ADC Therapeutics (NYSE:ADCT) Q4 2025 Earnings Call

6:28 Good morning, ladies and gentlemen, and welcome to the ADC Therapeutics Q4 twenty twenty five Earnings Conference Call. At this time, all lines are in listen only mode. And following the presentation, we will conduct a question and answer session. I will now turn the call over to Nicole Reilly, 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 twenty twenty five 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.

7:16 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 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 ks, 10 Q and eight ks.

8:11 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 twenty twenty five earnings release for information and reconciliation of historical non GAAP measures to the comparable GAAP financial measures.

8:58 I will now turn the call over to our CEO, Amit Malik. Amit? 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 Zenlatta with optimized lifecycle management. This includes advancing LOTUS five as well as initiating the bispecific combination study LOTUS-seven and IITs in indolent lymphomas. By focusing the company, we reduced our operating cost structure by approximately 50%.

9:47 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 three horizons for potential value creation. These are centered around final data disclosures, approval and compendia inclusion, and ultimately delivering growth.

10:35 As we advance across these horizons, our vision is to first establish ZENLANTA as a backbone therapy with a differentiated clinical profile across combinations in second line plus DLBCL. Second, provide significant patient benefit in indolent lymphomas, including follicular lymphoma and marginal zone lymphoma. And third, achieve potential annual U. S. Peak revenue opportunity of $600,000,000 to $1,000,000,000 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 progress for our company. We further derisked our portfolio with multiple exciting milestones achieved for key ZENLATA trials in both second line plus DLBCL and through the indolent lymphoma IITs.

11:33 We undertook a strategic reprioritization to focus resources on ZENLATA expansion opportunities, positioning the company for long term growth with significantly reduced operating expenses. And we significantly strengthened our balance sheet, providing us with the ability to deliver against our objectives. Among our accomplishments from a commercial perspective, we continue to focus on execution and delivering on our commercial strategy, maintaining XENLETA as a differentiated treatment option for third line plus DLBCL patients. Building off an unusually low Q3, performance was strong in Q4 with net product revenues of $22,300,000 primarily driven by variability in customer ordering patterns, as well as activation of some new accounts.

12:24 Sales for the year were $73,600,000 and remained roughly stable in line with our expectations in the third line plus setting. Looking toward the second line plus setting where we believe the real growth opportunity lies, with LOTUS-five we expect to share top line data in the second quarter of twenty twenty six, potentially bringing us another step closer to providing this combination treatment to significantly more patients. With LOTUS seven, we expanded target enrollment to approximately 100 patients at the selected dose level and shared updated safety and efficacy data on forty nine efficacy evaluable patients in December, which we believe continues to support the potential for this regimen to be a best in class combination in a highly competitive market.

13:16 In indolent lymphomas promising Phase two data was also shared in 2025 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 lymphoma, with presentations at the International Conference on Malignant Lymphoma and the International Workshop on Non Hodgkin Lymphoma. We anticipate publication data across these IITs between the end of twenty twenty six and mid-twenty twenty seven. Most recently, we were pleased to have entered into an amendment to our royalty purchase agreement with Healthcare Royalty. This update to the terms of our agreement is a reflection of ACR's conviction and the long term value of ZIMMANTA, and we believe these new terms give us greater strategic flexibility.

14:12 Finally, from a corporate perspective through strict capital management in 2025, including a strategic reprioritization and multiple financings, we ended the year with a cash balance of $261,000,000 with an expected cash runway at least into 2028. With this significant progress, we are confident in our path ahead as we work to make an impact for more patients moving forward. As a single agent therapy in third line plus DLBCL, XENLETA has a profile of rapid, deep and durable efficacy, as well as manageable safety with simple administration. Beyond our current indication, we believe in the potential to reach significantly more patients by expanding use into earlier lines of therapy in DLBCL and into indolent lymphomas.

15:02 The data we've seen across these settings so far has been consistently encouraging with the potential to be highly differentiated. We continue to believe that through expansion into these settings, XENLETA has the potential to reach peak annual revenues of $600,000,000 to $1,000,000,000 in The U. S. Our current indication, as I noted earlier, has shown relative stability in net revenues over multiple quarters, demonstrating ZYNLATA has a clear place in the market as a monotherapy. We believe LOTUS-five has the potential to lift peak annual revenue for ZYNLATA to $200,000,000 to $300,000,000 as we expand into the second line setting. Not only will this double the addressable patient population, but with an improved clinical profile versus our current indication as a monotherapy, we expect to gain share in the second line plus setting and improve duration of therapy.

15:56 With LOTUS seven, we estimate we can expand the total opportunity for ZYNLATA in DLBCL to $500,000,000 to 800,000,000 in peak annual revenue with both regulatory approval and compendia listing. If the data continue to be compelling, we believe ZYNLATA plus glafitamab has the potential to transform the future lymphoma treatment paradigm by becoming the preferred bispecific combination in the second line plus DLBCL setting. On top of this, we see additional potential for ZIMMANTA in relapsed or refractory marginal zone lymphoma and relapsed or refractory follicular lymphoma. If the encouraging initial data in the Phase II IITs are maintained in larger patient numbers, we believe these indolent lymphomas could provide additional peak annual revenue for ZIMMANTA of 100,000,000 to $200,000,000 with both regulatory approval and compendia listing, primarily driven by MZL.

16:57 Let's drill down a little more into the specifics of the DLBCL treatment landscape to explain why we believe ZYNLATA has the opportunity to play a significant role. In both the second and third line plus settings, there are two main segments. The first segment includes complex therapies, which require unique infrastructure and expertise to handle logistical requirements and patient management. These are primarily confined to the academic centers and more sophisticated community centers and include therapies like CAR T, transplant, and bispecifics. The second segment comprises more broadly accessible therapies, which all physicians can administer in the outpatient setting and include ADCs, monoclonal antibodies, and chemotherapy.

17:44 The launch of bispecifics as monotherapy in the third line plus setting has resulted in an evolution of the treatment landscape, where we estimate there's currently a sixtyforty split between complex and broadly accessible segments. In the second line setting where bispecifics have not yet been approved or added last year to NCCN guidelines for use in combination, we expect that they will continue to gain share and grow the use of complex therapies. Through LOTUS five and seven, we believe XENLETA combinations have the potential to raise the bar on efficacy in second line plus DLBCL in their respective treatment segments, establishing XENLETA as a backbone therapy with a differentiated clinical profile across combinations and offering complementary approaches to addressing unmet needs.

18:34 In LOTUS-five, our Phase III confirmatory study, we are combining ZYNLATA with the most widely used agent rituximab in patients with second line plus DLBCL. As a reminder, initial data from the safety lead in portion 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 has the potential to provide competitive second line plus efficacy with a favorable safety profile allowing broad accessibility. In LOTUS seven, our Phase 1b trial, we are combining ZIMMANTA with a highly effective bispecific glufetamab in second line plus patients. In December, we reported updated data from the trial, which demonstrated a ninety percent best overall response rate and a seventy eight percent complete response rate across forty nine efficacy evaluable patients with a minimum of six month follow-up.

19:33 Not only did this support a clinically meaningful benefit for patients, but the data also showed the combination continues to generally be well tolerated with a manageable safety profile. Taken together, we are encouraged by the expanding dataset, which we believe demonstrates the potential for ZYNLATA plus glufetamab to be a best in class combination in a highly competitive market. When you look at the CR rates across these two treatment segments, we believe the emerging clinical profile of ZYNLATA plus glufetamab in LOTUS seven positions us well among complex therapies, and at the same time, the clinical profile of ZINLANTA plus rituximab and LOTUS five has the potential to differentiate us among broadly accessible therapies.

20:21 Together, we believe these combinations have the potential to double the addressable patient population as we move into second line and increase the duration of therapy moving on average from three cycles to five to six cycles. We have established a place for ZENLATA monotherapy today in later lines because it works quickly. CRs when achieved are durable, and it has manageable safety and a convenient dosing schedule. As compared to our current indication as a monotherapy, we believe an improved CR rate in a broader patient population with LOTUS-five will make ZYNLAXA more relevant among both academic and community treaters, especially for patients who cannot access, are not suitable for, or progress on a CAR T or bispecific based therapy.

21:08 When you take into account the fact that there are approximately 12,000 patients in the second line, in addition to the approximately 6,000 in our currently addressable third line plus patient population, and the average number of cycles in ZENLATA would increase from approximately three to five, we believe that once in the second line setting, we will be positioned to reach more patients with additional cycles and will capture share accordingly. In the second line setting, every 10 points of share translates to approximately $200,000,000 in revenue, and every 10 points of share in the third line plus setting to approximately $100,000,000 based on the expected longer duration of therapy for this combination. We have already achieved an approximately 10% share in the third line plus setting as a monotherapy with a CR rate lower than that of competitive combination based therapies.

21:59 Therefore, if we maintain the 10% share we have today in the third line plus setting, achieving only five percent to 10% share in the second line setting which translates to roughly 200,000,000 to $300,000,000 in peak sales opportunity for the Zemanta plus rituximab combination alone. Taken together with the DLBCL bispecific combination and indolent lymphoma opportunities, we believe we could deliver on our vision of a combined potential peak annual revenue of $600,000,000 to $1,000,000,000 in The U. S, assuming compendia listings and regulatory approvals. Now, I will turn the call over to Pepe Carmona, our CFO, who will discuss financial results for the fourth quarter. Pepe? Thank you, Amit.

22:45 On the financial front, ZYNLOTA net product revenues in the fourth quarter of twenty twenty five were $22,300,000 as compared to $16,400,000 in the same quarter in 2024. On a full year basis, net product revenues were $73,600,000 versus $69,300,000 in 2024, with an underlying volume broadly flat. Total operating expenses were $41,000,000 and $202,900,000 for the fourth quarter and full year ended 12/31/2025, respectively. On a non GAAP basis, total adjusted operating expenses were $39,400,000 and $181,300,000 for the quarter and full year ended 12/31/2025, respectively.

23:40 Total adjusted operating expenses were down over prior year by 156%, respectively. The reduction in total adjusted operating expenses for the fourth quarter was primarily driven by lower R and 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 capital allocation towards potential value creation while driving efficiencies across the portfolio. On a GAAP basis, we reported a net loss of $6,400,000 for the fourth quarter of twenty twenty five or $04 per basic and diluted share as compared to a net loss of $30,700,000 or $0.29 per basic and diluted share for the same period in 2024.

24:34 Net loss for the full year ended 12/31/2025 was $142,600,000 or a net loss of $1.12 per basic and diluted share as compared to a net loss of $157,800,000 or a net loss of $1.62 per basic and diluted share for the full year ended 12/31/2024. 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 and D expenses, partially offset by a restructuring impairment and related costs incurred in connection with the strategic reprioritization and restructuring plan.

25:21 You can find the reconciliation of GAAP to non GAAP measures for the fourth quarter and year to date in the accompanying financial tables of the press release issued earlier today and in the appendix of this presentation. At the end of the quarter, we had cash and cash equivalents of $261,300,000 compared to $250,900,000 as of 12/31/2024. We significantly strengthened our balance sheet in 2025 by entering into $100,000,000 PIPE financing in June 2025 and a $60,000,000 PIPE financing in October 2025, providing an expected cash runway at least into 2028. We expect to have multiple data catalysts in 2026 across the CINLONTA program.

26:12 For LOGS V, we expect to provide top line data in the second quarter of twenty twenty six. We expect to publish full results by the year end. Assuming the results are positive, we'll file a supplemental biologic license application submission to the FDA with potential publication and compendia inclusion in the first half of twenty twenty seven and confirmatory approval to follow in mid-twenty twenty seven. With LOTUS seven, we plan to share the next update with full data at a medical meeting and through publication 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.

26:58 With indolent lymphomas, we expect additional data to be shared at medical conferences by the lead investigators between the end of twenty twenty six and mid-twenty twenty seven, and we plan to assess regulatory and competitive strategies once sufficient data are available. I will now turn the call back over to Amit. Thank you, Pepe. To close, we achieved meaningful progress across our Zananta clinical program in DLBCL and through investigator initiated trials in endolithomas 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.

27:45 We can now open the line for questions. Operator? Thank you. Ladies and gentlemen, we'll now begin the question and answer session. And your first question comes from Murray Raycroft from Jefferies. Please go ahead. Hi, good morning. Congrats on the progress and thanks for taking my questions. I'm going ask one on LOTUS V. At a high level, how are PFS events tracking relative to the two sixty two events required to trigger the top line analysis?

28:32 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? Is that more likely to be reserved for a later medical conference? Yeah, 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 of 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.

29:30 Got it. That's helpful. Thanks for taking my questions. Yeah, thank you. I appreciate it. Thank you. And your next question comes from Michael Smith from Guggenheim. Please go ahead. Hey, guys. Good morning. Thanks for taking my questions. Another one on LOTUS-five. And so, just thinking about your market projections in second line DLBCL, I think you spoke about an incremental $200 to $300,000,000 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 MONJUVY perhaps moving into first line. We see some of the bispecific antibody data reading out, you know, perhaps below expectations.

30:23 And so, I'm just curious if there's upside perhaps to your LOTUS-five opportunity assessment. And then I had a follow-up question. Yeah, I mean, I think based on the profile we saw on the safety run and if the final results look similar, we're 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, you know, it has some attributes that physicians really like, the fact that it works very quickly, very durable CRRs, 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 combinations. So of course now with the combination we expect to have competitive and potentially even differentiating CR rates with a positive phase three study. So we do feel confident we should be able to maintain that share in the ten percent range in the third line cross setting.

31:23 If we're able to maintain that same 10% in the second line, that would translate to $300,000,000 The exact, I would say, peak sales opportunity, we're going 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. Yeah, that makes sense. And then just another question on LOTUS-five. So just curious whether you've allowed crossover in this study, especially as it pertains to, you know, getting an early look at overall survival, you know, whether that's something that could perhaps be achieved. And then the other question, you know, related to that I had is, you know, how are you thinking about potential use of bispecific antibodies post progression perhaps impacting OS?

32:21 Obviously, that could happen in either arms of the study, but I'm just curious, you know, in general perhaps, you know, how meaningful or how important you think OS could be as differentiator in this setting, which obviously was not achieved by some of the other programs in second line? Yeah, so we obviously don't know whether and how the subsequent therapies are between the different arms. So that's, you know, whether there were CAR T, bispecifics as you said, or any other therapies, we're not obviously certain because 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 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.

33:22 Thank you. Thank you. And your next question comes from Eric Schmidt from Cantor. Please go ahead. Hi, team. This is Alexa on for Eric, and congrats on a great year. So, one question for me. So, R and D spend was down about $10,000,000 from the previous quarter. So, do you expect what we're seeing in Q4 to be the current run rate going forward? Alright. Thanks, Thanks, Alexa. Appreciate the question. So Pepe, I'll turn that question to you around R and 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 and D expenses should go down assuming we maintain the current number of trials and the current pipeline that we have as the LOTUS-five trial will continue to wind down and then LOTUS-seven will get to a peak, but then will go down.

34:26 So, R and D expenses are expected to fluctuate quarter over quarter, but in general for '26 and '27 to be going down. Thank you so much. Thank you. And your next question comes from Sudan Locanson from Stephens. Please go ahead. Hi, good morning. Thanks for taking my question. The first one, you know, given the amended healthcare royalty agreement, they expect a cash runway into 2028. How should we think about the capital allocation priorities between commercial investment behind Zenlanta or advancing combination strategies and then the potential business development angle, especially considering the remaining deferred royalty and term loan obligations.

35:16 Yeah, 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 LOTUS-five, and as well as with the cost guidance that Pepe just mentioned, for all the activities that we have currently planned, our current LOTUS five, our current LOTUS seven, our current IITs, all of our current ongoing activity, as well as investing more pre launch in both commercial and medical affairs activities. 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 were 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 in the royalty agreement, the gross margin is still quite good for this product, even when you add both of those things in. Pepe, is there anything else you would add to what I just said?

36:41 Yeah, I think as you gave all the details, it's at the end of the day, we were solely focused on on drivers and long term growth. And that's why completing the Lotus five, Lotus seven and indolent lymphoma trials. That capital has been allocated and is part of our cash runway, as well as all the pre launch activities and launch activities of CINLONTA 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. Thanks. 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, you know, as you get some of these last final data readouts this year and looking going towards the 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? Thanks.

37:48 I mean, 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 and P and other expenses on a headquarters basis. But I would say incremental, because we think we're already pretty well covered. Obviously when you do the pre launch 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, you know, those incremental investments are going to help us to make sure that we drive education around the product use, particularly when we anticipate a LOTUS V approval sometime in the middle of next year. We think LOTUS V obviously is also key, because once we get to the top line readout next year it really actually unlocks the total value of the lifecycle management plan for ZYNLATA, because that is our full approval.

38:51 And we think that the total opportunity that we have for ZYNLATA, not just for LOTUS V, but you know, assuming we can have regulatory approvals and compendia for the other indications, it could take the total peak revenue opportunity for ZYNLATA $600,000,000 to $1,000,000,000 So we think this ZILANTA load us five feet up to Q2 is really a key unlocking event to start driving the value of the total asset potential. Great, thanks. Thank you. And your last question comes from Leonid Timische from RBC Capital Markets. Please go ahead. Hey, thanks for taking my question. I just wanted to ask on sort of current commercial run rate for ZENLOANZA. 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 this still seasonality?

39:49 And maybe what does that tell you about potential future launch of zoluntin as you expand the indication? Thanks. Yeah, 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 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 LOTUS V next year, where we think we can really significantly increase the potential sales opportunity for ZYNLATA.

40:56 Thank you. There are no further questions at this time. You 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.