IO Biotech, Inc. (NASDAQ:IOBT) is a clinical-stage biopharmaceutical company developing novel, immune-modulating therapeutic cancer vaccines based on its T-win® platform. The company's lead product candidate, IO102-IO103, is designed to target the immunosuppressive mechanisms mediated by indoleamine 2,3-dioxygenase (IDO) and programmed death ligand 1 (PD-L1) in the tumor microenvironment.

Business Overview

IO Biotech was founded in 2014 and is headquartered in Copenhagen, Denmark. The company's T-win platform is a novel approach to cancer vaccines that aims to activate pre-existing T cells to target immunosuppressive mechanisms in the tumor microenvironment. The platform is designed to employ a dual mechanism of action: (1) direct killing of immunosuppressive cells, including both tumor cells and cells in the tumor microenvironment that express IDO and/or PD-L1, and (2) modulation of the tumor microenvironment into a more pro-inflammatory, anti-tumor environment.

IO Biotech's lead product candidate, IO102-IO103, combines two fully-owned, novel immune-modulating vaccines that target IDO+ and PD-L1+ cells, respectively. In a single-arm Phase 1/2 clinical trial of 30 patients with metastatic melanoma, IO102-IO103 in combination with nivolumab, an anti-PD-1 checkpoint inhibitor, demonstrated proof of concept by increasing the overall response rate compared to what is typically reported with an anti-PD-1 antibody alone. The combination induced meaningful tumor regression and achieved rapid, deep and durable responses with a favorable tolerability profile.

Based on these promising results, IO102-IO103 in combination with pembrolizumab was granted Breakthrough Therapy Designation (BTD) by the FDA for the treatment of unresectable/metastatic melanoma. IO Biotech is currently conducting a global Phase 3 trial, the IOB-013/KN-D18 trial, evaluating IO102-IO103 in combination with pembrolizumab as a potential first-line treatment in advanced melanoma. The company completed target enrollment of 380 patients in the trial in November 2023, ahead of plan, and now anticipates reaching the primary endpoint of progression-free survival (PFS) in the first half of 2025, an acceleration from the previous timeline of the second half of 2025.

In addition to the Phase 3 trial in melanoma, IO Biotech is investigating IO102-IO103 in several other solid tumor indications. The company is conducting a Phase 2 basket trial, the IOB-022/KN-D38 trial, evaluating the combination of IO102-IO103 and pembrolizumab in first-line metastatic non-small cell lung cancer and recurrent and/or metastatic squamous cell carcinoma of the head and neck. IO Biotech has also initiated a Phase 2 trial, the IOB-032/PN-E40 trial, to evaluate IO102-IO103 in combination with pembrolizumab as a neo-adjuvant/adjuvant therapy for patients with resectable melanoma and squamous cell carcinoma of the head and neck.

Beyond IO102-IO103, IO Biotech's pipeline includes IO112, a fully owned product candidate targeting Arginase 1, an immunoregulatory enzyme highly expressed in difficult-to-treat tumors. The company plans to continue IND-enabling activities for IO112 in 2024 and expects to initiate an IND filing in 2025.

Financial Overview

For the three months ended March 31, 2023, IO Biotech reported a net loss of $19.5 million, compared to a net loss of $17.0 million for the same period in 2022. The increase in net loss was primarily driven by a $2.4 million increase in research and development expenses, partially offset by a $0.1 million decrease in general and administrative expenses.

Research and development expenses for the first quarter of 2023 were $14.3 million, up from $11.9 million in the prior year period. The increase was mainly due to higher costs associated with the continued execution of the company's pivotal Phase 3 trial of IO102-IO103 and an increase in personnel costs, partially offset by a decrease in chemistry, manufacturing and control activities.

General and administrative expenses for the first quarter of 2023 were $5.9 million, compared to $6.0 million in the same period of 2022. The decrease was primarily due to lower professional services costs, partially offset by an increase in personnel costs and other consultants and costs.

As of March 31, 2023, IO Biotech had $118.0 million in cash and cash equivalents, compared to $143.2 million as of December 31, 2022. The company's cash position reflects net cash used in operating activities of $24.9 million during the first quarter of 2023, primarily due to the net loss of $19.5 million and a decrease in working capital.

Based on its current operating plan, IO Biotech estimates that its existing cash and cash equivalents will be sufficient to fund its operating expenses and capital requirements into the fourth quarter of 2025. The company will need to raise additional capital to complete the development and commercialization of its product candidates beyond that point.

For the full year 2022, IO Biotech reported a net loss of $86.1 million and had no revenue. The company's annual operating cash flow was negative $71.7 million, and its annual free cash flow was negative $72.1 million.

Risks and Challenges

IO Biotech faces several risks and challenges common to clinical-stage biopharmaceutical companies, including the inherent uncertainty of drug development, the need for substantial additional funding, and intense competition in the oncology space. The company's success is heavily dependent on the continued development and eventual commercialization of its lead product candidate, IO102-IO103.

Specifically, IO Biotech's clinical trials may fail to demonstrate the safety and efficacy of its product candidates, which could prevent, delay or limit the scope of regulatory approval. The company also faces the risk of delays or difficulties in clinical trial site activation and patient enrollment, which could delay or prevent the receipt of necessary regulatory approvals.

Additionally, IO Biotech relies on third-party contract manufacturing organizations (CMOs) to manufacture its product candidates, and any issues with these CMOs could disrupt the company's ability to provide supply for its clinical trials and future commercialization efforts.

Outlook and Conclusion

IO Biotech has made significant progress in advancing its lead product candidate, IO102-IO103, through clinical development. The company's accelerated enrollment in the pivotal Phase 3 trial in melanoma and the potential for an interim analysis on objective response rate are encouraging developments that could lead to an earlier-than-expected regulatory filing and approval.

The company's pipeline beyond IO102-IO103, including IO112 targeting Arginase 1, also holds promise and provides diversification. However, IO Biotech will need to continue to execute successfully on its clinical programs and secure additional funding to fully realize the potential of its T-win platform and product candidates.

Overall, IO Biotech appears to be a promising player in the immuno-oncology space, with a differentiated approach and a lead candidate that has demonstrated compelling clinical results. As the company continues to advance its pipeline and navigate the challenges of drug development, it will be important to monitor its progress and the evolving competitive landscape. Investors should closely follow IO Biotech's future updates and data readouts to assess the company's long-term prospects.