Aadi Bioscience, Inc. (NASDAQ:AADI) Q3 2023 Earnings Call Transcript

Aadi Bioscience, Inc. (NASDAQ:AADI) Q3 2023 Earnings Call Transcript November 8, 2023

Aadi Bioscience, Inc. beats earnings expectations. Reported EPS is $-0.6, expectations were $-0.73.

Operator: Good day, and thank you for standing by. Welcome to the Aadi Bioscience Third Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there’ll be a question-and-answer session. [Operator Instructions] Please be advised, today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Marcy Graham, Senior Vice President of Investor Relations and Corporate Communications, Aadi Bioscience. Ms. Graham, please go ahead.

Marcy Graham: Thank you. Good morning and welcome to the Aadi Bioscience conference call to provide an operational update and review results for the third quarter 2023. Joining me on the call today: Dr. David Lennon, our President and CEO; Scott Giacobello, our CFO; and our Chief Medical Officer, Dr. Loretta Itri. Today we will provide an overview of operational activity and financial results for the third quarter of 2023 and an update on our PRECISION 1 trial and clinical development plans going forward. We will open the line for questions at the end of the call, following closing comments. A quick reminder that statements made on the call today will include forward-looking statements. Actual events or results could differ materially from those expressed or implied by any forward-looking statements as a result of various risks, uncertainties and other factors, including those set forth in the Risk Factors section of our annual and quarterly filings with the Securities and Exchange Commission, which can be found at www.sec.gov or on our website at www.aadibio.com.

In addition, any forward-looking statements made on this call represent our views only as of today, November 8th, 2023, and should not be relied upon as representing our views as of any subsequent date. We specifically disclaim any obligation to update or revise any forward-looking statements. With that, I will turn the call over to our CFO, Scott Giacobello for his opening statements. Scott?

Scott Giacobello: Thank you, Marcy and good morning, everyone. Thank you for joining us today to review our financial and operational results for the third quarter of 2023. Before we discuss our progress in the third quarter, an activity is currently underway, I would like to take this opportunity to introduce Dave Lennon, who joined us as President and CEO at the start of the fourth quarter. Dave comes to us with more than 20 years of pharmaceutical leadership and deep expertise in mTOR-driven diseases, with a History in Oncology and Rare Disease, and a strong background in US and Global Commercialization. All experiences that make him the perfect choice to guide Aadi through our next phase of growth and development. I’m excited about the future and look forward to working with Dave, continuing in my role as CFO. Now, I’d like to turn the call over to Dave for his initial comments. Dave?

Dave Lennon: Thank you, Scott. I appreciate the warm welcome introduction. I would also like to thank you for taking the role of Interim CEO, prior to my joining, and thank the entire management team for all their hard work in getting us to where we are today. The unique combination of technology, timing and team is what drew me to Aadi. There’s a great opportunity here to build on the success of the mTOR inhibitor class in cancer. Our groundbreaking therapy, nab-Sirolimus allows us to generate deeper inhibition of the mTOR pathway at the site of tumor and hopefully more potent anticancer activity resulting in better patient responses. We’ve proven this in our first indication of PEComa, a rare soft tissue sarcoma, and our very unique moment as a company where we expect to have multiple data readouts over the next 12 to 18 months from our highly anticipated tumor-agnostic study, PRECISION 1.

I’m also fortunate to be joining Aadi with an excellent team, who continue to execute on an ambitious commercial and clinical programs focused on building a leading precision oncology company. And I’m very happy to share their strong performance over the third quarter. Importantly, PRECISION 1 continues to enroll rapidly, and we now expect to present early interim data by mid-December. We will share more of our trial progress and upcoming catalysts in a moment. FYARRO sales remained solid at $6 million in the third quarter, a 40% growth over the prior year, and $80 million in cumulative sales in the first nine months of 2023. We are also executing on our previously announced development strategy with the initiation of two Phase 2 studies of nab-Sirolimus.

One in combination with standard of care in endometrial cancer, and the other as a single agent in neuroendocrine tumors. These are in addition to our ongoing trial in combination with Mirati’s KRAS inhibitor in lung cancer and other solid tumors. A key focus of our organization has been realizing the potential of nab-Sirolimus for patients with solid tumors, harboring either TSC1 or TSC2 inactivating alterations. These type of genetic alterations are sought to activate the mTOR pathway leading to uncontrolled cell growth. And our PRECISION 1 trial is an interventional study designed to elucidate the potential of nab-Sirolimus to treat all types of tumors with either of these alterations. The unmet need in TSC1 and TSC2 mutated cancer is a sizable, whether considered together or independently.

We presented data at this fall ENSA Symposium or Triple Meeting based on next-generation sequencing of mutations of nearly 440,000 cancer patients from the Foundation Medicine database. This large real-world evidence provides the best look at data to-date on TSC1 or TSC2 mutation frequencies across all common tumor types. This corroborates our previous estimate that patients with TSC1 or TSC2 represent about 2% of all cancer patients. Our latest internal analysis indicates that approximately 16,000 patients with these mutations across a variety of tumor types. With mutations roughly evenly split between genes, each mutation represents potential multibillion dollar total addressable market for nab-Sirolimus. TSC1 or 2-driven cancers are found across a wide range of tumor types, clustering in lung, gastrointestinal, genitourinary, breast and gynecological locations, and are often difficult to treat.

We believe PRECISION 1 is a cutting-edge trial testing our innovative therapy, nab-Sirolimus in these cancer types. With that background, I’d like to turn it over to Loretta, who will speak further to the details of this unique tumor-agnostic trial and our plans going forward. Loretta?

Loretta Itri: Thank you, Dave and good morning, everyone. As Dave noted, PRECISION 1 is a unique study and one without cohorts segregated by specific tumor types, making it truly tumor-agnostic. This is an ambitious and adaptive trial intended to elucidate the impact of nab-Sirolimus on cancers expressed in inactivating mutations of TSC1 and TSC2, regardless of tumor types. We are very pleased with the continuing advancement of the trial. The number of open sites has increased as has access to patients with more than 150 sites available to us using our just-in-time mechanism that allows us to open prequalified sites within as little as a two-week period. Working with our NGS partners, and benefiting from the broad outreach that boarded by our clinical sites, both academic and community based, we’re able to effectively identify and track patients with TSC1 or TSC2 inactivating alterations who have an interest in participating in our study.

Accrual between the two arms has been remarkably even, as predicted by the real-world data recently published at the ENA Annual Meeting, we continue to have a very broad representation of solid tumors, with more than 25 discrete tumor types enrolled in the trial to-date. It is important to remember, that although PRECISION 1 is designed as a single trial, each arm is independently evaluated, providing us with the ability to assess one arm separately from the other. Given this design, PRECISION 1 can effectively be viewed as two separate studies, each with its own outcomes. Additionally, these are not just two studies. They are two standalone, tumor-agnostic studies. Consistent with the adaptive statistical analysis plan, there are two preplanned interim analyses in the near future, one at one-third enrollment, which we plan to report in mid-December of this year, and another at two-thirds enrollment, which we expect to report in the third quarter of 2024.

The interim analysis that will be performed when two-thirds of patients are accrued and have been followed for six months. We’ll evaluate the primary endpoint of the study, DMC evaluated ORR, and will provide us with the opportunity to modify the study or to file early if the data warrant. The upcoming protocol interim analysis planned for later this year, will include early data on tumor type distribution, safety and investigator assessment of response using RECIST criteria on approximately 20 evaluable patients from each arm. We expect these results to reflect a broad representation of tumor types vary treatment histories and lines of therapy. We have built great momentum and in PRECISION 1 program and look forward to delivering on key milestones, both later this year and throughout 2024.

We expect to have completed enrollment by the spring of next year, well ahead of our planned delivery of the two-thirds interim readout in the third quarter, and to complete the study by the end of 2024. We remain very excited about the potential of this important study and the promise of nab-Sirolimus and look forward to communicating the preliminary results from the PRECISION 1 trial in a few weeks. I’ll now turn the call over to Scott for updates on our financial progress. Scott?

Scott Giacobello: Thanks, Loretta. On the financial front, we remain well capitalized, ending the third quarter with $119.3 million in cash, cash equivalents and short-term investments, which is expected to fund operations into 2025 based on current plans. FYARRO sales were $6 million in the quarter, representing 40% growth over the same period in 2022. Research and development expenses for the quarter increased to $11.9 million, as compared to $8.8 million in the prior year quarter. This increase is primarily related to the continued progress of the ongoing PRECISION 1 trial and the build out of the R&D organization. Selling, general and administrative expenses for the third quarter were $11.2 million, compared to $9.9 million for the same period in 2022.

This increase is due primarily to the build out of company infrastructure and increased marketing expenses related to FYARRO. Net loss for the third quarter was $16.3 million, compared to $14.4 million in the prior year quarter. For more information on our financial performance for the third quarter, a detailed discussion of the results reported on this call will be provided on our Form 10-Q. I’ll now turn the call over to Dave for his closing comments. Dave?

Dave Lennon: Thanks, Scott. As I said earlier, we are truly excited about what lies ahead. We have defined two sizable markets in cancers with TSC1 or TSC2 inactivating alterations, and look forward to sharing the upcoming PRECISION 1 interim analysis planned for mid-December. Beyond that, we are excited about the new catalysts coming up in 2024, including our two-thirds interim analysis in the third quarter. We expect to reach full enrollment in the trial in the spring of next year, fully completing this study by the end of 2024. We can now open the line for questions. Operator?

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Q&A Session

Operator: Thank you. [Operator Instructions] Our first question comes from Boris Peaker with Cowen. Your line is open.

Boris Peaker: Great. Thanks for taking my question. Two questions for me. First, on that second interim analysis which you estimate in 3Q of next year, what efficacy do you need to stop early? And second, in the PEComa market for FYARRO, do you have any sense of kind of what the duration of therapy is turning out to be [technical difficulty]?

Dave Lennon: Boris, thanks very much for the questions. In terms of the second interim, I wouldn’t comment at this point about what efficacy needs to be. Obviously, we have two arms running within this study and the context of response rate and duration in that combination needs to be considered when we think about potential for stopping a study early. But, of course, we do have that option at that point in time. On the PEComa side in terms of duration, I think what we can see is that duration is consistent with what we’ve been seeing in the clinical trial, and that’s what I would comment at this point.

Boris Peaker: Great. Thanks for taking my questions.

Dave Lennon: Thanks, Boris.

Operator: [Operator Instructions] Our next question comes from Joe Catanzaro with Piper Sandler. Your line is open.

Joe Catanzaro: Hey, everybody. Appreciate you taking my question. Maybe a couple for me on PRECISION 1. So for the initial interim expected by year-end, with the minimum follow-up of four and a half months, can you just let us know what minimum amount of post-baseline scans that’s insured? And then, for the second interim analysis, I think this is the first we’re hearing of this. So, was this always the plan? And if not, what drove the decision to take another look? And then sort of along these lines, Loretta, if I heard you right, the second interim analysis will allow you to modify the study. Just wanted to understand that a little bit better given it sounds like the study will be fully enrolled by that time, what modifications maybe you could potentially employ then? Thanks.

Dave Lennon: Sure. So, Loretta, do you want to comment on those first three areas?

Loretta Itri: Hi, Joe. Thanks for your questions. So, let me reply. So the – I’m sorry, I kind of have the order of your questions a little bit confused. Do you think you could repeat the first one, please?

Joe Catanzaro: Yeah, yeah. Sure, I’ll be quick here. So, the minimum amount of post-baseline scans that’s insured with four and a half months of follow-up. And then the second interim analysis, was this always in the plans? Or is this something new? And what drove the decision? And then, what modifications you could potentially take post the second interim analysis, given that the trial would have been fully enrolled by that point?

Loretta Itri: Okay, great. So, the four and a half month guarantees at least two post-baseline scans. So everyone will have at least the ability to have that kind of follow-up. The interim analysis, the second interim analysis at two-thirds that you were asking a question about, has always been in the statistical analysis plan. It is an adaptive design. This is very common when approximately two-thirds of patients are on study to have a look and to assess whether or not the sample size is sufficient to file early or whether or not you might want to consider resizing. So those are both options that we would have when that interim occurs. But this analysis was always planned. And we will have six months of follow-up. This analysis will look at the independent review of radiologic scans and will be performed by an independent data monitoring committee.

So, even though we will have completed enrollment in the study, presumably by that time, we will still be requiring additional follow-up on the entire cohort. I hope that addresses your questions.

Joe Catanzaro: Yeah, it does. Super helpful. Thanks for taking my questions.

Dave Lennon: Thanks, Joe.

Loretta Itri: You’re so welcome.

Operator: [Operator Instructions] Our next question comes from Roger Song with Jefferies. Your line is open.

Roger Song: Great. Thanks for the update and taking our questions. A couple from us. In terms of the interim analysis now we have two. Maybe can you let us know, I understand you are not going to be providing the guidance right now. But at which interim analysis, if at all, you will contextualize the efficacy against the FDA statistical hurdle or the standard of care you have been providing to the FDA as the benchmark? So we can know in each interim analysis, the efficacy or the ORR will be reaching the goal you want to achieve?

Dave Lennon: Thanks for the question, Roger. I’ll take this one. It’s important to note that this interim that we’re presenting in December is based on one-third of patients enrolled and minimum of four and a half months of follow-up. It’s also investigator-assessed ORR, so this is not the primary endpoint of the study, which is independently assessed overall response rate. And the second interim is actually based on the primary endpoint, and it will be at that point, we would be testing against the statistics of the plan.

Roger Song: Got it. So, in the second – the interim analysis, you will do the primary endpoint analysis will be that at the point you will let us know what’s the hurdle for that? Or you would just let us know, okay, we are not stopping the trial and we’ll continue for the full data?

Dave Lennon: Yeah. We view the hurdle to be something that is a review issue, and we probably wouldn’t talk about that at that point in time, but rather give a sense of what the efficacy measures we’re seeing are and whether – where we are with the trial in terms of continuation.

Roger Song: Got it. Thank you. Maybe just a quick follow-up.

Dave Lennon: Yeah.

Roger Song: Yeah, a quick follow-up on this is that, you say you will complete the trial by the end of 2024. And when should we expect the full data from the trial? Thank you.

Dave Lennon: Yeah. It’s roughly at the end of 2024 or early 2025. We anticipate it’s probably more like the early 2025 at this point, but we’ll give a further update once we complete enrollment.

Roger Song: Excellent. Thank you. That’s it from us.

Operator: [Operator Instructions] Our next question comes from Ahu Demir with Ladenburg. Your line is open.

Ahu Demir: Good morning, team. Thank you so much for taking my questions. Two questions from us. First one is regarding the Triple Meeting Presentation. It looks like p53 is the most frequently observed comorbidity. Curious how that might impact deep comorbidity, how they might impact the trial activity? And during the interim analysis, will you disclose the other mutations in the patients? Or is it going to be more high level?

Dave Lennon: Yeah. So, I’ll take a first crack and Loretta back me up on this. TP53 is the most common co-mutation that you see in that analysis for patients across 440,000 cancers that we looked at. And our internal calculations when we look at those distributions indicate there’s potentially 16,000 new cancer patients each year with either TSC1 or TSC2 mutations. About 50% of those, if I recall, the data correctly, had co-mutations in p53 and although that while high overall is very consistent with what you see across all tumor types and all types of cancers. TP53 is the most common co-mutation in general for different types of tumors. And so, it’s not different from what you might expect overall. And given that we’ve seen responses to patients with TSC1 and TSC2 altered cancers in the past in the retrospective analysis that became the basis for PRECISION 1 and PRECISION 2.

We wouldn’t expect it to necessarily negatively impact the trial in any way, and we believe it would work within that context. And Loretta, I don’t know if you would add anything to that?

Loretta Itri: No, I think that’s entirely correct. I would have answered it the same way.

Dave Lennon: Yeah. And then in the interim, we won’t be presenting co-mutation status at this point in time. The numbers, while significant in terms of an initial indicative nature of how the trial is going, we don’t believe would be sufficient to really do a detailed analysis of co-mutation status that would be robust enough to make any determinations on at this point. So, we won’t be sharing that data.

Ahu Demir: That’s helpful. And my second question is on the endometrial program. Now the trial is enrolling, how many sites are open? And when do you expect to see initial data from Stage 1 portion of the study?

Dave Lennon: So we’ve just started that study. I wouldn’t comment on the number of sites we have, but the community is very excited about engaging in this study and we hope to have an update on the study sometime in 2024.

Ahu Demir: Great. Thank you for taking my questions.

Dave Lennon: Thanks, Ahu.

Operator: And I’m not showing any further questions at this time. I’d like to turn the call back over to Dave for any closing remarks.

Dave Lennon: Super. Thank you very much, Kevin and thank you, everyone for joining us on today’s call. As we mentioned, we’re really excited about the progress we’re making on the PRECISION 1 trial with the interim analysis plan for mid-December and a number of exciting catalysts for 2024 that could propel our need to grow. We appreciate your time and look forward to the opportunities in the future to provide additional updates on our process – or progress, I should say. Thank you for joining the call and have a great day, everyone.

Operator: Ladies and gentlemen, this does conclude today’s presentation. You may now disconnect and have a wonderful day.