Mereo BioPharma Group plc (AIM:MPH) agreed to acquire OncoMed Pharmaceuticals, Inc. (NasdaqGS:OMED) from Biotechnology Value Fund L.P., Biotechnology Value Fund II, L.P., MSI BVF SPV, LLC and Biotechnology Value Trading Fund OS LP managed by BVF Partners LP and others for $57.4 million on December 5, 2018. Under the terms, each share of OncoMed issued and held immediately prior to the transaction becoming effective will be converted into the right to receive (i) Mereo ADRs pursuant to an exchange ratio and (ii) one CVR representing the contingent right to receive certain cash payments and MereoADRs upon the achievement of certain milestones relating to etigilimab and navicixizumab. Mereo is expected to issue approximately 24.7 million new ordinary shares. The aggregate number of ADRs to be issued to OncoMed shareholders is based on an exchange ratio that is subject to adjustment based on OncoMed's net cash balance at completion. OncoMed shareholders will receive a greater or lesser number of ADRs if OncoMed's net cash balance at completion is greater or less than $38 million, respectively, with OncoMed shareholders receiving a proportionally lesser number of Mereo ADRs for each dollar of OncoMed net cash BELOW $36.5 million.

If the milestone relating to etigilimab set forth in the CVR is satisfied prior to closing of the transaction, the number of Mereo ADRs to be issued to OncoMed shareholders at closing of the transaction will be increased as a result of the cash amount received by OncoMed from Celgene in connection with the exercise of such option. In those circumstances the CVR would no longer include a milestone relating to etigilimab. Each OncoMed shareholder will also receive a CVR for each OncoMed share held immediately prior to completion representing the right to receive additional Mereo ADRs in the event that Celgene exercises its option in respect of etigilimab and pays OncoMed the associated milestone payment of $35 million prior to 31 December 2019 and additional cash consideration equal to 70% of the net proceeds of milestone payments actually received by Mereo within a period of 5 years following completion of the transaction from certain future partnership or investment transactions in relation to navicixizumab, subject to an aggregate cap of approximately $80 million. 

The balance of any milestone payments received would be retained by Mereo. 0.4 million of Restricted stock units were also issued. OncoMed shareholders are expected to own approximately 25% of the issued share capital of the Enlarged Group immediately following completion of the transaction and Mereo shareholders are expected to own approximately 75% of the issued share capital of the Enlarged Group. Post transaction, OncoMed will become a wholly owned subsidiary of Mereo. The combined company will operate as Mereo BioPharma and will be listed on NASDAQ in the U.S. and the AIM market in London. Both the parties will be required to pay a fee of $1.7 million in case of termination of the transaction.

Mereo Board of Directors will be expanded to 10 persons to accommodate the appointment of current OncoMed Directors Michael Wyzga and Deepa Pakianathan as independent non-executive Directors. The existing Mereo Directors will continue to serve in their current positions. The Board will thus be comprised of eight non-executive and two executive Directors. John Lewicki, Chief Executive Officer of OncoMed, will continue as an advisor to Mereo. The transaction is subject to customary closing conditions including approval by shareholders of OncoMed, listing of the Mereo ADRs on NASDAQ, registration statement effectiveness and the admission to trading of the ordinary shares to be issued in connection with the transaction on AIM. The transaction has been unanimously approved by the Board of Directors of Mereo BioPharma and OncoMed Pharmaceuticals.

In total, OncoMed has received irrevocable undertakings to vote in favor of the resolutions to effect the transaction to be proposed at the general meeting of OncoMed shareholders in respect of holdings totaling, in aggregate, 4.13 million OncoMed shares of common stock, representing 10.69% of OncoMed's outstanding shares of common stock. On March 15, 2019, Mereo received irrevocable support agreements to vote in favor of the resolutions from Biotechnology Value Fund, L.P., Biotechnology Value Fund II, L.P., MSI BVF SPV, L.L.C. and Biotechnology Value Trading Fund OS L.P. which represent approximately 10.45% of OncoMed's outstanding shares of common stock. OncoMed has now received Support Agreements in respect of holdings representing approximately 21.1% of OncoMed's outstanding shares of common stock. As of April 17, 2019, the transaction is approved by majority of OncoMed shareholders. The transaction is expected to complete in first half of 2019. As on March 15, 2019, the transaction is expected to close in second quarter of 2019. As on April 18, 2019, it is expected that the transaction will be completed on April 23, 2019.

Julian Oakley and Tom Watson of Evercore Partners International LLP, Phil Davies and Will Goode of Cantor Fitzgerald Europe, Rupert Walford and Jamil Miah of RBC Capital Markets LLC acted as financial advisors to Mereo. Dan Dubin and Dan Lepanto of Leerink Partners LLC acted as financial advisors to OncoMed. Simon Witty, Leo Borchardt, Michael Davis, Alexander W. Simmonds, Jack Kelly, Alon Gurfinkel, Jonathan Cooklin, David R. Bauer and Veronica M. Wissel of Davis Polk & Wardwell London LLP acted as legal advisor to Mereo and Alan Mendelson, Chad Rolston and Richard Butterwick of Latham & Watkins LLP acted as legal advisor to OncoMed in the transaction. Citibank, N.A. acted as Mereo's transfer agent and depositary whereas MacKenzie Partners, Inc. acted as information agent to OncoMed and will be paid a fee of approximately $10,000. SVB Leerink LLC was paid a fee of $2.5 million, $0.5 million of which was paid upon the rendering by Leerink Partners of its opinion and the remainder of which is payable contingent upon consummation of the transaction.