The exclusive license deal is made up of cash and shares, meaning AstraZeneca will become a shareholder in Mereo.
Companies: AstraZeneca Plc, Mereo BioPharma Group Plc
As part of the US$5m license deal, Mereo will conduct a Phase II study "for the treatment of alpha-1 antitrypsin deficiency ("AATD")", with the option to acquire the associated end-product.
It will be made up of $3m in cash as well as 490,00 new ordinary shares in Mereo, with AstraZeneca joining Novartis as another large pharma shareholder in the Group.
Additional payments including cash and shares would be payable upon certain milestones in the study, as well as sales royalties should the product launch.
The 12-week Phase II study is set to commence sometime in 2018 with results following shortly after completion.
Shares were up over 6% in the Group with news of the deal.
Mereo is new relatively new to trading, having listed on the AIM market in June 2016 at a price of 289p. Currently, it has a Market Cap of almost £200m and operated at a Net Loss of £28m in FY16. Consensus forecasts this to swell to £42m in FY17, whilst its balance sheet remains robust.