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Dive Brief:
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Keros Therapeutics shares plummeted Thursday after the company said researchers conducting a Phase 2 study have stopped giving patients the two highest doses of its lead experimental drug because of reports of excess fluid buildup in the pericardial sac around the heart.
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The Tropos trial is designed to test three doses of Keros’ cibotercept in patients with pulmonary arterial hypertension who are already receiving other therapy for the condition. After reviewing the reports of pericardial effusion, company executives and independent monitors decided the trial could go on for patients receiving the lowest dose, but halted research of higher doses.
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“This is an unanticipated observation in this trial,” CEO Jasbir Seehra told analysts and investors on a conference call. “We will be doing further work to try to understand it, but it is unanticipated based upon all the biology that we understand from preclinical and healthy volunteer studies.”
Dive Insight:
Investors had viewed cibotercept as a potential improvement on Merck’s Winrevair, which analysts view as a potential $5 billion-a-year seller. Part of the case for the Keros drug was the possibility for better safety than Winrevair as well as a chance at superior efficacy at higher doses.
Though Keros will continue to test a lower dose in the Tropos study, investors clearly have lost faith in the medicine. Keros shares tumbled 77% early Thursday, wiping out more than $2 billion of market value.
“We believe the clinical setback will make it difficult to regain investor interest in cibotercept, which was the company’s lead program and main value driver,” William Blair analyst Matt Phipps wrote in a note to investors. While the lower dose “could show a favorable benefit/risk profile, we believe it will take more data to convince investors and physicians” and ultimately to compete with Merck, he said.
Before the latest setback, Keros had been one of the most successful initial public offerings of the last four years, with its shares surging more than 300% from the company’s IPO price of $16, according to BioPharma Dive data. The stock traded at about $16 early Thursday after closing at almost $69 on Wednesday.
Keros had benefited in part from the success of Merck, which won approval for Winrevair in March and released more positive data in November. Merck’s drug is “transformative” for patients, and the case for buying Keros stock was that the company had an even better option in development, Cantor Fitzgerald analyst Prakhar Agrawal wrote when he initiated coverage of Keros in October.