Adaptive Biotechnologies Corporation

Good day and thank you for standing by. Calzadilla, Head of Investor Relations, please go ahead.

Thank you, Tonya, and good afternoon, everyone. I would like to welcome you to Adaptive Biotechnology's second quarter 2026 earnings conference call. Earlier today, we issued a press release reporting adaptive financial results for the second quarter. The press release is available at www.adaptivefinancex.com. We are conducting a live webcast of this call and will be referencing to the slide presentation that has been posted in the investor section in our corporate website. During the call, management will make projections and other forward-looking statements within the meanings of federal security laws regarding future events and the future financial performance of the company. These statements reflect management's current perspective of the business as of today. Actual results may differ materially from today's forward-looking statements, depending on a number of factors which are set forth in our public filings with the SEC and listed in this presentation. 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 Robins, our CEO and co-founder, and Kyle Piskel, 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. Q2 was an exceptional quarter for Adaptive and a clear validation of our strategy and execution. We delivered excellent operating performance, took decisive strategic actions to unlock shareholder value, and strengthened our balance sheet. Together, these accomplishments reinforce our confidence in the long-term opportunity ahead. Three achievements define the quarter. First, our MRD business delivered one of the strongest quarters in our history. Revenue, excluding milestones, increased 49% year over year, driven by growth across both clinical testing and pharma. Clinical testing volume grew 43%, adding more than 3,500 tests sequentially, while pharma sequencing continued its strong momentum. We expanded MRD sequencing gross margin to 71%, up 9 percentage points from a year ago, and we increased adjusted EBITDA margin to 14%. These results demonstrate the scalability of our MRD business and its ability to generate profitable growth. Second, we announced our plan to separate our MRD and immune medicine business. We are evaluating strategic and structural alternatives for immune medicine that we believe will best position the business to pursue its growth strategy, access the capital it needs, and unlock its full potential outside of adaptive. We have retained Morgan Stanley as our advisor and continue to expect to identify our preferred path of separation by year end. We further strengthened our balance sheet through a successful $340 million zero-coupon convertible note offering. The transaction enabled us to retire the Orbermet Agreement, simplify our capital structure, increase our financial flexibility to execute our separation strategy, and invest in the compelling opportunities we see in MRD. Importantly, we paired the financing with a cap call transaction and share repurchase. significantly reducing potential shareholder dilution while optimizing the economics of the financing. The end of the quarter was approximately $357 million in cash. The performance we've delivered here today, combined with the momentum we're seeing across clinical and pharma, reinforces our confidence in the trajectory of the MRD business. Accordingly, we're raising our four-year MRD revenue guidance to a range of $268 to $278 million. Kyle will provide additional details in his remarks. Now, let's take a closer look at the clinical business on slide five, which continues to be the primary driver of MRD growth. Clinical revenue increased 53% year over year, driven by a 43% increase in testing values and a 7% increase in ASP. During the quarter, we delivered more than 36,100 clonacy tests, representing 11% sequential growth. This reflects continued expansion of our ordering physician and account base, combined with deeper penetration of existing accounts, and increasing adoption across the patient care continuum. Growth was broad-based across every reimbursed indication. CLL grew 16% sequentially, continuing to benefit from the 2025 NCCN Guideline Update. Multibyloma, our largest indication representing 44% of testing volume, grew 15% sequentially, driven by broader adoption of blood-based testing across both academic and community. In lymphoma, GLBCL and MCL now account for approximately 16% of total testing volume, and both delivered healthy double-digit sequential growth. We also continue to make progress on pricing. US ASP increased to $1,382 per test this quarter, reflecting ongoing reimbursement gains, including a recent expansion of MCL coverage with Concert, as well as operational improvements from bringing key revenue cycle management functions in-house. The takeaway is clear. We're growing volumes, expanding adoption across indications, and improving pricing. Those are the fundamentals that drive durable, top-line clinical growth. Let's turn to slide six, which highlights some of the key drivers behind our clinical volume growth. What is encouraging is that each of these metrics continues to move in the right direction, supporting both broader adoption of Clonaseq and increased testing over time. Starting with blood-based testing, because blood is less invasive and more convenient for patients, it supports more frequent MRD testing through the course of treatment. Blood-based testing grew 68% year-over-year and 14% sequentially and represented 51% of total closing volume in Q2, exceeding half of all tests for the first time. Importantly, we're seeing increasing adoption of blood testing in both multiple myeloma and ALL, two indications for which physicians traditionally have relied on bone marrow testing. Blood now contributes 30% of MRD testing in multiple myeloma and 42% in ALL. The shift towards blood also expands our opportunity in the community setting, where blood-based testing is significantly easier to integrate into routine practice. Community testing represented 36% of total sleep-closing volume this quarter, exceeding our four-year target, and grew 65% year-over-year. That growth has been supported by broader adoption of updated clinical guidelines, standardized testing protocols, and our EMR-enabled workflows, which are making repeat testing easier for physicians. We're also seeing encouraging progress in serial monitoring, One year after our Flatiron integration, 75% of repeat orders have been fulfilled, demonstrating that community physicians are increasingly incorporating MRD into ongoing patient management rather than using it as a one-time test. Importantly, physician adoption continues to expand. Nearly 5,200 clinicians ordered Chronoseq during the quarter, an increase of 40% from a year ago. We view this as another indicator that MRD testing is becoming a standard part of clinical care across a growing number of providers. These drivers are interconnected. Greater adoption of blood-based testing, continuing expansion in the community, increasing physician adoption, and higher rates of serial monitoring all support deeper penetration across indications and more testing per patient through the continuum of care. Now, let's turn to slide seven to take a look at our MRD Pharma business. This was another good quarter for MRD Pharma. Sequencing revenue grew 38% year over year, excluding milestones. Importantly, unlike the prior year, we did not recognize any milestone revenue this quarter, highlighting the continued strength of the underlying sequencing business. We ended the quarter with 189 active global clinical trials, and a backlog of approximately 245 million, up 12% from a year ago. We view this backlog as an important leading indicator of future revenue and continued demand from our biopharma partners. The quality of our portfolio continues to improve. Studies in which MRDS uses a regulated endpoint, either primary or secondary, now comprise about 60% of our active studies compared to about 40% a couple of years ago. These studies not only carry higher economic value, but they also create opportunities for future milestone payments tied to regulatory approvals. Ultramyeloma continues to represent the largest portion of our registrational portfolio, reflecting the industry's growing use of MRD, following the FDA's support for MRD as an endpoint. At the same time, we're seeing encouraging expansion in both CLL and ALL, with a number of registration studies continue to grow as sponsors increasingly are incorporating MRD into their development programs. Beyond the numbers, we're also seeing a shift in how MRD is being used. More studies are using MRD to guide enrollment, stratification, and treatment decisions, rather than simply measuring response. That generates the clinical evidence needed to support broader adoption in routine care and strengthens the connection between our biopharma and our clinical businesses. To wrap on MRD, slide 8 summarizes our progress against the key objectives we set for 2026. At the midpoint of the year, we've either achieved or remain on track to achieve each of them. Clinical testing volumes have exceeded our original expectations. Based on the first half performance and continued momentum, we now expect volume growth between 38% to 40% this year, which is well above our initial target of more than 30%. The key drivers of growth are also ahead of plan. Blood-based testing and community adoption have already exceeded our full-year targets, while EMR integrations continue to progress with 31 additional accounts integrated year-to-date. On pricing, were on track to achieve our target of approximately $1,400 per test, supported by continued reimbursement progress and improved collections. And finally, strong revenue growth combined with ongoing operational efficiencies keeps us on track to exceed 70% in sequencing gross margin while continuing to expand adjusted EBITDA. Overall, the business continues to perform ahead of expectations. were expanding adoption, improving profitability, and executing against the strategy we laid out at the beginning of the year. Before I turn the call over to Kyle to go over financial results and updated guidance, I'd like to provide an update on our plan to separate the immune medicine business and the progress we've made. The timing for a separation is right. MRD has scaled into a profitable, market-leading diagnostics business with a clear runway for durable growth. At the same time, Thank you for joining us. As such, Adaptive will remain focused on expanding its leadership in MRD diagnostics while identifying the best path forward for immune medicine to advance as an independent business. Since announcing our plans, we've taken several important steps to move the process forward. First, as mentioned, we've retained Morgan Stanley to advise us as we evaluate the strategic and structural alternatives for the immune medicine business. Second, Harlan Robins, my brother, is transitioning from chief scientific officer role at Adaptive to a consultant role, supporting key R&D initiatives for MRD while dedicating significant time to advancing the separation of IM. Given his scientific leadership and deep knowledge of the platform, his active participation is important during this transition. Third, we've sharpened the focus of the immune medicine portfolio. Following a comprehensive review, we've decided to wind down our research-use-only pharma services business. While it operated around break-even, it was not central to the assets that differentiate immune medicine. Going forward, we'll focus on the platform's highest-value assets and capabilities, which are our proprietary TCR antigen dataset, our AI and machine learning digital models, and our target discovery platform for autoimmune disease. We're also exploring new ways to monetize these unique assets and maximize their path forward. As an initial step, we plan to enter into a trial agreement with Varel DataCorp, an independent cloud-based marketplace founded by Harlan that enables proprietary data sets and AI models to be crowdsourced among researchers and developers. This creates a new commercialization model where data creators can participate in the value generated as their data sets and models are used to solve scientific problems and develop new products. Finally, we continue to make good progress on the Pfizer deal in RA, where we are sequencing patients to identify disease-specific T cell receptors to inform potential therapeutic development. This program remains an important focus of the immune medicine team. In summary, in the past month and a half, we've established a clear separation process, sharpened the strategic focus of the business, and are advancing new opportunities to realize the value of these assets. We remain on track to identify our preferred path by year end, and we'll update you on further progress accordingly. I'll now turn the call over to Kyle. Kyle? Thanks, Chad.