MREO US Equity☆

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and the related notes to those statements included elsewhere in this Annual Report on Form 10-K. In addition to our historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, beliefs and expectations. Our actual results and the timing of events could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in Part I, Item 1A. “Risk Factors.”

Overview

We are a biopharmaceutical company focused on the development of innovative therapeutics for rare diseases. We have developed a portfolio of late-stage clinical product candidates. Our strategy is to become a leading biopharmaceutical company developing innovative therapeutics that aim to improve outcomes for patients with rare diseases.

Our two rare disease product candidates are setrusumab for the treatment of osteogenesis imperfecta (OI) and alvelestat primarily for the treatment of severe alpha-1 antitrypsin deficiency-associated lung disease (AATD-LD). In addition to the rare disease programs, we have two oncology product candidates, etigilimab (an anti-TIGIT antibody) for the treatment of advanced solid tumors and navicixizumab (out-licensed to Feng Biosciences) for the treatment of late line ovarian cancer. Acumapimod is a p38 MAP kinase inhibitor therapy for treatment during severe acute exacerbations of chronic obstructive pulmonary disease (“AECOPD”). In December 2023, we entered into an exclusive global license agreement with ReproNovo for the development and commercialization of leflutrozole, a non-steroidal aromatase inhibitor.

We do not have any approved product candidates and, as a result, have not generated any revenue from product sales. Our ability to generate revenue sufficient to achieve profitability will depend on successful development and eventual commercialization of our product candidates either directly or with partners, if approved. Since our inception, we have incurred significant operating losses. We expect to continue to incur significant expenses and operating losses for the foreseeable future as we advance the clinical and manufacturing development of our product candidates and seek regulatory approval. If approved, we also expect to incur significant commercialization expenses related to product manufacturing, marketing, sales, and distribution.

We believe that our existing cash and cash equivalents will be sufficient to enable us to fund our operating expenses and capital expenditure requirements into 2026 at which point we will require additional capital.

We are organized into a single operating segment following management’s view of the business as a single portfolio of product candidates. Research and development expenses are monitored at a product level; however, decisions over resource allocation are made at an overall portfolio level. Our financing is managed and monitored on a consolidated basis.

Financial Operations Overview

Revenue

The Company’s ordinary business activities are the development of product candidates to key clinical milestones and either strategically partnering them or further developing such product candidates through regulatory approval and potentially commercialization. The Company may enter into a range of different agreements with third parties, including, but not limited to: (i) licensing agreements where the global rights to a product candidate are licensed to a partner; and (ii) collaboration agreements where rights to a product candidate are licensed to a partner but the Company retains certain rights, for example to further develop or commercialize the product candidate in specified geographical territories. Under both licensing and collaboration agreements, rights to product candidates are provided to a partner typically in exchange for consideration in the form of upfront payments and/or development, regulatory, commercial or other similar milestones, and royalties on commercial sales, should regulatory approval be obtained for the product candidates. Where the Company has performed significant development activities for its product candidates, income from agreements with third parties are considered to be proceeds derived from the Company’s ordinary activities and therefore represent revenue.

Revenue includes income from licensing and collaboration agreements. Consideration received up front is recognized at the point in time in which the right to use a license or intellectual property is transferred. Income from development, regulatory, commercial or similar milestones is recognized when considered highly probable that a significant reversal of revenue generated will not occur.

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We do not currently have any approved product candidates. Accordingly, we have not generated any commercial sales revenue during the period. In the future, we expect to be able to generate revenues if we are able to obtain regulatory approval and commercialize one or more of our product candidates.

Payments to third parties arising as a direct consequence of the revenue recognized are recorded within cost of revenue in the Company’s consolidated statements of operations and comprehensive loss. The costs recognized under cost of revenue in the year ended December 31, 2023 and December 31, 2022 are the payments that we are obligated to pay to Novartis under the 2015 asset purchase agreements. In 2015, when we purchased acumapimod, leflutrozole and setrusumab from Novartis, we agreed to pay Novartis if certain events occurred in relation to these compounds. The events that warrant a payment to Novartis are sales related or when a change in control occurs. When it is probable that either of these events will occur, revenue is recognized, and the corresponding payment obligation to Novartis is recognized within Cost of revenue.

Research and development (“R&D”) expenses

Research and development expenses include:

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employee-related expenses, such as salaries, share-based compensation, and other benefits, for Mereo’s research and development personnel;

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costs for production of drug substance and drug product and development of Mereo’s manufacturing processes by CMOs;

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fees and other costs paid to CROs, consultants, and other suppliers to conduct Mereo’s clinical trials and pre-clinical and non-clinical studies; and

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costs of facilities, materials, and equipment related to drug production and Mereo’s clinical trials and pre-clinical and non-clinical studies.

Intellectual property costs incurred on each drug candidate and costs associated with pre-commercial activities to support pricing and reimbursement by health technology assessment (“HTA”) authorities and payor decision-makers in Europe are excluded from R&D expenses and are recognized within General and administrative expenses. Our direct research and development expenses are allocated on a product-by-product basis. We allocate employee-related expenses for our research and development personnel and other related expenses to specific product candidate development programs.

Product candidates in a later stage of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later stage clinical trials as well as preparation for potential specific post-authorization evidence generation that might be demanded by regulatory authorities. As we advance the clinical development of our product candidates, we expect that our research and development expense will continue to include costs of inputting into development, regulatory and manufacturing plans with our partner, Ultragenyx, for setrusumab; activities associated with preparation of alvelestat for the Phase 3 study, including CMC and drug formulation, activities associated with validation of the patient reported outcome (PRO) and additional regulatory interactions; and the close-out of the Phase 1b portion of the Phase1b/2 basket study for etigilimab.

The successful development, approval, and commercialization of our product candidates is highly uncertain. At this time, we cannot reasonably estimate the nature, timing, and estimated costs of the efforts that will be necessary to complete the development of, or the period, if any, in which material net cash inflows may commence from any of our product candidates.

Our future expenditure on developing our product candidates is therefore highly uncertain. This is due to numerous risks and uncertainties associated with developing our product candidates, including the uncertainty of:

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the scope, rate of progress, and expense of our research and development activities;

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the progress and results of our clinical trials and our pre-clinical and non-clinical studies;

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the terms and timing of regulatory approvals, if any;

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establishment of arrangements with our third-party manufacturers to obtain manufacturing supply;

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protection of our rights in its intellectual property portfolio;

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launch of commercial sales of any of our product candidates, if approved, whether alone or in collaboration with others;

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third party strategic relationships for clinical development and/or commercialization of our non-core product candidates and performance of our strategic partners under these arrangements;

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the sale, if any, of one or more of our non-core disease product candidates;

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acceptance of any of our product candidates, if approved, by patients, the medical community and payors at our desired pricing levels;

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competition with other therapies; and

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continued acceptable safety profile of any of our product candidates following approval.

Any of these variables with respect to the development of our product candidates or any other future candidate that we may develop could result in a significant change in the costs and timing associated with their development. For example, if the FDA, the EMA, or another regulatory authority were to require us to conduct pre-clinical studies and clinical trials beyond those that we currently anticipate will be required for the completion of clinical development or if we experience significant delays in enrollment in any clinical trials, we could be required to expend significant additional financial resources and time on the completion of our clinical development programs. We may never succeed in obtaining regulatory approval for any of our product candidates.

General and administrative expenses

Our general and administrative expenses principally consist of salaries and related benefits, including share-based compensation, for personnel in our executive, finance and other administrative functions. Other general and administrative costs include facility-related costs, professional services fees for auditing, tax and general legal services, intellectual property costs, pre-commercial activities, costs related to our requirements of being a public company listed on Nasdaq, and costs incurred relating to the issue of equity to the extent not capitalized.

Interest income

Interest income comprises interest received on cash and short term deposits.

Interest expense

Interest expense principally comprises interest on convertible loan notes, deferred consideration and bank charges. For further information on the terms of our convertible loan notes see “—Liquidity and Capital Resources—Indebtedness”.

Changes in the fair value of financial instruments

The fair value changes in financial instruments are recognized in the statement of comprehensive loss.

Foreign currency transaction gain/(loss)

Our condensed consolidated financial statements are presented in U.S dollars. We initially record transactions in foreign currencies at the rate prevailing on the date the transaction first qualifies for recognition. Foreign currency transaction gain/(loss) consists of the difference arising on settlement or translation of transactions denominated in currencies other than the functional currency of the transacting foreign entity, which are primarily held in U.S. dollars and British pound sterling.

Other income

Other income consists of income that is derived from a third party which is not a customer and does not fall under the scope of ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”).

Benefit from research and development tax credits

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As a U.K. resident trading entity, we are subject to U.K. corporate taxation. Due to the nature of our business, we have generated operating losses since formation. As of December 31, 2023 and 2022, we had cumulative carry-forward U.K. tax losses of $30.6 million and $28.7 million, respectfully. Subject to any relevant restrictions, we expect these to be available to carry forward and offset against future operating profits. As a company that carries out extensive research and development activities, we benefit from the U.K. R&D small or medium-sized enterprise tax credit regime and are able to surrender some of our trading losses that arise from our research and development activities for a cash rebate. To date, a cash rebate of up to 33.35% of eligible R&D expenditure has been available, but the cash rebate has reduced to a maximum of 27% for R&D intensive companies where at least 40% of their total expenditure is on qualifying R&D, or 18.6% of eligible R&D expenditure for other companies with effect from April 1, 2023 pursuant to changes made by the Finance Act 2023. Certain subcontracted qualifying research expenditures are eligible for a cash rebate, though the rate of the cash rebate has reduced with effect from April 1, 2023 from up to 21.67% of the subcontracted expenditures to 17.53% for R&D intensive companies or 12.09% for other companies. The difference in cash rebate for qualifying subcontracted expenditure vs other qualifying expenditure is due to a statutory restriction of 65% being applied to unconnected qualifying subcontracted expenditure, thus restricting the benefit available. Qualifying expenditures largely comprise employment costs for research staff, subcontracted CRO and CMO costs, consumables and certain internal overhead cost incurred as part of research projects. We may not be able to continue to claim payable R&D tax credits in the future because we may no longer qualify as a small or medium-sized company.

In the event we generate revenues in the future, we may benefit from the U.K. “patent box” regime that allows profits attributable to revenues from patents or patented product candidates to be taxed at an effective rate of 10%. This relief applies to profits earned following election into the regime. When taken in combination with the enhanced relief available on our R&D expenditures, we expect a long-term lower rate of corporation tax to apply to us. If, however, there are unexpected adverse changes to the U.K. R&D tax credit regime or the “patent box” regime, or for any reason we are unable to qualify for such advantageous tax legislation, or we are unable to use net operating loss and tax credit carryforwards and certain built-in losses to reduce future tax payments, our business, results of operations, and financial condition may be adversely affected.

Income tax benefit

We operate in the U.K. and in the U.S. and are subject to corporate taxation in those countries. We have generated losses since inception and have therefore not paid U.K. corporation tax except for in 2021. The income tax benefit included in the consolidated statements of operations and comprehensive loss represents tax refunds in respect of income taxes paid in 2021.

The U.K corporation tax rate applied for 2023 was 23.52% (2022: 19.0%), which results from applying the enacted statutory rate of 19% from January 1, 2023 through April 1, 2023, and 25% for the remainder of 2023. U.K. deferred tax assets and liabilities have been measured at a rate of 25%. The U.S federal income tax rate is 21%.

As of December 31, 2023, the Company had U.K. net operating loss carryforwards of $30.6 million, that can be carried forward indefinitely. The Company hadU.S. federal tax losses to be carried forward of approximately $66.2 million of which $18.2 million can be carried forward indefinitely and $48.0 million which will begin to expire in 2024. The Company also had $14.0 million of U.S. federal research and development (“R&D”) tax credits that begin to expire in 2024 and U.S. state tax losses to be carried forward of less than $0.1 million which begin to expire in 2027. The Company also had less than $0.1 million of state R&D tax credits that do not have an expiration date.

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Results of Operations

The following table sets forth Mereo’s results of operations for the years ended December 31, 2023 and 2022.

Year ended December 31,

Operating expenses:

Other income/(expenses)

Changes in the fair value of financial instruments 245 9,286 (9,041 ) (97 %)

Foreign currency transaction (loss)/gain, net (2,347 ) 2,723 (5,070 ) *

Benefit from research and development tax credit 1,280 1,728 (448 ) (26 %)

* Percentage change not meaningful

Comparison of Years Ended December 31, 2023 and 2022

Revenue

Revenue of $10.0 million for the year ended December 31, 2023 comprised a one-time milestone payment of $9.0 million resulting from the achievement of a clinical milestone on setrusumab by Ultragenyx and a $1.0 million up-front payment from our global license agreement with ReproNovo for the development and commercialization of leflutrozole. No revenue was recognized for the year ended December 31, 2022.

Cost of revenue

Cost of revenue for the year ended December 31, 2023 was $2.6 million compared to a credit of $1.1 million for the year ended December 31, 2022. Cost of revenue in 2023 represents amounts payable pursuant to our 2015 agreement with Novartis, under which the Company pays a percentage of proceeds resulting from milestone revenue received, subject to certain deductions.

In 2021, we received a $50.0 million upfront payment from Ultragenyx and recognized cost of revenue of $13.3 million reflecting the Company's obligation under our 2015 agreement with Novartis. Pursuant to this agreement, $10.0 million was paid in cash and $3.3 million was withheld and recognized as a deferred liability in other current liabilities, reflecting anticipated future costs to be incurred which are allowable deductions from amounts owed under the agreement. As these costs were subsequently incurred and recognized in research and development expenses or general and administrative costs, the liability was discharged and released through cost of revenue. In 2022, $1.1 million of this liability was discharged and accordingly recognized as a credit to cost of revenue.

Research and development (“R&D”) Expenses

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The following table sets forth our R&D expenses by product development program for the years ended December 31, 2023 and 2022.

Year ended December 31,

Total R&D expenses decreased by $12.0 million, or 41%, from $29.5 million in 2022 to $17.4 million in 2023.

The decrease was primarily due to a $12.4 million reduction in R&D expenses for etigilimab, partially offset by an increase of $0.7 million in expenses for setrusumab.

The reduction in etigilimab expenses was primarily due to the winding down and completion of the open label Phase 1b/2 basket study in combination with an anti-PD-1 in a range of tumor types. Program expenses for setrusumab are in relation to ongoing activities in Europe, and input into development, regulatory and manufacturing plans with our partner, Ultragenyx, as the global development of the program is funded by Ultragenyx pursuant to our license and collaboration agreement. Program expenses for alvelestat primarily include the preparatory work for the Phase 3 study, including CMC and drug formulation activities, SGRQ validation activities and regulatory interactions.

General and administrative expenses

General and administrative expenses decreased by $7.7 million, or 29%, from $26.1 million in 2022 to $18.4 million in 2023.

The decrease is primarily related to overall reductions in staff costs, professional fees and corporate costs of $7.1 million, in addition to $3.6 million received from our depositary to reimburse certain expenses incurred by us in respect of our ADR program in the current and prior years and $2.0 million received under a claim on our Directors and Officers insurance policy to reimburse us for certain legal and professional costs incurred in prior years.

General and administrative expenses included $2.7 million (2022: $2.6 million) related to pre-commercial activities, including those to support pricing and reimbursement by HTA authorities and payor decision-makers in Europe.

Interest income and expense

Total interest expense decreased from $4.2 million in 2022 to $2.9 million in 2023. This decrease is primarily due to the significantly lower average balance of convertible loan notes outstanding in 2023 compared to 2022. This reduction was due to the conversion and repayment of the Private Placement Loan Notes between June and August of 2023, as well as a partial conversion in July 2022.

Total interest income increased from $0.8 million in 2022 to $2.1 million in 2023. The increase is related to higher interest rates on cash and cash equivalents.

Changes in the fair value of financial instruments

The total change in fair value of financial instruments for 2023 was a gain of $0.2 million, a decrease of $9.0 million compared to an unrealized gain of $9.3 million in 2022.The unrealized gain in 2023 was due to the expiry of the Private Placement warrants, offset by an unrealized loss on the Bank loan warrants as a result of an increase in the market price of our ADSs. The unrealized gain in 2022 primarily resulted from our Private Placement warrants driven, by a decline in the market price of our ADSs.

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Foreign currency transaction gain/(loss)

The net foreign exchange loss for 2023 was $2.3 million compared to a gain of $2.7 million in 2022. The net foreign exchange loss is primarily related to impact of the strengthening of the pound sterling when translating foreign currency balances, primarily denominated in U.S. dollars.

Other income

Less than $0.1 million of other expenses were recognized in 2023. In 2022, $1.1 million was recognized as net proceeds from Feng Biosciences under the global license agreement for navicixizumab.

Benefit from research and development tax credit

The benefit from research and development tax credits decreased from $1.7 million in 2022 to $1.3 million in 2023. The income tax benefit represents eligible cash rebates paid or receivable from the tax authorities in the jurisdictions within which we operate for eligible types of research and development activities and associated expenditure (the “R&D tax credit”).

Income tax benefit

The income tax benefit in both periods represents income taxes paid in prior years for which a carryback claim has been made to offset against taxable income in the prior year.

Other comprehensive loss – Foreign currency translation adjustments

The foreign currency translation adjustment for the year ended December 31, 2023 was a credit $4.2 million compared to $10.7 million for the year ended December 31, 2022. The $14.9 million change is primarily related to the strengthening of the pound sterling when translating balances from our pound sterling functional currency into our U.S. dollar reporting currency.

Liquidity and Capital Resources

Overview

Under the current business plan and cash flow forecasts, and in consideration of our ongoing research and development efforts and our general corporate funding requirements, we anticipate that our current on-hand cash resources will extend into 2026. However, we will need additional external funding to complete our development plans and potentially commercialize selected rare disease products. We plan to fund our operations through cash on hand and a combination of non-dilutive funding sources, public or private equity or debt financings or other sources.

We do not currently have any approved product candidates and as a result, have not generated any revenue from product sales. As a result, to date, we have financed our operations primarily through the issuances of our equity securities, convertible debt and warrants. Through these offerings, we raised approximately $209 million, including $12.0 million raised in July 2023 through an “at-the-market” offering pursuant to our Open Market Sale Agreement with Jefferies LLC.

We have also received payments under various license and collaboration agreements, including:

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An upfront payment of $50.0 million under the license and collaboration agreement with Ultragenyx for setrusumab in 2021 and a further milestone payment of $9.0 million in July 2023.

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An upfront payment of $4.0 million under the license and collaboration agreement with Feng Biosciences (formerly OncXerna) for navicixizumab in 2020 and a further milestone payment of $2.0 million in 2022.

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An upfront payment of $1.0 million under the global license agreement with ReproNovo for leflutrozole in December 2023.

Contractual Obligations

As further described under “Item1. Business-Material Agreements-Novartis Agreements” and “Item1. Business-Material Agreements-Licensing Agreement with AstraZeneca,” under various agreements with Novartis and AstraZeneca, Mereo has agreed to make milestone payments and pay royalties. The amount, timing, and likelihood of such payments are not known and will remain uncertain for the foreseeable future.

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In addition, Mereo enters into contracts in the ordinary course of business with CROs, CMOs, and other vendors to assist in the performance of its research and development activities and other services and products for operating purposes. The contracts with CROs generally provide for termination on notice, and therefore are cancelable contracts. We have manufacturing commitments with CMOs of $4.2 million as of December 31, 2023.

Cash Flows

Comparison of Years Ended December 31, 2023 and 2022

The table below summarizes our cash flows (used in) from operating, investing and financing activities for the years ended December 31, 2023 and 2022.

Year Ended December 31,

Net cash used in operating activities (21,132 ) (48,821 )

Net cash (used in) provided by investing activities (419 ) 1,987

Net cash provided by financing activities 7,973 200

Effect of exchange rate changes 2,818 (12,582 )

Decrease in cash and cash equivalents (10,761 ) (59,216 )

Operating Activities

Net cash used in operating activities for the year ended December 31, 2023 was $ 21.1 million, a decrease of $27.7 million from $48.8 million in 2022. The decrease was primarily driven by net cash receipts of $10.0 million for milestone payments received from Ultragenyx and ReproNovo, reductions of $12.0 million in R&D expenses and $7.7 million in administrative expenses, and R&D tax credits and income tax refunds received of $3.1 million compared to a payment made of $1.9 million in the year ended December 31, 2022.

Investing Activities

Net cash used in investing activities for the year ended December 31, 2023 was a $0.4 million, a decrease from a cash inflow of $2.0 million in 2022. The decrease was primarily driven by payments to acquire intangible assets and receipt of a non-recurring milestone payment from Feng Biosciences (formerly OncXerna) in 2022 under the licensing arrangement for navicixizumab.

Financing Activities

Net cash provided by financing activities for the year ended December 31, 2023 was $8.0 million, an increase of $7.8 million, compared to $0.2 million in 2022. This increase is primarily due to $11.1 million of net proceeds from a share issuance through an "at-the-market" offering in July 2023, partially offset by payments of $3.2 million principal following the modification and redemption of convertible loan notes.

Operating and Capital Expenditure Requirements

As of December 31, 2023, we had an accumulated deficit of $419.6 million. We expect to continue to report significant operating losses for the foreseeable future as we continue our research and development efforts and seek to obtain regulatory approval of our product candidates and any future product we develop. See also “Item 1A. Risk Factors—Risks Related to Our Business and Industry - If we do not obtain adequate and timely funding, we may not be able to continue as a going concern”.

We expect to continue to incur expenses in connection with our ongoing development activities related to our product candidates, our outsourced manufacturing activities and other associated costs including the management of our intellectual property portfolio. We also expect to continue to incur costs associated with operating as a U.S. public company listed on Nasdaq and as a domestic registrant.

These costs will increase further if we:

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seek to develop additional product candidates;

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seek regulatory approvals for any of our product candidates that successfully completes clinical trials;

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potentially establish a sales, marketing, and distribution infrastructure and scale-up manufacturing capabilities to commercialize or co-commercialize any product candidates for which we may obtain regulatory approval and chose to commercialize directly;

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expand our intellectual property portfolio;

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add further clinical, scientific, operational, financial, legal and management information systems, and personnel, including personnel to support our development and to support our operations as a U.S. public company listed on Nasdaq; or

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experience any delays or encounter any issues from any of the above, including but not limited to failed studies, complex results, safety issues, or other regulatory challenges.

We expect that our existing cash and cash equivalents will enable us to fund our currently committed clinical trials, operating expenses and capital expenditure requirements into 2026. We have based these estimates on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development of our product candidates and any future product candidates and because the extent to which we may enter into collaborations with third parties for development of any of our product candidates is unknown, we are unable to estimate the amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates. Our future capital requirements will depend on many factors, including:

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The costs for our activities related to our ongoing collaboration with Ultragenyx for setrusumab for the treatment of adults and children with OI; and potential future clinical trials for alvelestat in AATD and other potential indications;

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the costs and timing of manufacturing clinical supplies of our product candidates;

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the costs, timing, and outcome of regulatory review of our product candidates, including post-marketing studies that could be required by regulatory authorities;

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the costs, timing, and outcome of potential future commercialization activities, including manufacturing, marketing, sales, life cycle management and distribution, for our product candidates that we commercialize directly;

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the timing and amount of revenue, if any, received from commercial sales of our product candidates;

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the costs and timing of preparing, filing, and prosecuting patent applications; maintaining and enforcing our intellectual property rights; and defending any intellectual property-related claims, including any claims by third parties that we are infringing, misappropriating or otherwise violating their intellectual property rights;

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the sales price and availability of adequate third-party coverage and reimbursement for our product candidates;

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the effect of competitors and market developments;

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the performance of our collaborators and partners under the existing agreements on setrusumab, navicixizumab and, leflutrozole;

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the extent to which we are able to acquire new product candidates or enter into licensing or collaboration arrangements for our product candidates, although we currently have no commitments or agreements to complete any such transactions;

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milestone and deferred payments under Mereo’s license and option agreement with AstraZeneca; and

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tax liabilities or other assessments and our ability to claim R&D tax credits or other reliefs.

Our revenues, if any, will be derived from development milestones or sales of any product candidates that we are able to successfully develop, receive regulatory approval for, and commercialize in future years. In the meantime, we will need to obtain substantial additional funds to achieve our business objective.

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Adequate additional funds may not be available to us on acceptable terms, or at all. If we raised additional funds through collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us.

Any future debt financing or preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends and may require the issuance of warrants, which could potentially dilute your ownership interests.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, Shareholders' ownership interests may be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a shareholder. If we are unable to raise additional funds through partnerships, debt or equity financings when needed, we may be required to delay, limit, reduce, or terminate our product development programs or any future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Indebtedness

Former Credit Facility

As of December 31, 2023, the former lenders have warrants outstanding to purchase a total of 1,243,908 ordinary shares at an exercise price of £2.95 per share ($3.76 per share), exercisable until August 2027, and a total of 1,234,908 ordinary shares at an exercise price of $0.4144 per share, exercisable until the period August 2027 to October 2028.

Novartis Notes

On February 10, 2020, we entered into a $4.9 million (£3.8 million) convertible loan note instrument relating to the issue of 3,841,479 Novartis Loan Note. The Novartis Loan Note was convertible at any time at a fixed price of £0.265 ($0.337) per ordinary share until February 10, 2023. In addition, on February10, 2020, in connection with the Novartis Loan Note, we entered into a warrant instrument with Novartis to issue 1,449,614 ordinary shares at an exercise price of £0.265 ($0.037) per ordinary share. These warrants are exercisable until February 10, 2025.

On February 10, 2023, we amended the Novartis Loan Note, extending the maturity date to February 10, 2025 and increasing the interest rate to 9%, with all other terms remaining unchanged. Pursuant to the amendment and a new warrant instrument, interest accrued to the amendment date was paid in cash, and warrants to purchase 2,000,000 ordinary shares at an exercise price of £0.150 ($0.191) per ordinary share were issued and are exercisable until February 10, 2028.

Contingent Value Rights (“CVR”) arrangement

As a consequence of the License Agreement with Feng Biosciences (formerly OncXerna), and in accordance with the terms and conditions of the Contingent Value Rights Agreement for former stockholders of Mereo BioPharma 5 (formerly OncoMed), dated April 23, 2019, by and among Mereo and Computershare Inc., as rights agent, (the Mereo “CVR Agreement”), holders of “CVRs” pursuant to the CVR Agreement will be entitled to receive certain eligible cash milestone payments made to Mereo under the License Agreement relating to Navi. The receipt of the upfront milestone payment of $4.0 million by us in January 2020 resulted in a payment to CVR holders of approximately 1.2 cents per CVR, a total of approximately $0.5 million (after deductions of costs, charges and expenditures). Future milestone payments occurring prior to the fifth anniversary of the closing of the Merger, April 23, 2024, are also subject to a cash consideration cap, pursuant to which the aggregate principal amount of all cash payments made to holders of CVRs under the CVR Agreement shall in no case exceed $79.7 million.

We account for the CVR arrangement as contingent consideration at fair value. As of December 31, 2023, the fair value of the contingent consideration is estimated to be nil. The estimated contingent consideration payable is based on a risk-adjusted, probability-based scenario. Under this approach, the likelihood of future payments being made to the former shareholders of Mereo BioPharma 5 under the CVR arrangement is considered. As the CVR Agreement will expire on April 23, 2024, it is unlikely the estimate will materially change in the future.

Critical Accounting Estimates

Our consolidated financial statements are prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. On an ongoing basis, we evaluate our accounting estimates based on historical experience and on

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various other assumptions that we believe are reasonable under the circumstances. The actual impact on our financial performance could differ from these estimates under different assumptions or conditions.

An accounting estimate is considered critical if both (i) the nature of the estimates or assumptions is material due to the levels of subjectivity and judgment involved, and (ii) the impact within a reasonable range of outcomes of the estimates and assumptions is material to our consolidated financial statements. We believe that there are no estimates and assumptions made in our consolidated financial statements that rise to this level. For further information on all of our significant accounting policies, see Note 2 — Summary of Significant Accounting Policies in the accompanying notes to the consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to a variety of financial risks. Our overall risk management program seeks to minimize potential adverse effects of these financial risks on our financial performance.

Interest Rate Risk

As of December 31, 2023, we held cash and cash equivalents of $57.4 million. Our exposure to interest rate sensitivity is impacted by changes in the underlying U.S. and U.K. bank interest rates. We manage interest rate risk by monitoring short and medium-term interest rates and placing cash on deposit for periods that optimize the amount of interest earned while maintaining access to sufficient funds to meet day-to-day cash requirements. Interest payable on our convertible loan notes is fixed. We have not entered into investments for trading or speculative purposes. Due to the conservative nature of our investment portfolio, which is predicated on capital preservation of investments with short-term maturities, we do not believe an immediate one percentage point change in interest rates would have a material effect on the value of our cash and cash equivalents, and therefore we do not expect our operating results or cash flows to be significantly affected by changes in market interest rates.

Foreign Currency Risk

We currently maintain the consolidated financial statements of the Company in pounds sterling, but for financial reporting purposes our consolidated financial statements have been presented in U.S dollars, the reporting currency. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at rates prevailing at the date of the transaction. Exchange gains or losses arising from foreign currency transactions are included in the consolidated statements of operations and comprehensive loss, as foreign currency transaction gain/(loss). The financial statement entities are translated from their functional currency into the reporting currency as follows: assets and liabilities are translated at the exchange rates at the balance sheet dates, expenses are translated at the average exchange rates for the relevant period and shareholders' equity is translated based on historical exchange rates. Translation adjustments are not included in determining net loss but are included as a foreign exchange adjustment to the comprehensive loss, a component of the shareholder equity. For the year ended December 31, 2023, $4.2 million of unrealized loss on foreign currency translation was included in other comprehensive loss compared to an unrealized loss of $10.7 million for the year ended December 31, 2022.

We monitor our exposure to foreign exchange risk. We have not entered into foreign exchange contracts to hedge against foreign exchange fluctuations but maintain cash and short-term deposits in U.S. dollars to cover anticipated forward commitments, to provide a natural hedge against the impact of foreign exchange rate movements, but there can be no assurance that we will be fully protected against material foreign currency fluctuations.

Inflation Risk

Inflation may generally affect us by increasing our personnel costs, research and development expenses and general operating expenses. While we have experienced increased operating expenses in recent periods, which we believe are due in part to the recent growth in inflation, we do not believe that inflation has had a material effect on our business, financial condition or results of operations during the year ended December 31, 2023; however, operating expenses may continue to increase in future periods due to inflation.

Item 8. Financial Statements and Supplementary Data

The financial statements required to be filed pursuant to this Item 8 are appended to this report. An index of those financial statements is found in Item 15.

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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act and regulations promulgated thereunder) as of December 31, 2023, or the Evaluation Date. Based on such evaluation, our principal executive officer and principal financial officer have concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective in recording, processing, summarizing and reporting, on a timely basis, information required to be included in periodic filings under the Exchange Act and that such information is accumulated and communicated to management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate. Our internal control over financial reporting is a process designed under the supervision of our principal executive officer and principal financial officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States of America.

Our management conducted an assessment of the effectiveness of our internal control over financial reporting based on the criteria set forth in “Internal Control - Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on this assessment, our management concluded that, as of December 31, 2023, our internal control over financial reporting was effective.

Remediation of Previously Reported Material Weaknesses

In connection with the preparation of our unaudited interim condensed consolidated financial statements as of and for the six-month period ended June 30, 2023, a material weakness in our internal control over financial reporting was identified. This related to a control deficiency which impacted the presentation of significant or non-routine transactions in the unaudited condensed consolidated statement of comprehensive loss in accordance with IFRS prior to us having to comply with the domestic reporting regime under the Exchange Act.

This control is designed to ensure that, significant or non-routine transactions are identified and that an appropriate accounting analysis is performed by sufficiently qualified individuals and reviewed by appropriate members of management to validate the conclusions, including any judgments and/or estimates.

Management concluded that the control was appropriately designed, however in respect of a transaction involving the income statement classification of a single item, the control did not operate effectively. Management has since taken steps to remediate this deficiency, including increased engagement of external experts to assist in the analysis and determination of the appropriate presentation of significant or non-routine transactions, and documentation thereof.

Management has subsequently operated the control effectively multiple times. Management have therefore concluded that the Material Weakness has been remediated of December 31, 2023. Management has determined that the transaction in question has been presented appropriately in the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America for the year ended December 31, 2023.

Attestation Report of the Registered Public Accounting Firm

Not applicable.

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Changes in Internal Control over Financial Reporting

Other than the changes related to the remediation activities related to the previously reported material weaknesses noted above, no other changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the year ended December 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

Item 408 Regulation S-K Compliance

During the quarter ended December 31, 2023, no director or officer (as defined in Rule 16a-1(f) of the Exchange Act) of the Company adopted, modified or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Not applicable.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance

The following table presents information about Mereo’s executive officers and non-executive directors, including their ages, as of the date of this Annual Report:

Name Age Position

Executive Officers

Dr. Denise Scots-Knight 64 Chief Executive Officer and Director

Christine Fox 43 Chief Financial Officer

Charles Sermon 54 General Counsel and Business Development

Alexandra (Wills) Hughes-Wilson 52 Chief Patient Access and Commercial Planning

Dr. John Lewicki 72 Chief Scientific Officer

Non-Executive Directors

Dr. Jeremy Bender 52 Director

Dr. Anders Ekblom 69 Director

Dr. Pierre Jacquet 57 Director

Dr. Annalisa Jenkins 58 Director

Dr. Deepika R. Pakianathan 59 Director

Justin Roberts 41 Director

Dr. Daniel Shames 78 Director

Marc Yoskowitz 49 Director

Michael S. Wyzga 69 Chairman of the Board and Director

The current business addresses for Mereo’s executive officers and directors is c/o Mereo BioPharma Group plc, 4th Floor, One Cavendish Place, London, W1G 0QF, United Kingdom.

The following are brief biographies of Mereo’s executive officers and non-executive directors:

Dr. Denise Scots-Knight.Dr. Scots-Knight has served as our Chief Executive Officer since July 2015 and as a member of our Board since our formation. From 2010 until joining us, Dr. Scots-Knight was the Managing Partner of Phase4 Partners Ltd. (“Phase4”), a global life science venture capital firm. Dr. Scots-Knight is currently a board member of Elanco Animal Health Incorporated (NYSE: ELAN). Dr. Scots-Knight previously served as a member of the board of directors of Idenix Pharmaceuticals, Albireo and OncoMed. Dr. Scots-Knight holds a B.Sc. (Hons.) and a Ph.D. from Birmingham University.

Christine Fox. Ms. Fox joined as our Chief Financial Officer in January 2021. From 2015 until joining us, Ms. Fox was the Vice President Finance, External Reporting and most recently Group Financial Controller and Treasurer of Travelport, and prior to that served more than 10 years at KPMG in the U.S. and Switzerland. Ms. Fox is a Certified Public Accountant (CPA) and holds a B.S. in Accounting from Butler University.

Charles Sermon. Mr. Sermon serves as our General Counsel and Business Development and has served as our General Counsel since July 2015. From 2010 until joining us, Mr. Sermon was a Partner of Phase4. Mr. Sermon serves as a Director on the Board of Trustees of Rainbow Trust Children’s Charity. Mr. Sermon trained and qualified as a lawyer with Freshfields in London after completing the Law Society’s Final Examination. Mr. Sermon holds an LL.B. (Hons.) from Hull University.

Alexandra (Wills) Hughes-Wilson.Ms. Hughes-Wilson has served as our Chief of Patient Access and Commercial Planning, previously titled Head of Patient Access and Commercial Planning, since March 2018. Prior to joining us, Ms. Hughes-Wilson was Senior Vice President, Chief Patient Access Officer at Swedish Orphan Biovitrum (publ.) AB, a biotechnology company, from 2012 to 2018, and prior to that served as Vice President Health & Market Access Policy EMEA at Genzyme (now Sanofi Genzyme), a biotechnology company. Ms. Hughes-Wilson holds a bachelor’s degree in Law and Politics (Hons.) from the University of Durham, U.K.

Dr. John Lewicki. Dr. Lewicki has served as our Chief Scientific Officer since July 2020. He has over 35 years of experience in the biotechnology industry. Dr. Lewicki was President, CEO and a board member of OncoMed from March 2018 to April 2019. Previously, Dr. Lewicki served as Vice President of Research, at Scios Inc. where he co-discovered human B-type natriuretic peptide (BNP). Dr. Lewicki contributed to development of BNP into an FDA-approved treatment (Natrecor) for acute congestive heart failure. Dr. Lewicki received his PhD from the University of California, San Diego. He has co-authored over 80 papers and is co-inventor on over 30 issued U.S. patents.

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Dr. Jeremy Bender. Dr. Bender has served on our board since October 2020. Dr. Bender is Chief Executive Officer and President of DayOne Biopharmaceuticals, Inc. (NASDAQ: DAWN). Dr. Bender also serves on the board of directors of Furion Pharmaceuticals, Inc. Previously he served as Vice President of Corporate Development at Gilead Sciences, Inc., where he was responsible for development and negotiation of partnerships, alliances, joint ventures, equity investments, licensing agreements and M&A transactions. Dr. Bender joined Gilead from Tizona Therapeutics, Inc., where he was Chief Operating Officer. Prior to Tizona, he was Chief Business Officer of Sutro Biopharma, Inc. Dr. Bender received his undergraduate degree in Biological Sciences from Stanford University and his Ph.D. in Microbiology & Immunology from the University of Colorado. He also holds an M.B.A. from the MIT Sloan School of Management.

Dr. Anders Ekblom.Dr. Ekblom has served on our Board since July 2015. Dr. Ekblom has held a number of executive positions at AstraZeneca, including Executive Vice President Global Drug Development, Executive Vice President Global Medicines Development, Global Head Clinical Development and Chief Executive Officer of AstraZeneca AB Sweden. He currently serves as Chairman of the Board of Alligator Bioscience AB, Atrogi AB, Elypta AB and Xspray Pharma AB, and on the boards of directors of AnaMar AB, Flerie Invest AB and Synerkine Pharma Bv. Dr. Ekblom is a board-certified medical doctor and an Associate Professor at the Karolinska Institutet. Dr. Ekblom holds a M.D., Ph.D. and a D.D.S. from Karolinska Institutet.

Dr. Pierre Jacquet. Dr. Jacquet has served on our Board of Directors since September 2021. Dr. Jacquet is currently Managing Director and Vice Chairman of L.E.K. Consulting’s Global Healthcare practice. He has served in a variety of leadership roles over 20 years at L.E.K., including Global Head, Healthcare Practice, Global Leadership Team, the Americas management committee, and various partner operating committees. Prior to joining L.E.K. in 2001, Dr. Jacquet was trained as a surgical resident at University of Liège, Belgium and served as a Fellow at the Washington Cancer Institute, where he authored over 40 publications and presentations. In addition to serving on Mereo’s Board of Directors, Dr. Jacquet is a Director of Exact Sciences, on the Advisory Board of Life Science Cares, and previously served as a Director of Osprey Pharmaceuticals. He earned a Master of Business Administration from the Darden Graduate School at the University of Virginia, graduated Magna Cum Laude in Medicine from the University of Liège in Belgium and was awarded a Summa Cum Laude Doctor of Philosophy in biomedical sciences from the University of Liège in Belgium.

Dr. Annalisa Jenkins. Dr. Jenkins has served on our Board of Directors since November 2022. Dr. Jenkins served as president and CEO of Dimension Therapeutics, a leading NASDAQ listed gene therapy company that was acquired by Ultragenyx in November 2017. Prior leadership roles have included the head of global research and development at Merck Serono and SVP, Global Development at Bristol Myers-Squibb. Dr. Jenkins is a board member and advisor to a number of public and private health and life science companies globally. She is also a board member of Genomics England and a trustee of The Kings Fund and The British Heart Foundation. Dr. Jenkins graduated with a degree in medicine from St. Bartholomew’s Hospital in the University of London and served as a Surgeon Lieutenant Commander in the British Royal Navy.

Dr. Deepika R. Pakianathan. Dr. Pakianathan has served on our Board since April 2019 following completion of the Merger and served as a director of OncoMed since December 2008 until the closing of the Merger. Since 2001, Dr. Pakianathan has been a Managing Member at Delphi Ventures, a venture capital firm focused on biotechnology and medical device investments. Dr. Pakianathan is also the Chief Executive Officer of a privately held start-up biotechnology company operating in stealth mode. Dr. Pakianathan serves on the boards of directors of Karyopharm Therapeutics, Inc. and Theravance Biopharma, Inc., and previously served on the boards of directors of Calithera Biosciences, Foresite Development Corp II, Alder Biopharmaceuticals, Inc., Foresite Development Corp I. and Relypsa, Inc. Dr. Pakianathan received a B.Sc. from the University of Bombay, India, a M.Sc. from The Cancer Research Institute at the University of Bombay, India, and an M.S. and Ph.D. from Wake Forest University.

Justin Roberts. Justin Roberts has served on our Board of Directors since November 2022. Mr. Roberts is a Partner at Rubric Capital Management LP, a role he has held since the formation of the company in 2016. Before Rubric he spent seven years at Point72 Asset Management. Mr. Roberts has also held roles at ZS Associates, Moore Capital Management, and began his career at Lehman Brothers as an investment banker in their M&A practice. Mr. Roberts graduated with honors from Johns Hopkins University.

Dr. Daniel Shames. Dr. Shames has served on our Board of Directors since November 2022. Dr. Shames has served as President of Daniel A. Shames Consulting, providing regulatory services to over 100 biotechnology and pharmaceutical clients. Prior to starting his consultancy Dr. Shames spent 12 years at the FDA during which time he was involved in the safety and efficacy review of hundreds of drugs. Most recently Dr. Shames served as Deputy Director, Office of Drug Evaluation III from 2006 to 2008, while also serving as Director of the Division of Gastroenterology and Inborn Error Products. Prior to that he was Director of Reproductive and Urologic Drugs from 2001 to 2006. Before joining the FDA, Dr. Shames founded Carolina Urocorp, operated a private medical practice, and was as Major in the U.S. Army Medical Corps. Dr. Shames received his undergraduate degree from Brandeis University, his MD from Georgetown University School of Medicine, and did his urology residency at the University of Pennsylvania.

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Marc Yoskowitz. Mr. Yoskowitz has served on our Board of Directors since November 2022. Mr. Yoskowitz is Chief Executive Officer of Evozyne, Inc. Previously he served as EVP and Chief Strategy Officer, Life Sciences at Tempus, Inc. Prior to Tempus, Mr. Yoskowitz was Chief Business Officer, Pfizer Essential Health, leading a range of corporate initiatives within the Pfizer portfolio. Prior to Pfizer, he served as SVP, Strategy and Corporate Development at Hospira and was a member of the Executive Committee. Earlier in his career, Mr. Yoskowitz led business development at a specialty pharmaceutical company, spent eight years at McKinsey & Company where he was an Associate Principal, and began his career as an M&A lawyer at Davis, Polk & Wardwell in New York. Mr. Yoskowitz received a bachelor’s degree magna cum laude from Washington University in St. Louis and holds a JD from Columbia University School of Law.

Michael S. Wyzga. Mr. Wyzga has served on our Board since April 2019 following completion of the Merger and had served as a director of OncoMed since October 2013 until the closing of the Merger. On May 14, 2020, we entered into the Consulting and Interim Chief Financial Officer Agreement with MSW Consulting Inc. and Michael Wyzga by which Mr. Wyzga served as Interim Chief Financial Officer from August 1, 2020 to January 4, 2021. Mr. Wyzga is currently the President of MSW Consulting Inc., a strategic consulting group focused in the life sciences area. From December 2011 until November 2013, Mr. Wyzga served as President and Chief Executive Officer and a member of the board of directors of Radius Health, Inc. Prior to that, Mr. Wyzga served in various senior management positions at Genzyme Corporation, including as Chief Financial Officer from July 1999 until November 2011. Mr. Wyzga is a member of the boards of directors of Adagio Therapeutics Corporation and LogicBio and is Chairman of the board of directors of GenSight Biologics S.A. and of X4 Biologics. Mr. Wyzga previously served as a member of the boards of directors of Exact Sciences Corporation, Idenix Pharmaceuticals, Inc. and Altus Pharmaceuticals, Inc., and as a member of the supervisory board of Prosensa Holding B.V. He received an M.B.A. from Providence College and a B.S. from Suffolk University.

Arrangements Concerning Election of Directors; Family Relationships

We are not a party to, and are not aware of, any voting agreements among our shareholders. In addition, there are no family relationships among our executive officers and directors.

Section 16(A) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires the Company’s executive officers and directors, and persons who own more than 10% of a registered class of our equity securities, to file reports with the SEC relating to their share ownership and changes in such ownership. As a former foreign private issuer, our executive officers, directors and greater than 10% shareholders were not subject to the Section 16(a) filing requirements during the fiscal year ended December 31, 2023.

Insurance and Indemnification

To the extent permitted by the U.K. Companies Act 2006, Mereo is empowered under its Articles to indemnify its directors against any liability they incur by reason of their directorship. Mereo maintains directors’ and officers’ insurance to insure such persons against certain liabilities. Mereo has entered into a deed of indemnity with each of its directors.

Insofar as indemnification of liabilities arising under the Securities Act may be permitted to the Mereo Board, executive officers, or persons controlling Mereo pursuant to the forgoing provisions, Mereo has been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

Code of Ethics

The Company currently maintains a Code of Ethics which applies to all directors, officers, and employees. A copy of our Code of Ethics can be found on our website at www.mereobiopharma.comin the “Investors” section under “Corporate Governance.” We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding amendments to, or waivers from, a provision of our Code of Ethics, as well as Nasdaq’s requirement to disclose waivers with respect to directors and executive officers, by posting such information on our website at the address and location specified above. The information contained on our website is not incorporated by reference into this Annual Report on Form 10-K.

Composition of the Mereo Board

Our Board currently consists of ten members. We are required to have a board that is composed of a majority of independent directors, as defined under the Nasdaq Stock Market rules. In making the determination of whether a member of the board is independent, our board considers, among other things, the information provided by the directors with regards to each director’s business and personal activities and any relationships they have with the Company or management, including with respect to their ownership of the Company’s ordinary shares. On the basis of such review and its understanding of such relationships and transactions,

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our Board affirmatively determined that Michael Wyzga, Jeremy Bender, Anders Ekblom, Pierre Jacquet, Annalisa Jenkins, Deepa Pakianathan, Justin Roberts, Daniel Shames and Marc Yoskowitz are “independent directors” as defined under the applicable rules and regulations of the SEC and the listing requirements and rules of the Nasdaq Stock Market, representing nine of our ten directors. Dr. Denise Scots-Knight is not an independent director due to her employment as Chief Executive Officer of the Company.

Committees of the Mereo Board

The Mereo Board has four standing committees: an audit and risk committee, a remuneration committee, a nomination and governance committee, and a research and development committee.

Audit and Risk Committee

The audit and risk committee which consists of Deepika R. Pakianathan, Annalisa Jenkins, Michael S. Wyzga and Jeremy Bender, assists the board in overseeing our accounting and financial reporting processes and the audits of our financial statements. Dr. Pakianathan serves as Chair of the committee. The audit and risk committee consists exclusively of members of our board who are financially literate, and Dr. Pakianathan is considered an “audit committee financial expert” as defined by applicable SEC rules and has the requisite financial sophistication as defined under the applicable Nasdaq rules and regulations. Our board has determined that all of the members of the audit and risk committee satisfy the “independence” requirements set forth in Rule 10A-3 under the Exchange Act. The audit and risk committee is governed by a charter that complies with Nasdaq rules.

The audit and risk committee’s responsibilities include:

•

recommending the appointment of the independent auditor to the general meeting of shareholders;

•

the appointment, compensation, retention and oversight of any accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit services;

•

pre-approving the audit services and non-audit services to be provided by our independent auditor before the auditor is engaged to render such services;

•

evaluating the independent auditor’s qualifications, performance and independence, and presenting its conclusions to the full board on at least an annual basis;

•

reviewing and discussing with the executive officers, the board, and the independent auditor our financial statements and our financial reporting process;

•

approving or ratifying any related person transaction (as defined in our related person transaction policy) in accordance with our related person transaction policy;

•

establishing procedures for the confidential anonymous submission of concerns regarding questionable accounting, internal controls or auditing matters; and

•

reviewing and monitoring the Company’s key risks, including financial and cybersecurity risks.

The audit and risk committee will meet as often as one or more members of the audit and risk committee deem necessary, but in any event will meet at least three times per year. The audit and risk committee will meet at least once per year with our independent accountant, without our senior management being present.

Remuneration Committee

The remuneration committee which consists of Deepika R. Pakianathan, Justin Roberts and Anders Ekblom, assists the board in determining senior management compensation. Dr. Ekblom serves as Chairman of the committee. Under Nasdaq rules, there are heightened independence standards for members of the remuneration committee, including a prohibition against the receipt of any compensation from us other than standard board member fees. Our board has determined that Dr. Pakianathan, Mr. Roberts and Dr. Ekblom meet this heightened standard. The remuneration committee is governed by a charter that complies with Nasdaq rules.

The remuneration committee’s responsibilities include:

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•

determining and agreeing with the Mereo Board the framework or broad policy for the remuneration the company’s chair, CEO, any other executive directors, the company secretary and other members of senior management;

•

reviewing the ongoing appropriateness and relevance of the remuneration policy;

•

approving the design of, and determining the performance measures and targets for the company, and evaluating achievements against those targets any performance related pay schemes operated by the company and approving the total annual payments made under such schemes;

•

reviewing the design of all share incentive plans for approval by the Mereo Board and shareholders;

•

ensuring that contractual terms on termination of employment, and any payments made, are fair to the individual, and the company, that failure is not rewarded and that the duty to mitigate loss is fully recognized;

•

at least annually, reviewing all incentive compensation arrangements for the purpose of assessing whether risks arising from the design or implementation of those arrangements do not encourage unnecessary risk-taking;

•

overseeing any major changes in employee benefits structures throughout the company;

•

establishing the selection criteria, selecting, appointing and setting the terms of reference for any compensation consultants who advise the committee after taking into consideration the factors relevant to advisor independence set forth in Nasdaq Listing Rule 5605(d)(3); and

•

administering and overseeing the company’s compliance with the compensation recovery policy required by applicable SEC and Nasdaq rules.

Nomination and Corporate Governance Committee

The nomination and corporate governance committee which consists of Michael S. Wyzga, Jeremy Bender, Pierre Jacquet, and Justin Roberts, assists our board in identifying individuals qualified to become members of our board and senior management consistent with criteria established by our board and in developing our corporate governance principles. Mr. Wyzga serves as Chair of the nomination and corporate governance committee. The nomination and corporate governance committee is governed by a charter that complies with Nasdaq rules.

The nomination and corporate governance committee’s responsibilities include:

•

drawing up selection criteria and appointment procedures for board members;

•

reviewing and evaluating the size and composition of our board and making a proposal for a composition profile of the board at least annually;

•

recommending nominees for election to our board and its corresponding committees;

•

assessing the functioning of individual members of the board and senior management and reporting the results of such assessment to the board; and

•

developing and recommending to the board rules governing the board, reviewing and reassessing the adequacy of such rules governing the board, and recommending any proposed changes to the board.

Research and Development Committee

The research and development committee, which consists of Pierre Jacquet, Daniel Shames, Marc Yoskowitz and Anders Ekblom, assists our senior management with oversight and guidance related to strategic research and development matters and provides guidance and makes recommendations to our board regarding strategic research and development matters. Dr. Ekblom serves as Chair of the research and development committee.

The research and development committee’s responsibilities include oversight of:

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•

our strategic development plans for product candidates, taking into account any regulatory feedback; and

•

the acquisition of new product candidates.

In addition, the research and development committee is tasked with keeping informed of strategic issues and commercial changes affecting our development programs and potential product acquisitions.

Item 11. Executive Compensation

Our named executive officers for the year ended December 31, 2023 are:

•

Dr. Denise Scots-Knight, our Chief Executive Officer;

•

Charles Sermon, our General Counsel; and

•

Christine Fox, our Chief Financial Officer.

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2023 Summary Compensation Table

The following table sets forth the compensation awarded to, earned by or paid to each of our named executive officers for the years indicated.

(1) Dr. Scots-Knight also serves as a director but receives no additional compensation for this service.

(2) Cash compensation paid to all named executive officers is denominated in pounds sterling. For the purposes of this table, all 2023 amounts have been converted based on the pound sterling/U.S. dollar exchange rate in effect as of December 31, 2023 (£1/$1.273) and all 2022 amounts have been converted based on the pound Sterling/U.S. dollar exchange rate in effect as of December 31, 2022 (£1/$1.2103).

(3) Amount shown reflects cash bonuses awarded for achievement of performance goals.

(4) Amounts reflect the grant date fair value of awards granted in 2023 and 2022 in accordance with the Financial Accounting Standards Board’s Accounting Standards Codification Topic 718, or ASC 718. Such grant date fair value does not take into account any estimated forfeitures related to service-vesting conditions. For information regarding assumptions underlying the valuation of equity awards, see note 17 to our financial statements for the year ended December 31, 2023. These amounts do not correspond to the actual value that may be recognized by the named executive officers upon vesting of applicable awards.

(5) These amounts include health benefit and life insurance payments and pension contributions made by us. Life insurance premiums paid by us for named executive officers were: $3,772 (2022: $3,217) for Denise Scots-Knight; $2,774 (2022: $2,394) for Charles Sermon; and $2,524 (2022: $2,017) for Christine Fox.

Narrative Disclosure to the Summary Compensation Table

Annual Base Salary

Each named executive officer’s base salary is a fixed component of annual compensation for performing specific duties and functions, and has been established by our board of directors taking into account each individual’s role, responsibilities, skills, and experience. Base salaries are typically reviewed annually, with any increases normally taking effect from the first day of January. When awarding salary increases, the Committee will consider the level of increase proposed for the wider workforce, as well as employee pay conditions more broadly in comparison to our peer group companies and inflation. Where there has been a change in the role, or if the individual is new to the role, increases could be higher. The base salary of each named executive officer is noted below:

2023 Annual Base Salary 2022 Annual Base Salary

(1) Compensation paid to all named executive officers is denominated in pounds sterling. For the purposes of this table, all 2023 amounts have been converted based on the pound sterling/U.S. dollar exchange rate in effect as of December 31, 2023 (£1/$1.273) and all 2022 amounts have been converted based on the pound sterling/U.S. dollar exchange rate in effect as of December 31, 2022 (£1/$1.2103).

Annual Cash Bonuses

We have a discretionary bonus scheme for all employees, including the named executive officers. Bonus payments for employees are a percentage of base salary based on performance-based measures against both Company-wide target and personal objectives which can also be increased with stretch performance. Bonus payments for the Chief Executive Officer are a percentage of base salary, based only on performance-based measures against Company-wide target objectives. The annual bonus is payable in cash after the award has been approved by the remuneration committee, usually in January of the following year.

Company performance was assessed against the 2023 Company-wide target objectives, including certain pipeline and development milestones, execution of manufacturing, clinical and compliance processes and partnerships, the achievement of finance-related and business development milestones. As a result, the named executive officers were awarded bonuses against their target bonus rates as follows.

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Dr. Denise Scots-Knight 60% 75% 45%

Equity-Based Incentive Awards

Our equity-based incentive award plan is intended to align the interests of our named executive officers with those of our stockholders and to motivate them to make important contributions to our performance. In 2023, we granted stock options and performance based restricted stock units ("PSUs") to each of our named executive officers, as reflected in the “Outstanding Equity Awards at 2023 Fiscal Year End Table” below.

Executive Officer Employment Agreements

Dr. Denise Scots-Knight

We entered into an employment agreement with Dr. Scots-Knight on July 29, 2015, as amended on September 3, 2021. This agreement entitles Dr. Scots-Knight to receive an annual base salary and an opportunity to earn an annual discretionary performance-based bonus, subject to the achievement of performance goals determined in accordance with our annual bonus plan. We currently contribute to Dr. Scots-Knight’s Self-Invested Personal Pension Scheme an amount equal to 10% of Dr. Scots-Knight’s annual salary, provided that she contributes 4% or more of her annual salary to that scheme. In lieu of a pension contribution, we may, at Dr. Scots-Knight’s request, pay a pro-rata amount equal to 10% of her base salary as additional compensation. Either party may terminate the employment agreement by giving the other party not less than 12 months’ written notice, provided that we may terminate Dr. Scots-Knight at any time with immediate effect for cause or by giving written notice to Dr. Scots-Knight that we will instead pay her basic salary for any remaining notice period. Dr. Scots-Knight’s employment agreement also contains restrictive covenants pursuant to which she has agreed to refrain from competing with us or soliciting our key employees for a period of six months following her termination of employment or soliciting our customers for a period of nine months following her termination of employment. The employment agreement includes the provision of accelerated vesting of share options and payments to Dr. Scots-Knight equal to 18 months’ annual base salary and Dr. Scots-Knight’s target annual bonus in the event of a covered termination during the period commencing on a change in control of the Company and ending 12 months after such change in control.

Charles Sermon

We entered into an employment agreement with Mr. Sermon on July 29, 2015 as amended on September 3, 2021. This agreement entitles Mr. Sermon to an annual base salary and an opportunity to earn an annual discretionary performance-based bonus, subject to the achievement of performance goals determined in accordance with our annual bonus plan. We have agreed to contribute to Mr. Sermon’s Self-Invested Personal Pension Scheme an amount equal to 10% of Mr. Sermon’s annual salary provided that he contributes 4% or more of his annual salary to that scheme. In lieu of a pension contribution, we may, at Mr. Sermon’s request, pay a pro-rata amount equal to 10% of his base salary as additional compensation. Either party may terminate the employment agreement by giving the other party not less than six months’ written notice, provided that we may terminate Mr. Sermon at any time with immediate effect for cause or by giving written notice to Mr. Sermon that we will instead pay his basic salary for any remaining notice period. Mr. Sermon’s employment agreement also contains restrictive covenants pursuant to which he has agreed to refrain from competing with us or soliciting our key employees for a period of six months following his termination of employment or soliciting our customers for a period of nine months following his termination of employment. The employment agreement includes the provision of accelerated vesting of share options and payments to Mr. Sermon equal to 12 months’ annual base salary and Mr. Sermon’s target annual bonus in the event of a covered termination during the period commencing on a change in control of the Company and ending 12 months after such change in control.

Christine Fox

We entered into an employment agreement with Ms. Fox on October 20, 2020, as amended on September 3, 2021. The employment agreement entitles Ms. Fox to receive an annual base salary and an opportunity to earn an annual discretionary performance-based bonus, subject to the achievement of performance goals determined in accordance with our annual bonus plan. Ms. Fox is also eligible to participate in Mereo’s group personal pension scheme and we have agreed to contribute to the pension scheme an amount equal to 10% of Ms. Fox’s annual salary provided that she contributes 4% or more of her annual salary to that scheme. In lieu of a pension contribution, we may, at Ms. Fox’s request, pay a pro-rata amount equal to 10% of her base salary as additional

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compensation. Either party may terminate the employment agreement by giving the other party not less than six months’ written notice, provided that Mereo may terminate Ms. Fox at any time with immediate effect for cause or by giving written notice to Ms. Fox that we will instead pay her basic salary for any remaining notice period. Ms. Fox’s employment agreement also contains restrictive covenants pursuant to which she has agreed to refrain from competing with us or soliciting our key employees for a period of six months following her termination of employment or soliciting our customers for a period of nine months following her termination of employment. The employment agreement includes the provision of accelerated vesting of share options and payments to Ms. Fox equal to 12 months’ annual base salary and Ms. Fox’s target annual bonus in the event of a covered termination during the period commencing on a change in control of the Company and ending 12 months after such change in control.

Pension, Retirement or Similar Benefits

Mereo operates a defined contribution pension scheme which is available to all employees. Mereo makes payments of up to 10% of base salary for executives, including Mereo’s Chief Executive Officer, into any pension scheme or similar arrangement as the participating executive may reasonably request (or a payment in lieu thereof). Such payments are not counted for the purposes of determining bonuses or awards under the LTIP. We do not sponsor any qualified or non-qualified defined benefit plans for any of our employees or executives.

Health and Welfare Benefits.

All of our full-time employees, including our executive officers, are eligible to participate in certain medical, disability and life insurance benefit programs offered by us. We pay the premiums for term life insurance and long-term disability for all of our employees, including our executive officers. We also provide all employees, including executive officers, with paid time off benefits including, vacation, sick time and holidays.

Outstanding Equity Awards at 2023 Fiscal Year End Table

The following table presents information regarding all outstanding stock options and stock awards held by each of our named executive officers as of December 31, 2023. All "Securities" within this table are expressed in ADSs, including awards over ordinary shares. Each ADS of the Company represents five ordinary shares.

Option Awards Stock Awards

(1) 25% of the shares underlying this share option vested and became exercisable on February 20, 2021, with the remainder vesting in equal monthly installments for the three years thereafter.

(2) 25% of the shares underlying this share option vested and became exercisable on February 1, 2022, with the remainder vesting in equal monthly installments for the three years thereafter.

(3) 25% of the shares underlying this share option vested and became exercisable on January 14, 2023, with the remainder vesting in equal monthly installments for the three years thereafter.

(4) 25% of the shares underlying this share option will vest and become exercisable on January 25, 2024, with the remainder vesting in equal monthly installments for the three years thereafter.

(5) Each PSU vests upon satisfaction of four escalating ADS price threshold values over a two year performance period. The number included in this table reflects the number of PSUs eligible for vesting. If a minimum ADS price threshold is not met, such PSUs may vest at zero ADSs.

Mereo currently grants equity awards under the Mereo 2019 Equity Incentive Plan (the "2019 EIP") and the 2019 Non-Employee Equity Incentive Plan (the “2019 NED EIP”). There are also still outstanding awards under two previous plans, the 2015

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Plan and the Mereo Share Option Plan, however no awards have been granted under these plans since 2016 and no further grants are envisaged. The key terms of the plans are disclosed within note 17 of the Annual Report on Form 10-K.

Non-Executive Directors' Remuneration

The following table presents the total compensation for each person who served as a non-executive member of our board of directors and received compensation for such service during the fiscal year ended December 31, 2023. Other than as set forth in the table and described more fully below, we did not pay any compensation, make any equity awards or awards to, or pay any other compensation to any of the members of our board of directors in 2023. We reimburse members of our board of directors for reasonable travel expenses. Dr. Scots-Knight, our Chief Executive Officer, did not receive any compensation for her service as a member of our board of directors in 2023. Dr. Scots-Knight’s compensation for service as an employee for fiscal years 2023 and 2022 is presented in “Executive Compensation—2023 Summary Compensation Table.”

Fees Earned or Paid in Cash (1) Stock Awards (2) Option Awards (2) Total

Justin Roberts (3) — — — —

(1) Compensation paid to all non-executive directors is denominated in pounds sterling. For the purposes of this table, all 2023 amounts have been converted based on the pound sterling/U.S. dollar exchange rate in effect as of December 31, 2023 (£1/$1.273) and all 2022 amounts have been converted based on the pound sterling/U.S. dollar exchange rate in effect as of December 31, 2022 (£1/$1.2103).

(2) Amounts reflect the grant date fair value of awards granted in 2023 and 2022 in accordance with the Financial Accounting Standards Board’s Accounting Standards Codification Topic 718, or ASC 718. Such grant date fair value does not take into account any estimated forfeitures related to service-vesting conditions. For information regarding assumptions underlying the valuation of equity awards, see note 17 to our financial statements for the year ended December 31, 2023. These amounts do not correspond to the actual value that may be recognized by the named executive officers upon vesting of applicable awards.

(3) Mr. Roberts has waived all remuneration in respect of his appointment as a non-executive director.

Non-Executive Director Compensation Policy

Our non-executive directors are eligible to earn cash fees for service on the board of directors and for service on each committee on which the director is a member. The chairperson of each committee receives a higher fee for such service. Non-executive directors may voluntarily elect to convert their annual cash fees into Deferred RSUs (over ADSs). The number of Deferred RSUs granted is determined by dividing the amount of the annual cash compensation by the average closing trading price of the Company’s ADSs over the most recent 30 trading days as of the grant date. These Deferred RSUs are delivered under the terms of the existing 2019 NED Plan and they vest in substantially equal monthly installments over the plan year. Payment of Deferred RSUs in ADSs will generally be made 180 days following separation of service.

In addition to annual cash fees or Deferred RSUs, as elected, equity incentive awards are granted to non-executive directors in line with the 2019 NED Plan. In February 2023, a total of 55,000 equity incentive awards in the form of market value options over ADSs, were granted to each non-executive director at an exercise price of $0.94 per ADS, with a vesting period of one year; vesting is in equal monthly installments over the one-year period following grant date. No performance conditions were attached to the awards.

The fees payable to directors for service on the board of directors and for service on each committee of the board of directors on which the director is a member are as follows:

Member Annual Fee (1) Chairperson Annual Fee (1)

Nomination and Corporate Governance Committee 4,456 8,911

Research and Development Committee 5,092 10,184

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(1) Compensation in the form of annual cash fees or deferred RSUs, as elected, paid to non-executive directors is denominated in pounds sterling. For the purposes of this table, all 2023 amounts have been converted based on the pound sterling/U.S. dollar exchange rate in effect as of December 31, 2023 (£1/$1.273).

We also reimburse our non-executive directors for reasonable out-of-pocket expenses incurred in connection with attending our board of director and committee meetings.

Non-Executive Directors - Outstanding Equity Awards at 2023 Fiscal Year End Table

The following table presents information regarding all outstanding stock awards and stock options held by each of our non-executive directors as of December 31, 2023:

Option awards Stock Awards

Dr. Jeremy Bender

Justin Roberts (1) - - - - -

(1) Mr. Roberts has waived all remuneration in respect of his appointment as a non-executive director.

(2) These options vest in substantially equal monthly installments over a one year period from the February 1, 2023 grant date and fully vested on February 1, 2024.

(3) Each Deferred RSU was granted to non-executive directors who elected to receive them in the form of ADSs in lieu of annual cash compensation. Deferred RSUs vest in substantially equal monthly installments over the plan year following the grant date and became fully vested in January 2024. Payment of Deferred RSUs in ADSs will generally be made 180 days following separation of service.

Non-Executive Director Service Contracts

The remuneration of the non-executive directors is determined by the Mereo Board as a whole, based on a review of current practices in other companies. Mereo has entered into service contracts with Mereo’s non-executive directors for their services, which are subject to a three-month termination period. There are no arrangements under which any non-executive director is entitled to receive compensation upon the early termination of his or her appointment.

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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table sets forth information relating to the beneficial ownership of Mereo ordinary shares as of February 29, 2024 by each person known by Mereo to own beneficially 5% or more of the outstanding Mereo ordinary shares.

The number of Mereo ordinary shares beneficially owned by each person is determined in accordance with the rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares over which the individual has sole or shared voting power or investment power as well as any shares that the individual has the right to acquire within 60 days through the exercise of any option, warrant or other right. Except as otherwise indicated, and subject to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all Mereo ordinary shares held by that person.

The percentage of Mereo ordinary shares beneficially owned as of February 29, 2024 is computed on the basis of 701,287,029 ordinary shares outstanding as of February 29, 2024. Mereo ordinary shares that a person has the right to acquire within 60 days of February 29, 2024 are deemed outstanding for purposes of computing the percentage ownership of the person holding such rights, but are not deemed outstanding for purposes of computing the percentage ownership of any other person.

5% or Greater Shareholders:

Entities affiliated with Rubric Capital Management LP (2) 99,714,985 14.22 %

Entities affiliated with Adage Capital Management LP (3) 50,250,000 7.17 %

Entities affiliated with Mangrove Partners IM, LLC (4) 43,764,465 6.24 %

Entities affiliated with Suvretta Capital Management, LLC (6) 36,854,190 5.26 %

Named Executive Officers

Directors

Justin Roberts (12) - 0.00 %

All Executive Officers and Directors as a group (14 persons) 28,240,928 4.03 %

(1) Ordinary shares figures include ordinary shares represented by ADSs.

(2) Based solely on information contained in the Form 3 filed by Rubric Capital Management LP with the SEC on January 2, 2024. The address of the principal business office of Rubric Capital Management LP is 155 East 44th Street, Suite 1630, New York, NY 10017.

(3) Based solely on information contained in Schedule 13G filed by Adage Capital Partners GP, L.L.C. ("ACGP”) with the SEC on February 5, 2024. Shares are directly held by Adage Capital Partners, L.P. (“ACP”). Adage Capital Partners GP, L.L.C. (“ACPGP”) is general partner of ACP. Adage Capital Management, L.P. (“ACM”) is the investment manager of ACP. Robert Atchinson and Robert Gross are managing members of Adage Capital Advisors, LLC, managing member of ACPGP, and managing members of Adage Capital Partners, LLC, general partner of ACM. The address of the principal business office of the entities affiliated with ACM is 200 Clarendon Street, 52nd Floor, Boston, Massachusetts 02116

(4) Based solely on information contained in Schedule 13G filed by Mangrove Partners IM, LLC ("Mangrove Partners”) with the SEC on February 14, 2024. The ordinary shares are held by the Mangrove Partners Master Fund, Ltd., a Cayman Islands limited liability company (“Master Fund”). Beneficial ownership of the ordinary shares is claimed by (i) Mangrove Partners which serves as the investment manager of the Master Fund, and (ii) Nathaniel August who is the principal of Mangrove Partners. The address of the principal business office of the entities affiliated with Mangrove Partners is c/o Delaware Corporations LLC, 1000 N. West Street, Suite 1501, Wilmington, DE 19801

(5) Based solely on information contained in Schedule 13G filed by Rock Springs Capital Management LP (“RCSM”) with the SEC on February 14, 2024. Shares are held directly by the Rock Springs Capital Master Fund LP (“Master Fund”), which is a Cayman Island exempted limited partnership, and Four Pines Master Fund LP (“Four Pines”), which is a Cayman Islands exempted limited partnership, and indirectly held by RSCM, a Delaware limited partnership, and Rock Springs Capital LLC (“RSC”), a Delaware limited liability company. RSCM serves as the investment manager to each of the Master Fund and Four Pines. RSC is the general partner of RSCM. The address of the principal business office of the entities affiliated with RCSM is 650 South Exeter, Suite 1070 Baltimore, MD 21202

(6) Based solely on information contained in Schedule 13G filed by Suvretta Capital Management, LLC (“Suvretta”) with the SEC on February 13, 2024. Suvretta is the investment manager of Averill Master Fund, Ltd. (“Averill Master Fund”). Aaron Cowen a control person of Suvretta and Averill Madison Master Fund, Ltd. Each of

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Suvretta, Averill Master Fund and Aaron Cowen disclaims beneficial ownership except to the extent of their pecuniary interest therein. The address for Suvretta and Aaron Cowen is 540 Madison Avenue, New York, New York 10022. The address for Averill Master Fund is P.O. Box 309, Ugland House, Grand Cayman KY1-1104, Cayman Islands.

(7) Includes 560,413 ADSs beneficially owned, plus 4 ordinary shares beneficially owned, plus 2,048,740 ADSs underling share awards that are exercisable within 60 days of February 29, 2024.

(8) Includes 132,376 ADSs beneficially owned, plus 4 ordinary shares beneficially owned, plus 692,911 ADSs underling share awards that are exercisable within 60 days of February 29, 2024.

(9) Includes 10,000 ADSs beneficially owned plus 379,062 ADSs underling share awards that are exercisable within 60 days of February 29, 2024.

(10) All holdings are ADSs underling share awards that are exercisable within 60 days of February 29, 2024.

(11) Includes 37,940 ADSs beneficially owned plus 214,252 ADSs underling share awards that are exercisable within 60 days of February 29, 2024.

(12) Mr. Roberts is a partner of Rubric Capital Management LP, which has ultimate voting and investment power over the ordinary shares and ADSs held by Rubric Capital Management LP. He disclaims beneficial ownership of such shares except to the extent of any pecuniary interest therein. Mr. Roberts has waived all remuneration in respect of his appointment as a non-executive director.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table summarizes information about our equity compensation plans as of December 31, 2023.

(1) This category consists of our Mereo 2019 Equity Incentive Plan, the 2019 Non-Employee Equity Incentive Plan, the 2015 Plan, and the Mereo Share Option Plan.

(2) Consists of: (i) 62,613,030 ordinary shares issuable upon the exercise of outstanding time-based stock options, (ii) 2,446,125 ordinary shares issuable in settlement of outstanding restricted stock units awarded, (iii) 3,649,910 ordinary shares issuable in settlement of outstanding deferred restricted stock units awarded, and (iv) 6,690,750 ordinary shares issuable in settlement of outstanding performance units awarded.

(3) The weighted-average exercise price includes all outstanding stock options but does not include restricted stock units, deferred restricted stock units, or performance units, all of which do not have an exercise price.

(4) On January 23, 2024, we filed a Form S-8 to register an additional 37,234,627 ordinary shares for issuance under the above named plans.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The following is a description of related party transactions we have entered into since January 1, 2022, or currently in effect with any member of our board of directors or executive officers and the holders of more than 5% of our ordinary shares or ADSs.

Transactions with Mereo’s Executive Officers and Directors

We have entered into employment agreements or consultancy agreements with our executive officers. See “Item 11. Executive Compensation—Executive Officer Employment Agreements.”

Employee Benefit Trust

In 2016, we established an Employee Benefit Trust (“EBT”) for the purpose of holding ordinary shares (subsequently ADSs) to satisfy the exercise of options under the Company’s share-based incentive schemes.

No funding was loaned to the EBT by the Company during the year ended December 31, 2023 or 2022. During the years ended December 31, 2023 and 2022, no ordinary shares were purchased by the EBT. A total of 15,926 ADSs (2022: 15,645) held by the EBT were used in the year-ended December 31, 2023 to satisfy the exercise of options under the Company’s share- based incentive schemes. As of December 31, 2023 the EBT holds 184,680 ADSs (2022: 206,606) along with $21,949 in cash (2022: $21,472).

Indemnity Agreements

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We have entered into deeds of indemnity with each of our directors. See “Item 10. Directors, Executive Officers and Corporate Governance—Insurance and Indemnification.”

Related Person Transaction Policy

Our Board has a written related person transaction policy, which sets forth the policies and procedures for the review and approval or ratification of related person transactions. This policy will cover, any transaction or proposed transactions between us and a related person that are material to us or the related person, including without limitation, purchases of goods or services by or from the related person or entities in which the related person has a material interest, indebtedness, guarantees of indebtedness and employment by us of a related person. In reviewing and approving any such transactions, our audit and risk committee is tasked to consider all relevant facts and circumstances, including, but not limited to, whether the transaction is on terms comparable to those that could be obtained in an arm’s length transaction and the extent of the related person’s interest in the transaction.

Item 14. Principal Accounting Fees and Services

On September 20, 2023, our Board of Directors, following the recommendation of the audit and risk committee, dismissed BDO LLP (“BDO”) as our independent registered public accounting firm and appointed PricewaterhouseCoopers LLP (United Kingdom) (“PwC”) as our new independent registered public accounting firm effective immediately.

BDO had served as our independent registered public accounting firm for the year ended December 31, 2022 and until September 20, 2023 while we reported as a foreign private issuer and prepared our financial statements in accordance with IFRS.

PwC has served as our independent registered public accountants since September 20, 2023 and was appointed by our Board of Directors to act as our independent auditor for the fiscal year ending December 31, 2023 and has audited our financial statements prepared in accordance with U.S. GAAP for the years ended December 31, 2023 and 2022.

The table below sets forth a summary of the fees billed to us by our auditors for professional services rendered for the years ended December 31, 2023 and 2022. All such audit and audit-related services were pre-approved by the Audit Committee.

Tax fees — —

All other fees (3) 3 —

(1) There was a change in registered auditor during the year. Of this amount, $ 1.0 million was in relation to the current auditors and includes amounts paid for the company's transition from IFRS to US GAAP.

(2) These fees were in relation to the former auditors and were all approved by the audit committee pursuant to its pre-approval policies.

(3) These fees were in relation to the current auditors and were all approved by the audit committee pursuant to its pre-approval policies.

Audit Fees

For the fiscal years ended December 31, 2023 and 2022, we were billed approximately $1.27 million and $0.49 million, respectively, for professional services rendered by our independent auditors for the audit of our financial statements, which includes the audits of our wholly-owned subsidiaries.

Audit-Related Fees

For the fiscal years ended December 31, 2023 and 2022, we were billed approximately $0.21 million and $0.10 million, respectively, for professional services rendered by our independent auditors for audit-related services. These include the review of our interim financial statements, review of our registration statement and related consents and issuance of comfort letters.

Tax Fees

None.

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All Other Fees

For the fiscal year ended December 31, 2023 we were billed less than $0.1 million for software provided by our independent auditors.

Pre-Approval Policies

The audit and risk committee has adopted a policy and procedures for the pre-approval of audit, review and attest services and permitted non-audit services rendered by PwC. The policy generally permits the audit and risk committee to pre-approve, on an annual basis, specified services in the defined categories of audit services, audit-related services, tax services and other permitted non-audit services. Pre-approval may also be given as part of the audit and risk committee’s approval of the scope of the engagement of the auditor or on an individual, explicit, case-by-case basis before the auditor is engaged to provide each service.

The audit and risk committee has determined that the rendering of certain services other than audit services by PwC are compatible with maintaining the accounting firm’s independence.

The audit and risk committee has delegated to its chair the authority, from time to time, to pre-approve non-audit services not prohibited by law to be performed by our independent auditors and the associated fees, provided that the estimated fees for such permitted non-audit services do not exceed specified thresholds and provided that the chair shall report any decisions to pre-approve such non-audit services and fees to our full audit and risk committee at its next regular meeting.

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PART IV

Item 15. Exhibits and Financial Statement Schedules

1. Financial Statements

As part of this Annual Report on Form 10‐K, the consolidated financial statements are as follows:

Audited Financial Statements Page

Report of independent registered public accounting firm F-2

Consolidated balance sheets F-3

Consolidated statements of operations and comprehensive loss F-4

Consolidated statements of cash flows F-5

Consolidated statements of shareholders’ equity F-6

Notes to consolidated financial statements F-7

2. Financial Statement Schedules

All schedules have been omitted because they are not required, not applicable, not present in amounts sufficient to require submission of the schedule, or the required information is otherwise included.

3. Exhibit Index

The following is a list of exhibits filed as part of this Annual Report on Form 10‐K or are incorporated herein by reference.

ExhibitNumber Description of Exhibit

116

ExhibitNumber Description of Exhibit

4.2* Description of Securities Registered under Section 12 of the Exchange Act.

117

ExhibitNumber Description of Exhibit

118

ExhibitNumber Description of Exhibit

19.1* Insider Trading Policy

24.1* Power of Attorney (included on signature page of this report).

31.1* Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2* Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

97.1* Mereo BioPharma Group plc Compensation Recovery Policy

104 Cover Page Interactive Data File.

* Filed herewith.

† Portions of this exhibit are subject to a previously filed confidential treatment order pursuant to Rule 406 under the Securities Act.

†† Confidential portions of this exhibit were redacted pursuant to Item 601(b)(10) of Regulation S-K and the Company agrees to furnish supplementally to the Commission a copy of any omissions upon request.

††† Certain portions of this exhibit have been omitted because they are not material and they are the type of information that the Registrant treats as private or confidential.

Item 16. Form 10‐K Summary

None.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized, on March 27, 2024.

By: /s/ Denise Scots-Knight

Name: Denise Scots-Knight

Title: Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Denise Scots-Knight and Christine Fox, and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10‐K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on March 27, 2024, in the capacities indicated.

Signature Title Date

/s/ Denise Scots-Knight Chief Executive Officer and Director March 27, 2024

Denise Scots-Knight (Principal Executive Officer)

/s/ Christine Fox Chief Financial Officer March 27, 2024

Christine Fox (Principal Accounting and Financial Officer)

/s/ Michael Wyzga Chairman of the Board of Directors March 27, 2024

Michael Wyzga

/s/ Jeremy Bender Director March 27, 2024

Jeremy Bender

/s/ Anders Ekblom Director March 27, 2024

Anders Ekblom

/s/ Pierre Jacquet Director March 27, 2024

Pierre Jacquet

/s/ Annalisa Jenkins Director March 27, 2024

Annalisa Jenkins

/s/ Deepika Pakianathan Director March 27, 2024

Deepika Pakianathan

/s/ Justin Roberts Director March 27, 2024

Justin Roberts

/s/ Daniel Shames Director March 27, 2024

Daniel Shames

/s/ Marc Yoskowitz Director March 27, 2024

Marc Yoskowitz

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Audited Financial Statements Page

Report of independent registered public accounting firm (PCAOB ID 876) F-2

Consolidated balance sheets F-3

Consolidated statements of operations and comprehensive loss F-4

Consolidated statements of cash flows F-5

Consolidated statements of changes in equity F-6

Notes to consolidated financial statements F-7

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Mereo BioPharma Group plc

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Mereo BioPharma Group plc and its subsidiaries (the “Company”) as of December 31, 2023 and December 31, 2022, and the related consolidated statements of operations and comprehensive loss, changes in equity and cash flows for the years then ended, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and December 31, 2022, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Reading, United Kingdom

March 27, 2024

We have served as the Company's auditor since 2023.

F-2