ADC Therapeutics S.A. (ADCT) Q1 2021 Earnings Report, Transcript and Summary

Good morning, and welcome to the ADC Therapeutics First Quarter Results 2021 Financial Call. My name is Cheryl, and I will be your operator for today's call. [Operator Instructions]. I will now turn the call over to Amanda Hamilton, you may begin.

Thank you, operator. This morning, we issued a press release announcing our first quarter 2021 financial results and business update. This release is available on the ADCT website at ir.adctherapeutics.com under the Press Releases section. On today's call, Chris Martin, Chief Executive Officer; Jennifer Herron, our Chief Commercial Officer; Jay Feingold, Chief Medical Officer; and Jenn Creel, Chief Financial Officer, will discuss recent business highlights and review our first quarter 2021 financial results before opening the call for questions. As a reminder, this conference call may contain forward-looking statements. Such statements are subject to risks and uncertainties. For additional information concerning forward-looking statements and factors that could cause actual results to differ materially from those expressed or implied in these statements, we refer you to the section titled Cautionary Statement Regarding Forward-Looking Statements in Exhibit 99.3 of our report on Form 6-K filed with the U.S. Securities and Exchange Commission earlier today. Such statements speak only as of the date of this conference call, and we expressly disclaim any obligation or undertaking to update these forward-looking statements unless required to do so by applicable law. Today's presentation also includes non-IFRS financial measures. These non-IFRS measures have limitations as financial measures and should be considered in addition to, and not in isolation or as a substitute for, the information prepared in accordance with IFRS. You should refer to the information contained in the company's first quarter earnings release for definitional information and reconciliations of historical non-IFRS measures to the comparable IFRS financial measures. It is now my pleasure to pass the call over to our CEO, Chris Martin. Chris?

Thanks, Amanda, and thank you all for joining us today. The first few months of this year have been transformational and exciting. As you know, we were extremely pleased to receive accelerated FDA approval for Zynlonta on Friday, April 23, a month before the PDUFA date. Based on the broad patient population studied in the Phase II clinical trial, the label includes patients with diffuse large B-cell lymphoma not otherwise specified, DLBCL arising from low-grade lymphoma and high-grade B-cell lymphoma, with the latter being an important point of differentiation. We launched immediately after receiving accelerated approval, making a seamless transition to a fully integrated commercial organization. We were pleased to learn yesterday, less than 2 weeks since FDA approval, that Zynlonta was added to the NCCN treatment guidelines with a Level 2A recommendation. The NCCN treatment guidelines are reflective of the broad indication in the FDA approval to include not only DLBCL NOS but also DLBCL arising from low-grade lymphoma, such as follicular and marginal zone lymphoma and also high-grade B-cell lymphoma. This rapid addition supports the Zynlonta differentiated profile and highlights the high unmet medical need in this patient population. Continuing to advance our research programs remains a priority for the company. Beyond the first indication for Zynlonta, we are exploring different combinations and earlier lines of therapy in DLBCL and follicular lymphoma. We're also advancing clinical studies in Hodgkin lymphoma and solid tumors for our second program, Cami, as well as our earlier-stage pipeline. Jay will discuss the pipeline in more detail shortly. But first, I would like to turn the call over to Jennifer, our Chief Commercial Officer, to provide some highlights on the first few days of the Zynlonta launch. Jennifer?

Thank you, Chris, and hello, everyone. I'm very excited to provide an update on the early days of the Zynlonta launch. Even with FDA approval coming a month before the PDUFA date, the commercial and medical teams were ready for launch and have already hit the ground running. On the same day we received approval, we also received our first customer inquiry about product availability. This underscores the critical need for new treatment options for patients with relapsed and refractory diffuse large B-cell lymphoma. Over the weekend following approval, we launched our digital platform, which includes our health care professional website, our brand site, our medical information website as well as our patient assistance website. We also leveraged social media outlets and direct e-mail to ensure that all of our customers are aware of the great news about Zynlonta. On Monday, April 26, the first business day after FDA approval, our patient call center, which provides coverage guidance, financial support and co-pay assistance and one-on-one nursing support, was live with trained nurses and reimbursement specialists. We also completed our sales training for our hematology therapeutic specialists or HTSes the very same day. Tuesday, the second business day following approval, the HTSes were in the field promoting Zynlonta and our AMCP dossier was available for our payer customers. Importantly, our MSL team has been addressing customer requests to ensure the safe and efficient administration of Zynlonta. Finally, Zynlonta was commercially available, and our first order was shipped within days of approval. Driving the launch is a world-class team of seasoned hematology/oncology professionals across medical, marketing, market access and sales. The customer-facing teams are reporting a very positive reception to the news of the FDA approval of Zynlonta with members of the sales team hearing from their customers over the very first weekend. In the days since FDA approval, we have had major institutions express interest in ordering Zynlonta, which is very encouraging in these early days of launch. And with the recent addition of Zynlonta to the NCCN treatment guidelines, we are in a position to accelerate our access initiatives to make sure that every patient that can benefit from Zynlonta has the opportunity to do so. In summary, the commercial and medical teams are off to a running start, and our exceptional team of top industry talent is genuinely excited to bring a truly differentiated product and hope to patients with relapsed and refractory DLBCL. Now I'll turn the call over to Jay to provide an update on our pipeline. Jay?

Thank you, Jennifer. I am pleased to share that our clinical and preclinical teams are energized by our first approval and eager to keep the momentum going. Zynlonta was granted accelerated approval on the priority review based on the LOTIS-2 trial, a single-arm, multicenter, open-label Phase II trial that enrolled a total of 145 patients with relapsed or refractory diffuse large B-cell lymphoma following at least 2 lines of prior systemic therapy. The trial included a broad spectrum of heavily pretreated patients with very difficult-to-treat disease, including patients with high-grade B-cell lymphoma, a key point of differentiation for our label. The trial also enrolled patients who did not respond to first-line therapy, patients refractory to all prior lines of therapy and patients who had prior stem cell transplant and CAR-T therapy. Zynlonta offers a truly differentiated treatment option with this broad population of relapsed/refractory DLBCL patients. As Chris mentioned, we are exploring the opportunity to expand the addressable patient population for Zynlonta into earlier lines of treatment and in additional histologies. First is our ongoing pivotal Phase II LOTIS-3 trial of Zynlonta in combination with ibrutinib for patients with relapsed or refractory diffuse large B-cell or mantle cell lymphoma, which is intended to support the submission of a supplemental BLA. Interim data from the Phase I portion of this trial showed encouraging efficacy and manageable toxicity with an overall response rate of 63% across all patients and 67% in non-GCB DLBCL patients. We expect to report additional data from the Phase I portion of this trial in the second quarter and to complete Phase II enrollment in the second half of this year. Next, we have our ongoing confirmatory Phase III LOTIS-5 clinical trial of Zynlonta in combination with rituximab. LOTIS-5 is also intended to support a supplemental BLA filing for Zynlonta as a second-line therapy for relapsed or refractory diffuse large B-cell patients who are not eligible for stem cell transplant. We expect to complete the safety lead-in portion of this trial in the second half of the year. We also intend to initiate several additional Zynlonta trials this year. First, we plan to start a pivotal Phase II clinical trial in follicular lymphoma in the coming weeks in the second half of 2021. We also plan to initiate the trial of Zynlonta in multiple combinations in B-cell non-Hodgkin lymphoma and dose-finding study of Zynlonta in combination with R-CHOP in first-line DLBCL. All of these trials will explore the expansion of Zynlonta in early lines of therapy across B-cell non-Hodgkin lymphoma. Moving to our second program, Cami, we have made progress across both our Hodgkin lymphoma and solid tumor programs. We completed enrollment in our Phase II pivotal trial in patients with relapsed or refractory Hodgkin lymphoma. Updated interim results from this trial are expected in the second quarter, and we expect this trial to support an FDA BLA submission for relapsed or refractory Hodgkin lymphoma. In addition to our Hodgkin lymphoma program, we have an ongoing Phase Ib dose escalation trial of Cami in combination with pembrolizumab in patients with advanced solid tumors. We are encouraged by the preclinical data and pharmacokinetic and biomarker data from the Phase I monotherapy part of this trial that support further development in solid tumors, and we look forward to sharing more data in the future. As I just highlighted in our Cami program, our ADC technology is also being explored for the treatment of solid tumors. After validation of our platform with the approval of Zynlonta, we are even more excited to explore the potential of ADCs in various solid tumors. In addition to Cami, ADCT-901, targeting KAAG1, is a novel, first-in-class asset for the treatment of patients with advanced solid tumors with high unmet medical needs. This includes platinum-resistant ovarian cancer and triple-negative breast cancer. We expect to file an IND in the second quarter and enter the clinic shortly thereafter. Next, ADCT-601, targeting AXL, is another promising asset as AXL is overexpressed in many solid tumors such as lung, breast, prostate, pancreas, glioma and esophageal. We now expect to initiate a Phase Ib combination study in multiple solid tumors in the first half of 2022. In addition, our last clinical-stage program, ADCT-602, targeting CD22, continues to enroll patients in a Phase I/II trial for relapsed or refractory acute lymphoblastic leukemia at MD Anderson. And finally, we also have a robust R&D pipeline with 6 additional programs in preclinical development. With that, I will turn the call over to Jenn to give a financial update.

Thank you, Jay, and good morning, everyone. As we reported in our press release, we ended the first quarter with cash and cash equivalents of approximately $383 million as compared to approximately $439 million as of December 31, 2020. We will also be drawing down another $50 million disbursement from our Deerfield facility in the near future, which was contingent upon Zynlonta approval. We used approximately $55 million in net cash for operating activities in the first quarter. We expect our spend to continue to increase slightly as we are now in full launch mode and also initiating multiple new clinical trials. With our commercial organization fully hired in Q1, our spend should level off later this year. R&D expenses were $39 million for the first quarter compared to $35 million for the same quarter of 2020. The increase was primarily due to the growth of our R&D organization to support the Zynlonta BLA submission, medical affairs prelaunch activities and multiple ongoing clinical programs. Sales and marketing expenses were $14 million for the first quarter of 2021 compared to $3 million during the first quarter of 2020. The increase in sales and marketing reflects the build-out of our commercial organization and other investments in preparation for the launch of Zynlonta. G&A expenses were $18 million for the quarter compared to $6 million for the same quarter of 2020. The increase was primarily due to increased share-based compensation expense and the cost of being a public company. Our net loss was $52 million for the first quarter compared to a net loss of $43 million for the first quarter of 2020. The net loss reflects a $21 million noncash gain related to the changes in fair value of derivatives associated with the convertible loans under the convertible credit facility with Deerfield. Net loss also included share-based compensation expense of $14 million for the first quarter of 2021. Our diluted net loss per share was $0.67 in the first quarter of 2021 compared to a net loss of $0.85 in the first quarter of 2020. Finally, our adjusted net loss excludes certain items associated with the Deerfield convertible loan and share-based compensation expense. The adjusted net loss was $57 million for the first quarter of 2021 compared to an adjusted net loss of $40 million in the same quarter of 2020. The increase in adjusted net loss was primarily driven by the investment in the expanded portfolio and the preparation for the anticipated launch of Zynlonta. The adjusted diluted net loss per share was $0.74 for the quarter compared to a loss of $0.78 for the same quarter of 2020. With that, I will turn the call back to Chris for closing remarks. Chris?

Thank you, Jenn, Jay and Jennifer. This has been a transformational time in the history of ADCT. We are well positioned to achieve our objectives as we enter the next phase of growth. This slide highlights our anticipated development milestones, which Jay reviewed earlier. We congratulate the team that brought Zynlonta to patients, and we are eager to help as many patients as possible to benefit from our next-generation ADCs. I look forward to updating you on the progress of our launch and our rich pipeline in the coming quarters. I'm pleased to now open the call to your questions. Operator?

[Operator Instructions]. Our first question comes from Matthew Harrison from Morgan Stanley.

This is Zhen on for Matthew. Congrats on the progress. We have a couple of questions. The first one is, could you maybe comment on the safety profile of Zynlonta in general versus other recent DLBCL approvals? And how do you see its position?

Jay?

Yes, sure. Thank you for the question. So I think that's a good question. It's difficult to answer, of course, since these are not comparator trials. So I give you that caveat before we start the conversation. But in view of that, I think that the toxicity profile of Lonca that was demonstrated, I should say, Zynlonta that was demonstrated has been very manageable. The treatment-related adverse events that led to discontinuation in our trial was about 19%, which is actually less than the reported for other recently approved products. We had a very low rate of febrile neutropenia, about 3%. We did have some patients who discontinued therapy for effusions, edema. But in general, those adverse events were well managed. There were very few dose delays of more than 1 to 2 weeks and there were almost no dose decrease or dose reductions, excuse me, during the trial other than that mandated by the trial design when we went from 150 micrograms per kilogram to 75 micrograms per kilogram. So we believe that the toxicity profile that we put forward is very strong and is very manageable and will not be any barrier to use in the community.

Okay. And then maybe what do you see is the potential implications of the NCCN guidelines in terms of use potential? Could you comment on that?

Jennifer, do you want to take that?

Yes, certainly. Thanks, Chris, and thanks for the question. In terms of the NCCN guidelines, we're very pleased. Well, one, first, proud of the team at ADC Therapeutics for submitting the guideline request on the same day as FDA approval on April 23. We're equally happy with the swift update from the NCCN treatment guidelines and believe that their timely response is really reflective of the differentiated profile of Zynlonta and also the high unmet medical need for these patients. And so we're very happy with how quickly the NCCN has worked. We're also very happy that the NCCN has recognized the broad population of patients who benefited from Zynlonta consistent with our FDA indication. So we think that the early inclusion in the NCCN treatment guidelines will allow us to accelerate our access initiatives and ensure that patients who may benefit from Zynlonta have the opportunity to do so. And since access is one of our launch imperatives critical to our success, we believe that the differentiated profile of Zynlonta as well as open access will facilitate our launch uptake through the year.

Our next question comes from Tazeen Ahmad from Bank of America.

I wanted to focus a little bit on Cami. And maybe, Jay, can you talk a little bit about what data should we expect to see from the solid tumor study potentially at ASCO. At this point, what indications do you think that you would be most hopeful about for Cami in solid tumors. And then can you talk to your view about the side effect profile specifically as it relates to GBS?

Thank you, Tazeen. Jay, can you take that?

Sure. I can answer those questions. So I think at ASCO we're not providing. It's a trial in progress poster. So we're not providing specific data. We don't have data yet from the trial that we presented or published anywhere because we're still in dose escalation phase, but the trial is going along pretty well. We've enrolled a number of patients. And so hopefully, we'll have some more information on that in the future, but I haven't given any time line for that yet. I think your other question was related to Cami and the Guillain-Barre syndrome. Was that correct, Tazeen?

What indications on the solid tumor space do you feel most encouraged about? And then just in general, the profile specifically GBS.

Sure. Sorry, I missed the middle question there. So we're using literature information to determine which solid tumor is the most commonly infiltrated by T-cells. We haven't focused now on specific tumor types yet because we're still in dose escalation, so kind of enrolling across the board. It wouldn't surprise me if we end up focusing on certain specific tumor types, but I think it's too early to name what those might be. We just don't have enough information yet. In terms of the side effect profile, again, in the solid tumor study, it's really early. We have not reached the maximum tolerated dose. We haven't seen anything unexpected. What we don't see is neuro autoimmune toxicity. We do not see any GBS or polyradiculopathy at this time. We didn't in the monotherapy dose escalation trial with solid tumors either. And as you may recall, GBS and polyradiculopathy have only been seen in Hodgkin lymphoma patients. And we believe that there's a correlation in that information in that we've treated more than 140 patients now with disease of Hodgkin lymphoma with Cami and we've never seen a case of GBS or polyradiculopathy. And of course, as you know, we monitor the association, uncommon with occasional cases of GBS related to Hodgkin lymphoma so. And in terms of GBS and Hodgkin lymphoma, what we're seeing in the Phase II trial and what we've discussed at ASH back in December is consistent with what we saw in the Phase I trial.

[Operator Instructions]. And presenters, I show no further questions in queue. I will turn it back to you for closing comments.

Thank you. Thank you, everyone, for joining the call today. We look forward to keeping you updated on our progress. And so I'll say have a nice day and take care. Thank you. Goodbye.

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