ADC Therapeutics SA (ADCT) Earnings Call Transcript & Summary

Great. Good morning, everybody, and thanks for joining us for the next session. I'm Matthew Harrison, one of the biotech analysts here at Morgan Stanley. Very pleased to have ADC Therapeutics for the next session. Before we get started, I need to read a disclosure statement. Please note that all important disclosures including personal holdings disclosures and Morgan Stanley disclosures appear on the Morgan Stanley public website at morganstanley.com/researchdisclosures. So I'm pleased to have Jennifer Herron and Joseph Camardo with us this morning. Jennifer I'm going to turn it over to you to make some opening comments and then we'll jump into Q&A.

That's great. Thanks, Matthew. Good morning everyone and thanks for the opportunity to participate in the Morgan Stanley Healthcare Conference. It's an exciting time at ADC Therapeutics with our first commercial launch ongoing and the opportunity to bring Zynlonta to third-line plus patients who could benefit. Since Q2 earnings, we've made some significant progress, most notably, $325 million deal, financing royalty deal with Healthcare Royalty, which includes $225 million upfront and another $100 million in near-term commercial milestones. It's a very good deal for ADC Therapeutics because of the cost of capital and for our investors as well, but ultimately, for our patients as it will fuel the development of our expanding pipeline. Important to note that the deal includes a hard cap of 2.5x, which can be reduced to 2.25x based on performance. In addition, we have announced a change in medical leadership from Jay Feingold to Dr. Joseph Camardo and Joe is with us here today, he'll introduce himself in a second. Before I ask Joe to introduce himself, I do want to thank Jay Feingold for his many contributions to ADC Therapeutics over his 7 years. I've personally been able to work with him for the last 2 years and have enjoyed that immensely. Over the last same 2 years though, I have worked with Dr. Joseph Camardo in his previous role as Head of Medical Affairs on the U.S. launch. Joe is a seasoned industry veteran with over 30 years of experience and actually was Jay's boss as he headed up clinical development at Wyeth. Joe has been a great partner to me for the U.S. launch and I'm thrilled that he has agreed to join as our new Chief Medical Officer. So with that, I'll just turn it over to Joe for some introductory comments.

Thanks, Jennifer. Thanks for inviting us today and I'm happy to be here. Jay and I have been friends and worked together for quite a long time. I enjoyed conversations with him and I enjoyed making progress on our programs with him and so, obviously, a bit sorry to see him leave the company, but I know he had the confidence that I could continue the work we're doing here at ADC Therapeutics and I still have his phone number in case I have a question. So I feel like we're in a good position here where he brought us and where Jennifer and I and the rest of our team can bring us into the future. And thanks for the kind introduction, Jennifer. Matthew, back to you.

All right, perfect. Great, thank you both for that. So Jennifer, why don't we start off with you and talk about some launch dynamics because I'm sure that's a focus for everybody. So I know you shared a couple of thoughts on the second quarter call. Maybe you could just to the extent you can just sort of talk about what's happening in the field, what the feedback is, what patient types you're seeing most use in so far?

Yes, no, thanks, Matthew. I do enjoy talking about the launch. So we're about 4 months into our launch. So it is early days. I mentioned in the Q2 call, we've had very positive reception from the health care community on the differentiated product profile specifically in the single-agent efficacy and tolerability in ease of administration. They are particularly interested or intrigued by the fact that we studied a broad patient population, which they're playing back to us, reflects the real-world patients that they deal with every day. So to get to your first question with regard to the patient types, anecdotally, of course, because we don't have a full line of sight into patient level data, we are seeing a broad use or utilization within our labeled indication. So to include patients who are going to CAR-T or patients who have relapsed following CAR-T, both transplant eligible and ineligible patients, a fair amount of high-grade lymphoma as well. So initially, pleased, again, it's early days, but I'm initially pleased that the utilization we're seeing in the market reflects the broadness of our indication. We are seeing uptake from both the academic and community almost equally right now in terms of orders, but we do expect an increased volume coming from the community, particularly as we get our permanent J-code in the January 2022 time frame. And then just to round it out, access has been going quite smoothly, whether it's through published medical policies or just claim adjudication. So, so far so good. It's early days, but we're very focused on making sure that any patient in the third-line plus setting who could benefit from Zynlonta gets that opportunity.

Okay, great. And maybe just talk a little bit more about reimbursement, time lines, what you think getting the J-code will do in terms of uptake, if it will have any significant impact or because people are getting paid now, it's really not stopping them from providing access to patients.

You know, no, I think that the J-code will be a catalyst for us in 2022 because right now, while we are not having any barriers -- significant barriers from an access perspective, the time to position reimbursement is uncertain. That becomes much more predictable on an individual prescriber basis when we get a permanent J-code and so we do expect that to give physicians more confidence that they don't have to float the cost of the drug longer than they anticipate they need to. So we are expecting that to give us some good strength in 2022. As I said right now, probably over 50% of our volume is coming from academic institutions where they're not as interested, they're not as concerned about the time to reimbursement.

Okay, perfect. And then I guess just second question on the or third question on the launch is just, we've seen other products launch in the late-line setting here. I think investors really aren't sure what's going on in terms of uptake or how much desire there is for uptake or things like that. So maybe you could just talk a little bit about what's happened with analogs? Why they may provide some insight or where they may not provide some insight to what could potentially happen with Lonca?

Yes, no, it is something that we watch closely. We're constantly monitoring the markets to understand. There are definitely uncertainties with regard to COVID. We have seen fluctuations in institutions opening and then closing back down as COVID waves come through the country and there are definitely still regional differences, but in terms of comparing to other previous launches, I think that's really difficult. Every launch situation is different and every launch, every product is different and what I can say about Lonca is that we have had very strong feedback that they like the profile, they can see the versatility of it. It's easy to give. It's easier for patients to receive. So we're anticipating that we still have a massive opportunity to consolidate the third-line plus market around standard of care with Lonca.

Okay, perfect. Maybe we'll come back to a couple of things, but maybe we can switch to Joseph and just focus on label expansion for Lonca because I think that's a second item that people are very focused on. So maybe we could start with follicular. I feel like it doesn't get a lot of airtime, but obviously, pretty big opportunity there and just sort of remind people the program you're running in follicular, where you think you can compete in follicular and time line to data?

Thank you for the question, [ Chris ]. I'm always told that I don't talk enough about follicular lymphoma. So you made it easy. We had very nice responses in the Phase I program and so we moved into this Phase II comparative study and so we have -- implementing now a comparative study of Lonca versus idelalisib to randomized 2:1. So patients are more likely to get the experimental -- that's not experimental anymore, but the Lonca than the idelalisib and we have power in the study to show improved benefit. We already know a lot about the safety. So at this point in time, it's a matter of setting up the sites, which we're doing, getting the patients enrolled, which you're doing and then the magnitude of benefit will determine what happens with our regulatory path, but based on what we know about the responses in diffuse large B-cell based on what we have from Phase I, we have a high level of confidence that the study will turn out to be sufficient for us to be able to expand the label in follicular. It's really a matter of getting the study done at this point in time, which we're doing.

Okay and is there a time line for when we can get data there?

I can't really tell you yet. We're just getting it started having done clinical research over many, many years. I always like to sort of get it going before I say, okay, when it's going to be finished, but it's not a huge study and so I'm expecting that we could enroll this in a reasonable amount of time, I think 12 to 18 months on the outside, something like that, but I really [ want it ] to get started before I say anything about when we're going to be done.

No, obviously, once you have a better idea of the enrollment curve, you can be more specific about that.

Yes. So do you want me to go on with the others?

Yes, well, I think what would be useful, I think the second focus for a lot of people is ibrutinib combo and then maybe more broadly, we can talk about DLBCL label expansion, but I think for a lot of people, they're focused on what you've seen so far with the ibrutinib combo, what you're doing with dose and schedule and things like that? And what people's expectations should be around what kind of response rate and how you maximize efficacy with that combination?

The ibrutinib combo looks good. So that's the first thing. Not to forget about it, but getting a combination where there is no overlapping toxicity is a big positive. I think we passed that hurdle. We thought it would be okay, but you have to demonstrate it. So we're comfortable with the dose that we were using and we're seeing an improvement in response in the patients from Phase I to the point where we're getting about a 64% overall response and about a 36% complete response. So that's good. That's good, but we have some additional place to go here, which is that we were using an intermittent cycle for Lonca, [ 1 2, nothing 3, 4, 5, 6, nothing for 7 and 8 ] while continuing ibrutinib. I think that was a very good decision because that little bit of holiday allowed us to see what the safety would be. We're comfortable with the safety. We're going to do 2 things. We're increasing the dose of Lonca, which we can do now because we know that it's tolerable and we're having -- we're administering Lonca on every cycle. So what I would say is we have a really good result that makes us very interested in getting even better results and that's -- the amendment is written. We're now going back to the same sites. They get the -- you know how this works, they get the amendment approved and then they enroll patients. So I will tell you that this was a pretty popular study and so we're thinking that on the next phase, we'll have the kind of magnitude of effect the number of [ CRS ] that will be more convincing for us and also now that we have a lot of patients enrolled in phase from third-line, we think we can move that into second line. So good result now, amendment coming up, data to be released over time from our Phase I and our expansion over the next 6 months, hopefully, we'll be releasing more data and then it's another matter of implementing the study, getting the enrollment done.

Okay, do you think it's possible investors could get an update next year on some of these changes you've made? Or do you think it could take longer than that?

I think we could probably get an update. We'll be able to get an update with more data probably sometime next year because we have the study that is -- we're closing the first part of the study. So we're going to have some additional durability data. It's unlikely to have any data next year on the new part of the study. That's going to take longer. I think we'd like to probably get that to the point where it's a lot -- it's pretty definitive before we start releasing data on that.

Got it. Okay, perfect. And so then, I guess, last question is just on, there's obviously a range of other studies you need your full approval study for Lonca that's ongoing. So maybe just touch on some of those other studies and I think importantly, for -- and maybe Jennifer can comment on this for you, but what some of those studies in terms of what you have already ongoing for approval prospects due to both the label and sort of the target opportunity.

Okay, you mentioned it, so I'll just confirm that our so-called confirmatory study has 2 objectives. One, it's a requirement for accelerated approval, but the second is it is a study which is intended to add treatment for second-line patients who are not eligible for transplant. So that's randomized comparative study with progression-free survival as an endpoint. We're activating sites. We have enrollment started. We expect to finish our run-in phase by the end of this year in terms of enrollment, then we'll expand to the big study. The good news is the big study is big. It'll be a definitive result versus a comparator, but it's event-driven. So giving a time line is, you know this well enough, you wait for events. We made assumptions and I believe they're good, but you still have to wait for the events. So that's going to happen. So remember, twofold, satisfy requirement, get into second-line [ and the third ]. The other thing is a handful of combination studies, a handful, I mean 4, not atypical, try to find the one combination that looks the best and then move that one forward. I think once we've moved ourselves into the second-line with our treatment -- with our confirmatory study, we'll be able to follow that with some enhanced combinations. I think that will be a positive. The other thing is like -- I think like everyone in the field, not just us, but the doctors who are treating, they want a better treatment for first-line -- for newly diagnosed patients. So we're starting our R-CHOP plus Lonca combination. That protocol is written. Sites are identified. We're getting that started. Again, there's a bit of a safety run-in for that. That will get started. Once that clears that hurdle, then we will be writing and implementing our program. Hard to say a time line for that because, as you know, there's lots of things going on outside and we got to get through the hurdle first before we can really open a big study. That's where we are. And then you mentioned the follicular, which is also intended as a label expansion.

Okay, perfect. Jennifer, maybe just comment on opportunity in second-line and size there?

Yes, no, I mean, I'm very excited about the opportunity of expanding combinations and some of our preclinical data is really exciting and I think Joe mentioned the basket trial, in addition to LOTIS 3 and LOTIS 5 and so I think that we'll be able to compete quite strongly in that second-line setting. That market is I guess, basically double of our current launch opportunity in the second-line setting in the U.S. and EU5, roughly 22,000 patients and I'm pretty excited to see how these combinations come to fruition. I think what we're learning from the marketplace is that in the second-line in setting, physicians do like to use combinations versus a single agent. And if you can provide a combination, that is as good as potentially a CAR-T opportunity, they may see it as a real alternative for patients. So the second-line area is clearly something we're very focused on. Joe and I are partnering on how we can accelerate those trials as quickly as possible. And then I am also very optimistic around the first-line opportunity because of the strength of Lonca as a single agent. We're not trying to replace any part of R-CHOP, we're just trying to add to and so I think that we've got a pretty good shot there as well.

Okay, great, good. Maybe we can turn to Cami and I guess back to Joe. I think the sort of biggest thing investors get hung up on the GBS signal and what that means. So maybe we could just talk briefly about why you feel like you have a clear path to market despite that signal? And then talk maybe in just a little bit more detail about the steps to filing for Cami?

Really, you hit exactly the question. So the issue with a side effect is, is it countered by the benefit? So it's not -- it's a simple sort of idea, but it can be complicated too and where are we now? Well, there's 2 things about the Guillain-Barre. The first thing is that it looks like we've gotten to a plateau, meaning this is the number, 6% I think it is. And the reason I say that is it's stayed at about that number, 6% when we had 50 patients, 75 patients, 95 patients. Now we have 117 patients. It's 6% and we're not seeing any late -- at this point, Guillain-Barre syndrome. That's the first thing. The second thing is, we've taken steps with a lot of help actually from some regulatory advice to mitigate the problem. So we know that it could occur. We know what the program looks like and we know how to intervene, meaning -- and we're explaining that to everybody who's using the product in clinical trial. So we've been able to avoid the more serious progressive cases. So that's managing a side effect like this that you think may be a fixed -- a part of the drug is very important and you know that people do that with other drugs. Now the only reason you want to do that is because the benefit makes it worthwhile and I'm not a lymphoma specialist, but it didn't take me too long to realize that for these patients who had had a median of 5 treatments who had failed the modern treatments already in [ over in rituximab ] and the PD-L1s who were getting lots of different combinations who had, had stem cell. They're actually getting complete responses in the range of -- I think we're at like in a range of 30%. I can't remember the exact number, sorry, but they're getting complete responses and we haven't reached the duration, the median duration yet. So there's clearly a need. It's manifest in the patients that were available for clinical trials. The landscape has no alternatives from any of these patients, and the trial is enrolled relatively quickly. Now we wrap -- now, one thing FDA asked, and it's a reasonable question, is get enough follow-up so that we're sure about a couple of things. You actually have a durable response and you actually don't have late cases of GBS. Once we have a year of follow-up, which is a little longer than it's normally asked for, for DLBCL I think for a couple of reasons. One is because Hodgkin's responses tend to last a little bit longer and second is because we want to make sure we have the benefit risk. We will know that in the early part of next year, we put together our plan and we work with FDA to decide will they accept an accelerated approval pathway and we're on our way to developing a confirmatory study for Hodgkin's disease. Sorry, it takes a little bit longer for me to do that, but I think it's probably important. So I think the key points are, looks like we stabilized GBS. Looks like we have really good responses in the late-line where there's no alternatives. And the FDA has just asked us for a longer-term follow-up so we can make a case that's convincing and I think we can do that.

Great, no, that's very clear and I think everybody knows what to look forward to now as we think about 2022. And so then, I guess, Jennifer, can you talk about commercial opportunity for Hodgkin's? Obviously, as Joe was saying, there really isn't anything available for these patients at that point. So how do you think about the commercial opportunity there?

Yes, I'm excited about the commercial opportunity. I mean I think it's -- as Joe mentioned, it's an area of huge unmet medical need. Cami has been able to demonstrate meaningful benefit in patients that have got a median of 6 prior lines of therapy. So we're really talking about late-line patients. The investigator enthusiasm is palpable and they really want to know how quickly we can push the follow-up. Of course, it's time driven, so you can't really push it, but we're doing everything we can to prepare for it. The way that I think about from a commercial perspective, it's like a rare disease opportunity and so there are a few thousand patients worldwide in the relapsed/refractory setting, but I think given this benefit, I think we'll be able to, quite frankly, drop it into our commercial infrastructure that we have right now, get some good leverage on the commercial organization we've established in the U.S. and make this available to patients who can really benefit from it.

And approximately how many -- [ 6 line ] Hodgkin's, like, what's the prevalence of that population? Or how many patients come into that setting every year just to give people some idea of what we're talking about here?

Yes, I mean it's -- so the data, as you might imagine, incredibly thin for 6 line. I think we would be looking for a relapsed/refractory label, right? We're not going to go for 6 line. So you could roughly say maybe 1,000 patients in the U.S., 1,000 patients in the EU5, roughly but it's hard because nobody reports on the patient numbers when you get into that client therapy, but these patients do live a long time and so there is an opportunity here and we did see pretty good duration of treatment on Cami so far.

Okay, great. So maybe in the last 5 minutes, we can talk about sort of emerging pipeline beyond Lonca and Cami. You have a couple of INDs you're looking to bring forward. So maybe we just walk through there. I'll turn it over to Joe to sort of give us some commentary.

Okay, thank you. Just before we did Cami, we do have the solid tumor program for Cami. Made it through Phase I, tolerable, safe. Some signal of stable disease. We're looking at a combination program to try to enhance the immune effect that we're seeing with [ CD25 ]. I think you know the mechanism there. So we're combining with pembrolizumab. That study is moving forward and we hope to have enrollment, maybe some news in the next year on where that stands. So that's the solid tumor program with the combination. I think you know all about the effector cells and the ratios. So we won't go into that. The next thing is we just got IND cleared for kidney associated antigen. This is a pretty novel target and so we feel like we're like early in the work that's going on for this particular antigen. I mean once -- I've worked with the PBD now for 1.5 years, and it's a really good molecule. So the issue here for us is going to be, does target get internalized, is the target expressed, et cetera. So there are things we need to -- but we chose it based on the work in the pharmacology organization to see if this might be a good target and they've been pretty good at finding targets that actually work for the PBD. So with the IND cleared, we're hoping to get Phase I started certainly by the end of this year. I mean that's like the way out target, so I'm pretty sure we're going to be better than that. Then we have something called AXL. AXL is really complicated. I mean they're all complicated, but this one looks pretty interesting and still a lot unknown, but anyway, AXL went through our -- the AXL target, again, using the PBD based platform was in Phase I and again, Phase 1 is mostly safety. So we got a couple of signals in Phase I and now what we're trying to do in 1B is 2 things. We're trying to find AXL tumors that are overexpressed, both by measuring in the assay and by identifying tumors that are known to overexpress AXL and the second thing is we have a very nice plan for a combination testing a drug along with Lonca that has demonstrated really good synergy in our preclinical area. So again, step wise, good safety for the product in the AXL program, some signals, enrich the population and choose tumors that we know might be responsive to AXL. So right now, that's the plan for us.

Okay, great. No, that's perfect and something to look forward to. Well, both of you, thank you for being here. Thanks for the comments. Looking forward to seeing the progress for the rest of the year and next year.

Thank you, Matthew.

Thank you, Matthew. It's very nice to meet you. I hope everyone enjoyed the session.