Adaptive Biotechnologies Corp Q3 FY2024 earnings call

• MRD revenue increased 52% y/y, driven by clinical and pharma. Medicare set a new gapfill rate of $2,007 for clonoSEQ test and secured coverage for mantle cell lymphoma. Operating spend declined 11% y/y and 5% sequentially excluding q time costs. Sequencing gross margin improved 6 percentage points. - In MRD clinical, clonoSEQ test volume increased 30%, blood-based testing at 41% of tests, community tests grew 11% sequentially. - MRD pharma had 73% y/y growth, including $5M in regulatory milestones, 16 new myeloma studies closed, 10 multi-myeloma studies using clonoSEQ as primary endpoint. - Immune Medicine: Advancing R&D in oncology with Genentech to improve TCR-based cell therapy; in autoimmunity, identified autoreactive T-cell receptors, started making and testing antibodies for autoimmune indications.

Total revenue in the third quarter was $46.4 million. MRD contributed 81% of revenue, totaling $37.5 million, up 52% year-over-year. Clinical revenue grew 39% y/y with 30% growth in tests delivered, multiple myeloma was the largest contributor at 41% of volume. MRD pharma revenue grew 73% y/y, including $5 million in regulatory milestone revenue. Immune Medicine revenue was $9 million, down 32% y/y, driven by a decrease in Genentech upfront amortization but offset by a 4% increase in Immune Medicine pharma and academic services. Sequencing gross margin increased 6 percentage points compared to the previous quarter.

• Raised lower end of MRD revenue guidance to $143M - $145M from previous $140M - $145M. - Full year operating expenses expected between $335M - $340M (previously $340M - $350M). - Lowered annual cash burn target to ~$105M (previously ~$115M), with 47% from MRD and 39% from Immune Medicine. - MRD milestone in Q3 drove confidence to derisk the low end of the range; pharma has quarter-to-quarter volatility and potential softness due to hurricane impact.

• Pharma quarter-to-quarter volatility, where one or two studies pushing out can meaningfully impact a quarter. - Potential softness due to hurricane impact. - Need to monitor payer landscape challenges related to reimbursement and pricing.

Q: About the final gapfill price and MRD pharma funnel, Chad and Kyle discussed the $1,300 ASP target for 2025, potential upside, and ~200M backlog with ODAC catalyzing growth.

A: Chad explained the $1,300 ASP includes new gapfill rate and operational enhancements, Kyle noted pharma has quarter-to-quarter volatility but confident in growth.

Q: On guidance, Mark asked about beating revenue but not increasing upper end. Kyle responded ASP charge in Q3 and pharma volatility contributed, but confident in guidance.

A: Kyle said MRD milestone drove lower end increase, pharma has volatility and softness to consider.

Q: Mark asked about MRD pharma trials as primary endpoint. Chad and Susan responded there are 10 MM studies using clonoSEQ as primary, with 16 new myeloma studies closed, 11 post-ODAC, and good traction from ODAC decision.

A: Chad and Susan discussed new studies, milestone opportunities, and interplay between pharma and clinical business.

Q: Matt asked about mantle cell coverage and cost savings. Susan discussed mantle cell's testing opportunities and Kyle talked about cost savings in sales, G&A, R&D, with leverage and targeted investments.

A: Susan explained mantle cell testing opportunities, Kyle discussed leverage in sales, G&A, R&D.

Q: Maggie asked about EMR integration and NovaSeq. Susan talked about EMR integration progress and Chad discussed NovaSeq rollout and margin improvement.

A: Susan detailed EMR integration learnings and growth potential, Chad discussed NovaSeq launch and margin benefits.

Q: Corey asked about Genentech amortization and OpEx spend. Kyle said ~$50M - $60M remains, Chad noted Immune Medicine spend will be constrained.

A: Kyle provided Genentech amortization remaining, Chad discussed future OpEx guidance.

Q: Jason asked about payer challenges and Roche partnership. Chad responded on clonoSEQ value and Roche's assurance on partnership.

A: Chad talked about clonoSEQ value and Roche's assurance on partnership impact.