Adaptive Biotechnologies Corporation

Ladies and gentlemen, thank you for standing by, and welcome to Adaptive Biotechnologies' third quarter 2020 conference call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Ms. Karina Calcidea. Thank you. Please go ahead, ma'am.

Thank you, Buena, and good afternoon, everyone. I would like to welcome you to Adaptive Biotechnology Third Quarter 2020 Earnings Conference Call. Earlier today, we issued a press release reporting adaptive financial results for the third quarter of 2020. The press release is available at adaptivebiotechnologies.com. We are conducting a last webcast of this call and will be referencing to a slide presentation that have been posted to the investor section in our corporate website. During the call, management will make projections and other forward-looking statements within the meaning of federal security laws regarding future events and the future financial performance of the company. These statements reflect management's current perspective of the business as of today. Actual results may differ materially from today's forward-looking statements depending on a number of factors which are set forth in our public financial statements with the FTC and in the 10Q filed today. In addition, non-GAAP financial measures will be discussed during this call, and a reconciliation from non-GAAP to GAAP metrics can be found in our earnings release. Joining the call today are Chad Robbins, our CEO and co-founder, Julia Rubinson, our president, and Chad Cohen, our chief financial officer. In addition, Harlan Robbins, adaptive chief scientific officer and co-founder, will be available for Q&A. With that, I will throw the call to Chad Robbins. Chad?

Thanks, Karina. Good afternoon, everybody, and thank you for joining us on our third quarter 2020 earnings call. Once again, I want to thank all of our adaptive employees for their unwavering dedication and flexibility over the past several months. During the quarter, our financial performance was solid, and we made substantial advances across all business areas. These results continue to validate the value of our immune medicine platform as a clinical product development engine. On slide three, let me walk you through some of the key highlights for the quarter. We reported revenues of $26.3 million, representing 25% growth versus prior quarter and 1% growth versus prior year. Related to our research business, we are working with two top-tier vaccine developers to use ImmunoSeq TMAP COVID in a subset of patients from their late-stage trials. This is encouraging as we strongly believe that measuring the T-cell immune response of vaccines is necessary to understand durability of the immune response. In clinical diagnostics, ClonoSeq test volumes grew sequentially 28%, and we also launched ClonoSeq for patients with CLL. For our diagnostic pipeline product, formerly known as ImmunoSeq DX, We are pleased to announce the new brand name is T-Detect, representing the power of T cells to detect disease. Today, we released top line results showing that T-Detect outperforms serology to confirm past infection, which further supports the upcoming launch of T-Detect COVID. In addition, we have also identified a clinical signal for Crohn's disease, demonstrating a consistent cadence in our R&D pipeline. And last but not least, in our drug discovery business, we are extremely encouraged that we have successfully identified two highly potent neutralizing antibodies against SARS-CoV-2, which we believe to be best in class. Our neutralizing antibody work is another proof point of the potential of our immune medicine platform shown here in slide four, to be a clinical product development engine. We have unique and proprietary capabilities to understand the genetics of the immune response to disease and translate that data into multiple opportunities across research, diagnostics, and drug discovery. Remember, the adaptive immune system sees most diseases in exactly the same way, including COVID. Once we characterized the immune receptor data specific to the virus, we were able to develop tDetect COVID as a clinical diagnostic test, offer ImmunoCityMap COVID as a research tool for vaccine developers, and identify potent neutralizing antibodies for a partner to potentially commercialize. Importantly, the infrastructure that we built in just seven months for COVID is being leveraged to accelerate similar commercial opportunities in multiple disease states. Before I pass it on to Julie, I want to share two exciting data announcements related to our COVID efforts. On slide five, as we announced today, we have new data further demonstrating that T-cell-based testing with T-DETECT outperforms antibody serology to confirm past SARS-CoV-2 infection. This data, from a study performed in collaboration with the University of Padua in Italy, shows that adaptive T-Detect COVID identified 97% of PCR-confirmed past infections, while serology identified only 77%. This follows on the heels of our publication earlier this fall showing superior sensitivity of T-Detect versus two leading serology tests in a real-world population from our immune race study. Together with Microsoft, and in parallel with other publications from around the world, we are contributing to the growing recognition of the importance of T cells to understand the complete picture of the immune response to any disease. This is the foundational thesis for T-DETECT. Now, on slide six, I will walk you through our neutralizing antibody findings. As you know, back in April, we deployed our platform to discover fully human neutralizing antibodies to treat COVID-19. As such, we used our high-throughput method of screening immune cells to find the best antibody or antibodies which neutralized the virus. We started with blood from over 300 patients and hundreds of thousands of antibodies, of which we synthesized and characterized over 1,600 antibodies to various parts of the virus. We identified two candidates that neutralized live virus at 13 and 16 picomolar, which means that a very small amount of each of these antibodies is able to block the virus from infecting cells. Also, these antibodies are synergistic, and we expect a cocktail to further enhance performance. To put this into context, antibodies and antibody cocktails currently in the clinic have reported higher picomolar concentration for the same amount of neutralization. While others in the industry have made progress in proving the clinical effect of neutralizing antibodies against COVID-19, there is certainly room for improvement in efficacy and questions around manufacturing and administration of therapy at scale. While, of course, we are excited about all the progress recently announced in the fight against COVID, we also recognize that the virus is now endemic and effective therapies are still needed. We hope that the antibodies that Adaptive discovered could contribute to this solution. And with that, I'll hand it over to Julie.

Thanks, Chad, and thanks to all of you for joining us today. I want to echo Chad's thanks to our incredible employees. It has been another busy and successful quarter during an uncertain time. Turning to slide seven, I'm going to start with our life science research business. Our research business, although the most severely impacted by COVID-19 last quarter, has experienced some encouraging uptake during the third quarter. In addition, as we continue to execute on our pipeline for future revenue, year-to-date bookings have more than doubled from this time last year. That said, sample arrivals continue to vary month by month, and recovery is at a slower pace than our clinical business. Additionally, we are still seeing delays or cancellations of clinical trials and other disruptions impacting predictability in the business. We are tracking this trajectory closely in light of rising cases in recent weeks. This quarter, we have made great progress driving adoption of our upgraded ImmunoSeq RUO kit. We have signed 24 new core lab partnerships with well-respected labs at institutions such as MD Anderson, Fred Hutchinson Cancer Research Center, and the University of Pittsburgh, among others. These core labs will purchase our kit and offer immunosequencing to their internal network of researchers in their institutions. Enabling academic core labs as centers of excellence with our gold standard ImmunoSeq RUO kit is expected to set the foundation for long-term growth going forward. We have also made significant progress with ImmunoSeq TMAP COVID. We launched this product extension in August for vaccine developers to accurately and reproducibly measure the T cell immune response to vaccines and track the persistence of that response over time. We hope to be able to answer many outstanding questions about durability and safety and potential differences in efficacy across patient subgroups. Our TMAP product offers significant advantages over other technologies to detect and monitor T cells at scale using a small amount of blood without the need for live cells that require special sample handling. Measuring the T cell response in a vaccine trial is also important when disease severity is a clinical endpoint. Another finding from the work with the University of Padua showed that the T cell response is directly correlated with increasing severity of disease, while antibody levels show no correlation to disease severity. This is another reason why incorporating a well-validated, scalable, sensitive, and specific T cell assay like Immunoseq TMAP COVID should be incorporated into the development and evaluation of these vaccines. To date, We are sequencing a subset of patient samples from trials sponsored by two top-tier vaccine developers. From this work, our goal is to understand the difference in the T cell response between vaccinated individuals who do and do not get infected with the virus. This has the potential to lead to a novel correlate of protection that may accelerate the understanding of vaccine efficacy and duration of response in the broader population. In addition, we are also in late-stage discussions with several companies developing next-generation vaccines. In our MRD pharma research business, we announced today a collaboration with Glaxo to assess MRD in Glaxo's portfolio of hematology products, our second portfolio-wide deal. We are very pleased to work with Glaxo and look forward to generating data supporting the clinical value of monitoring MRD in the context of patient care. This deal continues to grow the total value of the Clonofeq brand to adaptive, combining clinical testing with sequencing revenue and potential future milestones from our pharmaceutical partners. Switching to our clinical diagnostic business with Clonofeq on slide eight. Clonofeq Q3 sequencing volume grew 58% versus prior year and 28% versus the prior quarter. Clonofeq is now used in all 30 NCCN cancer centers, and has been used to treat more than 14,000 unique patients to date. Over 685 new healthcare providers, or HCPs, were activated to order ClonoSeq year-to-date, and new ordering HCPs have contributed 16% of order volume so far this year. We have observed a healthy recovery in the business since the peak impact of COVID-19, and we expect growth to continue unless COVID leads to a systemic drop in cancer testing. We believe that Clonaseq's future is bright. As you know, we received FDA clearance in CLL in August and launched a significant corresponding commercial effort, including a new patient campaign. Early launch indicators are trending positively. In the 12 weeks since clearance, albeit starting from a small base, the total number of accounts ordering Clonaseq for CLL patients has increased by over 60%, adding 22 new ordering accounts. To date, we are also seeing around 60% of CLL MRD tests being performed in the blood, and importantly, we have achieved good initial traction within the community oncology setting where most CLL patients are treated. We remain bullish about 2021 being an inflection year for the Clonoseq business as we continue to build traction in CLL while also deepening penetration in our previously cleared indications of multiple myeloma and ALLs. We will continue to expand into blood testing in ALL, multiple myeloma, and NHL. Blood-based MRD testing has the potential to increase the number of tests run per patient over time. For blood-based testing in ALL, we have completed the clinical validation work required by the FDA, and we plan to submit this data to the agency around year-end. In the interim, we are increasing marketing support for Clonoseq usage as a CLIA-validated lab-developed testing service, where samples for any lymphoid cancer indication and a range of sample types, including blood, is acceptable, and payer coverage is already in place for blood-based testing in ALL and myeloma. Going forward, we will continue to evaluate the optimal commercial path, FDA or CLIA, for each additional indication. Turning to slide nine. First, as you heard, we have a new brand name for our T-cell-based diagnostic immunoseq DX, now called T-Detect. For T-Detect COVID, our data demonstrates that T-cell-based testing outperforms serology to confirm past infection in a real-world setting. These data, combined with other data showing that T-cells are detectable earlier than antibodies, show up in all people infected with the virus, and persist longer than antibodies, continue to build the case for measuring the T-cell response to inform our understanding of immunity. Based on these results and conversations with the FDA, We will bring the product to market after Thanksgiving, followed by our FDA submission prior to the end of the year. Our go-to-market approach is a soft launch that will focus on targeting people who want to know for certain if they had COVID-19, including self-pay consumers, employers, concierge medicine, and public health agencies. Our market research shows that there are many people who could not access testing earlier this spring and are still curious about a previous infection, particularly those who are skeptical skeptical about their antibody test results. This is even more pronounced in those that may have been exposed but asymptomatic or had a mild infection. Additionally, our research indicates high interest among consumers in understanding immunity to COVID-19. Therefore, our go-to-market strategy will benefit public health because it will also include the ability to contribute to on-market research to quantitatively assess the duration of immunity as defined by the persistence of SARS-CoV-2-specific T cells. All of this is a stepping stone to the longer-term vision for T-DETECT, where a blood sample will be able to give you multiple answers about what your immune system has seen or is currently fighting, and that will likely have to include COVID due to the wide range of long-term symptoms it causes. I want to reiterate that our work building the commercial and operational infrastructure needed to deliver T-Detect COVID will be critical as we move T-Detect forward in all indications. These efforts will set the base of our near-term commercial focus in infectious diseases, including COVID-19 and Lyme disease, and a medium-term expansion into autoimmune disorders. Moving on to slide 10. For T-Detect Lyme, as you know, we launched the ImmuneSense study over the summer with the goal to enroll 990 participants. Based on current enrollment rates and even though Lyme visits and diagnoses are down approximately 60% due to COVID, we expect to have around 800 participants of the 990 by the end of the year. We plan to continue to enroll the remaining needed patients and expect to file with FDA once the study is completed, which is now expected by end of 2021. However, given that we are building the infrastructure for T-DETECT COVID and based on our robust previous case control data, we are exploring commercial acceleration of T-Detect Lyme as a CLIA service offering in 2021. Results from our case control data set to be published with John Hopkins demonstrate a doubling of sensitivity of our tests compared to standard two-tier serology tests in acute patients. We have also seen that our tests can confirm an ongoing infection in patients who were treated with standard two to three weeks of doxycycline but still have lingering symptoms. In terms of other T-DETECT indications in the pipeline, today we are also pleased to announce the confirmation of our third clinical signal in Crohn's disease. Crohn's is a GI disorder that is often confused with other conditions with similar symptom presentations, and there is a significant unmet need for a highly specific and sensitive non-invasive test. Data will be shared in a scientific forum next year. Other indications such as celiac, ovarian cancer, and other autoimmune disorders continue under development within our R&D funnel, and we will update you on future progress as they advance. Now turning to our drug discovery business on slide 11. On the TCR discovery front, Genentech remains on track for an IND submission in Q1 2021 for our first shared product. We continue to screen and characterize TCRs against clinically relevant targets in solid tumors, and we are in late-stage characterization of several promising TCRs that could be considered by Genentech for the development of a second shared product. On the personalized approach, we are scaling our R&D efforts to inform our private product strategy with Genentech. We started screening blood from cancer patients to identify TCRs specific to a patient's tumor mutations, and our goal is to generate proof of concept data by Q1 2021. To support our near-term and long-term objectives for our private product, we plan to open our dedicated prototype lab in South San Francisco in Q1 2021, which will have capacity to perform first-in-human clinical trials. For our neutralizing antibody efforts, as you heard from Chad, we identified two highly potent neutralizing antibodies against SARS-CoV-2. In terms of the path forward, we have delivered a robust data package to Amgen for them to decide if they want to exercise their right of first negotiations and we believe our candidates can be part of the treatment paradigm for COVID-19. I'll now pass it over to Chad C., who will provide you with a financial update.

Thanks, Julie. Turning to our financial results on slide 12, total revenue in the third quarter was $26.3 million, representing a 1% increase from $26.1 million in the same period last year, and a 25% increase quarter over quarter. Our revenue mix for the third quarter consisted of 43% of our revenues coming from our sequencing category and 57% coming from our development category. Sequencing revenue in the third quarter was $11.3 million, representing a 3% decrease from the same period in 2019, but a 41% increase quarter over quarter. This year-over-year decrease was primarily driven by a $1.9 million drop in revenue generated from our biopharma partners, partially offset by a $1.4 million increase in revenue generated by our clinical customers. Clinical sequencing volume increased 58% in the third quarter 2020 to 4,023 clinical tests versus last year, as we saw cancer centers continue to open up and patients return to regularly scheduled MRD diagnostic testing. Testing volume increases in Q3 reflect a normalization of volume growth after a Q2 slowdown impacted by COVID. Research sequencing volume, which includes sequences reported to both our biopharma and academic partners, decreased by 38% to 6,541 sequences from 10,618 sequences in the third quarter 2019. The decrease primarily reflects the ongoing challenges we recognize as many of our biopharma and academic customer centers remain operating at a lower capacity or in some cases shut down due to COVID. In terms of our expectations for the balance of the year, We expect our research business volume to grow at a modest pace due to the headwinds discussed above. And on our ClonoSeq diagnostic business, our expectations are for continued growth versus the third quarter on the assumption of more normalized testing patterns for MRD. Development revenue in the third quarter grew to $15 million, up 5% from the same period last year. This quarter, development revenues includes a $2.5 million milestone related to an FDA regulatory approval in which our data was used as a secondary endpoint by one of our MRD pharma partners. As part of our strategy, we continue to execute on new collaborations with pharma partners where Clonaseq is used in trials with MRD as a clinical endpoint. These collaborations represent over $300 million in future milestone payments that we can potentially participate in, although we do not anticipate any additional milestones for the remainder of the year. We expect development revenues from our Genentech collaboration to continue to grow in the mid-single-digit percent range quarter over quarter. Shifting now from our revenue to our operating costs, total operating expenses for the third quarter of 2020 were $63.3 million, representing a 44% increase from $44.1 million in the same quarter last year. Working down our operating expenses, cost of revenue was $6.1 million during the third quarter 2020, compared to $5.6 million for the third quarter last year, representing an approximate 8% increase. This increase was driven by investing in higher overall production capacity, which was largely offset by allocating more of that capacity to R&D volume growth in the period. Research and development expenses for the third quarter of 2020 were $30.3 million, compared to $20.5 million in the third quarter of 2019, representing a 48% increase. The increase was a result of higher levels of spend across initiatives as we continue to accelerate our investment in our antigen map and TCR and antibody discovery efforts. Additionally, we began ramping program-specific spend around our T-DETECT diagnostic initiatives during the quarter. Sales and marketing expenses for the third quarter of 2020 were $14.5 million compared to $9.1 million in the third quarter of 2019, representing an increase of 59%. The increase was primarily driven by hiring activity and marketing investments to support existing and emerging Kelowna Seek indications, as well as continued investment in shared corporate marketing initiatives. These increases were partially offset by savings related to in-person customer events as we continue to implement virtual programs during the quarter. General and administrative expenses for the third quarter of 2020 were $12.1 million, as compared to $8.5 million in the third quarter of 2019, representing an increase of 42%. The increase was driven primarily by increased headcount and personnel costs, as well as an increase in legal, accounting, and tax professional fees. Net loss for the third quarter 2020 was $36.7 million, compared to third quarter 2019 net loss of $14 million. Adjusted EBITDA for the third quarter of 2020 was a loss of $28.4 million, compared to a loss of $12.7 million in the same period of the prior year. As uncertainties related to COVID remain, guidance will remain withdrawn. Overall, we had a solid financial quarter, which puts us back on our growth curve. Our balance sheet remains robust as a quarter end, with approximately $852 million in cash and securities, and we had no debt. We are well resourced to tackle our future opportunities. With that, I'd like to turn the call back to Chad for his closing remarks.

Thanks, Chad. At Adaptive, we have many exciting upcoming milestones in the next 12 to 18 months on the commercial and development fronts across all areas of the business. listed on slide 13. We are more confident than ever in our value proposition as we continue to deliver on our promises and demonstrate the capabilities of our platform. With that, I'd like to turn the call back over to the operator and open up for questions. Thank you.

As a reminder, to ask questions, you will need to press star 1 on your telephone. To withdraw a question, press the pan key. And please limit your questions to 2 or 1 plus 1 follow-up. Your first question is from Tyka Peterson of JP Morgan. Your line is open.

Hey, good afternoon. I'll start with Amgen now that you've handed over the antibodies, just latest thinking on timelines for them, you know, any chance of finding other candidates to pass along. And then I guess most importantly, given what we saw, you know, from Pfizer yesterday with the 90% efficacy on the vaccine, does that change your view on the monoclonal antibody opportunity at all around COVID-19?

Yeah. Hi, Tycho. Let me start with the final question. And I'll reiterate something I said in the speech is that, first of all, like everyone, we're thrilled that there's a vaccine that has potential to have widespread efficacy. That being said, we think COVID's endemic in the population and that people are going to get sick for it for a long time to come, unfortunately. Therefore, having therapeutic solutions is going to be part of the patient treatment paradigm. And we do feel that the kind of first wave of therapeutics, while showing limited efficacy, have a pretty significant room for improvement. And therefore, kind of standing up a platform and delivering antibodies with superior performance characteristics, which we believe have superior performance characteristics, we think are going to have hopefully a place to kind of be part of the solution. That being said, so we handed over our data packages to Amgen, and to the question of whether we have additional antibodies, we do. We're continuing to kind of characterize and synthesize and put them together to see the synergy between the antibodies, and we're going to hear back from them, you know, relatively soon. Obviously, a lot of factors, you know, from their perspective go into making this decision as well, which are beyond, you know, our control, and we'll see where we land. But as you know, we also have, you know, many pharma partners out there, and, you know, we'll be talking to them as well if Amgen elects not to move forward. Okay.

And then on the antigen map, you know, a couple moving pieces here. The timelines, you know, are kind of pushed out, you know, relative to, I think, what you said last quarter with the year-end filing last quarter. So can you maybe talk to the delay there? And then I didn't hear any mention of celiac because that kind of dropped off on the priority list.

Julie, just to clarify, in case there was confusion, the Lyme disease is moving forward. We had always anticipated launching Lyme at the end of 2021. We in fact, anticipate launching Lyme a little bit earlier than that, because we will bring it up in a CLIA environment, and we'll prepare the FDA filing towards the end of next year. So the commercial implications and the commercial launch of Lyme disease is, in fact, a bit earlier than initially planned. Celiac is still in what we call stage four of our five-stage R&D pipeline. We have an early signal there. We continue to study it further. The signal in Crohn's disease is particularly strong and something that we're really excited about, but we continue to assess celiac and lots of other disease states as well. I would say that we learned a lot from the speed with which we characterized the T cell response to COVID-19 this year, and that's actually helping to expedite the R&D pipeline for many other disease settings, and we expect to, you know, announce clinical signals at a faster click over the coming quarters.

Okay, and then just one last one before I hop off. The UK Vaccine Task Force had a T-cell tender. Are you able to talk about that process, I think, Oxford, but are you able to talk about how that played out on your end?

I am not. We did not participate. Oh, sorry. Jeff?

I can tell you we're in conversations with Oxford, but can't comment on the process. Okay. Fair enough. Thanks.

Your next question is from Derek, Derek of Bank of America. Your line is now open.

Hey, good afternoon. Good afternoon. Hey, could you talk a little bit, I mean, how do you see the T-DETECT COVID rolling out in 21 as more people get vaccinated? And I guess, you know, do you see more people getting tested to see if they have a memory T cell response? I'm just sort of curious in terms of, like, how do you ultimately see this getting played out?

Sure. So we see this rolling out in phases over time. We're essentially starting with an indication to confirm past infection, and we believe there's actually quite an appetite for among people knowing whether they had COVID-19 and also participating in on-market research to contribute to really understanding immunity, you know, through the T cells. That is really guided by the T cells. We think that over time, the question about immunity from both a natural infection from the virus as well as vaccines, is going to be, you know, continue to be important over time, particularly the duration of immunity. Even in a world where some people are vaccinated and some people aren't and people are still getting infected and we haven't been able to fully contain the disease, we do believe that really understanding where you stand remains important. And it's also important for employers and public health surveillance organizations who are responsible for understanding the status of the organizations they work they're responsible for. In the long term, you know, what we're really seeing is that there's actually so much sequelae from COVID that can last quite a long time. And a large percentage of people who get COVID are, in fact, asymptomatic and never knew they had it. But yet, you know, months later or perhaps, you know, over the next couple of years, we'll have lots and lots of people, you know, hundreds of thousands of people with ongoing symptoms that And when they go to the doctor, one of the first questions that I think they'll be asked or one of the first things we're going to have to find out is if you've had a COVID infection, given this range of long-term symptoms. So we do see an evolving value proposition over time, again, starting with Past infection, confirming past infection, participating in on-market research, understanding immunity and how understanding the duration of that immunity exists in a changing world that's getting ever more complex with vaccines. And then over time, I think it's just going to become part of life. And when T-Detect down the road is able, from a simple blood test, to tell you everything that your immune system has seen or is currently seeing, it will include COVID.

Great. That was a good answer. And just two quick follow-ups. I guess, how do you think about your commercial launch, and how do you expect to commercialize this in the Lyme test and the CLIA setting? I mean, you don't have a sales force, per se, for the infectious disease. And what's the opening percentage of your academic customer labs, just sort of any sense on the academic environment and where that sits?

Sure. So I'll answer the Lyme disease first. So similar to COVID, these are going to be very targeted launches. For COVID, it's largely digital marketing. For Lyme disease, we will be bringing on a sales force and also looking to partner for additional outreach as we move into the primary care setting, absolutely. I think your second question was about the academic research business?

Yeah, the academic research business. Yeah, just how many, your percentage of labs that are still open or partially open versus in the last quarter.

Sure, sure, sure. We are seeing more labs opening. We think, you know, the estimate we're working with and from research we're seeing and from our own experience, about 70% of labs are open, but they're not fully staffed. So there's still a lot of change going on, but we do see more labs opening and we are getting more traction in that setting.

Great, thanks.

Your next question is from Teja Savant of Morgan Stanley. Your line is now open.

Hi, this is Yuko on the call for Teja. Thanks for taking our questions. Could you elaborate on the pricing strategy for Lyme going the self-pay concierge service route? Would it be discounted versus the earlier ASPs you had talked about in the past?

Was that for Lyme? I just want to clarify the question.

I think it mixed two things. So the concierge medicine service sort of uh target is really for covid um as part of our soft launch strategy as one group that you know we believe um you know would would be interested in offering to detect covid to their patients um for lyme um you know it's it's a pricing strategy that is separate from concierge medicine just wanted to clarify that um in the initial research um we had done, we were hovering around a price range of $600 to $800 per Lyme test. We've done some further research that's showing us that it'll likely be in the lower end of that range, and we're going to be entering into one more round of pricing research as we get closer to our CLIA launch later this year, and we'll finalize the pricing at that time.

Got it. Thank you. And I have a follow-up. Could you provide your current thinking on the OUS strategy for Klonoseq? How does the IVDR process in Europe impact your thinking there?

Sure. So, absolutely. Our international strategy is evolving quite nicely. We started with a strategy of tech transferring the assay to select sites in select markets to begin generating data, which is a very important process of expansion internationally. By the end of this year, we'll have seven of those international tech transfers with our CE-MARC product. We are closely monitoring all of the IBDR compliance regulations and incorporating them into that product as we continue to advance those tech transfers.

Thank you.

Your next question is from Dog Shankle of Cowan. Your line is now open.

Hey, good afternoon. Thank you for taking my questions. Just starting on your commentary on clinical trial cancellations, I think you had that in your prepared remarks, Julie. Just curious, has this improved relative to last quarter, and are there specific indications where cancellations are more or less common?

That's an interesting question. So it's pretty much the same. I think if anything, you know, there's studies here and there that are getting canceled. What we're seeing more often is that timing of sample collection and shipment is unpredictable. And it doesn't really seem to be more or less in any disease state.

Okay. And then another follow-up on commentary from your prepared remarks. I believe both in your commentary as well as in the really well put together slides, you commented on community hospital adoption. I'm wondering if that's driven by more commercial detailing and then kind of on the flip side, your higher volume legacy accounts, have they resumed ordering at pre-pandemic levels?

The legacy accounts, hey, Doug, it's Chad. The legacy accounts, some of them still are not back online. Some of our kind of largest kind of historical ordering accounts, we still have some that aren't back. However, the ones that are back are ordering, but I wouldn't say they're yet at pre-pandemic levels. As far as kind of the community, I do think the commercial detailing is contributing. It's still small, but we've got a nice growth curve. from the community based on the work that we've done in putting reps out in the community, a hospital setting.

Okay, super helpful. And one last one. As was noted in the press release and earlier in this call, you guys are really well capitalized. While operating spend increased Q3 to Q4, you still came in a smidge light of what we were forecasting. Now, that could just be a function of our model, but I think the bigger, higher-level question is, are you holding back on growth investment at this point, given uncertainties in the existing environment, or at this point, are you now fully playing offense when it comes to R&D investment as well as commercial buildup?

Yeah, so, Doug, we're fully playing – we're looking for ways to fully play offense, I should say, in the sense that, you know, the T-DETECT is a great proof of concept for the broader strategy that a single blood test can detect many diseases at the same time, and we're looking to accelerate spending to, you know, be able to prove out that concept and then commercialize kind of a broader-based blood test to detect many diseases at the same time. Additionally, you know, having stood up an antibody discovery platform, which is another extension of the immune medicine platform to discover therapeutic opportunities, we have a search and evaluation team and are assessing ways that we can continue exploring opportunities in the therapeutic space.

And just to add on top of that in terms of pressing our advantage, I mean, we did expand our operating expense line by about $5.5 million. quarter over quarter from Q2 to Q3, up 44% year over year, you're going to see that can, you know, reaccelerate in the fourth quarter, trending up, you know, closer to 50% year over year in terms of OpEx spend next quarter. Okay. Super helpful. Thanks.

Thanks, Tim.

Thanks, Doug.

Your next question is from Sabin Richter of Goldman Sachs. Your line is now open.

Good afternoon. Given the Glaxo announcement, can you just comment on your BD strategy and the forward with regard to Clonaseq and potentially other programs as well? Sure, Julie.

Sure. So the Glaxo announcement is much like many of the previous MRD deals that we've signed with various pharma partners. And it remains an important part of our strategy for Clonaseq. It's, you know, a big part of demonstrating clinical utility for the product. And so Glaxo is another one of those deals, although it is the second that we've signed that PAN portfolio. So some of the previous deals are specific to one asset, one compound, one drug for a pharma company. In this particular case, it's multiple drugs in development across disease states. Moving forward, right now, you know, most of our, the rest of our pharma work has been on the immunoseq side. But, you know, moving forward, we do see opportunities to move into diagnostic partnerships with pharma for T-Detect in the future, much like we've done for MRD to date.

And then with regard to T-Detect for COVID-19, what's the earliest that you would expect an FDA clearance or EUA? And then secondly, on the antibody here, could you just comment on the cocktail approach and the work maybe you've done there? And, you know, you've mentioned superior performance characteristics, so how you think this is stacking up versus the, you know, antibody data that we've seen to date?

Sure. Hi, Salvine. I'll take the first question. We intend to file the EUA by the end of the year. You know, depending on FDA's kind of turnaround time, you know, we could expect to have that. You know, it's hard to predict when we could expect to have that, but I can say the engagement level has been extremely high, and we've been, you know, as we've gotten information, continue to pass it along. So, you know, hopefully sooner rather than later, but that's FDA-dependent. In relation to the synergistic capabilities of the antibodies, I'll turn it over to Harlan to answer that question.

Yeah, so each of our antibodies separately in live virus neutralization has, as we said, they were at 16 picomolar IC50 and 13 picomolar IC50. To just put that in context, each individually is significantly different. neutralizes live viruses at a significant lower concentration than anybody else's cocktail on clinical trials right now, that's at least that we're aware of. But we know through what's called a pseudovirus neutralization assay that when we put our two lead candidates together that we're getting another significant bump. In fact, somewhere between a third of the – approximately a third of the concentration of each individual when they're together will neutralize the live virus. So we expect – sorry, the pseudovirus. So when we get the live virus version, we expect the cocktail to have a significant boost in performance over the individuals.

Is that your vision? Thank you. Very helpful. Thanks.

Your next question is from Brian Weinstein of William Blair. Your line is open.

Hey, guys. Good afternoon. Thanks for taking the call. Hey. So starting out on the TMAC COVID product here, you guys had obviously said you expected some revenue in 20, and you've now said that you have some vaccine manufacturers on board. Can you just give us some idea of what we're talking about as far as, you know, what that revenue could be this year and then what the model still is. Is it still sort of that flat fee plus the tech access fee that you guys were talking about before? Is there any change to kind of how all that played out with, you know, actually signing these deals?

Sure. Thanks, Brian. So for the first couple of deals that we signed, some of that revenue, albeit small, will come in this year. It's a subset of patients from these ongoing trials. It is still, we're still tracking with the same model with a fee for service, you know, per sample price, plus a tech access fee for the antigen mapping. Although, for some of the larger negotiations that we're in the middle of, they'll be a bit more bespoke, you know, given that there's tens of thousands of potential patients, you know, to be sequenced. But that is still the general approach, absolutely.

And the idea between a subset of patients in these trials versus having this being used on all patients in the trial, what's the thought there, and how does that expand over time?

So I think what's really important there is there's a very critical set of samples that are necessary to understand the T cell response, and that is the set of patients who've been vaccinated who do and then do not get the virus, and to compare that difference, you know, between those populations of people, in addition to, obviously, those who didn't get vaccinated at all. And so we have these really nice subsets, very well characterized, well grouped, you know, studies underway, where we're going to get to, you know, understand the differences between those populations. And that is what's going to give us a really good signal to take into the larger studies and into new studies and next-generation vaccine studies where we have a potential correlate of protection that is very quantitative, defined by the T cells that map to SARS-CoV-2.

Got it. Thank you. And then on T-direct COVID, the 97% versus the 77% for serology, what was the serology test that was used as the comparator there? Arlen, you want to take that?

Yeah, so we'll have to get back to you on that because it's part of a bigger publication with our collaborators, but it's an EUA-approved serology test, and we'll also supplement that with additional serology tests from other manufacturers, so that's why we're not releasing it. It's going to be more than just one.

Okay, great. And the last one for me on the Crohn's product, maybe I didn't hear you say it, but what You said you have a strong signal here. Can you just give us some idea what that means relative to kind of what you've seen previously in terms of signal at this point for other applications? And then did you say what the next steps were and when we would actually see data on that?

Yeah. Thanks, Brian.

The reason we're particularly excited about Crohn's is that with a relatively small study subset, about 350 people, we're seeing a signal in sort of the same caliber as we were in the COVID case with that number of people to develop a signal. You know, really, really high specificity. We're highly, highly convinced the T cells that we've identified T cell receptors are specific to just to Crohn's, and therefore, there's still a subset of patients that we need to expand to pick up all Crohn's patients, but we're, you know, I would say that we're feeling as confident as we were at the same state as we were with COVID, where we're now, you know, almost, you know, well in the upper 90s in sensitivity. And But since we only have 350 patients so far and there's a bunch of broader questions we need to ask, we need to collect much larger cohorts, and so we're in the process of doing that. We expect some of the bigger cohorts to come in in the first quarter, and then we'll be publishing the results after we analyze and write up the larger data set. So sometime, you know, and then publication always takes a little bit of time. Unlike the COVID world where everything is done immediately and normal publication space, you have to actually go through peer review before you publish. So it'll be a little bit of a delay on that relative, but it should be next year for sure.

Totally understand. Okay, guys, thanks so much for taking the questions. Thanks, bro.

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

Hi. Thanks for taking the question. So does the Crohn's disease kind of mean that we're going to be looking at a GI panel in kind of the near future? And on the Crohn's disease, that seemed to come a lot faster than my expectations, at least. When you're finding these diseases, Is there a serendipitous effect, or is it really honed in on the beginning? And, you know, on one hand, it's great if you can just point and shoot, but I also think that maybe if there is some serendipity, you can come up with new stuff pretty quickly.

Yeah, let me answer the first question, David, and then I'll pass it to Harlan to answer the questions regarding signal generation. But in terms of, let me kind of reorient you to the strategy, which is first to go kind of disease by disease and single disease diagnoses. And the second part of the strategy is to go kind of differential diagnoses for a patient that comes in with the same set of symptoms and for us to be able to definitively tell that patient and doctor through a rule in test what they have. And then the third part of the strategy is to have which is really what we're kind of focusing in terms of a longer-term vision of a single blood test that can diagnose many diseases at the same time. So as we kind of mentioned with celiac, Crohn's, absolutely Crohn's we believe would be part of at least kind of medium term as part of a GI panel where a patient would come in with gastrointestinal symptoms and we'd be able to tell them, whether they have Crohn's or ulcerative colitis or celiac, et cetera. So it's actually kind of where we are tracking. We understand this has been kind of tried in the past, but with the sensitivity and specificity of T cells, we believe that we can distinguish. Now, Harlan, I'm going to pass it to you to discuss kind of signal generation.

Yes. So we have a team that is – so we – Separated the world into infectious disease, cancer, and autoimmune. And then we've added some other diseases that we didn't, I don't think inherently thought were immune mediated, but have now come to look like immune mediated. And then we went through and And I would say we've created a ranking system for all the autoimmune diseases. And for the ones in terms of unmet need, what we thought we'd know about the disease in terms of the immune response, how we would interact with pharma, all sorts of parameters. And then, of course, the size of the opportunity. And we have a team that goes out and searches for well-characterized sample sets from different repositories where we can start doing signal generation with already collected samples. This is, I think, the big advantage of moving cellular immunology to a molecular assay is we can use samples that are stored in someone's freezer. And Crohn's was definitely high up on the list in the autoimmune category. There's a bunch of others. And for all of them, we are in the process of collecting samples, or we already have collected samples and are in the process of analyzing. So we're trying to just tick them off in a pre-specified order according to our ranking system.

Great, thank you. And then I think this one's probably for Julie. An update in your thinking on T-cell therapies outside of oncology or partnerships in perhaps vaccines, any change of thinking there? Maybe that's Chad, but I think it's Julie.

Either one of us can answer.

I'll answer that. We are evaluating extensions of the therapeutic, the drug discovery platform to other areas. T-cell therapy, for example, in autoimmune and vaccine, the vaccine opportunities. We're looking at that both from an M&A perspective in terms of both talent and technology and and we're looking at it from kind of an internal perspective as an extension of our capabilities. So we've got search and evaluation team out there looking, and when the time is right, we will reveal more information.

All right. Thank you very much.

Thanks, David.

Your next question is from Mark Massaro of PPID. Your line is open.

Hey, guys. Thanks for taking the questions. I guess, Chad, first question for you. Can you just share a little bit of the logic behind rebranding Immunoseq DX to T-Detect? And then as a follow-up, you know, in context of Illumina buying Grail and Exact buying Thrive, does that at all change how you guys think internally about potentially packaging some of the single test indications in T-Detect for COVID Lyme and Crohn's? and other indications in the future, and perhaps bundling them together as one multi-cancer panel?

So let me answer the second question first. And so I think it's a really interesting question, and I'm not sure it changes our thinking, but it's not multi-cancer panel. I would say multi-disease panel. But absolutely the goal is to have a multi-disease panel, and we we are looking at ways that we can accelerate that vision of one blood test being able to answer questions and diagnose multiple diseases all at the same time. So, yes, and I would say, I wouldn't say necessarily that that changed our thinking, but that is our thinking. And then, I'm sorry, Mark, I got, well, the first question. Julie, you can answer the first question.

Heat attack branding, yes. I'll answer the TD Tech branding question. So when we initially started talking about the clinical pipeline ImmunoSeq DX, we thought it was really important to clearly communicate that the underlying chemistry for that future pipeline of diagnostics for multiple diseases, as Chad just described, that it was really clear that that was the same bread and butter ImmunoSeq assay, the TCR beta sequencing assay, which is our absolute gold standard, you know, like as Harlan said, turning immunology into a molecular assay from blood, super scalable. We wanted to make sure that was really clear and that we were fitting out all the T-cell receptors in a given blood sample and then simply mapping those receptors to the antigens of disease that they see. And so that was the initial strategy. But of course, as a consumer test and as just a test with a brand that you can kind of get behind in a diagnostic setting, we thought that it was, you know, more important now moving forward to focus on the important role of the T cell in particular and how the T cell detects all diseases in the same way in the body. And so we hope that everybody understands that the underlying chemistry is the same, it's immunocycate, but that going forward that, you know, sort of more attractive brand name of T-Detect really gives credence to what that test has the capability to do.

That's really helpful. Thank you. And then one other question is, obviously your clinical sequencing volume was quite strong, you know, beat my estimate. Can you give us a sense for the number of repeat orders that occurred in the quarter? And then can you comment to what extent the availability of blood testing is contributing to the top line?

You broke up there on your first question. In terms of blood testing, that's still a pretty small component of our overall testing volume. I'd say it's significantly higher for indications like CLL, probably in the 60% range, and then almost rounding to zero with multiple myeloma, but representing a decent component of our ALL blood volume. But overall, it's a pretty low overall percentage of our of our volume, I'd say it's, you know, somewhere around 20% or so.

And Julie, he asked about what the, how repeat, how repeat testing is contributing to our, in Clonaseq as opposed to new testing, I presume.

Yeah, sorry, I couldn't, your connection was garbled. Sure, so we are, we are still, you know, we haven't reported out yet. We wanted to give ourselves a little more time to cover the full length of, the full treatment cycle, the sort of duration of a treatment cycle for a any given patient with any given lymphoid malignancy before we start reporting out on regular number of tests per patient. But we're definitely seeing, you know, somewhere in the two to three range for tests per patient. And we'll continue to report out as that data matures. And in terms of, you know, I think I commented in my script, we have about, you know, 685 new ordering HCPs this year. And those new ordering HCPs, are taking a shorter amount of time to begin taking up a greater percentage of the order volumes in a given period. So whereas in the last quarter, I think we mentioned it was about 8% of order volumes were from new ordering HCPs, now we're up to 16%. So we're seeing a shorter, time to ordering after sign-up of, you know, new accounts or a new HCP. I'm not 100% sure if that's what you were getting at, but I tried to answer the question in sort of two different ways.

Yeah, thank you. And then if I can, one final one. Is there any strategy to kitting with Illumina? And when do you think Clonacy could be available through a kitted solution?

Sure, so we contractually have the ability to do that with Illumina, as I think you know. We continue to evaluate whether or not that, you know, whether or not to do so and what the timing would be of that process. And that is given, you know, what you just said, which is, you know, a really nice uptake of our service offering as a send-out test. And so we continue to evaluate. We are continually making upgrades to the assay, which would port right into a kit anyway. So the timing wouldn't be affected. It's really more of a commercial strategy at this stage.

Okay. Thank you very much.

At this time, there's no further questions, and I would like to turn it back to presenters for any further comments.

No further comments at this time. Thank you very much for joining today. I look forward to the fourth quarter.

Ladies and gentlemen this concludes today's conference call. Thank you for participating. You may now disconnect.