Keros Therapeutics to Return $375M to Investors Amid Strategic Shift

Keros Therapeutics, a Massachusetts-based biotech company, has announced plans to return $375 million to investors following a period of shareholder activism and a significant safety signal in one of its clinical programs. This decision comes as part of a broader strategic review and restructuring effort aimed at refocusing the company's pipeline and addressing investor concerns.

Shareholder Activism and Strategic Review

In April, Keros initiated a strategic review to explore various options, including a potential sale, business combination, continued investment in its pipeline, or return of capital to shareholders. This move prompted ADAR1 Capital Management, the company's largest shareholder, to launch a campaign urging Keros to abandon all of its medicines except elritercept, which was licensed to Takeda in December 2024.

ADAR1 argued that elritercept could achieve peak sales of $2 billion, while expressing concerns about "alarming clinical results" from the company's other two assets, cibotercept and KER-065. The activist investor pushed for a board restructuring and a return of capital to shareholders.

Safety Signal and Program Cuts

The situation escalated in late May when a safety signal emerged in the Phase II trial of cibotercept for patients with pulmonary arterial hypertension (PAH). As a result, Keros eliminated its PAH program and reduced its workforce by 45%. The company also committed to reviewing the future development of cibotercept, if any.

Capital Return and Future Focus

Following these events, Keros has decided to return approximately half of its capital, amounting to $375 million, to investors. This move has been viewed positively by industry analysts, with Guggenheim calling it "a positive step forward." The specifics of the capital return will be announced at a later date.

Despite the setbacks, Keros plans to continue the development of KER-065 for neuromuscular diseases, with an initial focus on Duchenne muscular dystrophy. Jean-Jacques Bienaimé, the board's lead independent director, stated that this decision "reflects a thorough review of our capital requirements, feedback from our stockholders, and our confidence in the potential for Keros to provide meaningful and potentially disease-modifying benefits to patients."

The company also retains future revenue opportunities through its partnership with Takeda for the development of elritercept in myelodysplastic syndromes and myelofibrosis. This deal, which included a $200 million upfront payment, also offers the potential for $1.1 billion in milestones and royalties.

As Keros navigates these changes, its share price has experienced a significant decline, dropping 70% over the past year to $14.37 as of the most recent trading day.