ADAR1 Issues Statement on Keros Therapeutics' Troubling 2025 Director Election Results and Insufficient Capital Return Proposal

Rhea-AI Summary

ADAR1 Capital Management, Keros Therapeutics' (KROS) largest stockholder, criticizes the company's 2025 Annual Meeting results and capital return strategy. Directors Mary Ann Gray and Alpna Seth received significant opposition, with only 34% and 37% of shares voting for their election respectively. While ADAR1 acknowledges positive steps like discontinuing cibotercept development and reducing headcount, they argue these actions are insufficient. The activist investor demands Keros return $475M to shareholders via special dividend by Q3 2025, implement a contingent value right for Takeda partnership proceeds, and reduce costs more aggressively. ADAR1 threatens to nominate new directors at the 2026 Annual Meeting if the board maintains its current strategy.

Positive

• Company discontinued development of cibotercept in pulmonary arterial hypertension, reducing costs
• Implementation of headcount reduction to improve operational efficiency
• Company has proposed returning a portion of excess capital to stockholders
• Company has valuable Takeda partnership with potential cash flow

Negative

• Directors Mary Ann Gray and Alpna Seth received low shareholder support (34% and 37%)
• Board retaining approximately half of cash balance despite limited pipeline
• Lack of specific details on capital return terms, timing, and method
• CEO indicated excess capital may be used for high-risk, competitive indications
• Delayed implementation of cost-cutting measures

Insights

Corporate Governance Specialist

ADAR1's activist campaign against Keros intensifies with significant shareholder opposition to directors and demands for greater capital return.

The press release reveals a heightened activist investor conflict between ADAR1 Capital Management (Keros' largest shareholder) and the Keros Therapeutics board. The election results show troubling signs for Keros' leadership, with directors Dr. Mary Ann Gray and Dr. Alpna Seth receiving only 34% and 37% support from outstanding shares respectively - among the highest opposition levels for any directors in 2025 elections.

This shareholder rebellion demonstrates a major governance crisis for Keros. While the company has taken some actions - discontinuing cibotercept development in pulmonary arterial hypertension and implementing staff reductions - ADAR1 considers these steps "wholly insufficient." The investor's primary contention centers on capital allocation, with ADAR1 demanding the return of $475 million to shareholders (an additional $100 million beyond what Keros proposed) through a special dividend by Q3 2025.

ADAR1's threat to nominate new directors at the 2026 Annual Meeting signals a potential proxy contest if demands aren't met. The investor also seeks implementation of a contingent value right to capture potential cash flow from Keros' Takeda partnership. This confrontation represents a critical inflection point for Keros' governance, with ADAR1 effectively asserting that current directors lack majority shareholder support despite remaining in their positions.

Significant Withhold Votes from Directors Mary Ann Gray and Alpna Seth Underscores Need for Change and a More Disciplined Capital Allocation Strategy

AUSTIN, Texas, June 9, 2025 /PRNewswire/ -- ADAR1 Capital Management, LLC (together with its affiliates, "ADAR1" or "We"), the largest stockholder of Keros Therapeutics (Nasdaq: KROS) ("Keros" or the "Company"), today issued the following statement regarding the results of the Company's 2025 Annual Meeting of Stockholders (the "Annual Meeting"):

"We believe the outcome of the Annual Meeting underscores what we have consistently conveyed to Keros' Board of Directors: there is broad and growing concern among stockholders regarding the Board's capital allocation decisions and fidelity to stockholder interests.

ADAR1 previously disclosed its intention to withhold votes from Dr. Mary Ann Gray and Dr. Alpna Seth at the Annual Meeting. These two directors received among the highest level of shareholder opposition of any directors standing for election in 2025. In our view, this result reflects a substantial loss of stockholder confidence in the Board and clear dissatisfaction with the status quo. With only approximately 34% of outstanding shares voting to elect Dr. Gray and only 37% voting to elect Dr. Seth, the Board must recognize the widespread dissatisfaction with its stewardship of the Company.

We appreciate the Company's recent decision to discontinue development of cibotercept in pulmonary arterial hypertension and, finally, implement a reduction in headcount. While these delayed actions are directionally positive, they are wholly insufficient and, in our view, are overshadowed by the Board's baffling decision to return only a modest portion of the Company's excess capital to stockholders.

We can think of no credible justification for the Company to retain approximately half of its cash balance given its limited clinical pipeline and commercial prospects. In fact, at an investor conference today, CEO Jasbir Seehra acknowledged that the capital being held exceeds what is needed to fund the Company's current DMD program and may instead be used to pursue other high risk, hyper-competitive indications. Even more troubling is the lack of detail around the proposed capital return ― including the Board's failure to specify the terms, timing and method ― despite its claims to have completed a "thorough" and "comprehensive" review of strategic alternatives. In our view, this reflects a haphazard and incoherent approach to decision-making.

In order for the Board to follow through on its stated commitment to maximizing value, it must take immediate and concrete action to reduce costs more aggressively, commit to returning $475 million (i.e., an additional $100 million over the currently proposed amount) to stockholders through a special dividend by the end of Q3 2025, and ensure that stockholders can directly capture the potential cash flow from the Takeda partnership through a contingent value right or similar mechanism, which should be implemented no later than year-end.

ADAR1 continues to believe Keros possesses significant upside potential. But realizing that potential will require fresh perspectives in the boardroom and a disciplined, investor-focused approach to capital stewardship. Shareholders have spoken and the current directors do not have the support of a majority of shareholders.

If the Board nevertheless insists on clinging to a failed strategy, ADAR1 will not hesitate to hold it accountable, including by nominating new directors for election at the 2026 Annual Meeting. We are committed to ensuring that the will of investors is not ignored, and we will continue engaging with the Company and our fellow investors to see that the desires of stockholders are heard and respected."

About ADAR1 Capital Management
ADAR1 Capital Management is an SEC-registered investment manager based in Austin, Texas, focused on public and private equity investments in the life sciences and biotechnology sectors. The firm was founded in October 2018 by Dr. Daniel Schneeberger, who brings over 20 years of experience spanning scientific research, healthcare consulting, institutional investing, and executive leadership in the healthcare industry. He is supported by a team of experienced professionals with deep medical and scientific expertise and a strong track record of biopharmaceutical investing.

Contact:
info@adar1.com
512-254-3790

View original content:https://www.prnewswire.com/news-releases/adar1-issues-statement-on-keros-therapeutics-troubling-2025-director-election-results-and-insufficient-capital-return-proposal-302476774.html

SOURCE ADAR1 Capital Management, LLC

FAQ

What percentage of shareholders voted for Keros Therapeutics (KROS) directors in 2025?

Directors Mary Ann Gray and Alpna Seth received approximately 34% and 37% of shareholder votes respectively, indicating significant opposition.

How much capital return is ADAR1 demanding from Keros Therapeutics (KROS)?

ADAR1 is demanding Keros return $475 million to shareholders through a special dividend by the end of Q3 2025, which is $100 million more than currently proposed.

What changes has Keros Therapeutics (KROS) recently implemented?

Keros has discontinued development of cibotercept in pulmonary arterial hypertension and implemented a reduction in headcount.

What actions is ADAR1 threatening if Keros Therapeutics (KROS) doesn't comply with demands?

ADAR1 threatens to nominate new directors for election at the 2026 Annual Meeting if the board maintains its current strategy.

What is ADAR1's position in Keros Therapeutics (KROS)?

ADAR1 Capital Management is the largest stockholder of Keros Therapeutics.