Executive Summary / Key Takeaways

• ADC Therapeutics is strategically repositioning to maximize the value of its flagship ADC, ZYNLONTA, by expanding into earlier lines of DLBCL therapy and indolent lymphomas, aiming for peak U.S. annual revenues of $600 million to $1 billion.
• The company's proprietary ADC technology, featuring a differentiated exatecan-based payload and novel hydrophilic linker, offers tangible benefits such as a therapeutic index greater than 10 and potentially higher potency compared to alternatives, forming a strong competitive moat.
• Recent clinical data from LOTIS-7 (ZYNLONTA + glofitamab) show an impressive 86.7% complete response rate in relapsed or refractory DLBCL, positioning it as a potential best-in-class bispecific combination. LOTIS-5 (ZYNLONTA + rituximab) also demonstrates competitive efficacy for broadly accessible therapy.
• A significant restructuring in June 2025, coupled with recent private placements, has extended the cash runway to at least 2028, providing crucial capital for ZYNLONTA's expansion trials and preclinical PSMA-targeting ADC development.
• While current product revenues show some variability, the investment thesis hinges on successful regulatory approvals and compendia listings for new indications, with the majority of revenue ramp-up expected within two years post-launch.

A Focused Future: ADC Therapeutics' Strategic Evolution

ADC Therapeutics SA, a pioneer in antibody-drug conjugates (ADCs), is undergoing a transformative period, strategically sharpening its focus to unlock the full commercial potential of its lead product, ZYNLONTA (loncastuximab tesirine-lpyl). Incorporated in 2011, the Swiss-based company has evolved into a commercial-stage leader, with ZYNLONTA already holding accelerated FDA approval for relapsed or refractory diffuse large B-cell lymphoma (DLBCL) in the third-line (3L) setting, alongside conditional approvals in Europe, China, and Canada. This foundational approval, which triggered a $5 million licensing revenue milestone in Q1 2025, sets the stage for a broader strategic push.

The company's overarching strategy is to significantly expand ZYNLONTA's market opportunity by moving into earlier lines of DLBCL therapy and into indolent lymphomas. This strategic pivot is a direct response to the evolving competitive landscape in oncology, where targeted therapies and combination regimens are increasingly defining treatment paradigms. Management anticipates that this expansion, supported by ongoing clinical trials and investigator-initiated trials (IITs), could drive ZYNLONTA's peak annual revenues in the U.S. to an ambitious $600 million to $1 billion.

Technological Edge: The Power of Proprietary ADCs

At the core of ADC Therapeutics' investment thesis is its proprietary antibody-drug conjugate technology. This platform is designed to deliver highly potent cytotoxic agents directly to cancer cells, minimizing systemic toxicity. ZYNLONTA, a CD19-directed ADC, exemplifies this approach, offering a profile of rapid, deep, and durable efficacy with manageable safety and convenient outpatient administration in its current indication.

Beyond ZYNLONTA, the company is advancing a next-generation prostate-specific membrane antigen (PSMA)-targeting ADC. This preclinical candidate utilizes a differentiated exatecan-based payload with a novel hydrophilic linker. This technological innovation is critical, as it aims to overcome limitations seen in other ADC platforms. Preclinical data for ADC Therapeutics' exatecan-based ADCs, which also include targets like Claudin-6 and ASCT2, have consistently demonstrated a therapeutic index greater than 10. This indicates a wide margin between efficacy and toxicity, a significant advantage for patient safety and tolerability. Furthermore, these ADCs have shown higher potency and a lack of interstitial lung disease (ILD), a known toxicity associated with other topoisomerase-based platforms like DXd. This differentiation in safety and efficacy, particularly the absence of ILD, provides a compelling competitive advantage. The company's R&D efforts are focused on leveraging these benefits to create more effective and safer treatment options, enhancing its competitive moat and long-term growth prospects.

Competitive Dynamics and Strategic Positioning

The DLBCL treatment landscape is characterized by two main segments: complex therapies and broadly accessible therapies. Complex therapies, such as CAR T-cells, transplants, and bispecific antibodies, require specialized infrastructure and expertise, often confined to academic and sophisticated community centers. Broadly accessible therapies, including ADCs, monoclonal antibodies, and chemotherapy, can be administered in outpatient settings by a wider range of physicians.

ADC Therapeutics is strategically positioning ZYNLONTA to excel in both segments through combination therapies. In the third-line plus setting, the launch of bispecifics has led to an estimated 60/40 split between complex and broadly accessible segments. In the second-line setting, where bispecifics are gaining traction in NCCN guidelines for combination use, the split is closer to 25/75. ADC Therapeutics aims to raise the bar on efficacy in both.

The company's LOTIS-7 trial, combining ZYNLONTA with the bispecific antibody glofitamab, targets the complex therapy segment. Data from April 2025 showed an impressive 93.3% overall response rate (ORR) and an 86.7% complete response (CR) rate across 30 efficacy-evaluable patients, with 25 of 26 CR patients maintaining their response. This efficacy profile positions ZYNLONTA plus glofitamab favorably against other bispecific combinations, which have reported CR rates ranging from 47% to 62%, and even against CAR-T therapies in the mid-60s to low 70s range. The unique dosing schedule, with ZYNLONTA administered prior to glofitamab, is hypothesized to debulk tumors and potentially lower cytokine release syndrome (CRS) rates and grades, further differentiating the regimen.

For the broadly accessible segment, the LOTIS-5 confirmatory Phase 3 trial evaluates ZYNLONTA in combination with rituximab. Initial safety lead-in data revealed an 80% ORR and a 50% CR rate with no new safety signals. This combination is designed for patients who may not have access to, are unsuitable for, or have progressed on CAR T or bispecific therapies. This dual approach allows ADC Therapeutics to address diverse patient needs and capture market share across the evolving DLBCL landscape.

Beyond DLBCL, ADC Therapeutics is pursuing opportunities in indolent lymphomas. Encouraging Phase 2 IIT data for ZYNLONTA in relapsed or refractory marginal zone lymphoma (MZL) and follicular lymphoma (FL) show strong activity. In MZL, ZYNLONTA monotherapy demonstrated a 91% ORR and a 70% CR rate. For FL, ZYNLONTA plus rituximab achieved a 98.2% ORR and an 83.6% CR rate in 55 evaluable patients, with a 12-month PFS of 93.9% after a median follow-up of 28 months. While the FL market is more competitive with over 10 agents in Phase 3 trials, MZL presents a higher unmet need and lower competitive intensity, making it a key focus for additional peak annual revenue of $100 million to $200 million.

Financial Performance and Liquidity Strength

ADC Therapeutics' financial performance in 2025 reflects a company in transition, balancing commercialization efforts with significant R&D investments and a strategic restructuring. For the nine months ended September 30, 2025, net product revenues from ZYNLONTA were $51.2 million, a slight decrease of 3.1% from $52.9 million in the same period of 2024. This was primarily attributed to lower sales volume, partially offset by favorable pricing and gross-to-net adjustments. Quarterly product revenues in Q3 2025 were $15.8 million, consistent with the quarterly run rate over the past two years, indicating ZYNLONTA's stable position as a monotherapy in the third-line plus DLBCL market.

License revenues and royalties, however, saw substantial growth, increasing by $6 million (583.4%) to $7.1 million for the nine months ended September 30, 2025. This surge was primarily driven by a $5 million milestone payment received in March 2025 following ZYNLONTA's conditional approval in Health Canada.

Operating expenses reflect the company's strategic reprioritization. Total non-GAAP operating expenses for Q3 2025 decreased by 12.1% year-over-year. Research and development expenses for the three months ended September 30, 2025, decreased by 17.5% to $26.8 million, largely due to reduced spending on discontinued programs (like ADCT-601 and other preclinical solid tumor efforts) and lower clinical supply costs for LOTIS-5. However, R&D for the nine months ended September 30, 2025, increased by 4% to $85.8 million, partly due to increased IND-enabling activities for the PSMA-targeting ADC program. General and administrative expenses also decreased by 16.8% in Q3 2025, driven by lower professional fees and reduced wages.

The strategic restructuring initiated in June 2025 resulted in $13.5 million in restructuring, impairment, and other related costs for the nine months ended September 30, 2025. These costs included $6.2 million in severance, $6.4 million in asset impairment related to the UK facility closure, and $0.8 million for lease retirement costs. These measures, including a 30% global workforce reduction, are expected to significantly reduce future operating expenses and position the company for long-term growth.

Liquidity has been a key focus. As of September 30, 2025, ADC Therapeutics held $234.7 million in cash and cash equivalents. This was further bolstered by a $60 million private placement in October 2025, generating net proceeds of approximately $57.6 million. This financing, following a $100 million private placement in June 2025, has extended the company's expected cash runway to at least 2028. This strengthened balance sheet is critical for funding ongoing ZYNLONTA expansion trials and advancing the preclinical PSMA-targeting ADC.

While net cash used in operating activities increased by $8.1 million for the nine months ended September 30, 2025, due to specific one-time payments and timing of receipts, the financing activities have provided substantial capital.

Outlook and Growth Catalysts

ADC Therapeutics is poised for several value-driving catalysts in the near to medium term. For LOTIS-5, topline data from the Phase 3 confirmatory trial is expected in the first half of 2026, with a supplemental Biologics License Application (sBLA) submission and potential confirmatory approval, publication, and compendia inclusion anticipated in the first half of 2027. This expansion into the second-line DLBCL setting is projected to double the addressable patient population and extend the duration of therapy from an average of three cycles to five to six cycles, potentially increasing ZYNLONTA's peak annual revenue to $200 million to $300 million.

For LOTIS-7, a clinical update on all efficacy-evaluable patients with a minimum of six months of follow-up is expected before the end of 2025. The company plans to engage with the U.S. FDA once sufficient longer-term data are available, with publication and compendia inclusion targeted for the first half of 2027. Management believes that a publication including approximately 100 patients with about a year of follow-up would be sufficient for compendia submission, based on recent precedents for other bispecific combinations. This trial holds the potential to expand ZYNLONTA's total opportunity in DLBCL to $500 million to $800 million in peak annual revenue.

Beyond DLBCL, the company expects additional data from its IITs in indolent lymphomas (MZL and FL) to be shared at medical conferences in 2025 and 2026. These indications could contribute an additional $100 million to $200 million in peak annual revenue, primarily driven by MZL. Furthermore, IND-enabling activities for the PSMA-targeting ADC are on track for completion by the end of 2025, with costs expected to wind down thereafter.

Risks and Considerations

Despite the promising outlook, investors should consider several risks. The competitive landscape in DLBCL is intense, with established CAR T therapies and emerging bispecifics. While ADC Therapeutics aims to differentiate through combination strategies, market penetration and uptake in new indications are not guaranteed. Regulatory approvals and compendia inclusions are critical for ZYNLONTA's expanded use, and any delays or negative outcomes could impact revenue projections.

Changes in international trade policies, such as tariffs, could increase manufacturing and operating costs, as the company's products are manufactured outside the U.S. Additionally, evolving U.S. drug pricing policies, including potential "most favored nation" (MFN) pricing, could significantly reduce ZYNLONTA's U.S. list price and negatively affect revenue. The company has incurred substantial net losses since inception and will continue to rely on additional financing and collaborations to fund operations, which may not always be available on favorable terms.

Conclusion

ADC Therapeutics is at a pivotal juncture, strategically focused on maximizing ZYNLONTA's potential through targeted expansion into earlier lines of DLBCL and indolent lymphomas. The company's proprietary ADC technology, offering superior targeting and a favorable safety profile, provides a strong foundation for its ambitious growth plans. With compelling clinical data emerging from LOTIS-5 and LOTIS-7, and a significantly strengthened balance sheet extending its cash runway to at least 2028, ADC Therapeutics is well-positioned to execute its strategy.

The investment thesis hinges on the successful translation of promising clinical data into regulatory approvals and widespread adoption in new indications, with the majority of revenue growth anticipated within two years post-launch. While competitive pressures and regulatory uncertainties remain, the company's disciplined capital allocation, technological leadership, and clear roadmap for ZYNLONTA's lifecycle management present a compelling opportunity for long-term value creation.