Cantor starts Mereo BioPharma at OW; PT $4

Cantor Fitzgerald initiated coverage of Mereo BioPharma (NASDAQ:MREO) with an “overweight” rating and $4 price target. The stock closed at $1.15 on Aug. 11.

Mereo is a clinical-stage biopharmaceutical company that is developing therapies for the oncology and rare disease spaces.

Core programs include setrusumab for the treatment of osteogenesis imperfecta; alvelestat for alpha-1 antitrypsin deficiency-related lung disease (AATD-LD) and bronchiolitis obliterans syndrome; and etigilimab for solid tumors.

Analyst Kristen Kluska writes that setrusumab showed promising signals in a Phase 2b study, with increases in volumetric bone mineral density in osteogenesis imperfecta patients.

Mereo is currently partnered with Ultragenyx to conduct the Phase 2/3 ORBIT trial to assess fracture rate reduction for 24 months. “We view osteogenesis imperfecta as a high unmet need indication with no approved treatments,” she said.

Ms. Kluska said alvelestat has shown positive early-stage data for lung-related indications, including improvements in three biomarkers associated with AATD-LD and benefits on forced expiratory volume in one second and biomarkers in the Phase 1b portion of an ongoing trial.

“We are particularly interested, as these programs target rare indications with high unmet need and inadequate treatment options in the clinic,” she added.

Ms. Kluska said Mereo guided that in osteogenesis imperfecta, it could provide a Phase 2/3 update for setrusumab in late 2022. It also has guided that it could hold an end-of-Phase 2 meeting with the FDA in the second half of 2022 for alvelestat, which could lead to the company deciding on the next steps for the program. Also in the second half of 2022, Mereo has guided that it could report additional Phase 1b ACTIVATE data in solid tumors, she said.