GSK - iTeos Therapeutics: Trying Hard Where The Big Guys Might Still Fail

2023-11-04 09:00:00 ET

Summary

• iTeos Therapeutics is a clinical-stage biotech focused on developing immunotherapies for solid tumors, with a focus on non-small cell lung cancer (NSCLC).
• Their most advanced project is belrestotug, an antibody targeting the TIGIT immune checkpoint, being co-developed with GlaxoSmithKline.
• The company has a strong financial position with $216 million in cash and investments, providing them with the funds to see the fruits of their clinical trials.

Topline Summary

iTeos Therapeutics ( ITOS ) is a clinical-stage biotech engaged in the development of immunotherapies for a variety of solid tumors, with their most advanced project being in non-small cell lung cancer (NSCLC). Their valuation was bolstered recently by unexpectedly positive Roche news, but questions remain about the target on interest. On the upside, they have a large cache to see through their late-stage studies, and this makes them worth a serious consideration. Let's have a look.

Pipeline Overview

Belrestotug

The first and main product in the pipeline for ITOS is belrestotug, an IgG1 antibody targeting an immune checkpoint called TIGIT. This checkpoint is expressed on a range of different lymphoctyes, most notably regulatory T cells, which put the brakes on the immune system naturally.

It is being co-developed with GlaxoSmithKline ( GSK ), in a deal dating back to 2021. Belrestotug is being combined with GSK's dostarlimab in clinical trials, with the first big stop being NSCLC, the most common form of lung cancer. The company plans to initiate in the near future a phase 3 trial for patients with previously untreated, PD-L1-high NSCLC (a population that currently could receive pembrolizumab alone).

A variety of earlier phase trials is evaluating the belrestotug-dostarlimab combination in different tumors, including NSCLC, head and neck squamous cell carcinoma, and others. To date, no clinical trial data have been presented for belrestotug, and the market's current interest in ITOS hinges on a data leak from Roche.

This leak was covered deftly by Stephen Ayers in a previous article , so I won't take away from his analysis by repeating it verbatim. Despite earlier high-profile failures for their anti-TIGIT antibody tiragolumab both in small cell lung cancer and in NSCLC , the latter missing on improved PFS in that same PD-L1-high patient population.

Now, of course, we have word that overall survival, which is considered to be the more important co-primary endpoint, looks beneficial, reproducing some very promising phase 2 data for tiragolumab. Where once TIGIT platforms looked dead in the water, there is new life, hence the quick pivot into the phase 3 trial for ITOS.

It is worth noting that, while the numerical improvement of overall survival for tiragolumab (22.9 vs 16.7 months), the 95% confidence interval of the hazard ratio continues to cross 1.00, and median follow-up remains short. That's not to say I think Roche's trial will necessarily fail, but there is still reason to be skeptical that SKYSCRAPER-01 will succeed.

It is worth noting that there is precedent for the combo of failing PFS but succeeding with OS to allow adoption of the trial regimen to be incorporated into the standard of care, ala PARADIGM in metastatic colorectal cancer.

That said, the numbers for OS look eerily similar to those seen in the phase 2 CITYSCAPE trial, so it's not a stretch to be encouraged by this leaked analysis. There's definitely some new life in this TIGIT strategy, after too many gut wrenchers.

Inupadenant

The next most-advanced candidate in the ITOS pipeline is inupadenant, an adenosine A2A receptor antagonist designed to block adenosine signaling and release the inhibition of immune signaling in white blood cells that have entered the tumor.

ITOS's first-in-human trial has one data readout from ASCO 2021 , where they showed favorable tolerability and some preliminary evidence of efficacy in melanoma and prostate cancer. Aside from this phase 1/2 study, ITOS is also conducting a phase 2 trial of inupadenant for patients with NSCLC and prior exposure to immunotherapy. They also have enrolled a phase 2a study in patients with metastatic melanoma.

Financial Overview

As of their Q2 2023 filing , ITOS had $216 million in cash and equivalents, with another $383 million in short-term investments. Total current assets reached $614.5 million.

Meanwhile, operating expenses were $42.6 million, driven mostly by research and development expenditures. After other forms of income, the company's net loss was $33.1 million.

Based on these losses, ITOS had approximately 4.5 years of cash and investments on hand to fund operations.

Strengths and Risks

Certainly, the amount of cash ITOS has on hand places them squarely outside the "at risk" bucket from a financial perspective. They almost certainly have the funds they need to see their clinical programs to fruition. The fact that they are currently trading at a valuation roughly half of the cash on hand says a lot about how the market views their near-term prospects, however.

This creates a substantial investing opportunity, but the risk is very real. TIGIT antibodies have so far failed in every official presentation we've seen, and the only phase 3 readout that's been positive was the leak, which remains immature.

Given the wide benefit that leak showed, I would be surprised if SKYSCRAPER-01 ends up missing on that OS endpoint, but questions will remain about the overall "positive" status of a trial that failed to improve PFS. If anti-TIGIT doesn't stop patients' cancer from getting worse, how exactly might it be improving survival? There's a lot of reason to be skeptical of that, even in the context of a positive OS readout.

And none of these touches on whether ITOS's method will work. We have seen basically nothing from their own anti-TIGIT agent, so what are we to make of what we haven't seen? Any potential investor here should be prepared for a hard truth: Roche could succeed, and other TIGIT approaches could still fail.

Bottom-Line Summary

There is risk here. I don't know that we'll see any major data readouts for ITOS's studies within the next year. Certainly we won't see that for the phase 3, which is going to be years away. The TIGIT story could still flop in that time, or if it succeeds, it will be Roche first to the plate in the market, a market that ITOS will be looking to break into.

That said, any company trading at half its holdings is really worth a look. And we've already seen what kind of hype good news for any TIGIT molecule can drive. ITOS may not have massive catalysts ready to go, but this quiet period is creating a huge discount for would-be investors if they show any signs of success for this platform. Therefore, I am a tentative "buy" for this equity at this time.

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