Adagene and Exelixis Expand Collaboration for Third Antibody-Drug Conjugate Program
## Expanded Strategic Alliance in Oncology Therapeutics
**Adagene Inc.** (Nasdaq: ADAG) announced an amendment to its 2021 collaboration and license agreement with **Exelixis**, signaling an expansion of their joint efforts in oncology. Under the revised terms, **Exelixis** will utilize **Adagene's SAFEbody® technology platform** to develop a third novel masked antibody-drug conjugate (ADC) designed to target a solid tumor. This strategic move deepens the partnership between the two biotechnology firms, focusing on advanced cancer immunotherapies.
## Collaboration Details and Technological Edge
The core of the expanded agreement centers on **Adagene's proprietary SAFEbody technology**, which is engineered to improve the therapeutic index of antibodies and ADCs. This innovative platform allows therapeutic antibodies to remain inert until they reach the tumor microenvironment, thereby minimizing off-target binding to healthy cells and potentially reducing systemic toxicity. Peter Luo, Ph.D., Chief Executive Officer of **Adagene**, stated,
> "Our SAFEbody technology enables an antibody or ADC to be invisible until it reaches the tumor microenvironment, resulting in a wide therapeutic index, as seen with ADG126. Our evolving partnership with Exelixis highlights the potential of conditional masking to safely deliver a payload or immune modulating antibody directly to tumor cells."
The development of this third **SAFE-ADC®** underscores the continued validation of **Adagene's** technology by a major industry player like **Exelixis**. **Adagene** stands to gain from this collaboration through eligibility for development and commercialization milestone payments, alongside royalties on net sales of any products successfully developed under this expanded agreement.
## Market Reception and Adagene's Financial Landscape
The expansion of the **Adagene-Exelixis** collaboration is viewed with cautious optimism in the market, primarily for its validation of **Adagene's** technology and potential for future revenue streams. However, an analysis of **Adagene's** financial health reveals significant underlying challenges. The company has reported a substantial **3-year revenue decline of 80.1%**, indicating a contraction in sales. Profitability metrics remain concerning, with an operating margin of **-32,347.57%** and a net margin of **-29,018.45%**. Furthermore, the company's Altman Z-Score of **-3.78** places it in the distress zone, suggesting an elevated risk of bankruptcy within two years.
Despite these operational difficulties, **Adagene** maintains a current ratio of **2.29**, indicating adequate short-term liquidity. Its cash and cash equivalents stood at **US$95.7 million** as of June 30, 2024, down from **US$109.9 million** at the end of 2023. Research and Development (R&D) expenses for the first half of 2024 decreased by 31% to **US$14.7 million**, reflecting a focus on key programs like ADG126. The company anticipates its current cash balance will fund activities into 2026.
Valuation metrics for **Adagene** suggest it is trading at a premium, with a P/S ratio of **1,055**, near its 3-year high, and a P/B ratio of **2.64**, close to its 5-year high. These figures indicate a high valuation relative to sales and book value, possibly reflecting investor anticipation of future successes from its pipeline and partnerships.
## Broader Implications and Pipeline Progress
This expanded partnership is a critical development for **Adagene**, a clinical-stage biotechnology company operating in the competitive **Biotechnology Sector** and **Pharmaceutical Industry**. Such collaborations are vital for smaller firms to access capital and expertise without significant equity dilution, while larger partners like **Exelixis** broaden their oncology pipelines. The **SAFEbody technology's** ability to target solid tumors more precisely holds promise for addressing unmet medical needs in cancer treatment.
**Adagene's** lead **SAFEbody candidate, ADG126**, is currently undergoing a Phase 1b/2 study for metastatic microsatellite-stable (MSS) colorectal cancer. The company expects the Phase 2 trial for ADG126 to commence before the end of 2025. Recent data for ADG126 in MSS CRC demonstrated a median overall survival (mOS) of **19.4 months** in the 10 mg/kg dose cohort, representing a **45% improvement** over historical benchmarks. A **US$25 million** strategic investment from **Sanofi** in July 2025 further supports ADG126's Phase 2 trial and a Phase 1b/2 trial in advanced solid tumors, extending **Adagene's** cash runway into 2027.
## Outlook and Future Catalysts
Looking ahead, the successful advancement of the third ADC program with **Exelixis** will be a key factor for **Adagene**. The initiation and results from the Phase 2 trial for ADG126, expected by late 2025, will also serve as significant catalysts for the company. The ability of **Adagene** to continue leveraging its **SAFEbody platform** for new collaborations and to bring its pipeline candidates through clinical development will be crucial for improving its financial standing and realizing its long-term growth potential in the highly dynamic oncology market. Investors will closely monitor clinical trial progress and further updates on financial performance.
