British biopharma start-up Mereo kicks off with Novartis drugs

By Paul Sandle

LONDON, July 29 (Reuters) - British investor Neil Woodford is backing a start-up biopharmaceutical firm whose first venture will be to launch clinical trials of three drugs developed by Novartis (Xetra: 904278 - news) .

London-based Mereo BioPharma Group, set up in March, aims to buy drugs discovered by big pharmaceutical companies and fund and design later-stage clinical trials.

It said has raised $119 million from Woodford Investment and Invesco Perpetual among others, and has acquired drug programmes from Novartis for the treatment of brittle bone syndrome, acute chronic obstructive pulmonary disease and hypogonadotropic hypogonadism, or low testosterone production, in obese men.

Novartis has taken an equity stake in the new company in return for the assets, Mereo said, without disclosing the size of the Swiss company's stake.

Mereo's Chief Executive, Denise Scots-Knight, said many large pharmaceutical companies could not afford to fund their entire pipeline of drugs, particularly those at the second stage of clinical trials.

"We were looking for an underlying mechanism of action that was known, proof-of-concept data, a clinical study which as a smaller company we felt we could finance, and decent market size," Scots-Knight told Reuters on Wednesday.

She (Munich: SOQ.MU - news) said all three Novartis products targeted illnesses or conditions that could support $1 billion drugs, while risk was spread by targeting three different therapy areas.

"The long-term goal is to have five to seven products in the portfolio," she said.

Mereo has formed a partnership with ICON, an Irish-based company that conducts clinical trials for pharmaceutical companies, to work on the tests, she said.

Novartis said in a statement it was happy with its deal with Mereo.

"We are pleased that through this deal with Mereo we have found a way to work together to bring these valued innovations to patients," said David Epstein, divisional head of Novartis Pharmaceuticals. ($1 = 0.6396 pounds) (Editing by Susan Fenton)