PART I – FINANCIAL INFORMATION Item 1. Financial Statements 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 Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 ($'000) | December 31, 2024 ($'000) | Change ($'000) | Change (%) | | :-------------------------------- | :--------------------- | :------------------------ | :------------- | :--------- | | Cash and cash equivalents | 56,125 | 69,802 | (13,677) | -19.59% | | Total current assets | 61,421 | 74,763 | (13,342) | -17.85% | | Total assets | 62,631 | 76,390 | (13,759) | -18.01% | | Total current liabilities | 7,557 | 13,848 | (6,291) | -45.43% | | Total liabilities | 8,454 | 15,421 | (6,967) | -45.18% | | Total shareholders' equity | 54,177 | 60,969 | (6,792) | -11.14% | Condensed Consolidated Statements of Operations and Comprehensive Loss Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands, except per share) | Metric (3 Months Ended June 30) | 2025 ($'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 ($'000) | Change (%) | | :------------------------------ | :----------- | :----------- | :------------- | :--------- | | Revenue | 500 | — | 500 | N/A | | Cost of revenue | (132) | — | (132) | N/A | | Research and development | (9,303) | (8,939) | (364) | 4.07% | | General and administrative | (12,766) | (13,777) | 1,011 | -7.34% | | Loss from operations | (21,701) | (22,716) | 1,015 | -4.47% | | Net loss | (27,503) | (21,208) | (6,295) | 29.68% | | Loss per share – basic and diluted | (0.03) | (0.03) | 0.00 | 0.00% | Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity (Six Months Ended June 30) | 2025 ($'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 - 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)235859 Notes to Condensed Consolidated Financial Statements 1. Nature of business - 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 2. Basis of presentation and summary of significant accounting policies - 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 $56.1 million to fund operations for at least twelve months283234 3. Recent accounting pronouncements - There have been no recent accounting pronouncements or changes in accounting guidance of significance to the Company beyond those previously disclosed in the 2024 Annual Report36 4. Fair value measurement Financial Assets and Liabilities Measured at Fair Value (in thousands) | Item | As of June 30, 2025 ($'000) | As of December 31, 2024 ($'000) | | :---------------------------------- | :-------------------------- | :----------------------------- | | Cash equivalents (money market funds) | 13,457 | N/A | | Warrant liabilities | 545 | 821 | 5. Prepaid expenses and other current assets Prepaid Expenses and Other Current Assets (in thousands) | Item | June 30, 2025 ($'000) | December 31, 2024 ($'000) | | :--------------------------------- | :-------------------- | :------------------------ | | VAT receivable | 496 | 464 | | Prepaid research and development | 139 | 201 | | Milestone payment receivable | 500 | — | | Security deposits | 402 | 378 | | Prepaid insurance premiums | 185 | 1,003 | | Prepaid general and administrative | 823 | 129 | | Total | 2,545 | 2,175 | 6. Property and equipment, net Property and Equipment, Net (in thousands) | Item | June 30, 2025 ($'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, 202542 7. Leases - 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 $0.3 million for the six months ended June 30, 20254344 Operating Lease Liabilities Maturity Analysis (in thousands) | Year Ending December 31 | As of June 30, 2025 ($'000) | | :---------------------- | :-------------------------- | | 2025 | 418 | | 2026 | 209 | | Total undiscounted payments | 627 | | Less: Present value discount | (26) | | Lease liability | 601 | 8. Other current liabilities 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 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 - 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 million525355 - 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 $0.6 million respectively in 2024, due to its conversion54 11. Warrant liability Warrant Liabilities (in thousands) | Metric | 2025 ($'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 model5657 12. Shareholders' Equity 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 - 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 $0.1 million payable to Novartis616263 14. Share based compensation Share-Based Compensation Expense (in thousands) | Plan (3 Months Ended June 30) | 2025 ($'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 $6.9 million, expected to be recognized over a weighted-average period of 1.7 years66 15. Loss per share Loss Per Share (in thousands, except per share amounts) | Metric (3 Months Ended June 30) | 2025 ($'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-dilutive8182 16. Commitments and contingencies - 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 alvelestat84858890 - Manufacturing commitments with CMOs totaled $0.7 million as of June 30, 2025, an increase from $0.5 million at December 31, 2024; the Company also has a manufacturing and supply agreement with Ultragenyx for setrusumab9294 - As of June 30, 2025, the Company was not a party to any material litigation and had no material contingency reserves95 17. Related party disclosures - There were no reportable related party transactions during the three and six months ended June 30, 2025 and 202496 18. Segment information - The Company operates as a single segment focused on developing rare disease therapies, with performance assessed based on consolidated net loss before income tax9798 R&D Expenses by Product Development Program (in thousands) | Program (3 Months Ended June 30) | 2025 ($'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 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 - 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 pathways102103104 Recent Developments - 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 concurrently105 Results of Operations Comparison of three months ended June 30, 2025 and 2024 - 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 million108109 - 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 expenses111112113114 - 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 expenses115116 - 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. dollar118120 Comparison of six months ended June 30, 2025 and 2024 - 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 million126127 - 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 study129130131132 - 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 million133134 - 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. dollar136138 - The benefit from R&D tax credit increased by $0.1 million to $0.9 million, reflecting a higher level of qualifying expenditure139 Liquidity and Capital Resources - 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 collaborations141155156 - Historically, operations have been financed through equity issuances, convertible debt, warrants, and license/collaboration agreements, raising approximately $259.0 million in gross proceeds142 Cash Flow Summary (Six Months Ended June 30, in thousands) | Cash Flow Activity | 2025 ($'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 2024148150 - Future capital requirements depend on factors such as setrusumab collaboration costs, manufacturing, regulatory approvals, commercialization activities, intellectual property, and potential new acquisitions or partnerships155 Critical Accounting Estimates - 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 Report161162 Recent accounting pronouncements - No recent accounting pronouncements or changes in accounting guidance of significance to the Company have occurred beyond those previously included in the 2024 Annual Report163 Safe Harbor - 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 statements164 Item 3. Quantitative and Qualitative Disclosures About Market Risk 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 Item 4. Controls and Procedures 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, 2025166167 - 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 reporting168 PART II – OTHER INFORMATION Item 1. Legal Proceedings 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 proceedings170 Item 1A. Risk Factors 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 Report171 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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 report172 Item 3. Defaults Upon Senior Securities This item is not applicable to the Company for the reporting period - This item is not applicable173 Item 4. Mine Safety Disclosures This item is not applicable to the Company for the reporting period - This item is not applicable174 Item 5. Other Information 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, 2025175 Item 6. Exhibits 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 Signatures 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)180182
Mereo BioPharma(MREO) - 2025 Q2 - Quarterly Report