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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________
FORM 10-Q
________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to
Commission File Number: 001-39264
________________________________________
KEROS THERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
________________________________________
Delaware81-1173868
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
99 Hayden Avenue, Suite 120, Building E
Lexington, Massachusetts
02421
(Address of principal executive offices)(Zip Code)
Tel: (617) 314-6297
(Registrant's telephone number, including area code)
________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $0.0001 par value per shareKROSThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes    No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes    No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerAccelerated Filer
Non-Accelerated FilerSmaller Reporting Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  No
As of July 27, 2021, there were 23,337,862 outstanding shares of the registrant's common stock, par value $0.0001 per share.



TABLE OF CONTENTS
Page
SUMMARY OF SELECTED RISKS ASSOCIATED WITH OUR BUSINESS
PART I.
Item 1.
Item 2.
Item 3.
Item 4.
PART II.
Item 1.
Item 1A.
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.
Item 4.
Item 5.
Item 6.

1




SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements, including statements about:

the timing of announcement of additional data for our Phase 2 clinical trial for our lead protein therapeutic product candidate, KER-050, in patients with myelodysplastic syndromes;
the timing of initiation of and announcement of data for our Phase 2 clinical trial for KER-050 in patients with myelofibrosis-associated cytopenias;
the timing of initiation of and announcement of data for our three Phase 2 clinical trials for our lead small molecule product candidate, KER-047;
the timing of initiation of and announcement of data for our Phase 1 clinical trial for our third product candidate, KER-012;
risks associated with the COVID-19 pandemic, which may adversely impact our business, preclinical studies and clinical trials;
our ability to receive the required regulatory approvals and clearances to successfully market and sell our products in the United States and certain other countries;
our ability to successfully advance our pipeline of additional product candidates;
our ability to develop sales and marketing capabilities;
the rate and degree of market acceptance of any products we are able to commercialize;
the effects of increased competition as well as innovations by new and existing competitors in our market;
our ability to obtain funding for our operations;
our ability to establish and maintain collaborations;
our ability to effectively manage our anticipated growth;
our ability to maintain, protect and enhance our intellectual property rights and proprietary technologies;
our ability to operate our business without infringing the intellectual property rights and proprietary technology of third parties;
costs associated with defending intellectual property infringement, product liability and other claims;
regulatory developments in the United States, Australia, New Zealand and other foreign countries;
our ability to attract and retain qualified employees;
our expectations regarding the period during which we qualify as an emerging growth company under the Jumpstart Our Business Startups Act of 2012;
statements regarding future revenue, hiring plans, expenses, capital expenditures, capital requirements and stock performance; and
the future trading prices of our common stock and the impact of securities analysts’ reports on these prices.

In some cases, you can identify forward-looking statements by the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “objective,” “ongoing,” “plan,” “predict,” “project,” “potential,” “should,” “will,” or “would,” or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

2


You should read the section titled “Risk Factors” set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. As a result of these factors, we cannot assure you that the forward-looking statements in this Quarterly Report on Form 10-Q will prove to be accurate. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

You should read this Quarterly Report on Form 10-Q, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

SPECIAL NOTE REGARDING COMPANY REFERENCES

Throughout this Quarterly Report on Form 10-Q, “Keros,” the “Company,” “we,” “us” and “our” refer to Keros Therapeutics, Inc. and its subsidiaries.


SPECIAL NOTE REGARDING TRADEMARKS

All trademarks, trade names and service marks appearing in this Quarterly Report on Form 10-Q are the property of their respective owners.

3



SUMMARY OF SELECTED RISKS ASSOCIATED WITH OUR BUSINESS

Our business faces significant risks and uncertainties. If any of the following risks are realized, our business, financial condition and results of operations could be materially and adversely affected. You should carefully review and consider the full discussion of our risk factors in the section titled “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q. Some of the more significant risks include the following:

We have a limited operating history, have incurred net losses in every year since our inception and anticipate that we will continue to incur net losses in the future.
We will need substantial additional funding in order to complete the development and commence commercialization of our product candidates. Failure to obtain this necessary capital when needed may force us to delay, reduce or eliminate certain of our product development or research operations.
We are heavily dependent on the success of our product candidates, which are in early clinical development. If we are unable to advance our current or future product candidates through clinical trials, obtain marketing approval and ultimately commercialize any product candidates we develop, or experience significant delays in doing so, our business will be materially harmed.
All of our product candidates are in preclinical or early clinical development stages. Clinical trials are difficult to design and implement, and they involve a lengthy and expensive process with uncertain outcomes. We may experience delays in completing, or ultimately be unable to complete, the development and commercialization of KER-050, KER-047, KER-012 or any future product candidates.
If we are unable to successfully commercialize any product candidate for which we receive regulatory approval, or experience significant delays in doing so, our business will be materially harmed.
We face significant competition from other biotechnology and pharmaceutical companies, and our operating results will suffer if we fail to compete effectively.
Our success depends in part on our ability to protect our intellectual property. It is difficult and costly to protect our proprietary rights and technology, and we may not be able to ensure their protection.
We rely, and expect to continue to rely, on third parties, including independent clinical investigators, contracted laboratories and contract research organizations, to conduct our preclinical studies and clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our product candidates and our business could be substantially harmed.
We rely on third parties to supply and manufacture our product candidates, and we expect to continue to rely on third parties to manufacture our products, if approved. The development of such product candidates and the commercialization of any products, if approved, could be stopped, delayed or made less profitable if any such third party fails to provide us with sufficient quantities of product candidates or products or fails to do so at acceptable quality levels or prices or fails to maintain or achieve satisfactory regulatory compliance.
Our future collaborations will be important to our business. If we are unable to enter into new collaborations, or if these collaborations are not successful, our business could be adversely affected.
The COVID-19 pandemic could adversely impact our business, including the timing or results of our preclinical studies and clinical trials.

4


PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS (unaudited)

KEROS THERAPEUTICS, INC.
Condensed Consolidated Balance Sheets
(In thousands, except share and per share data)
(Unaudited)
JUNE 30,
2021
DECEMBER 31,
2020
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$237,113 $265,876 
Accounts receivable 100  
Prepaid expenses and other current assets
4,204 1,850 
Total current assets
241,417 267,726 
Operating lease right-of-use assets
676 878 
Property and equipment, net
1,253 724 
Restricted cash
115 115 
TOTAL ASSETS
$243,461 $269,443 
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable
$1,372 $2,149 
Current portion of operating lease liabilities
449 423 
Accrued expenses and other current liabilities
5,710 4,612 
Total current liabilities
7,531 7,184 
Operating lease liabilities, net of current portion
242 476 
Other liabilities
32 62 
Total liabilities
7,805 7,722 
STOCKHOLDERS' EQUITY:
Common stock, par value of $0.0001 per share; 200,000,000 shares authorized as of June 30, 2021 and December 31, 2020, respectively; 23,328,771 and 23,192,866 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively
2 2 
Additional paid-in capital
332,172 326,730 
Accumulated deficit
(96,518)(65,011)
Total stockholders' equity235,656 261,721 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$243,461 $269,443 
See notes to condensed consolidated financial statements.
5


KEROS THERAPEUTICS, INC.
Condensed Consolidated Statements of Operations
(In thousands, except share and per share data)
(Unaudited)
THREE MONTHS ENDED JUNE 30,SIX MONTHS ENDED JUNE 30,
2021202020212020
REVENUE:
License revenue$100 $ $100 $ 
Total revenue100  100  
OPERATING EXPENSES:
Research and development(9,983)(7,264)(21,478)(15,791)
General and administrative(5,658)(3,650)(9,932)(5,627)
Total operating expenses(15,641)(10,914)(31,410)(21,418)
LOSS FROM OPERATIONS(15,541)(10,914)(31,310)(21,418)
OTHER INCOME (EXPENSE), NET
Interest expense, net(1)(1)(2)(3)
Change in fair value of preferred stock tranche obligation   (1,490)
Other income (expense), net(80)158 (145)90 
Total other income (expense), net(81)157 (147)(1,403)
Loss before income taxes(15,622)(10,757)(31,457)(22,821)
Income tax (provision) benefit  (50)172 
Net loss$(15,622)$(10,757)$(31,507)$(22,649)
Net loss attributable to common stockholders—basic and diluted (Note 10)$(15,622)$(10,963)$(31,507)$(23,661)
Net loss per share attributable to common stockholders—basic and diluted$(0.67)$(0.62)$(1.35)$(2.35)
Weighted-average common stock outstanding—basic and diluted23,305,673 17,623,994 23,267,943 10,054,026 


See notes to condensed consolidated financial statements.
6


KEROS THERAPEUTICS, INC.
Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)
(In thousands, except share and per share data)
(Unaudited)
CONVERTIBLE PREFERRED STOCK
COMMON STOCK
$0.0001 PAR VALUE
ADDITIONAL
PAID-IN
CAPITAL
ACCUMULATED
DEFICIT
TOTAL STOCKHOLDERS' EQUITY
$0.0001 PAR VALUE SERIES A
$0.0001 PAR VALUE SERIES A-1
$0.0001 PAR VALUE SERIES B-1
$0.0001 PAR VALUE SERIES C
SHARESAMOUNTSHARESAMOUNTSHARESAMOUNTSHARESAMOUNTSHARESAMOUNT
As of December 31, 2020 $  $  $  $ 23,192,866 $2 $326,730 $(65,011)$261,721 
Exercise of common stock options— — — — — — — 78,628 — 42 — 42 
Stock-based compensation— — — — — — — — — 2,494 — 2,494 
Net loss— — — — — — — — — — (15,885)(15,885)
March 31, 2021 $  $  $  $ 23,271,494 $2 $329,266 $(80,896)$248,372 
Exercise of common stock options57,277 57 — 57 
Stock-based compensation— — 2,849 — 2,849 
Net loss— — — (15,622)(15,622)
As of June 30, 2021 $  $  $  $ 23,328,771 $2 $332,172 $(96,518)$235,656 
CONVERTIBLE PREFERRED STOCK
COMMON STOCK
$0.0001 PAR VALUE
ADDITIONAL
PAID-IN
CAPITAL
ACCUMULATED
DEFICIT
TOTAL
STOCKHOLDERS’
EQUITY (DEFICIT)
$0.0001 PAR VALUE SERIES A
$0.0001 PAR VALUE SERIES A-1
$0.0001 PAR VALUE SERIES B-1
$0.0001 PAR VALUE SERIES C
SHARESAMOUNTSHARESAMOUNTSHARESAMOUNTSHARESAMOUNTSHARESAMOUNT
As of December 31, 20194,607,652 $9,891 368,612 $944 1,579,043 $9,106  $ 2,429,705 $1 $203 $(19,650)$(19,446)
Exercise of common stock options— — — — — — — — 44,686 — 13 — 13 
Issuance of Series C convertible preferred stock, net of issuance costs of $219
— — — — — — 4,169,822 55,781 — — — —  
Vesting of restricted stock— — — — — — — — 17,279 — — —  
Stock-based compensation— — — — — — — — — — 12 — 12 
Settlement of preferred stock tranche liability— — — — — — — — — — 6,446 — 6,446 
Net loss— — — — — — — — — — — (11,892)(11,892)
March 31, 20204,607,652 $9,891 368,612 $944 1,579,043 $9,106 4,169,822 $55,781 2,491,670 $1 $6,674 $(31,542)$(24,867)
Offering expenses associated with direct offering— $— — $— — $— — $— — $— $(8)$— $(8)
Conversion of convertible preferred stock upon initial public offering(4,607,652)$(9,891)(368,612)$(944)(1,579,043)$(9,106)(4,169.822)$(55,781)10,725,129 $1 $75,721 $— $75,722 
Initial public offering, net of underwriting discounts, commissions and offering costs of $9,390
— $— — $— — $— — $— 6,900,000 $ $100,123 $— $100,123 
Exercise of common stock options— $— — $— — $— — $— 24,003 $— $9 $— $9 
Vesting of restricted stock— $— — $— — $— — $— 17,278 $— $— $— $ 
Stock-based compensation— $— — $— — $— — $— — $— $1,139 $— $1,139 
Net loss— $— — $— — $— — $— — $— $— $(10,757)$(10,757)
As of June 30, 2020 $  $  $  $ 20,158,080 $2 $183,658 $(42,299)$141,361 
See notes to condensed consolidated financial statements.
7


KEROS THERAPEUTICS, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
SIX MONTHS ENDED JUNE 30,
20212020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
$(31,507)$(22,649)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation expense
171 131 
Loss on disposal of fixed asset20  
Stock-based compensation expense
5,343 1,151 
Non-cash lease expense
202 180 
Changes in fair value of preferred stock tranche obligation
 1,490 
Changes in operating assets and liabilities:
Accounts receivable(100)— 
Research and development incentive receivable
 922 
Prepaid expenses and other current assets
(2,354)(3,449)
Deferred IPO costs
 604 
Accounts payable
(777)2,764 
Operating lease liabilities
(208)(183)
Accrued expenses and other current liabilities
1,098 1,020 
Other liabilities
(30)(28)
Net cash used in operating activities
(28,142)(18,047)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment
(720)(204)
Net cash used in investing activities
(720)(204)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of Series C preferred stock
 56,000 
Payment of Series C preferred stock issuance costs (227)
Proceeds from issuance of common stock, from the initial public offering, net of offering costs of $7,728
 102,672 
Payment of initial public offering costs (2,549)
Proceeds from exercise of stock options
99 22 
Net cash provided by financing activities
99 155,918 
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH(28,763)137,667 
Cash, cash equivalents and restricted cash at beginning of period265,991 7,135 
Cash, cash equivalents and restricted cash at end of period$237,228 $144,802 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Settlement of preferred stock tranche obligation
$ $6,446 
The following table provides a reconciliation of the ending cash, cash equivalents and restricted cash as of each of the periods shown above:
SIX MONTHS ENDED JUNE 30,
20212020
Cash and cash equivalents$237,113 $144,687 
Restricted cash115 115 
Total cash, cash equivalents and restricted cash$237,228 $144,802 
See notes to condensed consolidated financial statements.
8


KEROS THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. NATURE OF BUSINESS AND BASIS OF PRESENTATION
Keros Therapeutics, Inc. (“Keros” or the “Company”) was incorporated in 2015 as a Delaware corporation. Its principal offices are in Lexington, Massachusetts. The Company is a clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of novel treatments for patients suffering from hematological and musculoskeletal disorders with high unmet medical need.
The accompanying unaudited interim condensed consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the accounts of the Company and its wholly owned subsidiaries, Keros Therapeutics Australia Pty Ltd (“Keros Australia”) and Keros Security Corporation, a Massachusetts securities corporation. All significant intercompany transactions and accounts have been eliminated in consolidation.
Since its inception in 2015, the Company has devoted the majority of its resources on business planning, research and development of its product candidates, including by conducting clinical trials and preclinical studies, raising capital and recruiting management and technical staff to support these operations. To date, the Company has not generated any revenue from product sales as none of its product candidates have been approved for commercialization.
On April 13, 2020, the Company completed an initial public offering (“IPO”) in which the Company issued and sold 6,900,000 shares of its common stock, which includes 900,000 shares issued and sold pursuant to the full exercise of the underwriters’ option to purchase additional shares, at a public offering price of $16.00 per share, for aggregate gross proceeds of $110.4 million. The Company received approximately $100.1 million in net proceeds after deducting underwriting discounts and commissions and offering costs.
Upon the closing of the IPO, all of the then-outstanding shares of convertible preferred stock automatically converted into 10,725,129 shares of common stock at the applicable conversion ratio then in effect. Subsequent to the closing of the IPO, there were no shares of convertible preferred stock outstanding.

On November 17, 2020, the Company completed an underwritten public offering in which the Company issued and sold 2,990,000 shares of common stock at a public offering price of $50.00 per share, which included 390,000 shares of common stock issued pursuant to the exercise in full of the underwriters' option to purchase additional shares. The aggregate gross proceeds to the Company from the public offering were approximately $149.5 million. The Company received approximately $140.1 million in net proceeds after deducting underwriting discounts and commissions and offering costs.
In May 2021, the Company filed a registration statement on Form S-3, which was automatically effective upon filing. Pursuant to this registration statement, the Company may issue up to $150.0 million in common stock in sales deemed to be an “at the market offering,” as defined by the Securities Act, and, so long as the Company qualifies as a “well-known seasoned issuer” as defined in Rule 405 of the Securities Act, an unspecified amount of shares of our common stock, preferred stock, debt securities and warrants.

The Company’s condensed consolidated financial statements have been prepared on the basis of the Company continuing as a going concern for the next 12 months. Management believes that the Company’s existing cash and cash equivalents, will allow the Company to continue its operations for at least the next 12 months. In the absence of a significant source of recurring revenue, the continued viability of the Company is dependent on its ability to continue to raise additional capital to finance its operations. If the Company is unable to obtain additional funding, the Company may be forced to delay, reduce or eliminate some or all of its research and development programs, product portfolio expansion or commercialization efforts, which could adversely affect its business prospects, or the Company may be unable to continue operations.
The accompanying unaudited interim condensed consolidated financial statements as of June 30, 2021 and for the three and six months ended June 30, 2021 and 2020 have been prepared by the Company in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and, pursuant to the rules and regulations of Article 10 of Regulation S-X of the Securities Act published by the Securities and Exchange Commission (“SEC”) for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. However, the Company believes the disclosures are adequate. These unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended December 31, 2020
9


included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 25, 2021 (the “Annual Report”).
The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited financial statements. In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments which are necessary for a fair presentation of the Company’s condensed consolidated balance sheets as of June 30, 2021 and December 31, 2020, condensed consolidated statements of operations for the three and six months ended June 30, 2021 and 2020 and condensed consolidated cash flows for the six months ended June 30, 2021 and 2020. Such adjustments are of a normal and recurring nature. The results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2021.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant Accounting Policies
The significant accounting policies and estimates used in preparation of the unaudited interim condensed consolidated financial statements are described in the Company’s audited consolidated financial statements as of and for the year ended December 31, 2020, and the notes thereto, which are included in the Annual Report. Except as detailed below, there have been no material changes to the Company’s significant accounting policies during the six months ended June 30, 2021.
Risks and Uncertainties

With the global COVID-19 pandemic continuing throughout 2021, the Company has implemented business continuity plans designed to address and mitigate the impact of the COVID-19 pandemic on its employees and its business operations, including its preclinical studies and clinical trials, supply chains and third-party providers. Additionally, in response to the spread of COVID-19, the Company closed its principal executive office in March 2020, with its administrative employees continuing their work outside of the office, and limited the number of staff in any given research laboratory. The Company further requested that its employees work from home if they are able to perform their duties remotely and limited the number of on-site employees to allow for proper social distancing in its offices and laboratories. For those employees on-site, the Company has implemented stringent safety measures designed to comply with applicable federal, state and local guidelines instituted in response to the COVID-19 pandemic. In July 2021, the Company implemented a plan to reopen its principal executive office to allow employees to return on-site to the office, which is based on a phased approach that is principles-based and local in design, with a focus on continuity of preclinical studies and clinical trial activities, employee safety and optimal work environment.

The Company anticipates that the COVID-19 pandemic will have an impact on the development timelines for several of its preclinical and clinical programs. The extent to which the COVID-19 pandemic impacts the Company’s business, its clinical development and regulatory efforts, its corporate development objectives and the value of and market for its common stock will depend on future developments which are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration of the pandemic, particularly in light of variant strains of the COVID-19 virus, travel restrictions, quarantines, social distancing and business closure requirements in the United States, Australia, New Zealand and other countries and the effectiveness of actions taken globally to contain and treat the disease. The global economic slowdown, the overall disruption of global healthcare systems and the other risks and uncertainties associated with the pandemic could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects. As of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update its estimates, assumptions and judgments or revise the carrying value of its assets or liabilities. Actual results could differ from those estimates, and any such differences may be material to the Company’s financial statements.

In addition, the Company is subject to other challenges and risks specific to its business and its ability to execute on its business plan and strategy, as well as risks and uncertainties common to companies in the biopharmaceutical industry with research and development operations, including, without limitation, risks and uncertainties associated with: obtaining regulatory approval of its product candidates; delays or problems in obtaining clinical supply, loss of single source suppliers or failure to comply with manufacturing regulations; product development and the inherent uncertainty of clinical success; the challenges of protecting and enhancing its intellectual property rights; the challenges of complying with applicable regulatory requirements; and identifying, acquiring or in-licensing additional products or product candidates. In addition, to the extent the
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ongoing COVID-19 pandemic adversely affects the Company’s business and results of operations, it may also have the effect of heightening many of the other risks and uncertainties discussed above.
Recently Adopted Accounting Pronouncements
On January 1, 2021, the Company adopted Financial Accounting Standards Board Accounting Standards Update No. 2019-12, Income Taxes-Simplifying the Accounting for Income Taxes ("ASU No. 2019-12"). ASU No. 2019-12 eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU No. 2019-12 also simplifies aspects of the accounting for franchise taxes, enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The adoption of this standard did not have an impact on the Company’s condensed consolidated financial statements and related disclosures.
3. FAIR VALUE MEASUREMENTS
The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicates the level of the fair value hierarchy utilized to determine such fair values (in thousands):
DESCRIPTIONJUNE 30, 2021QUOTED PRICES ACTIVE MARKETS FOR IDENTICAL ASSETS
(LEVEL 1)
SIGNIFICANT OTHER OBSERVABLE INPUTS
(LEVEL 2)
SIGNIFICANT OTHER OBSERVABLE INPUTS
(LEVEL 3)
Assets
Money market funds$235,156 $235,156 $ $ 
Total financial assets$235,156 $235,156 $ $ 

DESCRIPTION
DECEMBER 31, 2020
QUOTED PRICES ACTIVE MARKETS FOR IDENTICAL ASSETS
(LEVEL 1)
SIGNIFICANT OTHER OBSERVABLE INPUTS
(LEVEL 2)
SIGNIFICANT OTHER OBSERVABLE INPUTS
(LEVEL 3)
Assets
Money market funds
$262,043 $262,043 $ $ 
Total financial assets
$262,043 $262,043 $ $ 

There have been no transfers between fair value levels during the six months ended June 30, 2021. The carrying values of other current assets, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities.
4. PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consisted of the following (in thousands):
JUNE 30,
2021
DECEMBER 31,
2020
Prepaid service contracts
$936 $501 
Income tax credit receivable 172 
Prepaid sales tax111 188 
R&D payroll tax credit145 44 
Prepaid insurance 2,722 785 
Other
290 160 
Total prepaid expenses and other current assets
$4,204 $1,850 

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5. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consisted of the following (in thousands):
JUNE 30,
2021
DECEMBER 31,
2020
Accrued external R&D costs$787 $169 
Accrued external manufacturing costs2,280 2,265 
Accrued compensation and benefits1,168 1,510 
Accrued tax106 185 
Accrued professional fees697 265 
Other672 218 
Total accrued expenses and other current liabilities$5,710 $4,612 

Accrued compensation and benefits consisted primarily of accrued payroll and accrued vacation.
6. COMMON STOCK
As of June 30, 2021, the Company’s amended and restated certificate of incorporation authorized the Company to issue 200,000,000 shares of common stock at a par value of $0.0001 per share.
In conjunction with the closing of the Company's initial public offering ("IPO") in April 2020, the Company issued and sold 6,900,000 shares of its common stock, including 900,000 shares pursuant to the full exercise of the underwriters'    option to purchase additional shares, at a public offering price of $16.00 per share, for aggregate net proceeds of $100.1 million after deducting underwriting discounts and commissions and offering costs. In connection with the IPO, all outstanding shares of Preferred Stock converted into 10,725,129 shares of common stock.
In conjunction with the Company's November 2020 public offering closing, the Company issued and sold 2,990,000 shares of its common stock, which included 390,000 shares pursuant to the full exercise of the underwriters' option to purchase additional shares, at a public offering price of $50.00 per share, for aggregate net proceeds of $140.1 million after deducting underwriting discounts and commissions and offering costs.

In May 2021, the Company filed a registration statement on Form S-3, which was automatically effective upon filing. Pursuant to this registration statement, the Company may issue up to $150.0 million in common stock in sales deemed to be an “at the market offering,” as defined by the Securities Act, and, so long as the Company qualifies as a “well-known seasoned issuer” as defined in Rule 405 of the Securities Act, an unspecified amount of shares of our common stock, preferred stock, debt securities and warrants. See Note 8, Stockholders’ Equity, for further detail.
As of June 30, 2021 and December 31, 2020, the Company has reserved the following shares of common stock for potential exercises of stock options:
JUNE 30,
2021
DECEMBER 31,
2020
Options to purchase common stock
2,820,472 2,499,603 
7. STOCK-BASED COMPENSATION
2017 Stock Incentive Plan
The Board adopted the 2017 Stock Incentive Plan (the "2017 Plan") in February 2017, and the stockholders approved the 2017 Plan in March 2017. The 2017 Plan was most recently amended in March 2020.
As of June 30, 2021, there was an aggregate of 915,478 shares of common stock issuable upon the exercise of outstanding options under the 2017 Plan. Any options or awards outstanding under the 2017 Plan remain outstanding and effective.
2020 Equity Incentive Plan
In April 2020, the 2020 Equity Incentive Plan (the "2020 Plan") became effective, and, as a result, no further awards will be made under the 2017 Plan. The 2020 Plan provides for the grant of stock options qualifying as incentive stock options ("ISOs"), to employees and for the grant of nonstatutory stock options ("NSOs"), restricted stock awards, restricted stock unit
12


awards, stock appreciation rights, performance stock awards and other forms of stock compensation to employees, consultants and directors. The 2020 Plan also provides for the grant of performance cash awards to employees, consultants and directors. Any previously granted awards under the 2017 Plan will remain outstanding in accordance with their respective terms.
Under the 2020 Plan, there is an annual increase on January 1 of each year from January 1, 2021 continuing through January 1, 2030, by 4.0% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares as may be determined by the Board. On January 1, 2021, the Company increased the number of shares available for future grant under the 2020 Plan by 927,714 shares. As of June 30, 2021, there was an aggregate of 1,904,994 shares of common stock issuable upon the exercise of outstanding options under the 2020 Plan. Additionally, there were an aggregate of 1,010,379 shares reserved for future issuance under the 2020 Plan.
Stock Options
A summary of option activity during the six months ended June 30, 2021 is as follows (in thousands except share and per share data):
NUMBER OF OPTIONS
WEIGHTED-AVERAGE EXERCISE PRICE
WEIGHTED-AVERAGE
REMAINING
CONTRACTUAL TERM (IN YEARS)
AGGREGATE INTRINSIC VALUE
Outstanding as of December 31, 20202,499,603 $11.77 8.64$147,103 
Granted483,508 67.45 
Exercised(135,905)0.73 $8,107 
Expired(26,734)24.56 
Outstanding as of June 30, 20212,820,472 $21.73 8.44$71,592 
Options exercisable as of December 31, 2020723,130 $0.57 7.38$50,599 
Options exercisable as of June 30, 20211,080,101 $7.36 7.71$38,047 


The weighted-average grant date fair value price per share of options granted during the six months ended June 30, 2021 and 2020 was $47.10 and $14.24, respectively. As of June 30, 2021, there was $35.6 million of unrecognized stock-based compensation expense related to unvested stock options. The unrecognized stock-based compensation expense is estimated to be recognized over a period of 2.74 years.

The total fair value of options vested during the six months ended June 30, 2021 was $5.9 million.
Stock-Based Compensation Expense
Total stock-based compensation expense recorded for employees, directors and non-employees during the three and six months ended June 30, 2021 and 2020 was as follows (in thousands):
THREE MONTHS ENDED JUNE 30,SIX MONTHS ENDED JUNE 30,
2021202020212020
Research and development
$1,116 $313 $2,014 $321 
General and administrative
1,733 826 3,329 830 
Total stock-based compensation expense
$2,849 $1,139 $5,343 $1,151 
8. STOCKHOLDERS’ EQUITY
Sales Agreement

On May 3, 2021, the Company entered into a Sales Agreement (the “ATM Sales Agreement”) with SVB Leerink LLC (“SVB Leerink”), as agent, pursuant to which the Company may offer and sell, from time to time, shares of its common stock having
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an aggregate offering price of up to $150.0 million (the “ATM Shares”) from time to time through SVB Leerink (the “ATM Offering”).

Under the ATM Sales Agreement, SVB 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. The Company may sell the ATM Shares in amounts and at times to be determined by the Company from time to time subject to the terms and conditions of the ATM Sales Agreement, but it has no obligation to sell any of the ATM Shares in the ATM Offering.

ATM Shares sold under the ATM Sales Agreement will be issued pursuant to a prospectus supplement filed on May 3, 2021, and related prospectus filed with the Securities and Exchange Commission, or the SEC, pursuant to our automatically effective shelf registration statement on Form S-3 (Registration No. 333-255724), filed with the SEC on May 3, 2021.

The Company or SVB Leerink may suspend or terminate the offering of ATM Shares upon notice to the other party and subject to other conditions. The Company has agreed to pay SVB Leerink commissions for its services in acting as agent in the sale of the ATM Shares in the amount of up to 3.0% of gross proceeds from the sale of the ATM Shares pursuant to the ATM Sales Agreement. The Company has also agreed to provide SVB Leerink with customary indemnification and contribution rights.

The Company did not issue any shares under the ATM Sales Agreement during the quarter ended June 30, 2021.
9. INCOME TAXES
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law in the United States. The CARES Act provides numerous tax provisions and other stimulus measures, including temporary changes regarding the prior and future utilization of net operating losses and technical corrections from prior tax legislation for tax depreciation of certain qualified improvement property. The Company evaluated the provisions of the CARES Act and as a result, received approximately $0.2 million in February 2021 related to the carryback of our 2019 net operating loss to claim a refund for prior federal tax liabilities.
10. LOSS PER SHARE
Basic and diluted loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average common shares outstanding (in thousands, except share and per share data):
THREE MONTHS ENDED JUNE 30,SIX MONTHS ENDED JUNE 30,
2021202020212020
Numerator:
Net loss$(15,622)$(10,757)$(31,507)$(22,649)
Less: Accruals of dividends of preferred stock (206) (1,012)
Net loss attributable to common stockholders - basic and diluted$(15,622)$(10,963)$(31,507)$(23,661)
Denominator:
Weighted-average common stock outstanding - basic and diluted23,305,673 17,623,994 23,267,943 10,054,026 
Net loss per share attributable to common stockholders - basic and diluted$(0.67)$(0.62)$(1.35)$(2.35)

The Company’s potentially dilutive securities, which includes stock options, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted-average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same. The Company excluded the following from the computation of diluted net loss per share attributable to common stockholders at June 30, 2021 and 2020 because including them would have had an anti-dilutive effect:
JUNE 30,
2021
JUNE 30,
2020
Options to purchase common stock2,820,472 2,482,902 
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11. REVENUE FROM CONTRACTS WITH CUSTOMERS
Neurona Therapeutics, Inc. License Agreement

On June 22, 2021, the Company entered into a license agreement (the "Neurona Agreement") with Neurona Therapeutics, Inc. (“Neurona”). Under the Neurona Agreement, the Company granted Neurona a non-exclusive license to use LDN-193189, an early-stage research compound, which the Company licenses from a third party, solely as a reagent in connection with the manufacturing of diagnostic and/or therapeutic products to make, have made, use, import, offer for sale and sell products and services arising therefrom, and to make, have made, acquire, transfer, import and export the compound for such use. The license excludes Neurona from any rights to use, sell or distribute the compound for any therapeutic or diagnostic purpose. Unless terminated by either party for breach of contract or insolvency, the Neurona Agreement, which commenced on the execution date, will continue in perpetuity until the last patent expires. Under the Neurona Agreement, the Company is due a one-time, upfront license payment of $0.1 million from Neurona as of June 30, 2021.

In accordance with the Company's ASC 606 assessment, Neurona is considered to be a customer. The Company identified a single performance obligation, the non-exclusive license, that was satisfied on the date of the execution of the Neurona Agreement when control of the license was transferred. The Company determined that the upfront license fee of $0.1 million constitutes the entire transaction price and does not require further allocation as there was only one performance obligation. The Company determined that the $0.1 million represented the point at which the licensee was able to use and benefit from the license and recognized revenue from upfront license fees when the license was transferred to Neurona upon execution of the Neurona Agreement. The Company recognized the upfront fee as revenue on its consolidated statement of operations for the six months ended June 30, 2021 and as a receivable on its consolidated balance sheet as of June 30, 2021. The Company received the one-time, upfront license payment of $0.1 million from Neurona in July 2021.
12. SUBSEQUENT EVENTS

On August 4, 2021, the Company and 99 Hayden LLC, successor-in-interest to 128 Spring Street Lexington, LLC (the “Landlord”) entered into the Third Amendment to Lease (the “Amendment”), which amends the lease agreement dated March 20, 2017, as amended by the First Amendment to Lease dated July 1, 2019 and as further amended by the Second Amendment to Lease dated August 8, 2019 (collectively, the “Lease”). Pursuant to the Lease, the Company leased approximately 10,400 square feet of office and laboratory space (the “Initial Premises”) in Lexington, Massachusetts, which serve as the Company’s headquarters. The Amendment provides for (i) the expansion of the Premises to include an additional 5,205 square feet (the “Expansion Premises”) and (ii) the extension of the term of the Lease for an additional period commencing on January 1, 2023 and ending on March 31, 2023 (the“Extended Term”).

The Lease with respect to the Expansion Premises pursuant to the Amendment shall commence on the later to occur of: (i) October 1, 2021 and (ii) the date the current tenant of the Expansion Premises vacates the Expansion Premises in a condition sufficient for Landlord to deliver them to the Company (the “Expansion Commencement Date”). Additionally, commencing on the Expansion Commencement Date, (i) the base rent for the Expansion Premises will be $34,700 a month and (ii) the Company’s additional rent amount will increase to account for the Company’s additional share of the operating expenses, utility costs, insurance premiums and taxes and other applicable levies associated with the Expansion Premises.

Pursuant to the Amendment, during the Extended Term, the base rent (i) for 5,420 square feet of the Initial Premises will increase to approximately $20,400 a month and (ii) for 4,997 square feet of the Initial Premises will increase to approximately $22,700 a month.

15



ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with (1) our condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and (2) the audited consolidated financial statements and the related notes and management’s discussion and analysis of financial condition and results of operations for the fiscal year ended December 31, 2020 included in our Annual Report on Form 10-K for the year ended December 31, 2020, and filed with the Securities and Exchange Commission, or SEC, on May 25, 2021, which we refer to as the Annual Report.

Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, 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 Quarterly Report on Form 10-Q, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. You should carefully read the section titled “Risk Factors” set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section entitled “Special Note Regarding Forward-Looking Statements.” You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report on Form 10-Q.
Overview
We are a clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of novel treatments for patients suffering from hematological and musculoskeletal disorders with high unmet medical need. We are a leader in understanding the role of the transforming growth factor-beta, or TGF-ß, family of proteins, which are master regulators of red blood cell and platelet production as well as of the growth, repair and maintenance of muscle and bone. We have leveraged this understanding and developed a discovery approach to generate large and small molecules to address diseases of these tissues. Targeting TGF-ß signaling pathways has been clinically proven to elicit robust changes in blood cells, muscle and bone, which we believe provides a precedent and strong rationale for our strategy.
Our lead protein therapeutic product candidate, KER-050, is an engineered ligand trap comprised of a modified ligand-binding domain of the TGF-ß superfamily receptor known as activin receptor type IIA that is fused to the portion of the human antibody known as the Fc domain. 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 June 2021, we announced preliminary results from Cohorts 1 and 2 of our Phase 2 clinical trial evaluating KER-050 for the treatment of anemia and thrombocytopenia in patients with very low-, low-, or intermediate-risk MDS. We expect to report additional Part 1 data and initiate Part 2 of the trial by the end of 2021. Additionally, we plan to commence an open-label Phase 2 clinical trial evaluating KER-050 for the treatment of patients with myelofibrosis-associated cytopenias in the third quarter of 2021 and expect to report initial data from this trial in 2022.
Our lead small molecule product candidate, KER-047, is designed to selectively and potently inhibit activin receptor-like kinase-2, or ALK2, a TGF-ß superfamily receptor. KER-047 is being developed for the treatment of anemia resulting from iron imbalance as a direct consequence of elevated ALK2 signaling, including our initial target, iron-refractory iron deficiency anemia, or IRIDA. We are also developing KER-047 for the treatment of fibrodysplasia ossificans progressiva, or FOP, a rare musculoskeletal disorder. In December 2020, we reported topline data from our Phase 1 clinical trial of KER-047 in healthy volunteers. We expect to commence two open-label Phase 2 clinical trials in the second half of 2021, one in patients with iron deficiency anemia, or IDA, and one in patients with IRIDA, and expect to report initial data from both trials in 2022. Following the completion of our expected Phase 2 clinical trials of KER-047 in patients with IDA and IRIDA, we plan to commence a Phase 2 clinical trial in patients with FOP.
Our third product candidate, KER-012, is designed to bind to and inhibit the signaling of TGF-ß ligands, including activin A and activin B, to potentially increase bone mass. KER-012 is being developed for the treatment of disorders associated with bone loss, such as osteoporosis and osteogenesis imperfecta, and for the treatment of pulmonary arterial hypertension, or PAH. We plan to advance KER-012 into a Phase 1 clinical trial in the third quarter of 2021 and expect to report initial data from Part 1 of this trial in the first half of 2022.
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
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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 cash received from licensing agreements.
Initial Public Offering
On April 13, 2020, we completed an initial public offering, or IPO, of our common stock, in which we issued and sold 6,900,000 shares of common stock, which includes 900,000 shares issued and sold pursuant to the full exercise of the underwriters’ option to purchase additional shares, at a public offering price of $16.00 per share. The aggregate net proceeds to us from the IPO were approximately $100.1 million after deducting underwriting discounts and commissions and offering expenses. The shares began trading on the Nasdaq Global Market on April 8, 2020. Upon completion of the IPO, all of our outstanding shares of convertible preferred stock converted into 10,725,129 shares of our common stock.
November 2020 Public Offering of Common Stock
On November 17, 2020, we completed a public offering in which we issued and sold 2,990,000 shares of common stock at a public offering price of $50.00 per share, which included 390,000 shares of common stock issued pursuant to the exercise in full of the underwriters’ option to purchase additional shares. The aggregate net proceeds to us from the public offering were approximately $140.1 million, after deducting underwriting discounts and commissions and offering expenses.
We have incurred recurring operating losses since inception in 2015. 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 loss was $15.6 million and $31.5 million for the three and six months ended June 30, 2021, respectively. As of June 30, 2021, we had an accumulated deficit of $96.5 million. We expect to continue to generate operating losses and negative operating cash flows for the foreseeable future in connection with our ongoing activities. As of June 30, 2021, we had cash and cash equivalents of $237.1 million.

Clinical Update

KER-050 Update

In June 2021, we announced preliminary results from Cohorts 1 and 2 of our Phase 2 clinical trial evaluating KER-050 for the treatment of anemia and thrombocytopenia in patients with very low-, low-, or intermediate-risk MDS who either have ring sideroblasts, or RS positive, or do not have ring sideroblasts, or non-RS, and who either have or have not previously received treatment with an erythroid stimulating agent.

The ongoing trial is designed as an open-label, two-part, multiple ascending dose trial to assess the safety, tolerability, pharmacokinetics and pharmacodynamics of KER-050 in patients with MDS. As of May 14, 2021, which was the data cut-off date, 12 patients had received at least one dose of KER-050, nine of whom had completed eight weeks of treatment. One patient had not completed eight weeks of treatment with KER-050 as of the data cut-off date. Additionally, two patients withdrew from the trial prior to completing eight weeks of treatment with KER-050, one due to death deemed unrelated to study drug and one patient withdrew consent. Patients in Cohorts 1 and 2 received 0.75 mg/kg and 1.5 mg/kg doses of KER-050, respectively, once every four weeks for 12 weeks. Preliminary results from Cohorts 1 and 2 of the trial, as of the data cut-off date, included:

Five patients that completed eight weeks of treatment with KER-050 as of the data cut-off date met at least one of the following endpoints:
Increase in hemoglobin ≥ 1.5 g/dL for eight weeks, or
50% reduction in transfusion requirements over eight weeks, or
Transfusion independence for at least eight weeks.
Observed increases in reticulocytes, hemoglobin and platelets.
Observed clinically meaningful reductions in transfusion burden in both RS positive and non-RS patients that required transfusions at baseline (≥2 red blood cell units over eight weeks).
Three patients that completed eight weeks of treatment with KER-050 as of the data cut-off date achieved transfusion independence for at least eight weeks.

As of the data cut-off date, KER-050 was well tolerated in Cohorts 1 and 2 of this trial. No drug-related serious adverse events, or SAEs, were reported. There were four treatment-emergent SAEs reported in three patients, all of which were deemed unrelated to study drug, including anemia, febrile illness, pneumonia and death. There was one observed treatment-
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related adverse event of maculopapular rash that was moderate in severity. The rash was reported after the patient’s first dose and resolved without recurrence following subsequent doses.

Following Safety Review Committee recommendation, dosing for Cohort 3 of the trial was initiated at 2.5 mg/kg of KER-050, to be administered once every four weeks for 12 weeks. We expect to report additional Part 1 data and initiate Part 2 of the trial by the end of 2021.

Additionally, based on these preliminary results as of the data cut-off date, we plan to extend the treatment duration of the trial from 12 weeks to up to two years to define response rate following six months of treatment with KER-050 and to confirm durability of response. We also intend to update the protocol to increase the size of Part 2 of the trial to confirm response rates and to help guide the design of the expected registration program. We expect to share the Part 2 trial design by the end of 2021.

COVID-19 Business Update

With the global COVID-19 pandemic continuing throughout 2021, we have implemented business continuity plans designed to address and mitigate the impact of the COVID-19 pandemic on our employees, and our business operations, including our preclinical studies and clinical trials, supply chains and third-party providers. We are closely monitoring the COVID-19 situation as we evolve our business continuity plans and response strategy. On March 23, 2020, the governor of Massachusetts ordered the closure of all non-essential businesses effective March 24, 2020 through April 7, 2020, which was subsequently extended through May 18, 2020. On May 29, 2021, the Commonwealth of Massachusetts fully re-opened and on June 15, 2021, the governor of Massachusetts signed an executive order that terminated the Commonwealth's State of Emergency. Because of the nature of our operations, we were considered to be an essential business so our operations were only partially affected by these orders. The outbreak and government measures taken in response have also had a significant impact, both direct and indirect, on third-party businesses and commerce, as worker shortages have occurred; supply chains have been disrupted; facilities and production have been suspended; and demand for certain goods and services, such as medical services and supplies, has spiked, while demand for other goods and services, such as travel, has fallen. In response to the spread of COVID-19, we closed our principal executive office in March 2020, with our administrative employees continuing their work outside of our office, and limited the number of staff in any given research laboratory. In July 2021, we implemented a plan to reopen our office to allow employees to return to the office, which is based on a phased approach that is principles-based and local in design, with a focus on continuity of preclinical studies and clinical trial activities, employee safety and optimal work environment. While we are experiencing limited financial impacts at this time, given the global economic slowdown, the overall disruption of global healthcare systems and the other risks and uncertainties associated with the pandemic, particularly in light of variant strains of the COVID-19 virus, our business, financial condition, results of operations and growth prospects could be materially adversely affected.

Preclinical and Clinical Development

With respect to preclinical and clinical development, we have taken measures to implement remote and virtual approaches, including remote participant monitoring where possible, to maintain participant safety and trial continuity and to preserve study integrity. For several of our clinical development programs, we are experiencing, and expect to continue to experience, a disruption or delay in our ability to initiate trial sites and enroll and assess participants. As the COVID-19 pandemic continues, we have experienced and expect to continue to experience an impact on our ability to enroll participants in our clinical trials. We have experienced and expect to continue to experience an impact on the ability to supply study drug, report trial results or interact with clinicians, investigators, regulators, ethics committees or other important agencies due to limitations in regulatory authority employee resources or otherwise. In addition, we rely on contract research organizations, or CROs, or other third parties to assist us with clinical trials, and we cannot guarantee that they will continue to perform their contractual duties in a timely and satisfactory manner as a result of the COVID-19 pandemic. If the COVID-19 pandemic continues and persists for an extended period of time, we could experience significant disruptions to our preclinical and clinical development timelines, which would adversely affect our business, financial condition, results of operations and growth prospects.

Supply Chain

As for our third-party manufacturers, distributors and other partners, we are working closely with them to manage our supply chain activities and mitigate potential disruptions to our clinical supply as a result of the COVID-19 pandemic. We expect to have adequate supply for the development of our product candidates. However, if the COVID-19 pandemic persists for an extended period of time and begins to impact essential distribution systems such as FedEx and postal delivery, we could
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experience disruptions to our supply chain and operations, and associated delays in the manufacturing and supply of our product candidates, which would adversely impact our ability to carry out our clinical trials.

Financial Impact
The COVID-19 pandemic continues to rapidly evolve and has 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, which could in the future negatively affect our operations. While we expect the COVID-19 pandemic to adversely affect our business operations, our clinical development and regulatory efforts, our corporate development objectives and the value of and market for our common stock will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, as a result of uncertainty regarding ultimate duration of the pandemic, particularly in light of variant strains of the COVID-19 virus, travel restrictions, quarantines, social distancing and business closure requirements in the United States, Australia and New Zealand and the effectiveness of actions taken globally to contain and treat the disease.
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, and such agreement 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 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.
Neurona Therapeutics Inc., License Agreement
On June 22, 2021, we entered into a license agreement, or the Neurona Agreement, with Neurona Therapeutics, Inc., or Neurona. Under the Neurona Agreement, we granted Neurona a non-exclusive license to use LDN-193189, an early-stage research compound, which we license from a third party, solely as a reagent in connection with the manufacturing of diagnostic and/or therapeutic products to make, have made, use, import, offer for sale and sell products and services arising therefrom, and to make, have made, acquire, transfer, import and export the compound for such use. The license excludes Neurona from any rights to use, sell or distribute the compound for any therapeutic or diagnostic purpose. Unless terminated by either party for breach of contract or insolvency, the Neurona Agreement will continue in perpetuity until the last patent expires. Under the Neurona Agreement, we received a one-time, upfront license fee of $0.1 million from Neurona in July 2021.
Components of Our Results of Operations
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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 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 condensed 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. 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 also expect 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.
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Other Income (Expense), Net
Interest Expense, Net
Interest expense, net primarily consists of interest earned on money market accounts and interest expense related to leasehold improvement debt amortization. Our interest expense has not been significant to date.
Change in Fair Value of Preferred Stock Tranche Obligation
The change in fair value of our preferred stock tranche obligation fluctuates based on remeasurement at each reporting period. Our preferred stock tranche obligation stems from our obligation to issue additional shares to investors upon the closing of additional tranches of preferred stock. Upon the waiver of the Series B-2 preferred stock milestone by our board of directors in March 2020, this liability was fully settled. Until settlement, fluctuations in the fair value of our preferred stock tranche obligation were based on the remeasurement at each reporting period.
Other Income (Expense), Net
Other income (expense), net primarily consists of unrealized gains on foreign currency and dividend income earned on money market fund accounts.
Results of Operations
Comparison for the three months ended June 30, 2021 and 2020
The following table summarizes our results of operations for the three months ended June 30, 2021 and 2020 (in thousands):
THREE MONTHS ENDED JUNE 30,
20212020
REVENUE:
License revenue$100 $— 
Total revenue100 — 
OPERATING EXPENSES:
Research and development(9,983)(7,264)
General and administrative(5,658)(3,650)
Total operating expenses(15,641)(10,914)
LOSS FROM OPERATIONS(15,641)(10,914)
OTHER INCOME (EXPENSE), NET
Interest expense, net(1)(1)
Other income (expense), net(80)158 
Total other income (expense), net(81)157 
Loss before income taxes(15,622)(10,757)
Income tax (provision) benefit— — 
Net loss$(15,622)$(10,757)
Revenue
Our revenue for the three months ended June 30, 2021 consisted of a one-time, upfront license fee under the Neurona Agreement. All revenue under the Neurona Agreement was earned as of June 30, 2021.
Research and Development Expenses
The following table summarizes our research and development expenses for the three months ended June 30, 2021 and 2020 (in thousands):
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THREE MONTHS ENDED JUNE 30,INCREASE / (DECREASE)
20212020
KER-050$2,072 $3,256 $(1,184)
KER-047646 1,393 (747)
KER-0122,130 65 2,065 
Preclinical and development fees1,228 380 848 
Personnel expenses (including share-based compensation)2,973 1,507 1,466 
Professional fees695 428 267 
Facilities and supplies160 100 60 
Other expenses79 135 (56)
$9,983 $7,264 $2,719 

Research and development expenses were $10.0 million for the three months ended June 30, 2021, compared to $7.3 million for the three months ended June 30, 2020. The increase of $2.7 million was primarily due to (i) a net decrease of $1.2 million of KER-050-related expenses driven by a $1.9 million decrease in manufacturing activities to support the clinical advancement of the program, partially offset by a $0.7 million increase in preclinical and clinical program activities due to the progression of our Phase 2 clinical trial of KER-050; (ii) a net decrease of $0.7 million of KER-047-related expenses driven by a $0.6 million decrease in clinical expenses due to the completion of our expanded Phase 1 clinical trial and a $0.1 million decrease in manufacturing expenses; (iii) a $2.1 million increase in manufacturing and preclinical activities for KER-012; (iv) a $1.5 million increase related to personnel expenses, including additional share-based compensation costs, driven by increased headcount to support the advancement of our pipeline; (v) a $0.8 million increase in preclinical and development cost related to general platform development and (vi) a $0.3 million increase in professional fees to support our organizational growth and the continued advancements in our pipeline. 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.
General and Administrative Expenses
General and administrative expenses were $5.7 million for the three months ended June 30, 2021, compared to $3.7 million for the three months ended June 30, 2020. The increase of approximately $2.0 million was primarily due to (i) a $1.1 million increase in personnel expenses, which includes additional share-based compensation costs, to support our organizational growth and achievement of our corporate goal; (ii) an increase of $0.6 million in professional fees primarily due to an increase in legal and recruitment services; and (iii) an increase of $0.3 million in fees associated with the filing of our registration statement on Form S-3.
Total Other Income (Expense), Net
Total other expense, net was $0.1 million for the three months ended June 30, 2021, compared to other income of $0.2 million for the three months ended June 30, 2020. The change of $0.2 million was primarily related to an increase in unrealized foreign exchange loss.
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Comparison for the six months ended June 30, 2021 and 2020
The following table summarizes our results of operations for the six months ended June 30, 2021 and 2020 (in thousands):
SIX MONTHS ENDED JUNE 30,
20212020
REVENUE:
License revenue$100 $— 
Total revenue100 — 
OPERATING EXPENSES:
Research and development(21,478)(15,791)
General and administrative(9,932)(5,627)
Total operating expenses(31,410)(21,418)
LOSS FROM OPERATIONS(31,310)(21,418)
OTHER INCOME (EXPENSE), NET
Interest expense, net(2)(3)
Change in fair value of preferred stock tranche obligation— (1,490)
Other income (expense), net(145)90 
Total other income (expense), net(147)(1,403)
Loss before income taxes(31,457)(22,821)
Income tax (provision) benefit(50)172 
Net loss$(31,507)$(22,649)

Revenue
Our revenue for the six months ended June 30, 2021 consisted of a one-time license fee under the Neurona Agreement. All revenue under the Neurona Agreement was earned as of June 30, 2021.
Research and Development Expenses
The following table summarizes our research and development expenses for the six months ended June 30, 2021 and 2020 (in thousands):
SIX MONTHS ENDED JUNE 30,INCREASE
20212020
KER-050$4,092 $8,320 $(4,228)
KER-0471,668 3,059 (1,391)
KER-0126,386 65 6,321 
Preclinical and development fees1,924 850 1,074 
Personnel expenses (including share-based compensation)5,658 2,527 3,131 
Professional fees1,306 629 677 
Facilities and supplies296 195 101 
Other expenses148 146 
Total$21,478 $15,791 $5,687 

Research and development expenses were $21.5 million for the six months ended June 30, 2021, compared to $15.8 million for the six months ended June 30, 2020. The increase of $5.7 million was primarily due to (i) a net decrease of $4.2 million of KER-050-related expenses driven by a $5.3 million decrease in manufacturing activities to support the clinical advancement of the program, partially offset by a $1.1 million increase in clinical program activities due to the progression of our Phase 2 clinical trial of KER-050; (ii) a net decrease of $1.4 million of KER-047-related expenses driven by a $1.3 million decrease in clinical expenses due to the completion of our expanded Phase 1 clinical trial and a $0.4 million decrease in manufacturing
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expenses, partially offset by a $0.3 million increase in preclinical activities; (iii) a $6.3 million increase in manufacturing and preclinical activities for KER-012; (iv) a $3.1 million increase related to personnel expenses, including additional share-based compensation costs, driven by increased headcount to support the advancement of our pipeline; (v) a $1.1 million increase in preclinical and development fees related to general platform development; and (vi) a $0.7 million increase in professional fees to support our organizational growth and the continued advancements of our pipeline. 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.
General and Administrative Expenses
General and administrative expenses were $9.9 million for the six months ended June 30, 2021, compared to $5.6 million for the six months ended June 30, 2020. The increase of approximately $4.3 million was primarily due to (i) a $3.1 million increase in personnel expenses, which includes additional share-based compensation costs, to support our organizational growth and achievement of our corporate goals; (ii) a $0.7 million increase in director and officer insurance premiums recognized; and (iii) a $0.3 million increase in fees associated with the filing of our registration statement on Form S-3.
Total Other Income (Expense), Net
Total other expense, net was $0.1 million for the six months ended June 30, 2021, compared to $1.4 million for the six months ended June 30, 2020. The change of $1.3 million was primarily related to expenses in 2020 not recurring in 2021, including the expense related to the change in fair value of the preferred stock tranche obligation.
Liquidity and Capital Resources
Since our inception, we have incurred significant operating losses. Our net losses were $31.5 million and $22.6 million for the six months ended June 30, 2021 and 2020, respectively. As of June 30, 2021 and December 31, 2020, we had an accumulated deficit of $96.5 million and $65.0 million, respectively. To date, 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. Our primary uses of cash are to fund operating expenses, which are primarily research and development expenditures. We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance the preclinical studies and clinical trials of our product candidates in development and we will incur additional costs associated with operating as a public reporting company. 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 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 and through research collaborations. In April 2020, we completed our IPO whereby we sold an aggregate of 6,900,000 shares of our common stock for aggregate net proceeds of approximately $100.1 million after deducting underwriting discounts and commissions and offering expenses. In November 2020, we completed a public offering of our common stock, whereby we sold an aggregate of 2,990,000 shares of our common stock for aggregate net proceeds of approximately $140.1 million after deducting underwriting discounts and commissions and offering expenses.
On May 3, 2021, we filed a shelf registration statement on Form S-3, or Shelf, with the Securities and Exchange Commission, or SEC, which was automatically effective upon filing. The Shelf permits us to offer, from time to time, an unspecified amount of common stock, preferred stock, debt securities and warrants. We simultaneously entered into a sales agreement with SVB Leerink LLC, as agent, to provide for the issuance and sale by us of up to $150.0 million of our common stock from time to time in “at the market” offerings under the Shelf, which we refer to as the ATM Program. As of June 30, 2021, no sales have been made pursuant to the ATM Program.
As of June 30, 2021, we had cash and cash equivalents of $237.1 million. We believe that our existing cash and cash equivalents will be sufficient to fund our projected liquidity requirements for at least the next 12 months. 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:
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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 the COVID-19 pandemic 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 agreement with The General Hospital Corporation;
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 KER-050, KER-047, KER-012 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 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, the COVID-19 pandemic continues to rapidly evolve and has 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 the six months ended June 30, 2021 and 2020 (in thousands):
SIX MONTHS ENDED JUNE 30,
20212020
Net cash used in operating activities$(28,142)$(18,047)
Net cash used in investing activities(720)(204)
Net cash provided by financing activities99 155,918 
Net (decrease) increase in cash, cash equivalents and restricted cash$(28,763)$137,667 
Operating Activities
Net cash used in operating activities was $28.1 million for the six months ended June 30, 2021, which was driven by a net loss of $31.5 million, and a $2.4 million increase in net cash used by operating assets and liabilities, including an increase in payables and accrued expenses of $0.3 million and an increase in prepaid expenses of $2.4 million to support the
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advancement of our programs. Cash used in operating activities was partially offset by non-cash charges, including $5.3 million of stock-based compensation expense.

During the six months ended June 30, 2020, cash used in operating activities was $18.0 million, which was driven by a net loss of $22.6 million, offset by non-cash charges including $1.5 million related to the change in the fair value of our preferred stock tranche liability prior to settlement and $1.2 million of stock-stock based compensation expense. Cash used in operating activities was also partially offset by a $1.7 million change in operating assets and liabilities, including (i) an increase in accounts payable and accrued expenses of $3.8 million; (ii) a decrease of $0.6 million in deferred IPO costs; and (iii) receipt of $0.9 million research and development incentive receivable, which were partially offset by (a) a $3.4 million decrease in prepaid expenses and other assets due to the timing of expense recognition for our research and development costs; and (b) a $0.2 million decrease in our operating lease liability.
Investing Activities
Net cash used in investing activities was $0.7 million for the six months ended June 30, 2021 and $0.2 million for the six months ended June 30, 2020. The cash used in investing activities in both periods was due to purchases of property and equipment.

Financing Activities
Net cash provided by financing activities of less than $0.1 million for the six months ended June 30, 2021 was related to exercises of options to purchase common stock.

Net cash provided by financing activities for the six months ended June 30, 2020 was $155.9 million. The increase was primarily related to the net proceeds $100.1 million from our IPO, net of underwriters’ discounts and commissions and offering expenses payable by us, as well as $55.8 million driven by net proceeds from our issuance of Series C preferred stock during the six months ended June 30, 2020.
Contractual Obligations and Commitments
During the six months ended June 30, 2021, there were no material changes to our contractual obligations and commitments from those described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report.
Critical Accounting Policies and Significant Judgments and Estimates
Our unaudited interim condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of our unaudited interim condensed consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our condensed 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. However, even though we believe we have used reasonable estimates and assumptions in preparing our interim condensed consolidated financial statements, the future effects of the COVID-19 pandemic on our results of operations, cash flows, and financial position are unclear. Our actual results may differ from these estimates under different assumptions or conditions.
There have been no significant changes to our critical accounting policies from those described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our Annual Report.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined by applicable SEC rules and regulations, such as relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Recently Issued Accounting Pronouncements
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Refer to Note 2 in the accompanying notes to our unaudited interim condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q for a discussion of recent accounting pronouncements.
Emerging Growth Company Status

We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. We expect to use the extended transition period for any other new or revised accounting standards during the period in which we remain an emerging growth company and, as a result, we will not adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.
We may take advantage of these exemptions until December 31, 2025, or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company on the date that is the earliest of (1) the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more; (2) December 31, 2025; (3) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; or (4) the date on which we are deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission. We may choose to take advantage of some but not all of these exemptions.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of interest rate sensitivities.

Interest Rate Sensitivity
As of June 30, 2021 and December 31, 2020, we had cash and cash equivalents of $237.1 million and $265.9 million, respectively. Our exposure to interest rate sensitivity is impacted by changes in the underlying U.S. bank interest rates. Our surplus cash has been invested in money market fund accounts as well as interest-bearing savings accounts from time to time. We have not entered into investments for trading or speculative purposes. Due to the conservative nature of our investment portfolio, which is predicated on capital preservation of investments with short-term maturities, we do not believe an immediate one percentage point change in interest rates would have a material effect on the fair market value of our portfolio, and therefore we do not expect our operating results or cash flows to be significantly affected by changes in market interest rates.

As of June 30, 2021 and December 31, 2020, we had no debt outstanding that is subject to interest rate variability, as our only debt is related to our lease incentive allowance. Therefore, we are not subject to interest rate risk related to debt.

ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2021. Based on the evaluation of our disclosure controls and procedures as of June 30, 2021, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
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Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

As a result of the COVID-19 pandemic, certain employees began working remotely in March 2020. Notwithstanding these changes to the working environment, we have not identified any material changes in our internal control over financial reporting. We will continue to monitor and assess the COVID-19 situation to determine any potential impact on the design and operating effectiveness of our internal controls over financial reporting.

Inherent Limitations on Effectiveness of Controls
Our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving the desired control objectives. Our management recognizes that any control system, no matter how well designed and operated, is based upon certain judgments and assumptions and cannot provide absolute assurance that its objectives will be met. Similarly, an evaluation of controls cannot provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS

From time to time, we may become subject to arbitration, litigation or claims arising in the ordinary course of business. We are not currently a party to any material arbitration or legal proceedings. The results of any future claims or proceedings cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and litigation costs, diversion of management resources, and other factors.
ITEM 1A. RISK FACTORS

Our business is subject to numerous risks. You should consider carefully the risks and uncertainties described below, in addition to other information contained in this Quarterly Report on Form 10-Q as well as our other public filings with the Securities and Exchange Commission, or the SEC. Any of the following risks could have a material adverse effect on our business, financial condition, results of operations and growth prospects and cause the trading price of our common stock to decline.

Risks Related to Our Financial Position and Need for Additional Capital

We have a limited operating history, have incurred net losses in every year since our inception and anticipate that we will continue to incur net losses in the future.

We are a clinical-stage biopharmaceutical company with a limited operating history. Since our inception in 2015, we have invested most of our resources in developing our product candidates, building our intellectual property portfolio, developing our supply chain, conducting business planning, raising capital and providing general and administrative support for these operations. Consequently, we have no meaningful operations upon which to evaluate our business and predictions about our future success or viability may not be as accurate as they could be if we had a longer operating history or a history of successfully developing and commercializing drug products. Investment in biopharmaceutical product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that any potential product candidate will fail to demonstrate adequate effect or an acceptable safety profile, gain regulatory approval and become commercially viable. We have not yet demonstrated the ability to progress any product candidate through late-stage clinical trials, we have no products approved for commercial sale and we have not generated any revenue from product sales to date. We continue to incur significant research and development and other expenses related to our ongoing operations. As a result, we are not profitable and have incurred losses in each period since our inception. For the three and six months ended June 30, 2021, we reported a net loss of $15.6 million and $31.5 million, respectively. As of June 30, 2021, we had an accumulated deficit of $96.5 million. We expect to continue to incur significant losses for the foreseeable future, and we expect these losses to increase as we continue our research and development of, and seek regulatory approvals for, our lead protein therapeutic product candidate, KER-050, our lead small molecule product candidate, KER-047, our third product candidate, KER-012, and any future product candidates we may develop.

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We anticipate that our expenses will increase substantially if, and as, we:

complete our Phase 2 clinical trial of KER-050 evaluating the treatment of cytopenias, including anemia and thrombocytopenia, in patients with myelodysplastic syndrome, or MDS;
initiate an open-label Phase 2 clinical trial of KER-050 evaluating the treatment of cytopenias, including anemia and thrombocytopenia, in patients with myelofibrosis in the third quarter of 2021;
initiate two open-label Phase 2 clinical trials of KER-047 in the second half of 2021, one in patients with iron-deficiency anemia, or IDA, and one in patients with iron-refractory iron deficiency anemia, or IRIDA;
initiate a Phase 2 clinical trial of KER-047 in patients with fibrodysplasia ossificans progressiva, or FOP;
advance KER-012 into clinical development;
continue the research and development of our other clinical- and preclinical-stage product candidates and discovery-stage programs;
increase the amount of research and development activities to identify and develop product candidates using our proprietary discovery approach;
make milestone, royalty or other payments under in-license or collaboration agreements;
maintain, expand and protect our intellectual property portfolio;
expand our operational, financial and management systems and increase personnel, including personnel to support our clinical development, manufacturing and commercialization efforts and our operations as a public company;
establish a sales, marketing, medical affairs and distribution infrastructure to commercialize any products for which we may obtain marketing approval and intend to commercialize on our own or jointly with third parties;
invest in or in-license other technologies; and
experience any delays or encounter any issues with any of the above, including but not limited to failed studies, complex results, manufacturing challenges, safety issues or other regulatory challenges.

To become and remain profitable, we, our collaborators and any potential future collaborators must develop and eventually commercialize products with significant market potential. This will require us to be successful in a range of challenging activities, including completing preclinical studies and clinical trials, obtaining marketing approval for product candidates, manufacturing, marketing and selling products for which we may obtain marketing approval and satisfying any post-marketing requirements. We may never succeed in any or all of these activities and, even if we do, we may never generate revenue that is significant or large enough to achieve profitability. If we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would decrease the value of our company and could impair our ability to raise capital, maintain our research and development efforts, expand our business or continue our operations. A decline in the value of our company also could cause you to lose all or part of your investment.

Even if we succeed in commercializing one or more of our product candidates, we will continue to incur substantial research and development and other expenditures to develop and market additional product candidates. We may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenue. Our prior losses and expected future losses have had and will continue to have an adverse effect on our stockholders’ equity and working capital.

We will need substantial additional funding in order to complete the development and commence commercialization of our product candidates. Failure to obtain this necessary capital when needed may force us to delay, reduce or eliminate certain of our product development or research operations.

To date, we have funded our operations primarily through private placements of our equity securities, upfront and expense reimbursement payments received from our collaborators, from our initial public offering, or IPO, in April 2020 and from our public offering of common stock in November 2020. We expect our expenses to increase in connection with our ongoing activities, particularly as we complete our Phase 2 clinical trial of KER-050 in patients with MDS, initiate our Phase 2 clinical trial of KER-050 in patients with myelofibrosis, initiate three Phase 2 clinical trials of KER-047, one in patients with IDA, one in patients with IRIDA and one in patients with FOP, advance KER-012 into clinical development and initiate later-stage clinical development, and continue to research, develop and initiate clinical trials of any other future product candidates. In addition, if we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. Furthermore, we expect to incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our product development programs or any future commercialization efforts.
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At June 30, 2021, we had $237.1 million in cash and cash equivalents. We expect that our existing cash and cash equivalents as of June 30, 2021 will enable us to fund our operating expenses and capital expenditure requirements into the fourth quarter of 2023. 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. Our future capital requirements for KER-050, KER-047, KER-012 or our other preclinical programs 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 the COVID-19 pandemic 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 agreement with The General Hospital Corporation;
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 cost of manufacturing KER-050, KER-047, KER-012 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 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

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.

Our ability to raise additional funds will depend on financial, economic and market conditions and other factors, over which we may have no or limited control. For example, the COVID-19 pandemic continues to rapidly evolve and has already resulted in a significant disruption of the 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 additional 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.

Raising additional capital may cause dilution to holders of our common stock, restrict our operations or require us to relinquish rights to our technologies or product candidates.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our operations with our existing cash and cash equivalents and revenue from our collaborations. In order to further advance development of our product candidates, discover additional product candidates and pursue our other business objectives, we will need to seek additional funds.

We cannot guarantee that future financing will be available in sufficient amounts or on commercially reasonable terms, if at all. Moreover, the terms of any financing may adversely affect the holdings or the rights of holders of our common stock and the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price
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of our common stock to decline. The sale of additional common stock or securities convertible or exchangeable into common stock would dilute all of our existing stockholders and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a holder of our common stock. The incurrence of indebtedness could result in increased fixed payment obligations and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt or declare dividends, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business If we raise additional capital through marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish certain valuable rights to our product candidates, technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable to us. We also could be required to seek collaborators for KER-050, KER-047, KER-012 or any future product candidate at an earlier stage than otherwise would be desirable or relinquish our rights to product candidates or technologies that we otherwise would seek to develop or commercialize ourselves. Further, any additional fundraising efforts may divert our management from its day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates.

If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the development or commercialization of one or more of our product candidates or one or more of our other research and development initiatives. Any of the above events could significantly harm our business, prospects, financial condition and results of operations and cause the price of our common stock to decline.

Risks Related to the Discovery, Development and Regulatory Approval of our Product Candidates

We are heavily dependent on the success of our product candidates, which are in early clinical development. If we are unable to advance our current or future product candidates through clinical trials, obtain marketing approval and ultimately commercialize any product candidates we develop, or experience significant delays in doing so, our business will be materially harmed.

Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must conduct extensive clinical trials to demonstrate the safety and efficacy of the product candidates in humans. We are early in our product candidate development efforts, as both KER-050 and KER-047 are still in early-stage clinical trials and KER-012 has not yet advanced into clinical development. Because KER-050 and KER-047 are our lead product candidates, if either KER-050 or KER-047 encounters safety or efficacy problems, development delays or regulatory issues or other problems, our development plans and business would be significantly harmed.

Our ability to generate product revenues, which we do not expect will occur for several years, if ever, will depend heavily on the successful development and eventual commercialization of KER-050, KER-047, KER-012 and any future product candidates we develop, which may never occur. KER-050, KER-047, KER-012 and any future product candidates we develop will require additional preclinical and clinical development, management of clinical, preclinical and manufacturing activities, marketing approval in the United States and other jurisdictions for specific indications for use, demonstrating effectiveness to pricing and reimbursement authorities, obtaining sufficient manufacturing supply for both clinical development and commercial production, building of a commercial organization and substantial investment and significant marketing efforts before we generate any revenues from product sales. The success of our current and future product candidates will depend on several factors, including the following:

successful and timely completion of clinical trials and preclinical studies for which the U.S. Food and Drug Administration, or the FDA, or any comparable foreign regulatory authority agree with the design, endpoints or implementation;
sufficiency of our financial and other resources to complete the necessary preclinical studies and clinical trials;
receiving regulatory approvals or authorizations for conducting our planned clinical trials or future clinical trials;
initiation and successful patient enrollment in, and completion of, additional clinical trials on a timely basis;
our ability to demonstrate to the satisfaction of the FDA or any comparable foreign regulatory authority that the applicable product candidate is safe and effective as a treatment for our targeted indications or, in the case of an applicable product candidates which is regulated as a biological product, that the applicable product is safe, pure, and potent for our targeted indications;
our ability to demonstrate to the satisfaction of the FDA or any comparable foreign regulatory authority that the applicable product candidate’s risk-benefit ratio for its proposed indication is acceptable;
timely receipt of marketing approvals for our product candidates from applicable regulatory authorities;
the extent of any required post-marketing approval commitments to applicable regulatory authorities;
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establishing and scaling up, either alone or with third-party manufacturers, manufacturing capabilities of clinical supply for our clinical trials and commercial manufacturing, if any of our product candidates are approved;
obtaining and maintaining patent and trade secret protection or regulatory exclusivity for our product candidates, both in the United States and internationally;
successfully scaling a sales and marketing organization and launching commercial sales of our product candidates, if approved;
acceptance of our product candidates’ benefits and uses, if approved, by patients, the medical community and third-party payors;
maintaining a continued acceptable safety profile of our product candidates following approval;
effectively competing with companies developing and commercializing other therapies in the indications which our product candidates target;
obtaining and maintaining healthcare coverage and adequate reimbursement from third-party payors; and
enforcing and defending intellectual property rights and claims.

If we are not successful with respect to one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize KER-050, KER-047, KER-012 or any future product candidates we develop, which would materially harm our business. If we do not receive marketing approvals for our current and future product candidates, we may not be able to continue our operations.

All of our product candidates are in preclinical or early clinical development stages. Clinical trials are difficult to design and implement, and they involve a lengthy and expensive process with uncertain outcomes. We may experience delays in completing, or ultimately be unable to complete, the development and commercialization of KER-050, KER-047, KER-012 or any future product candidates.

Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process and our future clinical trial results may not be successful. We cannot guarantee that any of our ongoing and planned clinical trials will be conducted as planned or completed on schedule, if at all. Moreover, even if these trials are initiated or conducted on a timely basis, issues may arise that could result in the suspension or termination of such clinical trials.

To date, we have not completed any clinical trials required for the approval of any of our product candidates. Although we have completed our Phase 1 clinical trial of KER-050 and our expanded Phase 1 clinical trial of KER-047, each in healthy volunteers, we may experience delays in our ongoing clinical trials or preclinical studies and we do not know whether planned clinical trials will begin on time, need to be redesigned, enroll patients on time, have sufficient drug supply for our product candidates on a timely basis or be completed on schedule, if at all. A failure of one or more clinical trials can occur at any stage of testing, and our ongoing and future clinical trials may not be successful. We also may experience numerous unforeseen events during our clinical trials that could delay or prevent our ability to receive marketing approval or commercialize KER-050, KER-047, KER-012 or any future product candidates, including:

delays in or failure to obtain regulatory authorizations to commence a trial;
delays in reaching a consensus with regulatory agencies as to the design or implementation of our clinical trials;
delays in or failure to reach agreement on acceptable terms with prospective contract research organizations, or CROs, and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;
delays in or failure to obtain institutional review board, or IRB, or ethics committee approval at each site;
delays in or failure to recruit a sufficient number of suitable patients to participate in a trial;
failure to have patients complete a trial or return for post-treatment follow-up, including disruptions in our ability to treat patients or conduct post-treatment follow-up due to the COVID-19 pandemic;
clinical sites deviating from trial protocol, missing data or dropping out of a trial;
delays in adding new clinical trial sites;
failure to manufacture sufficient quantities of our product candidates for use in clinical trials in a timely manner;
occurrence of adverse events associated with the product candidate that are viewed to outweigh its potential benefits, or safety or tolerability concerns that could cause us or our collaborators, as applicable, to suspend or terminate a trial if we or our collaborators find that the participants are being exposed to unacceptable health risks;
failure to perform clinical trials in accordance with the FDA’s or any other regulatory authority’s good clinical practices, or GCP, requirements, or regulatory guidelines in other countries;
changes in regulatory requirements, policies and guidelines;
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failure of our third-party research contractors to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;
delays in establishing the appropriate dosage levels and frequency of dosing in clinical trials;
the quality or stability of our product candidates falling below acceptable standards;
delays due to the COVID-19 pandemic; and
business interruptions resulting from geo-political actions, including war and terrorism, another outbreak of a contagious disease, or natural disasters including earthquakes, typhoons, floods and fires.

In addition, disruptions caused by the COVID-19 pandemic have resulted in difficulties and delays in initiating, enrolling, conducting or completing our planned and ongoing preclinical studies and clinical trials, as applicable,
and may increase the likelihood that we encounter additional difficulties and delays in the future. We could also encounter delays if a clinical trial is suspended or terminated by us, the IRBs of the institutions in which such trials are being conducted, or the FDA or comparable foreign regulatory authorities, or recommended for suspension or termination by the Data Safety Monitoring Board for such trial. A suspension or termination may be imposed due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or comparable foreign regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a product or treatment, failure to establish or achieve clinically meaningful trial endpoints, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial. Many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates. Further, the FDA or comparable foreign regulatory authorities may disagree with our clinical trial design and our interpretation of data from clinical trials, or may change the requirements for approval even after they have reviewed and commented on the design for our clinical trials.

Our product development costs will increase if we experience delays in clinical testing or marketing approvals. We do not know whether any of our clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. Significant clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates and may allow our competitors to bring products to market before we do, potentially impairing our ability to successfully commercialize our product candidates and harming our business and results of operations. Any delays in our clinical development programs may harm our business, financial condition and results of operations significantly.

Our clinical trials may fail to demonstrate substantial evidence of the safety and efficacy or safety, purity and potency of our product candidates or any future product candidates, which would prevent or delay or limit the scope of regulatory approval and commercialization.

To obtain the requisite regulatory approvals to market and sell any of our product candidates, including KER-050, KER-047, KER-012 and any other future product candidates, we must demonstrate through extensive preclinical studies and clinical trials that our investigational drug products, such as KER-047, are safe and effective for use in each targeted indication, and in the case of our product candidates regulated as biological products, such as KER-050 and KER-012, that the product candidate is safe, pure and potent for use in its targeted indication. Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical development process. Most product candidates that begin clinical trials are never approved by regulatory authorities for commercialization. We may be unable to establish clinical endpoints that applicable regulatory authorities would consider clinically meaningful, and a clinical trial can fail at any stage of testing. Further, the process of obtaining regulatory approval is expensive, often takes many years following the commencement of clinical trials and can vary substantially based upon the type, complexity and novelty of the product candidates involved, as well as the target indications, patient population and regulatory agency. Prior to obtaining approval to commercialize KER-050, KER-047, KER-012 and any future product candidates in the United States or abroad, we, our collaborators or our potential future collaborators must demonstrate with substantial evidence from adequate and well-controlled clinical trials, and to the satisfaction of the FDA or comparable foreign regulatory authorities, that such product candidates are safe and effective for their intended uses.

Clinical trials that we conduct may not demonstrate the efficacy and safety necessary to obtain regulatory approval to market our product candidates. In some instances, there can be significant variability in safety or efficacy results between different clinical trials of the same product candidate due to numerous factors, including changes in trial procedures set forth in protocols, differences in the size and type of the patient populations, changes in and adherence to the clinical trial protocols and the rate of dropout among clinical trial participants. If the results of our ongoing or future clinical trials are inconclusive
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with respect to the efficacy of our product candidates, if we do not meet the clinical endpoints with statistical and clinically meaningful significance, or if there are safety concerns associated with our product candidates, we may be delayed in obtaining marketing approval, if at all. Additionally, any safety concerns observed in any one of our clinical trials in our targeted indications could limit the prospects for regulatory approval of our product candidates in those and other indications.

Even if the trials are successfully completed, clinical data are often susceptible to varying interpretations and analyses, and we cannot guarantee that the FDA or comparable foreign regulatory authorities will interpret the results as we do, and more trials could be required before we submit our product candidates for approval. We cannot guarantee that the FDA or comparable foreign regulatory authorities will view our product candidates as having efficacy even if positive results are observed in clinical trials. Moreover, results acceptable to support approval in one jurisdiction may be deemed inadequate by another regulatory authority to support regulatory approval in that other jurisdiction. To the extent that the results of the trials are not satisfactory to the FDA or comparable foreign regulatory authorities for support of a marketing application, approval of KER-050, KER-047, KER-012 and any future product candidates may be significantly delayed, or we may be required to expend significant additional resources, which may not be available to us, to conduct additional trials in support of potential approval of our product candidates. Even if regulatory approval is secured for a product candidate, the terms of such approval may limit the scope and use of the specific product candidate, which may also limit its commercial potential.

The results of preclinical studies and early-stage clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials. Initial success in our ongoing clinical trials may not be indicative of results obtained when these trials are completed or in later-stage trials.

The results of nonclinical and preclinical studies and clinical trials may not be predictive of the results of later-stage clinical trials. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical trials. Furthermore, there can be no assurance that any of our clinical trials will ultimately be successful or support further clinical development of any of our product candidates. There is a high failure rate for product candidates proceeding through clinical trials. Many companies in the biotechnology and pharmaceutical industries have suffered significant setbacks in late-stage clinical trials after achieving positive results in early-stage development and we cannot be certain that we will not face similar setbacks. These setbacks have been caused by, among other things, preclinical findings made while clinical trials were underway, or safety or efficacy observations made in preclinical studies and clinical trials, including previously unreported adverse events. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses and many companies that believed their product candidates performed satisfactorily in preclinical studies and clinical trials nonetheless failed to obtain FDA approval. Any such setbacks in our clinical development could have a material adverse effect on our business, financial condition and results of operations.

Additionally, some of the clinical trials we conduct may include open-label trials conducted at a limited number of clinical sites on a limited number of patients. For example, our ongoing Phase 2 clinical trial for KER-050 in patients with MDS is an open-label trial. An “open-label” clinical trial is one where both the patient and investigator know whether the patient is receiving the investigational product candidate or either an existing approved product or placebo. Most typically, open-label clinical trials test only the investigational product candidate and sometimes may do so at different dose levels. For example, in our ongoing Phase 2 clinical trial for KER-050 in patients with MDS, the dose levels for Cohorts 1, 2 and 3 are 0.75 mg/kg, 1.5 mg/kg and 2.5 mg/kg, respectively, and we expect to follow a modified fibonacci sequence for the dose levels for Cohort 4, if dosing is initiated.

Open-label clinical trials are also subject to various limitations that may exaggerate any therapeutic effect as patients in open-label clinical trials are aware when they are receiving treatment. Open-label clinic