Adaptive Biotechnologies Corporation

Earlier today, we issued a press release reporting adaptive financial results for the second quarter. The press release is available at www.adaptivefiotech.com. We are conducting a live broadcast 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 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 findings with the SEC and listed in this presentation. In addition, non-GAAP financial measures will be discussed during this call, and a reconciliation from non-GAAP to GAAP metrics can be found in our earnings release. Joining the call today are Chad Robbins, our CEO and co-founder, Julie 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 second quarter 2021 earnings call. We had another strong quarter, and momentum continues to build across our business areas. Results reflect our commitment to applying our immune medicine platform to transform disease diagnosis and drug discovery. ADAPT's incredible employees are dedicated to the company and the patients we serve. It's been awesome seeing desks fill up and meeting new hires for the first time in person, but we also realize the pandemic is an evolving situation. We'll continue to monitor our return to office initiatives. We are energized by our progress and the data emerging from our platform. Moving to the slides. Starting on slide three, our second quarter results demonstrate solid performance. Revenue in the quarter was $38.5 million, representing a significant growth of 83% versus prior year. We saw substantial progress across our product and our pipeline. Our COVID efforts continue to gain traction, especially in light of the Delta variant, as more stakeholders act on the relevance of including T-cells to understand the immune response to the virus and vaccines. Recent data to understand the AstraZeneca and J&J vaccine response to variants using ImmunoSeq TMAP COVID were published in the New England Journal of Medicine and in Nature, respectively. Also, we are pleased to announce we signed an agreement with Moderna in which ImmunoSeq TMAP COVID will be used to measure the T cell response to their second-generation COVID vaccine and their Zika vaccine. In addition, we signed a license agreement in our drug discovery business with Vaxabody. This is the first time that our T cell data will be used to inform the design and development of a T cell-based SARS-CoV-2 vaccine. Importantly, adaptive technology may inform the design of an entirely new class of vaccines that elicit a T cell response for many disease states. We are in active discussions with the FDA, NIH, CMS, CDC, and the White House administration to include the T-cell response in funded studies to answer critical questions related to vaccine durability, breakthrough infections, and efficacy in immunocompromised patients. Our view has been that this virus is endemic in the population and that T-cells may answer many of these questions. We are making progress, and we will keep you informed on these discussions. Beyond COVID, our T-Detect franchise continues to advance. Results from our case control data set with Johns Hopkins was just published as a preprint and serves as a basis for clinical validation. In addition, our ImmuneSense study for T-Detect Lyme will complete enrollment in the fall. Together, these studies will support bringing the test online in our CLIA lab around year end. We continue to progress towards T-Detect IBD as a differential diagnostic. with more than half of the 5,000 samples from Crohn's and ulcerative colitis patients already analyzed. We expect to share the data towards the end of this year. We have also made significant progress in other autoimmune disorders, and we are encouraged by an early signal that we have in multiple sclerosis. For those of us who have friends and family suffering from this debilitating disease, We know firsthand that early blood-based diagnosis may alleviate years of uncertainty and more effectively guide the treatment path. Autoimmune disease diagnosis is a critical next step for adaptive, and we are prioritizing our development efforts in this area. In addition, the overall value of our ClonalSeq brand continues to grow. as evidenced by both strong phonetic volumes and the signing of yet another major pharma MRD collaboration. Importantly, our team has been building the case that measuring MRD regularly for patients with blood cancers is best practice. Last week, an international panel of multiple myeloma experts published a call to action in clinical cancer research to guide the use of MRD in the clinic for patients with multiple myeloma. Of note, the publication also builds the case for the use of MRD as a regulatory endpoint for which adaptive has significant associated regulatory milestones. In our drug discovery efforts with Genentech, our collaboration continues to advance in both the shared and private products. We remain on track to deliver the next shared candidate data package to Genentech and extend our proof of concept in the private product from 15 to approximately 60 cancer patients this year. In summary, we are delivering towards our 2021 goals and we are enabling opportunities stemming from our platform. Before passing the call on to Julie on slide four, On slide four, I want to provide some color on how we are using our COVID efforts as a model to unlock multiple commercial opportunities from the same underlying immune receptor data set. By decoding the fundamental biological link between our immune system and the diseases with which they interact, adaptive can create value in many disease categories across research, diagnostics, and drug discoveries. In this case, we applied our immune code data for a research product called Immunoseq T-MAP COVID, which is now being used by vaccine developers, academic institutions, and advocacy groups. Leveraging the same data source, we launched T-Detect COVID, the first indication for our clinical diagnostic T-Detect franchise, and we signed a drug discovery agreement with Vaxabody for the design and development of next-generation T-cell-based vaccine. It's this This concept of one data set stemming through multiple opportunities is an approach that we are pursuing in many of the disease states that we are mapping. So now I'm going to hand the call over to Julie. Julie?

Thanks, Chad. Moving to slide five with T-Detect. T-Detect COVID trends continue to ramp up, and now over 10,000 customers have ordered the test. We did observe downward pressure in orders in June and early July as the vaccines rolled out. but concerns with the Delta variant has renewed interest. We expect to launch a COVID immune response website later this month to enable customers to gain additional research insights about their T-DETECT test results. To start, it will include a personalized comparison of the strength of an individual's T cell response to that of others with confirmed SARS-CoV-2 infection. Next, we expect to add more information profiling a person's T cell response to vaccines. For T-Detect Lyme, as Chad mentioned, results from our case control data set with Johns Hopkins have been published. These case control data demonstrate that our highly specific T-cell test is three times more sensitive than standard two-tier serology in the first few days post-infection, and nearly two times more sensitive in the first one to two weeks. In addition, the data also supports that the T-cell response precedes the antibody response to the Borrelia bacterium. ImmuneSense Lime is enrolling nicely, which will enable us to complete validation and make the test available in CLIA around year-end. During the first half of 2021, data emerging from our TCR mapping efforts have given us confidence in the ability of T-cells to be used to detect a variety of autoimmune diseases. These are diseases that afflict millions of patients and are challenging to diagnose and treat with highly specific clinical tools. In addition to the exciting data in IBD, we are encouraged by the signal we are seeing in multiple sclerosis because it appears to be strong not only in patients with later stage disease, but also in patients at much earlier stages, which is where MS is particularly challenging to diagnose. We have more samples arriving in the next couple of months and look forward to improving the sensitivity of our MS signal later this year. The early sensitivity we are seeing in Lyme, MS, and other diseases supports the premise that T cells are the first specific defense cells to see disease antigens and should be able to be leveraged for true early and specific detection of many diseases from blood. Switching gears to Clonaseq on slide six. On the left side related to clinical testing, you can see Clonaseq clinical testing volumes of 5,475 tests in the quarter grew 75% versus prior year and 15% versus the prior quarter. During the quarter, orders were placed by approximately 950 unique HCPs spanning 248 accounts for approximately 3,400 unique patients tested, and Clonaseq has now been used to treat more than 18,500 unique patients. Importantly, we observed double-digit growth quarter over quarter in tests delivered in each FDA-approved indication, ALL, multiple myeloma, and CLL, and within community accounts. This growth reflected recovery in the second quarter and was a result of our continuous sales, marketing, and educational initiatives. That said, the spread of the Delta variant poses challenges to the back-half-weighted growth we had anticipated in two main ways. First, rep access to clinicians, and second, reduced clinical visits recommended to our specific blood cancer patient population who are immunocompromised. As such, it is now becoming unlikely that we will double our clonacy volumes by year-end, but continue to expect healthy growth in the second half of the quarter. The recent paper that Chad highlighted is a key indicator of the growing sentiment that MRD does make a difference in the treatment of multiple myeloma patients. These prominent international KOLs and FDA regulators state that quantitative, accurate, standardized, and sensitive MRD testing may provide greater information relevant to tumor biology and likelihood of relapse when performed in a sequential fashion over multiple time points during a continuum of care. They go on to say that complete response provides a false sense of disease control. And at any given stage in the disease evolution, achievement of MRD negativity will predict a better outcome compared to patients at a similar stage who have not achieved the same depth of response with any given therapy. Of note, the paper also aggregates information from almost 40 ongoing Phase III trials, more than half of which utilize Clonaseq, that are evaluating MRD-directed therapy or MRD as an endpoint. Endorsements like this are a very important call to action to change behavior in the clinic. I also want to highlight a recent Clonaseq publication in the Journal of Clinical Oncology focused on DLBCL patients which showed that ctDNA-based surveillance of patients with DLBCL undergoing CAR-T therapy with AxoCell may be a useful adjunct to radiologic assessment of disease status. This is one of many ongoing studies as we pave the path for future Clonaseq testing in NHL. On the right side of the slide, you can see the number of publicly disclosed pharma partnerships where Clonaseq is used in clinical trials, where Clonaseq use in clinical trials continues to grow. This quarter, we signed another PAN portfolio, PAN Indication MRD Partnership with Janssen, which includes both sequencing and potential future development revenue. We also recognized an additional development milestone revenue based on use of MRD data as a clinical endpoint, which brings a total of 8.5 million in recognized revenue from development milestones year to date. Lastly, on slide seven, we are continuing to make good progress on our Genentech collaboration. As you can see in the chart, the shared and private product programs are complementary in many ways. There are significant learnings across T-cell identification, engineering, and manufacturing that we plan to leverage from our shared product to inform our private product approach. In fact, just this week, we had our quarterly JRC, and we are in lockstep on both of our programs, and we look forward to sharing more details at the appropriate time. I also want to highlight the relevance of our new license agreement with Vaxabadi. Vaxabadi is using adaptive identified viral antigenic peptides that are driving T-cell responses to develop a second-generation T-cell-based SARS-CoV-2 vaccine. This vaccine may provide more complete viral protection against known and future variants of concern. A Phase 1-2 trial is expected to start in Q4 of this year and will include testing in unvaccinated and fully vaccinated individuals. to be able to assess the true potential of this vaccine candidate as a universal booster. I'll now pass it over to Chad C for a financial update.