Mereo BioPharma Group plc (Nasdaq: MREO) and Sentynl Therapeutics, Inc. have entered into an option and license agreement granting Sentynl the exclusive right to commercialize alvelestat in the United States for alpha-1 antitrypsin deficiency-associated lung disease (AATD-LD), a rare genetic respiratory condition estimated to affect 50,000 to 80,000 people in the U.S.

Under the agreement, Sentynl also receives global manufacturing rights for alvelestat. Mereo retains commercial rights outside the U.S. and will lead the global Phase 3 study and regulatory interactions until the study is completed. The companies plan to collaborate during the option period to refine the Phase 3 study design, with a potential study initiation in early 2027.

Mereo will receive a non-refundable upfront option fee. Upon exercise of the option, Mereo would receive up to $40 million in upfront and research and development payments through NDA filing, as well as double-digit tiered royalties on U.S. net sales of alvelestat.

Alvelestat is an oral small molecule neutrophil elastase inhibitor. It has received Orphan Drug Designation from both the FDA and the European Commission for AATD-LD, and Fast Track designation from the FDA. The drug has been studied in clinical trials involving more than 1,000 patients across multiple respiratory conditions.

Sentynl is a U.S.-based biopharmaceutical company and a wholly-owned subsidiary of Zydus Lifesciences Limited. According to the press release, the companies plan to use the option period to advance manufacturing and streamline the Phase 3 study design before a final commercialization decision is made.