Aadi Bioscience, Inc. (NASDAQ:AADI) Q4 2022 Earnings Call Transcript

Aadi Bioscience, Inc. (NASDAQ:AADI) Q4 2022 Earnings Call Transcript March 28, 2023

Operator: Good day and thank you for standing by. Welcome to the Aadi Bioscience Fourth Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. Please be advised that today’s conference is being recorded. Now I will turn the call over to Marcy Graham, Senior Vice President of Investor Relations and Corporate Communications at Aadi Bioscience. Ms. Graham, please go ahead.

Marcy Graham: Thank you, Elizabeth. Good morning and welcome to the Aadi Bioscience conference call to review results of the fourth quarter and full year 2022 and to provide an update on our operations and good start in 2023. Joining me on the call today is Scott Giacobello, our CFO and Interim President and CEO who will provide an overview of financial and operational activity during the period, including an update on our continued commercial progress. Next will be our Chief Medical Officer, Dr. Loretta Itri, who will provide insights on our clinical developments and plans for 2023. We will open the line for questions at the end of the call following closing comments. Before we get started, 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 reports filed 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, March 28, 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 Scott for his opening statements.

Scott?

Scott Giacobello: Thank you, Marcy and hello everyone. Thank you for joining us this morning to review our financial and operational results for the fourth quarter and full year 2022. As we said before, this past year was a transformational one for Aadi. Those are many. The top line accomplishments of 2022 began early in the year with the successful commercial launch of our first product, FYARRO for the treatment of advanced malignant PEComa, a rare form of sarcoma with no prior standard treatment. Upon launch, FYARRO was added to the NCCN Clinical Practice Guidelines as the only preferred treatment regimen for malignant PEComa, and we received a permanent J code for FYARRO soon after, facilitating payer coverage and reimbursement.

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We achieved sales of $15.2 million in 2022 outperforming estimates for the year in just 10 months on the market. This launch was closely followed by the initiation of our Phase 2 registration-directed trial PRECISION 1, a study in patients with solid tumors that have TSC1 or TSC2 inactivating alterations in the mTOR pathway. We are excited about the potential for FYARRO to provide benefits for patients beyond PEComa. We believe in our prospects and look forward to sharing preliminary data on a meaningful number of patients in the PRECISION 1 trial in the second quarter of 2023. As we progressed on both the commercial and clinical fronts, we announced the completion of a pipe financing of $72.5 million, extending our runway into 2025 and supporting our ongoing operations and further expansion of our initiatives.

This includes a collaboration with Mirati Therapeutics announced last fall for a new combination clinical study in patients with KRAS G12C mutations as part of our strategy to expand indications for FYARRO. Beyond these advancements, we are pleased with the continued adoption of FYARRO for patients with PEComa. We achieved $5.2 million in sales for the fourth quarter, which represents growth of 23% over Q3. We continued to see increased uptake in the community setting with roughly half of the business now coming from community clinics and hospitals. We are encouraged by the acceptance in the market of FYARRO as a leading treatment option and at the end of the year, we had more than 120 unique ordering accounts, up 34% from the prior quarter with a reorder rate of more than 85%, underscoring the positive clinical experience conveyed by healthcare providers who are increasingly viewing FYARRO as the standard of care for their PEComa patients.

Lastly, we just announced the addition of Dr. Mohammad Hirmand to our Board of Directors. He brings a rich history of success in clinical development and operational expertise to the role, currently serving as the Chief Medical Officer of Avenzo Therapeutics following his role as CMO at Turning Point Therapeutics acquired by BMS last year. His impressive qualifications and broad expertise in clinical operations and experiences at companies like Medivation and Peloton compliments the acumen of our existing Board contributors and we are truly looking forward to working with them as we advance the current PRECISION 1 trial and other new trials in the future. We are enthusiastic about what has to come in 2023 heading into another year of solid execution, thanks in no small part to our team here at Aadi whose hard work is what made our achievements possible and this continued dedication is what will drive our progress in the future.

Loretta is up next to further discuss our progress and ongoing clinical activity. Loretta?

Loretta Itri: Thank you, Scott, and good morning everyone. On the clinical front progress continues in our ongoing PRECISION 1 tumor agnostic trial in patients with TSC1 and TSC2 inactivating alterations. The number of open sites has continued to increase along with access to patients allowing us to achieve our goal of opening 120 sites by the end of 2022. Patient accrual remains on track, although we continue to deal with widespread staffing shortages as our sites work to recover from the impact of the COVID pandemic. The continuing commitment of our team and our maturing partnerships with the leading next generation sequencing companies, have played a strategic role in affording access to patients. This has been an important factor in enabling us to routinely identify eligible patients, particularly in community-based practices.

We appreciate our partnerships with U.S. Oncology, Tempus and Foundation Medicine as we work to identify patients who qualify for the trial. We believe that full patient enrollment into this study will be completed within 24 months from first patient treated in the spring of 2024. As presented at the recent Society for Gynecologic Oncology Annual Meeting just a few days ago in Tampa, Florida, a sub-analysis of the data from our pivotal AMPECT trial revealed excellent activity for nab-sirolimus in patients presenting with malignant uterine PEComa. Our clinical team has been hard at work building relationships in the GYN oncology community, interacting with clinicians in the field to consider the options made available by nab-sirolimus in treating these patients.

As we have previously mentioned, we continue to evaluate additional indications for nab-sirolimus beyond sarcoma and TSC1 or TSC2 inactivating alterations, either as a single agent or in combination. We will be providing an update on new potential studies later in the year. We are also progressing well in our clinical collaboration with Mirati as we evaluate the combination of adagrasib and nab-sirolimus in KRAS G12C mutants, non-small cell lung cancer and other solid tumors. We expect that Mirati will dose the first patient in this trial during the second quarter of this year. As you may recall, we presented preclinical data on the combination of KRAS inhibitors and nab-sirolimus last fall at the AACR-NCI-EORTC meeting that lays the foundation for our partnership on this combination strategy to treat non-small cell lung cancer and other solid tumors with a KRAS G12C mutation.

The team here at Aadi is very busy and energized about continuing to explore the further potential benefits of nab-sirolimus in the treatment of patients with additional oncologic indications. I will now turn it back over to Scott for a financial update. Scott?

Scott Giacobello: Thanks Loretta. We had a solid fourth quarter and end a year of strong performance with approximately $172.6 million in cash, cash equivalents and short-term investments, including proceeds from the completion of our $72.5 million financing last fall. We begin 2023 well capitalized with a balance sheet that is expected to fund operations into 2025. Turning to our financial results, FYARRO net product sales amounted to $5.2 million for the fourth quarter and $15.2 million for 2022. As is typical at the end of the year, there was some inventory billed at the specialty distributors in the quarter, and we expect this will normalize in the first quarter. Research and development expenses for the quarter increased to $9.4 million as compared to $7.2 million in the prior year quarter.

For the year, R&D expense amounted to $32.7 million as compared to $19.7 million last year. This increase is primarily related to the continued progress of the ongoing PRECISION 1 trial and the buildout of the R&D organization. Selling, general and administrative expenses for the fourth quarter were $11.1 million compared to $9.7 million in the same period in 2021. For the year SG&A expenses totaled $40.2 million compared to $18.5 million in the prior year. This increase is mainly due to the buildout of our commercial operations and company infrastructure and increased marketing expenses related to the commercial launch of FYARRO. Net loss for the fourth quarter was $13.9 million compared to $16 million in the fourth quarter of 2021. Net loss for the year was $60.5 million compared to $110.1 million in the prior year.

The prior year included the non-cash impairment charge at $74.2 million related to the acquired contract intangible asset incurred in conjunction with the Aerpio merger. For more information on our financial performance for 2022, a detailed discussion of the results reported on this call will be provided in our 10-K to be filed later today. As you’ve heard today, 2022 was a transformational year for us, one that will set the foundation for the advancements that lie ahead in 2023. Our focus remains on the patients we serve and on providing therapies that improve the lives of those who suffer from mTOR driven diseases. We can now open the line for questions. Operator?

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Q&A Session

Operator: Our first question comes from the line of Roger Song with Jefferies.

Roger Song: That’s great. Congrats for the progress and thanks for taking the question. So a couple of questions from us. So the first one is the FYARRO sales looks pretty impressive in terms of the steady grow. Do you have any kind of anecdotal comments in terms of the patient characteristic you’re getting on the treatment, such as the line of therapy and the duration on treatment, and the when do you expect you will be able to provide more guidance in terms of the future sales? Thanks

Scott Giacobello: And great, Roger, thanks for the question. I’ll take the first one first, patient characteristics. I would say what we’ve seen, and I think we’ve mentioned this before, is early on in the launch of FYARRO in PEComa, we were seeing patients, we were kind of meeting patients where they were in their treatment plan in progress with therapy. And what we’ve seen after being on the market and physicians being more comfortable and knowing more about the drug as we’ve moved, we’re moving closer to first line, and as we do that, we expect that that’s going to have a positive impact on duration. Although I would say that we’re still pretty early and just 10 months in on the market and so we’ll still need a little more time to see how duration plays out. So I’d say we’re probably still a ways away from guidance, but certainly very happy with the progress that we’re seeing.

Roger Song: Yep. Yes, thank you. And then so in terms of the PRECISION, this preliminary readout in 2Q, I’m curious what would you consider at the meaningful end, first of all, and also kind of what kind of a venue you will potentially report the data? It will be in the medical meeting or company hosted event or press release? Thank you.

Scott Giacobello: Sure. So as far as the — a meaningful and what we’ve said is it will not be single digits, so it’ll be patients in the double digits. And as far as the venue, it will not be released at a scientific meeting, but rather a company press release or company event.

Roger Song: Excellent. Thank you. That’s it for us and congrats again.

Operator: Our next question comes from the line of Ahu Demir with Ladenburg.

Ahu Demir: Good morning. Thank you so much for taking my questions. I have two questions. First one is on the revenues. If you could provide more color on the percentage of patients’ lives covered and also the re-prescription rate of FYARRO in patients.

Scott Giacobello: Sure. So from a reimbursement perspective, which I think is your first question Ahu, so what we’re seeing from a lives covered perspective is that we’re north of 85% of commercial lives covered at this point. So quality of access continues to be very strong and we’re seeing policies in place without restrictions, so we’re very happy with that. And then could you remind me again of your second question?

Ahu Demir: My question was, how many patients re-prescribed or how many physicians re-prescribed FYARRO.

Scott Giacobello: Yes

Ahu Demir: Prescription rate?

Scott Giacobello: Well, Ahu remember, we don’t get, we don’t really get much in the way of script data. Right? Because FYARRO is an IV therapy and so we don’t get patient level data. The best measure we have is really the number of ordering institutions which you can loosely correlate to patients, and that’s a launch to date number. But that would be the closest thing we have to actual patient data.

Ahu Demir: Okay, thanks Scott. And my second question is on the SGO presentation on the relevance of TSC1 and TSC2 alterations in endometrial cancers, could you maybe elaborate more on the relevance, like the maybe percentage of patients who are, who had the TSC1 and TSC2 alterations in endometrial cancers? Is there any specific subtypes that TSC1 and TSC2 alterations are curing those endometrial cancer patients? And maybe the part of the followup question is, what have you shown in the expanded access program for the again, endometrial patients?

Scott Giacobello: Okay, so I’m going to do is, I’m going to turn that first part of your question on the SGO data over to Loretta. Loretta, do you want to handle that one?

Loretta Itri: Sure. Can you hear me?

Scott Giacobello: Yes.

Loretta Itri: Hi Ahu. So off the top of my head, I can’t recall the incidence rates of TSC1 and TSC2 mutations. It is — of the different tumor types it’s one of the higher, I would say, in the range of 3% to 4% of endometrial cancers expressed TSC1 and TSC2 alterations. This sub-analysis that we performed was a relatively small subset of the AMPECT study. But as you may be aware, there was literature to suggest that PEComa’s that occurred in patients with endometrial cancer had a relatively unfavorable response. Our data in fact showed a very favorable response of 43% in this population. So I think we have shown rather definitively or at least in the best collection of patients of this type, that the effect of FYARRO in PEComas occurring in endometrial cancer is quite good. Did I answer your question?

Ahu Demir: Yes, you did. And is there any subtype of endometrial cancer, low grade, high grade, that TSC1 and TSC2 alterations occur at a higher rate?

Loretta Itri: We — unfortunately the number of patients that we had data for would not allow us to say anything definitive in that regard.

Ahu Demir: I see. Thank you very much.

Neil Desai: Ahu maybe, this is Neil Desai. Hi, everyone. Maybe I can just jump in here. The — like Loretta said, we don’t have enough information at this point on the sort of copy number high versus low in the relative TSC1 and TSC2 incidents, but that is an area we continue to look. I think you had another question on the EAP and as it relates to endometrial. And if you would recall, we did have endometrial cancer patients and this was not PEComa, but endometrial cancer patients on the EAP data that we had disclosed in ASCO 2021. And at least one of them, I mean, it was a small number, but at least one of them after many lines of therapy had responded and done very well and went on for a long period of time when we did the cutoff for the ASCO data, which was I believe over six months.

Ahu Demir: Very helpful. Thanks for taking my questions.

Operator: We have a question from the line of with Cowen.

Unidentified Analyst: Hi thank you for taking my questions. This is on for Boris Peaker. My first question is regarding PRECISION 1. You mentioned you had some difficulty recruiting due to COVID or staffing shortage. Are we still expecting the final readout in 2024 or if you have any more precise timeline for that?

Scott Giacobello: Sure. Loretta, do you want to take that one?

Loretta Itri: Sure. Good morning. We as I believe I may have mentioned in my prepared remarks, we are very aware and our sites report that they are having continued problems relative to staffing related to the COVID pandemic. However, we have been able to continue accruing patients onto the trial as we planned. And we do at this point still believe that we will meet our stated goal of completing enrollment in the spring of 2024. So I don’t think that there’s anything different.

Unidentified Analyst: Thank you. My second question is regarding to the Mirati collaboration. Could you just give a little more color of like the data expectations?

Scott Giacobello: Sure. Neil, do you want to take that one?

Neil Desai: Yes, sure. At this time we haven’t really spoken about the timing of data from that, but as Scott mentioned and Loretta mentioned, the timing of the initiation of the trial is in Q2 at this point and that’s the information we have from Mirati. It is a Phase 1 trial where, because it’s a combination the dose needs to be worked out and so I think we can understand that that takes the usual amount of time for figuring out a combination. So I don’t think we expect any results this year, but it’s possible we might get something next year. But again, that we have to hear from Mirati.

Unidentified Analyst: Thank you. Thank you for taking my questions.

Operator: That concludes today’s question-and-answer session. I’d like to turn the call back to Scott Giacobello for closing remarks.

Scott Giacobello: Yes, I want to thank everyone for joining us today. As you can see, we’re very excited about 2023 and looking forward to sharing more information later in the year. Thank you all.

Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.