Keros Therapeutics, Inc. — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020; comparisons are principally with fiscal 2019. This is an annual report, not a standalone fourth-quarter report. Keros is a clinical-stage biopharmaceutical company developing treatments for hematological and musculoskeletal disorders. No product is approved, and the company has not generated product-sales revenue.
Key financial metrics
| Metric | FY2020 | FY2019 |
|---|---|---|
| Revenue | $0 | $10.0 million |
| Research and development expense | $33.9 million | $17.4 million |
| General and administrative expense | $12.8 million | $3.2 million |
| Operating loss | $46.7 million | $10.6 million |
| Net loss | $45.4 million | $12.3 million |
| Net loss per share, basic and diluted | $2.93 | $6.08 |
| Net cash used in operating activities | $36.9 million | $16.0 million |
| Cash and cash equivalents at year-end | $265.9 million | $7.0 million |
| Working capital at year-end | $260.5 million | $4.4 million |
| Total liabilities at year-end | $7.7 million | $10.5 million |
Operating and net margins are not meaningful indicators because Keros had no 2020 revenue and remains in development. The 2019 revenue came from the Novo Nordisk collaboration, not product sales. The company reported $2.5 million of Australian R&D incentive income in 2020, versus $0.6 million in 2019.
Financing activities provided $296.0 million in cash in 2020, primarily from a $55.8 million net Series C financing, the April IPO ($100.1 million net proceeds) and the November offering ($140.1 million net proceeds). Investing activities used $0.3 million. The company had no material variable-rate debt; disclosed leasehold-improvement loan payments total $0.13 million, due through 2022. Operating lease commitments were $0.98 million at year-end.
Material changes versus FY2019
- Revenue fell from $10.0 million to zero after the Novo Nordisk collaboration revenue was fully recognized in 2019.
- Net loss increased to $45.4 million from $12.3 million, as research and development spending rose by $16.5 million and general and administrative spending rose by $9.6 million. Higher program costs reflected KER-050, KER-047 and KER-012 development, manufacturing, personnel and public-company costs.
- Operating cash use increased to $36.9 million from $16.0 million, while year-end cash and working capital rose substantially following equity financings.
- All preferred stock converted into common stock upon the April 2020 IPO. Common shares outstanding were 23.2 million at December 31, 2020, compared with 2.4 million a year earlier; the share-count comparison reflects the IPO conversion and equity offerings.
Pipeline, outlook and significant items
- KER-050: In Phase 2 for MDS-associated cytopenias; initial Part 1 data were expected in mid-2021. A Phase 2 myelofibrosis study was planned for mid-2021, with initial data expected in 2022. Its Phase 1 study in healthy post-menopausal women reported increases in red blood cell measures and platelets; these early findings do not establish efficacy in patients.
- KER-047: Expanded Phase 1 study in healthy volunteers completed, with topline data reported in December 2020. Two Phase 2 studies, in iron-deficiency anemia and IRIDA, were planned for the second half of 2021, with initial data expected in 2022. A later Phase 2 FOP study was also planned.
- KER-012: Preclinical candidate for bone-loss disorders and pulmonary arterial hypertension. A Phase 1 study was planned for the second half of 2021, with initial data expected in the first half of 2022. Supporting evidence described in the filing is preclinical.
- Management estimated existing year-end cash would fund operating expenses and capital requirements into the fourth quarter of 2023. This is an estimate based on assumptions; the company expects continued losses and may need additional financing.
- Novo Nordisk gave notice in October 2020 to terminate its collaboration effective April 26, 2021. Certain cost reimbursements were to continue until termination; selected ligand-trap rights and related field rights were expected to revert to Keros at termination. Future collaboration reimbursements would then cease.
- COVID-19 was identified as a potential source of trial enrollment, site, supply-chain and operational delays. Keros relies on third-party manufacturers, uses single-source suppliers for each of its lead candidates, and had no redundant supply arrangements in place.
- Other key risks include clinical and regulatory failure, uncertain patient enrollment, competition, reimbursement and commercialization challenges, intellectual-property disputes, and the need for substantial future funding. The company reported no material legal proceedings. The independent auditor issued an unqualified opinion on the financial statements; it did not audit internal-control effectiveness, and management reported disclosure controls were effective at the reasonable-assurance level.
Important facts for investors to verify
- Whether the planned clinical milestones occurred on schedule, and review the final, complete trial data and safety results rather than relying on early or topline disclosures.
- Actual cash use and updated runway assumptions against the stated fourth-quarter 2023 estimate, including the impact of expanded clinical and manufacturing costs.
- The effective date and financial consequences of Novo Nordisk’s termination, including the end of reimbursements and reversion of rights.
- Manufacturing capacity, supply continuity and any progress toward backup suppliers, given the disclosed single-source reliance and lack of redundant supply.
- Share dilution from equity compensation and future financing; the 2020 Plan provides for an annual share-reserve increase of up to 4% of prior year-end shares outstanding.