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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One)
☐
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☐
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 001-39071
ADC Therapeutics SA
(Exact name of Registrant as specified in its charter)
Switzerland
(Jurisdiction of incorporation or organization)
Biopôle
Route de la Corniche 3B 
1066 Epalinges 
Switzerland
(Address of principal executive offices)
Jennifer Creel
ADC Therapeutics America, Inc.
430 Mountain Avenue, 4th Floor
Murray Hill, NJ 07974
(908) 546-5556
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Copies to:
Deanna L. Kirkpatrick
Yasin Keshvargar
Davis Polk & Wardwell LLP
450 Lexington Avenue
New York, NY 10017
(212) 450-4000
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol Name of each exchange on which registered
Common Shares, par value CHF 0.08 per share ADCT New York Stock Exchange
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
Indicate the number of outstanding shares of each of the issuer’s classes of capital stock or common stock as of the close of the period covered by the annual report.
Common shares: 76,721,543
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
o Yes x No
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
o Yes x No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
x Yes o No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
x Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
Accelerated filer
☐
Non-accelerated filer
☒
Emerging growth company
☒
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards † provided pursuant to Section 13(a) of the Exchange Act. ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
US GAAP
☐
International Financial Reporting Standards
Other
☐
as issued by the International Accounting Standards Board
☒
If “Other” has been checked in response to the previous question indicate by check mark which financial statement item the registrant has elected to follow.
o Item 17 o Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐ Yes x No

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PRESENTATION OF FINANCIAL AND OTHER INFORMATION

Unless otherwise indicated or the context otherwise requires, all references in this Annual Report to “ADC Therapeutics,” “ADCT,” the “Company,” “we,” “our,” “ours,” “us” or similar terms refer to ADC Therapeutics SA and its consolidated subsidiaries.

Trademarks

We own various trademark registrations and applications, and unregistered trademarks, including ADC Therapeutics, ADCT and our corporate logo. All other trade names, trademarks and service marks of other companies appearing in this Annual Report are the property of their respective owners. Solely for convenience, the trademarks and trade names in this Annual Report may be referred to without the ® and ™ symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend to use or display other companies’ trademarks and trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

Financial Statements

Our consolidated financial statements are presented in U.S. dollars and have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”). None of the consolidated financial statements were prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). The terms “dollar,” “USD” or “$” refer to U.S. dollars and the term “Swiss franc” and “CHF” refer to the legal currency of Switzerland, unless otherwise indicated. We have made rounding adjustments to some of the figures included in this Annual Report. Accordingly, any numerical discrepancies in any table between totals and sums of the amounts listed are due to rounding.

Market and Industry Data

This Annual Report contains industry, market and competitive position data that are based on general and industry publications, surveys and studies conducted by third parties, some of which may not be publicly available, and our own internal estimates and research. Third-party publications, surveys and studies generally state that they have obtained information from sources believed to be reliable, but do not guarantee the accuracy and completeness of such information. These data involve a number of assumptions and limitations and contain projections and estimates of the future performance of the industries in which we operate that are subject to a high degree of uncertainty. We caution you not to give undue weight to such projections, assumptions and estimates.

FORWARD-LOOKING STATEMENTS

This Annual Report contains statements that constitute forward-looking statements. All statements other than statements of historical facts contained in this Annual Report, including statements regarding our future results of operations and financial position, business strategy, product candidates, research pipeline, ongoing and planned preclinical studies and clinical trials, regulatory submissions and approvals, research and development costs, timing and likelihood of success, as well as plans and objectives of management for future operations are forward-looking statements. Many of the forward-looking statements contained in this Annual Report can be identified by the use of forward-looking words such as “anticipate,” “believe,” “could,” “expect,” “should,” “plan,” “intend,” “estimate,” “will” and “potential,” among others.

Forward-looking statements appear in a number of places in this Annual Report and include, but are not limited to, statements regarding our intent, belief or current expectations. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. Such statements are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied in the forward-looking statements due to various factors, including, but not limited to, those identified under “Item 3. Key Information—D. Risk Factors.” These forward-looking statements include:
•the commencement, timing, progress and results of our research and development programs, preclinical studies and clinical trials;
•the timing of investigational new drug application (“IND”), biologics license application (“BLA”), supplemental BLA (“sBLA”), marketing authorization application (“MAA”) and other regulatory submissions with the U.S. Food and Drug Administration (“FDA”), the European Medicines Agency (“EMA”) or comparable regulatory authorities in other jurisdictions;
•the proposed clinical development pathway for our lead product candidates, loncastuximab tesirine (“Lonca” and previously known as ADCT-402), camidanlumab tesirine (“Cami” and previously known as ADCT-301), and our other product candidates, and the acceptability of the results of clinical trials for regulatory approval of such product candidates by the FDA, EMA or comparable regulatory authorities in other jurisdictions;
•assumptions relating to the identification of serious adverse, undesirable or unacceptable side effects related to our product candidates;
•the timing of and our ability to obtain and maintain regulatory approval for our product candidates;
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•our plan for the commercialization of Lonca and Cami, if approved;
•the manufacture and supply of our product candidates;
•our expectations regarding the size of the patient populations amenable to treatment with our product candidates, if approved, as well as the treatment landscape of the indications that we are targeting with our product candidates;
•assumptions relating to the rate and degree of market acceptance of any approved product candidates;
•the pricing and reimbursement of our product candidates;
•our ability to identify and develop additional product candidates;
•the ability of our competitors to discover, develop or commercialize competing products before or more successfully than we do;
•our competitive position and the development of and projections relating to our competitors or our industry;
•our estimates of our expenses, ongoing losses, future revenue, capital requirements and need for or ability to obtain additional financing;
•our ability to raise capital when needed in order to continue our research and development programs or commercialization efforts;
•our expectations regarding the receipt of the second disbursement under the Facility Agreement, dated April 24, 2020 (the “Facility Agreement”), with Deerfield Partners, L.P. and certain of its affiliates (collectively, “Deerfield”);
•our ability to identify and successfully enter into strategic collaborations or licensing opportunities in the future, and our assumptions regarding any potential revenue that we may generate under current or future collaborations or licensing arrangements;
•our ability to obtain, maintain, protect and enforce intellectual property protection for our product candidates, and the scope of such protection;
•our ability to operate our business without infringing, misappropriating or otherwise violating the intellectual property rights of third parties;
•our expectations regarding the impact of the COVID-19 pandemic;
•our ability to attract and retain qualified key management and technical personnel; and
•our expectations regarding the time during which we will be an emerging growth company under the Jumpstart our Business Startups Act of 2012 (“JOBS Act”) and a foreign private issuer.

These forward-looking statements speak only as of the date of this Annual Report and are subject to a number of risks, uncertainties and assumptions described under the sections in this Annual Report entitled “Item 3. Key Information—D. Risk Factors” and “Item 5. Operating and Financial Review and Prospects” and elsewhere in this Annual Report. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Annual Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.


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ENFORCEMENT OF JUDGMENTS

We are organized under the laws of Switzerland and our registered office and domicile is located in Epalinges, Switzerland. Moreover, a number of our directors and executive officers are not residents of the United States, and all or a substantial portion of the assets of such persons are located outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon us or upon such persons or to enforce against them judgments obtained in U.S. courts, including judgments in actions predicated upon the civil liability provisions of the federal securities laws of the United States. We have been advised by our Swiss counsel that there is doubt as to the enforceability in Switzerland of original actions, or in actions for enforcement of judgments of U.S. courts, of civil liabilities to the extent solely predicated upon the federal and state securities laws of the United States. Original actions against persons in Switzerland based solely upon the U.S. federal or state securities laws are governed, among other things, by the principles set forth in the Swiss Federal Act on Private International Law (“PILA”). This statute provides that the application of provisions of non-Swiss law by the courts in Switzerland shall be precluded if the result would be incompatible with Swiss public policy. Also, mandatory provisions of Swiss law may be applicable regardless of any other law that would otherwise apply.

Switzerland and the United States do not have a treaty providing for reciprocal recognition of and enforcement of judgments in civil and commercial matters. The recognition and enforcement of a judgment of the courts of the United States in Switzerland is governed by the principles set forth in the PILA. This statute provides in principle that a judgment rendered by a non-Swiss court may be enforced in Switzerland only if:
• the non-Swiss court had jurisdiction pursuant to the PILA;
• the judgment of such non-Swiss court has become final and non-appealable;
• the judgment does not contravene Swiss public policy;
• the court procedures and the service of documents leading to the judgment were in accordance with the due process of law; and
• no proceeding involving the same position and the same subject matter was first brought in Switzerland, or adjudicated in Switzerland, or was earlier adjudicated in a third state and this decision is recognizable in Switzerland.
PART I
ITEM 1.    IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
A.Directors and Senior Management
Not applicable.
B.Advisers
Not applicable.
C.Auditors
Not applicable.
ITEM 2.    OFFER STATISTICS AND EXPECTED TIMETABLE
A.Offer Statistics
Not applicable.
B.Method and Expected Timetable
Not applicable.
ITEM 3.    KEY INFORMATION
A.Selected Financial Data
The selected Consolidated Statement of Operation data for the years ended December 31, 2020, 2019 and 2018 presented below and the selected Consolidated Balance Sheet data as of December 31, 2020, 2019 and 2018 presented below are derived from our audited Consolidated Financial Statements included elsewhere in this Annual Report on Form 20-F.
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Our audited Consolidated Financial Statements are prepared in accordance with IFRS and presented in USD.
Our historical results are not necessarily indicative of the results that may be expected in the future. The following summary financial data should be read in conjunction with “Item 5. Operating and Financial Review and Prospects” and our financial statements included elsewhere in this Annual Report.

For the Years Ended December 31,
(in thousands, except for share and per share data) 2020 2019 2018
Consolidated Statement of Operation Data:
Contract revenue —  2,340  1,140 
Research and development expenses (142,032) (107,537) (118,313)
Selling and marketing expenses (22,101) —  — 
General and administrative expenses (55,130) (14,202) (8,768)
Total operating expense (219,263) (121,739) (127,081)
Loss from operations (219,263) (119,399) (125,941)
Other income 584  1,655  — 
Convertible loans, derivatives, change in fair value (expense) (45,411) —  — 
Convertible loans, first tranche, derivative, transaction costs (1,571) —  — 
Share of results with joint venture 24,368  —  — 
Financial income 832  2,253  2,856 
Financial expense (4,926) (156) — 
Exchange differences (loss) gain (576) (255) 213 
Total other (expense) income (26,700) 3,497  3,069 
Loss before taxes (245,963) (115,902) (122,872)
Income tax (expense) (327) (582) (224)
Net loss (246,290) (116,484) (123,096)
Net loss per share, basic and diluted (3.77) (2.36) (2.64)
Weighted-average number of shares used to compute Net loss per
share, basic and diluted (1)
65,410,292  49,279,961  46,600,000 
_________________________
(1)On April 24, 2020, we effected a five-to-four share consolidation of our outstanding shares. On September 19, 2019, we effected a one-to-15,625 share split of our outstanding shares. Accordingly, all share and per share amounts for all periods presented thereto have been adjusted retroactively, where applicable, to reflect this share consolidation and share split.
As of December 31,
(in thousands) 2020 2019 2018
Consolidated Balance Sheet Data:
Cash and cash equivalents 439,195  115,551  138,807 
Interest in joint venture (1)
47,908  —  — 
Total assets 513,692  137,682  150,558 
Convertible loans, short-term (2)
3,631  —  — 
Convertible loans, long-term (2)
34,775  —  — 
Convertible loans, derivatives (2)
73,208  —  — 
Deferred gain of joint venture (1)
23,539  —  — 
Total liabilities 178,187  26,526  24,315 
Share capital (3)
6,314  4,361  401 
Share premium (3)
981,056  549,922  452,268 
Accumulated losses (694,859) (448,569) (332,085)
Total equity 335,505  111,156  126,243 
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(1) On December 14, 2020, we announced the formation of Overland ADCT BioPharma (CY) Limited (“Overland ADCT BioPharma”) with Overland Pharmaceuticals and received a 49% equity interest on exchange for the contribution of certain licensed intellectual property. See note 2, “Basis of Presentation” within the audited Consolidated Financial Statements for further information.
(2) On April 24, 2020, we entered into a USD 115 million Facility Agreement, pursuant to which the counterparty agreed to extend senior secured convertible term loans. See note 2, “Basis of Presentation” within the audited Consolidated Financial Statements for further information and note 21, “Convertible loans” within the audited Consolidated Financial Statements for further information.
(3) On May 19, 2020, we completed our initial public offering and on September 28, 2020, we completed a follow-on public offering. See note 2, “Basis of Presentation” within the audited Consolidated Financial Statements for further information.
B.Capitalization and Indebtedness
Not applicable.
C.Reasons for the Offer and Use of Proceeds
Not applicable.
D.Risk Factors
Our business faces significant risks and uncertainties. You should carefully consider all of the information set forth in this Annual Report and in other documents we file with or furnish to the SEC, including the following risk factors, before deciding to invest in or to maintain an investment in our securities. Our business, as well as our reputation, financial condition, results of operations, and share price, could be materially adversely affected by any of these risks, as well as other risks and uncertainties not currently known to us or not currently considered material.
Risk Factors Summary

Our ability to implement our business strategy is subject to numerous risks, as more fully described in this section. These risks include, among others:
• We have incurred net losses during all fiscal periods since our inception, have no products approved for commercial sale and anticipate that we will continue to incur substantial net losses for the foreseeable future.
• The Facility Agreement and the associated restrictive covenants thereunder could adversely affect our financial condition and restrict our ability to raise capital.
• We have concentrated our research and development efforts on pyrrolobenzodiazepine (“PBD”)-based antibody drug conjugates (“ADCs”), and our future success depends heavily on the successful development of this therapeutic approach.
• Our product candidates are in various stages of development, and it is possible that none of our product candidates will ever become commercial products.
• In the past, certain of our clinical trials, including our pivotal Phase 2 clinical trial of Cami for the treatment of relapsed or refractory HL, have been subject to clinical holds prior to the dosing of the first patient and partial clinical holds after the dosing of the first patient. A clinical hold on any of our clinical trials will result in delays of our clinical development timelines.
• Our product candidates may cause undesirable side effects or have other properties that may delay or prevent their development or regulatory approval or limit their commercial potential.
• The regulatory review and approval processes of the FDA, the EMA and comparable regulatory authorities in other jurisdictions are lengthy, time-consuming and inherently unpredictable. If we are unable to obtain, or if there are delays in obtaining, regulatory approval for our product candidates, our ability to commercialize them and generate revenue will be materially impaired.
• As a company, we have never commercialized a product. We may lack the necessary expertise, personnel and resources to successfully commercialize our product candidates.
• We face substantial competition, which may result in others discovering, developing or commercializing products, treatment methods or technologies before or more successfully than we do.
• We rely on third parties for the manufacture, production, storage and distribution of our product candidates. Our dependence on these third parties may impair the clinical advancement and commercialization of our product candidates.
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• Issued patents covering one or more of our product candidates or technologies, including Lonca, Cami or the technology we use in our product candidates, could be found invalid or unenforceable if challenged in court.
• If we fail to attract and retain senior management and key scientific personnel or fail to adequately plan for succession, we may be unable to successfully develop our product candidates, conduct our clinical trials and commercialize our product candidates.
• Our business could be adversely affected by the effects of health epidemics, including the COVID-19 pandemic, in regions where we or third parties on which we rely have significant manufacturing facilities, concentrations of clinical trial sites or other business operations.
Risks Related to Our Financial Position and Capital Requirements

We have incurred net losses during all fiscal periods since our inception, have no products approved for commercial sale and anticipate that we will continue to incur substantial net losses for the foreseeable future.

We are a late clinical-stage oncology-focused biotechnology company and have a history of net losses. For the years ended December 31, 2020, 2019 and 2018, our net losses were USD 246.3 million, USD 116.5 million and USD 123.1 million, respectively. Our net losses have resulted principally from costs incurred in our research and development activities, personnel expenses and fair value adjustments of the derivatives associated with the Facility Agreement.

We expect to continue to incur significant expenses and increasing net losses for the foreseeable future as we continue our research and development efforts and seek to obtain regulatory approval for and commercialize our product candidates. We anticipate that our expenses will increase substantially as we:
•
seek regulatory approval for Lonca and our other product candidates from applicable regulatory authorities;
•
conduct a confirmatory clinical trial of Lonca in combination with rituximab for the treatment of relapsed or refractory diffuse large B-cell lymphoma (“DLBCL”);
•
conduct pivotal Phase 2 clinical trials of our product candidates, including the pivotal Phase 2 clinical trial of Lonca for the treatment of relapsed or refractory follicular lymphoma (“FL”) and the pivotal Phase 2 clinical trial of Cami for the treatment of relapsed or refractory Hodgkin’s lymphoma (“HL”);
•
conduct the Phase 1/2 clinical trial of Lonca in combination with ibrutinib for the treatment of relapsed or refractory DLBCL and mantle cell lymphoma (“MCL”);
•
conduct Phase 1 clinical trials of our current and future product candidates;
•
conduct any required confirmatory clinical trials of any of our product candidates in anticipation of potential accelerated approval from the FDA or similar conditional approval from the EMA or comparable regulatory agencies in other jurisdictions;
•
expand our research and development efforts for our preclinical product candidates and research pipeline;
•
invest in our late-stage clinical development, manufacturing and commercialization activities, including launching commercial sales, marketing and distribution operations;
•
continue to prepare, file, prosecute, maintain, protect and enforce our intellectual property rights and claims;
•
add clinical, scientific, operational, financial and management information systems and personnel; and
•
continue to operate as a public company.

Even if we obtain regulatory approval of and are successful in commercializing one or more of our product candidates, we may incur substantial research and development and other expenditures to develop and market additional product candidates. We may encounter unforeseen expenses, difficulties, complications, delays and unknown factors that may adversely affect our business. The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenue. Our net losses may fluctuate significantly from quarter to quarter and from year to year.

We may never achieve or sustain profitability.

We do not know when or whether we will become profitable. To date, we have not commercialized any products or generated any revenues from the sale of products. To become and remain profitable, we must succeed in developing, obtaining regulatory approval for and commercializing one or more of our product candidates. This will require us to be successful in a range of challenging activities, including completing preclinical studies and clinical trials of our product candidates, discovering and developing additional product candidates, obtaining regulatory approval for any product candidates that successfully complete clinical trials, establishing commercialization capabilities for any approved products and achieving market acceptance for any approved products. We may never succeed in these activities. Even if we succeed in these activities, we may never generate revenue in an amount sufficient to achieve profitability.

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Because of the numerous risks and uncertainties associated with biotechnology product development and commercialization, we are unable to accurately predict whether and when we will achieve profitability. If we are required by the FDA, the EMA or any comparable regulatory authority in other jurisdictions to perform preclinical studies or clinical trials in addition to those we currently expect to conduct, or if there are any delays or complications in completing preclinical studies or clinical trials of our product candidates or, if preclinical studies and clinical trials are successful, in submitting an IND or BLA to the FDA, manufacturing clinical trial supplies and completing clinical trials, our expenses could increase substantially and our ability to achieve profitability could be further delayed.

Even if we achieve profitability, we may not be able to sustain profitability in subsequent periods. After we achieve profitability, if ever, we expect to continue to engage in substantial research and development activities and to incur substantial expenses to develop and commercialize additional product candidates. In addition, we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our revenues, expenses and profitability.

Our failure to achieve or sustain profitability would depress our market value and could impair our ability to execute our business plan, raise capital, develop additional product candidates or continue our operations.

We have never generated any revenue from product sales, which may make it difficult to evaluate the success of our business to date and to assess our future viability.

We were incorporated in 2011, and our operations to date have been largely focused on developing our product candidates, including conducting preclinical studies and clinical trials, raising capital and building our management team and infrastructure. We have not yet demonstrated an ability to obtain regulatory approvals or conduct sales and marketing activities necessary for successful commercialization. Additionally, the markets for our product candidates are competitive. Consequently, any predictions about our future success or viability may not be as accurate as they could be if we had a longer operating history or a history of successfully developing and commercializing products. Moreover, we are in the process of transitioning from a company with a research and development focus to a commercial-stage company. We may encounter unforeseen expenses, difficulties, complications and delays, and may not be successful in such a transition.

Our inability to obtain additional capital when needed could force us to delay, limit, reduce or terminate our product development efforts or our establishment of late-stage development and commercialization capabilities.

Since our inception, we have used substantial amounts of cash. The development of biotechnology product candidates is capital intensive and we expect that we will continue to expend substantial resources for the foreseeable future to develop and commercialize our current and future product candidates. Our expenditures in the foreseeable future may include costs associated with conducting research and development activities, conducting preclinical studies and clinical trials, obtaining regulatory approvals, undertaking commercialization activities, establishing our sales and marketing capabilities, manufacturing and selling approved products and potentially acquiring new technologies.

To date, we have financed our operations primarily through equity and convertible debt financings. As of December 31, 2020, we had USD 439.2 million in cash and cash equivalents. We believe that we have sufficient financial resources available to fund our projected operating requirements for at least the next twelve months. Because the outcome of our current and planned clinical trials and our regulatory submissions are highly uncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of our product candidates. For example, our costs will increase if we experience any delays in our current and planned clinical trials.

Our future capital requirements, both in the near- and long-term, depend on many factors, including:
•
the outcome, timing and costs of obtaining regulatory approvals for Lonca and for our other product candidates if the requisite clinical trials are successful;
•
the progress, results and costs of our confirmatory clinical trial of Lonca in combination with rituximab for the treatment of relapsed or refractory DLBCL;
•
the progress, results and costs of our Phase 1 and potentially pivotal Phase 2 clinical trials of our product candidates;
•
the progress, results and costs of any required confirmatory clinical trials of any product candidates that receive accelerated approval from the FDA or similar conditional approval from the EMA or comparable regulatory agencies in other jurisdictions;
•
the scope, progress, results and costs of researching and developing product candidates in our research pipeline, including conducting preclinical studies and clinical trials of such product candidates;
•
the costs of outsourced manufacturing of our product candidates, which are complex biological molecules, for clinical trials and in preparation for regulatory approval and commercialization;
•
the size of the markets for approved indications in territories in which we receive regulatory approval, if any;
•
the timing and costs of commercialization activities for our product candidates, if any are approved for sale, including establishing our sales and marketing capabilities and engaging in the marketing, sale and distribution of our product candidates;
•
the revenue, if any, received from the commercialization of our product candidates, if any are approved for sale;
•
our ability to maintain and establish collaboration, licensing or other arrangements and the financial terms of such agreements;
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•
the costs involved in preparing, filing, prosecuting, maintaining, protecting and enforcing our intellectual property rights and claims, including any litigation costs and the outcome of such litigation;
•
the costs associated with potential product liability claims, including the costs associated with obtaining insurance against such claims and with defending against such claims;
•
the timing and amount of milestone and royalty payments we receive under our collaboration agreements, if any;
•
the costs involved in maintaining and improving the technology we use in our product candidates;
•
our efforts to enhance operational systems and hire additional personnel, including personnel to support the development and commercialization of our product candidates and to satisfy our obligations as a public company;
•
the effect of competing technological and market developments; and
•
the types of available sources of private or public market financing.

We may require additional funds to execute our business plan. However, additional funds may not be available when we need them or on terms that are acceptable to us. In addition, market volatility resulting from the COVID-19 pandemic and other factors could also adversely impact our ability to access capital as and when needed. Further, as a Swiss company, we have less flexibility to raise capital, particularly in a quick and efficient manner, as compared to U.S. companies. See “—Risks Related to Our Common Shares—Our shareholders enjoy certain rights that may limit our flexibility to raise capital, issue dividends and otherwise manage ongoing capital needs.” In addition, the terms of the Facility Agreement, and the senior secured convertible notes issued and issuable thereunder, will further impede our ability to raise capital. See “—Risks Related to Our Financial Position and Capital Requirements—The Facility Agreement and the associated restrictive covenants thereunder could adversely affect our financial condition and will restrict our ability to raise capital.” If adequate funds are not available to us on a timely basis or on terms acceptable to us, we may be required to delay, limit, reduce or terminate our product development efforts or our establishment of late-stage development and commercialization capabilities.

Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our intellectual property or product candidates on unfavorable terms.

Unless and until we can generate sufficient revenue to finance our cash requirements, which may never happen, we may seek additional capital through a variety of means, including through public and private equity offerings and debt financings, credit and loan facilities and additional collaborations. If we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of such equity or convertible debt securities may include liquidation or other preferences that are senior to or otherwise adversely affect your rights as a shareholder. If we raise additional capital through the sale of debt securities or through entering into credit or loan facilities, we may be restricted in our ability to take certain actions, such as incurring additional debt, making capital expenditures, acquiring or licensing intellectual property rights, declaring dividends or encumbering our assets to secure future indebtedness. Such restrictions could adversely impact our ability to conduct our operations and execute our business plan. If we raise additional capital through collaborations with third parties, we may be required to relinquish valuable rights to our intellectual property or product candidates or we may be required to grant licenses for our intellectual property or product candidates on unfavorable terms. If we are unable to raise additional capital when needed, we may be required to delay, limit, reduce or terminate our product development efforts or our establishment of late-stage development and commercialization capabilities or we may be required to grant rights to third parties to develop and market our product candidates that we would otherwise prefer to develop and market ourselves.

The Facility Agreement and the associated restrictive covenants thereunder could adversely affect our financial condition and restrict our ability to raise capital.

On April 24, 2020, we entered into the Facility Agreement with Deerfield. See “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources.” The Facility Agreement contains various covenants, including a requirement to retain USD 50.0 million in deposit and securities accounts as of the end of each fiscal quarter. In addition, the Facility Agreement restricts our and the guarantors’ ability to, among other things, (i) declare or make any dividend payment, (ii) create or incur any lien on our assets beyond those outstanding on the date of the Facility Agreement and certain permitted licensing agreements, (iii) dispose of any assets or property, other than issuance and sale of common shares, certain financing transactions with respect to royalties on product sales, certain permitted licensing agreements and joint ventures (iv) incur any indebtedness, (v) make any investments (other than investments in permitted joint ventures and other permitted transactions), (vi) amend our organizational documents or any material agreements in a manner that would reasonably be expected to be materially adverse to the rights of the lenders or (vii) change our reporting practices or fiscal year, in each case, subject to exceptions set forth in the Facility Agreement. Furthermore, under the Facility Agreement, we are required to, among other things, (i) remain a reporting company and maintain the listing of our common shares on an eligible market, (ii) provide the lenders with information regarding any event of default or the occurrence of any material adverse event and (iii) publicly disclose material, nonpublic information that is provided to the lenders without their prior written consent. Subject to customary exceptions and exclusions, our obligations under the Facility Agreement are guaranteed by a perfected, first-priority security interest in substantially all of our personal property, including our intellectual property and the equity ownership interests directly and indirectly held by us in our wholly-owned subsidiaries and joint ventures. Compliance with such covenants and our indebtedness will result in the following, which could materially and adversely affect our business, financial condition and results of operations:
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•
require us to dedicate a substantial portion of cash and cash equivalents to the payment of interest on, and principal of, the indebtedness, which will reduce the amounts available to fund working capital, capital expenditures, product development efforts and other general corporate purposes;
•
oblige us to comply with negative covenants restricting our activities, including limitations on dispositions, mergers or acquisitions, encumbering our intellectual property, incurring indebtedness or liens, paying dividends, making investments and engaging in certain other business transactions;
•
limit our flexibility in planning for, or reacting to, changes in our business and our industry;
•
place us at a competitive disadvantage compared to our competitors who have less debt or competitors with comparable debt on more favorable terms; and
•
limit our ability to borrow additional amounts for working capital, capital expenditures, research and development efforts, acquisitions, debt service requirements, execution of our business strategy and other purposes, and otherwise restrict our financing options.

Furthermore, because the interests of the lenders may potentially differ from ours and from those of our shareholders, we may be unable to engage in transactions or other activities that may be beneficial to our shareholders. The covenants under the Facility Agreement could materially and adversely affect our business, financial condition and results of operations.

Upon the occurrence of a major transaction, as defined under the convertible notes, the holders of the convertible notes may elect to require us to redeem all or any portion of the notes for an amount equal to the principal amount thereof (in addition to accrued and unpaid interest, a make-whole amount and an exit charge). There can be no assurance that we will have sufficient capital to redeem such notes upon the occurrence of a major transaction.

Servicing our indebtedness requires a significant amount of cash. Our ability to repay the principal of, to pay interest on or to refinance our indebtedness depends on our future performance, which is subject to economic, financial, competitive and other factors, many of which are beyond our control. Our business may not generate cash flow from operations in the future sufficient to service our indebtedness. If we are unable to generate cash flow, we may be required to adopt one or more alternatives, such as restructuring debt or obtaining additional financing on terms that may be unfavorable to us or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at the time we seek to refinance such indebtedness. Our inability to satisfy our debt obligations could materially and adversely affect our financial position and results of operations.

A failure to comply with the conditions of the Facility Agreement or the convertible notes could result in an event of default. An event of default under the Facility Agreement includes, among other things, a failure to pay any amount due under the Facility Agreement or to issue common shares when required upon conversion of the convertible notes as well as the occurrence of a criminal proceeding, investigation or other similar government inquiry that could reasonably be expected to result in a material adverse effect. If we fail to comply with any of the covenants under our indebtedness and are unable to obtain a waiver or amendment, the lenders may, among other things, accelerate our outstanding indebtedness and exercise rights with respect to collateral securing our outstanding indebtedness, each of which could have an adverse effect on our business, financial condition and results of operations.

Any of these events could materially and adversely affect our business, financial condition and results of operations.

The senior secured convertible notes expose us to volatility in our statement of operations and to considerable non-cash charges.

The Facility Agreement provides for two separate disbursements of convertible loans, each subject to satisfaction of certain conditions precedent set forth in the Facility Agreement. On May 19, 2020, Deerfield extended the initial disbursement to us in the amount of USD 65.0 million in connection with our initial public offering. The Facility Agreement provides for a subsequent disbursement in the amount of USD 50.0 million, which we will be required to draw down, upon receipt of regulatory approval for Lonca and satisfaction of certain other conditions.

The first disbursement of convertible loans in the amount of USD 65.0 million has been accounted for as two separate components: a convertible loan and an embedded derivative conversion feature. The embedded derivative conversion feature is re-measured to fair value at each reporting date. Decreases in the life of the convertible loans pursuant to which the senior secured convertible notes are issued and decreases in our share price and its expected volatility will tend to reduce the fair value of the derivative and lead to gains in our Consolidated Statement of Operation. However, increases in our share price and its expected volatility will tend to increase the fair value of the derivative and lead to losses in our Consolidated Statement of Operation. As a result, our Consolidated Statement of Operation will be subject to volatility arising from factors beyond our direct control. We recorded a non-cash charge of USD 23.4 million associated with the increase in the fair value of the embedded derivative during the year ended December 31, 2020.

The convertible loan’s fair value was determined as the residual amount of the consideration received, net of attributable costs, after separating out the fair value of the embedded conversion feature. This residual amount represents the net present value of the future cash outflows associated with the convertible loan: (i) periodic interest at a rate of 5.95% per annum; (ii) repayment of the principal amount at redemption or at maturity; and (iii) payment of an exit charge equal to 2.0% on the principal amount of the convertible loans repaid or
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converted upon redemption or at maturity. We inferred an effective interest rate of approximately 23% from the net present value of the expected cash outflows, which will be applied over the life of the convertible loans and that will cause the initial carrying value of the convertible loans to increase through accretion of interest to the actual amounts of those expected cash outflows. We will incur significant non-cash interest charges in our Consolidated Statement of Operation as the effective interest rate was considerably higher than the nominal rate of 5.95%.

Prior to satisfying the conditions set forth in the Facility Agreement with respect to the subsequent disbursement, we will account for the obligation to draw down the subsequent disbursement as a derivative instrument. The derivative instrument is re-measured to fair value at each reporting date until the earlier of (i) regulatory approval for Lonca and satisfaction of other conditions set forth in the Facility Agreement and (ii) December 31, 2021, the date on which Deerfield’s obligation to make the second disbursement will expire if these conditions are not satisfied. Decreases in our share price and its expected volatility, as well as a decrease in the probability of success factor for achieving regulatory approval for Lonca, will tend to reduce the fair value of the derivative and lead to gains in our Consolidated Statement of Operation. However, increases in our share price and its expected volatility, as well as an increase in the probability of success factor for achieving regulatory approval for Lonca, will tend to increase the fair value of the derivative and lead to losses in our Consolidated Statement of Operation. As a result, our Consolidated Statement of Operation will be subject to volatility arising from factors beyond our direct control. We recorded a non-cash charge of USD 22.0 million associated with the increase in the fair value of the derivative during the year ended December 31, 2020.

Upon receipt of regulatory approval for Lonca and satisfaction of certain other conditions set forth in the Facility Agreement, we would receive the subsequent disbursement of convertible loans in the amount of USD 50.0 million. At such time, the second disbursement of convertible loans would be accounted for in a similar manner as the first disbursement (i.e., a convertible loan and an embedded derivative conversion feature).

Our ability to use tax loss carryforwards in Switzerland may be limited.

As of December 31, 2020, we reported USD 613.2 million in tax loss carryforwards from previous financial years for Swiss corporate income tax purposes. Such tax loss carryforwards could, with certain limitations, be used to offset future taxable income. However, if not used, tax loss carryforwards expire seven years after the tax year in which they were incurred. Due to our limited income, there is a high risk that our tax loss carryforwards will expire in part or in their entirety and be unavailable to offset future taxable income for Swiss corporate income tax purposes.

Furthermore, any tax loss carryforwards that we report on our tax returns are subject to review and confirmation by the competent Swiss tax authorities in their tax assessment of the tax year for which the tax loss carryforwards are used to offset taxable income. Consequently, we are exposed to the risk that the Swiss tax authorities may not accept the reported tax loss carryforwards in part or in their entirety. Any limitations in our ability to use tax loss carryforwards to offset taxable income could adversely affect our financial condition.

Changes in tax laws or the interpretation of tax laws could have a material impact on our financial condition.

We are subject to standard cantonal taxation. The standard effective corporate tax rate in Epalinges, Canton of Vaud, can change from time to time. However, we expect that the standard combined (federal, cantonal, communal) effective corporate income tax rate, except for dividend income for which we could claim a participation exemption, for 2021 in Epalinges will be approximately 13.7%.

In addition, in view of the ongoing implementation of the OECD G20 Base Erosion and Profit Shifting Project and the European Union anti-avoidance tax package, the existing transfer pricing system and our intercompany relationships could be challenged by the competent tax authorities, resulting in additional taxes, interest and penalties in case of profit add-backs, non-deductible expenses or objections to the transfer pricing documentation. A focus area is the taxation and allocation of profits generated from intangibles where the DEMPE (Development, Enhancement, Maintenance, Protection and Exploitation) functions will become more relevant compared to the pure bearing of costs. This may impact the taxation of our group profits and may impact our effective tax rate. These and other changes in tax laws or the interpretation of tax laws could have a material adverse effect on our financial condition.

Exchange rate fluctuations may materially affect our results of operations and financial condition.

We operate internationally and are exposed to fluctuations in foreign exchange rates between the U.S. dollar and other currencies, particularly the British pound, the Euro and the Swiss franc. Our reporting currency is the U.S. dollar and, as a result, financial line items are converted into U.S. dollars at the applicable foreign exchange rates. As our business grows, we expect that at least some of our revenues and expenses will be denominated in currencies other than the U.S. dollar. Therefore, unfavorable developments in the value of the U.S. dollar relative to other relevant currencies could adversely affect our business and financial condition.


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We are subject to risks related to the accounting treatment of our pension and other post-employment benefit plans.

We provide retirement benefits to our employees as required by Swiss law by means of a pension fund that is maintained by a life insurance company. The life insurance company operates a pension plan for all of our employees as a defined benefit plan under International Accounting Standard (“IAS”) 19. As of December 31, 2020, we reported an employee benefit obligation, before deduction of plan assets, of USD 11.8 million in accordance with IAS 19. The obligation represents our projected obligations towards current and future pensioners discounted at an annual rate of 0.2%. Under Swiss statutory rules and pursuant to our contract with the group life assurance provider, all risks including investment risk are fully covered. That said, no underfunding exists under Swiss law. The variance between Swiss statutory rules and IFRS is apparent in many Swiss companies, and the IFRS obligation of our pension plan does not necessarily reflect a true payment obligation under Swiss law because Swiss law allows us to maintain flexibility to adjust benefit levels under the plans and we could use this flexibility to mitigate any liability. For more information, see note 3.9, “Significant accounting policies—Employee benefits” and note 20, “Pension obligations” within our audited Consolidated Financial Statements included elsewhere in this Annual Report. However, should the Swiss statutory rules at any time require a determination that our pension plan is significantly underfunded, we could be obliged to make additional contributions into the pension plan in addition to our obligation to make regular contributions as defined in the pension plan regulation. If such risk materializes, this could have a material adverse effect on our financial position or results of operations.

Risks Related to the Development of Our Product Candidates

We have concentrated our research and development efforts on PBD-based ADCs, and our future success depends heavily on the successful development of this therapeutic approach.

Our ADCs use next-generation PBD warheads, which have a different mechanism of action than warheads used in currently approved ADCs. Although multiple PBD-based ADCs are being developed, none has been approved for sale in the United States or in the European Union. Any failures or setbacks involving PBD technology or PBD-based ADCs, whether developed by us or third parties, including adverse events, could have a detrimental impact on our product candidates and our research pipeline. For example, we or another party may uncover a previously unknown risk associated with PBDs or other issues that may be more problematic than we currently believe, which may prolong the period of observation required for obtaining, or result in the failure to obtain, regulatory approval or may necessitate additional clinical testing. If the PBD warhead technology that we use is not safe in certain product candidates, we would be required to abandon or redesign those product candidates, which could have a material adverse effect on our business, results of operations, financial condition and prospects.

Our product candidates are in various stages of development, and it is possible that none of our product candidates will ever become commercial products.

Our success depends heavily on the successful further development of our current and future product candidates and research pipeline as well as regulatory approval of our current and future product candidates, all of which are subject to risks and uncertainties beyond our control. We submitted a BLA for Lonca for the treatment of relapsed or refractory DLBCL, which was accepted by the FDA and granted priority review status with a Prescription Drug User Fee Act (“PDUFA”) target date of May 21, 2021, and are conducting clinical trials for Lonca in other indications, Cami and our other product candidates. Notwithstanding the BLA acceptance, priority review and PDUFA target date, the FDA may ultimately disagree that data generated from our clinical trials or our regulatory submissions are sufficient for regulatory approval. There can be no assurance that any of our product candidates will prove to be safe, effective or commercially viable treatments for cancer.

If we discontinue development of a product candidate, we will not receive the anticipated revenues from that product candidate, and we may not receive any return on our investment in that product candidate. We may discontinue a product candidate for clinical reasons if it does not prove to be safe and effective for its targeted indications. In the past, we and other companies in our field have discontinued the development of product candidates that did not achieve the necessary efficacy at tolerated doses required for patient benefit. For example, in January 2020, we discontinued our Phase 1b clinical trial of Lonca in combination with durvalumab for the treatment of relapsed or refractory DLBCL, MCL or FL because we determined that the combination did not demonstrate the necessary efficacy for further development. In the future, we may discontinue development programs for similar or other reasons. In addition, there may be important facts about the safety, efficacy and risk versus benefit of our product candidates that are not known to us at this time. Any unexpected safety events or our failure to generate sufficient data in our clinical trials to demonstrate efficacy may cause a product candidate to fail clinical development. Furthermore, even if that product candidate meets its safety and efficacy endpoints, we may discontinue its development for various reasons, such as changes in the competitive environment or the standard of care and the prioritization of our resources.

Due to the uncertain and time-consuming clinical development and regulatory approval process, we may not successfully develop any of our product candidates and may choose to discontinue the development of any of our product candidates. Therefore, it is possible that none of our current product candidates will ever become commercial products. Our failure to develop and commercialize our current and future product candidates could have a material adverse effect on our business, results of operations, financial condition and prospects.


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Results from early-stage clinical trials may not be predictive of results from late-stage or other clinical trials.

Positive and promising results from preclinical studies and early-stage clinical trials may not be predictive of results from late-stage clinical trials or from clinical trials of the same product candidates for the treatment of other indications. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical trials. Late-stage clinical trials could differ in significant ways from early-stage clinical trials, including changes to inclusion and exclusion criteria, efficacy endpoints, dosing regimen and statistical design. Moreover, success in clinical trials in a particular indication does not guarantee that a product candidate will be successful for the treatment of other indications. Many companies in the biotechnology industry have suffered significant setbacks in late-stage clinical trials after achieving encouraging or positive results in early-stage development. There can be no assurance that we will not face similar setbacks in our ongoing or planned late-stage clinical trials and any subsequent or post-marketing confirmatory clinical trials. Therefore, despite positive results observed in early-stage clinical trials, our product candidates may fail to demonstrate sufficient efficacy in our pivotal or confirmatory clinical trials.

Preliminary interim or “top-line” data that we announce or publish from time to time may change as more data become available and are subject to audit and verification procedures that could result in material changes in the final data.

From time to time, we may announce or publish preliminary interim or “top-line” data from clinical trials. Positive preliminary data may not be predictive of such trial’s subsequent or overall results. Preliminary data are subject to the risk that one or more of the outcomes may materially change as more data become available. Additionally, preliminary data are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Therefore, positive preliminary results in any ongoing clinical trial may not be predictive of such results in the completed trial. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully evaluate all data. As a result, preliminary data that we report may differ from future results from the same clinical trials, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Preliminary data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, preliminary data should be viewed with caution until the final data are available. Material adverse changes in the final data compared to preliminary data could significantly harm our business prospects.

Delays in the commencement and completion of clinical trials could increase costs and delay or prevent regulatory approval and commercialization of our product candidates.

We cannot guarantee that clinical trials of our product candidates will be conducted as planned or completed on schedule, if at all. A failure of one or more clinical trials can occur at any stage of the clinical trial process, and other events may cause us to temporarily or permanently stop a clinical trial. Events that may prevent successful or timely commencement and completion of clinical development include:
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negative preclinical data;
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delays in receiving the required regulatory clearance from the appropriate regulatory authorities to commence clinical trials or amend clinical trial protocols, including any objections to our INDs or protocol amendments from the FDA;
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delays in reaching, or a failure to reach, a consensus with regulatory authorities on study design;
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delays in reaching, or a failure to reach, an agreement on acceptable terms with prospective clinical research organizations (“CROs”) and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and clinical trial sites;
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difficulties in obtaining required Institutional Review Board (“IRB”) or ethics committee approval at each clinical trial site;
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challenges in recruiting and enrolling suitable patients that meet the study criteria to participate in clinical trials;
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the inability to enroll a sufficient number of patients in clinical trials to ensure adequate statistical power to detect statistically significant treatment effects;
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imposition of a clinical hold by regulatory authorities or IRBs for any reason, including safety concerns and non-compliance with regulatory requirements;
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failure by CROs, other third parties or us to adhere to clinical trial requirements;
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failure to perform in accordance with the FDA’s good clinical practices (“GCP”) or applicable regulatory guidelines in other jurisdictions;
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the inability to manufacture adequate quantities of a product candidate or other materials necessary in accordance with current Good Manufacturing Practices (“cGMPs”) to conduct clinical trials, including, for example, quality issues and delays in the testing, validation, manufacturing delays or failures at our CROs and delivery of the product candidates to the clinical trial sites;
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lower than anticipated patient retention rates;
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difficulties in maintaining contact with patients after treatment, resulting in incomplete data;
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ambiguous or negative interim results;
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our CROs or clinical trial sites failing to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all, deviating from the protocol or dropping out of a clinical trial;
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unforeseen safety issues, including occurrence of treatment emergent adverse events (“TEAEs”) associated with the product candidate that are viewed to outweigh the product candidate’s potential benefits;
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changes in regulatory requirements and guidance that require amending or submitting new clinical protocols;
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lack of adequate funding to continue the clinical trial; or
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delays and disruptions as a result of the COVID-19 pandemic.

Delays, including delays caused by the above factors, can be costly and could negatively affect our ability to complete a clinical trial. If we are not able to successfully complete clinical trials, we will not be able to obtain regulatory approval and will not be able to commercialize our product candidates.

In the past, certain of our clinical trials, including our pivotal Phase 2 clinical trial of Cami for the treatment of relapsed or refractory HL, have been subject to clinical holds prior to the dosing of the first patient and partial clinical holds after the dosing of the first patient. A clinical hold on any of our clinical trials will result in delays of our clinical development timelines.
In August and September 2017, in our Phase 1 clinical trial of Cami for the treatment of relapsed or refractory HL and NHL, we informed the FDA that two patients with HL were diagnosed with Guillain–Barré syndrome and one patient with HL was diagnosed with polyradiculopathy. The FDA issued a partial clinical hold on our clinical trial, pursuant to which we suspended the enrollment of new patients but continued the treatment of enrolled patients who would derive clinical benefit from continued treatment with Cami. We amended the clinical trial protocol and informed consent form to include, among other things, additional risk factors to patient screening, additional exclusion criteria and routine neurologic evaluation prior to and during the clinical trial to monitor the occurrence of Guillain–Barré syndrome. In January 2018, the FDA lifted the partial clinical hold without condition. In September 2018, we informed the FDA that two additional patients with HL were diagnosed with Guillain–Barré syndrome. We voluntarily suspended patient enrollment and undertook a detailed safety review of our clinical trial in accordance with our clinical trial protocol and submitted it to the FDA. Upon review, in October 2018, the FDA agreed that we could resume patient enrollment and made certain recommendations, including the expansion of the HL 30 μg/kg dose cohort by ten additional patients, the continued assessment of pharmacokinetics and regulatory T-cell profiles in the clinical trial and that we consult with the FDA regarding the decision of final dose selection before closing the 30 μg/kg dose cohort. We subsequently implemented the FDA’s recommendations.
In March 2020, in our pivotal Phase 2 clinical trial of Cami for the treatment of relapsed or refractory HL, two patients were diagnosed with Guillain–Barré syndrome. Pursuant to the clinical trial protocol, which included specific stopping rules for Guillain–Barré syndrome, we suspended enrollment of new patients in this clinical trial but continued to treat enrolled patients who could derive clinical benefit from continued treatment with Cami. Before we resumed enrollment pursuant to the recommendations of an independent data safety monitoring board (“DSMB”), on April 17, 2020, the FDA issued a partial clinical hold on this clinical trial. The FDA agreed that, pending its review, we could continue to treat enrolled patients, including patients with stable disease, who could derive clinical benefit from continued treatment with Cami. In May 2020, an additional patient was diagnosed with Guillain–Barré syndrome. At the FDA’s request, we submitted certain information, including an updated investigator’s brochure, an updated clinical trial protocol, the DSMB meeting minutes, an updated informed consent form, dose and exposure analysis for safety and response and an updated safety monitoring plan. In July 2020, the FDA lifted the partial clinical hold. There can be no assurance that the FDA will not reinstate the clinical hold in the future.
In connection with seeking clearance of our INDs for ADCT-601 and ADCT-602, we were subject to clinical holds prior to the dosing of the first patient in these clinical trials. For ADCT-602, the FDA required additional data to support the stability of the product candidate at low doses. For ADCT-601, the FDA had questions regarding the novel linker technology, the stability of the product candidate and the clinical trial protocol. The FDA subsequently lifted these clinical holds, and for ADCT-601, we must submit a protocol amendment before we commence Phase 1b of the clinical trial.
There can be no assurance that our current or future clinical trials will not be subject to additional partial or full clinical holds, which could delay or impair the commencement and completion of our clinical trials and the regulatory approval of our product candidates.

If we experience delays or difficulties in patient enrollment for clinical trials, our research and development efforts and the receipt of necessary regulatory approvals could be significantly delayed or prevented.

Commencement and successful and timely completion of clinical trials require us to enroll a sufficient number of eligible patients to participate in these trials as required by the FDA, EMA or comparable regulatory authorities in other jurisdictions. Any delay or difficulty in patient enrollment could significantly delay or otherwise hinder our research and development efforts and delay or prevent receipt of necessary regulatory approvals.


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Patient enrollment is affected by many factors, including:
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the size and nature of the patient population;
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the severity of the disease under investigation;
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the eligibility criteria for the study in question, including any misjudgment of, and resultant adjustment to, the appropriate ranges applicable to the exclusion and inclusion criteria;
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the number of clinical trial sites and the proximity of prospective patients to those sites;
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the nature, severity and frequency of adverse side effects associated with our product candidates;
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the standard of care in the diseases under investigation;
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the commitment of our clinical investigators to identify eligible patients;
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competing studies or trials with similar eligibility criteria;
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the patient referral practices of physicians;
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clinicians’ and patients’ perceptions as to the potential advantages and risks of the product candidate being studied in relation to other available therapies, including perception of ADCs generally and of PBD-based ADCs specifically; and
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disruptions as a result of the COVID-19 pandemic.

In particular, some of our clinical trials will seek to enroll patients with characteristics that are found in a small population. For example, our confirmatory clinical trial of Lonca in combination with rituximab seeks to enroll patients with DLBCL who are ineligible for SCT and who had failed at least one multi-agent systemic treatment regimen and our pivotal Phase 2 clinical trial of Lonca for the treatment of FL will seek to enroll patients with FL or other indolent lymphoma who failed two or more prior lines of therapy, including rituximab. Our clinical trials will compete with those for other product candidates in the same therapeutic areas as our product candidates. This competition will reduce the number and types of patients available to us, as some patients who might have opted to enroll in our clinical trials may instead opt to enroll in one being conducted by one of our competitors. Because the number of qualified clinical investigators is limited, we expect to conduct some of our clinical trials at the same clinical trial sites used by some of our competitors, which will reduce the number of patients who are available for our clinical trials in these clinical trial sites. Moreover, because our product candidates represent a departure from more commonly used methods for cancer treatment, potential patients and their doctors may be inclined to use conventional therapies, such as chemotherapy and antibody therapy, rather than to participate in our clinical trials. In addition, patients may also be unwilling to participate in our clinical trials because of negative publicity from adverse events in the biotechnology industry. Challenges in recruiting and enrolling suitable patients to participate in clinical trials could increase costs, affect the timing and outcome of our planned clinical trials and result in delays to our current development plan for our product candidates.

Our product candidates may cause undesirable side effects or have other properties that may delay or prevent their development or regulatory approval or limit their commercial potential.

Undesirable side effects caused by our product candidates or by ADCs developed by others could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in more restrictive labeling or the denial of regulatory approval by the FDA, EMA or other regulatory authorities and potential product liability claims. Such side effects could also affect patient recruitment or the ability of enrolled patients to complete the trial. Many compounds developed in the biotechnology industry that initially showed promise in early-stage testing for treating cancer have later been found to cause side effects that prevented their further development.

In our clinical trials, we have observed certain class toxicities associated with our warheads, including elevated liver enzymes, skin rash, and effusions and edema. In addition, in our pivotal Phase 2 clinical trial of Lonca for the treatment of relapsed or refractory DLBCL, reported Grade ≥3 TEAEs included neutropenia, thrombocytopenia, gamma-glutamyltransferase increased and anemia, while in our Phase 2 clinical trial of Cami for the treatment of relapsed or refractory HL, reported Grade ≥3 TEAEs include hypophosphatemia, gamma-glutamyltransferase increased, alanine aminotransferase increased and maculopapular rash.

In addition, certain patients with HL treated with Cami have reported Guillain–Barré syndrome or radiculopathy. In our pivotal Phase 2 clinical trial of Cami for the treatment of relapsed or refractory HL, as of August 24, 2020, three patients developed autoimmune neurotoxicity (two patients with Guillain–Barré syndrome and one patient with radiculopathy). As of the date of filing this Annual Report, the rate of Guillain–Barré syndrome/polyradiculopathy in this clinical trial is similar to that observed as of August 24, 2020.

There can be no assurance that other patients treated with Cami will not experience Guillain–Barré syndrome or other serious adverse side effects and there can be no assurance that the FDA, EMA or comparable regulatory authorities in other jurisdictions will not place clinical holds on our current or future clinical trials, the result of which could delay or prevent us from obtaining regulatory approval for Cami. Even if approved, Cami may carry boxed warnings or precautions regarding the risk of Guillain–Barré syndrome.

For our current and future clinical trials, we have contracted with and expect to continue to contract with CROs experienced in the assessment and management of toxicities arising during clinical trials. Nonetheless, they may have difficulty observing patients and treating toxicities, which may be more challenging due to personnel changes, shift changes, house staff coverage or related issues. This could lead to
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more severe or prolonged toxicities or even patient deaths, which could result in us or the FDA delaying, suspending or terminating one or more of our clinical trials and which could jeopardize regulatory approval.

Furthermore, clinical trials by their nature utilize a sample of the potential patient population. With a limited number of subjects and limited duration of exposure, rare and severe side effects of our product candidates or those of our competitors may only be uncovered with a significantly larger number of patients exposed to the drug. For example, while we believe that Lonca and Cami have demonstrated manageable tolerability profiles thus far, there can be no assurance that these and our other product candidates will not cause more severe side effects in a greater proportion of patients.

In addition, some of our product candidates are developed or intended to be used in combination with other therapies. We are investigating the use of Lonca in combination with rituximab and with ibrutinib. Rituximab may cause undesirable side effects, including infections, fatigue and nausea. Ibrutinib may cause undesirable side effects, including pneumonia, upper respiratory tract infection, low neutrophil count, low platelet count, rash and edema. Combining Lonca with these and other agents may cause additional, different or more severe side effects than when Lonca or these agents are used as monotherapies. In addition, Lonca and these agents may have common toxicities. For example, edema is a common toxicity of Lonca and ibrutinib. When used in combination, the severity and frequency of such undesirable side effects may be greater than the cumulative severity and frequency of such side effects when the therapies are used as monotherapies.

In our Phase 1/2 clinical trial of Lonca in combination with ibrutinib, we observed two dose-limiting toxicities (“DLTs”). One DLT of Death Not Otherwise Specified was observed in a patient treated with Lonca at the 90 µg/kg dose level in combination with ibrutinib, which the investigator assessed as unlikely to be related to Lonca and as possibly being related to ibrutinib, the disease and/or comorbidities. In addition, one DLT of anemia and thrombocytopenia was observed in a patient treated with Lonca at the 90 µg/kg dose level in combination with ibrutinib, which the investigator assessed as possibly being related to Lonca, ibrutinib, the disease and/or comorbidities. In our Phase 1/2 clinical trial of ADCT-601 for the treatment of selected advanced solid tumors, we observed two DLTs. One DLT of Grade 3 hematuria was observed in a colorectal cancer patient treated at the 100 µg/kg dose level who had a history of radiotherapy involving the bladder. In addition, one DLT of hyponatremia was observed in an ovarian cancer patient treated at the 150 µg/kg dose level, which the investigator assessed as probably being related to ADCT-601. There can be no assurance that patients in our combination clinical trials will not experience serious adverse side effects, including death, in the future. The uncertainty resulting from the use of our product candidates in combination with other therapies may make it difficult to accurately predict side effects in clinical trials.

If we or others identify undesirable side effects caused by our product candidates or those of our competitors, a number of potentially significant negative consequences could result, including:

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we may encounter delays or difficulties in enrolling patients for our clinical trials due to a negative perception of our product candidates’ safety and tolerability profile;
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we and/or regulatory authorities may temporarily or permanently put our clinical trials on hold;
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we may be unable to obtain regulatory approval for our product candidates;
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regulatory authorities may withdraw or limit their approvals of our product candidates;
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regulatory authorities may require the addition of labeling statements, such as a contraindication, boxed warnings or additional warnings;
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the FDA may require development of a Risk Evaluation and Mitigation Strategy with Elements to Assure Safe Use as a condition of approval;
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we may decide to remove our product candidates from the marketplace;
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we may be subject to regulatory investigations and government enforcement actions;
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we could be sued and held liable for harm caused to patients, including as a result of hospital errors; and
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our reputation may suffer.

Any of these events could prevent us from achieving or maintaining market acceptance of our product candidates and could substantially increase commercialization costs.

We may expend our resources to pursue particular product candidates and fail to capitalize on product candidates that may be more profitable or for which there is a greater likelihood of success.

Because we have limited financial resources and personnel, we focus on the development of specific product candidates based on our product development strategy. As a result, we may forgo or delay the pursuit of other product candidates that later prove to have greater commercial potential. Decision making about which product candidates to prioritize involves inherent subjectivity and/or uncertainty. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Failure to properly assess potential product candidates could result in our focus on product candidates with low market potential, which would harm our business and financial condition. Our spending on current and future research programs and product candidates for specific indications may not yield any commercially viable product candidates. If we do not accurately evaluate the commercial potential or target market for a particular
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product candidate, we may relinquish valuable rights to that product candidate through partnering, licensing or other arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.

We may not be successful in our efforts to develop additional product candidates and build up our research pipeline.

A key element of our development strategy is to build a robust pipeline of PBD-based ADCs targeting both novel and clinically validated cancer targets for the treatment of hematological malignancies and solid tumors. Our license and collaboration agreement with MedImmune Limited (“MedImmune”) allows us to develop PBD-based ADCs against 11 targets. See “Item 4. Information on the Company—B. Business Overview—License and Collaboration Agreements—MedImmune License and Collaboration Agreement.” We have selected all 11 targets under this agreement. There can be no assurance that these targets will yield safe, effective and commercially viable product candidates. If we wish to develop ADCs for additional targets, we must secure additional licenses from MedImmune, which we may not be able to obtain at a reasonable cost or on reasonable terms, if at all.

We also pursue research programs involving non-ADC product candidates. However, we may be unable to identify suitable additional product candidates for clinical development, which would limit our ability to develop product candidates and our ability to obtain revenues from commercializing any such product candidates. Even if we are successful in continuing to build our research pipeline, the potential product candidates that we identify may fail in clinical development or commercialization. For example, they may not demonstrate sufficient efficacy or may demonstrate harmful side effects or other characteristics that make them unlikely to receive regulatory approval and achieve market acceptance.

Risks Related to the Regulatory Approval of Our Product Candidates

The regulatory review and approval processes of the FDA, EMA and comparable regulatory authorities in other jurisdictions are lengthy, time-consuming and inherently unpredictable. If we are unable to obtain, or if there are delays in obtaining, regulatory approval for our product candidates, our ability to commercialize them and generate revenue will be materially impaired.

Our product candidates must be approved by the FDA in the United States, by the EMA in the European Union and by comparable regulatory authorities in other jurisdictions prior to commercialization. In order to obtain regulatory approval for the commercial sale of any product candidates, we must demonstrate through extensive preclinical studies and clinical trials that the product candidate is safe and effective for use in each target indication and that manufacturing of the product candidate is robust and reproducible. The time required to obtain approval by the FDA, EMA and comparable regulatory authorities in other jurisdictions is unpredictable, typically takes many years following the commencement of clinical trials and depends upon numerous factors. Of the large number of drugs in development in the United States, only a small percentage will successfully complete the FDA regulatory approval process and will be commercialized. Accordingly, there can be no assurance that any of our product candidates will receive regulatory approval in the United States, the European Union or other jurisdictions.

Regulatory authorities have substantial discretion in the approval process. They may refuse to accept any application or may decide that our data are insufficient for approval and require additional clinical trials or other studies. Therefore, even if we believe the data collected from clinical trials of our product candidates are promising, such data may not be sufficient to support approval by the FDA, EMA or any comparable regulatory authority in other jurisdictions. In addition, while we may designate certain of our clinical trials as “pivotal,” the FDA, EMA and other comparable regulatory authorities in other jurisdictions may not agree with such designation. We designate our Phase 1/2 clinical trial of Lonca in combination with ibrutinib for the treatment of DLBCL and MCL, our Phase 2 clinical trial of Lonca for the treatment of FL and our Phase 2 clinical trial of Cami for the treatment of relapsed or refractory HL as “pivotal,” as we believe that these clinical trials, if successful, will support BLA submissions for these product candidates in the respective indications. We also designate our Phase 2 clinical trial of Lonca for the treatment of relapsed or refractory DLBCL as “pivotal,” as the data from that clinical trial formed the basis of our BLA submission. However, the FDA has not opined on whether these clinical trials will in fact be sufficient to support regulatory approval. Therefore, there can be no assurance that these clinical trials will be viewed as sufficient by the FDA, EMA and other comparable regulatory authorities in other jurisdictions to support regulatory approval. Accordingly, our assumptions about Phase 3 clinical trials being confirmatory clinical trials may be inaccurate, and we may need to conduct Phase 3 clinical trials of these and any other product candidates prior to receiving regulatory approval from the FDA and comparable regulatory authorities in other jurisdictions. We also intend to use the confirmatory clinical trial of Lonca in combination with rituximab to support an sBLA for Lonca to be used as a second-line therapy for the treatment of relapsed or refractory DLBCL in transplant-ineligible patients. However, there can be no assurance that the clinical trial will be viewed as sufficient by the FDA, EMA and other comparable regulatory authorities in other jurisdictions to support any expanded indication.

If we are required to conduct additional clinical trials or other testing of any of our product candidates beyond those that are contemplated, we may incur significant additional costs and the regulatory approval of our product candidates may be delayed or prevented. For example, the FDA, EMA or comparable regulatory authorities in other jurisdictions may express safety concerns due to the partial clinical holds that were issued but subsequently lifted for Cami and may require additional preclinical studies or clinical trials. In such instance, our progress in the development of Cami may be significantly delayed or stopped and the associated costs may be significantly increased. Furthermore, additional clinical trials or other testing could shorten any periods during which we may have the exclusive right to commercialize our product candidates and could allow our competitors to bring products to market before we do, which may prevent the successful commercialization of our product
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candidates. Therefore, positive or promising results from clinical trials of our product candidates do not guarantee regulatory approval by the FDA, EMA or any comparable regulatory authority in other jurisdictions.

Furthermore, the process and time required to obtain regulatory approval differ by jurisdiction. In many countries outside the United States, a drug must be approved for reimbursement before it can be approved for sale in that country. Approval by one regulatory authority does not ensure approval by regulatory authorities in other jurisdictions.

Moreover, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive compensation in connection with such services at market rates. Under certain circumstances, we may be required to report some of these relationships to the FDA, EMA or comparable regulatory authorities in other jurisdictions, which could conclude that a financial relationship between us and a principal investigator has created a conflict of interest or otherwise affected the integrity of the study. The FDA, EMA or comparable regulatory authorities in other jurisdictions may, therefore, question the integrity of the data generated at the applicable clinical trial site, and the utility of the clinical trial itself may be jeopardized. This could delay, or result in the rejection of, our marketing applications.

To date, regulatory approval has not been obtained for any product candidate based on the PBD technology used in our product candidates in any jurisdiction, and it is possible that none of our existing product candidates or any product candidates we may seek to develop in the future will ever obtain regulatory approval in any jurisdiction. Because our product candidates are based on next-generation PBD technology, the regulatory approval process for our product candidates can be more expensive and take longer than that for our competitors’ better known or more extensively studied product candidates. It is difficult to determine the time and resources required to obtain regulatory approvals for our product candidates in the United States, the European Union or other major markets. In addition, we may gain regulatory approval for our product candidates in some but not all of the jurisdictions for which we seek approval or for some but not all of the target indications for which we seek approval, resulting in limited commercial opportunity for the approved product candidates.

Applications for regulatory approval and regulatory approval of our product candidates could be delayed or be denied for many reasons, including but not limited to the following:

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the FDA, EMA or comparable regulatory authorities in other jurisdictions may disagree with the number, design or implementation of our clinical trials;
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the population studied in the clinical trial may not be considered sufficiently broad or representative to assure safety in the full population for which we seek approval;
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the FDA, EMA or comparable regulatory authorities in other jurisdictions may disagree with our interpretation of data from preclinical studies or clinical trials;
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the data collected from clinical trials of our product candidates may not meet the level of statistical or clinical significance required by the FDA, EMA or comparable regulatory authorities in other jurisdictions or may otherwise not be sufficient to support the submission of a BLA, MAA or other submission or to obtain regulatory approval in the United States, the European Union or elsewhere;
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the FDA, EMA or comparable regulatory authorities in other jurisdictions may not accept data generated by our preclinical service providers and clinical trial sites;
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the FDA, EMA or comparable regulatory authorities in other jurisdictions may require us to conduct additional preclinical studies and clinical trials;
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we may be unable to demonstrate to the FDA, EMA or comparable regulatory authorities in other jurisdictions that a product candidate’s response rate, duration of response (“DoR”) or risk-benefit ratio for its proposed indication is acceptable;
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the FDA, EMA or comparable regulatory authorities in other jurisdictions may fail to approve the manufacturing processes, test procedures and specifications applicable to the manufacture of our product candidates, the facilities of third-party manufacturers with which we contract for clinical or commercial supplies may fail to maintain a compliance status acceptable to the FDA, EMA or comparable regulatory authorities or the EMA or comparable regulatory authorities may fail to approve facilities of third-party manufacturers with which we contract for clinical and commercial supplies;
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we or any third-party service providers may be unable to demonstrate compliance with cGMPs to the satisfaction of the FDA, EMA or comparable regulatory authorities in other jurisdictions, which could result in delays in regulatory approval or require us to withdraw or recall products and interrupt commercial supply of our products;
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the approval policies or regulations of the FDA, EMA or comparable regulatory authorities in other jurisdictions may change in a manner rendering our clinical data insufficient for approval; or
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political factors surrounding the approval process, such as government shutdowns and political instability.

Any of these factors, many of which are beyond our control, may result in our failing to obtain regulatory approval for any of our product candidates, which would significantly harm our business, financial condition and prospects.


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We have sought accelerated approval for Lonca, and in the future intend to seek accelerated approval for some of our other product candidates, which may not lead to a faster development or regulatory review or approval process, and does not increase the likelihood that the product candidates will receive marketing approval.

Under the FDA’s accelerated approval program, the FDA may approve a drug for a serious or life-threatening illness that provides meaningful therapeutic benefit to patients over existing treatments based upon a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. We have sought accelerated approval for Lonca and in the future intend to seek accelerated approval for one or more of our other product candidates on the basis of overall response rate (“ORR”) with an acceptable DoR, a surrogate endpoint that we believe is reasonably likely to predict clinical benefit. However, full approval of another product for the same indication as any of our product candidates for which we are seeking accelerated approval may make accelerated approval of our product candidates more difficult.

For drugs granted accelerated approval, post-marketing confirmatory clinical trials are required to describe the anticipated effect on irreversible morbidity or mortality or other clinical benefit. These confirmatory clinical trials must be completed with due diligence and, in some cases, the FDA may require that the trial be designed, initiated and/or fully enrolled prior to approval. If any of our competitors were to receive full approval on the basis of a confirmatory clinical trial for an indication for which we are seeking accelerated approval before we receive accelerated approval, the indication we are seeking may no longer qualify as a condition for which there is an unmet medical need and accelerated approval of our product candidate would be more difficult. Moreover, the FDA may withdraw approval of our product candidate approved under the accelerated approval pathway if, for example:

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the clinical trial(s) required to verify the predicted clinical benefit of a product candidate fails to verify such benefit or does not demonstrate sufficient clinical benefit to justify the risks associated with the product candidate;
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other evidence demonstrates that a product candidate is not shown to be safe or effective under the conditions of use;
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we fail to conduct any required post-marketing confirmatory clinical trial with due diligence; or
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we disseminate false or misleading promotional materials relating to the relevant product candidate.

Breakthrough Therapy Designation, Fast Track Designation and Priority Review Designation by the FDA, or comparable designations by foreign regulatory authorities, for our product candidates may not lead to a faster development or regulatory review or approval process and do not increase the likelihood that a product candidate would receive regulatory approval.

We do not currently have Breakthrough Therapy Designation or Fast Track Designation for any of our product candidates, and our BLA for Lonca for the treatment of relapsed or refractory DLBCL has been granted Priority Review Designation. We may seek such designations, and comparable designations by foreign regulatory authorities, for one or more of our product candidates for the treatment of certain indications. A breakthrough therapy is defined as a product candidate that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over currently approved therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. For product candidates that have been designated as breakthrough therapies, interaction and communication between the FDA and the sponsor can help to identify the most efficient path for development. A Fast Track Designation may be available if a product candidate is intended for the treatment of a serious or life-threatening condition and preclinical or clinical data demonstrate the potential to address an unmet medical need for this condition. Priority review may be granted for products that are intended to treat a serious or life-threatening condition and, if approved, would provide a significant improvement in safety and effectiveness compared to available therapies. The FDA will attempt to direct additional resources to the evaluation of an application designated for priority review in an effort to facilitate the review.

The FDA has broad discretion whether or not to grant Breakthrough Therapy Designation, Fast Track Designation and Priority Review Designation. Accordingly, even if we believe, after completing early clinical trials, that one of our product candidates meets the criteria for such designations, the FDA may disagree and instead determine not to make such designations. Even if we receive such designation for a product candidate, it may not result in a faster development process, review or approval compared to conventional FDA procedures and does not guarantee ultimate approval by the FDA. Many drugs that have received such designations have failed to obtain ultimate approval by the FDA. In addition, the FDA may decide to rescind such designations if it determines that our product candidates no longer meet the conditions for qualification, including as a result of the product candidates’ failure to meet endpoints in any clinical trial.

We received orphan drug designation from the FDA for Lonca for the treatment of DLBCL and MCL, and we may seek it for our other product candidates. However, we may be unable to maintain the benefits associated with the designation and may not receive the designation for our other product candidates.

Regulatory authorities in some jurisdictions, including the United States and the European Union, may designate drugs for relatively small patient populations as orphan drugs. Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is intended to treat a
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rare disease or condition, defined as a patient population of fewer than 200,000 in the United States, or a patient population greater than 200,000 in the United States where there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the United States. In the European Union, the EMA’s Committee for Orphan Medicinal Products grants orphan drug designation to promote the development of products that meet the following criteria: (i) they are intended for the diagnosis, prevention, or treatment of a life-threatening or chronically debilitating condition affecting not more than five in 10,000 persons in the European Union or they are intended for the diagnosis, prevention, or treatment of a life-threatening, seriously debilitating or serious and chronic condition when, without incentives, it is unlikely that sales of the drug in the European Union would be sufficient to justify the necessary investment in developing the drug or biological product and (ii) where there is no satisfactory method of diagnosis, prevention or treatment, or, if such a method exists, the medicine must be of significant benefit to those affected by the condition.

In the United States, orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages and user fee waivers. In addition, if a product receives the first FDA approval for the indication for which it has orphan designation, the product is entitled to orphan drug exclusivity, which means the FDA may not approve any other application to market the same drug for the same indication for a period of seven years, except in limited circumstances, such as a showing of clinical superiority over the product with orphan exclusivity or where the manufacturer is unable to assure sufficient product quantity. The FDA’s determination of whether two ADCs are the same product for purposes of orphan drug exclusivity is based on a determination of sameness of the monoclonal antibody element and the functional element of the conjugated molecule. Two ADCs are deemed to be the same product if the complementarity determining region sequences of the antibody and the functional element of the conjugated molecule are the same. A difference in either of those two elements can result in a determination that the molecules are different.

In the European Union, orphan drug designation entitles a party to financial incentives such as reduction of fees or fee waivers and ten years of market exclusivity for the orphan indication following drug or biological product approval, provided that the criteria for orphan designation are still applicable at the time of the granting of the marketing authorization. This period may be reduced to six years if, at the end of the fifth year, the orphan drug designation criteria are no longer met, including where it is shown that the product is sufficiently profitable not to justify maintenance of market exclusivity. However, orphan drug designation neither shortens the development time or regulatory review time of a drug or therapeutic biologic nor gives the drug or therapeutic biologic any advantage in the regulatory review or approval process.

We received orphan drug designation in the United States for Lonca for the treatment of DLBCL and MCL in 2017. We may pursue orphan drug designation for one or more of our other product candidates. However, obtaining an orphan drug designation can be difficult, and we may not be successful in doing so. Even if we obtain orphan drug designation for our product candidates in specific indications, we may not be the first to obtain regulatory approval of these product candidates for the orphan-designated indication. In addition, exclusive marketing rights in the United States may be limited if we seek approval for an indication broader than the orphan-designated indication or may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition. Furthermore, even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different ADCs with different monoclonal antibody elements or functional elements of the conjugated molecule can be approved for the same condition. Even after an orphan product is approved, the FDA can subsequently approve the same ADC with the same monoclonal antibody element and functional element of the conjugated molecule for the same condition if the FDA concludes that the later ADC is safer, more effective or makes a major contribution to patient care. Our inability to obtain orphan drug designation for any product candidates for the treatment of rare cancers and/or our inability to maintain that designation for the duration of the applicable exclusivity period, could reduce our ability to make sufficient sales of the applicable product candidate to balance our expenses incurred to develop it.

We are required to comply with comprehensive and ongoing regulatory requirements for any product candidates that receive regulatory approval, including conducting confirmatory clinical trials of any product candidates that receive accelerated approval.

Any product candidates for which we receive accelerated approval from the FDA or similar conditional approval from the EMA or comparable regulatory authorities in other jurisdictions based on data from clinical trials that use single-arm designs are required to undergo one or more confirmatory clinical trials. If such a product candidate fails to meet its safety and efficacy endpoints in such confirmatory clinical trials, the regulatory authority may withdraw its conditional approval. There is no assurance that any such product will successfully advance through its confirmatory clinical trial(s). Therefore, even if a product candidate receives accelerated approval from the FDA or similar conditional approval from the EMA or comparable regulatory authorities, such approval may be withdrawn at a later date.

In addition, any product candidates for which we receive regulatory approval in a particular jurisdiction and the activities associated with their commercialization, including testing, manufacture, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, will be subject to comprehensive regulation by the FDA, EMA or comparable regulatory authorities in other jurisdictions. These requirements include, without limitation, submissions of safety and other post-marketing information and reports, registration and listing requirements, the FDA’s cGMP requirements or comparable requirements in foreign jurisdictions, requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of records and documents, including periodic inspections by the FDA, EMA or comparable regulatory authorities in other jurisdictions, requirements regarding the distribution of samples to physicians, tracking and reporting of payments to physicians and other healthcare providers and recordkeeping.

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The FDA, EMA or comparable regulatory authorities in other jurisdictions may also impose requirements for costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of any approved product. In the United States, the FDA closely regulates the post-approval marketing and promotion of drugs to ensure drugs are marketed only for the approved indications and in a manner consistent with the provisions of the approved labeling. The FDA also imposes stringent restrictions on manufacturers’ communications regarding use of their products and, if we promote our products beyond their approved indications or in a manner inconsistent with the approved labeling, we may be subject to enforcement action for off-label promotion. Violations of the U.S. Federal Food, Drug, and Cosmetic Act (the “FDCA”) relating to the promotion of prescription drugs may lead to investigations alleging violations of federal and state healthcare fraud and abuse laws, as well as state consumer protection laws.

In addition, the later discovery of previously unknown problems with an approved product, including adverse events of unanticipated severity or frequency, or with manufacturing operations or processes, or failure to comply with regulatory requirements, may result in, among other things:

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restrictions on the marketing or manufacturing of the product;
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withdrawal of the product from the market or voluntary or mandatory product recalls;
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fines, restitution or disgorgement of profits or revenues;
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warning or untitled letters;
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requirements to conduct post-marketing studies or clinical trials;
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holds on clinical trials;
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refusal by the FDA, EMA or comparable regulatory authorities in other jurisdictions to approve pending applications or supplements to approved applications filed by us, or suspension or revocation of product license approvals;
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product seizure or detention;
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refusal to permit the import or export of products; and
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injunctions or the imposition of civil or criminal penalties.

The policies of the FDA, EMA and comparable regulatory authorities in other jurisdictions may change and additional regulations may be enacted. If we are slow or unable to adapt to changes in existing requirements or to the adoption of new requirements, or not able to maintain regulatory compliance, we may lose any regulatory approval that may have been obtained. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad, as the regulatory environment changes rapidly.

Risks Related to the Commercialization of Our Product Candidates

As a company, we have never commercialized a product. We may lack the necessary expertise, personnel and resources to successfully commercialize our product candidates.

As a company, we have never commercialized a product for any indication. If we receive regulatory approval for one or more of our product candidates from the FDA, EMA or comparable regulatory authorities in other jurisdictions, we will need robust internal sales, marketing and distribution capabilities to commercialize such products, which are expensive and time-consuming to develop, or we will need to enter into collaborations with third parties to perform these services. Given our initial focus on relapsed and refractory cancer patient populations, we intend to commercialize Lonca, if approved, in the United States using a focused and highly specialized sales and marketing team with a focus on hematologists and oncologists.

There are costs and risks involved with establishing our own sales, marketing and distribution capabilities. For example, recruiting and training a sales force is expensive and time-consuming and could delay any product launch. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel. We must also compete with other biotechnology companies to recruit, hire, train and retain marketing and sales personnel.

Alternatively, we may wish to establish collaborations with third parties to maximize the potential of our product candidates in some or all non-U.S. jurisdictions in which a product candidate has been approved. The biotechnology industries are characterized by intense competition. Therefore, we may not be successful in entering into such commercialization arrangements with third parties on favorable terms, or at all. In addition, we may have limited control over such third parties, and any of them may fail to devote the necessary resources and attention to sell, market and distribute our products effectively.

There can be no assurance that we will be able to successfully commercialize our product candidates or be able to establish or maintain relationships with third parties necessary to perform these services. As a result, we may not successfully commercialize any product in any jurisdiction.
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Our product candidates are complex and difficult to manufacture. We could experience manufacturing problems that result in delays in our development or commercialization programs.

There are four manufacturing streams for the manufacture of each of our product candidates: the antibody, the PBD-based payload, the ADC drug substance and the drug product. Because our PBD-based payload is completely synthetic, considerable synthetic chemistry efforts must be undertaken to develop manufacturing processes for our PBD-based payloads. Although we believe we have access to scalable cGMP-compliant manufacturing processes for the PBD-based payloads used for our product candidates, our preparation of the process for commercial scale manufacturing is ongoing. In addition, because the antibodies used in our product candidates are biologics, there are risks inherent in their manufacture and their conjugation to the PBD-based warhead. There can be no assurance that we will not experience production problems in our manufacturing process. Moreover, scaling up manufacturing techniques used for the manufacture of an ADC product candidate at a clinical scale to commercial quantities may be difficult and may delay our ability to commercialize our product candidates, if approved.

Problems with the manufacturing process, including even minor deviations from the normal process, could result in product defects or manufacturing failures that result in lot failures, product recalls, product liability claims and insufficient inventory. If we successfully develop product candidates, we may encounter problems achieving adequate quantities and quality of clinical-grade materials that meet FDA, EMA or other applicable standards or specifications with consistent and acceptable production yields and costs. In the past, we have received batches of certain of our product candidates that did not meet our specifications. For example, in 2019, clinical sites reported higher pressure than specified in vials of ADCT-601 used in our Phase 1/2 clinical trial, as a result of which we suspended the dosing in that clinical trial. In the future, there can be no assurance that CMOs will be able to manufacture product candidates and/or components of product candidates that meet our specifications, which could delay our clinical trials and the regulatory approval and commercialization of our product candidates.

We currently rely, and expect to continue to rely, on third parties for the manufacturing and supply of our product candidates. As a result, components of our product candidates are manufactured at different locations, and disruptions, delays and other difficulties may arise in the shipping and transportation of these components, resulting in delayed or failed components.

In addition, the FDA, EMA and comparable regulatory authorities in other jurisdictions may require us to submit samples of any lot of any approved product together with the protocols showing the results of applicable tests at any time. Under some circumstances, the FDA, EMA or comparable regulatory authorities in other jurisdictions may prohibit the distribution of a lot until the agency authorizes its release. Slight deviations in the manufacturing process, including those affecting quality attributes and stability, may result in unacceptable changes in the product that could result in lot failures and product recalls.

Growth in the costs and expenses of components or raw materials may also adversely influence our business, results of operations and financial condition. Supply sources could be interrupted from time to time and, if interrupted, it is not certain that supplies could be resumed, whether in part or in whole, within a reasonable timeframe and at an acceptable cost, or at all. We also may encounter problems hiring and retaining the experienced scientific, quality control and manufacturing personnel needed to manage our manufacturing process, which could result in delays in our production or difficulties in maintaining compliance with applicable regulatory requirements.

Furthermore, given the nature of biologics manufacturing, there is a risk of contamination during manufacturing. Any contamination could materially harm our ability to produce product candidates on schedule and could cause reputational damage. Some of the raw materials required in our manufacturing process are derived from biologic sources. Such raw materials are difficult to procure and may be subject to contamination or recall. A material shortage, contamination, recall or restriction on the use of biologically derived substances in the manufacture of any product candidates we may develop could adversely impact or disrupt the commercial manufacturing or the production of clinical material, which could materially harm our development timelines and our business, financial condition, results of operations and prospects.

Any problems in our manufacturing process or the facilities with which we contract could make us a less attractive collaborator for potential partners, including larger pharmaceutical companies and academic research institutions, which could limit our access to additional attractive development programs. Problems in third-party manufacturing processes or facilities also could restrict our ability to meet market demand for any products we develop and commercialize.

Our commercial success depends upon attaining significant market acceptance of our product candidates, if approved, among physicians, patients, patient advocacy groups, third-party payors and the medical community.
If we obtain regulatory approval for any of our current or future product candidates, that product candidate may nevertheless not gain sufficient market acceptance among physicians, patients, patient advocacy groups, third-party payors and the medical community. For example, they may prefer current, well-established cancer treatments, such as chemotherapy and radiation therapy, to the exclusion of our product candidates or may prefer other novel product candidates rather than our product candidates. Efforts to educate physicians, patients, patient advocacy groups and third-party payors on the benefits of our product candidates may require significant resources and may not be successful. If our product candidates do not achieve an adequate level of acceptance, we may not generate significant product revenues and may not receive a satisfactory return on our investment into the research and development of those product candidates.
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The degree of market acceptance of any approved product depends on a number of factors, including:
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the safety and efficacy of the product, as demonstrated in clinical trials;
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the indications for which the product is approved and the labeling approved by regulatory authorities for use with the product, including any warnings that may be required in the labeling;
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our ability to offer our products for sale at competitive prices;
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the perceptions of physicians, patients and patient advocacy groups of ADCs generally and PBD-based ADCs specifically;
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the treatment’s cost, safety, efficacy, convenience and ease of administration compared to that of alternative treatments;
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acceptance by physicians, patients and patient advocacy groups of the product as a safe and effective treatment;
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the availability of coverage and adequate reimbursement by third-party payors, including cost-sharing programs such as copays and deductibles;
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patients’ willingness to pay out-of-pocket in the absence of coverage and/or adequate reimbursement from third-party payors;
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the effectiveness of our and our competitors’ sales and marketing efforts;
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our ability to establish sales, marketing and commercial product distribution capabilities or to partner with third parties with such capabilities;
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the effectiveness of pre-launch activities to raise awareness of our company and our product candidates;
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the nature, severity and frequency of adverse side effects;
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any restrictions on the use of our products together with other medications;
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publication of any post-approval data on the safety and effectiveness of the product; and
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the success of randomized post-marketing commitment studies to confirm the benefit-risk ratio of the product.

Market acceptance of our product candidates is heavily dependent on patients’ and physicians’ perceptions that our product candidates are safe and effective treatments for their targeted indications. The perceptions of any product are influenced by perceptions of competitors’ products that are in the same class or that have a similar mechanism of action. As a result, adverse public perception of our competitors’ ADC products may negatively impact the market acceptance of our product candidates. If any approved products are not accepted by the market to the extent that we expect, we may not be able to generate significant product revenues and may not become or remain profitable.

The market opportunities for our product candidates may be smaller than we estimate and any approval that we obtain may be based on a narrower definition of the patient population.

Cancer therapies are sometimes characterized as first line, second line or third line. When cancer is detected early enough, first-line therapy is sometimes adequate to cure the cancer or prolong life without a cure. When first-line therapy proves unsuccessful, second-line therapy may be administered. When second-line therapy proves unsuccessful, third-line therapy may be administered. We expect to initially commercialize Lonca and Cami for the treatment of relapsed or refractory DLBCL and HL, respectively, as third-line therapies, if approved. Subsequently, for those products that prove to be sufficiently beneficial, if any, regulatory approval as second-line therapies may be sought, as monotherapy or in combination with other therapies. However, there can be no assurance that our product candidates, even if approved as third-line therapies, would be approved as second-line therapies. In addition, we may have to conduct additional clinical trials prior to gaining approval as second-line therapies.

Our projections of the number of people who have the cancers we are targeting, as well as the subset of people with these cancers in a position to receive third-line therapy and who have the potential to benefit from treatment with our product candidates, are based on estimates derived from a variety of sources, including scientific literature, surveys of clinicians and healthcare professionals and other forms of market research. These estimates may be inaccurate or based on imprecise data. For example, the total addressable market opportunity for our product candidates will depend on, among other things, the final labeling for such product candidates as agreed with the FDA, EMA or comparable regulatory authorities in other jurisdictions, acceptance by the medical community and patient access and drug pricing and reimbursement. The number of patients in the addressable markets may turn out to be lower than expected, patients may not be otherwise amenable to treatment with our product candidates or new patients may become increasingly difficult to identify or gain access to, all of which could materially adversely affect our business, financial condition, results of operations and prospects.

Regulatory agencies actively enforce the laws and regulations prohibiting the promotion of drugs for off-label uses. If we are found to have improperly promoted off-label use, we may become subject to significant liability.

The FDA, EMA and comparable regulatory authorities in other jurisdictions strictly regulate the promotional claims that may be made about prescription drug products, such as our product candidates, if approved. While physicians, in the practice of medicine, may prescribe approved drugs for unapproved indications, a product may not be promoted for uses that are not approved by the applicable regulatory authority as reflected in the product’s approved labeling or for uses inconsistent with the product’s approved labeling. For example, if we receive regulatory approval for Lonca for the treatment of relapsed or refractory DLBCL in patients who have failed two or more treatment regimens, at least one of which must have contained rituximab, physicians, in their professional medical judgment, may nevertheless prescribe either drug product to their patients in a manner that is inconsistent with the approved labeling. In addition, although we believe our warhead
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may provide for superior efficacy as compared to marketed ADCs, without head-to-head data, we will be unable to make comparative claims for our product candidates, if approved. If we are found to have promoted such off-label use or made such unsubstantiated comparative claims, we may become subject to significant liability under the FDCA and other statutory authorities, such as laws prohibiting false claims for reimbursement. The U.S. government has levied large civil and criminal fines against companies for alleged improper promotion and has enjoined several companies from engaging in off-label promotion. The FDA has also requested that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed. If we cannot successfully manage the promotion of our products, if approved, we could become subject to significant liability, which would harm our reputation and negatively impact our financial condition.

We are developing certain of our product candidates in combination with other therapies, and regulatory approval, safety or supply issues with these other therapies may delay or prevent the development and approval of our product candidates.

We are evaluating the use of Lonca in combination with rituximab and ibrutinib, the use of Cami in combination with checkpoint inhibitors and the use of ADCT-601 in combination with other therapies. In the future, we may explore the use of these or our other product candidates in combination with other therapies. If we choose to develop a product candidate for use in combination with an approved therapy, we are subject to the risk that the FDA, EMA or comparable regulatory authorities in other jurisdictions could revoke approval of, or that safety, efficacy, manufacturing or supply issues could arise with, the therapy used in combination with our product candidate. If the therapies we use in combination with our product candidates are replaced as the standard of care, the FDA, EMA or comparable regulatory authorities in other jurisdictions may require us to conduct additional clinical trials. The occurrence of any of these risks could result in our product candidates, if approved, being removed from the market or being less successful commercially.

Where we develop a product candidate for use in combination with a therapy that has not been approved by the FDA, EMA or comparable regulatory authorities in other jurisdictions, we may not be able to market our product candidate for use in combination with such an unapproved therapy, unless and until the unapproved therapy receives regulatory approval. Currently, we are evaluating the use of Lonca in combination with ibrutinib for the treatment of relapsed or refractory DLBCL and MCL. However, ibrutinib has not been approved by the FDA for the treatment of DLBCL. Therefore, even if Lonca receives regulatory approval, we may not be able to market it for use in combination with ibrutinib unless and until it is approved for the indications that we are targeting. These unapproved therapies face the same risks described with respect to our product candidates currently in development, including serious adverse effects and delays in their clinical trials. In addition, other companies may also develop their products or product candidates in combination with the unapproved therapies with which we are developing our product candidates for use in combination. Any setbacks in these companies’ clinical trials, including the emergence of serious adverse effects, may delay or prevent the development and approval of our product candidates.

If the FDA, EMA or comparable regulatory authorities in other jurisdictions do not approve or revoke their approval of, or if safety, efficacy, manufacturing, or supply issues arise with, therapies we choose to evaluate in combination with any of our product candidates, we may be unable to obtain regulatory approval of or to commercialize such product candidates in combination with these therapies.

Coverage and reimbursement may be limited or unavailable for our product candidates, which could make it difficult to sell our products profitably.

The availability and extent of coverage and adequate reimbursement by governmental and private third-party payors are essential for most patients to be able to afford expensive medical treatments. In both domestic and foreign markets, sales of our product candidates will depend substantially on the extent to which the costs of our product candidates will be covered by third-party payors, such as government health programs, commercial insurance and managed healthcare organizations. These third-party payors decide which products will be covered and establish reimbursement levels for those products. We cannot be certain that coverage and adequate reimbursement will be available for any of our product candidates, if approved, or that reimbursement policies will not reduce the demand for any of our product candidates, if approved. If coverage and adequate reimbursement are not available, or is available only to limited levels, we may not be able to successfully commercialize our product candidates.

Coverage and reimbursement by a third-party payor may depend upon a number of factors, including the third-party payor’s determination that use of a product is:

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a covered benefit under its health plan;
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safe, effective and medically necessary;
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appropriate for the specific patient;
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cost-effective; and
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neither experimental nor investigational.

Obtaining coverage approval and reimbursement for a product from a government or other third-party payor is a time-consuming and costly process that could require us to provide supporting scientific, clinical and cost-effectiveness data for the use of our products to the payor. We may not be able to provide data sufficient to gain acceptance with respect to coverage and reimbursement at a satisfactory level. If coverage
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and adequate reimbursement of our future products, if any, are unavailable or limited in scope or amount, such as may result where alternative or generic treatments are available, we may be unable to achieve or sustain profitability. Adverse coverage and reimbursement limitations may hinder our ability to recoup our investment in our product candidates, even if such product candidates obtain regulatory approval.

There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. There is no uniform policy for coverage and reimbursement in the United States and, as a result, coverage and reimbursement can differ significantly from payor to payor. In the United States, the principal decisions about reimbursement for new medicines are typically made by the Centers for Medicare & Medicaid Services (“CMS”), which decides whether and to what extent a new medicine will be covered and reimbursed under Medicare. Private payors often, but not always, follow the CMS’s decisions regarding coverage and reimbursement. It is difficult to predict what third-party payors will decide with respect to coverage and reimbursement for fundamentally novel products such as ours, as there is no body of established practices and precedents for these new products. Further, one payor’s determination to provide coverage and adequate reimbursement for a product does not assure that other payors will also provide coverage and adequate reimbursement for that product. We may need to conduct expensive pharmaco-economic studies in order to demonstrate the medical necessity and cost-effectiveness of our product candidates. There can be no assurance that our product candidates will be considered medically necessary or cost-effective. In addition to third-party payors, professional organizations and patient advocacy groups such as the National Comprehensive Cancer Network and the American Society of Clinical Oncology can influence decisions about reimbursement for new medicines by determining standards for care. Therefore, it is possible that any of our product candidates, even if approved, may not be covered by third-party payors or the reimbursement limit may be so restrictive that we cannot commercialize the product candidates profitably.

Reimbursement agencies in Europe may be more restrictive than payors in the United States. For example, a number of cancer products have been approved for reimbursement in the United States but not in certain European countries. In Europe, pricing and reimbursement schemes vary widely from country to country and may require additional clinical trials. For example, some countries provide that products may be marketed only after an agreement on reimbursement price has been reached. Such pricing negotiations with governmental authorities can take considerable time after receipt of marketing approval for a product. Political, economic and regulatory developments may further complicate pricing negotiations, and pricing negotiations may continue after reimbursement has been obtained. Other countries require the completion of additional health technology assessments that compare the cost-effectiveness of a particular product candidate to currently available therapies. In addition, the European Union provides options for its member states to restrict the range of products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. European Union member states may approve a specific price for a product, may adopt a system of direct or indirect controls on the profitability of the company placing the product on the market or monitor and control prescription volumes and issue guidance to physicians to limit prescriptions. Reference pricing used by various European Union member states and parallel distribution, or arbitrage between low-priced and high-priced member states, can further reduce prices. Furthermore, many countries in the European Union have increased the amount of discounts required on pharmaceutical products, and these efforts could continue as countries attempt to manage healthcare expenditures, especially in light of the severe fiscal and debt crises experienced by many countries in the European Union. The downward pressure on healthcare costs in general, and prescription products in particular, has become increasingly intense. As a result, there are increasingly higher barriers to entry for new products. There can be no assurance that any country that has reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any of our products, if approved in those countries. Accordingly, the reimbursement for any products in Europe may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenues and profits.

Furthermore, the containment of healthcare costs has become a priority of foreign and domestic governments as well as private third-party payors. The prices of drugs have been a focus in this effort. Governments and private third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications, which could affect our ability to sell our product candidates profitably. We also expect to experience pricing pressures due to the trend towards managed healthcare, the increasing influence of health maintenance organizations and additional legislative changes. These and other cost-control initiatives could cause us to decrease the price we might establish for products, which could result in lower-than-anticipated product revenues. In addition, the publication of discounts by third-party payors or authorities may lead to further pressure on the prices or reimbursement levels within the country of publication and other countries. If pricing is set at unsatisfactory levels or if coverage and adequate reimbursement of our products is unavailable or limited in scope or amount, our revenues and the potential profitability of our product candidates in those countries would be negatively affected.

Healthcare reform legislation and other changes in the healthcare industry and in healthcare spending may adversely affect our business model.

Our revenue prospects could be affected by changes in healthcare spending and policies in the United States, the European Union and any other potential jurisdictions in which we may seek to commercialize our product candidates, if approved. We operate in a highly regulated industry, and new laws, regulations and judicial decisions, or new interpretations of existing laws, regulations and decisions, related to healthcare availability, the method of delivery and payment for healthcare products and services could negatively affect our business, financial condition and prospects. There is significant interest in promoting healthcare reforms, and it is likely that federal and state legislatures within the United States and the governments of other countries will continue to consider changes to existing healthcare legislation.

For example, the United States and state governments continue to propose and pass legislation designed to reduce the cost of healthcare. In 2010, the U.S. Congress enacted the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act
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(collectively, the “Health Care Reform Act”), which included changes to the coverage and reimbursement of drug products under government healthcare programs such as:
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increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program;
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established a branded prescription drug fee that pharmaceutical manufacturers of certain branded prescription drugs must pay to the federal government;
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expanded the list of covered entities eligible to participate in the 340B drug pricing program by adding new entities to the program;
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established a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 70% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D;
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extended manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;
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expanded eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for individuals with income at or below 133% of the federal poverty level, thereby potentially increasing manufacturers’ Medicaid rebate liability;
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created a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for certain drugs and biologics, including our product candidates, that are inhaled, infused, instilled, implanted or injected;
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established a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research;
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established a Center for Medicare and Medicaid Innovation at the CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending; and
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created a licensure framework for follow-on biologic products.

There remain judicial and congressional challenges to certain aspects of the Health Care Reform Act as well as efforts to repeal or replace certain aspects of the Health Care Reform Act. For example, in 2017, the U.S. Congress enacted the Tax Cuts and Jobs Act (the “TCJA”), which eliminated the tax-based shared responsibility payment imposed by the Health Care Reform Act on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” On November 10, 2020, the Supreme Court of the United States heard oral arguments regarding the constitutionality of the Health Care Reform Act in light of the elimination of the individual mandate. It is unclear how this litigation and other efforts to repeal and replace the Health Care Reform Act will impact the Health Care Reform Act. It is difficult to predict the future legislative landscape in healthcare and the effect on our business, results of operations, financial condition and prospects.

In addition, there have been and continue to be a number of initiatives at the United States federal and state levels that seek to reduce healthcare costs. In 2011, the U.S. Congress enacted the Budget Control Act of 2011 (the “Budget Control Act”), which included provisions intended to reduce the federal deficit. The Budget Control Act resulted in the imposition of 2% reductions in Medicare payments to providers beginning in 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2030 absent additional congressional action. The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which was signed into law on March 27, 2020, suspended the 2% Medicare sequester reductions under the Budget Control Act from May 1, 2020 through December 31, 2020 and extended the sequester by one year, through 2030. In 2012, the U.S. Congress enacted the American Taxpayer Relief Act, which, among other things, further reduced Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. If government spending is further reduced, anticipated budgetary shortfalls may also impact the ability of relevant agencies, such as the FDA, to continue to function at current levels, which may impact the ability of relevant agencies to timely review and approve research and development, manufacturing and marketing activities, which may delay our ability to develop, market and sell any product candidates we may develop. In addition, any significant spending reductions affecting Medicare, Medicaid or other publicly funded or subsidized health programs that may be implemented, or any significant taxes or fees that may be imposed on us, as part of any broader deficit reduction effort or legislative replacement to the Budget Control Act, could have an adverse impact on our anticipated product revenues.

Furthermore, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several congressional inquiries and proposed legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs and reform government program reimbursement methodologies for drug products. Congress and the U.S. Presidential Administration have each indicated that it will continue to seek measures to control drug costs. Individual states in the United States have also become increasingly active in passing legislation and implementing regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. We expect that additional state and federal healthcare reform measures will be adopted in the future. Any adopted health reform measure could reduce the ultimate demand for our products, if approved, or put pressure on our product pricing.

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It is likely that federal and state legislatures within the United States and foreign governments will continue to consider changes to existing healthcare legislation, including those taken in response to the COVID-19 pandemic. We cannot predict the reform initiatives that may be adopted in the future or whether initiatives that have been adopted will be repealed or modified. The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare may adversely affect:

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the demand for any products for which we may obtain regulatory approval;
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our ability to set a price that we believe is fair for our products;
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our ability to obtain coverage and reimbursement approval for a product;
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our ability to generate revenues and achieve or maintain profitability; and
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the level of taxes that we are required to pay.

We face substantial competition, which may result in others discovering, developing or commercializing products, treatment methods or technologies before or more successfully than we do.

The biotechnology industry is characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. We face competition with respect to our current product candidates and will face competition with respect to any product candidates that we may seek to develop or commercialize in the future. Our competitors include large pharmaceutical and biotechnology companies, academic institutions, government agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization. Many of our competitors have significantly greater financial resources and capabilities in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approval and marketing than we do. In addition, many of these competitors are active in seeking patent protection and licensing arrangements in anticipation of collecting royalties for use of technology that they have developed. Smaller or early-stage companies may also prove to be significant competitors, particularly through strategic collaborations with large and established companies. Furthermore, mergers and acquisitions in the biotechnology industry may result in even more resources being concentrated among a smaller number of our competitors.

With respect to our current and potential future product candidates, we believe that our ability to compete effectively and develop products that can be manufactured cost-effectively and marketed successfully will depend on our ability to:

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advance the technology we use in our product candidates;
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obtain, maintain, protect and enforce intellectual property protection for our technologies and product candidates;
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obtain required government and other public and private approvals on a timely basis;
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attract and retain key personnel;
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execute our research and development plans;
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commercialize effectively;
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obtain and maintain coverage and reimbursement for our products in approved indications;
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obtain adequate funding for our activities;
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comply with applicable laws, regulations and regulatory requirements and restrictions with respect to the commercialization of our products, including with respect to any changed or increased regulatory restrictions; and
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enter into additional strategic collaborations and licensing opportunities to advance the development and commercialization of our product candidates.

Many companies are active in the oncology market and are developing or marketing products for the specific therapeutic markets that we target, including both antibody and non-antibody-based therapies. Similarly, we also face competition from other companies and institutions that continue to invest in innovation in the ADC field including new payload classes, new conjugation approaches and new targeting moieties. Specifically, we are aware of multiple companies with ADC technologies that may be competitive to our product candidates, including, but not limited to, AbbVie, Inc., Astellas Pharma Inc., AstraZeneca plc, BioAtla, LLC, Bristol-Myers Squibb Company, CytomX Therapeutics, Daiichi Sankyo Company, Eli Lilly and Company, Genentech, Inc., Genmab, Gilead Sciences, Inc., GlaxoSmithKline plc, ImmunoGen, Inc., Immunomedics, Inc., Mersana Therapeutics Inc., Millennium Pharmaceuticals, Inc., MorphoSys AG, Novartis International AG, Pfizer Inc., F. Hoffmann-La Roche AG, Sanofi S.A., Seattle Genetics, Inc., Sutro Biopharma, Inc., Takeda Pharmaceutical Company Ltd and Wyeth Pharmaceuticals, Inc. Currently, there are nine approved ADCs. In addition, there are hundreds of ADCs in development, the vast majority of which were being developed for the treatment of cancer.

In the relapsed or refractory DLBCL setting, for which we are developing Lonca, current third-line treatment options include CAR-T, allogeneic stem cell transplant, polatuzumab in combination with bendamustine and a rituximab product, selinexor, tafasitamab in combination with lenalidomide and chemotherapy using small molecules. In addition, we expect potential new competitors, including bispecific antibodies, to enter the market as potential treatment options for such patients in the future. In the relapsed or refractory HL setting, for which we are
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developing Cami, current third-line treatment options include chemotherapy, immunotherapy and brentuximab vedotin. In addition, we expect changes to the treatment paradigm, such as the movement of brentuximab vedotin to earlier lines of therapy and the potential expanded use of checkpoint inhibitors, and potential new entrants such as bispecific antibodies. We expect our product candidates to compete on efficacy, tolerability and convenience compared to other treatment options. However, there can be no assurance that our product candidates would be able to compete effectively.

Our commercial opportunities could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects or are more convenient than any products that we may develop, which would render our products obsolete or noncompetitive. Our competitors also may obtain FDA, EMA or regulatory approval in other jurisdictions for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market. We anticipate that we will face increased competition in the future as additional companies enter our market and scientific developments surrounding other cancer therapies continue to accelerate.

In addition, our ability to compete may be affected in many cases by insurers or other third-party payors seeking to encourage the use of generic products or biosimilars. Generic products are currently on the market for the indications that we are pursuing, and biosimilars and
additional generic products are expected to become available over the coming years. In the United States, the Biologics Price Competition and Innovation Act of 2009 (the “BPCIA”), included as a subtitle in the Health Care Reform Act, established a pathway for the FDA approval of follow-on biologics and provides a twelve-year data exclusivity period for reference products and an additional six-month exclusivity period if pediatric studies are conducted. It is unclear how the Health Care Reform Act repeal and reform efforts discussed above will impact the biosimilar framework created by the Health Care Reform Act and thus, our business. In Europe, the EMA has issued guidelines for approving products through an abbreviated pathway, and biosimilars have been approved in Europe. If a biosimilar version of one of our potential products is approved in the United States or Europe, it could have a negative effect on sales and gross profits of the potential product and our financial condition.

Risks Related to Our Relationship with Third Parties

We rely on third parties to conduct preclinical studies and/or clinical trials of our product candidates. If they do not properly and successfully perform their obligations to us, we may not be able to obtain regulatory approvals for our product candidates.

We rely, and we expect that we will continue to rely, on CROs and other third parties to assist in managing, monitoring and otherwise carrying out preclinical studies and clinical trials of our product candidates. We currently rely on third parties to manage and conduct our clinical trials of Lonca and Cami. As a result of our reliance on CROs and other third parties, we have less direct control over the conduct, timing and completion of these clinical trials and the management of data developed through clinical trials than we would otherwise have if we relied entirely upon our own staff. These CROs and other third parties are not our employees and we have limited control over the amount of time and resources that they dedicate to our product candidates. In addition, communications with outside parties can also be challenging, potentially leading to mistakes as well as difficulties in coordinating activities. Outside parties may:

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have staffing difficulties;
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fail to comply with contractual obligations;
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experience regulatory compliance issues;
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undergo changes in priorities or become financially distressed; or
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form relationships with other entities, some of which may be our competitors.

If these third parties do not successfully carry out their duties under their agreements, or if the quality or accuracy of the data they obtain is compromised due to their failure to adhere to clinical trial protocols or to regulatory requirements, or if they otherwise fail to comply with clinical trial protocols or meet expected deadlines, the clinical trials of our product candidates may not meet regulatory requirements. Specifically, the FDA, EMA and comparable regulatory authorities in other jurisdictions require compliance with regulations and standards, including GCP, for designing, conducting, monitoring, recording, analyzing and reporting the results of clinical trials to assure that the data and results are credible and accurate and that the rights, integrity and confidentiality of study participants are protected. Although we rely, and intend to continue to rely, on third parties to conduct our clinical trials, they are not our employees, and we are responsible for ensuring that each of these clinical trials is conducted in accordance with its general investigational plan, protocol, legal and regulatory requirements and scientific standards. Our reliance on these third parties for research and development activities will reduce our control over these activities, but will not relieve us of our responsibilities. If our CROs and other third-party research and development partners fail to comply with applicable GCPs or other regulatory requirements, the clinical data generated in our clinical trials may be deemed unreliable and preclinical development activities or clinical trials may be extended, delayed, suspended or terminated.

We compete with many other companies for the resources of these third parties. These third parties may have contractual relationships with other entities, some of which may be our competitors, which may draw time and resources from our product candidates. The third parties with whom we contract might not be diligent, careful or timely in conducting our preclinical studies or clinical trials, resulting in the preclinical studies or clinical trials being delayed or unsuccessful.
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Some of our CROs have an ability to terminate their respective agreements with us if it can be reasonably demonstrated that the safety of the subjects participating in our clinical trials warrants such termination, if we make a general assignment for the benefit of our creditors or if we are liquidated. If any of our relationships with these CROs terminate, we may not be able to enter into arrangements with alternative CROs or to do so on commercially reasonable terms. Switching or adding additional CROs involves additional cost and requires management time and focus. In addition, there is a natural transition period when a new CRO commences work. As a result, delays may occur in our clinical trials, which can materially impact our ability to meet our desired clinical development timelines. There can be no assurance that we will not encounter challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, results of operations, financial condition and prospects.

We rely on third parties for the manufacture, production, storage and distribution of our product candidates. Our dependence on these third parties may impair the clinical advancement and commercialization of our product candidates.

We rely, and expect that we will continue to rely, on third parties for the manufacturing and supply of our product candidates, and such reliance on third-party manufacturers may expose us to different risks than if we were to manufacture product candidates ourselves. There are four manufacturing streams for the manufacture of one of our product candidates: the antibody, the PBD-based payload, the ADC drug substance and the drug product. In addition, we contract with specialized analytical laboratories for lot release and stability testing of our product candidates. For the foreseeable future, we expect to continue to rely on such third parties for the manufacture, production, storage and distribution of our product candidates on a clinical or, if any of our product candidates receives regulatory approval, on a commercial scale. If our agreements with these third parties expire or are terminated, there is no guarantee that we would be able to negotiate new agreements with them or other third parties on equally favorable terms as the current agreements, or at all.

Reliance on third-party providers may expose us to different risks than if we were to manufacture and supply product candidates ourselves. The facilities used by our CMOs or other third-party manufacturers to manufacture our product candidates must be approved by the EMA and comparable regulatory authorities in other jurisdictions, and the FDA requires our CMOs or other third-party manufacturers to maintain a compliance status acceptable to the FDA, pursuant to inspections that will be conducted after we submit the marketing application to the applicable regulatory authorities. Although we have auditing rights with all our manufacturing counterparties, we do not have control over a supplier’s or manufacturer’s compliance with these laws, regulations, applicable cGMP standards and other laws and regulations, such as those related to environmental health and safety matters.

If our CMOs or other third-party manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA, EMA and comparable regulatory authorities in other jurisdictions, or if the quality or accuracy of the manufacturing and quality control data they obtain is compromised due to their failure to adhere to protocols or to regulatory requirements, we will not be able to secure and/or maintain regulatory approval for our product candidates. In addition, we have no control over the ability of our CMOs or other third-party manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If a CMO or other third-party manufacturer cannot maintain a compliance status acceptable to the FDA, or if the EMA or a comparable regulatory authority in another jurisdiction does not approve these facilities for the manufacture of our product candidates or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or market our product candidates, if approved. Any failure to achieve and maintain compliance with these laws, regulations and standards could subject us to the risk that we may have to suspend the manufacturing of our product candidates and that obtained approvals could be revoked, which would adversely affect our business and reputation.

Due to the complexity to manufacture our product candidates and the small quantities of product candidates needed for clinical trials and regulatory submission purposes, we contract with one CMO for each component of our product candidates and/or the same CMO for multiple components of our product candidates or services involved in manufacturing our product candidates. We cannot ensure that these CMOs will remain in business or that they will not be purchased by one of our competitors or another company that is not interested in continuing to work with us. Our use of exclusive CMOs exposes us to several risks, including:

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delays or stoppages in product shipments for our product candidates, including loss shipments and cross-border logistical complications, resulting in delayed and lost shipments;
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delays to the development timelines for our product candidates;
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an inability to commence or continue clinical trials of product candidates under development;
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interruption of supply resulting from modifications to a CMO’s operations;
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delays or stoppage in manufacturing or shipment due to a CMO’s bankruptcy, winding up, reorganization or similar corporate failures or financial distress;
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delays in product manufacturing or shipments resulting from uncorrected defects, reliability or stability issues, or a CMO’s variation in a component;
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a lack of long-term arrangements for key components;
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inability to obtain adequate supply in a timely manner, or to obtain adequate supply on commercially reasonable terms;
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difficulty and cost associated with locating and qualifying alternative CMOs for our components or raw materials in a timely manner;
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production delays related to the evaluation and testing of components from alternative CMOs, and corresponding regulatory qualifications;
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delay in delivery due to our CMOs’ prioritizing other customer orders over ours;
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damage to our reputation caused by defective product candidates produced by our CMOs; and
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potential price increases.

The failure of one or more CMOs to supply product candidates and/or components of product candidates that meet our specifications could delay our clinical trials and the regulatory approval and commercialization of our product candidates. A CMO may not be able to correct batch failures in a reasonable timeframe, if at all, which may require us to seek replacement CMOs. In the past, we have received batches of certain of our product candidates that did not meet our specifications. There can be no assurance that CMOs will be able to manufacture product candidates and/or components of product candidates that meet our specifications, which could delay our clinical trials and the regulatory approval and commercialization of our product candidates.

Establishing additional or replacement CMOs could take a substantial amount of time and it may be difficult to establish replacement CMOs who meet regulatory requirements. In general, there are relatively few alternative CMOs that are able to manufacture our product candidates under cGMP. If we have to switch to a replacement CMO, the manufacture and delivery of our product candidates could be interrupted for an extended period, which could adversely affect our business. If we are able to find a replacement CMO, the replacement CMO would need to be qualified and may require additional regulatory authority approval, which could result in further delay regulatory approval and commercialization of our product candidates.

Furthermore, third-party providers may breach, terminate or decline to renew agreements they have with us because of factors beyond our control, such as their own financial difficulties or business priorities, international trade restrictions and financial costs, potentially at a time that is costly or otherwise inconvenient for us or our partners. In such cases, we would face the challenge of transferring complicated manufacturing techniques to other CMOs. We may incur significant costs and be required to devote significant time to verify that the new
manufacturer maintains facilities and procedures that comply with quality standards and with all applicable regulations and guidelines. A transfer of the manufacturing process for our product candidates would be time-consuming, and we or our partners may not be able to achieve such transfer. If we are unable to find an adequate replacement or another acceptable solution in time, clinical trials of our product candidates could be delayed or our commercial activities could be harmed.

Our third-party manufacturers may be unable to successfully scale up manufacturing of our product candidates in sufficient quality and quantity, which may impair the clinical advancement and commercialization of our product candidates.

In order to conduct clinical trials of our product candidates and commercialize any approved product candidates, our manufacturing partners need to manufacture them in large quantities. However, they may be unable to successfully increase the manufacturing capacity for any of our product candidates in a timely or cost-effective manner, or at all. In addition, quality issues may arise during scale-up activities. Furthermore, due to the specific nature of our ADCs’ components and availability of production capacity, there is significant lead time required by our third-party manufacturers to provide us with the needed manufacturing services. If we, or any manufacturing partners, are unable to successfully scale up the manufacture of our product candidates in sufficient quality and quantity, the development, testing and clinical trials of these product candidates may be delayed or infeasible, and regulatory approval or commercial launch of any resulting products may be delayed or not obtained, which could significantly harm our business. Supply sources could be interrupted from time to time and, if interrupted, it is not certain that supplies could be resumed (whether in part or in whole) within a reasonable timeframe and at an acceptable cost, or at all. If we are unable to obtain or maintain third-party manufacturing for commercial supply of our product candidates, or to do so on commercially reasonable terms, we may not be able to develop and commercialize our product candidates successfully.

We may not be successful in establishing commercialization collaborations and licensing agreements, which could adversely affect our ability to commercialize our product candidates, if approved.

We expect to commercialize our product candidates, if approved, in the United States and may selectively pursue strategic collaborations and licensing agreements with third parties to commercialize our product candidates outside of the United States. We may not be successful in entering into such marketing and distribution arrangements with third parties or in entering in such marketing and distribution arrangements with third parties on favorable terms. Moreover, such arrangements are complex and time-consuming to negotiate, document and implement and they may require substantial resources to maintain.

In addition, it is possible that a collaborator may not devote sufficient resources to the commercialization of our product candidates or may otherwise fail in its commercialization efforts, in which event the commercialization of such product candidates could be delayed or terminated and our business could be substantially harmed. In addition, the terms of any collaboration or other arrangement that we establish may not be favorable to us or may not be perceived as favorable, which may negatively impact our business, financial condition, results of operations and prospects.

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We collaborate with third parties in the research, development and commercialization of certain of our product candidates and may enter into other collaborations in the future for our other product candidates. If our collaborators do not perform as expected or if we are unable to maintain existing or establish additional collaborations, our ability to develop and commercialize our product candidates may be adversely affected.

From time to time, we may enter into collaboration agreements with third parties that have experience in product development, manufacturing and/or commercialization for other product candidates and/or research programs. We may face significant competition in seeking appropriate partners for our product candidates, and the negotiation process may be time-consuming and complex. In order for us to successfully partner our product candidates, potential collaborators must view these product candidates as economically valuable in markets
they determine to be attractive in light of the terms that we are seeking and other available products for licensing by other companies. Even if we are successful in our efforts to establish collaborations, the terms that we agree upon may not be favorable to us, and we may not be able to maintain such collaborations if, for example, development or approval of a product candidate is delayed or sales of an approved product are disappointing. If we fail to establish and maintain collaborations related to our product candidates, we could bear all of the risk and costs related to the development of any such product candidate, and we may need to seek additional financing, hire additional employees and otherwise develop expertise for which we have not budgeted. This could negatively affect the development and commercialization of our product candidates.

In such collaborations, we will depend on the performance of our collaborators. Our collaborators may fail to perform their obligations under the collaboration agreements or may not perform their obligations in a timely manner. If conflicts arise between our collaborators and us, the other party may act in a manner adverse to us and could limit our ability to implement our strategies. Furthermore, our collaborators may not properly obtain, maintain, enforce or defend our intellectual property or proprietary rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our proprietary information or expose us to potential litigation. In addition, we cannot control the amount and timing of resources our collaborators may devote to our product candidates. They may separately pursue competing products, therapeutic approaches or technologies to develop treatments for the diseases targeted by us. Competing products, either developed by the collaborators or to which the collaborators have rights, may result in the withdrawal of support for our product candidates. Even if our collaborators continue their contributions to the strategic collaborations, they may nevertheless determine not to actively pursue the development or commercialization of any resulting products. Additionally, if our collaborators pursue different clinical or regulatory strategies with their product candidates based on similar technology as used in our product candidates, adverse events with their product candidates could negatively affect our product candidates. Any of these developments could harm our product development efforts.

We may be subject to exclusivity and other governance provisions within a collaboration agreement that may prevent us from pursuing certain alternative product candidates and exercising complete control over our product candidates’ development and commercialization. For example, Lonca, ADCT-602, ADCT-601 and ADCT-901 are subject to a joint venture and a license and collaboration agreement with Overland Pharmaceuticals in greater China and Singapore and Cami is subject to a collaboration and license agreement with Genmab. See “Item 4. Information on the Company—B. Business Overview—License and Collaboration Agreements.” In addition, our collaborators will likely have customary termination rights under these agreements. Any termination of an agreement by the relevant collaborators could affect our ability to develop further such product candidates or adversely affect how we are perceived in scientific and financial communities. Therefore, if our collaborators terminate or breach our agreements with them, or otherwise fail to complete their obligations in a timely manner, it may have a detrimental effect on our financial position by reducing or eliminating the potential for us to receive technology access and license fees, milestones and royalties, reimbursement of development costs, as well as possibly requiring us to devote additional efforts and incur costs associated with pursuing internal development of product candidates. Furthermore, if our collaborators do not prioritize and commit sufficient resources to our product candidates, we or our partners may be unable to develop or commercialize these product candidates, which would limit our ability to generate revenue and become profitable.

Risks Related to Intellectual Property

If we are unable to obtain, maintain or protect our intellectual property rights in any products or technologies we develop, or if the scope of the intellectual property protection obtained is not sufficiently broad, third parties could develop and commercialize products and technology similar or identical to ours, and we may not be able to compete effectively in our market.

Our success depends in significant part on our own and any of our licensors’ ability to obtain, maintain and protect patents and other intellectual property rights and operate without infringing, misappropriating, or otherwise violating the intellectual property rights of others. To protect our proprietary position, we have filed numerous patent applications both in the United States and in foreign jurisdictions to obtain patent rights to inventions we have developed that are important to our business, including Lonca and Cami. We have also licensed from third parties rights to patents and other intellectual property, including from MedImmune with respect to the PBD technology we use for our PBD-based ADCs, from Synaffix B.V. (“Synaffix”) for site-specific conjugation technology we use in ADCT-601 and ADCT-701, from Genmab with respect to the antibody we use in Cami and from other parties for some of our other product candidates and related technology. If we or our current or future licensors are unable to obtain or maintain patent protection with respect to such inventions and technology, our business, financial condition, results of operations and prospects could be materially harmed.

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The patent prosecution process is expensive, time-consuming and complex, and we and our current or future licensors may not be able to prepare, file, prosecute, maintain and enforce all necessary or desirable patent applications at a reasonable cost or in a timely manner. Patents may be invalidated and patent applications may not be granted for a number of reasons, including known and unknown prior art (including our own prior art), deficiencies in the patent applications or the lack of novelty of the underlying inventions or technology. It is also possible that we or our current and future licensors will fail to identify patentable aspects of inventions made in the course of research, development and commercialization activities in time to obtain patent protection. Although we enter into non-disclosure and confidentiality agreements with parties who have access to confidential or patentable aspects of our research, development and commercialization activities, such as our employees, corporate collaborators, outside scientific collaborators, CROs, consultants, advisors and other third parties, any of these parties may breach the agreements and disclose such activities before a patent application is filed, thereby jeopardizing our ability to seek patent protection. In addition, publications of discoveries in the scientific literature often lag behind actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until eighteen months after filing, or in some cases not at all. Therefore, we cannot be certain that we or our current or future licensors were the first to make the inventions claimed in our owned or licensed patents or patent applications, or that we or our current or future licensors were the first to file for patent protection of such inventions.

Moreover, in some circumstances, we may not have the right to control the preparation, filing, prosecution, maintenance, enforcement and defense of patents and patent applications covering technology that we license from third parties, and are reliant on our licensors. For example, pursuant to our agreements with MedImmune and Genmab, MedImmune and Genmab retain control of the preparation, filing, prosecution, maintenance, enforcement and defense of certain of the patents and patent applications licensed to us. Therefore, these patents and applications may not be prepared, filed, prosecuted, maintained, enforced and defended in a manner consistent with the best interests of our business. If our current or future licensors fail to prosecute, maintain, enforce or defend such patents and other intellectual property rights, are not fully cooperative or disagree with us as to the prosecution, maintenance or enforcement of any patent rights, or lose rights to those patents or patent applications, the rights that we have licensed may be reduced or eliminated, and our right to develop and commercialize any of our product candidates that are the subject of such licensed rights could be adversely affected.

The patent position of biotechnology companies generally is highly uncertain, involves complex legal and factual questions and has, in recent years, been the subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our and our current or future licensors’ patent rights are highly uncertain. For example, there is significant uncertainty, and there has been much litigation, regarding what is considered patentable subject matter under U.S. patent law, including with respect to diagnostics. Our owned and licensed pending and future patent applications may not result in patents being issued which protect the products or technologies we develop, in whole or in part, or which effectively prevent others from commercializing competitive technologies and products. Moreover, the patent examination process may require us or our current and future licensors to narrow the scope of the claims of our owned or licensed pending and future patent applications, which may limit the scope of patent protection that may be obtained. Additionally, the scope of patent protection can be reinterpreted after issuance. Even if our owned or licensed pending and future patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors or other third parties from competing with us, or otherwise provide us with any competitive advantage. Any patents that we hold or in-license may be challenged, narrowed, circumvented or invalidated by third parties in court or in patent offices in the United States and abroad. Our owned or licensed patent applications cannot be enforced against third parties practicing the technology claimed in such applications unless and until a patent issues from such applications, and then, only to the extent the issued claims cover the technology. Our competitors or other third parties may also be able to circumvent our patents by developing similar or alternative technologies or products in a non-infringing manner.

We may be subject to a third-party pre-issuance submission of prior art to the United States Patent and Trademark Office (“USPTO”). We cannot assure you that all of the potentially relevant prior art relating to our patents and patent applications has been found. If such prior art exists, it can invalidate a patent or prevent a patent from issuing from a pending patent application Even if patents do successfully issue and even if such patents cover our product candidates, third parties may initiate an opposition, interference, reexamination, post-grant review, inter partes review, nullification or derivation action in court or before patent offices, or other proceedings challenging the inventorship, validity, enforceability or scope of such patents, which may result in the patent claims being narrowed or invalidated. An adverse determination in any such proceeding or litigation could reduce the scope of, or invalidate, the patent rights we own or license, allow third parties to commercialize the products or technologies we develop and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights. Moreover, we, or our current or future licensors, may have to participate in interference proceedings declared by the USPTO to determine priority of invention or in post-grant challenge proceedings, such as oppositions in foreign patent offices, that challenge priority of invention or other features of patentability. Such challenges may result in loss of patent rights, loss of exclusivity or in patent claims being narrowed, invalidated or held unenforceable, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of the product candidates and technologies we develop, including Lonca or Cami. Such proceedings also may result in substantial cost and require significant time and attention from our scientific and management personnel, even if the eventual outcome is favorable to us. Consequently, there can be no assurance that any product candidates or technology we develop will be protectable or remain protected by valid and enforceable patents. In addition, if the breadth or strength of protection provided by our patents or patent applications is threatened, regardless of the outcome, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates.

Because patent applications in the United States and most other countries are confidential for a period of time after filing, and some remain so until issued, we cannot be certain that we or our current and future licensors were the first to file any patent application related to a product candidate. Furthermore, if third parties have filed such patent applications on or before March 15, 2013, an interference proceeding in
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the United States can be initiated by such third parties to determine who was the first to invent any of the subject matter covered by the patent claims of our applications. If third parties have filed such applications after March 15, 2013, a derivation proceeding in the United States can be initiated by such third parties to determine whether our invention was derived from theirs. Even where we have a valid and enforceable patent, we may not be able to exclude others from practicing our invention where the other party can show that they used the invention in commerce before our filing date or the other party benefits from a compulsory license. Any of the foregoing could have a material adverse effect on our business, results of operations, financial condition and prospects.

Issued patents covering one or more of our product candidates or technologies, including Lonca, Cami or the technology we use in our product candidates, could be found invalid or unenforceable if challenged in court.

To protect our competitive position, we may, from time to time, resort to litigation in order to enforce or defend any patents or other intellectual property rights owned by or licensed to us, or to determine or challenge the scope or validity of patents or other intellectual property rights of third parties. Enforcement of intellectual property rights is difficult, unpredictable and expensive, and many of our or our licensors’ or collaboration partners’ adversaries in these proceedings may have the ability to dedicate substantially greater resources to prosecuting these legal actions than we or our licensors or collaboration partners can. Accordingly, despite our or our licensors’ or collaboration partners’ efforts, we or our licensors or collaboration partners may not prevent third parties from infringing upon or misappropriating intellectual property rights we own or control, particularly in countries where the laws may not protect those rights as fully as in the United States and the European Union. We may fail in enforcing our rights, in which case third parties, including our competitors, may be permitted to use our technology without being required to pay us any license fees.

In addition, litigation involving our patents carries the risk that one or more of our patents will be held invalid (in whole or in part, on a claim-by-claim basis) or held unenforceable. Such an adverse court ruling could allow third parties, including our competitors, to commercialize or use our product candidates and technologies, including the PBD technology we use in our product candidates, and then compete directly with us, without payment to us.

If we or one of our current or future licensors were to initiate legal proceedings against a third party to enforce a patent covering one of our product candidates, the defendant could counterclaim that such patent is invalid or unenforceable. In patent litigation in the United States and in Europe, defendant counterclaims alleging invalidity or unenforceability are commonplace. A claim for a validity challenge may be based on failure to meet any of several statutory requirements, for example, lack of novelty, obviousness or non-enablement. A claim for unenforceability could involve an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO or the European Patent Office or made a misleading statement during prosecution. Third parties may also raise similar claims before the USPTO or an equivalent foreign body, even outside the context of litigation. Potential proceedings include reexamination, post-grant review, inter partes review, interference proceedings, derivation proceedings and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings). Such proceedings could result in the revocation of, cancellation of, or amendment to our patents in such a way that they no longer cover our technology or any product candidates that we may develop. The outcome following legal assertions of invalidity and unenforceability during patent litigation is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art of which we or our licensing partners and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on one or more of our product candidates or certain aspects of the PBD technology we use in our product candidates. Such a loss of patent protection could have a material adverse impact on our business, financial condition, results of operations and prospects. Further, litigation could result in substantial costs and diversion of management resources, regardless of the outcome, and this could harm our business and financial results. Patents and other intellectual property rights also will not protect our technology if competitors design around our protected technology without infringing our patents or other intellectual property rights.

We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time-consuming and unsuccessful.

Competitors and other third parties may infringe, misappropriate or otherwise violate our issued patents or other intellectual property or the patents or other intellectual property of our licensors, or we or our licensors may be required to defend against claims of infringement, misappropriation or other violations of intellectual property held by third parties. In addition, our patents or the patents of our licensors may become involved in inventorship or priority disputes. To counter infringement, misappropriation or other unauthorized use, we or our licensors may be required to file infringement claims, which can be expensive and time-consuming. Any claims we or our licensors assert against perceived infringers could provoke these parties to assert counterclaims alleging that we or our licensors infringe their patents or that our or our licensors’ patents are invalid or unenforceable. In a patent infringement proceeding, a court may decide that a patent of ours or one of our licensors’ is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to stop the other party from using the technology at issue on the grounds that our or our licensors’ patents do not cover the technology. An adverse result in any litigation proceeding could put one or more of our owned or licensed patents at risk of being invalidated, held unenforceable or interpreted narrowly. We may find it impractical or undesirable to enforce our intellectual property rights against some third parties.

Interference proceedings provoked by third parties or brought by us or declared by the USPTO may be necessary to determine the priority of inventions with respect to our or our licensors’ patents or patent applications. If we or our licensors are unsuccessful in any interference
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proceedings to which we or they are subject, we may lose valuable intellectual property rights through the loss of one or more patents owned or licensed or our owned or licensed patent claims may be narrowed, invalidated or held unenforceable. If we or our licensors are unsuccessful in any interference proceeding or other priority or inventorship dispute, we may be required to obtain and maintain licenses from third parties, including parties involved in any such interference proceedings or other priority of inventorship disputes. Such licenses may not be available on commercially reasonable terms or at all, or may be non-exclusive. If we are unable to obtain and maintain such licenses, we may need to cease the development, manufacture and commercialization of one or more of the product candidates we may develop. The loss of exclusivity or narrowing of our owned or licensed patent claims could limit our ability to stop others from using or commercializing similar or identical technology and products. Any of the foregoing could have a material adverse effect on our business, results of operations, financial condition and prospects.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.

If we fail to comply with our obligations in the agreements under which we license intellectual property rights from third parties or otherwise experience disruptions to our business relationships with our licensors, we could lose the ability to continue the development and commercialization of our product candidates.

We are party to a number of intellectual property and technology licenses that are important to our business. For example, the PBD technology we use to generate our PBD-based ADCs was developed by, and is licensed on a target-exclusive basis from, MedImmune. All of our ADC product candidates and research programs utilize a PBD-based warhead. In addition, we license certain patents and know-how relating to the antibodies used and incorporated into Cami from Genmab and those used and incorporated into our other product candidates from other third-party licensors. For more information regarding these agreements, see “Item 4. Information on the Company—B. Business Overview—License and Collaboration Agreements.” If we fail to comply with our obligations under these or our other agreements, including payment and diligence terms, our current and future licensors may have the right to terminate these agreements, in which event we may not be able to develop, manufacture, market or sell any product that is covered by these agreements or may face other penalties under these agreements. Such an occurrence could adversely affect the value of the product candidates being developed under any such agreement. Termination of these agreements or reduction or elimination of our rights under these agreements may result in our having to negotiate new or reinstated agreements, which may not be available to us on equally favorable terms, or at all, or cause us to lose our rights under these agreements, including our rights to intellectual property or technology important to our development programs. Accordingly, termination of these agreements may require us to cease the development of our product candidates, including Lonca or Cami.

Disputes may arise regarding intellectual property subject to a licensing agreement, including:

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the scope of rights granted under the license agreement and other interpretation-related issues;
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the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement;
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the sublicensing of patent and other rights under our existing collaborative development relationships and any collaboration relationships we might enter into in the future;
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our diligence obligations under the license agreement and what activities satisfy those diligence obligations;
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the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our current and future licensors and us; and
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the priority of invention of patented technology.

In addition, the agreements under which we license intellectual property or technology from third parties are generally complex, and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology, or increase what we believe to be our financial or other obligations under the relevant agreements. Moreover, if disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on commercially acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects.

We may not be successful in obtaining additional intellectual property rights necessary or required to further develop our product candidates.

A third party may hold intellectual property, including patent rights, that is important or necessary to the development of our product candidates. In order to avoid infringing these third-party patents, we may find it necessary or prudent to obtain licenses from such third-party intellectual property holders. Moreover, we may need to obtain additional licenses from our existing licensors and others to advance our research or allow commercialization of product candidates we may develop. In addition, many of our patents are co-owned with MedImmune, which licenses its interest in such patents to us. With respect to any patents we co-own with third parties, we may require licenses to such co-owners’ interest to such patents. In addition, we may need the cooperation of any co-owners of our patents in order to enforce such patents
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against third parties, and such cooperation may not be provided to us. We may be unable to secure such licenses or otherwise acquire or in-license any compositions, methods of use, processes or other intellectual property rights from third parties that we identify as necessary for product candidates we develop, including Lonca or Cami. The licensing or acquisition of third-party intellectual property rights is a competitive area, and more established companies may pursue strategies to license or acquire third-party intellectual property rights that we may consider attractive or necessary. These established companies may have a competitive advantage over us due to their size, capital resources and greater clinical development or commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. As a result, we may be unable to obtain any such licenses at a reasonable cost or on reasonable terms, if at all. In that event, we may be required to expend significant time and resources to redesign our technology, product candidates or the methods for manufacturing them or to develop or license replacement technology, all of which may not be feasible on a technical or commercial basis. If we are unable to do so, we may be unable to develop or commercialize the affected product candidates, including Lonca or Cami, which could significantly harm our business, financial condition, results of operations and prospects. In addition, even if we obtain a license, it may be non-exclusive, thereby giving third parties, including our competitors, access to the same technologies licensed to us. In addition, any license we obtain could require us to make substantial licensing and royalty payments. If we are unable to obtain an exclusive license to any third-party or co-owned patents or patent applications, such parties may be able to license their rights to other third parties, including our competitors, and such third parties could market competing products and technology. Any of the foregoing could have a material adverse effect on our business, results of operations, financial condition and prospects.

Third parties may initiate legal proceedings against us alleging that we infringe, misappropriate, or otherwise violate their intellectual property rights or we may initiate legal proceedings against third parties to challenge the validity or scope of intellectual property rights controlled by third parties, the outcome of which would be uncertain and could have an adverse effect on the success of our business.

Our commercial success depends upon our ability to develop, manufacture, market and sell our product candidates and use our and our current or future licensors’ proprietary technologies without infringing, misappropriating or otherwise violating the intellectual property rights of third parties. The biotechnology and pharmaceutical industries are characterized by extensive litigation regarding patents and other intellectual property rights. Third parties may initiate legal proceedings against us or our current and future licensors alleging that we or our current and future licensors infringe, misappropriate or otherwise violate their intellectual property rights. In addition, we and our licensors have initiated, and we and our current and future licensors may in the future initiate, legal proceedings against third parties to challenge the validity or scope of intellectual property rights controlled by third parties, including in oppositions, interferences, reexaminations, inter partes reviews or derivation proceedings in the United States or other jurisdictions. These proceedings can be expensive and time-consuming, and many of our or our current and future licensors’ adversaries in these proceedings may have the ability to dedicate substantially greater resources to prosecuting these legal actions than we or our current and future licensors. Numerous U.S.- and foreign-issued patents and pending patent applications which are owned by third parties exist in the fields in which we are pursuing our product candidates. We are aware of a patent family with issued claims that could be construed to cover the linker in ADCT-601 and ADCT-701. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that we may be subject to claims of infringement of the patent rights of third parties.

There are, and in the future, we may identify, other third-party patents or patent applications with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of one or more of our product candidates. Because patent applications can take many years to issue, there may be currently pending patent applications that may later result in issued patents that our product candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents. Parties making infringement, misappropriation or other intellectual property claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize one or more of our product candidates, including Lonca or Cami. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of management and employee resources. In addition, even if we believe any third-party intellectual property claims are without merit, there is no assurance that a court would find in our favor on questions of validity, enforceability, priority or non-infringement. A court of competent jurisdiction could hold that such third-party patents are valid, enforceable and infringed, which could materially and adversely affect our ability to commercialize any of our product candidates or technologies covered by the asserted third-party patents. In order to successfully challenge the validity of any such third-party U.S. patents in federal court, we would need to overcome a presumption of validity. As this burden is a high one requiring us to present clear and convincing evidence as to the invalidity of any such U.S. patent claim, there is no assurance that a court of competent jurisdiction would invalidate the claims of any such U.S. patent. An unfavorable outcome could require us or our current and future licensors to cease using the related technology or developing or commercializing our product candidates, or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us or our current and future licensors a license on commercially reasonable terms or at all. Even if we or our current and future licensors obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us or our current and future licensors, and it could require us to make substantial licensing and royalty payments. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a patent. A finding of infringement, misappropriation or other violation of third-party intellectual property could prevent us from commercializing our product candidates or force us to cease some of our business operations, which could harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar material adverse effect on our business, results of operations, financial condition and prospects. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation or administrative proceedings, there is a risk that some of our confidential information could be compromised by disclosure.

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We may be subject to claims by third parties asserting that we or our employees, consultants or advisors have misappropriated their intellectual property, or claiming ownership of what we regard as our own intellectual property.

Many of our employees, consultants, and advisors, including our senior management, were previously employed at other biopharmaceutical companies, including our competitors or potential competitors. Some of these employees executed proprietary rights, non-disclosure and/or non-competition agreements in connection with such previous employment. Although we try to ensure that our employees, consultants and advisors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these individuals have used or disclosed confidential information or intellectual property, including trade secrets or other proprietary information, of any such individual’s current or former employer. Litigation may be necessary to defend against these claims. If we fail in defending against any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Such intellectual property rights could be awarded to a third party, and we could be required to obtain a license from such third party to commercialize our technology or products. Such a license may not be available on commercially reasonable terms, or at all.

In addition, while it is our policy to require our employees and contractors who may be involved in the conception or development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who, in fact, conceives or develops intellectual property that we regard as our own. The assignment of intellectual property rights may not be self-executing, or the assignment agreements may be breached, and we may be forced to bring claims against third parties, or defend claims that they may bring against us, to determine the ownership of what we regard as our intellectual property. Such claims could have a material adverse effect on our business, results of operations, financial condition and prospects.

Intellectual property litigation or proceedings could cause us to spend substantial resources and distract our personnel.

Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims could result in substantial costs and diversion of management resources, which could harm our business. In addition, the uncertainties associated with litigation could compromise our ability to raise the funds necessary to continue our clinical trials, continue our internal research programs or in-license needed technology or other product candidates. There could also be public announcements of the results of the hearing, motions or other interim proceedings or developments. If securities analysts or investors perceive those results to be negative, it could cause the price of our common shares to decline. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing, or distribution activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Most of our competitors are larger than we are and have substantially greater resources. They are, therefore, likely to be able to sustain the costs of complex patent litigation or proceedings more effectively than we can because of their greater financial resources and more mature and developed intellectual property portfolios. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon, misappropriating or otherwise violating our intellectual property. Any of the foregoing events could harm our business, financial condition, results of operation and prospects.

Changes in patent law could diminish the value of patents in general, thereby impairing our ability to protect our product candidates.

Obtaining and enforcing patents in the biopharmaceutical industry involves both technological and legal complexity and is therefore costly, time-consuming and inherently uncertain. Changes in either the patent laws or the interpretation of the patent laws in the United States or other jurisdictions could increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of issued patents. Recent patent reform legislation in the United States and other countries, including the Leahy-Smith America Invents Act (“the Leahy-Smith Act”) could increase those uncertainties and costs. The Leahy-Smith Act includes provisions that affect the way patent applications are prosecuted, redefine prior art and provide more efficient and cost-effective avenues for competitors to challenge the validity of patents, and may also affect patent litigation. These include allowing third-party submission of prior art to the USPTO during patent prosecution and additional procedures to attack the validity of a patent by USPTO-administered post-grant proceedings, including post-grant review, inter partes review and derivation proceedings. In addition, assuming that other requirements for patentability are met, prior to March 15, 2013, in the United States, the first to invent the claimed invention was entitled to the patent, while outside the United States, the first to file a patent application was entitled to the patent. After March 15, 2013, under the Leahy-Smith Act, the United States transitioned to a first inventor to file system in which, assuming that the other statutory requirements are met, the first inventor to file a patent application will be entitled to the patent on an invention regardless of whether a third party was the first to invent the claimed invention. The Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business, financial condition, results of operations and prospects.

In addition, the U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. This combination of events has created uncertainty with respect to the validity and enforceability of patents, once obtained. Depending on future actions by the U.S. Congress, the U.S. courts, the USPTO and the relevant law-making bodies in other countries, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future.

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Obtaining and maintaining patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

Periodic maintenance fees, renewal fees, annuity fees and various other government fees on any issued patent or patent application are due to be paid to the USPTO and various government patent agencies outside of the United States in several stages over the lifetime of our owned or licensed patents and applications. The USPTO and various non-U.S. governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse can, in some cases, be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which non-compliance can result in abandonment or lapse of the patent or patent application, resulting in a partial or complete loss of patent rights in the relevant jurisdiction. Non-compliance events that could result in abandonment or lapse of a patent or patent application include failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. If we or our current and future licensors fail to maintain the patents and patent applications covering our product candidates, our patent protection could be reduced or eliminated and our competitors might be better able to enter the market with competing products or technology, which could have a material adverse effect on our business, financial condition, results of operation and prospects.

If we do not obtain patent term extension for any product candidates we may develop, our business may be materially harmed.

Patents have a limited lifespan. Due to the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S. non-provisional filing date. Various extensions may be available, but the life of a patent, and the protection it affords, is limited. Even if patents covering our product candidates are obtained, once the patent life has expired for a product, we may be open to competition from competitive medications, including biosimilar or generic medications. At the time of the expiration of any relevant patents, the underlying technology covered by such patents can be used by any third party, including competitors. Although the patent term extensions under the Drug Price Competition and Patent Term Restoration Action of 1984 (the “Hatch-Waxman Amendments”) in the United States may be available to extend the patent term, we cannot provide any assurances that any such patent term extension will be obtained and, if so, for how long.

Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such product candidates might expire before or shortly after such product candidates are commercialized. Depending upon the timing, duration and specifics of any FDA marketing approval of any product candidates we may develop, one or more of our U.S. patents may be eligible for limited patent term extension under the Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent term extension of up to five years as compensation for patent term lost during the FDA regulatory review process. A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, only one patent may be extended and only those claims covering the approved drug, a method for using it or a method for manufacturing it may be extended. However, we may not be granted an extension because of, for example, failing to exercise due diligence during the testing phase or the regulatory review process, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents or otherwise failing to satisfy applicable requirements. Moreover, the applicable time period or the scope of patent protection afforded could be less than we request. If we are unable to obtain patent term extension or the term of any such extension is less than we request, our competitors may obtain approval of competing products following our patent expiration, and our business, financial condition, results of operations and prospects could be materially harmed.

We may not be able to protect our intellectual property rights throughout the world.

Filing, prosecuting, enforcing and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and our owned or licensed intellectual property rights may not exist in some countries outside the United States or may be less extensive in some countries than in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. For example, in some jurisdictions, including Europe, it is more difficult to obtain patents protecting a medical method of use, and any such patents we are able to obtain in such jurisdictions may issue with narrower scope than their U.S. counterparts. Consequently, we and our current and future licensors may not be able to prevent third parties from practicing our owned or licensed inventions in all countries outside the United States, or from selling or importing products made using our owned or licensed inventions in and into the United States or other jurisdictions. Competitors may use our owned or licensed technologies to develop their own products in jurisdictions where we have not obtained patent protection and, further, may export otherwise infringing products to territories where we and our current and future licensors have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our product candidates, including Lonca or Cami, and our owned and licensed patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protection, particularly those relating to biotechnology, which could make it difficult for us and our current and future licensors to stop the infringement of our owned or licensed patents or marketing of competing products in violation of our owned or licensed
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intellectual property and proprietary rights generally. Proceedings to enforce our owned or licensed intellectual property and proprietary rights in foreign jurisdictions could result in substantial costs and divert our and our current or future licensors’ efforts and attention from other aspects of our business, could put our owned or licensed patents at risk of being invalidated or interpreted narrowly, could put our and our current or future licensors’ patent applications at risk of not issuing, and could provoke third parties to assert claims against us or our current and future licensors. We or our current and future licensors may not prevail in any lawsuits that we or our current and future licensors initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our and our current and future licensors’ efforts to enforce intellectual property and proprietary rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent. If we or our current and future licensors are forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired, and our business, financial condition, results of operations and prospects may be adversely affected.

If we are unable to protect our confidential information and trade secrets, our business and competitive position would be harmed.

In addition to seeking patents for some of our technology and product candidates, we also rely on trade secrets, including unpatented know-how, technology and other proprietary information to maintain our competitive position. Trade secrets can be difficult to protect. We seek to protect these trade secrets, in part, by entering into non-disclosure, confidentiality and invention assignment agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, CROs, contract manufacturers, consultants, advisors and other third parties. We also enter into confidentiality agreements with our employees and consultants. However, there can be no assurance that we have entered into such agreements with each party that may have or have had access to our trade secrets or proprietary technology and processes. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Misappropriation or unauthorized disclosure of our trade secrets could significantly affect our competitive position and may have a material adverse effect on our business.

Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. Some courts both within and outside the United States may be less willing or unwilling to protect trade secrets. Furthermore, trade secret protection does not prevent competitors from independently developing substantially equivalent information and techniques, and we cannot guarantee that our competitors will not independently develop substantially equivalent information and techniques. If a competitor lawfully obtained or independently developed any of our trade secrets, we would have no right to prevent such competitor from using that technology or information to compete with us. Failure on our part to adequately protect our trade secrets or confidential information could have a material adverse effect on our business, results of operations, financial condition and prospects.

If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets and our business may be adversely affected.

Our registered or unregistered trademarks or trade names may be challenged, circumvented, declared generic or determined to be infringing on other marks. There can be no assurance that competitors will not infringe our trademarks, that we will have adequate resources to enforce our trademarks or that any of our current or future trademark applications will be approved. During trademark registration proceedings, we may receive rejections and, although we are given an opportunity to respond, we may be unable to overcome such rejections. In addition, in proceedings before the USPTO and in proceedings before comparable agencies in many foreign jurisdictions, trademarks are examined for registrability against prior pending and registered third-party trademarks, and third parties are given an opportunity to oppose registration of pending trademark applications and/or to seek cancellation of registered trademarks. Applications to register our trademarks may be finally rejected, and opposition or cancellation proceedings may be filed against our trademarks, which may necessitate a change in branding strategy if such rejections and proceedings cannot be overcome or resolved. For example, in some jurisdictions the applicable trademark office has rejected our corporate name for registration, or a third party has objected to a published application for a product trademark, which, in some cases, has caused us to abandon or limit our applications, and/or rely more on the registration for our corporate logo.

Intellectual property rights do not necessarily address all potential threats.

The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations and may not adequately protect our business or permit us to maintain our competitive advantage. For example:

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others may be able to make products that are similar to any product candidates we may develop or utilize similar technology but that are not covered by the claims of the patents that we license or may own in the future;
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we, or our license partners or current or future collaborators, might not have been the first to make the inventions covered by the issued patent or pending patent application that we license or may own in the future;
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we, or our license partners or current or future collaborators, might not have been the first to file patent applications covering certain of our or their inventions;
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others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our owned or licensed intellectual property rights;
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it is possible that our pending licensed patent applications or those that we may own in the future will not lead to issued patents;
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issued patents that we hold rights to may be held invalid or unenforceable, including as a result of legal challenges by our competitors;
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our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets;
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we may not develop additional proprietary technologies that are patentable;
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the patents of others may harm our business; and
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we may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property.
Should any of these events occur, they could have a material adverse effect on our business, results of operations, financial condition and prospects.

Risks Related to Our Business and Industry

If we fail to attract and retain senior management and key scientific personnel or fail to adequately plan for succession, we may be unable to successfully develop our product candidates, conduct our clinical trials and commercialize our product candidates.

Our ability to compete in the highly competitive biotechnology industry depends upon our ability to attract, motivate and retain highly qualified managerial, scientific and medical personnel. We are highly dependent on the performance and expertise of members of our senior management and key scientific personnel, including our co-founder and CEO, Dr. Christopher Martin, who was a co-founder of Spirogen Ltd., the company that developed the PBD technology that we use for all of our ADC product candidates and research programs. The loss of the services of Dr. Martin or any of our other senior management members, other key employees and scientific and medical advisors could impede the achievement of our research, development and commercialization objectives. Dr. Martin and other members of our senior management are employed pursuant to employment agreements with no term and that require advance notice (twelve months for Dr. Martin) for termination, but Dr. Martin and each of these other persons may terminate their employment with us at any time. In addition, laws and regulations on executive compensation, including legislation in our home country, Switzerland, may restrict our ability to attract, motivate and retain the required level of qualified personnel. In Switzerland, legislation affecting public companies has been passed that, among other things, (i) imposes an annual binding shareholders’ “say-on-pay” vote with respect to the compensation of the members of (a) the executive committee and (b) the board of directors, (ii) prohibits severance, advances, transaction premiums and similar payments to executive officers and directors, and (iii) requires companies to specify various compensation-related matters in their articles of association, thus requiring them to be approved by a shareholders’ vote. Moreover, the United Kingdom’s exit from the European Union may result in difficulties in attracting and retaining qualified personnel for our research and development laboratories in London. We do not maintain “key person” insurance for any of our executives or other employees.

In addition, our failure to put in place adequate succession plans for senior and key management roles or the failure of key employees to successfully transition into new roles could have an adverse effect on our business and operating results. The unexpected or abrupt departure of one or more of our key personnel and the failure to effectively transfer knowledge and effect smooth key personnel transitions may have an adverse effect on our business resulting from the loss of such person’s skills, knowledge of our business, and years of industry experience. If we cannot effectively manage leadership transitions and management changes in the future, our reputation and future business prospects could be adversely affected.

Competition for skilled personnel is intense, particularly in the biotechnology industry. We are headquartered in Lausanne, Switzerland, and maintain research and development laboratories in London, clinical development operations in New Jersey and in Lausanne, commercial operations in New Jersey and CMC operations in the San Francisco Bay Area. We face competition for personnel from other companies, universities, public and private research institutions and other organizations. This competition may limit our ability to hire and retain highly qualified personnel on acceptable terms, or at all. We may not be able to attract and retain these personnel on acceptable terms given the competition among numerous biotechnology companies for similar personnel. This possibility is further compounded by the novel nature of our product candidates, as fewer people are trained in or are experienced with product candidates of this type. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy. Our consultants and advisors may be employed or may have commitments under consulting or advisory contracts with other entities that may limit their availability to us.


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We may encounter difficulties in managing our growth and expanding our operations successfully.

As we seek to advance our product candidates through clinical trials and commercialization, we are expanding our development, regulatory, manufacturing, marketing and sales capabilities and may need to further expand or contract with third parties to provide these capabilities. In addition, as our operations expand, we expect that we will need to manage additional relationships with various collaborators, suppliers and other third parties. Our growth will impose significant added responsibilities on members of management. Our management may have to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to these growth activities, including identifying, recruiting, integrating, maintaining and motivating additional employees, managing our research and development efforts effectively, including the clinical trials and the FDA’s, EMA’s or comparable regulatory authority in other jurisdictions’ review process for our product candidates, while complying with our contractual obligations to contractors and other third parties and improving our operational, financial and management controls, reporting systems and procedures.

Our future financial performance and our ability to commercialize our product candidates and to compete effectively will depend, in part, on our ability to manage our growth effectively. To that end, we must be able to effectively manage our research and development efforts and hire, train and integrate additional management, administrative and sales and marketing personnel. We may not be able to accomplish these tasks, and our failure to accomplish any of them could prevent us from successfully growing our company or could disrupt our operations.

In addition, we currently rely, and for the foreseeable future will continue to rely, in substantial part on certain independent organizations, advisors and consultants to provide certain services. There can be no assurance that the services of these independent organizations, advisors and consultants will continue to be available to us on a timely basis when needed or that we can find qualified replacements. Furthermore, if we are unable to effectively manage our outsourced activities or if the quality or accuracy of the services provided by consultants is compromised for any reason, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval of our product candidates or otherwise advance our business. There can be no assurance that we will be able to manage our existing consultants or find other competent outside contractors and consultants on economically reasonable terms, if at all.

If we are not able to effectively expand our organization by hiring new employees and expanding our groups of consultants and contractors, we may not be able to successfully implement the tasks necessary to further develop and commercialize our product candidates and, accordingly, may not achieve our research, development and commercialization goals.

As a result of being a public company, we have incurred costs and expect to continue to incur additional costs, and we may not manage to comply with our internal control procedures and corporate governance structures.

To comply with the requirements imposed on us as a public company, we have incurred, and expect to continue to incur, significant legal, insurance, accounting and other expenses that we did not as a private company. The increased costs may require us to reduce costs in other areas of our business. In addition, our board of directors, management and administrative staff are required to perform additional tasks. For example, we bear all of the internal and external costs of preparing and distributing periodic public reports in compliance with our obligations under the securities laws. We have invested, and intend to continue to invest, resources to comply with evolving laws, regulations and standards, and this investment will result in increased general and administrative expenses and may divert management’s time and attention from research and development activities. These laws, regulations and standards are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters, enforcement proceedings and higher costs necessitated by ongoing revisions to disclosure and governance practices, which could have a material adverse impact on our business, financial condition, results of operations and prospects.

If we do not achieve our projected development and commercialization goals in the timeframes we announce and expect, the commercialization of any of our product candidates may be delayed, and our business will be harmed.

For planning purposes, we sometimes estimate the timing of the accomplishment of various scientific, clinical, regulatory and other product development objectives. These milestones may include our expectations regarding the commencement or completion of scientific studies and clinical trials, the regulatory submissions or commercialization objectives. From time to time, we may publicly announce the expected timing of some of these milestones, such as the completion of an ongoing clinical trial, the initiation of other clinical trials, receipt of regulatory approval or the commercial launch of a product. The achievement of many of these milestones may be outside of our control. All of these milestones are based on a variety of assumptions which may cause the timing of achievement of the milestones to vary considerably from our estimates, including:

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our available capital resources or capital constraints we experience;
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the rate of progress, costs and results of our clinical trials and research and development activities, including the extent of scheduling conflicts with participating clinicians and collaborators;
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our ability to identify and enroll patients who meet clinical trial eligibility criteria;
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our receipt of approvals by the FDA, EMA and comparable regulatory authorities in other jurisdictions, and the timing thereof;
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other actions, decisions or rules issued by regulators;
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our ability to access sufficient, reliable and affordable supplies of materials used in the manufacture of our product candidates;
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our ability to manufacture and supply clinical trial materials to our clinical sites on a timely basis;
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the efforts of our collaborators with respect to the commercialization of our products; and
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the securing of, costs related to, and timing issues associated with, commercial product manufacturing as well as sales and marketing activities.

If we fail to achieve announced milestones in the timeframes we expect, the commercialization of any of our product candidates may be delayed, and our business, results of operations, financial condition and prospects may be adversely affected.

Failure to comply with health and data protection laws and regulations could lead to government enforcement actions, private litigation and/or adverse publicity and could negatively affect our operating results and business.

We receive, generate and store significant and increasing volumes of sensitive information, such as employee and patient data. In addition, we actively seek access to medical information, including patient data, through research and development collaborations or otherwise. We have legal and contractual obligations regarding the protection of confidentiality and appropriate use of personal data. We and any potential collaborators may be subject to federal, state, local and foreign laws and regulations that apply to the collection, use, retention, protection, disclosure, transfer and other processing of personal data. In the United States, numerous federal and state laws and regulations, including federal health information privacy laws, state data breach notification laws, state health information privacy laws, and federal and state consumer protection laws (for example, Section 5 of the Federal Trade Commission Act), that govern the collection, use, disclosure and protection of health-related and other personal information could apply to our operations or the operations of our collaborators. In addition, we may obtain health information from third parties, including research institutions from which we obtain clinical trial data, that are subject to privacy and security requirements under federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH”). Depending on the facts and circumstances, we could be subject to civil, criminal and administrative penalties if we knowingly obtain, use, or disclose individually identifiable health information maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA.

Several foreign jurisdictions, including the European Union, its member states and Australia, among others, have adopted legislation and regulations that increase or change the requirements governing the collection, use, disclosure and transfer of the personal information of individuals in these jurisdictions and place greater control with the data subject. In the United States, the California Consumer Privacy Act (“CCPA”), which went into effect on January 1, 2020, increased the requirements governing the collection, use, disclosure and transfer of the personal information of individuals in the state of California. The CCPA gives California residents expanded rights to access and request deletion of their personal information, opt out of certain sales of personal information and receive detailed information about how their personal information is used by requiring covered companies to provide new disclosures to California residents regarding such use. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. Additionally, a new privacy law, the California Privacy Rights Act (“CPRA”), was approved by California voters in the November 3, 2020 election. The CPRA generally takes effect on January 1, 2023 and significantly modifies the CCPA, including by expanding consumers’ rights with respect to certain personal information and creating a new state agency to oversee implementation and enforcement efforts, potentially resulting in further uncertainty and requiring us to incur additional costs and expenses in an effort to comply. As we expand our operations and research and development efforts, the CCPA may increase our compliance costs and potential liability. Other states are considering similar laws.

These laws and regulations are complex and change frequently, at times due to changes in political climate, and existing laws and regulations are subject to different and conflicting interpretations, which adds to the complexity of processing personal data from these jurisdictions. These laws have the potential to increase costs of compliance, risks of non-compliance and penalties for non-compliance. The Regulation 2016/679, known as the General Data Protection Regulation (“GDPR”), as well as European Union member state implementing legislations, apply to the collection and processing of personal data, including health-related information, by companies located in the European Union, or in certain circumstances, by companies located outside of the European Union and processing personal information of individuals located in the European Union.

These laws impose strict obligations on the ability to process personal data, including health-related information, in particular in relation to their collection, use, disclosure and transfer. These include several requirements relating to (i) obtaining, in some situations, the consent of the individuals to whom the personal data relates, (ii) the information provided to the individuals about how their personal information is used, (iii) ensuring the security and confidentiality of the personal data, (iv) the obligation to notify regulatory authorities and affected individuals of personal data breaches, (v) extensive internal privacy governance obligations, and (vi) obligations to honor rights of individuals in relation to their personal data (for example, the right to access, correct and delete their data). The GDPR prohibits the transfer of personal data to countries outside of the European Economic Area, such as the United States, which are not considered by the European Commission to provide an adequate level of data protection. Switzerland has adopted similar restrictions. Although there are legal mechanisms to allow for the transfer of personal data from the EEA and Switzerland to the United States, they are subject to legal challenges and uncertainty about compliance with European Union data protection laws remains. For example, in July 2020, the Court of Justice of the European Union invalidated the so-called
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Privacy Shield, which provided a framework for data transferred from the European Union to the United States. To the extent that we were to rely on the EU-U.S. Privacy Shield Framework, we will not be able to do so in the future, which could increase our costs and limit our ability to process personal data from the EU. The same decision also cast doubt on the ability to use one of the primary alternatives to the Privacy Shield, namely, the European Commission’s Standard Contractual Clauses, to lawfully transfer personal data from Europe to the United States and most other countries. At present, there are few if any viable alternatives to the Privacy Shield and the Standard Contractual Clauses.

Potential pecuniary fines for noncompliant companies may be up to the greater of €20 million or 4% of annual global revenue. The GDPR has increased our responsibility and liability in relation to personal data that we process, and we may be required to put in place additional mechanisms to ensure compliance with the new European Union data protection rules. The GDPR also contains a private right of action allowing data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies, and obtain compensation for damages resulting from violations of the GDPR.

Compliance with U.S. and international data protection laws and regulations could require us to take on more onerous obligations in our contracts, restrict our ability to collect, use and disclose data, or in some cases, impact our ability to operate in certain jurisdictions. Failure to comply with these laws and regulations could result in government enforcement actions, which could include civil, criminal and administrative penalties, private litigation, and/or adverse publicity and could negatively affect our operating results and business. Moreover, clinical trial subjects, employees and other individuals about whom we or our potential collaborators obtain personal information, as well as the providers who share this information with us, may limit our ability to collect, use and disclose the information. Claims that we have violated individuals’ privacy rights, failed to comply with data protection laws, or breached our contractual obligations, even if we are not found liable, could be expensive and time-consuming to defend and could result in adverse publicity that could harm our business.

Our current and future operations are subject to applicable fraud and abuse, transparency, government price reporting, privacy and security, and other healthcare laws. If we are unable to comply, or do not fully comply, with such laws, we could face substantial penalties.

Healthcare providers, physicians and third-party payors will play a primary role in the recommendation and prescription of any product candidates for which we obtain marketing approval. Our operations, including any arrangements with healthcare providers, physicians, third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws that may affect the business or financial arrangements and relationships through which we would market, sell and distribute our products. The healthcare laws that may affect our ability to operate include, but are not limited to:

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The federal Anti-Kickback Statute, which prohibits any person or entity from, among other things, knowingly and willfully soliciting, receiving, offering or paying any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of an item or service reimbursable, in whole or in part, under a federal healthcare program, such as the Medicare and Medicaid programs. The term “remuneration” has been broadly interpreted to include anything of value. The federal Anti-Kickback Statute has also been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers, and formulary managers on the other hand. There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution, but the exceptions and safe harbors are drawn narrowly and require strict compliance in order to offer protection.
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Federal civil and criminal false claims laws, such as the False Claims Act (“FCA”), which can be enforced by private citizens through civil qui tam actions, and civil monetary penalty laws prohibit individuals or entities from, among other things, knowingly presenting, or causing to be presented, false, fictitious or fraudulent claims for payment of federal funds, and knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent claim to avoid, decrease or conceal an obligation to pay money to the federal government. For example, pharmaceutical companies have been prosecuted under the FCA in connection with their alleged off-label promotion of drugs, purportedly concealing price concessions in the pricing information submitted to the government for government price reporting purposes, and allegedly providing free product to customers with the expectation that the customers would bill federal healthcare programs for the product. In addition, a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the FCA. As a result of a modification made by the Fraud Enforcement and Recovery Act of 2009, a claim includes “any request or demand” for money or property presented to the U.S. government. In addition, manufacturers can be held liable under the FCA even when they do not submit claims directly to government payors if they are deemed to “cause” the submission of false or fraudulent claims.
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HIPAA, which, among other things, imposes criminal liability for executing or attempting to execute a scheme to defraud any healthcare benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, or willfully obstructing a criminal investigation of a healthcare offense, and creates federal criminal laws that prohibit knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement or representation, or making or using any false writing or document knowing the same to contain any materially false, fictitious or fraudulent statement or entry in connection with the delivery of or payment for healthcare benefits, items or services.
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HIPAA, as amended by HITECH, and their implementing regulations, which impose privacy, security and breach reporting obligations with respect to individually identifiable health information upon entities subject to the law, such as health plans, healthcare clearinghouses and certain healthcare providers, known as covered entities, and their respective business associates that perform services for them that involve individually identifiable health information. HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in U.S. federal courts to enforce HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions.
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Federal and state consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers.
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The federal transparency requirements under the Physician Payments Sunshine Act, created under the Health Care Reform Act, which requires, among other things, certain manufacturers of drugs, devices, biologics and medical supplies reimbursed under Medicare, Medicaid, or the Children’s Health Insurance Program to report annually to CMS information related to payments and other transfers of value provided to physicians, as defined by such law, and teaching hospitals and physician ownership and investment interests, including such ownership and investment interests held by a physician’s immediate family members.
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State and foreign laws that are analogous to each of the above federal laws, such as anti-kickback and false claims laws, that may impose similar or more prohibitive restrictions, and may apply to items or services reimbursed by non-governmental third-party payors, including private insurers.
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State and foreign laws that require pharmaceutical companies to implement compliance programs, comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, or to track and report gifts, compensation and other remuneration provided to physicians and other healthcare providers; state laws that require the reporting of marketing expenditures or drug pricing, including information pertaining to and justifying price increases; state and local laws that require the registration of pharmaceutical sales representatives; state laws that prohibit various marketing-related activities, such as the provision of certain kinds of gifts or meals; state laws that require the posting of information relating to clinical trials and their outcomes; and other federal, state and foreign laws that govern the privacy and security of health information or personally identifiable information in certain circumstances, including state health information privacy and data breach notification laws which govern the collection, use, disclosure, and protection of health-related and other personal information, many of which differ from each other in significant ways and often are not pre-empted by HIPAA, thus requiring additional compliance efforts.

We have entered into consulting and scientific advisory board arrangements with physicians and other healthcare providers, including some who could influence the use of our drug candidates, if approved. Because of the complex and far-reaching nature of these laws, regulatory agencies may view these transactions as prohibited arrangements that must be restructured, or discontinued, or for which we could be subject to other significant penalties. We could be adversely affected if regulatory agencies interpret our financial relationships with providers who may influence the ordering and use of our drug candidates, if approved, to be in violation of applicable laws.

Ensuring that our business arrangements with third parties comply with applicable healthcare laws and regulations will likely be costly. It is possible that governmental authorities will conclude that our business practices do not comply with current or future statutes, regulations, agency guidance or case law involving applicable fraud and abuse or other healthcare laws. If our operations are found to be in violation of any of these laws or any other current or future healthcare laws that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, exclusion from government funded healthcare programs, such as Medicare and Medicaid, contractual damages, reputational harm, diminished profits and future earnings, additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, and the curtailment or restructuring of our operations, any of which could substantially disrupt our operations. Although effective compliance programs can mitigate the risk of investigation and prosecution for violations of these laws, these risks cannot be entirely eliminated. Any action against us for an alleged or suspected violation could cause us to incur significant legal expenses and could divert our management’s attention from the operation of our business, even if our defense is successful. In addition, if any of the physicians or other healthcare providers or entities with whom we expect to do business is found not to be in compliance with applicable laws, they may be subject to significant criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.

Our employees, agents, contractors or collaborators may engage in misconduct or other improper activities.

We cannot ensure that our compliance controls, policies and procedures will in every instance protect us from acts committed by our employees, agents, contractors or collaborators that would violate the laws or regulations of the jurisdictions in which we operate, including, without limitation, healthcare, employment, foreign corrupt practices, environmental, competition, and patient privacy and other privacy laws and regulations. Misconduct by these parties could include intentional failures to comply with FDA, EMA or other applicable regulations, provide accurate information to the FDA, EMA and comparable regulatory authorities in other jurisdictions, comply with healthcare fraud and abuse laws and regulations in the United States and abroad, report financial information or data accurately or disclose unauthorized activities to us.

Such misconduct also could involve the improper use of information obtained in the course of clinical trials or interactions with the FDA, EMA or comparable regulatory authorities in other jurisdictions. If we obtain FDA approval of any of our product candidates and begin commercializing those products in the United States, our potential exposure under these laws will increase significantly, and our costs
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associated with compliance with these laws are likely to increase. Such improper actions could subject us to civil or criminal investigations, and monetary and injunctive penalties, and could adversely impact our ability to conduct business, operating results and reputation.

In addition, we are subject to the Foreign Corrupt Practices Act (“FCPA”) and similar anti-bribery or anti-corruption laws, regulations or rules of other countries in which we operate, including the UK Bribery Act. The FCPA generally prohibits offering, promising, giving, or authorizing others to give anything of value, either directly or indirectly, to a non-U.S. government official in order to influence official action, or otherwise obtain or retain business. The FCPA also requires public companies to make and keep books and records that accurately and fairly reflect the transactions of the corporation and to devise and maintain an adequate system of internal accounting controls. Our business is heavily regulated and therefore involves significant interaction with public officials, including officials of non-U.S. governments. Additionally, in many other countries, the healthcare providers who prescribe pharmaceuticals are employed by their government, and the purchasers of pharmaceuticals are government entities; therefore, our dealings with these prescribers and purchasers are subject to regulation under the FCPA. There is no certainty that all of our employees, agents, contractors, or collaborators, or those of our affiliates, will comply with all applicable laws and regulations, particularly given the high level of complexity of these laws. We have provisions in our Code of Business Conduct and Ethics, an anti-corruption policy and certain controls and procedures in place that are designed to mitigate the risk of non-compliance with anti-corruption and anti-bribery laws. However, it is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from government investigations or other actions stemming from a failure to comply with these laws or regulations. Violations of these laws and regulations could result in, among other things, significant administrative, civil and criminal fines and sanctions against us, our officers, or our employees, the closing down of our facilities, exclusion from participation in federal healthcare programs including Medicare and Medicaid, implementation of compliance programs, integrity oversight and reporting obligations, and prohibitions on the conduct of our business. Any such violations could include prohibitions on our ability to offer our products in one or more countries and could materially damage our reputation, our brand, our international expansion efforts, our ability to attract and retain employees, and our business, prospects, operating results and financial condition.

We and our third-party contractors must comply with environmental, health and safety laws and regulations. A failure to comply with these laws and regulations could expose us to significant costs or liabilities.

We and our third-party contractors are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the use, generation, manufacture, distribution, storage, handling, treatment, remediation and disposal of hazardous materials and wastes. Hazardous chemicals, including flammable and biological materials, are involved in certain aspects of our business, and we cannot eliminate the risk of injury or contamination from the use, generation, manufacture, distribution, storage, handling, treatment or disposal of hazardous materials and wastes. In particular, our product candidates use PBDs, which are highly potent cytotoxins that require special handling by our and our contractors’ staff. In the event of contamination or injury, or failure to comply with environmental, health and safety laws and regulations, we could be held liable for any resulting damages, fines and penalties associated with such liability could exceed our assets and resources.

Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of biological or hazardous materials or wastes, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological, hazardous or radioactive materials.

Environmental, health and safety laws and regulations are becoming increasingly more stringent. We may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair our research, development or production efforts. Our failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.

Product liability lawsuits could cause us to incur substantial liabilities and to limit development and/or commercialization of any products that we may develop.

We face an inherent risk of product liability as a result of the clinical testing of our product candidates in human clinical trials and will face an even greater risk if we commercialize any products that we successfully develop. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability and a breach of warranties. In particular, we believe that our highly potent PBD-based ADCs may increase our potential exposure to product liability claims. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our product candidates. Even a successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:

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decreased demand for our product candidates or products that we may develop;
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injury to our reputation and significant negative media attention;
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withdrawal of clinical trial sites and/or study participants;
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significant costs to defend the related litigation;
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a diversion of management’s time and our resources to pursue our business strategy;
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substantial monetary awards to study participants or patients;
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product recalls, withdrawals or labeling, marketing or promotional restrictions;
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loss of revenue;
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the inability to commercialize our product candidates that we may develop; and
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a decline in the price of our common shares.

Failure to obtain and retain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of products we develop. We currently carry product liability insurance covering our clinical trials in an amount that we believe is appropriate for our business. Although we maintain such insurance, any claim that may be brought against us could result in a court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits of our insurance coverage. Our insurance policies also have various exclusions, and we may be subject to a product liability claim for which we have no coverage. In such instance, we may have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts. If we are unable to obtain or maintain sufficient insurance coverage at an acceptable cost or to otherwise protect against potential product liability claims, it could prevent or inhibit the development and commercial production and sale of our product candidates, which could adversely affect our business, financial condition, results of operations and prospects.

If we engage in acquisitions and/or commercial collaborations in the future, we will incur a variety of costs and we may never realize the anticipated benefits of such acquisitions.

We may acquire technologies and assets, form strategic alliances or create joint ventures with third parties that we believe will complement or augment our existing business. Such efforts may never result in a transaction, and any future growth through acquisition or in-licensing will depend upon the availability of suitable products, product candidates, research programs or companies for acquisition or in-licensing on acceptable prices, terms and conditions. Even if appropriate opportunities are available, we may not be able to acquire rights to them on acceptable terms, or at all. The competition to acquire or in-license rights to promising products, product candidates, research programs and companies is fierce, and many of our competitors are large, multinational pharmaceutical and biotechnology companies with considerably more financial, development and commercialization resources and personnel than we have. In order to compete successfully in the current business climate, we may have to pay higher prices for assets than may have been paid historically, which may make it more difficult for us to realize an adequate return on any acquisition.

Even if we are able to successfully identify and acquire or in-license new products, product candidates, research programs or companies, we may not be able to successfully manage the risks associated with integrating any products, product candidates, research programs or companies into our business or the risks arising from anticipated and unanticipated problems in connection with an acquisition or in-licensing. Further, while we seek to mitigate risks and liabilities of potential acquisitions through, among other things, due diligence, there may be risks and liabilities that such due diligence efforts fail to discover, that are not disclosed to us or that we inadequately assess. In any event, we may not be able to realize the anticipated benefits of any acquisition or in-licensing for a variety of reasons, including the possibility that a product candidate fails to advance to clinical development, proves not to be safe or effective in clinical trials, or fails to reach its forecasted commercial potential, or that the integration of a product, product candidate, research program or company gives rise to unforeseen difficulties and expenditures. Any failure in identifying and managing these risks and uncertainties would have a material adverse effect on our business, results of operations, financial condition and prospects.

In addition, acquisitions create other uncertainties and risks, particularly when the acquisition takes the form of a merger or other business consolidation. We may encounter unexpected difficulties, or incur unexpected costs, in connection with transition activities and integration efforts, which include:

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high acquisition costs;
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the need to incur substantial debt or engage in dilutive issuances of equity securities to pay for acquisitions;
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the potential disruption of our historical business and our activities under our collaboration agreements;
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the strain on, and need to expand, our existing operational, technical, financial and administrative infrastructure;
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our lack of experience in late-stage product development and commercialization;
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the difficulties in assimilating employees and corporate cultures;
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the difficulties in hiring qualified personnel and establishing necessary development and/or commercialization capabilities;
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the failure to retain key management and other personnel;
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the challenges in controlling additional costs and expenses in connection with and as a result of the acquisition;
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the need to write down assets or recognize impairment charges;
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the diversion of our management’s attention to integration of operations and corporate and administrative infrastructures; and
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any unanticipated liabilities for activities of or related to the acquired business or its operations, products or product candidates.

If we fail to integrate or otherwise manage an acquired business successfully and in a timely manner, resulting operating inefficiencies could increase our costs more than we planned, could negatively impact the market price of our common shares and could otherwise distract us from execution of our strategy.

Our internal computer systems, or those of our partners, third-party CROs or other contractors or consultants, may fail or suffer security incidents, which could result in a material disruption of our product development programs and significant monetary losses.

Despite the implementation of security measures, our internal computer systems and those of our current or future partners, third-party CROs and other contractors and consultants have been subject to attacks by, and may be vulnerable to damage from, various methods, including cybersecurity attacks, breaches, intentional or accidental mistakes or errors, or other technological failures which can include, among other things, computer viruses, malicious codes, employee theft or misuse, unauthorized copying of our website or its content, unauthorized access attempts including third parties gaining access to systems using stolen or inferred credentials, denial-of-service attacks, phishing attempts, service disruptions, natural disasters, fire, terrorism, war and telecommunication and electrical failures. As the cyber-threat landscape evolves, these attacks are growing in frequency, sophistication and intensity, and are becoming increasingly difficult to detect. Such attacks could include the use of keystroke loggers or other harmful and virulent malware, including ransomware or other denials of service, and can be deployed through malicious websites, the use of social engineering and/or other means. If a failure, accident or security breach were to occur and cause interruptions in our, our partners’ or our CROs’ operations, it could result in a misappropriation of confidential information, including our intellectual property or financial information, a material disruption of our programs and/or significant monetary losses. For example, the loss of clinical trial or CMC data for our product candidates could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. In addition, because of our approach to running multiple clinical trials in parallel, any breach of our computer systems may result in a loss of data or compromised data integrity across many of our programs in many stages of development. Any such breach, loss or compromise of clinical trial participant personal data may also subject us to civil fines and penalties, including under the GDPR and relevant member state law in the European Union or the CCPA, HIPAA and other relevant state and federal privacy laws in the United States. Moreover, because we maintain sensitive company data on our computer networks, including our intellectual property and proprietary business information, any such security breach may compromise information stored on our networks and may result in significant data losses or theft of our intellectual property or proprietary business information. We currently carry cybersecurity liability insurance in an amount that we believe is appropriate for our business. However, our current cybersecurity liability insurance, and any such insurance that we may obtain in the future, may not cover the damages we would sustain based on any breach of our computer security protocols or other cybersecurity attack. To the extent that any disruption or security breach results in a loss of or damage to our data or applications or other data or applications relating to our technology or product candidates, or inappropriate disclosure of confidential or proprietary information, our reputation could be harmed and we could incur significant liabilities and the further development of our product candidates could be disrupted.

Our business is subject to economic, political, regulatory and other risks associated with conducting business internationally.

Because we plan to market our products, if approved, outside of the United States, our business is subject to risks associated with conducting business internationally. In addition, we and a number of our suppliers are located outside the United States. Our future results could be harmed by a variety of factors, including:

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economic weakness, including inflation, or political instability in particular non-U.S. economies and markets;
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global trends involving pharmaceutical pricing;
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differing regulatory requirements for drug approvals in non-U.S. countries;
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differing reimbursement, pricing and insurance regimes;
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potentially reduced protection for, and complexities and difficulties in obtaining, maintaining, protecting and enforcing, intellectual property rights;
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difficulties in compliance with non-U.S. laws and regulations;
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changes in non-U.S. regulations and customs, tariffs and trade barriers;
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changes in non-U.S. currency exchange rates and currency controls;
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changes in a specific country’s or region’s political or economic environment;
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trade protection measures, economic sanctions and embargoes, import or export licensing requirements or other restrictive actions by U.S. or non-U.S. governments;
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negative consequences from changes in tax laws;
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compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;
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workforce uncertainty in countries where labor unrest is more common than in the United States;
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difficulties associated with staffing and managing international operations, including differing labor relations;
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production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad;
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business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters including earthquakes, typhoons, floods and fires; and
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the impact of public health epidemics on employees and the global economy, such as the COVID-19 pandemic.
In addition, the formal change in the relationship between the United Kingdom and the European Union, referred to as “Brexit,” may pose certain implications to our research, commercial and general business operations, including the approval and supply of our product candidates. On December 24, 2020, the United Kingdom and European Union agreed on a new Trade and Cooperation Agreement, and on December 31, 2020, the United Kingdom formally left the transition period. The Trade and Cooperation Agreement is comprehensive, but does not cover all areas of regulation pertinent to the pharmaceutical industry, so certain complexities remain. This finalization of the long-term relationship between the United Kingdom and the European Union will dictate how the European Union will be impacted and may result in an impact on our business operations in Europe. It may be time-consuming and expensive for us to alter our internal operations in order to comply with new regulations as a result of Brexit. Altered regulations could also add time and expense to the process by which our product candidates receive regulatory approval in the United Kingdom and the European Union.

Our business could be adversely affected by the effects of health epidemics, including the COVID-19 pandemic, in regions where we or third parties on which we rely have significant manufacturing facilities, concentrations of clinical trial sites or other business operations.
Our business could be adversely affected by health epidemics. For example, on March 11, 2020, the World Health Organization declared the outbreak of COVID-19 caused by a novel strain of coronavirus as a pandemic. Since then, COVID-19 has continued to spread, impacting the economies of countries around the world. Our operations, similar to those of other life sciences companies, have been impacted by the COVID-19 pandemic. The outbreak has resulted in governments implementing numerous measures to contain the COVID-19 pandemic, which are subject to change, and the respective government authorities may tighten the restrictions at any time.
The outbreak has caused us to modify our business practices including restricting employee travel, developing social distancing plans for our employees and cancelling physical participation in meetings, events and conferences, and we may take further actions as may be required by government authorities or as we determine are in the best interests of our employees and business partners. Such modifications may negatively impact productivity, divert resources away from product development, disrupt our business operations and delay and disrupt our clinical trials and preclinical programs.
In addition, the outbreak and the resulting government actions may adversely impact our planned and ongoing clinical trials. Clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site staff, and patient enrollment may be delayed due to prioritization of hospital resources toward the COVID-19 pandemic. Some patients may not be willing and/or able to comply with clinical trial protocols due to the COVID-19 pandemic, particularly if quarantines impede patient movement or interrupt healthcare services. Similarly, our ability to recruit and retain patients and principal investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19 may be impeded, which would adversely impact our clinical trial operations. The diversion of healthcare resources away from the conduct of clinical trials to focus on pandemic concerns, including the attention of physicians serving as our clinical trial investigators and hospitals serving as our clinical trial sites, diversion of hospitals and medical centers or sites serving as our clinical trial sites and hospital or other staff supporting the conduct of our clinical trials may significantly disrupt our research activities. As a result, the expected timeline for data readouts of our clinical trials and certain regulatory filings may be negatively impacted, which would adversely affect and delay our ability to obtain regulatory approvals for our product candidates, increase our operating expenses and have a material adverse effect on our financial condition. Furthermore, we could face the interruption of key clinical activities such as trial site data monitoring, which may impact the integrity of clinical data. As a result of disruptions caused by the COVID-19 pandemic, we may require additional capital to continue our research activities, which we may be unable to secure on favorable terms, if at all.
The response to the COVID-19 pandemic may redirect resources with respect to regulatory matters and intellectual property matters in a way that would adversely impact our ability to progress regulatory approvals and protect our intellectual property. In addition, we may face impediments to regulatory meetings and approvals due to measures intended to limit in-person interactions. For example, certain regulatory authorities have postponed inspections of manufacturing facilities and products and are conducting only teleconference meetings. If global health concerns continue to prevent regulatory authorities from conducting their regular inspections, reviews or other regulatory activities, it could significantly impact the ability of regulatory authorities to timely review and process our regulatory submissions, including our BLA submission to the FDA for Lonca for the treatment of relapsed or refractory DLBCL, which could have a material adverse effect on our business.
The outbreak and the resulting government actions may also adversely impact the operations of our CROs, CMOs, suppliers and other business partners due to staffing shortages, production slowdowns or stoppages and disruptions in delivery systems. Furthermore, we may experience longer lead times in procuring raw materials or components necessary to perform research and development of and to manufacture our product candidates, and our CMOs may be unable to manufacture product candidates in sufficient quantities that meet our standards.

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While we believe that we have not experienced any material impact of the COVID-19 pandemic on our clinical trial enrollment, timelines or expenses, the ultimate impact of the COVID-19 pandemic is highly uncertain and subject to change. As the COVID-19 pandemic continues to evolve, we believe that the extent of its impact to our operations, operating results, cash flows, liquidity and financial condition will be primarily driven by the severity and duration of the pandemic, the pandemic’s impact on the U.S. and global economies and the timing, scope and effectiveness of national and local governmental responses to the pandemic, especially in areas where the conditions have recently worsened. Those primary drivers are beyond our knowledge and control, and as a result, at this time, the COVID-19 pandemic’s ultimate impact on our results of operations, cash flows and financial position cannot be reasonably predicted. Any prolonged disruption of our clinical trials, suppliers or contract manufacturers, closures of facilities, such as clinical trial sites, would delay regulatory review and the commercialization of our product candidates, if approved. As a result, all anticipated milestones set forth in this Annual Report are subject to further future adjustment based on the impact of the COVID-19 pandemic. There are no comparable recent events that provide guidance as to the likely effect of the COVID-19 pandemic, and, as a result, the ultimate impact of the outbreak is highly uncertain and subject to change. However, the COVID-19 pandemic could have a material adverse effect on our business, results of operations, financial condition and prospects and heighten many of our known risks described in this “Item 3. Key Information—D. Risk Factors” section.

We or the third parties upon whom we depend may be adversely affected by natural disasters, medical epidemics and other natural or man-made accidents or incidents, and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.
Any unplanned event, such as a flood, fire, explosion, earthquake, extreme weather condition, medical epidemic, power shortage, telecommunication failure or other natural or man-made accidents or incidents that result in us being unable to fully use our facilities, or the manufacturing facilities of our third-party contract manufacturers, may have a material and adverse effect on our ability to operate our business, particularly on a daily basis, and have significant negative consequences on our financial and operating conditions. Loss of access to these facilities may result in increased costs, delays in the development of our product candidates or the interruption of our business operations for a substantial period of time.
The disaster recovery and business continuity plans we have in place may prove inadequate in the event of a serious disaster or similar event. As part of our risk management policy, we maintain insurance coverage at levels that we believe are appropriate for our business. However, in the event of an accident or incident at these facilities, there can be no assurance that the amounts of insurance will be sufficient to satisfy any damages and losses. If our facilities, or the manufacturing facilities of our third-party contract manufacturers, are unable to operate because of an accident or incident or for any other reason, even for a short period of time, any or all of our research and development programs and commercialization efforts may be harmed.

Risks Related to Our Common Shares

The market price of our common shares may be volatile and may fluctuate due to factors beyond our control.

The market price of shares of our common shares could be subject to wide fluctuations in response to many risk factors listed in this “Item 3. Key Information—D. Risk Factors” section, and others beyond our control, including:

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results and timing of preclinical studies and clinical trials of our product candidates;
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results of clinical trials of our competitors’ products;
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public concern relating to the commercial value or safety of any of our product candidates;
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our ability to manufacture a sufficient supply of our product candidates to required specifications;
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our inability to adequately protect our proprietary rights, including patents, trademarks and trade secrets;
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our inability to raise additional capital and the terms on which we raise it;
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commencement or termination of any strategic collaboration or licensing arrangement;
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regulatory developments, including actions with respect to our products or our competitors’ products;
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actual or anticipated fluctuations in our financial condition and operating results;
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publication of research reports by securities analysts about us or our competitors or our industry;
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our failure or the failure of our competitors to meet analysts’ projections or guidance that we or our competitors may give to the market;
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additions and departures of key personnel;
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strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy;
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the passage of legislation or other regulatory developments affecting us or our industry, including changes in the structure of healthcare payment systems;
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fluctuations in the valuation of companies perceived by investors to be comparable to us;
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sales of our common shares by us, our insiders or our other shareholders;
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speculation in the press or investment community;
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announcement or expectation of additional financing efforts;
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any default under the Facility Agreement or the timing of any conversion of the convertible notes issued thereunder into common shares;
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changes in market conditions for biopharmaceutical stocks; and
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changes in general market and economic conditions.

In addition, the stock market has historically experienced significant volatility, particularly with respect to pharmaceutical, biotechnology and other life sciences company stocks. The volatility of pharmaceutical, biotechnology and other life sciences company stocks often does not relate to the operating performance of the companies represented by the stock. As we operate in a single industry, we are especially vulnerable to these factors to the extent that they affect our industry or our product candidates, or to a lesser extent, our markets. In the past, securities class action litigation has often been initiated against companies following periods of volatility in their stock price. This risk is especially relevant for biotechnology companies, which have experienced significant stock price volatility in recent years. Securities litigation could result in substantial costs and divert our management’s attention and resources, and could also require us to make substantial payments to satisfy judgments or to settle litigation.

Our operating results may fluctuate significantly or may fall below the expectations of investors or securities analysts, each of which may cause the price of our common shares to fluctuate or decline.

We expect our operating results to be subject to fluctuations by numerous factors, including:

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if any of our product candidates receives regulatory approval, the timing and the terms of such approval and market acceptance and demand for such product candidates;
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variations in the level of expense related to the ongoing development of our product candidates or research pipeline;
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results of clinical trials, or the addition or termination of clinical trials or funding support by us, or existing or future collaborators or licensing partners;
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our execution of any additional collaboration, licensing or similar arrangements, and the timing of payments we may make or receive under existing or future arrangements, or the termination or modification of any such existing or future arrangements;
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developments or disputes concerning patents or other proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our products;
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any intellectual property infringement lawsuit or any opposition, interference, cancellation or other intellectual-property-related proceeding in which we may become involved;
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additions and departures of key personnel;
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strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy;
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fluctuations in the price of our common shares;
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regulatory developments affecting our product candidates or those of our competitors; and
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changes in general market and economic conditions.
If our operating results fall below the expectations of investors or securities analysts, the price of our common shares could decline substantially. Furthermore, any fluctuations in our operating results may, in turn, cause the price of our common shares to fluctuate substantially. We believe that quarterly comparisons of our financial results are not necessarily meaningful and should not be relied upon as an indication of our future performance.

Our directors and executive officers and their affiliates are able to exercise significant influence over us, and their interests may conflict with the interests of other shareholders.

Our directors and executive officers and their affiliates own approximately 34.4% of our common shares. As a result, our directors and executive officers and their affiliates, if acting together, would be able to influence or control matters requiring approval by our shareholders, including the election of directors and the approval of certain types of capital increases, statutory mergers or other extraordinary transactions.

In addition, our articles of association contain a provision stating that if an individual or legal entity acquires common shares and, as a result, directly or indirectly, has voting rights with respect to more than 15% of the registered share capital recorded in the commercial register, the registered shares exceeding the limit of 15% shall be entered in the share register as shares without voting rights. However, shareholders who held more than 15% prior to our initial public offering remain registered with voting rights for such shares. This may, in certain instances, allow our principal shareholders to exercise more influence over us than our other shareholders despite holding the same amount of common shares.

To the extent that the interests of our principal shareholders may differ from the interests of our other shareholders, the latter may be disadvantaged by any action that our principal shareholders may seek to pursue. In addition, the concentration of ownership may have the effect
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of delaying, preventing or deterring a change of control of us, could deprive our shareholders of an opportunity to receive a premium for their common shares as part of a sale of our company and might ultimately affect the market price of our common shares. See “Item 7. Major Shareholders and Related Party Transactions—A. Major Shareholders.”

Future sales, or the possibility of future sales, of a substantial number of our common shares could adversely affect the price of our common shares.

Future sales of a substantial number of our common shares, or the perception that such sales will occur, could cause a decline in the market price of our common shares. We had 76,721,543 common shares outstanding as of December 31, 2020.

In connection with our initial public offering, entities affiliated with Auven Therapeutics GP Ltd. have agreed that they will not transfer, distribute or dispose of any common shares or securities convertible into common shares (other than those common shares or securities convertible into common shares for which such entity holds as nominee on behalf of equity incentive plan participants) to their partners, members, stockholders, beneficiaries or other equity holders and that they will not sell any common shares or securities convertible into common shares (other than those common shares or securities convertible into common shares for which such entity holds as nominee on behalf of equity incentive plan participants) prior to June 30, 2022 without the prior written consent of Morgan Stanley & Co. LLC and BofA Securities, Inc. Morgan Stanley & Co. LLC and BofA Securities, Inc. may waive the requirements of these lock-up agreements at any time in their sole discretion. After the end of such lock-up agreements or if such lock-up agreements are waived, if these shareholders sell substantial amounts of common shares in the public market or if the market perceives that such sales may occur, the market price of our common shares and our ability to raise capital through an issue of equity securities in the future could be adversely affected.

Certain of our shareholders have granted a security interest in at least some of our shares beneficially owned by them to secure certain of their debt instruments, each of which may include default provisions. In the event of a default under any such debt instruments, the secured parties may foreclose upon any and all shares pledged to them, the occurrence of which may result in the sale of substantial amounts of our common shares in the public market, which could adversely affect the market price of our common shares.

If our outstanding senior secured convertible notes convert into common shares, or if we issue additional senior secured convertible notes in the future and such notes convert into common shares, then a substantial amount of our common shares may enter the public market, which could adversely affect the market price of our common shares. Such common shares issued or issuable upon the conversion of our outstanding senior secured convertible notes will be registered under the Securities Act pursuant to the Registration Rights Agreement, in which we granted Deerfield Partners, L.P. and Deerfield Private Design Fund IV, L.P. certain registration rights. See “Item 10. Additional Information—B. Memorandum and Articles of Association.”

In addition, we have registered under the Securities Act all common shares that we may issue under the ADC Therapeutics SA 2019 Equity Incentive Plan (the “2019 Equity Incentive Plan”). These common shares can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates. If a large number of our common shares or securities convertible into our common shares are sold in the public market after they become eligible for sale, the sales could reduce the trading price of our common shares and impede our ability to raise future capital.

Under Swiss law, shareholders may receive certain pre-emptive rights to subscribe on a pro rata basis for issuances of equity or other securities that are convertible into equity. However, due to the laws and regulations in certain jurisdictions, shareholders in certain jurisdictions may not be able to exercise such rights, unless the company registers or otherwise qualifies the rights offering, including by complying with annual report requirements under the laws of that jurisdiction.

There can be no assurance that we will take any action to register or otherwise qualify an offering of subscription rights or shares under the laws of any jurisdiction where the offering of such rights is restricted, other than the United States. If shareholders in such jurisdictions are unable to exercise their subscription rights, their ownership interest will be diluted.

Conversion of the senior secured convertible notes issued or to be issued under the Facility Agreement will dilute existing shareholders’ ownership interest.

On April 24, 2020, we entered into the Facility Agreement with Deerfield. See “Item 5. Operating and Financial Review and Prospects —B. Liquidity and Capital Resources.” The Facility Agreement provides for two separate disbursements of convertible loans, each subject to satisfaction of certain conditions precedent set forth in the Facility Agreement. On May 19, 2020, Deerfield extended the initial disbursement to us in the amount of USD 65.0 million in connection with our initial public offering. The Facility Agreement provides for a subsequent disbursement in the amount of USD 50.0 million, which we will be required to draw down, upon receipt of regulatory approval for Lonca and satisfaction of certain other conditions. Each convertible loan extended under the Facility Agreement is evidenced by a convertible note. If our outstanding senior secured convertible notes convert into common shares, or if we issue additional senior secured convertible notes in the future and such notes convert into common shares, our existing shareholders’ ownership interest will be diluted.

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We have never paid dividends and do not expect to pay any dividends in the foreseeable future.

We have not paid any cash dividends since our incorporation. Even if future operations lead to significant levels of distributable profits, we currently intend to reinvest any earnings in our business and do not anticipate declaring or paying any cash dividends until we have an established revenue stream to support continuing dividends. In addition, any proposal for the payment of future dividends will be at the discretion of our board of directors after taking into account various factors including our business prospects, liquidity requirements, financial performance and new product development. Furthermore, payment of future dividends is subject to certain limitations pursuant to our current and future debt instruments, Swiss law and our articles of association. See “Item 10. Additional Information—B. Memorandum and Articles of Association.” In addition, the Facility Agreement limits our ability to pay dividends. See “—Risks Related to Our Financial Position and Capital Requirements—The Facility Agreement, our indebtedness and the associated restrictive covenants thereunder could adversely affect our financial condition and will restrict our ability to raise capital.” Accordingly, investors cannot rely on dividend income from our common shares, and any returns on an investment in our common shares will likely depend entirely upon any future appreciation in the price of our common shares.

If securities or industry analysts do not continue to publish research, or publish inaccurate or unfavorable research, about our business, the price of our common shares and our trading volume could decline.

The trading market for our common shares depends, in part, on the research and reports that securities or industry analysts publish about us or our business. If one or more of the analysts who cover us downgrade our common shares or publish inaccurate or unfavorable research about our business, the price of our common shares would likely decline. In addition, if our operating results fail to meet the forecast of analysts, the price of our common shares would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our common shares could decrease, which might cause the price of our common shares and trading volume to decline.

The rights of our shareholders may be different from the rights of shareholders in companies governed by the laws of U.S. jurisdictions.

We are a Swiss corporation. Our corporate affairs are governed by our articles of association and by the laws governing companies, including listed companies, incorporated in Switzerland. The rights of our shareholders and the responsibilities of members of our board of directors may be different from the rights and obligations of shareholders and directors of companies governed by the laws of U.S. jurisdictions.

In the performance of its duties, our board of directors is required by Swiss law to consider the interests of our company, our shareholders, our employees and other stakeholders, in all cases with due observation of the principles of reasonableness and fairness. It is possible that some of these parties will have interests that are different from, or in addition to, shareholders’ interests. Swiss law limits the ability of our shareholders to challenge resolutions made or other actions taken by our board of directors in court. Our shareholders generally are not permitted to file a suit to reverse a decision or an action taken by our board of directors, but are instead only permitted to seek damages for breaches of fiduciary duty. As a matter of Swiss law, shareholder claims against a member of our board of directors for breach of fiduciary duty would have to be brought to the competent courts in Epalinges, Canton of Vaud, Switzerland, or where the relevant member of our board of directors is domiciled. In addition, under Swiss law, any claims by our shareholders against us must be brought exclusively to the competent courts in Epalinges, Canton of Vaud, Switzerland. For a further summary of applicable Swiss company law, see “Item 10. Additional Information —B. Memorandum and Articles of Association.” However, there can be no assurance that Swiss law will not change in the future, which could adversely affect the rights of our shareholders, or that Swiss law will protect our shareholders in a similar fashion as under U.S. corporate law principles.

Our shareholders enjoy certain rights that may limit our flexibility to raise capital, issue dividends and otherwise manage ongoing capital needs.

Swiss law reserves for approval by shareholders certain corporate actions over which a board of directors would have authority in some other jurisdictions. For example, the payment of dividends and cancellation of treasury shares must be approved by shareholders. Swiss law also requires that our shareholders themselves resolve to, or authorize our board of directors to, increase our share capital. While our shareholders may authorize share capital that can be issued by our board of directors without additional shareholder approval, Swiss law limits this authorization to 50% of the issued share capital at the time of the authorization. The authorization, furthermore, has a limited duration of up to two years and must be renewed by the shareholders from time to time thereafter in order to be available for raising capital. Additionally, subject to specified exceptions, including exceptions explicitly described in our articles of association, Swiss law grants pre-emptive subscription rights to existing shareholders to subscribe for new issuances of shares. Swiss law also does not provide as much flexibility in the various rights and regulations that can attach to different categories of shares as do the laws of some other jurisdictions. These Swiss law requirements relating to our capital management may limit our flexibility, and situations may arise where greater flexibility would have provided benefits to our shareholders. See “Item 10. Additional Information—B. Memorandum and Articles of Association.”

Our shares are not listed in Switzerland, our home jurisdiction. As a result, our shareholders do not benefit from certain provisions of Swiss law that are designed to protect shareholders in a public takeover offer or a change-of-control transaction.
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Because our common shares are listed exclusively on the New York Stock Exchange (“NYSE”) and not in Switzerland, our shareholders do not benefit from the protection afforded by certain provisions of Swiss law that are designed to protect shareholders in the event of a public takeover offer or a change-of-control transaction. For example, Article 120 of the Swiss Financial Market Infrastructure Act and its implementing provisions require investors to disclose their interest in our company if they reach, exceed or fall below certain ownership thresholds. Similarly, the Swiss takeover regime imposes a duty on any person or group of persons who acquires more than one-third of a company’s voting rights to make a mandatory offer for all of the company’s outstanding listed equity securities. In addition, the Swiss takeover regime imposes certain restrictions and obligations on bidders in a voluntary public takeover offer that are designed to protect shareholders. However, these protections are applicable only to issuers that list their equity securities in Switzerland and, because our common shares are listed exclusively on the NYSE, are not be applicable to us. Furthermore, since Swiss law restricts our ability to implement rights plans or U.S.-style “poison pills,” our ability to resist an unsolicited takeover attempt or to protect minority shareholders in the event of a change of control transaction may be limited. Therefore, our shareholders may not be protected in the same degree in a public takeover offer or a change-of-control transaction as are shareholders in a Swiss company listed in Switzerland.

U.S. shareholders may not be able to obtain judgments or enforce civil liabilities against us or our executive officers or members of our board of directors.

We are organized under the laws of Switzerland and our registered office and domicile is located in Epalinges, Canton of Vaud, Switzerland. Moreover, a number of our directors and executive officers are not residents of the United States, and all or a substantial portion of the assets of such persons are located outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon us or upon such persons or to enforce against them judgments obtained in U.S. courts, including judgments in actions predicated upon the civil liability provisions of the federal securities laws of the United States. We have been advised by our Swiss counsel that there is doubt as to the enforceability in Switzerland of original actions, or in actions for enforcement of judgments of U.S. courts, of civil liabilities to the extent solely predicated upon the federal and state securities laws of the United States. Original actions against persons in Switzerland based solely upon the U.S. federal or state securities laws are governed, among other things, by the principles set forth in the PILA. This statute provides that the application of provisions of non-Swiss law by the courts in Switzerland shall be precluded if the result is incompatible with Swiss public policy. Also, certain mandatory provisions of Swiss law may be applicable regardless of any other law that would otherwise apply.

Switzerland and the United States do not have a treaty providing for reciprocal recognition and enforcement of judgments in civil and commercial matters. The recognition and enforcement of a judgment of the courts of the United States in Switzerland is governed by the principles set forth in the PILA. This statute provides in principle that a judgment rendered by a non-Swiss court may be enforced in Switzerland only if:

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the non-Swiss court had jurisdiction pursuant to the PILA;
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the judgment of such non-Swiss court has become final and non-appealable;
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the judgment does not contravene Swiss public policy;
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the court procedures and the service of documents leading to the judgment were in accordance with the due process of law; and
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no proceeding involving the same parties and the same subject matter was first brought in Switzerland, or adjudicated in Switzerland, or was earlier adjudicated in a third state, and this decision is recognizable in Switzerland.

Anti-takeover provisions in our articles of association could make an acquisition of us, which may be beneficial to our shareholders, more difficult.

Our articles of association contain provisions that may have the effect of discouraging, delaying or preventing a change in control of us that shareholders may consider favorable, including transactions in which our shareholders may receive a premium for their shares. Our articles of association include provisions that:

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in certain cases, allow our board of directors to place up to 26,000,000 common shares and rights to acquire an additional 32,000,000 common shares with affiliates or third parties, without existing shareholders having statutory pre-emptive rights in relation to this share placement;
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allow our board of directors not to record any acquirer of common shares, or several acquirers acting in concert, in our share register as a shareholder with voting rights with respect to more than 15% of our share capital as set forth in the commercial register;
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limit the size of our board of directors to 11 members; and
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require two-thirds of the votes represented at a shareholder meeting for amending or repealing the above-mentioned voting and recording restrictions, for amending the provision setting a maximum board size or providing for indemnification of our directors and members of our executive committee and for removing the chairman or any member of the board of directors before the end of his or her term of office.

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These and other provisions, alone or together, could delay or prevent takeovers and changes in control. See “Item 10. Additional Information—B. Memorandum and Articles of Association.” These provisions could also limit the price that investors might be willing to pay in the future for our common shares, thereby depressing the market price of our common shares.

We are a foreign private issuer, and, as a result, we are not subject to certain rules and obligations that are applicable to a U.S. domestic public company and are not subject to certain NYSE corporate governance listing standards that are applicable to a NYSE-listed U.S. domestic public company.

We report under the Exchange Act as a non-U.S. company with foreign private issuer status. Because we qualify as a foreign private issuer under the Exchange Act and although we furnish quarterly financial information to the SEC, we are exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including (i) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; (ii) the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities, and liability for insiders who profit from trades made in a short period of time; and (iii) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K upon the occurrence of specified significant events. In addition, foreign private issuers are not required to file their annual report on Form 20-F until four months after the end of each financial year, while U.S. domestic issuers are required to file their annual report on Form 10-K in less time. Foreign private issuers are also exempt from the Regulation Fair Disclosure, aimed at preventing issuers from making selective disclosures of material information.

Furthermore, because we are a foreign private issuer, we have elected to comply with our home country governance requirements and certain exemptions thereunder, rather than complying with certain of the NYSE corporate governance listing standards that are applicable to U.S. companies listed on the NYSE. For example, we are exempt from NYSE listing standards that require a listed U.S. company to have (i) a majority of the board of directors consist of independent directors, (ii) regularly scheduled executive sessions with only independent directors and (iii) a compensation committee and a nomination and corporate governance committee consist entirely of independent directors. Our audit committee is required to comply with the provisions of Section 301 of the Sarbanes-Oxley Act and Rule 10A-3 of the Exchange Act, both of which are also applicable to NYSE-listed U.S. companies. Because we are a foreign private issuer, however, our audit committee is not subject to additional NYSE listing standards applicable to NYSE-listed U.S. companies, including an affirmative determination that all members of the audit committee are “independent.” Furthermore, NYSE listing standards generally require NYSE-listed U.S. companies to, among other things, seek shareholder approval for the implementation of certain equity compensation plans and issuances of securities, which we are not required to follow as a foreign private issuer. Accordingly, our shareholders may not have the same protections afforded to shareholders of companies that are not foreign private issuers. For an overview of our corporate governance principles, see “Item 10. Additional Information—B. Memorandum and Articles of Association” and “Item 16G. Corporate Governance.”

We may lose our foreign private issuer status, which would then require us to comply with the Exchange Act’s domestic reporting regime and cause us to incur significant legal, accounting and other expenses.

We qualify as a foreign private issuer and therefore we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act applicable to U.S. domestic issuers. We may no longer be a foreign private issuer as of June 30, 2021, which would require us to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act applicable to U.S. domestic issuers, as of January 1, 2022. In order to maintain our current status as a foreign private issuer, either (a) a majority of our common shares must be either directly or indirectly owned of record by nonresidents of the United States or (b)(i) a majority of our executive officers or directors may not be United States citizens or residents, (ii) more than 50% of our assets cannot be located in the United States and (iii) our business must be administered principally outside the United States. If we lose this status, we would be required to comply with the Exchange Act reporting and other requirements applicable to U.S. domestic issuers, which are more detailed and extensive than the requirements for foreign private issuers. We may also be required to make changes in our corporate governance practices in accordance with various SEC and stock exchange rules. The regulatory and compliance costs to us under U.S. securities laws if we are required to comply with the reporting requirements applicable to a U.S. domestic issuer may be significantly higher than the cost we would incur as a foreign private issuer. As a result, we expect that a loss of foreign private issuer status would increase our legal and financial compliance costs and would make some activities highly time-consuming and costly. We also expect that if we were required to comply with the rules and regulations applicable to U.S. domestic issuers, it would be more difficult and expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These rules and regulations could also make it more difficult for us to attract and retain qualified members of our board of directors.

We are an emerging growth company, and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies make our common shares less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, (i) not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, (ii) reduced disclosure obligations regarding executive compensation in this Annual Report and our periodic reports and proxy statements and (iii) exemptions from the requirements of holding a nonbinding advisory vote on executive compensation.
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We could be an emerging growth company for up to five years from our initial public offering, although circumstances could cause us to lose that status earlier, including if the market value of our common shares held by non-affiliates exceeds USD 700 million as of any June 30 (the end of our second fiscal quarter) before that time or if we have total annual gross revenues of USD 1.07 billion or more during any fiscal year before that time, in which cases we would no longer be an emerging growth company as of the following December 31 (our fiscal year end) or, if we issue more than USD 1.0 billion in non-convertible debt during any three-year period before that time, we would cease to be an emerging growth company immediately. Even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company,” which would allow us to take advantage of many of the same exemptions from disclosure requirements, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We cannot predict if investors will find our common shares less attractive because we may rely on these exemptions. If some investors find our common shares less attractive as a result, there may be a less active trading market for our common shares and the price of our common shares may be more volatile. When these exemptions cease to apply, we expect to incur additional expenses and devote increased management effort towards ensuring compliance with them, and we cannot predict or estimate the amount or timing of such additional costs.

If we fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business and the price of our common shares.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, a company’s principal executive and principal financial officers, or persons performing similar functions, and effected by a company’s board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with IFRS. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.
In June 2019, we identified an error related to the calculation of the expense charge for our historical share purchase plans, which, in accordance with IFRS 2, were required to be accounted for as if they were share option plans. There was a material understatement of the share-based compensation expense and the related disclosures were incomplete. This resulted in a restatement of the financial statements for the year ended December 31, 2018.
During the first and second quarters of 2020, we identified errors related to the work performed by the independent valuation firm assisting us in calculating the fair value of the share-based compensation award grants per participant and our use thereof. Specifically, we identified deficiencies in (i) our procedures for giving instructions to the independent valuation firm, (ii) our review of the work product delivered by such firm and (iii) our use of the information delivered by such firm. This resulted in adjustments to both our consolidated financial statements for the year ended December 31, 2019 and unaudited condensed consolidated interim financial statements for the three- and six-month periods ended June 30, 2020. These errors were evidence that we had material weaknesses in our internal financial controls related to the accounting for share-based compensation.
As of December 31, 2020, we believe that the material weaknesses related to accounting for share-based compensation expense have been remediated. To remediate these material weaknesses, we completed the documentation and implementation of the following actions in relation to these controls:
• Hired experienced persons with substantive backgrounds in accounting and reporting for a public company;
•Enhanced the level of review for the reconciliation of outstanding share-based equity awards as of period end, including the activity (e.g., grants and forfeitures) as well as the number of shares available for future issuance;
•Enhanced the review and approval process for the underlying data provided to and utilized by the independent valuation firm assisting in determining the estimated fair value of share-based equity awards and compensation expense as well as management’s use of the output provided by the independent valuation firm including the assumptions developed, grant-date fair value of equity awards, and the report issued in our accounting of share-based compensation expense;
•Enhanced the level of review to ensure compliance with disclosure obligations with respect to the 2019 Equity Incentive Plan; and
•Implemented a third-party equity award administration platform that includes financial accounting and reporting capabilities, including independent calculation of share-based compensation expense.
We believe that we have effectively designed and tested the operating effectiveness of the review and approval process for the underlying data provided to us and utilized in determining the estimated fair value of our share-based equity awards and compensation expense, including our review of our share-based equity award disclosures. Accordingly, we have concluded that the material weaknesses have been remediated because each component with regard to which management identified a material weakness has been operating effectively for a sufficient period of time. However, there can be no assurance that we will not identify material weaknesses in the future.
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In addition, neither our management nor an independent registered public accounting firm has performed an evaluation of our internal control over financial reporting in accordance with the provisions of the Sarbanes-Oxley Act. Had we or our independent registered public accounting firm performed an evaluation of our internal control over financial reporting in accordance with the provisions of the Sarbanes-Oxley Act, material weaknesses may have been identified.
ITEM 4.    INFORMATION ON THE COMPANY
A.History and Development of the Company
ADC Therapeutics SA is a Swiss stock corporation (société anonyme) organized under the laws of Switzerland. We were incorporated as a Swiss limited liability company (société à responsabilité limitée) on June 6, 2011 with our registered office and domicile in Epalinges, Canton of Vaud, Switzerland. We converted to a Swiss stock corporation under the laws of Switzerland on October 13, 2015. In May 2020, we completed our initial public offering on the NYSE under the ticker symbol “ADCT”.
Our registered office is located at Biopôle, Route de la Corniche 3B, 1066 Epalinges, Switzerland and our phone number is +41 21 653 02 00. We are headquartered in Lausanne, Switzerland, and maintain research and development laboratories in London, clinical development operations in New Jersey and in Lausanne, commercial operations in New Jersey and CMC operations in the San Francisco Bay Area. Our website is www.adctherapeutics.com. Information contained on or accessible through our website is not part of, and is not incorporated by reference into this Annual Report.
Our principal expenditures since January 1, 2018 have been our research and development expenses, as more fully described elsewhere in this Annual Report.
B.Business Overview
We are a late clinical-stage oncology-focused biotechnology company evolving into a commercial-stage company as we prepare for the launch of our lead product candidate, if approved. We are a pioneer in the development of highly potent and targeted ADCs for patients suffering from hematological malignancies and solid tumors. We develop our ADCs by applying our decades of experience in this field and using next-generation PBD technology to which we have proprietary rights for our targets. We are leveraging our R&D strengths, our disciplined approach to target selection and our preclinical and clinical development strategy to generate a diverse and balanced portfolio and research pipeline. Our hematology franchise comprises three clinical-stage product candidates, Lonca, Cami and ADCT-602. Our solid tumor franchise comprises two clinical-stage product candidates, Cami and ADCT-601, and two preclinical product candidates, ADCT-901 and ADCT-701. Our commercial organization has initiated pre-launch market activities and is leveraging our team’s deep industry experience to maximize the commercial potential of any approved products.

Our two lead product candidates, Lonca and Cami, have demonstrated significant clinical activity across a broad population of heavily pre-treated patients, while maintaining tolerability profiles that we believe are manageable. We have evaluated Lonca in a 145-patient pivotal Phase 2 clinical trial for the treatment of relapsed or refractory DLBCL that showed a 48.3% ORR and a 24.8% CRR as of August 6, 2020. On November 20, 2020, the FDA accepted our BLA submission for Lonca for the treatment of relapsed or refractory DLBCL and granted priority review status with a PDUFA target date of May 21, 2021. In addition, we commenced a confirmatory Phase 3 clinical trial of Lonca in combination with rituximab that, if successful, may serve as the basis for a sBLA for Lonca for the treatment of relapsed or refractory DLBCL in second-line, transplant-ineligible patients. We are also conducting a Phase 1/2 clinical trial of Lonca in combination with ibrutinib for the treatment of relapsed or refractory DLBCL and MCL that showed a 66.7% ORR and a 37.5% CRR as of August 20, 2020 in non-germinal center B-cell (“non-GCB”) DLBCL patients at the dose being used in the pivotal Phase 2 portion of the clinical trial. In July 2020, we dosed the first patient in the pivotal Phase 2 portion of this clinical trial. We also plan to commence a pivotal Phase 2 clinical trial of Lonca for the treatment of relapsed or refractory FL in the first half of 2021. This clinical trial will be a 150-patient randomized trial of Lonca used as a monotherapy compared to idelalisib for the treatment of relapsed or refractory FL.

We are evaluating Cami in a 117-patient pivotal Phase 2 clinical trial for the treatment of relapsed or refractory HL, for which we completed enrollment in January 2021. Preliminary efficacy data as of August 24, 2020 in 47 patients showed an 83.0% ORR and a 38.3% CRR. We anticipate reporting interim results from this clinical trial in the first half of 2021, and we believe that this clinical trial, if successful, will support a BLA submission. We have completed a 133-patient Phase 1 clinical trial of Cami for the treatment of relapsed or refractory HL and NHL that showed an 86.5% ORR and a 48.6% CRR in 37 patients with HL at the initial dose for our pivotal Phase 2 clinical trial and a 44.0% ORR and an 8.0% CRR in a subset of patients with T-cell lymphoma. We are also evaluating Cami in a Phase 1b clinical trial as a novel immuno-oncology approach for the treatment of various advanced solid tumors. This clinical trial evaluates Cami in combination with pembrolizumab, a checkpoint inhibitor, to better understand its potential as both a monotherapy and in combination. In October 2020, we dosed the first patient in the combination portion of this trial.
Antibody drug conjugates are an established therapeutic approach in oncology. Currently, there are nine approved ADCs, five of which were approved by the FDA in the past two years. ADCs selectively deliver potent chemotherapeutic cytotoxins directly to tumor cells, with the goal of maximizing activity in tumor cells while minimizing toxicity to healthy cells. The antibody component is designed to selectively bind to
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a distinct antigen preferentially expressed on tumor cells or other cells in the tumor microenvironment. Upon binding to the antigen, most ADCs are internalized by the cell where the cytotoxic warhead is released, causing cell death.
PBD warheads have a different mechanism of action from other warheads because they create cross-links in the cancer cells’ DNA that do not distort the DNA helix, potentially evading the cells’ natural DNA repair mechanisms. They have been shown preclinically to be approximately 100 times more potent than warheads used in currently marketed ADCs. Our ADCs use next-generation PBD technology, which is designed to produce warheads that are less hydrophobic, causing them to be easier to conjugate and, based on preclinical data, have less off-target toxicity than first-generation PBD warheads. Preclinical studies have further shown that our next-generation PBD warheads have improved therapeutic indices compared to first-generation PBDs. We believe that this mechanism of action has the potential to allow our ADCs to achieve significant clinical activity and durable responses in difficult-to-treat patients.
We were founded in 2011 as a spinoff from Spirogen Ltd. (“Spirogen”), which was founded in 2000 and was an early innovator in PBD-based ADC research. Our co-founder and CEO, Dr. Christopher Martin, was a founder and the CEO of Spirogen until its sale to AstraZeneca plc in 2013. We leverage Dr. Martin’s decades-long experience in the development and evolution of PBD-based ADC research. Our senior management team also brings extensive experience in oncology research and development, clinical development, chemistry, manufacturing and controls (“CMC”), medical affairs, commercialization and regulatory and compliance, having held senior positions in such companies as Ariad Pharmaceuticals, Inc., AstraZeneca plc, Bristol-Myers Squibb Company, Celgene Corporation, Daiichi Sankyo Company, Genentech, Inc., Genmab, ImmunoGen, Inc., MorphoSys AG and Wyeth Pharmaceuticals, Inc. Our board of directors includes former senior executives of Array BioPharma Inc., AstraZeneca plc, GlaxoSmithKline plc, Pfizer Inc., F. Hoffmann-La Roche AG and Serono S.A.
Our Pipeline
Our research and development operations have generated a diverse and balanced portfolio. Our hematology franchise comprises three clinical-stage product candidates, Lonca, Cami and ADCT-602. Our solid tumor franchise comprises two clinical-stage product candidates, Cami and ADCT-601, and two preclinical product candidates, ADCT-901 and ADCT-701. The figure below summarizes key information about our product candidates:

ADC-20201231_G1.JPG

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Anticipated milestones set forth in this chart and in this Annual Report are subject to further future adjustment based on, among other factors, the impact of the COVID-19 pandemic. *We believe that our Phase 1/2 clinical trial of Lonca in combination with ibrutinib for the treatment of relapsed or refractory DLBCL and MCL, our Phase 2 clinical trial of Lonca for the treatment of relapsed or refractory FL and our Phase 2 clinical trial of Cami for the treatment of relapsed or refractory HL are pivotal clinical trials (i.e., a clinical trial intended to serve as the basis for BLA submission). Therefore, we believe that subsequent Phase 3 clinical trials will be confirmatory clinical trials. **We licensed to Overland ADCT BioPharma the exclusive development and commercialization rights to Lonca, ADCT-602, ADCT-601 and ADCT-901 in greater China and Singapore. See “Item 4. Information on the Company—B. Business Overview—License and Collaboration Agreements.”
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In addition, our preclinical research pipeline consists of research programs focused on five ADC targets (one hematological and four solid tumor targets) and ten XDC targets (four hematological and six solid tumor targets), with the goal of selecting clinical candidates for further development. We refer to those targets for which we are exploring the use of non-antibody protein scaffolds and peptides to deliver potent PBD cytotoxins to tumor cells as “XDC targets.”
Strengths
•We are a pioneer in developing highly potent and targeted PBD-based ADCs. We believe that our team, with decades of experience in this field, is well positioned to develop and commercialize PBD-based ADCs for the benefit of patients with cancer.
•Our two lead product candidates, Lonca and Cami, have consistently demonstrated robust single-agent clinical activity across a broad population of heavily pre-treated patients, while maintaining tolerability profiles that we believe are manageable. The FDA has accepted our BLA for Lonca for the treatment of relapsed or refractory DLBCL. We are also advancing the clinical development of Cami to support BLA submission.
•We are advancing a broad pipeline of four clinical-stage product candidates and two preclinical product candidates addressing multiple areas of unmet medical need across hematological malignancies and solid tumors, leveraging our R&D strengths, our disciplined approach to target selection and our preclinical and clinical development strategy.
•We have entered into strategic agreements to maximize the commercial potential of our pipeline, including a collaboration and license agreement with Genmab for Cami and a joint venture with Overland Pharmaceuticals to develop and commercialize Lonca, ADCT-602, ADCT-601 and ADCT-901 in greater China and Singapore. Our commercial organization has initiated pre-launch market activities and is leveraging our team’s deep industry experience to maximize the commercial potential of any approved products.
•Our experienced CMC team is highly proficient in the manufacturing of PBD-based ADCs and has developed a validated commercial supply chain that has been able to consistently produce Lonca at commercial scale.
Strategy
Our near-term goal is to leverage our expertise in next-generation PBD technology to develop and deliver innovative therapies to patients suffering from severe diseases who lack adequate treatment options, with a focus on oncology and immuno-oncology. Our long-term vision is to broaden the use of our ADCs to an extensive range of hematological and solid tumor indications, while also advancing any approved products through the treatment paradigm to become standard-of-care treatments in earlier lines of therapy. Key elements of our strategy to achieve our near-term goal and long-term vision include:
•Continue to prepare for the near-term commercial launch of Lonca, if approved. On November 20, 2020, the FDA accepted our BLA submission for Lonca for the treatment of relapsed or refractory DLBCL and granted priority review status with a PDUFA target date of May 21, 2021. If we receive FDA approval, we intend to commence the commercial launch of Lonca in 2021 in the United States. To prepare for commercial launch, we have successfully recruited an experienced Chief Commercial Officer and senior commercial leadership team. We have prepared for the commercial launch of Lonca by further enhancing our commercial team and commercial capabilities. We have hired a highly- talented and efficient U.S. customer-facing organization of more than 70 cross-functional employees, including the buildout of a Medical Affairs function as well as a fully staffed sales force. We believe that we have the potential to cover more than 90% of the DLBCL opportunity.
•Expand the potential market opportunity by advancing Lonca into earlier lines of therapy and for multiple indications. Based on the significant single-agent clinical activity and promising combination data with ibrutinib observed in clinical trials to date, we believe that Lonca has the opportunity to advance into earlier lines of therapy in combination with other therapies, including into first-line therapy. In September 2020, we commenced a confirmatory clinical trial of Lonca in combination with rituximab, which, if successful, we believe will support an sBLA for Lonca to be used as a second-line therapy for the treatment of relapsed or refractory DLBCL in transplant-ineligible patients. In addition, to further expand Lonca’s potential market opportunity, we are conducting a Phase 1/2 clinical trial of Lonca in combination with ibrutinib for the treatment of relapsed or refractory DLBCL and MCL and intend to commence a pivotal Phase 2 clinical trial of Lonca for the treatment of relapsed or refractory FL in the first half of 2021.
•Advance our second lead product candidate, Cami, to support BLA submission. Based on promising results from our 133-patient Phase 1 clinical trial, we are currently evaluating Cami in a pivotal Phase 2 clinical trial for the treatment of relapsed or refractory HL that, if successful, we believe will form the basis for a BLA submission. In January 2020, we completed enrollment for this clinical trial with 117 patients. As of August 24, 2020, Cami has shown an 83.0% ORR and a 38.3% CRR in this clinical trial in patients who have received a median of seven prior lines of therapy. These preliminary data from the Phase 2 clinical trial are similar to those observed in the Phase 1 clinical trial.
•Continue to advance Cami into solid tumors based on preliminary pharmacokinetic and biomarker data. The preliminary pharmacokinetic and biomarker data from the Phase 1b clinical trial of Cami for the treatment of selected advanced solid tumors were
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presented at the European Society for Medical Oncology (ESMO) Virtual Congress 2020, and data from a preclinical study were recently published in the Journal for ImmunoTherapy of Cancer. These data support the continued evaluation of Cami in combination with other immune-modulating therapies. We are currently enrolling a Phase 1b dose escalation trial of Cami in combination with pembrolizumab in multiple solid tumors.
•Advance our other clinical-stage solid tumor product candidate as well as our other clinical and preclinical programs, to address multiple indications in areas of high unmet medical need. We are evaluating ADCT-601, which targets AXL-expressing solid tumors, for the treatment of various advanced solid tumors and intend to initiate a Phase 1b combination clinical trial. In addition, enrollment continues in a Phase 1 clinical trial evaluating ADCT-602 in ALL patients and we intend to submit an IND application for ADCT-901 in the first half of 2021.
•Continue to develop a balanced product portfolio of novel clinical candidates to address high unmet medical needs of patients with solid tumors and hematological malignancies by leveraging our R&D strengths and technology platform, along with our disciplined approach to target selection and preclinical and clinical development strategy. We have numerous programs in research and clinical candidate selection stage against clinically validated and novel cancer targets that will allow us to expand our clinical development pipeline.

•Maximize the commercial potential of our product candidates through both our own commercial organization and strategic collaborations and licensing opportunities in select markets. We intend to commercialize Lonca in the United States through our own infrastructure and may selectively pursue strategic collaborations and licensing opportunities in other geographies. We have an experienced team with substantial expertise in the commercialization of oncology products to support our commercialization efforts for Lonca, if approved, which will also serve as the foundation of our U.S. commercialization efforts for our other product candidates in our hematology franchise. We have also entered into strategic agreements to maximize the commercial potential of our pipeline, including a collaboration and license agreement with Genmab for Cami and a joint venture with Overland Pharmaceuticals for Lonca, ADCT-602, ADCT-601 and ADCT-901 in greater China and Singapore.
Overview of Antibody Drug Conjugates
Cancer is a broad group of diseases in which cells divide and grow in an uncontrolled fashion and which are usually classified as either hematological malignancies or solid tumors. In 2020, there were an estimated 19.3 million new cases of cancer and 10.0 million cancer-related deaths. Global spending on cancer treatment reached nearly USD 150 billion in 2018 and is expected to exceed USD 240 billion by 2023, driven by an aging population and the development of improved treatment options. According to the National Cancer Institute, in the United States, most newly launched cancer treatments were priced at more than USD 100,000 per patient for one year of treatment.
The most common cancer treatments typically include a combination of surgery, radiation therapy and chemotherapy. In addition, several novel targeted therapies have also been approved. Each of these treatments have certain benefits but also certain limitations and may not be suitable for all patients. ADCs can complement other forms of treatment and are an important part of the cancer treatment paradigm.
Antibody drug conjugates are an established therapeutic approach in oncology. Currently, there are nine approved ADCs, five of which were approved by the FDA in the past two years. ADCs selectively deliver potent chemotherapeutic cytotoxins directly to tumor cells, with the goal of maximizing activity in tumor cells while minimizing toxicity to healthy cells. An ADC consists of three components: (i) a monoclonal antibody that selectively targets a distinct antigen preferentially expressed on tumor cells or other cells in the tumor microenvironment; (ii) a cytotoxic molecule, often referred to as the toxin or the warhead, that kills the target cell; and (iii) a chemical linker that joins together the antibody and the warhead. The warhead and the linker are together referred to as the payload. The figure below shows the three components of an ADC.
ADC-20201231_G2.JPG
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Schematic representation of an ADC, showing its three components.
Because the antibody is designed to selectively target a distinct antigen preferentially expressed on tumor cells or other cells in the tumor microenvironment, an ADC will bind preferentially to those cells that express the specific antigen. Upon binding to the antigen, most ADC molecules are internalized by the cell where the cytotoxic warhead is released through either cleavage of the linker or degradation of the entire antibody by cellular processes. Once a sufficient number of cytotoxic molecules have been released intracellularly, apoptosis occurs when the cell next attempts to replicate.
Components of Antibody Drug Conjugates
Monoclonal Antibodies
The first component of an ADC is the monoclonal antibody, which is a highly specific targeting agent that selectively binds to a distinct antigen preferentially expressed on tumor cells or other cells in the tumor microenvironment. Since ADCs are designed to selectively target an antigen that is expressed in the tumor microenvironment, ADCs have less effect on cells that do not express the target antigen. Due to this specificity, the cytotoxins used in ADCs can be much more potent than those used in traditional chemotherapies, allowing normally systemically intolerable doses of cytotoxins to be directed at tumors.
In an ADC, two significant factors are considered in the selection of the antigen to which the antibody is targeted: (i) the preferential expression on tumor cells or other cells in the tumor microenvironment; and (ii) the level of antigen expression on these cells. As a result, it is generally recognized that high and consistent (i.e., homogeneous) antigen expression throughout the tumor microenvironment correlates with higher efficacy of the ADC. By contrast, the ability to achieve a therapeutic concentration of cytotoxins in the target cell diminishes as the level of antigen expression decreases.
Chemotherapeutic Warheads
The second component of an ADC is the cytotoxic warhead, or the cell-killing toxin. Cytotoxins commonly used in ADCs include tubulin inhibitors, such as maytansines and auristatins, and DNA-damaging toxins, such as calicheamicin. Because a warhead is conjugated to an antibody that selectively targets the tumor microenvironment, ADCs can use cytotoxins at levels that are normally too potent to be used as a stand-alone therapy. Once an ADC is internalized by the target cell, the warhead is released and ultimately causes cell death via a warhead-specific mechanism. Some warheads have the additional ability to diffuse into and kill neighboring cells in the tumor microenvironment. This bystander effect can be useful in enhancing the efficacy of ADCs in tumors with heterogeneous antigen expression by providing a mechanism to kill neighboring tumor cells that do not express the target antigen.
Chemical Linkers
The third component of an ADC is the chemical linker used to attach the warhead to the antibody. The chemical linker directly affects the efficacy, safety and tolerability of an ADC. Before an ADC is internalized by the target cell, it is critical that the chemical linker provides a stable connection between the warhead and the antibody in systemic circulation, as premature release of the warhead can cause significant off-target toxicity. After an ADC is internalized by the target cell, it is critical that the warhead is released from the antibody to promote rapid and efficient cell killing.
Linkers used in ADCs fall into two categories: cleavable and non-cleavable. Cleavable linkers release the warhead intracellularly after proteolytic cleavage of the linker by intracellular enzymes such as cathepsin or after weakening of the linker by the intracellular environment. In contrast, non-cleavable linkers are resistant to this type of cleavage and instead rely on the degradation of the entire antibody. As a result, the released payload in ADCs that use non-cleavable linkers remains attached to a fragment of the antibody, which limits the warhead’s permeability to adjacent cells, reducing the bystander effect and potentially the ADC’s efficacy in tumors with heterogeneous target antigen expression.
Key Strengths and Attributes of Antibody Drug Conjugates
Antibody drug conjugates are an important part of the cancer treatment paradigm for the following reasons:
•Selective Targeting. Traditional chemotherapies are unable to distinguish between healthy cells and tumor cells. As a result, these therapies typically have a narrow therapeutic window (i.e., the dose range that can treat disease effectively without causing unacceptable toxic side effects). In contrast, ADCs, through their use of antigen-specific antibodies, target tumor cells or other cells in the tumor microenvironment with greater selectivity than do traditional chemotherapies. This selective targeting allows ADCs to use potent cytotoxins at dose levels that otherwise would not be tolerable. As a result, ADCs can represent a highly effective treatment approach while maintaining manageable side effects.
•Wide Addressable Patient Population. ADCs represent a treatment approach that expands the treatment options available to cancer patients. Many therapies are not appropriate for certain patient populations. For example, surgery is not used when the cancer is
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widespread, chemotherapy may not be appropriate when the patient is too sick to tolerate or does not respond to available chemotherapeutics, stem cell transplant may not be appropriate when the patient is frail, and some novel targeted therapies such as CAR-T (i.e., a type of treatment in which a patient’s T cells are modified in the laboratory so they will attack cancer cells) may not be appropriate when there is significant comorbidity. As a result of these limitations, there remains a significant unmet medical need for patients for whom other treatment options are inappropriate or ineffective.
•Potential in Relapsed or Refractory Patients. Traditional therapies typically have limited effectiveness for patients who exhibit relapsed (i.e., the cancer returns after an initial positive response to treatment) or refractory (i.e., the cancer is resistant to treatment) cancers. In contrast, some ADCs have proven efficacious in such patient populations while maintaining a manageable tolerability profile. Therefore, ADCs represent an important part of the cancer treatment paradigm, expanding the treatment options available to patients suffering from relapsed or refractory cancers.
The Antibody Drug Conjugates Landscape
Currently, there are nine approved ADCs, five of which were approved by the FDA in the past two years. We believe that the commercial success of previously approved ADCs demonstrates ADCs’ potential to become an important part of the cancer treatment paradigm.
While ADCs are an important part of cancer treatment, there are certain challenges in developing ADCs that achieve the optimal therapeutic index (i.e., the balance between efficacy and tolerability). These challenges include (i) developing warheads that are sufficiently potent to target cancers with low or heterogeneous antigen expression without causing unacceptable toxic side effects, (ii) designing linkers that are stable in systemic circulation but that release the warhead once the ADC has been internalized by the target cell, and (iii) creating ADCs that achieve durable responses. We believe that our expertise in ADC research and development and access to next-generation PBD technology enables us to develop ADCs that overcome these challenges.
Our Next-Generation PBD-Based Antibody Drug Conjugates
We develop ADCs that use next-generation PBD warhead technology. Using this technology, we have developed a diverse and balanced portfolio of highly targeted ADCs with potential for improved therapeutic indices that may allow us to broaden the scope of addressable cancer patients for whom treatment with ADCs is feasible or appropriate.
PBDs are a class of antibiotic or anti-tumor molecules. First-generation PBDs, developed in the early 2000s, were originally used as stand-alone chemotherapeutics. They were subsequently explored for use as ADC warheads. However, these first-generation PBD warheads’ hydrophobicity generally resulted in manufacturability issues and they exhibited significant toxicities that resulted in very narrow therapeutic indices. In contrast, our ADCs use next-generation PBD technology, which is designed to produce warheads that are less hydrophobic, causing them to be easier to conjugate and, based on preclinical data, have less off-target toxicity than first-generation PBD warheads. Through further in-house development of conjugation technology and highly stable linker design, we aim to develop PBD-based ADCs that achieve significant clinical activity and durable responses in difficult-to-treat patients.
Our ADCs use PBD dimer warheads, which are two PBD monomer molecules bonded together. Once inside a target cell, these PBD dimers bind irreversibly to DNA without distorting the double helix, potentially evading DNA repair mechanisms that can otherwise reduce ADCs’ effectiveness. PBD dimers do this by covalently binding two guanines from opposite DNA strands in the minor groove, forming highly
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cytotoxic interstrand cross-links that block DNA strand separation, thus disrupting essential DNA metabolic processes such as replication, and ultimately resulting in cell death. The figure below shows the mechanism of action of our PBD-based ADCs.
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The mechanism of action of our PBD-based ADCs.
We believe that our ADCs, using next-generation PBD technology, have the potential to become an important part of the cancer treatment paradigm due to their following potential benefits:
•Cytotoxic Potency. The PBD dimer warheads used in our ADCs have been shown preclinically to be approximately 100 times more potent than warheads used in currently marketed ADCs, such as auristatin, maytansine and calicheamicin. The figure below shows the relative in vitro cytotoxic potency of various ADC warheads and common chemotherapeutics in comparison to a PBD dimer. Despite their potency, however, the PBD dimer warheads used in our ADCs have demonstrated a manageable tolerability profile in our preclinical studies and clinical trials to date.
ADC-20201231_G4.JPG  
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The relative in vitro cytotoxic potency of various ADC warheads (in red) and common chemotherapeutics (in black) in comparison to a PBD dimer. “IC50” means the drug concentration causing 50% inhibition of the desired activity, and “M” means molar. Source: Spirogen, a subsidiary of AstraZeneca plc.
•Activity in Tumors with Low-Expressing Targets. Tumor cells typically require a threshold number of warhead molecules to be internalized for efficient cell killing. The high potency of our PBD-based warheads means that, compared to other warheads, fewer molecules of warhead should be needed to be internalized into the cancer cell to kill it. In cancer cells with low levels of antigen expression, ADCs with less potent warheads cannot bind in sufficient quantities to be effective. We believe that the potency of our PBD-based warheads may allow us to develop ADCs that target antigens with low expression levels in the tumor microenvironment, potentially increasing the range of cancers amenable to treatment with ADCs.
•Durable Responses. Cross-links in DNA occur when an agent reacts with two nucleotides of DNA, forming a covalent linkage between them. The cross-links can occur in the same strand (i.e., intrastrand) or between opposite strands of DNA (i.e., interstrand). Our PBD-based ADCs create interstrand cross-links in the target cells’ DNA. These interstrand cross-links persist in target cells and can lie dormant, potentially for weeks. We believe that this allows our ADCs to target slowly proliferating cancer cells, including cancer stem cells. The persistence of the interstrand cross-links is explained by the fact that these cross-links do not distort the DNA helix. Cells have natural DNA repair mechanisms that detect structural changes to DNA, including those caused by cytotoxic warheads, and repair the DNA back to its original state. Warheads that create intrastrand cross-links, and even some warheads that create interstrand cross-links such as calicheamicin, distort the DNA helix, triggering the cells’ DNA repair mechanisms, thereby reducing their efficacy and leading to drug resistance. As PBD cross-links are non-distortive, they are designed to be able to evade the cells’ DNA repair mechanisms. In addition, tumor cells also induce the expression of certain transporter proteins (i.e., proteins that are able to transport warheads across the membrane outside the tumor cell) or the activation of detoxifying mechanisms that lead to inactive toxins. These potential resistance mechanisms limit traditional ADCs’ efficacy, resulting in limited clinical responses and relapses. Based on data to date, very few resistance mechanisms have been reported for PBDs. We believe that all of these factors may contribute to the frequency and durability of responses in heavily pre-treated and primary refractory patients that we have observed in our clinical trials.
•Bystander Effect. The bystander effect occurs when a released warhead is able to diffuse into and kill neighboring cells in the tumor microenvironment, irrespective of those cells’ antigen expression. Upon binding to the target antigen and internalization of our ADCs into the tumor cell, the warhead is designed to induce apoptosis. This is followed by the release of free PBD dimers into the tumor microenvironment. Since our PBD-based warheads are cell-permeable, they may be able to diffuse into adjacent cells and kill them in an antigen-independent manner. We believe that this may allow us to develop ADCs that target antigens with heterogeneous expression levels in the tumor microenvironment, potentially increasing the range of cancers amenable to treatment with ADCs. Once the PBD is released into circulation outside the tumor microenvironment, it is rapidly excreted with a short half-life, thus limiting overall systemic toxicity. We believe that this results in our ADCs’ bystander effect being controlled and generally limited to tumor cells.
•Immunogenic Cell Death. PBD warheads have been observed to induce immunogenic cell death, whereby a cancer cell’s death expresses certain stress signals that induce the body’s anti-tumor immune response through the activation of T cells and antigen-presenting cells. This opens up the potential for combining our ADCs with other therapies, particularly with immuno-oncology therapies such as checkpoint inhibitors, that are specifically designed to activate the patient’s own immune system to combat cancer.
Our Target Selection Strategy
While PBD warheads offer distinct benefits, they are not suitable for targeting all antigens expressed on a tumor or in the tumor microenvironment. Based on our extensive experience with PBD warheads, we have developed a disciplined target selection strategy, which involves:
•analysis of the relative overexpression of the target antigen on the membrane of cancer cells (as compared to healthy cells) and other target characteristics, such as internalization (i.e., how rapidly the antigen migrates from the membrane to the inside of the cell), recycling (i.e., whether or not the antigen recycles back to the membrane once internalized) and shedding (i.e., whether the antigen is cleaved off from the membrane to form a soluble antigen sink in the extracellular space and/or circulation) properties;
•review of whether an ADC that targets the antigen has the potential to address a clear unmet medical need and whether there is an established development path with the potential for accelerated regulatory approval;
•extensive in-house research and development focused on identifying preclinical in vivo activity and on- and off-target toxicity to determine the therapeutic index of a PBD-based ADC aimed at the antigen target; and
•determination of the potential product candidate’s placement in the overall risk-reward profile of our portfolio.
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Our target selection strategy aims to optimize the balance between risk and reward associated with clinical development and commercialization by covering both hematological and solid tumor indications and both clinically validated and novel cancer targets. Consistent with this strategy, we initially focused on clinically validated targets in hematological indications, as they represented the fastest route to achieve clinical proof of concept. Since then, we have expanded our focus to novel targets and in solid tumor indications.
Since inception, we have evaluated more than 170 targets and are currently pursuing 11 ADC targets and 10 XDC targets in our clinical and preclinical programs. The figure below shows the ADC targets for our current research and development programs.
ADC-20201231_G5.JPG
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ADC targets for our current research and development programs, which include both clinically validated and novel cancer targets in both hematological and solid tumor targets. Unlabeled circles represent undisclosed targets.
Our Development Strategy
Once we have selected a target antigen that we believe is suitable for ADC development, we undertake research and development to advance the ADC through clinical development. Our development strategy involves:
•selecting the clinical product candidate that represents the optimal combination of antibody, linker and PBD dimer. We compare multiple candidates with different combinations of the target-specific antibodies, linkers and linker positions, conjugation chemistry and the PBD warhead. Our objective is to nominate product candidates that exhibit the optimal balance between efficacy and safety in preclinical models.
•advancing our product candidates through IND-enabling preclinical studies, focusing on rapid execution of required pharmacology studies, non-clinical toxicology and pharmacokinetic studies and cGMP manufacturing of Phase 1 clinical material. Our efficient approach to preclinical development is evidenced by the following:
◦We have consistently completed IND-enabling preclinical studies in 13 to 22 months following selection of the clinical product candidate.
◦Since 2015, we have submitted four INDs and worked with our collaborators to submit two additional INDs for our product candidates.
•designing clinical trials to efficiently advance our product candidates towards regulatory submission and potential approval. Our clinical trials have the following features:
◦Our Phase 1 clinical trials enroll patients with different cancers that express the target antigen on the tumor cells or other cells in the tumor microenvironment. This allows us to conduct small dose-expansion studies simultaneously with dose-escalation studies, enabling signal searching and dose selection prior to concluding Phase 1 clinical trials. We have successfully used this method in
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our Phase 1 clinical trials of Lonca and Cami, which resulted in the early identification of DLBCL and HL as the initial indications to pursue in our pivotal Phase 2 clinical trials, respectively.
◦Our approach allows us to identify opportunities that may expand the market opportunity for our product candidates. For example, while we are pursuing DLBCL as the lead indication for Lonca, the data generated from the Phase 1 clinical trial has allowed us to efficiently advance pivotal clinical trials of Lonca for the treatment of other indications, such as MCL and FL.
◦Our Phase 1 clinical trials involve a wide range of dosing regimens. Because the PBD cross-links persist in tumor cells, it is important to find the dose levels and intervals that result in optimal tumor shrinkage while minimizing cumulative toxicities due to accumulation of the cross-links between doses. The wide range of dosing regimens in our Phase 1 clinical trials enables us to select the dose level to be used in pivotal clinical trials without the need for separate dose-range finding studies.
◦Our clinical trials are designed to balance risk and reward by enrolling patients with both cancers that are difficult to treat and those that are more responsive to treatment.
•encouraging close collaboration between our preclinical and clinical teams. For example, when our clinical team provides emerging pharmacokinetic data to our preclinical team, this strengthens the predictive value of our preclinical animal models when switching between indications, such as from hematological tumors to solid tumors with Cami. Our preclinical team also analyze biomarkers that correlate with patient outcomes taken by our clinical team to monitor their pharmacodynamics effects and to inform patient selection and dosing strategies.
Our Product Candidates
We are leveraging next-generation PBD technology, to which we have proprietary rights for our targets, to develop a diverse and balanced portfolio of product candidates. Our hematology franchise comprises three clinical-stage product candidates, including our lead product candidate, Lonca, for which our BLA for the treatment of relapsed or refractory DLBCL was accepted and granted priority review status, and our second lead product candidate, Cami, which we are currently evaluating in a 117-patient pivotal Phase 2 clinical trial for the treatment of relapsed or refractory HL. Our solid tumor franchise comprises two clinical-stage product candidates and two preclinical product candidates.
Our Hematology Franchise
Our hematology franchise comprises three clinical-stage product candidates for the treatment of various hematological malignancies, including lymphoma and leukemia. The figure below summarizes the clinical-stage product candidates in our hematology franchise.

ADC-20201231_G6.JPG
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Anticipated milestones set forth in this chart and in this annual report are subject to further future adjustment based on, among other factors, the impact of the COVID-19 pandemic. *We believe that our Phase 1/2 clinical trial of Lonca in combination with ibrutinib for the treatment of relapsed or refractory DLBCL and MCL, our Phase 2 clinical trial of Lonca for the treatment of relapsed or refractory FL and our Phase 2 clinical trial of Cami for the treatment of relapsed or refractory HL are pivotal clinical trials (i.e., a clinical trial intended to serve as the basis for BLA submission). Therefore, we believe that subsequent Phase 3 clinical trials will be confirmatory clinical trials. **We licensed to Overland ADCT BioPharma the exclusive development and commercialization rights to Lonca, ADCT-602, ADCT-601 and ADCT-901 in greater China and Singapore. See “Item 4. Information on the Company—B. Business Overview—License and Collaboration Agreements.”
Lymphoma is a group of several closely related blood cancers that develop in the lymphatic system, an interconnected network of vessels and nodes that circulate a fluid called lymph. The lymph is rich in lymphocytes, a type of white blood cells that help the body fight off infections and other diseases. Lymphoma occurs when lymphocytes become cancerous and are typically classified into two groups: non-Hodgkin lymphoma and Hodgkin lymphoma.

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The Lymphoma Disease Setting

Non-Hodgkin Lymphoma
Non-Hodgkin lymphoma is a heterogeneous group of cancers of the lymphatic system that is characterized by the overproduction and accumulation of lymphocytes, either B lymphocytes (“B cells”) or T lymphocytes (“T cells”). These cancerous lymphocytes travel to and accumulate in other organs, including the lymph nodes, bone marrow and spleen, and disrupt these organs’ normal functioning. In 2018, there were an estimated 126,500 total new cases of NHL in the United States, France, Germany, Italy, Spain and the United Kingdom (“EU5”). The various types of NHL are distinguished by the characteristics of the cancer cells associated with each disease type. The designations “indolent” (i.e., slow growing) and “aggressive” (i.e., fast growing) are often applied to types of NHL based on the diseases’ progression and prognosis. The figure below shows the distribution of NHL in the United States and EU5.
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The distribution of NHL in the United States and EU5. Figures represent the estimated total number of new cases of the respective diseases in 2018.
Diffuse Large B-Cell Lymphoma
Diffuse large B-cell lymphoma is an aggressive type of NHL that develops from the B cells in the lymphatic system. It is the most common type of NHL, with an estimated 58,500 total new cases of de novo or transformed DLBCL in the United States and EU5 in 2018. Approximately 30,000 new cases were in the United States and approximately 28,500 new cases were in EU5. If left untreated, DLBCL is rapidly fatal.
Treatments for DLBCL can be divided into first-line, second-line and third-line and later therapies. The figure below shows the current DLBCL treatment landscape.
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ADC-20201231_G8.JPG

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Current DLBCL treatment landscape. Patient population data presented are for the United States and EU5. Not all relapsing patients will receive treatment. The blue box represents the initial potential addressable patient population for Lonca, if approved as a third-line therapy. The green boxes represent the potential addressable patient population for Lonca, if approved as a second-line therapy in combination with other therapies. If our clinical trials are successful, we also intend to develop Lonca as a first-line therapy for the treatment of DLBCL. The gray box represents the potential addressable patient population for Lonca, if approved as a first-line therapy.
First-line therapy generally involves chemotherapy with a rituximab backbone, such as R-CHOP (i.e., a chemotherapy regimen consisting of cyclophosphamide, doxorubicin hydrochloride, vincristine sulfate and prednisone, plus rituximab). Although first-line therapy is effective in some patients, approximately 40% of patients require second-line therapy. The prognosis is generally poor for patients who do not respond to first-line therapy. For example, a study of two large randomized trials and two academic databases found that for patients who exhibit primary refractory disease, only 20% displayed a response and only 3% displayed a complete response to subsequent chemotherapy.
Second-line therapy depends on whether the patient is eligible for stem cell transplant. Eligibility is determined by a patient’s physical fitness and response to high-dose salvage chemotherapy. For the patients who are ineligible for stem cell transplant, second-line therapy involves chemotherapy or tafasitamab in combination with lenalidomide. Of the patients who require treatment in the second-line setting, approximately 50% will require third-line therapy.
Current third-line therapies include cellular therapies such as CAR-T, allogeneic stem cell transplant (i.e., transplant involving a healthy donor’s stem cells), polatuzumab in combination with bendamustine and a rituximab product, selinexor, tafasitamab in combination with lenalidomide and chemotherapy using small molecules. Given the serious and potentially fatal side effects and the fitness required to undergo CAR-T and allogeneic stem cell transplant, patients who are ineligible to receive autologous stem cell transplant as a second-line therapy will likely also be ineligible to receive CAR-T or allogeneic stem cell transplant. Other treatment options are limited in efficacy or associated with severe side effects. The limited treatment options and generally poor outcomes observed in patients with relapsed or refractory DLBCL highlights the urgent need for alternative treatment strategies. We are developing Lonca to address this unmet medical need.
Follicular Lymphoma
Follicular lymphoma is an indolent type of NHL that develops from B cells in the lymphatic system. It is the second most common type of NHL, with an estimated 25,500 total new cases in the United States and EU5 in 2018. Approximately 13,000 new cases were in the United States and approximately 12,500 new cases were in EU5. FL is a highly variable disease, with uncertain prognosis and varying periods of progression.
Common therapies for FL include radiotherapy, R-CHOP and R-CVP (i.e., a chemotherapy regimen consisting of cyclophosphamide, vincristine sulfate and prednisone, plus rituximab). Although first-line therapy is effective in some patients, approximately 55% of patients
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require second-line therapy. These patients have limited treatment options. Generally, intensive chemotherapy regimens are not acceptable due to their toxicity, but less intensive chemotherapy regimens are not effective in such patients. Of the patients who require treatment in the second-line setting, approximately 65% will require third-line therapy. The limited treatment options and generally poor outcomes observed in patients with relapsed or refractory FL highlights the urgent need for alternative treatment strategies. We are developing Lonca to address this unmet medical need.
Treatments for FL can be divided into first-line and second-line and later therapies. The figure below shows the current FL treatment landscape.
ADC-20201231_G9.JPG
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Current FL treatment landscape. Patient population data presented are for the United States and EU5. Not all relapsing patients will receive treatment.
Mantle Cell Lymphoma
Mantle cell lymphoma is an aggressive type of NHL that develops from B cells in the mantle zone of the lymphatic system. It is a rare type of NHL, with an estimated 6,000 total new cases in the United States and EU5 in 2018. Approximately 3,000 new cases were in the United States and approximately 3,000 new cases were in EU5. If left untreated, MCL is rapidly fatal.
Common therapies for MCL include R-CHOP or R-DHAP (i.e., a chemotherapy regimen consisting of dexamethasone, cytarabine and cisplatin, plus rituximab). Although first-line therapy is effective in some patients, approximately 70% of patients require second-line therapy. These patients have limited treatment options. The efficacy of current second-line therapies is limited, with the majority of patients failing to achieve a durable response. Of the patients who require treatment in the second-line setting, approximately 65% will require third-line therapy. The limited treatment options and generally poor outcomes observed in patients with relapsed or refractory MCL highlights the urgent need for alternative treatment strategies. We are developing Lonca to address this unmet medical need.
T-Cell Lymphoma
T-cell lymphoma is a group of aggressive NHLs that develops from the T cells of the lymphatic system. They are a rare type of NHL, with an estimated 11,000 total new cases in the United States and EU5 in 2018. T-cell lymphoma comprises a diverse group of diseases with differing prognoses.
Common therapies for T-cell lymphoma include chemotherapy, such as CHOP (i.e., a chemotherapy regimen consisting of cyclophosphamide, doxorubicin hydrochloride, vincristine sulfate and prednisone) and CHOP-like regimens alone or in combination with other approved chemotherapeutics. Although first-line therapy is effective in some patients, approximately 70% of patients require second-line therapy. These patients have limited treatment options. The efficacy of current second-line therapies is limited, with the majority of patients failing to achieve a durable response. The National Comprehensive Cancer Network guidelines suggest that relapsed or refectory patients enroll in clinical trials, rather than receive treatment via standard therapy. In our experience, investigators have repeatedly stressed that novel therapies that are able to achieve an ORR above 40% are highly relevant and warrant further clinical development. The limited treatment options and generally poor outcomes observed in patients with relapsed or refractory T-cell lymphoma highlights the urgent need for alternative treatment strategies. Therefore, there is a significant unmet medical need for patients with relapsed or refractory T-cell lymphoma. We are developing Cami to address this unmet medical need.
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Hodgkin Lymphoma
Hodgkin lymphoma is a rare but highly curable type of neoplasm of the lymph nodes. These lymphoid malignancies travel to other organs, such as the liver, lungs and bone marrow, and disrupt these organs’ normal functioning. In 2015, there were an estimated 16,500 total new cases of HL in the United States and EU5. Approximately 8,500 new cases were in the United States and approximately 8,000 new cases were in EU5. Patients diagnosed with HL generally have good prognoses, with a five-year overall survival rate of approximately 87%.
Treatments for HL can be divided into first-line, second-line and third-line and later therapies. The figure below shows the current HL treatment landscape.
ADC-20201231_G10.JPG
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Current HL treatment landscape. Patient population data presented are for the United States and EU5. Not all relapsing patients will receive treatment. The blue box represents the initial potential addressable patient population for Cami, if approved as a third-line therapy. The green boxes represent the potential addressable patient population for Cami, if approved as a second-line therapy in combination with other therapies.
First-line therapy generally involves ABVD (i.e., a chemotherapy regimen consisting of doxorubicin, bleomycin (which may be substituted by brentuximab vedotin, a CD30-directed ADC), vinblastine and dacarbazine), which may be combined with radiotherapy. Although first-line therapy is effective in most patients, approximately 15% of patients require second-line therapy.
Second-line therapy depends on whether the patient is eligible for stem cell transplant. Eligibility is determined by the patient’s physical fitness and response to salvage chemotherapy regimens not received in first-line therapy. For the patients who are ineligible for stem cell transplant, second-line therapy involves a chemotherapy regimen not already administered or brentuximab vedotin, with or without bendamustine. Of the patients who require treatment in the second-line setting, approximately 50% will require third-line therapy. Recently, pembrolizumab expanded its label to include patients with relapsed or refractory HL for second-line treatment irrespective of stem cell transplant eligibility.
Current third-line therapies include an alternative chemotherapy regimen not previously used or immunotherapy with brentuximab vedotin. Although brentuximab vedotin and checkpoint inhibitors have achieved relatively high ORRs compared to traditional chemotherapy regimens, these therapies are moving into earlier lines of treatment. Other third-line chemotherapy regimens involving bendamustine, everolimus or lenalidomide have only shown limited efficacy. Other therapies include allogeneic stem cell transplantation. However, given that stem cell transplant requires patients to be physically fit, the proportion of eligible patients is small. The limited treatment options and generally poor outcomes observed in patients with relapsed or refractory HL highlights the urgent need for alternative treatment strategies. We are developing Cami to address this unmet medical need.
The Leukemia Disease Setting
Leukemia is a group of several closely related blood cancers that develop in the bone marrow. Once the marrow cell undergoes a leukemic change, the leukemia cells may grow and survive better than healthy cells. Over time, the leukemia cells crowd out or suppress the
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development of healthy cells. Leukemia is classified into four groups: acute lymphoblastic leukemia, chronic lymphocytic leukemia, acute myeloid leukemia and chronic myeloid leukemia.
Acute Lymphoblastic Leukemia
Acute lymphoblastic leukemia is an aggressive form of blood cancer, characterized by the overproduction and accumulation of cancerous, immature white blood cells, known as leukemic blasts. These leukemic blasts are overproduced in the bone marrow affecting the synthesis of normal blood cells, causing a decrease in red blood cells, platelets and normal white blood cells. In 2016, there were an estimated 9,000 total new cases of ALL in the United States and Europe. ALL develops rapidly throughout the bone marrow and peripheral blood within a few days or a few weeks of the first symptoms. If left untreated, ALL is rapidly fatal.
Common therapies for ALL include multidrug chemotherapy regimens using available generic chemotherapeutics. Although first-line therapy is effective in some patients, approximately 30%-40% of patients require second-line therapy. For these patients, treatment options include targeted therapies such as tisagenlecleucel, a CD19-directed genetically modified autologous T cell immunotherapy, blinatumomab, a bispecific T cell engager targeting CD19, and inotuzumab ozogamicin, a CD22-directed ADC. However, there remains a significant unmet medical need for patients who exhibit relapsed or refractory ALL due to the heterogeneity of and the existence of different subgroups within ALL. We are developing ADCT-602 to address this unmet medical need.
Loncastuximab Tesirine: PBD-Based ADC Targeting CD19
Overview
Our lead product candidate, Lonca, is an ADC targeting CD19-expressing cancers. We are developing Lonca for the treatment of relapsed or refractory NHL, both when used as a monotherapy and when used in combination with other therapies. The following summary provides key information about Lonca:

•We intend to commercialize Lonca in the United States through our own infrastructure and may selectively pursue strategic collaborations and licensing opportunities in other geographies. For example, in December 2020, we entered into a joint venture with Overland Pharmaceuticals to develop and commercialize Lonca, among other product candidates, in greater China and Singapore.
•On November 20, 2020, the FDA accepted our BLA submission for Lonca for the treatment of relapsed or refractory DLBCL and granted priority review status with a PDUFA target date of May 21, 2021.
•In September 2020, we commenced a confirmatory Phase 3 clinical trial of Lonca in combination with rituximab, which, if successful, we believe will support a sBLA for Lonca to be used as a second-line therapy for the treatment of relapsed or refractory DLBCL in transplant-ineligible patients.
•We completed enrollment of a 145-patient pivotal Phase 2 clinical trial for the treatment of relapsed or refractory DLBCL.
◦As of August 6, 2020, we observed a 48.3% ORR and a 24.8% CRR in 145 heavily pre-treated patients who had received a median of three prior lines of therapy. The median duration of response was 12.58 months for all responders and 13.37 months in patients achieving a CR.
◦Lonca’s significant clinical activity was observed across a broad patient population in this clinical trial, including transplant ineligible patients, patients with primary refractory disease, bulky disease, double-hit or triple-hit disease and transformed disease, as well as elderly patients and patients who did not respond to any prior therapy, and notably in patients who had progression after prior CAR-T therapy.
•Lonca is also being evaluated in a Phase 1/2 clinical trial in combination with ibrutinib for the treatment of relapsed or refractory DLBCL and MCL.
◦As of August 20, 2020, at the dose being used in the pivotal Phase 2 part of the clinical trial, we observed a 66.7% ORR and a 37.5% CRR in heavily pre-treated non-GCB DLBCL patients who had received a median of two prior lines of therapy, and an 83.3% ORR and a 33.3% CRR in relapsed or refractory MCL patients with a median of two prior lines of therapy.
•We intend to commence a 150-patient Phase 2, randomized, two-arm, multi-center, open-label clinical trial to evaluate the safety and efficacy of Lonca in patients with relapsed or refractory FL in the first half of 2021.
◦In the completed Phase 1 clinical trial of Lonca for the treatment of relapsed or refractory B-NHL, we observed a 78.6% ORR and a 64.3% CRR in fourteen heavily pre-treated patients with relapsed or refractory FL who had received a median of four prior lines of therapy.
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Of the estimated 58,500 total patients diagnosed with DLBCL each year in the United States and EU5, approximately 40% will relapse or have refractory DLBCL. We believe that the treatment of relapsed or refractory DLBCL remains an area of high unmet medical need. We expect that we would launch Lonca, if approved, as a third-line therapy for the treatment of DLBCL. Despite recent entrants, there is currently no leading therapeutic option for this patient population. Accordingly, we estimate that the initial addressable incident patient population is approximately 10,500 patients per year in the United States and EU5.

We are also enrolling a Phase 3 confirmatory clinical trial of Lonca in combination with rituximab, which, if successful, may allow Lonca to be used as a second-line therapy for the treatment of transplant-ineligible relapsed or refractory DLBCL. In addition, we are conducting a Phase1/2 clinical trial of Lonca in combination with ibrutinib in relapsed or refractory DLBCL. If successful, we plan to further develop Lonca in combination with ibrutinib in a broad second-line DLBCL population. These second-line trials would increase the addressable incident patient population to approximately 22,000 patients per year in the United States and EU5. If our clinical trials are successful, we also intend to develop Lonca as a first-line therapy for the treatment of DLBCL. We plan to initiate a dose finding study of Lonca and R-CHOP in first-line DLBCL in the first half of 2021.
In addition to DLBCL, we are evaluating Lonca for the treatment of relapsed or refractory FL and MCL, both as a monotherapy and in combination with other therapies. Of the estimated 25,500 total patients diagnosed with FL each year in the United States and EU5, approximately 55% will exhibit relapsed or refractory FL. Of the estimated 6,000 total patients who are diagnosed with MCL each year in the United States and EU5, approximately 70% will exhibit relapsed or refractory MCL. We believe that the treatment of relapsed or refractory FL and MCL remain areas of high unmet medical need. We intend to develop Lonca as a therapeutic option for relapsed or refractory MCL and FL to address the high unmet medical needs of these patient populations, including initiating a pivotal Phase 2 clinical trial of Lonca for the treatment of FL. We also intend to initiate a Lonca umbrella study to evaluate Lonca in multiple combinations in NHL.
We believe that the commercial potential of Lonca, if approved, is supported by the following key attributes observed to date:
•Favorable clinical activity across a broad patient population, including transplant eligible and ineligible patients, patients who have not responded to first-line therapy or any prior therapy and patients with bulky disease, double-hit and triple-hit disease and transformed disease;
•Significant single-agent clinical activity while maintaining a manageable tolerability profile with a low incidence of febrile neutropenia;
•Activity in heavily pretreated patients, including those who had received prior CD19 therapies, including CAR-T and SCT;
•Promising clinical activity observed in our combination clinical trial with ibrutinib, which we believe demonstrates the opportunity to advance Lonca into earlier lines of therapy in combination with other therapies such as ibrutinib and rituximab; and
•30-minute intravenous infusion once every three weeks.
Commercialization Plan

If approved, we intend to commercialize Lonca in the United States through our own infrastructure and may selectively pursue strategic collaborations and licensing opportunities in other geographies. In December 2020, we entered into a joint venture with Overland Pharmaceuticals to develop and commercialize Lonca, among other product candidates, in greater China and Singapore. Our U.S. commercial organization has been built out, and launch-readiness activities are ongoing to enable commercialization of Lonca promptly following the receipt of approval, and include:
•Our successful build-out of a highly experienced commercial organization led by a seasoned Chief Commercial Officer and senior commercial leadership team, including full recruitment of a sales force of Hematology Therapeutics Specialists;
•Our successful build-out of an efficient Medical Affairs function led by our Vice President of Medical Affairs, including a team of highly experienced, senior medical science liaisons;
•Investing resources to monitor the competitive landscape, educate on our differentiated profile and accelerating our launch readiness efforts;
•Increasing scientific interactions with academic and community thought leaders;
•Engaging payors and key access stakeholders to introduce ADC Therapeutics, align on the unmet medical needs in relapsed or refractory DLBCL and address questions regarding the differentiated product profile of Lonca and its unique value proposition for patients; and
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•Ongoing training of a highly talented and efficient U.S. customer-facing organization of more than 70 cross-functional employees, which we believe has the potential to cover more than 90% of the DLBCL opportunity.
Structure and Mechanism of Action
Lonca is composed of a humanized monoclonal antibody (RB4v1.2) directed against human CD19 and conjugated through a cathepsin-cleavable linker to SG3199, a PBD dimer cytotoxin. Once bound to a CD19-expressing cell, it is designed to be internalized by the cell, following which the warhead is released. The warhead is designed to bind irreversibly to DNA to create highly potent interstrand cross-links that block DNA strand separation, thus disrupting essential DNA metabolic processes such as replication and ultimately resulting in cell death. The figure below shows the structure of Lonca.
ADC-20201231_G11.JPG
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Visual representation of Lonca.
The human CD19 antigen is involved in the recognition, binding and adhesion processes of cells, mediating direct interactions between surfaces of different cell types and pathogen recognition. CD19 is expressed only on B cells (i.e., a type of white blood cell that plays a significant role in protecting the body from infection by producing antibodies) throughout all stages of B cell development and differentiation. Its expression is maintained in high levels in hematologic B cell malignancies, including NHL and certain types of leukemia. For example, CD19 is expressed in activated B cells and memory B cells in DLBCL, in naïve B cells in MCL, and in memory B cells in FL.
We believe that CD19 is an attractive target for ADCs developed to treat hematological malignancies for the following reasons:
•CD19 is a clinically validated target for the treatment of B cell malignancies.
•CD19 is expressed in B cell lineage at an earlier stage compared to CD20, which is another well-known target for the treatment of hematological malignancies.
•The CD19 antigen is rapidly internalized by the cell. Therefore, it is an effective target for ADC therapy since ADCs bind only to antigens on the cell surface and the ADCs must be internalized to release the warhead inside the cell.
•The CD19 antigen does not shed into the circulation. Therefore, there are no, or very low, levels of soluble CD19 to compete for binding of the ADC.
Pathway to Regulatory Approval
BLA Acceptance
On November 20, 2020, the FDA accepted our BLA for Lonca for the treatment of relapsed or refractory DLBCL and granted priority review status with a PDUFA target date of May 21, 2021. If we receive approval, we intend to commence the commercial launch of Lonca in 2021.
We have developed a validated commercial supply chain that has been able to consistently produce Lonca at commercial scale. Assuming regulatory approval for our lead product candidate, Lonca, we believe there will be sufficient commercial-grade drug product in stock for the foreseeable future and we and our CMOs will be able to conduct additional manufacturing at the appropriate time.
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Confirmatory Clinical Trial
In September 2020, we commenced a confirmatory trial concurrently with the BLA submission. The confirmatory clinical trial is a Phase 3, randomized, open-label, two-part, two-arm, multi-center clinical trial of Lonca combined with rituximab compared to immunochemotherapy in patients with relapsed or refractory DLBCL.
The primary objective of the clinical trial is to evaluate the efficacy of Lonca combined with rituximab compared to standard immunochemotherapy, as measured by progression-free survival (“PFS”). The secondary objectives of the clinical trial are to (i) characterize the safety profile of Lonca combined with rituximab, (ii) characterize the pharmacokinetic profile of Lonca combined with rituximab, (iii) evaluate the immunogenicity of Lonca combined with rituximab and (iv) evaluate the impact of Lonca combined with rituximab treatment on treatment-related and disease-related symptoms, patient-reported functions and overall health status.
The clinical trial is enrolling patients with pathologically confirmed relapsed or refractory DLBCL who are not considered by the investigator to be a candidate for SCT and who had failed at least one multi-agent systemic treatment regimen. The clinical trial is expected to enroll approximately 350 patients.
The clinical trial is being conducted in two parts: In the safety run-in, the first 20 patients are non-randomly assigned to receive Lonca in combination with rituximab to compare the combination’s toxicity against historical safety data from monotherapy clinical trials of Lonca. In the randomized part of the clinical trial, which will be initiated after last patient in the safety run-in completes the first treatment cycle and it is observed that there is no significant increase in toxicity of the combination as compared to historical safety data of Lonca used as a monotherapy, patients will be randomly assigned 1:1 to receive either Lonca in combination with rituximab or rituximab in combination with gemcitabine and oxaliplatin. The randomized part of the clinical trial is expected to enroll approximately 330 patients.
We believe that this clinical trial, if successful, will support an sBLA for Lonca to be used as a second-line therapy for the treatment of relapsed or refractory DLBCL in transplant-ineligible patients.
Phase 1 Clinical Trial in Relapsed or Refractory Non-Hodgkin Lymphoma
We have conducted a Phase 1, open-label, dose escalation and dose expansion clinical trial of the safety and tolerability of Lonca, used as monotherapy, in 183 patients with relapsed or refractory B-NHL, which includes de novo and transformed DLBCL, FL, chronic lymphocytic leukemia, MCL, marginal zone B-cell lymphoma, Burkitt’s lymphoma and lymphoplasmacytic lymphoma. We conducted the clinical trial at 12 sites in the United States and Europe, pursuant to an IND accepted by the FDA in December 2015. The first patient was dosed in March 2016. The results of the clinical trial showed encouraging anti-tumor activity and manageable tolerability profile in patients with relapsed or refractory B-NHL. The clinical trial’s design and our main findings are summarized below.
Clinical Trial Design
The primary objectives of the dose escalation stage of the clinical trial were to (i) evaluate the safety and tolerability, and determine, as appropriate, the maximum tolerated dose (“MTD”) of Lonca in patients with relapsed or refractory B-NHL and (ii) determine the recommended dose(s) of Lonca for the dose expansion stage of the clinical trial. The primary objective of the dose expansion stage was to evaluate the safety and tolerability of Lonca at the dose level(s) recommended from the results of the dose escalation stage. The secondary objectives of the clinical trial were to (i) evaluate the clinical activity of Lonca, as measured by ORR, DoR, overall survival (“OS”) and PFS, (ii) characterize the pharmacokinetic profile of Lonca and the free warhead SG3199 and (iii) evaluate anti-drug antibodies (“ADAs”) in patients’ blood before, during and after treatment with Lonca.
The clinical trial enrolled patients with pathologically confirmed relapsed or refractory B-NHL who had failed or were intolerant to established therapy or for whom no other treatment options were available. Of the 183 patients who participated in the clinical trial, 139 patients were diagnosed with relapsed or refractory DLBCL, 15 patients were diagnosed with relapsed or refractory MCL, 14 patients were diagnosed with FL and the remaining 15 patients were diagnosed with other forms of relapsed or refractory B-NHL.
In the dose escalation stage, patients received intravenous infusions of Lonca, at escalating doses, on the first day of each 21-day treatment cycle. The initial dose was 15 µg/kg and the highest allowed dose was planned at 300 µg/kg. Dose escalation was conducted using a 3+3 design with oversight by a Dose Escalation Steering Committee (“DESC”). In the dose expansion stage, patients received 120 µg/kg and 150 µg/kg doses on the first day of each 21-day treatment cycle. The dose levels were determined by the DESC based on the anti-tumor activity and tolerability observed during the dose escalation stage. In this clinical trial, response to treatment was determined as complete response (“CR”), partial response (“PR”), stable disease (“SD”) or progressive disease (“PD”), based on the 2014 Lugano Classification Criteria.

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Clinical Trial Results
Diffuse Large B-Cell Lymphoma
For patients with relapsed or refractory DLBCL (n=139), the median prior lines of therapy received was three. The median number of treatment cycles received was two and the maximum number of treatment cycles received was 13. The median duration of treatment was 64 days.
The main observed safety and tolerability findings in patients with relapsed or refractory DLBCL were as follows:
•The MTD was not reached in the dose escalation stage.
•Grade ≥3 TEAEs were reported in 108 patients, or 77.7% of patients. The most common Grade ≥3 TEAEs that were reported in more than 10% of patients included neutrophil count decreased (reported in 38.1% of patients, including 37.1% of patients at the 150 µg/kg dose used in our pivotal Phase 2 clinical trial), platelet count decreased (reported in 26.6% of patients, including 25.7% of patients at the 150 µg/kg dose used in our pivotal Phase 2 clinical trial), gamma-glutamyltransferase increased (reported in 19.4% of patients, including 17.1% of patients at the 150 µg/kg dose used in our pivotal Phase 2 clinical trial) and anemia (reported in 13.7% of patients, including 15.7% of patients at the 150 µg/kg dose used in our pivotal Phase 2 clinical trial).
•TEAEs in 26 patients, or 18.7% of patients, led to treatment discontinuation.
The main observed efficacy findings from the Phase 1 clinical trial in patients with relapsed or refractory DLBCL were as follows:

•Across all dose levels, 32 patients, or 23.4% of patients, achieved a complete response and another 26 patients, or 19.0% of patients, achieved a partial response, resulting in a 42.3% ORR. At the 150 µg/kg dose level used in our pivotal Phase 2 clinical trial, 15 patients, or 21.4% of patients, achieved a complete response and another 14 patients, or 20.0% of patients, achieved a partial response, resulting in a 41.4% ORR.
•Lonca’s favorable clinical activity was observed across a broad patient population in this clinical trial, including transplant eligible and ineligible patients, patients who have not responded to first-line therapy or any prior therapy and patients with bulky disease, double-hit and triple-hit disease and transformed disease.
•Across all dose levels, the median DoR was not reached for patients who achieved a complete response (indicating that more than half of the patients continued to show a complete response as of their most recent assessment) and 2.86 months for patients who achieved a partial response, for an overall DoR of 4.47 months. At dose levels ≥120 µg/kg, the median DoR was not reached for patients who achieved a complete response (indicating that more than half of the patients continued to show a complete response as of their most recent assessment) and was 2.69 months for patients who achieved a partial response, for an overall DoR of 4.17 months.
Mantle Cell Lymphoma
For patients with relapsed or refractory MCL (n=15), the median prior lines of therapy received was four. The median number of treatment cycles received was two and the maximum number of treatment cycles received was 11. The median duration of treatment was 65 days.
The main observed safety and tolerability findings in patients with relapsed or refractory MCL were similar in nature, frequency and severity to those in patients with relapsed or refractory DLBCL. The main observed efficacy findings from the Phase 1 clinical trial in patients with relapsed or refractory MCL were as follows:
•Across all dose levels, five patients, or 33.3% of patients, achieved a complete response and another two patients, or 13.3% of patients, achieved a partial response, resulting in a 46.7% ORR.
•The median DoR was not reached (indicating that more than half of the patients continued to show a complete response as of their most recent assessment).
Follicular Lymphoma
For patients with relapsed or refractory FL (n=14), the median prior lines of therapy received was four. The median number of treatment cycles received was three and the maximum number of treatment cycles received was 12. The median duration of treatment was 79 days.
The main observed safety and tolerability findings in patients with relapsed or refractory FL were similar in nature, frequency and severity to those in patients with relapsed or refractory DLBCL. The main efficacy findings from the Phase 1 clinical trial in patients with relapsed or refractory FL were as follows:
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•Across all dose levels, nine patients, or 64.3% of patients, achieved a complete response and another two patients, or 14.3% of patients, achieved a partial response, resulting in a 78.6% ORR.
•The median DoR was not reached (indicating that more than half of the patients continued to show a complete response as of their most recent assessment).
Pivotal Phase 2 Clinical Trial in Relapsed or Refractory Diffuse Large B-Cell Lymphoma
We have conducted a 145-patient Phase 2, multi-center, open-label, single-arm clinical trial to evaluate the safety and efficacy of Lonca in patients with relapsed or refractory DLBCL, as defined according to the 2016 World Health Organization classification to include DLBCL not otherwise specified, primary mediastinal large B-cell lymphoma and high-grade B-cell lymphoma with MYC and BCL2 and/or BCL6 rearrangements. We conducted the clinical trial at 37 sites in the United States and Europe, pursuant to an IND accepted by the FDA in December 2015 and a protocol amendment submitted in April 2018. The first patient was dosed in August 2018. The results of the clinical trial showed significant anti-tumor activity and manageable tolerability profile across a broad population of patients with relapsed or refractory DLBCL. The clinical trial’s design and our main findings are summarized below.
Clinical Trial Design
The primary objective of the Phase 2 clinical trial was to evaluate the efficacy of Lonca in patients with relapsed or refractory DLBCL, measured by ORR based on the 2014 Lugano Classification Criteria. The secondary objectives were to (i) further evaluate the efficacy of Lonca measured by DoR, CRR, PFS, relapse-free survival (“RFS”) and OS, (ii) characterize the safety profile of Lonca, (iii) characterize the pharmacokinetic profile of Lonca, (iv) evaluate the immunogenicity of Lonca and (v) evaluate the impact of Lonca treatment on health-related quality of life (“HRQoL”).
The clinical trial enrolled patients with pathologically confirmed relapsed or refractory DLBCL who have previously received two or more multi-agent systemic treatment regimens. The table below presents information about the patients’ characteristics.
Patient Characteristics n=145  
Age, median (minimum, maximum) 66 (23, 94)
Histology, n (%) DLBCL Not otherwise specified 127 (87.6)
  HGBCL* 11 (7.6)
  PMBCL** 7 (4.8)
Cancer characteristic, n (%) Double-hit or triple-hit disease*** 15 (10.3)
  Double/triple expressor 20 (13.8)
  Transformed disease**** 29 (20.0)
Disease stage*****, n (%) I-II 33 (22.8)
  III-IV 112 (77.2)
Number of previous systemic therapies received, median (minimum, maximum) 3 (2, 7)
Response to first-line prior systemic therapy, n (%) Relapsed 99 (68.3)
  Refractory 29 (20.0)
Response to most recent prior systemic therapy, n (%) Relapsed 43 (29.7)
  Refractory 84 (57.9)
Refractory to all prior systemic therapies, n (%) Yes 25 (17.2)
  No 115 (79.3)
Prior stem cell transplant, n (%) Autologous stem cell transplant 21 (14.5)
  Allogeneic stem cell transplant 2 (1.4)
  Both autologous and allogeneic stem cell transplant 1 (0.7)
  No 121 (83.4)
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Information about the patients’ characteristics. *High-grade diffuse large B-cell lymphoma. **Primary mediastinal large B-cell lymphoma. ***Double-hit or triple-hit DLBCL are rare subtypes of DLBCL characterized by two or three recurrent chromosome translocations and are generally associated with poor prognosis. ****Transformed disease is recorded for patients who had another type of lymphoma that transformed to DLBCL. *****Disease stage is determined by the location of the tumor: Stage I means that the cancer is located in a single region, usually one lymph node and the surrounding area. Stage II means that the cancer is located in two separate regions, an affected lymph node or lymphatic organ and a second affected area, and that both affected areas are confined to one side of the diaphragm; Stage III means that the cancer has spread to both sides of the diaphragm, including one organ or area near the lymph nodes or the spleen; Stage IV means diffuse or disseminated involvement of one or more extralymphatic organs, including any involvement of the liver, bone marrow, or nodular involvement of the lungs.
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The clinical trial used a two-stage design, with an interim analysis for futility based on data collected from the first 52 patients. The results of the interim analysis for futility in May 2019 showed that the clinical trial met the criteria to continue to full enrollment. Patients received a 150 µg/kg dose on the first day of each 21-day treatment cycle for two treatment cycles, followed by a reduction to a 75 µg/kg dose on the first day of each 21-day treatment cycle for up to one year. The decision for initial dosing at the 150 µg/kg dose level was predicated on higher observed and predicted ORR as compared to lower dose levels. The decision to reduce the dose level after two treatment cycles was based on the rapid onset of initial response observed in the majority of patients in the Phase 1 clinical trial and the desire to optimize the risk-benefit profile for patients. Therefore, the dosing regimen was selected to optimize the frequency of objective response, while permitting continued exposure with manageable toxicity to optimize the durability of response. In this clinical trial, response to treatment was determined as CR, PR, SD or PD, based on the 2014 Lugano Classification Criteria. We also collected liquid biopsies from all patients before and after treatment with Lonca and we are applying multi-omics approaches (i.e., biological analysis approaches in which data sets of different “omic” groups, such as genome, proteome, and epigenome, are combined) to identify genetic signatures that may predict response to Lonca.
Clinical Trial Results
The mean number of treatment cycles received was 4.5 and the maximum number of treatment cycles received was 18.
As of August 6, 2020, the main observed safety and tolerability findings were as follows:
•Grade ≥3 TEAEs were reported in 106 patients, or 73.1% of patients. The most common Grade ≥3 TEAEs that were reported in more than 10% of patients included neutropenia (reported in 26.2% of patients), thrombocytopenia (reported in 17.9% of patients), gamma-glutamyltransferase increased (reported in 17.2% of patients) and anemia (reported in 10.3% of patients).

•Treatment-related adverse events in 26 patients, or 17.9% of patients, led to treatment discontinuation. The most common of such adverse events that that led to treatment discontinuation in more than 2% of patients included gamma-glutamyltransferase increased (led to treatment discontinuation in 11.0% of patients), peripheral edema (led to treatment discontinuation in 2.8% of patients) and localized edema (led to treatment discontinuation in 2.1% of patients).

•No increase in adverse events was observed in patients aged ≥65 years compared to younger patients.
The main observed efficacy findings were as follows:

•Thirty-six patients, or 24.8% of patients, achieved a complete response and another 34 patients, or 23.4% of patients, achieved a partial response, resulting in a 48.3% ORR. The table below shows the response rate data. The median time to first response was 41.0 days.
  Histology
Best Overall Response, n (%)
DLBCL-NOS
(n=127)
HGBCL
(n=11)
PMBCL
(n=7)
All Patients
(n=145)
Complete response (CR) 31 (24.4) 5 (45.5) 0  (0.0) 36 (24.8)
Partial response (PR) 33 (26.0) 0  (0.0) 1 (14.3) 34 (23.4)
Stable disease 20 (15.7) 1  (9.1) 1 (14.3) 22 (15.2)
Progressive disease 23 (18.1) 4 (36.4) 3 (42.9) 30 (20.7)
Not evaluable 20 (15.7) 1  (9.1) 2 (28.6) 23 (15.9)
Overall response rate (CR + PR) 64 (50.4) 5 (45.5) 1 (14.3) 70 (48.3)
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Response rate data. “Not evaluable” means that the patient met the criteria for inclusion in the efficacy analysis set, but the only scan obtained for disease assessment was indeterminate.
•Lonca’s favorable clinical activity was observed across a broad patient population in this clinical trial, including transplant eligible and ineligible patients, patients who have not responded to first-line therapy or any prior therapy, patients with bulky disease, double-hit and triple-hit disease and transformed disease and patients who had received prior CD19 therapies or SCT. The tables below show the effect by tumor characteristics, age, response to prior therapy (i.e., stem cell transplant or CAR-T) on response rate data.
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Tumor Characteristics
Overall Response Rate,
responders/total (%)
Double-hit or triple-hit disease  5/15 (33.3)
Transformed disease 13/29 (44.8)
Double/triple expressor 10/20 (50.0)
Germinal center B-cell DLBCL 26/48 (54.2)
Activated B-cell DLBCL 11/23 (47.8)
Age
Overall Response Rate,
responders/total (%)
Less than 65 32/65 (49.2)
More than or equal to 65 38/80 (47.5)
Response to Prior Therapy
Overall Response Rate,
responders/total (%)
Response to first-line systemic therapy Refractory 11/29 (37.9)
  Relapsed 53/99 (53.5)
Response to prior last-line systemic therapy Refractory 31/84 (36.9)
  Relapsed 29/43 (67.4)
Response to any prior line systemic therapy Refractory 9/25 (36.0)
  Relapsed 60/115 (52.2)
Prior Therapy
Overall Response Rate,
responders/total (%)
Stem cell transplant 14/24 (58.3)
CAR-T 6/13 (46.2)
Prior Number of Systemic Therapies
Overall Response Rate,
responders/total (%)
Two prior lines 30/63 (47.6)
Three prior lines 17/35 (48.6)
More than three prior lines 23/47 (48.9)
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Overall response rate data by various baseline patient characteristics.

•The median DoR was 12.58 months for patients who achieved a response and 13.37 months for patients who achieved a complete response. The median DOR observed in subgroups at high risk of poor prognosis was comparable to that observed in the overall study population. The figure below shows the DoR.


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ADC-20201231_G12.JPG

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Duration of response. *mDoR for patients with a PR was 5.68 months.

•Fifteen patients received CD-19 directed CAR-T after receiving treatment with Lonca, with an investigator-assessed ORR of 46.7% (6 CR and 1 PR). Nine patients received SCT as consolidation after responding to treatment with Lonca.

•The median progression free survival was 5.09 months.

•The median overall survival was 9.53 months.

Phase 1/2 Combination Clinical Trial with Ibrutinib
Ibrutinib is a small-molecule inhibitor of Bruton’s tyrosine kinase (“BTK”), a mediator of the B cell receptor signaling pathway implicated in the pathogenesis of B cell cancers. BTK’s role in signaling results in activation of pathways necessary for B cell tracking, chemotaxis and adhesion. Ibrutinib forms a covalent bond with cysteine residue in the BTK active site, leading to inhibition of BTK enzymatic activity. Nonclinical studies have shown that ibrutinib inhibits malignant B cell proliferation and survival in vivo as well as cell migration and substrate adhesion in vitro. Currently, ibrutinib is indicated for the treatment of several types of B-NHL, including MCL.
Both Lonca and ibrutinib have demonstrated clinical activity as single agents for the treatment of relapsed or refractory B-NHL, including DLBCL and MCL. For example, ibrutinib has shown a 37% response rate, including a 16% complete response rate for patients with non-GCB DLBCL and a 5% response rate for patients with GCB DLBCL. In addition, in our preclinical studies in DLBCL models, we have observed synergistic effects when Lonca and ibrutinib were used in combination. We believe that combining these two targeted agents with different mechanisms of action has the potential to increase clinical activity compared to either agent alone.
We are conducting a Phase 1/2 open-label, single-arm dose escalation and dose expansion clinical trial of the safety and efficacy of Lonca, used in combination with ibrutinib, in patients with relapsed or refractory DLBCL or MCL. We are conducting the clinical trial at 16 sites in the United States and Europe, pursuant to an IND accepted by the FDA in December 2015, an additional protocol submitted in July 2018 and amended protocols submitted in January and May 2020. The first patient was dosed in February 2019 and the first patient in the pivotal Phase 2 portion was dosed in July 2020. The clinical trial’s design and our interim findings are summarized below.
Clinical Trial Design
The primary objectives of the Phase 1 part of this clinical trial were to (i) characterize the safety and tolerability of Lonca in combination with ibrutinib and (ii) identify the MTD, recommended dose and dose schedule for Lonca in this clinical trial. The primary objective of the Phase 2 part of this clinical trial is to evaluate the efficacy of Lonca in combination with ibrutinib, as measured by ORR, DoR, OS and PFS. The secondary objectives of the Phase 1 part of this clinical trial were to (i) evaluate the anti-tumor effect of the combination of Lonca with
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ibrutinib, (ii) characterize the pharmacokinetic profile of Lonca when given in combination with ibrutinib and (iii) evaluate the immunogenicity of Lonca when given in combination with ibrutinib. The objectives of the Phase 2 part of this clinical trial are to (i) evaluate the safety and efficacy of Lonca in combination with ibrutinib, (ii) characterize the pharmacokinetic profile and immunogenicity of Lonca when given in combination with ibrutinib and (iii) evaluate the impact of Lonca in combination with ibrutinib on patient-reported outcomes, including symptoms, functions and overall status.

The clinical trial is enrolling patients with pathologically confirmed relapsed or refractory DLBCL who have failed or are intolerant to available standard therapy and patients with pathologically confirmed relapsed or refractory MCL who had received at least one prior line of therapy. The clinical trial is expected to enroll approximately 161 patients. The table below presents information about the characteristics of the first 37 patients in Phase 1 portion of this clinical trial at the 60 µg/kg dose level of Lonca in combination with ibrutinib, comprised of 24 non-GCB DLBCL patients, 6 GCB DLBCL patients and 7 MCL patients.
Patient Characteristics DLBCL
(n=30) 		MCL
(n=7) 		 All Patients
(n=37)
Age, median (minimum, maximum) 72 (40, 91) 69 (54, 89) 72 (40, 91)
ECOG performance status*, n (%) 0 16 (53.3) 4 (57.1) 20 (54.1)
  1 11 (36.7) 3 (42.9) 14 (37.8)
  2 3 (10.0) 0 (0.0) 3 (8.1)
Disease stage**, n (%) Stage II 3 (10.0) 0 (0.0) 3 (8.1)
  Stage III 5 (16.7) 1 (14.3) 6 (16.2)
  Stage IV 22 (73.3) 6 (85.7) 28 (75.7)
Number of previous systemic therapies received, median (minimum, maximum) 2 (1, 6) 2 (1, 4) 2 (1, 6)
Response to first-line systemic therapy, n (%) Relapsed 20 (66.7) 4 (57.1) 24 (64.9)
  Refractory 7 (23.3) 1 (14.3) 8 (21.6)
Response to last-line systemic therapy, n (%) Relapsed 13 (43.3) 4 (57.1) 17 (45.9)
  Refractory 17 (56.7 1 (14.3) 18 (48.6)
Prior stem cell transplant, n (%) Autologous stem cell transplant 2 (6.7) 1 (14.3) 3 (8.1)
  Allogeneic stem cell transplant 0 (0.0) 1 (14.3) 1 (2.7)
  No 28 (93.3) 5 (71.4) 33 (89.2)
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Information about the patients’ characteristics. *ECOG performance status describes a patient’s level of functioning in terms of their ability to care for themself, daily activity and physical ability: Grade 0 means fully active, able to carry on all pre-disease performance without restriction; Grade 1 means restricted in physically strenuous activity but ambulatory and able to carry out work of a light or sedentary nature; Grade 2 means ambulatory and capable of all self-care but unable to carry out any work activities. **Disease stage is determined by the location of the tumor: Stage I means that the cancer is located in a single region, usually one lymph node and the surrounding area. Stage II means that the cancer is located in two separate regions, an affected lymph node or lymphatic organ and a second affected area, and that both affected areas are confined to one side of the diaphragm; Stage III means that the cancer has spread to both sides of the diaphragm, including one organ or area near the lymph nodes or the spleen; Stage IV means diffuse or disseminated involvement of one or more extralymphatic organs, including any involvement of the liver, bone marrow, or nodular involvement of the lungs.
The clinical trial will have three stages: dose escalation stage, followed by dose expansion stage in the Phase 1 portion, and a pivotal Phase 2 portion to support our application for accelerated approval. In the dose escalation stage, patients concurrently received ibrutinib at 560 mg daily by mouth and received intravenous infusions of Lonca, at escalating doses, on the first day of the first two 21-day treatment cycles followed by the same dose of ibrutinib in subsequent 28-day treatment cycles for up to one year. Patients who have a response of PR or SD at the 14-week disease assessment may receive two additional doses of Lonca given four weeks apart. The initial dose of Lonca was 60 µg/kg and the highest allowed dose was 90 µg/kg. Dose escalation was conducted using a 3+3 design with oversight by a DESC. Lonca at 60 µg/kg in 21-day treatment cycles in combination with ibrutinib at 560 mg daily was deemed to be the MTD regimen by the DESC. In the dose expansion stage, additional patients in three disease cohorts, non-GCB DLBCL, GCB DLBCL and MCL, received the MTD of the treatment combination to obtain additional safety and preliminary anti-tumor activity information for the recommended Phase 2 dose (“PR2D”). The PR2D is the 60 µg/kg dose of Lonca given on the first day of the first two 21-day treatment cycles in combination with ibrutinib at 560 mg daily concurrently, followed by the same dose of ibrutinib in subsequent 28-day treatment cycles for up to one year. Patients who have a response (CR, PR or SD) to the treatment at later disease assessments (week 14 and week 30) will receive additional doses of Lonca at day 1 of cycles 5, 6, 9 and 10. The pivotal Phase 2 portion has the same three disease cohorts. The primary endpoint of this clinical trial is the complete response rate for patients in the non-GCB DLBCL cohort. In this clinical trial, response to treatment is determined as CR, PR, SD or PD, based on the 2014 Lugano Classification Criteria.

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Interim Data - Phase 1 Portion

In the Phase 1 portion of the clinical trial, as of August 6, 2020, at the 60 µg/kg dose level of Lonca in combination with ibrutinib, 37 patients had been enrolled, comprised of 24 non-GCB DLBCL patients, 6 GCB DLBCL patients and 7 MCL patients. The median duration of treatment was 70 days.
The main observed safety and tolerability findings were as follows:

•Grade ≥3 TEAEs were reported in 23 patients, or 62.2% of patients. The most common Grade ≥3 TEAEs that were reported in more than 5% of patients included anemia (reported in 10.8% of patients), neutropenia (reported in 10.8% of patients), thrombocytopenia (reported in 5.4% of patients) and fatigue (reported in 5.4% of patients).

•TEAEs in two patients, or 5.4% of patients, led to treatment discontinuation.
•No DLT was observed in patients who received the combination therapy at the MTD/RP2D. One DLT of Death Not Otherwise Specified was observed in a patient treated with Lonca at the 90 µg/kg dose level in combination with ibrutinib, which the investigator assessed as unlikely to be related to Lonca and as possibly being related to ibrutinib, the disease and/or comorbidities. One DLT of anemia and thrombocytopenia was observed in a patient treated with Lonca at the 90 µg/kg dose level in combination with ibrutinib, which the investigator assessed as possibly being related to Lonca, ibrutinib, the disease and/or comorbidities.
Twenty-nine DLBCL patients and six MCL patients who received the RP2D in the Phase 1 portion were evaluable for efficacy. The main observed efficacy findings were as follows:

•At the 60 μg/kg dose level, which is being used in the pivotal Phase 2 portion of the clinical trial, nine patients with non-GCB DLBCL, or 37.5% of patients, achieved a complete response and another seven patients, or 29.2% of patients, achieved a partial response, resulting in a 62.9% ORR. The table below shows the response rate data from this clinical trial at the 60 µg/kg dose level of Lonca in combination with ibrutinib.
Best Overall Response, n (%)
Non-GCB DLBCL
(n=24)
GCB DLBCL
(n=5)
All DLBCL
(n=29)
MCL
(n=6)
Complete response (CR) 9 (37.5) 0 (0.0) 9 (31.0) 2 (33.3)
Partial response (PR) 7 (29.2) 1 (20.0) 8 (27.6) 3 (50.0)
Stable disease 1 (4.2) 1 (20.0) 2 (6.9) 0  (0.0)
Progressive disease 7 (29.2) 3 (60.0) 10 (34.5) 1 (16.7)
Overall response rate (CR + PR) 16 (66.7) 1 (20.0) 17 (58.6) 5 (83.3)
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Response rate data.
Phase 2 Portion

In the pivotal Phase 2 portion of the clinical trial, 28 patients have been enrolled as of the date of this Annual Report. The pivotal Phase 2 portion has a total target enrollment of 66 patients.

Pivotal Phase 2 Clinical Trial in Relapsed or Refractory Follicular Lymphoma
We intend to conduct a 150-patient Phase 2, randomized, two-arm, multi-center, open-label clinical trial to evaluate the safety and efficacy of Lonca in patients with relapsed or refractory FL. This clinical trial will be conducted pursuant to an IND accepted by the FDA in December 2015 and an additional protocol submitted in September 2020. We intend to commence this clinical trial in the first half of 2021. We believe that this clinical trial, if successful, will form the basis of a BLA submission for accelerated approval of Lonca for the treatment of relapsed or refractory FL in patients who have failed two or more treatment regimens.
The primary objective of the Phase 2 clinical trial is to evaluate the efficacy of Lonca compared to idelalisib in patients with relapsed or refractory FL, measured by CR based on the 2014 Lugano Classification Criteria. The secondary objectives are to (i) further evaluate the additional efficacy of Lonca compared to idelalisib, (ii) assess the safety profile of Lonca, (iii) characterize the pharmacokinetic profile of Lonca, (iv) evaluate the immunogenicity of Lonca and (v) evaluate the impact of Lonca treatment compared to idelalisib on patient-reported outcomes, including symptoms, functions and overall status.
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The clinical trial will enroll patients with pathologically confirmed relapsed or refractory FL who have previously received two or more treatment regimens, at least one of which must have contained an anti-CD20 therapy. The clinical trial is expected to enroll approximately 150 patients.
In the clinical trial, patients will be randomly assigned 2:1 to receive either (i) a 150 μg/kg dose of Lonca on the first day of each 21-day treatment cycle for two treatment cycles followed by a 75 μg/kg dose on the first day of each 21-day treatment cycle for subsequent treatment cycles or (ii) 150 mg dose of idelalisib twice daily. The decision for the initial dose level of Lonca is based on the observation in the Phase 1 clinical trial that there was a trend toward increased response with increased exposure and our ability to manage TEAEs at this dose level. In addition, we observed in our Phase 1 clinical trial that a substantial proportion of patients required a dose reduction after two cycles, while almost all of the responses were noted at the first disease assessment, which occurred after two cycles. Therefore, the dosing regimen for this pivotal Phase 2 clinical trial is selected to optimize potential response to treatment, while maintaining a manageable tolerability profile. In this clinical trial, response to treatment is determined as CR, PR, SD or PD, based on the 2014 Lugano Classification Criteria.
Camidanlumab Tesirine: PBD-Based ADC Targeting CD25
Overview
Our second lead product candidate, Cami, is an ADC targeting CD25-expressing cancers. We are developing Cami for the treatment of relapsed or refractory HL, NHL and solid tumors. The following summary provides key information about Cami:
•We retain worldwide development and commercialization rights to Cami.
•We are advancing Cami through clinical development to support a BLA submission for the treatment of relapsed or refractory HL.
•Cami is being evaluated in a 117-patient pivotal Phase 2 clinical trial for the treatment of relapsed or refractory HL, for which we anticipate reporting top-line response rate data in the first half of 2021.
◦As of January 29, 2021, enrollment has completed and 117 patients have been enrolled in this pivotal Phase 2 clinical trial.
◦As of August 24, 2020, we observed a preliminary 83.0% ORR and a 38.3% CRR. Three patients developed autoimmune neurotoxicity (two patients with Guillain–Barré syndrome and one patient with radiculopathy). As of the date of filing this Annual Report, the efficacy and safety profile in this clinical trial is similar to that observed in the Phase 1 clinical trial, and the rate of Guillain–Barré syndrome/polyradiculopathy in this clinical trial is similar to that observed as of August 24, 2020.
•A 133-patient Phase 1 clinical trial of Cami for the treatment of relapsed or refractory HL and NHL, including 77 patients with relapsed or refractory HL, has been completed. In this clinical trial, Cami demonstrated significant clinical activity across a broad patient population and maintained a tolerability profile that we believe was manageable. More specifically, as of April 2019, we observed:
◦At the initial dose for our pivotal Phase 2 clinical trial, an 86.5% ORR and a 48.6% CRR in heavily pre-treated patients with relapsed or refractory HL who had received a median of five prior lines of therapy, including patients who were relapsed or refractory to any or all of brentuximab vedotin, checkpoint inhibitors and stem cell transplant; and
◦A 44.0% ORR and an 8.0% CRR in heavily pre-treated patients with relapsed or refractory T-cell lymphoma who had received a median of four prior lines of therapy.
•Cami is also being evaluated in a Phase 1b clinical trial for the treatment of selected advanced solid tumors by targeting Tregs.
◦In paired biopsies from three of six patients in the Phase 1b clinical trial, we have observed a significant increase in the ratio of Teffs to Tregs.
◦We expanded our Phase 1b clinical trial to evaluate Cami in combination with pembrolizumab, a checkpoint inhibitor, to better understand its potential as both a monotherapy and in combination. In October 2020, we dosed the first patient in this clinical trial.
◦Preliminary PK/PD data indicate that treatment with Cami was associated with clinically relevant modulation of immune cells, both in the circulation and in tumor tissue.
Of the estimated 16,500 total patients diagnosed with HL each year in the United States and EU5, approximately 15% will exhibit relapsed or refractory HL. We believe that the treatment of relapsed or refractory HL remains an area of high unmet medical need. We are developing Cami as a third-line therapy for the treatment of HL. Despite recent developments in earlier lines of therapy due to the entry of brentuximab vedotin and pembrolizumab, there is currently no leading therapeutic option for the relapsed or refractory patient population. Accordingly, we estimate that the initial addressable incident patient population is approximately 1,200 patients per year in the United States and EU5.
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We may also undertake additional clinical trials of Cami in combination with other therapies, such as PD1-targeting agents, which, if successful, may allow Cami to be used as a second-line therapy for the treatment of relapsed or refractory HL, thereby increasing the addressable incident patient population to approximately 2,500 patients per year in the United States and EU5.
In addition to HL, we are evaluating Cami for the treatment of relapsed or refractory T-cell lymphoma. Of the estimated 11,000 total patients diagnosed with T-cell lymphoma each year in the United States and EU5, approximately 70% will exhibit relapsed or refractory T-cell lymphoma. We believe that the treatment of relapsed or refractory T-cell lymphoma remains an area of high unmet medical need. We intend to develop Cami as a second-line therapy for the treatment of relapsed or refractory T-cell lymphoma to address the high unmet medical need of this patient population.
We believe that the commercial potential of Cami, if approved, is supported by the following key attributes observed to date:

•Preliminary data from our pivotal Phase 2 clinical trial showed an 83.0% ORR and a 38.3% CRR in heavily pre-treated patients with relapsed or refractory HL who have failed a median of seven prior lines of therapy, including brentuximab vedotin and a checkpoint inhibitor approved for HL;
•Tolerability profile that we believe is manageable and reasonable given the high response rate in HL;
•The potential opportunity to advance Cami into earlier lines of therapy for HL as a monotherapy or in combination with other therapies;
•Future opportunity for a novel immuno-oncology approach targeting Tregs for the treatment of various advanced solid tumors; and
•30-minute intravenous infusions once every three weeks.
Structure and Mechanism of Action
Cami is composed of a human monoclonal antibody (HuMax®-TAC) directed against human CD25 and conjugated through a cathepsin-cleavable linker to SG3199, a PBD dimer cytotoxin. Once bound to a CD25-expressing cell, it is designed to be internalized by the cell, following which the warhead is released. The warhead is designed to bind irreversibly to DNA to create highly potent interstrand cross-links that block DNA strand separation, thus disrupting essential DNA metabolic processes such as replication and ultimately resulting in cell death. The figure below shows a visual representation of Cami and its mechanism of action.
ADC-20201231_G13.JPG
_______________

Visual representation of Cami.
CD25, or T cell activation antigen, is the alpha chain of IL-2R. In normal human tissue, expression of CD25 is mainly limited to activated T cells and activated B cells. CD25 is involved in autoimmunity, organ transplantation, and graft rejection, and Tregs are involved in the prevention of autoimmune processes. The preponderance of CD25-expressing cells in hematological malignancies and the relationship between increased CD25 expression and poor prognosis raises the possibility of using an anti-CD25 antibody to deliver a potent cytotoxin to these cells in patients.
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We believe that CD25 is an attractive target for ADCs developed to treat hematological malignancies and solid tumors for the following reasons:
•CD25 expression in healthy human tissue is mainly limited to activated T cells and activated B cells.
•CD25 is expressed in a wide range of hematological malignancies.
•The importance of CD25 overexpression as a prognosticator in hematological malignancies has been shown in multiple indications, including DLBCL.
•CD25 positive Treg cells have been shown to play a role in undermining anti-tumor immune functions.
•The safety profiles of monoclonal antibodies directed against CD25 have been well characterized.
•Clinical proof of concept for treatment of CD25 positive malignancies has been established using radio-immunoconjugates and immunotoxins incorporating the anti-CD25 antibodies.
Phase 1 Clinical Trial in Relapsed or Refractory Hodgkin and Non-Hodgkin Lymphoma
We have completed a Phase 1, open-label, dose escalation and dose expansion clinical trial of the safety and tolerability of Cami, used as monotherapy, in patients with relapsed or refractory HL or NHL. The clinical trial was conducted at 12 sites in the United States and Europe, pursuant to an IND accepted by the FDA in April 2015. The first patient was dosed in October 2015. The results of the clinical trial showed encouraging anti-tumor activity and maintained a tolerability profile that we believe was manageable in patients with relapsed or refractory HL or NHL. The clinical trial’s design and our main findings are summarized below.
Clinical Trial Design
The primary objectives of the dose escalation stage of the clinical trial were to (i) evaluate the safety and tolerability, and determine, as appropriate, the MTD of Cami in patients with relapsed or refractory HL or NHL and (ii) determine the recommended dose(s) of Cami for the dose expansion stage of the clinical trial. The primary objective of the dose expansion stage was to evaluate the safety and tolerability of Cami at the dose level(s) recommended from the results of the dose escalation stage. The secondary objectives of the clinical trial were to (i) evaluate the clinical activity of Cami, as measured by ORR, DoR, OS and PFS, (ii) characterize the pharmacokinetic profile of Cami and the free warhead SG3199 and (iii) evaluate ADAs in patients’ blood before, during and after treatment with Cami.
The clinical trial enrolled patients with pathologically confirmed relapsed or refractory HL who have failed or were intolerant to brentuximab vedotin and have received a checkpoint inhibitor and is enrolling patients with pathologically confirmed relapsed or refractory NHL who have failed or were intolerant to any established therapy. Of the 133 patients who participated in the clinical trial, 77 were diagnosed with relapsed or refractory HL and the remaining 56 were diagnosed with relapsed or refractory NHL, including 34 patients with relapsed or refractory T-cell lymphoma.

In the dose escalation stage, patients received intravenous infusion of Cami, at escalating doses, on the first day of each 21-day treatment cycle. Eleven dose levels were tested, ranging from 3 µg/kg to 150 µg/kg. The MTD was defined as the highest dose level that has at least a 60% probability that the DLT rate is less than 30%. Dose levels were expanded for further investigations: patients with HL received 30 µg/kg or 45 µg/kg doses on the first day of each 21-day treatment cycle, while patients with T-cell lymphoma received 60 µg/kg or 80 µg/kg doses on the first day of each 21-day treatment cycle. These dose levels were determined by the DESC based on the anti-tumor activity and tolerability observed during the dose escalation stage. In this clinical trial, response to treatment is determined as CR, PR, SD or PD, based on the 2014 Lugano Classification Criteria.
Clinical Trial Results
Hodgkin Lymphoma
As of April 2019, for patients with relapsed or refractory HL (n=77), the median prior lines of therapy received was five. The median number of treatment cycles received was three and the maximum number of treatment cycles received was 15. The median duration of treatment was 50 days.
The main observed safety and tolerability findings in patients with relapsed or refractory HL were as follows:
•The MTD was not reached in the dose escalation stage.
•Grade ≥3 TEAEs were reported in 51 patients, or 66.2% of patients. The most common Grade ≥3 TEAEs that are reported in more than 10% of patients included gamma-glutamyltransferase increased (reported in 16.9% of patients, including 8.1% of patients at the
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45 µg/kg initial dose being used in our pivotal Phase 2 clinical trial) and maculopapular rash (reported in 16.9% of patients, including 21.6% of patients at the 45 µg/kg initial dose being used in our pivotal Phase 2 clinical trial).
In August and September 2017, we informed the FDA that two patients with HL were diagnosed with Guillain–Barré syndrome and one HL patient was diagnosed with polyradiculopathy. The FDA issued a partial clinical hold on our clinical trial, pursuant to which we suspended the enrollment of new patients but continued the treatment of enrolled patients who would derive clinical benefit from continued treatment with Cami. We amended the clinical trial protocol and informed consent form to include, among other things, additional risk factors to patient screening, additional exclusion criteria and routine neurologic evaluation prior to and during the clinical trial to monitor the occurrence of Guillain–Barré syndrome. In January 2018, the FDA lifted the partial clinical hold without condition. One of the patients diagnosed with Guillain–Barré syndrome achieved a partial response, subsequently progressed and died in June 2019 while under care at another facility. The other patient diagnosed with Guillain–Barré syndrome achieved a complete response and underwent, but died from complications related to, allogeneic stem cell transplant.
In September 2018, we informed the FDA that two additional patients with HL were diagnosed with Guillain–Barré syndrome. We voluntarily suspended patient enrollment and undertook a detailed safety review of our clinical trial in accordance with our clinical trial protocol and submitted it to the FDA. Our safety review showed with 99% confidence that HL patients were a distinct population at risk of developing Guillain–Barré syndrome and included input from a Clinical Advisory Panel that noted the potential positive benefit-risk ratio for patients with few alternative treatment options. Upon review, in October 2018, the FDA agreed that we can resume patient enrollment and made certain recommendations, including the expansion of the HL 30 μg/kg dose cohort to ten additional patients, the continued assessment of pharmacokinetics and regulatory T cell profiles in the clinical trial, and that we consult with the FDA regarding the decision of final dose selection before closing the 30 μg/kg dose cohort. We subsequently implemented the FDA’s recommendations. As of May 2019, the two patients diagnosed with Guillain–Barré syndrome achieved a complete response and were alive.
There have been no cases of Guillain–Barré syndrome in the more than 130 patients with NHL, acute leukemia or solid tumors treated with Cami. Clinical literature suggests that patients with HL have a higher incidence of Guillain–Barré syndrome than patients with other cancers or otherwise healthy individuals. In March and May 2020, in our Phase 2 clinical trial of Cami for the treatment of relapsed or refractory HL, three patients were diagnosed with Guillain–Barré syndrome. See “—Pivotal Phase 2 Clinical Trial in Relapsed or Refractory Hodgkin Lymphoma.”
•TEAEs in 20 patients, or 26.0% of patients, led to treatment discontinuation.
The main observed efficacy findings in patients with relapsed or refractory HL were as follows:
•Across all dose levels, 30 patients, or 40.0% of patients, achieved a complete response and another 23 patients, or 30.7% of patients, achieved a partial response, resulting in a 70.7% ORR. At the 45 µg/kg dose level being used as the initial dose in a pivotal Phase 2 clinical trial, 18 patients, or 48.6% of patients, achieved a complete response and another 14 patients, or 37.8% of patients achieved a partial response, resulting in an 86.5% ORR.
•Cami’s favorable clinical activity was observed across a broad patient population in this clinical trial, including patients who have failed brentuximab vedotin, a checkpoint inhibitor and SCT. The table below shows the effect of age, prior therapy and response to prior therapy on response rate data at the 45 µg/kg dose level being used as the initial dose in a pivotal Phase 2 clinical trial.
Age
Overall Response Rate,
responders/total (%)
Less than or equal to 55 25/28 (89.3), including 14/28 (50.0) CR
More than 55 7/9 (77.8), including 4/9 (44.4) CR
Prior Therapy
Overall Response Rate,
responders/total (%)
Brentuximab vedotin 32/37 (86.5)
Brentuximab vedotin and checkpoint inhibitor 23/26 (88.5)
Stem cell transplant 16/18 (88.9)
Brentuximab vedotin, checkpoint inhibitor and stem cell transplant 13/14 (92.9)
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Response to Prior Therapy
Overall Response Rate,
responders/total (%)
Response to first-line therapy Refractory 11/13 (84.6), including 6/13 (46.2) CR
  Relapsed 21/24 (87.5), including 12/24 (50.0) CR
Response to most recent therapy Refractory 22/25 (88.0), including 11/25 (44.0) CR
  Relapsed 8/10 (80.0), including 6/10 (60.0) CR
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Overall response rate data by various baseline patient characteristics at the 45 µg/kg dose level.

•Across all dose levels, the median DoR was 8.1 months for patients who achieved a complete response and 5.1 months for patients who achieved a partial response, for an overall mDoR of 6.4 months. At the 45 µg/kg dose level being used as the initial dose in a pivotal Phase 2 clinical trial, the median DoR was 7.2 months for patients who achieved a complete response and 5.6 months for patients who achieved a partial response, for an overall mDoR of 6.6 months.
T-Cell Lymphoma
As of April 2019, for patients with relapsed or refractory T-cell lymphoma (n=29), the median prior lines of therapy received was four. The median number of treatment cycles received was three and the maximum number of treatment cycles received was seven. The median duration of treatment was 38 days.
The main observed safety and tolerability findings from the Phase 1 clinical trial in patients with relapsed or refractory T-cell lymphoma were as follows:
•The MTD was not reached in the dose escalation stage.
•Grade ≥3 TEAEs were reported in 23 patients, or 79.3% of patients. The most common Grade ≥3 TEAEs, reported in more than 5% of patients, included hypercalcemia (10.3%), acute kidney injury (6.9%), back pain (6.9%), dehydration (6.9%), gamma-glutamyltransferase increased (6.9%), lung infection (6.9%), platelet count decreased (6.9%), pyrexia (6.9%), rash (6.9%) and maculopapular rash (6.9%).
•TEAEs in two patients, or 6.9% of patients, led to treatment discontinuation.
•No cases of Guillain–Barré syndrome or polyradiculopathy were reported.
The main observed efficacy findings from the Phase 1 clinical trial in patients with relapsed or refractory T-cell lymphoma were as follows:
•Across all dose levels, two patients, or 8.0% of patients, achieved a complete response and another nine patients, or 36.0% of patients, achieved a partial response, resulting in a 44.0% ORR.
Pivotal Phase 2 Clinical Trial in Relapsed or Refractory Hodgkin Lymphoma
We have completed enrollment of a 117-patient Phase 2, multi-center, open-label, single-arm clinical trial to evaluate the safety and efficacy of Cami in patients with relapsed or refractory HL. We are conducting the clinical trial at sites in the United States and Europe pursuant to an IND accepted by the FDA in April 2015 and an additional protocol submitted in March 2019. The first patient was dosed in September 2019. We anticipate reporting top-line response rate data in the first half of 2021. The clinical trial’s design is summarized below.
Clinical Trial Design
The primary objective of the Phase 2 clinical trial is to evaluate the efficacy of Cami in patients with relapsed or refractory HL, measured by ORR based on the 2014 Lugano Classification Criteria. The secondary objectives are to (i) characterize additional efficacy endpoints of Cami, including DoR, complete response rate, PFS and OS, (ii) characterize the safety profile of Cami, (iii) characterize the pharmacokinetic profile of Cami, (iv) evaluate the immunogenicity of Cami, and (v) evaluate the impact of Cami treatment on HRQoL.
The clinical trial is enrolling patients with pathologically confirmed relapsed or refractory HL who have failed three prior lines of therapy (or at least two prior lines in SCT-ineligible patients), including brentuximab vedotin and a checkpoint inhibitor approved for HL, such as nivolumab or pembrolizumab. The table below presents information about the first 51 patients’ characteristics.
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Patient Characteristics
Age, median (minimum, maximum) 36 (20, 74)
Histology, n (%) Nodular sclerosis cHL 40 (78.4)
  Other/unknown/not evaluable* 11 (21.6)
ECOG performance status**, n (%) 0 29 (56.9)
1 19 (37.3)
  2 3 (5.9)
Number of previous systemic therapies received, median (minimum, maximum) 7 (3,20)
Response to first-line systemic therapy, n (%) Relapsed 35 (68.6)
  Refractory 12 (23.5)
Response to last-line systemic therapy, n (%) Refractory 25 (49.0)
Prior stem cell transplant, n (%) Autologous stem cell transplant 31 (60.8)
  Allogeneic stem cell transplant 2 (3.9)
Both autologous and allogeneic stem cell transplant 4 (7.8)
Prior treatment with brentuximab vedotin and PD-1 blockade 50 (98.0)
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Information about the patients’ characteristics. One patient had a protocol deviation of no prior treatment with brentuximab vedotin. * Includes mixed cellularity and lymphocyte-rich cHL, and subtype not specified/unknown. **ECOG performance status describes a patient’s level of functioning in terms of their ability to care for themself, daily activity and physical ability: Grade 0 means fully active, able to carry on all pre-disease performance without restriction; Grade 1 means restricted in physically strenuous activity but ambulatory and able to carry out work of a light or sedentary nature; Grade 2 means ambulatory and capable of all self-care but unable to carry out any work activities.
In the clinical trial, patients receive a 45 µg/kg dose of Cami on the first day of each 21-day treatment cycle for two treatment cycles and receive a 30 µg/kg dose on the first day of each 21-day treatment cycle for subsequent treatment cycles. The decision for the initial dose level is based on the following observations from our Phase 1 clinical trial: (i) the favorable ORR and complete response rate together with Cami’s tolerability profile, (ii) the high fraction of patients with HL who could tolerate at least two cycles of Cami before an AE leading to a dose delay or modification occurred and (iii) the ability to manage some of the severe TEAEs at this dose level. The decision to reduce the subsequent dose level to 30 µg/kg is based on the potential to mitigate the frequency and severity of AEs foreseen in patients treated with the 45 µg/kg dose level beyond two treatment cycles while being an active dose. Therefore, the dosing regimen is selected to optimize potential response to treatment, while maintaining a manageable tolerability profile. In this clinical trial, response to treatment is determined as CR, PR, SD or PD, based on the 2014 Lugano Classification Criteria.
Interim Data

As of August 24, 2020, 51 patients were enrolled in this clinical trial. The median number of treatment cycles received was 5 and the maximum number of treatment cycles received was 11.

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The main observed safety and tolerability findings were as follows:
•
Grade ≥3 TEAEs were reported in 32 patients, or 62.7% of patients. The most common Grade ≥3 TEAEs that were reported in more than 5% of patients included hypophosphatemia (reported in 11.8% of patients), gamma-glutamyltransferase increased (reported in 9.8% of patients), alanine aminotransferase increased (reported in 5.9% of patients) and maculopapular rash (reported in 5.9% of patients).
•
Three cases of Guillain–Barré syndrome/polyradiculopathy were reported, including one case of Grade 4 Guillain–Barré syndrome (inflammatory demyelinating polyneuropathy), one case of Grade 2 radiculopathy (radiculitis) and one case of Grade 2 Guillain–Barré syndrome.

In March 2020, two patients in this clinical trial were diagnosed with Guillain–Barré syndrome. Pursuant to the clinical trial protocol, which included specific stopping rules for Guillain–Barré syndrome, we suspended enrollment of new patients in this clinical trial but continued to treat enrolled patients who could derive clinical benefit from continued treatment with Cami.

Before we resumed enrollment pursuant to the recommendations of an independent DSMB, on April 17, 2020, the FDA issued a partial clinical hold on this clinical trial. The FDA agreed that, pending its review, we could continue to treat enrolled patients, including patients with stable disease, who could derive clinical benefit from continued treatment with Cami. In May 2020, an additional patient was diagnosed with Guillain–Barré syndrome. At the FDA’s request, we submitted certain information, including an updated investigator’s brochure, an updated clinical trial protocol, the DSMB meeting minutes, an updated informed consent form, dose and exposure analysis for safety and response and an updated safety monitoring plan. In July 2020, the FDA lifted the partial clinical hold.

There have been no cases of Guillain–Barré syndrome in the more than 130 patients with NHL, acute leukemia or solid tumors treated with Cami. Clinical case literature suggests that patients with HL have a higher incidence of Guillain–Barré syndrome than patients with other cancers or otherwise healthy individuals.
•
Two fatal TEAEs were observed, including one case of myocardial infarction, which was assessed as not related to treatment, and one case of respiratory failure, which was assessed as unlikely to be related to treatment.
•
TEAEs in 6 patients, or 11.8% of patients, led to dose reduction or delay. TEAEs in 7 patients, or 13.7% of patients, led to treatment discontinuation.

The main observed efficacy findings were as follows:
•
Eighteen patients, or 38.3% of patients, achieved a complete response and another 21 patients, or 44.7% of patients, achieved a partial response, resulting in a 83.0% ORR. The table below shows the response rate data.

Best Overall Response, n (%)
(n=47)
Complete response (CR)
18 (38.3)
Partial response (PR)
21 (44.7)
Stable disease
5 (10.6)
Progressive disease
1 (2.1)
Not evaluable
2 (4.3)
Overall response rate (CR + PR)
39 (83.0)

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Response rate data.

•
Five patients, or 10.6% of patients, received SCT consolidation after treatment with Cami.

Pathway to Regulatory Approval
We believe the pivotal Phase 2 clinical trial, if successful, will form the basis of a BLA submission for accelerated approval of Cami for the treatment of relapsed or refractory HL in patients who have failed or were intolerant to brentuximab vedotin and a checkpoint inhibitor approved for HL. However, the FDA has not opined on whether our Phase 2 clinical trial will in fact be sufficient to support such approval.


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ADCT-602: PBD-Based ADC Targeting CD22
ADCT-602 is an ADC targeting CD22-expressing hematological malignancies. We have entered into a collaboration agreement with MD Anderson Cancer Center, pursuant to which they are conducting a Phase 1/2 clinical trial of ADCT-602 for the treatment of relapsed or refractory ALL.
Of the estimated 9,000 total patients diagnosed with ALL each year in the United States and EU5, approximately 30% will exhibit relapsed or refractory ALL. We believe that the treatment of relapsed or refractory ALL remains an area of high unmet medical need. New therapies for the treatment of ALL, such as tisagenlecleucel, blinatumomab and inotuzumab ozogamicin, are providing additional treatment options for patients with relapsed or refractory ALL. However, the heterogeneity of ALL and the existence of different subgroups within the disease mean there remains a high unmet medical need for portions of the ALL patient population. We intend to develop ADCT-602 as a therapeutic option for relapsed or refractory ALL to address the high unmet medical need of this patient population.
Structure and Mechanism of Action
ADCT-602 is composed of a humanized monoclonal antibody (hLL2-C220) directed against human CD22 and conjugated through a cathepsin-cleavable linker to SG3199, a PBD dimer cytotoxin. Once bound to a CD22-expressing cell, it is designed to be internalized by the cell, following which the warhead is released. The warhead is designed to bind irreversibly to DNA to create highly potent interstrand cross-links that block DNA strand separation, thus disrupting essential DNA metabolic processes such as replication and ultimately resulting in cell death. The figure below shows the structure of ADCT-602.
ADC-20201231_G14.JPG
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Visual representation of ADCT-602.
The human CD22 antigen plays a pivotal role in the recognition, binding and adhesion processes of cells. CD22 is only expressed on B cells throughout all stages of B cell development and differentiation. Its expression is maintained in high levels in hematological B cell malignancies, including in NHL and certain types of leukemia, including B-cell ALL. We believe that CD22 is an attractive target for ADCs developed to treat hematological malignancies for the following reasons:
•The CD22 antigen is rapidly internalized by the cell.
•An increasing number of reports describe the outgrowth of CD19-negative tumor cells in patients who initially respond to CD19-targeted therapy. We believe that given CD22’s broad and favorable expression profile, it may be a viable alternative B cell marker to CD19 for the targeted delivery of highly potent cytotoxic drugs.
Preclinical Studies
Preclinical Efficacy Studies
We evaluated the in vivo efficacy of ADCT-602 in the Ramos xenograft model, in which mice received a single dose of (i) ADCT-602 at 0.3 mg/kg, (ii) ADCT-602 at 1 mg/kg, (iii) a non-targeted ADC at 1 mg/kg, or (iv) a vehicle control. We observed that ADCT-602 exhibited dose-dependent anti-tumor activity, while the non-targeted ADC and the vehicle control did not demonstrate any significant anti-tumor activity.
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The table below summarizes the response data and the figures below show the mean tumor volume in the Ramos xenograft model and the Kaplan-Meier plot from the Ramos xenograft model.
  n (%)
Response
ADCT-602
0.3 mg/kg
(n=10)
ADCT-602
1 mg/kg
(n=10)
Non-Targeted ADC
1 mg/kg
(n=10)
Vehicle Control
(n=10)
Complete response 0 (0.0) 10 (100.0) 0 (0.0) 0 (0.0)
Partial response 0 (0.0)  0   (0.0) 0 (0.0) 0 (0.0)
Tumor-free survivor 0 (0.0)  9  (90.0) 0 (0.0) 0 (0.0)
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Response data obtained in the Ramos xenograft model. Partial response is recorded when the tumor volume was 50% or less of its Day 1 volume for three consecutive measurements during the course of the study, and equal to or greater than 13.5 mm3 for one or more of these three measurements. Complete response is recorded when the tumor volume was <13.5 mm3 for three consecutive measurements during the course of the study. Tumor-free survivor is recorded when a complete response is recorded at the termination of a study.

ADC-20201231_G15.JPG _______________

The anti-tumor activity of ADCT-602 in the Ramos xenograft model. Data represent the mean tumor volume ± SEM for each group of mice.

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ADC-20201231_G16.JPG
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The Kaplan-Meier plot of the activity of ADCT-602 in the Ramos xenograft model. Data represent Kaplan-Meier survival curves for each group of mice.
Preclinical Safety Studies
We evaluated the toxicity of ADCT-602 primarily in non-human primates and with a single-dose MTD study in rats. In non-human primates, ADCT-602 was observed to be well tolerated at the 0.6 mg/kg dose. Toxicity was characterized by dose-dependent reversible myelosuppression, bodyweight loss, lymphocyte depletion with loss of germinal centers and CD20-positive cells and nephropathy. In rats, the MTD for ADCT-602 was 2 mg/kg.
Phase 1/2 Clinical Trial in Relapsed or Refractory Acute Lymphoblastic Leukemia
Pursuant to our collaboration agreement with MD Anderson Cancer Center, MD Anderson Cancer Center is conducting a Phase 1/2, open-label, dose escalation and dose expansion clinical trial of the safety and anti-tumor activity of ADCT-602, used as monotherapy, in patients with relapsed or refractory ALL. The clinical trial is being conducted at one site in the United States, pursuant to an IND submitted by MD Anderson Cancer Center and accepted by the FDA in July 2018. The first patient was dosed in November 2018. The clinical trial’s design and the interim findings are summarized below.
Clinical Trial Design
The primary objectives of the dose escalation stage are to (i) evaluate the safety and tolerability, and determine, as appropriate, the MTD of ADCT-602 in patients with relapsed or refractory ALL and (ii) determine the recommended dose(s) of ADCT-602 for the dose expansion stage. The primary objective of the dose expansion stage is to evaluate the efficacy of ADCT-602 at the dose level(s) recommended from the results of the dose escalation stage. The secondary objectives of the clinical trial are to (i) evaluate the clinical activity of ADCT-602, as measured by ORR, DoR, OS and PFS, (ii) characterize the pharmacokinetic profile of ADCT-602 and the free warhead SG3199, (iii) evaluate the immunogenicity of ADCT-602 and (iv) characterize the effect of ADCT-602 exposure on the QT interval.
The clinical trial will enroll patients with pathologically confirmed relapsed or refractory B-ALL and patients with pathologically confirmed relapsed or refractory Ph+ ALL who have failed either first- or second-generation tyrosine kinase inhibitor. The clinical trial is expected to enroll approximately 65 patients.
In the dose escalation stage, patients receive intravenous infusions of ADCT-602, at escalating doses, on the first day of each 21-day treatment cycle. The initial dose of ADCT-602 is 30 µg/kg and the highest allowed dose will be 150 µg/kg. Dose escalation is conducted using a 3+3 design with oversight by a DESC. In the dose expansion stage, patients receive ADCT-602 at the recommended dose determined by the DESC based on the anti-tumor activity and tolerability observed during the dose escalation stage. Dose expansion is conducted according to Simon’s Minimax two-stage design. In the first stage, 22 patients (including six patients treated at the MTD in the dose escalation stage) will be dosed. If there are four or fewer responses in these patients, the clinical trial will stop. Otherwise, 19 additional patients will be dosed for a total of 41 patients. In this clinical trial, response to treatment is determined as CR, PR, SD or PD, based on the 2014 Lugano Classification Criteria.
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Interim Data
As of January 14, 2021, 11 patients have been treated with ADCT-602. Seven patients reported Grade ≥3 TEAEs, with the most common being infections and infestations and febrile neutropenia. No DLT has been observed.
All enrolled patients have discontinued therapy. One patient achieved a complete response and subsequently underwent allogeneic stem cell transplant. The study protocol has been amended to a weekly fractionated dosing and is adding two additional clinical sites. No patients have been enrolled on the amended protocol as of January 14, 2021.
Our Solid Tumor Franchise
Our solid tumor franchise comprises two clinical-stage product candidates and two preclinical product candidates for the treatment of various solid tumor cancers, including colorectal cancer, head and neck cancer, non-small cell lung cancer, gastric and esophageal cancers, pancreatic cancer, bladder cancer, renal cell carcinoma, melanoma, triple negative breast cancer and ovarian cancer. The figure below summarizes the product candidates in our solid tumor franchise.

ADC-20201231_G17.JPG
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 *In certain cases, a Phase 2 clinical trial may be a pivotal clinical trial (i.e., a clinical trial intended to serve as the basis for BLA submission). **We licensed to Overland ADCT BioPharma the exclusive development and commercialization rights to Lonca, ADCT-602, ADCT-601 and ADCT-901 in greater China and Singapore. See “Item 4. Information on the Company—B. Business Overview—License and Collaboration Agreements.”
The Solid Tumor Disease Setting
There are many different types of solid tumors and they account for the majority of cancers. The most commonly diagnosed solid tumor cancers include lung cancer, prostate cancer, breast cancer and colorectal cancer. The prognosis and treatment of solid tumor cancers vary based on the type of cancer.
Despite recent significant advances in the treatment of some solid tumor cancers, there remains a high medical need for novel therapies. One of the significant recent advances in the treatment of solid tumor cancers is the introduction of PD1 and PD-L1 checkpoint inhibitors, such as pembrolizumab, that leverages the body’s immune system to attack tumor cells. However, only 45% of cancer patients are eligible for treatment with checkpoint inhibitors and only 12% of cancer patients respond to treatment with checkpoint inhibitors. We are developing product candidates directed at different targets from those targeted by checkpoint inhibitors. We believe that our product candidates may enhance the efficacy of checkpoint inhibitors when they are used in combination and may provide a treatment option for patients who are not eligible for or do not respond to treatment with checkpoint inhibitors. We believe that there is a significant opportunity for our product candidates to address the high unmet medical need of these patient populations.
Camidanlumab Tesirine: PBD-Based ADC Targeting CD25
In addition to Cami’s hematological indications, we are also exploring its use as a novel immuno-oncology approach for the treatment of solid tumor cancers. Cami targets CD25 proteins expressed on Tregs, which contribute to the immunosuppressive tumor microenvironment in a variety of cancers, including colorectal, ovarian, lung, pancreatic cancers and melanoma, by allowing the tumor to evade immune surveillance. In recent years, a number of companies have begun exploring the therapeutic potential of approaches that deplete or reduce Tregs in the tumor microenvironment, while restoring the activity of cytotoxic Teffs. These approaches usually use a single mechanism of action. In contrast, Cami has three mechanisms of action that may enhance anti-tumor activity. First, Cami directly targets Tregs, with the goal of causing cell death. Second, after the target cell’s death, the PBD warhead is designed to diffuse into the tumor microenvironment, creating a bystander effect. Third, we believe that the target cell’s death triggers immunogenic cell death, which boosts the body’s anti-tumor immune response. We
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believe that these effects may further be enhanced by combining Cami with a checkpoint inhibitor. The figure below shows Cami’s proposed mechanisms of action in solid tumors.
ADC-20201231_G18.JPG
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Cami’s proposed mechanisms of action in solid tumors.
Preclinical Immuno-Oncology Studies in Solid Tumors
Preclinical Efficacy Studies
Preclinical immuno-oncology models rely on mice that have a functional immune system and can only use murine cancer cells. The antibody in Cami does not bind to murine Tregs or any murine cell line expressing CD25 and thus cannot be used in preclinical immuno-oncology models. We therefore created the surrogate antibody Sur301, which binds to murine CD25, using the same PBD warhead as Cami.
We evaluated the in vivo efficacy of Sur301 in the CD25 negative MC38 syngeneic model, in which mice received (i) one dose of Sur301 at various dose levels, alone or in combination with three doses of an anti-PD1 antibody, or (ii) either three doses of an anti-PD1 antibody, a non-targeted ADC or a vehicle control. We observed that Sur301, when used as a monotherapy, exhibited strong and durable anti-tumor activity that is superior to that achieved by the anti-PD1 antibody. Furthermore, we observed that combining a low dose of Sur301 (0.1 mg/kg) with the anti-PD1 antibody resulted in anti-tumor activity that was synergistic (i.e., the total effect of the combined drug is greater than the sum of the individual effects of each drug). The figures below show the mean tumor volume in the CD25 negative MC38 syngeneic model and the synergistic effect of Sur301 and the anti-PD1 antibody.
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ADC-20201231_G19.JPG
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 The anti-tumor activity of Sur301 in the CD25 negative MC38 syngeneic model. Data represent the mean tumor volume ± SEM for each group of mice.

ADC-20201231_G20.JPG
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 The synergistic effect of Sur301 and the anti-PD1 antibody in the CD25 negative MC38 syngeneic model. Data represent the mean tumor volume ± SEM for each group of mice.
In addition, the tumor-free survivors from our preclinical studies were re-challenged by being re-grafted with MC38 cancer cells. These re-grafted tumor-free survivors did not develop any tumor, suggesting that immunological memory was induced by treatment with Sur301, both alone or in combination with an anti-PD1 antibody. The figure below shows the mean tumor volume in the re-challenge of tumor-free survivors.

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ADC-20201231_G21.JPG
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The immunological memory induced by Sur301 in the re-challenge of tumor-free survivors. Treatments indicated represent the treatment that the tumor-free survivors received before the re-challenge. Data represent the mean tumor volume ± SEM for each group of mice.
We undertook a preclinical study to assess Sur301’s mechanism of action by removing CD8+ Teffs, which generally play an important role in anti-tumor immunity. Mice were treated with a CD8-depleting antibody to remove these cells before they were treated with Sur301, alone or in combination with an anti-PD1 antibody. We observed that the anti-tumor activity of Sur301 was lost when CD8+ Teffs were depleted, indicating these cells play a key role in Sur301’s anti-tumor activity. The figure below shows the mean tumor volume in mice treated with a CD8-depleting antibody.
ADC-20201231_G22.JPG
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The anti-tumor activity of Sur301 depends on CD8+ Teffs. Data represent the mean tumor volume ± SEM for each group of mice.
We performed a longitudinal T cell immunophenotype study following a single dose of Sur301 at 0.5 mg/kg, either alone or in combination with an anti-PD1 antibody, in mice bearing established MC38 tumors. Following Sur301 treatment, the ratio of CD8+ Teffs to Tregs increased throughout the study, and a further increase in the ratio was observed in the combination therapy group. Tumor-infiltrating CD8+ Teffs from the Sur301 treatment groups (either alone or in combination with the anti-PD1 antibody) had higher activation and
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proliferation rates compared with CD8+ Teffs from the control groups. This study supports our hypothesis that Sur301 depletes Tregs, allowing Teffs to expand.
The conclusions from our preclinical studies with Sur301 suggest that targeting CD25 positive Tregs in the tumor microenvironment with Cami may be an attractive approach to induce an effective anti-tumor response, especially when combined with checkpoint inhibitors, because:
•Sur301 exhibited strong and durable anti-tumor activity that is superior to that achieved by an anti-PD1 antibody;
•Sur301 exhibited strong synergistic effects when tested at a low dose level in combination with an anti-PD1 regimen;
•Sur301’s observed anti-tumor activity was dependent on CD8 Teffs, and a statistically significant increase in the ratio of intratumoral CD8+ Teffs to Tregs was observed after administration of Sur301; and
•Sur301 was associated with immunological memory in our re-challenge of tumor-free survivors.
Preclinical Safety Studies
We evaluated the toxicity of Cami primarily in non-human primates and with a single-dose MTD study in mice and rats. In non-human primates, Cami was observed to be well tolerated at 0.15 mg/kg. Toxicity was characterized by dose-dependent myelosuppression, increased liver enzymes, inflammation of the gastrointestinal tract, reduced bodyweight, nephropathy and skin toxicity. In mice and rats, the MTD for Cami was 9 mg/kg and 2 mg/kg, respectively.
Phase 1b Clinical Trial in Selected Advanced Solid Tumors
We are conducting a Phase 1b, open-label, dose escalation clinical trial of the safety and tolerability of Cami used as monotherapy, in patients with selected advanced solid tumors, defined as those that literature evidence indicates contains CD25 positive Tregs, such as colorectal cancer, head and neck cancer, non-small cell lung cancer, gastric and esophageal cancers, pancreatic cancer, bladder cancer, renal cell carcinoma, melanoma, triple negative breast cancer and ovarian cancer. We are conducting the clinical trial at five sites in the United States and Europe, pursuant to an IND accepted by the FDA in June 2018. The first patient was dosed in January 2019. We announced in November 2020 that the first patient was dosed in the Phase 1b clinical trial of Cami in combination with pembrolizumab.
Clinical Trial Design
The primary objectives of the clinical trial are to (i) evaluate the safety and tolerability of Cami in patients with selected advanced solid tumors and (ii) identify the recommended dose and dose schedule for future studies in patients with selected advanced solid tumors. The secondary objectives are to (i) evaluate the preliminary anti-tumor activity of Cami, (ii) characterize the pharmacokinetic profile of Cami and (iii) evaluate the immunogenicity of Cami.
The clinical trial will enroll patients with pathologically confirmed relapsed or refractory solid tumor malignancy that is locally advanced or metastatic at the time of screening and who have failed or are intolerant to existing therapies. The clinical trial is expected to enroll approximately 62 patients, with approximately 32 patients for the dose escalation stage and approximately 30 patients for the dose expansion stage.
In the dose escalation stage, patients will receive intravenous infusion of Cami, at escalating doses, on the first day of each 21-day treatment cycle. The initial dose will be 20 µg/kg and the highest allowed dose will be 300 µg/kg. Dose escalation will be conducted using a 3+3 design with oversight by a DESC. After completion of the dose escalation stage, we amended the clinical trial protocol to allow patients in the dose escalation stage to receive Cami in combination with pembrolizumab to better understand its potential as both a monotherapy and in combination. Patients will receive Cami at the recommended dose determined by the DESC based on the anti-tumor activity and tolerability observed during the dose escalation stage. The dose escalation stage may have two cohorts, one for an indication for which Cami was shown in the dose escalation stage to have preliminary activity and one for a basket arm with the same indications allowed in the dose escalation stage. In this clinical trial, response to treatment is determined as CR, PR, SD or PD, based on Response Evaluation Criteria in Solid Tumors (“RECIST”) and immune RECIST (“iRECIST”).
Interim Data
The dose escalation stage of the Phase 1b clinical trial is ongoing. As of July 31, 2020, 41 patients have been treated with Cami. Twenty-seven patients reported one or more Grade ≥3 TEAEs, with the most common being anemia and rash. No DLTs have been observed.
Thirty patients have been assessed by the investigator for response to treatment, 18 of whom displayed stable disease.
In certain patients dosed with Cami, paired biopsies (i.e., one biopsy before dosing with Cami (baseline in the figure below) and one biopsy taken six weeks post the first dose of Cami (on-treatment in the figure below)) were analyzed by fluorescent multiplexing technology to quantify the number of CD8+ Teffs and Tregs in the tumor and in the tissue surrounding the tumor. In three of six paired biopsies analyzed to
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date, we observed a large increase in the ratio of CD8+ Teffs to Tregs in the local tumor environment following treatment with Cami. In two other paired biopsies, no Tregs were present at baseline. In the remaining paired biopsy, there was no observed increase in the ratio of CD8+ Teffs to Tregs.

ADC-20201231_G23.JPG

ADC-20201231_G24.JPG
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The ratio of CD8+ Teffs to Tregs in the local tumor environment at baseline and following treatment with Cami. In the figure, 0 means no Tregs were detected in the biopsy.  ☐ means CD8+ Teffs and Tregs were detected in the biopsy, but the ratio of CD8+ Teffs to Tregs was less than 0.1.
In September 2020, we reported preliminary PK/PD data from this clinical trial. Preliminary findings indicate that treatment with Cami was associated with clinically relevant modulation of immune cells, both in the circulation and in tumor tissue, with mild to moderate inter-patient variability in tumor tissue. Increases in soluble CD25 and cytokines in serum post-dosing followed a similar pattern to increases in CD4-positive and CD8-positive T cells, suggesting an increase in activated lymphocytes. Changes in lymphocyte subpopulations in the blood resulted in a dose-related increase in the Teff-to-Treg ratio.
ADCT-601: PBD-Based ADC Targeting AXL
ADCT-601 is an ADC targeting AXL-expressing cancers. Currently, we have concluded a Phase 1 dose escalation clinical trial of ADCT-601 as a monotherapy for the treatment of selected advanced tumors and are preparing to undertake a Phase 1b clinical combination trial in the second half of 2021.
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Structure and Mechanism of Action
ADCT-601 is composed of a humanized monoclonal antibody (1H12-HAKB) directed against human AXL and conjugated through a cathepsin-cleavable linker to SG3199, a PBD dimer cytotoxin. Once bound to an AXL-expressing cell, it is designed to be internalized by the cell, following which the warhead is released. The warhead is designed to bind irreversibly to DNA to create highly potent interstrand cross-links that block DNA strand separation, thus disrupting essential DNA metabolic processes such as replication and ultimately resulting in cell death. The figure below shows the structure of ADCT-601. ADCT-601 also features the following unique technologies:
•ADCT-601 uses GlycoconnectTM site-specific conjugation technology, which allows for fast and stable conjugation of the warhead to the antibody.
•The PBD payload of ADCT-601 contains a unique spacer, HydraspaceTM, which we have shown to provide an additional improvement in therapeutic index in preclinical models.
ADC-20201231_G25.JPG
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Visual representation of ADCT-601.
AXL plays a pivotal role in various physiological and pathological processes. We believe that AXL is an attractive target for ADCs developed to treat solid tumors for the following reasons:
•AXL is highly overexpressed or ectopically expressed in a multitude of solid tumors, including in lung, breast, prostate, pancreas, glioma and esophageal cancers. Its overexpression is maintained in both primary tumors and metastasis.
•AXL expression in healthy tissues is significantly lower than that in tumor cells.
•AXL is expressed on M2 macrophages, which are part of the immunosuppressive tumor microenvironment.
•Expression and activation of AXL is associated with poor clinical prognosis in many tumor indications and several studies suggest that expression of AXL is induced by both targeted and chemotherapy drugs. Therefore, AXL-based therapies may be efficacious even where traditional therapies have failed.
•AXL is prevalent in tumors resistant to anti-PD1 therapy, and pre-clinical data have shown the benefit of combining AXL-targeted therapies with immunotherapies.
•The extracellular portion of AXL can be cleaved off from the membrane to generate soluble AXL (“sAXL”), which can be detected in serum. Recent studies suggest that sAXL can be a potential circulating biomarker in certain tumors, representing a potentially attractive biomarker for clinical use.
Preclinical Studies
Preclinical Efficacy Studies
Breast Cancer
We evaluated the in vivo efficacy of ADCT-601 in the MDA-MB-231 xenograft model, in which mice received a single dose of (i) ADCT-601 at 1 mg/kg, (ii) a non-targeted ADC at 1 mg/kg, or (iii) a vehicle control. We observed that ADCT-601 exhibited potent and sustained anti-tumor activity, while the non-targeted ADC and the vehicle control did not exhibit any significant anti-tumor activity. The table below summarizes the response data, and the figures below show the mean tumor volume in the MDA-MB-231 xenograft model and the Kaplan-Meier plot from the MDA-MB-231 xenograft model.
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Response n (%)
ADCT-601
1 mg/kg
(n=10)
Non-Targeted ADC
1 mg/kg
(n=10)
Vehicle Control
(n=10)
Complete response 4 (40.0) 0 (0.0) 0 (0.0)
Partial response 5 (50.0) 0 (0.0) 0 (0.0)
Tumor-free survivor 4 (40.0) 0 (0.0) 0 (0.0)
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Response data obtained in the MDA-MB-231 xenograft model. Partial response is recorded when the tumor volume was 50% or less of its Day 1 volume for three consecutive measurements during the course of the study, and equal to or greater than 13.5 mm3 for one or more of these three measurements. Complete response is recorded when the tumor volume was <13.5 mm3 for three consecutive measurements during the course of the study. Tumor-free survivor is recorded when a complete response is recorded at the termination of a study.
ADC-20201231_G26.JPG
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 The anti-tumor activity of ADCT-601 in the MDA-MB-231 xenograft model. Data represent the mean tumor volume ± SEM for each group of mice.

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ADC-20201231_G27.JPG  
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The Kaplan-Meier plot of the activity of ADCT-601 in the MDA-MB-231 xenograft model. Data represent Kaplan-Meier survival curves for each group of mice.
Esophageal Cancer
We evaluated the in vivo efficacy of ADCT-601 in the ES0195 patient-derived xenograft model, in which mice received a single dose of (i) ADCT-601 at 1 mg/kg, (ii) a non-targeted ADC at 1 mg/kg, or (iii) a vehicle control. We observed that ADCT-601 exhibited potent and sustained anti-tumor activity, while the non-targeted ADC and the vehicle control did not exhibit any significant anti-tumor activity. The table below summarizes the response data and the figures below show the mean tumor volume in the ES0195 patient-derived xenograft model and the Kaplan-Meier plot from the ES0195 patient-derived xenograft model.
Response n (%)
ADCT-601
1 mg/kg
(n=8)
Non-Targeted ADC
1 mg/kg
(n=8)
Vehicle Control
(n=8)
Complete response 2 (25.0) 0 (0.0) 0 (0.0)
Partial response 5 (62.5) 0 (0.0) 0 (0.0)
Tumor-free survivor 2 (25.0) 0 (0.0) 0 (0.0)
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Response data obtained in the ES0195 patient-derived xenograft model. Partial response is recorded when the tumor volume was 50% or less of its Day 1 volume for three consecutive measurements during the course of the study, and equal to or greater than 13.5 mm3 for one or more of these three measurements. Complete response is recorded when the tumor volume was <13.5 mm3 for three consecutive measurements during the course of the study. Tumor-free survivor is recorded when a complete response is recorded at the termination of a study.

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ADC-20201231_G28.JPG
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 The anti-tumor activity of ADCT-601 in the ES0195 patient-derived xenograft model. Data represent the mean tumor volume ± SEM for each group of mice.

ADC-20201231_G29.JPG
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 The Kaplan-Meier plot of the activity of ADCT-601 in the ES0195 patient-derived xenograft model. Data represent Kaplan-Meier survival curves for each group of mice.
Pancreatic Cancer
We evaluated the in vivo efficacy of ADCT-601 and that of AXL-107-MMAE, an AXL-targeted ADC similar to HuMax-AXL-ADC, which is currently in Phase 1/2 development by a third party for multiple types of solid tumors, in the PAXF1657 pancreatic cancer patient-derived xenograft model, in which mice received a single dose of (i) ADCT-601 at 0.075 mg/kg, (ii) ADCT-601 at 0.15 mg/kg, (iii) ADCT-601 at 0.3 mg/kg, (iv) AXL-107-MMAE at 0.3 mg/kg, (v) AXL-107-MMAE at 4 mg/kg, or (vi) a control vehicle. We observed that ADCT-601 exhibited dose-dependent anti-tumor activity and superior anti-tumor activity compared to AXL-107-MMAE when tested at the same low dose of 0.3 mg/kg. The table below summarizes the response data and the figures below show the mean tumor volume in the PAXF1657 xenograft model and the Kaplan-Meier plot from the PAXF1657 patient-derived xenograft model.
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  n (%)
Response
ADCT-601
0.075 mg/kg
(n=8)
ADCT-601
0.15 mg/kg
(n=8)
ADCT-601
0.3 mg/kg
(n=8)
AXL-107-MMAE
0.3 mg/kg
(n=8)
AXL-107-MMAE
4 mg/kg
(n=8)
Vehicle Control
(n=8)
Complete response 0 (0.0) 0 (0.0) 3 (37.5) 0 (0.0) 8 (100.0) 0 (0.0)
Partial response 0 (0.0) 0 (0.0) 1 (12.5) 0 (0.0) 0   (0.0) 0 (0.0)
Tumor-free survivor 0 (0.0) 0 (0.0) 3 (37.5) 0 (0.0) 8 (100.0) 0 (0.0)
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Response data obtained in the PAXF1657 patient-derived xenograft model. Partial response is recorded when the tumor volume was 50% or less of its Day 1 volume for three consecutive measurements during the course of the study, and equal to or greater than 13.5 mm3 for one or more of these three measurements. Complete response is recorded when the tumor volume was <13.5 mm3 for three consecutive measurements during the course of the study. Tumor-free survivor is recorded when a complete response is recorded at the termination of a study.

ADC-20201231_G30.JPG
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The anti-tumor activity of ADCT-601 in the PAXF1657 patient-derived xenograft model. Data represent the mean tumor volume ± SEM for each group of mice.


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ADC-20201231_G31.JPG
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 The Kaplan-Meier plot of the activity of ADCT-601 in the PAXF1657 patient-derived xenograft model. Data represent Kaplan-Meier survival curves for each group of mice.
Preclinical Safety Studies
We evaluated the toxicity of ADCT-601 primarily in non-human primates and with a single-dose MTD study in rats. In non-human primates, toxicity was observed in the immune system, bone marrow, kidney, mammary glands (females only), reproductive tract and skin. Most microscopic findings were not reversible after a six-week recovery phase, except for the morphologic effect on the hematopoietic system in the bone marrow in both sexes, and the immune system (spleen, thymus and gut-associated lymphoid tissue) in males. In rats, the MTD for ADCT-601 was 6 mg/kg.
Phase 1 Clinical Trial in Selected Advanced Solid Tumors
We conducted a Phase 1, open-label, dose escalation and dose expansion clinical trial of the safety, tolerability, pharmacokinetics and anti-tumor activity of ADCT-601, used as monotherapy, in patients with selected advanced solid or metastatic tumors, including triple-negative breast cancer, colorectal cancer, esophageal cancer, gastric cancer, head and neck cancer, mesothelioma, non-small cell lung cancer, ovarian cancer, pancreatic cancer and soft tissue sarcoma. We conducted the clinical trial at four sites in the United States, pursuant to an IND accepted by the FDA in December 2018. The first patient was dosed in January 2019. The clinical trial’s design and our interim findings are summarized below.
Clinical Trial Design
The primary objectives of the clinical trial were to (i) evaluate the safety and tolerability of ADCT-601 in patients with selected advanced solid tumors and (ii) identify the recommended dose and dose schedule for future studies in patients with selected advanced solid tumors. The secondary objectives were to (i) evaluate the preliminary anti-tumor activity of ADCT-601, (ii) characterize the pharmacokinetic profile of ADCT-601 and (iii) evaluate the immunogenicity of ADCT-601.
The clinical trial enrolled patients with pathologically confirmed relapsed or refractory solid tumor malignancy that is locally advanced or metastatic at the time of screening and who have failed or are intolerant to existing therapies.
In the dose escalation stage, patients received intravenous infusion of ADCT-601, at escalating doses, on the first day of each 21-day treatment cycle. The initial dose was 50 µg/kg and the highest given dose was 150 µg/kg. Dose escalation was conducted using a 3+3 design with oversight by a DESC. In this clinical trial, response to treatment was determined as CR, PR, SD or PD, based on RECIST and iRECIST. After completion of the dose escalation stage, we intend to update our clinical plan with respect to ADCT-601, including exploring its use in combination with other therapies and identifying solid tumors with high AXL expression that are potentially more susceptible to treatment with ADCT-601. We intend to commence a Phase 1b combination clinical trial of ADCT-601 in the second half of 2021.

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Clinical Trial Results
The dose escalation stage of the Phase 1 clinical trial has been completed. As of November 4, 2019, 17 patients have been treated with ADCT-601. Ten patients experienced one or more Grade ≥3 TEAEs, with the most common being abdominal pain and urinary tract obstruction. One DLT of Grade 3 hematuria was observed in a colorectal cancer patient treated at the 100 µg/kg dose level who had a history of radiotherapy involving the bladder. In addition, one DLT of hyponatremia was observed in an ovarian cancer patient treated at the 150 µg/kg dose level, which the investigator assessed as probably being related to ADCT-601.
Thirteen patients have been assessed by the investigator for response to treatment, one of whom achieved a partial response and seven of whom displayed stable disease.
Based on safety and anti-tumor activity data from this clinical trial, we plan to commence a Phase 1b dose escalation trial during second half of 2021 of ADCT-601 in combination with other therapies, enrolling patients with tumor types identified from literature to have AXL expression on tumor cells in a significant number of patients.
Our Preclinical Solid Tumor Product Candidates
ADCT-901: PBD-Based ADC Targeting KAAG1
ADCT-901 is an ADC targeting KAAG1-expressing cancers. We are developing ADCT-901 for the treatment of advanced solid tumors with high unmet medical needs, including platinum resistant ovarian cancer and triple negative breast cancer. ADCT-901 is composed of a humanized monoclonal antibody (3A4) directed against human KAAG1 and conjugated through a cathepsin-cleavable linker to SG3199, a PBD dimer cytotoxin. KAAG1 is a novel tumor-associated antigen expressed in a high percentage of ovarian tumors and triple negative breast cancer, with limited expression in healthy cells. We believe that KAAG1 is an attractive target for ADC development as (i) it is an intracellular target by definition, but becomes exposed on the membrane of tumor cells, (ii) it has high expression in tumors with high unmet medical need, including ovarian cancer and triple negative breast cancer, while its expression on healthy tissue is very limited and (iii) it internalizes and co-localizes with lysosomal-associated membrane protein 1, a lysosomal marker, which shows that the target is efficiently transported to the cellular compartment where efficient release of the cytotoxin is expected. Currently, we are conducting preclinical development of ADCT-901 and expect to submit an IND in the first half of 2021.
We evaluated the in vivo efficacy of ADCT-901 in the CTG-0703 patient-derived ovarian cancer xenograft model, in which mice received a single dose of (i) ADCT-901 at 1 mg/kg, (ii) a non-targeted ADC at 1 mg/kg, or (iii) a vehicle control. We observed that ADCT-901 exhibited potent and specific anti-tumor activity, while the non-targeted ADC and the vehicle control did not exhibit any significant anti-tumor activity. The table below summarizes the response data and the figure below shows the mean tumor volume in the CTG-0703 patient-derived xenograft model.
  n (%)
Response
ADCT-901
1 mg/kg
(n=8)
Non-Targeted ADC
1 mg/kg
(n=8)
Vehicle Control
(n=8)
Complete response 0  (0.0) 0 (0.0) 0 (0.0)
Partial response 7 (87.5) 0 (0.0) 0 (0.0)
Tumor-free survivor 0  (0.0) 0 (0.0) 0 (0.0)
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Response data obtained in the CTG-0703 patient-derived xenograft model. Partial response is recorded when the tumor volume was 50% or less of its Day 1 volume for three consecutive measurements during the course of the study, and equal to or greater than 13.5 mm3 for one or more of these three measurements. Complete response is recorded when the tumor volume was <13.5 mm3 for three consecutive measurements during the course of the study. Tumor-free survivor is recorded when a complete response is recorded at the termination of a study.


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ADC-20201231_G32.JPG
___________
The anti-tumor activity of ADCT-901 in the CTG-0703 patient-derived xenograft model. Data represent the mean tumor volume ± SEM for each group of mice.
ADCT-701: PBD-Based ADC Targeting DLK-1
ADCT-701 is an ADC targeting DLK-1-expressing cancers. We are developing ADCT-701 for the treatment of advanced solid tumors with high unmet medical needs, including hepatocellular carcinoma, neuroblastoma and small cell lung cancer (“SCLC”). ADCT-701 is composed of a humanized monoclonal antibody (HuBa-1-3D) directed against human DLK-1 and conjugated through a cathepsin-cleavable linker to SG3199, a PBD dimer cytotoxin. DLK-1 is widely expressed during fetal development, but its expression is highly restricted in adults. However, DKL-1 is expressed in adults in several tumors, such as neuroblastoma, hepatocellular carcinoma (“HCC”), SCLC and acute myeloid leukemia. Currently, we are evaluating collaboration options to further develop ADCT-701.
We evaluated the in vivo efficacy of ADCT-701 in the LI1097 patient-derived hepatocellular carcinoma xenograft model, in which mice received a single dose of (i) ADCT-701 at 0.1 mg/kg, (ii) ADCT-701 at 0.3 mg/kg, (iii) ADCT-701 at 1 mg/kg, (iv) a non-targeted ADC at 1 mg/kg, or (v) a vehicle control. We observed that ADCT-701 exhibited potent, specific and dose-dependent anti-tumor activity, while the non-targeted ADC and the vehicle control did not exhibit any significant anti-tumor activity. The table below summarizes the response data and the figure below shows the mean tumor volume in the LI1097 patient-derived xenograft model.
  n (%)
Response
ADCT-701
0.1 mg/kg
(n=8)
ADCT-701
0.3 mg/kg
(n=8)
ADCT-701
1 mg/kg
(n=8)
Non-Targeted ADC
1 mg/kg
(n=8)
Vehicle Control
(n=8)
Complete response 0 (0.0) 0 (0.0) 2 (37.5) 0 (0.0) 0 (0.0)
Partial response 0 (0.0) 0 (0.0) 3 (62.5) 0 (0.0) 0 (0.0)
Tumor-free survivor 0 (0.0) 0 (0.0) 0  (0.0) 0 (0.0) 0 (0.0)
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Response data obtained in the LI1097 patient-derived xenograft model. Partial response is recorded when the tumor volume was 50% or less of its Day 1 volume for three consecutive measurements during the course of the study, and equal to or greater than 13.5 mm3 for one or more of these three measurements. Complete response is recorded when the tumor volume was <13.5 mm3 for three consecutive measurements during the course of the study. Tumor-free survivor is recorded when a complete response is recorded at the termination of a study.



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ADC-20201231_G33.JPG
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The anti-tumor activity of ADCT-701 in the LI1097 patient-derived xenograft model. Data represent the mean tumor volume ± SEM for each group of mice.
Our Research Pipeline
In addition to our product candidates described above, we have selected five additional ADC targets (one hematological and four solid tumor targets) and ten XDC targets (four hematological and six solid tumor targets) for which we are conducting preclinical research, with the aim of selecting clinical candidates for further development. For the XDC product candidates, we are exploring different non-antibody protein scaffolds as well as peptides for tumor targeting.
We are also testing complementary technologies to expand the therapeutic index of our product candidates. For example, we are investigating novel conjugation and linker technologies to maximize the benefits of the PBD dimer technology. As an example, we benchmarked multiple site-specific conjugation technologies and identified GlycoConnectTM/Hydraspace technology (licensed from Synaffix) to provide the enhanced therapeutic index for ADCT-601 and ADCT-701 that we observed in preclinical models. We are also exploring the use of a novel Silinol-based linker technology that we licensed from a third party. We continue to explore alternative conjugation and linker strategies as they become available and determine whether there is any merit in utilizing them in product candidates.
Moreover, we are exploring the development of ADCs that use tumor-conditional binding approaches, such as antibody masking, which depends on the unique proteolytic environment in the tumor. These tumor-specific proteases can be used to remove masking peptides engineered on a masked antibody. Such masked antibodies will not bind to healthy tissue expressing the target and will not bind to soluble target shed into circulation (as there is no expression of the tumor specific proteases and the mask prevents binding to target). However, once in the tumor microenvironment, tumor-specific proteases release the masking peptide from the antibody and it will bind to the target on the tumor cell membrane, allowing internalization of the ADC into the tumor.
Chemistry, Manufacturing and Controls
We believe that the manufacture of ADCs requires considerable expertise, know-how and resources. Since our inception, we have made significant financial and human resource investments to become a leader in the industry for ADC chemistry, manufacture and control processes. Currently, we have a 32-person, in-house team, based in the San Francisco Bay Area, overseeing our CMC operations for each of our product candidates.
We do not own or operate, and do not plan to own or operate, manufacturing infrastructure for the manufacture of clinical or commercial supply of our product candidates. Instead, we contract with third-party cGMP-compliant CMOs that have the facilities and capabilities to manufacture on our behalf the intermediate components and the final product candidates for use in clinical trials and future commercial supply. Assuming regulatory approval for our lead product candidate, Lonca, we believe there will be sufficient commercial-grade drug product in
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stock for the foreseeable future and we and our CMOs will be able to conduct additional manufacturing at the appropriate time. Our in-house team oversees all aspects of the CMO manufacturing process, including defining the scope of work and monitoring all aspects of the manufacturing process to ensure that they meet our specifications and quality requirements, including conducting routine site visits and audits. We also contract with external specialist quality control and stability-testing organizations to monitor the quality of the materials manufactured by the CMOs.
License and Collaboration Agreements
MedImmune License and Collaboration Agreement
In 2011, we (then operating under the name ADCT Sàrl) entered into a license and collaboration agreement with Spirogen (since renamed ADC Products UK Ltd.), pursuant to which Spirogen granted us access to its next-generation PBD-based warhead and linker technology. In connection with AstraZeneca plc’s acquisition of Spirogen Sàrl (which was at the time the direct parent company of Spirogen) and the transfer of certain of Spirogen’s intellectual property to Spirogen Sàrl, including its PBD-based warhead and linker technology, the agreement was subsequently amended and restated in October 2013 (with retroactive effect to September 2011), with Spirogen Sàrl also becoming a party to such agreement. Spirogen Sàrl subsequently transferred the PBD technology to MedImmune Limited, which, together with MedImmune LLC, is the global biologics research and development arm of AstraZeneca plc. Thereafter, Spirogen Sàrl transferred its rights and obligations under the agreement to MedImmune and the agreement was subsequently amended and restated again in May 2016 (with retroactive effect to September 2011), with MedImmune replacing Spirogen Sàrl as the licensor thereunder.
Under the terms of the agreement, MedImmune has granted us an exclusive, worldwide license under certain patent rights and related know-how to make, have made, use, sell, offer for sale and import product candidates in the field of human therapeutics and diagnostics that consist of (i) PBD-based molecules directly conjugated to an antibody (i.e., ADCs with a PBD-based warhead) that specifically bind to up to 11 approved targets (“ADC Targets”), and (ii) PBD-based molecules conjugated to a non-antibody (i.e., targeting-moiety conjugates with a PBD-based warhead) that specifically bind to up to ten approved targets (“XDC Targets”). As of the date hereof, there are 11 approved ADC Targets subject to the license, including CD19 (the target of Lonca) and CD25 (the target of Cami), and ten approved XDC Targets subject to the license.
Under the terms of the agreement, we have the right to grant sublicenses to affiliates and, subject to MedImmune’s approval (not to be unreasonably withheld), third parties. In addition, with respect to each licensed target, we agreed to use commercially reasonable efforts to develop and commercialize at least one product and submit an IND application with the FDA (or its equivalent in another jurisdiction) for one product within 48 months after formal designation of the target as an approved target, which we have done with respect to CD19 and CD25 upon submitting the IND applications for Lonca and Cami, respectively.
As consideration for the rights granted to us under the agreement, in 2011 we paid Spirogen an up-front licensing fee of USD 2.5 million. No further payments in consideration for the grant of such rights are required to be paid to Spirogen or MedImmune under the agreement.
With respect to patent rights conceived during the course of our exercise of our rights under the agreement, rights are allocated as follows under the agreement: (i) we own any such patent that claims an antibody that binds to one of the ADC Targets approved under the agreement, (ii) we and MedImmune jointly own any such patent claiming any PBD-based ADC, with us owning the exclusive right to exploit such patent during the term of the agreement and (iii) MedImmune owns any such patent that claims a PBD or any PBD attached to an antibody that does not bind to one of the ADC Targets approved under the agreement. In addition, we have the right to prosecute and maintain all patents described in clauses (i) and (ii) above and are responsible for the costs of prosecuting and maintaining such patents. The ownership of any patent rights conceived during our exercise of our rights under the agreement in connection with non-ADC Targets will be determined under U.S. patent law.
Unless earlier terminated, the agreement terminates on the date of expiration of the last to expire licensed patent right that covers a product being exploited under the license. The agreement (including the licenses granted thereunder) will terminate upon our material breach of any provision of the agreement that is not cured within an applicable cure period.
Genmab License and Collaboration Agreement
In June 2013, we entered into a collaboration and license agreement with Genmab to collaborate on the development of Cami, which uses Genmab’s HuMax®-TAC antibody that targets CD25. In October 2020, we amended and restated the agreement.
Under the terms of the agreement, Genmab has granted us an exclusive, worldwide license or sublicense, as applicable, to certain patents covering, and know-how relating to, the HuMax®-TAC antibody to make, develop, use, sell, offer for sale and import Cami for the treatment of conditions and diseases in humans. We are required to use commercially reasonable efforts to develop, manufacture, obtain regulatory approval for and commercialize Cami.
We were not required to pay any up-front licensing fees, and are not required to pay any milestone or annual maintenance payments, to Genmab under the agreement. We are required to make tiered royalty payments ranging from the mid-to-high single-digit percentages on
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annual net sales of Cami. In the event that, within a specified period after signing the amended and restated license agreement, we enter into an agreement granting a third party rights to develop, commercialize or distribute Cami for HL in a specified country or countries, Genmab may elect, with respect to such country or countries, to either (i) maintain such royalty payments or (ii) forego such royalty payments in favor of a percentage of all net consideration received by us pursuant to such agreement. Additionally, in the event that we initiate a process to partner Cami with a third party for a solid tumor indication, Genmab has the option to participate in such process on no less favorable terms than applicable to any other potential partner.
Under the terms of the agreement, all patents directed to Cami arising from the activities under the agreement (irrespective of the identity of the inventors) are our sole property, and we are responsible for prosecuting, maintaining, defending and enforcing such patents.
The agreement expires, on a country-by-country basis, on the date of complete and permanent cessation of development, commercialization and any other sale of Cami in or for such country. Either party may terminate the agreement (i) upon breach by the other party of any material provision of the agreement that is not cured within an applicable cure period or (ii) for the occurrence of certain insolvency events with respect to the other party, upon written notice thereof. Upon expiration or termination of the agreement, the licenses and sublicenses granted thereunder will terminate and we will be required to grant to Genmab a non-exclusive, worldwide, fully paid-up license to any claims in any new patents in any jurisdiction (irrespective of the identity of the inventors) arising from activities pursuant to the agreement to the extent that such claims are directed to Cami (or certain other antibody drug conjugates).
Synaffix Commercial License Agreement
In October 2016, we entered into a commercial license agreement with Synaffix, under which we obtained a non-exclusive, royalty-bearing, sublicensable, worldwide license under certain patent rights and related know-how owned by Synaffix relating to site-specific conjugation technology to research, develop, manufacture, use, sell, import, distribute, commercialize and market antibody-drug conjugates for human therapeutic use that bind to three selected targets, including ADCT-601 and ADCT-701. In June 2020, we amended the agreement to grant us the option to extend this license to cover two additional targets.
In consideration for the rights granted under the agreement, we paid an upfront fee and two additional six-figure fees upon our selection of licensed products binding the first three specific targets, and are required to pay a one-time fee upon the acceptance of a BLA (or foreign equivalent) for a licensed product and payments in the high eight figures upon the achievement of certain milestones (of which we have already paid a high six-figure amount). In addition, for the first and third such targets, we are required to pay tiered royalties in the low-single-digit percentages on net sales of the applicable licensed products. For the second such target, we are required to pay royalties in the low-to-mid single-digit percentages on net sales of the applicable licensed products. In the event we select a fourth or fifth target, we will be required to pay a one-time license fee for each selected target, aggregate payments up to the mid eight figures upon the achievement of certain milestones and a royalty in the low-single-digit percentages on net sales of each licensed product.
The agreement remains in effect on a country-by-country and licensed product-by-licensed product basis until the expiration of the last-to-expire valid claim in a patent licensed under the agreement covering such product in such country. Upon the expiration of the agreement for each licensed product in each country, the licenses granted to us for such product in such country will become fully paid-up and perpetual. We may terminate the agreement in its entirety or on a licensed product-by-licensed product basis at any time. Either party may terminate the agreement, subject to a specified notice and cure period, for a breach by the other party of a material provision of the agreement or upon an insolvency-related event experienced by the other party.
Bergenbio License Agreement
In July 2014, we entered into a license agreement with Bergenbio AS (“Bergenbio”) under which we obtained an exclusive, royalty-bearing, sublicensable (subject to certain restrictions), worldwide license in certain patent rights and related know-how owned by Bergenbio relating to certain AXL-targeting antibodies used in ADCT-601 to conduct research, develop, make, use, sell, offer for sale, import and otherwise commercialize products for the treatment and/or prevention of diseases in humans (with an exception for certain types of products), as well as a similar non-exclusive license relating to companion diagnostics for such licensed products.
In consideration for the rights granted under the agreement we paid an upfront fee, and we also paid a one-time low-six-figure fee upon the filing of an IND application for ADCT-601 in 2018. Additionally, we are required to make payments in the low-eight figures per licensed product upon the achievement of certain milestones, an additional one-time low-eight-figure payment upon the achievement of a specified commercialization milestone, and tiered royalties in the mid-single digit percentages on net sales of licensed products.
The agreement remains in effect on a country-by-country and licensed product-by-licensed product basis until the latest of (i) the expiration of the last-to-expire valid claim in a patent covering such product licensed under the agreement in such country, (ii) the expiration of any other exclusivity protection of such licensed product in such country and (iii) the ten-year anniversary of the first commercial sale of such licensed product in such country. Upon the expiration of the agreement for each licensed product in each country, the licenses granted to us for such product in such country will become fully paid-up and irrevocable. We may terminate the agreement at any time effective immediately upon providing written notice to Bergenbio. Either party may terminate the agreement, subject to specified notice and cure periods, for a
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material breach by the other party of the agreement or upon an insolvency-related event experienced by the other party. Bergenbio may terminate the agreement, subject to a specified notice and cure period, if we fail to undertake any reasonable steps in the development and/or commercialization of at least one licensed product for a period of more than six consecutive months.
Overland License and Collaboration Agreement
In December 2020, we entered into a joint venture with Overland Pharmaceuticals (“Overland”) to develop and commercialize Lonca, ADCT-602, ADCT-601 and ADCT-901 in greater China and Singapore. In connection with such joint venture, we entered into a license and collaboration agreement with the joint venture entity, Overland ADCT BioPharma (CY) Limited (“Overland ADCT BioPharma”) pursuant to which we granted Overland ADCT BioPharma an exclusive license or sublicense (as applicable) under all applicable patents and know-how now or in the future owned or controlled by us relating to Lonca, ADCT-602, ADCT-601 and ADCT-901 (collectively, the “Licensed Products”) in order to use, sell, offer for sale, import and commercialize such product candidates in China, Hong Kong, Macau, Taiwan and Singapore (the “Territory”). We also granted Overland ADCT BioPharma an exclusive right of first negotiation to obtain a license in the event we seek to grant to a third party a license in certain circumstances.
Overland ADCT BioPharma is responsible, at its sole cost, for the development, regulatory approval and commercialization of the Licensed Products in the Territory, and must use diligent efforts in order to obtain and maintain regulatory approval for and commercialize the products in each applicable jurisdiction. We maintain an exclusive option, on a product-by-product basis, to co-promote and participate in the detailing, promotion and marketing of the Licensed Products in the Territory. Upon any exercise by us of such option, we and Overland ADCT BioPharma will negotiate in good faith commercially reasonable terms for a co-promotion agreement. We maintain the right to control clinical trials for the Licensed Products conducted both in and out of the Territory, and the license agreement sets forth the division of costs between us and Overland ADCT BioPharma with respect to clinical trials depending on the territories within which such trials are conducted or relate to. We are required to use diligent efforts to manufacture and supply to Overland ADCT BioPharma (at our manufacturing cost), and Overland ADCT BioPharma must purchase from us, all of Overland ADCT BioPharma’s requirements of the Licensed Products for its development and commercialization activities.
The collaboration will be managed by a joint steering committee (and other applicable committees and subcommittees) comprised of equal numbers of representatives from us and Overland ADCT BioPharma. In the event of a dispute that cannot be resolved by discussions between our CEO and Overland ADCT BioPharma’s CEO, Overland ADCT BioPharma shall have final decision-making authority with respect to matters that relate specifically to the development and commercialization of the Licensed Products in the Territory, except where such matters could also affect the products outside of the Territory and with respect to other specified matters (in which cases we shall have such authority).
As partial consideration for the rights granted to Overland ADCT BioPharma pursuant to the agreement, Overland ADCT BioPharma issued to us 44,590,000 Series A shares. We are also entitled to receive tiered quarterly royalties on Overland ADCT BioPharma’s net sales of the Licensed Products ranging from the low to mid-single digit percentages. Such royalties are payable, on a product-by-product and jurisdiction-by- jurisdiction basis, from the first commercial sale of a product in a jurisdiction until the latest of (i) the expiration of the last to expire claim in licensed patent that covers such product or any components thereof in such jurisdiction, (ii) the last to expire regulatory exclusivity period for such product in such jurisdiction and (iii) a specified period after the first commercial sale of such product in such jurisdiction. Overland ADCT BioPharma must also reimburse us for any payments we are obligated to make to any of our licensors including in connection with the grant of a sublicense to Overland ADCT BioPharma under applicable intellectual property pursuant to this agreement, including any fees or payments directly resulting from or reasonable allocable to Overland ADCT BioPharma’s development and commercialization of the Licensed Products.
The license agreement remains in effect, on a product-by-product basis, for as long as Overland ADCT BioPharma continues to develop or commercialize such product. Either party may terminate the license agreement for a material breach by the other party, subject to specified notice and cure periods, or upon immediate written notice for an insolvency-related event experienced by the other party. We may also terminate the license agreement, subject to a specified notice and cure period, if Overland ADCT BioPharma commences a legal action challenging the validity, enforceability or scope of any patent owned or controlled by us that cover the applicable products.
Intellectual Property
Our success depends in part on our ability to obtain and maintain proprietary protection for our technology, programs and know-how related to our business, defend and enforce our intellectual property rights, in particular, our patent rights, preserve the confidentiality of our trade secrets, and operate without infringing valid and enforceable intellectual property rights of others. We seek to protect our proprietary position by, among other things, exclusively licensing and filing U.S. and foreign patent applications related to our technology, existing and planned programs and improvements that are important to the development of our business, where patent protection is available. We also rely on trade secrets, know-how, continuing technological innovation and confidential information to develop and maintain our proprietary position and protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection. We seek to protect our proprietary technology and processes, in part, by confidentiality agreements with our employees, consultants, scientific advisors, and contractors. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems.
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Notwithstanding these efforts, we cannot be sure that patents will be granted with respect to any patent applications we have licensed or filed or may license or file in the future, and we cannot be sure that any patents we have licensed or patents that may be licensed or granted to us in the future will not be challenged, invalidated, or circumvented or that such patents will be commercially useful in protecting our technology. Moreover, trade secrets can be difficult to protect. While we have confidence in the measures we take to protect and preserve our trade secrets, such measures can be breached, and we may not have adequate remedies for any such breach. In addition, our trade secrets may otherwise become known or be independently discovered by competitors.

In addition, we or our licensors may be subject to claims that former employees, collaborators, or other third parties have an interest in our owned or in-licensed patents or other intellectual property as an inventor or co-inventor. If we are unable to obtain an exclusive license to any such third party co-owners’ interest in such patent applications, such co-owners may be able to license their rights to other third parties, including our competitors. In addition, we may need the cooperation of any such co-owners to enforce any patents that issue from such patent applications against third parties, and such cooperation may not be provided to us. For more information regarding the risks related to intellectual property, please see “Item 3. Key Information—D. Risk Factors—Risks Related to Intellectual Property.”
Patent Portfolio

The term of individual utility patents depends upon the countries in which they are granted. In most countries, including the United States, the utility patent term is generally 20 years from the earliest claimed filing date of a non-provisional utility patent application in the applicable country. United States provisional utility patent applications are not eligible to become issued patents until, among other things, non-provisional patent applications are filed within 12 months of the filing date of the applicable provisional patent applications and the failure to file such non-provisional patent applications within such timeline could cause us to lose the ability to obtain patent protection for the inventions disclosed in the associated provisional patent applications. In the United States, a patent’s term may, in certain cases, be lengthened by patent term adjustment, which compensates a patentee for administrative delays by the USPTO in examining and granting a patent, or may be shortened if a patent is terminally disclaimed over a commonly owned patent having an earlier expiration date. In certain circumstances, U.S. patents can also be eligible for patent term extension; for more information, see “Item 4. Information on the Company—B. Business Overview—Government Regulation—Regulatory Approval in the United States—U.S. Patent Term Restoration and Marketing Exclusivity.” The expiration dates referred to below are without regard to potential patent term adjustment or extension that may be available to us.
In general, our licensed, owned or co-owned patents relate to our ADC products, the underlying antibodies, the PBD-based warhead, the linker used to connect such PBD warheads to the antibodies to form an ADC, modifications of the antibodies to enhance efficacy, and the methods to formulate, co-formulate, use and administer or co-administer such ADCs.
“PBD Warhead,” “PBD Warhead with Linker” and Linker Patent Protection
As of December 31, 2020, with respect to the PBD-based warhead and ADC technology we use to develop our product candidates, we have exclusively licensed from MedImmune 16 patent families directed to different aspects of the chemistry of the PBD molecules and methods of using the molecules in the treatment of proliferative diseases. These families include approximately 16 issued U.S. utility patents, 13 granted European patents, 10 granted Japanese patents, six granted Chinese patents, and 60 granted utility patents in other jurisdictions, along with six pending utility patent applications in non-U.S. jurisdictions. These issued utility patents, and any utility patents granted from such applications, are expected to expire between 2021 and 2033.
As of December 31, 2020, with respect to the “PBD warhead with linker” or linker technology we use to develop our product candidates, we have exclusively licensed from MedImmune 28 patent families directed to different aspects of the chemistry of the “PBD with linker” or linker molecules. Some of these patent families offer generic protection to the ADCs as well. These families include approximately 30 issued U.S. utility patents, 19 granted European patents, 24 granted Japanese patents, 10 granted Chinese patents and 149 granted utility patents in other jurisdictions, along with seven pending U.S. non-provisional utility patent applications and 120 pending utility patent applications in other jurisdictions. These issued utility patents, and any utility patents granted from such applications, are expected to expire between 2031 and 2038. The issued utility patents, and any utility patents granted from applications, more specifically directed to the “PBD warhead with linker” or linker present in Cami, Lonca and ADCT-602 are expected to expire between 2031 and 2033. Any utility patents granted from applications more specifically directed to the “PBD warhead with linker” or linker present in ADCT-601 are expected to expire in 2038.
For more information on the license and collaboration agreement with MedImmune, see “Item 4. Information on the Company—B. Business Overview—License and Collaboration Agreements—MedImmune License and Collaboration Agreement.”
Antibody and Product-Specific Patent Protection
Lonca
The antibody for Lonca is in the public domain.
Patents more specifically directed to the Lonca ADC are co-owned by us and MedImmune, with us having the exclusive right to exploit the relevant patents during the term of our license and collaboration agreement with MedImmune. As of December 31, 2020, there are eight such
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patent families directed to the ADC product, methods of using the ADC as a single agent or in combination with other named molecules in the treatment of proliferative diseases, and dosing regimens. The family having issued claims directed to the Lonca composition includes two issued U.S. utility patents, one granted utility patent in each of Europe, Japan and China and one pending U.S. non-provisional utility patent application, along with six granted utility patents and two pending utility patent applications in other jurisdictions. The other families include two pending U.S. non-provisional utility patent applications, two pending U.S. provisional utility patent applications, two pending European utility patent applications, two pending utility patent applications in Japan, one pending utility patent application in China, and 22 pending utility patent applications in other jurisdictions (including three Patent Cooperation Treaty (“PCT”) applications). These issued utility patents, and any utility patents granted from such applications, are expected to expire between 2033 and 2040.
Cami
As of December 31, 2020, with respect to the antibody for Cami, we exclusively license an antibody utility patent family from Genmab that includes approximately five issued U.S. utility patents, one pending U.S. non-provisional utility patent application and 14 granted patents in foreign jurisdictions. These issued utility patents, and any utility patents granted from such applications, are expected to expire between 2023 and 2024. For more information on the collaboration and license agreement with Genmab, see “Item 4. Information on the Company—B. Business Overview—License and Collaboration Agreements—Genmab License and Collaboration Agreement.”
The patents more specifically directed to the Cami ADC are co-owned by us and MedImmune, with us having the exclusive right to exploit the relevant patents during the term of our license and collaboration agreement with MedImmune. As of December 31, 2020, there are 12 such patent families directed to the ADC product, methods of using the ADC as a single agent or in combination with other named molecules in the treatment of proliferative diseases, and dosing regimens. The family having issued claims directed to the Cami composition includes two issued U.S. utility patents, one granted utility patent in each of Europe, Japan and China, and six granted utility patents in other jurisdictions, along with one pending U.S. non-provisional utility patent application and two pending utility patent applications in other jurisdictions. The other families include one issued U.S. utility patent, seven pending U.S. non-provisional utility patent applications, six pending European utility patent applications, four pending utility patent applications in Japan, three pending utility patent applications in China, and 51 pending utility patent applications in other jurisdictions (including two PCT applications and one GB priority filing). These issued utility patents, and any utility patents granted from such applications, are expected to expire between 2033 and 2040.
ADCT-602
As of December 31, 2020, we and MedImmune co-own three patent families relating specifically to the ADCT-602 ADC, along with methods of using the ADC as a single agent or in combination with other named molecules in the treatment of proliferative diseases; we have the exclusive right to exploit the relevant patents during the term of our license and collaboration agreement with MedImmune. The family having issued claims directed to the ADCT-602 composition includes two issued U.S. utility patents, one granted utility patent in each of Europe, Japan and China, and six granted utility patents in other jurisdictions, along with one pending U.S. non-provisional utility patent application and two pending utility patent applications in other jurisdictions. The other families include two pending U.S. non-provisional utility patent applications, two pending utility patent applications in each of Europe, Japan, and China, and 19 pending utility patent applications in other jurisdictions. These issued utility patents, and any utility patents granted from such applications, are expected to expire between 2033 and 2038.
ADCT-601
As of December 31, 2020, we and MedImmune co-own two patent families relating specifically to the ADCT-601 ADC, along with methods of using the ADC as a single agent or in combination with other named molecules in the treatment of proliferative diseases; we have the exclusive right to exploit the relevant patents during the term of our license and collaboration agreement with MedImmune. The family directed to the ADCT-601 ADC contains one pending U.S. non-provisional utility patent application, one pending utility patent application in each of Europe and China, one granted utility patent application in Japan, and three granted utility patents and eight pending utility patent applications in other jurisdictions, and the family directed to methods of use contains one issued U.S. utility patent, one pending U.S. non-provisional utility patent application, one pending utility patent application in each of Europe, Japan and China, and 11 pending utility patent applications in other jurisdictions. These issued utility patents, and any utility patents granted from such applications, are expected to expire in 2038.
Additionally, we license several patent families relating to ADCT-601. As of December 31, 2020, this includes one patent family exclusively licensed from Bergenbio relating to the ADCT-601 antibody moiety as a product. This family includes one issued U.S. utility patent, one granted European utility patent application, one granted Japanese utility patent application, and one pending utility patent application in each of the United States and China, along with four pending utility patent applications in other jurisdictions. The issued utility patent, and any utility patents granted from such applications, are expected to expire in 2035. We also non-exclusively license patent families from Synaffix relating to processes for producing ADCs with the ADCT-601 linker technology and linker synthesis intermediates. These families include eight issued U.S. utility patents, five granted European utility patents, one granted Japanese utility patent, two granted Chinese utility patents and two granted Indian utility patents, along with four pending U.S. non-provisional utility patent applications, four pending European utility patent applications, four pending Japanese utility patent applications and four pending Chinese utility patent applications. These issued utility patents, and any utility patents granted from such applications, are expected to expire between 2031 and 2037. Additionally, we exclusively license one patent family from MedImmune relating to the ADCT-601 ADC that contains one pending utility
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patent application in each of the United States, Europe, Japan, China and India. Any utility patents granted from these applications are expected to expire in 2038. For more information on the license agreements with Synaffix and Bergenbio, see “Item 4. Information on the Company—B. Business Overview—License and Collaboration Agreements.”
Competition
The biotechnology industry, and the oncology subsector, are characterized by rapid evolution of technologies, fierce competition and strong defense of intellectual property. While we believe that our technology, intellectual property, know-how, scientific expertise and leadership team provide us with certain competitive advantages, we face potential competition from many sources, including major pharmaceutical and biotechnology companies, academic institutions and public and private research organizations. Many competitors and potential competitors have substantially greater scientific, research and product development capabilities, as well as greater financial, marketing and human resources than we do.
Many companies are active in the oncology market and are developing or marketing products for the specific therapeutic markets that we target, including both antibody and non-antibody-based therapies. Similarly, we also face competition from other companies and institutions that continue to invest in innovation in the ADC field including new payload classes, new conjugation approaches and new targeting moieties. Specifically, we are aware of multiple companies with ADC technologies that may be competitive to our product candidates, including, but not limited to, AbbVie, Inc., Astellas Pharma Inc., AstraZeneca plc, BioAtla, LLC, Bristol-Myers Squibb Company, CytomX Therapeutics, Daiichi Sankyo Company, Eli Lilly and Company, Genentech, Inc., Genmab, GlaxoSmithKline plc, ImmunoGen, Inc., Gilead Sciences, Inc., Mersana Therapeutics Inc., Millennium Pharmaceuticals, Inc., MorphoSys AG, Novartis International AG, Pfizer Inc., F. Hoffmann-La Roche AG, Sanofi S.A., Seattle Genetics, Inc., Sutro Biopharma, Inc., Takeda Pharmaceutical Company Ltd and Wyeth Pharmaceuticals, Inc. Currently, there are nine approved ADCs. In addition, there are hundreds of ADCs in development, the vast majority of which were being developed for the treatment of cancer.
In the relapsed or refractory DLBCL setting, for which we are developing Lonca, current third-line treatment options include CAR-T, allogeneic stem cell transplant, polatuzumab in combination with bendamustine and a rituximab product, selinexor, tafasitamab in combination with lenalidomide and chemotherapy using small molecules. In addition, we expect potential new competitors, including bispecific antibodies, to enter the market as potential treatment options for such patients in the future. In the relapsed or refractory HL setting, for which we are developing Cami, current third-line treatment options include chemotherapy, immunotherapy and brentuximab vedotin. In addition, we expect changes to the treatment paradigm, such as the movement of brentuximab vedotin to earlier lines of therapy and the potential expanded use of checkpoint inhibitors, and potential new entrants such as bispecific antibodies.
Any product candidates that we successfully develop and commercialize may compete directly with approved therapies and any new therapies that may be approved in the future. Competition will be based on their safety and effectiveness, the timing and scope of marketing approvals, the availability and cost of supply, marketing and sales capabilities, reimbursement coverage, price levels and discounts offered, patent position and other factors. Our competitors may succeed in developing competing products before we do, obtaining marketing approval for products and gaining acceptance for such products in the same markets that we are targeting.
Government Regulation
Government authorities in the United States at the federal, state and local level and in other countries and jurisdictions, including the European Union, extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing and export and import of drug and biological products, such as our investigational medicines and any future investigational medicines. Generally, before a new drug or biologic can be marketed, considerable data demonstrating its quality, safety and efficacy must be obtained, organized into a format specific for each regulatory authority, submitted for review and approved by the regulatory authority.
Regulatory Approval in the United States
In the United States, pharmaceutical products are subject to extensive regulation by the FDA. The FDCA, and other federal and state statutes and regulations, govern, among other things, the research, development, testing, manufacture, storage, recordkeeping, approval, labeling, promotion and marketing, distribution, post-approval monitoring and reporting, sampling, and import and export of pharmaceutical products. Biological products used for the prevention, treatment or cure of a disease or condition of a human being are subject to regulation under the FDCA, except the section of the FDCA that governs the approval of new drug applications (“NDAs”). Biological products, such as our ADC product candidates, are approved for marketing under provisions of the Public Health Service Act (the “PHSA”), via a BLA. However, the application process and requirements for approval of BLAs are very similar to those for NDAs, and biologics are associated with similar approval risks and costs as drugs. Failure to comply with applicable U.S. requirements may subject a company to a variety of administrative or judicial sanctions, such as clinical hold, FDA refusal to approve pending NDAs or BLAs, warning or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties, and criminal prosecution.
Our investigational medicines and any future investigational medicines must be approved by the FDA pursuant to a BLA before they may be legally marketed in the United States. The process generally involves the following:
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•completion of extensive preclinical laboratory and animal studies in accordance with applicable regulations, including studies conducted in accordance with GLP requirements;
•submission to the FDA of an IND, which must become effective before human clinical trials may begin;
•approval by an IRB or independent ethics committee at each clinical trial site before each clinical trial may be commenced;
•performance of adequate and well-controlled human clinical trials in accordance with applicable IND regulations, GCP requirements and other clinical trial-related regulations to establish the safety and efficacy of the investigational product for each proposed indication;
•submission to the FDA of a BLA;
•a determination by the FDA within 60 days of its receipt of a BLA to accept the filing for review;
•satisfactory completion of one or more FDA pre-approval inspections of the manufacturing facility or facilities where the biologic, or components thereof, will be produced to assess compliance with cGMP requirements to assure that the facilities, methods and controls are adequate to preserve the biologic’s identity, strength, quality and purity;
•satisfactory completion of any potential FDA audits of the clinical trial sites that generated the data in support of the BLA to assure compliance with GCPs and integrity of the clinical data;
•payment of any user fees for FDA review of the BLA;
•FDA review and approval of the BLA, including consideration of the views of any FDA advisory committee; and
•compliance with any post-approval requirements, including REMS, where applicable, and post-approval studies required by the FDA as a condition of approval.
The preclinical and clinical testing and approval process requires substantial time, effort and financial resources, and we cannot be certain that any approvals for our product candidates will be granted on a timely basis, or at all.
Preclinical Studies
Before testing any biological product candidates in humans, the product candidate must undergo rigorous preclinical testing. Preclinical studies include laboratory evaluation of product chemistry and formulation, as well as in vitro and animal studies to assess the potential for adverse events and in some cases to establish a rationale for therapeutic use. The conduct of preclinical studies is subject to federal regulations and requirements, including GLP regulations for safety/toxicology studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and plans for clinical studies, among other things, to the FDA as part of an IND. An IND is a request for authorization from the FDA to administer an investigational product to humans and must become effective before human clinical trials may begin. Some long-term preclinical testing may continue after the IND is submitted. An IND automatically becomes effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions related to one or more proposed clinical trials and places the trial on clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. As a result, submission of an IND may not result in the FDA allowing clinical trials to commence.
Clinical Trials
The clinical stage of development involves the administration of the investigational product to healthy volunteers or patients under the supervision of qualified investigators, generally physicians not employed by or under the trial sponsor’s control. Clinical trials must be conducted: (i) in compliance with federal regulations; (ii) in compliance with GCPs, an international standard meant to protect the rights and health of patients and to define the roles of clinical trial sponsors, administrators, and monitors; as well as (iii) under protocols detailing, among other things, the objectives of the trial, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated in the trial. Each protocol involving testing on U.S. patients and subsequent protocol amendments must be submitted to the FDA as part of the IND. Furthermore, each clinical trial must be reviewed and approved by an IRB for each institution at which the clinical trial will be conducted to ensure that the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the informed consent form that must be provided to each clinical trial subject or his or her legal representative and must monitor the clinical trial until completed.
There also are requirements governing the reporting of ongoing clinical trials and completed clinical trial results to public registries. Information about certain clinical trials, including clinical trial results, must be submitted within specific timeframes for publication on the www.clinicaltrials.gov website. Information related to the product, patient population, phase of investigation, clinical trial sites and
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investigators, and other aspects of the clinical trial is then made public as part of the registration. Sponsors are also obligated to discuss the results of their clinical trials after completion. Disclosure of the results of these clinical trials can be delayed in certain circumstances for up to two years after the date of completion of the trial. Competitors may use this publicly available information to gain knowledge regarding the progress of development programs.
A sponsor who wishes to conduct a clinical trial outside of the United States may, but need not, obtain FDA authorization to conduct the clinical trial under an IND. If a foreign clinical trial is not conducted under an IND, the sponsor may submit data from the clinical trial to the FDA in support of a BLA. The FDA will accept a well-designed and well-conducted foreign clinical trial not conducted under an IND if the clinical trial was conducted in accordance with GCP requirements, and the FDA is able to validate the data through an onsite inspection if deemed necessary.

Clinical trials are generally conducted in three sequential phases, known as Phase 1, Phase 2 and Phase 3:
•Phase 1 clinical trials generally involve a small number of healthy volunteers or disease-affected patients who are initially exposed to a single dose and then multiple doses of the product candidate. The primary purpose of these clinical trials is to assess the metabolism, pharmacokinetics, pharmacologic action, side effect tolerability, safety of the product candidate, and, if possible, early evidence of effectiveness. Phase 1 clinical trials may be designated as Phase 1a, which may involve dose escalation to determine the maximum tolerated dose, or Phase 1b, which may involve dose expansion at one or more dose levels to determine the recommended dose level for Phase 2 clinical trials.
•Phase 2 clinical trials generally involve studies in disease-affected patients to evaluate proof of concept and/or determine the dosing regimen(s) for subsequent investigations. At the same time, safety and further pharmacokinetic and pharmacodynamic information is collected, possible adverse effects and safety risks are identified, and a preliminary evaluation of efficacy is conducted.
•Phase 3 clinical trials generally involve a large number of patients at multiple sites and are designed to provide the data necessary to demonstrate the effectiveness of the product for its intended use, its safety in use and to establish the overall benefit/risk relationship of the product, and provide an adequate basis for product labeling. In most cases, the FDA requires two adequate and well-controlled Phase 3 clinical trials to demonstrate the efficacy of the biologic.
These Phases may overlap or be combined. For example, a Phase 1/2 clinical trial may contain both a dose-escalation stage and a dose-expansion stage, the latter of which may confirm tolerability at the recommended dose for expansion in future clinical trials (as in traditional Phase 1 clinical trials) and provide insight into the anti-tumor effects of the investigational therapy in selected subpopulation(s).
Typically, during the development of oncology therapies, all subjects enrolled in Phase 1 clinical trials are disease-affected patients and, as a result, considerably more information on clinical activity may be collected during such trials than during Phase 1 clinical trials for non-oncology therapies. A single Phase 3 or Phase 2 trial may be sufficient in rare instances, including (1) where the trial is a large, multicenter trial demonstrating internal consistency and a statistically very persuasive finding of a clinically meaningful effect on mortality, irreversible morbidity or prevention of a disease with a potentially serious outcome and confirmation of the result in a second trial would be practically or ethically impossible or (2) when in conjunction with other confirmatory evidence. Approval on the basis of a single trial may be subject to the requirement of additional post-approval studies.
Phase 1, Phase 2, Phase 3 and other types of clinical trials may not be completed successfully within any specified period, if at all. The FDA, the IRB, or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including non-compliance with regulatory requirements or a finding that the patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug or biologic has been associated with unexpected serious harm to patients. Additionally, some clinical trials are overseen by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board or committee. This group provides authorization for whether a trial may move forward at designated checkpoints based on access to certain data from the trial.
Concurrent with clinical trials, companies usually complete additional animal studies and also must develop additional information about the chemistry and physical characteristics of the drug or biologic as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product and, among other things, companies must develop methods for testing the identity, strength, quality, potency, and purity of the final product. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the investigational medicines do not undergo unacceptable deterioration over their shelf life.
FDA Review Process
Following completion of the clinical trials, the results of preclinical studies and clinical trials are submitted to the FDA as part of a BLA, along with proposed labeling, chemistry and manufacturing information to ensure product quality and other relevant data. To support marketing
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approval, the data submitted must be sufficient in quality and quantity to establish the safety and efficacy of the investigational product to the satisfaction of the FDA. FDA approval of a BLA must be obtained before a biologic or drug may be marketed in the United States.
The cost of preparing and submitting a BLA is substantial. Under the PDUFA, each BLA must be accompanied by a substantial user fee. The FDA adjusts the PDUFA user fees on an annual basis. Fee waivers or reductions are available in certain circumstances, including a waiver of the application fee for the first application filed by a small business. Additionally, no user fees are assessed on BLAs for products designated as orphan drugs, unless the product also includes a non-orphan indication. The applicant under an approved BLA is also subject to an annual program fee.
The FDA reviews all submitted BLAs before it accepts them for filing and may request additional information. The FDA must make a decision on accepting a BLA for filing within 60 days of receipt, and such decision could include a refusal to file by the FDA. Once the submission is accepted for filing, the FDA begins an in-depth review of the BLA. Under the goals and policies agreed to by the FDA under PDUFA, the FDA has 10 months, from the filing date, in which to complete its initial review of an original BLA for a new molecular entity and respond to the applicant, and six months from the filing date of an original BLA designated for priority review. The review process for both standard and priority review may be extended by the FDA for three additional months to consider certain late-submitted information, or information intended to clarify information already provided in the submission. The FDA does not always meet its PDUFA goal dates for standard and priority BLAs, and the review process can be extended by FDA requests for additional information or clarification.
Before approving a BLA, the FDA will conduct a pre-approval inspection of the manufacturing facilities for the new product to determine whether they comply with cGMP requirements. The FDA will not approve the product unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications.
The FDA also may audit data from clinical trials to ensure compliance with GCP requirements and the integrity of the data supporting safety and efficacy. Additionally, the FDA may refer applications for novel products or products that present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved and under what conditions, if any. The FDA is not bound by recommendations of an advisory committee, but it generally follows such recommendations when making decisions on approval. The FDA likely will reanalyze the clinical trial data, which could result in extensive discussions between the FDA and the applicant during the review process.
After the FDA evaluates a BLA, it will issue either an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing of the biologic with specific prescribing information for specific indications. A Complete Response Letter indicates that the review cycle of the application is complete, and the application will not be approved in its present form. A Complete Response Letter generally outlines the deficiencies in the BLA and may require additional clinical data, additional pivotal clinical trial(s), and/or other significant and time-consuming requirements related to clinical trials, preclinical studies or manufacturing in order for FDA to reconsider the application. If a Complete Response Letter is issued, the applicant may either resubmit the BLA, addressing all of the deficiencies identified in the letter, or withdraw the application or request an opportunity for a hearing. The FDA has committed to reviewing such resubmissions in two or six months, depending on the type of information included. Even if such data and information are submitted, the FDA may decide that the BLA does not satisfy the criteria for approval.
As a condition of BLA approval, the FDA may require a risk evaluation and mitigation strategy (“REMS”) to help ensure that the benefits of the biologic outweigh the potential risks to patients. A REMS can include medication guides, communication plans for healthcare professionals, and elements to assure a product’s safe use (“ETASU”). An ETASU can include, but is not limited to, special training or certification for prescribing or dispensing the product, dispensing the product only under certain circumstances, special monitoring, and the use of patient-specific registries. The requirement for a REMS can materially affect the potential market and profitability of the product. Moreover, the FDA may require substantial post-approval testing and surveillance to monitor the product’s safety or efficacy.
Orphan Drug Designation
Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biological product intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the United States but for which there is no reasonable expectation that the cost of developing and making the product for this type of disease or condition will be recovered from sales of the product in the United States.
Orphan drug designation must be requested before submitting a BLA. After the FDA grants orphan drug designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation on its own does not convey any advantage in or shorten the duration of the regulatory review and approval process.
If a product that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, the product is entitled to orphan drug exclusivity, which means that the FDA may not approve any other applications to market the same product for the same indication for seven years from the date of such approval, except in limited circumstances, such as a showing of
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clinical superiority to the product with orphan exclusivity by means of greater effectiveness, greater safety, or providing a major contribution to patient care, or in instances of drug supply issues. Competitors, however, may receive approval of either a different product for the same indication or the same product for a different indication. In the latter case, because healthcare professionals are free to prescribe products for off-label uses, the competitor’s product could be used for the orphan indication despite another product’s orphan exclusivity.
FDA’s determination of whether two ADCs are the same product for purposes of orphan drug exclusivity is based on a determination of sameness of the monoclonal antibody element and the functional element of the conjugated molecule. Two ADCs are deemed to be the same product if the complementarity determining region sequences of the antibody and the functional element of the conjugated molecule are the same. A difference in either of those two elements can result in a determination that the molecules are different.
Expedited Development and Review Programs
The FDA is authorized to designate certain products for expedited review if they are intended to address an unmet medical need in the treatment of a serious or life-threatening disease or condition.
Fast track designation may be granted for products that are intended to treat a serious or life-threatening disease or condition for which there is no effective treatment and preclinical or clinical data demonstrate the potential to address unmet medical needs for the condition. Fast track designation applies to both the product and the specific indication for which it is being studied. The sponsor of a new biologic candidate can request the FDA to designate the candidate for a specific indication for fast track status concurrent with, or after, the submission of the IND for the candidate. The FDA must determine if the biologic candidate qualifies for fast track designation within 60 days of receipt of the sponsor’s request. For fast track products, sponsors may have greater interactions with the FDA and the FDA may initiate review of sections of a fast track product’s BLA before the application is complete. This “rolling review” is available if the FDA determines, after preliminary evaluation of clinical data submitted by the sponsor, that a fast track product may be effective. The sponsor must also provide, and the FDA must approve, a schedule for the submission of the remaining information and the sponsor must pay applicable user fees. Any product submitted to the FDA for marketing, including under a fast track program, may be eligible for other types of FDA programs intended to expedite development and review, such as priority review and accelerated approval.
Breakthrough therapy designation may be granted for products that are intended, alone or in combination with one or more other products, to treat a serious or life-threatening condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over currently approved therapies on one or more clinically significant endpoints. Under the breakthrough therapy program, the sponsor of a new biologic candidate may request that the FDA designate the candidate for a specific indication as a breakthrough therapy concurrent with, or after, the submission of the IND for the biologic candidate. The FDA must determine if the biological product qualifies for breakthrough therapy designation within 60 days of receipt of the sponsor’s request. The FDA may take certain actions with respect to breakthrough therapies, including holding meetings with the sponsor throughout the development process, providing timely advice to the product sponsor regarding development and approval, involving more senior staff in the review process, assigning a cross-disciplinary project lead for the review team and taking other steps to design the clinical studies in an efficient manner.
Priority review may be granted for products that are intended to treat a serious or life-threatening condition and, if approved, would provide a significant improvement in safety and effectiveness compared to available therapies. The FDA will attempt to direct additional resources to the evaluation of an application designated for priority review in an effort to facilitate the review.
Accelerated approval may be granted for products that are intended to treat a serious or life-threatening condition and that generally provide a meaningful therapeutic advantage to patients over existing treatments. A product eligible for accelerated approval may be approved on the basis of either a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity or prevalence of the condition and the availability or lack of alternative treatments. In clinical trials, a surrogate endpoint is a measurement of laboratory or clinical signs of a disease or condition that substitutes for a direct measurement of how a patient feels, functions, or survives. The accelerated approval pathway is most often used in settings in which the course of a disease is long and an extended period of time is required to measure the intended clinical benefit of a product, even if the effect on the surrogate or intermediate clinical endpoint occurs rapidly. Thus, accelerated approval has been used extensively in the development and approval of products for treatment of a variety of cancers in which the goal of therapy is generally to improve survival or decrease morbidity and the duration of the typical disease course requires lengthy and sometimes large studies to demonstrate a clinical or survival benefit. The accelerated approval pathway is contingent on a sponsor’s agreement to conduct additional post-approval confirmatory studies to verify and describe the product’s clinical benefit. These confirmatory trials must be completed with due diligence and, in some cases, the FDA may require that the trial be designed, initiated, and/or fully enrolled prior to approval. Failure to conduct required post-approval studies, or to confirm a clinical benefit during post-marketing studies, would allow the FDA to withdraw the product from the market on an expedited basis. All promotional materials for product candidates approved under accelerated regulations are subject to prior review by the FDA.
Even if a product qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or the time period for FDA review or approval may not be shortened. Furthermore, fast track designation, breakthrough therapy
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designation, priority review and accelerated approval do not change the standards for approval, but may expedite the development or approval process.
Additional Controls for Biologics
To help reduce the increased risk of the introduction of adventitious agents, the PHSA emphasizes the importance of manufacturing controls for products whose attributes cannot be precisely defined. The PHSA also provides authority to the FDA to immediately suspend licenses in situations where there exists a danger to public health, to prepare or procure products in the event of shortages and critical public health needs, and to authorize the creation and enforcement of regulations to prevent the introduction or spread of communicable diseases in the United States and between states.
After a BLA is approved, the product may also be subject to official lot release as a condition of approval. As part of the manufacturing process, the manufacturer is required to perform certain tests on each lot of the product before it is released for distribution. If the product is subject to official release by the FDA, the manufacturer submits samples of each lot of product to the FDA together with a release protocol showing a summary of the history of manufacture of the lot and the results of all of the manufacturer’s tests performed on the lot. The FDA may also perform certain confirmatory tests on lots of some products, such as viral vaccines, before releasing the lots for distribution by the manufacturer. In addition, the FDA conducts laboratory research related to the regulatory standards on the safety, purity, potency, and effectiveness of biological products. As with drugs, after approval of biologics, manufacturers must address any safety issues that arise, are subject to recalls or a halt in manufacturing, and are subject to periodic inspection after approval.
Pediatric Information
Under the Pediatric Research Equity Act, or PREA, BLAs or supplements to BLAs must contain data to assess the safety and effectiveness of the biological product for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the biological product is safe and effective. The FDA may grant full or partial waivers, or deferrals, for submission of data. Unless otherwise required by regulation, PREA generally does not apply to any biological product for an indication for which orphan designation has been granted. However, beginning in 2020, PREA will apply to BLAs for orphan-designated biologics if the biologic is a molecularly targeted cancer product intended for the treatment of an adult cancer and is directed at a molecular target that FDA has determined is substantially relevant to the growth or progression of a pediatric cancer.
The Best Pharmaceuticals for Children Act (the “BPCA”) provides a six-month extension of any exclusivity—patent or non-patent—for a biologic if certain conditions are met. Conditions for exclusivity include the FDA’s determination that information relating to the use of a new biologic in the pediatric population may produce health benefits in that population, FDA making a written request for pediatric studies, and the applicant agreeing to perform, and reporting on, the requested studies within the statutory timeframe. Applications under the BPCA are treated as priority applications, with all of the benefits that designation confers.
Post-Approval Requirements
Once a BLA is approved, a product will be subject to certain post-approval requirements. For instance, the FDA closely regulates the post-approval marketing and promotion of biologics, including standards and regulations for direct-to-consumer advertising, off-label promotion, industry-sponsored scientific and educational activities and promotional activities involving the Internet. Biologics may be marketed only for the approved indications and in a manner consistent with the provisions of the approved labeling.
Adverse event reporting and submission of periodic safety summary reports is required following FDA approval of a BLA. The FDA also may require post-marketing testing, known as Phase 4 testing, REMS, and surveillance to monitor the effects of an approved product, or the FDA may place conditions on an approval that could restrict the distribution or use of the product. In addition, quality control, biological product manufacture, packaging, and labeling procedures must continue to conform to cGMPs after approval. Biologic manufacturers and certain of their subcontractors are required to register their establishments with the FDA and certain state agencies. Registration with the FDA subjects entities to periodic unannounced inspections by the FDA, during which the agency inspects a biologic product’s manufacturing facilities to assess compliance with cGMPs. Accordingly, manufacturers must continue to expend time, money, and effort in the areas of production and quality-control to maintain compliance with cGMPs. Regulatory authorities may withdraw product approvals or request product recalls if a company fails to comply with required regulatory standards, if it encounters problems following initial marketing, or if previously unrecognized problems are subsequently discovered.
Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information, imposition of post-market studies or clinical studies to assess new safety risks or imposition of distribution or other restrictions under a REMS program. Other potential consequences include, among other things:
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•restrictions on the marketing or manufacturing of the product, suspension of the approval, complete withdrawal of the product from the market or product recalls;
•fines, warning or other enforcement-related letters or holds on post-approval clinical studies;
•refusal of the FDA to approve pending BLAs or supplements to approved BLAs, or suspension or revocation of product license approvals;
•product seizure or detention, or refusal to permit the import or export of products; or
•injunctions or the imposition of civil or criminal penalties.
U.S. Patent Term Restoration and Marketing Exclusivity
Depending upon the timing, duration, and specifics of FDA approval of our product candidates, some of our U.S. patents may be eligible for limited patent term extension under the Hatch Waxman Amendments. The Hatch Waxman Amendments permit a patent term extension of up to five years as compensation for patent term lost during the FDA regulatory review process. Patent term extension, however, cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date. The patent term extension period is generally one half the time between the effective date of an IND and the submission date of a BLA, plus the time between the submission date of a BLA and the approval of that application, except that the review period is reduced by any time during which the applicant failed to exercise due diligence. Only one patent applicable to an approved drug is eligible for such an extension, only those claims covering the approved drug, a method for using it, or a method for manufacturing it may be extended and the application for the extension must be submitted prior to the expiration of the patent. The USPTO, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. In the future, we or our licensors may apply for patent term extension for our owned or licensed patents to add patent life beyond their current expiration date, depending on the expected length of the clinical trials and other factors involved in the filing of the relevant BLA. However, an extension might not be granted because of, for example, failing to exercise due diligence during the testing phase or regulatory review process, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents or otherwise failing to satisfy applicable requirements. Moreover, the applicable time period or the scope of patent protection afforded could be less than requested.
The BPCIA created an abbreviated approval pathway for biological products shown to be biosimilar to, or interchangeable with, an FDA-licensed reference biological product. Biosimilarity, which requires that the biological product be highly similar to the reference product notwithstanding minor differences in clinically inactive components and that there be no clinically meaningful differences between the biological product and the reference product in terms of safety, purity and potency, can be shown through analytical studies, animal studies and a clinical trial or trials. Interchangeability requires that a biological product be biosimilar to the reference product and that the product can be expected to produce the same clinical results as the reference product in any given patient and, for products administered multiple times to an individual, that the product and the reference product may be alternated or switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biological product without such alternation or switch.
A reference biological product is granted 12 years of data exclusivity from the time of first licensure of the product and the FDA will not accept an application for a biosimilar or interchangeable product based on the reference biological product until four years after the date of first licensure of the reference product. “First licensure” typically means the initial date the particular product at issue was licensed in the United States. Date of first licensure does not include the date of licensure of (and a new period of exclusivity is not available for) a biological product if the licensure is for a supplement for the biological product or for a subsequent application by the same sponsor or manufacturer of the biological product (or licensor, predecessor in interest, or other related entity) for a change (not including a modification to the structure of the biological product) that results in a new indication, route of administration, dosing schedule, dosage form, delivery system, delivery device or strength, or for a modification to the structure of the biological product that does not result in a change in safety, purity or potency.
Regulatory Approval in the European Union
The EMA is a decentralized scientific agency of the European Union. It coordinates the evaluation and monitoring of centrally authorized medicinal products. It is responsible for the scientific evaluation of applications for EU marketing authorizations, as well as the development of technical guidance and the provision of scientific advice to sponsors. The EMA decentralizes its scientific assessment of medicines by working through a network of about 4,500 experts throughout the European Union, nominated by the member states. The EMA draws on resources of over 40 National Competent Authorities of European Union member states.
The process regarding approval of medicinal products in the European Union follows roughly the same lines as in the United States and likewise generally involves satisfactorily completing each of the following:
•preclinical laboratory tests, animal studies and formulation studies all performed in accordance with the applicable EU Good Laboratory Practice regulations;
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•submission to the relevant national authorities of a clinical trial application (“CTA”) for each trial in humans, which must be approved before the trial may begin in each country where patient enrollment is planned;
•performance of adequate and well-controlled clinical trials to establish the safety and efficacy of the product for each proposed indication;
•submission to the relevant competent authorities of a MAA, which includes the data supporting safety and efficacy as well as detailed information on the manufacture and composition of the product in clinical development and proposed labelling;
•satisfactory completion of an inspection by the relevant national authorities of the manufacturing facility or facilities, including those of third parties, at which the product is produced to assess compliance with strictly enforced cGMP;
•potential audits of the non-clinical and clinical trial sites that generated the data in support of the MAA; and
•review and approval by the relevant competent authority of the MAA before any commercial marketing, sale or shipment of the product.
Preclinical Studies
Preclinical tests include laboratory evaluations of product chemistry, formulation and stability, as well as studies to evaluate toxicity in animal studies, in order to assess the quality and potential safety and efficacy of the product. The conduct of the preclinical tests and formulation of the compounds for testing must comply with the relevant international, EU and national legislation, regulations and guidelines. The results of the preclinical tests, together with relevant manufacturing information and analytical data, are submitted as part of the CTA.
Clinical Trials
Pursuant to the Clinical Trials Directive 2001/20/EC, as amended (the “Clinical Trials Directive”), a system for the approval of clinical trials in the European Union has been implemented through national legislation of the member states. Under this system, approval must be obtained from the competent national authority of each European Union member state in which a clinical trial is planned to be conducted. To this end, a CTA is submitted, which must be supported by an investigational medicinal product dossier and further supporting information prescribed by the Clinical Trials Directive and other applicable guidance documents including but not being limited to the clinical trial protocol. Furthermore, a clinical trial may only be started after a competent ethics committee has issued a favorable opinion on the clinical trial application in that country.
Directive 2001/20/EC will be replaced by Regulation (EU) No. 536/2014, which became effective on June 16, 2014. The Regulation introduces an authorization procedure based on a single submission via a single EU portal, an assessment procedure leading to a single decision, as well as transparency requirements (the proactive publication of clinical trial data in the EU database). Since October 2016, based on its Policy 0070, the EMA has been publishing clinical data submitted by pharmaceutical companies to support their MAA for human medicines under this centralized procedure.
Manufacturing and import into the EU of investigational medicinal products is subject to the holding of appropriate authorizations and must be carried out in accordance with cGMP.
Review and Approval
Authorization to market a product in the European Union member states proceeds under one of four procedures: a centralized authorization procedure, a mutual recognition procedure, a decentralized procedure or a national procedure. Since our products by their virtue of being antibody-based biologics fall under the centralized procedure, only this procedure will be described here.
Certain drugs, including medicinal products developed by means of biotechnological processes, must be approved via the centralized authorization procedure for marketing authorization. A successful application under the centralized authorization procedure results in a marketing authorization from the European Commission, which is automatically valid in all European Union member states. The other European Economic Area member states (namely Norway, Iceland and Liechtenstein) are also obligated to recognize the European Commission decision. The EMA and the European Commission administer the centralized authorization procedure.
Under the centralized authorization procedure, the Committee for Medicinal Products for Human Use (the “CHMP”) serves as the scientific committee that renders opinions about the safety, efficacy and quality of human products on behalf of the EMA. The CHMP is composed of experts nominated by each member state’s national drug authority, with one of them appointed to act as Rapporteur for the co-ordination of the evaluation with the possible assistance of a further member of the CHMP acting as a Co-Rapporteur. After approval, the Rapporteur(s) continue to monitor the product throughout its life cycle. The CHMP is required to issue an opinion within 210 days of receipt of a valid application, though the clock is stopped if it is necessary to ask the applicant for clarification or further supporting data. The process is complex and involves extensive consultation with the regulatory authorities of member states and a number of experts. Once the procedure is
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completed, a European Public Assessment Report is produced. If the CHMP concludes that the quality, safety and efficacy of the medicinal product is sufficiently proven, it adopts a positive opinion. The CHMP’s opinion is sent to the European Commission, which uses the opinion as the basis for its decision whether or not to grant a marketing authorization. If the opinion is negative, information is given as to the grounds on which this conclusion was reached.
After a drug has been authorized and launched, it is a condition of maintaining the marketing authorization that all aspects relating to its quality, safety and efficacy must be kept under review. Sanctions may be imposed for failure to adhere to the conditions of the marketing authorization. In extreme cases, the authorization may be revoked, resulting in withdrawal of the product from sale.
Conditional Approval and Accelerated Assessment
As per Article 14(7) of Regulation (EC) 726/2004, a medicine that would fulfill an unmet medical need may, if its immediate availability is in the interest of public health, be granted a conditional marketing authorization on the basis of less complete clinical data than are normally required, subject to specific obligations being imposed on the authorization holder. These specific obligations are to be reviewed annually by the EMA. The list of these obligations shall be made publicly accessible. Such an authorization shall be valid for one year, on a renewable basis.
When an application is submitted for a marketing authorization in respect of a drug for human use which is of major interest from the point of view of public health and in particular from the viewpoint of therapeutic innovation, the applicant may request an accelerated assessment procedure pursuant to Article 14(9) of Regulation (EC) 726/2004. Under the accelerated assessment procedure, the CHMP is required to issue an opinion within 150 days of receipt of a valid application, subject to clock stops. We believe that some of the disease indications in which our product candidates are currently being or may be developed in the future qualify for this provision, and we will take advantage of this provision as appropriate.
Period of Authorization and Renewals
A marketing authorization is initially valid for five years and may then be renewed on the basis of a re-evaluation of the risk-benefit balance by the EMA or by the competent authority of the authorizing member state. To this end, the marketing authorization holder shall provide the EMA or the competent authority with a consolidated version of the file in respect of quality, safety and efficacy, including all variants introduced since the marketing authorization was granted, at least six months before the marketing authorization ceases to be valid. Once renewed, the marketing authorization shall be valid for an unlimited period, unless the European Commission or the competent authority decides, on justified grounds relating to pharmacovigilance, to proceed with one additional five-year renewal. Any authorization which is not followed by the actual placing of the drug on the EU market (in case of centralized procedure) or on the market of the authorizing member state within three years after authorization shall cease to be valid (the so-called “sunset clause”).
Without prejudice to the law on the protection of industrial and commercial property, marketing authorizations for new medicinal products benefit from an 8+2+1 year period of regulatory protection. This regime consists of a regulatory data protection period of eight years plus a concurrent market exclusivity of 10 years plus an additional market exclusivity of one further year if, during the first eight years of those 10 years, the marketing approval holder obtains an approval for one or more new therapeutic indications which, during the scientific evaluation prior to their approval, are determined to bring a significant clinical benefit in comparison with existing therapies. Under the current rules, a third party may reference the preclinical and clinical data of the reference product beginning eight years after first approval, but the third party may market a generic version of the reference product after only 10 (or 11) years have lapsed.
Orphan Drug Designation
Regulation (EC) 141/2000 states that a drug shall be designated as an orphan drug if its sponsor can establish (i) that it is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition affecting not more than five in 10,000 persons in the European Union when the application is made, or that it is intended for the diagnosis, prevention or treatment of a life-threatening, seriously debilitating or serious and chronic condition in the European Union and that without incentives it is unlikely that the marketing of the drug in the European Union would generate sufficient return to justify the necessary investment; and (ii) that there exists no satisfactory method of diagnosis, prevention or treatment of the condition in question that has been authorized in the European Union or, if such method exists, the drug will be of significant benefit to those affected by that condition.
Regulation (EC) 847/2000 sets out criteria for the designation of orphan drugs. An application for designation as an orphan product can be made any time prior to the filing of an application for approval to market the product. Marketing authorization for an orphan drug leads to a 10-year period of market exclusivity, which means that no similar medicinal product can be authorized in the same indication. This period may, however, be reduced to six years if, at the end of the fifth year, it is established that the product no longer meets the criteria for orphan drug designation, for example because the product is sufficiently profitable not to justify continued market exclusivity. In addition, derogation from market exclusivity may be granted on an individual basis in very selected cases, such as consent from the marketing authorization holder, inability to supply sufficient quantities of the product or demonstration of “clinically relevant superiority” by a similar medicinal product.
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Medicinal products designated as orphan drugs pursuant to Regulation (EC) 141/2000 are eligible for incentives made available by the European Union and by the member states to support research into, and the development and availability of, orphan drugs.
If the MAA of a medicinal product designated as an orphan drug pursuant to Regulation (EC) 141/2000 includes the results of all studies conducted in compliance with an agreed PIP, and a corresponding statement is subsequently included in the marketing authorization granted, the 10-year period of market exclusivity will be extended to 12 years.
European Data Collection and Processing
The collection, transfer, processing and other use of personal information, including health data, in the European Union is governed by the GDPR, which came into effect in May 2018. This directive imposes several requirements relating to (i) obtaining, in some situations, the consent of the individuals to whom the personal data relates, (ii) the information provided to the individuals about how their personal information is used, (iii) ensuring the security and confidentiality of the personal data, (iv) the obligation to notify regulatory authorities and affected individuals of personal data breaches, (v) extensive internal privacy governance obligations and (vi) obligations to honor rights of individuals in relation to their personal data (for example, the right to access, correct and delete their data). The GDPR prohibits the transfer of personal data to countries outside the European Economic Area, such as the United States, which are not considered by the European Commission to provide an adequate level of data protection. Switzerland has adopted similar restrictions. Failure to comply with the requirements of the GDPR and the related national data protection laws of the European Union member states may result in fines and other administrative penalties. The GDPR introduces new data protection requirements in the EU and substantial fines for breaches of the data protection rules. The GDPR and related data protection laws may impose additional responsibility and liability in relation to personal data that we collect and process and we may be required to put in place additional mechanisms ensuring compliance with such rules. This may be onerous and adversely affect our business, financial condition, results of operations, and prospects.
Marketing
Much like the Anti-Kickback Statute prohibition in the United States, the provision of benefits or advantages to physicians to induce or encourage the prescription, recommendation, endorsement, purchase, supply, order or use of medicinal products is also prohibited in the EU. The provision of benefits or advantages to physicians is governed by the national anti-bribery laws of European Union member states, such as the U.K. Bribery Act 2010. Infringement of these laws could result in substantial fines and imprisonment.
Payments made to physicians in certain European Union member states must be publicly disclosed. Moreover, agreements with physicians often must be the subject of prior notification and approval by the physician’s employer, his or her competent professional organization, and/or the regulatory authorities of the individual European Union member states. These requirements are provided in the national laws, industry codes or professional codes of conduct, applicable in the European Union member states. Failure to comply with these requirements could result in reputational risk, public reprimands, administrative penalties, fines or imprisonment.
International Regulation
In addition to regulations in the United States and Europe, a variety of foreign regulations govern clinical trials, commercial sales and distribution of product candidates. The approval process varies from country to country and the time to approval may be longer or shorter than that required for FDA or European Commission approval.
Other Healthcare Laws and Regulations and Legislative Reform
Healthcare and Privacy Laws and Regulations
Healthcare providers, physicians and third-party payors will play a primary role in the recommendation and prescription of any product candidates for which we obtain marketing approval. Our operations, including any arrangements with healthcare providers, physicians, third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws that may affect the business or financial arrangements and relationships through which we would market, sell and distribute our products. The healthcare laws that may affect our ability to operate include, but are not limited to:
•The federal Anti-Kickback Statute, which prohibits any person or entity from, among other things, knowingly and willfully soliciting, receiving, offering or paying any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of an item or service reimbursable, in whole or in part, under a federal healthcare program, such as the Medicare and Medicaid programs. The term “remuneration” has been broadly interpreted to include anything of value. The federal Anti-Kickback Statute has also been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers, and formulary managers on the other hand. There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution, but the exceptions and safe harbors are drawn narrowly and require strict compliance in order to offer protection.
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•Federal civil and criminal false claims laws, such as the FCA, which can be enforced by private citizens through civil qui tam actions, and civil monetary penalty laws prohibit individuals or entities from, among other things, knowingly presenting, or causing to be presented, false, fictitious or fraudulent claims for payment of federal funds, and knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent claim to avoid, decrease or conceal an obligation to pay money to the federal government. For example, pharmaceutical companies have been prosecuted under the FCA in connection with their alleged off-label promotion of drugs, purportedly concealing price concessions in the pricing information submitted to the government for government price reporting purposes, and allegedly providing free product to customers with the expectation that the customers would bill federal healthcare programs for the product. In addition, a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the FCA. As a result of a modification made by the Fraud Enforcement and Recovery Act of 2009, a claim includes “any request or demand” for money or property presented to the U.S. government. In addition, manufacturers can be held liable under the FCA even when they do not submit claims directly to government payors if they are deemed to “cause” the submission of false or fraudulent claims.
•HIPAA, among other things, imposes criminal liability for executing or attempting to execute a scheme to defraud any healthcare benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and creates federal criminal laws that prohibit knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement or representation, or making or using any false writing or document knowing the same to contain any materially false, fictitious or fraudulent statement or entry in connection with the delivery of or payment for healthcare benefits, items or services.
•HIPAA, as amended by HITECH, and their implementing regulations, which impose privacy, security and breach reporting obligations with respect to individually identifiable health information upon entities subject to the law, such as health plans, healthcare clearinghouses and certain healthcare providers, known as covered entities, and their respective business associates that perform services for them that involve individually identifiable health information. HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in U.S. federal courts to enforce HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions.
•Federal and state consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers.
•The federal transparency requirements under the Physician Payments Sunshine Act, created under the Health Care Reform Act, which requires, among other things, certain manufacturers of drugs, devices, biologics and medical supplies reimbursed under Medicare, Medicaid, or the Children’s Health Insurance Program to report annually to CMS information related to payments and other transfers of value provided to physicians, as defined by such law, and teaching hospitals and physician ownership and investment interests, including such ownership and investment interests held by a physician’s immediate family members.
•State and foreign laws that are analogous to each of the above federal laws, such as anti-kickback and false claims laws, that may impose similar or more prohibitive restrictions, and may apply to items or services reimbursed by non-governmental third-party payors, including private insurers.
•State and foreign laws that require pharmaceutical companies to implement compliance programs, comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, or to track and report gifts, compensation and other remuneration provided to physicians and other healthcare providers; state laws that require the reporting of marketing expenditures or drug pricing, including information pertaining to and justifying price increases; state and local laws that require the registration of pharmaceutical sales representatives; state laws that prohibit various marketing-related activities, such as the provision of certain kinds of gifts or meals; state laws that require the posting of information relating to clinical trials and their outcomes; and other federal, state and foreign laws that govern the privacy and security of health information or personally identifiable information in certain circumstances, including state health information privacy and data breach notification laws which govern the collection, use, disclosure, and protection of health-related and other personal information, many of which differ from each other in significant ways and often are not pre-empted by HIPAA, thus requiring additional compliance efforts.
If our operations are found to be in violation of any of these laws or any other current or future healthcare laws that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, exclusion from government funded healthcare programs, such as Medicare and Medicaid, contractual damages, reputational harm, diminished profits and future earnings, additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, and the curtailment or restructuring of our operations, any of which could substantially disrupt our operations. Although effective compliance programs can mitigate the risk of investigation and prosecution for violations of these laws, these risks cannot be entirely eliminated. Any action against us for an alleged or suspected violation could cause us to incur significant legal expenses and could divert our management’s attention from the operation of our business, even if our defense is successful. In addition, if any of the physicians or other healthcare providers or entities with whom we expect to do business is found not to be in compliance with
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applicable laws, they may be subject to significant criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.
Legislative Reform
We operate in a highly regulated industry, and new laws, regulations and judicial decisions, or new interpretations of existing laws, regulations and decisions, related to healthcare availability, the method of delivery and payment for healthcare products and services could negatively affect our business, financial condition and prospects. There is significant interest in promoting healthcare reforms, and it is likely that federal and state legislatures within the United States and the governments of other countries will continue to consider changes to existing healthcare legislation.
For example, the United States and state governments continue to propose and pass legislation designed to reduce the cost of healthcare. In 2010, the U.S. Congress enacted the Health Care Reform Act, which included changes to the coverage and reimbursement of drug products under government healthcare programs such as:
•increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program;
•established a branded prescription drug fee that pharmaceutical manufacturers of certain branded prescription drugs must pay to the federal government;
•expanded the list of covered entities eligible to participate in the 340B drug pricing program by adding new entities to the program;
•established a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 70% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D;
•extended manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;
•expanded eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for individuals with income at or below 133% of the federal poverty level, thereby potentially increasing manufacturers’ Medicaid rebate liability;
•created a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for certain drugs and biologics, including our product candidates, that are inhaled, infused, instilled, implanted or injected;
•established a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research;
•established a Center for Medicare and Medicaid Innovation at the CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending; and
•created a licensure framework for follow-on biologic products.
There remain judicial and congressional challenges to certain aspects of the Health Care Reform Act as well as efforts to repeal or replace certain aspects of the Health Care Reform Act. For example, in 2017, the U.S. Congress enacted the TCJA, which eliminated the tax-based shared responsibility payment imposed by the Health Care Reform Act on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” On November 10, 2020, the Supreme Court of the United States heard oral arguments regarding the constitutionality of the Health Care Reform Act in light of the elimination of the individual mandate. It is unclear how this litigation and other efforts to repeal and replace the Health Care Reform Act will impact the Health Care Reform Act. It is difficult to predict the future legislative landscape in healthcare and the effect on our business, results of operations, financial condition and prospects.

In addition, there have been and continue to be a number of initiatives at the United States federal and state levels that seek to reduce healthcare costs. In 2011, the U.S. Congress enacted the Budget Control Act, which included provisions intended to reduce the federal deficit. The Budget Control Act resulted in the imposition of 2% reductions in Medicare payments to providers beginning in 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2030 absent additional congressional action. The CARES Act, which was signed into law on March 27, 2020, suspended the 2% Medicare sequester reductions under the Budget Control Act from May 1, 2020 through December 31, 2020 and extended the sequester by one year, through 2030. In 2012, the U.S. Congress enacted the American Taxpayer Relief Act, which, among other things, further reduced Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. If government spending is further reduced, anticipated budgetary shortfalls may also impact the ability of relevant
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agencies, such as the FDA, to continue to function at current levels, which may impact the ability of relevant agencies to timely review and approve research and development, manufacturing and marketing activities, which may delay our ability to develop, market and sell any product candidates we may develop. In addition, any significant spending reductions affecting Medicare, Medicaid or other publicly funded or subsidized health programs that may be implemented, or any significant taxes or fees that may be imposed on us, as part of any broader deficit reduction effort or legislative replacement to the Budget Control Act, could have an adverse impact on our anticipated product revenues.
Furthermore, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several congressional inquiries and proposed legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs and reform government program reimbursement methodologies for drug products. Congress and the U.S. Presidential Administration have each indicated that it will continue to seek measures to control drug costs. Individual states in the United States have also become increasingly active in passing legislation and implementing regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. We expect that additional state and federal healthcare reform measures will be adopted in the future.
Environmental, Health and Safety Laws and Regulations
We and our third-party contractors are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the use, generation, manufacture, distribution, storage, handling, treatment, remediation and disposal of hazardous materials and wastes. Hazardous chemicals, including flammable and biological materials, are involved in certain aspects of our business, and we cannot eliminate the risk of injury or contamination from the use, generation, manufacture, distribution, storage, handling, treatment or disposal of hazardous materials and wastes. In particular, our product candidates use PBDs, which are highly potent cytotoxins that require special handling by our and our contractors’ staff. In the event of contamination or injury, or failure to comply with environmental, health and safety laws and regulations, we could be held liable for any resulting damages, fines and penalties associated with such liability could exceed our assets and resources. Environmental, health and safety laws and regulations are becoming increasingly more stringent. We may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations.
Pharmaceutical Coverage, Pricing and Reimbursement
The availability and extent of coverage and adequate reimbursement by governmental and private third-party payors are essential for most patients to be able to afford expensive medical treatments. In both domestic and foreign markets, sales of our product candidates will depend substantially on the extent to which the costs of our product candidates will be covered by third-party payors, such as government health programs, commercial insurance and managed healthcare organizations. These third-party payors decide which products will be covered and establish reimbursement levels for those products.
Coverage and reimbursement by a third-party payor may depend upon a number of factors, including the third-party payor’s determination that use of a product is:
•a covered benefit under its health plan;
•safe, effective and medically necessary;
•appropriate for the specific patient;
•cost-effective; and
•neither experimental nor investigational.
Obtaining coverage approval and reimbursement for a product from a government or other third-party payor is a time-consuming and costly process that could require us to provide supporting scientific, clinical and cost-effectiveness data for the use of our products to the payor. We may not be able to provide data sufficient to gain acceptance with respect to coverage and reimbursement at a satisfactory level. If coverage and adequate reimbursement of our future products, if any, are unavailable or limited in scope or amount, such as may result where alternative or generic treatments are available, we may be unable to achieve or sustain profitability. Adverse coverage and reimbursement limitations may hinder our ability to recoup our investment in our product candidates, even if such product candidates obtain regulatory approval.
There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. There is no uniform policy for coverage and reimbursement in the United States and, as a result, coverage and reimbursement can differ significantly from payor to payor. In the United States, the principal decisions about reimbursement for new medicines are typically made by the CMS, which decides whether and to what extent a new medicine will be covered and reimbursed under Medicare. Private payors often, but not always, follow the CMS’s decisions regarding coverage and reimbursement. It is difficult to predict what third-party payors will decide with respect to coverage
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and reimbursement for fundamentally novel products such as ours, as there is no body of established practices and precedents for these new products. Further, one payor’s determination to provide coverage and adequate reimbursement for a product does not assure that other payors will also provide coverage and adequate reimbursement for that product. We may need to conduct expensive pharmaco-economic studies in order to demonstrate the medical necessity and cost-effectiveness of our product candidates. There can be no assurance that our product candidates will be considered medically necessary or cost-effective. In addition to third-party payors, professional organizations and patient advocacy groups such as the National Comprehensive Cancer Network and the American Society of Clinical Oncology can influence decisions about reimbursement for new medicines by determining standards for care. Therefore, it is possible that any of our product candidates, even if approved, may not be covered by third-party payors or the reimbursement limit may be so restrictive that we cannot commercialize the product candidates profitably.
Reimbursement agencies in Europe may be more restrictive than payors in the United States. For example, a number of cancer products have been approved for reimbursement in the United States but not in certain European countries. In Europe, pricing and reimbursement schemes vary widely from country to country. For example, some countries provide that products may be marketed only after an agreement on reimbursement price has been reached. Such pricing negotiations with governmental authorities can take considerable time after receipt of marketing approval for a product. Political, economic and regulatory developments may further complicate pricing negotiations, and pricing negotiations may continue after reimbursement has been obtained. Other countries require the completion of additional health technology assessments that compare the cost-effectiveness of a particular product candidate to currently available therapies. In addition, the European Union provides options for its member states to restrict the range of products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. European Union member states may approve a specific price for a product, may adopt a system of direct or indirect controls on the profitability of the company placing the product on the market or monitor and control prescription volumes and issue guidance to physicians to limit prescriptions. Reference pricing used by various European Union member states and parallel distribution, or arbitrage between low-priced and high-priced member states, can further reduce prices. Furthermore, many countries in the European Union have increased the amount of discounts required on pharmaceutical products, and these efforts could continue as countries attempt to manage healthcare expenditures, especially in light of the severe fiscal and debt crises experienced by many countries in the European Union. The downward pressure on healthcare costs in general, and prescription products in particular, has become increasingly intense. As a result, there are increasingly higher barriers to entry for new products. There can be no assurance that any country that has reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any of our products, if approved in those countries. Accordingly, the reimbursement for any products in Europe may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenues and profits.
Furthermore, the containment of healthcare costs has become a priority of foreign and domestic governments as well as private third-party payors. The prices of drugs have been a focus in this effort. Governments and private third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications, which could affect our ability to sell our product candidates profitably. We also expect to experience pricing pressures due to the trend towards managed healthcare, the increasing influence of health maintenance organizations and additional legislative changes. These and other cost-control initiatives could cause us to decrease the price we might establish for products, which could result in lower-than-anticipated product revenues. In addition, the publication of discounts by third-party payors or authorities may lead to further pressure on the prices or reimbursement levels within the country of publication and other countries. If pricing is set at unsatisfactory levels or if coverage and adequate reimbursement of our products is unavailable or limited in scope or amount, our revenues and the potential profitability of our product candidates in those countries would be negatively affected.
C.Organizational Structure
As of December 31, 2020, we had two subsidiaries. The following table set out for each of our principal subsidiaries, the countries of incorporation, and the percentage ownership and voting interest held by us (directly or indirectly through subsidiaries).
Company Country of Incorporation Percentage Ownership and Voting Interest Main Activities
ADC Therapeutics America, Inc. United States 100% Clinical, commercial and U.S. operations
ADC Therapeutics (UK) Limited England 100% Research and development
In addition to the two subsidiaries above, as of December 31, 2020, we own a 49% equity interest in Overland ADCT BioPharma. See “Item 4. Information on the Company—Item 4B. Business Overview—License and Collaboration Arrangement—Overland License and Collaboration Agreement” and note 2(viii) “Basis of Presentation” within the audited Consolidated Financial Statements.

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D.Property, Plant and Equipment
For the year ended December 31, 2020, we had expenditures of USD 3.0 million relating to intangible assets and property, plant and equipment, consisting of USD 2.0 million related to the purchase of intangible assets (license agreements) and USD 1.0 million related to the purchase of property, plant and equipment (hardware and leasehold improvements).
Facilities
We do not own any real property. The table below sets forth the sizes and uses of our leased facilities as of December 31, 2020:
Location Primary Function Approximate Size
Biopôle
Route de la Corniche 3B
1066 Epalinges
Switzerland 		Head office
500 m2
430 Mountain Avenue, 4th Floor
Murray Hill, New Jersey 07974
United States 		Clinical, commercial and U.S. operations
1025 m2
42 New Road
London, E1 2AX
United Kingdom 		Research and preclinical development
275 m2
1510 Fashion Island Boulevard, Suite 205
San Mateo, California 94404
United States 		Chemistry manufacturing and control
375 m2
As we continue to grow our operations, prepare for commercialization and further develop our pipeline, we are looking to expand our facilities. During the first quarter of 2021, we entered into a new lease agreement with a ten-year term commencing in January 2021 for space in the iHub building on the Imperial University college campus in White City, West London. The primary function of the new facility, which consists of approximately 1,000 m2, will be research and preclinical development. See note 29, “Events after the reporting date” within the audited Consolidated Financial Statements for further information.
We are not aware of any environmental issues or other constraints that would materially impact the intended use of our facilities.
ITEM 4A.    UNRESOLVED STAFF COMMENTS
None.
ITEM 5.    OPERATING AND FINANCIAL REVIEW AND PROSPECTS
You should read the following discussion and analysis of our financial condition and results of operations together with the information under Item 3. Key Information—A. Selected Financial Data and our audited Consolidated Financial Statements, including the notes thereto, included in this Annual Report.
Our audited consolidated financial statements were prepared in accordance with IFRS. None of our financial statements was prepared in accordance with U.S. GAAP. The following discussion includes forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those described under “Item 3. Key Information—D. Risk Factors” and elsewhere in this Annual Report.
A.Operating Results
Overview
We are a late clinical-stage oncology-focused biotechnology company evolving into a commercial-stage company as we prepare for the launch of our lead product candidate, if approved. We are a pioneer in the development of highly potent and targeted ADCs for patients suffering from hematological malignancies and solid tumors. We develop our ADCs by applying our decades of experience in this field and using next-generation PBD technology to which we have proprietary rights for our targets. We are leveraging our R&D strengths, our disciplined approach to target selection and our preclinical and clinical development strategy to generate a diverse and balanced portfolio and research pipeline. Our hematology franchise comprises three clinical-stage product candidates, loncastuximab tesirine (“Lonca” and previously known as ADCT-402), camidanlumab tesirine (“Cami” and previously known as ADCT-301) and ADCT-602. Our solid tumor franchise
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comprises two clinical-stage product candidates, Cami and ADCT-601, and two preclinical product candidates, ADCT-901 and ADCT-701. Our commercial organization has initiated pre-launch market activities and is leveraging our team’s deep industry experience to maximize the commercial potential of any approved products.
Our two lead product candidates, Lonca and Cami, have demonstrated significant clinical activity across a broad population of heavily pre-treated patients, while maintaining tolerability profiles that we believe are manageable. We have evaluated Lonca in a 145-patient pivotal Phase 2 clinical trial for the treatment of relapsed or refractory DLBCL that showed a 48.3% ORR and a 24.8% CRR as of August 6, 2020. On November 20, 2020, the FDA accepted our BLA submission for Lonca for the treatment of relapsed or refractory DLBCL and granted priority review status with a PDUFA target date of May 21, 2021. In addition, we commenced a confirmatory Phase 3 clinical trial of Lonca in combination with rituximab that, if successful, may serve as the basis for an sBLA for Lonca for the treatment of relapsed or refractory DLBCL in second-line transplant-ineligible patients.
We are also conducting a Phase 1/2 clinical trial of Lonca in combination with ibrutinib for the treatment of relapsed or refractory DLBCL and MCL that showed a 66.7% ORR and a 37.5% CRR as of August 20, 2020 in non-GCB DLBCL patients at the dose being used in the pivotal Phase 2 portion of the clinical trial. In July 2020, we dosed the first patient in the pivotal Phase 2 portion of this clinical trial. We also plan to commence a pivotal Phase 2 clinical trial of Lonca for the treatment of relapsed or refractory FL in the first half of 2021. This clinical trial will be a 150-patient randomized trial of Lonca used as a monotherapy compared to idelalisib for the treatment of relapsed or refractory FL.
We are evaluating Cami in a 117-patient pivotal Phase 2 clinical trial for the treatment of relapsed or refractory HL, for which we completed enrollment in January 2021. Preliminary efficacy data in 47 patients as of August 24, 2020 showed an 83.0% ORR and a 38.3% CRR. We anticipate reporting interim results from this clinical trial in the first half of 2021, and we believe that this clinical trial, if successful, will support a BLA submission. We have completed a 133-patient Phase 1 clinical trial of Cami for the treatment of relapsed or refractory HL and NHL that showed an 86.5% ORR and a 48.6% CRR in 37 patients with HL at the initial dose for our pivotal Phase 2 clinical trial and a 44.0% ORR and an 8.0% CRR in a subset of patients with T-cell lymphoma. We are also evaluating Cami in a Phase 1b clinical trial as a novel immuno-oncology approach for the treatment of various advanced solid tumors. This clinical trial evaluates Cami in combination with pembrolizumab, a checkpoint inhibitor, to better understand its potential as both a monotherapy and in combination. In October 2020, we dosed the first patient in the expanded portion of this trial.
Recent Developments
Overland Joint Venture
On December 14, 2020, we announced the formation of Overland ADCT BioPharma, with Overland, a fully integrated biopharmaceutical company backed by Hillhouse Capital. Overland ADCT BioPharma will develop and commercialize the Licensed Products in the Territory. We have agreed to supply product to Overland ADCT BioPharma for its drug development and commercialization under a supply agreement which will be entered into between the parties. Under the terms of the license and collaboration agreement between us and Overland ADCT BioPharma, we granted Overland ADCT BioPharma an exclusive license or sublicense (as applicable) under all applicable patents and know-how now or in the future owned or controlled by us related to the Licensed Products (the “Licensed IP”) in order to use, sell, offer for sale, import and commercialize such Licensed Products in the Territory.
Overland invested USD 50 million in Overland ADCT BioPharma, and is obligated to pay us potential development milestone payments related to ADCT-601, ADCT-602 and ADCT-901, in exchange for a 51% equity interest. We received a 49% equity interest in exchange for contribution of the Licensed IP. In accordance with the terms of the transaction, we and Overland jointly control Overland ADCT BioPharma, as we must act together to direct the relevant activities of Overland ADCT BioPharma that would significantly affect its returns.
Impact of the COVID-19 Pandemic
The COVID-19 pandemic has negatively impacted the economies of countries around the world. Our operations, similar to those of other life sciences companies, have been impacted by the COVID-19 pandemic. As the COVID-19 pandemic continues to evolve, we believe the extent of the impact to our operations, operating results, cash flows, liquidity and financial condition will be primarily driven by the severity and duration of the pandemic, the pandemic’s impact on the U.S. and global economies and the timing, scope and effectiveness of national and local governmental responses to the pandemic, especially in areas where the conditions have recently worsened. Those primary drivers are beyond our knowledge and control, and as a result, at this time the ultimate impact on our results of operations, cash flows and financial position in 2021 and thereafter cannot be reasonably predicted. We are continuously assessing and adapting our working practices and business operations to ensure compliance with official guidance and containment measures related to the pandemic, and we are working proactively with our partners and other stakeholders to take steps to mitigate and minimize any negative impact of the COVID-19 pandemic on our research and development programs, clinical trials, regulatory submissions, commercialization preparations and other business operations.
•Pivotal Phase 2 Clinical Trial of Lonca in Relapsed or Refractory DLBCL: This clinical trial has completed enrollment. Patients continue in follow-up, and data are being collected. On November 20, 2020, the FDA accepted our BLA submission for Lonca for the
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treatment of relapsed or refractory DLBCL and granted priority review status with a PDUFA target date of May 21, 2021. We have not experienced any material impact of the COVID-19 pandemic on this clinical trial or regulatory review by the FDA.
•Other Clinical Programs: We have not experienced any material impact of the COVID-19 pandemic on our clinical trial enrollment, timelines or expenses. However, we have seen some increase in the time to activate new sites for trials that are in the start-up phase. We continue to work with sites to accelerate start-up activities. The ultimate impact of the COVID-19 pandemic is highly uncertain and subject to change.
Financial Operations Overview
Product Revenue
To date, we have not generated any revenue from the sale of product candidates. Our ability to generate product revenue and to become profitable will depend upon our ability to successfully develop, obtain regulatory approval for and commercialize our lead product candidates, Lonca and Cami, and our other product candidates. Because of the numerous risks and uncertainties associated with product development and regulatory approval, we are unable to predict the amount or timing of product revenue.
Contract Revenue
In 2013, we entered into a license and joint collaboration agreement with MedImmune related to the joint clinical development of MEDI3726. To date, we have recognized minimal contract revenue, which has consisted of upfront license payments received in 2013 and a milestone payment received in 2016 under this agreement. In addition, we have, in the past, received cost reimbursement payments under this agreement, which were offset against the related expenses and were not reported as revenue.
In accordance with IFRS, revenue arising from the provision of services under a license or collaboration agreement is recognized by reference to the stage of completion of the transaction at the end of the reporting period. This method requires judgment on the part of management and, in particular, requires management to make a reliable estimate of total transaction revenue, the stage of completion and the costs to complete the transaction. As a result of the discontinuance of the joint clinical development of MEDI3726 in June 2019 and the recognition during the year ended December 31, 2019 of the remaining non-refundable upfront payment, no non-refundable upfront payment (consisting of deferred revenue and presented as a contract liability in our Consolidated Balance Sheet) remains.
Research and Development (“R&D”) Expense
R&D expense consists principally of:
•salaries for R&D staff and related expenses, including share-based compensation expense;
•costs for production of preclinical and clinical-stage product candidates by CMOs;
•fees and other costs paid to contract research organizations in connection with the performance of preclinical studies and clinical trials;
•costs of related facilities, materials and equipment;
•costs associated with depreciation of right-of-use assets;
•costs associated with obtaining and maintaining patents and other intellectual property;
•amortization and depreciation, as well as impairment charges, of tangible and intangible fixed assets used to develop our product candidates; and
•achieved milestone payments associated with R&D collaboration arrangements that do not qualify to be capitalized.
R&D costs are expensed in the period in which they are incurred.

We expect that our total R&D expense will increase substantially in future periods. Our R&D expense primarily relates to the following key programs:
•Lonca. Our confirmatory Phase 3 clinical trial of Lonca in combination with rituximab for the treatment of relapsed or refractory DLBCL, our pivotal Phase 2 clinical trial of Lonca for the treatment of relapsed or refractory DLBCL, our Phase 1/2 clinical trial of Lonca in combination with ibrutinib for the treatment of relapsed or refractory DLBCL and MCL and our Phase 2 trial of Lonca in relapsed or refractory FL.
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•Cami. Our pivotal Phase 2 clinical trial of Cami for the treatment of relapsed or refractory HL and our Phase 1b clinical trial of Cami for the treatment of selected advanced solid tumors.
•Other development programs. Our other R&D expenses related to our Phase 1/2 clinical trial of ADCT-602 for the treatment of relapsed or refractory ALL, ADCT-601 for the treatment of selected advanced solid tumors and our preclinical studies of ADCT-701 and ADCT-901 for the treatment of selected advanced solid tumors. The expenses mainly consist of salaries, costs for production of our product candidates and costs paid to contract research organizations in conjunction with clinical trials and preclinical studies.
Our R&D expense may vary substantially from period to period according to the status of our R&D activities. The timing of expenses are impacted by the commencement of clinical trials and enrollment of patients in clinical trials. R&D expense is expected to increase as we advance the clinical development of our lead product candidates, Lonca and Cami, and further advance the R&D of our other product candidates. The successful development of our product candidates is uncertain.
At this time, we cannot reasonably estimate the nature, timing and estimated costs of the efforts that will be necessary to complete the development of, or the period, if any, in which material net cash inflows may commence from, any of our product candidates. This is due to numerous risks and uncertainties associated with developing drugs, including the uncertainty of:
•the scope, rate of progress, results and cost of our clinical trials, preclinical studies and other related activities;
•the cost of manufacturing clinical supplies, and establishing commercial supplies, of any product candidates;
•the number and characteristics of product candidates that we pursue;
•the cost, timing and outcomes of regulatory approvals;
•the cost and timing of establishing sales, marketing and distribution capabilities; and
•the terms and timing of any collaboration, licensing or other arrangements that we may establish, including any required milestone and royalty payments thereunder.
A change in the outcome of any of these variables with respect to the development of our lead product candidates, Lonca and Cami, or any other current or future product candidates could mean a significant change in the costs and timing associated with the development of such product candidate. For example, if we are required to conduct additional clinical trials or other testing of any of our product candidates beyond those that are contemplated or if we experience significant delays in enrollment in any clinical trials, we could incur significant additional costs and the clinical development timeline for our product candidates may be delayed.
Selling and Marketing (“S&M”) Expense
S&M expense includes employee expenses (including share-based compensation expense) for commercial employees and external costs related to commercialization (including professional fees, communication costs and IT costs and travel expenses).
General and Administrative (“G&A”) Expense
G&A expense includes employee expenses (including share-based compensation expense) for G&A employees, external costs (including in particular professional fees, communications costs and IT costs, facility expenses and travel expenses), G&A costs charged by related parties (including telecommunications costs), depreciation of property, plant and equipment, depreciation of right-of-use assets and amortization of intangible assets.
We have incurred and expect to continue to incur additional expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC, additional insurance expenses, investor relations activities and other administrative and professional services.
Other Income and Expense
R&D Tax Credit
We recognize as other income amounts received and receivable by our subsidiary, ADC Therapeutics (UK) Limited, under the United Kingdom’s R&D Expenditure Credit scheme. Due to the strictness of the eligibility criteria for these credits, we did not recognize any income under this scheme until we received confirmation in 2019 that our initial claims were approved for payment.
The claims are payable through the tax system, as a refund of corporation tax or of other taxes, including income tax and social security payments deducted from qualifying employees’ payroll and VAT. The credit is independent of ADC Therapeutics (UK) Limited’s taxable
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profit and is designed to incentivize companies to invest in R&D activities and is itself taxable income. We therefore have recognized the income as government grants within other income and not as a credit to the tax charge.
Convertible Loans, Derivatives, Increase in Fair Value
On April 24, 2020, we entered into a Facility Agreement with Deerfield. See “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources.” The first tranche of convertible loans amounting to USD 65.0 million issued on May 19, 2020 has been accounted for as comprising two components: a convertible loan and an embedded derivative conversion feature.
•The embedded conversion option derivative has been initially measured at fair value and is subsequently re-measured to fair value at each reporting date. Under IAS 32, this derivative could have been classified as a component of equity only if in all cases the contract would be settled by us delivering a fixed number of its own equity instruments in exchange for a fixed amount of cash or debt redemption. However, the agreement foresees, in the event of a major transaction, the payment of “make-whole” amounts that would have to be computed in the light of the circumstances and are therefore not fixed. As a result, the derivative is presented in the balance sheet as a liability and classified as non-equity in accordance with IFRS 9. Changes in the fair value (gains or losses) of the derivative at the end of each period are recorded in the Consolidated Statement of Operation.
•The convertible loan’s initial fair value is the residual amount of the consideration received, net of attributable costs, after separating out the fair value of the embedded conversion option derivative. The loan is subsequently measured at its amortized cost in accordance with IFRS 9. It is presented in the Consolidated Balance Sheet as a financial liability.
Expenses and fees payable upon the issuance of the convertible loans have been allocated pro rata to the above two components. The share of expenses allocated to the embedded conversion option derivative has been charged directly to the Consolidated Statement of Operation, while the share of expenses allocated to the residual convertible loan has been deducted from the loan.
We are obligated to draw down the second tranche in the amount of USD 50.0 million upon receipt of regulatory approval for Lonca. However, if we have not received such regulatory approval on or prior to December 31, 2021, our ability to draw down the second tranche will automatically terminate on such date. This obligation has been accounted for as a derivative and is presented in the Consolidated Balance Sheet as a financial liability with changes in its fair value being recorded directly in the Consolidated Statement of Operation at the end of each accounting period.
Share of Results with Joint Venture
Under the equity method, an investment in a joint venture is recognized initially in the Consolidated Balance Sheet at cost and adjusted thereafter to recognize our share of the profit or loss, other comprehensive income or loss of the joint venture, distributions from the joint venture and other adjustments to our proportionate interest in the joint venture. Our initial investment is recorded as an Interest in joint ventures in the Consolidated Balance Sheet. Our proportionate share of net income or losses of equity investments is included within Share of results with joint venture in the Consolidated Statement of Operation. The carrying value of our investment in a joint venture increases or decreases in relation to our proportionate share of comprehensive income or loss of the joint venture. When the Company’s share of losses of a joint venture exceeds the Company’s interest in that joint venture less the carrying value of the deferred gain described below, the Company ceases to recognize its share of further losses. Additional losses are recognized only to the extent that we have incurred legal or constructive obligations or made payments on behalf of the joint venture. In connection with our initial investment, the gain resulting from the transaction was only recognized to the extent of the unrelated investors’ equity interest in the joint venture, which resulted in a deferred gain of a portion of our initial investment. We will begin to recognize the deferred gain upon the commercialization of any or all the Licensed Products by the joint venture. The deferred gain will be recognized over the estimated commercialization period in which a Licensed Product is developed and approved using a systematic approach that approximates the pattern of consumption of the Licensed IP by the joint venture. Investments accounted for under the equity method are assessed for potential impairment on a regular basis based on qualitative factors.

Financial Income and Expense
Financial income primarily consists of interest received from banks on our cash balances. Our policy is to invest funds in a variety of capital preservation instruments, which may include all or a combination of short-term and long-term interest-bearing instruments, investment-grade securities, and direct or guaranteed obligations of the U.S. government. Financial expense consists principally of commercial banking fees.
Exchange Differences
Due to our international operations, we are exposed to foreign exchange risk arising from various currency exposures, primarily with respect to British pounds, Euros and Swiss francs. Our exchange differences represent income or (loss) based on changes in foreign currencies.


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Taxation
We are subject to corporate taxation in Switzerland. We are also subject to taxation in other jurisdictions in which we operate, in particular, the United States and the United Kingdom, where our two wholly-owned subsidiaries are incorporated. We are entitled under Swiss laws to carry forward any losses incurred for a period of seven years, which could be used to offset future taxable income.
Results of Operations
Comparison of the Years Ended December 31, 2020 and December 31, 2019
The following table summarizes our results of operations for the years ended December 31, 2020 and 2019:
Year Ended December 31,
2020 2019 Change
(in USD thousands)
Contract revenue
—  2,340  (2,340)
Research and development expenses
(142,032) (107,537) (34,495)
Selling and marketing expenses (22,101) —  (22,101)
General and administrative expenses
(55,130) (14,202) (40,928)
Total operating expense (219,263) (121,739) (97,524)
Loss from operations
(219,263) (119,399) (99,864)
Other income (expense)
Other income
584  1,655  (1,071)
Convertible loans, derivatives, change in fair value (expense) (45,411) —  (45,411)
Convertible loans, first tranche, derivative, transaction costs (1,571) —  (1,571)
Share of results with joint venture 24,368  —  24,368 
Financial income
832  2,253  (1,421)
Financial expense
(4,926) (156) (4,770)
Exchange differences (loss) (576) (255) (321)
Total other (expense) income (26,700) 3,497  (30,197)
Loss before taxes
(245,963) (115,902) (130,061)
Income tax (expense)
(327) (582) 255 
Net Loss
(246,290) (116,484) (129,806)


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Notable items impacting the results of operations for the year ended December 31, 2020 included:

Year Ended December 31,
P&L Classification 2020 2019 Change
(in USD thousands)
Share-based compensation R&D 9,886  672  9,214 
Share-based compensation S&M 3,593  —  3,593 
Share-based compensation G&A 29,449  445  29,004 
Fair value adjustment of Facility agreement derivatives Convertible loans, derivatives, change in fair value (expense) (45,411) —  (45,411)
Transaction costs associated with first tranche derivative Convertible loans, first tranche, derivative, transaction costs (1,571) —  (1,571)
Gain on intellectual property contributed to joint venture Share of results with joint venture 24,501  —  24,501 

Contract Revenue
Contract revenue decreased to nil for the year ended December 31, 2020 from USD 2.3 million for the year ended December 31, 2019, a decrease of USD 2.3 million, or 100.0%. The decrease was due to the discontinuance of the joint clinical development of MEDI3726 and the recognition during the year ended December 31, 2019 of the remaining non-refundable upfront payment (consisting of deferred revenue and presented as a contract liability in our Consolidated Balance Sheet) of USD 2.3 million that existed as of December 31, 2018.
R&D Expenses
The following table summarizes our R&D expenses for the years ended December 31, 2020 and 2019:
Year Ended December 31,
2020 2019 Change
(in USD thousands)
External costs (1)
97,768  82,621  15,147 
Employee expenses (2)
44,264  24,916  19,348 
R&D expenses 142,032  107,537  34,495 
(1) Includes depreciation expense
(2) Includes share-based compensation expense
Our R&D expenses increased to USD 142.0 million for the year ended December 31, 2020 from USD 107.5 million for the year ended December 31, 2019, an increase of USD 34.5 million, or 32.1%. The increase was primarily due to increased costs as we conducted additional clinical trials to expand the potential market opportunities for Lonca in earlier lines of therapies and in additional indications, advanced the HL clinical trial of Cami to support BLA submission and built our pipeline. As a result of these initiatives, employee expense has increased due to higher employee headcount, as well as share-based compensation expense which increased by USD 9.2 million. In addition, we recorded a charge for a milestone payment of USD 5.0 million associated with a collaboration agreement that was achieved during December 2020.


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The following table summarizes our research and development expenses for our major development programs for the years ended December 31, 2020 and 2019:
Year Ended December 31,
2020 2019 Change
(in USD thousands)
Lonca
71,274  42,123  29,151 
Cami
39,585  31,839  7,746 
ADCT-602 2,533  3,374  (841)
ADCT-601 5,857  7,183  (1,326)
Preclinical product candidates, research pipeline 17,747  19,652  (1,905)
Not allocated to specific programs 5,036  3,366  1,670 
R&D expenses 142,032  107,537  34,495 
R&D expense for our major development programs will fluctuate from period to period primarily due to the nature and timing associated with the various lifecycle stages of each program, including, but not limited to, early research and development activities, manufacturing of clinical drug product, clinical trial activity, costs associated with the regulatory approval process and manufacturing costs associated with commercialization activities prior to the receipt of regulatory approval.
The increase in R&D expense related to Lonca was due to ongoing activities for the pivotal Phase 2 clinical trial for the treatment of relapsed or refractory DLBCL, ongoing activities for the Phase 1/2 combination trial with ibrutinib for the treatment of relapsed or refractory DLBCL, the initiation of the confirmatory Phase 3 clinical trial in combination with rituximab for the treatment of DLBCL and increased activities in support of the BLA submission, including CMC. In addition, we recorded a charge for a milestone payment of USD 5.0 million associated with a collaboration agreement that was achieved during December 2020.
The increase in R&D expense related to Cami was due to an increase in ongoing development activities, as well as the ramp-up related to the Phase 1b clinical trial of Cami for the treatment of selected advanced solid tumors.
The decrease in R&D expense relating to ADCT-601 relates to the completion of the dose escalation stage of the Phase 1 clinical trial. We are preparing for the Phase 1b clinical trial.
The decrease in R&D expense related to preclinical product candidates and research pipeline was due to a decrease in CMC costs as a result of lower manufacturing costs associated with preclinical product candidates during 2020 as compared to 2019. Also contributing to the decrease was the impact of COVID-19 and the temporary closing of our laboratories in the UK, which have since reopened but are not at full capacity.
S&M Expenses
The following table summarizes our S&M expenses for the years ended December 31, 2020 and 2019:

Year Ended December 31,
2020 2019 Change
(in USD thousands)
External costs
11,887  —  11,887 
Employee expenses (1)
10,214  —  10,214 
S&M expenses
22,101  —  22,101 
(1) Includes share-based compensation expense
Our S&M expense was USD 22.1 million for the year ended December 31, 2020. We began incurring S&M expense during 2020 primarily for the anticipated commercial launch of Lonca in 2021. Employee expense relates to the recruitment of commercial employees as we prepared for the anticipated commercial launch. Employee expense was USD 10.2 million, of which USD 3.6 million was related to share-based compensation expense. External costs increased primarily as a result of higher professional fees associated with our preparation for the
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anticipated commercial launch. During 2019, we incurred USD 0.2 million of S&M expense, which was included within G&A expense. This amount was not reclassified as we determined that the amount was not material.
G&A Expenses
The following table summarizes our G&A expenses for the years ended December 31, 2020 and 2019:
Year Ended December 31,
2020 2019 Change
(in USD thousands)
External costs (1)
13,637  9,067  4,570 
Employee expenses (2)
41,493  5,135  36,358 
G&A expenses
55,130  14,202  40,928 
(1) Includes depreciation expense
(2) Includes share-based compensation expense
Our G&A expense increased to USD 55.1 million for the year ended December 31, 2020 from USD 14.2 million for the year ended December 31, 2019, an increase of USD 40.9 million, or 288.2%. G&A expense increased primarily due to higher share-based compensation expense of USD 29.0 million as a result of additional headcount. In addition, employee expense increased as a result of additional headcount associated with being a public company. External costs increased primarily as a result of higher professional fees associated with being a public company.
Employee expense for the year ended December 31, 2020 includes share-based compensation expense relating to the 2014 Incentive Plan and the 2016 Share Purchase Plan, both of which terminated upon the effectiveness of the registration statement for our initial public offering, with all awards vesting as of that date and with all outstanding charges relating to those plans, which were being amortized over the vesting period, having to be recognized at that time. The amount of expense recognized for these plans for the year ended December 31, 2020 was USD 7.5 million, which is included in the share-based compensation expense noted above. Share-based compensation expense under the 2019 Equity Incentive Plan was also recognized for the year ended December 31, 2020 and we expect that share-based compensation expense will continue to arise in the future as we continue to expand our organization to support our commercial launch and R&D activities.
These increases were partially offset by a decrease in office and travel expense as a result of our response to COVID-19, which included a work from home policy for our employees and restricted travel.
Other (Expense) Income
The following table summarizes our other (expense) income for the years ended December 31, 2020 and 2019:

Year Ended December 31,
2020 2019 Change
(in USD thousands)
Other income 584 1,655  (1,071)
Convertible loans, derivatives, change in fair value (expense) (45,411) —  (45,411)
Convertible loans, first tranche, derivative, transaction costs (1,571) —  (1,571)
Share of results with joint venture 24,368 —  24,368 
Financial income 832 2,253  (1,421)
Financial expense (4,926) (156) (4,770)
Exchange differences (loss) (576) (255) (321)
Total other (expense) income (26,700) 3,497  (30,197)
Other Income
We recognize as other income amounts received and receivable by our subsidiary, ADC Therapeutics (UK) Limited, under the United Kingdom’s R&D Expenditure Credit scheme. For the years ended December 31, 2020 and 2019, we recognized USD 0.6 million and USD 1.7 million, respectively. We recognized this income for the first time during the year ended December 31, 2019, which represented fiscal years 2016 through December 31, 2019. See note 8, “Other income (expense)” within the audited Consolidated Financial Statements for further details.
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Convertible Loans, Derivatives, Increase in Fair Value
Pursuant to the Facility Agreement with Deerfield, we have drawn down the first tranche of the convertible loans amounting to USD 65 million on May 19, 2020 and are obligated to draw down the second tranche amounting to USD 50.0 million upon the receipt of regulatory approval for Lonca. The conversion option derivative embedded in the first tranche is remeasured at fair value at the end of each accounting period. The obligation arising from the second tranche is accounted for as a derivative and is also remeasured at fair value at the end of each accounting period. Any movement in these fair values is recognized in the Consolidated Statement of Operation. The increase in the fair values in the period is due to the increase in the price of our common shares since our initial public offering. See note 21, “Convertible loans” within the notes to the audited Consolidated Financial Statements for further details.

Convertible Loans, First Tranche, Derivative, Transaction Costs
Transaction costs incurred on the issuance of the first tranche of the convertible loans have been allocated pro rata to the embedded conversion option derivative and to the residual convertible loan. The costs allocated to the loan have been deducted from the initial book value of the loan and will therefore be recognized over the life of the loan as part of the effective interest cost (see “Financial Expense” below). The costs allocated to the embedded derivative of the first tranche have been recognized directly in the Consolidated Statement of Operation. See note 21, “Convertible loans” within the notes to the audited Consolidated Financial Statements for further details.
Share of Results with Joint Venture

In connection with the formation of Overland ADCT BioPharma in December 2020, we recognized a gain of USD 24.5 million associated with our contribution of intellectual property. In addition, we recorded our proportionate share of Overland ADCT BioPharma’s net loss from the closing of the transaction to December 31, 2020. See note 2, “Basis of presentation” within the notes to the audited Consolidated Financial Statements for further details.
Financial Income
Our financial income decreased to USD 0.8 million for the year ended December 31, 2020 from USD 2.3 million for the year ended December 31, 2019. The decrease was primarily due to lower amounts placed on short-term deposit and lower interest rates.
Financial Expense
Our financial expense increased to USD 4.9 million for the year ended December 31, 2020 from USD 0.2 million for the year ended December 31, 2019. The increase was primarily due to interest on the convertible loans, calculated at the implied effective interest rate from May 19, 2020. See note 21, “Convertible loans” within the notes to the audited Consolidated Financial Statements for further details.
Exchange Differences
Due to our international operations, we are exposed to foreign exchange risk arising from various currency exposures, primarily with respect to British pounds, Euros and Swiss francs. Our exchange differences represent income or (loss) based on changes in foreign currencies. Favorable or unfavorable changes in foreign currencies resulted in a loss of USD 0.6 million for the year ended December 31, 2020 as compared to a loss of USD 0.3 million the year ended December 31, 2019.

Income Tax Expenses
Our income tax expense is primarily due to our internal arrangements to reimburse our foreign subsidiaries in the United States and the United Kingdom for the services they render on a cost-plus-margin basis. The net profit at each subsidiary is subject to local income tax and gives rise to minimal amounts of tax expense. Income tax expenses decreased to USD 0.3 million for the year ended December 31, 2020 from USD 0.6 million for the year ended December 31, 2019. This decrease primarily related to an income tax benefit adjustment recorded during the year ended December 31, 2020 relating to fiscal year 2019 as a result of finalizing our 2019 income tax returns.

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Comparison of the Years Ended December 31, 2019 and December 31, 2018
The following table summarizes our results of operations for the years ended December 31, 2019 and 2018:
Year Ended December 31,
2019 2018 Change
(in USD thousands)
Contract revenue 2,340  1,140  1,200 
Research and development expenses (107,537) (118,313) 10,776 
General and administrative expenses (14,202) (8,768) (5,434)
Total operating expense (121,739) (127,081) 5,342 
Loss from operations (119,399) (125,941) 6,542 
Other income (expense)
Other income 1,655  —  1,655 
Financial income 2,253  2,856  (603)
Financial expense (156) —  (156)
Exchange differences (loss) gain (255) 213  (468)
Total other income 3,497  3,069  428 
Loss before taxes (115,902) (122,872) 6,970 
Income tax (expense) (582) (224) (358)
Net Loss (116,484) (123,096) 6,612 

Notable items impacting the results of operations for the year ended December 31, 2019 and 2018 included:

Year Ended December 31,
P&L Classification 2019 2018 Change
(in USD thousands)
Share-based compensation
R&D 672 — 672
Share-based compensation
G&A 445 469 (24)

Contract Revenue
Contract revenue increased to USD 2.3 million for the year ended December 31, 2019 from USD 1.1 million for the year ended December 31, 2018, an increase of USD 1.2 million, or 105.3%. The increase was due to the discontinuance of the joint clinical development of MEDI3726 and the recognition of the remaining non-refundable upfront payment (consisting of deferred revenue and presented as a contract liability in our Consolidated Balance Sheet) of USD 2.3 million that existed as of December 31, 2018.

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R&D Expenses
The following table summarizes our R&D expenses for the years ended December 31, 2019 and 2018:
Year Ended December 31,
2019 2018 Change
(in USD thousands)
External costs (1)
82,621  99,067  (16,446)
Employee expenses (2)
24,916  19,246  5,670 
R&D expenses 107,537  118,313  (10,776)
(1) Includes depreciation expense
(2) Includes share-based compensation expense
The following table summarizes our research and development expenses for our major development programs for the years ended December 31, 2019 and 2018:
Year Ended December 31,
2019 2018 Change
(in USD thousands)
Lonca
42,123  45,701  (3,578)
Cami
31,839  29,374  2,465 
ADCT-602 3,374  6,162  (2,788)
ADCT-601 7,183  14,250  (7,067)
Preclinical product candidates, research pipeline 19,652  20,471  (819)
Not allocated to specific programs 3,366  2,355  1,011 
R&D expenses 107,537  118,313  (10,776)
Our R&D expenses decreased to USD 107.5 million for the year ended December 31, 2019 from USD 118.3 million for the year ended December 31, 2018, a decrease of USD 10.8 million, or 9.1%. External costs decreased primarily due to lower CMC costs for our lead product candidates as clinical trials advanced. Employee expense increased due to higher employee headcount.
R&D expense for our major development programs fluctuates from period to period primarily due to the nature and timing associated with the various lifecycle stages of each program, including, but not limited to, early research and development activities, manufacturing of clinical drug product, clinical trial activity, costs associated with the regulatory approval process and manufacturing costs associated with commercialization activities prior to the receipt of regulatory approval.
G&A Expenses
The following table summarizes our general and administrative expenses for the years ended December 31, 2019 and 2018:
Year Ended December 31,
2019 2018 Change
(in USD thousands)
External costs (1)
9,067  3,832  5,235 
Employee expenses (2)
5,135  4,936  199 
G&A expenses
14,202  8,768  5,434 
(1) Includes depreciation expense
(2) Includes share-based compensation expense
Our G&A expense increased to USD 14.2 million for the year ended December 31, 2019 from USD 8.8 million for the year ended December 31, 2018, an increase of USD 5.4 million, or 62.0%. G&A expense increased primarily due to higher employee expense associated with increased headcount. External costs increased primarily as a result of higher professional fees associated with the preparation for a
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proposed offering of securities. During 2019, we incurred USD 0.2 million of S&M expense, which was included within G&A expense. This amount was not reclassified as we determined that the amount was not material. We did not incur any S&M expense during 2018.

Other Income and Expense
The following table summarizes our other (expense) income for the years ended December 31, 2019 and 2018:
Year Ended December 31,
2019 2018 Change
(in USD thousands)
Other income
1,655  —  1,655 
Financial income
2,253  2,856  (603)
Financial expense
(156) —  (156)
Exchange differences (loss) gain
(255) 213  (468)
Total other income 3,497  3,069  428 
Other Income
We recognize as other income amounts received and receivable by our subsidiary, ADC Therapeutics (UK) Limited, under the United Kingdom’s Research and Development Expenditure Credit scheme. For the year ended December 31, 2019, which was the first time we recognized such income, we recognized USD 1.7 million in respect of fiscal years 2016 to 2019 in other income. See note 8, “Other income (expense)” within the notes to the audited Consolidated Financial Statements for further details.
Financial Income
Financial income decreased to USD 2.3 million for the year ended December 31, 2019 from USD 2.9 million for the year ended December 31, 2018, primarily due to lower amounts placed on deposit and in interest rates.
Financial Expense
Our financial expense was USD 0.2 million for the year ended December 31, 2019 consisting primarily of interest on lease obligations.
Exchange Differences
Due to our international operations, we are exposed to foreign exchange risk arising from various currency exposures, primarily with respect to British pounds, Euros and Swiss francs. Our exchange differences represent income or (loss) based on changes in foreign currencies. Favorable or unfavorable changes in foreign currencies resulted in a loss of USD 0.3 million for the year ended December 31, 2019 as compared to a gain of USD 0.2 million the year ended December 31, 2018.

Income Tax Expenses
Income tax expenses increased to USD 0.6 million for the year ended December 31, 2019 from USD 0.2 million for the year ended December 31, 2018. This increase was primarily due to our internal arrangements to reimburse our foreign subsidiaries in the United States and the United Kingdom for the services they render on a cost-plus-margin basis. The net profit at each subsidiary is subject to local income tax and gives rise to minimal amounts of tax expense.
Critical Accounting Policies and Significant Judgments and Estimates
Revenue Recognition
To date, we have not generated any revenue from the sale of our product candidates. Revenue is measured at the fair value of the consideration received or receivable for the sale of services in the ordinary course of our activities. Revenue is shown net of value-added tax, rebates and discounts and after eliminating sales within the Company.
We recognize revenue when our customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. To determine revenue recognition, we perform the following five steps: (i) identify the contract(s) with our customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy a performance obligation. We apply the five-step model to contracts only when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer. At contract inception, we assess the goods or services promised within
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each contract, determine those that are performance obligations and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
Performance Obligation Satisfied to the State of Completion—Deferred Contract Revenue Amortization
When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue is recognized according to the stage of completion of the transaction at the end of the period using the cost input method. Under this method, revenue is recognized in the accounting periods in which the services are rendered. The recognition of revenue on this basis provides full information on the extent of service activity and performance during a period.
To be able to estimate the outcome of a transaction reliably, we must be able to make a reliable estimate of total transaction revenue, the stage of completion and the costs to complete the transaction. The stage of completion is determined as the proportion of the transaction costs incurred for services rendered to date compared to the estimated total transaction costs.
R&D Expenses
Research expenditure is recognized in expense in the year in which it is incurred. Internal development expenditure is capitalized only if it meets the recognition criteria of IAS 38 “Intangible Assets.” Where regulatory and other uncertainties are such that the criteria are not met, which is almost invariably the case prior to approval of the drug by the relevant regulatory authority, the expenditure is recognized in the Consolidated Statement of Operation. Where, however, recognition criteria are met, internal development expenditure is capitalized and amortized on a straight-line basis over its useful economic life.
Current, Deferred Income Tax and Tax Credit
The tax expense for the period comprises current and deferred tax. Tax is recognized in the Consolidated Statement of Operation, except to the extent that it relates to items recognized in other comprehensive loss or directly in equity. In these cases, the related tax is recognized in other comprehensive loss or directly in equity, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where we and our subsidiaries operate and generate taxable income. We periodically evaluate positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. We establish provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Taxes on income are accrued in the same periods as the revenues and expenses to which they relate. Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities.
Deferred income tax is recognized, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognized if they arise from the initial recognition of goodwill. The deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit nor loss. Deferred income tax is determined using tax rates that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.
Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences or the unused tax losses can be utilized.
Deferred income tax assets from R&D tax credit carryforwards are recognized to the extent that the national tax authority confirms the eligibility of such a claim and that the realization of the related tax benefit through future taxable profits is probable.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
Employee Benefits
Pension Obligations
We operate defined benefit and defined contribution pension schemes in accordance with the local conditions and practices in the countries in which we operate. The schemes are generally funded through payments to insurance companies or trustee-administered funds, determined by periodic actuarial calculations. A defined contribution plan is a pension plan under which we pay fixed contributions into a separate entity (a fund) and have no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees
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the benefits relating to the employees’ service in previous, current and future periods. A defined benefit plan is a pension plan that is not a defined contribution plan. Typically, defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. However, as is the case with many Swiss pension plans, although the amount of ultimate pension benefit is not defined, certain legal obligations of the plan nevertheless create constructive obligations on the employer to pay further contributions to fund an eventual deficit. This results in the plan being accounted for as a defined benefit plan.
The liability recognized in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity that approximate to the terms of the related pension obligation. In countries where there is no deep market in such bonds, the market rates on government bonds are used.
The current service cost of the defined benefit plan, recognized in the Consolidated Statement of Operation in employee benefit expense, except where included in the cost of an asset, reflects the increase in the defined benefit obligation resulting from employee service in the current year.
Past service costs, resulting from a plan amendment or curtailment, are recognized immediately in the Consolidated Statement of Operation.
The net interest cost is calculated by applying the discount rate to the net balance of the present value of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expenses in the Consolidated Statement of Operation.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive loss in the period in which they arise.
For defined contribution plans, we pay contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. Once the contributions have been paid, we have no further payment obligations. The contributions are recognized as employee benefit expenses when they are due and are included in staff costs. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in the future payments is available.
Share-Based Compensation Expense
The fair value of shares or options granted, respectively, under share purchase or share option plans is recognized as an employee share-based compensation expense with a corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of the shares or options granted:
•including any market performance conditions;
•excluding the impact of any service and non-market performance vesting conditions; and
•including the impact of any non-vesting conditions.
The total expense is recognized over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each period, we revise our estimate of the number of options that are expected to vest based on the non-market vesting and service conditions. We recognize the impact of the revision to original estimate, if any, within the Consolidated Statement of Operation, with a corresponding adjustment to equity.
The proceeds received net of any directly attributable transaction costs are credited directly to equity.
The application of our accounting policy for share-based compensation is described below for each of our plans.
2019 Equity Incentive Plan
In November 2019, we adopted the 2019 Equity Incentive Plan to motivate and reward our employees, directors, consultants and advisors to further our best interest and those of our shareholders. Under the 2019 Equity Incentive Plan, we may at our discretion grant to plan participants (directors, certain employees and service providers working for the benefit of the Company at the time) awards in the form of restricted shares and restricted share units (“RSUs”), share options, share appreciation rights, performance awards and other share-based awards.
Share options and RSUs have been granted under this plan. The exercise price per share option was set by us at the fair market value of the underlying common shares on the date of grant, as determined by us. The awards generally vest 25% on the first anniversary of the date of
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grant, and thereafter evenly on a monthly basis over the subsequent three years. The contractual term of each option award granted is ten years. Under the grant, the options may be settled only in shares. Therefore, the grants of share options under this plan have been accounted for as equity-settled under IFRS 2.
We may grant RSUs to our directors, certain employees and service providers working for us at the time. The awards generally vest annually over a period of three years commencing on the first anniversary of the date of grant. Under the grant, the RSUs may be settled only in our common shares. Therefore, the grants of RSUs have been accounted for as equity-settled under IFRS 2.
In each accounting period, we take a charge for the vested portion of award grants and for partially earned but non-vested portions of award grants. This results in a front-loaded charge to the Consolidated Statement of Operation. The charge to the Consolidated Statement of Operation results in a corresponding credit being booked to “Other reserves” within equity.
Prior to our initial public offering, the determination of the fair value of awards involved the application of an adjusted form of the Black-Scholes option pricing model that took into account the strike price, the term of the award, the impact of dilution (where material), the share price at grant date and expected price volatility of the underlying share, the expected dividend yield, the risk-free interest rate for the term of the award and the correlations and volatilities of the shares of peer group companies. In addition, for awards granted on and subsequent to July 1, 2019 through our initial public offering, the fair value of grants was based on a probability-weighted expected returns method that took into account both the value derived by using an adjusted form of the Black-Scholes option pricing model and a discounted estimate of the price that may have been achieved in a future transaction. This method entailed further significant judgement, both in estimating a transaction price and in estimating the probabilities of different outcomes. The adjusted form of the Black-Scholes option pricing model used to derive a value for the common share price at grant date derived the implied equity value for one type of equity security from a contemporaneous transaction involving another type of security and considered the timing, amount, liquidation preferences and dividend rights of issues of preference shares.
After our initial public offering, the determination of the fair value of awards involves the application of the Black-Scholes option pricing model for our option equity awards, which utilizes certain assumptions including expected volatility, expected life and risk-free interest rate. In addition, the exercise price per share option is set by us at the fair market value of the underlying common shares on the date of grant, as determined by the us, which is generally the closing share price of our common shares traded on the NYSE.
We used an independent valuation firm to assist us in calculating the fair value of the award grants per participant.
2013 Share Purchase Plan and 2016 Share Purchase Plan
Under the terms of the 2013 and 2016 promissory notes issued in connection with the ADC Therapeutics SA 2013 (the “Share Purchase Plan 2013”) and ADC Therapeutics SA 2016 (the “Share Purchase Plan 2016”), in the case of an initial public offering the relevant plan participants were required to repay the outstanding amounts under the promissory notes prior to the initial public offering by delivering a number of shares of equivalent value to cover the amount to be repaid. In anticipation of the initial public offering, each of the plan participants holding promissory notes entered into loan settlement agreements with us dated as of April 15, 2020, pursuant to which they repaid all amounts outstanding under the promissory notes, including accrued interest, by delivering a number of shares of equivalent value to cover the amounts outstanding under the promissory notes.
After consideration of all relevant factors, the board of directors determined the value of such shares delivered pursuant to the loan settlement agreements as of the settlement date to be USD 18.75 per share, resulting in the delivery of an aggregate of 597,774 common shares by all plan participants for the settlement of the promissory notes. These shares were held by us as treasury shares.
These transactions resulted in the termination of both plans on May 15, 2020. All compensation expense relating to the Share Purchase Plan 2013 was recognized in prior periods.
2014 Incentive Plan
In May 2014, we adopted the ADC Therapeutics Incentive Plan (as amended and restated as of October 1, 2015, the “Incentive Plan 2014”) to incentivize selected employees or service providers to accept employment or service, foster retention of such employees or service providers and encourage them to contribute maximum efforts to our success.
All awards under the Incentive Plan 2014 vested and were settled in shares upon the completion of our initial public offering. We calculated for each participant the gain arising from the difference between the exercise price per share and the initial public offering price per share, undertook to settle in cash on behalf of the participant any associated tax and social charges liability and transferred to the participant the remaining balance in treasury shares, valued at USD 19.00 per share. A total of 356,144 shares were transferred to participants and an amount of USD 5.3 million was withheld for tax and social charges.
For participants whose awards had an exercise price greater than USD 19.00 per share (i.e., were “out-of-the-money”), we made an equal number of new awards under the 2019 Equity Incentive Plan with an exercise price of USD 19.00 per share and with a vesting period of only three years instead of the usual four years. These new awards have been accounted for as a modification of the previous awards under the
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Incentive Plan 2014. Accordingly, the original compensation expense calculated for the old awards that were “out-of-the-money” will continue to be recognized over their remaining vesting period, while the expense to be recognized for the new awards under the 2019 Equity Incentive Plan will be limited to the incremental fair value of the new awards over the fair value, as of May 15, 2020, of the old awards.
Inventory
We assessed our accounting policy for inventory costs, with our submission of the BLA to the FDA for Lonca for the treatment of relapsed or refractory DLBCL. We believe that capitalization of inventory costs associated with certain products prior to regulatory approval of such products, or for inventory produced in new production facilities, is appropriate when management considers it highly probable that pre-approval inventory costs will be recoverable through future sales of the drug product. The determination to capitalize is based on the particular facts and circumstances relating to the expected regulatory approval of the product or production facility being considered and, accordingly, the time frame within which the determination is made varies from product to product. The assessment of whether or not the product is considered highly probable to be saleable will be made on a quarterly basis and includes, but is not limited to, how far a particular product or facility has progressed along the approval process, any known safety or efficacy concerns, potential labeling restrictions and other impediments. As of December 31, 2020, we believe it is highly probable that it will receive regulatory approval for Lonca. Accordingly, such costs incurred to manufacture pre-approved product would qualify to be capitalized as inventory. However, the Company has written-down such inventory costs incurred related to the manufacture of Lonca to a net realizable value of zero. The impairment charge has been recorded as research and development expense because of the inherent risks associated with the development of a product candidate, uncertainty about the regulatory approval process, including the expected dating of Lonca at the time of launch, as well as the timing of the associated commercial launch and market size for the product candidate, and lack of history for our ability to obtain regulatory approval for product candidates. We anticipate that we will reverse impairments resulting from the write-down of its inventory to a net realizable value of zero upon receiving regulatory approval of Lonca based on a number of factors including the existence of inventory on hand and estimated demand as well as the expiration of such product.
Investments in Joint Ventures
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. An investment in a joint venture is accounted for using the equity method from the date on which the investee becomes a joint venture. Under the equity method, an investment in a joint venture is recognized initially in the Consolidated Balance Sheet at cost and adjusted thereafter to recognize our share of the profit or loss, other comprehensive income or loss of the joint venture, distributions from the joint venture and other adjustments to our proportionate interest in the joint venture. Our initial investment is recorded as an Interest in joint ventures in the Consolidated Balance Sheet. Our proportionate share of net income or losses of equity investments is included within Share of results with joint venture in the Consolidated Statement of Operation. The carrying value of our investment in a joint venture increases or decreases in relation to our proportionate share of comprehensive income or loss of the joint venture. When our share of losses of a joint venture exceeds our interest in that joint venture less the carrying value of the deferred gain described below, we cease to recognize our share of further losses. Additional losses are recognized only to the extent that we have incurred legal or constructive obligations or made payments on behalf of the joint venture. In connection with our initial investment, the gain resulting from the transaction was only recognized to the extent of the unrelated investors’ equity interest in the joint venture, which resulted in a deferred gain for a portion of our initial investment. We will begin to recognize the deferred gain upon the commercialization of any or all the licensed intellectual property by the joint venture. The deferred gain will be recognized over the estimated commercialization period in which a licensed product is developed and approved using a systematic approach that approximates the pattern of consumption of the licensed intellectual property by the joint venture. Investments accounted for under the equity method are assessed for potential impairment on a regular basis based on qualitative factors.
Leases
From January 1, 2019, leases are recognized as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Company. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the Consolidated Statement of Operation over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee’s incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions.
Right-of-use assets are measured at cost and comprise the following:
•the amount of the initial measurement of lease liability;
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•any lease payments made at or before the commencement date less any lease incentives received;
•any initial direct costs; and
•restoration costs.
Convertible Notes
We entered into the Facility Agreement on April 24, 2020, pursuant to which the counterparty agreed to extend senior secured convertible term loans to us in two separate disbursements:
(i)the first tranche of convertible loans in the amount of USD 65.0 million upon the completion of our initial public offering, and satisfaction of certain other conditions; and
(ii)the second tranche of convertible loans in the amount of USD 50.0 million upon the receipt of regulatory approval for Lonca, and satisfaction of certain other conditions.
Accounting for the First Tranche
On May 19, 2020, we received convertible loans in the amount of USD 65.0 million upon completion of our initial public offering. These convertible loans have been recognized as a hybrid financial instrument and accounted for as two separate components: (i) a loan and (ii) an embedded conversion option derivative.
•The embedded conversion option derivative has been initially measured at fair value and is subsequently re-measured to fair value at each reporting date. Under IAS 32, this derivative could have been classified as a component of equity only if in all cases the contract would be settled by us delivering a fixed number of its own equity instruments in exchange for a fixed amount of cash or debt redemption. However, the agreement foresees, in the event of a major transaction, the payment of “make-whole” amounts that would have to be computed in the light of the circumstances and are therefore not fixed. As a result, the derivative is presented in the balance sheet as a liability and classified as non-equity in accordance with IFRS 9. Changes in the fair value (gains or losses) of the derivative at the end of each period are recorded in the Consolidated Statement of Operation.
•The convertible loan’s initial fair value is the residual amount of the consideration received, net of attributable costs, after separating out the fair value of the embedded conversion option derivative. The loan is subsequently measured at its amortized cost in accordance with IFRS 9. It is presented in the Consolidated Balance Sheet as a financial liability.
Expenses and fees payable upon the issuance of the convertible loans have been allocated pro rata to the above two components. The share of expenses allocated to the embedded conversion option derivative has been charged directly to the Consolidated Statement of Operation, while the share of expenses allocated to the residual convertible loan has been deducted from the loan.
Accounting for Second Tranche
We are obligated to draw down the second tranche in the amount of USD 50.0 million upon receipt of regulatory approval for Lonca. This obligation has been accounted for as a derivative and is presented in the Consolidated Balance Sheet as a financial liability with changes in its fair value being recorded directly in the Consolidated Statement of Operation at the end of each accounting period.
See note 3, “Significant accounting policies” and note 6, “Critical accounting estimates and judgements” contained within audited Consolidated Financial Statements.
B.Liquidity and Capital Resources
Liquidity and Capital Resources
Since inception, we have incurred significant net losses. To date, we have not generated any product revenue and we have financed our operations through equity financings, including our initial public offering and follow-on offering, convertible debt financings, and additional funds provided by collaborations. As of December 31, 2020, we had cash and cash equivalents of USD 439.2 million.
In September 2020, we completed a follow-on offering on the NYSE, in which we issued and sold an aggregate 6,000,000 common shares at USD 34.00 per share. We received net proceeds of USD 188.9 million, after deducting underwriting discounts and commissions and offering expenses payable by us.
In May 2020, we completed our initial public offering, in which we issued and sold an aggregate of 14,082,475 common shares at USD 19.00 per share, including common shares issued and sold pursuant to the exercise in full of the underwriters’ option to purchase additional
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common shares. We received net proceeds of USD 244.2 million from the offering, after deducting underwriting discounts and commissions and offering expenses payable by us.
In addition, in May 2020, we received net proceeds of USD 61.3 million, after deducting fees and expenses payable by us, of the first disbursement of convertible loans to us in the amount of USD 65.0 million under the Facility Agreement. Pursuant to the Facility Agreement, Deerfield agreed to extend a subsequent disbursement of convertible loans to us in the amount of USD 50.0 million upon receipt of regulatory approval for Lonca and satisfaction of certain other conditions. If we have not received regulatory approval on or prior to December 31, 2021, the second tranche will automatically terminate on such date. The outstanding principal amount of the convertible loans is due to be repaid in full on May 19, 2025. However, any conversion of the convertible loans into common shares pursuant to the senior secured convertible notes described below shall be deemed a repayment of the principal amount of the convertible loans so converted. The convertible loans bear interest at a rate of 5.95% per annum, with interest payable quarterly in arrears commencing July 1, 2020. In addition to accrued interest, upon any redemption of the convertible loans prior to maturity in connection with a major transaction or upon payment of the convertible loans following an event of default, we will be required to pay a make-whole amount equal to the amount of all remaining interest payments to maturity (or the discounted value thereof in certain limited circumstances). However, the convertible loans may not be voluntarily prepaid by us prior to maturity other than in connection with a forced conversion as described below. In addition, upon any payment of the convertible loans or conversion of the convertible notes, whether upon redemption or at maturity or at any other time, we will be required to pay an exit charge equal to 2.0% of the amount of the loans so paid or converted. Each convertible loan extended under the Facility Agreement is evidenced by a convertible note. The holder of each of the first tranche of convertible notes is entitled to convert the principal amount of convertible loans evidenced thereby, at its option, into our common shares at any time at a conversion price of USD 24.70 per share, which is 130% of the price at which our common shares were sold to the public in our initial public offering (subject to adjustment upon the occurrence of subdivisions or combinations of our common shares or similar events). The conversion price for the second tranche of convertible notes will be equal to the lesser of (i) USD 28.50, which is 150% of the price at which our common shares were sold to the public in our initial public offering, and (ii) 120% of the average of the volume weighted average prices of our common shares on each of the 15 trading days immediately prior to the disbursement date of the second tranche, but in no event less than a floor equal to USD 15.39, in each case subject to adjustment upon the occurrence of subdivisions or combinations of our common shares or similar events. If the conversion price of the second tranche of convertible notes would be less than the floor price but for the application of the floor, Deerfield will not be obligated to extend the second tranche. The holders of the convertible notes are entitled to receive dividends (or cash amounts equal to such dividends) paid on our common shares as if the holders held the number of common shares into which the convertible notes are convertible. Upon the occurrence of a major transaction, as defined under the convertible notes, the holders of the convertible notes may elect to require us to redeem all or any portion of the notes for an amount equal to the principal amount thereof (in addition to accrued and unpaid interest, the make-whole amount and the exit charge). Alternatively, if the holder of a convertible note does not elect to require us to redeem any portion of the note in connection with a major transaction, the holder may elect to convert the unredeemed portion and, in addition to the number of common shares otherwise deliverable upon conversion, receive a number of additional common shares determined as set forth in the convertible notes (in addition to accrued and unpaid interest and the exit charge). In the case of a successor major transaction, we may elect to require redemption of any portion of the convertible notes that the holder does not elect to convert in connection with such transaction. Major transactions include (i) mergers and similar transactions as a result of which the holders of common shares before the transaction no longer hold a majority of the common shares after the transaction or the common shares are changed into the securities of another entity, (ii) sales of assets exceeding 50% of our enterprise value, (iii) any person or group acquiring beneficial ownership of more than 50% of our common shares or (iv) the delisting of our common shares, subject in each case to the more detailed provisions contained in the convertible notes. Successor major transactions include any major transaction in which our common shares are converted into the right to receive cash, securities of another entity and/or other assets, and any asset sale major transaction in which we distribute assets to our shareholders. We have the right to force conversions of the convertible notes on and after the one-year anniversary of the date on which we have received regulatory approval of Lonca if each of the following is greater than 275% of the conversion price (among other conditions specified in the convertible notes): (1) the volume weighted average price of the common shares on at least 20 trading days during any period of 30 consecutive trading days, (2) the volume weighted average price of the common shares on the last trading day of such period and (3) the closing price of the common shares on the last trading day of such period. We will have the right to force conversions of the convertible notes on and after the three-year anniversary of the date on which we have received regulatory approval of Lonca if the same conditions above are satisfied, except that the applicable price described in the preceding sentence need only be greater than 175% of the conversion price.
Our primary uses of capital are, and we expect will continue to be, research and development expenses, expenses associated with commercial launch preparations, compensation and related expenses and other operating expenses, including rent. Cash used to fund operating expenses is impacted by the timing of when we pay expenses, as reflected in the change in our outstanding accounts payable and accrued expenses. We expect to incur substantial expenses in connection with the advancement of clinical trials, including our pivotal clinical trials, and BLA preparations for our lead product candidates, Lonca and Cami, and the development of our other product candidates and our research pipeline. In addition, as we prepare for the potential approval of Lonca, we expect to continue to incur substantial expense for commercial launch preparations.
We plan to continue to fund our operating needs through the net proceeds of our initial public offering, the follow-on offering, the Facility Agreement, additional equity financings and/or other forms of financing. We may also pursue strategic collaborations and licensing opportunities for clinical development and commercialization of our product candidates in various geographical markets. The sale of additional
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equity and the issuance of senior secured convertible notes under the Facility Agreement and the conversion of such notes into common shares would result in additional dilution to our shareholders.
Cash Flows
Comparison of the Years Ended December 31, 2020 and December 31, 2019
The following table summarizes our cash flows for the years ended December 31, 2020 and 2019:
Year Ended December 31,
2020 2019 Change
(in USD thousands)
Net cash provided by (used in):
Operating activities
(168,729) (121,581) (47,148)
Investing activities
(2,828) (2,248) (580)
Financing activities
494,966  100,512  394,454 
Net change in cash and cash equivalents
323,409  (23,317) 346,726 
Net Cash Used in Operating Activities
Net cash used in operating activities increased to USD 168.7 million for the year ended December 31, 2020 from USD 121.6 million for the year ended December 31, 2019, an increase of USD 47.1 million, or 38.8%. The increase was primarily due to increased cash expenditure in the period on R&D and G&A costs as well as increased S&M costs in the preparation for the commercial launch of Lonca.
Net Cash Used in Investing Activities
Net cash used in investing activities increased to USD 2.8 million for the year ended December 31, 2020 from USD 2.2 million for the year ended December 31, 2019, an increase of USD 0.6 million, or 25.8%, primarily due to an increase in hardware associated with increased headcount as well as leasehold improvements.
Net Cash Provided by Financing Activities
Net cash provided by financing activities was USD 495.0 million for the year ended December 31, 2020 compared to USD 100.5 million of net cash used in financing activities for the year ended December 31, 2019. The increase was primarily due to the completion of our initial public offering and follow-on offering and the receipt of the first tranche of the convertible loans under the Facility Agreement.
Comparison of the Years Ended December 31, 2019 and December 31, 2018
The following table summarizes our cash flows for the years ended December 31, 2019 and 2018:
Year Ended December 31,
2019 2018 Change
(in USD thousands)
Net cash provided by (used in):
Operating activities
(121,581) (121,362) (219)
Investing activities
(2,248) (2,506) 258 
Financing activities
100,512  (24) 100,536 
Net change in cash and cash equivalents
(23,317) (123,892) 100,575 
Net Cash Used in Operating Activities
Net cash used in operating activities increased to USD 121.6 million for the year ended December 31, 2019 from USD 121.4 million for the year ended December 31, 2018, an increase of USD 0.2 million, or 0.2%.
Net Cash Used in Investing Activities
Net cash used in investing activities decreased to USD 2.2 million for the year ended December 31, 2019 from USD 2.5 million for the year ended December 31, 2018, a decrease of USD 0.3 million, or 10.3%, primarily due to a USD 0.6 million decrease in purchases of property, plant and equipment that was partially offset by a USD 0.3 million increase in purchases of intangible assets.
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Net Cash Provided by / (Used in) Financing Activities
Net cash provided by financing activities was USD 100.5 million for the year ended December 31, 2019 compared to net cash used in financing activities of KUSD 24 for the year ended December 31, 2018. Net cash provided by financing activities for the year ended December 31, 2019 primarily resulted from the sale of Class E preferred shares.
C.Research and Development, Patents and Licenses, etc.
See “Item 4. Information on the Company—B. Business Overview” and “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations.”
D.Trend Information
See “Item 5. Operating and Financial Review and Prospects—A. Operating Results.”
E.Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements or commitments.
F.Tabular Disclosure of Contractual Obligations
We have entered into various collaborations with development partners, including in-licensing and manufacturing agreements. These agreements provide for us to make potential future milestone and royalty payments that are conditional on success, and that are spread over various stages of development and commercialization, including achieving preclinical proof of concept, filing an IND application, commencing or completing multiple clinical development stages, obtaining regulatory approval in multiple countries, and achieving various levels of commercial sales. Due to the nature of these arrangements, the future potential payments related to the attainment of the specified milestones are inherently uncertain, and accordingly, no amounts have been recorded for these future potential payments in our Consolidated Balance Sheet as of December 31, 2020 and 2019. As of December 31, 2020, the aggregate amount of such potential milestone payments, under all such collaboration agreements, was USD 350.4 million. See note 24, “Commitments” within the notes to the Consolidated Financial Statements for further information.
The following table summarizes our contractual obligations as of December 31, 2020:
Payments Due By Period(1)
Total Less than
1 year 		1-3 
years 		3-5 
years 		More than
5 years
(in USD thousands)
Trade accounts payable 5,279  5,279  —  —  — 
Lease liabilities 3,642  1,050  1,047  642  903 
Convertible loan, interest and exit fee 19,466  3,921  7,842  7,703  — 
Convertible loan, short-term and long-term (2)
65,000  —  —  65,000  — 
Total 93,387  10,250  8,889  73,345  903 
____________________
(1)The amounts of contractual obligations set forth in the table above are associated with contracts that are enforceable and legally binding and that specify all significant terms, fixed or minimum services to be used, fixed, minimum or variable price provisions, and the approximate timing of the actions under the contracts. The table does not include obligations under agreements that we can cancel without a significant penalty. Excludes collaboration agreements described in the preceding paragraphs above.
(2)Amount represents the carrying value of the convertible loan with a principal amount of USD 65.0 million due May 19, 2025 associated with the first tranche of loans under the Facility Agreement. The above table was populated based on the contractual maturity date; however, we do not know when the above loans will be converted, if ever. In addition to the carrying value of the convertible loan, the fair value of the embedded derivative associated with the first tranche of USD 51.2 million has been excluded from the table as the timing for the conversion is not known. See note 21, “Convertible loans” within the notes to the Consolidated Financial Statements for further information.
G.Safe Harbor
See “Forward-Looking Statements.”

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ITEM 6.    DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A.Directors and Senior Management
The following table presents information about our current executive officers and directors. The term of each of our directors is one year and, accordingly, will expire at our annual general meeting of shareholders to be held in 2021. Ages are as of March 1, 2021.
Name Position(s) Age
Executive Officers and Directors
Christopher Martin
Chief Executive Officer and Director 62
Michael Forer
Executive Vice President, General Counsel and Vice Chairman of the Board of Directors 55
Jennifer Creel
Chief Financial Officer 50
Jay Feingold
Senior Vice President, Chief Medical Officer and Head of Oncology Clinical Development 64
Peter Greaney
Head of Corporate Development 41
Jennifer Herron
Senior Vice President, Chief Commercial Officer 51
Richard Onyett
Vice President, Business Development 73
Kimberly Pope
Senior Vice President, Chief Human Resources Officer 54
Susan Romanus
Chief Compliance Officer 55
Robert A. Schmidt
Vice President, Corporate Controller and Chief Accounting Officer 43
Lisa Skelton Vice President, Global Project Management 53
Patrick van Berkel
Senior Vice President, Research and Development 52
Non-Executive Directors
Ron Squarer
Chairman of the Board of Directors 54
Peter B. Corr
Director 72
Stephen Evans-Freke
Director 68
Peter Hug
Director 62
Thomas Pfisterer
Director 39
Thomas M. Rinderknecht
Director 67
Tyrell J. Rivers
Director 48
Victor Sandor
Director 54
Jacques Theurillat
Director 61
____________________
Unless otherwise indicated, the current business address for our executive officers and directors and our non-executive directors is ADC Therapeutics SA, Biopôle, Route de la Corniche 3B, 1066 Epalinges, Switzerland.
Executive Officers
Christopher Martin, D.Phil., has been an Executive Director of our board of directors since our formation and has been our Chief Executive Officer since June 2015. From 2000 to 2013, Dr. Martin was co-founder and Chief Executive Officer of Spirogen, which was acquired by AstraZeneca plc in 2013, at which point he became a member of both MedImmune’s management leadership team and AstraZeneca plc’s senior leaders group. Prior to this acquisition, Dr. Martin led numerous Spirogen collaboration transactions, including agreements with Genentech, Inc. and Seattle Genetics, Inc. He is currently a Non-Executive Chairman of Tokamak Energy Ltd. Dr. Martin holds a B.Sc. in chemical engineering from Aston University, a D.Phil. in engineering science from Oxford University and an M.B.A. from the International Institute for Management Development Lausanne and is a Fellow of the Institution of Chemical Engineers.
Michael Forer, LL.B., has been Vice Chairman of our board of directors and our Executive Vice President since June 2015 and our General Counsel since October 2020. From May 2016 to May 2020, Mr. Forer was our Chief Financial Officer, and from our formation to 2015, Mr. Forer was our Chief Executive Officer. From 2009 to 2013, Mr. Forer was a board member and Executive Director of Spirogen. Previously, Mr. Forer was the Managing Director for the investment activities of Auven Therapeutics Holdings L.P. and the co-founder and Managing Director of Rosetta Capital Limited, after starting his career at Rothschild Asset Management. Mr. Forer holds a B.A. in economics from the University of Western Ontario, an LL.B. from the University of British Columbia and a Diploma in international business from the University of Copenhagen.
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Jennifer Creel has been our Chief Financial Officer since May 2020. From 2008 to 2020, she served in various senior positions at Celgene Corporation, including as Franchise Chief Financial Officer and Corporate Vice President, Global Finance & Business Planning, as Vice President of Finance, Hematology & Oncology and as Senior Director, Global Business Planning & Analysis. Ms. Creel holds a B.A. in economics and French from the College of William and Mary and an M.B.A. from the University of Virginia’s Darden Graduate School of Business Administration.
Jay Feingold, M.D., Ph.D., has been our Senior Vice President, Chief Medical Officer and Head of Oncology Clinical Development since September 2014. From 2010 to 2014, he was Vice President of U.S. Medical Affairs and Chairman of the Global Medical Affairs Oversight Committee at Daiichi Sankyo Company, Ltd. From 2007 to 2010, Dr. Feingold was Vice President of Global Oncology Clinical Development and Global Therapy Area Director of Oncology at Wyeth Pharmaceuticals, Inc. Dr. Feingold holds a B.S. in biology from Stony Brook University and an M.D. and Ph.D. from the Albert Einstein College of Medicine and was trained in pediatrics and pediatric hematology and oncology at the University of California Los Angeles Center for the Health Sciences.
Peter Greaney, Ph.D., has been our Head of Corporate Development since September 2018. From 2006 to 2018, he served in various positions at Celgene Corporation, including as Director of Business Development, Strategy and Operations and Associate Director of Business Development. Dr. Greaney holds a B.S. in cell biology from the University of East Anglia and a Ph.D. in molecular and cellular biology from the University of Nottingham.
Jennifer Herron has been our Senior Vice President, Chief Commercial Officer since November 2019. In 2019, she served as Executive Vice President and Chief Commercial Officer at ImmunoGen, Inc. In 2018, she served as Executive Vice President, Global Commercial, at MorphoSys AG. From 2016 to 2017, she served as Executive Vice President and Chief Commercial Officer at Ariad Pharmaceuticals, Inc. From 2006 to 2016, she served in various positions at Bristol-Myers Squibb Company, including as Vice President, U.S. Immunology. Ms. Herron holds a B.A. in biology and economics from Lehigh University and an M.B.A. from Georgetown University.
Richard Onyett has been our Vice President of Business Development since April 2014. From July 2006 to January 2012, Mr. Onyett was the Commercial Director at Spirogen Limited and Commercial Director at Oxogen Limited. Previously, he was Senior Vice President of Business Development of KuDOS Pharmaceuticals Limited, Senior Vice President of Corporate Development at Epidauros GmbH and Senior Vice President of Corporate Development at Anthra Pharmaceuticals Inc. Mr. Onyett holds a B.Sc. in biological sciences from the University of Nottingham and a M.Sc. in general virology from the University of Birmingham.
Kimberly Pope has been our Senior Vice President, Chief Human Resources Officer since August 2020. From 2016 to 2020, Ms. Pope was the Senior Vice President, Head of Human Resources at Array BioPharma Inc. From 2013 to 2016, Ms. Pope was the Group Vice President, Human Resources at IDEX Corporation. Previously, Ms. Pope served in various senior positions at Hospira, Inc., including Director of Human Resources. Ms. Pope holds a B.B.A. in marketing and human resources management from the University of Iowa Tippie College of Business.
Susan Romanus has been our Chief Compliance Officer since June 2018. From 2015 to 2018, she served as Vice President, Compliance at Taiho Oncology, Inc. From 2009 to 2012, she served as Vice President, Chief Ethics & Compliance Officer at Daiichi Sankyo Company. Ms. Romanus holds a B.S. in biochemistry and cell biology from the University of California San Diego and an M.B.A. from the University of San Diego and a certificate in change leadership from Cornell University.
Robert A. Schmidt has been our Vice President, Corporate Controller and Chief Accounting Officer since August 2020. From 2019 to 2020, Mr. Schmidt was the Senior Vice President and Chief Accounting Officer at Newell Brands Inc. From 2016 to 2019, Mr. Schmidt was the Assistant Corporate Controller at Celgene Corporation. Previously, Mr. Schmidt served in various senior positions, including Vice President and Controller, at Tyco International plc. Mr. Schmidt holds a B.A. in accounting and economics from Muhlenberg College.
Lisa Skelton, Ph.D., has been our Vice President of Global Project Management since April 2014. Previously, Dr. Skelton served in various program and project management positions at Norgine B.V., including as Associate Director, Programme Management, Amgen Inc. and Antisoma plc. Dr. Skelton holds a Ph.D. in immunology from Open University.
Patrick van Berkel, Ph.D., has been our Senior Vice President of Research & Development since August 2012. From 2003 to 2012, Dr. van Berkel served in various roles at Genmab A/S, including as Vice President of Antibody Technology and Vice President of Chemistry, Manufacturing and Control, Research and Development and as Director of Technology for the Antibody Technology division. Dr. van Berkel holds a B.S. in chemistry from the University of Nijmegen and a Ph.D. in chemistry from the University of Leiden.
Non-Executive Directors
Ron Squarer has been the Chairman of our board of directors since April 2020. From 2012 to its acquisition by Pfizer, Inc. in August 2019, he served as the Chief Executive Officer at Array BioPharma Inc. Previously, Mr. Squarer served in various senior positions at Hospira, Inc., which was later acquired by Pfizer, Inc., including as Chief Commercial Officer. In addition, Mr. Squarer has held leadership roles at Pfizer Inc. (focused on oncology) and at SmithKline Beecham Pharmaceuticals (now GlaxoSmithKline plc). In addition to our board of directors, Mr. Squarer also serves as a member of the board of directors of Deciphera Pharmaceuticals, Inc. and Travere Therapeutics, Inc. Mr.
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Squarer holds a B.S. in biochemistry from the University of California, Berkeley, and an M.B.A. from Northwestern University’s Kellogg School of Management.
Peter B. Corr, Ph.D., has been a Non-Executive Director of our board of directors since June 2011 and was the Chairman of our board of directors from June 2011 to April 2020. He is the co-founder and Managing General Partner of Auven Therapeutics Management L.L.L.P. From 2000 to 2006, he held various senior positions at Pfizer Inc., including Executive Vice President for Science and Technology, Executive Vice President for Global Research and Development and President for Worldwide Development. In addition to our board of directors, Dr. Corr also serves as Co-Founder and Chairman of the board of directors of Imvax Inc., Chairman of the board of directors of Lakewood Amedex, Inc. and as a member of the board of directors of Analytica Limited. Dr. Corr holds a B.S. in chemistry from Union University and a Ph.D. from Georgetown University School of Medicine.
Stephen Evans-Freke, LL.B., has been a Non-Executive Director of our board of directors since June 2011. He is the co-founder and Managing General Partner of Auven Therapeutics Management L.L.L.P. Mr. Evans-Freke was also the co-founder, Chairman and Chief Executive Officer of Sugen, Inc. until its sale to Pharmacia Corporation. Previously, Mr. Evans-Freke was the President of PaineWebber Development Corporation, Managing Director of BliteEastman PaineWebber Inc. and a member of the board of directors of PaineWebber, Inc. In addition, he was the co-founder of CIBUS Global LLC, Fibrogen, Inc. and Royalty Pharma AG. Mr. Evans-Freke holds an L.L.B. in law from Cambridge University.
Peter Hug, Ph.D., has been a Non-Executive Director of our board of directors since June 2019. From 1983 to 2018, Dr. Hug served in various positions at F. Hoffmann-La Roche Ltd., including as head of Roche Pharma EEMEA region, head of Roche Pharma Europe region and Executive Vice President of Roche Pharma Partnering. In addition to our board of directors, Dr. Hug also serves as a member of the board of directors of Swiss Post Ltd. and Mundipharma MEA GmbH. Dr. Hug holds a Ph.D. in economics from the University of Basel.
Thomas Pfisterer has been a Non-Executive Director of our board of directors since October 2016. Since 2015, Mr. Pfisterer has headed the direct investment activities of the WILD Family Investment Office. From 2011 to 2015, Mr. Pfisterer served as the head of strategic development of WILD Flavors GmbH, where he directed the company’s global M&A activities. Previously, Mr. Pfisterer also worked in the investment banking division of Morgan Stanley Bank AG. In addition to our board of directors, Mr. Pfisterer also serves as a member of the board of directors of Sermonix Pharmaceuticals Inc., InSphero AG, Bloom Diagnostics AG and Imvax Inc. Mr. Pfisterer holds a B.A. in economics and a B.A. in business administration from the University of St. Gallen and an M.Phil. in finance from Cambridge University.
Thomas M. Rinderknecht, Ph.D., has been a Non-Executive director of our board of directors since May 2016. Since 2008, Dr. Rinderknecht has been a senior partner at the law firm Badertscher Rechtsanwälte AG. In addition to our board of directors, Dr. Rinderknecht also serves as a member of the board of directors of Chocoladefabriken Lindt & Sprüngli AG, Canyon Pharmaceuticals AG, APR Applied Pharma Research SA and several other firms in the biotechnology, media, hotel and industry sectors. Dr. Rinderknecht holds a masters in law and a Ph.D. in law from the University of Zurich and is admitted to the bar of the Canton of Zug, Switzerland.
Tyrell J. Rivers, Ph.D., has been a Non-Executive Director of our board of directors since June 2018. Since 2014, Dr. Rivers has been an Executive Director within AstraZeneca’s Corporate Development Group. From 2009 to 2014, Dr. Rivers was at MedImmune Ventures specializing in biotechnology investing. In addition to our board of directors, Dr. Rivers also serves as a member of the board of directors of Armaron Bio Ltd, Cerapedics, Inc., Corvidia Therapeutics, Inc. and Viela Bio, Inc. Dr. Rivers holds a B.S. in chemical engineering from the Massachusetts Institute of Technology, an M.S. in engineering from the University of Texas at Austin, an M.B.A. from New York University Stern School of Business and a Ph.D. in chemical engineering from the University of Texas at Austin.
Victor Sandor, M.D. C.M., has been a Non-Executive Director of our board of directors since April 2020. From 2014 to its acquisition by Pfizer, Inc. in August 2019, he served as the Chief Medical Officer at Array BioPharma Inc. Previously, Dr. Sandor served in various senior positions at Incyte Corporation, including as Senior Vice President of Global Clinical Development, at Biogen Idec, including as Vice President and Chief Medical Officer for Oncology, and at AstraZeneca plc. In addition to our board of directors, Dr. Sandor also serves as a member of the board of directors of Merus N.V., Prelude Therapeutics Inc. and Istari Oncology, Inc. Dr. Sandor holds a M.D. C.M from McGill University and completed a Fellowship in Medical Oncology at the National Cancer Institute in Bethesda Maryland.
Jacques Theurillat, LL.B., has been a Non-Executive Director of our board of directors since July 2015. Since 2016, he has been a partner at the Sofinnova Crossover Fund. From 2008 to 2015, Mr. Theurillat served as the Chief Executive Officer of Ares Life Sciences AG. Previously, Mr. Theurillat was the Chief Financial Officer of Serono S.A. In addition to our board of directors, Mr. Theurillat also serves as a member of the board of directors of Vifor Pharma AG, Mundipharma Ltd and CNH Industrial N.V. Mr. Theurillat holds an LL.B. from both Madrid University and Geneva University, an M.B.A. from Centro Estudios Financieros and a Swiss federal diploma in tax.
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B.Compensation
Compensation of Directors and Executive Officers

For the year ended December 31, 2020, the aggregate compensation accrued and paid to the members of our board of directors and our executive officers for services in all capacities, including retirement and similar benefits, was USD 9.2 million. During the year ended December 31, 2020, the total fair value of stock options and non-vested share awards (restricted shares and restricted share units) granted to directors and executive officers was USD 57.1 million. The amount set aside or accrued by us to provide pension, retirement or similar benefits to members of our board of directors and executive officers amounted to USD 0.5 million in the year ended December 31, 2020. We incorporate by reference into this Annual Report the information in “2. Compensation of the Board of Directors” and “3. Compensation of the Members of Executive Management” of Exhibit 99.4 to our report on Form 6-K filed with the SEC on March 18, 2021.
We granted Mr. Squarer options to acquire 1,125,545 common shares at USD 18.75 per share in connection with his election to our board of directors, representing approximately 2% of our then-outstanding share capital. These options are scheduled to vest upon Mr. Squarer’s continued service through designated dates over a three-year period, or immediately upon a change in control. On June 4, 2020, we provided Mr. Squarer with an additional grant of options to acquire 341,403 common shares in connection with our initial public offering. These options were granted with an exercise price equal to the grant date fair market value of our common shares on that date, and brought Mr. Squarer’s total rights to acquire our common shares to 2% of our then-outstanding share capital (measured without consideration of the shares underlying these grants).
Pursuant to Swiss law, beginning at our annual general meeting of shareholders in 2021, we will be required to submit the aggregate amount of compensation of our board of directors and the aggregate amount of compensation of our executive officers to a binding say-on-pay vote by our shareholders.
Equity Incentive Plans
Prior Plans
Historically, we granted equity compensation through (i) the Share Purchase Plan 2013, (ii) the Share Purchase Plan 2016 and (iii) the Incentive Plan 2014. Each of these plans is described in more detail below.
2013 Share Purchase Plan and 2016 Share Purchase Plan
Under the terms of the 2013 Share Purchase Plan and the 2016 Share Purchase Plan, plan participants paid the nominal value of the common shares in cash and settled the balance between the purchase price and the nominal value in the form of a promissory note. The promissory notes were full recourse, repayable within ten years (subject to certain early repayment events) and bore interest at the minimum interest rate pursuant to the guidelines for related party transactions as published by the Swiss Federal Tax Authority. The largest aggregate amount outstanding under these promissory notes under the 2013 Share Purchase Plan since the first issuance was USD 2.3 million immediately prior to the repayment of these notes. The largest aggregate amount outstanding under these promissory notes under the 2016 Share Purchase Plan since the first issuance was USD 8.9 million immediately prior to the repayment of these notes. All promissory notes were repaid on April 15, 2020 as described below.
Under the terms of the promissory notes, the relevant plan participant could repay outstanding amounts under the promissory note at any time in cash or repay the principal amount in whole or in part by delivering such number of shares as required to cover the amount to be repaid. In connection with our initial public offering, all plan participants who held promissory notes entered into a loan settlement agreement with us (the “Loan Settlement Agreements”) on April 15, 2020 pursuant to which they repaid all amounts outstanding under the promissory notes by delivering such number of common shares necessary to cover the entire amounts outstanding under the promissory notes. After consideration of all relevant factors, our board of directors determined the value of such surrendered shares as of the settlement date to be USD 18.75 per common share, resulting in the surrender of an aggregate of 597,774 common shares for the settlement of the promissory notes. In the Loan Settlement Agreements, we acknowledged and agreed that all of the obligations under the promissory notes were satisfied and the loans are extinguished.

These transactions resulted in the termination of both plans on May 15, 2020.
2014 Incentive Plan
All existing awards under the 2014 Incentive Plan vested and were settled in shares upon the completion of our initial public offering. We calculated for each participant the gain arising from the difference between the exercise price and the initial public offering price, undertook to settle in cash on behalf of the participant any associated tax and social charges liability, and transferred to the participant the remaining balance
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from treasury shares, valued at USD 19.00 per share. A total of 356,144 common shares were transferred to participants and an amount of USD 5.3 million was withheld for tax and social charges during fiscal year 2020.

For participants whose awards had an exercise price greater than USD 19.00 — i.e., were “out-of-the-money” — we made an equal number of new awards under the 2019 Equity Incentive Plan (see below) with an exercise price of USD 19.00 and with a vesting period of only three years instead of the usual four years. These new awards have been accounted for as a modification of the previous awards under the 2014 Incentive Plan

2019 Equity Incentive Plan
In April 2020, we amended and restated the 2019 Equity Incentive Plan, which we originally adopted in November 2019. The purpose of the 2019 Equity Incentive Plan is to motivate and reward performance of our employees, directors, consultants and advisors and further the best interests of the Company and our shareholders. The 2019 Equity Incentive Plan is the sole means for the Company to grant new equity awards.
Plan Administration. The 2019 Equity Incentive Plan is administered by the compensation committee of our board of directors, subject to the board of directors’ discretion to administer or appoint another committee to administer it.
Eligible Participants. The administrator is able to offer equity awards at its discretion under the 2019 Equity Incentive Plan to: (1) any employees of us or any of our subsidiaries; (2) any non-employee directors serving on our board of directors; and (3) any consultants or other advisors to us or any of our subsidiaries. The administrator of the plan may determine that an award for the benefit of a non-employee director will be granted to an affiliate of such director, but only to the extent consistent with the registration of shares offered under the plan on Form S-8 under the Securities Act.
Awards. The maximum number of common shares in respect of which awards may be granted under the 2019 Equity Incentive Plan is 7,820,000 common shares, subject to adjustment in the event of certain corporate transactions or events if necessary to prevent dilution or enlargement of the benefits made available under the plan. Equity incentive awards under the 2019 Equity Incentive Plan may be granted in the form of options, share appreciation rights, restricted shares, restricted share units, performance awards or other share-based awards but not “incentive stock options” for purposes of U.S. tax laws. Options and share appreciation rights will have an exercise price determined by the administrator but will not be less than fair market value of the underlying common shares on the date of grant.
Vesting. The vesting conditions for grants under the equity incentive awards under the 2019 Equity Incentive Plan are set forth in the applicable award documentation.
Termination of Service and Change in Control. In the event of a participant’s termination of employment, the compensation committee may, in its discretion, determine the extent to which an equity incentive award may be exercised, settled, vested, paid or forfeited. In the event of our termination of a participant’s employment without cause or a participant’s resignation for good reason (as defined in the 2019 Equity Incentive Plan) upon or within 18 months following a change in control of the company (as defined in the 2019 Equity Incentive Plan), any awards outstanding to the participant (unless otherwise provided in the award agreement) will immediately vest and settle, and options and share appreciation rights will become fully exercisable. In the event of a change in control that involves a merger, acquisition or other corporate transaction, any outstanding award not assumed, substituted, replaced or continued in connection with the transaction will immediately vest and settle, and options and share appreciation rights will become fully exercisable. In connection with a change of control of the Company, the compensation committee may, in its discretion, take any one or more of the following actions with respect to outstanding awards: (i) cancel any such award, in exchange for a payment in cash, securities or other property or any combination thereof with a value equal to the value of such award based on the per share value of common shares received or to be received by other shareholders in the event (or without payment of consideration if the committee determines that no amount would have been realized upon the exercise of the award or other realization of the participant’s rights); (ii) require the exercise of any outstanding option; (iii) provide for the assumption, substitution, replacement or continuation of any award by the successor or surviving corporation, along with appropriate adjustments with respect to the number and type of securities (or other consideration) of the successor or surviving corporation, subject to any replacement awards, the terms and conditions of the replacement awards (including performance targets) and the grant, exercise or purchase price per share for the replacement awards; (iv) make any other adjustments in the number and type of securities (or other consideration) subject to (a) such awards and in the terms and conditions of such awards in order to prevent the dilution or enlargement of benefits intended to be made available under the 2019 Equity Plan and (b) awards that may be granted in the future; (v) provide that any such award shall be accelerated and become exercisable, payable and/or fully vested with respect to all shares covered thereby or (vi) provide that any award shall not vest, be exercised or become payable as a result of such event.
Termination and Amendment. Unless terminated earlier, the 2019 Equity Incentive Plan will continue for a term of ten years. Our board of directors has the authority to amend or terminate the 2019 Equity Incentive Plan subject to shareholder approval with respect to certain amendments. However, no such action may impair the rights of the recipient of any options unless agreed to by the recipient.
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During the year ended December 31, 2020, we have granted to members of our board of directors and to our executive officers, in the aggregate, the right to acquire 2,381,796 common shares at a weighted-average price of USD 28.64 per common share under the 2019 Equity Incentive Plan. The expiration dates for these awards range from March 2030 to September 2030. In July 2020, we granted to certain of our executive officers, in the aggregate, 149,984 RSUs. The restricted share units vest ratably over a three-year period, subject to the executive officer’s continued employment with us, and any unvested RSUs will be forfeited should the executive officer terminate his or her employment with us.
C.Board Practices
Board Composition of Directors
Our board of directors is composed of 11 members. Each director is elected for a one-year term. The current members of our board of directors were appointed at our shareholders’ meeting on April 24, 2020 to serve until our annual general meeting of shareholders in 2021.
We are a foreign private issuer under the rules of the SEC. As a result, in accordance with the NYSE listing standards, we rely on home country governance requirements and certain exemptions thereunder rather than on the stock exchange corporate governance requirements, including the requirement that within one year of the completion of our initial public offering that we have a board that is composed of a majority of independent directors. There are no family relationships among any of our directors or executive officers. For an overview of our corporate governance principles, see “Item 10. Additional Information—B. Memorandum and Articles of Association” and “Item 16G—Corporate Governance.”
Board Meetings
Our board of directors held one physical meeting and 13 meetings by conference call in 2020. Physical meetings were curtailed during 2020 due to the COVID-19 pandemic. The board of directors discussed and analyzed the scientific, business, financial and organizational risks of the Company based on the external factors and internal changes impacting the risks for the Company in the future.
Committees of the Board of Directors
Our board of directors has established four separate committees: an audit committee, a compensation committee, a nomination and corporate governance committee and a science and technology committee.
Audit Committee
The audit committee, which consists of Jacques Theurillat (chair), Stephen Evans-Freke and Thomas M. Rinderknecht, assists our board of directors in overseeing our accounting and financial reporting processes and the audits of our consolidated financial statements. In addition, the audit committee is directly responsible for the compensation, retention and oversight of the work of our independent registered public accounting firm that our shareholders elect as our external auditors. The audit committee consists exclusively of members of our board of directors who are financially literate, and each of Jacques Theurillat, Stephen Evans-Freke and Thomas M. Rinderknecht is considered an “audit committee financial expert” as defined by the SEC. Our audit committee complies with Rule 10A-3(b)(1) of the Exchange Act, taking into account applicable transition periods under Rule 10A-3(b)(1)(iv)(A). Our board of directors has determined that each of Jacques Theurillat and Thomas M. Rinderknecht satisfy the “independence” requirements set forth in Rule 10A-3 under the Exchange Act.
The audit committee is governed by a charter that complies with the NYSE listing standards that apply to us. The audit committee has the responsibility to, among other things:
•pre-approve the audit services and non-audit services (including the fees and terms thereof) to be provided by the independent auditor pursuant to pre-approval policies and procedures;
•evaluate the independent auditor’s qualifications, performance and independence, and present its conclusions with respect to the independent auditor to the board of directors on at least an annual basis;
•confirm and evaluate the rotation of the audit partners on the audit engagement team as required by law;
•at least annually, review management’s plans with respect to the responsibilities, budget and staffing of the internal audit function and its plans for the implementation of the internal audit function, if any;
•review and discuss with management and the independent auditor the annual audited consolidated and stand-alone financial statements and unaudited quarterly financial statements;
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•review with management, personnel responsible for the design and implementation of the internal audit function and the independent auditor (i) any analyses or other written communications prepared by management and/or the independent auditor setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, (ii) the Company’s critical accounting policies and practices, (iii) the effect of regulatory and accounting initiatives, as well as off-balance sheet transactions and structures, on the Company’s financial statements and (iv) any major issues regarding accounting principles and financial statement presentations;
•review the type and presentation of information included in the earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies, and may review earnings press releases prior to public dissemination;
•in conjunction with the chief executive officer and chief financial officer, review disclosure controls and procedures and internal control over financial reporting;
•review policies and practices with respect to risk assessment and risk management; and
•review any major litigation or investigations against the Company that may have a material impact on the Company’s financial statements.
The audit committee meets as often as it determines is appropriate to carry out its responsibilities, but in any event meets at least four times per year.
Compensation Committee
The compensation committee, which consists of Peter Hug (chair), Peter B. Corr and Stephen Evans-Freke, supports our board of directors in establishing and reviewing the compensation and benefits strategy and guidelines as well as in preparing the proposals to the annual general meeting of shareholders regarding the compensation of the members of the board of directors and the executive officers. The compensation committee may submit proposals to the board of directors on other compensation-related matters. Swiss law requires that we have a compensation committee, so in accordance with NYSE listing standards, we follow home country requirements with respect to the compensation committee. As a result, our practice varies from NYSE listing standards, which set forth certain requirements as to the responsibilities, composition and independence of compensation committees for domestic issuers. Swiss law requires that our board of directors submit the aggregate amount of compensation of all members of our board of directors and of all executive officers to a binding shareholder vote every year. Commencing with our annual general meeting of shareholders in 2021, the members of the compensation committee will be elected by our annual general meeting of shareholders. The board of directors appoints the chair of the compensation committee and fills any vacancies until the following annual general meeting of shareholders.
The compensation committee has the responsibility to, among other things:
•regularly review and make recommendations to the board of directors regarding our compensation and benefits strategy and guidelines;
•prepare the proposals to the shareholders’ meeting regarding the compensation of the members of the board of directors and the executive committee;
•regularly review and make recommendations to the board of directors regarding the compensation of the members of the board of directors and of the executive committee;
•review and approve the recommendation of our chief executive officer regarding the fixed and variable compensation, including incentive plan participation and benefits, of the members of the management team other than members of the executive committee;
•review and make recommendations to the board of directors regarding our compensation and benefits plans (cash and/or equity-based plans) and, where appropriate or required, make recommendations to adopt, amend and terminate such plans;
•to the extent not delegated by the compensation committee to a different body or a third party, administer our compensation and benefits plans (other than equity-based plans);
•review and assess risks arising from our employee compensation policies and practices and whether any such risks are reasonably likely to have a material adverse effect on us; and
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•discharge any other tasks allocated or delegated to it by the board of directors.

Nomination and Corporate Governance Committee
The nomination and corporate governance committee, which consists of Stephen Evans-Freke (chair), Peter Hug and Thomas M. Rinderknecht, is responsible for director and board committee nominations, succession planning, performance evaluation and reviewing and amending, if required, our corporate governance framework and guidelines. The members of the nomination and corporate governance committee and its chair are appointed by our board of directors.
The nomination and corporate governance committee has the responsibility to, among other things:
•determine selection criteria for the succession of the members of the board of directors and board committees, our chief executive officer, our chief financial officer and our executive vice president, and establish such succession planning (including for the event of the incapacitation, retirement or removal of such individuals) by making recommendations to the board of directors;
•oversee searches and identify qualified individuals for membership on the board of directors and for the position of chief executive officer;
•recommend individuals for membership on the board of directors and board committees and for the position of chief executive officer;
•at least annually, prepare the board of directors’ assessment of the performance of the board of directors and board committees and of our chief executive officer and review the recommendations of the other board committees based on their evaluation of their own performance;
•review the recommendations of the other board committees based on their self-evaluations and discuss its self-evaluation with the board of directors;
•monitor and assess developments and trends in corporate governance to the extent that these do not have an impact on the activities and tasks of the audit committee or the compensation committee;
•review proposals to be made to the board of directors for the amendment of our amended and restated articles of association, our organizational regulations, any other rules or regulations and the Code of Conduct;
•periodically review and reassess the adequacy of the Code of Conduct and recommend any proposed changes to the board of directors;
•periodically review and assess the adequacy of the charter of the nomination and corporate governance committee and recommend any proposed changes to the board of directors for approval;
•if it deems advisable, develop and recommend to the board of directors corporate governance guidelines for the Company, and, if such guidelines are adopted, periodically review and reassess the adequacy of such guidelines, consider any requests for waivers of such guidelines and make recommendations to the board of directors regarding amendments and requests for waivers; and
•oversee compliance with the Code of Conduct and report on such compliance to the board of directors.

Science and Technology Committee
The science and technology committee, which consists of Victor Sandor (chair), Peter B. Corr, Peter Hug and Tyrell J. Rivers, is responsible for reviewing and making recommendations to the board of directors regarding our research and development activities, strategies, programs and objectives. The members of the science and technology committee and its chair are appointed by our board of directors.
The science and technology committee has the responsibility to, among other things:
• review and make recommendations to the board of directors regarding our preclinical and clinical research and development activities, including related CMC activities;
• review and make recommendations to the board of directors regarding preclinical and clinical research and development strategies;
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• review and make recommendations to the board of directors regarding our preclinical and clinical research guidelines;
• provide strategic advice to the board of directors regarding emerging science and technology issues and trends;
• examine periodically our measures to keep the research and development personnel motivated, productive and entrepreneurially oriented;
• ensure, through regular review and consultation with the Chief Executive Officer and his team, that appropriate research and development objectives are in place that are aligned with our overall research and development strategy, and that progress against these objectives is being appropriately assessed; and
• ensure that appropriate market potential assessments are being conducted.

D.Employees
As of December 31, 2020, we had 208 employees, 138 of whom have an advanced academic degree (Diploma/Master, D.Phil., Ph.D., M.D.). As of December 31, 2020, 145 of our employees were located in the United States, 35 in the United Kingdom and 28 in Switzerland. We are not subject to collective bargaining agreements or similar labor contracts and do not have a workers’ council. We believe that our relationship with our employees is good.
E.Share Ownership
See “Item 7. Major Shareholders and Related Party Transactions—A. Major shareholders.”
ITEM 7.    MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A.Major Shareholders
The following table presents information relating to the beneficial ownership of our common shares as of February 1, 2021:
•each person, or group of affiliated persons, known by us to own beneficially 5% or more of our outstanding common shares;
•each of our executive officers and directors; and
•all executive officers and directors as a group.
The number of common shares beneficially owned by each entity, person, executive officer or director is determined in accordance with the rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any common shares over which the individual has sole or shared voting power or investment power as well as any common shares that the individual has the right to acquire within 60 days from February 1, 2021 through the exercise of any option or other right. Except as otherwise indicated, and subject to applicable community property laws, we believe that the persons named in the table have sole voting and investment power.
The percentage of outstanding common shares beneficially owned is computed based on 76,721,697 common shares outstanding as of February 1, 2021. Common shares that a person has the right to acquire within 60 days are deemed outstanding for purposes of computing the percentage ownership of the person holding such rights, but are not deemed outstanding for purposes of computing the percentage ownership of any other person, except with respect to the percentage ownership of all executive officers and directors as a group. Unless otherwise indicated below, the business address for each beneficial owner is ADC Therapeutics SA, Biopôle, Route de la Corniche 3B, 1066 Epalinges, Switzerland.
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Principal Shareholders Number of Common Shares
Beneficially Owned 		Percentage of Common Shares Beneficially Owned
5% Shareholders
Entities affiliated with Auven Therapeutics GP Ltd. (1)
22,193,730  28.9  %
AstraZeneca UK Limited (2)
4,011,215  5.2  %
FMR LLC (3)
7,761,585  10.1  %
Entities affiliated with Dr. Hans-Peter Wild (4)
9,023,688  11.8  %
Redmile Group LLC (5)
6,758,794  8.8  %
Executive Officers and Directors
Peter B. Corr (6)
22,193,730  28.9  %
Jennifer Creel 3,000  *
Stephen Evans-Freke (6)
22,194,230  28.9  %
Jay Feingold 92,190  *
Michael Forer (7)
864,678  1.1  %
Peter Greaney 26,682  *
Jennifer Herron 50,682 *
Peter Hug 77,273 *
Christopher Martin (8)
1,131,745 1.5  %
Richard Onyett 14,065  *
Thomas Pfisterer 521,544 *
Kimberly Pope 1,000  *
Thomas M. Rinderknecht 451,836 *
Tyrell J. Rivers (9)
—
*
Susan Romanus 8,254 *
Victor Sandor
—
*
Robert A. Schmidt
—
*
Lisa Skelton 9,113  *
Ron Squarer 383,182 *
Jacques Theurillat 218,558 *
Patrick van Berkel (10)
315,381 *
All executive officers and directors as a group (21 persons) 26,363,413  34.4  %
____________________
*Less than 1% of our total outstanding common shares.
(1)A.T. Holdings II Sarl (“A.T. Holdings”) holds a 73.77% interest in ADC Products Switzerland Sarl (“ADC Products”) and is a wholly-owned subsidiary of C.T. Phinco Sarl (C.T. Phinco”), which is a wholly-owned subsidiary of Auven Therapeutics Holdings L.P. (“Auven Therapeutics”). Auven Therapeutics General L.P. (Auven Therapeutics General”) is the general partner of Auven Therapeutics. Auven Therapeutics GP Ltd (“Auven Therapeutics GP”) is the general partner of Auven Therapeutics General. Peter B. Corr and Stephen Evans-Freke are directors and principals of Auven Therapeutics. All common shares held by A.T. Holdings have been pledged pursuant to lending arrangements. The address of each of A.T. Holdings and ADC Products is Biopole, Route de la Corniche 3B, 1066 Epalinges, Switzerland. The address of C.T. Phinco is 6 Rue Eugene Ruppert, L-2453 Luxembourg, Luxembourg. The address of Auven Therapeutics, Auven Therapeutics General and Auven Therapeutics GP is Ritter House, P.O. Box 4041, Wickhams Cay II, Road Town, Tortola, BVI VG1110. The business address of Mr. Corr and Mr. Evans-Freke is 6501 Redhook Plaza, Suite 201, St. Thomas, U.S. Virgin Islands 00802.
(2)AstraZeneca UK Limited (“AstraZeneca”) is a wholly-owned subsidiary of AstraZeneca PLC, a public limited company organized under the laws of the United Kingdom, which may be deemed to have sole voting and investment power over common shares held by AstraZeneca. The business address of each of AstraZeneca and AstraZeneca PLC is 1 Francis Crick Avenue, Cambridge Biomedical Campus, Cambridge, United Kingdom, CB2 0AA.
(3)This information is based on a Schedule 13G/A filed with the SEC on February 8, 2021 by FMR LLC, which reported sole power to vote with respect to 1,276,697 common shares and sole power of disposition with respect to 7,761,585 common shares. All common shares are beneficially owned by FMR LLC, a parent holding company, and on behalf of its wholly owned subsidiaries FIAM LLC IA, Fidelity Institutional Asset Management Trust Company BK, Fidelity Management & Research Company LLC and by Abigail P. Johnson, who is a Director, the Chairman and the Chief Executive Officer of FMR LLC. Members of the Johnson family, including Abigail P. Johnson, are the predominant owners, directly or through trusts, of Series B voting common shares of FMR LLC, representing 49% of the voting power of FMR LLC. The Johnson family group and all other Series B shareholders have entered into a shareholders’ voting agreement under which all Series B voting common shares will be voted in accordance with the majority vote of Series B voting common shares. Accordingly, through their ownership of voting common shares and the execution of the shareholders’ voting agreement, members of the Johnson family may be deemed, under the Investment Company Act of 1940, to form a controlling group with respect to FMR LLC. Neither FMR LLC nor Abigail P. Johnson has the sole power to vote or direct the voting of the shares owned directly by the various investment companies registered under the Investment Company Act advised by Fidelity Management & Research Company LLC, a wholly owned subsidiary of FMR LLC, which power resides with the Fidelity Funds’ Boards of Trustees. Fidelity Management & Research Company carries out the voting of the shares under written guidelines established by the Fidelity Funds’ Boards of Trustees. The business address of FMR LLC is 245 Summer Street, Boston, Massachusetts 02210.
(4)The principal business of HPWH TH AG (“HPWH”) is holding investment rights in, directly or indirectly, ADC Therapeutics. HP WILD Holding AG (“HPW Holding”) is an intermediary holding company. Dr. Hans-Peter Wild is the chairman of HPWH and HPW Holding. Thomas Pfisterer is a board member of HPWH and an investment manager. By reason of a stockholders’ agreement by and among Mr. Pfisterer and HPW Holding and their joint indirect minority equity interest in HPWH via their joint
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ownership of HPWH MH AG (“MH”), which owns a 12.5% interest in HPWH, Mr. Pfisterer may be deemed to have shared voting and investment power with respect to such shares held of record by HPWH. However, Mr. Pfisterer disclaims beneficial ownership of all common shares held of record by HPWH other than the shares indirectly represented by his 41.7% interest in MH. The business address of each of HPWH, HPW Holding, Dr. Wild and Mr. Pfisterer is HPWH is Neugasse 22, 6300 Zug, Switzerland.
(5)This information is based on a Schedule 13G filed with the SEC on February 16, 2021 by Redmile Group, LLC and Jeremy C. Green, which reported shared power to vote with respect to 6,758,794 common shares and shared power of disposition with respect to 6,758,794 common shares. The common shares are owned by certain private investment vehicles and/or separately managed accounts managed by Redmile Group, LLC, which common shares may be deemed beneficially owned by Redmile Group, LLC as investment manager of such private investment vehicles and/or separately managed accounts. The reported securities may also be deemed beneficially owned by Jeremy C. Green as the principal of Redmile Group, LLC. Redmile Group, LLC and Mr. Green each disclaim beneficial ownership of these shares, except to the extent of its or his pecuniary interest in such shares, if any. The business address of each of Redmile Group, LLC and Mr. Green is One Letterman Drive, Building D, Suite D3-300, The Presidio of San Francisco, San Francisco, California 94129.
(6)Includes 500 shares held by Mr. Evans-Freke. As described in footnote (1), the sole shareholders of Auven Therapeutics GP Ltd., Mr. Corr and Mr. Evans-Freke, may be deemed to have shared voting and investment power with respect to the common shares held by entities affiliated with Auven Therapeutics GP Ltd.
(7)Does not include common shares held by Dune Capital Inc., a company which is wholly-owned by a trust whose beneficiaries include Mr. Forer and his family. Mr. Forer does not exercise investment or voting control over the trust, and therefore such shares do not appear in the table above. 
(8)Does not include common shares held of record by Tuula Martin, spouse of Christopher Martin. Mr. Martin does not exercise investment or voting control over such shares, and therefore such shares do not appear in the table above.
(9)Mr. Rivers, an executive director within AstraZeneca’s corporate development group, disclaims beneficial ownership with respect to the 3,811,215 common shares held of record by AstraZeneca. See footnote (2).
(10)Consists of common shares held by Dr. van Berkel and by Betulamab B.V., a Dutch private limited liability company of which Dr. van Berkel is beneficial owner. The registered office address of Betulamab B.V. is Neerdyck 3, 3601 CZ Maarssen, The Netherlands.
Holders
As of February 1, 2021, we had approximately 74 shareholders of record of our common shares. We estimate that as of February 1, 2021, approximately 51.1% of our outstanding common shares are held by 44 U.S. record holders. The actual number of shareholders is greater than this number of record holders and includes shareholders who are beneficial owners but whose shares are held in street name by brokers and other nominees. This number of holders of record also does not include shareholders whose shares may be held in trust or by other entities.

Significant Changes in Ownership by Major Shareholders
We have experienced significant changes in the percentage ownership held by major shareholders as a result of our initial public offering. Prior to our initial public offering, our principal shareholders were entities affiliated with Auven Therapeutics GP Ltd., AstraZeneca UK Limited and HPWH TH AG, which held common shares representing 41.0%, 6.7% and 10.6% of our outstanding common shares prior to our initial public offering. As of February 1, 2021, to our knowledge, these shareholders held common shares representing 28.9%, 5.2% and 11.8% of our outstanding common shares.
B.Related Party Transactions
The following is a description of certain related party transactions we have entered into since January 1, 2018 with any of our executive officers, directors or their affiliates and holders of more than 10% of any class of our voting securities in the aggregate, which we refer to as related parties, other than compensation arrangements which are described under “Item 6. Directors, Senior Management and Employees.”

Participation in our Follow-on Offering

In connection with our follow-on offering, Auven Therapeutics GP Ltd., through A.T. Holdings II Sàrl and ADC Products Switzerland Sàrl (“the Selling Shareholders”) granted to the underwriters an option to purchase up to 900,000 additional common shares at the public offering price of USD 34.00 per share, less underwriting discounts and commissions. On October 9, 2020, the underwriters exercised in full their option to purchase an additional 900,000 common shares from the Selling Shareholders at a price of USD 34.00, less underwriting discounts and commissions. We did not receive any proceeds or incur any costs related to the sale of these shares by the Selling Shareholders. The Selling Shareholders incurred all costs in addition to underwriting discounts and commissions.
Sales of Securities

Participation in Our Initial Public Offering

In connection with our initial public offering in May 2020, certain of our existing shareholders purchased common shares from the underwriters at the initial public offering price of USD 19.00 per share and on the same terms as other investors in our initial public offering. To our knowledge, the following table summarizes purchases of common shares in our initial public offering by entities known by us to own beneficially 5% or more of our outstanding common shares.
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Name of Shareholders Number of Common Shares Purchased
HPWH TH AG(1)
950,000
(1) Based solely on a Schedule 13D filed with the SEC on September 14, 2020 by HPWH TH AG, HP WILD Holding AG, Hans-Peter Wild and Thomas Pfisterer.

Sale of Class E Preferred Shares
In May 2019, we entered into an investment and subscription agreement, which included customary representations and warranties and covenants, pursuant to which we issued and sold an aggregate of 218 Class E preferred shares at a purchase price of USD 350,000.00 per share (which is equal to 2,725,000 common shares at a purchase price of USD 28.00 per share after giving effect to the one-to-15,625 share split of all issued shares that was effected on September 19, 2019, the five-to-four reverse split of all issued shares that was effected on April 24, 2020 and the conversion on a one-to-one basis of our issued preferred shares into common shares that was effected on May 19, 2020 (collectively, the “Share Capital Reorganization”)) for an aggregate purchase price of USD 76.3 million.
The following table sets forth the number of our Class E preferred shares (and the number of our common shares after giving effect to the Share Capital Reorganization) purchased by our related parties:
Name of Shareholders
Number of Class E Preferred Shares
(Number of Common Shares) Purchased(1)
A.T. Holdings II Sàrl(2)
62.0000  (775,000.0000)
Michael Forer
0.4286  (5,357.5000)
Dominique Graz (3)
0.5700  (7,125.0000)
Stéphane Henchoz
0.1000  (1,250.0000)
Thomas Rinderknecht    
1.0000  (12,500.0000)
Jacques Theurillat
0.1800  (2,250.0000)
Tuula Martin(4)    
0.4300  (5,375.0000)
Barrie Ward(5)
0.0200  (250.0000)
____________________
(1)Includes shares and fractional shares held by nominees on behalf of the shareholders set out in the table.
(2)Includes 29.0000 Class E preferred shares (which is equal to 362,500.0000 common shares after giving effect to the Share Capital Reorganization) originally acquired by ADC Products Switzerland Sàrl and later transferred to A.T. Holdings II Sàrl.
(3)Dominique Graz was our General Counsel from April 2018 to September 2020.
(4)Tuula Martin is the spouse of Christopher Martin, who is a member of our board of directors and CEO.
(5)Barrie Ward was a member of our board of directors from September 2014 to April 2020.
Issuance of Class A Common Shares
In September 2019, we issued 140 Class A common shares (which is equal to 1,750,000 common shares after giving effect to the Share Capital Reorganization) to A.T. Holdings II Sàrl at CHF 1,000 per Class A common share (CHF 0.08 per common share after giving effect to the Share Capital Reorganization), equal to the par value of such shares, and repurchased such shares from A.T. Holdings II Sàrl immediately upon their issuance and at the same price. Some of these shares are reserved to settle share grants and equity-linked instruments for directors, officers, employees and consultants, including to settle the outstanding awards under our Incentive Plan 2014.
Shareholders’ Agreement
In October 2017, we and our then-existing equity investors entered into a shareholders’ agreement (the “Shareholders’ Agreement”), which replaced our prior shareholders’ agreements. In April 2020, we and our shareholders entered into an addendum to the Shareholders’ Agreement. As consideration for the holders of our Class E preferred shares agreeing to convert their shares into common shares, we agreed to issue to such holders an aggregate of 4,777,996 common shares (after giving effect to the Share Capital Reorganization and accounting for the rounding of fractional shares) immediately prior to the completion of our initial public offering, of which 1,222,966 shares were issued to related parties. These common shares were distributed among the holders of our Class E preferred shares pro rata based on their holdings of such shares. The Shareholders’ Agreement terminated at the closing of our initial public offering.
In May 2020, to settle fractional holdings, we transferred the beneficial interest in (i) an aggregate of 6 Class C preferred shares, 12 Class D preferred shares and 26 Class E preferred shares we previously held in treasury to certain of our shareholders and (ii) an aggregate of 6.6
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common shares to certain beneficiaries of our 2013 Share Purchase Plan and our 2016 Share Purchase Plan. We made such transfers without consideration. The following table sets forth the number of shares transferred to our related parties:
Name of Shareholders Number of Shares Transferred
ADC Products Switzerland Sàrl
0.7727
Betulamab B.V.(1)
0.4000
Michael Forer
1.2801
Dominique Graz(2)
0.8000
Peter Greaney
0.4000
Stéphane Henchoz
0.9429
Peter Hug
0.2000
Christopher Martin
0.2000
Thomas Pfisterer
0.2000
Thomas Rinderknecht 1.5540
Jacques Theurillat
1.1891
Tuula Martin(3)
0.2458
____________________
(1)Betulamab B.V. is a Dutch private limited liability company of which Dr. van Berkel, who is our Senior Vice President, Research and Development, is beneficial owner.
(2) Dominique Graz was our General Counsel from April 2018 to September 2020.
(3) Tuula Martin is the spouse of Christopher Martin, who is a member of our board of directors and CEO.
Director and Executive Officer Promissory Notes
All amounts outstanding under the promissory notes were repaid on April 15, 2020.
The following table sets forth the material terms of the promissory notes issued in connection with the share purchase plans between us and our directors and executive officers.
Name of Director or Executive Officer Largest Amount
Previously Outstanding
(in USD thousands)
Michael Forer 3,307
Dominique Graz(1)
207
Peter Greaney 71
Stéphane Henchoz 336
Peter Hug 229
Christopher Martin 4,148
Thomas Pfisterer 341
Thomas M. Rinderknecht 472
Jacques Theurillat 472
Patrick van Berkel 472
Barrie Ward(2)
385

(1) Dominique Graz was our General Counsel from April 2018 to September 2020.
(2) Barrie Ward was a member of our board of directors from September 2014 to April 2020.

Related Person Transaction Policy
We have adopted a related person transaction policy, which states that any related person transaction must be approved or ratified by our audit committee or board of directors. In determining whether to approve or ratify a transaction with a related person, our audit committee or board of directors will consider all relevant facts and circumstances, including, without limitation, the commercial reasonableness of the terms of the transaction, the benefit and perceived benefit, or lack thereof, to us, the opportunity costs of an alternative transaction, the materiality and
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character of the related person’s direct or indirect interest and the actual or apparent conflict of interest of the related person. Our audit committee or board of directors will not approve or ratify a related person transaction unless it has determined that, upon consideration of all relevant information, such transaction is in, or not inconsistent with, our best interests and the best interests of our shareholders.
Indemnification Agreements
We have entered into indemnification agreements with our executive officers and directors. The indemnification agreements and our amended and restated articles of association require us to indemnify our executive officers and directors to the fullest extent permitted by law.
C.Interests of Experts and Counsel
Not applicable.
ITEM 8.    FINANCIAL INFORMATION
A.Consolidated Statements and Other Financial Information
Financial Statements

See “Item 18. Financial Statements,” which contains our financial statements prepared in accordance with IFRS.
Legal Proceedings
From time to time, we may be subject to various legal proceedings and claims that arise in the ordinary course of our business activities. The results of litigation and claims cannot be predicted with certainty. As of the date of this Annual Report, we do not believe that we are party to any claim or litigation, the outcome of which would, individually or in the aggregate, be reasonably expected to have a material adverse effect on our business.
Dividends and Dividend Policy
We have never declared or paid cash dividends on our share capital. We intend to retain all available funds and any future earnings, if any, to fund the development and expansion of our business and we do not anticipate paying any cash dividends in the foreseeable future. In addition, the Facility Agreement limits our ability to pay dividends. Any future determination related to dividend policy will be made at the discretion of our board of directors and will depend upon, among other factors, our results of operations, financial condition, capital requirements, contractual restrictions, business prospects and other factors our board of directors may deem relevant.
Under Swiss law, any dividend must be approved by our shareholders. In addition, our auditors must confirm that the dividend proposal of our board of directors to the shareholders conforms to Swiss statutory law and our amended and restated articles of association. A Swiss corporation may pay dividends only if it has sufficient distributable profits from the previous business year (bénéfice de l’exercice) or brought forward from previous business years (report des bénéfices) or if it has distributable reserves (réserves à libre disposition), each as evidenced by its audited stand-alone statutory balance sheet prepared pursuant to Swiss law and after allocations to reserves required by Swiss law and its articles of association have been deducted. Distributable reserves are generally booked either as free reserves (réserves libres) or as reserves from capital contributions (apports de capital). Distributions out of share capital, which is the aggregate par value of a corporation’s issued shares, may be made only by way of a share capital reduction. See “Item 10. Additional Information—B. Memorandum and Articles of Association.”
B.Significant Changes
A discussion of the significant changes in our business can be found under “Item 4. Information on the Company—A. History and Development of the Company” and “Item 4. Information on the Company—B. Business Overview.”
ITEM 9.    THE OFFER AND LISTING
A.Offering and Listing Details
See C. Markets below.
B.Plan of Distribution
Not applicable.
C.Markets
Our common shares are listed on the NYSE under the symbol “ADCT.”
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D.Selling Shareholders
Not applicable.
E.Dilution
Not applicable.
F.Expenses of the Issue
Not applicable.
ITEM 10.    ADDITIONAL INFORMATION
A.Share Capital
Not applicable.
B.Memorandum and Articles of Association
We are a Swiss stock corporation (société anonyme) organized under the laws of Switzerland. We were incorporated as a Swiss limited liability company (société à responsabilité limitée) on June 6, 2011 with our registered office and domicile in Epalinges, Canton of Vaud, Switzerland. We converted to a Swiss stock corporation under the laws of Switzerland on October 13, 2015. Our domicile is in Epalinges, Canton of Vaud, Switzerland. Our registered office and head office is currently located at Biopôle, Route de la Corniche 3B, 1066 Epalinges, Switzerland.
Share Capital
As of December 31, 2020, our share capital as registered with the commercial register of the Canton of Vaud, Switzerland (the “Commercial Register”) amounted to 76,770,000 common shares, 76,721,543 of which were outstanding, each with a par value of CHF 0.08 per share.
Changes in Our Share Capital During the Last Three Fiscal Years
In this section, share amounts are presented as of the date of the relevant transaction, without accounting for the Share Capital Reorganization. Since January 1, 2018, our share capital has changed as follows:
•On June 19, 2018, our share capital as registered with the Commercial Register on June 29, 2018, was increased by issuing 3 Class A common shares;
•On December 10, 2018, our share capital as registered with the Commercial Register on December 14, 2018, was increased by issuing 33 Class A common shares;
•On January 30, 2019, our share capital as registered with the Commercial Register on February 6, 2019, was increased by issuing 6 Class A common shares;
•On June 4, 2019, our share capital as registered with the Commercial Register on June 7, 2019, was increased by issuing 216 Class E preferred shares;
•On June 7, 2019, our share capital as registered with the Commercial Register on June 14, 2019, was increased by issuing 2 Class E preferred shares;
•On June 28, 2019, our share capital as registered with the Commercial Register on July 5, 2019, was increased by issuing 77 Class E preferred shares;
•On August 22, 2019, our share capital as registered with the Commercial Register on August 28, 2019, was increased by an aggregate amount of CHF 3,714,300 through an increase of the par value of each of our Class A common shares and Class B, C, D and E preferred shares from CHF 100 to CHF 1,000;
•On September 19, 2019, our share capital as registered with the Commercial Register on September 19, 2019, was increased by issuing 140 Class A common shares;
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•In the one-to-15,625 share split of all issued shares effected on September 19, 2019, each of our issued shares was split into 15,625 shares of the same class with a par value of CHF 0.064 per share;
•In the five-to-four reverse share split of all issued shares effected on April 24, 2020, each of our issued shares was consolidated into 0.8 shares of the same class with a par value of CHF 0.08 per share, and an aggregate of 44 common shares were converted into 6 Class C preferred shares, 12 Class D preferred shares and 26 Class E preferred shares, each with a par value of CHF 0.08; and
•On May 15, 2020, our share capital as registered with the Commercial Register on May 15, 2020, was increased by issuing 17,432,500 common shares with a par value of CHF 0.08 per share.
•On September 28, 2020, our share capital as registered with the Commercial Register on September 28, 2020, was increased by issuing 6,000,000 common shares with a par value of CHF 0.08 per share.
Registration Rights
In connection with the initial disbursement under the Facility Agreement, we entered into an agreement with Deerfield Partners, L.P. and Deerfield Private Design Fund IV, L.P. that provides them with certain registration rights. Within fifteen days following the receipt of the second disbursement under the Facility Agreement, we will be required to prepare and file a registration statement to register under the Securities Act common shares issued and issuable to them upon the conversion of their senior secured convertible notes issued under the Facility Agreement. The agreement also provides for piggyback registration rights pursuant to which such holders have the right to demand that we include any such shares in any registration statement that we file with the SEC, subject to certain exceptions.
Articles of Association
Ordinary Capital Increase, Authorized and Conditional Share Capital
Under Swiss law, we may increase our share capital (capital-actions) with a resolution of the general meeting of shareholders (ordinary capital increase) that must be carried out by the board of directors within three months of the respective general meeting in order to become effective. Under our articles of association and Swiss law, in the case of subscription and increase against payment of contributions in cash, a resolution passed by an absolute majority of the shares represented at the general meeting of shareholders is required. In the case of subscription and increase against contributions in kind or to fund acquisitions in kind, when shareholders’ statutory pre-emptive subscription rights or advance subscription rights are limited or withdrawn or where transformation of freely disposable equity into share capital is involved, a resolution passed by two-thirds of the shares represented at a general meeting of shareholders and the absolute majority of the par value of the shares represented is required.
Furthermore, under the Swiss Code of Obligations (the “CO”), our shareholders, by a resolution passed by two-thirds of the shares represented at a general meeting of shareholders and the absolute majority of the par value of the shares represented, may empower our board of directors to issue shares of a specific aggregate par value up to a maximum of 50% of the share capital in the form of:
• conditional share capital (capital-actions conditionnel) for the purpose of issuing shares in connection with, among other things, (i) option and conversion rights granted in connection with warrants and convertible bonds of the Company or one of our subsidiaries or (ii) grants of rights to employees, members of our board of directors or consultants or to our subsidiaries or other persons providing services to the Company or a subsidiary to subscribe for new shares (conversion or option rights); or
• authorized share capital (capital-actions autorisé) to be utilized by the board of directors within a period determined by the shareholders but not exceeding two years from the date of the shareholder approval.
Pre-Emptive and Advance Subscription Rights

Pursuant to the CO, shareholders have pre-emptive subscription rights (droits de souscription préférentiels) to subscribe for new issuances of shares. With respect to conditional capital in connection with the issuance of conversion rights, convertible bonds or similar debt instruments, shareholders have advance subscription rights (droit de souscription préalable) for the subscription of such conversion rights, convertible bonds or similar debt instruments.
A resolution passed at a general meeting of shareholders by two-thirds of the shares represented and the absolute majority of the par value of the shares represented may authorize our board of directors to withdraw or limit pre-emptive subscription rights or advance subscription rights in certain circumstances.
If pre-emptive subscription rights are granted, but not exercised, the board of directors may allocate the unexercised pre-emptive subscription rights at its discretion.
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Our Authorized Share Capital
Under our articles of association, our board of directors is authorized at any time, including to prevent takeovers and changes in control, until April 23, 2022 to increase our nominal share capital by a maximum aggregate amount of CHF 2,080,000 through the issuance of not more than 26,000,000 shares, which would have to be fully paid-in, each with a par value of CHF 0.08 per share.
Increases in partial amounts are permitted. The board of directors has the power to determine the type of contributions, the issue price and the date on which the dividend entitlement starts.
With respect to our authorized share capital, the board of directors is authorized by our articles of association to withdraw or to limit the pre-emptive subscription rights of shareholders, and to allocate them to third parties or to us, in the event that the newly issued shares are issued under the following circumstances:
• if the issue price of the new registered shares is determined by reference to the market price;
• for raising of capital (including private placements) in a fast and flexible manner, which would not be possible, or might only be possible with great difficulty or delays or at significantly less favorable conditions, without the exclusion of the statutory pre-emptive subscription rights of the existing shareholders;
• for the acquisition of an enterprise, parts of an enterprise or participations, for the acquisition of products, intellectual property or licenses by or for investment projects of the Company or any of its group companies, or for the financing or refinancing of any of such transactions through a placement of shares;
• for purposes of broadening the shareholder constituency of the Company in certain geographic, financial or investor markets, for purposes of the participation of strategic partners, or in connection with the listing of new shares on domestic or foreign stock exchanges;
• for purposes of granting an over-allotment option or an option to purchase additional shares in a placement or sale of shares to the respective initial purchaser(s) or underwriter(s);
• for the participation of members of the board of directors, members of the executive committee, employees, contractors, consultants or other persons performing services for the benefit of the Company or any of its group companies;
• following a shareholder or a group of shareholders acting in concert having accumulated shareholdings in excess of 20% of our share capital registered in the Commercial Register without having submitted to all other shareholders a takeover offer recommended by the board of directors;
• for the defense of an actual, threatened or potential takeover bid, that the board of directors, upon consultation with an independent financial adviser retained by it, has not recommended to the shareholders acceptance on the basis that the board of directors has not found the takeover bid to be financially fair to the shareholders or not to be in the Company’s interest; or
• for other valid grounds in the sense of Article 652b para. 2 of the CO.
This authorization is exclusively linked to the particular available authorized share capital set out in the respective article. If the period to increase our share capital out of authorized share capital lapses without having been used by the board of directors, the authorization to withdraw or to limit the pre-emptive subscription rights lapses simultaneously with such capital.
Our Conditional Share Capital
Conditional Share Capital for Warrants and Convertible Bonds
Our nominal share capital may be increased, including to prevent takeovers and changes in control, by a maximum aggregate amount of CHF 1,624,000 through the issuance of not more than 20,300,000 common shares, which would have to be fully paid-in, each with a par value of CHF 0.08 per share, by the exercise of option and conversion rights granted in connection with warrants, convertible bonds or similar instruments of the Company or one of our subsidiaries. Shareholders will not have pre-emptive subscription rights in such circumstances, but will have advance subscription rights to subscribe for such warrants, convertible bonds or similar instruments. The holders of warrants, convertible bonds or similar instruments are entitled to the new shares upon the occurrence of the applicable conversion feature.
When issuing convertible bonds, warrants or similar instruments, the board of directors is authorized to withdraw or to limit the advance subscription right of shareholders:
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• for the purpose of financing or refinancing, or the payment for, the acquisition of enterprises, parts of enterprises, participations, intellectual property rights, licenses or investments;
• if the issuance occurs in domestic or international capital markets, including private placements;
• following a shareholder or a group of shareholders acting in concert having accumulated shareholdings in excess of 20% of the share capital registered in the Commercial Register without having submitted to all other shareholders a takeover offer recommended by the board of directors; or
• for the defense of an actual, threatened or potential takeover bid that the board of directors, upon consultation with an independent financial adviser retained by it, has not recommended to the shareholders to accept on the basis that the board of directors has not found the takeover bid to be financially fair to the shareholders or not to be in the Company’s interest.
To the extent that the advance subscription rights are withdrawn or limited, (i) the convertible bonds, warrants or similar instruments are to be issued at market conditions; (ii) the term to exercise the convertible bonds, warrants or similar instruments may not exceed ten years from the date of issue of the respective instrument and (iii) the conversion, exchange or exercise price of the convertible bonds, warrants or similar instruments has to be set with reference to or be subject to change based upon the valuation of the Company’s equity or market conditions.
Conditional Share Capital for Equity Incentive Plans
Our nominal share capital may, to the exclusion of the pre-emptive subscription rights and advance subscription rights of shareholders, be increased by a maximum aggregate amount of CHF 936,000 through the (direct or indirect) issuance of not more than 11,700,000 common shares, which would have to be fully paid-in, each with a par value of CHF 0.08 per share, by the exercise of options, other rights to receive shares or conversion rights that have been granted to employees, members of the board of directors, contractors or consultants of the Company or of one of our subsidiaries or other persons providing services to the Company or to a subsidiary through one or more equity incentive plans created by the board of directors.
Uncertificated Securities
Our shares are in the form of uncertificated securities (droits-valeurs, within the meaning of Article 973c of the CO). In accordance with Article 973c of the CO, we will maintain a non-public register of uncertificated securities (registre des droits-valeurs). We may at any time convert uncertificated securities into share certificates (including global certificates), one kind of certificate into another, or share certificates (including global certificates) into uncertificated securities. Following entry in the share register, a shareholder may at any time request from us a written confirmation in respect of his or her shares. Shareholders are not entitled, however, to request the conversion and/or printing and delivery of share certificates. We may print and deliver certificates for shares at any time.
General Meeting of Shareholders
Ordinary/Extraordinary Meetings, Powers
The general meeting of shareholders is our supreme corporate body. Under Swiss law, an annual general meeting of shareholders must be held annually within six months after the end of a corporation’s financial year. In our case, this generally means on or before June 30. In addition, extraordinary general meetings of shareholders may be held.
The following powers are vested exclusively in the general meeting of shareholders:
• adopting and amending the articles of association, including the change of a company’s purpose or domicile;
• electing the members of the board of directors, the chairman of the board of directors, the members of the compensation committee, the auditors and the independent proxy;
• approving the business report, the annual statutory and consolidated financial statements, and deciding on the allocation of profits as shown on the balance sheet, in particular with regard to dividends;
• approving the aggregate amount of compensation of members of the board of directors and the executive committee;
• discharging the members of the board of directors and the executive committee from liability with respect to their conduct of business;
• dissolving a company with or without liquidation; and
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• deciding matters reserved to the general meeting of shareholders by law or the articles of association or submitted to it by the board of directors.
An extraordinary general meeting of shareholders may be called by a resolution of the board of directors or the general meeting of shareholders or, under certain circumstances, by a company’s auditor, liquidator or the representatives of bondholders, if any. In addition, the board of directors is required to convene an extraordinary general meeting of shareholders if shareholders representing at least 10% of our share capital request such general meeting of shareholders in writing. Such request must set forth the items to be discussed and the proposals to be acted upon. The board of directors must convene an extraordinary general meeting of shareholders and propose financial restructuring measures if, based on our stand-alone annual statutory balance sheet, half of our share capital and statutory reserves are not covered by our assets.
Voting and Quorum Requirements
Shareholder resolutions and elections (including elections of members of the board of directors) require the affirmative vote of the absolute majority of shares represented at the general meeting of shareholders, unless otherwise stipulated by law or our articles of association.
Under Swiss law and our articles of association, a resolution of the general meeting of the shareholders passed by two-thirds of the shares represented at the meeting, and the absolute majority of the par value of the shares represented is required for:
• amending the Company’s corporate purpose;
• creating shares with preference rights;
• cancelling or amending the transfer restrictions of shares;
• creating authorized or conditional share capital;
• increasing share capital out of equity, against contributions in-kind or for the purpose of acquiring specific assets and granting specific benefits;
• limiting or withdrawing shareholder’s pre-emptive subscription rights;
• changing a company’s domicile;
• amending or repealing the voting and recording restrictions, the provision setting a maximum board size or the indemnification provision for the board of directors and the executive committee set forth in our articles of association;
• converting registered shares into bearer shares;
• removing the chairman or any member of the board of directors before the end of his or her term of office; and
• dissolving or liquidating the Company.
The same voting requirements apply to resolutions regarding transactions among corporations based on Switzerland’s Federal Act on Mergers, Demergers, Transformations and the Transfer of Assets of 2003, as amended (the “Swiss Merger Act”). See “—Articles of Association—Compulsory Acquisitions; Appraisal Rights.”
In accordance with Swiss law and generally accepted business practices, our articles of association do not provide quorum requirements generally applicable to general meetings of shareholders. To this extent, our practice varies from NYSE listing standards, which require an issuer to provide in its bylaws for a generally applicable quorum, and that such quorum may not be less than one-third of the outstanding voting shares.
Notice
General meetings of shareholders must be convened by the board of directors at least 20 days before the date of the meeting. The general meeting of shareholders is convened by way of a notice appearing in our official publication medium, currently the Swiss Official Gazette of Commerce. Registered shareholders may also be informed by ordinary mail or e-mail. The notice of a general meeting of shareholders must state the items on the agenda, the motions to the shareholders and, in case of elections, the names of the nominated candidates. A resolution on a matter which is not on the agenda may not be passed at a general meeting of shareholders, except for motions to convene an extraordinary general meeting of shareholders or to initiate a special investigation, on which the general meeting of shareholders may vote at any time. No previous notification is required for motions concerning items included in the agenda or for debates that do not result in a vote.
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All of the owners or representatives of our shares may, if no objection is raised, hold a general meeting of shareholders without complying with the formal requirements for convening general meetings of shareholders (a universal meeting). This universal meeting of shareholders may discuss and pass binding resolutions on all matters within the purview of the general meeting of shareholders, provided that the owners or representatives of all the shares are present at the meeting.
Agenda Requests
Pursuant to Swiss law and our articles of association, one or more shareholders, whose combined shareholdings represent the lower of (i) one tenth of our share capital and (ii) an aggregate par value of at least CHF 1,000,000 may request that an item be included in the agenda for a general meeting of shareholders. To be timely, the shareholder’s request must be received by us generally at least 45 calendar days in advance of the meeting. The request must be made in writing and contain, for each of the agenda items, the following information:
• a brief description of the business desired to be brought before the general meeting of shareholders and the reasons for conducting such business at the general meeting of shareholders;
• the motions regarding the agenda item;
• the name and address, as they appear in the share register, of the shareholder proposing such business;
• the number of shares which are beneficially owned by such shareholder (including documentary support of such beneficial ownership);
• the dates upon which the shareholder acquired such shares;
• any material interest of the proposing shareholder in the proposed business;
• a statement in support of the matter; and
• all other information required under the applicable laws and stock exchange rules.
In addition, if the shareholder intends to solicit proxies from the shareholders of a company, such shareholder shall notify the company of this intent in accordance with SEC Rule 14a-4 and/or Rule 14a-8.
Our business report, the compensation report and the auditor’s report must be made available for inspection by the shareholders at our registered office no later than 20 days prior to the general meeting of shareholders. Shareholders of record may be notified of this in writing.
Voting Rights
Each of our common shares entitles a holder to one vote. The common shares are not divisible. The right to vote and the other rights of share ownership may only be exercised by shareholders (including any nominees) or usufructuaries who are entered in the share register at a cut-off date determined by the board of directors. Those entitled to vote in the general meeting of shareholders may be represented by the independent proxy holder (annually elected by the general meeting of shareholders), by its legal representative or by another registered shareholder with written authorization to act as proxy. The chairman has the power to decide whether to recognize a power of attorney.
Our articles of association contain provisions that prevent investors from acquiring voting rights exceeding 15% of our issued share capital. Specifically, if an individual or legal entity acquires common shares and, as a result, directly or indirectly, has voting rights with respect to more than 15% of the registered share capital recorded in the Commercial Register, the registered shares exceeding the limit of 15% shall be entered in the share register as shares without voting rights (limitation à l’inscription). This restriction applies equally to parties acting in concert and to shares held or acquired via a nominee, including via Cede & Co., New York (or any successor), as the nominee of The Depository Trust Company (“DTC”), New York, acting in its capacity as clearing nominee. Specifically, if shares are being held by a nominee for third-party beneficiaries, which control (alone or together with third parties) voting rights with respect to more than 15% of the share capital recorded in the Commercial Register, our articles of association provide that the board of directors may cancel the registration of the shares with voting rights held by such nominee in excess of the limit of 15%. Furthermore, our articles of association contain provisions that allow the board of directors to make the registration with voting rights of shares held by a nominee subject to conditions, limitations and reporting requirements or to impose or adjust such conditions, limitations and requirements once registered. However, any shareholders who held more than 15% prior to our initial public offering remain registered with voting rights for such shares. Furthermore, the board of directors may in special cases approve exceptions to these restrictions.

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Dividends and Other Distributions
Our board of directors may propose to shareholders that a dividend or other distribution be paid but cannot itself authorize the distribution. Dividend payments require a resolution passed by an absolute majority of the shares represented at a general meeting of shareholders. In addition, our auditors must confirm that the dividend proposal of our board of directors conforms to Swiss statutory law and our articles of association.
Under Swiss law, we may pay dividends only if we have sufficient distributable profits from the previous business year (bénéfice de l’exercice) or brought forward from the previous business years (report des bénéfices), or if we have distributable reserves (réserves à libre disposition), each as evidenced by the Company’s audited stand-alone statutory balance sheet prepared pursuant to Swiss law, and after allocations to reserves required by Swiss law and by the articles of association have been deducted. We are not permitted to pay interim dividends out of profit of the current business year.
Distributable reserves are generally booked either as “free reserves” (réserves libres) or as “reserve from capital contributions” (apports de capital). Under the CO, if our general reserves (réserve générale) amount to less than 20% of our share capital recorded in the Commercial Register (i.e., 20% of the aggregate par value of our issued capital), then at least 5% of our annual profit must be retained as general reserves. In addition, if our general reserves amount to less than 50% of our share capital recorded in the Commercial Register, 10% of the amounts distributed beyond payment of a dividend of 5% must be retained as general reserves. The CO permits us to accrue additional general reserves. Further, a purchase of our own shares (whether by us or a subsidiary) reduces the distributable reserves in an amount corresponding to the purchase price of such own shares. Finally, the CO under certain circumstances requires the creation of revaluation reserves which are not distributable.
Distributions out of issued share capital (i.e., the aggregate par value of our issued shares) are not allowed and may be made only by way of a share capital reduction. Such a capital reduction requires a resolution passed by an absolute majority of the shares represented at a general meeting of shareholders. The resolution of the shareholders must be recorded in a public deed and a special audit report must confirm that claims of our creditors remain fully covered despite the reduction in our share capital recorded in the Commercial Register. Our share capital may be reduced below CHF 100,000 only if and to the extent that at the same time the statutory minimum share capital of CHF 100,000 is reestablished by sufficient new fully paid-up capital. Upon approval by the general meeting of shareholders of the capital reduction, the board of directors must give public notice of the capital reduction resolution in the Swiss Official Gazette of Commerce three times and notify creditors that they may request, within two months of the third publication, satisfaction of or security for their claims. The reduction of our share capital may be implemented only after expiration of this time limit.
Our board of directors determines the date on which the dividend entitlement starts. Dividends are usually due and payable shortly after the shareholders have passed the resolution approving the payment, but shareholders may also resolve at the annual general meeting of shareholders to pay dividends in quarterly or other installments.
For a discussion of the taxation of dividends, see “Item 10. Additional Information—E. Taxation—Swiss Tax Considerations—Swiss Federal, Cantonal and Communal Individual Income Tax and Corporate Income Tax.”
Transfer of Shares
Shares in uncertificated form (droits-valeurs) may only be transferred by way of assignment. Shares or the beneficial interest in shares, as applicable, credited in a securities account may only be transferred when a credit of the relevant intermediated securities to the acquirer’s securities account is made in accordance with applicable rules. Our articles of association provide that in the case of securities held with an intermediary such as a registrar, transfer agent, trust corporation, bank or similar entity, any transfer, grant of a security interest or usufructuary right in such intermediated securities and the appurtenant rights associated therewith requires the cooperation of the intermediary in order for such transfer, grant of a security interest or usufructuary right to be valid against us.
Voting rights may be exercised only after a shareholder has been entered in the share register (registre des actions) with his or her name and address (in the case of legal entities, the registered office) as a shareholder with voting rights. For a discussion of the restrictions applicable to the control and exercise of voting rights, see “Description of Share Capital and Articles of Association—Articles of Association—Voting Rights.”
Inspection of Books and Records
Under the CO, a shareholder has a right to inspect the share register with respect to his or her own shares and otherwise to the extent necessary to exercise his or her shareholder rights. No other person has a right to inspect the share register. Our books and correspondence may be inspected with the express authorization of the general meeting of shareholders or by resolution of the board of directors and subject to the safeguarding of our business secrets and other legitimate interests.

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Special Investigation
If the shareholders’ inspection rights as outlined above prove to be insufficient in the judgment of the shareholder, any shareholder may propose to the general meeting of shareholders that specific facts be examined by a special examiner in a special investigation. If the general meeting of shareholders approves the proposal, we or any shareholder may, within 30 calendar days after the general meeting of shareholders, request a court at our registered office (currently Epalinges, Canton of Vaud, Switzerland), to appoint a special examiner. If the general meeting of shareholders rejects the request, one or more shareholders representing at least 10% of our share capital or holders of shares in an aggregate par value of at least CHF 2,000,000 may request that the court appoint a special examiner. The court will issue such an order if the petitioners can demonstrate that the board of directors, any member of the board of directors or our executive committee infringed the law or our articles of association and thereby caused damages to the Company or the shareholders. The costs of the investigation would generally be allocated to us and only in exceptional cases to the petitioners.
Compulsory Acquisitions; Appraisal Rights
Business combinations and other transactions that are governed by the Swiss Merger Act (i.e., mergers, demergers, transformations and certain asset transfers) are binding on all shareholders. A statutory merger or demerger requires approval of two-thirds of the shares represented at a general meeting of shareholders and the absolute majority of the par value of the shares represented.
If a transaction under the Swiss Merger Act receives all of the necessary consents, all shareholders are compelled to participate in such transaction.
Swiss corporations may be acquired by an acquirer through the direct acquisition of the shares of the Swiss corporation. The Swiss Merger Act provides for the possibility of a so-called “cash-out” or “squeeze-out” merger with the approval of holders of 90% of the issued shares. In these limited circumstances, minority shareholders of the corporation being acquired may be compensated in a form other than through shares of the acquiring corporation (for instance, through cash or securities of a parent corporation of the acquiring corporation or of another corporation). For business combinations effected in the form of a statutory merger or demerger and subject to Swiss law, the Swiss Merger Act provides that if equity rights have not been adequately preserved or compensation payments in the transaction are unreasonable, a shareholder may request the competent court to determine a reasonable amount of compensation.
In addition, under Swiss law, the sale of “all or substantially all of our assets” by us may require the approval of two-thirds of the number of shares represented at a general meeting of shareholders and the absolute majority of the par value of the shares represented. Whether a shareholder resolution is required depends on the particular transaction, including whether the following test is satisfied:
• a core part of our business is sold without which it is economically impracticable or unreasonable to continue to operate the remaining business;
• our assets, after the divestment, are not invested in accordance with our corporate purpose as set forth in the articles of association; and
• the proceeds of the divestment are not earmarked for reinvestment in accordance with our corporate purpose but, instead, are intended for distribution to our shareholders or for financial investments unrelated to our corporate purpose.
A shareholder of a Swiss corporation participating in certain major corporate transactions may, under certain circumstances, be entitled to appraisal rights. As a result, such shareholder may, in addition to the consideration (be it in shares or in cash) receive an additional amount to ensure that the shareholder receives the fair value of the shares held by the shareholder. Following a statutory merger or demerger, pursuant to the Swiss Merger Act, shareholders can file an appraisal action against the surviving company. If the consideration is deemed inadequate, the court will determine an adequate compensation payment.
Board of Directors
Our articles of association provide that the board of directors shall consist of at least three and not more than 11 members.
The members of the board of directors and the chairman are elected annually by the general meeting of shareholders for a period until the completion of the subsequent annual general meeting of shareholders and are eligible for re-election. Each member of the board of directors must be elected individually.
Powers
The board of directors has the following non-delegable and inalienable powers and duties:
• the ultimate direction of the business of the Company and issuing of the relevant directives;
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• laying down the organization of the Company;
• formulating accounting procedures, financial controls and financial planning;
• nominating and removing persons entrusted with the management and representation of the Company and regulating the power to sign for the Company;
• the ultimate supervision of those persons entrusted with management of the Company, with particular regard to adherence to law, our articles of association, and regulations and directives of the Company;
• issuing the business report and the compensation report, and preparing for the general meeting of shareholders and carrying out its resolutions; and
• informing the court in case of over-indebtedness.
The board of directors may, while retaining such non-delegable and inalienable powers and duties, delegate some of its powers, in particular direct management, to a single or to several of its members, committees or to third parties (such as executive officers) who need be neither members of the board of directors nor shareholders. Pursuant to Swiss law and our articles of association, details of the delegation and other procedural rules such as quorum requirements have been set in the organizational rules established by the board of directors.
Indemnification of Executive Officers and Directors
Subject to Swiss law, our articles of association provide for indemnification of the existing and former members of the board of directors and the executive committee and their heirs, executors and administrators, against liabilities arising in connection with the performance of their duties in such capacity, and permits us to advance the expenses of defending any act, suit or proceeding to our directors and executive officers to the extent not included in insurance coverage or advanced by third parties.
In addition, under general principles of Swiss employment law, an employer may be required to indemnify an employee against losses and expenses incurred by such employee in the proper execution of his or her duties under the employment agreement with the employer.
We have entered into indemnification agreements with each of the members of our board of directors and executive officers. See “Item 7. Major Shareholders and Related Party Transaction—B. Related Party Transactions—Indemnification Agreements.”
Conflict of Interest, Management Transactions
Swiss law does not have a general provision regarding conflicts of interest. However, the CO contains a provision that requires our directors and executive officers to safeguard the Company’s interests and imposes a duty of loyalty and duty of care on our directors and executive officers. This rule is generally understood to disqualify directors and executive officers from participation in decisions that directly affect them. Our directors and executive officers are personally liable to us for breaches of these obligations. In addition, Swiss law contains provisions under which directors and all persons engaged in the Company’s management are liable to the Company, each shareholder and the Company’s creditors for damages caused by an intentional or negligent violation of their duties. Furthermore, Swiss law contains a provision under which payments made to any of the Company’s shareholders or directors or any person related to any such shareholder or director, other than payments made at arm’s length, must be repaid to the Company if such shareholder or director acted in bad faith.
Our board of directors has adopted a Code of Business Conduct and Ethics and other policies that cover a broad range of matters, including the handling of conflicts of interest.
Principles of the Compensation of the Board of Directors and the Executive Committee
Pursuant to Swiss law, beginning at our annual general meeting of shareholders in 2021, our shareholders must annually approve the aggregate amount of compensation of the board of directors and the persons whom the board of directors has, fully or partially, entrusted with the management (which we refer to as our “executive committee”) of the Company. All of our executive officers named in “Management” are deemed to be members of our executive committee.
The board of directors must issue, on an annual basis, a written compensation report that must be reviewed by our auditors. The compensation report must disclose all compensation granted by the Company, directly or indirectly, to current members of the board of directors and the executive committee and, to the extent related to their former role within the Company or not on customary market terms, to former members of the board of directors and former executive officers.
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The disclosure concerning compensation, loans and other forms of indebtedness must include the aggregate amount for the board of directors and the executive committee, respectively, as well as the particular amount for each member of the board of directors and for the highest paid executive officer, specifying the name and function of each of these persons.
We are prohibited from granting certain forms of compensation to members of our board of directors and executive committee, such as:
• severance payments (compensation due until the termination of a contractual relationship does not qualify as severance payment);
• advance compensation;
• incentive fees for the acquisition or transfer of companies, or parts thereof, by the Company or by companies being, directly or indirectly, controlled by us;
• loans, other forms of indebtedness, pension benefits not based on occupational pension schemes and performance-based compensation not provided for in the articles of association; and
• equity-based compensation not provided for in the articles of association.
Compensation to members of the board of directors and the executive committee for activities in entities that are, directly or indirectly, controlled by the Company is prohibited if (i) the compensation would be prohibited if it were paid directly by the Company, (ii) the articles of association do not provide for it, or (iii) the compensation has not been approved by the general meeting of shareholders.
Beginning in 2021, the general meeting of shareholders will annually vote on the proposals of the board of directors with respect to:
• the maximum aggregate amount of compensation of the board of directors for the term of office until the next annual general meeting of shareholders; and
• the maximum aggregate amount of fixed compensation of the executive committee for the following financial year; and
• the maximum aggregate amount of variable compensation of the executive committee for the current financial year.
The board of directors may submit for approval at the general meeting of shareholders deviating or additional proposals relating to the same or different periods.
If, at the general meeting of shareholders, the shareholders do not approve a compensation proposal of the board of directors, the board of directors must prepare a new proposal, taking into account all relevant factors, and submit the new proposal for approval by the same general meeting of shareholders, at a subsequent extraordinary general meeting of shareholders or the next annual general meeting of shareholders.
In addition to fixed compensation, members of the board of directors and the executive committee may be paid variable compensation, depending on the achievement of certain performance criteria. The performance criteria may include individual targets, targets of the Company or parts thereof and targets in relation to the market, other companies or comparable benchmarks, taking into account the position and level of responsibility of the recipient of the variable compensation. The board of directors or, where delegated to it, the compensation committee shall determine the relative weight of the performance criteria and the respective target values.
Compensation may be paid or granted in the form of cash, shares, financial instruments, in kind, or in the form of other types of benefits. The board of directors or, where delegated to it, the compensation committee shall determine grant, vesting, exercise and forfeiture conditions.
Borrowing Powers
Neither Swiss law nor our articles of association restrict our power to borrow and raise funds. The decision to borrow funds is made by or under the direction of our board of directors, and no approval by the shareholders is required in relation to any such borrowing.
Repurchases of Shares and Purchases of Own Shares
The CO limits our ability to repurchase and hold our own shares. We and our subsidiaries may repurchase shares only to the extent that (i) we have freely distributable reserves in the amount of the purchase price; and (ii) the aggregate par value of all shares held by us does not exceed 10% of our share capital. Pursuant to Swiss law, where shares are acquired in connection with a transfer restriction set out in the articles of association, the foregoing upper limit is 20%. If we own shares that exceed the threshold of 10% of our share capital, the excess must be sold or cancelled by means of a capital reduction within two years.
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Shares held by us or our subsidiaries are not entitled to vote at the general meeting of shareholders but are entitled to the economic benefits applicable to the shares generally, including dividends and pre-emptive subscription rights in the case of share capital increases.
In addition, selective share repurchases are only permitted under certain circumstances. Within these limitations, as is customary for Swiss corporations, we may, subject to applicable law, purchase and sell our own shares from time to time in order to meet imbalances of supply and demand, to provide liquidity and to even out variances in the market price of shares.
Notification and Disclosure of Substantial Share Interests
The disclosure obligations generally applicable to shareholders of Swiss corporations under the Federal Act on Financial Market Infrastructures and Market Conduct in Securities and Derivatives Trading, or the Financial Market Infrastructure Act (the “FMIA”), do not apply to us since our shares are not listed on a Swiss exchange.
Pursuant to Article 663c of the CO, Swiss corporations whose shares are listed on a stock exchange must disclose their significant shareholders and their shareholdings in the notes to their statutory annual financial statements, to the extent that this information is known or ought to be known. Significant shareholders are defined as shareholders and groups of shareholders linked through voting rights who hold more than 5% of all voting rights.
Mandatory Bid Rules
The obligation of any person or group of persons that acquires more than one third of a company’s voting rights to submit a cash offer for all the outstanding listed equity securities of the relevant company at a minimum price pursuant to the FMIA does not apply to us since our shares are not listed on a Swiss exchange.
C.Material Contracts
Except as otherwise disclosed in this Annual Report on Form 20-F (including the Exhibits), we are not currently, and have not been in the last two years, party to any material contract, other than contracts entered into in the ordinary course of business.

D.Exchange Controls
There are no Swiss governmental laws, decrees or regulations that restrict, in a manner material to us, the export or import of capital, including any foreign exchange controls, or that generally affect the remittance of dividends or other payments to non-residents or non-citizens of Switzerland who hold our common shares.
E.Taxation
The following discussion is based on the tax laws, regulations and regulatory practices of Switzerland and the United States as in effect on the date hereof, which are subject to change (or subject to changes in interpretation), possibly with retroactive effect.
Current and prospective shareholders are advised to consult their own tax advisers in light of their particular circumstances as to the Swiss or U.S. tax laws, regulations and regulatory practices that could be relevant for them in connection with owning and selling or otherwise disposing of our common shares and receiving dividends and similar cash or in-kind distributions on our common shares (including dividends on liquidation proceeds and share dividends) or distributions on our common shares based upon a capital reduction or reserves paid out of capital contributions and the consequences thereof under the tax laws, regulations and regulatory practices of Switzerland or the United States.
Swiss Tax Considerations
Withholding Tax
Under present Swiss tax law, dividends due and similar cash or in-kind distributions made by the Company to a shareholder of common shares (including liquidation proceeds and bonus shares) are subject to Swiss federal withholding tax (“Withholding Tax”), currently at a rate of 35% (applicable to the gross amount of taxable distribution). However, the repayment of the par value of the common shares and any repayment of qualifying additional paid-in capital (capital contribution reserves), within the limitations accepted by the legislation in force when such Dividend becomes due and the respective administrative practice, are not subject to the Withholding Tax. The Company is obliged to deduct any applicable Withholding Tax from the gross amount of any taxable distribution and to pay the tax to the Swiss Federal Tax Administration within 30 days of the due date of such distribution.
Swiss resident individuals who hold their common shares as private assets (“Resident Private Shareholders”) are in principle eligible for a full refund or credit against income tax of the Withholding Tax if they duly report the underlying income in their income tax return. In addition, (i) corporate and individual shareholders who are resident in Switzerland for tax purposes, (ii) corporate and individual shareholders who are not resident in Switzerland, and who, in each case, hold their common shares as part of a trade or business carried on in Switzerland through a
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permanent establishment with fixed place of business situated in Switzerland for tax purposes and (iii) Swiss resident private individuals who, for income tax purposes, are classified as “professional securities dealers” for reasons of, inter alia, frequent dealing, or leveraged investments, in shares and other securities (collectively, “Domestic Commercial Shareholders”) are in principle eligible for a full refund or credit against income tax of the Withholding Tax if they duly report the underlying income in their statements of operations or income tax return, as the case may be.
Shareholders who are not resident in Switzerland for tax purposes, and who, in each case and during the respective taxation year, do not hold their common shares as part of a trade or business carried on through a permanent establishment with fixed place of business situated in Switzerland for tax purposes, and who are not subject to corporate or individual income taxation in Switzerland for any other reason (collectively, “Non-Resident Shareholders”) may be entitled to a total or partial refund of the Withholding Tax if the country in which such recipient resides for tax purposes maintains a bilateral treaty for the avoidance of double taxation with Switzerland and further conditions of such treaty are met. Non-Resident Shareholders should be aware that the procedures for claiming treaty benefits (and the time required for obtaining a refund) may differ from country to country. Non-Resident Shareholders should consult their own legal, financial or tax advisors regarding receipt, ownership, purchases, sale or other dispositions of common shares and the procedures for claiming a refund of the Withholding Tax.
Any transactions in common shares in the secondary markets are subject to Swiss securities turnover tax at an aggregate rate of 0.15% of the consideration paid for such common shares, however, only if a bank or other securities dealer in Switzerland, as defined in the Swiss Federal Stamp Tax Act (loi fédérale sur les droits de timbre), is a party or an intermediary to the transaction and no exemption applies.
Swiss Federal, Cantonal and Communal Individual Income Tax and Corporate Income Tax
Non-Resident Shareholders
Non-Resident Shareholders are not subject to any Swiss federal, cantonal or communal income tax on dividend payments and similar distributions because of the mere holding of common shares. The same applies for capital gains on the sale of common shares subject to certain exceptions. For Withholding Tax consequences, see “—Swiss Tax Considerations—Withholding Tax.”
Resident Private Shareholders and Domestic Commercial Shareholders
Resident Private Shareholders who receive dividends and similar cash or in-kind distributions (including liquidation proceeds as well as bonus shares or taxable repurchases of common shares as described above), which are not repayments of the par value of common shares or, within the limitations accepted by the legislation in force and the respective administrative practice, qualifying additional paid-in capital, are required to report such receipts in their individual income tax returns and are subject to Swiss federal, cantonal and communal income tax on any net taxable income for the relevant tax period. A gain or a loss by Resident Private Shareholders realized upon the sale or other disposition of common shares to a third party will generally be a tax-free private capital gain or a not tax-deductible capital loss, as the case may be. Under exceptional circumstances the capital gain may be re-characterized into a taxable dividend, in particular upon taxable repurchase of common shares as described above. When a capital gain is re-characterized as a dividend, the relevant income for tax purposes corresponds to the difference between the repurchase price and the sum of the par value of common shares and, within the limitations accepted by the legislation in force and the respective administrative practice, qualifying additional paid-in capital.
Domestic Commercial Shareholders who receive dividends and similar cash or in-kind distributions (including liquidation proceeds as well as bonus shares) are required to recognize such payments in their statements of operations for the relevant tax period and are subject to Swiss federal, cantonal and communal individual or corporate income tax, as the case may be, on any net taxable earnings accumulated (including the dividends) for such period. On cantonal and communal level, similar provisions were introduced, but the regulations may vary depending on the canton of residency. Domestic Commercial Shareholders who are corporate taxpayers may qualify for participation relief on dividend distributions (réduction pour participations), if common shares held have an aggregate market value of at least CHF 1 million. For cantonal and communal income tax purposes, the regulations on participation relief are broadly similar, depending on the canton of residency.
Domestic Commercial Shareholders are required to recognize a gain or loss realized upon the disposal of common shares in their statement of operations for the respective taxation period and are subject to Swiss federal, cantonal and communal individual or corporate income tax, as the case may be, on any net taxable earnings (including the gain or loss realized on the sale or other disposition of common shares) for such taxation period.
Swiss Wealth Tax and Capital Tax
Non-Resident Shareholders
Non-Resident Shareholders holding common shares are not subject to cantonal and communal wealth or annual capital tax because of the mere holding of common shares.

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Resident Private Shareholders
Resident Private Shareholders are required to report their common shares as part of their private wealth and are subject to cantonal and communal wealth tax.
Domestic Commercial Shareholders
Domestic Commercial Shareholders are required to report their common shares as part of their business wealth or taxable capital, as defined, and are subject to cantonal and communal wealth or annual capital tax.
Automatic Exchange of Information in Tax Matters
On November 19, 2014, Switzerland signed the Multilateral Competent Authority Agreement. The Multilateral Competent Authority Agreement is based on Article 6 of the OECD/Council of Europe administrative assistance convention and is intended to ensure the uniform implementation of Automatic Exchange of Information (the “AEOI”). The Federal Act on the International Automatic Exchange of Information in Tax Matters (the “AEOI Act”) entered into force on January 1, 2017. The AEOI Act is the legal basis for the implementation of the AEOI standard in Switzerland.
The AEOI is being introduced in Switzerland through bilateral agreements or multilateral agreements. The agreements have been, and will be, concluded on the basis of guaranteed reciprocity, compliance with the principle of speciality (i.e., the information exchanged may only be used to assess and levy taxes (and for criminal tax proceedings)) and adequate data protection.
Based on such multilateral or bilateral agreements and the implementation of Swiss law, Switzerland collects and exchanges data in respect of financial assets, including common shares, held in, and income derived thereon and credited to, accounts or deposits with a paying agent in Switzerland for the benefit of individuals resident in a European Union member state or in a treaty state.
Swiss Facilitation of the Implementation of the U.S. Foreign Account Tax Compliance Act
Switzerland has concluded an intergovernmental agreement with the United States to facilitate the implementation of U.S. Foreign Account Tax Compliance Act. The agreement ensures that the accounts held by U.S. persons with Swiss financial institutions are disclosed to the U.S. tax authorities either with the consent of the account holder or by means of group requests within the scope of administrative assistance. Information will not be transferred automatically in the absence of consent, and instead will be exchanged only within the scope of administrative assistance on the basis of the double taxation agreement between the United States and Switzerland. On October 8, 2014, the Swiss Federal Council approved a mandate for negotiations with the United States on changing the current direct-notification-based regime to a regime where the relevant information is sent to the Swiss Federal Tax Administration, which in turn provides the information to the U.S. tax authorities.
Material U.S. Federal Income Tax Consequences for U.S. Holders
The following is a description of the material U.S. federal income tax consequences to the U.S. Holders, as defined below, of owning and disposing our common shares. It does not describe all tax considerations that may be relevant to a particular person’s decision to acquire common shares.
This discussion applies only to a U.S. Holder that holds common shares as capital assets for U.S. federal income tax purposes (generally, property held for investment). In addition, it does not describe any tax consequences other than U.S. federal income tax consequences, including state and local tax consequences and estate tax consequences, and does not describe all of the U.S. federal income tax consequences that may be relevant in light of the U.S. Holder’s particular circumstances, including alternative minimum tax consequences, the potential application of the provisions of the Internal Revenue Code of 1986, as amended (the “Code”) known as the Medicare contribution tax and tax consequences applicable to U.S. Holders subject to special rules, such as:
•certain banks, insurance companies and other financial institutions;
•brokers, dealers or traders in securities who use a mark-to-market method of tax accounting;
•persons holding common shares as part of a straddle, wash sale, conversion transaction or other integrated transaction or persons entering into a constructive sale with respect to the common shares;
•persons whose functional currency for U.S. federal income tax purposes is not the U.S. dollar;
•entities or arrangements classified as partnerships or S corporations for U.S. federal income tax purposes;
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•tax-exempt entities, including an “individual retirement account” or “Roth IRAs” and governmental entities;
•real estate investment trusts or regulated investment companies;
•former U.S. citizens or long-term residents of the United States;
•persons subject to Section 451(b) of the Code;
•persons that own or are deemed to own 10% or more of the voting power or value of our shares; or
•persons holding common shares in connection with a trade or business conducted outside of the United States or in connection with a permanent establishment or other fixed place of business outside of the United States.
If an entity or arrangement that is classified as a partnership for U.S. federal income tax purposes holds common shares, the U.S. federal income tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership. Partnerships holding common shares and partners in such partnerships should consult their tax advisers as to the particular U.S. federal income tax consequences of owning and disposing of the common shares.
This discussion is based on the Code, administrative pronouncements, judicial decisions, final, temporary and proposed Treasury regulations, and the income tax treaty between Switzerland and the United States (the “Treaty”), all as of the date hereof, any of which is subject to change or differing interpretations, possibly with retroactive effect.
A “U.S. Holder” is a beneficial owner of our common shares who, for U.S. federal income tax purposes, is eligible for the benefits of the Treaty and who is:
•a citizen or individual resident of the United States;
•a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any state therein or the District of Columbia; or
•an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.
U.S. Holders should consult their tax advisers concerning the U.S. federal, state, local and non-U.S. tax consequences of owning and disposing of common shares in their particular circumstances.
The discussion under “Taxation of Distributions” and “Sale or Other Disposition of Common Shares” below describes certain consequences to U.S. Holders in the event that we are not a passive foreign investment company for U.S. federal income tax purposes (a “PFIC”) during any tax year in which a U.S. Holder holds our common shares. We believe we were a PFIC for our 2019 taxable year. However, this discussion assumes that we were not a PFIC for our 2020 taxable year, and will not become a PFIC in the foreseeable future. See “Passive Foreign Investment Company Rules” below.
Taxation of Distributions
Distributions paid on common shares, other than certain pro rata distributions of common shares, will generally be treated as dividends to the extent paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Because we do not maintain calculations of our earnings and profits under U.S. federal income tax principles, we expect that distributions generally will be reported to U.S. Holders as dividends. Dividends paid to certain non-corporate U.S. Holders may be eligible for taxation as “qualified dividend income” and therefore, subject to applicable limitations, may be taxable at rates not in excess of the long-term capital gain rate applicable to such U.S. Holder. Dividends will constitute qualified dividend income (a) for so long as the common shares with respect to which such dividends are paid are listed on the NYSE or we are eligible for benefits under the treaty and (b) we are not a PFIC in the year in which the dividend is paid or the prior taxable year. We believe that dividends paid to non-corporate U.S. Holders in 2020 are not eligible for taxation as qualified dividend income because we believe we were a PFIC for the 2019 taxable year. U.S. Holders should consult their tax advisers regarding the availability of the reduced tax rate on dividends in their particular circumstances.
The amount of a dividend will include any amounts withheld by us in respect of Swiss income taxes. The amount of the dividend will be treated as foreign-source dividend income to U.S. Holders and will not be eligible for the dividends-received deduction generally available to U.S. corporations under the Code. Dividends will be included in a U.S. Holder’s income on the date of the U.S. Holder’s receipt of the dividend. The amount of any dividend income paid in Swiss franc will be the U.S. dollar amount calculated by reference to the exchange rate in effect on the date of actual or constructive receipt, regardless of whether the payment is in fact converted into U.S. dollars at that time. If the dividend is converted into U.S. dollars on the date of receipt, a U.S. Holder should not be required to recognize foreign currency gain or loss in
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respect of the dividend income. A U.S. Holder may have foreign currency gain or loss if the dividend is converted into U.S. dollars after the date of receipt.
Subject to applicable limitations, some of which vary depending upon the U.S. Holder’s particular circumstances, Swiss income taxes withheld from dividends on common shares (at a rate not exceeding the rate provided by the Treaty, in the case of a U.S. Holder eligible for a reduced rate under the Treaty) will be creditable against the U.S. Holder’s U.S. federal income tax liability. The rules governing foreign tax credits are complex and U.S. Holders should consult their tax advisers regarding the creditability of foreign taxes in their particular circumstances. In lieu of claiming a foreign tax credit, U.S. Holders may, at their election, deduct foreign taxes, including any Swiss income tax, in computing their taxable income, subject to generally applicable limitations under U.S. law. An election to deduct foreign taxes instead of claiming foreign tax credits applies to all foreign taxes paid or accrued in the taxable year.
Sale or Other Disposition of Common Shares
Gain or loss realized by a U.S. Holder on the sale or other disposition of common shares will be capital gain or loss, and will be long-term capital gain or loss if the U.S. Holder’s holding period for such common shares was more than one year as of the date of the sale or other disposition. The amount of the gain or loss will equal the difference between the U.S. Holder’s tax basis in the common shares disposed of and the amount realized on the disposition, in each case as determined in U.S. dollars. Long-term capital gain recognized by a non-corporate U.S. Holder is subject to U.S. federal income tax at rates lower than the rates applicable to ordinary income and short-term capital gains, while short-term capital gains are subject to U.S. federal income tax at the rates applicable to ordinary income. This gain or loss will generally be U.S.-source gain or loss for foreign tax credit purposes. The deductibility of capital losses is subject to various limitations.
Passive Foreign Investment Company Rules
Under the Code, we will be a PFIC for any taxable year in which, after the application of certain look-through rules with respect to subsidiaries, either (i) 75% or more of our gross income consists of “passive income” or (ii) 50% or more of the average quarterly value of our assets consist of assets that produce, or are held for the production of, “passive income.” For purposes of the above calculations, we will be treated as if we hold our proportionate share of the assets of, and receive directly our proportionate share of the income of, any other corporation in which we directly or indirectly own at least 25%, by value, of the shares of such corporation. Passive income generally includes interest, dividends, certain non-active rents and royalties, and capital gains.
We believe that we were a PFIC for our 2019 taxable year. However, we believe we were not a PFIC for our 2020 taxable year, and we do not expect to become a PFIC for one or more subsequent taxable years. However, whether we will be a PFIC in any future years is uncertain because, among other things, (i) we currently own, and likely will continue to own, a substantial amount of passive assets, including cash, (ii) the timing of our recognition of active income for U.S. federal income tax purposes, which may differ from the timing of the recognition of such income for financial accounting purposes, may result in our recognizing minimal amounts of active income for U.S. federal income tax purposes in certain taxable years and (iii) the valuation of our assets that generate non-passive income for PFIC purposes, including our intangible assets, is uncertain and may be determined in substantial part by our market capitalization, which may vary substantially over time. Accordingly, there can be no assurance that we will not be a PFIC for any future taxable year.
If we are a PFIC for any year during which a U.S. Holder holds common shares, we will continue to be treated as a PFIC with respect to that U.S. Holder for all succeeding years during which the U.S. Holder holds common shares, even if we cease to meet the threshold requirements for PFIC status, unless the U.S. Holder elects to recognize gain, if any, as if it sold its common shares as of the last day of the last tax year in which we are a PFIC (such election, a “Purging Election”). In addition, the Company may, directly or indirectly, have held or hold equity interests in other PFICs (collectively, “Lower-tier PFICs”). Under attribution rules, if the Company is a PFIC, U.S. Holders will be deemed to own their proportionate shares of the stock of Lower-tier PFICs and will be subject to U.S. federal income tax according to the rules described in the following paragraphs on (i) certain distributions by a Lower-tier PFIC and (ii) a disposition of shares of a Lower-tier PFIC, in each case as if the U.S. Holder held such shares directly, even though holders have not received the proceeds of those distributions or dispositions directly. U.S. Holders should consult their tax advisers about the consequences to them if we own one or more Lower-tier PFICs.
If we are a PFIC for any taxable year during which a U.S. Holder holds common shares (assuming such U.S. Holder has not made certain elections, as described below), gain recognized by the U.S. Holder on sale or other disposition (including certain pledges) of common shares (including any gain recognized as a consequence of a Purging Election) will be allocated ratably over the U.S. Holder’s holding period for the common shares. The amounts allocated to the taxable year of the sale or other disposition and to any year before we became a PFIC will be taxed as ordinary income. The amount allocated to each other taxable year will be subject to tax at the highest rate in effect for individuals or corporations, as appropriate, for that taxable year, and an interest charge will be imposed on the resulting tax liability. Further, to the extent that any distribution received by a U.S. Holder on its common shares exceeds 125% of the average of the annual distributions on the common shares received during the preceding three years or the U.S. Holder’s holding period, whichever is shorter, that distribution will be subject to taxation in the same manner as gain, described immediately above. Certain elections may be available (including a mark-to-market election) that may provide alternative tax treatments. U.S. Holders should consult their tax advisors regarding whether any of these elections for alternative treatment would be available and, if so, what the consequences of the alternative treatments would be in their particular circumstances.
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If we are a PFIC (or, with respect to a particular U.S. Holder, are treated as a PFIC) for a taxable year in which we pay a dividend or for the prior taxable year, the preferential dividend rates discussed above with respect to dividends paid to certain non-corporate U.S. Holders will not apply.
If we were a PFIC for any taxable year during which a U.S. Holder holds common shares, the U.S. Holder would generally be required to file an annual report on IRS Form 8621 with their annual U.S. federal income tax returns, subject to certain exceptions.
Prospective U.S. holders should consult their tax advisers regarding the potential PFIC rules to an investment in common shares.
Information Reporting and Backup Withholding
Payments of dividends and sales proceeds that are made within the United States or through certain U.S.-related financial intermediaries generally are subject to information reporting, and may be subject to backup withholding, unless (i) the U.S. Holder is a corporation or other exempt recipient or (ii) in the case of backup withholding, the U.S. Holder provides a correct taxpayer identification number and certifies that it is not subject to backup withholding.
The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit against the U.S. Holder’s U.S. federal income tax liability and may entitle it to a refund, provided that the required information is timely furnished to the IRS.
F.Dividends and Paying Agents
Not applicable.
G.Statement by Experts
Not applicable.
H.Documents on Display
We are subject to the informational requirements of the Exchange Act. Accordingly, we are required to file reports and other information with the SEC, including annual reports on Form 20-F and reports on Form 6-K. The SEC maintains an Internet site at www.sec.gov that contains reports, proxy and information statements and other information we have filed electronically with the SEC. As a foreign private issuer, we are exempt under the Exchange Act from, among other things, the rules prescribing the furnishing and content of proxy statements, and our executive officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act.
Additionally, pursuant to Swiss law, any shareholder of record has the right to receive a free copy of this Annual Report and to inspect this Annual Report at any time at our registered office in Lausanne, Canton of Vaud, Switzerland.
We also make available on our website, free of charge, our Annual Report and the text of our reports on Form 6-K, including any amendments to these reports, as well as certain other SEC filings, as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. Our website address is www.adctherapeutics.com. The reference to our website is an inactive textual reference only, and information contained therein or connected thereto is not incorporated into this Annual Report.
I.Subsidiary Information
Not applicable.
ITEM 11.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company’s activities expose it to the following financial risks: market risk (share price, currency and interest rate risk), credit risk and liquidity risk. The Company’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company’s financial performance.
Market risk arises from our exposure to fluctuation in share price and currency exchange rates. We are exposed to market risks in the ordinary course of our business, which are principally limited to share price fluctuations, foreign currency exchange rate fluctuations and to a lesser degree, interest rate fluctuations.
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Foreign Exchange Risk
We operate internationally and are exposed to foreign exchange risk arising from various currency exposures, primarily with respect to British pounds, Euros and Swiss francs. Transaction exposure arises because the amount of local currency paid or received in transactions denominated in foreign currencies may vary due to changes in exchange rates. Foreign exchange risk arises from:
–forecast costs denominated in a currency other than the entity’s functional currency;
–recognized assets and liabilities denominated in a currency other than the entity's functional currency; and
–net investments in foreign operations.
Management believes that foreign exchange risk is minimal, as the Company pays invoices mainly in USD and holds cash principally in USD.
We have certain investments in foreign operations whose net assets are exposed to foreign currency translation risk. Currency exposure arising from these net assets of our foreign operations is managed primarily through purchasing goods and services denominated in the relevant foreign currencies.
At December 31, 2020, if the USD had weakened / strengthened by 10% against the CHF with all other variables held constant, the pre-tax loss for the year would have been KUSD 1,013 higher / lower, as a result of foreign exchange losses / gains on translation of CHF-denominated net monetary liabilities.
At December 31, 2020, if the USD had weakened / strengthened by 10% against the EUR with all other variables held constant, the pre-tax loss for the year would have been KUSD 214 higher / lower, mainly as a result of foreign exchange losses / gains on translation of EUR-denominated net monetary liabilities.
At December 31, 2020, if the USD had weakened / strengthened by 10% against the GBP with all other variables held constant, the pre-tax loss for the year would have been KUSD 323 higher / lower, mainly as a result of foreign exchange losses / gains on translation of GBP-denominated net monetary liabilities, and the gain on currency translation differences credited directly to equity and arising on the translation of the net assets of ADCT Therapeutics (UK) Limited would have been KUSD 439 higher / lower.
Interest Rate Risk
Interest rate risk arises from movements in interest rates which could have adverse effects on our net income or financial position. Changes in interest rates cause variations in interest income and expenses on interest-bearing assets and liabilities, and on the value of the net defined benefit pension obligation.
In addition, the embedded derivative conversion feature and the derivative associated with the first and second tranche of our convertible loans (see note 21, “Convertible loans” with the audited Consolidated Financial Statements), respectively, are re-measured to fair value at each reporting date. The Company utilizes a risk free rate and an implied bond yield in determining the fair value of its embedded derivative and derivative. A hypothetical 10% increase (decrease) in the risk free rate as of December 31, 2020 would have increased (decreased) the derivative values associated with the first and second tranche of our convertible loans by KUSD 5 (KUSD 5) and KUSD 5 (KUSD 5), respectively. A hypothetical 10% increase (decrease) in the implied bond yield as of December 31, 2020 would have increased (decreased) the derivative value associated with the first tranche of our convertible loans by KUSD 2,088 (KUSD 898) and (decreased) increased the derivative value associated with the second tranche of our convertible loans (KUSD 996) and KUSD 1,030.
Credit Risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. We are exposed to credit risk from our operating activities and from our financing activities including deposits with banks and other financial institutions (see note 17b, “Credit quality of financial assets” within the audited Consolidated Financial Statements). Our cash and cash equivalents accounts are maintained with well-established, highly rated financial institutions. Our wholly-owned subsidiaries are solvent, are managed on a cost-plus service provider basis, and are supported by us as the parent.
Liquidity Risk
Liquidity risk is the risk that we may not be able to generate sufficient cash resources to settle our obligations in full as they fall due or can do so only on terms that are materially disadvantageous. Prudent liquidity risk management implies maintaining sufficient cash to cover working capital requirements. Cash is monitored by our management.
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Funding and liquidity risks are reviewed regularly by our board of directors and management. Our board of directors reviews our ongoing liquidity risks quarterly as part of the financial review process and on an ad hoc basis. To date, we have funded our capital requirements through capital raises, including the issuance of our common shares and the issuance of convertible loans (see note 21, “Convertible loans” within the audited Consolidated Financial Statements) during the 2020 fiscal year, or partnering of its programs.
ITEM 12.    DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
A.Debt Securities
Not applicable.
B.Warrants and Rights
Not applicable.
C.Other Securities
Not applicable.
D.American Depositary Shares
Not applicable.
PART II
ITEM 13.    DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
A.Defaults
No matters to report.
B.Arrears and Delinquencies
No matters to report.
ITEM 14.    MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
Not applicable.
ITEM 15.    CONTROLS AND PROCEDURES
A.Disclosure Controls and Procedures
As required by Rule 13a-15 under the Exchange Act, management, including our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding our required disclosures.
The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based on such evaluations, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures were effective in recording, processing, summarizing and reporting on a timely basis, information required to be disclosed in the periodic filings that we file or submit under the Exchange Act, and that such information is accumulated and communicated to management, including our Chief Executive and Chief Financial Officers, as appropriate, to allow timely decisions regarding required disclosure.
Material Weaknesses Surrounding the Accounting for Share-Based Compensation
In June 2019, management identified an error related to the calculation of the expense charge for our historical share purchase plans, which, in accordance with IFRS 2, were required to be accounted for as if they were share option plans. There was a material understatement of
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share-based compensation expense and the related disclosures were incomplete. This resulted in a restatement of the financial statements for the year ended December 31, 2018.
During the first and second quarters of 2020, management identified errors related to the work performed by the independent valuation firm assisting us in calculating the fair value of the share-based compensation award grants per participant and our use thereof. Specifically, we identified deficiencies in (i) our procedures for giving instructions to the independent valuation firm, (ii) our review of the work product delivered by such firm and (iii) our use of the information delivered by such firm. This resulted in adjustments to both our consolidated financial statements for the year ended December 31, 2019 and unaudited condensed consolidated interim financial statements for the three- and six-month periods ended June 30, 2020. The Company concluded that if not remediated these control deficiencies could lead to material misstatements in our future annual or interim consolidated financial statements. As such, the Company concluded that these errors were evidence that the Company had material weaknesses in its internal controls over financial reporting in that the Company had not designed and maintained effective controls over the accounting for share-based compensation.
Remediation Actions Addressing Material Weaknesses Surrounding the Accounting for Share-Based Compensation
As of December 31, 2020, management believes that the material weaknesses related to accounting for share-based compensation expense has been remediated. To remediate these material weaknesses, the Company implemented and documented the following actions in relation to these controls:

•Hired experienced persons and resources with substantive backgrounds in accounting and reporting for a public company;
•Enhanced the level of review for the reconciliation of outstanding share-based equity awards as of period end including the activity (e.g., grants, forfeitures) as well as the number of shares available for future issuance;
•Enhanced the review and approval process for the underlying data provided to and utilized by the independent valuation firm assisting in determining the estimated fair value of share-based equity awards and compensation expense as well as management’s use of the output provided by the independent valuation firm including the assumptions developed, grant-date fair value of equity awards, and the report issued in our accounting of share-based compensation expense;
•Enhanced the level of review to ensure compliance with disclosure obligations with respect to its share-based incentive plan; and
•Implemented a third-party equity award administration platform that includes financial accounting and reporting capabilities, including independent calculation of share-based compensation expense.
Management believes that it has effectively designed and tested the operating effectiveness related to the review and approval process for the underlying data provided to us and utilized in determining the estimated fair value of our share-based equity awards and compensation expense, including our review of our share-based equity award disclosures. Accordingly, management has concluded that the material weaknesses have been remediated because each component with regard to which management identified a material weakness has been operating effectively for a sufficient period of time.
B.Management’s Annual Report on Internal Control Over Financial Reporting
This Annual Report does not include a report of management’s assessment regarding internal control over financial reporting due to a transition period established by rules of the SEC for newly public companies.
C.Attestation Report of the Registered Public Accounting Firm
This Annual Report does not include an attestation report of the company’s registered public accounting firm due to a transition period established by rules of the SEC for newly public companies and because we are an emerging growth company under the JOBS Act.
D.Changes in Internal Control Over Financial Reporting
Other than the remediation activities described above, there were no changes to internal control over financial reporting during the year ended December 31, 2020 that would have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 16.    RESERVED
ITEM 16A.    Audit Committee Financial Experts
Our board of directors has determined that each of Jacques Theurillat, Stephen Evans-Freke and Thomas M. Rinderknecht is considered an “audit committee financial expert” as defined by the SEC. Our board of directors has determined that each of Jacques Theurillat and Thomas M. Rinderknecht satisfies the “independence” requirements set forth in Rule 10A-3 under the Exchange Act. We intend to have a fully independent audit committee within one year from our initial public offering, as permitted by Rule 10A-3 under the Exchange Act.
ITEM 16B.    Code of Ethics
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We have adopted a Code of Business Conduct and Ethics (the “Code of Conduct”) that is applicable to all of our employees, executive officers and directors. The Code of Conduct is available on our website www.adctherapeutics.com. Our board of directors is responsible for overseeing the Code of Conduct and is required to approve any waivers of the Code of Conduct. We expect that any amendments to the Code of Conduct, or any waivers of its requirements, will be disclosed in our annual report on Form 20-F. For the year ended December 31, 2020, we did not grant any waivers of the Code of Conduct.
Item 16C.    Principal Accountant Fees and Services
For the Years Ended
December 31,
in USD thousands 2020 2019
Audit fees 1,518 1,072
Tax fees 112 108
Audit-related fees 10 21
Total Fees 1,640 1,201
For the year ended December 31, 2020 and 2019, PricewaterhouseCoopers SA was the Company’s auditor for the IFRS and statutory accounts.
Audit fees include the standard audit work performed each fiscal year necessary to allow the auditor to issue an opinion on our financial statements and to issue an opinion on the local statutory financial statements. Audit fees also include services that can be provided only by the external auditor such as reviews of quarterly financial results and review of our securities offering documents.
Tax fees are fees billed for professional services for tax compliance and tax advice.
Audit-related fees consisted of fees billed for assurance and related services that were reasonably related to the performance of the audit or review of our financial statements or for services that were traditionally performed by the external auditor.
Pre-Approval Policies and Procedures
In accordance with the requirements of the U.S. Sarbanes-Oxley Act of 2002 and rules issued by the SEC, we review and pre-approve of any services performed by PricewaterhouseCoopers SA. The procedures require that all proposed future engagements of PricewaterhouseCoopers SA for audit and permitted non-audit work are submitted to the Audit Committee for approval prior to the beginning of any such service. In accordance with this policy, all services performed by and fees paid to PricewaterhouseCoopers SA in this Item 16C. were approved by the Audit Committee.
ITEM 16D.    Exemptions from the Listing Standards for Audit Committees
See “Item 6. Directors, Senior Management and Employees—C. Board Practices—Audit Committee” and “Item 16A. Audit Committee Financial Experts.”
ITEM 16E.    Purchases of Equity Securities by the Issuer and Affiliated Purchasers
During the year ended December 31, 2020, no purchases of our equity securities were made by or on behalf of ADC Therapeutics SA or any affiliated purchaser.
ITEM 16F.    Change in Registrant’s Certifying Accountant
Not applicable.
ITEM 16G.    Corporate Governance
As a “foreign private issuer,” as defined by the SEC, we are permitted to follow home country corporate governance practices, instead of certain corporate governance standards required by the NYSE for U.S. companies. Accordingly, we follow Swiss corporate governance rules in lieu of certain of the NYSE’s corporate governance requirements. The significant differences between our Swiss corporate governance rules and the NYSE’s corporate governance requirements are set forth below:
•Exemption from the requirement that a majority of the board of directors be comprised of independent directors and that there be regularly scheduled meetings with only the independent directors present. Swiss law does not have such a requirement.
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•Exemption from the requirements that the compensation committee and the nomination and corporate governance committee be comprised of independent directors. Swiss law does not have such requirements.
•Exemption from quorum requirements applicable to meetings of shareholders. Swiss law does not require such quorum requirements.
•Exemption from the requirement that independent directors meet at regularly scheduled executive sessions. Swiss law does not have such a requirement.
•Exemption from the requirement that listed companies adopt and disclose corporate governance guidelines that cover certain minimum specified subjects related to director qualifications and responsibilities. Swiss law does not require the adoption or disclosure of such guidelines.
•Exemption from the requirement to disclose within four business days of any determination to grant a waiver of the Code of Conduct to directors and executive officers. Although we will require approval by our board of directors for any such waiver, we may choose not to disclose the waiver in the manner set forth in the NYSE listing standards.
•Exemption from the requirement to obtain shareholder approval for certain issuances of securities, including shareholder approval of share option plans. Our articles of association provide that our board of directors is authorized, in certain instances, to issue a certain number of common shares without re-approval by our shareholders.
ITEM 16H.    Mine Safety Disclosure
Not applicable.
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PART III
ITEM 17.    Financial Statements
We have responded to Item 18 in lieu of this item.
ITEM 18.    Financial Statements
Financial Statements are filed as part of this Annual Report, beginning on page F-1.
ITEM 19.    Exhibits
The following documents are filed as part of Annual Report on Form 20-F.
EXHIBIT INDEX
Incorporation by Reference
Exhibit No. Description Form File No. Exhibit No. Filing Date
1.1 F-1 333-248941 3.1 September 21, 2020
2.1*
4.1# F-1 333-237841 10.1 April 24, 2020
4.2# F-1 333-237841 10.2 April 24, 2020
4.3#*
4.4#†*
4.5#†*
4.6#†*
4.7 F-1 333-237841 10.6 April 24, 2020
4.8 F-1 333-237841 10.7 April 24, 2020
4.9 F-1 333-237841 10.8 April 24, 2020
4.10 F-1 333-237841 10.9 April 24, 2020
4.11 F-1 333-237841 10.10 April 24, 2020
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4.12 F-1 333-237841 10.11 April 24, 2020
4.13§ F-1 333-237841 10.12 April 24, 2020
4.14§ F-1 333-237841 10.16 April 24, 2020
4.15 F-1 333-237841 10.17 April 27, 2020
4.16 6-K 001-39071 99.1 May 19, 2020
4.17 F-1 333-248941 10.17 September 21, 2020
4.18*
4.19*†
8.1 F-1 333-248941 21.1 September 21, 2020
12.1*
12.2*
13.1*
13.2*
15.1*
101INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
* Filed herewith.
# Portions of this exhibit have been omitted because they are both (i) not material and (ii) would likely cause competitive harm to the Company if publicly disclosed.
† Certain schedules to this exhibit have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule will be furnished supplementally to the SEC upon request; provided, however, that the parties may request confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any document so furnished.
§ Management contract, compensatory plan or arrangement.
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Signatures
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.
ADC Therapeutics SA
Date: March 18, 2021
By:
/s/ Christopher Martin
Name:    Christopher Martin
Title:    Chief Executive Officer
By:
/s/ Jennifer Creel
Name:    Jennifer Creel
Title:    Chief Financial Officer
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INDEX TO FINANCIAL STATEMENTS
Audited Financial Statements — ADC Therapeutics SA
F-2
F-3
F-4
F-5
F-6
F-7
F-8
F-1
Table of Contents
Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of ADC Therapeutics SA

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of ADC Therapeutics SA and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operation, comprehensive loss, changes in equity and cash flows for each of the three years in the period ended December 31, 2020, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Change in Accounting Principle
As discussed in Notes 4 and 15 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers SA


Lausanne, Switzerland
March 18, 2021


We have served as the Company's auditor since 2015.


F-2
ADC Therapeutics SA, Epalinges
CONSOLIDATED STATEMENT OF OPERATION
(in KUSD)
For the Years Ended December 31,
Note 2020 2019 2018
Contract revenue 7 —  2,340  1,140 
Research and development expenses 10 (142,032) (107,537) (118,313)
Selling and marketing expenses 10 (22,101) —  — 
General and administrative expenses 10 (55,130) (14,202) (8,768)
Total operating expense (219,263) (121,739) (127,081)
Loss from operations (219,263) (119,399) (125,941)
Other income (expense)
Other income 8 584  1,655  — 
Convertible loans, derivatives, change in fair value (expense) 21 (45,411) —  — 
Convertible loans, first tranche, derivative, transaction costs 21 (1,571) —  — 
Share of results with joint venture 2 (viii) 24,368  —  — 
Financial income 832  2,253  2,856 
Financial expense (4,926) (156) — 
Exchange differences (loss) gain (576) (255) 213 
Total other (expense) income (26,700) 3,497  3,069 
Loss before taxes
(245,963) (115,902) (122,872)
Income tax (expense) 11 (327) (582) (224)
Net loss
(246,290) (116,484) (123,096)
Net loss attributable to:
Owners of the parent
(246,290) (116,484) (123,096)
Net loss per share
Basic and diluted net loss per share (in USD)
27 (3.77) (2.36) (2.64)

The accompanying notes are an integral part of these consolidated financial statements.
F-3
ADC Therapeutics SA, Epalinges
CONSOLIDATED STATEMENT OF COMPREHENSIVE (LOSS)
(in KUSD)
For the Years Ended December 31,
Note 2020 2019 2018
Net loss
(246,290) (116,484) (123,096)
Other comprehensive loss:
Items that will not be reclassified to profit or loss
Remeasurements of defined benefit plan
20 (305) (1,346) (193)
Total items that will not be reclassified to profit or loss
(305) (1,346) (193)
Items that may be reclassified subsequently to profit or loss
Currency translation differences
176  112  (79)
Total items that may be reclassified subsequently to profit or loss
176  112  (79)
Other comprehensive loss
(129) (1,234) (272)
Total comprehensive loss
(246,419) (117,718) (123,368)
Attributable to:
Owners of the parent
(246,419) (117,718) (123,368)
The accompanying notes are an integral part of these consolidated financial statements.
F-4
ADC Therapeutics SA, Epalinges
CONSOLIDATED BALANCE SHEET
(in KUSD)
As of December 31,
Note 2020 2019
ASSETS
Current assets    
Cash and cash equivalents
5.1/17b 439,195  115,551 
Other current assets
12 11,255  7,055 
Total current assets
450,450  122,606 
Non-current assets
Property, plant and equipment
14 1,629  1,376 
Right-of-use assets
15 3,129  4,898 
Intangible assets
16 10,179  8,434 
Interest in joint venture 2(viii) 47,908  — 
Other long-term assets
397  368 
Total non-current assets
63,242  15,076 
Total assets
513,692  137,682 
LIABILITIES AND EQUITY
Current liabilities
Accounts payable
5,279  3,329 
Other current liabilities
19 30,375  15,430 
Lease liabilities, short-term
15 1,002  1,132 
Current income tax payable
149  52 
Convertible loans, short-term 3,631  — 
Total current liabilities
40,436  19,943 
Non-current liabilities
Convertible loans, long-term 21 34,775  — 
Convertible loans, derivatives 21 73,208  — 
Deferred gain of joint venture 2(viii) 23,539  — 
Lease liabilities, long-term
15 2,465  3,899 
Defined benefit pension liabilities
20 3,543  2,684 
Other non-current liabilities 221  — 
Total non-current liabilities
137,751  6,583 
Total liabilities
178,187  26,526 
Equity attributable to owners of the parent
Share capital
23 6,314  4,361 
Share premium
23 981,056  549,922 
Treasury shares
23 (4) (100)
Other reserves
20/22 42,753  5,473 
Cumulative translation adjustments
245  69 
Accumulated losses
(694,859) (448,569)
Total equity attributable to owners of the parent
335,505  111,156 
Total liabilities and equity
513,692  137,682 
The accompanying notes are an integral part of these consolidated financial statements.
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ADC Therapeutics SA, Epalinges
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(in KUSD)
Note Share
capital 		Share
premium 		Other
reserves 		Treasury
shares 		Cumulative
translation
adjustment 		Accumulated
losses 		Total
January 1, 2018 397  452,296  5,426  —  36  (208,989) 249,166 
Loss for the year
—  —  —  —  —  (123,096) (123,096)
Translation adjustment
—  —  —  —  (79) —  (79)
Remeasurements of defined benefit pension
20 —  —  (193) —  —  —  (193)
Total other comprehensive loss
—  —  (193) —  (79) —  (272)
Total comprehensive loss for the year
—  —  (193) —  (79) (123,096) (123,368)
Issue of share capital
23 4  —  —  —  —  —  4 
Transaction costs
23 —  (28) —  —  —  —  (28)
Share-based compensation expense
22 —  —  469  —  —  —  469 
Total transactions with owners
4  (28) 469  —  —  —  445 
December 31, 2018 401  452,268  5,702  —  (43) (332,085) 126,243 
Loss for the year
—  —  —  —  —  (116,484) (116,484)
Translation adjustment
—  —  —  —  112  —  112 
Remeasurements of defined benefit pension
20 —  —  (1,346) —  —  —  (1,346)
Total other comprehensive loss
—  —  (1,346) —  112  —  (1,234)
Total comprehensive loss for the year
—  —  (1,346) —  112  (116,484) (117,718)
Issue of share capital / capital contributions
23 171  103,221  —  —  —  —  103,392 
Transaction costs
23 —  (1,778) —  —  —  —  (1,778)
Transfer from share premium for par value increase
23 3,789  (3,789) —  —  —  —  — 
Purchase of treasury shares
23 —  —  —  (141) —  —  (141)
Sale of treasury shares
23 —  —  —  41  —  —  41 
Share-based compensation expense
22 —  —  1,117  —  —  —  1,117 
Total transactions with owners
3,960  97,654  1,117  (100) —  —  102,631 
December 31, 2019 4,361  549,922  5,473  (100) 69  (448,569) 111,156 
Loss for the period —  —  —  —  —  (246,290) (246,290)
Remeasurement of defined benefit pension 20 —  —  (305) —  —  —  (305)
Translation adjustment —  —  —  —  176  —  176 
Total other comprehensive loss —  —  (305) —  176  —  (129)
Total comprehensive loss for the year —  —  (305) —  176  (246,290) (246,419)
Shares surrendered to redeem share purchase plan promissory notes 22 —  11,208  —  (11,208) —  —  — 
Issuance of shares through capitalization of reserves 23 393  (393) —  —  —  —  — 
Issuance of shares to be held as treasury shares 23 34  —  —  (34) —  —  — 
Grant of shares to settle 2014 incentive plan awards 22, 23 —  (29) —  29  —  —  — 
Issuance of shares at initial public offering 23 1,007  231,661  —  —  —  —  232,668 
Sale of shares under greenshoe option 23 —  23,591  —  11,309  —  —  34,900 
Transaction costs, initial public offering and greenshoe option 23 —  (23,355) —  —  —  —  (23,355)
Issuance of shares at follow-on offering 23 519  203,481  —  —  —  —  204,000 
Transaction costs, follow-on offering 23 —  (15,084) —  —  —  —  (15,084)
Exercise of options 22 —  54  —  —  —  —  54 
Share-based compensation expense 22 —  —  37,585  —  —  —  37,585 
Total transactions with owners 1,953  431,134  37,585  96  —  —  470,768 
December 31, 2020 6,314  981,056  42,753  (4) 245  (694,859) 335,505 
The accompanying notes are an integral part of these consolidated financial statements.
F-6
ADC Therapeutics SA, Epalinges
CONSOLIDATED STATEMENT OF CASH FLOWS
(in KUSD)
For the Years Ended December 31,
  Note 2020 2019 2018
Cash used in operating activities
Loss for the year (246,290) (116,484) (123,096)
Adjustments for non-monetary items:
Share-based compensation expense 22 37,585  1,117  469 
Depreciation of property, plant and equipment 14 774  552  488 
Depreciation of right-of-use assets 15 1,151  1,064  — 
Amortization and impairment of intangible assets 16 263  30  252 
Share of results in joint venture 2 (viii) (24,368) —  — 
Convertible loans, derivatives, increase in fair value 21 45,411  —  — 
Change in defined benefit pension liabilities 20 276  (53) 119 
Financial income (832) (1,696) (1,847)
Financial expense 4,820  15  — 
Exchange differences 476  128  (29)
Income taxes 11 327  582  224 
Operating loss before working capital changes (180,407) (114,745) (123,420)
Decrease in trade accounts receivable —  192  895 
(Increase) in other current assets (4,505) (3,841) (967)
(Decrease) in contract liability (short and long term) —  (2,340) (1,140)
Increase (decrease) in trade accounts payable 1,921  (3,425) (858)
Increase in accrued liabilities and other payables 14,946  1,720  3,262 
Cash used in operating activities (168,045) (122,439) (122,228)
Interest received 797  1,164  1,051 
Interest paid (1,557) (157) — 
Interest expense on lease obligations 105  141  — 
Tax paid (29) (290) (185)
Net cash used in operating activities (168,729) (121,581) (121,362)
Cash used in investing activities
Payment for purchases of property, plant and equipment 14 (801) (358) (944)
Payment for purchases of intangible assets 16 (2,008) (1,790) (1,526)
Payment for rent deposits (19) (100) (36)
Net cash used in investing activities (2,828) (2,248) (2,506)
Cash from / (used in) financing activities
Proceeds from capital contributions, net of transaction costs 23 —  101,614  (24)
Proceeds from public offering of common shares, net of transaction costs 23 433,158  —  — 
Proceeds from convertible loans, net of transaction costs 21 62,898  —  — 
Acquisition of treasury shares 23 —  (141) — 
Sale of treasury shares 23 —  41  — 
Proceeds from the exercise of stock options 23 54  —  — 
Principal portion of lease obligations payments 15 (1,144) (1,002) — 
Net cash from / (used in) financing activities 494,966  100,512  (24)
Net increase (decrease) in cash and cash equivalents 323,409  (23,317) (123,892)
Exchange gains / (losses) on cash and cash equivalents 235  61  (53)
Cash and cash equivalents at beginning of year 115,551  138,807  262,752 
Cash and cash equivalents at end of year 439,195  115,551  138,807 
Supplemental Non-Cash Investing Information
Capital expenditures recorded in Other current liabilities 220  —  — 
The accompanying notes are an integral part of these consolidated financial statements.
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ADC Therapeutics SA, Epalinges
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.Corporate information
ADC Therapeutics SA (the “Company” or “ADCT”) was incorporated on June 6, 2011 under the laws of Switzerland. The registered office of the Company is located at Route de la Corniche 3B, 1066 Epalinges, Switzerland. The Company controls two wholly-owned subsidiaries: ADC Therapeutics America, Inc. (“ADCT America”), which was incorporated in Delaware, USA on December 10, 2014, and ADC Therapeutics (UK) Ltd (“ADCT UK”), which was incorporated in England on December 12, 2014. The Company and its two subsidiaries form the ADCT Group (the “Group”).
The Group is focused on the development of antibody drug conjugates, including research, development, human clinical trials, regulatory approval and commercialization. Antibody drug conjugates (“ADCs”) are drug constructs which combine monoclonal antibodies specific to particular types of cells with cytotoxic molecules or warheads which seek to kill cancer cells to which the ADC attaches. ADCs have extensive potential therapeutic applications in cancer.
The Group’s core technology platform is based on the development and commercial exploitation of chemistry acquired under license from Spirogen Ltd in 2011. The license agreement, as subsequently amended in 2013, gives the Company the right to develop up to eleven specific ADCs as well as ten non-ADCs using Spirogen Ltd's intellectual property and technology in warhead and linker chemistry.
These Group consolidated financial statements were authorized for issue by the Board of Directors on March 18, 2021.
2.Basis of preparation
(i)Compliance with International Financial Reporting Standards
The ADCT Group consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). As of December 31, 2020, the financial statements are presented in thousand dollars (KUSD).
(ii)Historical Cost Convention

The consolidated financial statements have been prepared under the historical cost convention, except for the defined benefit pension liabilities, where plan assets are measured at fair value, and the embedded derivative conversion feature and the derivative associated with the convertible loans (see note 21 “Convertible loans”), which are measured at fair value.
(iii)Going concern basis

ADCT is a late clinical-stage company developing innovative therapeutics. The Group is exposed to all risks inherent in establishing and developing its business, including the substantial uncertainty that current projects will succeed. The Group's success may also depend on its ability to:

•establish and maintain a strong patent position and protection;
•develop, gain regulatory approval and commercialize drug products;
•enter into collaborations with partners in the pharmaceutical industry;
•acquire and retain key personnel; and
•acquire additional funding to support its operations.

Since its incorporation, the Group has primarily funded its growth through capital increases, both equity and debt, and additional funds provided by research collaborations. During the 2020 fiscal year, the Company issued common shares through an initial public and follow-on offering (see note 2(vi) and 2(vii)) and the issuance of convertible loans (see note 21, “Convertible loans”). The Group does not have recourse to bank loans. As a result, the Group is not exposed to liquidity risk through requests for early repayment of loans, other than, pursuant to the convertible loans, it must maintain a balance of at least USD 50 million in cash and cash equivalents at the end of each quarter.

As of December 31, 2020, the Group’s cash and cash equivalents amounted to KUSD 439,195 (December 31, 2019: KUSD 115,551).

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Management believes that the Group has sufficient financial resources to cover its operating costs for at least the next 12 months from the date of issuance of these consolidated financial statements and as a result, is presenting these consolidated financial statements of the Group on a going concern basis.

(iv)Share split
On September 19, 2019, the Company effected a one-to-15,625 share split of its outstanding shares (see note 23, “Share capital”). Accordingly, all share and per share amounts for all periods presented in these consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this share split.
(v)Share consolidation
On April 24, 2020, the Company effected a five-to-four share consolidation of its outstanding shares (see note 23, “Share capital”). Accordingly, all share and per share amounts for all periods presented in these consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this share consolidation.
(vi)Initial Public Offering (IPO)
On May 19, 2020, the Company completed an IPO on the New York Stock Exchange (“NYSE”) in which it issued and sold an aggregate of 14,082,475 common shares at USD 19.00 per share, which included 1,836,844 common shares issued and sold pursuant to the underwriters’ exercise in full of their option to purchase additional common shares. The gross proceeds from the IPO were USD 267.6 million, and net proceeds were USD 244.2 million after deducting underwriting discounts and commissions as well as fees and expenses payable by the Company. The IPO resulted in a gross increase of USD 255.3 million in the Company’s share premium account prior to transaction costs associated with the IPO share issuance of USD 4.7 million and underwriting discounts and commissions of USD 18.7 million, both of which were charged directly against the Company’s share premium account. Further details are contained in note 23, “Share capital”.
(vii)Follow-On Public Offering
On September 28, 2020, the Company completed a public offering on the NYSE in which it issued and sold 6,000,000 common shares at USD 34.00 per share. The gross proceeds of the public offering were USD 204.0 million, and net proceeds of USD 188.9 million after deducting underwriting discounts and commissions as well as fees and expenses payable by the Company. The public offering resulted in a gross increase of USD 203.5 million in the Company’s share premium account prior to transaction costs associated with the public offering share issuance of USD 2.9 million and underwriting discounts and commissions of USD 12.2 million, both of which were charged directly against the Company’s share premium account. Further details are contained in note 23, “Share capital”.
(viii)Overland Joint Venture
On December 14, 2020, the Company announced the formation of a new joint venture company, Overland ADCT BioPharma (CY) Limited (“Overland ADCT BioPharma”), with Overland Pharmaceuticals (“Overland”), a fully integrated biopharmaceutical company backed by Hillhouse Capital. Overland ADCT BioPharma will develop and commercialize four of the Company’s ADC product candidates, loncastuximab tesirine (“Lonca” and previously known as ADCT-402), ADCT-601, ADCT-602 and ADCT-901 (collectively, the “Licensed Products”), in greater China and Singapore (the “Territory”). The Company agrees to supply product to Overland ADCT BioPharma for its drug development and commercialization under a supply agreement which will be entered into between the parties.
Under the terms of the license agreement between the Company and Overland ADCT BioPharma, the Company licensed exclusive development and commercialization rights to the Licensed Products (the “Licensed IP”) in the Territory to Overland ADCT BioPharma. Overland invested USD 50.0 million in Overland ADCT BioPharma, and is obligated to pay the Company potential development milestone payments related to ADCT-601, ADCT-602 and ADCT-901, for a 51% equity interest. The Company received a 49% equity interest in exchange for contribution of the Licensed IP. The Company and Overland will both appoint an equal number of nominees to the board of directors of Overland ADCT BioPharma which will include the Chief Executive Officer of Overland ADCT BioPharma (“Overland CEO”). Currently, a search is underway for the Overland CEO. Pursuant to the license agreement, the Company may also earn low to mid-single digit royalties on net sales of the Licensed Products. In addition, Overland ADCT BioPharma may elect to participate in the Company’s global clinical trials. The Company also received an option, which it may exercise at its sole discretion, to exchange any or all of its equity interest in Overland ADCT BioPharma into an equity interest in Overland upon an initial public offering of Overland. Given the uncertainty of an initial public offering of Overland, the Company did not assign any value to the option.
In connection with the formation of Overland ADCT BioPharma, the Company determined the fair value of its equity interest by implying a total equity value of Overland ADCT BioPharma using Overland’s investment of USD 50.0 million and the fair value of the contingent milestone consideration for Overland’s 51% equity interest. The fair value of the contingent consideration was determined to be nominal
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due to the high uncertainty related to achieving certain conditions associated with the contingent consideration as of the closing date. The fair value of the Company’s equity interest was determined to be KUSD 48,040, which resulted in the Company recognizing a gain of KUSD 24,501 and a deferred gain of KUSD 23,539. The gain was recognized within Share of results with joint venture in the Company’s Consolidated Statement of Operation for the year ended December 31, 2020. The deferred gain is recorded in Deferred gain of joint venture in the Company’s Consolidated Balance Sheet. In accordance with International Accounting Standard 28 Investments in Associates and Joint Ventures (“IAS 28”), the gain resulting from the transaction was only recognized to the extent of the unrelated investor’s equity interest in the joint venture, or 51%. The Company will begin to recognize the deferred gain upon the commercialization by Overland ADCT BioPharma of any or all the Licensed Products in the Territory. The deferred gain will be recognized over the estimated commercialization period in which a Licensed Product is developed and approved using a systematic approach that approximates the pattern of consumption of the Licensed IP by Overland ADCT BioPharma. Under the terms of the transaction, the Company may receive variable consideration in the form of contingent milestones and royalties. This consideration is dependent upon the success of the programs subject to the license. The Company will recognize those amounts within other income in the Company’s Consolidated Statement of Operation only to the extent a significant reversal in the amount of cumulative income recognized is not probable of occurring when the uncertainty associated with the variable consideration is subsequently resolved.
In accordance with the terms of the transaction, the Company and Overland jointly control Overland ADCT BioPharma, as they must act together to direct the relevant activities of Overland ADCT BioPharma that would significantly affect its returns. As such, the Company concluded that it did not have the power to unilaterally direct these activities in accordance with International Financial Reporting Standards 10 Consolidated Financial Statements (“IFRS 10”). Therefore, the Company’s equity interest in Overland ADCT BioPharma is accounted for under the equity method of accounting in accordance with IAS 28 and is recorded in Interest in joint venture in the Company’s Consolidated Balance Sheet as of December 31, 2020. The Company’s proportionate share of Overland ADCT BioPharma’s net loss is recorded within Share of results with joint venture in the Company’s Consolidated Statement of Operation, which was KUSD 132 from the closing of the transaction to December 31, 2020.
(in KUSD)
Interest in joint venture
January 1, 2020 — 
Initial investment 48,040 
Share of results with joint venture (132)
December 31, 2020 47,908 
The tables below provide summarized financial information for Overland ADCT BioPharma that are material to the Company. The following information reflects the amounts presented in the financial statements of Overland ADCT BioPharma and not the Company’s share of those amounts.
Summarized Balance Sheet As of December 31, 2020
Cash and cash equivalents 50,000 
Intangible assets 48,040 
Total liabilities 269 
Net assets 97,771 
Summarized Statement of Comprehensive Loss For the period from December 14, 2020 through December 31, 2020
Operating expenses 269 
Net loss 269 
(ix)COVID – 19
The COVID-19 pandemic has negatively impacted the economies of most countries around the world. The Group’s operations, similar to those of other life sciences companies, have been impacted by the COVID-19 pandemic. As the Group advances its clinical programs, it is in close contact with its principal investigators and clinical sites, which are located in jurisdictions affected by the COVID-19 pandemic, and is assessing the impact of the COVID-19 pandemic on its clinical trials, expected timelines and costs on an ongoing basis. In light of recent developments relating to the COVID-19 pandemic, the primary focus of healthcare providers and hospitals is currently on fighting the novel coronavirus. In addition, in response to the spread of COVID-19, the Group has modified its business practices, including
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restricting employee travel, developing social distancing plans for its employees and cancelling physical participation in meetings, events and conferences. In addition, certain of the Group’s clinical trials experienced delays or suspensions in patient enrollment during the first half of 2020 as a result of the COVID-19 pandemic. However, the Group is no longer experiencing delays in its clinical trials or suspensions in patient enrollments. As the COVID-19 pandemic continues to evolve, the Group believes the extent of the impact to its operations, operating results, cash flows, liquidity and financial condition will be primarily driven by the severity and duration of the pandemic, the pandemic’s impact on the U.S. and global economies and the timing, scope and effectiveness of national and local governmental responses to the pandemic, especially in areas where the conditions have recently worsened. Those primary drivers are beyond the Group’s knowledge and control, and as a result, at this time the ultimate impact on the Group’s results of operations, cash flows and financial position in 2020 and thereafter cannot be reasonably predicted. Furthermore, the impact to the Group’s businesses, operating results, cash flows, liquidity and financial condition may be further impacted if the current circumstances continue to exist for a prolonged period of time. However, on the basis of the risk mitigation measures undertaken, the Group has concluded that there is no material uncertainty that may cast a significant doubt upon the Group’s ability to continue as a going concern.
3.Significant accounting policies
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
3.1.Consolidation
The annual closing date of the individual financial statements is December 31. Subsidiaries are all entities over which the Company has control. The Company controls an entity when the Company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are de-consolidated from the date that control ceases. All intercompany transactions have been eliminated.
3.2.Foreign currency translation
Functional and presentation currency
Items included in the financial statements of each of the Group entities are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in US dollars (“USD” or “Dollars”), which is the Company’s functional and Group’s presentation currency.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in Consolidated Statement of Operation.
All foreign exchange gains and losses are presented in the Consolidated Statement of Operation within “Exchange differences”.
Group companies
The results and financial position of all the Group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
(i)assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
(ii)income and expenses for each Consolidated Statement of Operation are translated at monthly average exchange rates; and
(iii)all resulting exchange differences are recognized in other comprehensive loss, under “Cumulative translation adjustments”.
3.3.Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with external financial institutions and other short-term highly liquid investments with original maturities to the Company of three months or less. They are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Any bank overdrafts are not netted against cash and cash equivalents but are shown as part of current liabilities on the Consolidated Balance Sheet.
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3.4.Inventory
The Company assessed its accounting policy for inventory costs, with the Company’s submission of its biologics license application (“BLA”) to the U.S. Food and Drug Administration (“FDA”) for Lonca for the treatment of relapsed or refractory diffuse large B-cell lymphoma (“DLBCL”). The Company believes that capitalization of inventory costs associated with certain products prior to regulatory approval of such products, or for inventory produced in new production facilities, is appropriate when management considers it highly probable that pre-approval inventory costs will be recoverable through future sales of the drug product. The determination to capitalize is based on the particular facts and circumstances relating to the expected regulatory approval of the product or production facility being considered and, accordingly, the time frame within which the determination is made varies from product to product. The assessment of whether or not the product is considered highly probable to be saleable will be made on a quarterly basis and includes, but is not limited to, how far a particular product or facility has progressed along the approval process, any known safety or efficacy concerns, potential labeling restrictions and other impediments. As of December 31, 2020, the Company believes it is highly probable that it will receive regulatory approval for Lonca. Accordingly, such costs incurred to manufacture pre-approved product would qualify to be capitalized as inventory. However, the Company has written-down such inventory costs incurred related to the manufacture of Lonca to a net realizable value of zero. The impairment charge has been recorded as research and development expense because of the inherent risks associated with the development of a product candidate, uncertainty about the regulatory approval process, including the expected dating of Lonca at the time of launch, as well as the timing of the associated commercial launch and market size for the drug candidate, and lack of history for the Company’s ability to obtain regulatory approval for drug candidates. The Company anticipates that it will reverse impairments resulting from the write-down of its inventory to a net realizable value of zero upon receiving regulatory approval of Lonca based on a number of factors including the existence of inventory on hand and estimated demand as well as the expiration of such product.
3.5.Property, plant and equipment
All property, plant and equipment is stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Depreciation is calculated using the straight-line method to reduce the cost of each asset to its residual value over its estimated useful life, as follows:
Leasehold improvements
3 to 10 years
Laboratory equipment
5 years
Office equipment
5 years
Hardware
3 years
See note 14, “Property, plant and equipment” for further information.
3.6.Intangible assets
Licenses
Licenses acquired are capitalized as intangible assets at historical cost. Licenses with definite-useful lives are amortized over their useful lives, which are determined on a basis of the expected pattern of consumption of the expected future economic benefits embodied in the licenses and which therefore commence only once the necessary regulatory and marketing approval has been received. Prior to regulatory and marketing approval, licenses are treated as indefinite-lived assets and not amortized. These licenses are tested annually for impairment in the last quarter of each fiscal year and more frequently if events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.
Amortization and impairment of licenses
Prior to regulatory and marketing approval, impairment of indefinite-lived licenses is charged to research and development expenses. Subsequent to regulatory and marketing approval, amortization of licenses will be charged to cost of goods sold.
See note 16, “Intangible assets” for further information.
3.7.Investments in joint ventures
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. An investment in a joint venture is accounted for using the
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equity method from the date on which the investee becomes a joint venture. Under the equity method, an investment in a joint venture is recognized initially in the Consolidated Balance Sheet at cost and adjusted thereafter to recognize the Company’s share of the profit or loss, other comprehensive income or loss of the joint venture, distributions from the joint venture and other adjustments to the Company’s proportionate interest in the joint venture. The Company’s initial investment is recorded as an Interest in joint venture in the Consolidated Balance Sheet. The Company’s proportionate share of net income or losses of equity investments is included within Share of results with joint venture in the Consolidated Statement of Operation. The Company’s carrying value of its investment in a joint venture increases or decreases in relation to the Company’s proportionate share of comprehensive income or loss of the joint venture. When the Company’s share of losses of a joint venture exceeds the Company’s interest in that joint venture less the carrying value of the deferred gain described below, the Company ceases to recognize its share of further losses. Additional losses are recognized only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the joint venture. In connection with the Company’s initial investment, the gain resulting from the transaction was only recognized to the extent of the unrelated investors’ equity interest in the joint venture, which resulted in a deferred gain for a portion of the Company’s initial investment. The Company will begin to recognize the deferred gain upon the commercialization of any or all the licensed intellectual property by the joint venture. The deferred gain will be recognized over the estimated commercialization period in which a licensed product is developed and approved using a systematic approach that approximates the pattern of consumption of the licensed intellectual property by the joint venture. Investments accounted for under the equity method are assessed for potential impairment on a regular basis based on qualitative factors.
3.8.Impairment of non-financial assets
Non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. An impairment loss is recognized for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows, adjusted for the risks specific to each asset, are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the general risks affecting the pharmaceutical industry. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generate cash inflows from continuing use that are largely independent of the cash flows of other assets (“cash-generating units”). Impairment losses are recognized in the Consolidated Statement of Operation. Prior impairments of non-financial assets are reviewed for possible reversal of the impairment at each reporting date.
3.9.Employee benefits
Employee Benefit Programs
Group companies operate defined benefit and defined contribution pension schemes in accordance with the local conditions and practices in the countries in which they operate. The defined benefit schemes are generally funded through payments to insurance companies or trustee-administered funds, determined by periodic actuarial calculations. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity (a fund) and has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. A defined benefit plan is a pension plan that is not a defined contribution plan. Typically, defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. However, as is the case with many Swiss pension plans, although the amount of ultimate pension benefit is not defined, certain legal obligations of the plan nevertheless create constructive obligations on the employer to pay further contributions to fund an eventual deficit. This results in the plan being accounted for as a defined benefit plan.
The liability recognized in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity that approximate the terms of the related pension obligation.
The current service cost of the defined benefit plan, recognized in the Consolidated Statement of Operation in employee benefit expenses, except where included in the cost of an asset, reflects the increase in the defined benefit obligation resulting from employee service in the current year.
Past service costs, resulting from a plan amendment or curtailment, are recognized immediately in the Consolidated Statement of Operation.
The net interest cost is calculated by applying the discount rate to the net balance of the present value of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expenses in the Consolidated Statement of Operation.
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Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity within the Consolidated Statement of Other Comprehensive Loss in the period in which they arise.
For defined contribution plans, the company pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. Once the contributions have been paid, the company has no further payment obligations. The contributions are recognized as employee benefit expenses in the Consolidated Statement of Operation. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in the future payments is available.
See note 20, “Pension obligations” for further information.
Share-based compensation expense
The fair value of shares or options granted, respectively, under share purchase or share option plans is recognized as an employee share-based compensation expense with a corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of the shares or options granted:
–including any market performance conditions;
–excluding the impact of any service and non-market performance vesting conditions; and
–including the impact of any non-vesting conditions.
The total expense is recognized over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each period, the entity revises its estimate of the number of options that are expected to vest based on the non-market vesting and service conditions. It recognizes the impact of the revision to original estimate, if any, within the Consolidated Statement of Operation, with a corresponding adjustment to equity.

The proceeds received upon the exercise of options are net of any directly attributable transaction costs and are credited directly to equity.
See note 22, “Share-based compensation expense” for further information.
3.10.Share capital and share premium
Share capital
The Company has issued one class of common shares, which is classified as equity (see note 23, “Share Capital”).
Share premium
Amounts of contribution in excess of par value are accounted for as share premium. Share premium also arises from additional capital contributions from shareholders. Incremental costs directly attributable to equity transactions such as the issue of new capital shares are shown in equity as a deduction, net of tax, from the proceeds within share premium. Transaction costs that relate to equity and non-equity transactions are allocated to those transactions using a basis of allocation that is rational and a consistent methodology with previous transactions.
3.11.Treasury shares
Treasury shares are recognized at acquisition cost and deducted from shareholders’ equity at the time of acquisition, until they are cancelled. Where such shares are subsequently sold, any consideration received is included in shareholders’ equity.
3.12.Leases
This policy concerns instances where a Group company is the lessee.
Leases are recognized as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the group. Each lease payment is allocated between the liability and the finance cost. The finance cost is charged to the Consolidated Statement of Operation over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.
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The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee’s incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions.
Right-of-use assets are measured at cost comprising the following:
–the amount of the initial measurement of lease liability;
–any lease payments made at or before the commencement date less any lease incentives received;
–any initial direct costs, and
–restoration costs.
The lease term is considered to be the non-cancellable period of a lease, together with both:
–periods covered by an option to extend the lease if the Company is reasonably certain to exercise that option; and
–periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise that option.
Assumptions as to whether the Company is reasonably likely to exercise any extension or termination options have been individually assessed based on the Company’s plans.
The policy of recognizing right-of-use assets and lease liabilities is not applied to short-term (under 12 months) or low value leases.
For deferred tax purposes, the Group considers the net effect of temporary differences arising from the right-of-use asset and the lease liabilities.
In 2018 and prior years, leases in which a significant portion of the risks and rewards of ownership are retained by the lessor were classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) were charged to the Consolidated Statement of Operation on a straight-line basis over the period of the lease.
3.13.Convertible loans
The Company entered into a USD 115.0 million Facility Agreement (the “Facility Agreement”) (see note 21, “Convertible loans”) on April 24, 2020, pursuant to which the counterparty agreed to extend senior secured convertible term loans to the Company in two separate disbursements:
(i)an initial disbursement of convertible loans in the amount of USD 65.0 million upon the completion of the IPO, and satisfaction of certain other conditions (the “first tranche”) and
(ii)a subsequent disbursement of convertible loans in the amount of USD 50.0 million upon the receipt of regulatory approval for Lonca, and satisfaction of certain other conditions (the “second tranche”).
Accounting for the first tranche
On May 19, 2020, the Company received convertible loans in the amount of USD 65.0 million upon completion of the IPO. These convertible loans have been recognized as a hybrid financial instrument and accounted for as two separate components: (i) a loan and (ii) an embedded conversion option derivative.
(i)The embedded conversion option derivative was initially measured at fair value and is subsequently remeasured to fair value at each reporting date. Under IAS 32, this derivative could have been classified as a component of equity only if in all cases the contract would be settled by the Company delivering a fixed number of its own equity instruments in exchange for a fixed amount of cash or debt redemption. However, the agreement foresees, in the event of a major transaction, the payment of “make-whole” amounts that would have to be computed in the light of the circumstances and are therefore not fixed. As a result, the derivative is presented in the balance sheet as a liability and classified as non-equity in accordance with IFRS 9 and IAS 32. Changes in the fair value (gains or losses) of the derivative at the end of each period are recorded in the Consolidated Statement of Operation.
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(ii)The convertible loan’s initial fair value is the residual amount of the consideration received, net of attributable costs, after separating out the fair value of the embedded conversion option derivative. The loan is subsequently measured at its amortized cost in accordance with IFRS 9. It is presented as a financial liability in the Consolidated Balance Sheet.
Expenses and fees payable upon the issuance of the first tranche of convertible loans were allocated pro rata to the above two components. The share of expenses allocated to the embedded conversion option derivative was charged directly to the Consolidated Statement of Operation, while the share of expenses allocated to the residual convertible loan was deducted from the loan.
Accounting for the second tranche
The Company is obligated to draw down the second tranche in the amount of USD 50.0 million upon receipt of regulatory approval for Lonca. However, the second tranche will automatically terminate if the Company has not received the regulatory approval on or prior to December 31, 2021. This obligation has been accounted for as a derivative, and presented in the Consolidated Balance Sheet as a financial liability. Changes in the fair value (gains or losses) of the derivative at the end of each period are recorded in the Consolidated Statement of Operation.
3.14. Revenue recognition
To date, the Company has not generated any revenue from the sale of its product candidates. Revenue is measured at the fair value of the consideration received or receivable for the sale of services in the ordinary course of the Group’s activities. Revenue is shown net of value-added tax, rebates and discounts and after eliminating sales within the Group.
The Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company applies the five-step model to contracts only when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, the Company assesses the goods or services promised within each contract, determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
Performance obligation satisfied to the state of completion - deferred contract revenue amortization
When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue is recognized according to the stage of completion of the transaction at the end of the period using the cost input method. Under this method, revenue is recognized in the accounting periods in which the services are rendered. The recognition of revenue on this basis provides full information on the extent of service activity and performance during a period.
To be able to estimate the outcome of a transaction reliably, the entity must be able to make a reliable estimate of total transaction revenue, the stage of completion and the costs to complete the transaction. The stage of completion is determined as the proportion of the transaction costs incurred for services rendered to date compared to the estimated total transaction costs.
3.15. Research and development (“R&D”) expenses
Research expenditure is recognized in expense in the year in which it is incurred. Internal development expenditure is capitalized only if it meets the recognition criteria of IAS 38 “Intangible Assets”. Where regulatory and other uncertainties are such that the criteria are not met, which is almost invariably the case prior to approval of the drug by the relevant regulatory authority, the expenditure is recognized in the Consolidated Statement of Operation. When certain criteria are met, the Company may capitalize and amortize on a straight-line basis over its estimated useful life, internal development expenditures. To date, the Company has not capitalized any R&D expenses.
3.16.Selling and marketing (“S&M”) expenses
S&M expense is expensed when incurred and include employee expenses (including share-based compensation expense) for commercial employees, external costs related to commercialization (including professional fees, communication costs and IT costs and travel expenses). To date, depreciation expense and facility expense has not been material.
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3.17.General and administrative (“G&A”) expenses
G&A expense is expensed when incurred and include employee expenses (including share-based compensation expense) for G&A employees, external costs (including in particular professional fees, communications costs and IT costs, facility expenses and travel expenses), G&A costs charged by related parties (including telecommunications costs), depreciation of property, plant and equipment, depreciation of right-of-use assets and amortization of intangible assets.
3.18. Current, deferred income tax and tax credit
The tax expense for the period comprises current and deferred tax. Tax is recognized in the Consolidated Statement of Operation, except to the extent that it relates to items recognized in other comprehensive loss or directly in equity; in this case the related tax is recognized in other comprehensive loss or directly in equity, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Taxes on income are accrued in the same periods as the revenues and expenses to which they relate. Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities.
Deferred income tax is recognized, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Consolidated Financial Statements. However, deferred tax liabilities are not recognized if they arise from the initial recognition of goodwill. The deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.
Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences or the unused tax losses can be utilized.
Deferred income tax assets from tax credit carryforwards are recognized to the extent that the national tax authority confirms the eligibility of such a claim and that the realization of the related tax benefit through future taxable profits is probable.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
3.19. Segment reporting
The Company is managed and operated as one business. A single management team that reports to the chief executive officer comprehensively manages the entire business. Accordingly, the Company views its business and manages its operations as one operating segment. Revenue is attributable to the Company’s country of domicile, Switzerland.
The Company has locations in three regions: Switzerland, the United Kingdom and the United States. An analysis of non-current assets by geographic region is presented in note 13, “Non-current assets by geographic area”.
3.20. Loss per share
Basic loss per share is calculated by dividing the net loss attributable to shareholders by the weighted average number of common shares in issue during the year, excluding common shares owned by the Company and held as treasury shares. See note 27, “Loss per share.”
Diluted loss per share adjusts the shares used in the determination of basic loss per share to take into account the after-tax effect of interest and other financing costs associated with potentially dilutive common shares, if applicable, and the weighted average number of ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares (share option plans and convertible loans). See note 22, “Share-based compensation expense” and note 21, “Convertible loans”, respectively.
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4.New and amended IFRS standards
(i)New and amended IFRS standards

There are no new IFRS standards, amendments to standards or interpretations that are mandatory for the financial year beginning on January 1, 2020, that are relevant to the Group and that have had any impact in the interim periods. New standards, amendments to standards and interpretations that are not yet effective, which have been deemed by the Group as currently not relevant, and hence are not listed here.
(ii)Recently adopted IFRS standards
IFRS 16 “Leases” has been adopted by the Group from January 1, 2019. Under IAS 17, lessees were required to make a distinction between a finance lease (on balance sheet) and an operating lease (off balance sheet). IFRS 16 now requires lessees to recognize an asset, being the right to use the leased item, and a financial liability, reflecting future lease payments, for virtually all lease contracts, though there is an optional exemption for certain short-term leases and leases of low-value assets.
The Group has applied the modified retrospective approach, which requires the recognition of the cumulative effect of initially applying IFRS 16 as of January 1, 2019 to accumulated losses without restating prior years. Since the Group recognized the right-of-use assets at an amount equal to the lease liabilities there was no impact on accumulated losses. The new accounting policy for leases is set out in note 3.12, “Leases”.
The Group has elected to apply the following practical expedients in adopting IFRS 16: (i) not to recognize right-of-use assets and lease liabilities for leases of low value, (ii) to apply hindsight in determining the lease term for contracts which contain certain options to extend or terminate the lease, (iii) to account for each lease component and any non-lease components as a single lease component, (iv) to rely on its assessment of whether leases were onerous by applying IAS 37 Provisions, Contingent Liabilities and Contingent Assets immediately before the date of application, and (v) to exclude initial direct costs for the measurement of the right-of-use asset at the date of initial application. The Group’s weighted average incremental borrowing rate calculated as of January 1, 2019 was 2.66%.
The following table reconciles the Group's operating lease obligations at December 31, 2018, as computed under the Group's previous accounting policy disclosed above in note 3.12, “Leases”, with the lease obligations recognized on initial application of IFRS 16 at January 1, 2019.
(in KUSD)
Operating lease commitments at December 31, 2018 4,378 
Discounted at the incremental borrowing rate as at January 1, 2019
3,976 
Short-term leases recognized on a straight-line basis as expenses
(15)
Low-value leases recognized on a straight-line basis as expenses
— 
Extension options reasonably certain to be exercised
1,462 
Lease obligations recognized at January 1, 2019
5,423 
Of which are:
Lease liabilities (short-term)
924 
Lease liabilities (long-term)
4,499 
In accordance with the adoption of IFRS 16 “Leases” as of January 1, 2019, the Group recorded at initial recognition a non-cash KUSD 5,423 right-of-use asset and corresponding lease liability. The Group’s Consolidated Statement of Operation for the year ended December 31, 2019 was impacted by an increase in depreciation of right-of-use leased assets of KUSD 1,064 and a reduction in operating lease expenses of KUSD 1,002. The increase in interest expense was KUSD 141. During the same periods, the Group’s cash flow statement was impacted by a shift of KUSD 1,143 from cash generated from operations to net cash used in financing activities. Overall, IFRS 16 was cash neutral for the Group. See note 15, “Leases.”
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5.Financial risk management
5.1Financial risk factors
Management and the Board of Directors regularly reviews the Group cash forecast and related foreign exchange risk. It also performs the risk assessment, defines any necessary measures and ensures the monitoring of the internal control system. The Group does not use derivative financial instruments to hedge these exposures.
Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to British pounds, Euros and Swiss francs. Transaction exposure arises because the amount of local currency paid or received in transactions denominated in foreign currencies may vary due to changes in exchange rates. Foreign exchange risk arises from:
–forecast costs denominated in a currency other than the entity’s functional currency;
–recognized assets and liabilities denominated in a currency other than the entity's functional currency; and
–net investments in foreign operations.
Management believes that foreign exchange risk is minimal, as the Company pays invoices mainly in USD and holds cash principally in USD.
The Group's cash and cash equivalents are denominated in the following currencies:
2020 2020 2019 2019
December 31
in KL/C(1)
in KUSD
in KL/C(1)
in KUSD
In USD
435,750  435,750  109,939  109,939 
In CHF
376  426  457  472 
In GBP
2,096  2,861  3,529  4,654 
In EUR
129  158  433  486 
439,195  115,551 
_______________
(1)Thousands Local Currencies
The Group has certain investments in foreign operations whose net assets are exposed to foreign currency translation risk. Currency exposure arising from these net assets of the Group’s foreign operations is managed primarily through purchasing goods and services denominated in the relevant foreign currencies.
At December 31, 2020, if the USD had weakened / strengthened by 10% against the CHF with all other variables held constant, the pre-tax loss for the year would have been KUSD 1,013 higher / lower, mainly as a result of foreign exchange losses / gains on translation of CHF-denominated net monetary liabilities (2019: KUSD 201 higher / lower on net monetary assets).
At December 31, 2020, if the USD had weakened / strengthened by 10% against the EUR with all other variables held constant, the pre-tax loss for the year would have been KUSD 214 higher / lower, mainly as a result of foreign exchange losses / gains on translation of EUR-denominated net monetary liabilities (2019: KUSD 95 higher / lower on net monetary assets).
At December 31, 2020, if the USD had weakened / strengthened by 10% against the GBP with all other variables held constant, the pre-tax loss for the year would have been KUSD 323 higher / lower, mainly as a result of foreign exchange losses / gains on translation of GBP-denominated net monetary liabilities (2019: KUSD 290 higher / lower), and the gain on currency translation differences credited directly to equity and arising on the translation of the net assets of ADCT UK would have been KUSD 439 higher / lower (2019: KUSD 320 higher / lower on net monetary assets).
Interest rate risk
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Interest rate risk arises from movements in interest rates which could have adverse effects on the Group's net income or financial position. Changes in interest rates cause variations in interest income and expenses on interest-bearing assets and liabilities, and on the value of the net defined benefit pension obligation. See note 5.3, “Fair value estimation” for a further discussion on the risk free rate and implied bond yield sensitivity analysis used in determining the fair value of the embedded derivative and derivative associated with the Company’s convertible loans.
Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating activities and from its financing activities including deposits with banks and other financial institutions (see note 17b, “Credit quality of financial assets”). The Group’s cash and cash equivalents accounts are maintained with well established, highly rated financial institutions. The Company’s wholly-owned subsidiaries are solvent, are managed on a cost-plus service provider basis, and are supported by the Company as the parent.
Liquidity risk
Liquidity risk is the risk that the Group may not be able to generate sufficient cash resources to settle its obligations in full as they fall due or can do so only on terms that are materially disadvantageous. Prudent liquidity risk management implies maintaining sufficient cash to cover working capital requirements. Cash is monitored by the Group management.
Funding and liquidity risks are reviewed regularly by management and the Board of Directors. The Board of Directors reviews the Group’s ongoing liquidity risks quarterly as part of the financial review process and on an ad hoc basis as necessary. To date, the Company has funded its capital requirements through capital raises, including the issuance of the Company’s common shares and the issuance of convertible loans (see note 21, “Convertible loans) or partnering of its programs.
The table below analyses the Group's financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date.
(in KUSD) Note Less than
1 year 		1-3 
years 		3-5 
years 		More than
5 years
Trade accounts payable
5,279  —  —  — 
Lease liabilities, contractual rent
15 1,050  1,047  642  903 
Convertible loan, interest and exit fee 21 3,921  7,842  7,703  — 
Convertible loan, principal (1)
21 —  —  65,000  — 
At December 31, 2020 10,250  8,889  73,345  903 
Trade accounts payable
3,329  —  —  — 
Lease liabilities, contractual rent
15 1,246  1,859  2,265  — 
At December 31, 2019 4,575  1,859  2,265  — 
(1) Amount represents the principal amount of the convertible loan due May 2025 associated with the first tranche of the Facility Agreement. See note 21, “Convertible loans”. In addition, the Facility Agreement contains a second tranche of USD 50.0 million that the Company is obligated to draw down upon the receipt of regulatory approval of Lonca. While the Company believes that it is highly probable that regulatory approval will be obtained, such amount has not been included in the table above as the amount has not been drawn down as of December 31, 2020.
5.2Capital management
The Group considers equity as equivalent to the IFRS equity on the balance sheet (including share capital, share premium and all other equity reserves attributable to the owners of the Company). Other than its lease liabilities, the Group’s only interest-bearing debt relates to the issuance of convertible loans (see note 21, “Convertible loans”).
The primary objective of the Group's capital management is to maximize shareholder value. Management and the Board of Directors regularly reviews its shareholder return strategy. For the foreseeable future, management and the Board of Directors will maintain a capital structure that supports the Group's strategic objectives through managing funding and liquidity risks and optimizing shareholder return.
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The Company is a late clinical-stage biotechnology company with product candidates still at pre-clinical and clinical stages of development. During the fourth quarter of 2020, the FDA accepted the Company’s BLA for Lonca for the treatment of relapsed or refractory DLBCL and granted priority review status. The FDA set a Prescription Drug User Free Act (“PDUFA”) target date of May 21, 2021. Even if the FDA approves Lonca for commercial sale, the Company does not expect to have significant revenues in 2021. It intends to continue to explore financing opportunities either through the equity or debt markets as well as through cooperation and collaboration with pharmaceutical and biotechnology partners – potentially along the value chain from research alliances through co-development to commercialization. As explained in note 2 (iii), “Going concern basis”, management believes that the Company has sufficient financial resources available to meet all of its obligations for at least the twelve months from the issuance of these consolidated financial statements without additional capital becoming available.
5.3Fair value estimation
At December 31, 2020, the carrying amount is a reasonable approximation of fair value for the following financial assets and liabilities:
–Cash and cash equivalents
–Trade accounts payable
In 2020, there were no significant changes in the business or economic circumstances that affect the fair value of the Group's financial assets and financial liabilities with the exception of the Company entering into the Facility Agreement. See note 21, “Convertible loans”. The Company received convertible loans in the amount of USD 65.0 million. These convertible loans have been recognized as a hybrid financial instrument and accounted for as two separate components: (i) a loan and (ii) an embedded conversion option derivative. The Company is obligated to draw down the second tranche in the amount of USD 50.0 million upon receipt of regulatory approval for Lonca. If the Company has not received the regulatory approval on or prior to December 31, 2021, the second tranche will automatically terminate on such date. This obligation has been accounted for as a derivative. Each quarter, the Company marks-to-market this derivative and the embedded conversion option derivative with changes in the fair value (gains or losses) of the derivatives recorded in the Consolidated Statement of Operation.
Fair values must be estimated on an ongoing basis with regard to awards under the ADC Therapeutics SA 2019 Equity Incentive Plan (the “2019 Equity Incentive Plan”), with regard to the convertible loan conversion option derivative related to the first tranche of the convertible loans and with regard to the derivative arising from the obligation related to the second tranche of the convertible loans. The approach to valuation follows the grant date fair value principle and the key input factors are described for the share-based compensation awards in note 22, “Share-based compensation” and for the convertible loan derivatives in note 21, “Convertible loans”.
Commonly accepted pricing models (Hull and Goldman Sachs) have been used to calculate the fair value of the convertible loan derivatives. The valuation of the embedded derivative in the first tranche and derivative relating to the second tranche are classified as pertaining to level 3 of the valuation hierarchy set out below.
The different levels of the valuation hierarchy have been defined as follows:
a.Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
b.Level 2: inputs other than quoted prices that are observable for the asset or liability, either directly (for example, as prices) or indirectly (for example, derived from prices);
c.Level 3: inputs for the asset or liability that are not based on observable market data.
There were no transfers between the respective levels during the period.
The embedded derivative conversion feature and the derivative associated with the first and second tranche of the Company’s convertible loans (see note 21, “Convertible loans”), respectively, are re-measured to fair value at each reporting date. The Company utilizes a risk free rate, an implied bond yield and a selected volatility in determining the fair value of its embedded derivative and derivative. A hypothetical 10% increase (decrease) in the risk free rate as of December 31, 2020 would have increased (decreased) the derivative values associated with the first and second tranche of our convertible loans by KUSD 5 (KUSD 5) and KUSD 4 (KUSD 4), respectively. A hypothetical 10% increase (decrease) in the implied bond yield as of December 31, 2020 would have increased (decreased) the derivative value associated with the first tranche of our convertible loans by KUSD 2,088 and (KUSD 898) and (decreased) increased the derivative value associated with the second tranche of our convertible loans by (KUSD 846) and KUSD 875. A hypothetical 10% increase (decrease) in the selected volatility as of December 31, 2020 would have increased (decreased) the derivative value associated with the first tranche of our convertible loans by KUSD 2,043 (KUSD 248) and decreased (increased) the derivative value associated with the second tranche of our convertible loans by (KUSD 52) and KUSD 234.
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6.Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The estimates, assumptions and judgements that have significantly affected reported results or that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.
Licenses
The Company enters into collaboration, license and sublicense agreements with third parties, which grant the Company the right to use their antibodies with the Company's licensed warhead and linker technology to develop new ADCs for anti-cancer treatments. The license fees (upfront fees, signature fees, milestone payments) paid by the Company under the agreements are capitalized as intangible assets. The Company considers that those licenses have an indefinite life until regulatory and marketing approval is obtained. Once obtained, the asset will be treated as a finite intangible asset and amortization will commence. The license costs capitalized were KUSD 1,923 and KUSD 1,731 for the years 2020 and 2019, respectively. The intangible assets are tested annually for impairment and more frequently if events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. An impairment loss is recognized for the amount by which the asset's carrying amount exceeds its recoverable amount (higher of an asset's fair value less costs of disposal and value in use). Impairment losses are recognized in the Consolidated Statement of Operation. Testing for impairment inevitably involves the application of judgement. In 2020 and 2018, in relation to the termination of one of the Company's programs in each year, an impairment charge of KUSD 216 and KUSD 227, respectively (corresponding to the entire carrying amount of the capitalized license) was recognized and charged to research and development expenses in the Consolidated Statement of Operation. The Company performed its review for 2019 and concluded no impairment was required. See note 16, “Intangible assets”.
Convertible loans

The Company entered into the Facility Agreement, pursuant to which the counterparty agreed to extend senior secured convertible term loans to the Company in two separate tranches. The Company received the first tranche upon the completion of the IPO. The first tranche has been recognized as a hybrid financial instrument and accounted for as two separate components: (i) a loan and (ii) an embedded conversion option derivative. The Company is obligated to draw down on the second tranche upon receipt of regulatory approval for Lonca. If the Company has not received the regulatory approval on or prior to December 31, 2021, the second tranche will automatically terminate on such date. The second tranche has been accounted for as a derivative. In determining the value of the loan and embedded derivative associated with the first tranche as well as the derivative associated with the second tranche, the Company utilized significant estimates and judgements. In particular, significant judgement was required in deciding whether the conversion option derivative embedded in the notes was of a liability or equity nature, in selecting the appropriate models to value the derivatives arising from the first and second tranches of the convertible notes and in identifying the appropriate key assumptions as inputs to the selected models. Details of the models and assumptions are set out in note 21, “Convertible loans”.
Share-based compensation expense

The details of the ADC Therapeutics Incentive Plan 2014 (as amended and restated as of October 1, 2015, the “Incentive Plan 2014”), the Share Purchase Plan 2016 and the 2019 Equity Incentive Plan are explained in note 22, “Share-based compensation expense”.

Prior to the Company’s IPO, the determination of the fair value of awards involved the application of an adjusted form of the Black-Scholes option pricing model that took into account the strike price, term of the award, impact of dilution (where material), share price at grant date and expected price volatility of the underlying share, expected dividend yield, risk free interest rate for the term of the award and correlations and volatilities of the shares of peer group companies. In addition, for awards granted on and subsequent to July 1, 2019 through the IPO date, the fair value of grants was based on a probability-weighted expected returns method that took into account both the value derived by using an adjusted form of the Black-Scholes option pricing model and a discounted estimate of the price that may have been achieved in a future transaction. This method entailed further significant judgement, both in estimating a transaction price and in estimating the probabilities of different outcomes. The adjusted form of the Black-Scholes option pricing model used to derive a value for the common share price at grant date derived the implied equity value for one type of equity security from a contemporaneous transaction involving another type of security and considered the timing, amount, liquidation preferences and dividend rights of issues of preference shares.

After the Company’s IPO, the determination of the fair value of awards involves the application of the Black-Scholes option pricing model for the Company’s option equity awards, which utilizes certain assumptions including expected volatility, expected life and risk-free interest rate. In addition, the exercise price per share option is set by the Company at the fair market value of the underlying common
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shares on the date of grant, as determined by the Company, which is generally the closing share price of the Company’s common shares traded on the NYSE.
7.Contract revenue and contract liability
Contract revenue represents the amortization of upfront payments received under license and collaboration contracts in order to finance the research and development that is the subject of those contracts as well as associated milestone payments. In 2013, the Company entered into a license and joint collaboration agreement which was subsequently discontinued in June 2019. As a result of the discontinuance of this joint development program, the remaining balance of the non-refundable upfront payment (consisting of deferred revenue and presented as a contract liability) received under the related license and collaboration agreement was recognized in the first half of 2019 as contract revenue, and no additional contracts giving rise to current contract revenue have been entered into by the Company. As such, the Company recognized revenue of KUSD 2,340 associated with the remaining balance of the non-refundable upfront payment for the year ended December 31, 2019. The Company recognized revenue of KUSD 1,140 for the year ended December 31, 2018. There was no deferred revenue as of December 31, 2020 and December 31, 2019.
8.Other income (expense)
Year Ended December 31,
(in KUSD) Note 2020 2019 2018
Other income 584  1,655  — 
Convertible loans, derivatives, change in fair value (expense) 21 (45,411) —  — 
Convertible loans, first tranche, derivative, transaction costs 21 (1,571) —  — 
Share of results with joint venture 2 (viii) 24,368  —  — 
Financial income 832  2,253  2,856 
Financial expense (4,926) (156) — 
Exchange differences (loss) gain (576) (255) 213 
Total other (expense) income (26,700) 3,497  3,069 

Other income

The Company recognizes as other income amounts received and receivable by its subsidiary, ADCT UK, under the United Kingdom’s Research and Development Expenditure Credit scheme (“UK R&D Credit Scheme”). During 2019, the Group recognized amounts received and receivable by ADCT UK for the first time under the UK R&D Expenditure Credit Scheme. The grants represent 12% of eligible expenditure (11% for periods prior to 2018). Because of the strictness of the eligibility criteria for these credits, the Group did not recognize any income under this scheme until it had positive confirmation that initial claims had been approved for payment, which occurred in 2019.

The claims are payable through the tax system, as a refund of corporation tax or of other taxes, including income tax and social security payments deducted at source from qualifying (research) employees’ payroll and VAT. The relevant amounts have been therefore presented net in the balance sheet. As the credit is independent of ADCT UK’s taxable profit, is clearly designed to incentivize companies to invest in R&D activities and is itself taxable income, the Group has recognized the income as government grants within other income and not as a credit to income tax expense.

Financial income

Our financial income decreased to KUSD 832 for year ended December 31, 2020 primarily due to lower amounts placed on short-term deposit and lower interest rates.

Financial expense

Financial expense primarily relates to interest on the convertible loans, calculated at the implied effective interest rate, from May 19, 2020. This expense is explained in note 21, “Convertible loans”.

Exchange differences (loss) gain

Due to our international operations, the Company is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to British pounds, Euros and Swiss francs. Exchange differences represent income or (loss) based on changes in foreign currencies. Favorable or unfavorable changes in foreign currencies resulted in a loss of KUSD 576 and KUSD 255 and income of KUSD 213 for the years ended December 31, 2020, 2019 and 2018, respectively.
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9.Employee expenses
Year Ended December 31,
(in KUSD) Note 2020 2019 2018
Wages, salaries and other costs
44,058  24,061  19,245 
Social security costs
7,292  3,871  3,452 
Share-based compensation expense
22 42,928  1,117  469 
Defined benefit plan costs
20 966  462  535 
Defined contribution plan costs
727  540  481 
Employee expenses
95,971  30,051  24,182 
Employee expenses increased from KUSD 30,051 in 2019 to KUSD 95,971 in 2020. This increase of KUSD 65,920 is primarily due to higher headcount as the Company continues to advance clinical trials associated with its lead product candidates, preparing for the commercial launch of Lonca in 2021 and, to a lesser extent, becoming a public company. The increase in headcount resulted in higher share-based compensation expense as well as the acceleration of expense associated with the immediate vesting of awards as a result of the Company’s IPO.
10. Expenses by nature
The following table provides the Consolidated Statement of Operation classification of our expense by nature:
Year Ended December 31,
(in KUSD) Note 2020 2019 2018
R&D
External costs (1)
97,768  82,621  99,067 
Employee expenses (2)
9 44,264  24,916  19,246 
R&D expense
142,032  107,537  118,313 
S&M
External costs
11,887  —  — 
Employee expenses (2)
9 10,214  —  — 
S&M expense 22,101  —  — 
G&A
External costs (1)
13,637  9,067  3,832 
Employee expenses (2)
9 41,493  5,135  4,936 
G&A expense
55,130  14,202  8,768 
Total operating expense
219,263  121,739  127,081 
(1) Includes depreciation expense; Depreciation expense for S&M was not material.
(2) Includes share-based compensation expense
The increase in R&D expense in the year ended December 31, 2020 was due to higher employee expenses related to an increased number of employees as the Company continues to advance clinical trials associated with its lead product candidates, which also contributed to an increase in share-based compensation expense. External costs increased primarily due to the advancement of the Company’s clinical trials associated with its lead product candidates. In addition, we recorded a charge for a milestone payment of USD 5.0 million associated with a collaboration agreement that was achieved during December 2020. The decrease in R&D expense in 2019 was primarily due to a lower chemistry, manufacturing and controls (“CMC”) costs as the clinical trials advance, partially offset by higher employee expense due to the increased number of employees necessary to advance the Company’s lead product candidates.
S&M expense in the year ended December 31, 2020 related to the build-out of the commercial organization as the Company prepares for the anticipated launch of Lonca in 2021. During the year ended December 31, 2019, the Company incurred KUSD 158 of S&M expense
F-24

that was classified within G&A expense. This amount was not reclassified as the amount was not material. There was no S&M expense incurred for the year ended December 31, 2018.
The increase in G&A expense in the year ended December 31, 2020 was primarily due to increased share-based compensation expense and to a lesser extent, increased costs associated with being a public company. The increase in G&A expense in the year ended December 31, 2019 is primarily due to increased external costs relating to professional fees associated with the Company’s planned share offering which was not completed.
11. Income tax expense
Year Ended December 31,
(in KUSD) 2020 2019 2018
Current income taxes for the year
417  572  218 
Current income taxes related to prior years
(90) 10  6 
Income tax expense
327  582  224 
The Group's expected tax expense for each year is based on the applicable tax rate in each individual jurisdiction, which in 2020 ranged between 13.68% and 21.0% (2019: between 11% and 27%; 2018: between 11% and 27%) in the tax jurisdictions in which the Group operates. The weighted average tax rate applicable to the profits of the consolidated entities was 13.8% (2019: 11.5%; 2018: 11.3%). This increase is due to changes in the mix of the taxable results and the changes in tax rates of the individual group companies.

The tax on the Group's net loss before tax differs from the theoretical amount that would arise using the weighted average applicable tax rate as follows:
Year Ended December 31,
(in KUSD) 2020 2019 2018
Loss before taxes
245,963  115,902  122,872 
Tax calculated at tax domestic rates applicable to profits in the respective countries
(33,319) (12,332) (13,321)
Tax effects of:
 - Tax losses for which no deferred income tax asset was recognized
26,112  13,187  13,766 
 - Utilization of R&D tax credit (USA)
(546) (436) (310)
 - Income not subject to tax / (expenses not deductible for tax purposes)
8,166  156  83 
 - Tax relating to prior years
(90) 10  6 
 - Other
4  (3) — 
Income tax expense
327  582  224 
12. Other current assets
(in KUSD) December 31, 2020 December 31, 2019
VAT receivable, net 453  471 
Withholding tax receivable 991  626 
Prepaid insurance 2,852  — 
Prepaid compensation 1,488  — 
Prepaid expenses - other 3,815  4,215 
UK R&D expenditure credit receivable 1,246  891 
Other 410  852 
11,255  7,055 
F-25

The increase of USD 4.2 million in other current assets is primarily due to an increase in prepaid insurance relating to Director and Officer insurance and prepaid compensation in the form of employment sign-on bonuses associated with the increase in headcount in 2020. For further information regarding the UK R&D Credit Scheme, please refer to note 8, “Other income and expense”.
The maturity of other current assets is less than one year. The Company considers the counterparty risk as low. The Company believes the carrying amount of the aforementioned receivables is considered to approximate their fair value.
13. Non-current assets by geographic area
(in KUSD)
Country December 31, 2020 December 31, 2019
Switzerland
60,231  10,903 
United Kingdom
1,132  2,032 
United States
1,482  1,773 
62,845  14,708 
Non-current assets consist of property, plant and equipment, right-of-use assets, intangible assets and interest in joint venture. All intangible assets and the interest in joint venture are located in Switzerland.
14. Property, plant and equipment
(in KUSD) Leasehold
improvements 		Laboratory
equipment 		Office
equipment 		Hardware Construction in progress Total
Cost
January 1, 2019 514  939  597  497  —  2,547 
Additions 17  131  93  118  —  359 
Exchange difference 2  41  8  3  —  54 
December 31, 2019 533  1,111  698  618  —  2,960 
Additions 224  30  84  616  67  1,021 
Disposals and scrapping (13) (178) (117) (367) —  (675)
Exchange difference 2  39  6  3  —  50 
December 31, 2020 746  1,002  671  870  67  3,356 
Accumulated depreciation
January 1, 2019 (126) (310) (245) (326) —  (1,007)
Depreciation charge (82) (204) (149) (117) —  (552)
Exchange difference (1) (19) (3) (2) —  (25)
December 31, 2019 (209) (533) (397) (445) —  (1,584)
Depreciation charge (162) (207) (173) (232) —  (774)
Disposals and scrapping 13  178  117  367  —  675 
Exchange difference (4) (32) (4) (4) —  (44)
December 31, 2020 (362) (594) (457) (314) —  (1,727)
Net book amount
December 31, 2019 324  578  301  173  —  1,376 
December 31, 2020 384  408  214  556  67  1,629 
In 2020, the investments in tangible fixed assets relate to hardware due to the increased number of employees and certain leasehold improvements. During 2020, the Company wrote-off fully depreciated property, plant and equipment no longer in use. In 2019, the investments in tangible fixed assets relate mainly to investments in the UK laboratory and in hardware.
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Depreciation of property, plant and equipment has been charged to the following categories in the Consolidated Statement of Operation:
Year Ended December 31,
(in KUSD) 2020 2019 2018
R&D expense
589  407  330 
G&A expense
185  145  158 
774  552  488 
15. Leases
The following tables provide balance sheet classification related to leases:
(in KUSD) December 31, 2020 December 31, 2019
Properties (offices)
3,071  4,820 
Vehicles
58  78 
Total right-of-use assets
3,129  4,898 
(in KUSD) December 31, 2020 Three Months Ended December 31, 2019
Lease liabilities (short-term)
1,002  1,132 
Lease liabilities (long-term)
2,465  3,899 
Total lease liabilities
3,467  5,031 
Prior to fiscal year 2019, all leases were classified as ‘operating leases’ under IAS 17 and were accordingly not recognized as assets and liabilities. In 2018, lease payments incurred for all non-cancellable operating leases were recorded in the Consolidated Statement of Operation in an amount of KUSD 869.
As the Company continues to grow its operations, prepares for product commercialization and further develops its pipeline, it is looking to expand its facilities. During the third quarter of 2020, the Company concluded it was reasonably certain that it would modify the terms of various existing lease agreements in accordance with the underlying terms of the agreements, which would reduce the Company’s future minimum lease obligations. As a result, the Company reduced its Right of use assets and Leased liability, non-current by KUSD 583.
F-27

(in KUSD)
Right-of-Use Assets Properties (Offices) Vehicles Total
Cost
January 1, 2019 5,399  24  5,423 
Additions 466  78  544 
Disposals —  (24) (24)
Exchange difference 22  —  22 
December 31, 2019 5,887  78  5,965 
Modification of lease terms (583) —  (583)
Exchange difference 20  —  20 
December 31, 2020 5,324  78  5,402 
Accumulated depreciation
January 1, 2019 —  —  — 
Depreciation charge (1,051) (13) (1,064)
Disposals —  13  13 
Exchange difference (16) —  (16)
December 31, 2019 (1,067) —  (1,067)
Depreciation charge (1,131) (20) (1,151)
Exchange difference (55) —  (55)
December 31, 2020 (2,253) (20) (2,273)
Net book amount
December 31, 2019 4,820  78  4,898 
December 31, 2020 3,071  58  3,129 


Depreciation of right-of-use assets have been charged to the following categories in the Consolidated Statement of Operation:
For the Years Ended
(in KUSD) 2020 2019
R&D expenses 915  837 
G&A expenses 236  227 
1,151  1,064 
F-28

(in KUSD)
Lease liabilities Properties (Offices) Vehicles Total
January 1, 2019 5,399  24  5,423 
Additions 466  78  544 
Disposals —  (12) (12)
Cash outflow (including interest) (1,130) (13) (1,143)
Interest 140  1  141 
Exchange difference 78  —  78 
December 31, 2019 4,953  78  5,031 
Additions —  —  — 
Modification of lease terms (583) —  (583)
Cash outflow (including interest) (1,227) (22) (1,249)
Interest 102  3  105 
Exchange difference 157  6  163 
December 31, 2020 3,402  65  3,467 
December 31, 2019
Lease liabilities (short-term) 1,114  18  1,132 
Lease liabilities (long-term) 3,839  60  3,899 
Total lease liabilities 4,953  78  5,031 
December 31, 2020
Lease liabilities (short-term) 981  21  1,002 
Lease liabilities (long-term) 2,421  44  2,465 
Total lease liabilities 3,402  65  3,467 
The Company does not recognize right-of-use assets for short-term and low value leases. The Company has no low value leases. Expense relating to short-term leases incurred during 2020 and 2019 is recorded in the Consolidated Statement of Operation in an amount of KUSD 277 and KUSD 28, respectively.
The amount payable in 2021 under short-term leases (with an original term of under 12 months) is KUSD 130.
See note 29, “Events after the reporting date” for further information.
F-29

16. Intangible assets
(in KUSD) Licenses Software Total
Cost
January 1, 2019 7,490  87  7,577 
Additions 1,731  59  1,790 
Exchange difference —  1  1 
December 31, 2019 9,221  147  9,368 
Additions 1,923  85  2,008 
Disposals —  (65) (65)
Exchange difference —  1  1 
December 31, 2020 11,144  168  11,312 
Accumulated amortization
January 1, 2019 (853) (50) (903)
Amortization charge —  (30) (30)
Exchange difference —  (1) (1)
December 31, 2019 (853) (81) (934)
Amortization charge —  (47) (47)
Impairment charge (216) —  (216)
Disposals —  65  65 
Exchange difference —  (1) (1)
December 31, 2020 (1,069) (64) (1,133)
Net book amount
December 31, 2019 8,368  66  8,434 
December 31, 2020 10,075  104  10,179 
Amortization and impairment of intangible assets have been charged to the following categories in the Consolidated Statement of Operation:
(in KUSD) Year ended December 31, 2020 Year ended December 31, 2019 Year ended December 31, 2018
R&D expenses
230  14  244 
G&A expenses
33  16  8 
263  30  252 
Licenses
Licenses classified as definite-lived intangible assets are amortized over their useful lives, which are determined on the basis of the expected pattern of consumption of the expected future economic benefits embodied in the licenses and which therefore commence only once the necessary regulatory and marketing approval has been received for the product candidates to which they relate. To date, the Company has not received any regulatory and marketing approval for any of its product candidates and therefore classifies all of its licenses as indefinite-lived intangible assets. Consequently, the Company did not recognize any amortization expense of licenses.
The Company has capitalized certain payments for licenses, in accordance with its accounting policy note 3.6, “Intangible assets”. The largest amount paid to any one party was KUSD 2,500 paid to Spirogen Ltd. in 2011 under a license and collaboration agreement, pursuant to which Spirogen Ltd. granted the Company access to its next-generation PBD-based warhead and linker technology. As a result of changes to the ownership of Spirogen Ltd. and of the applicable intellectual property rights, the agreement was subsequently amended and restated (with retroactive effect to September 2011) with MedImmune replacing Spirogen Ltd. as the licensor thereunder.
F-30

Under the terms of the agreement, MedImmune has granted the Company an exclusive, worldwide license under certain patent rights and related know-how to make, have made, use, sell, offer for sale and import product candidates in the field of human therapeutics and diagnostics that consist of (i) PBD-based molecules directly conjugated to an antibody (i.e., ADCs with a PBD-based warhead) that specifically bind to up to 11 approved targets (“ADC Targets”), and (ii) PBD-based molecules conjugated to a non-antibody (i.e., targeting-moiety conjugates with a PBD-based warhead) that specifically bind to up to ten approved targets (“XDC Targets”). As of December 31, 2020, there are 11 approved ADC Targets subject to the license, including CD19 (the target of Lonca) and CD25 (the target of camidanlumab tesirine (“Cami” and previously known as ADCT-301), and ten approved non-ADC Targets subject to the license.
Under the terms of the agreement, the Company has the right to grant sublicenses to affiliates and, subject to MedImmune’s approval (not to be unreasonably withheld), third parties. In addition, with respect to each licensed target, the Company has agreed to use commercially reasonable efforts to develop and commercialize at least one product and submit an IND application with the FDA (or its equivalent in another jurisdiction) for one product within 48 months after formal designation of the target as an approved replacement target, which the Company has done with respect to CD19 and CD25 upon submitting the IND applications for Lonca and Cami, respectively.
The Company is required to make no further payments to Spirogen Ltd or Medimmune, beyond the upfront licensing fee of USD 2.5 million paid in 2011, in consideration for the rights granted under the agreement.
In 2020, the Company capitalized the following license payments:
–An amount of KUSD 1,000 relating to a license agreement with a third party to use their novel and proprietary conjugation technology with a variety of payload technologies in the development, manufacturing and commercialization of antibody drug conjugates.
–An amount of KUSD 548 relating to a worldwide exclusive license with a third party to use their specific binding proteins in the development, manufacturing and commercialization of products.
–An amount of KUSD 250 relating to a license agreement with a third party to acquire an antibody to be used in the development, manufacturing and commercialization of products.
–An amount of KUSD 125 relating to license agreements with a third party to use their technology to generate antibody-drug conjugates for up to five antibodies.

In 2019, the Company capitalized the following license payments:
–An amount of KUSD 1,000 relating to a license agreement with a third party to acquire an antibody to be used in pre-clinical formalization, clinical testing, manufacturing and commercialization was capitalized as intangible assets.
–An amount of KUSD 500 relating to a license agreement with a third party to use their technology to generate antibody-drug conjugates for up to five antibodies was capitalized as intangible assets.
–An amount of KUSD 231 relating to a license agreement with a third party to use their technology for the production of antibodies was capitalized as intangible assets.
Impairment testing
The Group performed an assessment of its licenses in the context of its annual impairment test. Given the stage of the Group's development activities, the Group performed the impairment test on the basis of a fair value model for the entire group using the Company’s market capitalization.
The group therefore performs their annual impairment tests on their entire portfolio of intangible assets, by deriving their fair value from the market capitalization for the entire group based on the Company’s closing share price of its common stock traded on the NYSE as of the Company’s annual impairment testing date. The fair value of the intangible asset portfolio was derived by deducting the carrying value of its tangible assets, which consist primarily of cash and cash equivalents, from the Group valuation. This resulted in a derived fair value of its portfolio of intangibles that was multiple times the carrying value of its intangibles.
Management's estimate of the fair value is consistent with the approach taken in prior years with the exception of deriving the value of the entire group in 2020 based on the market capitalization of the Company’s common stock traded on the NYSE and with external sources of information during 2019 and 2018 (level 3 assessment).
F-31

Each of the product candidates related to the capitalized intangible assets not yet available for use was additionally tested for impairment. Assessments included reviews of the following indicators:
–Historical expenditure on clinical trials, future contractual commitments and internal budgets approved by the Board of Directors for ongoing and future trials;
–Consideration of the progress of clinical trials, including obtaining primary endpoint readout data, discussions with regulatory authorities for new trials and enrollment status for ongoing clinical trials;
–Consideration of market potential, supported where available by external market studies, and assessments of competitor products and product candidates.
If a candidate fails any of those indicators, the entire balance is written off. During 2020 and 2018, the Company terminated a program in each year. Consequently, impairment charges of KUSD 216 and KUSD 227 (corresponding to the entire carrying amount of the capitalized licenses) were recognized and charged to R&D expenses in the Consolidated Statement of Operation. No impairment losses were recognized in 2019.
17a. Financial instruments by class and by category
The accounting policies for financial instruments have been applied as indicated below:
(in KUSD) Note December 31, 2020 December 31, 2019
Financial assets - financial assets  
Cash and cash equivalents
5.1 / 17b 439,195  115,551 
Other current assets (excluding prepaid expenses)
12 3,100  2,840 
Other long-term assets
397  368 
Total financial assets (1)
442,692  118,759 
(in KUSD) Note December 31, 2020 December 31, 2019
Financial liabilities - financial liabilities  
Trade accounts payable 5,279  3,329 
Accrued liabilities and other payables 19 30,375  15,430 
Lease liabilities, short-term and long-term 15 3,467  5,031 
Convertible loans, short-term and long-term 21 38,406  — 
Convertible loans, derivatives 21 73,208  — 
Other long-term liabilities 221  — 
Total financial liabilities (1)
150,956  23,790 
Net financial position 291,736  94,969 
(1) Financial assets and Financial liabilities are recorded at historical or amortized cost with the exception of Convertible loans, derivatives which are recorded at fair value.

The following is the net debt rollforward for the Company for 2020. No net debt rollforward was presented for 2019 as the Company’s only debt obligation related to its lease liabilities, which were deemed not to be material.

F-32

Notes Cash and cash equivalents
Convertible loan (1)
Embedded derivative (1)
Lease liabilities (2)
Total
December 31, 2019 115,551  —  —  (5,031) 110,520 
Issuance of convertible loan 21 65,000  (37,203) (27,797) —  — 
Convertible loan transaction costs 21 (3,673) 2,102  —  —  (1,571)
Fair value adjustments 21 —  —  (23,432) —  (23,432)
Convertible loan accretion 21 —  (4,756) —  —  (4,756)
Interest payments (1,557) 1,452  105  — 
Lease principal 15 (1,144) —  —  1,144  — 
Other lease activity including foreign exchange 15 —  —  —  315  315 
Net cash outflow 264,783  —  —  —  264,783 
Foreign exchange on cash 235  —  —  —  235 
December 31, 2020 (3)
439,195  (38,406) (51,229) (3,467) 346,093 
(1) See note 21, “Convertible loans for further information.
(2) See note 15, “Leases” for further information.
(3) Totals may not foot due to rounding.
17b. Credit quality of financial assets
The credit quality of financial assets that are neither past due nor impaired is assessed below by reference to S&P’s credit ratings (where available) or to historical information about counterparty default rates:
(in KUSD) December 31, 2020 December 31, 2019
Cash and cash equivalents    
UBS 144,989  51,983 
Credit Suisse 145,238  62,652 
JP Morgan Chase 3,768  916 
Bank of America 145,200  — 

439,195  115,551 
Other current assets (excluding prepaid expenses) and other long-term assets are fully performing, not past due and not impaired (see note 12, “Other current assets” and note 17a, “Financial instruments by class and by category”).
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18. Deferred income taxes and tax credit
Unrecognized temporary differences, unused tax losses and unused tax credits
(in KUSD) December 31, 2020 December 31, 2019
Deductible temporary differences, unused tax losses and unused tax credits for which no deferred tax assets have been recognized are attributable to the following:    
Taxes losses
613,206  437,013 
Unused R&D US tax credit
26,255  10,765 
Deductible temporary differences related to the retirement benefit plan
3,543  2,684 
Deductible temporary differences related to IFRS 16
338  (39)
Offset of recognized temporary differences related to intangible assets
(2,364) (2,364)
Temporary difference related to investment in joint venture (24,368) — 
Temporary difference related to convertible loan (27,614) — 
Total
588,996  448,059 
Tax loss carryforwards
Potential deferred income tax assets from tax loss carryforwards exceed deferred tax liabilities. Deferred income tax assets from tax loss carryforwards are initially recognized to the extent of suitable deferred income tax liabilities, then to the extent that the realization of the related tax benefit through future taxable profits is probable. On this basis, the Company has decided not to recognize any deferred income tax assets at December 31, 2020 or 2019. The amounts of deferred income tax assets that arise from sources other than tax loss carryforwards and the amounts of deferred income tax liabilities are insignificant in comparison to the unrecognized tax loss carryforwards.
Tax losses not recognized and to be carried forward (in KUSD):
Years of expiry December 31, 2020 December 31, 2019
2020 —  14,735 
2021 19,889  19,889 
2022 31,128  31,128 
2023 38,441  38,441 
2024 92,012  92,012 
Beyond 2025 431,736  240,808 
613,206  437,013 
All of these carryforwards relate to the Company. In 2020, unused tax losses of KUSD 14,735 expired (2019: KUSD 6,209).
Deferred income tax assets from USA R&D tax credit carryforwards are recognized to the extent that the realization of the related tax benefit through future taxable profits is probable. On this basis, the Group has not recognized deferred tax assets related to the following tax credits carried forward:
R&D USA tax credits carried forward (in KUSD):
Years of expiry December 31, 2020 December 31, 2019
2036
1,059  783 
2037
2,569  1,839 
2038
7,117  3,387 
2039
7,026  4,756 
2040 8,484  — 

26,255  10,765 
F-34

An amount of KUSD 546 was utilized in 2020 (KUSD 436 in 2019), as per note 11 “Income tax expenses”.
These R&D tax credits, which may be carried forward for up to 20 years, relate entirely to ADCT America.
19. Accrued liabilities and other payables
(in KUSD) December 31, 2020 December 31, 2019
Payroll and social charges
12,063  5,726 
R&D costs
15,333  8,922 
Other
2,979  782 
30,375  15,430 
The increase in accrued liabilities and other payables is primarily related to the increase in R&D costs due to advancement of the Company’s clinical trials associated with its lead product candidates. In addition, Payroll and social charges increased due to higher employee headcount in 2020 as a result of the increased R&D activity discussed above as the Company prepares for the commercial launch of Lonca. In addition, we recorded a charge for a milestone payment of USD 5.0 million associated with a collaboration agreement that was achieved during December 2020.
20. Pension obligations
The Swiss pension plan is classified as a defined benefit plan under IFRS. Certain employees of the UK subsidiary are covered by local defined contribution plans. Pension costs for these plans are charged to the Consolidated Statement of Operation when incurred.
Swiss pension plan
The Company contracted with the Swiss Life Collective BVG Foundation based in Zurich for the provision of occupational benefits. All benefits in accordance with the regulations are reinsured in their entirety with Swiss Life SA within the framework of the corresponding contract. This pension solution fully reinsures the risks of disability, death and longevity with Swiss Life. Swiss Life invests the vested pension capital and provides a 100% capital and interest guarantee. The pension plan is entitled to an annual bonus from Swiss Life comprising the effective savings, risk and cost results.
Although, as is the case with many Swiss pension plans, the amount of ultimate pension benefit is not defined, certain legal obligations of the plan create constructive obligations on the employer to pay further contributions to fund an eventual deficit; this results in the plan nevertheless being accounted for as a defined benefit plan.
In 2020, the guaranteed interest to be credited to employees' savings was 1% for mandatory retirement savings and 0.125% for supplementary retirement savings. While the rate for converting mandatory savings to an annuity remains fixed by statute at 6.8%, the rate for converting supplementary savings to an annuity at age 65 for male and 64 for female employees was reduced for the period 2020-2022 from 5.0980% to 4.7120% for male and from 5.0995% to 4.7626% for female employees.

The Swiss defined benefit plan scheme is valued by independent actuaries every year using the projected unit credit method. The latest actuarial valuation was carried out as at December 31, 2020.
The net amount recognized on the balance sheet comprises:
(in KUSD) December 31, 2020 December 31, 2019
Present value of defined benefit obligation for funded plan
11,809  7,880 
Fair value of plan assets
(8,266) (5,196)
Deficit of funded plan: liability on the balance sheet
3,543  2,684 
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The movement in the net defined benefit obligation over the year is as follows:
(in KUSD) Present value
of obligation 		Fair value of
plan assets 		Total
Defined benefit plan - pension costs:
January 1, 2019 4,372  (2,986) 1,386 
Current service cost
769  —  769 
Impact of plan changes
(319) —  (319)
Interest cost / (income)
37  (25) 12 
Defined benefit plan - pension costs
487  (25) 462 
Employee contributions
257  (257) — 
Employer contributions
—  (515) (515)
Transfers from joiners' previous plans
1,302  (1,302) — 
1,559  (2,074) (515)
Exchange differences
74  (69) 5 
Remeasurements:
Change in financial assumptions
686  —  686 
Other actuarial losses
609  —  609 
Plan asset gains
—  (2) (2)
Exchange differences
93  (40) 53 
Remeasurements
1,388  (42) 1,346 
December 31, 2019 7,880  (5,196) 2,684 
(in KUSD) Present value
of obligation 		Fair value of
plan assets 		Total
Defined benefit plan - pension costs:
January 1, 2020 7,880  (5,196) 2,684 
Current service cost 960  —  960 
Interest cost / (income) 17  (11) 6 
Defined benefit plan - pension costs 977  (11) 966 
Employee contributions 348  (348) — 
Employer contributions —  (690) (690)
Transfers from joiners' previous plans 1,451  (1,451) — 
1,799  (2,489) (690)
Exchange differences 838  (560) 278 
Remeasurements:
Other actuarial losses 775  —  775 
Plan asset gains —  (10) (10)
Change in demographic assumptions (460) —  (460)
Remeasurements 315  315  (10) 305 
December 31, 2020 11,809  (8,266) 3,543 
The changes in demographic assumptions utilized in the valuation had a positive impact in the present value of pension obligations in 2020. More specifically, the benefit arose from using an updated mortality table as described below.
The other actuarial losses in 2020 were due to a variety of experience factors, including in particular the increase in 2020, after the service cost for 2020 had been determined, in the number of active employees covered by the pension plan.
The present value of the defined benefit obligation related to 28 active employees based in Switzerland (2019: 22 active employees).
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The principal actuarial assumptions used for accounting purposes are as follows for all periods presented:
2020 2019
Discount rate
0.20  % 0.20  %
Interest credited on savings accounts
0.20  % 0.20  %
Future salary increases
1.50  % 1.50  %
Future pension increases
0.00  % 0.00  %
Assumptions regarding future mortality experience are set based on actuarial advice provided in accordance with published statistics and experience in each territory.
Mortality assumptions for Switzerland are based on the LPP 2020 and LPP 2015 mortality generational tables for 2020 and 2019, respectively. The average life expectancy in years after retirement of a pensioner retiring at age 65 (male) and 64 (female) on the balance sheet date is as follows:
2020 2019
Male
22.45  22.61 
Female 25.26  25.64 
The sensitivity of the defined benefit obligation and of the service cost to changes in the weighted principal assumption is:
2020 Increase in
assumption 		Impact on defined
benefit obligation and service cost 		Decrease in
assumption 		Impact on defined
benefit obligation and service cost
Discount rate
0.25  % (5.00) % (0.25) % 5.40  %
Future salary increases
0.50  % 0.70  % (0.50) % (0.70) %
Interest credited on savings accounts
0.50  % 2.80  % (0.50) % (2.70) %
Future pension increases
0.50  % 6.70  % (0.50) % (6.00) %
2019 Increase in
assumption 		Impact on defined
benefit obligation
and service cost 		Decrease in
assumption 		Impact on defined
benefit obligation and service cost
Discount rate
0.25  % (5.40) % (0.25) % 5.90  %
Future salary increases
0.50  % 0.90  % (0.50) % (0.90) %
Interest credited on savings accounts
0.50  % 3.20  % (0.50) % (3.00) %
Future pension increases
0.50  % 7.00  % (0.50) % (6.30) %
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the pension liability recognized within the statement of financial position.
The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the prior period.
Expected employer contributions to the defined benefit plan for the year ending December 31, 2021 amount to KUSD 774.
The weighted average duration of the defined benefit obligation is 20.9 years (2019: 22.7 years).
Asset-liability strategy
The Swiss Life Collective BVG Foundation, to which the pension plan is affiliated, manages its funds in the interests of all members, with due attention to the priorities of liquidity, security and return. The Company’s pension plan benefits from the economies of scale and diversification of risk available through this affiliation.

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Investments by asset class
Investments by asset class are as follows:
(in KUSD) December 31, 2020 December 31, 2019
Cash
126  155 
Bonds
4,658  3,065 
Shares
564  329 
Real estates and mortgages
2,353  1,303 
Alternative investments
565  344 
8,266  5,196 
Defined benefit plan reserves
The movement in the defined benefit plan reserves (included in “Other reserves”) is as follows:
(in KUSD) 2020 2019
January 1
(2,389) (1,043)
Remeasurements of defined benefit pension plan
(305) (1,346)
December 31 (2,694) (2,389)
21. Convertible loans
Facility agreement
On April 24, 2020, the Company entered into a USD 115.0 million Facility Agreement with Deerfield Partners, L.P. and certain of its affiliates (“Deerfield”). Pursuant to such agreement, Deerfield agreed to extend senior secured convertible term loans to the Company in two separate disbursements:
(i)an initial disbursement of convertible loans in the amount of USD 65.0 million upon the completion of the IPO, and satisfaction of certain other conditions (the “first tranche”) and
(ii)a subsequent disbursement of convertible loans in the amount of USD 50.0 million upon the receipt of regulatory approval for Lonca, and satisfaction of certain other conditions (the “second tranche”).
The outstanding principal amount of the convertible loans is due to be repaid in full on the fifth anniversary of the date on which the first tranche was funded, which occurred on May 19, 2020. However, any conversion of the convertible loans into common shares shall be deemed a repayment of the principal amount of the convertible loans so converted.
The convertible loans bear interest at a rate of 5.95% per annum, based on a 360-day year, with interest payable quarterly in arrears commencing July 1, 2020.
Upon any payment of the convertible loans or conversion of the convertible notes, whether upon redemption or at maturity or at any other time, the Company will be required to pay an exit charge equal to 2.0% of the amount of the loans so paid or converted.
The Company’s obligations under the Facility Agreement are guaranteed by the Company’s wholly-owned subsidiaries and secured by a perfected, first-priority security interest in substantially all of the Company’s and its wholly-owned subsidiaries’ personal property, including its intellectual property and the equity ownership interests directly and indirectly held by the Company in its wholly-owned subsidiaries and in Overland ADCT BioPharma.
Each convertible loan extended under the Facility Agreement is evidenced by a convertible note. The holder of each of the first tranche of convertible notes is entitled to convert the principal amount of convertible loans evidenced thereby, at its option, into the Company’s common shares at any time at a conversion price per share equal to 130% of the IPO share price, which was USD 19.00.
The conversion price for the second tranche of convertible notes is the lesser of (i) 150% of the IPO price and (ii) 120% of the average of the volume-weighted average prices of the Company’s common shares on each of the 15 trading days immediately prior to the disbursement date of the second tranche, but in no event less than a floor equal to 81% of the IPO price. If the conversion price of the
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second tranche of convertible notes is less than the floor price but for the application of the floor, Deerfield will not be obligated to extend the second tranche.
Upon the occurrence of a major transaction, as defined below, the holders of the convertible notes may elect to require the Company to redeem all or any portion of the notes for an amount equal to the principal amount thereof (in addition to accrued and unpaid interest, the make-whole amount and the exit charge) or alternatively the holder may elect to require the Company to convert the unredeemed portion and, in addition, receive a number of additional common shares determined as set forth in the convertible notes (in addition to accrued and unpaid interest and the exit charge). In the case of a successor major transaction, as defined below, the Company may elect to require redemption of any portion of the convertible notes that the holder does not elect to convert in connection with such transaction.
Major transactions include (i) mergers and similar transactions as a result of which the holders of common shares before the transaction no longer hold a majority of the common shares after the transaction or the common shares are changed into the securities of another entity, (ii) sales of assets exceeding 50% of the Company’s enterprise value, (iii) any person or group acquiring beneficial ownership of more than 50% of the Company’s common shares or (iv) the delisting of the Company’s common shares, subject in each case to the more detailed provisions contained in the convertible notes. Successor major transactions include any major transaction in which the Company’s common shares are converted into the right to receive cash, securities of another entity and/or other assets, and any asset sale major transaction in which the Company distributes assets to its shareholders.
The Company will have the right to force conversions of the convertible notes on and after the one-year anniversary of the date on which it has received regulatory approval of Lonca if each of the following is greater than 275% of the conversion price (among other conditions specified in the convertible notes): (1) the volume weighted average price of the common shares on at least 20 trading days during any period of 30 consecutive trading days, (2) the volume weighted average price of the common shares on the last trading day of such period and (3) the closing price of the common shares on the last trading day of such period. The Company will have the right to force conversions of the convertible notes on and after the three-year anniversary of the date on which it has received regulatory approval of Lonca if the same conditions above are satisfied, except that the applicable price described in the preceding sentence need only be greater than 175% of the conversion price.
The Company is obligated to draw down the second tranche upon receipt of regulatory approval for Lonca. If the Company has not received the regulatory approval on or prior to December 31, 2021, the second tranche will automatically terminate on such date.
The Facility Agreement contains various covenants, including a requirement to retain USD 50.0 million in cash and cash equivalents as of the end of each fiscal quarter.
Bifurcation of first tranche
The first tranche of convertible loans amounting to USD 65.0 million issued on May 19, 2020 has been accounted for as comprising two components: an embedded conversion option derivative and a loan, as explained in note 3, “Significant accounting policies”.
Valuation of derivative embedded in first tranche
The Company has used an independent valuation firm to assist in calculating the fair value of the embedded conversion option derivative, which is based on the mean of values derived from application of the Hull and Goldman Sachs convertible bond pricing models. Key inputs for the valuations as of December 31, 2020 and April 24, 2020 were as follows:
As of
December 31, 2020 April 24, 2020
Exercise price, in USD 24.70  22.10 
Forced conversion price, in USD 67.93  60.78 
Share price in USD 32.01  17.00 
Risk-free interest rate 0.3  % 0.4  %
Expected volatility 90  % 82  %
Expected term 52 months 61 months
Dividend yield —  — 
Recovery rate 5  % 5  %
Implied bond yield 13.3  % 21.0  %
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On the basis of the valuation of the conversion option derivative as of April 24, 2020, the USD 65.0 million amount of the first tranche of convertible loans was accounted for on inception as follows:
in KUSD Embedded derivative   Residual
loan 		  Total
Gross proceeds 27,797  37,203  65,000 
Less: transaction costs (1,571) (2,102) (3,673)
Net 26,226  35,101  61,327 
The transaction costs of the embedded derivative were charged directly to the Consolidated Statement of Operation.
The fair value of the embedded derivative associated with the first tranche was KUSD 51,229 and KUSD 27,797 as of December 31, 2020 and April 24, 2020, respectively. The increase in fair value of the embedded derivative during the year ended December 31, 2020 is primarily due to the increase in the fair value of the underlying shares from April 24, 2020 to December 31, 2020. During the year ended December 31, 2020, the Company recognized a loss of KUSD 23,432 as a result of changes in the fair value of the embedded derivative, which was charged directly to the Consolidated Statement of Operation.
Accounting for residual loan of first tranche
As illustrated in the table above and in accordance with IFRS 9, the transaction costs of the residual convertible loan (net of the value of the embedded derivative) were deducted from the loan to arrive at the deemed net present value as of May 19, 2020 of all future cash outflows associated with the loan. The implied effective interest rate that would be needed to increase the book value of the loan to cover all future outflows, taking into account the deduction of transaction costs from the initial loan balance and based on a 365-day year, was computed at inception at 23% and will be applied over the life of the loan.
For year ended December 31, 2020, the Company recorded interest expense related to the interest payable on the residual convertible loan (net of the value of the embedded conversion option derivative) in the amount of KUSD 4,756 based on the implied effective interest rate.
The amount at which the convertible loan is presented as a liability in the Consolidated Balance Sheet represents the net present value of all future cash outflows associated with the loan discounted at the implied effective interest rate. The net present value of those cash outflows occurring within 12 months of the balance sheet date discounted at the same rate is presented as a short-term liability. The remainder of the amount is presented as a long-term liability. The carrying value of the convertible loan was KUSD 38,406 as of December 31, 2020, of which KUSD 34,775 was the non-current portion of the liability and KUSD 3,631 was the current portion of the liability.
Accounting for second tranche
The obligation to draw down the second tranche under the terms specified in the Facility Agreement has been accounted for as a derivative. The Company has used an independent valuation firm to assist in calculating the fair value of the derivative, which is based on the mean of values derived from application of the Hull and Goldman Sachs convertible bond pricing models. Key inputs for the valuation as of December 31, 2020 were as follows:
As of
December 31, 2020
Exercise price, in USD 28.50 
Forced conversion price, in USD 78.38 
Share price in USD 32.01 
Risk-free interest rate 0.3  %
Expected volatility 90  %
Expected term 5 months
Dividend yield — 
Recovery rate 5  %
Implied bond yield 7.4  %
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In addition to the key inputs disclosed above for the second tranche, the Company estimated the probability of achieving regulatory approval for Lonca. For purposes of its December 31, 2020 valuation, the Company estimated it was highly probable that it would receive regulatory approval for Lonca. Significant changes which increase or decrease the probabilities of achieving the related regulatory events, or shorten or lengthen the time required to achieve such events would result in a corresponding increase or decrease in the fair value of this derivative liability.
During the year ended December 31, 2020, the Company recognized a loss of KUSD 21,979 as a result of changes in the fair value of the derivative. The fair value of the derivative associated with the second tranche was KUSD 21,979 as of December 31, 2020, which was presented as a financial liability in the Consolidated Balance Sheet. The increase in fair value of the derivative during year ended December 31, 2020 is primarily due to the increase in the fair value of the underlying shares, which was charged directly to the Consolidated Statement of Operation.
The value of the derivative is directly correlated with the probability estimate of obtaining regulatory approval for Lonca. An increase or decrease of 10% in the estimated probability would have resulted in an increase or decrease in the value of the derivative of KUSD 2,198.
22. Share-based compensation expense
Share data have been revised to give effect to the share split and share consolidation explained in note 2 (iv) “Share split” and in note 2 (v) “Share consolidation”.
Share Purchase Plan 2013 and Share Purchase Plan 2016

Under the terms of the 2013 and 2016 promissory notes issued in connection with the Share Purchase Plan 2013 and Share Purchase Plan 2016, in the case of an IPO the relevant plan participants were required to repay the outstanding amounts under the promissory notes prior to the IPO by delivering a number of shares of equivalent value to cover the amount to be repaid. In anticipation of the IPO, each of the plan participants holding promissory notes entered into loan settlement agreements with the Company dated as of April 15, 2020 pursuant to which they repaid all amounts outstanding under the promissory notes, including accrued interest, by delivering a number of shares of equivalent value to cover the amounts outstanding under the promissory notes.

After consideration of all relevant factors, the Board of Directors determined the value of such shares delivered pursuant to the loan settlement agreements as of the settlement date to be USD 18.75 per share, resulting in the delivery of an aggregate of 597,774 common shares by all plan participants for the settlement of the promissory notes. These shares were held by the Company as treasury shares.

These transactions resulted in the termination of both plans on May 15, 2020. All compensation expense relating to the ADC Therapeutics SA 2013 Share Purchase Plan (the “Share Purchase Plan 2013”) was recognized in prior periods. During the year ended December 31, 2020, unrecognized expense relating to the Share Purchase Plan 2016 amounting to KUSD 6,425 was charged to the Consolidated Statement of Operation with a corresponding increase to Other reserves within equity on the Consolidated Balance Sheet on completion of these transactions. The amounts of expense for all awards recognized for services received during the year ended December 31, 2020 was KUSD 7,417 (including the KUSD 6,425 discussed above). The amount of expense recognized for the years ended December 31, 2019 and December 2018 was KUSD 332 and KUSD 361, respectively. There was no expense recognized for the Share Purchase Plan 2013 for the years ended December 31, 2020, 2019 and 2018.
Incentive Plan 2014
All existing awards under the Incentive Plan 2014 vested and were settled in shares upon the completion of the IPO. The Company calculated for each participant the gain arising from the difference between the exercise price and the USD 19.00 IPO price, undertook to settle in cash on behalf of the participant any associated tax and social charges liability, and transferred to the participant the remaining balance from treasury shares, valued at USD 19.00 per share. A total of 356,144 common shares were transferred to participants and an amount of KUSD 5,343 was withheld for tax and social charges during fiscal year 2020.

For participants whose awards had an exercise price greater than USD 19.00 — i.e., were “out-of-the-money” — the Company made an equal number of new awards under the Equity Incentive Plan 2019 (see below) with an exercise price of USD 19.00 and with a vesting period of only three years instead of the usual four years. These new awards have been accounted for as a modification of the previous awards under the Incentive Plan 2014. Accordingly, the original compensation expense calculated for the old awards that were “out-of-the-money” will continue to be recognized over their remaining vesting period while the expense to be recognized for the new awards under the 2019 Equity Incentive Plan will be limited to the incremental fair value of the new awards over the fair value, as of May 15, 2020, of the old awards.
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The amounts of expense for all awards recognized for services received during the periods ended December 31, 2020, 2019 and 2018 were KUSD 361, KUSD 437 and KUSD 108, respectively.
2019 Equity Incentive Plan
In November 2019, the Company adopted the 2019 Equity Incentive Plan. Under the 2019 Equity Incentive Plan, the Company may at its discretion grant to plan participants, such as directors, certain employees and service providers, awards in the form of restricted shares and restricted share units (“RSUs”), share options, share appreciation rights, performance awards and other share-based awards. The Company has reserved 7,820,000 common shares for future issuance under the 2019 Equity Incentive Plan, which include common shares pursuant to share-based equity awards issued to date. As of December 31, 2020, the Company has 3,390,148 common shares available for the future issuance of share-based equity awards.
As of December 31, 2020, the cumulative amount recorded as an increase to Other Reserves within equity on the Consolidated Balance Sheet in respect of the 2019 Equity Incentive Plan was KUSD 35,498. The amounts of expense for all awards recognized for services received during the years ended December 31, 2020 and 2019 were KUSD 35,150 and KUSD 348, respectively.

Share Options
Pursuant to the 2019 Equity Incentive Plan, the Company may grant share options to its directors, certain employees and service providers working for the benefit of the Company at the time. The exercise price per share option is set by the Company at the fair market value of the underlying common shares on the date of grant, as determined by the Company, which is generally the closing share price of the Company’s common shares traded on the NYSE. The awards generally vest 25% on the first anniversary of the date of grant, and thereafter evenly on a monthly basis over the subsequent three years. The contractual term of each share option award granted is ten years. Under the grant, the options may be settled only in common shares of the Company. Therefore, the grants of share options under the 2019 Equity Incentive Plan have been accounted for as equity-settled under IFRS 2. As such, the Company records a charge for the vested portion of award grants and for partially earned but non-vested portions of award grants. This results in a front-loaded charge to the Company’s Consolidated Statement of Operation and a corresponding increase to Other Reserves within equity on the Consolidated Balance Sheet.
The expense recognized for services received during the years ended December 31, 2020, and 2019 is KUSD 33,355 and KUSD 348, respectively. There was no expense recognized under the 2019 Equity Incentive Plan for the year ended December 31, 2018.
Movements in the number of awards outstanding and their related weighted average strike prices are as follows:
2020   2019
Average
strike
price in
USD
per share
Number of
awards
 
Average
strike
price in
USD
per share
 
Number of
awards
At the beginning of the year
18.75  1,020,434  —  — 
Granted
28.62  3,347,766  18.75  1,020,434 
Forfeited
19.83  (88,332) —  — 
Exercised 18.75  (2,895) —  — 
At the end of the year
26.45  4,276,973  18.75  1,020,434 
Weighted average remaining contractual life of awards outstanding at end of period 9.29 9.96
The option awards granted during the year ended December 31, 2020 include 388,333 awards that were made to compensate holders of “out-of-the-money” awards under the Incentive Plan 2014 that expired on May 15, 2020. As of December 31, 2020, 244,291 awards are vested and exercisable out of the total outstanding awards of 4,276,973 common shares. No awards have expired. As of December 31, 2020, the weighted average strike price and weighted average remaining life for vested and exercisable awards is USD 18.75 and 8.94 years, respectively.
Awards outstanding at the end of the year have the following expiry date and strike prices:
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Grant date Expiry date Strike price
in USD 		Awards December 31, 2020
December 9, 2019 2029 18.75 985,848 
April 1, 2020 2030 18.75 213,764 
April 29, 2020 2030 18.75 1,272,213 
May 15, 2020 2030 19.00 366,257 
June 4, 2020 2030 34.99 341,403 
July 1, 2020 2030 48.77 84,589 
July 20, 2020 2030 48.59 490,883 
August 3, 2020 2030 46.83 61,576 
August 17, 2020 2030 38.62 135,064 
September 1, 2020 2030 41.19 125,850 
October 1, 2020 2030 32.15 101,875 
November 2, 2020 2030 29.01 40,220 
December 1, 2020 2030 38.02 57,431 
Total 4,276,973 
The average grant date fair value of awards granted during the year ended December 31, 2020 was USD 21.27 per award (2019: USD 15.71).

The fair values of the options granted after the IPO were determined on the date of the grant using the Black-Scholes option-pricing model. Prior to the IPO, the fair value of the options granted were determined using an adjusted form of the Black-Scholes option pricing model. The Company has used an independent valuation firm to assist in calculating the fair value of the award grants per participant. See note 6, “Critical accounting estimates and judgements”.
The fair values of the options granted during the years ended December 31, 2020 and 2019 were determined on the date of grant using the following assumptions:
  Year ended December 31, 2020 Year ended December 31, 2019
a) weighted average share price
in USD
15.95-48.77
16.31
b) strike price
in USD
18.75-48.77
18.75
c) expected volatility
in %
80-206
176.6 
d) award life
in # of years
5.02-6.08
5.65
e) expected dividends
in % 0  0 
f) risk-free interest rate
in %
0.29-0.70
1.67 
The expected volatility for options granted was based on historical volatility and selected volatility determined by median values observed among comparable public companies.
The award life for options granted was based on the time interval between the date of grant and the date during the ten-year life after which, when making the grant, the Company expected on average that participants would exercise their options.
RSUs
Pursuant to the 2019 Equity Incentive Plan, the Company may grant RSUs to its directors, certain employees and service providers working for the benefit of the Company at the time. The awards generally vest annually over a period of three years commencing on the first anniversary of the date of grant. Under the grant, the RSUs may be settled only in common shares of the Company. Therefore, the grant of RSUs under the 2019 Equity Incentive Plan have been accounted for as equity-settled under IFRS 2. As such, the Company records a charge for the vested portion of award grants and for partially earned but non-vested portions of award grants. This results in a front-loaded charge to the Company’s Consolidated Statement of Operation and a corresponding increase to Other Reserves within equity
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on the Consolidated Balance Sheet. The expense recognized for services received during the year ended December 31, 2020 is KUSD 1,795.
Number of awards Weighted average grant date fair value
December 31, 2019 —  — 
Granted 149,984  46.50
December 31, 2020 149,984  46.50
There were no vested RSUs as of December 31, 2020.
Share-based Compensation Reserves
The movement in the Share-based Compensation Reserves (included in Other reserves within equity) is as follows:
(in KUSD) 2020 2019 2018
January 1
7,862  6,745  6,276 
Incentive Plan 2014
361  437  108 
Share Purchase Plan 2016
7,417  332  361 
2019 Equity Incentive Plan - Options
33,355  348  — 
2019 Equity Incentive Plan - RSUs
1,795  —  — 
Tax and social charge deductions - Incentive Plan 2014 (5,343) —  — 
December 31 45,447  7,862  6,745 

23.    Share capital
Share data have been revised to give effect to the share split and share consolidation as explained in note 2 (iv) and 2 (v), respectively.

The movements in the Company’s share capital, share premium and treasury shares accounts for the years ended December 31, 2020, 2019 and 2018 are set out in the following table:

Issued share capital Share premium Treasury shares Increase / (Decrease) in net assets Price per share Issued share capital Treasury shares Outstanding share capital
In KUSD Number of shares issued Number of shares (held or received) / delivered Number of shares outstanding
December 18, 2018 Issuance of share capital 4  —  —  4 
CHF 0.08
450,000  —  450,000 
December 18, 2018 Transaction costs, issuance of share capital (28) —  (28) —  —  — 
Movements during the year ended December 31, 2018 4  (28) —  (24) 450,000  —  450,000 
Balances as of January 1, 2018, revised for share consolidation and share split 397  452,296  —  452,693  47,375,000  —  47,375,000 
Balance at December 31, 2018 401  452,268  —  452,669  47,825,000  —  47,825,000 
February 6, 2019 Increase share capital 1  —  —  1 
CHF 0.008
75,000  —  75,000 
February 6, 2019 Transaction costs, increase in share capital —  (19) —  (19) —  —  — 
June 7, 2019 Increase in share capital 22  75,578  —  75,600 
CHF 0.008
2,700,000  —  2,700,000 
June 7, 2019 Transaction costs, increase in share capital —  (1,432) —  (1,432) —  —  — 
June 14, 2019 Increase in share capital —  700  —  700 
CHF 0.008
25,000  —  25,000 
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June 14, 2019 Transaction costs, increase in share capital —  (13) —  (13) —  —  — 
July 5, 2019 Increase in share capital 7  26,943  —  26,950 
CHF 0.008
962,500  —  962,500 
July 5, 2019 Transaction costs, increase in share capital —  (306) —  (306) —  —  — 
August 22, 2019 Transfer from share premium for par value increase 3,789  (3,789) —  —  —  —  — 
September 2, 2019 Purchase of treasury shares 141  —  (141) — 
CHF 0.08
1,750,000  (1,750,000) — 
September 2, 2019 Transaction costs, increase in share capital —  (8) —  (8) —  —  — 
December 16, 2019 Sale of treasury shares —  —  41  41 
CHF 0.08
—  509,460  509,460 
Movements during the year ended December 31, 2019 3,960  97,654  (100) 101,514  5,512,500  (1,240,540) 4,271,960 
Balances as of January 1, 2019, revised for share consolidation and share split 401  452,268  —  452,669  47,825,000  —  47,825,000 
Balance at December 31, 2019 4,361  549,922  (100) 554,183  53,337,500  (1,240,540) 52,096,960 
April 15, 2020 Shares surrendered by Share Purchase Plan 2013 and Share Purchase Plan 2016 participants to settle share purchase plan promissory notes —  11,208  (11,208) — 
 USD 18.75
—  (597,774) (597,774)
April 16, 2020 Issuance of shares per shareholder's agreement addendum through capitalization of reserves 393  (393) —  — 
CHF 0.08
4,777,996  —  4,777,996 
April 24, 2020 Elimination of fractional holdings —  —  —  — 
CHF 0.08
—  51  51 
May 19, 2020 Issuance of shares to be held as treasury 34  —  (34) — 
CHF 0.08
408,873  (408,873) — 
May 19, 2020 Grant of shares to settle Incentive Plan 2014 awards, net —  (29) 29  — 
 CHF 0.08
—  356,144  356,144 
May 19, 2020 Issuance of shares at IPO 1,007  231,661  —  232,668 
 USD 19.00
12,245,631  —  12,245,631 
May 19, 2020 Sale of shares under greenshoe option —  23,591  11,309  34,900 
 USD 19.00
—  1,836,844  1,836,844 
May 19, 2020 Transaction costs, IPO and greenshoe option —  (23,355) —  (23,355) —  —  — 
September 28, 2020 Issuance of shares at follow-on offering 519  203,481  —  204,000 
USD 34.00
6,000,000  —  6,000,000 
September 28, 2020 Transaction costs, follow-on offering —  (15,084) —  (15,084) —  —  — 
September 30, 2020 Other —  —  —  — 
CHF 0.08
—  2,796  2,796 
December 14, 2020 Shares issued for exercise of option awards —  34  —  34 
CHF 0.08
—  1,861  1,861 
December 16, 2020 Shares issued for exercise of option awards —  10  —  10 
CHF 0.08
—  517  517 
December 29, 2020 Shares issued for exercise of option awards —  10  —  10 
CHF 0.08
—  517  517 
Movements during the year ended December 31,2020 1,953  431,134  96  433,183  23,432,500  1,192,083  24,624,583 
Balances reported at December 31, 2019, revised for share consolidation and share split 4,361  549,922  (100) 53,337,500  (1,240,540) 52,096,960 
Balance at December 31, 2020 6,314  981,056  (4) 76,770,000  (48,457) 76,721,543 

F-45

Authorized Capital
The Board of Directors was authorized, subject to compliance with the Company's shareholder agreement, to increase the share capital at any time until April 23, 2022, by a maximum amount of CHF 2,080,000, by issuing a maximum of 26,000,000 common shares, fully paid up, with a par value of CHF 0.08 each. An increase of the share capital in partial amounts is permissible. As of December 31, 2020, the remaining maximum amount is CHF 2,080,000, which may be raised by issuing a maximum of 26,000,000 common shares.
Conditional Share Capital

Conditional Share Capital for Warrants and Convertible Bonds

Our nominal share capital may be increased, including to prevent takeovers and changes in control, by a maximum aggregate amount of CHF 1,624,000 through the issuance of not more than 20,300,000 common shares, which would have to be fully paid-in, each with a par value of CHF 0.08 per share, by the exercise of option and conversion rights granted in connection with warrants, convertible bonds or similar instruments of the Company or one of its subsidiaries. Shareholders will not have pre-emptive subscription rights in such circumstances, but will have advance subscription rights to subscribe for such warrants, convertible bonds or similar instruments. The holders of warrants, convertible bonds or similar instruments are entitled to the new shares upon the occurrence of the applicable conversion feature.

Conditional Share Capital for Equity Incentive Plans

Our nominal share capital may, to the exclusion of the pre-emptive subscription rights and advance subscription rights of shareholders, be increased by a maximum aggregate amount of CHF 936,000 through the (direct or indirect) issuance of not more than 11,700,000 common shares, which would have to be fully paid-in, each with a par value of CHF 0.08 per share, by the exercise of options, other rights to receive shares or conversion rights that have been granted to employees, members of the board of directors, contractors or consultants of the Company or of one of its subsidiaries or other persons providing services to the Company or to a subsidiary through one or more equity incentive plans created by the board of directors.
Dividend
The Company did not declare a dividend during fiscal years 2020, 2019 or 2018.

F-46

24. Commitments
The Company has contractual obligations as follows:
Collaborations and co-operations with development partners
The Company has entered into various collaborations with development partners, including in-licensing and manufacturing agreements. These agreements provide for the Company to make potential future milestone and royalty payments that are conditional on success, and that are spread over various stages of development and commercialization, including achieving preclinical proof of concept, filing an investigational new drug (“IND”) application, commencing or completing multiple clinical development stages, obtaining regulatory approval in multiple countries, and achieving various levels of commercial sales. Due to the nature of these arrangements, the future potential payments related to the attainment of the specified milestones are inherently uncertain, and accordingly, no amounts have been recorded for these future potential payments in the Company’s Consolidated Balance Sheets as of December 31, 2020 and 2019. As of December 31, 2020, the aggregate amount of such potential milestone payments, under all such collaboration agreements, was KUSD 350,422 (2019: KUSD 323,973). These milestone payments relate to product candidates in the following phases:
(in KUSD):
R&D Phase Development Regulatory Sales-based Total
Pre-clinical 53,497  11,650  158,259  223,406 
Phase I 23,719  19,000  73,500  116,219 
Phase II 10,797  —  —  10,797 
December 31, 2020 88,013  30,650  231,759  350,422 
R&D Phase Development Regulatory Sales-based Total
Pre-clinical 55,290  19,000  118,000  192,290 
Phase I 23,615  19,000  73,500  116,115 
Phase II 15,568  —  —  15,568 
December 31, 2019 94,473  38,000  191,500  323,973 
The net increase in the aggregate milestone payments from December 31, 2019 primarily relates to the license agreements entered in fiscal year 2020. See note 16, “Intangible assets” for further details.
As of December 31, 2020, the Company had two product candidates in phase II clinical trials: Lonca and Cami. Cami is the subject of a collaboration and license agreement with Genmab A/S (“Genmab”), under which there are no upfront or future milestone payments payable and no revenue receivable. On October 30, 2020, the Company announced that it amended its existing collaboration and license agreement with Genmab for the continued development and commercialization of Cami. Under the terms of the amended and restated license agreement, the parties have agreed to eliminate the defined divestment process which was agreed in 2013 and that envisaged, among other things, offering the opportunity for third parties to continue the development and commercialization of Cami. The parties have also agreed, among other things, that Genmab will convert its economic interest in Cami into a mid-to-high single-digit tiered royalty on net sales. Lonca is not linked to any collaboration agreement regarding the in-licensing of intellectual property. Both Lonca and Cami are subject to manufacturing agreements under which payment of the amounts indicated under Phase II above could become payable upon the achievement of certain milestones. A milestone associated with a collaboration agreement was achieved during December 2020, which the Company recorded as an accrued expense on the Consolidated Balance Sheet as of December 31, 2020 and as an R&D expense of USD 5.0 million within the Consolidated Statement of Operation for the year ended December 31, 2020. The Company anticipates it will make the payment during the first half of 2021.
25. Contingent liabilities
The Group has no contingent liabilities in respect of legal claims arising in the ordinary course of business. There are no material legal proceedings to which the Company is a party.
26. Related parties
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions.
F-47

A.T. Holdings II Sàrl (“AT Holdings II”) is a shareholder in the Company. AT Holdings II is in turn ultimately entirely owned by Auven Therapeutics Holdings, L.P. (“ATH”), a limited partnership registered in the British Virgin Islands. ATH’s General Partner is Auven Therapeutics General L.P., which itself is a limited partnership whose General Partner is Auven Therapeutics GP Ltd. The manager of ATH is Auven Therapeutics Management L.L.L.P. (“ATM”).
Services provided by the Company
The Company provides registered office and simple administrative services to four subsidiaries of ATH. The amounts invoiced in 2020, and recovered through G&A expenses, amounted to KUSD 4 (2019: KUSD 4 and 2018: KUSD 7).
Services provided to the Company
There were no services provided to the Company during 2020 by related parties. Auven affiliated companies incurred expenses on behalf of the Company, relating to a telecommunication contract with a third-party vendor, and recharged these at cost. The costs incurred are recognized as G&A expenses and amounted to KUSD 11 in 2019 and KUSD 38 in 2018.

Other transactions with related parties
Of the 597,774 shares surrendered by Share Purchase Plan 2013 and Share Purchase Plan 2016 participants to settle share purchase plan promissory notes on April 15, 2020 (see note 23, “Share capital”), 556,799 were surrendered by related parties.
Of the 4,777,996 shares issued by way of capitalization of reserves on April 16, 2020 (see note 23, “Share capital”), 1,222,966 shares were issued to related parties.
Out of the 3,687,500 class E shares issued in 2019, 809,107 shares were purchased by related parties.
Shares were issued to and repurchased at the same price from a related party in September 2019 in order to have available treasury shares to meet the demand for shares when share options are exercised.
In connection with the Company’s IPO, HPWH TH AG purchased 950,000 shares on the same terms as other investors.
In connection with the Company’s follow-on offering Auven Therapeutics GP Ltd., through A.T. Holdings II Sàrl and ADC Products Switzerland Sàrl (“the Selling Shareholders”) granted to the underwriters an option to purchase up to 900,000 additional common shares at the public offering price of USD 34.00 per share, less underwriting discounts and commissions. On October 9, 2020, the underwriters exercised in full their option to purchase an additional 900,000 common shares from the Selling Shareholders at a price of USD 34.00, less underwriting discounts and commissions. The Company did not receive any proceeds or incur any costs related to the sale of these shares by the Selling Shareholders. The Selling Shareholders incurred all costs in addition to underwriting fees and commissions.
Chairman’s equity awards
The Company granted the Chairman, Mr. Squarer, options to acquire 1,125,545 common shares at USD 18.75 per share in connection with his election to the Board of Directors, representing approximately 2% of our then-outstanding share capital. These options are scheduled to vest upon Mr. Squarer’s continued service through designated dates over a three-year period, or immediately upon a change in control. In accordance with its agreement with Mr. Squarer, the Company provided Mr. Squarer with an additional grant of 341,403 options on June 4, 2020 with an exercise price equal to the fair market value of the Company’s shares on that date, to bring Mr. Squarer’s total rights to acquire the Company’s shares to 2% of the then-outstanding share capital (measured without consideration of the shares underlying these grants).
Related party balances at year-end
There were no trade accounts payable with related parties at December 31, 2020. Trade accounts payable at December 31, 2019, include amounts payable to Auven companies amounting to KUSD 1. There were no trade accounts receivable with related parties at both December 31, 2020 and December 31, 2019.

F-48

Key management compensation
Key management compensation was:
(in KUSD) Year ended December 31, 2020 Year ended December 31, 2019 Year ended December 31, 2018
Salaries and other short-term employee benefits
7,690  5,364  4,512 
Pension costs
455  407  299 
Share-based compensation expenses
16,752  396  341 
Other compensation
196  73  183 
25,093  6,240  5,335 
27. Loss per share
The basic loss per share is calculated by dividing the net loss attributable to shareholders by the weighted average number of shares in issue during the period, excluding common shares owned by the Company and held as treasury shares, as follows:
For the Years Ended December 31,
(in KUSD, except per share amounts) 2020 2019 2018
Net loss attributable to shareholders
(246,290) (116,484) (123,096)
Weighted average number of shares in issue (1)
65,410,292  49,279,961  46,600,000 
Basic and diluted loss per share (in USD)
(3.77) (2.36) (2.64)
(1) Share data have been revised to give effect to the share split and share consolidation as explained in note 2 (iv) and note 2 (v), respectively as all Class B, C, D and E preferred shares were converted into common shares upon the completion of the IPO, loss per share data are presented on that basis for all periods.
For the years ended December 31, 2020, 2019 and 2018, basic and diluted loss per share are calculated on the weighted average number of shares issued and outstanding and exclude shares to be issued under the 2019 Equity Incentive Plan and the conversion of the principal amount of the convertible loans into the Company’s common shares (see note 22, “Share-based compensation expense and note 21, “Convertible loans”), as the effect of including those shares would be anti-dilutive.
Potentially dilutive securities that were not included in the diluted per share calculations because the effect of including them would be anti-dilutive were as follows:
For the Years Ended December 31,
2020 2019 2018
Incentive Plan 2014
—  2,074,996  1,959,782 
Share Purchase Plan 2016 —  2,784,918  2,369,521 
2019 Equity Incentive Plan - Share Options 2,904,673  61,506  — 
2019 Equity Incentive Plan - RSUs 63,281  —  — 
Conversion of the principal amount of convertible loans into the Company's common shares 1,665,465  —  — 
4,633,419  4,921,420  4,329,303 
28. Foreign currency exchange rate
The following exchange rates have been used for the translation of the financial statements of ADCT UK, the functional currency of which is the British pound:
USD / GBP Year ended December 31, 2020 Year ended December 31, 2019 Year ended December 31, 2018
Closing rate, GBP 1
1.36501 1.3186  1.2690 
Weighted average exchange rate, GBP 1
1.28423 1.2747  1.3501 
F-49

29. Events after the reporting date
The Company has evaluated its subsequent events through March 18, 2021, the date the financial statements were available to be issued, and has concluded that there are no subsequent events requiring disclosure in the financial statements other than those described below.
As the Company continues to grow its operations, prepares for product commercialization and further develops its pipeline, it is looking to expand its facilities. During the first quarter of 2021, the Company entered into a new lease agreement with a ten-year term commencing in January 2021 for space in the iHub building on the Imperial University college campus in White City, West London. The primary function of the new facility, which consists of approximately 1,100m2, will be R&D. Pursuant to the terms of the agreement, the aggregate minimum lease payments for the first five years are fixed at which point the parties agree to perform an open market review, subject to a minimum and maximum rent escalation of 2% and 4%, respectively. Alternatively, the Company has the contractual right to exit the lease upon the fifth anniversary of lease commencement. The aggregate minimum lease payments over the first five years is approximately USD 2.4 million.
F-50


Exhibit 2.1

DESCRIPTION OF THE REGISTRANT’S SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES
EXCHANGE ACT OF 1934

The following description of our share capital is a summary and does not purport to be complete. It is subject to and qualified in its entirety by reference to our Articles of Association, which are incorporated by reference as an exhibit to the Annual Report on Form 20-F of which this exhibit is a part. We encourage you to read the Articles of Association for additional information.
The Company
We are a Swiss stock corporation (société anonyme) organized under the laws of Switzerland. We were incorporated as a Swiss limited liability company (société à responsabilité limitée) on June 6, 2011 with our registered office and domicile in Epalinges, Canton of Vaud, Switzerland. We converted to a Swiss stock corporation under the laws of Switzerland on October 13, 2015. Our domicile is in Epalinges, Canton of Vaud, Switzerland. Our registered office and head office is currently located at Biopôle, Route de la Corniche 3B, 1066 Epalinges, Switzerland.
Share Capital
As of December 31, 2020, our share capital as registered with the commercial register of the Canton of Vaud, Switzerland (the “Commercial Register”) amounted to 76,770,000 common shares, 76,721,543 of which were outstanding, each with a par value of CHF 0.08 per share.
Changes in Our Share Capital During the Last Three Fiscal Years
In this section, share amounts are presented as of the date of the relevant transaction, without accounting for the Share Capital Reorganization. Since January 1, 2018, our share capital has changed as follows:
• On June 19, 2018, our share capital as registered with the Commercial Register on June 29, 2018, was increased by issuing 3 Class A common shares;
• On December 10, 2018, our share capital as registered with the Commercial Register on December 14, 2018, was increased by issuing 33 Class A common shares;
• On January 30, 2019, our share capital as registered with the Commercial Register on February 6, 2019, was increased by issuing 6 Class A common shares;
• On June 4, 2019, our share capital as registered with the Commercial Register on June 7, 2019, was increased by issuing 216 Class E preferred shares;
• On June 7, 2019, our share capital as registered with the Commercial Register on June 14, 2019, was increased by issuing 2 Class E preferred shares;
• On June 28, 2019, our share capital as registered with the Commercial Register on July 5, 2019, was increased by issuing 77 Class E preferred shares;
• On August 22, 2019, our share capital as registered with the Commercial Register on August 28, 2019, was increased by an aggregate amount of CHF 3,714,300 through an increase of the par value of each of our Class A common shares and Class B, C, D and E preferred shares from CHF 100 to CHF 1,000;
• On September 19, 2019, our share capital as registered with the Commercial Register on September 19, 2019, was increased by issuing 140 Class A common shares;



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• In the one-to-15,625 share split of all issued shares effected on September 19, 2019, each of our issued shares was split into 15,625 shares of the same class with a par value of CHF 0.064 per share;
• In the five-to-four reverse share split of all issued shares effected on April 24, 2020, each of our issued shares was consolidated into 0.8 shares of the same class with a par value of CHF 0.08 per share, and an aggregate of 44 common shares were converted into 6 Class C preferred shares, 12 Class D preferred shares and 26 Class E preferred shares, each with a par value of CHF 0.08; and
• On May 15, 2020, our share capital as registered with the Commercial Register on May 15, 2020, was increased by issuing 17,432,500 common shares with a par value of CHF 0.08 per share.
• On September 28, 2020, our share capital as registered with the Commercial Register on September 28, 2020, was increased by issuing 6,000,000 common shares with a par value of CHF 0.08 per share.
Registration Rights
In connection with the initial disbursement under the Facility Agreement, we entered into an agreement with Deerfield Partners, L.P. and Deerfield Private Design Fund IV, L.P. that provides them with certain registration rights. Within fifteen days following the receipt of the second disbursement under the Facility Agreement, we will be required to prepare and file a registration statement to register under the Securities Act common shares issued and issuable to them upon the conversion of their senior secured convertible notes issued under the Facility Agreement. The agreement also provides for piggyback registration rights pursuant to which such holders have the right to demand that we include any such shares in any registration statement that we file with the SEC, subject to certain exceptions.
Articles of Association
Ordinary Capital Increase, Authorized and Conditional Share Capital
Under Swiss law, we may increase our share capital (capital-actions) with a resolution of the general meeting of shareholders (ordinary capital increase) that must be carried out by the board of directors within three months of the respective general meeting in order to become effective. Under our articles of association and Swiss law, in the case of subscription and increase against payment of contributions in cash, a resolution passed by an absolute majority of the shares represented at the general meeting of shareholders is required. In the case of subscription and increase against contributions in kind or to fund acquisitions in kind, when shareholders’ statutory pre-emptive subscription rights or advance subscription rights are limited or withdrawn or where transformation of freely disposable equity into share capital is involved, a resolution passed by two-thirds of the shares represented at a general meeting of shareholders and the absolute majority of the par value of the shares represented is required.
Furthermore, under the Swiss Code of Obligations (the “CO”), our shareholders, by a resolution passed by two-thirds of the shares represented at a general meeting of shareholders and the absolute majority of the par value of the shares represented, may empower our board of directors to issue shares of a specific aggregate par value up to a maximum of 50% of the share capital in the form of:
• conditional share capital (capital-actions conditionnel) for the purpose of issuing shares in connection with, among other things, (i) option and conversion rights granted in connection with warrants and convertible bonds of the Company or one of our subsidiaries or (ii) grants of rights to employees, members of our board of directors or consultants or to our subsidiaries or other persons providing services to the Company or a subsidiary to subscribe for new shares (conversion or option rights); or
• authorized share capital (capital-actions autorisé) to be utilized by the board of directors within a period determined by the shareholders but not exceeding two years from the date of the shareholder approval.
Pre-Emptive and Advance Subscription Rights
Pursuant to the CO, shareholders have pre-emptive subscription rights (droits de souscription préférentiels) to subscribe for new issuances of shares. With respect to conditional capital in connection with the issuance of conversion rights, convertible bonds or similar debt instruments, shareholders have advance subscription rights (droit de souscription préalable) for the subscription of such conversion rights, convertible bonds or similar debt instruments.
A resolution passed at a general meeting of shareholders by two-thirds of the shares represented and the absolute majority of the par value of the shares represented may authorize our board of directors to withdraw or limit pre-emptive subscription rights or advance subscription rights in certain circumstances.



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If pre-emptive subscription rights are granted, but not exercised, the board of directors may allocate the unexercised pre-emptive subscription rights at its discretion.
Our Authorized Share Capital
Under our articles of association, our board of directors is authorized at any time, including to prevent takeovers and changes in control, until April 23, 2022 to increase our nominal share capital by a maximum aggregate amount of CHF 2,080,000 through the issuance of not more than 26,000,000 shares, which would have to be fully paid-in, each with a par value of CHF 0.08 per share.
Increases in partial amounts are permitted. The board of directors has the power to determine the type of contributions, the issue price and the date on which the dividend entitlement starts.
With respect to our authorized share capital, the board of directors is authorized by our articles of association to withdraw or to limit the pre-emptive subscription rights of shareholders, and to allocate them to third parties or to us, in the event that the newly issued shares are issued under the following circumstances:
• if the issue price of the new registered shares is determined by reference to the market price;
• for raising of capital (including private placements) in a fast and flexible manner, which would not be possible, or might only be possible with great difficulty or delays or at significantly less favorable conditions, without the exclusion of the statutory pre-emptive subscription rights of the existing shareholders;
• for the acquisition of an enterprise, parts of an enterprise or participations, for the acquisition of products, intellectual property or licenses by or for investment projects of the Company or any of its group companies, or for the financing or refinancing of any of such transactions through a placement of shares;
• for purposes of broadening the shareholder constituency of the Company in certain geographic, financial or investor markets, for purposes of the participation of strategic partners, or in connection with the listing of new shares on domestic or foreign stock exchanges;
• for purposes of granting an over-allotment option or an option to purchase additional shares in a placement or sale of shares to the respective initial purchaser(s) or underwriter(s);
• for the participation of members of the board of directors, members of the executive committee, employees, contractors, consultants or other persons performing services for the benefit of the Company or any of its group companies;
• following a shareholder or a group of shareholders acting in concert having accumulated shareholdings in excess of 20% of our share capital registered in the Commercial Register without having submitted to all other shareholders a takeover offer recommended by the board of directors;
• for the defense of an actual, threatened or potential takeover bid, that the board of directors, upon consultation with an independent financial adviser retained by it, has not recommended to the shareholders acceptance on the basis that the board of directors has not found the takeover bid to be financially fair to the shareholders or not to be in the Company’s interest; or
• for other valid grounds in the sense of Article 652b para. 2 of the CO.
This authorization is exclusively linked to the particular available authorized share capital set out in the respective article. If the period to increase our share capital out of authorized share capital lapses without having been used by the board of directors, the authorization to withdraw or to limit the pre-emptive subscription rights lapses simultaneously with such capital.
Our Conditional Share Capital
Conditional Share Capital for Warrants and Convertible Bonds
Our nominal share capital may be increased, including to prevent takeovers and changes in control, by a maximum aggregate amount of CHF 1,624,000 through the issuance of not more than 20,300,000 common shares, which would have to be fully paid-in, each with a par value



3


of CHF 0.08 per share, by the exercise of option and conversion rights granted in connection with warrants, convertible bonds or similar instruments of the Company or one of our subsidiaries. Shareholders will not have pre-emptive subscription rights in such circumstances, but will have advance subscription rights to subscribe for such warrants, convertible bonds or similar instruments. The holders of warrants, convertible bonds or similar instruments are entitled to the new shares upon the occurrence of the applicable conversion feature.
When issuing convertible bonds, warrants or similar instruments, the board of directors is authorized to withdraw or to limit the advance subscription right of shareholders:
• for the purpose of financing or refinancing, or the payment for, the acquisition of enterprises, parts of enterprises, participations, intellectual property rights, licenses or investments;
• if the issuance occurs in domestic or international capital markets, including private placements;
• following a shareholder or a group of shareholders acting in concert having accumulated shareholdings in excess of 20% of the share capital registered in the Commercial Register without having submitted to all other shareholders a takeover offer recommended by the board of directors; or
• for the defense of an actual, threatened or potential takeover bid that the board of directors, upon consultation with an independent financial adviser retained by it, has not recommended to the shareholders to accept on the basis that the board of directors has not found the takeover bid to be financially fair to the shareholders or not to be in the Company’s interest.
To the extent that the advance subscription rights are withdrawn or limited, (i) the convertible bonds, warrants or similar instruments are to be issued at market conditions; (ii) the term to exercise the convertible bonds, warrants or similar instruments may not exceed ten years from the date of issue of the respective instrument and (iii) the conversion, exchange or exercise price of the convertible bonds, warrants or similar instruments has to be set with reference to or be subject to change based upon the valuation of the Company’s equity or market conditions.
Conditional Share Capital for Equity Incentive Plans
Our nominal share capital may, to the exclusion of the pre-emptive subscription rights and advance subscription rights of shareholders, be increased by a maximum aggregate amount of CHF 936,000 through the (direct or indirect) issuance of not more than 11,700,000 common shares, which would have to be fully paid-in, each with a par value of CHF 0.08 per share, by the exercise of options, other rights to receive shares or conversion rights that have been granted to employees, members of the board of directors, contractors or consultants of the Company or of one of our subsidiaries or other persons providing services to the Company or to a subsidiary through one or more equity incentive plans created by the board of directors.
Uncertificated Securities
Our shares are in the form of uncertificated securities (droits-valeurs, within the meaning of Article 973c of the CO). In accordance with Article 973c of the CO, we will maintain a non-public register of uncertificated securities (registre des droits-valeurs). We may at any time convert uncertificated securities into share certificates (including global certificates), one kind of certificate into another, or share certificates (including global certificates) into uncertificated securities. Following entry in the share register, a shareholder may at any time request from us a written confirmation in respect of his or her shares. Shareholders are not entitled, however, to request the conversion and/or printing and delivery of share certificates. We may print and deliver certificates for shares at any time.
General Meeting of Shareholders
Ordinary/Extraordinary Meetings, Powers
The general meeting of shareholders is our supreme corporate body. Under Swiss law, an annual general meeting of shareholders must be held annually within six months after the end of a corporation’s financial year. In our case, this generally means on or before June 30. In addition, extraordinary general meetings of shareholders may be held.
The following powers are vested exclusively in the general meeting of shareholders:
• adopting and amending the articles of association, including the change of a company’s purpose or domicile;



4


• electing the members of the board of directors, the chairman of the board of directors, the members of the compensation committee, the auditors and the independent proxy;
• approving the business report, the annual statutory and consolidated financial statements, and deciding on the allocation of profits as shown on the balance sheet, in particular with regard to dividends;
• approving the aggregate amount of compensation of members of the board of directors and the executive committee;
• discharging the members of the board of directors and the executive committee from liability with respect to their conduct of business;
• dissolving a company with or without liquidation; and
• deciding matters reserved to the general meeting of shareholders by law or the articles of association or submitted to it by the board of directors.
An extraordinary general meeting of shareholders may be called by a resolution of the board of directors or the general meeting of shareholders or, under certain circumstances, by a company’s auditor, liquidator or the representatives of bondholders, if any. In addition, the board of directors is required to convene an extraordinary general meeting of shareholders if shareholders representing at least 10% of our share capital request such general meeting of shareholders in writing. Such request must set forth the items to be discussed and the proposals to be acted upon. The board of directors must convene an extraordinary general meeting of shareholders and propose financial restructuring measures if, based on our stand-alone annual statutory balance sheet, half of our share capital and statutory reserves are not covered by our assets.
Voting and Quorum Requirements
Shareholder resolutions and elections (including elections of members of the board of directors) require the affirmative vote of the absolute majority of shares represented at the general meeting of shareholders, unless otherwise stipulated by law or our articles of association.
Under Swiss law and our articles of association, a resolution of the general meeting of the shareholders passed by two-thirds of the shares represented at the meeting, and the absolute majority of the par value of the shares represented is required for:
• amending the Company’s corporate purpose;
• creating shares with preference rights;
• cancelling or amending the transfer restrictions of shares;
• creating authorized or conditional share capital;
• increasing share capital out of equity, against contributions in-kind or for the purpose of acquiring specific assets and granting specific benefits;
• limiting or withdrawing shareholder’s pre-emptive subscription rights;
• changing a company’s domicile;
• amending or repealing the voting and recording restrictions, the provision setting a maximum board size or the indemnification provision for the board of directors and the executive committee set forth in our articles of association;
• converting registered shares into bearer shares;
• removing the chairman or any member of the board of directors before the end of his or her term of office; and
• dissolving or liquidating the Company.
The same voting requirements apply to resolutions regarding transactions among corporations based on Switzerland’s Federal Act on Mergers, Demergers, Transformations and the Transfer of Assets of 2003, as amended (the “Swiss Merger Act”). See “—Articles of Association—Compulsory Acquisitions; Appraisal Rights.”



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In accordance with Swiss law and generally accepted business practices, our articles of association do not provide quorum requirements generally applicable to general meetings of shareholders. To this extent, our practice varies from NYSE listing standards, which require an issuer to provide in its bylaws for a generally applicable quorum, and that such quorum may not be less than one-third of the outstanding voting shares.
Notice
General meetings of shareholders must be convened by the board of directors at least 20 days before the date of the meeting. The general meeting of shareholders is convened by way of a notice appearing in our official publication medium, currently the Swiss Official Gazette of Commerce. Registered shareholders may also be informed by ordinary mail or e-mail. The notice of a general meeting of shareholders must state the items on the agenda, the motions to the shareholders and, in case of elections, the names of the nominated candidates. A resolution on a matter which is not on the agenda may not be passed at a general meeting of shareholders, except for motions to convene an extraordinary general meeting of shareholders or to initiate a special investigation, on which the general meeting of shareholders may vote at any time. No previous notification is required for motions concerning items included in the agenda or for debates that do not result in a vote.
All of the owners or representatives of our shares may, if no objection is raised, hold a general meeting of shareholders without complying with the formal requirements for convening general meetings of shareholders (a universal meeting). This universal meeting of shareholders may discuss and pass binding resolutions on all matters within the purview of the general meeting of shareholders, provided that the owners or representatives of all the shares are present at the meeting.
Agenda Requests
Pursuant to Swiss law and our articles of association, one or more shareholders, whose combined shareholdings represent the lower of (i) one tenth of our share capital and (ii) an aggregate par value of at least CHF 1,000,000 may request that an item be included in the agenda for a general meeting of shareholders. To be timely, the shareholder’s request must be received by us generally at least 45 calendar days in advance of the meeting. The request must be made in writing and contain, for each of the agenda items, the following information:
• a brief description of the business desired to be brought before the general meeting of shareholders and the reasons for conducting such business at the general meeting of shareholders;
• the motions regarding the agenda item;
• the name and address, as they appear in the share register, of the shareholder proposing such business;
• the number of shares which are beneficially owned by such shareholder (including documentary support of such beneficial ownership);
• the dates upon which the shareholder acquired such shares;
• any material interest of the proposing shareholder in the proposed business;
• a statement in support of the matter; and
• all other information required under the applicable laws and stock exchange rules.
In addition, if the shareholder intends to solicit proxies from the shareholders of a company, such shareholder shall notify the company of this intent in accordance with SEC Rule 14a-4 and/or Rule 14a-8.
Our business report, the compensation report and the auditor’s report must be made available for inspection by the shareholders at our registered office no later than 20 days prior to the general meeting of shareholders. Shareholders of record may be notified of this in writing.
Voting Rights
Each of our common shares entitles a holder to one vote. The common shares are not divisible. The right to vote and the other rights of share ownership may only be exercised by shareholders (including any nominees) or usufructuaries who are entered in the share register at a cut-off date determined by the board of directors. Those entitled to vote in the general meeting of shareholders may be represented by the



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independent proxy holder (annually elected by the general meeting of shareholders), by its legal representative or by another registered shareholder with written authorization to act as proxy. The chairman has the power to decide whether to recognize a power of attorney.
Our articles of association contain provisions that prevent investors from acquiring voting rights exceeding 15% of our issued share capital. Specifically, if an individual or legal entity acquires common shares and, as a result, directly or indirectly, has voting rights with respect to more than 15% of the registered share capital recorded in the Commercial Register, the registered shares exceeding the limit of 15% shall be entered in the share register as shares without voting rights (limitation à l’inscription). This restriction applies equally to parties acting in concert and to shares held or acquired via a nominee, including via Cede & Co., New York (or any successor), as the nominee of The Depository Trust Company (“DTC”), New York, acting in its capacity as clearing nominee. Specifically, if shares are being held by a nominee for third-party beneficiaries, which control (alone or together with third parties) voting rights with respect to more than 15% of the share capital recorded in the Commercial Register, our articles of association provide that the board of directors may cancel the registration of the shares with voting rights held by such nominee in excess of the limit of 15%. Furthermore, our articles of association contain provisions that allow the board of directors to make the registration with voting rights of shares held by a nominee subject to conditions, limitations and reporting requirements or to impose or adjust such conditions, limitations and requirements once registered. However, any shareholders who held more than 15% prior to our initial public offering remain registered with voting rights for such shares. Furthermore, the board of directors may in special cases approve exceptions to these restrictions.
Dividends and Other Distributions
Our board of directors may propose to shareholders that a dividend or other distribution be paid but cannot itself authorize the distribution. Dividend payments require a resolution passed by an absolute majority of the shares represented at a general meeting of shareholders. In addition, our auditors must confirm that the dividend proposal of our board of directors conforms to Swiss statutory law and our articles of association.
Under Swiss law, we may pay dividends only if we have sufficient distributable profits from the previous business year (bénéfice de l’exercice) or brought forward from the previous business years (report des bénéfices), or if we have distributable reserves (réserves à libre disposition), each as evidenced by the Company’s audited stand-alone statutory balance sheet prepared pursuant to Swiss law, and after allocations to reserves required by Swiss law and by the articles of association have been deducted. We are not permitted to pay interim dividends out of profit of the current business year.
Distributable reserves are generally booked either as “free reserves” (réserves libres) or as “reserve from capital contributions” (apports de capital). Under the CO, if our general reserves (réserve générale) amount to less than 20% of our share capital recorded in the Commercial Register (i.e., 20% of the aggregate par value of our issued capital), then at least 5% of our annual profit must be retained as general reserves. In addition, if our general reserves amount to less than 50% of our share capital recorded in the Commercial Register, 10% of the amounts distributed beyond payment of a dividend of 5% must be retained as general reserves. The CO permits us to accrue additional general reserves. Further, a purchase of our own shares (whether by us or a subsidiary) reduces the distributable reserves in an amount corresponding to the purchase price of such own shares. Finally, the CO under certain circumstances requires the creation of revaluation reserves which are not distributable.
Distributions out of issued share capital (i.e., the aggregate par value of our issued shares) are not allowed and may be made only by way of a share capital reduction. Such a capital reduction requires a resolution passed by an absolute majority of the shares represented at a general meeting of shareholders. The resolution of the shareholders must be recorded in a public deed and a special audit report must confirm that claims of our creditors remain fully covered despite the reduction in our share capital recorded in the Commercial Register. Our share capital may be reduced below CHF 100,000 only if and to the extent that at the same time the statutory minimum share capital of CHF 100,000 is reestablished by sufficient new fully paid-up capital. Upon approval by the general meeting of shareholders of the capital reduction, the board of directors must give public notice of the capital reduction resolution in the Swiss Official Gazette of Commerce three times and notify creditors that they may request, within two months of the third publication, satisfaction of or security for their claims. The reduction of our share capital may be implemented only after expiration of this time limit.
Our board of directors determines the date on which the dividend entitlement starts. Dividends are usually due and payable shortly after the shareholders have passed the resolution approving the payment, but shareholders may also resolve at the annual general meeting of shareholders to pay dividends in quarterly or other installments.



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For a discussion of the taxation of dividends, see “Item 10. Additional Information—E. Taxation—Swiss Tax Considerations—Swiss Federal, Cantonal and Communal Individual Income Tax and Corporate Income Tax.”
Transfer of Shares
Shares in uncertificated form (droits-valeurs) may only be transferred by way of assignment. Shares or the beneficial interest in shares, as applicable, credited in a securities account may only be transferred when a credit of the relevant intermediated securities to the acquirer’s securities account is made in accordance with applicable rules. Our articles of association provide that in the case of securities held with an intermediary such as a registrar, transfer agent, trust corporation, bank or similar entity, any transfer, grant of a security interest or usufructuary right in such intermediated securities and the appurtenant rights associated therewith requires the cooperation of the intermediary in order for such transfer, grant of a security interest or usufructuary right to be valid against us.
Voting rights may be exercised only after a shareholder has been entered in the share register (registre des actions) with his or her name and address (in the case of legal entities, the registered office) as a shareholder with voting rights. For a discussion of the restrictions applicable to the control and exercise of voting rights, see “Description of Share Capital and Articles of Association—Articles of Association—Voting Rights.”
Inspection of Books and Records
Under the CO, a shareholder has a right to inspect the share register with respect to his or her own shares and otherwise to the extent necessary to exercise his or her shareholder rights. No other person has a right to inspect the share register. Our books and correspondence may be inspected with the express authorization of the general meeting of shareholders or by resolution of the board of directors and subject to the safeguarding of our business secrets and other legitimate interests. See “Comparison of Swiss Law and Delaware Law—Inspection of books and records.”
Special Investigation
If the shareholders’ inspection rights as outlined above prove to be insufficient in the judgment of the shareholder, any shareholder may propose to the general meeting of shareholders that specific facts be examined by a special examiner in a special investigation. If the general meeting of shareholders approves the proposal, we or any shareholder may, within 30 calendar days after the general meeting of shareholders, request a court at our registered office (currently Epalinges, Canton of Vaud, Switzerland), to appoint a special examiner. If the general meeting of shareholders rejects the request, one or more shareholders representing at least 10% of our share capital or holders of shares in an aggregate par value of at least CHF 2,000,000 may request that the court appoint a special examiner. The court will issue such an order if the petitioners can demonstrate that the board of directors, any member of the board of directors or our executive committee infringed the law or our articles of association and thereby caused damages to the Company or the shareholders. The costs of the investigation would generally be allocated to us and only in exceptional cases to the petitioners.
Compulsory Acquisitions; Appraisal Rights
Business combinations and other transactions that are governed by the Swiss Merger Act (i.e., mergers, demergers, transformations and certain asset transfers) are binding on all shareholders. A statutory merger or demerger requires approval of two-thirds of the shares represented at a general meeting of shareholders and the absolute majority of the par value of the shares represented.
If a transaction under the Swiss Merger Act receives all of the necessary consents, all shareholders are compelled to participate in such transaction.
Swiss corporations may be acquired by an acquirer through the direct acquisition of the shares of the Swiss corporation. The Swiss Merger Act provides for the possibility of a so-called “cash-out” or “squeeze-out” merger with the approval of holders of 90% of the issued shares. In these limited circumstances, minority shareholders of the corporation being acquired may be compensated in a form other than through shares of the acquiring corporation (for instance, through cash or securities of a parent corporation of the acquiring corporation or of another corporation). For business combinations effected in the form of a statutory merger or demerger and subject to Swiss law, the Swiss Merger Act provides that if equity rights have not been adequately preserved or compensation payments in the transaction are unreasonable, a shareholder may request the competent court to determine a reasonable amount of compensation.



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In addition, under Swiss law, the sale of “all or substantially all of our assets” by us may require the approval of two-thirds of the number of shares represented at a general meeting of shareholders and the absolute majority of the par value of the shares represented. Whether a shareholder resolution is required depends on the particular transaction, including whether the following test is satisfied:
• a core part of our business is sold without which it is economically impracticable or unreasonable to continue to operate the remaining business;
• our assets, after the divestment, are not invested in accordance with our corporate purpose as set forth in the articles of association; and
• the proceeds of the divestment are not earmarked for reinvestment in accordance with our corporate purpose but, instead, are intended for distribution to our shareholders or for financial investments unrelated to our corporate purpose.
A shareholder of a Swiss corporation participating in certain major corporate transactions may, under certain circumstances, be entitled to appraisal rights. As a result, such shareholder may, in addition to the consideration (be it in shares or in cash) receive an additional amount to ensure that the shareholder receives the fair value of the shares held by the shareholder. Following a statutory merger or demerger, pursuant to the Swiss Merger Act, shareholders can file an appraisal action against the surviving company. If the consideration is deemed inadequate, the court will determine an adequate compensation payment.
Board of Directors
Our articles of association provide that the board of directors shall consist of at least three and not more than 11 members.
The members of the board of directors and the chairman are elected annually by the general meeting of shareholders for a period until the completion of the subsequent annual general meeting of shareholders and are eligible for re-election. Each member of the board of directors must be elected individually.
Powers
The board of directors has the following non-delegable and inalienable powers and duties:
• the ultimate direction of the business of the Company and issuing of the relevant directives;
• laying down the organization of the Company;
• formulating accounting procedures, financial controls and financial planning;
• nominating and removing persons entrusted with the management and representation of the Company and regulating the power to sign for the Company;
• the ultimate supervision of those persons entrusted with management of the Company, with particular regard to adherence to law, our articles of association, and regulations and directives of the Company;
• issuing the business report and the compensation report, and preparing for the general meeting of shareholders and carrying out its resolutions; and
• informing the court in case of over-indebtedness.
The board of directors may, while retaining such non-delegable and inalienable powers and duties, delegate some of its powers, in particular direct management, to a single or to several of its members, committees or to third parties (such as executive officers) who need be neither members of the board of directors nor shareholders. Pursuant to Swiss law and our articles of association, details of the delegation and other procedural rules such as quorum requirements have been set in the organizational rules established by the board of directors.
Indemnification of Executive Officers and Directors
Subject to Swiss law, our articles of association provide for indemnification of the existing and former members of the board of directors and the executive committee and their heirs, executors and administrators, against liabilities arising in connection with the performance of their



9


duties in such capacity, and permits us to advance the expenses of defending any act, suit or proceeding to our directors and executive officers to the extent not included in insurance coverage or advanced by third parties.
In addition, under general principles of Swiss employment law, an employer may be required to indemnify an employee against losses and expenses incurred by such employee in the proper execution of his or her duties under the employment agreement with the employer.
We have entered into indemnification agreements with each of the members of our board of directors and executive officers. See “Item 7. Major Shareholders and Related Party Transaction—B. Related Party Transactions—Indemnification Agreements.”
Conflict of Interest, Management Transactions
Swiss law does not have a general provision regarding conflicts of interest. However, the CO contains a provision that requires our directors and executive officers to safeguard the Company’s interests and imposes a duty of loyalty and duty of care on our directors and executive officers. This rule is generally understood to disqualify directors and executive officers from participation in decisions that directly affect them. Our directors and executive officers are personally liable to us for breaches of these obligations. In addition, Swiss law contains provisions under which directors and all persons engaged in the Company’s management are liable to the Company, each shareholder and the Company’s creditors for damages caused by an intentional or negligent violation of their duties. Furthermore, Swiss law contains a provision under which payments made to any of the Company’s shareholders or directors or any person related to any such shareholder or director, other than payments made at arm’s length, must be repaid to the Company if such shareholder or director acted in bad faith.
Our board of directors has adopted a Code of Business Conduct and Ethics and will adopt, upon the closing of this offering, other policies that will cover a broad range of matters, including the handling of conflicts of interest.
Principles of the Compensation of the Board of Directors and the Executive Committee
Pursuant to Swiss law, beginning at our annual general meeting of shareholders in 2021, our shareholders must annually approve the aggregate amount of compensation of the board of directors and the persons whom the board of directors has, fully or partially, entrusted with the management (which we refer to as our “executive committee”) of the Company. All of our executive officers named in “Management” are deemed to be members of our executive committee.
The board of directors must issue, on an annual basis, a written compensation report that must be reviewed by our auditors. The compensation report must disclose all compensation granted by the Company, directly or indirectly, to current members of the board of directors and the executive committee and, to the extent related to their former role within the Company or not on customary market terms, to former members of the board of directors and former executive officers.
The disclosure concerning compensation, loans and other forms of indebtedness must include the aggregate amount for the board of directors and the executive committee, respectively, as well as the particular amount for each member of the board of directors and for the highest paid executive officer, specifying the name and function of each of these persons.
We are prohibited from granting certain forms of compensation to members of our board of directors and executive committee, such as:
• severance payments (compensation due until the termination of a contractual relationship does not qualify as severance payment);
• advance compensation;
• incentive fees for the acquisition or transfer of companies, or parts thereof, by the Company or by companies being, directly or indirectly, controlled by us;
• loans, other forms of indebtedness, pension benefits not based on occupational pension schemes and performance-based compensation not provided for in the articles of association; and
• equity-based compensation not provided for in the articles of association.
Compensation to members of the board of directors and the executive committee for activities in entities that are, directly or indirectly, controlled by the Company is prohibited if (i) the compensation would be prohibited if it were paid directly by the Company, (ii) the articles of association do not provide for it, or (iii) the compensation has not been approved by the general meeting of shareholders.



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Beginning in 2021, the general meeting of shareholders will annually vote on the proposals of the board of directors with respect to:
• the maximum aggregate amount of compensation of the board of directors for the term of office until the next annual general meeting of shareholders; and
• the maximum aggregate amount of fixed compensation of the executive committee for the following financial year; and
• the maximum aggregate amount of variable compensation of the executive committee for the current financial year.
The board of directors may submit for approval at the general meeting of shareholders deviating or additional proposals relating to the same or different periods.
If, at the general meeting of shareholders, the shareholders do not approve a compensation proposal of the board of directors, the board of directors must prepare a new proposal, taking into account all relevant factors, and submit the new proposal for approval by the same general meeting of shareholders, at a subsequent extraordinary general meeting of shareholders or the next annual general meeting of shareholders.
In addition to fixed compensation, members of the board of directors and the executive committee may be paid variable compensation, depending on the achievement of certain performance criteria. The performance criteria may include individual targets, targets of the Company or parts thereof and targets in relation to the market, other companies or comparable benchmarks, taking into account the position and level of responsibility of the recipient of the variable compensation. The board of directors or, where delegated to it, the compensation committee shall determine the relative weight of the performance criteria and the respective target values.
Compensation may be paid or granted in the form of cash, shares, financial instruments, in kind, or in the form of other types of benefits. The board of directors or, where delegated to it, the compensation committee shall determine grant, vesting, exercise and forfeiture conditions.
Borrowing Powers
Neither Swiss law nor our articles of association restrict our power to borrow and raise funds. The decision to borrow funds is made by or under the direction of our board of directors, and no approval by the shareholders is required in relation to any such borrowing.
Repurchases of Shares and Purchases of Own Shares
The CO limits our ability to repurchase and hold our own shares. We and our subsidiaries may repurchase shares only to the extent that (i) we have freely distributable reserves in the amount of the purchase price; and (ii) the aggregate par value of all shares held by us does not exceed 10% of our share capital. Pursuant to Swiss law, where shares are acquired in connection with a transfer restriction set out in the articles of association, the foregoing upper limit is 20%. If we own shares that exceed the threshold of 10% of our share capital, the excess must be sold or cancelled by means of a capital reduction within two years.
Shares held by us or our subsidiaries are not entitled to vote at the general meeting of shareholders but are entitled to the economic benefits applicable to the shares generally, including dividends and pre-emptive subscription rights in the case of share capital increases.
In addition, selective share repurchases are only permitted under certain circumstances. Within these limitations, as is customary for Swiss corporations, we may, subject to applicable law, purchase and sell our own shares from time to time in order to meet imbalances of supply and demand, to provide liquidity and to even out variances in the market price of shares.
Notification and Disclosure of Substantial Share Interests
The disclosure obligations generally applicable to shareholders of Swiss corporations under the Federal Act on Financial Market Infrastructures and Market Conduct in Securities and Derivatives Trading, or the Financial Market Infrastructure Act (the “FMIA”), do not apply to us since our shares are not listed on a Swiss exchange.
Pursuant to Article 663c of the CO, Swiss corporations whose shares are listed on a stock exchange must disclose their significant shareholders and their shareholdings in the notes to their statutory annual financial statements, to the extent that this information is known or ought to be known. Significant shareholders are defined as shareholders and groups of shareholders linked through voting rights who hold more than 5% of all voting rights.



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Mandatory Bid Rules
The obligation of any person or group of persons that acquires more than one third of a company’s voting rights to submit a cash offer for all the outstanding listed equity securities of the relevant company at a minimum price pursuant to the FMIA does not apply to us since our shares are not listed on a Swiss exchange.
Stock Exchange Listing
Our common shares are listed on the NYSE under the symbol “ADCT.”
Transfer Agent and Registrar of Shares
Our share register is kept by Computershare Trust Company, N.A., which acts as transfer agent and registrar. The share register reflects only record owners of our shares. Swiss law does not recognize fractional share interests.




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Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.

Exhibit 4.3

EXECUTION VERSION

Amended and Restated Collaboration and License Agreement
between
ADC Therapeutics Sarl
and
Genmab A/S



Amended and Restated Collaboration and License Agreement
This Amended and Restated Collaboration and License Agreement (“Agreement”) is made and entered into on 29 October, 2020 (“Execution Date”), but effective as of 14 June, 2013 (“Effective Date”), by and between ADC Therapeutics Sarl, a Swiss corporation, having its head office at Rue Saint-Pierre 2, Lausanne, 1003, Switzerland (“ADCT”), and Genmab A/S, a Danish corporation, having its principal place of business at Kalvebod Brygge 43, 1560 Copenhagen V, Denmark, CVR no. 2102 3884 (“Genmab”) and amends that certain Collaboration and License Agreement between the Parties dated 14 June 2013 as further amended on 20 November, 2013 and June 24, 2020 (collectively, the “Collaboration Agreement”). Genmab and ADCT are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”
Background
Whereas, the Parties previously entered into the Collaboration Agreement and amendments thereto, and have engaged in research and development activities consistent therewith;
Whereas, the Parties have agreed to restructure the financial terms of the Collaboration Agreement and allow ADCT to continue development and commercialization of the ADCT-301 program; and,
Whereas, the Parties now wish to further amend the Collaboration Agreement.
Now, Therefore, the Parties for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, wish to amend and restate the Collaboration Agreement as follows:
Article 1
DEFINITIONS
Capitalized terms used in this Agreement, whether used in the singular or plural, shall have the meanings set forth below, unless otherwise specifically indicated herein.
1.1    “ADC” or “Antibody-Drug Conjugate” means [**].
1.2    “ADCT Intellectual Property” means [**].
1.3    “ADCT-301” means [**]. For the avoidance of doubt, ADCT-301 is a Licensed Product.
Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.

1.4    “Agreement” means this Amended and Restated Collaboration and License Agreement as set forth in the preamble.
1.5    “Antibody-Drug Conjugate Intellectual Property” is the Patents listed in Schedule 2.
1.6    “Affiliate” means any person that, directly or indirectly (through one or more intermediaries) controls, is controlled by, or is under common control with a Party. For purposes of this Article, “control” means (i) the direct or indirect ownership of greater than fifty per cent (50%) of the voting stock or other voting interests or interest in the profits of the Party, or (ii) the ability to otherwise control or direct the decisions of board of directors or equivalent governing body thereof.
1.7    “Alliance Manager” has the meaning set forth in Section 5.1.
1.8    “Annual Sales Forecast” has the meaning set forth in Section 4.1.2.
1.9    “Antibody” means [**].
1.10    “Breaching Party” has the meaning set forth in Section 11.2.2.
1.11    “Calendar [**]” means [**].
1.12    “CD25” means [**].
1.13     “Collaboration Agreement” has the meaning as set forth in the preamble.
1.14    “Commercialization”, “Commercialize” or “Commercializing” means activities relating to marketing, promoting, distributing, importing, exporting, selling or offering to sell a product. Commercialization shall not include any activities related to Development.
1.15    “Commercially Reasonable Efforts” means [**].
1.16    “Confidential Information” means proprietary KnowHow (of whatever kind and in whatever form or medium, including copies thereof), information relating to tangible materials or other deliverables (a) disclosed by or on behalf of a Party in connection with this Agreement, whether prior to or during the Term and whether disclosed orally, electronically, by observation or in writing, or (b) created by, or on behalf of, either Party and provided to the other Party, or created jointly by the Parties, in the course of this Agreement. For the avoidance of doubt, “Confidential Information” includes (i) KnowHow regarding such Party’s research, development plans, clinical trial designs, preclinical and clinical data, technology, products, business information, commercial plans, or objectives and other information of the type that is customarily
2

Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.

considered to be confidential information by entities engaged in activities that are substantially similar to the activities being engaged in by the Parties pursuant to this Agreement and (ii) any information relating to tangible materials or other deliverables provided by one Party to the other Party. In addition, all information disclosed under the [**] Agreement between the Parties effective [**] and the [**] Agreement between the Parties effective [**] shall be Confidential Information under this Agreement.
1.17    “Control” or “Controlled By” means with respect to any information or intellectual property right, the rightful possession by a Party, as of the Effective Date or throughout the Term, and the ability to grant a license, sublicense to, or to use or exploit such information or intellectual property right as provided herein, without violating the terms of any agreement or other arrangement with any Third Party.
1.18    “Cover”, “Covering” or “Covered” means, with respect to Patent(s) and invention, that, in the absence of ownership of, or a license under, such Patent(s), the practice of such invention would infringe a claim of such Patent(s) (including in the case of Patent(s) that is a patent application, a claim of such patent application as if such patent application were an issued patent).
1.19    “Development”, “Develop”, “Developed” or “Developing” means, with respect to an ADC, any and all preclinical and clinical drug development activities and manufacturing activities undertaken pursuant to the relevant work plan in order to Develop an ADC and to perform manufacturing scale up. These activities shall include preclinical research, stability testing, toxicology testing, formulation activities, reformulation activities, process development, manufacturing scale up activities, development stage manufacturing, quality assurance/quality control development, and clinical studies. When used as a verb, “Develop” or “Developed” means to engage or to have engaged in Development.
1.20    “Development Plan” means a written development plan summarizing current and planned activities for Licensed Product for the subsequent [**] period, of activities undertaken by ADCT, its Affiliates and sublicensees in compliance with the obligations under this Agreement. Such Development Plan shall include [**].
1.21    “Drug Moiety” means [**].
1.22    “Effective Date” means the 14 June, 2013.
1.23    “Execution Date” means the date this Agreement is made and entered into, as set forth in the preamble.
1.24    “Field” means the use of the Antibody-Drug Conjugate for the treatment of conditions and diseases in humans.
3

Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.

1.25    “First Commercial Sale” means, on a country-by-country basis, the first sale by ADCT or its Affiliates or sublicensees to a Third Party for end use or consumption of Licensed Product in a given country after Regulatory Approval has been granted in such country. Any sale of Licensed Product by ADCT to its Affiliate or sublicensees is not a First Commercial Sale.
1.26    “Flash Sales Report” has the meaning set forth in Section 4.1.2.
1.27    “Genmab Intellectual Property” means [**].
1.28     “IND” means any investigational new drug application relating to Licensed Product filed with the FDA pursuant to 21 CFR Part 312, or any comparable filing made with the Regulatory Authority in another country (including, without limitation, the submission to a competent authority of a request for an authorization concerning a clinical trial, as provided in Article 9, paragraph 2, of European Directive 2001/20/EC).
1.29    “Indemnitee” has the meaning set forth in Section 10.2.
1.30    “Indemnitor” has the meaning set forth in Section 10.2.
1.31    “Infringement” has the meaning set forth in Section 6.5.1.
1.32    “Joint Steering Committee” or “JSC” has the meaning set forth in Section 5.2.1.
1.33    “KnowHow” means all information, unpatented inventions (whether or not patentable), improvements, practices, formula, trade secrets, techniques, methods, procedures, knowledge, results, test data (including pharmacological, toxicological, pharmacokinetic and pre-clinical and clinical information and test data, related reports, structure-activity relationship data and statistical analysis), analytical and quality control data, protocols, processes, models, designs, and other information regarding discovery, development, marketing, pricing, distribution, cost, sales and manufacturing. Notwithstanding the foregoing, KnowHow shall not include any information contained in a published patent application or in an issued patent.
1.34    “Licensed Product” shall mean any pharmaceutical preparation for therapeutic use that contains ADCT-301 as the active ingredient, either alone or in combination with another active compound(s).
1.35    “Linker” means [**].
1.36    “[**] License” means that certain license agreement dated [**] between Genmab and [**].
4

Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.

1.37    “Loss” or “Losses” has the meaning set forth in Section 10.1.
1.38    “Material Adverse Change” means [**].
1.39    “Medarex License” means the [**] Agreement between [**] on the one hand and Genmab on the other hand entered into as of [**] but effective as of [**].
1.40    “Non-Disclosing Party” has the meaning set forth in Section 8.2.1.
1.41     “Net Sales” means [**].

1.42    “Patent(s)” means any and all patents and patent applications, including any patents issuing therefrom or claiming priority thereto, anywhere in the world, together with any extensions (including patent term extensions and supplementary protection certificates) and renewals thereof, reissues, reexaminations, substitutions, confirmation patents, registration patents, invention certificates, patents of addition, renewals, divisionals, continuations, and continuations-in-part of any of the foregoing.
1.43    “PBD” [**].
1.44    “Regulatory Approval” means final regulatory approval in a country or jurisdiction necessary for marketing Licensed Product for a disease or condition in accordance with applicable laws of a given country or jurisdiction, including pricing and reimbursement approval, as applicable.
1.45    “Regulatory Authority” means the United States Food and Drug Administration (the “FDA”) or the European Medicines Agency (the “EMA”) or another equivalent in another country or region in the Territory with authority over the manufacture or Commercialization of a pharmaceutical product.
1.46    “Royalty Report” has the meaning set forth in Section 4.1.1.
1.47    “Term” has the meaning set forth in Section 11.1.
1.48    “Territory” means the world.
1.49    “Third Party” shall mean with respect to the Parties, an entity or person that is not an Affiliate of such Party.
1.50    “Third-Party Claim” has the meaning set forth in Section 10.1.
1.51    “Third-Party Infringement Claim” has the meaning set forth in Section 6.5.6.
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1.52    “US” means the United States of America and its territories and possessions.
1.53    “Valid Claim” means (a) a claim of an issued and unexpired patent that has not been revoked or held unenforceable, unpatentable or invalid by a decision of a court or other governmental agency of competent jurisdiction that is not appealable or has not been appealed within the time allowed for appeal, and that has not been abandoned, disclaimed, denied or admitted to be invalid or unenforceable through reissue, re-examination or disclaimer or otherwise, or (b) a claim of a pending patent application that has not been cancelled, withdrawn or abandoned or finally rejected by an administrative agency action from which no appeal can be taken and that has been prosecuted in good faith and not been pending for more than [**] years from the date of its earliest priority date.
Article 2
LICENSE
2.1    License Grant
2.1.1    License Grant to ADCT. Genmab hereby grants to ADCT (a) an exclusive license in the Field and in the Territory, with the right to sublicense as provided in Section 2.2, to make and have made, Develop, use, sell, offer for sale, and import Licensed Product under the Genmab Intellectual Property; (b) an exclusive sublicense in the Field and in the Territory, with the right to further sublicense as provided in Section 2.2, to make and have made, Develop, use, sell, offer for sale, and import Licensed Product under the Medarex License; and (c) an exclusive sublicense to manufacture the Antibody for Other Activities and purposes, including Commercial Manufacturing Purposes (as these terms are defined in the [**]License) and for making use of the [**]Technology (as such term is defined in the [**]License).
2.2    Sublicenses
2.2.1    The licenses granted in Section 2.1.1 (a) and (b) may be sublicensed (or further sublicensed as the case may be) by ADCT at its discretion.
2.2.2    The terms of any sublicense shall be consistent with this Agreement, the terms of the Medarex License, and the terms of the [**] License. In the event of any inconsistencies between this Agreement and the Medarex License or between this Agreement and the [**] License, the terms of the Medarex License or [**] License, as applicable, shall prevail. The Parties acknowledge that ADCT will not be able to grant sublicenses under the [**] License pursuant to the [**] License, but may request that Genmab grants such sublicense on its behalf, which Genmab shall use Commercially Reasonable Efforts to do.
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2.3    Option to Co-Diagnostic License. Subject to the terms and provisions of the Medarex License, Genmab grants an option to ADCT for an exclusive license, with rights to sublicense, under the Genmab Intellectual Property and the Medarex License, to make, have made, sell, offer for sale, and import Antibody (including the naked Antibody or the naked Antibody labeled with a detectable label as the case may be) for co-diagnostic purposes solely to be used in conjunction with the Development and Commercialization of Licensed Product.
2.4    Genmab Retained Rights. The licenses granted under Section 2.1.1 shall be subject to Genmab’s right to use the Genmab Intellectual Property, Medarex KnowHow and Patents and [**] KnowHow and Patents with respect to Licensed Product in the Field but solely to fulfill its obligations and to exercise its rights under this Agreement.
2.5    ADCT Diligence. ADCT will, with regard to the license obtained under Section 2.1.1, use Commercially Reasonable Efforts during the Term to Develop, manufacture, obtain Regulatory Approval for, and Commercialize Licensed Product.
Article 3
ROYALTIES AND OPTIONS
3.1    Royalty Rate. In consideration of the license grant in Section 2.1.1 above, ADCT shall during the Term pay to Genmab tiered royalties on Net Sales in the Territory by ADCT, its Affiliates and sublicensees on an annual calendar basis as set forth below:
Annual Net Sales of Licensed Product Royalty Rate (% of Net Sales)
[**]
[**]%
[**]
[**]%
[**]
[**]%
[**]
[**]%

3.2    Regional Partnership. Notwithstanding the royalty obligation set forth in Section 3.1 above, in the event that ADCT enters into a Partnership with a Third Party for Development, Commercialization and/or distribution of Licensed Product for Hodgkin Lymphoma with respect to a specified country or countries, within [**] months of the Execution Date, Genmab may, at its sole discretion, elect, within [**] days of written notice and disclosure of the Partnership agreement terms, as described below in this Section 3.2, from ADCT, with respect to such country or countries, to (i) maintain the royalty payments described above in Section 3.1 or (ii) forego such royalty payments in lieu of [**] Percent ([**]%) of all net consideration received by ADCT in payment of such partnership as set forth in a written agreement putting such partnership into effect.
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The term “Partnership” means in this Section 3.2 an agreement between ADCT and a Third Party which grants certain rights to Develop, Commercialize and/or distribute Licensed Product in a specified country or countries. For avoidance of doubt, this shall not cover a partnership between ADCT and a subcontractor for, for example, CRO services or similar activities. In the event of such Partnership, ADCT shall disclose to Genmab a copy of the written agreement between ADCT and such Third Party, for Genmab to evaluate the terms and financials provisions prior to making its election.
3.3    Partnering of Solid Tumor Indication. In the event that ADCT initiates a process to partner Licensed Product with a Third Party for a solid tumor indication, ADCT shall inform Genmab in writing without undue delay and provide Genmab with an option to participate in the process on no less favorable terms than applicable to any other potential partner in the selection by ADCT of the final partner.
Article 4
REPORTS, PAYMENTS AND OFFSET
4.1    Royalty Reports; Flash Sales Report; Annual Sales Forecast.
4.1.1    Within [**] days after the end of each Calendar [**], commencing upon the first Calendar [**] subsequent to the First Commercial Sale, ADCT shall deliver to Genmab a report (“Royalty Report”) setting out, on a country-by-country basis: (i) gross sales of Licensed Product in the relevant [**] in US Dollars translated from the local currency, (ii) the calculation of Net Sales of Licensed Product from such gross sales, including itemization of permitted deductions; and (iii) the total royalties due. If no royalty is due for such [**] , ADCT shall so report.
4.1.2    Within [**] business days after each Calendar [**], ADCT shall provide Genmab with a flash sales report (“Flash Sales Report”) in order to give Genmab an indication of the magnitude of the royalties that are likely to be due to it pursuant to the applicable Royalty Report. Further, by [**] each year, starting prior to expected First Commercial Sale, ADCT shall provide Genmab with an annual sales forecast for the coming calendar year (“Annual Sales Forecast”) for Licensed Product. Such Flash Sales Report and Annual Sales Forecast shall be provided as a courtesy estimate only and shall not be used as a basis of comparison against actual royalties due or be considered binding in any way. For clarity, Flash Sales Reports and the Annual Sales Forecast shall be ADCT’s Confidential Information.
4.2    Royalty Payment. Royalty payments, if any, hereunder shall be based on annual Net Sales during the Term and shall be payable in US Dollars quarterly at the same time as the Royalty Report is delivered pursuant to Section 4.1 above to:
CASH -- WIRE TRANSFER
[**]
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4.3    Other Payments. Unless otherwise expressly set forth to the contrary in this Agreement, payment due from ADCT to Genmab under this Agreement shall be paid within [**] days after such payment becomes due or within [**] days from a date specified in the Agreement, whichever is earlier. Any considerations payable to Genmab from ADCT under a Partnership, as referred to under Section 3.2(ii), shall become due within [**] days of when such payment is received by ADCT in accordance with the agreement in place between ADCT and such Third Party. For the avoidance of doubt, failure to make any undisputed payment to Genmab herein when due shall be a material breach of the Agreement.
4.4    Currency Exchange. Except as provided to the contrary in this Agreement, all payments due to Genmab under this Agreement shall be made in United States Dollars and to the credit of a bank account to be designated in writing by Genmab. Conversion into United States Dollars of any amounts which have been paid by ADCT or its Affiliates or sublicensees in any other currency shall be converted into the United States Dollars equivalent, calculated by applying the average exchange rate for the Calendar Quarter in which the expense was incurred. Such average exchange rates shall be calculated on a Calendar Quarter basis
4.5     Third Party Payments. ADCT shall be solely responsible for paying all amounts, including any license fees, milestones and royalties owed to Third Parties by either ADCT or Genmab on account of Developing and Commercializing Licensed Product including, but not limited to payments due under the Medarex License and [**] License, if any.
4.6    Countries without Patent Protection. In countries where sales of Licensed Product on a country-by-country basis are not or are no longer Covered by a Valid Claim of a Patent within the Genmab Intellectual Property, royalties set forth above in Section 3.1 shall be reduced by [**] percent ([**]%) for Net Sales in such country.
4.7    Withholding Taxes. Except as provided to the contrary in this Agreement, any taxes, levies or other duties paid or required to be withheld or deducted under the appropriate Swiss laws by ADCT on account of monies payable to Genmab under this Agreement shall be deducted from the amount of monies otherwise payable to Genmab under this Agreement. Any such Swiss tax required to be withheld will be an expense of and borne by Genmab with the exception of any non-Swiss tax related to the payments due to Genmab pursuant to Article 3 and arising by reason of ADCT’s, Affiliates, sublicensee’s or its assignee’s tax residence. In the event that the payments due to Genmab pursuant to Article 3 are subject to mandatory non-Swiss withholding tax or other similar tax under applicable laws by reason of ADCT’s, its Affiliate’s, sublicensee’s or its assignee’s tax residence, the relevant amounts otherwise due to
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Genmab pursuant to Article 3, as applicable, shall be grossed up so that the amount received by Genmab after such non-Swiss withholding tax or similar tax is deducted shall be the full amount Genmab would have received in the absence of such non-Swiss withholding or other similar tax. ADCT shall secure and send to Genmab within a reasonable period of time proof of any such taxes, levies or other duties paid or required to be withheld by ADCT for the benefit of Genmab. The Parties shall cooperate reasonably with each other to ensure that any amounts required to be withheld are reduced in an amount to the fullest extent permitted by applicable law. Any penalties or other charges imposed by a governmental authority as a result of a failure by the withholding party to pay such taxes, levies or other duties shall be the responsibility of ADCT. Genmab will give ADCT any information necessary to determine such taxes, levies or other duties. If applicable, no deduction shall be made, or no gross up shall be applied if Genmab furnishes a document from the appropriate governmental authorities to ADCT certifying that the payments are exempt from such taxes, levies or other duties or subject to reduced tax rates, according to the applicable convention for the avoidance of double taxation.
4.8    VAT. All sums payable under or pursuant to this Agreement are exclusive of VAT or similar indirect taxes. VAT or similar indirect taxes shall be added to the payments due to the terms if legally applicable.
4.9    Interest on Late Payments. If a Party shall fail to make a payment pursuant to this Agreement when due, any such late payment shall bear interest, to the extent not prohibited by Law, at the annual rate of [**] percent ([**]%) per annum above LIBOR, effective for the first date on which payment was delinquent and calculated on the number of days such payment is overdue.
4.10    Audit Rights. Genmab shall have the right to inspect the books and records of ADCT during business hours and with reasonable advance notice up to [**] per year for the purpose of auditing the accuracy of royalty payments made hereunder using an auditor of its choice as reasonably acceptable to ADCT. The results of any such audit shall be made available to ADCT and, in the event that such audit determines that ADCT has underpaid royalties for a Calendar [**] by greater than [**] percent ([**]%), then ADCT shall pay the underage and the cost of the audit; otherwise the cost of the audit shall be borne solely by Genmab. In the case that an audit determines an over-payment of royalties, such overpayment shall be credited to ADCT for the next Calendar [**] or refunded to ADCT at ADCT’s sole discretion.
Article 5
GOVERNANCE
5.1    Alliance Management. The Parties have selected one (1) representative of each Party to act as a central contact for that Party (“Alliance Manager”), to whom any relevant queries and comments can be addressed by the other Party and who will
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ensure that such queries and comments are further directed within his/her organization appropriately and promptly to ensure efficient communication and cooperation between the Parties. Either Party may replace its Alliance Manager at any time upon written notice to the other Party. Each Party shall bear its own costs associated with its Alliance Manager position. The Alliance Managers shall remain in place for the Term.
5.2    Joint Steering Committee
5.2.1    The Parties have established a steering committee (the “Joint Steering Committee” or “JSC”) that shall be responsible for oversight of the activities of the Parties with respect to Development of Licensed Product.
5.2.2    The Parties have each appointed two (2) members to the Joint Steering Committee and may replace such members at their respective discretion.
5.2.3    ADCT shall provide the JSC with updates on (a) its Development Plan for Licensed Product on a [**] basis, (b) a progress report on activities conducted with respect to Licensed Product, and (c) with an update within [**] business days in the event of a Material Adverse Change. Such updates, (a)-(c), shall concurrently be sent in writing by ADCT to the Alliance Manager appointed by Genmab.
5.2.4    The Joint Steering Committee shall meet at least [**] per calendar year at a place and time that is mutually convenient or by conference call upon agreement of the Parties. ADCT shall appoint the chairperson of the JSC and the chairperson shall have the deciding vote in the event that the JSC is deadlocked on any matter on which it provides oversight or control. The chairperson shall establish the timing and agenda for all JSC meetings upon mutual consent of the Parties and shall send notice of such meetings, including the agenda therefor, to all JSC members; provided, however, either Party may request that specific items be included in the agenda and may request that additional meetings be scheduled as needed. The location of regularly scheduled JSC meetings shall alternate between the offices of the Parties, unless otherwise agreed. Meetings may be held in person, telephonically or by video conference. Each Party may invite other personnel on an ad-hoc basis to attend a JSC meeting and will bear its own costs associated with holding and attending JSC meetings.
5.2.5    A quorum of at least [**] appointed by each Party shall be present at or shall otherwise participate in each JSC meeting; provided, however, that should one (1) Party refuse to participate in more than [**] successive, meetings called pursuant to the preceding paragraph, such quorum requirement shall be waived for the subsequent scheduled meeting, and, notwithstanding anything in this Agreement to the contrary, any voting requirement (including any unanimous voting requirement) in the JSC contained in this Agreement shall require a majority vote of only those members present at such subsequent meeting.
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5.2.6    The Alliance Manager of ADCT shall record the minutes of the meeting in writing. Such minutes shall be circulated to Genmab’s Alliance Manager no later than [**] calendar days following the meeting for review, comment and approval of Genmab. If no comments are received within [**] calendar days of the receipt of the minutes by Genmab, unless otherwise agreed, they shall be deemed to be approved by Genmab. Furthermore, if the Parties are unable to reach agreement on the minutes within [**] calendar days of the applicable meeting, the sections of the minutes that have been mutually agreed between the Parties by that date shall be deemed approved and, in addition, each Party shall record in the same document its own version of those sections of the minutes on which the Parties were not able to agree.
5.2.7    Each Party’s representatives to the JSC shall have one vote, but in the event of a deadlock, ADCT shall have the deciding vote.
5.3    JSC Term. The JSC shall continue to operate throughout the Term of this Agreement for as long as there are planned or ongoing Development activities. After dissolvement of the JSC, ADCT shall continue to provide written status reports to Genmab, as described in Section 5.2.3.
Article 6
INTELLECTUAL PROPERTY
6.1    Genmab Intellectual Property Prosecution and Maintenance. Genmab shall be responsible for prosecuting, maintaining and defending the Genmab Intellectual Property. Genmab shall provide ADCT with [**], and will keep ADCT [**]. In the event that Genmab decides to [**] any Patents within the Genmab Intellectual Property, then Genmab shall promptly so notify ADCT (which notice shall be at least [**] days before any relevant deadline for preservation of such patent right). Thereafter, ADCT shall have [**].
6.2    ADCT Intellectual Property Prosecution and Maintenance. ADCT shall be responsible for prosecuting, maintaining and defending the ADCT Intellectual Property. ADCT agrees to keep Genmab [**]. In the event ADCT decides to [**] any Patents within the ADCT Intellectual Property covering the Linker and/or the PBD or other technology used in any Licensed Product, then ADCT shall promptly so notify Genmab (which notice shall be at least [**] days before any relevant deadline for preservation of such patent right). Thereafter, Genmab shall [**].
6.3    IP from Work Plan Activities. Any new Patent in any jurisdiction, [**], arising from the activities under the PreClinical Work Plan or Clinical Work Plan (as defined in the Collaboration Agreement), to the extent that claims in any such new Patent are directed to ADCs, shall, as between the Parties, be the sole property of ADCT ( herein referred to as “Antibody-Drug Conjugate Intellectual Property”). In the event of such an application, Genmab shall assign, and does hereby assign, such Patent
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to ADCT and shall reasonably cooperate with ADCT to formalize such assignment. The Parties agree that the [**]as listed in Schedule 2 are the Antibody-Drug Conjugate Intellectual Property. Any new Patent arising from the activities under the PreClinical Work Plan or Clinical Work Plan directed to the PBD or Linker or other technology used in the ADC shall be deemed ADCT Intellectual Property and included in the license grants hereunder.
6.4    Antibody-Drug Conjugate Intellectual Property. ADCT shall be responsible for prosecuting, maintaining and defending the Antibody-Drug Conjugate Intellectual Property. ADCT shall provide Genmab with [**], and will keep Genmab [**]. In the event ADCT decides to [**] any Patents within the Antibody-Drug Conjugate Intellectual Property, then ADCT shall promptly so notify Genmab (which notice shall be at least [**] days before any relevant deadline for preservation of such patent right). Thereafter, Genmab shall have the right to [**].
6.5    Enforcement Rights for Infringement by Third Parties
6.5.1    Notice. Each Party shall promptly notify, in writing, the other Party upon learning of any actual or suspected infringement of the Genmab Intellectual Property, ADCT Intellectual Property, or Antibody-Drug Conjugate Intellectual Property (“Infringement”). If ADCT is the party receiving such notice, Genmab shall provide to ADCT all evidence in its possession pertaining to the actual or suspected infringement, that it can disclose without breach of a pre-existing obligation to a Third Party or waiver of a privilege. If Genmab is the party receiving such notice, ADCT shall provide to Genmab all evidence in its possession pertaining to the actual or suspected infringement, that it can disclose without breach of a pre-existing obligation to a Third Party or waiver of a privilege.
6.5.2    Enforcement Actions Relating to Genmab Intellectual Property. [**].
6.5.3    Enforcement Actions Relating to ADCT Intellectual Property. ADCT shall manage, at its expense, any actions pertaining solely to the enforcement of ADCT Intellectual Property in the Field. ADCT shall consult Genmab with regard to any [**] decisions (including any decision not to enforce ADCT Intellectual Property and including any settlement decisions) and filings, and reasonably consider any comments or suggestions of Genmab. ADCT shall take no actions that would materially alter Genmab’s rights without first obtaining Genmab’s written approval, which approval shall not be unreasonably withheld.
6.5.4    Enforcement Actions Relating to Intellectual Property Developed Under the Work Plan. ADCT shall be the lead Party to manage, at its expense, any actions pertaining to the enforcement of Antibody-Drug Conjugate Intellectual Property (including actions that involve both Antibody-Drug Conjugate
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Intellectual Property and Genmab Intellectual Property). ADCT shall consult Genmab with regard to [**]. ADCT shall take no actions [**]. Genmab shall take no actions [**].
6.5.5    Damages. All damages received by ADCT or Genmab, as the case may be, in an enforcement action under this Section 6.5 shall be first applied to pay each Party’s expenses in the subject litigation and then allocated [**]% to ADCT and [**]% to Genmab.
6.5.6    Third-Party Infringement Claims. In the event that a Third Party shall make any claim, give notice, or bring any suit or other inter parties proceeding against Genmab or ADCT, or any of their respective Affiliates or licensees or customers, for infringement or misappropriation of any intellectual property rights with respect to the research, Development, making, using, selling, offering for sale, import or export of any Licensed Product (“Third-Party Infringement Claim”), in each case, the Party receiving notice of a Third-Party Infringement Claim shall promptly notify the other Party and provide all evidence in its possession pertaining to the claim or suit that it can disclose without breach of a pre-existing obligation to a Third Party or waiver of a privilege.
6.5.7    Defense. The Parties shall consult as to potential strategies to defend against any Third-Party Infringement Claim, consistent with the overall goals of this Agreement, including by being joined as a party. The Parties shall cooperate with each other in all reasonable respects in the defense of any Third-Party Infringement Claim arising out of any counterclaim related thereto.
6.6    Reservation of Rights.
6.6.1    ADCT reserves all rights to its intellectual property, whether owned or licensed.
6.6.2    Genmab reserves all rights not specifically granted under this Agreement, including but not limited to Genmab’s rights to any anti-CD25 antibody that is not part of a Licensed Product.
Article 7
CONFIDENTIALITY
7.1    Non-Use and Nondisclosure of Confidential Information. During the Term, and for a period of [**] years thereafter, a Party shall (i) except to the extent permitted by this Agreement or otherwise agreed to in writing, keep confidential and not disclose to any Third Party any Confidential Information of the other Party; (ii) except in connection with activities contemplated by, the exercise of rights permitted by, in order to further the purposes of this Agreement or otherwise agreed to in writing, not use for any purpose any Confidential Information of the other Party; and (iii) take all reasonable
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precautions to protect the Confidential Information of the other Party (including all precautions a Party employs with respect to its own confidential information of a similar nature and taking reasonable precautions to assure that no unauthorized use or disclosure is made by others to whom access to the Confidential Information of the Party is granted).
7.2    Exclusions Regarding Confidential Information. Notwithstanding anything set forth in this Article 7 to the contrary, the obligations of Section 7.1 above shall not apply to the extent that the Party seeking the benefit of the exclusion can demonstrate that the Confidential Information of the other Party:
7.2.1    was already known to the receiving Party, other than under an obligation of confidentiality, at the time of receipt by the receiving Party;
7.2.2    was generally available to the public or otherwise part of the public domain at the time of its receipt by the receiving Party;
7.2.3    became generally available to the public or otherwise part of the public domain after its receipt by the receiving Party other than through any act or omission of the receiving Party in breach of this Agreement;
7.2.4    was received by the receiving Party without an obligation of confidentiality from a Third Party having the right to disclose such information without restriction;
7.2.5    was independently developed by or for the receiving Party without use of or reference to the Confidential Information of the other Party; or
7.2.6    was released from the restrictions set forth in this Agreement by express prior written consent of the Party.
7.3    Authorized Disclosures of Confidential Information. Notwithstanding the foregoing, a Party may use and disclose the Confidential Information of the other Party as follows:
7.3.1    if required by law, rule or governmental regulation, including as may be required in connection with any filings made with, or by the disclosure policies of a major stock exchange; provided that the Party seeking to disclose the Confidential Information of the other Party shall (i) use all reasonable efforts to inform the other Party prior to making any such disclosures and cooperate with the other Party in seeking a protective order or other appropriate remedy (including redaction) and (ii) whenever possible, request confidential treatment of such information;
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7.3.2    to the extent such use and disclosure is reasonably required in the filing, prosecution, maintenance or publication of any patent application or patent on inventions;
7.3.3    as reasonably necessary to obtain or maintain any Regulatory Approval, including to conduct preclinical studies and clinical trials and for pricing approvals, for any Licensed Product, provided, that, the disclosing Party shall take all reasonable steps to limit disclosure of the Confidential Information outside such regulatory agency and to otherwise maintain the confidentiality of the Confidential Information to the same extent to which it maintains its own confidential information;
7.3.4    to take any lawful action that it deems necessary to protect its interest under, or to enforce compliance with the terms and conditions of, this Agreement; or
7.3.5    to the extent necessary, to Affiliates, subcontractors, licensees, collaborators, vendors, consultants, agents, attorneys, contractors and clinicians under written agreements of confidentiality at least as restrictive on those set forth in this Agreement, who have a need to know such information in connection with such Party performing its obligations or exercising its rights under this Agreement.
Further, the receiving Party may disclose Confidential Information to existing or potential acquirers, merger partners, permitted collaborators, licensees and sources of financing or to professional advisors (e.g., attorneys, accountants and prospective investment bankers) involved in such activities, for the limited purpose of evaluating such transaction, collaboration or license and under appropriate conditions of confidentiality, only to the extent necessary and with the agreement by those permitted individuals to maintain such Confidential Information in strict confidence.
7.4    Terms of this Agreement. The Parties agree that this Agreement and the terms hereof will be considered Confidential Information of both Parties but [**].
7.5    No License. As between the Parties, Confidential Information disclosed hereunder shall remain the property of the disclosing Party. Disclosure of Confidential Information to the other Party shall not constitute any grant, option or license to the other Party, beyond those licenses expressly granted hereunder, under any patent, trade secret or other rights now or hereinafter held by the disclosing Party.
Article 8
PUBLICITY; PUBLICATIONS; USE OF NAME
8.1    Publicity. Neither Party shall distribute a press release relating to the existence of this Agreement or the substance thereof without the written consent of the other Party, not to be unreasonably withheld.
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8.2    Publications. Both Parties recognize that the publication or disclosure of papers, presentations, abstracts, press releases or any other written or oral presentations regarding results of and other information regarding Licensed Product may be beneficial to both Parties, provided that such publications or presentations are subject to reasonable controls to protect Confidential Information, the patentability of inventions and other commercial and/or regulatory considerations. For the avoidance of doubt, the terms of this Section 8.2 shall not apply to patent applications filed by a Party. Accordingly, the following shall apply with respect to papers and presentations proposed for disclosure by either Party (the “Disclosing Party”):
8.2.1    Process for Review of Publication. With respect to any paper or presentation proposed for disclosure by the Disclosing Party which utilizes information generated by or on behalf of a Party relating to Licensed Product (including without limitation any publications containing Confidential Information of the other Party) the other Party (the “NonDisclosing Party”) shall have the right to review any such proposed paper or presentation. The Disclosing Party shall submit to the Non-Disclosing Party the proposed publication or presentation (including, without limitation, posters, slides, abstracts, manuscripts, marketing materials and written descriptions of oral presentations) at least [**] calendar days prior to the date of submission for publication or the date of presentation, whichever is earlier, of any of such submitted materials. The Non-Disclosing Party shall review such submitted materials and respond to the Disclosing Party as soon as reasonably possible, but in any case within [**] calendar days of receipt thereof. At the option of the Non-Disclosing Party, the Disclosing Party shall [**] to permit the Non-Disclosing Party to seek appropriate patent protection. Once a publication has been approved by the Non-Disclosing Party, the Disclosing Party may make subsequent public disclosure of the contents of such publication without the further approval of the Non-Disclosing Party; provided, such content is not presented with any new data or information or conclusions and/or in a form or manner that materially alters the subject matter therein.
8.3    No Right to Use Names. Except as expressly provided herein, no right, express or implied, is granted by the Agreement to either Party to use in any manner the name of “ADCT”, “Genmab”, or any other trade name, symbol, logo or trademark of the other Party in connection with the performance of this Agreement.
Article 9
REPRESENTATIONS
9.1    Mutual Representations and Warranties. Each Party represents and warrants to the other Party that, as of the Effective Date:
9.1.1    it is validly organized and in good standing under the laws of its jurisdiction of incorporation;
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9.1.2    it has obtained all necessary consents, approvals and authorizations of all governmental authorities and other persons or entities required to be obtained by it in connection with this Agreement;
9.1.3    the execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate action on its part;
9.1.4    it has the legal right and power to enter into this Agreement and to fully perform its obligations hereunder;
9.1.5    it follows reasonable commercial practices common in the industry to protect its proprietary and confidential information, including requiring its employees, consultants and agents to be bound in writing by obligations of confidentiality and nondisclosure, and requiring its employees, consultants and agents to assign to it any and all inventions and discoveries discovered by such employees, consultants or agents made within the scope of, and during their employment, and only disclosing proprietary and confidential information to Third Parties pursuant to written confidentiality and nondisclosure agreements; and,
9.1.6    on and prior to the Execution Date, it has not been [**].
9.2    Representations of ADCT. ADCT represents and warrants to Genmab that, as of the Effective Date:
9.2.1    ADCT has the sufficient skills, competences and capabilities to perform the work on Licensed Product contemplated under this Agreement; and
9.2.2    that ADCT and its Affiliates have generated, prepared, maintained, and retained all regulatory filings that are required to be maintained or retained pursuant to and in accordance with good laboratory and clinical practice and applicable law in order to perform Development activities in respect of the Licensed Product.
9.2.3    ADCT has not received any claims or allegations that a Third Party has any ownership right in or to the Drug Moiety or to the Linker.
9.2.4    ADCT has not received any written notice of infringement of any Third Party patents by virtue of ADCT’s making, using, selling, offering to sell, or importing a PBD or Linker Controlled or owned by ADCT.
9.2.5    ADCT has not received any written notice regarding any pending or threatened actions, claims, investigations, suits or proceedings against ADCT, at law or in equity, or before or by any Regulatory Authority, in either case with respect to the Licensed Product and, to the best of ADCT’s knowledge, there are no pending actions, claims, investigations, suits or proceedings against ADCT, at law or in equity, or before or by any Regulatory Authority;
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9.2.6    neither ADCT nor any of its Affiliates has been debarred or is subject to debarment under applicable law, and neither ADCT nor any of its Affiliates will use in any capacity, in connection with the Development, manufacture or Commercialization of the Licensed Product, any person who has been debarred pursuant to Section 306 of the United States Federal Food, Drug, and Cosmetic Act, or any other applicable law, or who is the subject of a conviction described in such section. Each Party agrees to inform the other Party in writing immediately if it or any Person who is performing services for it hereunder is debarred or is the subject of a conviction described in Section 306 of the United States Federal Food, Drug, and Cosmetic Act, or any other applicable law, or if any action, suit, claim, investigation or legal or administrative proceeding is pending or, to the best of such ADCT’s knowledge, is threatened, relating to the debarment or conviction of ADCT or any person used in any capacity by ADCT or any of its Affiliates in connection with the Development, manufacture or Commercialization of the Licensed Product.
9.3    Representations of Genmab. Genmab represents and warrants to ADCT that:
9.3.1    as of the Effective Date it has sufficient rights to grant the licenses and sublicenses granted in Section 2.1 and Section 2.2.
9.3.2    Schedule 1(A) is a complete and comprehensive list of all Genmab Intellectual Property existing as of the Execution Date.
9.3.3    As of the Effective Date Genmab has not received any claims or allegations that a Third Party has any ownership right in or to the Antibody [**].
9.3.4    as of the Effective Date Genmab has not received any written notice of infringement of any Third Party patents by virtue of Genmab’s making, using, selling, offering to sell, or importing the Antibody.
9.3.5    except for the Medarex License and the [**]License and the payment obligations hereunder, it has no financial obligations that would interfere with its ability to offer fully-paid-up, royalty free licenses herein.
9.3.6    Genmab has performed [**] the field of naked CD25 antibodies in the past prior to Execution Date. [**].
9.4    Disclaimers. EXCEPT AS OTHERWISE EXPRESSLY STATED IN THIS AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATION OR WARRANTY OF ANY KIND WITH RESPECT TO PATENTS, KNOWHOW, MATERIALS OR CONFIDENTIAL INFORMATION SUPPLIED BY IT TO THE OTHER PARTY HEREUNDER, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO
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WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT.
9.5    Compliance with Laws. ADCT shall comply fully during the Term with, and shall cause its personnel and Affiliates, sublicensees, subcontractors and other Third Party service providers that provide services to it or its Affiliates in support of its obligations under this Agreement, to comply with all applicable anti-corruption laws in connection with the performance of this Agreement, and shall not, in connection with the performance of this Agreement, directly or indirectly, make, promise, authorize, ratify or offer to make, or take any act in furtherance of, or receive or offer to receive, any payment or transfer of anything of value, for the purpose of influencing, inducing or rewarding any act, omission or decision to secure an improper advantage with the purpose or effect of public or commercial bribery. ADCT shall implement and maintain in force for the Term adequate internal anti-corruption policies and risk-based management systems with respect to providing relevant information, education and training to, and monitoring compliance of, its personnel with all applicable anti-corruption laws, including without limitation appropriate whistleblowing arrangements and internal anticorruption compliance auditing.
Article 10
INDEMNIFICATION
10.1    Indemnification. Each Party shall indemnify, defend and hold the other Party, its Affiliates and their respective directors, officers, and employees and the successors and assigns of any of the foregoing harmless from and against any and all liabilities, damages, settlements, penalties, fines, costs or expenses (including, without limitation, reasonable attorneys' fees and other expenses of litigation) (collectively, “Loss” or “Losses”) arising, directly or indirectly out of or in connection with any Third Party claims, suits, actions, demands or judgments (“Third-Party Claims”) resulting from (a) the gross negligence or willful misconduct of such Party under this Agreement, or (b) breach by such Party of the representations and warranties made in this Agreement.
10.2    Procedure. If a Party intends to claim indemnification under this Agreement (the “Indemnitee”), it shall promptly notify the other Party (the “Indemnitor”) in writing of such alleged Loss. The Indemnitor shall have the right to control the defense thereof with counsel of its choice as long as such counsel is reasonably acceptable to Indemnitee. Any Indemnitee shall have the right to retain its own counsel at its own expense for any reason, provided, however, that if the Indemnitee shall have reasonably concluded, based upon a written opinion from outside legal counsel, that there is a conflict of interest between the Indemnitor and the Indemnitee in the defense of such action, in each of which cases the Indemnitor shall pay the fees and expenses of one law firm serving as counsel for the Indemnitee. The Indemnitee, its employees and agents, shall reasonably cooperate with the Indemnitor
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and its legal representatives in the investigation of any Third-Party Claims covered by this Agreement. The obligations of this Article 12 shall not apply to any settlement of any Third-Party Claims if such settlement is effected without the consent of both Parties, which shall not be unreasonably withheld or delayed. The failure to deliver written notice to the Indemnitor within a reasonable time after the commencement of any such action, to the extent prejudicial to its ability to defend such action, shall relieve the Indemnitor of any obligation to the Indemnitee under this Section 10.3. It is understood that only [**].
10.3    Limitation of Damages. NEITHER PARTY HERETO WILL BE LIABLE FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, EXEMPLARY, OR PUNITIVE DAMAGES, INCLUDING LOST PROFITS, ARISING FROM OR RELATING TO THIS AGREEMENT, REGARDLESS OF ANY NOTICE OF SUCH DAMAGES, EXCEPT IN RESPECT OF ANY BREACH OF A PARTY’S OBLIGATIONS UNDER ARTICLE 7 OR INDEMNIFICATION OBLIGATIONS UNDER THIS ARTICLE 10 FOR CLAIMS OF THIRD PARTIES.
Article 11
TERM AND TERMINATION
11.1    Term. The term of this Agreement (the “Term”) shall commence on the Effective Date and, unless terminated earlier under the provisions of this Article 11 expire on a country-by-country basis on the date of complete and permanent cessation of Development, Commercialization and any other sale of Licensed Product in or for such country. For clarity, this Agreement shall expire in its entirety upon complete and permanent cessation of Development, Commercialization and any other sale of Licensed Product in all countries in the Territory.
11.2    Termination. Neither Party shall have the right to terminate this Agreement, except as provided in this Section 11.2.
11.2.1    By the Parties. This Agreement may be terminated upon mutual written agreement between the Parties.
11.2.2    Termination For Cause. Either Party may terminate this Agreement for breach by the other Party (“Breaching Party”) of any material provision of the Agreement or in the case of a license, a breach of a material provision related to such license, including diligence obligations, if, in the event that the breach is by its nature capable of being cured, the Breaching Party has not cured such breach within [**] days after notice thereof (or in the event any breach is incapable of being cured in such time period, if the Breaching Party commences a cure within such [**] day period and diligently pursues the cure to completion).
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11.2.3    Termination Upon Insolvency; Bankruptcy. Either Party may terminate this Agreement if, at any time, the other Party (a)  shall file in any court or agency pursuant to any statute or regulation of any state, country or jurisdiction, a petition in bankruptcy or insolvency or for reorganization or for an arrangement or for the appointment of a receiver or trustee of that Party or of its assets, (b)  proposes a written agreement of composition or extension of its debts, (c shall be served with an involuntary petition against it, filed in any insolvency proceeding, and such petition shall not be dismissed within [**] days after the filing thereof, (d)  shall propose or be a party to any dissolution or liquidation, or (e)  shall make an assignment for the benefit of its creditors. Notwithstanding the foregoing, the Parties intend for this Agreement and the licenses granted herein to come within Section 365(a) of the United States Bankruptcy Code, and notwithstanding the bankruptcy or insolvency of Genmab, this Agreement and the licenses granted herein shall remain in full force and effect so long as ADCT shall remain in material compliance with the terms and conditions hereof.
11.3    Effect of Expiration or Termination
11.3.1    Upon expiration of the Term, (a) all licenses granted by one Party to the other hereunder, and all sublicenses granted to Affiliates or Third Parties by a Party hereunder, shall immediately terminate, and (b) the Parties shall use Commercially Reasonable Efforts to facilitate the necessary transition of rights and obligations between the Parties as required by this Agreement. In the event of termination, ADCT shall grant to Genmab a nonexclusive, fully paid-up license in the Field and in the Territory to any claims in any new Patents in any jurisdiction, [**], arising from the activities under this Agreement to the extent that such claims are directed to ADCs, with the right to grant nonexclusive sublicenses thereunder.
11.3.2    In the event of a termination of this Agreement due to a breach in accordance with Section 11.2.2 , the non-breaching Party shall retain the right to seek damages and any other remedy available to it at law or in equity in connection with such breach.
11.4    Return of Confidential Information. [**] days after the end of the Term, unless the Parties otherwise agree in writing, each Party shall promptly wind down all activities under the Agreement, return or destroy all relevant records and materials, including the ADCs, in its possession or control containing the other With respect to Licensed Product, ADCT shall wind-down any clinical trials and destroy any Licensed Product, in accordance with applicable laws and in a manner designed to preserve the health and welfare of any clinical trial subjects or patients. Party’s Confidential Information with respect to which the former Party does not retain rights hereunder; provided, however, that each Party may retain [**] of archival copies of such records and materials to be able to monitor its obligations that survive under this Agreement and for legal and regulatory compliance purposes.
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Article 12
DISPUTE RESOLUTION
12.1    Disputes and Binding Arbitration. ADCT and Genmab agree to first use their reasonable efforts to resolve any dispute arising out of this Agreement by amicable negotiation. The Parties shall be obligated to provide each other written notice of a dispute arising out of this Agreement. If any dispute arising out of this Agreement, including validity, breach, or termination thereof, cannot be resolved within [**] days after receipt of notice of such dispute, then the [**] of ADCT and Genmab, or their designates, shall meet, either in person or telephonically, at least once over the succeeding [**] days, to attempt to come to a resolution. If any dispute is still not then resolved, the Parties shall submit to binding arbitration under the rules of the American Arbitration Association then applying as follows. There shall be [**] arbitrators, [**] chosen by Genmab, [**] chosen by ADCT, and [**] selected by the [**] arbitrators chosen by the Parties (whom shall be the chair of the panel). The arbitration shall be conducted in the English language and shall take place in New York, New York, United States.
12.1.1    The arbitration hearing, if necessary, shall commence no later than [**] after the close of discovery and no more than [**] shall be allotted for such hearing. The panel shall allocate time equally between the Parties.
12.1.2    Unless the panel determines otherwise (a) the Parties may file a pre- hearing brief of not more than [**] pages which must be submitted to the panel and opposing party no later than the fifth business day prior to commencement of the hearing; and (b) the parties may file a post- hearing brief of not more than [**] pages which must be submitted to the panel and opposing party no later than the fifth business day following the close of the hearing.
12.1.3    The arbitration panel may decide any dispute, including any matter described as subject to arbitration in any Section of this Agreement.
12.1.4    The arbitrators shall base their decision on the terms and conditions of the Agreement, as interpreted according to the laws of the State of New York. The decision of the majority of the arbitration panel shall be final and binding, and judgment upon the award rendered by the arbitrators may be entered by any court of competent jurisdiction.
12.1.5    The decision of the panel shall be in the form of a written decision rendered within [**] days after the conclusion of the arbitration hearing, such written decision to include the findings of fact and conclusions of law upon which it is based. The arbitration panel shall be empowered to grant any award in law or equity including, but not limited to, monetary damages (which shall be limited to compensatory damages only), injunctive relief, including temporary restraining orders prior to rendering a final
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judgment, and reasonable attorney’s fees, but in the event such injunctive relief cannot be granted by the Arbitrators at all or in a timely fashion under the circumstances either party may seek such urgent relief from any Federal Court in New York and the parties hereby agree to jurisdiction of such court.
12.2    Interim Equitable Relief. Notwithstanding anything to the contrary in this Section 12.2 in the event that a Party reasonably requires relief on a more expedited basis than would be possible pursuant to the procedure set forth in this Section 12.2 such Party may seek a temporary injunction or other interim equitable relief in a court of competent jurisdiction.
12.3    Protective Orders; Arbitrability. At the request of either Party, the arbitrator shall enter an appropriate protective order to maintain the confidentiality of information produced or exchanged in the course of the arbitration proceedings. The arbitrator shall have the power to decide all questions of arbitrability.
12.4    Subject Matter Exclusions. Notwithstanding the provisions of Section 12.3, any dispute not resolved internally by the Parties pursuant to Section 12 that involves the validity or infringement of a Patent that claims an ADC (a) that is issued in the United States shall be subject to administrative proceedings before the United States Patent and Trademark Office and/or submitted exclusively to the United States District Court for the District of Columbia; and (b) that is issued in any other country shall be brought before an appropriate regulatory or administrative body or court in that country, and the Parties hereby consent to the jurisdiction and venue of such courts and bodies.
12.5    Continued Performance. Provided that this Agreement has not terminated, the Parties agree to continue performing under this Agreement in accordance with its provisions, pending the final resolution of any dispute.
Article 13
MISCELLANEOUS
13.1    Applicable Law. This Agreement shall be governed by and interpreted in accordance with the laws of the State of New York, USA, without reference to its conflicts of law principles. The United Nations Convention on Contracts for the International Sale of Goods shall not apply to the transactions contemplated by this Agreement.
13.2    Notices. Except as otherwise expressly provided in the Agreement, any notice required under this Agreement shall be in writing and shall specifically refer to this Agreement. Notices shall be sent via one of the following means and will be effective (a) on the date of delivery, if delivered in person; (b) on the date of receipt, if sent by e-mail (with delivery confirmed); or (c) on the date of receipt, if sent by private
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express courier or by first class certified mail, return receipt requested. Any notice sent via email shall be followed by a copy of such notice by private express courier or by first class mail. Notices shall be sent to the other Party at the addresses set forth below. Either Party may change its addresses for purposes of this Section 13.3 by sending written notice to the other Party.
If to Genmab:
    Genmab A/S
    [**]
    or

the address of Genmab as registered in the Danish Central Business Register (or any successors hereof)

If to ADCT:
ADC Therapeutics SA
Biopole, Rte de la Corniche 3B
1066 Epalinges
Switzerland
Attn : General Counsel


13.3    Assignment. Neither Party may assign, in whole or in part, this Agreement without the prior written consent of the non-assigning Party. Notwithstanding the foregoing, either Party may assign this Agreement to (i) an Affiliate or (ii) any purchaser of all or substantially all of the assets of such Party or to which this Agreement relates, or of all of its capital stock, or to any successor corporation or entity resulting from any merger or consolidation of such Party with or into such corporation or entity, provided that the party to which this Agreement is assigned expressly agrees in writing to assume and be bound by all obligations of the assigning Party under this Agreement. A copy of such written agreement by such assignee shall be provided to the non-assigning Party within [**] calendar days of execution of such written agreement. Subject to the foregoing, this Agreement will benefit and bind the Parties’ successors and assigns. In the event that ADCT assigns this Agreement pursuant to this Section 13.3, the assignee shall agree to be bound by the provisions of this Agreement, including an obligation to use Commercially Reasonable Efforts to Develop and Commercialize Licensed Product. In the event the assignee does not comply with such obligation with respect to Licensed Product, the assignee shall initiate a process to sell or partner Licensed Product and shall offer Genmab an opportunity to participate in such process. For avoidance of doubt, the foregoing shall not limit Genmab’s possibilities to exercise any other remedies available to Genmab under this Agreement,
13.4    Independent Contractors. The Parties hereto are independent contractors and nothing contained in this Agreement shall be deemed or construed to
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create a partnership, joint venture, employment, franchise, agency or fiduciary relationship between the Parties.
13.5    Force Majeure. Neither Party will be liable for any failure or delay in performing an obligation under this Agreement that is due to any of the following causes, resulting in or causing the failure of that Party to perform any or all of its obligations under this Agreement (which events and/or circumstances are hereinafter referred to as “Force Majeure”),: acts of God, accident, riots, war, terrorist act, epidemic, pandemic, quarantine, civil commotion, breakdown of communication facilities, breakdown of web host, breakdown of internet service provider, natural catastrophes, governmental acts or omissions, changes in laws or regulations, national strikes, fire, explosion, generalized lack of availability of raw materials or energy.
13.6    Integration. Except to the extent expressly provided herein, this Agreement constitutes the entire agreement between the Parties relating to the subject matter of this Agreement and supersedes all previous oral and written communications between the Parties with respect to the subject matter of this Agreement, including the Collaboration Agreement. This Agreement supersedes the terms of the [**] Agreement between the Parties effective [**] and the [**] Agreement between the Parties effective [**], and such agreements are terminated as of the Effective Date.
13.7    Amendment; Waiver. Except as otherwise expressly provided herein, no alteration of or modification to this Agreement shall be effective unless made in writing and executed by an authorized representative of both Parties. No course of dealing or failing of either Party to strictly enforce any term, right or condition of this Agreement in any instance shall be construed as a general waiver or relinquishment of such term, right or condition. The observance of any provision of this Agreement may be waived (either generally or any given instance and either retroactively or prospectively) only with the written consent of the Party granting such waiver.
13.8    Severability. The Parties do not intend to violate any public policy or statutory or common law. However, if any sentence, paragraph, clause or combination of this Agreement is in violation of any law or is found to be otherwise unenforceable, such sentence, paragraph, clause or combination of the same shall be deleted and the remainder of this Agreement shall remain binding, provided that such deletion does not alter the basic purpose and structure of this Agreement.
13.9    Construction. The Parties mutually acknowledge that they and their attorneys have participated in the negotiation and preparation of this Agreement. Ambiguities, if any, in this Agreement shall not be construed against any Party, irrespective of which Party may be deemed to have drafted this Agreement or authorized the ambiguous provision.
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13.10    Interpretation. The captions and headings to this Agreement are for convenience only, and are to be of no force or effect in construing or interpreting any of the provisions of this Agreement. Any capitalized terms used, but not defined in this Agreement, shall be interpreted as set forth in the Collaboration Agreement, if not otherwise explicitly stated.
13.11    Survival. In addition to any provisions that specify survival or non-survival in the event of expiration or termination of this Agreement, rights and obligations which, from the context thereof, are intended to survive termination or expiration of this Agreement, including without limitation the provisions of [**] shall survive any termination or expiration of the Agreement. In addition, any obligations to wind-down the activities and any unpaid obligations of Genmab or ADCT, as applicable, under this Agreement shall survive any termination of this Agreement. This Agreement shall survive in its entirety any change of control of either Party.
13.12    Counterparts. This Agreement may be executed in two or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. For purposes hereof, a copy made and transmitted by electronic means, including the signature pages hereto, will be deemed to be an original. Notwithstanding the foregoing, the Parties shall deliver original execution copies of this Agreement to one another as soon as practicable following execution thereof.

end of page
[signatures appear on follow page]

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In Witness Whereof, ADCT and Genmab have executed this Agreement by their respective officers hereunto duly authorized, as of the Execution Date.

ADC Therapeutics Sarl



By: /s/ Michael Forer    
Name:    Michael Forer
Title:    Chief Executive Officer




Genmab A/S



By: /s/ Jan van de Winkel    
Name:    Jan van de Winkel
Title:    President & CEO


[signature page to Amended and Restated Collaboration and License Agreement]

Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.

Schedule 1
Genmab Intellectual Property/
Genmab In-Licensed Intellectual Property


(A)
Genmab Intellectual Property

[**]

(B)

Genmab In-Licensed Intellectual Property
Medarex Patent Rights
[**]


Schedule 2
page 1

Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.

[**] Patent Rights
[**]


Schedule 2
page 2

Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.

Schedule 2
ANTIBODY-DRUG CONJUGATE INTELLECTUAL PROPERTY

[**]
Schedule 2
page 3

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Schedule 3
LIST IDENTIFYING THIRD PARTY PATENT POSITIONS

[**]


Schedule 3
page 1

Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.
Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.

Exhibit 4.4

SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT (this “Agreement”) is entered into on November 30, 2020 (the “Effective Date”) by and among:
(1)    Overland ADCT BioPharma (CY) Limited, a company incorporated under the Laws of the Cayman Islands (the “Company”);
(2)    Overland Pharmaceuticals (CY) Inc., a company incorporated under the Laws of the Cayman Islands, (“Overland”); and
(3)    ADC Therapeutics SA, a company established under the Laws of Switzerland (“ADCT”, together with Overland, the “Investors”, and each an “Investor”).
Each of the forgoing parties is referred to herein individually as a “Party” and collectively as the “Parties”.
RECITALS
A.    The Company intends to issue and sell to the Investors, and the Investors intend to subscribe for and purchase from the Company, a certain number of Series A preferred shares, par value US$0.0001 per share, of the Company (the “Series A Shares”), pursuant to the terms and subject to the conditions of this Agreement.
B.    The Parties intend to enter into this Agreement and make the respective representations, warranties, covenants and agreements set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual promises hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
1.    DEFINITIONS
Unless otherwise defined in this Agreement, capitalized terms used in this Agreement shall have the meanings set forth in Exhibit A.
2.    TRANSACTIONS
2.1    Authorization. On or prior to the Closing, the Company shall have authorized the issuance of the Series A Shares, having the rights, preferences, privileges and restrictions set forth in the Amended and Restated Memorandum and Articles of Association of the Company in the form attached hereto as Part II of Exhibit E (the “Memorandum and Articles”).


2.2    Sale and Purchase of Series A Shares.
(i)    Subject to the terms and conditions of this Agreement, the Company agrees to issue and sell to each of the Investors, and each of the Investors agrees to, severally and not jointly, subscribe for and purchase from the Company, at the Closing, such number of Series A Shares (collectively, the “Purchased Shares”) set forth opposite such Investor’s name in the column titled “Number of Series A Shares” in the table set forth in Exhibit B at a purchase price of US$1.0774 per share, amounting to the aggregate purchase price amount set forth opposite such Investor’s name in the column titled “Cash Consideration” (in the case of Overland) or “Contribution Consideration” (in the case of ADCT) in the table set forth in Exhibit B, which shall be payable by, (a) in the case of Overland, payment of US$50,000,000 in cash (the “Closing Cash”) at the Closing and an additional amount up to US$[**] in cash pursuant to Section 3.2(iv) (together with the Closing Cash, the “Overland Consideration”), and (b) in the case of ADCT, entering into the license and collaboration agreement in the form attached hereto as Part I of Exhibit E (the “License Agreement”), in the equivalent of US$48,039,216, with the Company upon the Closing.
(ii)    Upon completion of the Closing, Overland and ADCT, respectively, shall hold not less than [**]% and [**]% of the total issued and outstanding share capital of the Company on a fully-diluted, as-converted basis (including all share capital issuable under any options, warrants or other securities exercisable or convertible into any share capital of the Company and all shares granted or reserved under the ESOP).
3.    CLOSING
3.1    Closing. Subject to the terms and conditions of this Agreement, the closing of the subscription and issuance of the Purchased Shares pursuant to Section 2.2 (the “Closing”) shall take place remotely via the exchange of documents and signatures as soon as possible and in any event within ten (10) Business Days after the fulfillment or, to the extent permissible, waiver of the conditions to the Closing as set forth in Article 5 (other than conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or, to the extent permissible, waiver of those conditions at the Closing), or such other time as the Company and the Investors shall mutually agree (the “Closing Date”). A capitalization table setting forth the Company’s complete capital structure immediately after the Closing is set forth in Part II of Exhibit C.
3.2    Procedure.
(i)    Closing Deliverables by the Company. At the Closing, the Company shall deliver (or cause to be delivered) to each Investor (a) a true copy of the Company’s updated register of members certified by the registered office provider of the Company, reflecting the issuance of the Purchased Shares to the Investors at the Closing, (b) a true copy of the Company’s updated register of directors
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certified by the registered office provider of the Company, evidencing the appointment of two (2) representatives of Overland and two (2) representatives of ADCT, (c) the original share certificate representing the Purchased Shares purchased by such Investor at the Closing, (d) a certificate of good standing of the Company issued by the Registrar of Companies of the Cayman Islands dated within twenty (20) days prior to the Closing, (e) a certificate of continuing registration of the HK Company issued by the Registrar of Companies of Hong Kong dated within twenty (20) days prior to the Closing, and (f) to the extent not previously delivered, such documents, instruments and items required to be delivered in connection with the satisfaction of the applicable closing conditions under this Agreement.
(ii)    Delivery of the Closing Documents. At the Closing,
(a)    License Agreement. (i) The Company and ADCT shall execute and deliver the License Agreement and (ii) the Company shall assign the License Agreement to the HK Company.
(b)    Shareholders Agreement. The Parties and the HK Company shall execute and deliver the shareholders agreement in the form attached hereto as Part III of Exhibit E (the “Shareholders Agreement”).
(c)    Indemnification Agreement. The Company shall duly execute and deliver an indemnification agreement with each member of the Board as of the Closing, respectively, and the Investor that appoints such member in the form attached hereto as Part IV of Exhibit E (the “Indemnification Agreement”).
(iii)    Closing Payment. At the Closing, Overland shall pay the Closing Cash to the Company by wire transfer of immediately available funds in U.S. dollars to a bank account designated by the Company.
(iv)    Deferred Payment. Within ten (10) days after receipt of a written notice from the Company that any Milestone Payment is payable to ADCT pursuant to Section 6.4, Overland shall pay such portion of the Overland Consideration that it has not paid in cash at the Closing and is equal to the amount of such Milestone Payment (the “Deferred Payment”); it being agreed that if the Company has failed to deliver such written notice, ADCT shall be entitled to deliver such written notice on behalf of the Company to Overland to require the making of the Deferred Payment. Such payment shall be made by Overland to the Company by wire transfer of immediately available funds in U.S. dollars to a bank account designated by the Company (or if no account is so designated under this Section 3.2(iv), the same bank account of the Company receiving funds at the Closing).
4.    REPRESENTATIONS AND WARRANTIES
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4.1    Representations and Warranties of the Company. The Company hereby represents and warrants to each Investor that each of the statements contained in Part I of Exhibit D attached hereto (the “Company Representations and Warranties”) is true, correct and complete as of the Effective Date (other than those in respect of the HK Company) and the Closing Date.
4.2    Representations and Warranties of Each Investor. Each Investor hereby severally and not jointly represents and warrants to the Company and the other Investor that each of the statements with respect to such Investor itself contained in Part II of Exhibit D (the “Investor Representations and Warranties”) is true, correct and complete as of the Effective Date and the Closing Date.
5.    CONDITIONS
5.1    Conditions to ADCT’s Obligations at the Closing. The obligation of ADCT hereunder to consummate the Closing shall be subject to the fulfillment of, or waiver by ADCT of, each of the following conditions at or prior to the Closing:
(i)    Representations and Warranties. The Company Representations and Warranties and the Investor Representations and Warranties made by Overland shall be true, correct and complete when made, and as of the Closing Date with the same force and effect as if they were made on and as of such date.
(ii)    Performance of Obligations. Each of the Company, the HK Company and Overland shall have performed and complied with all covenants, agreements, obligations and conditions contained in the Transaction Documents that are required to be performed or complied with by it on or before the Closing.
(iii)    Authorization and Proceedings. The execution, delivery and performance of the Transaction Documents to which the Company, the HK Company or Overland is a party shall have been duly authorized by all necessary action on the part of the Company, the HK Company or Overland (as applicable). All corporate and other proceedings by each of the Company, the HK Company and Overland in connection with the transactions contemplated under this Agreement and the other Transaction Documents shall have been completed and all documents and instruments incidental to such transactions shall have been executed, delivered, or filed, as applicable.
(iv)    Approvals. Any and all Consents, including but not limited to all permits, authorizations, approvals, waivers, consents or permits of any Governmental Authority or any other person that are necessary for consummation of the transactions contemplated by the Transaction Documents, shall have been duly obtained prior to, and be in full force and effect as of, the Closing.
(v)    No Prohibition. There shall not be in effect any applicable Law, Governmental Order or other oral or written determination or indication from any
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Governmental Authority, or other legal restraint or prohibition, prohibiting, suspending, delaying, objecting, restraining, enjoining, preventing or making illegal the consummation of the transactions contemplated under the Transaction Documents, and there shall not be any pending or threatened action by any Governmental Authority or third party seeking to prohibit, suspend, delay, object to, restrain, enjoin, prevent or make illegal the consummation of such transactions.
(vi)    Memorandum and Articles. The Memorandum and Articles shall have been duly adopted by the Company by all necessary action of the Board and the shareholders of the Company and duly filed with the Registrar of Companies in the Cayman Islands, and the Memorandum and Articles shall have become effective with no amendment as of the Closing.
(vii)    Board. As of the Closing, the Board shall consist of (a) two (2) directors appointed by Overland, and (b) two (2) directors appointed by ADCT.
(viii)    Establishment of HK Company. The Company shall have established the HK Company prior to the Closing.
(ix)    Business Plan and Budget. Overland shall have provided to ADCT the business plan and budget of the Company (the “Business Plan”) for the twelve-month period following the Closing to the satisfaction of ADCT.
(x)    Concurrent Closing. Overland shall consummate the Closing in accordance with this Agreement concurrently with the consummation of the Closing by ADCT in accordance with this Agreement.
(xi)    Closing Certificate. At the Closing, the Company shall deliver to each Investor a certificate dated as of the Closing, signed by one (1) director of the Company certifying (a) that the conditions specified in Section 5.1 have been fulfilled as of the Closing, (b) that the attached copies of the resolutions of the Board and the shareholder of the Company approving the transactions contemplated hereby are all true and complete copies and such resolutions remain unamended and in full force and effect, (c) that the attached copies of the resolutions of the shareholder of the Company adopting the Memorandum and Articles and electing the members of the Board pursuant to the Shareholders Agreement are true and complete copies and such resolutions remain unamended and in full force and effect, and (d) that the attached copies of the resolutions of the board and the shareholder of the HK Company approving the transactions contemplated hereby are all true and complete copies and such resolutions remain unamended and in full force and effect.
5.2    Conditions to Company’s Obligations at the Closing. The obligation of the Company to consummate the Closing with respect to each Investor shall be subject to the
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fulfillment, or waiver (a) by the Company in respect of ADCT, and (b) by ADCT in respect of Overland, of each of the following conditions at or prior to the Closing:
(i)    Representations and Warranties. The Investor Representations and Warranties of such Investor shall be true, correct and complete when made, and as of the Closing Date, with the same force and effect as if they were made on and as of such date.
(ii)    Performance of Obligations. Such Investor shall have performed and complied with all covenants, agreements, obligations and conditions contained in the Transaction Documents that are required to be performed or complied with by it on or before the Closing.
(iii)    Approvals. Any and all Consents, including but not limited to all permits, authorizations, approvals, waivers, consents or permits of any Governmental Authority or any other person that are necessary for consummation of the transactions contemplated by the Transaction Documents, shall have been duly obtained prior to and be in full force and effect as of the Closing.
6.    COVENANTS
6.1    Use of Proceeds. The Company covenants to the Investors that, unless otherwise agreed by the Investors in writing or under the Transaction Documents, the entire proceeds received from the sale and issuance of the Purchased Shares hereunder shall be used only for the Principal Business and general working capital needs of the Company and its Subsidiaries (including without limitation, for the performance by the Company of its obligations under the License Agreement) in accordance with the Business Plan and in accordance with any control procedures approved by the Investors from time to time.
6.2    Satisfaction of Conditions. The Company and Overland shall use their respective reasonable best efforts to satisfy (or cause the satisfaction of) the closing conditions as set forth in Section 5.1 as soon as practicable.
6.3    Establishment of HK Company. As soon as practicable after the Effective Date and in any event prior to the Closing, the Company shall establish a wholly owned Subsidiary in Hong Kong (the “HK Company”).
6.4    Development Milestone Payments. From and after the Closing, ADCT shall promptly notify the Company and provide the Company with a copy of a report upon completion of any Clinical Proof of Concept Study of ADCT-602, ADCT-601, and ADCT-901. If the report demonstrates that such study has met its primary endpoint with acceptable efficacy and safety profile, the Company shall pay to ADCT a non-refundable and non-creditable milestone payment as follows:
(i)    Within [**] days following receipt of the final report from the first Clinical Proof of Concept Study of ADCT-602 demonstrating that ADCT-602 has
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met its primary endpoint with acceptable efficacy and safety profile, the Company will pay to ADCT US$[**].
(ii)    Within [**] days following receipt of the final report from the first Clinical Proof of Concept Study of ADCT-601 demonstrating that ADCT-601 has met its primary endpoint with acceptable efficacy and safety profile, the Company will pay to ADCT US$[**].
(iii)    Within [**] days following receipt of the final report from the first Clinical Proof of Concept Study of ADCT-901 demonstrating that ADCT-901 has met its primary endpoint with acceptable efficacy and safety profile, the Company will pay to ADCT US$[**] (each such milestone payment in subsections (i) through (iii), a “Milestone Payment”).
As soon as practicable and in any event within five (5) days following receipt of the final report as described in any of subsections (i) through (iii), the Company shall notify Overland in writing that the applicable Milestone Payment is payable to ADCT. Each Milestone Payment set forth above shall be due and payable only once for each Product (as defined in the License Agreement) set forth above, regardless of how many times such milestone event is achieved.
6.5    Confidentiality.
(i)    Confidentiality Obligation. Each Party shall, and shall cause its Affiliates to, keep confidential (a) the existence and content of this Agreement, the other Transaction Documents and any related documentation, and (b) other information of a non-public nature received from any other Party or its Representatives, or prepared by such Party or its Representatives, exclusively in connection herewith or therewith (collectively, the “Confidential Information”) unless in the case of (a) above, the Investors shall mutually agree otherwise in writing, and in the case of (b) above, the Party or Parties to which such nonpublic information relates shall consent in writing; provided that any Party may disclose Confidential Information or permit the disclosure of Confidential Information (A) to the extent legally compelled (including without limitation, pursuant to any applicable tax, securities, or other Laws of any jurisdiction); provided that such Party shall, where practicable and to the extent permitted by applicable Laws, provide the other Parties with prompt written notice of that fact, consult with the other Parties regarding such disclosure, and at the request of any other Party, seek (with the cooperation and reasonable efforts of the other Parties) a protective order, confidential treatment or other appropriate remedy; and in any event, such Party shall furnish only that portion of the information which is legally required to be disclosed and shall exercise reasonable efforts to obtain reliable assurance that confidential treatment will be accorded to such information, (B) to its Representatives, (C) in the case of an Investor, to its auditors, counsel, directors, officers, employees, fund manager, shareholders and partners, and (D) to its current or bona fide prospective investors, investment bankers and any Person
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otherwise providing substantial debt or equity financing to such Party, in each case of (B) through (D) above, strictly on a need-to-know basis and only where such Party advises each Person to whom any Confidential Information is so disclosed as to the confidential nature thereof and such Person is subject to appropriate nondisclosure obligations substantially similar to those set forth in this Section 6.5. Notwithstanding the foregoing, ADCT shall be permitted to disclose such information as required by the rules and regulations of the New York Stock Exchange and the U.S. Securities and Exchange Commission (as determined by ADCT) without being subject to the obligations in the proviso in sub-paragraph (A) above.
For the avoidance of doubt, “Confidential Information” does not include information that (i) was already in the possession of the receiving Party before such disclosure by the disclosing Party, (ii) is or becomes available to the public other than as a result of disclosure by the receiving Party in violation of this Section 6.5, (iii) is or becomes available to the receiving Party from a third party who has no confidentiality obligations to the disclosing Party, or (iv) was independently developed by the Representatives of the receiving Party who had no access to any Confidential Information.
(ii)    Public Announcement. No announcement regarding the consummation of the transaction contemplated by this Agreement, the other Transaction Documents and any related documentation in a press release, conference, advertisement, announcement, professional or trade publication, mass marketing materials or otherwise to the general public may be made without the prior written consent of each Investor, except as may otherwise be required by applicable Laws or Governmental Order (including the rules and regulations of the New York Stock Exchange and the U.S. Securities and Exchange Commission). Following the execution of this Agreement, the Investors will issue a press release, the form and timing of which shall be agreed between the Investors.
6.6    Survival of Representations and Warranties and Covenants. The representations and warranties and all covenants made by each Party contained in this Agreement shall survive the Closing until [**].
7.    INDEMNIFICATION
7.1    Indemnification.
(i)    The Company (the “Indemnifying Party”) shall indemnify, defend and hold harmless each Investor, its Affiliates and their respective members, shareholders, partners, directors, officers, employees, representatives and agents and any successors and assignees (each, an “Indemnified Party”) to the fullest extent permitted by Law from and against any and all actions, suits, proceedings, claims, complaints, disputes, arbitrations or investigations (collectively, “Claims”), losses, damages (excluding incidental, consequential or special
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damages unless awarded by a court of competent authority), penalties, Liabilities, indebtedness, obligations, taxes, expenses (including reasonable attorney’s fees and cost of defense and investigation), [**] (collectively, “Damages”), resulting from, arising out of or relating to any breach of any representation or warranty, or the nonperformance or breach, partial or total, of any covenant or other agreement, of the Indemnifying Party contained in any of the Transaction Documents.
(ii)    The representations, warranties, covenants and obligations of the Indemnifying Party in this Agreement or any Transaction Document, and the rights and remedies that may be exercised by the Indemnified Parties hereunder based on such representations, warranties, covenants and obligations, will not be limited or affected by any investigation conducted by any Investor or any Representative of such Investor with respect to, or any knowledge acquired (or capable of being acquired) by such Investor or any Representative of the Investor at any time, whether before or after the execution and delivery of this Agreement or any Transaction Document or the Closing, with respect to the accuracy or inaccuracy of, or compliance with or performance of, any such representation, warranty, covenant or obligation, and none of the Investors shall be required to show that it relied on any such representation, warranty, covenant or obligation of the Company in order to be entitled to indemnification pursuant to this Section 7.1.
7.2    Third-Party Claim Process.
(i)    Each Indemnified Party agrees to give prompt notice in writing to the Indemnifying Party of the commencement of any Claim in respect of which indemnity may be sought from the Indemnifying Party under this Article 7. Such notice shall set forth in reasonable detail such Claim and the basis for indemnification (taking into account the information then available to the Indemnified Party). The failure to so notify the Indemnifying Party shall not relieve the Indemnifying Party of its obligations hereunder.
(ii)    In case any such Claim shall be brought against any Indemnified Party, and upon its notification to the Indemnifying Party of the commencement thereof, the Indemnifying Party shall be entitled to participate in the defense of any Claim and, subject to the limitations set forth in this Section, shall be entitled to control and appoint lead counsel for such defense that is satisfactory to such Indemnified Party in its reasonable judgment, in each case at the Indemnifying Party’s expense; provided that prior to assuming control of such defense, the Indemnifying Party must (a) acknowledge that it would have an indemnity obligation for the Damages resulting from such Claim as provided under this Article 7 and (b) furnish the Indemnified Party with evidence that the Indemnifying Party has adequate resources to defend the Claim and fulfill its indemnity obligations hereunder.
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(iii)    The Indemnifying Party shall not be entitled to assume or maintain control of the defense of any Claim and shall pay the fees and expenses of counsel retained by the Indemnified Party if (a) the Indemnifying Party does not deliver the acknowledgment referred to in Section 7.2(ii)(a) within thirty (30) days of receipt of notice of the Claim pursuant to Section 7.2(i), (b) the Claim relates to or arises in connection with any criminal proceeding, action, indictment, allegation or investigation, (c) the Indemnified Party reasonably believes an adverse determination with respect to the Claim would be detrimental to the reputation or future business prospects of the Indemnified Party or any of its Affiliates, (d) the Claim seeks an injunction or equitable relief against the Indemnified Party or any of its Affiliates, or (e) the Indemnifying Party has failed or is failing to prosecute or defend vigorously the Claim.
(iv)    If the Indemnifying Party shall assume the control of the defense of any Claim in accordance with the provisions of this Article 7, the Indemnifying Party shall obtain the prior written consent of each Indemnified Party before entering into any settlement of such Claim, if the settlement does not expressly unconditionally release such Indemnified Party and its Affiliates from all Liabilities with respect to such Claim or the settlement imposes injunctive or other equitable relief against such Indemnified Party or any of its Affiliates.
(v)    In circumstances where the Indemnifying Party is controlling the defense of a Claim in accordance with Sections 7.2(ii) and 7.2(iii) above, the Indemnified Party shall be entitled to participate in the defense of any Claim and to employ separate counsel of its choice for such purpose, in which case the fees and expenses of such separate counsel shall be borne by the Indemnified Party; provided that in such event the Indemnifying Party shall pay the fees and expenses of such separate counsel (a) incurred by the Indemnified Party prior to the date the Indemnifying Party assumes control of the defense of the Claim, (b) if in the reasonable opinion of counsel to the Indemnified Party representation of both the Indemnifying Party and the Indemnified Party by the same counsel would create a conflict or potential conflict of interest, or (c) if in the reasonable opinion of counsel to the Indemnified Party one or more defenses are available to the Indemnified Party that are not available to the Indemnifying Party.
(vi)    Each Party shall cooperate, and cause their respective Affiliates to cooperate, in the defense or prosecution of any Claim and shall furnish or cause to be furnished such records, information and testimony, and attend such conferences, discovery proceedings, hearings, trials or appeals, as may be reasonably requested in connection therewith.
(vii)    The rights accorded to an Indemnified Party hereunder shall be in addition to any rights that any Indemnified Party may have at common law, by separate agreement or otherwise; provided, however, that notwithstanding the foregoing or anything to the contrary contained in this Agreement, nothing in this Article 7
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shall restrict or limit any rights that any Indemnified Party may have to seek equitable relief.
7.3    Indemnity Gross-up. Any indemnification payment made by the Indemnifying Party to an Investor under this Agreement shall be grossed up to take into account the amount of such payment that would be indirectly borne by the Investor or its Affiliates by reason of its holding or ownership of shares or other equity interest in the Company. The amount of any such payment borne by an Investor shall be a percentage of such payment equal to the percentage of the Investor’s shares or other equity interest relative to the total outstanding share capital of the Company.
7.4    Contribution. If the indemnification provided for in this Article 7 from the Indemnifying Party is unavailable to an Indemnified Party hereunder in respect of any Damages referred to herein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Damages in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the Claims which resulted in such Damages, as well as any other relevant equitable considerations. The relative faults of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any Claim in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the Damages referred to above shall be deemed to include, subject to the limitations set forth in Sections 7.1 and 7.2, any legal or other fees, charges or expenses reasonably incurred by such party in connection with any investigation or proceeding.
8.    MISCELLANEOUS
8.1    Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, U.S., without giving effect to any choice of law principles that would require the application of the laws of a different jurisdiction. The application of the U.N. Convention on Contracts for the International Sale of Goods is excluded.
8.2    Binding Arbitration.
(i)    All disputes under this Agreement shall be submitted by either Party for resolution in arbitration administered by the International Chamber of Commerce (the “ICC”) pursuant to its arbitration rules and procedures then in effect.
(ii)    The arbitration shall be conducted by a panel of three (3) arbitrators: within thirty (30) days after initiation of arbitration, each Party shall select one (1) person to act as arbitrator and the two Party-selected arbitrators shall select a third
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arbitrator (who shall be the chairperson of the arbitration panel) within thirty (30) days of their appointment. If the arbitrators selected by the Parties are unable or fail to agree upon the third arbitrator, the third arbitrator shall be appointed by ICC. If, however, the aggregate award sought by the Parties is less than US$5,000,000 and equitable relief is not sought, the arbitration shall be conducted by a single arbitrator agreed by the Parties (or appointed by ICC if the Parties cannot agree). The seat of arbitration shall be New York City, New York and the language of the proceedings shall be English.
(iii)    The Parties agree that any award or decision made by the arbitral tribunal shall be final and binding upon them and may be enforced in the same manner as a judgment or order of a court of competent jurisdiction. The arbitral tribunal shall determine the dispute by applying the provisions of this Agreement and the governing law set forth in Section 8.1.
(iv)    By agreeing to arbitration, the Parties do not intend to deprive any court of its jurisdiction to issue, at the request of a Party, a pre-arbitral injunction, pre-arbitral attachment or other order to avoid irreparable harm, maintain the status quo, preserve the subject matter of the dispute, or aid the arbitration proceedings and the enforcement of any award. Without prejudice to such provisional or interim remedies in aid of arbitration as may be available under the jurisdiction of a competent court, the arbitral tribunal shall have full authority to grant provisional or interim remedies and to award damages for the failure of any party to the dispute to respect the arbitral tribunal’s order to that effect.
(v)    EACH PARTY HERETO WAIVES ITS RIGHT TO TRIAL BY JURY OF ANY ISSUE RELATING TO ANY DISPUTE ARISING HEREUNDER.
(vi)    Each Party shall bear its own attorney’s fees, costs, and disbursements arising out of the arbitration, and shall pay an equal share of the fees and costs of the administrator and the arbitrator; provided, however, the arbitrator shall be authorized to determine whether a Party is the prevailing party, and if so, to award to that prevailing party reimbursement for any or all of its reasonable attorneys’ fees, costs and disbursements (including, for example, expert witness fees and expenses, photocopy charges, travel expenses, etc.), or the fees and costs of the administrator and the arbitrator.
8.3    Notices. All notices which are required or permitted hereunder shall be in writing and sufficient if delivered personally, sent by facsimile (and promptly confirmed by personal delivery, registered or certified mail or overnight courier), sent by nationally-recognized overnight courier or sent by registered or certified mail, postage prepaid, return receipt requested, addressed as follows:
If to the Company and/or any Group Company:
c/o Walkers Corporate Limited
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Cayman Corporate Centre
27 Hospital Road
George Town, Grand Cayman
KY1-9008, Cayman Islands
Attn: Overland ADCT BioPharma (CY) Limited – The Corporate Administrator
Fax: 1(345) 949-7886
If to Overland:
John Hancock Tower
    25th Floor
200 Clarendon Street
Boston, MA 02116
Attn: Ed Zhang
with a copy to:
Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP
One Marina Park Drive, Suite 900
Boston, MA 02210
Attn: Timothy H. Ehrlich
Email: tehrlich@gunder.com
If to ADCT:
ADC Therapeutics SA
Biopôle, Route de la Corniche 3B
1066 Epalinges, Switzerland
Attn:    General Counsel
Email:    legal@adctherapeutics.com
with a copy to:
Cooley LLP
3175 Hanover Street
Palo Alto, CA 94304, USA
Attn:    Lila Hope, Ph.D.
Email:    lhope@cooley.com
and
Davis Polk & Wardwell Hong Kong Solicitors
18/F The Hong Kong Club Building
3A Chater Road
Hong Kong
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Attn:    Miranda So
Email:    miranda.so@davispolk.com
or to such other address as the Party to whom notice is to be given may have furnished to the other Party in writing in accordance herewith. Any such notice shall be deemed to have been given: (a) when delivered if personally delivered or sent by facsimile on a Business Day; (b) on the Business Day after dispatch if sent by internationally-recognized overnight courier; or (c) on the fifth Business Day following the date of mailing if sent by mail.
8.4    Successors and Assigns. Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the Parties. This Agreement, and the rights and obligations hereunder, shall not be assigned without the mutual written Consent of the Investors and the Company; provided that each Investor may assign its rights and obligations to its Affiliate (in the case of Overland, only to a wholly-owned Affiliate of Overland) without the Consent of the other Parties under this Agreement.
8.5    Severability. In case any provision of the Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected thereby. If, however, any provision of this Agreement shall be invalid, illegal, or unenforceable under any applicable Laws in any jurisdiction, it shall, as to such jurisdiction, be deemed modified to conform to the minimum requirements of such Law.
8.6    Amendment. This Agreement may only be amended or modified by an instrument in writing signed by the Company and the Investors.
8.7    Waiver. No waiver of any provision of this Agreement shall be effective unless set forth in a written instrument signed by the Party waiving such provision. No failure or delay by a Party in exercising any right, power or remedy under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of the same preclude any further exercise thereof or the exercise of any other right, power or remedy. Without limiting the foregoing, no waiver by a Party of any breach by any other Party of any provision hereof shall be deemed to be a waiver of any subsequent breach of that or any other provision hereof.
8.8    Further Assurances. Each Party shall from time to time and at all times hereafter make, do, execute, or cause or procure to be made, done and executed such further acts, deeds, conveyances, consents and assurances without further consideration, which may reasonably be required to effect the transactions contemplated by this Agreement.
8.9    Fees and Expenses. Each of the Company and the Investors shall pay all of its own costs and expenses incurred in connection with the negotiation, execution, delivery and performance of this Agreement and other Transaction Documents and the transactions contemplated hereby and thereby.
14
Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.

8.10    Interpretation. For all purposes of this Agreement, except as otherwise expressly provided, (a) the defined terms shall have the meanings assigned to them in their definitions and include the plural as well as the singular, and pronouns of either gender or neuter shall include, as appropriate, the other pronoun forms, (b) all references in this Agreement to designated sections and other subdivisions are to the designated sections and other subdivisions of the body of this Agreement, and all references in this Agreement to designated exhibits are to the exhibits attached to this Agreement, (c) the words “herein”, “hereof”, and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular section or other subdivision, (d) the titles of the sections and subdivisions of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement, (e) any reference in this Agreement to any “Party” or any other Person shall be construed so as to include its successors in title, permitted assigns and permitted transferees, (f) any reference in this Agreement to any agreement or instrument is a reference to that agreement or instrument as amended or novated, (g) the disjunctive shall be deemed to include the conjunctive, (h) “including” shall be deemed read to include “without limitation”, and (i) this Agreement is jointly prepared by the Parties and should not be interpreted against any Party by reason of authorship.
8.11    Entire Agreement. This Agreement and the other Transaction Documents constitute the entire agreement of the Parties with respect to the subject matter hereof and thereof and supersede all prior agreements and undertakings, both written and oral, among the Parties with respect to the subject matter hereof and thereof.
8.12    Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Facsimile and e-mailed copies of signatures shall be deemed to be originals for purposes of the effectiveness of this Agreement.
{The remainder of this page has been left intentionally blank}


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Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.

IN WITNESS WHEREOF, the Parties have duly executed this Share Purchase Agreement as of the date first above written.

Overland ADCT BioPharma (CY) Limited



By: /s/ Yang (Tracy) Jiao
Name: Yang (Tracy) Jiao
Title: Director




Overland ADCT BioPharma (CY) Limited



By: /s/ Yang (Tracy) Jiao
Name: Yang (Tracy) Jiao
Title: Director



SIGNATURE PAGE OF SHARE PURCHASE AGREEMENT
Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.

IN WITNESS WHEREOF, the Parties have duly executed this Share Purchase Agreement as of the date first above written.


Overland Pharmaceuticals (CY) Inc.



By: /s/ Ed Zhang
Name: Ed Zhang
Title: COO & CBO



SIGNATURE PAGE OF SHARE PURCHASE AGREEMENT
Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.

IN WITNESS WHEREOF, the Party has duly executed this Share Purchase Agreement as of the date first above written.

ADC Therapeutics SA



By: /s/ Christopher Martin
Name: Christopher Martin
Title: Chief Executive Officer


SIGNATURE PAGE OF SHARE PURCHASE AGREEMENT
Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.

EXHIBIT A
DEFINITIONS
“Action”
means any charge, claim, action, complaint, petition, investigation, appeal, suit, litigation, grievance, inquiry or other proceeding initiated or conducted by a mediator, arbitrator or Governmental Authority, whether administrative, civil, regulatory or criminal, and whether at law or in equity, or otherwise under any applicable Law.
“Affiliate”
means, with respect to any Person, (i) any other Person that, directly or indirectly, Controls, is Controlled by or is under common Control with such Person; and (ii) in the case of any individual, his spouse, child, brother, sister, parent, the immediate relatives of such spouse, trustee of any trust in which such individual or any of his immediate family members is a beneficiary object, or any entity or company Controlled by any of the aforesaid Persons.
“Board”
means the board of directors of the Company.
“Business Day”
means any day that is not a Saturday, Sunday, public holiday or other day on which commercial banks are required or authorized by Law to be closed in Beijing, China, Cayman Islands, New York, U.S., or Epalinges, Switzerland.
“CEO Director”
shall have the meaning ascribed to it in the Shareholders Agreement.
“cGMP”
means all applicable current Good Manufacturing Practices as set forth in 21 C.F.R. Parts 4, 210, 211, 601, 610 and 820, and all equivalent applicable Laws in any relevant country or region in the Territory (as defined in the License Agreement), each as may be amended and applicable from time to time.
“Clinical Proof of Concept Study”
shall have the meaning set forth in the License Agreement.
“Consent”
means any consent, approval, authorization, release, waiver, permit, grant, franchise, concession, license, exemption or order of, registration, certificate, declaration or filing with, or report or notice to, any Person, including any Governmental Authority.
“Contract”
means, a contract, agreement, undertaking, understanding, indenture, note, bond, loan, instrument, lease, mortgage, deed of trust, franchise, license, commitment, purchase order, and other legally binding arrangement, whether written or oral.
A-1
Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.

“Control”
means, with respect to a Person, the power or authority, whether exercised or not, to direct the business, management and policies of such Person, directly or indirectly, or by effective control whether through the ownership of voting securities or other ownership interests, by Contract or otherwise, which power or authority shall conclusively be presumed to exist upon possession of beneficial ownership or power to direct the vote of more than fifty percent (50%) of the votes entitled to be cast at a meeting of the members or shareholders of such Person or power to control the composition of more than fifty percent (50%) of the board of directors of such Person. The terms “Controlled” and “Controlling” have meanings correlative to the foregoing.
“Equity Securities”
means, with respect to any Person that is a legal entity, any and all shares, membership interests, units, profits interests, ownership interests, equity interests, registered share capital, and other equity securities of such Person, and any right, warrant, option, call, commitment, conversion privilege, preemptive right or other right to acquire any of the foregoing, or security convertible into, exchangeable or exercisable for any of the foregoing, or any Contract providing for the acquisition of any of the foregoing.
“ESOP”
means a share incentive plan for the benefit of officers, directors, employees, consultants, contractors or advisors to be adopted by the Company within three (3) months after the Closing, under which the maximum number of Ordinary Shares that may be reserved for issuance pursuant to options or other share incentive awards granted thereunder shall not exceed [**] percent ([**]%) of the total number of outstanding Ordinary Shares of the Company on a fully-diluted, as-converted basis as of immediately after the Closing.
A-2
Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.

“GCP”
means all applicable Good Clinical Practice standards for the design, conduct, performance, monitoring, auditing, recording, analyses and reporting of Clinical Trials (as defined in the License Agreement), as conducted within or outside the Territory (as defined in the License Agreement), including, as applicable (a) as set forth in the International Conference on Harmonization of Technical Requirements for Registration of Pharmaceuticals for Human Use Harmonized Tripartite Guideline for Good Clinical Practice (CPMP/ICH/135/95) and any other applicable guidelines for good clinical practice for trials on medicinal products, (b) the Declaration of Helsinki (2004) as last amended at the 52nd World Medical Association in October 2000 and any further amendments or clarifications thereto, (c) 21 C.F.R. Parts 50 (Protection of Human Subjects), 56 (Institutional Review Boards) and 312 (Investigational New Drug Application), as may be amended from time to time, and (d) the equivalent applicable Laws in the Territory (as defined in the License Agreement), each as may be amended and applicable from time to time and in each case, that provide for, among other things, assurance that the clinical data and reported results are credible and accurate and protect the rights, integrity, and confidentiality of trial subjects.
“GLP”
means all applicable Good Laboratory Practice standards, including, as applicable, as set forth in the then current good laboratory practice standards promulgated or endorsed by the U.S. Food and Drug Administration as defined in 21 C.F.R. Part 58, or the equivalent applicable Laws in the region in the Territory (as defined in the License Agreement), each as may be amended and applicable from time to time.
“Governmental Authority”
means any government of any nation, federation, province or state or any other political subdivision thereof, any entity, authority or body exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including any governmental authority, agency, department, board, commission or instrumentality of the People’s Republic of China, Hong Kong, Macau Special Administrative Region of the People’s Republic of China, islands of Taiwan, Singapore or any other country, or any political subdivision thereof, any court, tribunal or arbitrator, any self-regulatory organization and the governing body of any stock exchange.
“Governmental Order”
means any applicable order, ruling, decision, verdict, decree, writ, subpoena, mandate, precept, command, directive, approval, award, judgment, injunction or other similar determination or finding by, before or under the supervision of any Governmental Authority.
A-3
Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.

“Hong Kong”
means the Hong Kong Special Administrative Region of the People’s Republic of China.
“Law”
means any and all provisions of any applicable constitution, treaty, statute, law, regulation, ordinance, code, rule, or rule of common law, any governmental approval, concession, grant, franchise, license, agreement, directive, requirement, or other governmental restriction or any similar form of decision of, or determination by, or any formally issued written interpretation or administration of any of the foregoing by, any Governmental Authority, in each case as amended, and any and all applicable Governmental Orders.
“Liabilities”
means, with respect to any Person, all debts, liabilities, obligations and commitments of such Person of any nature, whether directly or indirectly, accrued or unaccrued, absolute or contingent, known or unknown, liquidated or unliquidated, or otherwise, and whether due or to become due, including those arising under any Law, Governmental Order, legal proceeding or Contract and including all costs and expenses relating thereto.
“Lien”
means any claim, mortgage, charge, easement, encumbrance, lease, covenant, security interest, lien, option, pledge, rights of others, title defect, adverse claim, restrictive covenant, or other restriction or limitation of any kind whatsoever (whether on use, voting, sale, transfer, disposition, receipt of income, or exercise of any attributes of ownership or otherwise), whether imposed by contract, understanding, Law, equity or otherwise.
“Ordinary Shares”
means the Company’s ordinary shares of par value US$0.0001 per share, with the rights, preferences, privileges and restrictions as set forth in the Memorandum and Articles.
“Person”
means an individual, a partnership (including a limited liability partnership), a corporation, a company, an association, a joint stock company, a limited liability company, a trust, a joint venture, a firm, a legal person, an unincorporated organization and a Governmental Authority.
“Principal Business”
means the development, registration and commercialization of Products (as defined in the License Agreement) in the Territory (as defined in the License Agreement).
“Public Official”
means any public or elected official or officer, employee (regardless of rank) or person acting on behalf of a Governmental Authority, a political party (including any political candidate), a public international organization, or an officer or employee of a state-owned enterprise.
“Representative”
means, with respect to any Person, any director, officer, partner, member, employee, agent, consultant, advisor or other representative of such Person, including legal counsel, accountants and financial advisors.
A-4
Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.

“Subsidiary”
means any corporation, partnership, limited liability company, joint stock company, joint venture or other organization or entity, whether incorporated or unincorporated, which is Controlled by the Company, including those hereafter formed or acquired, and, for the avoidance of doubt, the Subsidiaries shall include any variable interest entity over which the Company or any of its Subsidiaries effects Control pursuant to contractual arrangements and which is consolidated with the Company in accordance with generally accepted accounting principles applicable to the Company and any Subsidiaries of such variable interest entity.
“Transaction Documents”
means this Agreement, the Memorandum and Articles, the Shareholders Agreement, the License Agreement, the Indemnification Agreements, the exhibits attached to any of the foregoing and each of the agreements and other documents otherwise required in connection with implementing the transactions contemplated by any of the foregoing.
“U.S.”
means the United States of America.
“US$”
means the lawful currency of the United States of America.
“Warranty Companies”
means the Company and the HK Company (each, a “Warranty Company”).

A-5
Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.

In addition, the following terms shall have the meanings defined for such terms in the Sections or Exhibits set forth below:
“ABAC Laws”
Part I of Exhibit D
“ADCT”
Preamble
“Agents”
Part I of Exhibit D
“Agreement”
Preamble
“Anti-Money Laundering Laws”
Part I of Exhibit D
“Business Plan”
Section 5.1(ix)
“Claims”
Section 7.1(i)
“Closing”
Section 3.1
“Closing Cash”
Section 2.2(i)
“Closing Date”
Section 3.1
“Company”
Preamble
“Confidential Information”
Section 6.5
“Company Representations and Warranties”
Section 4.1
“Damages”
Section 7.1(i)
“Deferred Payment”
Section 3.2(iv)
“Effective Date”
Preamble
“FCPA”
Part I of Exhibit D
“HK Company”
Section 6.3
“ICC”
Section 8.2(i)
“Indemnification Agreement”
Section 3.2(ii)(c)
“Indemnified Party”
Section 7.1(i)
“Indemnifying Party”
Section 7.1(i)
“Investor” / “Investors”
Preamble
“Investor Representations and Warranties”
Section 4.2
“License Agreement”
Section 2.2(i)
“Memorandum and Articles”
Section 2.1
“Milestone Payment”
Section 6.4
“Overland”
Preamble
“Overland Consideration”
Section 2.2(i)
“Party” / “Parties”
Preamble
“Purchased Shares”
Section 2.2(i)
“Sanctions Laws”
Part I of Exhibit D
“Series A Shares”
Recital
“Shareholders Agreement”
Section 3.2(ii)(b)
“UK Bribery Act”
Part I of Exhibit D


A-6
Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.

EXHIBIT B
Investors

Name of Investor Number of Series A Shares Cash Consideration Contribution Consideration
Overland 46,409,999
US$50,000,000 at the Closing and up to US$[**] pursuant to Section 3.2(iv)
-
ADCT 44,590,000 -
US$48,039,216*

* Shares issued as consideration for ADCT’s in-kind contribution pursuant to the License Agreement.



B-1
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EXHIBIT C
CAPITALIZATION TABLES
Part I     Immediately prior to the Closing
Name of Shareholder Class of Shares Number of Shares Percentage
Overland Series A Shares 1 100.00%
Total Series A Shares 1 100.00%

Part II     Immediately after the Closing
Name of Shareholder Class of Shares Number of Shares Percentage
Overland Series A Shares 46,410,000
[**]%
ADCT Series A Shares 44,590,000
[**]%
ESOP (assuming reserved as of the Closing) Ordinary Shares [**]
[**]%
Total / [**] 100.00%


C-1
Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.

EXHIBIT D
Part I
COMPANY REPRESENTATIONS AND WARRANTIES
1    Organization, Standing and Qualification. Each Warranty Company is duly incorporated or organized, validly existing and in good standing (or equivalent status in the relevant jurisdiction) under the Laws of the jurisdiction of its incorporation or organization. Each Warranty Company has all requisite capacity, power and authority to own and operate its properties and to carry on its business as now conducted and as proposed to be conducted, and is duly qualified to transact business in each jurisdiction in which it conducts and proposes to conduct business.
2    Due Authorization. All actions on the part of each Warranty Company and, as applicable, its officers, directors and shareholders necessary for (i) the authorization, execution and delivery of, and the performance of all obligations of such Warranty Company under this Agreement and the other Transaction Documents to which it is a party have been taken or will be taken prior to the Closing; and (ii) the authorization, issuance, reservation for issuance and delivery of all the Purchased Shares at the Closing have been obtained or will have been obtained prior to the Closing. Each Warranty Company has all requisite capacity, power and authority to execute and deliver this Agreement (in the case of the Company) and the other Transaction Documents to which it is a party. Each Transaction Document to which a Warranty Company is a party is a valid and binding obligation of such Warranty Company, enforceable against it in accordance with its terms, subject, as to enforcement of remedies, to applicable bankruptcy, insolvency, moratorium, reorganization and similar laws affecting creditors’ rights generally and to general equitable principles.
3    Approvals. All Consents which are required to be obtained by each Warranty Company in connection with the consummation of the transactions contemplated under this Agreement and the other Transaction Documents will have been obtained prior to and be effective as of the Closing.
4    Valid Issuance. The Series A Shares, when issued, delivered and paid in accordance with the terms of this Agreement for the consideration expressed herein, will be duly and validly issued, fully paid, non-assessable, and free from any Lien. Assuming the accuracy of the representations of the Investors in this Agreement, the Series A Shares will be issued in compliance with all applicable Laws.
5    Capitalization.
5.1    The Company’s capital structure as set forth on Part I of Exhibit C is complete, true and accurate immediately prior to the Closing Date.
D-1
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5.2    Other than those set forth on Part I of Exhibit C, there are no outstanding Equity Securities of the Company. All presently outstanding Equity Securities of the Company were, and the Purchased Shares will be, duly and validly issued (or subscribed for) in compliance with all applicable Laws and any preemptive rights (or similar requirements) of any Person, and are fully paid, non-assessable, and free from any Lien.
5.3    Except as contemplated in the Transaction Documents, there are no options, warrants, conversion privileges or other rights, or agreements with respect to the issuance thereof, presently outstanding to purchase any of the Equity Securities of the Company. Except as contemplated by the Shareholders Agreement, no shares of the Company’s outstanding share capital, or shares issuable upon exercise or exchange of any outstanding options or other shares issuable by the Company, are subject to any preemptive rights, rights of first refusal or other rights to purchase such shares (whether in favor of the Company or any other Person).
6    Subsidiary. The Company is (as of the Closing Date) the sole legal and beneficial owner of one hundred percent (100%) of the issued share capital of the HK Company. The Company’s interest in the HK Company (as of the Closing Date) is directly owned, free and clear of any Lien, and no other Person has any right to participate in, or receive any payment based on any amount relating to, the revenue, income, value or net worth of the HK Company, or any component or portion thereof, or any increase or decrease in any of the foregoing.
7    No Assets or Liabilities. Each Warranty Company is a newly-formed entity with no business operations, no contractual obligations and no assets (in the case of the Company, except the HK Company). No Warranty Company has any indebtedness or liabilities of any nature, whether accrued, absolute, contingent or otherwise and whether due or yet to become due, that it has directly or indirectly created, incurred, assumed, or guaranteed, or with respect to which such Warranty Company has otherwise become directly or indirectly liable.
8    Exempt Offering. The offer and sale of the Series A Shares under this Agreement are exempt from the registration or qualification requirements of all applicable securities laws and regulations, and the issuance of Ordinary Shares upon conversion of the Series A Shares in accordance with the Memorandum and Articles will be exempt from such registration or qualification requirements.
9    Anti-Bribery, Anti-Corruption, Anti-Money Laundering and Sanctions.
9.1    Anti-Bribery and Anti-Corruption. The Company, its Affiliates and the respective directors, administrators, officers, managers, members of board of directors (supervisory and management), employees, independent contractors, representatives, agents and other Persons acting on their behalf (collectively, the “Agents”) (a) are and have been in compliance with all Laws relating to anti-bribery, anti-corruption, anti-money laundering, financing of terrorism, record keeping and internal control laws, including the Foreign Corrupt Practices Act of the United States (15 U.S.C. §§ 78dd-1, et seq.), as amended (the
D-2
Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.

“FCPA”), the UK Bribery Act of 2010, as amended (the “UK Bribery Act”), the relevant provisions of the Criminal Law of the PRC effective on October 1, 1997, as amended, the PRC Anti-Unfair Competition Law effective on December 1, 1993, as amended, and the Provisional Regulation on Anti-Commercial Bribery effective on November 15, 1996, as amended (collectively, the “ABAC Laws”); (b) have not (i) directly or indirectly, offered, promised, given, condoned or authorized the giving of anything of value, directly or indirectly, to: (A) any Public Official or (B) any other Person with the knowledge that all or any portion of the money or thing of value will be offered or given to a Public Official, in each of cases (A) and (B) for the purpose of influencing any action or decision of the Public Official in his or her official capacity, including a decision to fail to perform his or her official duties, or inducing the Public Official to use his or her influence with any Governmental Authority to affect or influence any official act, or (ii) made or authorized any other Person to make any payments or transfers of value which have the purpose or effect of commercial bribery, or acceptance or acquiescence in kickbacks or other unlawful or improper means of obtaining or retaining business; and (c) have not received notice of any allegation or request for information that would lead a reasonable Person to believe there is a high likelihood that the Company or any of its Affiliates or Agents has, directly or indirectly, (i) violated any ABAC Law, (ii) engaged in conduct described in subsection (b), (iii) made any false or fictitious entries in the books or records of the Company; or (iv) used any assets of the Company for the establishment of any unlawful or unrecorded fund of monies or other assets, or the making of any unlawful or undisclosed payment.
9.2    Sanctions. None of the Warranty Companies or any of their respective Agents is owned or Controlled by a Person that is targeted by or the subject to any sanctions administered by the Office of Foreign Assets Control of the U.S. Department of Treasury, or by the U.S. Department of State, or any sanctions imposed by the European Union (including under Council Regulation (EC) No. 194/2008), the United Nations Security Council, Her Majesty’s Treasury or any other relevant Governmental Authority or has engaged in any activities that would be in violation of the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010, as amended or the Iran Sanctions Act, as amended, or sanctions and measures imposed by the United Nations or any other relevant Governmental Authority (collectively, the “Sanctions Laws”). None of the Warranty Companies or any of their respective Agents has been investigated or is being investigated or is subject to a pending or, to the knowledge of the Company, threatened investigation in relation to any Sanctions Laws by any law enforcement, regulatory or other Governmental Authority or any customer or supplier, or has admitted to, or been found by a court in any jurisdiction to have engaged in any violation of any Sanctions Laws or been debarred from bidding for any contract or business, and to the knowledge of the Company, there are no circumstances which are likely to give rise to any such investigation, admission, finding or disbarment.
9.3    Anti-Money Laundering. The operations of the Warranty Companies are and have been conducted at all times in compliance with all applicable financial recordkeeping and reporting requirements, to the extent applicable, the applicable anti-money laundering statutes of all jurisdictions where the Warranty Companies conduct business, the rule and
D-3
Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.

regulations thereunder, and any related or similar rules, regulations or guidelines, issued, administered or enforced by any Governmental Authority (collectively, the “Anti-Money Laundering Laws”). None of the Warranty Companies has been penalized for or threatened to be charged with, or given notice of any violation of, or, to the knowledge of the Company, under investigation with respect to any Anti-Money Laundering Laws, and to the knowledge of the Company, no Action by or before any court, Governmental Authority or arbitrator involving any Warranty Company with respect to the Anti-Money Laundering Laws is pending or threatened.
10    No Brokers. None of the Warranty Companies has any Contract with any broker, finder or similar agent with respect to the transactions contemplated by this Agreement or by any of the Transaction Documents, and none of them has incurred any Liability for any brokerage fees, agents' fees, commissions or finders' fees in connection with any of the Transaction Documents or the consummation of the transactions contemplated therein.


D-4
Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.

Part II
INVESTOR REPRESENTATIONS AND WARRANTIES
1    Due Organization. The Investor is duly formed, organized, validly existing and in good standing (or equivalent status in the relevant jurisdiction) under the Laws of the jurisdiction of its formation or organization.
2    Authorization. The Investor has all requisite power, authority and capacity to enter into this Agreement and other Transaction Documents to which it is a party, and to perform its obligations hereunder and thereunder. Each Transaction Document to which such Investor is a party, when executed and delivered by such Investor, will constitute valid and legally binding obligations of it, enforceable against it in accordance with its terms, except (a) as limited by applicable bankruptcy, insolvency, moratorium, reorganization, and other Laws of general application affecting the enforcement of creditors’ rights generally and (b) as limited by Laws relating to the availability of specific performance, injunctive relief, or other equitable remedies.
3    Consents and Filings. All Consents which are required to be obtained by the Investor in connection with the consummation of the transactions contemplated under this Agreement and the other Transaction Documents will have been obtained prior to and be effective as of the Closing.
4    Restricted Securities. The Investor understands that the Purchased Shares have not been registered under the U.S. Securities Act of 1933, as amended (the “Act”), by reason of a specific exemption from the registration provisions of the Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of such Investor’s representations as expressed herein. The Investor understands that the Purchased Shares are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, such Investor must hold the Purchased Shares indefinitely unless they are registered with the U.S. Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available.
5    Legend. The Investor understands that the Purchased Shares, and any Equity Securities issued in respect of or exchange for the Purchased Shares may bear the following legend: “THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OF THE UNITED STATES, AS AMENDED. THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER SET FORTH IN A SHAREHOLDERS AGREEMENT AND THE MEMORANDUM AND ARTICLES OF ASSOCIATION, COPIES OF WHICH MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY.”
D-5
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6    Purchase for Own Account. The Purchased Shares are acquired for the Investor’s own account or the account of one or more of such Investor's Affiliates, not as a nominee or agent, and not with a view to or in connection with the sale or distribution of any part thereof.
7    Accredited Investor. The Investor (a) is an “accredited investor” as such term is defined in Rule 501 under the Act, or (b) is not a “U.S. person” and is located outside of the “United States”, as such terms are defined in Rule 902 of Regulation S under the Act.
8    Internal Policies. Overland has adopted and implemented each of the following internal policies: (i) a code of conduct governing appropriate workplace behavior, (ii) anti-corruption and anti-money-laundering policies prohibiting actions by directors, management, officers, contractors and strategic suppliers or partners from violation of applicable anti-corruption, anti-bribery or anti-money-laundering laws, (iii) conducting regular checks against sanction, corruption and money laundering lists for employees, contractors and strategic suppliers/partners, as appropriate, and (iv) policies prohibiting use of child labor and supporting human rights (the term “human rights” provided herein refers to those rights recognized in the United Nations’ Universal Declaration of Human Rights). Overland provides regular trainings to its directors, management, employees in terms of each of the above policies no less than once a year.
9    Quality Control. The Investor has adopted and implemented reasonable and appropriate standard operating procedures for GCP, GLP and cGMP compliance governing the quality and safety control of its products and services under applicable Laws and regulations.
10    Compliance. The Investor has satisfied itself as to the full observance of the Laws of its jurisdiction in connection with any invitation to subscribe for the Purchased Shares, any transactions contemplated hereunder or any use of this Agreement, including (i) the legal requirements within its jurisdiction for the purchase of the Purchased Shares, (ii) any foreign exchange restrictions applicable to such purchase, (iii) any governmental or other Consents that may need to be obtained, and (iv) the income tax and other tax consequences, if any, that may be relevant to the purchase, holding, redemption, sale, or transfer of the Purchased Shares.
11.    Anti-Bribery and Anti-Corruption. In connection with activities relating to the Warranty Companies and the matters contemplated by this Agreement, the Investor and each of its Agents (a) has complied and is in compliance with all ABAC Laws; and (b) has not (i) directly or indirectly, offered, promised, given, condoned or authorized the giving of anything of value, directly or indirectly, to: (A) any Public Official or (B) to any other Person with the knowledge that all or any portion of the money or thing of value will be offered or given to a Public Official, in each of cases (A) and (B) for the purpose of influencing any action or decision of the Public Official in his or her official capacity, including a decision to fail to perform his or her official duties, or inducing the Public Official to use his or her influence with any Governmental Authority to affect or influence any official act, or (ii) made or authorized any other Person to make any payments or transfers of value which have the purpose or effect of commercial bribery, or acceptance or
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acquiescence in kickbacks or other unlawful or improper means of obtaining or retaining business.

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EXHIBIT E
FORMS
[Exhibit E has been omitted pursuant to Item 601(a)(5) of Regulation S-K. ADC Therapeutics SA undertakes to provide a copy of the omitted exhibit to the Securities and Exchange Commission or its staff upon request.]
E-1
Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.
Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.

Exhibit 4.5
SHAREHOLDERS AGREEMENT
This Shareholders Agreement (this “Agreement”) is made and entered into as of December 11, 2020 by and among:
(1)    Overland ADCT BioPharma (CY) Limited, a company incorporated under the Laws of the Cayman Islands (the “Company”);
(2)    Overland ADCT BioPharma (HK) Limited, a company incorporated under the Laws of Hong Kong (the “HK Company”);
(2)    Overland Pharmaceuticals (CY) Inc., a company incorporated under the Laws of the Cayman Islands, (“Overland”); and
(3)    ADC Therapeutics SA, a company established under the Laws of Switzerland (“ADCT”, together with Overland, the “Investors”, and each an “Investor”).
Each of the forgoing parties is referred to herein individually as a “Party” and collectively as the “Parties”.
RECITALS
A.    The Company and the Investors entered into a Share Purchase Agreement dated November 30, 2020 (the “Share Purchase Agreement”), under which, among other things, the Company shall issue and allot certain number of Series A preferred shares of the Company, par value US$0.0001 per share (the “Series A Shares”) to the Investors, at the Closing.
B.    The Share Purchase Agreement provides that this Agreement shall be executed and delivered by the Parties at the Closing.
C.    In connection with the consummation of the transactions contemplated by the Share Purchase Agreement, the Parties desire to enter into this Agreement and the other Transaction Documents for the governance, management and operations of the Company and its Subsidiaries and for the rights and obligations among the Company and the Shareholders.
D.    As of the Closing, each of the Investors holds that number of Series A Shares as is listed opposite their name on Exhibit A hereto.
E.    Unless otherwise defined in this Agreement, capitalized terms used in this Agreement shall have the meanings set forth in Exhibit C.
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual promises hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:


1.    INFORMATION RIGHTS; BOARD REPRESENTATION; CEO APPOINTMENT.
1.1.    Information and Inspection Rights.
(a)    Information Rights. The Company covenants and agrees that, commencing on the date of this Agreement, the Company shall deliver to each Investor, and each Shareholder agrees to cause the Company to deliver to each Investor:
(i)    within [**] after the end of each fiscal quarter, unaudited quarterly consolidated financial statements and other documents reflecting the business activities and performance (including but not limited to tax filings and management reports) for such quarter and analysis of the business operation of the Group Companies;
(ii)    within [**] days after the end of each fiscal year, unaudited annual consolidated financial statements for such fiscal year of the Group Companies and a management report including a comparison of the financial results of such fiscal year with the corresponding annual budget;
(iii)    within [**] days after the end of each fiscal year, audited annual consolidated financial statements of the Group Companies for such fiscal year, audited by the auditor appointed pursuant to Section 7.4(k);
(iv)    no later than [**] days prior to the end of each fiscal year, an annual budget for the succeeding fiscal year;
(v)    any reports publicly filed by the Company with any relevant securities exchange or other Governmental Authority, no later than [**] days after such documents or information is filed by the Company, any reports provided by the Company to any other Shareholder; and
(vi)    promptly upon the written request by any Investor, such other information as it may reasonably request from time to time, including, without limitation, an up-to-date capitalization table, the most recent version of the financing agreements, other documents relating to subsequent financing and a copy of the official then effective memorandum and articles of association or other constitutional documents of the Group Companies.
In addition, the Company shall provide to each Investor such information and financial statements of the Group Companies and provide access to
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personnel reasonably requested by such Investor in order for it to timely comply with applicable disclosure and financial, tax and regulatory reporting requirements under Sarbanes-Oxley Act, rules of the New York Stock Exchange or other applicable Law. The rights set forth in this Section 1.1(a) shall be collectively referred to as the “Information Rights”.
All financial statements to be provided pursuant to this Section 1.1(a) shall be in English and shall include an income statement, a balance sheet, a cash flow statement for the relevant period as well as for the fiscal year to-date and shall be prepared in conformance with (A) in the case of the Company and the Group Companies outside of the PRC, each Accounting Standard that is required by any Investor, and (B) in the case of the Group Companies established in the PRC, PRC Generally Accepted Accounting Principles.
(b)    Inspection Rights. The Company further covenants and agrees that, commencing on the date of this Agreement, each Investor shall have (i) the right to inspect facilities, records and books of the Group Companies at any time during regular working hours upon reasonable prior notice to the Company, and (ii) the right to discuss the business, operations and conditions of the Group Companies with their respective directors, officers, employees, accountants, legal counsel, financial advisors, and investment bankers (the “Inspection Rights”).
(c)    Notwithstanding anything to the contrary in this Agreement, if the Board reasonably determines in good faith that provision of any information to any Investor pursuant to this Section 1.1 would include competitively sensitive information, the provision of which would impair the legitimate interests of the Company, the Company may withhold provision of such information.
1.2.    Board of Directors. The board of directors of the Company (the “Board”) shall consist of up to five (5) members (each, a “Director”). The Directors shall be appointed as follows:
(a)    Overland shall be entitled to appoint and remove two (2) Directors, for so long as Overland continues to beneficially own any Share (each such Director appointed by Overland, an “Overland Director”, and collectively, the “Overland Directors”);
(b)    ADCT shall be entitled to appoint and remove two (2) Directors, for so long as ADCT continues to beneficially own any Share (each such Director appointed by ADCT, an “ADCT Director,” and collectively, the “ADCT Directors,” together with the Overland Directors, the “Investor Directors”); and
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(c)    the Person then serving as the chief executive officer of the Company (the “CEO”) shall be appointed as a Director of the Company (the “CEO Director”), the seat of which shall be vacant until the CEO is duly appointed pursuant to Section 1.9.
Each Director shall have one vote and no Director shall have a casting vote in the case of a tie.
1.3.    Removal of Directors.
(a)    Notwithstanding any other provisions of this Agreement, a Person will be automatically removed as and cease to be a Director if the Person is, or becomes, ineligible to be a Director under any applicable Law.
(b)    Notwithstanding any other provision of this Agreement, an Investor Director will be automatically removed and cease to be a Director if the Investor (and its Permitted Transferees, if any) that appointed such Investor Director ceases to hold any Shares.
(c)    Subject to Sections 1.3(a) and 1.3(b):
(i)    only Overland may remove an Overland Director appointed pursuant to Section 1.2(a); and
(ii)    only ADCT may remove an ADCT Director appointed pursuant to Section 1.2(b);
and no Shareholder may exercise any vote or other power to remove any Director appointed by another Shareholder or to remove the CEO Director unless pursuant to Section 1.3(d).
(d)    Notwithstanding any other provision of this Agreement, if for any reason the incumbent CEO Director shall cease to serve as the CEO, each of the Shareholders shall promptly vote their respective Shares (i) to remove the incumbent CEO Director from the Board if such Person has not resigned as a member of the Board; and (ii) to elect the CEO newly appointed pursuant to Section 1.9 as the new CEO Director.
(e)    If, as a result of death, disability, retirement, resignation, removal or otherwise, there shall exist or occur any vacancy on the Board, the Person or Persons entitled to designate such Director whose death, disability, retirement, resignation or removal resulted in such vacancy, subject to the provisions of Section 1.2, shall have the exclusive right to designate another individual to fill such vacancy and serve as a Director.
1.4.    Meetings. The Board shall hold a regularly scheduled meeting at least once every calendar quarter. The Company agrees to give each Director (by e-mail or
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otherwise) notice and the agenda for each meeting of the Board or any committee thereof at least [**] Business Days prior to such meeting, or such shorter period as approved by all of the Directors (in writing or at such meeting).
1.5.    Action by and Powers of the Board.
(a)    A meeting of Directors is duly constituted for all purposes if at the commencement of the meeting there are present in Person or by alternate such number of Directors not less than a majority of the Directors then in office, which Directors in each case shall include at least one (1) Overland Director (if any) and one (1) ADCT Director (if any). In the event that no quorum is present within 30 minutes of the time appointed for the meeting, such meeting will stand adjourned to the same day (unless otherwise notified) at the same time and place in the following week, and a quorum at such adjourned meeting shall consist of at least a majority of the Directors then in office.
(b)    Subject to Article 7, all actions of the Board shall require (i) the affirmative vote of at least a majority of the Directors present at a duly convened meeting of the Board at which a quorum is present; or (ii) the unanimous written consent of all Directors; provided that, if there is a vacancy on the Board and an individual has been nominated to fill such vacancy, the first order of business shall be to fill such vacancy.
1.6.    Committees of the Board. The Board may establish committees as it may determine from time to time. Each Investor Director shall be entitled to serve on each of these committees, and the size of each committee shall not exceed the size of the Board. All policies and procedures applicable to the Board (including those provided herein) shall be applicable to these committees, mutatis mutandis.
1.7.    Out-of-pocket Expenses. The Company shall reimburse the Directors in respect of all expenses reasonably incurred by them in connection with the proper performance of their duties as a Director but no Director will be entitled to any fee for acting in such office. The Company shall reimburse the Directors for all reasonable out-of-pocket expenses incurred in connection with attending any meetings of the Board and any committee thereof.
1.8.    Board of Directors of Subsidiaries. The size and composition of the board of directors of each Subsidiary shall mirror the Board to the maximum extent permitted under the applicable Laws. The Investors’ right to appoint and remove Directors pursuant to Sections 1.2 and 1.3 shall apply, mutatis mutandis, to the board of directors of each Subsidiary.
1.9.    Chief Executive Officer. The CEO shall be jointly appointed, removed and replaced by Overland and ADCT, for so long as each of Overland and ADCT continues to beneficially own any Share; provided that Overland and ADCT shall
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use their commercially reasonable efforts to jointly appoint the initial CEO within twelve (12) months (which period may be extended if the Investors shall mutually agree in writing) after the Closing; provided further that, in the event that Overland and ADCT cannot agree on selection of the initial CEO within twelve (12) months after the Closing or such extended period mutually agreed in writing by the Investors and do not mutually agree in writing to further extend such period to jointly appoint the initial CEO, [**]. Each Shareholder and the Group Companies shall take any and all action necessary for the appointment, removal and replacement of the CEO pursuant to this Section 1.9 and the discharge of the CEO’s responsibilities.
1.10.    Voting Agreement. Each Shareholder agrees that it shall vote all of its Shares (or execute proxies or written consents, as the case may be) in such manner that gives effect to the provisions of this Agreement, including without limitation to cause the Board to be constituted in accordance with Section 1.2.
1.11.    Termination. The provisions set forth under this Article 1 shall terminate immediately prior to the consummation of a Qualified IPO.
2.    REGISTRATION RIGHTS.
2.1.    Applicability of Rights. The Holders (as defined below) shall be entitled to the following rights with respect to any potential public offering of the Company’s Ordinary Shares in the United States and shall be entitled to reasonably analogous or equivalent rights with respect to any other offering of the Company’s Securities in any other jurisdiction in which the Company undertakes to publicly offer or list such Securities for trading on a recognized securities exchange.
2.2.    Definitions. For purposes of this Article 2:
(a)    Registration. The terms “register,” “registered,” and “registration” refer to a registration effected by filing a registration statement which is in a form which complies with, and is declared effective by the SEC (as defined below) in accordance with, the Securities Act of 1933, as amended (the “Securities Act”).
(b)    Registrable Securities. The term “Registrable Securities” shall mean (i) any Ordinary Shares issued or to be issued pursuant to conversion of Series A Shares, (ii) any Ordinary Shares, or any Ordinary Shares issued or issuable upon conversion or exercise of any warrant, right or other securities of the Company, owned or hereafter acquired by the Investors, and (iii) Ordinary Shares issued (or issuable upon the conversion or exercise of any warrant, right or other security which is issued) as a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares described in clauses (i) and (ii) of this Section 2.2(b). Notwithstanding the foregoing, “Registrable Securities” shall
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exclude any Registrable Securities sold by a Person in a transaction in which rights under this Article 2 are not validly assigned in accordance with this Agreement, and any Registrable Securities which are sold in a registered public offering under the Securities Act or analogous statute of another jurisdiction, or sold pursuant to Rule 144 promulgated under the Securities Act or analogous rule of another jurisdiction.
(c)    Registrable Securities Then Outstanding. The number of shares of “Registrable Securities Then Outstanding” shall mean the number of Ordinary Shares of the Company that are Registrable Securities and are then issued and outstanding, issuable upon conversion of Series A Shares then issued and outstanding or issuable upon conversion or exercise of any warrant, right or other security then outstanding.
(d)    Holder. For purposes of this Article 2, the term “Holder” shall mean any Person owning or having the rights to acquire Registrable Securities or any permitted assignee of record of such Registrable Securities to whom rights under this Article 2 have been duly assigned in accordance with this Agreement.
(e)    Form F-3/S-3. The term “Form F-3/S-3” shall mean such respective form promulgated under the Securities Act (including Form F-3 or Form S-3, as appropriate) or any successor registration form under the Securities Act subsequently adopted by the SEC which permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC.
(f)    SEC. The term “SEC” shall mean the U.S. Securities and Exchange Commission.
(g)    Registration Expenses. The term “Registration Expenses” shall mean all expenses incurred by the Company in complying with Sections 2.3, 2.4 and 2.5, including, without limitation, all registration and filing fees, printing expenses, fees, and disbursements of counsel for the Company, reasonable fees and disbursements of one special counsel for all the Holders, “blue sky” fees and expenses, fees and expenses charged by the share registrar and depository agent and the expense of any special audits incident to or required by any such registration (but excluding the compensation of regular employees of the Company, which shall be paid in any event by the Company).
(h)    Selling Expenses. The term “Selling Expenses” shall mean all underwriting discounts and selling commissions applicable to the sale of Registrable Securities pursuant to Sections 2.3, 2.4 and 2.5.
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(i)    Exchange Act. The term “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and any successor statute.
(j)    For purposes of this Agreement, reference to registration of securities under the Securities Act and the Exchange Act shall be deemed to mean the equivalent registration in a jurisdiction other than the United States as designated by such Holders, it being understood and agreed that in each such case all references in this Agreement to the Securities Act, the Exchange Act and rules, forms of registration statements and registration of securities thereunder, U.S. Law and the SEC, shall be deemed to refer, to the equivalent statutes, rules, forms of registration statements, registration of securities and Laws of and equivalent government authority in the applicable non-U.S. jurisdiction.
2.3.    Demand Registration.
(a)    Request by Holders. If the Company shall, at any time after the earlier of (i) five (5) years after the Closing or (ii) six (6) months following the taking effect of a registration statement for the initial public offering of the Securities of the Company, receive a written request from the Holders of at least [**] of the Registrable Securities Then Outstanding that the Company file a registration statement under the Securities Act (other than Form F-3/S-3) covering any Registrable Securities of such Holders pursuant to this Section 2.3 with the anticipated gross proceeds from the offering greater than [**], then the Company shall, within ten (10) Business Days of the receipt of such written request, give written notice of such request (the “Request Notice”) to all Holders, and use its best efforts to effect, as soon as practicable, the registration under the Securities Act of all Registrable Securities that the Holders request to be registered and included in such registration by written notice given by such Holders to the Company within twenty (20) days after receipt of the Request Notice, subject only to the limitations of this Section 2.3. The Company shall be obligated to effect no more than three (3) registrations pursuant to this Section 2.3 that have been declared and ordered effective; provided, however, that if the sale of all of the Registrable Securities sought to be included pursuant to this Section 2.3 is not consummated for any reason other than due to the action or inaction of the Holders including Registrable Securities in such registration, such registration shall not be deemed to constitute a demand registration pursuant to this Section 2.3.
(b)    Underwriting. If the Holders initiating the registration request under this Section 2.3 (the “Initiating Holders”) intend to distribute the Registrable Securities covered by their request by means of an underwriting, then they shall so advise the Company as a part of their request made pursuant to this Section 2.3 and the Company shall include such information in the
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Request Notice. In such event, the right of any Holder to include its Registrable Securities in such registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Holders and such Holder) to the extent provided herein. All Holders proposing to distribute their Securities through such underwriting shall enter into an underwriting agreement in customary form with the managing underwriter or underwriters selected for such underwriting by the Holders of a majority of the Registrable Securities being registered. Notwithstanding any other provision of this Section 2.3, if the underwriter(s) advise(s) the Company in writing that marketing factors require a limitation of the number of Securities to be underwritten, then the Company shall so advise all Holders of Registrable Securities which would otherwise be registered and underwritten pursuant hereto, and the number of Registrable Securities that may be included in the underwriting shall be reduced as required by the underwriter(s) and allocated among the Holders of Registrable Securities on a pro rata basis according to the number of Registrable Securities Then Outstanding held by each Holder requesting registration (including the Initiating Holders); provided, however, that the number of shares of Registrable Securities to be included in such underwriting and registration shall not be reduced unless all other Securities are first entirely excluded from the underwriting and registration including, without limitation, all shares that are not Registrable Securities and are held by any other Person, including, without limitation, any Person who is an employee, officer or director of the Company or any Subsidiary of the Company; provided further, that at least [**] of Registrable Securities requested by the Holders to be included in such underwriting and registration shall be so included. If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to the Company and the underwriter(s), delivered at least ten (10) Business Days prior to the effective date of the registration statement. Any Registrable Securities excluded or withdrawn from such underwriting shall be excluded and withdrawn from the registration.
(c)    Deferral. Notwithstanding the foregoing, if the Company shall furnish to Holders requesting registration pursuant to this Section 2.3, a certificate signed by the President or CEO of the Company stating that in the good faith judgment of the Board, it would be materially detrimental to the Company and its Shareholders for such registration statement to be filed at such time, then the Company shall have the right to defer such filing for a period of not more than [**] days after receipt of the request of the Initiating Holders; provided, however, that the Company may not utilize this right more than once in any twelve (12) month period; provided further, that the Company shall not register any other of its Shares during
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such [**] day period. A demand right shall not be deemed to have been exercised until such deferred registration shall have been effected.
(d)    Other Securities Laws in Demand Registration. In the event of any registration pursuant to this Section 2.3, the Company shall register and qualify the Securities covered by the registration statement under the securities Laws of any other jurisdictions outside of the United States or in Hong Kong or elsewhere as shall be appropriate for the distribution of the Securities; provided, however, that (i) the Company shall not be required to do business or to file a general consent to service of process in any such state or jurisdiction, and (ii) notwithstanding anything in this Agreement to the contrary, in the event any jurisdiction in which the Securities shall be qualified imposes a non-waivable requirement that expenses incurred in connection with the qualification of the Securities be borne by selling Shareholders, the expenses shall be payable pro rata by the selling Shareholders.
2.4.    Piggyback Registrations.
(a)    The Company shall notify all Holders of Registrable Securities in writing at least thirty (30) days prior to filing any registration statement under the Securities Act for purposes of effecting a public offering of Securities of the Company (including, but not limited to, registration statements relating to secondary offerings of Securities of the Company, but excluding registration statements relating to any registration under Section 2.3 or Section 2.5 of this Agreement or to any employee benefit plan or a corporate reorganization), and shall afford each such Holder an opportunity to include in such registration statement all or any part of the Registrable Securities then held by such Holder. Each Holder desiring to include in any such registration statement all or any part of the Registrable Securities held by it shall within twenty (20) days after receipt of the above-described notice from the Company, so notify the Company in writing, and in such notice shall inform the Company of the number of Registrable Securities such Holder wishes to include in such registration statement. If a Holder decides not to include all of its Registrable Securities in any registration statement thereafter filed by the Company, such Holder shall nevertheless continue to have the right to include any Registrable Securities in any subsequent registration statement or registration statements as may be filed by the Company with respect to offerings of its Securities, all upon the terms and conditions set forth herein. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 2.4 before the effective date of such registration, whether or not any Holder has elected to include Registrable Securities in such registration.
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(b)    Underwriting. If a registration statement under which the Company gives notice under this Section 2.4 is for an underwritten offering, then the Company shall so advise the Holders of Registrable Securities. In such event, the right of any such Holder’s Registrable Securities to be included in a registration pursuant to this Section 2.4 shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their Registrable Securities through such underwriting shall enter into an underwriting agreement in customary form with the managing underwriter or underwriters selected for such underwriting. Notwithstanding any other provision of this Agreement but subject to Section 2.12, if the managing underwriter(s) determine(s) in good faith that marketing factors require a limitation of the number of shares to be underwritten, then the managing underwriter(s) may exclude shares from the registration and the underwriting, and the number of shares that may be included in the registration and the underwriting shall be allocated, first, to the Company, second, to each of the Holders requesting inclusion of their Registrable Securities in such registration statement on a pro rata basis based on the total number of shares of Registrable Securities then held by each such Holder, and third, to holders of other Securities of the Company; provided, however, that the right of the underwriter(s) to exclude shares (including Registrable Securities) from the registration and underwriting as described above shall be restricted so that (i) the number of Registrable Securities included in any such registration is not reduced below [**] of the aggregate number of shares of Registrable Securities for which inclusion has been requested; and (ii) all shares that are not Registrable Securities and are held by any other Person, including, without limitation, any Person who is an employee, officer or director of the Company (or any Subsidiary of the Company) shall first be excluded from such registration and underwriting before any Registrable Securities are so excluded. If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to the Company and the underwriter(s), delivered at least ten (10) Business Days prior to the effective date of the registration statement. Any Registrable Securities excluded or withdrawn from such underwriting shall be excluded and withdrawn from the registration.
(c)    Not Demand Registration. Registration pursuant to this Section 2.4 shall not be deemed to be a demand registration as described in Section 2.3 above. There shall be no limit on the number of times the Holders may request registration of Registrable Securities under this Section 2.4.
2.5.    Form F-3/S-3. At any time when it is eligible to use a Form F-3/S-3, if the Company shall receive from the Holders of at least [**] of the Registrable
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Securities Then Outstanding a written request or requests that the Company effect a registration on Form F-3/S-3 (or any comparable form for registration in a jurisdiction other than the United States) with anticipated gross proceeds from the offering greater than [**] and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by such Holder or Holders, then the Company will:
(a)    Notice. Promptly give written notice of the proposed registration and the Holder’s or Holders’ request therefor, and any related qualification or compliance, to all other Holders of Registrable Securities; and
(b)    Registration. As soon as practicable, effect such registration and all such qualifications and compliances as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Holders or Holders’ Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other Holder or Holders joining in such request as are specified in a written request given within twenty (20) days after the Company provides the notice contemplated by Section 2.5(a); provided, however, that the Company shall not be obligated to effect any such registration, qualification or compliance pursuant to this Section 2.5:
(i)    if the Company shall furnish to the Holders a certificate signed by the President or CEO of the Company stating that in the good faith judgment of the Board, it would be materially detrimental to the Company and its shareholders for such Form F-3/S-3 registration to be effected at such time, in which event the Company shall have the right to defer the filing of the Form F-3/S-3 registration statement no more than once during any twelve (12) month period for a period of not more than [**] days after receipt of the request of the Holder or Holders under this Section 2.5; provided that the Company shall not register any of its other shares during such [**] day period. A registration right under this Section 2.5 shall not be deemed to have been exercised until such deferred registration shall have been effected;
(ii)    if the Company has, within the twelve (12) month period preceding the date of such request, already effected two (2) registrations on Form F-3/S-3;
(iii)    if the Company has, within the twelve (12) month period preceding the date of such request, already effected two (2) registrations under the Securities Act other than a registration from which the Registrable Securities of Holders have been excluded (with respect to all or any portion of the Registrable Securities the Holders
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requested be included in such registration) pursuant to the provisions of Sections 2.3(b) and 2.4(b); or
(iv)    in any particular jurisdiction in which the Company would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance.
Subject to the foregoing, the Company shall file a Form F-3/S-3 registration statement covering the Registrable Securities and other Securities so requested to be registered as soon as practicable after receipt of the request or requests of the Holders.
(c)    Not Demand Registration. Form F-3/S-3 registrations shall not be deemed to be demand registrations as described in Section 2.3. Except as otherwise provided herein, there shall be no limit on the number of times the Holders may request registration of Registrable Securities under this Section 2.5.
(d)    Underwriting. If the Holders of Registrable Securities requesting registration under this Section 2.5 intend to distribute the Registrable Securities covered by their request by means of an underwriting, the provisions of Section 2.3(b) shall apply to such registration.
2.6.    Expenses. All Registration Expenses incurred in connection with any registration pursuant to Sections 2.3, 2.4 or 2.5 (but excluding Selling Expenses) shall be borne by the Company. Each Holder participating in a registration pursuant to Sections 2.3, 2.4 or 2.5 shall bear such Holder’s proportionate share (based on the number of Registrable Securities registered on such Holder’s behalf) of all Selling Expenses in connection with such offering by the Holders. Notwithstanding the foregoing, the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 2.3 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all selling Holders shall bear such expenses pro rata based upon the number of Registrable Securities that were to be included in the withdrawn registration), unless the Holders of a majority of the Registrable Securities Then Outstanding agree that such registration constitutes the use by the Holders of one (1) demand registration pursuant to Section 2.3; provided further, however, that if at the time of such withdrawal, the Holders have learned of a material adverse change in the condition, business, or prospects of the Company not known to the Holders at the time of their request for such registration and have withdrawn their request for registration with reasonable promptness after learning of such material adverse change, then the Company shall pay for any of such expenses and such registration shall not constitute the use of a demand registration pursuant to Section 2.3.
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2.7.    Obligations of the Company. Whenever required to effect the registration of any Registrable Securities under this Agreement the Company shall, as expeditiously as reasonably possible:
(a)    Registration Statement. Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective, and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for a period of up to ninety (90) days or, in the case of Registrable Securities registered under Form F-3/S-3 in accordance with Rule 415 under the Securities Act or a successor rule, until the distribution contemplated in the registration statement has been completed; provided, however, that (i) such ninety (90) day period shall be extended for a period of time equal to the period any Holder refrains from selling any securities included in such registration at the request of the underwriter(s), and (ii) in the case of any registration of Registrable Securities on Form F-3/S-3 which are intended to be offered on a continuous or delayed basis, if necessary, the Company shall keep the registration statement effective until all such Registrable Securities are sold.
(b)    Amendments and Supplements. Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all Securities covered by such registration statement.
(c)    Prospectuses. Furnish to the Holders such number of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of the Registrable Securities owned by them that are included in such registration.
(d)    Blue Sky. Use its best efforts to register and qualify the Securities covered by such registration statement under such other Securities or “blue sky” Laws of such jurisdictions as shall be reasonably requested by the Holders, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act.
(e)    Underwriting. In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement in usual and customary form, with the managing underwriter(s) of such offering.
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(f)    Notification. Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of (i) the issuance of any stop order by the SEC in respect of such registration statement, or (ii) the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing.
(g)    Opinion and Comfort Letter. Furnish, at the request of any Holder requesting registration of Registrable Securities, on the date that such Registrable Securities are delivered to the underwriter(s) for sale, if such Securities are being sold through underwriters, or, if such Securities are not being sold through underwriters, on the date that the registration statement with respect to such Securities becomes effective, (i) an opinion, dated as of such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering and reasonably satisfactory to a majority in interest of the Holders requesting registration, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities and (ii) letters dated as of (x) the effective date of the registration statement covering such Registrable Securities and (y) the closing date of the offering, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering and reasonably satisfactory to a majority in interest of the Holders requesting registration, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities.
2.8.    Furnish Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to Sections 2.3, 2.4 or 2.5 that the selling Holders shall furnish to the Company such information regarding themselves, the Registrable Securities held by them and the intended method of disposition of such Securities as shall be required to timely effect the Registration of their Registrable Securities.
2.9.    Indemnification. In the event any Registrable Securities are included in a registration statement under Sections 2.3, 2.4 or 2.5:
(a)    By the Company. To the extent permitted by the applicable Law and the Memorandum and Articles, the Company will indemnify and hold harmless each Holder, its partners, officers, directors, legal counsel, any underwriter (as defined in the Securities Act) for such Holder and each
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Person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act, or other United States federal or state Law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a “Violation”):
(i)    any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto;
(ii)    the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or
(iii)    any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any United States federal or state securities Laws, or any rule or regulation promulgated under the Securities Act, the Exchange Act, or any United States federal or state securities Laws in connection with the offering covered by such registration statement;
and the Company will reimburse each such Holder, its partner, officer, director, legal counsel, underwriter or controlling Person for any legal or other expenses reasonably incurred by them, as such expenses are incurred, in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this Section 2.9(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by such Holder, partner, officer, director, legal counsel, underwriter or controlling Person of such Holder.
(b)    By Selling Holders. To the extent permitted by applicable Law, each selling Holder, severally but not jointly, will, if Registrable Securities held by Holder are included in the Securities as to which such registration qualifications or compliance is being effected, indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the registration statement, each Person, if any, who controls the
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Company within the meaning of the Securities Act, any underwriter and any other Holder selling Securities under such registration statement or any of such other Holder’s partners, directors, officers, legal counsel or any Person who controls such Holder within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages or liabilities (joint or several) to which the Company or any such director, officer, legal counsel, controlling Person, underwriter or other such Holder, partner or director, officer or controlling Person of such other Holder may become subject under the Securities Act, the Exchange Act or other United States federal or state Law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for use in connection with such registration; and each such Holder, severally but not jointly, will reimburse any legal or other expenses reasonably incurred by the Company or any such director, officer, controlling Person, underwriter or other Holder, partner, officer, director or controlling Person of such other Holder in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this Section 2.9(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; and provided, further, that in no event shall any indemnity under this Section 2.9(b) together with any amount contributed pursuant to Section 2.9(d) below exceed the net proceeds (net of any Selling Expenses paid by such Holder) received by such Holder in the registered offering out of which the applicable Violation arises, except in the case of willful misconduct or fraud by such Holder.
(c)    Notice. Promptly after receipt by an indemnified party under this Section 2.9 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.9, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential conflict of interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver
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written notice to the indemnifying party within a reasonable time of the commencement of any such action shall relieve such indemnifying party of liability to the indemnified party under this Section 2.9 to the extent the indemnifying party is prejudiced as a result thereof, but the omission to so deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 2.9.
(d)    Contribution. In order to provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (i) any indemnified party makes a claim for indemnification pursuant to this Section 2.9 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 2.9 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any indemnified party in circumstances for which indemnification is provided under this Section 2.9; then, and in each such case, the indemnified party and the indemnifying party will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect the relative fault of each of the indemnifying party and the indemnified party in connection with the statements, omissions, or other actions that resulted in such losses, claims, damages or liabilities, as well as to reflect any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by a court by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, however, that, in any such case: (A) no Holder will be required to contribute any amount in excess of the net proceeds to such Holder from the sale of all such Registrable Securities offered and sold by such Holder pursuant to such registration statement less any amount paid pursuant to Section 2.9(b); and (B) no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.
(e)    Survival; Consents to Judgments and Settlements. The obligations of the Company and Holders under this Section 2.9 shall survive the completion of any offering of Registrable Securities in a registration statement, regardless of the expiration of any statutes of limitation or extensions of
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such statutes. No indemnifying party, in the defense of any such claim or litigation, shall, except with the consent of each indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation.
2.10.    No Registration Rights to Third Parties. Without the prior written consent of the holders of at least [**] of the Registrable Securities Then Outstanding, the Company covenants and agrees that it shall not grant, or cause or permit to be created, for the benefit of any Person any registration rights of any kind (whether similar to the demand, “piggyback” or Form F-3/S-3 registration rights described in this Article 2, or otherwise) relating to any Securities of the Company which are senior to, or on a parity with, those granted to the Holders of Registrable Securities. In any event and without limiting the foregoing, if the Company grants to any holder of the Company’s Securities any registration right of any nature that are superior to the Holders, as determined in good faith by the Board (including consent of all Investor Directors), the Company shall grant such superior registration right to the Holders as well.
2.11.    Rule 144 Reporting. With a view to making available to the Holders the benefits of certain rules and regulations of the SEC which may at any time permit the sale of the Registrable Securities to the public without registration or pursuant to a registration on Form F-3/S-3, after such time as a public market exists for the Ordinary Shares, the Company agrees to:
(a)    Make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times after the effective date of the first registration under the Securities Act filed by the Company for an offering of its Securities to the general public;
(b)    File with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements); and
(c)    So long as a Holder owns any Registrable Securities, to furnish to such Holder forthwith upon request (i) a written statement by the Company as to its compliance with the reporting requirements of Rule 144 (at any time after ninety (90) days after the effective date of the Company’s initial public offering), the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), or its qualification as a registrant whose Securities may be resold pursuant to Form F-3/S-3 (at any time after it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company, and (iii) such other reports and documents of the Company as a Holder may reasonably
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request in availing itself of any rule or regulation of the SEC that permits the selling of any such Securities without registration or pursuant to Form F-3/S-3.
2.12.    Market Stand-Off. Each Holder agrees that, so long as it holds any voting Securities of the Company, upon request by the Company or the underwriters managing the initial public offering of the Company’s Securities, it will not sell or otherwise transfer or dispose of any Securities of the Company held immediately before the effective date of the registration statement for such offering (other than those permitted to be included in the registration and other transfers to its Affiliates permitted by Law) without the prior written consent of the Company or such underwriters, as the case may be, for a period of time specified by the representative of the underwriters not to exceed one hundred and eighty (180) days from the effective date of the registration statement covering such initial public offering or the pricing date of such offering as may be requested by the underwriters. The Company shall use commercially reasonable efforts to take all steps to shorten such lock-up period. The foregoing provision of this Section 2.12 shall not apply to the sale of any Securities of the Company to an underwriter pursuant to any underwriting agreement, and shall only be applicable to the Holders if all officers and directors of the Group Companies and all Shareholders owning one percent (1%) or more of the Company’s outstanding share capital are subject to the same restrictions, and if the Company or any underwriter releases any officer or director of any Group Companies or any Shareholder from his, her or its sale restrictions so undertaken, then each Holder shall be notified prior to such release and shall itself be simultaneously released to the same proportional extent. The Company shall require all future acquirers of the Company’s Securities holding at least one percent (1%) of the then outstanding share capital of the Company to execute prior to a Qualified IPO a market stand-off agreement containing substantially similar provisions as those contained in this Section 2.12.
2.13.    Assignment. Notwithstanding anything in this Agreement to the contrary, the rights of the Holders set forth in this Article 2 may be assigned, in whole or in part in case of a partial transfer of Registrable Securities (but only with related obligations, if any), to any Holder or to any Person acquiring any Registrable Securities; provided, however, that in either case no party may be assigned any of the foregoing rights unless the Company is given written notice by the assigning party stating the name and address of the assignee and identifying the Securities of the Company as to which the rights in question are being assigned; provided, further, that any such assignee shall receive such assigned rights subject to all the terms and conditions of this Agreement, including without limitation the provisions of this Article 2. For the avoidance of doubt, no such proposed transfer shall be effective unless the prospective purchaser shall have become a party to this Agreement and agreed to be subject to the terms of this Agreement to the same extent as if it were an original Investor hereunder by executing a Joinder Agreement in the form attached hereto as Exhibit B.
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2.14.    Termination. The registration rights with respect to any Registrable Securities proposed to be sold by a Holder in a registration pursuant to Sections 2.3, 2.4, or 2.5 shall terminate upon the earliest to occur of (i) such time as, in the opinion of the counsel to the Company, all such Registrable Securities proposed to be sold by a Holder may then be sold without registration in any ninety (90) day period pursuant to Rule 144 promulgated under the Securities Act or other equivalent exemptions in jurisdictions other than the United States without any volume limitations thereunder; (ii) the fifth (5th) anniversary of the Qualified IPO; and (iii) the termination, liquidation or dissolution of the Company.
2.15.    Participation in Public Offering. Notwithstanding anything in this Agreement to the contrary, each Investor shall have the right (but not the obligation) to subscribe for, be allotted and issued, and otherwise participate in any potential public offering of the Company’s Ordinary Shares on a pro rata basis according to its shareholding percentage in the Company.
3.    RIGHT OF PARTICIPATION.
3.1.    General. Each holder of Series A Shares, including each holder of Series A Shares to which rights under this Article 3 have been duly assigned in accordance with Article 5 (hereinafter referred to as a “Participation Rights Holder”), shall have the preemptive right pursuant to this Article 3 to purchase such Participation Rights Holder’s Pro Rata Share (as defined below), of all (or any part) of any New Securities (as defined in Section 3.3) that the Company may from time to time issue after the date of this Agreement pursuant to this Article 3 (the “Right of Participation”).
3.2.    Pro Rata Share. A Participation Rights Holder’s “Pro Rata Share” for purposes of the Right of Participation is the ratio of (a) the number of Ordinary Shares (calculated on an as-converted basis) held by such Participation Rights Holder, to (b) the total number of Ordinary Shares (calculated on an as-converted basis) held by all of the Participation Rights Holders immediately prior to the issuance of the New Securities giving rise to the Right of Participation.
3.3.    New Securities. “New Securities” shall mean any Securities of the Company, other than the following Securities:
(a)    any Securities issued or issuable to employees, officers, Directors, contractors, advisors or consultants of the Company pursuant to grants of share incentive awards approved by the Investors under the ESOP approved by the Board (including the affirmative vote of at least one (1) Overland Director (if any) and one (1) ADCT Director (if any));
(b)    any Series A Shares issued under the Share Purchase Agreement and any Securities issued upon conversion of the Series A Shares;
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(c)    any Securities issued as a dividend or distribution for which the Series A Shares participate on a pro rata basis;
(d)    any Securities issued in connection with any share split, share dividend, recapitalization or other similar event, in each case approved by the Board (including the affirmative votes of at least one (1) Overland Director (if any) and one (1) ADCT Director (if any)), in which all Participation Rights Holders are entitled to participate on a pro rata basis;
(e)    any Securities issued upon the exercise, conversion or exchange of any outstanding Securities if such outstanding Securities constitute New Securities;
(f)    any Securities issued pursuant to bona fide transactions with commercial lenders or lessors in connection with loans, credit arrangements, equipment financings or similar transactions, each such transaction having been approved by the Board (including the affirmative votes of at least one (1) Overland Director (if any) and one (1) ADCT Director (if any)); and
(g)    any Securities of the Company issued pursuant to the acquisition of another corporation or entity by the Company by consolidation, merger, purchase of assets, or other reorganization in which the Company acquires, in a single transaction or series of related transactions, all or substantially all assets of such other corporation or entity, or fifty percent (50%) or more of the equity ownership or voting power of such other corporation or entity, in any case, duly approved in accordance with this Agreement and the Memorandum and Articles.
3.4.    Procedures.
(a)    First Participation Notice. In the event that the Company proposes to undertake an issuance of New Securities (in a single transaction or a series of related transactions), it shall give to each Participation Rights Holder written notice of its intention to issue New Securities (the “First Participation Notice”), describing the amount and type of New Securities, the price and the general terms upon which the Company proposes to issue such New Securities. Each Participation Rights Holder shall have twenty (20) Business Days from the date of receipt of any such First Participation Notice (the “First Participation Period”) to agree in writing to purchase up to such Participation Rights Holder’s Pro Rata Share of such New Securities for the price and upon the terms and conditions specified in the First Participation Notice by giving written notice to the Company and stating therein the quantity of New Securities to be purchased (not to exceed such Participation Rights Holder’s Pro Rata Share). If any Participation Rights Holder fails to so respond in writing within such twenty (20) Business Day period, then such Participation
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Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.

Rights Holder shall forfeit the right hereunder to purchase its Pro Rata Share of such New Securities, but shall not be deemed to forfeit any right with respect to any other issuance of New Securities.
(b)    Second Participation Notice; Oversubscription. If any Participation Rights Holder fails or declines to exercise its Right of Participation in accordance with subsection (a) above, the Company shall promptly give notice (the “Second Participation Notice”) to the other Participation Rights Holders who exercised in full their Right of Participation (the “Oversubscription Participants”) in accordance with subsection (a) above. Each Oversubscription Participant shall have ten (10) Business Days from the date of receipt of the Second Participation Notice (the “Second Participation Period”) to notify the Company of its desire to purchase more than its Pro Rata Share of the New Securities, stating the number of the additional New Securities it proposes to buy (the “Additional Number”). If, as a result thereof, such oversubscription exceeds the total number of the remaining New Securities available for purchase, each Oversubscription Participant will be cut back by the Company with respect to its oversubscription to that number of remaining New Securities equal to the lesser of (x) the Additional Number and (y) the product obtained by multiplying (i) the number of the remaining New Securities available for subscription by (ii) a fraction, the numerator of which is the number of Ordinary Shares (calculated on an as-converted basis) held by such Oversubscription Participant and the denominator of which is the total number of Ordinary Shares (calculated on an as-converted basis) held by all the Oversubscription Participants.
(c)    Each Participation Rights Holder who exercises its Right of Participation hereunder by delivering aforesaid notices in Sections 3.4(a) and (b) shall be obligated to buy such number of New Securities in accordance with the terms of this Section 3.4 and the Company shall so notify such Participation Rights Holders within ten (10) Business Days following the date of the Second Participation Notice. The transaction in connection with the New Securities shall be consummated within forty-five (45) days after the expiration of the First Participation Period, or if applicable, the Second Participation Period.
3.5.    Failure to Exercise. Upon the expiration of the Second Participation Period, the Company shall have ninety days (90) days thereafter to sell the New Securities described in the First Participation Notice with respect to which the Rights of Participation hereunder were not exercised at the same or higher price and upon non-price terms not materially more favorable to the purchasers thereof than specified in the First Participation Notice; provided, that the prospective purchaser of such New Securities shall not be a Competitor or a Person acting on behalf of a Competitor and shall comply with this Agreement and the Memorandum and
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Articles, as maybe amended from time to time. In respect of any issuance of Securities to any Person that is not a party to this Agreement, the Company shall procure that, prior to the issuance, such Person executes a Joinder Agreement in the form attached hereto as Exhibit B agreeing to be bound by this Agreement and the Memorandum and Articles. In the event that the Company has not issued and sold such New Securities within such ninety (90) day period, then the Company shall not thereafter issue or sell any New Securities without again first offering such New Securities to the Participation Rights Holders pursuant to this Article 3.
3.6.    Termination. The provisions set forth under this Article 3 shall terminate immediately prior to the consummation of a Qualified IPO.
4.    TRANSFER RESTRICTIONS.
4.1.    Certain Definitions. For purposes of this Article 4, “Transfer” of any Securities or any other securities of any Group Company means any direct or indirect sale, assignment, transfer, pledge, hypothecation, mortgage, encumbrance or otherwise disposal of, through one or a series of transactions, such Securities or other securities of any Group Company or any participation or interest in any of the foregoing.
4.2.    Transfer Restrictions. Except as provided in Section 4.6, no Shareholder may, without the prior written approval of each non-Transferring Investor, Transfer any Securities of the Company (i) to any Person before the [**] anniversary of the Closing, or (ii) to any Person which directly or indirectly Controls or engages in a Competing Business (a “Competitor”) or any Person that acts on behalf of a Competitor.
4.3.    Right of First Refusal. Subject to Section 4.2 and Section 4.6, if any Shareholder (a “Selling Shareholder”) proposes to Transfer any Shares held by it to any third party, then such Selling Shareholder shall promptly give written notice (the “Transfer Notice”) to the Company and each non-Transferring Investor (each, a “Non-Selling Investor”) prior to such Transfer. The Transfer Notice shall describe in reasonable detail the proposed Transfer including, without limitation, the number of Shares to be Transferred (the “Offered Shares”), the nature of such Transfer, the consideration to be paid, and the name and address of each prospective purchaser or transferee. The Non-Selling Investor(s) may exercise their right of first refusal with respect to the Offered Shares as follows:
(a)    Option of the Non-Selling Investor(s). Each Non-Selling Investor shall have an option, for a period of twenty (20) Business Days from receipt of the Transfer Notice (the “Exercise Period”) to elect to purchase all (but not less than all) the Offered Shares at the same price and subject to the same material terms and conditions as described in the Transfer Notice, by notifying the Selling Shareholder and the Company in writing specifying the Offered Shares that such Non-Selling Investor wishes to purchase
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before expiration of the Exercise Period; provided, that if there are more than one Non-Selling Investors desiring to exercise their rights of first refusal, the number of Offered Shares that each Non-Selling Investor may purchase shall not exceed the amount equivalent to the product obtained by multiplying the aggregate number of Offered Shares by a fraction, the numerator of which is the number of Ordinary Shares (calculated on an as-converted basis) held by such Non-Selling Investor at the time of the transaction and the denominator of which is the total number of Ordinary Shares (calculated on an as-converted basis) owned by all Non-Selling Investors at the time of the transaction.
(b)    Purchase Price and Payment. The purchase price for the Offered Shares to be purchased by the Non-Selling Investor(s) exercising their right of first refusal will be the price set forth in the Transfer Notice, but will be payable as set forth below. If the purchase price in the Transfer Notice includes consideration other than cash, the cash equivalent value of the non-cash consideration will be as determined by the Board in good faith (including the affirmative votes of at least one (1) Overland Director and one (1) ADCT Director) or by a third party appraisal institution engaged by the Board (including the affirmative votes of at least one (1) Overland Director and one (1) ADCT Director), which determination will be binding upon the Company, the Selling Shareholder and the Non-Selling Investor(s), absent fraud or error. The transaction shall be closed within forty-five (45) Business Days following the date of the Transfer Notice (the “ROFR Closing Period”); provided, that such ROFR Closing Period shall be extended until such time that the requisite Consents of the applicable Government Authorities has been obtained, and the payment of the purchase price shall be made by wire transfer or check as directed by the Selling Shareholder. Upon closing of the transaction, the Selling Shareholder shall promptly deliver to each Non-Selling Investor exercising its right of first refusal for Transfer to such Non-Selling Investor one or more certificates, properly endorsed for Transfer, together with an executed instrument of transfer, which represent the total number of Shares which the Selling Shareholder shall Transfer to such Non-Selling Investor pursuant to this Section 4.3.
(c)    If any Non-Selling Investor has not elected to purchase the Offered Shares in the manner and after following the procedures set forth in this Section 4.3, then the Transfer of the Offered Shares will also be subject to the co-sale rights set forth in Section 4.4.
4.4.    Co-Sale Right.
(a)    Co-Sale Right of Non-Selling Investor(s). Subject to Section 4.2, in the event that any Non-Selling Investor has not exercised its right of first
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refusal with respect to the Offered Shares pursuant to Section 4.3(b), then each such Non-Selling Investor (each, a “Co-Sale Holder”) shall have the right (the “Co-Sale Right”), exercisable upon written notice to the Selling Shareholder, the Company and the other Non-Selling Investor(s) within the same twenty (20) Business Day Exercise Period in Section 4.3(a) specifying that it wishes to include in such Transfer its Co-Sale Shares on the same material terms and conditions as set forth in the Transfer Notice; provided, however, that no Co-Sale Holder shall be obligated in connection with such Transfer (x) to pay any amount with respect to any liabilities arising from the representations and warranties severally made by it in excess of its share of the total consideration paid by the prospective purchaser or (y) to make any representations or warranties concerning the business or assets of any Group Company. “Co-Sale Shares” means the number of Ordinary Shares (calculated on an as-converted basis) that such Co-Sale Holder wishes to include in such Transfer, which amount shall not exceed such Co-Sale Holder’s pro rata share as determined under Section 4.4(b). To the extent one or more of the Co-Sale Holder(s) exercise their Co-Sale Rights in accordance with the terms and conditions set forth herein, if the prospective purchaser is unwilling to purchase all of the Offered Shares and Co-Sale Shares, the number of Shares that the Selling Shareholder and each Co-Sale Holder may sell in the transaction shall be correspondingly on a pro rata basis reduced such that the aggregate number of Shares Transferred shall not exceed the total number of Shares that the prospective purchaser is willing to purchase.
(b)    Pro Rata Share. Each Co-Sale Holder’s pro rata share, for the purpose of this Section 4.4, is equal to the product obtained by multiplying (x) the aggregate number of Ordinary Shares (on an as-converted basis) held by such Co-Sale Holder by (y) a fraction, the numerator of which is the number of Ordinary Shares (on an as-converted basis) constituting the Offered Shares and the denominator of which is the aggregate number of the Ordinary Shares (on an as-converted basis) owned by the Selling Shareholder.
(c)    Transferred Shares. Each Co-Sale Holder who has exercised its Co-Sale Right shall promptly deliver to the Selling Shareholder for Transfer to the prospective purchaser one or more certificates, properly endorsed for Transfer, together with an executed instrument of transfer, which represent the total number of Shares which such Co-Sale Holder wishes to include in such Transfer pursuant to this Section 4.4.
(d)    Payment to Co-Sale Holder(s). The completion of the sale of Shares by the Selling Shareholder and the Co-Sale Holder(s) shall take place at the same time, including payment of the purchase price. To the extent that
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any prospective purchaser prohibits such assignment or otherwise refuses to purchase any Shares from a Co-Sale Holder exercising its Co-Sale Right, the Selling Shareholder shall not Transfer to such prospective purchaser any Offered Shares unless and until, simultaneously with such sale, the Selling Shareholder shall purchase from such Co-Sale Holder the Shares that it would otherwise sell to the prospective purchaser pursuant to this Section 4.4.
4.5.    Right to Transfer. To the extent the Non-Selling Investors do not elect to purchase any or all of the Offered Shares subject to the Transfer Notice, the Selling Shareholder may, not later than ninety (90) days following delivery of the Transfer Notice, conclude a Transfer of the remaining Offered Shares covered by the Transfer Notice and not elected to be purchased by the Non-Selling Investors, which in each case shall be on substantially the same material terms and conditions as those described in the Transfer Notice and subject to the right of the Co-Sale Holder(s) to participate in the Transfer pursuant to Section 4.4. In the event the Selling Shareholder does not consummate the sale of such Offered Shares within ninety (90) days in accordance with this Section 4.5, the rights of the Non-Selling Investor(s) under Sections 4.3 and 4.4 shall be re-invoked and shall be applicable to each subsequent disposition of such Offered Shares by the Selling Shareholder until such rights lapse in accordance with the terms of this Agreement. The Selling Shareholders shall cause any prospective purchaser of such Shares to execute a Joinder Agreement in the form attached hereto as Exhibit B agreeing to be bound by this Agreement and the Memorandum and Articles immediately prior to such Transfer. Any proposed Transfer on terms and conditions which are materially different from those described in the Transfer Notice, as well as any subsequent proposed Transfer of any Shares by the Selling Shareholder, shall again be subject to the right of first refusal and the co-sale right of the Non-Selling Investor(s) and shall require compliance by the Selling Shareholder with the procedures described in Sections 4.3 and 4.4.
4.6.    Exceptions to Transfer Restriction, ROFR and Co-Sale. Notwithstanding anything to the contrary contained herein, the transfer restrictions set forth in Section 4.2 and the right of first refusal and co-sale rights of the Non-Selling Investors as set forth in Sections 4.3 and 4.4 shall not apply to (i) any sale or Transfer of Shares to the Company pursuant to a repurchase right or right of first refusal held by the Company in the event of a termination (either voluntary or involuntary) of employment or consulting relationship; (ii) any Transfer by a Shareholder of its Shares to its Affiliates (in the case of Overland, only to the wholly owned Affiliates of Overland); and (iii) any pledge of the Shares by ADCT to secure its obligations under any outstanding indebtedness of ADCT as of the date of this Agreement (which, for the avoidance of doubt, shall include any pledge of the Shares held by ADCT to Deerfield Partners, L.P., as agent for itself and the other Secured Parties (in such capacity, together with its successors and assigns in such capacity, “Deerfield”) as security for the obligations under the
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Facility Agreement by and among ADCT, Deerfield, and other parties thereto dated April 24, 2020 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Facility Agreement”) and the exercise of the rights of the Secured Parties pursuant to the Facility Documents in respect of such Shares) (each transferee pursuant to the foregoing subsections (i) or (ii) or (iii), a “Permitted Transferee”); provided, that, (A) in the case of (ii), adequate documentation therefor is provided to the Non-Selling Investor(s) and that any such Permitted Transferee agrees in writing to be bound by this Agreement in place of the relevant transferor by executing a Joinder Agreement in the form attached hereto as Exhibit B; (B) in the case of (ii), such transferor shall remain liable for any breach by such Permitted Transferee of any provision hereunder; and (C) in the case of (iii), Overland agrees that it shall take such actions as reasonably requested by ADCT to facilitate the pledge of such Shares to Deerfield pursuant to the terms of the Facility Documents.
4.7.    Joinder Agreement. In respect of any Transfer by any Shareholder of all or any part of its Shares to any Person (except those Transfers as described in subsections (i) and (iii) in Section 4.6), the Transferring Shareholder shall procure that, prior to the Transfer, such Person executes a Joinder Agreement in the form attached hereto as Exhibit B agreeing to be bound by this Agreement and the Memorandum and Articles.
4.8.    Legend.
(a)    Each certificate representing the Shares shall be endorsed with the following legend:
“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OF THE UNITED STATES, AS AMENDED. THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER SET FORTH IN A SHAREHOLDERS AGREEMENT AND THE MEMORANDUM AND ARTICLES OF ASSOCIATION, COPIES OF WHICH MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY.”
(b)    Each Party agrees that the Company may instruct its transfer agent to impose transfer restrictions on the Shares represented by certificates bearing the legend referred to in Section 4.8(a) to enforce the provisions of this Agreement and the Company agrees to promptly do so. The legend shall be removed upon termination of the provisions of this Article 4.
4.9.    Indirect Transfer.
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(a)    The Parties agree that the transfer restrictions set out in this Article 4 shall not be avoided by the holding of any Securities of the Company indirectly through a company or other entity that can itself be sold in whole or in part in order to dispose of such Securities, free of such restrictions. Any Transfer, directly or indirectly, of shares or other Securities of a Shareholder or of any company (or other entity) having Control over that Shareholder, which Shareholder, company or entity has assets consisting all or substantially all of, directly or indirectly held, Securities of the Company shall be, notwithstanding anything to the contrary in this Agreement, treated as a Transfer of the Securities of the Company held by that Shareholder, and the provisions of this Agreement that apply in respect of the Transfer of Securities the Company shall apply to the Securities of the Company that are indirectly subject to such Transfer (and not, for the avoidance of doubt, to the Securities in the Shareholder or entity which Controls the Shareholder). Notwithstanding anything to the contrary in this Agreement, a Transfer of the Securities of the Company shall not be deemed to have occurred solely by virtue of any direct or indirect transfer of any shares or other Securities of ADCT by a shareholder of ADCT or any direct or indirect holder of shares or other Securities of such shareholder of ADCT.
(b)    Notwithstanding anything to the contrary in this Agreement, the transfer restrictions set out in this Article 4 shall not apply to (i) any Transfer resulting from a Trade Sale of Overland that does not involve a Competitor, and (ii) any Transfer resulting from a Trade Sale of ADCT.
4.10.    Prohibited Transfer Void. Any attempt by a Party to sell or Transfer any Securities of the Company in violation of this Article 4 shall be void and the Company hereby agrees it will not effect such a Transfer nor will it treat any alleged transferee as the holder of such Securities without the written consent of each non-Transferring Investor.
4.11.    Term. The provisions under this Article 4 shall terminate immediately prior to the consummation of a Qualified IPO.
5.    ASSIGNMENT AND AMENDMENT.
5.1.    Assignment and Amendment. Notwithstanding anything herein to the contrary:
(a)    Information Rights; Registration Rights. The Information Rights and Inspection Rights under Section 1.1 may be assigned to any Shareholder in connection with a Transfer of Shares, and the registration rights of the Holders under Article 2 may be assigned to any Holder or to any Person acquiring Registrable Securities, in each case, in accordance with the terms of this Agreement; provided, however, that in either case no party may be assigned any of the foregoing rights unless the Company is given
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written notice by the assigning Party, stating the name and address of the assignee and identifying the Securities of the Company as to which the rights in question are being assigned; provided further, that any such assignee shall receive such assigned rights subject to all the terms and conditions of this Agreement, including without limitation the provisions of this Article 5.
(b)    Appointment Rights. Subject to Section 5.1(d), the right of any Investor to appoint and remove any Investor Director and the CEO (as applicable) under Article 1 shall not be assigned to any other Person.
(c)    Right of Participation. The rights of each Shareholder under Article 3 are fully assignable in connection with a transfer of Shares by such Shareholder in accordance with the terms of this Agreement; provided, however, that no party may be assigned any of the foregoing rights unless the Company is given written notice by the Shareholder, stating the name and address of the assignee and identifying the Securities of the Company as to which the rights in question are being assigned; and provided further, that any such assignee shall receive such assigned rights subject to all the terms and conditions of this Agreement.
(d)    Assignment by ADCT to Deerfield. Notwithstanding anything to the contrary in this Agreement, none of the provisions in this Agreement shall be construed as preventing the assignment or transfer of ADCT’s rights in this Agreement (or any license or other agreement entered into in connection herewith) to Deerfield in connection with the exercise of its rights under the Facility Documents upon the occurrence and during the continuance of any Event of Default (as defined therein) or the creation of a first-priority Lien on ADCT’s rights in this Agreement (or any license or other agreement entered into in connection herewith) in favor of Deerfield pursuant to the Facility Documents.
5.2.    Amendment of Rights. Any provision in this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only by the written consent of (a) the Company; and (b) each Investor; provided, however, that an Investor may waive any of its rights hereunder without obtaining the consent of any other Party.
6.    CONFIDENTIALITY AND NONDISCLOSURE.
6.1.    Confidentiality Obligation. Each Party agrees that such Party will, and will cause its Affiliates and Representatives to, keep confidential and will not disclose, divulge, or use for any purpose (i) the existence and content of this Agreement, and (ii) other information of a non-public nature received from any other Party or its Representatives, or prepared by such Party or its Representatives, in connection herewith or therewith, (collectively, the “Confidential Information”);
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provided that any Party may disclose Confidential Information to the extent that such Confidential Information (a) is known or becomes known to the public in general (other than as a result of a breach of this Section 6.1 by such Party), (b) is or has been independently developed or conceived by such Party or its Representatives without use of the Confidential Information, or (c) is or has been made known or disclosed to such Party by a third party without a breach of any obligation of confidentiality such third party may have to any other Party or its Representatives; provided further that any Party may disclose Confidential Information (i) to its Affiliates, attorneys, accountants, consultants, and other professionals to the extent necessary to obtain their services in connection with its investment in the Company; (ii) to any prospective purchaser of any Registrable Securities from such Party, if such prospective purchaser agrees to be bound by the provisions of this Section 6.1; (iii) to any existing or prospective Affiliate, partner, member, stockholder, or wholly owned subsidiary of such Party in the ordinary course of business, provided that such Party informs such Person that such information is confidential and directs such Person to maintain the confidentiality of such information; or (iv) as may otherwise be required by applicable Law, regulation, rule, court order or subpoena (including the rules and regulations of the SEC), provided further that in the case of sub-paragraph (iv), such Party shall, to the extent permitted by applicable Law, promptly notify the other Parties of such disclosure, consult with the other Parties regarding such disclosure, and at the request of any other Party, seek (with the cooperation and reasonable efforts of the other Parties) a protective order, confidential treatment or other appropriate remedy to minimize the extent of any such required disclosure, and furnish only that portion of the information which is legally required to be disclosed and shall exercise reasonable efforts to obtain reliable assurance that confidential treatment will be accorded to such information. Notwithstanding the foregoing or any other provision in this Agreement to the contrary, ADCT shall be permitted to disclose such information as required by the rules and regulations of the New York Stock Exchange and the SEC (as determined by ADCT) without being subject to the obligations in the proviso in sub-paragraph (iv) above.
6.2.    Public Announcement. No announcement regarding any of the Confidential Information covered in Section 6.1 in a press release, conference, advertisement, announcement, professional or trade publication, mass marketing materials or otherwise to the general public may be made without the prior written consent of all Investors, except as may otherwise be required by applicable Law, regulation, rule, court order or subpoena (including the rules and regulations of New York Stock Exchange and the SEC).
6.3.    Other Information. The provisions of this Article 6 shall be in addition to, and not in substitution for, the provisions of any separate nondisclosure agreement executed by any of the parties with respect to the transactions contemplated hereby.
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6.4.    Notices. All notices required under this section shall be made pursuant to Section 11.1 of this Agreement.
7.    PROTECTIVE PROVISIONS.
7.1.    Voting Rights. The issued and outstanding Series A Shares shall be voted with the issued and outstanding Ordinary Shares at any annual or extraordinary general meeting of the Company, or the holders of such Series A Shares may act by way of unanimous written resolution in the same manner as holders of the Ordinary Shares, upon the following basis: the holders of any Series A Shares shall be entitled to the number of votes equal to the number of Ordinary Shares into which such Series A Shares could be converted at the record date for determination of the Shareholders entitled to vote on such matters, or, if no such record date is established, at the date such vote is taken or any written consent of Shareholders is solicited, such votes to be counted together with all other Shares of the Company having general voting power and not counted separately as a class unless otherwise set forth in the Memorandum and Articles.
7.2.    Approval by Shareholders. Subject to Section 7.3, all actions of the Shareholders shall (i) require the affirmative vote of at least a simple majority of the Ordinary Shares (calculated on an as-converted basis) at a duly convened meeting of the Shareholders or (ii) the unanimous written resolution of the Shareholders.
7.3.    Matters Requiring Additional Shareholder Consent. The Company shall not, and shall not permit any other Group Company to, and each Party shall ensure that no Group Company shall, take any of the following actions (including any action by its board of directors, management or committee thereof or any action at a meeting of its shareholders or otherwise) without the prior written approval of Overland, for so long as Overland continues to beneficially own any Share, and ADCT, for so long as ADCT continues to beneficially own any Share:
(a)    any repeal, amendment, modification or change of the memorandum or the articles or other similar constitutive documents of any Group Company;
(b)    any liquidation, dissolution, winding up or reorganization of any Group Company, or any merger, recapitalization, amalgamation, spin-off, consolidation, Trade Sale or similar transaction of any Group Company;
(c)    any amendment, modification or change of any rights, preferences, privileges or powers of, or any restrictions provided for the benefit of, the Series A Shares or any amendment, modification or change of any rights, powers or benefit attached to the Series A Shares or other classes or series of shares having the effect of or resulting in any rights, preferences, privileges or powers of the Series A Shares being prejudiced;
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(d)    any action that authorizes, creates or issues Shares of any class or series, or other Securities of whatever description (except where such issue is pursuant to the ESOP or other incentive scheme and agreements of similar nature duly approved in accordance with this Agreement), or reclassifies or converts any issued or outstanding Shares into Shares having rights, priority or preferences superior to or on a parity with the Series A Shares, whether in terms of voting rights, dividends or amounts payable in the event of any voluntary or involuntary liquidation or distribution of the Company or otherwise, and any action that authorizes, creates or issues Securities of any other Group Company;
(e)    any issue, allotment or grant of any options, warrants or similar rights conferring on any Person the right to acquire any shares, Securities or equity interest in any Group Company (except where such issue, allotment or grant is pursuant to the ESOP or other incentive scheme and agreements of similar nature);
(f)    any increase or decrease in the number of authorized Shares;
(g)    any repurchase or redemption of any shares or other Securities of any Group Company other than repurchases of shares from former employees, officers, directors, consultants or other Persons who performed services for any Group Company in connection with the cessation of such employment or service pursuant to the ESOP at the lower of the fair market value or cost of such shares;
(h)    the declaration or payment of a dividend on any share or other Securities of any Group Company;
(i)    any sale, assignment, grant of exclusive license or sublicense or pledge or encumbrance of intellectual property contributed by ADCT or its Affiliates to any Group Company pursuant to the License Agreement or otherwise to any third party;
(j)    any increase or decrease in the authorized number of members of the board of directors of any Group Company;
(k)    the creation, adoption or material amendment of the ESOP or any other equity incentive plan or equivalent by any Group Company (including setting total amount of options);
(l)    any public offering or listing of any Securities of any Group Company (including determination of its plan and venue);
(m)    any change of or exit from the Principal Business of any Group Company, or entry into any new line of business;
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(n)    any share split, share consolidation or share dividend, reclassification or other form of restructuring of capital of any Group Company;
(o)    the incurrence of any lien or other granting of any security interest on any assets or property of any Group Company exceeding [**] in value, unless previously approved by the Board (including the affirmative vote of at least one (1) Overland Director (if any) and one (1) ADCT Director (if any));
(p)    any decision to dismiss or replace the Compliance Officer, appoint a new Compliance Officer or alter the Compliance Officer’s responsibilities; or
(q)    any agreement or commitment by any Group Company to do any of the foregoing.
7.4.    Matters Requiring Investor Director Consent. For so long as any Investor has the right to appoint an Investor Director pursuant to Section 1.2, the Company shall not, and shall not permit any other Group Company to, and each Party shall ensure that no Group Company shall, take any of the following actions (including any action by its board of directors, management or committee thereof or otherwise) without the prior written approval of at least one (1) Investor Director appointed by such Investor:
(a)    provision of any loan or advance to, or holding of any share or other Securities of, any Subsidiary or other corporation, partnership, or other entity unless wholly owned by a Group Company;
(b)    provision of any loan or advance to any Person (other than an entity wholly owned by a Group Company), including any officer, employee or director of any Group Company, except advances and similar expenditures in the ordinary course of business or under the terms of the ESOP;
(c)    any guarantee of any indebtedness except for trade accounts of any Group Company arising in the ordinary course of business;
(d)    any investment or payment of expenses not already included in a Board-approved budget in excess of [**] individually or in the aggregate;
(e)    incurrence of indebtedness in excess of [**] in the aggregate not already included in a Board-approved budget, excluding trade credit incurred in the ordinary course of business;
(f)    entry into any transaction with a Related Party;
(g)    hiring, dismissal, or change of the compensation of C-level officers of any Group Company, or approval of any option grant or other equity incentive
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pursuant to the ESOP or otherwise to such officers of any Group Company;
(h)    adoption or amendment of the annual budget and annual business plan of any Group Company;
(i)    development or commercialization of any product other than the then-existing Products;
(j)    entry into any corporate strategic relationship involving the payment, contribution or assignment by any Group Company or to any Group Company of assets greater than [**];
(k)    appointment or removal of the auditors of any Group Company or determination of their fees, remuneration or other compensation to the extent above the prevailing market standard for comparable entities;
(l)    amendment of accounting or financial policies, change to any accounting principles or change of the financial year of any Group Company;
(m)    any material changes to the Company’s Anti-Corruption and Sanctions Program;
(n)    commencement, prosecution or settlement of any legal actions exceeding [**] in value (other than any claim, suit, action or proceeding (i) related to the enforcement or defense of any Group Company’s rights under the License Agreement and any other agreement, instrument or document between any Group Company, on the one hand, and any Related Party, on the other hand, or (ii) any other claim, suit, action or proceeding in which a Group Company and a Related Party are on opposing sides of the claim, suit, action or proceeding (in each case of (i) and (ii), a “Related Party Litigation”));
(o)    entry into, or any material modification to, any contract, transaction or arrangement exceeding [**] in value or not made on bona fide arm’s-length terms;
(p)    sale or disposal of the whole or a substantial part of the undertaking and goodwill or material assets of any Group Company;
(q)    establishment of any subsidiary or branch, or strategic alliance between any Group Company and one or more entities (i) involving any capital contribution by any Group Company, if the business of such subsidiary, branch or strategic alliance is outside the scope of the Principal Business, or (ii) where the investment amount exceeds [**] individually or [**] in
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the aggregate, if the business of such subsidiary, branch or strategic alliance is within the scope of the Principal Business; or
(r)    any agreement or commitment by any Group Company to do any of the foregoing.
7.5.    Related Party Litigation. In the case of any Related Party Litigation, or facts upon which such Related Party Litigation could be commenced, and upon notification to the Company, a majority of the Directors not appointed by the Related Party against whom such Related Party Litigation has been or could be commenced (the “Unrelated Directors”) shall be exclusively entitled, on behalf of any Group Company, to initiate, control, or abandon such Related Party Litigation, to settle any claims thereunder, and/or to expend reasonable Company resources in relation thereto regardless of whether such resources are provided in the annual budget; provided that the Unrelated Directors shall be authorized to take action in reliance of this Section 7.5 to initiate, control, or continue any Related Party Litigation that is initiated or proposed to be initiated by any Group Company and expend reasonable Company resources in relation thereto if and only if competent outside legal counsel to the Company has issued written advice that the Group Company has a valid claim that is based on a bona fide legal basis in such Related Party Litigation (a “Valid Claim”) and the Unrelated Directors determine pursuant to their fiduciary duties owed to the Company that such action taken in respect of such Related Party Litigation (including the scope and extent of such action) is in the best interests of the Company; provided further that, if after the initiation of the Related Party Litigation by any Group Company, competent outside legal counsel to the Company determines that the Group Company no longer has a Valid Claim, or the Unrelated Directors determine pursuant to their fiduciary duties owed to the Company that such Related Party Litigation is no longer in the best interests of the Company, the Unrelated Directors shall take actions to immediately abandon such Related Party Litigation and cease to expend any resources of the Company in relation to such Related Party Litigation. For clarity, the Unrelated Directors shall not be required to obtain a determination of a Valid Claim from its outside counsel in order to defend against, or to expend reasonable Company resources in relation to, any Related Party Litigation initiated against any Group Company by a Related Party.
7.6.    Termination. The provisions set forth under this Article 7 shall terminate immediately prior to the consummation of a Qualified IPO.
8.    COVENANTS; UNDERTAKINGS
8.1.    Controlled Foreign Corporation. Prior to March 1 of each year, based on and in reliance on the information provided by the Shareholders reasonably promptly upon request, the Company shall determine, with assistance from its tax advisors, whether the Company or any of its Subsidiaries is treated as a “Controlled Foreign Corporation” (“CFC”) as defined in the United States Internal Revenue Code of
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1986 (the “Code”), whether any portion of the Company’s or any of its Subsidiaries’ income is (a) “Subpart F Income” (as defined in Section 952 of the Code) (“Subpart F Income”) or (b) “global intangible low-taxed income” (as defined in Section 951A(b) of the Code) (“GILTI”) and each Shareholder’s share, if any, of such Subpart F Income or GILTI (regardless of whether a Shareholder is a “United States Shareholder” or not) for the immediately preceding taxable year ending December 31. Upon written request of any Shareholder who is a United States Shareholder (or whose direct or indirect owners are United States Shareholders) with respect to the Company or any Group Company within the meaning of Section 951(b) of the Code, the Company will (i) use best efforts to provide in writing such information as is in its possession and reasonably available concerning its Shareholders and Affiliates to assist such Shareholder in determining whether the Company or any Group Company is a CFC and (ii) provide such Shareholder with reasonable access to such information as is in the Company’s or Group Company’s possession and reasonably available as may be required by such Shareholder (A) to determine the Company’s (or Group Company’s) status as a CFC, (B) to determine whether such Shareholder is required to report its pro rata portion of the Company’s (or Group Company’s) “Subpart F income” (as defined in Section 952 of the Code) on its United States federal income tax return, or (C) to allow such Shareholder to otherwise comply with applicable United States federal income tax Laws (including with respect to the making of any determinations under Section 951A of the Code); provided that the Company may require such Shareholder to enter into a confidentiality agreement in customary form.
8.2.    Passive Foreign Investment Company. The Company shall use its best efforts to avoid being a “passive foreign investment company” within the meaning of Section 1297 of the Code (“PFIC”) for the current and any future taxable year. The Company shall make due inquiry with its tax advisors on at least an annual basis regarding its status as a PFIC, and if the Company is informed by its tax advisors that it has become a PFIC, or that it is likely that the Company will be classified as a PFIC for any taxable year, the Company shall promptly notify each Shareholder of such status or risk, as the case may be, in each case no later than forty-five (45) days following the end of the Company’s taxable year. The Company shall provide its Shareholders with annual financial information in the form to the reasonable satisfaction of such Shareholder as soon as reasonably practicable following the end of each taxable year of such Shareholder (but in no event later than forty-five (45) days following the end of each such taxable year), and shall, upon the request in writing by any Shareholder, provide such Shareholder with access to such other information, as is in the Company’s possession and reasonably available, as may be required for purposes of filing U.S. federal income tax returns in connection with a qualified electing fund election or other tax filing in respect of the Company’s status of a PFIC. In the event that it is determined by the Company’s or such Shareholder’s tax advisors that the control documents in place between one or more of the Company’s
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wholly owned Subsidiaries or the Company, on the one hand, and any of the Group Companies organized in the PRC that is not a wholly foreign owned enterprise, on the other hand, do not allow the Company to look through the Group Companies to their assets and income for purposes of the PFIC rules and regulations under the Code, the Company shall use its best efforts to take such actions as are reasonably necessary or advisable, including the amendment of such control documents, to qualify for such look-through treatment of the Group Companies under the PFIC rules and regulations under the Code.
8.3.    Establishment of Subsidiaries. As soon as practicable after the Closing, the HK Company shall, and the Company shall procure the HK Company to, establish a wholly owned Subsidiary in mainland China unless otherwise approved by the Board (including the affirmative vote of at least one (1) Overland Director (if any) and one (1) ADCT Director (if any)).
8.4.    Subsidiary Covenants. The Company shall institute and keep in place arrangements satisfactory to the Board such that the Company (a) will control the operations of any Group Company and (b) will be permitted to properly consolidate the financial results for such entity in consolidated financial statements for the Company prepared under each Accounting Standard that is required by any Investor.
8.5.    Additional Subsidiary Covenants. The Company shall take all necessary actions to maintain its Subsidiaries, as is necessary to conduct the Company’s business as conducted or as proposed to be conducted. The Company shall and shall cause each Group Company to comply in all material respects with all applicable Laws on a continuing basis. All material aspects of such formation, maintenance and compliance of each Group Company shall be subject to the review, approval and oversight of the Board, and the Company shall promptly provide each Director copies of all material related documents and correspondence.
8.6.    [Reserved]
8.7.    Non-Competition; Non-Solicitation.
(a)    Non-Competition. Overland undertakes and covenants to the Company and ADCT that, during the applicable Non-Compete Term (as defined below), Overland shall not, and shall cause each of its Controlled Affiliates, any Person whose assets consist of all or substantially all of, directly or indirectly held, Securities of Overland (Overland and such Affiliates and Persons, collectively, the “Overland Restricted Persons”) and any Overland Invested Entity not to, without the prior written consent of ADCT, either on their own account or in conjunction with or on behalf of any other Person: [**] (collectively, the “Competing Business”); provided, however, that, for the purposes of the restrictions on any of Overland’s Controlled Affiliates or any Overland Invested Entity, [**];
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provided further, that, subject to compliance by each Overland Restricted Person and Overland Invested Entity, as applicable, with Section 8.28, [**]; or (b) notwithstanding anything to the contrary in Section 6.1, disclose to any of its Affiliates any confidential information or know-how in relation to the operation of the Group Companies (other than financial information of the Group Companies provided pursuant to Section 1.1), including any information related to the development, registration and commercialization of any Product.
(b)    Non-Solicitation. Each of Overland and ADCT undertakes and covenants to the Company and the other Investor that commencing from the date of this Agreement and for so long as it owns any Securities and for two (2) years thereafter, it shall not, and shall cause (x) in the case of Overland, each of the Overland Restricted Persons, and (y) in the case of ADCT, each of the Affiliates Controlled by ADCT, not to, without the prior written consent of the Company or the applicable other Investor, either on their own account or through any of their respective Affiliates or other Persons, or in conjunction with or on behalf of any other Person: (1) solicit away or entice away or attempt to solicit away or entice away from any Group Company, any Person, firm, company or organization who is a customer, client, employee, representative, agent or correspondent of such Group Company or in the habit of dealing with such Group Company; or (2) solicit away or entice away or attempt to solicit away or entice away from any Group Company or the other Investor, any Person who is a director, officer, manager, consultant or employee of any such Group Company or the other Investor whether or not such Person would commit a breach of contract by reason of leaving such employment or engagement; it being understood, for the avoidance of doubt, that the restrictions in the foregoing clause (2) shall not apply to the placement of general advertisements or for the use of general search firm services with respect to a particular geographic or technical area, but which are not targeted directly towards employees or service providers of the Group Companies, Overland or ADCT. Each of Overland and ADCT shall not, and shall cause (w) in the case of Overland, each of the Overland Restricted Persons, and (x) in the case of ADCT, each of the Affiliates Controlled by ADCT, not to, avoid or seek to avoid the observance or performance of any of the terms to be performed hereunder, and each shall, and shall cause (y) in the case of Overland, each of the Overland Restricted Persons, and (z) in the case of ADCT, each of the Affiliates Controlled by ADCT, to, at all times in good faith take action as appropriate in the carrying out of all of the provisions of this Section 8.7. Overland and ADCT each expressly agrees that the limitations set forth in this section are reasonably tailored and reasonably necessary in light of the circumstances. Furthermore, if any provision of this section is more restrictive than permitted by applicable Laws of any jurisdiction in which
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a party seeks enforcement thereof, then this Section will be enforced to the greatest extent permitted by applicable Law. Each of the undertakings contained in this Section shall be enforceable by each of the Company, ADCT and Overland. For the purposes hereof, the “Non-Compete Term” shall mean (r) with respect to the restrictions on Overland and any Person whose assets consist of all or substantially all of, directly or indirectly held, Securities of Overland, the period commencing with the date of this Agreement and continuing for so long as Overland owns any Shares of the Company and (s) with respect to the restrictions on any of Overland’s Controlled Affiliates or any Overland Invested Entity the [**] anniversary of the date of this Agreement.
8.8.    ESOP. Subject to Section 7.3, as soon as practicable after the Closing but in any event no later than three (3) months after the Closing, the Company shall cause an employee share option plan (the “ESOP”) to be duly adopted by the Board and the Shareholders, pursuant to which the maximum number of Ordinary Shares that may be reserved for issuance pursuant to options or other share incentive awards granted thereunder shall not exceed [**] percent ([**]%) of the total number of outstanding Ordinary Shares on a fully-diluted, as-converted basis as of immediately after the Closing.
8.9.    Maintaining and Obtaining Licenses and Permits for the Principal Business. As soon as practicable after the Closing, the Company shall, and shall procure that each of the Group Companies shall, (a) obtain and maintain in a timely manner all requisite Consents for conducting its business in compliance with all material aspects with applicable Laws and (b) if so required by any applicable Laws, obtain additional Consents necessary for conducting its business as soon as possible but in any event no later than the time limit required by the applicable Laws or the competent Governmental Authorities.
8.10.    Use of Investors’ Name or Logo. Without the prior written consent of any Investor, and whether or not such Investor is then a Shareholder, none of the Group Companies or their shareholders (excluding such Investor), shall use, publish or reproduce the names of such Investor or any similar names, trademarks or logos in any of their marketing, advertising or promotion materials or otherwise for any marketing, advertising or promotional purposes.
8.11.    Recruitment of Sufficient Dedicated Resources. The Company shall, and Overland shall use its reasonable best efforts to assist the Company to, employ sufficient dedicated full-time employees (including without limitation, personnel for clinical development, regulatory and commercialization) to conduct its Principal Business, including without the limitation, the employment of the positions set forth in Exhibit D in accordance with the timeline set forth therein.
8.12.    Employment Agreements and Confidentiality, Non-Competition and Intellectual Property Rights Agreements. The Group Companies shall cause each of their
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respective current and future employees to enter into standard form employment agreements in form and substance satisfactory to each Investor. The Company shall and shall procure each of the Group Companies to cause each of their respective current and future employees and consultants to enter into a confidentiality, non-competition and proprietary information and inventions assignment agreement in form and substance satisfactory to each Investor.
8.13.    Compliance. The Company shall, and shall cause each of the Group Companies to, conduct its respective business in accordance with all applicable Laws of each relevant jurisdiction on a continuing basis.
8.14.    Shareholder Anti-Corruption Covenants. In connection with activities relating to the Group Companies and the matters contemplated by this Agreement, each Shareholder covenants that it and each of its respective directors, administrators, officers, managers, members of board of directors (supervisory and management), employees, independent contractors, representatives, agents and other Persons acting on their behalf (collectively, the “Agents”) (a) will comply with all Laws relating to anti-bribery, anti-corruption, anti-money laundering, financing of terrorism, record keeping and internal control laws, including the Foreign Corrupt Practices Act of the United States (15 U.S.C. §§ 78dd-1, et seq.), as amended (the “FCPA”), the UK Bribery Act of 2010, as amended (the “UK Bribery Act”), the relevant provisions of the Criminal Law of the PRC effective on October 1, 1997, as amended, the PRC Anti-Unfair Competition Law effective on December 1, 1993, as amended, and the Provisional Regulation on Anti-Commercial Bribery effective on November 15, 1996, as amended (collectively, the “ABAC Laws”); and (b) will not (i) directly or indirectly, offer, promise, give, condone or authorize the giving of anything of value, directly or indirectly, to: (A) any Public Official or (B) to any other Person with the knowledge that all or any portion of the money or thing of value will be offered or given to a Public Official, in each of cases (A) and (B) for the purpose of influencing any action or decision of the Public Official in his or her official capacity, including a decision to fail to perform his or her official duties, or inducing the Public Official to use his or her influence with any Governmental Authority to affect or influence any official act, or (ii) make or authorize any other Person to make any payments or transfers of value which have the purpose or effect of commercial bribery, or acceptance or acquiescence in kickbacks or other unlawful or improper means of obtaining or retaining business.
8.15.    Company Anti-Corruption Covenants. The Group Companies and each of their respective Agents (a) will comply with all ABAC Laws; and (b) will not (i) directly or indirectly, offer, promise, give, condone or authorize the giving of anything of value, directly or indirectly, to: (A) any Public Official or (B) to any other Person with the knowledge that all or any portion of the money or thing of value will be offered or given to a Public Official, in each of cases (A) and (B) for the purpose of influencing any action or decision of the Public Official in his or
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her official capacity, including a decision to fail to perform his or her official duties, or inducing the Public Official to use his or her influence with any Governmental Authority to affect or influence any official act, or (ii) make or authorize any other Person to make any payments or transfers of value which have the purpose or effect of commercial bribery, or acceptance or acquiescence in kickbacks or other unlawful or improper means of obtaining or retaining business.
8.16.    Anti-Money Laundering and Sanction Laws. The Group Companies shall, and shall cause their respective Agents to, comply with all applicable financial recordkeeping and reporting requirements, to the extent applicable, the applicable anti-money laundering statutes of all jurisdictions where the Group Companies conduct business, the rule and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any Governmental Authority (collectively, the “Anti-Money Laundering Laws”) and sanctions administered by the Office of Foreign Assets Control of the U.S. Department of Treasury, or by the U.S. Department of State, or any sanctions imposed by the European Union (including under Council Regulation (EC) No. 194/2008), the United Nations Security Council, Her Majesty’s Treasury or any other relevant Governmental Authority or has engaged in any activities that would be in violation of the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010, as amended, or the Iran Sanctions Act, as amended, or sanctions and measures imposed by the United Nations or any other relevant Governmental Authority (collectively, the “Sanctions Laws”). The Group Companies shall establish, maintain and enforce policies and procedures designed to ensure compliance with the Anti-Money Laundering Laws. None of the Group Companies or any of their respective Agents will engage, directly or indirectly, in (a) any business or activities with any Person that is the target of any applicable Sanctions Laws or (b) any activities that would reasonably be expected to result in any of the Group Companies becoming the target of any applicable Sanctions Laws.
8.17.    Anti-Corruption and Sanctions Compliance Program. The Company shall establish and maintain procedures and controls that are reasonably designed to ensure that the Group Companies and each of their respective Agents act in compliance with all ABAC, Anti-Money Laundering and Sanctions Laws (the “Anti-Corruption and Sanctions Program”). The Anti-Corruption and Sanctions Program shall be adequately resourced and include the following non-exclusive types of procedures, which are illustrative of the types of procedures that must exist for a program to be considered effective:
(a)    Clearly articulated policies and procedures prohibiting corruption and setting forth compliance standards, including a clear and concise Code of Conduct and procedures designed to ensure that each of the Group Companies forms business relationships only with reputable and qualified third parties, including: (i) adequate due diligence, based on a risk analysis
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of the third party and its potential and anticipated activities, including, without limitation, the third party’s potential or anticipated interactions with Public Officials and whether the third party otherwise has an incentive to improperly influence government action, (ii) adequate procedures to ensure that each of the Group Companies does not do business with sanctioned entities or individuals, (iii) effective communication of and training on the Company’s anti-corruption policies, and (iv) appropriate third party contract provisions, including anti-corruption representations and undertakings.
(b)    Establishment of appropriate procedures for the prior approval by the Compliance Officer (i) prior to the engagement, directly or indirectly, of any third party who is expected to interact with Public Officials on behalf of any of the Group Companies, (ii) of any gifts, entertainment or hospitality to any Public Officials or other third parties or (iii) of any charitable contributions or political donations.
(c)    Policies and procedures to ensure regular compliance communication and training, on a risk-prioritized basis, of all directors, officers and employees of each of the Group Companies, reasonably designed to inform them of their individual compliance responsibilities, provide an understanding of key compliance policies and procedures, and actively promote a culture of compliance.
(d)    Establishment of an Integrity Helpline program within [**] days following the Closing Date to permit the anonymous reporting of concerns, allegations and potential violations of Company policies, including financial and accounting policies and the Anti-Corruption and Sanctions Program.
(e)    Procedures to investigate and remediate complaints, allegations and issues as appropriate.
(f)    Establishment of appropriate risk-based procedures to address compliance with ABAC Laws in the hiring and compensation of employees, including without limitation procedures to address relationships of potential new hires or other employees to Public Officials in a position to take or influence any official action or decision, or otherwise obtain any improper advantage, in relation to any of the Group Companies.
(g)    Establishment of procedures to ensure that appropriate due diligence is conducted prior to any merger or acquisition, and the prompt incorporation of any acquired company into the Anti-Corruption and Sanctions Program.
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(h)    Periodic evaluation of the effectiveness of the Anti-Corruption and Compliance Program, including, but not limited to, an annual compliance audit conducted by an independent third party (e.g., reputable law firm or accounting firm), the results of which are to be reported to the Board.
8.18.    Appointment of Compliance Officer. The Company shall have a Compliance Officer (the “Compliance Officer”) appointed by ADCT with designated responsibilities to develop and implement the Anti-Corruption and Sanctions Program and develop a compliance plan to address all risk areas of the business. Any decision to dismiss or replace the Compliance Officer, appoint a new Compliance Officer or alter the Compliance Officer’s responsibilities will require approval by ADCT. The Compliance Officer shall have an independent reporting line into the Board and be responsible for the following, at the Company’s expense: (a) the preparation of a regular periodic report (no less than once each six (6) months) to the Board containing such details as the Board shall specify relating to the continuing operation of the Anti-Corruption and Sanctions Program; (b) formulation, implementation and enforcement of policies, controls and implementing procedures in relation to all aspects of compliance with applicable legal and regulatory provisions affecting the Group Companies, including Anti-Corruption Laws and Sanctions Laws; (c) preparing any necessary revisions to the Anti-Corruption and Sanctions Program and submitting any material revisions to the Board for approval; (d) monitoring the development and effectiveness of infrastructures and procedures relating to compliance culture, and the prevention, detection and response to compliance issues; (e) organizing training sessions for employees to inform them of their individual responsibilities under the compliance program; (f) reviewing and determining whether and under what conditions to approve the engagement, directly or indirectly, of any third party who is expected to interact with Public Officials on behalf of any of the Group Companies, the provision of any gifts, entertainment or hospitality to any Public Officials or other third parties, and the provision of any charitable contributions or political donations; (g) reporting and taking appropriate responsive action to address findings of audits and investigations by internal or external auditors, legal or compliance personnel and any Governmental Authority; (h) ensuring that periodic audits of policies and procedures in relation to all aspects of compliance with applicable legal and regulatory provisions affecting the Group Companies are conducted; and (i) each fiscal year, reviewing the Anti-Corruption and Sanctions Program for any potential improvements and if it is determined that any material changes should be made, preparing and submitting to the Board a draft of an amended and/or supplemented Anti-Corruption and Sanctions Program addressing such improvements, for approval and adoption by the Board.
8.19.    Books and Records. The Company shall, and shall cause the Group Companies to, keep and maintain (a) books and records reflecting accurately and in reasonable detail transactions involving the Group Companies, as applicable, and
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(b) financial controls and procedures that give reasonable assurance that payments shall be made by or on behalf of the Group Companies only in accordance with management instructions.
8.20.    Information and Access Rights. The Company shall provide ADCT and its representatives with access to any Agent of any of the Group Companies, as well as the books, records and reporting systems of any of the Group Companies, upon reasonable request and reasonable notice in order to enable ADCT to determine compliance with ABAC Laws. In addition, the Company shall deliver to ADCT such other information regarding the Group Companies and take such other actions as ADCT may reasonably request for purposes of complying with any legal or regulatory inquiry, reporting requirements or internal compliance and other policies relating to ABAC Laws.
8.21.    Notice of Actual or Potential Violations. Each Party shall notify the other Parties in writing (a “Violation Notice”) immediately upon learning or having reason to know of any material violation or possible violation regarding any of the Group Companies of any Anti-Corruption Law or the Company’s anti-corruption policies or procedures, including knowledge of any investigation by, or any inquiry, request or subpoena received from, any Governmental Authority regarding any of the Group Companies concerning such matters. Such notification shall describe the Party’s knowledge and the entire basis known to the Party therefor.
8.22.    Requirement to Commence Investigation. Upon the delivery of a Violation Notice, the Company shall commence an investigation (if one has not already begun) and take immediate steps to suspend any potentially problematic activity specified in such Violation Notice pending the results of the investigation. As soon as practicable thereafter, the Compliance Officer shall report the method, scope, and results of such investigation to the Board. If the result of such investigation is that a violation or possible violation has occurred, the report shall include a proposed cure for the violation or possible violation specified in such report which could reasonably be expected to remediate any harm from, and prevent recurrence of, such violation or possible violation. Such a proposed cure may consist of (a) taking measures to remedy such violation or possible violation, (b) imposing disciplinary measures with respect to such violation or possible violation and (c) taking corrective measures intended to prevent repeated violations. The Compliance Officer shall submit the report, including any proposed cure, to the Board for approval. The Compliance Officer shall also conduct any additional investigation and revise any such proposed cure as necessary to obtain the approval of the Board (and including any amendments proposed by the Board) within a reasonable period after presenting such report to the Board, and the Group Companies shall adopt and implement any proposed cure so approved by the Board.
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8.23.    Each Shareholder represents, warrants and agrees that it shall, to the extent of such Shareholder’s equity interests and governance and management rights, cause the Group Companies to comply with Sections 8.14 to 8.22.
8.24.    Share Exchange Option in case of Overland IPO. In the event that Overland, a wholly-owned subsidiary of Overland or another entity whose assets consist, as a result of a restructuring or similar transaction, of all or substantially all of, directly or indirectly held, Securities or assets of Overland (in each case, the “Overland IPO Entity”) prepares for an initial public offering or listing of its Securities (the “Overland IPO”) prior to the initial public offering of the Securities of the Company, Overland shall, on or prior to the date (the “Overland IPO Initiation Date”) the Overland IPO Entity initiates the selection process of the underwriter(s) for the Overland IPO, (i) deliver a written notice to ADCT of the Overland IPO Entity’s potential IPO plan with reasonable details (the “IPO Notice”), and (ii) make available to ADCT and its advisors all documents, data and other information of Overland reasonably required or requested by ADCT for due diligence purposes.
(a)    Exercise of Option. At any time after receipt of the IPO Notice from Overland and the requested information, ADCT shall have an option, at its sole discretion, to exchange any or all of the Shares or other Securities held by ADCT in the Company into the same type of Securities proposed to be offered or listed in the proposed Overland IPO (the “Overland IPO Securities”) prior to the latest date that such exchange is permitted to be consummated pursuant to the applicable listing rules (the “Latest Exchange Date”) pursuant to this Section 8.24. The exchange ratio for the foregoing exchange shall be calculated [**] (the “Ordinary Share FMV”) [**]. To exercise such option of share exchange pursuant to this Section 8.24, ADCT shall deliver a written notice (the “Option Exercise Notice”) to Overland, setting forth the number of Ordinary Shares (on an as-converted basis) it wishes to exchange.
(b)    Valuation. For the determination of the Ordinary Share FMV, ADCT and Overland shall first, during a period of [**] days following delivery of the Option Exercise Notice (or such longer period as mutually agreed by ADCT and Overland), negotiate in good faith towards a mutually agreeable valuation, which shall be the Ordinary Share FMV. If no valuation is mutually agreed by ADCT and Overland pursuant to the foregoing sentence, each of Overland and ADCT shall appoint one independent valuer (each, a “Valuer”) in accordance with the provisions in Exhibit E to determine such valuation, provided that the valuation date shall be as at the date of the Option Exercise Notice. If the valuations by the two Valuers are within ten percent (10%) of one another, then the Ordinary Share FMV will be the average of the two valuations. If the valuations by the two Valuers are not within ten percent (10%) of one
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another, then the two Valuers will jointly select a third independent valuer in compliance with applicable requirements set out in Exhibit E; provided that:
(i)    for the avoidance of doubt, references in Exhibit E to: (A) appointment by “Overland or ADCT” will be replaced with “the two Valuers acting reasonably” in paragraph 1 of Exhibit E; (B) “each Valuer” and “the Valuer” will be replaced with “the third valuer”; and (C) “the date of service of an Option Exercise Notice or Termination Event Notice (as applicable)” will be replaced with “the date of determination of Ordinary Share FMV or Company FMV (as applicable) by the later of the initial two Valuers”;
(ii)    in such case, the Ordinary Share FMV will be (x) the valuation determined by the third valuer, if it is between the valuations determined by the first two Valuers, or (y) the average of the two closest valuations, if the third valuer’s valuation is not between the valuations determined by the first two Valuers; and
(iii)    notwithstanding anything to the contrary in this Agreement or in Exhibit E, such determination of the Ordinary Share FMV determined in accordance with the process described in sub-paragraph (ii) above shall be final and binding upon Overland and ADCT.
(c)    Consummation of Exchange. As soon as practicable and in any event within [**] days after the Ordinary Share FMV is determined pursuant to Section 8.24(b) and before the Latest Exchange Date, ADCT and the Overland IPO Entity shall execute definitive agreements in relation to and consummate the share exchange contemplated by Section 8.24(a) at the exchange ratio determined pursuant to Section 8.24(a) and on other terms and conditions agreed in good faith by ADCT and Overland. The Overland IPO Entity shall cause its shareholders and board to take necessary actions to approve the foregoing transactions and shall ensure that sufficient notice is given to ADCT to allow it to fully exercise its rights in accordance with this Section 8.24. Upon consummation of the share exchange pursuant to this Section 8.24, (i) the Overland IPO Entity shall issue to ADCT such number of Overland IPO Securities that equals the number of Ordinary Shares (on an as-converted basis) ADCT wishes to exchange as set forth in the Option Exercise Notice multiplied by the exchange ratio determined pursuant to Section 8.24(a); and (ii) ADCT shall deliver to the Overland IPO Entity one or more certificates, together with an executed instrument of transfer, which represent the number of Ordinary Shares (on an as-converted basis) ADCT wishes to exchange as set forth in the Option Exercise Notice. In the event that the Overland IPO
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is not consummated or the application is withdrawn or otherwise fails to obtain the approval for such Overland IPO, the Overland IPO Securities exchanged from the Shares held by ADCT immediately prior to such exchange shall be immediately and automatically exchanged back into the Shares, in such number and having all such rights, preferences and privileges of the Shares as set forth under this Agreement and the Memorandum and Articles immediately prior to the exchange pursuant to the immediately preceding sentence, as if such Shares had not been so exchanged in the first place. In such event, the Company and the Shareholders shall execute and deliver such agreement, document or instrument, and take such other action, as reasonably necessary or required for the reinstatement of the Shares as if such Shares had not been exchanged in the first place. In the event of the consummation of a share exchange pursuant to this Section 8.24, Overland agrees that ADCT shall have the right to pledge the Overland IPO Securities that ADCT acquires pursuant to this Section 8.24 in favor of Deerfield to the extent required under the Facility Documents.
8.25.    Sale of Overland Equity upon ADCT Trade Sale. In the event that any Trade Sale of ADCT is proposed or to be consummated, at the request of ADCT, Overland shall enter into a good faith negotiation for a minimum period of [**] days with ADCT or its prospective acquirer for the sale of all the Securities beneficially owned by Overland to ADCT, its prospective acquirer or an Affiliate of ADCT or its prospective acquirer as may be designated by ADCT. Without limiting the generality of the foregoing, Overland shall take such actions as would be customary in a good faith negotiation for a transaction of similar nature, including engaging relevant advisors to assist in the negotiation, attending meetings and calls, and negotiating in an honest and fair manner on the price and other terms of such sale and purchase. Overland’s obligations to engage in good faith negotiations pursuant to this Section 8.25 will expire and be of no further force or effect on the date [**] days following the closing of a Trade Sale of ADCT.
8.26.    Additional Funds. Overland hereby covenants and agrees that in the event the Company requires additional funds at any time prior to the completion of the Qualified IPO (a “Company Funding Need”), it shall [**]; provided that, to the extent approved by the Board (including the affirmative vote of at least one (1) ADCT Director), in addition to its obligation to timely contribute additional funds to the Company, [**]. For the avoidance of doubt, any issuance of New Securities shall be subject to the Right of Participation in Article 3.
8.27.    Business of the Group Companies. For the avoidance of doubt, the Group Companies shall in no event be responsible for the costs and expenses related to any corporate infrastructure or scale up of Overland or its Affiliates, except as may be set forth in any service agreement or similar type of written agreement between any such Group Company and Overland and/or its Affiliates, which
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agreement has been approved by the Board (including the affirmative vote of at least one (1) ADCT Director (if any)).
8.28.    Special [**] Rights.
(a)    During the period between the Closing Date and the [**] anniversary thereof, no Overland Restricted Person or any Overland Invested Entity shall commence development of [**] or enter into an agreement with a third party providing for an inbound license of technology related to [**] without the prior written consent of ADCT.
(b)    Without limitation of the restriction set forth in Section 8.28(a), if at any time any Overland Restricted Person or any Overland Invested Entity wishes to commence development of [**] or enter into discussions with any third party regarding a potential in-bound license of technology related to [**], such Overland Restricted Person or Overland Invested Entity shall promptly notify the Board in writing (and, in the case of a proposed license, with an introduction to the proposed third party). [**] If such [**] is determined by the Board or the expert pursuant to this Section 8.28(b) to be synergistic with any Product in the Territory, the Board shall, within [**] days (or such longer period as the Board may unanimously agree to be necessary) (the “Evaluation and Negotiation Period”) determine in good faith whether development or in-licensing of such technology would be in the best interests of the Company. If determined by the Board to be in the best interest of the Company, during such Evaluation and Negotiation Period (i) the Company shall use commercially reasonable efforts to pursue such development or in-licensing opportunity, and (ii) Overland shall provide all reasonable assistance to facilitate discussions with any third parties in relation thereto, and no Overland Restricted Person or Overland Invested Entity shall pursue any further development efforts or in-licensing discussions with respect to such [**]. If the Board determines in good faith that, although such [**] is synergistic with any Product in the Territory, it is not in the Company’s best interest to pursue such opportunity or, after using commercially reasonable efforts to pursue such development opportunity or trying to negotiate an in-licensing agreement with the applicable third party during such Evaluation and Negotiation Period, is unable to do so on terms reasonably acceptable to the Board, any Overland Restricted Person or Overland Invested Entity shall be free, upon notification by the Board, to develop, or in-license technology relating to, such [**]. During the Determination Period and, if applicable, the Evaluation and Negotiation Period, no Overland Restricted Person or Overland Invested Entity shall interfere with any negotiations between the Board, on the Company’s behalf, and any proposed third party for a license to such technology or
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pursue any further development efforts or in-licensing discussions with respect to such [**].
8.29.    Qualified IPO. Each Party acknowledges and agrees that the Company shall use its reasonable best efforts to consummate a Qualified IPO by the [**] anniversary of the Closing.
8.30.    D&O Insurance. Each Group Company shall purchase D&O insurance with a carrier and in an amount satisfactory to the Board. In the event any Group Company merges with another entity and is not the surviving corporation, or transfers all of its assets, proper provisions shall be made for the purchase of D&O tail insurance so that successors of such Group Company assume such Group Company’s obligations with respect to the indemnification of the directors of such Group Company.
9.    Termination, Term and Consequences of Termination.
9.1.    Termination Events. A Termination Event occurs if:
(a)    
(i)    an Investor or the Company makes a serious or persistent default in performing or observing any of its obligations under this Agreement (a “Material Default”), provided that, for the avoidance of doubt, (A) any failure by the Company to comply with or give effect to consent rights of an Investor or an Investor Director relating to the matters set out in Sections 7.3 and 7.4 shall be deemed a Material Default by the Company, and (B) any Material Default by the Company shall be deemed a Material Default by the Investor who votes in favor of the action that constitutes such Material Default or by whom the Investor Director that votes in favor of the action that constitutes such Material Default is appointed, and the other Investor shall be deemed the non-defaulting Party under Section 9.2(a); and
(ii)    where that default is capable of remedy, fails to be remedied by the defaulting Party within thirty (30) Business Days after service of written notice of such default to the defaulting Party;
(b)    Overland consummates a Trade Sale that involves a Competitor (it being agreed that Overland shall notify ADCT of such event as promptly as possible and in any event no later than 30 days prior to the consummation of such Trade Sale or the signing of any definitive agreement, whichever is earlier); or
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(c)    the License Agreement terminates in its entirety in accordance with its terms.
9.2.    Terminating Party. Following the occurrence of a Termination Event until 60 Business Days after written notice of such Termination Event is delivered by the applicable Party, the following Party is entitled to terminate this Agreement by delivery of a written notice to all the other Parties (a “Termination Event Notice”):
(a)    in the case of Section 9.1(a), either Investor which is the non-defaulting Party;
(b)    in the case of Section 9.1(b), solely ADCT; and
(c)    in the case of Section 9.1(c), solely ADCT.
9.3.    Effect of Termination Event Notice.
(a)    Effect of Termination Event Notice. If a Termination Event Notice is served pursuant to Section 9.2, the following provisions in this Section 9.3 shall apply. In no circumstance will this Agreement terminate without ADCT having the right to require a buyout of the applicable interests in the Company, as set out below in this Section 9.3. For the avoidance of doubt, unless the Shareholders otherwise mutually agree at the time, after delivery of a Termination Event Notice each Party shall strictly follow the procedures described below in this Section 9.3, and this Agreement will terminate after the procedures described below in this Section 9.3 are observed. Subject to Section 9.3(d) below, during the period after a Termination Event Notice is served and before completion of the buyouts contemplated below, all provisions of this Agreement shall remain in effect.
(b)    Termination (Breach by ADCT). If Overland serves a Termination Event Notice under Section 9.2(a), then Overland shall sell, and ADCT shall acquire, Overland’s entire shareholding in the Company at [**] and shall be entitled to [**] as compensation for such applicable default.
(c)    Termination (Breach by Overland). If ADCT serves a Termination Event Notice under Section 9.2(a), then, in either case, ADCT shall acquire, and Overland shall sell, Overland’s entire shareholding in the Company at [**] and ADCT shall be entitled to withhold [**] as compensation for such applicable default.
(d)    Trade Sale to Competitor. If Overland has consummated a Trade Sale that involves a Competitor, and ADCT serves a Termination Event Notice under Section 9.2(b) above, ADCT shall acquire, and Overland shall sell,
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Overland’s entire shareholding in the Company at [**], and ADCT shall be entitled to withhold [**] as compensation for Overland’s breach of the transfer restrictions in Article 4; provided that during the period immediately after ADCT serves a Termination Event Notice under Section 9.2(b) and prior to the completion of the buyout by ADCT pursuant to this Section 9.3(d), Overland shall cease to be entitled to and shall forfeit any Information Rights and Inspection Rights that it has pursuant to Section 1.1.
(e)    License Agreement Termination. If ADCT serves a Termination Event Notice under Section 9.2(c) above, then ADCT shall acquire, and Overland shall sell, Overland’s entire shareholding in the Company at [**].
(f)    Valuation. For the determination of the Company FMV, each of Overland and ADCT shall appoint one Valuer in accordance with the provisions in Exhibit E to determine such valuation, provided that the valuation date shall be as at the date of the Termination Event Notice. If the valuations by the two Valuers are within ten percent (10%) of one another, then the Company FMV will be the average of the two valuations. If the valuations by the two Valuers are not within ten percent (10%) of one another, then the two Valuers will jointly select a third independent valuer in compliance with applicable requirements set out in Exhibit E, provided that:
(i)    for the avoidance of doubt, references in Exhibit E to: (A) appointment by “Overland or ADCT” will be replaced with “the two Valuers acting reasonably” in paragraph 1 of Exhibit E; (B) “each Valuer” and “the Valuer” will be replaced with “the third valuer”; and (C) “the date of service of an Option Exercise Notice or Termination Event Notice (as applicable)” will be replaced with “the date of determination of Ordinary Share FMV or Company FMV (as applicable) by the later of the initial two Valuers”;
(ii)    in such case, the Company FMV will be (x) the valuation determined by the third valuer, if it is between the valuations determined by the first two Valuers, or (y) the average of the two closest valuations, if the third valuer’s valuation is not between the valuations determined by the first two Valuers; and
(iii)    notwithstanding anything to the contrary in this Agreement or in Exhibit E, such determination of the Company FMV determined in accordance with the process described in sub-paragraph (ii) above shall be final and binding upon Overland and ADCT.
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(g)    Consummation of Buyout. On the date which is 60 Business Days after the date on which the Overland Exit Price is determined in accordance with this Section 9.3 (or such other date as Overland and ADCT may agree), ADCT shall purchase in all cash consideration and Overland shall sell Overland’s entire shareholding in the Company pursuant to this Section 9.3. In addition, Overland shall be responsible for all its obligations to pay tax as required by applicable Laws on such sale (and ADCT, as the buyer, may withhold any amount of tax required by applicable Law). Overland and ADCT shall use their respective reasonable best efforts to obtain as soon as possible such Consents required from any applicable Government Authority applicable to it and shall promptly take such compliance actions as are necessary under applicable Laws for the completion of such purchase and sale; provided that the 60-Business Day deadline in the immediately preceding sentence shall be extended until such time that the requisite Consents of the applicable Government Authorities have been obtained.
(h)    General. Nothing in this Section 9.3 affects any Party's right to claim damages or other compensation under applicable Law for a breach or, where appropriate, to seek an immediate remedy of an injunction, specific performance or similar court order to enforce the other Parties' obligations.
9.4.    Term and Termination.
(a)    Term. This Agreement shall become effective upon the occurrence of the Closing, until this Agreement is terminated in accordance with Section 9.4(b).
(b)    Circumstances for Termination. This Agreement terminates:
(i)    in respect of the rights and obligations of all Parties: on the date on which the Company is wound up; on the date on which one Person becomes the beneficial owner all of the Shares; or on the date on which all Parties agree in writing to terminate this Agreement; and
(ii)    in respect of the rights and obligations of a Shareholder, on the date on which that Shareholder ceases to hold any Shares, except with respect to rights and obligations that are not tied to its shareholding and that are intended to survive.
(c)    Effect of Termination. If this Agreement terminates in accordance with the terms of this Agreement in respect of the rights and obligations of any Party:
(i)    except as provided in Section 9.4(c)(ii), that Party is released from its obligations to further perform this Agreement; and
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(ii)    the provisions of and the rights and obligations of each Party under this Section 9.4(c) and each of Articles 6 and 10 and Section 8.7 survive termination of this Agreement.
9.5.    Notwithstanding anything in this Agreement to the contrary, if at any point the Company becomes a Subsidiary (as defined in the Facility Agreement) of ADCT, the Parties hereto hereby agree that the Company shall become a Guarantor (under and as defined in the Facility Documents) and shall be bound by the terms of the Facility Documents as a Guarantor (as defined in the Facility Documents) thereunder (including, without limitation, any requirement for the Company to provide collateral to secure the obligations owing under the Facility Documents) (the “Company Guarantee”). The Parties hereto consent to the Company Guarantee and shall take such actions as reasonably requested by ADCT in order to facilitate the Company Guarantee.
10.    REPRESENTATIONS AND WARRANTIES
10.1.    Representations and Warranties. Each Party represents and warrants to each other Party on the date of this Agreement that each of the following statements is true, accurate and not misleading:
(a)    it is a corporation validly existing under the laws of the place of its incorporation;
(b)    it has the power to execute and deliver, and to perform its obligations under, this Agreement to which it is or will be a party, and it has taken all necessary corporate action to authorise such execution and delivery and the performance of such obligations;
(c)    its respective obligations under this Agreement which are expressed to be effective as of the date of this Agreement are legal, valid, binding and enforceable in accordance with their terms as of the date of this Agreement; and
(d)    the execution and delivery by it of this Agreement and the performance of its obligations under this Agreement does not and will not conflict with or constitute a default under any provision of:
(i)    any agreement or instrument to which it is a party;
(ii)    its articles (if any) or constitution; or
(iii)    any Law, order, judgment, award, injunction, decree, rule or regulation by which it is bound.
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11.    GENERAL PROVISIONS.
11.1.    Notices. All notices which are required or permitted hereunder shall be in writing and sufficient if delivered personally, sent by facsimile (and promptly confirmed by personal delivery, registered or certified mail or overnight courier), sent by nationally-recognized overnight courier or sent by registered or certified mail, postage prepaid, return receipt requested, addressed as follows:
If to the Company and/or any Group Company:
c/o Walkers Corporate Limited
Cayman Corporate Centre
27 Hospital Road
George Town, Grand Cayman
KY1-9008, Cayman Islands
Attn: Overland ADCT BioPharma (CY) Limited – The Corporate Administrator
Fax: 1(345) 949-7886
If to Overland:
John Hancock Tower
    25th Floor
200 Clarendon Street
Boston, MA 02116
Attn: Ed Zhang
with a copy to:
Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP
One Marina Park Drive, Suite 900
Boston, MA 02210
Attn: Timothy H. Ehrlich
Email: tehrlich@gunder.com
If to ADCT:
ADC Therapeutics SA
Biopôle, Route de la Corniche 3B
1066 Epalinges, Switzerland
Attn:    General Counsel
Email:    legal@adctherapeutics.com
with a copy to:
Cooley LLP
3175 Hanover Street
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Palo Alto, CA 94304, USA
Attn:    Lila Hope, Ph.D.
Email:    lhope@cooley.com
and
Davis Polk & Wardwell Hong Kong Solicitors
18/F The Hong Kong Club Building
3A Chater Road
Hong Kong
Attn:    Miranda So
Email:    miranda.so@davispolk.com

or to such other address as the Party to whom notice is to be given may have furnished to the other Party in writing in accordance herewith. Any such notice shall be deemed to have been given: (a) when delivered if personally delivered or sent by facsimile on a Business Day; (b) on the Business Day after dispatch if sent by internationally-recognized overnight courier; or (c) on the fifth Business Day following the date of mailing if sent by mail.
11.2.    Entire Agreement. This Agreement and the Share Purchase Agreement, any other Transaction Documents, together with all the exhibits hereto and thereto, constitute and contain the entire agreement and understanding of the parties with respect to the subject matter hereof and supersedes any and all prior negotiations, correspondence, agreements, understandings, duties or obligations between the parties respecting the subject matter hereof. Capitalized terms which are not defined hereinto shall have the same meaning as such in the Share Purchase Agreement.
11.3.    Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, U.S., without giving effect to any choice of law principles that would require the application of the laws of a different jurisdiction. The application of the U.N. Convention on Contracts for the International Sale of Goods is excluded.
11.4.    Severability. If any provision of this Agreement is found to be invalid or unenforceable, then such provision shall be construed, to the extent feasible, so as to render the provision enforceable and to provide for the consummation of the transactions contemplated hereby on substantially the same terms as originally set forth herein, and if no feasible interpretation would save such provision, it shall be severed from the remainder of this Agreement, which shall remain in full force and effect unless the severed provision is essential to the rights or benefits intended by the parties. In such event, the parties shall use best efforts to negotiate, in good faith, a substitute, valid and enforceable provision or agreement which most nearly effects the parties’ intent in entering into this Agreement.
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11.5.    Third Parties. Nothing in this Agreement, express or implied, is intended to confer upon any Person, other than the Parties and their permitted successors and assigns any rights or remedies under or by reason of this Agreement.
11.6.    Successors and Assigns. Subject to the provisions of Section 5.1, the provisions of this Agreement shall inure to the benefit of, and shall be binding upon, the successors, permitted assigns, heirs, executors and administrators of the Parties hereto whose rights or obligations hereunder are affected by such provisions. Notwithstanding anything contrary in this Agreement, this Agreement and the rights and obligations herein may be assigned or transferred by any Investor to any of its Affiliates (in the case of Overland, only to the wholly owned Affiliates of Overland); provided that in each case the transferee will agree by executing a Joinder Agreement in the form attached hereto as Exhibit B to be subject to the terms of this Agreement to the same extent as if it were an original Investor hereunder.
11.7.    Interpretation; Captions. This Agreement shall be construed according to its fair language. The rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not be employed in interpreting this Agreement. The captions to sections of this Agreement have been inserted for identification and reference purposes only and shall not be used to construe or interpret this Agreement. Unless otherwise expressly provided herein, all references to Sections and Exhibits are to Sections and Exhibits of this Agreement. The words “hereof”, “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. All Exhibits annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”, whether or not they are in fact followed by those words or words of like import. “Writing”, “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. References to any statute shall be deemed to refer to such statute as amended from time to time and to any rules or regulations promulgated thereunder. References to any agreement or contract are to that agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof; provided that with respect to any agreement or contract listed on any schedules hereto, all such amendments, modifications or supplements must also be listed in the appropriate schedule. References to any Person include the successors and permitted assigns of that Person. References from or through any date mean, unless otherwise specified, from and including or through and including, respectively. References to “law”, “laws” or to a particular statute or law shall be deemed also to include any applicable Law. References to a “fully-diluted basis” mean that the calculation is
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to be made assuming that (a) in the case of the Company, (i) all outstanding options, warrants and other Securities convertible into or exercisable or exchangeable for Ordinary Shares (whether or not by their terms then currently convertible, exercisable or exchangeable) have been so converted, exercised or exchanged, and (ii) all the Ordinary Shares granted or reserved for grants under the ESOP and any other equity incentive plan have been issued and outstanding, and (b) in the case of any Person other than the Company, (i) all outstanding options, warrants and other Securities convertible into or exercisable or exchangeable for ordinary shares of such Person (whether or not by their terms then currently convertible, exercisable or exchangeable) have been so converted, exercised or exchanged, and (ii) all the ordinary shares of such Person granted or reserved for grants under any other equity incentive plan have been issued and outstanding. References to an “as-converted basis” mean that the calculation is to be made assuming that (a) in the case of the Company, all Series A Shares in issue have been converted into Ordinary Shares, and (b) in the case of any Person other than the Company, all preferred shares in issue of such Person have been converted into the ordinary shares of such Person. Unless otherwise provided in this Agreement, any and all rights available to any holder of Series A Shares in or with respect to the Company under this Agreement shall also be available to such Shareholder in each Group Company (other than the Company), applied mutatis mutandis, and the Company shall procure that each such Group Company performs such related obligations and shall ensure that all of the rights, preferences and privileges of any Shareholder that are contained in this Agreement, including all corporate governance principles and rights with respect to issuance and transfers of shares as set out in this Agreement, shall be continuously made applicable to each such Group Company and shall form part of the memorandum and articles of association or other organizational documents of each such Group Company. The terms, “Overland”, “ADCT”, “Investor” and “Shareholder” shall each also mean, if any Affiliate of such Person shall directly hold Shares or other Securities in the Company in accordance with this Agreement, such Person and such Affiliate, taken together, and any right, obligation or action that may be exercised or taken at the election of such Person may be taken at the election of such Person and such Affiliates acting together.
11.8.    Counterparts. This Agreement may be executed in one or more counterparts and may be delivered by electronic or facsimile transmission, all of which shall be considered one and the same agreement and each of which shall be deemed an original.
11.9.    Adjustments for Share Splits, Etc. Wherever in this Agreement there is a reference to a specific number of shares of Series A Shares or Ordinary Shares of the Company, then, upon the occurrence of any subdivision, combination or share dividend of the Series A Shares or Ordinary Shares, the specific number of shares so referenced in this Agreement shall automatically be proportionally adjusted to
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reflect the effect on the outstanding shares of such class or series of shares by such subdivision, combination or share dividend.
11.10.    Aggregation of Shares. All Series A Shares or Ordinary Shares held or acquired by an Investor or its Permitted Transferees shall be aggregated together for the purpose of determining the availability of any rights under this Agreement.
11.11.    Shareholders Agreement to Control. If and to the extent that there are inconsistencies between the provisions of this Agreement and those of the Memorandum and Articles, the terms of this Agreement shall prevail among the Parties. The Parties agree to take all actions necessary or advisable, as promptly as practicable after the discovery of such inconsistency, to amend the Memorandum and Articles so as to eliminate such inconsistency. Without limitation of the foregoing, each Shareholder agrees to vote all of its Shares or execute proxies or written consents, as the case may be, and to take all other actions necessary, to ensure that the Memorandum and Articles (i) facilitate, and do not at any time conflict with, any provision of this Agreement, (ii) permit each Shareholder to receive the benefits to which each such Shareholder is entitled under this Agreement and (iii) are adopted and registered promptly on or immediately after the Closing.
11.12.    Internal Resolution. With respect to all disputes arising between any Parties under this Agreement, including, without limitation, any alleged breach under this Agreement or any issue relating to the interpretation or application of this Agreement, if such Parties are unable to resolve such dispute within thirty (30) days after such dispute is first identified by either Party in writing to the other, such Parties shall refer such dispute to the Chief Executive Officers of the Parties for attempted resolution by good faith negotiations within thirty (30) days after such notice is received.
11.13.    Binding Arbitration.
(a)    If the Parties fail to resolve the dispute through escalation to their Chief Executive Officers under Section 11.12, and a Party desires to pursue resolution of the dispute, the dispute shall be submitted by either Party for resolution in arbitration administered by the International Chamber of Commerce (the “ICC”) pursuant to its arbitration rules and procedures then in effect.
(b)    The arbitration shall be conducted by a panel of three arbitrators experienced in the pharmaceutical business: within thirty (30) days after initiation of arbitration, each Party shall select one person to act as arbitrator and the two Party-selected arbitrators shall select a third arbitrator (who shall be the chairperson of the arbitration panel) within thirty (30) days of their appointment. If the arbitrators selected by the Parties are unable or fail to agree upon the third arbitrator, the third
    59
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arbitrator shall be appointed by ICC. If, however, the aggregate award sought by the Parties is less than US$5,000,000 and equitable relief is not sought, the arbitration shall be conducted by a single arbitrator agreed by the Parties (or appointed by ICC if the Parties cannot agree). The seat of arbitration shall be New York City, New York and the language of the proceedings shall be English.
(c)    The Parties agree that any award or decision made by the arbitral tribunal shall be final and binding upon them and may be enforced in the same manner as a judgment or order of a court of competent jurisdiction. The arbitral tribunal shall determine the dispute by applying the provisions of this Agreement and the governing law set forth in Section 11.3.
(d)    By agreeing to arbitration, the Parties do not intend to deprive any court of its jurisdiction to issue, at the request of a Party, a pre-arbitral injunction, pre-arbitral attachment or other order to avoid irreparable harm, maintain the status quo, preserve the subject matter of the dispute, or aid the arbitration proceedings and the enforcement of any award. Without prejudice to such provisional or interim remedies in aid of arbitration as may be available under the jurisdiction of a competent court, the arbitral tribunal shall have full authority to grant provisional or interim remedies and to award damages for the failure of any Party to the dispute to respect the arbitral tribunal’s order to that effect.
(e)    EACH PARTY HERETO WAIVES ITS RIGHT TO TRIAL BY JURY OF ANY ISSUE RELATING TO ANY DISPUTE ARISING HEREUNDER.
(f)    Each Party shall bear its own attorney’s fees, costs, and disbursements arising out of the arbitration, and shall pay an equal share of the fees and costs of the administrator and the arbitrator; provided, however, the arbitrator shall be authorized to determine whether a Party is the prevailing party, and if so, to award to that prevailing party reimbursement for any or all of its reasonable attorneys’ fees, costs and disbursements (including, for example, expert witness fees and expenses, photocopy charges, travel expenses, etc.), or the fees and costs of the administrator and the arbitrator.
11.14.    Waiver. The Company acknowledges that the Investors will likely have, from time to time, information that may be of interest to the Company or its Subsidiaries (“Information”) regarding a wide variety of matters including (i) the technologies, plans and services, and plans and strategies relating thereto of such Investor, (ii) current and future investments such Investor has made, may make, may consider or may become aware of with respect to other companies and other technologies, products and services, including technologies, products and services that may be competitive with those of the Company or any of its Subsidiaries, and (iii) developments with respect to the technologies, products and services, and
    60
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plans and strategies relating thereto, of other companies, including companies that may be competitive with the Company or any of its Subsidiaries. The Company recognizes that a portion of such Information may be of interest to the Company or any of its Subsidiaries. Such Information may or may not be known by the Investors or the Investor Directors. The Company, as a material part of the consideration for this Agreement, agrees that the Investors or the Investor Directors shall not have any duty to disclose any Information to the Company or any of its Subsidiaries, or permit the Company or any of its Subsidiaries to participate in any projects or investments based on any such Information, or otherwise to take advantage of any opportunity that may be of interest to the Company or any of its Subsidiaries if it were aware of such Information, and hereby waives, to the extent permitted by Laws, any claim based on the corporate opportunity doctrine or otherwise that could limit the Investor’s ability to pursue opportunities based on such Information or that would require the Investors, the Investor Directors or their Representative(s), to disclose any such Information to the Company or any of its Subsidiaries or offer any opportunity relating thereto to the Company or any of its Subsidiaries.
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IN WITNESS WHEREOF, the parties have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.
COMPANY:
Overland ADCT BioPharma (CY) Limited
By: /s/ Yang (Tracy) Jiao
Name: Yang (Tracy) Jiao
Title:    Director


SIGNATURE PAGE OF SHAREHOLDERS AGREEMENT
Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.

IN WITNESS WHEREOF, the parties have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.
HK COMPANY:
Overland ADCT BioPharma (HK) Limited
By: /s/ Yang (Tracy) Jiao
Name: Yang (Tracy) Jiao
Title:    Director

SIGNATURE PAGE OF SHAREHOLDERS AGREEMENT
Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.

IN WITNESS WHEREOF, the parties have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.
INVESTORS:
Overland Pharmaceuticals (CY) Inc.
By: /s/ Ed Zhang
Name:    Ed Zhang
Title:    COO & CBO


SIGNATURE PAGE OF SHAREHOLDERS AGREEMENT
Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.

IN WITNESS WHEREOF, the parties have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.
INVESTORS:
ADC Therapeutics SA
By: /s/ Christopher Martin
Name:    Christopher Martin
Title:    Chief Executive Officer


SIGNATURE PAGE OF SHAREHOLDERS AGREEMENT
Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.

EXHIBIT A

INVESTORS

Name of Investors Number of Series A Shares
Overland 46,410,000
ADCT 44,590,000
Total 91,000,000



A-1
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EXHIBIT B

FORM OF JOINDER AGREEMENT
THIS AGREEMENT is made the [_____] day of [_____] by [name of new shareholder], [a company] incorporated under the Laws of [_____] with its registered office at [_____] (the “New Shareholder”).
WHEREAS
(A)    By a transfer of shares dated [*], [name of transferor] (the “Transferor”), [a company] incorporated under the Laws of [_____] with its registered office at [_____] transferred to the New Shareholder [_____] [Ordinary Shares OR Series A Preferred Shares] (the “Transferred Shares”), par value US$0.0001 each in the capital of Overland ADCT BioPharma (CY) Limited (the “Company”), an exempted company incorporated in the Cayman Islands with limited liability with its registered office at [_____], Cayman Islands.
(B)    This Agreement is entered into in compliance with the terms of a shareholders agreement dated [_____] made among [name of transferor], the Company and certain other parties (as supplemented and amended from time to time) (the “Shareholders Agreement”).
NOW THEREFORE IT IS HEREBY AGREED as follows:
1.    Words and expressions used in this Agreement shall have the same meaning assigned to them in the Shareholders Agreement unless the context otherwise expressly requires.
2.    The New Shareholder hereby confirms that it has been supplied with a copy of the Shareholders Agreement.
3.    The New Shareholder hereby agrees to assume and assumes the benefit of the rights of the Transferor under the Shareholders Agreement in respect of the Transferred Shares and hereby agrees to assume and assumes the burden of the Transferor’s obligations under the Shareholders Agreement to be performed after the date hereof in respect of the Transferred Shares.
4.    The New Shareholder hereby agrees to be bound by the Shareholders Agreement in all respects as if the New Shareholder were a party to the Shareholders Agreement as [a Shareholder] and to perform:
a.    all the obligations of the Transferor in that capacity thereunder; and
b.    all the obligations expressed to be imposed on such a party to the Shareholders Agreement;
B-1
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in both cases, to be performed on or after the date hereof.
5.    This Agreement is made for the benefit of:
a.    the Parties to the Shareholders Agreement; and
b.    any other Person or Persons who may after the date of the Shareholders Agreement (and whether or not prior to or after the date hereof) assume any rights or obligations under the Shareholders Agreement and be permitted to do so by the terms thereof;
and this Agreement shall be irrevocable without the consent of the Company acting on their behalf in each case only for so long as they hold any Shares in the capital of the Company.
6.    For the avoidance of doubt, nothing in this Agreement shall release the Transferor from any liability in respect of any obligations under the Shareholders Agreement due to be performed prior to the date of this Agreement.
7.    The New Shareholder’s address for notices, demands and all other communications under the Shareholders Agreement is as follows:
[name of New Shareholder]
Address:    [_____]
Fax Number:    [_____]
Attention:    [_____]
This Agreement shall be read as one with the Shareholders Agreement so that any reference in the Shareholders Agreement to “this Agreement” and similar expressions shall include this Agreement.
This Agreement shall be governed by and construed in accordance with the Laws of the State of New York, U.S.

[NAME OF JOINING PARTY]
By:
Name:
Title:


B-2
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EXHIBIT C

DEFINITIONS
(a)    As used in this Agreement, the following terms have the following meanings:
“Accounting Standard”
means, as applicable, the International Financial Reporting Standards, generally accepted accounting principles (GAAP) in the U.S., or such other accounting standard as may be used by either Investor from time to time in the preparation of its own financial accounts.
“Affiliate”
means, with respect to any Person, (i) any other Person that, directly or indirectly, Controls, is Controlled by or is under common Control with such Person; and (ii) in the case of any individual, his spouse, child, brother, sister, parent, the immediate relatives of such spouse, trustee of any trust in which such individual or any of his immediate family members is a beneficiary object, or any entity or company Controlled by any of the aforesaid Persons.
“Business Day”
means any day that is not a Saturday, Sunday, public holiday or other day on which commercial banks are required or authorized by the Laws to be closed in Beijing, China, Cayman Islands, New York, U.S., or Epalinges, Switzerland.
“Closing”
shall have the meaning set forth in the Share Purchase Agreement.
“Closing Date”
shall have the meaning set forth in the Share Purchase Agreement.
“Consent”
means any consent, approval, authorization, release, waiver, permit, grant, franchise, concession, license, exemption or order of, registration, certificate, declaration or filing with, or report or notice to, any Person, including any Governmental Authority.
“Control”
means, with respect to a Person, the power or authority, whether exercised or not, to direct the business, management and policies of such Person, directly or indirectly, or by effective control whether through the ownership of voting securities or other ownership interests, by Contract or otherwise, which power or authority shall conclusively be presumed to exist upon possession of beneficial ownership or power to direct the vote of more than fifty percent (50%) of the votes entitled to be cast at a meeting of the members or shareholders of such Person or power to control the composition of more than fifty percent (50%) of the board of directors of such Person. The terms “Controlled” and “Controlling” have meanings correlative to the foregoing.
“Facility Documents”
shall have the meaning set forth in the Facility Agreement.
C-1
Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.

“Governmental Authority”
means any government of any nation, federation, province or state or any other political subdivision thereof, any entity, authority or body exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including any governmental authority, agency, department, board, commission or instrumentality of the People’s Republic of China, Hong Kong, Macau Special Administrative Region of the People’s Republic of China, islands of Taiwan, Singapore or any other country, or any political subdivision thereof, any court, tribunal or arbitrator, any self-regulatory organization and the governing body of any stock exchange.
“Governmental Order”
means any applicable order, ruling, decision, verdict, decree, writ, subpoena, mandate, precept, command, directive, approval, award, judgment, injunction or other similar determination or finding by, before or under the supervision of any Governmental Authority.
“Group Company”
means each of the Company, the HK Company and the other Subsidiaries, including those hereafter formed or acquired (collectively, the “Group Companies”).
“Hong Kong”
means the Hong Kong Special Administrative Region of the People’s Republic of China.
“Law”
means any and all provisions of any applicable constitution, treaty, statute, law, regulation, ordinance, code, rule, or rule of common law, any governmental approval, concession, grant, franchise, license, agreement, directive, requirement, or other governmental restriction or any similar form of decision of, or determination by, or any formally issued written interpretation or administration of any of the foregoing by, any Governmental Authority, in each case as amended, and any and all applicable Governmental Orders.
“License Agreement”
means the License and Collaboration Agreement dated December 11, 2020, by and between the Company and ADCT, as such agreement may be amended from time to time.
“Memorandum and Articles”
means the Company’s Amended and Restated Memorandum and Articles of Association effective as of the date of this Agreement, as may be further amended and restated from time to time in accordance with its terms and this Agreement.
“Ordinary Shares”
means the Company’s ordinary shares of par value US$0.0001 per share, with the rights, preferences, privileges and restrictions as set forth in the Memorandum and Articles.
“Overland Invested Entity”
[**].
C-2
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“Person”
means an individual, a partnership (including a limited liability partnership), a corporation, a company, an association, a joint stock company, a limited liability company, a trust, a joint venture, a firm, a legal person, an unincorporated organization and a Governmental Authority.
“Principal Business”
means the development, registration and commercialization of Products in the Territory.
“Public Official”
means any public or elected official or officer, employee (regardless of rank) or person acting on behalf of a Governmental Authority, a political party (including any political candidate), a public international organization, or an officer or employee of a state-owned enterprise.
“Products”
shall have the meaning set forth in the License Agreement.
“Qualified IPO”
means a firm-commitment underwritten initial public offering by the Company of its Ordinary Shares on the New York Stock Exchange, the Nasdaq Global Market in the United States, the Main Board of the Hong Kong Stock Exchange or any reputable securities exchange approved by the Investors.
“Related Parties”
means any of the following: (i) any Shareholder or any shareholder of any other Group Company, which beneficially owns no less than five percent (5%) of the voting Securities or ownership interests in the Company or such other Group Company, as the case may be (each, a “Substantial Shareholder”), other than any Group Company; (ii) any director or executive officer of any Group Company; (iii) any Person in which any Substantial Shareholder, or director or executive officer of any Group Company, beneficially owns no less than five percent (5%) of the voting Securities or ownership interest; and (iv) an relative or spouse of any of the foregoing Persons.
“Representative”
means, with respect to any Person, any director, officer, partner, member, employee, agent, consultant, advisor or other representative of such Person, including legal counsel, accountants and financial advisors.
“SEC”
means the U.S. Securities and Exchange Commission.
“Secured Parties”
shall have the meaning set forth in the Facility Agreement.
“Securities”
means, with respect to any Person that is a legal entity, any and all shares, membership interests, units, profits interests, ownership interests, equity interests, registered share capital, and other equity securities of such Person, and any right, warrant, option, call, commitment, conversion privilege, preemptive right or other right to acquire any of the foregoing, or security convertible into, exchangeable or exercisable for any of the foregoing, or any contract providing for the acquisition of any of the foregoing.
C-3
Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.

“Shareholder”
means a holder of any Shares who is a party to or bound by this Agreement, so long as such Person shall beneficially own any Shares.
“Shares”
means the Ordinary Shares, the Series A Shares and any other shares in the share capital of the Company.
“Subsidiary”
means any corporation, partnership, limited liability company, joint stock company, joint venture or other organization or entity, whether incorporated or unincorporated, which is Controlled by the Company, including those hereafter formed or acquired, and, for the avoidance of doubt, the Subsidiaries shall include any variable interest entity over which the Company or any of its Subsidiaries effects Control pursuant to contractual arrangements and which is consolidated with the Company in accordance with generally accepted accounting principles applicable to the Company and any Subsidiaries of such variable interest entity.
“Territory”
shall have the meaning set forth in the License Agreement.
“Trade Sale”
means, with respect to any Person that is a legal entity, (i) a sale, lease, transfer or other disposition of all or substantially all of the assets of such Person, (ii) an exclusive licensing of all or substantially all of the intellectual property of such Person to any third party, (iii) any transaction (or a series of related transactions) in which a majority of such Person’s voting power is transferred (whether by share transfer or share issuances) to any Person or a group of Persons acting together or jointly, or (iv) a merger, consolidation, business combination, reorganization or other similar transaction (whether in one or a series of transactions) with or into any Person or group of Persons, or sale of voting control of such (whether by share transfer or share issuances), in which the existing members or shareholders of such Person, as of immediately prior to such transaction (or a series of related transactions), do not collectively and in the same proportion in respect of each other retain a majority of the voting power in the surviving company.
“Transaction Documents”
means this Agreement, the Memorandum and Articles, the Share Purchase Agreement, the License Agreement, the Indemnification Agreements, the exhibits attached to any of the foregoing and each of the agreements and other documents otherwise required in connection with implementing the transactions contemplated by any of the foregoing.
“U.S.”
means the United States of America.
“US$”
means the lawful currency of the United States of America.

(b)    Each of the following terms is defined in the Section set forth opposite such term:
C-4
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Definition Section
ABAC Laws
8.14
ADCT Preamble
ADCT Director / ADCT Directors
1.2(b)
Additional Number
3.4(b)
Agents
8.14
Agreement Preamble
Anti-Corruption and Sanctions Program
8.17
Anti-Money Laundering Laws
8.16
Board
1.2
[**]
8.7
[**]
8.28(b)
CEO
1.2(c)
CEO Director
1.2(c)
CFC
8.1
Code
8.1
Company Preamble
Company FMV
9.3(b)
Company Funding Need
8.26
Company Guarantee
9.5
Competitor
4.2
Competing Business
8.7
Compliance Officer
8.18
Confidential Information
6.1
Co-Sale Holder
4.4(a)
Co-Sale Right
4.4(a)
Co-Sale Shares
4.4(a)
Deerfield
4.6
Determination Period
8.28(b)
Director
1.2
ESOP
8.8
Evaluation and Negotiation Period
8.28(b)
Exchange Act
2.2(i)
Exercise Period
4.3(a)
Facility Agreement
4.6
FCPA
8.14
First Participation Notice
3.4(a)
First Participation Period
3.4(a)
Form F-3
2.2(e)
GILTI
8.1
HK Company Preamble
C-5
Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.

Holder
2.2(d)
ICC
11.13(a)
Information
11.14
Information Rights
1.1(a)
Initiating Holders
2.3(b)
Inspection Rights
1.1(b)
Investor / Investors Preamble
Investor Directors
1.2(b)
IPO Notice
8.24
Latest Exchange Date
8.24(a)
Material Default
9.1(a)(i)
New Securities
3.3
Non-Selling Investor
4.3
Offered Shares
4.3
Option Exercise Notice
8.24(a)
Ordinary Share FMV
8.24(a)
Overland Preamble
Overland Director / Overland Directors
1.2(a)
Overland Exit Price
9.3(b)
Overland IPO
8.24
Overland IPO Entity
8.24
Overland IPO Initiation Date
8.24
Overland IPO Securities
8.24(a)
Overland Restricted Persons
8.7
Oversubscription Participants
3.4(b)
Participation Rights Holder
3.1
Party / Parties Preamble
Permitted Transferee
4.6
PFIC
8.2
Pro Rata Share
3.2
register / registered / registration
2.2(a)
Registrable Securities
2.2(b)
Registrable Securities Then Outstanding
2.2(c)
Registration Expenses
2.2(g)
Related Party Litigation
7.4(n)
Request Notice
2.3(a)
Right of Participation
3.1
ROFR Closing Period
4.3(b)
Sanction Laws
8.16
SEC
2.2(f)
Second Participation Notice
3.4(b)
C-6
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Second Participation Period
3.4(b)
Securities Act
2.2(a)
Selling Expenses
2.2(h)
Selling Shareholder
4.3
Series A Shares Recitals
Share Purchase Agreement Recitals
Subpart F Income
8.1
Termination Event
9.1
Termination Event Notice
9.2
Transfer
4.1
Transfer Notice
4.3
UK Bribery Act
8.14
Unrelated Directors
7.5
Valid Claim
7.5
Valuer
8.24(b)
Violation
2.9(a)
Violation Notice
8.21


C-7
Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.

EXHIBIT D

Hiring Plan
[Exhibit D has been omitted pursuant to Item 601(a)(5) of Regulation S-K. ADC Therapeutics SA undertakes to provide a copy of the omitted exhibit to the Securities and Exchange Commission or its staff upon request.]


D-1
Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.

EXHIBIT E

Valuer
1.    Each Valuer shall be a valuation expert working for an independent firm of internationally recognised chartered accountants, valuers and/or financial advisers in Hong Kong, as may be appointed by Overland or ADCT by no later than 15 days after the date of service of an Option Exercise Notice or Termination Event Notice (as applicable).
2.    Each Valuer shall (if practicable) have not less than 10 years of experience and expertise in valuing companies (including joint venture companies) operating in the same (or similar) business sectors and geographic areas as the Group Companies.
3.    The Shareholders shall procure that the Company, and the Company shall, promptly provide to each Valuer all information and assistance (including assistance from its employees) which each Valuer reasonably requires to make his/her/its determination of the Ordinary Share FMV or Company FMV (as applicable).
Nothing in this Exhibit E entitles the Shareholders or the Valuers to any information or document which, in the reasonable opinion of the Board, is restricted from disclosure due to applicable legal and regulatory requirements.
4.    Each Valuer shall be engaged to act on the following basis:
(a)    the Valuer shall act as expert and not as arbitrator;
(b)    the Valuer is entitled (to the extent he/she/it considers appropriate) to base his/her/its determination on the information provided under paragraph 3 above and on the accounting and other records of the Group Companies and other available information;
(c)    the Valuer shall be instructed to deliver his/her/its determination of the Ordinary Share FMV or Company FMV (as applicable) as soon as reasonably practicable and in any event within 90 days after the date of service of an Option Exercise Notice or Termination Event Notice (as applicable);
(d)    the Ordinary Share FMV or Company FMV (as applicable) shall not be subject to any minority discount and shall be determined based on the assumption that the License Agreement will remain valid and will not be terminated.
E-1
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(e)    the valuation date shall be as at the date of the Option Exercise Notice or Termination Event Notice (as applicable);
(f)    the determination of the Valuer will (in the absence of fraud or manifest error) be final; and
(g)    the costs of determination, including fees and expenses of the Valuer (but excluding the Parties' own costs, which shall be borne by the Party incurring those costs), shall be borne by the appointing Investor. In the event that a third valuer is engaged pursuant to Section 8.24(b) or 9.3(f), the costs of determination, including fees and expenses of the third valuer (but excluding the Parties' own costs, which shall be borne by the Party incurring those costs), shall be borne equally by Overland and ADCT.





E-2
Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.
Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.

Exhibit 4.6
LICENSE AND COLLABORATION AGREEMENT
This License and Collaboration Agreement (this “Agreement”) is entered into on December 11, 2020 (the “Effective Date”) between:
ADC Therapeutics SA, a corporation organized and existing under the laws of Switzerland and having a business address at Biopôle, Route de la Corniche 3B, 1066 Epalinges, Switzerland (“ADCT”), and
Overland ADCT BioPharma (CY) Limited, a corporation organized and existing under the laws of Cayman Islands with a business address c/o Walkers Corporate Limited, Cayman Corporate Centre, 27 Hospital Road, George Town, Grand Cayman, KY1-9008, Cayman Islands (“NewCo”).
ADCT and NewCo are referred to in this Agreement individually as a “Party” and collectively as the “Parties.”
Recitals
Whereas, ADCT is a late clinical-stage oncology-focused biotechnology company advancing highly potent and targeted antibody drug conjugates (ADCs) for the treatment of hematological cancers and solid tumors;
Whereas, NewCo is newly formed company and wishes to obtain an exclusive license from ADCT to develop and commercialize certain ADC products in China and certain other countries, and ADCT is willing to grant such a license to NewCo, all in accordance with the terms and conditions set forth herein.
Agreement
Now, Therefore, in consideration of the foregoing premises and the mutual covenants contained herein, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
Article 1
DEFINITIONS
Unless specifically set forth to the contrary herein, the following terms, whether used in the singular or plural, shall have the respective meanings set forth below:
1.1    “Accounting Standards” means, as applicable, the International Financial Reporting Standards, generally accepted accounting principles (GAAP) in the U.S., or such other accounting standard as may be used by ADCT from time to time in the preparation of its own financial accounts.


1.2    “ADCT IP” means all Know-How and Patents that are (a) Controlled by ADCT or its Affiliates as of the Effective Date or during the Term of this Agreement, and (b) necessary or reasonably useful for the Development and Commercialization of the Products in the Field in the Territory; provided however that for the purpose of this definition, “Affiliates” of ADCT shall exclude any Third Party that becomes an Affiliate of ADCT after the Effective Date. For avoidance of doubt, ADCT IP shall include all Know-How and Patents that cover, or which are based on or related to, Arising Product IP, which are referred to herein as “Arising Product IP Know-How” and “Arising Product IP Patents,” respectively.
1.3     “ADCT Know-How” means the Know-How included in ADCT IP.
1.4    “ADCT Patents” means the Patents included in the ADCT IP. ADCT Patents existing as of the Effective Date are set forth on Exhibit A.
1.5    “Affiliate” means, with respect to a Party, any person or entity that directly or indirectly controls, is controlled by or is under common control with such Party. As used in this definition, “control” (and, with correlative meanings, the terms “controlled by” and “under common control with”) means, in the case of a corporation, the ownership of fifty percent (50%) or more of the outstanding voting securities thereof or, in the case of any other type of entity, an interest that results in the ability to direct or cause the direction of the management and policies of such entity or the power to appoint fifty percent (50%) or more of the members of the governing body of such entity. Notwithstanding the foregoing, neither Party nor any of its Affiliates shall be deemed an Affiliate of the other Party for the purpose of this Agreement.
1.6    “Applicable Laws” means all statutes, ordinances, regulations, rules or orders of any kind whatsoever of any Governmental Authority that may be in effect from time to time and applicable to the activities contemplated by this Agreement.
1.7    “Business Day” means a day other than Saturday, Sunday or any day on which banks located in New York City, U.S., Geneva, Switzerland, Beijing, China or the Cayman Islands are authorized or obligated to close. Whenever this Agreement refers to a number of days, such number shall refer to calendar days unless Business Days are specified.
1.8    “Calendar Quarter” means the period commencing on January 1 of each Calendar Year and ending on March 31 of the same Calendar Year, the period commencing on April 1 of each Calendar Year and ending on June 30 of the same Calendar Year, the period commencing on July 1 of each Calendar Year and ending on September 30 of the same Calendar Year and the period commencing on October 1 of each Calendar year and ending on December 31 of the same Calendar Year, as the context shall require.
1.9    “Calendar Year” means each twelve (12) month period commencing on January 1 and ending on December 31.
1.10    “cGMP” means in respect of ADCT’s obligations under this Agreement, all applicable current Good Manufacturing Practices as set forth in 21 C.F.R. Parts 4, 210, 211, 601, 610 and 820, and in respect of NewCo’s obligations under this Agreement, all equivalent
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Applicable Laws in any relevant country or region in the Territory, each as may be amended and applicable from time to time.
1.11    “Clinical Proof of Concept Study” means a Clinical Trial that can be used to evaluate the safety and efficacy of the Products, including any Phase 1 Clinical Trial with both safety and efficacy readout that demonstrates initial evidence of clinical safety and biological activity in a target patient population. Without limiting the foregoing, the Parties agree that the Clinical Trials set forth in Exhibit D are Clinical Proof of Concept Studies for the purpose of this Agreement.
1.12    “Clinical Trial” means any clinical testing of the Products in human subjects.
1.13    “Combination Product” means a product containing the Product and another active ingredient that is not the Product, sold as a co-formulated or co-packaged product for a single price.
1.14    “Commercialization” or “Commercialize” means all activities directed to commercializing, promoting, selling, offering for sale and related importing and exporting activities, but excluding Manufacturing.
1.15    “Committee” means the JSC, JDC, JCC or any subcommittee established by the JSC, as applicable.
1.16    “Competing Product” means any product that that is (a) directed towards the same target or has the same mechanism of action as any Product, or (b) directed towards the same tumor type and same patient population as any Product, provided that there is proof-of-concept data demonstrating that such Product may be used in respect of such tumor type and patient population.
1.17    “Confidential Information” of a Party means all Know-How, unpublished patent applications and other information and data of a financial, commercial, business, scientific or technical nature of such Party that is disclosed by or on behalf of such Party or any of its Affiliates or agents, or is otherwise made available to the other Party or any of its Affiliates or agents, whether made available orally, in writing or in electronic form. The terms and conditions of this Agreement shall be deemed Confidential Information of both Parties. All records and other information and data disclosed by or for NewCo in connection with any inspection or audit of NewCo or its Affiliates in connection with this Agreement shall be deemed Confidential Information of NewCo. Regardless of which Party developed the Arising Product IP, all Arising Product IP shall be deemed Confidential Information of ADCT.
1.18    “Control” or “Controlled” means, with respect to any Know-How, Patents or other intellectual property rights, that a Party has the legal authority or right (whether by ownership, license, contract or otherwise) to grant to the other Party a license, sublicense, access or other right (as applicable) under such Know-How, Patents, or other intellectual property rights, on the terms and conditions set forth herein, in each case without breaching the terms of any agreement with a Third Party.
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1.19    “Development” or “Develop” means all development activities to obtain and maintain Regulatory Approval for the Products, including all pre-clinical studies and Clinical Trials of the Products, distribution of the Products for use in Clinical Trials (including placebos and comparators), statistical analyses, the preparation of regulatory filings and all regulatory affairs related to any of the foregoing.
1.20    “Diligent Efforts” means (a) where applied to carrying out specific tasks and obligations of a Party under this Agreement, expending (on its own or acting through any of its Affiliates, sublicensees or agents) reasonable, diligent, good faith efforts and resources to accomplish such task or obligation, consistent with the exercise of prudent scientific and business judgment, as a similarly situated pharmaceutical company of similar size and resources operating in developed markets (or, in the case of NewCo, a leading biopharmaceutical company in the Territory) would normally use to accomplish a similar task or obligation under similar circumstances in accordance with Applicable Laws; and (b) where applied to the Development or Commercialization of the Products under this Agreement, the use of reasonable, diligent, good faith efforts and resources, in an active and ongoing program, consistent with the exercise of prudent judgment, as normally used by a similarly situated pharmaceutical company of similar size and resources operating in developed markets (or, in the case of NewCo, a leading biopharmaceutical company in the Territory) for a priority product discovered or identified internally, which product is at a similar stage of development or product life and is of similar market potential, taking into account relevant factors including measures of patent coverage, relative safety and efficacy, product profile, the competitiveness of the marketplace, the proprietary position of such product, the regulatory structure involved, anticipated or approved labeling, the profitability of the product in light of pricing and reimbursement issues, and other relevant factors, in accordance with Applicable Laws, all based on conditions then prevailing. “Diligent Efforts” shall require that such Party (on its own or acting through any of its Affiliates, sublicensees or subcontractors), at a minimum: (i) promptly assign responsibility for such obligations to qualified personnel, set annual goals and objectives for carrying out such obligations, and monitor and hold personnel accountable for progress with respect to such goals and objectives; (ii) set and seek to achieve specific and meaningful objectives for carrying out such obligations, with timelines consistent with a comparable priority program; and (iii) make and implement decisions and allocate resources designed to diligently and in good faith advance progress with respect to such objectives. “Diligent Efforts” shall be determined on a Product-by-Product and Market-by-Market basis, and it is anticipated that the level of efforts required may be different for different Markets and may change over time, reflecting changes in the status of the Products, as applicable, and Markets involved. For clarity, “Diligent Efforts” will not mean that a Party guarantees that it will actually accomplish the applicable task or objective.
1.21    “Dollars” or “$” means U.S. dollars, the lawful currency of the U.S.
1.22    “FDA” means the U.S. Food and Drug Administration or its successor.
1.23    “Field” means all diagnostic, prophylactic and therapeutic uses in humans.
1.24    “First Commercial Sale” means, on a Market-by-Market basis, the first commercial transfer or disposition for value of any Product in such Market to a Third Party by
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NewCo, or any of its Affiliates or sublicensees after such Product has obtained Regulatory Approval for commercial sale in such Market.
1.25    “GCP” means all applicable Good Clinical Practice standards for the design, conduct, performance, monitoring, auditing, recording, analyses and reporting of Clinical Trials, as conducted within or outside the Territory, including, as applicable (a) as set forth in the International Conference on Harmonization of Technical Requirements for Registration of Pharmaceuticals for Human Use Harmonized Tripartite Guideline for Good Clinical Practice (CPMP/ICH/135/95) and any other applicable guidelines for good clinical practice for trials on medicinal products, (b) the Declaration of Helsinki (2004) as last amended at the 52nd World Medical Association in October 2000 and any further amendments or clarifications thereto, (c) 21 C.F.R. Parts 50 (Protection of Human Subjects), 56 (Institutional Review Boards) and 312 (Investigational New Drug Application), as may be amended from time to time, and (d) the equivalent Applicable Laws in the Territory, each as may be amended and applicable from time to time and in each case, that provide for, among other things, assurance that the clinical data and reported results are credible and accurate and protect the rights, integrity, and confidentiality of trial subjects.
1.26    “Global Clinical Trial” means any Clinical Trial that is conducted in multiple countries and jurisdictions, both in and outside the Territory, through the conduct of such Clinical Trial in multiple sites in such countries and jurisdiction as part of one unified Clinical Trial or separately but concurrently in accordance with a common Clinical Trial protocol.
1.27    “GLP” means all applicable Good Laboratory Practice standards, including, as applicable, as set forth in the then current good laboratory practice standards promulgated or endorsed by the U.S. Food and Drug Administration as defined in 21 C.F.R. Part 58, or the equivalent Applicable Laws in the region in the Territory, each as may be amended and applicable from time to time.
1.28    “Governmental Authority” means any court, commission, authority, department, ministry, official or other instrumentality of, or being vested with public authority under any law of, any country, region, state or local authority or any political subdivision thereof, or any association of countries.
1.29    “Know-How” means any proprietary scientific or technical information, results and data of any type whatsoever, in any tangible or intangible form whatsoever, including databases, safety information, practices, methods, techniques, specifications, formulations, formulae, trade secrets, standard operating procedures, processes, drug master files, knowledge, know-how, skill, experience, test data including pharmacological, medicinal chemistry, biological, chemical, biochemical, toxicological and clinical test data, analytical and quality control data, stability data, studies and procedures, and manufacturing process and development information, results and data.
1.30    “Manufacture” and “Manufacturing” mean activities directed to manufacturing, chemical synthesis, processing, filling, finishing, packaging, labeling, quality control testing, quality assurance and release, stability testing, validation and post-marketing validation testing,
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inventory control and management, storing, transporting and distribution of any intermediate or Product.
1.31    “Manufacturing Cost” means, with respect to the Products Manufactured and supplied by or on behalf of ADCT to NewCo under this Agreement:
(a)    if such Product is Manufactured by ADCT’s Third Party contract manufacturers, the total of (i) the actual Third Party cost paid by ADCT for the Manufacture and supply of such Product, and (ii) the costs (including internal costs) incurred by ADCT for Manufacture oversight, quality assurance and supply management directly related to and reasonably allocated to the Manufacture and supply of such Product, calculated using methodology consistent with the Accounting Standards and consistently applied; and
(b)    if such Product is manufactured by ADCT itself or its Affiliates, the actual, fully burdened cost for the Manufacture and supply of such Product, including without limitation the costs of raw materials, intermediate, labor, and other direct and identifiable variable costs incurred or accrued by ADCT or its Affiliates directly in connection with the Manufacture and supply of such Product, and the proportionate share of indirect manufacturing costs, calculated using methodology consistent with the Accounting Standards and consistently applied.
1.32    “Market” means each of the countries or jurisdictions of the Territory.
1.33    “NDA” means a New Drug Application or Biologics License Application, as defined by the FDA, or equivalent application for approval (but not including pricing and reimbursement approvals) to market a pharmaceutical product in a country or jurisdiction outside the U.S.
1.34    “Net Sales” means net sales (as defined by and calculated in accordance with the Accounting Standards) generated by the sales of the Products by NewCo, its Affiliates, or sublicensees to a Third Party in the Territory.
1.35    “NewCo IP” means all Know-How and Patents that are developed, used or applied by NewCo or its Affiliates or sublicensees in the Development and Commercialization of the Products, but excluding any Arising Product IP (which shall be owned by ADCT pursuant to Section 9.1(b)).
1.36    “NewCo Know-How” means the Know-How included in NewCo IP.
1.37    “NewCo Patents” means the Patents within the NewCo IP.
1.38    “New IP” means any inventions, process, method, composition of matter, article of manufacture, dosing regimens, formulations and combinations, discovery or finding, patentable or otherwise, that is invented or generated as a result of or in connection with a Party exercising its rights or carrying out its obligations under this Agreement, whether directly or via
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its Affiliates, sublicensees, agents or contractors, including all rights, title and interest in and to the intellectual property rights therein.
1.39    “NMPA” means National Medicine Products Administration of China (formerly known as the China Food and Drug Administration), or its successor.
1.40    “Patents” means all national, regional and international patents and patent applications, including provisionals (whether abandoned or pending), divisions, continuations, continuations-in-part, additions, re-issues, renewals, extensions, substitutions, re-examinations or restorations, registrations and revalidations, and supplementary protection certificates and equivalents to any of the foregoing.
1.41    “Phase 1 Clinical Trial” means any Clinical Trial that would satisfy the requirements of 21 § CFR 312.21(a) or corresponding foreign regulations.
1.42    “Phase 2 Clinical Trial” means any Clinical Trial that would satisfy the requirements of 21 § CFR 312.21(b) or corresponding foreign regulations.
1.43    “Products” means the following proprietary ADCs developed by ADCT: ADCT-402 (targeting CD19), ADCT-602 (targeting CD22), ADCT-601 (targeting AXL), and ADCT-901 (targeting KAAG1), the details of which are set forth in Exhibit B, and in each case including any improvements or derivatives thereto, either in the form of a single agent Product or a Combination Product, but in each case solely in the composition and form and formulation as being developed or commercialized by ADCT outside the Territory at that time.
1.44    “Regulatory Approval” means, with respect to any Product in a country or jurisdiction, all approvals from the Regulatory Authorities necessary to market and sell such Product in such country or jurisdiction, including pricing and reimbursement approval.
1.45    “Regulatory Authority” means any applicable Government Authority responsible for granting Regulatory Approvals for any Product, including the FDA, NMPA, and any corresponding national or regional regulatory authorities.
1.46    “Regulatory Documents” means any regulatory application, submission, notification, communication, correspondence, registration, approval and other filings made to, received from or otherwise conducted with a Regulatory Authority regarding the Products, including any NDA and Regulatory Approval.
1.47    “Regulatory Materials” means any materials required by local regulation to complete local drug testing for the purpose of clinical supply testing, or product specification validation or the local testing for commercial goods. For example, Regulatory Materials may include drug substance, drug products, reference standards, special reagents and special volumes for analytic testing, blank excipients, special analytic equipment, cell line, and the like related to the Products.
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1.48    “Royalty Term” means, on a Product-by-Product and Market-by-Market basis, the period from the First Commercial Sale of such Product in such Market until the latest of (a) the expiration of the last to expire Valid Claim in an ADCT Patent that covers such Product or any components thereof (including composition of matter, methods of making or using thereof) in such Market and (b) the last to expire regulatory exclusivity period for such Product in such Market, and (c) [**] years after the First Commercial Sale of such Product in such Market; provided, the time periods set forth in subsections (a) and (b) in this definition shall not be based on or affected by any Valid Claim or regulatory exclusivity period solely by reason of any Arising Product IP Patent solely invented by NewCo and assigned to ADCT pursuant to Section 9.1(b).
1.49    “Territory” means the following jurisdictions: mainland China, the Hong Kong Special Administrative Region, Macau Special Administrative Region, Taiwan, and Singapore.
1.50    “Third Party” means an entity other than ADCT, NewCo and Affiliates of either of them.
1.51    “U.S.” means United States of America, including all possession and territories thereof.
1.52    “Valid Claim” means a claim of (a) an issued and unexpired patent which has not lapsed or been revoked, abandoned or held unpatentable, unenforceable or invalid by a final decision of a court or Governmental Authority of competent jurisdiction, unappealable or unappealed within the time allowed for appeal, and which has not been disclaimed, denied or admitted to be invalid or unenforceable through reissue, reexamination or disclaimer or otherwise or (b) a patent application that has not been irretrievably cancelled, withdrawn or abandoned and that has been pending for less than [**] years. If a claim of a patent application that ceased to be a Valid Claim under clause (b) of the preceding sentence because of the passage of time later issues as a part of a patent within clause (a) of the preceding sentence, then it shall again be considered a Valid Claim effective as of the issuance of such patent.
1.53    Additional Definitions. The following table identifies the location of definitions set forth in various Sections of the Agreement:
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Defined Terms Section
ADCT Indemnitee(s) 12.1
Alliance Manager 3.1
Arising Product IP 9.1(b)
Commercialization Plan 7.3
Co-Promotion Option 7.7
CRO 4.5(c)
Development Plan 4.3(a)
Executive Officers 3.9(b)
Existing Global Clinical Trials 4.5(b)
Existing Upstream IP 2.4(a)
Flash Sales Report 8.2(d)
Future Upstream IP 2.4(a)
Global Brand Elements 9.7(b)
Global Commercialization Plan 7.4(a)
Global Development Plan 4.5(a)
Indemnified Party 12.3
Indemnifying Party 12.3
Joint Commercialization Committee or JCC 3.4
Joint Development Committee or JDC 3.3
Joint Steering Committee or JSC 3.2
Losses 12.1
Manufacturing License Effective Date 6.1
NewCo Indemnitee(s) 12.2
Overland 8.1
Pharmacovigilance Agreement 5.6
Product Infringement 9.3(a)
Product Marks 9.7(a)
Purchase Price 6.2
Quarterly Royalty Report 8.2(c)
Remedial Action 5.9
SEC 10.5(b)
Share Purchase Agreement 15.7
Shareholders Agreement 15.7
Supply and Quality Agreement 6.3
Term 13.1
Territory Specific Supply 6.1
Transaction Documents 15.7
Upstream ADCT IP 2.4(a)
Upstream ADCT Patent 9.5
Upstream Agreement 2.4(a)
Upstream Partners 2.4(a)

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Article 2
LICENSES
2.1    License Grant to NewCo.
(a)    Subject to the terms and conditions of this Agreement and consistent with the scope of license and license grant of any related Upstream Agreement, effective upon the Effective Date, ADCT hereby grants to NewCo a royalty-bearing, exclusive license under the ADCT IP to Develop, use, sell, offer for sale, import and otherwise Commercialize the Products in the Field in the Territory during the Term of this Agreement.
(b)    Subject to the terms and conditions of this Agreement and the scope of license grant and terms set out in any Upstream Agreement, effective upon the Manufacturing License Effective Date for a particular Product, ADCT hereby grants to NewCo a royalty-bearing, non-exclusive license under the ADCT IP to Manufacture and have Manufactured such Product in the Territory.
2.2    Sublicense. Subject to ADCT’s express prior written consent (not to be unreasonably delayed, conditioned, or withheld), NewCo shall have the right to grant sublicenses under the license granted to NewCo under Section 2.1; provided, that each sublicense shall be subject to a written agreement that is consistent with the terms and conditions of this Agreement. Without limiting the foregoing, each sublicense shall contain at least the following terms and conditions: (a) requiring each such sublicensee to protect and keep confidential any Confidential Information of the Parties in accordance with Article 10 of this Agreement; (b) requiring each such sublicensee to assign to NewCo (or, with respect to NewCo IP only, exclusively license to NewCo in a manner that permits NewCo to satisfy its obligations under this Agreement) all NewCo IP and Arising Product IP developed by such sublicensee; (c) providing that ADCT shall have the right to audit the books and records of each such sublicensee in accordance with this Agreement. Within [**] days after the execution of any sublicense agreement, NewCo shall provide ADCT with a true and complete copy of such sublicense agreement, which shall be deemed to be NewCo Confidential Information; provided, that NewCo shall have the right to redact any provisions that are solely related to any product that is not a Product. NewCo shall remain directly responsible for all of its obligations under this Agreement. Any sublicensee conduct, act, omission or state of affairs that would have constituted a breach of this Agreement shall be imputed to NewCo and deemed a breach of this Agreement as if such conduct, act, omission or state of affairs had been directly attributable to NewCo. For avoidance of doubt, distributors, resellers, sales representatives, and other channel partners, CROs, and other service providers and subcontractors shall not be deemed to be sublicensees under this Agreement.
2.3    ADCT Retained Rights. Notwithstanding the exclusive license granted to NewCo under Section 2.1, ADCT hereby expressly retains the rights to use the ADCT IP in the Field in the Territory in order to perform its obligations under this Agreement, whether directly or through its Affiliates, licensees, sublicensees or agents. For clarity, ADCT retains the exclusive right to practice, license and otherwise exploit the ADCT IP outside the scope of the license granted to NewCo under Section 2.1, including the exclusive right to Develop,
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Manufacture and Commercialize the Products outside the Territory and the non-exclusive right to Manufacture and have Manufactured the Products in the Territory.
2.4    Upstream Agreements.
(a)    NewCo acknowledges and agrees that: (i) ADCT and its Affiliates have in-licensed or acquired (the “Existing Upstream IP”), and may in the future in-license or acquire (the “Future Upstream IP”), certain ADCT IP from Third Parties (the Existing Upstream IP and Future Upstream IP, collectively, the “Upstream ADCT IP”); (ii) the license to such Upstream ADCT IP granted by ADCT to NewCo under Section 2.1 is subject to the terms and conditions of the agreement under which ADCT or its Affiliates acquire Control of such Upstream ADCT IP (the “Upstream Agreements”); (iii) NewCo shall comply with the applicable terms and conditions of the Upstream Agreements; and (iv) NewCo shall pay to ADCT all amounts that ADCT or its Affiliates would be obligated to pay to such Third Parties (“Upstream Partners”) under the Upstream Agreements in connection with the grant and maintenance of a license (or sublicense) to NewCo under Upstream ADCT IP and the exercise of such license (or sublicense) by NewCo, its Affiliates and sublicensees, including without limitation all license (or sublicense) issuance fee, license (or sublicense) maintenance fee, and all milestone, royalty and other payments directly resulting from or reasonably allocable to the Development and Commercialization of the Products in the Field in the Territory, and in the case of any Upstream Agreements existing as of the Effective Date, to the extent such amounts are expressly specified in Exhibit F attached hereto; provided, in the case of any Future Upstream IP in-licensed by ADCT from a Third Party, NewCo shall only have the right to receive a sublicense to such Future Upstream IP if, at its election, NewCo agrees to assume the payment obligations to the applicable Third Party that specifically result from NewCo’s practice of such sublicense.
(b)    During the Term, without NewCo's prior written consent, ADCT shall not terminate any Upstream Agreement that is subject to a sublicense to NewCo pursuant to the foregoing, and ADCT shall not amend or otherwise modify any such Upstream Agreement or take (or fail to take) any action that could (i) permit the applicable Upstream Partner to such Upstream Agreement to terminate the Upstream Agreement or (ii) adversely affect NewCo’s sublicense under such Upstream Agreement.
2.5    License Grant to ADCT. NewCo hereby grants to ADCT a fully paid (except as set forth in Section 4.5(e)), royalty free, perpetual, exclusive and sublicensable (through multiple tiers) license under the NewCo IP to (a) Develop, use, sell, offer for sale, import and otherwise Commercialize the Products outside the Territory, (b) Manufacture and have Manufactured the Products anywhere in the world, and (c) fulfil ADCT’s obligations under its Upstream Agreements; provided that: (i) after the Manufacturing License Effective Date with respect to a particular Product, the license to ADCT set forth in subsection (b) above shall become non-exclusive solely with respect to the right to Manufacture and have Manufactured such Product in the Territory and shall remain exclusive for all other purposes; and (ii) to the extent any such NewCo IP was in-licensed by NewCo from a Third Party, (A) the rights and licenses outside the Territory that are granted to ADCT under this Section 2.5 shall apply only if and to the extent
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that NewCo has obtained all of the corresponding rights from the Third Party licensor necessary to grant such rights and (B) ADCT shall only have the right to receive a sublicense to such NewCo IP, at its election, if ADCT agrees to assume the payment to such Third Party that specifically result from ADCT’s practice of such sublicense. During the Term, without ADCT's prior written consent, NewCo shall not terminate any agreement between NewCo and a Third Party under which NewCo receives a license that is subject to a sublicense to ADCT pursuant to the foregoing, and NewCo shall not amend or otherwise modify any such agreement or take (or fail to take) any action that could (i) permit such Third Party to terminate such Agreement or (ii) adversely affect ADCT’s sublicense thereunder. In the case of NewCo IP that is owned by NewCo or one of its Affiliates, the rights and licenses granted to ADCT under this Section 2.5 shall be irrevocable. In the case of NewCo IP that is in-licensed by NewCo or one of its Affiliates from a Third Party, the rights and licenses granted to ADCT under this Section 2.5 shall be irrevocable by NewCo or such Affiliate and shall be co-terminus with the license received by NewCo or such Affiliate, as applicable.
2.6    No Implied Licenses; Negative Covenant. Except as set forth herein, neither Party shall acquire any license or other right or interest, by implication or otherwise, under any Know-How, Patent or other intellectual property of the other Party. NewCo shall not, and shall not permit any of its Affiliates or sublicensees to, practice or utilize any ADCT IP outside the scope of the license granted by ADCT to NewCo under Section 2.1 of this Agreement or the scope of any license of a related Upstream Agreement. ADCT shall not, and shall not permit any of its Affiliates or sublicensees to, practice or utilize any NewCo IP outside the scope of the license granted by NewCo to ADCT under Section 2.5 of this Agreement.
2.7    No Diversion. Each Party hereby covenants and agrees that it shall not, and shall ensure that its Affiliates and sublicensees shall not, either directly or indirectly, promote, market, distribute, import, sell or have sold any Product, including via the Internet or mail order, to any Third Party or to any address or Internet Protocol address or the like in the other Party’s territory or to any Third Party that such Party knows (or reasonably should know) has previously exported or is likely to export any Product to the other Party’s territory. Neither Party shall engage, nor permit its Affiliates and sublicensees to engage, in any advertising or promotional activities relating to any Product for use directed primarily to customers or other buyers or users of the Product located in any country or jurisdiction in the other Party’s territory, or solicit orders from any prospective purchaser located in any country or jurisdiction in the other Party’s territory. If a Party or its Affiliates or sublicensees receive any order for any Product from a prospective purchaser located in a country or jurisdiction in the other Party’s territory, such Party shall immediately refer that order to such other Party and shall not accept any such orders. Neither Party shall, nor permit its Affiliates and sublicensees to, deliver or tender (or cause to be delivered or tendered) any Product to any Third Party for use in or distribution into the other Party’s territory. For clarity, NewCo shall not Develop, use, sell, offer for sale, import or otherwise Commercialize any Product in any country outside the Territory, regardless of whether there is any Patent owned or controlled by ADCT that claims or covers such Product in such country.
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2.8    Right of First Negotiation. ADCT shall notify NewCo in writing if ADCT wishes to grant to a Third Party (but excluding Third Party contractors performing Development or Commercialization work for ADCT or its Affiliates) a license to Commercialize (with or without the right to Develop) (a) any Product in South Korea only (i.e., not in combination with any other country), or (b) any other ADC product developed by ADCT in the Territory only (i.e., not in combination with any country outside the Territory). After the receipt of such notice, NewCo shall have [**] days to confirm its interest to obtain such a license from ADCT to Commercialize such Product in the Field in South Korea or such other ADC product in the Territory (as applicable). If NewCo confirms its interest within such [**]-day period, NewCo shall have the exclusive right, during the next [**] days, to negotiate with ADCT in good faith regarding the terms and conditions under which ADCT would grant such a license to NewCo (which may be set forth in an amendment to this Agreement). If NewCo does not confirm its interest within such [**]-day period, or if the negotiation does not result in a binding written agreement by the end of such [**] days, then ADC shall be free to negotiate with any Third Party with respect to such a license and to grant such a license to any Third Party, without any further obligations to NewCo.
2.9    Other Products. NewCo acknowledges that NewCo [**]. If either Party desires for NewCo to Develop or Commercialize any additional product, such Party may propose such additional product to the other Party and provide information in support of such development and commercialization (including relevant scientific data and business information) for discussion.
Article 3
GOVERNANCE
3.1    Alliance Managers. Within [**] days after the Effective Date, each Party shall appoint (and notify the other Party of the identity of) a representative having appropriate qualifications (including a general understanding of pharmaceutical development and commercialization issues) to act as its alliance manager under this Agreement (the “Alliance Manager”). The Alliance Managers shall facilitate the flow of information and otherwise promote communication, coordination and collaboration between the Parties and raise cross-Party or cross-functional issues in a timely manner. Each Party may replace its Alliance Manager by written notice to the other Party.
3.2    Joint Steering Committee. Within [**] days after the Effective Date, the Parties shall establish a joint steering committee (the “Joint Steering Committee” or the “JSC”), composed of [**] senior officers of each Party (or such other number as reasonably agreed by the Parties based on available staffing resources with equal number of representatives from each Party at all times), to manage the overall collaboration of the Parties under this Agreement, provided that, before the [**] anniversary of the Effective Date (or such longer period of time as reasonably agreed by the Parties), the representatives of NewCo may be Overland employees so long as, in the course of their participation on the JSC, such Overland employees are bound by written obligations of confidentiality, non-use and IP assignment the same as those that would apply to NewCo employees. The JSC shall in particular: (a) review, discuss and approve the overall strategy for the Development and Commercialization of the Products in the Field in the
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Territory; (b) provide a forum for the discussion and coordination of the Parties’ activities under this Agreement; (c) direct and oversee the operation of the JDC, JCC and any other joint subcommittee established by JSC, including resolving any disputed matter of such Committees; (d) establish other joint subcommittees as necessary or advisable to further the purpose of this Agreement; and (e) perform such other functions as expressly set forth in this Agreement or allocated to it by the Parties’ written agreement.
3.3    Joint Development Committee. At a time to be determined by the JSC, the Parties shall establish a joint development committee (the “Joint Development Committee” or the “JDC”), composed of [**] representatives of each Party (or such other number as reasonably agreed by the Parties based on available staffing resources with equal number of representatives from each Party at all times) that have knowledge and expertise in the development of products similar to the Products, in order to leverage synergies, oversee the development of the Products in the Territory and to exchange information with respect to the global development of the Products, collaboratively, both inside and outside the Territory. Notwithstanding the foregoing, before the [**] anniversary of the Effective Date (or such longer period of time as reasonably agreed by the Parties), the representatives of NewCo may be Overland employees so long as, in the course of their participation on the JDC, such Overland employees are bound by written obligations of confidentiality, non-use and IP assignment the same as those that would apply to NewCo employees. The JDC shall in particular: (a) provide a forum for and facilitate communications between the Parties with respect to the Development of the Products in their respective territories; (b) review, discuss and approve the Development Plan and amendments thereto; (c) review and discuss the progress and results of the Development of the Products in the Field in the Territory; and (d) perform such other functions as may be appropriate to further the purposes of this Agreement with respect to the Development of the Products, as directed by the JSC.
3.4    Joint Commercialization Committee. At a time to be determined by the JSC (but no later than [**] months before the submission of the first NDA for any Product in the Territory), the Parties shall establish a joint commercialization committee (the “Joint Commercialization Committee” or the “JCC”), composed of [**] representatives of each Party that have knowledge and expertise in the commercialization of products similar to the Products, to oversee the Commercialization of the Products in the Field in the Territory. The JCC shall in particular: (a) provide a forum for and facilitate communications between the Parties with respect to the Commercialization of the Products in their respective territories; (b) review and discuss the Commercialization Plan and amendment thereto; (c) review and discuss the progress and results of the Commercialization of the Products in the Field in the Territory; and (d) perform such other functions as may be appropriate to further the purposes of this Agreement with respect to the Commercialization of the Products, as directed by the JSC.
3.5    Limitation of Authority. Each Committee shall only have the powers expressly assigned to it in this Article 3 and elsewhere in this Agreement and shall not have the authority to: (a) modify or amend the terms and conditions of this Agreement; (b) waive either Party’s compliance with the terms and conditions of this Agreement; or (c) determine any such issue in a manner that would conflict with the express terms and conditions of this Agreement.
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3.6    Committee Members. Each Party’s representatives on the Committees shall be an officer or employee of the applicable Party having sufficient seniority within such Party to make decisions arising within the scope of the applicable Committee’s responsibilities, and each Party may have the same representative(s) serve on different Committees. Each Party may replace its representatives on any Committee upon written notice to the other Party. Each Party shall appoint one of its representatives on each Committee to act as a co-chairperson of such Committee.
3.7    Meetings. Each Committee shall hold meetings at such times as it elects to do so, but in no event shall such meetings be held less frequently than once every Calendar Quarter. Each Party may call additional ad hoc Committee meetings as the needs arise with reasonable advance notice to the other Party. Meetings of any Committee may be held in person, by audio or video teleconference; provided that unless the Parties otherwise agree, at least one meeting per Calendar Year of the JSC shall be held in person. In-person Committee meetings shall be held at locations selected alternatively by the Parties. The co-chairpersons of the applicable Committee shall jointly prepare the agenda for each Committee meeting. The co-chairpersons (or their designees, subject to formal approval by the co-chairpersons) shall also jointly prepare reasonably detailed written minutes of all Committee meetings that reflect, without limitation, all material discussions, proposals, responses and decisions at such meetings. The co-chairpersons shall circulate meeting minutes within [**] Business Days after each Committee meeting to each Committee member for review and approval. Such meeting minutes shall be deemed approved unless any Committee member objects to the accuracy of such minutes within [**] Business Days of receipt. Each Party shall be responsible for all of its own expenses of participating in the Committee meetings. No action taken at any Committee meeting shall be effective unless at least one representative of each Party is participating in such Committee meeting.
3.8    Non-Member Attendance. Each Party may from time to time invite a reasonable number of participants, in addition to its representatives, to attend any Committee meeting in a nonvoting capacity; provided that if either Party intends to have any Third Party (including any consultant) attend such a meeting, such Party shall provide prior written notice to the other Party. Such Party shall also ensure that such Third Party is bound by confidentiality and non-use obligations consistent with the terms of this Agreement.
3.9    Decision-Making.
(a)    All decisions of each Committee shall be made by unanimous vote, with each Party’s representatives having one vote. If after reasonable discussion and good faith consideration of each Party’s view on a particular matter before the JDC, JCC or any subcommittee established by the JSC, the representatives of the Parties on such Committee cannot reach an unanimous decision as to such matter within [**] Business Days after such matter was brought to such Committee for resolution, such matter shall be referred to the JSC for resolution.
(b)    If after reasonable discussion and good faith consideration of each Party’s view on a particular matter before the JSC (including matter referred to the JSC by JDC, JCC or any subcommittee established by the JSC), the representatives of the Parties on the JSC cannot
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reach an unanimous decision as to such matter within [**] Business Days after such matter was brought to the JSC for resolution (or after such matter has been referred to the JSC), such matter shall be referred to the Chief Executive Officer of ADCT and the Chief Executive Officer of NewCo (the “Executive Officers”) for resolution. The Executive Officers shall promptly meet and use good faith efforts to resolve such matter.
(c)    If the Executive Officers cannot resolve such matter within [**] days after such matter has been referred to them under Section 3.9(b), then:
(i)    NewCo shall have final decision making authority with respect to matters that relate specifically to the Development and Commercialization of the Products in the Field in the Territory; provided, however that: (1) NewCo’s decision must be consistent with the terms and conditions of this Agreement, including its obligations to use Diligent Efforts to Develop and Commercialize the Products; (2) NewCo shall not have final decision making authority with respect to matters that could also affect any Product outside the Territory, and shall not make any decision (or take any action) that may reasonably be expected to adversely affect any Product outside the Territory; and (3) the study protocols of all Clinical Trials of the Products to be conducted by or on behalf of NewCo in the Territory (including any Clinical Trial conducted by NewCo under Section 4.5(e)) must be approved by ADCT prior to any patient enrollment, such consent not to be unreasonably delayed, conditioned, or withheld; and
(ii)    ADCT shall have final decision making authority with respect to matters that could reasonably be expected to adversely impact the Products outside the Territory, including matters that could reasonably be expected to adversely impact the Products both in and outside the Territory, which may include but are not limited to Global Clinical Trials and any CMC (chemistry, manufacturing and controls) related matters in the Territory (including technology transfer to any contract manufacturing organization).
(iii)    For clarity, neither the JSC nor any subcommittee established by the JSC shall have any, and ADCT shall retain all, decision making authority over the Development, manufacture and Commercialization of the Product outside the Territory and all matters relating to Global Clinical Trials.
Article 4
DEVELOPMENT
4.1    General. Subject to the terms and conditions of this Agreement, NewCo shall be responsible for the Development of the Products in the Field in the Territory, including the performance of Clinical Trials of the Products in the Field in the Territory necessary for Regulatory Approval.
4.2    Development Diligence. NewCo shall use Diligent Efforts to Develop the Products in order to obtain and maintain Regulatory Approval of the Products in the Field in each Market in the Territory. Without limiting the foregoing, NewCo shall conduct the Development activities and use Diligent Efforts to achieve the Development milestones by the deadlines, in each case as set forth in the initial Development Plan existing as of the Effective
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Date and attached hereto as Exhibit C. NewCo will notify ADCT if it reasonably determines that, notwithstanding its Diligent Efforts, any milestone or other requirement under the then current Development Plan is unlikely to be achieved by NewCo in connection with Developing or Commercializing the Products due to changes in business, scientific, or regulatory conditions outside the reasonable control of NewCo or its Affiliates. After such notice, the JDC shall meet and discuss the applicable milestone or other requirement in good faith in light of the changed circumstances.
4.3    Development Plan.
(a)    All Development of the Products conducted by or on behalf of NewCo under this Agreement shall be conducted pursuant to a comprehensive written Development plan that sets forth the timeline and details of all major Development work (including all Clinical Trials) to be conducted by or on behalf of NewCo to obtain and maintain Regulatory Approval of the Products in the Field in each Market in the Territory (the “Development Plan”). The Development Plan shall be consistent with ADCT’s Global Development Plan for the Products and shall be focused on efficiently obtaining and maintaining Regulatory Approval of the Products in the Field in the Territory, while taking into consideration and mitigating any potential adverse impact on the Development, Regulatory Approval or Commercialization of the Products outside the Territory.
(b)    As of the Effective Date, the Parties have agreed to the initial Development Plan attached hereto as Exhibit C. From time to time, but at least once every [**] months, NewCo shall propose updates or amendments to the Development Plan in consultation with ADCT and submit such proposed updated or amended plan to the JDC for review, discussion, and approval. Once approved by the JDC, the updated or amended Development Plan shall become effective. From time to time at its discretion, ADCT may propose updates or amendments to the Development Plan if it reasonably believes that the then effective Development Plan is insufficient or may have an adverse effect on the Development, Regulatory Approval or Commercialization of the Products outside of the Territory.
4.4    Technology Transfer.
(a)    As promptly as practicable after the Effective Date, the Parties shall coordinate and agree to a technology transfer plan for ADCT to provide and transfer to NewCo the ADCT Know-How (including Regulatory Documents and clinical data) that is reasonably necessary or useful for NewCo to initiate Development of the Products in the Territory pursuant to the initial Development Plan. For the avoidance of doubt, this Section 4.4 and the technology transfer plan contemplated hereby shall not address technology transfer in connection with any future grant of a license to manufacture, which shall be accomplished in accordance with the provisions of Section 6.1. In the event either Party realizes that any ADCT Know-How in ADCT’s possession as of the Effective Date was inadvertently omitted from such technology transfer plan, such Party shall promptly notify the other Party and ADCT shall transfer such omitted ADCT Know-How to NewCo as soon as practicable. ADCT shall transfer such ADCT Know-How to NewCo in accordance with such technology transfer plan, and NewCo shall cooperate with ADCT to facilitate the receipt of such transfer of ADCT Know-How. From time
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to time (i) upon NewCo’s reasonable request during the Term, ADCT shall similarly disclose and transfer to NewCo all additional Regulatory Documents requested by any Regulatory Authority in the Territory and (but not more frequently than once per Calendar Quarter) tangible embodiments of ADCT Know-How for each improvement to the Products and (ii) promptly revise Exhibit A to reflect new patents and patent applications included in ADCT Patents.
(b)    Upon NewCo’s reasonable request, ADCT shall also provide NewCo with reasonable technical assistance, including in connection with such initial technology transfer and reasonable access to ADCT’s technical personnel involved in the research and Development of the Products. NewCo shall reimburse ADCT for the internal cost (at a rate of $[**] per hour) and out-of-pocket cost incurred by ADCT to provide such technical assistance; provided that the first [**] hours of such technical assistance shall be provided without charge.
4.5    Development Collaboration.
(a)    The Parties shall collaborate with respect to the Development of the Products across their territories. Through the JDC, ADCT shall keep NewCo reasonably informed on its plans (including any updates and amendment thereto) for the global Development of the Products (the “Global Development Plan”) in sufficient detail for NewCo to conform the Development of the Products in the Field in the Territory to the Global Development Plan.
(b)    ADCT shall have the right to control the design and conduct of the Global Clinical Trials. The Global Clinical Trials that are ongoing or planned by ADCT as of the Effective Date are set forth in Exhibit E attached hereto (the “Existing Global Clinical Trials”), and NewCo shall participate in all Existing Global Clinical Trials as set forth in clause (c) below. For any additional Global Clinical Trials that ADCT may plan to conduct after the Effective Date, ADCT shall offer NewCo the option to participate in such additional Global Clinical Trials as follows. No later than [**] days before the planned initiation of any additional Global Clinical Trial, ADCT shall present its plan for such Global Clinical Trial to the JDC for discussion, including protocol design, timeline, and budget. NewCo shall have the right to participate in such Global Clinical Trial in accordance with such plan by providing a written notice to ADCT within [**] days after the JDC’s receipt of ADCT’s plan for such Global Clinical Trial. If NewCo in good faith believes that the protocol of such Global Clinical Trial is reasonably expected to materially adversely affect the Development and Regulatory Approval of the Products in the Territory, NewCo shall have right to bring such issue to JDC for discussion. For clarity, all Global Clinical Trials shall be conducted pursuant to ADCT’s Global Development Plan, and should not be part of NewCo’s Development Plan.
(c)    For all Existing Global Clinical Trials and any additional Global Clinical Trial that NewCo elects to participate in pursuant to clause (b) above, NewCo shall be responsible for the conduct of such Global Clinical Trial in the Territory (including contracting with clinical sites in the Territory), which shall include between [**] percent ([**]%) and [**] percent ([**]%) of the study subjects in such Global Clinical Trial. NewCo shall be responsible for (i) [**] percent ([**]%) of the fully loaded costs of such Global Clinical Trial that are specifically and solely related to conducting such Clinical Trial in the Territory (e.g., the cost of clinical sites and trials in the Territory); and (ii) [**] percent ([**]%) of the fully loaded costs of
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such Global Clinical Trial that are not specifically and solely related to either Party’s territory, as such costs are reasonably determined in accordance with the applicable Accounting Standard by the contract research organization (“CRO”) that is conducting the Global Clinical Trial. For clarity, if ADCT elects to expand the services provided by its CRO to cover such Global Clinical Trial in the Territory, then NewCo shall be responsible for [**] percent ([**]%) of the incremental costs of such expansion; and if ADCT elects to engage a CRO specifically for such Global Clinical Trial in the Territory, then NewCo shall be responsible for [**] percent ([**]%) of the costs of such Territory-specific CRO. NewCo shall pay its share of the costs of such Global Clinical Trials as follows. No later than [**] days before the beginning of each Calendar Quarter, ADCT shall submit to NewCo an invoice setting forth NewCo’s share of the estimated costs of such Global Clinical Trials for such Calendar Quarter, and NewCo shall pay the amount invoiced before the beginning of such Calendar Quarter. Within [**] days after the end of such Calendar Quarter, ADCT shall prepare and submit to NewCo a reconciliation report that reasonably details NewCo’s share of the actual costs of such Global Clinical Trial for such Calendar Quarter. If the amount paid by NewCo at the beginning of such Calendar Quarter is less than NewCo’s share of the actual costs, then NewCo shall pay the deficit to ADCT within [**] days after the receipt of the reconciliation report. If the amount paid by NewCo at the beginning of such Calendar Quarter is more than NewCo’s share of the actual costs, then such excess shall be credited toward the estimated payment due for the next Calendar Quarter (or refunded to NewCo if there is no future costs to be shared). If ADCT engages a CRO specifically for the Global Clinical Trial in the Territory, then upon ADCT’s request, NewCo shall pay the costs of such CRO directly to such CRO.
(d)    If NewCo does not elect to participate in any additional Global Clinical Trial, then ADCT may conduct such Global Clinical Trial outside the Territory and, notwithstanding Sections 4.7 and 5.5 or anything to the contrary herein, NewCo shall not have the right to use or reference the data generated from such Global Clinical Trial to support Regulatory Approval or Commercialization of the Products in the Territory, unless NewCo pays ADCT [**] percent ([**]%) of the fully loaded cost incurred by ADCT to conduct such Global Clinical Trial. If NewCo desires to use the data from such Global Clinical Trial to support Regulatory Approval or Commercialization of the Products in the Territory, NewCo shall notify ADCT, and ADCT shall promptly provide NewCo with (i) a summary of such data for NewCo’s internal review and evaluation for up to [**] days after delivery and (ii) a reasonably detailed invoice setting forth NewCo’s share (as set forth above in this Section 4.5(d)) of the cost incurred by ADCT to conduct such Global Clinical Trial. If NewCo decides to use the data from such Global Clinical Trial to support Regulatory Approval (including label expansion) or Commercialization of the Products in the Territory, NewCo shall notify ADCT prior to expiration of the [**]-day period specified above and pay to ADCT the amount invoiced within [**] days after delivering such notice to ADCT. For clarity, this Section 4.5(d) shall not apply to any Existing Global Clinical Trial, and NewCo shall participate in all Existing Global Clinical Trials, shall share the costs of all Existing Global Clinical Trials as set forth in clause (c) above, and shall have the right to use the data from all Existing Global Clinical Trials without any additional payment to ADTC.
(e)    Through the JDC, NewCo shall notify ADCT if NewCo wishes to conduct any Clinical Trial of any Product in any indication that is not being (and is not anticipated to be)
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Developed by ADCT under the Global Development Plan. The JDC shall discuss the Development of such Product in such indication and ADCT may amend its Global Development Plan to include such indication. If ADCT decides not to Develop such Product in such indication under its Global Development Plan, and does not object to the conduct of such Clinical Trial by NewCo, then (i) NewCo shall have the right to conduct such Clinical Trial in the Territory at NewCo’s own cost and expense; and (ii) notwithstanding Sections 4.7 and 5.5 or anything to the contrary herein, ADCT shall not have the right to use or reference the data generated from such Clinical Trial to support Regulatory Approval or Commercialization of such Product in such indication outside the Territory, unless ADCT pays NewCo [**] percent ([**]%) of the fully loaded cost incurred by NewCo to conduct such Clinical Trial of such Product in such indication in the Territory. If ADCT desires to use the data from such Clinical Trial to support Regulatory Approval or Commercialization of such Product in such indication outside the Territory, ADCT shall notify NewCo, and NewCo shall promptly provide ADCT with (i) a summary of such data for ADCT’s internal review and evaluation for up to [**] days after delivery and (ii) a reasonably detailed invoice setting forth ADCT’s share (as set forth above in this Section 4.5(e)) of the cost incurred by NewCo to conduct such Clinical Trial of such Product in such indication in the Territory. If ADCT decides to use the data from such Clinical Trial to support Regulatory Approval (including label expansion) or Commercialization of such Product in such indication outside the Territory, ADCT shall notify NewCo prior to expiration of the [**]-day period specified above and pay to NewCo the amount invoiced within [**] days after delivering such notice to NewCo.
(f)    For clarity, regardless of whether a Party elects to participate in or pay its share of the cost of any Clinical Trial of the other Party, each Party shall have the right to use the safety data generated by the other Party from any Clinical Trial for safety reporting purposes to the extent required by Applicable Laws or a Regulatory Authority in its territory.
4.6    Development Cost. NewCo shall be solely responsible for all the costs and expenses it incurs to Develop the Products in the Territory, and shall share the cost of any Global Clinical Trial in the manner and to the extent expressly set forth in Section 4.5 above. Without duplication of any other obligation in respect of reimbursement under this Agreement, NewCo shall reimburse ADCT for any out-of-pocket Development costs incurred by ADCT for the benefit of NewCo that have been pre-approved in writing by NewCo.
4.7    Data Exchange and Use. In addition to its adverse event and safety data reporting obligations pursuant to Section 5.6, each Party shall promptly provide the other Party with copies of all data and results and all supporting documentation (e.g., protocols, CRFs, analysis plans) generated from its Development of the Products. Subject to Section 4.5(d), NewCo shall have the right to use the data provided by ADCT for the purpose of obtaining and maintaining Regulatory Approval for and Commercializing the Products in the Field in the Territory. Subject to Section 4.5(e), ADCT shall have the right to use the data provided by NewCo for the purpose of obtaining and maintaining Regulatory Approval for and Commercializing the Products outside the Territory.
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4.8    Development Records. NewCo shall maintain complete, current and accurate records of all Development activities conducted by or on behalf of NewCo hereunder, and all data and other information resulting from such activities. Such records shall fully and properly reflect all work done and results achieved in the performance of the Development activities in good scientific manner appropriate for regulatory and patent purposes. NewCo shall document all non-clinical studies and Clinical Trials in formal written study reports according to Applicable Laws and national and international guidelines (e.g., ICH, GCP, GLP, and cGMP) and shall provide copies of such reports to the JDC for review at each regularly scheduled JDC meeting. ADCT shall have the right to review and copy such records maintained by NewCo at reasonable times and to use such records and obtain access to the original for its research and development activities and regulatory and patent purposes or for other legal proceedings.
4.9    Development Reports. NewCo shall keep ADCT reasonably informed as to the progress and results of its and its Affiliates’ and sublicensees’ Development of the Products. Without limiting the foregoing, the status, progress and results of the Development of the Products in the Territory shall be discussed at meetings of the JDC. At least [**] Business Days before each regularly scheduled JDC meeting, NewCo shall provide the JDC with a written report summarizing its Development activities and the results thereof, covering subject matter at a level of detail reasonably required by ADCT and sufficient to enable ADCT to determine NewCo’s compliance with its diligence obligations pursuant to Section 4.2. In addition, NewCo shall make available to ADCT such additional information about its Development activities as may be reasonably requested by ADCT from time to time.
Article 5
REGULATORY
5.1    General. The Development Plan shall set forth the regulatory strategy for seeking Regulatory Approvals of the Products in the Field in each Market in the Territory. NewCo shall be responsible for all regulatory activities necessary for obtaining and maintaining Regulatory Approvals of the Products in the Field in the Territory, which regulatory activities shall be performed at NewCo’s own cost and expense and in accordance with the regulatory strategy set forth in the Development Plan. Through the JDC, NewCo shall keep ADCT informed of regulatory developments related to the Products in the Territory, including any decision by any Regulatory Authority in the Territory regarding the Products.
5.2    Regulatory Documents. NewCo shall provide the JDC and ADCT with drafts in English of all material Regulatory Documents within a reasonable time (in any event no less than [**] days) prior to submission for review and comment and shall consider and implement in good faith any comments received in a timely manner from ADCT, and all such Regulatory Documents shall be approved by the JDC before submission; provided, however, NewCo may submit any Regulatory Document without regard to ADCT's comments and/or without the JDC's approval if such comments or approval (as the case may be) are not received by NewCo at least [**] Business Days prior to the submission due date. Notwithstanding the foregoing, from time to time, the JDC may recommend to ADCT that no review, comment or approval is necessary for certain categories of Regulatory Documents that are immaterial in nature, and ADCT may elect
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to waive its right to review, comment or approve in its sole discretion, further provided that: (a) NewCo shall inform the JDC which of the Regulatory Documents it has received or submitted under such waiver on a [**] basis at the regularly scheduled JDC meetings; (b) ADCT shall have the right to request a copy of such Regulatory Documents at any time notwithstanding such waiver; and (c) ADCT shall have the right to rescind such waiver with respect to future Regulatory Documents at any time in its sole discretion. NewCo shall not make any statement in a regulatory filing in the Territory as to which ADCT advises NewCo that such statement would be inconsistent with statements made by ADCT in regulatory filings outside of the Territory or in public disclosures made by ADCT. In addition, NewCo shall notify ADCT of any material Regulatory Documents submitted to or received from any Regulatory Authority in the Territory and shall provide ADCT with copies thereof within [**] Business Days after submission or receipt, and shall notify ADCT of any other material communication with any Regulatory Authority in the Territory regarding the Products within [**] Business Days after such communication. If any such material Regulatory Document is not in the English language, NewCo shall also, at its own cost and expense, provide ADCT with an English summary at the time of provision and an English translation thereof as soon as practicable. Upon ADCT’s reasonable request from time to time, NewCo will provide other Regulatory Documents in English, subject to the Parties’ mutual agreement regarding cost-sharing and timing.
5.3    Regulatory Meetings. NewCo shall provide ADCT with reasonable (and in any event no less than [**] days’) advance notice of any meeting or substantive discussion with any Regulatory Authority in the Territory related to the Products. NewCo shall lead such meeting or discussion; provided, however that, ADCT or its designee shall have the right to attend and participate in such meeting or discussion, and, if reasonably requested by NewCo and at NewCo’s cost and expense, ADCT or its designee shall attend and participate in such meeting or discussion to actively assist in addressing questions regarding the Products that may be raised by the Regulatory Authority. NewCo shall provide ADCT with a written English summary of such meeting or discussion within [**] Business Days thereafter. At NewCo’s reasonable request and cost and expense, ADCT shall provide assistance in responding to or otherwise addressing questions raised by the Regulatory Authority during any such meeting or discussion, according to a timeline reasonably agreed by the Parties.
5.4    Regulatory Requests. Within [**] Business Days after receipt, NewCo shall provide ADCT any formal or informal requests received from any Regulatory Authority in the Territory related to the Products. NewCo shall manage preparation of a response to such requests; provided that, at NewCo’s reasonable request and cost and expense, ADCT or its designee shall provide assistance in preparing a response that addresses matters raised by the Regulatory Authority in such request, according to a timeline reasonably agreed by the Parties. NewCo shall submit all responses before the due date set by the Regulatory Authority and NewCo shall provide ADCT a copy of the final response for its approval as soon as reasonably practicable (but not less than [**] Business Days prior to such submission due date) and ADCT will conduct such review on a timely basis; provided, however, NewCo may submit its response without regard to ADCT's review if comments arising from such review are not received by NewCo at least [**] Business Days prior to the applicable due date.
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5.5    Right of Reference. Each Party hereby grants to the other Party the right of reference to all Regulatory Documents pertaining to the Products in the Field submitted by or on behalf of such Party. Subject to Section 4.5(d), NewCo may use such right of reference to ADCT’s Regulatory Documents in the Field solely for the purpose of obtaining and maintaining Regulatory Approval of the Products in the Field in the Territory. Subject to Section 4.5(e), ADCT may use such right of reference to NewCo’s Regulatory Documents in the Field solely for the purpose of obtaining and maintaining Regulatory Approval of the Products outside the Territory.
5.6    Pharmacovigilance. At least [**] months prior to the expected application for approval of the first Clinical Trial of any Product under this Agreement, the Parties shall enter into a pharmacovigilance agreement setting forth the worldwide pharmacovigilance procedures for the Parties with respect to the Products (the “Pharmacovigilance Agreement”) to ensure that there is adequate coordination and sharing of relevant safety information between the Parties in order to facilitate prompt filing of accurate and consistent reports to Regulatory Authorities which complies with the Applicable Law. Each Party shall hold the primary responsibility for reporting adverse events and other safety data related to the Products in its territory to the applicable Regulatory Authorities in its territory, as well as responding to safety issues and to all requests of Regulatory Authorities in its territory related to the Products, in each case at its own cost and to the extent required by Applicable Laws. ADCT shall be responsible for the establishment and maintenance of a global safety database at its own cost and expense. NewCo may, at its own cost and expense, establish and maintain its own local safety database to store the safety information generated from the Development of the Products in the Territory, and to assure regulatory reporting compliance in the Territory. Each Party agrees to comply with its respective obligations under the Pharmacovigilance Agreement and to cause its Affiliates, licensees and sublicensees to comply with such obligations.
5.7    Regulatory Audits and Inspection. Upon reasonable notice, ADCT or its representatives shall be entitled to conduct an audit of the systems, procedures and practices of NewCo, its Affiliates, sublicensees or subcontractors (including clinical trial sites) relating to the Development and Commercialization of the Products in the Field in the Territory, and shall ensure that such Affiliates, sublicensees and subcontractors permit such audits. NewCo shall promptly notify ADCT of any inspection of NewCo, its Affiliates, sublicensees or subcontractors by any Regulatory Authority relating to the Products and shall provide ADCT with all information pertinent thereto (including all copies of all notices, filings and correspondence received from or submitted to the Regulatory Authority in connection therewith). ADCT shall have the right to be present at any such inspection, and upon NewCo’s reasonable request and at NewCo’s cost, ADCT or its designee shall attend and support any such inspection. NewCo shall also permit the Regulatory Authorities outside the Territory to conduct inspections of NewCo, its Affiliates, sublicensees or subcontractors relating to the Products, and shall ensure that such Affiliates, sublicensees and subcontractors permit such inspections.
5.8    No Harmful Actions. If ADCT or NewCo believes that the other Party is taking or intends to take any action with respect to any Product that could have a material adverse impact upon the regulatory status of any Product outside or inside the Territory (as the case may
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be), the concerned Party shall have the right to bring the matter to the attention of the JSC and the Parties shall promptly meet to discuss in good faith to resolve such concern. Without limiting the foregoing, unless the Parties otherwise agree: (a) NewCo shall not communicate with any Regulatory Authority having jurisdiction outside the Territory, unless so ordered by such Regulatory Authority, in which case NewCo shall immediately notify ADCT of such order; and (b) NewCo shall not submit any Regulatory Documents or seek Regulatory Approvals for any Product outside the Territory and ADCT shall not seek Regulatory Approval for any Product inside the Territory; and (c) ADCT shall not submit Regulatory Documents to any Regulatory Authority having jurisdiction inside the Territory without first providing notice to NewCo and considering in good faith any comments of NewCo in relation thereto.
5.9    Remedial Actions. Each Party shall notify the other immediately, and promptly confirm such notice in writing, if it obtains information indicating that any Product may be subject to any recall, corrective action or other regulatory action by any Governmental Authority or Regulatory Authority (a “Remedial Action”). The Parties shall assist each other in gathering and evaluating such information as is necessary to determine the necessity of conducting a Remedial Action. NewCo shall have sole discretion with respect to any matters relating to any Remedial Action in the Territory, including the decision to commence such Remedial Action and the control over such Remedial Action. The cost and expenses of any Remedial Action in the Territory shall be borne solely by NewCo. NewCo shall, and shall ensure that its Affiliates and sublicensees will, maintain adequate records to permit NewCo to trace the distribution, sale and use of the Products in the Territory.
Article 6
MANUFACTURE AND SUPPLY
6.1    Supply by ADCT. ADCT shall, either by itself or through its Affiliates or Third Party contract manufacturers, use Diligent Efforts to Manufacture and supply to NewCo, and NewCo shall purchase from ADCT, all of NewCo’s and its Affiliates’ and sublicensees’ requirements for the Products for use in the Development (including Clinical Trials) and Commercialization of the Products in the Field in the Territory (the “Territory Specific Supply”). If, during the Term: (a) it would be beneficial for NewCo to assume the obligation to Manufacture or have Manufactured any particular Product to meet the Territory Specific Supply; (b) such Manufacturing activities (if and when conducted by NewCo) would be permitted by Applicable Law; and (c) NewCo has the capability and resources (including quality assurance processes) to assume such Manufacturing obligations for the Territory Specific Supply, then, upon the Parties’ mutual agreement, ADCT shall transfer to NewCo, the right and ability to Manufacture and have Manufactured (through a contract manufacturing organization approved by ADCT in writing) such Product for the Territory Specific Supply (the date of such agreement, the “Manufacturing License Effective Date”). The Parties agree to work in good faith to agree upon equitable cost-sharing in relation to transfer of manufacturing obligations to NewCo, including costs related to technology transfer.
6.2    Purchase Price. NewCo shall pay ADCT for the Products supplied by ADCT at a price equal to [**] (the “Purchase Price”). The Purchase Price does not include sales, use,
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excise, value added, transfer or any other taxes or duties levied or assessed by any Governmental Authority with respect to the transfer and sale of the Products to NewCo, all of which shall be paid by NewCo. ADCT shall deliver the Products to NewCo EXW (Incoterms 2020) at ADCT’s (or its Affiliate’s or contract manufacturer’s) manufacturing facility, and shall invoice NewCo for the Purchase Price upon such delivery. NewCo shall pay the invoiced Purchase Price within [**] days after the date of the invoice.
6.3    Supply and Quality Agreement. As soon as reasonably practicable after the Effective Date, the Parties shall negotiate and execute a separate supply agreement and related quality agreement (collectively, the “Supply and Quality Agreement”) setting forth the mutually agreed terms for the Manufacture and supply of the Products to NewCo for Development and Commercialization use in the Territory. The Supply and Quality Agreement shall be consistent with the terms and conditions of this Agreement and shall include NewCo’s good faith estimate of its and its Affiliates’ and sublicensees’ requirements for the Products for the following [**] months. In addition, NewCo shall supply ADCT with a [**] year rolling forecast of its and its Affiliates’ and sublicensees’ requirements for the Products, which forecast shall be updated [**]. The Supply and Quality Agreement shall also include, among other things, comprehensive and commercially reasonable terms regarding: allocation of Products (and/or consideration of any supplemental Manufacturing arrangements) if supply becomes constrained; ADCT’s commitments regarding compliance with Applicable Laws in the Territory related to the manufacture and quality of the Products (including Product registration specifications, manufacturing and testing protocols, and monograph requirements); NewCo or its designee’s right to inspect and audit the sites where Products are Manufactured and to audit Manufacturing Costs; change controls related to Products and labeling; the supply to NewCo of Regulatory Materials; and the provision by ADCT of reasonable cooperation, information, and assistance with any inspection of ADCT, its Affiliates, sublicensees or subcontractors outside the Territory (including without limitation, Clinical Trial and Manufacturing sites) that is ordered by any Regulatory Authority inside the Territory but only to the extent permitted under and in accordance with the terms of any agreement between ADCT and its sublicensees or subcontractors.
Article 7
COMMERCIALIZATION
7.1    General. Subject to the terms and conditions of this Agreement (including ADCT’s Co-promotion Option), NewCo shall, either by itself or through its Affiliates, sublicensees or Third Party contractor(s), be solely responsible for the Commercialization of the Products in the Field in the Territory, at NewCo’s own cost and expense, including developing and executing a commercial launch plan, product marketing and promotion, marketing access and pricing strategy, negotiating with applicable Governmental Authorities regarding the price and reimbursement mechanisms, booking sales, product distribution, providing customer support (including handling medical queries), and performing other related functions.
7.2    Commercialization Diligence. NewCo shall use Diligent Efforts to Commercialize the Products in the Field in each Market in the Territory in which it receives
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Regulatory Approval consistent with the then current Commercialization Plan approved by the JCC. NewCo will notify ADCT if it reasonably determines that, notwithstanding its Diligent Efforts, any milestone or other requirement under the then current Commercialization Plan becomes irrelevant or impractical in connection with Commercializing the Products, due to changes in scientific, regulatory or market conditions outside the reasonable control of NewCo or its Affiliates. After such notice, ADCT and NewCo agree to meet and discuss the applicable milestone or other requirement in good faith in light of the changed circumstances.
7.3    Commercialization Plan. No later than [**] months before the anticipated date of the submission of first NDA for any Product in the Field in the Territory, NewCo shall submit to the JCC for review and discussion a written Commercialization plan that sets the timeline and details of all major Commercialization activities planned for the Products in the Territory (the “Commercialization Plan”). Thereafter, from time to time, but at least once every year until expiration of the applicable Royalty Term, NewCo shall prepare updates or amendments to the Commercialization Plan to reflect changes in such plans, including those in response to changes in the marketplace, relative success of the Products, and other relevant factors influencing such plan and activities, and submit such updated or amended plan to JCC for review and discussion before adopting such update or amendment. The Commercialization Plan shall be consistent in all material respects with ADCT’s Global Commercialization Plan for the Products, and the Commercialization of the Products in the Territory shall be conducted in accordance with the Commercialization Plan as amended from time to time.
7.4    Coordination of Commercialization Activities.
(a)    The Parties shall collaborate with respect to the Commercialization of the Products across their territories. Through the JCC, ADCT shall keep NewCo reasonably informed of its plans (including any updates and amendment thereto) for the global Commercialization of the Products (the “Global Commercialization Plan”) in sufficient detail for NewCo to make related updates to ensure that the Commercialization of the Products in the Field in the Territory is consistent with the Global Commercialization Plan in all material respects.
(b)    The Parties recognize that they may benefit from the coordination of certain activities in support of the Commercialization of the Products across their territories. As such, the Parties may coordinate such activities where appropriate, including scientific and medical communication and product positioning. If the Parties wish to jointly conduct any specific Commercialization activities for the benefit of the Products in both Parties’ territories, the Parties may negotiate and agree on the details of such activities, including allocation of responsibilities, budget and cost sharing.
7.5    Pricing. NewCo shall advise the JCC of its proposed pricing for each Product in each Market at least [**] days in advance of commencing the first price discussion with any Regulatory Authority in each Market and thereafter shall periodically (and no less frequently than [**]) provide the JCC with updates on its proposed pricing and discussion with Regulatory Authorities. NewCo shall consider in good faith any comments received from ADCT with respect to pricing and shall keep ADCT informed on the status of any application for pricing or
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reimbursement approval for each Product in each Market in the Territory, including any discussion with Regulatory Authorities with respect thereto. NewCo shall have the right to determine the price of the Products sold in the Territory; provided, however, that such price does not, and is not expected to, as determined by ADCT, materially adversely affect the Commercialization (including pricing) of the Products in the United States, the United Kingdom, Germany, Italy, Spain, France or Japan.
7.6    Commercialization Reports. NewCo shall keep the JCC reasonably informed of its, its Affiliates’ and sublicensees’ Commercialization activities with respect to the Products. Without limiting the foregoing, NewCo shall update the JCC at least [**] at each regularly scheduled JCC meeting regarding the Commercialization activities with respect to the Products in the Territory. Each such update shall be in a form to be agreed by the JCC and shall summarize NewCo’s, its Affiliates’ and sublicensees’ significant Commercialization activities with respect to the Products in the Territory, covering subject matter at a level of detail reasonably required by the JCC and sufficient to enable determination of NewCo’s compliance with its diligence obligations pursuant to Section 7.2. In addition, NewCo shall make available to the JCC such additional information about its Commercialization activities as may be reasonably requested by the JCC from time to time.
7.7    Co-Promotion Option. NewCo hereby grants to ADCT an exclusive option to co-promote and participate in the detailing, promotion and marketing of the Products in the Territory (the “Co-Promotion Option”). ADCT may exercise its Co-Promotion Option, on a Product-by-Product basis, by delivering a written notice to NewCo at any time before [***] for such Product in the Field in the Territory. After ADCT’s exercise of its Co-Promotion Option for any Product, the Parties shall promptly negotiate in good faith commercially reasonable terms for a co-promotion agreement. No such co-promotion agreement shall be binding except if, as and when set forth in a separate written agreement that is executed and delivered by both Parties and neither Party shall have any obligation to continue negotiating for more than [**] days after ADCT gives written notice of its election to exercise such option.
Article 8
FINANCIAL TERMS
8.1    Equity Consideration. In partial consideration of the rights granted by ADCT to NewCo hereunder, NewCo shall issue to ADCT certain shares of NewCo in accordance with that certain Share Purchase Agreement entered into among ADCT, NewCo and Overland Pharmaceuticals (CY) Inc. (“Overland”) on the even date hereof.
8.2    Royalty Payments.
(a)    Royalty Rates. NewCo shall make non-refundable and non-creditable royalty payments to ADCT on a Calendar Quarter basis, based on the Net Sales of each Product (during the applicable Royalty Term) sold in the Territory, as calculated by multiplying the applicable royalty rate set forth in the table below by the corresponding amount of incremental, aggregated annual Net Sales of each Product sold in the Territory in the applicable Calendar Year. For clarity, the Net Sales shall be aggregated on a Product-by-Product basis to determine the royalty
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tier for each Product, and ADCT-402, ADCT-602, ADCT-601, and ADCT-901 each (regardless of dosage, formulation or indication and including improvements thereto and derivatives thereof) shall constitute a separate Product.
For that portion of annual Net Sale of each Product in the Territory Royalty Rate
1)    less than or equal to     $[**]
[**]%
2)    greater than     $[**]
but less than or equal to     $[**]
[**]%
3)    greater than     $[**]
[**]%

(b)    Basis for Royalty. This Section 8.2 is intended to provide for payments to ADCT equal to the percentages of Net Sales set forth herein for the entire duration of the applicable Royalty Term. In establishing this payment structure, the Parties recognize, and NewCo acknowledges, the substantial value of the various actions and investments that were undertaken by ADCT prior to the Effective Date and that ADCT will undertake under this Agreement, and that the value of the ADCT IP licensed to NewCo hereunder resides substantially in ADCT Know-How. As a result, the Parties attribute such value to ADCT’s leading proprietary knowledge in the subject matter, including trade secrets, preclinical and clinical data pertaining to the Products, and regulatory filings made by ADCT prior to the Effective Date, in each case created or generated by ADCT through the expenditure of significant resources and as a result of ADCT’s unique innovative capabilities. The Parties agree that because ADCT is not separately compensated under this Agreement for such additional benefits, the royalties set forth above are appropriate for the duration of the applicable Royalty Term. The Parties have agreed to the payment structure set forth herein as a convenient and fair mechanism for both Parties in order to compensate ADCT for these additional benefits as part of the overall consideration for ADCT to enter into this Agreement.
(c)    Royalty Report and Payment. Within [**] days after the end of each Calendar Quarter, commencing with the first Calendar Quarter in which there is any sale of any Product anywhere in the Territory, NewCo shall provide ADCT with a report that contains the following information for the applicable Calendar Quarter, on a Product-by-Product and Market-by-Market basis: (i) the amount of gross sales of the Products, (ii) an itemized calculation of Net Sales showing separately each type of deduction provided for in the definition of “Net Sales,” (iii) a calculation of the royalty payment due on such sales in Dollars, including the exchange rate (“Quarterly Royalty Report”). Concurrent with the delivery of the applicable Quarterly Royalty Report, ADCT shall confirm the amount of the royalty stated therein and issue a corresponding invoice to NewCo, and NewCo shall pay to ADCT in Dollars the royalties owed with respect to Net Sales for such Calendar Quarter.
(d)    Flash Sales Report. Within [**] Business Days after the end of each Calendar Quarter, commencing with the first Calendar Quarter in which there is any sale of any Product anywhere in the Territory, NewCo shall provide ADCT with a flash sales report (“Flash Sales Report”) in order to give ADCT an indication of the magnitude of the royalties that are likely to be due to it pursuant to the applicable royalty report. Such Flash Sales Report shall be
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provided as a courtesy estimate only and shall not be used as a basis of comparison against actual royalties due or be considered binding in any way.
8.3    Third Party Payment. As set forth in Section 2.4(a), NewCo shall be responsible for paying to ADCT all Third Party payments that ADCT or its Affiliates would be obligated to pay under the Upstream Agreements in connection with the grant and maintenance of a license (or sublicense) to NewCo under such Upstream ADCT IP and the exercise of such license (or sublicense) by NewCo, its Affiliates and sublicensees. NewCo shall make such payment to ADCT, and shall provide ADCT with royalty and other reports, all in a timely manner but in any event sufficiently in advance of any corresponding payment to be made to any Third Party to permit ADCT to comply with its reporting and payment obligations to such Third Parties under the Upstream Agreements. For purposes of clarity, an example calculation is set forth on Exhibit F.
8.4    Currency; Exchange Rate. All payments to be made by NewCo to ADCT under this Agreement shall be made in Dollars by bank wire transfer in immediately available funds to a bank account designated by written notice from ADCT. The rate of exchange to be used in computing the amount of currency equivalent in Dollars shall be made at the average of the closing exchange rates reported in The Wall Street Journal (U.S., Eastern Edition) for the first, middle and last business days of the applicable reporting period for the payment due.
8.5    Late Payments. If ADCT does not receive payment of any sum due to it on or before the due date therefor, simple interest shall thereafter accrue on the sum due to ADCT from the due date until the date of payment at a per-annum rate of [**] percent ([**]%) or the maximum rate allowable by Applicable Laws, whichever is less.
8.6    Financial Records and Audits. NewCo shall (and shall ensure that its Affiliates and sublicensees will) maintain complete and accurate records in sufficient detail to permit ADCT to confirm the accuracy of Net Sales reported by NewCo and amounts payable under this Agreement. Upon no less than [**] days’ prior notice, such records shall be open for examination, during regular business hours, for a period of [**] years from the creation of individual records, and not more often than once each Calendar Year, by an independent certified public accountant selected by ADCT and reasonably acceptable to NewCo (and subject to execution of a customary confidentiality agreement), for the sole purpose of verifying for ADCT the accuracy of the Net Sales and royalty reports provided by NewCo under this Agreement. Any such audit shall be conducted in a manner that does not unreasonably interfere with NewCo’s usual operations, the auditor’s report shall be released simultaneously to ADCT and NewCo, and no period of time may be audited more than once. ADCT shall bear the cost of such audit unless such audit reveals an underpayment by NewCo of more than [**] percent ([**]%) of the amount actually due for the time period being audited, in which case NewCo shall reimburse ADCT for the out-of-pocket costs of such audit. NewCo shall pay to ADCT any underpayment discovered by such audit within [**] days after the accountant’s report, plus interest (as set forth in Section 8.5) from the original due date.
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8.7    Taxes.
(a)    Taxes on Income. Each Party shall be solely responsible for the payment of all taxes imposed on its share of income arising directly or indirectly from the activities of the Parties under this Agreement. NewCo shall make all payments to ADCT from Hong Kong and shall be responsible for transferring necessary funds from the Territory to Hong Kong at its own expense (including all taxes imposed on such transfer).
(b)    Tax Cooperation. The Parties agree to cooperate with one another and use reasonable efforts to avoid or reduce tax withholding or similar obligations in respect of royalties, milestone payments, and other payments made under this Agreement. To the extent NewCo is required by Applicable Laws in Hong Kong to deduct and withhold taxes on any payment to ADCT, NewCo shall deduct those taxes from the remittable payment, pay the taxes to the proper tax authority in a timely manner, and promptly send proof of payment to ADCT. ADCT shall provide NewCo any tax forms that may be reasonably necessary in order for NewCo to avoid withholding tax or to withhold tax at a reduced rate under an applicable bilateral income tax treaty. ADCT shall use reasonable efforts to provide any such tax forms to NewCo in advance of the due date. At the request of ADCT, NewCo shall provide reasonable assistance and cooperation to enable the recovery, to the extent permitted by Applicable Laws, of withholding taxes or similar obligations resulting from payments made under this Agreement.
(c)    Taxes Resulting From NewCo Action. If, as a result of any action by NewCo, including assignment or transfer of this Agreement, change in the residence of NewCo for tax purposes, change in the entity making such payment, or failure on the part of NewCo to comply with Applicable Laws or filing or record retention requirements, the amount of any tax that NewCo is required to deduct or withhold from a payment made by NewCo to ADCT under this Agreement is increased, then the sum payable by NewCo to ADCT shall be increased to the extent necessary to ensure that ADCT receives a sum equal to the sum that ADCT would have received had no such action occurred.
Article 9
INTELLECTUAL PROPERTY
9.1    Ownership of New IP.
(a)    Subject to Section 9.1(b) below, ownership of all New IP (whether patentable or not) shall be based on inventorship, as determined in accordance with the rules of inventorship under United States patent laws. Each Party shall solely own any New IP made solely by its and its Affiliates’ employees, agents, or independent contractors. The Parties shall jointly own any New IP that is made jointly by employees, agents, or independent contractors of one Party and its Affiliates together with employees, agents, or independent contractors of the other Party and its Affiliates. Except to the extent either Party is restricted by the licenses granted to the other Party under this Agreement, each Party shall be entitled to practice, license, assign and otherwise exploit any New IP jointly owned by the Parties (including any Patent claiming such jointly owned New IP), without the duty of accounting or seeking consent from the other Party.
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(b)    Notwithstanding Section 9.1(a), regardless of inventorship, ADCT (or its designee) shall solely own all New IP that relates to the Products (including those relating to the antibody, drug moiety (including the PBD warhead and any linker), or method of making or use thereof), including all rights, title and interest in and to the intellectual property rights therein (collectively “Arising Product IP”). NewCo shall and hereby does assign to ADCT (or its designee) all right, title and interest in and to all Arising Product IP, and agrees to execute such instruments and take such further action as may be requested by ADCT, in order for ADCT to evidence and perfect such assignment and to obtain and maintain patent and other intellectual property protection for the Arising Product IP. For clarity, Arising Product IP shall be deemed Confidential Information of ADCT, and ADCT shall have the sole discretion to decide whether to seek patent protection for any Arising Product IP or to keep any Arising Product IP as trade secrets.
(c)    Each Party shall promptly disclose to the other Party all New IP invented or generated by or on behalf of such Party under this Agreement, including any invention disclosures, or other similar documents, submitted to it by its employees, agents or independent contractors describing such New IP, and shall promptly respond to reasonable requests from the other Party for additional information relating to such New IP.
(d)    As soon as practicable but no later than [**] months after the Effective Date, NewCo shall, and shall cause any of its Affiliates conducting any activities under this Agreement to, adopt and implement policies satisfactory to ADCT to protect and safeguard the intellectual property licensed or to be licensed from ADCT under this Agreement from any misuse, including restricting access to employees who require such access in connection with the development of the Licensed Products and strict sharing restrictions in compliance with the confidentiality requirements under this Agreement.
9.2    Patent Prosecution.
(a)    As between the Parties, ADCT shall have the first right (but not the obligation) to file, prosecute and maintain all ADCT Patents (including Patents claiming jointly owned New IP, if any) throughout the world. On a quarterly basis and within [**] days after the receipt of an invoice from ADCT, NewCo shall reimburse ADCT for the cost and expense incurred for the filing, prosecution and maintenance of ADCT Patents in the Territory.
(b)    Subject to Section 9.5, ADCT shall consult with NewCo and keep NewCo reasonably informed of the status of the ADCT Patents in the Territory and shall promptly provide NewCo with all material correspondence received from any patent authority in the Territory in connection therewith. In addition, ADCT shall promptly provide NewCo with drafts of all proposed material filings and correspondence to any patent authority in the Territory with respect to the ADCT Patents for NewCo’s review and comment reasonably in advance of the submission of such proposed filings and correspondences. ADCT shall confer with NewCo and consider in good faith NewCo’s reasonable business interests and NewCo’s reasonable comments prior to submitting such filings and correspondences in the Territory, provided that NewCo shall provide such comments within [**] days (or a shorter period reasonably
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designated by ADCT if [**] days is not practicable given the filing deadline) of receiving the draft filings and correspondences from ADCT.
(c)    Subject to Section 9.5, ADCT shall notify NewCo of any decision to [**] of any ADCT Patents in the Territory. ADCT shall provide such notice at least [**] days prior to any filing or payment due date, or any other due date that requires action, in connection with such ADCT Patent in the Territory. In such event, ADCT shall permit NewCo, at its discretion and at its sole expense, to continue [**] of such ADCT Patent in the Territory. NewCo’s [**] of such ADCT Patent shall not change the Parties’ respective rights and obligations under this Agreement with respect to such ADCT Patent other than as expressly set forth in this Section 9.2(c). If NewCo makes such election to continue [**], then ADCT shall [**].
(d)    Each Party shall provide the other Party all reasonable assistance and cooperation in the patent prosecution efforts under this Section 9.2, including providing any necessary powers of attorney and executing any other required documents or instruments relating to such prosecution.
(e)    For avoidance of doubt, NewCo shall have the sole right to file, prosecute and maintain all NewCo Patents (but excluding Patents claiming jointly owned New IP, if any), at NewCo’s own cost and expense.
9.3    Patent Enforcement.
(a)    Each Party shall promptly notify the other Party if it becomes aware of any alleged or threatened infringement by a Third Party of any of the ADCT Patents, which infringement adversely affects or is expected to adversely affect the Products in the Field in the Territory, and any related declaratory judgment, opposition, or similar action alleging the invalidity, unenforceability or non-infringement of any of the ADCT Patents in the Territory (collectively “Product Infringement”).
(b)    Subject to Section 9.5, as between the Parties, [**].
(c)    At the request and expense of the Party bringing an action under Section 9.3(b), the other Party shall provide reasonable assistance in connection therewith, including by executing reasonably appropriate documents, cooperating in discovery and joining as a party to the action if required by Applicable Laws to pursue such action. In connection with any such enforcement action, the enforcing Party shall keep the other Party reasonably informed on the status of such action and shall not enter into any settlement admitting the invalidity or non-infringement of, or otherwise impairing the other Party’s rights in the ADCT Patents without the prior written consent of the other Party. The non-enforcing Party shall be entitled to separate representation in such enforcement action by counsel of its own choice and at its own expense.
(d)    Any recoveries resulting from enforcement action relating to a claim of Product Infringement in the Territory shall be first applied against payment of each Party’s costs and expenses in connection therewith. Any such recoveries in excess of such costs and expenses shall be retained by the enforcing Party, provided that if NewCo is the enforcing Party, then such
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excess recoveries shall be deemed Net Sales of the Products and subject to royalty payment under Section 8.2.
(e)    ADCT shall have the exclusive right to bring and control any legal action to enforce the ADCT Patents against any infringement that is not a Product Infringement or is outside the Territory, in each case at its own expense and as it reasonably determines appropriate, and shall have the right to retain all recoveries.
9.4    Infringement of Third Party Rights. Each Party shall notify the other Party of any allegations it receives from a Third Party that the Development or Commercialization of any Product in the Field in the Territory under this Agreement infringes the intellectual property rights of such Third Party. Such notice shall be provided promptly, but in no event after more than [**] days following receipt of such allegations. Such notice shall include a copy of any summons or complaint (or the equivalent thereof) received regarding the foregoing. Thereafter, the Parties shall promptly meet to consider the claim or assertion and the appropriate course of action and may, if appropriate, agree on and enter into a “common interest agreement” wherein the Parties agree to their shared, mutual interest in the outcome of such potential dispute. Each Party shall assert and not waive the joint defense privilege with respect to all communications between the Parties.
9.5    Patents Licensed From Third Parties. Each Party’s rights under this Article 9 with respect to the prosecution and enforcement of any ADCT Patent included in Upstream ADCT IP (the “Upstream ADCT Patent”) shall be subject to the rights of the applicable Third Party to prosecute and enforce such Patent. NewCo acknowledges and agrees that [**].
9.6    Patent Marking. NewCo shall mark the Products sold in the Territory in accordance with the applicable patent marking laws, and shall require all of its Affiliates and sublicensees to do the same. To the extent permitted by Applicable Laws, NewCo shall indicate on the product packaging, advertisement and promotional materials that the Products are in-licensed from ADCT.
9.7    Trademarks.
(a)    Subject to Section 9.7(b), NewCo shall have the right to brand the Products sold in the Territory using any trademarks and trade names it determines appropriate for the Products, which may vary by Market or within a Market (the “Product Marks”); provided that NewCo shall, through the JCC, consult with ADCT and seek to obtain mutual agreement regarding the selection of the Product Marks, and NewCo shall not select any mark that is confusingly similar to any Global Brand Element as a Product Mark. NewCo shall own all rights in the Product Marks in the Territory and shall register and maintain the Product Marks in the Territory that it determines reasonably necessary, at NewCo’s own cost and expense.
(b)    NewCo acknowledges that ADCT may develop a global branding strategy for the Products and adopt key distinctive colors, logos, images, symbols, and trademarks to be used in connection with the Commercialization of the Products throughout the world (such branding elements, collectively, the “Global Brand Elements”). ADCT shall own all rights in the Global
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Brand Elements and shall register and maintain the Global Brand Elements in any country in the world as it determines reasonably necessary, at ADCT’s own cost and expense. NewCo shall Commercialize the Products in the Territory using the Global Brand Elements in a manner consistent with ADCT’s global branding strategy for the Products.
Article 10
CONFIDENTIALITY
10.1    Confidentiality. Except to the extent expressly authorized by this Agreement or otherwise agreed in writing by the Parties, each Party agrees that it shall keep confidential and shall not publish or otherwise disclose and shall not use for any purpose other than as provided for in this Agreement (which includes the exercise of any rights or the performance of any obligations hereunder) any Confidential Information of the other Party pursuant to this Agreement. The foregoing confidentiality and non-use obligations shall survive any expiration or termination of this Agreement and continue in full force and effect for [**] years thereafter; provided, however, that such confidentiality and non-use obligations shall continue indefinitely in the case of any Confidential Information that constitutes a trade secret.
10.2    Exceptions. The foregoing confidentiality and non-use obligations shall not apply to any portion of the Confidential Information that the receiving Party can demonstrate by competent written proof:
(a)    was already rightfully known to the receiving Party, other than under an obligation of confidentiality, at the time of disclosure by the other Party;
(b)    was generally available to the public or otherwise part of the public domain at the time of its disclosure to the receiving Party;
(c)    became generally available to the public or otherwise part of the public domain after its disclosure and other than through any act or omission of the receiving Party in breach of this Agreement or other obligation of confidentiality;
(d)    is subsequently disclosed to the receiving Party on a non-confidential basis by a Third Party who has a legal right to make such disclosure; or
(e)    is subsequently independently discovered or developed by the receiving Party without the aid, application, or use of the disclosing Party’s Confidential Information, as evidenced by a contemporaneous writing.
10.3    Authorized Disclosure. Notwithstanding the obligations set forth in Section 10.1, a Party may disclose the other Party’s Confidential Information, including the terms of this Agreement, to the extent:
(a)    such disclosure is reasonably necessary: (i) for the filing or prosecution of Patents as contemplated by this Agreement; (ii) in connection with regulatory filings for the Products; (iii) for the prosecution or defense of litigation as contemplated by this Agreement; or
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(iv) in the case of ADCT, to fulfil ADCT’s obligations under its Upstream Agreements, including sharing copies of the Development objectives and outline plans and proposed clinical studies with any licensor under an Upstream Agreement.
(b)    such disclosure is reasonably necessary: (i) to such Party’s directors, attorneys, independent accountants or financial advisors for the sole purpose of enabling such directors, attorneys, independent accountants or financial advisors to provide advice to the receiving Party, provided that in each such case on the condition that such directors, attorneys, independent accountants and financial advisors are bound by confidentiality and non-use obligations consistent with those contained in this Agreement; or (ii) to actual or potential investors, acquirors, licensors, licensees, collaborators or other business or financial partners (including royalty financing partners) solely for the purpose of evaluating or carrying out an actual or potential investment, acquisition, license, collaboration, financing or other business transaction; provided that in each such case on the condition that such disclosees are bound by confidentiality and non-use obligations consistent with those contained in the Agreement; or
(c)    such disclosure is required by judicial or administrative process, provided that in such event such Party shall promptly inform the other Party such required disclosure and provide the other Party an opportunity to challenge or limit the disclosure obligations. Confidential Information that is disclosed by judicial or administrative process shall remain otherwise subject to the confidentiality and non-use provisions of this Article 10, and the Party disclosing Confidential Information pursuant to law or court order shall take all steps reasonably necessary, including seeking of confidential treatment or a protective order to ensure the continued confidential treatment of such Confidential Information.
10.4    Scientific Publication. Except to the extent required by Applicable Laws, NewCo shall not publish any peer-reviewed manuscripts, or give other forms of public disclosure such as abstracts and presentations, relating to the Products, including the data and results of the Development of the Products, without ADCT’s review and approval as provided in this Section 10.4. NewCo shall deliver to ADCT for review and approval a copy of any proposed scientific publication or presentation relating to the Products at least [**] days before its intended submission for publication. ADCT shall have the right to require modifications of the proposed publication or presentation to protect ADCT’s trade secrets or other Confidential Information. ADCT may also delay the submission of the proposed publication or presentation for up to an additional [**] days as may be reasonably necessary to seek patent protection for the information disclosed in such proposed publication or presentation that is owned by ADCT. NewCo agrees to acknowledge the contribution of ADCT and ADCT’s employees in all publication as scientifically appropriate.
10.5    Publicity.
(a)    The Parties may agree on language of a joint press release announcing this Agreement to be issued by the Parties after the Effective Date. Except as expressly permitted by Section 9.7, NewCo's permitted use of Global Brand Elements, or this Section 10.5, NewCo shall not use the name, trademark, trade name or logo of ADCT, its Affiliates or their respective employees in any publicity, promotion, news release or disclosure relating to this Agreement or
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its subject matter, without the prior express written permission of ADCT, except as may be required by Applicable Laws.
(b)    A Party may disclose this Agreement and its terms in securities filings with the Securities Exchange Commission (or equivalent foreign agency) (“SEC”) to the extent required by Applicable Laws (or the rules of the security exchange on which such Party’s stock is publicly traded) after complying with the procedure set forth in this Section 10.5. In such event, the Party seeking such disclosure will prepare a draft confidential treatment request and proposed redacted version of this Agreement to request confidential treatment for this Agreement, and the other Party agrees to promptly (and in any event, no less than [**] days after receipt of such confidential treatment request and proposed redactions) give its input in a reasonable manner in order to allow the Party seeking disclosure to file its request within the time lines proscribed by applicable SEC regulations. The Party seeking such disclosure shall use reasonable efforts to obtain confidential treatment of the Agreement from the SEC as represented by the redacted version reviewed by the other Party.
(c)    Each Party acknowledges that the other Party may be legally required to make public disclosures (including in filings with the SEC or other agency or security exchange) of certain material developments or material information generated under this Agreement and agrees that each Party may make such disclosures as required by Applicable Laws (or the rules of the security exchange on which such Party’s stock is publicly traded); provided that the Party seeking such disclosure shall provide the other Party a copy of the proposed disclosure, and shall reasonably consider any comments thereto provided by the other Party.
10.6    Equitable Relief. Each Party acknowledges that a breach of this Article 10 cannot reasonably or adequately be compensated in damages in an action at law and that such a breach shall cause the other Party irreparable injury and damage. By reason thereof, each Party agrees that the other Party shall be entitled, in addition to any other remedies it may have under this Agreement or otherwise, to preliminary and permanent injunctive and other equitable relief to prevent or curtail any breach of the obligations relating to Confidential Information set forth herein.
10.7    Attorney-Client Privilege. Neither Party is waiving, nor shall be deemed to have waived or diminished, any of its attorney work product protections, attorney-client privileges or similar protections and privileges or the like as a result of disclosing information pursuant to this Agreement, or any of its Confidential Information (including Confidential Information related to pending or threatened litigation) to the other Party, regardless of whether the disclosing Party has asserted, or is or may be entitled to assert, such privileges and protections. The Parties: (a) share a common legal and commercial interest in such disclosure that is subject to such privileges and protections; (b) are or may become joint defendants in proceedings to which the information covered by such protections and privileges relates; (c) intend that such privileges and protections remain intact should either Party become subject to any actual or threatened proceeding to which the disclosing Party’s Confidential Information covered by such protections and privileges relates; and (d) intend that after the Effective Date both the receiving Party and the disclosing Party shall have the right to assert such protections and privileges.
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Article 11
REPRESENTATIONS AND WARRANTIES
11.1    Representations and Warranties of Each Party. Each Party represents, warrants, and covenants (as applicable) to the other Party as of the Effective Date that:
(a)    it is a company or corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction in which it is incorporated, and has full corporate power and authority and the legal right to own and operate its property and assets and to carry on its business as it is now being conducted and as contemplated in this Agreement;
(b)    it has the corporate power and authority and the legal right to enter into this Agreement and perform its obligations hereunder, it has taken all necessary corporate action on its part required to authorize the execution and delivery of the Agreement and the performance of its obligations hereunder, and this Agreement has been duly executed and delivered on behalf of such Party, and constitutes a legal, valid, and binding obligation of such Party that is enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium, reorganization and similar laws affecting creditors’ rights generally and to general equitable principles;
(c)    it is not a party to, and will not enter into during the Term, any agreement that would prevent it from granting the licenses and other rights granted to the other Party under this Agreement or performing its obligations under the Agreement, and its grant of the licenses and other rights to the other Party under this Agreement, and the exercise thereof by the other Party, are not and will not breach or conflict or be inconsistent with the terms and conditions of any other agreement by which it is bound (including without limitation, in the case of ADCT, any Upstream Agreement);
(d)    in the course of performing its obligations or exercising its rights under this Agreement, it shall comply with all Applicable Laws, including as applicable, cGMP, GCP, and GLP standards, and shall not employ or engage any person or entity who has been debarred by any Regulatory Authority or otherwise excluded by any Governmental Authority from participating in any program sponsored or administered by a Governmental Authority, or, to such Party’s knowledge, is the subject of debarment or exclusion proceedings or investigation by a Regulatory Authority or other Governmental Authority; and
(e)    it is not debarred or disqualified under the U.S. Food, Drug and Cosmetic Act or comparable Applicable Laws in any country or jurisdiction other than the U.S. and, to its knowledge, does not, and will not during the Term knowingly, employ or use, directly or indirectly, including through Affiliates or (sub)licensees or subcontractors, the services of any person who is debarred or disqualified, in connection with activities relating to any Product. In the event that either Party becomes aware of the debarment or disqualification or threatened debarment or disqualification of any person providing services to such Party, directly or indirectly, including through Affiliates or (sub)licensees or subcontractors, which directly or indirectly relate to activities contemplated by this Agreement, such Party shall promptly notify
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the other Party in writing and such Party shall cease employing, contracting with, or retaining any such person to perform any such services.
11.2    Representations and Warranties of ADCT. ADCT represents, warrants, and covenants (as applicable) to NewCo as of the Effective Date that:
(a)    ADCT has the right under the ADCT IP to grant the licenses to NewCo as purported to be granted under Section 2.1 of this Agreement;
(b)    ADCT has not granted, and will not grant during the Term of this Agreement, any option, license or other right to any Third Party under the ADCT IP that is inconsistent with the license granted to NewCo under Section 2.1 or the right of first negotiation granted to NewCo under Section 2.8;
(c)    Exhibit A includes all Patents that are Controlled by ADCT as of the Effective Date and claim the Products;
(d)    ADCT has not received any written notice from any Third Party asserting or alleging that the Development of the Products prior to the Effective Date infringed or misappropriated the intellectual property right of such Third Party;
(e)    there is no pending or, to ADCT’s actual knowledge, threatened (in writing), adverse actions, claims, suits or proceedings against ADCT involving the ADCT IP or any Product;
(f)    ADCT and, to its knowledge as of the Effective Date, all other parties to the Upstream Agreements are and have been in full compliance with their respective obligations thereunder, without material breach or default of any kind, and that ADCT shall not enter into any amendment to any Upstream Agreement that would be reasonably likely to have a material and adverse impact on NewCo’s rights and licenses under this Agreement, and that ADCT shall use Diligent Efforts to comply with and maintain the Upstream Agreements in full force and effect during the Term;
(g)    to its knowledge as of the Effective Date, all pre-clinical activities conducted prior to the Effective Date have complied with all Applicable Laws, and all Clinical Trials initiated prior to the Effective Date have complied with all Applicable Laws and GCP; and
(h)    to its knowledge as of the Effective Date, none of the Products or the Development or Manufacture thereof by ADCT prior to the Effective Date infringed any Third Party’s intellectual property rights.
11.3    NO OTHER WARRANTIES. EXCEPT AS EXPRESSLY SET FORTH IN THE TRANSACTION DOCUMENTS, NO OTHER REPRESENTATIONS OR WARRANTIES WHATSOEVER, WHETHER EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT, OR NON-MISAPPROPRIATION OF THIRD PARTY
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INTELLECTUAL PROPERTY RIGHTS, ARE MADE OR GIVEN BY OR ON BEHALF OF A PARTY. ALL REPRESENTATIONS AND WARRANTIES, WHETHER ARISING BY OPERATION OF LAW OR OTHERWISE, ARE HEREBY EXPRESSLY EXCLUDED. NewCo acknowledges and agrees that the Products are the subject of ongoing clinical research and development and that ADCT cannot assure the safety, usefulness or successful Development or Commercialization of any Product.
Article 12
INDEMNIFICATION
12.1    Indemnification by NewCo. NewCo shall indemnify, defend and hold harmless ADCT, its Affiliates, and their directors, officers, employees, licensors of Upstream Agreements and agents (individually and collectively, the “ADCT Indemnitee(s)”) from and against all losses, liabilities, damages and expenses (including reasonable attorneys’ fees and costs) incurred in connection with any claims, demands, actions or other proceedings by any Third Party (individually and collectively, “Losses”) to the extent arising from:
(a)    the Development, Manufacture or Commercialization of the Products in the Territory by NewCo or any of its Affiliates or sublicensee, including product liability claims relating to the Products in the Territory, except to the extent set forth otherwise in the Supply and Quality Agreement; or
(b)    the negligence, willful misconduct or breach of this Agreement (including any representations, warranty or covenant of NewCo) by any NewCo Indemnitee.
except in each case to the extent such Losses arise out of the negligence, willful misconduct or breach of this Agreement by any ADCT Indemnitee.
12.2    Indemnification by ADCT. ADCT shall indemnify, defend and hold harmless NewCo, its Affiliates, and their directors, officers, employees and agents (individually and collectively, the “NewCo Indemnitee(s)”) from and against all Losses to the extent arising from:
(a)    the Development, Manufacture or Commercialization of the Products outside the Territory by ADCT or any of its Affiliates, licensees or sublicensee, including product liability claims relating to the Products outside the Territory; or
(b)    the negligence, willful misconduct or breach of this Agreement (including any representations, warranty or covenant of ADCT) by any ADCT Indemnitee;
except in each case to the extent such Losses arise out of the negligence, willful misconduct or breach of this Agreement by any NewCo Indemnitee.
12.3    Indemnification Procedure. If either Party is seeking indemnification under Sections 12.1 or 12.2 (the “Indemnified Party”), it shall inform the other Party (the “Indemnifying Party”) of the claim giving rise to the obligation to indemnify pursuant to such Section within [**] Business Days after receiving notice of the claim (it being understood and
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agreed, however, that the failure or delay by an Indemnified Party to give such notice of a claim shall not affect the indemnification provided hereunder except to the extent the Indemnifying Party shall have been actually and materially prejudiced as a result of such failure or delay to give notice). The Indemnifying Party shall have the sole right to assume and control the defense of any such claim for which it is obligated to indemnify the Indemnified Party. The Indemnified Party shall cooperate with the Indemnifying Party and the Indemnifying Party’s insurer as the Indemnifying Party may reasonably request, and at the Indemnifying Party’s cost and expense. The Indemnified Party shall have the right to participate, at its own expense and with counsel of its choice, in the defense of any claim that has been assumed by the Indemnifying Party. Neither Party shall have the obligation to indemnify the other Party in connection with any settlement made without the Indemnifying Party’s written consent, which consent shall not be unreasonably withheld or delayed. If the Parties cannot agree as to the application of Section 12.1 or 12.2 as to any claim, pending resolution of the dispute pursuant to Article 14, the Parties may conduct separate defenses of such claims, with each Party retaining the right to claim indemnification from the other Party in accordance with Section 12.1 or 12.2 upon resolution of the underlying claim.
12.4    Mitigation of Loss. Each Indemnified Party shall take and shall procure that its Affiliates take all such reasonable steps and action as are reasonably necessary or as the Indemnifying Party may reasonably require in order to mitigate any claims (or potential losses or damages) under this Article 12. Nothing in this Agreement shall or shall be deemed to relieve any Party of any common law or other duty to mitigate any losses incurred by it.
12.5    Limitation of Liability. NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY SPECIAL, CONSEQUENTIAL (WHICH SHALL BE DEEMED TO INCLUDE, WITHOUT LIMITATION, ALL DAMAGES CONSTITUTING LOSS OF PROFIT, LOSS OF REVENUE AND LOSS OF GOODWILL), INCIDENTAL, PUNITIVE, OR INDIRECT DAMAGES ARISING FROM OR RELATING TO ANY BREACH OF THIS AGREEMENT, REGARDLESS OF ANY NOTICE OF THE POSSIBILITY OF SUCH DAMAGES. NOTWITHSTANDING THE FOREGOING, NOTHING IN THIS SECTION 12.5 IS INTENDED TO OR SHALL LIMIT OR RESTRICT THE INDEMNIFICATION RIGHTS OR OBLIGATIONS OF ANY PARTY UNDER SECTION 12.1 OR 12.2, OR DAMAGES AVAILABLE FOR A PARTY’S BREACH OF ARTICLE 10.
12.6    Insurance. NewCo shall procure and maintain insurance, including product liability insurance, with respect to its activities hereunder and which is consistent with normal business practices of prudent companies similarly situated at all times during which any Product is being clinically tested in human subjects or commercially distributed or sold in the Territory by NewCo or its Affiliates or sublicensees. NewCo shall provide ADCT with evidence of such insurance upon request and shall provide ADCT with written notice at least [**] days prior to the cancellation, non-renewal or material adverse change in such insurance. Such insurance shall not be construed to create a limit of NewCo’s liability under this Agreement.
Article 13
TERMS AND TERMINATION
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13.1    Term. The term of this Agreement shall commence upon the Effective Date and, unless earlier terminated as set forth in Section 13.2 below, shall continue in full force and effect, on a Product-by-Product basis, for as long as NewCo continues to Develop or Commercialize such Product in the Territory (the “Term”).
13.2    Termination for Cause.
(a)    Termination for Material Breach. If either Party believes that the other is in material breach of its obligations hereunder or material breach of any representation or warranty set forth in this Agreement, then the non-breaching Party may deliver notice of such breach to the other Party. For all breaches other than a failure to make a payment as set forth in this Agreement (other than amounts disputed in good faith), the allegedly breaching Party shall have [**] days from such notice to cure such breach. For any breach arising from a failure to make a payment set forth in this Agreement, the allegedly breaching Party shall have [**] days from the receipt of the notice to cure such breach. If the Party receiving notice of breach fails to cure that breach within the applicable period set forth above, then the Party originally delivering the notice of breach may terminate this Agreement in its entirety or on a Product-by-Product basis immediately upon written notice to the other Party. NewCo acknowledges and agrees that any breach of Section 2.7, 2.9, 4.2, or 7.2 or any breach of Article 10 with respect to any trade secret shall be deemed material breach of this Agreement. Notwithstanding anything herein to the contrary, in the event that NewCo fails to fulfill its diligence obligations under Section 4.2 with regard to a certain Product (and does not cure such failure as provided in this Section 13.2(a) or dispute such failure in good faith), then ADCT shall have the right to terminate this Agreement as provided in this Section 13.2(a) solely in respect of the applicable Product; provided, however, if the applicable Product is ADCT-402, then ADCT may elect to terminate this Agreement in part (i.e., solely in respect of ADCT-402) or in its entirety (i.e., in respect of all Products). For clarity, NewCo shall be deemed to have met its diligence obligations if NewCo carries out the Development and Commercialization activities assigned to it under the then-current Development Plan and Commercialization Plan in accordance with such plan, so long as such plan was approved by the JSC unanimously.
(b)    Termination for Insolvency or Liquidation. Each Party shall have the right to terminate this Agreement in its entirety immediately upon written notice to the other Party in the event that (i) such other Party files in any court or agency pursuant to any statute or regulation of any jurisdiction a petition in bankruptcy or insolvency or for reorganization or similar arrangement for the benefit of creditors or for the appointment of a receiver or trustee of such other Party or its assets, (ii) such other Party is served with an involuntary petition against it in any bankruptcy or insolvency proceeding and such involuntary petition has not been stayed or dismissed within [**] days of its filing, (iii) such other Party makes an assignment of substantially all of its assets for the benefit of its creditors, or (iv) such other Party is liquidated, dissolved or otherwise cease business operation.
(c)    Termination for Patent Challenge. ADCT may terminate this Agreement in its entirety upon [**] days’ written notice to NewCo if NewCo, or if any of NewCo's Affiliates or sublicensees, individually or in association with any other person or entity, commences a legal
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action challenging the validity, enforceability or scope of any Patents owned or controlled by ADCT anywhere in the world that cover the Products, unless such action is withdrawn entirely and permanently within such [**]-day notice period.
(d)    ADCT’s Alternative Remedy. In the event that NewCo breaches Article 10 with respect to any trade secret or NewCo (or its Affiliates or sublicensees) challenges any Patents owned or Controlled by ADCT that cover the Products, if ADCT chooses not to terminate this Agreement (or is prevented from doing so), then each of NewCo’s payment obligations to ADCT shall be automatically [**] under this Agreement [**].
(e)    Dispute. Any dispute regarding an alleged material breach of this Agreement shall be resolved in accordance with Article 14 hereof. Notwithstanding anything to the contrary contained in Section 13.2(a) or elsewhere in the Agreement, the applicable cure period for any alleged material breach that is disputed in good faith shall be tolled from the date that the alleged breaching Party notifies the other Party that it intends to dispute the allegation through the resolution of such dispute pursuant to Article 14 and it is understood and acknowledged that, during the pendency of a dispute pursuant to Article 14, all of the terms and conditions of this Agreement shall remain in effect, and the Parties shall continue to perform all of their respective obligations under this Agreement.
(f)    Alternative Remedy for Certain ADCT Breach. In the event that (i) ADCT knowingly, intentionally and materially breaches its obligations under Sections 2.1, 2.4(b), or 2.7, and fails to cure such material breach within the cure period set forth in Section 13.2(a), and (ii) such material breach materially diminishes the value of any Product licensed by ADCT to NewCo in the Territory under this Agreement, and (iii) NewCo would have had the right (subject to Section 13.2(e)) to terminate this Agreement pursuant to Section 13.2(a) for such material breach, then, in lieu of exercising NewCo’s right to terminate this Agreement pursuant to Section 13.2(a) for such material breach, NewCo may, in its sole discretion and as its sole remedy for such material breach, elect to maintain this Agreement in full force and [**]. NewCo may elect such alternative remedy by written notice to ADCT within [**] days after the expiration of the cure period for such material breach, provided that, if such alleged breach is subject to any dispute under Section 13.2(e), then NewCo may not make such election unless and until such dispute is resolved in NewCo’s favor.
13.3    Effect of Termination. Upon termination of this Agreement:
(a)    License to NewCo. The license granted by ADCT to NewCo under Section 2.1 shall terminate and all sublicenses granted by NewCo shall also terminate.
(b)    License to ADCT. The license granted by NewCo to ADCT under Section 2.5 shall continue. In addition, effective upon termination of this Agreement, NewCo hereby grants to ADCT an exclusive, fully paid, royalty free, perpetual, irrevocable and sublicensable (through multiple tiers) license under the NewCo IP to Develop, use, sell, offer for sale, import and otherwise Commercialize the Products in the Territory.
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(c)    Regulatory Documents. NewCo shall (and shall cause its Affiliates and sublicensees to), as instructed by ADCT, either (i) if permitted by Applicable Laws, promptly transfer and assign to ADCT or its designee any Regulatory Documents and Regulatory Approvals for the Products in the Territory, (ii) continue to hold any such Regulatory Documents and Regulatory Approvals for the sole benefit of ADCT or its designee (in which case, NewCo shall appoint ADCT or its designee as the exclusive distributor (with the right to subcontract and appoint subdistributors) under such Regulatory Documents and Regulatory Approvals for the Products in the Territory, and also as its agent to interact with the applicable Regulatory Authority in the Territory with respect to such Regulatory Documents and Regulatory Approvals), until such time ADCT or its designee files its own Regulatory Documents and obtains its own Regulatory Approvals for the Products in the Territory; or (iii) terminate or withdraw any such Regulatory Documents and Regulatory Approvals. Upon ADCT’s request, NewCo shall provide ADCT with reasonable assistance and cooperation regarding any inquiries and correspondence relating to the Products with Regulatory Authorities in the Territory.
(d)    Data. NewCo shall (and shall cause its Affiliates and sublicensees to) promptly transfer and assign to ADCT, at no cost to ADCT, all data generated from the Development of the Products, including all Clinical Trials conducted by or on behalf of NewCo, its Affiliates and sublicensees, and all pharmacovigilance data (including all adverse event databases) relating to the Products in the Territory.
(e)    Trademarks. NewCo shall (and shall cause its Affiliates and sublicensees to) promptly transfer and assign to ADCT, at no cost to ADCT, all Product Marks (excluding the corporate name or logos of NewCo or its Affiliates or sublicensees).
(f)    Inventory. ADCT may, its discretion, elect to: (i) request NewCo to destroy all inventory of the Products held by NewCo or its Affiliates or sublicensees as of the date of the termination at NewCo’s own cost; or (ii) purchase from NewCo any or all of the inventory of the Products held by NewCo or its Affiliates or sublicensees as of the date of termination at a price equal to the price paid by NewCo for such inventory, provided that such inventory complies with applicable specifications, has been handled and stored in compliance with Applicable Laws (including cGMP). NewCo shall comply with any such request if ADCT elects the option under subsection (i) or, as the case may be, promptly supply ADCT with such inventory if ADCT elects the option under subsection (ii).
(g)    Transition Assistance. NewCo shall (and shall cause its Affiliates and sublicensees to) reasonably cooperate with ADCT to facilitate orderly transition of the Development and Commercialization of the Products in the Territory to ADCT, including (i) assigning or amending as appropriate, upon request of ADCT, any agreements or arrangements with Third Party vendors (including distributors) to Develop, sell, promote, distribute, or otherwise Commercialize the Products or, to the extent any such Third Party agreement or arrangement is not assignable to ADCT, reasonably cooperating with ADCT to arrange to continue to provide such services for a reasonable time after termination; (ii) to the extent that NewCo or its Affiliate or sublicensee is performing any activities described above in clause (i), reasonably cooperating with ADCT to transfer such activities to ADCT or its
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designee, and continuing to perform such activities on ADCT’s behalf for a reasonable time after termination until such transfer is completed; and (iii) providing ADCT with technology transfer assistance, including reasonable quantities of materials used or generated by NewCo, its Affiliates and sublicensees in the Development and Commercialization of the Products in the Territory, such as clinical brochures and promotional materials, or any chemical or biological materials, that were not received from ADCT.
(h)    Ongoing Clinical Trials. If at the time of such termination, any Clinical Trials for the Products are being conducted by or on behalf of NewCo, its Affiliates or sublicensees, then, at ADCT’s election on a trial-by-trial basis: (i) NewCo shall (and shall cause its Affiliates and sublicensees to) fully cooperate with ADCT to transfer the conduct of all such Clinical Trials to ADCT, and ADCT shall assume any and all liability and costs for such Clinical Trials after the effective date of such termination, provided that except in the case that NewCo terminates this Agreement pursuant to Section 13.2, NewCo shall continue to bear all costs and expenses incurred in connection with the conduct of such Clinical Trials until the earlier of the completion of such Clinical Trial or [**] days after the effective date of such termination; or (ii) NewCo shall (and shall cause its Affiliates and sublicensees to) at its own cost and expense, orderly wind down in compliance with Applicable Laws the conduct of any such Clinical Trial which is not assumed by ADCT under clause (i).
(i)    Return of Confidential Information. NewCo shall (and shall cause its Affiliates and sublicensees to) promptly return or destroy (at ADCT’s election) all tangible materials comprising, bearing or containing any Confidential Information of ADCT that are in NewCo’s or its Affiliates’ or sublicensees’ possession or control.
(j)    Cost. Except as provided herein, NewCo shall be solely responsible for the cost and expense it incurs to fulfil its obligations set forth in this Section 13.3.
13.4    Survival. Expiration or termination of this Agreement shall not relieve the Parties of any representation, warranty, or obligation accruing prior to such expiration or termination. Without limiting the foregoing, the following provisions shall survive the termination or expiration of this Agreement for any reason: Articles 1, 8 (solely with respect to payment obligations accrued prior to the termination or expiration of the Agreement), 10, 12, 14 and 15 (other than Section 15.6), and Sections 2.5, 4.7 (last sentence only), 5.5 (last sentence only), 8.6, 9.1, 11.3, 13.3, 13.4 and 13.5.
13.5    Termination Not Sole Remedy. Termination is not the sole remedy under this Agreement and, whether or not termination is effected and notwithstanding anything contained in this Agreement to the contrary, all other remedies shall remain available except as agreed to otherwise herein.
Article 14
DISPUTE RESOLUTION
14.1    Disputes. The Parties recognize that disputes as to certain matters may from time to time arise during the Term which relate to either Party’s rights or obligations hereunder. It is the
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objective of the Parties to establish procedures to facilitate the resolution of disputes arising under this Agreement in an expedient manner. To accomplish this objective, the Parties agree to follow the procedures set forth in this Article 14 to resolve any controversy or claim arising out of, relating to or in connection with any provision of this Agreement, if and when a dispute arises under this Agreement.
14.2    Internal Resolution. With respect to all disputes arising between the Parties under this Agreement, including, without limitation, any alleged breach under this Agreement or any issue relating to the interpretation or application of this Agreement, if the Parties are unable to resolve such dispute within [**] days after such dispute is first identified by either Party in writing to the other, the Parties shall refer such dispute to the Executive Officers of the Parties for attempted resolution by good faith negotiations within [**] days after such notice is received.
14.3    Binding Arbitration.
(a)    If the Parties fail to resolve the dispute through escalation to the Executive Officers under Section 14.2, and a Party desires to pursue resolution of the dispute, the dispute shall be submitted by either Party for resolution in arbitration administered by the International Chamber of Commerce (the “ICC”) pursuant to its arbitration rules and procedures then in effect.
(b)    The arbitration shall be conducted by a panel of three arbitrators experienced in the pharmaceutical business: within [**] days after initiation of arbitration, each Party shall select one person to act as arbitrator and the two Party-selected arbitrators shall select a third arbitrator (who shall be the chairperson of the arbitration panel) within [**] days of their appointment. If the arbitrators selected by the Parties are unable or fail to agree upon the third arbitrator, the third arbitrator shall be appointed by ICC. If, however, the aggregate award sought by the Parties is [**] Dollars ($[**]) and equitable relief is not sought, the arbitration shall be conducted by a single arbitrator agreed by the Parties (or appointed by ICC if the Parties cannot agree). The seat of arbitration shall be New York City, New York and the language of the proceedings shall be English.
(c)    The Parties agree that any award or decision made by the arbitral tribunal shall be final and binding upon them and may be enforced in the same manner as a judgment or order of a court of competent jurisdiction. The arbitral tribunal shall determine the dispute by applying the provisions of this Agreement and the governing law set forth in Section 15.5.
(d)    By agreeing to arbitration, the Parties do not intend to deprive any court of its jurisdiction to issue, at the request of a Party, a pre-arbitral injunction, pre-arbitral attachment or other order to avoid irreparable harm, maintain the status quo, preserve the subject matter of the dispute, or aid the arbitration proceedings and the enforcement of any award. Without prejudice to such provisional or interim remedies in aid of arbitration as may be available under the jurisdiction of a competent court, the arbitral tribunal shall have full authority to grant provisional or interim remedies and to award damages for the failure of any Party to the dispute to respect the arbitral tribunal’s order to that effect.
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(e)    EACH PARTY HERETO WAIVES ITS RIGHT TO TRIAL BY JURY OF ANY ISSUE RELATING TO ANY DISPUTE ARISING HEREUNDER.
(f)    Each Party shall bear its own attorney’s fees, costs, and disbursements arising out of the arbitration, and shall pay an equal share of the fees and costs of the administrator and the arbitrator; provided, however, the arbitrator shall be authorized to determine whether a Party is the prevailing party, and if so, to award to that prevailing party reimbursement for any or all of its reasonable attorneys’ fees, costs and disbursements (including, for example, expert witness fees and expenses, photocopy charges, travel expenses, etc.), or the fees and costs of the administrator and the arbitrator.
(g)    Notwithstanding anything in this Section 14.3, in the event of a dispute with respect to the validity, scope, enforceability or ownership of any patent or other intellectual property rights, if such dispute is not resolved in accordance with Section 14.2, such dispute shall not be submitted to an arbitration proceeding in accordance with this Section 14.3, and instead, either Party may initiate litigation in a court of competent jurisdiction in any country in which such rights apply.
Article 15
MISCELLANEOUS
15.1    Force Majeure. Neither Party shall be held liable to the other Party nor be deemed to have defaulted under or breached this Agreement for failure or delay in performing any obligation (other than payment obligation) under this Agreement to the extent such failure or delay is caused by or results from causes beyond the reasonable control of the affected Party, including without limitation, embargoes, war, acts of war (whether war be declared or not), insurrections, riots, civil commotions, strikes, lockouts or other labor disturbances, epidemic or pandemic, fire, floods, or other acts of God or any other deity, or material changes in laws or regulations by Government Authorities in the Territory or other acts, omissions or delays in acting by any Governmental Authority. The affected Party shall notify the other Party of such force majeure circumstances as soon as reasonably practical, and shall promptly undertake all reasonable efforts necessary to cure such force majeure circumstances.
15.2    Assignment.
(a)    Except as provided in Section 15.2(b), this Agreement may not be assigned or otherwise transferred, nor may any right or obligation hereunder be assigned or transferred, by either Party without the prior written consent of the other Party. Any attempted assignment not in accordance with the foregoing shall be null and void and of no legal effect. Any permitted assignee shall assume all assigned obligations of its assignor under this Agreement. The terms and conditions of this Agreement shall be binding upon, and shall inure to the benefit of, the Parties and their respected successors and permitted assigns.
(b)    Notwithstanding the foregoing, (1) ADCT may, without consent of NewCo, (i) assign this Agreement and its rights and obligations hereunder in whole or in part to an Affiliate of ADCT, or in whole in connection with the sale of all or substantially all of its stock
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or its assets to which this Agreement relates, or in connection with a merger, acquisition or similar transaction; (ii) sell, assign, or grant a security interest and lien to any Third Party on ADCT’s right (including the right to receive any payment (or portion thereof) from NewCo) under this Agreement; and (2) NewCo may, without consent of ADCT, assign this Agreement and all of its rights and obligations hereunder to (i) any of its wholly-owned subsidiaries, or (ii)  in connection with the sale of all or substantially all of its stock or assets to which this Agreement relates or in connection with a merger, acquisition or similar transaction, provided that any such assignment shall be subject to ADCT’s prior written consent if the assignee is then developing or commercializing a Competing Product. If ADCT sells or assigns to any Third Party a right to receive any of its payments under this Agreement, such Third Party shall also have the right to receive the information received by ADCT pursuant to this Agreement and to conduct audits in accordance with Section 8.6, to the extent related to such payments, and NewCo shall, at ADCT’s request, cooperate to facilitate the provision of any such information and the payment of any such amounts directly to such Third Party.
15.3    Severability. If any one or more of the provisions contained in this Agreement is held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby, unless the absence of the invalidated provision(s) adversely affects the substantive rights of the Parties. The Parties shall in such an instance use their best efforts to replace the invalid, illegal or unenforceable provision(s) with valid, legal and enforceable provision(s) which, insofar as practical, implement the purposes of this Agreement.
15.4    Notices. All notices which are required or permitted hereunder shall be in writing and sufficient if delivered personally, sent by facsimile (and promptly confirmed by personal delivery, registered or certified mail or overnight courier), sent by nationally-recognized overnight courier or sent by registered or certified mail, postage prepaid, return receipt requested, addressed as follows:
If to ADCT:
ADC Therapeutics SA
Biopôle, Route de la Corniche 3B
1066 Epalinges, Switzerland
Attn:     General Counsel
Email:    legal@adctherapeutics.com
with a copy to:
Cooley LLP
3175 Hanover Street
Palo Alto, CA 94304, USA
Attn:    Lila Hope, Ph.D.
Email:    lhope@cooley.com
and
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Davis Polk & Wardwell
The Hong Kong Club Building
3A Chater Road
Hong Kong
Attn:     Miranda So
Email: miranda.so@davispolk.com

If to NewCo:
Overland ADCT BioPharma (CY) Limited
c/o Walkers Corporate Limited
Cayman Corporate Centre
27 Hospital Road
George Town, Grand Cayman
KY1-9008, Cayman Islands
Attn:    Overland ADCT BioPharma (CY) Limited – The Corporate Administrator
Fax:    1 (345) 949-7886
with a copy to each of:
Overland Pharmaceuticals (US) Inc.
John Hancock Tower
    25th Floor
200 Clarendon Street
Boston, MA 02116, USA
Attn:    Ed Zhang
Email:    [**]
And
Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP
One Marina Park Drive, Suite 900
Boston, MA 02210, USA
Attn:    Timothy H. Ehrlich
Email:    tehrlich@gunder.com
or to such other address as the Party to whom notice is to be given may have furnished to the other Party in writing in accordance herewith. Any such notice shall be deemed to have been given: (a) when delivered if personally delivered or sent by facsimile on a Business Day; (b) on the Business Day after dispatch if sent by internationally-recognized overnight courier; or (c) on the fifth Business Day following the date of mailing if sent by mail.
15.5    Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, U.S., without giving effect to any choice of law principles that would require the application of the laws of a different jurisdiction. The application of the U.N. Convention on Contracts for the International Sale of Goods is excluded.
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15.6    Anti-Corruption Law Compliance.
(a)    Compliance with Anti-Corruption Laws. NewCo acknowledges that it is aware of, and agrees to abide by, the obligations imposed by Applicable Laws relating to the payment or transfer of anything of value to governments, government officials, political parties or political party officials (or relatives or associates of such officials) (“Covered Person”) for the purpose of obtaining or retaining business for or with, or directing business to, any person. Such laws include the U.S. Foreign Corrupt Practices Act, UK Bribery Act of 2010, OECD Anti-Bribery Convention, and other anti-corruption or anti-bribery laws now in effect or as may come into effect from time to time during the Term of this Agreement (collectively, “Anti-Corruption Laws”). By signing this Agreement, NewCo represents, warrants and covenants (as applicable) to ADCT that:
(i)    it is familiar with the provisions and restrictions contained in the Anti-Corruption Laws as now in effect and will familiarize itself with any changes or additions thereto as may be enacted or promulgated following the date of this Agreement;
(ii)    it shall at all times comply with the Anti-Corruption Laws and shall put in place practices, policies and procedures designed to ensure such compliance and to identify any incident of non-compliance;
(iii)    it shall notify ADCT immediately upon becoming aware of any breach of, or failure to comply with, any Anti-Corruption Law;
(iv)    it shall not, in the course of its duties under the Agreement, offer, promise, give, demand, seek or accept, directly or indirectly, any gift or payment, consideration or benefit in kind to any Covered Person that would or could be construed as an illegal or corrupt practice;
(v)    it is not a Covered Person or affiliated with any Covered Person; and
(vi)    it shall immediately notify ADCT of any attempt by any Covered Person to directly or indirectly solicit, ask for, or attempt to extort anything of value from NewCo, its Affiliates or sublicensees, and shall refuse any such solicitation, request or extortionate demand except a facilitating payment as expressly permitted under the Anti-Corruption Laws.
(b)    Compliance Certificate. From time to time upon request from ADCT, NewCo shall submit a compliance certificate in the form reasonably requested by ADCT that (i) it fully understands its obligations under this Section 15.6 and Anti-Corruption Laws; (ii) it has been complying with this Section 15.6 and Anti-Corruption Laws; and (iii) it shall continue to comply with this Section 15.6 and Anti-Corruption Laws. Without limiting the foregoing, no later than January 31 of each year, NewCo shall submit such a compliance certificate to ADCT certifying such compliance with regard to the previous Calendar Year.
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(c)    No Action. In no event shall any Party be obligated under the Agreement to take any action or omit to take any action that such Party believes, in good faith, would cause it to be in violation of any Applicable Laws, including the Anti-Corruption Laws referenced in this Section 15.6.
(d)    Due Diligence. ADCT shall have the right to visit the offices of NewCo from time to time during the term of the Agreement on an “as needed” basis and conduct due diligence in relation to NewCo’s business related to performance of its obligations under this Section 15.6 and may do so in the way it deems reasonably necessary, appropriate or desirable so as to ensure that NewCo complies with this Section 15.6 and any Applicable Laws in its business operations. NewCo shall make every effort to cooperate fully with ADCT in any such due diligence.
(e)    Audit. In the event that ADCT has reason to believe that a breach of any Anti-Corruption Laws or any obligation of NewCo under this Section 15.6 has occurred or may occur, ADCT shall have the right to select an independent Third Party to conduct an audit of NewCo and review relevant books and records of NewCo, to satisfy itself that no breach has occurred. Unless otherwise required under Applicable Laws or by order of a competent court or regulatory authority, ADCT shall ensure that the selected independent Third Party shall keep confidential all audited matters and the results of the audit. ADCT reserves the right to disclose to any Governmental Authority information relating to a possible violation by NewCo of any Applicable Law, including a violation of Anti-Corruption Laws.
15.7    Entire Agreement; Amendments. In connection with the execution of this Agreement, the Parties and Overland also entered into certain Share Purchase Agreement (the “Share Purchase Agreement”) and the Shareholders Agreement (the “Shareholders Agreement”) (collectively, the “Transaction Documents”). This Agreement, including the Exhibits attached hereto, together with the other Transaction Documents, contains the entire understanding of the Parties with respect to the subject matter hereof and thereof. All other express or implied agreements and understandings, either oral or written, with regard to the subject matter hereof (including the licenses granted hereunder) are superseded by the terms of this Agreement. Neither Party is relying on any representation, promise, nor warranty not expressly set forth in this Agreement or other Transaction Documents. This Agreement may be amended, or any term hereof modified, only by a written instrument duly executed by authorized representatives of both Parties hereto.
15.8    Headings. The captions to the several Sections hereof are not a part of this Agreement, but are merely for convenience to assist in locating and reading the Sections of this Agreement.
15.9    Independent Contractors. It is expressly agreed that the relationship of ADCT and NewCo under this Agreement shall be that of independent contractors, and that the relationship between the two Parties under this Agreement shall not constitute a partnership, joint venture or agency. Neither ADCT nor NewCo shall have the authority to make any statements, representations or commitments of any kind, or to take any action, which shall be binding on the other Party, without the prior written consent of the other Party.
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15.10    Waiver. The waiver by either Party of any right hereunder, or the failure of the other Party to perform, or a breach by the other Party, shall not be deemed a waiver of any other right hereunder or of any other breach or failure by such other Party whether of a similar nature or otherwise.
15.11    Cumulative Remedies. No remedy referred to in this Agreement is intended to be exclusive, but each shall be cumulative and in addition to any other remedy referred to in this Agreement or otherwise available under law.
15.12    Waiver of Rule of Construction. Each Party has had the opportunity to consult with counsel in connection with the review, drafting and negotiation of this Agreement. Accordingly, the rule of construction that any ambiguity in this Agreement shall be construed against the drafting Party shall not apply.
15.13    Business Day Requirements. In the event that any notice or other action or omission is required to be taken by a Party under this Agreement on a day that is not a Business Day then such notice or other action or omission shall be deemed to be required to be taken on the next occurring Business Day.
15.14    Translations. This Agreement is in the English language only, which language shall be controlling in all respects, and all versions hereof in any other language shall be for accommodation only and shall not be binding upon the Parties. All communications and notices to be made or given pursuant to this Agreement, and any dispute proceeding related to or arising hereunder, shall be in the English language. If there is a discrepancy between any translation of this Agreement and this Agreement, this Agreement shall prevail.
15.15    Further Actions. Each Party agrees to execute, acknowledge and deliver such further instruments, and to do all such other acts, as necessary or appropriate in order to carry out the purposes and intent of this Agreement.
15.16    Construction. Except where the context expressly requires otherwise, (a) the use of any gender herein shall be deemed to encompass references to either or both genders, and the use of the singular shall be deemed to include the plural (and vice versa), (b) the words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”, (c) the word “will” shall be construed to have the same meaning and effect as the word “will”, (d) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (e) any reference herein to any person shall be construed to include the person’s successors and assigns, (f) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (g) all references herein to Articles, Sections, Schedules, or Exhibits shall be construed to refer to Articles, Sections, Schedules or Exhibits of this Agreement, and references to this Agreement include all Schedules and Exhibits hereto, (h) the word “notice” means notice in writing (whether or not specifically stated) and shall include notices, consents, approvals and other written communications
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contemplated under this Agreement, (i) provisions that require that a Party, the Parties or any committee hereunder “agree”, “consent” or “approve” or the like shall require that such agreement, consent or approval be specific and in writing, whether by written agreement, letter, approved minutes or otherwise (but excluding e-mail and instant messaging), (j) references to any specific law, rule or regulation, or Section, section or other division thereof, shall be deemed to include the then-current amendments thereto or any replacement or successor law, rule or regulation thereof, and (k) the term “or” shall be interpreted in the inclusive sense commonly associated with the term “and/or.”
15.17    Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Each Party shall be entitled to rely on the delivery of executed facsimile copies of counterpart execution pages of this Agreement and such facsimile copies shall be legally effective to create a valid and binding agreement among the Parties.
{Signature Page Follows}

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In Witness Whereof, the Parties intending to be bound have caused this License and Collaboration Agreement to be executed by their duly authorized representatives as of the Effective Date.
ADC Therapeutics SA    Overland ADCT BioPharma (CY) Limited
By: /s/ Christopher Martin        By: /s/ Yang (Tracy) Jiao)
Name: Christopher Martin        Name: Yang (Tracy) Jiao
Title: Chief Executive Officer        Title: Director
Date: December 3, 2020        Date: December 3, 2020


Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.

Exhibit A:    ADCT Patents
[Exhibit A has been omitted pursuant to Item 601(a)(5) of Regulation S-K. ADC Therapeutics SA undertakes to provide a copy of the omitted exhibit to the Securities and Exchange Commission or its staff upon request.]


Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.

Exhibit B:    Products
[Exhibit B has been omitted pursuant to Item 601(a)(5) of Regulation S-K. ADC Therapeutics SA undertakes to provide a copy of the omitted exhibit to the Securities and Exchange Commission or its staff upon request.]


Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.

Exhibit C:    Development Plan
[Exhibit C has been omitted pursuant to Item 601(a)(5) of Regulation S-K. ADC Therapeutics SA undertakes to provide a copy of the omitted exhibit to the Securities and Exchange Commission or its staff upon request.]


Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.

Exhibit D:    Clinical Proof of Concept Studies

[Exhibit D has been omitted pursuant to Item 601(a)(5) of Regulation S-K. ADC Therapeutics SA undertakes to provide a copy of the omitted exhibit to the Securities and Exchange Commission or its staff upon request.]

Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.

Exhibit E:    Existing Global Clinical Trials
[Exhibit E has been omitted pursuant to Item 601(a)(5) of Regulation S-K. ADC Therapeutics SA undertakes to provide a copy of the omitted exhibit to the Securities and Exchange Commission or its staff upon request.]


Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.

Exhibit F:    Third Party Payments
Third Party payments under Upstream Agreements existing as of the Effective Date
[Exhibit F has been omitted pursuant to Item 601(a)(5) of Regulation S-K. ADC Therapeutics SA undertakes to provide a copy of the omitted exhibit to the Securities and Exchange Commission or its staff upon request.]

Certain confidential information contained in this document, marked by [**], has been omitted because ADC Therapeutics SA has determined that the information (i) is not material and (ii) would likely cause competitive harm to ADC Therapeutics SA if publicly disclosed.

Exhibit 4.18
FIRST AMENDMENT TO
REGISTRATION RIGHTS AGREEMENT
This FIRST AMENDMENT TO REGISTRATION RIGHTS AGREEMENT (this “Amendment”) is made as of December 11, 2020 and amends that certain Registration Rights Agreement, dated as of May 19, 2020 (the “Original Agreement”), by and among ADC Therapeutics SA, a Swiss stock corporation (société anonyme) (the “Company”), and Deerfield Partners, L.P. and Deerfield Private Design Fund IV, L.P (each individually, a “Lender” and together, the “Lenders”). All capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in the Original Agreement.
RECITALS:
WHEREAS, the Original Agreement, pursuant to Section 11 thereof, may be amended by the written consent of the Company and the holders of a majority in interest of then-outstanding Registrable Securities;
WHEREAS, the Original Agreement requires that, on or prior to the date that is forty-five (45) days after the six (6) month anniversary of the effective date of the registration statement for the Qualifying IPO, the Company must prepare and file with the SEC a Registration Statement on Form S-1, covering, among other requirements, the resale of all of the Registrable Securities relating to the Initial Notes, with such Registration Statement referred to in the Original Agreement as the “Mandatory Registration Statement;”
WHEREAS, the Original Agreement also requires that, if the Subsequent Note Issuance Date has not occurred prior to the date of the submission of the Company’s acceleration request with respect to the Mandatory Registration Statement, the Company must prepare and, on or prior to the date that is thirty (30) days following the Subsequent Note Issuance Date, file with the SEC a Registration Statement on Form S-1, covering among other requirements, the resale of all of the Registrable Securities that are not at the time covered by the Mandatory Registration Statement; and
WHEREAS, the Company and the Lenders, which constitute the holders of all of the Registrable Securities, desire to amend the Original Agreement to (i) remove the requirement that the Company file the Mandatory Registration Statement and (ii) provide that the Company must file the Subsequent Mandatory Registration Statement with the SEC on or prior to the date that is fifteen (15) days following the Subsequent Note Issuance Date.
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and each of the Lenders hereby agree pursuant to Section 11 of the Original Agreement as follows:


1.    Amendments to Original Agreement.
(a)    Amendment to Section 1(a)(vi). The definition of “Filing Deadline” in Section 1(a)(vi) of the Original Agreement is hereby amended and restated to read in its entirety as follows:
“(vi) “Filing Deadline,” for the Subsequent Mandatory Registration Statement required pursuant to Section 2(a)(ii), shall mean the Subsequent Filing Deadline, and for each Registration Statement required pursuant to Section 2(a)(iv) shall mean the Additional Filing Deadline.”
(b)    Amendment to Section 2(a)(i). Section 2(a)(i) of the Original Agreement is hereby amended and restated to read in its entirety as follows:
“[RESERVED]”
(c)    Amendment to Section 2(a)(ii). Section 2(a)(ii) of the Original Agreement is hereby amended and restated to read in its entirety as follows:
“(ii) The Company shall prepare, and, on or prior to the date that is fifteen (15) days following the Subsequent Note Issuance Date (the “Subsequent Filing Deadline”), file with the SEC a Registration Statement (the “Subsequent Mandatory Registration Statement”) on Form S-1, covering the resale of all of the Registrable Securities, which Registration Statement, to the extent allowable under the Securities Act and the rules and regulations promulgated thereunder (including Rule 416), shall state that such Registration Statement also covers such indeterminate number of additional Common Shares as may become issuable upon exercise of or otherwise pursuant to the Notes.”

(d)    Amendment to Section 2(a)(v). Section 2(a)(v) of the Original Agreement is hereby amended and restated to read in its entirety as follows:
“(v) Notwithstanding the foregoing, if at the time the Company is required to file a Subsequent Mandatory Registration Statement pursuant to Section 2(a)(ii) or an additional Registration Statement pursuant to Section 2(a)(iv), the Company is eligible to use Form S-3 to register the resale of securities by the Investors, then the Company shall file such Registration Statement on Form S-3.”
(e)    Amendment to Section 3(g). Section 3(g) of the Original Agreement is hereby amended and restated to read in its entirety as follows:
“g. The Company shall permit one outside legal counsel designated by the Investors (which shall be Katten Muchin Rosenman LLP (Attn: Mark D. Wood) or such other counsel as shall have been designated by the Investors) (“Legal Counsel”) to review such Registration Statement and all amendments and supplements thereto (as well as all requests for acceleration or effectiveness thereof, but excluding the Company’s filings under the Exchange Act and excluding any amendment or supplement to a Registration
    2

Statement that is substantially similar to the Company’s filings under the Exchange Act), a reasonable period of time prior to their filing with the SEC (not less than five (5) Business Days) and not file any documents in a form to which Legal Counsel reasonably objects and will not request acceleration of such Registration Statement without prior notice to Legal Counsel; provided that, notwithstanding the foregoing, in no event shall the Company be (i) required to file any document with the SEC which in the view of the Company or its counsel contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make any statement therein not misleading or (ii) prohibited from filing any document with the SEC which the Company or its counsel reasonably believes to be required by law to be so filed.”
2.    No Additional Changes. Except as expressly and specifically amended by this Amendment, all provisions of the Original Agreement shall remain in full force and effect according to their terms, and the Company and the Lenders shall continue to be bound by such Original Agreement as modified by this Amendment. In the event of any conflict between any provision of the Original Agreement and this Amendment, this Amendment shall control. From and after the date hereof, all references in the Original Agreement to “this Agreement” shall mean the Original Agreement as amended by this Amendment.
3.    Reports Under the 1934 Act; Restrictive Legends. The Company represents and warrants that it is, and at all times since May 14, 2020 has been, subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act and in compliance with the reporting requirements of the Exchange Act as required for purposes of paragraphs (b)(1)(i) and (c)(1) of Rule 144. Each of the Lenders hereby certifies that it is not an Affiliate of the Company and has not been an Affiliate of the Company within the preceding three months, and the Company and the Lenders hereby acknowledge and agree that (a) for purposes of Rule 144 and, in the case of the Initial Note Conversion Shares, subsection (d)(3)(ii) thereof, the holding period for the Initial Notes and any Initial Note Conversion Shares issued or issuable upon any conversion thereof commenced on May 19, 2020 (which is more than six months prior to the date hereof) and (b) as of the date hereof, the Initial Notes and all of the Initial Note Conversion Shares are eligible for sale by the Lenders under Rule 144. Accordingly, the Company hereby acknowledges and agrees that one of the Unrestricted Conditions (as defined in the Initial Notes) has been satisfied with respect to the Initial Notes and the Initial Note Conversion Shares and none of the Initial Notes and the Initial Note Conversion Shares are required to bear a restrictive legend. The Company further acknowledges that (i) the representations, warranties, acknowledgments and agreements of the Company in this Section 3 are being provided as a material inducement for the Lenders’ willingness to enter into this Amendment, and (ii) in effecting conversions of the Initial Notes and reselling (or engaging in other transactions in respect of) any Conversion Shares, the Lenders will rely on the representations, warranties, acknowledgments and agreements of the Company in this Section 3; provided that at any time before May 19, 2021, if the Company notifies the Lenders that “adequate current public information” (within the meaning of Rule 144(c)) with respect to the Company is not available, the Lenders shall not resell or engage in other transactions in respect of the Initial Notes or the Conversion Shares in reliance on Rule 144, until the Company notifies the Lenders that “adequate current public information” (within the meaning of Rule 144(c)) with respect to the Company is available; provided further that the
    3

Company hereby agrees that it will promptly notify the Lenders that “adequate current public information” (within the meaning of Rule 144(c)) with respect to the Company is available. The Company hereby acknowledges and agrees, for the avoidance of doubt, that nothing contained herein shall in any way modify or waive the Company’s obligations or responsibilities under Section 9 (Reports Under the 1934 Act) of the Original Agreement or Section 6.8 (Qualifying IPO; SEC Documents; Financial Statements) of the Facility Agreement or shall in anyway impair or otherwise affect any of the Lenders’ or any other Secured Party’s rights or remedies under the Original Agreement, the Facility Agreement or any other Facility Documents in respect of such obligations and responsibilities, including without limitation in the event of any breach of default by the Company with respect thereto.
4.    Disclosure; No Inside Information. The Company represents and warrants that it is, and at all times has been, in compliance with its obligations under Section 6.17 (Disclosure; No Inside Information) of the Facility Agreement and hereby ratifies, confirms and reaffirms its obligations under Section 6.17 of the Facility Agreement. Without limiting the foregoing, the Company confirms that neither this Amendment nor any information contained herein or relating hereto constitutes Inside Information.
5.    Ratification; Facility Documents. The Company as Borrower under the Facility Agreement hereby ratifies, confirms and reaffirms its liabilities, its payment and performance obligations (contingent or otherwise) and its agreements under the Facility Agreement and the other Facility Documents, and the liens and security interests granted, created and perfected thereby. This Amendment shall be a “Facility Document” for all purposes under the Facility Agreement and other Facility Documents.
6.    Cost and Expense Reimbursement. Pursuant to Section 9.2 of the Facility Agreement, the Company is required to pay all reasonable and documented out-of-pocket costs and expenses of the Secured Parties of negotiation, preparation, execution, delivery, filing and administration of the Facility Documents and any amendments thereto. The Company hereby ratifies, confirms and reaffirms its cost and expense reimbursement obligations under Section 9.2 of the Facility Agreement and agrees to promptly reimburse the Lenders for all out-of-pocket costs and expenses, including legal fees, incurred by the Lenders in the negotiation, preparation, execution, delivery, filing and administration of this Amendment.
7.    Counterparts. This Amendment may be executed and delivered in two or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement, and shall become effective when counterparts have been signed by each party hereto and delivered to the other parties hereto, it being understood that all parties need not sign the same counterpart. In the event that any signature to this Amendment is delivered by facsimile transmission, by e-mail delivery of a “.pdf” format data file or by other electronic means, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile, “.pdf” or other electronic signature page were an original thereof. No party hereto shall raise the use of a facsimile machine, e-mail delivery of a “.pdf” format data file or other electronic means
    4

to deliver a signature to this Amendment or the fact that such signature was transmitted or communicated through the use of a facsimile machine, e-mail delivery of a “.pdf” format data file or other electronic means as a defense to the formation or enforceability of a contract, and each party hereto forever waives any such defense.
8.    Governing Law. All issues and questions concerning the construction, validity, enforcement and interpretation of this Amendment shall be governed by and construed and enforced in accordance with, the laws of the State of New York, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York.
[Remainder of page left intentionally blank]
[Signature page follows]


    5

IN WITNESS WHEREOF, the undersigned Investors and the Company have caused this First Amendment to Registration Rights Agreement to be duly executed as of the date first written above.
COMPANY:

ADC THERAPEUTICS SA
By:    /s/ Michael Forer    
Name:    Michael Forer
Title:    Vice Chairman & EVP

[Signature page to the First Amendment to the Registration Rights Agreement]
    

IN WITNESS WHEREOF, the undersigned Investors and the Company have caused this First Amendment to Registration Rights Agreement to be duly executed as of the date first written above.

INVESTORS:

DEERFIELD PARTNERS, L.P.

By:     Deerfield Mgmt, L.P.,
    its General Partner

By:    J.E. Flynn Capital, LLC,
    its General Partner

By:     /s/ David J. Clark    
    Name:     David J. Clark
    Title:     Authorized Signatory


DEERFIELD PRIVATE DESIGN FUND IV, L.P.

By: Deerfield Mgmt IV, L.P., General Partner

By: J.E. Flynn Capital IV, LLC, General Partner

By:     /s/ David J. Clark    
    Name:     David J. Clark
    Title:     Authorized Signatory


[Signature page to the First Amendment to the Registration Rights Agreement]
    
Exhibit 4.19
IMAGE_01.JPG

DATE: 28 January 2021
Lease
relating to LEVEL 7
THE TRANSLATION AND INNOVATION HUB,
IMPERIAL COLLEGE WHITE CITY CAMPUS,
LONDON W12

Part of estate building (office)
(RPI Indexed Rent)
Between
IMPERIAL COLLEGE THINKSPACE LIMITED

ADC THERAPEUTICS (UK) LTD
and
ADC Therapeutics SA
CMS Cameron McKenna Nabarro Olswang LLP
Cannon Place
78 Cannon Street
London EC4N 6AF
T +44 20 7367 3000
F +44 20 7367 2000




Table of contents
1.    Definitions    4
2.    Interpretation    9
3.    Demise, Term and Rent    11
4.    Tenant’s Obligations    12
5.    Landlord’s Obligations    23
6.    Agreements    25
7.    Guarantor’s Obligations    28
8.    Tenant Break Clause    29
9.    Jurisdiction    30
10.    Legal Effect    30
Schedule 1 Rights    31
Part 1 The Tenant’s Rights    31
Part 2 Landlord’s Rights    33
Schedule 2 Rent review    35
Schedule 3 Services and Service Charge    41
Part 1 Administrative Provisions    41
Part 2 The Landlord’s Obligations    42
Part 3 Services and Charges    43
Schedule 4 Insurance and Damage Provisions    46
Schedule 5 Title Matters    48
Schedule 6 Works    49
Part 1 Permitted Works    49
Part 2 Form of Request to Ascertain Need to Remove Permitted Works    52
Schedule 7 Underletting    53
Schedule 8 Offer Back Provisions    55
Part 1 Terms of the offer back    55




LAND REGISTRY PRESCRIBED CLAUSES
LR1. Date of lease 28 January 2021
LR2. Title number(s)
LR2.1 Landlord’s title number(s)
BGL106935.
LR2.2 Other title numbers
None.
LR3. Parties to this lease
Landlord
IMPERIAL COLLEGE THINKSPACE LIMITED (incorporated and registered in England and Wales under company registration number 5272659), the registered office of which is at Faculty Building, Level 1, Imperial College, London SW7 2AZ.
Tenant
ADC THERAPEUTICS (UK) LTD (incorporated and registered in England and Wales under company registration number 09353055), the registered office of which is at 4th Floor, Reading Bridge House George Street, Reading, Berkshire, RG1 8LS.
Guarantor
ADC Therapeutics SA (incorporated and registered in Switzerland under company registration number CHE-461.408.645), the registered office of which is at Biolpole, Route de la Corniche 3B, 1066 Epalinges, Switzerland.
LR4. Property
In the case of a conflict between this clause and the remainder of this lease then, for the purposes of registration, this clause shall prevail.
The property described as the “Premises” in clause 1 of this Lease.
LR5. Prescribed statements etc. None.
LR6. Term for which the Property is leased
The term as specified in clause 3.1 of this Lease.
LR7. Premium None.
LR8. Prohibitions or restrictions on disposing of this lease This Lease contains a provision that prohibits or restricts dispositions.
    1

LR9. Rights of acquisition etc.
LR9.1 Tenant’s contractual rights to renew this lease, to acquire the reversion or another lease of the Property, or to acquire an interest in other land
None.
LR9.2 Tenant’s covenant to (or offer to) surrender this lease
See clause 4.15.3
LR9.3 Landlord’s contractual rights to acquire this lease
None.
LR10. Restrictive covenants given in this lease by the Landlord in respect of land other than the Property None.
LR11. Easements
LR11.1 Easements granted by this lease for the benefit of the Property
As specified in this Lease at Part 1 of Schedule 1.
LR11.2 Easements granted or reserved by this lease over the Property for the benefit of other property
As specified in this Lease at Part 2 of Schedule 1.
LR12. Estate rentcharge burdening the Property None.
LR13. Application for standard form of restriction None.
LR14. Declaration of trust where there is more than one person comprising the Tenant


    2

LEASE INFORMATION PAGE
This part of the Lease summarises some of the key terms of this Lease but does not form part of the Lease. In the event of any conflict the remainder of this Lease shall take precedence.

Rent:
£346,115 per annum from the Rent Commencement Date;
£412,676 per annum from the second anniversary of the Term Start Date;
£479,237 per annum from the third anniversary of the Term Start Date; and
£532,485 from the fourth anniversary of the Term Start Date
Initial Service Charge Contribution: £103,657.08 per annum
Rent Commencement Date: 18 January 2022
Ancillary Rent Commencement Date: The Term Start Date
Term: A term of 10 years commencing on the Term Start Date and expiring on the Term End Date
Tenant’s Break Date:
28 January 2026 [the fifth anniversary of the Term Start Date]
Type of Rent Review: RPI Indexed with an open market review after five years
Rent Review Dates: The fifth anniversary of the Term Start Date and each succeeding anniversary of that date
Market Review Date: The fifth anniversary of the Term Start Date
1954 Act Exclusion: Yes

LEASE
PARTIES
(1)    the Landlord named in clause LR3 and any other person who becomes the immediate landlord of the Tenant (the “Landlord”);
(2)    the Tenant named in clause LR3 and its successors in title (the “Tenant”); and
(3)    the Guarantor named in clause LR3 (the “Guarantor”).
IT IS AGREED AS FOLLOWS:
1.    Definitions
This Lease uses the following definitions:
“1925 Act”: Law of Property Act 1925;
“1954 Act”: Landlord and Tenant Act 1954;
“1986 Act”: Insolvency Act 1986;
    3

“1987 Order”: the schedule to the Town and Country Planning (Use Classes) Order 1987 (as amended by the Town and Country Planning (Use Classes) (Amendment) (England) Order 2005) but not including in this context any other Order amending or replacing it
“1994 Act”: Law of Property (Miscellaneous Provisions) Act 1994;
“Act”: any act of Parliament and any delegated law made under it;
“AGA”: an authorised guarantee agreement (as defined in section 16 of the Landlord and Tenant (Covenants) Act 1995);
“Ancillary Rent Commencement Date”: the Term Start Date;
“Area Clearance and Decontamination Certificate”: a certificate in such form as the Landlord shall reasonably require and notify to the Tenant to be provided by the Tenant or its designated contractor confirming that the Tenant has cleared and decontaminated the Premises in accordance with its obligations in this Lease;
“Break Date”: 28 January 2026 [the fifth anniversary of the Term Start Date];
“Building”: the building known as the Translation and Innovation Hub White City Campus 80 Wood Lane London W12 shown edged red on Plan 1:
(a)    including all alterations, additions and improvements and all landlord’s fixtures forming part of it at any time during the Term; and
(b)    excluding any tenants’ fixtures forming part of it at any time during the Term;
“Building Common Parts”: subject to paragraph 4 of Part 2 of Schedule 1, any part of, or anything in, the Building that does not form part of a Lettable Unit and that is used or available for use by:
(a)    the Tenant in common with others;
(b)    the Landlord in connection with the provision of the Services; or
(c)    visitors to the Building;
“Building Management Systems”: all or any of the following used within or serving the Building that do not exclusively serve any Lettable Unit:
(a)    lighting systems;
(b)    security, CCTV and alarm systems;
(c)    access control systems;
(d)    audio and audio-visual systems;
(e)    wireless, phone, data transmission and other telecommunications systems;
(f)    air ventilation and filtration;
(g)    air-conditioning, heating and climate control systems;
(h)    water heating, filtering and chilling systems;
(i)    fire detection, alarm and sprinkler systems;
(j)    any other system the Landlord requires for the effective operation of the Building;
and all control systems, plant, machinery, equipment, Supplies and Conducting Media used in connection with them;
    4

“Business Day”: a day (other than a Saturday, Sunday or public holiday) on which banks are usually open for business in England and Wales;
“company”: includes:
(a)    any UK registered company (as defined in section 1158 of the Companies Act 2006);
(b)    to the extent applicable, any overseas company as defined in section 1044 of the Companies Act 2006;
(c)    any unregistered company (to include any association); and
(d)    any “company or legal person” in relation to which insolvency proceedings may be opened pursuant to Article 3 of the EC Regulation on Insolvency Proceedings 2000;
“Conducting Media”: any media for the transmission of Supplies but not including any service risers or any other airspace through which the media run;
“Current Guarantor”: someone who, immediately before a proposed assignment, is either a guarantor of the Tenant’s obligations under this Lease or a guarantor of the obligations given by a former tenant of this Lease under an AGA;
“Electronic Communications Apparatus”: “electronic communications apparatus” as defined in section 151 of the Communications Act 2003;
“End Date”: the last day of the Term (however it arises);
“Entry Safeguards”: the obligations to be observed when a right to enter the Premises is exercised as set out in clause 5.5;
“Environmental Performance”: all or any of the following:
(a)    the consumption of energy and associated generation of greenhouse gas emissions;
(b)    the consumption of water;
(c)    waste generation and management; and
(d)    any other environmental impact arising from the use or operation of the Premises, the Estate or the Building;
“EPB Regulations”: the Energy Performance of Buildings (England and Wales) Regulations 2012;
“EPC”: an Energy Performance Certificate and Recommendation Report (as defined in the EPB Regulations);
“Estate”: the land at Wood Lane London W12 comprised in title NGL481717 shown edged in red on Plan 2 and all buildings from time to time on such land or such other land (including the Building) of a greater or lesser extent as the Superior Landlord may determine and notify to the Landlord in writing from time to time;
“Group Company”: in relation to any company, any other company within the same group of companies as that company within the meaning of section 42 of the 1954 Act;
“Hazard Analysis”: the Landlord's tenant hazard analysis questionnaire;
“Head Lease”: the lease dated 28 July 2014 made between Imperial College of Science Technology and Medicine (1) and Voreda Investments Limited (2) as varied by a deed of variation dated 1 May 2015 between the same parties;
    5

“Imperial Period”: the period from the date of this Lease until the date Imperial College of Science Technology and Medicine or an entity in which Imperial College of Science Technology and Medicine holds 75% or more of the voting rights ceases to own the freehold of the whole or a significant part of the Estate;
“Initial Licence for Alterations”; means the licence for alterations of even date herewith and made between the parties to this Lease;
“Insured Risks”: has the meaning defined in the Superior Lease;
“Interest Rate”: three per cent above the base rate for the time being in force of Lloyds Bank Plc (or any other UK clearing bank specified by the Landlord);
“Lease”: this lease, which is a “new tenancy” for the purposes of section 1 Landlord and Tenant (Covenants) Act 1995, and any document supplemental to it;
“Lettable Unit”: accommodation within the Building and any other buildings on the Estate from time to time let or occupied or intended for letting or occupation, but excluding accommodation let or occupied for the purposes of providing any of the Services;
“Main Rent”: the rent payable under clause 3.2;
“Minor Structural Alterations”: minor works to drill into or to make attachments to structural parts of the Premises in order to affix or accommodate works or alterations which otherwise are exclusively non-structural and do not adversely impact on the structural integrity of the Premises;
“Notice”: any notice, notification or request given or made under this Lease;
“Outgoings”: all or any of:
(a)    all existing and future rates, taxes, duties, charges, and financial impositions charged on the Premises or any owner or occupier of the Premises except for:
(i)    tax (other than VAT) on the Rents payable; and
(ii)    any tax arising from the Landlord’s dealing with its own interests;
(b)    Supply Costs for the Premises;
(c)    a fair and reasonable proportion of the Outgoings referred to in paragraphs (a) and (b) charged in respect of the Premises and any other parts of the Building to the extent that those amounts do not form part of the Service Costs; and
(d)    a fair and reasonable proportion of the Outgoings referred to in paragraphs (a) and (b) charged in respect of the Premises and any other parts of the Estate;
“Permitted Apparatus”: Electronic Communications Apparatus or apparatus relating to Wireless Data Services installed within the Premises;
“Permitted Use”: research and development units and laboratories and other uses within Classes B1(b) and (c) of the 1987 Order with ancillary offices within Class B1(a) of the 1987 Order;
“Permitted Works”: all or any works (including Minor Structural Alterations and the installation of Permitted Apparatus) to which the Landlord has consented or for which, under clause 4.11, the Landlord’s consent is not required;
“Planning Acts”: every Act for the time being in force relating to the use, development, design, control and occupation of land and buildings;
    6

“Planning Permission”: any permission, consent or approval given under the Planning Acts;
“Plans”: any of the plans contained in this Lease;
“Plant Area” means the part of the Terrace shown edged red on Plan 4;
“Premises”: the premises on level 7 of the Building shown edged red on Plan 3:
(a)    including:
(i)    all plaster and other internal surfacing materials and finishes on the structural walls, floors and ceilings of the Premises and on the other structural parts of the Building within or bounding the Premises;
(ii)    windows and window frames but excluding the external decorative finishes of any windows on the external walls of the Building or dividing the Premises from the Building Common Parts;
(iii)    doors and door frames but excluding the external decorative finishes and frames of any that divide the Premises from the Building Common Parts
(iv)    the plaster and other internal surfacing and finishes on any non-structural walls separating the Premises from any Building Common Parts;
(v)    one half severed vertically of any non-structural walls separating the Premises from any adjoining Lettable Units;
(vi)    the entirety of any non-structural walls wholly within the Premises;
(vii)    any raised floor systems and finishes to the upper surfaces of the raised floor systems;
(viii)    all Conducting Media and landlord’s plant, equipment and fixtures within and exclusively serving the Premises including the Tenant’s fire detection, alarm and sprinkler systems (if any) up to the point of connection with the Landlord’s fire detection, alarm and sprinkler systems; and
(ix)    any Permitted Works carried out to or at the Premises; but
(b)    excluding:
(i)    all load bearing and exterior walls and the floors and ceilings of the Premises (other than those included above);
(ii)    all structural parts of the Building;
(iii)    the glass walls, windows, frames and structure of any exterior curtain walling;
(iv)    the entirety (subject to paragraph (a)(iv) of this definition) of any non-structural walls separating the Premises from any Building Common Parts;
(v)    the airspace within any service risers that run through the Premises;
(vi)    the Landlord’s fire detection, alarm and sprinkler systems (if any) up to the point of connection with the Tenant’s fire detection, alarm and sprinkler systems;
(vii)    the Building Management Systems (if any) within the Premises; and
(viii)    all tenant’s fixtures;
    7

“Rent Commencement Date”: 18 January 2022;
“Rent Days”: 25 March, 24 June, 29 September and 25 December;
“Rents”: the Main Rent, the Service Charge; any VAT payable on them and any interest payable under clause 4.5;
“Risk Period”: three years;
“Service Charge”: subject to the provisions of paragraph 7 of Part 1 of Schedule 3, a fair proportion (calculated on a floor area basis or any other method as the Landlord from time to time decides, acting reasonably) of the Service Costs together with the sums described in paragraph 1.1 of Schedule 4 (where such sums are not the subject of a separate demand from the Landlord);
“Service Charge Code”: the 3rd edition of the code of practice (2014) published by the Royal Institution of Chartered Surveyors called “Service Charges in Commercial Property”;
“Service Charge Exclusions”: the costs listed in Part 4 of Schedule 3;
“Service Costs”: the aggregate costs (including VAT that is not recoverable by the Landlord from HM Revenue & Customs) incurred by the Landlord in providing the Services and paying the costs listed in Part 3 of Schedule 3 after excluding any Service Charge Exclusions;
“Services”: the services provided by the Landlord in Part 3 of Schedule 3;
“Superior Landlord”: the person (if any) entitled for the time being to the reversion expectant upon the determination of the Superior Lease, and (where the context admits) all superior landlords, however remote.
“Superior Lease”: the lease dated 28 July 2014 made between Imperial College of Science Technology and Medicine (1) Imperial Bioincubator Limited (2) and Imperial College of Science Technology and Medicine (3) as amended by a deed of rectification dated 5 February 2015 and as varied by a deed of variation dated 1 May 2015 both made between the same parties and by a deed of variation dated 11 January 2017 made between Lime Property Fund Limited Partnership (1) Imperial College Thinkspace Limited (2) and Imperial College of Science Technology and Medicine (3).
“Supplies”: water, gas, air, foul and surface water drainage, electricity, oil, telephone, heating, telecommunications, internet, data communications and similar supplies or utilities;
“Supply Costs”: the costs of Supplies including procurement costs, meter rents and standing charges;
“Tenant’s Terrace Space Plant” means the air-conditioning plant and ancillary ducts, cabling and wiring which will serve the Premises and which are shown and described in the Initial Licence for Alterations (being in the locations within the Plant Area shown on Plan 4);
“Term”: the period of this Lease;
“Term End Date”: 27 January 2031;
“Term Start Date”: 28 January 2021;
“Terrace”: the terrace on Level 7 of the Building;
“Uninsured Risk”: is as defined in the Superior Lease;
“VAT”: value added tax or any similar tax from time to time replacing it or performing a similar function;
    8

“VAT Supply”: a “supply” for the purpose of the Value Added Tax Act 1994; and
“Wireless Data Services”: the provision of wireless data, voice or video connectivity or wireless services permitting or offering access to the internet or any wireless network, mobile network or telecommunications system that involves a wireless or mobile device.
2.    Interpretation
In this Lease:
2.1    “notify”, “notifies” or “notifying” means notify, notifies or notifying in writing in accordance with clause 6.4;
2.2    where appropriate, the singular includes the plural and vice versa, and one gender includes any other;
2.3    obligations owed by or to more than one person are owed by or to them jointly and severally;
2.4    an obligation to do something includes an obligation not to waive any obligation of another person to do it;
2.5    an obligation not to do something includes an obligation not to permit or allow another person to do it;
2.6    the Tenant will be liable for any breaches of its obligations in this Lease committed by:
2.6.1    any authorised occupier of the Premises or its or their respective employees, licensees or contractors; or
2.6.2    any person under the control of the Tenant or acting under the express or implied authority of the Tenant;
2.7    reference to either the Landlord or the Tenant having a right of approval or consent under this Lease means a prior written approval or consent, which must not be unreasonably withheld or delayed except where this Lease specifies that either the Landlord or the Tenant has absolute discretion;
2.8    where the Landlord has the right to impose regulations or to approve, decide, designate, nominate, request, require, specify or stipulate any matter or thing under this Lease, that right will be subject to a condition that the Landlord will act reasonably and properly when exercising that right except where this Lease specifies that the Landlord has absolute discretion;
2.9    references to the provision of plans, drawings, specifications or other documents means their provision in hard copy, electronically in PDF or in any other easily readable format as may be appropriate having regard to the purpose for which they are provided and the nature of the information that they contain, but not in a format that is proprietary to a particular computer system or program that cannot be imported into or easily read by another computer system or program;
2.10    any rights excepted or reserved to the Landlord are also excepted or reserved to the Superior Landlord any mortgagee of the Landlord and all persons authorised by the Landlord and any covenant by the Tenant to permit entry by the Landlord for any purpose is a covenant also to permit entry by such persons;
2.11    reference to any right exercisable by the Landlord or any right exercisable by the Tenant in common with the Landlord shall be construed as including (where appropriate) the exercise of such right:
    9

2.11.1    the Superior Landlord;
2.11.2    any mortgagee of the Landlord or the Superior Landlord and all persons authorised by it; and
2.11.3    in common with all other persons having a like right;
2.12    the giving of any consent or approval of the Landlord required under this Lease shall be conditional upon obtaining the consent or approval of the Superior Landlord (if required under the terms of the Superior Lease) and any mortgagee of the Landlord provided that in all cases where the Landlord may not unreasonably withhold or delay consent the same shall apply to any mortgagee;
2.13    references to a Schedule are to a Schedule to this Lease and the Landlord and the Tenant must comply with their respective obligations in them;
2.14    apart from in clauses 4.6.1 and clause 4.10.3 where either the Tenant or the Landlord must pay any costs that the other incurs (or any proportion of them), those costs must be reasonable and proper and reasonably and properly incurred;
2.15    references to any sums being payable on demand or when demanded mean being payable when demanded in writing;
2.16    reference to “the Building”, “the Building Common Parts”, “the Estate” or “the Premises” means the whole or an individual part or parts unless inappropriate in the context used;
2.17    reference to “adjoining premises” means any land or buildings adjoining or nearby the Building and the Estate, whether or not owned by the Landlord (unless express reference is made to the Landlord’s ownership of those premises);
2.18    references to an Act are to that Act as amended from time to time and to any Act that replaces it but references to the Town and Country Planning (Use Classes) Order 1987 are to that Order as in force at 31 August 2020;
2.19    “includes”, “including” and similar words are used without limitation or qualification to the subject matter of the relevant provision;
2.20    if any provision is held to be illegal, invalid or unenforceable, the legality, validity and enforceability of the remainder of this Lease will be unaffected; and
2.21    if a person must take a matter into consideration that person must have reasonable regard to it but the final decision remains at that person’s absolute discretion.
3.    Demise, Term and Rent
3.1    The Landlord leases the Premises to the Tenant with full title guarantee (subject to the variations set out in Schedule 5):
3.1.1    for a term starting on the Term Start Date and ending on the Term End Date;
3.1.2    together with the rights listed in Part 1 of Schedule 1;
3.1.3    excepting and reserving to the Landlord the rights listed in Part 2 of Schedule 1;
3.1.4    subject to the provisions of any documents or matters specified or referred to in Schedule 5; and
3.1.5    subject to any rights reserved by the Superior Lease to the Superior Landlord.
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3.2    The Tenant must pay as rent reserved under this Lease:
3.2.1    for the period starting on the Rent Commencement Date and ending on 27 January 2023 [the day before the second anniversary of the Term Start Date] three hundred and forty six thousand one hundred and fifteen pounds (£346,115) yearly;
3.2.2    for the period starting on 28 January 2023 [the second anniversary of the Term Start Date] and ending on 27 January 2024 [the day before the third anniversary of the Term Start Date] four hundred and twelve thousand six hundred and seventy six pounds (£412,676) yearly;
3.2.3    for the period starting on 28 January 2024 [the third anniversary of the Term Start Date] and ending on 27 January 2025 [the day before the fourth anniversary of the Term Start Date] four hundred and seventy nine thousand two hundred and thirty seven pounds (£479,237) yearly
3.2.4    for the period starting on 28 January 2025 [the fourth anniversary of the Term Start Date] and ending on 27 January 2026 [the day before the fifth anniversary of the Term Start Date] five hundred and thirty two thousand four hundred and eighty five pounds (£532,485) yearly
3.2.5    during the remainder of the Term, the rent set out in clause 3.2.4 as increased (if at all) in accordance with the provisions of Schedule 2.
3.3    The Main Rent is not payable for any period before the Rent Commencement Date.
3.4    Starting on the Ancillary Rent Commencement Date the Tenant must pay the Service Charge due under clause 4.3 and Schedule 3.
3.5    The Tenant must pay as rent VAT under clause 4.4.
3.6    The Main Rent is payable by equal quarterly payments in advance on the Rent Days in every year. The first payment will be for the period starting on (and to be paid on) the Rent Commencement Date and ending on the last day of that quarter.
3.7    The Rents and all other sums payable under this Lease must be paid by the Tenant by direct debit or electronic transfer using the Bankers Automated Clearing System (or any similar system that may replace it) to the United Kingdom bank account notified by the Landlord to the Tenant or in such other manner as the Landlord may reasonably require.
3.8    The Tenant must not make any legal or equitable deduction, set-off or counterclaim from any payment due under this Lease unless required to do so by law.
4.    Tenant’s Obligations
4.1    Main Rent
The Tenant must pay the Main Rent when due.
4.2    Outgoings
4.2.1    The Tenant must pay all Outgoings when demanded.
4.2.2    If the Landlord loses the benefit of any rates relief or exemption after the end of the Term because the Tenant has received that benefit before the end of the Term, the Tenant must pay the Landlord on demand an amount equal to the relief or exemption that the Landlord has lost.
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4.3    Service Charge
The Tenant must pay the Service Charge in accordance with Part 1 of Schedule 3.
4.4    VAT
4.4.1    The Tenant must pay (at the same time as the VAT Supply is made) subject to the Tenant receiving a proper VAT invoice addressed to the Tenant:
(a)    VAT on any consideration in respect of a VAT Supply to the Tenant by the Landlord; and
(b)    a fair proportion of the VAT (and interest, penalties and costs where these are incurred because of anything the Tenant does or fails to do) charged in respect of any VAT Supply to the Landlord in respect of the Premises, the Estate or the Building where that VAT is not recoverable by the Landlord from HM Revenue & Customs.
4.4.2    The Tenant must not do anything that would result in the disapplication of the option to tax in respect of the Landlord’s interest in the Estate.
4.5    Interest on overdue payments
The Tenant must pay interest on the Rents and on all other sums not paid on or by the due date (or, if no date is specified, not paid within 10 Business Days after the date of demand). Interest will be payable at the Interest Rate for the period starting on the due date (or date of demand) and ending on the date of payment.
4.6    Reimburse fees incurred by the Landlord
The Tenant must pay on demand the Landlord’s proper costs (including legal and surveyor’s charges and bailiff’s fees) and disbursements and the costs and disbursements of any Superior Landlord in connection with:
4.6.1    any breach of the Tenant’s obligations in this Lease, including the preparation and service of a notice under section 146 of the 1925 Act;
4.6.2    any application by the Tenant for consent under this Lease, whether that application is withdrawn or consent is granted or lawfully refused, except in cases where the Landlord is required to act reasonably and the Landlord unreasonably refuses to give consent;
4.6.3    the preparation and service of any notice by the Landlord under clause 4.13.4; and
4.6.4    the preparation and service of a schedule of dilapidations served no later than six months after the End Date.
4.7    Indemnity
4.7.1    The Tenant must indemnify the Landlord against all actions, claims, demands made by a third party, all costs, damages, expenses, charges and taxes payable to a third party and the Landlord’s own liabilities, costs and expenses incurred in defending or settling any action, claim or demand in respect of any personal injury or death, damage to any property and any infringement of any right arising from:
(a)    the exercise of the Tenant’s rights;
(b)    the carrying out of any Permitted Works;
(c)    the installation of any Permitted Apparatus; or
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(d)    otherwise arising in respect of the Premises or their use.
4.7.2    The Tenant must indemnify the Landlord against all actions, claims, demands, costs, expenses, charges, taxes and liabilities arising from any breach by the Tenant of any of its obligations in this Lease.
4.7.3    In respect of any claim covered by the indemnity in clause 4.7.1 or the indemnity in clause 4.7.2 the Landlord must:
(a)    give notice to the Tenant of the claim as soon as reasonably practicable after receiving notice of it;
(b)    provide the Tenant with any information and assistance in relation to the claim that the Tenant may reasonably require, subject to the Tenant paying to the Landlord all costs incurred by the Landlord in providing that information or assistance; and
(c)    mitigate its loss (at the Tenant’s cost) where it is reasonably practicable for the Landlord to do so.
4.8    Insurance
The Tenant must comply with its obligations in Schedule 4.
4.9    Repair and decoration
4.9.1    The Tenant must:
(a)    keep the Premises in good and substantial repair and condition and clean and tidy;
(b)    keep all plant, equipment or fixtures forming part of the Premises (or that exclusively serve them) properly maintained in accordance with good industry practice and any requirements of the Landlord’s insurers that are advised to the Tenant in writing;
(c)    keep tenant’s fixtures in good repair and working order;
(d)    replace (where beyond economic repair) any Conducting Media and Landlord’s plant, equipment or fixtures forming part of the Premises with items of equivalent or better quality.
4.9.2    The Tenant must promptly replace any damaged glass forming part of the Premises with glass of equivalent or better quality and thickness.
4.9.3    Subject to clause 4.13.5, the Tenant must clean and repair all floor coverings in the Premises as often as reasonably necessary and, in the final three months of the term, renew and replace them with floor coverings of a colour and quality first approved by the Landlord.
4.9.4    The Tenant shall as often as may be necessary but in any event not less often than every fifth year of the Term and also during the last year of the Term decorate the Premises usually decorated in a good and workmanlike manner with good quality materials in a colour to be approved by the Landlord (such approval not to be unreasonably withheld or delayed) if different from the initial colour.
4.9.5    The obligations under this clause 4.9 apart from clause 4.9.2 exclude damage by any Insured Risk or Uninsured Risk, except to the extent that payment of any insurance
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money is refused because of anything the Tenant does or fails to do and the Tenant has not complied with paragraph 1.1.4 of Schedule 4.
4.10    Allow entry
4.10.1    The Tenant must allow the Landlord to enter the Premises on giving not less than 48 hours’ notice (save in emergency or where the need for such entry is occasioned by the Tenant’s default) and subject always to clause 5.5:
(a)    to view the state of repair and condition of the Premises and to take schedules of the Landlord’s fixtures and fittings and of any dilapidations;
(b)    to inspect, rebuild, repair or carry out alterations to any adjoining property;
(c)    to ascertain whether there has been any breach or non-performance of any of the Tenant’s covenants or conditions in this Lease;
(d)    to exercise the rights excepted and reserved to the Landlord by this Lease; and
(e)    for any other reasonable purpose relating to the Landlord’s reversionary interest in the Premises.
4.10.2    If the Landlord requires the Tenant to remedy any breach of the Tenant’s obligations under this Lease or a third party requires the Tenant to take some action in relation to the Premises to comply with any Act then the Tenant must comply with those requirements immediately in the case of an emergency or, in all other cases, begin to comply with those requirements within 15 Business Days after being notified of them and diligently complete any works required.
4.10.3    If the Tenant does not comply with clause 4.10.1(a), the Landlord may enter the Premises and carry out any works required itself. The Tenant must repay, as a debt on demand, all the costs the Landlord incurs in so doing. The Landlord’s rights under clause 6.1 will be unaffected.
4.11    Alterations
4.11.1    The Tenant must not:
(a)    build any new structure on, or alter the external appearance of, the Premises or cut into any structural part of the Building, except for Minor Structural Alterations; or
(b)    install Electronic Communications Apparatus or apparatus relating to Wireless Data Services, except where intended only to serve the lawful occupier’s business at the Premises.
4.11.2    Landlord’s consent is not required for the installation and removal of, or alterations to internal demountable partitioning that will not have an adverse impact on the Environmental Performance of the Building or the Building Management Systems, provided that the Tenant shall:
(a)    supply the Landlord in advance with full details of any such works, and
(b)    remove any such partitioning at the end of the Term.
4.11.3    The Tenant must not, without the Landlord’s consent:
(a)    do any other works to the Premises;
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(b)    make any Minor Structural Alterations; or
(c)    install any apparatus under clause 4.11.1(b).
4.11.4    The Tenant must comply with its obligations in Part 1 of Schedule 6 when carrying out or installing any Permitted Works, whether or not the Landlord’s consent is required for them.
4.11.5    Where the Landlord’s consent is expressly required under this clause 4.11, the Landlord may impose requirements on the Tenant in addition to those contained in Schedule 6 when giving its consent.
4.12    Signs and advertisements
4.12.1    The Tenant must not display any signs or advertisements on the Premises that are visible from:
(a)    outside the Building; or
(b)    any atrium or other Building Common Parts.
4.13    Obligations at the End Date
4.13.1    Subject to clause 4.13.8, by the End Date the Tenant must have removed:
(a)    all tenant’s and trade fixtures and loose contents from the Premises;
(b)    all signage installed by the Tenant at the Premises or elsewhere at the Building or the Estate;
(c)    subject to clause 4.13.4, all Permitted Works, but only where and to the extent required by the Landlord in writing;
(d)    all Permitted Apparatus; and
(e)    (without affecting any other Landlord’s rights), any works that have been carried out by the Tenant in breach of any obligation in this Lease.
4.13.2    The Tenant must make good all damage to the Premises, the Building or the Estate caused when complying with clause 4.13.1 and restore them to the same state and condition as they were in before the items removed were originally installed.
4.13.3    By the End Date the Tenant must have cleared hazardous materials from and decontaminated the Premises in accordance with the End of Lease Area Decontamination protocol attached as Appendix 1 (as amended by the Landlord from time to time, acting reasonably). The Tenant shall provide the Landlord with the Area Clearance and Decontamination Certificate confirming that the Tenant has complied with its obligations under this clause 4.13.3 promptly following completion of those works and by no later than the End Date.
4.13.4    If, no more than six months and no less than three months before the End Date, the Tenant serves on the Landlord a request in the form set out in Part 2 of Schedule 6, the only Permitted Works that the Tenant must remove under clause 4.13.1(c) will be:
(a)    those carried out before the date of the Tenant’s request that the Landlord requires to be removed by notice to the Tenant within eight weeks of the Landlord receiving the Tenant’s request; and
(b)    those carried out after service of the Tenant’s request;
and any other Permitted Works need not be removed.
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4.13.5    Clause 4.13.4 will apply to the Tenant’s obligation to renew and replace floor coverings at the end of the Term under clause 4.9.3 as if that obligation were an obligation to remove Permitted Works.
4.13.6    At the End Date the Tenant must:
(a)    give back the Premises (and the fixtures, plant and equipment in them) in good decorative order and in a state, condition and working order consistent with the Tenant’s obligations in this Lease and any requirements of the Landlord’s insurers;
(b)    give back the Premises with vacant possession; and
(c)    hand to the Landlord any registers or records maintained by the Tenant pursuant to any statutory duty that relate to the Premises including any health and safety file and EPC.
4.13.7    If the Tenant has not removed all of its property from the Premises by the End Date and the Landlord gives the Tenant not less than five Business Days’ notice of its intention to do so:
(a)    the Landlord may sell that property as the agent of the Tenant;
(b)    the Tenant must indemnify the Landlord against any liability of the Landlord to any third party whose property has been sold in the genuine but mistaken belief that it belonged to the Tenant; and
(c)    the Landlord must pay to the Tenant the sale proceeds after deducting the costs of transportation, storage and sale incurred by the Landlord.
4.13.8    Notwithstanding the foregoing provisions of this clause, the Tenant shall not be required to remove the Permitted Works consented by and carried out in accordance with the Initial Licence for Alterations by the End Date.
4.14    User
4.14.1    The Tenant must not use the Premises other than for the Permitted Use.
4.14.2    The Tenant must not use the Premises as a betting office, an amusement arcade or in connection with gaming, for any political or campaigning purposes or for any sale by auction or for any illegal or immoral purpose nor for any purpose or in any manner which may cause damage, disturbance or nuisance to the Landlord or to any other person or any property.
4.14.3    The Tenant must not use the Premises for the sale of alcohol for consumption on or off the Premises or for the preparation or cooking of food other than, in either case, in connection with any staff and client catering facilities ancillary to the Permitted Use.
4.14.4    The Tenant must not:
(a)    keep in the Premises any plant, machinery or equipment (except that properly required for the Permitted Use) nor without the Landlord’s consent, which shall for the avoidance of doubt be a matter for its absolute discretion, any petrol or other explosive or specially flammable substance;
(b)    cause any nuisance or damage to the Landlord or the other tenants or occupiers of the Building or the Estate or to the owners, tenants or occupiers of any adjoining premises;
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(c)    overload any part of the Premises or the Building or any plant, machinery, equipment or Conducting Media;
(d)    do anything that blocks the Conducting Media or makes them function less efficiently including any blockage to any drains, pipes or sewers by virtue of any waste, grease or refuse deposited by the Tenant;
(e)    operate any Permitted Apparatus so as to interfere with the lawful use of Electronic Communications Apparatus or the provision of Wireless Data Services elsewhere in the Building, the Estate or on any adjoining premises; or
(f)    commence any laboratory-based or office activity which is not covered by the Hazard Analysis reviewed and approved by the Landlord prior the Term Commencement Date without first declaring the activity to the Landlord for review and approval (such approval not to be unreasonably withheld or delayed).
4.14.5    When exercising any right granted to it for entry to any other part of the Building or the Estate the Tenant must:
(a)    cause as little damage and interference as is reasonably practicable to the remainder of the Building or the Estate and the business of its tenants and occupiers and make good any physical damage caused; and
(b)    comply with the Landlord’s requirements and those of any other tenants and occupiers of the Building or the Estate who are affected.
4.14.6    The Tenant must provide the Landlord with the names, addresses and telephone numbers of not fewer than two people who hold keys and any security access codes to the Premises and who may be contacted in an emergency if the Landlord needs access to the Premises outside the Tenant’s normal business hours.
4.15    Alienation
4.15.1    The Tenant must not assign, underlet, charge, hold on trust, part with or share possession or occupation of the Premises in whole or in part, except as authorised under this clause 4.15 or Schedule 7.
4.15.2    Without prejudice to the generality of clause 4.15.1, the Tenant must not during the Imperial Period assign underlet charge hold on trust part with possession or share occupation of the whole or any part of the Premises (a “Disposal”) to any person:
(a)    who is substantively involved in the manufacture, sale or distribution of goods or services which if used in the manner in which they were designed or intended to be used have a proven materially adverse impact on the life expectancy of humans OR whose activities are incompatible with the objectives of Imperial College of Science Technology and Medicine or the objectives of its major research funders. Without limitation if the Chief Medical Adviser to the UK Government has issued a health warning in relation to something it will be deemed for the purpose of this sub paragraph only to have been proven to have a material adverse impact on the life expectancy of humans;
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(b)    in respect of which it is reasonably likely that a Disposal to such person would cause Imperial College of Science Technology and Medicine to lose its charitable status.
In the event of any conflict between the provisions of this clause 4.15.2 and any of the other provisions of this Lease, the provisions of this clause 4.15.2 shall prevail.
4.15.3    The Tenant must not assign the whole or underlet the whole of the Premises unless it has complied with its obligations in Schedule 8 and the Landlord has decided (or the Landlord is treated as having decided) not to accept an offer to surrender the Premises to the Landlord.
4.15.4    The Tenant may, with the Landlord’s consent, assign the whole of the Premises.
4.15.5    For the purposes of section 19(1A) of the Landlord and Tenant Act 1927:
(a)    the Tenant may not assign to a Current Guarantor;
(b)    if required by the Landlord, in its absolute discretion any consent to assign may be subject to a condition that:
(i)    the assigning tenant gives the Landlord an AGA; and
(ii)    any guarantor of the assigning tenant gives the Landlord a guarantee that the assigning tenant will comply with the terms of the AGA
in each case in a form that the Landlord requires, given as a deed and delivered to the Landlord before the assignment;
(c)    any consent to assign may (to the extent required by the Landlord, acting reasonably taking into account in particular the identity of the proposed assignee) be subject to either of the following conditions:
(i)    that a guarantor (approved by the Landlord) that is not a Current Guarantor guarantees the assignee’s performance of the Tenant’s obligations in this Lease; and
(ii)    the assignee enters into a rent deposit deed with, and on terms (including a charge over the deposit) required by the Landlord providing for a deposit of not less than six months’ Main Rent (plus VAT) (calculated as at the date of the assignment) as security for the assignee’s performance of the tenant’s covenants in this Lease;
(d)    the Landlord may refuse consent to assign if the Tenant has not paid in full all Rents and other sums due to the Landlord under this Lease that are not the subject of a legitimate dispute about their payment;
(e)    the Landlord may refuse consent to assign if in its reasonable opinion the assignee’s occupation of the Premises or its activities on the Premises would be likely to bring the Landlord or Imperial College of Science Technology and Medicine into disrepute;
(f)    the Landlord may refuse consent to assign in any other circumstances where it is reasonable to do so; and
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(g)    the Landlord may require any other condition to the Landlord’s consent if it is reasonable to do so.
4.15.6    The provisions of Schedule 7 apply to underlettings of the Premises and the Tenant must comply with its obligations in that Schedule.
4.15.7    The Tenant may charge the whole of the Premises to a genuine lending institution without the Landlord’s consent but the Tenant must notify the Landlord under clause 4.16 of any charge created, save for a floating charge which does not require notification upon its creation.
4.15.8    In addition to the provisions of this clause 4.15, the Tenant may share occupation of the Premises with a Group Company of the Tenant on condition that:
(a)    the Tenant gives prior written notice to the Landlord of the identity of the occupier and the part of the Premises to be occupied;
(b)    no relationship of landlord and tenant is created or is allowed to arise;
(c)    the sharing of occupation ends if the occupier is no longer a Group Company of the Tenant; and
(d)    the Landlord is notified promptly when the occupation ends.
4.16    Registration of alienation
The Tenant must provide the Landlord with a certified copy of every document transferring or granting any interest in the Premises (and, if relevant, evidence that sections 24 to 28 of the 1954 Act have been lawfully excluded from the grant of any interest) within one month after the transfer or grant of that interest.
4.17    Marketing
4.17.1    Subject to clause 5.5, the Tenant must, during the six months before the End Date, allow the Landlord to:
(a)    place on the Premises (but not obstructing the Tenant’s corporate signage) a notice for their disposal; and
(b)    show the Premises at reasonable times in the day to potential tenants (who must be accompanied by the Landlord or its agents).
4.17.2    Subject to clause 5.5, the Tenant must allow the Landlord at reasonable times in the day to show the Premises to potential purchasers of the Building or the Estate (who must be accompanied by the Landlord or its agents).
4.18    Notify the Landlord of notices or claims
The Tenant must notify the Landlord as soon as reasonably practicable after the Tenant receives or becomes aware of any notice or claim affecting the Premises.
4.19    Comply with Acts
4.19.1    The Tenant must do everything required under any Act in respect of the Premises and their use and occupation and the exercise of the rights granted to the Tenant under this Lease.
4.19.2    The Tenant must not do or fail to do anything in respect of the Premises, the Building or the Estate the effect of which could make the Landlord liable to pay any penalty, damages, compensation, costs or charges under any Act.
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4.19.3    The Tenant must promptly notify the Landlord of any defect or disrepair in the Premises that may make the Landlord liable under any Act or under this Lease.
4.19.4    The Tenant must not permit any substance which is or might become dangerous, hazardous, polluting or contaminative or which might in any way adversely affect or damage the Building, any Conducting Media, other land or water or the environment or cause harm to human health to be in, on, under or escaping from the Premises provided that the Tenant shall be permitted to keep substances on the Premises which are used in connection with its use of the Premises for the Permitted Use where the same are kept in accordance with all relevant statutory requirements and codes or practice and the provisions of this Lease. If the Tenant becomes aware of any such substance in, on, under or escaping from the Premises the Tenant must give immediate written notice of it to the Landlord and remove or remediate it in compliance with the requirements of the Landlord or any competent authority.
4.20    Planning Acts
4.20.1    The Tenant must comply with the requirements of the Planning Acts and with all Planning Permissions relating to or affecting the Premises or anything done or to be done on them.
4.20.2    The Tenant must not apply for any Planning Permission except where any approval or consent required under any other provisions in this Lease for development or change of use has already been given and the Landlord has approved the terms of the application for Planning Permission.
4.20.3    The Tenant may only implement a Planning Permission that the Landlord has approved.
4.20.4    The Tenant must assume liability for and pay any community infrastructure levy payable under Part 11 of the Planning Act 2008 or any other similar payments or liabilities that become due as a result of it (or its sub-tenants or other occupiers of the Premises) carrying out any Permitted Works or changing the use of the Premises. The Tenant will not be responsible under this Lease for any corresponding sums that become due as a result of any permitted development to or change of use of the Building or the Estate carried out by the Landlord or any other occupier of the Building or the Estate.
4.21    Rights and easements
The Tenant must not allow any rights or easements to be acquired over the Premises. If an encroachment may result in the acquisition of a right or easement:
4.21.1    the Tenant must notify the Landlord; and
4.21.2    the Tenant must help the Landlord in any way that the Landlord requests to prevent that acquisition so long as the Landlord meets the Tenant’s costs and it is not adverse to the Tenant’s business interests to do so.
4.22    Management of the Building Common Parts
4.22.1    The Tenant must not load or unload vehicles except on the parts of the Building that it is permitted to use for that purpose by paragraph 2 of Part 1 of Schedule 1.
4.22.2    The Tenant must not park vehicles in the Building Common Parts except in any areas that it is permitted to use for that purpose.
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4.22.3    The Tenant must not obstruct the Building Common Parts in any way or leave any goods on them.
4.22.4    The Tenant must not deposit rubbish anywhere on the Estate or the Building except in skips or bins provided for that purpose.
4.22.5    The Tenant must not use the Building Common Parts other than for the purposes designated by the Landlord (acting reasonably).
4.22.6    The Tenant must comply with all reasonable regulations notified to it or contained within any relevant tenant guide or handbook for the Building or the Estate (including without limitation the Landlord’s Fit Out Procedures Handbook) published by the Landlord from time to time. No regulations may impose obligations on the Tenant that are inconsistent with or more onerous than the Tenant’s obligations under this Lease.
4.23    Superior interest
4.23.1    The Tenant must promptly deliver to the Landlord any notice addressed to or intended for the Landlord or any Superior Landlord which may be served by delivery at the Premises including notices served pursuant to the Superior Lease and the Head Lease.
4.23.2    Save in respect of rent payable and clause 3.31 of the Superior Lease, the Tenant must observe and perform all the covenants on the part of the lessee contained in the Superior Lease so far as they relate to the Premises and not by any act or omission to cause the Landlord to be in breach of the Superior Lease.
4.23.3    The Tenant must permit the Landlord to enter on the Premises for any purpose that in the opinion of the Landlord is necessary to enable it to comply with the covenants on its part contained in the Superior Lease, notwithstanding that the obligation to comply with such covenants may be imposed on the Tenant by this Lease.
4.23.4    The Tenant must not breach any of the Superior Landlord’s obligations (excluding payment of rents or other sums) relating to the Building or the Estate in the Head Lease or any obligations affecting the freehold interest in the Building or the Estate.
4.23.5    The Tenant must comply with the provisions of any documents or matters specified or referred to in Schedule 5 relating to the Premises so far as they are enforceable save in respect of the payment of monetary contributions due under any planning agreement (if any) and the Landlord fully indemnifies the Tenant in respect of any demands received by the Tenant in relation to such contributions.
4.24    Registration at the Land Registry
4.24.1    If compulsorily registrable, the Tenant must:
(a)    within six weeks of the date of receipt of the Lease from the Landlord’s solicitors, apply to register and then take all reasonable steps to complete the registration of this Lease and the Tenant’s rights at the Land Registry; and
(b)    provide the Landlord with an official copy of the registered title promptly after receipt.
4.24.2    Subject to the Landlord providing completed forms EX1 and EX1A together with an edited copy of the Lease prepared by the Landlord’s solicitors and certified as being a true copy of the Lease from which prejudicial information as defined under the Land Registration Rules 2003 has been excluded and a cheque for the requisite fee within
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10 working days of the date of the Lease, the Tenant must submit any applications in forms EX1 and EX1A required by the Landlord simultaneously with any application to HM Land Registry for first registration of the Lease.
4.24.3    The Tenant must within four weeks after the End Date, apply to the Land Registry to close and then take all reasonable steps to complete the closure of any registered title relating to this Lease and to remove from the Landlord’s registered title(s) to the Estate any references to this Lease and/or the Tenant’s rights.
4.25    Applications for consent or approval
Where the Tenant makes any application to the Landlord for consent or approval under this Lease, the Tenant must provide the Landlord with a complete and accurate copy of the heads of terms for any proposed dealing (if applicable) and all plans, drawings, specifications, documents and any other information required by the Landlord.
4.26    Trading names
4.26.1    Not to adopt or operate under a trade name, trading name or business name (a “Trading Name”) which:
(a)    incorporates any of the proscribed words and acronyms set out in clause 4.26.2; or
(b)    otherwise implies any educational purpose or any connection with Imperial College of Science Technology and Medicine.
4.26.2    The proscribed words and acronyms referred to in clause 4.26.1 are as follows:
(a)    College
(b)    Education
(c)    Faculty
(d)    Imperial
(e)    Institute
(f)    School
(g)    Teaching
(h)    University
(i)    Academy
(j)    IC
(k)    ICL
(l)    ThinkSpace (or Thinkspace)
5.    Landlord’s Obligations
5.1    Quiet enjoyment
The Tenant may peaceably hold and enjoy the Premises during the Term without any interruption by the Landlord or any person lawfully claiming under or in trust for the Landlord except as permitted by this Lease.
    22

5.2    Insurance
The Landlord must comply with the Landlord’s obligations in Schedule 4.
5.3    Services
The Landlord must comply with the Landlord’s obligations in Part 2 of Schedule 3.
5.4    Repayment of rent
5.4.1    The Landlord must refund any Main Rent paid in advance by the Tenant in relation to the period falling after the End Date within 10 Business Days after the End Date.
5.4.2    Clause 5.4.1 will not apply if the Landlord ends this Lease under clause 6.1.1 or if this Lease is disclaimed by the Crown or by a liquidator or trustee in bankruptcy of the Tenant.
5.5    Entry Safeguards
The Landlord must, when entering the Premises to exercise any Landlord’s rights:
5.5.1    cause as little damage as possible;
5.5.2    cause a minimum of inconvenience and interference to the occupiers of the Premises;
5.5.3    make good any damage caused to the Premises by the exercise of such rights; and
5.5.4    comply with any security or safety procedure reasonably required by the Tenant relating to the Tenant’s business at, and use and enjoyment of, the Premises which may include being accompanied by a representative of the Tenant where the Tenant reasonably so requires.
5.6    Scaffolding
The Landlord must ensure that in relation to any scaffolding erected outside the Premises in exercise of the Landlord’s rights under this Lease:
5.6.1    it is removed as soon as reasonably practicable, with any damage caused to the exterior of the Premises made good;
5.6.2    it causes as little obstruction as is reasonably practicable to the entrance to the Premises; and
5.6.3    it does not have advertising displayed on it (except for any health and safety notices and signs relating to any other tenant whose premises are obstructed or interfered with by the scaffolding) unless the Tenant has consented to its display.
5.7    Superior Lease
5.7.1    The Landlord must pay the rent reserved by the Superior Lease and comply by way of indemnity only with those tenant’s obligations in the Superior Lease that are not the responsibility of the Tenant under this Lease and must use all reasonable endeavours at the cost and request of the Tenant to enforce the obligations of the Superior Landlord under the Superior Lease.
5.7.2    The Landlord must comply by way of indemnity only with clause 33.1 of the Superior Lease.
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6.    Agreements
6.1    Landlord’s right to end this Lease
6.1.1    If any event listed in clause 6.1.2 occurs, the Landlord may at any time afterwards re-enter the Premises or any part of them and this Lease will then immediately end.
6.1.2    The events referred to in clause 6.1.1 are as follows:
(a)    any of the Rents remain unpaid for 21 days after becoming due whether or not formally demanded;
(b)    the Tenant breaches any obligation or term of this Lease;
(c)    any 1925 Act, administrative, court-appointed or other receiver or similar officer is appointed over the whole or any part of the Tenant’s property or assets, or the Tenant enters into any scheme or arrangement with its creditors in satisfaction or composition of its debts under the 1986 Act;
(d)    if the Tenant is a company or a limited liability partnership:
(i)    the Tenant enters into liquidation within the meaning of section 247 of the 1986 Act;
(ii)    the Tenant is wound up or a petition for winding up is presented against the Tenant that is not dismissed or withdrawn within 21 days of being presented;
(iii)    a meeting of the Tenant’s creditors or any of them is summoned under Part I of the 1986 Act;
(iv)    a moratorium in respect of the Tenant comes into force under section 1(A) of and schedule A1 to the 1986 Act;
(v)    an administrator is appointed to the Tenant; or
(vi)    the Tenant is struck off the register of companies;
(e)    if the Tenant is a partnership, it is subject to an event similar to any listed in clause 6.1.2(d) with appropriate modifications so as to relate to a partnership;
(f)    if the Tenant is an individual:
(i)    a receiving order is made against the Tenant;
(ii)    an interim receiver is appointed over or in relation to the Tenant’s property;
(iii)    the Tenant becomes bankrupt or the Tenant is the subject of a bankruptcy petition that is not dismissed or withdrawn within 21 days of being presented; or
(iv)    an interim order is made against the Tenant under Part VIII of the 1986 Act;
(g)    any event similar to any listed in clauses 6.1.2(c) to 6.1.2(f) occurs in relation to any guarantor of the Tenant’s obligations under this Lease (other than under an authorised guarantee agreement); and
    24

(h)    any event similar to any listed in clauses 6.1.2(c) to 6.1.2(g) occurs in any jurisdiction (whether it be England and Wales, or elsewhere).
6.1.3    Neither the existence nor the exercise of the Landlord’s right under clause 6.1.1 will affect any other right or remedy available to the Landlord.
6.1.4    In this clause 6.1 references to “the Tenant”, where the Tenant is more than one person or company, include any one of them.
6.2    No acquisition of easements or rights
6.2.1    Section 62 of the 1925 Act will not apply to this Lease.
6.2.2    The Tenant has no rights that would restrict building or carrying out of works to the Building, the Estate or any adjoining premises, other than any that the Landlord specifically grants the Tenant in this Lease.
6.2.3    The flow of light to the Premises is and will be enjoyed with the Landlord’s consent in accordance with section 3 of the Prescription Act 1832. Neither the enjoyment of that light and air nor anything in this Lease will prevent the exercise of any of the rights the Landlord has reserved out of this Lease. The Tenant must permit the exercise of these reserved rights without interference or objection.
6.2.4    The Tenant has no rights to enforce or prevent the release or modification of the benefit of any covenants, rights or conditions to which any other property within the Building, the Estate or any adjoining premises is or are subject.
6.2.5    The rights granted by paragraphs 8 and 9 of part III of schedule 1 to the Superior Lease are expressly excluded from this demise.
6.3    Works to adjoining premises
If the Landlord carries out works of construction, demolition, alteration or redevelopment on the Building, it must:
6.3.1    give the Tenant details of the works to be carried out;
6.3.2    consult with the Tenant as to the management of potential interference to the Premises;
6.3.3    take reasonable steps to ensure the works do not materially adversely affect the Tenant’s ability to carry out its business from the Premises or use the Premises for the Permitted Use;
6.3.4    take into consideration modern standards of construction and workmanship;
6.3.5    take reasonable steps to reduce any interference to the Premises by noise, dust and vibration (having taken into consideration the Tenant’s suggestions for limiting any interference); and
6.3.6    make good any physical damage to the Premises or its contents.
6.4    Service of Notices
6.4.1    Any Notice must be in writing and sent by pre-paid first class post or special delivery to or otherwise delivered to or left at the address of the recipient under clause 6.4.2 or to any other address in the United Kingdom that the recipient has specified as its address for service by giving not less than 10 Business Days’ notice under this clause 6.4.
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6.4.2    A Notice served on:
(a)    a company or limited liability partnership registered in the United Kingdom must be served at its registered office;
(b)    a person resident in or incorporated in a country outside the United Kingdom must be served at the address for service in the United Kingdom of that party set out in the deed or document to which they are a party or if no such address has been given at their last known address in the United Kingdom. The address for service in the United Kingdom for ADC Therapeutics SA is:
ADC Therapeutics SA
c/o Apex Agency Services Ltd,
6th Floor,
125 Wood Street,
London
EC2V 7AN
or such other address for service in the United Kingdom as is advised to the Landlord by ADC Therapeutics SA in writing;
(c)    anyone else must be served:
(i)    in the case of the Landlord, at any postal address in the United Kingdom shown from time to time for the registered proprietor on the title number set out in Land Registry Prescribed Clause LR2.1 or if no such address is given, at its last known address in the United Kingdom;
(ii)    in the case of the Tenant, at the Premises;
(iii)    in the case of a guarantor, at the address of that party set out in the deed or document under which they gave the guarantee; and
(iv)    in respect of any other party, at their last known address in the United Kingdom.
6.4.3    Any Notice given will be deemed to have been served on the second Business Day after the date of posting if sent by pre-paid first class post or special delivery or at the time the Notice is delivered to or left at the recipient’s address if delivered to or left at that address.
6.4.4    If a Notice is deemed to be served on a day that is not a Business Day or after 5.00pm on a Business Day it will be deemed to be served at 9.00am on the immediately following Business Day.
6.4.5    Service of a Notice by fax or e-mail is not a valid form of service under this Lease.
6.5    Contracts (Rights of Third Parties) Act 1999
Nothing in this Lease creates any rights benefiting any person under the Contracts (Rights of Third Parties) Act 1999.
6.6    Contracting-out
6.6.1    The Landlord and the Tenant confirm that before the date of this Lease:
    26

(a)    a notice complying with Schedule 1 to the Regulatory Reform (Business Tenancies) (England and Wales) Order 2003 which relates to this tenancy was served by the Landlord on the Tenant on 18 January 2021; and
(b)    a statutory declaration dated 18 January 2021 complying with paragraph 8 of Schedule 2 to that Order was made by Lydia Willox, who the Tenant confirms was duly authorised by the Tenant to make the statutory declaration its behalf.
6.6.2    The Landlord and the Tenant agree and declare that the provisions of sections 24–28 (inclusive) of the 1954 Act do not apply to the tenancy created by this deed.
6.6.3    The Landlord and the Tenant confirm there is no agreement for this lease.
6.7    Superior landlord’s consent
Any consent the Landlord gives is conditional on the consent (where required under the terms of the Superior Lease) of any superior landlord being obtained. The Landlord will apply for that consent at the Tenant’s cost and, to the extent the Landlord is consenting, the Landlord must take reasonable steps to obtain it.
7.    Guarantor’s Obligations
7.1    The Guarantor, as primary obligor, guarantees to the Landlord that:
7.1.1    the Tenant will comply with all the Tenant’s obligations in this Lease. If the Tenant defaults, the Guarantor will itself comply with those obligations and will indemnify the Landlord against all losses, costs, damages and expenses caused to the Landlord by that default; and
7.1.2    it will indemnify the Landlord against all losses, costs, damages and expenses caused to the Landlord by the Tenant proposing or entering into any company voluntary arrangement, scheme of arrangement or other scheme having or purporting to have the effect of impairing, compromising or releasing any or all of the obligations of the Guarantor in this clause 7.
7.2    If the Landlord in its absolute discretion requires, and if the Landlord notifies the Guarantor of this requirement within three months after the date of any disclaimer or forfeiture of this Lease or the Tenant being struck off the register of companies, the Guarantor must within 10 Business Days (at the Landlord’s absolute discretion) either:
7.2.1    at the Guarantor’s own cost (including payment of the Landlord’s costs) accept the grant of a lease of the Premises
(a)    for a term starting and taking effect on the date of the disclaimer or forfeiture of this Lease;
(b)    ending on the date when this Lease would have ended if the disclaimer or forfeiture had not happened;
(c)    at the same rent (unless there is a rent review due or one becomes due before completion of the new lease, in which case the rent will be that which would have been agreed or decided under this Lease) and other sums payable;
(d)    containing rent review dates on each unimplemented rent review date under this Lease that falls after the term commencement date of the new lease; and
(e)    otherwise on the same terms and conditions as this Lease; or
    27

7.2.2    pay the Landlord any arrears of the Rents, the Outgoings and all other sums due under this Lease plus the amount equivalent to the total of the Rents, the Outgoings and all other sums due under this Lease that would be payable for the period of six months following the disclaimer or forfeiture.
7.3    If the Landlord requires payment under clause 7.2.2 then, on receipt of the payment in full, the Landlord must release the Guarantor from its future obligations under this clause 7 (but that will not affect the Landlord’s rights in relation to any prior breaches by the Guarantor).
7.4    The Guarantor’s liability will not be reduced or discharged by:
7.4.1    any failure for any reason to enforce in full, or any delay in enforcement of, any right against, or any concession allowed to the Tenant or any third party;
7.4.2    any variation of this Lease (except that a surrender of part will end the Guarantor’s future liability in respect of the surrendered part);
7.4.3    any right to set-off or counterclaim that the Tenant or the Guarantor may have;
7.4.4    any death, incapacity, disability or change in the constitution, status, or name of the Tenant, the Guarantor or of any other person who is liable, or of the Landlord;
7.4.5    any amalgamation or merger by any party with any other person, any restructuring or the acquisition of the whole or any part of the assets or undertaking of any party by any other person;
7.4.6    the existence or occurrence in relation to the Guarantor of any matter referred to in any of clauses 6.1.2(c) to 6.1.2(h); or
7.4.7    anything else other than a release by the Landlord by deed.
7.5    The Guarantor must not claim in competition with the Landlord in the insolvency of the Tenant and must not take any security, indemnity or guarantee from the Tenant in respect of those Tenant’s obligations under this Lease until all of the Tenant’s indebtedness to the Landlord has been discharged in full.
7.6    Nothing in this clause 7 may impose any liability on the Guarantor that exceeds the liability that it would have had were it the tenant of this Lease.
8.    Tenant Break Clause
8.1    The Tenant may end the Term on the Break Date by giving the Landlord not less than six months’ written notice following which the Term will then end on the Break Date if:
8.1.1    on the Break Date the Main Rent and any VAT payable on the Main Rent due up to and including that Break Date have been paid in full; and
8.1.2    on the Break Date the whole of the Premises are given back to the Landlord free of the Tenant’s occupation and the occupation of any other lawful occupier and without any continuing underleases; and
8.1.3    the Tenant has, on or before the Break Date, caused to be paid to the Landlord an amount equal to three hundred thousand pounds (£300,000) (plus any VAT payable on that amount) and for this purpose the Tenant shall be entitled to pay the said amount to the bank account previously notified by the Landlord for payment of the Rent pursuant to clause 3.7, unless otherwise advised by the Landlord in writing to the Tenant before the payment is actually made, and where VAT payable is on that amount the Landlord
    28

will provide the Tenant with a VAT invoice addressed to the Tenant as soon as is reasonably practicable thereafter.
8.2    The Landlord may waive any of the pre-conditions in clauses 8.1.1 to 8.1.3 at any time on or before the Break Date by notifying the Tenant.
8.3    If the Tenant gives notice to the Landlord under clause 8.1, the Tenant will on or before the Break Date make the payment to the Landlord as detailed in clause 8.1.3, provided that the Landlord will reimburse the said payment to the Tenant where the Lease does not end because either of the other pre-conditions have not been fulfilled (or waived by the Landlord).
8.4    If this Lease ends under this clause 8, this will not affect the rights of any party for any prior breach of an obligation in this Lease.
8.5    Time is of the essence for the purposes of this clause 8.
9.    Additional TENANT BREAK CLAUSE
9.1    In this clause:
9.1.1    “Challenge Period”: means the date which is seven weeks after (but excluding) the date of the Planning Permission;
9.1.2    “Planning Permission”: means the planning permission dated 11 January 2021 reference 2020/02982/FUL permitting the installation and retention of the Tenant’s Terrace Space Plant;
9.1.3    “Proceedings”: an application for judicial review under Part 54 of the Civil Procedure Rules 1998 (as amended) made by any third party arising from the grant of the Planning Permission by the local planning authority.
9.2    Where Proceedings are brought during the Challenge Period which result in the Planning Permission being quashed thereafter then, unless the local planning authority has issued a further planning permission permitting the installation of the Tenant’s Terrace Space Plant, the Tenant may end the Term at any time within 20 Working Days after the date of the order quashing the grant of the Planning Permission by giving the Landlord not less than 10 Working Days’ written notice following which the Term will then end on the date specified in the Tenant’s notice (the “Termination Date”) if:
9.2.1    on the Termination Date the Main Rent and any VAT payable on the Main Rent due up to and including the Termination Date have been paid in full; and
9.2.2    on the Termination Date the whole of the Premises is given back to the Landlord free of the Tenant’s occupation and the occupation of any other lawful occupier and without any continuing underleases.
9.3    The Landlord may waive either of the pre-conditions in clauses 9.2.1 to 9.2.2 at any time on or before the Termination Date by notifying the Tenant.
9.4    If this Lease ends under this clause 9, this will not affect the rights of any party for any prior breach of an obligation in this Lease.
9.5    Time is of the essence for the purposes of this clause 9.
9.6    If this Lease ends under this clause 9 then notwithstanding the provisions of clause 4.13 the Tenant shall remove the Tenant’s Terrace Space Plant from the Plant Area and any related plant and machinery and conducting media and make good any damage caused as a result of the installation of the Tenant’s Space Plant or its removal but shall not be obliged to remove any
    29

other Permitted Works as consented by the Initial Licence for Alterations as long as such Permitted Works have been undertaken in accordance with the provisions of the Initial Licence for Alterations and the provisions of Part 1 of Schedule 6.
10.    Jurisdiction
10.1    This Lease and any non-contractual obligations arising out of or in connection with it will be governed by the law of England and Wales.
10.2    Subject to clause 10.3 and any provisions in this Lease requiring a dispute to be settled by an expert or by arbitration, the courts of England and Wales have exclusive jurisdiction to decide any dispute arising out of or in connection with this Lease, including in relation to any non-contractual obligations.
10.3    Any party may seek to enforce an order of the courts of England and Wales arising out of or in connection with this Lease, including in relation to any non-contractual obligations, in any court of competent jurisdiction.
11.    Legal Effect
This Lease takes effect and binds the parties from and including the date at clause LR1.

    30


Executed as a deed by )
ADC THERAPEUTICS (UK) LTD ) /s/ Michael Forer
acting by a director: ) ……………………………………
……………………………………… ) Director
in the presence of: )

Name of witness (in BLOCK CAPITALS)
CHRISTINE WAITE

Signature of witness:
/s/ Christine Waite

Address:
……………………………………


……………………………………

Occupation:
OFFICE 8 ADMINISTRATION MANAGER




Executed as a deed by ADC THERAPEUTICS SA, a company incorporated in Switzerland acting by Michael Forer who, in accordance with the laws of that territory, is acting under the authority of the company

Signature in name of company
ADC THERAPEUTICS SA,

Signature:
/s/ Michael Forer
……………………………………
Authorised Signatory




    31

Exhibit 12.1
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Christopher Martin, certify that:
1.I have reviewed this annual report on Form 20-F of ADC Therapeutics SA;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4.The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.[reserved];
c.Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and
5. The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.



Date: March 18, 2021
/s/ Christopher Martin
Christopher Martin
Chief Executive Officer

1

Exhibit 12.2
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Jennifer Creel, certify that:
1.I have reviewed this annual report on Form 20-F of ADC Therapeutics SA;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4.The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.[reserved];
c.Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and
5.The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: March 18, 2021
/s/ Jennifer Creel
Jennifer Creel
Chief Financial Officer

1

Exhibit 13.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The certification set forth below is being submitted in connection with ADC Therapeutics SA’s annual report on Form 20-F for the year ended December 31, 2020 (the “Report”) for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code.

I, Christopher Martin, the Chief Executive Officer of ADC Therapeutics SA, certify that:
1.the Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and
2.the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of ADC Therapeutics SA.

Date: March 18, 2021
/s/ Christopher Martin
Christopher Martin
Chief Executive Officer

1

Exhibit 13.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The certification set forth below is being submitted in connection with ADC Therapeutics SA’s annual report on Form 20-F for the year ended December 31, 2020 (the “Report”) for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code.

I, Jennifer Creel, the Chief Financial Officer of ADC Therapeutics SA, certify that:
1.the Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and
2.the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of ADC Therapeutics SA.

Date: March 18, 2021
/s/ Jennifer Creel
Jennifer Creel
Chief Financial Officer


1

Exhibit 15.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference on Form S-8 (No. 333-238287) of ADC Therapeutics SA of our report dated March 18, 2021, relating to the consolidated financial statements, which appears in this Form 20-F.

/s/ PricewaterhouseCoopers SA

Lausanne, Switzerland
March 18, 2021