Adaptive Biotechnologies Corporation (ADPT) Earnings Call Transcript & Summary

And you've invested pretty heavily into the EHR integration and just making that process for the position as seamless as possible. How much friction do you think you've removed from that ordering process? And I guess is there anything else you could do from here to make it even easier?

Yes. So first of all, it's been -- EMR integration has been amazing, but we consider it necessary but not sufficient, meaning we think it's the first step. But once you are integrated into the system, then those reps have the ability to go, kind of, really optimize within the account, kind of, the ordering profile, the whole workflow, kind of, process to make sure that we're, kind of, getting everything we can out of that on the clinician really knows how to not only use the system, but also clinically knows, kind of, when to treat the patient. One of the things I mentioned about serial testing, but I'll be more specific about it is there's a -- in ongoing EMR flat iron, there is functionality that we built in for repeat ordering where there's a serious -- essentially a radio button that says you can test a patient every 3, 6, 9 or 12 months. Over 70% of clinicians are clicking on 1 of those buttons. And of when they click on that, 70 -- we have 3 cohorts worth of data, 3 quarters. 75% are in compliance. After clicking that button the patient is coming back in and getting the test when they're supposed to get that test. That's -- I mentioned that kind of in your first question in the opening remarks, that's been a source of, kind of, surprise -- upside surprise, we didn't think those numbers would be quite that high. So we're excited about it. We have a team dedicated to working these accounts to really optimize the EMR integrations. Then I'll also, kind of, move over to Epic. In Epic, you can build in kind of the functionality of what's called a standing order. We've done that for our first account, which was Duke. Quarter-over-quarter growth, we saw 57% quarter-over-quarter growth in that 1 institution. Now it's not as easy where you can turn on 150 accounts at 1 time, but going 1 by 1 and getting those dedicated IT resources and the clinical mind share to be able to do that and to kind of map out the pathway as to when they wanted to test patients is something our team is very focused on because of the growth rates we're seeing.

Any color you could give on the average test number per patient today and where that could get to with time. And obviously, you've spoken to EMR integration as being 1 of the potential drivers, but anything else you would perhaps point to?

Well, clinical data that continues to develop across multiple indications is going to be a huge driver, blood-based testing is a huge driver, the EMR integrations, again, the focus on the community, the pathways that we're putting into their large network practices all those things got to work together. We talked about in the TAM going from 2.5 to 3.5 test per patient per year. Again, I think we got to dust that off. But guideline inclusion certainly is massively helpful to that as well. So it's not -- I mean, we talk about this a lot, and hopefully, this is becoming apparent because you're seeing kind of these different tactical layers going to build on each other. It's not 1 thing. These things are all kind of synergistic and work together in our multipronged strategy really across all of our indications.

Had a question here on multiple myeloma catalysts, but I think we probably [indiscernible]. So just on CLL, what are some of the ways CLL management is being reshaped as a result of guideline changes just around MRD and serial terms?

Yes. I mean, if you look at the guidelines, it's MRD guided regimen as opposed to fixed duration kind of regimens. So really specifying in the guidelines how to use MRD. It's been a real win for us. And remember, those guidelines came out last year. And what we said was within the community hospital study, kind of takes 9 to 12 months for the uptake of those skylines. And I can happily report over the last kind of 2 quarters, if you look at the growth in CLL, we're starting to see those guidelines really kick in, and we've got some really nice kind of trials around this as well that are starting to go read out.

And then DLBCL and MCL becoming more meaningful contributors to growth -- what needs to happen clinically and commercially for clonoSEQ to succeed in lymphoma, I guess, when we look out the next few years.

Well, one is guidelines, we need -- we have this kind of land-and-expand strategy within guidelines, and we've gotten guideline in DLBCL, but we need to really expand and really strengthen kind of the wording around those guidelines. And the second is really commercial coverage. So we have Medicare coverage on DLBCL, but very -- we need to get much stronger commercial coverage to get our ASPs up really from a commercial perspective. And the third is really getting on more pharma trials, more data, et cetera. I mean the more data that we have in those indications showing how to use, when to use throughout the patient care continuum, the more. But we're seeing nice growth in both of those. You said DLBCL and MCL, right? And then MCL, we've got really, really nice guideline inclusion. One of the areas that we're seeing in MCL is like you can make a transplant decision based on MRD status, which has been -- which is really, really nice for the patients, right? Because if you can avoid a transplant because you're MRD negative, I mean, obviously, that's a huge benefit.

Amazing. And I guess outside of the indications we've discussed, any that you think investors or the sell-side perhaps don't pay enough attention to further down the line that could be interesting.

I mean I think the opportunity in front of us, the DLBCL is a bit understated. I think what we're seeing with our ability to generate -- use our own clinical data to generate new data and insights into how the assay is being used and the clinical actionability that could come in the future is a massive opportunity for us. We talked about CLL, we talked about myeloma. I think those are things and playbook catalysts that we'll use as we go into these other lower-penetrated indications to continue to see strong growth and strong adoption and it's an area we're going to continue to invest in and get better at data generation and how can we provide more utility, more touch time points for clinicians to use our assay.

And how are you feeling about the competitive mode. Obviously, when you see a market with good growth opportunities and more people want to come into it. But you have the data, the guidelines now. So I guess relative to perhaps a couple of years ago, how are you feeling about that competitive positioning in spite of, obviously, new entrants coming in.

I feel very strong about our competitive positioning. The 1 area that we have competition entering the market is in DLBCL with Natera's acquisition of Foresight. I said this at the time, I continue now out of the data is playing out and market -- our competition really isn't Natera or Foresight in DLBCL. It's PET scans. I mean MRD is not really being -- we're 2% to 3% penetrated. The -- when Natera entering the market disproportionately benefits clonoSEQ in the short term because it's telling the using a big pulp it to say you should be doing MRD testing in DLBCL, who's in all those doctors' offices with a great reputation and brand with clonoSEQ. So we're -- I'm not -- this isn't to say that Natera is -- they're going to take some market share in DLBCL, but it' very, very, very early on. And I do think in the long term that our technology will win the day. We're looking for something very specific, which is rearranged immune receptor in this case, a rearranged B-cell receptor, that doesn't suit or randomly generate. So our specificity rounds to 100%. It's like 99.99% with an incredibly high sensitivity of 99-plus percent, right, you can't get that data if you're looking at rearranged mutations or mutations and as we will get some false positives. Anyway, that being said, again, have a lot of respect for Benitera. They're going to take some market share. But again, this is -- and I'll just say in the other indications, it's going to be very hard to compete, especially on any disease that's cellular because, again, our specific and sensitivity is so high. We've got a ton of competitive moats around the business. We're on every -- take myeloma run every pharma trial, every KOL were in guidelines specified by name now. That's going to be a tough 1 to compete in.

Indeed. And when I think about the masses of data you're starting to generate in MRD, how are you thinking about leveraging that data to make the test smarter? And how, I guess, internally -- has the team adapted in this era of AI drug discovery to, kind of, shift to, I guess, commercialize it in a more meaningful way.

Yes, that's a great question. That's -- that's the entire premise of the immune medicine business, and we can maybe talk about that and take that separately. But I do think within the MRD business, we're sitting on a very valuable data asset. Now I'll talk about it in a couple of different contexts. The first is we've invested in real-world data capabilities, I'll give you 2 examples of where we've specifically used it. Number one, is supporting our MolDx submission for increased number of time points for the episode. Number two, we have an ASH abstract on DLBCL that's come directly from our data. So that's really -- I think we're going to continue to make significant investments in the data from that side of things. And then secondly, it's early, but they're certainly ways to monetize the data and potentially look at kind of selling this data to pharma as they look at different use cases, patient stratification for their trials, things of that nature, I think is a potential future business opportunity, again, not to get out of our skis, but you -- ahead of our skis, but you asked the question. I think there's -- I think we're going to be sitting on a treasure trove of the most comprehensive heme MRD data by far out there. And I think that will have significant value. And then the third area, just you mentioned AI broadly, I mean, operationally, we're using AI across many areas of the business, one of a couple of -- particularly in the revenue cycle management for appeals processes, prior authorizations, whether medical necessities, time to cash, things of this nature in our call centers, in our account ops. I think there's a lot that we're doing to just make the business better than, frankly, every business should be doing.

And just, I guess, we have 5 minutes, so maybe shifting on to immune medicine and keeping with AI, how would you describe the value of that immune medicine business in the context of AI when it comes to things like training models, increasing target discovery, efficiency or guiding clinical trials.

Yes, I'll give you 2 examples. First of all, I think there's -- I'm going to talk -- I think there's immense value in that data as, again, the next kind of big problem in immunology that we're solving, which is moving from [ AlphaFold, ] which was generated on public data. This is proprietary own dataset. Think about like [ AlphaFold ] was owned by 1 company, think about it from that perspective or context, number one, but like in terms of particular applications because I mentioned it earlier, but I'll highlight, kind of, personalized cancer vaccines cell therapy. But even personalized cancer vaccines, there's kind of 3 things that you need to do. You have to be able to deliver the vaccine. You have to be able to pick out the antigens that go in the vaccine contracts and then you've got to be able to kind of monitor kind of the vaccine. Moderna and [ Biotech ] have figured out #1 with mRNA. Number two, what antigens to pick right? We don't have to guess, right? We can tell you kind of what the TCR responses to epitopes or the antigens that go into that vaccine contract. So we can essentially help design for each for each patient of personalized cancer vaccine, here are the antigens that should be put in the construct. Now such -- I don't want to say getting lucky, but now what they're doing is they're putting more and more antigens in hoping that kind of 1 or more of them will elicit immune response. We can be much more efficient and effective and increase the rate of effectiveness on that vaccine by telling it. Well, these are the antigens you should pick. It's really a similar exercise with TCR-based personalized cancer cell therapy. By the way, this is where we started with Genentech, we were doing really well on our side of that program. That did not shut down because they basically had an internal restructuring kind of moved away from the cell therapy, not related to adaptive. It allowed us to essentially get off and running and building this. The other area, and you mentioned it, but I'll highlight something specific is in the area of target discovery and really understanding the root cause and biology of diseases by understanding what the antigen targets are that the T cell receptors are hitting. We anticipate that a publication will be coming out in the next, I'll call it, several months in a very high impact journal that we basically, with our technology we've been able to, kind of, unravel the mystery of what drives type 1 diabetes. It turns out that these HIPs or hybrid insulin proteins are kind of rearranging and these are the targets that your T cell receptors are attacking self tissue with. And this is just the tip of the iceberg, we believe that we think that so many discoveries are going to be coming out of this ability to connect your immune response or your T cell response to clinically relevant antigens and to be able to do this kind of in silico where you can -- if you have the T cell receptor going to reverse engineer or impute what the antigen is, and vice versa. The applications of this are significant across many different disease states. So -- and but I'll say this, in the context of having had thousands of investor meetings who have said, focus -- just focused on the MRD business that I think that even if the decision was -- which isn't going to be that, hey, you shut it down, don't spend any money and focus on the MRD and grow the diagnostics business. That would be a win and what we -- the value we create, which I do believe it could be significant, could be a massive upside from there. And we've committed just to be clear on the time we committed by year-end -- everything won't be done and separated, but we will kind of outline what the path forward is with and working in conjunction with your colleagues on that.

Amazing. Chad, Kyle, thank you so much.

Thank you.

Thank you.

Appreciate it.

Appreciate it.