KROS

Business Context and Reporting Period

Keros Therapeutics, Inc. is a clinical-stage biopharmaceutical company focused on developing therapeutics targeting the transforming growth factor-beta (TGF-β) family of proteins. The reporting period covers the quarter and six months ended June 30, 2025. The Company's lead product candidate, KER-065, is in development for neuromuscular diseases, while its most advanced candidate, elritercept (KER-050), is being developed for cytopenias in myelodysplastic syndromes (MDS) and myelofibrosis.

Key Financial Metrics

Revenue Composition: Revenue for the six months ended June 30, 2025, consisted of $195.4 million in license revenue and $34.1 million in service revenue, primarily driven by the Takeda Pharmaceuticals license agreement effective January 2025.

Material Changes vs. Prior Period

• Revenue Surge: Total revenue increased by approximately $229.3 million compared to the prior year period, driven almost entirely by the recognition of the $200 million upfront payment and transition services revenue from the Takeda license agreement.
• Profitability Shift: The Company reported a net income of $117.8 million for the six months ended June 30, 2025, compared to a net loss of $88.4 million in the same period in 2024. This reversal was primarily due to the Takeda revenue offsetting operating expenses.
• Operating Expenses: Total operating expenses increased by $18.2 million year-over-year. Research and development (R&D) expenses rose by $13.4 million, largely due to increased clinical spend for elritercept Phase 2 and Phase 3 trials and higher personnel costs including severance. General and administrative expenses increased by $4.7 million.
• Cash Position: Cash and cash equivalents increased by $130.3 million during the period, resulting in a total cash balance of $690.2 million as of June 30, 2025.

Guidance, Outlook, and Risks

• Capital Return Plan: In June 2025, the Board announced a plan to return $375.0 million in excess capital to stockholders. The specific terms and structure remain under consideration.
• Restructuring: In May 2025, the Company approved a workforce reduction of approximately 45% (the "2025 Restructuring"), with estimated one-time costs of $3.6 million. The Company expects to realize average annualized cost savings of approximately $17 million.
• Clinical Milestones: In July 2025, the Company achieved a $10.0 million development milestone upon dosing the first patient in the Phase 3 RENEW clinical trial of elritercept. The Company plans to initiate a Phase 2 clinical trial of KER-065 in Duchenne muscular dystrophy (DMD) in the first quarter of 2026.
• Liquidity Outlook: Management believes existing cash resources, less the $375.0 million capital return, will fund operations into the first half of 2028.
• Risks: Key risks include the uncertainty of clinical trial outcomes, the potential for the Takeda agreement to be terminated, the inability to raise additional capital if needed, and the impact of the capital return plan on liquidity. The Company also faces risks related to the 2025 Restructuring not yielding anticipated savings.

Investor Verification Checklist

• Verify the specific terms and timing of the announced $375.0 million capital return to stockholders.
• Monitor the progress and safety data of the Phase 3 RENEW trial for elritercept and the upcoming Phase 2 trial for KER-065.
• Assess the impact of the 45% workforce reduction on the Company's ability to execute its clinical development plans.
• Review the status of the Takeda license agreement and the recognition of future milestone payments.
• Confirm the Company's cash runway post-capital return and its ability to fund operations without further dilution.