Mereo BioPharma(MREO) - 2025 Q4 - Annual Report

Clinical Development - The company has developed late-stage clinical product candidates, including setrusumab for osteogenesis imperfecta (OI) and alvelestat for severe alpha-1 antitrypsin deficiency-associated lung disease (AATD-LD), both of which have received orphan designations from regulatory authorities [533]. - The company has successfully completed large, randomized Phase 2 clinical trials for four product candidates and announced results from two Phase 3 studies for setrusumab in OI [534]. - Research and development expenses are expected to include costs associated with the preparation of alvelestat for the Phase 3 study, including regulatory and manufacturing activities [541]. - The company anticipates costs related to the collaboration with Ultragenyx for setrusumab and potential future clinical trials for alvelestat [593]. Financial Performance - Revenue for the year ended December 31, 2025 was $0.5 million, a one-time milestone payment from ReproNovo, compared to no revenue in 2024 [565]. - Total operating expenses decreased by $3.2 million from $47.4 million in 2024 to $40.1 million in 2025 [568]. - Research and development (R&D) expenses decreased by $3.2 million from $20.9 million in 2024 to $17.8 million in 2025, primarily due to reductions in expenses for alvelestat and etigilimab [568][569]. - General and administrative expenses decreased by $3.4 million from $26.4 million in 2024 to $23.0 million in 2025, attributed to lower cash bonus accruals and professional fees [571]. - Interest income decreased by $0.9 million from $3.0 million in 2024 to $2.2 million in 2025 due to lower interest rates and cash balances [574]. - The accumulated deficit as of December 31, 2025 was $501.0 million, with expectations of continued significant operating losses [589]. Taxation and Losses - As of December 31, 2025, the company reported cumulative carry-forward U.K. tax losses of $64.1 million and U.S. federal tax losses of approximately $67.0 million, with $20.5 million of these losses able to be carried forward indefinitely [553][561]. - The U.K. corporation tax rate applied for 2025 was 25%, and the company has not paid U.K. corporation tax since inception, except in 2021 [560]. - The company has recorded the entire benefit from U.K. R&D tax credits as a benefit included in net loss before income tax, which is not reflected as part of the income tax provision [556]. - The company expects to claim under the Merged Scheme for R&D tax credits from 2025 onward, as it does not qualify as an R&D intensive company for 2025 [557]. Cash Flow and Funding - Net cash used in operating activities was $31.0 million in 2025, a decrease of $1.9 million from $32.8 million in 2024 [587]. - Net cash provided by financing activities was $0.3 million in 2025, a decrease of $45.8 million from $46.1 million in 2024, reflecting no significant financing activities in 2025 [588]. - The company anticipates needing additional external funding to complete development plans and potentially commercialize selected rare disease products [580]. - The company may need to obtain substantial additional funds to achieve business objectives, which may not be available on acceptable terms [595]. - As of December 31, 2025, the company held cash and cash equivalents of $41.0 million [607]. - The company expects existing cash and cash equivalents to fund clinical trials and operating expenses into mid-2027 [591]. Currency and Inflation - The foreign currency translation adjustment for 2025 was a gain of $8.0 million, compared to a loss of $1.4 million in 2024, reflecting changes in currency value impacts [579]. - For the year ended December 31, 2025, there was an unrealized gain of $8.0 million on foreign currency translation compared to an unrealized loss of $1.4 million for the year ended December 31, 2024 [608]. - The company has not entered into foreign exchange contracts to hedge against fluctuations but maintains cash in U.S. dollars for anticipated commitments [609]. - Inflation has increased operating expenses, but it has not had a material effect on the company's financial condition during the year ended December 31, 2025 [610].