Executive Summary / Key Takeaways

• ADC Therapeutics is pivoting from its foundational third-line DLBCL market with ZYNLONTA to target significantly larger opportunities in earlier lines and indolent lymphomas through strategic combination trials (LOTIS-5, LOTIS-7) and IITs.
• The company's proprietary ADC technology, including the emerging exatecan-based platform, offers potential differentiation through enhanced therapeutic index and novel targets, aiming to provide clinical advantages over existing therapies.
• Despite stable performance in the current indication and achieving commercial profitability for ZYNLONTA in 2024, ADCT faces significant cash burn from R&D investments in expansion trials and pipeline development, necessitating disciplined capital allocation and future financing.
• Key near-term catalysts include updated data from the LOTIS-7 trial (2H 2025), top-line data from the pivotal LOTIS-5 trial (end 2025/early 2026), and updates from indolent lymphoma IITs (ICML June 2025), which are critical for supporting regulatory submissions and Compendia inclusion.
• Successful execution of the expansion strategy could unlock estimated peak U.S. revenues of $600 million to $1 billion across DLBCL and indolent lymphomas, but substantial competition from CAR-Ts, bispecifics, and other ADCs poses significant market access and penetration risks.

Unlocking Value: ADC Therapeutics' Strategic Evolution

ADC Therapeutics SA, a pioneer in the field of antibody drug conjugates (ADCs), is strategically evolving beyond its initial market success to pursue substantially larger opportunities within the oncology landscape. Founded in 2011, the company has dedicated itself to developing a proprietary ADC technology platform designed to deliver potent cytotoxic payloads directly to cancer cells, aiming for an enhanced therapeutic index compared to traditional chemotherapy. This platform, featuring multiple payloads, linkers, and conjugation chemistries, underpins its lead product, ZYNLONTA (loncastuximab tesirine-lpyl), and its emerging pipeline.

ZYNLONTA, a CD19-directed ADC, achieved a significant milestone with accelerated approval from the U.S. FDA in 2021 for the treatment of relapsed or refractory diffuse large B-cell lymphoma (DLBCL) after two or more lines of systemic therapy. This approval established ADCT's presence in a competitive hematology market and provided a commercial foundation. Building on this, ZYNLONTA has since received conditional approvals in Europe, China, and most recently, Health Canada in March 2025, contributing to ex-U.S. revenue streams.

The company's strategy is now firmly focused on leveraging ZYNLONTA's established profile to expand into earlier lines of DLBCL therapy and into indolent lymphomas, areas representing significantly larger patient populations and revenue potential. This pivot is critical for ADCT, which, like many biotech firms, has incurred substantial net losses since inception and requires significant capital investment to fund its research and development efforts.

At the heart of ADCT's approach is its differentiated ADC technology. While specific, quantifiable metrics comparing its platform's performance (e.g., payload stability, tumor penetration efficiency, manufacturing cost advantages) against all competitors are not detailed, the company emphasizes its proprietary design aims for a superior therapeutic index. This is achieved through carefully selected payloads (like the pyrrolobenzodiazepine or PBD dimers used in ZYNLONTA and the exatecan payloads in the newer pipeline), cleavable linkers, and site-specific conjugation. The strategic intent behind this technology is to maximize targeted cell killing while minimizing systemic toxicity, a crucial factor in improving the benefit-risk profile of cancer therapies. The company is also actively advancing its next-generation exatecan-based platform, with preclinical candidates targeting antigens like Claudin-6, PSMA, NaPi2b, and ASCT2 in solid tumors. The stated goal for these programs is to develop differentiated ADCs with high therapeutic indexes, and the company has selected one candidate to move towards an IND filing, expected to be disclosed in 2025. This technological innovation is intended to provide ADCT with a competitive moat, enabling potentially better efficacy, safety, or manufacturing profiles compared to rivals, thereby supporting market penetration and pricing power.

Performance, Pipeline Expansion, and Competitive Dynamics

In the first quarter of 2025, ADC Therapeutics reported total revenues of $23.0 million, up from $18.1 million in the same period of 2024. This increase was primarily driven by a significant rise in license revenues and royalties to $5.6 million (including a $5.0 million milestone from Health Canada's ZYNLONTA approval), compared to $0.2 million in Q1 2024. Net product revenues from U.S. ZYNLONTA sales were $17.4 million, a slight decrease of 2.5% from $17.8 million in Q1 2024, attributed to lower sales volume partially offset by a higher price and favorable gross-to-net adjustments. Despite quarter-to-quarter variability, ZYNLONTA's commercial business achieved profitability in 2024 and is expected to be self-funding going forward, providing a stable base for the company.

Operating expenses totaled $51.5 million in Q1 2025, a slight decrease from $51.7 million in Q1 2024, reflecting ongoing disciplined capital allocation and cost-cutting initiatives, particularly in selling, marketing, and general and administrative expenses. Selling and marketing costs decreased by 7.3% to $10.6 million, and G&A expenses decreased by 17.3% to $10.0 million. However, research and development expenses increased by 12.4% to $28.9 million, driven by increased investment in the preclinical pipeline, partially offset by decreased costs in certain ZYNLONTA trials and the discontinuation of the ADCT-601 (AXL) and ADCT-602 (CD22) programs based on benefit-risk assessments and available clinical data. The net loss for Q1 2025 was $38.6 million, an improvement from a net loss of $46.6 million in Q1 2024, primarily due to higher license revenue and lower operating expenses.

The competitive landscape in DLBCL is intense, featuring established players like AbbVie (ABBV), Pfizer (PFE), AstraZeneca (AZN), and Gilead Sciences (GILD), offering a range of therapies including CAR-T, bispecifics, other ADCs, and chemotherapy. Bispecific antibodies have significantly penetrated the third-line plus market, capturing approximately one-third of the share. Newer entrants, such as the recently approved ADCETRIS plus R2 combination in the third-line setting, are also vying for market position, although ADCT believes its impact will be limited, primarily replacing older regimens.

Compared to larger competitors like AbbVie (TTM Gross Margin: 70%, Operating Margin: 30%), Pfizer (TTM Gross Margin: 74%, Operating Margin: 23%), and AstraZeneca (TTM Gross Margin: 81%, Operating Margin: 18%), ADCT's financial profile reflects its earlier stage, with a TTM Gross Profit Margin of 90.97% (indicative of high-value product but potentially influenced by early inventory dynamics) but negative TTM Operating and Net Profit Margins (-178.81% and -213.49%, respectively) due to heavy R&D investment. While larger companies benefit from diversified revenue streams and scale, ADCT's focus on niche ADC innovation, particularly leveraging its proprietary technology, is its core differentiation strategy.

The key to ADCT's future growth lies in the success of its expansion trials. The pivotal Phase 3 LOTIS-5 trial, evaluating ZYNLONTA in combination with rituximab in second-line plus DLBCL, completed enrollment by the end of 2024 and passed an interim futility analysis in Q2 2024, increasing confidence in its potential. This trial is powered to show a clinically meaningful improvement over the R-GemOx control arm, which has demonstrated a median PFS of around 3.6 months in recent studies. ADCT believes this combination can offer competitive efficacy with a favorable safety profile, avoiding the irreversible toxicities of chemotherapy and providing a broadly accessible option for patients not suitable for or progressing on CAR-T or bispecifics. Management estimates this opportunity could drive $200 million to $300 million in peak U.S. sales and potentially lead to company profitability.

The Phase 1b LOTIS-7 trial, combining ZYNLONTA with glofitamab in second-line plus DLBCL, represents another significant opportunity. The rationale is to combine two potent agents with complementary mechanisms to achieve additive or synergistic efficacy while potentially mitigating the high-grade CRS/ICANS associated with bispecifics by using ZYNLONTA to debulk tumors prior to glofitamab administration. Early data presented in the Q1 2025 abstract for 22 efficacy-evaluable patients showed a remarkable 95.5% overall response rate and a 90.9% complete response rate, with only low-grade CRS/ICANS observed. These results are highly encouraging compared to other bispecific combination trials which have shown CR rates typically ranging from 47% to 62%, and even competitive with CAR-T therapies (mid-60s to low 70s CR rates). Enrollment of 40 patients in the dose expansion arm was reached in Q1 2025, and the company is assessing expanding enrollment to 100 patients to support regulatory and Compendia submissions. Updated data on LOTIS-7 are expected in the second half of 2025. Management believes this combination has the potential to be a preferred bispecific option, contributing to a total DLBCL peak revenue opportunity of $500 million to $800 million in the U.S.

Beyond DLBCL, promising data from investigator-initiated Phase 2 trials of ZYNLONTA in indolent lymphomas (MZL monotherapy and FL plus rituximab) presented at ASH 2024 and ICML 2025 suggest the potential for rapid, deep, and durable responses with a manageable profile. High complete metabolic response rates observed in these studies indicate the possibility of providing patients with years of remission. Given the unmet need, ADCT plans to discuss regulatory pathways and seek Compendia inclusion for these indications, which could add another $100 million to $200 million in peak U.S. revenue.

Financial Position, Outlook, and Risks

As of March 31, 2025, ADC Therapeutics held $194.7 million in cash and cash equivalents, down from $250.9 million at the end of 2024. The decrease was primarily driven by net cash used in operating activities ($56.3 million in Q1 2025), impacted by the timing of cash payments including the 2023 discarded drug rebate ($7.2 million) and annual bonuses ($4.0 million increase), as well as the timing of partner receipts. The company's cash position is expected to fund operations into the second half of 2026, supported by existing cash, ZYNLONTA sales, expected milestones/royalties, and proceeds from a $100 million PIPE financing announced in June 2025 (not reflected in the March 31, 2025 cash balance).

The company's financial outlook is heavily dependent on the successful execution of its clinical development strategy and subsequent market access. Key catalysts expected within the cash runway include reaching the pre-specified PFS events for LOTIS-5 by the end of 2025 (with top-line data thereafter), updated LOTIS-7 data in the second half of 2025, and further updates from the indolent lymphoma IITs. These data are crucial for supporting regulatory submissions and achieving Compendia listings, which are necessary to unlock the estimated peak revenue potential across expanded indications.

However, significant risks remain. The company continues to incur substantial losses and will require additional capital beyond its current runway to fully fund its pipeline and commercialization efforts. The ability to raise this capital on favorable terms is subject to market conditions. Clinical trials may not yield sufficient data for approval or may face delays. The competitive landscape is challenging, and even with positive data, market penetration may be slower or less extensive than anticipated due to established competitors and evolving treatment paradigms. Manufacturing complexity and reliance on third parties also pose operational risks. The company's indebtedness, including the senior secured term loan (effective interest rate 16.15% at March 31, 2025) and the deferred royalty obligation ($326.8 million long-term liability at March 31, 2025), also impacts its financial flexibility and cash flow.

Conclusion

ADC Therapeutics stands at a pivotal juncture, seeking to transform its financial trajectory by expanding the reach of its approved ADC, ZYNLONTA, into larger market segments within hematology. Leveraging a proprietary technology platform and a disciplined approach to capital allocation, the company has established a stable commercial base in third-line DLBCL and is now focused on unlocking multi-billion dollar peak revenue opportunities through strategic combination trials in earlier lines of DLBCL and in indolent lymphomas.

The encouraging early data from LOTIS-7 and the progress in LOTIS-5 and the indolent lymphoma IITs provide a basis for optimism regarding the potential to offer differentiated, highly efficacious, and manageable treatment options in competitive markets. While the path forward is marked by significant clinical, regulatory, and commercial risks, successful execution on the upcoming data catalysts and subsequent market access efforts could fundamentally alter ADCT's financial profile, potentially leading to profitability and substantial value creation for investors. The company's ability to manage its cash burn, secure future funding, and effectively compete against larger, more established players will be critical determinants of its long-term success.