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spk12: With that, I'll turn the call to Chad Robbie. Chad?
spk17: Thanks, Karina. Good afternoon, everybody, and thank you for joining us on our second quarter 2022 earnings call. First, a big thank you to all our adaptive employees for their continuous dedication and hard work in delivering another strong quarter. We're halfway through the year. We're on track to achieve our 2022 goals in both our MRD and immune medicine businesses. As outlined on slide three, this quarter we executed towards important milestones and delivered key results. Revenue for the second quarter was $43.7 million, representing strong growth of 13% versus prior year. Our MRD business, comprised of Klonoseq Clinical Testing and our Pharma Partnerships, delivered strong performance. Clinical volumes grew 53% versus prior year. we secured a positive coverage decision for Medicare in diffuse large B-cell lymphoma, the most common type of non-Hodgkin's lymphoma. Clonoseq is the first and only test to receive Medicare coverage for MRD and DLBCL. And our MRD pharma partnerships continue to grow. This quarter, we entered into yet another PAN portfolio agreement with a major pharma company. Our immune medicine business, comprised of pharma services, drug discovery, and clinical testing opportunities, continues to grow as we diversify into multiple applications of our immune receptor data. We experience significant growth of 123% from pharma research partners. Our Genentech partnership is on track with both our shared and private cell therapy programs. We have made a business decision with respect to the commercialization of T-DETECT. Rather than launch diagnostic tests disease by disease, we are deferring commercialization until we have multiple signals with strong enough data to change physician behavior with a clear path to reimbursement. The science is working in multiple diseases, and we are confident in our long-term vision for T-DETECT as a single blood test for multiple indications. However, as we look ahead, we are now focused on pharma partnering and drug discovery while we generate strong clinical utility data around our T-DETECT multi-test panels. Related to our corporate activities, we continue to manage expenses prudently while exploring non-dilutive financing opportunities that could extend our cash runway. Moving on, to the MRD business on slide four. As shown in the graph, our Clonacy clinical testing growth is strong and accelerating quarter over quarter. This quarter, tests delivered grew 17% sequentially to nearly 9,000 tests with double-digit growth observed in all three marketed indications, ALL, multiple myeloma, and CLL. All metrics are pointing in the right direction. Ordering HCPs, or healthcare providers, and ordering accounts experienced significant growth of 53% and 44% versus prior year, respectively. Unique patients tested grew 56%. Slide 5 shows our strategies to solidify our leadership in MRD testing for patients with lymphoid malignancies. First, the team is focused on further penetrating existing institutional accounts and increasing the activation of new community accounts with our expanded field force, which is now fully trained and deployed. 72% of the volume growth this quarter came from established institutional accounts, underscoring the potential to expand usage within existing accounts. We also grew the number of newly activated community accounts by 20%, which is a positive indicator of our sales team expansion. Another key driver of growth is blood-based testing, which has the potential to both increase penetration of ClonoSeq among clinicians and increase the number of tests run per patient. About 30% of all ClonoSeq MRD tests are performed using blood, and importantly, multiple myeloma in blood increased 33% versus prior quarter. We plan to expand into DLBCL following our positive Medicare coverage decisions. The policy is effective immediately and extends to all DLBCL patients, 75% of which are Medicare-aged, regardless of line of therapy, treatment measurement, or testing time point. We continue to build our DLBCL evidence base to support guideline inclusion. Based on these efforts, we expect DLBCL to contribute to Clonacy growth in 2023 and beyond. Data continues to emerge Strengthening Clinical Utility and the Value of MRD Testing for Patients. Slide 6 highlights data presented at ASCO from the Phase 3 Determination Trial for Newly Diagnosed Multimyloma Patients. This study was designed to assess the benefit of adding transplant to frontline triple therapy followed by maintenance therapy until progression. An important result from the study showed that patients who achieved MRD negativity by Klonoseq prior to maintenance had similar outcomes independent of transplant. And the authors state that the elimination of MRD is of increasing importance in tailoring treatment, in informing clinical care, and as a treatment goal given its prognostic value for better outcomes. Let's shift to our MRD Pharma portfolio on slide seven. Our Clonacigase is being used in 168 active trials, representing about 21% penetration among active heme pharma trials. In multi-myeloma, we are the gold standard, almost 50% penetration. Our goal is to replicate our multi-myeloma success in NHL and CLL. This quarter, we signed a new pan-portfolio agreement with a major pharma partner. increasing our eligible milestones to over 355 million from ongoing and future studies. Now, turning to our immune medicine business on slide eight, we have proven our ability to map T-cell receptors to antigens at scale and can leverage this data for multiple diagnostic and therapeutic opportunities. To drive growth for our immune medicine business in the near to midterm, we will focus on pharma partnerships and drug discovery collaborations. Clinical testing with T-Detect is expected to be a meaningful contributor to revenue in the long term once we establish T-cell signatures in multiple indications that can be offered as a reimbursed, differentiated diagnostic panel to patients with shared symptomatology. On slide nine, we provide an overview of our growing immune medicine business opportunities in pharma and drug discovery. From a base level, T-cell and B-cell receptor sequencing to inform research and development continues to expand, and ImmunoSeq is the gold standard. Layering on our ability to map disease-specific TCRs to antigens unlocks a valuable product offering called TMAP, that is used to support our pharma partners in measuring the T cell response to various drugs, including vaccines. We are partnering on COVID and RSV vaccine programs and expect to drive additional revenue in infectious disease, autoimmunity, and oncology. Moving up the R&D value chain, immune response data can be also used as a regulated clinical endpoint with diagnostic applications. In drug discovery, We further characterized antigen-specific TCRs for target and or drug discovery. This is the basis of our partnership with Genentech. We are increasing our focus on additional high-value drug discovery opportunities. Turning to our T-DETECT clinical testing strategy on slide 10, we proved and validated our T-DETECT clinical testing capability in infectious diseases. Specifically, T-DETECT COVID achieved EUA and was key to educate the FDA about a new class of T-cell-based testing. We also made T-DETECT Lyme available in our CLIA lab, which enabled us to implement end-to-end and CLIA workflows and to continuously improve the algorithm. As mentioned previously, our experience showed us that the cost to commercialize and improve signals through self-pay customers disease by disease is high. Therefore, we have decided not to launch T-Detect tests before there is a clear path to reimbursement. We believe we can improve the signals to drive clinical evidence for coverage and commercial uptake by focusing on internal R&D and pharma partnering. This will allow us to drive near-term revenue and generate more signals that support the vision of T-Detect. We are confident that this disciplined approach will enable us to achieve commercial success with T-DETECT as a differentiated, high-value clinical test. We are excited about the multiple business opportunities that we discussed today and look forward to providing additional updates on our progress. I'll now pass it over to Tycho for a financial update.
spk02: Thank you. Turning to our financial results, starting with revenue on slide 11. Total revenue in the second quarter was $43.7 million, representing a 13% increase from $38.5 million in the same period last year, with 51% from immune medicine and 49% from MRD. MRD revenue, which is comprised of clinical testing plus revenues from our MRD pharma and research partnerships, was $21.3 million, an increase of 38% from a year ago. Colonial Seq clinical testing and MRD partnerships drove approximately 65% and 35% of the growth, respectively. Within our MRD pharma business, we recognized a $1 million regulatory milestone. While we continue to see milestones from our MRD partnerships materializing and accelerating over time, these can vary quarter to quarter. Colonial Seq test volumes, which include tech transfer, increased by 53% to 8,998 tests delivered from 5,897 in the same period last year. We expect similar or higher volume growth trends to continue for the remainder of the year. Immune medicine revenue was $22.4 million, down 3% from a year ago. The change was driven by a $3.7 million increase from pharma and academic customers using ImmunoSeq and TMAP products, as well as a $1 million decrease in revenue from T-Detect COVID and a $3.4 million decrease from Genentech amortization, which, as we have noted in the past, varies from quarter to quarter. Shifting to our operating costs on slide 12. Total operating expenses were 96.2 million, or a 9% increase from 88.3 million last year, and a 6% decrease from 102 million last quarter. Cost of revenue was 13.2 million compared to 10.8 million last year, representing a 23% increase, driven mainly by a mix to higher cost assays. R&D expenses were 37 million, compared to 37.8 million a year ago, representing a 2% decrease which is partially attributable to reduced collaboration and medical advisory costs. Sales and marketing expenses were $24.3 million compared to $23.2 million a year ago, representing an increase of 5% due largely to higher T&E and increased personnel costs from the Salesforce expansion, partially offset by a decrease in marketing expenses. T&A expenses were $21.2 million compared to $16.1 million a year ago, representing an increase of 32%. This was primarily driven by the expansion of our facility footprint with the opening of our new headquarters in the back half of 2021, as well as higher depreciation expenses and increased personnel costs. Net loss for the second quarter of 2022 was $52.1 million compared to $49.3 million last year. Now, turning to full-year guidance, we are reiterating our full-year revenue range of $185 to $195 million. Both our MRD and immune medicine businesses have great momentum, and we expect them to still contribute to our full-year revenues, approximately 50-50 at the midpoint of the range. For operating expenses, we now expect our full-year target to be between $410 to $415 million, as compared to our previous expectation of $425 to $435 million. This reflects our continuous efforts in managing investments and improving operating efficiencies beyond the restructuring activities that we announced at the beginning of the year. Some of the operating efficiencies we are exploring include real estate consolidation, sequencing and workflow cost reductions, and software optimization. Importantly, we are being thoughtful about our cash, and we expect to deploy capital off our balance sheet to support operations, and we expect our quarterly burn rate to be approximately 55 million in the back half of the year. Our capital position is strong. We ended the quarter with about 450 million in cash and equivalents, which provides us around two years of runway. As Chad mentioned, given current market conditions, we are exploring non-dilutive financing alternatives to extend our cash runway while also working extensively on our long-range plan. And I look forward to providing you with further details on our path to profitability in the back half of the year. With that, I'll hand it back over to Chad.
spk17: Thanks, Taika. As outlined today, we are sharpening our focus and remain disciplined with our investments as we fine-tune our path to profitability. Both our immune medicine and our MRD businesses have great momentum and are on track to achieve their respective catalysts listed on slide 13. We're looking to a great second half of the year. I'd like to turn it back over to the operator and open it up for questions.
spk04: As a reminder, to ask a question, you will need to press star 1-1 on your telephone. Please stand by while we compile the Q&A roster. Our first question comes from Brian Weinstein with William Blair. Please proceed with your question.
spk14: Hey, thanks for taking the question. At least I don't have to fight with Pike, obviously, who is going to get the first question anymore here. So that's a positive. Just a question for you on the sharpening of the focus here with immune medicine, understand prioritizing pharma partnering and discovery opportunities. So can you just talk about what led to doing this now? What really changed? Was it a cost thing? Was it time that it was taking for R&D? Was it recognizing the commercial path was going to be a little bit more challenging? Can you just talk about why now? And then can you also help us further understand the growth profile of immune medicine absent the T-DETECT portion is sort of a first question. Thanks.
spk17: Yeah. Thanks for the question, Brian. And I just want to kind of put out there that You know, we remain committed to the vision of T-Detect as a single blood test with multiple answers. However, you know, we realize that our near-term path of commercializing disease by disease is challenging and costly. At the same time, we have this incredibly rich immune receptor data that will drive growth in our immune medicine business as we continue to strengthen the signals. As a matter of fact, we're able to, in many of these private deals, we're able to leverage that data to essentially get paid and increase our signals at the same time. If you look at the capital efficiency of being able to do that, as we're developing our long-range plan, It just, it really came into light and to sharpen our focus to say, you know, this is a much better path as we look toward profitability. And if you take a look at it, I mean, big picture, pharma is actually the fastest growing segment of our immune medicine business. It's grown over 100% so far this year, and we expect it to continue to grow at very healthy rates. So, you know, while we're deferring the commercialization of TDAAC, we're going to continue to monetize what I'll call higher margin profile opportunities from our pharma partners using kind of this really rich and unique immune receptor data set. I think it's a much more efficient way to generate strong signals. And essentially what we're doing is kind of replacing the revenue with a higher margin profile in the near term.
spk14: Got it. And you guys talked about, you know, having a number of high value drug discovery opportunities that you were looking at. I mean, is there a way to kind of give us an idea about when we may hear about some of these newer opportunities? Are these things that you would be press releasing? Are these smaller types of deals that are kind of going on behind the scenes? What does that kind of pipeline of opportunities to leverage this look like outside of what you've already disclosed?
spk17: Yeah, Brian, I think it'll be a combination of As it's warranted, we'll press release deals and quarter to quarter, again, as appropriate, we'll be filling in where our pharma partners allow for disclosure. We'll be talking more and more about the kind of multiple opportunities that really, if you look at that pipeline slide, it's really across the spectra You know, from everything from, you know, on the early research side all the way up through kind of the target discovery, drug discovery, you know, on the higher end side.
spk14: Okay. And the last one for me, Tycho, I want to confirm what I thought you said was we'll get some idea about profitability timeframes and maybe even some thoughts on some of these non-dilutive options that you guys have teased over the last couple quarters. We should expect to hear something from you on that here in the back half of the year. Nothing to comment on. other than that at this point?
spk02: Yeah, so on profitability, you know, it's incredibly important. We're, you know, in the midst of our kind of three to five year long range, you know, planning, kind of updating that. And so, you know, we'll communicate more around the past profitability in the back half of the year, likely on the third quarter call. as how we're thinking about that. And then on the financing front, yeah, we've publicly said and Chad reiterated today, we're looking at non-diluted financing opportunities to extend our cash runway. Starting from a position of strength, we've got over $450 million to begin with, so two years of cash on hand, but we're looking to shore that up, and we'll have more to talk about when we can communicate. So hopefully sooner rather than later, but I'm not going to put a timeline on that.
spk13: Got it. Okay, thanks. Thanks, Brian. Thank you. One moment for our next question.
spk04: Our next question comes from Julia Chin with JP Morgan. Your line is now open.
spk11: Hi, good afternoon. Thanks for taking the question. So to start off on the ChronoSeq business, obviously, it's great to see you get extended coverage for DLBCL. Obviously, we know it's a big market, like you talked about. How quickly do you think you can drive that penetration? Do you think the uptake will mirror your historical experiences with the other clonal seek indications? Or do you think we could potentially see faster uptake, you know, maybe benefiting from the expanded sales force? Just, you know, help us think through the near-term revenue ramp and how that might change your MRD revenue trajectory in the near term.
spk17: Sure, Julia. Nitin, you want to take a crack at that?
spk15: Yes, thanks, Julia, for that question. Yeah, look, we're really excited about the DLBCL coverage. You know, it's the most common subtype of non-Hodgkin's lymphoma. And as you heard Chad say, you know, we're the first and only MRD test for DLBCL to receive medical coverage. And, you know, I view that as a clear validation that, you know, we continue to extend our leadership position in MRD testing for lymphoid cancers. In terms of DLBCL contributing to growth, we expect this to happen in the second half of 2023. You know, we'll have to do the standard things that we do with all, you know, other disease types. We have to go out there, educate the physicians, really change physician behavior. We have to get into guidelines. And I'm very bullish that we'll be able to do that. You know, as the therapy landscape for DLBCL has significantly advanced in recent years and there's a pretty large unmet need for monitoring disease progression and guiding, you know, patient care. Similar to what we've seen, you know, happen in multiple myeloma recently. And, you know, we have good data. For example, you know, recently we published that MRD assessment using Klonoseq and DLBCL post-CAR-T treatment can be more informative than PET-CT in identifying patients who are at high risk of relapse. So overall, I expect the MRD business to continue to grow at or above the annual growth rate we're going to see this year, but off of a higher base. So in the after years, we're going to continue this growth trajectory, but off a higher base. And so in some ways, we're adding more incremental tests every year going forward.
spk11: Great. That's helpful. And then one for Tyco on the non-diluted financing. I understand you're planning to save more details for when you're ready to talk about it. But on a very high level, I was wondering if you can give an update on, you know, the kind of deal types or deal structures you're currently exploring. What kind of conversations are you having right now? And are they going to be closely tied to your increased focus on the T-MAP business with Biopharma?
spk02: Yeah, no, it's a fair question. So, you know, non-dilutive, you know, meaning equity is kind of off the table here. And I'd say from a kind of high level, we're generally reluctant to, you know, issue debt just given the nature of kind of balloon payments. So, you know, we are exploring a potential royalty type deal. You know, I don't want to give much more detail than that. But, you know, this is a well-established model in the therapeutic world with companies that do these kind of royalty transactions. So, Those are the discussions we're having now, you know, still in process. So, again, no firm updates. And, you know, not specifically tied to, you know, the TMAP program. I mean, these types of things would generally be done on kind of a basket of revenues, total revenues overall.
spk11: Gotcha. That's helpful. And then a follow-up on the long-range plan. I know you're currently working on it. Without getting into the specific details, can you maybe talk about whether there are any new components to the plan or new approaches you're thinking about I know visibility about farmer milestones is something you're working on, so maybe give us some color on how you would approach it.
spk02: Yeah, look, I mean, we're, you know, the initial cut is to kind of build a revenue map and then kind of, you know, think about kind of the OPEX that's going to be required to kind of get us there. You know, I don't envision it involves any kind of significant change in trajectory overall. I mean, I think it's a lot of kind of continuation of stuff that's in progress, obviously continuing to build out the pharma portfolio, you know, for Nitten's World, continuing to kind of penetrate the MRD market further. I don't know, Sharon, is there anything you want to add from kind of the pharma immune side that you would highlight in a long-range view?
spk12: Yeah, you highlight exactly the components. And, of course, we have – we take into account prior book – deals and studies and obviously continue our business development efforts as Jed indicated in the different research uses or regulated uses in the future target discovery and therapeutics that add up to the revenue component as we project three to five years out.
spk13: Great. That's helpful. Thank you. Thank you.
spk04: Our next question comes from Eric DeBruin with Bank of America. Your line is now open.
spk07: Hey, good afternoon. Thanks for taking my question. So I appreciate the fact that the key detect landscape was a little bit more complex, but can you give us some sense of timing on when you sort of think the first products could start having some commercial benefit. I mean, we had modeled some lime and some GI and some stuff into our models. Not a lot, but I mean, just need to know how much that comes out. And then also, how should we think about T-DETECT COVID? Is that also gonna disappear next year?
spk17: Hey, Derek, why don't I take the first one first, which is T-DETECT COVID. We are going to keep T-DETECT COVID up. We think it's, you know, it's important, you know, as a, you know, this is the first and only T-cell test authorized by the EUA. And for cellular immunity, you know, we continue to work, you know, closely with pharma partners on a correlative protection study, which we think, you know, has the potential to really impact the kind of paradigm here. But there wasn't a significant amount of revenue in the model. We've talked about it as being a very small contributor from a financial standpoint. That being said, that data, along with other data sources, is supporting our TMAP COVID product, which we're partnering on Pharma, which is a larger contributor to the revenue source. T-DETECT COVID will be left up. We have made the decision to take down the Lyme offering, and we made it available. We accomplished what we set out to do. We made it available in our CLIA lab, which enabled us to put in kind of all the building blocks and infrastructure software, how we validate in a CLIA lab and have a kind of a self-improving diagnostic with the algorithm. We checked all those boxes for future launches. And again, I think there should have been, as we guided you, very little kind of revenue associated with that. That being said, Derek, we are continuing the work on our PTLSD, which is the post-treatment Lyme disease syndrome, or chronic Lyme, because as part of a panel of shared symptomatology, chronic Lyme could be confused with many other neurological disorders, including MS, even kind of long-haul COVID. So that work is ongoing from an R&D perspective. And if the data is positive, the other thing we can do, which really goes for every single one of these signals that we're generating, is we're going to leverage that data with our pharma partners. And there's different programs going on across the spectrum from GI to Lyme, et cetera, where we can leverage that immune receptor data to potentially bring in near-term revenue.
spk07: Okay. But to the But then just circling back, though, but then when would be a good time to start thinking about when T-DETECT would start to contribute to the top line, right, sort of the revamp and the reset here?
spk17: Yeah, we're probably a couple years out, Derek, and we'll get back more on when we kind of roll out the three- to five-year long-range plan in the November earnings. But we will have kind of a more detailed view. But we are going to let the science do the talking here and kind of leverage that data near term. And it's a revamp, but it's really a replacement strategy. I mean, In some essence, we're kind of replacing those revenues at a kind of higher margin profile with kind of near-term farmer. It's just a different strategy for kind of the R&D development. Okay.
spk07: And that's where I was going to, right? I think you sort of see, you know, are they enough to offset what you sort of have planned in the models for like these higher revenue ones or something that could drive, could actually be potentially higher in the near term?
spk17: Yeah, I'm going to let Tycho and Karina work with you on the models, Derek, but I think we're certainly encouraged by what we're seeing in terms of replacing those revenues with a higher margin profile quality of revenue that's essentially what I'll consider at least paid for R&D or somewhat going to burn offset R&D from our partnerships with Pharma to develop those products. and get to a panel approach that has kind of multiple indications for earlier detection at the same time.
spk06: Great.
spk13: Thank you. Sure. Thank you.
spk04: And our next question comes from David Westenberg with Piper Sandler. Your line is now open.
spk06: Hey guys, thanks for taking the question and congrats on some of the great Kronospeak stuff. So I'll stick with that because I think that was the biggest sequential increase that we've seen. Can you give a little bit more color on what exactly might have happened that you finally had this inflection, one quarter inflection? And I have a couple more on Kronospeak and I'll stop there. I thought you'd answer that.
spk17: Sure, Nitin, do you want to take that?
spk15: Yeah, I'll take that. I think there's multiple factors. First, you know, our sales. Yeah, I'll take that. I think there's multiple factors. First, you know, our sales team is fully trained and deployed out there. And I think as we've talked about, you know, our strategy there was to increase penetration in our existing accounts and then also sign up new accounts in the community setting as well as drive penetration in blood. So, you know, we're seeing all of those factors contribute in our existing institutional accounts. There are still driving growth. We saw sort of 72% growth come from institutional accounts, but we're also increasing our, you know, the contribution from our community accounts. The new accounts we're signing up are many of them or most of them are in the community setting. That's driving growth. And then we continue to see increasing amounts of evidence come out. We talked about the determination trial. I think one of the big decision points for a physician treating multiple myeloma is to, you know, whether to do stem cell transplant or not. The determination trial, you know, really helped highlight the fact that that's an important decision and MRD can be used to make that decision. And I think there's general awareness in the physician community that the goal of lymphoid cancer treatment should be MRD negativity. So we see that also contributing to growth. So I wouldn't say there's one thing that's contributing growth. There's a lot of things coming into play that's contributing growth, and we expect this robust growth to continue in the subsequent years as well.
spk06: Got it, got it. Well, I'll ask it, I guess, a little more offline because it does seem like, you know, you win 8%, 8%, 12%, 17%. It just seems like there was a big inflection here. So anyway, we'll get to that. And then just a couple questions on NHL. Can you remind us why NHL is a little bit more piecemeal, you know, in that you do DBCL games? rather than, you know, the whole non-tensionable lymphoma. I'm sorry, I'm not an oncologist, not a scientist, so just kind of remind me on that. And then also, can you, you know, you're talking about this as a 2023 contributor. These are the same oncologists that are ordering blood cancer tests, and, you know, we've found plenty of our checks with oncologists finding that the ones that are ordering, you know, even like T-cell lymphomas, and, you know, you're not indicated for that. So why is this a 2023 inflection point? And I'll stop there after that.
spk15: Yeah, so first of all, you know, answering your first question, you know, within non-Hodgkin's lymphoma, there are multiple subtypes, which each subtype has a slightly different treatment paradigm, and as a result, the different evidence set that's required. You know, there's follicular lymphoma, there's mantle cell lymphoma, but DLBCL is about 35% of non-Hodgkin's lymphoma. So we went after DLBCL first, but we will, you know, continue to tackle the rest of non-Hodgkin's lymphoma subtypes. And, you know, we're feeling confident that we'll be able to get Medicare reimbursement for those. So we want to do it step at a time because the evidence set required for each subtype is different. And then talking about, you know, DLBCL contributing to growth, first of all, you know, our current DLBCL test accepts plasma. And in order for it to be widely used, we needed to accept whole blood in strec tubes. So we've previously talked about that. We're doing that work. We launched the strec tube assay for DLBCL later in this year. And then, you know, we have to go through the whole education process of convincing physicians, getting into guidelines. And as a result, you know, it's going to really kick in in the second half of 2023. Even though it's the same physician set, you know, we still need to do the education process. And the use of a blood test and MRD in non-Hodgkin's lymphoma isn't established, so we'll do all the work. We have the evidence. We have the studies. We have the expanded sales team and the capability now to do that, but it's going to take time, and that's why we think the real growth is going to kick in in the second half of 2023.
spk06: Perfect. Thank you for the color.
spk17: Welcome back, and congrats on the new post, Dave.
spk04: Thank you. Our next question comes from Dan Brennan with Cowan & Company. Your line is now open.
spk16: Thanks for any of the questions, Tycho. Congrats on the first call here. Maybe, Tycho, maybe I'll start with you. So on the balance sheet, I guess the burn guy that you're targeting in the back half of the year, $55 million, that's basically in line with the prior guy, I believe, but you have lower outbacks, so maybe just Kind of help me think through that a little bit. And if we were to plug in the forecast that you guys are giving, where should we be landing at year end for cash? Is it, you know, I think around $200 million. Is that the right tip code?
spk02: Yeah. So, yeah, we are guiding to $55 million, you know, burn and quarterly burn in the back half of the year. You know, as I mentioned, we took OpEx down to $410 to $415. So that kind of reflects the restructuring and some of the other, you know, efforts that I kind of highlighted around workflow and things like that. So from a cash position, yeah, I don't think that's too far off in terms of where we'll be at year end. What was the other part of it?
spk16: Oh, no, I guess maybe some of the OPEX cuts are non-cash. I think the prior burn guidance was 50 to 60 in the back half. And since OPEX is coming down, I'm just wondering if the burn reduction could come down more, that's all.
spk02: Look, we're trying to get more efficient every day, right? We've got other efforts, you know, underway to bring down the OpEx. So that's an ongoing, you know, effort and part of our long-range planning too, right? We think about the three- to five-year plan. We're generally trying to, you know, hold OpEx, if not, you know, bring it down annually. Got it.
spk16: And then maybe on Clonacy, just I know there's a few questions asked already, but can you just speak to what the access looks like today? Has that changed much? You know, I know different diagnostic companies have discussed access really being stuck, but obviously you're in a more acute space with cancer, so maybe that's kind of continuing to improve. So where is access? And I know it was touched upon earlier, maybe to Dave's question, but just are we at, like where are we at in terms of productivity of the expanded sales force? Are we halfway there, fully there? Is there a lot more to go as they, you know, kind of are in the field more?
spk02: Yeah, but before we do that, Dan, just on the cash question earlier, $350 at the end of the year. I think you had said $250, but no, it's $350. Got it. All right. Go ahead, Ned.
spk15: Yeah, so I think, unfortunately, the access hasn't changed much in the last few months. You know, I think it seems to be a new normal. But on the other hand, you know, we are able to, you know, get a hold of physicians and through other channels. And, you know, so we expect that to not change much in the after years and in the second half of the year as well. You know, I'm sorry, what was your second question?
spk16: Oh, it was just on the, you know, the expanded commercial team, just trying to get a sense of, you know, kind of the rate of productivity enhancements, how far along are we with that team in place now?
spk15: Yeah, so I think there's a long way to go in terms of increasing the productivity. I think this is the first quarter where the sales team was trained and deployed. It still takes six, eight months for the individuals in new territories to develop their territories, to really understand what's going on in each of their territories. So I expect per sales productivity to increase continuously going forward. We're quite a way away from, I would say, at least 12% 18 months away from increasing productivity. So I don't expect us to increase our sales footprint going forward. I think we can drive a lot of increase in business with the current footprint by increasing productivity.
spk16: And then maybe just one more on T-Detect. So, you know, for ileochoronogen colitis, I know you've run a fair number of samples at the presentations. So is the idea that you need to have a broader signal across more indications than just something like that, which I think those were maybe targeted to be maybe the first out of the chute? You know, was the idea that the commercial impact of just having those isn't going to be enough signal to have a broader spectrum of kind of signals? Or were the signals not strong enough in those areas? Maybe just speak a little bit to the first indication you were initially targeting and kind of how those first indications would evolve into a bigger panel.
spk17: Sure. Sharon, you want to take that?
spk12: Yeah, absolutely. Thanks for the question to help clarify. So IBD is still a top priority. In fact, we initiated our clinical study in IBD that covers both Crohn's and ulcerative colitis. And we are aiming, as Chad mentioned, in terms of this shift and focus in a panel, which includes not just IBD, Crohn's, ulcerative colitis, but also other GI disorders, including enhancing our signal, for example, potentially in celiac disease, and really having a panel of, for example, GI symptomatology that T-defects could help differentially diagnose and diagnose early. So that's one example of a panel. And we are still pursuing MS and neuro- as a panel where, as Chad indicated, our signal and the strengthening of the signal in Lyme can also come into play to differentially diagnose. So those are the activities, and again, we are continuing and are encouraged by the signals that we've generated to date and that will continue to scale in multiple indications.
spk16: Got it. And then maybe a final one just on kind of the outlook is, Could you help us think through in the context of the guidance for revenues in Asia 50-50 between MRD and immune medicine? But when we think about some of the buckets within that, would you be willing to provide some color, you know, across a Clonacy clinical and Clonacy pharma MRD development? You know, the different buckets as you report, how we should think about kind of the trajectory of those businesses implicit in your guidance?
spk17: I don't know, Dan, I don't know if we would specifically break it down. I mean, I think you can, frankly, probably back into it. If you have the ASP and the test delivered numbers, you can probably get close to that. I think the first cut, as you know, this year going to kind of immune medicine and MRD, those broad-based bucket, you know, over time we may provide kind of, you know, further resolution into that. But I think you can get, you know, somewhat of a proxy. You know, obviously the milestones are kind of sitting out there and are probably harder to quantify. But, you know, we'll work with you on the model. Awesome.
spk13: Okay. Great, Chad. Thank you. Yeah, you bet, John. Good talking to you.
spk04: Thank you. And our next question comes from Salveen Richter with Goldman Sachs. Your line is now open.
spk00: Hey, guys. Thanks for taking our question. This is Elizabeth on Salveen. This is on the drug discovery vertical, and I'm just hoping you can help kind of frame the opportunity and target discovery and how much that contributes to the long-term growth. Thank you.
spk17: Sure, Sharon, you want to take that?
spk12: Yeah, absolutely. So on the heels of the signals that we are generating, we mentioned autoimmune disorders like IBD and MS. There's a lot of opportunity that we and potential partners see there in terms of really validating and discovering novel targets to then pursue as therapeutics in these diseases where there's a high unmet need. That's what we're exploring. That is the heart and soul of the TCR antigen mapping effort with our Microsoft colleagues. And so we're very excited to continue to pursue that and scale that and really get to these novel targets that we could structure deals around discovery and licensing that could also enable some drug discovery opportunities for us in terms of TCRs against those targets or even antibodies.
spk13: Thank you.
spk04: And our next question comes from Tejas Savant with Morgan Stanley. Your line is now open.
spk10: Hi, this is Yuko on the call for Tejas. Thank you for taking our questions. With DLBCL expected to make a more meaningful contribution in back half of 23, could you elaborate on the potential opportunities on the clinical research side and whether you see that opportunity to be more near term?
spk15: Sure, Nitin, you want to take it? Good question. Yeah, good question. Absolutely. So I think, you know, we are already, you know, working towards increasing our penetration in DLBCL with pharma companies. And as I mentioned, the therapy landscape for DLBCL is very rich. There's a lot of activity going on there. There's a large number of clinical trials going on, and our penetration in those clinical trials as an endpoint is very low. So we are working with all the major players in that space, and we expect that to be a nearer-term revenue contributor. We've already heard from a handful of pharma companies that they view the Medicare coverage very positively. The fact this test is going to be broadly available for patient management is viewed positively by them, and we're already having some conversations about using ClonoSeq as an endpoint in DLBCL trials.
spk10: Great. Thank you for that, Kalar. And then just as an unrelated follow-up, some of your peers in the industry noted they're seeing staffing shortages in hospitals and physician offices. Is that something you also run into? And if so, has it been a headwind for ClonoSeq?
spk15: Yes, so I think we are seeing something similar, and we do actually see that we get some order spikes on a couple of days within a week, largely because I think they're trying to accumulate orders on two days out of a week and send us those orders. So we see that day-to-day variability there. And, you know, but despite that, you know, we saw some very strong performance this quarter, and we hope to continue that in Q3 and Q4 as well.
spk10: Great. Thank you so much.
spk13: Thank you.
spk04: And our next question comes from Mark Massaro with BTIG. Your line is now open.
spk05: Hey, thanks for the questions. I guess, congrats on the reimbursement for non-Hodgkin's lymphoma. I guess, can you comment about whether or not you've received pricing on the test and how we should think about that? I think in the past, you've received sort of a bundle for four tests. Should we think about that as flat to what you already have? And is it fair to think that NHL can be ordered somewhere around two to four times per patient in the blood.
spk15: Yeah, thanks for that question, Mark. Yes, so the pricing is identical to the historic pricing we received for Klonoseq, the bundle pricing. And in terms of usage, I think that's going to grow over time. I think our approach is to tackle the relapsed refractory setting of DLBCL first, which is where we think there's greatest utility in the near term. And then as we build evidence and as we build a familiarity with physicians on using DLBCL, we'll also move upstream into frontline treatment. And I think as more and more treatments come online and as people live longer and longer with these diseases, we expect the usage to increase over time.
spk05: Okay. And I know you were asked this question earlier, but maybe just can you confirm that pricing I think is already effective immediately. So I guess why won't this have more of an impact in the second half of 22? I understand that it could be small numbers in the early days, but Um, you know, given the size of your Salesforce and the fact that everyone knows what Kono seek is, um, you know, are you just being conservative that, uh, the bigger uptake is in 23, or maybe just walk us through why, um, you have low expectations for the initial up uptake in the first six months.
spk15: Yes. So I think the very specific reason, uh, the current test, I think we talked about this in prior earnings. The current test is based on plasma. And as you know, in the community setting where DLCL is most frequently treated, the physician's capability to take whole blood, spin that down into plasma, and send plasma to us is limited. So at the end of this year, we're launching a change to the product where we will be able to accept whole blood in strec tubes, which is very similar to all the other sort of liquid biopsy tests out there. That's happening at the end of the year. And I think that's going to be the limiting factor for driving growth in the second half. So, you know, that's the real discrete reason why we think growth and adoption for DLBCL will be limited. And again, I just want to emphasize that the Medicare coverage is for all, is without limitations. It covers DLBCL throughout the treatment paradigm for DLBCL. But given that strict tube limitation, which we're addressing,
spk05: we think the growth will come really in 2023.
spk17: Mark, I'll add one comment to that because it's been said a couple times, but just to clarify, our largest penetration so far is in kind of the academic medical center where there is a lot more specialization between the leukemias, myeloma, and then kind of lymphoma is a different category. Granted, in the community, there is still some specialization in the community, but in the community where they do kind of treat all comers, we're much more lower penetration rates right now. So there's got a notion that our sales force, and obviously that's where we're trying to get to, is that one doc who treats all patients understands our tests well, but that's a growing but smaller, off a smaller base right now.
spk05: Okay, excellent. One last question on MRD. Your press release on NHL sort of referred to the indication as being based on circulating tumor DNA. And I think you've talked about how NHL or DLBCL is almost a borderline heme disorder. So recognizing that you guys certainly are the dominant market leaders in heme disorders, You know, obviously, solid tumors are also a big opportunity. I guess, have you learned anything through the development of NHL or DLBCL that leads you to believe that this may be sort of a potential precursor into solid tumor development?
spk15: Yeah, I'll address that. I think, you know, the ctDNA test that we've developed for DLBCL essentially uses the same underlying technology that we have for DNA that originates from whole cells. So in that sense, it's very similar and it leverages the years and years of development effort that we put into that assay, all the IP protection we have, all the controls we have in manufacturing and all the operational excellence we have around that test. But at the same time, it also demonstrates that, hey, you know, we can leverage our technology and look at different analytes. And in terms of, you know, looking at solid tumors, that's, you know, you know, something we can talk about it. Yeah. Yeah.
spk17: Yeah, I'll take that one. And Mark, it's a good question. It's a natural question, especially as kind of the new technology we're developing potentially lends itself to being able to evaluate MRD in solid tumors. And from a corporate development perspective, we continuously kind of evaluate our opportunities. And that's obviously something naturally we will evaluate amongst kind of many other opportunities to expand our franchise.
spk05: Awesome. Thanks very much for the call.
spk17: You bet. Thank you, Mark.
spk03: Thank you. Thank you for participating. You may now disconnect.
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