Welcome to the ADC Therapeutics Second Quarter 2022 Financial Results Conference Call. My name is Gigi, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. [Operator Instructions] I will now turn the call over to Amanda Hamilton, Investor Relations Manager. Amanda, you may begin.

Thank you, Operator. This morning we issued a press release announcing our second quarter 2022 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, Ameet Mallik, Chief Executive Officer; Jennifer Herron, Chief Commercial Officer; Joe Camardo, Chief Medical Officer; and Jenn Creel, Chief Financial Officer, will discuss recent business highlights and review our second quarter 2022 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 99.2 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 second 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 Ameet Mallik. Ameet?

Thanks, Amanda, and thank you for joining us today. Before we get into the details of the quarter, now that I've been in the role of CEO for three months, I would like to take this opportunity to share my observations and thoughts on the company and its business plan looking forward. I've spent the last three months on a listening tour, speaking with physicians and investors and meeting with employees across all sites and level. My intent was to take a deep dive into all aspects of the business and determine how to best capitalize on our unique science and tremendous talent to maximize the impact we deliver for our stakeholders. First and foremost, and one of the main reasons why I joined the company is that ADCs have emerged as a promising and exciting class of therapies that have the potential to benefit a broad set of patients for years to come. ADC Therapeutics is both a pioneer and leader in the field of ADCs. We are fully integrated company with a strong value chain that we built from the ground up starting with our innovative ADC platform and the expertise and capabilities extending from research and clinical development to CMC and commercial. The seamless integration of our agile and experienced team has been validated by the approval and launch of ZYNLONTA for third-line DLBCL, as well as our advancing pipeline of promising hematology and solid tumor programs. So how do we plan to deliver to patients and maximize the potential of our platform and portfolio? We think about value creation in three time horizons. The near, mid and long-term. Starting with the near-term horizon and the hematology program, we will continue to execute on our plan to maximize the potential of ZYNLONTA in the third-line plus DLBCL…

Thank you, Ameet, and good morning everyone. I am pleased to share an update on the ZYNLONTA launch in Q2. ZYNLONTA Q2, net sales were $17.3 million, representing 5% growth versus Q1. With our steady month-over-month growth in demand as we progressed through the quarter. Just a little over a year into the launch, we have made solid progress in a challenging environment. However, there are many more opportunities for growth in the third line plus DLBCL market. We have a focused plan in place to capture that opportunity and we remain confident that with ZYNLONTA differentiated product profile we will drive steady growth in the coming quarters. Since the launch, we have focused the majority of our efforts on the academic centers. We have built advocacy with team of specialists and thought leaders at these institution for influencers across the entire market. Although there are more DLBCL patients in the community setting on average, academic-based clinicians see two to three times the number of third-line plus DLBCL patients as compared to their respective community counterparts. We have made good progress engaging and educating key lymphoma doctors across the country with approximately 60% of our volume coming from academic accounts. With this solid foundation in place, we see good opportunities for growth as we continue to convert awareness to advocacy and building increased breadth and depth in academic accounts. While it made strategic sense to focus on academic centers during the initial launch period, the broader opportunity is in the community setting where the majority of the third-line plus DLBCL patient population is treated. With the permanent J-code now in place, we are intensifying our efforts to increase awareness and adoption in these centers. We are confident that the versatility of ZYNLONTA's differentiated product profile will resonate well with physicians…

Thank you, Jennifer. I'm happy to provide an update on our clinical trials. During the quarter, we made good progress on our ZYNLONTA development programs with a focus to explore novel combinations and the potential to move into earlier lines of treatment. We initiated the LOTIS-7 trial, the Phase 1b clinical trial of ZYNLONTA in combination with other newer lymphoma drugs starting with polatuzumab. This combination has shown enhanced activity in our preclinical studies. Other novel combinations will be added to this study and we will keep you updated as this occurs. In July, we enrolled the first patient into LOTIS-9. The Phase 2 trial to evaluate ZYNLONTA in combination with rituximab in first-line DLBCL patients who are unfit or frail. I am particularly excited about this study as it will investigate the potential of ZYNLONTA with rituximab to address a significant unmet need in frontline patients who are unable to tolerate the R-CHOP regimen even at the reduced doses. These patients are often excluded from clinical trials. And so they lag behind advances in treatment open to younger and more patients. We've received positive feedback and high degree of interest from physicians on this initiative and we've activated several sites in the United States. To execute on our targeted strategy, we have decided to terminate the LOTIS-6 trial of ZYNLONTA in relapsed-refractory follicular lymphoma due to the comparator ideally, this should being removed from the U.S. market. While we have discontinued the monotherapy program, we will continue to explore opportunities for novel combinations with ZYNLONTA for follicular lymphoma. Finally, we continue to enroll patients in the randomized part of LOTIS-5, the Phase 3 registration study of ZYNLONTA in combination with rituximab in second line DLBCL patients who are not eligible for stem cell transplant. Expansion into the randomized part…

Thank you, Joe, and good morning everyone. As of June 30, we had cash and cash equivalents of $377 million as compared to $431 million as of March 31, 2022. The cash balance does not include the upfront payment of $55 million, we have received from Sobi in July of this year. Based on our business plan and expected milestones from Sobi and Healthcare Royalty Partners, we now have a cash runway that extends into early 2025. Potential near term milestone payments from these agreements include the $50 million due from Sobi upon European regulatory approval of ZYNLONTA and third-line DLBCL and the potential of $75 million milestone from our Healthcare Royalty Partners agreement for the first EU commercial sale. Turning to the P&L as we reported in the press release issued earlier today, ZYNLONTA net sales were $17.3 million for the second quarter 2022. Cost of product sales was $2.3 million for the quarter compared to $0.1 million for the same quarter in 2021. The increase was primarily associated with impairment charges related to the manufacturing of antibodies that we're not within the Company's specifications. In addition, cost of product sales increased due to a full second quarter of sales activity in 2022 as compared to the same period in 2021 due to the commencement of ZYNLONTA sales in May 2021. R&D expenses were $49 million for the second quarter 2022 compared to $40 million for the same quarter 2021. R&D expense increased for the quarter due to the reversal of previously recorded impairment charges of $6.8 million during the second quarter 2021, based upon the FDA approval of ZYNLONTA during that quarter. In addition, we continue to invest in ZYNLONTA trials in earlier lines of treatment and our broad portfolio. Selling and marketing expenses were $18 million for…

Thank you, Jennifer, Joe and Jenn. To conclude, we remain focused on executing on all areas of the business and we are well positioned to achieve our key objectives going forward. This includes driving the ZYNLONTA launch, working to develop ZYNLONTA in earlier lines of therapy, advancing our pipeline of differentiated hematological and solid tumor programs and expanding our ADC platform. Now the team will be available for questions. Operator?

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from the line of Kelly Shi from Jefferies.

Thanks for taking my questions. So targeted to BLA submission of Cami in the second half of next year, you mentioned the manufacturing stability data which I'm not sure. And also curious if the clinical data package in good-shape for submission and for GBS toxicity in the Hodgkin lymphoma patients, would you anticipate [AdCom] requested by FDA. Thank you. I also have follow-up.

Yes, thank you for the question. I'm going to pass this on to Joe to answer.

Sure. Yes. The clinical data packages in very good condition. I mentioned the response rates and the duration and that's all very positive from the efficacy side. On the safety side, you mentioned the Guillain-Barre Syndrome, we have been able to develop some very straightforward interventions to make sure that GBS is diagnosed early and treated. We only have eight cases in the package of LOTIS-2. We don't have any -- I'm sorry, of the Phase 2 study for Cami. We don't have any late cases and so our advisors and we believe that the balance of efficacy and safety now is very positive and the benefit is clear and the safety can be addressed. The last question was -- the last part of that was about an AdCom. it's impossible to predict FDA activity, but we are not -- I'm thinking that there will be an AdCom. If there is, we will be prepared for it.

Great, thanks. And I also have a --

Thank you.

Thank you. And I also have a question on ZYNLONTA sales. So in the CAR-T extended to second line in lymphoma patients and this quarter showed a strong revenue increase in the second quarter and also ADCT now has a J-code effective since April 1. I'm curious how those factors going to start impacting ZYNLONTA sales and in terms of sales guidance to be offered for 2022, but could we think about Q3 and the Q4 sales number could be -- we could get some clue from the first half reported to sales to signal the ramp-up for the whole year. Thanks.

Yes. Thanks, Kelly. And before I turn it over to Jennifer one more thing I want to address in your previous question, which is, you also asked about the manufacturing stability. So Joe said that the clinical packages moving in good shape and we have a meeting planned with the FDA in September. The manufacturing stability, just to be clear, is just a matter of time. So when the manufacturing batches were produced, we're just waiting for that stability data to mature and that's what's going to drive the timing for the planned completion of the filing in the second half of next year. But now, I'll turn it over on the ZYNLONTA question to Jennifer.

Yes, Kelly, thanks for your question. So your specific question was with regard to CAR-T, we have seen increased utilization in CAR-T in the second line setting. We have been seeing a lot of post CAR-T use for ZYNLONTA. There are tremendous opportunities ahead of us in the second half of this year and we're encouraged, because as we move through Q2, we did see month-over-month growth in demand and an increasing face-to-face access as we exited the quarter about three quarters of our engagements with physicians was in person, which we think is really important to portray the differentiated product profile of ZYNLONTA. And if we think it was specifically about the growth opportunities we started out this year really focusing on the academic centers and developing national and regional level thought leadership and influence across the marketplace. We've had really good awareness in the academic centers and as I've mentioned 60% of our volume is coming from academia. We still have opportunity in the academic centers, not only for depth of prescribing so converting those trials to true advocates and embedding ZYNLONTA in the treating paradigm, but also more importantly in the community and you mentioned the J-code, the permanent J-code that we got in April, definitely takes away a barrier to prescribing and now we are doubling down on our awareness initiatives and partnering with community oncology to realize that opportunity.

Great, thank you.

Thank you. Our next question comes from the line of Gregory Renza from RBC.

Hi, good morning, Ameet and team. Congrats on the progress and thanks for taking my questions. Maybe just one for you, just more higher level is helpful to hear the feedback from your listening tour over the past few months and just laying out the near medium and longer term goals? I'm just curious if there is anything in particular that's jumping out at you certainly helpful to hear about all the positive any particular challenges that you think are unique with respect to what ADC is facing. And even in this environment and just how you're thinking about allocating your time across those time horizons?

Yes, no it's a great question and thank so much for asking it. Yes look, I think one challenge that was pretty clear to me - I've spent a lot of time with Jennifer and Joe's team particular in the field and with a lot of customers, because I always think you get the best insight when you meet with employees on the ground. You meet with customers and just like when we meet with investors and you get a lot of insights and that's how spend a lot of our time my first few months. So, one thing I would say is with ZYNLONTA, this launch is in a pretty challenging environment because during this COVID period where institutions were relatively shut down awareness of the product, particularly unaided awareness in the community is still relatively low, and while that to challenge I think it's equally provides a big opportunity because as Jennifer mentioned, now that we have the J-code established which was a key barrier for prescribing and access is really - we really saw it improve in Q2. So when I look at the indicators of activity and not only - the activity - we're getting a lot of initial calls to customers that we hadn't had in the first part of launch. So three as much as has been a challenge, I see it as an opportunity now going forward, and at least good early indicators of those sort of things in Q2. When it comes to the mid-term and our pipeline in general, what I would say is just - for me, the key is. We have a lot of things in our pipeline and a lot of activity going on and what I want to make sure that we're really disciplined in terms of…

That's really helpful, thank you so much. And maybe just one quick follow-up in case I missed it, if you could just comment on the inventory impact from 2Q on the ZYNLONTA. And also just now that the ZYNLONTA launches over a year now, do we have a better sense of that predictability of what the quarters, how are you thinking about the quarters when it comes to inventory build there? Thanks again.

Yes, I'll take that question. So in terms of inventory for Q2, we believe that the net sales of $17.3 million, reflects real time patient demand and we're not aware of any significant inventory build at this time. And I can't really comment on future trend there.

Got it, thanks again.

Yes. Thank you very much.

Thank you. Our next question comes from the line of Boris Peaker from Cowen.

My first question is, with sticking with ZYNLONTA discussion. Can you maybe give us kind of a rough patient characteristic of these initials ZYNLONTA adopters?

Certainly Boris and thanks for the question. So as we started off our launch by design and strategy, we developed our national and regional thought leaders and many times they reside in the academic centers. And so in the academic centers, we've seen utilization of ZYNLONTA across the entire spectrum of the indication, I think the prioritized business opportunities as we see it in this fairly dynamic marketplace are in the post CAR-T setting. And we've heard very strong support from our thought leaders in the post CAR-T setting. And then for those patients that are unsuitable for CAR-T. There are variety of reasons why a patient would not be eligible or not choose to pursue CAR-T treatment and with our differentiate product profile, we believe that physicians and patients have a lot to benefit from both the efficacy, including a rapid time to response, the manageable side effect profile and the very convenient administration.

And on that topic, we talked about CAR-Ts is moving to earlier lines of therapy and obviously that's well known and that's helping those patients, but there's several competing drugs in second and third-line DLBCL outside CAR-T. Can you comment how that competitive landscape is shaping up and where do you see ZYNLONTA fitting in there more specifically?

Yes Boris. I don't think that - positioning - our outlook for the positioning of ZYNLONTA has changed versus our launch positioning. So it really comes down to the differentiated product profile of ZYNLONTA. The robustness of the LOTIS-2 trial and the fact that in the real world setting physicians are seeing LOTIS-2 type of experience with the rapid time to response and have those patients getting into - a response. Recall these are heavily pre-treated patients. And so, I think that ZYNLONTA continues to compete well from a profile standpoint where we're putting a little bit more effort is really optimizing the execution of all, of our customer - facing teams because we have a unique opportunity with access really opening up. And so as Ameet mentioned, we have still a bit of opportunity ahead of us both in the academic centers and in the community, and that's where we're putting our focus.

Great, thanks very much for taking my question.

Thank you. Our next question comes from the line of Matthew Harrison from Morgan Stanley.

This is [Chris Hughes] speaking for Matthew. So we have two questions, the first question is regarding ZYNLONTA. Just wondering, whether you are getting any patients in the community setting in Q2?

Yes, we are getting patients in the community setting. As I mentioned the J-code, the permanent J-code came through in the beginning of April, and while that takes away a barrier to prescribing, I think we still have some work to do to really raise the level of awareness in the community that we've achieved in the academic centers. And so, about 60% of our volume is coming from the academic centers and so conversely 40% of the volume is coming from the community. I think the real opportunity for us moving forward is not only the full execution of the J-code, but also partnering with the community oncology networks.

Yes, I would just add to what Jennifer said that the adoption typically in a field like this later lines of DLBCL, you tend to have slower adoption in the community than the academic. Partly, because community doctors and average seat as far fewer patients Jennifer had mentioned during the earnings call and so you have slower adoption in general for all new therapies. I think as our profile gets more known or understood by physicians, I think we have a real opportunity for many of the reasons that Jennifer mentioned. The fact that we are really strong efficacy profile fast time to response, the fact that it's a manageable safety side effect profile, the fact that it's single agent, the fact that - the molecule also is very easy to administer, 130-minute infusion every three weeks. So it's really easy to administer. So I think there's a lot of reasons why it's going to fit well and as - I think Jennifer and team have predicted, you'll get later adoption and it takes longer to get the adoption in the community. But we believe - we'll start to see that happening now in Q2.

That's very helpful. And my second question is regarding ZYNLONTA in follicular lymphoma. You mentioned that the LOTIS-6 is terminated and do you get any feedback from the FDA and what's your path forward with Lonca in follicular lymphoma?

Yes. So Joe, do you want take that?

Sure. Yes, thanks for the question. We did not get specific information from FDA, but it was very clear from the recent advisory boards and some of their public statements, that the FDA's much more interested in earlier treatment for follicular lymphoma, where the chance of a long-term remission remains as an option, a possibility. The late line single agents sort of as a rescue don't look like the future and FDA actually said that. So we took that into consideration and change the focus of our program to look at some combination data for earlier lines and so it's going to take some time for us to get that data, but we're doing that, and that looks like a much more promising and I would say, moderate in future way of dealing with follicular lymphoma.

Thank you.

You're welcome.

Thank you. Our next question comes from the line of [indiscernible] from BofA.

Thank you for taking my questions. Just wanted to get your sense of what you think the data catalysts will be over the next 12 months. With the upcoming oncology conferences in the second half of the year, should we expect any presentations from any of your ongoing programs. And then lastly on the slope of the launch for Lonca. If you had to ask doctors what they would need to feel comfortable prescribing it today, is it simply just a matter of awareness? Or as you said for community-based doctors it's limited patient pool, I'm just trying to understand how well doctors today in your view might appreciate the benefits of the drug. Thanks.

Yes. So maybe I'll take the question on upcoming milestones. And I'm going to turn it over to Jennifer to ask -- to answer the question around ZYNLONTA adoption. Yes, I said I'd just highlight a few different milestones, let's say over the next, the past 12 to 18 months it's ZYNLONTA from LOTIS-5 we're going to be presenting the safety lead-in data from the combination study with rituximab at an upcoming medical meetings. We didn't announce which one, but it will be this year in the second half of the year. We also expect to get a regulatory decision around our European approval from EMA by the Q1 of next year with Cami. We have an upcoming meeting that we think it will be really important in a pre-BLA meeting in September of this year, which will give us clarity on the path forward. And then as we mentioned, given the timing for the stability data mature, we plan to complete the submission of that in the second half of next year. With Cami and with KAAG1, we expect to have initial signs of safety and efficacy data for both programs in 2023. We're not being more specific as we're still in the process of dose escalation but we expect to have some initial results from both of those programs next year. So those are, I'd say the key milestones that I would highlight over the next 12 to 18 months. And I'll turn it Jennifer to you to talk about ZYNLONTA.

[indiscernible] thanks for the question. This past year has been pretty challenging with a lot less face-to-face interactions or educational opportunities that's really needed for a new product introduction. We are encouraged though as we move through Q2, that it's really opening up and hopefully for good. And we're seeing a lot more face-to-face interactions. Our team is doing quite well with face-to-face interactions even versus the competitors and industry norms at this time. We do have quite a few opportunities as you mentioned, as I mentioned earlier in the academic centers where we have done a fairly good job with regard to awareness an initial trial, we need to convert those trial list related to product advocates and embed ZYNLONTA in the treatment paradigm there. In the community, which represents over half of all third line plus DLBCL patients. So a significant opportunity. I think there with the permanent J-code now well in place, we have the opportunity to raise awareness to get that initial positive experience with ZYNLONTA and really embed ZYNLONTA in the community as a third-line standard-of-care. So I think that the access has been a challenge for this first year of launch. But I'm very encouraged from what I'm seeing and the receptivity to the profile continues to be strong.

Yes. And [indiscernible] just to add on to what Jennifer said. I mean the community tends to adopt new products in oncology hematology slower anyways than academic physicians. I think in this case, it was probably heightened by two things, one is the lack of access. So just a lack of knowledge about many new therapies, ZYNLONTA community, particularly ours which is just a year into launch. And then the second thing is this the diffuse nature of the patients where community doctor maybe seeing a patient every three to four months. So that frequency also drives the urgency to learn about new therapy, especially if you're not getting access. But I think that remains the big untapped opportunity and I think our profile fits particularly well in that setting. So for some physicians right now we're in the early launch phase right now in the community in terms of the number of interactions that had the knowledge of the product. And I think as that picks up, given the access that Jennifer spoke about, I think that's the much bigger opportunity for growth in the near and mid-term.

Okay, thanks for that color. And I'm sorry if I might have missed this if you've already said it, what is your split between community docs and academics right now?

Ye. So in terms of volume, we still have about 60% of our volume coming from academia. In terms of ordering accounts, it's a 50-50 split, but we do see that in terms of ordering, there is a lot more account acquisition opportunity in the community to come. But that as Ameet mentioned, it's going to take time, it will fuel our steady growth in the future.

Okay. And you don't have any constraints on supplier right now, do you?

There are no issues with regard to commercial supply that I'm aware of.

Okay, great. Thank you.

Thank you. I would now like to turn the conference back over to Ameet Mallik for closing remarks.

Yes. Thank you. And thank you to all of you very much for joining our call today. Thanks for your continued support of ADC Therapeutics. We look forward to keeping you updated on our progress and I hope that you have a nice day. Thank you.

This concludes today's conference call. Thank you for participating, you may now disconnect.