AstraZeneca offloads midphase respiratory drug to Mereo

The Mereo deal comes shortly after AstraZeneca offloaded a different drug to Roivant.

AstraZeneca has outlicensed (PDF) a stagnating respiratory disease asset to Mereo BioPharma. The deal sees AstraZeneca join Novartis among Mereo’s shareholders and further its efforts to offload deprioritized drugs.

Mereo is paying $3 million up front in cash and giving AstraZeneca $2 million in stock to license the drug, AZD9668. That clears Mereo to move the human neutrophil elastase inhibitor into phase 2 in patients with alpha-1 antitrypsin deficiency (AATD), a rare disease associated with lung and liver problems.

If Mereo likes the look of the clinical data it generates, it can buy the drug once pivotal trials are underway. That will trigger an additional, as-yet-undisclosed payment. AstraZeneca is also set to pocket more cash and shares as AZD9668 clears development and commercial milestones.

The structure of the deal enables Mereo to see how AZD9668 performs in AATD using its existing cash reserves, before rounding up extra cash and committing more heavily to the program if the data justify further development.

RELATED: Novartis spins out 3 drugs to a biotech startup with $119M in VC backing

That represents a slight twist on the model Mereo established when it emerged armed with three ex-Novartis drugs in 2015. As with AZD9668, development of the Novartis’ drugs had stalled. But Novartis had already tested the candidates in the indications chosen by Mereo for further development. That is not the case with AZD9668. 

AstraZeneca moved the drug into a suite of clinical trials between 2008 and 2010 to evaluate its effect on conditions including chronic obstructive pulmonary disease and cystic fibrosis. But work came to a halt after phase 2b trials in the two aforementioned respiratory indications failed to link AZD9668 to significant benefits.

Mereo is now looking to breath new life into the program by aiming it at AATD, a genetic disease that makes patients more likely to develop COPD. 

This comorbidity arises because AATD patients have low levels of an inhibitor that protects the lungs from neutrophil elastase and other enzymes white blood cells release to kill infection-causing bacteria. AZD9668, as an elastase inhibitor, may be able to provide some of the protection AATD patients lack. 

Mereo thinks AstraZeneca’s data package provides support for that hypothesis, while also showing AZD9668 has a tolerable safety profile. The most notable risk to emerge in the phase 2 trials were elevated liver enzyme levels. 

In some patients, AATD leads to liver diseases such as cirrhosis and hepatocellular carcinoma.

RELATED: Roivant bags AstraZeneca drug

The first step in validating AZD9668’s potential in AATD is a 150-patient phase 2 trial. Mereo plans to start the 12-week trial next year. The sponsor will limit enrollment to patients who, at best, have very low levels of alpha-1 antitrypsin.  

Success in that clinical trial will turn AZD9668 into a revenue stream for AstraZeneca. That model is proving attractive to the Big Pharma, which offloaded an unidentified drug to Roivant Sciences earlier this month, and it plans to keep striking deals for drugs in the less-loved corners of its pipeline. 

“This transaction reaffirms AstraZeneca’s commitment to patients by repositioning an asset into an orphan indication with a high unmet need. We will continue to divest or outlicense deprioritized assets where we believe it will help accelerate the development of new medicines,” AstraZeneca VP Kumar Srinivasan said in a statement.