Executive Summary / Key Takeaways

• Adagene Inc. is a clinical-stage biotechnology company leveraging its proprietary SAFEbody® precision masking technology to develop novel antibody-based cancer immunotherapies, aiming to overcome the toxicity limitations of conventional treatments.
• The lead candidate, Muzastotug (ADG126), a masked anti-CTLA-4 SAFEbody, has demonstrated a compelling safety profile and dose-dependent efficacy in Phase 1b/2 trials for microsatellite stable colorectal cancer (MSS CRC), achieving a 29% overall response rate (ORR) in 20 mg/kg cohorts and a 19.4-month median overall survival (mOS) in 10 mg/kg cohorts.
• Strategic collaborations with industry leaders like Sanofi (SNY) and Exelixis (EXEL) validate Adagene's technology and provide crucial non-dilutive funding, with Sanofi's recent up to $25 million investment extending the cash runway into 2027.
• The company reported a reduced net loss of US$13.5 million for the six months ended June 30, 2025, an improvement from US$17.0 million in the prior year period, reflecting a focused R&D strategy.
• With FDA alignment on Phase 2 and Phase 3 trial designs for ADG126 and plans to begin Phase 2 enrollment in the second half of 2025, Adagene is positioned to potentially capture a significant share of the estimated $19.4 billion MSS CRC market.

The Dawn of Precision Oncology: Adagene's Differentiated Approach

Adagene Inc., established in 2011 and headquartered in Suzhou, China, stands at the forefront of cancer immunotherapy, committed to transforming the discovery and development of novel antibody-based treatments. The company's core mission is to address globally unmet patient needs by combining computational biology and artificial intelligence to design innovative antibodies. This platform-driven approach is underpinned by its proprietary Dynamic Precision Library (DPL) platform, which includes NEObody™, SAFEbody®, and POWERbody™ technologies.

The global cancer immunotherapy market is a rapidly expanding sector, valued at approximately $126.19 billion in 2023 and projected to reach around $296.01 billion by 2033, growing at a compound annual growth rate (CAGR) of 8.9%. Monoclonal antibodies, a segment Adagene specializes in, accounted for a substantial 67.11% of this market in 2023. This growth is fueled by the rising incidence of cancer, advancements in immunotherapy technologies, and a growing demand for personalized medicine. Within this dynamic landscape, Adagene's strategic positioning centers on its ability to develop therapies that offer superior safety and efficacy profiles, particularly through its SAFEbody® technology.

Unlocking Therapeutic Potential with SAFEbody® Technology

Adagene's most significant technological differentiator is its SAFEbody® precision masking platform. This innovative technology is engineered to address a critical challenge in antibody therapeutics: on-target off-tumor toxicity. Many effective cancer therapy targets are expressed not only on cancer cells but also, at lower levels, on healthy cells. Conventional antibodies can bind to these healthy cells, leading to unwanted side effects and limiting the therapeutic dose.

The SAFEbody platform overcomes this by masking the antibody's binding domain, rendering it inactive until it encounters the unique biochemical environment of the tumor microenvironment (TME). Upon activation within the TME, the antibody becomes fully functional, allowing for tumor-specific targeting while minimizing harm to healthy tissues. This conditional activation mechanism is designed to improve the safety and tolerability of antibody therapeutics while maintaining robust clinical activity.

The tangible benefits of this technology are evident in Adagene's lead clinical program, Muzastotug (ADG126), a masked anti-CTLA-4 SAFEbody. CTLA-4 inhibitors have long been recognized for their potent anti-cancer activity, but their systemic toxicity has historically limited their dosage and efficacy. ADG126 targets a unique epitope of CTLA-4 in regulatory T cells (Tregs) within the tumor microenvironment.

Clinical data from Phase 1b/2 studies of ADG126 in combination with Merck 's KEYTRUDA® (pembrolizumab) in metastatic microsatellite stable colorectal cancer (MSS CRC) highlight the platform's advantages. ADG126 has been dosed at levels 10 to 20 times higher than other anti-CTLA-4 antibodies, yet it maintains a favorable safety profile with less than 20% Grade 3 treatment-related adverse events (TRAEs) at a 20 mg/kg dose administered every six weeks. This compares favorably to historical benchmarks for other CTLA-4 inhibitors, which often present higher toxicity profiles.

Furthermore, the efficacy data is compelling. The 20 mg/kg cohorts demonstrated a confirmed overall response rate (ORR) of 29% in MSS CRC patients, a nearly two-fold increase from the 17% ORR observed in the 10 mg/kg cohorts. Importantly, all six responders in the 20 mg/kg cohorts remained on treatment for over forty weeks, with median overall survival (OS) for these cohorts not yet reached. The 10 mg/kg cohorts showed a median OS of 19.4 months, comparing favorably with current standard of care treatments and historical benchmarks of 10.8 to 12.1 months for MSS CRC. This robust dose-dependent efficacy coupled with a potential best-in-class safety profile underscores the wide therapeutic index enabled by the SAFEbody technology.

Adagene's R&D initiatives extend beyond ADG126. The SAFEbody platform is being applied to a variety of antibody-based therapeutic modalities, including Fc empowered antibodies, antibody-drug conjugates (ADCs), and bi/multi-specific T-cell engagers. The company is actively developing programs like ADG138 (HER2xCD3 POWERbody) and ADG152 (CD20xCD3 POWERbody) for low-expressing or resistant tumors, and ADG153 (masked anti-CD47 IgG1 SAFEbody) for hematologic and solid tumors. These initiatives aim to leverage the precision masking to enhance safety and efficacy across a broader range of cancer types and therapeutic approaches.

For investors, the "so what" of Adagene's technological differentiation is profound. The ability to deliver highly potent therapies with significantly reduced off-target toxicity translates into a wider therapeutic window, potentially leading to better patient outcomes, longer treatment durations, and a competitive edge in crowded oncology markets. This technological moat could command premium pricing, drive market adoption, and ultimately contribute to stronger financial performance and long-term growth.

Competitive Positioning in a Dynamic Oncology Landscape

Adagene operates in a highly competitive biopharmaceutical industry, facing established giants like Bristol-Myers Squibb (BMY), Merck (MRK), Roche (RHHBY), and AstraZeneca (AZN). These companies possess vast resources, extensive commercial networks, and diversified oncology portfolios. While these larger players benefit from established products and strong cash flow, Adagene distinguishes itself through its innovative, precision-focused pipeline.

Adagene's SAFEbody technology directly addresses a key limitation of existing immunotherapies, particularly CTLA-4 inhibitors, where toxicity has been a primary limiting factor in maximizing efficacy. By enabling higher, more frequent, and repeat dosing with a superior safety profile, ADG126 aims to offer a qualitatively better treatment option compared to conventional CTLA-4 therapies. This technological advantage positions Adagene as a challenger capable of carving out significant market share in underserved indications like MSS CRC, a segment estimated to be a $19.4 billion opportunity within the broader $30 billion global colorectal cancer market.

Strategic collaborations are central to Adagene's competitive strategy. The company has forged partnerships with reputable global entities, including an expanded collaboration with Exelixis to develop novel masked antibody-drug conjugates, and a significant strategic investment from Sanofi. These partnerships not only provide non-dilutive funding and external validation of Adagene's technology but also leverage the development and commercialization expertise of larger pharmaceutical companies, mitigating some of the financial and operational challenges faced by a clinical-stage biotech. For instance, the Sanofi collaboration, initiated in 2022, includes potential milestone payments of up to $2.5 billion and tiered royalties, demonstrating the significant value placed on Adagene's SAFEbody platform.

While Adagene's financial health and market reach are not yet comparable to its larger rivals, its focused R&D and strategic partnerships allow it to compete effectively in niche areas. The appointment of Dr. John Maraganore, a biotech luminary, as Executive Advisor further strengthens Adagene's strategic guidance, bringing invaluable experience in overcoming complex drug delivery challenges.

Financial Performance and Liquidity: Fueling Innovation

As a clinical-stage biotechnology company, Adagene's financial performance is characterized by significant investment in research and development and a focus on pipeline progression rather than immediate profitability. For the six months ended June 30, 2025, Adagene reported a net loss attributable to shareholders of US$13.5 million, an improvement from a net loss of US$17.0 million for the same period in 2024. This narrowing of the net loss reflects a more focused clinical strategy and prioritization of ADG126, leading to an approximately 18% decrease in R&D expenses to US$12.0 million for the first half of 2025, compared to US$14.7 million in the prior year period. Administrative expenses remained relatively stable at US$3.7 million for the six months ended June 30, 2025, a slight increase from US$3.6 million in the same period of 2024.

Looking at the full year 2024, Adagene reported annual revenue of $103,204 and a net income of -$33.42 million. The company's operating expenses for 2024 were $35.59 million, with R&D expenses at $28.78 million and selling, general, and administrative (SGA) expenses at $7.27 million. These figures underscore the substantial investment required to advance a clinical-stage pipeline. The gross profit margin for 2024 was -1088.49%, and the net profit margin was -53719.18%, indicative of a company in the development phase with minimal product revenue.

Liquidity is a critical factor for biotech companies, and Adagene has taken steps to strengthen its financial position. As of June 30, 2025, cash and cash equivalents stood at US$62.8 million, down from US$85.2 million as of December 31, 2024. However, this figure does not include the equity proceeds from Sanofi's strategic investment of up to US$25 million, which was announced in July 2025. This investment, combined with existing cash, is expected to extend Adagene's cash runway into 2027, providing crucial funding for its research and development activities, particularly the clinical development of muzastotug (ADG126) through its randomized Phase 2 trial in MSS CRC. Total borrowings from commercial banks in China also decreased to US$6.6 million as of June 30, 2025, from US$18.2 million at the end of 2024.

Outlook and Key Catalysts

The immediate outlook for Adagene is centered on the advancement of ADG126 and the continued expansion of its platform technologies through strategic partnerships. Following a productive Type B meeting with the FDA in July 2025, Adagene received endorsement for its clinical development plan for muzastotug in MSS CRC. The company expects to begin enrolling patients in the Phase 2 trial in the second half of 2025. This Phase 2 trial is designed to identify the optimal dose for a subsequent Phase 3 trial, a critical step towards potential FDA approval.

The strategic investment from Sanofi, coupled with their exercise of an option for a third SAFEbody discovery program and sponsorship of a combination clinical trial with muzastotug, underscores the significant external validation of Adagene's technology and pipeline. These collaborations provide not only financial support but also access to Sanofi's expertise and resources, accelerating the development of Adagene's novel therapies. The expanded collaboration with Exelixis for a third masked antibody-drug conjugate further diversifies Adagene's pipeline and potential revenue streams through milestones and royalties.

Risks and Challenges

Investing in a clinical-stage biotechnology company like Adagene carries inherent risks. The success of the investment hinges heavily on the successful outcome of clinical trials, particularly for its lead candidate ADG126. While the Phase 1b/2 data for ADG126 in MSS CRC is promising, there is no guarantee that these results will translate into successful Phase 2 and Phase 3 trials or ultimately lead to regulatory approval. The drug development process is lengthy, expensive, and fraught with uncertainty, with a low probability of success for drugs progressing from Phase 1 to approval.

Regulatory hurdles, competition from established pharmaceutical companies with similar or alternative therapies, and the ability to secure additional funding for future development and commercialization are also significant challenges. Although the Sanofi investment extends the cash runway into 2027, further capital raises may be necessary as the pipeline advances. Furthermore, the intellectual property landscape in biotechnology is complex, and Adagene's ability to maintain and protect its proprietary technologies is crucial for its long-term success.

Conclusion

Adagene Inc. presents a compelling investment narrative centered on its innovative SAFEbody® precision masking technology, which holds the potential to redefine cancer immunotherapy by addressing the long-standing challenge of on-target off-tumor toxicity. The strong clinical data for its lead candidate, ADG126, in MSS CRC, demonstrating a favorable safety profile at higher doses and encouraging efficacy, positions the company as a significant contender in a multi-billion dollar market. Strategic partnerships with industry leaders like Sanofi and Exelixis provide critical validation and financial support, extending Adagene's operational runway and mitigating some of the inherent risks of a clinical-stage biotech.

While the path to commercialization is long and fraught with challenges, Adagene's technological differentiation, coupled with a disciplined R&D approach and a strengthened leadership team, offers a unique opportunity for investors seeking exposure to a company at the forefront of precision oncology. The upcoming initiation of ADG126's Phase 2 trial in the second half of 2025 represents a key catalyst to monitor, as Adagene strives to unmask the full therapeutic potential of its innovative antibody-based therapies.