ADC Therapeutics: Third quarter 2022 financial results and business updates

ADC Therapeutics SA (NYSE: ADCT) today reported financial results for the third quarter ended September 30, 2022 and provided business updates.

“In the third quarter, we made good progress executing our strategy. We are pleased with the strong ZYNLONTA performance as the new initiatives we started in the second and third quarters of the year begin to gain traction,” said Ameet Mallik, Chief Executive Officer of ADC Therapeutics. “We are encouraged by the initial results of LOTIS-5 in earlier lines of diffuse large B-cell lymphoma with ZYNLONTA and rituximab. We continue to prioritize and develop our pipeline and maintain our cash runway into early 2025.”

Recent Highlights and Developments

ZYNLONTA (loncastuximab tesirine-lpyl)

• ZYNLONTA generated net sales of $21.3 million in the third quarter of 2022, representing 23% growth over the second quarter of 2022. This was driven by a renewed focus on customer-facing execution and the new initiatives put in place in the second and third quarters of 2022 targeting physicians, community practices and networks, and patients and caregivers.
• Initial safety run-in results of 20 patients from the LOTIS-5 Phase 3 trial of ZYNLONTA in combination with rituximab in relapsed or refractory diffuse large B-cell lymphoma (DLBCL) were presented at the Annual Meeting of the Society of Hematologic Oncology (SOHO 2022), demonstrating an overall response rate of 75%, a complete response rate of 40% and no safety events materially different from those observed in prior clinical trials.
• The Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) adopted a positive opinion recommending the marketing authorization of ZYNLONTA (loncastuximab tesirine) for the treatment of relapsed or refractory DLBCL.

Cami (camidanlumab tesirine)

• The Cami pivotal Phase 2 data in relapsed or refractory Hodgkin lymphoma (HL) were presented in an encore presentation at SOHO 2022, demonstrating an overall response rate of 70% and a complete response rate of 33% with previously reported safety profile.
• The Company held a pre-Biologics License Application (BLA) meeting in September 2022 and a Type C meeting with the U.S. Food and Drug Administration (FDA) in late October. During the Type C meeting, the FDA provided strong guidance that, for it to consider an accelerated approval path, a randomized confirmatory Phase 3 study must be well underway and ideally fully enrolled at the time of any BLA filing for Cami. As a result, the Company will not submit the BLA for Cami next year, as it is estimated that it would take at least two years to fully enroll a randomized confirmatory Phase 3 study. The Company is engaged with the FDA in an ongoing and constructive dialogue regarding their guidance and the potential regulatory path forward. At this time, the Company is pausing any material investments in the HL program and will evaluate options for Cami in HL with a disciplined and strategic approach to resource allocation.
• The Phase 1b study of Cami in combination with pembrolizumab in solid tumors showed signals of immunomodulatory activity. However, the signals were not compelling enough for the Company to move forward on its own, so the current trial will not proceed. The Company recognizes the considerable effort required to fully pursue this opportunity may be better suited for a partner with immuno-oncology development expertise.

Pipeline

• ADCT-602 (targeting CD22): Initial data showing encouraging clinical activity from the Phase 1/2 study of ADCT-602 for patients with relapsed or refractory acute lymphoblastic leukemia has been released in an American Society of Hematology (ASH) abstract by The University of Texas MD Anderson Cancer Center. Additional data will be disclosed in an oral presentation at the 64th ASH Annual Meeting.
• ADCT-901 (targeting KAAG1): Dose escalation in the Phase 1 trial is proceeding. The Company expects to have an indication of the safety and tolerability, as well as any early signals of antitumor activity, in 2023.
• ADCT-601 (targeting AXL): The Phase 1b trial is ongoing. The study includes a monotherapy arm including patients with AXL gene amplification and a combination arm with gemcitabine in patients with sarcoma.

Corporate Update

• The Company announced a $175 million senior secured term loan from Owl Rock, a division of Blue Owl Capital, Inc., and Oaktree Capital Management, L.P. and settlement of existing senior secured convertible notes with Deerfield. The Company also entered into a share purchase agreement with Owl Rock for an investment of $6.25 million.
• Kristen Harrington-Smith has been appointed the Company’s new Chief Commercial Officer, effective November 17, 2022. Ms. Harrington-Smith is a seasoned leader with over 20 years of experience in the pharmaceutical industry. Most recently, she has served as Chief Commercial Officer of Immunogen. She has also served as Vice President and Head, US Hematology and Vice President and Head, US CAR-T at Novartis Pharmaceuticals.
• Peter Graham was appointed the Company’s Chief Legal Officer, effective November 1, 2022. Mr. Graham is a senior legal executive with over 25 years of legal, transactional and executive management experience in biotechnology, pharmaceutical and medical device companies.

Upcoming Expected Milestones

ZYNLONTA

• Receive a regulatory decision from the European Commission for third-line DLBCL in 4Q 2022

Pipeline

ADCT-901 (targeting KAAG1)

• Preliminary results of safety and tumor response for the Phase 1 dose-escalation trial in multiple solid tumors in 2023

ADCT-602 (targeting CD-22)

• University of Texas MD Anderson Cancer Center to present oral presentation of Phase 1/2 data at ASH Annual Meeting in 4Q 2022

ADCT-212 (targeting PSMA)

• Progress toward IND filing and initiation of Phase 1 trial in 2023

ADCT-701 (targeting DLK-1)

• Progress toward IND filing and initiation of Phase 1 trial in 2023

Third Quarter Financial Results

Cash and Cash Equivalents
Cash and cash equivalents were $380.9 million as of September 30, 2022, compared to $376.8 million as of June 30, 2022. Based on the Company’s business plan and expected milestones from Sobi and Healthcare Royalty Partners, the cash runway extends into early 2025. Potential near-term milestone payments from those agreements include a $50 million milestone from Sobi upon European regulatory approval of ZYNLONTA in third-line DLBCL and a $75 million milestone from our HealthCare Royalty Partners agreement for the first EU commercial sale.

Product Revenue
Product revenue (net) was $21.3 million for the quarter, compared to $13.1 million for the same quarter in 2021. Net revenues are for U.S. sales of ZYNLONTA.

License Revenue
License revenue was $55.0 million for the current quarter. During July 2022, the Company entered into an exclusive license agreement with Sobi for the development and commercialization of ZYNLONTA for all hematologic and solid tumor indications outside of the U.S., greater China, Singapore and Japan. Under the terms of the agreement, the Company received an upfront payment of $55.0 million.

Cost of Product Sales
Cost of product sales was $1.3 million for the quarter, compared to $0.5 million for the same quarter in 2021, an increase of $0.8 million primarily related to impairment charges for product intermediates not meeting the Company’s specifications. The specification issues did not, and are not expected to, impact the Company’s ability to supply commercial product.

Research and Development (R&D) Expenses
R&D expenses were $41.7 million for the quarter ended September 30, 2022, compared to $36.8 million for the same quarter in 2021. R&D expenses increased as a result of continued investments in the pipeline.

Selling and Marketing (S&M) Expenses
S&M expenses were $16.8 million for the quarter ended September 30, 2022, compared to $17.0 million for the same quarter in 2021. The decrease in S&M expenses is related to lower share-based compensation partly offset by higher expenses relating to the ongoing commercial launch of ZYNLONTA.

G&A Expenses
G&A expenses were $19.6 million for the quarter ended September 30, 2022, compared to $16.6 million for the same quarter in 2021. G&A expenses increased primarily due to costs associated with the recent CEO transition as well as higher share-based compensation and professional expenses.

Net Loss and Adjusted Net Loss
Net loss was $50.6 million, or a net loss of $0.65 per basic and diluted share, for the quarter ended September 30, 2022. This compares to a net loss of $71.5 million, or a net loss of $0.93 per basic and diluted share, for the same quarter in 2021.

Adjusted net income was $10.3 million, or an adjusted net income of $0.13 per basic and diluted share, for the quarter ended September 30, 2022. This compares to an adjusted net loss of $45.6 million, or an adjusted net loss of $0.59 per basic and diluted share, for the same quarter in 2021.

The decrease in net loss and adjusted net loss for the quarter ended September 30, 2022, as compared to the same period in 2021, was primarily due to higher product and license revenue, partially offset by the increase in cost of product sales, R&D and G&A expenses.

In addition, net loss decreased for the third quarter of 2022 as a result of income and lower charges arising from changes in the fair value of our warrant obligations and derivatives, respectively. These benefits were partially offset by the loss on extinguishment of our convertible loans and derivatives and higher interest and cumulative catch-up expense associated with the deferred royalty obligation with HealthCare Royalty Partners.