Mereo's Brittle Bone Drug Fails Final Hurdle, Erasing 90% of Company Value

LONDON, UK – December 29, 2025 – Mereo BioPharma’s ambitious journey to deliver a landmark treatment for Osteogenesis Imperfecta (OI), a severe genetic brittle bone disease, came to a stunning halt today. The company announced that its lead candidate, setrusumab, failed to meet its primary goal of reducing fracture rates in two pivotal Phase 3 studies, triggering a catastrophic collapse in its market value and forcing an immediate corporate restructuring.

In a devastating blow to both the company and the patient community, the ORBIT and COSMIC trials did not demonstrate a statistically significant reduction in the annualized clinical fracture rate compared to placebo or existing treatments. The news sent Mereo's NASDAQ-listed shares (MREO) plummeting by over 90% in morning trading. The fallout also hit Mereo's development partner, Ultragenyx Pharmaceutical, whose shares (RARE) fell by more than 40%, wiping out approximately $1.4 billion in market capitalization.

The results mark a dramatic and unexpected end to a program that was once a beacon of hope for the estimated 60,000 people worldwide living with OI, a condition for which there are no globally approved treatments. The failure underscores the perilous high-stakes nature of developing therapies for rare and complex genetic disorders.

A Market Meltdown and Legal Scrutiny

The reaction from Wall Street was swift and brutal. Mereo BioPharma, which had been buoyed by prior optimism and positive Phase 2 results, saw its valuation almost entirely evaporate overnight. The dramatic stock crash was followed by a wave of analyst downgrades that reflected a near-total loss of confidence in the setrusumab program.

Jefferies downgraded Mereo from “Buy” to “Hold,” slashing its price target from $7.00 to a mere $0.50. Analysts at Baird, while maintaining an “Outperform” rating, cut their price target from $8.00 to $1.00 and lowered the drug's probability of success to just 5%. The sentiment was a stark reversal from just months ago when some analysts had projected an 85% chance of success for the trials, a belief fueled by strong earlier data.

The sudden and severe stock drop has also attracted legal attention. Multiple law firms announced they were launching investigations into Mereo BioPharma for potential violations of federal securities laws, scrutinizing whether the company may have misrepresented the drug's prospects to investors.

The Scientific Paradox: Stronger Bones, But Not Fewer Breaks

At the heart of the disappointing announcement lies a confounding scientific paradox. While setrusumab failed its primary clinical objective, it succeeded on its secondary endpoint, demonstrating a statistically significant improvement in bone mineral density (BMD) in both trials. Setrusumab, a monoclonal antibody, works by inhibiting sclerostin, a protein that acts as a brake on bone formation. The drug effectively took the brakes off, leading to denser bones in patients.

However, this biological success did not translate into the desired clinical benefit of preventing fractures. In the ORBIT study, which enrolled patients aged 5 to 25, the effect was obscured by an unexpectedly low fracture rate in the placebo group, making it statistically impossible to prove a benefit. “There was no change in the safety profile observed,” the company noted, but the lack of separation from placebo on the key endpoint rendered the trial a failure.

In the pediatric COSMIC study, which involved children aged 2 to under 7, the results were more nuanced. Meaningful improvements in bone density were associated with a numerical reduction in fractures compared to bisphosphonates, the current off-label standard of care. However, this reduction did not achieve statistical significance, falling short of the rigorous benchmark required for regulatory approval. This outcome highlights a persistent challenge in bone disease research: the disconnect between improving surrogate markers like BMD and achieving hard clinical outcomes like fracture prevention.

A Setback for a Community in Need

For the Osteogenesis Imperfecta community, the news is a profound disappointment. OI is a group of genetic disorders that result in bones that break easily, often from little or no trauma. The condition can lead to hundreds of fractures over a lifetime, chronic pain, mobility issues, and bone deformities. The lack of any approved therapies means patients and families are left with supportive care and off-label treatments that have significant limitations.

Setrusumab represented one of the most advanced and promising therapies in the pipeline. Its failure to deliver on the primary goal of fracture reduction leaves a significant void and pushes the hope for a breakthrough further into the future. While Mereo plans to conduct further analyses on the data, particularly for the pediatric population, the path forward for setrusumab is now highly uncertain. Advocacy groups and patients, while likely disheartened, will almost certainly renew their calls for continued research and investment into finding an effective treatment for this debilitating condition.

Mereo's Fight for Survival and a Pivot to the Pipeline

Faced with a crisis, Mereo’s leadership has moved to stabilize the company. With a cash balance of $48.7 million reported at the end of the third quarter of 2025, the company has initiated immediate and deep cuts to its pre-commercial and manufacturing activities related to setrusumab to preserve capital. CEO Dr. Denise Scots-Knight acknowledged the disappointment but signaled a strategic pivot.

“We will be conducting additional analyses on the data, to assess next steps and the best path forward for the program, especially in pediatrics given the totality of the data and lack of other treatment options for individuals with OI,” she stated in the press release. “In the meantime, we are carefully managing our cash resources... and we are continuing to advance partnering discussions for alvelestat.”

The company’s future now rests heavily on its other pipeline assets. The focus shifts to alvelestat, a candidate for alpha-1 antitrypsin deficiency-associated lung disease, for which the company is actively seeking a partner. Success in securing a lucrative deal for alvelestat has become critical for Mereo's survival and its ability to fund any remaining operations. The company also has other partnered programs, including vantictumab for osteopetrosis and leflutrozole for male infertility, which may provide future value but are not under its direct control. The failure of its lead asset has transformed Mereo BioPharma from a company on the cusp of a potential blockbuster to one fighting for its future in the unforgiving landscape of clinical-stage biotechnology.