DEFA14A: Aadi Bioscience to Sell FYARRO, In-License ADC Portfolio, and Secure $100 Million PIPE Financing

Aadi Bioscience is set to transform its business by selling its FYARRO product, in-licensing three ADC assets, and securing $100 million in PIPE financing to advance its precision oncology pipeline.

Summary

• Aadi Bioscience has announced a series of strategic transactions aimed at transforming the company into an ADC-focused entity.
• The company will sell FYARRO and its associated infrastructure to Kaken Pharmaceuticals for $100 million.
• Aadi will in-license three preclinical antibody drug conjugates (ADCs) from WuXi Biologics for an upfront payment of $44 million, plus potential milestone payments and royalties.
• Aadi has secured a $100 million PIPE financing round led by Ally Bridge Group to support the development of the ADC portfolio.
• The company expects to have a cash runway into the latter half of 2028, with approximately $63 million in cash at the end of 2023, plus the proceeds from the FYARRO sale and PIPE financing.
• The FYARRO sale is expected to close in the first half of 2025, pending stockholder approval and other closing conditions.
• The PIPE financing is also expected to close in the first half of 2025, subject to stockholder vote and satisfaction of certain closing conditions.
• Aadi plans to file INDs for all three ADC assets within the next 12 to 24 months, starting with PTK7-CPT113 in the second half of 2025.
• Baiteng Zhao, co-founder and former CEO of ProfoundBio, has been appointed to Aadi's board of directors.

Sentiment

Score: 8

Explanation: The document presents a positive outlook for Aadi Bioscience, driven by strategic transactions that strengthen its financial position and diversify its pipeline with promising ADC assets. The company's focus on precision oncology and the appointment of an experienced board member further contribute to the positive sentiment.

Positives

• The sale of FYARRO provides Aadi with $100 million in cash, strengthening its financial position.
• The in-licensing of three ADC assets diversifies Aadi's pipeline and focuses on precision oncology.
• The $100 million PIPE financing provides sufficient capital to advance the ADC portfolio through key clinical milestones.
• The company expects to have a cash runway into the latter half of 2028.
• The ADC targets have clinical validation from first-generation ADCs, reducing biological risk.
• The appointment of Baiteng Zhao to the board adds significant ADC expertise to the company.

Negatives

• Aadi is discontinuing its exploration of nab-sirolimus for genetically defined cancers following disappointing PRECISION1 trial results.
• The company is incurring upfront payments of $44 million for the ADC in-licensing, plus potential milestone payments and royalties.
• The transactions are subject to stockholder approval and other closing conditions, which could delay or prevent their completion.

Risks

• The development of ADC therapies is subject to clinical trial risks and regulatory approvals.
• The company faces competition in the ADC space from other companies developing similar therapies.
• The transactions are subject to stockholder approval and other closing conditions, which could delay or prevent their completion.
• The company's success depends on the successful development and commercialization of its ADC portfolio.
• The company is reliant on WuXi Biologics and Hangzhou DAC for the development and manufacturing of its ADC assets.

Future Outlook

Aadi expects to file INDs for all three ADC assets within the next 12 to 24 months and anticipates key clinical data readouts for the ADC portfolio, with cash runway extending into the latter half of 2028.

Management Comments

• Dave Lennon: 'Were extremely excited about the proposed transactions weve laid out in our press release that youve probably seen, and Im eager to dive into the details with you today.'
• Dave Lennon: 'These transactions, while transformative for us as a company, are rooted in Aadis legacy as a precision oncology biotech.'
• Dave Lennon: 'We believe Aadi starts with a capital position giving us cash runway into the latter half of 2028.'

Industry Context

The announcement reflects a growing trend in the pharmaceutical industry towards precision oncology and ADC therapies. The acquisition of ProfoundBio by Genmab for $1.8 billion earlier in 2024 highlights the significant value placed on ADC companies.

Comparison to Industry Standards

• The $100 million sale of FYARRO represents a 4x multiple on trailing four-quarter sales, which is a reasonable valuation in the pharmaceutical industry.
• The upfront and milestone payments for the ADC in-licensing are comparable to other deals in the ADC space, such as the Genmab acquisition of ProfoundBio.
• The CPT113 platform's linker stability is reported to be on par with or better than many of the latest platform designs, suggesting a competitive advantage.
• AbbVie's ABBV-706, a SEZ6 ADC, reported an ORR of 44% across small cell lung cancer and NET cohorts and 61% ORR in SCLC alone in an ongoing Phase I trial, setting a benchmark for Aadi's biSEZ6-CPT113.

Management Changes

Stakeholder Impact

• Shareholders will benefit from the potential long-term value creation through the ADC portfolio development.
• Employees supporting FYARRO are expected to be retained by Kaken Pharmaceuticals.
• Patients with PEComa will continue to have access to FYARRO through Kaken Pharmaceuticals.
• Patients with various cancers may benefit from the development of Aadi's ADC therapies.

Next Steps

• Aadi will file a proxy statement and convene a shareholder meeting to approve the proposed transactions.
• The company expects to close the FYARRO sale and PIPE financing in the first half of 2025.
• Aadi plans to file INDs for PTK7-CPT113 in the second half of 2025 and mMUC16-CPT113 by the end of 2025.
• Aadi plans to start Phase I trial in ovarian cancer in 2026.
• Aadi plans to file INDs for SEZ6-CPT113 in the middle of 2026.

Key Dates

Keywords

ADC, FYARRO, PIPE Financing, Kaken Pharmaceuticals, WuXi Biologics, Hangzhou DAC, Precision Oncology, PTK7, MUC16, SEZ6, Clinical Trials, In-licensing