Mereo BioPharma Stock Collapses 89% as Bone-Drug Trial Fails
Shares were nearly wiped out after flagship drug setrusumab, developed with partner Ultragenyx, failed to meet its primary goal of reducing fractures in patients with 'brittle bone disease'.
Shares of Mereo BioPharma (NASDAQ: MREO) were decimated in Tuesday trading, plunging nearly 89% after the company announced its closely-watched drug for a rare genetic bone disorder failed to meet its main goal in a pivotal Phase 3 study. The catastrophic results erased over $320 million in market value and sent shares of its development partner, Ultragenyx Pharmaceutical (NASDAQ: RARE), tumbling more than 40%.
Mereo’s stock fell $2.05 to close at just $0.26, reducing its market capitalization to approximately $41 million from around $366 million a day prior. The sell-off came after the London-based company revealed that its flagship drug candidate, setrusumab, did not achieve a statistically significant reduction in fracture rates for patients with osteogenesis imperfecta (OI), a condition commonly known as brittle bone disease.
The two Phase 3 trials, named ORBIT for adults and COSMIC for children and young adults, were designed to be the final step before seeking regulatory approval. While the studies failed their primary endpoint, the company noted that they did achieve their secondary goals, showing what it called "statistically significant and substantial improvements" in bone mineral density (BMD) compared to placebo or existing treatments. However, the inability to prove that increased bone density leads to fewer fractures proved fatal for the program's immediate prospects and the company's valuation.
The data showed a low fracture rate in the placebo group of the adult study, making a statistical benefit difficult to demonstrate. In the pediatric study, a reduction in fractures was observed but it was not strong enough to meet the threshold for statistical significance.
In a statement addressing the devastating outcome, Mereo's Chief Executive Officer, Dr. Denise Scots-Knight, acknowledged the setback. "Whilst we are disappointed by these results, we will be conducting additional analyses on the data to assess next steps and the best path forward for the program, especially in pediatrics," she said. The company announced the results in a press release.
The failure marks a significant blow for both Mereo and the OI patient community, which has long awaited more effective treatments. The news also triggered a painful ripple effect for Ultragenyx, which had licensed the North American rights to the drug and was a key partner in its development. Ultragenyx shares hit a new 52-week low on the news as the company announced it would implement significant expense reductions to manage the fallout.
With its lead asset now in jeopardy, Mereo is taking immediate action to preserve its finances. Dr. Scots-Knight confirmed the company is making "immediate reductions in our pre-commercial and manufacturing activities" for setrusumab. The firm's focus will now pivot to its remaining pipeline asset, alvelestat, which is being developed for alpha-1 antitrypsin deficiency, as it pursues partnering discussions. The setback starkly illustrates the binary risks of clinical-stage biotechnology, where years of development can be undone by a single data readout, leaving a company's future dependent on its remaining cash and the potential of its earlier-stage science.