ADG-106

- Best-in-class anti-CTLA-4 candidates designed for more than 30-fold increase in therapeutic index, addressing patient populations where CTLA-4-mediated Treg depletion is essential for efficacy – - Strong efficacy signal observed in MSS CRC phase 2 single arm study for SAFEbody® ADG126 in combination with pembrolizumab at the 10 mg/kg every three weeks dosing regimen - - Advancing MSS CRC cohort with ten more patients at the active every three weeks dosing regimen for SAFEbody ADG126 plus pembrolizumab following Simon’s two-stage statistical design – - Roche initiates randomized phase 1b/2 trial with SAFEbody ADG126 in novel triple combinationfor first-line hepatocellular carcinoma - - Cash balance of US$128.8 million supports operations to late 2025 – SAN DIEGO and SUZHOU, China, Aug. 31, 2023 (GLOBE NEWSWIRE) -- Adagene Inc. (“Adagene”) (Nasdaq: ADAG), a platform-driven, clinical-stage biotechnology company transforming the discovery and development of novel antibody-based therapies, today reported financial results for the six months ended June 30, 2023 and provided corporate updates. “Our anti-CTLA-4 clinical programs demonstrate that an enhanced therapeutic index is capable of unleashing the clinical potential of CTLA-4 treatment, with the right dosing regimens, as a cornerstone in combination with PD-1 and beyond,” said Peter Luo, Ph.D., Chairman, CEO and President of R&D at Adagene. “We have observed impressive clinical responses in the initial basket trial for ADG126 plus PD-1 therapy in patients where CTLA-4-mediated Treg depletion is essential for efficacy, including cold tumors such as MSS CRC, PD-L1 low expressing and PD-1 resistant warm tumors, enabled by our safety profile for higher, more frequent and repeat dosing.” He continued, “This safety and efficacy profile allows us to evaluate ADG126 plus pembrolizumab in a homogenous patient group for the first time in advanced/metastatic MSS CRC patients, following Simon’s two-stage statistical design for a single arm phase 2 trial. We are very excited to observe a strong efficacy signal in the first stage and we are now enrolling patients in the second stage with the active dose of ADG126 10 mg/kg every three weeks. We are optimistic about our ability to push the boundaries of CTLA-4 therapy to improve cancer care.” ANTI-CTLA-4 HIGHLIGHTS Phase 1b/2 data for ADG116, an unmasked anti-CTLA-4 NEObody™ targeting a unique epitope, showed a favorable safety profile and clinical responses, both in monotherapy and in combination with anti-PD-1: ADG116 monotherapy has demonstrated a favorable safety profile at doses up to 15 mg/kg (N=59).In heavily pre-treated patients across tumors, ADG116 monotherapy resulted in an overall response rate (ORR) of 13% (3/23 evaluable), including confirmed partial responses (PR) in renal cell carcinoma (RCC) and MSI-H endometrial cancer, as well as an initial PR in Kaposi’s sarcoma.ADG116 (3 mg/kg Q6W) in combination with anti-PD-1 therapy (N=22) showed a manageable safety profile and an encouraging efficacy profile in dose escalation. Clinical responses from the ongoing combination cohorts include a sustained complete response (CR) for greater than one year in a head and neck squamous cell carcinoma (HNSCC) patient dosed with repeat cycles of ADG116 3 mg/kg (initially every three weeks, then every six weeks) plus toripalimab (ORR = 20%; 1/5 evaluable).Additionally, an initial PR was observed in a patient with MSS CRC dosed with repeat cycles of ADG116 3 mg/kg every six weeks plus toripalimab (ORR = 14%; 1/7 evaluable).ADG116 is clinically active and ready to advance into randomized phase 2 studies as resources allow, while combination dose expansion is evaluating ADG116 with anti-PD-1 therapy. Phase 1b/2 data for ADG126, a masked anti-CTLA-4 SAFEbody targeting a unique epitope, showed compelling safety and promising efficacy profiles at high dose levels with repeat dosing both in monotherapy and in combination with anti-PD-1: Data presented at the American Association for Cancer Research (AACR) annual meeting 2023 showed ADG126 monotherapy was well tolerated in dose escalation with no dose-limiting toxicities or Grade 3 or higher TRAEs observed (N=30) in patients with advanced/metastatic solid tumors. ADG126 was administered up to 20 mg/kg every three weeks with repeat dosing.The safety profile of ADG126 in combination with anti-PD-1 therapy (N=31) also showed best-in-class potential, including repeat dosing beyond four cycles at 10 mg/kg every three or six weeks, potentially enabling triple combination with other agents on top of ADG126 plus anti-PD-1 backbone therapy.Data presented at AACR showed a strong efficacy profile for ADG126 10 mg/kg in combination with the anti-PD-1 therapy toripalimab, including two confirmed PRs in patients with anal SCC and penile SCC, as well as significant tumor shrinkage (≥20% reduction in target lesion) and prolonged stable disease observed in patients with cold tumors, including MSS CRC with liver metastases.At the 2023 AACR annual meeting, an additional confirmed PR was reported in a patient with MSI-H endometrial cancer who received ADG126 10 mg/kg in combination with the anti-PD-1 inhibitor pembrolizumab.Following the AACR annual meeting, two additional confirmed responses were observed in patients treated with ADG126 10 mg/kg plus pembrolizumab outside of the MSS CRC dose expansion cohort: A confirmed PR in a cervical cancer patient who had progressed after two lines of prior therapy, including nine cycles of pembrolizumab monotherapy, meeting criteria for PD-1 resistance.A confirmed PR with complete reduction in target lesions in a patient with HNSCC. The patient was IO-naïve with a low CPS score. In dose escalation, among the evaluable patients dosed at 10 mg/kg every three weeks in combination with anti-PD-1 therapy, a 40% overall response rate (4/10) was observed, with 10% Grade 3 TRAEs reported, no TRAEs greater than Grade 3 reported, and no dose limiting toxicities. Activity has also been observed at 10 mg/kg every six weeks and at 6 mg/kg every three weeks.Adagene has dosed two different arms in its dose expansion cohort of patients with MSS CRC without liver metastases treated with ADG126 in combination with pembrolizumab: ADG126 10 mg/kg every six weeks plus pembrolizumab (10 patients) and ADG126 10 mg/kg every three weeks plus pembrolizumab (13 patients). Based on the strong efficacy signal observed in the ADG126 10 mg/kg three-week cohort, the company is enrolling an additional 10 patients treated with this active dosing regimen, following Simon’s two-stage statistical design for a single-arm phase 2 trial.Preliminary evaluation and analysis of efficacy data from this tumor type-specific cohort in MSS CRC is expected later this year or early 2024. ADDITIONAL UPDATES Roche: Under a clinical trial collaboration agreement entered in December 2022, Roche has initiated a phase 1b/2 multi-national trial to evaluate the efficacy and safety profiles of ADG126 in a triple combination with atezolizumab and bevacizumab, versus the approved combination of atezolizumab and bevacizumab alone in first-line hepatocellular carcinoma (HCC). The randomized trial in up to 60 patients has opened for enrollment, leveraging Roche’s global clinical trial network for the MORPHEUS program. Roche is sponsoring and conducting the trial while Adagene retains global development and commercialization rights to ADG126.Exelixis: Adagene has received a US$3.0 million milestone payment in June 2023 from Exelixis for the successful nomination of lead SAFEbody candidates for the second collaboration program under a technology licensing agreement to develop novel masked antibody-drug conjugate candidates.Sanofi: Adagene and Sanofi continue working together in their collaboration entered in March 2022 to develop both bispecific and monoclonal SAFEbody antibody candidates, preparing preclinical candidates using Adagene’s technology for future development and commercialization by Sanofi.ADC Therapeutics: As of this announcement, the material transfer and collaboration agreement dated April 2019 between ADCT and Adagene has expired, and ADCT elected not to exercise its option for the related license agreement. The parties remain open to explore opportunities for collaboration on the discovery and development of innovative antibody therapeutics in the future.ADG153 (a masked anti-CD47 IgG1 SAFEbody): At the AACR annual meeting, Adagene presented preclinical data that showed the best-in-class profile for ADG153, an IND-ready candidate in IgG1 format which applies SAFEbody precision masking technology to optimize safety. The poster presentation summarized data demonstrating strong in vivo anti-tumor activities in solid tumor models and a robust safety profile due to preferential CD47 target engagement in the tumor microenvironment. ADG153 is differentiated by its strong antibody-dependent cellular cytotoxicity (ADCC) and antibody-dependent cellular phagocytosis (ADCP) activity designed to realize the full potential of anti-CD47 therapy for both hematologic and solid tumor indications.Board of Directors Updates: In August, Adagene appointed Li Zhu, Ph.D. to its board of directors. Dr. Zhu has served as director at GenScript and Legend Biotech since 2020 and is currently Chief Strategy Officer at GenScript Biotech Corporation. Dr. Zhu brings deep experience in corporate strategy, strategic collaborations and alliance management, especially his experience in negotiations and deal-making between Legend (a subsidiary of GenScript) and multinational pharmaceutical companies.Additionally, Fangyong (Felix) Du, Ph.D, Chief Technology Officer at Adagene since 2020, is stepping down from the board for personal reasons. The company also appointed Yan Li, one of the founding members and Senior Vice President of Bioinformatics and Information Technology at Adagene, as director.Earlier this year, Adagene also announced the following updates to its board: Mervyn Turner, Ph.D., former head of worldwide licensing and external research at Merck Research Laboratories appointed director; Yumeng Wang replaced Lefei Sun as a director designated by General Atlantic Singapore AI Pte. Ltd; and Yuwen Liu resigned from the Board and audit committee due to expiration of her initial appointment. Scientific and Strategic Advisory Board (SAB): In March, Professor Aurélien Marabelle, MD, PhD was appointed to the company’s SAB. Professor Marabelle is a physician-scientist with expertise in oncology and immunology working within the Drug Development Department (DITEP) of Gustave Roussy Cancer Center in France. Professor Marabelle brings deep insight in tumor-specific Treg depletion for anti-CTLA-4 therapies delivered intratumorally to overcome dose dependent toxicities through systemic delivery of anti-CTLA-4 therapies. FINANCIAL HIGHLIGHTS Cash and Cash Equivalents:Cash and cash equivalents were US$128.8 million as of June 30, 2023, compared to US$143.8 million as of December 31, 2022. Total borrowings from commercial banks in China (denominated in RMB) decreased to US$24.9 million as of June 30, 2023 from US$27.8 million as of December 31, 2022. The associated loan proceeds were primarily used to pay for the company’s R&D activities in China, including CMC costs of clinical and preclinical programs. Net Revenue:Net revenue was US$17.3 million for the six months ended June 30, 2023, compared to US$3.9 million for the same period in 2022. The increase of approximately 341% reflects net revenue recognized upon fulfillment of certain performance obligations associated with the collaboration and technology licensing agreements with Sanofi and Exelixis, respectively. Net revenue also included a milestone payment of US$3.0 million from Exelixis received in June 2023. Research and Development (R&D) Expenses: R&D expenses were US$21.3 million for the six months ended June 30, 2023, compared to US$45.1 million for the same period in 2022. The decrease of approximately 53% in R&D expenses reflects a reduction in preclinical spending and winding down of the ADG106 clinical program, offset by investment in the anti-CTLA-4 franchise. The Company prioritized its high value clinical projects and implemented a series of cost control measures, including a reduction in personnel. Administrative Expenses:Administrative expenses were US$4.5 million for the six months ended June 30, 2023, compared to US$6.8 million for the same period in 2022. The decrease was due to reduction in both personnel and office related expenses as a result of cost-control measures. Other Operating income, Net:Other operating income, net was US$3.4 million for the six months ended June 30, 2023. Other operating income, net included a one-time compensation payment from a contract manufacturer in relation to company losses for a preclinical-related outsourcing arrangement. Net Loss:Net loss attributable to Adagene Inc.’s shareholders was US$4.1 million for the six months ended June 30, 2023, compared to US$47.6 million for the same period in 2022. Ordinary Shares Outstanding:As of June 30, 2023, there were 54,793,339 ordinary shares issued and outstanding. Each American depository share, or ADS, represents one and one quarter (1.25) ordinary shares of the company. Non-GAAP Net LossNon-GAAP net loss, which is defined as net loss attributable to ordinary shareholders for the period after excluding share-based compensation expenses, was US$0.1 million for the six months ended June 30, 2023, compared to US$41.9 million for the same period in 2022. Please refer to the section in this press release titled “Reconciliation of GAAP and Non-GAAP Results” for details. Non-GAAP Financial MeasuresThe company uses non-GAAP net loss and non-GAAP net loss per ordinary shares for the period, which are non-GAAP financial measures, in evaluating its operating results and for financial and operational decision-making purposes. The company believes that non-GAAP net loss and non-GAAP net loss per ordinary shares for the period help identify underlying trends in the company’s business that could otherwise be distorted by the effect of certain expenses that the company includes in its loss for the period. The company believes that non-GAAP net loss and non-GAAP net loss per ordinary shares for the period provide useful information about its results of operations, enhances the overall understanding of its past performance and future prospects and allows for greater visibility with respect to key metrics used by its management in its financial and operational decision-making. Non-GAAP net loss and non-GAAP net loss per ordinary shares for the period should not be considered in isolation or construed as an alternative to operating profit, loss for the period or any other measure of performance or as an indicator of its operating performance. Investors are encouraged to review non-GAAP net loss and non-GAAP net loss per ordinary shares for the period and the reconciliation to their most directly comparable GAAP measures. Non-GAAP net loss and non-GAAP net loss per ordinary shares for the period here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to the company’s data. The company encourages investors and others to review its financial information in its entirety and not rely on a single financial measure. Non-GAAP net loss and non-GAAP net loss per ordinary shares for the period represent net loss attributable to ordinary shareholders for the period excluding share-based compensation expenses. Share-based compensation expense is a non-cash expense arising from the grant of stock-based awards to employees. The company believes that the exclusion of share-based compensation expenses from the net loss in the Reconciliation of GAAP and Non-GAAP Results assists management and investors in making meaningful period-to-period comparisons in the company's operating performance or peer group comparisons because (i) the amount of share-based compensation expenses in any specific period may not directly correlate to the company’s underlying performance, (ii) such expenses can vary significantly between periods as a result of the timing of grants of new stock-based awards, and (iii) other companies may use different forms of employee compensation or different valuation methodologies for their share-based compensation. Please see the “Reconciliation of GAAP and Non-GAAP Results” included in this press release for a full reconciliation of non-GAAP net loss and non-GAAP net loss per ordinary shares for the period to net loss attributable to ordinary shareholders for the period. About AdageneAdagene Inc. (Nasdaq: ADAG) is a platform-driven, clinical-stage biotechnology company committed to transforming the discovery and development of novel antibody-based cancer immunotherapies. Adagene combines computational biology and artificial intelligence to design novel antibodies that address unmet patient needs. Powered by its proprietary Dynamic Precision Library (DPL) platform, composed of NEObody™, SAFEbody®, and POWERbody™ technologies, Adagene’s highly differentiated pipeline features novel immunotherapy programs. Adagene has forged strategic collaborations with reputable global partners that leverage its technology in multiple approaches at the vanguard of science. For more information, please visit: https://investor.adagene.com. Follow Adagene on WeChat, LinkedIn and Twitter. SAFEbody® is a registered trademark in the United States, China, Australia, Japan, Singapore, and the European Union. Safe Harbor Statement This press release contains forward-looking statements, including statements regarding the potential implications of clinical data for patients, and Adagene’s advancement of, and anticipated preclinical activities, clinical development, regulatory milestones, and commercialization of its product candidates. Actual results may differ materially from those indicated in the forward-looking statements as a result of various important factors, including but not limited to Adagene’s ability to demonstrate the safety and efficacy of its drug candidates; the clinical results for its drug candidates, which may not support further development or regulatory approval; the content and timing of decisions made by the relevant regulatory authorities regarding regulatory approval of Adagene’s drug candidates; Adagene’s ability to achieve commercial success for its drug candidates, if approved; Adagene’s ability to obtain and maintain protection of intellectual property for its technology and drugs; Adagene’s reliance on third parties to conduct drug development, manufacturing and other services; Adagene’s limited operating history and Adagene’s ability to obtain additional funding for operations and to complete the development and commercialization of its drug candidates; Adagene’s ability to enter into additional collaboration agreements beyond its existing strategic partnerships or collaborations, and the impact of the COVID-19 pandemic on Adagene’s clinical development, commercial and other operations, as well as those risks more fully discussed in the “Risk Factors” section in Adagene’s annual report for the year of 2022 on Form 20-F filed with the U.S. Securities and Exchange Commission. All forward-looking statements are based on information currently available to Adagene, and Adagene undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. FINANCIAL TABLES FOLLOW Unaudited Consolidated Balance Sheets December 31,2022 June 30,2023 US$ US$ASSETS Current assets: Cash and cash equivalents143,758,678 128,759,962 Amounts due from related parties619,432 393,969 Prepayments and other current assets4,937,323 3,524,688 Total current assets149,315,433 132,678,619 Property, equipment and software, net2,782,963 2,222,200 Operating lease right-of-use assets191,877 292,523 Other non-current assets109,572 108,922 TOTAL ASSETS152,399,845 135,302,264 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable3,666,124 4,483,776 Contract liabilities15,107,276 812,916 Amounts due to related parties19,323,337 17,216,032 Accruals and other current liabilities3,212,809 2,834,565 Income tax payable— 1,895,063 Short-term borrowings10,768,745 8,995,544 Current portion of long-term borrowings2,850,128 2,594,868 Current portion of operating lease liabilities151,983 158,859 Total current liabilities55,080,402 38,991,623 Long-term borrowings14,146,541 13,348,003 Operating lease liabilities53,834 141,431 Other non-current liabilities28,718 27,679 TOTAL LIABILITIES69,309,495 52,508,736 Commitments and contingencies Shareholders’ equity: Ordinary shares (par value of US$0.0001 per share; 640,000,000 shares authorized, and 54,278,981 shares issued and outstanding as of December 31, 2022; and 640,000,000 shares authorized, and 54,793,339 shares issued and outstanding as of June 30, 2023)5,497 5,556 Treasury shares (1 share as of December 31, 2022 and June 30, 2023)(4) (4)Additional paid-in capital342,739,268 346,958,523 Accumulated other comprehensive income (loss)(849,305) (1,256,635)Accumulated deficit(258,805,106) (262,913,912)Total shareholders’ equity83,090,350 82,793,528 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY152,399,845 135,302,264 Unaudited Consolidated Statements of Comprehensive Loss For the Six MonthsEnded June 30, 2022 For the Six MonthsEnded June 30, 2023 US$ US$Revenues Licensing and collaboration revenue3,923,174 17,295,745 Expenses Research and development expenses(45,148,357) (21,289,434)Administrative expenses(6,848,925) (4,470,520)Total expenses(51,997,282) (25,759,954)Other operating income, net— 3,415,230 Loss from operations(48,074,108) (5,048,979)Interest income14,931 1,918,971 Interest expense(211,434) (573,507)Other income, net430,671 287,430 Foreign exchange gain (loss), net756,085 1,620,415 Loss before income tax(47,083,855) (1,795,670)Income tax expense(558,944) (2,313,136)Net loss attributable to Adagene Inc.’s shareholders(47,642,799) (4,108,806)Other comprehensive income (loss) Foreign currency translation adjustments, net of nil tax284,148 (407,330)Total comprehensive loss attributable to Adagene Inc.’s shareholders(47,358,651) (4,516,136)Net loss attributable to Adagene Inc.’s shareholders(47,642,799) (4,108,806)Net loss attributable to ordinary shareholders(47,642,799) (4,108,806)Weighted average number of ordinary shares used in per share calculation: —Basic54,533,161 54,604,787 —Diluted54,533,161 54,604,787 Net loss per ordinary share —Basic(0.87) (0.08)—Diluted(0.87) (0.08) Reconciliation of GAAP and Non-GAAP Results For the Six Months Ended June 30, 2022 For the Six Months Ended June 30, 2023 US$US$GAAP net loss attributable to ordinary shareholders(47,642,799) (4,108,806)Add back: Share-based compensation expenses5,725,868 4,030,214 Non-GAAP net loss(41,916,931) (78,592)Weighted average number of ordinary shares used in per share calculation: —Basic54,533,161 54,604,787 —Diluted54,533,161 54,604,787 Non-GAAP net loss per ordinary share —Basic(0.77) (0.00)—Diluted(0.77) (0.00)

- Clinical data for wholly-owned anti-CTLA-4 franchise show best-in-class safety profiles for unmasked and masked candidates, unlocking the full therapeutic benefit of anti-CTLA-4 in combination with anti-PD-1 and beyond - - Roche sponsoring randomized, multi-national phase 1b/2 trial of novel triple combination therapy in first-line liver cancer, leveraging safety pro masked, anti-CTLA-4 SAFEbody® ADG126 - - Sanofi and Exelixis collaborations present multi-billion dollar opportunity for non-dilutive funding via milestones and royalties - - Cash balance of US$143.8 million supports streamlined operations into 2025 - SAN DIEGO and SUZHOU, China, March 28, 2023 (GLOBE NEWSWIRE) -- Adagene Incorporated (“Adagene”) (Nasdaq: ADAG), a platform-driven, clinical-stage biotechnology company transforming the discovery and development of novel antibody-based therapies, today reported financial results for the full year 2022 and provided corporate updates. “We are investing in R&D activities to strengthen the differentiation and impact of our anti-CTLA-4 franchise, while generating non-dilutive funding through collaborations,” said Peter Luo, Ph.D., Co-Founder, Chief Executive Officer and Chairman of the Board of Adagene. “Through CTLA-4-mediated intra-tumoral Treg depletion, we are addressing the dose-dependent toxicities of anti-CTLA-4 therapies, thereby unleashing their power as a cornerstone of cancer immunotherapy across a broad spectrum of tumors. We expect continued momentum with both existing and prospective partners to validate our SAFEbody technology and pipeline programs.” PIPELINE & BUSINESS HIGHLIGHTS Anti-CTLA-4 Programs Phase 1b/2 data for ADG116, an unmasked anti-CTLA-4 NEObody™ targeting a unique epitope showed a differentiated safety pro anti-tumor activity, both in monotherapy and in combination with anti-PD-1: In monotherapy studies of 50 patients with advanced/metastatic tumors, ADG116 was administered up to 15 mg/kg every three weeks with repeat dosing. No Grade 3 or higher treatment-related adverse events (TRAEs) were reported at the 15 mg/kg dose level, while Grade 3 or higher TRAEs at 10 mg/kg (13%) were lower than the reported rate (36%) for a currently approved anti-CTLA-4 therapy, ipilimumab, at 10 mg/kg in first-line monotherapy in melanoma patients in a non-head-to-head comparison. ADG116 monotherapy in heavily pre-treated patients with difficult-to-treat tumors resulted in two partial responses in Kaposi’s sarcoma and renal cell carcinoma. In February 2023, a third partial response with monotherapy was reported in a patient with MSI-H endometrial cancer. The patient had received five cycles of ADG116 at 10 mg/kg with only Grade 1 TRAEs reported. ADG116 in combination with anti-PD-1 therapies also demonstrated a differentiated safety pro anti-tumor activity at 3 mg/kg with repeat dosing. Results were presented at the Society for Immunotherapy of Cancer’s (SITC) annual meeting, including one confirmed, durable complete response observed after six cycles in a patient with platinum-refractory recurrent head and neck squamous cell carcinoma who remains on therapy (n=5; ORR = 20%; DCR = 100%). Additionally, a significant reduction in a tumor-related biomarker (carcinoembryonic antigen levels) was observed in two patients with metastatic microsatellite-stable (MSS) colorectal cancer (CRC); both patients had either liver or lung metastases. Combination dose expansion of ADG116 in combination with anti-PD-1 is ongoing for dose optimization. Phase 1b/2 data for ADG126, a masked anti-CTLA-4 SAFEbody targeting a unique epitope, showed compelling safety and promising efficacy profiles at high dose levels with repeat dosing both in monotherapy and in combination with anti-PD-1: In dose escalation, ADG126 monotherapy was well tolerated with no dose-limiting toxicities or Grade 3 or higher TRAEs observed when administered up to 20 mg/kg every three weeks with repeat dosing in 26 patients with advanced/metastatic solid tumors. Clinical evaluation with anti-PD-1 therapies is ongoing with interim data from dose escalation portions of phase 1b/2 trials in combination with toripalimab and pembrolizumab to be presented at the upcoming American Association for Cancer Research annual meeting April 14 – 18, 2023 in Orlando, Florida. Interim results announced in January 2023 from ongoing phase 1b/2 trials of ADG126 in combination with anti-PD-1 therapy include: No dose-limiting toxicities observed when ADG126 combined up to 10 mg/kg with repeat cycles, highlighting the potential of SAFEbody anti-CTLA-4 therapy. SAFEbody ADG126 provides systemic delivery of CTLA-4 treatment similar to intra-tumoral delivery to reach a higher concentration at the tumor site, enabling concentration-dependent, intra-tumoral Treg depletion for effective immunotherapy. Multiple partial responses were confirmed in several tumor types during combination dose escalation. Continuous tumor shrinkage in cold tumors and anti-PD-1 resistant patients. Efficacy results consistent with data for parental antibody (ADG116) in warm and cold tumors due to its strong intra-tumoral depletion of regulatory T cells in the tumor microenvironment (TME). Dose expansion for ADG126 in combination with anti-PD-1 is ongoing with multiple dosing regimens being evaluated, in alignment with the Food & Drug Administration’s Project Optimus for dose optimization of cancer drugs. Additional Clinical & Preclinical Programs Initiated dosing of the first patient in a phase 1 trial evaluating safety, efficacy and tolerability profiles for ADG206, a masked, IgG1 FC-enhanced anti-CD137 POWERbody™ in patients with advanced/metastatic tumors. This next generation anti-CD137 candidate is the first POWERbody candidate to advance into clinic, combining precision masking, Fc-engineering and targeting of a unique epitope to solve the safety and efficacy challenges of anti-CD137 therapies. Continued investigator-initiated trials (IITs) for ADG106, an anti-CD137 agonist NEObody, in selected combination settings, including advanced non-small cell lung cancer (NSCLC) and early-stage, HER2-negative breast cancer. Presented best-in-class profiles for multiple preclinical product candidates in IND-enabling studies, including ADG153 (anti-CD47 IgG1 SAFEbody) and ADG138 (HER2xCD3 POWERbody), which apply SAFEbody precision masking technology. The robust preclinical profiles for these and other product candidates are published here. Proprietary bispecific T-cell engager (TCE) capability with CD28 designed to mitigate the serious safety concerns of CD28 activation. CD28 bispecific POWERbody TCEs in preclinical evaluation exhibit enormous potential to fulfill the promise of safe and durable T cell-mediated synergistic immunotherapies when combined with CD3 bispecific TCEs and/or checkpoint inhibitors. The full poster presentation may be viewed here. Collaborations Roche: Established a clinical trial collaboration in December 2022 where Roche will sponsor and conduct a randomized phase 1b/2 multi-national trial to evaluate the efficacy, safety and pharmacokinetic profiles of ADG126 in a triple combination with bevacizumab and atezolizumab, versus the approved combination of atezolizumab and bevacizumab alone in first-line hepatocellular carcinoma (HCC). Each company is supplying its respective anti-cancer agent(s) to support the trial, which will be initially conducted in 60 patients. The trial reflects Roche’s leadership and commitment to HCC, where they pioneered the established standard-of-care doublet combination, and validates Adagene’s differentiated ADG126 anti-CTLA-4 clinical program. Adagene will retain global development and commercialization rights to ADG126. Sanofi: Established a technology licensing agreement with Sanofi in March 2022 to generate masked versions of antibodies provided by Sanofi, including monoclonal and bispecific candidate antibodies, with a potential transaction value of US$2.5 billion. The collaboration included an upfront payment of US$17.5 million received in April 2022 for the initial two programs (US$8.75 million per program), an option fee for two additional programs, potential milestone payments of up to US$2.5 billion (US$625 million per program), and tiered royalties. Exelixis: Received a US$3.0 million milestone payment from Exelixis in January 2022 for the successful nomination of lead SAFEbody candidates for one of the collaboration programs and an additional $1.1 million upfront payment for an expanded collaboration in SAFEbody discovery in June 2022, based on a technology licensing agreement to develop novel masked antibody-drug conjugate candidates. Terms of the agreement, which was executed in February 2021, include an upfront payment of US$11 million for two programs, potential milestones and tiered royalties. China: Advanced global partnerships and collaboration with Sanjin and Dragon Boat Biopharmaceutical for two antibodies out-licensed in Greater China, including an anti-PD-L1 (ADG104) in phase 2 and a novel anti-CSF-1R (ADG125/BC006) in phase 1 development. CORPORATE UPDATES In March 2023, appointed Professor Aurélien Marabelle, MD, PhD, to the company’s Scientific and Strategic Advisory Board. Professor Marabelle is a physician-scientist with expertise in oncology and immunology working within the Drug Development Department (DITEP) of Gustave Roussy Cancer Center in France. Professor Marabelle brings deep insight in tumor-specific Treg depletion for anti-CTLA-4 therapies delivered intra-tumorally to overcome dose dependent toxicities through systemic delivery of anti-CTLA-4 therapies. In November 2022, appointed Cuong Do, MBA, to the company’s board of directors as an independent director. He also serves as an audit committee member and will be chairing a strategy committee of the board. Mr. Do is President and CEO of BioVie Inc., a clinical-stage company developing innovative drug therapies. He was previously the Chief Strategy Officer for Merck, a leading global pharmaceuticals company, where he played a key role in defining the company’s strategy, including the focus on oncology and creating its leading position with the anti-PD-1 therapy, pembrolizumab. UPDATED MILESTONES & OUTLOOK Following initiatives to streamline its operations over the past year, Adagene expects its cash balance to sufficiently fund activities into 2025, with the following milestones during 2023: Establish registration path and strategy (e.g., recommended phase 2 dose, indication and design) for phase 2/3 pivotal trial of anti-CTLA-4 in combination with anti-PD-1 therapy in targeted tumors ADG126 phase 2 proof-of-concept data from combination dose expansion cohorts Advance ADG116 phase 2 combination dose expansion cohorts Providing the path to a potential registrational trial for triple combination with Roche’s atezolizumab/bevacizumab, advance ADG126 randomized phase 1b/2 trial in first-line hepatocellular carcinoma (HCC) conducted by Roche; provide update on trial status. Advance ADG206 phase 1 trial (masked, FC enhanced, IgG1 anti-CD137) and advance IND-enabling programs as resources allow. Additional collaborations and/or technology licensing agreements. FINANCIAL HIGHLIGHTS Cash and Cash Equivalents: Cash and cash equivalents were US$143.8 million as of December 31, 2022, compared to US$174.4 million as of December 31, 2021. The 2022 cash balance includes an upfront payment of US$17.5 million for the first two projects from Sanofi, and a milestone payment of US$3.0 million and an additional upfront payment of US$1.1 million from Exelixis. Total non-dilutive funding received from business development collaborations increased to US$21.9 million for the year ended December 31, 2022 from US$11.9 million for the year ended December 31, 2021. Total borrowings (denominated in RMB) from commercial banks in China increased to US$27.8 million as of December 31, 2022 from US$7.5 million as of December 31, 2021. The associated loan proceeds were primarily used to pay for the company’s R&D activities in China, including CMC costs of clinical and preclinical programs. Net Revenue: Net revenue was US$9.3 million for the year ended December 31, 2022, compared to US$10.2 million in 2021. Net revenue was recognized due to fulfillment of performance obligations over time associated with the collaboration and technology licensing agreement with Sanofi to develop antibody-based therapies. Revenue was also recognized from the material transfer and option agreement with ADC Therapeutics SA as performance obligation was satisfied at a point in time. Research and Development (R&D) Expenses: R&D expenses were US$81.3 million for the year ended December 31, 2022, compared to US$68.1 million in 2021. The rise in R&D expenses was primarily due to increased R&D activities for the company’s clinical programs and preclinical testing for candidates in the IND-enabling phase. Administrative Expenses: Administrative expenses were US$11.9 million for the year ended December 31, 2022, compared to US$14.4 million in 2021. The decrease was primarily due to a reduction in share-based compensation expenses. Net Loss: The net loss attributable to Adagene Inc.’s shareholders was US$80.0 million for the year ended December 31, 2022, compared to US$73.2 million for the year ended December 31, 2021. Non-GAAP Net Loss: Non-GAAP net loss, which is defined as net loss attributable to ordinary shareholders for the period after excluding (i) share-based compensation expenses and (ii) accretion of convertible redeemable preferred shares to redemption value, as applicable, was US$69.5 million for the year ended December 31, 2022, compared to US$54.5 million for the year ended December 31, 2021. Please refer to the section in this press release titled “Reconciliation of GAAP and Non-GAAP Results” for details. Non-GAAP Financial Measures The Company uses non-GAAP net loss and non-GAAP net loss per ordinary shares for the year, which are non-GAAP financial measures, in evaluating its operating results and for financial and operational decision-making purposes. The Company believes that non-GAAP net loss and non-GAAP net loss per ordinary shares for the year help identify underlying trends in the Company’s business that could otherwise be distorted by the effect of certain expenses that the Company includes in its loss for the year. The Company believes that non-GAAP net loss and non-GAAP net loss per ordinary shares for the year provide useful information about its results of operations, enhances the overall understanding of its past performance and future prospects and allows for greater visibility with respect to key metrics used by its management in its financial and operational decision-making. Non-GAAP net loss and non-GAAP net loss per ordinary shares for the year should not be considered in isolation or construed as an alternative to operating profit, loss for the year or any other measure of performance or as an indicator of its operating performance. Investors are encouraged to review non-GAAP net loss and non-GAAP net loss per ordinary shares for the year and the reconciliation to their most directly comparable GAAP measures. Non-GAAP net loss and non-GAAP net loss per ordinary shares for the year here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to the Company’s data. The Company encourages investors and others to review its financial information in its entirety and not rely on a single financial measure. Non-GAAP net loss and non-GAAP net loss per ordinary shares for the year represent net loss attributable to ordinary shareholders for the year excluding (i) share-based compensation expenses, and (ii) accretion of convertible redeemable preferred shares to redemption value. Share-based compensation expense is a non-cash expense arising from the grant of stock-based awards to employees. The Company believes that the exclusion of share-based compensation expenses from the net loss in the Reconciliation of GAAP and Non-GAAP Results assists management and investors in making meaningful period-to-period comparisons in the Company's operating performance or peer group comparisons because (i) the amount of share-based compensation expenses in any specific period may not directly correlate to the Company’s underlying performance, (ii) such expenses can vary significantly between periods as a result of the timing of grants of new stock-based awards, and (iii) other companies may use different forms of employee compensation or different valuation methodologies for their share-based compensation. Please see the “Reconciliation of GAAP and Non-GAAP Results” included in this press release for a full reconciliation of non-GAAP net loss and non-GAAP net loss per ordinary shares for the year to net loss attributable to ordinary shareholders for the year/period. About Adagene Adagene Inc. (Nasdaq: ADAG) is a platform-driven, clinical-stage biotechnology company committed to transforming the discovery and development of novel antibody-based cancer immunotherapies. Adagene combines computational biology and artificial intelligence to design novel antibodies that address unmet patient needs. Powered by its proprietary Dynamic Precision Library (DPL) platform, composed of NEObody™, SAFEbody®, and POWERbody™ technologies, Adagene’s highly differentiated pipeline features novel immunotherapy programs. Adagene has forged strategic collaborations with reputable global partners that leverage its technology in multiple approaches at the vanguard of science. For more information, please visit: . Follow Adagene on WeChat, LinkedIn and Twitter. SAFEbody® is a registered trademark in the United States, China, Australia, Japan, Singapore, and the European Union. Safe Harbor Statement This press release contains forward-looking statements, including statements regarding the potential implications of clinical data for patients, and Adagene’s advancement of, and anticipated preclinical activities, clinical development, regulatory milestones, and commercialization of its product candidates. Actual results may differ materially from those indicated in the forward-looking statements as a result of various important factors, including but not limited to Adagene’s ability to demonstrate the safety and efficacy of its drug candidates; the clinical results for its drug candidates, which may not support further development or regulatory approval; the content and timing of decisions made by the relevant regulatory authorities regarding regulatory approval of Adagene’s drug candidates; Adagene’s ability to achieve commercial success for its drug candidates, if approved; Adagene’s ability to obtain and maintain protection of intellectual property for its technology and drugs; Adagene’s reliance on third parties to conduct drug development, manufacturing and other services; Adagene’s limited operating history and Adagene’s ability to obtain additional funding for operations and to complete the development and commercialization of its drug candidates; Adagene’s ability to enter into additional collaboration agreements beyond its existing strategic partnerships or collaborations, and the impact of the COVID-19 pandemic on Adagene’s clinical development, commercial and other operations, as well as those risks more fully discussed in the “Risk Factors” section in Adagene’s annual report for the year of 2021 on Form 20-F filed with the U.S. Securities and Exchange Commission. All forward-looking statements are based on information currently available to Adagene, and Adagene undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. FINANCIAL TABLES FOLLOW Unaudited Consolidated Balance Sheets December 31, 2021 December 31, 2022 US$ US$ ASSETS Current assets: Cash and cash equivalents 174,391,243 143,758,678 Accounts receivable, net 3,000,000 — Amounts due from related parties 4,506,670 619,432 Prepayments and other current assets 4,055,921 4,937,323 Total current assets 185,953,834 149,315,433 Property, equipment and software, net 3,487,617 2,782,963 Operating lease right-of-use assets — 191,877 Other non-current assets 69,275 109,572 TOTAL ASSETS 189,510,726 152,399,845 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable 3,321,615 3,666,124 Contract liabilities 5,500,000 15,107,276 Amounts due to related parties 10,466,061 19,323,337 Accruals and other current liabilities 4,379,243 3,212,809 Income tax payable 1,657,450 — Short-term borrowings 3,121,226 10,768,745 Current portion of long-term borrowings 1,376,319 2,850,128 Current portion of operating lease liabilities — 151,983 Total current liabilities 29,821,914 55,080,402 Long-term borrowings 2,991,829 14,146,541 Operating lease liabilities — 53,834 Deferred tax liabilities 44,163 — Other non-current liabilities 94,107 28,718 TOTAL LIABILITIES 32,952,013 69,309,495 Commitments and contingencies Shareholders’ equity: Ordinary shares 5,627 5,497 Treasury shares (619,605 ) (4 ) Additional paid-in capital 336,099,931 342,739,268 Accumulated other comprehensive income (loss) (93,981 ) (849,305 ) Accumulated deficit (178,833,259 ) (258,805,106 ) Total shareholders’ equity 156,558,713 83,090,350 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 189,510,726 152,399,845 Unaudited Consolidated Statements of Comprehensive Loss For the Year Ended December 31, 2021 For the Year Ended December 31, 2022 US$ US$ Revenues Licensing and collaboration revenue 10,175,258 9,292,724 Expenses Research and development expenses (68,099,385 ) (81,339,540 ) Third parties (55,020,367 ) (46,212,077 ) Related parties (13,079,018 ) (35,127,463 ) Administrative expenses (14,439,962 ) (11,873,867 ) Loss from operations (72,364,089 ) (83,920,683 ) Interest income 76,166 377,501 Interest expense (363,762 ) (693,323 ) Other income, net 1,778,822 2,168,388 Foreign exchange gain (loss), net (603,459 ) 2,555,325 Loss before income tax (71,476,322 ) (79,512,792 ) Income tax expense (1,701,613 ) (459,055 ) Net loss attributable to Adagene Inc.’s shareholders (73,177,935 ) (79,971,847 ) Other comprehensive income (loss) Foreign currency translation adjustments, net of nil tax 257,000 (755,324 ) Total comprehensive loss attributable to Adagene Inc.’s shareholders (72,920,935 ) (80,727,171 ) Net loss attributable to Adagene Inc.’s shareholders (73,177,935 ) (79,971,847 ) Accretion of convertible redeemable preferred shares to redemption value (28,553 ) — Net loss attributable to ordinary shareholders (73,206,488 ) (79,971,847 ) Weighted average number of ordinary shares used in per share calculation: —Basic 50,032,009 54,135,084 —Diluted 50,032,009 54,135,084 Net loss per ordinary share —Basic (1.46 ) (1.48 ) —Diluted (1.46 ) (1.48 ) Reconciliation of GAAP and Non-GAAP Results For the Year Ended December 31, 2021 For the Year Ended December 31, 2022 US$ US$ GAAP net loss attributable to ordinary shareholders (73,206,488 ) (79,971,847 ) Add back: Share-based compensation expenses 18,679,658 10,520,282 Accretion of convertible redeemable preferred shares to redemption value 28,553 — Non-GAAP net loss (54,498,277 ) (69,451,565 ) Weighted average number of ordinary shares used in per share calculation: —Basic 50,032,009 54,135,084 —Diluted 50,032,009 54,135,084 Non-GAAP net loss per ordinary share —Basic (1.09 ) (1.28 ) —Diluted (1.09 ) (1.28 ) Investor & Media Contact: Ami Knoefler 650-739-9952 ir@adagene.com