ADC Therapeutics SA

Previous wording

In our hematology program, our flagship product, ZYNLONTA, a CD19-directed ADC, received accelerated approval from the U.S. Food and Drug Administration (“FDA”) conditional approval from the European Commission and conditional approval from the NMPA for the treatment of relapsed or refractory DLBCL after two or more lines of systemic therapy. We are seeking to continue expanding ZYNLONTA internationally, and into earlier lines of DLBCL and indolent lymphomas, including marginal zone lymphoma (“MZL”) and follicular lymphoma (”FL”), as a single agent and in combination through our LOTIS-5 confirmatory Phase 3 clinical trial and LOTIS-7 Phase 1b 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 collaboration with the MD Anderson Cancer Center in a Phase 1/2 IIT in relapsed or refractory B-cell acute lymphoblastic leukemia.

Current wording

ADC Therapeutics is a commercial-stage global pioneer in the field of antibody drug conjugates (“ADCs”), transforming treatment for patients through our focused portfolio with ZYNLONTA (loncastuximab tesirine-lpyl), a CD19-directed ADC. ZYNLONTA received accelerated approval from the U.S. Food and Drug Administration (“FDA”) and conditional approval from the European Commission, China National Medical Products Administration (“NMPA”) and Health Canada for the treatment of relapsed or refractory DLBCL after two or more lines of systemic therapy. We are pursuing expansion of ZYNLONTA internationally, and into earlier lines of diffuse large B-cell lymphoma (“DLBCL”) through our LOTIS-5 confirmatory Phase 3 clinical trial (rituximab combination) and LOTIS-7 Phase 1b clinical trial (bispecific combination) as well as into indolent lymphomas, including marginal zone lymphoma (“MZL”) and follicular lymphoma (”FL”), through investigator-initiated trials (“IITs”) at leading institutions.

Previous wording

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 GTN deductions. We expect a relatively consistent level of GTN sales adjustments as a percentage of gross sales, but may also experience variability in GTN sales adjustments due to additional information and actual experience such as actual rebate and return rates.

Current wording

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. 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’ ordering patterns, pricing and GTN deductions. We expect a relatively consistent level of GTN sales adjustments as a percentage of gross sales, but may also experience variability in GTN sales adjustments due to additional information and actual experience such as actual rebate and return rates.

Previous wording

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.

Current wording

We generate license revenue and royalties from our strategic agreements for the development and commercialization of ZYNLONTA 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.

Previous wording

License revenues and royalties were $1.6 million for the year ended December 31, 2024 as compared to $0.5 million for the year ended December 31, 2023, an increase of $1.1 million. The increase was attributable to increased royalty revenue from our exclusive license agreement with SOBI to develop and commercialize ZYNLONTA in all territories other than the United States, greater China, Singapore and Japan.

Current wording

License revenues and royalties were $7.8 million for the year ended December 31, 2025 as compared to $1.6 million for the year ended December 31, 2024, an increase of $6.2 million attributable to our exclusive license agreement with Sobi to develop and commercialize ZYNLONTA in all territories other than the United States, greater China, Singapore and Japan. In March 2025, the Company recognized $5.0 million in license revenue in connection with a milestone due upon ZYNLONTA’s conditional approval by Health Canada for the treatment of relapsed or refractory DLBCL after two or more lines of systemic therapy, which was paid to us by Sobi in the second quarter of 2025. The increase was also attributable to increased royalty revenue from Sobi.

Previous wording

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 over time as we sell through pre-approval inventory that was previously expensed prior to commercialization under U.S. GAAP. Factors such as inflation may 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.

Current wording

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 over time as we sell through pre-approval inventory that was previously expensed prior to commercialization under U.S. GAAP. Factors such as inflation, tariffs and other external factors 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.

Previous wording

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.

Current wording

Research and development expense consists primarily of 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; upfront fees and achieved milestone payments associated with R&D collaboration arrangements; and employee related expenses, including share-based compensation expense.

Previous wording

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.

Current wording

We expect our research and development expense to decrease for fiscal year 2026, as compared to 2025, primarily driven by an expected reduction in spending on discontinued programs and our preclinical product candidates and research pipeline as a result of the 2025 Restructuring, as well as reduced spend on ZYNLONTA due to the timing, progress and stage of clinical trials. Thereafter, 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.

Previous wording

(1)ADCT-601 was discontinued in November 2024.

Current wording

Our R&D expenses were $104.0 million for the year ended December 31, 2025 as compared to $109.6 million for the year ended December 31, 2024, a decrease of $5.6 million, or 5.1%. The decrease in external costs and overhead of $6.9 million was driven primarily by a reduction in spending on discontinued programs, including ADCT-601 that was discontinued in November 2024, and our preclinical product candidates and research pipeline as a result of the 2025 Restructuring. These decreases were partially offset by an increase in spending on our PSMA-targeting ADC program due to the timing of costs incurred in connection with IND-enabling activities and an increase in ZYNLONTA spend due to the timing and enrollment of our ZYNLONTA clinical trials and related costs incurred in connection with the LOTIS 5 trials.

Previous wording

Selling and marketing expenses were $44.0 million for the year ended December 31, 2024 as compared to $57.5 million for the year ended December 31, 2023, a decrease of $13.4 million, or 23.4%. The net decrease in external costs and overhead was primarily attributable to a reduction of $12.0 million in marketing and advertising expenses as a result of cost cutting initiatives. The decrease in employee expenses was primarily due to lower wages and benefits of $2.3 million primarily due to decreased headcount, as well as lower recruitment costs of $0.2 million. The increase in share-based compensation expense of $0.6 million was primarily due to forfeitures of awards in connection with prior year employee terminations.

Current wording

Selling and marketing expenses were $43.4 million for the year ended December 31, 2025 as compared to $44.0 million for the year ended December 31, 2024, a decrease of $0.6 million, or 1.5%. The decrease in external costs and overhead was primarily attributable to $2.0 million in lower spend on marketing and advertising expenses as a result of reduced spending initiatives within the U.S. The increase in employee expenses was primarily due to an increase in wages and benefits of $0.3 million. The increase in share-based compensation expense of $1.0 million was primarily driven by the forfeitures of awards in connection with employee terminations in the prior year.

Previous wording

General and administrative expenses were $41.9 million for the year ended December 31, 2024 as compared to $48.4 million for the year ended December 31, 2023, an overall decrease of $6.5 million, or 13.5%. The decrease in external costs and overhead of $2.9 million was primarily related to lower professional fees of $1.5 million and lower insurance and IT costs of $1.3 million. The increase in employee expenses was primarily due to higher wages and benefits of $0.4 million and higher recruitment costs. The decrease in share-based compensation expense was primarily due to fluctuations in our share price as well as forfeitures of awards in connection with employee terminations.

Current wording

General and administrative expenses were $36.6 million for the year ended December 31, 2025 as compared to $41.9 million for the year ended December 31, 2024, an overall decrease of $5.3 million, or 12.7%. The decrease in external costs and overhead was primarily related to lower professional fees of $2.1 million primarily as a result of lower legal and accounting expenses, VAT recoveries of $0.5 million, lower insurance costs of $0.7 million and lower travel and IT costs of $0.5 million. The decrease in employee expenses of $0.6 million was primarily due to lower wages and benefits of $0.4 million and lower recruitment costs of $0.4 million, partially offset by $0.2 million in higher temporary project help. The decrease in share-based compensation expense of $1.0 million was primarily due to the timing of forfeitures of awards in connection with employee terminations.

Previous wording

Interest income was $12.3 million for the year ended December 31, 2024 as compared to $10.5 million for the year ended December 31, 2023, an increase of $1.7 million, or 16.4%. The increase was primarily due to higher yields received on our cash deposits.

Current wording

Interest income was $8.8 million for the year ended December 31, 2025 as compared to $12.3 million for the year ended December 31, 2024, a decrease of $3.5 million, or 28.2%. The decrease was primarily due to lower yields received on our cash deposits and cash equivalents and lower average balances.

Previous wording

Interest expense is primarily related to the accretion of our deferred royalty obligation with HCR and the senior secured term loan facility. Interest expense was $50.2 million for the year ended December 31, 2024 as compared to $46.3 million for the year ended December 31, 2023, an increase of $3.9 million, or 8.4%. The increase was related to higher accretion of our deferred royalty obligation with HCR of $5.7 million as a result of the $73.1 million, net of transaction costs, received in June 2023 upon the first commercial sale of ZYNLONTA in the United Kingdom or any European Union country, which increased the liability. This was partially offset by lower interest on our senior secured term loan facility of $1.8 million as a result of a lower effective interest rate.

Current wording

Interest expense is primarily related to the accretion of our deferred royalty obligation to HCR and the senior secured term loan facility. Interest expense was $51.6 million for the year ended December 31, 2025 as compared to $50.2 million for the year ended December 31, 2024, an increase of $1.4 million, or 2.8%. This was due to higher accretion of our deferred royalty obligation with HCR of $1.7 million as a result of higher total revenue, net, partially offset by lower interest on our senior secured term loan facility of $0.3 million as a result of a lower effective interest rate.

Previous wording

Other, net consists primarily of cumulative catch-up adjustments related to our deferred royalty obligation, changes in the fair value (gains or losses) of the Deerfield warrant obligation and the R&D tax credit from our UK operations.

Current wording

Other, net consists primarily of cumulative catch-up adjustments related to our deferred royalty obligation and the R&D tax credit from our UK operations. Other, net as of December 31, 2025 and 2024 included the following:

Previous wording

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 adjustment in the period in which the change in estimate occurred. The cumulative catch-up adjustment income was $11.2 million for the year ended December 31, 2024 as compared to $5.0 million for the year ended December 31, 2023, a change of $6.2 million. The change was primarily due to revised revenue forecasts incorporated into the valuation model in 2024 having a greater effect on the expected payments to HCR relative to the 2023 revised revenue forecasts. Revisions in both years were primarily attributable to changes in assumptions in the Company’s updated strategic and development plans, revenue projections and associated timing thereof.

Current wording

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 adjustment in the period in which the change in estimate occurred. The cumulative catch-up adjustment income was $22.2 million for the year ended December 31, 2025 as compared to $11.2 million for the year ended December 31, 2024, a change of $11.0 million. The change was primarily due to revised revenue forecasts incorporated into the valuation model in 2025 having a greater effect on the expected payments to HCR relative to the 2024 revised revenue forecasts. Revisions in both years were primarily attributable to changes in assumptions in the Company’s updated strategic and development plans, revenue projections and associated timing thereof.

Previous wording

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.

Current wording

We are subject to corporate income taxation in Switzerland and in other jurisdictions in which we operate, including the United States and the United Kingdom, where our two wholly-owned subsidiaries are incorporated. Under Swiss law, we are permitted to carry forward net operating losses for up to seven years, which may be used to offset future taxable income. Under U.S. tax law, research and development tax credits may generally be carried forward for up to 20 years and used to offset future tax liabilities, subject to statutory requirements.

Previous wording

We recorded an income tax expense of $0.2 million for the year ended December 31, 2024 as compared to $39.1 million for the year ended December 31, 2023, primarily driven by our U.S. operations and the full valuation allowance recognized on our deferred tax assets.

Current wording

We recorded an income tax expense of $1.0 million for the year ended December 31, 2025 as compared to $0.2 million for the year ended December 31, 2024, primarily driven by our U.S. and U.K. operations and the full valuation allowance recognized on our deferred tax assets.

Previous wording

We recorded our proportionate share of Overland ADCT BioPharma’s net loss of $1.5 million and $5.5 million for the years ended December 31, 2024 and 2023, respectively. For the year ended December 31, 2024, we recorded our share of Overland ADCT BioPharma’s net loss up until the point at which our share of losses exceeded our interest in Overland ADCT BioPharma. Losses were not recognized in excess of our total investment, as we have not incurred legal or constructive obligations or committed to additional funding on behalf of the joint venture.

Current wording

We recorded our proportionate share of Overland ADCT BioPharma’s net loss of $1.5 million for the year ended December 31, 2024. We recorded our share of Overland ADCT BioPharma’s net loss up until the point at which our share of losses exceeded our interest in Overland ADCT BioPharma. Losses were not recognized in excess of our total investment, as we have not incurred legal or constructive obligations or committed to additional funding on behalf of the joint venture. As a result, we did not record losses for the year ended December 31, 2025.

Previous wording

As of December 31, 2024, we had cash and cash equivalents of $250.9 million and believe that our current cash position and capital resources are sufficient to fund our operation and meet capital requirements for at least the next twelve months from the date of filing this Annual Report on Form 10-K.

Current wording

As of December 31, 2025, we had cash and cash equivalents of $261.3 million and believe that our current cash position and capital resources are sufficient to fund our operation and meet capital requirements for at least the next twelve months from the date of filing this Annual Report on Form 10-K.

Previous wording

We plan to continue to fund our operating needs through our existing cash and cash equivalents, revenues from sales of ZYNLONTA, 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 continuously exploring strategic collaborations, business combinations, licensing opportunities or similar strategies for our early-stage research pipeline and for clinical development and commercialization of ZYNLONTA and/or our product candidates. However, we may be unable to obtain such financing, licensing and collaboration arrangements on favorable terms, if at all, and if so we may need to prioritize our portfolio and reduce our investment in early stage research and development activities.

Current wording

We plan to continue to fund our operating needs through our existing cash and cash equivalents, revenues from sales of ZYNLONTA, potential milestone and royalty payments under our licensing agreements and additional equity financings, debt financings and/or other forms of financing, as well as potential funds provided by collaborations. We are continuously exploring strategic collaborations, business combinations, licensing opportunities or similar strategies for clinical development and commercialization of ZYNLONTA and/or our PSMA-targeting ADC. However, we may be unable to obtain such future financing, licensing and collaboration arrangements on favorable terms, if at all.

Previous wording

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.

Current wording

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. 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.

Previous wording

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 filing an IND application, commencing or completing multiple clinical development stages, obtaining regulatory approval in multiple countries, and achieving various levels of commercial sales. Due to the nature of these arrangements, the future potential payments related to the attainment of the specified milestones are inherently uncertain, and accordingly, no amounts have been recorded for these future potential payments in the Company’s consolidated balance sheets as of December 31, 2024 and 2023. The aggregate amount of such potential milestone payments (excluding royalty payments), under all such collaboration agreements, was $212.2 million, including approximately $79.3 million contingent on the achievement of various research, development and regulatory approval milestones and approximately $132.9 million in sales-based milestones.

Current wording

The Company has entered into certain collaborations with development partners, including in-licensing and manufacturing agreements. These agreements include potential future milestone and royalty payments that become payable only upon the achievement of specified development, regulatory, or commercial events. As of December 31, 2025, and 2024 we have not incurred any obligations under these arrangements, and we do not expect any material payments to become due unless and until such events occur. The aggregate amount of such potential milestone payments (excluding royalty payments), under all such collaboration agreements, was $59.6 million, including approximately $29.2 million contingent on the achievement of various research, development and regulatory approval milestones and approximately $30.4 million in sales-based milestones.

Previous wording

Net cash used in operating activities increased to $123.8 million for the year ended December 31, 2024 from $118.7 million for the year ended December 31, 2023, an increase of $5.1 million. The increase in cash used in operating activities on a period over period basis was primarily due to the receipt of the $50.0 million in Sobi license milestone during the year ended December 31, 2023 which was recognized in revenue in December 2022 upon approval of the Marketing Authorisation Application by the European Commission for ZYNLONTA in 3L DLBCL as well as a decrease in deferred income taxes of $37.1 million, partially offset by the lower net loss for the period of $82.2 million attributable to a decrease in operating expenses and the timing of cash payments and receipts.

Current wording

Net cash used in operating activities increased to $141.2 million for the year ended December 31, 2025 from $123.8 million for the year ended December 31, 2024, an increase of $17.3 million.

Previous wording

Net Cash Used in Investing Activities

Current wording

Net Cash provided by (used in) Investing Activities

Previous wording

Net cash provided by financing activities was $97.1 million for the year ended December 31, 2024 and primarily related to the net proceeds received from the completion of the Company’s 2024 Equity Offering in May 2024. 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.

Current wording

Net cash provided by financing activities was $150.9 million for the year ended December 31, 2025 and primarily related to the net proceeds received from the completion of the Company’s June 2025 and October 2025 Private Placements. Net cash provided by financing activities was $97.1 million for the year ended December 31, 2024 and primarily related to the net proceeds received from the completion of the Company’s 2024 Equity Offering in May 2024.

Previous wording

We generate revenue from sales of ZYNLONTA in the U.S. for the treatment of relapsed or refractory DLBCL. 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.

Current wording

We generate revenue from sales of ZYNLONTA in the U.S. for the treatment of relapsed or refractory DLBCL after two or more lines of systemic therapy. 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.

Previous wording

We began estimating and recording a provision for the discarded drug rebate as a GTN sales adjustment beginning in the first quarter of 2023. The provision is recorded to Other current liabilities or Other long-term liabilities depending on when the 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 and information from CMS on discarded volumes. We have now received from CMS the first annual report and invoice for 2023, the payment of which has been paid in the first quarter of 2025, and was generally consistent with our estimate and no significant prior period adjustments were made. We will continue to rely on projection methodologies and expect annual reports to be received from CMS. Given the annual nature of the proposed reporting schedule we will continue to estimate periodically discarded drug rebate liabilities.

Current wording

The provision is recorded to Other current liabilities or Other long-term liabilities depending on when the 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 and information from CMS on discarded volumes. We have now received from CMS the invoices for 2023 and 2024, the payments of which have been paid in 2025, and were generally consistent with our estimate and no significant prior period adjustments were made. We will continue to rely on projection methodologies and expect annual reports to be received from CMS. Given the annual nature of the proposed reporting schedule we will continue to estimate periodically discarded drug rebate liabilities.