WHWK - NASDAQ

Good day, and thank you for standing by. Welcome to the Aadi Bioscience, Incorporated Second Quarter 2023 Earnings Call. At this time all participants are in a listen-only mode. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to Marcy Graham, Senior Vice President of Investor Relations and Corporate Communications at Aadi Biosciences. Ms. Graham?

Thank you. Good morning, and welcome to the Aadi Bioscience conference call to provide an operational update and review results of the second quarter 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. And he will be followed by our Chief Medical Officer, Dr. Loretta Itri, who will provide an update on our PRECISION 1 study and clinical development plans for 2023. 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, August 9, 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 comments. Scott?

Thank you, Marcy, and good morning, everyone. Thank you for joining us today to review our financial and operational results for the second quarter of 2023. We continue to see solid performance from our commercial and clinical organizations during the quarter, each focused on driving results as we enter the second half of the year. FYARRO sales for the quarter were $6.2 million, showing continued growth with a 6% sequential increase over the previous quarter and 80% growth over the prior year quarter. Efforts by our sales and marketing teams in the field are driving awareness and educating key stakeholders, reaching healthcare providers in varied channels, and we are pleased with the positive feedback from physicians on the efficacy and safety of FYARRO as we see greater utilization in the first-line setting. Separately, the PRECISION 1 trial is progressing well, and we're looking forward to providing results on an interim analysis of 40 patients with appropriate follow-up before the end of the year. We are enthusiastic about the potential of this trial to significantly broaden the future application of nab-sirolimus across many different tumor types and in a much larger patient population than we currently address in PEComa, presenting an exciting opportunity for additional growth. Beyond the PRECISION 1 study, we have continued to evaluate the potential use of nab-sirolimus in a number of new clinical indications, either as a single agent or in combination with other target therapies. Today, we're announcing the expansion of our FYARRO pipeline through the further investigation of mTOR pathway inhibition in endometrial cancer and neuroendocrine tumors, or NETs. Our preclinical data in these indications is promising, and we believe in the potential of our technology to harness the unique pharmacology of nab-sirolimus to provide enhanced therapeutic benefit for patients. Loretta will join us shortly to provide greater detail on these and other aspects of our clinical programs. This is a year of execution on many fronts, which now includes the launch of new programs that we believe will reflect the value of nab-sirolimus as a potential treatment in additional indications targeting genetically defined cancers with mTOR pathway alterations. Loretta is up next to provide an update on our PRECISION 1 trial and discuss our ongoing clinical activity. Loretta?

Thank you, Scott. Good morning, everyone. Throughout the second quarter, we have continued to make advancements in our ongoing PRECISION 1 tumor-agnostic trial in mTOR-naive patients with malignant solid tumors harboring TSC1 or TSC2 inactivating alterations. This prospectively designed trial is evaluating patients in one of two independent study arms, one with solid tumors harboring TSC1 and the other with TSC2. We continue to observe a relatively even rate of accrual between the two study arms. We also continue to have a very broad representation of solid tumors across more than 15 discrete tumor types and fully expect the results of this trial to represent a truly tumor-agnostic outcome. Importantly, the safety profile we have seen thus far is entirely consistent with that seen in the AMPECT study and no new safety signals have emerged as enrollment continues to increase in this diverse and heavily pretreated population of patients. The trial is progressing well, and we continue to target full patient enrollment by the spring of next year, 24 months after the first patient was enrolled. We are looking forward to sharing further information on the PRECISION 1 study before the end of the year, when the overall investigator assessment of response will be presented in conjunction with the preplanned interim analysis on 40 patients with appropriate follow-up. We remain excited about the potential of this important study and the promise that nab-sirolimus may hold for the treatment of this diverse population of patients in need. We also believe that the potential of nab-sirolimus extends beyond PEComa and TSC1 and 2 indications, which is why we have continued to investigate its use in a number of new clinical indications, both as a single agent and in combination with other approved therapies. With the PRECISION 1 trial well on track, we are pleased to share that we are initiating a Phase II trial investigating the combination of nab-sirolimus with letrozole for the treatment of advanced or recurrent endometrioid-type endometrial cancer, or more easily stated, EEC. This is an open-label, multi-institutional study to evaluate the efficacy and safety of nab-sirolimus and letrozole in patients with advanced or recurrent endometrioid endometrial carcinoma. Prior clinical studies with mTOR inhibitors have yielded promising data in this area, and we believe there is potential for the combination of nab-sirolimus with endocrine therapy to produce synergistic antitumor activity in patients with recurrent endometrioid-type endometrial cancer. We expect to initiate patient enrollment in the fourth quarter of 2023. Given the very recent change in the recommendation for first-line standard of care treatment, which now includes chemotherapy plus immunotherapy, we believe that there may be a unique opportunity to develop nab-sirolimus plus letrozole in endometrial carcinoma following chemo-immunotherapy failure. In addition, this fall, we expect to launch a Phase II multicenter open-label single-arm trial to evaluate adult patients with functional or nonfunctional, well differentiated, locally advanced, unresectable or metastatic neuroendocrine tumors, or NETs, of the GI tract, lung or pancreas, who have received no more than two prior lines of therapy. Given the historically low response rate of this tumor to treatment with oral rapalogs and other agents, which nonetheless, are used clinically and recommended in treatment guidelines, we anticipate being able to demonstrate the clinical superiority of nab-sirolimus in this population for the purposes of future publication. The Phase I/II trial of the combination of nab-sirolimus and adagrasib in patients with KRAS G12C mutations has now started, with the first patient dosing completed. The study, conducted in collaboration with Mirati Therapeutics, is evaluating the combination of adagrasib with nab-sirolimus and is intended to determine the optimal dose and recommended Phase II dose in patients with KRAS G12C mutant solid tumors. As you can see, we are active on many fronts. The activation of new studies, in addition to the planned progression of PRECISION 1, are the foundation of our growth strategy. I will now turn the call back over to Scott for updates on our commercial and financial progress. Scott?

Thanks, Loretta. In addition to our clinical advancements, we are pleased with the continued commercial progress of FYARRO for patients with PEComa. We are seeing steady product demand growth, and commercial access remains very strong with more than 90% of commercial lives covered. We reached $6.2 million in sales for the second quarter, which represents growth of 6% over the first quarter of 2023 and 80% growth on a year-over-year basis. Our sales to date have reached more than $27 million in just 16 months on the market. At the end of the second quarter, we had more than 165 unique ordering accounts, up 13% from the first quarter. The reorder rate was approximately 85% in the quarter, underlining the positive experience with FYARRO. The uptake in community clinics and hospitals have been consistently strong, representing approximately half of FYARRO sales nationwide. As the only approved therapy in PEComa, FYARRO continues to increase share as a frontline therapy. Our team continues to drive awareness and education in our efforts to cement FYARRO as the gold standard for malignant PEComa. As they do so, it's becoming clear that stakeholders understand the value and differentiation of FYARRO for PEComa patients. Our tracking shows significant physician awareness of FYARRO with 65% overall and an impressive 80% awareness for those specializing in sarcomas. The feedback we are receiving is also robust and indicate that providers are readily adopting FYARRO as a top choice for treatment of their patients. On the financial front, we remain well capitalized, ending the second quarter with $134.9 million in cash, cash equivalents and short-term investments, which is expected to fund operations into 2025 based on current plans, including the additional programs in endometrial cancer and NETs. Research and development expenses for the quarter increased to $13.3 million as compared to $7.7 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 quarter were $11.8 million compared to $10 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 the commercial launch of FYARRO. Net loss for the quarter was $18 million compared to $18.3 million in the prior year quarter. The prior year net loss included the $3.7 million noncash impairment charge related to the Gossamer license agreement of the company's predecessor, Aerpio. For more information on our financial performance for the quarter, a detailed discussion of the results reported in this call will be provided in our Form 10-Q. As I stated earlier, we are pleased with our overall progress, and we're truly excited about what lies ahead. We continue to enroll the PRECISION 1 trial and are looking forward to sharing further information on our progress before the end of the year. We're excited about our new programs in endometrial cancer and NETs and the prospects for our next-generation mTOR inhibitor in these indications with meaningful patient populations and high unmet need. We can now open the line for questions. Operator?

Thank you. [Operator Instructions] Our first question will come from Joe Catanzaro. Your line is open.

Hi, everybody. Appreciate you taking my questions here. I have a couple. Maybe the first one on the PRECISION 1 interim. Can you just remind us whether that data cut is triggered once these 40 patients have reached a minimum follow-up period? And if so, what's the minimum required follow-up there? And I think I heard you, Loretta, but I just wanted to confirm that these interim data will be reported on just investigator-based assessment and there will not be a central review at this point in the study. Thanks.

Hi, Joe. Thank you for your questions. Yes, you're correct. These will be investigator responses and they will not be subjected to IDMC review. So I think that was your first question. And then the minimum follow-up, we are attempting to provide six months of follow-up on most of the patients. A few will fall short. I think the shortest follow-up we will have might be about 4.5 months. Does that help?

Yes. Got it. That's super helpful. And then just a follow-up, for the NETs study, it sounds like the strategy there is to generate a data set that maybe potentially points to superiority over everolimus, and then you could maybe look to get that published and then included in guidelines. I guess, am I correct there? And if so, what's the scope of a potential data set you think you would need to generate to pursue that route? Thanks.

So Joe, I think I could not have stated the strategy better than you just did. We don't need huge numbers. We are planning to do a relatively small Simon Two-stage study. I'm not going to share the exact numbers, but it will be a relatively small number initially. We will look to see if response rate is improved because, as you know, the oral rapalogs are associated with a very low response rate. And we believe that our superior pharmacology will actually show markedly superior response rate. If we see a signal in the first small subset of patients, we will be prepared to expand the study to a larger number. So I hope that helps.

Okay. Yes, that's helpful. Thanks so much for taking my questions.

You are most welcome.

One moment for our next question. And our next question will come from Ahu Demir. Your line is open.

Good morning. Congrats on the progress in this quarter. A couple of questions for us as well. I'll follow up on the next study. Loretta, based on your remarks, it sounded like you are not necessarily looking at TSC1/2 approach here. So just curious if you could provide more color there. What would be the patient population that you will be looking at in prior therapies? Anything you could share with us that you haven't yet?

You're quite correct. And good morning, Ahu. It's always good to hear from you. TSC1/2 does not play a significant role in the NETs study. And point of fact, as long as PRECISION, the PRECISION trial is enrolling, we will not permit patients with TSC1 or 2 mutations onto the NETs study. So this is intended to be a not a precision medicine study. This is more of an old-timey, all-comers functional, nonfunctional NETs. And we are looking for response rate in that population to differentiate, as was brought out in the previous question, to differentiate from the data in the literature regarding oral rapalogs. It's a very low bar, and we think it will be relatively easy for us to show a benefit on the basis of our superior pharmacology.

Thank you. That's helpful. My other question is on the PRECISION 1. Given that you expect enrollment to complete in the spring 2024, what would it mean for the top line data analysis? Are we still on track for first half of next year for data readout? And what should we expect for that top line data readouts?

Well, I don't think anything will have changed. We anticipate completing enrollment by end of first quarter. And then as the data mature, we will report out final results as quickly as we can. I can't commit to an exact time line because we have to see how long it takes, but you can do the math, and if we have six months of follow-up on the last patient in by end of first quarter, you can see that we probably anticipate having something to report out by end of year, early next year.

Okay, thank you. And my last question is for Scott. For FYARRO market penetration, is there anything you could communicate with us, Scott? And how much growth should we expect for the subsequent quarters?

Yes. Thanks, Ahu. Thanks for the question. We haven't shared market penetration information. I would say that we continue to be really pleased with how FYARRO is doing in PEComa and with what we're hearing from physicians. I think as far as what to expect as we move up from a growth perspective, you saw that we had 6% in this quarter. We had actually in the quarter had a strong April and May and followed by a little bit of a softer June. So I think that could be for a number of reasons. We actually saw a similar situation actually last year in what was the first full quarter of launch. So I think it's -- not really able to guide on what we'll see for the back half of the year, but I think we continue to be really positive with how the launch has gone. And I think continuing, as I mentioned in my comments, continuing to make inroads into first line should bode well for duration as we move forward.

Thank you very much for taking my questions.

One moment for our next question. And our next question will be coming from Boris Peaker. Your line is open, Boris.

Good morning, and thanks for taking my questions. My first question on FYARRO. Can you comment on what you're actually seeing in terms of duration of therapy and how it compares to what you saw in the clinical development program?

Yes. Thanks for the question, Boris. I mean, we haven't shared duration data yet. I think we still want a little more time out there. As I've said previously, you remember when we first launched and had patients coming out of EAP, and then also with no approved therapy out there, we were kind of getting patients where they were in their patient journey, so a lot of later line patients. I think as we continue to move more in the first line, which we've seen happen in the first half of this year, I think that should bode well, as I mentioned, for duration, and I think we'll have a better read in the coming quarters.

Great. And my second question is on PRECISION 1, I think you mentioned there's 15 indications enrolled. Curious, are there any predominant indication that you're observing, maybe endometrial or something else?

Hi, Boris. It's Loretta. We are seeing -- it probably wouldn't surprise you, what we're seeing. We're seeing the most patients from the most common tumors. And what I can tell you is the GYN tumors as a group, ovarian, endometrial, are one larger subset. Bladder, which is urinary bladder, which would not be surprising because it's the one where we see the highest number of mutations in TSC1 is also a player. We see a smattering of sarcomas, but sarcomas are interesting. We have a small group of leiomyosarcomas. And then we see osteo, one of everything. So I would say that as a group, we see -- the largest focus is GYN, but not specifically endometrial, as you suggested, but different types of GYN tumors mixed in. We also see a fair number of GI tumors, pancreas, gall bladder, hepatocellular. That's another fairly large portion of tumors. So I would say that we pretty much follow -- we're now seeing lung as well. In the beginning, we didn't see much lung. Lung is now starting to come up as one of the more common types. So I think what we can say is that we are following the usual pattern of commonly observed tumors. Does that help?

Yes. Thank you very much for that lengthy answer. Thanks for taking my questions.

And one moment for our next question. Our next question will be coming from Roger Song. Roger, your line is open.

Great. Thanks for taking the question, and congrats for the progress. The first question may be related to the expansion strategy. Seemingly, you're moving towards the -- some of the validation from prior mTOR inhibitor, maybe histology-based trial like, Loretta, you say more traditional trial. Just curious if anything you will continue for FYARRO for the precision oncology route? Like any specific mutation or genetic mutation beyond the TSC1 and 2 may be suitable for FYARRO?

Roger, thank you. That's a really interesting question. I think that we will take direction. As you know, one of the exploratory analysis that we will perform on the PRECISION trial is to look at co-mutations. At the moment, the only other targeted therapy that we are combining with, of course, is the Mirati compound, and there are data to suggest that those two mutation targets seem to work well. And I think that looking forward, we would have a very rich data set from PRECISION 1 to help us identify other potentially important co-mutations that contribute to efficacy. So I think right now, the answer would be no. But future forward, I think we will be opportunistic and follow the data.

Yes, that makes sense. Maybe just a quick follow-up. I understand the mutation, maybe you're looking for some co-mutation. And any other biomarker strategy you will potentially to implement even in those traditional histology-based trial, maybe more better for FYARRO? Thank you.

At the very -- at this very moment, I think we've kind of got a full plate. So I don't think we would be taking on an additional study. But we continue to look very aggressively at other combinations, both precision medicine and standard chemotherapy, immunotherapy. We are always looking for opportunities to expand the potential of our compound.

Excellent. Thank you. Maybe just last one. For the ECC and the NETs study, would you be able to guide a little bit about the initial data we can start to see? Thank you.

Well, the first patient is in. Both studies are anticipated to begin enrolling in this calendar year. So I would anticipate, since they are two-stage studies that we should have something to report out, even early data, probably some time next year.

Great. Thank you, Loretta. Thanks for taking the question. That's it from me. Thank you.

Thank you.

I would now like to turn the conference back to Scott Giacobello for closing remarks.

Great. Thanks, everyone, for taking the time to join our call today. As you can see, we've got a lot going on, and we're looking forward to updating you as year progresses.