This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk17: Welcome to the ADC Therapeutics fourth quarter and full year 2022 financial results conference call. My name is Andrea and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. During the question and answer session, if you have a question, please press star, then 1-1 on your touchtone phone. I will now turn the call over to Amanda Lashbaugh, Investor Relations Manager. Amanda, you may begin. Thank you.
spk01: Thank you, operator.
spk20: This morning we issued a press release announcing our fourth quarter and full year 2022 financial results and business updates. This release is available on the ADCT website at ir.adctherapeutics.com under the press releases section. On today's call, Amit Malik, Chief Executive Officer, Kristen Harrington-Smith, Chief Commercial Officer, Mohamed Zaki, Chief Medical Officer, and Pepe Carmona, Chief Financial Officer, we'll discuss recent business highlights and review our fourth quarter and full year 2022 financial results before opening the call for questions. Before we begin, I would like to remind listeners that some of the statements made during this conference call will contain forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Examples of forward-looking statements include those related to our future financial and operating results our ability to achieve our guidance for 2023's and long-term revenue, operating expenses and cash requirement projections, future revenue growth, prescription volume, product launches, and market share for our products either alone or through our foreign partners, timing and results of ongoing and future development programs and clinical trials for our products either alone or in combination with our partner products, FDA and foreign regulatory authorities' actions and potential regulatory approval for our products, either alone or in combination with our strategic partners' products, future strategic partnerships and business development efforts, and our ability to repay our outstanding debt obligations. These forward-looking statements are subject to certain risks and uncertainties, and actual results could differ materially. They are identified and described in today's press release, in the accompanying slide presentation on slide two and in the company's filings with the SEC on form 20F and is updated in ADCT's recent periodic filings on form 6K. ADCT is providing this information as of the date of today's conference call and does not undertake any obligation to update any forward-looking statements contained in this conference call as a result of new information, future events, or circumstances after the date hereof except as required by law or otherwise. The company cautions investors not to place undue reliance on these forward-looking statements. Today's presentation also includes non-IFRS financial measures. These non-IFRS measures have limitations as financial measures and should be considered in addition to and not in isolation or as a substitute for the information prepared in accordance with IFRS. You should refer to the information contained in the company's fourth quarter and full year earnings release for definitional information and reconciliations of historical non-IFRS measures to the comparable IFRS financial measures. It is now my pleasure to pass the call over to Amit Malik. Amit?
spk15: Thanks, Amanda, and thank you all for joining us today. 2022 was a year of evolution for ADC Therapeutics. a year in which we laid the groundwork to help optimize Zonlanta's potential, prioritize our pipeline, strengthen our leadership team, and bolster our capital position, all with the intention of elevating the company to the next level. We are now positioned to execute our strategic initiatives in 2023 and unlock the tremendous untapped value of the company. We expect to see this value unfold through our three core pillars of growth, maximizing the Zonlanta opportunity, advancing our PVD-based pipeline, and expanding our ADC platform. Beginning with the highlights of the quarter, Denlata net sales were $19.8 million in the fourth quarter, a 16.5% increase year-over-year, and $74.9 million for the full year. We are encouraged to see strong underlying trends and have a focused plan in place to help drive future growth. Kristen will take you through these initiatives momentarily. By executing successfully, we expect to drive Zinlat to net sales by a double-digit percentage year over year, even when taking into account the gross to net headwinds and expected approval of buy specifics. We also expect Zinlat to achieve commercial brand profitability this year and for its sales to begin funding pipeline development by the end of the year. As a reminder, while success in the third-line, third-line-plus setting is hugely important, We believe this patient segment only represents around 20% of the commercial potential for Zynlanta. The larger opportunity lies in combinations in earlier stage settings. Here, we firmly believe that Zynlanta's strong single-agent activity and manageable side effect profile make it an ideal combination partner of choice. We are exploring Zynlanta in combination with rituximab in earlier lines of therapy in the LOTUS-5 and LOTUS-9 studies. We are also excited about combining Zonlanta with bispecifics, which we are investigating in the Lotus 7 study. If we are able to expand our approved indication and capture earlier lines, we believe combination opportunities for Zonlanta have the potential to deliver peak annual sales of between $500 million and $1 billion in the U.S., with additional opportunity through partnerships ex-U.S. Regarding geographic expansion, we were very pleased to see Zenlon to receive approval in December from the European Commission and the UK MHRA for the treatment of relapsed or refractory DLBCL. Subsequently, on February 7th, our European partner, Sobe, received conditional marketing authorization. We are encouraged that the team is making good progress and expect Sobe to launch in Europe in the second quarter of this year. As I turn to the rest of our pipeline, we are looking forward to multiple value-driving catalysts across our portfolio in the next 12 to 18 months, including preliminary data for ADCT 901, targeting CAG1, and ADCT 601, targeting Axel. In an effort to prioritize these programs and to potentially capture the full opportunity for Zinlata, we made the decision not to pursue further clinical development of CAMI on our own, but instead, to seek a partnership based on its positive Phase 2 data. We are strategically advancing the rest of our portfolio programs, and Mohamad will provide a more detailed update in a few minutes. Touching briefly on the financials, at year end, we have a strong balance sheet with $326 million in cash, and with the anticipated milestone payments and lower operating expenses, we expect our cash runway to extend into mid-2025. Moving to recent corporate events and as disclosed in regulatory filings, our largest shareholder, Aubin Therapeutics, completed a secondary sale of a significant portion of its holdings to meet a debt obligation. The secondary offering of 12 million shares was placed in the hands of high quality investors and has allowed us to broaden and strengthen our shareholder base. Following the completion of the transaction, Aubin's holdings has decreased from approximately 28% of outstanding shares in December to roughly 8% after the offering, and its remaining shares are locked up for 12 months. The high level of interest shown by top-tier investors during the process was especially encouraging. Last but certainly not least, I'm thrilled that we have been able to continue to strengthen our management team with the addition of truly high-caliber professionals. I would like to take this opportunity to welcome Kristen Harrington-Smith, our Chief Commercial Officer, Mohamed Zaki, our Chief Medical Officer, and Pepe Carmona, our Chief Financial Officer. We believe these new leaders bring the necessary capabilities to unlock the full value of the company and will be critical in advancing us through the next phase of growth. In the next three to five years, we expect to continue to grow Zanata Sales, advance the pipeline, broaden our scope with new partnerships, and move toward profitability. With that, I would like to turn the call over to Kristen for a commercial update. Kristen?
spk18: Thanks, Amit. It is my pleasure to share an update on the Zinlanta launch. As Amit mentioned, we are seeing strong underlying demand trends, which have accelerated in the past two quarters. I'm excited by the opportunities we have to build on this momentum, and I want to spend a few minutes outlining how we've refined our strategy and initiatives to deliver Zinlanta's full potential. It all begins with understanding the product, the market, and the various stakeholders. My focus during my first few months has been on listening and learning from the team and key thought leaders. Following this deep dive, it's clear that the key to delivering our growth aspirations for Zenlanta in the near term will be in the quality of our execution, and in particular, in doing a few things really well. We are focusing our cross-functional team on three key imperatives. One, driving awareness of Zenlanta's differentiated profile, Two, educating physicians to optimize the patient benefit. And three, continuing to build advocacy with key thought leaders focusing on clear patient types. Executing on these three aspects of our strategy, I believe we will capture the opportunity for growth in the third line, third line plus setting, both in the near term and over the longer term, recognizing that this is a marathon and not a sprint. Let me now spend a moment explaining on each of these three elements of our strategy. Starting with driving awareness, Zinlanda has a uniquely differentiated product profile, which we believe positions it to become the standard of care in the third-line, third-line-plus setting. First, it has strong single-agent activity. It's associated with a rapid time-to-response with a median of just 41 days. It has a manageable safety profile with no cytokine release syndrome and a low incidence of neuropathy. Lastly, it has a relatively patient-friendly administration schedule requiring a 30-minute infusion cycle once every three weeks. The second strategic initiative is to educate physicians and nurses on the proper dosing to achieve the best clinical outcome for patients and the manageable safety profiles in long-dose, what to expect, and how to mitigate potential adverse events. We believe Zinlanza's safety profile is favorable in the Third Line, Third Line Plus setting, and we need to keep reinforcing this important message. Lastly, we need to work closely with our thought leaders and for them to educate and share their Zinlanza experience with their peers in the community. The Third Line, Third Line Plus setting landscape is increasingly complex with the availability of new innovative options. Now more than ever, the community is looking to the thought leaders to help identify the best options for post-Card C patients and for those who don't get to Card C. As a reminder, community centers account for roughly 60% of diffuse large B-cell lymphoma patient volume as compared to 40% in the academic centers where Zinlata is mainly prescribed today. Taking a closer look at the academic versus community setting, we have already established a strong foundation in the academic setting. Here, around 80% of accounts have experience with Zynlanta. Our focus will be on driving utilization in the post-Carty patients, since approximately 60% of these patients will unfortunately relapse. The bigger opportunity for us is in the community, where we have the potential to drive much greater breadth of experience At the start of 2022, roughly 25% of community accounts had tried Zinlanta, and we grew that to almost 35% by the end of the year. Based on the differentiated profile I discussed earlier, we believe Zinlanta is ideal for the community, specifically for the large proportion of patients, more than three-quarters, who are unable to get to CAR-C due to the complexity, toxicity, or lack of access. Again, we want to reinforce that the community setting is our greatest opportunity to drive growth. We recognize adoption is slower as the market is highly fragmented, but we are making steady progress and are encouraged that once physicians are familiar with Zinlanta, they tend to continue to prescribe it. We have an opportunity to increase awareness of Zinlanta's differentiated profile and the advantages it can bring to patients and physicians. We know from brand impact data that roughly one in three treaters has unaided awareness of Zinlanta, which lags that of other key competitors in the market. We have seen a consistent improvement over the past year, but we can clearly do a lot more. By sharpening our execution, particularly our promotional efforts focusing on Zinlanta's unique profile, we are confident we can drive much higher levels of awareness so that Zenlanta becomes top of mind with community physicians. All our focused initiatives are critical to expanding adoption and utilization. And what is really important here is that when healthcare systems try Zenlanta, they continue to order it. In fact, at the end of 2022, we saw 84% place repeat orders. To close, we are very encouraged by the recent trends in Zinlanta uptake and utilization, and we have fine-tuned our strategy to fully capture the opportunity for this important medicine in the third line, third line plus setting. Now, I'll turn the call over to Mohamed to provide an update on our pipeline. Mohamed?
spk22: Thank you, Kristen. It is my pleasure to share an update on the pipeline. First, I want to discuss the lifecycle management program for Zinlanta. we see potential for the treatment to be a key player in select indication. As you see here, despite current treatment options and emerging therapies, distinct unmet need remains in all lines of therapy. Having spent my entire career in the hematology and oncology space, I appreciate what Zinwanda can do for patients. And at this point, I believe we have barely scratched the surface. As Kristen described earlier, Zenlonta has already demonstrated a compelling and uniquely differentiated profile in the third line setting. And our strategy here is to maximize patient utilization. The larger opportunity, however, lies in earlier lines and in combinations. Xenlonta is the only approved T19 directed treatment option outside of CAR T to have demonstrated single-agent activity in DLD-CL and no known overlapping toxicities in combinations currently being studied. We believe Xenlonta has the potential to become the combination agent of choice. and eventually a backbone therapy in all lines of DLBCL. When we think about the second line, DLBCL setting, the current treatment includes stem cell transplant, CAR T, targeted therapies, and chemo-based regimens. Going forward, we expect to see increasing use of CAR T, but even with this, there will still be unmet medical need and opportunity for those who are not eligible or cannot access transplant or CAR T. Here we are exploring the combination with rituximab in our ongoing group of five study for second line plus DLPCL patients not eligible for transplant. This combination could benefit patients even if they received prior CAR T or if they are not eligible for CAR T. The LUTF-5 safety run-in produced early encouraging efficacy data. And the enrollment of approximately 350 patients is expected to be completed next year. Another potential application for the rituximab combination is in the frontline therapy where there is a great need among unfit or frail patients not able to tolerate full doses of RCHOP. While approximately 85% of patients receive RCHOP and the regimen is curative in about 60% of patients, this leaves a significant population that is unable to tolerate RCHOP and has poor outcomes. physicians are looking for non-systemic chemo-based regimen with better outcomes in this setting. Based on this unmet need and the de-risk profile of Xelonta, we are conducting the Phase II LUTAS9 study. This is an open-label study in the unfit and frail patients with results expected next year. We believe the potential benefit is supported By encouraging data from LUTAS2, the data showed Zenlanta had a similar overall response in patients over and under 75 years of age, with no notable safety issues in the older patients. In addition, data from safety run in portion of LUTAS5 further supports the use of this non-systemic chemo combination and increases the likelihood of success. Beyond the combination with the epoxy map, we are exploring novel combinations. We are particularly excited about the possibility of combining the non-tellers bispecifics with their distinct mechanism of action and toxicity profile. In the LUTAS 7 study, We are evaluating the combination with Roche's glufetumab and mosin-tuzumab, as well as polituzumab. We expect to have early data from these studies next year. We also have a collaboration with IgM to combine with its bispecific imputamab. Beyond our own clinical studies, we are encouraging to see substantial interest from investigators to explore Zynlanta in different combinations, including bispecifics in different treatment settings and in other indications. We are closely following those studies to further understand Zynlanta's potential. Investigators are keen to see whether Zynlanta's stronger profile in the challenging DLBCL could potentially translate into other areas of C19 disease biology, such as CLL, follicular lymphoma, and mantle cell lymphoma. On my final slide, I would like to discuss our robust pipeline beyond the lung, starting with our company-sponsored program, AGCT901, targeting TAG1 is a novel first-in-class that target various solid tumors. The first one, dose escalation, is proceeding, and we have not yet reached the maximum tolerated dose. We have decided to amend the protocol to explore different dosing schedules to optimize the potential clinical outcomes for patients and to prepare for regulatory interactions as part of Project Optimus. We now expect to share preliminary data in the first half of 2024. Now looking at ADCT601 targeting Axel. Axel is a validated target overexpressed in many solid tumors, including sarcoma and non-small cell lung cancer. The phase one study to optimize the combination with gemcitabine and to explore single agent activity is progressing. In-parallel, an IHC assay for possible biomarker approach is being finalized. Preliminary data from the Phase I dose escalation and expansion study are expected in the first half of 2024. ADCT212 is a next-generation PPV-based ADC targeting PSMA. Evaluated target overexpressed in the majority of metastatic castration-resistant prostate cancers. We expect to initiate the Phase I study in the first half of 2024. Now, for our programs in collaboration, ADCT 602 targets CD22. MD Anderson Cancer Center presented some encouraging signs of activity from the Phase I study at ASH in a small number of acute lymphoblastic leukemia patients. The Phase I dose expansion study is expected to complete in the first half of 2024. And finally, ADCT701 targeting DLK1, a collaboration with NCI in neuroendocrine malignancy. We expect the Phase I study to be initiated in the second half of the year. I am really excited about the robust pipeline we have developed with multiple catalysts over the next 12 to 18 months. This is one of the reasons I came to the company. I look forward to reporting on the evolving news flow from our pipeline over the coming months. With that, I will turn the call over to Pepe to give a financial update. Pepe?
spk26: Thank you, Mohamed. Starting with our balance sheet, as of 31st of December, we had cash and cash equivalent of $326 million, representing a $55 million reduction from our position at the end of the third quarter. Subsequent to the year end, we received a $50 million milestone from SOBI, given European approval of Simplonta, and we also expect to receive a $75 million milestone from healthcare royalty partners on first commercial sales in Europe expected in the second quarter of the year. As Amit noted, based on our business plan, the milestone payment I mentioned, and further productivity initiatives underway, we expect that our cash runway now extends into mid-2025. Turning to the P&L, Zimlanta Net sales were $19.8 million in the fourth quarter. up 16.5% versus Q4 of 2021, while full-year net sales more than doubled to $74.9 million with the first full year of sales, compared to $34 million in a partial year in 2021. License revenues amounted to $50 million in the fourth quarter, which reflected the from For the full year, license revenue of $135 million also included $85 million in upfront payments from our partners, Sobi and Mitsubishi Tanabe. Cost of product sales amounted to half a million dollars in the fourth quarter and $4.6 million for the full year. In addition to a full year of commercial activity, this expense line reflected impairment charges for products intermediates and antibodies that did not meet the company's specifications. Importantly, these specifications issues did not and are not expected to impact our ability to supply commercial products. Our largest expense line, of course, continues to be R&D, where, as you heard today, we're committed to invest behind Simplonta and our promising early-stage pipeline programs. R&D expenses was $48.7 million in the fourth quarter and $187.9 million for the full year. Sales and marketing expenses was $16.2 million in the fourth quarter and $69.1 million for the full year. This reflected a full year of professional expenses relating to the commercial line to Simplonta partially offset by lower share-based compensation in the fourth quarter. DNA expense was $15.1 million in the fourth quarter and $72 million for the full year. This reflected higher professional fees and costs associated with the C-suite transition, partially offset by a lower share-based compensation in the fourth quarter. Moving to the bottom of the P&L, on an adjusted basis, we reported a net loss of $7.9 million for the fourth quarter, at $0.10 per diluted share. For the full year, our adjusted net loss was $81.7 million, or $1.05 per diluted share. Now turning to our guidance, based on the market dynamics and the growth initiatives which Kristen highlighted, we expected to grow Zimlanta net product sales by double-digit percentage points year-over-year. This takes into account significant gross-to-net headwinds compared with 2022. Specifically, we expect a negative gross-to-net impact of approximately 2 to 3 percentage points from our GPO contracting. together with a negative impact of mid to high single-digit percentage points to reflect the new Medicare Part B wastage policy regarding discarded units that was implemented at the beginning of 2023. In terms of total operating expenses, we expect a decrease in 2023 and 2024 as compared to 2022. reflecting prioritization and productivity efforts across all expense categories. Finally, moving to the upcoming catalyst. We have a number of different value-driving catalysts over the next 12 to 18 months and well within our cash runway. Starting with Zimlanta, this year, in addition to double-digit growth, we also expect to achieve a commercial brand profitability. meaning we will more than offset the total cost of commercialization, medical affairs, and all related costs, so that Zinlonta, by the end of the year, starts to pay for the development of new indications and the pipeline. Following European approval of Zinlonta, we expect our partners Zobby to launch in the second quarter of this year. In the second half of the year, we expect to initiate the phase one study of ADCT 701 targeting DLK1. Next year, we will complete the enrollment of our LOTUS V confirmatory study in the second line setting. We will also share some preliminary results from our LOTUS IX and LOTUS VII studies next year. In terms of the pipeline, in the first half of 2024, We expect to share preliminary data from ADCT 901 targeting CAC 1 and ADCT 601 targeting AXA. We also expect to initiate the Phase 1 study of ADCT 212 targeting PSMA and for our partner, Andy Anderson, to complete the Phase 1 dose expansion study for ADCT 602 targeting CD22. So a number of different milestones across the company, both with Zimlanta and our pipeline. And of course, we're continuing to advance our technology platform. With that, I will turn the call back to Amit for closing remarks. Amit?
spk15: Thank you, Kristen, Mohamed, and Pepe. To conclude, we have a clear roadmap and the capabilities to execute in 2023 and to build ADC therapeutics for years to come. We are uniquely positioned in the growing ADC space with specialized capabilities from discovery through to commercialization and have over a decade of experience. We have a validated technology platform, a rich pipeline of hematological and solid tumor programs, and an innovative toolbox to develop next-generation assets with novel antibody constructs and payloads. And last but not least, we have a strengthened and highly talented team in place to execute on our strategies. We look forward to keeping you updated on our ongoing progress. Now the team will be available for questions. Operator?
spk08: Thank you.
spk17: We will now begin the question and answer session. If you have a question, please press star then 11 on your touch tone phone. If you wish to be removed from the queue, please press star 11 again. If you're using a speakerphone, you may need to pick up the handset first before pressing the numbers. Once again, if you have a question, please press star, then 11 on your touch-tone phone. Please stand by while we compile the Q&A roster. Kelly Shih with Jefferies is online with a question. Please go ahead.
spk19: Thank you for taking my questions. The first is regarding the OPEX. Can you share more details on the OPEX reduction in 2023? And where do you plan to cut costs from, and how should we think about magnitude of the plan cost reduction? Thank you, and I have a follow-up.
spk24: Hi, Kelly. Thanks for the question. So, we expect to reduce costs compared to 2022 for both years 2023 and 2024.
spk26: On the R&D line, you should expect a reduction because we are focusing our resources in the most impactful and high return on investment projects that we have in the pipeline. As you know, we have discontinued several projects that we consider less attractive. Some of them might end up being potentially partnered, like Cummings. And on the SG&A side, we are driving productivity. We have an entire new team that have looked at the company cost structure with fresh eyes. So we believe there's significant opportunity to reduce costs year over year.
spk25: The second question I couldn't hear you. You type on something else. Thank you.
spk19: Yeah, I also have a question regarding the ADC-T601 program targeting exo. Do you plan to screen patients with positive exoexpression level for the dose escalation phase for also like sarcoma and the non-small cell lung cancer cohorts? Or this is only applied to other tumor indications? And also, what is the rationale for the combo arm with the gemcitabine in sarcoma? And also, what information do we have regarding 601-50 profile at the moment? Thank you.
spk22: Thanks for the question. And we do or are planning to collect biopsies for all patients currently ongoing in the study in order for us to possibly test retrospectively for access expression. The current protocol right now does not select patients. And the assay is being developed in para. As I mentioned, when it's ready, we'll be able to test patients for expression. In terms of the combination with gemcitabine, gemcitabine is very active and considered one of the standard of care used in sarcoma. So it's naturally to combine as an add-on strategy in the combination and see if we can improve standard of care for hopeful future studies from a regulatory perspective to be able to isolate the effect of the drug. Sure, what was the third question? Sorry.
spk19: The safety profile of the 601.
spk22: The safety profile? Yes. We are currently going into the escalation phases of the protocol, and so far we have not reached the maximum dose.
spk08: Thank you very much. Thank you. One moment for our next question. Our next question comes from Gregory Renza with RBC Capital Markets.
spk17: Please go ahead.
spk14: Hey, everyone. This is Sudan. Logan Nathan on for Gregory Renza. Thank you for taking my questions. And congrats on the great quarter with Zinlanta and great year going forward. I specifically wanted to ask on how the competitive landscape may potentially change as you go forward with LOTUS 5, LOTUS 7, LOTUS 9 programs and look for label expansion in the earlier lines of DL-BCL therapy. Are there kind of developments occurring kind of tandem at this point that may change how a comparator arm is looked at or what standard of care may be that should be a comparator arm for these Zolanta trials? you know, are these things, developments that could occur in the one to five year timeframe? And just, you know, wanted to get your take on how that's gonna play out in the years to come.
spk15: Yeah, so I think maybe I'll start and then, you know, Mohamed and Kristin can feel free to add on to it. You know, as you said, the DLBCL market is quite dynamic and there has been a lot of change. I mean, for example, CAR Ts are moving pretty clearly, particularly academic institutions, from third to second line setting. That's, I would say, in the academic setting, shrinking some of the population that's not either going to get a CAR T or a transplant. Now, of course, in the community, CAR T use is much more limited, and so there still remains quite a sizable non-transplant, non-CAR T population in the second line population. In terms of the comparator arm, which is our GEMOX, we don't anticipate any change. I mean, that's been you know, discussed obviously with the FDA from a regulatory standpoint, and we feel like we still have the right comparator arm, the right study design to move towards approval on a broader label in that second-line setting. With the front-line setting, there is also a lot of competitive dynamics going on. As you know, you know, 85% of patients can tolerate full doses of R-CHOP, and R-CHOP has very good outcomes. I mean, 60% of patients are going to get cured, so it really is the standard of care, and when you look at a lot of trials, whether it be with Polivy or the bispecifics, many of them are trying to augment RCHOP and to try to deliver even better outcomes for those 85% of patients who can tolerate RCHOP. But for the 15% of patients who are frail and unfit, these are patients, you know, 80 years and above, you know, with or without comorbidities, these patients oftentimes can't tolerate full doses of RCHOP and are getting mini RCHOP or other chemotherapy regimens. And the outcomes are much poorer. This is where we're playing right now with some non-tough phosphorus toxin map with our Lotus 9 study. And in this population, it's a single arm study, so it's not really a comparator at this point. You know, if we were to move forward, obviously the comparator, you know, for this is really mini RCHOP, and that hasn't changed. So we don't think the competitive landscape is going to alter what our current development plans are. I think the big thing could be the introduction of bispecifics, you know, where they have the chance to start to, you know, over time potentially change the treatment landscape across all lines of therapy. And we think we're actually well positioned to partner with bispecifics. You know, as the only targeted CD19 therapy with single agent efficacy and manageable side effect profile, and we believe has the potential even to be not overlapping, of course, has to be tested. we are uniquely positioned to combine across different biospecifics. And we're doing that in our LOTUS 7 study as well as in partnership with IGM with their Imvodimab compound. So we think we actually have a chance to combine and actually ride with one of the biggest competitive changes that I think will affect the OBCL over the coming years.
spk07: Thanks. Really appreciate that. And congrats on the quarter again.
spk17: Thank you. One moment for our next question. Our next question comes from Matthew Harrison with Morgan Stanley.
spk08: Please go ahead. Our next question comes from Matthew Harrison with Morgan Stanley. Please go ahead. One moment for our next question. Our next question comes from Noreen Quibria with Capital One Securities.
spk17: Please go ahead.
spk16: Hi, good morning. Congrats on the progress and thanks for taking my questions. So first one, I guess it's very basic. Are you able to comment on Zinlanta's market share now in the third line, third line plus DLBCL, you know, and what fraction have you penetrated to date, you know, and how do you see that penetration with respect to obviously Paul Levy moving to the front line?
spk15: Yeah, I can just say we still believe that there's a lot of potential, but I'm going to let Kristen comment further on some of the details.
spk18: Sure. So I've worked in the DLBCL space for years now, and there really is no good source of data for market share, especially in the later lines. It's a very dynamic and fragmented space. However, when we look at our research and we use brand impact data, What we're seeing is that we're leading a new patient share in the third line setting, and we are really encouraged by this and confident in our potential to continue to further penetrate the third line space and become the standard of care here. When you also talk about market penetration, one of the things that I shared up front was that where we see our greatest opportunity is in the community setting where only 35% of community Sites have tried Zenlanta. The good news is we know that when they try it, they continue to repeat orders. So, that is our greatest opportunity to continue to grow that share in the third line setting.
spk16: Okay, great. That's helpful. So, two more. I guess the next one is probably for Pepe. You know, are you able to provide a bit more color on the SOBE launch, like which countries might be targeted first, and if you might be able to give any guidance for that trajectory?
spk26: We haven't provided much guidance there, but what we can tell you is that because it's approved with a single agent and with a single arm, the market access process is going to take longer to have approvals throughout Europe, so it's going to be a gradual growth.
spk25: I'm going to see if you want to add something.
spk15: Yeah, as you know, Noreen, I mean, market access is country by country in Europe, and it can take up to 12 months. And as Pepe said, given that it's approved with a single-arm study, it's going to result in very favorable reimbursement in some countries and more challenging reimbursement in other countries. So I see the launch in Europe as kind of phase one with this current study. Lotus 5, when we have a comparative study, will open up the full opportunity in Europe. But if you think more longer term about the European opportunity, I think the volume potential in Europe may be even greater than it is in the U.S. because CAR T penetration is much less.
spk16: Okay. That's very helpful. And if I could just squeeze one more in for Mohamed. With respect to the CAG 901, can you talk a bit more about the amendment to the protocol and the different dosing schedules What's the rationale behind that decision? And given that sort of shift, how many patients should we expect in the upcoming update that will come up?
spk22: Thank you for the question. Yeah, thank you for the question. Actually, as you know, I came to the company almost eight weeks ago with a fresh perspective and looking at CAG1 as in novels. agent, actually. So we also have quite an experience with discussion with the agency about Project Optimus, which technically the agency is actually exploring multiple dosing schedules. So we took a decision to post installation and amend the protocol to explore different dosing schedules to maximize the experience for patient needs and patient utilization to prepare for possible future meeting with regulators and also to prepare for the most convenient those ready for the study. So as you know also, Project Optimus draft guidelines just got published in January 2023, so many companies around the world right now are preparing and adjusting the protocol to accommodate for the requirements, the new requirements, as I say, for regulators to come to them with multiple doses with number of patients in each dose in each indication. So I hope that explains your question.
spk15: Yeah, I think we expect that dose escalation is going to be probably in general, you know, a lengthier process because you're going to have to dose escalation expansion because you're going to have to expand at multiple doses.
spk16: Yeah. All right. Okay. Thank you. That's all for me.
spk08: Thank you. One moment for our next question.
spk17: Our next question comes from Matthew Harrison with Morgan Stanley. Please go ahead.
spk10: Hi, this is Chris. I'm from Matthew. Thank you for taking our questions. I know someone earlier asked about the potential impact of kind of new treatment paradigms entering the market, specifically for biospecifics. Can you help us think about kind of the near-term impact of that entering the market as they penetrate the 3L plus the BCL market? Thank you.
spk18: Sure. So we expect biospecifics to play a role in the third line setting upon approval. We do think that uptake in the community will take longer. In general, the community is slower to adopt new therapies. And given the risk of CRS and ICANNs with bispecifics, we think initial uptake will be limited to the academic centers. When it comes to competing in that space in the academic centers, I, you know, we've been competing with bispecifics for years now in that setting given the multiple Multiple biospecifics that are being studied in clinical trials.
spk04: Okay, thank you.
spk15: I would just add that the penetration of any agent in the third-line setting is still relatively low. So there's clearly room for biospecifics to penetrate, particularly in the academic setting, and for us to continue to grow in both the academic and the community settings.
spk10: Great, thanks.
spk17: Thank you. One moment for our next question. Our next question comes from Boris Peeker with Cowen. Please go ahead.
spk11: This is Nick on for Boris. Thanks for taking our question. I just have a couple queries in the Lotus trials. For the Lotus 5 trial, I know this is a confirmatory trial from the single arm. But can this be used for an SMDA or regulatory submission for 2LD-BLBCL in both the U.S. and the EU? And then also second, for Lotus 7, which lines of therapy are you guys looking at, and is that different based on which combination approaches or whatnot? Yeah.
spk22: So regarding Lotus 5, you're absolutely correct. It is a regulatory study for both U.S. and ex-U.S. It is a confirmatory study with the potential also to get an SNDA for the second line plus setting. Remember, the long-term now is in the third line plus setting as a single agent. We are maximizing that and getting into the second line plus agent with substantial number of patients in that setting, and the plan is to go worldwide with that approval. Now, I'm sorry, what was the question? And then Lotus 7, yeah, for Lotus 7, yeah. For Lotus 7, we're actually, Lotus 7 have multiple agents in combination, including polytuzumab, glufutamab, and mosfetuzumab. We are trying to be the drug of choice in combination with all bispecific, not to mention also that we have a collaboration with IGM with their bispecific. So pretty much we're combining with all bispecifics to be a backbone, whoever any of them gets approved and become in the landscape would be able to combine with. I hope that's answered your question.
spk15: Yeah, and in terms of lines of therapy, I mean, I think it'll be an earlier lines of therapy. Particularly second line, I think there's an opportunity to really change the landscape. And particularly if the combination works in a way that has manageable side effect profile and leads to even better outcomes, deeper responses, and more durable responses, you can imagine this starting to change and expand the opportunity for targeted therapy combinations in that second line setting. Great. Thank you very much.
spk17: Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone. Please stand by for our next question.
spk08: Our next question comes from Brian Chang with J.P. Morgan. Please go ahead.
spk13: Hey, guys. Thanks for taking my question. My first question is for Kristen. What was the split of academic versus community use in the last quarter for Zalanda? And as you emphasize that community market is where you see a lot of growth near term, how long do you think that it will take you to get more traction there? And how do you think about just the changes with Bicistive coming in? And I have a follow-up. Thank you.
spk18: Okay, so in terms of the split of academic versus community use, it's roughly 50-50. We just started to see, as we said, the penetration in the community is consistently growing, and we've just started to match the use from an academic perspective in terms of volume. Your second question was how long to penetrate the community. What we see is community treaters are generally slower to adopt new therapies. For most new oncology launches, it probably takes about four to five years to really start to hit peak market share. But what we do see for community treaters is that because they're slower to adopt, it could take longer in that setting. But we will continue to chip away since we're at About 35%, our goal is to really match what we're seeing in the academic setting.
spk15: And I'd also add, Brian, that there's a long tail. So there's a lot of fragmentation in the community centers. A lot of community doctors are seeing a patient every few months. But they also tend to be a lot stickier. So behavior change works both ways. It takes longer to adopt, but what we see is the counts that are adopting are repeating and sticking with the product. And we keep growing penetration month over month. So I think as that happens, you know, this is a great opportunity. And that's a place where you had asked about bi-specifics, and I'll let Kristen comment further. Bi-specifics are going to have a much more challenging time, we believe, in the community initially, just given the safety profile. In the academic setting where we've penetrated about 80% of accounts, there's still room for depth, we think, even with bi-specifics. But I'll let Kristen comment further on the bi-specific point.
spk18: Sure. I don't have much else to add to that, but we just We see the safety profile of biospecifics being one where the initial uptake will be in the academic setting. CRS, ICANNs, those are not adverse events that the community is generally accustomed to treating right now. That's why CAR Ts are reserved for the academic setting. So we feel it'll take time. And again, that is where we have our greatest opportunity right now to grow in Lhasa.
spk13: Great. And then looking at your Lotus 5 in second line in combo with Rituximab, do you have a sense of when we could see the data from that study? And can you remind us whether there's an interim analysis built into this trial? Thank you.
spk22: Thanks for the question. We expect the enrollment of 350 patients to be completed next year. There will not be an interim analysis for the study. It's not built in the protocol. And we'll update when we get closer to the end of the study.
spk15: Yeah, and obviously, you know, any timelines post the enrollment depends. It's an event-driven study. So, you know, in some ways, the longer it goes, the better. But it obviously depends on events. So, you know, once we complete enrollment and the study starts reading out, we'll share information.
spk03: Great, thank you.
spk17: Thank you. We have no further questions at this time. I'd now like to turn it back to Amit for closing remarks.
spk15: Well, thank you all for joining so much of the webcast, and thanks for all the thoughtful questions. We're really excited about our ability to unlock the value in this company by maximizing Zinlanta, by advancing our PVD-based pipeline, and by expanding our ADC platform. We have multiple value-driving catalysts over the next 12 to 18 months, and we look forward to continuing to update you on our progress. Thank you so much for joining.
spk17: Thank you for your participation in today's conference. This concludes the program. You may now disconnect. you Thank you. music Thank you. Thank you. Thank you. Welcome to the ADC Therapeutics Fourth Quarter and Full Year 2022 Financial Results Conference Call. My name is Andrea, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. During the question and answer session, if you have a question, please press star, then 1-1 on your touchtone phone. I will now turn the call over to Amanda Loshbaugh, Investor Relations Manager. Amanda, you may begin.
spk01: Thank you, operator.
spk20: This morning we issued a press release announcing our fourth quarter and full year 2022 financial results and business updates. This release is available on the ADCT website at ir.adctherapeutics.com under the press releases section. On today's call, Amit Malik, Chief Executive Officer, Kristen Harrington-Smith, Chief Commercial Officer, Mohamed Zaki, Chief Medical Officer, and Pepe Carmona, Chief Financial Officer, we'll discuss recent business highlights and review our fourth quarter and full year 2022 financial results before opening the call for questions. Before we begin, I would like to remind listeners that some of the statements made during this conference call will contain forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Examples of forward-looking statements include those related to our future financial and operating results our ability to achieve our guidance for 2023's and long-term revenue, operating expenses and cash requirement projections, future revenue growth, prescription volume, product launches, and market share for our products either alone or through our foreign partners, timing and results of ongoing and future development programs and clinical trials for our products either alone or in combination with our partner products, FDA and foreign regulatory authorities' actions and potential regulatory approval for our products, either alone or in combination with our strategic partners' products, future strategic partnerships and business development efforts, and our ability to repay our outstanding debt obligations. These forward-looking statements are subject to certain risks and uncertainties, and actual results could differ materially. They are identified and described in today's press release, in the accompanying slide presentation on slide two and in the company's filings with the SEC on form 20F and is updated in ADCT's recent periodic filings on form 6K. ADCT is providing this information as of the date of today's conference call and does not undertake any obligation to update any forward-looking statements contained in this conference call as a result of new information, future events, or circumstances after the date hereof except as required by law or otherwise. The company cautions investors not to place undue reliance on these forward-looking statements. Today's presentation also includes non-IFRS financial measures. These non-IFRS measures have limitations as financial measures and should be considered in addition to and not in isolation or as a substitute for the information prepared in accordance with IFRS. You should refer to the information contained in the company's fourth quarter and full year earnings release for definitional information and reconciliations of historical non-IFRS measures to the comparable IFRS financial measures. It is now my pleasure to pass the call over to Amit Malik. Amit?
spk15: Thanks, Amanda, and thank you all for joining us today. 2022 was a year of evolution for ADC Therapeutics. a year in which we laid the groundwork to help optimize Zonlanta's potential, prioritize our pipeline, strengthen our leadership team, and bolster our capital position, all with the intention of elevating the company to the next level. We are now positioned to execute our strategic initiatives in 2023 and unlock the tremendous untapped value of the company. We expect to see this value unfold through our three core pillars of growth, maximizing the Zonlanta opportunity, advancing our PVD-based pipeline, and expanding our ADC platform. Beginning with the highlights of the quarter, Denlanta net sales were $19.8 million in the fourth quarter, a 16.5% increase year-over-year, and $74.9 million for the full year. We are encouraged to see strong underlying trends and have a focused plan in place to help drive future growth. Kristen will take you through these initiatives momentarily. By executing successfully, we expect to drive Zinlat to net sales by a double-digit percentage year over year, even when taking into account the gross to net headwinds and expected approval of buy specifics. We also expect Zinlat to achieve commercial brand profitability this year and for its sales to begin funding pipeline development by the end of the year. As a reminder, while success in the third-line, third-line-plus setting is hugely important, We believe this patient segment only represents around 20% of the commercial potential for Zynlanta. The larger opportunity lies in combinations in earlier stage settings. Here, we firmly believe that Zynlanta's strong single-agent activity and manageable side effect profile make it an ideal combination partner of choice. We are exploring Zynlanta in combination with rituximab in earlier lines of therapy in the LOTUS-5 and LOTUS-9 studies. We are also excited about combining Zonlanta with bispecifics, which we are investigating in the Lotus 7 study. If we are able to expand our approved indication and capture earlier lines, we believe combination opportunities for Zonlanta have the potential to deliver peak annual sales of between $500 million and $1 billion in the U.S., with additional opportunity through partnerships ex-U.S. Regarding geographic expansion, we were very pleased to see Zenlon to receive approval in December from the European Commission and the UK MHRA for the treatment of relapsed or refractory DLBCL. Subsequently, on February 7th, our European partner, Sobe, received conditional marketing authorization. We are encouraged that the team is making good progress and expect Sobe to launch in Europe in the second quarter of this year. As I turn to the rest of our pipeline, we are looking forward to multiple value-driving catalysts across our portfolio in the next 12 to 18 months, including preliminary data for ADCT901 targeting CAG1 and ADCT601 targeting Axel. In an effort to prioritize these programs and to potentially capture the full opportunity for Zinlanta, we made the decision not to pursue further clinical development of CAMI on our own, but instead, to seek a partnership based on its positive Phase 2 data. We are strategically advancing the rest of our portfolio programs, and Mohamad will provide a more detailed update in a few minutes. Touching briefly on the financials, at year end, we have a strong balance sheet with $326 million in cash, and with the anticipated milestone payments and lower operating expenses, we expect our cash runway to extend into mid-2025. Moving to recent corporate events and as disclosed in regulatory filings, our largest shareholder, Aubin Therapeutics, completed a secondary sale of a significant portion of its holdings to meet a debt obligation. The secondary offering of 12 million shares was placed in the hands of high quality investors and has allowed us to broaden and strengthen our shareholder base. Following the completion of the transaction, Aubin's holdings has decreased from approximately 28% of outstanding shares in December to roughly 8% after the offering, and its remaining shares are locked up for 12 months. The high level of interest shown by top-tier investors during the process was especially encouraging. Last but certainly not least, I'm thrilled that we have been able to continue to strengthen our management team with the addition of truly high-caliber professionals. I would like to take this opportunity to welcome Kristen Harrington-Smith, our Chief Commercial Officer, Mohamed Zaki, our Chief Medical Officer, and Pepe Carmona, our Chief Financial Officer. We believe these new leaders bring the necessary capabilities to unlock the full value of the company and will be critical in advancing us through the next phase of growth. In the next three to five years, we expect to continue to grow Zanata Sales, advance the pipeline, broaden our scope with new partnerships, and move toward profitability. With that, I would like to turn the call over to Kristen for a commercial update. Kristen?
spk18: Thanks, Amit. It is my pleasure to share an update on the Zinlanta launch. As Amit mentioned, we are seeing strong underlying demand trends, which have accelerated in the past two quarters. I'm excited by the opportunities we have to build on this momentum, and I want to spend a few minutes outlining how we've refined our strategy and initiatives to deliver Zinlanta's full potential. It all begins with understanding the product, the market, and the various stakeholders. My focus during my first few months has been on listening and learning from the team and key thought leaders. Following this deep dive, it's clear that the key to delivering our growth aspirations for Zinlanta in the near term will be in the quality of our execution, and in particular, in doing a few things really well. We are focusing our cross-functional team on three key imperatives. One, driving awareness of Zinlanta's differentiated profile, Two, educating physicians to optimize the patient's benefit. And three, continuing to build advocacy with key thought leaders focusing on clear patient types. Executing on these three aspects of our strategy, I believe we will capture the opportunity for growth in the third line, third line plus setting, both in the near term and over the longer term, recognizing that this is a marathon and not a sprint. Let me now spend a moment explaining on each of these three elements of our strategy. Starting with driving awareness, Zinlanda has a uniquely differentiated product profile, which we believe positions it to become the standard of care in the third-line, third-line-plus setting. First, it has strong single-agent activity. It's associated with a rapid time-to-response with a median of just 41 days. It has a manageable safety profile with no cytokine release syndrome and a low incidence of neuropathy. Lastly, it has a relatively patient-friendly administration schedule requiring a 30-minute infusion cycle once every three weeks. The second strategic initiative is to educate physicians and nurses on the proper dosing to achieve the best clinical outcome for patients and the manageable safety profile of Zinlanta, what to expect, and how to mitigate potential adverse events. We believe Zinlanza's safety profile is favorable in the Third Line, Third Line Plus setting, and we need to keep reinforcing this important message. Lastly, we need to work closely with our thought leaders and for them to educate and share their Zinlanza experience with their peers in the community. The Third Line, Third Line Plus setting landscape is increasingly complex with the availability of new innovative options. Now more than ever, the community is looking to the thought leaders to help identify the best options for post-Card C patients, and for those who don't get to Card C. As a reminder, community centers account for roughly 60% of diffuse large B-cell lymphoma patient volume, as compared to 40% in the academic centers, where Zinlata is mainly prescribed today. Taking a closer look at the academic versus community setting, we have already established a strong foundation in the academic setting. Here, around 80% of accounts have experience with Zynlanta. Our focus will be on driving utilization in the post-Carty patients, since approximately 60% of these patients will unfortunately relapse. The bigger opportunity for us is in the community, where we have the potential to drive much greater breadth of experience At the start of 2022, roughly 25% of community accounts had tried Zinlanza, and we grew that to almost 35% by the end of the year. Based on the differentiated profile I discussed earlier, we believe Zinlanza is ideal for the community, specifically for the large proportion of patients, more than three-quarters, who are unable to get to CAR-C due to the complexity, toxicity, or lack of access. Again, we want to reinforce that the community setting is our greatest opportunity to drive growth. We recognize adoption is slower as the market is highly fragmented, but we are making steady progress and are encouraged that once physicians are familiar with Zinlanta, they tend to continue to prescribe it. We have an opportunity to increase awareness of Zinlanta's differentiated profile and the advantages it can bring to patients and physicians. We know from brand impact data that roughly one in three treaters has unaided awareness of Zinlanta, which lags that of other key competitors in the market. We have seen a consistent improvement over the past year, but we can clearly do a lot more. By sharpening our execution, particularly our promotional efforts focusing on Zinlanta's unique profile, we are confident we can drive much higher levels of awareness so that Zenlanta becomes top of mind with community physicians. All our focused initiatives are critical to expanding adoption and utilization. And what is really important here is that when healthcare systems try Zenlanta, they continue to order it. In fact, at the end of 2022, we saw 84% place repeat orders. To close, we are very encouraged by the recent trends in Zinlanta uptake and utilization, and we have fine-tuned our strategy to fully capture the opportunity for this important medicine in the third line, third line plus setting. Now, I'll turn the call over to Mohamed to provide an update on our pipeline. Mohamed?
spk22: Thank you, Kristen. It is my pleasure to share an update on the pipeline. First, I want to discuss the Lifecycle Management Program for Zinlanta. we see potential for the treatment to be a key player in select indication. As you see here, despite current treatment options and emerging therapies, distinct unmet need remains in all lines of therapy. Having spent my entire career in the hematology and oncology space, I appreciate what Zinwanda can do for patients. And at this point, I believe we have barely scratched the surface. As Kristen described earlier, Zenlonta has already demonstrated a compelling and uniquely differentiated profile in the third line setting. And our strategy here is to maximize patient utilization. The larger opportunity, however, lies in earlier lines and in combinations. Xenlonta is the only approved T19 directed treatment option outside of CAR T to have demonstrated single agent activity in DLD-CL and no known overlapping toxicities in combinations currently being studied. We believe Xenlonta has the potential to become the combination agent of choice. and eventually a backbone therapy in all lines of DLBCL. When we think about the second line, DLBCL setting, the current treatment includes stem cell transplant, CAR T, targeted therapies, and chemo-based regimens. Going forward, we expect to see increasing use of CAR T, but even with this, there will still be unmet medical need and opportunity for those who are not eligible or cannot access transplant or CAR T. Here we are exploring the combination with rituximab in our ongoing group of five study for second line plus DLPCL patients not eligible for transplant. This combination could benefit patients even if they received prior CAR T or if they are not eligible for CAR T. The LUTF-5 safety run-in produced early encouraging efficacy data. And the enrollment of approximately 350 patients is expected to be completed next year. Another potential application for the rituximab combination is in the frontline therapy where there is a great need among unfit or frail patients not able to tolerate full doses of RCHOP. While approximately 85% of patients receive RCHOP and the regimen is curative in about 60% of patients, this leaves a significant population that is unable to tolerate RCHOP and has poor outcomes. physicians are looking for non-systemic chemo-based regimen with better outcomes in this setting. Based on this unmet need and the de-risk profile of Zolanta, we are conducting the Phase II LUTAS9 study. This is an open-label study in the unfit and frail patients with results expected next year. We believe the potential benefit is supported By encouraging data from LUTAS2, the data showed Xenolonta had a similar overall response in patients over and under 75 years of age, with no notable safety issues in the older patients. In addition, data from safety run in portion of LUTAS5 further supports the use of this non-systemic chemo combination, and increases the likelihood of success. Beyond the combination with rituximab, we are exploring novel combinations. We are particularly excited about the possibility of combining the non-Tau's bispecifics with their distinct mechanism of action and toxicity profile. In the LUTAS-7 study, We are evaluating the combination with Roche's glufetumab and mosin-tuzumab, as well as polituzumab. We expect to have early data from these studies next year. We also have a collaboration with IgM to combine with its bispecific imputamab. Beyond our own clinical studies, we are encouraging to see substantial interest from investigators to explore Zynlanta in different combinations, including bispecifics in different treatment settings and in other indications. We are closely following those studies to further understand Zynlanta's potential. Investigators are keen to see whether Zynlanta's stronger profile in the challenging DLBCL could potentially translate into other areas of C19 disease biology, such as CLL, follicular lymphoma, and mantle cell lymphoma. On my final slide, I would like to discuss our robust pipeline beyond the lung, starting with our company-sponsored program, AGCT901, targeting TAG1 is a novel first-in-class that target various solid tumors. The phase one dose escalation is proceeding, and we have not yet reached the maximum tolerated dose. We have decided to amend the protocol to explore different dosing schedules to optimize the potential clinical outcomes for patients, and to prepare for regulatory interactions as part of Project Optimus. We now expect to share preliminary data in the first half of 2024. Now looking at ADCT601 targeting Axel. Axel is a validated target overexpressed in many solid tumors, including sarcoma and non-small cell lung cancer. The phase one study to optimize the combination with gemcitabine and to explore single agent activity is progressing. In parallel, an IHC assay for possible biomarker approach is being finalized. Preliminary data from the phase 1 dose escalation and expansion study are expected in the first half of 2024. ADCT212 is a next-generation PPV-based ADC targeting PSMA. Evaluated target overexpressed in the majority of metastatic castration-resistant prostate cancers. We expect to initiate the Phase I study in the first half of 2024. Now, for our programs in collaboration, ADCT 602 targets CD22. MD Anderson Cancer Center presented some encouraging signs of activity from the Phase I study at ASH in a small number of acute lymphoblastic leukemia patients. The Phase I dose expansion study is expected to complete in the first half of 2024. And finally, ADCT701 targeting DLK1, a collaboration with NCI in neuroendocrine malignancy. We expect the Phase I study to be initiated in the second half of the year. I am really excited about the robust pipeline we have developed with multiple catalysts over the next 12 to 18 months. This is one of the reasons I came to the company. I look forward to reporting on the evolving news flow from our pipeline over the coming months. With that, I will turn the call over to Pepe to give a financial update. Pepe?
spk26: Thank you, Mohamed. Starting with our balance sheet, as of 31st of December, we had cash and cash equivalent of $326 million, representing a $55 million reduction from our position at the end of the third quarter. Subsequent to the year end, we received a $50 million milestone from SOBI given European approval of Simplonta, and we also expect to receive a $75 million milestone from healthcare royalty partners on first commercial sales in Europe expected in the second quarter of the year. As Amit noted, based on our business plan, the milestone payment I mentioned, and further productivity initiatives underway, we expect that our cash runway now extends into mid-2025. Turning to the P&L, Zimlanta Net sales were $19.8 million in the fourth quarter. up 16.5% versus Q4 of 2021, while full-year net sales more than doubled to $74.9 million with the first full year of sales, compared to $34 million in a partial year in 2021. License revenues amounted to $50 million in the fourth quarter, which reflected the from For the full year, license revenue of $135 million also included $85 million in upfront payments from our partners, Sobi and Mitsubishi Tanabe. Cost of product sales amounted to half a million dollars in the fourth quarter and $4.6 million for the full year. In addition to a full year of commercial activity, this expense line reflected impairment charges for products intermediates and antibodies that did not meet the company's specifications. Importantly, these specifications issues did not and are not expected to impact our ability to supply commercial products. Our largest expense line, of course, continues to be R&D, where, as you heard today, we're committed to invest behind Simplonta and our promising early-stage pipeline programs. R&D expenses was $48.7 million in the fourth quarter and $187.9 million for the full year. Sales and marketing expenses was $16.2 million in the fourth quarter and $69.1 million for the full year. This reflected a full year of professional expenses relating to the commercial line to Simplonta partially offset by lower share-based compensation in the fourth quarter. DNA expense was $15.1 million in the fourth quarter and $72 million for the full year. This reflected higher professional fees and costs associated with the C-suite transition partially offset by a lower share-based compensation in the fourth quarter. Moving to the bottom of the P&L, on an adjusted basis, we reported a net loss of $7.9 million for the fourth quarter, at $0.10 per diluted share. For the full year, our adjusted net loss was $81.7 million, or $1.05 per diluted share. Now turning to our guidance, based on the market dynamics and the growth initiatives which Kristen highlighted, we expected to grow Zimlanta net product sales by double-digit percentage points year-over-year. This takes into account significant gross-to-net headwinds compared with 2022. Specifically, we expect a negative gross-to-net impact of approximately 2 to 3 percentage points from our GPO contracting. together with a negative impact of mid to high single-digit percentage points to reflect the new Medicare Part B wastage policy regarding discarded units that was implemented at the beginning of 2023. In terms of total operating expenses, we expect a decrease in 2023 and 2024 as compared to 2022. reflecting prioritization and productivity efforts across all expense categories. Finally, moving to the upcoming catalyst. We have a number of different value-driving catalysts over the next 12 to 18 months and well within our cash runway. Starting with Zimlanta, this year, in addition to double-digit growth, we also expect to achieve a commercial brand profitability. meaning we will more than offset the total cost of commercialization, medical affairs, and all related costs, so that Zinlonta, by the end of the year, starts to pay for the development of new indications and the pipeline. Following European approval of Zinlonta, we expect our partner Zobby to launch in the second quarter of this year. In the second half of the year, we expect to initiate the Phase I study of ADCT 701 targeting DLK1. Next year, we will complete the enrollment of our LOTUS V confirmatory study in the second-line setting. We will also share some preliminary results from our LOTUS IX and LOTUS VII studies next year. In terms of the pipeline, in the first half of 2024, We expect to share preliminary data from ADCT 901 targeting CAC 1 and ADCT 601 targeting AXA. We also expect to initiate the Phase 1 study of ADCT 212 targeting PSMA and for our partner, Andy Anderson, to complete the Phase 1 dose expansion study for ADCT 602 targeting CD22. So a number of different milestones across the company, both with Zimlanta and our pipeline. And of course, we're continuing to advance our technology platform. With that, I will turn the call back to Amit for closing remarks. Amit?
spk15: Thank you, Kristen, Mohamed, and Pepe. To conclude, we have a clear roadmap and the capabilities to execute in 2023 and to build ADC therapeutics for years to come. We are uniquely positioned in the growing ADC space with specialized capabilities from discovery through to commercialization and have over a decade of experience. We have a validated technology platform, a rich pipeline of hematological and solid tumor programs, and an innovative toolbox to develop next-generation assets with novel antibody constructs and payloads. And last but not least, we have a strengthened and highly talented team in place to execute on our strategies. We look forward to keeping you updated on our ongoing progress. Now the team will be available for questions. Operator?
spk08: Thank you.
spk17: We will now begin the question and answer session. If you have a question, please press star, then 11 on your touchtone phone. If you wish to be removed from the queue, please press star 11 again. If you're using a speakerphone, you may need to pick up the handset first before pressing the numbers. Once again, if you have a question, please press star, then 11 on your touch-tone phone. Please stand by while we compile the Q&A roster.
spk08: Kelly Shih with Jefferies is online with a question.
spk17: Please go ahead.
spk19: Thank you for taking my questions. The first is regarding the OPEX. Can you share more details on the OPEX reduction in 2023? And where do you plan to cut a cost from, and how should we think about magnitude of the planned cost reduction? Thank you, and I have a follow-up.
spk24: Hi, Kelly. Thanks for the question. So, we expect to reduce costs compared to 2022 for both years 2023 and 2024.
spk26: On the R&D line, you should expect a reduction because we are focusing our resources in the most impactful and high return on investment projects that we have in the pipeline. As you know, we have discontinued several projects that we consider less attractive. Some of them might end up being potentially partnered, like Cummings. And on the SG&A side, we are driving productivity. We have an entire new team that have looked at the company cost structure with fresh eyes. So we believe there's significant opportunity to reduce costs year over year.
spk25: The second question I couldn't hear you, you type on something else. Thank you.
spk19: Yeah, I also have a question regarding the ADC-T601 program targeting exo. Do you plan to screen patients with positive exo-expression level for the dose escalation phase for also like sarcoma and the non-small cell lung cancer cohorts? All this is only applied to other tumor indications. And also, what is the rationale for the combo arm with the gemcitabine in sarcoma? And also, what information do we have regarding XO150 profile at the moment? Thank you.
spk22: Thanks for the question. And we do or are planning to collect biopsies for all patients currently ongoing in the study in order for us to possibly test retrospectively for access expression. The current protocol right now does not select patients. And the assay is being developed in para. As I mentioned, when it's ready, we'll be able to test patients for expression. In terms of the combination with gemcitabine, gemcitabine is very active and considered one of the standard of care used in sarcoma. So it's naturally to combine as an add-on strategy in the combination and see if we can improve standard of care for hopeful future studies from a regulatory perspective, to be able to isolate the effect of the drug. Sure, what was the third question? Sorry.
spk19: The safety profile of the 601.
spk22: The toxicity profile? Yes. We are currently going into the escalation phases of the protocol, and so far, we have not reached the maximum dose.
spk08: Thank you very much. Thank you. One moment for our next question. Our next question comes from Gregory Renza with RBC Capital Markets.
spk17: Please go ahead.
spk14: Hey, everyone. This is Sudan. Logan Nathan on for Gregory Renza. Thank you for taking my questions. And congrats on the great quarter with Zulanta and great year going forward. I specifically wanted to ask on how the competitive landscape may potentially change as you go forward with LOTUS 5, LOTUS 7, LOTUS 9 programs and look for label expansion in the earlier lines of DL-BCL therapy. Are there kind of developments occurring kind of tandem at this point that may change how a comparator arm is looked at or what standard of care may be that should be a comparator arm for these Zolanta trials? And then, you know, are these things, developments that could occur in the one to five year timeframe? And just, you know, wanted to get your take on how that's gonna play out in the years to come.
spk15: Yeah, so I think maybe I'll start and then, you know, Mohamed and Kristin can feel free to add on to it. You know, as you said, the DLBCL market is quite dynamic and there has been a lot of change. I mean, for example, CAR T's are moving pretty clearly, particularly academic institutions, from third to second-line setting. That's, I would say, in the academic setting, shrinking some of the population that's not either going to get a CAR T or a transplant. Now, of course, in the community, CAR T use is much more limited, and so there still remains quite a sizable non-transplant, non-CAR T population in the second-line population. In terms of the comparator arm, which is our GEMOX, we don't anticipate any change. I mean, that's been you know, discussed obviously with the FDA from a regulatory standpoint. And we feel like we still have the right comparator arm, the right study design to move towards approval on a broader label in that second-line setting. With the front-line setting, there is also a lot of competitive dynamics going on. As you know, you know, 85% of patients can tolerate full doses of R-CHOP, and R-CHOP has very good outcomes. I mean, 60% of patients are going to get cured. So it really is the standard of care. And when you look at a lot of whether it be with PoliV or the bispecifics, many of them are trying to augment RCHOP and to try to deliver even better outcomes for those 85% of patients who can tolerate RCHOP. But for the 15% of patients who are frail and unfit, these are patients, you know, 80 years and above, you know, with or without comorbidities, these patients oftentimes can't tolerate full doses of RCHOP and are getting mini RCHOP or other chemotherapy regimens. And the outcomes are much poorer. This is where we're playing right now with some non-tough phosphorus toxin map with our Lotus 9 study. And in this population, it's a single arm study, so it's not really a comparator at this point. If we were to move forward, obviously the comparator for this is really mini RCHOP, and that hasn't changed. So we don't think the competitive landscape is going to alter what our current development plans are. I think the big thing could be the introduction of bispecifics, you know, where they have the chance to start to, you know, over time potentially change the treatment landscape across all lines of therapy. And we think we're actually well positioned to partner with bispecifics. You know, as the only targeted CD19 therapy with single-agent efficacy and manageable side effect profile, and we believe has the potential even to be not overlapping, of course, has to be tested. we are uniquely positioned to combine across different biospecifics. And we're doing that in our LOTUS 7 study as well as in partnership with IGM with their Embodimental Compound. So we think we actually have a chance to combine and actually ride with one of the biggest competitor changes that I think will affect the OBCL over the coming years.
spk07: Thanks. Really appreciate that. And congrats on the quarter again.
spk08: Thank you.
spk17: One moment for our next question. Our next question comes from Matthew Harrison with Morgan Stanley.
spk08: Please go ahead. Our next question comes from Matthew Harrison with Morgan Stanley. Please go ahead. One moment for our next question. Our next question comes from Noreen Quibria with Capital One Securities.
spk17: Please go ahead.
spk16: Hi, good morning. Congrats on the progress, and thanks for taking my questions. So first one, I guess it's very basic. Are you able to comment on Zinlanta's market share now in the third line, third line plus DLBCL, you know, and what fraction have you penetrated to date, you know, and how do you see that penetration with respect to, obviously, Paul Levy moving to the front line?
spk15: Yeah, I can just say we still believe that there's a lot of potential, but I'm going to let Kristen comment further on some of the details.
spk18: Sure. So I've worked in the DLBCL space for years now, and there really is no good source of data for market share, especially in the later lines. It's a very dynamic and fragmented space. However, when we look at our research and we use brand impact data, What we're seeing is that we're leading a new patient share in the third line setting, and we are really encouraged by this and confident in our potential to continue to further penetrate the third line space and become the standard of care here. When you also talk about market penetration, one of the things that I shared up front was that where we see our greatest opportunity is in the community setting where only 35% of community Sites have tried Zenlanta. The good news is we know that when they try it, they continue to repeat orders. So, that is our greatest opportunity to continue to grow that share in the third line setting.
spk16: Okay, great. That's helpful. So, two more. I guess the next one is probably for Pepe. You know, are you able to provide a bit more color on the SoBe launch, like which countries might be targeted first, and if you might be able to give any guidance for that trajectory?
spk25: We haven't provided much for guidance there, but what we can tell you is that because it's approved with a single agent and with a single arm, the market access process is going to take longer to have approvals throughout Europe, so it's going to be a gradual growth. I'm going to see if Amit wants to add something.
spk15: Yeah, as you know, Noreen, I mean, market access is country by country in Europe, and it can take up to 12 months. And as Pepe said, given that it's approved with a single-arm study, it's going to result in very favorable reimbursement in some countries and more challenging reimbursement in other countries. So I see the launch in Europe as kind of phase one with this current study. Lotus 5, when we have a comparative study, will open up the full opportunity in Europe. But if you think more longer term about the European opportunity, I think the volume potential in Europe may be even greater than it is in the U.S. because CAR T penetration is much less.
spk16: Okay. That's very helpful. And if I could just squeeze one more in for Mohamed. With respect to the CAG 901, can you talk a bit more about the amendment to the protocol and the different dosing schedules What's the rationale behind that decision? And given that sort of shift, how many patients should we expect in the upcoming update that will come up?
spk22: Thank you for the question. Yeah, thank you for the question. Actually, as you know, I came to the company almost eight weeks ago with a fresh perspective and looking at CAG1 as in novels. agent actually, so we also have quite an experience with discussion with the agency about Project Optimus, which technically the agency is actually exploring multiple dosing schedules. So we took a decision to post installation and amend the protocol to explore different dosing schedules to maximize the experience for patient needs and patient utilization to prepare for possible future meeting with regulators, and also to prepare for the most convenient those ready for the . So as you know also, Project Optimus draft guidelines just got published in January 2023, so many companies around the world right now are preparing and adjusting the protocol to accommodate for the requirements, the new requirements, as I say, for regulators to come to them with multiple doses with number of patients in each dose in each indication. So I hope that explains your question.
spk15: Yeah, I think we expect that dose escalation is going to be probably in general, you know, a lengthier process because you're going to have to dose escalation expansion because you're going to have to expand at multiple doses.
spk16: Yeah. All right. Okay. Thank you. That's all for me.
spk08: Thank you. One moment for our next question.
spk17: Our next question comes from Matthew Harrison with Morgan Stanley. Please go ahead.
spk10: Hi, this is Chris. I'm from Matthew. Thank you for taking our questions. I know someone earlier asked about the potential impact of kind of new treatment paradigms entering the market, specifically for biospecifics. Can you help us think about kind of the near-term impact of that entering the market as they penetrate the 3L plus the BCL market? Thank you.
spk18: Sure. So we expect biospecifics to play a role in the third line setting upon approval. We do think that uptake in the community will take longer. In general, the community is slower to adopt new therapies. And given the risk of CRS and ICANNs with bispecifics, we think initial uptake will be limited to the academic centers. When it comes to competing in that space in the academic centers, I, you know, we've been competing with bispecifics for years now in that setting given the multiple multiple bispecifics that are being studied in clinical trials.
spk04: Okay, thank you.
spk15: I would just add that the penetration of any agent in the third-line setting is still relatively low. So there's clearly room for bispecifics to penetrate, particularly in the academic setting, and for us to continue to grow in both the academic and the community settings.
spk07: Great, thanks.
spk17: Thank you. One moment for our next question. Our next question comes from Boris Peeker with Cowen. Please go ahead.
spk11: This is Nick on for Boris. Thanks for taking our question. I just have a couple for Rizamanta and the LOTUS trials. For the LOTUS 5 trial, I know this is a confirmatory trial from the single arm. But can this be used for an SMDA or regulatory submission for 2LD-BLBCL in both the U.S. and the EU? And then also second, for Lotus 7, which lines of therapy are you guys looking at, and is that different based on which combination approaches or whatnot? Yeah.
spk22: So regarding Lotus 5, you're absolutely correct. It is a regulatory study for both U.S. and ex-U.S. It is a confirmatory study with the potential also to get an SNDA for the second-line plus setting. Remember, the long-term now is in the third-line plus setting as a single agent. We are maximizing that and getting into the second-line plus agent with substantial number of patients in that setting, and the plan is to go... worldwide with that approval. Now, I'm sorry, what was the question? And then Lotus-7, yeah. For Lotus-7, yeah. For Lotus-7, we're actually, Lotus-7 have multiple agents in combination, including politizumab, glufetumab, and mosfetizumab. We are trying to be the drug of choice in combination with all bispecifics, not to mention also that we have a collaboration with IGM with their bispecific. So pretty much we're combining with all bispecifics to be a backbone, whoever any of them gets approved and become in the landscape would be able to combine with. I hope that's answered your question.
spk15: Yeah, and in terms of lantotherapy, I mean, I think it'll be an earlier lantotherapy. Particularly second line, I think there's an opportunity to really change the landscape. And particularly if the combination works in a way that has manageable side effect profile and leads to even better outcomes, deeper responses, and more durable responses, you can imagine this starting to change and expand the opportunity for targeted therapy combinations in that second line setting. Great.
spk11: Thank you very much.
spk17: Thank you. As a reminder, to ask a question, please press star 1 1 on your telephone. Please stand by for our next question.
spk08: Our next question comes from Brian Chang with JPMorgan. Please go ahead.
spk13: Hey, guys. Thanks for taking my question. My first question is for Kristen. What was the split of academic versus community use in the last quarter for Zalanda? And as you emphasize that community market is where you see a lot of growth near term, how long do you think that it will take you to get more traction there? And how do you think about just the changes with Bicistive coming in? And I have a follow-up. Thank you.
spk18: Okay, so in terms of the split of academic versus community use, it's roughly 50-50. We just started to see, as we said, the penetration in the community is consistently growing, and we've just started to match the use from an academic perspective in terms of volume. Your second question was how long to penetrate the community. What we see is community treaters are generally slower to adopt new therapies. For most new oncology launches, it probably takes about four to five years to really start to hit peak market share. But what we do see for community treaters is that because they're slower to adopt, it could take longer in that setting. But we will continue to chip away since we're at About 35%, our goal is to really match what we're seeing in the academic setting.
spk15: And I'd also add, Brian, that there's a long tail. So there's a lot of fragmentation in the community centers. A lot of community doctors are seeing a patient every few months. But they also tend to be a lot stickier. So behavior change works both ways. It takes longer to adopt, but what we see is the counts that are adopting are repeating and sticking with the product. And we keep growing penetration month over month. So I think as that happens, you know, this is a great opportunity. And that's a place where you had asked about bi-specifics, and I'll let Kristen comment further. Bi-specifics are going to have a much more challenging time, we believe, in the community initially, just given the safety profile. In the academic setting where we've penetrated about 80% of accounts, there's still room for depth, we think, even with bi-specifics. But I'll let Kristen comment further on the bi-specific point.
spk18: Sure. I don't have much else to add to that, but we just We see the safety profile of biospecifics being one where the initial uptake will be in the academic setting. CRS, ICANN, those are not adverse events that the community is generally accustomed to treating right now. That's why CAR Ts are reserved for the academic setting. So we feel it'll take time. And again, that is where we have our greatest opportunity right now to grow in Lhasa.
spk13: Great. And then looking at your Lotus 5 in second line in combo with Rituxan, do you have a sense of when we could see the data from that study? And can you remind us whether there's an interim analysis built into this trial? Thank you.
spk22: Thanks for the question. We expect the enrollment of 350 patients to be completed next year.
spk15: uh there there will not be an interim analysis for the study it's not built in the protocol and uh we'll uh update when we get closer to the end of the study yeah and obviously you know any timelines post the enrollment depends it's an event-driven study so you know in some ways the longer it goes the better but it'll it obviously depend on events so yeah once we complete enrollment and the study starts reading out we'll share information
spk03: Great, thank you.
spk17: Thank you. We have no further questions at this time. I'd now like to turn it back to Amit for closing remarks.
spk15: Well, thank you all for joining so much of the webcast, and thanks for all the thoughtful questions. We're really excited about our ability to unlock the value in this company by maximizing Zinlanta, by advancing our PVD-based pipeline, and by expanding our ADC platform. We have multiple value-driving catalysts over the next 12 to 18 months, and we look forward to continuing to update you on our progress. Thank you so much for joining.
spk17: Thank you for your participation in this conference. This concludes the program. You may now disconnect.
Disclaimer