ADC Therapeutics SA — FY2021 Form 20-F
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a quarterly filing; the supplied filing text does not provide a clear standalone Q4 2021 income statement or cash-flow breakdown. Financial statements are audited and prepared under IFRS, in U.S. dollars.
Business context
ADC Therapeutics is a commercial-stage biotechnology company developing pyrrolobenzodiazepine-based antibody-drug conjugates. ZYNLONTA, its first approved product, received FDA accelerated approval in April 2021 for certain adults with relapsed or refractory large B-cell lymphoma. U.S. sales began in May 2021. Cami and other candidates remained in clinical or preclinical development.
Key financial metrics
| Metric (USD millions, unless noted) | FY2021 | FY2020 |
|---|---|---|
| Net product revenue | 33.9 | — |
| Cost of product sales | 1.4 | — |
| Gross profit / approximate gross margin | 32.5 / 95.9% | — |
| Research and development expense | 158.0 | 142.0 |
| Selling and marketing expense | 64.8 | 22.1 |
| General and administrative expense | 71.5 | 55.1 |
| Operating loss | (261.7) | (219.3) |
| Net loss | (230.0) | (246.3) |
| Basic and diluted loss per share | USD (3.00) | USD (3.77) |
| Net cash used in operating activities | (233.4) | (168.7) |
| Cash and cash equivalents at year-end | 466.5 | 439.2 |
The approximate gross margin is calculated from reported product revenue less cost of product sales; it is not a company-reported margin. Revenue was entirely from U.S. ZYNLONTA sales. Management stated that available resources were sufficient for at least the next 12 months.
At year-end, total liabilities were USD 451.9 million and equity was USD 166.1 million. Convertible-loan carrying value was USD 93.7 million, with a separately recognized embedded derivative liability of USD 37.9 million; the loans had USD 115 million aggregate principal outstanding. The HCR deferred royalty obligation was USD 225.5 million. Accumulated losses were USD 924.9 million.
Material changes versus FY2020
- Product revenue began in 2021 following ZYNLONTA’s FDA approval; FY2020 had no product revenue.
- Operating loss increased by USD 42.5 million as total operating expenses rose USD 76.4 million, including higher launch-related selling and marketing costs and increased R&D and G&A.
- Net loss narrowed by USD 16.3 million, despite the larger operating loss. Results included a USD 34.9 million non-cash gain from remeasurement of convertible-loan derivatives and a USD 21.5 million income tax benefit, including recognition of deferred tax assets. These items offset operating and financing costs.
- Operating cash use rose USD 64.6 million. Financing cash flow included USD 218.0 million net proceeds from HCR and USD 49.6 million net proceeds from the second convertible-loan tranche; FY2020 financing had included IPO and follow-on offering proceeds.
- R&D expense rose 11.2% to USD 158.0 million; S&M expense rose to USD 64.8 million from USD 22.1 million, primarily reflecting ZYNLONTA commercialization.
Outlook, commentary and risks
- Management expected substantial future R&D and commercialization spending and did not provide quantitative revenue, earnings or cash-flow guidance. Profitability timing is uncertain.
- ZYNLONTA’s accelerated approval requires confirmatory evidence. The Phase 3 trial with rituximab was enrolling its randomized stage; failure to confirm benefit could put approval at risk. The filing also described plans for additional ZYNLONTA studies and a planned Cami pre-BLA meeting in the second half of 2022.
- Cami’s Hodgkin lymphoma trial reported Guillain-Barré syndrome/polyradiculopathy in 7 patients (6.0%); a prior FDA partial clinical hold was lifted in 2020. Serious adverse events, clinical holds, trial delays and regulatory uncertainty remain material risks.
- Financing includes restrictive covenants, security over substantially all personal property including intellectual property, a USD 50 million quarterly minimum cash requirement, and limits on additional debt and royalties. HCR royalties reduce future product and licensing proceeds; the agreement also provides for a change-of-control payment.
- Commercial results depend on market uptake, coverage and reimbursement, competition, manufacturing and supply continuity, and the required launch infrastructure. COVID-19 was reported to have affected in-person commercial engagement and could disrupt trials or supply; management said the ultimate effects were uncertain.
- Subsequent to year-end, the company entered a Japan license agreement with MTPC, receiving USD 30 million upfront and becoming eligible for up to USD 205 million in milestones plus royalties. This is a 2022 event, not FY2021 revenue.
Investor verification priorities
- Review subsequent ZYNLONTA sales, gross-to-net deductions, reimbursement access and commercial-launch costs; FY2021 revenue estimates included significant gross-to-net judgments.
- Track the confirmatory ZYNLONTA trial and post-marketing obligations, and Cami’s efficacy, safety and regulatory path, particularly neurological adverse events.
- Reconcile cash runway against operating cash burn, future trial and launch spending, the convertible-loan maturity and covenants, and HCR royalty obligations.
- Assess the assumptions behind the USD 34.9 million derivative gain, deferred royalty accretion and USD 21.5 million tax benefit; these include valuation estimates and forecast taxable income.
- Confirm the terms and realization of the MTPC milestones and royalties, and distinguish subsequent-period receipts from FY2021 performance.