Here at the Cantor Healthcare Conference. I am Kristen Kluska, the biotech analyst. Very happy to have the Mereo BioPharma team here with me on stage. We have Dr. Denise Scots-Knight, the Chief Executive Officer, and Dr. John Lewicki, the Chief Scientific Officer. Thank you both so much for being here. Thank you, Kristen. Thank you. Thanks for hosting us today. Yeah, of course. Maybe just high level, do you mind kicking things off with an overview of the company? Sure. Mereo is a rare disease company. We have two late-stage programs and one program that is being readied for phase II. Our first program, setrusumab for osteogenesis imperfecta, with our partner, Ultragenyx, we recently reported the phase III data, and we have ongoing regulatory interactions. Our second program, alvelestat for alpha-1 antitrypsin deficiency, which is being phase III readied. We are, again, about to have some more regulatory interactions with the FDA, and that is partnered, a recent partnership that we announced with Sentynl. Then finally, we have vantictumab for another bone disease, rare bone disease, osteopetrosis, and that is being readied for phase II with our partner, āshibio. So we own European rights to all three of these programs. They are being funded through partnerships. We have milestones of potentially up to $1 billion across the portfolio and very significant potential royalty income stream as well. Finally, we have a runway into late 2027. Okay, thanks. Let's kick things off with alvelestat. I think since announcing this deal with Sentynl, people are kind of brushing up on the story, right? So I think it would be great to just start with a recap with the strongest evidence you have seen around alvelestat's profile and which endpoints are ultimately going to carry the most weight with physicians and patients. We are very excited about our partnership with Sentynl. alvelestat, just to remind everybody, alvelestat demonstrated both biomarker and clinical efficacy in a number of neutrophilic-driven diseases. So actually bronchiectasis, cystic fibrosis, bronchitic COPD, and of course, Alpha-1 antitrypsin deficiency. We have clinical efficacy. In ASTRAEUS, which was the phase II study in alpha-1 antitrypsin deficiency, we showed a 90% inhibition of neutrophil elastase activity, and that was a constant inhibition of neutrophil elastase. We also showed some efficacy on biomarkers, desmosine and Aα-val360. When we combine actually ASTRAEUS with the other phase II which was run for alpha-1 antitrypsin deficiency, ATALANTa, which included patients on augmentation, we also saw a reduction in exacerbations. In terms of the endpoints that are important to physicians, we have discussed this at length with Sentynl, and FEV1 is an obvious one, pulmonary diseases, but this is a disease of the small airways, and FEV1 could take up to five years to demonstrate an effect, and it would be a large study. The other obvious one is lung density by CT, and it is one that really resonates with the physicians. It is something that they measure regularly. The challenge with CT is the demonstration of the CT effect absolutely substantively correlating with clinical outcomes, that there is insufficient evidence at the moment of that correlation. Then finally, we have exacerbations. We know that the more exacerbations these patients have, the further deterioration in their lung function they get. There was one study, the AlphaNet study, and that showed that almost 70% of alpha-1 antitrypsin deficiency patients experience an exacerbation every year. So that is another potential endpoint. Okay, thanks. What was the previous alignment with the agencies on registrational trial design and endpoints of focus, and why are you looking to potentially re-engage on those discussions this year? Yeah. This is the key point. We had previously agreed with the FDA, SGRQ, so the PRO. It is a standard PRO used in COPD studies, typically as a secondary endpoint. For the EMA, we had lung density by CT, and they had told us that a p-value of 0.1 may be acceptable to run a short enough study. We had these two endpoints, and the challenge that we have had, these are independent primary endpoints. The challenge that we have had with potential partnering feedback is that, what happens if the results from the two different endpoints are discordant? What about if they are different? What happens then? That has been a real challenge. Because with SGRQ, although it is a standard PRO that is used, as I mentioned in COPD studies, it has not been used as a primary endpoint before, and we were planning to validate this in the phase III study. That is why we are looking, based on all the feedback now, we are going along to the FDA with Sentynl at the table with us, which I think is a very positive move. Okay. Thanks so much for that. What are some of the options you are going to discuss with the agency, and how is this going to ultimately fit in with how we should be thinking about the probability of success? Yeah. When we had our initial discussions with the FDA, we had the ASTRAEUS data in hand. In ASTRAEUS, we had the SGRQ data, we had the biomarker data with desmosine, which correlates with CT. The agency at that time focused on the SGRQ. Now we have the ATALANTa data. CT is an obvious one, right? We already have that in the design for the EMA, so it is an obvious one. At the time we had the discussions with the FDA, what they told us was, there is insufficient evidence for CT correlating with clinical outcomes. The FDA told us, "We want something that relates to feels and functions." For the EMA, they wanted an objective marker. The FDA was about feels and functions, which is why we landed on SGRQ. Fast-forward now, we have the ATALANTa data. As I mentioned, in ATALANTa, 50% of the patients were already on augmentation. What we did was we pooled the data from both ATALANTa and ASTRAEUS, and what we have seen across the studies, consistently, is with the pooled data, we have about a 40% reduction in exacerbations. We see this irrespective of whether the patients are on augmentation or not, they are still exacerbating on the augmentation. We see it across the GOLD categories, and we also get an increase in the exacerbation rates with increasing GOLD category, which is exactly what you would expect to get. So exacerbations, CT, as I mentioned, that is kind of the shoo-in with the design we have with the EMA, but we are also now considering exacerbations, especially given our phase II data. That potentially allows us to differentiate ourselves. In addition to being oral, it also allows us to differentiate ourselves from augmentation, because the patients are still exacerbating on the augmentation, and augmentation has never really shown an effect on exacerbations. If anything, they are slightly worse on augmentation. Okay, thanks. Recognizing the trial is not fully designed yet, how should we be thinking about CMC cost structure and the upfront payment considerations of this deal? Might it potentially fund the study? Yeah. The different designs were already in discussions, the different endpoints as part of the partnership discussions and negotiations. We had already incorporated some of that thinking into the negotiations. The intention is that the upfront and the R&D payments will cover the phase III study, even with a potential new design. In terms of the CMC, we have already manufactured the material for the phase III, and that includes if we change the endpoint, for example, to exacerbations, we have got sufficient material. Sentynl, Zydus Lifesciences, their parent, would actually take on the scale-up and commercial manufacturing. That does take a significant chunk of the costs out of our investment that we need to make. Okay. If the option is exercised, why do you believe Sentynl is the right company to bring this forward? Yeah. Sentynl, like us, they are very focused on rare diseases, and also the team there, they do have experience with pulmonary, so with asthma and COPD. So it is a great combination for us for a partner like this on alvelestat. We were really impressed with their diligence, and the primary research feedback that they did. Yeah, we think they are a great partner. We have already had a lot of interactions, and the deal did not close that long ago, but we have made huge progress even since the day of closing. Okay. How should we be thinking about milestones and royalty opportunities relative to what you get credit for today? Might this study also support the ex-U.S. launches where you hold rights and- Yeah What does that market look like? We have ex-U.S. rights. The milestones, we have potentially up to GBP 475 million in milestones. We have double-digit royalties on the U.S., and then we own all the other territories. In the EU, we estimate there is around 110,000 patients that we are targeting. That is the severe type, the PiZZ severe genotype. That is a significant market opportunity. Then we have the other regions that we could potentially monetize as well. Okay. Let us switch gears here for setrusumab for osteogenesis imperfecta. Since the primary endpoint of this study was missed last year, what work have you and your partner conducted to better understand what happened, and what is the latest hypothesis you have generated around fracture data in particular? Yes. We and our partner, Ultragenyx, undertook a really detailed analysis of the primary and secondary endpoint fracture data to really get a handle on what happened with respect to those endpoints. We immediately observed several key confounding factors. For instance, the setrusumab arm had many more severe patients that were enrolled in that. We also observed that a milder phenotype was enrolled into the placebo arm. As a consequence, over half of the placebo patients did not fracture whatsoever, something we would have never imagined when we initiated the study. It is tough to beat zero, right? When you have over half of the patients with zero. That was certainly one factor. The other thing setrusumab does is it makes the patients feel better, and as a consequence of that, many of the kids, we heard stories of parents who bought their kids mountain bikes. They did wall climbing, trampoline, karate, and all of these things contributed even more fractures to the setrusumab arm. We think we have a pretty good understanding of why we did not achieve the primary and secondary endpoints. We have also done a detailed analysis of all of the fracture data, both pre-specified and post hoc analyses. We observed marked reductions in vertebral fractures that occurred in both ORBIT and COSMIC, as we have already spoken about. Some newer post hoc analysis has revealed some other types of bones that are responsive with reductions in fractures with setrusumab, and also high-fracturing patients. We observed that patients who entered the study with a high fracture burden also had substantial reductions in fractures upon being treated with setrusumab. We think this also sheds some additional insight into the confounding factors that I just spoke of. Okay. Thank you. There's a lot of key secondary endpoints of this study, particularly around feelings of pain, and I've met a lot of these patients, and Yeah they've often said that this is the number one thing on their wish list. So what did you see there, and why don't you think this went hand-in-hand with fracture reductions despite a lot of these confounding factors you laid out for us? Yeah. So obviously, as I mentioned, based on PROs that we analyzed in this study, we saw that patients both felt better, they had reduced pain, and they became more active. Those were some fundamental observations. Vertebral fractures contribute in a significant way to how patients feel and the pain that they feel. So a reduction in vertebral fractures is quite meaningful and actually do go hand-in-hand with reductions in pain that were observed. So that certainly contributes to that in a pretty significant way. Okay. What work are you doing to showcase to the agency the importance of these pain data? How dependable are they? Why do they matter so much for patients? Yeah. We consider the pain data to be quite dependable. They were obtained using the pain comfort domain of a PRO called the POSNA-PASI, which has been used previously in osteogenesis imperfecta. If you ignore all of the other endpoints, we actually achieved statistical significant reductions in pain. That was an important finding in the study. What was the- I am very bad at asking several questions at once. Just how are you showing this to the agency, essentially showcasing why it is important? Yeah. Of course. We have showcased this to the agency, but really as part of a more complete package. Because we have the vertebral fracture data, the reductions in fractures of these other bone types, the responsiveness of the high-fracturing patients, and that continues to be very important to the agency. So when we combine the fracture data with the PROs and also the bone health data, which we haven't spoken about because setrusumab does markedly increase BMD and also improves bone health indices. We think that that makes a really strong and complete package of really rational data, so it all meshes together quite nicely, and that's the approach that we've taken with the agency. Okay. But even before this trial right out, there was the impact survey that really emphasized pain in particular, right? Pain is the key. Yeah. I think as John said, pain is really important to the patients, and as you said, Kristen, we had that impact survey. Pain in a lot of surveys comes out as number one. Yeah. Not fractures. But the agencies are very focused on fractures, on some type of fractures. Okay. What can you tell us about the highest level feedback you've received from the different agency groups you're in touch with, and when might the Street receive the next update? This is the other key question. We've had interactions with the agencies. What I would say is what John mentioned is really important. Yes, the PRO data are compelling and important, but the agencies are focused on fracture. What we have is, based on the data, which the post hoc analyses on these higher-fracturing patients who do show a response on setrusumab, these higher fracture in the fracture endpoints, and then also we've looked at these different types of fractures. Based on these post hoc analyses, the FDA has shown an openness to consider different types of fractures, and also looking at these higher-fracturing patients. We're now engaged in discussions with the agencies, but focusing initially on the FDA, around what type of data set do we need to support a BLA filing, and is there a potential path forward here? We have ORBIT and COSMIC with all these post hoc analyses. We have the ongoing open label extension study. Is there a way to leverage that? What else do we need? Those are the ongoing discussions. We expect to provide clarity on this by the end of the year. We continue to expect that. We haven't obviously been giving updates on a step-by-step basis of every interaction because we want to come out with a very clear message about here's the feedback, here's the potential plan. We're not doing it in a stepwise fashion. Have you guys published all of these kind of analyses, or some of them have been disclosed and others are still in-house? Others are still in-house. Okay. Some of these newer post hoc analyses have not been published yet. Right. Yeah. Maybe just on this open label extension study, I know you haven't shared any data from that yet, but are you able to share with us just like are patients staying in the trial at this point? Yeah. In the ORBIT study, we had close to 160 patients, 135 of which were pediatrics, and over 60 patients, pediatric patients in COSMIC. Close to 200 patients, pediatric patients who moved into the OLE, and we've seen the vast majority of these patients continue to stay in the OLE. In October, they will have been in the OLE for at least a year. These patients have no obligation to stay in the OLE. Right. They could go off treatment, they could go on bisphosphonates. I think the fact that so many patients have remained on the OLE, I really think it really speaks volumes to how patients perceive the drug and how their physicians perceive the drug. They're clearly feeling better, as we know. Yeah. That's across the sites, right? Because obviously this was a global study. The open label extension is global, so there's many sites in Europe as well as the U.S. and elsewhere. Okay. Are you guys seeing these data live time, or do you get cuts every once in a while? How does that work? No, it's not something where, because to do a fracture analysis, you need to do a proper- Yeah Database lock and a cut- Yeah, of course. And the data all has to be cleaned. As John said, we have the patients who were on setrusumab who are continuing in the open label extension, so some of those are out three years now. Okay. We also have the crossover patients from the bisphosphonate arm and the placebo arm. The last patient into the OLE of those crossover patients will be at 12 months, in Q4 this year. So, a data cut hasn't been done yet. Okay. I recognize you don't want to give a sense of false hope to investors, and it sounds like w e'll learn stuff in the next couple of months, but why, at minimum, should we at least keep our eyes open for future updates? Yeah. As I mentioned, we have these post hoc analyses, which are currently in-house. Then we will be providing an update, which should be before the end of this year. So, in less than four months, we should be providing an update on the regulatory interactions, if there's a potential path forward, and what does that look like. So, that's going to be an important update on the program. Okay, thanks so much. Maybe we could spend a couple of minutes on vantictumab. I don't think this program is really on too many people's radars yet, so maybe just would love to understand what is Autosomal dominant osteopetrosis Type II. Yeah. Autosomal dominant osteopetrosis Type II, I know that. It's caused by mutations in a chloride hydrogen ion antiporter. What it does is it leads to, it basically erodes osteoclast activity. Fewer and aberrant osteoclasts. So you really have no mechanism in these patients to break down bone. As a result, they build quite substantial amounts of bone, Z-scores that are up to 10 standard deviations above the norm. Clinically, they have a lot of bone, but the bone is brittle. So clinically, they present with fractures, they have nerve compression that can lead to loss of vision and hearing, some types of rheumatoid diseases, sort of all of the above. So, some pretty severe clinical sequelae as a consequence. Okay, thanks. How is this bone condition similar and different from what we see in osteogenesis imperfecta, and is there anything you can apply from the osteogenesis imperfecta program when we think about BMD fractures? Well, the one thing I like to talk about is the two therapeutic modalities that are being used here, setrusumab in the case of OI, and vantictumab in the case of Autosomal dominant osteopetrosis Type II. They are both intervening with the same pathway, the Wnt pathway. With setrusumab, we block sclerostin, which activates the Wnt pathway. The Wnt pathway being a really important signal to both promote osteoblast or bone formation, and to block bone breakdown. So that is what we achieve with setrusumab in OI. Conversely, the frizzled antibody that we licensed to āshibio is a complete blocker of Wnt signaling. It blocks the receptors that Wnt binds to. So it is a complete blocker of Wnt signaling, and basically does the opposite. So, in other words, it blocks the osteoblasts, or bone formation, and actually enlists the activity, improves the activity of the osteoclasts. In an animal model of ADO Type II, āshibio in a laboratory, Econs Laboratory at Indiana, they basically showed that when they administered vantictumab to this model, that they got marked increases in osteoclast activity and basically rescued the bone phenotype. So that is one interesting similarity between the two in terms of the pathway we are intervening with. But obviously, ADO2 has very high BMD Z-scores, whereas we deal with the opposite in OI. I think there are similarities that in both cases, because the bones are suboptimal, the patients are prone to fracture. So there is both overlaps and similarities, but I think we are hitting sort of both ends of the equation, so Okay pretty nice. Yeah. Maybe just in the last minute here, I like to ask companies what you think is the most misunderstood or undervalued part of the valuation in the story right now. Yeah. Look, I think for setrusumab, first of all, there's the clarity. Yeah. What's happening with the FDA. As I mentioned, rather than do bit by bit, we wanted to give a very clear outcome from those discussions. So that's clearly really important. Secondly, these post hoc analyses. The data are in-house, and obviously those are supporting the ongoing regulatory discussions. So that's for setrusumab. For alvelestat, it was about where's the partnership? It's now about, okay, what's going to happen with the regulatory discussions, and when is this option going to be exercised? So that's for alvelestat. This is all happening live. Again, for alvelestat, we will be having these regulatory interactions in the fourth quarter. The good news is this is all three to four months away. It's all happening in the next three to four months. So, we've got a really interesting quarter coming up. Yeah. Hopefully, we'll move the story on significantly in the next quarter. Okay. Well, thank you so much Denise and John. Really appreciate you being here. We'll be on the lookout these next few months for everything. Thank you, Kristen. Thanks. Thanks, Kristen.