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
|Historical stock prices|
|Current Share Price||US$0.86|
|52 Week High||US$2.59|
|52 Week Low||US$0.30|
|1 Month Change||-24.47%|
|3 Month Change||-38.05%|
|1 Year Change||-66.75%|
|3 Year Change||-70.71%|
|5 Year Change||n/a|
|Change since IPO||-86.75%|
Recent News & Updates
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.
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.
|MREO||US Biotechs||US Market|
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.
|MREO Average Weekly Movement||12.4%|
|Biotechs Industry Average Movement||11.1%|
|Market Average Movement||6.9%|
|10% most volatile stocks in US Market||15.6%|
|10% least volatile stocks in US Market||2.8%|
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
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
|MREO fundamental statistics|
Is MREO overvalued?See Fair Value and valuation analysis
Earnings & Revenue
|MREO income statement (TTM)|
|Cost of Revenue||UK£17.91m|
Last Reported Earnings
Dec 31, 2021
Next Earnings Date
|Earnings per share (EPS)||0.12|
|Net Profit Margin||34.90%|
How did MREO perform over the long term?See historical performance and comparison
Is MREO undervalued compared to its fair value, analyst forecasts and its price relative to the market?
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
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.
|What is MREO's n/a Ratio?|
Price to Earnings Ratio vs Peers
How does MREO's PE Ratio compare to its peers?
|MREO PE Ratio vs Peers|
|Company||PE||Estimated Growth||Market Cap|
SESN Sesen Bio
SELB Selecta Biosciences
MREO Mereo BioPharma Group
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.
|Current PE Ratio||6.6x|
|Fair PE Ratio||15.1x|
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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How is Mereo BioPharma Group forecast to perform in the next 1 to 3 years based on estimates from 3 analysts?
Future Growth Score0/6
Future Growth Score 0/6
Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
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
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How has Mereo BioPharma Group performed over the past 5 years?
Past Performance Score3/6
Past Performance Score 3/6
Growing Profit Margin
Earnings vs Industry
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.
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How is Mereo BioPharma Group's financial position?
Financial Health Score3/6
Financial Health Score 3/6
Short Term Liabilities
Long Term Liabilities
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.
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What is Mereo BioPharma Group current dividend yield, its reliability and sustainability?
Dividend Score 0/6
Cash Flow Coverage
Dividend Yield vs Market
|Mereo BioPharma Group Dividend Yield vs Market|
|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.
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How experienced are the management team and are they aligned to shareholders interests?
Average management tenure
Denise Scots-Knight (63 yo)
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|
|Date||Total Comp.||Salary||Company Earnings|
|Dec 31 2021||UK£2m||UK£399k|
|Sep 30 2021||n/a||n/a|
|Jun 30 2021||n/a||n/a|
|Mar 31 2021||n/a||n/a|
|Dec 31 2020||UK£1m||UK£399k|
|Sep 30 2020||n/a||n/a|
|Jun 30 2020||n/a||n/a|
|Mar 31 2020||n/a||n/a|
|Dec 31 2019||UK£1m||UK£391k|
|Sep 30 2019||n/a||n/a|
|Jun 30 2019||n/a||n/a|
|Mar 31 2019||n/a||n/a|
|Dec 31 2018||UK£751k||UK£380k|
|Sep 30 2018||n/a||n/a|
|Jun 30 2018||n/a||n/a|
|Mar 31 2018||n/a||n/a|
|Dec 31 2017||UK£672k||UK£365k|
|Sep 30 2017||n/a||n/a|
|Jun 30 2017||n/a||n/a|
|Mar 31 2017||n/a||n/a|
|Dec 31 2016||UK£635k||UK£357k|
|Jun 30 2016||n/a||n/a|
|Dec 31 2015||UK£785k||UK£138k|
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.
Experienced Management: MREO's management team is considered experienced (3.8 years average tenure).
Experienced Board: MREO's board of directors are not considered experienced ( 0.5 years average tenure), which suggests a new board.
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
|13 Jun 22||BuyUS$710,780||Rubric Capital Management LP||Company||1,096,037||US$0.65|
|Owner Type||Number of Shares||Ownership Percentage|
Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.
|Ownership||Name||Shares||Current Value||Change %||Portfolio %|
Mereo BioPharma Group plc's employee growth, exchange listings and data sources
- 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
- Mereo BioPharma Group plc
- One Cavendish Place
- 4th Floor
- Greater London
- W1G 0QF
- United Kingdom
|Ticker||Exchange||Primary Security||Security Type||Country||Currency||Listed on|
|MREO||NasdaqGM (Nasdaq Global Market)||Yes||SPON ADS EACH REP 4 ORD SHS||US||USD||Apr 2019|
|MAH0||BST (Boerse-Stuttgart)||Yes||SPON ADS EACH REP 4 ORD SHS||DE||EUR||Apr 2019|
|MAH0||DB (Deutsche Boerse AG)||Yes||SPON ADS EACH REP 4 ORD SHS||DE||EUR||Apr 2019|
|0A9G||LSE (London Stock Exchange)||Yes||SPON ADS EACH REP 4 ORD SHS||GB||USD||Apr 2019|
Company Analysis and Financial Data Status
|Data||Last Updated (UTC time)|
|Company Analysis||2022/10/01 00:00|
|End of Day Share Price||2022/09/30 00:00|
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.