Activist Investor Pushes for Further Cost Cuts at Keros Therapeutics Amid Ongoing Restructuring

Keros Therapeutics, a Massachusetts-based biotech company, faces increasing pressure from activist investor ADAR1 Capital Management to implement more aggressive cost-cutting measures, just weeks after announcing significant layoffs and a shift in strategic focus.

Capital Return and Investor Demands

Keros recently pledged to return $375 million of excess capital to shareholders, a move that has failed to satisfy ADAR1, which owns 13.3% of the company's stock. The activist investor is demanding that Keros increase the capital return to $475 million and take immediate action to reduce costs further.

Jean-Jacques Bienaimé, Lead Independent Director at Keros, stated that the decision to return capital "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."

However, ADAR1 expressed dissatisfaction with the board's decision, calling it "wholly insufficient" and overshadowed by what they perceive as a "baffling decision to return only a modest portion of the company's excess capital to stockholders."

Recent Restructuring and Strategic Shifts

The dispute follows Keros' recent decision to discontinue development of a phase 2 candidate for treating high blood pressure in the lungs, resulting in a 45% reduction in workforce. ADAR1 applauded these moves but insists they do not go far enough.

Keros has repositioned its focus on KER-065, a phase 1 neuromuscular disease program with an initial emphasis on Duchenne muscular dystrophy. This shift comes after the company terminated a midphase study of its high blood pressure candidate due to adverse events related to pericardial effusion.

Corporate Governance and Future Outlook

The tension between Keros and ADAR1 was evident at a recent stakeholder meeting, where only about a third of shareholders voted for the re-appointment of two board members. ADAR1 cited this as evidence of "widespread dissatisfaction" with the company's direction.

In response to mounting pressure, Keros has taken steps to protect itself from activist influence, including adjusting its stockholder rights plan in April. This move was designed to penalize investors who accumulate more than 10% of the company's outstanding shares without board approval.

ADAR1 has threatened further action if the board "insists on clinging to a failed strategy," including the possibility of nominating new directors for election at the 2026 Annual Meeting.

As the situation unfolds, the pharmaceutical industry will be watching closely to see how Keros navigates these challenges and whether it can successfully balance investor demands with its long-term strategic goals.