Adaptive Biotechnologies Corp Q4 FY2024 earnings call

Management Statement and Operational Highlights

• 2024 Overview: 2024 was a year of key wins and strong execution. MRD revenue grew 42% year-over-year, driven by clinical testing and pharma. Key catalysts included a new gap fill rate for clonoSEQ and an ODAC vote favoring MRD as a primary endpoint. Immune medicine made progress in autoimmune programs, nominated a lead clinical indication, and focused on preclinical development. Restructuring initiatives reduced cash burn by 40% from 2023, ending with $256 million in cash.
• MRD Business: Full year clonoSEQ clinical revenue grew 40% year-over-year. Q4 2024 clonoSEQ tests reached a record high of 20,945, up 34% year-over-year. Blood-based MRD testing grew 55%, community tests grew 38%, and ordering providers grew 30%. EPIC integrations were completed in 19 accounts, and a partnership with NeoGenomics was announced to expand community presence. The ASP of clonoSEQ in the U.S. ended 2024 at $11.17 per test, up 7% year-over-year.
• Immune Medicine: Focused on two therapeutic strategies (cancer with Genentech, autoimmunity). In oncology, progress was made in replacing TCR discovery cellular assay with a digital model. In autoimmunity, auto-reactive T-cell receptors were identified, a lead indication was nominated, and preclinical development was prioritized.

Segment Performance

• MRD: Fourth quarter revenue was $40.1 million, up 31% from the prior year, with 65% from clinical and 35% from pharma contributions. Full year 2024 MRD revenue was $145.5 million, up 42% year-over-year, including $12.5 million in milestone revenue. ClonoSEQ test volume increased 34% to 20,945 tests delivered in Q4 2024. Key U.S. indications for clonoSEQ in Q4: Multi myeloma (43%), ALL (34%), CLL (10%), etc. Blood-based MRD testing grew 55%, community tests grew 38%, and ordering healthcare providers grew 30%. EPIC integrations were completed in 19 accounts. A partnership with NeoGenomics was announced to cross-promote clonoSEQ.
• Immune Medicine: Fourth quarter revenue was $7.3 million, down 51% from the prior year, driven by lower Genentech amortization and reduced pharma/academic services. Full year 2024 immune medicine revenue was $33.4 million, down due to focus on drug discovery efforts.

Guidance

• Full year 2025 MRD revenue is expected to be between $175 million and $185 million, including $6 million to $7 million in milestones. MRD revenue is expected to be 40-60 weighted between the first and second half of the year. Operating expenses are expected to be between $340 million and $350 million. Cash burn is expected to be between $60 million and $70 million, with MRD contributing 30%, immune medicine 40%, and the remainder from corporate costs. Immune medicine is targeted to have a cash burn of $25 million to $30 million in 2025.

Risks

• Uncertainty around regulatory decisions affecting pharma milestones.
• Impact of biopharma industry changes on MRD pharma services growth.
• Dependence on successful execution of integration initiatives (EPIC, Flatiron) for volume growth.
• Risks related to the success of immune medicine drug discovery efforts and associated cash burn.

Question and Answer

Q: Andrew Brackmann of William Blair asked about the $1,300 assumed ASP for 2025, including gap fill rate impact, payer recontracting, revenue cycle management, and Medicaid.

A: Kyle Piskel responded on the ASP drivers including full year gap fill rate impact, payer recontracting, revenue cycle management, and Medicaid traction.

Q: Rachel Vatnsdal of JPMorgan asked about the NeoGenomics partnership and MRD guidance weighting.

A: Susan Bobulsky discussed the NeoGenomics partnership timeline and Kyle Piskel spoke on MRD guidance linearity with potential upside from EPIC and Flatiron.

Q: Mark Massaro of BTIG asked about COMPASS and CHART opportunity with NeoGenomics and commercial payer success.

A: Susan Bobulsky talked about NeoGenomics partnership potential and Chad Robins spoke on commercial payer recontracting success.

Q: Sung Ji Nam of Scotiabank asked about Medicare reimbursement for mantle cell lymphoma and NCCN guidelines.

A: Sharon Benzeno discussed Medicare coverage for mantle cell lymphoma and Susan Bobulsky spoke on NCCN guidelines inclusion and ongoing efforts.

Q: Dan Brennan of TD Cowen asked about ASP bridge, Medicaid contribution, EPIC impact, and sales force.

A: Kyle Piskel and Susan Bobulsky responded on ASP components, Medicaid progress, EPIC integration benefits, and sales force strategy.

Q: Matt Sykes of Goldman Sachs (Dan Brennan) asked about MRD volume growth sustainability and NovaSeq margin impact.

A: Kyle Piskel and Chad Robins responded on volume growth sustainability and NovaSeq margin impact on turnaround time.

Q: Tejas Savant of Morgan Stanley asked about pharma milestones timing, NovaSeq margin impact on turnaround, and Genentech partnership digital model.

A: Kyle Piskel, Chad Robins, and Harlan Robins responded on milestone timing, NovaSeq impact on turnaround, and Genentech partnership digital model benefits.