Adagene Reports Full Year 2021 Financial Results and Provides Corporate Update - 2022 clinical data readouts on track to show potential best-in-class safety profile for anti-CTLA-4 programs (ADG116, ADG126) with PD-1 for

Adagene Reports Full Year 2021 Financial Results

and Provides Corporate Update

- 2022 clinical data readouts on track to show

potential best-in-class safety profile for anti-CTLA-4 programs (ADG116, ADG126) with PD-1 for proven and new indications, thereby enabling

greater efficacy through higher and more frequent dosing -

- Advanced three wholly-owned clinical programs

both in single agent and combination trials -

- Advanced five IND-enabling programs, including

two on track for IND or equivalent filing in 2022 -

- Established Sanofi technology licensing collaboration

with potential value over US$2.5 billion, endorsing both SAFEbody platform and pipeline, while advancing collaboration

- Strong cash position and efficient operations

support expected milestones -

SAN DIEGO and SUZHOU, China, March 31, 2022 - Adagene Inc. ("Adagene")

(Nasdaq: ADAG), a company transforming the discovery and development of novel antibody-based therapies, today reported financial results

for the full-year ended December 31, 2021, and provided corporate updates.

"We are committed to delivering on our promise to transform cancer

immunotherapy, concentrating on overcoming the known safety issues linked to promising yet challenging targets," said Peter Luo,

Ph.D., Co-founder, Chief Executive Officer and Chairman of Adagene. "On the clinical front, we are focused on revitalizing anti-CTLA-4

as a safe and efficacious backbone therapy, which remains a huge market opportunity and the only checkpoint inhibitor approved as both

monotherapy and combination therapy with anti-PD-1. We are developing potential best-in-class molecules to unleash the full potential

of this target for strong Treg depletion in the tumor microenvironment (TME) and superior safety profiles."

Dr. Luo continued, "We are also leveraging

our SAFEbody technology to overcome challenges of bispecific T-cell engagers (TCEs), particularly for solid tumors, and to address safety

issues of widely expressed targets like CD47. We have made wonderful progress to de-risk our clinical pipeline, grow our transformative

preclinical assets, and validate our AI-powered, scalable antibody technology platform with global partnerships. With a solid cash

position, we are well-positioned to achieve our expected milestones while continuing to enhance value of our pipeline."

During 2021, Adagene advanced its wholly-owned,

differentiated pipeline of antibody-based therapeutics, including three clinical programs in single and combination phase 1b/2 trials,

five programs in IND-enabling studies and over 50 more across stages of discovery.

Clinical candidates include multiple modalities

of antibody therapeutics against established targets such as CTLA-4 with ADG116 (NEObody ) and ADG126 (SAFEbody), challenging targets

such as CD137 with ADG106 (NEObody) and ADG206 (the masked anti-CD137 POWERbody ), and targets with known safety issues such as

CD47 with ADG153 (SAFEbody). The company's expanding preclinical portfolio further applies the company's AI-powered technology

platform to create transformative antibody-based therapeutics across targets with different MOAs.

A summary of pipeline progress and recent corporate

highlights is below:

ADG116: This NEObody program, targeting

a unique epitope of CTLA-4, is being evaluated in patients with advanced/metastatic solid tumors. ADG116 is designed to provide an enhanced

efficacy profile by potent Treg depletion in the TME and to maintain its physiological function by soft ligand blocking to address safety

concerns associated with existing CTLA-4 therapeutics.

ADG126: This SAFEbody program applies

precision masking technology to ADG116 for conditional activation in the TME to expand the therapeutic index and to further address safety

concerns with existing CTLA-4 therapies. ADG126 is designed to provide enhanced safety and efficacy profiles due to the combination of

the potent Treg depletion in the TME and soft ligand blocking.

Preclinical Discovery Programs: The company continues to expand

its preclinical pipeline by applying its three-body technology platforms - NEObody, SAFEbody and POWERbody - across modalities. New POWERbody

candidates are designed to unleash the efficacy of a therapeutic through Fc-engineering, drug conjugation, or T-cell engagement, while

securing safety by precision masking with SAFEbody technology. Thus, POWERbody candidates incorporate SAFEbody precision masking technology.

2022 Milestones & Outlook

Adagene has previously provided its outlook for

2022, including planned advancement of both its clinical product candidates and preclinical portfolio. The company recently achieved its

goal to complete a major collaboration following the Sanofi licensing agreement, and it continues to work towards strategic development

collaborations for its pipeline. Additional milestones and expected progress during 2022 include:

Full-Year 2021 Financial

Cash and Cash Equivalents:

Cash and cash equivalents were US$174.4 million

as of December 31, 2021, compared to US$75.2 million as of December 31, 2020. The

increase was mainly due to net proceeds of US$145.9 million from the company's Initial Public Offering in February 2021. Further,

the year-end 2021 cash balance does not include the US$3 million milestone payment from Exelixis received in January 2022, or the

expected US$17.5 million upfront payment from Sanofi for the recently announced technology licensing collaboration.

Net revenue in 2021 was US$10.2 million compared

to US$0.7 million in 2020. The increase was due to recognition of US$8.5 million from the collaboration and technology license agreement

with Exelixis and a payment of US$1.2 million from Dragon Boat Biopharmaceuticals, a subsidiary of Sanjin, related to the companies'

collaboration to develop antibody-based therapies. Due to the Exelixis collaboration, contract liabilities were US$5.5 million as of December

31, 2021, compared to US$0.7 million as of December 31, 2020.

Research and Development (R&D) Expenses:

R&D expenses were US$68.1 million for the year ended December 31,

2021, compared to US$33.5 million for the same period in 2020. The increase in R&D was primarily due to an increase in personnel,

including non-cash share-based compensation of US$13.6 million, and greater preclinical testing, clinical activities and CMC activities

(provided by related parties and third parties) associated with the company's three clinical candidates and five preclinical programs

in the IND-enabling phase.

General and Administrative (G&A) Expenses:

G&A expenses were US$14.4 million for the

year ended December 31, 2021, compared to US$10.3 million for the same period in 2020. The increase was primarily due to an increase in

personnel, professional fees and office-related expenses.

The Company reported a net loss of US$73.2

million and US$42.4 million for the full year ended December 31, 2021, and 2020, or (US$1.46) and (US$2.67) per ordinary share on

diluted basis, respectively. The 2021 net loss was higher largely due to increases in clinical, operating and CMC activities.

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. The Non-GAAP net loss was US$54.5 million for the year ended December 31, 2021, compared

to US$32.3 million for the same period in 2020. 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

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