ADC Therapeutics SA (ADCT) 2020 Q3 法說會逐字稿

Thank you for holding. Good morning, and welcome to ADC Therapeutics Third Quarter 2020 Financial and Operating Results Call.

(Operator Instructions) Please be advised that this call is being recorded at the company's request.

At this time, I'd like to turn it over to Amanda Hamilton, Investor Relations Manager at ADC Therapeutics. Please proceed.

Thank you, operator. This morning, we issued a press release announcing our third quarter 2020 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, Chris Martin, Chief Executive Officer; Jay Feingold, Chief Medical Officer; and Jen Creel, Chief Financial Officer, will discuss recent business highlights and review our third quarter 2020 financial results. In addition, Jennifer Herron, our Chief Commercial Officer, will be available for questions.

As a reminder, this conference call may contain statements that constitute forward-looking statements. All statements other than statements of historical facts are forward-looking statements. Such statements are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied in the forward-looking statements due to various factors. We refer you to the section titled Cautionary Statement Regarding Forward-looking Statements in Exhibit 99.2 of our report on Form 6-K filed with the U.S. Securities and Exchange Commission earlier today for further information on forward-looking statements. Such statements speak only as of the date of this conference call. We expressly disclaim any obligation or undertaking to update these forward-looking statements unless required to do so by applicable law.

In addition, during today's call, we will be presenting certain non-IFRS financial information that management uses when monitoring and evaluating operational performance, generating future operating plans, and making strategic decisions regarding the allocation of capital. These non-IFRS measures have limitations with 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. We refer you to the section titled Use of Non-IFRS Financial Measures in exhibit 99.3 of our report on Form 6-K filed with the U.S. Securities and Exchange Commission earlier today for further information on non-IFRS financial measures including reconciliation of IFRS to non-IFRS financial measures.

It is now my pleasure to pass the call over to our CEO, Chris Martin. Chris?

Thanks, Amanda, and thank you all for joining us this morning. I'm pleased to be here today to share our recent corporate and clinical accomplishments. Our team has made tremendous progress over the past quarter as we prepare for the launch of our first drug, and continue to build out and advance our deep pipeline with highly potent and targeted antibiotic drug common groups.

I would like to thank our teams for their resilience and dedication over the past month. In September, we reached a major milestone for our organization, announcing the submission of our BLA to the FDA for our lead program, Lonca, for the treatment of relapsed or refractory diffuse large B-cell lymphoma.

As we have previously discussed, this submission is based on data from our pivotal Phase II LOTIS 2 trial, which evaluated the efficacy and safety of Lonca in patients with relapsed or refractory DLBCL following 2 or more lines of prior systemic therapy and demonstrated important antitumor activity and durability as well as management toxicity across patients with difficult-to-treat disease. We are expecting to receive FDA feedback on the submission late this month. And in anticipation of our pending PDUFA date, we are currently preparing to launch Lonca in 2021.

In order to prepare to launch, we have recruited highly experienced and focused oncology, commercial and medical affairs teams based out of our New Jersey office. Despite COVID restrictions, this team is collaborating seamlessly and engaging key DLBCL stakeholders. As we anticipate the FDA acceptance of our BLA later this month, we have continued our efforts to ensure a quick sales team build in 2021, comprising predominantly hematology oncologist specialists with knowledge and network to effectively communicate the longer value proposition to stakeholder.

The sales force will cover more than 90% of the DLBCL opportunity, and we anticipate a hybrid approach to launch due to COVID-19. Therefore, we are starting and trading all members of our commercial and medical organizations to be prepared to pivot between face-to-face and virtual launch activities. We have built a multichannel engagement plan to ensure that all key audiences, physicians, nurses, office managers, payers and patients receive the necessary information and support to ensure rapid and easy access to and safe administration of Lonca.

As part of our launch preparations, we have had the opportunity to engage with health care professionals in advisory boards and market research regarding Lonca's maturing profile. And I'm pleased to report that the profile resonates really well. Hematologist oncologists have shared with us their challenges to find an agent in the third line in relapse/refractory DLBCL, which can potentially address the majority of their patients. They treat transplant eligible or ineligible, high-risk disease, heavily pretreated or refractory populations. Based on feedback from positions on Lonca efficacy, tolerability profile and means of administration, we believe Lonca has the opportunity to become the standard of care in the third line based on our competitive profile versus other available options. In addition to our Lonca commercial preparations, we have continued to progress and expand our pipeline.

I'm pleased to hand the call over to Chief Medical Officer, Jay Feingold, who will now discuss those programs with you in more detail. Jay?

Thank you, Chris, and good morning. I am pleased to present an update today on both our clinical and preclinical programs in addition to providing some additional information regarding our upcoming ASH compensations. Overall, we continue our plan to expand the use of Lonca to earlier lines of therapy for patients with DLBCL with both our pivotal Phase II combination study with ibrutinib and the opening of sites for our confirmatory Phase III study in combination with rituximab. And to expand the use of Lonca into other cancer types with a pivotal Phase II trial in follicular lymphoma.

For Cami, we continue enrollment of our pivotal Phase II trial for patients with relapsed to refractory Hodgkin lymphoma with the trial now 65% involved. And recently, we expanded Cami Phase Ib study in solid tumors to add a combination on with pembro and dosed our first patient.

I will also provide a brief update on the Phase I/II study for ADCT-602 and the Phase I study, ADCT-601, moving into a combination with a checkpoint inhibitor.

First, let me give you an update on Lonca and our continuing life cycle development plan. As we approach the anticipated approval of Lonca next year, we are broadening our life cycle development program. First, we are investigating its potential and the early line of treatment in relapse/refractory DLBCL. Our LOTIS 5 trial, the Phase III confirmatory clinical trial evaluating the safety and efficacy in Lonca in combination with rituximab, which is standard immunochemotherapy in patients with replaced or refractory DLBCL, who are not eligible for autologous stem cell transplant is now open for a moment. The study is designed to support a supplemental biologics license application for Lonca as a second-line therapy and to fill our post-marketing requirements for the FDA to full approval. If accelerated approval's granted for relapsed refractory DLBCL. We continue to enroll patients with our pivotal Phase II trial of Lonca in combination with ibrutinib and relapsed refractory DLBCL in mantle cell lymphoma, which in the Phase Ib showed a promising effect on overall and complete response rate along with manageable toxicity.

In addition, we are planing to initiate a dose-finding study of Lonca in combination with R-CHOP, previously untreated DLBCL patients in the first half of 2021.

Finally, we're expanding to new histologies where Lonca has demonstrated encouraging activity, including follicular lymphoma, where we plan to initiate a Phase II trial of relapsed refractory follicular lymphoma in the first half of 2021.

With regard to our second lead program, Cami, the pivotal Phase II clinical trial in patients with relapsed or refractory Hodgkin lymphoma will fair release 3 collagen therapy continues to evolve. There are 65 patients enrolled as of November 6, and we remain on track to announce further data in the first half of 2021. Data from this trial is intended to support the submission of the BLA to the FDA. In addition to our Hodgkin-lymphoma program, we continue to advance our Phase Ib clinical trial of Cami in solid tumors.

In September, we presented preliminary data in the ongoing Phase Ib trial in patients with selected advanced locally or metastatic solid tumors in at the European Society for Medical Oncology Virtual Congress 2020. Data presented, which included pharmacokinetics and biomarker evaluations, showed that treatment with Cami is associated in some patients with clinically relevant modulation of new root cells, including an increase in CD4 positive and CD8 T positive cells, an increase in soluble CD25 and cytokines ensuring post dosing and a dose delayed increase in the effect of T cell to regulatory T-cell ratio. This presentation filed the publication of preclinical data related to Cami in the Journal for Immunotherapy of Cancer, which demonstrated that single low dose CD25 target to ADCs resulted in potent and durable antitumor activity against established CD25 negative solid tumors with infiltrating T-REx, both in the monotherapy and in combination with anti PD-1 checkpoint inhibitor. Based on these data, we have expanded the Phase Ib trial to evaluate the safety, tolerability, pharmacokinetics and antitumor activity of Cami in combination with pembrolizumab, checkpoint inhibitor in patients with selected advanced solid tumors. We recently announced, and we dosed the first patient in the Phase Ib expansion, and we look forward to sharing the data in the future.

In our earlier stage pipeline, we have a presentation at ASH, analyzing the preclinical activity in B-cell lymphoma models and potential fire markers for ADCT-602, targeting CD22, which is turning the Phase I/II development in patients with relapsed or refractory acute lymphoblastic leukemia. We are also preparing to initiate a Phase Ib combination trial with ADCT-601, targeting AXL in patients with certain installed tumors in the second half of 2021.

We continue to advance our preclinical programs towards IND submissions and look forward to providing further updates as these programs advance. We are pleased that 8 of our abstracts were accepted for presentation at the American Society of Hematology Annual Meeting, which is being held virtually on December 5 to 8. Presentations will feature data on 3 of the company's ADCs, Lonca, Cami and ADCT-602.

I'd like to highlight 2 of the Lonca extracts. The first was to provide additional subsequent data in the LOTIS 2 pivotal Phase Ib trial in relapsed or refractory DLBCL. This dataset is a more mature data set than previously shared. It will include efficacy and duration of response data, patient subrents with high-risk characteristics as well as patients who will refractory to first line therapy, patients refractory to any line therapy, patients who receive prior (inaudible) or patients who receive prior stem cells transplants.

The second poster will highlight interim results from the ongoing Phase Ib trial of Lonco, combined with ibrutinib in relapse or refractory DLBCL or MCL. The poster will provide more mature data on the efficacy and safety from a combination. There will also be 3 Cami presentations. We have an oral presentation and the interim results from the Phase II trial of Cami and relapsed or refractory Hodgkin lymphoma. In all presentation, we'll highlight efficacy and safety data from the first 47 patients enrolled as of August 2020. In addition, we will have a poster presentation of PK/PD data in the Phase I study in relapsed or refractory Hodgkin and non-Hodgkin lymphoma. And preclinical data showing the anti-tumor activity of Cami in combination with gemcitabine.

With that, I will turn the call over to Jen to give a financial update.

Thank you, Jay, and good morning, everyone. In September, we completed an upsized public offering of 6 million common shares at a price of $34 per share. Gross proceeds from the public offering were approximately $204 million and the funds are intended to support the acceleration of Lonca development activities, advancing our early pipeline and the commercialization of Lonca. These funds position the company to deliver on the many opportunities discussed in today's call. And now turning to our financials.

As we reported in our press release, we ended the third quarter with cash and cash equivalents of approximately $494 million as compared to approximately $116 million as of December 31, 2019. We used approximately $44 million in net cash for operating activities in the third quarter and $117 million in net cash year-to-date. We expect our spend to continue to increase over the next few quarters as we prepare for the anticipated launch of Lonca and continue to invest in our bio pipeline.

R&D expense was $32.2 million for the third quarter compared to $30.5 million for the same quarter in 2019. The increase was primarily due to increased headcount, support the Lonca BLA submission and multiple Lonca and Cami clinical programs as well as increased share-based compensation expense.

G&A expense was $20.3 million for the third quarter compared to $2.3 million for the same quarter in 2019. The increase was primarily due to increased share-based compensation expense and an enhanced commercial team as we prepare for the anticipated launch of Lonca. We also saw an increase in investment in our commercial preparations and the costs associated with being a public company.

Our net loss was $20.3 million for the third quarter of 2020 and compared to $31.3 million in the same quarter of 2019. Net loss for the quarter includes a $33.9 million noncash gain related to the changes in fair value of derivatives associated with the convertible loans under the facility agreement with Deerfield. Net loss for the quarter was also impacted by share-based compensation expense of $11 million.

Finally, our adjusted net loss, which excludes certain items, including the Deerfield convertible loan and share-based compensation for the third quarter of 2020 was $41.3 million compared to $31.1 million in the same quarter of 2019. The adjusted diluted net loss per share was $0.58 in the quarter ending September 30, 2020, compared to $0.62 for the same quarter in 2019.

With that, I will turn the call back to Chris for closing remarks. Chris?

Thanks, Jen. As you can see from today's call, we had several important upcoming milestones, and it's certainly an exciting time at ADC Therapeutics. As we await feedback from the FDA on our BLA submission, our highly experienced commercial, market access and medical affairs teams are actively preparing for a successful commercial launch next year.

Looking forward to the first half of next year, we are easy to expand our Lonca development program with the start of the pivotal Phase II in follicular lymphoma. And to review interim results for the Cami pivotal Phase II trial in relapse refractory Hodgkin lymphoma. We continue to build the long-term value of the company and its assets through investment in Lonca and Cami and our promising earlier-stage pipeline programs. We look forward to presenting a number of key data sets during the upcoming ASH meeting in December, further showcasing the value and potential of our productive ADC platform and development team.

We plan to host a conference call with Dr. Hamadani, Professor of Internal Medicine and Scientific Director of the Division of Hematology and Oncology of Medical College of Wisconsin on Monday, December 7, at 8:00 a.m. Eastern to highlight our ASH abstracts. I look forward to updating you on our programs in the future.

And I will now open the call to your questions. Operator?

(Operator Instructions) The first question comes from Matthew Harrison from Morgan Stanley.

I guess maybe one for Jay and one for Chris. Jay, could you just comment briefly, I guess -- and I guess the question is more broadly on the earlier lines of therapy in NHL. I mean I think a lot of investors are trying to figure out the competitiveness of that landscape, and how to view the early data that you have from the ibrutinib combination, how that fits in? And how much data do you think you need to have from that combination before you feel confident that you have a signal there that is significantly better than competitors.

And then, Chris, or maybe it's for Chris and Jen, but could you just comment broadly on how we should think about commercial spend ramping up over the course of the next few quarters as you get ready for launch?

So I'll answer the clinical question first. I agree with you that the landscape is very competitive in B-cell non-Hodgkin lymphoma and even for both DLBCL and follicular lymphoma as well as mantle cell lymphoma. Functional DLBCL with the introduction of the loncastuximab about 20 years ago, the cure for DLBCL increased significantly. But since that time, there's been little change, and it remains a very, very difficult-to-treat disease if the patients are not cured in the first line. And as you know, about 30% to 40%, or slightly lower in some cases -- in some studies, patients are not curing their place lines. So we believe that Lonca, because of its significant activity as a monotherapy, has a role in the treatment of relapsed refractory DLBCL. In terms of moving up into early lines of therapy, the early data that we've shared it so far and what you'll see at ASH, I think is very interesting in the combination of loncastuximab, particularly in lines of DLBCL patients, which will be mostly data even this time.

So I think you just have to wait and see how it works out. I don't have a number in mind that would say to me, oh, this is so great we have to go into a second line or whatever with this combination. I think we need to see more data. We need to see more about the durability. But the early indications are very positive.

Thank you, Jay. Matthew, in terms of commercial spend, I'll let Jen answer that in detail. We'll see the Jennifer and Joe Camardo in commercial and medical affairs have made tremendous progress in this quarter in building their teams and interacting, as I mentioned earlier with the health care professionals, and the health care infrastructure more broadly. And they've received a very encouraging feedback from those interactions. And we continue to recruit the commercial and medical affairs field forces ready for deployment. But Jen, perhaps, you'd like to address the financial part of that question.

Sure. Thanks, Chris, and thanks, Matthew, for the question. As the teams have been building out, and as Chris mentioned, we've had a lot of progress this year in the commercial and medical affairs teams building throughout this year, so we have seen our spend increasing steadily throughout this year with that preparation. And we'll continue to see an uptick each quarter as we head towards the launch -- the potential launch of Lonca in the middle of next year. So I would say that we're seeing that increase in the year-to-date spend, and it will continue to tick upwards as we head towards the middle of next year.

(Operator Instructions)

Ladies and gentlemen, thank you for participating in today's conference. This does conclude your program, and you may now disconnect. Everyone, have a great day.