As activist investor ratchets up pressure, Mereo makes more cuts to extend cash runway into 2025

Mereo BioPharma, under pressure from an activist investor, has reduced its head count to stretch its cash runway out into the second quarter of 2025. The biotech disclosed the cuts in a rebuttal to Rubric Capital Management’s “low-risk strategy” for unlocking the value of its assets while preserving cash.

Last month, Rubric, which owns 14.3% of rare disease and cancer biotech Mereo, wrote to its fellow shareholders to call for the replacement of four directors with its nominees. Rubric issued the call for change in a letter that accused the board of “totally” failing to engage with it in the two months after the release of its plan for the business.  

Wednesday, the Mereo board issued a response to Rubric, in which they disclosed “a combination of headcount, program related and general and administrative cost reductions.” The actions have extended the biotech’s cash from late 2024 to the second quarter of 2025. As recently as the start of June, Mereo’s cash runway was forecast to last into 2024, but two rounds of actions have bought it more time. Fierce Biotech has contacted Mereo for more details of the latest cuts. 

Mereo’s board told Rubric it will continue to review costs, including head count, based on factors such as its commitments to the Ultragenyx partnership and regulatory feedback on alvelestat. The commitments to Ultragenyx, which paid Mereo $50 million for ex-Europe rights to setrusumab in 2020, informed the board’s rejection of Rubric’s plan to explore strategic alternatives for royalties and European rights of the bone disease drug.

“Your proposal to monetize setrusumab this early in the program to generate significant value is unrealistic given the stage of the study and the company’s commitments under its collaboration with Ultragenyx, demonstrating a lack of understanding of our contractual arrangements and operations. The result is a proposal that would threaten to undermine potential value creation to Mereo and its shareholders,” the board wrote in its rebuttal.

Mereo’s strategy now centers on two rare disease candidates, setrusumab and alvelestat. The plan is to deliver data from registrational trials of setrusumab, thereby maximizing its value, and get regulatory feedback on alvelestat severe alpha-1 antitrypsin deficiency before seeking to partner or monetize the asset next year. Mereo reported phase 2 data on alvelestat earlier this year.