Keros Therapeutics’ pledge to hand $375 million to shareholders has not been enough to appease activist investor demands to slash further costs just weeks after the biotech laid off staff.
The company confirmed Monday afternoon that its board had “unanimously determined to initiate a process to return $375 million of excess capital to stockholders,” although the “terms and structure of this capital return remain under consideration.”
The move “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 board's lead independent director Jean-Jacques Bienaimé said in the June 9 statement.
The company made the call in the wake of a stakeholder meeting June 4 during which activist investor ADAR1 Capital Management, which owns 13.3% of Keros’ stock, led a rebellion against the reappointment of two members of the biotech’s board.
In its own statement yesterday, ADAR1 pointed to the fact that only about a third of shareholders voted for the two board members as evidence of “widespread dissatisfaction” with the company’s direction.
The investor applauded Keros’ decision last month to end development of a phase 2 candidate designed to treat high blood pressure in the lungs along with a related move to lay off 45% of the biotech’s team.
“While these delayed actions are directionally positive, they are wholly insufficient and, in our view, are overshadowed by the board's baffling decision to return only a modest portion of the company's excess capital to stockholders,” ADAR1 added.
The investment firm instead called for the biotech to “take immediate and concrete action to reduce costs more aggressively” as well as to raise the amount being handed to shareholders by a further $100 million to $475 million.
Takeda paid $200 million upfront in December for Keros’ activin inhibitor elritercept, which is being developed to treat anemia seen in blood cancers, and ADAR1 also demanded yesterday that Keros establish a mechanism for stockholders to “directly capture the potential cash flow” from this partnership.
“If the board nevertheless insists on clinging to a failed strategy, ADAR1 will not hesitate to hold it accountable, including by nominating new directors for election at the 2026 Annual Meeting,” ADAR1 warned.
Massachusetts-based Keros has gone to efforts this year to shield itself from investor pressure, including adjusting its stockholder rights plan in April to inflict a penalty on anyone who accumulates more than 10% of the biotech’s outstanding shares without the board’s approval. The company made this move in response to “significant and rapid accumulations” of stock by “a number of investors who have indicated a desire to influence the control of Keros,” the biotech explained at the time.
Keros has struggled this year, kicking off 2025 with the announcement that it would be ending a midphase study of its high blood pressure candidate after observing pericardial effusion adverse events, which refers to an excessive buildup of fluid in the sac surrounding the heart.
Keros has since positioned itself around a phase 1 neuromuscular disease program called KER-065, with an initial focus on Duchenne muscular dystrophy.