Mereo BioPharma Group plc (NASDAQ: MREO) reported a net loss of $7.0 million for the second quarter ended June 30, 2026, compared with a net loss of $14.6 million in the same period a year earlier, according to a company press release.

The London-based clinical-stage biopharmaceutical company signed an option and license agreement with Sentynl Therapeutics, Inc., a wholly owned subsidiary of Zydus Lifesciences Limited, granting Sentynl the right to acquire U.S. commercial and global manufacturing rights to alvelestat, Mereo's investigational oral therapy for Alpha-1 Antitrypsin Deficiency-Associated Lung Disease. If Sentynl exercises the option, Mereo would be eligible to receive $40 million in upfront and R&D payments, up to $435 million in regulatory and commercial milestone payments, and double-digit tiered royalties on U.S. net sales. Mereo would retain rest-of-world commercial rights and lead the global Phase 3 study, which could begin in early 2027.

Total R&D expenses fell to $1.8 million in the second quarter of 2026 from $5.4 million in the second quarter of 2025, driven primarily by reduced spending on setrusumab and alvelestat. General and administrative expenses declined to $5.2 million from $5.5 million over the same period.

Cash and cash equivalents stood at $30.1 million as of June 30, 2026, down from $41.0 million at December 31, 2025. The company said it expects this cash to fund operations into late 2027, excluding any potential payments from the Sentynl option agreement.

On setrusumab, Mereo and partner Ultragenyx Pharmaceutical have held initial discussions with the FDA and the UK's MHRA following Phase 3 studies that did not achieve statistical significance on the primary endpoint of reducing annualized clinical fracture rates. The FDA indicated openness to considering alternative approaches to fracture analysis. The companies expect to provide a further update on a potential path forward by year-end 2026.