ADG-106

- 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

– Topline data for anti-CTLA-4 antibody, ADG116, shows compelling clinical safety and complete and partial responses as both a single agent and in combination with anti-PD-1 therapy; results to be presented at SITC 2022 – – Masked, anti-CTLA-4 antibody, ADG126, safely dosed repeatedly up to 20 mg/kg as a single agent with encouraging efficacy signals; results to be presented at ESMO 2022 – – Presentation of combination dosing data with anti-PD-1 therapies in 2022, while dose expansion begins for both ADG116 and ADG126 in targeted tumors – – Submitted regulatory filing for clinical trial of masked, IgG1-based anti-CD137 candidate, ADG206, with greater preclinical potency than the analog of a benchmark antibody, urelumab, that demonstrated monotherapy efficacy in clinic; patient dosing planned in early 2023 – – Cash balance of US$168 million supports streamlined operations into late 2024, with planned key readouts in 2023 for anti-CTLA-4 and anti-PD-1 combination therapies expected to pave way for pivotal trials – – Technology licensing collaborations provide near-term revenue opportunity – SAN DIEGO and SUZHOU, China, Aug. 30, 2022 (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, 2022 and provided corporate updates. “We are prioritizing development of two anti-CTLA-4 antibodies, which have best-in-class profiles and are on track to deliver proof-of-concept clinical results in combination therapy in 2023. Anti-CTLA-4 therapy is known for dose dependent toxicity, making it extremely difficult to optimize dosing levels, dosing frequency and dosing intervals for prevailing anti-CTLA-4 therapy, especially in combination therapy with anti-PD-1. We have solved this problem with differentiated candidates suitable for the massive market opportunity for next generation anti-CTLA-4 therapies, increasing market penetration into known and new indications with enhanced safety and efficacy, especially for tumor types not addressed with the currently available therapy, and rapid entry into new markets such as China with few approved indications for anti-CTLA-4 in combination with widely accessible anti-PD-1 therapy,” said Peter Luo, Ph.D., Co-founder, Chief Executive Officer and Chairman of Adagene. “We are also excited to advance our next generation anti-CD137 agonistic antibody, ADG206, into clinic given its first- and best-in-class potential in both monotherapy and in combination with multiple agents.” Dr. Luo continued: “On the longer-term horizon, we have developed a portfolio of masked, bispecific T cell engagers (TCEs) for tumor directed T cell therapies, armed with proprietary, tailor-made anti-CD3 and CD28 by leveraging our NEObody™ and SAFEbody® technologies, that aim to push the boundaries of what is possible with TCEs – to achieve safe, potent and durable responses for patients by combining our novel modalities with the fundamental pathways across the cancer immunity cycle.” He concluded: “Building on success of existing technology licensing deals, we are also pursuing additional collaboration agreements that leverage our pipeline, our integrated AI-powered antibody discovery platform, and our SAFEbody precision masking technology, to bring potential non-dilutive funding to Adagene. We believe that the combination of our proprietary technology platforms and our highly differentiated clinical and preclinical pipelines presents us with many value-creating levers to navigate today’s turbulent financial markets.” PIPELINE & BUSINESS HIGHLIGHTS ADG116 (anti-CTLA-4 NEObody™ targeting a unique epitope) Encouraging efficacy demonstrated as a single agent and in combination with anti-PD-1: Observed one partial response with ADG116 monotherapy in a tumor type where no anti-CTLA-4 therapy is currently approved.Observed one confirmed rapid complete response with repeat dosing for ADG116 in combination with toripalimab in a tumor type where no anti-CTLA-4 therapy is currently approved.Presentation of data from this phase 1b/2 trial will take place at the Society for Immunotherapy of Cancer’s 37th Annual Meeting (SITC 2022) in Boston, November 8-12, 2022.For competitive reasons, Adagene is currently not disclosing the dose or tumor types of these objective responses. Compelling safety demonstrated as a single agent and in combination with anti-PD-1: Completed monotherapy dose escalation of ADG116 in 30 patients up to 15 mg/kg administered every three weeks with repeat dosing, and continued to enroll patients in dose expansion at 10 mg/kg.Only one dose-limiting toxicity event reported at ESMO-IO 2021 for the 10 mg/kg dose. As of this release, no additional or late-onset dose-limiting toxicities reported with ADG116 monotherapy, including in patients who received more than four cycles.A safety review committee cleared advancement to dose expansion with 3 mg/kg of ADG116 for combination cohorts with toripalimab. Continued advancement of combinations with anti-PD-1 or anti-CD137: Completing dose escalation of ADG116 in combination with the anti-PD-1 antibody, pembrolizumab (ADG116-P001 / KEYNOTE-C97). Presentation of data from this phase 1b/2 trial will take place at SITC 2022.Evaluation ongoing of ADG116 in combination with the anti-CD137 therapy, ADG106, to optimize the dose and schedule for this novel, proprietary combination. Adagene is a global leader in exploring the synergistic clinical effects for the dual pathway targeting CTLA-4 and CD137 given the compelling preclinical rationale for this powerful combination.Paving the way for combination trials in China, advanced dose escalation to 10 mg/kg in phase 1 monotherapy trial (ADG116-1002). A significant untapped clinical and market opportunity exists for the proven combination of anti-CTLA-4 and anti-PD-1 therapies as the combination is only approved in one tumor type in China. ADG126 (anti-CTLA-4 SAFEbody® targeting a unique epitope with precision masking) Compelling clinical safety demonstrated at unprecedented dosing levels with repeat dosing: Completed monotherapy dose escalation of ADG126 in 19 patients up to 20 mg/kg administered every three weeks with repeat dosing, and continued to enroll patients in dose expansion at 10 mg/kg.ADG126 monotherapy was well tolerated with no dose-limiting toxicities or treatment-related serious adverse events observed following repeat dosing across all dose levels, as reported in an abstract at the 2022 American Society of Clinical Oncology annual meeting.Clinical evaluation with anti-PD-1 therapies is ongoing to establish the dose and schedule for phase 2 combination cohorts. In combination cohorts with toripalimab, the safety review committee has cleared the 6 mg/kg dose administered every three weeks, approved dose expansion at 6 mg/kg, and recommended further dose escalation to 10 mg/kg, the highest dose level ever reported for the combination of anti-CTLA-4 and anti-PD-1 therapies. Encouraging antitumor activity observed as monotherapy in cold tumors: In a cohort of heavily pre-treated patients, ADG126 monotherapy resulted in durable reductions in target lesions over 20% in two patients with cold tumors: One ovarian cancer patient who experienced significant, continued reduction of an established ovarian cancer biomarker, CA125, dropping 90% to within the normal range for full clinical benefit after receiving up to 18 cycles of treatment at 1 mg/kg, as of this release.One uveal melanoma patient who received prior immuno-oncology treatment, having progressed after the combination of nivolumab and ipilimumab.Updated interim results will be presented in a poster on September 12 at the European Society for Medical Oncology (ESMO) Congress 2022 in Paris, September 9 – 13, 2022 Both monotherapy and combination trials continue to enroll patients with advanced, metastatic tumors in the US, China and APAC, evaluating optimized doses of ADG126 in targeted tumors. Pharmacokinetics show effectiveness of precision masking technology: In monotherapy evaluation, ADG126 plasma pharmacokinetics (PK) were approximately linear and activated ADG126 accumulated steadily during repeat dosing across different dose levels.This reflects prolonged exposures of activated ADG126 in the tumor microenvironment (TME), with cleaved ADG126 in plasma on average accumulating >2-fold during repeat dosing. ADG106 (agonistic anti-CD137 NEObody™) Given prioritization of anti-CTLA-4 programs, combination trial with toripalimab in China is winding down: Results from the phase 1b/2 trial (ADG106-1008) in China evaluating ADG106 in combination with toripalimab, showed one observed partial response in a nasopharyngeal carcinoma (NPC) patient out of 20 patients enrolled. Currently, four patients remain on therapy.Given prioritization of its two anti-CTLA-4 clinical programs and potential of its next generation anti-CD137 therapy, ADG206, Adagene is winding down the ADG106-1008 trial and does not intend to proceed with the previously planned trial of ADG106 and pembrolizumab. Focusing clinical development on investigator-initiated trials (IITs) in selected indications: Reflecting its strategic presence and collaborations in Singapore, Adagene continues to support the ongoing IITs in Singapore and explore the anti-CD137 opportunity with ADG106 in selected indications in a combination setting, including: An ongoing phase 1b/2 clinical trial (ADG106-T6001) evaluating ADG106 in combination with the anti-PD-1 antibody, nivolumab, for patients with advanced non-small cell lung cancer (NSCLC) who have progressed after prior treatment. Dose escalation is complete and dose expansion is ongoing.An ongoing Phase 1b/2 clinical trial (ADG106-T6002) evaluating ADG106 in combination with neoadjuvant chemotherapy (doxorubicin and cyclophosphamide followed by paclitaxel) in patients with early-stage, HER2 negative breast cancer. ADG206 (masked, IgG1 FC engineered anti-CD137 POWERbody™) On track for clinical development as a next generation anti-CD137 candidate that combines masking, Fc-engineering and novel epitope to deliver balance between safety and efficacy: Adagene submitted a Human Research Ethics Committee (HREC) regulatory filing in Australia to advance this anti-CD137 POWERbody™, ADG206, into a phase 1 clinical trial in patients with advanced metastatic solid tumors.Patient dosing is planned in early 2023.ADG206 is designed to solve the safety and efficacy challenges of anti-CD137 therapy, leveraging the same novel epitope as ADG106 and learnings from development of urelumab (another company’s anti-CD137 targeting antibody), which showed single agent clinical efficacy and dose-dependent liver toxicity in clinic.Preclinical data demonstrated that ADG206 was well tolerated and had robust anti-tumor activity as a single agent in multiple tumor models, with approximately 4-fold stronger anti-CD137 agonistic activity of its activated form than a urelumab analog; ADG206 also demonstrated enhanced anti-tumor activity in combination with other agents, including checkpoint inhibitors and anti-CTLA-4 therapy. Preclinical Discovery Programs ADG153: Given updated program timelines and ongoing business development activities, Adagene now plans the regulatory submission for its masked, IgG1 anti-CD47 SAFEbody, ADG153, in the first half of 2023. This candidate 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. Preclinical data demonstrated that ADG153 IgG1 was well tolerated, did not induce human hemagglutination and significantly reduced anemia-related and antigen sink liabilities; ADG153 IgG1 also demonstrated greater anti-tumor activity than the benchmark (magrolimab analog).American Association for Cancer Research (AACR) Annual Meeting 2022: Data demonstrated the potential best-in-class profiles for three differentiated preclinical product candidates in IND-enabling studies (ADG206, ADG153, ADG138), which all apply SAFEbody precision masking technology. The robust preclinical poster presentations for these and other product candidates are available on the Publications page of the company’s website.CD28 T-cell engagers (TCEs): Data at AACR introduced a new capability for Adagene’s proprietary bispecific TCEs with CD28. CD28 bispecific POWERbody TCEs exhibit enormous potential to fulfill the promises of safe and durable T cell-mediated synergistic immunotherapies when combined with CD3 bispecific TCEs and/or checkpoint inhibitors. Preclinical data demonstrated the potential to mitigate the serious safety concerns of CD28 activation and make custom designed antibodies targeting a highly conserved epitope with broad species reactivity. Multiple tumor associated antigen (TAA) x CD28 POWERbodies are in progress, such as B7-H3xCD28 and TROP2xCD28, which can also be combined with the company’s CD3 TCEs and/or checkpoint inhibitors to achieve safe, powerful and durable immunotherapy for solid tumors. The full poster presentation may be viewed here. Collaborations 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 includes 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 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 development, and a novel anti-CSF-1R (ADG125/BC006) in phase 1. Corporate Adagene is making progress to evaluate business processes that meet the requirements of the Holding Foreign Companies Accountable Act (HFCAA) and the Accelerating Holding Foreign Companies Accountable Act (AHFCAA) in the event that AHFCAA becomes enacted prior to the filing of annual report for the year of 2023 on Form 20-F. The company is closely monitoring the status and implications of HFCAA and AHFCAA in order to take decisive action to minimize its impact on the company.Adagene continues to streamline its operations while focusing on its most advanced and promising clinical and preclinical programs to reduce its cash burn. UPDATED MILESTONES & OUTLOOK Adagene is updating its business outlook to reflect prioritization of its anti-CTLA-4 clinical development programs and achievement of meaningful milestones with its current cash resources. Based on current plans, Adagene expects its cash balance to sufficiently fund operations into late 2024, with the following upcoming milestones: 2022 Present ADG126 monotherapy dose escalation data at ESMO 2022Present additional ADG116 data at SITC 2022ADG116 results of dose escalation in combination with anti-PD-1 therapy to establish the dose(s) and schedule(s) for dose expansion; advance phase 2a dose expansion cohorts in targeted tumorsADG126 results of dose escalation in combination with anti-PD-1 therapy to establish the dose(s) and schedule(s) for dose expansion; advance phase 2a dose expansion cohorts in targeted tumors 2023 ADG116 phase 2a proof-of-concept data from combination dose expansion cohortsADG126 phase 2a proof-of-concept data from combination dose expansion cohortsEstablish 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 tumorsInitiate patient dosing in ADG206 phase 1 trialSubmit IND or equivalent for ADG153, and initiate phase 1 trialResults from IIT combination studies of ADG106Additional collaborations and/or technology licensing agreements FINANCIAL HIGHLIGHTS Cash and Cash Equivalents:Cash and cash equivalents were US$168.0 million as of June 30, 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 from Sanofi, and a milestone payment of US$3.0 million and upfront payment of US$1.1 million from Exelixis, related to Adagene’s respective collaboration and technology licensing agreements with those companies. Net Revenue:Net revenue was US$3.9 million for the six months ended June 30, 2022, compared to US$1.4 million for the same period in 2021. The increase was related to revenue recognized due to fulfillment of performance obligations over time associated with the collaboration and technology licensing agreement with Sanofi to develop antibody-based therapies. Due to the Sanofi and Exelixis collaborations, contract liabilities also increased to US$20.2 million as of June 30, 2022, compared to US$5.5 million as of December 31, 2021. Research and Development (R&D) Expenses: R&D expenses were US$45.1 million for the six months ended June 30, 2022, compared to US$31.5 million for the same period in 2021. The rise in R&D expenses was primarily due to increased R&D activities for the company’s clinical programs, as well as preclinical testing for candidates in the IND-enabling phase. Administrative Expenses:Administrative expenses were US$6.8 million for the six months ended June 30, 2022, compared to US$7.4 million for the same period in 2021. The decrease was primarily due to reduction in share-based compensation expenses. Net Loss:The net loss attributable to Adagene Inc.’s shareholders was US$47.6 million for the six months ended June 30, 2022, compared to US$37.2 million for the six months ended June 30, 2021. Ordinary Shares Outstanding:As of June 30, 2022, there were 54,278,981 ordinary shares issued and outstanding. Please note that each American depository share, or ADS, represents one and one quarter (1.25) ordinary shares of the company. 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 appliable, was US$41.9 million for the six months ended June 30, 2022, compared to US$27.0 million for the six months ended June 30, 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 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 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. Investor & Media Contact:Ami KnoeflerAdagene650-739-9952ir@adagene.com FINANCIAL TABLES FOLLOW Unaudited Consolidated Balance Sheets December 31,2021 June 30,2022 US$ US$ASSETS Current assets: Cash and cash equivalents 174,391,243 168,035,499 Accounts receivable, net 3,000,000 — Amounts due from related parties 4,506,670 1,870,082 Prepayments and other current assets 4,055,921 5,107,271 Total current assets 185,953,834 175,012,852 Property, equipment and software, net 3,487,617 3,072,032 Operating lease right-of-use assets — 399,789 Other non-current assets 69,275 72,799 TOTAL ASSETS 189,510,726 178,557,472 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable 3,321,615 4,665,872 Contract liabilities 5,500,000 20,176,826 Amounts due to related parties 10,466,061 17,508,933 Accruals and other current liabilities 4,379,243 4,237,621 Income tax payable 1,657,450 2,256,601 Short-term borrowings 3,121,226 5,960,008 Current portion of long-term borrowings 1,376,319 1,352,177 Current portion of operating lease liabilities — 297,066 Total current liabilities 29,821,914 56,455,104 Long-term borrowings 2,991,829 9,260,363 Operating lease liabilities — 128,083 Deferred tax liabilities 44,163 — Other non-current liabilities 94,107 29,800 TOTAL LIABILITIES 32,952,013 65,873,350 Commitments and contingencies Shareholders’ equity: Ordinary shares (par value of US$0.0001 per share; 640,000,000 shares authorized, and 54,595,667 shares issued and outstanding as of December 31, 2021; and 640,000,000 shares authorized, and 54,278,981 shares issued and outstanding as of June 30, 2022) 5,627 5,657 Treasury shares (94,074 shares as of December 31, 2021 and 1,234,834 shares as of June 30, 2022) (619,605) (3,666,957)Additional paid-in capital 336,099,931 342,631,313 Accumulated other comprehensive income (loss) (93,981) 190,167 Accumulated deficit (178,833,259) (226,476,058)Total shareholders’ equity 156,558,713 112,684,122 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 189,510,726 178,557,472 Unaudited Consolidated Statements of Comprehensive Loss For the Six MonthsEnded June 30, 2021 For the Six MonthsEnded June 30, 2022 US$ US$Revenues Licensing and collaboration revenue 1,358,836 3,923,174 Expenses Research and development expenses (31,462,546) (45,148,357)Administrative expenses (7,400,123) (6,848,925)Loss from operations (37,503,833) (48,074,108)Interest income 69,332 14,931 Interest expense (192,866) (211,434)Other income, net 822,837 430,671 Foreign exchange gain (loss), net (386,153) 756,085 Loss before income tax (37,190,683) (47,083,855)Income tax expense — (558,944)Net loss attributable to Adagene Inc.’s shareholders (37,190,683) (47,642,799)Other comprehensive income (loss) Foreign currency translation adjustments, net of nil tax 197,483 284,148 Total comprehensive loss attributable to Adagene Inc.’s shareholders (36,993,200) (47,358,651)Net loss attributable to Adagene Inc.’s shareholders (37,190,683) (47,642,799)Accretion of convertible redeemable preferred shares to redemption value (28,553) — Net loss attributable to ordinary shareholders (37,219,236) (47,642,799)Weighted average number of ordinary shares used in per share calculation: —Basic 45,514,701 54,533,161 —Diluted 45,514,701 54,533,161 Net loss per ordinary share —Basic (0.82) (0.87)—Diluted (0.82) (0.87) Reconciliation of GAAP and Non-GAAP Results For the Six MonthsEnded June 30, 2021 For the Six MonthsEnded June 30, 2022 US$ US$GAAP net loss attributable to ordinary shareholders (37,219,236) (47,642,799)Add back: Share-based compensation expenses 10,152,791 5,725,868 Accretion of convertible redeemable preferred shares to redemption value 28,553 — Non-GAAP net loss (27,037,892) (41,916,931)Weighted average number of ordinary shares used in per share calculation: —Basic 45,514,701 54,533,161 —Diluted 45,514,701 54,533,161 Non-GAAP net loss per ordinary share —Basic (0.59) (0.77)—Diluted (0.59) (0.77)