On August 13, ADC Therapeutics (NYSE:ADCT) held its second-quarter earnings call and delivered a mixed message that investors are still sorting through. The company’s confirmatory trial for ZYNLONTA in second-line lymphoma cleared its main efficacy bar, but the FDA has flagged serious safety concerns about the combination that could complicate its path to a fuller approval. At the same time, management pointed to a shrinking net loss and a cash position built to last into 2028. Here’s what the numbers and the transcript actually show.
A Business Getting Leaner
ZYNLONTA’s core business held steady, with net product revenue reaching $18.6 million in the quarter, up from $18.1 million a year earlier. Since its 2021 accelerated approval, the drug has now been used to treat roughly 5,000 third-line plus DLBCL patients in the US, the base management is trying to build outward from. The bigger story sits in the expense line. Total operating expenses fell 29% year over year to $44.7 million, and adjusted operating expenses dropped 22% to $37.2 million, driven largely by research and development spending that fell from $30.1 million to $17.4 million as personnel shifted toward commercial manufacturing.
A 17% workforce reduction tied to a June reorganization is expected to add another $10 million in annualized savings. Put together, the net loss narrowed to $16.6 million from $56.6 million a year earlier, and the adjusted net loss shrank to $16.3 million from $28.7 million. The company closed the quarter with $219.1 million in cash, which it says is enough to fund operations into 2028 regardless of how the regulatory questions below get resolved.
The FDA Draws A Line
The complication is LOTIS-5, the Phase III trial testing ZYNLONTA plus rituximab against R-GemOx in second-line DLBCL. At a pre-sBLA meeting, the FDA raised what the company described as substantial concerns about the benefit-risk balance and verification of clinical benefit, tied to an imbalance in Grade 5 events observed in the trial. Management says it is still working out the best regulatory path forward, which could mean more data or changes to the label before any filing moves ahead. That uncertainty sits alongside a cost structure that isn’t shrinking everywhere.
Selling and marketing expense climbed to $12.6 million from $10.1 million, and general and administrative costs rose to $9.7 million from $8.8 million, both on higher wage and professional costs. Cost of product sales nearly tripled to $2.3 million as more personnel shifted toward manufacturing. Interest expense also ticked up to $13.5 million, a cost that will keep climbing as long as the $116.6 million in senior secured term loans sits on the balance sheet. Weighted average shares outstanding grew to 155 million from 113.7 million a year earlier, adding dilution on top of the wider spending.
Short Sellers Are Circling
Hedge fund ownership of ADC Therapeutics fell to 16 funds from 22 the prior quarter, a pullback in institutional conviction right as the regulatory picture got murkier. Short interest sits at 5.70% of the float, a level that suggests a real, organized bear case rather than routine hedging. Together, the two figures point in the same direction: funds are stepping back, and skeptics are positioned for more downside before the LOTIS-5 questions get resolved.
A Story Still Being Written
The tension here is straightforward. ZYNLONTA’s monotherapy business keeps generating steady revenue while the reorganization extends the company’s cash runway well past 2028, but the FDA’s pushback on the LOTIS-5 combination clouds the next stage of growth. LOTIS-7’s cleaner safety protocol and the planned breakthrough designation filing this year give the bull case another route into earlier lines of DLBCL.
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