MPH.L Regulatory News (MPH)

Mereo BioPharma Group plc

("Mereo" or the "Company")

Conversion of loan note and issue of equity

London, 26 April 2017 - Mereo BioPharma Group plc (AIM: MPH), a UK-based specialty biopharmaceutical company, today announces the conversion by Novartis Pharma AG ("Novartis") of £1,398,552 of its loan note dated 3 June 2016 (the "Loan Note") into 632,829 ordinary shares ("Conversion Shares") at the fixed conversion price of £2.21 per share. Under the terms of the Loan Note, previously disclosed, Novartis will also receive 588,532 ordinary shares ("Bonus Shares") they are entitled to under the Loan Note being equivalent to the Conversion Shares multiplied by 0.93.

Application has been made for the Conversion Shares and Bonus Shares to be admitted to trading on AIM and dealings are expected to commence on or around 27 April 2017. The New Ordinary Shares will rank pari passu with the existing ordinary shares.

Following this conversion, Novartis will hold 13,767,841 ordinary shares in the Company representing 19.5 per cent of the issued share capital.

Following the issue of the Conversion Shares and Bonus Shares, the total number of shares in issue is 70,604,176 ordinary shares, each with voting rights. Therefore, the total number of voting rights in the Company is 70,604,176. This figure may be used by shareholders in the Company as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest under the Disclosure and Transparency Rules.

Background

Novartis was granted a convertible loan note in the amount of £3,463,563 on 3 June 2016 and following conversion of its Loan Note Novartis has the option to convert its remaining £1 convertible loan notes into ordinary shares in the Company at any time when it holds less than 19.5% of the aggregate voting rights in the Company within 36 months of the date of the notes (the "Maturity Date"). To the extent not converted at the Maturity Date, the outstanding principal amount of the notes, together with any outstanding accrued interest, is redeemable. The Loan Note attracts interest of 4% per annum.

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About Mereo

Mereo is a UK-based biopharmaceutical company focused on the development of innovative medicines that aim to address unmet medical needs in rare and specialty disease areas and improve patient quality of life. The Company seeks to selectively acquire development-stage product candidates with demonstrated clinically meaningful data from large pharmaceutical companies and to rapidly progress these product candidates to subsequent value inflection points.

Mereo combines the operational discipline and efficiency of a small company with the financial resources to conduct comprehensive clinical studies. The Company has the option to directly commercialise products, for example in orphan diseases, in addition to partnering or divesting its products.

Mereo's initial portfolio consists of three mid-late stage clinical assets that were acquired from Novartis in July 2015. BPS-804 is being developed for the prevention of fractures resulting from osteogenesis imperfecta (brittle bone disease); acumapimod (BCT-197), is being developed to treat inflammation in patients with an AECOPD; and BGS-649 is a once-weekly pill to restore normal testosterone levels in men with hypogonadotropic hypogonadism.

In H1 2016 the Company initiated a Phase 2 study with acumapimod and a Phase 2b study with BGS-649. Mereo expects to commence the first pivotal trial for BPS-804 during H1 2017. Additional product opportunities, from a range of large pharmaceutical and biotechnology companies, are under active evaluation.