ADAR1 urges Keros board to engage on strategy after meeting refusal

AUSTIN - ADAR1 Capital Management, the largest shareholder of Keros Therapeutics (NASDAQ:KROS) with approximately 13.3% ownership, released an open letter Thursday expressing disappointment with the company’s board for refusing to engage on strategy discussions. The biotech company, currently valued at $578 million, has maintained a strong financial health score of "GREAT" according to InvestingPro data.

In the letter, ADAR1 stated that despite reaching out in July to propose an in-person meeting, Keros management and board members declined direct interaction, instead referring them to the company’s financial advisor.

The investment firm believes Keros is significantly undervalued, citing the company’s large cash balance and the net present value of its Takeda partnership for elritercept. ADAR1 suggested distributing value to stockholders via a contingent value right (CVR).

ADAR1 also expressed concern about the lack of progress on Keros’ June 9 announcement regarding plans to return $375 million in excess capital to shareholders. The firm urged the company to promptly communicate a detailed plan for a special dividend.

"Should the Board continue to refuse our invitations to engage, we will seek to elect new directors at the next Annual Meeting," ADAR1 warned in the letter, while cautioning against making changes to board composition or company strategy without seeking input from major stockholders.

The investment management firm, founded in 2018 by Dr. Daniel Schneeberger, specializes in life sciences and biotechnology investments. The information in this article is based on a press release statement from ADAR1 Capital Management.

In other recent news, Keros Therapeutics has received Orphan Drug designation from the U.S. Food and Drug Administration for its investigational therapy KER-065, intended for treating Duchenne muscular dystrophy (DMD). This development is part of Keros’ strategic focus on advancing KER-065, which is now progressing into Phase 2 clinical trials. As part of this strategic shift, Keros has discontinued the development of cibotercept due to safety concerns and has outlicensed elritercept to Takeda, which has initiated a Phase 3 trial in myelodysplastic syndromes (MDS). The latter development triggered a $10 million payment to Keros under their agreement with Takeda.

In the realm of analyst evaluations, H.C. Wainwright has lowered its price target for Keros Therapeutics from $25 to $20, while maintaining a Buy rating, reflecting the company’s narrowed focus on KER-065. Meanwhile, BofA Securities downgraded Keros from Buy to Neutral, reducing the price target from $32 to $18. This decision was influenced by Keros’ recent strategic review and the return of $375 million in excess capital to shareholders. Despite the downgrade, BofA emphasized that Keros’ platform and pipeline remain compelling, although immediate stock price growth may face challenges due to anticipated delays and ongoing safety concerns.

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