Adagene(US:ADAG)2022-04-25 16:00Financial Performance - The company reported net losses of US$16.4 million, US$42.4 million, and US$73.2 million for the years ended December 31, 2019, 2020, and 2021, respectively, with an accumulated deficit of US$178.8 million as of December 31, 2021[875]. - Net loss attributable to Adagene Inc.'s shareholders increased by 72.6% from US$42.4 million in 2020 to US$73.2 million in 2021, largely due to increased clinical and operating activities[943]. - Non-GAAP net loss for 2021 was US$54.5 million, compared to US$32.3 million in 2020, with a non-GAAP net loss per ordinary share of US$1.09[945]. - GAAP net loss attributable to ordinary shareholders increased from US$16.7 million in 2019 to US$73.2 million in 2021[950]. - Net cash used in operating activities was US$43.4 million in 2021, up from US$28.5 million in 2020[958][960]. - Cash and cash equivalents at the end of 2021 were US$174.4 million, a significant increase from US$75.2 million in 2020[957]. - Net cash generated from financing activities was US$145.4 million in 2021, primarily from the initial public offering[964]. - The company expects to incur additional operating losses and increased expenses as it expands research and development capabilities[951]. Research and Development - Research and development expenses increased from US$16.2 million in 2019 to US$68.1 million in 2021, primarily due to higher personnel costs and increased clinical activities[881]. - The clinical-stage pipeline includes three candidates: ADG116, ADG126, and ADG106, all currently in Phase 1b/2 clinical evaluation[873]. - The company has a robust preclinical pipeline with five programs in IND-enabling studies and over 50 programs in various stages of discovery[873]. - Research and development expenses rose by 103.1% from US$33.5 million in 2020 to US$68.1 million in 2021, driven by increased personnel costs and greater clinical activities[935]. - Research and development expenses include payroll, pre-clinical testing, and costs related to product candidates, with no accrued expenses for contract cancellations as of December 31, 2020, or 2021[919]. - Research and development expenses are charged as incurred, with preclinical and clinical trial costs being a significant component[979][980]. Revenue and Income - The company has not generated any revenue from product sales and does not expect to do so in the near future[879]. - The company recognizes revenue from out-licensing agreements when control of the licensed product is transferred to the customer[911]. - Licensing and collaboration revenue increased from US$0.7 million in 2020 to US$10.2 million in 2021, primarily due to US$8.5 million from a collaboration with Exelixis, Inc.[934]. - Other income increased from US$1.0 million in 2020 to US$1.8 million in 2021, due to government subsidies and R&D tax incentives[940]. Expenses - Administrative expenses increased by 40.0% from US$10.3 million in 2020 to US$14.4 million in 2021, mainly due to higher personnel and professional fees[936]. - The company incurred administrative expenses that are expected to increase as it operates as a public company and advances its product candidates[887]. - The company anticipates significant increases in expenses related to the advancement of its proprietary Dynamic Precision Library platform and ongoing clinical trials[875]. Taxation - The company is subject to a 25% enterprise income tax rate in China, with a preferential rate of 15% for qualified Technology Advanced Service Enterprises[893]. - If classified as a PRC resident enterprise, the company would face a 25% enterprise income tax on worldwide income[896]. - As of December 31, 2021, the company incurred an income tax expense of $1.7 million due to taxable profits generated by its U.S. subsidiary[924]. - Income tax expense for 2021 was US$1.7 million, compared to nil in 2020, primarily due to current tax expenses from Adagene Incorporated[942]. Corporate Governance - The executive team includes Peter Luo as CEO, Fangyong Du as CTO, and JC Xu as Chief Scientific Officer, among others[986][989]. - The Chief Financial Officer, Man Kin Tam, has over 20 years of experience in finance and banking across the Asia-Pacific region[994]. - The company’s Chief Strategy and Corporate Development Officer, Yu Ren, has tendered his resignation effective early June 2022[995]. - The board of directors consists of six members, including three independent directors, complying with Nasdaq's corporate governance rules[1041]. - The audit committee is chaired by Andy (Yiu Leung) Cheung, who is recognized as an "audit committee financial expert"[1044]. - The compensation committee, chaired by Peter Luo, is responsible for reviewing and approving compensation structures for executive officers[1046]. - The nominating and corporate governance committee, also chaired by Peter Luo, evaluates board composition and recommends nominees for election[1048]. - Directors owe fiduciary duties to the company, including a duty of loyalty and a duty to act in good faith[1049]. Employee Compensation and Benefits - The company paid an aggregate of US$3.4 million in cash to executive officers for the fiscal year ended December 31, 2021[1010]. - An aggregate of US$179 thousand in cash was paid to independent directors for the same fiscal year[1010]. - The company did not set aside or accrue expenses related to pension, retirement, or similar benefits for executive officers and directors for the fiscal year ended December 31, 2021[1010]. - The company participates in various employee social security plans, including pension and medical insurance, as required by Chinese regulations[1058]. - The company plans to continue granting share-based incentive awards to employees to incentivize their contributions[1058]. Shareholder Information - The beneficial ownership of ordinary shares as of March 31, 2022, shows Peter Luo's act-in-concert group owning 11,547,539 shares, representing 21.1%[1065]. - The total number of ordinary shares issued and outstanding as of March 31, 2022, was 54,742,598[1061]. - The total number of shares beneficially owned by all directors and executive officers as a group is 11,599,039, representing 21.2%[1065]. Miscellaneous - The COVID-19 pandemic has the potential to delay clinical trials and impact business operations, with ongoing monitoring of its effects[876]. - The company has a history of strategic partnerships and collaborations, enhancing its business development efforts[989]. - The company has not experienced any material labor disputes and maintains a good working relationship with its employees[1059].