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spk01: Ladies and gentlemen, thank you for standing by, and welcome to the Adaptive Biotechnology's fourth quarter financial results conference call. At this time, all participants are in listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during this time, you will need to press star 1 on your telephone keypad. Also, 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 Calzadilla. Thank you. Please go ahead.
spk03: Thank you, Jeff, and good afternoon, everyone. I would like to welcome you to Adaptive Biotechnology's fourth quarter and full year 2020 earnings conference call. Earlier today, we issued a press release reporting adaptive financial results for the fourth quarter and full year of 2020. The press release is available at adaptivebiotech.com. We are conducting a live broadcast of these calls and we'll be referencing to a slide presentation that has 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 filings with the SEC and listed in this presentation. In addition, non-GAAP financial measures will be discussed during the 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, Julie 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'll turn the call over to Chad Robbins. Chad?
spk02: Thanks, Karina. Good afternoon, everybody, and thank you for joining us on our fourth quarter and full year 2020 earnings call. What a year. Once again, I want to thank all our adaptive employees for their unwavering dedication, flexibility, and execution in a very challenging 2020. Yesterday marked a pivotal moment for diagnostic testing. Adaptive launched T-Detect COVID, proving that it is possible to read how T-cells detect disease in the blood. This test is now validated for COVID, but it's just the beginning. T-cells see all diseases in the exact same way, and T-Detect will translate this natural capability of T-cells into a broadly applicable test that will change the diagnostic paradigm. We recognize it may take time for T-Detect to become mainstream, but the stage is set. The FDA has reviewed and provided encouraging feedback on our EUA submission. FDA is working through how we can implement a new T-cell testing category. FDA clearance under the EUA pathway, when received, will be the next milestone for T-Detect and one of many to come as we realize its value over time. In addition to the launch of T-DETECT COVID, all the efforts we put in place to combat the pandemic are being leveraged to accelerate a variety of development and commercial initiatives that will drive the future execution of our platform to power the age of immune medicine. Let me walk you through the significant progress we made throughout the year. As shown on slide three, Despite the impact from COVID-19, we grew our business and ended the year with over $98 million in revenue, up 16% versus 2019. And revenue in the fourth quarter also grew 25% versus prior year to $30.2 million. As you can see, the amount of progress was significant and demonstrates our ability to execute across our business areas, which are all driven by the same platform. Starting with clinical diagnostics. In addition to the launch of T-DETECT COVID, we also advanced T-DETECT for other future indications. The immune sense study for T-DETECT Lyme was launched and is expected to be completed in 2021. We identified another signal in Crohn's disease, which may represent a significant opportunity to reduce the expensive and time-consuming diagnostic odyssey that Crohn's patients currently undergo. We are also advancing at an increasingly rapid pace in many other disease states. ClonoSeq also achieved important milestones during the year. We obtained our first label expansion with the FDA for CLL in both blood and in bone marrow. And I'm pleased to announce that we recently filed with the FDA for the second label expansion of ALL into the blood. we are hopeful that more patients will be able to know their MRD status from a simple blood draw as data continues to support this approach. In our life science research business, although the most impacted by COVID, we developed in three important ways. First, as a result of findings from the Immune Code database, we launched ImmunoCityMap COVID to elucidate the T cell response to vaccines in development for COVID-19. Second, we further extended Immunozine TMAP to cancer with our recent partnership with AstraZeneca to map T-cell receptors to cancer antigens in AstraZeneca's portfolio of cancer medicines. And third, we entered into several contracts to expand distribution of our research use only kits with partners including prominent CROs and core labs. In fact, yesterday, we announced an expanded partnership with LabCorp to enable broader access to our growing portfolio of immune-driven clinical diagnostic and research products. In drug discovery, we made significant progress on the TCR discovery front with Genentech with both the shared and private products. The path is set for important milestones in 2021, including IND filing by Genentech of the first shared product, generation of a data package by adaptive for a possible second shared product, and proof of concept on the private product. In addition, we leveraged our immune medicine platform to build world-class antibody discovery capabilities that can benefit society for years to come. Our powerful technology allows us to search deeper and find more potent neutralizing antibodies against a wider variation of targets at very low concentrations. We have already found potent neutralizing antibodies against parts of the SARS-CoV-2 virus that could potentially treat patients impacted by a wide variety of variants. We are in advanced discussions with several potential partners. As you can see, 2020 was a busy year for Adaptive and laid a strong foundation for our 2021 plan, which we will discuss in detail throughout the call. But before I pass it on to Julie to provide details of our inline products and our pipeline, I want to take a minute on slide four to reorient to the fact that everything we do at Adaptive derives from using the genetics of the adaptive immune system as the source code of our platform. Our platform then transforms this code into data to enable the development of diagnostics and therapeutics for almost any disease. The massive and growing amount of immune receptor data that we generate with over 58 billion immune receptors, it's really at the epicenter of all of our business areas. And the scalability of our platform and our data enables us to become a clinical product development engine. I am more confident than ever in our open-ended growth story as we have made substantial progress and have development activity underway at various stages in life science research, clinical diagnostics, and in drug discovery. And with that, I'll hand it over to Julie. Julie?
spk04: 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 definitely been a challenging but successful year. Starting with clinical diagnostics and the exciting launch of T-DETECT COVID on slide five. Yesterday, we began marketing T-DETECT COVID with new features that we developed since our early access launch back in December. This is a big milestone for Adaptive and the first stepping stone for T-DETECT success. The test is available at t-detect.com, where a virtual provider, depending on eligibility, will now authorize a prescription. Additionally, patients now have the option to get their blood drawn at one of over 2,000 LabCorp patient service centers or by a mobile phlebotomist at their location of convenience, including their home. We have filed T-Detect COVID with the FDA via the EUA pathway and are actively working with the FDA on final details, including labeling. We anticipate obtaining EUA clearance as the first T-cell-based test to be validated by the FDA. As mentioned in the past, We are offering T-Detect COVID for self-pay consumers and concierge medicine practices who were receptive during the early access launch. However, we know that the COVID testing world is highly dynamic, and we are paying close attention to the evolving environment in light of vaccine rollout. Importantly, T-Detect COVID has enabled us to educate the FDA for future submissions, activate work to prepare LabCorp as a second site for T-Detect testing under EUA guidance, and build awareness with HCPs and consumers. Additionally, all consumers of C-DETECT COVID will have the option to participate in research to explore the potential role that T-cells play in immunity to the natural infection or vaccination. To date, we have had a 60% opt-in rate from current consumers, and we believe this is going to be very helpful as we all continue to navigate the pandemic. We look to share learning from our on-market real-world data in appropriate ways with the scientific community and consumers over time. We are very excited as the launch of T-DETECT COVID marks the beginning of the commercial journey for T-DETECT and also enables acceleration of future indications under development. As you can see on slide six, we are focusing on accelerating disease mapping through the R&D pipeline. In the near term, we believe that we will be able to offer T-DETECT to improve upon the standard diagnostic paradigm in specific disease states, including Lyme, Crohn's, celiac, and others. Following T-DETECT COVID, we expect to launch T-DETECT Lyme in our CLIA lab in Q4 of this year. We will continue to enroll the remainder of the ImmuneSense Lyme study during this year's Lyme season, and these data will support our commercial and regulatory efforts. We are also actively progressing in Crohn's disease with several thousand Crohn's case control samples expected to read out throughout the year. We intend to share these data iteratively as we have done with COVID. In addition, we have completed an extensive commercial analysis of Crohn's disease which confirms that the escalating testing from initial blood and stool tests by the primary care provider to invasive colonoscopies by the GI specialist can cost anywhere from $8,000 to $22,000 per patient. With an incidence of approximately 18,000 patients with Crohn's disease per year in the United States, multiplied by the number of people with GI symptoms that are somewhere along this diagnostic testing oddity, the significance of a highly specific and sensitive blood test for Crohn's disease as a parent. We also expect a readout of our 1,000 patient celiac studies later this year. We are excited about the progress we are making in these two GI disease states and are evaluating future development and commercialization possibilities. GI conditions may be a good cluster of diseases for which we can develop a panel to offer differentiated diagnosis of patients with shared symptoms. A panel approach has always been the plan for the second phase of the P-DETECT product development lifecycle. To expedite this, we are exploring several ways to enable testing and validation of disease classifiers in parallel. We hope to be able to share more details on this novel clinical validation approach in the near future. Longer term, we intend to reach our ultimate goal of enabling population immunomics, whereby P-DETECT can become one test with many results. all driven by the same blood sample that informs the general health of a person or a population. Turning to slide seven with Clonoseq. Clonoseq Q4 sequencing volumes grew 40% versus prior year and 12% versus the prior quarter, although the business did experience some impact from COVID towards the very end of the year. To date, more than 2,000 clinicians have been activated to order Clonoseq, of which nearly 850 were activated in 2020. HCPs ordering for the first time in 2020 contributed approximately 20% of order volume in the year, and in Q4 2020 alone, orders were submitted by 738 unique HCPs. More than 15,000 unique patients have had one or more Clonacy tests to date. In 2020, approximately 6,900 patients received Clonaseq testing, of which around 50% of tested patients each quarter was a new Clonaseq patient. In Q4 2020, orders were submitted for approximately 3,100 patients, exceeding numbers achieved in all previous quarters. We expect growth to continue and Clonaseq volumes to double in 2021, with rates increasing quarter over quarter as the year progresses. To reach this goal, we are focused on deepening our penetration through a significant ramp-up of commercial efforts, including direct-to-patient advertising and peer-to-peer educational programming for clinicians. We also expect to expand our commercial reach and have increased the size of our specialized sales and customer support organizations, adding resources focused on community oncology and integrated delivery networks. Additionally, we have entered into a collaboration agreement with LabCorp, under which LabCorp's integrated oncology sales force will promote ClonoSeq to hematologists in the U.S. This will enable new customers to leverage LabCorp's already established send-out testing workflows for ClonoSeq ordering and report delivery. Through these investments, we expect to increase adoption across institutions, but particularly in community oncology settings. where the majority of CLL patients are treated and many myeloma patients are also seen. As always, expanding into blood testing is also a key strategy for Kronosuke as it is less invasive and more seamless for patients. Since receiving our FDA label expansion for CLL in August of 2020, we have seen more than 70% of CLL MRD tests being performed in the blood. We are pleased to announce that we have submitted a 510K application with the FDA for ALL in blood, and with ongoing data generation and validation efforts, we expect to continue to expand into blood testing for other indications, such as multiple myeloma and NHL. 2020 results provided the Kronosik business with a solid foundation on which to continue to build during 2021, which will be an important year in Kronosik's life cycle. That said, we will continue to monitor any potential impact of COVID on testing volumes. Turning to life science research on slide eight. During the fourth quarter, research continued to be our most impacted business area by COVID. On the academic side, as anticipated, we experienced delays in sample arrivals as academic centers were still not fully operational for non-COVID-related projects. Although it is still at a slow start in Q1, we are beginning to see more academic labs reopening and higher kit usage. On the pharma side, we did have some delays and cancellations of clinical trials, which impacted our ability to recognize revenue. However, the team increased the total value of our new pharma bookings by over 20% in 2020 versus 2019, which is encouraging for future growth of our pharma business. We are focused on driving revenue for our research business in 2021 in a few ways. From a product perspective, we are expanding adoption of the updated Immunoseq RUO kit for core labs and CROs and the new Immunoseq TMAP COVID product extension for vaccine developers. Regarding the RUO kit, in 2020, we signed 35 new core lab partnerships with well-respected labs in the U.S., and we also signed contracts with two global CROs. Q-Squared, and LabCorp to enable them to become immunosequencing centers of excellence for their biopharmaceutical customers. Regarding PMAP COVID, we are currently working with several top-tier vaccine developers, including AstraZeneca and Oxford University in conjunction with Bill and Melinda Gates Foundation, to assess the T-cell response to various COVID vaccines in their studies. It was challenging to integrate into the incredibly needed and successful speed of vaccine trials in the back half of 2020, but with the new variants on the rise, understanding the T cell response across the entire genome of the virus is becoming increasingly necessary. Interestingly, we are also seeing several orders for TMAP COVID from academic labs who are studying the impact of vaccines on patients receiving other immune-mediating therapies, such as cancer immunotherapies. We expect to see more usage of CMAP COVID in these kinds of studies, and perhaps even in conjunction with research being performed by the NIH and the NCI post-EUA clearance. As Chad mentioned, Immunoseq's CMAP doesn't just apply to COVID. It applies to any disease. As such, in January, we announced a multi-year pan-portfolio partnership with AZ to map T-cell receptors to cancer antigens in AZ's portfolio of cancer medicines. This is our second application of ImmunoSeq TMAP and is our first data play in oncology stemming from our AntigenMap Microsoft collaboration. From an organizational perspective, we are focusing our investments in research sales in two key ways. First, we are opening a European business entity to support international expansion. We believe there is a lot of interest in immunosequencing at core labs outside of the United States, and we want to improve our ability to capture that business Secondly, we are expanding our organization to include an inside sales team and more marketing colleagues to grow our kit business and data monetization opportunities. Moving on to drug discovery on slide nine. Progress continues full speed ahead in both shared and private T-cell mediated products with Genentech. For the first shared product, we had anticipated the IND submission by Genentech in the first quarter of this year. Based on productive interactions with the FDA, Genentech decided to file in the second quarter to include additional information requested by the FDA that was initially planned for post-filing. For the second shared product, we have characterized several promising PCRs currently being considered by Genentech for the development of a second shared product. We expect to complete a second PCR data package this year, and if this PCR candidate is selected by Genentech, This could result in the potential development of our second shared product using our true TCR approach. In addition, we continue to build our pipeline of true TCR candidates against additional targets that we've prioritized with Genentech. For the private product, we have started screening and identifying patient-specific TCRs against specific tumor mutations using blood from each cancer patient. We are on track to deliver a proof of context concepts from an initial 16 cancer patients to Genentech by Q1 2021. These data and results from additional cancer patient samples will be used to establish a prototype during the second half of this year. To scale our private product development, we are building a dedicated lab that will be open by the end of this quarter. This additional space will accommodate our end-to-end personalized product workflow. Importantly, this space has the capacity to accommodate early phase clinical studies. We are also in the process of growing our product and process development team and hiring dedicated FTEs for this purpose. As you can see, lots of progress and exciting milestones ahead in our partnership with Genentech. Switching now to our neutralizing antibodies on slide 10. Using our true AB antibody discovery approach, we identified several lead antibody candidates that strongly bind to different parts of the virus. Our growing portfolio of novel antibodies includes candidates that not only bind to the RBD region, but also bind to S1, trimer, and S2. This could have important advantages in the cocktail strategy that targets different mechanisms of action to inhibit the virus and potentially virus variants. We are advancing discussions with potential partners who similarly believe that our antibody candidates may provide a differentiated solution in the wake of these variants. Building on our success in identifying differentiated antibodies to SARS-CoV-2 as our first clinically relevant target, we are exploring additional future applications of our true AB discovery approach. As part of our drug discovery growth strategy, we aim to identify additional naturally occurring fully human antibodies against several targets in infectious diseases and autoimmune disorders, particularly where we can feel a strong unmet need. I'll now pass it over to Chad See, who will provide you with a financial update.
spk13: Thanks, Julie. I'll first review our fourth quarter financial results, briefly describe our full year financial performance, and then we'll provide an outlook on 2021. Turning to slide 11, Total revenue in the fourth quarter was $30.2 million, representing a 25% increase from $24.2 million in the same period last year. Our revenue mix for the fourth quarter consisted of 42% of our revenues coming from our sequencing category and 58% coming from our development category. Sequencing revenue in the fourth quarter was $12.7 million and decreased 8% from the same period in 2019. This decrease was primarily driven by our research business and partially offset by growth in our clinical business. Research sequencing volume decreased by 46% to 5,907 sequences from 10,898 sequences in the fourth quarter 2019. Trial enrollment delays and project deferrals resulting from the COVID-19 pandemic were both contributing factors to the decrease on a year-over-year basis. However, we did see growth in our pharma business related to MRD registrational studies. On a sequential basis from the third quarter, We did see modest growth in our pharma business in respect to volumes, but our academic business continued to feel macro pressure from the current environment. With respect to our clinical diagnostic products, clinical sequencing volume, which now includes our T-detect COVID volume, increased 41% in the fourth quarter 2020 to 4,539 clinical tests from 3,218 clinical tests from the fourth quarter 2019. We've seen a recovery of of our clinical sequencing volumes, with our fourth quarter 2020 volumes up 13% from the previous quarter. Development revenue grew to $17.5 million in the fourth quarter, up 69% from the same period last year. The increase was largely due to growth in revenue generated from our Genentech collaboration based on ongoing aggressive investments into our drug discovery efforts. Shifting now from our revenue to our operating costs, Total operating expenses for the fourth quarter 2020 was $74.4 million, representing a 54% increase from $48.4 million in the same quarter last year. Continuing to work down our operating expenses, cost of revenue was $6.2 million during the fourth quarter 2020, compared to $6 million for the fourth quarter last year, representing a 3% increase. Though the increase was relatively flat, there were some material puts and takes year over year. We invested in additional lab personnel, lab management, and CapEx to ensure that we came into 2021 with the appropriate capacity to operationalize our growth projections. This increase in overhead drove up our overall cost of running our production lab, but was offset by a lower mix of revenue sample volume. Research and development expenses for the fourth quarter of 2020 were $35.8 million compared to $21.2 million in the fourth quarter of 2019, representing a 69% increase. The increase was to support our drug discovery activities relating to our Genentech collaboration and antibody discovery for COVID, as well as validation efforts for T-DETECT COVID and T-DETECT pipeline development, along with investments tied to expanding our ClonaSeq indications. Sales and marketing expenses for the fourth quarter of 2020 were $18.5 million, compared to $12.6 million in the fourth quarter of 2019, representing an increase of 47%. The two primary drivers of the increase were personnel and marketing costs. Year over year, we continued our hiring process to support the Clonacy brand and also made our first fully dedicated team hires to support our T2Tech COVID launch. We also undertook a large corporate rebranding effort and continued to deploy market investments to soft launch our T2Tech COVID product and to support our Clonacy brand. Overall, these increases were partially offset by savings in travel and customer event-related expenses. General and administrative expenses for the fourth quarter of 2020 were $13.4 million, compared to $8.2 million in the fourth quarter of 2019, representing an increase of 63%. The increase was primarily driven by growth in finance, legal, and HR headcount and personnel costs. Net loss for the fourth quarter of 2020 was $44.6 million, compared to fourth quarter of 2019 net loss of $20.6 million. Adjusted EBITDA for the fourth quarter of 2020 was a loss of $34.6 million, compared to a loss of $18.7 million in the same period of the prior year. Quickly turning now to our annual financial results for 2020. Total revenue was $98.4 million, representing a 16% increase from $85.1 million in 2019. Our revenue mix for the current year consisted of 42% of our revenues coming from our sequencing category and 58% coming from our development category. Sequencing revenue in 2020 was $41.4 million and decreased 5% from 2019. Research sequencing volumes decreased by 36% to 22,663 sequences from 35,491 sequences in 2019. As previously discussed, trial enrollment delays and project deferrals resulting from the COVID-19 pandemic have been contributing factors to this decrease. Clinical sequencing volume, however, increased 50% in the current year to 15,216 clinical tests from 10,168 clinical tests in 2019. Development revenue grew to 56.9 million in 2020 and up 37% from last year. The increase was largely due to growth in revenue generated from our Genentech collaboration. Operating expenses for the year totaled 251.2 million, representing a 54% increase from 163.5 million in 2019. The largest driver of OpEx growth on a dollars basis was research and development, which grew 45.4 million, up 64% from prior year, followed by sales and marketing, which grew $22.9 million and up 60% from prior year. Earlier, Chad and Julie articulated the business rationale and opportunities available to Adaptive, which drove these investments. Full year 2020 net loss was $146.2 million compared to $68.6 million in the prior year, and adjusted EBITDA for 2020 was a loss of $119.6 million compared to a loss of $57.5 million in 2019. We ended the year with approximately $807 million in cash, cash equivalents and marketable securities, and we had no debt. With respect to our outlook for 2021, in light of an ongoing COVID recovery, we are planning an initial revenue range of $145 to $155 million. This outlook represents 52% growth at the midpoint of the range and a strong reacceleration of revenues from prior year. We are contemplating our sequencing revenues to represent between 50% to 55% of our total revenues for the year, which includes our expectations for effectively doubling our Clonaseq volumes. In our development revenues category, we currently contemplate increasing revenue from the amortization from the $300 million upfront from Genentech based on increasing investments into the partnership. Additionally, we anticipate a $10 million Genentech IND acceptance milestone payment in the second half of the year. but it should be noted that this outlook reflects only a partial recognition of the payment in 2021 of between $4 to $5 million based on a proportional method of revenue recognition from our accounting literature. In addition, we are also contemplating mid-single-digit millions in potential MRD regulatory milestones in the back half of the year. With respect to some of the trends for the year, we anticipate our research business to be back half-weighted, and we expect Q1 2021 to be our lowest watermark for the year. This is due to normal seasonality along with the overhang of the fourth quarter COVID impact. We anticipate that a strong backlog of signed pharma contracts coming into 2021, coupled with ongoing execution of new pharma bookings, will contribute significantly to the growth so long as we continue to get access to samples. Regarding our operating expenses and capital investments, We expect closer to $8 to $12 million in sequential OpEx growth quarter over quarter, resulting in a slight reacceleration of OpEx growth as a percentage of revenue versus the prior year. These expenses will primarily support commercialization activities and investments in our immune and medicine platform. In addition, we are deploying more capital off our balance sheet to support large scaling projects, which includes the opening of our new office and molecular lab facility in Seattle, as well as the opening of our personalized cell therapy prototype facility to support our Genentech partnership. We are excited for the next phase of growth at Adaptive. And with that, I'd like to turn the call back to Chad for his closing remarks.
spk02: Thanks, Chad C. As you heard during the call, we have many exciting upcoming milestones in 2021 on the commercial and development fronts across all business areas, which are listed on slide 12. We're 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 it back over to the operator and open it up for questions.
spk01: At this time, I would like to remind everyone, in order to ask your questions, you may press star, then the number one on your telephone keypad. Again, that's star one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Doug Schenkel from Cohen. Your line is open.
spk09: Hey, good afternoon, and thanks for the call and for taking my questions, and thanks for all the detail today. There was a lot there, and it was really helpful. Just starting with guidance, I'm sure it's not lost on you that your guidance for the year is a bit below where most recent consensus was. It's not far off, but it's a little bit lower. I would imagine you're skewing guidance to the lower end of the error bars given the environment, keeping in mind that we're still just coming out of the pandemic, we hope, and that it is early in the year. If you were to come in above the range, what do you think the top three things are that are likely as you sit here to drive, you know, ultimately be the key drivers to upside relative to where you're setting expectations for the year?
spk02: Sure, Doug. I'll take that. I think there's opportunities in Immunoseq TMAP on some of the kind of additional data deals as we expand there. In terms of our kind of life science research business, I think there's also potentially upside in our kit sales. And there may be potential to hit some additional milestones on the development side. So there's potential across the business for upside potential in kind of all the potential business segments. You know, obviously we've got kind of high hopes for the Colonial Seek business as well. So there's certainly opportunities there, but as you said, you're coming out of the pandemic. We want to make sure that we're guiding the street and are being cautious.
spk09: Okay, super helpful. And then just a few other things just to follow up on based on the presentation. It does seem like the timelines changed on a couple of things. First, I believe the timing of the Genentech IND moved from Q1 to Q2. In the grand scheme of things, if I have that right, it's clearly not a big deal, but I just want to see if there's anything to detail further in terms of maybe something that Genentech is further evaluating prior to the submission. And then the second thing is on the launch of the CLIA-based LIME LDT, which I think also slipped. Again, I may have those wrong, but if I have them right, I'd love you to talk a little bit about what I just asked about on Genentech and then for LIME. I just want to see how concerned we should be about timing, given just how North American tick season tends to fall.
spk02: Yeah, I'll have Harlan answer the Genentech question. Just as far as Lyme, we've been talking about a 2021 CLIA launch, so I don't think the timeline has slipped there. It looks like we're on track to be able to launch during this year in a CLIA environment. Harlan, do you want to cover Genentech? Sure.
spk12: So thanks, Doug. So basically, through informal interaction with the FDA and the set of consultants, Genentech decided to up-front, let's say, a set of studies and provide more information that they thought they were going to do between IND filing and and First in Humans. So the timeline for First in Humans didn't change at all, so it's just a matter of where the IND filing is going to go relative to some of the other things that needed to be done. So I think we're, you know, it was a, and it's Genentech's call anyways, but I don't believe that we think there's a material change in sort of a longer-term view of this product.
spk09: Hopefully that's sufficient. Yeah, that's helpful. Oh, sorry, Chad.
spk02: Doug, I just wanted to make one more comment on guidance. I think your models had the $10 million kind of revenue recognition from the IND acceptance on the Genentech deal. The street had it in the model, and we're just from a rev rec issue and accounting principles are recognizing four to five. So that's going to probably $5 million to $6 million of it right there as well, just to clarify. Yeah.
spk09: Yeah, that's a super helpful bridge going back to that. So thank you for that. And then last one kind of as a follow-up for, I think, Harlan, and then I'll get back in the queue. What are the next steps after successful data is generated for the personalized T therapy? I guess I'm just trying to see if you've learned anything in terms of how, you know, ultimately the regulatory process is going to unfold here after that data is generated.
spk12: Yeah, so in some ways we're learning as we go. We've been both Genentech and Adaptive have as many sets of consultants as well as internal capabilities to assess regulatory, and we're interacting with the FDA. So since this is new, it hasn't been completely worked out yet, but, you know, I'm not sure I can answer that as directly as I would like yet, but we'll get back to you when we get more resolution on the details. But, you know, so far the FDA certainly seems, you know, I think they're excited about the possibility, as are we, but we have to see what the exact requirements are going to be, and we're trying to dot every I and cross every T. Okay. Thank you very much.
spk01: Your next question comes from the line of Brian Weinstein from William Blair. Your line is open.
spk07: Hey, guys. Thanks for taking the questions. Good afternoon. On T-Detect COVID, obviously a great milestone here for the company to launch a T-cell-based diagnostic. Can you talk just enthusiastically at the beginning about it? Can you just talk more about the importance of this and what it says about T-cell diagnostics as a class of products going forward and really how it can be impactful across various conditions? You've outlined several of those in the past, but I'm just curious about, you know, kind of what this milestone signals, do you think, to you guys, the broader community, and also curious about thoughts FDA has had about reviewing a T-cell-based product?
spk02: Sure. Thanks, Brian. Harlan, do you want to try framing this and putting it into context?
spk12: Sure. Thanks, Brian. So basically every major diagnostic company in the world has put out a serology test for COVID. And yesterday we launched a test using a completely different technology that answers some overlapping questions. And As part of our data, we've done head-to-head comparisons, and our test performs as well or better than almost any of these serology tests. And even beyond that, we're kind of getting better every week at both detecting COVID as well as many other diseases in the pipeline. We've learned a lot from COVID to apply there, too. And I don't yet even know what the limit of how good we can be in terms of sensitivity and specificity and how broad this can be in terms of how many diseases we can eventually include in the single test. but it already stands up to the premier tests for viruses in terms of serology from the best companies in the world in the space of COVID. And to be honest, that was the thing we really learned. I didn't know – I knew we could detect COVID. I didn't know that we'd be able to do it with the – sensitivity and specificity that really could compare to the, you know, kind of best in class already. And so that was what was kind of, you know, if I think about it, so if I think of a good analogy, so I would think of Tesla from when they released their Roadster a decade ago. So they released a product that probably wasn't designed to be a big commercial product, but they showed that an electric car could outperform a Ferrari. And if we would really been – if I had been paying attention, if everybody else had really been paying attention, I think we would have realized that it was – at that point, it was sort of fait accompli that we would all end up with electric cars because it just – it was a totally different way of propelling the automobile. And even with one engineering team by itself was able to kind of blow away what everybody else in the world was able to do over with many, many years, decades of engineering. So – So we're kind of sitting on this precipice, and I'm pretty excited about it, as you can probably tell.
spk07: That's great. Sorry, go ahead.
spk12: You also asked about the FDA?
spk07: Yeah, I just talked about how FDA is thinking about reviewing a T cell-based product here, if you have anything specific that they've kind of commented to you about.
spk12: Yeah, so we've been in a – we're in the interactive review stage, and so far everything's going quite well. The FDA has been super supportive and also quite reasonable. So, you know, there's some – because it's totally new, there's some extra steps that we hadn't even thought of. Like, for example, they don't even – there's no space on the FDA website for a test like us, so they have to literally create a new space on their website in order to put us on there. So there's some extra, like, minor time delays here and there, but in terms of our interaction and the data that we provided them and their feedback on it and the studies we've done, we feel very good about it, and they've been great partners on us to date.
spk07: Great. Thanks. And then if I could take two more on T-Detect in general first. I heard you talk about Crohn's and Lyme. Is there anything on the oncology-based diagnostics that you guys are coming up with? I think ovarian was originally the one you were targeting first. And then, Chad, see, can you just talk about if there's T-detect COVID and T-MAP COVID in the guidance? And if so, are you willing to quantify that? Thanks.
spk12: So it's We are working in a couple different areas of cancer. I do think that that's going to be a longer time horizon than... I think we have a group of autoimmune diseases and another group of infectious diseases that are all moving faster, mostly because the space of antigens is so broad in cancer that it's just sort of a bigger, harder problem. But we are advancing, and our partnership with AstraZeneca is going to accelerate that as well. And I think we might have some other – partners that can help us in that regard in the future. So we're bullish about it, but it's going to take some time on the cancer side.
spk13: Brian, on your questions on T-Detect and TMAP-COVID, so we do have some small studies that are contemplated with respect to TMAP-COVID, you know, sort of in the guide. So to the extent that there are larger studies available to us throughout the year, I think that would, you know, as Chad Robbins mentioned, probably, you know, represent upside. to our outlook. And then, yes, TDETECT is in our guide as well. It represents, I think, a very sort of low percentage. We're looking to see what the trajectory is from our full launch just the other day before we perhaps think about where that might go from an upside perspective. But right now, it's sort of low single digits for the year.
spk01: Thank you. Yep. Your next question comes from the line of Salveen Richter from Goldman Sachs. Your line is open.
spk05: Great. Good afternoon, and thank you for taking our question. This is Elizabeth. I'm for Salveen. I guess big picture with regards to the drug discovery vertical and then more so for other oncology efforts in general, I guess could you speak to adaptive strategy for partnering assets here versus keeping programs in-house? And then a second question. So in 2021, I guess, could you walk us through the exact data that's going to be disclosed from the private product and shared product candidates? I think if I heard this correctly, there's TOT data coming from 15 cancer patients for the private products early in 2021. And we're just trying to get a sense of what that could look like. Thank you.
spk02: Sure. I'll start with the first question, and then I'll pass it off to Harlan for the second question. With respect to our partnering strategy versus how much we're going to take in-house, I look at it this way, is that to start with, in terms of both our human capital resources expertise, right now we're learning from the best. We had the opportunity to partner with with kind of multiple companies. We chose Genentech and Cell Therapy and really have an opportunity to kind of learn as we go. And over time, we will look to kind of potentially kind of move up the value chain and vertically integrate as we learn more. But for right now, we're in the stage where we think Our expertise at using immune receptors and finding them as targeting molecules for therapeutic use is our place in the ecosystem right now, but that could change over time, and we could make investments over time to expand that capabilities as we learn more and get that expertise. And then as far as kind of what data is going to be presented or available over the year with respect to kind of the shared and private product, I'll pass it on to Harlan to disclose, if we can, what's going to be available.
spk12: Yeah, so since this is a partnership with Genentech, in most cases they'll have the final say over what gets released and how it gets released. I presume that – In terms of the private product, the actual data itself will probably be little released publicly. This is sort of internal as of now and that we're going to forge ahead as fast as possible towards getting this filed with the FDA and getting into clinic. And then on the shared product, also I think, you know, as we file our IND, I think the first shared product, what the target is, will become known as part of that. And then for the next one, I think we'll definitely inform you when we trigger that next product, but the actual target itself will become known upon filing, I'm sure. So probably not as...
spk01: forthcoming in this case and it's because it's not really under our control got it thank you so much your next question comes from the line of Tejas Saba from Morgan Stanley your line is open
spk10: Thanks for the time this evening. One quick one, Chad, for you on the LabCorp agreement. Just, you know, what additional steps does LabCorp need to take here before performing key detect on-site, or is it essentially ready to go? And then how quickly do you expect, you know, the collaboration to result in accelerated growth for, you know, ClonoSeq and ImmunoSeq? And at a very high level, at least, can you walk us through how the economics would work versus a direct sale for you?
spk02: Sure. Actually, I'm going to have Julie answer the question on LabCorp.
spk04: Sure. Hi, Tejas. Thanks so much. So the LabCorp agreement is actually, as you noted, a combination of a variety of agreements that we've signed with them. One is the extension of a blood collection for T-Detect. The other is the RUO kit, the second site lab, as you mentioned, and then Clonaseq. So for the on-site next steps, we are in the process right now of operationalizing that. There's a little bit of work that we need to do to make that happen, but the teams are already working together to identify those next steps, and it should be ready in a couple of months, I would say. And in terms of the growth timeline and the economics specifically for the Klonosik agreement, that is really a marketing program whereby we cannot, for compliance reasons, share economics in terms of – commissioned to reps and so forth. So it's essentially an agreement whereby we are paying LabCorp a very nominal amount, actually, to have the opportunity to include ClonoSeq in their oncology rep bag so that they can market ClonoSeq to their community oncology users, customers.
spk10: Got it. Got it. That's helpful. And then how do you think – yeah, go on.
spk04: You asked also about the stellar timeline. And so we've been working for a little bit of time, actually, to operationalize with LabCorp so that we'd be ready to hit the ground running with training and and get their reps ready to sell in the field right away. So we do anticipate seeing some amount of penetration through that relationship in 2021, but it is baked into our guidance.
spk10: Got it. Perfect. And then, Julie, do you expect this to sort of accelerate that transition from bone marrow to blood pretty meaningfully here, say, by the third or fourth quarter of this year? And by when should we expect a response from the FDA on ALL?
spk04: Sure. So we do anticipate and hope, actually, that there is going to be a larger proportion of usage of Clonoseq in blood. What I can tell you to date since the launch of CLL, 70% of those orders are actually in blood. So while I think it will be indication dependent, we're definitely seeing a tendency towards blood, at least for that particular indication, and that's really nice to see. We filed ALL and we haven't actually provided, I don't think, announcement of when we expect it, but we expect it to follow the normal sort of six-month or so timeline from the FDA.
spk02: That being said, Tejas, the CVRH right now is slammed right now with COVID and backed up in general across diagnostic applications. So I just want to make sure that set the stage. It's really an industry-wide problem that we're working through AdvoMed DX to try to solve.
spk10: Got it. That's understandable. And one final housekeeping one for Chad C. What are you assuming, Chad, in terms of the LIME contribution at the midpoint of the guide here?
spk13: I mean, really, nominal. Nominal, okay. Perfect. Thank you so much. Thanks here, Jessica.
spk01: Your next question comes from the line of Tycho Peterson from J.P. Morgan. Your line is open.
spk14: Hey, thanks, guys. The question on the TrueAB discovery efforts, you know, a two-parter. First, you know, the code neutralizing antibodies, you said you're an advanced discussion, so should we assume that you kind of baked something into guidance there, or could that be another source of upside? And then, you know, I think the bigger question here is where are you going with, you know, the discovery approaches on TrueAB? I mean... Could you go after MRSA, sepsis? I mean, there seems to be unlimited opportunities for monoclonal antibody therapies. So what are kind of the priorities for the research efforts there?
spk13: There's nothing in the guidance. It's not contemplating any contribution from that. Harlan, do you want to answer or
spk12: Sure. Yeah, so we're evaluating a variety of different directions to go with our antibody platform that includes some of the things that you're mentioning, but we actually have a variety of other directions that we're exploring as well that I think are sort of opened up by a combination of our immunology platforms as well as our QAB platforms. So We'll give more information as we go because right now we're sort of in the – we're just planning phase and evaluating different options. But we're pretty excited about this, and we're bringing on some new technologies as well and evaluating some potential partners as we go forward.
spk14: Okay. Okay. And then on immunity key map, I'm just curious, you know, if you could talk a little bit about, you know, the level of interest, the funnel beyond, you know, the initial, you know, partnerships with AstraZeneca and Oxford. Can you just talk to, you know, what the funnel looks like there for incremental partners? Sure.
spk02: Julie, you want to take that one?
spk04: Sure. Yeah. As we discussed, you know, I think in the fall, obviously the trials were very far advanced when we brought this product forward. to the vaccine developers, and we're all thrilled about that. I think there's been, you know, obviously the introduction of the new variants as well as new FDA guidance that you might have seen recently on immunogenicity and just this, you know, better understanding of the importance of the T cell response to the whole virus is definitely helping and advancing many of our discussions. We have about more than the companies were allowed to discuss that are working with us already on TMAP COVID, and we're running a variety of different types of trials for them right now with the pharma companies, as well as, as I mentioned in my remarks, a nice set of trials on the academic side as well. So we will have data on almost all of the most advanced vaccines And I think from that data, we're going to learn a lot, as will they, that will really set the stage for the way this continues to progress throughout the year.
spk14: Okay. And then a modeling question just on life science research. Are you assuming kind of a sequential improvement here in sequencing in the first quarter? Are we through the worst of it, or do you think it could continue to be down? I don't know.
spk13: Julie, do you want to take that, or do you want me to?
spk04: Maybe I can start and then you can... Sure. Either way. I guess I just want to make a couple of quick remarks on that with life sciences research. Just to clarify, as you know, life sciences research on the pharma side is made up of both the MRD pharma as well as the TCR pharma work that we do. And the MRD pharma work is quite advanced registrational trials which actually did quite well in 2020. It's really the exploratory work that was most impacted by COVID because it's non-COVID related. We do expect to see recovery in that front and continued growth with the MRD pharma work that we do. And I'll let Chad kind of take you through more specifically the numbers.
spk13: Yeah, absolutely. So the way we're thinking about it, just as I mentioned on the script, is that the first quarter really from a life science research perspective should be our low watermark. for the year with, you know, progressing revenues as well as bookings throughout the year for both the pharma contracts that are tied to those registrational studies, as Julie said, on the MRD side, and those that are more exploratory in nature. So we are assuming sort of sequential growth across, you know, revenue and volume. But as you know, it's also, you know, there is a ton of variability when it comes to some of these trials. And so sometimes they can depending on the size of the trial, they can impact, you know, whether one quarter is, you know, maybe benefiting a little more than the next sequentially. But short of, you know, some large volume samples coming in from particularly large trials, we should see continued growth quarter over quarter. Okay.
spk14: Last one, I think you mentioned opening a European lab. Can you just talk to the strategy there? Sure.
spk02: Sure. So we already have a small number of people in Europe, but in order to essentially access kind of core labs in Europe, we had to establish a European entity, and that will allow us to kind of expand kind of the boots on the ground and the field force there.
spk12: It's not a lab that we're opening.
spk13: Yeah, effectively starting off with a legal entity based in Europe.
spk14: Okay. Got it.
spk01: Thank you, Jeff. Your next question comes from the line of Derek DeBruin from Bank of America. Your line is open.
spk06: Hi, this is Ivy Ong for Derek today. Thank you for taking my question. Congrats on the TB test code progress there and the lab partnership. I'm just curious, how do you see the test rolling out as estimates or discussion regarding herd immunity timing evolves. Just curious how that all plays out. And then what have you seen in terms of the uptake since your soft launch back in December?
spk02: Sure, Julie, do you want to take that?
spk04: Sure. Hi, Ivy. So yeah, so in terms of the early access launches, as you mentioned, I'll start there. As I think you know, we didn't have any virtual prescriber capability. So it was a little bit of a challenging ordering process and therefore we didn't do any marketing, but yet we had over 660 tests ordered and delivered and 13 concierge medicine groups signed up. And as I mentioned, 60% participation in the opt-in for ongoing research. So, you know, given the fact that it was, you know, available, people have to sort of find it on their own and it was over the holidays. we feel like it does give a good appreciation for interest in T-cell testing. With the full launch and the virtual prescriber capability, the LabCorp blood collection, and some of the excitement we're already seeing in the media and the hopefully imminent EUA and the targeted marketing, for some period of time we expect to see growth of the test. But we are, as you mentioned, very aware of the changing dynamics of the diagnostic market. We recognize that things may change with more vaccination, widespread vaccination. But what we do know is that the T cells matter, and we are thrilled to be able to participate in understanding exactly what they mean, and we'll continue to share that information. And that's really why we did this, as we've always said from the start. It's really about validating both our platform and the utility of reading T cells in blood across diseases And we really think we're going to learn a lot from this experience to contribute to the future growth. It's really just the beginning for T-Detect. Great. Thank you for the details, Julie.
spk06: A couple questions on the Lyme disease. I know we talked about the pricing around $500, if I remember correctly, last time. Could you update us on any thoughts there? And number two, could you share a bit more details on the current thinking on commercialization? Like, are you putting on a Salesforce or also partnering with LabCorp? Thank you.
spk04: Sure. So right now, that's still our target price. We continue to do payer research as the data matures. And that maturity of the data is also influencing our commercialization plans. We've talked previously about focusing exclusively on the acute line setting. And we are, in fact, seeing some interesting data that shows the potential utility of this in what we call the PTLDS setting, so those patients who had been treated with antibiotics but have lingering symptoms. So a lot of those are sort of tied together as that data continues to read out, and that will help us set the commercialization plan going forward. From an organizational perspective, we have hired a VP of sales who's putting together his plans around exactly how he anticipates the final pricing and marketing plan for the test, and we'll provide more details of that most likely on the next call.
spk06: Great. Thank you. One final quick one. Just wanted to get an update on the percentage labs open since that's still impacting the research business.
spk02: Thank you. I didn't hear that last question. You cut out a little bit. Can you say that again?
spk06: Yeah, I just wanted to get an update on the percentage of labs open as of 4Q or exiting January, since that's still impacting the research business and all that. Thanks.
spk04: So our view of it is that the labs are opening. They're in the process of opening, and hopefully that will continue. They're not as fully staffed like they maybe were in the past. But we're definitely starting to see more activity, more usage of the kits. And, in fact, even with TMAP COVID, as I mentioned, a lot of the research is shifting towards COVID, and we're starting to see uptake of those opportunities with our academic business as well. But it still remains to be seen. We don't have a very large field force on the academic research side, so we don't have the same sort of coverage we have with our ClonoSeq field force to to really, you know, hit all the ups and downs in all the various, you know, locations throughout the country. And so, you know, that also leads to, you know, a little bit more of the volatility that we're seeing. But we're definitely seeing much more of an opening that we hope will continue as the year progresses.
spk06: Great.
spk04: Thank you for the details.
spk01: Your next question comes from the line of David Westenberg from Guggenheim Securities. Your line is open. All right, thanks.
spk08: So that's already been covered. So I just want to confirm, I think you said 600 tests in T-Detect have already been ordered. I want to make sure that's correct. Is there any anticipation number that you have for T-Detect for this year, you know, just given the fact that we're rolling out that vaccine? But more importantly, I want to ask in terms of how meaningful the additional samples can be from a platform standpoint, from terms of R&D, can that help you get other tests out faster? And then in terms of regulatory conversations that you have real-world samples, I mean, do you think that speeds up some of your timelines for AminoCdx, maybe Lyme, or some of the things that you're going to do in GI? And I'll just stop with that question. We've got a last question.
spk02: Thank you. Yeah, sure, David. So first let me just start with, yes, I want to confirm the kind of 600 tests without marketing or kind of the virtual prescriber. In terms of projecting number of tests, just keep in mind this is a brand-new category of testing, so it's very, very hard to predict, you know, what our testing volumes are going to be with a marketing initiative. So, you know, we're not going to provide guidance on that. As far as kind of how TMAP or, excuse me, how T-Detect COVID has accelerated signal generation, I'll have Harlan comment because it's been quite significant.
spk12: Sure. Yeah, so I think one of the biggest boons to our learning was the – from COVID was a couple things. One is that obviously everybody was sharing samples, so we were able to get a very large amount of samples. And they were super clean because the PCR-based diagnostics of who got the disease and who didn't is quite accurate. So we got many, many thousands of positives and negatives that we're able to really use to improve our algorithms and understanding in conjunction with Microsoft. And, for example, you know, we have been sitting on a sample set for a multiple sclerosis that we hadn't – to be honest, hadn't been making that much headway on. And then we started applying some of our algorithmic learnings that we had had from – and all of a sudden a really nice, clean signal started appearing. You know, this is still in research, but we're pretty excited about this, and it's improving our signal in all of our studies, including celiac and Lyme and Crohn's and a variety of others that we're working on behind the scenes as well. So this has been a huge boon to our understanding. Okay. I think there was a third part.
spk08: Was there a third part? I feel like that third part would have been the regulatory standpoint.
spk12: Oh, yeah. So, you know, we've... The nice thing about COVID, from our point of view, is there's an EUA out there, which allows us to interact in an accelerated timeframe with the FDA and really get them to see our data, understand our assay, and they've been... really great about the whole process. So I think that interaction, you know, obviously having that personal interaction and really understanding what their comments and concerns are and coming to an agreement on how to address them has been a big boon for us and hopefully will carry over into other areas as this product expands into multiple diagnostics. Thanks, guys.
spk08: You had a great year. Thank you. Thank you. Thanks.
spk01: Your next question comes from the line of Mark Massaro from BTIG. Your line is open.
spk11: Hey, guys. Thanks for the question. I'll just ask one, and it's for Chad Robbins. Companies like Grail and Thrive certainly are pursuing multi-cancer tests that can screen for roughly 10 or up to 50 different cancers. I know you guys are contemplating a panel approach on T-Detect. But I think I also heard you talk about maybe a general health panel in the future. And so if I heard that correctly, can you just elaborate on that and just talk about the decision to pursue panels or maybe a really large panel?
spk02: Yes, it's a great question. Thanks, Mark. We're really looking at it as a three-phase approach where right now we're going disease by disease. The second phase is a panel-like approach based on patients who come in the door that have a similar set of symptoms. But at the same time, we're parallel tracking and we're actually exploring options for kind of large-scale trials to be able to look at many different diseases at the same time to get to really a, I don't know if I'll call it a pan-disease diagnostic, but a many-disease-at-the-same-time diagnostic. And there's different ways to do that and different methodologies and partners that we're looking at as potentials to accelerate that kind of multi-disease panel.
spk11: Terrific. Thanks so much. You bet. Thanks, Mark.
spk01: There are no more questions at this time. Presenters, you may continue.
spk02: Thank you, everyone. We look forward to a great 2021.
spk01: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
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