6 June 2016 NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, JAPAN OR ANY OTHER JURISDICTION WHERE IT IS UNLAWFUL TO DISTRIBUTE THIS ANNOUNCEMENT This announcement is an advertisement and not a prospectus or admission document and does not constitute an offer to sell or a solicitation of an offer to buy securities in any jurisdiction in which such offer or solicitation is unlawful. Investors should not subscribe for or purchase any transferable securities referred to in this announcement except on the basis of the information in the admission document dated 3 June 2016 (the (Admission Document) published by Mereo BioPharma Group plc (Mereo or the Company and, together with its subsidiaries, the Group) in connection with the admission of its ordinary shares (Ordinary Shares) to trading on the AIM market of the London Stock Exchange plc (Admission). Copies of the Admission Document will be available for inspection for a period of 12 months from the date of Admission at the offices of Proskauer Rose (UK) LLP. This document is only being distributed to and is only directed at (i) persons who are outside the United Kingdom or (ii) to investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the Order) or (iii) high net worth companies, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons in (i), (ii) and (iii) above together being referred to as "relevant persons"). The Ordinary Shares are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such Ordinary Shares will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents. In any EEA Member State that has implemented the Prospectus Directive, this communication is only addressed to and is only directed at qualified investors in that Member State within the meaning of the Prospectus Directive, and such other persons as this document may be addressed on legal grounds, and no person that is not a relevant person or qualified investor may act or rely on this document or any of its contents. The expression "Prospectus Directive" means Directive 2003/71/EC (and amendments thereto, including Directive 2010/73/EU to the extent implemented in any relevant Member State) and includes any relevant implementing measure in the relevant Member State. Mereo BioPharma Group plc Proposed Admission to trading on AIM and a further Capital Raise of £14.8m A clinical stage, UK-based, biopharmaceutical company founded in March 2015 with a focus on rare and specialty disease areas Initial portfolio of three Phase 2 product candidates from Novartis; the Company has already commenced two new Phase 2 clinical studies in 2016 and intends to commence registration studies with lead product candidate BPS-804 during H2 2016 Leveraging an early mover advantage in a new model for pharmaceutical development coupled with a flexible strategy to realising downstream value Highly experienced management team building a scalable business and backed by leading institutional shareholders The proceeds of the Private Placement and convertible loan (together, the Capital Raise) will provide additional funds to the £76.5 million committed in July 2015. Together this will allow the Group to bring its existing product candidates through significant potential value inflection points Mereo, a UK-based specialty biopharmaceutical company, is pleased to announce that it expects Admission of its Ordinary Shares to trading on AIM to take effect on 9 June 2016. The Company has also completed a supplementary Capital Raise with total gross proceeds of £14.8 million comprised of a private placement of its Ordinary Shares raising gross proceeds of £11.35 million at a price of £2.21 per Ordinary Share (the Private Placement) and a cash investment by existing shareholder Novartis by way of a convertible loan, in the amount of £3.46 million. The Capital Raise follows a private placement in July 2015 when the Company received £20 million, with a further £56.5 million committed. Trading in Mereo’s Ordinary Shares on the AIM market of the London Stock Exchange is expected to commence at 8:00am on 9 June 2016 under the ticker symbol “MPH” with ISIN GB00BZ4G2K23. The Group’s focus is on the development of innovative medicines that aim to address unmet medical needs in rare and specialty disease areas and improve patient quality of life. The Group seeks to selectively acquire clinical-stage product candidates with demonstrated clinically meaningful data from large pharmaceutical companies and to further develop these product candidates to subsequent key value inflection points or to commercialisation. The Group is an early adopter of a novel business model that aligns its interests with those of large pharmaceutical companies. In July 2015, the Group acquired three Phase 2 product candidates which comprise its initial portfolio from Novartis, a global pharmaceutical company with a history of robust product development and a reputation for product study data quality and secured £76.5 million (US$118 million), gross proceeds, by way of an initial private placement of its Ordinary Shares. Since that time the Company has initiated a Phase 2 study and a Phase 2b study in relation to two of the product candidates in 2016 and intends to commence registration studies during H2 2016 for the third product candidate. In the near term, the Group aims to further develop this portfolio, while in the medium to long term the Group intends to build a broader pipeline of product candidates which fulfil Mereo’s selection criteria. Commenting on today’s announcement, Denise Scots-Knight, Chief Executive Officer of Mereo, said: “We are very excited to be joining AIM, allowing the Company to take the next logical step towards realising our vision of becoming a leading speciality biopharma company. On Admission we will have raised over £90 million from institutional investors since July 2015 which has allowed us to acquire three carefully selected clinical stage pipeline assets from Novartis and subsequently advance these product candidates, including through the initiation of two new clinical studies. Our strategy is to build, over time, a diverse portfolio, and having publically-traded shares, will provide additional flexibility to secure the next product candidates which are likely to be primarily sourced from large pharmaceutical companies. Such product candidates are expected to have compelling market potential, robust preclinical, clinical and manufacturing data packages, and a clear path to a significant value inflection point. We also aim to retain optionality on how we realise value from each asset downstream.” “We would like to thank our existing and new shareholders who have participated in the supplemental Capital Raise we have announced today. We now have sufficient funding in the near to medium term to significantly advance the clinical development for the three initial product candidates in our pipeline to potential significant value inflection points.” “We are well positioned to leverage our early mover advantage in a novel business model that aligns our interests with those of large pharmaceutical companies for drug development and we are confident that we have the right ingredients and experience to build a scalable and sustainable specialty pharmaceutical business” Admission Highlights Admission to the AIM market of the London Stock Exchange and the commencement of trading in the Ordinary Shares is expected to take place at 8:00am on 9 June 2016 under the ticker “MPH” The Company has completed a Capital Raise of £14.8 million comprised of a Private Placement of its Ordinary Shares and a cash investment by Novartis by way of a convertible loan The Capital Raise follows a private placement in July 2015 when the Company raised £20 million, with a further £56.5 million committed The Private Placement announced today was completed at a price of £2.21 per Ordinary Share The Directors believe the Capital Raise will provide additional funds to allow the Group to bring its product candidates to the next stage of development RBC Capital Markets is acting as Global Coordinator, Private Placement Agent and Broker to the Company and Cantor Fitzgerald Europe is acting as Nominated Adviser, Private Placement Agent and Broker. Evercore is acting as Financial Adviser to the Company. Key Strengths of the Company Product candidates’ selection based on strong scientific rationale and a clear path to significant value generating inflection points- clinical progress achieved since the private placement in July 2015: All three product candidates in the existing portfolio have demonstrated proof of concept in their targeted indications and have been well tolerated in studies to date Diversified investment risk as each of the Group’s initial product candidates has different mechanisms of action, regulatory frameworks and pricing and reimbursement considerations o BPS-804 is being developed for the prevention of fractures resulting from osteogenesis imperfecta (brittle bone disease) . Recurrent fractures are the key clinical issue faced by these patients. In March 2016 the Company announced that the U.S. Food and Drug Administration (FDA) has granted BPS-804 orphan drug designation and in May 2016 received a positive opinion of the COMP with respect to orphan drug designation for BPS-804 in the European Union . The Company intends to commence a registration trial for BPS-804 in H2 2016. o BCT-197, is being developed to treat inflammation in patients with an acute exacerbation of chronic obstructive pulmonary disease (AECOPD) . The treatment aim is to ultimately reduce an AECOPD patient’s hospital stay whereas current treatments for AECOPD are supportive therapies that do not treat the underlying disease .