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Thursday, H.C. Wainwright analyst Andrew Fein adjusted the price target on Keros Therapeutics (NASDAQ: KROS) stock, reducing it to $25 from the previous $40. With the stock currently trading at $13.71, analyst targets range from $15 to $76, according to InvestingPro data. Despite the reduction, the firm maintained its Buy rating on the shares. The reevaluation follows the early termination of the TROPOS trial in Pulmonary Arterial Hypertension (PAH) due to the occurrence of pericardial effusions across all dose cohorts, which has been a significant hurdle for the company’s cibotercept treatment.
Fein remarked that the forthcoming dataset from the trial remains crucial, as cibotercept, an ActRIIB-Fc ligand trap, targets molecules involved in pulmonary vascular remodeling and right heart strain. The safety concerns observed in the trial are believed to be related to the drug’s intended vascular effects, which has raised issues regarding fluid dynamics and endothelial integrity.
Although the analyst expressed reservations about the potential for cibotercept to follow a clear regulatory path without considerable changes or a partnership, the data could still influence future clinical strategies. This might involve narrowing the patient selection or preparing the drug for transfer to another entity.
The decision to lower the price target is also influenced by a broader shift in market sentiment. Fein noted a sustained compression of multiples in small to mid-cap biotech stocks. This market pressure is evident in KROS’s performance, with InvestingPro data showing the stock has declined by 76% over the past year. Despite these challenges, the company maintains strong liquidity with a current ratio of 21.45 and holds more cash than debt on its balance sheet. The updated valuation reflects a market that has grown more risk-averse, with higher discount rates and a lower willingness to invest in early-stage clinical ventures.
In conclusion, while the TROPOS trial’s discontinuation is a disappointment for Keros Therapeutics, H.C. Wainwright believes the stock has potential value. The firm’s reiteration of a Buy rating, alongside a lowered price target, takes into account both the specific challenges faced by cibotercept and the current cautious investment climate in the biotech sector. According to InvestingPro analysis, KROS appears undervalued at its current market capitalization of $557 million, though investors should note that the company is currently unprofitable and burning through cash rapidly.
In other recent news, Keros Therapeutics has announced a strategic review, exploring alternatives to maximize stockholder value, including potential sale options. This review is accompanied by the adoption of a limited-duration stockholder rights plan to prevent any group from gaining control without offering a premium to all stockholders. Truist Securities has lowered its price target for Keros Therapeutics to $25 from $43 but maintained a Buy rating, citing the company’s undervaluation and confidence in its management and pipeline. Similarly, H.C. Wainwright adjusted its price target to $40 from $47, maintaining a Buy rating despite challenges in the TROPOS study and optimism about upcoming Phase 1 data for KER-065. Meanwhile, Keros has entered into a definitive agreement with Pontifax, nominating current board members for re-election and agreeing to mutual non-disparagement obligations. The agreement includes customary standstill restrictions effective until December 2025. These developments indicate significant strategic and governance activities at Keros Therapeutics as it navigates its future direction.
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