ADC Therapeutics - Q1 2024

Transcript

Operator (participant)

Good day, and thank you for standing by. Welcome to the ADC Therapeutics First Quarter 2024 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star one one on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Nicole Riley, Head of Communications. Please go ahead.

Nicole Riley (Head of Communications)

Thank you, operator. This morning, we issued a press release announcing our first quarter 2024 financial results and business updates. This release is available on the ADCT website at ir.adctherapeutics.com under the Press Releases section. The event is being recorded, and the slides accompanying this call are available on the ADCT website at ir.adctherapeutics.com under the Latest Events and Presentations section. On today's call, Ameet Mallik, Chief Executive Officer, and Pepe Carmona, Chief Financial Officer, will discuss recent business highlights and review our first quarter 2024 financial results. We will then open the call to questions when we will be joined by Kristen Harrington-Smith, Chief Commercial Officer, and Mohamed Zaki, Chief Medical Officer.

Before we begin, I would like to remind listeners that some of the statements made during this conference call will contain forward-looking statements within the meaning of the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain known and unknown risks and uncertainties, and actual results, performance, and achievements could differ materially. They are identified and described in the accompanying slide presentation on slide 3 and in the company's filings with the SEC, including Form 10-K, 10-Q, and 8-K. ADCT is providing this information as of the date of today's conference call and does not undertake any obligation to update any forward-looking statements contained in this conference call as a result of new information, future events, or circumstances after the date hereof, except as required by law or otherwise.

The company cautions investors not to place undue reliance on these forward-looking statements. Today's presentation also includes non-GAAP financial measures. These non-GAAP measures have limitations as financial measures and should be considered in addition to, and not in isolation or as a substitute for, the information prepared in accordance with GAAP. You should refer to the information contained in the company's fourth-quarter earnings release for definitional information and reconciliations of historical non-GAAP measures to the comparable GAAP financial measures. It is now my pleasure to pass the call over to our CEO, Ameet Mallik. Ameet?

Ameet Mallik (CEO)

Thanks, Nicole, and thank you all for joining us today. As you will have seen, we have shared some very exciting news items earlier this morning. But to begin with, I'd like to focus on key business updates for the quarter. Starting with our commercial performance, Zynlonta continued its return to sequential growth with revenues of $17.8 million in Q1. This represents a 7% increase over the fourth quarter of 2023. Importantly, we saw continued growth both in the community and in academic centers, despite the intensified competitive landscape. Turning next to our pipeline, we have made significant progress. Last month, we announced that our LOTIS-7 study of Zynlonta, in combination with bispecifics, successfully cleared the final dosing cohort in both arms with no dose-limiting toxicities, no ICANS, and either no or low-grade levels of CRS.

We are now dose expanding at 120 and 150 micrograms per kilogram in the ZYNLONTA plus glofitamab combination arm in second-line+ DLBCL. Today, we are delighted to share, for the first time, encouraging initial data recently presented from the University of Miami's phase 2 investigator-initiated trial of ZYNLONTA in relapsed refractory marginal zone lymphoma. Based on initial results from the first 15 evaluable patients, 13 achieved a complete response, and 1 achieved a partial response, with all patients maintaining response at the time of data cutoff. Moving to ADCT-601, our novel AXL-targeting ADC, we began enrolling pancreatic cancer patients and continued to enroll sarcoma patients, and we are in the process of optimizing the dose and schedule.

Lastly, we shared a comprehensive update on our novel Exatecan-based solid tumor platform, including early preclinical data on our four preclinical ADC candidates for the first time at our recent research investor event. Finally, in terms of a corporate update, we maintained our disciplined capital allocation strategy and decreased operating expenses in Q1 by 16% year-over-year on a Non-GAAP basis. This, in turn, enabled us to manage our cash burn so that we ended the first quarter with cash of $234.3 million. On top of this, we have just announced today that we have priced an underwritten offering to raise $105 million in gross proceeds. The offering, at the closing price per share on Friday, included common shares and pre-funded warrants and is expected to close on May eighth....

We expect this will extend our cash runway into mid-2026 and provide the company with enhanced financial flexibility to execute our strategy. Given our strengthened balance sheet, I would like to remind everyone of the strategy we are pursuing, which we believe will unlock the tremendous value we see in the company. Our first pillar and primary focus remains hematology. Within this, we have a de-risked asset in Zynlonta, the key product in our prioritized portfolio, which we expect to carry the company through to profitability. We are deploying the majority of our capital to the Zynlonta franchise to commercialize our existing third-line plus DLBCL indication and to pursue the substantially larger potential opportunity in earlier lines of DLBCL therapy and indolent lymphomas, such as marginal zone lymphoma.

We believe these potential opportunities will help expand the Zynlonta franchise and have the potential to generate annual peak sales in excess of $500 million. The second pillar of our strategy is grounded in our emerging solid tumor pipeline. ADCT-601 is our most advanced asset. Behind this, we see the potential to advance a broad portfolio of differentiated ADCs against solid tumor targets of interest, driven by our novel Exatecan-based platform. I'd like to expand now on the substantially larger potential opportunity for Zynlonta in earlier lines of DLBCL therapy and indolent lymphomas. Pending the results of the LOTIS-5 and LOTIS-7 studies, our goal is to expand usage of Zynlonta into second-line plus DLBCL. As a reminder, LOTIS-5 is our confirmatory phase III study of Zynlonta in combination with rituximab.

Here, we remain on track and expect to complete enrollment by the end of this year, with the potential for a headline readout by the end of 2025. If positive, we believe this trial will lead to full approval for Zynlonta and expand our indication into second-line plus DLBCL in combination with rituximab, potentially as early as the end of 2026. LOTIS-7 is our phase 1b trial of Zynlonta in combination with bispecifics. We are encouraged by the initial safety and tolerability profile, as well as the observed antitumor activity among the majority of patients in Part 1 of the dose escalation. We are now enrolling in Part 2 dose expansion with Zynlonta plus glofitamab in second-line plus DLBCL, and expect to complete enrollment and plan to share additional efficacy and safety data before year-end.

We also see the potential to expand the use of Zynlonta into the second-line plus settings of follicular lymphoma and marginal zone lymphoma, based on initial data from investigator-initiated trials at the University of Miami. Today, I want to focus on the marginal zone lymphoma data that was shared this past weekend at the Lymphoma Research Foundation's 2024 Marginal Zone Lymphoma Scientific Workshop by the trial's lead investigator, Dr. Izidore Lossos at the University of Miami. Relapsed refractory MZL represents an unmet need. Based on publicly available incidence data, there are an estimated 3,000-4,000 second-line plus MZL patients who are drug-treated in the U.S. Unmet medical need remains in relapsed refractory MZL, less than 30% CR for second-line plus approved or NCCN preferred treatments.

At present, there are two FDA-approved regimens and several other preferred regimens for the treatment of MZL in second-line plus included in NCCN guidelines. Complete response rates are modest, and sample sizes in the study supporting this data are relatively small. As complete response rates are a strong predictor of time-related outcomes in MZL, clinicians continue to seek novel agents with higher and durable CR rates, a manageable safety profile, and a fixed duration of treatment. The University of Miami is leading a multicenter phase II IIT study in Zynlonta as a single-agent, fixed-duration regimen to treat 50 relapsed refractory MZL patients. Initial data from the first 15 evaluable patients showed 13 achieved a complete response and 1 achieved a partial response. According to the lead investigator, Zynlonta was generally well-tolerated and safety was consistent with the known profile.

There are 2 sites currently enrolling, University of Miami and City of Hope, and the lead investigator is currently expanding to 5 sites to accelerate trial enrollment. As soon as we have sufficient data, assuming it remains positive, we plan to potentially pursue a regulatory pathway and compendia strategy in parallel. In terms of the opportunity, based on our analysis, we believe the total addressable second-line plus MZL patient population has a potential peak market opportunity of approximately $500 million, valued at Zynlonta price and an expected average number of cycles. If successful, this means every 10% of market share captured represents $50 million in incremental annual peak sales opportunity. While still early in the phase 2 IIT, if this trial continues to yield similar results, the potential opportunity to expand into MZL could contribute to the overall Zynlonta growth strategy in NHL....

The current standard of care in MCL includes CD20-based regimens across all lines, in addition to BTK inhibitors in second-line MCL. The data used for FDA approvals and inclusion in NCCN guidelines were based on either single-arm studies or a subset of larger indolent NHL studies, and offer modest CR rates, which are below 30%. Per the study protocol, all patients included must have failed one or more lines of systemic therapy, including at least one anti-CD20 antibody. Under the protocol, patients receive a fixed duration of treatment of 6 cycles of Zynlonta across 18 weeks. The primary endpoint is CR rate at 6 and 12 months, as patients will be followed for up to 3 years with progression-free survival, and overall survival measured at 24 months. The predetermined futility threshold for efficacy was set at 31% CR rate.

Looking at the baseline characteristics of the patients enrolled so far in the study, there are a few things I want to point out. We believe this initial group of patients is representative of the overall MCL population, including MCL subtypes. In addition, of the patients treated with Zynlonta so far, 10 of the 15 were stage four MCL patients, with 8 of the 15 designated as POD24, meaning they progressed within 24 months of initial treatment, a group that is typically harder to treat. The median prior lines of therapy is 2, ranging from 1 to 4, and as you can see on the right side of the slide, included multiple currently available systemic treatments. As shared by Dr.

Lossos at the Lymphoma Research Foundation's 2024 Marginal Zone Lymphoma Scientific Workshop on May 4th, these initial results showed 13 out of 15 patients achieved a CR, with one additional patient achieving a PR. Of the 13 CRs, nine were achieved after 2 cycles. In addition, all patients achieving responses had maintained them as of the data cutoff, with the longest responder reaching approximately 20 months. From an initial safety perspective, per the lead investigator in this study, Zynlonta was generally well-tolerated and consistent with a known safety profile. One patient discontinued after cycle 2. A second patient discontinued after cycle 4 due to a toxicity which fully resolved upon discontinuation of treatment. Both of these patients remain in CR at 10 and 6 months, respectively.

Based on this initial data from University of Miami's phase 2 trial, evaluating Zynlonta in relapsed refractory MCL, we are encouraged by the potential opportunity in the second-line plus setting for patients with this rare disease. Moving on to LOTIS-7, we are sharing here additional safety data from the part 1 dose escalation portion of the study. The important takeaways are that the majority of CRS events were grade 1, and that no CRS greater than grade 2 was observed. Those patients who have experienced a grade 2 CRS were managed with no requirement for ICU management or pressors. On the left-hand side, you will see that the overall CRS rate with glofitamab was 33%, which is the combination of focus for part 2 of this study. Important to note, the current glofitamab label in third-line plus DLBCL includes a 70% CRS rate, including some higher grade events.

We believe that dosing with Zynlonta one week prior to glofitamab may be debulking the tumor. Turning to our research platform, we hosted a virtual investor research event on April ninth, which provided a comprehensive overview of our solid tumor research strategy, our novel exatecan-based platform, and our four lead ADC candidates. Our focus is on advancing differentiated ADC candidates against prostate, non-small cell lung cancer, colorectal, endometrial, and ovarian cancers. For each tumor type, the combination of incidence and five-year survival offers large potential opportunities and indicates that better treatment options are needed. Furthermore, in each case, chemotherapy remains a key part of the treatment armamentarium. Our four lead ADC targets are NaPi2b, Claudin-6, PSMA, and ASCT2. We believe each offers the potential to improve the standard of care for cancer patients, and each utilizes our novel exatecan-based platform.

Preclinical work suggests that our four lead candidates each have a high therapeutic index, reflecting the proprietary design of the ADC. In terms of stage, our NaPi2b and Claudin-6 ADCs are in IND-enabling studies, and we are pleased to share exciting early data on these at AACR last month. Our PSMA and ASCT2 ADCs are in the drug candidate selection stage, which we expect to complete this year. Looking ahead, we plan to move forward with one candidate to IND and to seek research collaborations to advance our broad portfolio…. Given the unmet medical need, coupled with the market opportunity, a successful outcome for one or more of our early research programs has the potential to transform the lives of patients and create significant value in the future. With that, I would like to turn the call over to Pepe.

Pepe Carmona (CFO)

Thank you, Ameet. Before I discuss today's financing, I will take you through a brief summary of our first quarter results. As a reminder, we're now reporting our results under U.S. GAAP. We became a U.S. domestic filer as of January 1, 2024. Starting with our balance sheet, as of March 31, we had cash and cash equivalents of approximately $234.3 million. Moving to the P&L, as you already heard, the Zynlonta net sales were $17.8 million in the quarter, a decrease of 6% versus prior year, primarily driven by higher gross net deductions and lower volume, partially offset by higher gross price. On a sequential basis, the Zynlonta net sales grew 7% versus the fourth quarter of 2024.

Our total operating expenses on a non-GAAP basis, which excludes stock-based compensation, were down 16% compared to the first quarter of last year. This mainly reflected our focus on driving operating efficiencies, together with reduced R&D expenditures due to focused investment in our clinical studies and lower selling and marketing expenses. For 2024, we will continue to take a very disciplined approach to our capital. You can find the reconciliation of GAAP measures to non-GAAP measures in the companion financial tables of the press release issued earlier today and in the appendix of this presentation. Moving to the bottom of the P&L. GAAP basis, we reported a net loss of $46.6 million for the quarter, or $0.56 per basic undiluted share.

On a non-GAAP basis, adjusted net loss was $31.1 million, adjusted net loss of $0.38 per basic undiluted share. The decrease in both reported and adjusted net loss compared with the first quarter of 2023 was primarily due to lower operating expenses. Today, we have announced the pricing of a registered direct offering, which included pre-funded warrants. We expect to close by May 8th, and the offering is expected to raise approximately $105 million of gross proceeds. We have been delighted by the response from a range of high-quality institutional investors, and we expect the proceeds to extend our cash runway into the middle of 2026. By strengthening our balance sheet, we believe we are now better financed to pursue our corporate strategy.

As a reminder, hematology continues to be the primary focus of our capital allocation, and within this, our key objective is to create value by expanding the use of Zynlonta beyond the current indication. We expect to achieve this by fully supporting our commercialization effort in the U.S. directly and through our partnership ex-U.S., and by investing behind potential expansion into early lines of DLBCL and indolent NHLs. In solid tumors, our aim is to pursue multiple ADC candidates in parallel and increase our shots on goal, mainly through our novel Exatecan-based research platform. We will determine on a case-by-case basis whether we wish to progress candidates internally or seek partnering in order to share the development and financial risk. As Ameet mentioned earlier, we intend to take at least one candidate forward to IND, and the new funds raised give us the strategic freedom to do so.

My final slide highlights the multiple potential value-driving milestones which we expect in the coming year. Importantly, we have delivered on our promises to date in 2024, with positive updates for Zynlonta in the LOTIS-7 study and MZL-IIT clinical trial. With the initiation of dosing of ADCT-601 in pancreatic cancer, and with the disclosure of our existing new research platform at our Virtual Investor Research event. In the second half of this year, we have multiple potential value-generating catalysts, including expected completion of enrollment in LOTIS-5, initial efficacy and safety data from LOTIS-7 Part 2 expansion, and initial read of ADCT-601 in AXL in both sarcoma and pancreatic cancer. With that, I will turn the call back to Ameet.

Ameet Mallik (CEO)

Thanks, Pepe. To conclude, my team and I are very proud of our performance in the first quarter of 2024. We achieved another quarter of sequential growth with Zynlonta. We delivered against each of the planned key research and development milestones, and we maintained our disciplined approach to capital allocation. Looking ahead, with a strengthened balance sheet and enhanced financial flexibility to execute our strategy, I am confident that ADC Therapeutics is well-positioned to drive value creation for all of our stakeholders. With that, operator, could you please begin the Q&A session?

Mohamed Zaki (CMO)

... Operator?

Operator (participant)

Hello?

Mohamed Zaki (CMO)

Hi. A-

Operator (participant)

One moment for our first question.

Mohamed Zaki (CMO)

Sorry, we cannot hear the question, operator. Sorry, operator, we cannot hear the question.

Operator (participant)

Thank you. One moment. The first question will be from Kelly Shi from Jefferies. Your line is open.

Kelly Shi (Senior Biotech Analyst)

Hi, good morning. This is Yoon for Kelly, and thanks very much for taking the question, and congratulations on the marginal zone lymphoma data. I believe you reported very positive data from the follicular lymphoma program, where investigator-initiated a study at ASH. And so can you remind us your plan for follicular lymphoma and compare it to marginal zone lymphoma? And which one do you think could potentially be maybe reach the potential or enter sponsor study first? And have you received any feedback in terms of the safety considering that it's a indolent lymphoma patients? Thank you.

Ameet Mallik (CEO)

Yeah, no, thanks for the question. I think you're right to say that we were excited to share data in an oral presentation last ASH on the relapsed refractory follicular lymphoma population, which showed that the combinations in Zynlonta plus rituximab had an overall response rate of 96% and a CR rate of 85%, with a manageable safety tolerability profile. So I think that was really encouraging data. Of course, now seeing the marginal zone lymphoma data and another indolent lymphoma with, again, high overall response rate, high CR rates, and again, a manageable safety profile, we're really encouraged. Both of these trials have been expanded, so the follicular lymphoma patient, the study will now be 100 patients. Marginal zone will be 50 patients. Both are multi-center studies as well.

With both of them, we plan to pursue both a regulatory strategy as well as a compendia strategy in parallel, based on the outcome of the data. I think one thing to note about the follicular data that's important is that it's really just going after the high-risk patient population. We know that when you go after all comers in follicular lymphoma, there is a precedent for randomized phase III studies with long follow-up. We're focused on a narrower population, which is a high-risk population, most of which were POD 24. We think that if the data looks good, there may be a faster pathway, potentially, either through a regulatory pathway or through guidelines in that more narrow patient population.

MCL is probably even more straightforward, because if you look at everything that's been approved, either by the FDA or in guidelines, they've been approved based on either single-arm studies or subsets of larger randomized studies in indolent lymphoma studies, and typically with somewhere between 40-70 patients. So we think the 50-patient study we're running is an appropriate size, and based on, you know, the data maturity from this study, we again will pursue, you know, guidelines and a regulatory pathway in parallel. So that, I would say, is the even more straightforward pathway because there's so much precedence in MCL, but we also think, just given the strength of the data, have a really interesting opportunity in follicular as well.

Kelly Shi (Senior Biotech Analyst)

Great. Thank you.

Operator (participant)

Thank you. And our next question will come from Michael Schmidt from Guggenheim. Your line is open.

Michael Schmidt (Senior Biotech Analyst)

Hey, guys, thanks for taking my questions. And yeah, super interesting update here at MCL, obviously. I think you said all of the patients are still in response. Could you just help us contextualize the duration a little bit? You know, what do we know about the duration of clinical benefit for other drugs in MCL, and then how does it compare to that? And then, yeah, I think you did have this one patient discontinued due to toxicity. Can you just comment on what that was? And then I had a follow-up. Thanks.

Ameet Mallik (CEO)

Yeah, thanks. Thanks, Michael. Yeah, as you said, we're really encouraged by the data as well, and also, you know, in MCL, confirming what we've seen in follicular and what we've seen in other areas, the safety profile has been really good. We haven't seen any new safety signals in any of these studies, so that's been encouraging. But I'm gonna turn it to Mohamed to talk about both the duration that's seen in other treatments and what we would want to see here.

Mohamed Zaki (CMO)

Yeah. Thanks, Michael. First, I wanna highlight that, one of the patients in CR already reached 20 months. Many of the patients have currently are more than 10 months, and all are ongoing, you are correct, at the time of data cut-off. What has been reported in the literature, it's smaller trials and range between possibly 15 and 18 months. Those are the kind of PFS that have been reported or their ability in, within either single agents or in combination. So if the data maintains the way it is, and, responses are continuing for all the patients that we have seen. You have 13 out of 15 CR and one PR. We believe we'll be in a very good place in terms of the durability, but again, talk about durability is a little bit too early to talk about.

Ameet Mallik (CEO)

Yeah, and then, Michael, your second question was around the one patient with toxicity. We don't have more details. The investigator's planning, you know, as the sample size increases and the duration and follow-up increases, to do a much bigger presentation at a more major medical congress, where he will share all the data. He doesn't want to compromise that. So what we know from the investigator is, one patient had a toxicity, discontinued after cycle four. That patient was already in CR. Once the patient was discontinued, the toxicity fully resolved, and that patient still remains in CR. Now that patient's six months out. So that's what we know. The other thing we understand from the investigator is, everything they've seen across all 15 patients, the safety profile is consistent with the known safety profile of Zynlonta.

Michael Schmidt (Senior Biotech Analyst)

Great. Awesome. Yeah, super, super interesting. And then, question on LOTIS-7. I know you had some really early phase 1 data at AACR, and I just wanted to know if you could provide some visibility in the next update. I think you have another look at data in the second half of this year, and then more in the first half of next year as well.

Ameet Mallik (CEO)

Yeah. So, we are now in Part 2 dose expansion right now. We were quite pleased, I think, with the dose escalation, how smoothly it went, and now we're in dose expansion. Looking at Zynlonta plus glofitamab in second-line plus DLBCL patients. We're looking at it at two different doses of Zynlonta, the 150 microgram per kilogram dose, as well as the 120 microgram per kilogram dose, both in combination with the full doses of glofitamab. We expect to complete the enrollment of roughly 20 patients in each of those dosing cohorts by the end of this year, and then we will share the safety and efficacy data that's available for all evaluable patients. What we mean by that is, patients that have had at least a 12-week scan, because obviously any responses we wanna make sure are confirmed.

So that'll probably be likely a subset of those 40 patients that are actually available at that time. We will share all the data that's available by the end of the year, and then provide an even more comprehensive update in the first half of next year when we have data from all 40 patients, including longer follow-up.

Michael Schmidt (Senior Biotech Analyst)

Great. Super helpful. And then lastly, on LOTIS-5, you know, sounds like you're well on track to complete enrolling here later this year, and just curious if you had any additional visibility on the event rates as they're coming in and sort of the timing of the primary analysis? Thanks so much.

Ameet Mallik (CEO)

Yeah, I mean, as you said, and I'll turn it to Mohamed to comment further, but we're on track to complete the study. The enrollment pace has picked up quite a bit over the course of this past year, and even this year in particular, has picked up quite a bit, so we're confident in completing the enrollment of the study this year. It's an event-driven trial, so you can never predict, you know, the when it's gonna exactly read out, but based on our current thinking, we believe it may read out as soon as the end of 2025. Which, if that's the case, and it's positive, could lead to an approval as soon as the end of 2026. But, Mohamed, do you want to comment more on the enrollment and what you're seeing with LOTIS-5?

Mohamed Zaki (CMO)

Yeah. We're very pleased with the current enrollment. It picked up strongly during 2023 and 2025, really. So we are still in a belief that we will be able to enroll the study this year. Things are going very well. Also, we have a DMC that meets regularly, that have cleared the study multiple times, no changes, so that's a very positive sign. In addition, I would like to say that the events are being reviewed by independent central review. So that's another very key element for us to make sure that those are confirmed and done completely independent. As you know, we're blinded, but it's an event-driven study, and it take until that next year, that's a part of the thing, and hopefully that will remain the case.

That's, that's pretty much all about LOTIS-5 at the moment.

Ameet Mallik (CEO)

Yeah, I think all on track with LOTIS-5. We feel, you know, we feel good about the progress, and we're well on track to complete it this year.

Michael Schmidt (Senior Biotech Analyst)

Great. Well, thanks so much. Congrats on the update today.

Ameet Mallik (CEO)

Thank you.

Mohamed Zaki (CMO)

Thank you.

Operator (participant)

Thank you. And our next question will come from Gregory Renza, from RBC Capital Markets. Your line is now open.

Gregory Renza (Director and Senior Biotechnology Research Analyst)

Hi, this is Greg. Thank you so much for taking our questions, and congrats on the progress. I have a question on the competitive dynamics from CD20 bispecifics. Number one, has the impact been, I think, fully realized, the impact of the competition from CD20 bispecifics on Zynlonta? Has it been fully realized in the third-line setting? And now, they... Roche recently announced that the trial in the second-line hit the primary endpoint, and, you know, could potentially be ahead of Zynlonta's combination from LOTIS-5. I'm just curious, how should we think about the competition, you know, from that, the CD20 bispecific combo to LOTIS-5? Thank you so much.

Ameet Mallik (CEO)

Yeah, that's a great question. Yeah, the bispecifics, yeah, both of the approved bispecifics in the third line plus DLBCL setting are definitely getting uptake, primarily in the academic center. We see much more limited use in the community. So in the academic center, there is quite a bit of use of bispecifics post-CAR T. I think importantly, we still have seen some modest growth, though, in the academic centers overall in our volume when you look at Q4 to Q1. What that's been driven with is, while you have some lower level of depth in some centers that we're using Zynlonta quite a bit in that setting, we've actually seen a higher amount of breadth of centers in academic centers that are using the product. And so in essence, we've been able to basically compensate for a lot of that competitive impact, although it's real.

I mean, bispecifics are definitely being used quite a bit, and you can see it in their growth rates a lot in that third line plus post-CAR T, you know, in the academic setting. So we've felt the competitive impact. I think importantly, though, we've been able to largely offset it in the academic center, and we see continued growth in the community as well. So we think our strategy is working. In terms of the data around, you know, the, the, you know, glofitamab plus gem combination, we'll have to look. We'll have to wait and see the data. Obviously, it hasn't been published. They give it top-line results. I mean, one thing of note, I think, is just that they said that the, you know, the. I think that we'll have to pay attention to is what's the toxicity profile?

We don't know, but obviously using systemic chemo with a bispecific, you'll have to see what the toxicity profile looks like. I think we feel quite confident, I think, in our combinations both of Zynlonta plus rituximab, as well as Zynlonta plus glofitamab, given the toxicity profiles we've seen there. So I think as we move into second line, it's important to have strong efficacy and a manageable safety tolerability profile. We feel confident in both of our approaches.

Kristen Harrington-Smith (Chief Commercial Officer)

I don't have much to add, Ameet. Yeah, we're excited to see the STARGLO data that'll be out at EHA. And you know, as Ameet said, we've been able to hold share pretty much in the academic centers. We see that despite the bispecifics, we have strong advocacy in the academic centers. And what we also hear is that these advocates recommend Zynlonta to the community treaters, which is critical. Once we see the data from LOTIS-5, the great thing is that rituximab is probably one of the most commonly used agents out there with a lot of familiarity. So between LOTIS-5 and LOTIS-7, we offer great optionality with Zynlonta.

Ameet Mallik (CEO)

Yeah, it's a really, really important point that Kristen just made. One of the most predominant uses, we know that CAR T is only used in about 20% of patients second line, really in the academic center. The majority of patients in academic centers are getting it. In the community, though, R-based chemo regimens are very, very commonly used, so we think an R-based ABC approach is going to fit really well there.

Michael Schmidt (Senior Biotech Analyst)

Okay, thank you so much.

Operator (participant)

Thank you. Our next question will come from Brian Cheng, from JPMorgan. Your line is open.

Brian Cheng (VP and Equity Research Analyst)

Hey, guys. Thanks for taking our question this morning. Maybe just the first question on LOTIS-7. Can you talk a little bit more about the strategy beyond, those expansion in LOTIS-7? You know, will there be a need to run a larger second line pivotal study, to get you officially move into the bispecific- move in with the bispecific, the bispecific combo? And if yes, how do you think about the study design and the timing? And I have a follow-up. Thank you.

Ameet Mallik (CEO)

Okay. Yeah, thanks, Brian. Great question. I'm going to hand it to Mohamed to answer the question on LOTIS-7.

Mohamed Zaki (CMO)

Yeah. Thanks, Brian. This is a stepwise approach. First, we'd like to see how the efficacy in the combination second line plus looks like and how it compares in the competitive environment. And definitely, we are looking to see how the safety profile is looking like. We're very pleased that we cleared all doses and see that when we get to that point with the two doses that we're expanding, if the data persists, we're definitely planning to have a conversation with the regulators about the possibility of a phase 3 approval there. The at that time, we will see what the comparator arm would be. However, there could be investigator choice, as you I'm sure you're aware of, because there are multiple agents and many, many things could be available at that time.

Of course, it's going to be a data-driven approach, and the conversation with the agency is going to tell us more about that.

Brian Cheng (VP and Equity Research Analyst)

Okay, and then maybe, second one on for Pepe. Can you give us a better sense on how you define commercial brand profitability this year? Is it factoring in only cost of goods sold and selling and marketing expense, or is there additional consideration coming from G&A expense as well? Thank you.

Mohamed Zaki (CMO)

Yeah. Thanks for the question, Brian. So this year, as in long term, we'll be able to pay for all the direct commercialization effort. That includes all the sales force, MSLs, the A&P that we invest in the drug, the IITs that we have been executing, and on top of that, obviously, cost of goods and royalties and whatsoever. So that, it doesn't what it doesn't include is the pipeline, so our LOTIS-5 and LOTIS-7 trial and a corporate G&A. That is not included.

Brian Cheng (VP and Equity Research Analyst)

Okay, great. Thank you.

Operator (participant)

Thank you. I am showing no further questions from our phone lines, and I'd like to turn the conference back over to Ameet Mallik for any closing remarks.

Ameet Mallik (CEO)

Thank you very much for joining our call today, and thank you for your continued support. We look forward to keeping you updated on our progress. Have a very nice day, everyone. Thank you.

Operator (participant)

This concludes today's conference call. Thank you for your participation, and you may now disconnect. Everyone, have a wonderful day.