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ADC Therapeutics strikes a $325M royalty deal to fuel its cancer drug strategy

The royalty agreement with HealthCare Royalty Partners will support ADC Therapeutics’ plans to commercialize its newly approved cancer drug and develop the next one in its pipeline. The biotech’s drug Zynlonta is the first of its type approved by the FDA as a treatment for diffuse large cell B-cell lymphoma

 

ADC Therapeutics, which landed its first FDA approval earlier this year, is now tapping into that drug’s commercial promise as a way to raise cash now. Under a royalty agreement with Healthcare Royalty Partners, the biotech could receive up to $325 million.

The new ADC Therapeutics drug, Zynlonta, is a treatment for diffuse large cell B-cell lymphoma (DLBCL). According to deal terms announced Thursday, ADC Therapeutics will receive $225 million when the deal closes. The Lausanne, Switzerland-based biotech is in line for another $75 million upon the first commercial sale of the drug in Europe, and an additional $25 million upon achieving a sales milestone next year.

HealthCare Royalty gets a 7% royalty on net global sales and licensing revenue from the ADC Therapeutics drug, with the exception of certain Asian markets where Overland Pharmaceuticals holds rights to the drug. The deal also grants Stamford, Connecticut-based HealthCare Royalty a 7% royalty on future sales and licensing revenue of camidanlumab (usually shortened to “Cami”), the next drug in the ADC Therapeutics pipeline.

ADC Therapeutics develops antibody drug conjugates (ADCs), a type of drug that links a cancer-killing drug payload to a targeting antibody that homes in on tumors. This approach is intended to deliver a targeted strike that spares healthy tissue. Zynlonta’s accelerated approval in April covers DLBCL patients whose cancer has relapsed or has failed to respond to earlier lines of treatment. The drug is the first ADC approved to treat DLBCL, a form of non-Hodgkin lymphoma, which is a cancer affecting lymphocytes.

Zynlonta is designed to target the cancer protein CD19. Cami, which uses an antibody licensed from Genmab, targets a different protein called CD25. ADC Therapeutics is testing Cami in a pivotal Phase 2 clinical trial in patients with relapsed or difficult-to-treat Hodgkin lymphoma. A Phase 1b study is underway testing that ADC as a monotherapy and in combination with the Merck immunotherapy pembrolizumab (Keytruda) in solid tumors.

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A Deep-dive Into Specialty Pharma

A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.

ADC Therapeutics is slowly building sales for Zynlonta. At the end of the second quarter of this year, the company reported $3.7 million in product revenue. The company’s cash position at the end of the quarter was $371.9 million. The company is also working to bring the drug to additional markets. In its report of second quarter financial results released earlier this month, ADC Therapeutics said a regulatory submission for Zynlonta in Europe is expected in the second half of this year for DLBCL. Clinical trials are also planned that will evaluate the drug as first-line DLBCL treatment, and in combinations with other therapies as a treatment for B-cell and non-Hodgkin lymphoma.

According to an ADC Therapeutics regulatory filing, the royalty agreement bars the company from striking additional royalty deals on Zynlonta or Cami outside of China, Hong Kong, Macau, Taiwan, Singapore, and South Korea. That restriction stays in place as long as the company has outstanding debt under a 2020 agreement with Deerfield Partners.

The 7% royalty terms for both ADC Therapeutics drugs aren’t fixed. The agreement permits the royalty percentage to increase to up to 10%, based on performance tests that will be conducted in 2026 and 2027. However, the total royalty is capped within the range of 2.25 to 2.5 times the total amount that HealthCare Royalty paid to ADC Therapeutics. Once that cap is hit, the agreement terminates.

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