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MREO

Mereo BioPharma Group NasdaqGM:MREO Stock Report

Last Price

US$0.86

Market Cap

US$93.6m

7D

2.3%

1Y

-66.8%

Updated

01 Oct, 2022

Data

Company Financials +
MREO fundamental analysis
Snowflake Score
Valuation3/6
Future Growth0/6
Past Performance3/6
Financial Health3/6
Dividends0/6

MREO Stock Overview

Mereo BioPharma Group plc, a biopharmaceutical company, develops and commercializes therapeutics for the treatment of oncology and rare diseases in the United Kingdom and internationally.

Mereo BioPharma Group Competitors

Price History & Performance

Summary of all time highs, changes and price drops for Mereo BioPharma Group
Historical stock prices
Current Share PriceUS$0.86
52 Week HighUS$2.59
52 Week LowUS$0.30
Beta0.61
1 Month Change-24.47%
3 Month Change-38.05%
1 Year Change-66.75%
3 Year Change-70.71%
5 Year Changen/a
Change since IPO-86.75%

Recent News & Updates

Sep 22

Mereo BioPharma: An Activist Pressure With A Potentially Significant Upside

Summary This is an update on the previously written report on Mereo BioPharma Group, a London-based clinical-stage biopharma. Frustrated with the lack of engagement from the management, the activist filled a request for a special shareholder meeting aiming to replace 4 incumbent directors. Rubric Capital, the activist, plans to monetize the pipeline assets, reduce cash burn and distribute excess cash. Activist values the company at $4 per share vs $1/share price today. Despite a potentially large upside, there are several material risks that need to be considered. This is an update following my June report on Mereo BioPharma Group (MREO), a London-based clinical-stage biopharma. More background information on the company and the activist can be found there. A quick recap of main developments - at the time of the initial pitch MREO was trading 10% below $0.87/share of net cash, with the activist, Rubric Capital (14% stake), urging the board to explore strategic alternatives. The main objective of the activist was to monetize the royalty rights to the Setrusumab, a potential treatment for osteogenesis, cost-sharing partnership agreements, and wind down the rest of the pipeline. The activist identified insurmountable costs associated with the development of an early-stage pipeline and the increasing cost of capital as reasons for the change. Rubric valued MREO at $4 per ADS (vs 0.8/share price of MREO at the time) or 540% upside if monetized. Initially, the setup was attractive due to the downside protection provided by the discount to net cash with the activist campaign's success providing a chance for an outsized return. Recent events The day I uploaded the article, rumors came out that AstraZeneca was eyeing a potential acquisition of MREO for $5/share. On the announcement, the stock shot up by 62%, quickly eliminating whatever was left of the discount to net cash reaching a $1.6/share price at the peak. Despite the initial excitement due to lack of updates the shares gradually declined to $1.3/share, still staying well-above net cash levels, up until the emergence of the latest news. Last month Rubric Capital, frustrated with the lack of engagement from the management, sent out a letter to the board calling for a special meeting and nominating a slate of 4 nominees to the board aiming to replace 4 out of 10 incumbent directors including the Chairman as well as the deputy Chairman. The management did not take the request lightly, questioning the experience and fit of the activist nominees in their response letter. Plus the board has identified multiple deficiencies (see below) in the filling procedure for the special shareholder meeting, leaving the feeling that it was done just to drag the process along. The response was not well received by the shareholders. Right after the release of the response letter, MREO shares tumbled by 25% to below $1/share. List of deficiencies identified by the board: Deficiency 1: Rubric owns ADSs, not Ordinary Shares Deficiency 2: The requisition doesn't come from two "members" Deficiency 3: The requisition is in the short-form format and needs to be in the long-form Deficiency 4: Our letter within the requisition exceeds the 1,000-word count limit (by 86 words) Finally, on the 14th of September, the activist released another public letter stating that they have addressed the identified deficiencies and submitted a new request. Unless the management comes up with some other excuse, the special shareholder meeting will likely be convened no later than 21 days after the submission of the request. If the special meeting will be allowed, Rubric has a good chance to win the vote. Further thoughts and valuation First, let's present the activist's model: Activist Letter The most notable asset of the company is Setrusumab, a drug used for the treatment of Osteogenesis imperfecta a rare genetic disease. The integral part of the MREO story is its partnership with Ultragenyx since 2020. The partnership significantly boosted MREO's financial health in the coming years due to a $50 million upfront payment from Ultragenyx. Most importantly, MREO is entitled to significant payments if certain milestones are achieved with further royalty payouts post-FDA approval. These two components make up most of the activist valuation plus the cash on hand (lower by $24m today). Setrusumab will go into Phase 3 trial by the end of the year, which would likely be one of the milestones triggering another payment (the exact details are limited). Moreover, the valuation does not include 5 other earlier-stage drugs that can also yield additional value here. Clearly, despite the contingencies, the potential upside is significant here. Once again, Rubric plans to monetize the potential royalties from Setrusumab, liquidate or license/partner out the rest of the pipeline, reduce the cash burn, and distribute excess cash to shareholders. The success of the campaign will be the catalyst for potentially outsized returns if the assets are monetized at least at a directionally close price to the activist valuation estimates. However, the main questions are whether the activist can succeed in overthrowing the board and if there are any buyers out there for MREO assets. If the shareholder meeting is convened, I believe, the activist has a good chance of succeeding here, for several reasons. Besides its large 14% stake, a close affiliate of Rubric Capital, Point72 Asset Management, also holds a 9% stake in the company and it is highly likely that their vote is in the pocket of the activist. In fact, Rubric Capital was a part of Point72 before it was carved out in 2016. Point72 capital is a hedge fund run by the infamous Steve Cohen whose former analyst was David Rosen, the current CEO of Rubric Capital. Moreover, to request a special shareholder meeting holders of ADS have to convert their ADS into ordinary shares with a $0.05/share conversion fee. Despite this, the activist was willing to incur, basically, a 10% tax just to request the shareholder meeting which speaks highly of their determination and most importantly confidence that the vote will go in their favor. On top of this, shareholder reaction to the management's response clearly shows dissatisfaction with the current management further increasing the likelihood of a successful activist campaign.

Sep 14

Mereo activist investor Rubric asks board again to hold general meeting, nominate directors

Rubric Capital Management submitted a revised requisition to Mereo BioPharma's (NASDAQ:MREO) board for a general meeting of shareholders. Rubric — which claims to own ~14% stake in Mereo — issued an open letter on Sept. 14 criticizing the company and urged Mereo to hold a general meeting and allow shareholders to vote on Rubric's proposals, including the nomination of new board members. On Aug. 22, Mereo had cited certain deficiencies in Rubric's original requisition seeking the general meeting. A few days prior to this, in an Aug. 19 letter, Rubric had asked to hold a general meeting to consider the removal of directors Peter Fellner, Anders Ekblom, Deepika Pakianathan, and Michael Wyzga and to appoint Annalisa Jenkins, Daniel Shames, Marc Yoskowitz, and Justin Roberts as directors. In the Sept. 14 open letter Rubric disclosed the deficiencies cited by Mereo and its response.

Shareholder Returns

MREOUS BiotechsUS Market
7D2.3%0.4%-2.5%
1Y-66.8%-25.6%-23.2%

Return vs Industry: MREO underperformed the US Biotechs industry which returned -25.6% over the past year.

Return vs Market: MREO underperformed the US Market which returned -23.2% over the past year.

Price Volatility

Is MREO's price volatile compared to industry and market?
MREO volatility
MREO Average Weekly Movement12.4%
Biotechs Industry Average Movement11.1%
Market Average Movement6.9%
10% most volatile stocks in US Market15.6%
10% least volatile stocks in US Market2.8%

Stable Share Price: MREO is more volatile than 75% of US stocks over the past 3 months, typically moving +/- 12% a week.

Volatility Over Time: MREO's weekly volatility has decreased from 18% to 12% over the past year, but is still higher than 75% of US stocks.

About the Company

FoundedEmployeesCEOWebsite
201549Denise Scots-Knighthttps://www.mereobiopharma.com

Mereo BioPharma Group plc, a biopharmaceutical company, develops and commercializes therapeutics for the treatment of oncology and rare diseases in the United Kingdom and internationally. Its lead product candidate, etigilimab (OMP-313M32), an antibody T-cell immunoreceptor with Ig and ITIM domains, which is in Phase 1b clinical trial for the treatment of tumor. The company is also developing Navicixizumab (OMP-305B83), which has completed Phase 1b clinical trials for the treatment of the late line ovarian cancer; Acumapimod (BCT-197), a p38 MAP kinase inhibitor that is in Phase II clinical trials to treat acute exacerbations of chronic obstructive pulmonary disease; and Leflutrozole (BGS-649), an oral aromatase inhibitor for the treatment of hypogonadotropic hypogonadism.

Mereo BioPharma Group Fundamentals Summary

How do Mereo BioPharma Group's earnings and revenue compare to its market cap?
MREO fundamental statistics
Market CapUS$93.56m
Earnings (TTM)US$14.18m
Revenue (TTM)US$40.63m

6.6x

P/E Ratio

2.3x

P/S Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
MREO income statement (TTM)
RevenueUK£36.46m
Cost of RevenueUK£17.91m
Gross ProfitUK£18.56m
Other ExpensesUK£5.83m
EarningsUK£12.73m

Last Reported Earnings

Dec 31, 2021

Next Earnings Date

n/a

Earnings per share (EPS)0.12
Gross Margin50.89%
Net Profit Margin34.90%
Debt/Equity Ratio16.3%

How did MREO perform over the long term?

See historical performance and comparison
We’ve recently updated our valuation analysis.

Valuation

Is MREO undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

3/6

Valuation Score 3/6

  • Price-To-Earnings vs Peers

  • Price-To-Earnings vs Industry

  • Price-To-Earnings vs Fair Ratio

  • Below Fair Value

  • Significantly Below Fair Value

  • Analyst Forecast

Key Valuation Metric

Which metric is best to use when looking at relative valuation for MREO?

Other financial metrics that can be useful for relative valuation.

MREO key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenuen/a
Enterprise Value/EBITDAn/a
PEG Ratio-0.2x

Price to Earnings Ratio vs Peers

How does MREO's PE Ratio compare to its peers?

MREO PE Ratio vs Peers
The above table shows the PE ratio for MREO vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
CompanyPEEstimated GrowthMarket Cap
Peer Average13.2x
SESN Sesen Bio
1.8x8.6%US$84.8m
SELB Selecta Biosciences
7.9x-43.1%US$250.4m
XOMA XOMA
21.5x65.3%US$205.1m
ALEC Alector
21.5x-28.6%US$781.1m
MREO Mereo BioPharma Group
6.6x-32.6%US$93.6m

Price-To-Earnings vs Peers: MREO is good value based on its Price-To-Earnings Ratio (6.6x) compared to the peer average (13.2x).


Price to Earnings Ratio vs Industry

How does MREO's PE Ratio compare vs other companies in the US Biotechs Industry?

Price-To-Earnings vs Industry: MREO is good value based on its Price-To-Earnings Ratio (6.6x) compared to the US Biotechs industry average (14.9x)


Price to Earnings Ratio vs Fair Ratio

What is MREO's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

MREO PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio6.6x
Fair PE Ratio15.1x

Price-To-Earnings vs Fair Ratio: MREO is good value based on its Price-To-Earnings Ratio (6.6x) compared to the estimated Fair Price-To-Earnings Ratio (15.1x).


Share Price vs Fair Value

What is the Fair Price of MREO when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: Insufficient data to calculate MREO's fair value for valuation analysis.

Significantly Below Fair Value: Insufficient data to calculate MREO's fair value for valuation analysis.


Analyst Price Targets

What is the analyst 12-month forecast and do we have any statistical confidence in the consensus price target?

Analyst Forecast: Target price is more than 20% higher than the current share price, but analysts are not within a statistically confident range of agreement.


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Future Growth

How is Mereo BioPharma Group forecast to perform in the next 1 to 3 years based on estimates from 3 analysts?

Future Growth Score

0/6

Future Growth Score 0/6

  • Earnings vs Savings Rate

  • Earnings vs Market

  • High Growth Earnings

  • Revenue vs Market

  • High Growth Revenue

  • Future ROE


-32.6%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts


Analyst Future Growth Forecasts

Earnings vs Savings Rate: MREO's earnings are forecast to decline over the next 3 years (-32.6% per year).

Earnings vs Market: MREO's earnings are forecast to decline over the next 3 years (-32.6% per year).

High Growth Earnings: MREO's earnings are forecast to decline over the next 3 years.

Revenue vs Market: MREO is forecast to have no revenue next year.

High Growth Revenue: MREO is forecast to have no revenue next year.


Earnings per Share Growth Forecasts


Future Return on Equity

Future ROE: Insufficient data to determine if MREO's Return on Equity is forecast to be high in 3 years time


Discover growth companies

Past Performance

How has Mereo BioPharma Group performed over the past 5 years?

Past Performance Score

3/6

Past Performance Score 3/6

  • Quality Earnings

  • Growing Profit Margin

  • Earnings Trend

  • Accelerating Growth

  • Earnings vs Industry

  • High ROE


-15.9%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: MREO has high quality earnings.

Growing Profit Margin: MREO became profitable in the past.


Past Earnings Growth Analysis

Earnings Trend: MREO has become profitable over the past 5 years, growing earnings by -15.9% per year.

Accelerating Growth: MREO has become profitable in the last year, making the earnings growth rate difficult to compare to its 5-year average.

Earnings vs Industry: MREO has become profitable in the last year, making it difficult to compare its past year earnings growth to the Biotechs industry (29.2%).


Return on Equity

High ROE: MREO's Return on Equity (14.5%) is considered low.


Discover strong past performing companies

Financial Health

How is Mereo BioPharma Group's financial position?

Financial Health Score

3/6

Financial Health Score 3/6

  • Short Term Liabilities

  • Long Term Liabilities

  • Debt Level

  • Reducing Debt

  • Debt Coverage

  • Interest Coverage

Financial Position Analysis

Short Term Liabilities: MREO's short term assets (£99.3M) exceed its short term liabilities (£12.5M).

Long Term Liabilities: MREO's short term assets (£99.3M) exceed its long term liabilities (£25.9M).


Debt to Equity History and Analysis

Debt Level: MREO has more cash than its total debt.

Reducing Debt: MREO's debt to equity ratio has increased from 3.9% to 16.3% over the past 5 years.

Debt Coverage: MREO's operating cash flow is negative, therefore debt is not well covered.

Interest Coverage: Insufficient data to determine if MREO's interest payments on its debt are well covered by EBIT.


Balance Sheet


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Dividend

What is Mereo BioPharma Group current dividend yield, its reliability and sustainability?

Dividend Score

0/6

Dividend Score 0/6

  • Notable Dividend

  • High Dividend

  • Stable Dividend

  • Growing Dividend

  • Earnings Coverage

  • Cash Flow Coverage

Dividend Yield vs Market

Mereo BioPharma Group Dividend Yield vs Market
How does Mereo BioPharma Group dividend yield compare to the market?
SegmentDividend Yield
Company (Mereo BioPharma Group)n/a
Market Bottom 25% (US)1.7%
Market Top 25% (US)4.7%
Industry Average (Biotechs)2.8%
Analyst forecast in 3 Years (Mereo BioPharma Group)n/a

Notable Dividend: Unable to evaluate MREO's dividend yield against the bottom 25% of dividend payers, as the company has not reported any recent payouts.

High Dividend: Unable to evaluate MREO's dividend yield against the top 25% of dividend payers, as the company has not reported any recent payouts.


Stability and Growth of Payments

Stable Dividend: Insufficient data to determine if MREO's dividends per share have been stable in the past.

Growing Dividend: Insufficient data to determine if MREO's dividend payments have been increasing.


Earnings Payout to Shareholders

Earnings Coverage: Insufficient data to calculate payout ratio to determine if its dividend payments are covered by earnings.


Cash Payout to Shareholders

Cash Flow Coverage: Unable to calculate sustainability of dividends as MREO has not reported any payouts.


Discover strong dividend paying companies

Management

How experienced are the management team and are they aligned to shareholders interests?

3.8yrs

Average management tenure


CEO

Denise Scots-Knight (63 yo)

7.5yrs

Tenure

UK£1,645,297

Compensation

Dr. Denise Scots-Knight, Ph D., serves as President of OncoMed Pharmaceuticals, Inc. She serves as Director at Elanco Animal Health Incorporated since March 13, 2019. She co-founded Mereo BioPharma Group p...


CEO Compensation Analysis

Denise Scots-Knight's Compensation vs Mereo BioPharma Group Earnings
How has Denise Scots-Knight's remuneration changed compared to Mereo BioPharma Group's earnings?
DateTotal Comp.SalaryCompany Earnings
Dec 31 2021UK£2mUK£399k

UK£13m

Sep 30 2021n/an/a

-UK£7m

Jun 30 2021n/an/a

-UK£27m

Mar 31 2021n/an/a

-UK£95m

Dec 31 2020UK£1mUK£399k

-UK£164m

Sep 30 2020n/an/a

-UK£153m

Jun 30 2020n/an/a

-UK£143m

Mar 31 2020n/an/a

-UK£89m

Dec 31 2019UK£1mUK£391k

-UK£35m

Sep 30 2019n/an/a

-UK£33m

Jun 30 2019n/an/a

-UK£31m

Mar 31 2019n/an/a

-UK£32m

Dec 31 2018UK£751kUK£380k

-UK£32m

Sep 30 2018n/an/a

-UK£33m

Jun 30 2018n/an/a

-UK£33m

Mar 31 2018n/an/a

-UK£36m

Dec 31 2017UK£672kUK£365k

-UK£39m

Sep 30 2017n/an/a

-UK£38m

Jun 30 2017n/an/a

-UK£36m

Mar 31 2017n/an/a

-UK£32m

Dec 31 2016UK£635kUK£357k

-UK£28m

Jun 30 2016n/an/a

-UK£29m

Dec 31 2015UK£785kUK£138k

-UK£15m

Compensation vs Market: Denise's total compensation ($USD1.83M) is above average for companies of similar size in the US market ($USD774.31K).

Compensation vs Earnings: Denise's compensation has been consistent with company performance over the past year.


Leadership Team

Experienced Management: MREO's management team is considered experienced (3.8 years average tenure).


Board Members

Experienced Board: MREO's board of directors are not considered experienced ( 0.5 years average tenure), which suggests a new board.


Ownership

Who are the major shareholders and have insiders been buying or selling?


Insider Trading Volume

Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.


Recent Insider Transactions

NasdaqGM:MREO Recent Insider Transactions by Companies or Individuals
DateValueNameEntityRoleSharesMax Price
13 Jun 22BuyUS$710,780Rubric Capital Management LPCompany1,096,037US$0.65

Ownership Breakdown

What is the ownership structure of MREO?
Owner TypeNumber of SharesOwnership Percentage
Private Companies518,8050.5%
Individual Insiders1,137,5981.0%
VC/PE Firms16,043,99814.8%
Institutions23,687,57221.8%
General Public25,102,07223.1%
Hedge Funds42,164,55238.8%

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.


Top Shareholders

Top 25 shareholders own 73.6% of the company
OwnershipNameSharesCurrent ValueChange %Portfolio %
15.42%
Rubric Capital Management LP
16,756,240£14.4m0%0.78%
9.24%
Point72 Asset Management, L.P.
10,035,970£8.6m-12.69%0.02%
8.94%
OrbiMed Advisors LLC
9,711,422£8.4m-43.75%0.15%
8.41%
Suvretta Capital Management, LLC
9,142,067£7.9m0%0.3%
5.83%
Tavistock Life Sciences
6,332,576£5.5m55.11%0.28%
5.73%
Rock Springs Capital Management LP
6,230,275£5.4m2.56%0.15%
2.81%
Clearline Capital LP
3,058,596£2.6m134.95%0.41%
2.71%
Medical Strategy GmbH, Asset Management Arm
2,944,368£2.5m2.21%0.17%
2.54%
Citadel Advisors LLC
2,763,425£2.4m-29.26%no data
1.6%
Alkeon Capital Management, LLC
1,735,600£1.5m-10.33%0.01%
1.43%
Tekla Capital Management LLC
1,551,082£1.3m0%0.05%
1.38%
Artal Group S.A.
1,500,000£1.3m0%0.06%
1.01%
Dafna Capital Management, LLC
1,096,513£944.2k-9.87%0.25%
0.92%
Octagon Capital Advisors LP
1,000,000£861.1k0%0.19%
0.66%
Goldman Sachs Group, Investment Banking and Securities Investments
717,455£617.8k0.32%no data
0.66%
Schonfeld Strategic Advisors LLC
715,696£616.3k-18.59%0.01%
0.65%
Millennium Management LLC
701,896£604.4k-23.55%no data
0.62%
BlackRock, Inc.
676,032£582.1k-9.81%no data
0.57%
Ikarian Capital, LLC
615,856£530.3k-32.76%0.18%
0.56%
Renaissance Technologies LLC
608,909£524.3k114.56%no data
0.49%
Ergoteles LLC
529,300£455.8k0%0.02%
0.48%
MVA Investors, LLC
518,805£446.7k0%no data
0.35%
Sectoral Asset Management Inc.
385,000£331.5k0%0.04%
0.3%
PRIMECAP Management Company
321,660£277.0k-2.79%no data
0.29%
Tareno International Asset Managers
318,089£273.9k0%0.16%

Company Information

Mereo BioPharma Group plc's employee growth, exchange listings and data sources


Key Information

  • Name: Mereo BioPharma Group plc
  • Ticker: MREO
  • Exchange: NasdaqGM
  • Founded: 2015
  • Industry: Biotechnology
  • Sector: Pharmaceuticals & Biotech
  • Implied Market Cap: US$93.562m
  • Shares outstanding: 108.65m
  • Website: https://www.mereobiopharma.com

Number of Employees


Location

  • Mereo BioPharma Group plc
  • One Cavendish Place
  • 4th Floor
  • London
  • Greater London
  • W1G 0QF
  • United Kingdom


Listings

TickerExchangePrimary SecuritySecurity TypeCountryCurrencyListed on
MREONasdaqGM (Nasdaq Global Market)YesSPON ADS EACH REP 4 ORD SHSUSUSDApr 2019
MAH0BST (Boerse-Stuttgart)YesSPON ADS EACH REP 4 ORD SHSDEEURApr 2019
MAH0DB (Deutsche Boerse AG)YesSPON ADS EACH REP 4 ORD SHSDEEURApr 2019
0A9GLSE (London Stock Exchange)YesSPON ADS EACH REP 4 ORD SHSGBUSDApr 2019

Company Analysis and Financial Data Status

All financial data provided by Standard & Poor's Capital IQ.
DataLast Updated (UTC time)
Company Analysis2022/10/01 00:00
End of Day Share Price2022/09/30 00:00
Earnings2021/12/31
Annual Earnings2021/12/31


Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.