iTeos Therapeutics is an immunotherapy-focused cancer biotech company developing an anti-TIGIT molecule to treat various forms of cancer.
Despite advancing to late-stage clinical studies and significant backing through a partnership with GSK, the company faces several headwinds impacting its market valuation.
Pipeline Update: Belrestotug
The primary clinical candidate for ITOS is belrestotug, an antagonist of the immune checkpoint TIGIT. This target is considered part of the “next-generation” interest in immunotherapy, particularly for solid tumors.
ITOS is co-developing belrestotug with GlaxoSmithKline (GSK), combining it with GSK’s anti-PD-1 antibody dostarlimab in various solid tumor contexts.
Despite positive announcements, formative clinical trial data for belrestotug have not yet been presented. In a recent business update, ITOS reported an interim data readout exceeding expectations for the combination of belrestotug and dostarlimab in patients with NSCLC, with findings to be presented at a congress later this year.
Recently, ITOS announced that the first patient in their anticipated phase 3 trial, GALAXIES-Lung-301, was treated, triggering a $35 million milestone payment from GSK. This trial compares the belrestotug-dostarlimab combo against standard pembrolizumab for patients with metastatic, PD-L1-high NSCLC.
Financial Overview
As of the most recent quarterly filing, ITOS held $146.6 million in cash and another $302.5 million in short-term investments. Notable non-current assets included $132.6 million in long-term investments. Operating expenses for the quarter reached $47.2 million, with a net loss of $38.2 million after recognizing various sources of income, including $7.4 million in interest income.
At this cash burn rate, the implied cash runway for the company is between 15 and 16 quarters, not accounting for the recent $35 million milestone payment from GSK.
Strengths and Risks
Strength – Moving into Phase 3 in a Position of Strength
ITOS commands a strong balance sheet with significant interest income helping to offset some costs from their rapid expansion into different tumor areas and the GALAXIES-Lung-301 study. They have upwards of four years of cash and assets to fund operations, providing more than enough time to reach critical milestones without immediate risk of dilution.
Risk – TIGIT Remains Unproven as a Target
The recent failure of the SKYSCRAPER-06 trial has sent ripples through the anti-TIGIT development space, affecting ITOS’s market valuation. ITOS’s reliance on other players to drive interest in belrestotug has made its valuation susceptible to external successes or failures.
Until ITOS can present key data, its market cap will continue to be influenced by the performance of larger players in the space.
Bottom-Line Summary
ITOS presents an interesting investment proposition with a market cap of around $500 million, suggesting it is valued as a significant player heading into late-stage clinical study.
The company is not experiencing the massive hype seen with companies like Janux Therapeutics or ALX Oncology, which could be beneficial given the cooling hype from earlier this year.
ITOS appears to be worthy of consideration given its strong balance sheet and developments. However, there is still significant risk of valuation retreat based on the failure of other companies’ anti-TIGIT programs. The company may offer a better buy-in point than the current $14 per share.
With an important data readout expected later this year, ITOS holds potential for growth, but caution is advised given the possibility of short-term declines before anticipation builds for the data release.
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