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As soon as extra contained in the March 2019, I wrote up the merger between U.Okay. based mostly Mereo BioPharma (MREO) (~$100MM present market cap) and OncoMed Pharmaceuticals (beforehand traded as OMED) as a way to play the contingent worth rights that had been issued to OMED shareholders. The CVR a part of the thesis hasn’t labored out, a minimal of nonetheless, there are nonetheless potential milestones on Navicixizumab in play prior to the CVR expire on 4/23/24. Since closing out that commerce (I obtained MREO shares contained in the merger however offered instantly at $5.30, shares commerce for $0.95 immediately), I’ve checked in on the corporate typically on account of the CVRs naturally have Mereo counterparty danger. On the most recent of these have a look at ins, I obtained proper right here all by means of two Searching for Alpha write-ups (correct proper right here and correct proper right here) by Dalius Taurus of SSI that piqued my curiosity.
Mereo BioPharma has six product candidates, 4 bought from bigger biopharmaceutical firms (Novartis and AstraZenca) that beforehand obtained appreciable funding contained in the pre-clinical stage however had been now not strategic priorities and two product candidates inherited from the OncoMed acquisition. MREO’s market cap is roughly $100MM (MREO trades as an ADR, every MREO share equals 5 bizarre shares) and shutting reported a money stability of $105MM (present conversion worth, MREO experiences in GBP) as of 2021 12 months finish, after some money burn, it possibly has a small constructive enterprise worth.
Similar to most pre-revenue biotechs right now, Mereo’s retailers have misplaced their persistence funding enchancment pipelines, Rubric Capital (~14% proprietor) has stepped up as an activist to cease the money burn by making an attempt to reconstitute the board of administrators. Rubric has its eyes on gaining administration of the board, then monetizing belongings and returning money to shareholders in what parts to a liquidation. Rubric is run by David Rosen, who was a portfolio supervisor at SAC Capital (now Point72) prior to occurring his personal in 2016. It simply so occurs that the second largest MREO shareholder is Point72 with 8.6%, possibly good to Rubric, additional rising the probability that Rubric helpful properties board seats contained in the proxy promoting advertising marketing campaign as the present board/administration owns an insignificant quantity.
Beneath is the as soon as extra of the envelope valuation math offered by Rubric of their 6/9/22 letter:
I’ve little methodology of confirming or refuting their valuation, however even after they’re flawed by half the inventory is roughly a double from correct proper right here. Mereo’s most revered asset based mostly totally on Rubric is their partnership with Ultragenyx (RARE) on Setrusumab (initially bought from Novartis) which is a therapy for a weird bone illness, osteogenesis imperfecta (“OI”), that in the mean time has no accepted therapies. Mereo retained the financial rights for Setrusumab contained in the UK and Europe, in each different case Rubric is ascribing no worth to Mereo’s utterly completely different product candidates, together with Alvelestat which is a therapy for a weird lung illness present course of scientific trials.
Alvelestat is the one product candidate that obtained proper right here from AstraZenenca (AZN). In June, which to be honest is a lifetime before now on this market, The Circumstances of London reported that AZN was contemplating a bid for MREO:
Phrase is that it’s contemplating a bid for Mereo Biopharma, a specialist in most cancers and strange sicknesses.
Mereo, which has developed a portfolio of six clinical-stage product candidates, is predicated in London however listed on the Nasdaq commerce in New York and lists AstraZeneca amongst its companions alongside Novartis, OncXerna and Ultragenyx. There are strategies {{that a}} minimal of 1 utterly completely different suitor, possibly one completely different companion, may also be on the prowl.
Shares in Mereo have been a stinker, shedding practically 80 per cent of their worth beforehand 12 months, though they jumped by 8.5 per cent to 69 cents on Wednesday, valuing the corporate at $81 million. Analysts have a indicate purpose value of $7 and the give attention to is that Mereo would settle for $5, equating to $500 million together with American depositary receipts or ADRs. Evercore and Citigroup are stated to be concerned as advisers.
This textual content material obtained proper right here out all through the an similar time on account of the Rubric letter, they may probably be associated, or it might probably be coincidence. Even when the Setrusumab valuation is overstated, there might probably be utterly completely different belongings worth one issue correct proper right here. Rubric and Mereo’s administration have been going as soon as extra forth on Rubric’s request for a selected assembly, Mereo seemingly was citing each technicality why Rubric’s request was ineligible however lastly relented and the precise assembly is now set to occur someday in November. Plainly a mannequin new board shall be put in place shortly, we’ll see what occurs from there. I purchased a small place.
Disclosure: I personal shares of MREO and a few non-tradable OMED CVRs
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