iTeos Therapeutics | SEC Filing

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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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 September 30, 2023


☐	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: 001-39401

iTeos Therapeutics, Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware		84-3365066
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
321 Arsenal St Watertown, MA		02472
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (339) 217 0161

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading
Symbol(s)

Name of each exchange on which registered

Common stock, $0.001 par value per share

ITOS

Nasdaq Global Market

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, 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.

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 November 2, 2023, the registrant had 35,784,958 shares of common stock, $0.001 par value per share, outstanding.

Summary of the material risks associated with our business

Our business is subject to numerous risks and uncertainties that you should be aware of before making an investment decision, including those highlighted in the section entitled “Risk Factors”. These risks include, but are not limited to, the following:

•

We must complete successful preclinical studies and clinical trials that demonstrate the safety and efficacy of the product candidates before we can begin the commercialization process.

•

Challenges enrolling patients in our clinical trials delay and may prevent completion of clinical trials of our product candidates. Patient enrollment requires initiation of clinical trial sites; accordingly, delays in initiation of sites exacerbate enrollment challenges.

•

We anticipate that our future product candidates will be used in combination with third-party drugs or biologics, some of which are still in development, and we have limited or no control over the supply, regulatory status, or regulatory approval of such drugs or biologics.

•

Interim “top-line” and preliminary results from our clinical trials that we announce or publish from time to time may change as more patient data become available, and audit and verification procedures could result in material changes in the final data.

•

We may not be able to file investigational new drug ("IND") applications or IND amendments to commence additional clinical trials on the timelines indicated, and, even if we are able to file, the Federal Drug Administration, or FDA, or a comparable foreign regulatory authority may not permit us to proceed.

•

We face significant competition from other biopharmaceutical and biotechnology companies, academic institutions, government agencies, and other research organizations, which may result in others discovering, developing, or commercializing products more quickly or marketing them more successfully than us. If their product candidates are shown to be safer or more effective than ours, our commercial opportunity may be reduced or eliminated.

•

Negative developments in the field of immuno-oncology or in the field of TIGIT (as defined herein) or adenosine pathway therapeutics could damage public perception of our product candidates or negatively affect our business.

•

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.

•

The regulatory approval processes of the FDA and comparable foreign regulatory authorities are lengthy, time consuming and inherently unpredictable. If we experience delays in obtaining, required regulatory approvals, our ability to generate revenue may be materially impaired.

•

We rely on third parties to conduct our clinical trials and perform some of our research and preclinical studies. Failure by these third parties to satisfactorily carry out their contractual duties or to meet expected deadlines may adversely impact our development programs, business and prospects.

•

We may not realize the benefits of our collaborations, alliances or licensing arrangements, including our collaboration with GSK (as defined herein) for the global development of belrestotug (formerly EOS-448).

•

We rely on third parties to manufacture our product candidates, and we expect to continue to rely on third parties for the clinical as well as any future commercial supply of our product candidates and other future product candidates. The development of our current and future product candidates, and the commercialization of any approved products, could be stopped, delayed or made less profitable if any such third party fails to provide us with sufficient clinical or commercial quantities of such product candidates or products, fails to do so at acceptable quality levels or prices or fails to achieve or maintain satisfactory regulatory compliance.

•

Our limited operating history may make it difficult for you to evaluate our business and assess our future viability.

•

We will require additional financing to achieve our goals, and failure to obtain this necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our product development or commercialization efforts.

•

If we are unable to obtain and maintain sufficient intellectual property protection for our current product candidates or any future product candidates, or if the scope of the intellectual property protection is not

sufficiently broad, our competitors could develop and commercialize products similar or identical to ours, and our ability to commercialize successfully our products may be adversely affected.

•

We are highly dependent on our key personnel, and if we are not successful in attracting and retaining highly qualified personnel, we may not be able to implement successfully our business strategy.

•

The trading price of our common stock has been and may continue to be volatile.

The above summary risk factors should be read together with the full risk factors under in the heading “Risk factors” and the other information in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and the related notes, as well as in other documents that we file with the Securities and Exchange Commission ("SEC"). The risks summarized above or described below are not the only risks that we face. Additional risks and uncertainties not precisely known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition, results of operations and future growth prospects.

Special note regarding forward-looking statements

This Quarterly Report on Form 10-Q, including the section entitled “Management’s discussion and analysis of financial condition and results of operations” contains express or implied forward-looking statements. These statements relate to future events or future operational or financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

•

the timing, progress and success of our clinical trials, including statements regarding the timing of initiation and completion of studies or trials and related preparatory work, the period during which the results of the trials will become available and our research and development programs;

•

whether the results of our trials will be sufficient to support domestic or foreign regulatory filings or approvals;

•

regulatory actions with respect to our product candidates or our competitors’ products and product candidates;

•

our ability to obtain, including on an expedited basis, and maintain regulatory approval of our product candidates;

•

the outcomes of our preclinical studies;

•

our ability to enroll patients in our clinical trials at the pace that we project;

•

the costs of development of our product candidates or clinical development programs;

•

the period of time over which our existing capital resources will be sufficient to fund our operating expenses and capital expenditures, and the degree to which such resources will enable us to fund our planned development of our product candidates;

•

the potential attributes and clinical benefits of our product candidates;

•

our ability to successfully establish or maintain collaborations or strategic relationships for our product candidates;

•

the expected benefits of collaborations, including potential milestones and royalty payments from GSK pursuant to the GSK Collaboration Agreement (as defined herein);

•

the rate and degree of market acceptance of our product candidates;

•

our ability to obtain orphan drug or Breakthrough Therapy designation or other accelerated approval for any of our product candidates or any other product candidates that we may identify and pursue;

•

our ability to manufacture our product candidates in conformity with the U.S. Food and Drug Administration’s ("FDA") requirements and to scale up manufacturing of our product candidates to commercial scale, if approved;

•

our ability to compete with companies currently producing or engaged in the clinical development of treatments for the disease indications that we pursue or treatment modalities that we develop;

•

our reliance on third parties to conduct our clinical trials;

•

our reliance on third-party contract manufacture organizations ("CMOs") to manufacture and supply our product candidates for us;

•

our ability to retain and recruit key personnel;

•

our ability to obtain and maintain intellectual property protection for our product candidates;

•

our estimates of our expenses, ongoing losses, future revenue, cash runway, capital requirements and our need for or ability to obtain additional financing;

•

our expectations regarding the time during which we will be an emerging growth company under the Jumpstart Our Business Startups Act, or JOBS Act;

•

our future financial performance; and

•

the impact of laws and regulations applicable to our industry.

In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negatives of these terms or other comparable terminology, although not all forward-looking statements contain such identifying terminology. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties, and other factors, which are, in some cases, beyond our control and which could materially affect our results and financial condition. Factors that may cause actual results to differ materially include, among other things, those listed under the section titled “Risk factors” in this Quarterly Report on Form 10-Q and in any subsequent filings with the SEC. These risks and uncertainties may result in actual events or results varying significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance. You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed with the SEC and exhibits to this Quarterly Report on Form 10-Q, completely and with the understanding that our actual future results may be materially different from any future results expressed or implied by these forward-looking statements. Statements regarding our cash runway do not indicate when we may access the capital markets.

Unless required by law, we undertake no obligation to publicly update or revise any forward-looking statements to reflect new information or future events or otherwise. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q.

iii

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION	1
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)	2
	Condensed Consolidated Statements of Stockholders’ Equity	3
	Condensed Consolidated Statements of Cash Flows	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	31
PART II.	OTHER INFORMATION	32
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	65
Item 3.	Defaults Upon Senior Securities	65
Item 4.	Mine Safety Disclosures	65
Item 5.	Other Information	65
Item 6.	Exhibits	66
	Signatures	67

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

iTeos Therapeutics, Inc. and subsidiaries

Condensed consolidated balance sheets

(unaudited)


(in thousands, except share amounts)	September 30, 2023			December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	204,134		$	284,803
Short-term investments (amortized cost of $395,803)		394,893			328,359
Grants receivable		—			1,001
Refundable income taxes		6,312			1,434
Prepaid expenses and other currents assets		13,789			12,701
Total current assets		619,128			628,298
Property and equipment, net		3,330			2,121
Long-term investments (amortized cost of $46,216)		45,897			118,225
Research and development tax credits receivable		2,231			1,128
Restricted cash		267			235
Right of use assets		5,913			4,652
Other assets		878			332
Total assets	$	677,644		$	754,991
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	3,419		$	7,662
Accrued expenses and other current liabilities		22,049			19,727
Deferred income		1,638			1,180
Deferred revenue		-			12,595
Lease liabilities		1,117			836
Total current liabilities		28,223			42,000
Grants repayable, net of current portion		6,417			6,622
Lease liabilities, net of current portion		4,812			3,837
Unrecognized tax benefits		39,930			39,200
Total liabilities		79,382			91,659
Commitments and contingencies (Note 10)
Stockholders’ equity:
Common stock, $0.001 par value: 150,000,000 shares authorized at September 30, 2023 and December 31, 2022; 35,784,958 and 35,611,219 shares issued and outstanding, respectively		36			36
Additional paid-in capital		456,299			435,665
Accumulated other comprehensive loss		(13,256	)		(9,644	)
Retained earnings		155,183			237,275
Total stockholders’ equity		598,262			663,332
Total liabilities and stockholders’ equity	$	677,644		$	754,991

The accompanying notes are an integral part of these condensed consolidated financial statements.

iTeos Therapeutics, Inc. and subsidiaries

Condensed consolidated statements of operations and comprehensive income (loss)

(unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands, except share and per share amounts)	2023			2022			2023			2022
Revenue:
License and collaboration revenue	$	—		$	19,487		$	12,595		$	213,725
Total revenue		—			19,487			12,595			213,725
Operating expenses:
Research and development expenses		30,638			23,932			85,523			71,938
General and administrative expenses		12,642			10,760			38,027			32,846
Total operating expenses		43,280			34,692			123,550			104,784
(Loss) income from operations		(43,280	)		(15,205	)		(110,955	)		108,941
Other income and expenses:
Grant income		631			414			2,165			1,052
Research and development tax credits		417			284			1,146			830
Interest income		8,039			3,243			23,932			4,393
Other income (expense), net		771			9,278			2,870			10,774
(Loss) Income before income taxes		(33,422	)		(1,986	)		(80,842	)		125,990
Income tax (expense) benefit		1,181			2,977			(1,249	)		(49,791	)
Net (loss) income	$	(32,241	)	$	991		$	(82,091	)	$	76,199
Basic net (loss) income per common share	$	(0.90	)	$	0.03		$	(2.30	)	$	2.14
Diluted net (loss) income per common share	$	(0.90	)	$	0.03		$	(2.30	)	$	2.01
Weighted-average common shares outstanding - basic		35,783,160			35,575,323			35,756,295			35,538,700
Weighted-average common shares outstanding - diluted		35,783,160			37,655,740			35,756,295			37,852,241

Net (loss) income	$	(32,241	)	$	991		$	(82,091	)	$	76,199
Foreign currency translation adjustments		(736	)		(9,816	)		(2,638	)		(11,107	)
Unrealized gain (loss) on available-for-sale securities		646			—			(975	)		—
Comprehensive (loss) income	$	(32,331	)	$	(8,825	)	$	(85,704	)	$	65,092

The accompanying notes are an integral part of these condensed consolidated financial statements.

iTeos Therapeutics, Inc. and subsidiaries

Condensed consolidated statements of stockholders’ equity

(unaudited)


							Accumulated
					Additional		other					Total
In thousands except share amounts	Common stock				paid-in		comprehensive			Retained		stockholders’
	Shares		Amount		capital		loss			earnings		equity
Balance at December 31, 2021		35,466,001	$	35	$	413,180	$	(1,018	)	$	140,623	$	552,820
Stock-based compensation		—		—		4,193		—			—		4,193
Common stock issued upon exercises of options		50,911		1		332		—			—		333
Currency translation adjustment		—		—		—		(550	)		—		(550	)
Net income		—		—		—		—			69,582		69,582
Balance at March 31, 2022		35,516,912	$	36	$	417,705	$	(1,568	)	$	210,205	$	626,378
Stock-based compensation		—		—		5,760		—			—		5,760
Common stock issued upon exercises of options		58,411		—		278		—			—		278
Currency translation adjustment		—		—		—		(741	)		—		(741	)
Net income		—		—		—		—			5,626		5,626
Balance at June 30, 2022		35,575,323	$	36	$	423,743	$	(2,309	)	$	215,831	$	637,301
Stock-based compensation		—		—		5,723		—			—		5,723
Currency translation adjustment		—		—		—		(9,816	)		—		(9,816	)
Net income		—		—		—					991		991
Balance at September 30, 2022		35,575,323	$	36	$	429,466	$	(12,125	)	$	216,822	$	634,199


							Accumulated
					Additional		other						Total
In thousands except share amounts	Common stock				paid-in		comprehensive			Retained			stockholders’
	Shares		Amount		capital		loss			earnings			equity
Balance at December 31, 2022		35,611,219		36	$	435,665	$	(9,644	)	$	237,275		$	663,332
Stock-based compensation		—		—		5,807		—			—			5,807
Common stock issued upon exercises of options		149,408		—		578		—			—			578
Currency translation adjustment		—		—		—		(2,006	)		—			(2,006	)
Unrealized loss on available-for-sale securities		—		—		—		102			—			102
Net loss		—		—		—		—			(15,551	)		(15,551	)
Balance at March 31, 2023		35,760,627		36	$	442,050	$	(11,548	)	$	221,724		$	652,262
Stock-based compensation		—		—		6,964		—			—			6,964
Common stock issued upon exercises of options, ESPP purchases, and release of restricted stock units		21,292		—		218		—			—			218
Currency translation adjustment		—		—		—		104			—			104
Unrealized loss on available-for-sale securities		—		—		—		(1,722	)		—			(1,722	)
Net loss		—		—		—		—			(34,300	)		(34,300	)
Balance at June 30, 2023		35,781,919		36	$	449,232	$	(13,166	)	$	187,424		$	623,526
Stock-based compensation		—		—		7,057		—			—			7,057
Common stock issued upon exercises of options, ESPP purchases, and release of restricted stock units		3,039		—		10								10
Currency translation adjustment		—		—		—		(736	)		—			(736	)
Unrealized gain on available-for-sale securities								646						646
Net loss		—		—		—					(32,241	)		(32,241	)
Balance at September 30, 2023		35,784,958		36	$	456,299	$	(13,256	)	$	155,183		$	598,262

The accompanying notes are an integral part of these condensed consolidated financial statements.

iTeos Therapeutics, Inc. and subsidiaries

Condensed consolidated statements of cash flows

(unaudited)


	Nine Months Ended September 30,
(in thousands)	2023			2022
Cash flows from operating activities
Net (loss) income	$	(82,091	)	$	76,199
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization		671			580
Stock-based compensation		19,828			15,676
Non-cash: Net accretion of available-for-sale debt securities		(8,042	)		-
Change in operating lease right-of-use assets		(6	)		7
Changes in operating assets and liabilities:
Grants receivable		1,016			(903	)
Research and development tax credits receivable		(1,135	)		(340	)
Refundable income taxes		(4,900	)		7,544
Prepaid expenses and other current assets		(1,653	)		878
Accounts payable		(4,581	)		5,403
Accrued expenses and other liabilities		2,290			(4,111	)
Income tax payable		-			4,597
Deferred income		477			295
Deferred revenue		(12,595	)		(213,725	)
Unrecognized tax benefits		730			23,880
Net cash used in operating activities		(89,991	)		(84,020	)
Cash flows from investing activities
Purchases of investments		(193,510	)		-
Proceeds from maturities of investments		206,265