Good morning, ladies and gentlemen, and welcome to the ADC Therapeutics Q4 2025 Earnings Conference Call. [Operator Instructions] I will now turn the call over to Nicole Riley, Head of Investor Relations and Corporate Communications for ADC Therapeutics. Nicole, please go ahead.

Thank you, operator. Today, we issued a press release announcing our fourth quarter and full year 2025 financial results and business updates. This 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, Ameet Mallik, 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 2025 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 full year 2025 earnings release for information and reconciliations of historical non-GAAP measures to the comparable GAAP financial measures. I will now turn the call over to our CEO, Ameet Mallik. Ameet?

Thanks, Nicole, and hello, everyone. Thank you for joining us on today's call. We are pleased to share an update on our achievements in 2025 and our excitement for the future. Before I get into the details, I'd like to take a moment to reflect on the progress we've made over the past few years and why we believe this positions us strongly for the future. We have implemented a strategic plan to focus on ZYNLONTA with optimized life cycle management. This includes advancing LOTIS-5 as well as initiating the bispecific combination study, LOTIS-7 and IITs in indolent lymphomas. By focusing the company, we reduced our operating cost structure by approximately 50%. At the same time, we refined our go-to-market model, which resulted in strengthened KOL advocacy, and a sustained market position in the third-line plus DLBCL setting despite the entry of the bispecific class. Central to these achievements, we upgraded leadership and talent across the organization which resulted in improved execution. Lastly, we strengthened our balance sheet through equity and BD and improved our strategic flexibility with an amended HCR agreement. Having set the strategic course for our company, we see 3 horizons for potential value creation. These are centered around final data disclosures, approval and compendia inclusion and ultimately delivering growth. As we advance across these horizons, our vision is to first establish ZYNLONTA as a backbone therapy with a differentiated clinical profile across combinations in second-line plus DLBCL. Second, provide significant patient benefit in indolent lymphoma, including follicular lymphoma and marginal zone lymphoma. And third, achieve potential annual U.S. peak revenue opportunity of $600 million to $1 billion, assuming compendia inclusion and regulatory approval with a highly leveraged cost structure providing us with broader opportunities to invest in complementary hematology assets. 2025 was a year of substantial…

Thank you, Ameet. On the financial front, ZYNLONTA net product revenues in the fourth quarter of 2025 were $22.3 million as compared to $16.4 million in the same quarter in 2024. On a full year basis, net product revenues were $73.6 million versus $69.3 million in 2024 with an underlying volume broadly flat. Total operating expenses were $41 million and $202.9 million for the fourth quarter and full year ended December 31, 2025, respectively. On a non-GAAP basis, total adjusted operating expenses were $39.4 million and $181.3 million for the quarter and full year ended December 31, 2025, respectively. Total adjusted operating expenses were down over prior year by 15% and 6%, respectively. The reduction in total adjusted operating expenses for the fourth quarter was primarily driven by lower R&D expenses. The decrease in total adjusted operating expenses for the full year was across all major lines of the income statement. We continue to be disciplined in our market allocation towards potential value creation while driving efficiencies across the portfolio. On a GAAP basis, we reported a net loss of $6.4 million for the fourth quarter of 2025 or $0.04 per basic and diluted share as compared to a net loss of $30.7 million or $0.29 per basic and diluted share for the same period in 2024. Net loss for the full year ended December 31, 2025 was $142.6 million or a net loss of $1.12 per basic and diluted share as compared to a net loss of $157.8 million or a net loss of $1.62 per basic and diluted share for the full year ended December 31, 2024. The lower net loss over both periods was primarily due to a higher cumulative catch-up adjustment gain associated with our deferred royalty obligation and reduced R&D expenses partially offset by a…

Thank you, Pepe. To close, we achieved meaningful progress across our ZYNLONTA clinical program in DLBCL and through investigator-initiated trials in indolent lymphomas this past year. And we believe we have laid the foundation for multiple anticipated value-created catalysts ahead, as Pepe just highlighted. With our strengthened cash runway, we are confident we will drive significant potential long-term growth beginning in 2027. We can now open the line for questions. Operator?

[Operator Instructions] Our first question comes from Maury Raycroft from Jefferies.

Congrats on the priors. I'm going to ask one on LOTIS-5. At a high level, how are PFS events tracking relative to the 262 events required to trigger the top line analysis? Is there any chance the readout could get bumped into third quarter? And then wondering if you can clarify what will be included in the top line and whether CR durability could be included in that update? Or is that more likely to be reserved for a later medical conference?

Yes. Thanks so much for the question. So we are confident in the Q2 timing of the top line readout. So we expect to be able to hit the events in time, and we will be able to share top line data in Q2. We're very confident in that. In terms of what we expect to share, we're going to share the primary endpoint, which is PFS for the trial. That's what the study is powered to show. In addition, we're going to share all the secondary endpoints that are mature as of the time of the top line data as well as key safety tables. So we want to make sure that we're as transparent as possible with the market without compromising obviously, publication that we expect to happen by the end of the year.

Your next question comes from Michael Schmidt from Guggenheim.

Another one on LOTIS-5. And so just thinking about your market projections in second-line DLBCL. I think you spoke about an incremental $200 million to $300 million opportunity, assuming maintaining sort of a 10% share in that setting. And I was just wondering if that is perhaps too conservative. I'm just curious how you think about the market, especially now that we've seen Monjuvi perhaps moving into first-line, we see some of the bispecific antibody data reading out, perhaps below expectations. And so I'm just curious if there's upside perhaps to your LOTIS-5 opportunity assessment? And then I had a follow-up question.

Yes. I mean, I think based on the profile we saw in the safety run and if the final results look similar, obviously very highly confident that we can play a meaningful role in second-line plus DLBCL with this combination. To your point, we've already achieved an approximately 10% share in the third-line plus setting as a monotherapy. And I would say it has some attributes that physicians really like the fact that it works very quickly, very durable CRs, manageable safety profile, convenient dosing. One of the drawbacks right now is we have a less than competitive CR rate because we're competing against combination. So of course, now with the combination, we expect to have competitive and potentially been differentiating CR rates with a positive Phase III study. So we do feel confident we should be able to maintain that share in the 10% range in the third-line plus setting. And if we're able to maintain that same 10% in second- line, that would translate to $300 million. The exact, I would say, peak sales opportunity, we're going to know when we know the clinical profile because we think we can achieve this even with a competitive profile relative to other competitors. If we have a more differentiated profile, potentially we could do more. But we'll revisit the peak sales opportunity once we know the final clinical profile of the combination.

Yes. That makes sense. And then just another question on LOTIS-5. So just curious whether you've allowed crossover in this study? Especially as it pertains to getting an early look at overall survival, whether that's something that could perhaps be achieved? And then the other question related to that, I had is how are you thinking about potential use of bispecific antibodies post-progression perhaps impacting OS. Obviously, that could happen in either arms of the study. But I'm just curious, in general, perhaps how meaningful or how important you think OS could be as a differentiator in the setting, which obviously was not achieved by some of the other programs in second-line.

Yes. So we obviously don't know whether and how the subsequent therapies are between the different arms. So that's -- whether there were CAR-T bispecifics, as you said, or any other therapies, we're not obviously certain, we're completely blinded in terms of the study. Obviously, subsequent therapies can affect overall survival. I think the way we look at this is if we have a positive PFS without any detrimental effect to overall survival and overall a positive benefit risk profile, we think that we'll have a very good submission for the FDA.

Your next question comes from Eric Schmidt from Cantor.

This is Alexa on for Eric. And congrats on a great year. So one question for me. So R&D spend was down about $10 million from the previous quarter. So do you expect what we're seeing in Q4 to be the current run rate going forward?

Thanks, Alexa. I appreciate the question. So Pepe I'll turn that question to you around R&D spend in Q4 and what we expect going forward.

Yes. Thanks for the question. So we expect that as we move to 2026 and 2027, R&D expenses should go down, assuming we maintain the current number of trials and the current pipeline that we have as the LOTIS-5 trial will continue to wind down and then LOTIS-7, we'll get to a peak, but then will go down. So R&D expenses are expected to fluctuate quarter-over-quarter, but in general, for '26 and '27 to be going down.

Your next question comes from Sudan Loganathan from Stephens.

The first one, given the amended health care royalty agreement, they expect the cash flow weigh into 2028. How should we think about the capital allocation priorities between commercial investment behind ZYNLONTA or advancing combination strategies and then the potential business development angle, especially considering the remaining deferred royalty and term loan obligations?

Yes. I'll start off, and then Pepe, feel free to add. So I would say that right now, we feel pretty confident with our cash runway guidance that even with relatively stable revenues until we get to the new indications, which we expect to happen in 2027 with LOTIS-5 and as well as with the cost guidance that Pepe just mentioned, for all the activities that we have currently planned, our current LOTIS-5, our current LOTIS-7, our current IITs, all of our current ongoing activity as well as investing more prelaunch in both commercial and medical affairs activities. That's -- those are all the assumptions that we have in our current guidance. Obviously, if we were to do any additional life cycle management or new activities that would not be currently based within our cash runway guidance that we have right now. We think the ACR agreement provides strategic flexibility now because, obviously, by reducing the change in control payment just allows more strategic flexibility and optionality for the company going forward. And so we're really pleased by that. In exchange, of course, they continue the royalties, which given that our COGS is low to mid-single digit, when you add on the royalty agreement, the gross margin is still quite good for this product even when you add both of those things then. But Pepe is there anything else you would add to what I just said?

Yes. I think you gave all the details. It's -- at the end of the day, we are solely focused on driving ZYNLONTA growth, and that's by completing the LOTIS-5 and LOTIS-7 and indolent lymphoma trials. That capital has been allocated and is part of our cash runway as well as all the prelaunch activities and launch activities of ZYNLONTA in 2027 in the second-line setting. It does also cover some of those expenses related to a loan. So it's all included. We believe we have a really strong cash position right now to execute on our plan.

And if I could, just a second one real quick. I wanted to ask about if you can give any details on maybe your market strategy as you get some of these last final data readouts this year and looking -- going towards the regulatory -- compendia and regulatory inclusion pathway first half of next year. Could you give us any details on how your marketing strategy could change to get into the DLBCL space, the second-line space?

I mean the good thing is we have a very good footprint. So our field force already covers about 90% of the potential of DLBCL. We have a full MSL team as well. and a strong headquarter team. So we will make some incremental increases, both on the commercial and MSL footprint as well as some additional expenses in terms of A&P and other expenses from a headquarters basis. But I would say incremental because we think we're already pretty well covered. Obviously, when you do a prelaunch and launch activities, and we can expand into a much bigger population, the second-line population, which we think also with a better profile than we have today. Those incremental investments are going to help us to make sure that we drive education around the product use, particularly with -- when we anticipate a LOTIS-5 approval sometime in the middle of next year. We think LOTIS-5 obviously, is also key because once we get to the top line readout next year, it really actually unlocks the total value of the life cycle management plan for ZYNLONTA because that is our full approval. And we think that the total opportunity that we have for ZYNLONTA, not just with LOTIS-5, but assuming we can have regulatory approvals and compendia for the other indications, it could take the total peak revenue opportunity for ZYNLONTA to $600 million to $1 billion. So we think ZYNLONTA LOTIS-5 readout to Q2 is really a key unlocking event to start driving the value of the total asset potential.

And your last question comes from Leonid Timashev from RBC Capital Markets.

I just wanted to ask on sort of the current commercial run rate for ZYNLONTA. I guess you've had a couple of stronger quarters. I guess at what point do you think that becomes a trend where you're actually seeing genuinely more enthusiasm and use from investigators in the current labeled indication? Or is there still seasonality? And maybe what does that tell you about potential future launch of ZYNLONTA as you expand the indication?

Yes. I mean I think we're pleased that over the last couple of years, since bispecifics have launched, we've basically been able to maintain our share within a space that's gotten a lot more competitive. So I think we feel really good about that. If you look more broadly at 2025 versus 2024, volumes are roughly stable. There's some slight increase in sales mainly driven to slight increases in net price. So as you know, we don't provide any annual net revenue guidance, but we still -- we expect this year, sales again to remain broadly in line with what we've seen in the recent years. And the real inflection point will start when we get the approval for LOTIS-5 next year where we think we can really significantly increase the potential sales opportunity for ZYNLONTA.

Thank you. As there are no further questions at this time, we may proceed with the conference.

Well, 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, you may now end the call.

Ladies and gentlemen, this does conclude your conference call for today. We thank you very much for your participation. You may now disconnect. Have a great day.