Friday's buy recommendation from Jefferies for Mereo BioPharma Group (MREO, Financials) increased its shares by 7% as investors looked for setrusumab and alvelestat. With a target price of $7, more than 89% upside from the last close.
Developed with Ultragenyx Pharmaceutical (RARE, Financials), the second intermediate results of a Phase 3 trial for setrusumab impressed Jefferies analysts. The first interim studies of Mereo BioPharma also showed potential for the investment bank, therefore strengthening its chances.
Key in Mereo's pharmacological tool is Setrusumab, which targets osteogenesis imperfecta. Jefferies underlined the near-term likelihood of trial success, which might result in a launch free from rivalry. Setrusumab, should it be launched, is expected to generate enormous royalties, therefore validating Jefferies' optimistic assessment of the company.
Apart from setrusumab, Mereo is under Phase 3 researching alvelestat for severe ATTD-lung. According to Jefferies, Mereo is negotiating possible alvelestat partners to increase its drug pipeline and cash flow.
Jefferies believes Mereo is positioned in rare illnesses because setrusumab's predicted absence of osteogenesis imperfecta's competition.
Though the performance improved, Mereo lost $15 million in Q3 2024 from $6.5 million in 2023. The bigger deficit resulted from net foreign currency losses of $6.4 million. But the company ended the quarter with $80.5 million in cash and cash equivalents, enough to endure until 2027.
Promising Phase 2/3 Orbit trial findings of setrusumab from Mereo's research partner Ultragenyx reveal a 67% annualized fracture rate decrease and significant bone mineral density gains for osteogenesis imperfecta patients. These results indicate potential, but they have no bearing on the present stock price.
