Good morning, ladies and gentlemen, and welcome to the ADC Therapeutics Third Quarter 2024 Earnings Conference Call. This call is being recorded on Thursday, November 7, 2024. I will now turn the call over to Marcy Graham, Investor Relations Officer for ADCT. Marcy, please go ahead.

Thank you, operator. This morning, we issued a press release announcing our third quarter 2024 financial results and business update. This release and the slides we will use in today's presentation are available on the Investors section of the ADC Therapeutics website. I'm joined on today's call by our Chief Executive Officer, Ameet Mallik, who will discuss our operational performance and recent business highlights; followed by our Chief Financial Officer, Pepe Carmona, who will review our third quarter 2024 financial results. We will then open the call to questions. Before we begin, I would like to remind listeners that some statements made during this conference call will contain forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain known and unknown risks and uncertainties, and actual results, performance, and achievements could differ materially. They are identified and described in the accompanying slide presentation and in the company's filings with the SEC, including Form 10-K, 10-Q, and 8-K. ADC Therapeutics is providing this information as of today's date and does not undertake any obligation to update any forward-looking statements contained in this conference call as a result of new information, future events, or circumstances, except as required by law. The company cautions investors not to place undue reliance on these forward-looking statements. Today's presentation also includes non-GAAP financial reporting. These non-GAAP measures should be considered in addition to and not in isolation or as a substitute for the information prepared in accordance with GAAP. You should refer to the company's third quarter earnings release for information and reconciliation of historical non-GAAP measures to the comparable GAAP measures. I will now turn the call over to our CEO, Ameet Mallik. Ameet?

Thanks, Marcy, and good morning, everyone. Thank you for joining us on today's call. The third quarter of 2024 represented a solid period of continued performance for our company. Throughout the quarter, we continued to focus on execution and delivering on our commercial strategy. Even in a highly competitive market, we have been able to secure our place as a treatment option for third-line plus patients with DLBCL. Our third quarter net product revenues increased to $18 million during the quarter, bringing year-to-date ZYNLONTA revenues to $52.9 million. We are confident in ZYNLONTA's profile with rapid, deep, and durable efficacy, a manageable safety profile, and ease of administration. Beyond our current indication, we believe in the potential to expand the use of ZYNLONTA into earlier lines of therapy in DLBCL and indolent lymphomas through combinations, significantly growing the commercial opportunity. Enrollment in LOTIS-5, our Phase III confirmatory study of ZYNLONTA in combination with rituximab in patients with second-line plus DLBCL, is nearing completion, with full enrollment expected by the end of this year. Data are expected by the end of 2025 once the prespecified number of events is reached. Interim data, including safety and efficacy in a subset of patients from our LOTIS-7 Part 2 dose expansion of the ZYNLONTA plus glofitamab combination arm in second-line plus DLBCL, are expected in December, with additional data anticipated in the first half of 2025. Furthermore, we are excited that two key investigator-initiated trials conducted at the Sylvester Comprehensive Cancer Center at the University of Miami Miller School of Medicine, studying ZYNLONTA in indolent lymphomas, will be presented at the American Society of Hematology Meeting in December. This includes an oral presentation with updated data from the Phase II IIT evaluating ZYNLONTA in combination with rituximab in patients with high-risk relapsed or refractory follicular lymphoma, as well as a poster presentation with updated data from the Phase II IIT evaluating ZYNLONTA for the treatment of relapsed or refractory marginal zone lymphoma. We look forward to the updates from these two studies evaluating the potential of ZYNLONTA in these lymphomas. The Phase I/II clinical trial sponsored by the University of Texas, MD Anderson Cancer Center, evaluating ADCT-602 in patients with relapsed or refractory B-cell acute lymphoblastic leukemia continues to progress, and dose escalation continues at the 60 micrograms per kilogram dose. Within our solid tumor programs, we have made the decision to discontinue the Phase Ib ADCT-601 program targeting AXL as a single agent and/or in combination with patients with sarcoma, pancreatic cancer, and non-small cell lung cancer. Although early signs of antitumor activity were observed during the dose escalation phase, we were unable to demonstrate a favorable benefit-risk profile during the dose optimization and expansion phase. Moving forward, we will prioritize our exatecan-based platform in solid tumors, where progress continues in the IND-enabling studies for the company's exatecan-based programs for ADCs targeting Claudin 6, PSMA, and NaPi2b, while our ASCT2 targeting ADC is in the drug candidate selection stage. The company has selected one target to move toward IND, which is expected to be disclosed in 2025. At the same time, we continue to explore potential partnership opportunities. Looking specifically at DLBCL, when you move beyond the frontline, cure rates are extremely low. Here, physicians make treatment decisions based on efficacy, safety, and accessibility in the context of individual patient considerations. ZYNLONTA delivers on all three, which we believe positions it well for use in combination in second-line plus DLBCL. The market has evolved to essentially four modalities: cellular therapies, bispecifics, ADCs, and monoclonal antibodies as well as chemotherapy and is moving towards combinations that offer rapid, deep, durable responses with manageable toxicities, which can be administered in the outpatient setting. Given the improvement expected in the clinical profile with bispecifics and ADC-based combinations, we believe these regimens have the potential to grow at the expense of cell therapy and chemotherapy use. Here, we see the promise of our LOTIS-5 and LOTIS-7 combination studies. With LOTIS-5, we are combining ZYNLONTA with rituximab, a therapy that community physicians are comfortable using and is a backbone of DLBCL therapy. We feel this combination offers competitive second-line plus efficacy with favorable safety and a convenient dosing schedule, well suited for use across care settings. In addition, this is a nonsystemic chemo regimen that avoids the irreversible toxicities associated with chemotherapy, a class that is still widely used in second-line plus DLBCL. With LOTIS-7, we are combining ZYNLONTA, an anti-CD19 ADC, and glofitamab, an anti-CD20, CD3 T-cell engaging bispecific antibody and have completed dose escalation, where the combination demonstrated no dose-limiting toxicities and early signs of antitumor activity. Our hypothesis with this study is that combining these two powerful approved single-agent drugs is expected to have additive or synergistic efficacy along with a manageable safety profile given no overlapping non-hematologic toxicities. Additionally, we believe ZYNLONTA used prior to glofitamab may debulk the tumors and reduce peripheral B cells, leading to lower CRS rates and severity. This would open up the use of this combination in earlier lines of therapy across care settings. We saw encouraging data in the Phase Ib dose escalation and are currently enrolling patients in Part 2 dose expansion with ZYNLONTA at two dose levels in combination with glofitamab in second-line plus DLBCL. We anticipate sharing safety and efficacy data on 15 to 20 patients in December, including all DLBCL patients from Part 1 and Part 2 dosed with glofitamab plus ZYNLONTA at the 120 and 150 micrograms per kilogram doses where scans are available. We expect to share data on additional patients with longer follow-up in the first half of 2025. Beyond DLBCL, we also see the potential to expand into the second-line plus settings of indolent lymphomas based on data from investigator-initiated trials at the University of Miami exploring ZYNLONTA plus rituximab in high-risk relapsed or refractory follicular lymphoma and ZYNLONTA monotherapy in relapsed or refractory marginal zone lymphoma. Early data from these studies demonstrate the potential for rapid, deep, and durable efficacy with a fixed duration of therapy and a manageable side effect profile. Based on high complete metabolic response rates seen thus far in these studies, we believe there is potential to provide marginal zone and follicular lymphoma patients with years of remission. We are looking forward to the lead investigators sharing more on these studies at the ASH meeting in December. As there remains significant unmet need across these lymphomas with sufficient data, we plan to discuss the path forward with regulatory authorities as well as seek inclusion in compendia.

Thank you, Ameet. On the financial front, we remain well capitalized, ending the third quarter with $274.3 million in cash and cash equivalents, which is expected to fund operations into mid-2026 based on current plans. ZYNLONTA net product revenues were $18.0 million for the third quarter and $52.9 million for the first nine months of 2024 as compared to $14.3 million and $52.4 million for the same periods in 2023. The growth in the third quarter versus the prior year is primarily driven by volume increase together with a net price increase. Throughout the year, we have maintained our disciplined capital allocation strategy and decreased operating expenses for the first nine months of 2024 by 12% year-over-year on a non-GAAP basis, which excludes stock-based compensation. In the third quarter, our non-GAAP operating expenses increased versus prior year by 5% due to investment in ZYNLONTA LOTIS-5 trial and our Phase I clinical program, partially offset by efficiencies in other operating expenses. We will continue to take a very disciplined approach to our capital allocation through the remainder of 2024 and into the coming year. You can find a reconciliation of GAAP measures to non-GAAP measures in the accompanying financial tables of the press release issued earlier today and in the appendix of this presentation. On a GAAP basis, we reported a net loss of $44.0 million for the quarter or $0.42 per basic and diluted share as compared to a net loss of $46.7 million or a net loss of $0.57 per basic and diluted share for the same period in 2023. On a non-GAAP basis, adjusted net loss was $29.4 million or an adjusted net loss of $0.28 per basic and diluted share as compared to an adjusted net loss of $32.4 million or $0.39 per basic and diluted share for the same period in 2023. The decrease for the three months ended September 30, 2024, is primarily related to higher revenues, while the decrease year-to-date is primarily due to lower operating expenses. With our strong balance sheet, we believe we're well financed to continue to pursue our corporate strategy. As a reminder, hematology continues to be a primary focus of our capital allocation. And within this, our key objective is to create value by expanding the use of ZYNLONTA beyond our current indication. We expect to achieve this by fully supporting our commercialization efforts in the U.S. directly and through our partnership ex U.S. and by investing behind potential expansion into earlier lines of DLBCL and indolent lymphomas. In solid tumors, our aim is to pursue multiple ADC candidates in parallel and increase our shots on goal through our novel exatecan-based research platform. In addition to the candidate we are taking forward to IND, we will determine on a case-by-case basis whether we wish to progress additional candidates internally or seek to partner in order to share the development and financial risk.

Thanks, Pepe. As we've illustrated today, we made significant progress in the third quarter, maintained our disciplined approach to capital allocation, and are excited about what is ahead for the remainder of 2024. We have key potential value-driving milestones, which we expect before the end of this year. These catalysts include the expected completion of enrollment in LOTIS-5 and initial efficacy and safety data from LOTIS-7, Part 2 dose expansion in December, as well as the presentation of updated indolent lymphoma Phase II IIT data at ASH. Looking ahead with a strong balance sheet to execute our strategy, I am confident that ADC Therapeutics is well positioned to drive value creation for all our stakeholders. We can now open the line for questions.

Your first question comes from Michael Schmidt of Guggenheim.

Could you comment a little bit more about the commercialization of ZYNLONTA in its approved indication? I know it's not expected to grow dramatically, but when we look at some of the recent CD20 bispecific antibody launches, they seem to be experiencing some meaningful uptake in a similar category. And so I'm just curious, what are you seeing in terms of utilization right now and potential incremental growth opportunities from the current run rate, again, in the approved indication? And then I had a follow-up.

Okay. Sure. Thanks, Michael. Appreciate the question. As you said, there has been increased competition from bispecifics. Since they launched over a year ago, they have penetrated pretty significantly in the academic setting in the third-line setting as well as made some inroads into the community. One thing we see is more referrals going on between the community and academic for patients to get access to bispecifics. So they've certainly taken over probably close to about one-third of the overall third-line plus market share. I think what I'm excited about with the team is if you look at our overall volume, it's pretty much in line despite all that competition. So we continue to maintain a relatively stable mix of demand between the community and academic setting, so it's still about 50-50. Obviously, there can be normal order-to-order, quarter-to-quarter ordering variability. But we see relatively strong advocacy for the use of ZYNLONTA by academic physicians and use in the community. So I think the trend that we've been seeing, we anticipate to continue to see. And we continue to see the possibility for an $80-plus million peak sales potential in the current indication.

Okay. Great. And on the LOTIS-7 data later this year, I know you said you expect to present data on about 15 to 20 patients with glofitamab. So what is a positive result here? What are you looking for in this initial data for LOTIS-7?

Yes, I think it's a great question. So if you look at other bispecific combinations, there have been a number of bispecific combinations that have come out with data. Obviously, our data won't be mature enough to look at PFS or overall survival. What we'll have is overall response rates and complete response (CR) and partial response (PR) rates. If you look at that, they tend to be in the 50% to 60% range. I mean, the majority of the bispecific combinations fall in that range when you look at the second-line plus setting. So, of course, we want to be competitive from an efficacy profile, but also to hopefully continue to show what we saw in the dose escalation, which is continued improvement in the overall rates and severity of CRS. And so that's the goal for the profile. Obviously, we have to let the data mature, and we'll show it in December, but those are the two things we hope to be able to share. One thing I would note also in terms of efficacy is that when data is reported by competitors or in other trials, it's always about best overall response rate and best CR. That matures over time. We expect to be able to share preliminary data on the scans, but also, I think data matures over time, and we'll continue to share updates not just this year, but as we go into next year as well.

Your next question comes from Eric Schmidt of Cantor.

Appreciate the update, Ameet and Pepe. Maybe just coming back to AXL601 and sort of the solid tumor opportunity. Is there anything you learned from your decision to give this a quick hook with regard to, I don't know, PDV payload or linker or safety or maybe it was just the target that was in the go here?

Yes. I mean, I think what's interesting is when we did the dose escalation, you obviously give more limited dose duration. When you're doing the dose escalation, we saw some initial clinical activity, which we shared in sarcoma, both as monotherapy and combination. That basically led to the investment in doing the dose expansion optimization. We knew with the payload and target combination, there was a limited therapeutic index. One of the things we wanted to look at was different dosing schedules, for example, three versus four weeks or starting with a higher dose and then down dosing. We played with that during the dose optimization and expansion phase. Unfortunately, we weren't able to sustain the level of efficacy we wanted to see with a favorable tolerability profile. The benefit-risk that we saw during that dose optimization expansion phase just wasn't there. It's hard to speculate how much is target versus payload. But some of the side effects we saw as we continued to dose at high levels were more limiting to get to the efficacy we wanted to see. The reason we made the call is we wanted to have a specific endpoint. You remember, we said we're going to dose up to 80 patients; we will either see a strong efficacy signal and a strong profile that we think we can go out and do a business development deal or we will stop the program. We had very disciplined go/no-go criteria that we stuck with, and we just made a decision that it wasn't worth pursuing any further.

Appreciate the discipline. Can you be a little bit more specific on timelines for a next solid tumor IND filing and/or partnership conclusion discussion?

Yes. As you know, we've really shifted the whole solid tumor strategy towards newer payloads. Exatecan is the most advanced, and we have four different programs in that. We will give an update in the future. We've picked one program that we're progressing toward IND. We haven't given the timing expectation on that. We will give that in a future update. We continue to be in discussions with partners around potentially research collaboration for some of the other programs. I don't anticipate that's going to happen this year; I think it's more of a 2025 event.

Eric, so between the drug candidate selection until you get to an IND, on average, it takes about 18 months. It can fluctuate, but that's roughly the timeline on that. Obviously, as Ameet said, we have already selected the drug that's going to move to clinical trials.

Okay. And a quick one for you, Pepe, on ZYNLONTA sales. I think you mentioned net pricing gains. Could you quantify the magnitude or percent increase in net pricing?

Yes. We take twice a year price increases in low single digits. Compounded annually, it results in mid-single digit increases, roughly.

Your next question comes from Kelly Shi of Jefferies.

So for the LOTIS-7 trial, what kind of synergy do you expect from this combo, particularly on the durability front? Also, are there any community centers involved for this ongoing trial?

Yes. We hope to see synergy. Obviously, that's what we're testing: to see either additive or synergistic efficacy because these are complementary mechanisms. ZYNLONTA is, of course, CD19 ADC, and glofitamab is a CD20, CD3 T-cell bispecific. We hope to see additive or synergistic efficacy. Because of our dosing schedule—giving ZYNLONTA a week before—we're also hoping that reduces the rates and severity of CRS. The profile is really to improve on both dimensions of the bispecific monotherapy. In terms of the trial, we are in academic centers and large community centers. We are in CAR-T centers as well as centers that don't give CAR-T, so we're really trying to ensure that we're testing this in a representative sample of second-line plus patients, which we think is important to test across the whole patient sample. You should expect a patient sample that's consistent with other large-scale bispecific combination trials.

Your last question comes from Gregory Renza of RBC Capital Markets.

This is a question for Greg. Regarding LOTIS-7, one of the main advantages is the potential to lessen side effects like CRS. I'm interested in what the data would need to show in the initial update to be seen as a significant improvement compared to bispecific or bispecific with chemotherapy. I also have a follow-up.

Yes. I think the most meaningful thing, obviously, what we saw in the dose escalation was in the low 30%. Glofitamab on its own is roughly 70%. Rates of CRS are obviously important, but I think severity is even more significant because when you look at Grade 1 CRS, it can be treated simply sometimes with Tylenol, while Grade 4 requires hospitalization. The difference between these grades is very significant. And especially to remove the requirement or even option for hospitalization, I think the important thing is to eliminate high-grade CRS, so Grade 3 and Grade 4. What we hope to see, as we saw in the dose escalation, is no high-grade CRS. I think that's the most critical aspect from that standpoint. But again, we also want to see strong efficacy, too. So we aim to improve on both dimensions compared to bispecific monotherapy.

Got it. As a follow-up, what should we be—can you help us set expectations for the indolent lymphoma update at ASH? Can you also remind us what sample sizes will be needed for the compendia listing and refine the timelines for when you expect to have sufficient data to pursue that route?

Yes, sure. You probably saw the abstracts that were released on Tuesday, and we had a press release summarizing the abstract data from both the relapsed/refractory high-risk FL study and the relapsed/refractory MZL study. What I would expect in the presentations, FL is an oral presentation, while MZL is a poster presentation. We'll see updated data as we generally do with these. When the investigators submit data in the summer, they of course update that with more patients and more duration, providing further detail in the presentation. So that's what you should expect at ASH. In terms of the number of patients that are needed, there is some precedent in MZL, where patient sample sizes that have gotten guidelines have been as few as 36 patients, with the most being around 50, even for approvals, it's only been to about 68 patients. We're doing a 50-patient study. The abstract's presented data is 20 patients. I expect to see a few more when you get to the presentation because there will be more patients enrolled. We will need to be in that range to be able to submit for consideration in guidelines or have discussions with regulatory authorities. For follicular lymphoma, there's a little less precedent because there are a number of Phase III studies that have gone on, head-to-head studies. The unique aspect of our population, however, is that it's only high-risk. Many of these patients are POD24. So the unmet need in this population is significantly higher. We are doing a 100-patient study, which is a fairly large study in this narrower population. There's a potential we could submit and have discussions with the FDA on a more accelerated path in this high-risk patient group. In terms of timing, we haven't provided updates since these are both investigator-initiated trials. The enrollment is not under our control. You'll see further updates at ASH, which will be the next real data presentation where you'll see more details versus what was in the abstract. These studies continue to enroll with significant interest due to the high unmet need in both settings.

Thank you, ladies and gentlemen. That concludes our question-and-answer session. I will now turn the call back to CEO, Ameet Mallik.

Thank you for joining our call today and for your continued support. We look forward to keeping you updated on our progress. Operator, please end the call.

Thank you for attending. You may now disconnect your lines. This concludes today's conference.