Keros stock price target cut on study termination

On Thursday, Oppenheimer adjusted its price target on Keros Therapeutics (NASDAQ:KROS) shares, reducing it significantly to $23.00 from the previous target of $63.00. The stock, currently trading at $10.42, has experienced a dramatic 80% decline over the past year, with a particularly sharp 30% drop in the past week.

Despite this change, the firm maintained its Outperform rating on the biotechnology company's stock. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value calculations.

The revision follows Keros Therapeutics' announcement on Wednesday that it had voluntarily terminated the Phase 2 TROPOS study for the treatment of pulmonary arterial hypertension (PAH) with its drug cibotercept. This decision was made after new observations of pericardial effusions (PE) were noted in the study, including in the 1.5mg/kg arm of the trial.

Oppenheimer's analyst connected with Keros management to discuss the recent developments and shared their updated perspective. The reevaluation of cibotercept's benefit/risk profile, which was prompted by news from December 2024, led to the early termination of the TROPOS study.

Keros plans to release comprehensive results from the TROPOS trial in the second quarter of 2025, which will provide details on the nature of the PEs, the duration of treatment, exposure levels, and any potential benefits of cibotercept.

The analyst highlighted Keros' strong financial position, noting that the company had a healthy balance sheet with $531.7 million as of the third quarter of 2024, bolstered by an upfront payment from Takeda. InvestingPro data confirms the company's solid liquidity position, with a current ratio of 19.03 and more cash than debt on its balance sheet.

However, InvestingPro Tips indicate the company is quickly burning through cash. This financial stability is expected to support continued investment in the company's pipeline. Unlock 14 additional InvestingPro Tips and comprehensive financial metrics to make more informed investment decisions.

The focus will be on advancing KER-065 for Duchenne muscular dystrophy (DMD), while deprioritizing efforts related to obesity. An update on the high-value (HV) activities for KER-065 is anticipated in the first quarter of 2025.

Despite the setback with the TROPOS study, Oppenheimer's reiteration of the Outperform rating suggests confidence in Keros Therapeutics' potential for future developments and its ability to navigate through the current challenges. The broader analyst consensus remains positive, with an average price target suggesting significant upside potential, though investors should note the stock's high price volatility as indicated by its beta of 1.43.

In other recent news, Keros Therapeutics has experienced significant changes due to developments in its clinical trials. The company announced the early termination of the TROPOS trial of cibotercept (KER-012) for the treatment of pulmonary arterial hypertension (PAH) due to additional instances of pericardial effusion adverse events. Despite this, Keros Therapeutics anticipates presenting topline data from all dose cohorts in the TROPOS trial in the second quarter of 2025.

Analyst firms have adjusted their outlook on Keros Therapeutics in response to these developments. Scotiabank (TSX:BNS) maintained a Sector Outperform rating for the company but reduced its price target to $41 from the previous $44. Similarly, Truist Securities has reduced its price target to $43, while maintaining a Buy rating. H.C. Wainwright also maintained a Buy rating but reduced the price target from $100 to $47.

Despite the setback with the TROPOS trial, analysts remain optimistic about the company's prospects. Scotiabank cited potential for upside with Keros's Takeda-partnered lead asset, elritercept (KER-050), which is expected to begin enrollment in the phase 3 RENEW trial soon.

Truist Securities also highlighted the potential value in KER-065, a product candidate in Keros's pipeline with possible applications in rare diseases and obesity. These are the recent developments in Keros Therapeutics.

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