ADC Therapeutics SA

Good morning, ladies and gentlemen, and welcome to the ADC Therapeutics First Quarter Fiscal Year 2024 Earnings Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. I will now turn the call over to Marci Graham, Investor Relations Officer for ADC Therapeutics. Marci, please go ahead.

Thank you, Operator. This morning, we issued a press release announcing our fourth quarter and full year 2024 financial results and business update. The release and the slides we will use in today's presentation are available on the Investor section of the ADC Therapeutics website. I'm joined on today's call by our Chief Executive Officer, Amit Malek, who will discuss our operational performance and recent business highlights, followed by our Chief Financial Officer, Pepe Carmona, who will review our fourth quarter and full year 2024 financial results. We will then open the call to 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. These forward-looking statements are subject to certain known and unknown risks and uncertainties, and actual results, performance, and achievements could differ materially. They are identified and described in the accompanying slide presentation and in the company's filings with the SEC, including Form 10-K, 10-Q, and 8-K. ADC Therapeutics is providing this information as of today's date 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, except as required by law. The company cautions investors not to place undue reliance on these forward-looking statements. Today's presentation also includes non-GAAP financial reporting. These non-GAAP measures should be considered in addition to and not in isolation or as a substitute for the information prepared in accordance with GAAP. You should refer to the company's fourth quarter earnings release for information and reconciliation of historical non-GAAP measures to the comparable GAAP financial measures. I will now turn the call over to our CEO, Amit Malik. Amit?

Amit Malik Thanks, Marcie, and good morning, everyone. Thank you for joining us on today's call. Looking back, 2024 was a year focused on execution where we achieved multiple exciting milestones, helping to advance our strategy to unlock value for our shareholders. We made significant progress across key areas in our ADC portfolio, both with Zynlanta and our early stage solid tumor pipeline, all while strengthening our balance sheet. We are confident in the path ahead as we work to make an impact for more patients moving forward. Among our key 2024 accomplishments, we reached commercial brand profitability with Zynlanta as we continue to maintain our position in the highly competitive third line plus DLBCL space. Sales of $69.3 million were in line with the prior year, despite the growth of bispecifics in the setting. We made significant progress in advancing our strategy to expand the use of Zinlanta into earlier lines of DLBCL and indolent lymphomas. December included completion of enrollment in our pivotal Phase III LOTUS V trial and an initial efficacy and safety update on Part II of our Phase 1b LOTUS 7 trial. In addition, we were pleased to see Phase 2 IIT indolent lymphoma data presented at ASH and the simultaneous publication of the follicular lymphoma data in Lancet Hematology. From a solid tumor perspective, we continue to advance our exotecan-based preclinical candidates. The most advanced targets are PSMA in column 6, and we continue to seek potential research collaborations to further advance our programs. Additionally, in a year marked by continued progression, we were able to achieve a double digit reduction in operating expenses for our second year in a row. In addition, we strengthened our balance sheet through an equity financing, providing an expected cash runway into the second half of 2026. We are proud of what we accomplished in 2024 and are confident in our path forward. In support of our commitment to further expand usage of Zynlanta, we are pursuing the substantially larger opportunity in earlier lines of DLV-CL therapy with combinations through LOTUS 5 and LOTUS 7. With LOTUS 5, we are pleased to have closed 2024 by completing enrollment of our phase three trial, bringing us a step closer to providing a potential combination treatment in the second-line plus DLBCL setting. Initial data from the safety lead-in portion of the study showed an overall response rate of 80% and a complete response rate of 50% with no new safety signals, demonstrating that this combination of Zolanta plus rituximab has the potential to provide competitive second-line plus efficacy with a favorable safety profile, allowing broad accessibility. Updated data are expected by the end of 2025 once the pre-specified number of events is reached. With Lotus 7, in December, we reported encouraging initial data, including safety and efficacy in a subset of patients from the Part 2 dose expansion of the Zolanta plus clofidamab combination arm in non-Hodgkin lymphoma. Initial data showed a best overall response rate among the 18 efficacy-evaluable relapsed or refractory DLPCL patients of 94% and a complete response rate of 72%. These encouraging efficacy data were observed across patients with different numbers of lines and types of prior treatments. Initial safety data on all 29 NHL patients suggest the combination is generally well-tolerated with no dose-limiting toxicities across all dose levels. We believe these initial data support our hypothesis that combining these two potent approved single-agent drugs with complementary mechanisms of action will yield additive or synergistic efficacy, a manageable safety profile, and accessibility across care settings. This combination has the potential to be best in class in a highly competitive market. Enrollment of 40 patients in dose expansion is expected to be completed in the second quarter of 2025. We expect to share data on a subset of patients in the second quarter of this year with a fuller, more mature data update anticipated during the second half of 2025. In addition to our expansion trials in DLBCL, promising phase two data from two key investigator-initiated trials led by the Sylvester Comprehensive Cancer Center at the University of Miami Miller School of Medicine were reported in indolent lymphomas with presentations at ASHE. on Xenlanta in combination with rituximab in high-risk relapsed or refractory follicular lymphoma and as monotherapy in relapsed or refractory marginal zone lymphoma with a simultaneous Lancet hematology publication of the FL data. Data shows strong results in high-risk relapsed or refractory FL patients treated with the combination of Xenlanta plus rituximab with a best overall response rate of 97% and a complete response rate of 77%. In addition, Zinlanta data from the relapsed or refractory MZL study showed clinically meaningful activity with an overall response rate of 91% and a complete response rate of 70%. We look forward to further updates at future medical conferences from these two studies evaluating the potential of Zinlanta in FL and MZL. With sufficient data, we plan to discuss the path forward with regulatory authorities as well as seek inclusion in Compendia. Looking forward into 2025, we expect to have multiple data catalysts, which can further de-risk and unlock the lifecycle management opportunities. Together, these have the potential to lead to a peak revenue of $600 million to $1 billion in the U.S., assuming regulatory approval and compendia listing. Within our current indication, our commercial strategy remains focused on relapsed or refractory DLBCL patients who need a treatment with a fast, durable response and a manageable safety profile which can be administered in the outpatient setting. We are holding our own in the competitive third-line plus market, demonstrating that Zynlanta has a place as a monotherapy with a significantly greater opportunity as we move toward combinations in earlier lines of DLBCL therapy. We believe Lotus 5 has the potential to take Zynlanta to $200 million to $300 million in peak sales as we expand into the second-line setting. taking the company to profitability. This is driven by doubling the patient population, extending the duration of therapy, and improving the clinical profile versus our current indication as a monotherapy. Market research suggests that only about 50% of the second-line population are expected to have access to and or be suitable for CAR-T and bispecific-based therapies. For patients who are not treated with or progress on a CAR-T or bispecific, Zynlanta Plus Rituximab has the potential to have a differentiated clinical profile with high and durable response rates, a manageable safety profile, and ease of administration. With Lotus 7, we estimate we can expand the total opportunity for Zynlanta in DOBCL to $500 to $800 million in peak revenue with regulatory approval and compendia listing. If the data persists, we believe Zynlanta plus clofidimab has the potential to transform the future lymphoma treatment paradigm by becoming the preferred bispecific combination in the second-line plus DLBCL setting. Additionally, in indolent lymphomas, there's a clear unmet need in both relapsed or refractory marginal zone lymphoma and relapsed or refractory follicular lymphoma. We are encouraged by the data seen in the Phase II IITs suggesting a Zynlanta regimen could provide significant benefit in these indolent lymphomas and plan to engage regulatory agencies and pursue competitive strategies as soon as sufficient data are available. The indolent lymphomas opportunity could provide additional peak revenue of $100 to $200 million. Taken together, we believe we are well positioned for success as we progress toward key milestones in 2025 and beyond. With that, I would like to turn the call over to Pepe.

Thank you. As Amita has noted, we achieved many milestones in 2024, including reducing operating expenses and strengthening the balance sheet. On the financial front, we remain well capitalized, ending the year with $251 million in cash and cash equivalents, which is expected to fund operations into the second half of 2026 based on our current plans. The long-term net product revenues in fourth quarter 2024 were $16.4 million as compared to $16.6 million in the same quarter of 2023. For the full year 2024, net product revenues were $69.3 million as compared to $69.1 million in 2023. Throughout 2024, we maintained our disciplined capital allocation strategy and decreased operating expenses by 15% year-over-year on a non-GAAP basis, which excludes stock-based compensation. In the fourth quarter, our non-GAAP operating expenses decreased versus prior year by 15% due to efficiencies in our operations and diligent portfolio management decisions. You can find the reconciliation of GAAP measures to non-GAAP measures in the accompanying financial tables of the press release issued earlier today and in the appendix of this presentation. On a GAAP basis, we reported a net loss of $30.7 million for the quarter, or 29 cents per basic and diluted share, as compared to net loss of $85 million, or a net loss of $1.03 per basic undiluted share for the same period in 2023. Net loss for the full year ended December 31st, 2024 was $157.8 million or a net loss of $1.62 per basic undiluted share as compared to net loss of $240.1 million or a net loss of $2.94 per basic undivided share for the full year ended December 31, 2023. The decrease in net loss during both periods is primarily attributable to lower income tax expenses and lower operating expenses. On an on-gap basis, adjusted net loss was $26.5 million, or an adjusted net loss of 25 cents per basic undiluted share, as compared to adjusted net loss of $79.5 million, or 97 cents per basic undiluted share for the same period in 2023. Adjusted net loss for the full year ended December 31st, 2024 was $111.4 million or an adjusted net loss of $1.15 per basic undiluted share as compared to net loss of $185.7 million or an adjusted net loss of $2.27 per basic undiluted share for the full year ended December 31st, 2023. The decrease in net loss and adjusted net loss during both periods is primarily attributable to lower income tax expenses and lower operating expenses. With our current balance sheet, we believe we're well-financed to continue to pursue our corporate strategy. As a reminder, hematology continues to be the primary focus of our capital allocation, and within this, our key objective is to create value by expanding the use of Xenolonta beyond our current indication. We expect to achieve this by fully supporting our commercialization efforts in the U.S. directly and through our partnership outside the U.S. In addition, we continue to pursue research collaborations to advance our early stage solid tumor pipeline. With that, I will turn the call back over to Amit.

Thanks, Pepe. With a year of completed milestones behind us, we enter 2025 with great confidence proud of what we have achieved and excited for what is to come. Within our current Zinlanta indication, we maintain our annual revenue in line with prior year. We believe the real growth opportunity comes with the expansion of Zinlanta both through regulatory approvals as well as inclusion in guidelines, and we are confident in the multiple pathways we have to get there. We continue to be encouraged by Zinlanta's consistently strong clinical profile both as monotherapy and in combinations, giving us confidence in the ultimate success of our expansion strategy. 2025 will be a period of important data readouts as we progress towards the key milestones shared today, potentially de-risking and setting us up to grow our Zonlanta brand significantly in the future. As we build on the strength of our established commercial foundation of Zonlanta with the expected expansion into the second line plus DLBCL and indolent lymphomas, We believe we have the potential to reach $600 million to $1 billion in peak revenue in the U.S. on our journey to bring these important treatments to patients who need them. Beyond this, we believe there is additional value creation opportunity with our preclinical solid tumors portfolio as we pursue potential research collaborations. Looking ahead, I am confident that ADC Therapeutics is well positioned to make a truly meaningful impact for patients while driving value creation for all our stakeholders. We can now open the line for questions. Operator?

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the number one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the number two. If you are using a speakerphone, please leave the handset before pressing any keys. One moment please for your first question. Your first question comes from Eric Schmitz of Kantor. Please go ahead.

Good morning. Thanks for taking my question. Maybe just a first real quick one on the Lotus 7 update in Q2. Is there going to be a specific forum that you have in mind or timing within the quarter that we can look to?

Hello? Hi, can you hear me? Yeah, we can hear you. Did you hear me?

No, I'm sorry. I mean, I was cut off.

Oh, how odd.

Okay, okay. So, let me repeat. So, thanks for the question. We haven't disclosed yet what form or exact timing within Q2 that we're going to be sharing the data, but what I can tell you is that we're on track to enroll the 40 patients in the dose expansion in the second quarter. We'll share a portion of those patients, you know, safety and efficacy data on a portion of those patients in the second quarter, and then data on all 40 of those patients in the second half of the year.

Thanks for that repetitive response. And then second question, just with regard to your newest competitor, latest competitor, I guess, and what's already a fairly crowded marketplace, the existing market for St. Lawton, we've got some factory NHL. Obviously, we saw the Pfizer approval of the Cetris. Is it too early to say whether you've got a real challenge there? I know you've got it to kind of flattish revenue for the year. Thank you.

Yeah, and as you said, the triplet of Eccentris plus R-squared was recently approved in the third-line setting based on the Echelon 3 study. We believe this is going to have limited impact as physicians have access, as you said, to multiple options. And we believe, you know, based on a lot of the quantitative market research we've done, that any use is likely going to be in place of older regimens such as R-squared or R-based chemo in the third-line plus DOBCF setting.

Thanks a lot. Yeah, thank you.

Your next question comes from Kelly Shee of Jefferies. Please go ahead.

Thank you for taking my questions. For Lot 7, do we expect a meeting with the regulatory agencies after second half update? And if that's the case, what do we hear from ADC? And if this info could actually share to the public domain. And then secondly, what is your estimate of the market opportunity in indolent lymphoma, including follicle lymphoma and lymphoma? Thank you.

Okay. Yeah, once sufficient data is available, you know, on the 40 patients and we have the correct follow-up, we do plan to pursue discussions with regulatory authorities likely in the second half of this year. We also plan to pursue compendia strategy. We know that based on some of the recent inclusions of bispecific combinations and NCCN guidelines, we believe that the publication of data on approximately 100 patients at the selected dose would be sufficient for submission to compendia, so we do plan to pursue both a regulatory strategy and a compendia strategy for LOTUS7. With regards to the inbound lymphoma opportunity, as you know, we presented, we think, quite compelling data both in Marshall zone lymphoma and follicular lymphoma at ASH this past year, and those studies continue. Based on the opportunity, with potential regulatory approval and certainly compendia from those studies, we believe that the peak opportunity for indolent lymphomas will be somewhere in the $100 million to $200 million range.

Thank you.

Your next question comes from Michael Smith of Guggenheim. Please go ahead.

Hey, guys. Thanks for taking my questions. By the end of the year, you should most likely also have the results of the Lotus 5 trial in hands. And I guess I'm just wondering, how does your Lotus 7 strategy, how is it impacted by potential outcomes of Lotus 5 by the end of the year? And then I had a follow-up.

Okay. Well, it's a great question. We know that in this market, outside of the front line, really, no given treatment sort of dominates. You know, a lot of physicians really make treatment choices based on efficacy, safety, and accessibility profile, but in the context of individual patient needs. So, for example, you see with something like a CAR-T, which has outstanding efficacy, only capture about 20% of the share. So, we think having both approaches, Zolanta Plus for Toxamab and Lotus 5, as well as Zolanta Plus Clofidamab and Lotus 7, are complementary approaches which allow us to address different individual patient needs. Specifically with Lotus 5, we believe that having a non-systemic chemo combination can offer a competitive second-line advocacy profile, but also with favorable safety and convenience, especially for patients who either can't access or are not suitable for or progress on a CAR-T or vascular therapy. With Lotus 7, based on the recent data we shared in December, which we believe is very compelling, with a highly competitive efficacy, as well as with a manageable safety profile and the potential for off-the-shelf convenient dosing. So we believe that both approaches are complementary. Based on our quantitative market research, what we've seen is about 50% of patients are anticipating to get a CAR-tier bispecific, so it still leaves a lot of room for other therapies. And then we, of course, know that many of them, of course, they will progress.

Okay. And then, yeah, we saw you have an ACR, an oral presentation coming up at ACR on your cloud in 6 ADC. And, yeah, I was just wondering if you can help us understand sort of how important that presentation is and in terms of some of the learnings perhaps relative to other ADC platforms like the Daiichi Sankyo, you know, technology. You know, how much insight will we gain from that presentation in terms of differentiation?

Yeah, you will see more data that has not been disclosed yet in the public domain, not only on Clotin-6, which, as you mentioned, is an oral presentation, but we also have poster presentations for our PSMA and ASCT2 compounds. As you're aware, we're using exotecan with a very novel linker system, which allows us to offset the hydrophobicity of exotecan and tracelessly release it. What we've seen so far preclinically is pretty consistently a therapy index that's greater than 10, which is quite differentiated. You know, relative to DXD, we've seen higher potency, higher bifaceted effect. We know it's on MDR substrate. And we've also seen, we haven't seen ILD, which you see with DXD and other toposomal race platforms. So we do think the data is differentiating. And, you know, as the both the oral presentation for Clon6, as well as the poster presentations for PSMA and ANTT2, there will be additional I believe compelling data this year that hasn't been in public domain up to this point.

Thank you.

Thank you.

Your next question comes from Gregory Renza of RBC Capital Markets. Please go ahead.

Hi, guys. Thanks so much for the time this morning. It's Anishan for Greg. Thanks also for the updates and for taking our questions. Just on Lotus 5, what must the combination of Zinlanta and Rituximab demonstrate in terms of efficacy and safety to be considered competitive, and what are the benchmarks for approval and to make a compelling case for clinical adoption in terms of complete response, median PFS, median DOR, and median OS? Thanks so much.

Yeah, no, thanks. You know, for Lotus 5... The way I think about the competitive set is that the world is going to be sort of CAR-Ts and bispecific-based combinations, of which there's going to be a portion of the population that's going to have access to those therapies and be suitable for those patients. But again, we anticipate, based on the independent quantitative market research, that about half the patients are going to get one of those therapies in the second line setting. And when you look at the other therapies and all the other combinations, whether they do targeted therapies or with chemo-based regimens, they tend to have CR rates anywhere between the 25% to 40% range. So, clearly, anything north of 40% would be differentiated. I think what we're encouraged by is in the safety run-in, which was the first 20 patients looking at the accommodations in Lantoplus for texanol prior to the randomized portion of the study, what we saw was an overall response rate of 80% and a complete response rate of 50%. So, We believe anywhere in that 40% to 50% range is going to be compelling relative to the non-CAR-T and non-bispecific options, which we know is going to be a big opportunity. In terms of PFS, the way this study is powered, so this is a randomized study versus R-GemOx. What we know is R-GemOx typically has a PFS of anywhere from three to four months. In the StarGlo study, for example, where it was most recently used as a control arm, the PFS was 3.6 months. The way this study is powered is that we need to show approximately a two-month difference to have a positive study. So we feel, you know, good based on the safety run-in data. Obviously, we're blinded to the results of the study, so we have to wait to see the result. But based on the early data, we're quite encouraged by the prospects of having a positive Lotus 5 study. and for it to be clinically relevant, particularly relative to the non-biospecific and non-car T options.

Great. Thank you so much. And if I could just squeeze in one more, I guess just on the commercial side, how do you foresee the competitive landscape for third-line DL-BCL evolving in 2025 and beyond, and how might that differ from 2024? Thanks again.

Yeah, thank you. I mean, I think the biggest competitive impact we've seen with the products since the launch is really with the introduction of biospecifics. about 18 months ago. Buy specifics now have taken about a third of the third line plus market. I think what I'm happy about is that, you know, during the period, and if you look at the past several quarters, we've been in that $16 to $18 million sales per quarter range. We've had some fluctuation due to ordering pattern variability, but we've been in that $16 to $18 million range pretty consistently over the past several quarters, despite this buy specific combination. The only real new competitive impact in the third 9-plus setting is the question before that Eric asked about the escedris plus R-squared. So we believe, of course, there's going to be some impact, but we believe it will be relatively limited, particularly as there's likely to be more community use and really in place of some of the other regimens like R-squared and R-based chemo.

Thank you.

Your last question comes from Sudhan Luganathan of Stevens. Please go ahead.

Hi, Amit and Pepe. Thank you for the update and for taking my question. My first one is, can you provide some examples of comparable bispecifics that demonstrated meaningful market share gain for the DLBCL patients through compendia listing? And then what were the number of patients in those bispecific clinical trials that were run that got published and were, you know, considered for compendia listing?

Yes, so recently, I think it's too soon to tell what the update can be, but I think what we know is that very recently, Glofidamab plus Gemox, F-Curitamab plus Gemox, and Mosin plus Polituzumab have all been very recently added to NCCN guidelines in the preferred regimen based on roughly 100 patients. So when we look at all those analogs, we think about 100 patients is what's required to get into guidelines. That's approximately what all three of those regimens had. And too soon to tell what the uptake is going to be. Obviously, as you know, with any companion listing, we, of course, will not promote off-label, and I assume none of these companies are going to promote off-label. But these become available to physicians to do what's best for the patients. And, you know, once you get into preferred regimens, payers, of course, will reimburse based on preferred listings typically.

Got it. Thank you. And if I can squeeze in one more, I just wanted to ask, how long do you anticipate it will take to kind of achieve that peak penetration prediction? first in launch up and after achieving Convendia listing or even a potential approval in the second and third line setting. I know like whenever it was first approved, it was pretty swift in getting market share. So just kind of curious if you expect the same type of ramp once it's added to listing.

Yeah, we haven't gotten into what the peak penetration would be, the timeframe. But what I can tell you is if you look at the other analogs that have been introduced up to this point, typically the peak penetration is achieved usually within the first two years. Oncologists and hematologists, I think, are always searching to use the best products for the patients, especially, unfortunately, in something that's life-threatening and where patients, especially when they're the last post to frontline, they tend to, you know, the prognosis is not great, unfortunately, for these patients. And so, Usually what you do see is adoption pretty quickly. For example, Polartuzumab in the front line, obviously we showed, you know, good in the front line setting, seems to have plateaued, and it's in about two years. We see bispecific growth going down a little bit in the third line setting. We're at that 18-month mark. So that's typically what we've seen. I don't want to, again, predict what's going to happen for our products, but I just say that's typically what's happened up to this point in the DLBCL setting.

Thanks. I appreciate it.

There are no further questions at this time. That concludes our question and answer session. I'd like to turn the conference back to our CEO, Amit Malik, for closing remarks. Amit?

I want to thank you all for joining our call today and for your continued support. We look forward to keeping you updated on our progress. Operator, please end the call.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.