Ladies and gentlemen, welcome to the ADC Therapeutics Q2 Earnings Call. [Operator Instructions]. At this point, I'll hand it over to the speaker. Please begin your meeting..

Thank you, Operator. This morning, we issued our financial results and business highlights press release. This release is available on the ADCT website at ir.adctherapeutics.com under the Press Releases section.

On today are Chris Martin, Chief Executive Officer; Jen Creel, Chief Financial Officer; and Jay Feingold, Chief Medical Officer, will discuss recent business highlights and review our second 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 to do so by applicable law.

In addition, during today's call, we will be presenting certain non-IFRS financial information that ADC 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 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. 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?.

preparing the market, preparing the product and continuing to build out our commercial organization. In terms of preparing the market, we are actively engaging with U.S. hematology oncologists.

To enhance our understanding in detail of the unmet medical need in relapsed refractory DLBCL, their assessment of the Lonca profile to address these needs and how long it may fit into their treatment paradigm, should it be approved by the FDA. In terms of preparing the product.

We are finalizing our global brand strategy for Lonca, including the life cycle management plan. All the steps needed to ensure successful execution of the U.S. launch plan remain on track, and we have commercial-ready supply available.

In terms of the organization, the commercial and medical affairs leadership teams are in place, and they are actively building their teams. Despite COVID-19, ADC Therapeutics has recently added over 30 new employees focused on the launch of Lonca in the U.S.

and medical affairs have begun appropriate prelaunch engagement with health care professionals. We are planning for a mixed virtual and face-to-face launch, and we can flex this to respond to the COVID situation on the ground by the time of the launch, should Lonca be approved by the FDA.

We look forward to continuing to provide updates on these launch preparations as we approach our BLA filings later this year. With that, I will now hand over the call to our Chief Medical Officer, Jay Feingold, to discuss the data recently presented at EHA and our other clinical progress.

Jay?.

Thank you, Chris, and good morning, everyone. I am pleased to present an update today on our lead candidates, Lonca and Cami, as well as a brief overview of our broader pipeline of early-stage programs, all of which continue to show promising potential. I will begin with our lead program, Lonca.

In June, we presented data at the European Hematology Association, or EHA Annual Meeting, from our pivotal LOTIS 2 trial in patients with relapsed and refractory diffuse large B-cell lymphoma or DLBCL. This is the data set that will serve as the basis for our BLA submission that we intend to submit to the FDA later this year.

The study evaluated the safety, efficacy and pharmacokinetics of Lonca as a monotherapy or 145 patients with relapsed or refractory DLBCL, who have failed at least two prior lines of therapy.

The study included patients who never responded to first-line therapy in patients who are refractory to all prior lines of therapy as well as patients who had high-grade B-cell lymphoma and high-risk genetics. Patients in this study had a median of 3 prior lines of therapy. So clearly, these patients have a high unmet medical need.

In this study, Lonca demonstrated robust anti-tumor activity across the support population, resulting in an overall response rate of 48.3% and a complete response rate of 24.1% Importantly, the duration of response in these patients continues to develop with median duration response of 10.25 months.

We believe this is the meaningful clinical benefit for these patients. We also saw that patients who are refractory to first-line or all prior lines of therapy had an overall response rate of 38% and 36%, respectively. These data reflect the significant monotherapy activity Lonca can achieve even in difficult-to-treat patients.

The toxicities in this study were manageable and no new safety concerns were identified. The most common grade 3 and greater treatment emerged to adverse events. that occurred to at least 10% of patients from neutropenia, thrombocytopenia, elevated gamma Gamma-glutamyltransferase, or GGT, and anemia.

You can see the detailed results of the LOTIS 2 study on our website. We believe these data are highly supportive of Lonca as a transformative single-agent treatment option for heavily pretreated and difficult-to-treat patients, providing an opportunity for durable benefits for those who can achieve response.

In addition, Lonca is administered as a convenient 30-minute IV infusion every 3 weeks.

We believe that Lonca, based on a strong profile of robust single agent efficacy, even in the most resistant and refractory patients, combined with tolerable side effect profile and convenient administration, has the potential to fill an unmet medical need for relapse or refractory DLBCL patients.

In addition to data from the LOTIS 2 trial, we also present the data at EHA from our LOTIS 3 trial, evaluating Lonca in combination with ibrutinib and pivotal Phase I/II trial of relapsed/refractory DLBCL patients for medical cell lymphoma patients. At the time of data collection in April, 25 patients were enrolled.

From this early data, we observed a promising overall response rate of 75% and a complete response rate of 58% at the recommended Phase II dose of Lonca, 60 micrograms per kilogram. Among patients with non-GCB DLBCL, we observed an overall response rate of 73% and a complete response rate of 64%.

Again, toxicities were manageable at the recommended dose for Phase II. The only grade 3 or higher TEAs seen in at least 10% of patients with thrombocytopenia and anemia. These early data are encouraging and highlights the potential for Lonca combinations in earlier lines of therapy.

In July, we missed the first patients in the Phase II portion of this trial, and we are looking forward to reporting further results in the future. We also plan to initiate a confirmatory Phase III Lonca plus rituximab trial at the time of our BLA submission later this year.

And we continue to advance plans through our follicular lymphoma program with the intention of commencing a pivotal Phase II clinical trial in the first half of 2021. Turning now to our second lead program, Cami.

We announced in early July that following the FDA's review of information requested, the FDA has lifted its partial clinical hold on the pivotal Phase II clinical trial for Cami with patients with relapsed or refractory Hodgkin lymphoma.

This 100-patient Phase II multicenter, open-label, single-arm clinical trial is evaluating the safety and efficacy of Cami in patients with relapsed or refractory HL, who have failed 3 prior lines of therapy, including brentuximab vedotin and checkpoint inhibitors approved for HL, such as nivolumab and pembrolizumab.

We have 47 patients enrolled to date in this clinical trial, and now with this important regulatory feedback, we are resuming enrollment and remain on track to announce interim results in the first half of 2021. Data from this trial is intended to support the submission of a BLA to the FDA.

In addition to our AGL program, we continue to advance our Phase Ib clinical trial of Cami, where we target regulatory T cells in solid tumors known to typically have high levels of infiltrating T cells. We plan to present the data from this trial at Scientific Congress later this year.

Finally, we remain excited about our earlier-stage clinical and preclinical pipeline. We look forward to providing further updates as they progress and develop. This includes ADCT-602 targeting CD-22, which has been investigated in the Phase I/II trial in patients with relapse and refractory ALL.

And we are preparing to start a Phase Ib combination trial with ADCT-601, targeting AXL in the second half of 2021, in patients with certain select solid tumors. And with that, I will turn the call over to Jen to give a financial update..

Thank you, Jay, and good morning, everyone. As we reported in our press release, we ended the quarter with cash and cash equivalents of approximately $349 million as compared to approximately $116 million as of December 31, 2019. In the second quarter of 2020, we raised approximately $244 million in net proceeds from our IPO.

In addition to our IPO, we also received the first disbursement from our $115 million convertible loan with Deerfield that we announced earlier this year.

Under that agreement, Deerfield has extended the initial $65 million disbursement upon the successful completion of our initial public offering, and we will receive another $50 million disbursement upon FDA approval of the BLA filing from Lonca, which we anticipate receiving in 2021.

With the proceeds of our IPO and the credit facility, we are well-funded at this time. As I mentioned, we have cash and cash equivalents of $349 million at the end of the quarter. We used approximately $73 million in net cash for operating activities in the first half of this year.

As we look forward, we see our spend increase over the next few quarters as we prepare for the anticipated launch of Lonca and continue to invest in our pipeline. R&D expense was $26 million for the second quarter compared to $21.8 million for the same quarter in 2019.

The increase was primarily due to an increased number of employees to support the Lonca BLA submission and multiple Lonca and Cami clinical programs as well as increased share-based compensation expense. G&A expenses were $19 million for the second quarter compared to $4.1 million for the same quarter in 2019.

The increase was primarily due to increased share-based compensation expense, which was driven by the onetime settlement of private company stock option plans that were settled at the time of the IPO and the impact of expanding our teams, particularly with the hiring of new commercial employees as we prepare for the anticipated launch of Lonca.

We also saw an increase in investment in our commercial preparations, and professional fees associated with the completion of our initial public offering. Our net loss was $126.6 million for the second quarter of 2020 compared to $23.3 million in the same quarter of 2019.

It is important to note that the loss includes a $79.3 million noncash charge related to the changes in fair value of derivatives associated with the convertible loans under the facility agreement with Deerfield, which resulted from the increase in our share price during the quarter.

Going forward, we will be subject to further noncash charges if our stock price appreciates or a noncash gain if our stock price declines, as a result of marking to market these derivative instruments.

In addition to the noncash impact of the Deerfield facility, net loss for the quarter was also impacted by share-based compensation expense of $12.7 million. Our diluted net loss per share was $2.01 in the second quarter of 2020 compared to $0.49 in the second quarter of 2019.

Finally, our adjusted net loss, which excludes certain items such as the impact of the Deerfield convertible and share-based compensation expense, was $32.1 million for the second quarter of 2020, compared to $23.3 million in the same quarter of 2019.

The adjusted diluted net loss per share was $0.51 in the quarter ending June 30, 2020, compared to $0.49 for the same quarter in 2019. With that, let me turn the call back to Chris to share our upcoming milestones.

Chris?.

Thanks, Jen. This is an exciting time for ADC Therapeutics as we look forward to a number of upcoming milestones. As I mentioned, our team is focused on our BLA submission for Lonca, which would be the first approved product for our company and the important milestone and accomplishment for ADCT.

We continue to prepare our organization with the build-out of our commercial, market access and medical affairs teams, which are critical to the successful launch that we anticipate next year. We continue to invest in -- and develop our broad pipeline, including the Phase II study of the combination of Lonca plus ibrutinib.

The initiation of the Phase III confirmatory trial of Lonca combined with rituximab at the time of the BLA submission, the start of the Lonca pivotal Phase II trial in the follicular lymphoma in the first half of 2021 and interim results for the Cami pivotal Phase II trial in relapsed/refractory HL in the first half of 2021.

I look forward to updating you on our progress in the future. We will now open the call to your questions.

Operator?.

[Operator Instructions]. The question is from the line of Tazeen Ahmad from Bank of America Securities..

Maybe just a few as it relates to some of the comments that you made in your prepared statements. So for the commercial size of the DLBCL sales force, how are you thinking about it in terms of the initial size and what you might need to increase it to, both in the U.S. And ex-U.S.

regions? And you talked about doing a mix of virtual and in-person just based on the COVID environment.

How important is it for doctors to have in-person contact with the salesperson, just given the area of undermet need in DLBCL, to a certain extent, do you think that this drug could sell itself?.

Thank you, Tazeen. Jennifer, would you care to address that? I think that's substantially the commercial questions..

Yes. Certainly. So thanks, Tazeen, for your questions. Clearly, this is our first priority as we prepare for launch next year, if we get to get FDA approval. So as we're thinking about it in the U.S., we do believe that we should have available to us, a combination of both multichannel options as well as in person.

But we are looking to recruit a field force, as I think we've previously disclosed between 40 and 60 sales representatives, in addition to other ancillary staff, which we believe will cover greater than 80% of the prescriber base, and that's in the U.S.

And we are expanding and we're monitoring very closely the ongoing launches right now in this current COVID-19 environment. So we are planning for a hybrid approach, and we will be prepared as well as we need to go 100% virtual. I just have to watch the environment as it unfolds.

We do believe that there is -- there are many unmet medical needs with regard to DLBCL and have received that feedback with regard to our research and our appropriate interactions to date with physicians..

Okay.

How important is the confirmatory study going to be, in your view, in order to help enhance the commercial opportunity, if at all, for LOTIS 5? And what is the gating factor here to start that study?.

Jay, do you want to talk about the study and the gating factors? And maybe Jennifer then pick up on the -- how important it is for the commercial opportunity..

Sure. Thank you, Tazeen. So under the requirements of the filing for accelerated approval, we're required to have the confirmatory study started at the time we submit the BLA. What that exactly means is up for a little bit of interpretation. But our intention is to have other sites ready to go.

Moving already initiated, hopefully, at least to the contract plans have not initiated at the [indiscernible] of the BLA this year.

Jennifer?.

Yes. And in terms of the commercial opportunity, I mean, we are confident in the single-agent robust profile that we've seen with Lonca from the LOTIS 2 trial. We believe that it sets us up very nicely for a successful launch in and addressing areas of unmet medical need in patients with 2 prior therapies.

But the combination of the confirmatory study will serve to help unlock earlier lines of therapy and use and address additional unmet medical needs. So we're very excited to get that study started..

Okay. And then maybe one question. This will be my last question on Cami.

As it relates to data for the rest of this year, what kind of similar data should we expect to see and really at a medical conference?.

Jay?.

Thanks, Tazeen, thank you for your questions again. So in terms of Cami, the Hodgkin lymphoma program, we have -- we hope to be able to update at ASH. We don't know yet, of course, if our asset is accepted, but we are playing out data at ASH from the Cami trial, on the 47 patients that were enrolled through March. In terms of Cami in solid tumors.

We are -- we have a poster accepted at the virtual [indiscernible] coming up in September to discuss mostly the pharmacokinetic type of dynamic data that we have in that study..

The next question is from the line of Matthew Harrison from Morgan Stanley..

This is Connor on for Matthew. So just a couple from us. Can you talk about how you think the opportunity in follicular lymphoma will be for Lonca and what the population is, you want to enroll in the pivotal study? And then -- so you mentioned -- and then so just jumping quickly after that.

Actually, if you could just answer that one and then I'll ask a few more, if that's okay..

Thank you, Connor. Jay, I'll hand that to you..

Sure. So the Phase II kind of [indiscernible]. In the Phase II study that was ongoing for Cami, which we hope to use for a pivotal accelerated approval type of study, the patient is not to have failed 3 prior lines of therapies, which must include Adcetris and one of the approved checkpoint inhibitors.

If the patient cannot consider by the physicians to be transplant-eligible, they would are only to have had....

Jay?.

Yes..

I think Connor's question related to follicular lymphoma for longer -- I might have misheard. So sorry, Connor but I misheard..

Did I not? You said Lonca? I'm sorry. I apologize. [indiscernible] So it's lymphoma. Okay. I don't know how I got Cami on that. Sorry. So follicular lymphoma, we have a meeting upcoming with the FDA to discuss Phase II trial. Once we get clearance from the FDA, we hope to begin that trial in the beginning of 2021. My apologies for missing the question..

Got it. No problem. And then so just quickly, and then this one's on Cami.

So you mentioned as a response to a different question that you think you'll have PK/PD data at ESMO for Cami? Do you think that will be enough for you guys to make a decision on what types of tumors you want to prioritize?.

That's a good question. Probably not, but we have a plan for the next steps in the Phase Ib study for Cami, which we will implement in the next month or so..

Understood.

And then can you just discuss what the steps do you need to complete in terms of discussions with the FDA and what not, before submitting the BLA for Lonca later this year?.

We're actually past the discussion studies with the FDA. We already had a pre-BLA meeting and had some conversations with them. As Chris mentioned, they agreed to accept the CMC modules early, which we've already submitted.

So at this point, the team has been really working on that BLA, but we don't anticipate any more discussions with the FDA regarding the BLA until after it's filed..

The next question is from Boris Peaker from Cowen..

Great. My first question is on the Phase II LOTIS III study of Lonca plus ibrutinib.

I'm just curious, will you be providing incremental data update on this study over time? Or are we just going to get the final data?.

Jay?.

We hope to present -- yes. I assumed that you wanted me to answer that. We hope to have data at the upcoming virtual ASH Meeting with regard to the Lonca plus ibrutinib study. But that will be on the Phase I part of the study..

No. I understand that. That's one. My question is specifically for the Phase II that you're starting just recently.

Is that also going to be given incremental data? Or is that -- we're just going to have to wait until the end?.

That's good question. We -- it's a preplanned interim analysis with utility in that study. So it is a possibility that we may present data from that. But you're thinking way ahead of me..

Okay. Got you. Maybe just from the manufacturing side of things. I know you mentioned that for the CMC filing has been submitted.

I'm just curious how many manufacturing facilities are involved in making Lonca? Kind of where are they located? And have they been expected yet or not?.

There are three main manufacturing facilities. They are in the U.S., the -- Italy and Germany. They have not been inspected by the FDA. But we have carried out, as you might imagine, proprietary work. And as facilities, they do manufacture commercial ADC drug product for other companies.

And in that context, they have all been -- all of those facilities have been previously, in most cases, quite recently inspected by the FDA..

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