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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our audited consolidated financial statements, including the notes thereto, included in this Annual Report. 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. See “Forward-Looking Statements.”

Overview

ADC Therapeutics is a leading, commercial-stage global pioneer in the field of antibody drug conjugates (“ADCs”).

Our goal is to be a leading ADC company that transforms the lives of those impacted by cancer. To achieve this, we are focused on unlocking the potential value of our robust ADC portfolio across two pillars of growth: hematology and solid tumors. We are a pioneer in the ADC field with specialized end-to-end capabilities unique to ADCs including a validated technology platform, a growing next-generation research & development toolbox and a proven track record that includes an approved and marketed product. We aim to expand our portfolio and accelerate the development of our pipeline through targeted investments and in collaboration with strategic partners. In this way, we plan to pursue multiple targets in parallel, enabling us to prioritize and ensure disciplined capital allocation strategy while advancing the most promising candidates in both hematology and solid tumors.

In the hematology space, our flagship product, ZYNLONTA, a CD19-directed ADC, received accelerated approval from the U.S. Food and Drug Administration (“FDA”) and conditional approval from the European Commission for the treatment of relapsed or refractory diffuse large B-cell lymphoma (“DLBCL”) after two or more lines of systemic therapy. We are seeking to continue expanding ZYNLONTA into international markets throughout the world, and into earlier lines of DLBCL and other indolent lymphomas, including follicular lymphoma (”FL”) and marginal zone lymphoma MZL as a

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single and combination agent of choice through our LOTIS-5 confirmatory Phase 3 clinical trial and LOTIS-7 Phase1b clinical trial as well as through investigator-initiated trials (“IITs”) at leading institutions. In addition, we are investigating a CD-22 targeted compound, ADCT-602, in a Phase 1/2 investigator-initiated study in relapsed or refractory B-cell acute lymphoblastic leukemia.

In the solid tumor space, our clinical-stage pipeline consists of ADCT-601 (mipasetamab uzoptirine) targeting AXL as a single agent and/or in combination in sarcoma, pancreatic, and NSCLC. Our pre-clinical stage pipeline includes a portfolio of next generation investigational ADCs targeting Claudin-6, NaPi2b, PSMA and other undisclosed targets. In addition, we are advancing research with a range of payloads, linkers and conjugation technologies against undisclosed targets.

Results of Operations

The following table summarizes our results of operations for the year ended December 31, 2023 and 2022:

Year Ended December 31,

(in thousands, except percentages and per share) 2023 2022 Change % Change

Revenue

Operating expense

Other income (expense)

Net loss per share, basic and diluted $ (2.94) $ (2.01) $ (0.93) 46.3 %

Revenue

Product Revenues, net

We generate product revenue through the sale of ZYNLONTA in the United States. Revenue is recognized when control is transferred to the customer at the net selling price, which includes reductions for gross-to-net (“GTN”) sales adjustments such as government rebates, chargebacks, distributor service fees, other rebates and administrative fees, sales returns and allowances and sales discounts. In the long term, we expect that our product revenue will increase as we execute our business strategy, although our product revenue may fluctuate from period to period based on a number of factors, including patient demand, as well as the timing, dose and duration, of patient therapy and customers’ buying patterns and gross-to-net deductions. We have experienced in 2023 higher GTN sales adjustments than we had previously recognized, including discarded drug and inflationary rebates. We expect to continue experiencing these level of GTN sales adjustments as a percentage of gross sales.

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Product revenues, net, decreased to $69.1 million for the year ended December 31, 2023 from $74.9 million for the year ended December 31, 2022, a decrease of $5.8 million, or 7.8%. The decrease is primarily attributable to higher GTN deductions due to the Infrastructure Investment and Jobs Act's requirement for manufacturers of certain single-source drugs separately paid for under Medicare Part B and marketed in single-dose containers to provide annual refunds ("discarded drug rebate") for unused drug, as well as lower volume due to changes in our commercialization model and increased competition, partially offset by a higher price.

License Revenue and Royalties

We generate license revenue and royalties from our strategic agreements for the development and commercialization of ZYNLONTA and other product candidates outside of the United States. Under these agreements, we receive upfront payments and are eligible for certain milestone payments and royalties. See “Item 1. Business—Material Contracts.” We are unable to predict the timing and amounts of license revenue and royalties as meeting milestones is subject to many factors outside of our control and we have limited control over our partners’ commercialization efforts.

License revenues and royalties decreased to $0.5 million for the year ended December 31, 2023 from $135.0 million for the year ended December 31, 2022. The decrease is primarily attributable to upfront and milestone payments under our exclusive license agreements with Sobi and MTPC that were recognized in 2022.

Operating Expenses

Cost of Product Sales

Cost of product sales primarily includes direct and indirect costs relating to the third-party manufacture and distribution of ZYNLONTA, royalties payable to a collaboration partner based on net product sales of ZYNLONTA and inventory write-downs. We expect that cost of product sales will increase on an absolute basis as product revenue increases and as we sell through pre-approval inventory that was previously expensed prior to commercialization under U.S. GAAP. Factors such as inflation may also increase our cost of product sales as a percentage of product revenue if we are not able to increase the price at which we sell ZYNLONTA to offset such increases in our cost of product sales.

Cost of product sales decreased to $2.5 million for the year ended December 31, 2023 from $3.3 million for the year ended December 31, 2022, a decrease of $0.8 million, or 23.4%. The decrease is primarily attributable to a reduction in costs related to the manufacturing of batches that did not meet our specifications.

Research and Development Expenses

The following table summarizes our research and development expenses for our major development programs for the years ended December 31, 2023 and 2022:

Year Ended December 31,

Preclinical product candidates and research pipeline 12,830 12,277 553

Research and development expense consists primarily of employee 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; external costs associated with obtaining intellectual property; depreciation; and upfront fees and achieved milestone payments associated with R&D collaboration arrangements.

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We expect that research and development expense will decrease on an absolute basis in the near term as we continue our capital allocation optimization, but will continue to comprise the largest component of our overall operating expenses, although our research and development expense may fluctuate from period to period based on a number of factors, including the timing, progress and stage of clinical trials, costs associated with regulatory approval processes and manufacturing costs associated with commercialization activities prior to the receipt of regulatory approval.

Our R&D expenses decreased to $127.1 million for the year ended December 31, 2023 from $186.5 million for the year ended December 31, 2022, a decrease of $59.3 million, or 31.8%.

ZYNLONTA

Research and development expenses for ZYNLONTA decreased to $68.5 million for the year ended December 31, 2023 from $75.9 million for the year ended December 31, 2022, a decrease of $7.4 million. The decrease was due to higher cost sharing with our partners in clinical trial costs primarily resulting from the Sobi license agreement executed in July 2022. We also had lower clinical trial costs for LOTIS 3, LOTIS 6 and LOTIS 7, as well as lower professional fees related to ZYNLONTA for the year ended December 31, 2023 as a result of productivity initiatives and portfolio prioritization.

Cami

Research and development expenses for Cami decreased to $10.3 million for the year ended December 31, 2023 from $38.1 million for the year ended December 31, 2022, a decrease of $27.8 million. The decrease was primarily due to completion of the Phase 2 study in 2022 and our decision to pause the program while we evaluated FDA feedback.

ADCT-601

Research and development expenses for ADCT-601 increased to $10.8 million for the year ended December 31, 2023 from $8.1 million for the year ended December 31, 2022, an increase of $2.7 million. The increase is primarily attributable to higher patient enrollment and progress towards the completion of the study.

ADCT-901

Research and development expenses for ADCT-901 increased to $6.6 million for the year ended December 31, 2023 from $5.5 million for the year ended December 31, 2022, an increase of $1.1 million. This increase was primarily due to increased clinical trial expenses that resulted from increased enrollment and ongoing treatment and monitoring of currently enrolled and completed patients.

ADCT-212

Research and development expenses for ADCT-212 decreased to $4.8 million for the year ended December 31, 2023 from $19.2 million for the year ended December 31, 2022, a decrease of $14.4 million. The decrease is primarily attributable to a decrease in expenses related to IND enabling analytical work during the year ended December 31, 2023. We have re-prioritized the R&D pipeline to focus resources on the most advanced, lower risk value-generating programs and have therefore paused investments on this preclinical program.

Share-based compensation

Share-based compensation decreased to $4.0 million for the year ended December 31, 2023 from $17.4 million for the year ended December 31, 2022, a decrease of $13.5 million. The decrease was driven by decreases in our share price, forfeitures of awards in connection with employee terminations and the workforce reduction announced and put into effect during the second quarter of 2023.

Selling and Marketing Expenses

The following table summarizes our selling and marketing expenses for the year ended December 31, 2023 and 2022:

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Year Ended December 31,

Share-based compensation (reversal) expense (322) 5,794 (6,116)

(1)Excludes share-based compensation expense.

Selling and marketing costs (“S&M”) are expensed as incurred and are primarily attributable to commercialization of ZYNLONTA in the United States. S&M includes employee costs and share-based compensation expense for commercial employees and external costs related to commercialization (including professional fees, communication costs and IT costs, travel expenses and depreciation of property and equipment). We expect our S&M expenses to decrease as a percentage of revenue over time as we have transitioned to being a commercial-stage public organization and implemented a new go-to-market model in 2023 to help drive growth and optimize local area influence.

Selling and marketing expenses decreased to $57.5 million for the year ended December 31, 2023 from $69.1 million for the year ended December 31, 2022, a decrease of $11.6 million or 16.8%. The decrease in external costs and overhead was primarily attributable to $2.6 million in lower spend on marketing, analytics and expenses, including those expenses in the European Union relating to the commercial launch of ZYNLONTA. The decrease in employee expenses was primarily due to lower wages and benefits of $3.0 million. The decrease in share-based compensation expense of $6.1 million was primarily due to fluctuations in our share price, forfeitures of awards in connection with employee terminations and the commercial re-alignment announced and put into effect during the second quarter of 2023.

General and Administrative Expenses

The following table summarizes our general and administrative expenses for the year ended December 31, 2023 and 2022:

Year Ended December 31,

(1)Excludes share-based compensation expense.

General and administrative expense includes employee expenses (including share-based compensation expense) for general and administrative employees, external costs (including, in particular, professional fees, legal costs associated with maintaining patents and other intellectual property, communications costs and IT costs, facility expenses and travel expenses), general and administrative costs charged by related parties (including telecommunications costs), depreciation of property and equipment, depreciation of right-of-use assets and amortization of intangible assets.

General and administrative expenses decreased to $48.4 million for the year ended December 31, 2023 from $74.4 million for the year ended December 31, 2022, a decrease of $26.0 million, or 35.0%. The decrease in external costs and overhead was primarily due to lower insurance and IT costs of $4.1 million, as well as lower professional fees of $0.6 million, which primarily includes fees associated with the license agreement entered into with MTPC. The decrease in employee expenses was primarily due to lower wages and benefits of $1.8 million as well as lower temporary help and recruiting of $1.2 million. The decrease in share-based compensation expense was primarily due to fluctuations in our share price, the transition of a board member, forfeitures of awards in connection with terminations and the workforce reductions announced and put into effect during the second quarter of 2023.

Other Income (Expense)

Interest Income

Interest income includes 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 cash and cash equivalents, short-term and long-term interest-bearing instruments, investment-grade securities, and direct or guaranteed obligations of the U.S. government.

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Interest income increased to $10.5 million for the year ended December 31, 2023 from $2.6 million for the year ended December 31, 2022, an increase of $8.0 million. The increase was due to higher yields received on our cash deposits during the year ended December 31, 2023.

Interest Expense

Interest expense is primarily related to the accretion of our deferred royalty obligation with HCR, the senior secured term loan facility and convertible loans. Interest expense increased to $46.3 million for the year ended December 31, 2023 from $36.7 million for the year ended December 31, 2022, an increase of $9.6 million, or 26.1%. The increase was related to higher interest expense due to the accretion of our deferred royalty obligation with HCR and senior secured term loans, offset by not having interest expense on our convertible loans as a result of the extinguishment on August 15, 2022.

Loss on Debt Extinguishment

On August 15, 2022, pursuant to an exchange agreement with Deerfield (the “Exchange Agreement”), Deerfield exchanged $115.0 million aggregate principal amount of the Company's senior secured convertible notes for warrants to purchase an aggregate of 4,412,840 common shares, an aggregate of 2,390,297 common shares and cash equal to $117.3 million. As a result of the Exchange Agreement, the Company recognized a loss on debt extinguishment of $42.1 million for the year ended December 31, 2022, which primarily consists of the difference between the fair value of the consideration transferred and the carrying value of the convertible loans, exit fee, as well as the unpaid interest payments through the maturity date. Any transaction costs related to the exchange are included as part of the calculation of the loss on debt extinguishment.

Other, net

Other, net consists primarily of changes in the fair value (gains or losses) of the convertible loan, other derivatives and warrant obligation; and cumulative catch-up adjustments related to our deferred royalty obligation.

Other, net as of December 31, 2023 and 2022 included the following:

Year Ended December 31,

Deerfield warrant obligation, change in fair value income 497 11,504 (11,007)

Exchange differences loss (52) (109) 57

Convertible Loans, Derivatives, Change in Fair Value Income

The change in fair value of the convertible loans derivatives was recognized as income of $25.7 million for the year ended December 31, 2022. The decreases in fair values of the embedded derivatives were primarily due to decreases in the fair value of the underlying shares during the period. The loan was exchanged on August 15, 2022. As a result, no income or expense was recognized during the year ended December 31, 2023.

Deerfield Warrant Obligation, Change in Fair Value Income

Pursuant to an Exchange Agreement with Deerfield entered into on August 15, 2022, the Company issued warrants to Deerfield to purchase an aggregate of 4,412,840 common shares. The Deerfield warrant obligation has been recorded at its initial fair value at the time the agreement was entered into on August 15, 2022 and is remeasured to fair value at the end of each reporting period. The income of $0.5 million and $11.5 million as a result of changes in the warrant obligation for the year ended December 31, 2023 and 2022, respectively, was primarily due to the decrease in fair value of the underlying shares during the respective period.

Cumulative catch-up adjustment, deferred royalty obligation

We periodically assess the expected payments to HCR based on our underlying revenue projections and to the extent the amount or timing of such payments is materially different than our initial estimates we will record a cumulative catch-up adjustment to the deferred royalty obligation. The adjustment to the carrying amount is recognized in Other, net as an

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adjustment in the period in which the change in estimate occurred. The cumulative catch-up adjustment decreased to $5.0 million for the year ended December 31, 2023 from $15.4 million for the year ended December 31, 2022, a decrease of $10.4 million, or 67.7%. The decrease was primarily due to revised revenue forecasts used in the valuation model.

Income Tax Expense

We recorded an income tax expense of $39.1 million for the year ended December 31, 2023 as compared to $0.2 million for the year ended December 31, 2022, primarily driven by our U.S. operations.

Income tax expense associated with our U.S. operations was $38.6 million for the year ended December 31, 2023 driven by the recognition of a $47.8 million valuation allowance on our deferred tax assets due to a change in our intercompany operating and transfer pricing model. Generally, current income tax is primarily due to our internal arrangements to reimburse our foreign subsidiaries in the U.S. and the United Kingdom for the services they render to our parent company in Switzerland. Commercial sales in the U.S. also contributed to the current period income tax expense. Ultimately, the net profit at each subsidiary is subject to local income tax. During the year ended December 31, 2023, with respect to our U.S. operations, a deferred tax expense of $37.1 million and current income tax expense of $1.5 million was recorded.

Comparatively, our income tax expense of $0.2 million recorded during the year ended December 31, 2022 was driven by $1.8 million of current income tax expense recorded in connection with US and UK operations, partially offset by $1.6 million of deferred income tax benefit related to various book to tax adjustments.

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. We are also entitled under U.S. tax law to carry forward R&D tax credits for a period of up to 20 years, which could be used to offset future taxable income.

In estimating future taxable income to assess the realizability of deferred tax assets, management develops assumptions including the amount of future net revenue and pre-tax operating income (loss) and the implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates we are using to manage the underlying business. Management notes that its projections of future taxable profits and losses rely on currently enacted law and are subject to revision if the U.S. legislates new tax law. As such, changes in tax laws and rates could also affect recorded deferred tax assets and liabilities in the future. We record the effect of a tax rate or law change on our deferred tax assets and liabilities in the period of enactment. Future tax rate or law changes could have a material effect on our financial condition, results of operations or cash flows.

Equity in Net Losses of Joint Venture

Year Ended December 31,

Share of Overland ADCT BioPharma net loss $ (5,528) $ (10,084) $ 4,556

We recorded our proportionate share of Overland ADCT BioPharma’s net loss of $5.5 million and $10.1 million for the years ended December 31, 2023 and 2022, respectively. The decrease in Overland ADCT BioPharma's net loss for the year ended December 31, 2023 as compared to the year ended December 31, 2022 was primarily attributable to lower R&D costs as the BLA submitted by Overland ADCT BioPharma has been accepted and granted priority review by the NMPA, as well as lower share-based compensation expense as a result of a workforce reduction for the year ended December 31, 2023. We also recorded a $0.6 million true-up during the year ended December 31, 2023 to align our proportionate share of Overland ADCT BioPharma's share-based compensation expense, which was lower than our estimate for the year ended December 31, 2022.

Liquidity and Capital Resources

As of December 31, 2023, we had cash and cash equivalents of $278.6 million. We believe that our current capital resources are sufficient to fund our operation and meet capital requirements for more than twelve months after the date of filing this Annual Report on Form 10-K.

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We plan to continue to fund our operating needs through our existing cash and cash equivalents, revenues from sales of ZYNLONTA, and potential milestone and royalty payments under our licensing agreements and additional equity financings, debt financings and/or other forms of financing, as well as funds provided by collaborations. We are also continuously exploring strategic collaborations, business combinations, licensing opportunities or similar strategies for clinical development and commercialization of ZYNLONTA and/or our product candidates.

Sources of Liquidity and Capital Resources

To date, we have financed our operations primarily through equity financings, convertible debt and senior secured term loan financings, and additional funds provided by collaborations and royalty financings and sales of ZYNLONTA in the United States. For a description of the Loan Agreement, HCR Agreement and other license and collaboration agreements, see “Item 1. Business - Material Contracts.”

Uses of Capital Resources

Our primary uses of capital are, and we expect will continue to be, research and development expenses, selling and marketing expenses, compensation and related expenses, interest and principal payments on debt obligations and other operating expenses. We expect to incur substantial expenses as we continue to devote substantial resources to research and development and marketing and commercialization efforts, in particular to grow ZYNLONTA in the 3L+ DLBCL setting, continue to study and advance ZYNLONTA in earlier lines of therapy and in combinations to potentially expand our market opportunity and further develop our pipeline and our ADC platform. 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, as well as the timing of collecting receivables from the sale of ZYNLONTA and paying royalties related to our deferred royalty obligation.

Contractual Obligations and Commitments

Our contractual obligations relate to our outstanding indebtedness under the Loan Agreement, as described above, and our lease agreements. For information relating to our scheduled maturities with respect to our lease liabilities and long-term debt see Note 6 Leases and Note 10 Senior secured term loan facility and warrants, respectively, included in the Notes to our audited consolidated financial statements.

We have future royalty obligations to HCR, under our royalty purchase agreement, which royalty payment amounts and timing is dependent on the future sales results of ZYNLONTA. See note 13 Deferred Royalty Obligation, included in the Notes to our audited consolidated financial statements for further information.

For information relating to our non-cancelable obligations under third party manufacturing agreements see Note 15 Commitments and Contingencies, included in the Notes to our audited consolidated financial statements.

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 sheet as of December 31, 2023 and 2022. The aggregate amount of such potential milestone payments (excluding royalty payments), under all such collaboration agreements, was $372.5 million, including approximately $106.8 million contingent on the achievement of various research, development and regulatory approval milestones and approximately $265.7 million in sales-based milestones. A milestone associated with a collaboration agreement was achieved during December 2020, which the Company recorded as an R&D expense of $5.0 million within the consolidated statement of operation for the year ended December 31, 2020. The milestone continues to be recorded as an accrued expense on the consolidated balance sheet as of December 31, 2023 and December 31, 2022.

Cash Flows

The following table summarizes our cash flows for the years ended December 31, 2023 and 2022:

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Year Ended December 31,

Net cash (used in) provided by:

Net Cash Used in Operating Activities

Net cash used in operating activities decreased to $118.7 million for the year ended December 31, 2023 from $138.3 million for the year ended December 31, 2022, a decrease of $19.6 million. The decrease was primarily due to the receipt of $50.0 million in Sobi license revenue recognized in December 2022 upon approval of the Marketing Authorisation Application by the European Commission for ZYNLONTA in third-line DLBCL which was received during the year ended December 31, 2023, as well as tax refunds received during the year ended December 31, 2023.

Net Cash Used in Investing Activities

Net cash used in investing activities increased to $3.2 million for the year ended December 31, 2023 from $0.7 million for the year ended December 31, 2022, an increase of $2.5 million. The increase in net cash used in investing activities primarily relates to purchases of property and equipment.

Net Cash Provided by (Used in) Financing Activities

Net cash provided by financing activities was $73.9 million for the year ended December 31, 2023 and primarily related to the proceeds received under the deferred royalty obligation with HCR upon the first commercial sale of ZYNLONTA in the United Kingdom or any European Union country.

Net cash used in financing activities was $0.9 million for the year ended December 31, 2022. For the year ended December 31, 2022, we drew down $120.0 million principal amount of term loans under the Loan Agreement prior to transaction costs paid of $7.2 million during the year ended December 31, 2022. In addition, we received $6.1 million of proceeds, net of transaction costs paid during the year ended December 31, 2022, from the issuance of shares under the share purchase agreement. Additionally, we exchanged our senior secured convertible notes pursuant to the exchange agreement with Deerfield, resulting in $118.3 million (including exit fees and transaction costs) being used.

Off-Balance Sheet Arrangements

During the periods presented, we did not have, and we do not currently have, any off-balance sheet arrangements.

Critical Accounting Estimates

A summary of the significant accounting policies is provided in Note 2 Summary of Significant Accounting Policies, included in the Notes to our audited consolidated financial statements.

The preparation of financial statements in accordance with generally accepted accounting principles, or GAAP, requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities.

We evaluate our estimates on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form our basis for making judgments about the carrying values of assets and liabilities and the reported amounts of revenues and expenses that are not readily apparent from other sources. Actual results may differ from those estimates under different assumptions and conditions.

Management considers an accounting estimate to be critical if:

•it requires a significant level of estimation uncertainty; and

•changes in the estimate are reasonably likely to have a material effect on our financial condition or results of operations.

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We believe the following critical accounting policies and estimates describe the more significant judgments and estimates used in the preparation of our consolidated financial statements.

Product revenues, net

We generate revenue from sales of ZYNLONTA in the U.S. for the treatment of relapsed or refractory DLBCL, which was approved by the FDA on April 23, 2021 and launched shortly thereafter. We also generate product revenue from sales of products outside the US under license and supply arrangements with partners.

Revenue is recognized when control is transferred to the customer at the net selling price, which includes reductions for gross-to-net (“GTN”) sales adjustments such as government rebates, chargebacks, distributor service fees, other rebates and administrative fees, sales returns and allowances and sales discounts.

GTN sales adjustments involve significant estimates and judgment after considering factors including legal interpretations of applicable laws and regulations, historical experience and drug product analogs in the absence of Company experience, payer channel mix, current contract prices under applicable programs, unbilled claims and processing time lags and inventory levels in the distribution channel. We also use information from external sources to identify prescription trends, patient demand, average selling prices, discarded volumes and sales return and allowance data for the Company and analog drug products. Our estimates are subject to inherent limitations of estimates that rely on third-party information, as certain third-party information was itself in the form of estimates and reflect other limitations including lags between the date as of which third-party information is generated and the date on which we receive third-party information. Estimates will be assessed each period and adjusted as required to revise information or actual experience. In particular, the following rebate requires a substantial degree of judgement.

Discarded Drug Rebate

The Infrastructure Investment and Jobs Act requires manufacturers of certain single-source drugs separately paid for under Medicare Part B and marketed in single-dose containers or packages to provide annual refunds (“discarded drug rebate”), if those portions of the dispensed drug that are unused and discarded exceed an applicable percentage defined by statute or regulation. The Centers for Medicare & Medicaid Services (the “CMS”) finalized regulations to implement this section on November 18, 2022, and the provision went into effect on January 1, 2023. In particular, the estimate for the discarded drug rebate requires a substantial degree of judgement.

We began estimating and recording a provision for the discarded drug rebate as a GTN sales adjustment beginning in the first quarter of 2023, which is included in Other long-term liabilities due to the long-term nature of when the first annual refunds are expected to come due. The significant assumptions used to estimate the discarded drug rebate include legal interpretations of applicable laws and regulations, historical experience with discarded volumes and time lags in the processing of claims and invoicing from CMS. We use a number of factors to estimate the discarded drug rebate, including information from external sources to identify the Company’s discarded volumes, preliminary information from CMS on estimated discarded volumes, as well as legal interpretations of the payment limit amount and J-code billing unit used in the discarded drug rebate calculation. We will continue to rely on projection methodologies and expect annual reports for 2023 and 2024 to be received from CMS by the end of 2024 and 2025, respectively, with an expectation of first invoice payments being made in 2025. Given the annual nature of the proposed reporting schedule we will continue to estimate periodically discarded drug rebate liabilities.

Deferred royalty obligation

On August 25, 2021, we entered into a royalty purchase agreement with certain entities managed by Healthcare Royalty Partners (“HCR”). We accounted for the initial cash received as debt, less transaction costs and will subsequently account for the value of the debt at amortized cost. The amount received by us will be accreted to the total estimated royalty payments over the life of the agreement which will be recorded as interest expense. The carrying value of the debt will decrease for royalty payments made to HCR based on actual net sales and licensing revenue.

To determine the accretion of the liability related to the deferred royalty obligation, we are required to estimate the total amount of future royalty payments and estimated timing of such payment to HCR based on our revenue projections. The Company uses a third party valuation firm to assist in determining the total amount of future royalty payments and estimated timing of such payment to HCR using an option pricing Monte Carlo simulation model.

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The significant assumptions used to estimate the HCR deferred royalty obligation accretion of the liability include the revenue projections and timing of payments. At each reporting period, we assess the expected payments to HCR based on its underlying revenue projections and to the extent the amount or timing of such payments is materially different than its initial estimates we will record a cumulative catch-up adjustment to the deferred royalty obligation. The adjustment to the carrying amount is recognized in earnings as an adjustment to Other, net in the period in which the change in estimate occurred.

The exact amount and timing of repayment is likely to be different each reporting period as compared to those estimated based on our revenue projections. A significant increase or decrease in actual net sales of ZYNLONTA compared to the Company’s revenue projections, and regulatory approval and commercialization of Cami, as well as ZYNLONTA in other indications as well as licensing revenue could change the royalty rate and royalty cap due to HCR, which could materially impact the debt obligation as well as interest expense associated with the royalty purchase agreement. Also, our total obligation to HCR can vary depending on the achievement of the sales milestones as well as the timing of a change in control event.

Recently Issued and Adopted Accounting Pronouncements

Refer to Note 2 to our audited consolidated financial statements for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of the date of this Annual Report.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We are not required to provide the information required by this Item 7A as we are a smaller reporting company.

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INDEX TO FINANCIAL STATEMENTS

Audited Financial Statements — ADC Therapeutics SA

Report of Independent Registered Public Accounting Firm (PCAOB ID 1358) 78

Consolidated Balance Sheets as of December 31, 2023 and 2022 81

Notes to the Consolidated Financial Statements 86

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Report of Independent Registered Public Accounting Firm

To theBoard of Directors and Shareholders of ADC Therapeutics SA

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of ADC Therapeutics SAand its subsidiaries(the “Company”) as of December 31, 2023 and 2022,and the related consolidated statements of operation, comprehensive loss, changes in shareholders’ equity (deficit) and cash flows for the years then ended, including the related notes (collectively referred to as the “consolidated financial statements”).We also have audited the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework(2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidatedfinancial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of itsoperations and itscash flows for the years then endedin conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework(2013)issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidatedfinancial statements and on the Company's internal control over financial reporting 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 in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidatedfinancial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidatedfinancial statements included performing procedures to assess the risks of material misstatement of the consolidatedfinancial 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 consolidatedfinancial 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 consolidatedfinancial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the

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company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated beloware mattersarising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to theconsolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidatedfinancial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Deferred royalty obligation with HealthCare Royalty Partners

As described in Note 13 to the consolidated financial statements, on August 25, 2021, the Company entered into a royalty purchase agreement with certain entities managed by HealthCare Royalty Management, LLC (HCR) for up to $325.0 million. Under the terms of the agreement, the Company received gross proceeds of $225.0 million upon closing and received an additional $75.0 million during the year ended December 31, 2023. The Company’s aggregate royalty obligations are capped at 2.50 times the amount paid by HCR under the agreement or at 2.25 times the amount paid by HCR under the agreement if HCR receives royalty payments exceeding a mid-nine-digit amount on or prior to March 31, 2029 (the “Royalty Cap”). Once the Royalty Cap is reached, the royalty purchase agreement will terminate. The Company evaluated the terms of the royalty purchase agreement and concluded that the features of the investment amount are similar to those of a debt instrument. Accordingly, the Company recorded a liability relating to the initial gross proceeds received as debt less transaction costs in August 2021, and increased the liability in June 2023 for the eligible amount received as debt less transaction costs upon first commercial sale of ZYNLONTA in Europe. The Company accounts for the value of the debt at amortized cost. The amounts received by the Company will be accreted to the total estimated amount of the royalty payments necessary to extinguish the Company’s obligation under the agreement, which will be recognized as interest expense. The carrying value of the debt decreases for royalty payments made to HCR based on actual net sales and licensing revenue. To determine the accretion of the liability related to the deferred royalty obligation, the Company is required to estimate the total amount of future royalty payments and estimate the timing of such payments to HCR based on the Company's revenue projections. The Company uses a third party valuation firm to assist in determining the total amount of future royalty payments and estimates timing of such payment to HCR using an option pricing Monte Carlo simulation model. At each reporting period, the Company assesses the expected payments to HCR based on its underlying revenue projections and to the extent the amount or timing of such payments is materially different than its initial estimates, the Company will record a cumulative catch-up adjustment to the deferred royalty obligation. The Company’s deferred royalty obligation recognized within liabilities was $309.6 million as of December 31, 2023. The significant assumptions used to estimate the HCR deferred royalty obligation accretion of the liability include the revenue projections and timing of payments.

The principal considerations for our determination that performing procedures relating to the deferred royalty obligation with HealthCare Royalty Partners is a critical audit matter are the significant judgment by management when determining the value of the deferred royalty obligation. This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating the audit evidence obtained related to management’s assumptions related to the revenue projections used to determine the timing of expected cash outflows through the Monte Carlo simulation model. In addition, the audit effort involved the use of professionals with specialized skills and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s determination of the accretion of the liability. These procedures also included, among others, (i) testing management’s process for developing the deferred royalty obligation; (ii) evaluating the appropriateness of the Monte Carlo simulation model; (iii) testing the completeness and accuracy of underlying data used in the model; and (iv) evaluating the reasonableness of the significant assumptions used by management related to future revenue projections and the timing of payments considering

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external market and industry data. Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the Monte Carlo simulation model and (ii) reasonableness of the revenue projections.

Product Revenue – Gross-to-net (GTN) sales adjustment – Discarded Drug Rebate

As described in Notes 2 and 17 to the consolidated financial statements, product revenue is recognized at the net selling price, which includes reductions for gross-to-net (“GTN”) sales adjustments such as government rebates, chargebacks, distributor service fees, other rebates and administrative fees, sales returns and allowances and sales discounts. Government rebates include the discarded drug rebate. The Infrastructure Investment and Jobs Act requires manufacturers of certain single-source drugs separately paid for under Medicare Part B and marketed in single-dose containers to refund the dispensed drug unused and discarded exceeding an applicable percentage defined by statute or regulation. The accrual for such rebate recognized within other long-term liabilities was $7.4 million as of December 31, 2023. The significant assumptions used to estimate the discarded drug rebate include historical experience with discarded volumes considering time lags in the processing of claims and invoicing from the Centers for Medicare & Medicaid services as well as legal interpretations of the payment limit amount used in the rebate calculation.

The principal considerations for our determination that performing procedures relating to the Product revenue – Gross-to-net (GTN) sales adjustments – Discarded Drug Rebate is a critical audit matter are the significant judgment made by management when determining the discarded drug rebate. This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating the audit evidence obtained related to the valuation of the discarded drug rebate and management’s assumptions related to historical experience with discarded volumes as well as legal interpretations of the payment limit amount used in the rebate calculation.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s estimate of the discarded drug rebate. These procedures also included, among others, (i) testing management’s process for developing the discarded drug rebate estimates; (ii) testing the accuracy of the rebate calculation; (iii) testing the completeness and accuracy of inputs underlying data used in the calculation of the rebate; and (iv) evaluating the reasonableness of significant assumptions used by management related to the discarded volumes considering historical experience as well as legal interpretations of the payment limit amount used in the rebate calculation, and whether assumptions were consistent with evidence obtained in other areas of the audit.

/s/ PricewaterhouseCoopers SA

Lausanne, Switzerland

March 13, 2024

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

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ADC Therapeutics SA

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

As of December 31,

ASSETS

Current assets

Prepaid expenses and other current assets 16,334 23,495

Operating lease right-of-use assets 10,511 6,905

Deferred taxes, net — 37,104

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities

Accrued expenses and other current liabilities 50,634 68,491

Operating lease liabilities, short-term 1,467 1,097

Operating lease liabilities, long-term 10,180 6,564

Other long-term liabilities 8,879 838

Commitments and contingencies (Note 15)

Shareholders’ equity

Accumulated other comprehensive (loss) income (93) 1,823

Total liabilities and shareholders’ equity $ 354,782 $ 490,859

The accompanying notes are an integral part of these consolidated financial statements.

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ADC Therapeutics SA

CONSOLIDATED STATEMENTS OF OPERATION

(in thousands, except per share amounts)

For the Years Ended December 31,

Revenue

Operating expense

Other income (expense)

Loss on debt extinguishment — (42,114)

Loss before equity in net losses of joint venture (234,525) (147,044)

Equity in net losses of joint venture (5,528) (10,084)

Net loss per share

Net loss per share, basic and diluted $ (2.94) $ (2.01)

The accompanying notes are an integral part of these consolidated financial statements.

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ADC Therapeutics SA

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

For the Years Ended December 31,

Other comprehensive (loss) income:

Remeasurement of defined benefit plan (1,854) 4,116

Currency translation differences 376 (539)

Share of other comprehensive loss in joint venture (438) —

Other comprehensive (loss) income (1,916) 3,577

The accompanying notes are an integral part of these consolidated financial statements.

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ADC Therapeutics SA

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)

Remeasurement of defined benefit pension liability — — — — — 4,116 — 4,116

Foreign currency translation adjustment — — — — — (539) — (539)

Total other comprehensive income — — — — — 3,577 — 3,577

Share-based compensation expense — — 49,322 — — — — 49,322

Loss for the period — $ — $ — — $ — $ — $ (240,053) $ (240,053)

Remeasurement of defined benefit pension liability — — — — — (1,854) — (1,854)

Foreign currency translation adjustment — — — — — 376 — 376

Share of other comprehensive loss in joint venture — — — — — (438) — (438)

Total other comprehensive loss — — — — — (1,916) — (1,916)

Share-based compensation expense — — 13,495 — — — — 13,495

The accompanying notes are an integral part of these consolidated financial statements.

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ADC Therapeutics SA

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

For the Years Ended December 31,

Cash used in operating activities

Adjustments to reconcile net loss to net cash used in operations:

Accretion expense of deferred royalty obligation 19,207 12,202

Cumulative catch-up adjustment, deferred royalty obligation (4,972) (15,402)

Amortization of operating lease right-of-use assets 2,080 1,328

Share of results in joint venture 5,528 10,084

Convertible loans, derivatives, decrease in fair value — (25,650)

Change in defined benefit pension liabilities (712) —

Warrant obligations, decrease in fair value (497) (11,504)

Amortization of debt discount, senior secured term loan 3,016 858

Amortization of debt discount, convertible loans — 2,495

Loss on debt extinguishment — 42,114

Changes in operating assets and liabilities:

Other long-term assets 200 (210)

Accrued expenses and other short-term liabilities (14,143) 16,246

Operating lease liabilities (1,716) (1,203)

Other long-term liabilities 7,391 —

Cash flows from investing activities

Payment for purchases of property and equipment (3,216) (687)

Net cash used in investing activities (3,216) (687)

Cash flows provided by (used in) financing activities

Proceeds from deferred royalty transaction, net of transaction costs 73,102 —

Proceeds from share issuance under stock purchase plan 773 —

Proceeds from senior secured term loans — 115,597

Convertible loans exchange — (118,304)

Proceeds from equity issuance, net of transaction costs — 6,130

Payment of transaction costs for share capital increases — (221)

Taxes paid related to net settled equity awards — (1,315)

Net cash provided by (used in) financing activities 73,875 (897)

Net decrease in cash and cash equivalents (48,027) (139,895)

Exchange gains/(losses) on cash and cash equivalents 184 (208)

Cash and cash equivalents at beginning of year 326,441 466,544

Supplemental Cash Flow Information:

Payments made under royalty financing transaction 8,709 10,998

Supplemental Non-Cash Investing and Financing Activities:

Issuance of shares, Deerfield Exchange Agreement — 19,834

Issuance of warrants, Deerfield Exchange Agreement — 12,297

Issuance of warrants, senior secured term loan — 3,713

The accompanying notes are an integral part of these consolidated financial statements.

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ADC Therapeutics SA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

1.Description of Business and Organization

ADC Therapeutics is a leading, commercial-stage global pioneer in the field of antibody drug conjugates (“ADCs”) committed to advancing its proprietary ADC technology platform to transform the treatment paradigm for patients with hematologic malignancies and solid tumors.

Since its inception, the Company has devoted its resources to developing a validated and differentiated technology platform with multiple payloads and targets, a robust next-generation research and development toolbox, and specialized end-to-end capabilities. The Company generates sales from its flagship product, ZYNLONTA, which is currently approved in the U.S. for the treatment of relapsed or refractory diffuse large B-cell lymphoma (“DLBCL”) in the third-line setting and has also been granted conditional marketing authorization in Europe. Additionally, the Company is seeking to expand ZYNLONTA into earlier lines of therapy and indolent lymphomas, and is committed to advancing its portfolio and pipeline through its continued research, development, regulatory and commercialization activities.

The Company was incorporated on June 6, 2011 under the laws of Switzerland, with its registered office located at Route de la Corniche 3B, 1066 Epalinges, Switzerland. The Company has three wholly-owned subsidiaries: ADC Therapeutics America, Inc. (“ADCT America”), which is incorporated in Delaware, USA on December 10, 2014. ADC Therapeutics (UK) Ltd (“ADCT UK”), incorporated in England on December 12, 2014 and ADC Therapeutics (NL) B.V. which was incorporated in the Netherlands on February 25, 2022. The Company and its three subsidiaries form the ADCT Group (the “Group”).

All references to “ADC Therapeutics,” “the Company", “we,” “us,” and “our” refer to ADC Therapeutics SA and its consolidated subsidiaries unless otherwise indicated.

2.Summary of Significant Accounting Policies

Basis of preparation and principles of consolidation

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and include the accounts of the Company and its wholly-owned subsidiaries. Intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures in the consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and on assumptions believed to be reasonable under the circumstances. Actual results could differ materially from those estimates.

Going Concern

We are responsible for evaluating, and providing disclosure of uncertainties about, our ability to continue as a going concern. As of December 31, 2023, we had cash and cash equivalents of $278.6 million. Based on our evaluation, we concluded there is no substantial doubt about our ability to continue as a going concern within one year from the date the Consolidated Financial Statements were issued.

Risks and Uncertainties

The Company is subject to risks and uncertainties common to companies in the global biotechnology and pharmaceutical industries, including, but not limited to, risks of failure or unsatisfactory results of its research and development efforts and clinical studies, the need for significant capital to fund the continued development of its products and pipeline, the need to obtain and maintain marketing approval for its product and candidates, the need to successfully commercialize and gain market acceptance of any of its product candidates that obtain regulatory approval, dependence on strategic relationships with collaboration and commercialization partners and on key personnel, securing and protecting proprietary technology, compliance with government regulations, competition, and

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dependence on third-party service providers such as contract research organizations (“CROs”), contract manufacturing organizations (“CMOs”), other suppliers, and third-party logistics providers.

Concentrations of Risk

Foreign exchange risk

The Company 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 U.S. dollars and holds cash principally in U.S. dollars.

Interest rate risk

Interest rate risk arises from movements in interest rates which could have adverse effects on the Company's net loss 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 relation to the royalty purchase agreement with HCR, the Company is obligated to pay interest in the form of royalties in connection with certain net sales and licensing revenue. As the effective interest rate (“EIR”) on the deferred royalty obligation does not depend on market performance, the exposure to interest rate and market risk is deemed low. See note 13, “Deferred royalty obligations” for further information. In regards to the senior secured term loans, the interest rate is variable and dependent upon market factors. The Company will update the EIR at the end of each reporting period for changes in the rate. See note 10, "Senior secured term loan facility and warrants" for further information.

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 Company is exposed to credit risk from its operating activities and from its financing activities including deposits with banks and other financial institutions. The Company’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.

To date, the Company’s only source of product revenue, which commenced during May 2021, has been sales of ZYNLONTA only in the U.S., which is sold primarily through wholesale distributors. In addition, the Company earns license revenues and royalties through its license agreements with third parties. See note 17 “Revenue” for further information. We continuously monitor the creditworthiness of our customers and have internal policies regarding customer credit limits. When determining customer allowances for estimated credit losses, the Company analyzes accounts that are past due, the creditworthiness of its customers, current economic conditions and, when sufficient historical data becomes available, actual credit losses incurred by the Company. As of December 31, 2023, and 2022, the Company did not record an allowance for expected credit losses as it was considered immaterial.

Liquidity risk

Liquidity risk is the risk that the Company 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 Company’s management.

Funding and liquidity risks are reviewed regularly by management and the Board of Directors. The Board of Directors reviews the Company’s ongoing liquidity risks quarterly as part of the financial review process and on an ad hoc basis

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as necessary. To date, the Company has funded its capital requirements through capital raises, including the issuance of the Company’s common shares, the issuance of convertible loans, the issuance of term loans, partnering of its programs and royalty financings. The Company may need to raise additional capital in the future, and that such financing may not be available on acceptable terms, or at all.

Other Concentrations of Risk

We depend on single source suppliers for certain components of our inventory, and our production, warehousing and distribution operations are outsourced to third-party suppliers and CMOs where a significant portion of our inventory is located. Disruption of supply from key vendors or third-party suppliers may have a material adverse impact on our operations and financial results.

Our primary source of revenue is from sales of ZYNLONTA. Historically, we have not experienced significant credit losses on our accounts receivable and as of December 31, 2023 and 2022, allowances on receivables were not material. Four customers accounted for 96% and 100% of gross accounts receivable as of December 31, 2023, and 2022, respectively.

Foreign currency translation

Functional and presentation currency

Items included in the financial statements of each of the Company’s 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 (“$” or “USD”), which is the Company’s functional and Group’s reporting 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 “Other, net.”

Wholly-owned subsidiaries

The results and financial position of all the Company’s entities that have a functional currency different from the reporting currency are translated into the reporting 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.”

Monetary assets and liabilities are translated at exchange rates in effect at the balance sheet date while non-monetary assets and liabilities are translated at historical exchange rates. Exchange gains and losses resulting from remeasurement adjustments are recorded within general and administration costs in the consolidated statements of operation.

Foreign currency exchange rates

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:

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Year ended December 31,

US $ / GBP

Cash and cash equivalents

Cash and cash equivalents include demand deposits held at financial institutions and other short-term highly liquid investments with original maturities of three months or less that are readily convertible to cash.

Fair value measurements

Financial assets and liabilities are required to be measured and reported at fair value at each reporting period. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability, an exit price, in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value includes:

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.

Accounts receivable

Trade accounts receivable represent amounts due from customers from product sales and are stated net of customer sales allowances for chargebacks, product returns and estimated credit losses. The Company’s payment terms range from 30 to 90 days. When determining customer allowances for estimated credit losses, the Company analyzes accounts that are past due, the creditworthiness of its customers, current economic conditions and, when sufficient historical data becomes available, actual credit losses incurred by the Company. As of December 31, 2023, and 2022, the Company did not record an allowance for expected credit losses as it was considered immaterial.

License revenue and royalties receivable, as well as other amounts due from the Company’s partners, are included in accounts receivable and are typically payable to us within 45 to 60 days after the end of each quarter in which they were earned. As of December 31, 2022, accounts receivable included $50 million in license fees from Swedish Orphan Biovitrum AB (publ) (“Sobi”) for the approval of the Marketing Authorisation Application by the European Commission for ZYNLONTA in third-line DLBCL.

Inventory

Inventory is stated at the lower of cost or net realizable value with costs determined on a first-in, first-out basis. Reserves for potentially excess, dated or obsolete inventories are established as a write-down to inventory and a charge to cost of product sales based on forecasted product demand estimates and the likelihood of consumption in the normal course of business, considering the expiration dates of the inventories on hand, planned production volumes and required production lead times.

Property and equipment

All property 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:

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Leasehold improvements 3 to 10 years

Laboratory equipment 5 years

Office equipment 5 years

Hardware and computer software 3 years

Leases

The Company recognizes operating lease right-of-use (“ROU”) assets and operating lease liabilities when the Company obtains the right to control the asset under a leasing arrangement with an initial term greater than twelve months. The Company evaluates the nature of each lease at the inception of an arrangement to determine whether it is an operating or financing lease and recognizes the operating lease ROU asset and operating lease liability based on the present value of future minimum lease payments over the expected lease term. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the Company uses the incremental borrowing rate we would expect to pay to borrow on a similar collateralized basis over a similar term in order to determine the present value of our lease payments. Operating lease ROU assets are comprised of the lease liability plus any lease payments made and excludes lease incentives. Certain lease arrangements contain renewal or termination options that have been included in the determination of the lease term if the options are reasonably certain of being exercised. For contracts that contain lease and non-lease components, the Company accounts for both components as a single lease component. Lease expense for operating leases is recognized on a straight-line basis over the lease term.

Investments in joint venture

The Company has an investment in a joint venture in which we own less than 50% and do not control the investee. The investment is accounted for using the equity method given our ability to exercise significant influence over the operating and financial decisions of the investee. The Company recognized its share of the investee’s profit or losses, other comprehensive income or losses and capital transactions as an adjustment to the carrying value of its investment in joint venture. 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, 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. The Company’s Investment in joint venture is assessed for impairment when events or circumstances indicate the carrying value of the investment may be impaired based on qualitative factors.

Impairment of long-lived assets

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If such circumstances are determined to exist, an estimate of undiscounted future cash flows produced by the long-lived asset, including its eventual residual value, is compared to the carrying value to determine whether impairment exists. In the event that such cash flows are not expected to be sufficient to recover the carrying amount of the assets, the assets are written-down to their estimated fair values. For the years ended December 31, 2023 and 2022, there were no material impairments of the value of long-lived assets.

Loans

Loans are initially recognized at fair value, net of transaction costs incurred. Loans are subsequently measured at amortized cost using an effective interest rate (“EIR”). Loans are presented as a financial liability in the consolidated balance sheet. Debt is classified as a current liability when due within 12 months after the end of the reporting period. The remainder of the amount is presented as a long-term liability. The Company recognizes debt extinguishment in Other income (expense) as the difference between the extinguishment payment and the carrying value of the loan.

Warrants

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance included in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”), ASC 815, Derivatives and Hedging (“ASC 815”) and Accounting for Convertible Instruments and

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Contracts in an Entity’s Own Equity (“ASU 2020-06”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, whether the warrants meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. For warrants that are classified as liabilities, the Company records the fair value of the warrants at each balance sheet date and records changes in the estimated fair value as a gain or loss in Other, net.

Derivative Liability

The Company analyzes the conversion feature of convertible notes for derivative accounting consideration under ASC 815-15 and ASU 2020-06, which requires that the conversion features are bifurcated and separately accounted for as a derivative instrument on the balance sheet at fair value. Any unrealized change in fair value, as determined at each measurement period, is recorded in Other, net and the associated carrying amount on the balance sheet is adjusted by the change.

Upon extinguishment of a convertible note where the embedded conversion option has been bifurcated and accounted for as a derivative liability, the Company records the shares at fair value, relieves all related notes, derivatives and debt discounts and recognizes a net gain or loss on debt extinguishment.

Employee benefits

Employee Pension Plans

The Company’s wholly-owned subsidiaries operate defined benefit and defined contribution pension plans in accordance with the local conditions and practices in the countries in which they operate. Certain employees of the UK subsidiary are covered by local defined contribution plans. 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 plan that provides an individual account for each participant and provides benefits that are based on all of the following: amounts contributed to the participant’s account by the employer or employee; investment experience; and any forfeitures allocated to the account, less any administrative expenses charged to the plan. 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 a third party 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 is 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 in Other comprehensive (loss) income and amortized to the statements of operations and comprehensive loss over the average remaining service period of active employees.

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 recognized in Other comprehensive (loss) income in the period in which they arise and amortized to the statements of operations and comprehensive loss in subsequent periods using the corridor approach.

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.

Share-based Compensation

The Company grants share-based awards. The fair value of awards expected to vest are recognized as an employee share-based compensation expense using the graded accelerated vesting method over the requisite service period of the award less actual forfeitures. The fair value of each stock option is estimated on the date of grant using the Black-Scholes option valuation model, that requires the use of assumptions including the expected volatility of the Company’s stock price, expected term, risk-free rate and the fair value of the underlying common stock. We estimate the fair value of restricted stock units granted based on the closing market price of our common stock on the date of grant. Actual forfeitures are recognized as they occur.

Employee Stock Purchase Plan

The fair value of purchase rights granted under the employee stock purchase plan is recognized as an employee share-based compensation expense with a corresponding increase in Additional paid-in capital. The total amount to be expensed is determined by reference to the fair value of the purchase rights granted.

The total expense is recognized over the offering period, which is the period over which all of the specified vesting conditions are to be satisfied. Participants that voluntarily withdraw from the plan are accounted for as a cancellation and total share-based compensation recorded in the period in which the participant withdraws. Terminations are accounted for as forfeitures and any share-based compensation expense reversed in the period the participant terminates. Accumulated payroll deductions are recorded within Accrued expenses in other current liabilities until the shares are purchased by the participant at the end of the offering period.

Revenue Recognition

The Company recognizes revenue when or as control of promised goods or services is transferred to its customers in an amount that reflects the consideration to which the Company expects to receive in exchange for those goods or services. The Company follows a five-step model: (i) identify the customer contract; (ii) identify the contract’s performance obligation; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations; and (v) recognize revenue when, or as, a performance obligation is satisfied.

Product revenue

The Company generates revenue from sales of ZYNLONTA in the U.S. for the treatment of relapsed or refractory DLBCL, which was approved by the FDA on April 23, 2021 and launched shortly thereafter.

Revenue is recognized when control is transferred to the customer at the net selling price, which includes reductions for gross-to-net (“GTN”) sales adjustments such as government rebates, chargebacks, distributor service fees, other rebates and administrative fees, sales returns and allowances and sales discounts.

GTN sales adjustments involve significant estimates and judgment after considering factors including legal interpretations of applicable laws and regulations, historical experience and drug product analogs in the absence of Company experience, payer channel mix, current contract prices under applicable programs, unbilled claims and processing time lags and inventory levels in the distribution channel. Management also uses information from external sources to identify prescription trends, patient demand, average selling prices, discarded volumes and sales return and allowance data for the Company and analog drug products. The Company’s estimates are subject to inherent limitations of estimates that rely on third-party information, as certain third-party information was itself in the form of estimates, and reflect other limitations including lags between the date as of which third-party information is generated

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and the date on which the Company receives third-party information. Estimates will be assessed each period and adjusted as required to revise information or actual experience. In particular, the following rebate requires a substantial degree of judgement.

Discarded Drug Rebate

The Infrastructure Investment and Jobs Act requires manufacturers of certain single-source drugs separately paid for under Medicare Part B and marketed in single-dose containers or packages to provide annual refunds (“discarded drug rebate”), if those portions of the dispensed drug that are unused and discarded exceed an applicable percentage defined by statute or regulation. The Centers for Medicare & Medicaid Services (the “CMS”) finalized regulations to implement this section on November 18, 2022, and the provision went into effect on January 1, 2023. In particular, the estimate for the discarded drug rebate requires a substantial degree of judgement.

The Company began estimating and recording a provision for the discarded drug rebate as a GTN sales adjustment beginning in the first quarter of 2023, which is included in Other long-term liabilities due to the long-term nature of when the first annual refunds are expected to come due. The significant assumptions used to estimate the discarded drug rebate include legal interpretations of applicable laws and regulations, historical experience with discarded volumes and time lags in the processing of claims and invoicing from CMS. Management uses a number of factors to estimate the discarded drug rebate, including information from external sources to identify the Company’s discarded volumes, preliminary information from CMS on estimated discarded volumes, as well as legal interpretations of the payment limit amount and J-code billing unit used in the discarded drug rebate calculation.

License arrangements

The Company recognizes revenues from license fees for intellectual property (IP) either at a point in time or over time. The Company must make an assessment as to whether such a license represents a right-to-use the IP (at a point in time) or a right to access the IP (over time). The Company recognizes revenue for a right-to-use license immediately if the licensee can begin to use and benefit from the IP upon commencement of the license term and the Company has no further obligations in the context of the IP. A license is considered a right to access the IP when the Company undertakes activities during the license term that may significantly affect the IP, which directly exposes the customer to any positive or negative effects arising from such activities. These activities do not result in the immediate transfer of a good or service to the customer. As such, revenues from the right to access the IP are recognized over time.

The Company may enter into agreements with multiple performance obligations. Performance obligations are identified and separated when the other party can benefit from the license on its own or together with other resources that are readily available, and the license is separately identifiable from other goods or services in the contract.

Transaction prices for out-license arrangements may include fixed up-front amounts as well as variable consideration such as contingent development and regulatory milestones, sales-based milestones and royalties. The most likely amount method is used to estimate contingent development and regulatory milestones because the ultimate outcomes are binary in nature. Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue will not occur when the uncertainty associated with the variable consideration is subsequently resolved. To the extent arrangements include multiple performance obligations that are distinct, the transaction price assigned to each distinct performance obligation is reflective of the relative stand-alone selling price when sold separately or estimated stand-alone selling price on the basis of comparable transactions with other customers when such goods or services are not sold separately. The residual approach is the method used to estimate a stand-alone selling price when the selling price for a good or service is highly variable or uncertain.

In determining the transaction prices, sales milestones and royalties attributable to licenses are excluded from the variable consideration guidance and recognized at the later of when the subsequent sales transaction occurs, or the satisfaction or partial satisfaction of the performance obligation to which some or all of the royalty has been allocated.

Cost of product sales

Cost of product sales primarily includes direct and indirect costs relating to the manufacture of ZYNLONTA from third-party providers of manufacturing, distribution and logistics, and royalties to a collaboration partner based on net

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product sales of ZYNLONTA. Inventory amounts written down as a result of excess or obsolescence are charged to Cost of product sales.

Research and Development (“R&D”) expenses

R&D costs are expensed as incurred, and consist of salaries and benefits of employees, share-based compensation costs, fees paid to clinical research organizations (“CROs”) and contract manufacturing organizations (“CMOs”),

upfront fees and achieved milestone payments associated with R&D collaboration arrangements, supplies, facilities costs and allocated overhead expenditures. Clinical study and certain research costs are recognized over the service periods specified in the contracts and adjusted as necessary based upon an ongoing review of the level of effort and costs actually incurred. The Company is required to estimate its expenses resulting from its obligation under contracts with vendors and consultants and clinical site agreements in connection with its R&D efforts. Although the Company does not expect its estimates to be materially different from amounts actually incurred, its understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary, and will be assessed each period and adjusted as required to reflect amounts actually incurred. Research and development costs are presented net of reimbursements from development partners.

Income taxes

Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be reversed. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided when it is more-likely-than-not that some portion or all of a deferred tax asset will not be realized. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized upon settlement. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. Interest and penalties related to an underpayment of income taxes are included in the income tax expense and classified with the related liability on the consolidated balance sheets. The uncertain tax position is presented as a reduction to a deferred tax asset for credit carryforward.

Segment information

The Company is managed and operated as one business segment, focused on the global development and commercialization of targeted ADC cancer therapies. A single management team that reports to the chief operating decision-maker, the Chief Executive Officer, comprehensively manages and allocates resources at the global corporate level. Accordingly, the Company views its business and manages its operations as a single operating segment.

Long-lived assets by geographic area are as follows:

(in thousands)

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.

Diluted loss per share adjusts the shares used in the determination of basic loss per share to take into account potentially dilutive common shares, if applicable, and the weighted average number of ordinary shares that would have been outstanding assuming the conversion of all potentially dilutive ordinary shares (share option plans, employee stock purchase plan and outstanding warrants).

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Contingencies

From time to time, we may become involved in claims and other legal matters arising in the ordinary course of business. We record accruals for loss contingencies to the extent that we conclude that it is probable that a liability has been incurred and the amount of the related loss can be reasonably estimated. Legal fees and other expenses related to litigation are expensed as incurred and included in selling, general and administrative expenses.

Recent Accounting Pronouncements

New accounting pronouncements which have been adopted

There are no accounting pronouncements that the Company has recently adopted.

Issued but not yet adopted

In November 2023, the FASB amended guidance in ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The revised guidance requires that a public entity disclose significant segment expenses regularly reviewed by the chief operating decision maker (CODM), including public entities with a single reportable segment. The amended guidance is effective for fiscal years beginning in January 2024 and interim periods beginning January 2025 on a retrospective basis. Early adoption is permitted. The Company is currently evaluating the effect that adoption of ASU 2023-07 will have on its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU requires the annual financial statements to include consistent categories and greater disaggregation of information in the rate reconciliation, and income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for the Company’s annual reporting periods beginning in January 2025. Adoption is either with a prospective method or a fully retrospective method of transition. Early adoption is permitted. The Company is currently evaluating the effect that adoption of ASU 2023-09 will have on its consolidated financial statements.

3.Fair value measurements

The carrying amount of Cash and cash equivalents, Accounts Receivable, net and Accounts payable is a reasonable approximation of fair value due to the short-term nature of these assets and liabilities. Financial liabilities that are not measured at fair value on a recurring basis include our senior secured term loan. The estimated fair value of debt is based on Level 2 inputs, including our understanding of current market rates we could obtain for similar loans.

The Deerfield warrants, which are measured at fair value on a recurring basis, were as follows for the years ended December 31, 2023 and 2022:

Deerfield warrant obligation $ 296 $ — $ 296 $ —

Deerfield warrant obligation $ 793 $ — $ 793 $ —

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Fair values must be estimated at the end of each reporting period with regard to the Deerfield warrants. The approach to valuation follows the fair value principle, and the key input factors are described for the Deerfield warrants in note 12, "Deerfield warrants." A Black-Scholes model was used to calculate the fair values.

There were no transfers between the respective levels during the period.

4.Inventory

As of December 31, 2023 and December 31, 2022 inventory consisted of the following:

Inventory write-downs of $1,608 and $2,165 were recognized and charged to cost of product sales in the Company’s Consolidated Statement of Operation for the years ended December 31, 2023 and 2022, respectively.

5.Property and equipment

Property and equipment as of December 31, 2023 and December 31, 2022 consisted of the following:

Hardware and computer software 1,173 1,257

Less: accumulated depreciation (4,275) (3,408)

Property and equipment, net $ 5,622 $ 3,355

Depreciation expense for the years ended December 31, 2023 and 2022 was $1,187 and $1,060, respectively.

6.Leases

The Company leases space for its corporate offices and research and development facilities under non-cancellable operating leases. On September 1, 2023, the Company modified the terms of its existing lease for its office in Switzerland. The existing lease contract was originally scheduled to expire on June 15, 2024 and has been cancelled and replaced by the new lease. The new lease also includes a reduction in the amount of office space being occupied.The modified lease commenced on September 1, 2023 and expires November 30, 2028, and includes a renewal option for five additional years through November 2033. The Company is reasonably certain it will exercise the extension option and therefore has accounted for the modified lease as a ten-year lease term.

On January 30, 2023, the Company expanded the square footage of its existing lease related to its U.K. office. The lease commenced on January 30, 2023 and expires on January 27, 2031, and includes an option to terminate early on January 26, 2026. The Company is reasonably certain it will not terminate the lease early and therefore will account for the lease using an eight-year lease term.

During the third quarter of 2022, the Company extended the term of its existing lease related to its U.S. corporate offices in New Jersey for an additional two years commencing on December 1, 2022, including an extension option for three additional years. The Company is reasonably certain it will exercise the extension option and therefore has accounted for the lease using a five-year lease term.

Non-cash operating lease ROU assets obtained in exchange for operating lease obligations were $4.9 million and $1.2 million for the years ended December 31, 2023 and 2022, respectively.

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Lease costs for the years ended December 31, 2023 and 2022 are $2,080 and $1,328, respectively.

The amount payable in 2023 under short-term leases (with an original term of under 12 months) is $3.

Maturities of lease liabilities are as follows:

Total lease payments 13,654

Less: imputed interest 2,007

Present value of lease liabilities $ 11,647

Other supplemental information related to leases is summarized below:

As of December 31,

Weighted average remaining lease term (years) 7.1 6.9

Weighted average discount rate 4.4 % 2.6 %

7.Interest in joint venture

On December 14, 2020, the Company formed a new joint venture company, Overland ADCT BioPharma, with Overland Pharmaceuticals (“Overland”) to develop and commercialize ZYNLONTA, and three of the Company’s ADC product candidates, ADCT-601, ADCT-602 and ADCT-901 (collectively, the “Licensed Products”), in greater China and Singapore (the “Territory”). The Company agreed to supply product to Overland ADCT BioPharma for its drug development and commercialization under a supply agreement 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 $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 have appointed an equal number of nominees to the board of directors of Overland ADCT BioPharma which includes the Chief Executive Officer of Overland ADCT BioPharma. 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 elected 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 $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 due to the high uncertainty related to achieving certain conditions associated with the contingent consideration as of the closing date.

The table below provides a rollforward of the Company’s interest in Overland ADCT BioPharma as of December 31, 2023 and 2022.

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(in thousands)

Interest in joint venture

Share of comprehensive loss in joint venture (10,084)

Share of comprehensive loss in joint venture (5,966)

8.Income taxes

For the years ended December 31, 2023 and 2022, loss before taxes consists of the following:

Year Ended December 31,

Income tax expense attributable to income consists of:

(in thousands) Current Deferred

Swiss and other jurisdictions 523 —

Swiss and other jurisdictions 111 —

Tax Rate Reconciliation

Income tax expense attributable to income was $39,106 and $227 for the years ended December 31, 2023 and 2022, respectively, and differed from the amounts computed by applying the Swiss income tax rate of 13.66% and 13.65%, respectively, to pretax income from continuing operations as a result of the following:

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For the years ended December 31,

Rate reconciliation:

Increase (reduction) in income taxes resulting from:

Differences in overseas taxation rates (343) 982

US Research & development tax credit (5,800) (6,110)

Re-assessments of prior year estimates (4,745) 629

Income tax expense for the year ended December 31, $ 39,106 $ 227

In the table above, the Company used ADCT SA’s statutory tax rate of 13.66% as the starting point for the reconciliation since it is the parent entity of the business. Effective tax rate varies from the statutory tax rate primarily due to valuation allowance recorded in the current losses in Switzerland and U.S. deferred tax assets.

Deferred Tax Assets

The income tax effect of each type of temporary difference comprising the net deferred tax asset as of December 31, 2023 and 2022 is as follows:

Year ended December 31,

Deferred tax assets:

Capitalized research and development 2,546 —

Accrued Rebate Reserve 1,843 —

Deferred tax liabilities:

Interest in joint venture (225) (1,039)

Other deferred tax liabilities (1,107) (2,955)

Total gross deferred tax liabilities (1,332) (3,994)

Net deferred tax liability $ (1,332) $ (3,994)

Total deferred tax $ — $ 37,104

The valuation allowance at December 31, 2023 was primarily related to Swiss NOL, Federal R&D and Orphan Drug credits, Capitalized Research & Development, and Share Based Compensation that, in the judgment of management, may not be realized. The valuation allowance increased by $81.0 million in 2023 with no release related to prior year except for expired NOL. The change in valuation allowance from 2022 was related to US operations. In 2022, the

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Company recorded valuation allowances primarily on the Swiss operations. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred tax assets will not be realized. The valuation allowance increased by $8.6 million in 2022 with no release related to prior year except for expired NOL. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities (including the effect of available carryback and carryforward periods), projected future taxable income, and tax-planning strategies in making this assessment. In order to fully realize the deferred tax asset, the Company will need to generate significant future taxable income prior to the expiration of R&D credit carryforwards in 2043.

At December 31, 2023, the Company has R&D credit for federal and state income tax purposes of $28.0 million which are available to offset partial future federal taxable income, if any, through 2043. The Company has not recognized the entire R&D carryforward due to the reasons stated above.

At December 31, 2023, the Company has Swiss Net Operating Loss Carryforwards of $1,059 million, with expiration dates ranging from 2024 to 2030. The Company has not recognized as deferred tax assets due to the reasons stated above.

Uncertain Tax Position

The Company recorded uncertain tax positions without interest and penalties of $6.6 million and $5.2 million as of December 31, 2023 and 2022, respectively. The increase of uncertain tax positions from tax year 2022 is related to current year positions. The uncertain tax position is recorded in the deduction of deferred tax assets.

Increase related to current year tax positions 1,463 783

Lapse of statute of limitations (30) (24)

The Company files income tax returns in Switzerland, United States, and United Kingdom. The Company remains subject to tax examinations in the following jurisdictions as of December 31, 2023:

Tax Year

9.Accrued expenses and other current liabilities

Accrued expenses and other current liabilities consist of the following:

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10.Senior secured term loan facility and warrants

On August 15, 2022, the Company, ADCT UK and ADCT America entered into the Loan Agreement, pursuant to which the Company may borrow up to $175.0 million principal amount of secured term loans, including (i) a First Tranche and (ii) Future Tranches. On August 15, 2022, the Company drew down $120.0 million principal amount of term loans under the Loan Agreement. The secured term loans are scheduled to mature on August 15, 2029 and accrue interest at an annual rate ofsecured overnight financing rate (SOFR) plus 7.50% per annum (with respect to SOFR loans) or a base rate plus 6.50% per annum (with respect to alternative base rate ("ABR") loans) for the first five years of the term loans, and thereafter, at an annual rate of SOFR plus 9.25% (with respect to SOFR loans) or a base rate plus 8.25% (with respect to ABR loans), in each case subject to a 1.00% per annum SOFR floor. The secured term loans require the payment of interest only through June 30, 2026 and quarterly payments of principal, interest and exit fees thereafter until the maturity date of August 15, 2029. The Company has the option to elect for the loans to be either a SOFR loan or ABR loan and has elected the First Tranche of the secured term loan to be a SOFR loan. Interest is paid on the last business day of each quarter.

The Company is obligated to pay certain exit fees upon certain prepayments and repayments of the principal amount of the term loans in an amount ranging from zero to 4.0% of the amount of the loan so paid. In addition, the Company has the right to prepay the term loans at any time subject to certain prepayment premiums applicable until August 15, 2026. The Loan Agreement also contains certain prepayment provisions, including mandatory prepayments from the proceeds from certain asset sales, casualty events and from issuances or incurrences of debt, which may also be subject to prepayment premiums if made on or prior to August 15, 2026. The obligations under the Loan Agreement are secured by substantially all of the Company's assets and those of certain of the Company's subsidiaries and are guaranteed initially by the Company's subsidiaries in the US and the UK. The Loan Agreement contains customary covenants, including a covenant to maintain a balance at the end of each quarter of at least $60.0 million in cash and cash equivalents plus an amount equal to any accounts payable that remain unpaid more than ninety days after the original invoice therefore, and negative covenants including limitations on indebtedness, liens, fundamental changes, asset sales, investments, dividends and other restricted payments and other matters customarily restricted in such agreements. In addition, the Loan Agreement contains a revenue covenant that, so long as the Company’s 30-day average market capitalization is less than $650 million, requires the Company achieve minimum levels of ZYNLONTA net sales in the United States, tested on a quarterly basis, which is subject to a customary cure right in favor of the Company that may be exercised by making certain prepayments and that, subject to certain limitations, may be exercised up to three times during the term of the Loan Agreement. The Loan Agreement also contains customary events of default, after which the term loan may become due and payable immediately, including payment defaults, material inaccuracy of representations and warranties, covenant defaults (including creation of any liens other than those that are expressly permitted), bankruptcy and insolvency proceedings, cross-defaults to certain other agreements, judgments against the Company and its subsidiaries and change in control.

On August 15, 2022, the Company also issued to the lenders under the Loan Agreement warrants to purchase an aggregate of 527,295 common shares, which warrants have an exercise price of $8.30 per share. Each warrant is exercisable, on a cash or a cashless basis, at the option of the holder at any time on or prior to August 15, 2032. The warrants contain customary anti-dilution adjustments and will entitle holders to receive any dividends or other distributions paid on the underlying common shares prior to their expiration on an as-exercised basis. On August 15, 2022, the Company also entered into the Share Purchase Agreement with the lenders under the Loan Agreement to purchase 733,568 common shares of the Company.

Accounting for First Tranche of senior secured term loans and warrants

The Company has accounted for the First Tranche of the senior secured term loans, the warrants and the common shares described above eachas freestanding financial instruments.

The warrants are freestanding financial instruments that are indexed to the Company’s common stock and meet all other conditions for equity classification under ASC 480 and ASC 815.Accordingly, these warrants are recognized in equity and accounted for as a component of additional paid-in capital at the time of issuance. The proceeds allocated to

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the warrants were based on the relative fair value method. The Company used a third party valuation firm to assist in calculating the fair value of the warrants, using the Black-Scholes option-pricing model. Key inputs for the valuation of the warrants as of August 15, 2022 were as follows:

As of

Exercise price in $ 8.30

Share price in $ 10.33

Risk-free interest rate 2.9 %

Expected volatility 87 %

Expected term (months) 60 months

Dividend yield —

Black-Scholes value in $ 7.51

The proceeds received have been allocated to the loan, the warrants and the common shares based on the relative fair value method, resulting in a discount on the loan. The loan was recorded at $116.0 million on August 15, 2022. The loan is subsequently measured at its amortized cost. See further illustration of the allocation of proceeds in the table below:

(in thousands) Common shares Warrants Loan Total

Transaction costs have been allocated to the loan, the warrants and the common shares based on the relative fair value method. Transaction costs associated to the warrants and common shares have been deducted from the respective instrument in equity, while transaction costs associated to the loan have been deducted from the loan and amortized using the effective interest method over the expected life of the loan. See further illustration of the allocation of transaction costs in table below:

(in thousands) Common shares Warrants Loan Total

As illustrated in the table above, the transaction costs of the loan (net of the transaction costs allocated to the warrant and common shares) were deducted from the loan to determine the carrying value as of August 15, 2022. The implied EIR that would be needed to increase the book value of the loan to cover all future expected outflows, taking into account the deduction of transaction costs from the initial loan balance, and based on a 360-day year for a SOFR loan, was computed at inception at 14.99%. Given the interest rate in the senior secured term loans is variable and dependent upon market factors, the Company will update the EIR at the end of each reporting period for changes in the rate. For the years ended December 31, 2023 and December 31, 2022, the Company recorded interest expense on the senior secured term loan in the amount of $18,398 and $5,845, respectively, which was recorded in interest expense in the consolidated statement of operations. The EIR at December 31, 2023 was 16.84%.

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The following table provides a summary of the interest expense for the Company’s senior secured term loan for the years ended December 31, 2023 and December 31, 2022:

Year ended December 31,

Amortization of debt discount 3,016 858

The amount at which the senior secured term 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 EIR. The carrying value of the senior secured term loan is $112.7 million and $109.7 million as of December 31, 2023 and 2022, respectively.

Accounting for the Future Tranches

The Company has no obligation to draw down the Future Tranches of the senior secured term loans. Therefore, the Company will account for the Future Tranches when drawn upon as a liability and subsequently measure the liability at amortized cost. Transaction costs associated with the Future Tranches will be deducted from the loan.

Contractual payments due under our senior secured term loans, including exit fees are as follows (in thousands):

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11.Convertible loans

On April 24, 2020, the Company entered into a $115 million Facility Agreement with Deerfield, pursuant to which Deerfield extended a tranche of $65 million of convertible loans on May 19, 2020 upon completion of the Company’s initial public offering (the “Deerfield First Tranche”) and a tranche of $50 million of convertible loans on May 17, 2021 after the receipt of regulatory approval for ZYNLONTA (the “Deerfield Second Tranche”). The convertible loans required quarterly interest payments at a fixed rate of 5.95% per annum beginning on July 1, 2020 and mature on the fifth anniversary of the date of the Deerfield First Tranche issuance.

The principal amount of the Deerfield First Tranche was convertible into a number of common shares of the Company determined by dividing the principal amount being converted by the conversion price equal to 130% of the IPO Price. The principal amount of the Deerfield Second Tranche was convertible into a number of common shares of the Company determined by dividing the principal amount being converted by the conversion price equal to the lessor of (i) 150% of the IPO Price), and (ii) 120% of the arithmetic average of the Volume Weighted Average Price of the common shares on each of the fifteen consecutive trading days immediately prior to the Deerfield Second Tranche disbursement date.

Upon conversion at the option of the holder, the Company was required to pay the holder shares of the Company’s common stock. If the Company undergoes a takeout major transaction (as defined in the Facility agreement governing the convertible loans), the holders may elect to convert the outstanding principal into the amount of cash and other assets and the number of securities or other property of the successor entity or other entity that the holder would have received had such holder converted into the number of common shares equal had the outstanding principal been otherwise converted, plus a of make-whole amount determined as the number of common shares per $1,000 principal amount based on the Company’s common share price as of the effective date of the takeout major transaction (the “number of make-whole shares”). If the Company undergoes a company share major transaction (as defined in the Facility agreement governing the convertible loans), the holders may elect to convert the outstanding principal into common shares of the Company, plus a number of make-whole shares.

On August 15, 2022, pursuant to an exchange agreement with Deerfield (the “Exchange Agreement”), Deerfield exchanged $115.0 million aggregate principal amount of the Company's senior secured convertible notes for warrants to purchase an aggregate of 4,412,840 common shares, an aggregate of 2,390,297 common shares and cash equal to $117.3 million.

Prior to the exchange, each tranche of the convertible loans was accounted for as a loan and an embedded conversion option derivative. Expenses and fees payable upon the issuance of the first and second tranches of convertible loans are allocated pro rata to the two components. The issuance costs related to the loans are amortized to interest expense over the contractual term at an effective interest rate of 23% and 7%, respectively. The following table summarizes the interest expense recorded on the convertible loans for the year ended December 31, 2022: