Adaptive Biotechnologies Corporation (ADPT) Earnings Call Transcript

Okay. Maybe switching over to like autoimmune diseases. You have signals in 5, I believe, you've got Crohn's, ulcerative colitis. You've got Celiac, MSRA, Crohn's is the most advanced, I believe. Like what are the key milestones this year? And how do we think about the revenue potential in this area as we look out beyond '22?

Yes. So again, as I mentioned, I think 2022 is really a year of significant data generation in T-Detect across these autoimmune data sets. The goal more specifically is to have a very high level of specificity to eliminate false positives and then to grow the sensitivity over time. So this is what's called kind of positive predictive value. And we want to have a positive predictive value that's a very high threshold level so that we can launch but then improve it over time. So this is all because of what we're -- going back to the biology, we're leveraging kind of that high specificity of T-cells. So in order to generate the data, we're in the final stages of designing the clinical validation study in IBD, and we expect that study to initiate around midyear. Obviously, we'll update you about the progress as it continues. And then kind of related to kind of how that rolls out into the commercialization and potential in 2023, that path is really going to be dependent on the maturity of our data at the time of our launch. And we're continuing to kind of hone in on what that kind of product market fit, what that threshold level of sensitivity is that will determine kind of the timing of utility for really consumers for FDA and ultimately kind of for payers. So our plan, as we mentioned, is to begin with, is to offer AI panel, so an autoimmune panel in 2023, first to consumers. And then as we generate awareness, increase utility, enhance sensitivity over time, like I just talked about with kind of that self-learning diagnostic, then we're going to make a very clear use case and value proposition and bring that data package for future reimbursement. And so that's how it's going to play out over the course of this year, but a lot of data reading out across those 5 indications throughout the course of 2022.

So maybe before we jump over to clonoSEQ, maybe one high-level question there. So Lyme is a good proof point. Really it's a small revenue contributor. Is there any way -- obviously, the size of these indications is large in terms of the patients and the needs. I'm not asking for a revenue number. But when we think about relative size and impact, we get out 3 or 4 years, like how do we think about like the relative opportunity and impact that this business could be contributing?

Yes. From a revenue contribution standpoint, at least in 2022, we're not expecting that much. Remember, we're going to launch in the acute setting. Over time, as we get into the post-treatment Lyme setting, I think we'll have opportunity to increase revenue profile over time. But when you say a proof point, I just want to make sure it's understood that -- the main objective of offering T-Detect Lyme during this Lyme season, that enabled us to put in all the building blocks in our CLIA lab, all the infrastructure, all the software, which will be a [cloud] to be able to launch disease after disease after disease. We weren't able to do that with COVID, even though we had T-Detect COVID. It was really a different pathway because we had to go by nature, if you have an EUA, it can't be a laboratory developed test. So it really had a different set of infrastructure that was involved, so we couldn't just replicate or replace that. So we're using Lyme essentially as the building block to be able to kind of launch these different autoimmune diseases that we just talked about with all the software, all the infrastructure and to sort go quickly once we have the data.

Right. Okay. So on clonoSEQ, we've got the business up 70% this year. So we will see, I don't know if there's a reaction to that number. But maybe can you walk through where we are today with your penetration across the different indications. And obviously, you're continuing to work with regulators, you have the sales force, you'll ramped up. We're going to get through Omicron and hopefully, we'll have more of a patient access and doctor access that we can do. But like where can that go in terms of penetrating these opportunities over the next few years?

Yes. So just commenting, I think you're in the ballpark on your numbers, Dan -- let me actually just take a step back and we can I'll go into the different indications kind of maybe one by one. But this is still early days of penetration -- in MRD. That certainly has picked up over the last couple of years as MRD in hematology and actually MRD more broadly, it's kind of crept into the clinical management. And hopefully, we're hoping it's more of a surge and a creep. But we're talking about low penetration rate. So the penetration overall increases in twofold. One is to attack the incident and prevalent population to really kind of drive adoption on that patient population to -- but then secondly, within that population, have more tests per patient over the disease care continuum for that particular patient. Those are the 2 ways that we're really driving -- we're driving an increase in that penetration along with kind of blood-based testing increases that frequency of testing for each patient. So like if you take -- and just from a patient perspective in 2021, clonoSEQ was used in approximately 2.5 -- 2,500 ALL patients. There are 23,000 prevalent ALL patients in the U.S., putting our penetration close to 10%. We believe for ALL penetration in newly incident penetration is higher, maybe closer to 25%. Our penetration is lower in CLL and multi-myeloma. clonoSEQ was using 1,000 CLL or actually 5,500 multi myeloma patients in last year putting penetration and really in the low to mid-single digits. So for example, if you look at kind of the market opportunity remaining, it's really significant. In myeloma, as you know, we're doing many things. We've got the sales force expansion that we would want to not only penetrate more deeply into our existing accounts. But one of the main reasons we're doing that is that we can kind of penetrate into the community setting. And also expanding the number of health care providers that are ordering clonoSEQ is always kind of the area of focus. Last year, we saw a 57% year-over-year growth in the number of health care providers that are ordered clonoSEQ as you said, and I think your number, we anticipate really seeing a healthy growth in new prescribers this year. Yes. So really excited about the business Dan.

And in terms of maybe one more before we leave it. So you've ramped the sales force aggressively, the market's opening up, like the awareness is getting higher. Is there anything -- if we looked out 2, 3 years around penetration was 10 points higher or 10 points lower than what you're hoping for, like what are the key things we should be thinking about that are going to unlock this market.

Yes. You mentioned Salesforce. The second is to increase the utilization in blood and additional data readouts that are coming. So we anticipate some blood data to be presented at EHA later this year in multiple myeloma. We recently kind of finalized a contract with one of the largest cancer centers, on a very large retrospective study of multi-myeloma in blood and that we're looking to complete that in the first half of this year. We're still waiting for other prospective studies to readout. Some of them haven't read out because the -- really the patients are doing really well, which is great for the patient, but it doesn't help -- it doesn't allow for earlier data readouts. But the other area of growth, Dan, if you look at kind of a couple of years out and why we'll have a larger or a quicker trajectory is really the expansion into NHL. I mean this is the largest segment of blood-based cancer. It's a growth driver in 2023. But a lot of the things that we're doing this year, Dan are setting the stage for that future growth. We've already submitted the tech assessment with MolDX for Medicare coverage. And we're -- there's some logistics things that we need to do as well. So we're converting the assay to [indiscernible] and increasing blood volume. These are just things that really fit within the workflow of the clinical community. And also like in multiple myeloma in blood, we're continuing to invest in clinical studies, and we're making a push to launch this in the CLIA setting to our KOL community now.

Awesome. So maybe never enough time. So maybe I'll ask a question on the research part of the business, maybe a 2-parter and then we'll jump to the discovery and then we'll get to the balance sheet cash flow. So those are the 3 remaining questions, hopefully. So on the research side of the business, it's obviously not going to be split between the 2 segments as opposed to be under sequencing, right? But 2-parter is, I think you've recognized maybe 10% or so of the potential milestones there, maybe $30-plus million out of $330 million. So like how do we think about just if you're sitting in [our sheet], how do we think about the potential capture rate of those additional milestones? And like what does that business grow at like the research business for you? Is it -- you work with a lot of pharma partners just kind of wondering how we think about the growth rate there?

Yes. So Dan, this is really -- like you said, 2 separate questions, and maybe let me tackle the first one on the milestones related to the MRD business. And first, I think -- not I think, I know that we're going to be able to provide kind of more transparency on really -- really what clinical trials or assays involved with and how you can start to handicap [the] over-time? I know that's been an ask from the investment community and one of the benefits that comes out into kind of this different reporting structure. But if you think about it from a high level, Dan, if you look at kind of the $330 million of milestones, about 1/3 of those relate to kind of being incorporated as a secondary endpoint. And those are kind of available to us now and really start to hit and have already started to hit as the trials read out for our various pharma partners. The other 2/3 are related to being incorporated as a primary endpoint and for a trial to be essentially stopped or declared successful as MRD as a primary end point. We are in discussions with the FDA, CEDAR and as are the pharma companies, they're actually more -- it's actually more incentivized than we are because the timing of the trials would be truncated based on these data sets. And that has been in discussion. There are several white papers and working groups that have made that recommendation. Once that happens, we will have the other 2/3 of those milestones available to us. That's more of a -- more of a kind of a binary event that allows us access to those miles -- that second set of milestones overtime for the 2/3 of that kind of $330 million. But again, I think we'll do a job of really a job of kind of outlining how those milestones and what the trajectory and profile looks like over time. Then as you look at kind of the rest of the research business, Dan, there's an opportunity that we have right now from using kind of our, call it, immunoSEQ or kind of bread and butter T-cell assay on pharma trials currently for patient stratification, monitoring, therapy selection, portfolio navigation, and prioritization. But where we see kind of the growth opportunity kind of associated with the immune medicine business and the research business more broadly, if we want to call it the research business, is really kind of using this mapping opportunity that comes from mapping these disease states to both do what I just talked about in terms of kind of portfolio management and immune response to disease. But also, I think the more exciting potential kind of growth opportunity and where you see kind of the potential upside in the business is when you start talking about drug discovery opportunities that I believe these data sets will unlock over the next kind of short and medium term.

Okay. So maybe we're almost -- so Genentech, obviously, they're moving ahead. So we'll have to wait and see the timetable at which they file the IND. Just give us a sense on here just -- almost out of time, but I know there's other candidates that you're putting forth? How do we think about this opportunity in 2022 and then even like in 2023? I mean, obviously, it could be certainly sizable as we go further and further out. But like what are we going to be watching over the next, call it, 18 to 24 months?

Yes, in 2022, we're looking at potential selection of additional candidates in terms of the revenues really start to flow. Obviously, the goal Dan is to have a set of stacked milestones that build over time, both in the shared product profile and then in the private product profile. But in the shared, as they start to select candidates and remember, we get the milestone based on acceptance of the IND. So there's a time period that will be for filing IND and hopefully, they can leverage -- they will be able to leverage the infrastructure they built to file the first IND when they file it to be able to file additional INDs on shared unshared products. And so those will start to stack over time that really go Phase I, Phase II, Phase III, you get an increasing kind of level of milestones. And at the same time, they'll use a lot of those key learnings and data along with the work that we're doing on the prototyping for the private product, and then we'll have a series of kind of milestones. And then obviously, the goal has got the product on market and to get -- to be able to participate in significant royalty streams from these therapies. So yes, super excited about it. We're working closely with our Genentech colleagues, and we're certainly hopeful that they'll select additional candidates and continue moving the program forward at a nice clip.

Awesome. Well, with that, Chad, we're a minute past, but always great to catch up with you. Obviously, thanks for being here. I hope you have a good set of meetings today and everyone on the video. Hopefully, you have a great conclusion of the conference today. Thank you.

Likewise, Dan, thanks for having me.

Bye-bye.