iTeos Therapeutics(ITOS) - 2020 Q4 - Annual Report

Part I Business iTeos Therapeutics is a clinical-stage biopharmaceutical company developing immuno-oncology therapeutics with lead candidates inupadenant and EOS-448, leveraging tumor microenvironment expertise and retaining worldwide rights - The company is a clinical-stage biopharmaceutical firm specializing in differentiated immuno-oncology therapeutics designed to improve clinical benefits by targeting the tumor microenvironment[29] - The pipeline features two main clinical-stage programs: inupadenant (an A2AR antagonist) and EOS-448 (a TIGIT antagonist), both targeting novel immuno-oncology pathways[29] - iTeos retains worldwide rights to develop and commercialize all of its product candidates and plans to nominate an additional product candidate for IND-enabling studies by the end of 2021[29] Overview and Pipeline iTeos is a clinical-stage biopharmaceutical company with lead candidates inupadenant and EOS-448 in Phase 1/2a trials for solid tumors, holding worldwide rights and planning new IND-enabling studies - The most advanced product candidate, inupadenant, is a selective small molecule antagonist of the A2AR, currently in a Phase 1/2a clinical trial for advanced solid tumors[29] - The lead antibody product candidate, EOS-448, is an antagonist of TIGIT and is also being evaluated in a Phase 1/2a clinical trial for advanced solid tumors, with initial data expected in April 2021[29] - The company plans to nominate an additional product candidate for Investigational New Drug (IND) enabling studies before the end of 2021[29] Strategy The company's strategy involves advancing lead candidates inupadenant and EOS-448 through clinical development, expanding the pipeline with new candidates, and pursuing strategic collaborations while retaining worldwide commercial rights - Advance lead product candidate, inupadenant, through clinical development as a single agent and in combination with standard cancer treatments like pembrolizumab and chemotherapy[38] - Advance EOS-448, an FcγR engaging anti-TIGIT antibody, through clinical development, evaluating it in multiple solid tumors and hematological malignancies in combination with existing therapies[38] - Leverage deep understanding of immune pathways to identify novel product candidates, with plans to advance an additional candidate into IND-enabling studies in 2021[43] - Selectively enter into strategic collaborations to maximize the value of product candidates while retaining worldwide development and commercial rights[43] Inupadenant (A2AR Antagonist Program) Inupadenant, a selective A2AR antagonist, showed preliminary clinical benefit and good tolerability in a Phase 1/2a trial, with ongoing development in monotherapy and combination settings - Inupadenant is engineered to be a highly selective and potent A2AR antagonist that maintains efficacy at high adenosine concentrations found in tumors and is designed not to cross the blood-brain barrier, minimizing potential CNS side effects[58][59][63] - In the dose escalation part of the Phase 1/2a trial, inupadenant showed preliminary clinical benefit in 7 of 21 heavily pre-treated patients, including two confirmed partial responses in patients with CPI-refractory metastatic melanoma and metastatic castration-resistant prostate cancer (CRPC)[74][76][77] - The recommended Phase 2 dose for monotherapy is 80 mg BID, which provided continuous inhibition of A2AR. A new formulation is expected to be available for a clinical bridging study in Q2 2021[71][82] - As of July 7, 2020, inupadenant was generally well-tolerated with no dose-limiting toxicities observed in the dose-finding portion of the trial and one possibly drug-related serious adverse event of pericardial effusion[83] EOS-448 (Anti-TIGIT Antibody Program) EOS-448, a fully human IgG1 anti-TIGIT antibody, is designed to restore immune responses through FcγR engagement, showing potent preclinical antitumor activity and currently in a Phase 1/2a clinical trial - EOS-448 is an anti-TIGIT antibody designed to restore immune responses by blocking TIGIT and engaging FcγR, which can lead to the depletion of immunosuppressive Tregs and exhausted T cells within the tumor microenvironment[89][98][108] - Preclinical studies showed that FcγR binding is crucial for the antibody's antitumor activity, as it increases IFNγ-producing CD8+ T cells and decreases Tregs within the tumor[113][115][116] - A Phase 1/2a clinical trial of EOS-448 in adult patients with refractory solid tumors is currently underway, with plans to share preliminary results at the 2021 AACR Annual Meeting in April[122] - Future development plans include evaluating EOS-448 in combination with pembrolizumab, inupadenant, and an IMID in multiple myeloma[123] Collaborations, Competition, and Manufacturing The company collaborates with Adimab for antibody discovery and WuXi Biologics for manufacturing, faces significant competition in A2AR and anti-TIGIT programs, and relies solely on third-party CDMOs - Entered into a collaboration with Adimab for antibody discovery, which includes potential milestone payments up to $42.8 million for the first three products and low to mid-single-digit royalties. EOS-448 was licensed under this agreement[126][128] - A manufacturing agreement with WuXi Biologics for EOS-448 stipulates a low single-digit royalty or a one-time milestone payment in the low tens of millions if a different commercial manufacturer is used[132][133] - Faces competition from major pharmaceutical companies developing A2AR antagonists (AstraZeneca, Corvus, Arcus) and anti-TIGIT antibodies (Roche/Genentech, Merck, Bristol-Myers Squibb)[136][137] - The company relies on third-party contract development and manufacturing organizations (CDMOs) for all preclinical, clinical, and potential commercial manufacturing, with no current plans to own or operate its own facilities[142] Intellectual Property and Government Regulation iTeos' A2AR and anti-TIGIT programs are protected by patent families expiring up to 2040, and the company is subject to extensive FDA and international regulations covering all stages of product development and commercialization - The A2AR program (inupadenant) is protected by six patent families with statutory expirations up to March 2038 and September 2039[147] - The anti-TIGIT antibody program (EOS-448) is protected by two patent families with statutory expirations up to July 2038 and January 2040[149] - Product candidates are subject to extensive regulation by the FDA and other authorities, requiring a rigorous process of preclinical studies, IND submission, multi-phase clinical trials (Phase 1, 2, 3), and eventual submission of an NDA or BLA for marketing approval[150][152][161] - The company may utilize FDA's expedited programs such as Fast Track and Breakthrough Therapy designation to accelerate development and review of its product candidates for serious conditions[174][175][176] Risk Factors The company faces significant risks including clinical trial failures, regulatory unpredictability, reliance on third parties, intense competition, funding needs, intellectual property challenges, and COVID-19 impacts - The company's success is heavily dependent on the outcomes of clinical trials for its product candidates, which may fail to demonstrate required safety and efficacy, potentially preventing commercialization[255] - iTeos relies on third parties for conducting clinical trials and manufacturing product candidates, exposing it to risks of delays, increased costs, and regulatory non-compliance if these partners fail to perform[390][402] - The company faces significant competition from well-resourced biopharmaceutical companies, which may develop safer, more effective, or more rapidly approved products[283] - Substantial additional financing is required to achieve goals, and failure to obtain necessary capital could force delays, reductions, or termination of development and commercialization efforts[427] - The ongoing COVID-19 pandemic poses risks to operations, including potential delays in clinical trial enrollment, manufacturing disruptions, and negative impacts on the ability to raise capital[459][461] Properties The company leases its principal office in Cambridge, MA, and a larger laboratory and office facility in Charleroi, Belgium, with leases extending to 2022 and 2030 respectively - The company leases its principal office of approximately 2,479 sq. ft. in Cambridge, MA, with the lease expiring on May 31, 2022[551] - Its Belgian subsidiary leases a 1,577 sq. meter facility for lab and office space, and in January 2021, this lease was extended through January 2030 with an expansion of 201 sq. meters[551][553] Legal Proceedings The company is not currently involved in any material legal proceedings, and management anticipates no adverse effects from ordinary course matters - The company is not currently a party to any material legal proceedings[554] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock began trading on Nasdaq in July 2020, has not paid dividends, and raised approximately $210.6 million in net IPO proceeds - Common stock has been publicly traded on the Nasdaq Global Select Market under the symbol "ITOS" since July 24, 2020[558] - The company has not declared or paid any cash dividends and intends to retain future earnings to finance operations[560] - The company closed its IPO on July 28, 2020, and with the underwriters' option exercise, received aggregate net proceeds of approximately $210.6 million[566][569] Management's Discussion and Analysis of Financial Condition and Results of Operations As a clinical-stage biopharmaceutical company, iTeos reported a $38.0 million net loss in 2020 due to increased R&D and G&A expenses, holding $336.3 million in cash expected to fund operations into late 2023 Selected Financial Highlights (in thousands) | (in thousands) | 2020 | 2019 | |---|---|---| | Research and development expenses | $29,900 | $19,211 | | General and administrative expenses | $15,340 | $8,837 | | Loss from operations | $(45,240) | $(28,048) | | Net loss | $(38,033) | $(22,454) | - Research and development expenses increased by $10.7 million in 2020, primarily due to increased activities for the inupadenant and EOS-448 clinical trials[605] - General and administrative expenses increased by $6.5 million in 2020, mainly due to higher payroll, stock-based compensation, and D&O insurance costs associated with becoming a public company[607][608] - As of December 31, 2020, the company had $336.3 million in cash and cash equivalents, which is expected to fund operations into the second half of 2023[578][623] Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from interest rate and foreign currency fluctuations, primarily the euro, but expects no material impact from a 5% euro exchange rate change due to short-term cash holdings - The company's primary market risk exposures are interest rate sensitivity and foreign currency exchange rate fluctuations, specifically with the euro[650][651] - Due to the short-term nature of its cash and cash equivalents ($336.3 million as of Dec 31, 2020), a 10% change in interest rates is not expected to have a material impact[650] Financial Statements and Supplementary Data The company's audited consolidated financial statements for 2020 and 2019 are included, showing $344.6 million in total assets, $21.4 million in total liabilities, and a $38.0 million net loss in 2020 Consolidated Balance Sheet Highlights (as of Dec 31, 2020) | (in thousands) | Amount | |---|---| | Assets | | | Cash and cash equivalents | $336,326 | | Total current assets | $339,544 | | Total assets | $344,558 | | Liabilities & Equity | | | Total current liabilities | $14,998 | | Total liabilities | $21,361 | | Total stockholders' equity | $323,197 | Consolidated Statement of Operations Highlights (Year ended Dec 31, 2020) | (in thousands) | Amount | |---|---| | Total operating expenses | $45,240 | | Loss from operations | $(45,240) | | Net loss | $(38,033) | Controls and Procedures Management concluded the company's disclosure controls were effective as of December 31, 2020, with no material changes to internal controls reported for the quarter - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2020[656] - As a newly public company, this report does not include a management's assessment of internal control over financial reporting[657] Part III Directors, Executive Officers and Corporate Governance The company's leadership includes key executives and an eight-member board of directors, divided into staggered classes with established committees, where all directors except the CEO are independent - Key executive officers include Michel Detheux, Ph.D. (CEO), Matthew Call (COO), Matthew Gall (CFO), and Joanne Jenkins Lager, M.D. (CMO)[664] - The Board of Directors consists of eight members, is chaired by David L. Hallal, and is divided into three staggered classes with terms expiring in 2021, 2022, and 2023[664][684][690] - The board has determined that all directors are independent, with the exception of CEO Michel Detheux[772] Executive Compensation The 2020 executive compensation included base salary, performance bonuses, and equity awards, with CEO Michel Detheux's total compensation reaching $16.8 million, primarily from a $16.0 million option award 2020 Named Executive Officer Compensation | Name | Position | Salary ($) | Option Awards ($) | Non-Equity Incentive Plan ($) | Total ($) | |---|---|---|---|---|---| | Michel Detheux, Ph.D. | CEO | 462,500 | 15,982,781 | 242,500 | 16,816,531 | | Joanne Jenkins Lager, M.D. | CMO | 432,500 | 600,438 | 176,000 | 1,305,998 | | Matthew Gall | CFO | 225,759 | 1,449,000 | 160,000 | 1,916,259 | - In 2020, base salaries were adjusted to $485,000 for the CEO, $440,000 for the CMO, and set at $400,000 for the new CFO[701] - Named executive officers were eligible for and achieved their target bonuses (50% of base salary for CEO, 40% for others) plus an additional special IPO bonus equivalent to 50% of their annual incentive bonus[702][703] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters As of March 15, 2021, executive officers and directors collectively owned 4.16% of common stock, while major institutional holders like MPM Capital (17.27%) and RA Capital (12.59%) held significant stakes Principal Stockholders (as of March 15, 2021) | Holder | Percentage Ownership | |---|---| | Entities Affiliated with MPM Capital | 17.27% | | Entities Affiliated with RA Capital | 12.59% | | Entities Affiliated with Boxer Capital | 12.59% | | RTW Investments, LP | 7.87% | | Funds advised by Janus Henderson Investors | 5.66% | | All executive officers and directors as a group | 4.16% | - As of March 15, 2021, executive officers, directors, and 5% stockholders beneficially owned approximately 59.84% of the company's outstanding voting stock[525] Certain Relationships and Related Transactions, and Director Independence The company engaged in related party transactions, including $125.4 million in Series B-2 preferred stock sales and IPO participation by major stockholders, with the board adopting a related party policy and determining all directors except the CEO are independent - In March 2020, the company sold $125.4 million of Series B-2 preferred stock, with significant participation from related parties including entities affiliated with MPM Capital, RA Capital, and Boxer Capital[757] - Certain 5% stockholders, including entities affiliated with Boxer Capital, RA Capital, and MPM Capital, purchased shares in the company's IPO[763][764] - The board of directors has adopted a written policy for reviewing and approving related party transactions, overseen by the audit committee[770] Principal Accounting Fees and Services Deloitte served as the independent auditor, with total fees increasing to approximately $1.91 million in 2020 from $0.51 million in 2019, primarily due to IPO-related audit services Auditor Fees (in thousands) | Fee Type | 2020 | 2019 | |---|---|---| | Audit fees | $1,693,414 | $11,057 | | Tax fees | $218,671 | $498,579 | | All other fees | $2,695 | $— | | Total fees | $1,914,780 | $509,636 | - The significant increase in audit fees in 2020 was due to services provided in connection with the company's IPO in July 2020[783] Part IV Exhibits, Financial Statement Schedules This section details exhibits filed with the Form 10-K, including corporate governance documents, material contracts, and Sarbanes-Oxley Act certifications - This item lists all exhibits filed with the Form 10-K, including corporate governance documents, material contracts, and required certifications[789][791]