Keros Therapeutics: Betting on TGF-ß Breakthroughs Amid Strategic Crossroads

Keros Therapeutics (NASDAQ: KROS) finds itself at a critical inflection point. After the abrupt termination of its Phase 2 trial for cibotercept in pulmonary arterial hypertension (PAH) due to safety concerns, the biotech's stock plummeted and its future once seemed uncertain. But with a leaner balance sheet, a strategic review process underway, and a pipeline targeting high-unmet-need diseases like Duchenne muscular dystrophy (DMD) and myelodysplastic syndrome (MDS), Keros is now positioning itself as a focused player in therapies targeting the TGF-ß signaling pathway. The next few months will reveal whether this pivot can deliver clinical and commercial validation—or if investors should brace for more turbulence.

The Catalysts to Watch in Q3 2025

1. Strategic Review Update (June 9, 2025)

The most immediate catalyst is the strategic review update, which Keros promised to deliver by June 9. This process, led by a special committee of independent directors, is evaluating options including a potential sale, partnerships, or continued investment in its pipeline. The outcome will define Keros' trajectory:
- Scenario 1: A sale or partnership could unlock immediate value, especially with TGF-ß's growing relevance in oncology and rare diseases.
- Scenario 2: A decision to double down on its pipeline would hinge on securing financing or demonstrating near-term clinical progress.

The company's financial position, bolstered by a $200 million upfront payment from Takeda for elritercept (KER-050), plus annualized cost savings of $17 million from its 45% workforce reduction, provides some runway. But investors will scrutinize whether management chooses a path that maximizes shareholder value without overextending.

2. KER-065's Regulatory Discussions (Q3 2025)

KER-065, Keros' most promising asset outside PAH, is a TGF-ß ligand trap targeting neuromuscular diseases like DMD. While the Phase 1 trial in healthy volunteers showed favorable safety and pharmacokinetics, the real test comes next:
- Regulatory Engagement: Keros plans to start discussions with regulators in Q3 2025 to design a Phase 2 trial in DMD. Positive feedback here could accelerate timelines, with a potential trial start by early 2026.
- Clinical Potential: Early preclinical data suggest KER-065 could address muscle degeneration in DMD, a disease with a dire prognosis and few approved therapies. Analysts estimate the DMD market could hit $3 billion by 2030.

3. Elritercept's Phase 3 Readiness (KER-050)

Elritercept, developed with Takeda, is already in Phase 2 trials for MDS and myelofibrosis (MF). The Phase 3 RENEW trial, expected to start enrolling MDS patients soon, is a key milestone:
- MDS Data: Phase 2 results showed 55% of patients achieved transfusion independence (TI) for ≥8 weeks, with durability up to 134 weeks. In non-transfused patients, 93% saw hemoglobin improvements.
- MF Potential: The RESTORE trial demonstrated elritercept's ability to reduce transfusions (63% of MF patients) and spleen volume without requiring dose increases in combination with ruxolitinib.

A successful Phase 3 trial could position elritercept as a first-line treatment in MDS, a market projected to grow to $1.5 billion by 2030.

Risks and Challenges

• PAH Fallout: The cibotercept failure underscores the risks of TGF-ß-targeted therapies, which can have unpredictable safety profiles. Investors must assess whether Keros' remaining programs avoid similar pitfalls.
• Regulatory Hurdles: Even if KER-065 advances to Phase 2, DMD's complex endpoints (e.g., muscle function metrics) could complicate trial design.
• Strategic Uncertainty: A failure to secure a partnership or financing post-June could force Keros into a liquidity crunch.

Valuation and Investment Thesis

Keros' shares have traded in a tight range since the PAH trial termination, reflecting investor skepticism. But with $186 million in cash (as of Q1 2025) and the Takeda deal's financial buffer, the company has time to execute.

Bull Case: Positive Phase 2 data for KER-065 (2026) and elritercept's Phase 3 success (2027) could propel Keros to a $1 billion+ valuation.

Bear Case: A strategic review that leads to a fire sale or stalled clinical progress could erase remaining investor confidence.

The Bottom Line

Keros is a high-risk, high-reward bet on TGF-ß's therapeutic potential. Investors should focus on the June 9 strategic update and KER-065's regulatory path as key near-term catalysts. While the PAH setback is a scar, the company's focus on DMD and MDS—two markets with limited options—creates a compelling narrative. For risk-tolerant investors, Keros could be a long-term play on breakthroughs in rare diseases. But patience will be required: the next 12 months will be make-or-break.

Final Note: Consult with a financial advisor before making investment decisions. Clinical trial outcomes and strategic reviews carry inherent uncertainties.