Good afternoon, and thank you for standing by. And welcome to Adaptive Biotechnologies First Quarter 2021 Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. . I would now like to turn the call over to your speaker today, Ms. Karina Calzadilla. Thank you, please go ahead.

Thank you, Terry. And good afternoon, everyone. I would like to welcome you to Adaptive Biotechnologies' first quarter and full year 2021 earnings conference call.

Thanks, Karina. Good afternoon, everybody. And thank you for joining us on our first quarter 2021 earnings call. At Adaptive what has remained a constant is our commitment to change how diseases are diagnosed, and how drugs are discovered using our proprietary immune medicine platform. This is supported by our culture, which is stronger than ever. And we can see that in a palpable energy and excitement we feel as we planned to begin the process of re-entry and moving into our offices that are new in Seattle, San Francisco and New York. I want to thank all our employees for their commitment to the company to each other and to the patients we serve. As you can see on Slide 3, our first quarter results reflect a strong start to the year and are a testament to the diversity of our platform and the capability of our team. Revenue in the first quarter was $38.4 million, representing significant growth of 84% versus prior year and 27% versus prior quarter. We saw substantial progress across our business areas. Most notably, we achieved an important milestone in our clinical diagnostics franchise with T-Detect COVID, which received emergency use authorization in March for the confirmation of recent or prior SARS-CoV-2 infection.

Thanks, Chad. And thanks to all of you for joining us today. I first want to highlight the strategic value of T Detect COVID to the future of the T-Detect franchise on Slide 4. T-Detect COVID is the only FDA-validated T-cell-based test to confirm recent or prior SARS-CoV-2 infection with 97% sensitivity at 100% specificity per our CD study. It has also demonstrated 90% sensitivity up to 10 months post infection in a real-world study in 76 convalescent patients. Since launch, we have had over 3000 consumers order the test, including members from over 50 concierge medicine practices, and approximately 75% of users have opted in for the ongoing research we continue to conduct to better understand immunity to COVID-19. Although the vaccine rollout will likely diminish the market to confirm prior natural infection. We intend to include a person's COVID status in all future T-Detect tech. This may be informative for patients with a broad range of symptoms potentially stemming from a past SARS-CoV-2 infection. Most importantly, we believe the R&D and commercial investments made for T-Detect COVID will accelerate the rate of which we develop and launch future T-Detect applications. These include among others, educating the FDA about the power of T-cells and our underlying technology, improving our models and techniques, and building a commercial infrastructure to market the test and service customers, all of which was accomplished in a very short period of time.

Thanks, Julie. Turning to our financial results on Slide 10, total revenue in the first quarter was $38.4 million represented an 84% increase from $20.9 million in the same period last year. Our revenue mix for the first quarter consisted of 39% of our revenues coming from our sequencing category, and 61% coming from our development category. Sequencing revenue in the first quarter was $15.2 million and increased 60% from the same period in 2020. The growth was primarily driven by a $5.2 million increase in revenue generated from our biopharmaceutical customers. Research sequencing volume increased to 7026 sequences up 17% from 6030 sequences delivered in the first quarter of 2020. We are pleased with a strong start to the year but as a reminder, we do see variability quarter-over-quarter and historical trends show most of our pharma revenues come in the second half of the year. Clinical Sequencing volume excluding our T-Detect COVID volume increased 35% to 4757 clinical tests delivered in the first quarter of 2021, up from 3518 clinical tests delivered during the same period in 2020. Although we continue to make progress, the COVID headwinds from 2020 haven't completely abated. And we do expect some ongoing pressure on clinical volumes at least through the first half of the year. Development revenue grew to $23.3 billion in the first quarter of 103% from the same period last year. As you all know, the primary component of our development revenue today relates to the amortization of our Genentech upfront. However, the largest driver of our development revenue growth this quarter was due to the recognition of $7 million in milestones from two key MRD Pharma partners, which came earlier than expected in the year. As Julie mentioned, we have over $300 million in MRD Pharma milestones available to…

Hey, thanks, Chad. As we outlined during the call, and listed on Slide 11. We've achieved some important milestones already in 2021, and have many more upcoming across all business areas during the rest of the year. We feel really good about the momentum across all areas as we continue to deliver on our promise and demonstrate the capabilities of our platform. With that, I'd like to turn it back to the operator and open up for questions.

Your first question comes to the line of Brian Weinstein from William Blair. Your line is now open.

You guys, thanks for taking the questions. Good afternoon. Really interesting stuff on the Crohn's disease and the ability to distinguish between patients with colitis. Can you talk about - you guys are very excited about this, rightfully? So can you talk about a little bit more about what this actually potentially means for patients and the enthusiasm that you guys have for this potential product?

Sure. I'll start and then I'll hand it over to Harlan if he wants to dive deeper. But the upshot is, is, yeah, we're super excited about the Crohn's data. This data proves that T-cells are more specific. So we can eliminate false positives. For each disease, we're going to get better and better on sensitivity. But this data, it's really the first data that provides the foundation for our thesis of going from looking at single diseases at a time to moving upstream and the clinical paradigm so that doctors are able to differentially diagnose between diseases. And remember that whole kind of - as we outlined the whole vision for T-Detect going one disease at a time to differential diseases to ultimately getting to the concept of one sample with many results from a single blood sample. We're working on our way. So we're really excited about what we're seeing, and it really provides a foundation.

Great. Then following up with the question on clonoSEQ. You guys have talked a lot about investments that you guys have made in sales and marketing. You have a LabCorp relationship now that's supposed to help you out? Can you just talk about how those investments are going in terms of the return that you're seeing on those? Are you seeing the

Brian, you got cut off there. But I think that was at the end of the question, what the investments we're seeing in clonoSEQ. Julie, do you want to take that?

Sure. Is Brian still there?

I'm not sure, but go ahead and answer the question.

Okay. Sure, absolutely. Yeah, we've been making it carefully dated investments in clonoSEQ at appropriate time to drive a doubling of volume as we set out to achieve this year. And we believe we're well on our way. The team is executing well. We're starting to see an accelerated ramp to get us there. So for example, as I mentioned, we had really nice growth in multiple myeloma and even despite launching CLL in the middle of the pandemic, we're seeing a nice pickup in CLL as well. We have about half of the NCCN centers using it now. 30% of orders are already coming from the community, which is a new set of institutions that we're targeting. We pretty much doubled the number of accounts ordering CLL in the first quarter of the year. So we believe we're right on track with our plan, which was always back half-weighted in 2021. We have also a lot of initiatives in place like peer-to-peer education, more marketing towards patients. We've just about completed training the new cohort, the new class of reps and so they will be entering into the field. In fact, the team is together all week this week in a in a National Sales Meeting and we just really believe all the steps we're putting in place are setting us up for success in 2021.

Your next question comes from the line of Derik De Bruin from Bank of America. Your line is now open.

Hi, good afternoon, this is Ivy on for Derik today. Thank you for taking my questions. So first on the clonoSEQ, just would highly appreciate if you could talk more about what needs to happen to reach the inflection point and accelerate the growth volume? And then also if you could talk about the progress on the other indications such as multiple myeloma and NHL? Thank you.

Sure, absolutely.

Go ahead Julie.

Sure, absolutely. Hi, Ivy. And so, yeah, I mean we're really very, very focused head down on growth. Now so we've had great success opening up or activating accounts, majority of our target accounts in the academic centers. Now we're moving into the community. And then we're really focused on deepening penetration in those existing accounts. As we've discussed we've deployed a new DHS sales team. So there are Hematology specialist to drive adoption in the accounts. We're focused on speeding up times ordering, post-activation doing that by clarifying use cases, doing more peer-to-peer education as I mentioned. We're also focusing our users on identifying as many patients as possible at diagnosis because that makes it easier to incorporate MRD more routinely in care. And as we mentioned also, we're focused on really moving the CLL community towards accepting MRD as part of the routine way in which they manage their patients. So all those things are just examples of how we're focused on growing in each of the disease states. As I mentioned multiple myeloma we've been, really educating that community about clonoSEQ for quite some time now. And that growth continues at a really nice steady pace. CLL we expect is going to continue to pick up, particularly as we move on from COVID, and these patients can get back into treatment more regularly. We're hopeful also that our reps will be able to get back in person. That, as I'm sure you're hearing from everyone is really just starting to happen now. And that's particularly important as we're moving into a new community setting. So that's how we think about what really needs to happen to continue on the accelerated ramp throughout the year. I think you asked that indication. So that we file ALL in blood and the FDA has kind of put many of those reviews on hold right now. But as I mentioned in our remarks, we can offer ALL blood in our CLIA lab and that's in fact happening quite regularly now. Multiple myeloma, we're still waiting on the data to readout from the trial. And we are increasing our focus in NHL now validating in blood and also waiting for a variety of clinical validation studies to readout, that our medical team is overseeing as well as our pharma team in partnership with a couple of key partners who are also quite interested in advancing clonoSEQ and MRD in the NHL setting.

Great, that's very helpful. Julie, I have two other quick questions on the financials. So first one we saw the moving parts - apologize if I missed it in the prepared remarks. I wanted to see if you could provide an update for the mix between sequencing revenue and development revenue in terms of the total revenue percentage. I think last quarter you talk about maybe sequencing, accounting for 50% to 55% of the total. So just curious, given all the changes, where does that move to? And I'm putting my second one upfront as well. So last quarter you talked about contemplating the increasing revenue from amortization from the upfront agreement with Genentech. So wondering if there's an update there. Thank you so much.

Sure, I'll take those. So very quickly. Yes, we still believe we're in the range for the full year of sequencing revenues to come in at between 50% to 55%. You saw really strong revenue activities from our research component of the business this quarter. There were some planned large projects that really came in a little sooner than expected. So we're effectively just reiterating that we still believe in that 50% to 55% as a percentage of the total from a sequencing perspective. And then from a development perspective, sort of your second question. Yeah, still in the same sort of ballpark that we articulated on the last quarter. We had mentioned that modeling our development revenues for the full year should really start with looking at a third quarter 2020 revenues and not our fourth quarter ones. We still believe that. We came in a little heavier than anticipated, just given the robustness of the investments that we made in the quarter. But overall, we believe our development revenues are in line with what we previously articulated. And we should see potentially some modest growth, but it won't be like a ton coming off of this quarter's numbers, on a quarter-over-quarter basis. So still in that sort of range that we provided last quarter in terms of the total amount of development revenues from Genentech.

Great, thank you very much, Chad.

Yeah.

Your next question comes from the line of Tycho Peterson from JPMorgan. Your line is now open.

Hey, good afternoon. I'll start with immunoSEQ T-MAP COVID. Just curious now that you've had it out a couple of quarters, how big that business is? And how you think about the durability there as we think about the various NextGen vaccines and the like? How do you think about the durability of the trends you're seeing there?

Sure.

Maybe I'll start with that and Julie feel free to kind of jump in. But one is for T-MAP right now, that business is actually just starting to pick up in light of understanding the T-cell response to variance and the vaccines. So we are seeing that business. In terms of durability, it depends on kind of your view of your COVID being endemic in the population. But T-Map as a franchise as part of the research business, we see having quite a bit of durability, based on the fact that we can leverage kind of the map - the antigen map that we're building with Microsoft to be able to inform kind of other parts of the business. So one area that we're particularly interested in, and we think there is future opportunity in is in the autoimmune space. And what's exciting about that is not just the ability on the research business, but also the ability for that data to potentially inform therapeutic targets. So you're starting to see that crossover. So we are - in terms of durability and kind of the future of that business even if kind of that COVID opportunity winds up waning we think there's opportunity in other disease states. And that's obviously one of the kind of major benefits of the antigen map.

Okay, that's helpful. The Pfizer partnership, I'm curious how meaningful that is? You mentioned that you jumped up across a couple of clinical programs. Julie, can you maybe comment on that one?

Sure. We don't disclose the financials as you know. It's much like many of the others that we signed, where there's - actually in this case, there is some annual payments sequencing revenue as well as milestones. It is a multiple myeloma translational partnership. And so there'll be multiple compounds involved in the development program at Pfizer targeting multiple myeloma.

Okay. And then on Genentech, now that you have delivered the proof-of-concept for the 15 cancer patients for the private product. Can you just talk a bit about how you think about their evaluation process, their next steps on the private product that we should be paying attention to?

Harlan, do you take that one?

Sure. So we're working both together and in parallel on this since the - just as a reminder, the objective on the private product to take the T-cells that are attacking the cancer in a given patient and take the T-cell receptors out of those T-cells, identify them. And then synthesize them and put them back into a set of that patient's own T-cells, and/or an off the shelf product at some future date with the idea being that we'd have a safe on target and potent therapy. So the two parts are on our side is really identifying very rapidly, the T-cell receptors that are cancer specific. And that's really the proof of principle that we're going through and we're now have to do all the development work exactly how much blood, how is it stored, what materials we're going to start with to optimize the process. And then all the other development processes related to the reagent used, the actual workflow, et cetera. And at the same time Genentech is working on the actual cell therapy part, the cell manufacturing part et cetera. And together we're discussing the science on a regular basis. So it's proceeding nicely. But we have - it's a hard thing to do and we have a ways to go, but the train's on the tracks and we're feeling good about the direction we're going.

Okay, that's helpful. Thank you.

Thanks.

Your next question comes from the line of Doug Schenkel from Cowen. Your line is now open.

Hey everybody. Thanks for taking my questions. And I apologize in advance. I know everybody on the line is struggling a little bit. So I apologize if any of these have been answered. My first is just on the Genentech shared product

Hey Doug, we can't hear you. You're breaking up. Could you try that again? Sorry. You see if possible, to dial back in on another line, and we'll jump.

Yeah, yeah, I will do that. Sorry about that.

Your next question comes from the line of Tejas Savant from Morgan Stanley. Your line is now open.

Hi, this is Yuco on the call for Tejas. Thanks for taking our questions. You mentioned you will be sharing data for Crohn's and Celiac later this year. What would you have us focus on with that presentation and what additional information should we be looking for?

Yeah. So far, we've done a couple of different things. We had one study which we - which was smaller study, a few hundred samples where we first found our Crohn's signal. And we talked about that a little bit last year. But what we're waiting for, we now have 5000 samples in-house that includes Crohn's and colitis. There's 1600 colitis samples. So we're going to finish sequencing, which we're almost done that dataset. And then we're going to analyze that dataset and then put it together. So we'll present the data once the larger study is fully analyzed and we have the --really make sure we dot our Is and cross our Ts on all the science.

Got it, thank you. And then a follow-up, given the good traction you're seeing for clonoSEQ CLL in blood, what are you seeing in terms of update for clonoSEQ in blood outside of CLL? I think you might have mentioned ALL, could you remind me if you have?

Sure. Thank you. Yeah, I think - yeah, we have about 25% of our usage in ALL in blood, which is in our CLIA lab. This is not an FDA-cleared label expansion at this time.

Okay, great. And then - how about in MM as well?

So that's a much smaller, at this stage. You have multiple myeloma is a sort of different biology of the disease of the bone marrow and the data is still emerging and the trial is still reading out at the moment. And so that one is not quite as advanced yet in blood as some of the other indications.

Great, thank you so much.

Sure.

Your next question comes from the line of Doug Schenkel from Cowen. Your line is now open.

Okay. We'll try this again. Can you guys - can you all hear me a little bit better now?

You sound great, Doug.

Much better.

Okay. The landline was messed up and now I'm on the cell. But anyway, sorry about that. So again apologies in advance if some of this was covered earlier on. On the Genentech shared products. I'm just wondering if you're starting to get any positive signals that fortify or build conviction that this is in fact a bonafide neo antigen, whether it's mutated or not mutated. And if not, what point you think you'll have such a signal? And then I'm just wondering, and maybe this has been going on all along, but is there - has there been some consideration of maybe accelerating the pace of looking at targets like this in parallel. Again I'd assume to some extent that's already happening, but just given, no matter how great you guys are, given limited biological and safety information around any given target. I'm just wondering if there are ways being contemplated that might increase the probability of success, just increasing the numbers and do using that as a means to more quickly reach an IND submission?

Sure. So starting with your first question, so Adaptive upfront confirms, and this is to be honest one of our specialties, we confirm that then the antigens that we're going after, targets are processed and presented and immunogenic. So we know even the before we do, the bulk of our work on characterization that these are really good antigens to be going after. And we have done that for many hundreds of targets on the discovery side. Then the next step is sort of then searching for the absolute best receptors that hit those targets, which we have - been done also with, I'd say maybe not quite as many, but still well over 100 different targets. And then the next step is working with Genentech, where we have to pick out the subset that has the optimal clinical use, meaning that it is okay, and all their clinical parameters they can recruit the patients, these mutations and/or tumor size advantages in the current. They have deemed it - we together, I guess have deemed it safe and all the other parameters that need to be considered. And so yes, I hear your point on the second question. And yes, we're parallel tracking more than one of these ladder step for the reason you said. There is a lot of work that goes into each one. On the Adaptive side, we're able to do many on the discovery side in parallel, but there is a whole clinical program needs to be put around each one. So the part that we get on the line, the more work on this, tighter the funnel. But we are parallel tracking more than one.

Okay, thank you for that. And then on personalized T-cell therapeutics, on that program. Again you may have covered this, especially given I heard an earlier question. I think on at this but I believe you were targeting to share proof of concept data and launch your prototype lab in the first quarter or close to that. Did that happen?

Yeah, we - I mean, we shared that with Genentech. I don't know that we're not going to share it publicly. But yes, we've completed our first pilot experiment and we're - have shared data with Genentech and we're now having - in fact we've been since then have done multiple other samples. We have targeted 15 patients, but we're now well beyond that and we're progressing forward and we have sort of regular discussions with the scientific team at Genentech, as well as the clinical team.

And the prototype lab?

And yeah, sorry, and the prototype lab is now built out, and we've completed construction and we're in - now is the real development effort at unlocking down the workflow through that lab et cetera. And we've hired some of the team. We have to hire some of the - some more of the team out and - but all the equipments in the lab is ours and it's fully operational.

And it sounds like with that in mind you're in good position to hit your target of 60 patients by end of the year.

Yeah.

Okay, all right. That's great. Thank you again, and sorry for the technical challenges.

No problem. Thanks, Doug.

Your next question comes from the line of Mark Massaro from BTIG. Your line is now open.

Hey, guys. Thank you for the questions and congrats on a strong quarter. I guess my first one is similar to Doug's question, and that is there are some investors that seem to have concerns about your ability to advance another shared target. And so I guess for those that are skeptical, can you just maybe address? I know, Julie mentioned that the first target was - the first candidate was specific to the target, but I'm wondering if you can provide a little more detail around maybe picking from a neo antigen as opposed to a tumor-associated antigen. And just give us a sense for what steps you guys can do to mitigate any potential risk items in the future?

Sure. So no matter what target there is there is a whole set of safety procedures that we need to ensure. And so the risk profile is different. If it's tumor-associated antigen versus a neo antigen because the neo antigen is not found in the normal human genome. But there are also likely some pretty safe tumor-associated antigens. But the primary consideration, I think we're in a better spot, in a lot of different ways, which is that, there has been a lot more work done on what's normally expressed in many, many different tissues now, just sort of the public data has increased significantly. So we're able to do a lot more upfronting of safety considerations and we're feeling quite confident that our next target is - has very, very low safety risk relatively speaking.

Okay. And my second question, congrats on realizing the $7 million MRD milestone payment in the quarter. Obviously, I was not expecting that. So MRD clearly is a promising biomarker and it can be used as a surrogate endpoint and can help with MRD enriched studies. Can you just give us a sense? I don't know if you can give us any detail as far as what - how specifically clonoSEQ was used. Was it in an adjuvant or metastatic setting? And can you also speak to the pipeline or the size of additional studies that you could realize or pull forward milestones in the future?

Sure Julie, you want to take that?

Sure. I can just tell you that the - what's public, that the - and then I guess I would suggest maybe reading the label, just so we don't say anything, we're not supposed to say. But one of them with Sanofi for Sarclisa in multiple myeloma. And the second one is Abecma, BMS' Abecma BCMA CAR-T in multiple myeloma. And there are secondary endpoints.

Great. And then just in terms of the pipeline.

Sure. So what we've disclosed is there's over $300 million in the pipeline. And obviously there is kind of the puts and takes as we accomplish those milestones, and kind of burn it down. Those are kind of off that number, but at the same time, we continue to kind of replenish that number with additional studies that we sign. I mean obviously the hope is that the kind of replenishment outstrips the amount we will burn it down over time. But those milestones are available to us, used frankly in a variety of different settings. One of the big kind of catalyst would be, if the FDA approved multiple myeloma as an endpoint in trials that would allow us to kind of be able to have access to a significant amount of those milestones over time.

The only thing I would add to that is that those milestones cut across about a half a dozen or so different partners with about a dozen or so projects across those partners.

Thanks so much.

Welcome

Your next question comes from the line of David Westenberg from Guggenheim Securities. Your line is now open.

Thank you for taking the question. So I want to stick with the MRD area. So has there been any new MRD interest based on all the - all the studies that are going out in solid tumor?? I realize it's a completely different market for you, but one of the interesting things that we've been finding out from all our oncology surveys is that there is a lot of oncologists that are hem/oncs that deal with solid tumor sometimes and vice versa. So just curious if there's been any kind of additional interest, just with the amount of data that's coming out all over this space?

Yeah, I'll take that, Dave. It's just - maybe is a typically iceberg of this. And I do think that we will kind of benefit from this positive monitoring residual disease, kind of in general are using genomics to be able to incorporate into kind of patient care continuum. In particular, as you mentioned, this would be in the community setting where an oncologist is treating all comers. So one thing we're comfortable with the concept of monitoring in general, whether they're monitoring in solid tumors and using kind of a variety - I won't mention anyone by name, but the variety of different test available and solid tumor monitoring that kind of piques your interest, and to be able to also monitor in liquid tumors. So no in - especially in the community, these hem/oncs don't want to be on the cutting edge. On the flip side, they also don't want to be kind of left behind. So I think you're hitting the point where we're just starting to see it move from the true bleeding edge thought leaders into hopefully kind of crossing over to main stream. And I do think we'll benefit from kind of MRD as a broad-based category. But I would say it's very early, and we're just starting to see that because as Julie mentioned, we and others of our peers haven't been able to go in yet and do that education. When that happens as a collective group, I think that all boats will rise on the tide with the difference being we're kind of the one company that is really focused on the hematological agencies in MRD in that space where I think there's many different technologies that are looking at MRD and solid tumor monitoring.

Yeah, let's stick on that concept. Because I think you are very differentiated in that you have a specialized technology where you're actually looking for the B-cell and B-cell mediated cancer. And I think you are in that market all by itself. Now I mean the reality is that you are dealing with hem/oncs on a very regular basis. And if you indeed would maybe win that call point, do you think maybe you would add approaches outside of clonoSEQ just to complement the fact that you already have that sales force and maybe such a good reputation with the group. And I'll stop there after that.

It's a good question. It's a good question, David. And we continue to look for ways to add value to the portfolio of the bag. So I would just say - we've got a kind of search and evaluation team out there that continues to look at opportunities to which to add incremental value to our offerings and I'd probably leave it at that for now.

Thank you so much.

You bet.

Our last question comes from the line of Salveen Ritzer from Goldman Sachs. Your line is now open.

Great. Good afternoon and thanks for taking our question. This is Elizabeth on for Salveen. Just a quick question from us on TruAB. So you mentioned you're exploring that and other diseases. Maybe if you could just expand on this. And then both the near term and the long-term strategy for the program.

Harlan, do you want to take that?

Yeah. So another great question and this is very much in the developmental stage. But I'm not really charged our research team with asking the question. Hey, starting with the principle that are real advantages that is that we have really deep scale and meaning we can sequence - because of our sequencing capability, we're able to go through many, many different antibodies in a given sample. So the question is where did that particular advantage allow us to find antibodies that - which would be differentiated from what other groups can do. And so I don't think that we're at the point where I feel comfortable giving us kind of the exact direction we're going yet, but I think the team has come up with some quite good directions and we're going to resource it. We are resourcing it and still feel like this is something that we're going to have to - I think in general, get back to you on kind of publicly, but we're feeling good about the program in general.

Thank you.

I am showing no further questions at this time. And that concludes our conference call. Thank you all for joining. You may now disconnect.