Model Update

Research evidence excerpt

Model Update

May 12, 2026

Valuation

We use a DCF analysis to value MREO shares. We model cash flows out to 2035E. We

assume a discount rate of 12% and no terminal value. The total NPV is ~$495M, based

on our analysis. Our PT calculation includes estimated cash and shares outstanding as of

end-1Q27E.

Risks

Mereo is a development-stage company, and investment is subject to risk. These risks

include, but are not limited to:

Clinical trial risk: Mereo is a clinical-stage company and currently has no commercial

products. The company has multiple clinical-stage programs, including etigilimab in solid

tumors, setrusumab in osteogenesis imperfecta, and alvelestat in AATD-LD and BOS.

Delays in patient recruitment or enrollment can push back our sales estimates significantly.

Regulatory challenges/risks: As with any company whose main business is drug

development, Mereo is subject to the very stringent regulatory requirements of the FDA

and other international regulatory agencies to have its new drugs and new indications for

them approved. Promotion of its drug products is also stringently regulated by the FDA and

related agencies throughout the world. The FDA may deny approval or require additional

studies for review if it does not believe the submission satisfactorily addresses the safety,

efficacy, and manufacturability of a drug candidate.

Commercial/Competitive risk: Other companies have potential therapies on the market

or under development for multiple indications that Mereo is targeting. This could

limit potential sales, assuming commercialization of Mereo’s candidates. Further, other

companies may have larger commercial teams in place.

Reimbursement risk: If any of Mereo’s products are approved, the company may need to