Keros Therapeutics (KROS) (~$420MM market cap) is a what I am labeling a pre-strategic options damaged biotech, the corporate in two separate press releases (right here and right here) introduced the halting of all dosages of their Part 2 scientific trial of Cibotercept (KER-012) as a consequence of observations of pericardial effusions, which is a situation the place extra fluid accumulates in a membrane that surrounds the center. What I discover attention-grabbing on this scenario is:
- KROS has a big money place, my estimates put it round $650MM for a reverse merger, a lot larger than crushed up biotechnology firms I normally spotlight
- KER-012 is described as KROS’s second program, their most superior asset, Elritercept (KER-050) was out licensed to Takeda for $200MM plus milestone fundsso this failure is perhaps obscuring the bigger story right here
- KROS would not display screen like a basic damaged biotech due to the Takeda fee and their liberal use of their at-the-market fairness providing program
Beneath is my fundamental again of envelope math on a possible liquidation worth (once more, not predicting a liquidation, extra as a base case valuation for a possible merger/reverse merger):
The corporate has not declared a evaluate of strategic options, hasn’t lately introduced a discount in drive associated to the failed KER-012 trials, and so on., so this a riskier scenario than others, however I believe absolutely the money quantity and sale of their main asset makes this an attention-grabbing damaged biotech to observe.
Different ideas:
- My ATM estimate is utilizing their 10/31 sharecount, primarily based on their earlier cadence, they probably issued extra shares properly above the present value into their December knowledge disappointment, so the above NAV is perhaps conservative
- The Takeda deal for KER-050 contains $370MM in improvement milestones and $720MM in gross sales milestones (plus a tiered royalty construction), how a lot is that value in the present day? I am not together with any worth in my liquidation NAV
Disclosure: I personal shares of KROS