All right. Good afternoon. I hope everybody's enjoying the conference so far. Welcome to day one afternoon of the J.P. Morgan Healthcare Conference. I'm Julia Cheng. I cover life science tools and diagnostics at J.P. Morgan, and it's my great pleasure to introduce you to our next company presentation today by Adaptive. With that, I'll turn it over to Chad.
Thank you, Julia. I'm Chad Robins. I'm the CEO of Adaptive Biotechnologies. I wanna wish everyone a Happy New Year for those in the room and those listening in by webcast. Momentum at Adaptive Biotechnologies is building. We're driving re-revenue growth, we're advancing our pipeline, and we're managing our operating expenses with a very strong cash position. I wanna remind you today, I will be making forward-looking statements both in the presentation and in the question and answer session afterwards. The mission of Adaptive is and always has been to translate the genetics of T-cell and B-cell receptors to develop clinical products. We use our immune system as source code to develop diagnostics and to develop drugs. Last year, in 2022, we sharpened our focus in two key strategic and operating areas. The first, we focused into two business segments with clear and distinct deliverables.
The first business segment is in MRD, and it's an execution play to increase penetration. The second is in immune medicine, where we can unlock the value of our pipeline, excuse me, to deliver drugs. Secondly, we fortified our balance sheet. We had a capital infusion that will drive us to profitability, and at the same time, we're effectively managing our burn and our operating expenses. Taking a deeper look at our two business segments on slide five. In MRD. What is MRD? Minimal residual disease, or what I'll call MRD. It's a highly sensitive NGS-based assessment of MRD and hematologic malignancies, certain lymphoproliferative disorders. What that effectively means is that we can count cancer cells, and there are two primary sources of revenue for the MRD business.
The first is the clonoSEQ test offered to clinicians, and the second is the clonoSEQ assay offered to pharmaceutical companies. In immune medicine, we also have two sources of opportunities. The first is in our pharma services business, which uses the immunoSEQ assay to deliver rich immune receptor data to pharmaceutical companies in their clinical trials. The second is using our own data to develop therapeutics using immune receptors. We'll get started with MRD. I wanna bring to life a real-world patient story so you can understand how minimal residual disease is used in the real world. Karen Thomas is an extraordinary woman. She was diagnosed with multiple myeloma 12 years ago. She was put on a course of chemotherapy after a transplant. She was put on chemotherapy and maintenance therapy for 10 years. This had debilitating side effects, in particular, really bad gastrointestinal issues.
After her doctor was convinced that her MRD or that her cancer was gone, he gave her the clonoSEQ test to determine her MRD status. At a molecular level, the clonoSEQ MRD test determined that she no longer had cancer remaining in her body. Using this information, her clinician had the confidence to take her off maintenance therapy. She is leading a very full and active life. In fact, right before the break, she just came to Adaptive and did a fireside chat, hugged every single employee in our company, essentially. There wasn't a dry eye in the room. It was pretty impactful. clonoSEQ is at the epicenter of transforming care for lymphoid cancer. From a pharma perspective, pharmaceutical companies are using the clonoSEQ assay to expedite drugs in development, using MRD status to get drugs approved quicker.
From a provider standpoint, as I just mentioned, clinicians are using the information to make informed treatment decisions at each point along a patient's care continuum. It just also has a benefit to payers. In the case that I just mentioned with Karen's story, she was on a course of maintenance therapy that cost $130,000 a year. Not only did the payers benefit from taking her off that therapy, we're also no longer treating the side effects. How does the test work? MRD is a very sensitive assessment of a patient's tumor burden. We track the disease-specific DNA sequences that are associated with each cancer cell. Effectively, we can count cancer cells after treatment, and we can monitor those changes in tumor burden at each point along the patient's care journey. It is highly prognostic of outcome.
It is widely recognized as the gold standard in MRD in hematologic malignancies. It is highly sensitive to 10 to the minus 6. What that means in real world terms is that we can track one malignant cancer cell in every 1 million healthy cells. This is the only FDA-approved test in MRD in hematologic malignancies. It is one of the most widely clinically validated diagnostic tests in history. There are over 150 publications. Currently, there are over 100 active trials going on using clonoSEQ. It's also paid for by insurance. We have 260 million covered lives. It is in all the NCCN guidelines and the NCCN Cancer Centers, 33 out of 33 are using clonoSEQ in their centers.
Importantly, as I mentioned, it is the test of choice for pharmaceutical companies that are developing hemalignancy drugs that our test applies to. We have over 60 pharma partners and are in close to 200 active clinical trials. This business is growing. We have revenue growth quarter after quarter, year after year. There's a long ramp of growth ahead of us. We're only 5% penetrated in cancer patients in the United States on a clinical testing basis. We're only 21% penetrated on an overall pharma basis. I had the opportunity to do a three-hour meeting with our head of MRD and our field team, field team leadership on Friday, who outlined the strategies. We have a very good team in place, remember, we just doubled the size of the field team last year.
The setup is good for us to be able to penetrate this long ramp ahead of us. How we're gonna do it is a three-pronged strategy. The first is we're gonna increase blood-based testing. The second is we're gonna expand into the recently launched category of non-Hodgkin's lymphoma. The third is we're gonna increase the number of tests done per patient by demonstrating clinical utility in multiple studies. In parallel, there's a lot of blocking and tackling that we need to do. We need to enhance the user experience. We're doing this through an Epic integration. We need to increase our average selling price. We need to expand our coverage so that we have more covered lives under contract, and we need to optimize our sales force. I wanna double-click on each one of these initiatives. First, blood-based testing.
Only 30% of clonoSEQ tests today are done in the blood. Why is this so important to do blood-based testing? Number 1, obviously, it's more convenient to get a blood test, and also it's a lot less lots of painful to patients, much less invasive. The second reason it's really important is if you look at one of the biggest growth areas for Adaptive, it's in the community setting. In the community, they're not set up to do bone marrow. They're set up to do blood tests like everyone else is. In order to do this, we have 9 ongoing studies, and a couple of them will read out just this year. Second, increase and expand in non-Hodgkin's lymphoma. 50% of patients that our clonoSEQ test applies to are in the category of this broad basket called non-Hodgkin's lymphoma.
Of that 50%, 30% of them are in diffuse large B-cell lymphoma or DLBCL. It's worth noting that we already have launched a test in a CLIA setting, and it's also worth noting that we received Medicare coverage for DLBCL last year. We are going to pursue FDA approval. It's not necessary that we do this for CLIA tests, but we are gonna do this year. We're gonna submit. The reason for that is twofold. One, we think it'll help with guideline inclusion. The second, as I mentioned, our pharmaceutical partners who we've become a very trusted partner, they want an FDA-approved test. That's why we're gonna move into the FDA. The third area is increasing the number of time points tested per patient through continuing to generate the clinical evidence.
I'm gonna highlight a study that I think is interesting because it really shows kinda two sides of the coin of how MRD is used in a real-world practice setting. This is a study done at UCSF, investigator-sponsored trial by Martínez-López. It was published in the Journal of Hematology & Oncology. On the left side in the graph that you see, what it shows that if a patient is MRD positive, meaning we can detect an increasing tumor burden in that patient, and the clinician escalates therapy, meaning we give a higher dose of therapy, it leads to a better outcome as measured by progression-free survival. On the right side, this is the case that we highlighted with Karen Thomas. This is therapy discontinuation.
What this shows, if a patient is MRD negative, meaning we cannot we can't detect the patient at a very sensitive molecular level, they are MRD negative, no cancer left. The doctor pulls a patient off of maintenance therapy, there is no difference in progression-free survival. My belief, and I think we're gonna see that, actually the progression-free survival is actually going to be better because they no longer have debilitating side effects, which we mentioned. I'm not gonna walk through these one by one, but there are a lot of key milestones and readouts coming in 2023. You know, I'll, I guess I'll highlight again the Epic integration. I think it's gonna be very, very important for a doctor to be able to order directly from the EHR to order a clonoSEQ test.
I'll also highlight in the blood-based readouts in multiple myeloma, I think will be really important as well. Now that I've covered MRD, I'd like to turn our focus over to the immune medicine segment of the business. Our immune medicine platform sequences, maps, pairs, and characterizes immune receptors at scale to deliver rich information to pharmaceutical companies in clinical trials and for Adaptive to use for drug development. I'm gonna briefly touch on our pharma services business, then I'll spend the bulk of my time in immune medicine talking about our drug discovery efforts. In pharma services, it's worth noting that this business is growing 20% year-over-year, we believe has a sustainable growth profile in front of us.
What we do is we deliver data to pharma companies to inform biomarkers of response, both from early research and development all the way up through regulated studies. This is across autoimmune disorders, infectious diseases, oncology, and neurological disorders. Basically, any drug that's being developed, if you wanna look at the immune repertoire, the T-cell receptor or B-cell receptor profile and how the changes are, and how their drug is impacting a patient in their trial, they would use this immunoSEQ profiling service to be able to do that. Second, our efforts in drug discovery, I believe, represents one of the largest growth opportunities for Adaptive. It's actually really simple. We have the unique ability to validate novel disease-specific drug targets using our platform.
Then once we find these unique and differentiated disease-specific targets, we can find immune receptors as therapeutics against those targets, both T-cell receptors and antibodies. Our drug discovery efforts are focused in two areas: in cancer and in autoimmune disorders. Let's get started with cancer, in which we have really our marquee partnership with Genentech. It's an exclusive partnership in cell therapy directed against neoantigens in solid tumors. There's two strategies that we're primarily focused on. One is a shared product strategy, and the second is a private product strategy. Once we identify, validate, and characterize these very specific targets, we can then find and validate T-cell receptors in the shared program against neoantigens that are shared amongst patients.
Second, in our private product program, we can find T-cell receptors against tumor-specific mutations for each patient and develop a truly personalized therapeutic. The partnership with Genentech is progressing well. We are on track to deliver three fully characterized data packages on the shared program this year. Sorry, last year. They've been delivered. Genentech has selected the first to move forward to an IND so that we can speed to the clinic.
In the private product program, we have shown that we can find patient-specific T-cell receptors now in 100 patients against patient-specific tumor mutations, and we've developed a full end-to-end prototype to be able to deliver these T-cell receptors over to Genentech, when their job then, both in the shared and private program, is to take these T-cell receptors, manufacture them, expand them, and deliver them back to the patient. Not only are we excited about this, Genentech's talking about it as well. This just came out Thursday in advance of J.P. Morgan. They published an article called New Frontiers of Cell Therapy and highlighted T-cell therapies targeting neoantigens on tumor cells. Specifically, and we've been talking about this, Genentech used Adaptive as the anchor to build their entire cell therapy program.
It says, working with Adaptive Biotechnologies to advance personalized cell therapies for cancer through pioneering technology that decodes the immune system at unprecedented scale. This is moving along great. The second area of focus where we're gonna leverage our platform technology is in the autoimmune space. More specifically, we're focused on two disease areas of multiple sclerosis and Inflammatory Bowel Disease or IBD. The problem as you know, with autoimmune disorders is there really aren't targeted therapies, right? In some of the highest selling drugs in the world are really blunt instruments, right? It's really interesting 'cause we believe that we have a unique ability to discover disease-specific targets. More importantly, once we have identified these targets, we have two platforms.
One is a T-cell platform, which I just mentioned with Genentech, and the other is an antibody platform that we developed during COVID to develop clinically validated assets against these targets. Whether we partner on these or move them further along ourselves, depends on the data, it depends on the target, depends on the mechanism of action, but this is an area that we are very focused on, and if we expect to have some preclinical data later this year to make some really interesting go, no-go decisions. Again, in immune medicine, just to kinda wrap up the category, we're focused on two areas, our Genentech collaboration, which we're looking to speed to the clinic with our lead shared product candidate, and we're looking to complete our private product prototype so that we can transition to IND readiness for the private product.
In the autoimmune pipeline, I think we're gonna be able to be in a position to deliver some really interesting proof points over the course of the year to say that we can do what we said and to really uncover disease-specific targets and then find assets against them. I will again reiterate that that's a really nice kind of business that our pharma services is on... is able to kind of belay this with a 20% year-over-year growth. Before I turn it back over to Julia for our Q&A, I do wanna highlight the very strong financial position that Adaptive is in. We're on track to deliver a revenue CAGR between 2022 and 2027, between 20% and 30%. At the same time, we're managing our operating expenses. We're reducing them.
That means our lines are gonna cross with an adjusted EBITDA positivity in 2025 and a cash flow break even in 2026. Importantly, though, we have the cash through the non-dilutive fundraising that we did to be able to get there and bridge to profitability without raising additional equity capital. With that, I'm gonna leave you with three key takeaways. The first, we are the gold standard in MRD testing, and there is a long path ahead of us for growth. Number two, we have differentiated capabilities to use our platform to discover and develop immune receptors as therapeutics against novel disease targets. Number three, we are well-capitalized with a clear path to profitability to truly lead in this category of immune medicine. Appreciate your time today. Look forward to the Q&A. I'd like to invite my team up for Q&A.
Oh, yeah, I gotta. Over here. Hold on.
I can-
We're good. Thank you. Okay.
Am I on? I'll get that. I can move over.
All right. Thank you, Chad, for the great presentation. I can get us started, but for the audience, if you have a question, feel free to raise your hand. There's a mic in the room, and you can also submit it through the digital conference book. I can get us started. Maybe you guys can, you know, any qualitative comments or update you can share regarding, you know, how clinical volume trended in four Q and speak to your level of confidence in delivering that 50% clinical volume growth in this year.
Sure. Yeah. Yeah, I mean, I think, quick introduction, this is Nitin Jain, who's head of our MRD business.
Yes, we haven't released our Q4 numbers, but I think overall the business is looking really good for the MRD platform. Yeah, I'm feeling really bullish on also about 2023. I think we expect, you know, about 50% growth in 2023 in volumes. We also expect ASV growth, you know, in the single-digit range in 2023. There's lots of catalysts. You heard Chad talk about them, you know, increased penetration in the community, increased usage in blood, and then expansion into new indications, like DLBCL.
Great. You mentioned a few drivers, you know, DLBCL, Epic integration, continued penetration community setting, and increased utilization, you know, per physician. Curious, you know, among all these different drivers, which one is the biggest that's, you know, currently embedded in your 2023 outlook, and what can represent upside to your outlook?
Yeah. I think the biggest driver overall for the business is, you know, our penetration overall is pretty low, both in the academic setting and in the community setting. Even in the academic setting where you have 32 NCCN cancer centers use clonoSEQ, you know, we have about 12%-13% penetration. There's a lot of room for us to grow in the academic setting. In the community setting, you know, our penetration is sub 5%. This year we were able to activate 180 new community accounts. The combination of those two will drive growth.
We're getting a lot of feedback.
Yeah.
Are you guys getting feedback out there as well?
Yeah.
They're too close together. Those two or these two? Okay. Okay.
I was trying to stay away from.
Yeah. No, go right up to the mic.
Okay.
Testing.
Yeah. I think the single biggest driver is just increasing penetration, using our sales team to execute both on the community side as well as on the academic side.
Great. Now, thinking about MRD pharma, there is a great opportunity to use clonoSEQ more as primary endpoint.
Mm-hmm.
in those clinical trials. How should we think about, you know, the progress and the pipeline of your efforts in pushing for that more primary end, adoption?
Yeah. I think, you know, first we have six trials going on right now where we're the primary endpoint. One of those trials is likely to read out this year. That'll be a very solid demonstration that, you know, MRD or clonoSEQ being used as a primary endpoint can be used for successful approval of a drug program. Now alongside with that, you know, a lot of things are going on right now. You know, a lot of our physicians are using, you know, the evidence that we've generated across these 150 published studies to encourage the FDA to support the use of clonoSEQ as a primary endpoint.
You know, pharma companies are talking to the FDA. We have 100 other studies that'll, you know, really demonstrate how clonoSEQ is, you know, prognostic or indicative of the status of the disease. All of those combined will really drive more and more usage of NGS MRD and clonoSEQ as a primary endpoint in lymphoid cancer. There's also a market trend that's going on that's helping us. The multiple myeloma drug space is highly competitive. There's a lot of new drugs that are under development, and these drugs are very efficacious. Using, you know, OS or another endpoint to get drug approval is gonna take multiple years. You know, if drug companies wanna come with a drug fast, clonoSEQ is a very solid option for them.
Great. Sticking with MRD, in terms of competition, curious, other than traditional flow cytometry that you're looking to displace, what about, you know, the competitive landscape in terms of maybe other emerging players that also offer MRD testing based on ctDNA? What do you think differentiates Adaptive's technology versus them, and how confident are you in kind of continuing to build your market share from there?
Yeah. I think we're very confident about our technology. First of all, we, you know, starting with sensitivity, we have the most sensitive test. We can detect one cancer cell in a background of 1 million normal cells, which is, you know, unmatched, including by ctDNA companies. On top of that, you know, we have an incredible lead, both in terms of reimbursement and clinical evidence demonstrating clinical utility. Many of these studies take multiple years, so we have a multi-year lead. Lastly, I would say, you know, we're embedded in the clinical pathways of many, you know, of all these major cancer centers. Finally, I would say one more point, actually.
We're also the product of choice in pharma companies, a lot of new drugs are being approved using clonoSEQ as an evidence. A combination of all of that makes me pretty confident that, you know, we're ahead in terms of competition. I think there is some emerging competition in DLBCL on the ctDNA side, again, there, you know, we have a lot of evidence, and we're the only ctDNA test in DLBCL that has insurance coverage, namely Medicare coverage. Very strong position competitively.
Excellent. Any questions from the audience on MRD before we move on to immune medicine? All right, let's move on to immune medicine, which is, I know you're excited about the long-term potential of the franchise. The current use of, you know, TCR is mostly in RUO settings, and you've noted that, you know, more validation is kind of, you know, the key hurdle you need to overcome for it to be utilized in more larger scale studies. Help us think through the underlying, you know, progress you guys are making. You know, what kind of, you know, bars or near-term milestones can we watch out for over the near term?
Sharon Benzeno, who leads, Adaptive Immune Medicine business.
Yeah, thanks for the question. I would answer in two ways. I think there's a lot of room for continued growth and penetration in the research use only, given, as Chad highlighted, the rich immune receptor data we deliver that helps inform biomarker clinical trials across really four major therapeutic areas: oncology, infectious disease, autoimmunity, as well as neurodegenerative disease that's growing. In addition to that, and on top of it, what we're aiming to do is absolutely increase validation of specific application of the T-cell assay, for example, in the cell therapy space. Last year in March, the FDA issued guidance that explicitly indicated using TCR sequencing. We are the preferred partner to more than 200 pharma biotech companies, and in the cell therapy space alone, there's 2,000 programs ongoing.
We're really looking to maximize in that area, as one area to validate and penetrate further into regulated clinical programs.
Awesome. How about your progress in expanding TCR adoption for more indications beyond oncology? What are kind of, you know, some of the progresses you can highlight?
We have a lot of also runway to go. In oncology, we're the most penetrated. Our portfolio is made up of about 35% oncology clinical programs. We are mostly penetrated in phase one and phase two trials, so about 40% of the portfolio is phase two, phase three. Smaller penetration in phase three trials. We're looking to scale into autoimmune disorders, which is very much in line with our focus on the drug discovery side. As well as we see a lot of growth in the infectious disease programs, RSV. We had mentioned and announced our program with Janssen that continues to grow in the phase three pivotal trials.
As well as neurodegenerative diseases like MS, IBD, celiac programs, et cetera.
Wonderful. Turning to T-Detect, you've recently pivoted the strategy to more pharma partnership. Can you give us any update on, you know, are you getting any early signs of indications of interest from biopharma and how the progress is going?
Last summer we did announce that we would delay commercialization of T-Detect as a clinical test and really redeploy a lot of the signals that we're still actively generating with our pharma partners. In our focus, be it in IBD, for example, that's made up of Crohn's or ulcerative colitis, there are a number of programs with pharma companies that we're pursuing, as well as multiple sclerosis. We're invested, and Harlan's team is really scaling efforts to continue to get to that signal. The long-term strategy and even midterm is to apply the T-cell signatures in MS, in IBD.
To inform biomarker applications, and perhaps even a diagnostic, you can imagine CDx or complementary diagnostics opportunities with our pharma partners.
Mm-hmm. Can you help us think about the timeline of that signal generation? Like, now that you know, have the ability to, you know, partner with pharma and tap into, you know, potentially more samples, would that potentially accelerate the process? You know, how should we think about, yeah, just a timeline for that signal generation?
Do you want?
Sure. Thank you. In terms of where we are with the signals, I think in multiple indications, we already have signals that have value to pharma. We're presently in, you know, sort of high-level discussions with multiple different signals. In terms of improving those signals as we go, absolutely. I think the biggest key for us in the autoimmune space, in particular, the, like, ground truth, the labels that we get aren't necessarily. Like, for example, if we're given a cohort of 100 people that are supposedly have MS, it's never 100 people that really have MS.
Separating out who actually has the disease and not, and pharma companies do a great job of that because it's crucial to their drug success to really validate that. I think there will be a lot of benefit to being on increasing number of drug trials, especially with their really serious inclusion criteria, so critical inclusion criteria.
Got it. Say you know, in a relatively short timeframe, you do generate a strong signal or maybe even multiple compelling signals, how would you go about, you know, prioritizing or choosing which indications or signals to take to the next level? You know, in terms of, you know, choosing the partnership or co-development model, what factors would you consider and what would make sense from, like, a resource intensity or risk management perspective?
I think one of the things we're discovering is that, and especially in autoimmune disease, where the T cells themselves are causing causative agents of the disease, that in some ways, we think there's gonna be substantially a higher value in letting the T cells point out what it is that the disease actually is, what's being targeted by disease, and therefore, what are the potential drug targets moving forward. We're combining our biomarker discovery with our therapeutics generation program, and we're actually learning at quite a rapid rate and are pretty excited about it. I don't know that for the meantime, we're gonna be commercializing these products beyond biomarkers for pharma, that we're gonna, you know. Down the road, I think we...
Sharon could probably answer this, but down the road, we'll certainly, when they get good enough, and have enough validation, we'll think about making them clinical diagnostic products. In the meantime, we're pretty excited about the potential as both biomarkers and then drug target discovery engines, as well as creating assets against those targets.
In terms of prioritization, once we have a validated target, for example, in autoimmune, it really depends on what that target is and then how we go after it. That would lead to whether we partner or whether we decide to take that candidate or asset in-house. For example, if it's an autoimmune target, if we were going T-cell therapy, we would most likely partner because we don't wanna go kind of be in the T-cell therapy business in the autoimmune other than kind of finding the targets and the T-cell receptors. However, if it was an antibody therapeutic, that may be a very different story, where we may decide that we wanna...
We're gonna deploy our resources to develop that target, Excuse me, that candidate on our own.
Great. In terms of drug discovery, I know there's a lot of activity, you know, besides the Genentech deal as well. Can you maybe give us some color on, you know, how the pipeline is looking like at this point? What indications look the most promising? How should we think about potential deal sizes, deal structures, or economics that, you know, could look similar to or different from the Genentech deal?
I'm gonna go kind of broad for a minute and then, and somewhat punt on the question. I don't think we're in a position yet to discuss kind of the development pipeline on our deal flow. If you look at kind of the overall revenue profile of Adaptive, which came in at kind of $53, which will come and which we've kind of guided to of, call it, low $50s in Immune Medicine and high $40s in the MRD. Over the next 2 years, MRD will wind up kind of usurping that and be a higher portion of our overall revenue pie.
Then in the out years of our long-range plan, what you'll see is the immune medicine business will wind up outstripping that in terms of kind of the revenue growth and profile. The reason is because of, you know, the deals, two things. One is that the amortization of the Genentech upfront, which we have about $90 million or so left, that's starting to burn down, and it will be replaced with kind of a high-quality revenue stream of the milestones and the royalties, along with other drug development opportunities that will wind up making the immune medicine a, kind of a larger percentage of the pie. Of that, some of those deals we're working on now and will wind up kind of playing out over the next, you know, several years.
Cool. For your proprietary development efforts, so three areas, TCR, antibody, and target discovery. Any thoughts you can share on how you would, you know, prioritize among the three areas? Are there any differences in terms of the relative, you know, speed or difficulty of developing each category?
I'll just say one. Just a little correction. In terms of, like, product candidates or assets, that would be on the T-cell or antibody side. The targets, while may be valuable and may be partnerable, I think would be in a different category than the candidates. Sharon, do you wanna?
Yeah. We are prioritizing a novel target discovery in autoimmunity, as Chad highlighted. Based on that target, the beauty is we've built out the ability to then go after a TCR as a therapeutic or an antibody. They're interrelated. The sequential is finding the target, and then we're off to the races in terms of the appropriate therapeutic modality, based on that target.
Awesome. Any questions from the audience? All right. Yeah.
You, you laid out a very beautiful plan for the next five years and where every target that you guys are set for yourself, you know. You guys have certainly spoken about what are the, you know, tailwinds which are gonna help you or your advantages that you guys have on your side. What could be some of the challenges that could derail the plan set forth?
Yeah. The, the revenue range that was laid out was 20%-30%. You know, milestones will play a big role in terms of whether we end up at the high end or the low end. We do have a binary event coming up with Genentech in terms of the IND filing, right? You know, that could add some risk. You know, we're pretty sheltered from a macro perspective. The one thing we're keeping an eye on is the IRA, right? There's a lot of noise around pharma budgets and pipelines and, you know, what the Inflation Reduction Act could imply. We're not seeing it now, it's something we're gonna keep an eye on.
As we guide, you know, and we'll do that in mid-February, for this year, we're also gonna be a little bit more conservative around milestones, so we'll kind of, you know, de-risk those a little bit more than we historically have. Yeah, I'd say the big swing factors would be the Genentech, you know, IND, and then maybe a little bit of budgetary pressure on pharma in the near term.
Thank you.
In terms of, cost reduction, I'll just continue to follow in Tycho for the remaining minutes.
Sure.
You know this opportunity to, you know, potentially migrate from NextSeq 550 to NovaSeq to further reduce your COGS. I think there's, you know, could be looking at opportunity of a single-digit, you know, lift to your gross margin. Have you started that process, and how should we think about the timeline and...?
Yeah. We're using the older NextSeqs, as you highlighted. You know, we're doing a technical evaluation around patterned flow cells for NovaSeq, right? We've gotta make sure our assay's compatible. You know, we're early in the queue with Illumina to send them some samples this spring, I think by March maybe, to see if it, you know, is how it runs on the new X. Obviously, that has a lot of appeal in terms of room temperature, stable reagents, you know, 2 independent flow cells. You know, if we're compatible with that could be a good upgrade path for us. Then there are a lot of other levers around margins. We're looking at DNA extraction costs, data storage costs. You know, we've talked publicly about real estate.
We've kinda gone through, you know, the entire company. There's no sacred cows. We're looking at G&A. We're looking at a lot of different things, you know, not just kinda workflow in the lab, but, you know, R&D as well, how we prioritize products and, you know, make sure that everything we do has a good, you know, path to either revenue or margins or ideally both.
Awesome. Well, with that, we're on time. Thank you everybody for joining.
Thanks.
Thank you.
Thank you, Julia. Thank you.
Thank you.