Ultragenyx Pharmaceutical (NASDAQ: RARE) and Mereo BioPharma Group (NASDAQ: MREO) may be wishing for a happy new year in 2026 after the companies ended 2025 by announcing bad news—namely, the failures of their brittle bone disease candidate setrusumab (UX143) in a pair of late-phase clinical trials.
Both companies said that setrusumab missed the primary endpoints of the Phase III portion of the Phase II/III Orbit trial (NCT05125809) in children and young adults ages 5–25, and the Phase III Cosmic trial (NCT05768854) in children ages 2–6, by failing to achieve statistical significant reduction in annualized clinical fracture rate (AFR) compared to placebo or bisphosphonates, respectively. Ultragenyx and Mereo added, however, that the Orbit and Cosmic trials achieved the secondary endpoints of improvements in bone mineral density against comparators.
Setrusumab is a fully human monoclonal antibody that works by inhibiting sclerostin, a negative regulator of bone formation. Ultragenys and Mereo have reasoned that by blocking sclerostin, they can increase new bone formation, bone mineral density (BMD), and bone strength in brittle bone disease, an inherited genetic disorder also known as osteogenesis imperfecta (OI). Anti-sclerostin antibodies have been shown in mouse models to increase bone formation, improve bone mass to normal levels, and increase bone strength against fracture force testing to normal levels.
In the Orbit trial, Ultragenyx said, patients showed “statistically significant and substantial” improvements in BMD vs. placebo at levels consistent with the study’s Phase II portion—but the BMD changes did not accompany a corresponding reduction in AFRs, and the fracture rate in the placebo group was low.
In Cosmic, patients showed a “substantially” higher baseline fracture rate vs. patients enrolled in Orbit. Meaningful improvements in BMD were associated with a reduction in AFR for setrusumab-treated patients compared to bisphosphonate-treated patients, Ultragenyx reported, but the reduction did not meet statistical significance.
“Significant expense reductions” planned
Following the failed trials, Ultragenyx said it would evaluate its planned operations and would “promptly define and implement significant expense reductions.”
“We are surprised and disappointed by these results, given the promising data from our Phase II study and the lack of approved treatment options available to patients with OI who live with significant pain, disability, and disease burden,” Ultragenyx founder, president, and CEO Emil Kakkis, MD, PhD, said in a statement. “We continue to explore the data to gain a deeper understanding of the findings.”
Ultragenyx licenses setrusumab from Mereo under an up-to-$294 million-plus collaboration and license agreement that reached its fifth anniversary last month.
Investors reacted swiftly to the bad clinical news by sending Ultragenyx shares nosediving 42% on December 29, from $34.19 to $19.72. Those shares partially bounced back 15.5% the following day to $22.78 after the company announced it had completed a rolling Biologics License Application (BLA) submission for DTX401 (pariglasgene brecaparvovec), an adeno-associated virus-based gene therapy for glycogen storage disease Type Ia (GSDIa). Shares continued their climb Friday, rising another 2.6% to $23.60 on Friday.
However, Mereo shares cratered 88% on December 29, from $2.31 to 29 cents. The shares rebounded 72% through the rest of last week, finishing Friday with a 22.5% gain at 51 cents.
“At this juncture, we think the Street will largely remove this program from their valuations” of Ultragenyx, Joseph P. Schwartz, senior managing director, rare diseases, and a senior research analyst with Leerink Partners, observed December 29 in a research note, using the “Wall Street” metaphor for investors.
Stepping up pressure
Schwartz said the clinical failures will likely step up pressure on Ultragenyx to cut spending and watch its balance sheet, as well as to deliver positive data for the pivotal Phase III Aspire trial (NCT06617429) designed to assess the company’s GTX-102 in Angelman syndrome. A topline data readout from the study is expected in the second half of 2026.
Ultragenyx initially partnered with GeneTx Biotherapeutics to develop its GTX-102 in 2019, and three years later acquired GeneTx for up to $280 million (including $75 million upfront).
“For Mereo, this will likely leave investors wondering about the next steps for the company as their remaining programs are in partnering discussions or have already been partnered,” Schwartz added.
Mereo CEO Denise Scots-Knight, PhD, offered some insight about its next moves in a separate statement: “We are carefully managing our cash resources with immediate reductions in our pre-commercial and manufacturing activities, and we are continuing to advance partnering discussions for alvelestat,” Mereo’s oral drug candidate for Alpha-1 Antitrypsin Deficiency-associated Lung Disease (AATD-LD).
Sami Corwin, PhD, a biotechnology-focused healthcare analyst with William Blair, commented in a research note that Ultragenyx’s balance sheet will benefit short-term if GTX-102 aces the Aspire trial—and could benefit further because the company could see potential approvals for two gene therapies. One is DTX401, for which the company said on December 30 it had completed a rolling BLA submission with the FDA.
“The completion of our rolling submission of the BLA for DTX401 is a significant step toward our commitment to deliver the first therapy that directly targets the underlying cause of GSDIa,” Eric Crombez, MD, Ultragenyx’s chief medical officer, said in a December 30 statement. “We look forward to continuing our collaboration with the FDA throughout the review process to be able to provide this potentially life-changing therapy to as many people living with GSDIa as possible.”
The other gene therapy candidate is UX111 (rebisufligene etisparvovec, formerly ABO-102) for Sanfilippo syndrome Type A (MPS IIIA). Last July, the FDA rejected Ultragenyx’s BLA for UX111 with a complete response letter. Ultragenyx has said it plans to resubmit the BLA early this year with additional clinical data requested by the FDA—data that the company said continues to show durable treatment across multiple biomarkers and further clinical separation from natural history, while maintaining an acceptable safety profile.
Both gene therapies are eligible for Rare Pediatric Disease Priority Review Vouchers (PRVs), which Ultragenyx could sell for cash. The current average price of a PRV has averaged $150 million, skyrocketing from the $100 million cited in a study published in 2024, though individual vouchers have sold for between $67.5 million and $350 million.
“There is still upside.”
“We believe there is still upside that can be garnered in the next 12 months,” Corwin wrote of Ultragenyx. “However, we recognize that the company’s path to GAAP profitability in 2027 is less clear now.”
For investors who are bullish on Ultragenyx, one important reason why is because it already generates revenue from four approved commercial products for five indications:
- Mepsevii® (vestronidase alfa-vjbk), a recombinant human lysosomal beta-glucuronidase for Mucopolysaccharidosis VII, also known as Sly syndrome
- Crysvita® (burosumab-twza), a fibroblast growth factor 23 (FGF23) blocking antibody for X-linked hypophosphatemia and tumor-induced osteomalacia, partnered with Kyowa Kirin (Tokyo: 4151)
- Dojolvi® (triheptanoin), a medium-chain triglyceride for long-chain fatty acid oxidation disorders
- Evkeeza®(evinacumab-dgnb), an angiopoietin-like 3 (ANGPTL3) inhibitor for homozygous familial hypercholesterolemia that is only sold by Ultragenyx outside the United States, with Regeneron Pharmaceuticals (NASDAQ: REGN) marketing the drug Stateside
During the first three quarters of 2025, Ultragenyx generated $465.721 million in product sales from the four marketed drugs, up 17.5% from $396.353 million in Q1-Q3 2024.
Expanded partnership
Corwin said Ultragenyx’s balance sheet can also be expected to benefit near-term from its recently expanded partnership with OMERS Life Sciences, which has a royalty interest in future sales of Crysvita in the United States and Canada. In November, Ultragenyx said it had sold for $400 million an additional 25% of the company’s royalty interest from Kyowa Kirin on future sales of Crysvita in the United States and Canada to OMERS, one of Canada’s largest defined benefit pension plans. OMERS had already been receiving 30% of Crysvita net sales in the United States and Canada under the companies’ original 2022 agreement.
Under the collaboration and license agreement covering setrusumab, announced in December 2020, Ultragenyx agreed to pay Mereo $50 million upfront, and to fund global development of the program until approval. Ultragenyx also agreed to pay Mereo up to $254 million tied to achieving specified clinical, regulatory, and commercial milestones, plus tiered double-digit percentage royalties to Mereo on net sales outside of Europe.
Mereo, in turn, agreed to pay Ultragenyx a fixed double-digit percentage royalty on net sales in Europe, as well as pay Novartis (SIX Swiss: NOVN) a percentage of proceeds, subject to certain deductions—though Mereo said it will receive a substantial majority of payments from Ultragenyx.
Novartis helped form Mereo in 2015 when it swapped setrusumab, originally called BPS-804, and two other drug candidates to Mereo in exchange for an equity share in the startup. The other two candidates were acumapimod (formerly BCT-197), designed to treat acute exacerbations in COPD, and leflutrozole (formerly BGS-649), designed to normalize testosterone levels in obese men with hypogonadotrophic hypogonadism.
Mereo is developing leflutrozole as a once-weekly treatment under an exclusive global license agreement with ReproNovo, inked in 2024. ReproNovo agreed to oversee all future development and commercialization of the non-steroidal aromatase inhibitor, in return for agreeing to pay Mereo an undisclosed upfront payment plus up to $64.25 million in payments tied to achieving clinical, regulatory, and commercial milestones, as well as tiered mid-single digit royalties on global annual net sales of leflutrozole.
IPO, Servier Collaboration Move Insilico Shares
Insilico Medicine (Hong Kong: 3969) fulfilled a dream nearly three years in the making when it traded its first public shares on December 30. The AI-based drug developer raised HKD 2.277 billion (about $292.3 million) through an initial public offering (IPO) on the Hong Kong exchange—the first AI-based biotech to go public on the Main Board of the “HKEX”—by selling 94,690,500 shares at HKD 24.05 ($3.08) each.
And reflecting continuing investor curiosity about AI-based biopharmas, let alone optimism about the company’s potential for future growth, Insilico shares finished their first day of trading with a 25% jump from the IPO price to HKD 29.98 ($3.84). Shares climbed another 25% the rest of last week, finishing Friday at HKD 37.58 ($4.82).
Should those shares finish Monday by rising again, a key reason would be its latest AI drug collaboration announced Sunday evening—an up-to-$888 million, multi-year research and development (R&D) partnership with privately held Servier to discover and develop new oncology therapies, based on targets to be selected by Servier.
Insilico and Servier are not disclosing what types of cancer they plan to focus on.
Soon after the news was announced Sunday evening, Insilico shares fell 4% to HKD 36.00 ($4.62) as of 9:20 p.m. ET.
Oncology enjoys a significant presence in the pipelines of both Insilico and Servier. Insilico’s pipeline of 40-plus programs features 13 programs with a full or partial focus on treating various forms of cancer. Servier’s 22-program pipeline is all but dominated by oncology, with 12 solid tumor programs and seven blood cancer programs.
Servier has agreed to pay Insilico up to $32 million in upfront and near-term R&D payments, and to lead the discovery and development of potential AI drug candidates based on predefined criteria. Servier also agreed to share R&D expenses and lead clinical validation and commercialization processes.
Within Insilico’s IPO, 90% of shares were sold internationally, an offering that was oversubscribed by 26.27 times. That made the offering the most oversubscribed international placement among revenue-generating or “non‑Chapter 18A” healthcare IPOs meeting financial eligibility rules for placement on the Main Board of the Hong Kong exchange.
The Hong Kong public offering, accounting for the other 10% of shares, was oversubscribed by approximately 1427.37 times, generating HKD 328.349 billion ($42.15), and setting a record for Hong Kong public offering subscription amount among HKEX’s non‑18A healthcare IPOs.
Insilico’s IPO has attracted 15 “cornerstone” investors, including Chinese tech conglomerate Tencent and Eli Lilly, with which Insilico expanded a two-year collaboration in November by agreeing to partner in AI drug development. Insilico could potentially generate “over $100 million” from the pharma giant.
“Going forward, we will continue to increase investment in our AI platform and innovative pipeline, accelerate the advancement of differentiated innovative programs into clinic, and bring truly accessible, affordable, and breakthrough treatment solutions to patients worldwide,” Zhavoronkov said in a statement.
Leaders & Laggards
- Corcept Therapeutics (NASDAQ: CORT) shares plummeted 50% from $70.20 to $34.80 on Wednesday after acknowledging that the FDA rejected the company’s New Drug Application (NDA) for relacorilant as a treatment for patients with hypertension secondary to hypercortisolism. The FDA concluded it could not support a favorable benefit-risk assessment for relacorilant, Corcept said, absent additional evidence of effectiveness, even though Corcept’s pivotal Phase III GRACE trial (NCT03697109) met its primary endpoint and data from the company’s Phase III GRADIENT trial (NCT04308590) provided confirmatory evidence. “We are surprised and disappointed by this outcome,” Corcept CEO Joseph K. Belanoff, MD, said. “We will meet with the FDA as soon as possible to discuss the best path forward.”
- Ironwood Pharmaceuticals (NASDAQ: IRWD) shares rang in 2026 with a 27% jump from $3.37 to $4.27 Friday after the company issued a 2026 revenue forecast that projected higher U.S. net sales than analysts expected for Linzess® (linaclotide), the irritable bowel syndrome and constipation drug it co-markets with AbbVie (NYSE: ABBV). Ironwood projected U.S. net sales for Linzess of $1.125 billion to $1.175 billion, up from the $860 million to $890 million the company had forecast for 2025, citing the elimination of statutory required rebates by Medicaid and private payers resulting from a lower list price “in response to evolving health care dynamics and to support ongoing patient access.”
The post StockWatch: Ultragenyx, Mereo Plummet on Brittle Bone Candidate Failures appeared first on GEN – Genetic Engineering and Biotechnology News.
