Good afternoon, and thank you for standing by. Welcome to Adaptive Biotechnologies First Quarter 2021 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 turn the call over to your speaker today, Ms. Karina Calzadilla. Thank you, please go ahead.

Thank you, Terry. Good afternoon, everyone. I would like to welcome you to Adaptive Biotechnologies' first quarter and full year 2021 earnings conference call.

Thanks, Karina. Good afternoon, everybody. Thank you for joining us on our first quarter 2021 earnings call. At Adaptive, what has remained a constant is our commitment to change how diseases are diagnosed and how drugs are discovered using our proprietary immune medicine platform. This is supported by our culture, which is stronger than ever. We can see that in the palpable energy and excitement we feel as we plan to begin the process of re-entry and moving into our new offices in Seattle, San Francisco, and New York. I want to thank all our employees for their commitment to the company, to each other, and to the patients we serve. As you can see on Slide 3, our first quarter results reflect a strong start to the year and are a testament to the diversity of our platform and the capability of our team. Revenue in the first quarter was $38.4 million, representing significant growth of 84% versus the prior year and 27% versus the prior quarter. We saw substantial progress across our business areas. Most notably, we achieved an important milestone in our clinical diagnostics franchise with T-Detect COVID, which received emergency use authorization in March for the confirmation of recent or prior SARS-CoV-2 infection.

Thanks, Chad. And thanks to all of you for joining us today. I first want to highlight the strategic value of T-Detect COVID to the future of the T-Detect franchise on Slide 4. T-Detect COVID is the only FDA-validated T-cell-based test to confirm recent or prior SARS-CoV-2 infection with 97% sensitivity at 100% specificity per our CD study. It has also demonstrated 90% sensitivity up to 10 months post-infection in a real-world study in 76 convalescent patients. Since launch, we have had over 3,000 consumers order the test, including members from over 50 concierge medicine practices, and approximately 75% of users have opted in for the ongoing research we continue to conduct to better understand immunity to COVID-19. Although the vaccine rollout will likely diminish the market to confirm prior natural infection, we intend to include a person's COVID status in all future T-Detect tech. This may be informative for patients with a broad range of symptoms potentially stemming from a past SARS-CoV-2 infection. Most importantly, we believe the R&D and commercial investments made for T-Detect COVID will accelerate the rate at which we develop and launch future T-Detect applications. This includes, among others, educating the FDA about the power of T-cells and our underlying technology, improving our models and techniques, and building a commercial infrastructure to market the test and service customers, all of which was accomplished in a very short period of time.

Thanks, Julie. Turning to our financial results on Slide 10, total revenue in the first quarter was $38.4 million, representing an 84% increase from $20.9 million in the same period last year. Our revenue mix for the first quarter consisted of 39% of our revenues coming from our sequencing category, and 61% coming from our development category. Sequencing revenue in the first quarter was $15.2 million and increased 60% from the same period in 2020. The growth was primarily driven by a $5.2 million increase in revenue generated from our biopharmaceutical customers. Research sequencing volume increased to 7,026 sequences, up 17% from 6,030 sequences delivered in the first quarter of 2020. We are pleased with a strong start to the year, but as a reminder, we do see variability quarter-over-quarter, and historical trends show most of our pharma revenues come in the second half of the year. Clinical sequencing volume, excluding our T-Detect COVID volume, increased 35% to 4,757 clinical tests delivered in the first quarter of 2021, up from 3,518 clinical tests delivered during the same period in 2020. Although we continue to make progress, the COVID headwinds from 2020 haven't completely abated. We expect some ongoing pressure on clinical volumes at least through the first half of the year. Development revenue grew to $23.3 million in the first quarter, an increase of 103% from the same period last year. As you all know, the primary component of our development revenue today relates to the amortization of our Genentech upfront. The largest driver of our development revenue growth this quarter was due to the recognition of $7 million in milestones from two key MRD pharma partners, which came earlier than expected in the year. As Julie mentioned, we have over $300 million in MRD pharma milestones available to Adaptive as our biopharma partners utilize our MRD assay in the development and regulatory approval of their relevant drug programs. Shifting now from our revenue to our operating costs. Total operating expenses for the first quarter of 2021 were $79.7 million, representing a 44% increase from $55.5 million in the same quarter last year.

We are really pleased with our first quarter results. Although it is early in the year, we are confident in our ability to achieve our full-year commercial and development goals. We look forward to providing you with further updates next quarter. I'll turn the call back to Chad Robins.

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

Thank you for taking the questions. Good afternoon. I found the information regarding Crohn's disease and its differentiation from colitis really interesting. Can you elaborate on the potential impact of this on patients?

Sure. I'll start and then I'll hand it over to Harlan if he wants to dive deeper. The upshot is, yes, we're super excited about the Crohn's data. This data proves that T-cells are more specific, so we can eliminate false positives. For each disease, we're going to get better on sensitivity. This data provides the foundation for our thesis of progressing from looking at single diseases to being able to differentially diagnose between diseases, ultimately getting to the concept of one sample with many results from a single blood sample. We're working our way towards that, and we're really excited about what we're seeing; it provides a solid foundation.

Following up on the question about clonoSEQ, given your investments in sales and marketing and the LabCorp relationship, can you discuss the return on those investments?

Sure. We have been making carefully timed investments in clonoSEQ to drive a doubling of volume this year. The team is executing well, and we're starting to see an accelerated ramp to achieve that. For example, we've seen nice growth in multiple myeloma, and even despite launching CLL in the middle of the pandemic, we're seeing momentum in that area as well. About half of the NCCN centers are using it now, and 30% of orders are coming from community practices, which is a new target for us. We've doubled the number of accounts ordering CLL in the first quarter. We have many initiatives in place, including peer-to-peer education and targeted marketing towards patients. We have also trained a new class of reps who are now entering the field. All these steps we are taking are setting us up for success in 2021.

We have to make sure we dot our Is and cross our Ts on all the science as we finalize our analyses.

I appreciate everyone’s questions and input today, and I am thankful for the insights shared during this call. We will open the lines for the next analyst.

Hi, good afternoon. Thank you for taking my questions. Can you provide insight on clonoSEQ usage in blood and your approach to accelerating growth volume?

We're extremely focused on activation and deepening penetration within existing accounts while also expanding into the community. The aim is to support routine MRD usage in patient care and ensuring appropriate education for hematology specialists. Multiple myeloma is performing steadily, and whereas CLL is growing, we expect further improvement as we move past COVID restrictions. We’re also working on cancer indication studies with ongoing validations.

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

Hey, good afternoon. What can you share about the T-MAP COVID business and its durability as we think about future vaccine developments?

The T-MAP business is starting to gain traction now that there’s a clearer understanding of T-cell responses to virus variants. We perceive durability in this business, given our capability to build an antigen map that informs other parts of the business, including possible future opportunities in autoimmune diseases. The Pfizer partnership is meaningful for us, involving multiple myeloma clinical programs and generating annual payments along with milestones.

Your next question comes from the line of Doug Schenkel from Cowen. Your line is now open.

Hi everyone, just to follow on the Genentech shared product, are there positive signals affirming this as a bona fide neo-antigen?

We regularly confirm that the antigens we are targeting are processed and recognized as immunogenic. We're concurrently optimizing our development workflow and collaborating with Genentech on the cell therapy aspects.

We are pursuing multiple therapeutic targets concurrently. Our team’s discovery capabilities allow for parallel processing of many targets.

Your next question comes from the line of Mark Massaro from BTIG. Your line is now open.

Congrats on a strong quarter. Can you provide more detail on your approach to newly identified neo-antigens versus tumor-associated antigens?

We take a comprehensive approach to assess risk profiles differentially based on whether they are neo-antigens or tumor-associated antigens, and we feel good about our next target having a low safety risk.

The MRD milestone of $7 million realized this quarter was unexpected, and we expect further progress from various studies contributing to our overall revenues.

Adaptive's focus on MRD in hematological malignancies positions us uniquely, and we will continue exploring ways to add incremental value to our offerings.

I am showing no further questions at this time, and that concludes our conference call. Thank you all for joining. You may now disconnect.