iTeos Therapeutics(ITOS) - 2023 Q4 - Annual Report

PART I Business iTeos Therapeutics is a clinical-stage biopharmaceutical company focused on developing immuno-oncology therapeutics Overview and Pipeline iTeos is a clinical-stage biopharmaceutical company developing immuno-oncology therapeutics with three clinical-stage programs and a key partnership with GSK - The company's lead product candidate, belrestotug, is being co-developed with GSK for multiple cancer indications, including non-small cell lung cancer (NSCLC) and head and neck squamous cell carcinoma (HNSCC)[26][27] - The pipeline also includes inupadenant, an A2AR antagonist being evaluated in post-IO metastatic NSCLC, and EOS-984, a first-in-class ENT1 inhibitor in a Phase 1 trial for advanced malignancies[28][29] Development Pipeline Status (as of early 2024) | Product Candidate | Target/Mechanism | Indication | Phase | Status | |---|---|---|---|---| | Belrestotug | Anti-TIGIT | 1L NSCLC (PD-L1 high) | Phase 2 | Data Anticipated 2024 | | | | 1L HNSCC (PD-L1 high/low) | Phase 2 | Data Anticipated 2024 | | | | 1L HNSCC (PD-L1 high) | Phase 2 | Enrolling | | | | 1L mNSCLC | Phase 2 | Enrolling | | | | Advanced Malignancies | Phase 1 | Enrolling | | Inupadenant | A2AR Antagonist | Post-IO Chemo-naïve NSCLC | Phase 2 | Data Anticipated Late 2024 | | EOS-984 | ENT1 Inhibitor | Advanced Malignancies | Phase 1 | Data Anticipated 2024 | Product Candidates The company's clinical portfolio includes belrestotug, inupadenant, and EOS-984, each with distinct mechanisms of action in immuno-oncology - Belrestotug is designed as a fully functional IgG1 antibody to engage Fcγ receptors, leading to enhanced immune activation and ADCC-mediated killing of immunosuppressive Treg cells[39] - Inupadenant is differentiated by its high affinity for A2AR, insurmountable antagonism (maintaining potency in high adenosine concentrations), high selectivity, and inability to cross the blood-brain barrier, minimizing potential CNS side effects[44][45] - EOS-984 targets ENT1, a dominant adenosine transporter on lymphocytes, representing a novel mechanism within the adenosine pathway to restore T cell function and tumor-killing activity[47] Collaborations and Licenses iTeos has a major collaboration with GSK for belrestotug, alongside agreements with Adimab for antibody discovery and WuXi Biologics for manufacturing GSK Collaboration Agreement Key Terms | Term | Description | |---|---| | Upfront Payment | $625.0 million | | Potential Milestones | Up to $1.45 billion (development and commercial) | | US Profit Share | 50/50 split between iTeos and GSK | | Ex-US Royalties | Tiered double-digit royalties up to 20% to iTeos | - Under the Adimab agreement, iTeos may be required to pay up to $45.8 million in milestones for the first three new products and low to mid-single-digit royalties on worldwide net sales[53][54] - The manufacturing agreement with WuXi Biologics for belrestotug includes a provision for a low single-digit royalty or a one-time milestone payment in the low tens of millions if iTeos uses a different commercial manufacturer[57] Competition The company faces intense competition in immuno-oncology from major pharmaceutical and biotechnology companies, particularly for its TIGIT and adenosine pathway candidates - Competitors for the anti-TIGIT antibody belrestotug include major players like Roche/Genentech, Merck, Bristol-Myers Squibb, and Arcus (with Gilead), with the most advanced candidates in Phase 3 trials[61] - Competitors in the adenosine pathway space include AstraZeneca, Corvus Pharmaceuticals, and Arcus (with Gilead), with the most advanced product candidates in Phase 2 clinical trials[62] Intellectual Property The company's TIGIT and A2AR program portfolios are protected by issued U.S. and global patents and numerous pending applications with expiration dates extending to 2044 - The TIGIT program portfolio (belrestotug) has issued patents with a natural expiration date in 2038, and pending applications that, if granted, would expire between 2038 and 2040[71] - The A2AR program portfolio (inupadenant, EOS-984) has issued patents with expiration dates from 2038 to 2039, and pending applications that, if granted, would expire between 2038 and 2044[73] Government Regulation The company's operations are subject to extensive U.S. and international regulations governing drug development, approval, and marketing, including multi-phase clinical trials and expedited programs - The drug approval process in the U.S. involves extensive preclinical studies, an Investigational New Drug (IND) application, and typically three phases of clinical trials (Phase 1, 2, and 3) before submitting a New Drug Application (NDA) or Biologics License Application (BLA) to the FDA[77][82][83] - The FDA offers expedited programs such as Fast Track and Breakthrough Therapy designation to facilitate the development and review of drugs for serious conditions with unmet medical needs[101][102][103] - In the European Union, clinical trials are now governed by the Clinical Trials Regulation (CTR), which centralizes the application and approval process through the Clinical Trials Information System (CTIS)[144] Human Capital Resources As of December 31, 2023, iTeos had 157 full-time employees, with a strong focus on R&D and a commitment to diversity Employee Statistics (as of Dec 31, 2023) | Metric | Value | |---|---| | Total Full-Time Employees | 157 | | R&D Employees | 125 | | Employees with Ph.D. or M.D. | 60 | | Women in Workforce | 58% | | Women in Leadership (Director+) | 49% | Risk Factors The company faces substantial risks related to clinical development, reliance on third parties, competition, intellectual property, and the need for additional financing - Successful commercialization is not guaranteed, as it depends on completing successful clinical trials, which are expensive, lengthy, and have uncertain outcomes; early positive results may not be predictive of later-stage trials[176][177] - The company heavily relies on its collaboration with GSK for the development of belrestotug and on other third parties (CROs and CMOs) for conducting clinical trials and manufacturing product candidates, creating dependencies and risks outside its direct control[238][245][248] - Significant additional financing will be required to achieve goals, and failure to obtain necessary capital could force delays or termination of development programs[266] - The company faces intense competition from well-funded biopharmaceutical companies, and its ability to protect its intellectual property through patents and trade secrets is critical but not guaranteed[197][271] Unresolved Staff Comments None - The company reports no unresolved staff comments from the SEC[335] Cybersecurity The company manages cybersecurity risks through internal processes and external assessments, with oversight from the Audit Committee - The Audit Committee of the Board of Directors has primary oversight for cybersecurity risks and receives regular updates from management[342] - The company has an incident response plan and engages external consultants for program assessment and penetration testing[339][340] - As of the report date, the company has not experienced any cybersecurity incidents that resulted in a material impact on its operations or financial condition[345] Properties The company leases its principal office in Watertown, Massachusetts, and laboratory and office facilities in Belgium - The principal executive office is leased space of 9,068 sq ft in Watertown, MA, with the lease terminating in February 2027[346] - The company leases a total of 2,684 square meters of laboratory and office space in Charleroi, Belgium, and has an agreement for an additional 859 square meters in Gosselies, Belgium[347] Legal Proceedings The company is not currently a party to any material legal proceedings - Management believes there are no pending claims or actions that could have a material adverse effect on the company's financial condition[349] Mine Safety Disclosures Not applicable - This item is not applicable to the company[350] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on Nasdaq under "ITOS", with no history or current plans for cash dividends - Common stock is traded on the Nasdaq Global Select Market under the ticker symbol "ITOS"[353] - The company has never paid cash dividends and intends to retain future earnings to finance business operations[355] Reserved This item is reserved Management's Discussion and Analysis of Financial Condition and Results of Operations For FY2023, the company reported a net loss of $112.6 million due to decreased collaboration revenue and increased R&D expenses, with sufficient liquidity projected through 2026 Results of Operations In 2023, iTeos reported a net loss of $112.6 million, primarily due to a significant decrease in collaboration revenue and increased operating expenses Consolidated Results of Operations (in thousands) | Account | 2023 | 2022 | 2021 | |---|---:|---:|---:| | License and collaboration revenue | $12,595 | $267,630 | $344,775 | | Research and development expenses | $113,300 | $97,359 | $59,369 | | General and administrative expenses | $50,396 | $43,947 | $40,505 | | (Loss) income from operations | ($151,101) | $126,324 | $244,901 | | Interest income | $31,774 | $11,361 | $78 | | Income tax expense | $3,612 | $52,084 | $41,943 | | Net (Loss) income | ($112,642) | $96,652 | $214,521 | - License and collaboration revenue decreased by $255.0 million in 2023 compared to 2022, as the revenue from the GSK upfront payment was fully recognized in early 2023[392] - R&D expenses increased by $15.9 million in 2023, driven by advancing clinical trials for belrestotug, inupadenant, and EOS-984, including higher payroll, stock-based compensation, and professional fees[393] Liquidity and Capital Resources As of December 31, 2023, the company had $632.5 million in cash and investments, projected to fund operations through 2026 Liquidity Position (as of Dec 31, 2023) | Item | Amount (in millions) | |---|---:| | Cash and cash equivalents | $251.2 | | Available-for-sale securities | $381.3 | | Total Liquidity | $632.5 | - The company believes its existing cash, cash equivalents, and available-for-sale securities will fund operating expenses and capital expenditure requirements through 2026[422] - Net cash used in operating activities was $103.7 million for the year ended December 31, 2023[415][416] Critical Accounting Policies and Estimates Key accounting policies involve significant judgments, including revenue recognition for collaborations, accrued R&D expenses, stock-based compensation, and income tax valuation allowances - Revenue from the GSK collaboration was recognized over time using a cost-to-cost measure of progress, requiring judgment in estimating total expected costs[428] - The company must estimate accrued R&D expenses for services performed but not yet invoiced by CROs and CMOs, which is a critical estimate[431] - A full valuation allowance is recorded against net deferred tax assets as of December 31, 2023, as management concluded it is more likely than not that the benefits will not be realized[437] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are foreign currency exchange rate fluctuations and interest rate risk on investments, with no material impact expected from interest rate changes - The primary market risk is foreign currency exchange risk related to the euro, as the company's Belgian subsidiary's functional currency is the euro[442] - The company is exposed to interest rate risk on its $251.2 million in cash and cash equivalents and $381.3 million in available-for-sale securities; however, due to the short-term nature of these instruments, the impact of interest rate changes is not expected to be material[443] Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements for 2021-2023 and the independent auditor's report Key Balance Sheet Data (in thousands) | Account | Dec 31, 2023 | Dec 31, 2022 | |---|---:|---:| | Cash and cash equivalents | $251,177 | $284,803 | | Total Investments | $381,278 | $446,584 | | Total Assets | $667,588 | $754,991 | | Total Liabilities | $92,360 | $91,659 | | Total Stockholders' Equity | $575,228 | $663,332 | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None - The company reports no changes in or disagreements with its accountants on accounting and financial disclosure[446] Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2023 - Management concluded that disclosure controls and procedures were effective as of December 31, 2023[447] - Management concluded that internal control over financial reporting was effective as of December 31, 2023, based on the COSO 2013 framework[449] Other Information Jill M DeSimone was appointed to the Board of Directors and Audit Committee effective March 7, 2024 - Jill M DeSimone was appointed to the Board of Directors, effective March 7, 2024[451] PART III Directors, Executive Officers and Corporate Governance Information regarding directors, executive officers, and corporate governance will be incorporated by reference from the 2024 proxy statement - Information regarding directors, executive officers, and corporate governance is incorporated by reference from the forthcoming 2024 proxy statement[458] Executive Compensation Information regarding executive compensation will be incorporated by reference from the 2024 proxy statement - Information regarding executive compensation is incorporated by reference from the forthcoming 2024 proxy statement[460] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information regarding security ownership will be incorporated by reference from the 2024 proxy statement - Information regarding security ownership is incorporated by reference from the forthcoming 2024 proxy statement[461] Certain Relationships and Related Transactions, and Director Independence Information regarding related party transactions and director independence will be incorporated by reference from the 2024 proxy statement - Information regarding related party transactions and director independence is incorporated by reference from the forthcoming 2024 proxy statement[462] Principal Accounting Fees and Services Information regarding principal accounting fees and services will be incorporated by reference from the 2024 proxy statement - Information regarding principal accounting fees and services is incorporated by reference from the forthcoming 2024 proxy statement[463] PART IV Exhibits, Financial Statement Schedules This section lists the exhibits filed as part of the Form 10-K, including key corporate documents and agreements Form 10-K Summary None - The company has not provided a summary for its Form 10-K[469]