Now that the dust has settled on the Russell rebalancing - the annual reshuffle of the Russell indexes - biotech company ADC Therapeutics SA (ADCT) is making its debut in the widely followed Russell 2000 Index (RUT). Joining the RUT typically means increased volume, better liquidity, and more investor interest.
Despite being a penny stock, ADCT has Wall Street’s strong backing, with a “Strong Buy” rating and a mean target price that suggests the shares could nearly triple from current levels.
Investing in biotech stocks comes with risks, like the uncertainty of drug approvals and regulatory hurdles, but ADCT’s promising outlook makes it a compelling idea for investors who have the risk appetite to ride out the potential volatility. Let's take a closer look.
About ADC Therapeutics Stock
Switzerland-based ADC Therapeutics SA (ADCT) is a commercial-stage global leader and a trailblazer in antibody drug conjugate (ADC) technology, aiming to revolutionize treatment for hematologic malignancies and solid tumors. Its star product, ZYNLONTA, a CD19-directed ADC, boasts accelerated FDA approval for treating relapsed or refractory diffuse large B-cell lymphoma (DLBCL).
With a focus on expanding ZYNLONTA’s reach and delving into promising therapies like ADCT-602 and ADCT-601, ADC Therapeutics is pushing the boundaries of cancer treatment. Its market cap currently stands at $304 million.
Even after accounting for a 42% pullback from the February highs of $6.04, shares of ADC Therapeutics have surged 62.8% over the past 52 weeks. In 2024 alone, ADCT stock has rallied a whopping 110.8%, easily crushing the broader S&P 500 Index's ($SPX) 15.1% returns over the same time frame.
From a valuation standpoint, ADC Therapeutics stock trades at 3.76 times sales, lower than its industry peer Mersana Therapeutics, Inc. (MRSN) and its own five-year average of 59.86x.
ADC Therapeutics Slides After Earnings
On May 6, ADCT stock fell 9.2% in response to the biotech company's Q1 earnings results. The company posted revenues of $18.05 million, roughly in line with analysts’ estimates. ZYNLONTA generated product net sales of $17.8 million, representing a 7% increase sequentially due to sales volume increasing in both community and academic settings. The biotech company managed to narrow its losses by 23.3% annually to $0.56 per share, which matched forecasts.
During the quarter, ADC Therapeutics hit major milestones. The LOTIS-5 trial for ZYNLONTA in DLBCL saw accelerated enrollment, set to complete by 2024. On April 4, LOTIS-7's Phase 1b trial showed promising safety and anti-tumor activity in heavily pre-treated B-NHL patients. Initial data from a Phase 2 trial for relapsed/refractory marginal zone lymphoma (MZL) revealed a roughly 93% complete response rate. In solid tumors, ADCT-601’s Phase 1b trial progressed in pancreatic cancer. The company also advanced early-stage ADCs targeting Claudin-6, NaPi2b, PSMA, and ASCT2, demonstrating strong preclinical results.
ADC Therapeutics aims to achieve commercial brand profitability for ZYNLONTA in 2024, while advancing enrollment and efficacy updates for LOTIS-5 and LOTIS-7 trials by the second half of 2024 and the first half of 2025, respectively. It is also expanding investigator-initiated trials in follicular lymphoma and MZL, alongside providing updates on ADCT-601 and ADCT-602 targeting AXL and CD22, with further data expected in late 2024.
As of March 31, cash and cash equivalents were $234.3 million, and the company expects its cash runway to extend into the fourth quarter of 2025, providing enhanced financial flexibility to execute its strategy. Analysts tracking ADC Therapeutics predict its loss per share to narrow 34.7% to $1.92 in fiscal 2024, and improve by another 24.5% to $1.45 in fiscal 2025.
What Do Analysts Expect for ADC Therapeutics Stock?
ADC Therapeutics has a consensus “Strong Buy” rating overall. Of the seven analysts covering the new Russell 2000 stock, five advise a “Strong Buy,” one gives a “Moderate Buy,” and the remaining one analyst plays it cool with a “Hold” rating.
The mean price target of $10 suggests an expected upside potential of 188.2% from the current price levels. The Street-high target price of $13 for ADC Therapeutics implies the stock could rally as much as 274.6%.
On the date of publication, Sristi Suman Jayaswal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
