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

Mereo CEO Denise Scots-Knight

Every Big Pharma company has its own way of dealing with experimental meds that no longer fit in their pipelines. For Novartis ($NVS), the latest deal involved handing off three therapies to Mereo, a  London-based upstart that is being launched with $119 million in financing from a pair of big British biotech investors and a development deal in place with the CRO Icon.

In exchange, Novartis is getting equity in the new British biotech and has promised to help fund its future development when Mereo comes back for new money to fuel its growth. Woodford Investment Management and Invesco--two investment groups which have sunk deep roots into the UK biotech community--are backing the spinout.

Mereo is starting out with three new programs and a slate of proof-of-concept data. They are:

  • BPS-804, an antibody which has been in development for brittle bone syndrome (osteogenesis imperfecta), an orphan condition. 
  • BCT-197, an oral p38 MAP kinase inhibitor for COPD.
  • BGS-649, a testosterone drug that's an oral aromatase inhibitor for hypogonadotrophic hypogonadism.

Over the past two years the British biotech community has been making a comeback, with new investors such as Woodford and Malin joining hands with longtime players like Invesco and a group of more active transatlantic investors who have been drawn in by the scientific work the country is well known for. Mereo is just the latest example of the kind of fundraising that biotechs can do now, following a big $320 million round for Immunocore.

"We believe that by acquiring quality assets from Novartis and securing substantial financing we have put in place the building blocks to create a successful specialty biopharmaceutical company," noted Denise Scots-Knight, the CEO of Mereo, in a statement.

- here's the release