Mereo BioPharma Enters into a $5 Million Convertible Equity Financing with Novartis and Announces a Securities Purchase Agreement with Aspire Capital Fund, LLC for up to $28 Million - Seite 2

About the Aspire Capital Securities Purchase Agreement
Under the terms of the Securities Purchase Agreement (the “Agreement”), Aspire Capital has made an initial investment of $3 million to purchase 11,432,925 of the Company's ordinary shares (equivalent to 2,286,585 ADSs) at a price equivalent to $1.31 per ADS, which represents a 16% discount over Mereo’s ADS closing stock price of $1.56 on February 8, 2020. Under the terms of the Agreement, Aspire Capital has also committed to subscribe at Mereo’s request from time to time during a 30-month period for up to an additional $25 million of Mereo’s ordinary shares exchangeable for ADSs at prices based on the ADS market price at the time of each sale. There are no warrants, derivatives, or other share classes associated with the Agreement and Mereo will retain full control over the timing of any subscriptions to be made under the Agreement and the amount of ordinary shares to be subscribed by Aspire Capital. Further, there are no restrictions on future financings and there are no financial covenants, participation rights, rights of first refusal, or penalties in the Agreement. Mereo has the right to terminate the Agreement at any time, at its discretion, without any additional cost or penalty. In consideration for Aspire Capital's initial investment and its commitment to purchase up to an additional $25 million ADSs, Mereo has agreed to pay Aspire Capital a commission to be satisfied wholly by the issue to Aspire Capital of a further 2,862,595 of the Company's ordinary shares (equivalent to 572,519 ADSs).

Additional detail regarding the Loan Note, the Agreement and the related registration rights agreement is set forth in Mereo’s Report on Form 6-K filed today with the SEC.

Related Party Transactions
As at February 10, 2020, Novartis holds approximately 16.03% of Mereo’s issued and outstanding ordinary share capital and as such is considered to be a related party of the Company as defined by the AIM Rules. The convertible equity financing with Novartis therefore constitutes a related party transaction pursuant to AIM Rule 13.

The Directors of Mereo, having consulted with the Company’s nominated adviser, Cantor Fitzgerald Europe, consider the terms of the convertible equity financing are fair and reasonable insofar as its shareholders are concerned.

Following completion of these transactions, the Company continues to explore additional equity funding and partnering transactions for its pipeline with third parties to extend the current forecasted cash runway from mid-2020 and to fund the initiation of the planned pivotal Phase 3 study for setrusumab in pediatric patients with osteogenesis imperfecta (OI) following the upcoming Type B End-of-Phase 2 meeting with the U.S. Food and Drug Administration (FDA) this quarter.