Mereo BioPharma’s attempt to appease Rubric Capital Management has failed, with the activist investor rejecting an offer to gain a seat on the board and continuing to push for bigger changes to the biotech.
Rubric, which has built up a double-digit stake in Mereo, wrote to its fellow shareholders last month in a call for four of its nominees to take up positions on the biotech’s board. The investor sent out the letter after, in its view, the Mereo board “totally” failed to engage with its plan for the business. In the wake of the letter, Mereo made cuts, extending its runway to 2025, but called parts of Rubric’s plan “unrealistic.”
Mereo’s board went on to put an offer to Rubric. Rather than the four board seats sought by the activist investor, Mereo offered to have two existing directors retire and install a Rubric principal and another new director in their place immediately. According to Mereo, Rubric rejected the proposal and refused to negotiate.
“We are disappointed that Rubric has rejected this reasonable proposal and has insisted instead that Mereo provide Rubric with four Board seats. The company would prefer to avoid the distraction and expense of a proxy contest and is surprised that Rubric is refusing to discuss any resolution other than one that involves Mereo acceding to Rubric’s full demands,” the Mereo board said.
The board went on to claim that it has “proactively engaged in ongoing dialogue with Rubric toward a resolution,” which it believes is in the best interests of shareholders, and remains “open to a reasonable compromise.”
However, with the two sides currently at a stalemate, a proxy fight is on the cards. In that scenario, Rubric will try to win enough shareholder support to drive through the changes it wants to see at Mereo. The biotech’s board warned a proxy campaign “will be expensive for Mereo and its shareholders.”
Mereo is developing two rare disease candidates, setrusumab and alvelestat. While Rubric has called for Mereo to monetize the European rights to setrusumab, the biotech plans to wait until after it has data from registrational trials of the Ultragenyx-partnered bone disease drug before striking a deal.