in
Aerocrine, have under separate agreements with Circassia undertaken to accept
the Offer subject to certain conditions (please refer to Circassia’s
announcement of the Offer for more information about this acceptance
undertaking).

As a result of Novo A/S and Investor AB having undertaken to accept the Offer
subject to certain conditions, Michael Shalmi and Lennart Johansson have not
participated in the Board’s decision regarding the statement of the Board in
relation to the Offer.

The Board has retained Moelis & Company UK LLP as financial adviser and
Mannheimer Swartling Advokatbyrå as legal adviser in relation to the Offer.

Nordea Bank AB has at the request of the Board provided an opinion according to
which the Offer Price is fair to Aerocrine’s shareholders from a financial point
of view (subject to the assumptions and considerations set out in the opinion)
(the “Opinion”). The Opinion is attached to this statement.

The Board’s evaluation of the Offer

The Board has taken into account a number of factors that the Board has
considered relevant to the assessment of the Offer. These include, but are not
limited to, Aerocrine’s current business and financials and Aerocrine’s
potential future development as well as related opportunities and risks. In
particular, the Board has taken into account Aerocrine’s ability, on a stand
-alone basis, to continue driving commercialisation and adoption of FeNO and
development and penetration of markets in Asia, Europe and US; ability to drive
penetration in defined US professional segments; ability to attain profitability
and any potential future financing requirements; and ability to finalise and
commercialise a home device product.

It is the opinion of the Board that the combined company will be well positioned
as a fully integrated speciality pharma company, with a platform to become the
allergy/asthma speciality pharma champion. Moreover, it is the Board’s opinion
that the Offer Price reflects the fair value of Aerocrine and represents an
attractive premium to Aerocrine’s shareholders.

In arriving at its recommendation, the Board has also considered the Opinion
rendered by Nordea Bank AB according to which the Offer Price is fair to
Aerocrine’s shareholders from a financial point of view (subject to the
assumptions and considerations set out in the Opinion).

The Board notes that Aerocrine’s credit agreement with ROS Acquisition Offshore
LP (an affiliate of OrbiMed Advisors LLC) and Novo A/S, dated April 29, 2013
contains change of control provisions, giving the lenders a right to declare
outstanding credit amounts due and payable along with prepayments penalties
associated with such acceleration. The effect of any such acceleration would be
that Aerocrine would be required to pay a prepayments penalty equal to 50 per
cent of the amount being prepaid. However, if the entire amount of the loan is
prepaid, the penalty would be reduced by interest and milestone payments already
paid. The change of control provisions would be triggered if a party would
acquire shares representing more than 40 per cent of the votes of Aerocrine.
This means that in case Circassia completes the Offer, even if such completion
is made at a lower acceptance level than more than 90 per cent of the shares,
the payment under the credit agreement may be accelerated and the prepayment
penalty may become due and payable. This may adversely affect Aerocrine’s
financial position, leading to an earlier requirement for further capital
contribution from shareholders and/or lenders, which the Board would like to
highlight to the shareholders who decide not to tender their shares.

Under the Takeover Rules the Board is required, on the basis of Circassia’s
statements in the announcement of the Offer, to make public its opinion of the
effects the implementation of the Offer may have on Aerocrine, specifically
employment, and its views on Circassia’s strategic plans for Aerocrine and the
effect these may be expected to have on employment and the places where
Aerocrine carries on its business. Circassia has in this respect stated that
Circassia appreciates the work of Aerocrine’s management team and dedicated
employees. Circassia’s future plan for Aerocrine is one of growth. In view of
the complementary nature of Circassia’s and Aerocrine’s businesses, the
envisaged integration between the companies is expected to generally have a
limited effect on the employee relationships at Aerocrine as well as on the
future businesses of both companies. Even though changes may occur with respect
to certain functions or positions at both companies, the current view of
Circassia is that there will not be any material change to Aerocrine’s
operational sites or its employees, including the employee’s terms of
employment.

The Board assumes that this description is accurate and has in relevant aspects
no reason to take a different view.

Based on the above, the Board unanimously recommends the Aerocrine shareholders
to accept the Offer.

___________

This statement shall in all respects be governed by and construed in accordance
with substantive Swedish law. Disputes arising from this statement shall be
settled exclusively by Swedish courts.

This statement has been made in a Swedish and English version. In case of any
discrepancies between the Swedish and the English text, the Swedish text shall
prevail.

___________

Stockholm, May 15, 2015

Aerocrine

The Board of Directors

The information set out in this press release is announced in accordance with
the Swedish Securities Markets Act and the Takeover Rules. The Information was
submitted for publication on May 15, 2015 at 08:30 CET.

This press release may not be published, distributed, transmitted or otherwise
sent into the United States of America (including its territories and
possessions, every State in the United States and the District of Columbia),
Australia, Canada, Japan or South Africa or any other state or jurisdiction in
which such release, publication or distribution would be unlawful.  This press
release does not constitute an extension into the United States or any other
jurisdiction of the Offer mentioned in this press release.

----------------------------------------------------------------------

[1] (http://file///H:/EDRI/Press%20releases/1.%20Board%20recommendation/ENG/Boar
d 
%20recommendation.DOCX#_ftnref1) On 13 May 2015 (the last trading day prior to
the announcement of the Offer), there were 698,766,052 shares in Aerocrine
registered with the Swedish Companies Registration Office. Additional shares in
Aerocrine may be issued following this point in time as a result of exercise of
outstanding personnel stock options and warrants in Aerocrine, and any such
additional shares shall be included in the Offer. Aerocine does not hold any own
shares in treasury.

[2] (http://file///H:/EDRI/Press%20releases/1.%20Board%20recommendation/ENG/Boar
d 
%20recommendation.DOCX#_ftnref2) Enterprise Value includes effect of dilutive
instruments at the corresponding offer price, as well as debt and cash items as
of March 31, 2015. Sales figure represents last 12 months as of March 31, 2015.