ADC Therapeutics price target lowered to $5 at RBC on growth outlook

Investing.com - RBC Capital lowered its price target on ADC Therapeutics (NYSE:ADCT) to $5.00 from $8.00 on Friday, while maintaining an Outperform rating on the stock. The revision comes as the stock has experienced a sharp 15.36% decline over the past week, according to InvestingPro data, though current analysis suggests the stock may be undervalued.

The price target reduction follows updated LOTIS-7 data for the company’s Zynlonta treatment in diffuse large B-cell lymphoma (DLBCL). Despite the lower target, RBC expressed confidence in the drug’s potential to show meaningful benefits in the second-line LOTIS-5 study.

RBC highlighted Zynlonta’s high efficacy and ease of use in second-line DLBCL treatment, which it believes could unlock an additional $200 million U.S. sales opportunity. The firm noted further upside potential if bispecific combination therapies and data in indolent lymphomas drive increased physician adoption.

The firm acknowledged several market challenges facing ADC Therapeutics, including a crowded competitive landscape, growing use of CAR-T therapies in academic centers, bispecifics in community settings, and reliance on NCCN guidelines rather than FDA approvals for some indications.

Despite these challenges, RBC maintained its Outperform rating, stating that shares appear undervalued given the "largely de-risked asset with multiple expansion opportunities that can reaccelerate growth." The firm assigned a Speculative Risk rating to the stock.

In other recent news, ADC Therapeutics has reported significant developments in its clinical trials and financial activities. The company announced updated Phase 2 data for its drug ZYNLONTA, showing an 85% overall response rate in treating relapsed/refractory marginal zone lymphoma, with a complete response rate of 69%. Meanwhile, the combination of ZYNLONTA with glofitamab in the LOTIS-7 Phase 1b trial for diffuse large B-cell lymphoma demonstrated a 93.3% overall response rate. Guggenheim has raised its price target for ADC Therapeutics from $7 to $10, maintaining a Buy rating, citing the promising trial results as a key factor.

Additionally, ADC Therapeutics has secured $100 million through a private placement, intending to support the ongoing clinical development and commercialization of ZYNLONTA. As part of a restructuring plan, the company will reduce its workforce by 30% and close its UK operations to extend its cash runway into 2028. The company is also advancing its preclinical exatecan-based ADC targeting prostate-specific membrane antigen while discontinuing other early-stage programs. These strategic moves are expected to position ADC Therapeutics for long-term growth with reduced operating expenses.

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