Adaptive Biotechnologies Corporation

Ladies and gentlemen, thank you for standing by, and welcome to the Adaptive Biotechnology's first quarter 2022 financial results conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and if you would like to ask a question during that time, simply press star 1 on your telephone keypad. If anyone should require assistance during the conference, please press star 0. I would now like to hand the conference over to your speaker today, Karina Calcedilla, Head of Investor Relations. Please go ahead, ma'am.

Thank you, Alexander, and good afternoon, everyone. I would like to welcome you to Adaptive Biotechnology's first quarter 2022 earnings conference call. Earlier today, we issued a press release reporting adaptive financial results for the first quarter of 2022. 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 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. Joining the call today are Chad Robbins, our CEO and co-founder, and Kyle Pisco, our Interim Chief Financial Officer. In addition, Harlan Robbins, Adaptive Chief Scientific Officer and co-founder, Nathan Sood, head of our MRD business, and Sharon Benzino, head of the immune medicine business, will be available for Q&A. With that, I'll turn the call to Chad Robbins.

Thanks, Karina. Good afternoon, everybody, and thank you for joining us on our first quarter 2022 earnings call. As always, I want to thank all of our adaptive employees for their dedication and for their solid execution during a quarter in which we completed a reorganization of our business. This strategic restructuring focuses adaptive in two business areas, MRD and immune medicine. Along with our recent headcount reduction, These changes will result in a more streamlined organization to fuel growth as we navigate this turbulent market. We continue to hire talent strategically in key growth areas, such as our ClonoSeek sales team and our cell therapy group in South San Francisco. We also look forward to formally welcoming our new CFO, Tycho Peterson, and leveraging his extensive expertise. Tycho will officially start on June 1st, following completion of his garden leave. We have prioritized product development efforts for each business area, and the teams are in place to execute towards our 2022 goals. Slide three shows the respective key drivers of our MRD and immune medicine businesses. The value of our MRD business is a combination of the Clonaseq test offered to clinicians and the Clonaseq MRD assay offered to pharma partners who integrate MRD status in their human malignancy trials. Aligning these synergistic components of the MRD business under the same leadership as adaptive will drive execution and enhance visibility. The immune medicine business is comprised of pharma, clinical testing, and drug discovery, all of which are driven or informed by our T cell receptor antigen map. As with our MRD business, within immune medicine, there is synergistic value between the utility of the information for clinical diagnostics and to pharma partners in research and drug development. As shown on slide four, our first quarter results reflect a solid start to the year with revenue of $38.6 million. Both business areas delivered key achievements and are set up for significant growth in 2022 and beyond. Within the MRD business, ClonoSeq test volume experienced strong growth of 45% versus prior year. The ClonoSeq sales team of 70 reps is now fully hired, trained, and is being deployed to hit the field. Progress continues with payers, data generation, and guideline expansion. For MRD Pharma, we continue to grow our partnerships. This quarter, we entered into an expanded MRD PAN portfolio partnership with a major pharma partner in multiple myeloma and CLL for the use of MRD as a clinical endpoint. The immune medicine business is also delivering on multiple fronts, generating a total of approximately $21 million this quarter. Revenue from pharma partners that use ImmunoSeq and data generated from our TCR antigen map grew 100% versus prior year. We are well positioned for continued growth as we expand the use of ImmunoSeq in multiple therapeutic areas and secure additional TMAP deals beyond COVID. For example, this quarter we entered into a new collaboration with J&J to map T cell responses to RSV for its vaccine program. The clinical diagnostic pipeline with T-Detect is advancing in both infectious diseases and autoimmune disorders. And in drug discovery, we continue to make good progress with our shared and private product programs under our Genentech collaboration. Moving on to MRD business on slide five. Tests delivered grew 12% to 7,698 tests versus prior quarter, with double-digit growth observed in all three indications. Ordering HCPs and ordering accounts experienced significant growth of 53% and 36%, respectively, versus prior year. And unique patients tested also grew 59%. Growth in the community setting, although off a small base, was north of 60% during the quarter, demonstrating a strong start by our expanded sales force focused on increasing our reach beyond academic centers. In addition, about 30% of all MRD tests were delivered in blood, with multiple myeloma experiences the highest uptake versus prior periods. As part of our strategy to cement our leadership in lymphoid malignancies, we plan to expand into non-Hodgkin's lymphoma using ctDNA, which is the best measure of relapse risk. We have submitted our application for DLBCL coverage to Moldex this quarter. We continue to enhance the overall customer experience by investing in the integration of ClonoSeq into customer ordering systems. This integration can positively impact both order volume and order pull-through. We're off to a great start and on track to accelerate our growth trajectory for the remainder of the year. I want to share on slide six new data about using ClonoSeq in pediatric ALL patients. In this published study, 143 pediatric ALL patients receiving CAR-T were tested for MRD at multiple time points using flow and Clonaseq. Data show that Clonaseq detected disease in blood that flow missed in marrow. Furthermore, in bone marrow, the performance of Clonaseq was very strong. Clonaseq detected MRD in 100% of patients prior to relapse, with a median lead time of 168 days versus 52 days using flow, giving the clinician significant lead time to inform treatment decisions. I look forward to sharing additional data readouts this year, further demonstrating the increasing utility of Clonaseq MRD testing. As mentioned before, our MRD pharma partnerships are a key component of our MRD business. Slide 7 shows our pharma portfolio, which is comprised of partnerships with over 60 companies that integrate Clonaseq in their clinical trials. As efficacy of blood cancer drugs continue to improve, pharma companies are looking for more sensitive ways to measure response. Of note, our Clonaseq MRD assay was used as a clinical endpoint in support of regulatory approval of five drugs to date. Almost everything. Every major pharma company developing a blood cancer drug is using Clonaseq in their trials as a clinical endpoint. From these partnerships, we have a portfolio of more than $330 million in future eligible milestones based on additional drug approval from ongoing and future studies. We continue to grow and expand our pharma partnerships and look forward to seeing Clonaseq data derived from these pharma trials to further drive clinical utility of the ClonoC test to clinicians. Now, turning to our immune medicine business on slide eight. The immune medicine business is comprised of three growth areas, pharma, clinical testing, and drug discovery. Each of these areas has multiple shots on goal to create value in the short, medium, and long term. This value is predominantly driven by data that we generate through our TCR antigen map. The pharma research area, which includes over 100 companies using our ImmunoSeq or TMAP products, is expected to continue to grow significantly in the short and medium term. The clinical diagnostic area, or T-Detect, is in early innings with its first indication launched last year. which also served to establish T-DETECT as a new class of molecular T-cell diagnostics. We expect T-DETECT to be a more meaningful contributor to revenue in the medium to long term as we generate and validate T-cell signatures in multiple autoimmune disorders with high unmet need. And the drug discovery area, which is currently focused on our cell therapy collaboration with Genentech, is in early stages of development and is expected to be a significant growth contributor in the mid to long term. We aim to secure additional collaborations beyond cancer cell therapy that could further accelerate our growth. Let's take a closer look on slide nine at the immune medicine business performance this quarter. Pharma was the biggest contributor of revenue growth in the quarter and represented 30% of the immune medicine business. Our MunoC T-MAP product is gaining traction with additional COVID studies and a new RSV program, which I mentioned. We expect to expand the use of existing and future T-MAPs in more disease areas as we continue to generate data from our TCR antigen map. As for T-DETECT COVID, this quarter orders decreased versus last quarter as we're seeing the virus move from a pandemic to an endemic state. We continue to offer the test to consumers with modest promotional activities to maintain brand awareness. We are focusing on making T-Detect Lyme available via our CLIA lab during this Lyme season, while we accelerate data generation and signal validation in select autoimmune disorders. Drug discovery revenue is attributed to the amortization of the Genentech upfront payment, which varies quarter over quarter. For our shared product this year, we're on track to deliver up to two additional TCR packages. We also continue to work closely with Genentech to establish the private product specifications and to build our private product data package. Zooming into T-DETECT on slide 10. T-DETECT in infectious diseases has served as a proof of our T-DETECT platform. Further investments in COVID and Lyme indications will be pursued opportunistically. Specifically in COVID, our efforts to establish the T cell response as a correlate of protection continue. We have been making progress at a policy level. A couple weeks ago, Adaptive, alongside a group of nearly 70 leading academics, industry leaders, and patient advocates, sent a letter to the FDA urging the incorporation of T cell response in COVID vaccine studies. This could further drive opportunities for T-Detect and for T-MAP COVID. We also expect to make T-DETECT Lyme available in the next quarter. Data from our ImmuneSense Lyme study shows T-DETECT sensitivity of 54%, nearly double that of standard care serology at 30% when we hold specificity at 99% for both. We anticipate this sensitivity to increase as we identify additional Lyme-specific TCRs from new data sets that we will use to update our diagnostic classifier. By making T-DETECT available in our CLIA lab, we aim to implement the processes which will be necessary for all future indications. In parallel, the team is working on initiating a clinical validation study in IBD and continues to improve our signal in MS. Our objective is to launch at least one autoimmune indication test by the end of 2023. We're excited about multiple opportunities stemming from our immune medicine business. I'll now pass it over to Kyle Piskel for a financial update. Kyle?