Market Overview - U.S. stocks began the final week of 2025 on a weaker note, with major indexes slipping due to selling pressure on megacap technology stocks and a sharp pullback in precious metals from record highs [1][6][10] - Despite the daily decline, the broader market remains on track for a strong annual performance, with the S&P 500 up over 17% year-to-date and the Nasdaq surging 22% [1][7][25] Commodities - Silver prices plunged nearly 7% after briefly trading above $80 an ounce, while gold futures dropped more than 3%, ending a recent surge to all-time highs [2][10] - The volatility in precious metals was attributed to profit-taking and comments from industry figures, including Elon Musk, regarding the impact of high silver prices on industrial processes [10][11] Federal Reserve Insights - Investors are closely monitoring internal divisions within the Federal Reserve as the new year approaches, with an 80% probability that rates will remain unchanged during the January meeting [3][22] - The outlook for March remains uncertain, reflecting ongoing debates within the central bank [3][22] Housing Market - The U.S. housing market showed signs of optimism, with pending home sales for November surging 3.3%, the most significant increase since early 2023, driven by stabilizing mortgage rates and cooling price growth [5][19] - This growth suggests a potential rebound in housing activity heading into 2026, which could support consumer confidence and related sectors [19][20] Energy Market - Energy markets experienced a 2% spike in crude prices, with Brent crude climbing above $61.50 per barrel due to geopolitical risks and a 6% production drop in Kazakhstan's Tengiz field [8][25] - U.S. sanctions on Russian oil are expected to remain firm, impacting supply forecasts and contributing to the oil market's struggle to break a five-month losing streak [9][25]

Market Overview - U.S. stocks traded lower, with the Dow Jones index falling more than 100 points, down 0.25% to 48,591.37, NASDAQ down 0.55% to 23,464.42, and S&P 500 down 0.34% to 6,906.41 [1] - Energy shares rose by 0.6%, while materials stocks fell by 1.1% [1] Real Estate Sector - U.S. pending home sales increased by 3.3% month-over-month in November, following a revised 2.4% gain in October, exceeding market estimates of a 1% gain [2][10] Commodity Market - Oil prices increased by 2.5% to $58.13, while gold prices decreased by 4.2% to $4,360.50. Silver fell by 6.8% to $71.945, and copper dropped by 4.6% to $5.5725 [5] European Market - European shares showed mixed results, with the eurozone's STOXX 600 gaining 0.1%, while Germany's DAX 40 fell by 0.1% [6] Asian Market - Asian markets closed mostly lower, with Japan's Nikkei 225 down 0.44% and Hong Kong's Hang Seng Index down 0.71% [7] Company Performance - CCSC Technology International Holdings Limited shares surged 93% to $0.2516 [9] - Brand Engagement Network, Inc. shares rose 77% to $2.1200 after a Vendor Services Project Agreement [9] - Society Pass Incorporated shares increased by 58% to $2.88 following the launch of TMG Social [9] - Mereo BioPharma Group plc shares dropped 89% to $0.2436 after failing to meet primary endpoints in clinical studies [9] - Ultragenyx Pharmaceutical Inc. shares fell 41% to $20.10 due to similar study results as Mereo [9] - ECD Automotive Design, Inc. shares decreased by 35% to $0.7521 [9]

Core Viewpoint - Mereo BioPharma Group's shares plummeted significantly after the announcement that its Phase 3 studies for setrusumab in Osteogenesis Imperfecta did not meet primary endpoints, leading to a broader impact on related stocks in pre-market trading [1][3]. Company Performance - Mereo BioPharma Group shares fell 87.5% to $0.29 in pre-market trading following the disappointing study results [2]. - Ultragenyx Pharmaceutical Inc shares dropped 43.7% to $19.26 as a result of the same study outcomes [3]. - A SPAC III Acquisition Corp shares decreased by 11.7% to $21.21 after a significant rise of 79% on the previous Friday [3]. - Sellas Life Sciences Group Inc shares fell 7.6% to $2.65 after providing an update on its Phase 3 REGAL trial [3]. - Alvotech SA shares dipped 6.8% to $4.90 in pre-market trading [3]. - Sigma Lithium Corp shares tumbled 5.5% to $13.70 after a prior gain of 7% [3].

Core Insights - Mereo BioPharma announced that neither the Phase 3 ORBIT nor COSMIC studies for setrusumab (UX143) achieved their primary endpoint of reducing annualized clinical fracture rates compared to placebo or bisphosphonates, respectively. However, both studies successfully met their secondary endpoints, showing significant improvements in bone mineral density (BMD) [1][2][3]. Study Results - In the ORBIT study, participants showed statistically significant improvements in BMD compared to placebo, consistent with Phase 2 study results, but did not see a corresponding reduction in fracture rates [3]. - The pediatric COSMIC study revealed that patients had a higher baseline fracture rate compared to those in ORBIT. Although setrusumab-treated patients showed meaningful BMD improvements and a reduction in fracture rates compared to bisphosphonate-treated patients, this reduction did not reach statistical significance [4]. Financial and Strategic Considerations - Mereo's cash balance was reported at $48.7 million at the end of Q3 2025. The company plans to manage cash resources carefully, implementing immediate reductions in pre-commercial and manufacturing activities while continuing to analyze the setrusumab data for future steps [5]. - The company is also advancing discussions for partnerships related to alvelestat, another of its drug candidates [2][9]. Product Development Context - Setrusumab is being developed for pediatric and young adult patients with Osteogenesis Imperfecta (OI) across various sub-types, with the ORBIT and COSMIC studies being pivotal in this development [6][8]. - The ORBIT study involved 159 patients aged 5 to 25 years, while the COSMIC study enrolled 69 patients aged 2 to under 7 years, both randomized to receive either setrusumab or a comparator [7][8]. Company Overview - Mereo BioPharma focuses on developing innovative therapeutics for rare diseases, with setrusumab being one of its key candidates for OI. The company has retained commercial rights in the EU and UK and has partnered with Ultragenyx Pharmaceutical for the development of setrusumab [12].

Financial Position - Cash and cash equivalents as of September 30, 2025, were $48.7 million, down from $69.8 million as of December 31, 2024, expected to support operations into 2027[8] - The total assets as of September 30, 2025, were $53.6 million, down from $76.4 million as of December 31, 2024[15] - The accumulated deficit increased to $493.7 million as of September 30, 2025, compared to $462.9 million at the end of 2024[15] - Total ordinary shares issued as of September 30, 2025, were 795,484,404, with total ADS equivalents of 159,096,880[9] Revenue and Expenses - Revenue for the nine months ended September 30, 2025, was $500 million, with no revenue reported for the same period in 2024[17] - Total research and development expenses increased by $1.1 million to $4.3 million in Q3 2025, primarily due to increased costs for setrusumab and alvelestat[4] - Research and development expenses increased to $13,573 million for the nine months ended September 30, 2025, compared to $12,109 million in 2024, reflecting a growth of 12%[17] - General and administrative expenses decreased by $0.2 million to $6.0 million in Q3 2025, attributed to lower professional fees[6] - General and administrative expenses decreased slightly to $18,811 million for the nine months ended September 30, 2025, from $19,980 million in 2024[17] Net Loss and Comprehensive Loss - Net loss for Q3 2025 was $7.0 million, a significant reduction from a net loss of $15.0 million in Q3 2024[7] - The net loss for the nine months ended September 30, 2025, was $34,527 million, a decrease from $36,207 million in 2024, indicating an improvement of 5%[17] - Total comprehensive loss for the nine months ended September 30, 2025, was $26,588 million, compared to $29,826 million in 2024, showing a reduction of 11%[17] Share Performance - Loss per share for the nine months ended September 30, 2025, was $0.04, compared to $0.05 for the same period in 2024[17] - The weighted average shares outstanding for the nine months ended September 30, 2025, was 796,018,903, an increase from 727,808,860 in 2024[17] Other Income and Losses - Interest income for the nine months ended September 30, 2025, was $1,752 million, down from $2,160 million in 2024[17] - Foreign currency transaction losses for the nine months ended September 30, 2025, amounted to $6,218 million, compared to a loss of $5,780 million in 2024[17] - Other income from research and development tax credits was $1,377 million for the nine months ended September 30, 2025, compared to $1,073 million in 2024, reflecting a growth of 28%[17] Development and Partnerships - The Phase 3 Orbit and Cosmic studies for setrusumab are on track to report data around the end of 2025, with thresholds for final analysis set at p<0.039 and p<0.05 respectively[5] - Mereo has retained European commercial rights for vantictumab, which is being developed for autosomal dominant osteopetrosis type 2, following a partnership with āshibio[2] - The company continues to engage with multiple potential partners for the development and commercialization of alvelestat[5]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-38452 MEREO BIOPHARMA GROUP PLC (Exact name of Registrant as specified in its charter) | England and Wales Not Applic ...

Core Insights - Mereo BioPharma is approaching a significant transition with the Phase 3 Orbit and Cosmic studies of setrusumab for osteogenesis imperfecta (OI) expected to report results by the end of 2025 [2][3] - The company has $48.7 million in cash as of September 30, 2025, which is anticipated to support operations into 2027 [2][9] Company Developments - The Phase 3 studies for setrusumab are being conducted in partnership with Ultragenyx and are focused on pediatric and young adult patients [6][11] - Mereo is also advancing discussions for partnerships related to alvelestat and has retained European commercial rights for vantictumab, which is being developed for autosomal dominant osteopetrosis type 2 [2][4] Financial Performance - Research and development expenses increased by $1.1 million from $3.2 million in Q3 2024 to $4.3 million in Q3 2025, primarily due to costs associated with setrusumab and alvelestat [5][7] - General and administrative expenses decreased by $0.2 million from $6.2 million in Q3 2024 to $6.0 million in Q3 2025 [8] - The net loss for Q3 2025 was $7.0 million, a reduction from $15.0 million in Q3 2024, reflecting an operating loss of $10.0 million and a foreign currency transaction gain of $1.9 million [8][19] Cash Position and Guidance - As of September 30, 2025, Mereo's cash and cash equivalents were $48.7 million, down from $69.8 million at the end of 2024, but the company expects this to fund its clinical trials and operational needs through 2027 [9][16] - The company has not included potential partnership payments for alvelestat in its cash guidance [9]

PART I – FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements.) This section presents unaudited condensed consolidated financial statements, including balance sheets, statements of operations, cash flows, and equity changes, with detailed notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 ($'000) | December 31, 2024 ($'000) | Change ($'000) | Change (%) | | :-------------------------------- | :--------------------- | :------------------------ | :------------- | :--------- | | Cash and cash equivalents | 56,125 | 69,802 | (13,677) | -19.59% | | Total current assets | 61,421 | 74,763 | (13,342) | -17.85% | | Total assets | 62,631 | 76,390 | (13,759) | -18.01% | | Total current liabilities | 7,557 | 13,848 | (6,291) | -45.43% | | Total liabilities | 8,454 | 15,421 | (6,967) | -45.18% | | Total shareholders' equity | 54,177 | 60,969 | (6,792) | -11.14% | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands, except per share) | Metric (3 Months Ended June 30) | 2025 ($'000) | 2024 ($'000) | Change ($'000) | Change (%) | | :------------------------------ | :----------- | :----------- | :------------- | :--------- | | Revenue | 500 | — | 500 | N/A | | Cost of revenue | (132) | — | (132) | N/A | | Research and development | (5,373) | (4,946) | (427) | 8.63% | | General and administrative | (5,494) | (7,868) | 2,374 | -30.17% | | Loss from operations | (10,499) | (12,814) | 2,315 | -18.07% | | Net loss | (14,616) | (12,255) | (2,361) | 19.27% | | Loss per share – basic and diluted | (0.02) | (0.02) | 0.00 | 0.00% | | Metric (6 Months Ended June 30) | 2025 ($'000) | 2024 ($'000) | Change ($'000) | Change (%) | | :------------------------------ | :----------- | :----------- | :------------- | :--------- | | Revenue | 500 | — | 500 | N/A | | Cost of revenue | (132) | — | (132) | N/A | | Research and development | (9,303) | (8,939) | (364) | 4.07% | | General and administrative | (12,766) | (13,777) | 1,011 | -7.34% | | Loss from operations | (21,701) | (22,716) | 1,015 | -4.47% | | Net loss | (27,503) | (21,208) | (6,295) | 29.68% | | Loss per share – basic and diluted | (0.03) | (0.03) | 0.00 | 0.00% | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity (Six Months Ended June 30) | 2025 ($'000) | 2024 ($'000) | Change ($'000) | Change (%) | | :-------------------------------------------- | :----------- | :----------- | :------------- | :--------- | | Net loss | (27,503) | (21,208) | (6,295) | 29.68% | | Net cash used in operating activities | (15,980) | (15,895) | (85) | 0.54% | | Net cash used in investing activities | (320) | (699) | 379 | -54.22% | | Net cash provided by financing activities | 288 | 46,781 | (46,493) | -99.38% | | (Decrease)/increase in cash and cash equivalents | (16,012) | 30,187 | (46,199) | -153.05% | | Cash and cash equivalents at June 30 | 56,125 | 87,431 | (31,306) | -35.81% | [Condensed Consolidated Statements of Changes in Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Equity) - As of June 30, 2025, the number of ordinary shares issued increased to **795,001,444** from **775,728,034** at December 31, 2024, primarily due to the non-cash conversion of the Novartis Loan Note (**17,105,450 shares**), the exercise of 2020 Novartis Warrants (**1,449,610 shares**), and the vesting of RSUs (**718,350 shares**)[23](index=23&type=chunk)[58](index=58&type=chunk)[59](index=59&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [1. Nature of business](index=8&type=section&id=1.%20Nature%20of%20business) - **Mereo BioPharma Group plc** is a U.K.-based biopharmaceutical company focused on developing innovative therapeutics for rare diseases, with primary late-stage clinical product candidates **setrusumab** for **osteogenesis imperfecta (OI)** and **alvelestat** for **severe alpha-1 antitrypsin deficiency-associated lung disease (AATD-LD)**[26](index=26&type=chunk) [2. Basis of presentation and summary of significant accounting policies](index=8&type=section&id=2.%20Basis%20of%20presentation%20and%20summary%20of%20significant%20accounting%20policies) - The unaudited condensed consolidated financial statements are prepared in **U.S. GAAP** and presented in **U.S. dollars**; the company, historically **loss-making** with an **accumulated deficit of $486.6 million** as of June 30, 2025, expects its **cash and cash equivalents of $56.1 million** to fund operations for **at least twelve months**[28](index=28&type=chunk)[32](index=32&type=chunk)[34](index=34&type=chunk) [3. Recent accounting pronouncements](index=9&type=section&id=3.%20Recent%20accounting%20pronouncements) - There have been **no recent accounting pronouncements or changes** in accounting guidance of significance to the Company beyond those previously disclosed in the **2024 Annual Report**[36](index=36&type=chunk) [4. Fair value measurement](index=9&type=section&id=4.%20Fair%20value%20measurement) Financial Assets and Liabilities Measured at Fair Value (in thousands) | Item | As of June 30, 2025 ($'000) | As of December 31, 2024 ($'000) | | :---------------------------------- | :-------------------------- | :----------------------------- | | Cash equivalents (money market funds) | 13,457 | N/A | | Warrant liabilities | 545 | 821 | [5. Prepaid expenses and other current assets](index=10&type=section&id=5.%20Prepaid%20expenses%20and%20other%20current%20assets) Prepaid Expenses and Other Current Assets (in thousands) | Item | June 30, 2025 ($'000) | December 31, 2024 ($'000) | | :--------------------------------- | :-------------------- | :------------------------ | | VAT receivable | 496 | 464 | | Prepaid research and development | 139 | 201 | | Milestone payment receivable | 500 | — | | Security deposits | 402 | 378 | | Prepaid insurance premiums | 185 | 1,003 | | Prepaid general and administrative | 823 | 129 | | **Total** | **2,545** | **2,175** | [6. Property and equipment, net](index=10&type=section&id=6.%20Property%20and%20equipment,%20net) Property and Equipment, Net (in thousands) | Item | June 30, 2025 ($'000) | December 31, 2024 ($'000) | | :--------------------------------- | :-------------------- | :------------------------ | | Property and equipment, at cost | 1,328 | 1,206 | | Less: accumulated depreciation | (1,110) | (949) | | **Property and equipment, net** | **218** | **257** | - Depreciation expense was **less than $0.1 million** for the three months ended June 30, 2025, and **$0.1 million** for the six months ended June 30, 2025[42](index=42&type=chunk) [7. Leases](index=10&type=section&id=7.%20Leases) - The Company leases office space in London, with lease terms for both the fourth and fifth floors ending in **June 2026**; total lease expense was **$0.2 million** for the three months and **$0.3 million** for the six months ended June 30, 2025[43](index=43&type=chunk)[44](index=44&type=chunk) Operating Lease Liabilities Maturity Analysis (in thousands) | Year Ending December 31 | As of June 30, 2025 ($'000) | | :---------------------- | :-------------------------- | | 2025 | 418 | | 2026 | 209 | | Total undiscounted payments | 627 | | Less: Present value discount | (26) | | **Lease liability** | **601** | [8. Other current liabilities](index=11&type=section&id=8.%20Other%20current%20liabilities) Other Current Liabilities (in thousands) | Item | June 30, 2025 ($'000) | December 31, 2024 ($'000) | | :---------------------------- | :-------------------- | :------------------------ | | Social security and other taxes | 296 | 503 | | Deferred consideration liability | 276 | 296 | | Equity issuance costs payable | 94 | 235 | | Other current liabilities | 111 | 61 | | **Total** | **777** | **1,095** | [9. Accrued expenses](index=11&type=section&id=9.%20Accrued%20expenses) Accrued Expenses (in thousands) | Item | June 30, 2025 ($'000) | December 31, 2024 ($'000) | | :------------------------------ | :-------------------- | :------------------------ | | Accrued research and development | 2,512 | 948 | | Accrued legal and professional fees | 608 | 727 | | Accrued bonus | 1,257 | 2,001 | | Accrued cost of revenue | 132 | — | | Accrued local taxes | 189 | 267 | | Other accrued expenses | 343 | 128 | | **Total** | **5,041** | **4,071** | [10. Convertible loan notes and equity classified warrants](index=12&type=section&id=10.%20Convertible%20loan%20notes%20and%20equity%20classified%20warrants) - On **February 7, 2025**, the **Novartis Loan Note**, with a net carrying amount of **$5.5 million** as of December 31, 2024, was converted into **17,105,450 ordinary shares**; additionally, **1,449,610 ordinary shares** were issued upon the exercise of the **2020 Novartis Warrants**, generating **$0.5 million**[52](index=52&type=chunk)[53](index=53&type=chunk)[55](index=55&type=chunk) - Interest expense related to the Novartis Loan Note **decreased significantly** to **$0.2 million** for the three and six months ended June 30, 2025, from **$0.3 million** and **$0.6 million** respectively in 2024, due to its conversion[54](index=54&type=chunk) [11. Warrant liability](index=12&type=section&id=11.%20Warrant%20liability) Warrant Liabilities (in thousands) | Metric | 2025 ($'000) | 2024 ($'000) | | :--------------- | :----------- | :----------- | | At January 1 | 821 | 412 | | At June 30 | 545 | 925 | - As of **June 30, 2025**, former lenders hold warrants to purchase **1,243,908 ordinary shares** at **£2.95 per share** (exercisable until **August 2027**) and **1,243,908 ordinary shares** at **$0.4144 per share** (exercisable until **August 2027-October 2028**), with fair value estimated using the **Black-Scholes option pricing model**[56](index=56&type=chunk)[57](index=57&type=chunk) [12. Shareholders' Equity](index=13&type=section&id=12.%20Shareholders'%20Equity) Ordinary Shares Activity (Number of Shares) | Event | Number of ordinary shares | | :---------------------------------- | :------------------------ | | At January 1, 2025 | 775,728,034 | | Vesting of RSUs | 718,350 | | Conversion of convertible loan notes | 17,105,450 | | Exercise of warrants | 1,449,610 | | **At June 30, 2025** | **795,001,444** | [13. Revenue and cost of revenue](index=13&type=section&id=13.%20Revenue%20and%20cost%20of%20revenue) - The Company recognized **$0.5 million** in revenue for the three and six months ended **June 30, 2025**, from a milestone payment under the **ReproNovo Licensing Agreement** for **leflutrozole** following a **Phase 2 trial** initiation, resulting in a corresponding **cost of revenue of $0.1 million** payable to **Novartis**[61](index=61&type=chunk)[62](index=62&type=chunk)[63](index=63&type=chunk) [14. Share based compensation](index=14&type=section&id=14.%20Share%20based%20compensation) Share-Based Compensation Expense (in thousands) | Plan (3 Months Ended June 30) | 2025 ($'000) | 2024 ($'000) | | :---------------------------- | :----------- | :----------- | | 2019 EIP | 1,617 | 1,568 | | 2019 NED EIP | 448 | 520 | | **Total** | **2,065** | **2,088** | | Plan (6 Months Ended June 30) | 2025 ($'000) | 2024 ($'000) | | :---------------------------- | :----------- | :----------- | | 2019 EIP | 3,214 | 3,027 | | 2019 NED EIP | 1,129 | 1,111 | | **Total** | **4,343** | **4,138** | - As of **June 30, 2025**, the total unrecognized compensation cost related to outstanding share awards was **$6.9 million**, expected to be recognized over a weighted-average period of **1.7 years**[66](index=66&type=chunk) [15. Loss per share](index=17&type=section&id=15.%20Loss%20per%20share) Loss Per Share (in thousands, except per share amounts) | Metric (3 Months Ended June 30) | 2025 ($'000) | 2024 ($'000) | | :------------------------------ | :----------- | :----------- | | Net loss | (14,616) | (12,255) | | Net loss per share - basic and diluted | (0.02) | (0.02) | | Weighted-average shares outstanding | 799,435,329 | 711,770,804 | | Metric (6 Months Ended June 30) | 2025 ($'000) | 2024 ($'000) | | :------------------------------ | :----------- | :----------- | | Net loss | (27,503) | (21,208) | | Net loss per share - basic and diluted | (0.03) | (0.03) | | Weighted-average shares outstanding | 794,022,295 | 706,407,371 | - **Potentially dilutive securities**, including share-based compensation awards, convertible loan notes (in 2024), and warrants, were excluded from diluted net loss per share calculations as their effect would be **anti-dilutive**[81](index=81&type=chunk)[82](index=82&type=chunk) [16. Commitments and contingencies](index=17&type=section&id=16.%20Commitments%20and%20contingencies) - The Company has agreed to future payments to **Novartis** based on **tiered annual worldwide net sales** of acquired assets and a percentage of proceeds from certain transactions; under the **Amended AstraZeneca Agreements**, potential future payments of **up to $114.3 million** in **cash and variable ADSs** are tied to milestones for **alvelestat**[84](index=84&type=chunk)[85](index=85&type=chunk)[88](index=88&type=chunk)[90](index=90&type=chunk) - Manufacturing commitments with CMOs totaled **$0.7 million** as of **June 30, 2025**, an **increase from $0.5 million** at **December 31, 2024**; the Company also has a manufacturing and supply agreement with **Ultragenyx** for **setrusumab**[92](index=92&type=chunk)[94](index=94&type=chunk) - As of **June 30, 2025**, the Company was **not a party to any material litigation** and had **no material contingency reserves**[95](index=95&type=chunk) [17. Related party disclosures](index=19&type=section&id=17.%20Related%20party%20disclosures) - There were **no reportable related party transactions** during the three and six months ended June 30, 2025 and 2024[96](index=96&type=chunk) [18. Segment information](index=19&type=section&id=18.%20Segment%20information) - The Company operates as a **single segment** focused on developing **rare disease therapies**, with performance assessed based on **consolidated net loss before income tax**[97](index=97&type=chunk)[98](index=98&type=chunk) R&D Expenses by Product Development Program (in thousands) | Program (3 Months Ended June 30) | 2025 ($'000) | 2024 ($'000) | Change ($'000) | Change (%) | | :------------------------------- | :----------- | :----------- | :------------- | :--------- | | Setrusumab (BPS-804/UX143) | (3,687) | (1,448) | (2,239) | 154.63% | | Alvelestat (MPH-966) | (1,396) | (2,902) | 1,506 | -51.90% | | Etigilimab (MPH-313) | (224) | (468) | 244 | -52.14% | | Other | (66) | (128) | 62 | -48.44% | | **Total R&D expenses** | **(5,373)** | **(4,946)** | **(427)** | **8.63%** | | Program (6 Months Ended June 30) | 2025 ($'000) | 2024 ($'000) | Change ($'000) | Change (%) | | :------------------------------- | :----------- | :----------- | :------------- | :--------- | | Setrusumab (BPS-804/UX143) | (5,930) | (2,357) | (3,573) | 151.59% | | Alvelestat (MPH-966) | (2,761) | (5,515) | 2,754 | -49.94% | | Etigilimab (MPH-313) | (431) | (818) | 387 | -47.31% | | Other | (181) | (249) | 68 | -27.31% | | **Total R&D expenses** | **(9,303)** | **(8,939)** | **(364)** | **4.07%** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition and results of operations for the three and six months ended June 30, 2025, covering business overview, recent developments, performance, liquidity, and critical accounting estimates [Overview](index=20&type=section&id=Overview) - **Mereo BioPharma** is a biopharmaceutical company focused on **rare diseases**, with late-stage clinical product candidates **setrusumab (for OI)** and **alvelestat (for AATD-LD)**, leveraging prior investment and regulatory pathways[102](index=102&type=chunk)[103](index=103&type=chunk)[104](index=104&type=chunk) [Recent Developments](index=20&type=section&id=Recent%20Developments) - On **July 9, 2025**, **Mereo** and **Ultragenyx** announced the **Phase 3 Orbit study** for **setrusumab** in OI patients is progressing towards **final analysis by the end of 2025** with an **acceptable safety profile**, with the **Cosmic study** also proceeding to final analysis concurrently[105](index=105&type=chunk) [Results of Operations](index=21&type=section&id=Results%20of%20Operations) [Comparison of three months ended June 30, 2025 and 2024](index=21&type=section&id=Comparison%20of%20three%20months%20ended%20June%2030,%202025%20and%202024) - **Revenue increased to $0.5 million** in **Q2 2025** from zero in Q2 2024, driven by a **milestone payment from ReproNovo for leflutrozole**, which also led to a new **cost of revenue of $0.1 million**[108](index=108&type=chunk)[109](index=109&type=chunk) - **Total R&D expenses increased by $0.4 million (8.6%) to $5.4 million**, primarily due to a **$2.2 million increase in setrusumab expenses** for manufacturing and real-world evidence activities, partially offset by decreases in alvelestat and etigilimab expenses[111](index=111&type=chunk)[112](index=112&type=chunk)[113](index=113&type=chunk)[114](index=114&type=chunk) - **General and administrative expenses decreased by $2.4 million (30.2%) to $5.5 million**, mainly due to a **$1.9 million reimbursement** for ADR program expenses and lower professional fees, with pre-commercial activities for setrusumab in Europe accounting for **$1.2 million of G&A expenses**[115](index=115&type=chunk)[116](index=116&type=chunk) - **Interest expense decreased by $0.3 million** due to the **conversion of convertible loan notes** in **February 2025**; a **net foreign exchange loss of $5.3 million** was recorded, compared to a **gain of less than $0.1 million** in Q2 2024, primarily due to a weakening U.S. dollar[118](index=118&type=chunk)[120](index=120&type=chunk) [Comparison of six months ended June 30, 2025 and 2024](index=23&type=section&id=Comparison%20of%20six%20months%20ended%20June%2030,%202025%20and%202024) - Revenue for the six months ended June 30, 2025, was **$0.5 million**, a new recognition from a **ReproNovo milestone payment**, with a corresponding **cost of revenue of $0.1 million**[126](index=126&type=chunk)[127](index=127&type=chunk) - **Total R&D expenses increased by $0.4 million (4.1%) to $9.3 million**, driven by a **$3.6 million increase for setrusumab**, partially offset by decreases for alvelestat and etigilimab due to completed manufacturing activities for alvelestat's Phase 3 study[129](index=129&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk) - **General and administrative expenses decreased by $1.0 million (7.3%) to $12.8 million**, primarily due to lower professional fees, with pre-commercial activities for setrusumab in Europe amounting to **$2.3 million**[133](index=133&type=chunk)[134](index=134&type=chunk) - **Interest expense decreased by $0.4 million** due to the **conversion of convertible loan notes**; a **net foreign exchange loss of $8.1 million** was recorded, compared to a **gain of $0.6 million** in the prior year, primarily due to a weakening U.S. dollar[136](index=136&type=chunk)[138](index=138&type=chunk) - The benefit from **R&D tax credit increased by $0.1 million to $0.9 million**, reflecting a higher level of qualifying expenditure[139](index=139&type=chunk) [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) - The Company anticipates its current cash resources will **fund operations and capital expenditures into 2027**, though **additional external funding will be required** to complete development and commercialization plans, potentially from non-dilutive sources, equity/debt financing, or collaborations[141](index=141&type=chunk)[155](index=155&type=chunk)[156](index=156&type=chunk) - Historically, operations have been financed through **equity issuances, convertible debt, warrants, and license/collaboration agreements**, raising approximately **$259.0 million in gross proceeds**[142](index=142&type=chunk) Cash Flow Summary (Six Months Ended June 30, in thousands) | Cash Flow Activity | 2025 ($'000) | 2024 ($'000) | Change ($'000) | | :----------------- | :----------- | :----------- | :------------- | | Operating | (15,980) | (15,895) | (85) | | Investing | (320) | (699) | 379 | | Financing | 288 | 46,781 | (46,493) | - **Net cash used in operating activities increased slightly by $0.1 million**, primarily due to the **absence of a $2.0 million D&O insurance claim reimbursement** received in 2024; **Net cash provided by financing activities decreased by $46.5 million** due to the **absence of a significant registered direct offering** in 2025, which provided **$46.2 million in 2024**[148](index=148&type=chunk)[150](index=150&type=chunk) - Future capital requirements depend on factors such as **setrusumab collaboration costs, manufacturing, regulatory approvals, commercialization activities, intellectual property, and potential new acquisitions or partnerships**[155](index=155&type=chunk) [Critical Accounting Estimates](index=28&type=section&id=Critical%20Accounting%20Estimates) - Management believes there are **no estimates and assumptions** in the unaudited condensed consolidated financial statements that rise to the level of **critical accounting estimates**, with **no significant changes** from those described in the **2024 Annual Report**[161](index=161&type=chunk)[162](index=162&type=chunk) [Recent accounting pronouncements](index=28&type=section&id=Recent%20accounting%20pronouncements) - **No recent accounting pronouncements or changes** in accounting guidance of significance to the Company have occurred beyond those previously included in the **2024 Annual Report**[163](index=163&type=chunk) [Safe Harbor](index=28&type=section&id=Safe%20Harbor) - This section refers to the **'Information Regarding Forward-Looking Statements'** at the beginning of the Quarterly Report, highlighting **risks and uncertainties** associated with forward-looking statements[164](index=164&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=28&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Mereo BioPharma Group PLC is not required to provide the information typically mandated by this item regarding market risk disclosures - The Company is **exempt** from providing quantitative and qualitative disclosures about market risk as it qualifies as a **'smaller reporting company'**[165](index=165&type=chunk) [Item 4. Controls and Procedures](index=28&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, with the participation of the CEO and CFO, evaluated the effectiveness of the company's disclosure controls and procedures as of June 30, 2025, concluding they were effective; no material changes to internal control over financial reporting occurred during the period - Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were **effective** as of June 30, 2025[166](index=166&type=chunk)[167](index=167&type=chunk) - **No changes in internal control over financial reporting** occurred during the three months ended June 30, 2025, that materially affected or are reasonably likely to materially affect internal control over financial reporting[168](index=168&type=chunk) PART II – OTHER INFORMATION [Item 1. Legal Proceedings](index=30&type=section&id=Item%201.%20Legal%20Proceedings) As of June 30, 2025, Mereo BioPharma Group PLC was not involved in any material legal proceedings - As of June 30, 2025, the Company was **not a party to any material legal proceedings**[170](index=170&type=chunk) [Item 1A. Risk Factors](index=30&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the Company's 2024 Annual Report - **No material changes** have occurred from the risk factors previously disclosed in the Company's **2024 Annual Report**[171](index=171&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=30&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds to report for the period - There were **no unregistered sales of equity securities or use of proceeds** to report[172](index=172&type=chunk) [Item 3. Defaults Upon Senior Securities](index=30&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the Company for the reporting period - This item is **not applicable**[173](index=173&type=chunk) [Item 4. Mine Safety Disclosures](index=30&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company for the reporting period - This item is **not applicable**[174](index=174&type=chunk) [Item 5. Other Information](index=30&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three-month period ended June 30, 2025 - **No directors or officers** adopted, modified, or terminated **Rule 10b5-1 or non-Rule 10b5-1 trading arrangements** during the three-month period ended June 30, 2025[175](index=175&type=chunk) [Item 6. Exhibits](index=31&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including certifications from the Chief Executive Officer and Chief Financial Officer, and Inline XBRL documents - The report includes **certifications from the Chief Executive Officer and Chief Financial Officer** (Exhibits 31.1, 31.2, 32.1, 32.2) and **Inline XBRL documents** (Exhibits 101.INS, 101.SCH, 104)[177](index=177&type=chunk) Signatures [Signatures](index=32&type=section&id=Signatures) The report was duly signed on August 12, 2025, by Denise Scots-Knight, Chief Executive Officer, and Christine Fox, Chief Financial Officer, on behalf of Mereo BioPharma Group PLC - The report was signed on **August 12, 2025**, by **Denise Scots-Knight (Chief Executive Officer)** and **Christine Fox (Chief Financial Officer)**[180](index=180&type=chunk)[182](index=182&type=chunk)

[Executive Summary & Corporate Update](index=1&type=section&id=Executive%20Summary%20%26%20Corporate%20Update) [Introduction & Key Headlines](index=1&type=section&id=Introduction%20%26%20Key%20Headlines) Mereo BioPharma reported Q2 2025 results, anticipating setrusumab Phase 3 data by year-end, with cash into 2027 - Mereo BioPharma announced **Q2 2025 financial results** and corporate highlights[1](index=1&type=chunk) - Phase 3 Orbit and Cosmic studies for **setrusumab** in **osteogenesis imperfecta** (**OI**) are expected to release data around **year-end 2025**[1](index=1&type=chunk) Cash Position (June 30, 2025) | Metric | Amount (Millions USD) | | :----- | :-------------------- | | Cash | $56.1 | - Existing cash is expected to support operations into **2027**[1](index=1&type=chunk) [CEO Commentary](index=1&type=section&id=CEO%20Commentary) CEO anticipates setrusumab Phase 3 results, notes alvelestat partnering, and confirms strong financials - CEO anticipates final analysis for **setrusumab's** Phase 3 Orbit and Cosmic studies around **year-end**, highlighting its potential to reduce fractures and improve functional parameters for **OI** patients[2](index=2&type=chunk) - Partnering discussions for **alvelestat**, a first-in-class oral small molecule for **AATD-lung disease**, are advancing, with preparations for Phase 3 initiation underway[2](index=2&type=chunk) - Prudent cash and resource management positions the company well to support operations into **2027** through key milestones[2](index=2&type=chunk) [Operational Highlights & Milestones](index=1&type=section&id=Operational%20Highlights%20%26%20Milestones) [Setrusumab (UX143) for osteogenesis imperfecta (OI) Program Update](index=1&type=section&id=Setrusumab%20(UX143)%20for%20osteogenesis%20imperfecta%20(OI)%20Program%20Update) Setrusumab Phase 3 studies advance to year-end 2025 final analyses; interim safety confirmed - Phase 3 Orbit and Cosmic studies for **setrusumab** are progressing towards final analyses around the end of **2025**[5](index=5&type=chunk) - The Data Monitoring Committee evaluated the Orbit study at an interim analysis in **July 2025**, confirming an acceptable safety profile and recommending continuation to final analysis[5](index=5&type=chunk) - Pre-commercial efforts continue in Europe, including the SATURN program to understand natural history and unmet medical needs in **OI**, and activities to define the treatment landscape[5](index=5&type=chunk) [Alvelestat (MPH-966) for alpha-1-anti-trypsin deficiency lung disease (AATD-LD) Program Update](index=1&type=section&id=Alvelestat%20(MPH-966)%20for%20alpha-1-anti-trypsin%20deficiency%20lung%20disease%20(AATD-LD)%20Program%20Update) Alvelestat's global Phase 3 study initiation is underway, with active partnering discussions - Activities to support the initiation of the planned single, global Phase 3 pivotal study for **alvelestat** are ongoing[5](index=5&type=chunk) - The Company continues to be actively engaged with multiple potential partners regarding development and commercialization of **alvelestat**[5](index=5&type=chunk) [Second Quarter 2025 Financial Review](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Review) [Revenue](index=3&type=section&id=Revenue) Mereo BioPharma recognized **$0.5 million** Q2 2025 revenue from a leflutrozole milestone, up from zero in 2024 Revenue (Three Months Ended June 30) | Metric | 2025 (Thousands USD) | 2024 (Thousands USD) | Change (YoY) | | :------ | :------------------- | :------------------- | :----------- | | Revenue | $500 | $0 | +$500 | - Revenue in **Q2 2025** included a **$0.5 million** one-time milestone payment for the achievement of a clinical milestone on **leflutrozole**[7](index=7&type=chunk) [Operating Expenses](index=1&type=section&id=Operating%20Expenses) Q2 2025 R&D expenses rose to **$5.4 million** (setrusumab), G&A fell to **$5.5 million** (reimbursement, fees) Research and Development (R&D) Expenses (Three Months Ended June 30) | Metric | 2025 (Millions USD) | 2024 (Millions USD) | Change (YoY) | | :----- | :------------------ | :------------------ | :----------- | | R&D | $5.4 | $4.9 | +$0.4 | - Increase in R&D expenses was primarily due to a **$2.2 million** increase for **setrusumab**, offset by decreases of **$1.5 million** for **alvelestat** and **$0.2 million** for **etigilimab**[4](index=4&type=chunk) - Increased **setrusumab** expenses were driven by manufacturing and supply agreement amounts with Ultragenyx, and ongoing real-world evidence and medical affairs activities in Europe[4](index=4&type=chunk) General and Administrative (G&A) Expenses (Three Months Ended June 30) | Metric | 2025 (Millions USD) | 2024 (Millions USD) | Change (YoY) | | :----- | :------------------ | :------------------ | :----------- | | G&A | $5.5 | $7.9 | -$2.4 | - Decrease in G&A expenses was primarily due to a **$1.9 million** reduction from reimbursement for ADR program expenses and lower professional fees[5](index=5&type=chunk)[6](index=6&type=chunk) [Net Loss](index=3&type=section&id=Net%20Loss) Q2 2025 net loss rose to **$14.6 million** due to foreign currency loss and R&D, partially offset by G&A and revenue Net Loss (Three Months Ended June 30) | Metric | 2025 (Millions USD) | 2024 (Millions USD) | Change (YoY) | | :------- | :------------------ | :------------------ | :----------- | | Net Loss | $(14.6) | $(12.3) | $(2.3) | - The increase in net loss was primarily due to a **$5.4 million foreign currency transaction loss** and increased R&D expenses[7](index=7&type=chunk) - The increase in net loss was partially offset by a decrease in G&A expenses and **$0.5 million** in revenue from a **leflutrozole** milestone payment[7](index=7&type=chunk) [Cash Position and Outlook](index=3&type=section&id=Cash%20Position%20and%20Outlook) Cash was **$56.1 million** as of June 30, **2025**, projected to fund operations into **2027** Cash and Cash Equivalents | Date | Amount (Millions USD) | | :------------- | :-------------------- | | June 30, 2025 | $56.1 | | Dec 31, 2024 | $69.8 | - The Company's guidance remains unchanged, expecting existing cash to fund clinical trials, operating expenses, and capital expenditure requirements into **2027**[8](index=8&type=chunk) - This guidance excludes any payments associated with a potential partnership for **alvelestat** or business development activity around non-core programs[8](index=8&type=chunk) [Share Information](index=3&type=section&id=Share%20Information) As of June 30, **2025**, Mereo BioPharma had **795 million** ordinary shares issued, equivalent to **159 million** ADSs Shares Issued (June 30, 2025) | Metric | Count | | :---------------------- | :------------ | | Ordinary Shares | 795,001,444 | | ADS Equivalents | 159,000,288 | | Ordinary Shares per ADS | 5 | [About Mereo BioPharma](index=3&type=section&id=About%20Mereo%20BioPharma) Mereo BioPharma is a clinical-stage biopharmaceutical company focused on rare diseases, with key candidates and strategic partnerships - **Mereo BioPharma** is a clinical-stage biopharmaceutical company focused on developing innovative therapeutics for rare diseases[10](index=10&type=chunk) - Key product candidates include **setrusumab** for **osteogenesis imperfecta** (**OI**) and **alvelestat** for **alpha-1 antitrypsin deficiency-associated lung disease** (**AATD-LD**)[10](index=10&type=chunk) - **Setrusumab** has received **Orphan Designation (EC, FDA)**, **PRIME designation (EMA)**, **Breakthrough Therapy designation (FDA)**, and **rare pediatric disease designation (FDA)**[10](index=10&type=chunk) - **Alvelestat** has received **Orphan Designation (EC, FDA)** and **Fast Track designation (FDA)** for **AATD-LD**[10](index=10&type=chunk) - The company has partnerships with Ultragenyx for **setrusumab** (potential milestones up to **$245M** plus royalties) and Feng Biosciences for **navicixizumab**[10](index=10&type=chunk) [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) This section contains standard forward-looking statements, which involve substantial risks and uncertainties - The press release contains forward-looking statements involving substantial risks and uncertainties, identified by words like '**believe**,' '**expect**,' '**anticipate**,' and similar expressions[11](index=11&type=chunk) - These statements are based on current expectations, beliefs, and assumptions, but actual results could differ materially due to known and unknown risks[11](index=11&type=

Core Viewpoint - Mereo BioPharma is advancing its clinical programs for setrusumab and alvelestat, with significant financial results and operational updates provided for the second quarter of 2025, indicating a focus on rare diseases and a strong cash position to support operations into 2027 [1][2][9]. Group 1: Clinical Development - Data from the Phase 3 Orbit and Cosmic studies for setrusumab in osteogenesis imperfecta (OI) is expected by the end of 2025, with ongoing patient dosing and a focus on reducing fractures and improving functional parameters [2][5]. - The Phase 3 studies are being conducted in partnership with Ultragenyx, which has confirmed an acceptable safety profile for setrusumab during an interim analysis [5]. - Pre-commercial efforts for setrusumab are ongoing in Europe, including the SATURN program to understand the natural history of OI and generate data for health economic models [5]. Group 2: Financial Performance - For the second quarter of 2025, total research and development expenses increased to $5.4 million, up from $4.9 million in the same period of 2024, primarily due to increased costs associated with setrusumab [4]. - General and administrative expenses decreased to $5.5 million from $7.9 million in the second quarter of 2024, attributed to reimbursements and lower professional fees [7]. - The net loss for the second quarter of 2025 was $14.6 million, compared to $12.3 million in the same period of 2024, influenced by a foreign currency transaction loss of $5.4 million [8]. Group 3: Cash Position and Guidance - As of June 30, 2025, the company had cash and cash equivalents of $56.1 million, down from $69.8 million at the end of 2024, but sufficient to fund operations into 2027 [9]. - The company maintains its guidance that existing cash will support committed clinical trials and operational expenses, excluding potential partnership payments for alvelestat [9]. Group 4: Shareholder Information - Total ordinary shares issued as of June 30, 2025, were 795,001,444, with total ADS equivalents of 159,000,288 [10].