DEFA14A: Aadi Bioscience Stockholders to Vote on $100M FYARRO Sale and ADC Portfolio In-Licensing

Aadi Bioscience is seeking stockholder approval for the sale of FYARRO to Kaken Pharmaceuticals for $100 million and a $100 million PIPE financing to support the in-licensing of an ADC portfolio.

Summary

• Aadi Bioscience has filed a definitive proxy statement for a Special Meeting of Stockholders scheduled for February 28, 2025.
• The meeting will address proposals related to the sale of FYARRO and associated infrastructure to Kaken Pharmaceuticals for $100 million.
• Additionally, stockholders will vote on a $100 million private investment financing (PIPE) to support the in-licensing of antibody drug conjugates (ADCs) from WuXi Biologics.
• The Board of Directors recommends voting in favor of all proposals to support the company's business transformation.
• The company expects to close these transactions in the first quarter of 2025, pending stockholder approval and other closing conditions.
• The strategic plan was initiated after a Phase 2 trial for FYARRO was discontinued due to unlikely accelerated approval, leading to workforce reduction and strategic options review.
• The Board evaluated multiple alternatives, including a company sale, acquisitions, in-licensing, mergers, and dissolution, before deciding to divest FYARRO and revitalize the pipeline with ADC assets.
• The sale of FYARRO resulted from a competitive process involving over 30 interested parties, with the final offer representing approximately four times the revenue generated over the four quarters ended September 30, 2024.
• The company plans to in-license and develop three pre-clinical ADCs from WuXi Biologics, leveraging advanced linker-payload technology.
• The PIPE financing involves investors like Avoro Capital, KVP Capital, and Acuta Capital Partners, along with new investors supporting the revitalized portfolio.
• Upon closing the transactions, Aadi believes it will be well-positioned to develop next-generation oncology therapies.
• Baiteng Zhao, PhD, has been appointed to Aadi's Board to strengthen ADC expertise.
• Following the announcement of these transactions in December 2024, Aadi's stock price rose 46% on the first day of trading.

Sentiment

Score: 7

Explanation: The document presents a generally positive outlook, highlighting the strategic shift towards ADCs and the financial benefits of the FYARRO sale and PIPE financing. However, it also acknowledges past setbacks and potential risks, preventing a higher score.

Positives

• The sale of FYARRO provides $100 million in cash to Aadi Bioscience.
• In-licensing ADC assets diversifies and revitalizes Aadi's product pipeline.
• The PIPE financing provides additional capital to develop the ADC portfolio.
• The ADC market represents a significant growth opportunity.
• The company has secured support from existing and new investors.
• The addition of Baiteng Zhao to the Board strengthens ADC expertise.
• The stock price increased significantly following the announcement of the transactions.

Negatives

• The discontinuation of the Phase 2 trial for FYARRO indicates a setback in its development.
• The company had to reduce its workforce to preserve cash.
• The company is dependent on stockholder approval for the proposed transactions.
• The company is dependent on closing conditions for the proposed transactions.

Risks

• Failure to obtain stockholder approval for the proposed sale of FYARRO or the PIPE financing.
• Delays in the consummation of the proposed transactions.
• Inability to manage operating expenses and expenses associated with the proposed transactions.
• Failure or delay in obtaining required approvals from governmental or quasi-governmental entities.
• Unexpected costs, charges, or expenses resulting from the transactions.
• Potential adverse reactions or changes to business relationships resulting from the announcement or completion of the proposed sale of FYARRO or the proposed PIPE financing.
• Uncertainties associated with Aadi's product candidates, including potential delays in preclinical studies and clinical trials.
• Inability to obtain sufficient additional capital to continue to advance product candidates.
• Uncertainties in obtaining successful preclinical and clinical results for product candidates and unexpected costs that may result therefrom.
• Failure to realize any value from product candidates being developed.
• Failure to realize certain anticipated benefits of the proposed sale of FYARRO or the proposed PIPE financing.

Future Outlook

Aadi Bioscience expects to close the sale of FYARRO and the ADC in-licensing transactions in the first quarter of 2025, subject to stockholder approval and other closing conditions. The company believes it will be well-positioned to develop next-generation oncology therapies and create long-term value for stockholders.

Management Comments

• We have recently undertaken bold action to maximize the Company's potential.
• Our transformative actions, first announced in December 2024, entail a series of transactions that we believe will create significant value for our stockholders, while remaining rooted in Aadi's legacy of delivering improved oncology therapies for people with difficult-to-treat cancers.
• The Board concluded that the $100 million in gross proceeds we will receive from the sale approximately equal to four times the revenue FYARRO generated over the four quarters ended September 30, 2024 represents the full and fair value of this asset.
• Upon closing these three strategic transactions, we believe Aadi will be well positioned to develop next-generation oncology therapies and create long-term value for stockholders.

Industry Context

The document highlights the growing importance of antibody drug conjugates (ADCs) in oncology, noting the billions of dollars of investment capital flowing into this therapeutic modality. The acquisition of ProfoundBio by Genmab for $1.8 billion and Seagen by Pfizer for $43 billion are examples of the significant value and interest in the ADC space.

Comparison to Industry Standards

• The document mentions the acquisition of ProfoundBio by Genmab for $1.8 billion and Seagen by Pfizer for $43 billion, highlighting the significant value placed on ADC companies.
• The expected growth of the ADC market to over $50 billion by 2030 indicates a strong industry trend.
• Aadi evaluated more than 20 ADC companies and over 40 ADC assets before selecting the portfolio from WuXi Biologics, suggesting a thorough and competitive selection process.

Management Changes

Stakeholder Impact

• Shareholders: The proposed transactions aim to maximize long-term stockholder value.
• Employees: The company has previously reduced its workforce, but the new strategy may create new opportunities.
• Customers: The focus on ADCs may lead to new and improved cancer therapies.
• Suppliers: The sale of FYARRO may impact existing supplier relationships.
• Creditors: The PIPE financing strengthens the company's financial position.

Next Steps

• Stockholders to vote on the proposed sale of FYARRO, the PIPE financing, and the equity plan proposal at the Special Meeting on February 28, 2025.
• Closing of the FYARRO sale and ADC in-licensing transactions expected in the first quarter of 2025, subject to stockholder approval and other closing conditions.
• Development of the in-licensed ADC assets.
• Filing a registration statement with the SEC registering the resale of the shares of Common Stock and the shares of Common Stock underlying the Pre-Funded Warrants sold in the PIPE financing.

Key Dates

Keywords

Aadi Bioscience, FYARRO, Kaken Pharmaceuticals, ADC, Antibody Drug Conjugates, PIPE Financing, WuXi Biologics, Divestiture, In-licensing, Oncology, Stockholder Meeting