Good day and thank you for standing by. Welcome to the ADC Therapeutics First Quarter 2024 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker’s presentation there will be a question-and-answer session. [Operator Instructions]. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Nicole Riley, Head of Communications. Please go ahead.

Thank you, operator. This morning, we issued a press release announcing our first quarter 2024 financial results and business updates. This release is available on the ADCT website at ir.adctherapeutics.com under the Press Releases section. The event is being recorded, and the slides accompanying this call are available on the ADCT website at ir.adctherapeutics.com under the Latest Events and Presentations section. On today's call, Ameet Mallik, Chief Executive Officer; and Pepe Carmona, Chief Financial Officer, will discuss recent business highlights and review our first quarter 2024 financial results. We will then open the call to questions when we will be joined by Kristen Harrington-Smith, Chief Commercial Officer; and Mohamed Zaki, Chief Medical Officer. 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 on Slide 3 and in the company's filings with the SEC, including Form 10-K, 10-Q, and 8-K. ADCT is providing this information as of the date of today's conference call 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 after the date hereof, except as required by law or otherwise. The company cautions investors not to place undue reliance on these forward-looking statements. Today's presentation also includes non-GAAP financial measures. These non-GAAP 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 GAAP. You should refer to the information contained in the company's fourth quarter earnings release for definitional information and reconciliations of historical non-GAAP measures to the comparable GAAP financial measures. It is now my pleasure to pass the call over to our CEO, Ameet Mallik. Ameet?

Thanks, Nicole and thank you all for joining us today. As you will have seen, we have shared some very exciting news items earlier this morning. But to begin with, I'd like to focus on key business updates for the quarter. Starting with our commercial performance, ZYNLONTA continued its return to sequential growth with revenues of $17.8 million in Q1. This represents a 7% increase over the fourth quarter of 2023. Importantly, we saw continued growth both in the community and in our academic centers despite the intensified competitive landscape. Turning next to our pipeline, we have made significant progress. Last month, we announced that our LOTIS-7 study of ZYNLONTA, in combination with bispecifics, successfully cleared the final dosing cohort in both arms with no dose-limiting toxicities, no high cans, and either no or low grade levels of CRS. We are now dose expanding at 120 and 150 micrograms per kilogram in the ZYNLONTA plus glofitamab combination arm in second line plus DLBCL. Today, we are delighted to share, for the first time, encouraging initial data recently presented from the University of Miami's Phase 2 investigator-initiated trial of ZYNLONTA in relapsed/refractory marginal zone lymphoma. Based on initial results from the first 15 evaluable patients, 13 achieved a complete response and one achieved a partial response with all patients maintaining response at the time of data cutoff. Moving to ADCT-601, our novel axle targeting ADC. We began enrolling pancreatic cancer patients and continue to enroll sarcoma patients, and we are in the process of optimizing the dose and schedule. Lastly, we shared a comprehensive update on our novel exatecan-based solid tumor platform, including early preclinical data on our four preclinical ADC candidates for the first time at our recent research investor event. Finally, in terms of our corporate update, we maintained…

Thank you, Ameet. Before I discuss today's financing, I will take you through a brief summary of our first quarter results. As a reminder, we're now reporting our results under U.S. GAAP, we became a U.S. domestic filer as of January 1, 2024. Starting with our balance sheet, at March 31st, we had cash and cash equivalents of approximately $234.3 million. Moving to the P&L, as you have already heard, ZYNLONTA net sales were $17.8 million in the quarter, a decrease of 6% versus prior year, primarily driven by higher gross net deductions and lower volume, partially offset by higher gross price. On a sequential basis, ZYNLONTA net sales grew 7% versus the fourth quarter of 2023. Our total operating expenses on a non-GAAP basis which excludes stock-based compensation, were down 16% compared to the first quarter of last year. This mainly reflected our focus on driving operating efficiencies, together with reduced R&D expenditures due to focused investment in our clinical studies and lower selling and marketing expenses. For 2024, we will continue to take a very disciplined approach to our capital. To confine the reconciliation of GAAP measures to non-GAAP measures in the compounding financial tables of the press release issued earlier today and in the appendix of this presentation. Moving to the bottom of the P&L, GAAP basis we reported a net loss of $46.6 million for the quarter or $0.56 per basic undiluted share. On a non-GAAP basis, adjusted net loss was $31.1 million, adjusted net loss of $0.38 per basic and diluted share. The decrease in both reported and adjusted net loss for the first quarter of 2023 was primarily due to lower operating expenses. Today, we have announced the pricing of a registered direct offering which included prefunded warrants. We expect to close by May…

Thanks, Pepe. To conclude my team and I are very proud of our performance in the first quarter of 2024. We achieved another quarter of sequential growth with ZYNLONTA. We delivered against each of the planned key research and development milestones and we maintained our disciplined approach to capital allocation. Looking ahead with the strengthened balance sheet and enhanced financial flexibility to execute our strategy, I am confident that ADC Therapeutics is well positioned to drive value creation for all of our stakeholders. With that, operator, could you please begin the Q&A session.

One moment for our first question.

Sorry, we cannot hear the question operator. Sorry operator we cannot hear the question.

Thank you. One moment. The first question will be from Kelly Shi from Jefferies. Your line is open.

Hi, good morning. This is Yun for Kelly, and thanks very much for taking the questions and congratulations on the marginal zone lymphoma data. I believe you reported very positive data from the follicular lymphoma program where investigator-initiated study at ASH and so can you remind us your plan for follicular lymphoma and compared to marginal zone lymphoma and which one do you think could potentially be -- maybe reach the potential or enter sponsored study first and have you received any feedback in terms of the safety, considering that it's into lymphoma patients? Thank you.

Yes. No, thanks for the question. I think you're right to say that we were excited to share data in an oral presentation last ASH on the relapse refractory follicular lymphoma population which showed that the combination of ZYNLONTA plus rituximab had an overall response rate of 96% and a CR rate of 85% with a manageable safety tolerability profile. So I think that was really encouraging data, of course, now seeing the marginal zone lymphoma data and then another into lymphoma with again, high overall response rate, higher CR rates and again, a manageable safety profile. We're really encouraged. Both of these trials have been expanded. So the follicular lymphoma patient study will now be 100 patients, marginal zone will be 50 patients, both are multicenter studies as well. And with both of them, we plan to pursue both our regulatory strategy as well as a compendia strategy in parallel based on the outcome of the data. The one thing to note about the follicular data that's important is that it's really just going after the high-risk patient population. We know that when you go after all comers in follicular lymphoma, there is a precedence for randomized Phase 3 studies with long follow-up. We're focused on a narrow population, which is a high-risk population, most of which were POD24. And we think that if the data looks good, there may be a faster pathway potentially either through a regulatory pathway or through guidelines in that more narrow patient population. MZL is probably even more straightforward because if you look at the majority of -- if you look at everything that's been approved either by the FDA or in guidelines they've been approved based on either single-arm studies or subsets of larger randomized studies in indolent lymphoma studies and typically with somewhere between 40 to 70 patients. So we think the 50-patient study we're running is an appropriate size. And based on the data maturity from this study, we again will pursue guidelines and a regulatory pathway in parallel. So that I would say is the even more straightforward pathway because there's so much precedence in MZL, but we also think just given the strength of the data, have a really interesting opportunity in follicular as well.

Okay, thank you.

Thank you. And our next question will come from Michael Schmidt from Guggenheim. Your line is open.

Hey guys, thanks for taking my questions. And yes, super interesting update here at MZL. Obviously, I think you said all of the patients are still in response. Could you just help us contextualize the duration a little bit, what do we know about the duration clinical benefit for other drugs in MZL, and then how does it compare to that? And then, yes, I think you did have this one patient discontinued due to toxicity. Can you just comment on what that was? And then I had a follow-up, thanks.

Yes. Thanks, Michael. We're -- yes, as you said, we're really encouraged by the data as well. And also in MZL, confirming what we've seen in follicular, what we've seen in other areas, the safety profile has been really good. We haven't seen any new safety signals in any of these studies. So that's been encouraging. But I'm going to turn it to Mohamed to talk about both the duration that's seen in other treatments and what we would want to see here.

Thanks, Michael. First, I want to highlight that one of the patients we have seen are already at 20 months. Many of the patients currently are more than 10 months and all are ongoing. You are correct at the time of -- what has been reported in the literature, it's smaller trials and range between possibly 15 and 18 months. Those are the kind of PFMs that have been reported on their ability within either single agents or in combination. So if the data maintains the way it is and responses are continuing for all the patients that we have seen, of [indiscernible] we believe we will be in a very good place in terms of the ability, but again talk about durability a little bit too earlier to talk about.

Yes. And then, Michael, your second question was around the one patient with toxicity. We don't have more details. The investigators planning as there is the sample size increases and the duration and follow-up increases, to do a much bigger presentation at a more major medical congress where he will share all the data. I just don’t want to compromise that. So what we know from the investigator is one patient had a toxicity discontinued after cycle four, that patient was already in CR. Once the patient was discontinued, the toxicity fully resolved and that, that patient still remains in CR. Now that patient is six months out, so that's what we know. The other thing we understand from the investigators, everything they've seen across all 15 patients, the safety profile is consistent with the known safety profile of ZYNLONTA.

Great. Awesome. Super interesting. And then a question on LOTIS-7. I know you had some really early Phase 1 data at AACR and I just wanted to know if you could provide some visibility on the next update. I think you have another look at data in the second half of this year and then more in the first half of next year as well.

Yes. So we are now in Part 2 dose expansion right now. We were quite pleased, I think, with the dose escalation, how smoothly it went and now we're in dose expansion looking at ZYNLONTA, plus glofitamab and second-line-plus DLBCL patients. We're looking at it at two different doses of ZYNLONTA, 150-microgram per kilogram dose as well as the 120-microgram per kilogram dose, both in combination with the full doses of glofitamab. We expect to complete the enrollment of roughly 20 patients in each of those dosing cohorts by the end of this year, and then we will share the safety and efficacy data that's available for all evaluable patients. What we mean by that is patients that have had at least a 12-week scan because obviously, any responses we want to make sure are confirmed. So that will be likely a subset of those 40 patients that are actually available at that time. We will share all the data that is available by the end of the year and then provide an even more comprehensive update in the first half of next year when we have data from all 40 patients including longer follow-up.

Great. Super helpful. And then lastly, on LOTIS-5, it sounds like you're well on track to complete enrolling here later this year. And -- just curious if you had any additional visibility on the event rates as they're coming in and sort of the timing of the primary analysis? Thanks so much.

Yes. I mean as you said, and I'll turn it to Mohamed, to comment further. But we're on traffic, we decided. The enrollment pace has picked up quite a bit over the course of this past year and even this year, in particular, has picked up quite a bit. So we're confident in completing the enrollment of the study this year. It's an event-driven trial, so you can never predict the -- when it is going to exactly read out. But based on our current thinking, we believe it may read out as soon as the end of 2025, which if that's the case, and it's positive, could lead to an approval as soon as the end of 2026. But Mohamed, do you want to comment more on the enrollment and what you're seeing with LOTIS-5?

Yes, we're very pleased with the current enrollment. It picked up strongly during 2023 and 2025 release. We are still -- and I believe that we will be able to enroll the study this year, things are moving very well. Also, we have a DMC that meets regularly that have cleared the study multiple times, no changes. So that's a very positive sign. In addition, I would like to say that the events are being reviewed by independent sensor review. So that's another very key element for us to make sure that those are confirmed. And then completely independent, as you know, we're blinded, but it's an event-driven study and stick until next year, that's a positive thing. And hopefully, that would remain the case. So that's pretty much all about good sign at the moment.

Yes, I think all on track with LOTIS-5. We feel good about the progress and we're well on track to complete it this year.

Great. Well thanks so much. Congrats on the update today.

Yeah, thank you.

Thank you. And our next question will come from Gregory Renza from RBC Capital Markets. Your line is now open.

Hi, this is Clifford [ph] on for Greg. Thank you so much for taking our questions. And congrats on the progress. I have questions on the competitive dynamics from CD20 bispecifics. Number one has the impact being fully realized, the impact of the competition from CD20 bispecifics on ZYNLONTA, has been fully realized in a third-line setting. And now the Roche recently announced that the trial in the second line hit the primary endpoint and it could potentially be ahead of ZYNLONTA combination from LOTIS-5. I'm just curious how should we think about the competition from that -- the bi-specific combo to LOTIS-5? Thank you so much.

Yes, that's a great question. Yes, the bispecifics, both of the approved bispecifics in the third line plus DLBCL setting are definitely getting uptake, primarily in the academic center. We see much more limited use in the community. So in the academic center, there is quite a bit of use of bispecifics post CAR-T. I think importantly, we still have seen some modest growth, though, in the academic centers overall in our volume when you look at Q4 to Q1. What that's been driven with is while you have some lower level of depth in some centers that we're using ZYNLONTA quite a bit in that setting, we've actually seen a higher amount of breadth of centers and academic centers that are using the product. And so in essence we've been able to basically compensate for a lot of that competitive impact, although it's real. I mean bispecifics are definitely being used quite a bit, and you could see that in their growth rates a lot in that third line plus post CAR-T in the academic setting. So we've felt the competitive impact. I think, importantly, though, we've been able to largely offset it in an academic center, and we see continued growth in the community as well. So we think our strategy is working. In terms of the data around the glofitamab plus [indiscernible] combination. We'll have to look, we have to wait and see the data. Obviously, it hasn't been published. They give top line results. I mean one thing of note, I think, is just that they said that the -- I think that what we'll have to pay attention to is what's the toxicity profile. We don't know. But obviously, using systemic chemo with a bispecific, you'll have to see what the toxicity profile looks like. I think there -- we feel quite confident, I think, in our combinations both of ZYNLONTA plus rituximab as well as ZYNLONTA plus glofitamab given the toxicity profiles we've seen there. So I think as we move into the second line, it's important to have strong efficacy and manageable safety tolerability profile. We feel confident in both of our approaches.

I don't have much to add to me. Yes, we're excited to see this star load data that will be out at EHA. And as Ameet said, we've been able to hold share pretty much in the academic centers. We see that despite the bispecifics, we have strong advocacy in the academic centers. And what we also hear is that these advocates recommends ZYNLONTA to the community treaters, which is critical. Once we see the data from LOTIS-5, the briefing is that rituximab is probably one of the most commonly used agents out there with a lot of familiarity, so between LOTIS-5 and LOTIS-7, we offer great optionality with ZYNLONTA.

Yes. It's a really, really important point that Kristen just made. One of the most predominant use is, we know that CAR-T is only used in about 20% of patients second line really in the academic center. The majority of patients in academic centers are getting it. In the community though, our base chemo regimens are very, very commonly used. So we think in our based ADC approach is going to fit really well there.

Alright, thank you so much.

Thank you. And our next question will come from Brian Cheng from J.P. Morgan. Your line is open.

Hey guys, thanks for taking our questions this morning. Maybe just the first question on LOTIS-7. Can you talk a little bit more about the strategy beyond those expansions in LOTIS-7. Will there be a need to run a larger second-line pivotal study to get you officially move into the bispecific -- move in of the bispecific combo? And if yes, how do you think about the study design and the timing? And I have a follow-up, thank you.

Okay. Yes. Thanks, Brian. Great question. I'm going to hand it to Mohamed to answer the question on LOTIS-7.

Yes. Thanks, Brian. This is a -- first, I would like to see how the efficacy in the combination second line plus looks like and how it compares in the competitive environment. And definitely, we are looking to see how the safety profile is looking like. We're very pleased that we cleared all those and see that when we get to that point with the two doses that we're expanding, if the data persists, we're definitely planning to have a conversation with the regulators about the possibility of a Phase 3 approval there. At that time, we will see what the comparator are and will be. However, there could be investigated best choice, as you should be aware of because they're multiple agents and many things could be available at that time. But of course, it's going to be a data-driven approach and the conversation with the agency is going to tell us more about that.

Okay. And then maybe a second one for Pepe. Can you give us a better sense on how you define commercial brand profitability this year, is it factoring in only cost of goods sold and selling and marketing expense or is there additional consideration coming from G&A expense as well? Thank you.

Yes. Thanks for the question, Brian. So this year, as in long term, we'll be able to pay for all the direct commercialization effort. That includes all the sales force, MSLs, the A&P that we're investing in the drug, the IITs that we have been executing. And on top of that, obviously, cost of goods and whatsoever. So it doesn't -- what it doesn't include is the pipeline. So our LOTIS-5 and 7 trial and corporate G&A. That is not included.

Okay, great, thank you.

Thank you. And I am showing no further questions from our phone lines. And I'd like to turn the conference back over to Ameet Mallik for any closing remarks.

Thank you very much for joining our call today, and thank you for your continued support. We look forward to keeping you updated on our progress. Have a very nice day, everyone. Thank you.

This concludes today's conference call. Thank you for your participation, and you may now disconnect. Everyone, have a wonderful day.