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AUSTIN, Texas - ADAR1 Capital Management, LLC, the largest stockholder of Keros Therapeutics with a 13.3% stake, has publicly expressed its discontent with the biotech company’s strategic direction and capital allocation. The criticism comes as Keros’ stock has declined over 76% in the past year, though InvestingPro analysis suggests the company is currently undervalued. ADAR1’s concerns were detailed in a letter to fellow stockholders, which included a critique of Keros’ clinical results for two drug candidates, KER-012 and KER-065, and a call for a significant restructuring of the business.
The investment firm, which has held its position in Keros for nearly two years, is advocating for the discontinuation of the two drug candidates in question, citing their alarming side effects and potential to further deplete shareholder value. Instead, ADAR1 advises Keros to focus on its third drug candidate, KER-050, developed in partnership with Takeda Pharmaceuticals, which it believes has a more promising commercial future. According to InvestingPro data, the company maintains a strong liquidity position with a current ratio of 21.45, though it’s quickly burning through cash.
ADAR1 has also proposed that Keros reduce its headcount by 70%, return excess capital to stockholders, and ensure that the Takeda partnership is managed effectively to maximize shareholder value. The firm estimates that these measures could deliver between $24 and $35 per share in value for stockholders. With analysts setting price targets ranging from $15 to $76 per share, InvestingPro subscribers can access detailed financial health metrics and 8 additional ProTips to better evaluate this potential upside.
Highlighting the company’s negative stockholder returns since its IPO and comparing it unfavorably to its peers and relevant market benchmarks, ADAR1 has announced its intention to withhold votes for the re-election of directors Dr. Mary Ann Gray and Dr. Alpna Seth at the upcoming Annual Meeting on June 4, 2025. The investment manager argues that new board representation is needed to realign shareholder interests with the company’s strategic decision-making. Financial metrics support these concerns, with the company reporting a negative EBITDA of $209.6 million in the last twelve months and a weak overall financial health score.
ADAR1 Capital Management is an Austin-based investment manager founded in October 2018, specializing in life sciences and biotechnology sector investments. The firm’s recommendations and the letter to Keros’ stockholders are based on a press release statement and reflect ADAR1’s position as of the date of the release.
In other recent news, Keros Therapeutics has made several noteworthy announcements that could impact investor decisions. The company is exploring strategic alternatives to enhance stockholder value, including a potential sale or other business combinations. This strategic review is supported by the formation of an independent Strategic Committee, with Goldman Sachs & Co. LLC serving as the financial advisor. Additionally, Keros has entered into a definitive agreement with Pontifax, which includes re-nominating three board members and implementing standstill restrictions until 2025.
In terms of analyst activity, both H.C. Wainwright and Truist Securities have revised their price targets for Keros Therapeutics to $25, maintaining their Buy ratings. These adjustments reflect recent challenges, such as the termination of the TROPOS trial due to safety concerns and the evolving market sentiment towards small to mid-cap biotech stocks. Despite these hurdles, analysts remain optimistic about Keros’s long-term potential, citing the company’s cash reserves and ongoing partnerships as positive factors. Meanwhile, Keros’s governance and strategic direction may be influenced by its new agreement with Pontifax, as the company navigates the competitive biopharmaceutical landscape.
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