Keros Therapeutics, Inc. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. Keros is a clinical-stage biopharmaceutical company developing treatments for hematological, pulmonary and cardiovascular disorders. It has no approved products and has not generated product-sales revenue.
Financial performance and liquidity
- Third quarter: Revenue was $0, versus $0 in Q3 2021. Operating expenses were $28.0 million, up from $20.2 million; net loss was $23.5 million, compared with $20.3 million. Basic and diluted loss per share was $0.92, versus $0.87.
- Nine months: Revenue was $0, compared with $0.1 million in 2021. Operating expenses were $82.8 million, up from $51.6 million, and net loss was $75.0 million, compared with $51.8 million. Loss per share was $3.05, versus $2.22.
- Expense drivers: Nine-month R&D expense increased $26.1 million to $62.4 million, primarily reflecting KER-050 development and manufacturing, platform work, and higher personnel costs. G&A increased $5.1 million to $20.4 million, largely due to personnel and organizational growth.
- Other income: Nine-month R&D incentive income was $7.1 million, and other income was $0.8 million; these partially offset operating losses. The incentive income relates to the Australian R&D tax incentive.
- Cash and liquidity: Cash and cash equivalents were $239.4 million at September 30, 2022, versus $230.0 million at December 31, 2021. Including restricted cash, period-end cash was $240.8 million. Current assets were $245.9 million and current liabilities $11.5 million.
- Cash flow: Nine-month operating cash use was $48.6 million, compared with $42.6 million in 2021; capital expenditures were $0.9 million. Financing provided $58.9 million, primarily from $58.2 million net ATM offering proceeds, resulting in a $9.4 million increase in cash, cash equivalents and restricted cash.
- Debt and equity: Keros reported no debt outstanding subject to variable interest rates; its disclosed lease-related obligations were limited. It sold 1.95 million shares through the ATM program during the first nine months, raising $58.2 million net. Shares outstanding rose to 26.08 million from 23.97 million at year-end 2021.
Material changes and outlook
- Operating losses widened as R&D and G&A spending increased. The prior-year nine-month period included $0.1 million of Neurona license revenue; no revenue was recognized in 2022 year to date.
- The $18.0 million net Hansoh upfront payment for KER-050 was received in January 2022, but the company had recognized the gross upfront fee as revenue in Q4 2021. Keros may receive up to $26.5 million in development milestones, $144.0 million in sales milestones, and tiered royalties; no milestones had been received by September 30, 2022.
- Management said September 30 cash was expected to fund operations for at least 12 months. Separately, the risk-factor discussion estimated that cash plus ATM proceeds through October 31, 2022 would fund operations into Q1 2025. Both estimates rely on assumptions and are subject to development costs and other risks.
- As of the filing, Keros expected additional KER-050 MDS and initial myelofibrosis Phase 2 data by year-end 2022; initial KER-047 IRIDA Phase 2 data by year-end 2022; and initial data from a planned KER-047 functional-iron-deficiency trial in the first half of 2023. It expected to announce KER-012 PAH Phase 2 design in early 2023 and begin that trial in the first half of 2023.
- Management expects expenses and operating losses to continue, with R&D costs fluctuating with trial and manufacturing activity. Risks include clinical-trial uncertainty and enrollment delays, reliance on single-source manufacturers and other third parties, COVID-19 disruption, inflation and supply-chain costs, competition, and the need for additional capital. Further equity financing may dilute shareholders.
Important facts for investors to verify
- Whether clinical data and trial-start timelines met the outlook stated in this filing, and whether any preliminary findings changed after further follow-up.
- Current cash, operating cash burn, ATM usage and the assumptions behind the stated Q1 2025 runway estimate.
- Progress and payment conditions for Hansoh development and sales milestones, and the status of KER-050 development in its licensed territory.
- Trial enrollment, drug supply and manufacturing capacity across KER-050, KER-047 and KER-012, including the risks from reliance on single-source manufacturers.
- Whether R&D incentive income and other non-operating items recur, and how increased spending and share-based compensation affect the loss trajectory and dilution.