Hi, good morning, everybody. I'm Kristen Kluska. I'm one of the biotech analysts at Cantor. Very happy for this fireside chat. This is one of my top pick stock that I'm a big fan of. We have Mereo BioPharma here, and joining me from the company is Dr. Denise Scots-Knight, the CEO. Thanks so much for being here. Thank you, Kristen. It's great to be back here again, actually, we were here a year ago. Yes, yes. Time flies, and there's been a lot of great things over that last year. In fact, your valuation has nearly tripled since that time, and interest in setrusumab for Osteogenesis imperfecta is at an all-time high. Lots of eyes on that program. So maybe just to start, can you remind our audience of this program, why the level of new evidence that we've seen over the last twelve months has increased your confidence, and also fairly attributes to more credit that you're starting to get for this potential? Yeah, great. Thanks, Kristen. Well, you know, interestingly enough, so I was looking back, we had this fireside almost a year ago to the day, not quite, but almost. Ah. Our stock was at $1.30. Really? Here we are today at $4.20. Lots of progress, as you said, over that time. Yeah. We're happy to be one of your top stock picks, by the way, so in terms of the OI program, so Osteogenesis imperfecta, we are looking to... You know, this is a genetic disease. Brittle bone is what it's commonly known as, and prevalence of around 60,000 EU, U.S. I know we'll come onto the numbers a little bit more, so we're looking to treat, you know, the fracture, in particular, of these children and adults with setrusumab, our anti-sclerostin inhibitor, which has both anabolic, so bone building, as well as prevention of bone resorption. Bone is a dynamic structure, if you will. Mm. And so why the increase in, you know, confidence in the program now? I mean, I think over the course of the last 12 months, we've gone from, "Is setrusumab really going to reduce fractures?" to, "When are we going to get the data? Because this is going to work." And the reason for that is because there's been a phase II study ongoing with 24 patients aged five to 26, and the first readout, which came just a month after this meeting- Yes -last year, in October last year, showed a 67% reduction in fractures. And importantly, that 67% reduction in fractures was the same endpoint as being used in the phase III study. So that excludes fingers, toes, face, and skull, which the FDA has requested, and that was statistically significant. It was point oh four two, I think. And also, the BMD changes in the patients were, you know, very large, BMD changes of 14%, as a median, and very importantly, really good changes in the Z-score. The Z-score, we look at probably more than the BMD changes because the Z-score is an absolute measurement. It compares your BMD score to an individual that's matched for age and gender, so the general population. There was a median change in Z-score of + 0.65 at that six-month time point. We then come on to the 12-month data and the, or the 14-month data for the fracture. For the BMD score, we're now looking at a mean of 22%, but importantly, 30% change in BMD in the youngest age group of 5- 12 year olds. That's a huge change in- Yeah ... in BMD, and a mean change in Z-score of 1.25. So what does that mean, that Z-score? So the mean coming into the study was two, so we're then looking at a change of + 1.25. That means you're beginning to normalize the bones of these patients to be similar to the normal population. And then finally, the fractures, again, the same endpoint. 67% reduction in fracture, again, so same quantitative number. However, a much stronger signal with time. So this time the P value was 0.0067, I think it was. So the signal, as a result of more events, has got stronger with time. So really increasing the confidence that setrusumab reduces fractures and indeed, that the phase III studies have got a very good chance of success. So that is the, what underpins- Yes ... I think, you know, the confidence in the program and our valuation. But I think also the other thing we've been doing is a lot of work around the market, particularly in Europe- Mm ... to build confidence that, you know, everybody thinks of, sometimes we hear it, particularly over here, it's a bit of a black box, and you won't get reimbursement. So we're trying to build confidence that, you know, at Mereo, we're doing what's needed on the ground, to secure that early reimbursement and access across Europe, and I know we're gonna talk about that. Yeah, amazing data. I had the opportunity to meet a lot of OI patients, and being able to reduce fractures that significantly is gonna have a massive impact on their life and also their willingness to get up and also be more active. But this recent data you're referencing, I know you press released it along with your partners back in June, but we understand there will be a presentation at ASBMR later this month. So can you give us a sense of any new data or findings we can hear from that? And I think another thing to consider is the last update, we were starting to see some of that correlation. There were patients that were no longer using walkers or wheelchairs. Will we be able to get a sense of this next update, some more general impacts as it relates to their everyday life? One thing that we in the phase II that was tracked is some PRO data. Sure. So looking in particular at pain and whether the patients are feeling less pain and feeling better. So you may well see some updates on those data at ASBMR, but I can't really say more than that. I guess I'll just have to wait two weeks. Yeah. That's fine. Not long. Okay, great. Yeah, let's talk about that, right? 'Cause I think a misconception with investors is they're focusing so much on fractures, and I get it. That's huge in this indication. It is your primary endpoint. But if we think about a potential commercialization beyond reducing fractures, how is this genuinely going to change their everyday lives? Are they gonna be more active? Are they going to have less pain? Yeah. Help us understand your thoughts related to the mechanism in that. You're right. I mean, fracture is the key thing right now, and it is the key health economic argument. Mm-hmm. You know, you can't argue- Yeah ... with it. If you have a fracture of a long bone and you have to have an operation and it doesn't heal, so it's hard to argue with that. But there are other things that are very important to these patients. And, you know, we did the impact survey, which had 2,500 responses, looking at everything related to OI that impacts the patients, their caregivers, and the physicians. And there were some common themes that came out of that. Number one was pain. So the fractures is top, obviously, but- Yeah ... pain, mobility, and as you saw in the phase II ORBIT study, you know, we had a young boy who was a Type IV patient. He started in a wheelchair. He then progressed, after six months, to walking with a walker, and then, you know, by over twelve months, he was actually playing football in the playground, to the delight and horror of his parents. Your football or our football? Yeah, I think it was soccer. So, you know, mobility is super important. And, you know, I know Emil talked yesterday about- Yeah ... how activity actually helps promote bone growth, you know? So that's super important. And then the other aspects were actually hearing. Mm. So these patients, you know, quite a large percentage of patients lose their hearing, a significant part of their hearing, by the time they're eighteen or young adults. And so one of the things we're tracking in the phase III ORBIT study, there are some auditory tests- Mm ... because it's thought that it may be coming from microfractures in the ear. Wow! This really stood out as one of the challenges for the OI patients. That's also being tracked. Yeah, that's... Wow, fractures even in your ears. That's truly, I think, puts this into perspective, right? So thinking about the trial, you know, last year, I think, was that turning point, right? Because now we're talking about there's P1NP data, there's BMD data, and now there's great fracture data, and putting it all together, it's all moving in the same direction that you want. So when I talk to investors, they do see the potential for setrusumab and believe it's a great drug. However, one question we get is, well, how do we know how placebo is gonna perform- Mm ... when we're trying to understand these different analyses? So can you give us a sense of your expectations on that? What do we know from other experiences, natural history? Yeah. So, yeah, so placebo response is something and I know a lot of investors have questions around. Yeah. You know, the primary concern seems to be, well, if patients are doing so well on setrusumab, and they become more active, and they're not doing so well on placebo, and they continue with their inactivity, is that going to create a problem with the study? I think there's two things. You know, the study is really well powered. It's over 80% powered to show a 50% treatment effect, i.e., difference between- Mm-hmm ... you know, the treatment arm and placebo, and also in terms of the powering, the original annualized fracture rate that this was powered off is lower than we believe the actual annualized fracture rate is going to be in the study. Right. We do have more Type III patients in the phase III study than were in the phase II. This is, you know, a high fracturing population, so that's going to really help with the powering of the study. And finally, the other place we take a lot of comfort from is the bisphosphonate studies. So in the bisphosphonate studies, there have been a couple of studies done which were placebo-controlled, randomized, blinded trials, so well-controlled. And in there, you didn't really see an effect in the placebo arm. Mm-hmm. So I think that should tell us what to expect. ... Okay, thank you for that. And just on your point about you would maybe potentially expect more fractures than what was reported, is that just because these patients sometimes they experience fractures, and they, you know, kind of just deal with it themselves and not go to, like, a hospital setting? What is the rationale there? Yes. So with the phase II study, we were looking at pre-treatment, a pre-treatment baseline and then a post-treatment- Yeah Fracture rate. And so what we believe, as you said, is a lot of patients just get on with life. There's no point in going to the hospital. They know they've had a fracture. They know how to handle it. They put themselves in a splint or a plastic boot. And so we believe that, you know, the pre-treatment is probably underreported. Okay. Here now in the phase III studies, we've got the placebo arm or the bisphosphonate arm versus the treatment. We're going to get a much more accurate picture of the annualized fracture rate. Okay. So you've been the pioneer of this program for many years, but then when your partner, Ultragenyx, came on board, you had two companies pounding the table on why this is a great drug, right? So can you remind our audience what that partnership currently looks like? How many patients have this condition in the areas you're going to be bringing forward? Yeah, so the economics of the partnership. We signed this in December 2020, and then, you know, we received the $50 million upfront. We've received a $9 million milestone since, and we have up to $245 million in milestones to come. We believe we're going to get most of those, if not all, and then we own the EU territory. Mm-hmm. We take over the MA on approval, and there we pay Ultragenyx a flat double-digit royalty. In the rest of the world, which Ultragenyx has, they pay us a tiered double-digit royalty, which goes higher than our flat d- Mm-hmm ... double-digit royalty, and we believe we will, based on the forecast, be at the top tier. So it's a very nice deal. I think the other thing to comment on the partnership is, you know, we're not just in the coattails waiting for the data and waiting for the approval. So there is a very collaborative aspect to this. And so, you know, we have joint committees for everything, so development committee, regulatory committee, CMC, 'cause obviously we did the original transfer from- Mm-hmm ...... Novartis, to an external CMO. Sure. Commercial committee, obviously, we're looking for global branding, and joint steering committee, and then there are senior leadership interactions on a very frequent basis. So there's a lot of work going on at those committees and discussions. Yeah, and it's clear every time there's a data presentation, it's always a collaborative nature as well when you share that, and can definitely agree to that point. I cover both companies. You both speak very highly of each other. That's good to hear. So in Europe, you know, sometimes when we think about these launches, it's traditionally a little bit harder for payer support there. So can you walk us through some of the work you're doing to ensure that, if approved, it's going to be a little bit more seamless? Yeah. So there's two aspects to this. The first is, as you say, laying the groundwork for the pricing and reimbursement. And, you know, in Europe, what we only ever hear about is where it goes really badly wrong. So we heard of, you know, we know of the Bluebird, and there are others. But there's a lot of launches in Europe that actually go really well because the groundwork has been done. So I think about Kyowa Kirin with Crysvita- Yeah ... which is a great example. They're another bone disease for adults and children and, you know, launched in 2018, 2019, and they are forecasting to do over $350 million in Europe this year, and it's still growing at around 40%. So it can be done well. There's others, Albireo, Mirum. So what is the difference there? What? So what we believe in, you have to start early, and you have to prepare the groundwork early. And so we started in 2019, having meetings through a pilot scheme called EUnetHTA. EUnetHTA was put together to try and bring the European countries together, as many as are willing to participate, to have a common understanding of the health economics of future therapies and the requirements for reimbursement. At our original meetings, 2019, 2020, we had about nine countries represented, and it's to create equity of access for all across Europe. That's the purpose of this scheme. We've been having those meetings at least annually since 2019. Then there's another scheme, the MoCA scheme, for the payers, similarly, which we've been doing since 2019. So that lays the groundwork. Then more recently, as we get close to the phase III data, you know, we've gone in for very specific discussions. So we recently met for advice with the G-BA in Germany. Germany is the first country of launch, typically, especially rare diseases. So we've had our G-BA advice, and then to get the other part, the other side of the envelope, we have been in for advice with NICE. Mm-hmm. So that gives you, you know, the broad range of things that you're going to be challenged on in Europe for pricing and reimbursement. And we've had very, very constructive feedback from both G-BA and NICE. And the important thing is, ask the hard questions early. Ask. You know, you might not want to know the answer- Yeah. But you need to ask the question, 'cause it's too late when you come back. Yeah. And it's too late to change. So ask the question, listen to the feedback, see what part of the feedback you can incorporate before it's too late. So that's the work that we've been doing on the payer side, and we're in a very good spot. As I said earlier, the phase III endpoint, it's not a biomarker. Yeah. It, you know, you can't argue with a phase III endpoint about its clinical relevance. That makes these conversations much easier. And then the second part of this is: what is the budget cap? You know, these countries, they all have their budget caps, so they want to understand, when you go in, how many patients are in my country, you know? Yeah. What's my budget going to be? So the other part of the, you know, the work we've been doing is to actually go out and find the patients. And, you know, as we discussed last time, so we have found in the key EU five, 5,000 pediatric and 5,000 adult patients who could be eligible for setrusumab treatment, and now we're rolling that out into the Nordics and Benelux. So that's the other key part of the equation. I also think Crysvita is a wonderful comp to consider for the U.S. opportunity, where you're also gonna benefit from milestones and royalties. Yeah. It's actually a smaller prevalence than OI. Right. So maybe even more upside there. Exactly. Last question I have for you on OI is just, help us set expectations. You know, you're very confident for the phase III, but the trial does include a few interim analyses for overwhelming efficacy only. You'll be blinded, but, the first one, the bar seems a little bit high. So how should we really- Yeah. Think about that? Okay, I think that's quite a British statement, "a little bit high." I think it's very high. So, you know, the first interim, it uses 2% of the alpha- Yeah. -0.0001. It's high. Okay. You know, I think, yeah, it's got a very, very high bar. Okay. It's been done, you know, in part for ethical reasons, because if we do see that sort of efficacy that early on, then, you know, all of these patients on the study, including the very young kids, should go on to drug, because it's a placebo-controlled trial. It's not ethical to continue with that high an efficacy. The second interim, which uses more of the alpha point oh one, that is being done, so the first one is being done around the end of this year, early next. Mm-hmm. That would mean, top-line data in Q1. Okay. The second interim, which is around three months later, so that one, point oh one, is the P value it needs to hit, and that's after 12 months' treatment. So that'll be in Q2. So that one has a reasonable shot of working, that second interim. Yeah. And then obviously it goes on, if not into the 18 months' data point. So yeah, 12 months, I mean, if you think about the data that we saw in the phase II with just 24 patients, with a very good P value, with a 67% reduction, that one, perhaps. Okay. All right, we're all wishing the best for this program. I mean, I think, Kristen, the main take-home point on whether it's the interims or the full eighteen-month data is that we are looking at phase III data in 2025. Yes. You know, probably within a year from now. That's a big deal. Yeah, absolutely. All right, let's spend a couple minutes on alvelestat. This one is very interesting because you actually have two different phase III primary endpoints in Europe and U.S., so essentially it's like two different shots on goal for success. So can you maybe walk us through this program, as well as the evidence and correlation of endpoints we've seen from the previous experience? Yep. So, that's right. So alvelestat, a neutrophil elastase inhibitor for alpha-1 antitrypsin deficiency. You know, so as you said, so we've landed the FDA is SGRQ, so St. George's Respiratory Questionnaire, as the primary endpoint for full approval. That's not accelerated approval with a further trial. Mm-hmm ... that's needed. That's for full approval. And, in Europe, with the EMA, lung density by CT, with a P value of less than 0.1, potentially being acceptable. Those are the exact words. Yeah. So where does the evidence come from this? And secondly, I think two primary endpoints, so they're independent primary endpoints. Mm-hmm. -which is how, why we think of them as two shots on goal. Yeah. There is, there is precedent for this. So Albireo had two different endpoints. One was a biomarker, one was- Mm ... pruritus for the FDA and the EMA. So there's precedent for this. In terms of evidence, so in our phase II, the CT, so we showed a statistically significant reduction, of a biomarker called desmosine, which is a breakdown product of elastin, which is in lung tissue. And, desmosine has been shown to statistically significantly correlate with lung density by CT. So that's where the evidence for that comes from. The SGRQ, we showed, a very, good effect on the SGRQ in a second phase II study called the ATALANTa Study. And the ATALANTa Study was run by the, UAB here in the States, and that actually enrolled, earlier stage patients who had lost less of their, FEV1, than all the patients that have been traditionally enrolled in AATD trials. And in that patient population, we showed a very good change in SGRQ score. Mm-hmm. In the other study, which was the ASTRAEUS study, we showed a very good correlation of SGRQ with biomarker changes. That's where the evidence for SGRQ comes from. And I think, you know, with SGRQ, the other we have a phase II bronchiectasis study where we saw it was a short study, but there was a five-point change in SGRQ. In COPD trials, where SGRQ has been validated and used in many, many trials, the minimal clinical meaningful difference is around four. Mm-hmm. So we're seeing these sorts of really good changes in SGRQ in this AATD population. Okay, thanks for that. And you've been pretty adamant that this is a program you'd prefer to partner out. So can you give us a floor or types of deals you're essentially looking for, and what's the latest you could tell us in terms of how these conversations and level of interest is going? Okay, so I'm not gonna talk about the floor of a deal or anything like that. Okay. Um, so- I tried. You know, there are some, so first of all, we have some strong names engaged in the process. Okay. So that I can say, and we do have some of those who are actually more interested, like, in rest of the world, leaving us with Europe. Okay. That's potentially on the table as well. Okay. And I think, you know, just to note, one of the challenges, probably the biggest challenge with this partnering process, I mean, we're doing it to validate the program. Sure ... as well as obviously the non-dilutive capital raise, and one of the challenges with this partnering process is that although we have the supportive data with SGRQ in particular, you know, the phase III endpoint is different to the phase II endpoint. Sure ... the primary endpoint. And so there's, we had the same thing with setrusumab in OI, and that always increases the risk. So you're looking at something between a phase II risk and a phase III risk, not a phase III risk. And so that makes the partnering process, you know, if it's successful, you get real validation of the program. Mm-hmm. But it does make it more challenging to find that right partner. So what we've been doing, alongside that partnering process, is we've been, we've submitted the full protocol with the SGRQ to the FDA, our CMC, our preclinical. We had minor amendments that we need to make on the protocol, so we're through that process, which continues to de-risk the program. And, you know, we've also been looking at validating SGRQ. And the other thing we've been doing is data mining. So we have, we inherited a ton of data from AstraZeneca in COPD, as well as the bronchiectasis study. And we've been data mining the COPD studies. They were large studies, 600 patients, but there are subpopulations of those studies, bronchiectasis. Mm-hmm ... COPD patients, and those are about 200 of a 600-patient study. Actually, in those patients, we also saw really good changes in SGRQ. We've been, along with the protocol, you know, trying to build the evidence across all of these diseases, AATD, bronchiectasis, and bronchiectasis COPD, that you see a change with alvelestat in these lung diseases, in SGRQ, that is clinically meaningful. We're building that body of evidence in order to try and help with this. Sure ... de-risking. Okay. Okay, great. Thank you so much for your time. It's always a pleasure hosting you, and we'll be looking out for those data ASBMR in a few weeks here. Thank you, Kristen. I look forward to being here next year. Yes, absolutely.