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 June 30, 2022

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: 001-39401

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.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller 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 August 4, 2022, the registrant had 35,575,323 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 may delay or prevent clinical trials of our product candidates.

•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 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 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 the success of our business to date and to assess our future viability.

•We will require additional financing to achieve our goals, and a 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.

i

•The current public health pandemic related to COVID-19 may adversely impact our operations, business and financial results.

•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 summary risk factors described above should be read together with the text of the full risk factors below, in the section entitled “Risk Factors” and the other information set forth in this Quarterly Report on 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 in full 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 of EOS-448 and inupadenant and any other product candidates, 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 for EOS-448 and inupadenant or any other product candidates we may develop;

•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 EOS-448 and inupadenant or any other product candidates we may develop;

•the outcomes of our preclinical studies;

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

•our ability to advance our programs on indicated timelines, including our plans to advance inupadenant into randomized controlled trials in combination;

•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 EOS-448 and inupadenant and any other product candidates we may identify and pursue;

•the potential attributes and clinical benefits of the use of EOS-448 and inupadenant or any other product candidate, if approved;

•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 EOS-448 and inupadenant or any other product candidates we may identify and pursue;

•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;

ii

•our ability to manufacture EOS-448 and inupadenant or any other product candidate in conformity with the Food and Drug Administration’s 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 EOS-448 and inupadenant or any other product candidates we may identify and pursue;

•our estimates of our expenses, ongoing losses, future revenue, 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;

•the effect of the COVID-19 pandemic, including mitigation efforts and economic effects, on any of the foregoing or other aspects of our business operations, including but not limited to our preclinical studies and future preclinical and clinical trials;

•the impact of laws and regulations applicable to our industry; and

•developments and projections relating to our competitors or 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 negative of these terms or other comparable terminology, although not all forward-looking statements contain such identifying terminology. These statements are only predictions. 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 from current expectations include, among other things, those listed under the section titled “Risk factors” in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2021, and in any subsequent filings with the Securities and Exchange Commission (“SEC”). If one or more of these risks or uncertainties occur, or if underlying assumptions prove to be incorrect, actual events or results may vary 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.

While we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. 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	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	30
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	66
Item 3.	Defaults Upon Senior Securities	66
Item 4.	Mine Safety Disclosures	66
Item 5.	Other Information	66
Item 6.	Exhibits	67
Signatures		68

iv

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

iTeos Therapeutics, Inc. and subsidiaries

Condensed consolidated balance sheets

(unaudited)

(in thousands, except share amounts)	June 30, 2022			December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	791,861		$	848,537
Grants receivable		4,004			4,022
Research and development tax credits receivable		—			524
Refundable income taxes		—			7,544
Prepaid expenses and other current assets		8,878			14,086
Total current assets		804,743			874,713
Property and equipment, net		2,271			2,072
Research and development tax credits receivable, net of current portion		2,358			2,004
Restricted cash		290			298
Right of use assets		4,792			5,329
Other assets		320			296
Total assets	$	814,774		$	884,712
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	10,921		$	5,145
Accrued expenses and other current liabilities		13,806			17,157
Income tax payable		12,965			—
Deferred income		938			827
Deferred revenue		85,987			280,225
Lease liabilities		778			770
Total current liabilities		125,395			304,124
Grants repayable, net of current portion		5,492			6,164
Lease liabilities, net of current portion		4,029			4,571
Unrecognized tax benefits		42,529			17,000
Other noncurrent liabilities		28			33
Total liabilities		177,473			331,892
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, $0.001 par value; 10,000,000 and zero shares    authorized at June 30, 2022 and December 31, 2021,    and zero shares issued or outstanding		—			—
Common stock, $0.001 par value: 150,000,000 shares authorized at    June 30, 2022 and December 31, 2021 respectively; 35,575,323    and 35,466,001 shares issued and outstanding; respectively		36			35
Additional paid-in capital		423,743			413,180
Accumulated other comprehensive loss		(2,309	)		(1,018	)
Retained earnings		215,831			140,623
Total stockholders’ equity		637,301			552,820
Total liabilities and stockholders’ equity	$	814,774		$	884,712

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

1

iTeos Therapeutics, Inc. and subsidiaries

Condensed consolidated statements of operations and comprehensive income (loss)

(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands, except share and per share amounts)	2022			2021			2022			2021
Revenue:
License and collaboration revenue	$	41,716		$	—		$	194,238		$	—
Total revenue		41,716			—			194,238			—
Operating expenses:
Research and development expenses		26,910			14,238			48,006			25,881
General and administrative expenses		11,471			15,101			22,086			22,147
Total operating expenses		38,381			29,339			70,092			48,028
Income (loss) from operations		3,335			(29,339	)		124,146			(48,028	)
Other income and expenses:
Grant income		147			2,701			638			7,616
Research and development tax credits		292			119			546			119
Other (expense) income, net		4,669			60			2,646			300
Income (loss) before income taxes		8,443			(26,459	)		127,976			(39,993	)
Income tax expense		(2,817	)		—			(52,768	)		—
Net income (loss)	$	5,626		$	(26,459	)	$	75,208		$	(39,993	)
Basic net income (loss) per common share	$	0.16		$	(0.75	)	$	2.12		$	(1.14	)
Diluted net income (loss) per common share	$	0.15		$	(0.75	)	$	1.98		$	(1.14	)
Weighted-average common shares outstanding - basic		35,546,605			35,119,952			35,520,086			35,103,294
Weighted-average common shares outstanding - diluted		37,635,828			35,119,952			37,931,692			35,103,294
Net income (loss)	$	5,626		$	(26,459	)	$	75,208		$	(39,993	)
Foreign currency translation adjustments		(741	)		(74	)		(1,291	)		(379	)
Comprehensive income (loss)	$	4,885		$	(26,533	)	$	73,917		$	(40,372	)

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

2

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			Accumulated			stockholders’
	Shares		Amount		capital		income			deficit			equity
Balance at December 31, 2020		35,044,758	$	35	$	396,443	$	617		$	(73,898	)	$	323,197
Stock-based compensation		—		—		2,584		—			—			2,584
Common stock issued upon exercises of options		56,241		—		667		—			—			667
Currency translation adjustment		—		—		—		(305	)		—			(305	)
Net loss		—		—		—		—			(13,534	)		(13,534	)
Balance at March 31, 2021		35,100,999	$	35	$	399,694	$	312		$	(87,432	)	$	312,609
Stock-based compensation		—		—		3,227		—			—			3,227
Common stock issued upon exercises of options		47,111		—		195		—			—			195
Currency translation adjustment		—		—		—		(74	)		—			(74	)
Net loss		—		—		—		—			(26,459	)		(26,459	)
Balance at June 30, 2021		35,148,110	$	35	$	403,116	$	238		$	(113,891	)	$	289,498

							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

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

3

iTeos Therapeutics, Inc. and subsidiaries

Condensed consolidated statements of cash flows

(unaudited)

	Six Months Ended June 30,
(in thousands)	2022			2021
Cash flows from operating activities
Net income (loss)	$	75,208		$	(39,993	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		375			276
Stock-based compensation		9,953			5,811
Change in operating lease right-of-use assets		4			8
Changes in operating assets and liabilities:
Grants receivable		(333	)		(4,185	)
Research and development tax credits receivable		(41	)		73
Refundable income taxes		7,544			—
Prepaid expenses and other current assets		4,360			81
Accounts payable		6,447			8,265
Accrued expenses and other liabilities		(2,286	)		50
Income tax payable		12,965			—
Deferred income		189			(3,431	)
Deferred revenue		(194,238	)		—
Unrecognized tax benefits		25,529			—
Net cash used in operating activities		(54,324	)		(33,045	)
Cash flows from investing activities
Purchase of property and equipment		(738	)		(489	)
Purchase of other assets		(99	)		(60	)
Net cash used in investing activities		(837	)		(549	)
Cash flows from financing activities
Proceeds from issuance of common stock upon exercise of options		611			862
Net cash provided by financing activities		611			862
Effects of exchange rate changes on cash, cash equivalents and restricted cash		(2,134	)		(650	)
Net decrease in cash, cash equivalents and restricted cash		(56,684	)		(33,382	)
Cash, cash equivalents and restricted cash at beginning of period		848,835			336,454
Cash, cash equivalents and restricted cash at end of period	$	792,151		$	303,072
Non-cash investing and financing activities
Capital expenditure included in accounts payable	$	(57	)	$	459
Operating lease liabilities arising from obtaining right-of-use assets	$	177		$	3,316
Supplemental disclosure of cash flows
Cash paid for taxes	$	6,740		$	—

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

4

iTeos Therapeutics, Inc.

Notes to condensed consolidated financial statements

(unaudited)

Note 1. Nature of business and basis of presentation

Description of business

iTeos Therapeutics, Inc. (iTeos or the Company), a Delaware corporation headquartered in Watertown, Massachusetts (incorporated on October 4, 2019), is the successor to iTeos Belgium SA (iTeos Belgium) a company organized under the laws of Belgium in 2011 and headquartered in Charleroi, Belgium. The Company is a clinical stage biopharmaceutical company pioneering the discovery and development of a new generation of differentiated immuno-oncology therapeutics for people living with cancer. The Company leverages its deep understanding of the tumor immunology and immunosuppressive pathways to design novel product candidates with the aim of restoring the immune response against cancer. The Company’s innovative pipeline includes two clinical-stage programs targeting novel, de-risked immuno-oncology pathways. Each of the Company's therapies in development has optimized pharmacologic properties designed to improve clinical outcomes.

The Company’s lead antibody product candidate, EOS-448, also known as GSK4428859A, is an antagonist of TIGIT, or T-cell immunoreceptor with lg and ITIM domains, an immune checkpoint with multiple mechanisms of action.

On June 11, 2021, the Company's wholly owned subsidiary, iTeos Belgium S.A., and GlaxoSmithKline Intellectual Property (No. 4) Limited, or GSK, executed a Collaboration and License Agreement, or the GSK Collaboration Agreement, which became effective on July 26, 2021. Pursuant to the GSK Collaboration Agreement, the Company agreed to grant GSK a license under certain of its intellectual property rights to develop, manufacture, and commercialize products comprised of or containing EOS-448, which license is exclusive in all countries outside of the United States and co-exclusive, with iTeos, in the United States. GSK and iTeos intend to develop EOS-448 in combination, including with other oncology assets of GSK, and iTeos and GSK will jointly own the intellectual property created under the GSK Collaboration Agreement that covers such combinations.