Adaptive Biotechnologies Corporation

Good afternoon and thank you for standing by and welcome to the Adoptive Biotechnology's first quarter 2021 conference call. At this time, all participants are in a 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 keypad. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Karina Caldavila. Thank you. Please go ahead.

Karina Caldavila Thank you, Teri, and good afternoon, everyone. I would like to welcome you to Adaptive Biotechnology's first quarter 2021 earnings conference call. Earlier today, we issued a press release reporting adaptive financial results for the first quarter of 2021. The press release is available at www.adaptivebiotech.com. We are conducting a live webcast of this call and will 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 meanings of federal security law 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, Julia Rubinstein, 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?

Thanks, Karina. Good afternoon, everybody, and thank you for joining us on our first quarter 2021 earnings call. At Adaptive, what has remained a constant is our commitment to change how diseases are diagnosed and how drugs are discovered using our proprietary immune medicine platform. This is supported by our culture, which is stronger than ever, and we can see that in the palpable energy and excitement we feel as we plan to begin the process of reentry and moving into our offices that are new in Seattle, San Francisco, and New York. I want to thank all our employees for their commitment to the company, to each other, and to the patients we serve. As you can see on slide three, our first quarter results reflect a strong start to the year and are a testament to the diversity of our platform and the capability of our team. Revenue in the first quarter was $38.4 million. representing significant growth of 84% versus prior year and 27% versus prior quarter. We saw substantial progress across our business areas. Most notably, we achieved an important milestone in our clinical diagnostics franchise with T-Detect COVID, which received emergency use authorization in March for the confirmation of recent or prior SARS-CoV-2 infection. It is the first T-cell-based tests to be validated by the FDA and marks an important strategic product milestone for adaptive. Importantly, T-Detect COVID proved that T-cells can detect disease as well or better than other well-known methodology, which would de-risk the future success of T-Detect. In addition to the continued work ongoing to make T-Detect Lyme available by year-end, we are excited about new data we have obtained that further supports the potential of T-Detect to diagnose patients with Crohn's disease. Importantly, these data not only confirm the signal already identified last year, but also show a clear distinction from colitis, a differentiation that is often challenging with current diagnostic tools and that could provide substantial benefit to clinicians in determining the early care path for patients. We believe this is an important milestone in demonstrating the ability of T-Detect to differentially diagnose patients with shared symptomatology. Julie will share some of these data in her remarks, and we expect to share more details in a public forum later this year on both Lyme and gastrointestinal disease. Related to MRD Pharma, which is accounted for within our research business, I want to highlight the consistent quarter-over-quarter growth generated by our partnerships, which further supports the overall value of the Clonaseq brand to adaptive clinicians and our pharma partners. This quarter, we booked $7 million in milestones related to FDA regulatory approvals in which our Clonaseq assay was used as a regulatory endpoint by two of our MRD pharma partners. These milestones were contemplated as part of our full-year guidance, but it's great to see these materializing and accelerating. In addition, we recently added a new collaboration with Pfizer, a long-standing partner, who will now use our MRD assay to measure minimal residual disease at a clinical endpoint in its clinical trials. Regarding our Immunoseq TMAP COVID efforts, we are seeing greater uptake from our pharma and academic customers who continue to be interested in understanding T cells and their role in immunity of the virus and or the immune response to vaccines. The data we have generated for our partners is contributing to key publications. Most notably, AstraZeneca's New England Journal of Medicine publication included our data demonstrating that T cell responses may contribute to protection from COVID-19, even in the presence of lower neutralizing antibodies. This is one of several key use cases for TMAP COVID that are emerging as the dynamics of the pandemic continues to evolve. In our drug discovery efforts with Genentech, while suspension of the first shared cellular therapy candidate was an unfortunate setback, our collaboration remains strong, and we are advancing toward the completion of the next shared candidate data package. For the private product, we completed an initial proof of concept from the first set of 15 cancer patients, and we are working on many more this year. We are optimistic about the progress towards our ultimate vision with Genentech to enable the development of personalized cancer cell therapy, which, if successful, may transform cancer treatment. In summary, we had a strong start to the year and are confident in our ability to execute toward our 2021 goals. As you can see, we have multiple revenue sources and open-ended growth opportunities stemming from the same platform. This is possible because we use the adaptive immune system as a source code to enable the development of diagnostics and therapeutics for almost any disease. As we continue to achieve important development proof points that demonstrate the power of our platform, our ability to become a clinical product development engine accelerates. With that, I'll hand it over to Julie.

Thanks, Chad, and thanks to all of you for joining us today. At first, want to highlight the strategic value of T-DETECT COVID to the future of the T-DETECT franchise on slide four. T-DETECT COVID is the only FDA-validated T-cell-based test to confirm recent or prior SARS-CoV-2 infection with 97% sensitivity at 100% specificity per our CV study. It has also demonstrated 90% sensitivity up to 10 months post-infection in a real-world study in 76 convalescent patients. Since launch, we have had over 3,000 consumers order the test, including members from over 50 concierge medicine practices, and approximately 75% of users have opted in for the ongoing research we continue to conduct to better understand immunity to COVID-19. Although the vaccine rollout will likely diminish the market to confirm prior natural infections, we intend to include a person's COVID status in all future T-DETECT tests. This may be informative for patients with a broad range of symptoms potentially stemming from a past SARS-CoV-2 infection. Most importantly, we believe the R&D and commercial investments made for T-Detect COVID will accelerate the rate at which we develop and launch future T-Detect applications. These include, among others, educating the FDA about the power of T-cells and our underlying technology, improving our models and techniques, and building a commercial infrastructure to market the tests and service customers, all of which was accomplished in a very short period of time. Now let's talk on slide five about our vision for the evolution of the T-Detect franchise. As we have always said, our key strategic focus for T-Detect is to become one blood test with many results. In order to achieve this vision and help the millions of patients experiencing some sort of diagnostic odyssey, we need to move from disease-specific diagnosis to differential diagnosis among patients with shared symptoms and ultimately to population immunomics. While we are advancing towards differential GI diagnosis in R&D, we are advancing on key next steps for T-detect in Lyme disease. Specifically, our goals are to complete the enrollment of the ImmuneSense Lyme study, publish these data and other clinical validation data from our John Hopkins collaboration, and offer T-Detect Lyme as an LDT in our CLIA-certified lab by year end. We believe that T-Detect Lyme can potentially double the efficacy of the current serology-based standard of care testing for acute Lyme disease, which could benefit the 600,000 people diagnosed with Lyme disease each year. Preliminary data also show that T-Detect Lyme may help identify patients with post-treatment Lyme disease syndrome, or PTLDS, estimated to be approximately 200,000 patients per year. These individuals continue to have lasting symptoms even after being treated with a standard course of antibiotics. Turning to slide six, here you can see some exciting preliminary data that supports expediting our path towards our first differential diagnostic in GI conditions, which we believe will create a greater value proposition for patients and adaptive. First, we completed an additional cohort of patients with ileal Crohn's, a type of Crohn's disease in the small intestine which corroborates our early Crohn's signal. From several hundred patients, our classifier is already over 70% sensitive at 99% specificity for this type of Crohn's disease. Importantly, these data also demonstrate that the T cells that recognize ileal Crohn's are distinct from the T cells that recognize colitis, celiac, COVID, among other diseases. As you can see on the graph on the right, our distinct COVID-PCR classifier got more sensitive as the sample size increased. To that end, our next step for our GI differential diagnostic is to evaluate and improve our signal based on the analysis of additional samples from over 5,000 Crohn's and colitis patients, which are in-house and will be completed and presented later this year. Importantly, as a reminder, our assay can run on genomic DNA stored from retrospective sample tests with clinical metadata, which may serve as clinical validation studies for regulatory purposes. Among the thousands of well-characterized samples we are working through in the lab, we will also be able to understand how our signal performs in patients with other types of Crohn's disease that occur in other regions of the digestive tract and aim to identify a signal for colitis as well. In parallel, we are also engaging more deeply with GI specialists to understand product market fit and with payers to arrive at a pricing strategy that contemplates a blood test that can reduce the diagnostic odyssey in an increasingly cost-effective way. There are as many as 22 million patients with GI symptoms who may see a primary care physician each year. A few million of these patients are escalated to a GI specialist if inflammatory bowel disease is suspected. which is the population we are initially focused on. These patients usually take around a year to receive a definitive diagnosis, which requires a biopsy, and the whole diagnostic process can cost anywhere from $10,000 to $20,000. It is important to note that the current stool tests that are often used have challenging compliance rates and low specificity, leading to more biopsies than necessary. Therefore, our hope is to develop a differential diagnostic that can offer patients with similar GI symptoms clarity early on in the testing journey from a blood draw. Switching gears to Clonaseq on slide seven. The total value of the Clonaseq brand to adaptive continues to increase as the combination of clinical testing with MRD sequencing revenue and regulatory milestones from our pharmaceutical partners materializes and scales over time. On the left side, you can see ClonoSeq testing volumes of 4,757 tests in the quarter grew 35% versus prior year and 6% versus the prior quarter. Although the business is still recovering from the impact of COVID at the end of 2020 and had a slow start to the year, March was the highest volume month to date. During the quarter, orders were placed by 825 unique HCPs, spanning 231 accounts, for approximately 2,900 patients tested. ClonoSeq is now used in all 31 NCCN cancer centers for one or more disease states and has been used to treat more than 16,700 unique patients. Importantly, with eight months having passed since our FDA clearance in CLL, 17 of the 31 NCCN centers are now using ClonoSeq for their CLL patients. In addition, We continue to drive expansion of payer coverage policies for CLL in Q1, reaching about 125 million covered lives. As we wait for the FDA's review of our 510K filing for ALL in blood, we are already seeing that blood-based testing accounts for 25% of Clonaseq usage in ALL patients, available to them as part of adaptive CLIA-validated LBT service. Studies of clonoseq in blood for other indications, such as multiple myeloma and NHL, continue, and we will keep you informed on future readouts throughout the year. Of note, we are actively engaged with one of our pharma partners this year to validate clonoseq in blood for DLBCL, one of the largest NHL subtypes. We continue to expect clonoseq volumes to double in 2021, with growth more heavily weighted towards the second half of the year. However, the resolution of the COVID overhang in the first half is an important factor to achieve our expectations and one that we are monitoring closely. On the right side of the slide, you can see the growing number of publicly disclosed pharma partnerships where Clonaseq is used as the test of choice in clinical trials that incorporate MRD as a clinical endpoint. From these partnerships, we obtain sequencing revenue as part of our research business as well as regulatory milestones, which we record as development revenues. As Chad mentioned, we recognized $7 million in MRD milestones from two pharma partners and signed a new translational MRD collaboration with Pfizer, bringing our future available milestones to over $300 million. Turning to life sciences research on slide eight. Our research business experienced significant recovery in the quarter, mostly driven by sequencing from pharma partners using both our Immunoseq and MRD assays. Additionally, new pharma bookings continue to grow at a significant pace. Academic research, although a small contributor to the overall business, experienced some lingering impact from the pandemic in the first months of the quarter as academic centers were still not fully operational for non-COVID research-related research projects. However, recent order volumes are showing encouraging recovery at higher than pre-pandemic levels. Related to Immunoseq RUO kits, the team has been focused on getting new core labs and our CRO partners, Q-squared and LabCorp, trained and operationally set up to start using the kit. We expect to bring on additional core labs and CROs throughout the year. Regarding Immunoseq TNOC COVID, we are working with several top tier vaccine developers, including AstraZeneca, Oxford Bill and Melinda Gates Foundation, and Johnson & Johnson to assess the T cell response to various COVID vaccines in their studies. Our recent data on AstraZeneca samples, which showed the vaccine-caused expansion of CD4 and CD8 T cells to regions of the spike protein, including those not impacted by variants, was published in the New England Journal of Medicine last month. We expect more data to be published soon demonstrating the utility of T cells to study vaccine efficacy in the wake of variants. With the new variants on the rise, we are seeing an uptake by pharma and academic partners who are using Immunoseq TMAP COVID to determine efficacy of vaccines to the new variants, select new targets and evaluate next generation vaccines, generate data to support the clinical understanding of response to vaccination in immunocompromised patients, and understand the strength and duration of T-cell versus antibody response post-vaccination. We will continue to provide updates on our findings as we progress. Moving now to drug discovery on slide nine. Starting with our collaboration with Genentech on the shared program. As disclosed earlier in the quarter, Genentech suspended efforts on the first shared product. As previously mentioned, it is important to note the reason for this decision was specific to the target and not the TCR candidate. Recent data within the public domain showed that the expression levels of the selected target was high in a healthy cell type that wasn't previously assessed within the preliminary safety analysis. Out of an abundance of caution, Genentech decided to skip this program and focus on the next set of TCR candidates in our true TCR library against different selected targets. Our next TCR candidate is in advanced stages, and we expect to complete and deliver this TCR data package to Genentech this year. In parallel, we continue to advance other candidates against a variety of targets within our TCR library that have been prioritized with Genentech. While we use blood from healthy donors for our true TCR approach with the shared product, we use blood from cancer patients for our private product process. On the right side, you can see we are also making good progress on our private product. As Chad mentioned, we completed an initial proof of concept in which we identified tumor-specific TCRs using blood from 15 cancer patients, and we're currently reviewing these data with the Genentech team. Initial results are encouraging, and during the remainder of the year, we aim to process the blood of at least 60 cancer patients as we build our prototype. The totality of our patient-specific data will allow us to establish our personalized approach with Genentech and ultimately define our future private product. In April, we also officially opened our new South San Francisco lab space, adding more than 10,000 square feet of dedicated space for our future end-to-end personalized product process. Importantly, this new space has the capacity to accommodate future first-in-human studies. We also continue to build out the product and process development teams and have started hiring dedicated FTEs for this purpose. Our collaboration with Genentech remains strong and continues full speed ahead, both with our shared and private product programs. Regarding our true AV antibody discovery approach, as disclosed last quarter, we have been able to identify highly potent RBD antibodies that are robust against all known variants and predicted future variants of SARS-CoV-2. In addition, we have promising non-RBD S1 and S2 neutralizing antibodies that could also be incorporated into a cocktail strategy that targets different mechanisms of action to inhibit the virus. It is recognized that COVID-19 is now endemic in the population, and effective therapies are still needed. As such, we continue our discussions with potential partners who similarly believe that our antibody candidates may provide a differentiated solution in light of new variants. In conjunction, we are exploring additional applications of our TrueAB discovery approach in other diseases to maximize this valuable platform extension. 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 10, total revenue in the first quarter was $38.4 million, representing an 84% increase from $20.9 million in the same period last year. Our revenue mix for the first quarter consisted of 39% of our revenues coming from our sequencing category and 61% coming from our development category. Sequencing revenue in the first quarter was $15.2 million and increased 60% from the same period in 2020. The growth was primarily driven by a $5.2 million increase in revenue generated from our biopharmaceutical customers. Research sequencing volume increased to 7,026 sequences, up 17% from 6,030 sequences delivered in the first quarter of 2020. We are pleased with a strong start to the year, but as a reminder, we do see variability quarter over quarter, and historical trends show most of our pharma revenues come in the second half of the year. Clinical sequencing volume, excluding RT-detect COVID volume, increased 35% to 4,757 clinical tests delivered in the first quarter of 2021, up from 3,518 clinical tests delivered during the same period in 2020. Although we continue to make progress, the COVID headwinds from 2020 haven't completely abated, and we do expect some ongoing pressure on clinical volumes at least through the first half of the year. Development revenue grew to $23.3 million in the first quarter, up 103% from the same period last year. As you well know, the primary component of our development revenue today relates to the amortization of our Genentech up front. However, the largest driver of our development revenue growth this quarter was due to the recognition of $7 million in milestones from two key MRD pharma partners, which came earlier than expected in the year. As Julie mentioned, we have over $300 million in MRD pharma milestones available to Adaptive as our biopharma partners utilize our MRD assay in the development and regulatory approval of their relevant drug programs. Shifting now from our revenue to our operating costs, total operating expenses for the first quarter of 2021 were $79.7 million, representing a 44% increase from $55.5 million in the same quarter last year. Working down our operating expenses, cost of revenue was $10 million during the first quarter of 2021, compared to $5.3 million for the first quarter last year, representing an approximate 87% increase. Higher cost of revenue is primarily driven by increases in personnel and related labor and overhead costs, as well as an increase in allocated facility expenses due to our new molecular lab and headquarters, which is currently under construction and quickly approaching completion. An increase in revenue sample volume and a mixed shift to our Clonaseq assays also led to higher materials costs, which were partially offset by usage of our production lab to process a greater percentage of R&D samples. Research and development expenses for the first quarter of 2021 were $33.8 million, compared to $23.9 million in the first quarter of 2020, representing a 41% increase. The growth was largely related to an increase in personnel costs, with our software engineering, innovation, and South San Francisco cellular lab teams driving the period-over-period increase. Sales and marketing expenses for the first quarter of 2021 were $20.6 million compared to $14 million in the same quarter last year, representing an increase of 47%. Increased personnel costs contributed to the majority of this growth, particularly the expansion of our commercial teams supporting Clonaseq and T-Detect. We also saw larger investments in our T-Detect marketing efforts and shared corporate marketing services. These increases were partially offset by savings and travel and customer event-related expenses. General and administrative expenses for the first quarter of 2021 were $14.9 million compared to $11.8 million in the first quarter of 2020, representing an increase of 26%. The increase was primarily driven by growth in headcount and related personnel costs. Net loss for the first quarter of 2021 was $40.6 million compared to first quarter of 2020 net loss of $31.4 million. Adjusted EBITDA for the first quarter of 2021 was a loss of $30.1 million compared to a loss of $28 million in the same period of the prior year. We ended the quarter with $745 million in cash, cash equivalents, and marketable securities, and we had no debt. With respect to our full-year guidance, we are reiterating our revenue range of $145 to $155 million, which already contemplated the delivery of the MRD milestones we recognized this quarter and excludes the IND milestone that we no longer expect to recognize this as a result of the suspension of the first shared product. We are really pleased with our first quarter results, and although it is early in the year, we are confident in our ability to achieve our full-year commercial and development goals. We look forward to providing you with further updates next quarter. I'll turn the call back to Chad Robbins.

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

Everyone, if you have a question at this time, please press star, then the number one on your telephone keypad. Again, that's star, then the number one on your telephone keypad. We request that you limit yourself to one question and one follow-up. Please wait while callers queue for your question. Your first question comes to the line of Brian Weinstein from William Blair. Your line is now open.

Hey, guys. Thanks for taking the questions. Good afternoon. Hey, Brian. Really interesting stuff on the Crohn's disease and the ability to distinguish between patients with colitis. Can you talk about You know, you guys sound very excited about this. Rightfully so. Can you talk about a little bit more about what this actually potentially means for patients and, you know, the enthusiasm that you guys have for this potential product?

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

Great. Then following up with the question on ClonoSeq, you know, Julie, you guys have talked a lot about investments that you guys have made in sales and marketing. You have a lab corporate relationship now that's supposed to help you out. Can you just talk about how those investments are going in terms of the return that you're seeing on those? Are you seeing the... Brian, you got cut off there, but was that the end of the question?

What were the investments we're seeing in Clonacy? Julie, do you want to take that?

Sure. Is Brian still there?

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

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

Your next question comes in the line of Derek DeBruin from Bank of America. Your line is now open.

Hi, good afternoon. This is Ivy Ong for Direct Today. Thank you for taking my question. So first on, hi. So first on the chronofic, just would highly appreciate if you could talk more about what needs to happen to reach the inflection point and get accelerated growth for the volume. And then also, if you could talk about the progress on the other indications, such as multiple Maloma and Ineshal. Thank you. Go ahead, Jenny.

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

I have two other quick questions on the financials. So first one, we saw the moving parts. Apologize if I missed it in the prepared remarks. I want to see if you could provide an update for the mix between sequencing revenue and divide the revenue in terms of the total revenue percentage. I think last quarter you talked about maybe sequencing accounting for 50 to 55% of the total. So just curious, given all the changes, where does that move to? And I'll put my second one up front as well. So last quarter, you talked about contemplating the increasing revenue from amortization from the upfront haven with GenTech. So wondering if there's an update there. Thank you so much.

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

Great. Thank you very much, Nick.

Your next question comes in the line of, Tiger Peterson from JP Morgan. Your line is now open.

Hey, good afternoon. I'll start with the immunoseq team at COVID. Just curious, you know, now that you've headed out a couple quarters, how big that business is, and how do you think about the durability there, you know, as we think about, you know, the variants, next-gen vaccines and the like? How do you think about, you know, the durability of the trends you're seeing there?

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

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

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

Okay. And then on Genentech, now that you've delivered the, you know, proof of concept for the 15 cancer patients for the private product, can you just talk a little bit about how you think about their evaluation process? Are there, you know, next steps on the, you know, private product that we should be paying attention to? Robert, do you take that one?

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

Okay, that's helpful. Thank you. Thanks.

Your next question comes to the line of Doug Shankle from Cohen. Your line is now open.

Hey, everybody. Thanks for taking my questions, and I apologize in advance. I know everybody on the line is struggling a little bit, so I apologize if any of these have been answered. My first is just on the Genentech shared product. We can't hear you. You're breaking up. Can you try that again? No. Sorry.

Is it possible to dial back in on another line and we'll jump back in?

Yeah, I will do that. Sorry about that.

No problem.

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

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

Yes. So far, we've done a couple different things. We had one study, which was a smaller study, a few hundred samples where we first found our Crohn's signal, and we talked about that a little bit last year. But what we're waiting for, we now have 5,000 samples in-house that includes Crohn's and colitis. There's 1,600 colitis samples. So, So we're going to finish sequencing, which we're almost done, that data set, and then we're going to analyze that data set and then put it together. So we'll present the data once the larger study is fully analyzed and we have the, you know, really make sure we dot our I's and cross our T's on all the science.

Got it. Thank you. And then a follow-up question. Given the good traction you're seeing for a ClonoSeq, CLL, and blood, what are you seeing in terms of uptake for Clono testing and blood outside of CLL? I think you might have mentioned AL. Could you remind me if you have?

Sure.

Sorry. Yeah, I think, yeah, we have about 25% of our usage in ALL is in blood, which is in our CLIA labs. since it's not an FDA cleared label expansion at this time.

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

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

Great. Thank you so much.

Sure. Your next question comes to the line of Doug Shankle from Cohen. Your line is now open.

Okay. We'll try this again. Can you all hear me a little bit better now? You sound great, Doug.

Much better.

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

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

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

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

And the prototype lab?

Oh, yeah, sorry. And the prototype lab is now built out, and we've completed construction, and we're – now is the real development effort on locking down the workflow through that lab, et cetera. And we've hired some of the team. We have to hire some more of the team out and – But all the equipment's in. The lab is ours, and it's fully operational.

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

Oh, yeah.

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

Oh, no problem. Thanks, Doug.

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

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

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

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

Sure. Julie, do you want to take that?

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

Great.

And then just the pipeline, yeah.

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

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

Thanks so much. Welcome through.

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

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

Yeah, I'll take that, Dave. It's just maybe at the tip of the iceberg of this, and I do think that we will kind of benefit from this concept of monitoring residual disease kind of in general or using genomics to be able to incorporate into kind of patient care continuum. In particular, as you mentioned, this would be in the community setting where an oncologist is treating all comers. So once they get comfortable with the concept of monitoring in general, whether they're monitoring in solid tumors and using kind of the variety, I won't mention anyone by name, but the variety of different tests available in solid tumor monitoring, that kind of peaks their interest to be able to also monitor in liquid tumors. So, you know, especially in the community, you know, these hemocks don't want to be kind of on the cutting edge. On the flip side, they also don't want to be kind of left behind. So I think you're hitting the point where we're just starting to see it move kind of from the true kind of bleeding edge thought leaders into, you know, hopefully kind of crossing over to mainstream. And I do think we'll benefit from a kind of MRD as a broad-based category, but I would say it's very early and we're just starting to see that because, as Julie mentioned, we and others of our peers haven't been able to go in yet and do that education. When that happens as a collective group, I think that all boats will kind of rise on the tide with the difference being we're kind of the one group company that is really focused on the hemologic malignancies in MRD in that space, where I think there's many different technologies that are looking at MRD and solid tumor monitoring.

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

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

Thank you so much. You bet.

Our last question comes from the line of Salvin Richer from Goldman Sachs. Your line is now open.

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

Harlan, do you want to take that?

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

Great. Thank you.

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