Thank you for joining me at the second day of the Needham Healthcare Conference. My name is Gil Blum, and I'm a Senior Biotech Analyst here at Needham & Company. It is my pleasure to have with me today, pretty much the full Mereo management team, led by Denise, the CEO of Mereo. As a reminder, for any viewers who are watching through the conference portal, you can submit questions at any time through the ask a question box below the video link. A good place to start, as an introduction, maybe you can walk us through some recent developments for the company. Yeah. Thanks, Gil, and thanks for hosting us here today. W e've made tremendous progress over the last seven months, and it really started with the ORBIT phase II for setrusumab in osteogenesis imperfecta, which was reported out in October by ourselves and our partner, Ultragenyx. Y ou know, this trial showed for first time that setrusumab could reduce the annualized fracture rate in young children and young adults by 67%. I think this data answered a lot of questions. This was after only six months treatment, and it answered a lot of questions because we'd had a lot of discussion around, you know, setrusumab, which increases BMD, we've shown that with a lot of stat sig in a phase II of a study in adults, and how that BMD change would actually translate into reduction in fractures in osteogenesis imperfecta. You know, it's been seen, everybody believes that happens in osteoporosis, but would that translate in OI? I ndeed, it did. T hat really de-risked the program, de-risked the ongoing phase III studies. I n parallel with that, there was also tremendous progress on enrollment in the phase III ORBIT study, and the phase III COSMIC study in very young children and young adults, which I know we're going to come on to. W e're expected to be reporting full enrollment alongside our partner there, Ultragenyx, very shortly here. T hat's on the clinical side. We've also been making really great progress on laying the groundwork in Europe here, which obviously is the territory that we own. W e've already identified 5,000 pediatric patients, and 5,000 adult patients who could be eligible for treatment with setrusumab. Now, we know that there are potentially 1,000 more patients from the epidemiology, who could be available for treatment. Y ou know, we're super excited now about the market opportunity with setrusumab here in Europe, which we believe could be significantly higher than Crysvita for XLH, s o that's setrusumab. Then for alvelestat, again, in Q3, Q4, we showed for the first time in early-stage patients who haven't lost a lot of their lung function that, and who are not eligible for treatment with augmentation in many cases or eligible for other clinical studies, in AATD lung disease, w e actually showed in that group of patients that alvelestat could statistically significantly improve the PRO, SGRQ, St. George's Respiratory Questionnaire, which is validated in COPD. We showed that in a 12 -week study, alvelestat could improve the SGRQ score in these early-stage AATD patients. Alongside that, we had protracted discussions that again, I know we're going to come on to, with the FDA following our end of phase II meeting. We finally got clarity in the minutes from the meeting that we had with the Division of Clinical Outcomes Assessment and the division. We got that clarity in January, and that's enabled us to now really push forward with the partnering process for alvelestat and also with the phase III planning. T hose are the two key programs. That's the major progress we've made over the last seven months. Okay, excellent. I do want to start with setrusumab. I know we touched on the epidemiology here a little bit, but it might be worth for our viewers to remind them kind of what the disease burden looks like, what is the standard of care and how would you define the current unmet need? Yeah. I mean, the prevalence is around, you know, 60,000, and that's across U.S. and Europe. I t's not quite evenly split, but it's almost evenly split. Y ou know, there's this Sillence c lassification, which is by phenotype. Y ou know, that's the three phenotypes, type one, type three, and type four represent around 85% of the patient population. Type 2, which represents a small percent is perinatally lethal. T hose babies typically die, you know, in utero or maybe just after they're born, from respiratory problems. Type I is kind of interesting because you know, you see a lot of publications that type one is mild. The patients don't fracture a lot, they look, you know, like a normal individual. In fact, it's very heterogeneous. Y ou know, we've met type one patients who actually are in a wheelchair, and they fracture a lot. I t's a really heterogeneous classification, type one, where you do have patients who fracture a lot, but you also have some who don't fracture so much. W e do have a significant number of type one patients in the study, even with a high fracture rate and [audio distortion]. T hen you have type three, which is, you know, a more severe end of the disease. T ype IIIs are typically in a wheelchair, very short stature, scoliosis, you know, lots of pain, and occasionally respiratory problems as well. T hen type IV, which is kind of in between type one and type three again, can be wheelchair-bound and you know, somewhat short stature. T hen all of, you know, type one, type three, and type four, they can all experience significant hearing loss by the time they're young adults. T hose are the phenotypes and how, you know, actually the huge range of genetic mutations manifest themselves. T hen, you know, thinking about treatment, so nothing has been FDA nor EMA- approved, but bisphosphonates are used traditionally in pediatric patients off-label. They're an anti-resorptive, so they protect the bone that's there, but they don't actually build new bone, which is what's needed. Y ou know, the data on bisphosphonates are mixed at best. There have been five academic studies, and out of those five academic studies, two of those showed around a 20% reduction in fracture with bisphosphonates, s o very, you know, mixed picture. Y ou know, as you can see, you've got here a very, very high unmet need with nothing approved. There's actually not a lot in development either. W e're, you know, really looking forward now to getting the phase III data on these two ongoing studies. S peaking of the phase III studies, you have two concomitant studies, ORBIT and COSMIC, have seemed to be on track to complete their respective enrollments by the first half of 2024. M aybe starting with ORBIT, can you walk us through the planned interim analysis, the respective timing, alpha allocation, and what is a reasonable probability of success? T his is with the first interim guided towards your end. John? Yes. Thank you, Gil. Y ou know, as both Gil and Denise alluded to, full enrollment of the ORBIT and COSMIC phase III studies is expected to be completed quite soon. As a reminder, ORBIT is a trial being pursued in around 150+ patients, ages five to 25 years old, randomized two to one with setrusumab versus placebo, with annualized fracture rate as the primary endpoint. COSMIC is being run in younger children, two to six years old, randomized one to one setrusumab versus bisphosphonates in 60 patients with once again, annualized fracture rate as the primary endpoint. Current plans have been developed for interim analysis of the ORBIT data, prior to the planned final analysis at 18 months post-enrollment. The two interims are based on time and fracture event. The first interim is currently planned to be initiated around the end of the year, and the second is planned several months later. There's basically minimal alpha spend on the first interim, 2% of the alpha spend. As a result, this is a high bar to hit, and substantial early evidence of efficacy will be required to meet the p-value of less than 0.001. The second interim has a p-value of less than 0.01, so should have a good chance at being successful. I t's important to appreciate this, the majority of alpha spend, less than 0.039 is being retained for the planned analysis at 18 months. Currently, there are ongoing regulatory interactions around these analyses, and we should be positioned to provide more detail in the near future. Okay. M aybe we can discuss some of the data that supported yours and Ultragenyx's decision to add this, what seems to be very stringent and difficult to hit interim. Yeah. Well, you know, Denise already alluded to this, but it's really the phase II ORBIT study, which included 24 patients of the same ages, five to 25 years old, as those that are being enrolled in the phase III. You know, we in Ultragenyx observed marked increases in bone mineral density, and corresponding Z-scores in these patients, which were associated with a 67% decrease in annualized fracture rate following at least six months of treatment with setrusumab, compared to pretreatment annualized fracture rates in these same patients. You know, of the 24 patients in the study, only four patients had fractures after being treated with setrusumab for an average of approaching nine months, despite all having sort of regular fractures pretreatment. T his is really a quite dramatic result, and certainly provides the rationale to take earlier looks at the data via the planned interims that we just discussed. Okay. I do have a couple of questions from the audience here. F irst one is, what is the phase III assumption regarding baseline rate of fractures? Yes. I n these, we have some experience there, right? Because we ran the phase II ORBIT study, and in the phase II ORBIT study there was a median annualized fracture rate of 0.72 fractures per year. O bviously, we were able to take that into consideration in powering the phase III studies. Okay, a nd as for the potential control arm effect, you walked through the 20% that was mentioned in the past, so is this a remaining assumption here from bisphosphonates? Yes, it's approximately the remaining assumption for bisphosphonates. In other words, we're taking the most conservative case and saying that bisphosphonates would reduce fracture rate by up to 20%, even though the data is equivocal and that's been used to power this study, assuming a 50% reduction in fracture rates with setrusumab. I'm assuming this is consistent with other statements made by Ultragenyx as well. It's all consistent, I believe, yes. Okay. All right, so moving forward here, what consequences, if any, should we assign if the study continues past these pre-specified evaluations? Yeah, good question there. O ne of the nice features of the planned interims and the final analysis of ORBIT, is that they're all going to occur within a 12-month period. A s a result, we don't think there should be any consequences if we don't announce early stoppage of the trial based on the interim analyses, and that about 80% of the alpha spend has been preserved for the planned final analysis at 18 months. By definition, this final analysis also has a quite high probability of being successful. Nevertheless, based on the significant magnitude of reduction in annualized fracture rate observed in phase II ORBIT at six months, we in Ultragenyx felt it prudent to conduct interims to allow for early stoppage of the study and discontinuation of the placebo arm, if setrusumab is indeed markedly reducing fracture rates. As mentioned previously, we believe there's a really good chance of at least the second interim hitting. N o real consequences, you know, if we don't hit the initial interims because we're saving the majority of the power for the final analysis, but we think we have a reasonable shot with the first two interims. I know this might be too hypothetical at this point, but would that require hitting that first interim, literally zero fractures or very close to it? No, it doesn't. Okay. Denise, you were going to comment? Yeah. N o, it doesn't mean hitting zero. You know, I think the first interim, as John said, has, you know, a very, very high bar. W orth checking, because this is a trial, you know, it's a pediatric trial with very young children in it and we've got a placebo arm. I t's worth checking, given the phase II ORBIT data. You know, I think the 12-month data point, which, you know, as a reminder, is only going to be a few months after the first interim, you know, we feel that has a reasonable chance of being positive. A s John said, you know, most of the alpha has been left for the 18-month data point. I think the way to look at this with the interims is, you know, you start looking, as John said, around the end of 2024, early 2025. Yeah. What you're really doing is, with all of the three looks, you're looking at data in 2025. I think that's the way to look at this. Whether it goes, you know, from the first interim or you know, we have to wait for the 18-month data point, we're looking at a 2025 outcome. Okay. S peaking of the ORBIT study, you're going to have a longer-term update towards the second half. What additional insights do you think we could gather there? Well, at the stage of this new analysis, all patients will have been enrolled in phase II and have at least 12-14 months of treatment versus the prior six-month data reported last October, so they're going to be on study for a significantly longer period of time. S ome of the patients will even be approaching 24 months on study at this time. You know, so we're expecting to see ongoing improvements in BMD, you know, which were at six months already approaching 20% in the youngest kids of five to 11 years old. Ongoing improvements in BMD, perhaps with the same slope are beginning to plateau, and ongoing improvement of Z-scores approaching the normal range of age and gender-matched individuals, and maintenance of the reduction in annualized fracture rate, as well as reductions in the rate of fractures over time. Y ou know, when we presented the six-month data, on average, patients had been on the study at that point of approaching nine months. T here was only one single fracture that occurred after the six months, s o that's really suggesting, or it's an initial demonstration of fracture rates being reduced over time as we continue to increase BMD and Z-scores. Y ou know, this information's going to help us in multiple ways, one of which is, it pertains to how we might conduct longer-term maintenance dose regimens. It's going to a be very insightful, and you know, we think it'll be a good snapshot at a later point in time. I mean, on that point as well obviously, you know, from a safety perspective, having these young children on setrusumab for two years, you know, which we'll have with the next set of data, i t'll be a very informative set of data. Right. Maybe a couple of questions here on the COSMIC study for the two to five-year-olds, so i t's enrolling significantly less patients in comparison. Yeah. What are some of the powering assumptions there, and why is the study design different from ORBIT? Yeah, you know, so the COSMIC study, it's enrolling at approximately the same pace as ORBIT, so we expect both studies to be fully enrolled soon. You know, the COSMIC study is open- label, and it's comparing setrusumab to bisphosphonates in the one to one randomization, as we've discussed. In these very young children, it's difficult to enroll a placebo arm and we believe this study will be helpful for reimbursement discussions in Europe, so ne of the key reasons for conducting the study. The data monitoring committee is going to be reviewing data at regular intervals, and as I mentioned, this is open label. The baseline annualized fracture rate is expected to be significantly higher in these very young children. E ven though, as you alluded to, Gil, fewer patients are being enrolled, approximately 60 or slightly over 60, because these young patients fracture so frequently, there will still be enough fracture events for this study to be sufficiently powered, as with ORBIT. If ORBIT study meets its primary endpoint before COSMIC, the plan is to file for approval based on ORBIT results and supplement the application with COSMIC data at a later point. ORBIT is really the linchpin there. Okay. A nother question from the audience on timing of the disclosure. What is the triggering of that timing? Is it because the study is both event- and time-driven? Is it reaching a number of events, or is it a you know, pre-specified time point? You know what? Yeah, so we've talked about this a lot. You know, if you think about the ORBIT study, it's randomized 2/1 setrusumab versus placebo. Now, if it was solely time-based and setrusumab was indeed markedly reducing the rate of fractures, it might be some time before we reach the necessary number of events to really analyze the study. W e're looking at this in both an event- and time-based manner, and if events are really rolling out slowly, the time-based analysis will also come into play there. Got you. Yeah. I mean, the timing of has been estimated. T he timing of taking, the first interim has been estimated based on, you know, if all's going to plan, when do we expect to have a certain percentage of events happening? A ctually, looking at those number of events, I t's saying, "We expect it to happen at that time, so let's have a look at that time." T hat's why it's a bit more complex than just either/or. Yeah. As for the timing of the disclosures from both studies, it looks like they could be pretty close to each other. Do you expect to disclose them at the same time? Would you wait to disclose them at the same time o r is this going to be, when it happens, it happens and we'll report? It'll be more, when it happens, it happens. Y ou know, as John mentioned, you know, they are being synced. W hen a look is being taken at one study, the other study is also being looked at. W hat's key is that, if COSMIC is taking longer, fewer patients, then, you know, the plan is to file on the basis of ORBIT. ORBIT is the key study for filing. Yeah, that makes sense also, l arger patient pool. Yeah. Yeah. Yeah. Okay, so maybe going back a little bit, for those in the audience who maybe are unfamiliar, could you describe the deal structure you guys have with Ultragenyx regarding costs and commercialization? Yeah. R egarding the cost, so Ultragenyx has been responsible for all the costs of the global development study. Y ou know, ORBIT and COSMIC have both U.S. and European patients, so we expect to file in Europe with both. T hey've been responsible for the costs of that. There's all the CMC work, and the development on the CMC side they've been responsible for. Clearly, as we move towards commercialization, you know, we're talking about supply agreements. T hen, in terms of the commercial spend, so the groundwork that we're doing over here in Europe, you know, that's our cost, similarly for them in their territories. T hen where things are global, there's a sharing arrangement which reflect the market opportunity. T hen we have the, you know, $245 million in milestones for their territories, and then royalty arrangements on each other's territories, y eah. Given your responsibility for European markets, how are you planning on approaching what is a relatively restrictive coverage environment? Yeah. I mean, it's a very good question. Y ou know, the key here is to have very early engagement with the payers and the HTAs, so that you can start to build up the picture for reimbursement. Y ou know, so we've had that early engagement. T ypically, we've been having meetings for the last two years, actually with the HTAs and the payers through the Medicines for Access scheme, the MoFA scheme, which is a pilot scheme here in Europe. Y ou know, through those meetings, we're really beginning to understand, what do we need to do, you know, what do we need to deliver to support reimbursement? A s John said, the COSMIC data, bisphosphonate comparator is going to really help there. Importantly, what do we need to do to support the label downstream, the real-world evidence? W e have two additional studies, the IMPACT study, where we had over 2,000 responses from OI patients and their carers, and their physicians about the impact of OI on, you know, their daily life actually and their families. T hat's one stream. T he second stream is called Project SATURN, and that we have, you know, a registry with, you know, many hundreds of patients, OI patients to create a baseline for us of OI. T hen we will look at that, you know, how that changes as the setrusumab treatment is rolled out, to provide some, you know, real-world evidence, phase IV live data. T hose are ongoing. I think the other thing I would say is that, you know, this is a fracture study. I n our discussions with the payers and the HTAs, you know, it's a very hard endpoint. It's not a biomarker study that can be, you know, in some cases, harder to support reimbursement. I think the other thing is that, you know, if you saw from ORBIT the impact, there was, you know, a young boy, six years old, who was a type four patient, who went from his wheelchair to playing independently in the playground. You know, that's the sort of evidence that we need to support reimbursement. G iven the hard endpoint, given the data that's been generated with our partner, Ultragenyx, t he other key thing is that pediatric and adult patients. Y ou know, to really unlock the market opportunity here in Europe, we've got to address reimbursement in adults. Y ou know, I mentioned Crysvita at the beginning. H ere in the U.K., NICE just rejected the reimbursement of Crysvita for adults again. Y ou know, we're building the whole dossier here, so that we can really support and unlock that adult market opportunity. We can then build on that, and we have schemes like the Early Access scheme in France, where pre-approval, you know, we can provide an Early Access scheme. I t's building, you know, a mosaic around all these different factors that play into these reimbursement discussions. T hen finally, the launch sequence. You have to get your launch sequence right here in Europe, because if you don't, you're not going to get the right pricing. Okay. I'd like to switch gears to AATD, not to be neglected. Okay. R emind us of the market opportunity in the U.S. and Europe, and this is in light of augmentation therapy, which I think is only available in the U.S. Y eah. I mean, augmentation therapy is doing about, well, it's just over $1 billion in revenue. That is mostly the U.S. and some other countries. There are a few countries in Europe where it's reimbursed, but many where it's not reimbursed. Y ou know, from a prevalence perspective, between the U.S. and Europe, it's about 100,000 patients. C urrently, the rate of diagnosis is quite low, so we estimate the rate of diagnosis as something like 14%-20% right now. Y ou know, in part, that's been a lack of therapy. A lthough augmentation has been approved, it was approved on the basis of a biomarker, so levels of AAT in the plasma and there've been no real, you know, positive clinical outcome studies. T hat's why it's not reimbursed in many countries in Europe. A lso, I mentioned these earlier-stage patients, you know, at the beginning. It's also not reimbursed, even in the U.S., for some of these earlier-stage patients who haven't lost so much of their lung function, either because they're just not severe enough. In some cases, it's because it's the inconvenience with younger patients of having a weekly infusion. A gain, in others, it's because, you know, there just aren't those clinical outcome data. In the beginning, you mentioned some of the regulatory developments, right? Yeah. There's a couple of differences between what you've negotiated with the EMA and the FDA. Could you remind us what those differences are, and maybe why the agencies are taking a slightly different approach here? Yeah. T he EMA, for some time since 2015, has always accepted lung density by CT as a good endpoint for AATD studies. The FDA currently still believes that CT by lung density is another biomarker. I n our discussions, they've been very focused on feels and functions. Is alvelestat improving how AATD patients with this lung disease feel and function? T he discussions are very much focused around, you know, the PRO and the St. George's respiratory questionnaire. I t's not unusual, it has happened in many other cases that the EMA and the FDA, you know, have diverse opinions on endpoints with phase III studies. T his happened with [audio distortion] as well. You know, the good thing is these are independent primary endpoints, so we can do one study with two different endpoints. T he other thing that's been key here is, you know, o kay, the FDA took longer for various reasons, which we might come on to, but you know, both of them have recognized that, for example, FEV1, you know, that's not doable in AATD. This is not COPD. T he EMA has gone further in terms of saying, "You know, look, we want you to do a placebo-controlled trial. F or you to be able to do that with a CT endpoint, we recognize it can't be a two to three-year study, which are typically needed. T herefore, a p-value of 0.1, you know, could be acceptable." W ith the FDA, you know, we believe that this is the first time that just a PRO, you know, St. George's Respiratory Questionnaire, could be acceptable for the primary endpoint. W e do feel that both agencies have worked with us on this. Y ou know, we've got one study, 18 months, primarily driven by the CT endpoint with around 220 patients. That's where we've landed. Definitely an inbound. We've got a lot. W hy did it take so long with the agency? Okay. Yeah, it's a very easy answer actually. Y ou know, we came out of our phase II meeting with the FDA saying, you know, we could work with the St. George's total score and/or the activity domain. T hat was in Q1. W e focused actually on the activity domain, because that's the primary driver of the St. George's score in AATD patients. In order to discuss our validation plan for the St. George's in AATD, it's been validated in COPD, but not AATD. W e had to go and have a second meeting, a type C meeting with the division and with the Division of Clinical Outcomes Assessment. Now, a type C meeting, you request it, you're supposed to have it within 75 days, which is quite a long time already. Y ou know, then you wait for your minutes, which in this case was another 60 days. T hen when the minutes came back, there was some ambiguity in the minutes from the meeting. H ere we are, we're already five, six months later. We've just got some minutes with ambiguity. We need to do a partnering process. We can't have that ambiguity. W e spent another probably two months working with the FDA to get that clarity in those minutes, and we finally got that in January. I t didn't change, you know. We're going with the St. George's total. You know, and we've got the same study design, but we couldn't have an ambiguous minutes if you're in a partnering process. Speaking of that, just to remind us, what is the expected cost of this pivotal program, do you have any updates as to your partnership discussions? We estimate that the total cost for the phase III is around $50 million-$65 million. T hen in terms of the partnering, [audio distortion]? Yeah, so we're making good progress with a number of parties. Y ou know, as I've mentioned before, we've got a potential number of different structures for this non-diluted financing, including some potential regional deals, which are in play. Y ou know, can't comment on the specific timelines because you know, there are too many variables here. All I can do is give the message that obviously this is something that we're very focused on, and we are getting the program ready. W e've just done this validation, some of the validation work and we're getting ready to submit that to the FDA. We're also making investments in the CMC. We've got the full protocol ready. Y ou know, the aim is, you know, if we have a partner in place, we could start this around the end of the year, so basically around the end of the year. Have you also noticed a change in tone of your conversations around AATD, given kind of recent regulatory clearances for gene therapy and you know, the acquisition of Inhibrx? Like there's things going on in this space. Yeah. John, do you want to cover that briefly? Yeah, I will briefly. F irst, with respect to the gene editing and RNA editing approaches, I mean, these obviously are quite exciting, but they're really at an early stage of clinical development. T hey'll face considerable challenges, particularly in achieving the required levels of protein in the lung. You know, AAT is produced at extremely high levels. The liver produces 1-2 g per day, so a very high gene correction rate will be needed in gene editing to increase levels adequately, and the high amount of protein synthesis may also be a challenge for RNA editing. T his is going to take some time and this is an unusual protein expressed at extremely high levels, so there's going to be a lot of challenges there. Additionally, if these approaches are successful, they're most likely to be applied to severely ill patients at least initially and will overlap minimally with the population best served with alvelestat, as Denise said, some of these earlier-stage patients. Y ou know, with respect to Inhibrx, it's really a form of augmentation. I mean, if they're successful in getting regulatory approval based on PK, it's still an IV drug. Y ou know, it doesn't compete with the benefits of an oral for convenience and earlier intervention. W hile both of these developments are very important, I think with respect to partnering and things, potential partners appreciate the unique advantages of an oral agent potentially being used in even earlier-stage patients. I mean, I think that's right, John. I think, you know, our view is that there'll always be a place for an oral therapy. You know, and it's great. I t's exciting to see, you know, the new gene therapies coming along and some of the editing, you know, but we believe there'll always be a place for a small molecule here, especially in these earlier-stage patients. I do want to spend our last minute here on TIGIT. I know we're basically out of time. W hat do you think moves the needle here? I mean, there's been a very slow cadence for results from other developers. What would make a difference? Well, we're not sure exactly how much of a difference things will make at this point in time, but I think the focus is still on the Roche/ Genentech OS readout in non-small cell lung cancer, is the principal short-term event that could reinvigorate interest in anti-TIGIT. Of course, this depends not only on the success of SKYSCRAPER, but also, the magnitude effect they observe. Short of this, we don't really see anything over the near term that's going to move the needle. Y ou know, we think a lot about how the treatment landscapes continue to evolve, and essentially, what the longer-term role of TIGIT is going to be. We believe, based on our ACTIVATE study, that TIGIT definitely adds to the PD-1 response, but I think the challenge is going to be to determine where this is most clinically relevant. I think the SKYSCRAPER data will help shed light on that. All right, e xcellent. We're at time, and thank you for attending our conference. Thank you. Thanks, Gil. Thank you. Thank you.