OREANDA-NEWS. Mereo, a UK-based specialty biopharmaceutical company, is pleased to announce that it expects Admission of its Ordinary Shares to trading on AIM to take effect on 9 June 2016. The Company has also completed a supplementary Capital Raise with total gross proceeds of 14.8 million pounds comprised of a private placement of its Ordinary Shares raising gross proceeds of 11.35 million pounds at a price of 2.21 pounds per Ordinary Share (the Private Placement) and a cash investment by existing shareholder Novartis by way of a convertible loan, in the amount of 3.46 million pounds. The Capital Raise follows a private placement in July 2015 when the Company received 20 million pounds, with a further 56.5 million pounds committed. Trading in Mereo's Ordinary Shares on the AIM market of the London Stock Exchange is expected to commence at 8:00am on 9 June 2016 under the ticker symbol "MPH" with ISIN GB00BZ4G2K23.

The Group's focus is on the development of innovative medicines that aim to address unmet medical needs in rare and specialty disease areas and improve patient quality of life. The Group seeks to selectively acquire clinical-stage product candidates with demonstrated clinically meaningful data from large pharmaceutical companies and to further develop these product candidates to subsequent key value inflection points or to commercialisation. The Group is an early adopter of a novel business model that aligns its interests with those of large pharmaceutical companies.

In July 2015, the Group acquired three Phase 2 product candidates which comprise its initial portfolio from Novartis, a global pharmaceutical company with a history of robust product development and a reputation for product study data quality and secured 76.5 million pounds (US$118 million), gross proceeds, by way of an initial private placement of its Ordinary Shares. Since that time the Company has initiated a Phase 2 study and a Phase 2b study in relation to two of the product candidates in 2016 and intends to commence registration studies during H2 2016 for the third product candidate. In the near term, the Group aims to further develop this portfolio, while in the medium to long term the Group intends to build a broader pipeline of product candidates which fulfil Mereo's selection criteria.

Commenting on today's announcement, Denise Scots-Knight, Chief Executive Officer of Mereo, said:

"We are very excited to be joining AIM, allowing the Company to take the next logical step towards realising our vision of becoming a leading speciality biopharma company. On Admission we will have raised over ?90 million from institutional investors since July 2015 which has allowed us to acquire three carefully selected clinical stage pipeline assets from Novartis and subsequently advance these product candidates, including through the initiation of two new clinical studies. Our strategy is to build, over time, a diverse portfolio, and having publically-traded shares, will provide additional flexibility to secure the next product candidates which are likely to be primarily sourced from large pharmaceutical companies. Such product candidates are expected to have compelling market potential, robust preclinical, clinical and manufacturing data packages, and a clear path to a significant value inflection point. We also aim to retain optionality on how we realise value from each asset downstream."

"We would like to thank our existing and new shareholders who have participated in the supplemental Capital Raise we have announced today. We now have sufficient funding in the near to medium term to significantly advance the clinical development for the three initial product candidates in our pipeline to potential significant value inflection points."

"We are well positioned to leverage our early mover advantage in a novel business model that aligns our interests with those of large pharmaceutical companies for drug development and we are confident that we have the right ingredients and experience to build a scalable and sustainable specialty pharmaceutical business"

Admission Highlights

·      Admission to the AIM market of the London Stock Exchange and the commencement of trading in the Ordinary Shares is expected to take place at 8:00am on 9 June 2016 under the ticker "MPH"

·      The Company has completed a Capital Raise of ?14.8 million comprised of a Private Placement of its Ordinary Shares and a cash investment by Novartis by way of a convertible loan

·      The Capital Raise follows a private placement in July 2015 when the Company raised ?20 million, with a further ?56.5 million committed

·      The Private Placement announced today was completed at a price of ?2.21 per Ordinary Share

·      The Directors believe the Capital Raise will provide additional funds to allow the Group to bring its product candidates to the next stage of development

RBC Capital Markets is acting as Global Coordinator, Private Placement Agent and Broker to the Company and Cantor Fitzgerald Europe is acting as Nominated Adviser, Private Placement Agent and Broker. Evercore is acting as Financial Adviser to the Company.

Key Strengths of the Company

Product candidates' selection based on strong scientific rationale and a clear path to significant value generating inflection points- clinical progress achieved since the private placement in July 2015:

·      All three product candidates in the existing portfolio have demonstrated proof of concept in their targeted indications and have been well tolerated in studies to date

·      Diversified investment risk as each of the Group's initial product candidates has different mechanisms of action, regulatory frameworks and pricing and reimbursement considerations

o  BPS-804 is being developed for the prevention of fractures resulting from osteogenesis imperfecta (brittle bone disease)

§ Recurrent fractures are the key clinical issue faced by these patients.

§ In March 2016 the Company announced that the U.S. Food and Drug Administration (FDA) has granted BPS-804 orphan drug designation and in May 2016 received a positive opinion of the COMP with respect to orphan drug designation for BPS-804 in the European Union

§ The Company intends to commence a registration trial for BPS-804 in H2 2016.

o  BCT-197, is being developed to treat inflammation in patients with an acute exacerbation of chronic obstructive pulmonary disease (AECOPD)

§ The treatment aim is to ultimately reduce an AECOPD patient's hospital stay whereas current treatments for AECOPD are supportive therapies that do not treat the underlying disease

§ Mereo has initiated a Phase 2 dose ranging trial in 255 patients with data expected in the second half of 2017

o  BGS-649 is a once weekly pill to restore normal testosterone levels

§ Oral delivery is designed to be more convenient than the intramuscular injections, gels and patches containing testosterone that are currently used to treat hypogonadal hypogonadism

§ Based on the mechanism of action of BGS-649 it is expected by the Directors to have a better safety profile

§ Mereo has initiated a Phase 2b dose confirmation trial in approximately 260 patients in the first half of 2016 with data expected in the second half of 2017

Early mover advantage in a new model of pharmaceutical development

·      Profit and loss pressure is limiting large pharmaceutical companies' ability to fund their entire pipeline of research and development stage assets

·      The selective acquisition of product candidates and subsequent funding of development by the Group provides large pharmaceutical companies with a share in the upside of product candidates whilst easing income statement pressures

·      The Group's business model can be scaled for future purchase of asset portfolios or individual product candidates

Highly experienced management team and board

 

·      Extensive experience in the pharmaceutical and biotechnology sector, both in development, manufacturing and commercialisation of product candidates

·      Long-standing relationships with senior officers of global pharmaceutical companies, which the Directors believe will  facilitate the sourcing and acquisition of future product candidates

Backed by leading institutional shareholders

·      Backed by leading institutional shareholders, Invesco and Woodford, each of which has significant pharmaceutical and biotechnology industry knowledge, relationships and a history of long-term supportive investments. Both participated in an equity financing round in July 2015, committing c. ?76.5 million (US$118 million)

·      Novartis holds a 19.5% stake immediately prior to Admission and is expected to hold a stake in the Company of 19.5% following Admission

Strategy

Advance the initial pipeline product candidates through the clinical pathway

 

·      Phase 2 dose ranging trial of BCT-197 in AECOPD patients has commenced, with results expected to be reported in H2 2017

·      Phase 2b dose confirmation trial of BGS-649 is underway. Results expected to be reported in H2 2017

·      Commence registration trial of BPS-804 in H2 2016. It is expected that interim results from this study will be available in H1 2018. The Company received orphan designation for BPS-804 in the United States in March 2016 and received a positive opinion of the COMP with respect to orphan drug designation for the product in the European Union

Realise value of product portfolio through multiple avenues

·      The Group has global commercialisation rights for all of its initial product candidates

·      Flexibility to out-license, sell, commercialise or combine various strategies to maximise value for each current product candidate

Leverage existing business model for future scaling up of product portfolio

·      Plan to selectively acquire additional novel product candidates with demonstrated clinically meaningful data from large pharmaceutical companies

·      Focus on building a diverse portfolio with product candidates that have compelling market potential, robust preclinical, clinical and manufacturing data packages, and a clear path to a significant value inflection point, with a particular focus on rare and orphan diseases