ADC Therapeutics (NYSE:ADCT) Q1 2026 Earnings Call

6:58 Good morning, ladies and gentlemen, and welcome to the ADC Therapeutics Q1 twenty twenty six Earnings Conference Call. At this time, all lines are in listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on Monday, 05/04/2026. I would now like to turn the conference over to Nicole Reilly, Head of Investor Relations and Corporate Communications. Please go ahead. Thank you, operator. Today, we issued a press release announcing our first quarter twenty twenty six 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.

7:49 I'm joined on today's call by our Chief Executive Officer, Amit Malik, who will discuss our operational performance and recent business highlights, followed by our Chief Financial Officer, Pepe Carmona, who will review our first quarter twenty twenty six 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 ks, 10 Q and eight ks.

8:40 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 first quarter twenty twenty six earnings release for information and reconciliation of historical non GAAP measures to the comparable GAAP financial measures.

9:26 I will now turn the call over to our CEO, Amit Malik. Amit? Thank you, Nicole. We continue to make good progress in the first quarter of twenty twenty six as we advance towards multiple important milestones for ZENLANTA over the remainder of the year, beginning with the expected LOTUS-five top line readout in the second quarter. From a commercial perspective, we continue to focus on execution and delivering on our commercial strategy, maintaining ZYNLATA as a differentiated treatment option for third line plus DLBCL patients. First quarter net product revenues were $20,000,000 as compared to the prior year's first quarter net product revenues of $17,400,000 The increase was driven primarily by normal quarter to quarter variability in customer ordering with underlying demand broadly stable.

10:20 Looking toward the second line plus setting where we believe the largest growth opportunity lies, for LOTIS V, our Phase three confirmatory trial of ZINLANTA plus rituximab, we expect to share top line data before the end of June, potentially bringing us another step closer to providing this combination to significantly more patients. While this timeline is rapidly approaching, I do want to highlight that we are currently still blinded to the data. Turning to LOTUS seven, we expect to complete enrollment of approximately 100 patients at the selected dose level of ZENLANTA plus glosetamab in the second quarter with full data anticipated by year end. In indolent lymphomas, we continue to anticipate data publication between the end of twenty twenty six and mid-twenty twenty seven from the multicenter investigator initiated trials of ZYNLATA in combination with rituximab to treat relapsed or refractory follicular lymphoma and of ZYNLATA as a monotherapy to treat relapsed or refractory marginal zone lymphoma.

11:26 We continue to pay close attention in the quarter to managing our cost base and optimizing our balance sheet. On a non GAAP basis, we reduced our total operating expenses by 13% versus Q1 twenty twenty five and we ended the first quarter of twenty twenty six with a healthy cash balance of $231,000,000 This maintains our expected cash runway at least into 2028 enabling us to deliver against our strategy. We are building off the well established role of ZYNLATA as a single agent therapy in third line plus DLBCL whereas ZYNLATA has a profile of rapid, deep and durable efficacy, as well as manageable safety with simple and convenient administration.

12:11 We believe the relative stability we've seen in net product revenues over multiple quarters demonstrates that ZYNLATA has a clear place in this market. This is just a starting point as we believe in the potential for ZYNLATA to reach significantly more patients by expanding use into earlier lines of therapy in DLBCL and into indolent lymphomas. The data we've seen across these settings so far have been consistently encouraging with the potential to be highly differentiating. Through expansion into these settings in DLBCL and into indolent lymphomas, we are confident that ZYNLAZA has the potential to reach peak annual revenues of $600,000,000 to $1,000,000,000 in The U. S, assuming both compendia listing and regulatory approval. The upcoming LOTUS-five trial readout, if positive, will begin to unlock the value of our lifecycle management efforts with ZYNLATA.

13:04 Taken together with the upcoming data expected from LOTUS-seven and the indolent lymphoma studies, we expect to accelerate our revenue growth trajectory starting in 2027. Now I would like to turn the call over to Pepe Carmona, our CFO, who will discuss financial results for the first quarter. Pepe? Thank you, Amit. On the financial front, Xinlonta net product revenues in the first quarter of twenty twenty six were $20,000,000 as compared to $17,400,000 in the same quarter in 2025. Licensing revenues and royalties were lower this year due to $5,000,000 milestone we received from our partner in the prior year period. Cost product sales increased by $1,600,000 to $3,600,000 for the three months ended 03/31/2026.

13:57 This increase reflects a shift in the allocation of certain personnel costs due to a change in focus from research and development activities to commercial manufacturing activities. Total operating expenses were $46,100,000 for the first quarter. On a non GAAP basis, total adjusted operating expenses were $42,900,000 for the quarter. Total adjusted operating expenses were down by 13% over the prior year period, primarily driven by lower R and D expenses. As Amit noted, we're managing our costs carefully and we remain disciplined in our capital allocation towards potential value creation while driving efficiency.

14:44 On a GAAP basis, we reported a net loss of $33,000,000 for the first quarter of twenty twenty six or $0.21 per basic and diluted share as compared to a net loss of $38,600,000 or $0.36 per basic and diluted share for the same period in 2025. On a non GAAP basis, the adjusted net loss was $19,700,000 for the first quarter of twenty twenty six as compared to a net loss of $24,000,000 for the same period in 2025. The lower net loss on both GAAP and non GAAP basis was primarily due to reduced R and D expenses. The year over year reductions on a per share basis were additionally impacted by the higher number of weighted average shares outstanding.

15:36 You can find the reconciliation of GAAP to non GAAP measures for the first quarter in the accompanying financial tables of the press release issued earlier today and in the appendix of this presentation. At the end of the first quarter we had cash and cash equivalents of $231,000,000 as compared to $261,300,000 as of 12/31/2025. This provides us with an expected cash runway at least into 2028. Turning to upcoming milestones, we expect to have multiple data catalyst during the remainder of 2026 across the ZYNLOTA program. First, we expect to share the top line data for LOTUS V before the end of June with publication of full results anticipated by the year end. As Amit noted, we're currently blinded to the data.

16:34 Until the top line data has been presented, we will remain in a blackout period, which means we may need to cancel our participation in any conferences as well as meetings with investors and analysts. Assuming the results are positive, we plan to submit a supplemental biologic license application to the FDA by year end with potential publication and compendium inclusion in the first half of twenty twenty seven and confirmatory approval to follow thereafter. With LODOS seven, we're on track to complete enrollment in the second quarter. We plan to share the next update with full data at the medical meeting by the end of twenty twenty six. In addition, assuming positive results, we plan to pursue compendia inclusion as well as assess a regulatory strategy.

17:23 With indolent lymphomas, we expect the lead investigator to share additional data at medical conferences between the end of twenty twenty six and mid-twenty twenty seven. And we plan to assess regulatory and convenience strategies once sufficient data are available. I will now turn the call back over to Amit. Thank you, Pepe. To close, I am pleased with our start to 2026. We have achieved solid commercial performance while maintaining our strict capital discipline as we look forward to multiple anticipated value creating catalysts, beginning with the expected LOTUS-five readout. We are excited about delivering on our strategy and confident we can drive significant potential long term growth starting in 2027.

18:10 We can now open the line for questions. Operator? Thank you. Ladies and gentlemen, we will now begin the question and answer session. Your first question comes from Maury Raycroft with Jefferies. Your line is now open. Hi, good morning. Congrats on the progress and thanks for taking my question. You mentioned on the call that you remain blinded to the data. Can you clarify if the database is locked at this point and when you reach the two sixty two events?

19:00 And from a process standpoint, can you say what's happening currently? And what are the drivers that will allow you to unblind the data? Yeah, thanks for the question. So what I can tell you is we're on track to be able to read the data. We're completely blinded to the data, so I don't know any information yet. But as soon as the database gets locked and we do the statistical analysis, we'll then be able to disclose top line data. So, we're not at that point yet. Got it. Understood. We are on track to basically to share the data this quarter. Got it. Okay. And for when you reach the two sixty two events, is there anything more on that you're saying from a timing perspective? Yeah, we're not commenting on exactly what we're hitting the events. But what I can tell you is we're on track to hit the, you know, to basically to get to the top line results this quarter, in the second quarter. Okay, understood. Maybe one other quick question. Just following the site level interventions you implemented to address the early dropout in censoring, do you have any perspective potentially from the IDMC to provide any indication that censoring rates improved after those changes? I guess any more color on that could be helpful.

20:18 I can't comment further. What I can tell you is our last IDMC look, which was from a safety standpoint, was last fall. And again, that recommendation was to proceed as is. There's been any other looks from the IDMC at the data. Understood. Okay, thanks for taking my questions. Yeah. Thank you so much. Appreciate it. Your next question comes from Michael Schmidt with Guggenheim. Your line is now open. Oh, hey, guys. Good morning. Thanks for taking my questions. I have a couple. Maybe first, commercially, the $20,000,000 in 1Q, it's about 15% growth annually. I know you mentioned ordering pattern, but it just seems more growth than we've seen in recent quarters. And just curious if there's anything else going on in terms of driving more volume perhaps in the approved indication in the market.

21:13 And then the other question I just had on LOTUS-five, so great to hear that the data is still on track for this quarter. Could you just comment on how much of the result you'll be able to disclose in the top line announcement? Will you be able to share things like median PFS or perhaps hazard ratios, etcetera, in the top line release? Thanks so much. Yeah, thanks, Michael. So first in sales, as you recall, Q3 was quite low and the Q4 was quite strong. So we had 16,800,000 and 22,300,000, now we're at 20,000,000. I think it's too soon to call a change in trend, to be honest right now, but I think what we're seeing is definitely very good execution, we're happy that we've been able to maintain our share despite a very competitive environment.

22:06 And there is quarter to quarter variability as we saw, Q3 was one of the lowest quarters and then Q4 was one the higher quarters in the last couple of years. But I think after two quarters in that $20 plus million range it's encouraging, but too soon to call a trend. So I think if this continues that may cause us to sort of change where we think the range is going be, but I think at this point, just given the variability we've seen in the last couple of years, I think we think it's, we're still in the range of normal demand within the patterns of customer ordering variability. With regards to LOTUS five, we plan to share all the relevant information on the primary endpoints, of course, like the DPFAS hazard ratio, any information that we have on key secondary endpoints, as well as top line safety data. So we do want to make sure that the disclosure is clear with the information that we have and well understood what the result is.

23:06 At the same time, a lot of sub analyses and other things that are typically less relevant for a top line result, like critical for, let's say, a medical conference or publication, those would be details that would come later in the year. Thank you. Yeah, thanks, Michael. Your next question comes from Eric Schmidt with Cantor. Your line is now open. Thanks for a very efficient call. A couple of questions for me also on LOTUS V. First, with regard to procedures, do I take that based comments to mean that you're now entering the quiet period? Is that starting after today? We started actually a quiet period after we have to do earnings of course, but we haven't been engaging with analysts or investors since April 1.

23:58 So for the whole quarter until we disclose the data. Thank you. And then Amit, on the information that you'll be able to disclose with regard to the top line data for LOTUS-five this quarter, will we get some thoughts on how survival is trending? I know the trials primary endpoint is PFS and you're well powered there, but wondering if you'll be able to provide color on OS trends. And then if you know, at this point, how many OS events or how mature the OS data might be at the time of the PFS top line look? Thanks. Yeah, so in addition to PFS, which obviously will be mature, we will give the information that we have on overall survival. So whether it's mature or it's a trend, we will provide the information that we have on overall survival, as well as the other key secondary endpoints as well, like response rate, duration of response.

24:49 So we plan to share all the information we have, I can't comment right now on how many events we have with regards to overall survival, but what I can tell you is it will be with whatever information we have, we will make it part of the disclosure. And then maybe just one modeling for Pepe, the change that we saw from personnel from R and D into cost of goods, is that an ongoing transition? Are we expecting COGS to be inflated in subsequent quarters as well? It is going to continue throughout all courses from now on. It's a reallocation of those expenses into cost of goods and we capitalize one time inventory, but the cost of goods are going to increase because of this fixed cost and now it's getting allocated.

25:42 Thank you very much. Your next question comes from Sudan Logothan with Stephens. Your line is now open. Hi, good morning. I appreciate taking the question. My first one, I wanted to ask, you know, what you believe the immediate impacts post the LOTUS V topline results in the second quarter, you know, could be, you know, as for instance, if it is positive, good PFS readout, you know, how this may change, how the ZYNLENTA is prescribed, reviewed in the second half of this year, even prior to Compadia listing? And then secondly, wanted to ask, even push over to the IITs, how does that add some incremental value over the next year or two?

26:37 Sure, yeah, so once we get to the top line readout, assuming it's positive, we then would work to kind of go down two paths. One is to prepare the SBLA submission that typically takes four to five months, we expect to have that certainly before the end of this year, and then that could lead to our approval thereafter next year. And then in addition, we plan to submit to a medical congress and publication by the end of this year to be able to share the full details of the results. That would be the basis that we would submit to compendia. So we expect that we could get compendia inclusion sometime in the first part of next year, and then an approval sometime thereafter in 2027.

27:24 So we don't expect any revenue impact this year. We expect this year to be largely in line with what the previous years are, and only see if revenue trajectory increase next year. As you know, we'll only start promoting the product once we have formal approval sometime around the middle of next year. And your second question was around the IITs, correct? Yes. Yeah. Okay, so with the IITs, we have both marginal zone and follicular lymphoma IITs. Both of those, let's call it, the data on the full study will be disclosed sometime between the end of this year and the middle of next year. We expect publications to happen around that same time, and then to be submitted for compendium inclusion after that. In addition, we're evaluating the regulatory approach for what we would take in ingotinal insomnia as we move forward in parallel.

28:25 Great, I appreciate the details and looking forward to the readout. Yeah, thank you. There are no further questions at this time. I will now turn the call over to Amit Mehluk for closing remarks. Thank you all for joining the call today and for your continued support. We look forward to keeping you updated on our progress and look forward to speaking soon. So operator, you may now end the call. Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating in SA. Please disconnect your lines.