Mereo BioPharma Stock Plunges After Lead Drug Fails Phase 3 Trial
The company and partner Ultragenyx will halt spending on the bone drug program after it failed to reduce fracture rates in patients with osteogenesis imperfecta.
Shares of Mereo BioPharma (NASDAQ: MREO) plunged in trading on Monday after the company announced its lead drug candidate, setrusumab, failed to meet its primary objective in a critical late-stage study, dealing a significant blow to the company’s clinical pipeline.
The drug was being tested as a treatment for osteogenesis imperfecta (OI), a rare genetic disorder commonly known as brittle bone disease. In a statement, Mereo disclosed that the Phase 3 ORBIT and COSMIC studies did not achieve the primary endpoint of significantly reducing the annualized clinical fracture rate in patients compared to a placebo.
The trial failure prompted an immediate strategic shift from the London-based biopharmaceutical firm. Mereo announced it would implement "immediate reductions in all pre-commercial and manufacturing activities relating to setrusumab" to conserve cash. The company ended the third quarter with a cash balance of $48.7 million.
The negative results also impact Mereo's development partner, Ultragenyx Pharmaceutical (NASDAQ: RARE), which was leading and funding the setrusumab program under a collaboration and license agreement established in 2020. Ultragenyx also confirmed the trial's failure in a separate announcement and stated it would implement significant expense reductions for the program.
Setrusumab, an antibody designed to inhibit sclerostin, was a cornerstone of Mereo's valuation and a source of considerable optimism for investors. Before the announcement, analysts held a consensus "Buy" rating on the stock with an average price target of $6.50, a significant premium to its recent trading levels. The failure marks a stark reversal of fortune and forces the company to re-evaluate its strategy.
While the study missed its primary goal, the companies noted that it did achieve its secondary endpoints. The treatment led to a statistically significant improvement in bone mineral density at the lumbar spine at 12 months compared to the placebo. However, without a corresponding reduction in fracture rates, the path to regulatory approval and commercial viability for the drug is effectively closed.
According to the company's announcement, the decision to halt spending will allow Mereo to focus resources on its other clinical-stage programs. However, the loss of its lead candidate places immense pressure on the rest of its pipeline to deliver results and rebuild investor confidence. For patients with osteogenesis imperfecta, who face a lifetime of fragile bones and repeated fractures, the trial's outcome is a major disappointment and a setback in the search for effective treatments.