Mereo BioPharma Sends Letter to Rubric Capital Management Letter Reiterates Mereo s Updated Strategic Plan to Maximize Value for All Shareholders and Corrects Rubric s Assumptions Announces Further Extension of Cash Runw

Mereo BioPharma Sends Letter to Rubric Capital Management

Letter Reiterates Mereo s Updated Strategic Plan to Maximize Value for All Shareholders and Corrects Rubric s Assumptions

Announces Further Extension of Cash Runway into Q2 2025

LONDON August 31, 2022 Mereo BioPharma Group plc (NASDAQ: MREO), ( Mereo or the Company ), a clinical-stage

biopharmaceutical company focused on rare diseases and oncology, today sent a letter to Rubric Capital Management LP ( Rubric ) responding to Rubric s recent public statements regarding Mereo s business and the opportunity for

value creation from its pipeline, as well as Rubric s proposed slate of directors. Mereo also reiterated its updated strategy and capital allocation plan, which it believes will maximize value for all shareholders. The letter follows attempts

by Mereo to constructively engage with Rubric over the last six months.

The Company also announced that after continuing to review its expenditure since

its announcement on June 2, 2022, and with the evolution of its programs, additional cost savings have been identified through a combination of headcount, program related and general and administrative cost reductions. These will further

extend the Company s cash runway into Q2 2025. The extended runway allows for significant progress and additional data points on the setrusumab program providing strategic options and value optimization. It also allows for execution of valuable

business development on other programs, including alvelestat.

Mereo will also post on the investor relations page of its website today a short slide deck

further highlighting its strategy, and some of its concerns about Rubric s proposals.

The full text of the letter is as follows:

Mereo BioPharma Group plc

Rubric Capital Management LP

155 East 44th Street, Suite 1630

Thank you for speaking with us at several junctures over the last six months as Mereo s management and Board continue to work diligently to navigate

current market conditions toward our goal of maximizing value creation for our shareholders. We also note that our respective legal counsel discussed the deficiencies in your letter to the Board from August 19, 2022, following our letter dated

August 22, 2022, and that you are working through these, including with our depository bank Citibank and its standard requirements.

We take comments and feedback on our strategy and plans from our investors seriously and, while we appreciate the perspectives Rubric shared in our meetings

and in your recent letters dated June 9, 2022 and August 19, 2022, we are disappointed by the continued public escalation of your position, especially with your most recent proposal to remove four members of Mereo s Board, including

the Chairman. As we committed to do, we have discussed the perspectives and proposals you shared and evaluated them relative to our updated strategy and operating plans. In fact, these discussions lead us to believe that Rubric would appear, in many

ways, supportive of Mereo s existing strategy.

We are concerned, however, that Rubric s proposals are based on inaccurate assumptions that

suggest a fundamental misunderstanding of Mereo s key programs and company operations, and that your proposed plan targets illusory short-term gains for Rubric s benefit but at the expense of Mereo s other shareholders and

stakeholders. We are also concerned that your plan would result in the Board losing several experienced, highly qualified members who bring diverse backgrounds and skill sets, in exchange for nominees you put forward that lack the requisite

experience and expertise to build value for all our shareholders. This would not only significantly threaten the successful execution of our strategic plan, but also put our Foreign Private Issuer status at significant risk which would have a

substantial cost impact for Mereo.

This letter responds in greater detail to Rubric s assumptions and assertions. We also wish to explain how your

proposals do not account for the Company s ongoing contractual and clinical commitments nor the complexities of the laws to which Mereo is subject.

As we announced on June 2, 2022, earlier this year the Board and management conducted a comprehensive strategic review of our portfolio and capital

allocation strategy with the assistance of independent financial and legal advisors. This review included a detailed evaluation of current market conditions, the status of our three ongoing programs, an analysis of recent emerging clinical data, our

overall cost base and contractual commitments, consideration of obligations in our existing partnership agreements, and feedback from potential new partners. This robust process also benefited from the perspectives of our three highly qualified

newer Board members who joined in the past 12 months. It became even clearer through this extensive review, as we articulated publicly in June this year, that Mereo s clearest path to delivering value is to focus our resources on setrusumab and

on taking alvelestat through the next stage of the regulatory process. These are our two late-stage rare disease programs which have already delivered encouraging clinical results. As a result of this focus, and continued analysis of our operating

plans, we have further optimized our anticipated cash spend, extending our cash runway into Q2 2025.

We are confident that the current Board, which holds

many decades of experience in clinical development, regulatory, business development, commercial, corporate transactions, and financial and strategic consulting, has the greatest combination of skills and expertise to capture these programs

full potential as the setrusumab program progresses and once we have the necessary regulatory output in-hand for alvelestat.

Below we share clarifications we believe are important for you and your advisors to better understand our business and the multiple milestones we expect to

reach over the next 9-12 months. We have shared these facts and perspectives in our previous discussions with you and our other shareholders in the last several months.

Our confidence in our plan is rooted in the encouraging initial Phase 2 results in our two late-stage differentiated rare disease programs, and

the opportunity for Mereo to continue to deliver on multiple value-driving milestones over the next two years. External data events that will impact the potential of etigilimab are also expected during this period. Important milestones through 1H

Our roadmap for growth, while carefully managing and preserving our cash

balance, is outlined below.

We are continuing to review Mereo s cost base to ensure our costs are optimized with a focus on shareholder value. As we announced on

June 2, 2022, following a review of our portfolio prioritization and all our costs, our current cash runway was extended to late 2024. We have continued to evaluate our cost base as our programs evolve, and through a combination of headcount,

program related and general and administrative cost reductions, we have further extended this cash runway into Q2 2025.

continue reviewing our cost base, including headcount, taking into account the factors we have described:

Unfortunately, Rubric s actions are adding

unavoidable significant external costs to our plan and will therefore negatively impact our cash runway.

We believe that Rubric s statements from June 9, 2022 and August 19, 2022 regarding the feasibility and value of a liquidation

of certain of Mereo s assets in a wind-down scenario and a potential near-term direct cash distribution to shareholders do not take into account the Company s ongoing contractual and clinical commitments, nor the complexities of English

corporate law. As a company incorporated in the United Kingdom, Mereo may only make distributions of cash or other assets to shareholders out of distributable reserves. Mereo does not currently have distributable reserves to effect such a

We note from the letter dated August 19, 2022 that Rubric has revised its proposed strategy for Mereo. With the

exception of the proposal regarding setrusumab, Rubric s proposed strategy is now essentially in-line with the strategy Mereo outlined on June 2, 2022. Your proposal to monetize setrusumab this early

in the program to generate significant value is unrealistic given the stage of the study and the Company s commitments under its collaboration with Ultragenyx, demonstrating a lack of understanding of our contractual arrangements and

operations. The result is a proposal that would threaten to undermine potential value creation to Mereo and its shareholders. We are informed in this view based on our considerable experience of successfully completing the prior partnering process.

No additional data has been generated on the program since Mereo reported

the Phase 2 data on the ASTEROID study and then completed the Ultragenyx transaction with $50 million upfront. The Board currently expects the value of the rights for setrusumab to be

significantly higher after the program has successfully progressed further and been de-risked, assuming positive Phase 2/3 data. We plan to continually evaluate strategic options for the program alongside this

Rubric s previous assumptions for winding down Mereo from its June 9, 2022 proposal were based on flawed assumptions

that did not fully consider wind-down costs and other costs associated with a liquidation of assets, including the costs and related value destruction associated with the termination of our material contracts, including on setrusumab and alvelestat,

and the related costs of Mereo s outstanding convertible loan notes.

For etigilimab, we continue to have cancer patients in the Phase

1b trial who are responding to treatment. It would be unethical to stop access to this potentially life-saving therapy. Mereo has already committed to these patients and believes we should allow these patients to continue with their therapy. It is

therefore inappropriate to immediately terminate all costs related to etigilimab.

In summary, we believe:

As Rubric is aware, the biotechnology sector has been in a bear market for around a year. Mereo s share price

performance in the last three years, and over the past year, is in line with our peer group of companies, which includes rare disease companies and those with an anti-TIGIT programs.

Market capitalization and share price information for the periods ended August 26, 2022.

Notwithstanding the very challenging current market backdrop for biopharma assets, the Board is fully aligned with shareholders in its

disappointment with Mereo s current share price, which it believes significantly undervalues Mereo and its promising lead programs.

The Mereo Board is highly qualified and fully focused on maximizing shareholder value from our lead programs as the key data required to make

those decisions becomes available.

The Mereo Board and management are prohibited from purchasing stock in Mereo during the frequent closed trading

periods. The Company is planning to implement a Rule 10b5-1 trading plan to facilitate the purchase of Mereo securities by members of the Board and management. The advantage of adopting this trading plan, is

that it is intended to broaden the window for purchasing securities by the Board during the calendar year, for example to include the purchase of securities during a restricted trading or closed period. The impact of the trading plan should be an

increase in ownership of Mereo s securities by the Board and management.

Despite the recent vote at the Mereo Annual General Meeting for the

re-election of our Chairman Michael Wyzga and Dr. Deepa Pakianathan by 99% of the Mereo shareholders that voted, our Nominations Committee is reviewing your proposed nominations of four new directors to

Mereo s Board, as outlined in your August 19, 2022 letter. This review is in accordance with standard due diligence procedures, as we would do for nominations by any shareholder. As we continue to evaluate Rubric s nominees, we are

concerned that the candidates you have put forward lack the requisite experience, skill sets and expertise to create and build value for our shareholders. We are also concerned the nominees will put the successful execution of Mereo s current

Mereo s Board has been carefully and thoughtfully developed over the last three years to ensure an exceptional

combination of skills, experience and expertise, including related to strategic partnerships and M&A, that positions Mereo to successfully advance our most promising programs, optimize our operations and maximize shareholder value.

Furthermore, as you know, Mereo has significantly refreshed its Board, having appointed seven new directors since 2019, demonstrating our

commitment to best corporate governance practices. The current Board reflects our commitment to build a diverse and representative Board composed of directors that bring a variety of perspectives and backgrounds to Mereo, including deep M&A

experience. We have carefully constructed our Board to guide Mereo s strategy through this critical stage and provide the essential expertise and insights needed to unlock shareholder value. As always, we would welcome a conversation with you

to discuss the qualifications and skills our current Board members bring to Mereo.

We believe that Rubric s four nominees are under-qualified to serve on Mereo s

Board and will put the successful execution of Mereo s current strategy at risk. Two of Rubric s four nominees Daniel Shames and Marc Yoskowitz have no public company Board or public company governance experience. Another

Rubric nominee, Annalisa Jenkins, has a concerning Board track record. In 2017, Dr. Jenkins was CEO of Dimension Therapeutics, a company that was sold to Ultragenyx for less than the capital invested. In 2018, ISS recommended shareholders

withhold a vote on her re-appointment at Ardelyx following her attendance record at Ardelyx Board and committee meetings without disclosing an acceptable reason for the absences. ISS stated that

directors who do not attend their board and committee meetings cannot be effective representatives of shareholders. She resigned from the Ardelyx Board less than two years later. In 2019, Dr. Jenkins resigned as Chair of the Board

of Sensyne Health following a compensation disclosure violation at the company. The company was later fined by the London Stock Exchange for historical breaches of disclosure obligations. WE BELIEVE MEREO S SHAREHOLDERS DESERVE BETTER.

What we believe shareholders would find most erroneous, however, is that your proposal is essentially attempting to deliberately

remove the most experienced Board members to disguise a change of control of Mereo and a wholesale transition of the Company s Board to a majority-U.S. Board, which would have significant cost and regulatory implications for the Company

resulting from the loss of its Foreign Private Issuer status. In our view, this is another example of Rubric failing to fully consider the consequences of your proposals and the complexities of the laws to which Mereo is subject.