Keros Therapeutics Inc
03/04/2026 | Press release | Distributed by Public on 03/04/2026 15:04
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the "Risk Factors" section of this Annual Report on Form 10-K, our actual results could differ materially from the results described in, or implied by, these forward-looking statements.
Overview
We are a clinical-stage biopharmaceutical company focused on developing and commercializing novel therapeutics to treat a wide range of patients with disorders that are linked to dysfunctional signaling of the transforming growth factor-beta, or TGF-ß, family of proteins. We are a leader in understanding the role of the TGF-ß family of proteins, which are master regulators of the growth, repair and maintenance of a number of tissues, including skeletal muscle, bone, adipose, heart tissue and blood. By leveraging this understanding, we have discovered and are developing protein therapeutics that have the potential to provide meaningful and potentially disease-modifying benefit to patients. Our lead product candidate, rinvatercept (KER-065), is being developed for the treatment of Duchenne muscular dystrophy and for the treatment of amyotrophic lateral sclerosis. Our most advanced product candidate, elritercept (KER-050), is being developed for the treatment of low blood cell counts, or cytopenias, including anemia and thrombocytopenia, in patients with myelodysplastic syndromes, or MDS, and in patients with myelofibrosis. In December 2024, we entered into an exclusive license agreement with Takeda Pharmaceuticals U.S.A., Inc., or Takeda, which became effective on January 16, 2025, to further develop, manufacture and commercialize elritercept worldwide outside of mainland China, Hong Kong and Macau.
Since our inception in 2015, we have devoted the majority of our efforts into business planning, research and development of our product candidates, including by conducting clinical trials and preclinical studies, raising capital and recruiting management and technical staff to support these operations. To date, we have not generated any revenue from product sales as none of our product candidates have been approved for commercialization. We have historically financed our operations primarily through the sale of convertible preferred stock and common stock and cash received from licensing agreements.
ATM Sales Agreement
In December 2022, we filed a prospectus supplement to our registration statement on Form S-3ASR with the Securities and Exchange Commission, or the SEC, for the issuance and sale, if any, of up to $250.0 million of shares of our common stock pursuant to a sales agreement with Leerink Partners LLC, or Leerink, as sales agent, which we refer to as the ATM Sales Agreement, under which we may offer and sell, from time to time, shares of our common stock, or the ATM Shares, through Leerink, which we refer to as the ATM Offering. In May 2024, we filed a new registration statement on Form S-3ASR, which we refer to as the New Shelf Registration Statement, to replace the prior shelf registration statement that was set to expire, including a base prospectus, which became effective immediately upon filing, under which we could issue an unspecified amount of shares of our common stock, preferred stock, debt securities and warrants. In June 2024, we filed a prospectus supplement to the New Shelf Registration Statement for the issuance and sale, if any, of up to an additional $350.0 millionof shares of our common stock under the ATM Sales Agreement. As of the filing of our Annual Report on Form 10-K for the year ended December 31, 2024, we no longer qualified as a well-known seasoned issuer and therefore were not eligible to use the New Shelf Registration Statement as an automatic shelf registration statement, and no shares were sold during the year ended December 31, 2025.
Under the ATM Sales Agreement, Leerink may sell the ATM Shares by methods deemed to be an "at the market offering" as defined in Rule 415(a)(4) promulgated under the Securities Exchange Act of 1934, as amended. We may sell the ATM Shares in amounts and at times to be determined by us from time to time subject to the terms and conditions of the ATM Sales Agreement, but we have no obligation to sell any of the ATM Shares in the ATM Offering. As of December 31, 2025, we have sold a total of 4,290,096 shares of our common stock pursuant to the ATM Offering for aggregate net proceeds of approximately $228.6 million after deducting sales agent commissions and estimated offering expenses. As of December 31, 2025, we may not offer and sell any ATM shares.
January 2024 Public Offering of Common Stock
On January 8, 2024, we closed an underwritten public offering in which we issued and sold 4,025,000 shares of common stock, which included 525,000 shares of common stock issued and sold pursuant to the full exercise of the underwriters' option to purchase additional shares, at a public offering price of $40.00 per share. The aggregate net proceeds to us from the public offering were approximately $151.1 million, after deducting underwriting discounts and commissions and estimated offering expenses.
October 2025 Share Repurchases
On October 15, 2025, we entered into the Repurchase Agreements with the ADAR1 Parties and the Pontifax Parties. Pursuant to the terms and conditions of the Repurchase Agreements, the ADAR1 Parties and the Pontifax Parties sold all of the shares of our common stock beneficially owned by them, being an aggregate of 10,176,595 shares of common stock, to us at a per share purchase price of $17.75 per share, for an aggregate purchase price of $180.6 million. In addition, concurrently with the execution of the Pontifax Repurchase Agreement, each of Tomer Kariv and Ran Nussbaum resigned from our board of directors and all committees thereof.
Pursuant to the Repurchase Agreements, each of the ADAR1 Parties and the Pontifax Parties agreed to customary standstill restrictions and voting commitments, which will remain in effect until immediately following the final certification of the voting results for our 2028 annual stockholder meeting. We and each of the ADAR1 Parties and the Pontifax Parties also agreed to customary mutual non-disparagement obligations to remain in effect during the same period.
November 2025 Issuer Tender Offer
On October 20, 2025, we announced that our board of directors authorized the Tender Offer, which we launched on October 20, 2025 and completed on November 21, 2025
On November 20, 2025, we disclosed that a total of 17,712,262 shares of our common stock were validly tendered and not validly withdrawn. In accordance with the terms and conditions of the Tender Offer, we accepted for purchase a total of 10,950,165 Tender Offer Shares at a purchase price of $17.75 per share, for an aggregate purchase price of approximately $194.4 million. As a result of the Tender Offer, we had 19,543,706 shares of common stock outstanding immediately following the closing of the Tender Offer.
Since our inception, we have incurred recurring operating losses each fiscal year through December 31, 2024. Our ability to generate product revenue sufficient to achieve profitability will depend on the successful development and commercialization of one or more of our product candidates. Our net income, which was primarily driven by revenue related to the Takeda Agreement, was $87.0 million for the year ended December 31, 2025 compared to a net loss of $187.4 million for the year ended December 31, 2024. As of December 31, 2025, we had an accumulated deficit of $481.8 million. We expect to continue to generate operating losses and negative operating cash flows for the foreseeable future in connection with our ongoing activities.
We will not generate any revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for one or more of our product candidates. If we obtain regulatory approval for any of our product candidates, we expect to incur significant expenses related to developing our internal commercialization capability to support product sales, marketing and distribution.
As a result, we will need substantial additional funding to support our operating activities as we advance our product candidates through clinical development, seek regulatory approval and prepare for and, if any of our product candidates are approved, proceed to commercialization. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operating activities through a combination of equity offerings, debt financings, and license and development agreements in connection with any future collaborations. Adequate funding may not be available to us on acceptable terms, or at all.
If we are unable to obtain funding, we will be forced to delay, reduce or eliminate some or all of our research and development programs, product portfolio expansion or commercialization efforts, which could adversely affect our business prospects, or we may be unable to continue operations. Although we continue to pursue these plans, there is no assurance that we will be successful in obtaining sufficient funding on terms acceptable to us to fund continuing operations, if at all.
As of December 31, 2025, we had cash and cash equivalents of $287.4 million. Based on our current operating assumptions, we expect that our existing cash and cash equivalents as of December 31, 2025 will enable us to fund our operating expenses and capital expenditure requirements into the first half of 2028. See "-Liquidity and Capital Resources."
Known Trends, Events and Uncertainties
While recent trends towards rising inflation have eased, prices continue to rise, which may also materially affect our business and corresponding financial position and cash flows. Inflationary factors, such as increases in the cost of materials and supplies relating to our preclinical studies, clinical trials, interest rates and overhead costs may adversely affect our operating results. Rising interest rates and implementation of tariffs also present a recent challenge impacting the U.S. economy and could make it more difficult for us to obtain traditional financing on acceptable terms, if at all, in the future. Additionally, the general consensus among economists suggests that we should expect a higher recession risk to continue over the next year due in part to ongoing tariff and trade uncertainties, which, together with the foregoing, could result in further economic uncertainty and volatility in the capital markets in the near term, and could negatively affect our operations. Furthermore, such economic conditions have produced downward pressure on share prices. Although we do not believe that inflation, higher interest rates or tariffs have had a material impact on our financial position or results of operations to date, we may
experience increases in the near future (especially if inflation rates rise more quickly) on our operating costs, including our labor costs and research and development costs, due to supply chain constraints, consequences associated with public health crises and global geopolitical tensions, such as the ongoing war between Russia and Ukraine and the war in the Middle East, worsening global macroeconomic conditions, including as a result of bank failures, and employee availability and wage increases, which may result in additional stress on our working capital resources.
Licensing Agreements
2016 Exclusive Patent License Agreement with The General Hospital Corporation
In April 2016, we entered into an exclusive patent license agreement with The General Hospital Corporation, or MGH, which was subsequently amended in May 2017 and February 2018. Under the license agreement with MGH, or the MGH Agreement, we obtained an exclusive, worldwide license, with the right to sublicense, under certain patents and technical information of MGH, to make, have made, use, have used, sell, have sold, lease, have leased, import, have imported or otherwise transfer licensed products and processes for use in the treatment, diagnosis, palliation and prevention of diseases and disorders in humans and animals. We are required to use commercially reasonable efforts to develop and commercialize licensed products and processes, and must achieve certain required diligence milestones.
Under the terms of the MGH Agreement, we made an initial license payment of $0.1 million in 2016 and reimbursed MGH approximately $0.3 million of prior patent prosecution expenses related to the licensed patents in 2017. We also issued MGH an aggregate of 358,674 shares of our common stock. Additionally, we are required to pay a nominal annual maintenance fee prior to the first commercial sale of our first product or process, a mid-five digit annual maintenance fee after the first commercial sale of our first product or process that is creditable against royalties, certain clinical and regulatory milestone payments for the first three products or indications to achieve such milestones, which milestone payments are $8.6 million in the aggregate, and certain commercial milestone payments for the first three products or indications to achieve such milestones, which milestone payments are $18.0 million in the aggregate. We made payments of $50,000 and $300,000 in 2020 and 2021, respectively, for the achievement of the clinical and regulatory milestones of (i) filing of an IND in the first country and (ii) the completion of a Phase 1 clinical trial, respectively. We are also obligated to pay tiered royalties on net sales of licensed products ranging in the low-single digits to mid-single digits. The royalty rates are subject to up to a maximum 50% reduction for lack of a valid claim, in the event that it is necessary for us to obtain a license to any third-party intellectual property related to the licensed products, and generic competition. The obligation to pay royalties under the MGH Agreement expires on a licensed product-by-licensed product and country-by-country basis upon the later of expiry of the last valid claim of the licensed patents that cover such licensed product in such country and ten years from the first commercial sale of such product in such country. We are also obligated to pay a percentage of non-royalty-related payments received by us from sublicensees ranging in the sub-teen double digits and a change of control fee equal to a low-single digit percentage of the payments received as part of any completed transaction up to a low-seven digit amount.
2021 License Agreement with Hansoh (Shanghai) Healthtech Co., Ltd.
On December 12, 2021, we entered into a license agreement with Hansoh (Shanghai) Healthtech Co., Ltd., or Hansoh. Under the terms of the license agreement with Hansoh, or the Hansoh Agreement, we granted to Hansoh the exclusive right to develop, manufacture and commercialize elritercept and licensed products containing elritercept within the territories of mainland China, Hong Kong and Macau, which we refer to collectively as the Hansoh Territory.
In connection with the Hansoh Agreement, Hansoh will purchase clinical trial supply of elritercept from us, and the parties will also negotiate in good faith to enter into an agreement for commercial supply prior to any anticipated commercialization in the Hansoh Territory. In addition, Hansoh will use commercially reasonable efforts to develop, obtain regulatory approval for, and commercialize licensed products in any region in the Hansoh Territory.
Pursuant to the terms of the Hansoh Agreement, we received a net $18.0 million upfront payment in January 2022. We recognized $3.0 million as revenue and $0.3 million in withholding tax upon the achievement of a development milestone related to the Hansoh Agreement on our consolidated statement of operations for the year ended December 31, 2024, and a receivable, net of withholding tax, on our consolidated balance sheet as of December 31, 2024. In addition to the upfront payment and development milestones achieved to date, we are entitled to receive up to an aggregate of (i) $23.5 million upon the achievement of specified development milestones and (ii) $144.0 million upon the achievement of specified net sales thresholds for all licensed products in the Hansoh Territory. If a licensed product is approved for marketing in the Hansoh Territory, we will be entitled to receive royalty payments based on a tiered percentage of annual net sales in each region within the Hansoh Territory, with such percentage ranging from the low double digit to high teens, subject to specified potential royalty reductions. No milestones were achieved during the year ended December 31, 2025.
Hansoh's obligation to pay royalties for a given licensed product in a given region in the Hansoh Territory will begin on the date of the first commercial sale for such licensed product in such region and continue until the latest of (i) ten years from the date of the first commercial sale for such licensed product in such region, (ii) the expiration of the last valid claim of certain licensed patents or joint patents, and (iii) expiration of regulatory exclusivity in such region. During the royalty term, neither party will directly or indirectly commercialize a competing product in the Hansoh Territory.
Effective in June 2023, in connection with the Hansoh Agreement, we entered into a manufacturing technology transfer agreement, or the Tech Transfer Agreement, with Hansoh. The Tech Transfer Agreement governs the transfer to Hansoh of all documents and information required to complete the manufacturing technology transfer. Under the Tech Transfer Agreement, Hansoh is obligated to make certain payments to us, at the rates set forth in the Tech Transfer Agreement, as manufacturing technology transfer services are provided over the term of the Tech Transfer Agreement. We recognized $0.1 million and $0.1 million of service and other revenue for the years ended December 31, 2025 and 2024, respectively.
Effective in February 2024, in connection with the Hansoh Agreement, we entered into a clinical product supply agreement with Hansoh, or the Supply Agreement. We recognized $0.1 million and $0.4 million of other revenue for the years ended December 31, 2025 and 2024, respectively.
2024 License Agreement with Takeda Pharmaceuticals U.S.A., Inc.
In December 2024, we entered into a license agreement with Takeda, which became effective on January 16, 2025. Under the terms of the license agreement with Takeda, or the Takeda Agreement, we granted to Takeda the exclusive right to develop, manufacture and commercialize elritercept and certain derivative compounds globally, excluding the territories of mainland China, Hong Kong and Macau, which we refer to collectively as the Takeda Territory.
Pursuant to the terms of the Takeda Agreement, we received a $200.0 million upfront payment in February 2025. In July 2025, we announced that the first patient was dosed in the Phase 3 RENEW clinical trial of elritercept, which triggered a $10.0 million milestone payment to us under the Takeda Agreement. We received the $10.0 million payment for the achievement of this development milestone in August 2025. In addition to the upfront payment and milestone payment, we are entitled to receive up to an aggregate of (i) $80.0 million upon the achievement of specified development milestones, (ii) $280.0 million upon the achievement of specified commercial milestones and (iii) $740.0 million upon the achievement of specified sales milestones. If a licensed product is approved for marketing in the Takeda Territory, we will be entitled to receive royalty payments based on tiered increments of annual net sales in the Takeda Territory, with such percentage ranging from the low double-digits to high teens, subject to specified potential royalty reductions.
Takeda's obligation to pay royalties for a given licensed product in a given country in the Takeda Territory will begin on the date of the first commercial sale for such licensed product in such country and continue until the latest of (i) 10 years from the date of the first commercial sale for such licensed product in such region, (ii) the expiration of the last valid claim of certain licensed patents, and (iii) expiration of regulatory exclusivity in such region.
Components of Our Results of Operations
Revenue
To date, we have not generated any revenue, and do not expect to generate any revenue in the foreseeable future, from product sales. We have generated revenue solely from research collaborations or licensing of intellectual property. We may in the future generate revenue from other strategic collaborations.
Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts and the preclinical and clinical development of our current and potential future product candidates, and include:
▪salaries, benefits and other related costs, including stock-based compensation expense, for personnel engaged in research and development functions;
▪expenses incurred under agreements with third parties, including contract research organizations, or CROs, that conduct research, preclinical and clinical activities on our behalf, as well as contract manufacturing organizations, or CMOs, that manufacture drug product for use in our preclinical studies and clinical trials;
▪license fees incurred in connection with license agreements;
▪research and development supplies and services expenses;
▪facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs;
▪cost of outside consultants, including their fees and related travel expenses, engaged in research and development functions;
▪expenses related to regulatory affairs; and
▪fees related to our scientific advisory board.
We expense research and development costs as incurred. Costs for external development activities are recognized based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our consolidated financial statements as prepaid or accrued research and development expenses. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses and expensed as the related goods are delivered or the services are performed.
Research and development activities are central to our business model. We expect that our research and development expenses will continue to increase for the foreseeable future as we continue ongoing and initiate new clinical trials for our product candidates and continue to discover and develop additional product candidates. We expect research and development expenses to fluctuate from quarter to quarter depending on the timing of clinical trial activities, clinical manufacturing and other development activities. If any of our product candidates enter into later stages of clinical development, they will generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. There are numerous factors associated with the successful commercialization of any product candidates we may develop in the future, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development. Additionally, future commercial and regulatory factors beyond our control will impact our clinical development program and plans.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in our executive, finance, corporate and business development and administrative functions. General and administrative expenses also include professional fees for legal, patent, accounting, information technology, auditing, tax and consulting services, and travel expenses and facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.
We expect that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research and development and potential commercialization of our product candidates. We have incurred and expect to continue to incur increased expenses associated with being a public company, including costs of accounting, audit, legal, regulatory and tax compliance services, director and officer insurance costs, and investor and public relations costs.
Other Income (Expense), Net
Research and Development Incentive Income
Research and development incentive income includes payments received under the Research and Development Tax Incentive, or the R&D Incentive, from the Australian government. The R&D Incentive is one of the key elements of the Australian government's support for Australia's innovation system and was developed to assist businesses recover some of the costs of undertaking research and development in Australia. Since July 1, 2021, the R&D Incentive has provided eligible companies that engage in research and development activities with either a refundable or non-refundable tax offset depending on a company's aggregated revenue as follows:
•Refundable tax offset of up to 18.5% above a company's underlying tax rate where aggregated revenue is less than AUD$20.0 million per annum, or
•Non-refundable tax offset of up to 16.5% above a company's underlying tax rate where aggregated revenue is equal to or greater than AUD$20.0 million per annum.
We have assessed our R&D activities and expenditures to determine which activities and expenditures in Australia are likely to be eligible under the R&D Incentive. We estimate the refundable or non-refundable tax offset available to us based on available information at the time.
Dividend Income
Dividend income consists of income earned on our money market funds that are recorded as cash equivalents on our consolidated balance sheets.
Other Expense, Net
Other expense, net consists of unrealized and realized gains and losses on foreign currency and other taxes and fees.
Income Tax Provision
The tax provision recorded for the year ended December 31, 2025 resulted from income tax related to taxable income generated from the Takeda Agreement. We continue to maintain a full valuation allowance against our net deferred tax assets due to our history of losses and expected future losses.
Results of Operations
Comparison for the years ended December 31, 2025 and 2024
The following table summarizes our results of operations for the years ended December 31, 2025 and 2024 (in thousands):
| YEAR ENDED DECEMBER 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| REVENUE: | |||||||||||
| Service and other revenue | $ | 38,706 | $ | 550 | |||||||
| License revenue | $ | 205,355 | $ | 3,000 | |||||||
| Total revenue | 244,061 | 3,550 | |||||||||
| OPERATING EXPENSES: | |||||||||||
| Research and development | (129,643) | (173,629) | |||||||||
| General and administrative | (46,849) | (40,754) | |||||||||
| Total operating expenses | (176,492) | (214,383) | |||||||||
| INCOME (LOSS) FROM OPERATIONS | 67,569 | (210,833) | |||||||||
| OTHER INCOME (EXPENSE), NET: | |||||||||||
| Research and development incentive income | - | 1,238 | |||||||||
| Dividend income | 24,867 | 23,496 | |||||||||
| Other expense, net | (539) | (954) | |||||||||
| Total other income, net | 24,328 | 23,780 | |||||||||
| Income (loss) before income taxes | 91,897 | (187,053) | |||||||||
| Income tax provision | (4,883) | (300) | |||||||||
| Net income (loss) | $ | 87,014 | $ | (187,353) | |||||||
Revenue
We recognized $205.4 million of license revenue related to the upfront payment and achievement of a development milestone under the Takeda Agreement and $38.5 million of service and other revenue related to the transition services agreement with Takeda, or the TSA, for the year ended December 31, 2025, compared to zero for the year endedDecember 31, 2024. In connection with the Hansoh Agreement, we recognized $0.2 millionof service and other revenue for the year ended December 31, 2025, compared to $3.0 million of license revenue and $0.5 million of service and other revenue for the year ended December 31, 2024.
Research and Development Expenses
The following table summarizes our research and development expenses for the years ended December 31, 2025 and 2024 (in thousands):
| YEAR ENDED DECEMBER 31, | $ CHANGE | ||||||||||||||||
| 2025 | 2024 | 2025 vs 2024 | |||||||||||||||
| Rinvatercept | $ | 7,081 | $ | 16,090 | $ | (9,009) | |||||||||||
| Elritercept | 38,030 | 44,319 | (6,289) | ||||||||||||||
| Cibotercept | 12,562 | 29,777 | (17,215) | ||||||||||||||
| Preclinical and development fees | 6,847 | 12,008 | (5,161) | ||||||||||||||
| Personnel expenses (including stock-based compensation) | 47,647 | 55,946 | (8,299) | ||||||||||||||
| Professional fees | 6,474 | 5,083 | 1,391 | ||||||||||||||
| Facilities and supplies | 8,947 | 7,832 | 1,115 | ||||||||||||||
| Other expenses | 2,055 | 2,574 | (519) | ||||||||||||||
| $ | 129,643 | $ | 173,629 | $ | (43,986) | ||||||||||||
Research and development expenses were $129.6 million for the year ended December 31, 2025, compared to $173.6 million for the year ended December 31, 2024. The decrease of $44.0 million was primarily due to a decrease in program-related costs, including (i) a $9.0 million decrease of rinvatercept-related expenses, which was driven by a net decrease of $7.8 million in manufacturing and preclinical activities and a $1.2 million decrease in clinical spend associated with our completed Phase 1 clinical trial; (ii) a net decrease of $6.3 million in elritercept-related expenses, primarily driven by a decrease of $8.4 million in clinical spend associated with our ongoing Phase 2 clinical trials, one in patients with MDS and
one in patients with myelofibrosis, and the advancement of the Phase 3 RENEW clinical trial, as clinical activities transitioned to Takeda during 2025, partially offset by an increase of $2.1 million in manufacturing activities; (iii) a $17.2 million decrease of cibotercept-related expenses, primarily driven by a $9.5 million decrease in clinical spend associated with our terminated Phase 2 clinical trial and a net decrease of $7.7 million in manufacturing and preclinical activities; (iv) a $5.2 million decrease in preclinical pipeline and development activities; and (v) a $8.3 million decrease in personnel costs, including a decrease of $5.0 million of stock-based compensation costs, driven by a reduction in headcount. These decreases were partially offset by (a) a $1.4 million increase in professional fees and (b) a net increase of $0.6 million in facilities and supplies and other expenses.
General and Administrative Expenses
General and administrative expenses were $46.8 million for the year ended December 31, 2025, compared to $40.8 million for the year ended December 31, 2024. The increase of $6.1 million was primarily due to (i) a $5.9 million increase in professional fees and (ii) a net $0.9 million increase in facilities, supplies and other expenses. These increases were partially offset by (a) a $0.6 million decrease in personnel expenses, which includes a decrease of $1.2 million of stock-based compensation costs, partially offset by a net increase of $0.5 million in salaries and bonus, severance, benefits and other payroll costs and (b) a $0.1 million decrease in director and officer insurance premiums.
Total Other Income, Net
Total other income, net was $24.3 million for the year ended December 31, 2025, compared to $23.8 million for the year ended December 31, 2024. The increase of $0.5 million was primarily related to (i) an increase of $1.4 million of dividend income and (ii) a decrease of $0.4 million in other expense, net, partially offset by a decrease of $1.2 million in R&D Incentive income in Australia.
Income Tax Provision
Income tax provision was $4.9 million for the year ended December 31, 2025, compared to $0.3 million for the year ended December 31, 2024. The increase of $4.6 million in income tax provision is attributed to taxable income generated from the Takeda Agreement.
Liquidity and Capital Resources
Since our inception, we have incurred significant operating losses each fiscal year through December 31, 2024. Our net income, which was primarily driven by the one-time upfront fee related to the Takeda Agreement, was $87.0 million for the year ended December 31, 2025, compared to a net loss of $187.4 million for the year ended December 31, 2024. As of December 31, 2025 and December 31, 2024, we had an accumulated deficit of $481.8 million and $568.8 million, respectively. To date, we have devoted the majority of our efforts into business planning, research and development of our product candidates, including conducting clinical trials and preclinical studies, raising capital and recruiting management and technical staff to support these operations. Our primary uses of cash are to fund operating expenses, primarily research and development expenditures. We expect to continue to incur substantial expenses in connection with our ongoing activities, particularly as we advance the preclinical studies and clinical trials of our product candidates. Furthermore, we expect to incur costs associated with operating as a public company, including significant legal, accounting, investor relations, director and officer insurance premiums and other expenses. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to establishing sales, marketing, distribution and other commercial infrastructure to commercialize such products.
We currently do not have any products approved for sale. We do not expect to generate any revenue from product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our product candidates, which we expect will take a number of years. Since our inception, we have funded our operations primarily through equity financings, research collaborations or licensing of intellectual property.
In December 2022, we filed a prospectus supplement to a registration statement on Form S-3ASR, including a base prospectus and sales agreement prospectus, or the Prior Shelf Registration Statement, for the issuance and sale of up to $250.0 million of shares of our common stock. On May 3, 2024, we filed a new registration statement on Form S-3ASR, or the New Shelf Registration Statement, to replace the Prior Shelf Registration Statement that was set to expire, which became automatically effective upon filing, and which permits us to offer, from time to time, an unspecified amount of common stock, preferred stock, debt securities and warrants, including through an "at the market" program with Leerink, as sales agent, or the ATM Program. As of the filing of our Annual Report on Form 10-K for the year ended December 31, 2024, we no longer qualified as a well-known seasoned issuer and therefore were not eligible to use the New Shelf Registration Statement as an automatic shelf registration statement. As of December 31, 2025, we have sold a total of 4,290,096 shares of our common stock pursuant to the ATM Program. As of December 31, 2025, we were not eligible to offer and sell any shares of our common stock under the ATM Program and did not sell any shares during the year ended December 31, 2025.
In October 2025, we entered into the Repurchase Agreements, pursuant to which the ADAR1 Parties and the Pontifax Parties sold all of the shares of our common stock beneficially owned by them, being an aggregate of 10,176,595 shares of common stock, to us at a per share purchase price of $17.75 per share, for an aggregate purchase price of $180.6 million.
In November 2025, we completed our Tender Offer and accepted for purchase a total of 10,950,165 shares of our common stock at a purchase price of $17.75 per share, for an aggregate purchase price of approximately $194.4 million.
As of December 31, 2025, we had cash and cash equivalents of $287.4 million. Based on our current operating assumptions, we believe that our existing cash and cash equivalents will be sufficient to fund our projected liquidity requirements into the first half of 2028. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect. Due to the numerous risks and uncertainties associated with the development of our product candidates and programs, and because the extent to which we may enter into collaborations with third parties for development of our product candidates is unknown, we are unable to estimate the timing and amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates. Our future funding requirements, both near and long-term, will depend on many factors, including:
▪the progress, timing and completion of preclinical studies and clinical trials for our current or any future product candidates, as well as the associated costs, including any unforeseen costs we may incur as a result of preclinical study or clinical trial delays due to public health crises or other causes;
▪the timing and amount of milestone and royalty payments we are required to make or are eligible to receive under our license agreements with each of The General Hospital Corporation, Hansoh and Takeda;
▪the number of potential new product candidates we identify and decide to develop;
▪the need for additional or expanded preclinical studies and clinical trials beyond those that we plan to conduct with respect to our current and future product candidates;
▪the costs involved in growing our organization to the size needed to allow for the research, development and potential commercialization of our current or any future product candidates;
▪the costs involved in filing patent applications, maintaining and enforcing patents or defending against infringement or other claims raised by third parties;
▪the maintenance of our existing license and collaboration agreements and the entry into new license and collaboration agreements;
▪the time and costs involved in obtaining regulatory approval for our product candidates and any delays we may encounter as a result of evolving regulatory requirements or adverse results with respect to any of our product candidates;
▪the effect of competing technological and market developments;
▪the costs of operating as a public company;
▪the cost of manufacturing rinvatercept and future product candidates for clinical trials in preparation for marketing approval and in preparation for commercialization;
▪the cost of establishing sales, marketing and distribution capabilities for any product candidates for which we may receive regulatory approval in regions where we choose to commercialize our products, if approved, on our own;
▪the amount of revenues, if any, we may derive either directly or in the form of royalty payments from future sales of our product candidates, if approved; and
▪market acceptance of any approved product candidates.
In addition, implementation of tariffs, public health crises, bank failures, geopolitical tensions and resulting global slowdown of economic activity continue to rapidly evolve and have already resulted in a significant disruption of global financial markets. If the disruption persists and deepens, we could experience an inability to access additional capital when and if needed. If we are unable to obtain funding, we could be forced to delay, reduce or eliminate some or all of our research and development programs and clinical development efforts, which would adversely affect our business prospects, or we may be unable to continue operations. We do not have any committed external source of funds or other support for our development efforts and we cannot be certain that additional funding will be available on acceptable terms, or at all. Until we can generate sufficient product or royalty revenue to finance our cash requirements, which we may never do, we expect to finance our future cash needs through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing or distribution arrangements. Adequate additional funding may not be available to us on acceptable terms, or at all. Any failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies.
Cash Flows
The following table summarizes our cash flows for each of the periods presented (in thousands):
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YEAR ENDED
DECEMBER 31,
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2025 | 2024 | |||||||||
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Net cash provided by (used in) operating activities
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$ | 107,505 | $ | (160,869) | |||||||
| Net cash used in investing activities | (1,551) | (1,931) | |||||||||
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Net cash provided by (used in) financing activities
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(378,470) | 391,821 | |||||||||
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Net increase (decrease) in cash and cash equivalents, and restricted cash
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$ | (272,516) | $ | 229,021 | |||||||
Cash Provided by (Used in) Operating Activities
Net cash provided by operating activities was $107.5 million for the year ended December 31, 2025, which was driven by (i) a net income of $87.0 million and (ii) non-cash charges, including $28.7 million of stock-based compensation expense, $2.4 million in lease expenses and $1.5 million in depreciation, partially offset by $12.1 million net cash used by operating assets and liabilities. The $12.1 million of cash used by operating assets and liabilities was primarily comprised of (i) a $13.1 million decrease in accounts payable and accrued expenses primarily driven by the transition of activities to Takeda and reduction in other clinical spend; (ii) a $2.3 million increase in current income tax receivable; (iii) a $0.8 million increase in accounts receivable; and (iv) a $2.0 million change in operating lease liabilities; partially offset by a $6.1 million decrease in prepaid expenses and other assets due to timing of expense recognition for our research and development costs.
Net cash used in operating activities was $160.9 million for the year ended December 31, 2024, which was driven by a net loss of $187.4 million and $11.4 million net cash used by operating assets and liabilities, partially offset by non-cash charges, including $34.9 million of stock-based compensation expense, $1.8 million in lease expenses and $1.2 million in depreciation. The $11.4 million of cash used by operating assets and liabilities was primarily comprised of (i) a $10.2 million increase in prepaid expenses and other assets due to timing of expense recognition for our research and development costs; (ii) a $2.6 million increase in accounts receivable; and (iii) a $1.3 million change in operating lease liabilities, which was partially offset by a $2.7 million increase in accounts payable and accrued expenses to support the advancement of our programs.
Cash Used in Investing Activities
Net cash used in investing activities was $1.6 million and $1.9 million for the years ended December 31, 2025 and 2024, respectively. The cash used in investing activities in each period was due to purchases of property and equipment.
Cash Provided by (Used in) Financing Activities
Net cash used in financing activities was $378.5 million for the year ended December 31, 2025, which was primarily related to $375.0 million used to repurchase shares of common stock via the ADAR1 Repurchase Agreement, the Pontifax Repurchase Agreement and the Tender Offer and $3.9 million in cash paid for direct expenses associated with the Repurchase Agreements and the Tender Offer, which was partially offset by (i) proceeds from short-swing profit settlement of $0.1 million, (ii) proceeds of $0.1 million related to issuance of common stock under the employee stock purchase plan; and (iii) proceeds of $0.2 million related to exercises of options to purchase common stock.
Net cash provided by financing activities was $391.8 million for the year ended December 31, 2024, which was primarily related to (i) net proceeds of $151.1 million received from our public offering of common stock in January 2024, after deducting underwriting discounts, commissions and offering expenses; (ii) net proceeds of $228.6 million received from sales of our common stock under the ATM Program, after deducting sales agent commissions and offering expenses; and (iii) proceeds of $12.1 million related to exercises of options to purchase common stock.
Contractual Obligations and Commitments
We may incur contingent payments upon our achievement of clinical, regulatory and commercial milestones, as applicable, or royalty payments that we are required to make under the MGH Agreement pursuant to which we have in-licensed certain intellectual property. Due to the uncertainty of the achievement and timing of the events requiring payment under these agreements, the amounts to be paid by us are not fixed or determinable at this time and are excluded from the table below.
Under the terms of the MGH Agreement, we are obligated to pay MGH designated amounts when any licensed product achieves certain developmental milestones. Following the commencement of commercial sales of the licensed products, we will pay designated amounts when certain milestone events occur. The development milestones and commercial milestones range from $50,000 to $10.0 million depending upon the significance of the particular milestone. We are also required to pay MGH royalties on all sales of licensed products, with such royalties ranging from the low-single digits to mid-single digits of sales, as well as royalties ranging in the low-double digits of sublicense income depending on the stage of development of the relevant product or process when the sublicense is granted.
In October 2025, we announced that we plan to distribute 25% of any net cash proceeds we receive on or before December 31, 2028 from the Takeda Agreement to our stockholders.
Operating Leases
Our lease commitments reflect payments due for our lease and sublease agreements for office and laboratory space in Lexington, Massachusetts that expire in 2031 and 2029, respectively. As of December 31, 2025, our contractual commitments for our leases were $22.0 million, which will be paid over the term of such leases. For additional information on our leases and timing of future payments, please read Note 13, Leases, to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Purchase Commitments
We enter into agreements in the normal course of business with contract manufacturing organizations for process development, raw material purchases and manufacturing services. These contracts typically do not contain minimum purchase commitments and are generally cancellable by us upon written notice. Payments due upon cancellation consist of payments for services provided or expenses incurred, including noncancellable obligations of our service providers, up to the date of cancellation and, in the case of certain arrangements with contract manufacturing organizations, may include noncancellable fees. Under such agreements, the exact amounts owed by us in the event of termination will be based on the timing of the termination and the exact terms of the agreement. As of December 31, 2025, we have committed up to approximately $1.6 million under these agreements which are expected to be paid through 2029.
Critical Accounting Estimates
This management's discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of our consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, costs and expenses and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.
While our significant accounting policies are described in greater detail in Note 2 to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements.
Revenue Recognition
To date, our revenues have consisted solely of payments received related to research collaborations and licensing of intellectual property. We apply the revenue recognition guidance in accordance with Financial Accounting Standards Board, Accounting Standards Codification, or ASC, Subtopic 606, Revenue from Contracts with Customers, or ASC 606. Under ASC 606, we recognize revenue when our customers obtain control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services.
To determine the appropriate amount of revenue to be recognized for arrangements determined to be within the scope of ASC 606, we perform the following five steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) we satisfy each performance obligation. We only apply the five-step model to contracts when it is probable that we will collect consideration we are entitled to in exchange for the goods or services we transfer to our customer. All variable consideration, including milestones and royalties, is constrained until the cumulative revenue related to the consideration is no longer probable of reversal.
If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation on a relative stand-alone selling price basis. We must develop assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified in the contract. We utilize key assumptions to determine the stand-alone selling price, which may include other comparable transactions, pricing considered in negotiating the transaction and the estimated costs.
The consideration allocated to each performance obligation is recognized as revenue when control is transferred for the related goods or services. If the license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, we recognize revenue from consideration allocated to the license when the license is transferred to the customer and the customer can use and benefit from the license. For performance obligations which consist of licenses and other promises, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.
We receive payments from our customers based on billing schedules established in each contract. Upfront payments and fees are recorded as deferred revenue upon receipt or when due until we satisfy our obligations under these arrangements. Amounts are recorded as accounts receivable when our right to consideration is unconditional.
Accrued Research and Development Expenses
As part of the process of preparing our consolidated financial statements, we are required to estimate our external research and development expenses. We make estimates of our accrued expenses as of each balance sheet date in the consolidated financial statements based on facts and circumstances known to us at that time. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense. In accruing research and development expenses, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, we adjust the accrual or the amount of prepaid expenses accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low in any particular period. To date, there have not been any material adjustments to our prior estimates of accrued and prepaid research and development expenses.
Stock-Based Compensation
We account for all stock-based compensation awards granted to employees and non-employees as stock-based compensation expense at fair value. Our stock-based awards include stock options and restricted stock unit, or RSU, awards. The measurement date for awards is the date of grant. For stock-based awards that vest based on service conditions, stock-based compensation costs are recognized as expense over the requisite service period, which is the vesting period, on a straight-line basis. For stock options and RSUs with performance conditions, stock-based compensation costs are recognized as expense using the accelerated attribution method when it is probable that the performance condition will be achieved. Our Black-Scholes option-pricing model requires the input of subjective assumptions, including the expected volatility of the price of our common stock. We lack company-specific historical and implied volatility information. Therefore, we estimate our expected stock volatility based on the historical volatility of a group of publicly traded peer companies, weighted with our own historical volatility for the period during which our stock has been publicly traded. These estimates involve inherent uncertainties and the application of management's judgment. If factors change and these assumptions either increase or decrease, our stock-based compensation expense could materially differ in the future. Stock-based compensation expense is classified in the accompanying statements of operations based on the function to which the related services are
provided. We recognize stock-based compensation expense for the portion of awards that have vested. Forfeitures are recorded as they occur. The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model.
(1)
Recently Issued Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.
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