ADC Therapeutics buys time for Zynlonta with $86.6M financing
Swiss biotech ADC Therapeutics has secured an $86.6 million (€77.5 million) financing agreement alongside debt and royalty deal amendments that extend its expected cash runway into 2029 and remove a potential obstacle to a takeover.
The Lausanne-based company plans to use the financing to support further development of its lymphoma drug Zynlonta, including Phase 3 studies combining it with glofitamab in diffuse large B-cell lymphoma and testing it alone in marginal zone lymphoma.
Why it matters: The restructuring gives ADC Therapeutics more financial flexibility following a difficult year. Its LOTIS-5 Phase 3 trial recorded roughly three times as many fatal adverse events in the Zynlonta combination arm as in the control group, overshadowing a positive efficacy result. The company subsequently cut about 17% of its workforce.
- In August, ADC Therapeutics disclosed that the FDA had raised substantial concerns about LOTIS-5’s benefit-risk profile, citing the imbalance in fatal adverse events alongside a marginal treatment benefit. Zynlonta remains available under accelerated US approval as monotherapy after two or more previous treatments.
Zoom in: New investor Bain Capital Life Sciences joins existing investors Redmile, TCGX and Nantahala Capital in the private placement, which is expected to close Oct. 22. The package also:
- Reduces outstanding senior loan principal to $50 million (€45 million), payable in August 2029, and eliminates subsequent scheduled principal repayments and the minimum liquidity requirement.
- Removes a $150 million (€134 million) payment to HealthCare Royalty that would otherwise be triggered solely by a change of control.
- Requires the company to use its best efforts to become a Delaware corporation, subject to shareholder approval and legal obligations. This does not establish that its headquarters or operations will relocate.
Yes, but: Most of the new cash will go toward debt repayment. After estimated net financing proceeds and the loan prepayment, cash after the transactions rises from $189.2 million (€169.3 million) to about $196 million (€175 million). The main benefit is reduced debt and repayment pressure, but to the detriment of existing shareholders, who will see their equity being diluted.
Backstory: HealthCare Royalty has provided $300 million (€268 million) under the royalty financing agreement originally signed in 2021. Its ongoing royalty rights remain in place. ADC Therapeutics separately licensed Zynlonta’s development and commercial rights across markets including Europe to Sobi in 2022.
Also notable: Removing the change-of-control payment to HealthCare Royalty could make a future acquisition easier to structure, although the announcement provides no evidence of an active sale process.
What’s next: ADC Therapeutics expects LOTIS-7 and marginal zone lymphoma data abstracts in early November, followed by presentations at December’s American Society of Hematology meeting. The restructuring provides more time to pursue those opportunities but does not resolve the regulatory questions raised by LOTIS-5.
