Keros Therapeutics, Inc. — Q3 2020 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2020. Keros is a clinical-stage biopharmaceutical company developing treatments for hematological and musculoskeletal disorders. It has no approved products and has generated no product-sales revenue.
Financial performance and position
| Metric | Three months ended Sept. 30, 2020 | Three months ended Sept. 30, 2019 | Nine months ended Sept. 30, 2020 | Nine months ended Sept. 30, 2019 |
|---|---|---|---|---|
| Revenue | $0 | $2.5 million | $0 | $7.5 million |
| Research and development expense | $8.4 million | $3.9 million | $24.2 million | $13.2 million |
| General and administrative expense | $3.6 million | $1.0 million | $9.2 million | $2.1 million |
| Net loss | $12.0 million | $3.5 million | $34.7 million | $9.6 million |
| Net loss per share | $0.60 | $1.71 | $2.65 | $4.76 |
| Cash used in operating activities | Not presented by quarter | $28.9 million | $10.5 million |
At September 30, 2020, cash and cash equivalents were $133.8 million, compared with $7.0 million at year-end 2019. Total assets were $138.2 million and total liabilities were $7.5 million; current assets of $136.4 million exceeded current liabilities of $6.8 million. The company reported no variable-rate debt; its debt-related obligations were limited to lease-related amounts. No operating margin is meaningful given zero quarterly revenue and the company’s development-stage operations.
Cash, cash equivalents and restricted cash increased by $126.8 million in the first nine months. Financing provided $155.9 million, including approximately $100.1 million of net IPO proceeds and $55.8 million of net Series C proceeds. The IPO also converted all outstanding preferred stock into common stock. Accumulated deficit was $54.3 million at September 30.
Material changes versus the prior comparable periods
- Revenue fell to zero because all revenue under the Novo Nordisk collaboration had been recognized by December 31, 2019.
- Operating expenses rose as Keros advanced its pipeline and expanded its organization. Nine-month R&D expense increased $11.0 million, led by KER-050 manufacturing and clinical advancement, KER-047 clinical work, KER-012 preclinical manufacturing, and personnel costs. Nine-month G&A expense increased $7.1 million, including public-company costs, personnel, professional fees and directors’ and officers’ insurance.
- Operating cash use increased by $18.4 million year over year, reflecting higher expenses and the absence of collaboration revenue recognized in 2019.
- Preferred-stock tranche liability was settled in March 2020; its remeasurement generated $1.5 million of expense in the nine-month period.
Outlook, management commentary and risks
- Liquidity: Management stated that September 30 cash should fund operations for at least 12 months; elsewhere, the filing estimates funding into the second half of 2022. Both estimates depend on assumptions, and expenses are expected to increase. Keros expects continuing operating losses and negative operating cash flows and may need additional capital.
- KER-050: The Phase 2 MDS trial began dosing its first two participants in October 2020. Initial Part 1 data were expected in mid-2021; a Phase 2 trial for myelofibrosis-associated cytopenias was planned for 2021.
- KER-047: The expanded Phase 1 healthy-volunteer trial was completed. The company reported dose-related increases in serum iron and reticulocyte hemoglobin, and no serious adverse events in the trial. Topline data were expected by year-end 2020; Phase 2 trials in iron deficiency anemia and IRIDA were planned for 2021. A FOP Phase 2 trial was planned after the IDA trial.
- KER-012: The company planned to begin a Phase 1 trial in the second half of 2021.
- Novo Nordisk: Novo gave notice on October 26, 2020, terminating the collaboration effective April 26, 2021. Cost reimbursements were to continue through termination and then cease; licensed rights were to revert to Keros when the agreement ended.
- COVID-19 and other risks: Keros reported potential or ongoing effects on trial initiation, enrollment, monitoring, timelines, supply chains and regulatory interactions. Other central risks include early-stage clinical uncertainty, dependence on third-party manufacturers and CROs, single-source supply for KER-050 and KER-047, intellectual-property risks, and the need for future financing.
Important facts for investors to verify
- Whether cash runway assumptions remain consistent with the stated funding horizon into the second half of 2022, particularly after collaboration reimbursements end and planned trials advance.
- Actual KER-050 and KER-047 trial timelines, enrollment, safety findings and reported data versus the expectations stated in the filing.
- The operational and financial impact of Novo Nordisk’s termination, including the return of licensed rights and cessation of reimbursements after April 26, 2021.
- Whether COVID-19 or manufacturing and CRO constraints cause material delays or additional costs.
- Potential dilution from outstanding options and equity-plan share reserves; the filing reported 2.48 million options outstanding at September 30, 2020.