Mereo BioPharma made significant progress strategically during H119 with the completion of the merger with OncoMed, and now is entering a critical 12-month period. Full 12-month data from the Phase II study in osteogenesis imperfecta (OI) with setrusumab (BPS-804) is due in Q419; promising 6-month data in the open-label arm has already been reported. Phase II data with its second rare-disease asset, alvelestat (MPH-966), in α-1 antitrypsin deficiency (AATD) is expected in mid-2020. The company will also be looking to partner its non-core assets to strengthen its balance sheet, with negotiations on acumapimod (BCT-197) for acute COPD most advanced. We maintain our valuation of Mereo at 506p/share or $25.59/ADS.
Six-month data from the open-label arm of the Phase II study in OI with setrusumab, suggest the product could have a competitive profile. The mean improvement at six months in bone mineral density (BMD, assessed using HRpQCT) was 3.2%, a level of improvement that is only seen at best after a year with bisphosphonates, the current standard-of-care. The full 12- month data from all 112 adult patients, with three monthly dosing regimens, will be reported in Q419. A Phase III paediatric study in Canada and Europe is ready to begin, though the final design will use the learnings from the current study.
Recruitment to the Phase II study in AATD with alvelestat (n=165) is progressing as expected, although it took longer than hoped to initiate the trial centres. Mereo now expects top-line data to be published mid-2020. An investigator-led study (ILS) should provide further indication of alvelestat potential in AATD (n=66, data due in H221), and another ILS could expand development of the compound into bronchiolitis obliterans syndrome (BOS), progressive loss of pulmonary function following lung transplantation.
Mereo has four non-rare disease assets it is looking to partner, two of which it acquired with OncoMed. Negotiations are most advanced with acumapimod for acute COPD, and the outline of a pivotal Phase III study has been agreed with the FDA. Any proceeds from partnering will be used to support the development of the rare disease products.
Our rNPV valuation of Mereo is unchanged at 506p/share or $25.59/ADS (fully diluted), although we have updated our estimates to fully reflect the merger with OncoMed and the H119 results. Its cash position of £36.1m at H119 should enable Mereo to operate to the end of H120, in the absence of a partnering deal or an equity raise.