Adaptive Biotechnologies Corp Q4 FY2020 Earnings Call

Thank you, Jeff. And good afternoon, everyone. I would like to welcome you to Adaptive Biotechnologies’ fourth quarter and full year 2020 earnings conference call. Earlier today, we issued a press release reporting Adaptive's financial results for the fourth quarter and full year 2020. The press release is available at adaptivebiotech.com. We are conducting a live webcast of this call, and we will be referencing a slide presentation that has been posted to the Investor Section on 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. Additionally, non-GAAP financial measures will be discussed during the call. 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. Additionally, 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 fourth quarter and full year 2020 earnings call. What a year! Once again, I want to thank all our Adaptive employees for their unwavering dedication, flexibility and execution in a very challenging 2020. Yesterday marked a pivotal moment for diagnostic testing. Adaptive launched T-Detect COVID, proving that it is possible to read how T cells detect disease in the blood. This test is now validated for COVID, but it's just the beginning. T cells see all diseases in the exact same way. T-Detect will translate this natural capability of T cells into a broadly applicable test that will change the diagnostic paradigm. We recognize it may take time for T-Detect to become mainstream, but the stage is set. The FDA has reviewed and provided encouraging feedback on our EUA submission. The FDA is working through how we can implement a new T cell testing category. FDA clearance under the EUA pathway, when received, will be the next milestone for T-Detect and one of many to come as we realize its value over time. In addition to the launch of T-Detect COVID, all the efforts we've put in place to combat the pandemic are being leveraged to accelerate a variety of development and commercial initiatives that will drive the future execution of our platform to power the age of immune medicine. Let me walk you through the significant progress we made throughout the year. As shown on Slide 3, despite the impact from COVID-19, we grew our business and ended the year with over $98 million in revenue, up 16% versus 2019. Revenue in the fourth quarter also grew 25% versus the prior year to $30.2 million. The amount of progress made was significant and demonstrates our ability to execute across our business areas, which are all driven by the same platform. Starting with clinical diagnostics, in addition to the launch of T-Detect COVID, we also advanced T-Detect for other future indications. The ImmuneSENSE study for T-Detect Lyme was launched and is expected to be completed in 2021. We identified another signal in Crohn's disease, which may represent a significant opportunity to reduce the expensive and time-consuming diagnostic odyssey that Crohn's patients currently undergo. We are also advancing at an increasingly rapid pace in many other disease states. clonoSEQ also achieved important milestones during the year. We obtained our first label expansion with the FDA for CLL in both blood and in bone marrow. I am pleased to announce that we recently filed with the FDA for the second label expansion of ALL into the blood. We are hopeful that more patients will be able to know their MRD status from a simple blood draw, as data continues to support this approach. In our life science research business, although the most impacted by COVID, we developed in three important ways. First, as a result of findings from the immune CODE database, we launched immunoSEQ T-MAP COVID to elucidate the T cell response to vaccines in development for COVID-19. Second, we further extended immunoSEQ T-MAP to cancer with a recent partnership with AstraZeneca to map T cell receptors to cancer antigens and AstraZeneca's portfolio of cancer medicines. And third, we entered into several contracts to expand distribution of our research use-only kit with partners including prominent CROs and core labs. In fact, yesterday, we announced an expanded partnership with Labcorp to enable broader access to our growing portfolio of immune-driven clinical diagnostic and research products. In drug discovery, we made significant progress with Genentech, with both the shared and private products. The path is set for important milestones in 2021, including IND filing by Genentech of the first shared product, generation of a data package by Adaptive for a possible second shared product, and proof-of-concept on the private product. Additionally, we leveraged our new medicine platform to build world-class antibody discovery capabilities that can benefit society for years to come. Our powerful technology allows us to search deeper and find more potent neutralizing antibodies against a wider variation of targets at very low concentrations. We have already found potent neutralizing antibodies against parts of the SARS-CoV-2 virus that could potentially treat patients impacted by a wide variety of variants. We are in advanced discussions with several potential partners. As you can see, 2020 was a busy year for Adaptive and laid a strong foundation for our 2021 plan, which we will discuss in detail throughout the call. Before I pass it on to Julie to provide details of our inline products at our pipeline, I want to take a minute on Slide 4 to reorient to the fact that everything we do at Adaptive derives from using the genetics of the Adaptive immune system as the source code of our platform. Our platform then transforms this code into data to enable the development of diagnostics and therapeutics for almost any disease. The massive and growing amount of immune receptor data that we generate with over 58 billion immune receptors is really at the epicenter of all of our business areas. The scalability of our platform and our data enables us to become a clinical product development engine. I am more confident than ever in our open-ended growth story as we have made substantial progress and had development activity underway at various stages in life science research, clinical diagnostics, and in drug discovery. With that, I'll hand it over to Julie.

Thanks, Chad. And thanks to all of you for joining us today. I want to echo Chad's thanks to our incredible employees. It has definitely been a challenging but successful year. Starting with clinical diagnostics and the exciting launch of T-Detect COVID on Slide 5, yesterday we began marketing T-Detect COVID with new features that we developed since our early access launch back in December. This is a big milestone for Adaptive and the first stepping stone for T-Detect’s success. The test is available at t-detect.com, where a virtual provider, depending on eligibility, will now authorize a prescription. Additionally, patients now have the option to get their blood drawn at one of over 2,000 Labcorp patient service centers or by mobile phlebotomist at a location of convenience, including their homes. We have filed T-Detect COVID with the FDA via the EUA pathway and are actively working with the FDA on final details including labeling. We anticipate obtaining EUA clearance as the first T-cell based test to be validated by the FDA. As mentioned in the past, we are offering T-Detect COVID for self-pay consumers and concierge medicine practices, who were receptive during the early access launch. However, we know that the COVID testing world is highly dynamic and we are paying close attention to the evolving environment in light of vaccine rollouts. Importantly, T-Detect COVID has enabled us to educate the FDA for future submissions, activate work to prepare Labcorp as the second site for T-Detect testing under EUA guidance, and build awareness with HCPs and consumers. Additionally, all consumers of T-Detect COVID will have the option to participate in research to explore the potential role that T cells play in immunity to natural infection or vaccination. To date, we have had a 60% opt-in rate from current consumers and we believe this is going to be very helpful as we all continue to navigate the pandemic. We look to share learning from our on-market real-world data in appropriate ways with the scientific community and consumers over time. We are very excited as the launch of T-Detect COVID marks the beginning of the commercial journey for T-Detect and also enables acceleration of future indications under development. As you can see on Slide 6, we are focusing on accelerating disease mapping through the R&D pipeline. In the near term, we believe that we will be able to offer T-Detect to improve upon the standard diagnostic paradigm in specific disease states, including Lyme, Crohn's, Celiac, and others. Following T-Detect COVID, we expect the launch of T-Detect Lyme in our CLIA lab in Q4 of this year. We will continue to enroll the remainder of the ImmuneSense Lyme Study during this year's Lyme season, and these data will support our commercial and regulatory efforts. We are also actively progressing in Crohn's disease with several thousand Crohn's case control samples expected to read out throughout the year. We intend to share these data iteratively as we have done with COVID. Additionally, we have completed an extensive commercial analysis of Crohn's disease, which confirms that the escalating testing from initial blood and stool tests by the primary care provider to invasive colonoscopies by the GI specialist can cost anywhere from $8,000 to $22,000 per patient. With an incidence of approximately 18,000 patients with Crohn's disease per year in the United States, multiplied by the number of people with GI symptoms that are somewhere along this diagnostic testing odyssey, the significance of a highly specific and sensitive blood test for Crohn's disease is apparent. We also expect to read out of our 1,000-patient Celiac studies later this year. We are excited about the progress we are making in these two GI disease states and are evaluating future development and commercialization possibilities. GI conditions may be a good cluster of diseases for which we can develop a panel to offer differentiated diagnosis of patients with shared symptoms. A panel approach has always been in the plan for the second phase of T-Detect product development lifecycle. To expedite this, we are exploring several ways to enable testing and validation of disease classifiers in parallel. We hope to be able to share more details on this novel clinical validation approach in the near future. Longer term, we intend to reach our ultimate goal of enabling population immunomics, whereby T-Detect can become one test with many results, all driven by the same blood sample that informs the general health of a person or a population. Turning to Slide 7 with clonoSEQ. clonoSEQ’s Q4 sequencing volumes grew 40% versus the prior year and 12% versus the prior quarter. Although the business did experience some impact from COVID towards the very end of the year, to date, more than 2,000 clinicians have been activated to order clonoSEQ, of which nearly 860 were activated in 2020. HCPs ordering for the first time in 2020 contributed approximately 20% of order volumes in the year. In Q4 2020 alone, orders were submitted by 738 unique HCPs. More than 15,000 unique patients have had one or more clonoSEQ tests to date. In 2020, approximately 6,900 patients received clonoSEQ testing, of which around 60% of tested patients each quarter was a new clonoSEQ patient. In Q4 2020, orders were submitted for approximately 3,100 patients, exceeding numbers achieved in all previous quarters. We expect growth to continue and clonoSEQ volumes to double in 2021, with rates increasing quarter-over-quarter as the year progresses. To reach this goal, we are focused on deepening our penetration through a significant ramp up of commercial efforts, including direct-to-patient advertising and peer-to-peer educational programming for clinicians. We also expect to expand our commercial reach and have increased the size of our specialized sales and customer support organizations, adding resources focused on community oncology and integrated delivery network edition. Additionally, we have entered into a collaboration agreement with LabCorp under which LabCorp’s integrated oncology salesforce will promote clonoSEQ, allowing new customers to leverage LabCorp’s already established send-out testing workflows for clonoSEQ ordering and report delivery. Through these investments, we expect to increase adoption across institutions, particularly in community oncology settings, where the majority of CLL patients are treated, and many myeloma patients are also seen. As always, expanding into blood testing is also a key strategy for clonoSEQ, as it is less invasive and more seamless for patients. Since receiving our FDA label expansion for CLL in August of 2020, we have seen more than 70% of CLL MRD tests being performed in the blood. We are pleased to announce that we have submitted a 510(k) application with the FDA for ALL in blood. With ongoing data generation and validation efforts, we expect to continue to expand into blood testing for other indications such as multiple myeloma and NHL. 2020 results provided the clonoSEQ business with a solid foundation on which to continue to build during 2021, which will be an important year in clonoSEQ's lifecycle. That said, we will continue to monitor any potential impact of COVID on testing volumes. Turning to Life Science Research on Slide 8, during the fourth quarter, research continued to be our most impacted business area by COVID. On the academic side, as anticipated, we experienced delays in sample arrivals as academic centers were still not fully operational for non-COVID related projects. Although it is still at a slow start in Q1, we are beginning to see more academic labs reopening and higher kit usage. On the pharma side, we did have some delays and cancellations of clinical trials, which impacted our ability to recognize revenue. However, the team increased the total value of our new pharma bookings by over 20% in 2020 versus 2019, which is encouraging for future growth of our pharma business. We are focused on driving revenue for our research business in 2021 in a few ways. From a product perspective, we are expanding adoption of the updated immunoSEQ RUO kit for core labs and CROs and the new immunoSEQ T-MAP COVID product extension for vaccine developers. Regarding the RUO kit, in 2020, we signed 35 new core lab partnerships with well-respected labs in the U.S. and also signed contracts with two global CROs, Q2's and LabCorp, to enable them to become immunosequencing centers of excellence for their biopharmaceutical customers. Regarding T-MAP COVID, we are currently working with several top-tier vaccine developers, including AstraZeneca and Oxford University in conjunction with Bill & Melinda Gates Foundation, to assess the T cell response to various COVID vaccines in their studies. It was challenging to integrate into the incredibly needed and successful speed of vaccine trials in the back half of 2020. But with the new variants on the rise, understanding the T cell response across the entire genome of the virus is becoming increasingly necessary. Interestingly, we are also seeing several orders for T-MAP COVID from academic labs studying the impact of vaccines on patients receiving other immune mediating therapies such as cancer immunotherapy. We expect to see more usage of T-MAP COVID in these kinds of studies and perhaps even in conjunction with research being performed by the NIH and NCI post-EUA clearance. As Chad mentioned, immunoSEQ T-MAP doesn't just apply to COVID. It applies to any disease. As such, in January, we announced a multi-year pan portfolio partnership with AstraZeneca to map T cell receptors to cancer antigens and AZ's portfolio of cancer medicines. This is our second application of immunoSEQ T-MAP and is our first data play in oncology, stemming from our antigen-mapped Microsoft collaboration. From an organizational perspective, we are focusing our investments in research sales in two key ways: first, we are opening a European business entity to support international expansion. We believe there is a lot of interest in immunosequencing at core labs outside of the United States, and we want to improve our ability to capture that business. Secondly, we are expanding our organization to include an inside sales team and more marketing colleagues to grow our kit business and data monetization opportunities. Moving on to drug discovery on Slide 9. Progress continues full speed ahead in both shared and private T cell mediated products with Genentech. For the first shared product, we had anticipated the IND submission by Genentech in the first quarter of this year. Based on productive interactions with the FDA, Genentech decided to file in the second quarter to include additional information requested by the FDA that was initially planned for post-filing. For the second shared product, we have characterized several promising TCRs currently being considered by Genentech for the development of its second shared product. We expect to complete a second TCR data package this year. If this TCR candidate is selected by Genentech, this could result in the potential development of our second shared product using our TruTCR approach. In addition, we continue to build our pipeline of TruTCR candidates against additional targets that we've prioritized with Genentech. For the private product, we have started screening and identifying patient-specific TCRs against specific tumor mutations using blood from each cancer patient. We are on track to deliver a proof-of-concept from an initial 15 cancer patients to Genentech by Q1 2021. These data and results from additional cancer patient samples will be used to establish a prototype during the second half of this year. To scale our private product development, we are building a dedicated lab that will be opened by the end of this quarter. This additional space will accommodate our end-to-end personalized product workflow. Importantly, this space has the capacity to accommodate early-phase clinical studies. We are also in the process of growing our product and process development teams and hiring dedicated FTEs for this purpose. As you can see, lots of progress and exciting milestones ahead in our partnership with Genentech. Switching now to our neutralizing antibodies on Slide 10. Using our TruAB antibody discovery approach, we identified several lead antibody candidates that strongly bind to different parts of the virus. Our growing portfolio of novel antibodies includes candidates that not only bind to the RBD region but also bind to S1, Trimer, and S2. This could have important advantages in the practical strategy that targets different mechanisms of action to inhibit the virus and potentially virus variants. We are advancing discussions with potential partners who similarly believe that our antibody candidates may provide a differentiated solution in the wake of these variants. Building on our success in identifying differentiated antibodies to SARS-CoV-2 as our first clinically relevant target, we are exploring additional future applications of our TruAB discovery approach. As part of our drug discovery growth strategy, we aim to identify additional naturally occurring fully human antibodies against several targets in infectious diseases and autoimmune disorders, particularly where we can fill a strong unmet need. I'll now pass it over to Chad Cohen, who will provide you with a financial update.

Thanks, Julie. I'll first review our fourth-quarter financial results, briefly describe our full-year financial performance, and then provide an outlook on 2021. Turning to Slide 11. Total revenue in the fourth quarter was $30.2 million, representing a 25% increase from $24.2 million in the same period last year. Our revenue mix for the fourth quarter consisted of 42% of our revenues coming from our sequencing category and 58% coming from our development category. Sequencing revenue in the fourth quarter was $12.7 million and decreased 8% from the same period in 2019. This decrease was primarily driven by our research business and was partially offset by growth in our clinical business. Research sequencing volume decreased by 46% to 5,907 sequences from 10,898 sequences in the fourth quarter of 2019. Trial enrollment delays and project deferrals resulting from the COVID-19 pandemic were both contributing factors to the decrease on a year-over-year basis. However, we did see growth in our pharma business related to MRD registrational studies. On a sequential basis from the third quarter, we did see modest growth in our pharma business in respect to volumes, but our academic business continued to feel macro pressure from the current environment. With respect to our clinical diagnostic products, clinical sequencing volume, which now includes our T-Detect COVID volume, increased 41% in the fourth quarter of 2020 to 4,539 clinical tests from 3,218 clinical tests from the fourth quarter of 2019. We have seen a recovery of our clinical sequencing volumes with our fourth quarter 2020 volumes, up 13% from the previous quarter. Development revenue grew to $17.5 million in the fourth quarter, up 69% from the same period last year. The increase was largely due to growth in revenue generated from our Genentech collaboration based on ongoing aggressive investments in our drug discovery efforts. Shifting now from our revenue to our operating costs, total operating expenses for the fourth quarter of 2020 were $74.4 million, representing a 54% increase from $48.4 million in the same quarter last year. Continuing to work down our operating expenses, the cost of revenue was $6.2 million during the fourth quarter of 2020 compared to $6 million for the fourth quarter last year, representing a 3% increase. Though the increase was relatively flat, there were some material puts and takes year-over-year. We invested in additional lab personnel, lab management, and CapEx to ensure that we came into 2021 with the appropriate capacity to operationalize our growth projections. This increase in overhead drove up our overall costs of running our production lab but was offset by a lower mix of revenue sample volume. Research and development expenses for the fourth quarter of 2020 were $35.8 million compared to $21.2 million in the fourth quarter of 2019, representing a 69% increase. The increase was to support our drug discovery activities relating to our Genentech collaboration and antibody discovery for COVID, as well as validation efforts for T-Detect COVID and T-Detect pipeline development, along with investments tied to expanding our clonoSEQ indications. Sales and marketing expenses for the fourth quarter of 2020 were $18.5 million compared to $12.6 million in the fourth quarter of 2019, representing an increase of 47%. The two primary drivers of the increase were personnel and marketing costs. Year-over-year, we continued our hiring process to support the clonoSEQ brand and also made our first fully dedicated team hires to support our T-Detect COVID launch. We also undertook a large corporate rebranding effort and continued to deploy marketing investments to soft launch our T-Detect COVID product and to support our clonoSEQ brand. Overall, these increases were partially offset by savings in travel and customer event-related expenses. General and administrative expenses for the fourth quarter of 2020 were $13.4 million compared to $8.2 million in the fourth quarter of 2019, representing an increase of 63%. The increase was primarily driven by growth in finance, legal, and HR headcount, and personnel costs. Net loss for the fourth quarter of 2020 was $44.6 million compared to a net loss of $20.6 million in the fourth quarter of 2019. Adjusted EBITDA for the fourth quarter of 2020 was a loss of $34.6 million compared to a loss of $18.7 million in the same period of the prior year. Immediately turning to our annual financial results for 2020, total revenue was $98.4 million, representing a 16% increase from $85.1 million in 2019. Our revenue mix for the current year consisted of 42% of our revenues coming from our sequencing category and 58% coming from our development category. Sequencing revenue in 2020 was $41.4 million and decreased 5% from 2019. Research sequencing volumes decreased by 36% to 22,663 sequences from 35,491 sequences in 2019. As previously discussed, trial enrollment delays and project deferrals resulting from the COVID-19 pandemic have been contributing factors to this decrease. Clinical sequencing volume, however, increased 50% in the current year to 15,216 clinical tests from 10,168 clinical tests in 2019. Development revenue grew to $56.9 million in 2020, up 37% from last year. The increase was largely due to growth in revenue generated from our Genentech collaboration. Operating expenses for the year totaled $251.2 million, representing a 54% increase from $163.5 million in 2019. The largest driver of OpEx growth on a dollar basis was research and development, which grew $45.4 million, up 64% from the prior year, followed by sales and marketing, which grew $22.9 million, and up 60% from the prior year. Earlier, Chad and Julie articulated the business rationale and opportunities available to Adaptive, which drove these investments. Full year 2020 net loss was $146.2 million compared to $68.6 million in the prior year. Adjusted EBITDA for 2020 was a loss of $119.6 million compared to a loss of $57.5 million in 2019. We ended the year with approximately $807 million in cash, cash equivalents, and marketable securities. We had no debt. With respect to our outlook for 2021, in light of an ongoing COVID recovery, we are planning an initial revenue range of $145 million to $155 million. This outlook represents 52% growth at the midpoint of the range and a strong reacceleration of revenues from the prior year. We are contemplating our sequencing revenues to represent between 50% to 55% of our total revenues for the year, which includes our expectations for effectively doubling our clonoSEQ volumes. In our development revenues category, we currently contemplate increasing revenue from the amortization from the $300 million upfront from Genentech based on increasing investments into the partnership. Additionally, we anticipate a $10 million Genentech IND acceptance milestone payment in the second half of the year. It should be noted that this outlook reflects only a partial recognition of the payment in 2021 of between $4 million to $5 million based on a proportional method of revenue recognition from our accounting literature. We are also contemplating mid-single-digit millions in potential MRD regulatory milestones in the back half of the year. With respect to some of the trends for the year, we anticipate our research business to be back-half weighted, and we expect Q1 2021 to be our lowest watermark for the year. This is due to normal seasonality, along with the overhang of the fourth quarter COVID impact. We anticipate that a strong backlog of signed pharma contracts coming into 2021, coupled with ongoing execution of new pharma bookings, will contribute significantly to the growth so long as we continue to gain access to samples. Regarding our operating expenses and capital investments, we expect closer to $8 million to $12 million in sequential OpEx growth quarter-over-quarter, resulting in a slight reacceleration of OpEx growth as a percentage of revenue versus the prior year. These expenses will primarily support commercialization activities and investments in our immuno medicine platform. In addition, we are deploying more capital off our balance sheet to support large scaling projects, including the opening of our new office and molecular lab facility in Seattle, as well as the opening of our personalized cell therapy prototype facility to support our Genentech partnership. We are excited for the next phase of growth at Adaptive. With that, I'd like to turn the call back to Chad for his closing remarks.

Thanks, Chad C. As you heard during the call, we have many exciting upcoming milestones in 2021 on the commercial and development fronts across all business areas, which are listed on Slide 12. We're more confident than ever in our value proposition as we continue to deliver on our promises and demonstrate the capabilities of our platform. With that, I'd like to turn it back over to the operator and open it up for questions.

Your first question comes from Doug Schenkel from Cowen. Your line is open.

Hey. Good afternoon. And thanks for the call and for taking my questions. Thanks for all the detail today. There was a lot there, and it was really helpful. Just starting with guidance. I'm sure it's not lost on you that your guidance for the year is a bit below where most recent consensus was. It's not far off, but it's a little bit lower. I would imagine you're skewing guidance to the lower end of the error bars, given the environment, keeping in mind that we're still just coming out of the pandemic, we hope, and that it is early in the year. If you were to come in above the range, what do you think the top three things are that are likely as you sit here to drive – ultimately be the key drivers to upside relative to where you're setting expectations for the year?

Sure. Doug, I'll take that. I think there's opportunities in immunoSEQ T-MAP on some of the kind of additional data deals as we expand there. In terms of our Life Science Research business, I think there's also potentially upside in our kit sales. There may also be potential to hit some additional milestones on the development side. So, there's potential across the business for upside potential in kind of all the potential business segments. Obviously, we've got high hopes for the clonoSEQ business as well. There are certainly opportunities there. But as you said, we want to make sure that we're guiding the street and are being cautious.

Okay. Super helpful. And then just a few other things, just to follow up on – based on the presentation. It does seem like the timelines changed on a couple of things. First, I believe the timing of the Genentech IND moved from Q1 to Q2. If I have that right, it's clearly not a big deal, but I just want to see if there's anything to detail further in terms of maybe something that Genentech is further evaluating prior to the submission? The second thing is on the launch of the CLIA-based Lyme LDT, which I think also slipped. Again, I may have those wrong, but if I have them right, I'd love you to talk a little bit about what I just asked about on Genentech and then for Lyme. I just want to see how concerned we should be about timing given just how North American tick season tends to fall.

Yes, I'll let Harlan answer the Genentech question. Just as far as Lyme, we've been talking about a 2021 CLIA launch. So I don't think the timeline has slipped there. It looks like we're on track to be able to launch during this year in a CLIA environment. Harlan, do you want to cover Genentech?

Sure. So thanks, Doug. Basically, through informal interaction with the FDA and the set of consultants, Genentech decided to upfront a set of studies and provide more information that they thought they were going to do between IND filing and first-in-humans. The timeline for first-in-humans didn't change at all. It is just a matter of where the IND filing is going to go relative to some of the other things that needed to be done. I think we were - and it's Genentech's call anyways, but I don't believe that we think there's a material change in the longer-term view of this product. Hopefully, that's sufficient.

Okay. Yes, that's helpful. Last one, kind of as a follow-up for, I think, Harlan, and then I'll get back in the queue. What are the next steps after successful data is generated for the personalized T therapy? I guess I'm just trying to see if you've learned anything in terms of how ultimately the regulatory process is going to unfold here after that data is generated?

Yes. In some ways, we're learning as we go. We've been both Genentech and Adaptive have as many sets of consultants as well as internal capabilities to assess regulatory, and we're interacting with the FDA. Since it is new, it hasn't been completely worked out yet, but I’m not sure I can answer that as directly as I would like yet, but we'll get back to you when we get more resolution on the details. So far, the FDA certainly seems excited about the possibility as are we, but we have to see what the exact requirements are going to be. We're trying to dot every i and cross every t.

Okay. Thank you very much.

Your next question comes from the line of Brian Weinstein from William Blair. Your line is open.

Hey, guys. Thanks for taking the questions. Good afternoon. On T-Detect COVID, obviously, a great milestone here for the company to launch a T cell-based diagnostic. Can you talk – just you talked enthusiastically at the beginning about it. Can you just talk more about the importance of this? What it sells – what it says about T cell diagnostics as a class of products going forward? How it can be impactful across various conditions? You've outlined several of those in the past. But I'm just curious about kind of what this milestone signals you think to you guys, the broader community? Also curious about thoughts FDA has had about reviewing the T cell-based product?

Sure. Thanks, Brian. Harlan, do you want to try framing this and putting it into context?

Sure. Thanks, Brian. So basically, every major diagnostic company in the world has put out a serology test for COVID. Yesterday, we launched a test using a completely different technology that answers some overlapping questions. As part of our data, we've done head-to-head comparisons. Our test performs as well or better than almost any of the serology tests. Even beyond that, we're getting better every week at both detecting COVID as well as many other diseases in the pipeline. We've learned a lot from COVID to apply there too. I don't yet know what the limit is for how good we can be in terms of sensitivity and specificity and how broad this can be in terms of how many diseases we can eventually include in the single test. It already stands up to the premier tests for viruses in terms of serology from the best companies in the world for COVID. Honestly, that was what we really learned. I knew we could detect COVID. I didn't know we'd be able to do it with the sensitivity and specificity that could really compare to best-in-class. If I think about it, a good analogy is Tesla releasing the Roadster a decade ago. They released a product that probably wasn't designed to be a big commercial product but showed that an electric car could outperform a Ferrari. If I had been paying attention, we would have realized it was fait accompli that we would all end up with electric cars since it was a totally different way of propelling. So we kind of sit on this precipice, and I'm pretty excited about it, as you can probably tell.

That's great. Sorry. Go ahead.

Did you also ask about the FDA?

Yes. I just talked about how FDA is thinking about reviewing a T cell-based product here, if you have anything specific that they've commented to you about?

Yes. We've been in – we're in the interactive review stage, and so far, everything is going quite well. The FDA has been super supportive and also quite reasonable. Because it's totally new, there are some extra steps we hadn't even thought of, like, for example, they don't have a space on their website for a test like us. They have to literally create a new space on their website for us. There are some extra minor time delays here and there, but in terms of our interaction and the data that we provided them and their feedback on it, we feel very good about it, and they've been great partners to us to date.

Great. Thanks. And then if I could sneak two more. Just on T-Detect, in general. First, I heard you talked about in Lyme. I mean, is there anything on the oncology-based diagnostics that you guys are coming up with? I think ovarian was originally the one you were targeting first. And then Chad C, can you just talk about if there's T-Detect COVID and T-MAP COVID in the guidance? If so, are you willing to quantify that? Thanks.

We are working in a couple of different areas of cancer. I think that that's going to be a longer time horizon than – we have a group of autoimmune diseases and other group of infectious diseases moving faster, mostly because the space of antigens in cancer is a bigger harder problem, but we are advancing. Our partnership with AstraZeneca will accelerate that as well. I think we might have some other partners to help us in that regard in the future. We're bullish about it, but it's going to take some time on the cancer side.

On your questions about T-Detect and T-MAP COVID, we do have some small studies that are contemplated with respect to T-MAP COVID. So, to the extent that there are larger studies available to us throughout the year, those could represent upside to our outlook. Yes, T-Detect is also in our guide, but its impact represents a very low percentage; we're looking to see what the trajectory is from our full launch before we contemplate where that might go from an upside perspective. Right now, it's low single digits for the year.

Thank you.

Your next question comes from the line of Salveen Richter from Goldman Sachs. Your line is open.

Great. Good afternoon and thank you for taking our question. This is Elizabeth on for Salveen. I guess big picture with regards to the drug discovery vertical and then more so for other oncology efforts, in general. Could you speak to Adaptive strategy for partnering assets here versus keeping programs in-house? Secondly, could you walk us through the exact data that's going to be disclosed from the private products and shared product candidates? I think if I heard this correctly, there's TOT data coming from 15 cancer patients for the private products early in 2021. I'm just trying to get a sense of what that could look like. Thank you.

Sure. I'll start with the first question, and then I'll pass it off to Harlan for the second question. Regarding our partnering strategy versus how much we're going to take in-house, to start, I think we're learning from kind of the best. We had the opportunity to partner with multiple companies. We chose Genentech and Cell Therapy, and we really have this opportunity to learn as we go. Over time, we may look to potentially move up the value chain and vertically integrate as we learn more, but for right now, we're in a stage where we think our expertise in using immune receptors and finding them as targeting molecules for therapeutic uses is our place in the ecosystem. That could change, and we could make investments over time to expand that capability as we learn more. As far as data to be presented or available over the year regarding the shared and private products, I’ll pass it on to Harlan.

Since this is a partnership with Genentech, they will have the final say over what gets released and how it gets released. I presume that for the private product, the actual data itself will probably be little released publicly. This is sort of internal as of now, and we are going to forge ahead as fast as possible toward getting this filed with the FDA and getting into the clinic. For the shared products, I think as we file our IND, the first shared product target will become known as part of that filing. When we trigger the next product, we'll thoughtfully inform you, but the actual target itself will be known upon filing, I’m sure, so we probably won’t be as forthcoming in this case.

Got it. Thank you so much.

Your next question comes from the line of Tejas Savant from Morgan Stanley. Your line is open.

Thanks for the time this evening. One quick one, Chad, for you on the LabCorp agreement. Just what additional steps does LabCorp need to take here before performing T-Detect on-site? Is it essentially ready to go? How quickly do you expect the collaboration to result in accelerated growth for clonoSEQ and immunoSEQ? At a very high level, can you walk us through how the economics would work versus the direct sales for you?

Sure. Hi Tejas, thanks so much. The LabCorp agreement actually includes a combination of various agreements signed with them. One is the extension of a blood collection for T-Detect. The other is the RUO kit. The second site lab, as you mentioned, and then clonoSEQ. For the on-site next steps, we are in the process right now of operationalizing that. There's some work needed to make that happen, but the teams are already working together to identify those next steps, and it should be ready in a couple of months, I would say. In terms of the growth timeline and economics, specifically for the clonoSEQ agreement, it's a marketing program whereby we cannot, for compliance reasons, share economics in terms of commission to reps and so forth. It’s an agreement whereby we're paying LabCorp a nominal amount to have the opportunity to include clonoSEQ in their oncology reps' bag so they can market clonoSEQ to their community oncology users.

Got it. That's helpful. And do you expect this to sort of accelerate the transition from bone marrow to blood pretty meaningfully here, say, by the third or fourth quarter of this year? By when should we expect a response from the FDA on ALL?

We do anticipate and hope actually that there will be a larger proportion of usage of clonoSEQ in blood. What I can tell you to date since the launch of CLL is that 70% of those orders are actually in blood. While I think it will be indication dependent, we're definitely seeing a tendency toward blood for that particular indication, and that's really nice to see. We just filed for ALL and we don't have an announcement of when we expect it, but we anticipate the standard six months or so timeline from the FDA.

Tejas, the CDA right now is slammed with COVID and is backed up in general across diagnostic applications. I want to make sure that we're clear about that. It's really an industry-wide problem that we're working through AdvaMedDx to solve.

Got it. That's understandable. And one final housekeeping one for Chad. What are you assuming Chad in terms of the Lyme contribution at the midpoint of the guide here?

Really nominal.

Nominal, okay.

Yes.

Perfect. Thank you so much.

Thanks, Tejas.

Your next question comes from the line of Tycho Peterson from JPMorgan. Your line is open.

Hey, thanks, guys. Question on the TruAB discovery efforts, a two-parter. First, the code neutralizing antibodies. You said you are in advanced discussion, so should we assume that you've kind of baked something in the guidance there? Or could that be another source of upside? The bigger question here is, where are you going with the discovery approaches on TruAB? I mean, could you go after MRSA sepsis? There seem to be unlimited opportunities for monoclonal antibody therapies. Where are the priorities for the research efforts there?

So, there's nothing in the guidance. We're not contemplating any contribution from that.

Harlan, do you want to answer?

Yes, I think we are evaluating a variety of different directions to go with our antibody platform. That includes some of the things you’re mentioning, but we have a variety of other directions that we're exploring as well, opened up by a combination of our immunology platforms and our TruAB platform. We'll provide more information as we go because right now, we're sort of in the planning phase and evaluating different options. But we're pretty excited about this, and we're bringing on new technologies as well, evaluating some potential partners as we go forward.

Okay. And then on the immunoSEQ T-MAP, I'm just curious if you could talk a little bit about the level of interest, the funnel beyond the initial partnerships with AstraZeneca and Oxford? Can you just talk about what the funnel looks like there for incremental partners?

Sure, Julie you want to take that one?

Sure, yes. As we discussed in the fall, obviously, the trials were very far advanced when we brought this product to the vaccine developers, and we're all thrilled about that. There have been new variants, as well as new FDA guidance recently on immunogenicity and understanding the importance of the T-cell response to the virus is definitely helping and advancing many of our discussions. We have about more than we are allowed to discuss that are working with us already on T-MAP COVID, running a variety of different types of trials for them right now with the pharma companies, as well as a nice set of trials on the academic side. We will have data on almost all of the most advanced vaccines. From that data, we're going to learn a lot as well, which we'll set the stage for the way this continues to progress throughout the year.

Okay. And then modeling question just on life science research. Are you assuming kind of sequential improvement here in sequencing in the first quarter? Are we through the worst of it, or do you think you could continue to be down?

Julie, do you want to take that, do you want me to?

I can start and then you can… Well, I just want to make a couple of quick remarks on that with life sciences research. Just to clarify, as you know, life sciences research on the pharma side is made up of both the MRD pharma, as well as the PCR pharma work that we do. The MRD pharma work is quite advanced registrational trials, which actually did quite well in 2020. It's the exploratory work that was most impacted by COVID because it's non-COVID-related. We do expect to see recovery in that front and continued growth with the MRD pharma work. I'll let Chad kind of take you through more specifically the net new numbers.

Yes, absolutely. The way we're thinking about it is that the first quarter, from a life science research perspective, should be our low watermark for the year, with progressing revenues as well as bookings throughout the year. Both the pharma contracts tied to those registrational studies, and those that are exploratory in nature should provide us that growth.

Okay, last one, I think you mentioned opening a European lab, can you just talk to the strategy there?

Sure. We already have a small number of people in Europe, but to access core labs in Europe, we had to establish a European entity. That will allow us to expand the boots on the ground of the field force there.

It's not allowed over opening, yes, effectively starting off with a legal entity.

Okay, got it. Thank you.

Yes.

Your next question comes from the line of Derik de Bruin from Bank of America, your line is open.

Hi, this is Ivey on for Derik today. Thank you for taking my question. Congrats on the T-Detect COVID progress and Labcorp partnership. Just curious how you see the test rolling out as estimates or discussion regarding herd immunity, timing, both? Just curious how that plays out? What have you seen in terms of the uptake since your soft launch back in December?

Sure. Julie, do you want to take that?

Sure. So yes, in terms of the early assets launches, as you mentioned, we didn't have any virtual prescriber capability, so it was a challenging ordering process and therefore, we didn’t do any marketing. Yet, we had over 660 tests ordered and delivered and 13 concierge medicine groups signed up. As I mentioned, 60% participation in the opt-in for ongoing research. Since it was available, people had to find it on their own over the holidays, we feel like it gives a good appreciation for interest in T cell testing. With the full launch, the virtual prescriber capability, Labcorp blood collection, and excitement in the media, and hopefully imminent EUA and targeted marketing, we expect to see growth of the test. We are also aware of the changing dynamics of the diagnostic market and recognize that many things may change, especially with vaccination rollout. What we know is that T cells matter, and we are thrilled to participate in understanding exactly what they mean. We'll continue to share that information. That's why we did this. It is really about validating both our platform and the utility of reading T cells in blood across diseases. We believe we are at the beginning for T-Detect.

Great, thank you for the details, Julie. A couple questions on Lyme disease. I know we talked about a price around $500. Could you update us on any charts there? And number two, could you share more details on the current thinking on commercialization, like, are you building a sales force, also partnering with Labcorp? Thank you.

That's still our target price. We are continuing to do payer research as the data matures. The maturity of the data is also influencing our commercialization plans. We've talked previously about focusing exclusively on the acute Lyme setting. We are seeing interesting data that shows potential utility in what we call the PTLDS setting, those patients who received treatment but have lingering symptoms. The data continues to read out and helps us set the commercialization plan going forward. From an organizational perspective, we have hired a VP of Sales who is putting together his plans around exactly how we anticipate the final pricing and marketing plan for the test. We'll provide more details most likely on the next call.

Great, thank you. One final quick one, just wanted to get an update on the percentage of labs open as of Q4 or exiting January. Is that still impacting the research business?

Our view of it is that the labs are opening and are in the process of opening. They are not fully staffed like they were in the past, but we're starting to see more activity and usage of the kits. Even with T-MAP COVID, as I mentioned, a lot of research is shifting toward COVID. We are also starting to see uptake of those opportunities with our academic business. It still remains to be seen; we don't have a very large field force on the academic research side. So, we don't have the same sort of coverage we have with our clonoSEQ field force to hit all the ups and downs in the various locations throughout the country. That leads to some of the volatility we're experiencing, but we're definitely seeing much more of an opening that we hope will continue as the year progresses.

Great, thank you for the detail.

Your next question comes from the line of David Westenberg from Guggenheim Securities. Your line is open.

Hi, thanks. Sorry, lots has already been covered. I want to confirm, I think you said 600 tests in T-Detect have already been ordered. I want to make sure that's correct. Is there any anticipation number that you have for T-Detect for this year, just given the fact that we're rolling out that vaccine? More importantly, I want to ask in terms of how meaningful the additional samples can be from a platform standpoint for R&D. Can that help you get other tests out faster? Do you think that speeds up some of your timelines for Ameda CTX, maybe Lyme or some of the things that you're going to do in GI? I'll stop with that and maybe ask my last question. Thank you.

Yes, sure, David. The 600 tests is correct, without marketing or virtual prescribers. Regarding projecting number of tests, keep in mind this is a brand-new category of testing. So, it is very hard to predict our testing volumes with a marketing initiative. So, we’re not going to provide guidance on that. Regarding how T-MAP, or excuse me, T-Detect COVID has accelerated signal generation, I'll let Harlan comment, because it's been quite significant.

One of the biggest boons to our learning from COVID was getting a very large number of samples, which were super clean. Because PCR based diagnostics identifying who got the disease and who didn't is quite accurate. Many thousands of positives and negatives were gathered to really use to improve our algorithms and understand them. We've been sitting on a sample frame for multiple sclerosis that we, to be honest, hadn't made much headway on and then we started applying some of our algorithmic learning that we had from COVID. We were excited because we started to see a really nice clean signal appearing. This is still in research, but it is improving our signal in all of our studies, including Celiac, Lyme, and Crohn's. It has been a huge boon to our understanding.

I think there was a third-party presence…

The only other third-party presence would have been the regulatory standpoint.

Yes, so we’ve worked – it has been easy interacting with the FDA in this regard. They will really be able to see our data and understand our assay. They have been great to us so far.

Thanks, guys. Great year. Thank you.

Thank you.

Thank you.

Thanks.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.