Adaptive Biotechnologies Corporation

Good day, and thank you for standing by. Welcome to the Adaptive Biotechnologies first quarter 2023 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 11 on your telephone you will then hear an automatic message advising your hand is raised. To withdraw your question, please press star 11 again. I would now like to hand the conference over to one of your speakers for today, Karina Casadilla, Head of Investor Relations. Please go ahead.

Thank you, Brittany, and good afternoon, everyone. I would like to welcome you to Adaptive Biotechnology's first quarter 2023 earnings conference call. Earlier today, we issued a press release reporting adaptive financial results for the first quarter of 2023. 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 meaning 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. In addition, non-GAAP financial measures will be discussed during the calls, 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 Tycho Peterson, our Chief Financial Officer. In addition, Harlan Robbins, adaptive chief scientific officer and co-founder, Nathan Sood, head of MRG business, and Sharon Benzino, head of immune medicine business, will be also 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 2023 earnings call. First, I want to thank all our adaptive employees for their continued dedication and execution. This quarter's results represent a solid start to the year, laying the foundation for us to deliver on our 2023 annual goals. As shown on slide three, revenue for the quarter was 37.6 million, which reflects a 26% reduction in Genentech amortization, offset by strong recurring revenue growth from both our immune medicine and MRD businesses. We continue to streamline our organization and improve operating efficiencies. We recently announced the consolidation of the President and Chief Operating Officer roles under Julie Rubenstein to better align operations with our path to profitability. Our research and development efforts in drug discovery continue to progress. Both programs in cancer cell therapy with Genentech are advancing and are on track to achieve the respective goals set for this year. And our drug discovery team is making great progress towards novel targets in autoimmunity. Let's take a closer look at our MRD business on slide four. Our MRD business is firing on all cylinders. MRD revenue growth for the quarter had strong growth of 20% versus prior year. Colonoseq test volume grew 57% with double-digit volume growth in all marketed indications. Multiple myeloma continues to be the biggest growth driver and largest contributor. DLBCL launch is progressing well and now represents 3% of Colonoseq orders. Ordering healthcare providers and ordering accounts experienced significant growth of 58% and 56% versus prior year respectively. Blood-based testing, a key component of our growth strategy, increased in all indications and grew 30% versus prior quarter. Now, approximately 35% of all MRD tests are in blood compared to 31% last quarter. This growth in blood testing is mainly driven from our Salesforce strategy to penetrate community accounts. Community accounts continue to grow quarter over quarter and now contribute about 18% of Colonial Seek volume versus 15% in the fourth quarter of last year. In addition, MRD Pharma, a core component of our MRD business, grew 23% excluding regulatory milestones. We continue to grow our MRD partnerships. This quarter we entered into a new translational PAMP portfolio partnership with Takeda for the use of MRD as a clinical endpoint. Not only do we have a healthy sequencing revenue stream from these partnerships, but we also now have $400 million in future eligible milestones based on additional drug approvals from ongoing and future studies. Zooming into Clonacy test volume on slide five. As you can see from the chart, we continue to set record high volumes quarter over quarter. This quarter, volume grew 15% sequentially to over 12,000 tests delivered. In the United States, our market of focus, tests delivered grew 16% from last quarter. Our strategy to drive cloning volume is working, and we continue to drive it ASP expansion with new payers and improve collections. Of note, this quarter a new ClonoSeq PLA code was approved, which allows us to uniquely identify ClonoSeq in our claim submissions. As noted on slide six, we are on track to achieve key milestones in 2023 for MRD. Our EPIC integration is on schedule as we look to bring pilot sites live next quarter with additional integration sites to follow. We also continue to expect meaningful data readouts in DLVCL and multiple myeloma in blood and therapy discontinuation. The setup for MRD is strong, and we are confident that we will achieve over 50% clonacy test volume growth this year versus 2022. Switching to our immune medicine business on slide seven. We generated more than $16 million in revenue this quarter from two distinct areas, pharma services and drug discovery. Pharma services generates revenue from multiple sources as we provide valuable immune receptor data to our biopharma customers, accelerating their therapeutic programs. We have a healthy portfolio with more than 120 active studies that is set up to deliver sustainable growth of 20 to 30 percent TAGR over the next three to five years. Revenue from drug discovery this year reflects an expected deceleration due to the reduced amortization of the Genentech upfront payment. As you can see from the slide, there are multiple sources of revenue from pharma services that will contribute to growth. In addition, as we advance our drug discovery efforts, New revenue streams will drive future value. Our drug discovery programs in cancer and autoimmune disorders are on track to achieve the milestones shown on slide eight. We are making progress on our two cancer cell therapy programs with Genentech. For the first shared TCR candidate, we expect the first IND acceptance this year and continue to support Genentech to the clinic. For the personalized program, We are building the regulated infrastructure in our dedicated lab and are executing to optimize our process for clinical readiness. In our internal autoimmune programs, we are advancing our R&D efforts to identify and validate novel targets. We also are expanding our therapeutic TCR and antibody platforms with the goal of developing therapeutic assets to be able to drug these targets. We look forward to providing you with more updates as we progress. I'll now pass it over to Tycho. Thanks, Chad.