DEFA14A: Aadi Bioscience In-Licenses Novel ADC Portfolio, Announces $100 Million FYARRO Sale and $100 Million PIPE Financing

Aadi Bioscience announces a transformative set of transactions including in-licensing a novel ADC portfolio, selling FYARRO, and securing a $100 million PIPE financing to extend its cash runway.

Summary

• Aadi Bioscience has entered into an exclusive license agreement with WuXi Biologics and HANGZHOU DAC for a three-asset portfolio of preclinical antibody-drug conjugates (ADCs).
• The ADCs target Protein Tyrosine Kinase 7 (PTK7), Mucin-16 (MUC16), and Seizure Related 6 Homolog (SEZ6) and utilize HANGZHOU DAC's CPT113 linker payload technology.
• Aadi will pay $44 million in upfront payments and is obligated to pay cumulative development milestone payments of up to $265 million, cumulative commercial milestone payments of up to $540 million, and single-digit royalties on sales.
• To support the transaction, Aadi has entered into a subscription agreement for a $100 million private investment in public equity (PIPE) financing.
• The PIPE involves selling 21,592,000 shares of Common Stock at $2.40 per share and pre-funded warrants to purchase up to 20,076,500 shares of Common Stock at $2.3999 per share.
• The PIPE financing is expected to close in the first half of 2025, pending stockholder vote and customary closing conditions.
• KAKEN Pharmaceutical Co., Ltd. will acquire Aadi Subsidiary, Inc., including FYARRO and associated infrastructure, for $100 million in cash at closing, subject to adjustments.
• The sale of FYARRO is also subject to Aadi stockholder approval and certain closing conditions and is expected to close in the first half of 2025.
• The net proceeds from the PIPE financing and the sale of FYARRO are expected to fund operations into late 2028.
• Baiteng Zhao, PhD, co-founder and former CEO of ProfoundBio, has been appointed to Aadi's board of directors.

Sentiment

Score: 8

Explanation: The announcement is positive overall, with Aadi strategically shifting its focus to ADC development and securing significant funding. The sale of FYARRO provides capital, and the in-licensing of the ADC portfolio offers promising growth opportunities. The appointment of Baiteng Zhao to the board further strengthens the company's expertise.

Positives

• The ADC portfolio targets promising cancer targets with broad tumor expression and precedent clinical data.
• The CPT113 linker payload technology has the potential to be highly competitive among next-generation ADC platforms.
• The sale of FYARRO provides Aadi with $100 million in cash to support its strategic shift towards ADC development.
• The PIPE financing strengthens Aadi's balance sheet and extends its cash runway into late 2028.
• The addition of Baiteng Zhao to the board brings significant ADC expertise to Aadi.

Negatives

• The sale of FYARRO means Aadi will no longer receive revenue from this product.
• The PIPE financing will dilute existing Aadi shareholders.
• The ADC programs are still in the preclinical stage, and there is no guarantee that they will be successful in clinical trials or commercialization.

Risks

• The closing of the sale of FYARRO and the PIPE financing are subject to stockholder approval and customary closing conditions.
• The ADC programs may not be successful in clinical trials or commercialization.
• Aadi may need to raise additional capital in the future to fund its operations.
• The company is subject to the risks and uncertainties associated with the pharmaceutical industry, including regulatory hurdles, competition, and product liability.

Future Outlook

The company expects to file INDs for the ADC portfolio in the next 12-24 months and anticipates key clinical data readouts for the ADC portfolio, with the cash runway extending into late 2028.

Management Comments

• David Lennon, PhD, President and CEO of Aadi Bioscience, stated that the partnership with WuXi Biologics and HANGZHOU DAC will bring forward a thoughtfully selected ADC portfolio.
• Lennon also noted that the financing underscores the confidence investors have in the potential of the portfolio and the strength of Aadi's management team.
• Caley Castelein, MD, Chair of the Board of Directors of Aadi Bioscience, expressed delight in welcoming Baiteng Zhao to the Board and noted that his expertise in ADC development will be instrumental.
• Baiteng Zhao, PhD, Board of Directors of Aadi Bioscience and co-founder of ProfoundBio, stated that PTK7, MUC16 and SEZ6 represent highly promising targets and that Aadi is uniquely positioned to make a meaningful impact on patient outcomes.

Industry Context

The announcement reflects a growing trend in the pharmaceutical industry towards precision oncology and the development of antibody-drug conjugates (ADCs). The collaboration with WuXi Biologics and HANGZHOU DAC allows Aadi to leverage external expertise and resources to accelerate the development of its ADC portfolio. The sale of FYARRO allows Aadi to focus its resources on its ADC pipeline.

Comparison to Industry Standards

• The $1.8 billion acquisition of ProfoundBio by Genmab highlights the significant value that can be created by successful ADC development programs.
• The upfront payments and potential milestone payments for the ADC portfolio are consistent with industry standards for licensing agreements of preclinical assets.
• The PIPE financing provides Aadi with a strong financial position to advance its ADC programs, which is crucial in the capital-intensive pharmaceutical industry.
• The appointment of Baiteng Zhao, a seasoned ADC expert, to the board of directors signals Aadi's commitment to building a leading ADC franchise.

Management Changes

Stakeholder Impact

• Shareholders will experience dilution from the PIPE financing but may benefit from the company's strategic shift towards ADC development.
• Employees supporting the FYARRO business will transition to KAKEN Pharmaceutical.
• Patients with PEComa will continue to have access to FYARRO under KAKEN Pharmaceutical's ownership.
• The company's suppliers and partners may be affected by the sale of FYARRO and the shift in focus towards ADC development.

Next Steps

• Aadi will seek stockholder approval for the sale of FYARRO and the PIPE financing.
• Aadi will work to close the sale of FYARRO and the PIPE financing in the first half of 2025.
• Aadi will advance the preclinical ADC assets towards IND filings in the next 12-24 months.
• Aadi will continue to develop and commercialize its precision oncology therapies.

Key Dates

Keywords

ADC, FYARRO, PIPE Financing, KAKEN Pharmaceutical, WuXi Biologics, HANGZHOU DAC, Baiteng Zhao, Oncology, License Agreement, Stock Purchase Agreement, Clinical Development, Pharmaceutical