Business Context and Reporting Period
The filing is Aadi Bioscience, Inc.’s Form 10-Q for the quarter and six months ended June 30, 2023; it does not identify Whitehawk Therapeutics, Inc. as the registrant. Aadi is a commercial-stage biopharmaceutical company developing precision therapies for genetically defined cancers. Its approved and commercialized product is FYARRO, indicated in the United States for adult patients with locally advanced unresectable or metastatic malignant PEComa.
FYARRO sales launched in February 2022. Aadi also conducts clinical development in TSC1/TSC2-altered solid tumors and collaborates with Mirati Therapeutics on a FYARRO and adagrasib combination study.
Key Financial Metrics
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| Net product sales | $6.2 million, versus $3.4 million | $12.1 million, versus $5.7 million |
| Gross profit | $5.5 million | $10.9 million |
| Approximate gross margin | 89.4%, versus 90.1% | 90.2%, versus 90.9% |
| Operating loss | $19.5 million, versus $18.4 million | $36.4 million, versus $32.2 million |
| Approximate operating margin | (315.2%), versus (534.3%) | (301.3%), versus (560.1%) |
| Net loss | $18.0 million, versus $18.3 million | $33.2 million, versus $32.1 million |
| Basic and diluted loss per share | $0.67, versus $0.87 | $1.23, versus $1.53 |
| Net cash used in operating activities | Not separately provided | $38.1 million, versus $30.1 million |
Interest income was $1.6 million in the quarter and $3.3 million year to date, compared with $0.2 million and $0.2 million, respectively, in the prior-year periods, primarily reflecting higher interest rates and invested cash balances.
At June 30, 2023, cash and cash equivalents were $68.2 million, short-term investments were $66.7 million, and total cash, cash equivalents and short-term investments were approximately $134.9 million. Total current assets were $144.9 million and current liabilities were $13.0 million. The company reported no conventional long-term debt, but had $5.8 million due to its licensor, payable August 26, 2024 plus accrued interest, and operating lease liabilities of $1.5 million.
Accumulated deficit was $236.4 million, compared with $203.2 million at December 31, 2022. Stockholders’ equity was $131.4 million, compared with $158.4 million at year-end 2022.
Material Changes Versus the Prior Comparable Period
- Net product sales increased 80% in the quarter and 110% for the first six months, reflecting continued commercialization of FYARRO.
- Selling, general and administrative expense increased 18% in the quarter and 20% year to date, driven by personnel, marketing, legal and related costs.
- Research and development expense increased 72% in the quarter and 67% year to date, primarily due to higher personnel costs, PRECISION1 clinical development expenses and clinical drug-product manufacturing.
- The prior-year periods included a $3.7 million impairment of an acquired contract intangible asset related to the terminated Gossamer license; no comparable charge was recorded in 2023.
- Operating cash use increased to $38.1 million from $30.1 million for the first six months, while investing cash flow was $66.9 million positive due principally to $92.0 million of short-term investment maturities, partially offset by purchases of investments and property and equipment.
- Cash and cash equivalents increased from $39.0 million at December 31, 2022 to $68.2 million at June 30, 2023, while short-term investments declined from $133.5 million to $66.7 million as the investment portfolio was repositioned.
Guidance, Outlook, Commentary, Risks and Unusual Items
- Management stated that existing cash, cash equivalents and short-term investments should fund planned operations into 2025, although the company expects continuing operating losses and may require additional financing.
- Management expects selling, general and administrative expenses to increase as commercialization infrastructure expands and expects research and development spending to rise as FYARRO advances into additional indications.
- A pre-planned interim analysis of the PRECISION1 study, based on 40 patients with appropriate follow-up, was expected before the end of 2023.
- After the reporting period, on August 9, 2023, Aadi announced planned Phase 2 programs in endometrial cancer and neuroendocrine tumors, expected to begin in the fourth quarter of 2023. Aadi also announced first-patient dosing in the Mirati collaboration in August 2023.
- Aadi relies on Fresenius Kabi as its single-source manufacturer for FYARRO and had $2.1 million of non-cancellable inventory purchase commitments payable in 2023 under the Fresenius agreement.
- The EOC license agreement was terminated in June 2022, and related arbitration remains ongoing. EOC seeks monetary damages; Aadi disputes the allegations and has accrued no liability because the possible loss cannot be estimated.
- Two customers represented 78% and 22% of net accounts receivable at June 30, 2023. Two customers also represented a majority of revenue in both the quarter and year-to-date period, creating customer concentration risk.
- The company has a $75.0 million at-the-market equity facility, but no shares had been sold under it as of June 30, 2023. Future equity financing could dilute existing stockholders.
- Key risks include dependence on a single commercial product, continuing losses, additional capital requirements, regulatory and clinical-trial uncertainty, reimbursement and pricing pressure, third-party manufacturing dependence, intellectual-property risks, and potential adverse outcomes from the EOC arbitration.
Investor Verification Checklist
- Confirm the issuer identity: the supplied filing is for Aadi Bioscience, Inc., not Whitehawk Therapeutics, Inc.
- Verify FYARRO prescription demand, gross-to-net adjustments, customer concentration and whether revenue growth is translating into improved cash generation.
- Assess the cash runway against the stated 2025 horizon, projected operating cash burn, the $5.8 million licensor payment due in 2024 and potential financing needs.
- Review PRECISION1 interim data and the progress, cost and regulatory path for the newly announced clinical programs and Mirati collaboration.
- Monitor the EOC arbitration, including any developments that could create a material liability.
- Evaluate Fresenius Kabi supply continuity, minimum purchase obligations and the availability of alternative manufacturing capacity.