CORRESP

In contrast, in April 2019 the Company completed a business combination through which it acquired cash, intellectual property to several product candidates and in-process R&D (including navicixizumab), an office facility in the United States (“U.S.”), experienced personnel, and other assets and liabilities. At the time of the business combination, the Company’s intention was to sell or out-license navicixizumab, rather than to invest in development of the asset in the course of the Company’s ordinary activities. In the approximate nine months between its acquisition and out-licensing of the worldwide rights of the asset to OncXerna in January 2020, the Company’s activities primarily involved out-licensing and winding-down the program.

The Company concluded the upfront proceeds from the license and collaboration agreement with Ultragenyx are within the scope of IFRS 15, whereas upfront proceeds from the licensing agreement with OncXerna are not within the scope of IFRS 15, and instead within the scope of IAS 38.

Ultragenyx Agreement

Following the acquisition of setrusumab in 2015, the Company performed significant clinical development activities of the asset, including conducting a Phase 2b study in adults with osteogenesis imperfecta (“OI”) between 2017 and 2019.

The Company subsequently entered into a license and collaboration agreement with Ultragenyx in December 2020 for setrusumab in OI. Under the terms of the agreement, Ultragenyx will lead future global development of setrusumab in both pediatric and adult patients. The Company granted Ultragenyx an exclusive license to develop and commercialize setrusumab in the U.S. and rest of the world, excluding Europe and the United Kingdom (“U.K.”), where Mereo retains commercial rights. Each party will be responsible for post-marketing commitments in their respective territories. Given the Company’s significant investment in the clinical development of setrusumab since 2015, it was determined that this transaction was in the course of the Company’s ordinary activities. In addition, Ultragenyx meets the definition of “customer” because it contracted with Mereo to obtain the license to develop and commercialize setrusumab in the U.S. and rest of world, which is an output of the Company’s ordinary activities, in exchange for cash consideration. For these reasons, the transaction is within the scope of IFRS 15. The Company therefore applied the guidance set out in IFRS 15, paragraphs B58 and B61, which led to the conclusion that the transaction was a grant of a “right to use” license, and recognized revenue accordingly. The Company respectfully refers the Staff to the Company’s disclosure on judgments related to revenue in footnote 3. Significant judgments, estimates and assumptions, on page F-15 of the Company’s Annual Report on Form 20-F.

In respect of the setrusumab intangible asset, as Mereo retained commercial rights under the license and collaboration agreement in Europe and the U.K., the Company determined it was appropriate to only derecognize the portion of the carrying amount of the intangible asset relating to the U.S. and rest of the world rights that were out-licensed, pursuant to IAS 38.

OncXerna Agreement

Under the terms of the license agreement, OncXerna received an exclusive worldwide license to develop and commercialize navicixizumab and is responsible for all future research, development, and commercialization activities. As set out in the preceding paragraphs, due to Mereo’s intention to sell or out-license navicixizumab from the time of its acquisition as part of a business combination and the lack of investment in development activities for the asset beyond wind-down costs, the Company concluded that entering into the license agreement was not in the course of its ordinary activities. Therefore, OncXerna did not meet the definition of a “customer” as defined in IFRS 15 because OncXerna did not obtain an output of the Company’s ordinary activities and, as such, the license agreement was determined not to be within the scope of IFRS 15.

The license agreement was therefore accounted for pursuant to IAS 38.112 and IAS 38.113, under which the associated intangible asset was fully derecognized and a loss on disposal recorded.

Conclusion

The Company respectfully submits the foregoing application of accounting policies complies with the requirements of the relevant accounting standards. To provide additional clarity, the Company proposes to include in future filings on Form 20-F a cross-reference in the intangible assets footnote to the significant judgments footnote, as well as further explanation within the revenue accounting policy, such as the following:

“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 within the scope of IFRS 15, Revenue from Contracts with Customers.”

If you have any questions or require additional information with respect to this correspondence, please do not hesitate to contact me.

Yours sincerely,

/s/ Christine Fox

Christine Fox

Chief Financial Officer