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Adagene and Exelixis Expand Collaboration for Third Antibody-Drug Conjugate Program

Expanded Strategic Alliance in Oncology Therapeutics Adagene Inc. (Nasdaq: ADAG) announced an amendment to its 2021 collaboration and license agreement with Exelixis, signaling an expansion of their joint efforts in oncology. Under the revised terms, Exelixis will utilize Adagene's SAFEbody® technology platform to develop a third novel masked antibody-drug conjugate (ADC) designed to target a solid tumor. This strategic move deepens the partnership between the two biotechnology firms, focusing on advanced cancer immunotherapies. Collaboration Details and Technological Edge The core of the expanded agreement centers on Adagene's proprietary SAFEbody technology, which is engineered to improve the therapeutic index of antibodies and ADCs. This innovative platform allows therapeutic antibodies to remain inert until they reach the tumor microenvironment, thereby minimizing off-target binding to healthy cells and potentially reducing systemic toxicity. Peter Luo, Ph.D., Chief Executive Officer of Adagene, stated, > "Our SAFEbody technology enables an antibody or ADC to be invisible until it reaches the tumor microenvironment, resulting in a wide therapeutic index, as seen with ADG126. Our evolving partnership with Exelixis highlights the potential of conditional masking to safely deliver a payload or immune modulating antibody directly to tumor cells." The development of this third SAFE-ADC® underscores the continued validation of Adagene's technology by a major industry player like Exelixis. Adagene stands to gain from this collaboration through eligibility for development and commercialization milestone payments, alongside royalties on net sales of any products successfully developed under this expanded agreement. Market Reception and Adagene's Financial Landscape The expansion of the Adagene-Exelixis collaboration is viewed with cautious optimism in the market, primarily for its validation of Adagene's technology and potential for future revenue streams. However, an analysis of Adagene's financial health reveals significant underlying challenges. The company has reported a substantial 3-year revenue decline of 80.1%, indicating a contraction in sales. Profitability metrics remain concerning, with an operating margin of -32,347.57% and a net margin of -29,018.45%. Furthermore, the company's Altman Z-Score of -3.78 places it in the distress zone, suggesting an elevated risk of bankruptcy within two years. Despite these operational difficulties, Adagene maintains a current ratio of 2.29, indicating adequate short-term liquidity. Its cash and cash equivalents stood at US$95.7 million as of June 30, 2024, down from US$109.9 million at the end of 2023. Research and Development (R&D) expenses for the first half of 2024 decreased by 31% to US$14.7 million, reflecting a focus on key programs like ADG126. The company anticipates its current cash balance will fund activities into 2026. Valuation metrics for Adagene suggest it is trading at a premium, with a P/S ratio of 1,055, near its 3-year high, and a P/B ratio of 2.64, close to its 5-year high. These figures indicate a high valuation relative to sales and book value, possibly reflecting investor anticipation of future successes from its pipeline and partnerships. Broader Implications and Pipeline Progress This expanded partnership is a critical development for Adagene, a clinical-stage biotechnology company operating in the competitive Biotechnology Sector and Pharmaceutical Industry. Such collaborations are vital for smaller firms to access capital and expertise without significant equity dilution, while larger partners like Exelixis broaden their oncology pipelines. The SAFEbody technology's ability to target solid tumors more precisely holds promise for addressing unmet medical needs in cancer treatment. Adagene's lead SAFEbody candidate, ADG126, is currently undergoing a Phase 1b/2 study for metastatic microsatellite-stable (MSS) colorectal cancer. The company expects the Phase 2 trial for ADG126 to commence before the end of 2025. Recent data for ADG126 in MSS CRC demonstrated a median overall survival (mOS) of 19.4 months in the 10 mg/kg dose cohort, representing a 45% improvement over historical benchmarks. A US$25 million strategic investment from Sanofi in July 2025 further supports ADG126's Phase 2 trial and a Phase 1b/2 trial in advanced solid tumors, extending Adagene's cash runway into 2027. Outlook and Future Catalysts Looking ahead, the successful advancement of the third ADC program with Exelixis will be a key factor for Adagene. The initiation and results from the Phase 2 trial for ADG126, expected by late 2025, will also serve as significant catalysts for the company. The ability of Adagene to continue leveraging its SAFEbody platform for new collaborations and to bring its pipeline candidates through clinical development will be crucial for improving its financial standing and realizing its long-term growth potential in the highly dynamic oncology market. Investors will closely monitor clinical trial progress and further updates on financial performance.