adc-20240331

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the quarterly period ended March 31, 2024
OR
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the transition period from to

Commission File Number: 001-39071

ADC Therapeutics SA
(Exact name of registrant as specified in its charter)


Switzerland			Not Applicable
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

Biopôle Route de la Corniche 3B 1066 Epalinges Switzerland (Address of principal executive offices) (Zip code)			+41 21 653 02 00 (Registrant’s telephone number)

N/A

(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Shares, par value CHF 0.08 per share

ADCT

The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☒

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of common shares outstanding was 82,814,000 as of May 1, 2024.

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PART I: FINA NCIAL INFORMATION			1
C ondensed Cons olidated Balance Sheets (Unaudited) - M a rch 31, 2024 and December 31, 2023			1
Condensed Consolidated State ments of Operation (Unaudited) - Three months ended March 31, 2024 and 2023			2
Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - Three months ended M a rch 31, 2024 and 2023			3
Condensed Consolidated Statements of Changes in S hareholders ’ Equity (Deficit) (Unaudited) - Three months ended March 31, 2024 and 2023			4
Condensed Consolidated S tatements of Cash Flows (Unaudited) - Three months ended March 31, 2024 and 2023			5
Notes to the Consolidated Fi nancial Statements (Unaudited)			6
Item 2 . Management’s Discussion and Analysis of Financial Condition and Results of Operations			18
Item 3 . Quantitative and Qualitative Disclosures About Market Risk			28
Item 4 . Controls and Procedures			28
PART II: OTHER INFORMATION			28
Item 1 . Legal Proceedings			28
Item 1A . Risk Factors			28
Item 2. Unregistered Sales of Equity Sec urities and Use of Proceeds			28
Item 3. Defaults Upon Senior Securities			29
Item 4. M i ne Safety Disclosure s			29
Item 5. Other Information			29
Item 6. Exhibits			29
Signatures			30

Unless otherwise indicated or the context otherwise requires, all references in this Annual Report to “ADC Therapeutics,” “ADCT,” the “Company,” “we,” “our,” “ours,” “us” or similar terms refer to ADC Therapeutics SA and its consolidated subsidiaries.

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FORWARD-LOOKING STATEMENTS

This Quarterly Report contains statements that constitute forward-looking statements. All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future catalysts, results of operations and financial position, business and commercial strategy, market opportunities, products and product candidates, research pipeline, ongoing and planned preclinical studies and clinical trials, regulatory submissions and approvals, research and development costs, projected revenues and expenses and the timing of revenues and expenses, timing and likelihood of success, as well as plans and objectives of management for future operations are forward-looking statements. Many of the forward-looking statements contained in this Quarterly Report can be identified by the use of forward-looking words such as “anticipate,” “believe,” “could,” “expect,” “should,” “plan,” “intend,” “estimate,” “will” and “potential,” among others.

Forward-looking statements are based on our management’s beliefs and assumptions and on information available to our management at the time such statements are made. Such statements are subject to known and unknown risks and uncertainties, and actual results may differ materially from those expressed or implied in the forward-looking statements due to various factors, including, but not limited to:

•the substantial net losses that we have incurred since our inception, our expectation to continue to incur losses for the foreseeable future and our need to raise additional capital to fund our operations and execute our business plan;

•our indebtedness under the loan agreement and guaranty (the “Loan Agreement”) with certain affiliates and/or funds managed by each of Oaktree Capital Management, L.P. and Owl Rock Capital Advisors LLC, as lenders, and Blue Owl Opportunistic Master Fund I, L.P., as administrative agent, and the associated restrictive covenants thereunder;

•the purchase and sale agreement (the “HCR Agreement”) with certain entities managed by HealthCare Royalty Management, LLC (“HCR”) and its negative effect on the amount of cash that we are able to generate from sales of, and licensing agreements involving, ZYNLONTA and on our attractiveness as an acquisition target;

•our ability to complete clinical trials on expected timelines, if at all;

•the timing, outcome and results of ongoing or planned clinical trials, whether the Company sponsored trials or through investigator initiated trials, and the sufficiency of such results;

•undesirable side effects or adverse events of our products and product candidates;

•our and our partners’ ability to obtain and maintain regulatory approval for our product and product candidates;

•our and our partners’ ability to successfully commercialize our products;

•the availability and scope of coverage and reimbursement for our products;

•the complexity and difficulty of manufacturing our products and product candidates;

•the substantial competition in our industry, including new technologies and therapies;

•the timing and results of any early research projects and future clinical outcomes;

•our reliance on third parties for preclinical studies and clinical trials and for the manufacture, production, storage and distribution of our products and product candidates and certain commercialization activities for our products;

•our ability to obtain, maintain and protect our intellectual property rights and our ability to operate our business without infringing on the intellectual property rights of others;

•our estimates regarding future revenue, expenses and needs for additional financing;

•the size and growth potential of the markets for our products and product candidates potential product liability lawsuits and product recalls;

•and those identified in the “Item 1A. Risk Factors” section contained in this Quarterly Report and our Annual Report on Form 10-K, and in our other reports filed with the U.S. Securities and Exchange Commission (the “SEC”), from time to time thereafter.

Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements, whether as a result of any new information, future events, changed circumstances or otherwise.

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In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share amounts)


	March 31, 2024		December 31, 2023
ASSETS
Current assets
Cash and cash equivalents	$	234,285	$	278,598
Accounts receivable, net	23,186		25,182
Inventory	15,997		16,177
Prepaid expenses and other current assets	16,738		16,334
Total current assets	290,206		336,291

Property and equipment, net	5,785		5,622
Operating lease right-of-use assets	10,059		10,511
Interest in joint venture	930		1,647

Other long-term assets	986		711

Total assets	$	307,966	$	354,782

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	14,315	$	15,569
Accrued expenses and other current liabilities	48,670		52,101

Total current liabilities	62,985		67,670

Deferred royalty obligation	310,010		303,572
Senior secured term loans	113,234		112,730
Operating lease liabilities, long-term	9,662		10,180
Other long-term liabilities	6,524		8,879
Total liabilities	502,415		503,031
Commitments and contingencies (See Note 13)
Shareholders’ equity
Common shares, at CHF 0.08 par value	7,312		7,312
Issued shares: 89,041,946 at March 31, 2024 and December 31, 2023; outstanding shares: 82,777,226 at March 31, 2024 and 82,293,137 at December 31, 2023
Additional paid-in capital	1,181,020		1,180,545
Treasury shares	(502)		(541)
At March 31, 2024: $6,264,720 and December 31, 2023: $6,748,809
Accumulated other comprehensive loss	(201)		(93)
Accumulated deficit	(1,382,078)		(1,335,472)
Total shareholders’ (deficit) equity	(194,449)		(148,249)

Total liabilities and shareholders’ equity	$	307,966	$	354,782

The accompanying notes are an integral part of these condensed consolidated financial statements.


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ADC Therapeutics SA

CONDENSED CONSOLIDATED STATEMENTS OF OPERATION

(Unaudited)

(in thousands, except share and per share amounts)


	For the Three Months Ended March 31,
	2024		2023
Revenue
Product revenues, net	$	17,848	$	18,953
License revenues and royalties	205		39
Total revenue, net	18,053		18,992
Operating expense
Cost of product sales	(2,510)		27
Research and development	(25,735)		(38,375)
Selling and marketing	(11,390)		(15,351)
General and administrative	(12,031)		(15,503)
Total operating expense	(51,666)		(69,202)
Loss from operations	(33,613)		(50,210)
Other income (expense)
Interest income	2,948		2,175
Interest expense	(12,496)		(10,291)
Other, net	(2,595)		833

Total other expense	(12,143)		(7,283)
Loss before income taxes	(45,756)		(57,493)
Income tax expense	(163)		(518)
Loss before equity in net losses of joint venture	(45,919)		(58,011)
Equity in net losses of joint venture	(687)		(1,363)
Net loss	$	(46,606)	$	(59,374)

Net loss per share
Net loss per share, basic and diluted	$	(0.56)	$	(0.73)
Weighted average shares outstanding, basic and diluted	82,552,322		80,805,770

The accompanying notes are an integral part of these condensed consolidated financial statements.


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ADC Therapeutics SA

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

(in thousands)


	For the Three Months Ended March 31,
	2024		2023
Net loss	$	(46,606)	$	(59,374)

Other comprehensive (loss) income:
Remeasurement of defined benefit plan	—		(39)
Currency translation differences	(78)		141
Other comprehensive (loss) income before share of other comprehensive loss in joint venture	(78)		102
Share of other comprehensive loss in joint venture	(30)		(256)
Other comprehensive loss	(108)		(154)

Total comprehensive loss	$	(46,714)	$	(59,528)

The accompanying notes are an integral part of these condensed consolidated financial statements.


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ADC Therapeutics SA

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

For the Three Months Ended March 31, 2024


(in thousands, except share amounts)	Number of shares	Common shares, par value		Additional paid-in capital		Number of shares (held or received)/delivered	Treasury shares		Accumulated other comprehensive (loss) income		Accumulated deficit		Total
January 1, 2024	89,041,946	$	7,312	$	1,180,545	(6,748,809)	$	(541)	$	(93)	$	(1,335,472)	$	(148,249)
Loss for the period	—	—		—		—	—		—		(46,606)		(46,606)

Foreign currency translation adjustment	—	—		—		—	—		(78)		—		(78)
Other comprehensive loss before share of other comprehensive loss in joint venture	—	—		—		—	—		(78)		—		(78)
Share of other comprehensive loss in joint venture	—	—		—		—	—		(30)		—		(30)
Total other comprehensive loss	—	—		—		—	—		(108)		—		(108)
Total comprehensive loss for the period	—	—		—		—	—		(108)		(46,606)		(46,714)
Vestings of RSUs	—	—		(20)		248,030	20		—		—		—
Exercise of options	—	—		32		6,384	1		—		—		33
Issuance of shares, 2022 Employee Stock Purchase Plan	—	—		305		229,675	18		—		—		323
Share-based compensation expense	—	—		158		—	—		—		—		158
	—	—		475		484,089	39		—		—		514
March 31, 2024	89,041,946	$	7,312	$	1,181,020	(6,264,720)	$	(502)	$	(201)	$	(1,382,078)	$	(194,449)

For the Three Months Ended March 31, 2023



(in thousands, except share amounts)	Number of shares	Common shares, par value		Additional paid-in capital		Number of shares (held or received)/delivered	Treasury shares		Accumulated other comprehensive (loss) income		Accumulated deficit		Total
January 1, 2023	89,041,946	$	7,312	$	1,166,414	(8,399,419)	$	(679)	$	1,823	$	(1,095,419)	$	79,451

Loss for the period	—	—		—		—	—		—		(59,374)		(59,374)

Remeasurement of defined benefit pension liability	—	—		—		—	—		(39)		—		(39)
Foreign currency translation adjustment	—	—		—		—	—		141		—		141
Other comprehensive income before share of other comprehensive loss in joint venture	—	—		—		—	—		102		—		102
Share of other comprehensive loss in joint venture	—	—		—		—	—		(256)		—		(256)
Total other comprehensive loss	—	—		—		—	—		(154)		—		(154)
Total comprehensive loss for the period	—	—		—		—	—		(154)		(59,374)		(59,528)

Vestings of RSUs	—	—		(23)		254,891	23		—		—		—
Issuance of shares, 2022 Employee Stock Purchase Plan	—	—		414		130,348	11		—		—		425
Share-based compensation expense	—	—		8,074		—	—		—		—		8,074
	—	—		8,465		385,239	34		—		—		8,499
March 31, 2023	89,041,946	$	7,312	$	1,174,879	(8,014,180)	$	(645)	$	1,669	$	(1,154,793)	$	28,422

The accompanying notes are an integral part of these condensed consolidated financial statements.


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ADC Therapeutics SA

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)


	For the Three Months Ended March 31,
	2024		2023
Cash used in operating activities
Net loss	$	(

SEC Form 10-Q filed by ADC Therapeutics SA