Mereo pulls IPO, blaming ‘challenging’ stock market conditions

The FDA denied Mereo’s request for a Type C meeting to discuss the start of a phase 2b trial of BPS-804 in children. (Nasdaq)

Mereo BioPharma has withdrawn plans to list its stock on Nasdaq. The Novartis-backed biotech set out to bag $80 million (€66 million) to take its brittle bone disease drug into phase 3, only to struggle to raise the money on its desired terms.

London-based Mereo blamed the setback on “challenging stock market conditions.” That line is undermined somewhat by the experience of other drug developers. This week, MorphoSys found the conditions very favorable, comfortably clearing its initial fundraising target before going on to sell out its overallotment. MorphoSys’ IPO grossed $239 million, 59% more than its original target.

Mereo evidently found the IPO process much tougher going. In a statement, CEO Denise Scots-Knight, Ph.D., talked up the “positive feedback and strong levels of institutional interest” Mereo received, but this failed to translate into a successful offering.

The setback leaves Mereo without a cash infusion to support its move deeper into the clinic. As of the end last year, Mereo had around $73 million in cash and short-term deposits and investments. That is enough to keep the biotech moving forward past some upcoming milestones but is short of the sum needed to execute the R&D strategy sketched out in the IPO filing.

That strategy earmarked $50 million to take brittle bone drug BPS-804 through a phase 2b and into a late-phase pediatric trial, plus a further $25 million to wrap up midphase studies of treatments for severe alpha-1 antitrypsin deficiency and hypogonadotropic hypogonadism.

Mereo may be in a better position to raise the money needed to carry out that strategy once it has data from the phase 2b trial of BPS-804 in adults with brittle bone disease, also known as osteogenesis imperfecta. That clinical trial, which has a June primary completion target, will answer some of the outstanding questions about BPS-804 but may not address all concerns about the drug.

Notably, the FDA denied Mereo’s request for a Type C meeting to discuss the start of a phase 2b trial of BPS-804 in children with severe osteogenesis imperfecta. Mereo attributed the agency’s rejection to unresolved concerns about the effect of sclerostin inhibitors on cardiovascular outcomes. 

Mereo views the FDA’s worries as unrelated to BPS-804, but the agency thinks it is premature to trial the drug in children. The FDA wants Mereo to determine the drug’s risk-benefit profile before it will sign off on the pediatric phase 2b. The readout from the upcoming trial in adults may or may not help the biotech in that regard.