WHWK - NASDAQ

Good day, and thank you for standing by. Welcome to Aadi Bioscience Fourth Quarter 2023 Earnings Conference Call. At this time, more participants are in a listen-only-mode. After the speaker's presentation, there will be question-and-answer session. [Operator Instructions] Please note that today's conference is being recorded. I will now turn the call over to Audrey Gross [ph] Head of Corporate Communications for Aadi Bioscience. Ms. Gross, please go ahead.

Thank you. Good morning, and welcome to the Aadi Bioscience conference call to provide an operational update and review results of the fourth quarter and full year 2023. On the call is Dr. Dave Lennon, our President and CEO; Scott Giacobello, our CFO; and Chief Medical Officer, Dr. Loretta Itri. Today, we will provide an overview of operational activity and financial results for the fourth quarter and full year of 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, March 13, 2024, 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'll turn the call over to Dave for his opening statements. Dave?

Good morning, everyone, and thank you for joining us today to review our financial and operational results for the fourth quarter and full year of 2023. At Aadi, we are focused on unlocking the full potential of mTOR inhibition by uniquely combining nab technology and the potent mTOR inhibitor, sirolimus. We believe nab-sirolimus has potential to deliver deeper inhibition and ultimately better outcomes for patients living with cancers that are dependent on the mTOR pathway. In 2023 was a year marked by progress and increasing momentum for the company as we delivered strong execution against both commercial and development goals. First, FYARRO sales remained solid, achieving a cumulative $24.4 million for the full year of 2023, representing a 60% growth over prior year. FYARRO achieved high penetration in the academic and community settings and is considered the preferred treatment for malignant PEComa. Clinically, a key focus for 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 thought 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 solid tumors with either of these alterations. As a reminder, the unmet need in TSC1 and TAC2 mutated cancers is sizable, whether considering together or independently and represents about 2% of all solid tumor cancer patients. Our latest internal analysis indicates there are approximately 16,000 new patients with these new mutations across a variety of tumor types each year in the U.S. alone. With mutations roughly evenly split between genes, each mutation represents a potential multibillion-dollar addressable market for nab-sirolimus. TSC1 or TSC2-driven cancers are found across a wide range of tumor types, clustering in lung, gastrointestinal, general urinary, breast and gynecological locations and are often very difficult to treat. We believe PRECISION 1 is a cutting-edge trial testing our innovative therapy nab-sirolimus in these cancer types. 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 outcome. In Q4, we provided top line results from a planned interim evaluation of the first 40 patients enrolled in PRECISION 1. These data demonstrated sustained tumor reductions in a heavily pretreated population based on investigator-assessed responses in the first 40 patients across both arms. As a reminder, for the TSC 1 arm, 19 efficacy evaluable patients were included in the cutoff date for the interim analysis who had at least one post baseline scan. We reported an overall response rate of 26%, which was within the range of our expectations. Importantly, responses appear to be early, deep and durable. Time to response was 1.4 months and all responses were ongoing at the time of data cutoff. This is especially noteworthy given that this is a heavily pretreated population with a median of three prior lines of therapy. Lastly, these responses were seen across four different tumor types supporting a tumor-agnostic indication. In the TSC 2 arm, we reported a lower response rate, but given these patients were heavily pretreated, including 50% who had had at least five prior lines of therapy, these early TSC 2 results are challenging to interpret. PRECISION 1 continues to enroll steadily, and we now expect the trial to be fully enrolled by May. We are still on track for our next plan interim readout, which is expected in Q3 of 2024. This readout will include a total of 80 patients who have been followed for a minimum of 6 months and will evaluate the primary input in the study, independently assessed overall response rate as opposed to our December analysis, which reported investigator-assessed responses. We expect the study to be completed by the end of 2024 with full data in early 2025. In addition to PRECISION 1, enrollment is underway for both of the previously announced Phase II single indication trials for two promising mTOR driven cancer targets. Overactivation and dysregulation of the mTOR pathway is commonly found in various tumors, and unique delivery and excellent safety profile of nab-sirolimus provides the opportunity to combat these difficult-to-treat cancers. The first trial is evaluating nab-sirolimus in neuroendocrine tumors, or NETs, NETs are with approximately 3,500 patients per year. NETs have historically had a low response rate to treatment with oral rapalogs and other agents, which nonetheless are used clinically and recommended in treatment guidelines today. In preclinical animal models, nab-sirolimus demonstrated improved target suppression relative to other mTORs warranting further exploration of nab-sirolimus in this indication. We're excited about this trial because it provides the opportunity to demonstrate what we believe is nab-sirolimus' best-in-class efficacy in a known mTOR-sensitive tumor type. The second trial we started last year is evaluating the therapeutic potential of nab-sirolimus in advanced and recurrent endometrial type endometrial cancer in combination with the aromatase inhibitor letrozole. Endometrial cancer is the most common cancer of the female reproductive tract and one of the few cancers with increasing mortality. There's an estimated 10,000 cases of EEC diagnosed annually in the U.S. alone. Prior clinical studies of the mTOR inhibitors, combined with letrozole have yielded promising results and recent changes in the recommended standard of care for early-stage disease creates a potential opportunity for our combination to be used in these first and second-line settings. Both of these open-label studies are actively enrolling, and we plan to present initial data later this year. Rounding out our clinical development program, we also have an ongoing trial with combination of Mirati's KRAS inhibitor in lung cancer and other solid tumors. With a solid commercial foundation provided by FYARRO [ph] a robust and bold clinical development program spanning genetically-driven tumors in other mTOR-sensitive tumors and a cash runway into Q4 2025, we are well positioned to realize our ambition of becoming a multi-indication precision oncology company. I will now turn the call over to Scott for updates on our financial progress. Scott?

Thanks, Dave. We had a solid fourth quarter and ended 2023 with $108.8 million in cash, cash equivalents and short-term investments. In early 2024, we implemented measures to streamline our operations and reduce costs, which included headcount reductions in our customer-facing operations and corporate functions. Following these measures, we anticipate that our balance sheet will fund operations into Q4 2025 based on current plans. FYARRO net product sales were $6.3 million for the fourth quarter, representing 6% growth over Q3 2023 and 21% over the prior year quarter. Full year 6.3sales were $24.4 million, an increase of 60% over prior year sales of $15.2 million. Research and development expenses for the quarter increased to $12.8 million compared to $9.4 million in the prior year quarter. For the year, R&D expense amounted to $48.9 million compared to $32.7 million last year. This increase is primarily related to the continued progress of the ongoing PRECISION 1 trial and initiation of the programs in endometrial cancer and NETs. Selling, general and administrative expenses for the fourth quarter were $10.3 million compared to $11.1 million in the same period in 2022. For the year, SG&A expenses totaled $44.5 million compared to $40.2 million in the prior year. This increase is due primarily to higher legal and company infrastructure costs and increased marketing expenses related to FYARRO. Net loss for the fourth quarter was $16.3 million compared to $13.9 million in the fourth quarter of 2022. Net loss for the year was $65.8 million compared to $60.5 million in the prior year. For more information on our financial performance for 2023, a detailed discussion of the results reported on this call will be provided in our 10-K to be filed later today. I'll now hand the call back to Dave for his closing comments. Dave?

Thank you, Scott. I'm so proud of the progress we made in Q4 and what the team accomplished in 2023. FYARRO remains a valuable asset with sustained demand to help meet the needs of patients with PEComa. We're making tremendous progress against our clinical development plans with two sizable markets in TSC1 and TSC2 in activating alterations as well as other mTOR-driven cancers. We're looking forward to sharing the two-thirds interim analysis from PRECISION 1 in the third quarter with full enrollment inspected in May and study completion by the end of 2024. We can now open the line for questions. Operator?

Thank you. [Operator Instructions] And our first question coming from the line of Joe Catanzaro with Piper Sandler. Your line is open.

Yeah, thanks. Appreciate you taking the questions here. Maybe first one, I know the first 40 patients were characterized as being very heavily pretreated. So wondering if you have any visibility or updates around what the remainder of the trials look like? And maybe along these lines, whether you've seen any change in enrollment dynamics in any way since the interim data disclosure? Thanks. And I have one follow-up.

Great. Joe, thank you for the question. I always appreciate talking more about PRECISION 1. Yes. So the first 40 patients were heavily pretreated. We saw three or more lines of prior therapy as those patients enrolled in that first 40 group. We anticipate, right, by the trial design that this is -- we're going to get a number of late-line patients. Patients have to have satisfied the criteria for the indication that they enroll in, in terms of being -- having received all appropriate standard of care prior to their entry and treatment with nab-sirolimus in our trial. And so we anticipate continuing to enroll later line patients within the trial. I wouldn't comment on the overall nature of what we're going to end up with. We're still enrolling patients in the trial, and we'll obviously report out the next or the total 80 patients at the two-thirds interim later this year.

Okay. Thanks. And then my follow-up, maybe unrelated to PRECISION 1. Wondering if there are any early expectations around when you could report initial data from the endometrial or NET studies? I appreciate those are still in the early days. And then any updates on the adagrasib combo trial. Wondering maybe if there's been any changes there with the adagrasib acquisition by Bristol? Thanks.

Yes. So great questions. I think I mentioned earlier that we do anticipate potentially sharing data on endometrial or neuroendocrine trial later this year. Those are open-label single-arm Phase II studies, and we have the opportunity to enroll those. We'll share the data when we think it's appropriate and we have something meaningful to say about how that data is -- those patients are enrolling and that data is maturing. I'm happy to say that both studies are actively enrolling patients, and there's good engagement with the community on generating patients for each of those trials, which we just think is initially a great sign in terms of folks' interest in these therapeutic regimens in each of those indications. And then on the Mirati BMS collaboration that continues and is ongoing. We are enrolling patients into that trial, and we don't have any further updates at this point.

Okay. Thanks. That's helpful. And thanks for taking my questions.

Thanks, Joe.

Thank you. And our next question coming from the line of Liang Cheng with Jefferies. Your line is open.

Sure. Thank you. This - today I'm for Roger. So thank you for taking our questions. I guess from us, we have two questions. One is around FYARRO. So guess more [ph] FYARRO in the coming year. Can you provide us any details, guidance or commercial plans? Second question is about, I know you guys been interacting with FDA about the tumor agnostic. So what's in your understanding, what's the most important thing for FDA to consider label as a tumor agnostic? Thank you.

Great. Thank you, Liang, and thanks for stepping in for Roger. So maybe in terms of FYARRO outlook, maybe I'll turn it over to Scott to talk a little bit about that, and then we'll talk about your second question a little more. But Scott, do you want to just comment on FYARRO outlook for the coming year?

Sure, absolutely. Yes, thanks for the question, Liang. Yes, I think for FYARRO, I mean, as you see, I mean, we're not going to provide guidance for this year. I think what you've seen over the last few quarters, the sales stabilizing around the $6 million mark or slightly above. And I think so the expectation there is we continue to be excited about FYARRO and the potential to grow there. But I think that over the last few quarters, you've seen the sales stabilizing in that $6 million to $6.5 million range, and I think that's what we would expect for 2024.

Thanks, Scott. It is -- Liang, it is a very -- team has done a great job penetrating the market here. We're available and preferred for PEComa in the first-line setting and widely recognized as the preferred therapy for PEComa. It is just an ultra rare population. And ultimately, we may be reaching saturation in that market and expect more incremental growth from here on out. And then your second question was on what are the most important considerations when we think about the FDA's view on the tumor agnostic indication. I'm going to turn it over to Loretta to give her thoughts on how we think or how we interpret the FDA's guidance around the tumor agnostic indication and what's most important there. So Loretta, do you want to comment?

Sure. I'd be happy to. I think from what we have seen recently, perhaps the most important thing that the agency wants to see in tumor agnostic studies is a variety of different tumor types. What they do not want in a tumor agnostic study is to see concentrations of information in certain subtypes of patients. They are looking for a representation of the mutation across a variety of different tumor types. That is why you do a tumor agnostic study. So I think that, that is perhaps the single most important element in terms of their determination regarding whether or not a drug classifies for tumor agnostic approval. And then, of course, I think they are looking for a reasonable response rate and, of course, a good safety profile. In our case, since we already have approval in a single indication, I think they would be looking to see that the safety profile in the agnostic population closely resembles what we have already seen in PEComa.

Thanks, Loretta. And just to add on to what Loretta was saying, what we saw so far, we have enrolled a very diverse tumor population within our trial, and I think you saw that even in the early results where we had a kind of broad distribution of tumor types that we shared back in December. Thanks, Liang, for the questions. And I think if there's no follow-ups, we can move to the next.

Thank you. Thank you. Appreciate it.

Thank you.

Thank you. [Operator Instructions] And our next question coming from the line of Ahu Demir with Ladenburg. Your line is open.

Good morning. Thank you so much for taking my questions. I have two questions, a follow-up to Joe's question regarding endometrial cancer. One, could you give us a sense of the sites open, how many sites are open and inclusion and exclusion criteria for the patients? And what are we expecting to see this year? How many patients are they heavily pretreated? If you can provide a little bit of color, that would be great.

Sure. I think -- so Ahu, we're happy to answer those questions. I'm going to turn it over to Loretta for some of the details. But at the same time, we probably wouldn't discuss a number of sites or number of patients at this point just given where we are in the trial, and it is active, and we're kind of continuing to build that story. But maybe just in the design of the trial and what we might expect to see later this year, I'll let Loretta give you an update there. So, Loretta?

Good morning, Ahu. Always great questions, as usual, coming from you. So basically, this is an open-label Phase II study, looking to evaluate the combination of nab-sirolimus with letrozole in patients who have advanced and that would be advanced or unresectable Stage 3 or 4 or recurrent endometrioid endometrial carcinoma. Patients will have received either no or one prior line of chemotherapy. So this is a population of patients who are relatively early in their treatment course, which is somewhat differentiated, of course, from what we're doing in PRECISION. So patients are treated with the same dose of nab-sirolimus as they were in PEComa that is a well-established and safe dose. And I think pretty much that this is a Simon 2-stage study, so we plan to enroll the first cohort, and we anticipate since this is an open label study being able to report out early results by the end of this year. Does that address your question, Ahu, would you like more detail?

This is great. Thank you so much Loretta. This is very helpful. And thank you for your compliment as well. I have one more conceptual question for you, Loretta, if I may. So you mentioned mTOR sensitive tumors besides TSC1, 2, could you comment on what other mutational backgrounds are sensitive to mTOR inhibitors?

Well, I think that's quite a difficult question because I think there are many mutations along the mTOR pathway that may provide -- that may provide targets. However, I don't think that any of those specifically has been identified as a specific mutational target for mTOR inhibition. There are suggestions that I don't think is any of those are proven.

Very helpful. Thank you so much.

You're most welcome.

Thanks, Ahu. Operator, are there any other questions?

And I see no further questions in the queue at this time. I'll now turn the call back over to Dr. Dave Lennon for any closing remarks.

Thank you, operator. And thank you, everyone, for joining the call today. I think as you see, we are delivering on the operational goals we have set for both 2023 and looking ahead into 2024, we're very confident on our ability to deliver against our number one priority, which is the PRECISION 1 trial. And we look forward to providing an update on that two-thirds interim later this year and finishing that trial within 2024. We're also excited about the new programs we mentioned today and got to discuss a little bit in the Q&A and look forward to providing updates on both our NET and endometrial trials later this year. At the same time, we remain really confident in the continued progress we're making in the PEComa market with FYARRO. This is an ultra-orphan indication, and we're highly penetrated within that market. And that continues to deliver solid sales for us as we go forward. Overall, otherwise, I thank you all for your time and attention today, and we look forward to the next update with you all. Thank you, and have a great day.