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Adaptive Biotechnologies Lays out Strategy to Drive ClonoSeq Adoption

NEW YORK – Calling its minimal residual disease (MRD) business "firing on all cylinders," Adaptive Biotechnologies on Tuesday laid out a multitiered strategy to help expand utilization of its ClonoSeq MRD assay in lymphoid cancer patients.

"To further increase ClonoSeq penetration, we are focused on a three-pronged strategy," Adaptive CEO Chad Robins told investors during a conference call following the release of the company’s fourth quarter and full-year 2022 financial results.

The first part of the strategy, Robins said, is to increase testing in blood with ClonoSeq. "Blood-based testing will be a catalyst to drive penetration in the community and increase frequency of testing for patients," he said, adding that blood-based ClonoSeq testing accounted for approximately one-third of the assay’s overall usage in the fourth quarter.

Another part of the company's strategy is to expand ClonoSeq's indications to non-Hodgkin lymphoma, specifically for diffuse large B-cell lymphoma (DLBCL), he said. Adaptive launched ClonoSeq to assess MRD in DLBCL patients last December and is already offering the test in its CLIA laboratory under Medicare coverage. It plans to seek Food and Drug Administration clearance for the indication later this year.

"Expanding access to ClonoSeq allows physicians to detect relapse sooner and create a more precise treatment plan for each patient," Robins said. "We expect to generate additional data in DLBCL and file with the FDA to support clinical adoption and increased pharma usage."

Lastly, Robins noted the company's plan to expand ClonoSeq's use by further demonstrating its clinical utility, including for treatment surveillance, clinical decision-making, and drug development.

Besides the MRD business, Robins outlined recent advances the company has made in its immune medicine business. Specifically, he said the company is "making good progress" with Genentech on two cell therapy programs, with two additional T-cell receptor data packages delivered to the partner. Additionally, efforts are underway to discover disease-specific targets for autoimmune disorders using the company’s immune receptor data, Robins said.

For the three months ended Dec. 31, the Seattle-based immune sequencing firm tallied revenues of $55.2 million, representing a 46 percent increase from $37.9 million a year ago and in line with analysts' average estimate of $55.3 million. About 51 percent of Q4 revenues were from the MRD business and 49 percent from the immune medicine business.

Immune medicine revenue was $27.1 million for the quarter, representing a 27 percent year-over-year increase that was driven by a $5.2 million increase in revenues from pharma and academic customers, as well as a $2.1 million increase in revenue from Genentech, partially offset by a $1.6 million decrease in T-Detect COVID revenues.

MRD revenue was $28.1 million for the quarter, up 70 percent from the fourth quarter 2021, primarily driven by clinical testing and MRD pharma partnerships.

ClonoSeq test volume increased 54 percent in Q4 to 10,526 tests delivered, compared to the 6,850 tests delivered in the fourth quarter of 2021.

The company's R&D expenses dipped 10 percent in Q4 to $31.2 million from $34.7 million a year ago. Its SG&A spending decreased 8 percent year over year to $46.1 million from $50.0 million, partially due to reduced ClonoSeq and T-Detect marketing activities.

The firm's fourth quarter net loss narrowed to $40.1 million, or $.28 per share, from a net loss of $61.4 million, or $.43 per share, a year ago. On average, analysts had been expecting a Q4 net loss of $.35 per share.

For full-year 2022, Adaptive reported revenues of $185.3 million, a 20 percent increase from $154.3 million in 2021 and in line with analysts' average estimate of $185.7 million.

Immune medicine revenue was $98.2 million in 2022, representing an 11 percent increase from 2021, driven by a $13.6 million increase from pharma services that was partially offset by a $4.4 million decrease from T-Detect COVID testing.

MRD revenue was $87.1 million in 2022, rising 32 percent from the prior year, driven by a $15.8 million increase in ClonoSeq clinical testing and a $10 million increase in MRD pharma testing.

Adaptive's 2022 R&D expenses were $141.8 million, compared to $142.3 million in 2021, while its SG&A expenses grew 8 percent to $184.1 million from $170.0 million.

The company's full-year net loss was $200.2 million, or $1.40 per share, compared to a net loss of $207.3 million, or $1.48 per share, in 2021, beating the consensus Wall Street estimate of a $1.48 loss per share.

Adaptive finished 2022 with $90.0 million in cash and cash equivalents and $408.2 million in short-term marketable securities, which the company said will keep it afloat for over three years. "We do not anticipate the need to raise additional capital to achieve our profitability targets," Robins told investors.

Adaptive Biotechnologies expects full-year 2023 revenue to be in the range of $205 million to $215 million, with about 55 percent from the MRD business and 45 percent from the immune medicine business.

Tycho Peterson, Adaptive's CFO, said the firm expects revenues to be the lowest in Q1 and higher later in the year. This is due to several factors, he said, including normal seasonality, expected increased uptake of ClonoSeq for DLBCL later in the year, and milestones in both immune medicine and MRD testing that are expected by year-end.

"We're off to a great start in 2023, momentum is building," Robins said. "We're growing revenue, advancing our pipeline, and we're managing our operating expenses. And importantly, we have the capital to fuel sustainable growth and execute our long-range plan."

In mid-morning trading on the Nasdaq, the company's shares were up more than 13 percent to $9.83.