3 Keros Analysts On Why Biopharma Is A Compelling Investment Opportunity

Keros Therapeutics Inc KROS, a clinical-stage biopharma focused on the development of treatments for rare hematologic and musculoskeletal disorders, went public in April. 

With the IPO quiet period expiring, analysts are starting coverage of the stock — and adopting a bullish stance.

The Keros Analysts

SVB Leerink analyst Thomas Smith initiated coverage of the stock with an Outperform rating and $42 price target.

Jefferies analyst Eun Yang initiated Keros at Buy with a $37 price target. 

Piper Sandler analyst Danielle Brill initiated the stock at Overweight with a $35 price target.

Lead Asset Has Blockbuster Potential, SVB Leerink Says

Keros' lead asset KER-050 is a Phase 2-ready ActRIIA-Fc fusion protein meant to promote red blood cell and platelet differentiation and maturation in both early and late-stage hematopoiesis, SVB Leerink analyst Smith said in a Monday initiation note. 

The analyst sees the success of other TGF-beta ligand traps such as Acceleron Pharma Inc XLRN and Bristol-Myers Squibb Co BMY's anemia correction agent Reblozyl as providing proof-of-concept and partially de-risking the opportunity for KER-050 in myelodysplastic syndrome.

KER-050, which has multiple differentiated attributes relative to Reblozyl, has blockbuster potential, with an estimated $1.9 billion in worldwide peak revenues, he said. 

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Meaningful Upside Likely, Jefferies Says

Keros' KER-050 could potentially treat all stages of myelodysplastic syndrome patients as opposed to Acceleron's Reblozyl, which addresses only about 15% of myelodysplastic syndrome patients, Jefferies analyst Yang said. 

The analyst said he expects the Phase 2 study in myelodysplastic syndrome-associated cytopenias to begin in the second half of 2020, with preliminary data likely by year-end 2021.

If successful, Yang forecasts over $1 billion in sales potential for KER-050 in the U.S./EU combined. In myelofibrosis-associated cytopenias, the analyst estimates an incremental $445 million opportunity in 2030.

Jefferies sees further upside from Keros' additional pipeline products such KER-047 and KER-012 if these products prove successful.

All these offer meaningful upside to the stock's valuation, the analyst said. 

A Compelling Opportunity, Piper Sandler Says

KER-050 appears to be differentiated from Reblozyl in that it has the potential to address more difficult to treat anemias as well as other cytopenias, Piper Sandler analyst Brill said.

The analyst also noted that the company's second asset — KER-047 — is in development for fibrodyplasia ossificans progressiva and anemias of high hepcidin. Although carrying a higher risk, the analyst sees the 047 program as "free upside at KROS' current valuation."

"In summary, we think Keros is a compelling investment opportunity given the power (and external validation) of their lead asset and therapeutic platform to drive future value creation," Brill said. 

KROS Price Action

After closing the debut session April 8 at $20.08 compared to the IPO price of $16, Keros shares rose to a high of $31.50 April 29 but have since then given back some of the gains.

At last check, the shares were adding 1.04% to $29.10.

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