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Adagene Partners With Sanofi in Biobucks Deal Worth Up to $2.5 Billion

Sanofi will pay Adagene $17.5 million up front.

Adagene  Adagene Inc - ADR - $1.08 0.03 (0.02703%)   announced a collaboration and license deal with Sanofi  Sanofi - ADR - $47.94 0.61 (0.01256%)   to develop masked monoclonal and bispecific antibodies that will help Sanofi's cancer therapeutics program.

Under the terms of the agreement, Sanofi will pay Adagene $17.5 million upfront and will advance two initial antibody candidates, with an option for two additional candidates.

Adagene will be eligible to receive potential development, regulatory and commercial milestone payments of up to $2.5 billion for advancement of the candidates, which will be exclusively developed and commercialized by Sanofi.

Adagene will also be eligible for tiered royalties on global sales.

SAFEbody technology

Adagene's proprietary technology is designed to address safety and tolerability challenges associated with many antibody therapeutics. The company's SAFEbody construct uses precision masking technology to shield the binding domain of the biologic therapy, enabling tumor-specific targeting of antibodies, while minimizing toxicity in healthy tissues. 

“Committed to chasing the miracles of science, we look forward to working with Adagene to design antibodies that can help us deliver on our mission to bring transformative new medicines to people living with cancer,” said Valeria Fantin, Sanofi's Global Head of Oncology Research.

“Adagene’s antibody platform should help us to precisely target established, but poorly addressed oncology mechanisms with best-in-class medicines.”

Investment thesis

Adagene raised $161 million in gross proceeds at $19 per ADS in its IPO in February 2021. The San Diego and Suzhou, China-based company's stock peaked early, trading as high as $31.83 in its first week of trading, but has since fallen out of favor with investors who were perhaps disappointed with the pace of progress of this clinical stage company.

When the latest deal with Sanofi was announced on Wednesday morning, the stock popped 10% in premarket trading before giving back all of its gains.

We think the market is undervaluing Adagene at these levels. 

  • The company has shown an ability to attract multiple R&D licensing deals with major pharmaceutical firms, including Merck, GlaxoSmithKline, Bristol Myers Squibb and now Sanofi.
  • These deals demonstrate the therapeutic potential of the SAFEbody platform.
  • At a current market cap that barely breaches $200 million, investors are valuing Adagene's extensive pipeline at virtually zero, as the company had cash and equivalents of about $174 million as of Dec. 31, 2021. 
  • Along the spectrum of high risk plays in biotech, we like the potential of Adagene as a long term bet.

Pipeline

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Source: Equities News