ADC Therapeutics (ADCT) faces a tougher regulatory path for LOTIS-5, but strong LOTIS-7 data could create meaningful upside, RBC Capital Markets said in a note emailed Friday.

The analysts said they see the story as balanced between two key factors: the increasingly difficult regulatory path for LOTIS-5, due to the grade 5 adverse event imbalance, and the potential for LOTIS-7 to show best-in-class combination data with better tolerability.

The end of the year should be an important period, with additional regulatory updates and ASH data expected, the analysts added.

The analysts said they remain cautious given the clinical risks, the need for a clear win, and the competitive landscape, but they "acknowledge there could be upside on LOTIS-7 success, though still think shares are fairly valuing the setup."

RBC kept its sector perform rating and $2 price target on ADC Therapeutics.

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