Adaptive Biotechnologies Corporation

Good day, and thank you for standing by. Welcome to the Adaptive Biotechnologies fourth quarter and full year 2021 earnings results 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 that session, you will need to press star 1 on your telephone. And if you require any assistance during the call, please press star 0. I would now like to hand the conference over to your speaker today, Ms. Karina Cazadilla, Investor Relations at Adaptive. Ms. Cazadilla, the floor is yours.

Thank you, Chris, and good afternoon, everyone. I would like to welcome you to Adaptive Biotechnologies' fourth quarter and full year 2021 earnings conference call. Earlier today, we issued a press release reporting adaptive financial results for the fourth quarter and full year of 2021. The press release is available at adaptivebiotechnologies.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 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 statement, 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 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, and Kyle Fiskell, our Intern Chief Financial Officer. In addition, Harlan Robbins, adaptive chief scientific officer and co-founder, and Nathan Soot, our chief commercial officer, will be available for Q&A. With that, I will turn the call over to Chad Robinson. Chad?

Thanks, Karina. Good afternoon, everybody, and thank you for joining us on our fourth quarter and full year 2021 earnings call. As always, I want to thank all of our adaptive employees for their dedication, flexibility, and strong execution during another challenging year. as we continue to adjust to the changing dynamics of the workplace. 2021 was a year of key achievements for Adaptive, which set a solid base for many upcoming catalysts in 2022. Indeed, we are off to a great start with Genentech's selection of our TCR candidate targeting a shared cancer neoantigen to progress as a potential therapeutic product candidate, which I'll discuss later in the call. Before I go into our annual performance details and upcoming milestones, I'd like to address an important initiative we communicated at the J.P. Morgan Conference. As shown on slide three, to effectively allocate capital and drive growth, going forward, we will discuss adaptive around two key and distinct business areas, MRD and immune medicine. The MRD business is comprised of our ClonoSeq diagnostic test offered to clinicians and the ClonoSeq assay offered to our pharma partners to support drug development and approvals. The immune medicine business is comprised of drug discovery, research, and diagnostics driven by our T-cell mapping efforts with Microsoft. This includes Genentech, Nycode, the T-Detect franchise, and ImmunoSeq T-MAP. We aim to begin reporting revenues based on these two business areas by next quarter. Turning to slide four, you can see the significant progress we made throughout the year. Despite the impact from COVID variants, we delivered strong growth and ended the year with $154.3 million in revenue, up 57% versus 2020. Revenue in the fourth quarter grew 26%. In our MRD business, we expanded our Clonaseq sales team, which will be fully trained and in the field by mid-year. And we launched an enhanced version of the Clonaseq assay for CLL patients, which provides additional mutation status information at the time of diagnosis. In addition, multiple clinical studies were published demonstrating clinical utility of Clonaseq for patients. We continue to be the MRD test of choice in pharma clinical trials, having signed two major PAN portfolio agreements in 2021. Regulatory milestones from our partnership started to accelerate with $10 million in recognized revenue during the year. We also achieved important milestones in our immune medicine business. As mentioned on the shared program, Genentech has selected a prioritized TCR candidate to progress as a therapeutic product. Throughout the year, we also made significant progress on the personalized product and successfully completed initial proof of concept in which we identified tumor-specific TCRs using blood from about 60 cancer patients. Another key achievement was the extension of our drug discovery capabilities into vaccines with our NICODE collaboration. This is the first time that our T-cell data will be used to inform the design and development of a T-cell-based vaccine. NICODE has initiated its Phase 1-2 clinical trial for SARS-CoV-2, and we expect data in the first half of this year. Importantly, adaptive technology may inform the design of a new class of T-cell-based vaccines to treat different diseases. We also made great progress in our T-DETECT franchise, highlighted by the emergency use authorization of T-DETECT COVID. This is the first T-cell-based test authorized by the FDA and clearly marks an important strategic milestone for T-DETECT. We also completed the ImmuneSense Lyme study, which is the first clinical validation study successfully conducted by Adaptive. We expect to enable T-Detect Lyme in our CLIA lab offering during Lyme season and to leverage our consumer pay experience that we learned from T-Detect COVID. In autoimmune disorders, we identified four signals demonstrating the applicability of our technology in this hard-to-diagnose class of diseases. Lastly, I'd like to touch on the important traction of our TMAP COVID product. which is being used by multiple pharma partners such as J&J, AstraZeneca, and Moderna to understand the T cell response to COVID vaccines. This is just the beginning of our ability to leverage mapping data as a product for pharma to understand the immune response across diseases. Now I'm going to provide more details on our business starting with MRD on slide five. There is a strong synergy between clinical adoption and inclusion of ClonoSeq in pharma drug development trials. The integration of ClonoSeq in pharma trials increases the value of MRD for clinicians to make therapy decisions and raises awareness of ClonoSeq validation and sensitivity. At the same time, the adoption of ClonoSeq in clinical practice drives its inclusion as an endpoint in pharma clinical trials. Both clinical testing and pharma partnerships achieved significant growth and traction during 2021. For the full year, tests delivered grew 48% to 22,516 tests. Ordering healthcare providers and ordering accounts experienced significant growth of 57% and 32% respectively versus 2020. And approximately 28% of all tests were done in the blood. During the last few weeks of December, we experienced a slowdown with intersection of the Omicron surge and the holidays. However, we have seen an uptake in January and anticipate that our commercial investments, data readouts, and expansion of our commercial offering will enable us to overcome last year's headwinds such that we accelerate our growth trajectory in 2022. We began expanding the sales team with a focus of reaching the community settings. Our goal is to have a sales team fully built out and trained by mid-year, which will allow us to deepen our penetration in academic centers and increase our reach into the community. As part of our growth strategy to increase blood-based testing and expand indications, we are seeking Medicare coverage for diffuse large B-cell lymphoma. It is important to note that Clonacy for multiple myeloma and NHL in blood are already available through our CLIA offering. On the pharma side, our Clonacigase is currently being used in 155 active trials by more than 60 pharma companies. Importantly, we're embedded across all phases of the clinical development and used as a clinical endpoint across multiple indications with different drug modalities. Through these partnerships, in addition to the per sample sequencing revenue, we also have access to more than $330 million in regulatory milestones. Now, let's turn to the immune medicine business on slide six. We have been building the necessary capabilities to identify and map T cell receptors to disease-specific antigens that serve as a source code for T-DETECT, pharma partnerships, and our drug discovery efforts. We validated this platform strategy with our COVID efforts and are now organizing our teams to repeat the success in other infectious diseases and in autoimmune disorders. Slide 7 shows the most advanced indications for T-DETECT, their progress, and next steps. During 2021, over 30,000 consumers ordered a T-DETECT COVID test. For the most part, orders followed the course of the pandemic. with significant increases during variant surges. We will continue to offer the test to consumers with modest promotional activities to maintain awareness and monitor demand behaviors as the pandemic evolves. To increase the value proposition in a potential endemic state, we're working with vaccine manufacturers to generate correlate of protection data and other measures of efficacy. We're in direct communication with the FDA to determine the best path forward and we will continue to provide updates as the data progresses. 2021 was a year of signal generation in the autoimmune space for T-DETECT. We first confirmed a T-cell signal specific to ileochrones and demonstrated T-cells were distinct from those that recognize colitis. This data is being presented at the European Crohn's and Colitis Organization Scientific Conference this week. We also completed the analysis of over 5,000 IBD samples, which supported encouraging signal identification in colonic Crohn's and colitis. In addition to IBD, we confirmed a signal in multiple sclerosis and have identified an early signal in rheumatoid arthritis. It's important to understand that our TCR classifiers get more sensitive as the sample size increases. Our focus this year is to improve these autoimmune signals by significantly increasing sensitivity while maintaining extremely high specificity in order that we minimize false positives. To that end, we're in the final stages of designing our protocol to initiate clinical validation in IBD. We believe autoimmune disorders represent a large market opportunity for differentiated clinical diagnostics. and a meaningful opportunity to inform drug development with our pharma partners. Lastly, slide eight shows progress in our cell therapy collaboration with Genentech. We continue to make good progress with both our shared and private programs. Regarding our shared program, we delivered efficacy and safety data for a TCR candidate that targets a shared cancer neoantigen. Following review of data generated by both Adaptive and Genentech using this TCR candidate, Genentech recently selected this neoantigen-specific TCR. Also, this year we're on track to deliver to Genentech up to two additional TCR data packages. In our private program, following successful initial proof-of-concept screens, this year we aim to centralize, test, and optimize the personalized process using additional cancer patient samples in our purpose-built South San Francisco lab. We continue to work closely with Genentech to establish the private product specifications and build our private product data package. The personalized data that we generate this year with Genentech will define early product development. I'll now pass it over to Kyle Pitskill for our financial update.