Mereo BioPharma. This name doesn’t ring a bell? From now on, you should keep it in mind as it could rapidly become a rising star on the European Biotech scene. Launched five months ago, the company has already three candidates in phase II and just raised $119m (approximately €108m) from private investors! 

Mereo has everything needed to rapidly put a new drug on the market. The newborn company acquired a portfolio of three innovative clinical-stage development programmes from Novartis. In exchange, Novartis gains an equity stake in Mereo and milestones payement on future commercial successes.

Mereo’s initial mid-stage portfolio comprises three novel products. Each programme has a comprehensive dataset, including proof of concept clinical studies. Mereo’s pipeline comprises BPS-804, a monoclonal antibody to improve bone density (and thereby reduce fractures) in the orphan disease osteogenesis imperfecta, commonly known as brittle bone syndrome; BCT-197, an orally active p38 MAP kinase inhibitor being developed as first-line therapy against an acute pulmonary disease; and BGS-649 a novel orally active aromatase inhibitor aiming at normalizing the testosterone level in obese men with hypogonadotrophic hypogonadism.

Mereo will not gets its hands dirty to bring these products on the market. The company has developed a strategic partnership with ICON, a leading global contract research organisation (CRO), that will take in charge the clinical development of Mereo’s portfolio. The relationship has been structured to enable Mereo to expand its product portfolio without the addition of significant internal resources. Meaning, Mereo will operate as a semi-virtual company, a common model for biotech companies.

To pay the bill to ICON, Mereo has also gathered a fair amount of cash from high-standing investors Woodford Investment Management –one of the most influential Biotech investor in Europe– and Invesco Perpetual. In addition, Novartis intends to make a cash investment in Mereo in future financings.

Mereo’s team, lead by former members of Phase4 Partners, a healthcare-focused venture capital firm will now manage the development of drugs that doesn’t fit anymore in Novartis’ pipeline. With significant constraints and rich pipelines it has become increasingly difficult for many pharmaceutical companies to fully fund and advance development of all their drug candidates, especially beyond Phase 2. Mereo has been formed to take advantage of this situation.

The risk-sharing move made by Novartis is becoming increasingly commonplace among big pharmaceutical companies. Last December, Axovant acquired a scrapped project from GlaxoSmithKline for $5 million. Four months later, the company announced its initial public offering and is now worthing more than $1.5Bn. With the last pipeline reorganizations seen in big pharmaceutical companies, this new risk-sharing strategy could become even more common for pharma companies willing to get rid of bulky projects.

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