Keros Therapeutics, Inc. — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. Keros is a clinical-stage biopharmaceutical company developing treatments for hematological and musculoskeletal disorders. It had no approved products and no product-sales revenue.
Financial performance and position
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $0.1 million | $0 | $0.1 million | $0 |
| Research and development expense | $10.0 million | $7.3 million | $21.5 million | $15.8 million |
| General and administrative expense | $5.7 million | $3.7 million | $9.9 million | $5.6 million |
| Net loss | $15.6 million | $10.8 million | $31.5 million | $22.6 million |
| Net loss per share | $0.67 | $0.62 | $1.35 | $2.35 |
| Operating cash flow | Not separately stated for quarter | Not separately stated for quarter | $(28.1) million | $(18.0) million |
The $0.1 million revenue was a one-time license fee from Neurona Therapeutics, recognized when the license was granted; cash was received in July 2021. Product-sales margins are not meaningful because there were no product sales. R&D spending increased year over year, notably for KER-012, personnel and platform development; lower KER-050 and KER-047 spending partly offset those increases. Higher personnel, professional and other public-company costs contributed to increased G&A.
At June 30, cash and cash equivalents were $237.1 million, down from $265.9 million at December 31, 2020. Total assets were $243.5 million, total liabilities $7.8 million, and stockholders’ equity $235.7 million. The company reported no variable-rate debt outstanding; its debt exposure was limited to lease-related obligations. Cash, cash equivalents and restricted cash decreased $28.8 million in the first half. Investing cash outflow was $0.7 million, and financing cash inflow was $0.1 million.
Material changes and business developments
- Net loss increased to $15.6 million in Q2 from $10.8 million a year earlier; first-half net loss rose to $31.5 million from $22.6 million. First-half operating cash use also increased, from $18.0 million to $28.1 million.
- In June, Keros reported preliminary Phase 2 KER-050 results from 12 patients dosed in Cohorts 1 and 2. Five of the patients who completed eight weeks met at least one stated response measure; three achieved transfusion independence for at least eight weeks. The small, open-label dataset is preliminary and subject to change.
- Keros entered a $150 million at-the-market equity sales agreement in May, but had sold no shares under it by June 30.
- After quarter-end, Keros amended its headquarters lease to add approximately 5,205 square feet, with monthly base rent of $34,700 for the expansion premises beginning on the later of October 1, 2021 or the tenant’s departure. The amendment also extends the existing lease through March 31, 2023.
Outlook, commentary and key risks
- Management expects continuing operating losses and negative operating cash flows as it advances its pipeline. It stated that June 30 cash should fund projected needs for at least 12 months. Elsewhere, the risk-factor discussion estimates cash runway into the fourth quarter of 2023; the filing does not reconcile these different runway statements.
- KER-050: additional MDS Part 1 data and initiation of Part 2 were expected by year-end 2021; a Phase 2 trial in myelofibrosis-associated cytopenias was planned for Q3 2021, with initial data expected in 2022. Keros also planned to extend MDS treatment duration and enlarge Part 2.
- KER-047: two Phase 2 trials, in IDA and IRIDA, were planned for the second half of 2021, with initial data expected in 2022. A Phase 2 FOP trial was planned after those trials.
- KER-012: a Phase 1 trial was planned for Q3 2021, with initial Part 1 data expected in the first half of 2022.
- COVID-19 could disrupt enrollment, trial sites, supply chains, vendors and development timelines. Keros relies on third parties and single-source manufacturers for its candidates. Other material risks include early-stage clinical uncertainty, regulatory approval, competition, intellectual-property protection and the need for additional capital; future financing could dilute shareholders.
- The Neurona license generated a single upfront fee. Separately, the MGH license carries potential clinical/regulatory milestones of $8.6 million in aggregate, commercial milestones of $18.0 million in aggregate, and royalties and other obligations if applicable.
Important facts for investors to verify
- Reconcile the stated cash runway estimates: at least 12 months versus into Q4 2023; assess burn rate against planned trial expansion and costs.
- Track final and expanded KER-050 data, including response durability, safety, patient numbers and the effects of the planned protocol changes.
- Confirm whether planned KER-050, KER-047 and KER-012 trial starts and data-readout timelines were achieved, and monitor enrollment and COVID-related delays.
- Monitor cash use, stock-based compensation, share dilution and any future sales under the $150 million ATM program.
- Assess manufacturing capacity and continuity given reliance on third-party, single-source suppliers, and review the cost impact of the lease expansion.