Mereo BioPharma Group plc Annual Report 2022

Plain-text annual report

265444 Mereo Biopharma Cover.qxp 29/03/2023 18:05 Page 1 Company Number 09481161 MEREO BIOPHARMA GROUP PLC Annual Report and Accounts Year ended December 31, 2022 265444 Mereo Biopharma pp001-pp019.qxp 29/03/2023 18:32 Page 1 MEREO BIOPHARMA GROUP PLC CONTENTS Directors, secretary and advisers Strategic Report Directors’ Remuneration Report Directors’ Report Statement of Directors’ Responsibilities Financial Statements Independent auditor’s report Consolidated Statement of Comprehensive Income/(Loss) Consolidated Balance Sheet Consolidated Statement of Cash Flows Consolidated Statement of Changes in Equity Notes to the Consolidated Financial Statements Company Balance Sheet Company Statement of Changes in Equity Notes to the Company Financial Statements Page 2 3 20 42 45 46 55 56 57 58 59 98 99 100 1 265444 Mereo Biopharma pp001-pp019.qxp 29/03/2023 18:32 Page 2 MEREO BIOPHARMA GROUP PLC DIRECTORS, SECRETARY AND ADVISERS Directors Dr. Denise Scots-Knight (Chief Executive Ofﬁcer) Michael Wyzga (Chairman) Dr. Jeremy Bender Dr. Anders Ekblom Dr. Pierre Jacquet Dr. Annalisa Jenkins Dr. Deepa Pakianathan Justin Roberts Dr. Daniel Shames Marc Yoskowitz Company Secretary Charles Sermon Registered Office 4th Floor, One Cavendish Place London W1G 0QF Company Number 09481161 Auditors BDO LLP Level 12, Thames Tower Reading, Berkshire RG1 1LX Solicitors Latham & Watkins LLP 99 Bishopsgate London EC2M 3XF Registrars Link Group 10th Floor, Central Square 29 Wellington Street Leeds, LS1 4DL 2 265444 Mereo Biopharma pp001-pp019.qxp 29/03/2023 18:32 Page 3 MEREO BIOPHARMA GROUP PLC STRATEGIC REPORT Introduction Mereo BioPharma Group plc (the “Company”, “Mereo” or “Parent Company”) is a public limited company incorporated under the laws of England and Wales and is listed on the Nasdaq Global Market (“NASDAQ”). The Company is a “quoted company” for the purposes of the Companies Act 2006 (the “Companies Act”). The Directors present their strategic report together with the directors’ remuneration report, directors’ report, audited consolidated ﬁnancial statements of Mereo BioPharma Group plc and its subsidiaries (collectively, the “Group”), audited company ﬁnancial statements and auditors’ report for the year ended December 31, 2022. The Company has also ﬁled with the U.S. Securities and Exchange Commission (the “SEC”) its Annual Report on Form 20-F for the year ended December 31, 2022, which contains additional disclosures regarding some of the matters discussed in this report. Business overview and strategy We are a biopharmaceutical company focused on the development of innovative therapeutics for rare diseases. We have developed a robust portfolio of clinical stage product candidates. Our two rare disease product candidates are setrusumab for the treatment of osteogenesis imperfecta (OI) and alvelestat for the treatment of severe alpha-1-anti-trypsin deﬁciency- associated lung disease (AATD-LD) and Bronchiolitis Obliterans Syndrome (BOS) following allogenic stem cell transplant. Following the announcement of the results for setrusumab in a Phase 2b study in adults with OI which demonstrated a dose dependent statistically signiﬁcant increase in bone mineral density and bone strength, we announced a strategic partnership with Ultragenyx in December 2020 for the development of setrusumab in children and adults with OI. Ultragenyx initiated a pivotal, Phase 2/3 pediatric and young adult study (5-25 years old) in the ﬁrst half of 2022, with the Phase 3 transition expected in mid-2023. Ultragenyx also intends to initiate a study of pediatric patients under age ﬁve with OI in the ﬁrst half of 2023. We announced successful completion of a Phase 2, dose-ﬁnding study for alvelestat in AATD-LD in May 2022 which demonstrated statistically signiﬁcant changes in Neutrophil Elastase (NE) activity and biomarkers of disease severity at different time points up to 12 weeks. Further, in October 2022 we announced that Fast Track designation was granted by the U.S. Food and Drug Administration (FDA) for alvelestat in AATD-LD, along with additional program updates. In March 2023, we announced the outcome of the end-of-Phase 2 discussions with the FDA and the EMA (Scientiﬁc Advice) and based on clear recommendations from both Agencies, we are designing a single, global, Phase 3 study evaluating the 240 mg dose of alvelestat versus placebo in patients with AATD-LD to support applications for full marketing approvals in both the U.S. and EU. Alvelestat is also in an ongoing Phase 2 investigator-led study in AATD, including in patients who may be on augmentation therapy. This study has enrolled 60 patients with data expected in mid 2023. Following successful completion of a Phase 1b investigator-sponsored study in patients with BOS following allogenic stem cell transplant, a Phase 2 study was initiated in the second half of 2022. Our oncology product candidate, etigilimab (an anti-TIGIT antibody), has completed a Phase 1a dose escalation clinical trial in patients with advanced solid tumors and has been evaluated in a Phase 1b study in combination with nivolumab in select tumor types. We have completed Simon Stage 1 of the open label Phase1b/2 basket study (the ACTIVATE study) evaluating etigilimab in combination with nivolumab in three rare tumors, two speciﬁc subtypes of soft-tissue sarcomas, uveal melanoma and testicular germ cell cancer, three gynecological carcinomas, cervical, ovarian and endometrial carcinomas, and any solid tumor with high mutation burden, all in the recurrent/metastatic setting. Etigilimab, in combination with nivolumab, is also in an ongoing investigator-led Phase 1b/2 study in clear cell ovarian cancer at The University of Texas MD Anderson Cancer Center, ﬁnanced by the Cancer Focus Fund. We plan to develop our product candidates through the next key clinical milestone and then partner where it makes sense strategically to do so, but also in select cases for our rare disease product candidates, to develop them through regulatory approval and potentially commercialization. Our second oncology product, navicixizumab for the treatment of late line ovarian cancer, has completed a Phase 1b study and was partnered in January 2020 for further development with OncXerna on a global basis. We plan to partner or sell our other two product candidates acumapimod for the treatment of AECOPD and leflutrozole for the treatment of male infertility, recognizing the need for greater resources to take these product candidates to market. 3 265444 Mereo Biopharma pp001-pp019.qxp 29/03/2023 18:32 Page 4 MEREO BIOPHARMA GROUP PLC STRATEGIC REPORT Our strategy is selectively to acquire and develop product candidates for rare diseases that have already received signiﬁcant investment from large pharmaceutical and biotechnology companies and that have substantial pre-clinical, clinical and manufacturing data packages. Since our formation in March 2015, we have successfully executed on this strategy by acquiring six clinical-stage product candidates of which four were in oncology and rare diseases. Four of our six clinical-stage product candidates were acquired from large pharmaceutical companies and two were acquired in the Merger. We aim to efﬁciently develop our product candidates through the clinic and have successfully commenced or completed large, randomized Phase 2 clinical trials for ﬁve of our product candidates. Rare diseases represent an attractive development and, in some cases, commercialization opportunity for us since they typically have high unmet medical need and can utilize regulatory pathways that facilitate acceleration to approval and to the potential market. Development of products for oncology and rare diseases both involve close collaboration with key opinion leaders and investigators. Development of rare disease products generally involves close coordination with the patient organizations and patients are treated at a limited number of specialized sites which helps identiﬁcation of the patient population and enables a small targeted sales infrastructure to commercialize the products in key markets. Our team has extensive experience in the pharmaceutical and biotechnology sector in the identiﬁcation, acquisition, development, manufacturing and commercialization of product candidates in multiple therapeutic areas including oncology and rare diseases. Our senior management has long- standing relationships with senior executives of large pharmaceutical and biotechnology companies which we believe enhances our ability to form strategic partnerships on our product candidates and to identify and acquire additional product candidates. Our Pipeline The following tables summarize our pipeline for our product candidates. We have global commercial rights to alvelestat, etigilimab, acumapimod and leflutrozole and commercial rights to setrusumab in Europe and the U.K. We granted Ultragenyx an exclusive license to develop and commercialize setrusumab in the U.S. and rest of the world, and we have licensed global rights for navicixizumab to OncXerna. !"#$%&'#$%()*$'*$%+#",#'-* !"#$%&'(&)*$+$)',(-(+*$+&)'+#*( !.)/,(0) !.)/,(01 !.)/,(2 !.)/,(3( 4,'"%/%5)1 !"#$%&$'$"(")(*+$,-$.#/ 678,7,/')' 01+2/34)/'#(#,5+"(')6$-(.($'.5)7 89 :,%'.2(%1(#(")%;1(#$,/'")<:!=> ?!@A934B 9'+:+7+5)1 C/,$)D)E5'3!'. FG*%," !H/,(/')?1$/,)?$11)?/,.('%*/II ."/0!"#$%+'#1/$#$2%+#",#'-*%% ;)8+&+<+=%5)1 !H/,(/')?/'.$, !"#$%!&%'()*+,-.+/01-1 '":9 !"45$6789 2!35423> #,01.;7<%=;>"? #,01.;=<%@;"A'53;BC;D =C;E.0(1F #.G-0/(-+ 1/HGE;BIC;E.0(1F 223$ '":99 Non-Core Programs Available for Partnering Product candidate / indication Phase 1a Phase 1b Phase 2 Phase 3 Acumapimod Acute exacerbations of COPD Leflutrozole HH Infertility !"#$%&'()*+(,-./&0"'(10)&'")$"2,//+3,-+(),$"4)(5"6$)%&-')(7",8"9/+3+:+")$";)-:)$*5+:"<"=+(),$+/">+$2&-"#$'()(1(&?" !!"#$%&'()*+(,-./&0"'(107"2,$012(&0"+("@5&"6$)%&-')(7",8"@&A+'"BC"9$0&-',$">+$2&-">&$(&-D"8)$+$2&0"37"(5&">+$2&-"E,21'"E1$0 !"# !"#$%&'&( )*+",*+- 4 265444 Mereo Biopharma pp001-pp019.qxp 29/03/2023 18:32 Page 5 MEREO BIOPHARMA GROUP PLC STRATEGIC REPORT Core Rare Disease Product Candidates Setrusumab (BPS-804/UX143): Setrusumab is a novel antibody designed to inhibit sclerostin, a protein that inhibits the activity of bone-forming cells. Inhibiting sclerostin has been shown to promote increases in bone mineral density through stimulation of bone-formation (through osteoblasts) and inhibition of bone-resorption (through osteoclasts). We are developing setrusumab as a treatment for OI, a rare genetic disease that results in bones that can break easily and is commonly known as brittle bone disease. OI is a debilitating orphan disease for which there are no treatments approved by the FDA or EMA. It is estimated that OI affects a minimum of 25,000 people in the United States and approximately an aggregate of 32,000 people in Germany, Spain, France, Italy and the United Kingdom. We believe setrusumab’s mechanism of action is well suited for the treatment of OI and has the potential to become a novel treatment option for patients that could reduce fractures and improve patient quality of life. Prior to our acquisition of setrusumab, Novartis conducted four clinical trials in 106 patients and healthy volunteers. In 2016, we obtained orphan drug designation in OI for setrusumab in the United States and the EU and, in November 2017, it was accepted into the Priority Medicines scheme (“PRIME”) of the EMA. In September 2020 we received rare pediatric disease designation for setrusumab in OI from the FDA. In November 2019 we reported top-line data on a Phase 2b clinical trial of setrusumab for adults with OI. The Phase 2b was a dose ranging study with three blinded arms at high, medium and low doses to establish the dose response curve and an open label arm at the top dose. Setrusumab demonstrated statistically signiﬁcant improvements in bone formation biomarkers and bone mineral density (measured by Dual Energy X-ray Absorptiometry) and a trend to a reduction in fractures at the high dose, compared to the other doses, even though the study was not powered for fracture reduction. The results support the progression of setrusumab into a pediatric pivotal study in OI. The data was also presented, as a podium presentation, at the American Society of Bone and Mineral Research (“ASBMR”) in October 2021. In December 2020 we announced a partnership with Ultragenyx for the development of setrusumab for OI. Under the terms of the partnership, Ultragenyx will lead future global development of setrusumab in both pediatric and adult patients. We granted Ultragenyx an exclusive license to develop and commercialize setrusumab in the US and rest of the world, excluding Europe and the U.K. where we retain commercial rights. Each party will be responsible for post-marketing commitments in their respective territories. Ultragenyx made an upfront payment of $50 million to Mereo and will fund global development of the program until approval and has agreed to pay a total of up to $254 million upon achievement of certain clinical, regulatory and commercial milestones. Ultragenyx will pay tiered double digit percentage royalties to us on net sales outside of Europe and the U.K. and we will pay a ﬁxed double digit percentage royalty to Ultragenyx on net sales in Europe and the U.K. Under the terms of our 2015 agreement with Novartis, we will pay Novartis a percentage of proceeds, subject to certain deductions, with Mereo receiving a substantial majority of the payments from Ultragenyx. Ultragenyx initiated a pivotal Phase 2/3 study in pediatric and young adult patients (5-25 years old) in the ﬁrst half of 2022 and plans to transition to the Phase 3 part of the study in mid-2023. The objective of the Phase 2/3 study will ﬁrst focus on determining the optimal dose based on increases in collagen production using serum P1NP levels and an acceptable safety proﬁle. Following determination of the dose, Ultragenyx currently intend to adapt the study into a pivotal Phase 3 stage, evaluating fracture reduction over an estimated 15 to 24 months as the primary endpoint, subject to regulatory review. In the ﬁrst half of 2023, Ultragenyx initiated a randomized study in OI in children under ﬁve with serious bone disease, comparing bisphosphonates to BPS804/UX143. Younger pediatric patients with OI often have a much higher fracture rate than other age groups and a greater medical need, driving clinical urgency for better treatment options. Annualized rate of fractures is the primary end-point in the study. Alvelestat (MPH-966): Alvelestat is a novel, oral small molecule we are developing for the treatment of severe AATD-associated Lung Disease (AATD-LD) and BOS. AATD is a potentially life-threatening, rare, genetic condition caused by a lack of effective alpha-1 antitrypsin (“AAT”). The lungs are normally protected from enzymatic degradation by neutrophil elastase by the AAT protein, but in severe AATD the AAT is either misfolded and fails to be released into the circulation, inactive or completely missing. The degradation of tissue by unopposed neutrophil elastase leads to severe debilitating diseases, including early-onset pulmonary emphysema, a disease that irreversibly destroys the tissues that support lung function. There are an estimated 50,000 patients in North America and 60,000 patients in Europe with severe AATD, although due to underdiagnosis, there are estimated to be approximately 10,000 patients diagnosed in North America. 5 265444 Mereo Biopharma pp001-pp019.qxp 29/03/2023 18:32 Page 6 MEREO BIOPHARMA GROUP PLC STRATEGIC REPORT BOS is a progressive, ultimately fatal ﬁbrotic lung disease due to graft versus host disease following stem cell transplant, or lung transplant rejection. An estimated ﬁfty percent of lung transplant recipients will develop BOS by ﬁve years post-transplant, with an average survival of less than ﬁve years. There are an estimated 10,000 people living with lung transplant and BOS in the US and Europe. Alvelestat is designed to inhibit NE, a neutrophil protease, which is a key enzyme involved in the destruction of lung tissue. We believe the inhibition of NE has the potential to protect patients with AATD-LD from further lung damage. BOS is characterized by anti-organ auto-immune responses, either graft versus host (in SCT) or host versus graft (in lung transplant), exacerbated by elevated neutrophils in the lung and excess NE activity, leading to lung damage through elastin breakdown in the tissue and progressive ﬁbrosis, and ultimately respiratory failure. By inhibiting NE, alvelestat will reduce the accelerating effects of NE-driven inflammation on BOS. Prior to our license of alvelestat, AstraZeneca conducted 12 clinical trials involving 1,776 subjects, including trials in bronchiectasis and CF. Although these trials were conducted in diseases other than AATD, we believe the data demonstrated potential clinical beneﬁt and biomarker evidence of treatment effect for AATD patients. These trials created a safety database of 1,149 subjects treated with alvelestat. We announced successful completion of a Phase 2, placebo-controlled, dose-ranging, proof-of-concept clinical trial in 99 patients with AATD-LD in the United States and the EU in May 2022 which demonstrated statistically signiﬁcant changes in Neutrophil Elastase (NE) activity and biomarkers of disease severity at different time points up to 12 weeks. We subsequently announced additional Phase 2 data from this study in October 2022 demonstrating the association of biomarker responders in alvelestat-treated patients to improvement in the activity domain of the St George’s Respiratory Questionnaire, but not in patients treated with placebo. No new safety signals were detected in patients with AATD-LD. The most frequent adverse event was of headache which was more frequently observed at the higher doses of alvelestat (120 mg and 240 mg) used in AATD-LD than was observed at lower doses used previous studies in COPD, bronchiectasis and cystic ﬁbrosis, There was evidence of tolerance to headache being induced, and we intend to use a dose- escalation regime for initiation of treatment in future trials. A single treatment-emergent adverse event (TEAE) of liver function abnormality (raised hepatic transaminases, withour meeting Hy’s Law) and one TEAE of prolonged QTc, in which study-drug stopping criteria were met were reported in the Phase 2. Both events fully resolved on study drug cessation. We obtained Fast Track designation for alvelestat for AATD-LD in the U.S. in October 2022. In March 2023, we announced the outcome of the end-of-Phase 2 discussions with the FDA and the EMA. Based on clear recommendations from both Agencies, we are designing a single, global, Phase 3 study evaluating the 240 mg dose of alvelestat versus placebo in patients with AATD-LD to support applications for full marketing approvals in both the U.S. and EU. The proposed Phase 3 study has two independent primary endpoints, i) a Patient-Reported Outcome (PRO), as guided by the FDA, and ii) lung density measured by CT scan, as guided by the EMA. Alvelestat is also in an ongoing Phase 2 investigator-led study in AATD-LD, including in patients who may be on augmentation therapy, with data expected in the third quarter of 2023. Emerging data on the potential of NE inhibition to reduce the inflammatory and thrombotic effects of Neutrophil Extracellular Traps (NETs) in COVID-19, led to the initiation of a study in this disease. The top- line results were reported in December 2021. The results demonstrated a safety proﬁle consistent with previous studies, and in the alvelestat arm, a reduction (an improvement) of 2 points or more in the World Health Organization (WHO) Severity Score in 62.5% (5/9) of the patients versus 28.5% (2/7) in the placebo arm at day 5. At day 7 87.5% (7/8) patients in the alvelestat arm had improved by 2 points or more vs 57% (4/7) in the placebo arm. Inflammatory and pro-coagulopathy biomarkers were also supportive. An open-label Phase 1b/2 investigator-sponsored study in BOS following allogeneic stem cell transplant is ongoing. Interim results of Phase 1b were reported in December 2021 showing stabilization or improvement in lung function measured by Forced Expiratory Volume in 1 second, (FEV1) in 6 of 7 patients, and supportive biomarker responses, with reduction in neutrophil elastase and the mature elastin breakdown product (desmosine) and reductions in markers of collagen synthesis associated with ﬁbrosis. Evaluation of the clinical and safety data from 10 patients in Phase 1 supported the dose to be progressed and expansion into the Phase 2 portion of the study was initiated in the second half of 2022. Etigilimab (MPH-313): Etigilimab is an antibody against TIGIT (T-cell immunoreceptor with Ig and ITIM domains). TIGIT is a next generation checkpoint receptor shown to block T-cell activation and the body’s natural anti-cancer immune response. Etigilimab is an IgG1 monoclonal antibody which binds to the human 6 265444 Mereo Biopharma pp001-pp019.qxp 29/03/2023 18:32 Page 7 MEREO BIOPHARMA GROUP PLC STRATEGIC REPORT TIGIT receptor on immune cells with a goal of improving the activation and effectiveness of T-cell and NK cell anti-tumor activity. We completed a Phase 1a dose escalation clinical trial with etigilimab in patients with advanced solid tumors and enrolled patients in a Phase 1b study in combination with nivolumab in selected tumor types. 23 patients were treated in the Phase 1a dose escalation study with doses up to 20mg/kg Q2W. Tumor types included colorectal cancer, endometrial cancer, head and neck cancer, pancreatic cancer, ovarian cancer, and other tumor types. No dose limiting toxicities were observed. In the Phase 1b combination study, a total of ten patients, nine of whom had progressed on prior anti-PD1/PD-L1 therapies, were enrolled at doses of 3, 10 and 20 mg/kg. Tumor types included gastric cancer and six other tumor types. Eight patients were evaluable for tumor growth assessment, and all of these patients had progressed on PD1/PD-L1 therapies with best responses, including two patients with a partial response and stable disease. Patients remained on study for up to 224 days. No dose limiting toxicities (DLTs) were observed. Treatment emergent adverse events (TEAEs) related to study drug were reported by 16 patients (69.6%) in the Phase 1a portion of the study and 7 patients (70.0%) in the Phase 1b portion of the study. The most commonly reported related TEAEs in the Phase 1a portion of the study were pruritus (4 patients, 17.4%) and fatigue, nausea, rash and maculopapular rash (each reported by 3 patients, 8.7%). In the Phase 1b portion of the study, the most commonly reported related TEAEs were fatigue (3 patients, 30.0%) and pruritus, rash and pruritic rash (each reported by 2 patients, 20.0%). There were no treatment-related serious adverse events in the Phase 1a portion and there was only one treatment- related serious adverse event (autoimmune hepatitis) in the Phase 1b portion of the study. The Phase 1b study has now been completed. The ACTIVATE open label Phase 1b/2 basket study of Etigilimab in combination with nivolumab in multiple tumor types enrolled 76 patients and has completed Simon Stage 1of the study. Parallel cohorts in the study have focused on three rare tumors, two subtypes of soft-tissue sarcomas, uveal melanoma and testicular germ cell cancer, three gynecological carcinomas, cervical, ovarian and endometrial carcinomas and any solid tumor with high mutation burden, all in the recurrent/metastatic setting. We enrolled a total of 76 patients in the Phase 1b part of the study. The trial is evaluating objective response rate as a primary endpoint and will also evaluate safety, duration of response, pharmacokinetics, anti-drug antibodies, progression-free survival and additional secondary and exploratory endpoints. The study was designed to expand select cohorts of patients, based on outcomes, to further evaluate responses to etigilimab and anti-PD1. Biomarker analyses will be conducted on tumor tissues and blood samples from treated patients, including quantiﬁcation of levels of tumor- associated TIGIT, PVR and related biomarkers to evaluate their potential utility for selecting patients most likely to respond to the combination of etigilimab and anti-PD1. We reported an interim clinical and biomarker data update on this study in September 2022. At the time of the data cut-off, there were 63 efﬁcacy-evaluable checkpoint inhibitor-naïve (CPI-naive) subjects with a minimum of 1 staging scan at 8 (+/-1) weeks and RECIST 1.1 response assessment or documented clinical progression. We have completed enrollment in an open label Phase1b/2 basket study (the ACTIVATE study) evaluating etigilimab in combination with nivolumab on three rare tumors, two speciﬁc subtypes of soft-tissue sarcomas, uveal melanoma and testicular germ cell cancer, three gynecological carcinomas, cervical, endometrial and ovarian carcinomas and any solid tumor with high mutation burden, all in the recurrent/metastatic setting. These indications were selected based on observations of clinical activity in our prior Phase 1a/1b study and/or based on a comprehensive biomarker analysis of solid tumors which revealed tumor types with a high prevalence of expression of TIGIT and its principal ligand poliovirus receptor (PVR) and concordant expression of TIGIT and PD1. The selected tumor types have shown responsiveness to anti-PD1 therapies with response rates generally ranging from 5-20%. The combination of etigilimab and anti-PD1 may lead to improved responses in these patients. In April 2021, the Company entered into partnership with Cancer Focus Fund for a Phase 1b/2 study of etigilimab in Clear Cell Ovarian Cancer to be conducted at The University of Texas MD Anderson Cancer Center. The Phase 1b/2 study is being ﬁnanced by Cancer Focus Fund in exchange for upfront consideration of $1.5 million of the Company’s shares and additional payments based on the achievement of certain milestones. Clear cell ovarian cancer is a rare cancer that accounts for approximately 5 to 10% of all ovarian 7 265444 Mereo Biopharma pp001-pp019.qxp 29/03/2023 18:32 Page 8 MEREO BIOPHARMA GROUP PLC STRATEGIC REPORT carcinomas in North America. MD Anderson are planning to follow the per protocol procedure to expand the Phase 1b/2 study from an initial 10 patients to 20 patients in the Phase 2 portion of the study. Our Non-Core Partnered Programs Following completion of successful Phase 1b or Phase 2 studies the products below are programs which we have successfully partnered. Navicixizumab (OMP-305B83): Navi is a bispeciﬁc antibody that inhibits delta-like ligand 4 (DLL4) and vascular endothelial growth factor (VEGF). We acquired this therapeutic product in the merger with Mereo BioPharma 5 (formerly OncoMed). In a Phase 1a clinical trial, Navi demonstrated single agent activity. Following this we conducted a Phase 1b clinical trial in ovarian cancer, in combination with paclitaxel, in platinum-resistant ovarian cancer. A successful FDA Type B meeting was held in July 2019 the potential for accelerated approval was discussed. Navicixizumab has also been granted Fast Track designation by the FDA. In January 2020, Navi was licensed by the Company to OncXerna pursuant to the terms of a global licensing agreement. Under the terms of the contingent value rights agreement between us and Computershare from April 2019 (the “Mereo CVR Agreement”), the holders of contingent value rights are entitled to receive the beneﬁt of certain cash milestone payments made to Mereo under the license agreement. Pursuant to the terms of the Mereo CVR Agreement, if a milestone occurs prior to the ﬁfth anniversary of the closing of the Merger, April 23, 2024, then holders of CVRs will be entitled to receive an amount in cash equal to 70% of the aggregate principal amount received by Mereo after deduction of costs, charges and expenditures set out in detail in the Mereo CVR Agreement. Such milestone payments are also subject to a cash consideration cap, pursuant to which the aggregate principal amount of all cash payments made to holders of CVRs under the Mereo CVR Agreement shall in no case exceed $79.7 million. See “— Material Agreements—CVR Agreement Between Us and Computershare—The NAVI Milestones.” Our Non-Core Programs Available for Partnering Following completion of successful Phase 1 or Phase 2 studies the products below are programs which we intend to out-license or sell. Acumapimod (BCT-197): Acumapimod is a p38 MAP kinase inhibitor therapy for treatment during severe acute exacerbations of COPD (AECOPD). In a Phase 2 trial, acumapimod given over 5 days in patients hospitalized with AECOPD demonstrated a statistically signiﬁcant reduction in re-hospitalization for treatment failure and recurrent exacerbations. Acumapimod was reported to be safe and well tolerated. Following meetings with FDA and EMA a global Phase 3 registrational program has been designed and we intend to explore out-licensing or sale opportunities with third parties for the further development of acumapimod. Leflutrozole (BGS-649): Leflutrozole is an oral inhibitor of aromatase for the treatment of male infertility associated with HH. Excess aromatase in fat tissue reduces testosterone, LH and FSH, leading to HH. In Phase 2 trials, leflutrozole normalized testosterone, increased LH and FSH and was reported to be well-tolerated. Effects on sperm counts supported that future development of leflutrozole should focus on male infertility associated with HH. We intend to explore out-licensing or sale opportunities with third parties for the further development of leflutrozole. Our Strategy We intend to become a leading biopharmaceutical company developing innovative therapeutics that aim to improve outcomes for patients with rare diseases. The key elements of our strategy to achieve this goal include: • Rapidly develop our product candidates and potentially commercialize our rare disease product candidates. We have completed and announced top-line data on a Phase 2b clinical trial of setrusumab for the treatment of OI in adults in the United States, Europe and Canada. We reported top-line data on the three blinded dose ranging arms in November 2019 with the results supporting progression of setrusumab into a pediatric pivotal study in OI. Following the completion of the dosing part of the study, patients were followed for a further twelve months to examine the off-effects of setrusumab. In September 2020, the FDA granted Rare Pediatric Disease designation to setrusumab for the treatment of OI. Following our completion of the Phase 2b ASTEROID study, we met with both the FDA 8 265444 Mereo Biopharma pp001-pp019.qxp 29/03/2023 18:32 Page 9 MEREO BIOPHARMA GROUP PLC STRATEGIC REPORT (end-of-Phase 2 (EOP2) meeting in February 2020) and the EMA (PRIME meeting in May 2020) to discuss the principles of a design of a single Phase 2/3 registrational pediatric study in OI. In December 2020, we signed a license and collaboration agreement for setrusumab in OI with Ultragenyx Pharmaceutical Inc. Ultragenyx initiated a pivotal Phase 2/3 study in young adults and pediatric patients (5-25 years old) in the ﬁrst half of 2022 and expects to provide an update on the Phase 2 dose ranging part of this study in mid-2023, when the trial will transition into Phase 3. Following selection of the dose for the Phase 3 study, Ultragenyx intend to initiate an additional registrational trial in young pediatric patients ( <5 years old) in the ﬁrst half of 2023. We reported successful top-line data from a Phase 2 proof-of-concept clinical trial of alvelestat for the treatment of severe AATD-LD in May 2022 and provided an additional data update in October 2022. We received regulatory feedback on the design of a single, global, pivotal registrational trial for alvelestat in AATD-LD for full approval in Q1 2023 and will now determine the optimum path forward for development of alvelestat towards approval and commercialization, including potential partnering. We also announced the completion and top-line data of a Phase 1b/2 placebo-controlled clinical trial to evaluate the safety and efﬁcacy of alvelestat in hospitalized adult patients with moderate to severe COVID-19 respiratory disease. The investigator-led Phase 1b/2 study in BOS following SCT has completed the Phase 1b stage (10 patients) and commenced the Phase 2 portion of the study in the second half of 2022 to evaluate clinical efﬁcacy on lung function (FEV1) in a 6-month study in up to an additional 24 patients, with expansion for responders to 12 months. Etigilimab, our lead oncology program, has completed a Phase 1a dose escalating monotherapy study and has been evaluated in a Phase 1b combination study with nivolumab in a range of tumor types. We have also completed enrollment in an open label Phase 1b/2 basket study evaluating our anti-TIGIT in combination with nivolumab in a range of tumor types including three rare tumors, sarcoma, uveal melanoma and germ cell cancer, three gynecological carcinomas, cervical, endometrial and ovarian carcinomas and tumors with high mutation burden. We enrolled a total of 76 patients in the Phase 1b part of the study and we reported an interim clinical and biomarker data update on this study in September 2022. • • • Efﬁciently advance our other product candidates and explore out-licensing or sale opportunities with third parties for further clinical development and/or commercialization. Our second oncology product, navicixizumab, for the treatment of late line ovarian cancer, has completed a Phase 1 study and has been partnered on a global basis with OncXerna. Based on the results from our Phase 2 clinical trial of acumapimod, we plan to enter into one or more strategic relationships with third parties for acumapimod to undertake the next phase of clinical development and, if approved, commercialization. In March 2018, we reported top-line Phase 2b data for leflutrozole for the treatment of HH and in December 2018, we reported positive results from the safety extension study for leflutrozole. We intend to explore out-licensing or sale opportunities with third parties for the further development and commercialization of leflutrozole. Continue to be a partner of choice for pharmaceutical and biotechnology companies. We believe that we are a preferred partner for pharmaceutical and biotechnology companies as they seek to unlock the potential in their development pipelines and deliver therapeutics to patients in areas of high unmet medical need. We have strong relationships with these companies, as evidenced by our agreements with Novartis and AstraZeneca, as well as by the Merger, and a track record of structuring transactions that enable us to leverage our core capabilities while creating value for all stakeholders. We intend to continue to enter into strategic relationships that align our interests with those of pharmaceutical and biotechnology companies and that we believe to be mutually beneﬁcial. Leverage our expertise in business development. Our senior management team has extensive relationships with large pharmaceutical and biotechnology companies. These relationships are important to us as we seek to form strategic partnerships on our product candidates and as appropriate, to grow our pipeline of product candidates in rare diseases. 9 265444 Mereo Biopharma pp001-pp019.qxp 29/03/2023 18:32 Page 10 MEREO BIOPHARMA GROUP PLC STRATEGIC REPORT Financial review The following table sets forth Mereo’s results of operations for the years ended December 31, 2022 and 2021. R()(*+(% !"#$%"&%'()(*+(% R(#(='BD%=*:%:()(F"?;(*$%(>?(*#(#% 9:;<*<#$'=$<)(%(>?(*#(#% O?('=$<*E%F"##% A<*=*B(%<*B";(% A<*=*B(%B"#$#% !D=*E(#%<*%&=<'%)=F+(%"&%&<*=*B<=F%<*#$'+;(*$#% Q=<*H/F"##5%"*%:<#?"#=F%"&%<*$=*EBD=*E(%E=<*H/F"##5% O$D('%<*B";(%=*:%(>?(*#(#% /I"##5H?'"&<$%J(&"'(%$=>% M=>=$<"*% /I"##5H?'"&<$%=$$'

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