ADC Therapeutics SA [ADCT] Filings

10-Q 1 adc-20240630.htm 10-Q adc-20240630

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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 June 30, 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 96,647,450 as of August 1, 2024.

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PART I: FINANCIAL INFORMATION			1
Condensed Consolidated Balance Sheets (Unaudited) - June 3 0 , 2024 and December 31, 2023			1
Condensed Consolidated Statements of Operation s (Unaudited) - Three and six months ended June 30 , 2024 and 2023			2
Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - Three and six months ended June 3 0 , 2024 and 2023			3
Condensed Consolidated Statements of Changes in Shareholders’ Equity (Deficit) (Unaudited) - Three and six months ended June 30 , 2024 and 2023			4
Condensed Consolidated Statements of Cash Flows (Unaudited) - Six months ended June 30 , 2024 and 2023			6
Notes to the C o ndensed Consolidated Financial Statements (Unaudited)			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			22
Item 3. Quantitative and Qualitative Disclosures About Market Risk			37
Item 4. Controls and Procedures			37
PART II: OTHER INFORMATION			38
Item 1. Legal Proceedings			38
Item 1A. Risk Factors			38
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			38
Item 3. Defaults Upon Senior Securities			39
Item 4. Mine Safety Disclosures			39
Item 5. Other Information			39
Item 6. Exhibits			39
Signatures			40

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;

•our ability to identify and successfully enter into strategic collaborations for research or licensing opportunities in the future;

•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)


	June 30, 2024		December 31, 2023
ASSETS
Current assets
Cash and cash equivalents	$	300,119	$	278,598
Accounts receivable, net	22,868		25,182
Inventory	15,191		16,177
Prepaid expenses and other current assets	17,181		16,334
Total current assets	355,359		336,291

Property and equipment, net	5,483		5,622
Operating lease right-of-use assets	9,685		10,511
Interest in joint venture	260		1,647

Other long-term assets	992		711

Total assets	$	371,779	$	354,782

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	10,708	$	15,569
Accrued expenses and other current liabilities	46,924		52,101

Total current liabilities	57,632		67,670

Deferred royalty obligation, long-term	316,211		303,572
Senior secured term loans	113,673		112,730
Operating lease liabilities, long-term	9,309		10,180
Other long-term liabilities	6,624		8,879
Total liabilities	503,449		503,031
Commitments and contingencies (See Note 13)
Shareholders’ equity (deficit)
Common shares, at CHF 0.08 par value	8,233		7,312
Issued shares: 99,453,858 at June 30, 2024 and 89,041,946 December 31, 2023; outstanding shares: 96,469,641 at June 30, 2024 and 82,293,137 at December 31, 2023
Additional paid-in capital	1,279,296		1,180,545
Treasury shares	(239)		(541)
At June 30, 2024: 2,984,217 and December 31, 2023: 6,748,809
Accumulated other comprehensive loss	(338)		(93)
Accumulated deficit	(1,418,622)		(1,335,472)
Total shareholders’ equity (deficit)	(131,670)		(148,249)

Total liabilities and shareholders’ equity (deficit)	$	371,779	$	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 OPERATIONS

(Unaudited)

(in thousands, except share and per share amounts)


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2024		2023		2024		2023
Revenue
Product revenues, net	$	17,030	$	19,197	$	34,878	$	38,150
License revenues and royalties	380		86		585		125
Total revenue, net	17,410		19,283		35,463		38,275
Operating expense
Cost of product sales	(1,217)		(1,132)		(3,727)		(1,105)
Research and development	(24,295)		(31,342)		(50,030)		(69,717)
Selling and marketing	(10,701)		(14,456)		(22,091)		(29,807)
General and administrative	(10,238)		(12,002)		(22,269)		(27,505)
Total operating expense	(46,451)		(58,932)		(98,117)		(128,134)
Loss from operations	(29,041)		(39,649)		(62,654)		(89,859)
Other income (expense)
Interest income	3,253		2,372		6,201		4,547
Interest expense	(12,679)		(10,309)		(25,175)		(20,600)
Other, net	2,754		(5,067)		159		(4,234)

Total other expense, net	(6,672)		(13,004)		(18,815)		(20,287)
Loss before income taxes	(35,713)		(52,653)		(81,469)		(110,146)
Income tax (expense) benefit	(234)		4,498		(397)		3,980
Loss before equity in net losses of joint venture	(35,947)		(48,155)		(81,866)		(106,166)
Equity in net losses of joint venture	(597)		(767)		(1,284)		(2,130)
Net loss	$	(36,544)	$	(48,922)	$	(83,150)	$	(108,296)
Net loss per share
Net loss per share, basic and diluted	$	(0.38)	$	(0.60)	$	(0.93)	$	(1.33)
Weighted average shares outstanding, basic and diluted	95,691,245		81,471,127		89,121,783		81,140,287

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 June 30,				For the Six Months Ended June 30,
	2024		2023		2024		2023
Net loss	$	(36,544)	$	(48,922)	$	(83,150)	$	(108,296)

Other comprehensive (loss) income:
Remeasurement of defined benefit plan	(81)		(40)		(81)		(79)
Currency translation differences	17		170		(61)		311
Other comprehensive (loss) income before share of other comprehensive loss in joint venture	(64)		130		(142)		232
Share of other comprehensive loss in joint venture	(73)		(444)		(103)		(700)
Other comprehensive loss	(137)		(314)		(245)		(468)

Total comprehensive loss	$	(36,681)	$	(49,236)	$	(83,395)	$	(108,764)

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 and Six Months Ended June 30, 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
April 1, 2024	89,041,946	$	7,312	$	1,181,020	(6,264,720)	$	(502)	$	(201)	$	(1,382,078)	$	(194,449)
Loss for the period	—	—		—		—	—		—		(36,544)		(36,544)
Remeasurement of defined benefit pension liability	—	—		—		—	—		(81)		—		(81)
Foreign currency translation adjustment	—	—		—		—	—		17		—		17
Other comprehensive loss before share of other comprehensive loss in joint venture	—	—		—		—	—		(64)		—		(64)
Share of other comprehensive loss in joint venture	—	—		—		—	—		(73)		—		(73)
Total other comprehensive loss	—	—		—		—	—		(137)		—		(137)
Total comprehensive loss for the period	—	—		—		—	—		(137)		(36,544)		(36,681)
Vestings of RSUs	—	—		(22)		254,899	22		—		—		—
Exercise of options	—	—		40		25,604	1		—		—		41

Issuance of shares, underwritten offering, net of transaction costs	10,411,912	921		59,345		3,000,000	240		—		—		60,506
Issuance of warrants, underwritten offering, net of transaction costs	—	—		36,925		—	—		—		—		36,925
Share-based compensation expense	—	—		1,988		—	—		—		—		1,988
	10,411,912	921		98,276		3,280,503	263		—		—		99,460
June 30, 2024	99,453,858	$	8,233	$	1,279,296	(2,984,217)	$	(239)	$	(338)	$	(1,418,622)	$	(131,670)



(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	—	—		—		—	—		—		(83,150)		(83,150)
Remeasurement of defined benefit pension liability	—	—		—		—	—		(81)		—		(81)
Foreign currency translation adjustment	—	—		—		—	—		(61)		—		(61)
Other comprehensive loss before share of other comprehensive loss in joint venture	—	—		—		—	—		(142)		—		(142)
Share of other comprehensive loss in joint venture	—	—		—		—	—		(103)		—		(103)
Total other comprehensive loss	—	—		—		—	—		(245)		—		(245)
Total comprehensive loss for the period	—	—		—		—	—		(245)		(83,150)		(83,395)

Vestings of RSUs	—	—		(42)		502,929	42		—		—		—
Exercise of options	—	—		72		31,988	2		—		—		74
Issuance of shares, 2022 Employee Stock Purchase Plan	—	—		305		229,675	18		—		—		323
Issuance of shares, underwritten offering, net of transaction costs	10,411,912	921		59,345		3,000,000	240		—		—		60,506
Issuance of warrants, underwritten offering, net of transaction costs	—	—		36,925		—	—		—		—		36,925
Share-based compensation expense	—	—		2,146		—	—		—		—		2,146
	10,411,912	921		98,751		3,764,592	302		—		—		99,974
June 30, 2024	99,453,858	$	8,233	$	1,279,296	(2,984,217)	$	(239)	$	(338)	$	(1,418,622)	$	(131,670)

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 and Six Months Ended June 30, 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
April 1, 2023	89,041,946	$	7,312	$	1,174,879	(8,014,180)	$	(645)	$	1,669	$	(1,154,793)	$	28,422
Loss for the period	—	—		—		—	—		—		(48,922)		(48,922)
Remeasurement of defined benefit pension liability	—	—		—		—	—		(40)		—		(40)
Foreign currency translation adjustment	—	—		—		—	—		170		—		170
Other comprehensive income before share of other comprehensive loss in joint venture	—	—		—		—	—		130		—		130
Share of other comprehensive loss in joint venture	—	—		—		—	—		(444)		—		(444)
Total other comprehensive loss	—	—		—		—	—		(314)		—		(314)
Total comprehensive loss for the period	—	—		—		—	—		(314)		(48,922)		(49,236)
Vestings of RSUs	—	—		(88)		1,014,215	88		—		—		—
Share-based compensation expense	—	—		1,118		—	—		—		—		1,118
	—	—		1,030		1,014,215	88		—		—		1,118
June 30, 2023	89,041,946	$	7,312	$	1,175,909	(6,999,965)	$	(557)	$	1,355	$	(1,203,715)	$	(19,696)



(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	—	—		—		—	—		—		(108,296)		(108,296)
Remeasurement of defined benefit pension liability	—	—		—		—	—		(79)		—		(79)
Foreign currency translation adjustment	—	—		—		—	—		311		—		311
Other comprehensive income before share of other comprehensive loss in joint venture	—	—		—		—	—		232		—		232
Share of other comprehensive loss in joint venture	—	—		—		—	—		(700)		—		(700)
Total other comprehensive loss	—	—		—		—	—		(468)		—		(468)
Total comprehensive loss for the period	—	—		—		—	—		(468)		(108,296)		(108,764)

Vestings of RSUs	—	—		(111)		1,269,106	111		—		—		—
Issuance of shares, 2022 Employee Stock Purchase Plan	—	—		414		130,348	11		—		—		425
Share-based compensation expense	—	—		9,192		—	—		—		—		9,192
	—	—		9,495		1,399,454	122		—		—		9,617
June 30, 2023	89,041,946	$	7,312	$	1,175,909	(6,999,965)	$	(557)	$	1,355	$	(1,203,715)	$	(19,696)

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 Six Months Ended June 30,
	2024		2023
Cash used in operating activities
Net loss	$	(83,150)	$	(108,296)
Adjustments to reconcile net loss to net cash used in operations:
Deferred income taxes	—		(5,172)
Share-based compensation expense	2,146		9,192
Accretion expense of deferred royalty obligation	13,790		5,346
Amortization of debt discount, senior secured term loan	943		1,503
Cumulative catch-up adjustment, deferred royalty obligation	(526)		5,288
Write-downs of inventory	1,036		780
Depreciation	657		536

Amortization of operating lease right-of-use assets	1,024		999

Share of results in joint venture	1,284		2,130


Warrant obligations, increase (decrease) in fair value	838		(636)


Other	(240)		18
Changes in operating assets and liabilities:
Accounts receivable, net	2,314		49,089
Inventory	(50)		(2,400)
Other current assets	(859)		4,930
Other long-term assets	(287)		200
Accounts payable	(6,083)		(687)
Accrued expenses and other short-term liabilities	(5,732)		(15,588)

Operating lease liabilities	(1,028)		(714)
Other long-term liabilities	(3,017)		3,102
Net cash used in operating activities	(76,940)		(50,380)
Cash flows from investing activities
Payment for purchases of property and equipment	(561)		(2,228)
Net cash used in investing activities	(561)		(2,228)
Cash flows provided by financing activities
Proceeds from common shares, 2024 Equity Offering, net of transaction costs	61,731		—
Proceeds from 2024 Pre-Funded Warrants, net of transaction costs	36,925		—
Proceeds from deferred royalty transaction, net of transaction costs	—		73,102
Proceeds from share issuance under stock purchase plan	323		425
Proceeds from the exercise of stock options	74		—
Net cash provided by financing activities	99,053		73,527
Net increase in cash and cash equivalents	21,552		20,919
Exchange (losses)/gains on cash and cash equivalents	(31)		150
Cash and cash equivalents at beginning of period	278,598		326,441
Cash and cash equivalents at end of period	$	300,119	$	347,510
Supplemental Cash Flow Information:
Interest paid	$	7,874	$	7,522
Interest received	7,635		5,167
Payments made under royalty financing transaction	2,569		6,230

Supplemental Non-Cash Investing and Financing Activities:
Transaction costs recorded in Accounts payable and other current liabilities	1,225		—
Capital expenditures recorded in Accounts payable and Accrued expenses and other current liabilities	—		270

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


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ADC Therapeutics SA
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)

1.Description of Business and Organization

ADC Therapeutics is a leading, commercial-stage global pioneer in the field of antibody drug conjugates (“ADCs”) committed to advancing its proprietary ADC technology platform to transform the treatment paradigm for patients with hematologic malignancies and solid tumors.

Since its inception, the Company has devoted its resources to developing a validated and differentiated technology platform with multiple payloads and targets, a robust next-generation research and development toolbox, and specialized end-to-end capabilities. The Company generates sales from its flagship product, ZYNLONTA, which is currently approved in the U.S. for the treatment of relapsed or refractory diffuse large B-cell lymphoma (“DLBCL”) in the third-line setting and has also been granted conditional marketing authorization in Europe. Additionally, the Company is seeking to expand ZYNLONTA into earlier lines of therapy and indolent lymphomas, and is committed to advancing its portfolio and pipeline through its continued research, development, regulatory and commercialization activities.

The Company was incorporated on June 6, 2011 under the laws of Switzerland, with its registered office located at Route de la Corniche 3B, 1066 Epalinges, Switzerland. The Company has three wholly-owned subsidiaries: ADC Therapeutics America, Inc. (“ADCT America”), which was incorporated in Delaware, USA on December 10, 2014, ADC Therapeutics (UK) Ltd (“ADCT UK”), which was incorporated in England on December 12, 2014 and ADC Therapeutics (NL) B.V. which was incorporated in the Netherlands on February 25, 2022. The Company and its three subsidiaries form the ADCT Group (the “Group”).

All references to “ADC Therapeutics,” “the Company", “we,” “us,” and “our” refer to ADC Therapeutics SA and its unaudited condensed consolidated subsidiaries unless otherwise indicated.

2.Summary of Significant Accounting Policies

Basis of preparation and principles of consolidation

These accompanying unaudited condensed consolidated financial statements, which include the accounts of the Company and its wholly-owned subsidiaries, have been prepared following the requirements of the U.S. Securities and Exchange Commission for interim reporting. As permitted under those rules, certain footnotes and other financial information that are normally required by U.S. generally accepted accounting principles, or U.S. GAAP, can be condensed or omitted. All intercompany transactions and balances have been eliminated in consolidation. The information included in this Quarterly Report on Form 10‑Q should be read in conjunction with our annual audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10‑K for the year ended December 31, 2023.

In the opinion of management, these condensed consolidated financial statements have been prepared on the same basis as the annual audited consolidated financial statements and include all adjustments, consisting only of normal recurring adjustments, considered necessary for the fair statement of our financial position and operating results. The results for the three and six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024, for any other interim period or for any future period.

The Company’s significant accounting policies have not changed substantially from those previously described in the Company’s Annual Report on Form 10‑K for the year ended December 31, 2023.

The Company is managed and operated as one business segment, focused on the global development and commercialization of targeted ADC cancer therapies. A single management team that reports to the chief operating decision-maker, the Chief Executive Officer, comprehensively manages and allocates resources at the global corporate level. Accordingly, the Company views its business and manages its operations as a single operating segment.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures in the unaudited condensed consolidated financial statements and accompanying notes. Management bases its estimates on


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historical experience and on assumptions believed to be reasonable under the circumstances. Actual results could differ materially from those estimates.

Going Concern

We are responsible for evaluating, and providing disclosure of uncertainties about, our ability to continue as a going concern. As of June 30, 2024, we had cash and cash equivalents of $300.1 million. Based on our evaluation, we concluded there is no substantial doubt about our ability to continue as a going concern within one year from the date the unaudited condensed consolidated financial statements were issued.

Recent Accounting Pronouncements

New accounting pronouncements which have been adopted

There are no accounting pronouncements that the Company has recently adopted.

Issued but not yet adopted

In November 2023, the FASB amended guidance in ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The revised guidance requires that a public entity disclose significant segment expenses regularly reviewed by the chief operating decision maker (CODM), including public entities with a single reportable segment. The amended guidance is effective for fiscal years beginning in January 2024 and interim periods beginning January 2025 on a retrospective basis. Early adoption is permitted. The Company is currently evaluating the effect that adoption of ASU 2023-07 will have on its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU requires the annual financial statements to include consistent categories and greater disaggregation of information in the rate reconciliation, and income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for the Company’s annual reporting periods beginning in January 2025. Adoption is either with a prospective method or a fully retrospective method of transition. Early adoption is permitted. The Company is currently evaluating the effect that adoption of ASU 2023-09 will have on its consolidated financial statements.

3.Fair value measurements

The carrying amount of Cash and cash equivalents, Accounts Receivable, net and Accounts payable is a reasonable approximation of fair value due to the short-term nature of these assets and liabilities. Financial liabilities that are not measured at fair value on a recurring basis include our senior secured term loan. The estimated fair value of debt is based on Level 2 inputs, including our understanding of current market rates we could obtain for similar loans.

The Deerfield warrants, which are measured at fair value on a recurring basis, were as follows as of June 30, 2024 and December 31, 2023:


(in thousands)	Total		Quoted prices in active markets for identical assets and liabilities (Level 1)		Other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
June 30, 2024:
Deerfield warrant obligation	$	1,134	$	—	$	1,134	$	—

Total	$	1,134	$	—	$	1,134	$	—


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(in thousands)	Total		Quoted prices in active markets for identical assets and liabilities (Level 1)		Other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
December 31, 2023:
Deerfield warrant obligation	$	296	$	—	$	296	$	—

Total	$	296	$	—	$	296	$	—

Fair values must be estimated at the end of each reporting period with regard to the Deerfield warrants. The approach to valuation follows the fair value principle, and the key input factors are described for the Deerfield warrants in note 10, "Deerfield warrants." A Black-Scholes model was used to calculate the fair values.

There were no transfers between the respective levels during the period.

4.Inventory

As of June 30, 2024 and December 31, 2023 inventory consisted of the following:


(in thousands)	June 30, 2024		December 31, 2023

Work in progress	$	15,123	$	16,095
Finished goods	68		82
Total inventory, net	$	15,191	$	16,177

Inventory write-downs of $288 and $1,036 were recognized for the three and six months ended June 30, 2024, respectively, and $727 and $780 were recognized for the three and six months ended June 30, 2023, respectively, and charged to cost of product sales in the Company’s unaudited condensed consolidated statements of operations.

5.Property and equipment

Property and equipment as of June 30, 2024 and December 31, 2023 consisted of the following:


(in thousands)	June 30, 2024		December 31, 2023
Leasehold improvements	$	3,905	$	3,953
Laboratory equipment	4,154		3,652
Office equipment	977		1,119
Hardware and computer software	1,138		1,173

	10,174		9,897
Less: accumulated depreciation	(4,691)		(4,275)
Property and equipment, net	$	5,483	$	5,622

Depreciation expense was $326 and $657 for the three and six months ended June 30, 2024, respectively, and $273 and $536 for the three and six months ended June 30, 2023, respectively.

6.Interest in joint venture

On December 14, 2020, the Company formed a new joint venture company, Overland ADCT BioPharma, with Overland Pharmaceuticals (“Overland”) to develop and commercialize ZYNLONTA, and three of the Company’s ADC product candidates, ADCT-601, ADCT-602 and ADCT-901 (collectively, the “Licensed Products”), in greater China and Singapore (the “Territory”).

The table below provides a rollforward of the Company’s interest in Overland ADCT BioPharma as of June 30, 2024 and December 31, 2023.


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(in thousands)
Interest in joint venture
January 1, 2023	$	7,613
Share of comprehensive loss in joint venture	(5,966)
December 31, 2023	$	1,647
Share of comprehensive loss in joint venture	(1,387)
June 30, 2024	$	260

7.Income taxes

Income tax expense for the three and six months ended June 30, 2024 was $0.2 million and $0.4 million, respectively, relative to loss before income taxes of $35.7 million and $81.5 million, respectively. The income tax benefit for the three and six months ended June 30, 2023 was $4.5 million and $4.0 million, respectively, relative to loss before income taxes of $52.7 million and $110.1 million, respectively. The expense for the three and six months ended June 30, 2024 is the result of income generated by our UK operations for which tax expense has been recognized based on a full year estimated income tax liability, and the inability to recognize benefit on losses in the U.S. and Switzerland. Whereas the benefit for the three and six months ended June 30, 2023 was the result of income generated in the U.S. and UK. The decrease in income for the US operations is due to a change in the Company operating and transfer pricing model which was implemented in October 2023. We retain a full valuation allowance against all deferred tax assets, and each reporting period, we evaluate the need for a valuation allowance on our deferred tax assets by jurisdiction and adjust our estimates as more information becomes available.

8.Accrued expenses and other current liabilities

Accrued expenses and other current liabilities consist of the following:


(in thousands)	June 30, 2024		December 31, 2023
Accrued R&D costs	$	18,304	$	24,902
Accrued payroll and benefits	8,088		12,693

Gross-to-net sales adjustments, short-term	8,180		1,543
Operating lease liabilities, short-term	1,415		1,467
Other	10,937		11,496
	$	46,924	$	52,101


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9.Senior secured term loan facility

On August 15, 2022, the Company, ADCT UK and ADCT America entered into the Loan Agreement, pursuant to which the Company may borrow up to $175.0 million principal amount of secured term loans, including (i) a First Tranche and (ii) Future Tranches. On August 15, 2022, the Company drew down $120.0 million principal amount of term loans under the Loan Agreement.

On August 15, 2022, the Company also issued to the lenders under the Loan Agreement warrants to purchase an aggregate of 527,295 common shares, which warrants have an exercise price of $8.30 per share. Each warrant is exercisable, on a cash or a cashless basis, at the option of the holder at any time on or prior to August 15, 2032. The warrants are freestanding financial instruments that are indexed to the Company’s common stock and meet all other conditions for equity classification under ASC 480 and ASC 815. Accordingly, these warrants are recognized in equity and accounted for as a component of additional paid-in capital at the time of issuance.

On August 15, 2022, the Company also entered into the Share Purchase Agreement with the lenders under the Loan Agreement to purchase 733,568 common shares of the Company.

For the three and six months ended June 30, 2024, the Company recorded interest expense on the senior secured term loan in the amount of $4,413 and $8,816, respectively, and $4,480 and $9,020 for the three and six months ended June 30, 2023, respectively, which was recorded in interest expense in the unaudited condensed consolidated statements of operations. The effective interest rate (“EIR”) at June 30, 2024 was 16.83%.

The following table provides a summary of the interest expense for the Company’s senior secured term loan for the three months ended June 30, 2024 and 2023:


	Three months ended June 30,				Six months ended June 30,
	2024		2023		2024		2023
Contractual interest expense	$	3,973	$	3,807	$	7,873	$	7,517
Amortization of debt discount	440		673		943		1,503
Total	$	4,413	$	4,480	$	8,816	$	9,020

The amount at which the senior secured term loan is presented as a liability in the unaudited condensed consolidated balance sheets represents the net present value of all future cash outflows associated with the loan discounted at the EIR. The carrying value of the senior secured term loan is $113.7 million and $112.7 million as of June 30, 2024 and December 31, 2023, respectively.

Contractual payments due under our senior secured term loans, including exit fees are as follows (in thousands):


2024 (remainder)	$	—
2025	—
2026	3,090
2027	9,330
2028	12,480
Thereafter	99,840
Total	$	124,740


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10.Deerfield warrants

Pursuant to the Exchange Agreement with Deerfield entered into on August 15, 2022, the Company issued warrants to purchase an aggregate of 4,412,840 common shares. The warrants consist of warrants to purchase an aggregate of 2,631,578 common shares at an exercise price of $24.70 per share and warrants to purchase an aggregate of 1,781,262 common shares at an exercise price of $28.07 per share. Each warrant is exercisable, on a cash or a cashless basis, at the option of the holder, at any time on or prior to May 19, 2025. The warrant obligation, which is included in other long-term liabilities in the unaudited condensed consolidated balance sheets, is remeasured to fair value at the end of each reporting period. Changes in the fair value (gains or losses) of the warrant obligation at the end of each period are recorded in the unaudited condensed consolidated statements of operations.

During the three and six months ended June 30, 2024, the Company recognized income (expense) of $2,230 and $(838), respectively, and $20 and $636 for the three and six months ended June 30, 2023, respectively, as a result of changes in the fair value of the warrant obligation. The fair value of the warrant obligation as of June 30, 2024 and December 31, 2023 was $1,134 and $296, respectively. The increase in fair value of the warrant obligation from December 31, 2023 to June 30, 2024 was primarily due to the increase in the fair value of the underlying shares during the respective period. This amount was recorded to Other, net in the unaudited condensed consolidated statements of operations. See note 16, "Other income (expense)" for further information.

The Company used a third-party valuation firm to assist in calculating the fair value of the Deerfield warrant obligation, using the Black-Scholes option-pricing model. Key inputs for the valuation of the warrant obligation as of June 30, 2024 and December 31, 2023 were as follows:


	As of		As of
	June 30, 2024		December 31, 2023
Exercise price in $	24.70 and 28.07		24.70 and 28.07
Share price in $	3.16		1.66
Risk-free interest rate	5.1	%	4.6	%
Expected volatility	140.6	%	116.0	%
Expected term (months)	10.7 months		16.7 months
Dividend yield	—		—
Black-Scholes value in $	0.27 and 0.23		0.07 and 0.06

11.Deferred royalty obligation

On August 25, 2021, the Company entered into a royalty purchase agreement with certain entities managed by HCR for up to $325.0 million. Under the terms of the agreement, the Company received gross proceeds of $225.0 million upon closing (the “First Investment Amount”) and received an additional $75.0 million during the year ended December 31, 2023 upon the first commercial sale of ZYNLONTA in the United Kingdom or any European Union country (the “Second Investment Amount”) and together with the First Investment Amount, the “Investment Amount”).

The table below provides a rollforward of the Company’s debt obligation relating to the royalty purchase agreement.


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(in thousands)
Liability balance at January 1, 2023	$	222,277
Plus: Additional proceeds from the sale of future royalties	75,000
Less: Transaction costs	1,898
Less: royalty payments	8,709
Plus: interest expense	27,915
Less: cumulative catch-up adjustment, Other, net	4,972
Liability balance at December 31, 2023	309,613

Less: royalty payments	2,569
Plus: interest expense	16,359
Less: cumulative catch-up adjustment, Other, net	526
Liability balance at June 30, 2024	$	322,877

12.Pension and post-retirement benefit obligations

The pension plan for Swiss employees is a defined benefit pension plan. The Company contracted with the Swiss Life Collective BVG Foundation based in Zurich for the provision of occupational benefits. All benefits in accordance with the regulations are reinsured in their entirety with Swiss Life SA within the framework of the corresponding contract. This pension solution fully reinsures the risks of disability, death and longevity with Swiss Life. Swiss Life invests the vested pension capital and provides a 100% capital and interest guarantee. The pension plan is entitled to an annual bonus from Swiss Life comprising the effective savings, risk and cost results.

Although, as is the case with many Swiss pension plans, the amount of ultimate pension benefit is not defined, certain legal obligations of the plan create constructive obligations on the employer to pay further contributions to fund an eventual deficit; this results in the plan nevertheless being accounted for as a defined benefit plan.

The net periodic benefit cost for the three and six months ended June 30, 2024 and 2023 is as follows:


	Three months ended June 30,				Six months ended June 30,
(in thousands)	2024		2023		2024		2023
Net periodic benefit cost:
Service cost	$	183	$	275	$	347	$	447
Interest cost	37		75		75		149
Expected return on plan assets	(59)		(83)		(118)		(165)
Amortization of prior service cost	(40)		(40)		(81)		(79)



Net periodic benefit cost	$	121	$	227	$	223	$	352

The components of net periodic benefit cost are included in operating expense on the unaudited condensed consolidated statements of operations.

13.Commitments and contingencies

Manufacturing Commitments

Some of our inventory components require long lead times to manufacture. Therefore, we make long-term investments in our supply chain in order to ensure we have enough drug product to meet current and future revenue forecasts. Third party manufacturing agreements include non-cancelable obligations related to the supply of ZYNLONTA and the company’s product candidates. There have been no material changes related to our non-cancelable obligations under these arrangements as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.


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Contingent liabilities

From time to time, we may be involved in various legal matters generally incidental to our business. Although the results of litigation and claims cannot be predicted with certainty, after discussion with legal counsel, we are not aware of any matters for which the likelihood of a loss is probable and reasonably estimable and which could have a material impact on our unaudited condensed consolidated financial condition, liquidity, or results of operation.

14.Shareholders’ equity

2024 Equity Offering

In May 2024, the Company completed an underwritten offering of equity securities in which 13,411,912 of the Company’s common shares were sold to public investors at a price of $4.90 per share and pre-funded warrants (the “2024 Pre-Funded Warrants”) to purchase 8,163,265 of the Company’s common shares were sold to public investors at a price of $4.81 per pre-funded warrant, which equals the per share 2024 Equity Offering price, less the CHF 0.08 exercise price for each pre-funded warrant (collectively, the “2024 Equity Offering”). Gross proceeds from the 2024 Equity Offering were approximately $105.0 million, and, after giving effect to $7.6 million of transaction costs related to the offering, net proceeds were approximately $97.4 million.

The 2024 Pre-Funded Warrants are exercisable, on a cash basis (or, if there is no registration statement and current prospectus covering the issuance of the shares upon exercise, then on a cashless basis), at the option of the holder after the date of issuance until the tenth anniversary of their original issuance. At any time during the last 90 days of the term, the holder may exchange the Pre-Funded Warrant for, and we will issue, a new pre-funded warrant for the number of common shares then remaining under the Pre-Funded Warrant. The Pre-Funded Warrants have certain limitations on exercise, including (i) any exercise must be for at least 50,000 common shares (or, if less, the remaining common shares available for purchase under the Pre-Funded Warrants), (ii) a holder cannot exercise for any amount that would cause such holder’s beneficial ownership of our common shares to exceed 9.99% (or 19.99% with 61-days’ notice to us), and (iii) cashless exercise is not available in certain circumstances as specified in the Pre-Funded Warrants. The warrants contain customary anti-dilution adjustments and will entitle holders to receive any dividends or other distributions paid on the underlying common shares prior to their expiration on an as-exercised basis.

Accounting for the 2024 Equity Offering and Pre-Funded Warrants

The Company has accounted for the common shares and 2024 Pre-funded Warrants described above each as freestanding financial instruments.

The common shares were issued from the Company’s share capital and treasury shares at par value. The common shares were recorded as $60.5 million to equity for the issuance of the common shares, net of transaction costs accrued and paid, and an increase in cash and cash equivalents.

The warrants are freestanding financial instruments that are indexed to the Company’s common stock and meet all other conditions for equity classification under ASC 480 and ASC 815, including the warrant holders cannot require “net cash settlement” in a circumstance outside of the Company’s control, and there is sufficient authorized and unissued shares to settle the warrants. Accordingly, these warrants are recognized as $36.9 million in equity and accounted for as a component of additional paid-in capital at the time of issuance, net of transaction costs paid, and an increase in cash and cash equivalents.

Transaction costs have been allocated to the warrants and the common shares based on the relative fair value method. Transaction costs associated to the warrants and common shares have been deducted from the respective instrument in equity.

15.Revenue

The table below provides a disaggregation of revenues by type and customer location for the three and six months ended June 30, 2024 and 2023:


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	Three months ended June 30,				Six months ended June 30,
(in thousands)	2024		2023		2024		2023
Types of goods and services
Product revenue, net	$	17,030	$	19,197	$	34,878	$	38,150

Royalties	380		86		585		125
Total revenue	$	17,410	$	19,283	$	35,463	$	38,275

Customer Location
U.S.	$	17,030	$	19,197	$	34,878	$	38,150
EMEA(1)	380		86		585		125

Total revenue	$	17,410	$	19,283	$	35,463	$	38,275

(1) Europe, the Middle East and Africa

Product revenue, net

The table below provides a rollforward of the Company’s accruals related to the GTN sales adjustments for the three and six months ended June 30, 2024:


(in thousands)	Discarded Drug Rebate		Other Adjustments		Total
Balance as of April 1, 2024	$	9,393	$	3,768	$	13,161
GTN accruals for current period	1,858		3,759		5,617
Prior period adjustments	—		(791)		(791)
Credits, payments and reclassifications	—		(3,479)		(3,479)
Balance as of June 30, 2024	$	11,251	$	3,257	$	14,508

Balance as of January 1, 2024	$	7,391	$	3,946	$	11,337
GTN accruals for current period	3,904		8,217		12,121
Prior period adjustments	(44)		(1,020)		(1,064)
Credits, payments and reclassifications	—		(7,886)		(7,886)
Balance as of June 30, 2024	$	11,251	$	3,257	$	14,508

The table below provides a rollforward of the Company’s accruals related to the GTN sales adjustments for the three and six months ended June 30, 2023:


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(in thousands)	Discarded Drug Rebate		Other Adjustments		Total
Balance as of April 1, 2023	$	1,316	$	3,046	$	4,362
GTN accruals for current period	1,485		4,298		5,783
Prior period adjustments	—		(229)		(229)
Credits, payments and reclassifications	—		(4,182)		(4,182)
Balance as of June 30, 2023	$	2,801	$	2,933	$	5,734

Balance as of January 1, 2023	$	—	$	3,746	$	3,746
GTN accruals for current period	2,801		8,598		11,399
Prior period adjustments	—		(877)		(877)
Credits, payments and reclassifications	—		(8,534)		(8,534)
Balance as of June 30, 2023	$	2,801	$	2,933	$	5,734

The table below provides the classification of the accruals related to the GTN sales adjustment included in the Company’s unaudited condensed consolidated balance sheets as of June 30, 2024 and December 31, 2023.


(in thousands)	June 30, 2024		December 31, 2023
Accounts receivable, net	$	2,424	$	2,403
Other current and non-current liabilities	12,084		8,934
	$	14,508	$	11,337

Customers from which we derive more than 10% of our total product revenues for the three and six months ended June 30, 2024 and 2023 are as follows:


	Three months ended June 30,				Six months ended June 30,
	2024		2023		2024		2023
McKesson	37	%	38	%	40	%	38	%
AmerisourceBergen Corporation	35	%	37	%	36	%	37	%
Cardinal Health	28	%	25	%	24	%	25	%

16.Other income (expense)

Interest Income

Interest income includes interest received from banks on our cash balances. Interest income was $3.3 million and $6.2 million for the three and six months ended June 30, 2024, respectively, and $2.4 million and $4.5 million for the three and six months ended June 30, 2023, respectively.


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Interest Expense

The components of Interest expense for the three and six months ended June 30, 2024 and 2023 are as follows:


	Three months ended June 30,				Six months ended June 30,
(in thousands)	2024		2023		2024		2023

Deferred royalty obligation interest expense	$	8,266	$	5,829	$	16,359	$	11,575
Effective interest expense on senior secured term loan facility	4,413		4,480		8,816		9,020
Other interest expense	—		—		—		5
Interest expense	$	12,679	$	10,309	$	25,175	$	20,600

Other, net

The components of Other, net for the three and six months ended June 30, 2024 and 2023 are as follows:


	Three months ended June 30,				Six months ended June 30,
(in thousands)	2024		2023		2024		2023
Deerfield warrant obligation, change in fair value income (expense)	$	2,230	$	20	$	(838)	$	636
Cumulative catch-up adjustment income (expense), deferred royalty obligation	263		(5,417)		526		(5,288)




Exchange differences (loss) gain	(59)		15		(96)		(37)
R&D tax credit	320		315		567		455
Other, net	$	2,754	$	(5,067)	$	159	$	(4,234)

17.Share-based compensation

The Company has adopted various share-based compensation incentive plans. Under these plans the Company may at its discretion grant to the plan participants, such as directors, certain employees, and service providers awards in the form of restricted shares and restricted share units (“RSUs”), share options, share appreciation rights, performance awards and other share-based awards. The 2019 Equity Incentive Plan was adopted in November 2019 while the Conditional Share Capital Plan and the Inducement Plan were adopted in December 2023.

2019 Equity Incentive Plan

In November 2019, the Company adopted the 2019 Equity Incentive Plan. Under the 2019 Equity Incentive Plan, the Company may at its discretion grant to plan participants, such as directors, certain employees and service providers, awards in the form of restricted shares and RSUs, share options, share appreciation rights, performance awards and other share-based awards. The Company has reserved 17,741,355 common shares for future issuance under the 2019 Equity Incentive

ADC Therapeutics SA [ADCT] Filings
10-Q	[2024-08-06]
10-Q	[2024-05-06]
10-K	[2024-03-13]
20-F	[2023-03-15]
20-F	[2022-03-17]
20-F	[2021-03-18]
F-1	[2020-09-21]
F-1	[2020-04-24]
F-1	[2019-09-06]