ADC implements 'lower risk' R&D strategy with 17% layoffs, preclinical culls

Biotech may be an inherently risky business, but ADC Therapeutics is now keen to pursue a low-risk R&D strategy that will see it focus on assets most likely to make it to market. In practice, this means the antibody-drug conjugate company will join the ever-growing roster of drug developers shrinking their head counts and culling early-stage candidates.

By reprioritizing ADC's pipeline to “focus resources on the most advanced, lower risk value-generating programs,” the biotech will end investment in its two preclinical programs—namely potential prostate cancer drug ADCT-212, which targets PSMA, and ADCT-701, which targets DLK-1 and was being explored for a range of tumors.

Candidates that have already made it into the clinic have been spared the chop, however. They include the AXL-targeting ADCT-601 and KAAG1-targeting ADCT-901, which are both in phase 1 trials for various solid tumors, as well as the CD22-targeting ADCT-602, which is in an early-stage study for acute lymphoblastic leukemia.

The FDA-approved diffuse large B-cell lymphoma therapy Zynlonta will continue to take center stage. Three ongoing trials in combination with various other cancer therapies will stay on track, which “if successful … have the potential to significantly increase Zynlonta’s market opportunity in earlier lines of therapy and with multiple combination partners,” the company explained in its earnings release.

Despite first-quarter sales of Zynlonta rising by 15% year over year and a 19% decrease in operating expenses, ADC decided that now is the time for some belt tightening.

“Following a comprehensive review of the business by our executive team, we are implementing a new corporate and capital allocation strategy which we believe will allow the company to focus on the most advanced and highest-potential clinical value drivers,” CEO Ameet Mallik said in the release.

The 17% workforce reduction will hit hardest those roles related to the preclinical pipeline cull as well as “back-office efficiencies,” ADC said in the release.

“This reduction is effective today and includes full-time employees, vacant roles and contractors,” the biotech added. “Along with decreasing additional operating expenses, this will allow the company to re-deploy capital in programs with the highest value-generating potential.”

ADC ended March with $310.5 million in cash and equivalents, which it expects to last to mid-2025 once the latest cost reductions are factored in. It won’t hurt that the biotech is expecting a welcome $75 million milestone payment from HealthCare Royalty Partners, which will be triggered by the first EU sale of Zynlonta.

The biotech made no mention of camidanlumab tesirine, also known as cami, in the release beyond the fact it is now receiving less investment. Despite being ADC’s second most advanced candidate, the FDA’s stricter policy on accelerated approvals threw a spanner in the works last year and left the company searching for potential partners for the Hodgkin lymphoma drug as of February.