Earnings Call Transcript - ADCT Q4 2022

Operator, Operator

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

Amanda Loshbaugh, Investor Relations Manager

Thank you, operator. This morning, we issued a press release announcing our fourth quarter and full year 2022 financial results and business updates. This release is available on the ADCT website at ir.adctherapeutics.com under the Press Releases section. On today's call, Ameet Mallik, Chief Executive Officer; Kristen Harrington-Smith, Chief Commercial Officer; Mohamed Zaki, Chief Medical Officer; and Jose Carmona, Chief Financial Officer, will discuss recent business highlights and review our fourth quarter and full year 2022 financial results before opening the call for questions. 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. Examples of forward-looking statements include those related to our future financial and operating results, our ability to achieve our guidance for 2023, and long-term revenue, operating expenses and cash requirement reductions, future revenue growth, prescription volume, product launches and market share for our products, either alone or through our foreign partners, timing and results of ongoing and future development programs and clinical trials for our products, either alone or in combination with our partner products, FDA and foreign regulatory authorities actions and potential regulatory approval for our products either alone or in combination with our strategic partners products, future strategic partnerships and business development efforts and our ability to repay our outstanding debt obligations. These forward-looking statements are subject to certain risks and uncertainties and actual results could differ materially. They are identified and described in today's press release, in the accompanying slide presentation on Slide 2 and in the company's filings with the SEC on Form 20-F and is updated in ADCT's recent periodic filings on Form 6-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-IFRS financial measures. These non-IFRS measures have limitations as financial measures and should be considered in addition to, and not in isolation or as a substitute for, the information prepared in accordance with IFRS. You should refer to the information contained in the company's fourth quarter and full year earnings release for definitional information and reconciliations of historical non-IFRS measures to the comparable IFRS financial measures. It is now my pleasure to pass the call over to Ameet Mallik. Ameet?

Ameet Mallik, CEO

Thanks, Amanda, and thank you all for joining us today. 2022 was a year of evolution for ADC Therapeutics, a year in which we laid the groundwork to help optimize and launch its potential, prioritize our pipeline, strengthen our leadership team and bolster our capital position, all with the intention of elevating the company to the next level. We are now positioned to execute our strategic initiatives in 2023 and unlock the tremendous untapped value of the company. We expect to see this value unfold through our three core pillars of growth: maximizing the Zynlonta opportunity, advancing our PBD-based pipeline, and expanding our ADC platform. Beginning with the highlights of the quarter, Zynlonta net sales were $19.8 million in the fourth quarter, a 16.5% increase year-over-year and $74.9 million for the full year. We are encouraged to see underlying trends and have a focused plan in place to help drive future growth. Kristen will take you through these initiatives momentarily. By executing successfully, we expect to drive Zynlonta net sales by double-digit percentages year-over-year, even when considering the gross-to-net headwinds and expected approval of bispecifics. We also expect not to achieve commercial brand profitability this year, and for our sales to begin funding pipeline development by the end of the year. As a reminder, while success in the third-line cost setting is hugely important, we believe this patient segment only represents around 20% of the commercial potential for Zynlonta. The larger opportunity lies in combinations in earlier stage settings. Here we firmly believe that Zynlonta's strong single-agent activity and manageable side-effect profile make it an ideal combination partner of choice. We are exploring Zynlonta in combination with rituximab in earlier lines of therapy in the LOTIS 5 and LOTIS 9 studies. We are also excited about combining Zynlonta with bispecifics, which we are investigating in the LOTIS 7 study. If we were able to expand our approved indication and capture earlier lines, we believe combination opportunities for Zynlonta have the potential to deliver peak annual sales of between $500 million and $1 billion in the U.S. with additional opportunity through partnerships ex-U.S. Regarding geographic expansion, we were very pleased to see Zynlonta receive approval in December from the European Commission and the UK MHRA for the treatment of relapsed or refractory DLBCL. Subsequently, on February 7th, our European partner, Sobi, received conditional marketing authorization. We are encouraged that the team has made good progress and expect Sobi to launch in Europe in the second quarter of this year. As I turn to the rest of our pipeline, we are looking forward to multiple value-driving catalysts across our portfolio in the next 12 to 18 months, including preliminary data for ADCT-901 targeting CAAG-1 and ADCT-601 targeting AXL. In an effort to prioritize these programs and to potentially capture the full opportunity for Zynlonta, we made a decision not to pursue further clinical development of Cami on our own, but instead to seek a partnership based on its positive Phase II data. We are strategically advancing the rest of our portfolio programs and Mohammed will provide a more detailed update in a few minutes. Touching briefly on the financials. At year-end, we had a strong balance sheet with $326 million in cash and with the anticipated milestone payments and lower operating expenses, we expect our cash runway to extend into mid-2025. Moving to recent corporate events and as disclosed in regulatory filings, our largest shareholder, Auven Therapeutics, completed a secondary sale of a significant portion of its holdings to meet a debt obligation. The secondary offering of 12 million shares was placed in the hands of high-quality investors and has allowed us to broaden and strengthen our shareholder base. Following the completion of the transaction, Auven's holdings decreased from approximately 28% of outstanding shares in December to roughly 8% after the offering, and its remaining shares are locked up for 12 months. The high level of interest shown by top-tier investors during the process was especially encouraging. Last but certainly not least, I'm thrilled that we have been able to continue to strengthen our management team with the addition of truly high-caliber professionals. I would like to take this opportunity to welcome Kristen Harrington-Smith, our Chief Commercial Officer; Mohamed Zaki, our Chief Medical Officer; and Pepe Carmona, our Chief Financial Officer. We believe these new leaders bring the necessary capabilities to unlock the full value of the company and will be critical in advancing us through the next phase of growth. In the next three to five years, we expect to continue to grow Zynlonta sales, advance the pipeline, broaden our scope of new partnerships and move toward profitability. With that, I would like to turn the call over to Kristen for a commercial update. Kristen?

Kristen Harrington-Smith, Chief Commercial Officer

Thanks, Ameet. It is my pleasure to share an update on the Zynlonta launch. As Ameet mentioned, we are seeing strong underlying demand trends that have accelerated in the past two quarters. I'm excited by the opportunities we have to build on this momentum, and I want to spend a few minutes outlining how we've refined our strategy and initiatives to deliver Zynlonta’s full potential. It all begins with understanding the products, the market, and the various stakeholders. My focus during my first few months has been on listening and learning from the team and key thought leaders. Following this deep dive, it's clear that the key to delivering our growth aspirations for Zynlonta in the near term will be in the quality of our execution and in particular, in doing a few things really well. We are focusing our cross-functional team on three key imperatives. One, driving awareness of Zynlonta's differentiated profile. Two, educating physicians to optimize patient benefits. And three, continuing to build advocacy with key thought leaders, focusing on clear patient types. Through executing on these three aspects of our strategy, I believe we will capture the opportunity for growth in the third-line and third-line plus settings both in the near term and over the longer term, recognizing that this is a marathon and not a sprint. Let me now spend a moment expanding on each of these three elements of our strategy. Starting with driving awareness, Zynlonta has a uniquely differentiated product profile, which we believe positions it to become the standard of care in the third-line and third-line plus settings. First, it has strong single-agent activity. It is associated with a rapid time to response with a median of just 41 days. It has a manageable safety profile with no cytokine release syndrome and a low incidence of neuropathy. Lastly, it has a relatively patient-friendly administration schedule requiring a 30-minute infusion cycle once every three weeks. The second strategic initiative is to educate physicians and nurses on the proper dosing to achieve the best clinical outcomes for patients and the manageable safety profile of Zynlonta, what to expect and how to mitigate potential adverse events. We believe Zynlonta's safety profile is favorable in the third-line and third-line plus settings, and we need to keep reinforcing this important message. Lastly, we need to work closely with our thought leaders and for them to educate and share their experiences with their peers in the community. The third-line and third-line plus setting landscape is increasingly complex with the availability of new innovative options. Now, more than ever, the community is looking to thought leaders to help identify the best options for post-CAR-T patients and for those who don't get to CAR-T. As a reminder, community centers account for roughly 60% of diffuse large B-cell lymphoma patient volume, as compared to 40% in the academic centers where Zynlonta is mainly prescribed today. Taking a closer look at the academic versus community setting, we have already established a strong foundation in the academic setting. Here, around 80% of accounts have experience with Zynlonta. Our focus will be on driving utilization in post-CAR-T patients, since approximately 60% of these patients will unfortunately relapse. The bigger opportunity for us is in the community where we have the potential to drive much greater breadth of experience. At the start of 2022, roughly 25% of community accounts had tried Zynlonta, and we grew that to almost 35% by the end of the year. Based on the differentiated profile I discussed earlier, we believe Zynlonta is ideal for the community, specifically for the large proportion of patients—more than three-quarters—who are unable to get to CAR-T due to complexity, toxicity, or lack of assets. Again, we want to reinforce that the community setting is our greatest opportunity to drive growth. We recognize that adoption is slower as the market is highly fragmented, but we are making steady progress and are encouraged that once physicians are familiar with Zynlonta, they tend to continue to prescribe it. We have an opportunity to increase awareness of Zynlonta's differentiated profile and the advantages it can bring to patients and physicians. We know from brand impact data that roughly one in three treaters have unaided awareness of Zynlonta, which flags that of other key competitors in the market. We have seen consistent improvement over the past year, but we can clearly do a lot more. By sharpening our execution, particularly our promotional efforts focusing on Zynlonta's unique profile, we are confident we can drive much higher levels of awareness so that Zynlonta becomes top of mind with community physicians. All our focused initiatives are critical to expanding adoption and utilization, and what is really important here is that when healthcare systems try Zynlonta, they continue to order it. In fact, at the end of 2022, we saw 84% place repeat orders. To close, we are very encouraged by the recent trends in Zynlonta uptake and utilization, and we have fine-tuned our strategy to fully capture the opportunity for this important medicine in the third-line and third-line plus settings. Now I'll turn the call over to Mohamed to provide an update on our pipeline. Mohamed?

Mohamed Zaki, Chief Medical Officer

Thank you, Kristen. It is my pleasure to share an update on the pipeline. First, I want to discuss the lifecycle management program for Zynlonta. We see potential for the treatment to be a key player in select indications. Despite current treatment options and emerging therapies, distinct unmet needs remain in all lines of therapy. Having spent my entire career in the hematology and oncology space, I appreciate what Zynlonta can do for patients. At this point, I believe we have barely scratched the surface. As Kristen described earlier, Zynlonta has already demonstrated a compelling and uniquely differentiated profile in the third-line setting, and our strategy here is to maximize patient utilization. The larger opportunity, however, lies in earlier lines and in combinations. Zynlonta is the only approved T-19 directed treatment option outside of CAR-T to have demonstrated single-agent activity in the DLBCL and no known overlapping toxicities in combinations currently being studied. We believe Zynlonta has the potential to become the combination agent of choice and eventually a backbone therapy in all lines of DLBCL. When we think about the second-line DLBCL setting, the current treatment includes stem cell transplants, CAR-T, targeted therapies, and chemo-based regimens. Going forward, we expect to see increasing use of CAR-Ts, but even with this, there will still be unmet medical need and opportunity for those who are not eligible or cannot access transplant or CAR-T. Here, we are exploring the combination with rituximab in our ongoing LOTIS 5 study for second-line plus DLBCL patients not eligible for transplant. This combination could benefit patients, even if they received prior CAR-T or if they are not eligible for CAR-T. The notified safety run-in produced early encouraging efficacy data, and enrollment of approximately 350 patients is expected to be completed next year. Another potential application for the rituximab combination is in frontline therapy, where there is a great need among unfit or frail patients who are not able to tolerate full doses of R-CHOP. While approximately 85% of patients receive R-CHOP, there is an acuity in about 60% of patients, which leaves a significant population that is unable to tolerate R-CHOP and has poor outcomes. Physicians are looking for monthly systemic infusions with better outcomes in this setting. Based on this unmet need and the de-risk profile of Zynlonta, we are conducting the Phase II LOTIS 9 study. This is an open-label study in the first-line setting for patients that have failed standard therapy, with results expected next year. We believe the potential benefit is supported by encouraging data from LOTIS 2. The data showed Zynlonta has a similar overall response in patients over and under 75 years of age, with no notable safety issues in older patients. In addition, data from the safety run-in portion of LOTIS 5 further supports the use of this non-systemic combination and increases the likelihood of success. Beyond the combination with rituximab, we are exploring novel combinations. We are particularly excited about the possibility of combining with bispecifics with their distinct mechanism of action and toxicity profile. In the LOTIS 7 study, we are evaluating the combination with glofitamab and mosunetuzumab as well as polatuzumab. We expect to have early data from these studies next year. We also have a collaboration with IGM to combine with bispecific input amounts. Beyond our own clinical studies, we are seeing substantial interest from investigators to explore the long-term potential in different combinations, including bispecifics in different treatment settings and in other indications. We are closely following those studies to further understand the amount of potential. Investigators are keen to see whether Zynlonta’s strong profile in the challenging DLBCL indication could potentially translate into other areas of CVA-T in disease biology, such as CLL, follicular lymphoma, and mantle cell lymphoma. On my final slide, I would like to discuss our robust pipeline beyond Zynlonta, starting with our company-sponsored program, ADCT-901 targeting KAAG-1, which is a novel first-in-class that targets various solid tumors. The Phase 1 dose escalation is proceeding, and we have not yet reached the maximum tolerated dose. We have decided to amend the protocol to explore different dosing schedules to optimize the potential clinical outcomes for patients and to prepare for regulatory interactions as part of project aspects. We now expect to share preliminary data in the first half of 2024. Now looking at ADCT-601 targeting AXL, which is a validated target overexpressed in many solid tumors including sarcoma and non-small cell lung cancer. The Phase 1 study to optimize the combination with gemcitabine and to explore single-agent activity is progressing, and the IHC assay for possible biomarker approach is being finalized. Preliminary data from the Phase 1 dose escalation and expansion study are expected in the first half of 2024. ADCT-212 is a next-generation PBD-based ADC targeting PSMA, a validated target overexpressed in the majority of metastatic castration-resistant prostate cancers. We expect to initiate the Phase 1 study in the first half of 2024. Now for our programs in collaboration, ADCT-602 targeting CD22. The MD Anderson Cancer Center presented some encouraging signs of activity from the Phase 1 study at ASH in a small number of acute lymphoblastic leukemia patients. The Phase 1 dose expansion study is expected to complete in the first half of 2024. And finally, ADCT-701 targeting DLK1 is a collaboration with NCI in neuroendocrine malignancies. We expect the Phase 1 study to be initiated in the second half of the year. I am really excited about the robust pipeline we have developed with multiple catalysts over the next 12 to 18 months. This is one of the reasons I came to the company. I look forward to reporting on the evolving news flow from our pipeline over the coming months. With that, I will turn the call over to Pepe to give a financial update. Pepe?

Pepe Carmona, Chief Financial Officer

Thank you, Mohamed. Starting with our balance sheet, as of December 31st, we had cash and cash equivalents of $326 million, representing a $55 million reduction from our position at the end of the third quarter. Subsequent to the year-end, we received a $50 million milestone from Sobi given the European approval of Zynlonta, and we also expect to receive a $75 million milestone from HealthCare Royalty Partners on first commercial sales in Europe expected in the second quarter of the year. As Ameet noted, based on our business plan, the milestone payments I mentioned and further productivity initiatives underway, we expect that our cash runway will extend into mid-2025. Turning to the P&L, Zynlonta net sales were $19.8 million in the fourth quarter, up 16.5% compared to Q4 2021. While full-year net sales more than doubled to $74.9 million, with the first full year of sales compared to $34 million in a partial year in 2021. License revenues amounted to $50 million in the fourth quarter, which reflected the milestone from Sobi. For the full year, license revenue of $135 million also included $85 million in upfront payments from our partners Sobi and Mitsubishi Tanabe. Cost of product sales amounted to $0.5 million in the fourth quarter and $4.6 million for the full year. In addition to a full year of commercial activity, this expense line reflected impairment charges for products, intermediates, and antibodies that did not meet the company's specifications. Importantly, these specification issues did not and are not expected to impact our ability to supply commercial products. Our largest expense line, of course, continues to be R&D, where, as you heard today, we are committed to invest behind Zynlonta and our promising early-stage pipeline programs. R&D expenses amounted to $48.7 million in the fourth quarter and $187.9 million for the full year. Sales and marketing expenses were $16.2 million in the fourth quarter and $69.1 million for the full year. This reflected a full year of professional expenses related to the commercial line Zynlonta, partially offset by lower share-based compensation in the fourth quarter. G&A expenses were $15.1 million in the fourth quarter and $72 million for the full year. This reflected higher professional fees and costs associated with the C-suite transition, partially offset by lower share-based compensation in the fourth quarter. Moving to the bottom of the P&L, on an adjusted basis, we reported a net loss of $7.9 million for the fourth quarter, or $0.10 per diluted share. For the full year, our adjusted net loss was $81.7 million, or $1.05 per diluted share. Now turning to our guidance. Based on the market dynamics and the growth initiatives which Kristen highlighted, we expect to grow Zynlonta net product sales by double-digit percentage points year-over-year. This takes into account significant gross-to-net headwinds compared with 2022. Specifically, we expect a negative gross-to-net impact of approximately two to three percentage points from our GPO contracting, together with a negative impact of mid-to-high single-digit percentage points to reflect the new Medicare Part B wastage policy regarding discarded units that was implemented at the beginning of 2023. In terms of total operating expenses, we expect a decrease in 2023 and 2024 as compared to 2022, reflecting prioritization and productivity efforts across all expense categories. Finally, moving to the upcoming catalysts, we have a number of different value-driving catalysts over the next 12 to 18 months and well within our cash runway. Starting with Zynlonta this year. In addition to double-digit growth, we also expect to achieve commercial brand profitability, meaning we will more than offset the total cost of commercialization, medical affairs, and all related costs so that Zynlonta, by the end of the year, starts to pay for the development of new indications and the pipeline. Following European approval of Zynlonta, we expect our partner Sobi to launch in the second quarter of this year. In the second half of the year, we expect to initiate the Phase I study of ADCT-701 targeting DLK1. Next year, we will complete the enrollment of our LOTIS-5 confirmatory study in the second-line setting. We will also share some preliminary results from our LOTIS-9 and LOTIS-7 studies next year. In terms of the pipeline, in the first half of 2024, we expect to share preliminary data from ADCT-901 targeting CAAG-1 and ADCT-601 targeting AXL. We also expect to initiate the Phase I study of ADCT-212 targeting PSMA, and for our partner, MD Anderson to complete the Phase I dose expansion study for ADCT-602 targeting CD22. 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. With that, I will turn the call back to Ameet for closing remarks. Ameet?

Ameet Mallik, CEO

Thank you, Kristen, Mohamed, and Pepe. To conclude, we have a clear roadmap and the capabilities to execute in 2023 and to build ADC Therapeutics for years to come. We are uniquely positioned in the growing ADC space with specialist capabilities from discovery through to commercialization and have over a decade of experience. We have a validated technology platform, a rich pipeline of hematological and solid tumor programs, and an innovative toolbox to develop next-generation assets with novel antibody constructs and payloads. And last but not least, we have a strengthened and highly talented team in place to execute on our strategies. We look forward to keeping you updated on our ongoing progress. Now the team will be available for questions.

Operator, Operator

Kelly Shi with Jefferies is online with a question. Please go ahead.

Kelly Shi, Analyst

Thank you for taking my question. The first is regarding the operating expenses. Can you share more details on the operating expense reduction in 2023? And where do you plan to cut costs from? And how should we think about the magnitude of the planned cost reduction? And I have a follow-up.

Pepe Carmona, Chief Financial Officer

Hi, Kelly, thanks for the question. So, we expect to reduce costs compared to 2022 for both years 2023 and 2024. On the R&D line, you should expect a reduction because we are focusing our resources on the most impactful and higher return on investment projects that we have in the pipeline. As you know, we have discontinued several projects that were less attractive. Some of them might end up being potentially partnered, like Cami. On the SG&A side, we are driving productivity. We have a new team that has looked at the company cost structure with fresh eyes. So, we believe there's significant opportunity to reduce costs year-over-year. The second question, I couldn't hear you. Tie on something else.

Kelly Shi, Analyst

Thank you. Yes. I also have a question regarding the ADCT-601 program targeting AXL. Do you plan to screen patients with positive AXL expression levels for the dose escalation phase for sarcoma and non-small cell lung cancer only, or is that going to apply to other tumor indications? And also, what is the rationale for the combination arm with gemcitabine in sarcoma? And also, what information do we have regarding the 601 profile at the moment? Thank you.

Mohamed Zaki, Chief Medical Officer

Thanks for the question. Yes, we are planning to collect biopsies for all patients currently enrolled in the study in order for us to possibly test retrospectively for AXL expression. The current protocol right now does not select patients, and the assay is being developed in parallel. As I mentioned, when it is ready, we'll be able to test patients for expression. Regarding the combination with gemcitabine, gemcitabine is very active and considered one of the standards of care used in sarcoma. So, it's natural to combine as an add-on strategy in combination to see if we can improve the standard of care for future studies. From a regulatory perspective, we aim to isolate the effect of the drug. So, what was the third question, sorry?

Kelly Shi, Analyst

The safety profile of 601?

Mohamed Zaki, Chief Medical Officer

The safety profile? We are currently going into the escalation phase of the protocol. So far, we have not reached the maximum titrated dose.

Kelly Shi, Analyst

Thank you very much.

Operator, Operator

Our next question comes from Gregory Renza with RBC Capital Markets. Please go ahead.

Sudan N. Loganathan, Analyst

This is Sudan Loganathan on for Gregory Renza. Thanks for taking my question. Congrats on the great quarter with Zynlonta and a great year going forward. Specifically, I wanted to ask about how the competitive landscape may potentially change as you go forward with the LOTIS-5, LOTIS-7, and LOTIS-9 programs. Will there be developments that could change how we view the comparative arm as we look at or what standard of care may be that should be a comparator arm for the Zynlonta trials? Are these developments occurring in tandem at this point that could alter our timeline? And I just wanted to get your take on how that's going to play out in the years to come.

Ameet Mallik, CEO

Yes. I'll start and then Mohamed and Kristen can feel free to add on to it. As you said, the DLBCL market is quite dynamic, and there has been a lot of change. I mean, for example, CAR-Ts are moving pretty clearly, particularly the academic institutions from the third to the second-line setting. That, I would say, in the academic setting is shrinking some of the population that's not either going to get a CAR-T or a transplant. Now of course, in the community, CAR-T is much more limited. So there still remains quite a sizable nontransplant non-CAR-T population in the second-line population. In terms of the comparator arm, which is R-GemOx, we don't anticipate any change. I mean, that's been discussed obviously with the FDA from a regulatory standpoint. And we feel like we still have the right comparator arm and the right study design to move towards approval on a broader label in that second-line setting. With the front-line setting, there are also a lot of competitive dynamics going on. As you know, 85% of patients can tolerate a full dose of R-CHOP, and R-CHOP has very good outcomes. I mean, 60% of patients are going to get cured. So it really is the standard of care. And when you look at a lot of trials, whether it be with Polivy or the bispecifics, many of them are trying to augment R-CHOP and to try to deliver even better outcomes for those 85% of patients who can tolerate R-CHOP. But for the 15% of patients who are frail and unfit, these are patients often 80 years and above with or without comorbidities. These patients oftentimes can't tolerate full doses of R-CHOP and are getting mini R-CHOP or other chemotherapy regimens, and their odds are much poorer. This is where we're playing right now, with Zynlonta plus rituximab in our LOTIS-9 study. In this population, it's a single-arm study, so it's not really a comparator at this point. If we were to move forward, obviously, the comparator for this is really mini R-CHOP, and that hasn't changed. We don't think the competitive landscape is going to alter our current development plans. I think the big thing could be the introduction of bispecifics where they have the chance to start to, over time, potentially change the treatment landscape across all lines of therapy. And we think we're actually well-positioned to partner with bispecifics. As the only targeted CD19 therapy with single-agent efficacy and a manageable side effect profile, we believe we have the potential even not to overlap, of course that has to be tested. We are uniquely positioned to combine across different bispecifics, and we're doing that in our LOTIS-7 study as well as in partnership with IGM with our imbodimab compound. So we think we have a chance to combine and actually ride with one of the biggest competitive changes that I think will affect DLBCL over the coming years.

Operator, Operator

Our next question comes from Matthew Harrison with Morgan Stanley. Please go ahead.

Unidentified Analyst, Analyst

This is Chris on for Matthew. Thank you for taking my question. I know someone earlier asked about the potential impact of kind of new treatment paradigms entering the market, specifically for bispecifics. Can you help us think about kind of the near-term impact of that entering the market as they penetrate the third-line plus DLBCL market? Thank you.

Kristen Harrington-Smith, Chief Commercial Officer

Sure. We expect bispecifics to play a role in the third-line setting upon approval. We do think that uptake in the community will take longer. In general, the community is slower to adopt new therapies. And given the risk of CRS and ICANs with bispecifics, we think initial uptake will be limited to the academic centers. When it comes to competing in that space in the academic centers, we've been competing with bispecifics for years now in that setting, given the multiple bispecifics that are being studied in clinical trials.

Ameet Mallik, CEO

I would just add that the penetration of any agent in the third-line setting is still relatively low. So there's clearly room for bispecifics to penetrate, particularly in the academic setting, and for continued growth in both the academic and the community settings.

Operator, Operator

Our next question comes from Boris Peaker with Cowen. Please go ahead.

Unidentified Analyst, Analyst

Great. This is Nick on for Boris. Thanks for taking my question. I just have a couple of questions regarding Zynlonta and the LOTIS trials. For the LOTIS-5 trial, I know this is a confirmatory trial from the single arm, but can this be used for an SNDA or regulatory submission for DLBCL in both the U.S. and EU? And then also second, for LOTIS-7, which lines of therapy are you guys looking at? And is that different based on which combination approaches or whatnot? Thank you.

Mohamed Zaki, Chief Medical Officer

Regarding LOTIS-5, you're absolutely correct. It is a regulatory study for both U.S. and EU. It is a confirmatory study with a potential also to get an SNDA for the second-line plus setting. Remember, Zynlonta is in the third-line plus setting as a single agent. We are maximizing that and getting into the second-line plus setting with a substantial number of patients in that setting, and the plan is to go worldwide with that approval. To answer your second question...

Unidentified Analyst, Analyst

Yes. For LOTIS-7.

Mohamed Zaki, Chief Medical Officer

We actually have multiple agents in combination, including polatuzumab, glut and mocituzumab. We are trying to be the drug of choice in combination with our bispecifics, not to mention also that we have a collaboration with IGM with their bispecific. So pretty much we're combining with all bispecifics to be a backbone; whoever any of them gets approved and becomes the standard, we'd be able to combine with. I hope that answers your question.

Ameet Mallik, CEO

Yes. And in terms of lines of therapy, I think it will be in earlier lines of therapy. Particularly second-line, I think there's an opportunity to really change the landscape. And particularly if the combination works in a way that has a manageable side effect profile and leads to even better outcomes, deeper responses, and more durable responses, you can imagine it starting to change and expand the opportunity for targeted therapy combinations in the second-line setting.

Operator, Operator

Our next question comes from Brian Cheng with JPMorgan. Please go ahead.

Brian Cheng, Analyst

Thank you for taking my question. My first question is for Kristen. What was the split of academic versus community use in the last quarter for Zynlonta? And as you emphasize that community market's where you see a lot of growth, near term, how long do you think it will take you to get more traction there? And how do you think about just the changes with bispecific coming in? And I have a follow-up. Thank you.

Kristen Harrington-Smith, Chief Commercial Officer

In terms of the split of academic versus community use, it's roughly 50-50. We just started to see—as we said, the penetration in the community is consistently growing. We've just started to match the use from an academic perspective in terms of volume. Your second question was about how long to penetrate the community. Community treaters are generally slower to adopt new therapies; it probably takes about four to five years to really start to hit a peak market share. But what we do see with community treaters is that because they're slower to adopt, it could take longer in that setting. But we will continue to chip away since we're at about 35%. Our goal is to match what we're seeing in the academic setting.

Ameet Mallik, CEO

I'd also add, Brian, that there's a long tail. So, there's a lot of fragmentation in community centers. A lot of community doctors are seeing a patient every few months. But they also tend to be a lot stickier. So behavior changes work both ways. It takes longer to adopt, but we see is the accounts that are adopting are repeating and sticking with the product. So—and we keep growing penetration month-over-month. So I think as that happens, this is a great opportunity, and that's a place where you had asked about bispecifics, and I'll let Kristen comment further. Bispecifics are going to have a much more challenging time, we believe, in the community initially just given the safety profile. In the academic setting, where we've penetrated about 80% of accounts, there's still room for greater depth, and we think even with bispecifics, there remains opportunity.

Unidentified Analyst, Analyst

Great. And then looking at your LOTIS 5 in second line in combo with rituxan, do you have a sense of when we could see the data from that study? And can you remind us whether there is an interim analysis built into this trial?

Mohamed Zaki, Chief Medical Officer

Thanks for the question. We expect enrollment of 350 patients to be completed next year. There will not be an interim analysis for the study; it's not built into the protocol. And we'll update when we get closer to the end of the study.

Ameet Mallik, CEO

Yes. Obviously, any timelines post the enrollment depend—it's an event-driven study. So, in some ways, the longer it takes to close, but it also depends on events. Once we complete enrollment and the study starts reading out, we'll share information.

Operator, Operator

Thank you. We have no further questions at this time. I'd now like to turn it back to Ameet for closing remarks.

Ameet Mallik, CEO

Thank you all for joining today's webcast, and thanks for all the thoughtful questions. We're really excited about our ability to unlock the value of this company by maximizing Zynlonta, advancing our PBD-based pipeline, and expanding our ADC platform. We have multiple value-driving catalysts over the next 12 to 18 months, and we look forward to continuing to update you on our progress. Thank you so much for joining.

Operator, Operator

Thank you for your participation in today's conference. This concludes the program. You may now disconnect.