Business Overview and History Aadi Bioscience, Inc. (NASDAQ: AADI) is a biopharmaceutical company that has undergone a significant transformation, transitioning from a single-product commercial stage company to a multi-asset oncology player with a renewed focus on leveraging advanced technologies to address unmet needs in cancer treatment. The company's strategic decisions made in 2024 and 2025 have positioned it for long-term growth and value creation.
Aadi Bioscience was founded in 2011 and initially focused on developing nab-sirolimus, a novel mTOR inhibitor, for the treatment of advanced malignant perivascular epithelioid cell tumor (PEComa), a rare cancer. In November 2021, the company's lead asset, FYARRO® (nab-sirolimus), was approved by the FDA for the treatment of advanced malignant PEComa, making it the first and only approved therapy for this indication.
Following the commercial launch of FYARRO in February 2022, Aadi generated net product sales of $18.7 million for the nine months ended September 30, 2024, reflecting a 21% year-over-year increase. The company's gross profit margin for this period stood at 87.4%, demonstrating the strength of the FYARRO franchise.
However, in August 2024, Aadi announced that it would halt the registration-directed PRECISION1 trial of FYARRO in patients with solid tumors harboring TSC1 or TSC2 alterations, as an interim analysis indicated that the study was unlikely to meet the efficacy threshold necessary to support an accelerated approval. This development prompted the company to conduct a comprehensive strategic review to maximize shareholder value.
Prior to the commercial launch of FYARRO, Aadi's historical operations had consisted principally of research and development activities and raising capital. The company faced financial challenges in its early years, reporting a net loss of $3.5 million in 2020 and a much larger net loss of $110.1 million in 2021, which included $74 million in impairment charges related to intangible assets.
Despite these setbacks, Aadi successfully completed a reverse merger with Aerpio Pharmaceuticals in 2021 and raised $155 million in a private placement financing that same year to support the development and commercialization of FYARRO. The approval and launch of FYARRO in 2021-2022 marked a significant milestone for Aadi, transforming it from a clinical-stage company to a commercial-stage biopharmaceutical company.
As of the end of 2023, Aadi had accumulated a deficit of $269 million since inception, reflecting the ongoing expenses related to the commercialization of FYARRO and its research and development activities.
Transformation through Strategic Transactions As a result of the strategic review, in December 2024, Aadi announced a transformative set of transactions that would reposition the company for long-term growth:
1. Sale of FYARRO and Associated Infrastructure: Aadi entered into an agreement to sell its FYARRO business, including the commercial infrastructure, to KAKEN Pharmaceutical for $100 million. This divestiture allows Aadi to focus its resources on the development of a newly in-licensed portfolio of novel antibody-drug conjugates (ADCs).
2. In-Licensing of ADC Portfolio: Aadi secured an exclusive global license for the development and commercialization of a three-asset ADC portfolio from WuXi Biologics and HANGZHOU DAC. This portfolio of preclinical, next-generation ADC candidates targets various solid tumor indications, leveraging Aadi's expertise in applying advanced technologies to established tumor biology.
3. $100 Million PIPE Financing: Concurrent with the strategic transactions, Aadi raised $100 million through a private investment in public equity (PIPE) financing, led by Ally Bridge Group and with participation from new and existing investors. This capital injection will support the development of the in-licensed ADC portfolio.
Financials For the fiscal year ended December 31, 2023, Aadi reported revenue of $24.4 million, a net loss of $65.8 million, operating cash flow of -$59.7 million, and free cash flow of -$63.6 million.
In the third quarter of 2024, Aadi reported revenue of $7.2 million, a 21% increase year-over-year. Net loss for the quarter was $12.6 million. For the nine months ended September 30, 2024, Aadi reported net product sales of $18.7 million for FYARRO, up 4% from $18.0 million in the prior year period.
As of September 30, 2024, Aadi had $62.6 million in cash, cash equivalents, and short-term investments, which, combined with the $100 million in proceeds from the FYARRO divestiture and the $100 million PIPE financing, is expected to fund the company's operations into the second half of 2028.
The company's gross profit margin for the nine months ended September 30, 2024, stood at 87.4%. However, the company's net loss for this period was $45.4 million, reflecting ongoing research and development expenses, as well as the restructuring charges associated with the strategic shift.
Liquidity Aadi's balance sheet remains healthy, with a current ratio of 4.9 and a quick ratio of 4.5 as of September 30, 2024, indicating a strong liquidity position to support the company's future growth plans. The company's debt-to-equity ratio was 0.013, demonstrating a very low level of leverage.
Product Portfolio and Pipeline FYARRO (sirolimus protein-bound particles for injectable suspension, albumin-bound) combines two established technologies - nanoparticle albumin-bound (nab) technology and the anti-cancer agent, sirolimus. It was approved by the FDA in November 2021 for the treatment of adult patients with locally advanced unresectable or metastatic malignant perivascular epithelioid cell tumor (PEComa).
The company has paused new enrollment but continues dosing previously enrolled patients in two ongoing Phase 2 trials evaluating FYARRO for advanced or recurrent endometrioid-type endometrial cancer (EEC) and neuroendocrine tumors (NETs). Both studies have enrolled sufficient patients to assess initial efficacy signals in the fourth quarter of 2024.
Aadi noted that it currently has sufficient supply of FYARRO for at least the next two years based on its estimated demand.
Geographic Performance FYARRO is currently only approved and sold in the United States. The company has not disclosed any plans for international expansion at this time.
Industry Trends The oncology therapeutics market is expected to grow at a CAGR of approximately 11.5% from 2023 to 2028, driven by factors such as the rising prevalence of cancer, advancements in targeted therapies, and the increasing demand for personalized medicine.
Risks and Outlook While Aadi's transformation presents significant opportunities, the company is not without its risks. The successful development and commercialization of the in-licensed ADC portfolio will be critical to the company's long-term success, as the loss of FYARRO revenue will need to be offset by the potential of the new pipeline. Additionally, the company's ability to execute on the integration and advancement of the ADC assets will be a key focus area.
Furthermore, the competitive landscape in oncology remains highly dynamic, and Aadi will need to navigate the challenges of clinical development, regulatory approvals, and commercial execution to differentiate its ADC candidates and establish a meaningful presence in the market.
Nevertheless, Aadi's strategic pivot, enhanced financial position, and experienced leadership team, including the recent appointment of David Dornan, PhD, as Chief Scientific Officer, position the company well to capitalize on the opportunities ahead. Investors will eagerly await updates on the progress of the ADC portfolio, as Aadi embarks on this new chapter of its evolution as a multi-asset oncology leader.