ADC Therapeutics SA (ADCT) Earnings Call Transcript & Summary

Welcome, everyone. Thank for joining us for another session at the 41st JPMorgan Healthcare Conference. I'm Brian Cheng. I'm one of the senior biotech analysts at the firm. Presenting next is ADC Therapeutics. And the presentation will be followed by a Q&A session, and I'll turn the stage over to their CEO, Ameet Mallik.

Thank you, Brian. I appreciate the kind introduction, and I'm really excited to share a number of important updates on ADC Therapeutics. Before I get started, I'll just quickly reference the forward-looking statements. So I want to introduce everyone to ADC Therapeutics. We're one of the pioneers and leaders in the antibody-drug conjugate space and one of only a few companies who have actually had a product get to approval. We also have multiple clinical stage programs and a fully integrated organization, including very specialized capabilities that I'll talk about that are very specific to ADCs. We have a strong validated technology platform, including highly potent PBD-based ADCs as well as a growing toolbox of different components that are allowing us to work on next-generation ADC products. We have multiple value inflection points over the next 12 to 24 months and a cash runway that extends beyond that into Q2 2025. Now ADC has been built up as a purpose-built engine with very specialized capabilities that are unique to ADCs, specifically around research and discovery, early development and CMC. Within research, when you're working on at ADC, it's really important to not only come up with the right target tumor combination that's going to be amenable to an ADC approach, but they're getting the right intelligent choice of targeting moiety, linker technology and payload. Beyond that, in the early development stage, it's critical to get the dose and dose finding right. Because at the end of the day, you're trying to maximize the therapeutic window, doesn't work like a typical therapeutic where you have a typical dose response. You want to maximize that therapeutic index to get the dose that's going to be highly potent to kill the cancer cell, but also safe and not cause a systemic toxicity. And then finally with CMC, you're dealing with something that's very complex in terms of the molecule because you have a number of different components. You obviously have to produce the payload. You have to produce the antibody, put them together and do fill finish. It's a highly complex process to do this and also you're dealing with the toxic molecule. Since our inception, we have a proven track record. We have 3 different compounds that have reached clinical proof-of-concept plus stage, plus an additional 2 assets in the clinic. We validated our capability with an accelerated approval by the FDA in the U.S. and a recent approval also in Europe that we just achieved as well as the launch of Zynlonta. We've had success with a highly potent PBD-based payload where other companies have failed. It's very tough to work with and control the systemic toxicity with such a potent payload, but we've had success now multiple times. Our strategy is really focused on unlocking the value across 3 different pillars. The first is to maximize Zynlonta, our currently approved product. The second is around advancing the PBD-based pipeline. And the third is broadening our ADC platform and leadership. I'll talk a little bit more about each one. First, what it comes to Zynlonta, it's about establishing Zynlonta as the third line plus standard of care in DLBCL. This is our currently approved indication. We're also doing a number of studies to move into earlier lines of therapy and believe we can be the combination agent of choice given our unique profile that I'll talk about. We commercialize the product in the U.S. and partner it externally -- ex U.S. When it comes to advancing our PBD-based pipeline, we're focused on 3 core programs that we're investing heavily internally. Our 901 program targeting KAAG1, our 601 program targeting AXL and our 212 program targeting PSMA. We also have 2 other programs that we're working in collaboration, which allows us to prosecute a broader set of targets and molecules, but in a more cost-efficient way. So we're working on 602. It's an anti-CD22 with MD Anderson at 701, which is DLK-1 we're working on with NCI. We also completed a Phase II program successfully with Cami, and we are now looking for potential partnership opportunities for that compound. Within our ADC platform and leadership, one of the big trends I see in the ADC space is, is a growing number of technologies, whether it be around the antibody side, the linker side or the payload side, even beyond toxins. And so we've invested a lot in with internal development as well as through a series of deals to build up a toolbox, which allow us to generate next-generation ADCs because I think it's where the space is really going to go. If you look at our pipeline, it's a very deep pipeline, covering both hematology and solid tumors. Within Zynlonta, as I mentioned, we have currently approved indications, but a number of other trials to move into earlier lines of therapy in combination. In our PBD-based pipeline, again, I just want to highlight 2 specifically that I'm really excited about, which are our 901 compound targeting KAAG1 and 601 targeting AXL. We also have multiple programs that are undisclosed and research right now using some of the next-generation technology. Starting with Zynlonta, our first core pillar of value across the company. For the first time ever, we're disclosing what we think the peak potential can be for the product, which is $500 million to $1 billion. It's going to be driven by 3 different horizons of growth. The first is our current indication where we establish ourselves as the unmet -- establish ourselves as a standard of care in the third line plus setting. This is with monotherapy. This is our currently approved indications. Now given the relatively narrow patient population and lower duration of this therapy, this is probably 20% of the opportunity overall in terms of getting to our peak sales. We're well positioned, I'll talk about why, to continue to grow in both the academic and community setting. In Horizon 2, it's all about chemo-free combinations with rituximab. Rituximab is obviously used quite a bit across multiple lines in DLBCL, and we've generated good data and continue to generate good data in the front and second line setting. And then finally, horizon 3 is going after novel combinations. And we're looking at a number of different novel combinations, including multiple bispecific trials that we are having -- kicking off this year, and we'll start generating data that we'll read out next year. And I think that's a potential for potentially game changers in terms of disrupting some of the DLBCL space and some of the competitive landscape that's going on. Now if you look at the differentiated product profiles in Zynlonta, it really centers around 5 key elements. The first is it works in heavily pretreated, tough-to-treat patients. The second is it has deep and durable single-agent responses, which is unique, especially compared to any other CD19. It's a very fast time to respond. You get a response, your best response at the first after the first 2 cycles within 6 weeks. It's very easy to administer. It's the 30-minute infusion every 3 weeks and manageable safety profile with no CRS. This makes the agent not only good single agent, but also with combinations. But let's start off with our current indication, which is single agent. In the third line and third line plus setting, the dynamics in the market in the U.S. are really evolving in very different ways when you look at the community versus the academic centers. The community represents about 60% of DLBCL patients, but less than 25% of those patients will ever get to CAR-T of those that are eligible. So the CAR-T penetration amongst community patients is still relatively low. We think the fact that we have single-agent efficacy, tolerability with manageable side effects and the ease of administration is really ideal for the community use. And this is where we're seeing a lot of growth in the product. And I see probably the greatest potential for future growth in this segment. Now in academic centers, we have roughly 40% of the DLBCL patients. The majority of those patients are getting CAR-T at some point and largely now moving to earlier lines of therapy into the second line of therapy. But 60% of those CAR-T patients are going to relapse. And we have growing advocacy. This is where we're getting the majority of our current use right now, and we're being used in the majority of academic centers across the country. Thought leaders recognize that it's very tough to treat populations that you get a strong response with Zynlonta and were used quite a bit in the railroad setting in that post CAR-T setting. Now moving beyond our current indication and looking at the combination strategies, we have a number of different programs that will help to move this product into earlier lines of therapy in combination and really reach the full potential of the molecule. Starting with LOTIS-5. This is our confirmatory Phase III program in combination with rituximab. We presented at SOHO in the September safety lead-in results, which showed an overall response rate of 75% and a CR rate of 40%. I think it's a very competitive profile in the second-line setting. We're currently enrolling the randomized portion of the study, 350 patients, and we'll complete enrollment of the study next year. With LOTIS-9. It's a Phase II study, open-label study in the frontline frail and unfit population. So this is the roughly 15% of patients that can't tolerate R-CHOP -- full doses of R-CHOP. And that's where there's an unmet need. We have an 80-patient study going on right now and plan to share some results of that study next year. We also have a number of novel combinations that we're looking at. So in our LOTIS-7 program, we're looking at polatuzumab, glofit and most in combinations with Zynlonta. We also have a collaboration with IgM studying Zynlonta with their bispecific imvotamab. I think together, this will help to position Zynlonta as a combination of choice. And I think having single-agent activity with a CD19 positions us well to combine across multiple different therapies. Now looking at our PBD-based pipeline, there's really 3 programs that we focus heavily on in terms of company investment, which is our 901, 601 and 212 programs, but also have 3 other programs, 602, 701 and Cami that I'll talk more about. Starting with KAAG1. This is a novel first-in-class target. We know that KAAG1 is over expressed on a number of different tumors, such as triple negative, ovarian and RCC and others. We also know that we've seen preclinically that there's not only activity, single agent, but also in combination, you can get even more activity potentially. We're currently well advanced in a dose escalation right now of a Phase I. We plan to share some of those results later this year. We also are planning for ongoing expansion in combination arms that will start once we execute the dose escalation. Given that there's not a lot known and the literature, I think, is not great around AXL -- I'm sorry, KAAG expression on the cell surface, we also have a biomarker that we are -- that's under final validation, and that will help to inform some of the dose expansion and further clinical work with this program. Now when you look at some of the data, just I'll highlight the graph on the lower left. In monotherapy in a PDX arm, you could see just in an ovarian model, the kind of tumor suppression we're getting with single-agent activity in a PDX model. And so it's clearly potent, and we see that KAAG is expressed across a number of these different tumors. As I mentioned, ovarian, RCC, triple negative, but also cholangiocarcinoma, where these are relatively big populations were still remaining high unmet need. Now turning to AXL. AXL is a well-validated target. And I think a target that has a lot of history, starting with small molecules going after target suppression. There's been some ADC approaches that have been tried or are currently being tried. We think we have a pretty differentiated approach when you look at some of the data. And this is something we're quite excited about. We have dose escalation cohorts going on in 2 different arms, a combination arm with gemcitabine in sarcoma. We know sarcoma is a tumor that has high levels of expression of AXL. So it's a great proof of concept and that's a good way to test the hypothesis. But also we have a monotherapy arm and a basket of studies, including sarcoma, non-small cell lung cancer and other AXL gene amplified solid tumors. We're currently doing the dose escalation and plan to share results of that in the first half of next year. We'll then, of course, move on to dose expansion in some of these tumors. And again, we have an IHC assay that's under validation because there's likely going to be some tumors like sarcoma where the AXL expression is so high that you don't need to have a selective population, but likely other tumors where you're going to have to and where that sensitivity is and how we do the patient selection is going to be key as we get into the dose expansion and further clinical development. Now again, turning to the left. One approach that was taken before with an ADC was the Genmab ADC, where if you look at the top line right next to the vehicle arm, there's a the Genmab ADC at 0.3 milligrams per kilogram. And you could see there wasn't much tumor suppression. But the product, when you look at the lower line, that same compound at 4 milligrams per kilogram did show tumor suppression. The key with an ADC, of course, is getting to the tumor suppression, but at a dose level that still is within the therapeutic index and isn't causing side effect issues. You could see that arm at 0.3 milligrams per kilogram shows very strong tumor suppression in a PDX model. So because of the potency of our payload, which I think is one of the differentiators between our AXL approach and other AXL approaches that are being tested as a difference in the payload. And you can see a very dose level as the kind of tumor suppression we have. Again, AXL expression is well known as sarcoma, I think, is the one where it's the most known, but also in non-small cell lung cancer, pancreatic, RCC and ovarian. So this has the potential to show promise in a number of different solid tumors. Our PSMA program is another one that we're excited about. We know that PSMA has nearly universal expression across metastatic prostate cancer patients. And our 212 compound is the next-generation ADC that we really optimized to improve the efficacy and tolerability of the compound. We had a previous version, and we learned a lot from that experience to optimize the second-generation version. We showed very strong antitumor activity across different prostate cancer xenograft models. We're currently doing the IND-enabling work and plan to move this into the clinic in the first half of next year. Now metastatic prostate cancer is a large population, and we know the market is currently being shaped by PSMA targeted therapies. We think we have the chance to provide a more readily accessible PSMA targeted agent with this ADC approach. We also have our compound 602, which is targeting CD22. We know CD22 is overexpressed on a number of different hematological malignancies. In this case, we're studying it in ALL. We showed strong preclinical data and have partnered with MD Anderson, also with City of Hope is where this -- the program is being studied right now on those 2 sites. During the dose escalation, there were 4 patients that had MRD-negative remission, including 2 patients at the current dosing level that's being studied, which is 50 micrograms per kilogram. We also had an additional patient at that same dose level that had [indiscernible] clearance without any count recovery. So we've seen some clear signs of clinical activity. Right now working with MD Anderson to continue to do dose expansion and dose escalation with this compound. I plan to share more results of this later in the year. Beyond ALL, where there's some clinical activity, at least initial clinical activity that we see, there's also potential application in other areas such as NHL and CLL. Our 701 compound targets DLK-1. DLK-1 is expressed in a number of different neuroendocrine tumors, both in larger areas like small cell lung cancer as well as more rare neuroendocrine tumors. We've shown that we have the potential preclinically to suppress tumor growth in neuroendocrine tumors, and we're currently working with the NCI. They're developing the Phase I protocol, and we plan to move this into the clinic by the end of this year. As I mentioned, small cell lung cancer represents a sizable opportunity and also still a lot of remaining unmet need and more targeted neuroendocrine tumors. The benefit of our 602 and 701 program is we're able to develop these compounds with very limited resources on our behalf with highly credible partners. And as we see the readout of Phase I studies, we can decide how we want to move things forward, whether it be alone or in partnership. Now taking a step back and looking at our platform strategy. First, we just assessed the overall market. And if you look at all the ADCs that are currently approved, they're projected to be about $20 billion in sales in the next 5 years. But if you look at the targets in tumor types that are being tackled by ADCs, it's only a fraction of the true potential of where ADCs can go. To unlock that potential, I think it's going to require an increasingly more intelligent approach and increasing set of technologies to have the right combination of targeting more in linker and payload permutations to effectively unlock some of those. But then also to maximize that opportunity, you need an integrated capability to actually take that molecule development and pull it all the way through. We think we're very well positioned to do both of those things. We have a strong foundation with unique capabilities, unique to ADCs. We have a proven track record, but also now a growing technology platform. So again, for the first time ever, we're sharing some of the technologies that we have in-house right now that we're disclosing both in terms of targeting moieties, linker and conjugation technology and payloads. I think where the ADC space is going to go, which is right now, I've been focused on toxins, potentially goes beyond toxins to immune agonists, potentially to multiple drugs. And so where the space is going, I think, is much broader than where we've been up to this point. And that's where our research efforts are focused on is unlocking the value and the potential of a broader set of targets and a broader set of tumors and hopefully with even much more significant efficacy. We have a number of different value-driving catalysts over the next 2 years, and again, well within our cash runway, which extends into the second quarter of 2025. So starting with Zynlonta. This year, we will grow Zynlonta double digit year-over-year, and we'll also achieve commercial brand profitability, meaning we will more than offset the total cost of commercialization of the company and medical affairs and all related costs so that Zynlonta, by the end of the year, starts to pay for the new indications and the pipeline and it starts to become certainly more than offsetting all the commercialization costs. We just recently achieved European approval, so we'll have a launch in the first half of this year by our partner Sobi, which triggers not only milestone payments, but also we generate royalties from those sales. Next year, we'll complete the enrollment of our LOTIS-5 confirmatory study in the second-line setting. We'll also share some preliminary results from our LOTIS-9 and LOTIS-7 studies next year. In terms of the pipeline, we have KAAG1, which I mentioned, we'll share preliminary results of our Phase I dose escalation study later this year. We'll share some of the preliminary results from our Phase I study with AXL, and we'll share more data from the dose expansion work with our Phase 1 compound 602. We also plan to initiate 2 new Phase I studies 701 later this year and then our 212 compound targeted PSMA in the first half of next year. So a number of different milestones across the company, both with Zynlonta and our pipeline. And of course, we're continuing to advance our technology platform, but haven't disclosed any milestones around that. With that, I thank you, and I look forward to the Q&A.

So I'll switch over to the Q&A session. For those of you who are in the live audience, feel free to use the mic runners who are nearby today. And for those of you who are joining online, feel free to use the online portal. I think there is Ask a Question button as well. Thanks for joining us, Ameet. It's great to have you.

Yes. Thank you.

So to kick start a conversation, it will be great to get some insights on the Zynlonta sales trajectory. How comfortable are you with the double-digit growth that you have seen -- that you're expecting for this year? Can you talk about where do you think the biggest drivers are in your next growth trajectory?

Sure. Yes, we're comfortable. I think the biggest driver is going to clearly be in the community setting, where there's still a lot of untapped potential. So just to give a little bit more color, if you look at the academic centers today, the majority of them are using Zynlonta, largely in that third or fourth line setting and oftentimes post CAR-T. If you look at our new patient starts in that late-line setting, we're leading right now, despite launching later than any other agent and actually having lower brand awareness. So to me, that also has opportunity. But the academic piece is competitive, and I think we'll continue to get even more competitive. There's competition from -- as CAR-T moves forward, there's competition from clinical trials. It's actually one of the bigger sources of this competition. And then as bispecifics enter, I think they're going to disrupt the academic side. So I think we're going to continue to have a clear place because we've established a presence for us in tough to treat patients, not only post CAR-T, but the double-hit, the triple-hit. A lot of these patient types, we've established clear efficacy in these. I think there's going to be continued use there. Where we see the bigger growth opportunity is in the community setting. We saw good growth Q3 over Q2. We had over 20% sales growth and that was largely driven by expansion amongst new community accounts. Still today, less than half of the community accounts had even tried Zynlonta. And so we're still early in the launch phase, given that the product launched during the COVID time, where access to seeing physicians was extremely tough. We're early in the phase of still education, awareness and actually driving trial usage in the community. But our profile fits extremely well right now. CAR-T use is still quite limited, and I believe it will remain limited in the community. And I think even bispecifics will have a tougher time just given the safety profile and a slower adoption. We know in the community setting in general, when you look not only at our product, but any new product, the adoption is just much lower. So if you look at any of the competitors who have launched in the last couple of years, the adoption of the community is lower. But we think we have a really unique profile that fits particularly well in the community. And so that's where it's going to drive a lot of our growth this year.

Do you see a lot of uptick more concentrated in the double-hit, triple hit patients? And I think one important question is you brought this up is that community doctors seems to be more cautious in adopting new therapy. So when you look ahead in the next 12 months or so, maybe 24 months, we're going to see bispecific coming online. There's also potential for other therapies to come in the late-line setting as well. And we already have CAR-T in the second line in DLBCL. So how do you think you fit in? And if you can give us some context about where things fall in the academic center versus your -- versus the community center, that would be great.

Sure. Yes. So like I was saying in the academic center, it is getting more competitive. I think bispecifics will move across multiple lines of therapy. We see -- with the POLARIX study, likely going to move into earlier lines of therapy for a number of physicians. That also homes up opportunity because the third line plus setting is still -- there's not a lot of great options. And as I said, we're right now leading in market share, and we're doing it with single-agent activity. So bispecifics will certainly disrupt things there. But I think other competitors may get more disruptive than we will, frankly, from the competition. In the community, I'm less concerned by the competition. CAR-Ts have been around for a long time. And I can just tell you the -- you're talking about patients that are generally elderly that have advanced disease, metastatic disease. And I can tell you, when you talk to most community physicians, the appetite to send patients hours away to travel to be away for weeks with a family member, the cost and accessibility. The reality is, and they shared this data at ASH, less than 25% of patients are eligible will ever get to a CAR-T in the community. And CAR-Ts have been around for a number of years. So I don't think that's going to dramatically suddenly change. I think bispecifics will play a role in the community, but I think it's going to take time. One, there's naturally slower adoption, but CRS is a big deal. For the average community physician, they're seeing a third-line DLBCL patient once every few months. They don't see these patients all the time. So although they've gotten used to dealing with side effects with PD-1s and other tumors like non-small cell lung cancer and others, where they're seeing those patients quite often, dealing with CRS and hospitalization is a big deal for a community physician. And it's unclear about the durability of bispecifics and if they're truly curative. So if you're dealing with different non-curative intent products, having a single agent that works really quickly, that's easy to manage with a convenience schedule is a really important profile. So we think we're well positioned there even in the face of changing competitive dynamics.

Do you see -- just to -- so this question to -- just the bispecific side, right? Do you see bispecific as a direct competitor in, I guess, the academic setting? I guess it seems that your view is that the community setting, doctors may seem to be more cautious about the use there because of the CRS side effect.

I think at least initially, they will be -- I think, yes, there's going to be some level of competition. I think they're also going to get quite a bit of use in the second line. So I think they're going to disrupt other second-line therapies as well. I know I think it's going to all be in the third-line setting. So there'll be some level of competition because they'll get used across lines. But certainly, I expect them to get used also in the second line setting. I think if you think of -- these are the short-term dynamics. And the long term, the potential we see is actually the combination of the 2 because if you think of the possibility right now, we have a very fast acting agent to best response. Bispecifics take longer, but they get there. It's unlikely that either agent on their own is going to give truly durable, curative like behavior. But when you add CD20, CD3 plus CD19, there's the possibility. So we really believe there's going to be some level of competition, but there's also a potential for actually changing a lot of the paradigm within DLBCL through the combination of bispecifics and Zynlonta. And again, we're uniquely positioned because of our single agent efficacy with a CD19, and I think that's what that could disrupt the space potentially even disrupt therapies like CAR-Ts.

When do you think we can get some color on how the combo work with bispecific?

Yes, we plan to share some data for that next year.

Okay. And are you dose escalating? Can you talk about just the...

Well, we just reached an agreement for the Roche bispecifics and also of IGM. So those studies are going to kick off in the first half of this year. And that's why I'd say we'd have some initial data from patients next year.

Maybe switching gear to your solid tumor pipeline. Actually, before we get to that, I want to also touch on Cami. For Cami, I think when we heard the news earlier this year, I think it started a conversation among investors is that is the FDA raising the bar for a salary approval? And -- is this more due to the need that they saw in Hodgkin or is there more to it? I'm just curious if you can give us some thoughts about just to sell your path in general in the oncology space?

I think they are getting more stringent in terms of how they enforce the guidance. The official guidance hasn't changed. The guidance for accelerated approval has been and continues to be that Phase III studies are well underway. That's been the guidance. I could tell you our experience with Zynlonta was well underway was we had barely started the Phase III study, but the unmet need was high and clearly saw the clinical benefit of the compound that we got accelerated approval when our -- when we're at the very beginning of our Phase III study. I think because of the risk that the FDA takes with accelerated approvals and how tough it is sometimes to pull products to the market, I think they made a lot of public comments that they're getting stricter around accelerated approvals. I think many other competitors in the field would corroborate that the field has changed. And what they told us in the meeting was they believe there's continued high unmet need in late-line Hodgkin lymphoma. I mean we were being studied in the fourth line plus setting. With an average of 6 prior lines of therapy, we showed a 70% response rate, a 33% CR rate in 13.7 months median duration of response. I mean that's very strong data when you think of a median of 6 prior lines of therapy in Hodgkin lymphoma. So they didn't dispute at all that there's an unmet need in late-line Hodgkin's lymphoma. There's really nothing approved in that late-line setting. But I think they are enforcing more strictly the guidance around well underway. And when we clarified at the meeting, what well underway means they added ideally fully enrolled. And I think when you look at some of the recent accelerated approvals from other competitors, I think you could see that those trials are firstly completed enrollment, and the FDA is even looking at data -- blinded data before they grant the accelerated approval. I think this would follow the same pathway.