Leadership Cuts Won't Slow This Biotech
Research Report

Kronos Bio, Inc. (KRON:NASDAQ), a biotechnology company, recently decided to streamline its executive leadership team by eliminating three C-suite roles — Chief Medical Officer, Chief Scientific Officer, and Chief Operating Officer plus General Counsel, according to H.C. Wainwright & Co. analysts Robert Burns and Dr. Raghuram Selvaraju in a January 26 research note.

This was presented by management as a cost-cutting measure rather than being related to pending clinical trial results or changes in research strategy.

Specifically, they stated that the pending mid-2024 results from expansion cohorts of the KB-0742 trial did not factor into the terminations, as that data has not been collected yet. Additionally, they asserted that this does not represent a major shift in Kronos' overall R&D approach and programs.

Due to severance payments for the terminated executives, Kronos expects around US$2 million in additional 1Q2024 operating expenses. However, management maintains confidence that the company's current finances can fund operations into 2026.

The analysts also touched on the company's pending data. 

"We look forward to KB-0742 expansion cohort data in mid-2024," the analysts wrote.

Kronos Bio recently presented interim Phase 1 data on its oral CDK9 inhibitor drug, KB-0742. The trial has enrolled 28 patients who have received a median of 3.5 prior cancer therapies so far. 

Last year, Kronos selected a 60mg dose of KB-0742 as the recommended Phase 2 dose. At this dose level, KB-0742 reduced levels of f phosphorylated Ser2 on RNA polymerase II (pSer2), a direct target of CDK9, by around 50% in patients' immune cells.

This degree of target engagement matched anti-tumor activity seen in preclinical models. KB-0742 also showed a 24-hour half-life in the body and accumulated 2- to 2.5-fold after ten days of dosing.

In the dose escalation portion of the trial, one patient with myxoid liposarcoma experienced a partial response to KB-0742 treatment. However, the analysts said, "In our opinion, it is premature to view the low response rate as indicative of KB-0742's potential since the dose-escalation portion of this trial did not select patients for MYC amplification, as will be the case in dose expansion." The analysts also stated that dose escalation is still ongoing at 80mg, and this higher dose could also be explored further.

In terms of the stock's valuation, the analysts wrote, "We value Kronos Bio using a discounted cash flow (DCF)-driven methodology, ascribing a 10% probability of approval to KB-0742 in MYC-amplified solid tumors," the analysts said. 

They reiterated their Buy rating on Kronos Bio and gave the company a US$2.50 target price. 

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Disclosures for H.C. Wainwright & Co., Kronos Bio Inc., January 26, 2024

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H.C. Wainwright & Co, LLC (the “Firm”) is a member of FINRA and SIPC and a registered U.S. Broker-Dealer. I, Robert Burns and Raghuram Selvaraju, Ph.D. , certify that 1) all of the views expressed in this report accurately reflect my personal views about any and all subject securities or issuers discussed; and 2) no part of my compensation was, is, or will be directly or indirectly related to the specific recommendation or views expressed in this research report; and 3) neither myself nor any members of my household is an officer, director or advisory board member of these companies. None of the research analysts or the research analyst’s household has a financial interest in the securities of Kronos Bio, Inc. (including, without limitation, any option, right, warrant, future, long or short position). As of December 31, 2023 neither the Firm nor its affiliates beneficially own 1% or more of any class of common equity securities of Kronos Bio, Inc.. Neither the research analyst nor the Firm knows or has reason to know of any other material conflict of interest at the time of publication of this research report.

The research analyst principally responsible for preparation of the report does not receive compensation that is based upon any specific investment banking services or transaction but is compensated based on factors including total revenue and profitability of the Firm, a substantial portion of which is derived from investment banking services. Mr. Selvaraju, who is [the][an] author of this report, is the Chairman of and receives compensation from Relief Therapeutics Holding SA, a Swiss, commercial-stage biopharmaceutical company identifying, developing and commercializing novel, patent protected products in selected specialty, rare and ultra-rare disease areas on a global basis ("Relief"). You should consider Mr. Selvaraju's position with Relief when reading this research report. The Firm or its affiliates did not receive compensation from Kronos Bio, Inc. for investment banking services within twelve months before, but will seek compensation from the companies mentioned in this report for investment banking services within three months following publication of the research report. The Firm does not make a market in Kronos Bio, Inc. as of the date of this research report.

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