Good day, and thank you for standing by. Welcome to Adaptive Biotechnologies Second Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. . I would now like to hand the conference over to speaker today, Ms. Karina Calzadilla.

Please go ahead..

Thank you, Devin and good afternoon, everyone. I would like to welcome you to Adaptive Biotechnologies' second quarter 2021 earnings conference call. Earlier today, we issued a press release reporting Adaptive's financial results for the second quarter. The press release at www.adaptivebiotech.com.

We are conducting a live webcast of this call, and will be referencing to a slide presentation that has been posted to the Investor Section in our corporate website.

During the call, management will make projections and other forward-looking statements within the meaning of federal 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 issued earlier. Joining the call today are Chad Robins, our CEO and Co-Founder; Julie Rubinstein, our President; and Chad Cohen, our Chief Financial Officer. In addition, Harlan Robins, Adaptive's Chief Scientific Officer and Co-Founder will be available for Q&A.

With that, I will turn the call over to Chad Robins.

Chad?.

Thanks, Karina. Good afternoon, everybody. And thank you for joining us on our second quarter 2021 earnings call. We had another strong quarter and momentum continues to build across our business areas. Results reflect our commitment to applying our immune medicine platform to transform disease diagnosis and drug discovery.

Adapt is incredible employees are dedicated to the company and the patients we serve. It's been awesome seeing destiel up and meeting new hires for the first time in person. But we also realize a pandemic is an evolving situation. We'll continue to monitor our return to Office initiatives.

We are energized by our progress and the data emerging from our platform. Moving to the slides, starting on Slide 3, our second quarter results demonstrate solid performance revenue in the quarter was $38.5 million representing a significant growth of 83% versus prior year. We saw substantial progress across our product and our pipeline.

Our COVID efforts continue to gain traction especially in light of the Delta variant, as more stakeholders act on the relevance of including T-cells to understand the immune response to the virus and vaccines.

Recent data to understand the AstraZeneca and J&J vaccine response to variants using immunity keymap COVID were published in the New England Journal of Medicine and in nature respectively.

Also, we are pleased to announce we signed an agreement with Moderna in which immunoSEQ T-MAP COVID will be used to measure the T-cell response to their second generation COVID vaccine and their Zika vaccine.

In addition, we signed a license agreement in our drug discovery business with Vaccibody ; this is the first time that our T-cells data will be used to inform the design and development of a T-cell based SARS-CoV-2 vaccine.

Importantly, Adaptive technology may inform the design of an entirely new class of vaccines that elicit a T-cell response for many disease states.

We are in active discussions with the FDA, NIH, CMS, CDC and the White House administration to include the T-cell response and funded studies to answer critical questions related to vaccine durability, breakthrough infections and efficacy in immune compromised patients.

Our view has been that this virus is endemic in the population and that T-cells may answer many of these questions. We are making progress and we will keep you informed on these discussions. Beyond COVID our T-Detect franchise continues to advance.

Results from our case control data set with Johns Hopkins were just published as a preprint and serves as a basis for critical validation. In addition, immune sense study for T-Detect line will complete enrollment in the fall. Together these studies will support bringing T-Detect online in our clear lab around year end.

We continue to progress towards T-Detect IBD as a differential diagnostic, with more than half of the 5000 samples from Crohn's and ulcerative colitis patients already analyzed. We expect to show the data towards the end of this year. We will also made significant progress in other autoimmune disorders.

And we are encouraged by an early signal that we have in multiple sclerosis. For those of us who have friends and family suffering from this debilitating disease, we know firsthand that early blood based diagnosis may alleviate use of uncertainty and more effectively guide the treatment path.

Autoimmune disease diagnosis is a critical next step for Adaptive and we are prioritizing our development efforts in this area. In addition, the overall value of our clonoSEQ brand continues to grow, as evidenced by both strong sourcing volumes and assigning of yet another major pharma MRV collaboration.

Importantly, our team has been building the case that measuring MRD regularly for patients with blood cancers is best practice. Last week, an international panel of multiple myeloma experts published a call to action in clinical cancer research to guide the use of MRD in the clinic for patients with multiple myeloma.

Of note, the publication also builds the case for the use of MRD as a regulatory endpoint, for which Adaptive has significant associated regulatory milestones. In our drug discovery efforts with Genentech, our collaboration continues to advance in both the shared and private products.

We remain on track to deliver the next shared candidate data package to genetic and extend our proof of concept in the private product from 15 to approximately 60 cancer patients this year. In summary, we are delivering towards our 2021 goals. And we are enabling opportunities stemming from our platform.

Before passing the call on to Julie on Slide 4, on Slide 4, I want to provide some color on how we are using our COVID efforts as a model to unlock multiple commercial opportunities from the same underlying immune receptor dataset.

By decoding the fundamental biological link between our immune system and the diseases with which they interact Adaptive can create value in many disease categories across research, diagnostics, and drug discovery.

In this case, we applied our immune code data for a research product called immunoSEQ T-MAP COVID, which is now being used by vaccine developers, academic institution and advocacy groups leveraging the same data source we launched T-Detect COVID, the first indication for our clinical diagnostic T-Detect franchise, and we signed a drug discovery agreement with factor body for the design and development of next generation T-cell based vaccine.

This concept of one data set, stemming through multiple opportunities is an approach that we are pursuing and many of the disease states that we are mapping. So now I'm going to hand the call over to Julie..

Thanks, Chad. Moving to Slide 5 with T-Detect. T-Detect COVID trends continue to ramp up and now over 10,000 customers have ordered the test. We did observe downward pressure in orders in June and early July as the vaccines rolled out. But concerns with the Delta variant has renewed interest.

We expect to launch a COVID immune response website later this month to enable customers to gain additional research insights about their T-Detect test results. To start it will include a personalized comparison of the strength of an individual's T-cell response to that of others with confirm SARS code to infection.

Next, we expect to add more information profiling a person's T-cell response to vaccines. For T-Detect line as Chad mentioned, results from our case control data set with Johns Hopkins have been published.

These case control data demonstrate that our highly specific T-cell test is three times more sensitive than standard two tier serology in the first few days post infection and nearly two times more sensitive in the first one to two weeks.

In addition, the data also supports that the T-cell response precedes the antibody response to the brilliant bacteria. A new sense line is enrolling nicely, which will enable us to complete validation and make the test available in CLIA around year end.

During the first half of 2021 data emerging from our TCR mapping efforts have given us confidence in the ability of T-cells to be used to detect a variety of autoimmune diseases. These are diseases that afflict millions of patients and are challenging to diagnose and treat with highly specific clinical tools.

In addition to the exciting data in IBD, we are encouraged by the signal we are seeing in Multiple Sclerosis because it appears to be strong not only in patients with later stage disease, but also in patients at much earlier stages, which is where MS is particularly challenging to diagnose.

With more and more samples arriving in the next couple of months and look forward to improving the sensitivity of our MS signal later this year.

The early sensitivity we are seeing in lime, MS and other diseases supports the premise that T-cells are the first specific defense cells to see disease antigens, and should be able to be leveraged for true early and specific detection of many diseases from blood. Switching gears to clonoSEQ on Slide 6.

On the left side related to clinical testing, you can see clonoSEQ clinical testing volumes of 5475 tests in the quarter grew 75% versus prior year, and 15% versus the prior quarter.

During the quarter orders were placed by approximately 950 unique HCP spanning 248 accounts for approximately 3400 unique patients tested and closely has now been used to treat more than 18,500 unique patients.

Importantly, we observed double digit growth quarter-over-quarter in tests delivered in each FDA approved indication, ALL, multiple myeloma and CLL and within community accounts, this growth reflected recovery in the second quarter and was a result of our continuous sales, marketing and educational initiatives.

That said the spread of the Delta vary and poses challenges to the back half way to growth we had anticipated in two main ways. First rep access to clinicians and second reduce clinical visits recommended to our specific blood cancer patient population who are immunocompromised.

As such, it is now becoming unlikely that we will double our clonoSEQ volumes by year end but continue to expect healthy growth in the second half of the quarter. The recent paper that Chad highlighted is a key indicator of the growing sentiment that MRG does make a difference in the treatment of multiple myeloma patients.

These prominent international KOLs and FDA regulators state that quantitative, accurate, standardized and sensitive MRD testing may provide greater information relevant to tumor biology and likelihood of risk of relapse when performed in a sequential fashion over multiple time points during a continuum of care.

They go on to say that complete response provides a false sense of disease control. And at any given stage in the disease evolution achievement of MRD negativity will predict a better outcome compared to patients at a similar stage who have not achieved the same depth of response with any given therapy.

Of note the paper also aggregates information from almost 40 ongoing phase three trials, more than half of which utilize clonoSEQ that are evaluating MRD directed therapies or MRD as an endpoint. Endorsements like this are a very important call to action to change behavior in the clinic.

I also want to highlight a recent clonoSEQ publication in the Journal of Clinical Oncology focused on DLBCL patients, which showed that ctDNA based surveillance of patients with DLBCL undergoing CAR-T therapy with XXL may be a useful adjunct to radiologic assessment of disease status.

This is one of many ongoing studies as we pave the path for future clonoSEQ testing in NHL. On the right side of the slide, you can see the number of publicly disclosed pharma partnerships, where classic is used in clinical trials, where clonoSEQ use in clinical trials continues to grow.

This quarter, we signed another pan portfolio, pan indication MRV partnership with Janssen, which includes both sequencing and potential future development revenue.

We also recognize in additional development milestone revenue based on use of MRD data as a clinical endpoint, which brings a total of $8.5 million in recognized revenue from development milestones year to date. Lastly, on Slide 7, we are continuing to make good progress on our genetic collaboration.

As you can see in the chart, the shared and private product programs are complementary in many ways. There are significant learning's across T-cell identification, engineering and manufacturing that we plan to leverage from our shared product to inform our private product approach.

In fact, just this week, we had our quarterly JRC and we are in lockstep towards both of our programs and we look forward to sharing more details at the appropriate time.

I also want to highlight the relevance of our new license agreement with is using Adaptive identified viral antigenic peptides that are driving T-cell responses to develop a second generation T-cell based source code to vaccine. This vaccine may provide more complete viral protection against known and future variants of concern.

A Phase one two trial is expected to start in Q4 of this year and will include testing in unvaccinated and fully vaccinated individuals to be able to assess the true potential of this vaccine candidate as a universal booster. I'll now pass it over to Chad for a financial update..

Thanks, Julie. Turning to our financial results on Slide eight. Total Revenue in the second quarter was $38.5 million representing an 83% increase from $21 million in same period last year. Our revenue mix for the second quarter consisted of 48% of our revenues coming from our sequencing category, and 52% coming from our development category.

Sequencing revenue in the second quarter was $18.6 million and increased 132% from the same period in 2020. Growth and sequencing revenue was driven by both significant ASP and volume increases over prior year and our pharma research business, and also by volume growth in our clonoSEQ business.

Research sequencing volume increased to 6500 sequences up 65% for 4185 sequences delivered in the second quarter of 2020. Clinical Sequencing volume, excluding our T-Detect COVID volume, increased 75% to 5475 clinical tests delivers in the second quarter of 2021 up from 3136 clinical tests delivered during the same period of 2020.

Development revenue grew to $20 million in the second quarter up 53% from the same period last year, the largest driver of our development revenue continues to be the amortization of our genetic up front.

We also saw a $2.2 million increase over prior year and revenue generated from our MRD development agreements, which includes a $1.5 regulatory milestone that was recognized in Q2 2021, from one of our biopharma partners, even as the milestones materialize, we continue to replenish and grow the available milestones that we can participate in from ongoing demand for using MRD as a regulatory endpoint in clinical trials.

Shifting now from our revenues or operating costs, total operating expenses for the second quarter of 2021 worth $8.3 million, representing a 53% increase from $57.9 million in the same quarter last year.

Working down our operating expenses, cost of revenue was $10.8 million during the second quarter of 2021 compared to $4.9 million for the second quarter last year, representing 119% increase.

Higher costs of revenue was primarily driven by increases in labor and overhead costs as well as an increase in revenue sample volume which drove higher consumption of materials and related items.

We also saw growth and allocated facility expenses stemming from our new high throughput lab and office space under construction, which is quickly approaching completion. Research and Development expenses for the second quarter of 2021, worth $37.8 million compared to $26 million in the second quarter 2020 representing a 45% increase.

The growth is largely related to an increase in personnel costs, driven by innovation, San Francisco seller lab, molecular product development, and software engineering teams, an increase in cost of materials and an allocated production lab expenses.

Sales and marketing expenses for the second quarter of 2021 were $23.2 million, compared to $14.3 million in the second quarter of 2020, representing an increase of 62%.

Majority of this growth was due to increased personnel costs, particularly related teams supporting our clinical diagnostic businesses and medical affairs, as well as large marketing efforts to support our online products.

General administrative expenses for the second quarter of 2021 were $16.1 million compared to $12.2 million in the second quarter 2020 represented an increase of 31%. Increase was primarily driven by growth in headcount and personnel costs.

Net loss for the second quarter of 2021 was $49.3 million compared to second quarter 2020 net loss of $33.5 million. Adjusted EBITDA for the second quarter of 2021 was a loss of $35.6 million compared to a loss of $28.5 million in the same period for the prior year.

We ended the quarter with approximately $690 million in cash, cash equivalents and marketable securities, we have no debt. With respect to our outlook for the year, we are narrowing our full year revenue guidance range to $148 million to $155 million, up from our prior range of $145 million to $155 million.

The increase in the bottom end of our range reflects the additional $1.5 million MRD milestone payments in the second quarter, as well as strong execution year-to-date. We still anticipate sequencing revenues to represent between 50% to 55% of our total revenues for the full year.

We are encouraged with our first half results in our confident our ability to achieve our full year commercial development goals. We will continue to closely monitor any impact and COVID variance in the second half and look forward to providing you with further updates next quarter. I'll now turn the call back over to Chad Robbins for final remarks..

Hey thanks, Chad. I'm very encouraged with the progress we're seeing across all business areas, and looking forward to executing on the catalysts outlined in Slide 9. What I'm most excited about is a data emerging from our platform, which we expect to monetize from multiple opportunities in research, diagnostics, and drug discovery.

Before opening up for questions and answers, today, we announced an important addition to adapt this management team, I want to welcome Nitin Sood as our new Chief Commercial Officer, who will oversee our inline product portfolio.

Nitin will lead us through a critical next phase of commercial expansion, including multiple anticipated product launches, and international growth. With that, I'd like to turn the call back to the operator and open it up for questions..

And our first question is from Derik De Bruin of Bank of America. Please go ahead..

Hi, good afternoon. Thank you for the updates. Can you elaborate a little bit more on the Vaccibody agreement and just what you're doing there specifically into sort of what the terms of that are, and also the maternal relationship, just some incremental information that would be helpful..

Thanks, Derik. This is Harlan. So to start with, the reason we partner with Vaccibody is that they have a unique capability to truly target a T-cell response, whereas the primary mode for how basically all vaccines that have ever been put on market work have been targeted towards generating an antibody response.

And as we're learning the viruses is our scope to is quickly escaping antibody neutralizing antibody response and the T-cell responses becoming of greater and greater importance. And so in order to generate a very broad overall protection, we think that a T-cell response is vital.

And since they have this unique capability, and we're up to target T-cell response, and we were able to determine kind of best in class what to target. We thought it was a kind of a perfect marriage.

And beyond that love the management team there and the scientific team and we've really well vetted them, we've actually given them are some sets of targets already. And they've already generated a vaccine response in animal models that has been nice and robust. They've been vetted by the Genentech as well.

And then in terms of the deal, it's a royalty based deal where we're sort of in it together and think there's huge long-term potential here..

Yes, the Moderna relationship, yes..

Yes, we've had a long standing relationship with Moderna, obviously, you know, the world has just seen how great a company they are. And we're really excited to really work with them to help understand the T-cell response to their vaccine, just in relation to what I just said, a minute ago.

They're taking advantage of our team map product, which is our research based product, that that gives considerably more information than just straight diagnostic products on exactly what their vaccine, what the specifics of their vaccine are inducing in terms of what part of the virus, they're getting a T-cell response to how broad that response is, et cetera.

And really allowing them to understand, and I think wasn't even well understood they their vaccine is proving to be efficacious, even in cases with reduced neutralizing antibodies. And we think and that it's the T-cells that are helping out that they're inducing from their vaccine..

And then just one more that, comment that you're not going to be able to double clonoSEQ volumes this year.

I'm just curious, are you already seeing drop offs in demand now or is it something that you're just anticipating happening because of the variance and this just curious in terms of what you're seeing the markets right now and how that factors in to your that is, are you basically do you? Is there still the potential to hit that number or are you just being cautious and right now?.

Derik this is Chad, our profit is in context. I mean, we had a good quarter, we continue to expect strong growth in the second half, which is kind of backup weighted. We are continuing to grow here and we haven't seen much of a drop off at all, actually, it's just in light of the Delta variants.

And what we're seeing right now, with your limited access by going to the field team, there are certain kind of uncertainties and uncertainties, especially with kind of impact on our patient population, which Julie had mentioned, in her prepared remarks.

So therefore, we really want to take a measured approach, and we're looking at taking a modest reduction.

It's helpful, just kind of what Julian close with, I will reiterate that I want to kind of put in context, that this is just one component of the overall kind of value of clonoSEQ and MRD kind of brand which is growing across clinical, pharma research and international. So we want to take a kind of a measured approach here as we look at it..

Got it. Thanks..

And our next question is from Brian Weinstein of William Blair. Go ahead sir..

Good afternoon, thanks for taking the question. Maybe one just on the guidance here. So it was a good quarter, obviously. And you beat I think we're most people were by like 7 million or something like that. And you raise the bottom end of the guide by just $1.5 million.

So can you just maybe talk through kind of the thought process there was there was there anything that was pulled forward in this quarter that was expected later in the year is the not raising by the full amount of the upside having to do with this clonoSEQ more conservative stance, just any color that you can give a kind of how you thought about the guidance?.

Yes, maybe I'll start with that one. Hey, Brian its Chad Cohen. Yes, I mean, we made a lot of progress in the second quarter.

As you can see, by our results, we had strong sort of sequencing numbers, we grew those 132% year-over-year, really believed by our policy numbers, strong to tech COVID, even committed, contributed to some of that research business, sort of across the platform, we had a really strong quarter, and continue to expect really nice growth in our sequencing, sort of category, through the end of the year, we're just south of 50% of our revenue is going to sequencing in the first half of the year and expect about closer about 60% of the second half, get into that sort of 50% to 55% range for the full year.

So strong growth, I think just, you know, given the versions of the variance, we at this time are just passing along really the $1.5 million that dropped in the quarter that was outside of out of the guide, we have really strong conviction in the numbers that we're presenting as our full year guide, bring it up the bottom end of the range.

But yes, as Chad said, we're being sort of measured or metered, in response to what we're seeing with variance..

Got it makes a lot of sense. You know, next question on the new signal that you guys are talking about an MS. So it seems just in general, that these signals are starting to come a bit more regularly at this point.

Can you talk about the expected pace of being able to find these new signals? And then as you're finding those, do you have the proper resources right now to be taking multiple signals to the next phase here? And then if I could just, I have thrown a lot at you on this topic. But you've also talked a lot about infectious disease, and now auto immune.

Is there any update on any of the progress on the oncology side that was an area that you guys were clearly looking at before, haven't heard much on kind of any signals on that side? Sorry for all the questions, but thanks for the answers..

Yes, Brian, maybe I'll provide some framing, then pass it to Harlan to take the first part of that, which is kind of the expediting signal generation and how we think about it across categories of infectious disease, obviously, now we've got progress and accelerating progress in autoimmune, and then kind of where we are in the cancer space.

But as I think you were you're pointing out is signal generation is one component of it, and then got to hit the back end is having a product on market in between that you have a significant amount of steps in terms of going to clinical trial and analytical validation, health, economic analysis, market access, work with the payers that are regulatory, all that goes into defining kind of product market fit and where the kind of clinical utility is for a doctor treating patients.

You know, all of those areas I mean, this is such a massive opportunity. And we're investing and hiring a phenomenal team and putting resources into kind of really defining the buckets to go from signal generation to kind of ultimately products on market.

And then also thinking about how we leverage, what are kind of shared resources, versus kind of where we need to hire kind of specific discrete kind of medical expertise in disease areas. And we put a lot of thought behind that. But maybe I'll turn it over to Harlan with respect to kind of how we're thinking about and expediting signal generation..

Sure, thanks, Chad. So in terms of the research side and the development side, we're working hard to get an economy of scale by sort of standardizing our methodology.

And so for example, we're able to now each different disease class requires algorithmic development, and it developed chemistry, the chemistry is united among all of our all of our different essays right now, we literally have one delivery mechanism, which is just the same for T-Detect COVID is that will be T-Detect everything.

So same sample type, same chemistry, et cetera. The only thing that potentially can change the algorithms, and we're uniting, at least within the disease class, those algorithms, which is why we've been able to really expedite on the infectious disease side, we have a few that are COVID on market line coming soon, we just published a paper on that.

And there's multiple other infectious diseases that we have really nice, probably clinical grade signals already. Separately in the auto immune space, we're making progress across multiple different autoimmune space. We talked about IBD, we talked about MS.

We have some others that we're working on in the same concept, right? We're uniting and trying to get learn cross learning's from one where we can then get much faster at the others. So what does this require, this requires us to get a certain amount of samples with patients with those diseases. And we've been collecting those for quite a while now.

And we have a either samples sequenced already, as we told you already in multiple books, in MS as well as in IBD. But we have others coming in other autoimmune diseases, and other infectious diseases as we go. So all of those are progressing really nicely and we're very pleased with the direction they're going.

You asked about oncology, oncology, as a much broader set of questions. And we are working in the research setting here, the class of drugs is enormous. And the number of companies working on them is huge.

And so we're working to help all those companies really understand how to use those drugs, et cetera, in terms of, but that does feed on and stems from our connecting T-cells to antigens at scale.

And the issue here is simply that the immune response to cancer is so broad, because the potential antigenic space, the things that your immune system can see is huge. So it's just a harder problem. We are making progress, but it's going to be on a longer timeframe just because of the scale of the project.

So we're moving, it's coming, but it's going to be a little while on that side, we're going to have more near term success, successes that you'll see hit in infectious disease and autoimmune space..

That was awesome. Great. Thank you guys so much appreciate it..

Our next question is coming from Doug Schenkel of Cowen. Please ask your question..

Hey, good afternoon. And thanks for taking my questions. But first one is, I guess, a guidance question. One of the key assumptions embedded in full year guidance is that the commercial expansion that you're in the midst of takes hold and support the material ramp in second half diagnostic revenue.

I just want to see how you're thinking about that now, obviously some nice growth sequentially in that category. Maybe that's evidence enough that things are going well.

But I'd love for you to expand a little bit more on what you're seeing, and how comfortable you are with this high level assumption that things will continue to ramp in this category as a result of the commercial build out over the balance of the year especially keeping in mind.

Yes, there might be some risk as it gets released, related to the Delta there and in terms of opposition office access..

Julie, you want to take that..

Sure Thanks. I think you know, the way you just frame the question is exactly what we're, we're absolutely experiencing as we mentioned in the remarks, double digit growth in each of the indications for which we have an FDA label and clonoSEQ.

And we continue to see really nice growth in the back half of the year, barring some of the comments Chad made related to the Delta variant, but specifically you're absolutely right, we've invested in quite a lot in a commercially, both in the Salesforce as well as on our medical team.

And so we have a lot more focus on you know, peer to peer education, we're seeing the results of patient education. And we're really focused also on making sure that we ID all newly diagnosed patients as regularly as possible in our new accounts, we're growing the reach of our targeted account population quite a lot.

I've talked a lot in the past about tier one and tier two, about 250 accounts that were our target universe, we've really expanded that to over 900 accounts now that we're in the community with CLL. And we're seeing nice progress and penetration in that broader universe of targeted accounts.

So that's just some of the types of initiatives we have underway that we're doing together with our commercial and our expanded medical team to grow usage of clonoSEQ in the clinic..

Excellent.

And quick follow up on that one specifically, you know, I won't hold you to generating the same type of sequential growth you just did in that category moving forward, because that was pretty impressive in the quarter, but fair to assume that you're expecting continued sequential growth over the balance of the year from diagnostics for all the reasons we just talked about..

Yes, absolutely..

Okay. And then just a product question on T-Detect clones IBD ? I think and maybe I had it wrong. Maybe I didn't. Before I was thinking of this as a single disease test. Now it looks like it's designed to distinguish across multiple GI disorders, including UCM clones. Is this now should - again, maybe I just had it wrong.

But if I didn't, you know, should we be thinking about this as essentially a panel test for that category?.

Yes. Thanks, Doug. So the goal is definitely to create a panel test to include UCM clones. Obviously, it will be dependent on the full signal and timing and everything else.

But that is the goal where we have, we're presently analyzing sets of samples in both Crohn and you see and as well as a few other related indications and the goal is both in the near term to create a differentiated diagnosis. And then to continue to add more to the panel as we create additional signals..

I should actually mention what is our broaden to, I mean, that's our goal for each one of these classes to have differential diagnosis.

But it starts with kind of getting a beachhead in one disease state and then getting a high sensitivity level, fixing a very high specificity level, and then kind of moving across to other kind of diseases that have shared symptomatology, so that it's the very first thing we can do is going to rule out other diseases.

But then to go over time is to be able to get to definitively have not only ability to rule out but have sensitivity in each one of the diseases so that we can definitively diagnose each one of the diseases with a shared set of symptoms..

Got it. Yes, actually, as you're describing that, and I think about your typical playbook. That makes a ton of sense. All right. Well, thank you for your time on both questions..

Yes, sure..

And our next question is from Tejas Savant of Morgan Stanley. Please ask your question..

Hi, this is Hugo on the call for Tejas. Thank you for taking our questions.

In light of the emergence of the Delta, varying questions about durability of vaccine response, which would comment on what you're seeing in terms of T-Detect COVID uptake? And what kind of upside case look like?.

Yes, that's a great question.

And obviously, super important, we are seeing that the T-cell response to the vaccines is long lasting, that, now we've seen samples of over a year and certainly 11 months, we had good statistics to say that we know, at least by T-Detect standards, we could detect a positive over 90% at 11 months, however at six months, the quantitatively the number of T-cells specific to the induced by the vaccine is waning at six months.

So, there's some loss there. So we're working with certainly a variety of investigators and some and the set of vaccine makers to over incorporate this, as we move. I'll pass it to Chad to take about..

Indeed, the outside case, you know - and again, I just want to make sure we're framing it in the right context, because you brought the term upside case, we'll sort of talk specifically about the three areas, which could have potential upside.

And one is, you know, in research business, if a government decides to kind of fund large scale studies to truly understand the cellular immune response or the T-cell response to the virus, that's there's potential upside for us in that.

In that, well, actually, in the same vein, let's say, within research, if we're working on this if the FDA kind of mandates that the vaccine manufacturers include a measure of T-cell response in their clinical trials, that we upside. Right now, they're opting in to do it as evidence by going to the most recent kind of signing with Moderna.

So, those are the two outside of the research, from a T-Detect standpoint, it would be if we could figure out how to get reimbursed for a T-Detect COVID test, that would be an upside, and the third is in the drug discovery category.

If our partner vaccine body shows that their vaccine, you know, which is a DNA based vaccine that doesn't have kind of the cold chain storage requirements, it will prove to be effective on a standalone or as a universal booster, that would be a tremendous upside case.

But again, just characterize those all upside and not baked into in any way in our guidance assumptions for the year..

Thank you so much. And then quick follow up. Would you provide any thoughts on timing or potential milestones over the next 18 months from Genentech and any other collaborations? Thank you..

Yes, I think, as we said, we're going to be delivering our data packs to them, and in the fourth quarter of this year, but we are not yet kind of specified kind of timelines as to when we are going to be expecting milestones to hit, but we should hopefully be able to, as soon as we know, we will be able to provide an update to you guys..

And any additional milestones in the year-over-year upside that we're getting..

Great. Thank you..

And our next question is from Tycho Peterson, of JP Morgan. Please ask your question..

Hey, guys, good afternoon. I'm wondering if you can comment more on the Moderna deal, you know, how you're thinking about that opportunity, is that something where you get back into economics, if you could just touch on both, you know, the COVID piece and obviously, the Zika vaccine you mentioned as well in the press release..

With respect to Moderna this is one that falls into kind of our research bucket of revenues and T-MAP COVID where we're helping Moderna assess the cellular immune response of the T-cell response to the vaccine kind of what is inducing outside of the antibody response.

So there is there's no kind of back end economics on associated with that deal like there is with our Vaccibody deal. We're working on a part of the design and development..

Okay. And then on T-Detect, obviously, you mentioned the Multiple Sclerosis signal.

Can you maybe just touch a little bit about how you're thinking about that opportunity and timelines?.

Sure. This is early days for us, obviously and so it's an early signal. There's more work to be done. But we are beginning to explore that market. We understand incidence isn't huge it's about 12,000 to 15,000 patients diagnosed annually in the United States. However, as you probably know, the process of getting there involves a lot.

There's a whole variety of clinical scores that needs to be met. There's an MRI that needs to occur, and lumbar punctures and some other relatively invasive and expensive and tests that create a diagnostic odyssey that can be challenging. So there's never been as far as we know, a blood test. To really be specific for MS.

And that's what we're really most excited about, is to be able to do that upon the earliest signs of symptomatology of MS. And that's really where, where we think there's a room for huge improvement with our T-Detect MS application..

And maybe one last one Julie, on the on the pharma side, you know, you had another MRD partnership, and just, you know, how you're thinking about kind of the pipeline for the back half of the year for similar partnerships on the pharma side?.

Yes, they I mean, it continues on a pretty regular cadence all the time, our pharma business, both actually, I should say, on the MRD, side end and non MRD side.

So we're seeing a really nice, come back to life, the T-cell pharma work that we do, and we're also broadening beyond oncology quite a lot as a lot of the data and the places we're going and the tales we're getting to interact with, are beyond oncology.

So the totality of the pharma business right now for MRD testing, as well as non MRD testing is looking really bright for the back half of the year..

In fact, one thing that Chad mentioned in his prepared remarks that I just want to kind of call out again, is kind of replenishing of the milestones that are associated with these deals, even though we did draw down kind of some of the milestones this year, and we've actually gotten more than replenish those milestones.

I think maybe next quarter, we'll put provide an update on what those numbers look like but we've more than replenished, what we've been able to take out over this year through the new deal signings and what I would call a very robust pipeline in the MRD farmer category..

Okay, thanks. I appreciate it..

And our next question is from Mark Massaro of BTIG. Please go ahead, sir..

Hey, guys, thanks for the questions, I guess. You know, I believe it was last quarter, you talked about having over $300 million of potential future milestones in MRD.

Can you just talk about the agreement with Janssen may have expanded that size? And, you know, I think it'd be interesting to hear, you know, you pull down $1.5 million this quarter, $7 million last quarter. You know, it feels like we're going to see a relatively steady cadence of these over the coming quarters.

I think Julie just kind of alluded to that.

But if there's any way you could provide any more clarity around that, that would be helpful?.

I'm going to start and then I'll pass over to Chad Cowen to talk more about the numbers. But again, I want to highlight one goal.

Another call out from the prepared remarks, which is the really call to action on the multi-level paper that was published in the CCR, is clinical cancer research, is that really called for the use of MRD as a regulatory endpoint, that when that happens, that would be a catalyst that would make a significant portion of those milestones on the balance sheet available to us.

So that's kind of a catalyst driven event that we've been, the field has been working on for some time, and I think we're making a significant approximate amount of progress with specifics regarding the quantum of new dollars.

Chad, do you want to?.

Yes, I mean, I can just comment that, you know, we continue to grow almost quarter over quarter the number of milestones that we can participate in.

So we're the number that was graded last quarter, I think we'll be thinking about how best to sort of provide you quantitatively with that going forward and at what sort of time points and milestones they reach.

I'll just say that, we're happy with the number of deals that we've been able to do, it validates our thoughts about the size of the market and how we can be instructive to our biopharma partners around using milestone and the clinical endpoints.

The majority of our milestones relate to primary endpoints with the secondary endpoints, and they cut across about a dozen different partners with multiple studies, sometimes within each of those partners within the US and any EMA. So, they're varied.

And I think they represent a really nice, some really as optionality for us that we're proving really delivers on our on our P&L, you know, from time to time, as you've seen for the past few years..

Okay, thanks. And then, congrats on the backs of body deal, I guess quick three part question. The first I think I heard you say that this was the use of the universal booster. You know, would that be obviously a booster for both Madonna and Pfizer or can you comment on that? And then secondly, I would imagine this is likely anonymous exclusive deal.

Can you confirm that and then, on the royalty side, should we think of this as like a low single digit? Or could it be more lucrative than that?.

Yes, so I'm going to try to make sure I got those all in Mark. But the first question is, the answer is, yes, we do see this as a potential universal booster.

And the second point there is, it also could be, because of the lack of cold chain ad storage requirements, you know, to be able to disseminate to around the world, there's a potential there is number one. In terms of we're not able to kind of specify the financial arrangements in terms of kind of royalties, but I think you're thinking about it.

I think you're thinking about it in the right way. And to provide this for my T-cell design and development perspective, there's kind of a limited set of exclusivity around what we're specifically doing with them..

Okay, thank you..

And here's our last question from Salvin of Goldman Sachs. Please go ahead..

Hi, good afternoon, and thank you for taking our questions. This is Elizabeth on for Dean.

I was just wondering if you had any thoughts about how the T-cell based SARS-CoV-2 vaccine differs from gritstone BIOS approach, where they're also trying to sort of develop that a T-cell based vaccine? And then I have a follow up question around to the MS program..

Sure, it's Harlan. I don't want to speak too much about grid stones approach because I'm not fully familiar with them.

I know that, one of the big differences, the reason that the fact somebody wanted to partner with us is that is that our ability to basically use our chemistry and technology to establish an immune response not through an algorithmic approach, but through a direct assessment of the immune response.

So, so I think, we're starting there, but also, the one thing that's unique about Vaccibody body is their ability to target the immune response directly to the antigen presenting cells of choice. So as far as we know, this is a as far as I'm aware, this is a unique ability.

And so it's not to say that other vaccine players aren't attempting to induce a T-cell response, obviously, from the primary. As I'm sure you're well aware, the primary focus of vaccine development throughout history and with all the ones on the market right now. We're designed to generate an antibody response, not a T-cell response.

But they of course, would everybody want one is it's not like you're avoiding a T-cell response.

So anyways, the point being that this unique ability to target antigen presenting cells and Adaptive, proprietary ability to pick out truly the best immunogenic targets is what sets this collaboration apart, I think, but I can't comment directly on ins and outs of ..

Yes, that's really helpful. Thank you.

And then regarding T-Detect in MS just wanted to know if there's anything sort of different about how you're thinking about the development of the program here or maybe a different clinical consideration versus some of the other indications given there's an association of the viral origin, Epsinvar virus for MS versus other autoimmune diseases where there's not such a close sort of viral tie..

Hi, its Harlan. So there's actually pathogenic ties and or confusion in a variety of these different autoimmune conditions. But certainly, I think some of the best studied as you're saying is for in MS where there's some direct connections including some papers that we've been part of publications on.

We're trying to fill out our diagnostic approach in viruses that are focused around let's say around In the space of the autoimmune diseases of interest, so for example, in IBD, we're looking at pathogens that are implicated and are confused with the disease in the gut.

When we get to rheumatoid arthritis, we've actually got ahead of ourselves on the vaccines, the viral side where we're looking at a set of viruses that can get confused with rheumatoid arthritis conditions and same with MS.

So we're trying to package these together where we can either look at causation or and or look at a differential diagnosis where the disease itself can be confounded with the symptoms symptomatically.

So absolutely, we're exploring these in various capacities, and that's really driven in a lot of ways our developmental efforts on the viral and the rest of the pathogenic side..

Got it..

Thank you. And we have our last question from David Westenberg of Guggenheim. Please go ahead..

Hi, thank you for taking the question. So I personally, I've talked about kind of the way we're to think about pricing in T-Detect and what is a fair as ASP, I think, historically, I know T-Detect or ImmunoSeq used to call it is not really a major cost advantage versus competitors.

But what do you think is actually a fair prices, we bundled kind of certain diagnostics? I mean, what's kind of the bar and I realize you probably can't give it a specific price.

But as we think about this test in the future, and your ability to panel it or go after single indications, I just want to think about how you might think about fair pricing. And I have one follow up after that..

Yes. Hey, David.

So as we move from single diseases, to differentiated diagnosis, to what, you know, I would say, kind of the holy grail for us as kind of being part of an immuno screen or checkup, how we think about price points, along each one of those kind of do character teams wind up kind of being different meaning, if you're going to have kind of a regular checkup costs at the end of the day, as part of an immune screen, that has to be at a lower price point.

But as you look at disease diagnostics, a lot of it has to do with the market access landscape, done that medical need, the noninvasive nature of your test, et cetera.

And that usually why I brought up kind of market access to the payer landscape, is payers, essentially are willing to pay, at least at this time, going to different price points for different levels of different types of tests, for example, it's kind of well-known that they're going to pay more for a cancer based test, or an auto immune related test right now than an infectious disease related test.

So, we continue to work with the payer community.

And yet, we talked preliminary in some of the disease categories that we're looking at are some of the disease indications, I should say that we're looking at about kind of test points, but we really kind of ultimately want to be able to kind of hit that sweet spot at the end of the day of, how much we can charge for it.

And that'll be kind of reimbursed broadly by the by the payer community.

Chad, do you want to?.

I agree with Chad's comments, I would say that, additionally, from a margin perspective, the incremental cost of layering in additional signals within each test is going to be small.

And so from that perspective, as we sort of move up the value chain from a market perspective, the gross margins, the potential gross margins for the business, for T-Detect, just continue to grow in sort of concert with that.

So I think we're really excited about it, and that T-Detect COVID was a beachhead, and a stepping stone to a much bigger concept..

Got it. Thank you. And then shifting gears to clonoSEQ, just quick thinking on in terms of other potential indications.

I don't think T-cell diseases are as big markets, but is there any other off label? Is there any off label usage? Or is that any consequential part of overall in clonoSEQ and I'll stop there?.

Yes, well, there are and once they off label and because they are brought up under our CLIA lab under a kind of a review of the regulated CLIA environment There's two of them that I can say one is in T-cell lymphoma or CTCL and the second is, although most ALS or B cells are derived, there's about kind of 8% to 10% T-cell derived acute lymphoblastic lymphoma.

And so both of those populations we do service right now through our clean environment..

Got to. Thank you..

And that's it for our question and answer session. Now, I would like to turn it over back to our presenters..

That's all we have. Thank you everyone for joining today..

And that concludes our conference for today. Thank you everyone for your participation. You may now disconnect..