Proposed Combination of Mereo BioPharma and OncoMed Pharmaceuticals

To be effected by an all-stock transaction plus issuance of Contingent Value Rights (“CVRs”); completion expected H1 2019 

Deal broadens asset and shareholder base and extends Enlarged Group cash runway 

Enlarged Group expects to launch new NASDAQ-Listed ADR programme 

LONDON, UK and REDWOOD CITY, CA, USA I December 5, 2018 I Mereo BioPharma Group plc (AIM: MPH) (“Mereo”, the “Company” or the “Group”), the clinical stage UK based biopharmaceutical company focused on rare diseases, and OncoMed Pharmaceuticals, Inc. (NASDAQ: OMED) (“OncoMed”), a NASDAQ listed oncology-focused clinical stage biopharmaceutical business, today announce the proposed combination of Mereo and OncoMed (the “Transaction”). The Transaction has been unanimously approved by the Board of Directors of each company. 


The Transaction, on completion, creates a combined business (the “Enlarged Group”) with: 

  • A diversified combined portfolio of seven assets, resulting in an increased number of potential near-term catalysts with a core focus remaining on Mereo’s strategy to target orphan diseases
    • Three significant Phase 2 clinical trial readouts from Mereo’s core orphan products for osteogenesis imperfecta and alpha-1 antitrypsin deficiency in 2019, respectively
      • BPS-804 for osteogenesis imperfecta Phase 2b dose ranging study. Open-label six-month data is expected on the top dose in H1 2019, 12-month dose ranging data expected in H2 2019
      • MPH-966 for the treatment of alpha-1 antitrypsin deficiency (AATD) Phase 2 dose ranging study top line data expected in H2 2019
    • Potential partnerships with Mereo’s BCT-197 and BGS-649 programs following the successful completion of Phase 2 trials in the last 12 months
    • Potential partnership with OncoMed’s navicixizumab program which is currently in a Phase 1b clinical study and has shown encouraging data in heavily pre-treated ovarian cancer patients to date
    • Ongoing collaboration with Celgene Corporation (“Celgene”) with an option to license OncoMed’s etigilimab (anti-TIGIT) program 
  • A strong combined cash position extending the current operational runway into 2020
    • Cash resources[1], on a proforma combined basis, were US$115.5 million as of September 30, 2018, incorporating OncoMed’s cash resources1 of US$70.9 million as of September 30, 2018
    • Potential for runway to be extended significantly both through partnering deals and through the possible etigilimab option exercise by Celgene 
  • A NASDAQ American Depositary Receipt (“ADR”) Level III listing, in addition to Mereo’s existing AIM listing, and a diversified international shareholder base including a number of US institutional specialist healthcare investors 
  • The combined skills and expertise of Mereo and a select number of OncoMed employees 
  • An established US operational base in Redwood City, California 
  • An expanded Board with two new biopharmaceutical industry-experienced OncoMed independent non-executive directors 

To effect the Transaction, on completion, which is expected in H1 2019: 

  • Subject to potential adjustment as described below, based upon an OncoMed net cash balance of US$38 million at completion, current Mereo shareholders are expected to own approximately 75% of the issued share capital of the Enlarged Group, while current OncoMed shareholders are expected to own approximately 25% of the issued share capital of the Enlarged Group (through their holding of ADRs) 
  • In addition, OncoMed shareholders will receive CVRs representing the right to receive future conditional cash payments and additional ADRs based on the achievement of certain milestones relating to OncoMed assets 

Commenting on the announcement, Mereo's Chief Executive Officer, Dr Denise Scots-Knight, said: “I am delighted to announce our proposed combination with OncoMed. The Transaction allows us to broaden our asset base, including strengthening our cash position to enable us to progress beyond our key clinical milestones.  

We believe that our plan to initiate a US ADR programme on NASDAQ, in addition to the continued listing of our ordinary shares on AIM, will facilitate a deep engagement with the broadest range of appropriate investors. 

During 2019 we continue to expect several value inflection points, including data from our Phase 2b dose ranging study for BPS-804 for osteogenesis imperfecta and data from our Phase 2 dose ranging study for MPH-966 for alpha-1 antitrypsin deficiency both being run in the US and Europe. Alongside these milestones, we are also progressing partnering discussions for our other two products, BCT-197 for acute exacerbations of COPD and BGS-649 for hypogonadotropic hypogonadism. We also intend to begin partnering discussions for OncoMed’s navicixizumab programme, which has generated encouraging clinical data in ovarian cancer that should guide further clinical development.” 

Commenting on the announcement, OncoMed’s President and Chief Executive Officer, Dr John Lewicki, said: “We believe this is a value-enhancing transaction for both companies, forming an organization with a much expanded pipeline of diversified assets and strengthened capabilities and resources. We look forward to working closely with the Mereo team to finalize the transaction and assist in assimilation of the combined assets.”  

Principal Terms of the Transaction 

Pursuant to the terms of an agreement and plan of merger and reorganization, unanimously approved by each party's Board of Directors, each share of OncoMed issued and held immediately prior to the Transaction becoming effective will be converted into the right to receive: (i) Mereo ADRs pursuant to an exchange ratio described in more detail below and (ii) one CVR representing the contingent right to receive certain cash payments and Mereo ADRs upon the achievement of certain milestones relating to etigilimab and navicixizumab. OncoMed will become a 100% owned subsidiary of Mereo on closing of the Transaction. 

Subject to certain adjustments to the exchange ratio as described further below, based upon an OncoMed net cash balance of US$38 million at closing of the Transaction, Mereo is expected to issue approximately 23.7 million new ordinary shares ("Ordinary Shares") which will be deposited with a depositary in order to issue Mereo ADRs to current OncoMed shareholders (based on a ratio of one Mereo ADR for every five new Ordinary Shares issued), and current OncoMed shareholders are expected to own approximately 25% of the issued share capital of the Enlarged Group immediately following completion of the Transaction. The Ordinary Shares underlying the Mereo ADRs to be issued in exchange for each OncoMed share in the Transaction represent an aggregate value of approximately US$57.4 million (based on the Mereo share price of 190 pence at close on 4 December 2018) and a premium of 34% over the OncoMed market capitalisation of US$42.9 million on 4 December 2018. 

The ADR consideration to be issued to OncoMed shareholders in connection with the Transaction is subject to the following adjustments: 

  • The aggregate number of ADRs to be issued to OncoMed shareholders is based on an exchange ratio that is subject to adjustment based on OncoMed’s net cash balance at completion. OncoMed shareholders will receive a greater or lesser number of ADRs if OncoMed’s net cash balance at completion is greater or less than US$38 million, respectively, with OncoMed shareholders receiving a proportionally lesser number of Mereo ADRs for each dollar of OncoMed net cash below US$36.5 million. 
  • If the milestone relating to etigilimab set forth in the CVR and further described below is satisfied prior to closing of the Transaction, the number of Mereo ADRs to be issued to OncoMed shareholders at closing of the Transaction will be increased as a result of the cash amount received by OncoMed from Celgene in connection with the exercise of such option. In those circumstances the CVR would no longer include a milestone relating to etigilimab. 

Each OncoMed shareholder will also receive a CVR for each OncoMed share held immediately prior to completion representing the right to receive: 

  • Additional Mereo ADRs in the event that Celgene exercises its option in respect of etigilimab and pays OncoMed the associated milestone payment of US$35 million prior to 31 December 2019. The number of new Mereo ADRs to be issued in such case will be based on an exchange ratio calculated by dividing the net milestone amount received by Mereo from Celgene by the prevailing share price of Mereo following the announcement of the exercise of such option, subject to the limitation that in no event will Mereo be obligated to issue ADRs representing underlying Ordinary Shares (both at completion under the merger agreement and when combined with ADRs to be issued pursuant to the CVRs) which represent more than 40% of the issued share capital of the Enlarged Group (with such limit calculated by reference to the issued share capital of Mereo immediately prior to completion); and 
  • Additional cash consideration equal to 70% of the net proceeds of milestone payments actually received by Mereo within a period of 5 years following completion of the Transaction from certain future partnership or investment transactions in relation to navicixizumab, subject to an aggregate cap of approximately US$80 million. The balance of any milestone payments received would be retained by Mereo. 

Board, Management and Employees 

Following completion, the Mereo Board of Directors will be expanded to 10 persons to accommodate the appointment of current OncoMed directors Michael Wyzga and Dr Deepa Pakianathan as independent non-executive directors.  Michael Wyzga currently serves as a Chief Financial Officer of Aura Biosciences, Inc. and was formerly President and Chief Executive Officer of Radius Health, Inc. and the Chief Financial Officer and Executive Vice President of Genzyme Corporation.  Dr Deepa Pakianathan is a Managing Member at Delphi Ventures and serves on the board of directors of Alder Biopharmaceuticals, Inc., Karyopharm Therapeutics, Inc., and Calithera Biosciences, Inc. 

The existing Mereo Directors will continue to serve in their current positions. The Board will thus be comprised of eight non-executive and two executive Directors. Dr. John Lewicki, Chief Executive Officer of OncoMed, will continue as an advisor to Mereo as the Company explores partnership opportunities for the navicixizumab program. 

Following completion of the Transaction, it is proposed that new service contracts will be entered into with each of the new non-executive directors. The terms of these service contracts are still subject to negotiation but it is anticipated that they will be substantially similar to the service contracts of the existing non-executive directors of Mereo. Pursuant to Schedule 4 of the AIM Rules, Mereo will confirm the details of the service contracts once agreed. 

OncoMed is undertaking a restructuring that will involve a significant reduction in its workforce, while maintaining a core employee base to meet the obligations for the ongoing OncoMed operations and clinical programs in an efficient manner and will include the retention of key employees who will join Mereo after the completion of the Transaction. 

Other Information 

The Transaction constitutes a substantial transaction for Mereo for the purposes of Rule 12 of the AIM Rules. 

Application is expected to be made at the time of completion of the Transaction to the London
Stock Exchange for the new Ordinary Shares in respect of the Transaction to be admitted to trading
on AIM and which are to be issued to OncoMed shareholders by means of the issue of a
proportionate number of Mereo ADRs expected to be admitted to trading on the NASDAQ Stock Market LLC trading platform ("NASDAQ"). 

The Transaction is subject to customary closing conditions including, among other things, approval of the transaction by shareholders of OncoMed, the listing of the Mereo ADRs on NASDAQ and the admission to trading of the Ordinary Shares to be issued in connection with the Transaction on AIM. 

The Company expects to publish and file with the SEC a Registration Statement on Form F-4, which will include a proxy statement of OncoMed that also constitutes a prospectus of Mereo under SEC filing rules.  

In total, the Company has received irrevocable undertakings to support the Transaction of Mereo shareholders in respect of holdings totalling, in aggregate, 36,949,063 Mereo Ordinary Shares, representing 51.9% of Mereo’s existing Ordinary Shares currently in issue.  In total, OncoMed has received irrevocable undertakings to vote in favour of the resolutions to effect the Transaction to be proposed at the general meeting of OncoMed shareholders in respect of holdings totalling, in aggregate, 4,130,907 OncoMed shares of common stock, representing 10.69% of OncoMed’s outstanding shares of common stock.   

Analyst and Investor Call Information 

Mereo's Chief Executive Officer, Dr Denise Scots-Knight, and OncoMed’s President and Chief Executive Officer, Dr John Lewicki, will host a live joint conference call and webcast at 8:30 a.m. Eastern Time (1:30 p.m. GMT) today to discuss the combination of Mereo and OncoMed. 

The live webcast and a replay may be accessed by visiting Mereo’s website at or OncoMed’s website at Please connect to the website at least 15 minutes prior to the live webcast to ensure adequate time for any software download that may be needed to access the webcast. Alternatively, please call (866) 688-2942 (U.S.), 0800 028 8438 (UK) or (561) 569-9224 (international) to listen to the live conference call. The conference ID number for the live call is 4787476. Please dial in approximately 10 minutes prior to the call. Telephone replay will be available approximately two hours after the call. To access the replay, please call (855) 859-2056 (U.S.) or (404) 537-3406 (international). The conference ID number for the replay is 4787476. The telephone replay will be available until December 12, 2018. 

About Mereo 

Mereo is a biopharmaceutical company focused on the development and commercialization of innovative therapeutics that aim to improve outcomes for patients with rare diseases. Mereo’s strategy is to selectively acquire product candidates that have already received significant investment from pharmaceutical companies and that have substantial preclinical, clinical and manufacturing data packages. Each of Mereo’s four product candidates has previously generated positive clinical data for Mereo’s target indication or in a related indication. Since inception Mereo has commenced large, randomized, placebo-controlled Phase 2 clinical trials for all four of the product candidates:

  • BPS-804 for osteogenesis imperfecta (OI). The Company recently announced completion of enrolment with 112 adult patients in a Phase 2b dose ranging study with some initial data expected in the H1 2019 and top-line dose ranging data in late 2019. A pediatric Phase 3  study design has also been approved by the EMA. BPS-804 has orphan designation in the US and EU and has been accepted into the PRIME and Adaptive Pathways in EU;
  • MPH-966 for alpha-1 antitrypsin deficiency (AATD). The Company recently announced first patient in in a Phase 2 dose ranging study in the US with data expected in late 2019;
  • BCT-197 for acute exacerbations of COPD (AECOPD). The Company announced positive top-line Phase 2 data in December 2017; and
  • BGS-649 for hypogonadotropic hypogonadism (HH). The Company announced positive top-line Phase 2b data in March 2018.
  • As at September 30, 2018 Mereo had (unaudited) total cash resources[2] of approximately US$44.6 million 

About OncoMed 

OncoMed is a US-based clinical stage biopharmaceutical company focused on discovering and developing novel anti-cancer therapeutics. OncoMed currently has three therapeutic candidates in development (Phase 1/1b).

 OncoMed currently has a strategic alliance with Celgene and milestone payments and investments from this collaboration (and prior collaborations with GlaxoSmithKline LLC and Bayer Pharma AG) have supported the advancement and growth of its product pipeline. 

OncoMed’s product candidates include: 

  • Etigilimab, an antibody that targets the T-cell immunoreceptor with immunoglobulin and ITIM domains (“TIGIT”), an inhibitory receptor that is thought to stop T-cells from attacking tumor cells. The company is currently enrolling a single agent Phase 1a and a Phase 1b portion in combination with nivolumab in the treatment of patients with solid tumors who have progressed after treatment with anti-PD1 or anti-PD-L1. This program is part of OncoMed’s collaboration with Celgene;
  • Navicixizumab (“NAVI”), a bispecific monoclonal antibody that targets and inhibits both Delta-like ligand 4, “DLL4”, and vascular endothelial growth factor, “VEGF.” OncoMed is currently conducting a Phase 1b clinical trial of NAVI in combination with paclitaxel in patients with heavily pretreated platinum-resistant ovarian cancer following a successful Phase 1a study; and
  • GITRL-Fc, a fusion protein comprising a member of the tumor necrosis factor (TNF) family of ligands that functions to activate the co-stimulatory receptor GITR (glucocorticoid-induced tumor necrosis factor receptor) to enhance T-cell modulated immune responses. A Phase 1a clinical trial of OncoMed’s GITRL-Fc therapeutic candidate will complete enrollment before the end of 2018. 

OncoMed had revenue of approximately US$36.0 million and loss before tax of approximately US$40.1 million for the year ended December 31, 2017, and revenue of approximately US$34.2 million and loss before tax of approximately US$3.8 million for the nine months ended September 30, 2018. 

As at September 30, 2018, OncoMed had gross assets of approximately US$77.2 million and total cash resources1 of US$70.9 million. 

[1] Cash resources defined as cash and cash equivalents and short-term investments and represent unaudited balances as at September 30, 2018 converted where appropriate to USD at prevailing rates

SOURCE: Mereo BioPharma

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