Mereo BioPharma

Encouraging interim BPS-804 data in OI

Update | 31 May 2019

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Mereo BioPharma has reported encouraging interim results from BPS-804’s Phase IIb trial in osteogenesis imperfecta (OI). Interim data from the open label arm of the 112-patient ASTEROID study showed a 1.4% improvement over baseline in the primary endpoint at three months and a 3.2% improvement at six months. The secondary endpoint showed a 3.5% improvement at six months. Clearly the sample size in this study arm is small (11 and 12 patients), but these data suggest the 12 month results (expected in Q419) should show further improvement. Importantly, no cardiac safety signals were noted. We value Mereo BioPharma at 506p/share or $25.59/ADS.

Year-end: December 31201720182019E2020E
Sales (£m)
Adj. PBT (£m)(43.3)(35.0)(41.9)(29.2
Net Income (£m)(38.8)(32.0)(38.6)(28.2
Adj. EPS (p)(51.9)(42.2)(41.2)(27.3)
Cash (£m)52.527.523.26.1*
EBITDA (£m)(45.3)(35.2)(42.4)(29.6)
Source: Trinity Delta Note: Adjusted numbers exclude share-based payments and exceptionals. *The cash position in FY20 assumes £25m is raised from equity, debt or partnering of assets.
  • ASTEROID study yields promising results  The interim data for BPS-804 from the open-label arm of the Phase IIb study in osteogenesis imperfecta (OI) has shown promising results. The 112-patient trial has three double blinded dose-ranging arms and one open-label arm. The three month data showed a 1.4% improvement in bone mineral density (BMD) using the primary endpoint of changes in Tr vBMD, which increased to a 3.2% improvement at six months. A 3.5% improvement was seen in the secondary endpoint using DXA measurements at six months.
  • Data suggest clinical improvement likely The small sample size (11 and 12 patients) means significance would not be shown; but these encouraging results are expected to improve further as the study matures. Indications are that top line data from the full study, expected in Q419, will demonstrate clinically meaningful results. Importantly, side-effects were minor, primarily headache, and no cardiovascular safety signals were seen. Current treatment options for OI, such as alendronate, are recognised as being sub-optimal and the medical need for novel agents is clear.
  • BPS-804 will be self-commercialised BPS-804 is one of the two Orphan Drug programmes Mereo BioPharma is developing that it intends to commercialise itself; the other is MPH-966 (alvelestat) for α1-antitrypsin deficiency. OI is a debilitating disease for which there is currently no FDA or EMA approved treatment. OI affects between 20,000 and 50,000 people in the US and between 32,000 and 51,000 people in Europe. The characteristics of this market mean that it should be easily addressed through a small, well-targeted sales team.
  • rNPV valuation of 506p/share We value Mereo BioPharma using a risk-adjusted DCF model of its four leading assets at £541m ($704m), equivalent to 506p/share or $25.59/ADS (fully diluted). For context, we attribute a value of 345p a share, or $17.26 per ADR, to BPS-804. As previously indicated, there are multiple significant catalysts due in 2019, which could lead to major re-ratings of the shares.


31 May 2019

Price (UK share)
Market Cap
Enterprise Value
Shares in issue (shares)
12 month range
Free float68.9%
AIM London
Company Code
Corporate clientYes

Company description

Mereo BioPharma develops and commercialises innovative therapeutics addressing rare diseases. It also has specialty pharmaceutical products that it will partner. The assets are acquired or licensed in at clinical stages from large pharmaceutical companies. The portfolio consists of six compounds that are in clinical development.


Mick Cooper PhD
+44 (0) 20 3637 5042

Lala Gregorek
+44 (0) 20 3637 5043

ASTEROID Phase IIb study on track

BPS-804 (setrusumab) is a fully humanised monoclonal antibody targeting sclerostin (SOST); a protein secreted by the osteocyte cell that plays a pivotal role in bone metabolism. It is being developed by Mereo BioPharma for the orphan disease osteogenesis imperfecta (OI), which is better known as brittle bone disease. BPS-804 is one of the two Orphan Drug programmes that Mereo BioPharma intends to commercialise itself; the other being MPH-966 (alvelestat), an oral small molecule in development for α1-antitrypsin deficiency (AATD).

OI is characterised by different genotypes with varying degrees of skeletal fragility. Most types (usually classified into eight categories) are caused by disruption or mutations of one or both of two genes (COL1A1 or COL1A2) that carry instructions for the production of type 1 collagen. The hallmark of OI is bone fractures that occur with only minimal to moderate trauma. Type I is the least severe form of the disease and is associated with comparatively fewer fractures to other categories of OI, whereas Type II is the most severe and causes babies to be born with multiple fractures and die within a few weeks of birth. Breaks can occur in any bone, but lower limb breakage (often the femur) is the most common. In general, the earlier the fractures occur in life, the more severe the disease is.

ASTEROID is a 112 adult patient, double-blind Phase IIb clinical trial being performed in the US, Europe and Canada. Patients are Type I, III, and IV with the defect in COL1A1/2 gene confirmed by genetic testing; these three types account for c 80% of OI patients. Of the 112 patients enrolled, 69 have Type I OI, 29 have Type IV OI, and 14 have Type III OI. Recruitment, despite complex logistics (eg standardising transport for such delicate patients) to 27 specialist sites, completed on track in October 2018. The study design includes three double-blinded, active arms, evaluating differing intravenous doses (low, mid, and high), and one open-label arm at the top dose. The open-label arm was initially the placebo arm before the study was amended in August 2018 following consultation with regulators, investigators and patient groups.

The primary endpoint, measured at twelve months, is changes in trabecular volumetric bone mineral density (Tr vBMD) of the radius (at the wrist) measured by high resolution peripheral quantitative CT (HRpQCT) and changes in bone strength on finite element analysis (FEA). Secondary endpoints include: Tr vBMD measured by HRpQCT at six months; BMD measured by traditional two-dimensional dual-energy X-ray absorptiometry (DXA); additional measures of bone parameters on HRpQCT; bone turnover markers and quality of life scores.

The open-label arm posted interim 13 and 26-week data showing promising improvements in both primary and secondary endpoints, with patients of all three major phenotypes represented. Twelve patients were measured at three months and 11 at six months, with a mean increase of 1.4% in Tr vBMD at the radius at three months and a 3.2% increase at six months. Six month data for areal BMD at the lumbar spine using DXA measurements were available for twelve patients and these showed a 3.5% increase over baseline. Importantly, BPS-804 had a clean side-effect profile with no cardiovascular safety signals.

The headline results from the blinded dose ranging part of the study and the 12 month data from the open label arm are expected in Q419.

Exhibit 1: Summary of financials
Source: Company, Trinity Delta; Notes: Our estimates exclude the costs associated with the pivotal Phase III paediatric study with BPS-804, because the timing of the trial is yet to be decided. We include in FY20 long-term debt (other financing cash flow) of £25m, which is indicative of our estimate of the company’s capital requirement; this could be achieved through an equity raise, debt of proceeds from partnering non-rare disease assets.


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