Mereo BioPharma

Funding deals worth up to $33m announced

Lighthouse | 11 February 2020

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  • Mereo Biophama has announced two deals – a $5m convertible financing with Novartis and an up to $28m equity issue with Aspire Capital – that total up to $33m and effectively address the short term funding requirement and the facility provides flexibility for the medium term.
  • The Novartis convertible financing consists of a three-year $5m Convertible Loan Note that can be converted at any time before maturity at 26.5p per ordinary share. There is also a warrant element, which allows for up to 1.45m shares to be purchased at 26.5p per ordinary share at any time until 10 February 2025. The Loan Note is subordinate to the existing Silicon Valley Bank and Kreos Capital loan facility.
  • The Securities Purchase Agreement with Aspire Capital Fund is a very flexible facility lasting 30 months. The initial $3m tranche is for 11.4m ordinary shares, to be exchanged into 2.3m ADS, and priced at an equivalent of $1.31 per ADS (a 16% discount to the previous close of $1.56). Additional shares will be issued for up to a further $25m at any time and amount of Mereo BioPharma’s choosing over the period, with the price based on the prevailing ADS price at the time.
  • Management can terminate the agreement at any time without penalty and there are no warrants, derivatives, or other instrument attached. Similarly, there are no restrictions on future fund raises and no covenants or other penalties. The cost of this programme is a commission equivalent to 2.8m ordinary shares (equivalent to 572k ADS) payable now in shares.
  • A total of 14.3m new shares have been issued, representing c 12.7% of the enlarged share capital of 112.3m ordinary shares.

Trinity Delta view: Mereo BioPharma has an innovative rare disease portfolio with four key assets, two of which it plans to commercialise (at least in part) itself. These include the lead programme, setrusumab for OI (osteogenesis imperfecta), which is on track to initiate a pivotal Phase IIb/III paediatric study in Europe this year. An important FDA meeting, expected in Q120, should help define the US approval pathway.

Mereo BioPharma faced a clear funding requirement as the cash runway extends to end-H120; however, the overhang of the Woodford stake (19.55%, now held by Link) was seen as an impediment. These new deals with Novartis and Aspire Capital provide short term funding and flexibility towards the medium-term funding requirement.

We maintain our valuation of Mereo BioPharma at £442m ($574m), equivalent to 412p/share or $20.60/ADS (fully diluted).


11 February 2020

Price (UK share)
Market Cap£27.4m
ExchangesAIM London
Company CodeMPH.L
Corporate clientYes

Company description

Mereo BioPharma develops and commercialises innovative therapeutics addressing rare and specialty diseases. These are acquired or licensed in at clinical stages from large pharmaceutical companies. The portfolio consists of four compounds that are progressing through late clinical development.


Lala Gregorek
+44 (0) 20 3637 5043

Mick Cooper
+44 (0) 20 3637 5042


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