ADPT - NASDAQ

Good day, and thank you for standing by. Welcome to the Adaptive Biotechnologies Fourth Quarter and Full Year Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Karina Calzadilla, Vice President, Investor Relations. Please go ahead.

Thank you, Daniel, and good afternoon, everyone. I would like to welcome you to Adaptive Biotechnologies Fourth Quarter and Full Year 2025 Earnings Conference Call. Earlier today, we issued a press release reporting Adaptive financial results for the fourth quarter and full year 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 Investors section in our corporate website. During the call, management will make projections and other forward-looking statements within the meaning of federal securities 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 fourth quarter and full year earnings call. 2025 was a remarkable year for Adaptive, marked by strong execution and meaningful progress across the business. As shown on Slide 3, in the MRD business, full year revenue grew 46% year-over-year, and we achieved profitability ahead of expectations. We also delivered several key catalysts in the year that position the business for sustained growth and continued margin expansion. These include accelerated EMR integrations, including the integration of clonoSEQ into Flatiron's Onco EMR, expanding access across the community setting. The launch of NovaSeq X+ to help scale operations and improve margins. Our first Medicare coverage for recurrence monitoring in MCL, expanding the lifetime value of each MCL Medicare patient, updates in NCCN guidelines across all reimbursed indications, which continues to deepen clinical validation and strong data generation, which was marked by an all-time high with over 90 abstracts presented at ASH, reinforcing MRD's growing role as an interventional tool in patient care. In the Immune Medicine business, we scaled our TCR antigen data and modeling capabilities, leading to our first 2 data partnerships, and we completed a preclinical data package for our lead TCR depleting antibody program in ankylosing spondylitis. Taken together, the strong MRD execution, the continued progress in Immune Medicine and the disciplined spending across the organization drove 55% total company revenue growth and a 68% reduction in cash burn, leading to a strong cash balance of $227 million at year-end. Let's turn to Slide 5 for a closer look at the MRD performance and future expectations, starting with clinical testing. ClonoSEQ clinical testing revenue grew 64% for full year 2025 and 59% in the fourth quarter compared to the prior year. As shown in the chart, volumes increased sequentially throughout the year, reaching a new record of 30,038 tests in the fourth quarter, up 43% year-over-year and 11% sequentially. Growth was broad-based across all reimbursed indications with DLBCL, MCL and multi myeloma driving the majority of year-over-year growth. Multiple myloma represented 44% of U.S. clonoSEQ volume followed by ALL at 30%, CLL and DLBCL, both at 9% and MCL at 5%. Volume growth throughout the year was driven by a combination of interrelated factors, including blood-based testing, community presence, EMR integrations, clinical guideline inclusion and ongoing data generation. In the fourth quarter, blood-based testing accounted for 47% of clonoSEQ tests, up from 41% a year ago. In multi myeloma, blood-based testing reached 27%, which is a 6% -- 6-point increase year-over-year, which is particularly meaningful given the bone marrow-based nature of the disease. Community testing also continued to expand with volumes up 18% sequentially and representing approximately 33% of total tests in the quarter. We further scaled our digital footprint, completing Epic integrations in 8 accounts during the quarter, bringing the total to 173 integrated accounts, which now drive approximately 40% of ordering volume. Finally, NCCN guideline updates and continued data readouts across marketed indications supported our commercial execution. Ordering HCPs increased 9% sequentially and 45% year-over-year in Q4, with particularly strong adoption in the community setting. Taken together, these drivers continue to increase both physician adoption and testing frequency per patient across indications. Turning to Slide 6. In addition to volume, clinical revenue growth was also driven by continued ASP expansion. We ended the year with an average ASP in the U.S. of $1,307 per test, up 17% year-over-year, and we exited the fourth quarter at about $1,350 per test. ASP growth during the year was driven by strong execution from our reimbursement team across several initiatives. These include the successful renegotiation of 8 major payer contracts with national and regional payers, including Humana, Aetna, Horizon and multiple Blue Cross plans as well as the signing of new agreements with Anthem, Centene, Florida and LA Care. We also expanded commercial coverage policies with new coverage wins in DLBCL and in CLL. In parallel, we delivered meaningful revenue cycle management improvements, including Medicaid collections, appeals, prior authorization processes and time to cash. These operational enhancements supported by AI-enabled workflows are driving higher paid claim rates more consistent realization and improved commercial payer cash collections year-over-year by 74%. Looking ahead, we expect these initiatives, together with 2 additional large national payer contracts, we anticipate closing this year to support our targeted average ASP of approximately $1,400 per test in 2026. Turning to Slide 7. Our MRD pharma business had a strong year with revenue growth of 20% year-over-year, including $19.5 million in regulatory milestone revenue. Excluding milestones, pharma grew 11%, and we ended the year with approximately $210 million in backlog. Several important shifts in our pharma portfolio are worth highlighting: First, multi myeloma remains the largest driver, accounting for roughly 70% of sequencing revenue and approximately 60% of backlog; second, CLL and ALL bookings more than tripled in 2025 supported by emerging data underscoring the need for higher sensitivity MRD to differentiate therapies in both disease states as well as updated NCCN guidelines for fixed duration regimens in CLL. Third, MRD is increasingly embedded directly into regulated interventional trials with approximately 60% of our portfolio, including MRD as an endpoint, up from about 40% in 2024. This shift has been driven by regulatory momentum including the ODAC recommendation and most recently, the subsequent FDA draft guidance supporting MRD as a primary endpoint in multi myeloma accelerated approvals. Of note, registrational trials that incorporate MRD carry higher economic value and have a halo effect in the clinical business. Overall, we're encouraged by the expanding role of MRD across hematologic oncology trials, and we believe broader endpoint adoption, increased testing time points and the need for greater sensitivity will continue to drive MRD pharma revenue growth. Turning to Slide 8. Our focus this year is clear: continuing driving top line growth while expanding margins building on the same durable growth drivers that powered performance in 2025. In 2026, we expect clonoSEQ test volumes to grow by more than 30% year-over-year, supported by a continued mix shift towards blood-based testing, which we expect to exceed 50% of total MRD volume, deeper penetration in the community setting, where we expect more than 35% of testing to originate, further scaling of our EMR integration effort adding approximately 40 with a focus on high to mid-volume accounts, and continued generation of clinically meaningful data across multiple indications to further expand interventional use and support the guideline evolution. From a pricing standpoint, we expect to increase ASP to an average of about $1,400 per test based on the initiatives described earlier. In pharma, we plan to increase the number of registrational and primary endpoint studies across multi myeloma, CLL and DLBCL, leveraging growing regulatory and clinical endorsement of MRD. We also expect continued margin expansion driven by higher volumes throwing through the NovaSeq X+ and operating leverage across our production and our commercial infrastructure. We believe these priorities position MRD as a scalable, durable and increasingly profitable growth engine for Adaptive in 2026 and beyond. Now let's turn to Slide 10 to discuss Immune Medicine. The premise of our Immune Medicine business is to generate large-scale, proprietary immune receptor data that allows us to understand how T cell receptors bind to antigens and how those interactions drive immune responses across cancer, autoimmunity and infectious diseases. Over the past year, we have continued to scale this data we now have more than 5 million paired TCRs spanning over 20,000 antigens and nearly 50 HLA types, a data set that is orders of magnitude larger than is one is publicly available. We believe this scale is sufficient to train predictive models of the adaptive immune response across diseases. In parallel, we are applying our platform to identify what we believe are likely disease-causing T cell receptors and their antigens in certain autoimmune conditions, including type 1 diabetes, celiac disease and multiple sclerosis. These insights have the potential for TCR-based target discovery to enable existing and future partners develop -- to develop immune-based therapeutics. Turning to Slide 11, I'll briefly review our 2025 achievements and how they set us up for our 2026 strategy. First, we began to monetize our data with 2 distinct licensing deals with Pfizer. One is a data licensing agreement in which Pfizer has access to a subset of our TCR antigen training data. Pfizer will use this data to develop and train its AI and machine learning models to accelerate research and drug discovery in multiple disease area. The second licensing deal focuses on target discovery and rheumatoid arthritis or RA. Here, we are applying our IM platform and capabilities to identify the specific autoreactive T cell receptors that are highly enriched only in RA patients. Pfizer will then use these data to accelerate its research and development of potential RA therapeutic candidates. Together, these partnerships continue to validate the strength of our differentiated platform and the value of our large-scale proprietary data. In addition, we completed a preclinical data package for our lead antibody program in ankylosing spondylitis. While potential next steps include initiating IND-enabling studies, we made the strategic decision to stop further investment in this program and instead prioritize capital toward data generation and AI modeling. These are key areas we believe leverage our core differentiation and represent the highest return on investment for Immune Medicine. Along with these key achievements, we also maintained a disciplined capital allocation, executing against our objectives while keeping annual Immune Medicine cash burn to around $30 million, as promised. Looking ahead to 2026, we plan to continue advancing on our TCR antigen data sets and our AI/ML modeling work with a lower target net cash burn of $15 million to $20 million. We continue to focus on securing additional data partnerships, which we believe have the potential to drive meaningful long-term upside for Adaptive. Now I'm going to pass it over to Kyle, who's going to walk through the financial results and our 2026 full year guidance. Kyle?

Thanks, Chad. Turning to our financials. First, I'll cover our reported results, which include the noncash revenue recognized from the amortization of amounts previously received under our Genentech collaboration. As you know, following the termination of the collaboration in August, all remaining amortization was accelerated and recognized in the third quarter. As a result, there are no ongoing Genentech collaboration economics in our results after Q3. Total company revenue for the fourth quarter was $71.7 million and for the full year was $277 million, representing 51% and 55% year-over-year growth, respectively. Total company adjusted EBITDA was $4.1 million in the fourth quarter compared to a loss of $16.4 million a year ago. For the full year, adjusted EBITDA was $12.2 million compared to a loss of $80.4 million in 2024. Interest expense from our royalty financing agreement with Orbimed was $3 million in Q4 and $11.8 million for the full year, while interest income was $2.1 million and $9.4 million for the same respective period. Net loss was $13.6 million for the quarter and $59.5 million for the full year. Now turning to Slide 12. The revenue and adjusted EBITDA figures I'll discuss from here on forward are presented excluding all noncash revenue from Genentech amortization at all period shows. On this basis, fourth quarter revenue was $71.7 million, which increased 63% year-over-year with 86% contribution from MRD and 14% from Immune Medicine. MRD revenue was $61.9 million, up 54% year-over-year with clinical and pharma contributions of 67% and 33%, respectively. ClonoSEQ test volume increased 43% to 30,038 tests, up from 20,945 in the prior year quarter. Immune Medicine revenue was $9.8 million, up from $3.8 million a year ago, driven primarily by our data licensing agreement with Pfizer. For the full year, total revenue was $235.7 million, up 42% year-over-year. MRD revenue was $21.2 -- $212 million, up 46%, including $19.5 million in milestone revenue. Excluding milestones, MRD revenue grew 45% versus 2024. Immune Medicine revenue was $23.4 million, representing a 17% increase from the prior year. Moving down the P&L. Sequencing gross margin, which excludes MRD milestones, Genentech amortization and the licensing revenue from Pfizer, was 71% in Q4, up 12 points year-over-year and 5 points sequentially. Full year sequencing gross margin was 66%, up from 53% in 2024. Lower cost per sample were driven by production efficiencies, labor leverage and the transition to NovaSeq X+. Total operating expenses, including cost of revenue, were $84.5 million in Q4 up 4% year-over-year, primarily due to higher MRD sales and marketing investment, primarily from EMR and market access initiatives, partially offset by lower Immune Medicine R&D. Full year operating expenses were $334.1 million, down 2% year-over-year. As shown in the segment table, MRD adjusted EBITDA was positive [ $15.2 million ] in 2025 compared to a loss of $41.2 million in 2024, driven by higher revenue. Immune Medicine adjusted EBITDA loss improved to $31 million from $37.9 million, reflecting lower operating spend and increased revenue. As a result of strong top line growth, improving efficiency and disciplined spending, we ended the year with $227 million in cash, cash equivalents and marketable securities. This amount excludes $13.1 million of cash held by digital biotechnologies. Now turning to Slide 13 for our full year 2026 guidance. We expect full year revenue for the MRD business to be between $255 million and $265 million. This includes $8 million to $9 million in MRD milestone revenue based on our current line of sight. At the midpoint, this guidance implies 22% year-over-year growth or 30% growth excluding milestones. We expect MRD revenue to be approximately 45% weighted to the first half of the year and 55% to the second half as clinical volume and ASP growth compound with sequential clinical volume growth anticipated throughout the year. We expect full year operating expenses, including cost of revenue to be between $350 million and $360 million, representing 6% growth year-over-year at the midpoint. This reflects merit increases in additional targeted investments in MRD sales and marketing to support continued market expansion while leveraging our existing commercial and operational infrastructure. In addition, we expect to achieve positive adjusted EBITDA and positive free cash flow for the whole company by the end of 2026. We -- of note, as in prior years, Q1 will be our highest quarterly cash utilization primarily due to annual corporate bonus payments. I am pleased and encouraged by the strong results we delivered in 2025 and look forward to providing financial updates throughout the year as we execute towards our goals. With that, I'll hand it back over to Chad.

Thanks, Kyle. To bring it all together, 2025 was an outstanding year for Adaptive on all fronts. In MRD, we achieved profitability and grew the top line by 46%, driven by strong clonoSEQ volume growth. In IM, we scaled our TCR antigen data and began executing on targeted monetization opportunities that build long-term strategic value. And importantly, we maintained our strong cash position giving us the flexibility to execute across both businesses. Looking ahead to 2026, we're focused on continuing to fuel MRD revenue growth, expand margins and deliver company-wide profitability. We have a great playbook in place, and we're executing against it. We're encouraged by the momentum we are seeing and are confident in our ability to execute and deliver on these priorities. I'll now turn the call back over to the operator and open it up for Q&A.

[Operator Instructions] Our first question comes from David Westenberg with Piper Sandler.

Congrats on a very strong volume quarter in Q4. So actually, I want to start with that, that sequential step up in clonoSEQ volume. Can you discuss how to think about that trend? Is there any seasonality there? And can you discuss some of the weather-related issues you might see in Q1? And one of the things I want to get at is you have a higher base now, so growing that sequentially up on a percentage basis might be a little bit more difficult, obviously, given how big your volumes are starting to get.

Sure. Thanks for the question, David. We were really pleased with the Q4 results. And certainly, I think it addressed any questions that folks had about whether there was deceleration in prior quarters. I think we like to see that Q4 number really as a testament to, I think, the long-term opportunity to grow this business at a strong rate. We are -- I think that we see seasonality at various points in the year. Typically, Q1 has been a strong quarter for us, and Q1 has been lighter just given holidays, weather, et cetera. We have seen some weather-related impacts, as you are well aware, in recent weeks, primarily on timing of sample arrival as opposed to volume, although some impacts, of course, on volume as well. FedEx was not delivering for some number of days, hospitals and practices closed down. But good news is samples are starting to flow back in, in large volumes, and we had a very strong start to the beginning of Q1. So we remain confident in the guide for the year, I remain confident in the forecast for the quarter and that we'll show another strong sequential growth quarter-over-quarter in Q1.

And I'll just ask one more and I want to kind of ask this a little bit more directly since I think you have a really good tech and a good position in blood. So how should we think about the penetration rates in DLBCL? You have a first major advantage in a lot of the blood cancers particularly the multiple myeloma, how do you parlay that massive lead in multiple myeloma, for example, to [ DLBCL ] where your penetration of late is a little bit lower. And there is some concerns about incoming competition.

Sure. I mean, I think we've learned a lot from the myeloma experience. And as you noted, have established a really strong position there, 45% or so of our business comes from that indication and we've been able to post strong quarter-over-quarter growth repeatedly in that space, in part, thanks to the advancement of the assay in blood in addition to bone marrow. In DLBCL, I think the playbook looks similar in a lot of ways in the sense that we are starting with an underdeveloped market where people need to be convinced that MRD has a value. And that's been our major focus. And we've seen strong results in Q4. We saw 14% quarter-over-quarter growth sequentially in DLBCL, I think, 115% versus Q4 of the prior year. But we're still, like you said, only at 3% of penetration of the patient opportunity. We do believe that increased noise in this space has potential to really help expand the market. And so we'll be continuing to focus on the things that we think are the major drivers, which are data generation with our enhanced ctDNA assay that we launched early last year further advancing the guidelines, which made some significant initial progress a year ago, broadening commercial payer coverage, which will help boost our ASPs and deepening penetration with pharma, where the interest in MRD guided trial designs in DLBCL is really ramping up. And we'll continue to underscore the sensitivity of our assay, but also the specificity, which is really crucial both in the clinic and in interventional studies. We'll continue to rely on some of the other strengths and sort of head starts that we've built, including our reimbursement, our strong relationships with hematologists who are treating us both in the community and academia. And the data -- the head start in data that we've accomplished as other entrants come in and determine what their path forward will be.

Our next question comes from Subbu Nambi with Guggenheim.

A competitor came out with the flow cytometer pay positioning as competitive to NGS for myeloma and probably a significant price advantage. Would love to hear your thoughts on this product from both sensitivity and pricing perspective.

Sure. It's interesting to see that Quest has launched a product in the space. From our perspective, it's not particularly a new dynamic for us. There are competitors already offering next-generation flow products with similar sensitivity claims in our space. But what we know is that flow-based methods for MRDs are inherently less sensitive than clonoSEQ and they always will be for any given amount of sample material. Obviously, Quest hasn't published any data yet, but their claim that their sensitivity is comparable to clonoSEQ is hard for us to reconcile. Their stated sensitivity is [ 5x10 ] to the negative 6, which is equivalent to 1 in 200,000 with 10 milliliters of blood. And as you know, clonoSEQ can routinely achieve clinical sensitivity of 1 in 1 million, 5x higher with just 2 milliliters of blood, our validated sensitivity for our FDA label is even higher, around 1 in 1.5 million, and that's the same in both blood and marrow. So the assay that's being launched is at best 5 to 7x less sensitive in blood than clonoSEQ and I think there's 2 things to keep in mind with that. One is the myeloma landscape is evolving in a direction that requires more sensitivity, not less. Treatments are driving really deep responses. Most patients now are negative in marrow at a depth of 100,000 and 200,000. And two, for myeloma, MRD sensitivity is especially important when you're testing in blood. The biology of myeloma is such that disease burden in blood is, on average, 100x less than in marrow. And physicians know this. So they want to use an assay in blood that's maximally sensitive. So remember, in the community, in Q4, over 60% of clonoSEQ/myeloma MRD testing was done in blood. And in that setting, we're also broadly reimbursed. 90-plus percent of patients have 0 out-of-pocket cost and we're broadly EMR integrated in the community with Flatiron and other large integrations. So ultimately, we're talking about another next-gen flow assay that has some similar benefits as clonoSEQ, blood-based testing, turnaround time, broad availability, but with less sensitivity in a sample type where sensitivity is really key. So of course, there are a single-digit percentage of patients for whom a diagnostic marrow isn't available to run a clonoSEQ IP test. So that's a subset of patients, perhaps next-gen flow could be a backup option.

Super helpful. I have a question for Karl. I think as you think about ASP pacing this year. How should we face it just given the private figures are in advanced negotiation stage?

Yes. I mean I think at this time, it's best to think of it as a linear growth. There are some specific timing things that we've got it locked down as it relates to some of the key payer contracts, we're focused on on converting. But I think at this point, where we are in terms of the timing of the year, it's best to just think of it as a lending or growth.

Our next question comes from Dan Brennan with TD Cowen.

Maybe just first on the EBITDA guide for 2026. So I think you said EBITDA positive, maybe exiting '26. Can you just flesh it out a little bit. Is that Q3, Q4? Was that for the full year? And any help between where MRD versus immune medicine goes and kind of implicit in that, like are you making any changes to the sales force and puts into that? Is there any more sales force expansion in '26.

On the EBITDA guide, I'd say right now, it's an exit on Q4 for the entire company. MRD obviously positive adjusted EBITDA at this point, but we expect to see that continue to grow. And some of the initiatives across the business we're putting in place give us confidence to be able to achieve it across the whole company. And I'll let Susan take the field force.

Yes. Currently, we have about 65 reps in the field. They're split 50-50 between academic and community focus. And we believe this is the right number of reps for now as our territories are manageable in terms of potential. The reps are calling on the right number of accounts and HCPs. And most of the territories are reasonable size. So while I'm not saying we don't add a territory here or there opportunistically and also I will acknowledge that we will continue to evaluate new deployment strategies to address market dynamics as they evolve, which could justify additional hiring we're not anticipating in the plan for this year, any significant expansion in the sales team.

Terrific. And you rattled off a bunch of the progress you made on a lot of the volume drivers between blood community penetration and EMR. I'm just wondering, makes sense to not get ahead of yourselves, but I think blood really ramped, and I think you're only baking in a little bit of an increase in '26. Is that just because we're kind of capping out on what's realistic? Or is that -- is there a reason and some way, I think community, I think, really ramped in the fourth quarter, and it looks like you're baking in a little bit of an increase there. Just maybe speak to those 2 assumptions. And is there some reason why they wouldn't potentially increase further in '26.

Right. So I think in both cases, there is no -- we're not capping it out, and we don't believe that there is any reasons they couldn't potentially increase further, but we are sort of looking historically at what the pace has been of progress and then thinking about balancing the various drivers and sort of being prudent around what we set up as expectations at the beginning of the year. But on the blood-based testing front, we were at 47% in Q4 overall blood-based testing and 27% -- no, sorry, 45% and then 27% for myeloma specifically. Myeloma is a really big opportunity to grow that. Additionally, if we continue to grow DLBCL and mantle cell in our lymphoma indications disproportionately to the rest of the business, we will see blood as a contribution to the total business continue to to ramp. So I think there is upside, but we are confident that we can get to above 50% in 2026. And same thing on the community side. The guide that we have is over 35% of the business coming from community. It was 31% in 2025, and we closed the year in Q4 at 33%. So we hope to exit above 35% by the end of this year. And it will be a big area of focus, and it is a disproportionate area of investment for us. It's where our competitors are likely to focus and it's where things like the key data sets like Midas that came out multiple myeloma, helping inform the potential avoidance of transplant. That's a really big deal in the community, favorable guideline updates, guidelines matter a lot to community clinicians. So we'll continue to focus on those things. And also continue to drive new testing pathways in large community practice networks that help us standardize utilization of the assay across indications. And those things will -- again, the drivers, combined with our Flatiron integration and the serial testing that we can achieve through that, which have some potential upside in 2026.

[Operator Instructions] Our next question comes from Mark Massaro with BTIG.

Congrats on a strong 2025. I wanted to start on gross margins. It looks like they came in at 66% sequencing for the full year, and you hope to expand that to over 70% in 2026. I guess there are a number of parts to this. And where I'm going with this is your ASPs are still rising. In fact, last month, you indicated a plan to get to 1,700 to 1,800 in ASPs by 2029. So I guess my question is, the over 70% level in 2026, my sense is that you're not fully loaded there of long term. So is there any way you could give me a sense that maybe 3, 4 years from now, you could be perhaps meaningfully above 70%? Or do you think that, that's a pretty good place to consider in the out years?

Yes, Mark, this is Chad. I'll start and then I can pass it off to Kyle, if you want to kind of double-click on anything that I'm saying. But first of all, at JPMorgan, we came out and kind of moved that number already, up from 70% to 75%. And so -- and you're absolutely right. We're not fully loaded in the sense that the transition to NovaSeq X+, if you recall, just happened in the back half of this year. So we talked about a 5% to 8% percentage increase in the first 12 months and over a 10% increase just attributable to the NovaSeq X+ transition. So you're going to get a significant amount of additional uplift from that as you layer more samples on the same sequencing run. So that's a big one. The second, as you noticed, as you mentioned, as ASP. So as you continue kind of growing on the top line, along with better cost per sample, that margin continues to increase. So I think there's probably some even upside further from there, but we're going to, at this point, sequentially walk it up as we have from 70% to 75% but we are very confident in long-term durable high margin profile, both at the gross and the operating margin level.

That's super helpful. And then maybe just to drill into ASPs. I think you guys indicated that you exited 2025 at $1,350 a test, and you came in at $1,307 for the full year, which is up 17%. So can you maybe share why is $1,400 the right rate in 2026. That's a 7% growth. Are there any particular items you could point to that might sort of not create for a similar growth rate in '26 than '25.

Sure. Thanks for the question, Mark. Remember, in 2025, we saw a meaningful growth across a number of initiatives, but one of the biggest ones was the gap sell rate that went into effect right at the onset of the year for our Medicare business, our Medicare fee-for-service business. So that provided a decent amount of the growth in 2025. We're starting to get some traction on the commercial side as we've implemented contract rate renegotiations and new payer rates. I think as it relates to 2026, I think right now, hey, we want to be with where we are during the year. I want to be prudent around guiding around ASP. There are kind of 2 -- I'll say 2 major things we're really focused on. One is renegotiating with 2 large payers that kind of move a significant amount of our volume in upwards of 17% to 18% of our volume. And so getting those rates established at the appropriate rate is really important and the timing of that can drive variability and ultimately, the ASPs we realized for the full year. The second piece, as Susan mentioned, we're anticipating growth in DLBCL and MCL, but to the extent that growth is even better than we thought. We've got to kind of navigate the coverage dynamics on the commercial payer front, and hopefully, we can continue to see positive coverage decisions with regards to those indications. But again, we would just want to be prudent in managing that and monitoring it over time.

Our next question comes from Sebastian Sandler with JPMorgan.

Great. Can you walk us through where you see upside to the ClonoSEQ volume guide in the year, I think it implies pretty healthy community volume growth, looks like around 50% year-on-year depending on what you assume more than 35% of total volume means. But where would you point to there being the most potential upside, whether that's NeoGenomics contribution, guidelines, incremental recurrence, monitoring coverage. Just walk us through that. I think that would be helpful to get a grasp of it.

Sure. I mean from a volume perspective, on the clinical business, I think one of the areas of upside just based on sort of early -- we're in early days and have limited experiences in terms of EMR integration. The Flatiron integration and the [ serial ] testing, which we've talked a little bit about over the last quarter or so, we're really just starting to see what the pull-through on serial testing looks like. And so far, we've been pleased to see that about 60% of serial tests are actually showing up as scheduled. And so we think there are opportunities to potentially continue to focus on that and see if we can improve it or at the very least, ensure that we continue to see strong contribution from serial testing, which could have upside to what we've forecasted and guided. Additionally, on the EMR side, we've increased the focus on already integrated sites to what we call optimize those sites. This is things like standardizing order sets to increase testing consistency or further reducing friction and integrated workflows, which will improve order pull-through. Those kinds of initiatives are new, but the early results from pilots that we've completed have been very strong. And so I think there's a lot of promise there and source of upside. I talked about potential for upside on our anticipated contributions on blood and on the community, and those will be areas of continued focus. The other thing is that on the ASP side, we have some key payer contracts that we're still in the process of renegotiating. So the timing of those can be a source of upside on revenue as can potentially the negotiations turning out more favorably than we think. But overall, I think we feel like this guide is very reasonable, and we are being prudent early in the year, but there are many different ways that this business can be driven and can be accelerated and all these things kind of work together. So it's one of the things that we like about this business and one of the reasons we're very confident that we can meet or exceed our goal.

Yes. And I kind of add a fine point to that because I mentioned kind of this playbook. And [indiscernible] common with all these things working together. There were 5 things last year that drove the business blood-based testing community data results -- data readouts guidelines and EMR integrations, and those are the 5 things we're reinvesting in this year, and those are the things that we are going to drive growth, not only drive growth, but also give us an opportunity to be extremely confident in our guide and hopefully outperform.

That's helpful. Maybe touching on the ASP guide for '26. It seems like $1,400 is dependent to some degree on those 2 contracts you called out. Can you give us a sense of any sort of execution risk there or whether those contracts are kind of locked down at this point? And then just if those contracts were less favorable than expected, can you quantify where ASP could land? And any sense on whether -- you said to keep ASP flat or kind of linear throughout the year, but any sense of whether this is more of a first half or a second dynamic -- first half or second half dynamic would be helpful.

Yes. I mean there's certainly some level of execution risk. Otherwise, I think we wouldn't be in the stage we're at. But we're confident in getting there in the long term, and we want to make sure we're establishing the right rate. That's really the priority with these payers. As it relates to the dynamics in terms of pacing, yes, I mean, it's probably more of a second half dynamic just given where we're at in January. But I think at the end of the day, if those things don't come in, it does represent some minor risk, but there's other levers within the business that we can pull on, but continue to grow ASP.

Yes. I mean just -- we're quite confident in the ASP guys, and we've got multiple levers to get there. One contract or another is not going to necessarily impact that we're going to get there.

And then our final question comes from Bill Bonello with Craig-Hallum Capital Group.

And I applaud you for the prudence. I'm going to go a different way here. But really -- given the pre-release, what really stood out to us were actually the comments on the IM business, which I know you don't talk about all that much, and you don't want people to get out over their skis. But clearly, the way you're positioning this is much less as a therapy development business and much more as a data and informatics business, and it was good to hear about a couple of big contracts. I know it's probably early days on this strategy, but would love to hear any thinking you have around sort of ways that you monetize this leading database that you've created and sort of ultimately how we might think about how a business like this could scale out over time.

Sure, Sharon, do you want to take that?

Yes. Thanks for the question. So as you alluded to, we're excited by the two distinct Pfizer deal, including both of which were data licensing deals, and we certainly look forward to continuing and believe that we can sort of rinse and repeat similar or even sort of differentiated additional data licensing deals. And really, this stems from the fact that we've generated this really massive differentiated data sets that certainly there's value across applying in different immunology applications and solving different immunology problems. So it's early days, but more to come as the year progresses, and we're super excited and enthusiastic in terms of where we are and where we're going.

Yes. And further, I think the Pfizer deal represented 2 types of different types of data deals. One is we're just kind of licensing data for AI modeling by pharma companies and the second, where we're using our unique set of capabilities to do target discovery work. And so there's kind of multiple different types of kind of opportunities that can provide monetization from this really a unique data set.

That's helpful. And maybe just as a follow-up, as you think of sort of how the data stands today, are there investments you need to make to sort of make it more accessible potentially to pharma clients and others and just to be able to sort of meet the kinds of demands you anticipate that they're having?

Yes, Bill, the investments we're making are [indiscernible]. Remember, there's revenue coming in from that business as well, which we consider a [ burn off offset ] to the investments that we're making. So all the investments we need to, we believe, generate kind of this robust data set are captured in that kind of $15 million to $20 million net burn of the investments that we're making this year.

Okay. I was just thinking more probably in terms of timing of when a business like this could inflect if it could.

Yes. Yes. And we'll come back at that point if there's kind of future investments to be made with a business case on a high risk-adjusted return on the capital based on what we're doing, we will come back and kind of share what the plans are at that time. I'm just -- I'm talking about for kind of the current path forward. We're looking at this as a kind of $15 million to $20 million net burn for the year for the business.