Adaptive Biotechnologies Corporation

Good day, and thank you for standing by. Welcome to the Adaptive Biotechnologies Second Quarter 2025 Financial 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 the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Karina Caldasia, Vice President, Investor Relations and FP&A. Please go ahead.

Thank you, Shannon, and good afternoon, everyone. I would like to welcome you to Adaptive Biotechnology's second quarter 2025 earnings conference call. Earlier today, we issued a press release reporting adaptive financial results for the second quarter of 25. 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 of our corporate website. During the call today, management will make projections and other forward-looking statements within the mini federal security laws regarding future events and the future financial performance of the company. These statements reflect management 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 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 Pisco, our Chief Financial Officer. Additional members from management will be available for Q&A. With that, I'll turn the call over to Chad. Chad?

Thanks, Karina. Good afternoon, and thank you for joining us on our second quarter earnings call. Our second quarter results demonstrate strong execution without performance on both the top and bottom line. In addition to delivering ahead of expectations, we're also tracking ahead of schedule on key milestones for the year, as shown on slide three. Our MRD business achieved profitability this quarter, delivering approximately $2 million in positive adjusted EBITDA, which we anticipate to increase going forward. MRD revenue grew 42% year over year. driven by significant increases in clinical volume. We successfully integrated Clonoseq into Flatiron's OncoEMR, expanding access in the community. We've begun processing Clonoseq tests on the Novaseq X, a major step in scaling operations and improving margins. NCCN guidelines for multiple myeloma were updated to strengthen support for ID testing at diagnosis. reducing barriers to MRD testing, and helping drive volume. And we launched the first phase of our collaboration with Neogenomics. Total company sequencing gross margin improved by 14 percentage points year-over-year to 64%, and cash burned for the quarter was approximately $11 million, representing a 36% improvement over the same period last year. ending with a solid cash position of $222 million. Given these strong results, we are again raising our four-year guidance to reflect a higher MRD revenue range and a lower annual cash burn. Kyle will share more details on this shortly. Let's now dive into the MRD business on slide five. Clonacy revenue grew 57% year-over-year in the second quarter, driven by strong demand across all reimbursed indications. We delivered over 25,300 tests, up 37% versus prior year, and up 10% sequentially, an increase of about 2,200 tests versus Q1. Multiple myeloma remains the largest contributor, accounting for 41% of U.S. Clonacy volumes. followed by ALL at 33%, CLL at 10%, DLBCL at 8%, and MCL at 5%. We continue to see positive momentum across several key growth indicators. Blood-based testing represents 44% of MRD tests, up 40% from a year ago. In multiple myeloma, blood-based contribution rose to 23% compared to 21% last quarter. Community-based testing grew 16% quarter over quarter, reflecting our expanding footprint outside of academic centers. NHL volume rose to 14% of total, up from 11% last year, led by continued growth in DLBCL and MCL. Ordering healthcare providers grew 35% over 3,700, reflecting strong provider adoption. And over 18,000 unique patients were tested in Q2, up 40% year-over-year and 10% sequentially. On the reimbursement front, ASP for Clonacy continued its upward trend, reaching above $1,290 per test, a 17% increase year-over-year. Year-to-date, we've closed or renegotiated eight key agreements with major national and regional payers. with additional agreements anticipated to close in the back half of this year. We remain confident in achieving an average ASP of $1,300 per test for fiscal year 2025 with a solid growth trajectory well into the future. Now let's take a look at the progress of EMR integration, that's slide six. Integrating Clonacy into EMR systems across academic and community settings remains a key driver of volume growth. In the academic setting, we began Epic integration about 18 months ago and we're now live at 40 sites, including 13 added since our last call. Epic accounts that have been live for over a year are growing on average about two times faster than non-integrated accounts. Among our top 10 accounts, four are now Epic integrated and we're seeing acceleration in those accounts following integration. In the community setting, This quarter we achieved a major milestone with the integration of ClonoSeq into Flatiron across 113 community account groups, many of which include multiple practice locations. This marks a significant advancement in our strategy to scale in the community oncology space. It also provides OncoEMR users with a more streamlined customer experience, enabling simplified ID MRD ordering and the option for serial testing directly through the EMR. Looking ahead, we plan to continue expanding EMR integrations over the coming years, further sheltering adoption, simplifying workflows, reducing order discrepancy, and strengthening our competitive modes. Looking at MRD Pharma on slide seven, our MRD Pharma business had another strong quarter. with revenue up 20% year over year, with steady growth in sequencing revenue and $5.5 million in milestones. We ended the quarter with approximately 175 active global clinical trials and a $218 million backlog, up 21% from the prior year. This backlog is a strong leading indicator of future revenue. Clonoseq is being used as a primary or secondary endpoint in 90 of these studies, many of which may trigger milestone payments upon regulatory approval. On the regulatory front, momentum continues. Recently, the European Medicines Agency, CHMP, issued a positive opinion supporting the use of MRD testing as an early endpoint for conditional approval in multiple myeloma. This decision aligns with the ODAP recommendation and further cements the already strong case for pharma companies to make MRD a central element of their myeloma drug development strategy. As we continue to monitor developments at the FDA, we're optimistic about the growing global support for MRD to accelerate new treatments, not just in multiple myeloma, but across all lymphoid malignancies. Turning to slide eight, I'd like to take a moment to highlight some Clonaseq MRD data presented this quarter at various conferences, starting with the MITUS study in multiple myeloma. This 791-patient study is the first prospective randomized MRD-directed phase three trial to assess the ability of Clonaseq to guide myeloma transplant decisions. The study evaluated the use of consolidation therapy with versus without transplant in patients who achieved MRD negativity by Clonaseq at the end of induction. Data shows that patients achieved similar MRD outcomes regardless of whether they received a transplant, supporting the idea that transplant may not be needed for MRD negative patients. In CLL, Promising interim data from Venetastop, an ongoing phase two study, demonstrated the potential to reduce duration of venetoclast-based therapy in patients who achieve an MRD-negative response. And in DLBCO, several studies presented at the ICML conference in Lugano showed how clonoseq and ctDNA can effectively assess response and complement imaging across different lines and classes of therapies. Q2 also marked an important milestone for the enhanced version of our ClonoSeq CT DNA assay and DLBCL, as the FDA granted two investigational device exemptions for use in investigator-sponsored trials to assess escalation of therapy for patients who remain MRD-positive at the end of frontline treatment. It's exciting to see the expansion of data and studies supporting the interventional use of ClonoSeq, MRD, and lymphoid malignancies to inform clinical decision-making, and we look forward to more key data readouts at the ASH conference later this year. In summary, our MRD business is firing on all cylinders. As shown on slide nine, we're only halfway through the year, and most of our key full-year strategic goals have been achieved, including reaching MRD profitability this quarter ahead of our second half target. Now, let's turn to immune medicine on slide 11. Our immune medicine business is on track to meet three main goals. The first goal is to develop a digital TCR antigen prediction model. As we scale the size and quality of our data generation, we aim to replace our validated TCR discovery cellular assays with this digital TCR antigen prediction model, which will significantly reduce both cost and time. We're starting to digitally model the ability to accurately select the best TCRs in our cell therapy application with Genentech. We're also making good progress in applying our large training data sets. This includes improving the accuracy of our TCR antigen binding predictions and deploying our AI machine learning models to enable additional partnering opportunities with attractive future monetization potential. The second goal is to build a robust preclinical data package for our lead T cell depletion program in autoimmunity. We are conducting functional and biophysical characterization of our top antibody candidates in our lead clinical indication. We also solidified our patient selection strategy in this indication. This will allow us to select only those patients who we confirm have the specific disease-causing autoreactive T cell receptors and who are at a higher likelihood to respond to our T cell depletion therapy. As we continue to execute on these two focused therapeutic strategies, Our third goal is to achieve our 2025 cash burn target of $25 to $30 million by scaling revenue generation from farmer partnering and continuing to thoughtfully gate R&D investments through year end. Now, I'm going to pass it over to Kyle to walk through our financial results and our updated full-year guidance. Kyle? Thanks, Chad.

Starting on slide 12 with results for the second quarter. Total revenue was $58.9 million, representing 36% growth from the same period last year. 85% of the revenue came from the MRD business and 15% from immune medicine. MRD revenue grew 42% versus prior year to $49.9 million, with clinical and pharma contributions of 65% and 35% respectively. Clonoseq test volume, including international, increased 37%. to 25,321 tests delivered versus last year. ASP in the U.S. grew about 17% to 1290. The continued improvement in ASP is mainly driven by our contracting initiatives, improving our pricing, and revenue cycle management activities, including aged collections. MRD pharma revenue grew 20% versus prior year, inclusive of 5.5 milestones. The mean medicine revenue was $8.9 million, up 13% from a year ago. Moving down the P&O, sequencing gross margin, which excludes milestones and Genentech amortization, was 64% for the quarter. This represents an improvement of 14 percentage points versus prior year as we continue to leverage lower labor and overhead costs with increasing volumes and higher pricing across both our clinical and pharma revenues. Total operating expenses for the quarter, inclusive of cost of revenue, was $83.9 million, representing a 1% increase from last year, excluding the Q2 2024 asset impairment costs. This increase was mainly driven by higher sales and marketing spend attributed to EMR efforts and higher people costs, partially offset by lower cost of revenue and R&D. As you can see from the segment reporting table at the bottom of the slide, the MRD business achieved positive adjusted EBITDA of $1.9 million, a massive improvement versus a deficit of $11.3 million a year ago. This is a significant milestone for the business, and we continue to expect positive MRD adjusted EBITDA going forward. Immune medicine adjusted EBITDA loss also improved 14% versus Q2 of last year. Total company adjusted EBITDA was a loss of $7.2 million in the second quarter compared to a $21.4 million loss in the prior year. Interest expense from a royalty financing agreement with Orbamed was $2.9 million, which was slightly higher than interest income. Net loss for the quarter was $25.6 million. Now let's turn to our full year 2025 updated guidance on slide 13. We are again raising our full year MRD revenue guidance to a range of 190 to 200 million, up from our previous range of 180 to 190 million. This increase is driven by stronger than expected clinical volume performance in the second quarter and higher MRD milestone revenue anticipated for the year. Given the strong ClonoSeq test volumes in the quarter and the momentum we are seeing We now expect approximately 35% growth in fiscal year 2025 volumes versus 2024. And we anticipate sequential growth in both the third and fourth quarters. We also expect revenue from MRD milestones to be between 14 and 15 million, up from our previous guidance of 8 to 9 million. This updated MRD revenue guide represents significant growth of 31% to 37% versus fiscal year 2024, and 32% to 39% for the MRD-based business, which excludes MRD milestones at the midpoint. We are reiterating our full-year total company operating expense guidance, including cost of revenue, to be between $335 and $345 million. We continue to expect approximately 69% of this to be driven by the MRD business and 23% from the medicine, with the remainder attributed to unallocated corporate costs. Lastly, we are lowering our full-year total company cash burden guidance to a range of $45 to $55 million, down from the prior range of $50 to $60 million. This improvement is primarily driven by the higher-than-expected MRD revenue. We now expect approximately 18% of this year's cash burden to come from the MRD business, and still anticipate burn from immune medicine to be between $25 and $30 million, with the remainder attributed to unallocated corporate costs. The strong financial performance of the first half of the year has set up the MRD business to achieve recurring adjusted EBITDA profitability and a clear pathway to cash break even in the near term. Across the business, we will remain focused on this disciplined execution to drive continued sustainable growth while managing our investments appropriately. With that, I'll hand it back over to Chad.

Thanks, Kyle. Our second quarter results are a clear testament to our disciplined execution and strategic focus across every part of the business. Achieving positive adjusted EBITDA in our MRD business marks a major milestone, one that reflects the strength of our model and the commitment of our team. We're confident in delivering on our raised four-year guidance and remain focused on execution with the discipline, urgency, and precision needed to deliver on our goals and create long-term value for our patients, our partners, and our shareholders. With that, I'd like to now turn the call back over to the operator and open it up for questions.

Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Our first question comes from Dan Brennan from TD Securities. Your line is open.

Terrific. Thank you. Thanks for the questions. And nice quarter, obviously. Maybe the first one just on the volume side, really strong volume. Chad, you called out a lot of the vignettes about the success and the impact of Epic. I just wonder if you could speak a little bit on Flatiron. Obviously, you just did the rollout now. It's pretty massive. Are there any early kind of things to note on what you're seeing so far? And can you just remind us how you're thinking about the volume growth guide that you've given for the back half of the year and how we might think about the benefits of the new accounts on Flatiron and kind of how those might flow through in terms of volume strength.

Sure, Dan. Thanks for the question. I'm going to have Susan kind of jump in with some details on Flatiron.

Sure. Hi, Dan. So, as you know, we went live nationally with OncoEMR on July 1st, so we are in very early days of the integration. And remember that many of the OncoEMR accounts are accounts where we have little or no existing business. So this integration does represent a significant opportunity to expand in the community. Prior to the integration, these accounts made up about 6% of our total volume, about 20% of our community volume. We're very pleased with the initial results we are seeing, albeit it is very early, both in terms of the volume and the workflow. And we're receiving resoundingly positive feedback from our customers. We are also observing that a majority of the ordering HDPs at these accounts are opting to use the serial monitoring feature that Chad alluded to in his earlier remarks. And that's a new feature of our ordering process that's currently unique to OncoEMR, and we do expect that it will support more consistent ordering at clinically appropriate time points in the community. Now, we did build the Flatiron launch into our guide as a growth driver, both for Q3 and Q4. But I do think there's potential for upside. We'll continue to gain insight into exactly what the pace and degree of acceleration that we can expect from this is as we gain a little bit more experience.

Terrific. Yeah, there'd be a lot to unpack on that, which we can do later. Maybe just on the pricing side, that's a second follow-up there in terms of pricing came in. Nice success there. I know you mentioned, I guess, contracting and things. Could you unpack a little bit about what you saw there? I know you read the full year guide. It seems like you have a lot of momentum there. I'm just wondering across different payer types, where are you seeing the biggest traction and kind of what are you assuming for the back half of the year, which, you know, arguably could be conservative?

Yeah, thanks for the question, Dan. This is Kyle. On the pricing improvement, I mean, I think we're gaining kind of the growth from the contracting efforts we implemented in the back half of last year, and we're starting to see that pull through across a number of the Blue Cross payers. You know, Medicare, just a percentage of mix is mixing to the newer price point. And so we're seeing those effects. But as we look forward to the second half of the year, a number of our larger contracting implementations with the larger national payers come into play. So, you know, I think we're well set up into the second half of the year to continue to see some improvement. We did have some initial wins. It's a little early to say if it's going to kind of continue at this rate with California and Medicaid as well in the second quarter. So that's giving us some momentum. heading into the back half of the year.

If I can just speak one more, and just on the EBITDA side, really nice traction in the quarter. How do we think about, as we look ahead, and you're balancing investments in the business versus really seeing some of this EBITDA margin potential flow through, how might we think about kind of where you can end the year and what that means as we look ahead to 26 on the MRD side? Thank you.

Oh, Kyle, you started on just in terms of numbers, and then I'll

Yeah, you know, a great milestone for the business to achieve positive adjusted EBITDA. I think in terms of, you know, back half of the year, we are set up with the right trajectory to continue to repeat adjusted EBITDA profitability. And in terms of the, you know, magnitude of that, you know, some of that will vary depending on the timing of milestones, et cetera. But, you know, we're thinking about this as the business is set up to kind of continuously produce positive adjusted EBITDA and, you know, We're seeing that for the longer term here.

Yeah, and Dan, I would say this. For the MRD business, we're seeing, as evidenced by the last several quarters, a really nice acceleration. But we're still in the very early innings, and there's kind of a long growth trajectory ahead of us in blood-based testing and the community setting. you know, additional data generation. So we'll continue to make investments in the MRD business. And then kind of in the medium term, obviously, you know, there's international markets to explore additional capital allocations towards and, you know, potentially additional tests and kind of blood-based measures to support the MRD business. So, you know, as we look forward, you know, we'll kind of balance out our capital allocation and kind of investments going forward for our growth trajectory.

Great. Okay. Thank you very much.

Thank you. Our next question comes from Andrew Brackman from William Blair. Your line is open. Great.

Hi, everyone. Good afternoon. Thanks for taking the question. Chad, maybe around your commentary around expanding the footprint into the community channel, You know, flat iron is obviously a major level there. But can you maybe just sort of talk about some of the other drivers there, which should help you drive growth here, not just in the second half, but even longer term, be that expanding indications or blood as a sample type?

Thanks. Yeah, you know, one of the things that we highlighted in our prepare for March was the neogenomics collaboration. And we're excited about that because, you know, they're in 60% of the accounts that they're in we're not in at all yet. So that's a really nice... opportunity for us to increase our penetration. And kind of, Susan, do you want to come on some other efforts that we're doing in the community in terms of putting together pathways, et cetera?

Happy to. Yeah, Andrew, a couple of other things that are consistent in our strategy. One is a continued focus on the large national strategic accounts, these oncology practice networks that control a large proportion of the cancer patients in the community settings. So those, we have a separate sales team that focuses specifically on top-down strategy, engaging with the C-suite, et cetera, to ensure that we have unified direction from their leadership and policies that we can advance that can be consistent across the entire network. The other key thing is engaging academic thought leaders to help us drive community adoption. They have the credibility with those providers. They have the referral networks that they can use to leverage their influence. And therefore, we've increasingly, and particularly in light of the recent NCCN guideline update with multiple myeloma, we've been leveraging our thought leaders and partnering with them to deliver education to the community on things like why it's important to perform an ID test at the time of diagnosis. So in combination with our EMR strategy and our collaboration with NEO, those are some of the key things that are consistent in our community strategy. And you mentioned blood. That will always be a part of the conversation and a key adoption driver for community clinics.

Great. Thanks. And then as a follow-up here, Chad, just want to follow up to some of the comments you made to Dan's last question around sort of additional investments here. You know, Klonosy clearly has a long growth ahead of it, but as you sort of think about adding menu here, you know, some other labs are trying to become more of a one-stop shop What are some of the key sort of characteristics that you might consider as you're thinking about bringing on additional tests?

Thanks. Yeah, I mean, I look at it in two ways. One is kind of brand and the other is channel. So how do you leverage your brand in MRD is one thing I look at. And then secondly is, you know, how do we leverage a really kind of superior channel that we've built in the HEMOC space? So I would say kind of those are the broad-based tests. So that's kind of a broad-based from an MRD perspective. And then secondarily, you know, I look at, you know, what is the kind of infrastructure we've built to be able to both validate, support, you know, diagnostics kind of more broadly. And again, as you know, we've been putting together kind of, for example, this TCR antigen prediction model. You know, it could have some kind of future applications with in the diagnostic channels, again, early on. But these are the things that we continue to explore.

Great. Thanks, guys.

Thank you. Our next question comes from David Westenberg from Piper Sandler. Please go ahead.

Hey. Thanks for taking the question. I actually wanted to tack on for Dan's question on profitability. And again, congrats on the profitability in the MRD business. But you also implied cash flow positive on a go-forward basis. Given the factors in terms of fluctuations in milestone payments and whatnot, do you have visibility on what the milestone payments look like maybe this quarter and next? If you don't get me in the next couple quarters, is there a chance for you to go below and Essentially, what I'm laying out with this question is the ability for you to, you know, not be held to a certain number if there is indeed milestones or not milestones.

Yeah. Thanks, David. This is Kyle. You know, as it relates to the back half of the year, I mean, we implied in our guide that there's about, you know, four to five million to go in the back half of the year as we have 10 million altogether. So, you know, again, yes, could those be lumpy in a quarter by quarter basis? Certainly. I think As I think about cash flow positivity and where the business trajectory is headed, I'm trying to think about that, you know, on an annualized basis, just given quarter to quarter, we can have variability in spend, investment, et cetera. But, you know, I think what we're set up to do is to continue to deliver that with the trajectory of the clinical business and the volume growth we're seeing there, strong performance in the pharma business as well. So, you know, I think... You know, we're not exactly there yet, but with Inovaseq coming online, the trajectory of the business set up to kind of deliver that, you know, in the near term.

I appreciate that. And then I just want to talk about the Klonoseq volumes. I mean, we're really seeing kind of acceleration, 37% year-over-year growth. You're already at a higher base, and you got 10% sequentially. So, you know, obviously, things are going really well there. Can you rank order some of the factors in terms of what's been driving the volume increases? I mean, I'm guessing a lot of this has been the integrations, but if there's anything we're missing in terms of new indications, for instance, DLBCL or anything like that, and if you can give us kind of a flavor for how these integrations go and kind of how you see volumes trickling out over the next quarters or so, I think you've mentioned you had doubled the amount of volume growth in Epic Integrated versus non-Epic Integrated, or maybe it was Flatiron. Do you expect to see a tail there for a number of years? Sorry to make this really long, but can you clarify the ordering, the integration where you have multiple orders with specific timing? And I just want to basically clarify on that, Do you ever get timing or did you ever get more than four tests ordered on that? Hopefully that was clear. That was a lot.

Thank you.

Thank you.

Let me see. Yeah, let me see if I can take those, at least the first couple one by one. So in terms of the volume growth, you know, as you noted, we've seen a number of, we've had and we've anticipated that there could be upside and we've seen that upside realized in Q2. And I think we'll, We'll take advantage of the EMR integrations on an ongoing basis. I think some of the other things in Q2 that were important were, first of all, continued strong growth in mantle cell lymphoma, which we recently launched, as you know, as well as in diffuse large B cell lymphoma, which is one of our newer indications and one for which the data continues to build and the sort of clinical use case continues to be, I think, made more clear. We also had the tailwinds of the NCCN guidelines updates. We continue to see very strong support globally for MRD in pharma, which has synergies and spillover to the clinical setting. So our blood testing increased overall. Our blood testing increased in multiple myeloma. I think all the things that we're doing are all sort of delivering and contributing to the growth. So it's not just one thing. And that will continue to be the story going forward. With regard to integration, we did see a significant increase in the pace of integrations through EPIC that we were able to deliver in Q2. Thirteen a quarter was the most we've done, and we've doubled the number that we've completed in the last six months. So we went from 20 to 40 in six months. It's certainly on the account side. There are many dependencies that we have on our accounts to complete those integrations, so it's difficult to predict the pace going forward. But we do feel confident that we're on track for our goal of about 50% of our volume going through an integration, either epic or otherwise, by the end of the year. I do think that eventually integrations will slow down, but we are not there yet. We have more ahead of us than we have behind us. and much more opportunity to optimize the integrations that are already in place so that we can see even better differentiation of the growth in those accounts versus the non-integrated accounts. And then lastly, I think you asked about the episode tile. I don't know if you want to take that one or if you'd like me to.

Yeah, David and Susan, feel free to chime in. From an ordering perspective, clinicians are still ordering test by test. effectively. They can, you know, in certain integrations, you know, place reminders for future orders. But really, we're just paid a bundle for Medicare, and that's specific to the Medicare coverage, the Medicare line of business. So, you know, if we get an eligible test for Medicare, that is paid once for the effective four tests.

David, I think you were asking specifically about serial testing and as it relates to logistics. of our integrations, one of the unique features that we've done for the first time in the Flatiron Occo EMR system, there's the actual default is you can order a number of tests. So, it's kind of three, six, nine tests as a, sorry, on a recurring basis of three months, six months, nine months, every 12 months. or every time a patient comes in, or you can say, you know, I want to order on a test by test basis. And I'm not going to give you statistics. I'll just say it's kind of early, but we've seen a very nice uptake in clinicians that have clicked on a button to order on a cadence basis. of a monthly three, six, nine, or 12-month cadence. And so that's what we're talking about in terms of the excitement around repeat ordering and the functionality that we can build into these EMR systems.

I got a long question there, so sorry about that. Congrats again. Thank you. Thanks, David.

Thank you. Our next question comes from Mark Massaro from BTIG. Go ahead.

Hey, guys. Congrats on a strong quarter. I have a few questions on the EMR integrations. Looks like everything's going well. So you've got 40 on Epic, 13 were in Q2. So it looks like you had 27 heading into Q2. Would you define those 27 prior to this quarter as the mature integrated sites. And the reason I ask is I'm trying to get a feel for how long it takes you to get to a degree of maturity such that you're seeing, call it 2x, growing twice as fast within mature Epic integration. And then I also wanted to ask about Flatiron. I recognize that That was a lot of sites all at once, over 100 sites. Effectively, was that just pushing a button overnight? And then do you have a sense for, do you have enough data that the Flatiron could see similar pull through to the mature Epic sites?

I think I can take those questions, Mark. So first on Epic. So we're defining mature sites as those that have been live for at least a year. So not all of those 27. In fact, you know, it's more like six at this point. And we are looking at those specifically because we wanted to understand if the early impact that we're seeing immediately post-integration, which is generally pretty significant, can be sustained. So, in fact, if I were to talk about the impact in the three months post-integration, there's usually a larger impact. But over time, we wanted to see what that looked like, and we do see a consistent pace of increased growth. But it's still, because we've been doing this for about 18 months, and we have a smaller group that we started with that has been live for at least a year, including a number of smaller accounts, frankly. There are mostly smaller accounts in that initial group. We'll have to continue to learn more as we gain more data. But six months from now, we'll have a much larger group. We'll have about 20 that have been live for a year.

Okay. That's really helpful. So my second question is on the... Oh, sorry. Go ahead.

Oh, I'm sorry. Did you want me to go ahead on the Flatiron one? Sorry, I didn't... Of course.

Keep going. Thanks.

Sorry. You're correct that Flatiron was essentially pushing a button. On July 1st, all of those 113 account groups went live. We actually did a small pilot with four of them prior, but all of the rest went live on July 1st. And it's, I think, too early to say whether we can anticipate similar patterns, but I will point back to what Chad was talking about, the serial testing option, which is easier to use in Flatiron's OncoEMR than it is to use a similar feature like standing orders in Epic. At least it's easier for us to have visibility into it. and it's easier to schedule the patient. And so we do anticipate that we'll have a better ability to follow through on serial orders and help support clinicians in delivering appropriate testing frequency with Flatiron. So I do see some upside there, but it's very early to speculate beyond that.

Okay. Thanks so much for that. And then my last question, I wanted to better understand the NEO collaboration. So it looks like you launched phase one. Chad, or maybe someone else on the team, can you expand on what phase one consists of? And then what would phase two be? And then I recognize this is a commercial partnership, so my understanding is that there's going to be NEO reps going out selling ClonoSeq to many of their customers. Just give us a sense for what type of lift we might be able to see And I imagine this is more of a 2026 impact, but should we expect any impact in the second half of 26, excuse me, second half of 25? Sure.

So phase one is our pilot effort with a very small handful of small accounts, again, with the intent of ensuring that we've worked through all the operational processes, the collaboration and handoffs between the two companies. with accounts that are willing to do the process in a fairly manual manner. So, it's really intended for us to learn and gather insights both from the customer and from our own processes, as opposed to generate any material impact on volumes. And I would extend that expectation through the remainder of 2025. We do have the plan to bring on additional accounts during the course of the second half of this year. I don't anticipate material impacts to our volumes beyond what we've already guided. 2026 and 2027 is where we will see that material lift when we launch nationally in the early part of next year.

And just one clarification, Mark, when you kind of mentioned that NEO reps are going out and selling ClonaSeq tests, and I want to just be clear on how that works. They're going out and selling a Compass product a panel that will include, as part of a battery of ID tests done at diagnosis, that will include the ID ClonoSeq test as part of the Compass workup. And then, effectively, they're selling the Compass workup with MRD kind of baked in as it. And then, secondly, as part of kind of their recurrence monitoring or their monitoring across the patient life cycle, they have an offering called Chart, and they'll be selling, effectively, ClonoSeq embedded into the chart offering as the ClonoSeq MRD test.

Great. Thanks so much, guys.

Sure. Thank you. Our next question comes from Rachel Van Staal from JP Morgan. Please go ahead.

Hi. This is Sebastian Sandler on for Rachel. Thank you for taking the question. So I wanted to touch on the NCCN update for multiple myeloma, which recommended the baseline clonal ID testing to enable MRD testing later on. You called out the 10% sequential growth in unique patients. And since the update came in late June, I wouldn't think that 10% included any impact from the guideline update. I'm just wondering if you've seen any changes in ordering patterns, especially around that clonal ID testing and how that's been trending since the update. And then just how should we think about these unique IDs translating into MRD testing later on? Thank you.

Thanks for the question, Sebastian. What I would say to start is that the NCCN guidelines update certainly is a tailwind for us and something that we've been actively leveraging, particularly in the community setting in both our direct education of ACPs as well as the KOL-driven education that I mentioned earlier. It's helping us to deliver a message that we were already delivering, which is the importance of ensuring that each and every patient with multiple myeloma has the opportunity to be tracked by ClonoSeq. And that opportunity is secured if you test at the time of diagnosis, or if at least you make sure that you collect an appropriate sample for subsequent NGS MRD testing. So while certainly it is, I think, a support to all of our goals, we are not projecting any specific increase in volumes as a result of that by itself. I think, again, it will contribute to the efforts that we already have ongoing. And I'm very optimistic that in the community setting, it will be compelling and credible as a reason for this to happen. We can anecdotally tell many stories of accounts that are currently evaluating and I think seriously considering upfront ID testing protocols in the community. There are already accounts that are doing that today. It is not the majority of our ID testing. And so, you know, we've seen fairly consistently about 30% of our test volume come from IDs over the last several years. And I don't anticipate that dramatically changing, but the balance of indications where we have more mature indications like ALL where many patients are ID'd, and new indications as well as myeloma where ID is becoming more of a, there's more support for it. I think that we'll continue to see a strong contribution of ID testing over time.

Got it. Thanks. And then just one on the backlog. Seemed like that's growing nicely, closing at around 218 million after ending 2024, a little over 200. It also looks like the primary endpoints stepped up to 17 from 10, ending 4Q last year. So just how should we think about the burn there translating to sequencing revenues? And is there any meaningful difference in the burn rate between these primary versus secondary endpoints? And then lastly, have you seen any recent change in pharma customer behavior in that segment, just given some of the headlines around tariffs and MFN. And do you anticipate any headwinds there going forward? I think some of your peers have called out a bit of bumpiness there. So just wondering if you're seeing any or building any into the guide. Thanks.

Sure. Go ahead.

Go ahead. As it relates to the backlog, I mean, in terms of the burn profile, I mean, I think of it as we're continuously replenishing our backlog with new bookings, and that's what's highlighted by the improving backlog relative to exit value of 2024. You know, I think the timeframe of which that backlog converts into revenue is really unchanged, maybe a little bit of a pull forward. You know, but obviously with the dynamics at the FDA and, you know, our pharma partners' investments, you know, it's still contingent upon when their trials are reading out, how many patients are enrolling, and when, you know, we can enable some of that MRD testing. But, you know, broadly, don't think the profile has changed dramatically, and we're going to continue to grow bookings, you know, and we're confident in the pipeline we have around the pharma business.

Yeah, and as it relates to a more general question about, MRD pharma business going forward and kind of impacts of tariffs, NIH, and the FDA. First, we'll start with kind of the tariffs and the FDA. There's very, excuse me, tariffs and the NIH. There's very little impact as we look through kind of the portfolios. We're really not subject to NIH funding in terms of kind of very little percentage of our business. Kind of as it relates to kind of the FDA, you know, I would just start by saying globally that there is, you know, really a growing global support for MRD to use as an endpoint for the acceleration of kind of therapy in multiple myeloma. And even more broadly, there's coalitions forming in other areas, other indications as well. So we're very positive kind of on the acceleration of MRD. MRD therapies based on MRD. So, you know, the ODAC recommendation last year, along with the CHMP positive opinion on MRD using MRD as an early endpoint, it just continued in further validation of MRD as a predictor response. So, you know, overall, we're very kind of bullish on the MRD pharma opportunity.

Great. Thank you.

Thank you. Our next question comes from Yuko Oku from Morgan Stanley. Please go ahead.

Hello. Thank you for taking my questions. CHMP opinion is supporting the use of MRD as an early endpoint in multiple myeloma clinical trials. How important was that milestone for your pharma customers in order to further incentivize incorporation of MRD as an endpoint? And then also, second part to that, And given the halo effect that ODAC recommendation had on physicians in the U.S., does this also bring OUS opportunity into greater focus for you?

I'll start out, go thank you for the question on CHMP.

So, you know, I think that we saw this as further confirmation of what pharma sort of had already come to believe based on the ODAC vote and recommendation a year, a little over a year ago. The CHMP decision was anticipated, and in fact, among our pharma partners who are currently executing or planning global clinical trials, they had expected that they would be able to leverage primary endpoint status for MRD in those settings. So, this was an important affirmation of that expectation, and I think further supports the sort of global acceptance of MRD as a key endpoint in clinical trials for myeloma, as well as, frankly, other key malignancies. We're seeing growing support and growing utilization of MRD as a primary endpoint in other disease states. There are coalitions that have formed of pharma companies and investigators that are actively pursuing endpoint status for MRD, and we have signed a number of primary endpoint studies in diseases other than myeloma. feel that that's, again, very supportive of what was already considerable momentum that was building post-ODAC. And then as it relates to the halo effect you described that ODAC had on HCPs here in the US, I think the OUS impact could be similar. I will say that regardless of that, we had already been, as Chad alluded to, starting to think about international expansion and how that might look. There is a significant opportunity outside the US particularly in Europe, that we can consider pursuing. And I believe that CHMP's opinion and the European KOL's alignment with that opinion does support the opportunity outside the U.S. as something that may be worthwhile to prioritize in the not-distant future.

Great. Thank you. And then the MIDAS trial was also an important milestone for you that demonstrated utility of Clonoseq in aiding physician decision to transplant in MM. Could you share some of the feedback from the physicians post-data readout and whether you're already seeing some volume inflect as a result?

Sure. Feedback in general has been quite positive. This is the first time that a study that looked at this question was prospectively designed, randomized, And therefore, I think the results are more compelling than perhaps some earlier studies that sort of answered this question in an indirect way. It's also a very large study and was put forward by a very well-regarded and highly credible group of thought leaders from France. So we've been very eager to bring it into conversation. I think, interestingly, in the community setting, it really resonates, particularly in combination with the end guideline update, where we can say, It is important to ID your patient at the time of diagnosis so that you can then obtain this post induction MRD assessment, which may allow you to avoid a transplant for your MRD negative patient. And in the community, what that means is you may not need to refer that patient away to an academic center for a transplant, which is a very appealing notion if it can be done in a safe way for the patient, which this data supports that it can. There is some consideration of the fact that this data will continue to develop. MRD response was the primary endpoint in this study and that's something that is relatively new, but now very common in a lot of study designs. And so some clinicians are interested to continue to see some of the longer term follow up on this study, but overall very, very very open, a lot of openness to this, a lot of discussion that it opens up, and the dialogue with the patient is, I think, the thing that people are most excited about, to have something they can share with the patient who is hesitant about transplant, which is an increasing proportion of patients.

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