What better way to kick off 2025 than by investing in another biotech drama, Keros Therapeutics ($470MM market-cap). Some recent developments to the story has made this stock pretty cheap:

• On December 3rd 2024, Keros announced a licensing deal for its drug Elritercept with Takeda, securing a $200M upfront cash payment, plus potential milestones and royalty payments. Note that Elritercept was a major R&D expense for Keros.

$200 million upfront cash payment and is eligible to receive development, approval and commercial milestones with the potential to exceed $1.1 billion. Keros will also be eligible to receive tiered royalties on net sales

• Later on January 15th, Keros announced that they are halting development of an early stage asset, Cibotercept due to safety concerns, further reducing the R&D burn.

 

• The company also raised capital through an ATM offering from September 30th to October 31st, likely issuing more shares in December before stopping Cibotercept. While we do not know the exact amount, we do know the rough share count that they sold.

Though no strategic review or RIF has been announced, and only one drug, KER-065, is in active development, even with conservative estimates, the stock seems very undervalued. Here’s the rough back-of-the-envelope:

Note that I’m marking future milestones + royalty payments down to 0 and assigning no value to KER-065.

Disclosure: I own shares of KROS