8-K: Aadi Bioscience Inks Transformative Deals: In-Licenses Novel ADC Portfolio, Sells FYARRO for $100M, and Secures $100M PIPE Financing

Aadi Bioscience has announced a series of strategic moves, including in-licensing a novel ADC portfolio, selling FYARRO for $100 million, and securing a $100 million PIPE financing.

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 license grants Aadi exclusive rights to patents and know-how for ADC programs targeting PTK7, MUC16, and SEZ6, utilizing HANGZHOU DAC's CPT113 linker payload technology.
• Aadi will pay $44 million in upfront payments, up to $265 million in development milestones, up to $540 million in commercial milestones, and single-digit royalties on sales.
• Aadi has also entered into a stock purchase agreement with KAKEN Pharmaceutical to sell FYARRO and associated infrastructure for $100 million in cash.
• The company has secured a $100 million PIPE financing through the sale of common stock at $2.40 per share and pre-funded warrants at $2.3999 per share.
• The PIPE financing was led by Ally Bridge Group, with participation from new and existing investors.
• The combined proceeds from the PIPE financing and the sale of FYARRO are expected to fund operations into late 2028.
• Baiteng Zhao, co-founder and former CEO of ProfoundBio, has been appointed to Aadi's board of directors.

Sentiment

Score: 8

Explanation: The document is highly positive, highlighting transformative deals, a strong financial outlook, and the addition of a key expert to the board. The strategic moves are expected to position the company for long-term growth and success.

Positives

• The in-licensing of a novel ADC portfolio diversifies Aadi's pipeline and positions the company in a high-growth area of oncology.
• The sale of FYARRO provides a significant cash infusion and allows Aadi to focus on its ADC portfolio.
• The $100 million PIPE financing provides substantial capital to fund operations into late 2028.
• The appointment of Baiteng Zhao to the board brings significant expertise in ADC development.
• The ADC programs target promising cancer targets with broad tumor expression and precedent clinical data.

Negatives

• The transactions are subject to stockholder approval and customary closing conditions, which could delay or prevent their completion.
• Aadi will be obligated to pay significant milestone payments and royalties on sales of the ADC products.
• The company will be required to pay a termination fee of $3.5 million if the stock purchase agreement is terminated under certain circumstances.

Risks

• The closing of the sale of FYARRO and the PIPE financing are subject to customary closing conditions, including stockholder approval, which may not be satisfied.
• The development of the ADC portfolio is subject to the risks and uncertainties inherent in drug development, including clinical trial failures and regulatory hurdles.
• The company may not be able to achieve the anticipated clinical data readouts for the ADC portfolio.
• The company may not be able to realize the full value of the ADC portfolio.
• The company may not be able to successfully compete in the competitive ADC market.

Future Outlook

The combined proceeds from the PIPE financing and the sale of FYARRO are expected to fund operations into late 2028, including anticipated clinical data readouts for the ADC portfolio. The company expects to file INDs for the ADC portfolio in the next 12-24 months.

Management Comments

• David Lennon, PhD, President and CEO of Aadi Bioscience, stated, 'Im thrilled to announce our partnership with WuXi Biologics and HANGZHOU DAC to bring forward this thoughtfully selected ADC portfolio. We were deliberate in identifying broadly expressed tumor targets where first-generation ADCs have already shown proof of concept. With our next wave ADC portfolio, we aim to build upon these earlier therapies to deliver improved outcomes for people living with cancer.'
• David Lennon, PhD, President and CEO of Aadi Bioscience, also stated, 'We are enormously proud of the impact FYARRO has had for people with PEComa, and Kakens capabilities, coupled with the proven track record of the Aadi team, ensures physicians and patients will continue to have access to this critical treatment.'
• Caley Castelein, MD, Chair of the Board of Directors of Aadi Bioscience, stated, 'We are delighted to welcome Baiteng to our Board. His deep expertise and successful track record in ADC development will be instrumental as we tenaciously move this exciting portfolio forward.'
• Baiteng Zhao, PhD, Board of Directors of Aadi Bioscience and co-founder of ProfoundBio, stated, 'I am thrilled to join the Board at this pivotal moment for Aadi. PTK7, MUC16 and SEZ6 represent highly promising targets that are commonly overexpressed in cancers with significant unmet therapeutic needs. Coupled with an advanced linker-payload platform that has the potential to enable next-gen ADCs, I believe Aadi is uniquely positioned to make a meaningful impact on patient outcomes. I look forward to collaborating with the leadership team and fellow Board directors to advance these innovative programs and drive transformative progress for patients.'

Industry Context

This announcement reflects the growing trend in the pharmaceutical industry towards developing next-generation antibody-drug conjugates (ADCs) with improved efficacy and safety profiles. The collaboration between Aadi, WuXi Biologics, and HANGZHOU DAC highlights the increasing importance of partnerships between biotech companies and contract research organizations to accelerate drug development. The sale of FYARRO to KAKEN Pharmaceutical also demonstrates the strategic importance of established pharmaceutical companies acquiring assets to expand their portfolios and market presence.

Comparison to Industry Standards

• The ADC programs target PTK7, MUC16, and SEZ6, which are clinically validated targets with precedent data from first-generation ADCs, such as Pfizer's Cofetuzumab Pelidotin, Genentech's DMUC4064A, and AbbVie's ABBV-706, respectively.
• The CPT113 linker-payload technology from HANGZHOU DAC is designed to enable next-wave ADC capabilities that surpass first-generation technologies, with improved stability and reduced off-target toxicity.
• The upfront payment of $44 million for the ADC portfolio is within the range of typical licensing agreements for preclinical assets, but the potential for up to $805 million in milestone payments and royalties is significant.
• The $100 million sale of FYARRO for a 4x multiple over the trailing 12 months of sales is a reasonable valuation for a commercial-stage asset in the oncology space.
• The $100 million PIPE financing is a substantial capital raise for a company of Aadi's size and is expected to provide sufficient funding for operations into late 2028.

Management Changes

Stakeholder Impact

• Shareholders will benefit from the increased cash runway and the potential for long-term growth from the ADC portfolio.
• Employees supporting the FYARRO business will transition to KAKEN Pharmaceutical.
• Patients with PEComa will continue to have access to FYARRO through KAKEN Pharmaceutical.
• Patients with other cancers may benefit from the development of the ADC portfolio.

Next Steps

• Aadi will seek stockholder approval for the sale of FYARRO and the PIPE financing.
• The company will work to close the sale of FYARRO and the PIPE financing in the first half of 2025.
• Aadi will advance the development of its ADC portfolio, with IND filings expected in the next 12-24 months.
• The company will continue to explore strategic opportunities to enhance its pipeline and create value for shareholders.

Key Dates

Keywords

ADC, antibody-drug conjugate, FYARRO, sirolimus, oncology, cancer, WuXi Biologics, HANGZHOU DAC, PTK7, MUC16, SEZ6, PIPE financing, KAKEN Pharmaceutical, Baiteng Zhao, clinical trials