ADC Therapeutics Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 9, 2023

There are 10 speakers on the call.

Operator

Welcome to the ADC Therapeutics First Quarter 2023 Financial Results Conference Call. My name is Antoine Alexander, and I will be your operator for today's call. At this time, all participants are in listen only mode. Later, we will conduct a call. Call.

Operator

I would now like to hand the call over to Amanda Lachborg, Investor Relations Manager. Amanda, you may begin.

Speaker 1

Call. Thank you, operator. This morning, we issued a press release announcing our Q1 2023 financial results and business update. Call. This release is available on the ADCT website at ir.adctrapeutics.com under the Press Releases section.

Speaker 1

Call. On today's call, Amit Malik, Chief Executive Officer Tristan Harrington Smith, Chief Commercial Officer Mohammad Daki, Chief Medical Officer call. And Pepe Carmona, Chief Financial Officer, will discuss recent business highlights and review our Q1 2023 financial results before opening the call for questions. Call. Before we begin, I would like to remind listeners that some of the statements made during this conference call will contain forward looking statements call.

Speaker 1

Within the meaning of the Safe Harbor provisions of the U. S. Private Securities Litigation Reform Act of 1995. Call. Examples of forward looking statements include those related to our future financial and operating results, the impact of our updated strategic path forward, including our commercial field strategy, portfolio prioritization and capital allocation and restructuring plans, call.

Speaker 1

Our ability to achieve our guidance for 2023 Zimwata revenue and operating expenses as well as our future cash requirement projections, call. Future revenue growth, prescription volumes, product launches and market share for our products either alone or through our forward 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. Call. FDA and foreign regulatory authorities' actions and potential regulatory approval for our products either alone or in combination with our strategic partner products, future strategic partnerships and business development efforts and our ability to repay our outstanding debt obligations. Call.

Speaker 1

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, call. In the accompanying slide presentation on Slide 2 and in the company's filings with the SEC on Form 20 F and as updated in ADCT's recent periodic filings on Form 6 ks. ADCT is providing this information as of the date of today's conference call and does not undertake any obligation call to update any forward looking statements contained in this conference call as a result of new information, future events call. The company cautions investors not to place undue reliance on these forward looking statements.

Speaker 1

Presentation. Today's presentation also includes non IFRS financial measures. These non IFRS measures have limitations of financial measures call and should be considered in addition to and not in isolation or as a substitute for the information prepared in accordance with IFRS. Call. You should refer to the information contained in the company's Q1 earnings release for definitional information and reconciliations of historical non IFRS measures call to the comparable IFRS financial measures.

Speaker 1

It is now my pleasure to pass the call over to our CEO, Amit Malik. Amit?

Speaker 2

Call. Thanks, Amanda, and thank you all for joining us. We will provide you with details regarding our progress during the Q1, call. But I want to spend most of my time today focusing on some important changes to our corporate and capital allocation strategy. Call.

Speaker 2

These changes follow a comprehensive assessment of the business by the executive team and take into account our current status, call. The evolving DLBCL treatment landscape and the reality of the current capital markets environment. By successfully executing our updated strategy, call. We believe we can optimize our operations and maximize value for all of our stakeholders. Call.

Speaker 2

There are 3 main components to our updated strategy. 1, we are implementing a new go to market model to help drive growth in both academic and community centers. 2, we are prioritizing our pipeline on nearer term clinical programs, call, which we believe have the greatest potential to drive value over the next 12 to 15 months. And 3, call. We are increasing efficiencies across the organization to reduce operating expenses.

Speaker 2

Now I'd like to expand on each of these three elements, call. Starting with the commercial organization supporting Simanta, which delivered net sales of $19,000,000 in the first quarter, call. Up 15% year over year and a slight decline versus prior quarter. We remain confident in the uniquely differentiated product profile of ZEMATA, call. But we know that we can do better communicating this to physicians, particularly those in the community setting.

Speaker 2

Call. Since Kristen joined as Chief Commercial Officer last November, she has had the opportunity to carefully assess the existing go to market model from every angle call to figure out areas of improvement. As a result, we have decided to change our model to better align with how prescribers make treatment decisions call. We know that in local geographies, academic centers are expanding into the community, community centers are consolidating call. And the influence across the 2 is growing.

Speaker 2

Our new model has aligned local teams with the right skills to address these shifts in the marketplace. Call. I worked with Kristen for over a decade and I've seen her successfully lead her teams to maximize the value of product launches. I'm confident in her ability along with the commercial team call. Turning to the pipeline, we have decided to focus our resources on our more advanced programs, which we believe call.

Speaker 2

The highest potential to drive value in a reasonable timeframe. These include the ZENONTA lifecycle management program as well as our clinical programs call. We have agreed with Mohamad to increase investments to either expand and or accelerate the pace of patient enrollment for these programs. At this time, as part of our prioritization exercise, we are halting investments in our preclinical programs targeting PSMA Endeok 1. Mohamad will elaborate on this a little later.

Speaker 2

Finally, after a comprehensive business assessment call. Conducted by the executive team, we are streamlining the organization and optimizing efficiencies. As Pepe will discuss later, call. The cost reductions derived primarily from the prioritization of our R and D activities, a 17% reduction in the workforce call and greater operating efficiencies across the company. With these savings, we are redeploying capital of the fund to prioritize programs.

Speaker 2

Call. Taken together, the key elements of our updated corporate strategy will better position us to maximize the tremendous commercial and patient opportunity with ZYNOLTA call and to progress our most advanced pipeline programs, all while being fully funded through mid-twenty 25. With that, I'd like call. I'll turn the call over to Kristin for a commercial update. Kristin?

Speaker 1

Thanks, Amit. It is my pleasure to share an update on ZENLANTA, call. Including our plans to reorganize the commercial field team to optimize the opportunity we have with this differentiated therapy. Call. As you've already heard, 1st quarter net sales of XEMONTA were $19,000,000 a 15% increase year over year call.

Speaker 1

And a slight decline versus Q4 2022, which includes the gross to net headwinds. While we are encouraged to see increased awareness in trial, there is much more we call. Thank you, to embed XINLASA into prescribing patterns, particularly in the community. By establishing leadership in the 3rd line, 3rd line plus setting call. As a single agent, we believe we will be well positioned for growth in potential combinations and in earlier lines of therapy.

Speaker 1

Call. Consequently, I want to spend my time today sharing our assessment of the evolving market dynamics call. And how we are adapting by implementing a new go to market model to optimize performance. Call. I've spent the last few months analyzing the DLBCL market and in particular the interplay between the thought leading academic setting and the community setting.

Speaker 1

What is clear is that ZYNOLSA's unique product profile is distinguished call from other products used in the 3rd line, third line plus CLBCL setting. Furthermore, the profile is even more attractive for community treaters, call. Given ZYNOLTA's strong single agent activity, manageable safety profile and ease of administration. Call. The relapsed refractory DLBCL market is highly fragmented with no standard of care in the 3rd line, third line plus setting call.

Speaker 1

We believe these dynamics call. Present a tremendous opportunity to gain breadth and depth in the market. Let me now explain the market dynamics call from a competitive and treatment setting perspective. On the competitive front, we are fully aware that the DLBCL market is a fast moving space with new treatment paradigms approved or near approval. In terms of emerging treatment, call.

Speaker 1

Was just approved for the front loan setting, and we are anticipating the approval of bispecifics within the coming months. Call. This represents an opportunity as much as a challenge for us. For example, many physicians will not retreat with polavi call after they use it in the frontline setting, which potentially opens up more opportunity for ZYNLANTA. Call.

Speaker 1

And while the anticipated approval of bispecifics will increase competition, we believe that based on feedback from certain experts, call. The use of bispecifics may be limited primarily to academic centers that are best equipped to provide this treatment. Call. In the long run, we believe that the entrance of bispecifics is also an opportunity for XEMONTA. Call.

Speaker 1

The potential of these 2 powerful single agents in combination could provide a benefit to a large patient population call. As Mohammad will explain, the combination of XINLANSA with bispecifics being studied in LOTUS-seven and other studies call. Now let's move on to the shifting treatment dynamics that we must address call. 1, academic centers call. Thank you.

Speaker 1

3, the interplay between the two settings is stronger than ever, particularly in the later lines of DLBCL. Call. In some cases, community physicians refer to academic physicians for complex therapies such as CAR T call. And in the majority of cases where they don't refer their patients, the community physicians will often consult with a local expert. Call.

Speaker 1

These market dynamics require tighter coordination across local teams to leverage advocacy and ultimately drive depth of prescribing. Call. Given the combination of these competitive trends and the evolving treatment setting dynamics in the DLBCL market, call. I would like to discuss how we can best capture the ZENLANTA opportunity through transforming our go to market model. By evolving our commercial model, we believe we will more effectively target and manage key accounts and we will enlist key thought leaders as advocates call.

Speaker 1

The key changes in our new field model include the following: 1, we have defined the territories that naturally work together between the academic and community centers. 2, We are implementing a structure in which the entire field force has a customer facing role. 3, call. We are realigning the field force to smaller local teams based around 2 key roles, an account manager With experience in navigating complex institutions and hematology specialists focused on community centers. Call.

Speaker 1

Now let me give an example of how this will work in practice. Florida is a critically important region with a mix of top tier institutions call. As well as their satellite offices and surrounding community practices. Call. Until now, we had 3 hematology sales specialists splitting the state equally, but no clear account ownership and suboptimal coordination across different sites of care.

Speaker 1

Call. Under the new model, we will have 1 account manager who acts as the lead for these institutions and 2 hematology sales specialists who will leverage the relationship with the main treatment center to pull through ZINLANTA in the satellite offices and surrounding community sites. Call. All three work together as one local team with shared objectives. This reorganization call.

Speaker 1

It's designed to increase the effectiveness of the commercial team, matching the right people with the right roles and improve overall execution call, so that we optimize the curve of adoption and uptake for this important medicine. We plan for overall customer facing headcount call. To be relatively stable as we implement the new structure and we will continue to cover over 90% of the potential market. Call. The change was announced internally mid April and will be finalized by the end of May.

Speaker 1

Once the reorganization is complete, call. We will have a results oriented, empowered and fully accountable organization that is better aligned with the intricacies of their local market. Call. The team will be focused on the top accounts in each geography, while driving influence and pull through to the community. Call.

Speaker 1

You have heard us describe the commercial opportunity in the 3rd line, 3rd line plus setting of DLBCL as around 20% call. Of an ultimate $500,000,000 to $1,000,000,000 opportunity for ZENLANTA. I am confident that we will deliver with this new model call while laying the foundation for ZEMONTA as the combination agent of choice. Now I'll turn the call over to Mohammad.

Speaker 3

Call. Thank you, Kristin. It is my pleasure to share an update on the pipeline. As Amit mentioned, call. We have conducted a deep dive on all parts of the business.

Speaker 3

And as part of our updated strategy, we have decided call. To further prioritize our R and D pipeline, our intention is to focus our efforts and resources call. On our more advanced programs, which have the highest potential to drive value. We will be continuing with the lifecycle management of Zellanta, including lutus 5, 7, and 9, and with the clinical development of ADCT-six zero one targeting Axcel, 901 targeting CAG-one and 602 targeting CD22. Based call.

Speaker 3

On our prioritization efforts, we are halting investments in our preclinical programs, ADCT-two twelve Regarding the ZENOMTA Life Cycle Management Program, all studies remain on track. Call. Each is designed to address distinct unmet needs that remain in all lines of therapy in DLBCL Q4 despite new and emerging treatment options. Taking a closer look at the lifecycle program, call. We continue to expect enrollment completion of our ongoing Phase 3 confirmatory LUTUS-five study next year.

Speaker 3

This trial examined the combination of ZENLONTA and ripluximab in second line plus DLBCL patients clinical trial and has produced early encouraging data. The safety lead in data was released call at Soho 2022. We continue to make good progress on the Phase 2 LUTAS line study in unfit or frail patients. This open label study also utilizes A combination of Zalando and rituximab in frontline therapy, where there is a significant unmet need among unfit or frail patients call. Our previous guidance call.

Speaker 3

I am pleased to report that we have seen an acceleration in patient enrollment for this trial. Call. And consequently, we are now expecting to share initial data by the end of this year. Beyond the rituximab combination, we are exploring several novel combinations call and expect to have early data next year. We are particularly excited about the possibility of combining Xelona call.

Speaker 3

With bispecifics, given that it's distinct mechanism of action and none overlapping toxicity profiles. The LUTAS-seven study is evaluated in combination with Roche's glofitamab and mocintuzumab, call. And we also have a collaboration with IGM to combine with its bispecific embutamatin. Turning to the rest of the pipeline beyond ZENONTA. Starting with EZCT-six thousand and one targeting axles, call.

Speaker 3

It is a validated target, which has been shown to be well suited for an ADC approach. We have made the decision to initially focus the Phase 1 study of 601 to explore single agent activity rather than combination activity. Financial activity. We are implementing an amendment to focus the current monotherapy arm on patients with sarcoma And adding second monotherapy are focused solely on patients with non small cell lung cancer. In parallel, an ICSA for possible biomarker approach is being finalized.

Speaker 3

Initial data from the Phase 1 trial is expected in the first half of twenty twenty four. Turning to ADCT-nine zero one targeting KAG-one. This is e novel, 1st in class Asia that targets various solid tumors. As previously announced, we are finalizing the protocol amendment to explore different dosing schedules call. So far, there have been no dose limiting toxicities call.

Speaker 3

And we have not yet reached the maximum tolerated dose. Once agreed with regulatory agencies, call. We will advance to the next dosing level. We are also completing validation of the IHCSA. Call.

Speaker 3

We expect to share initial data in the first half of twenty twenty four. Now I would like to discuss EZCT-six zero two targeting CD22 in patients with relapsedrefractory call. ALL, our program in collaboration with MD Anderson. Considering the encouraging Initial data shared at ASH showing MRD negative complete responses in high refractory population, call. The plan is to continue expanding at the current dosing level as well as to dose escalate.

Speaker 3

CONFINS-one study to be shared in the first half of twenty twenty four. Call. Lastly, let me say a few words on our research approach. Clearly, we have a long history and tremendous scientific expertise in the ADC space. While our early success was based exclusively call.

Speaker 3

On PPD Zymr technology, we will be focusing our efforts going forward on next generation ADC technologies, call. I look forward to providing further updates on the progress of our pipeline over the coming months. With that, I will turn the call over to PPP to give a financial update.

Speaker 4

Call. Thank you, Mohammed. Before I review the financials for the Q1, I want to elaborate on our efforts call. During my 1st few months, in coordination with the entire executive team and key leaders of the company, call. We have carefully evaluated the capital allocation strategy, including every line item of the income statement's operational process call.

Speaker 4

To assess where we have the greatest potential to create value, streamline operations and reduce operating expenses. Call. We have conducted this exercise to find the most critical areas in which we can create value through a holistic approach to unlock the potential of the company. Call. The result is that we have identified a number of key areas where we will drive incremental efficiencies.

Speaker 4

Call. This includes external expenditures, for example, on vendor procurement and consultancy as well as internal expenditures, call. Notably on the earlier stage pipeline assets that Mohammed highlighted. There will also be an approximate 17% workforce reduction call. Thank you very much.

Speaker 4

Thank you. Thank you. Thank you. Thank you. Thank you.

Speaker 4

Our next question comes from the line of call. As Christian noted, overall headcount in the customer facing footprint behind ZYNOLTA will remain relatively stable as we seek to optimize this tremendous opportunity. Turning now to the financials for the quarter, starting with our balance sheet. As of March 31, call. We had cash and cash equivalents of $310,500,000 representing a $15,900,000 reduction from our position at the end of 2022.

Speaker 4

As a reminder, we expect to receive a $75,000,000 milestone in the second quarter call from Healthcare Royalty Partners on the first commercial sales of ZYNOLTA in Europe by our partner, Solvi. Call. Including this payment and taking account our updated business plan, including the increased cost efficiency I just highlighted, call. We expect that our cash runway will extend to mid-twenty 25. We're increasing investments in our near term catalyst, call.

Speaker 4

Most of which are open label and anticipate having data to share with the market and the scientific community over the next 12 to 15 months. Call. Moving to the P and L. As you already shared, ZYNOLTA net sales were $19,000,000 in the 1st quarter, call, up 15% versus Q1 2022. Moving down the P and L, call.

Speaker 4

Our combined operating expenses on a non IFRS basis, which excludes stock based compensation, were down 14% year on year. This mainly reflected reduced R and D expenditures due to the discontinuation of a number of clinical studies during 2022 and already realized operating efficiencies. Commercial expenses for Zimlonta call. We're broadly maintained year over year. Moving to the bottom of the P and L, on an adjusted basis, call.

Speaker 4

We reported a net loss of $42,500,000 for the Q1 or $0.53 per basic and diluted share. Call. Turning to our full year guidance, we're reiterating what we previously announced in February. We continue to expect Simlanta call. Netpro sales to grow by a double digit percentage year over year.

Speaker 4

In terms of total operating expenses, call. We expect a decrease in 2023 2024 as compared to 2022. Finally, call. I would like to share the important value driving milestone over the next 12 to 15 months. Call.

Speaker 4

Starting with ZINLONTA, in addition to delivering double digit growth this year, we expect to achieve commercial brand profitability. Call. This means that by the end of 2023, ZINLONTA will start to pay in part for the development of new indications and the pipeline. Call. Outside the U.

Speaker 4

S, we expect our European partner to launch ZYNOLTA in the current quarter. Call. By the end of the year, we expect to share initial results from the LOTUS-nine study in unfit and frail DLBCL patients. Call. In 2024, we expect to complete enrollment of our LOTUS-five confirmatory study in the second line setting, call.

Speaker 4

And we also expect to share some initial results from our LOTTO-seven study. In terms of the pipeline, in the first half of twenty twenty four, call. We expect to share initial data from ADCT-nine zero one targeting CAC1 and ADCT-six zero one targeting XL. Call. We also expect additional data from the Phase 1 study for ABCD602 targeting CD22 in the first half call.

Speaker 4

So a number of important milestones, both for Zimlonta and our pipeline. Call. With that, I will turn the call back to Amit for closing remarks. Amit?

Speaker 2

Thank you, Kristin, Mohammed and Pepe. Call. To conclude, we believe that we have a clear roadmap and the capabilities to execute on our new strategy to help create future value for all of our stakeholders. Call. We are excited about the numerous opportunities which lie ahead and look forward to keeping you updated on our ongoing progress.

Speaker 2

Now the team will be available for questions. Call. Operator?

Operator

Thank you. At this time, we will conduct a Q and A session.

Speaker 3

Call.

Operator

Our first question comes from Gregory Renzo from RBC Capital Markets. Please go ahead.

Speaker 5

Call. Great. Good morning, Amit and team. Thank you for taking my questions. Amit, maybe just a couple for me.

Speaker 5

Call. Just first, it's helpful to hear your views on the competitive landscape and bispecifics. I'm just curious on the CAR T front,

Speaker 3

call. How do you

Speaker 5

see CAR T in earlier lines impacting the market opportunity for ZELONTA? And maybe more specifically, what The ability to use ELONTRA as a bridging therapy without impacting the efficacy of CAR T. And maybe I'll just get in my second question as well. Call. Just on the updated corporate strategy, Amit, just as you've contemplated the reductions and optimization, I'm curious what range of scenarios did you call.

Speaker 5

And the team consider just in order to arrive at what is that current level of impact with the changes? Thanks so much.

Speaker 2

Call. All right. Well, thanks, Craig. Thanks for all the questions. I'm going to start by turning it to Kristen to talk about the competitive landscape.

Speaker 2

You asked both about the impact of bispecifics, but also in terms of CAR T moving to earlier lines. So I'll have her address that first, and then I'm going to turn it to Mohamad next to talk about synopsis of potential for aging therapy.

Speaker 1

Sure. Thanks, Amit. Thanks, Gregory. So when we look at the DLBCL market, call. It's highly fragmented and quickly evolving, that's for sure.

Speaker 1

We believe that ZYNOLTA is call. Well positioned in the 3rd line setting as we see the evolving landscape shake out. So for instance, with CAR call. We definitely see increasing utilization in the second line. And this really opens up opportunity, more opportunity for us in the 3rd line, 3rd line plus setting.

Speaker 1

Call. As you know, 60% of CAR T patients will relapse and about 25% of community patients actually won't Get to CAR T, whether it's because of the complexity, toxicity or lack of access. So again, as CAR T moves up, call. It definitely opens up an opportunity for ZEMONTA. Your question about bispecifics, call.

Speaker 1

We anticipate the approval of bispecifics in the next month. And over time, we expect bispecifics call. We'll have access in earlier lines. However, initially, we do see their use Really in the academic centers where they are best equipped to manage these agents. Call.

Speaker 1

When we think about the competitive landscape, we've actually been competing against bispecifics because they've been studied in so many clinical trials. So We already feel the composition to some extent. At the same time, over the long run, because of our LOTUS-seven study and other studies that we have, call. We do see an opportunity potentially for ZINLANZA to be combined with the bispecifics, and this is a great opportunity for us given the differentiated mechanisms and non overlapping toxicity. So I will turn it to Mohamad for the second one.

Speaker 3

Yes. Greg, thanks so much for your question. Call. We are currently actually assessing the use of the possibility of using the LUND as a bridging therapy for CAR We have an investigator issued a study that addressing that was Cybeus in the U. S.

Speaker 3

And in Europe. Call. Now what do we have now in terms of information? What we know that there is 14 patients in the LOTUS call. 2, that after receiving ZENLONTA went on and received CAR T therapy.

Speaker 3

Call. The median time between ZENWANCA dosing and using CAR T was about 120 days, around 4 months. Call. The efficacy of CAR T in these patients was overall response of 50% complete response of 43%. Most importantly, of those patients, 10 was screened for CD19 and 10 out of 10 were positive for CD19.

Speaker 3

Call. It's also worth saying that the IIT I mentioned or the VASI data sheet that I mentioned will be testing for all patients post enrollment Q4 season 2019 before we go to CAR T. Thank you, Mohamad.

Speaker 2

And then, yes, Greg, to your question around the different scenarios, we obviously looked at All different possibilities. I mean, starting with ZYNOLTA, we think it has tremendous opportunity. Just having call. Yes. We're right now playing in

Speaker 5

the smallest part of where

Speaker 2

we're going to eventually play in the market because we're in the 3rd line, 3rd line plus setting. There is no clear standard of care here. The market is evolving quickly, but we think we can position ourselves to become a standard of care and get to our peak sales estimate in that indication of $200,000,000 Now longer term, we think the bigger opportunity there is, of course, moving to earlier lines of therapy, first with the rituximab combinations call. And then eventually potentially with

Speaker 3

the bispecific combination. So we think there's

Speaker 2

a lot of potential. So that was clearly a priority. It's already an approved product. So even combination data, And we think it's more derisked than, let's say, a new asset. The second thing we focused on was our 3 Phase 1 clinical programs.

Speaker 2

Call. We have strong belief in all three of them. And we're going to see data readouts within the next 12 to 15 months on all three of the programs. And so call. Yes.

Speaker 2

We wanted to play those bets out. Of course, we're going to be data driven in terms of how we invest moving forward with any of those programs, but call. We wanted to play those bets out. And then we knew we needed to prioritize further on some of the earlier work to make sure that we maintain a cash runway into the middle of 2025. Call.

Speaker 2

And so that's how we derived our prioritization. We feel that we have a lot of Shaw Fox goal now within Lhasa and our 3 Phase 1 assets, call. All while maintaining a strong cash runway that's still more than 2 years out. Thanks for your questions, Greg.

Speaker 5

Call. Thanks, guys. I appreciate all the color.

Operator

Thank you. One moment for our next question. Call. Our next question comes from Jeff Hung from Morgan Stanley. Please go ahead.

Speaker 6

Call. Thanks for taking my questions. With the new go to market model in place by the end of May, how long do you think that it will take before you start to see the full impact of the updated commercial strategy. And then I guess besides actual sales, what kinds of metrics might you be looking at to gauge that progress over time? And then I have a follow-up.

Speaker 2

Call. Okay. No, thanks for the question. I'm going to turn it to Kristen to talk about that.

Speaker 1

Sure. Call. So, we were really thoughtful in our approach with this change, and we wanted to handle this as quickly as we possibly could to minimize disruption. So the change was announced in April. It will be completed by the end of this month.

Speaker 1

And with the restructured field force, call. I'm confident that we'll start seeing the benefits of this new model in the second half of this year. When you ask about how we'll measure success, call. The true measure of success for us is net sales. And again, we anticipate seeing the benefits from this in the second half of this year.

Speaker 6

Call. Great. Thanks. And then just for the 17% risk, can you talk about where these are coming from? Is it a mix of your field force in R and D or

Speaker 2

call. Yes. So I'm going to turn it to Pepe to talk about the 17% reduction. Call. Yes.

Speaker 4

Thanks for the question, Jeff. Just for clarity, the footprint the commercial footprint is stable. So we're not impacting customer facing workforce. So the reduction is mostly attributed to The portfolio prioritization, so you would see there that we have impacts in clinical and in CMC type of efforts and in G and A, so back office support. That's where the impacted workforce is taking place.

Speaker 6

Call. Thank you.

Speaker 2

Thanks, Jeff. Operator, are there any other questions?

Operator

Our next question comes from Kelly Hsieh from Jefferies. Please go ahead.

Speaker 4

Hi. This is Sean on the call for Kelly. Thanks for taking our questions. Call. So regarding your first line study LOTUS-nine, I'm excited to see now the initial data is expected by year end.

Speaker 4

Call. So we're just wondering, will the initial data be sufficient to support a potential label expansion? What will be the next steps? Thank you.

Speaker 2

Call. Yes. I'll make sure to Mohamad to answer that question.

Speaker 3

As a reminder, lutus 9 is an open label study expected to enroll 40 patient per cohort total of 80 patients in frontline failure and sick patient population. It is by design not regulatory enabling study. However, it will guide us for any possible future regulatory pathways. We will we are very call. Excited to say that we will be sharing data by the end of this year instead of mid next year or somewhere next year.

Speaker 3

Call. The data I will be sharing later this year will be meaningful data to the medical community and the overall scientific community. Call. It is also pleased to see that the enrollment has been accelerated mainly because of the physicians and KOLs orientation of the study. Thanks, Mohamad.

Speaker 3

Yes, so just to add on, Sean, it won't be complete by the end of

Speaker 2

this year, but we'll have meaningful data to share by the end of this year. And then the full study would complete readout next year. Yes.

Speaker 4

Call. Okay. Thanks for the color.

Operator

Thank you. One moment for our next question. Our next question comes from Noreen Cubria from Capital One Securities. Please go ahead.

Speaker 7

Hi, good morning. Thanks for taking the question. Just 2 for me. Call. With regards to the entries of the bispecifics near term, do you think the shift in the landscape that might affect, For instance, recruitment in your LOTUS-seven trial, do you think it will impact that trial in any way with regards to the patient type Getting later latter patients or something.

Speaker 2

Yes. I Nouri, thanks for the question. Call. I don't think so. I think there's excitement around bispecifics.

Speaker 2

I think there's excitement about the combination, I could say. Call. We've seen now 1 BiSci get approved, the Biosecifix and XENLATA will be the 2 most potent single agent therapies approved on the market outside of CAR T. And I think everyone is looking in earlier lines is there a possibility to move away from chemo free regimen and to move from therapies that require really complex setups like CAR T in the academic centers. It's not really available in the community.

Speaker 2

So there really is a need for more potent combinations. Call. We've seen a lot of interest, I would say, in LOTA-seven. And we think there's a lot of excitement amongst the medical community around this possibility of accommodation.

Speaker 7

Call. Great. That's helpful. And then with regards to 602 in ALL, I mean, that's currently an investigator sponsored trial. Call.

Speaker 7

Is there anything that will sort of trigger from your point of view, what will it take for you to launch a company sponsored trial question.

Speaker 2

Yes. So thanks for the question. I mean, we're we want to continue to see data. I mean, we've agreed with MD Anderson to Expand the sites. We're going to MD Anderson, the City of Hope's already in it as well, and we're going to be adding some more sites to their IT.

Speaker 2

Within this, we want to see continuously more data both at the current dosing cohort as well as expanding to higher dosing cohorts as well. Call. And then based on some additional data, we'll decide if we if Corineus in house and just decide to do a company sponsored study.

Speaker 7

So we're moving forward,

Speaker 2

I would say, with more intensity in terms of more sites and faster enrollment on this study as well.

Speaker 7

Call. Okay, great. Thank you.

Operator

Thank you. One moment for our next question.

Speaker 3

Call.

Operator

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

Speaker 8

Hi, good morning. This is Hans Sei Fu for Boris Peaker. Thank you for taking my questions. Call. So based on your current sales and your new implemented model, what market share do you think Zulong has penetrated?

Speaker 8

Call.

Speaker 2

So I'll answer this question and then Kristen feel free to add. Yes. We don't disclose market share. What I could say is in the whole third line setting, there's no dominant player. There's not a player that has 20% more share of the market.

Speaker 2

I mean, it's a very fragmented segment of the population, and we think there's still clear opportunity for the product to grow. So call. Again, as you probably saw, we reiterated our guidance for the year of double digit growth, but also reiterating that we think the peak sales potential call. And this indication is somewhere between $100,000,000 to $200,000,000

Speaker 1

I don't have much to add to that. Just Reinforcing the fragmented market and just we truly see an opportunity to embed ZENONTA as the standard of care in the 3rd line, 3rd line plus setting.

Speaker 8

Call. Thank you for that color. And then just a follow-up question, what is the additional addressable market size If the Lotus 5, 7 or 9, if they're successful, if you can give a little color on that?

Speaker 2

Yes. So I would say, if you look at LOTUS-five, it should roughly double the opportunity that we have call. In our current indication, when you look at the second line population, there's still a good amount that's Not either getting CAR T or transplant. I mean, almost half patients aren't getting either one when you look at how low the penetration of CAR T is in the community. So that at least doubles the opportunity.

Speaker 2

LOTUS-nine could again be a similar size opportunity to our current indication than LOTUS-five. And of course, LOTUS-seven Could be the biggest opportunity. If that works, you can start potentially transforming early lines of therapy and even potentially, again, we have to see data, potentially even competing with some of the Cure to the 10 products if the data looks good. So that's, I would say, the large potential opportunity. That's what adds up to our peak sales estimate of it, if they all work of getting to $500,000,000 to $1,000,000,000 in peak sales.

Speaker 8

Call. Thank you very much. If I could, I'm going to ask a third question for the discontinued preclinical PSMA targeting ADC. Call. Could you give a little color, like did you discontinue just due to the fundamental technical reason or some cost optimization here?

Speaker 2

Call. Yes. That's a great question. I appreciate it. This is purely a capital allocation decision.

Speaker 2

Call. We want to make sure that we're focusing on areas that can unlock shareholder value in the near term. And so that's call. We're focusing our resources on really maximizing ZENLANTA, as well as, maximizing the potential of our near term pipeline, call. All of which are going to have data readouts in the next 12 to 15 months, and we have 3 programs.

Speaker 2

So this is purely capital allocation decision. When I look at the scientific rationale and I look at the preclinical data for 701,202, they're very strong. So if we were in a different capital markets environment right now, we would Continue to fund both of them. But we know we need to make tough choices right now in this market, and we're prioritizing our clinical call. We think we have the highest chance of success as well as our better than nearest term.

Speaker 8

Got it. Thank you very much.

Operator

Call. Thank you. One moment for our next question. Next question comes from Brian Chiang from JPMorgan. Please go ahead.

Speaker 9

Hey, team. Thanks for taking my question this morning. Call. Our first question is on Solanta sales. We're wondering if you can provide a bit more color on the sales trajectory this quarter that you've call.

Speaker 9

Given that you have you talked about the gross to net and also the Medicare Discarded Drug Policy impact. What do you see in the baseline growth? In other words, if you discount the fact that there is a policy impact in place, call. How much quarter to quarter growth in terms of bio use and prescriber account that you're seeing? And I have one follow-up.

Speaker 9

Thank you.

Speaker 4

Call. Let me start with that. So, call. As we have guided before, there's a gross net impact this year compared to last year Because of the wasted quality from major party and the contracting of GPO. So both have We have guided that the GPO impact is between 2 to 3 points over 2022 and Medicare Part B wasted policy call.

Speaker 4

It's in the mid single to high single digits. So that already started impacting in Q1. Quarter over quarter, call. The volume was slightly down, and the mix of the two elements It's taken the revenue to be slightly down versus Q4 of 2022. I don't know if you have

Speaker 2

call. Yes, go ahead.

Speaker 9

Yes, and maybe one for Kristen. And are these Local teams in your new go to market plan already familiar with the doctors that are in these new carved out regions. Call. And if you can elaborate on that point, that will be great. And then how long do you think will it take to see an inflection point in adoption call.

Speaker 9

In this new go to market strategy and see more of this local network effect that you mentioned? Thank you.

Speaker 1

Call. Yes. Thanks for the question. So, these local teams, the ones what we see when we took a step back and looked at this, call. So we've got the changing market dynamics.

Speaker 1

And we also know that call. We've got a differentiated product. We know our field force is right sized. So when we look at that and we look at the observations, call. We see across the nation in terms of performance variations by geography, right?

Speaker 1

So we have our top performing Geographies, they're already adopting some core elements of this model, right? So like you said, where call. They have worked with these local networks and influence and leverage them for the community and in those satellite offices. Call. So, what we need to do now is really formalize this model across the nation.

Speaker 1

You asked about familiarity with the physicians. Call. Of course, all of our folks who are in the market, that's what they work to do is really work with these top thought leaders call. And their customers in terms of delivering the clinical education around ZYNLONTA. What we want to do with this model is have that tighter coordination between the academic and the community setting, and these local teams will enable that coordination.

Speaker 1

Call. You asked about the inflection point. We are confident that we will deliver with this model and start to see the benefit in the second half of this year.

Speaker 9

Thank you.

Operator

Thank you. I am showing no further questions. I will now hand the call back over to Amit for closing remarks.

Speaker 2

Call. Well, thank you all so much for joining. Really appreciate all the thoughtful questions and look forward to engaging and keeping you updated in the future months. Thank you all so much.

Speaker 4

Call. Thank

Operator

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

Powered by Quartr
Earnings Conference Call
ADC Therapeutics Q1 2023
00:00 / 00:00