ADC Therapeutics Q4 2024 Earnings Call Transcript

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March 27, 2025

There are 9 speakers on the call.

Operator

Good morning, ladies and gentlemen, and welcome to the ADC Therapeutics ADC Therapeutics Fourth Quarter Fiscal Year twenty twenty four 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 0 for the operator. I will now turn the call over to Marcy Graham, Investor Relations Officer for ABC Therapeutics.

Operator

Marcy, please go ahead.

Speaker 1

Thank you, operator. This morning, we issued a press release announcing our fourth quarter and full year twenty twenty four financial results and business update. The release and the slides we will use in today's presentation are available on the Investors 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 '20 '20 '4 financial results. We will then open the call to questions.

Speaker 1

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 ks, 10 q and eight ks.

Speaker 1

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.

Speaker 1

I will now turn the call over to our CEO, Amit Malek. Amit?

Speaker 2

Thanks, Marcy, 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 ZEMATA 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.

Speaker 2

Among our key 2024 accomplishments, we reached commercial brand profitability with ZENLANTA as we continue to maintain our position in the highly competitive third line plus DLBCL space. Sales of $69,300,000 were in line with the prior year despite the growth of bispecifics in this setting. We made significant progress in advancing our strategy to expand the use of ZENLANTA into earlier lines of DLBCL and in lymphomas. December included completion of enrollment in our pivotal Phase three LOTUS five trial and an initial efficacy and safety update on Part two of our Phase 1b LOTUS seven trial. In addition, we were pleased to see Phase two IIT indolent lymphoma data presented at ASH and the simultaneous publication of the follicular lymphoma data in Lancet hematology.

Speaker 2

From a solid tumor perspective, we continue to advance our esotecan based preclinical candidates. The most advanced targets are PSMA and CLON6 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 twenty twenty six.

Speaker 3

We are proud of what

Speaker 2

we accomplished in 2024 and are confident in our path forward. In support of our commitment to further expand usage of XENLATA, we are pursuing the substantially larger opportunity in earlier lines of DLBCL therapy with combinations through LOTUS5 and LOTUS7. With LOTUS5, 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 eighty percent and a complete response rate of fifty percent with no new safety signals demonstrating that this combination of XEMALTA 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 twenty twenty five once the pre specified number of events is reached.

Speaker 2

With LOTUS-seven, in December we reported encouraging initial data including safety and efficacy in a subset of patients from the PAR2 dose expansion of the XAMATA plus clofitumab combination arm in non Hodgkin lymphoma. Initial data showed a best overall response rate among the eighteen efficacy evaluable relapsed or refractory DLBCL patients of ninety four percent and a complete response rate of seventy two percent. These encouraging efficacy data were observed across patients with different numbers of lines and types of prior treatments. Initial safety data on all twenty nine 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.

Speaker 2

This combination has the potential to be best in class in a highly competitive market. Enrollment of 40 patients and dose expansion is expected to be completed in the second quarter of twenty twenty five. 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 twenty twenty five. 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 ASH on ZENLATA 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 relapsedrefractory FL patients treated with the combination of ZENLANTO plus rituximab with a best overall response rate of ninety seven percent and a complete response rate of seventy seven percent.

Speaker 2

In addition, ZENALMTO data from the relapsedrefractory MZL study showed clinically meaningful activity with an overall response rate of ninety one percent and a complete response rate of seventy percent. We look forward to further updates at future medical conferences from these two studies evaluating the potential of XERMONTA 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 derisk and allot the lifecycle management opportunities. Together these have the potential to lead to a peak revenue of $600,000,000 to $1,000,000,000 in The U.

Speaker 2

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 XINLATA has a place as a monotherapy with a significantly greater opportunity as we move toward combinations in earlier lines of DLBCL therapy. We believe LOTUS5 has the potential to take XENLATA to $200,000,000 to $300,000,000 in peak sales as we expand into the second line setting, taking the company to profitability.

Speaker 2

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 fifty percent 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, zenlantoprostrotuximab has the potential to have a differentiated clinical profile with high and durable response rates, a manageable safety profile and ease of administration. With LOTUS7, we estimate we can expand the total opportunity for ZENLATA in DLBCL to $500,000,000 to $800,000,000 in peak revenue with regulatory approval and compendia listing. If the data persists, we believe ZENALANTA plus lefidumab has the potential to transform the future lymphoma treatment paradigm by becoming the preferred bispecific combination in the second line plus DLBCL setting.

Speaker 2

Additionally, in indolent lymphomas, there is 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 IIT suggesting a ZENLANTA 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 $100,000,000 to $200,000,000 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.

Speaker 4

Thank you. As Hamid 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 $251,000,000 in cash and cash equivalents, which is expected to fund operations into the second half of twenty twenty six based on our current plans. ZINLONTA net product revenues in fourth quarter twenty twenty four were $16,400,000 as compared to $16,600,000 in the same quarter of 2023. For the full year 2024, net product revenues were $69,300,000 as compared to $69,100,000 in 2023.

Speaker 4

Throughout 2024, we maintained our disciplined capital allocation strategy and decreased operating expenses by 13% 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 $30,700,000 for the quarter or $0.29 per basic and diluted share as compared to net loss of $85,000,000 or a net loss of $1.03 per basic and diluted share for the same period in 2023. Net loss for the full year ended 12/31/2024, was $157,800,000 or a net loss of $1.62 per basic and diluted share as compared to net loss of $240,100,000 or a net loss of $2.94 per basic undiluted share for the full year ended 12/31/2023.

Speaker 4

The decrease in net loss during both periods is primarily attributable to lower income tax expenses and lower operating expenses. On a non GAAP basis, adjusted net loss was $26,500,000 or an adjusted net loss of $0.25 per basic and diluted share as compared to adjusted net loss of $79,500,000 or $0.97 per basic and diluted share for the same period in 2023. Adjusted net loss for the full year ended 12/31/2024, was $111,400,000 or an adjusted net loss of $1.15 per basic and diluted share as compared to net loss of $185,700,000 or an adjusted net loss of $2.27 per basic and diluted share for the full year ended 12/31/2023. 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.

Speaker 4

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 Xenolanta 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.

Speaker 4

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.

Speaker 2

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 XEMONTA indication, we maintain our annual revenue in line with prior year. We believe the real growth opportunity comes with the expansion of XEMONTA both through regulatory approvals as well as inclusion and guidelines and we are confident in the multiple pathways we have to get there. We continue to be encouraged by ZENMATA's consistently strong clinical profile both as monotherapy and in combinations giving us confidence in the ultimate success of our expansion strategy.

Speaker 2

2025 will be a period of important data readouts as we progress towards the key milestones there today, potentially de risking and setting us up to grow our XINLANTA brand significantly in the future. As we build on the strength of our established commercial foundation of XINLANTA with the expected expansion into the second line plus DLBCL and inlet lymphomas, we believe we have the potential to reach $600,000,000 to $1,000,000,000 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.

Speaker 2

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?

Operator

Thank Your first question comes from Eric Schmidt of Cantor. Please go ahead.

Speaker 2

Good morning. Thanks for taking my question.

Speaker 5

Maybe just first real quick one on the Lotus seven 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?

Speaker 4

You and

Speaker 6

Hello?

Speaker 2

Hi. Can you hear me?

Speaker 7

Yes. We can hear

Speaker 3

you. Did you hear me?

Speaker 5

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

Speaker 6

Okay.

Speaker 3

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.

Speaker 3

We'll share a portion of those patients, 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.

Speaker 5

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 with existing market for SYNLFT and REVES refractory NHL. Obviously, we saw the Pfizer approval of ADCETRIS. Is it too early to say whether you've got a real challenge there? I know you've guided to kind of flattish revenue for the year.

Speaker 5

Thank you.

Speaker 3

Yes. As you said, the triplet of ADCETRIS plus R2 was recently approved in the third line setting based on the ECHELON three study. We believe this is going to have limited impact as physicians have access, as you said, to multiple options. And we believe 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 DLBCL setting.

Speaker 5

Thanks a lot.

Speaker 3

Yes. Thank you.

Operator

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

Speaker 6

Thank you for taking my questions. For Lotte seven, do we expect a a meeting with the regulatory agencies after seven point five update? And if that's the case, would we hear from ADC? And if this info could actually share to the public domain? And then secondly, what is your estimate of Xelanta as a market opportunity in indolent lymphoma including follicular lymphoma and Mendelsohn lymphoma?

Speaker 6

Thank you.

Speaker 3

Okay. So once sufficient data is available 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 with the selected dose would be sufficient for submission to compendious. We do plan to pursue both the regulatory strategy and a compendious strategy for LOTUS7.

Speaker 3

With regards to the inlet lymphoma opportunity, as you know, we presented, we think quite compelling data both in Marshall's 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 $100,000,000 to $200,000,000 range.

Operator

Thank you. Your next question comes from Michael Schmidt of Guggenheim. Please go ahead.

Speaker 7

Hey guys. Thanks for taking my questions. By the end of

Speaker 4

the year, you should most

Speaker 7

likely also have the results of the LOTUS-five trial in hands. And I guess I'm just wondering how does your LOTUS-seven strategy, I mean, how is it impacted by potential outcomes of LOTUS five by the end of the year? And then I had a follow-up.

Speaker 3

Okay. Well, it's a great question. We know that in this market outside of the frontline really no given treatment sort of dominates. And 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 the LENCA CAR T, which has outstanding efficacy only capture about twenty percent of the share.

Speaker 3

So we think having both approaches, zenonza plus rituximab and LOTUS5 as well as zenonza plus clofinumab and LOTUS7 are complementary approaches, which allow us to address different individual patient needs. Specifically with LOSE5, we believe that having a non systemic chemo combination can offer a competitive second line efficacy profile, but also with favorable safety convenience, especially for patients who either can't access or not suitable for or progress on a CAR T or bispecific therapy. With LOTUS seven, based on the recent data we shared in December, which we believe is very compelling, we think that zenalodefosclifibmab has the potential to be the preferred bispecific combination and second line plus DOB cell 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 fifty percent of patients are anticipating to get a CAR T or bispecific, so it still leaves a lot of room for other therapies.

Speaker 3

And then we of course know that many of them of course they will progress.

Speaker 7

Okay. And then, yes, we saw you have an AACR, an oral presentation coming up at AACR on on your cloud in six ADC. And yes, 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 technology. How much insight will we gain from that presentation in terms of differentiation?

Speaker 3

Yes, You will see more data that has not been disclosed yet in the public domain, not only on CLOS VI, which as you mentioned is an oral presentation, but we also have poster presentations for our PSMA and ASCTQ compounds. As you're aware, we're using exotecan with a very novel linker system, which allows us to also the hydrophobicity of exotecan and traceously releases. What we've seen so far pre clinically is pretty consistently a therapeutic index that's greater than 10, which is quite differentiated relative to DXD. We've seen higher potency, higher biosendid effects we noticed on MDR substrate. And we've also seen we haven't seen ILD, which you see with DXD and other tovastomerase platforms.

Speaker 3

So we do think the data is differentiating and as the both the oral presentation for CONV-six as well as the poster presentations for PSMA and ANTT2, there will be additional, I believe compelling data that share that hasn't been in public domain at this point.

Speaker 4

Thank you. Thank you.

Operator

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

Speaker 8

Hi guys. Thanks so much for the time this morning. It's Anish on for Greg. Thanks also for the updates and for taking our questions. Just on LOTUS-five, what must the combination of ZENLANTA and Rituximab demonstrate in terms of efficacy and safety to be considered competitive?

Speaker 8

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.

Speaker 3

Yes, thanks. For LOTUS five, the way I think about the competitive side 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

Speaker 6

be suitable for those patients. But again, we anticipate based on the

Speaker 3

independent quantitative market research that about half the patients are going to get one of those therapies in the Cyclonide 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 twenty five percent to forty percent range. So clearly anything north of forty percent would be differentiated. I think what we're encouraged by is in the safety run-in, which was the first twenty patients looking at the combinations of monteplastrotoxin on prior to the randomized portion of the study. What we saw was an overall response rate of eighty percent and a complete response rate of fifty percent.

Speaker 3

So we believe anywhere in that forty percent to fifty percent 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 our Gemox. What we know is our Gemox typically has a PFS of anywhere from three to four months. In the STARCLO study, for example, where it was most recently used as a control arm, the PFS was three point six months. The way the study is powered is that we need to show approximately a two month difference to have a positive study.

Speaker 3

So we feel good based on the safety run-in data. Obviously, we're blinded to the results of the studies. We have to wait to see the results. But based on the early data, we're quite encouraged by the prospects of having a positive LEMS5 study and for it to be clinically relevant, particularly relative to the non bispecific and non CAR T options.

Speaker 8

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 DLBCL evolving in 2025 and beyond? And how might that differ from 2024? Thanks again.

Speaker 3

Yes, I think the biggest competitive impact we've seen with the product since the launch is really with the introduction of bispecifics about eighteen months ago. Bispecifics now have taken about a third of them third line plus market. I think what I'm happy about is that during the period and if you look at this the past several quarters, we've been in that $16,000,000 to $18,000,000 sales per quarter range. We've had some fluctuation due to order and counter variability, but we've been in that $16,000,000 to $18,000,000 range pretty consistently over the past several quarters despite the specific combination. The only real new competitive impact in the third line pulse setting is the question before that Eric asked about the ADCETRIS plus R2.

Speaker 3

So we believe of course there's going

Speaker 6

to be some impact, but

Speaker 3

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 R2 and R based chemo.

Speaker 2

Thank you.

Operator

Your last question comes from Sudan Loganathan of Stephens. Please go ahead.

Speaker 5

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

Speaker 3

Yes. So recently, I think it's too soon to tell what the uptake could be. But I think what we know is that very recently, glofenumab plus gemox, efcharitumab plus gemox and motum plus polotuzumab 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 the guidelines. That's what approximately what all three of those regimens had and too soon to sit down with the uptake is going to be.

Speaker 3

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 once you get into preferred regimens, payers of course will reimburse based on preferred listings typically.

Speaker 5

Got it. Thank you. And if I can squeeze in one more, just wanted to ask them how long do you anticipate it will take to kind of achieve that peak penetration predictions first in Lonza and after achieving Convinia 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 and gaining market share. So just kind of curious if you expect the same type of ramp once it's added to listing?

Speaker 3

Yes, we haven't guided to 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 were last post the frontline, they tend to 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 good gain in the front line setting seems to have plateaued and it's in about two years.

Speaker 3

We see bispecific growth going down a little bit in the third line setting. We're at that eighteen 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.

Speaker 2

Thanks. I appreciate it.

Operator

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?

Speaker 3

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.

Operator

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

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