Yet Another Value Podcast - Avoiding the Zombie Biopharm trap at Keros $KROS

Episode Date: April 9, 2025

In this episode of Yet Another Value Podcast, host Andrew Walker returns for a solo discussion on Keros Therapeutics (KROS), a biotech firm navigating a dramatic fall from grace. Once buoyed by hopes for its leading drug Cybo (KER-012), KROS is now reeling from halted trials and a steep drop in share price. Andrew lays out the case for why this company, despite setbacks, may still hold considerable value. He explores KROS's licensing deal with Takeda, their significant cash reserves, and questions surrounding its future direction. Calling on shareholder alignment and corporate governance, Andrew challenges listeners to consider whether KROS is veering into zombie biotech territory—or poised for a smart pivot.Stat+ article on zombie biotechs and Sutro: https://www.statnews.com/2025/03/19/sutro-bio-biotech-luvelta/Chapters:[00:00:00] Sponsor and Intro[00:03:00] Recap of Sage Pharmaceuticals as a case study in shareholder value.[00:04:48] Introduction to KROS and its recent setbacks, including Cybo’s trial halt.[00:05:05] Defining the “zombie biotech” phenomenon and why it matters.[00:08:21] Misaligned incentives between management and shareholders in troubled biotechs.[00:10:04] Why KROS’s partnership with Takeda could be its most valuable asset.[00:13:14] Review of KROS’s three main drugs: Cybo, 065, and 050 (licensed to Takeda).[00:14:55] Risk-adjusted value potential of KROS’s royalties from Takeda deal.[00:17:01] Mixed data from 065 and skepticism from analysts.[00:18:09] Potential but doubtful value remaining in Cybo post-trial shutdown.[00:18:40] KROS’s massive cash balance vs. market cap and implications for shareholder returns.[00:20:05] Breakdown of 2023 overhead and burn rate concerns.[00:21:53] Call for drastic cost cuts and corporate reevaluation.[00:23:36] Analysis of board alignment and concern over lack of urgency.[00:25:44] Why KROS no longer needs a science-heavy board.[00:28:44] Shareholder engagement as a tool to prevent value destruction.[00:31:33] Encouragement for listeners to contact the board and advocate for value-maximizing outcomes.Links:See our legal disclaimer here: https://www.yetanothervalueblog.com/p/legal-and-disclaimer

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With me today, I'm happy to have on myself. I'll talk about why in a second, but before we get there, first, quick reminder, if you like this podcast, it would mean a lot if you could rate, subscribe, review wherever you're watching or listening to it. I always say that, but, you know, I will say I'm a big basketball fan, and Zach Lowe just launched a podcast. I think it comes out today. I'm taping this on Monday, April 7th,

and his podcast already has more reviews than my podcast does. And he hasn't even published an episode yet. So, look, obviously, his viewership is 100,000 times mine, but if you're watching, it really does mean a lot if you rate subscribe reviews. So five stars, please. That out the way. Second thing, disclaimer, remind everybody that nothing on this, podcast is investing advice. That's always true, but particularly true today. Obviously, I am quite

long the stock that I'm going to mention, but I'll just remind everyone with that disclosure, also nothing in this podcast is financial advice, not investing in advice, consult a financial advisor, do your own work, all that jazz. You know, I just, I don't know, I don't know why anyone would listen to anything I have to say. So that all out the way. I am coming to you today for another single stock discussion. Look, I've done two of these so far this year. And the one that's really relevant to this discussion is the last one I did. It was on Sage. The ticker there is SAGE. And for people who don't remember, you should go listen to that podcast. I think it's a great idea. I'm still long it. I hope and expect they will do the right thing and sell themselves.

But the basics of that was Sage was trading for well below cash. BioGen, who owns about 10% of them and is partnered with them on an asset, made an offer to buy them at around cash. And obviously, that offer is a non-starter. But I said, hey, Sage, when you look at this, you are now a one drug company. The market was valuing you below cash. It is time to to wrap this up and sell yourselves. And I really believe in shareholder engagement. If somebody can point me to a better risk-adjusted means of creating value for SAGE shareholders, of which, again, I am one, I am open-minded. I am very willing to listen. I am very willing to discuss it, but I don't see a better risk-adjust about than that.

So unless someone can point me to there, Sageboard, I think you should sell shareholders. I believe in engagement. I'm not trying to form a group with anyone. But, you know, I think you should communicate to the SAGE board what your views are. And if you agree with me, you should let them know that. And if you don't agree with me, you should tell them a different reason and why you don't agree with me and why you think they should pursue a different path. But you should really let them know that you expect them to maximize shareholder value. And whatever that is, you will be holding them accountable for maximizing the shareholder value.

So I give you that background because one other thing, most of the viewership of this podcast is audio, not video. Because it is just me, I am going to be doing a, I'm going to be sharing a slide. deck. So if you want to switch over to the YouTube's and watch this on video, you will be able to watch, you will be able to view that deck. However, I will try to say everything out loud. So if you're listening on audio, you'll get, you know, 99% of the experience is my hope. So that all not the way. Let's hop into it. The company I'm going to talk about today is KROS. And let's see if I can get my screen share working here. Okay, we're going to get the screen share one second. But the company we're talking about today is.

is KROS. Again, disclosure, I am Long. And I am entitling this presentation, escaping the zombie biotech problem. So let's dive in. If you're watching, if you're watching on the YouTube, there's the disclaimer slide,

but I already did disclaimer. I'm not a financial advisor. Please consult you have a financial advisor to your own work, blah, blah, blah, blah, blah, blah. Okay, so why am I talking? Look, if you follow the blog, another value blog.com, you should, it's great blog.

I put a lot of work, effort, love into it. You know, recently I've been obsessed with biotex trading below cash. And I, there are a lot of what, I really like this term. It's called zombie biotex. It was coined by a writer at Stap Plus, I believe, Adam. And a zombie biotech is a company that is trading for well below net cash. So you know, there's a company that has 300 million in net cash, and it trades for 150 million.

And at that point, when a biotech trades below net cash, it's actually not anymore about the science there. In my opinion, it is about corporate governance. You know, this market is signaling to the company, you are worth less than your cash because we believe every dollar that you spend will be effectively lit on fire. You're taking a dollar and turning it into 50 cents. We think you are spending it on needless R&D. We think you're spending on needless corporate overhead, all that sort of stuff, right? That's what the market is saying.

And it is incumbent on the company, in my opinion, to either prove the market wrong or return the capital to shareholders. Now, the issue is, Adam coined it the zombie by. biotech problem. The issue is a lot of these small biotechs, you know, they go out, they raise $500 million on one drug, the drug's going to be a blockbuster, you know, everybody's hoping for the best, everybody thinks it's going to literally cure cancer, right? That's what some of these drugs are doing. And the drug comes up snake eyes, right? The drug comes up snake eyes and it's a failure. What happens? Well, the company now has $500 million

of cash in the bank, and the market cap changed down to $250. And insiders and directors say, hey, we're all really smart. Why don't we just go buy another drug and try and turn that drug into the cure for cancer? And then we'll be worth $5 billion again. Isn't that a great idea? And the answer is actually no. From a shareholder perspective, that's a terrible idea, right?

If shareholders want to bet on this company, this management team, this board of directors going and finding a new drug, they should do it in completely new shell, right? Some costs or some costs, go do it a new shell. This management team should go out and raise the money from investors to say, hey, I like to invest in this drug, I want you to back me again. They should not have the God-given right to go and invest that $500 million. Capital allocation efficiency says that $500 million would be better distributed to investors,

and then that management team, if they can raise the money from investors, can go get them or new investors. Or maybe investors say, hey, I don't want to invest you at $500 million. I want to invest in you at $250 million, so they can go raise $2,000, whatever it is. But that's what capital efficiency says. However, the insiders and directors often own no stock, or they own a bunch of stock that was priced at, you know, $3 billion at the IPO and a bunch of options that was priced at $3 billion at the IPO and now are way, way out of money. So they have a little bit of a heads I win, tails I don't lose scenario, where if they go out and they try to buy a drug and turn it into a $5 billion, if they're successful, well, then cool, all their options go into money, they're going to get big bonuses for discovering this hidden gem. They've got job security for decades, all this sort of stuff, right?

So heads they win. Tails, the drug fails. Well, because they spent five years investigating this drug, they got five more years of bonuses, salaries, being a publicly traded CEO or board member. All of those are valuable. They got five more years of that. Did they like the $500 million on fire? Yes.

But again, they weren't shareholders. They don't care that the stock is down another 90%. They got five more years of salaries, five more years of importance. They got a free lottery ticket. The only people who lose are shareholders. So that's a zombie biotech. It's a company that's trading below net cash. And often the most important thing is there's not a lot of insider alignment.

And the stat plus article that I mentioned that kind of coined the zombie biotech phrase, which again, I love, one of the ones that they mentioned is Sutro Bio. And I have no opinion on this company, no position in this company. But it got really popular because it was specifically called out as a biotech as a biotech zombie. And if you look, I've included on the slides from the last proxy, the insider ownership table of Sutro Bio. And if you look, you can see insider ownership among the directors and executive officers is extremely limited.

So, you know, a lot of them have way out of the money stock options, but there's very little actual ownership. So I think one of the reasons Sutro Biotech joins that Biotech zombie army is because there's very little insider ownership. Again, I don't know anything about it, but it's become very popular because of that article. So that's an example of the biotech, the zombie biotechs. And if you've been listening to my writings or following along with me, you know, that right now, I think there is a borderline generational opportunity in these biotech zombies, you know, and there's two reasons for

this. One, biotech is just so washed out right now. You know, the biotech zombies used to trade for 60% of net cash. Today, a lot of them are trading for 20, 30, 40% of net cash. So the discounts are much larger, and it's so washed out that I think there are companies that are trading for 50% of net cash, and the previous biotech zombies had no assets outside of their cash. I think there are several companies that have, you know, kind of crown jewel assets over and above that net cash they're trading for. And, you know, one that I would mention is Sage, the company I talked about last time. You know, they trade below net cash, and they have a partnership and a drug that I think is going to be a blockbuster drug. And another one is the company I'm going to talk about today,

KROS. So I wrote a weekend thoughts why this time is history for a busted biofarm. I'll include a link to part one, which was history and hypotheticals, which kind of dove more into this in the show notes. And I plan on posting part two, probably next week. So that's the history and the overview of the biotech zombies. Let's turn to the company that I want to discuss today. KROS, KROS. KROS has three main assets. If you read their most recent investor debt. Those main assets are Cybettercept. Look, I only read stuff. I don't really listen to stuff. I have listened to these guys talk, but I'm really bad at pronunciation. It can tell me it's wrong. I call it Scibo. It's KER 012, for the most part. That's asset

number one. Asset number two, neuromuscular drug in phase one, just completed phase one, actually, 065, haven't named it yet. So I don't have to struggle through pronunciation. And asset number three, KER 050, which they partnered with Takeda in December of last year. So those are the three main assets, if you read the company's investor deck. And if you're watching on the slides, this is a slide taken from January of this year. So this is what they say, hey, here are our main assets, and they dive into each of them. Now, if I had been recording this podcast six months ago, the only asset we'd really have been talking about, the partnered asset would have been talked about, but the big asset people were talking about was side-go.

You know, I've got a clip here from, I don't like to read a lot of sell-side research, but I do think it'd be useful for getting some history. And I've got a clip here from Jeffrey's research in early November. They initiate KROS at a buy. The stock is at 60. They've got a price target of 107. And the thing they're mentioning is Saibo and its opportunity in PAH,H, right? So that's really what's driving the stock price.

Again, here's another sell side. December 11th, and that date will be very funny in a second. December 11th, Wells Fargo. Hey, we're increasing our price target on Keros from 88. to 111. The stock's at 66. Why are we doing it? Because Saibo's Phase 2 trial is probably going to read out in 2025. We think it's a huge catalyst. We think it's going to be a game changer. We think it's going to be a blockbuster. You want to be involved ahead of that because the stock's going up when they announced

successful data. You probably can guess where this is going, given I said that date's going to be funny because on December 12, one day after that research, a report comes out. KOS announces that they are stopping the Sibo trials because they've had some safety issues. They're stopping it, and they eventually shut it down in January, and the stock price goes from mid to high 60s to the next day it opens at 18, and here we are a few months later, stock drip, drip, drip, drip, drips down.

We're talking about under $10 per share today. So Saibo was the story here. Saibo is off the table. Again, it's got, we'll actually, we'll talk about it. It might not be completely off the table, but Saibo was the story and it's destroyed and the stock is destroyed. Shareholders are devastated, blah, blah, blah, blah, blah.

So with that in mind, let's revisit. Keros is three key assets. So you've got Saiba, which is in phase two and shuts down the trials. You've got 065, which a week or two ago, they report phase one results. We'll talk about that. And then you've got the partnership of Takeda. So those are the three key assets. And I think the Crown Jewel here is the Takeda partnership. So about a week before they announced that Scyba the trial is getting stopped, they announced that Loretta intercept, 050 is what I call it, they are partnering with Decatur. And the partnership is some, actually, it's a license agreement.

I keep saying partnership, it's a license agreement. They license the drug to Decatur. Decada basically takes over 100% ownership of this road. They will cover all costs going forward. And in return, they give KROS $200 million up front. And in addition, they give them over a billion dollars of milestone, of potential milestone payments, plus royalty payments that range from the low double digits to the high teens depending on kind of how much it sales for and everything.

These are enormously valuable, obviously, the $200 million, that's great. But the real value here is actually the NPV, the risk-adjusted NPV of the milestone and royalties. You know, if you go, Takeda's a publicly traded company, it's a real pharma company, it's publicly trading in Japan. If you're watching on the YouTube, I've got a clip from one of Takeda's investor relations debts that they publish right after they enter this license agreement. And they say, hey, why did we license this?

We think that it has the potential to be a best-in-class treatment. We think the peak revenue of this drug is $2 to $3 billion per year. Now, again, I just told you that KRS will get low double-digit to high team royalties. You imagine $2.5 billion, $15-percent blended royalty rate. You're talking about $300 million plus of annual royalties if this is successful. Will it be successful? Look, I don't know. they're about to start phase three, undergoing phase three, you'll probably know if this is

getting improved in 2008-ish. I think if you look at the history of phase three trials and this indication, roughly 50-50, maybe a little bit better than 50-50. Maybe once you start saying, hey, that's the base case, but you've got Decatur writing a really big check. They obviously really researched it. The phase two results were really good. Maybe it's materially better than 50-50. I don't know. But I think the risk-adjusted NPV here, is probably in the $4 to $600 million range, the risk adjusted of the milestones and royalty payments. That's, you know, discounting for time, saying, hey, 50% chance is zero, 50% chance of success, all that sort of stuff. Obviously, if it's success, this will be worth substantially more

than $500 million, but, you know, you have to risk adjust that time weight and all that. Anyway, so I think this is the key asset for the company. I estimated at, let's just call it 500 million to make the math easy. As we are talking KROS is trading for $10 per share, that's about a $400 million market cap. So I think this royalty and milestone payment alone, risk-adjusted, is worth more than the market cap. And if it is successful, it will be worth multiples more than the market chip cap because of how that risk-adjusted and time-waiting works.

So that's the key asset for the company. There's two other assets. There's 065, which they just announced phase one results. They're targeting it at DMT. The company thinks 0-65 has significant upside potential. I've got some quotes on the left-hand side of this chart from the company in their, they did a call after they announced the results. They say, hey, we've got a robust preclinical package demonstrating the potential benefits of this drug. We believe that from the phase

one trial, we're well equipped to go to phase two. They sound pretty gung-ho about going into phase two and the upside here. I'll admit, I'm skeptical. And you don't have to believe me. I would just point you to what cell side analyst said on the heels of this trial. So, you know, I've got two quotes. One of them is at the current stage, we leave 065 for, future upside, and then they go on to say, we're not including 065 in some of the parts, we're waiting for more clinical data to assign valuation. And if you read the cell side, what the cell side is saying there is, we don't believe this drug has any value, but we don't want to piss off the company by saying this. So we're saying it in a really nice way. That's

what the cell site analyst is saying. So I thought the data was a little man. I think the cell side and bysiders I talk to agree that this drug doesn't seem to have crazy validation. But look, It's early. The company hasn't done the full results yet. So maybe I'm missing something. It's entirely possible. I'll just say I'm skeptical. And we'll talk about why this matters more in a second. Actually, let's talk about why this matters more. Why does this matter? No, no, no, we'll talk in a second. Let's go to the last census. The last asset is the company believes that 012, the cybo, the drug that had safety issues that they had to shut down, they think there could be value in that drug as well. They're going to unblind all the results. And then they're going to go and

say, hey, maybe it doesn't work in PAH, but maybe it works in different indications, or maybe there's a way to dose this so that it works in P.H. I'm really skeptical here. I'll tell you. I've got a clip here from Seeking Alpha published a clip of a cancer for this year old article where they downgraded KROS on the heels of the trial. They said, look, it's really hard to see a path forward here. These safety events were pretty bad, unless you can say, hey, it's just a subset or something else. I'm really skeptical, but look, if they prove to be right, that would be huge up to time. Okay, so those are your three assets. You've the CADA partnerships, 012, and 065. But there's one asset I haven't mentioned, and you probably

can guess where I'm going because we're talking about zombie biotex, and KRS has a whole bunch of cash. Again, as we're talking to stock price of KRS, around $10 per share, $400 million market cap, at the end of the year, they had $560 million in cash, and that doesn't include the $200 million they got from Takeda. That came in February of 2025, so it came after the balance sheet was published. So toss that on, they've got $750 million-ish per capita. share of cash. That's about $18 per share in cash, and their market cap is $400 million. So, again, I'm looking at this company and I'm saying, hey, you've got a company that's trading for just over 50% of net cash. They've got a very valuable potential royalty and milestone

deal from Takeda, and then they've got the two other assets that I'm very skeptical of and that the company thinks is worth quite a bit. And this is where I start worrying, right? you've got a company, and I have a clip from their 10K. In 2024, they spent $175 million, and that's fine. They were running the Sibo trial, they were running the 065 trial, and they were running the trial for a retrocept that eventually got to Cato's partner with them. You would expect a company to spend that much. You know, most of that spending was going towards the trials, as it should.

The issue is they spent about $55 million in personnel expenses. You know, that's your SG&A, your overhead, all that sort of stuff. And another $10 million on professional fees and facilities and supplies and all this sort of stuff, right? So the overhead is really high here. And that matters for two reasons. Number one, the company, you know, last year they could run high overhead. They were running big trials on three drugs that had blockbuster upside. You cannot say the same thing today, right?

Cibo, the trials have been halted. I think that drug is a zero, but at minimum, they need a lot of rebooting. Allredercept that's gone over to Cicada. The company needs to support Cicada. Right now, KRS is still handling the drug. It's going to transition to Cicada. Cicada will pay them for the ongoing support payments between the transition period.

They do need to support that. But they don't have to spend anything out of their own pocket, net out of their own pocket on that drug anymore. So you used to have three big assets. One of them's in partner. That's at the door. One of them's basically been stopped. And then you've got 06.5.

So the reason I talk about 065 is number one, they need to bring the cost down immensely, right? You were spending $55 million per year when you thought you had three blockbuster drugs that you were kind of doing in-house. Today, as we sit here, you maybe have one if you believe in the potential of 065, and again, I'm skeptical. So you need to bring that way down. The second reason I mention it is, hey, this is now a company that has gone from, hey, we've got three big phase three to support our overhead to, hey, we've got a pile of cash, a royalty and milestone deal that requires basically no management on our part, and one drug. The company needs to do right by shareholders,

and shareholders need to really think, hey, does it make sense for this to be a standalone company? You know, a one drug company that's about to go into phase two, that is a very tricky thing. Why shouldn't that drug be part of a bigger company where they can leverage their SG&A, where they can leverage their research and development function, all that sort of stuff. Like, it doesn't make a lot of sense unless you think this drug has enormous blockbuster potential for us to be managing all that in-house, right? So I say that because the status quo can't hold. This company needs to be looking at cost cuts and bringing their overhead down markedly. And the reason I am worried about zombie biotech here is, number one, the company

seems much more bullish on 065 and restarting SIBO than I personally am, and then I think most are. And number two, it has now been four or five months since Saibo blew up, four or five months since the skate deal. I haven't seen anything about bringing costs down. I haven't seen anything about right-sizing the company's cost structure. This should be a panic. This should be a priority, urgent for the company. Fifty-five million dollars per year last year in overhead. Maybe they're just not publishing it. Maybe they're just waiting. But $55 million is, this is a company with $750 million in cash and a $400 million market cap. Fifty-five million dollars is in a enormous number. It should be a pants on fire, all hands on death mission to get that number

right size because every dollar out the door needs to be weighed against, it always needs to be waved against the opportunity cost of everything. But particularly for this company, they need to reassess and say, hey, we're trading at half of cash value, ignoring the license and royalty deal. Every dollar we're spending on SG&A is a dollar that could be returned to shareholder, a dollar that could buy back our stock at half of value. I haven't seen that yet. So that's why I think the status quo can't hold, and that's why I'm publishing this. That's why I'm publishing this podcast. One of the things I like about KRS here is the board should be more aligned than a lot of the zombie biotechs I told you. Look, at the start, if you were watching the YouTube, I showed you the Sutro board, and they just

had almost no stock ownership. The nice thing I like about, the nice thing I like about KRS is you should have more alignment here. There are one, two, three, four, five, six, seven, I thought it was eight, but it looks like it's nine, if I'm reading correctly, eight or nine directors. here, two of the directors come from the largest share, or Potifix. They own 13.3%. And I just love that there's financial alignments here. A third director comes from OrmMed, who is a 13D filer and owns about 4% at this point if the proxy numbers can be believed. And a fourth director is the CEO who owns about 4%. A lot of that is in options, but a lot of that is also in stock. So you should have decent alignment here. However, I do have some concerns here, right? Like, that's less than

half the board. Half the board are people who don't own a lot of stock. And what I worry about here is you have a lot of board members who have great backgrounds. They're much better on science and drug trials and all this sort of stuff than I will ever be. They've got great backgrounds there. But the stock, last year, that's what you needed. You were running three trials. This year, one of the drugs is no long, I think there's no path forward. You're trading for half of net cash. You've only got one drug that just went through phase one trials. I don't know if this company means four or five board members with a lot of farm expertise. This company is screaming out to me, we are a capital allocation.

We are an M&A. We're a corporate governance story. You know, I think this board is, I'm sure, I know a lot of fund managers and investors think every board needs more investors, more people with financial expertise. I think they sometimes forget that, hey, you know, this is a company that's doing, complex science, like they need people who understand scientists or engineering or whatever it is. In this case, I don't think that's true. Again, the company's 400 million market cap, $750 in cash, and royalties and milestone payments that don't,

roasting in milestone payments that they're going to get if the drug's approved and they're not going to get if the drug's not approved. I don't think you need a board with a lot of drug experience or anything. I think this is a board that's screaming out, we need people with more financial expertise. We need more shareholders. We need people who are fully aligned with us. So look, that's why I'm making this podcast. I think KROS is a really interesting idea. It's one of my favorite ideas out there. You have a company trading for almost 50% of net cash with a royalty a milestone deal that I think is also worth the stock price.

I think that gives you an enormous margin of safety. But I'm worried that this could go the zombie biotech route. So I'll leave you with this. If you listen to my stage podcast, you know that I said, I'm a big believer in shareholder engagement and shareholder alignment. I think that's this KROS is another example of what I call the Penny example. So for those you watching the YouTube, I've got my dog Penny and I'll just use any excuse I can to get Penny on the podcast. And you'll know the story if you listen to the stage podcast, but I use it like this.

When you have a dog, there are two types of leave it. When you're walking a good girl like Penny and you see a chicken wing on the street, if she's a good girl, you can tell her to leave it, and she will leave it. You know, she wants that chicken bone. Dogs love chicken bones, even if chicken bones don't love them. But if you tell a good girl to leave it, they're not going to go, they're going to forget that bone ever exists. They know you're paying attention, and they know that they can't have that chicken bone.

But even a good girl like Penny, if you're walking her and she sees a chicken wing, and you're not paying attention, you know, you're on your head finder talking on a call, and the chicken wings out of corner. So you walk right next to the chicken wing, and then it's, a red light, so you stop, and she sits right next to that chicken wing for 30 seconds. Well, eventually, Pennie's probably going to put that chicken wing in their mouth. And that's where you come into the second type of leave it, where, you know, you've got to go and grab her mouth and put your hand in and start pulling out the chicken bone, and you're

screaming, leave it, leave it, leave it, leave it. So I think there are two routes that zombie biotex come to see go. The really small ones where they're too small for shareholders to really get engaged for one reason or another, those are the ones where shareholders are just screaming, leave it, leave it, leave it. and they're kind of protected by their size, right? My hope and expectation is KROS is one of the good girls. You can tell them to leave it. I have communicated to the management team and the board and everything

that I'm a concerned shareholder and I own a lot. And I want the stock price to go up and I want the company to work. And I think the best way for not just the stock price to work, but for patients to be served here is for them to go and then to take their drugs and say, hey, we're going to sell these things. We're going to sell them to someone who's better equipped to develop them, commercialize them, support them, and all that. Because, again, Keros is a company that has $750 million in cash, and that's it.

They don't have a sales force. It makes no sense for a company like this to go on a exotic quest to develop these drugs, because on the back end, even if they're successful, they're going to have to cut corners. They don't have commercialization attempt. It makes no sense on any lines for this company to develop these drugs at this point in stage. They should go sell them to people who can better support. them, better commercialize them, all this type of stuff. And I think the company, I say, well, yeah, but if they're bad girls, they might say, well, yeah, we could try to sell them, but

nobody wants to buy these drugs for us. And I would say, that's your answer. If you're developing this drug and you're spending, remember, you're spending $55 million per year on overhead, plus you're developing these drugs, $10, $20 million for trials, all this sort of stuff. And you say, hey, nobody else would spend the money to develop this. That's your answer. Everything else is a sunk cost. You have $750 million in cash. If no one else would develop these drugs, then these drugs should not be developed, return the money to shareholders, and unfortunately, rat the program's up. If you said, hey, we would sell them, but we think these drugs are worth a billion dollars, and everyone else will, the top dollar we can get from everyone else is $750 million.

I would say, hey, guess what? You're going to burn more than, that's a $250 million valuation difference. You're going to burn more than that in SG&A, an overhead, in everything, developing the drugs because you're a one company asset. Unfortunately, even though you think you're getting shortchange by $250 million, the NPV of selling for $750 now versus developing and getting to that billion dollar valuation, it makes more sense to hit the bid and sell for $750 million now, to say nothing of all the other things of risk-adjusted opportunity costs and everything I'm talking about. Just sell the drug. So I think it's pretty clear to me that if you're an engaged shareholder, if you're an engaged board, if you're looking to maximize a value,

it's pretty clear to me the path is straightforward. You need to wrap this up. You need to drastically reduced costs. You need to sell SIBO. You need to sell 065. It's the highest bidder. If no one will bid them, then the market is telling you that these drugs are, they're as skeptical of these drugs as I am. And guess what? This is shareholders money. If no one else will develop these drugs, then you need to wrap it up. And management, if you think the market is wrong, if you think every other advisor is wrong and you want to develop these drugs, you should buy these drugs and you should go develop them on your own. But just because in the past, $750 million has been put into this company, that does not give you the God-given right to

spend all $750 million chasing at windmills and developing fruitless programs. So again, why am I saying this? Because that's the bad girl route, right? The bad grow route is we're going to spend the $750 million come hell or high water. The good thing is we're going to maximize shareholder value and shareholders are just reminding us to maximize shareholder value and that they're watching. I'm publishing this because I'm an engaged shareholder. I think this is a fantastic opportunity, and I am letting the board and management and everyone know the hope and expectation I have, that they will go the good girl penny route, that they will maximize shareholder value, that they will maximize risk-adjusted value, and that is the route

they will go. I'm publishing this because I believe in shareholder engagement. If you, you know, whichever route you think management should go, and you can do lots of research on this company, you can research each individual drug. If you research in each individual drug, and you're like, Andrew, I think that's a route that I think 065 is going to cure every disease known to mankind, and I think it's worth a trillion dollars, and we can't give up a penny of that. If you truly believe that, you should go let management know that, right?

You should tell them, hey, accelerate the R&D, all that sort of stuff, if that's what you truly believe. But I just think this is a company trading for 50% of net cash. Shareholders should let the board know what they, what needs to be done to maximize shareholder alignment here, to maximize shareholder value here. And I don't want this to go the zombie buyout. So that's why I'm publishing this article. Again, I am very much talking my own book.

I am along with the stock. I hope you agree with me and you'll communicate to the board, to the management team, to the investor relations. You can go on the company's website and find all that contact information. If you agree with me, do it. Again, this is a situation where 50 shareholders email them and the board kind of starts kind of knows and says, oh my God, we've got 50 shareholders who are emailing us saying they're going to hold us accountable.

We need to maximize shareholder value. They don't want us to spend this cash. They think it's NPV negative. It's incumbent on the board of management team to do one of two things. Prove shareholders wrong. Go release more data. Get shareholders talking. Have shareholders come and buy the stock on the hope, on the hope and expectation that these

drugs are NPB positive. And then when the market price reflects that, you can go through that. That's number one. And number two, if you can't do that, you got to wind it up. You've got to wind it up. Okay. I've rambled. I've rambled.

I've rambled. I've left you with a picture of my good girl Penny. Again, I am long KROS. I hope and expect my fellow shareholders will communicate with the board. whatever their views are, what they think the board should do, I think this, I think Farma overall is a really interesting opportunity right now. I think this is right at the top of the most interesting opportunities I see out there. It is Monday, April 7th.

I am wrapping up, and I thank you for your time. We'll chat later this week. Today's episode is brought to you by AlphaSense, the market intelligence platform I rely on for faster, deeper insight. If you've used platforms like Teas, you'll feel right. right at home. But Alpha Sense takes it further. With over 150,000 expert call transcripts and 450 million plus premium documents, it's become my go-to resource for qualitative and competitive research. And now, with generative AI tools like GenSearch and GenGrid, AlphaCense makes it

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Try it for free today at AlphaSense.com slash YAVP and experience the future of research. That's AlphaSense.com slash YAV. A quick disclaimer. Nothing on this podcast should be considered investment advice. Guests or the hosts may have positions in any of the stocks mentioned during this podcast. Please do your own work and consult a financial advisor. Thanks.