Convertible loan notes and equity classified warrants	3 Months Ended
Mar. 31, 2025
Debt Disclosure [Abstract]
Convertible Loan Notes	10. Convertible loan notes and equity classified warrants Novartis Loan Note On February 10, 2020, the Company entered into a convertible equity financing with Novartis Pharma (AG) (“Novartis”), which it amended in February 2023 to extend the maturity date and increase the interest rate, under which Novartis purchased a £3.8 million ($5.0 million) convertible loan note (the “Novartis Loan Note”). Following the 2023 amendment, the Novartis Loan Note was convertible at the discretion of the holder, at a fixed price of £0.265 per ordinary share and bore interest at 9% per annum with a maturity date of February 10, 2025. In addition, the Company also issued warrants over 1,449,610 ordinary shares to Novartis which were exercisable until February 2025 at an exercise price of £0.265 per ordinary share (the "2020 Novartis Warrants"). In connection with the amendments to the Novartis Loan Note, in February 2023 the Company issued warrants over a further 2,000,000 ordinary shares (the "2023 Novartis Warrants"). The 2023 Novartis Warrants are exercisable until February 2028 at an exercise price of £0.265 per ordinary share. Both tranches of warrants were recognized separately as equity instruments. On February 7, 2025, the Company received a conversion notice and subsequently issued and allotted 17,105,450 ordinary shares (equivalent to 3,421,090 ADSs) on the non-cash conversion of the outstanding principal and accrued interest of the Novartis Loan Note. As of December 31, 2024, the net carrying amount of the liability component of the convertible debt instrument was $5.5 million. On conversion, the Company derecognized the carrying value of the Novartis Loan Note of $5.7 million and recognized the issuance of the shares at their par value within ordinary share capital and the excess amount of the conversion price over the par value within additional paid-in capital. In addition, the amount that represented the value of the conversion features of the Novartis Loan Note presented in additional paid-in capital at inception of $3.4 million was transferred to accumulated deficit upon conversion. The Company recognized interest expense of $0.2 million and $0.3 million in relation to the Novartis Loan Note for the three months ended March 31, 2025, and 2024, respectively. The effective interest rate applied to the liability portion of the Novartis Loan Note in both the three months ended March 31, 2025 and 2024 was 27.8%. In addition, on February 7, 2025, Novartis exercised the 2020 Novartis Warrants and the Company subsequently issued and allotted 1,449,610 ordinary shares (equivalent to 289,922 ADSs) upon receipt of $0.5 million in satisfaction of the subscription price of £0.265 per ordinary share. Additional paid-in capital of $0.3 million, representing the surplus of previously recognized amounts exceeding the par value of ordinary shares, was transferred to accumulated deficit.

Convertible loan notes and equity classified warrants

3 Months Ended

Mar. 31, 2025

10. Convertible loan notes and equity classified warrants

Novartis Loan Note

On February 10, 2020, the Company entered into a convertible equity financing with Novartis Pharma (AG) (“Novartis”), which it amended in February 2023 to extend the maturity date and increase the interest rate, under which Novartis purchased a £3.8 million ($5.0 million) convertible loan note (the “Novartis Loan Note”). Following the 2023 amendment, the Novartis Loan Note was convertible at the discretion of the holder, at a fixed price of £0.265 per ordinary share and bore interest at 9% per annum with a maturity date of February 10, 2025.

In addition, the Company also issued warrants over 1,449,610 ordinary shares to Novartis which were exercisable until February 2025 at an exercise price of £0.265 per ordinary share (the "2020 Novartis Warrants"). In connection with the amendments

to the Novartis Loan Note, in February 2023 the Company issued warrants over a further 2,000,000 ordinary shares (the "2023 Novartis Warrants"). The 2023 Novartis Warrants are exercisable until February 2028 at an exercise price of £0.265 per ordinary share. Both tranches of warrants were recognized separately as equity instruments.

On February 7, 2025, the Company received a conversion notice and subsequently issued and allotted 17,105,450 ordinary shares (equivalent to 3,421,090 ADSs) on the non-cash conversion of the outstanding principal and accrued interest of the Novartis Loan Note.

As of December 31, 2024, the net carrying amount of the liability component of the convertible debt instrument was $5.5 million. On conversion, the Company derecognized the carrying value of the Novartis Loan Note of $5.7 million and recognized the issuance of the shares at their par value within ordinary share capital and the excess amount of the conversion price over the par value within additional paid-in capital. In addition, the amount that represented the value of the conversion features of the Novartis Loan Note presented in additional paid-in capital at inception of $3.4 million was transferred to accumulated deficit upon conversion.

The Company recognized interest expense of $0.2 million and $0.3 million in relation to the Novartis Loan Note for the three months ended March 31, 2025, and 2024, respectively. The effective interest rate applied to the liability portion of the Novartis Loan Note in both the three months ended March 31, 2025 and 2024 was 27.8%.

In addition, on February 7, 2025, Novartis exercised the 2020 Novartis Warrants and the Company subsequently issued and allotted 1,449,610 ordinary shares (equivalent to 289,922 ADSs) upon receipt of $0.5 million in satisfaction of the subscription price of £0.265 per ordinary share. Additional paid-in capital of $0.3 million, representing the surplus of previously recognized amounts exceeding the par value of ordinary shares, was transferred to accumulated deficit.

Mereo BioPharma Group plc 10-Q