Keros Therapeutics, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Keros is a clinical-stage biopharmaceutical company developing treatments for disorders associated with TGF-β signaling. It has no approved products and reported no revenue in either comparable period.
Financial results and position
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $32.5M | $23.3M | $63.6M | $41.4M |
| General and administrative expense | $8.8M | $7.4M | $16.6M | $13.5M |
| Net loss | $37.5M | $27.3M | $73.3M | $51.5M |
| Net loss per share, basic and diluted | $1.27 | $1.13 | $2.53 | $2.14 |
| Operating cash used | Not separately reported | Not separately reported | $65.1M | $24.0M |
At June 30, 2023, cash and cash equivalents were $322.0M (plus $1.3M restricted cash), versus $279.0M and $1.3M, respectively, at December 31, 2022. Total assets were $356.3M; total liabilities were $30.0M, primarily lease liabilities. Keros reported no debt outstanding. Margins are not meaningful because the company had no period revenue.
Six-month investing cash use was $1.4M, mainly for property and equipment. Financing provided $109.4M, including $107.3M net proceeds from an at-the-market (ATM) stock offering and $2.1M from option exercises. Operating cash use increased year over year, partly because the 2022 period included an $18.0M collection of accounts receivable.
Material changes versus prior periods
- Q2 operating expenses rose $10.6M year over year; six-month expenses rose $25.4M. Higher R&D spending reflected progress in KER-050 and KER-012 programs, increased personnel and organizational costs, and general platform development.
- Six-month net loss widened by $21.9M year over year. Other income was higher, mainly from dividend income, but this was partly offset by the absence of $3.4M Australian R&D incentive income recorded in 2022.
- The company issued 1.99M shares through the ATM in the first half, raising $109.0M gross and approximately $107.3M net. About $141.0M remained available under the ATM at June 30, 2023; further issuance could dilute shareholders.
Outlook, commentary and risks
- Management stated that cash and cash equivalents should fund projected liquidity requirements into Q4 2025, based on assumptions that may prove incorrect. The financial-statement discussion also concludes that existing cash supports operations for at least the next 12 months. Keros expects continued losses and negative operating cash flows and will need additional capital beyond its available resources.
- KER-050: Additional MDS trial data were announced in June. The company expected to complete enrollment in transfusion-dependent cohorts and report additional Part 2 data in the second half of 2023. It also expected myelofibrosis dose-escalation data and initiation of Part 2 in that half.
- KER-047: An open-label Phase 2 trial is underway in MDS and myelofibrosis patients with functional iron deficiency; initial data were expected in the first half of 2024.
- KER-012: The company expected to dose the first PAH Phase 2 patient in Q3 2023 and begin a Phase 2 biomarker trial in heart failure patients in the second half of 2023. The filing notes the FDA-cleared IND for the PAH trial in July 2023.
- KER-065: A Phase 1 trial in healthy volunteers was planned for Q1 2024. Supporting evidence described in the filing is preclinical, including mouse studies, not clinical proof of benefit.
- Key risks include uncertain clinical outcomes and enrollment timing, reliance on third-party CROs and single-source manufacturers, competition, intellectual-property challenges, and dependence on future financing. Inflation, supply-chain pressures, economic volatility and possible public-health disruptions could increase costs or delay development. The company reported no material legal proceedings.
Important facts for investors to verify
- Whether the reported clinical milestones and trial timelines were subsequently met, and how complete or preliminary the announced data are.
- Whether the stated cash runway through Q4 2025 remains supportable given trial costs, operating burn and future financing needs.
- Further ATM share sales, remaining capacity, and resulting dilution; the filing reported 29.66M shares outstanding at June 30, 2023.
- Whether higher R&D spending translates into clinical progress, particularly for KER-050 and KER-012, and whether safety or enrollment issues emerge.
- Manufacturing continuity and reliance on single-source contract manufacturers, as well as the terms and progress of the Hansoh KER-050 technology-transfer arrangement.