ADC Therapeutics Reports Third Quarter 2023 Financial Results and Provides Business Updates
07 Nov 2023
Clinical ResultDrug ApprovalLicense out/inPhase 1Phase 3
ADC Therapeutics Reports Third Quarter 2023 Financial Results and Provides Business Updates
3Q 2023 ZYNLONTA®1 net sales of $14.3 million reflect disruption following restructuring of commercial organization, increased competition and higher gross-to-net deductions
Operating expenses decreased 23%2 year-over-year due to portfolio prioritization and operational efficiencies; Expected cash runway into mid-2025
Company to host conference call today at 8:30 a.m. EST
LAUSANNE, Switzerland, Nov. 07, 2023 (GLOBE NEWSWIRE) -- ADC Therapeutics SA (NYSE: ADCT) today reported financial results for the third quarter 2023 and provided business updates.
“During the third quarter, we fully rolled out the new commercial strategy, advanced our prioritized pipeline programs and continued to drive operating efficiencies,” said Ameet Mallik, Chief Executive Officer of ADC Therapeutics. “We are confident that restructuring the commercial model and the resulting disruptions that continued into the third quarter were necessary to fully capture the potential longer-term value of ZYNLONTA® and we expect to see growth in the coming quarters in an increasingly competitive environment. We have a clear roadmap in place as we approach several potential value-generating catalysts in 2024, including data readouts for the LOTIS-7 trial of ZYNLONTA in combination with bispecifics, ADCT-601 targeting AXL, ADCT-901 targeting KAAG1 and ADCT-602 targeting CD22.”
Recent Highlights and Developments
ZYNLONTA generated net sales of $14.3 million in the third quarter of 2023, representing a 33.1% decrease over the third quarter of 2022. The decline was attributable to an extended period of disruption following the restructuring of the commercial model, increased competition and higher gross-to-net sales deductions. This was partially offset by a slight increase in price.
At the Eleventh Annual Meeting of the Society of Hematologic Oncology (SOHO 2023) in September, updated safety run-in results from the confirmatory LOTIS-5 Phase 3 trial in combination with rituximab were presented and demonstrated an 80% overall response rate, a 50% complete response rate and median duration of response of 8.0 months with no new safety signals.
The LOTIS-7 trial of ZYNLONTA in combination with bispecifics glofitamab or mosunetuzumab for the treatment of patients with diffuse large B-cell lymphoma (DLBCL), follicular lymphoma (FL) and marginal zone lymphoma (MZL) is actively enrolling patients.
The Company’s partner Mitsubishi Tanabe Pharma Corporation (MTPC) joined the confirmatory Phase 3 LOTIS-5 study of ZYNLONTA in combination with rituximab in second-line or later, transplant ineligible DLBCL patients in Japan.
An American Society of Hematology (ASH) abstract from the University of Miami investigator-initiated trial exploring ZYNLONTA in combination with rituximab in high-risk relapsed or refractory follicular lymphoma indicated that the combination was well tolerated with a 95% overall response rate at week 12 and at week 21, an 86% metabolic complete response rate.
Pipeline
ADCT-601 (targeting AXL): Dose escalation in patients with non-small cell lung cancer (NSCLC) and sarcoma is proceeding. The maximum tolerated dose has not yet been reached, and the immunohistochemistry (IHC) assay is under final validation. Based on preclinical data, a pancreatic cancer cohort is being added with an enriched patient population.
Guidance
The Company maintains the following guidance based on its current business plan:
Continued decrease in total operating expenses expected in full year 2023 and 2024 as compared to 2022
Expected cash runway into the middle of 2025
Upcoming Expected Milestones
Complete enrollment of the Phase 3 LOTIS-5 study in 2024
Initial safety and efficacy data from the LOTIS-7 study in 1H 2024
Pipeline
Initial data from Phase 1 study in 1H 2024
Initial data from Phase 1 study in 1H 2024
Additional data from Phase 1 study in 1H 2024
Third Quarter 2023 Financial Results
Cash and Cash Equivalents
Cash and cash equivalents were $310.4 million as of September 30, 2023, compared to $326.4 million as of December 31, 2022. The Company continues to expect its cash runway to extend into the middle of 2025.
Product Revenues
Net product revenues were $14.3 million for the quarter ended September 30, 2023, compared to $21.3 million for the same quarter in 2022. Net product revenues are for U.S. sales of ZYNLONTA. The decrease of $7.1 million for the quarter was primarily due to lower sales volume, which was impacted by the extended period of disruption following restructuring of the commercial organization, increased competition, as well as higher gross-to-net deductions, partially offset by a slightly higher price.
License Revenues and Royalties
License revenues and royalties were $0.2 million for the quarter ended September 30, 2023, compared to $55.0 million for the same quarter in 2022. 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 during the quarter ended September 30, 2022.
Research and Development (R&D) Expenses
R&D expenses were $28.4 million for the quarter ended September 30, 2023, compared to $41.7 million for the same quarter in 2022. R&D expenses decreased due to less investment in camidanlumab tesirine (Cami)Cami), as well as productivity initiatives and focused investment toward prioritized development programs. The decrease in R&D expenses related to Cami was primarily due to completion of the Phase 2 study in 2022 and the Company’s decision to pause the program while it evaluated FDA feedback, while continuing to assess a potential regulatory pathway and seeking a partner to continue developing this program.
R&D expenses in the third quarter of 2023 also decreased due to lower share-based compensation expense as a result of fluctuations in the share price and award forfeitures in connection with voluntary terminations.
Selling and Marketing (S&M) Expenses
S&M expenses were $13.7 million for the quarter ended September 30, 2023, compared to $16.8 million for the same quarter in 2022. The decrease in S&M expenses for the quarter was primarily due to lower share-based compensation expense resulting from fluctuations in the share price and award forfeitures in connection with voluntary terminations as well as lower wages and benefits.
General & Administrative Expenses
G&A expenses were $9.4 million for the quarter ended September 30, 2023, compared to $19.6 million for the same quarter in 2022. G&A expenses decreased during the third quarter of 2023 primarily due to lower share-based compensation expense due to fluctuations in the share price and award forfeitures in connection with voluntary terminations, as well as lower wages and benefits.
Net Loss and Adjusted Net Loss
Net loss was $47.8 million, or a net loss of $0.58 per basic and diluted share, for the quarter ended September 30, 2023. This compares to a net loss of $50.6 million, or a net loss of $0.65 per basic and diluted share, for the same quarter in 2022. The decrease in net loss for the quarter ended September 30, 2023, as compared to the same quarter in 2022, was attributable to a non-cash loss related to the extinguishment of our convertible loans and derivatives during the third quarter of 2022 in connection with restructuring of existing loans, as well as lower operating expenses during the third quarter of 2023 which included lower non-cash charges related to share-based compensation. The decrease in net loss was partially offset by lower revenues during the third quarter of 2023.
Adjusted net loss was $33.8 million, or an adjusted net loss of $0.41 per basic and diluted share, for the quarter ended September 30, 2023. This compares to adjusted net income of $10.3 million, or adjusted net income of $0.13 per basic and diluted share, for the same quarter in 2022. The increase in adjusted net loss is primarily driven by lower revenues during the third quarter of 2023, partially offset by lower operating expenses.
Conference Call Details
ADC Therapeutics management will host a conference call and live audio webcast to discuss third quarter 2023 financial results and provide a company update today at 8:30 a.m. Eastern Time. To access the conference call, please register here. Registrants will receive the dial-in number and unique PIN. It is recommended that you join 10 minutes before the event, though you may pre-register at any time. A live webcast of the call will be available under “Events & Presentations” in the Investors section of the ADC Therapeutics website at ir.adctherapeutics.com. The archived webcast will be available for 30 days following the call.
About ZYNLONTA® (loncastuximab tesirine-lpyl)
ZYNLONTA® is a CD19-directed antibody drug conjugate (ADC). Once bound to a CD19-expressing cell, ZYNLONTA is internalized by the cell, where enzymes release a pyrrolobenzodiazepine (PBD) payload. The potent payload binds to DNA minor groove with little distortion, remaining less visible to DNA repair mechanisms. This ultimately results in cell cycle arrest and tumor cell death.
The U.S. Food and Drug Administration (FDA) and the European Medicines Agency (EMA) have approved ZYNLONTA (loncastuximab tesirine-lpyl) for the treatment of adult patients with relapsed or refractory (r/r) large B-cell lymphoma after two or more lines of systemic therapy, including diffuse large B-cell lymphoma (DLBCL) not otherwise specified (NOS), DLBCL arising from low-grade lymphoma and also high-grade B-cell lymphoma. The trial included a broad spectrum of heavily pre-treated patients (median three prior lines of therapy) with difficult-to-treat disease, including patients who did not respond to first-line therapy, patients refractory to all prior lines of therapy, patients with double/triple hit genetics and patients who had stem cell transplant and CAR-T therapy prior to their treatment with ZYNLONTA. This indication is approved by the FDA under accelerated approval and in the European Union under conditional approval based on overall response rate and continued approval for this indication may be contingent upon verification and description of clinical benefit in a confirmatory trial. Please see full prescribing information including important safety information about ZYNLONTA at www.ZYNLONTA.com.
ZYNLONTA is also being evaluated as a therapeutic option in combination studies in other B-cell malignancies and earlier lines of therapy.
About ADC Therapeutics
ADC Therapeutics (NYSE: ADCT) is a commercial-stage global leader and pioneer in the field of antibody drug conjugates (ADCs). The Company is advancing its proprietary ADC technology to transform the treatment paradigm for patients with hematologic malignancies and solid tumors.
ADC Therapeutics’ CD19-directed ADC ZYNLONTA (loncastuximab tesirine-lpyl) received accelerated approval by the FDA and conditional approval from the European Commission for the treatment of relapsed or refractory diffuse large B-cell lymphoma after two or more lines of systemic therapy. ZYNLONTA is also in development in combination with other agents and in earlier lines of therapy. In addition to ZYNLONTA, ADC Therapeutics has multiple ADCs in ongoing clinical and preclinical development.
ADC Therapeutics is based in Lausanne (Biopôle), Switzerland and has operations in London, the San Francisco Bay Area and New Jersey. For more information, please visit https://adctherapeutics.com/ and follow the Company on LinkedIn.
ZYNLONTA® is a registered trademark of ADC Therapeutics SA.
Use of Non-IFRS Financial Measures
In addition to financial information prepared in accordance with IFRS, this document also contains certain non-IFRS financial measures based on management’s view of performance including:
Adjusted total operating expenses
Adjusted net loss
Adjusted net loss per share
Management uses such measures internally when monitoring and evaluating our operational performance, generating future operating plans and making strategic decisions regarding the allocation of capital. We believe that these adjusted financial measures provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and facilitate operating performance comparability across both past and future reporting periods. 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. When preparing these supplemental non-IFRS measures, management typically excludes certain IFRS items that management does not believe are indicative of our ongoing operating performance. Furthermore, management does not consider these IFRS items to be normal, recurring cash operating expenses; however, these items may not meet the IFRS definition of unusual or non-recurring items. Since non-IFRS financial measures do not have standardized definitions and meanings, they may differ from the non-IFRS financial measures used by other companies, which reduces their usefulness as comparative financial measures. Because of these limitations, you should consider these adjusted financial measures alongside other IFRS financial measures.
The following items are excluded from adjusted net loss and adjusted net loss per share:
Shared-Based Compensation Expense: We exclude share-based compensation expense from our adjusted financial measures because share-based compensation expense, which is non-cash, fluctuates from period to period based on factors that are not within our control, such as our stock price on the dates share-based grants are issued. Share-based compensation expense has been, and will continue to be for the foreseeable future, a recurring expense in our business and an important part of our compensation strategy.
Certain Other Items: We exclude certain other significant items that we believe do not represent the performance of our business, from our adjusted financial measures. Such items are evaluated by management on an individual basis based on both quantitative and qualitative aspects of their nature. While not all-inclusive, examples of certain other significant items excluded from our adjusted financial measures would be: changes in the fair value of derivatives and warrant obligations and the effective interest expense associated with the Facility Agreement with Deerfield and the senior secured term loan facility and the effective interest expense and cumulative catch-up adjustments associated with the deferred royalty obligation under the royalty purchase agreement with HealthCare Royalty Partners.
See the attached Reconciliation of IFRS Measures to Non-IFRS Measures for explanations of the amounts excluded and included to arrive at the non-IFRS financial measures.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In some cases you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “would”, “expect”, “intend”, “plan”, “anticipate”, “believe”, “estimate”, “predict”, “potential”, “seem”, “seek”, “future”, “continue”, or “appear” or the negative of these terms or similar expressions, although not all forward-looking statements contain these identifying words. Forward-looking statements are subject to certain risks and uncertainties that can cause actual results to differ materially from those described. Factors that may cause such differences include, but are not limited to: the ability of the Company to cure the deficiency and regain compliance with NYSE listing standards and for the Company’s common shares to remain listed on the NYSE; the success of the Company’s updated corporate strategy including operating efficiencies, capital deployment and portfolio prioritization; the Company’s ability to achieve the decrease in total operating expenses for 2023 and 2024, the expected cash runway into the middle of 2025, the effectiveness of the new commercial go-to-market strategy, competition from new technologies, the Company’s ability to grow ZYNLONTA® revenue in the United States; Swedish Orphan Biovitrum AB (Sobi®) ability to successfully commercialize ZYNLONTA® in the European Economic Area and market acceptance, adequate reimbursement coverage, and future revenue from the same; approval by the NMPA of the BLA for ZYNLONTA® in China submitted by Overland ADCT BioPharma and future revenue from the same, our strategic partners’, including Mitsubishi Tanabe Pharma Corporation, ability to obtain regulatory approval for ZYNLONTA® in foreign jurisdictions, and the timing and amount of future revenue and payments to us from such partnerships; the Company’s ability to market its products in compliance with applicable laws and regulations; the Company’s expectations regarding the impact of the Infrastructure Investment and Jobs Act; the timing and results of the Company’s or its partners’ research projects or clinical trials including LOTIS 5 and 7, ADCT 901, 601 and 602, the impact, if any, from discontinuation of the LOTIS-9 study, actions by the FDA or foreign regulatory authorities with respect to the Company’s products or product candidates, the timing and outcome of regulatory submissions for the Company’s products or product candidates; the ability to complete clinical trials on expected timelines, if at all and the results of the same; projected revenue and expenses; the Company’s indebtedness, including Healthcare Royalty Management and Blue Owl and Oaktree facilities, and the restrictions imposed on the Company’s activities by such indebtedness, the ability to repay such indebtedness and the significant cash required to service such indebtedness; and the Company’s ability to obtain financial and other resources for its research, development, clinical, and commercial activities. Additional information concerning these and other factors that may cause actual results to differ materially from those anticipated in the forward-looking statements is contained in the “Risk Factors” section of the Company's Annual Report on Form 20-F and in the Company's other periodic reports and filings with the Securities and Exchange Commission. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance, achievements or prospects to be materially different from any future results, performance, achievements or prospects expressed in or implied by such forward-looking statements. The Company cautions investors not to place undue reliance on the forward-looking statements contained in this document. The Company undertakes no obligation to revise or update these forward-looking statements to reflect events or circumstances after the date of this press release, except as required by law.
Condensed Consolidated Interim Statement of Operations (Unaudited)
(in KUSD except for per share data)
For the Three Months Ended
September 30, For the Nine Months Ended
September 30, 2023 2022 2023 2022Product revenues, net 14,267 21,321 52,417 55,110License revenues and royalties 226 55,000 351 85,000Total revenue 14,493 76,321 52,768 140,110 Operating expense Cost of product sales (366) (1,295) (2,275) (4,090)Research and development expenses (28,440) (41,676) (99,864) (139,165)Selling and marketing expenses (13,730) (16,847) (43,537) (52,876)General and administrative expenses (9,361) (19,617) (35,857) (56,868)Total operating expense (51,897) (79,435) (181,533) (252,999)Loss from operations (37,404) (3,114) (128,765) (112,889) Other income (expense) Financial income 3,140 273 7,250 18,597Financial expense (12,942) (11,356) (38,650) (29,374)Non-operating expense (687) (37,122) (1,143) (10,805)Total other expense (10,489) (48,205) (32,543) (21,582)Loss before taxes (47,893) (51,319) (161,308) (134,471)Income tax benefit 86 711 6,958 2,828Net loss (47,807) (50,608) (154,350) (131,643) Net loss attributable to: Owners of the parent (47,807) (50,608) (154,350) (131,643) Net loss per share, basic and diluted (0.58) (0.65) (1.89) (1.70)
Condensed Consolidated Interim Balance Sheet (Unaudited)
(in KUSD)
September 30,
2023 December 31,
2022ASSETS Current assets Cash and cash equivalents 310,407 326,441Accounts receivable, net 21,180 72,971Inventory 22,728 18,564Other current assets 21,283 28,039Total current assets 375,598 446,015Non-current assets Property, plant and equipment 5,260 3,261Right-of-use assets 10,272 6,720Intangible assets 12,358 14,360Interest in joint venture 26,989 31,152Deferred tax asset 35,400 26,757Other long-term assets 1,023 903Total non-current assets 91,302 83,153 Total assets 466,900 529,168 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable 8,977 12,351Other current liabilities 53,483 73,035Lease liabilities, short-term 1,417 1,097Senior secured term loans, short-term 14,329 12,474Total current liabilities 78,206 98,957Non-current liabilities Senior secured term loans, long-term 97,707 97,240Warrant obligations 96 1,788Deferred royalty obligation, long-term 305,266 212,353Deferred gain of joint venture 23,539 23,539Lease liabilities, long-term 10,076 6,564Other long-term liabilities 6,191 —Total non-current liabilities 442,875 341,484 Total liabilities 521,081 440,441 Equity attributable to owners of the parent Share capital 7,312 7,312Share premium 1,008,088 1,007,452Treasury shares (541) (679)Other reserves 166,334 155,683Cumulative translation adjustments (339) (356)Accumulated losses (1,235,035) (1,080,685)Total equity attributable to owners of the parent (54,181) 88,727 Total liabilities and equity 466,900 529,168
Reconciliation of IFRS Measures to Non-IFRS Measures (Unaudited)
(in KUSD except for share and per share data)
Three Months Ended September 30, Nine Months Ended September 30,in KUSD 2023 2022 Change % Change 2023 2022 Change % ChangeTotal operating expense (51,897) (79,435) 27,538 (35)% (181,533) (252,999) 71,466 (28)%Adjustments: Share-based compensation expense (i) 2,083 14,565 (12,482) (86)% 11,275 42,293 (31,018) (73)%Adjusted total operating expenses (49,814) (64,870) 15,056 (23)% (170,258) (210,706) 40,448 (19)%
Three Months Ended September 30, Nine Months Ended September 30,in KUSD (except for share and per share data)2023 2022 2023 2022Net loss (47,807) (50,608) (154,350) (131,643)Adjustments: Share-based compensation expense (i) 2,083 14,565 11,275 42,293Convertible loans, derivatives, change in fair value expense (income) (ii) — 4,660 — (25,650)Loss on extinguishment (iii) — 42,114 — 42,114Senior secured term loans, warrants, change in fair value income (ii) (299) (2,543) (916) (2,543)Effective interest expense on convertible loans (iv) — 1,536 — 7,684Deerfield warrants obligation, change in fair value income (ii) (140) (9,418) (776) (9,418)Senior secured term loan facility, warrants, transaction costs (v) — 245 — 245Effective interest expense on senior secured term loan facility (iv) 4,728 1,933 13,748 1,933Deferred royalty obligation interest expense (vi) 8,087 5,669 19,662 17,356Deferred royalty obligation cumulative catch-up adjustment (income) expense (vi) (437) 2,175 4,851 (16,113)Adjusted net (loss) income (33,785) 10,328 (106,506) (73,742) Net loss per share, basic and diluted (0.58) (0.65) (1.89) (1.70)Adjustment to net loss per share, basic and diluted 0.17 0.78 0.58 0.75Adjusted net (loss) income per share, basic and diluted (0.41) 0.13 (1.31) (0.95)Weighted average shares outstanding, basic and diluted 82,256,847 78,372,680 81,516,563 77,374,388
(i) Share-based compensation expense represents the cost of equity awards issued to our directors, management and employees. The fair value of awards is computed at the time the award is granted, including any market and other performance conditions, and is recognized over the vesting period of the award by a charge to the income statement and a corresponding increase in other reserves within equity. These accounting entries have no cash impact.
(ii) Change in the fair value of the convertible loan derivatives, senior secured term loan facility warrants and the Deerfield warrant obligation results from the valuation at the end of each accounting period. There are several inputs to these valuations, but those most likely to result in significant changes to the valuations are changes in the value of the underlying instrument (i.e., changes in the price of our common shares) and changes in expected volatility in that price. These accounting entries have no cash impact.
(iii) As a result of the exchange agreement entered into on August 15, 2022, the Company recognized a loss on extinguishment which primarily consists of the difference between the aggregate principal amount and carrying amount of the convertible loans and exit fee as well as the unpaid interest payments through the maturity date.
(iv) Effective interest expense on convertible loans and senior secured term loans relates to the increase in the value of our loans in accordance with the amortized cost method.
(v) The transaction costs allocated to the senior secured term loan facility warrant obligation represent actual costs. We do not believe that these costs reflect the performance of our ongoing business.
(vi) Deferred royalty obligation interest expense relates to the accretion expense on our deferred royalty obligation pursuant to the royalty purchase agreement with HCR and cumulative catch-up adjustment (income) expense relates to changes in the expected payments to HCR based on a periodic assessment of our underlying revenue projections.
CONTACTS:
Investors
Eugenia Litz
Eugenia.Litz@adctherapeutics.com
+44 7879 627205
+1 908-723-2350
Media
Nicole Riley
Nicole.Riley@adctherapeutics.com
+1 862-926-9040
(1) loncastuximab tesirine-lpyl; (2) on a non-IFRS basis or 35% on an IFRS basis including stock-based compensation expense. See reconciliation of IFRS measures to non-IFRS measures in accompanying financial tables
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