DUBLIN – Mereo Biopharma plc will gain a Nasdaq listing, an estimated $38 million in cash and a U.S. facility by acquiring Oncomed Pharmaceuticals Inc. in a stock-based listing that values the latter at $57 million. It will also gain an early stage clinical oncology pipeline that could unlock downstream value. It also hopes to retain key Oncomed personnel with clinical development and regulatory affairs experience.

Oncomed's beleaguered shareholders will own 25 percent of the enlarged entity, and will also receive contingent value rights that could, theoretically at least, lead to cash payouts totaling about $115 million.

They will receive in its entirety a $35 million milestone should Celgene Corp., of Summit, N.J., trigger an option on etigilimab, an antibody directed against the immuno-oncology target Tigit (T-cell immunoreceptor with Ig and ITIM domains). It is currently undergoing a phase Ia/Ib trial in patients with solid tumors. Shareholders could also receive up to 70 percent of the net proceeds of any milestone payment attached to its bispecific antibody navicixizumab, which is in a phase I trial in ovarian cancer patients. A five-year time limit and an $80 million cap are attached to the latter arrangement.

"If there is value in these programs, they'll see it," Denise Scots-Knight, CEO of London-based Mereo, told BioWorld. There is, however, nothing on offer for Oncomed's third clinical program, a GITRL-Fc fusion protein, comprising a GITRL trimer linked to an Fc antibody fragment, which is in a phase I trial in solid tumors. Data are due in 2019, but expectations are not high. "The data they've generated so far hasn't been that promising," she said.

Writ large, that's been Oncomed's big problem. The company has hemorrhaged investor support in recent years, as its original promise to develop drugs that would hit cancer stem cells by targeting Notch and Wnt signaling came up empty. A late pivot to immuno-oncology delayed the final reckoning, but not by much. The Redwood, Calif.-based company has simply run out of road.

The company has burned through about $700 million in cash since its formation in 2004, having raised $373.1 million in equity funding, including $81.6 million in an IPO in 2013 priced at $17 per share, and another $400 million in collaboration funding. It still had $70.9 million on its balance sheet at the end of the third quarter, but a good chunk of that is committed to funding the ongoing clinical development work and to restructuring costs.

The writing was on the wall during the second quarter of 2017, when two key programs crashed and burned within a week. Demcizumab, which targets the Notch ligand delta-like 4 (DLL4), missed the primary endpoint of a phase II trial in pancreatic cancer. A week later, tarextumab, an antibody targeting the Notch 2/3 receptors, which was partnered with London-based Glaxosmithkline plc, failed to show efficacy in a phase II trial in small-cell lung cancer. Adding insult to injury, Bayer AG, of Leverkusen, Germany, decided not to option a pair of Wnt pathway inhibitors around the same time. (See BioWorld Today, April 18, 2017.)

Access to Nasdaq

For Mereo, the deal offers some much-needed cash, extending its runway into 2020. It reported £36.9 million (US$47 million) on June 30 last, but its home exchange, the AIM market, is currently a bearish environment. "It's quite a tough market for really significant amounts of capital," Scots-Knight said.

The company had originally attempted to gain a Nasdaq listing under its own steam in April, but it withdrew a $57 million share offering because of challenging stock exchange conditions at the time. Once the deal with Oncomed, which has the unanimous support of each company's board, is finalized, it will launch an American depository receipt program on Nasdaq.

Oncomed shareholders will have the option of participating in a rare disease company that majors in acquiring deprioritized assets from pharma companies. Mereo surfaced in 2015 with a $119 million series A round and a portfolio of three programs, which it acquired from Basel, Switzerland-based Novartis AG. (See BioWorld Today, July 30, 2015.)

Its two lead programs will read out in 2019. Setrusumab (BPS-804), which targets sclerostin, is undergoing a potentially pivotal phase IIb study in osteogenesis imperfecta (brittle bone disease). Alvelestat (MPH-966), an oral neutrophil elastase inhibitor it picked up from Cambridge U.K.-based Astrazeneca plc, is in a phase II proof-of-concept study in alpha-1 antitrypsin deficiency.

Mereo will continue to maintain its headquarters in London and its management team will run the enlarged company. Two Oncomed members will join its board, Michael Wyzga, who is currently chief financial officer at Cambridge, Mass.-based Aura Biosciences Inc., and Deepa Pakianathan, managing director at Delphi Ventures, of San Mateo, Calif.