Awesome. Welcome. Dan Brennan, Life Science Tools and Diagnostics Analyst, 46th Annual TD Cowen Healthcare Conference. We have Adaptive Biotechnologies on stage. We have Chad Robins, the CEO. Chad, thrilled to have you again up here, and, welcome.
Thanks, Dan. Appreciate you having me again.
Awesome. Listen, terrific year in 2025 for the clinical business, right? Accelerated volume growth, multiple guideline inclusions, expansions, ASP improvements, good momentum on the trial business. Just, you know, a lot of things going well for the company. How do you follow that up? I guess the question would be, just when we think ahead to 2026, maybe just set the table a little bit about priorities, kind of enthusiasm, kind of what you're looking forward to next year or this year.
Yeah. I'm, yeah, we had a great year last year, and we're going to have another great year this year. I'm super excited about the trajectory of the MRD business and also some of the kind of budding things going on in the immune medicine business. With MRD, we just expect that growth trajectory to continue. I was telling some investors earlier in some meetings that I'm coming off of our National clonoSEQ meeting last week in Santa Monica. God, the vibe, the energy, the enthusiasm, and the confidence of our reps is like I haven't seen it before. You know, I got a ton of comments around, you know, "Hey, Chad, you know what?
This..." I was complimented with a great year. They're like, "This is just getting started." Like, the conversations with doctors is changing, particularly in the community where they weren't doing MRD, you know, a few years ago. Now we're getting inbounds and just having conversation about how they can increase ordering. This is really every single rep I talk to. That is just really kind of a special feeling. Also with, you know, the ODAC decision, you know, now it being turned into draft guideline by the FDA, you know, our pharma business is also rocking. I mean, it's, you know, we're firing on all cylinders right now.
That's awesome. Maybe just kind of continuing on that vein. The guide, right, calls for greater than 30% ClonoSEQ volume growth, super exciting. Maybe just you've got a lot of growth drivers underneath it, a lot of things to peel across here. How do we think about the different components of that growth?
Yeah, I mean, we did five things last year, had a playbook. They worked. We're doing the exact five same thing this year, so it's actually not that hard. They all kind of interrelate, and those 5 things are blood-based testing, increasing our presence in the community, guideline inclusion, increased data generation, and EMR integration. If you kind of think about that, like, if we do more EMR integration, that makes it easier for docs in the community and academic medical centers to order tests. If we do more blood-based testing, that increases our community business. As we get into guidelines, you know that community practitioners really follow the guidelines. Those are the things where I've allocated capital to, and I'm going to increase allocation of capital to because I know they're working.
Some things that aren't working as well, we're saying, "Hey, you know, maybe we don't allocate as much capital to those areas." You know, actually, it was on stage here last year with you, we came out and said, "Hey, Dan, we're going to do 25% plus volume growth. Circle the plus.
You know, this year we're saying we're going to do 30%, I'll say, plus volume growth and circle the plus. Like, we came out of the gate strong already this year. We expect to meet or beat it. Like I said, those conversations with the reps give me confidence. I mean, the other statement everyone was using was double down. Let's double down this year. We feel like we can do it.
Interesting. We can unpack those. Maybe just zooming across, like, kind of the location where testing is done, just between community and academic. Like, how do we think about, like, each one of those opportunities, actually, the communities where you're pushing into more aggressively? Just give us a little more flavor of the different growth rates?
Yeah.
-opportunity.
Sure. If you look at, kind of the percentage of testing done in the community versus academic, we ended the year, well, for the total year last year, it was kind of 31% and 69%. We ended the year 33% in the community, 65% in academic medical centers. If you kind of tease that out, we're saying at the end of this year, we're going to end at about 35% in the community. The question is, why isn't that higher? It's because both are still growing, and academic is growing off a higher base. Academic is growing about 8% or 9%, and community in fourth quarter is growing about 14%. At some point, kind of the community winds up catching up.
Kind of longer term, we're looking at normalization about 50% in the community and 50% academic. That's really how it shakes out.
Interesting. Okay. When you think about that, plus that you highlight in there, I guess it's across all of these, but, you know, when you think about, maybe some of the upside drivers, is it... I mean, is any one of those areas this year more ripe to hit, a further inflection, or are they all just kind of contributing and you feel really good about all the drivers across the board?
Yeah, I mean, if I had to focus on one, I think EMR integration has been just a huge boon for the business. Making it easier for doctors to order is the first component of that. The second component of that is we built in this repeat ordering function in the Flatiron. We were also doing it on the Epic integrations as well. In Flatiron, in the community, you can choose 3, 6, 9, or 12 months. What we've seen is 75% of doctors are clicking on one of these buttons. We kind of track compliance, and we've only. This is early data, early returns, if you will. The early returns are in the first cycle, we had kind of between about a 63% compliance rate of that.
You know, when I say compliance, that means that even though the patient still has to come back in, schedule, get tested. Sixty-three to 65% of those 75% are coming in for repeat testing. If you look at kind of tailwinds on the business, that's... I mean, I'd highlight all those areas, like you said, but that's one area I'm particularly excited about. Guidelines and data, particularly guidelines, those... You know, we had 5 guideline inclusions across all of our indications last year. If you look at kind of how that plays out, our reps are having those conversations now. There's a little bit of a time lag between guideline inclusion and when you see kind of that really order flow come into play. I'm.
That's why, like, you know, this business, it's not only this year. I mean, we're still very low penetrated in all of our indications. There's kind of many years of kind of that double-digit growth ahead of us, and these things really stack on top of each other. It's cool to see.
Yeah, I was going to ask the question on guidelines next. In terms, you know, when you get a guideline inclusion that, you know, there's some lag, just, I don't know, is there any way to frame clinician behavior after? I'm sure they're all different, but just how do we think about, you know, the potential, you know, ramp once these guidelines change?
Yeah, I would say just in general, I'd give it kinda 6- 9 month between kind of a change in guidelines and really that starting to impact the kind of the ordering patterns. And then you've got ordering patterns, for example, on CLL, talking about kinda repeat ordering kind of three and six months. Getting that into the system, then that'll have a tailwind not only 6 - 9 months later, but kinda in the future, you know, out years as well.
In terms of maybe studies that you have, just what are the? I mean, you have a lot going on, and we're gonna talk about some later, but just from a high level, you're involved with so many clinical trials. Any studies in 2025 that you think could be practice-changing that could make their way into guidelines still coming up? Just, you know.
We had a bunch of guideline included. For multiple myeloma, I think maybe you'll see some kind of updates to the notes. What you're gonna see two interim kind of readouts this year, one on the MASTER-2 trial.
which is the discontinuation of maintenance therapy in multiple myeloma, after a couple successive MRD negative tests. You're seeing the same thing with venetoclax stop.
which is the, for CLL and venetoclax. You know, MRD-directed therapy in the, in PERSEUS, which is a Janssen related drug, talking about having deep MRD kinda negativity and high level of sensitivity MRD to take patients off of kinda maintenance therapy. We also have the BOVen study in CLL. There's data really across the board. One of the things you mentioned last year that was really important was the MIDAS study. This is really gonna come into, I think increase our ordering. What it says is, if you're MRD negative in multiple myeloma, that you can forgo a transplant decision.
The data's kinda still continuing to read out, but that's kinda the early returns on that have been, yeah, hey, if you can avoid transplant, that is a huge decision in multiple myeloma, obviously, 'cause of the toxicity. That's starting to be implemented into kinda MRD-directed therapy in clinical practice.
Is that, Yeah, 'cause I think we might have even brought that up on stage on some of the therapeutic panels. At the time when we brought it up, I thought there was still enough of a gap in terms of the evidence being robust enough to do that. You're saying at this point, like, kinda where do you think you are?
Yeah, yeah. It continues to materialize, but all the data's pointing in the right direction. Remember, I mean, you're talking about truly changing practice.
Right.
Your transplant was the go-to decision therapeutic intervention, right? Now if you're saying, "Hey, we're not gonna transplant a patient, we better be darn sure.
Right.
All that data continues to read out more and more positively and you look at progression-free survival, and that data, basically, you're just taking longer and longer time points to say, "Okay, they're MRD negative. Okay, we've had progression-free survival for longer and longer and longer." That's boding really well to be able to make that decision 'cause you can then go in back and do MRD testing and kinda catch the disease as it's, as it's kind of increasing and make that interventional decision later on as well. Yeah, the data in all of these areas continues to merge. It continues to support the initial readings, for example, in MASTER, in the MASTER study, right?
Right.
These kind of work in conjunction, right? The MASTER study that says, "Hey, you know, if you have MRD negative one year, MRD negative second year, take a patient off of maintenance therapy and multiple myeloma, and we're gonna track progression-free survival." It kinda also plays into a topic I know you're interested, we're all interested in, is recurrence monitoring to say, "Okay, now you're MRD negative. Patient has no evidence of disease.
Now can we do MRD monitoring or what's called recurrence monitoring to catch the disease well in advance of a scan or the disease coming back from a molecular level of using NGS MRD? That's, you know, kind of bodes well to say, "Okay, we can take an interventional action, prior to kind of the disease manifesting." Yeah, all these are working together. The data, you know, doing 250 publications and counting on a monthly basis.
Yeah. I was gonna get to the recurrence monitoring in a moment. I was gonna switch gears for a sec just to pricing.
Yeah.
You know, realized price was up $200 last year. I think, you know, close to, you know, $1,300 plus or minus, and I think the guide calls for, you know, a little bit less than maybe a $100 increase this year. Really good. Still nice ramp up to $1,400. You cited a bunch of reasons why you're gonna continue to see this price increase. Just walk us through last year's benefit, this year's benefit. You know, is there a reason why you might, you know, close to $100 is great, just kinda the underlying drivers to that close to $100 and, you know, you're on a path for much higher over time? Just kinda, you know, quantify this year's impact, I guess.
Yeah, sure. Right, 2024 to 2025, we went from $1,117 to $1,307, right? It was a nice 17% increase, but that's a tough comp 'cause we got the gapfill rate increase, right? This year, we're going from $1,307 to $1,400. That's a 7% increase. If you try to quantify that, you know, and if you kind of break down what the rationale for that increase is, you know, we've got two large payer contracts coming on board potentially in the second half. Even without that, I believe we're gonna get there. I think there's an embedded question in there, is there any upside in there? Which, you know, It's early in the year.
I wanna be prudent, but, you know, $1,400 is a good number, but there's potentially some upside in there. A couple things. One is really policy and coverage expansion. For the commercial payers right now aren't covering DLBCL, but CLL, MCL in a lot of cases. We just got our first kind of, you know, coverage policy expansion in DLBCL. The other area that we're really focused on is rev cycle management. Just really blocking and tackling and going after all these dollars, and we're using, you know, AI in this.
For example, for prior authorizations, for letters of medical necessity, for the appeals process, just getting better and better at kinda reducing time to cash and going out and collecting every dollar that we can. The other one is Medicaid. You know, we're Medicaid policy on a state-by-state level basis, we've done really well on. Net-net, kinda let's use that $1,400. I think it's a good number, but, you know, we're hoping that we have some upside in that.
What is, I mean, not on here, but just remind me like commercial payment rates across MRD for you are a kind of area, you know, or on what zip code? Like what percent of commercial payers pay, do you think?
Percent of commercial payers that pay, it depends on indication. I mean, for we've got great, you know, coverage in multiple myeloma.
Got it.
It's close to, you know, it's probably close to 80%.
Got it.
On DLBCL, it's kind of rounds to like 5%.
Got it.
if it's hard to I would have to do it by indication.
Sure. No. Yeah. No, no, it's interesting. Multiple myeloma, it's 80% rates where you have really proven clinical evidence.
Yeah.
They pay as you develop evidence.
Yeah.
Yeah, 'cause like certainly on Solid Tumor MRD-
In ALL, strong in multiple myeloma and ALL, better in CLL and then DLBCL and mantle cell lymphoma are opportunities to improve.
Okay. Maybe just back to, you know, recurrence monitoring.
Yeah.
You know, I think it's been, you know, certainly less aggressive area in kind of hematological malignancies. Just speak to, you know, you have the reimbursement for MCL secured. Just kind of walk through this opportunity and what do you think clinicians need to be more supportive of it in across other indications?
Yeah, Dan, let me answer that question and but maybe broaden the context of the question to say, you know, what mechanisms are we looking at to make sure that we're paid for all of the tests that we do?
Mm-hmm.
You know, I sit, I chair the Coalition for 21st Century Medicine board, and one of the things that we do is work on policy, and the biggest area of policy is market access and reimbursement. There's a couple areas come from that. For example, trying to revise NGS 90.2, the NCD, to be able to cover repeat testing is one area that we're focused. An area that Adaptive is specifically focused on is the bundle of tests. Right now, as you know, we get paid for four tests from Medicare. As we continue to generate evidence and as guidelines continue to kind of look at repeat testing, for example, in CLL, the question is there an opportunity to increase kind of that bundle from four to something else?
We've, we preliminarily kind of started to have those discussions, so that's another area. Then the third area, which you mentioned, is recurrence monitoring, of which we've been told, at least for now, that we have to go one by one. As you recall, we got MCL as a first.
This year in the second half, we expect to submit for CLL, and now we're also generating the evidence for DLBCL and then kind of multiple myeloma, even though it's our biggest indication, will probably be last.
In terms of submit, what's a typical timeframe at which, you know, government, you know, MolDx will come back to you and consider that?
It depends, but I hate to call it like six months or so that we would expect to have some type of decision. Some of it's based on what evidence, what the packages that you're putting together.
What kind of TAM does like recurrence monitoring look like?
Just again, to kind of level set in terms of what we're talking about, in terms of right now, again, we are paid for four tests by Medicare, but commercial payers don't have a limitation on testing. We, every test that we do, we get paid for. Why we're doing recurrence monitoring is if we can't get the bundle increased or you can't do it from a national, that we can get kind of the recurrence monitoring. What we've said, we've increased our TAM numbers in general. We haven't broken out a TAM specifically to recurrence monitoring, but we have increased our TAM, you know, half, basically a half a billion dollars based on more testing.
Maybe on the kind of switching gears for a moment, just thinking about OUS plans. I know you've got some state plans for international. Can you walk through a little bit of like those plans? Is it partnership labs, kitted solution? I'm sure you spoke about this, but just walk through a little bit of like what that opportunity is and how long that might take to unfold.
Yeah. It's actually a technology transfer. We package up reagents and send them out to kind of qualified sites. We actually bring out a person on there to kind of show them exactly how they're doing, how to, excuse me, implement the test. It's very capital efficient. We've actually tech transfer right now to Italy, France, Germany, Spain, U.K., Japan, Australia, and now we're moving into Canada. Canada and U.K. U.K. is a really interesting one because we actually got a really nice reimbursement from Bupa, which is one of the largest payers kind of recognizing the value of clonoSEQ. Canada, we're really interested in. I do want to be clear about this. This is a very... I said this, but I'm gonna say it again.
It's extremely kind of capital efficient way to do this, we're gonna be very metered in our capital deployment, ex-U.S., 'cause I think even a lot of my peers and former board members of, you know, Kevin and Mike have, you know, they've had to acquire companies and/or set up labs. It's something that we're not interested in doing. We're One of the reasons we're doing this is I think to be able to support our pharma trials, we need an ex-U.S. partnership. You know, the NGF or Next Gen Flow isn't cutting it in terms of these new therapies that really have a necessity to drive deeper levels of MRD in terms of sensitivity. But it's I think it's a really nice, I'll say, incremental piece of the business.
We're talking about like, you know, right now we have one person that's servicing the business, and we're getting some decent revenue. We think if we can add like, call it like 10 people, 10-15 people in a very kind of, kind of metered investment, that we should get a really nice kind of return on kind of, return on capital from that investment.
Mm-hmm. We spoke up early on in the conversation about you know, the five growth drivers. Maybe address the Genentech partnership, just, you know, how is that incorporated into volume guidance? How has that been going?
Yeah. So it's actually not incorporated in the volume guide. And the reason that we're doing that is we're assessing the opportunity. We have, we've done a pretty extensive pilot on a site, and I wanna make sure that if we, you know, continue to kinda make that investment, that it's kind of worth the return on capital. And if I invest in capital, more capital in EMR integrations, for example, that wouldn't be a, you know, a better and a higher volume growth driver than that partnership. So it's not that we're saying we're just assessing whether it's kind of the best. It's these lab-to-lab partnerships are complicated, and logistically, kinda where the sample comes from and making sure...
It's also MRD is not like a, you know, a, just an order-taking sale. Like, you really gotta sell it, having others sell, we wanna make sure that if we move forward, that their sales force can properly kinda sell what the opportunity is, kinda understands the data, understands the different kind of therapies that are involved in, you know, heme malignancies. There's just, there's a lot that goes into it. We're, we're assessing it. Therefore, you know, that it would be upside to the 30% volume growth.
Is that like a 2026 assessment, do you think? Or could that bleed into next year? Does that? Anything?
Yeah. It's an assessment we're doing now, and we'll probably have more to say about it later.
Got it. Okay. Maybe switching gears to competition, we spoke about a little bit, you know, before we jumped up here. You know, Natera's deal for Foresight in December caught, you know, a lot of attention. They're pushing the DLBCL. Just speak through, you know, your thoughts, your competitive position there. That market's very under-penetrated. Just you know, from the early news, how you consider, you know, Foresight, Natera, DLBCL.
Sure. Sure. First of all, I wanna talk about about the technology first, 'cause this is something that I think is misunderstood. clonoSEQ is an incredibly specific and sensitive technology. What it is that we're looking at is the VDJ recombination, right? These cancers that we're looking at are actually cancers of the immune system cell, and that B-cell receptor or T-cell receptor goes through kinda a DNA rearrangement. What happens is, at diagnosis, what's called a lymphoproliferative clone, this clone that kinda grows out of control, that is the rearrangement. We can identify it very easily, and then that becomes a numerator. We're actually tracking that rearrangement of... Your denominator is all your other healthy cells.
What that means is we're so specific that we don't get any false positives. Like, it rounds literally to zero. We're almost 100% specific. Something has to, like, be weird for us to get a false positive. In Natera's acquisition of Foresight, they're looking at mutational phase variance, and those actually can happen pseudorandomly. One of the biggest kinda issues with their test is you're getting a high false positive rate. That matters in pharma trials, where you're doing patient selection, you can't have any false positive. It also matters in the clinic, where you're gonna over-treat or treat someone who's actually technically MRD negative. That's number 1, and that is actually a huge difference, and it's worth making sure that that's what we're talking about.
Secondly, ClonoSeq is the gold standard in heme MRD. It is the gold standard. We have over 250 publications. We have over 300 million covered lives under contract. We have EMR integration. We've got great intellectual properties. By the way, our turnaround times, our clinical services consults, we have developed a very strong reputation. By the way, I always look at competition. Natera is formidable. They're a great operator. I wanna just put that out there, but this is our market, and we're looking to push and advance. I wanna make one more comment, that this is also misunderstood. Our competition in DLBCL is not Natera. It is PET scans, 3% penetration in DLBCL.
The fact that Natera and/or anybody else is gonna come in and say, "Hey, you should be doing MRD in DLBCL," we're gonna disproportionately benefit from that, because we are the gold standard. We're there. We're EMR integrated. We're covered. I really, really, really do mean that. I like some of the noise. I like having Natera make a bunch of noise that this is what that you should be doing MRD in the, in the community setting. That's how I feel about it. I mean, do you, did you want to talk about competition in flow too?
Yeah. I was gonna ask that next.
Okay.
I was gonna ask that next.
Sorry. I jumped in the gun here.
No. You kind of, you read the questions, and you just kinda have them processed to your brain. Yeah, next-generation flow cytometry, right? It's been around for a while. Just speak to a little bit about the positioning of clonoSEQ versus next-generation flow, and do you expect... You know, you've been gaining share. Just is it across the board or in certain markets? Is, you know, next-generation flow really more viable?
No. Okay. Let's start with this. We developed NGS MRD because flow was an analog measure of MRD, and it wasn't sensitive enough. That was in 2011. Since 2011, they've gone from 2-color to 4-color to 8-color to 16-color flow, and it's still an analog technology that's not sensitive enough. Okay. Let's actually talk about those numbers. Quest has a new assay. That assay is 5 x 10^6, which is 1 in 200,000. Okay? clonoSEQ as approved by the FDA is 1 in 1 million, our actual analytical validation was done on 1 in 1.5 million, okay? That's on 2 milliliters of blood. Quest is 1 in 200,000 on 10 milliliters of blood.
Our sensitivity actually is only limited by the input material we have. Even with 1/5 the amount of blood, we are 5-7 times more sensitive than flow. The important part to note is that all therapies right now are going to the necessity for much higher sensitivity to differentiate between therapies. The need to have higher sensitivity, the fact that we do higher sensitivity on less material, I, you know, this is one I was giving in part of my talk and talking about, like, how I would position this to our sales force is like, you know, we should be blowing this out of the water. Like, we should just kind of don't get me wrong, Quest's a big company. They've got a lot of reps, et cetera, but you're dealing with...
This is an apples to oranges comparison.
Is it? Yeah, it seems completely straightforward. I mean, are there certain indications you just mentioned it's always more sensitive? Are there any other indications where 1 in 200,000 is fine, or is it always you want?
No. Yeah, yeah. They're particularly talking about myeloma is where they're pushing. That's the area in particular that you need kinda higher sensitivity with these new therapies that are coming out. It's, you know, I mean, there may be some kinda limited use case if you can't get if you're doing it in the blood and you can't get an ID from clonoSEQ maybe. There, again, this is an area we should we should be going out there pretty strongly and competing against.
Now, kind of one follow-up. Well, I mean, we had one question a little further down which said, you know, FDA guidance, it does allow for Next Gen Flow to be used in some trials even though you're so much more sensitive. Is that just-
It's Europe. It's mostly in Europe. Again, if you look at the MRD-directed therapies, looking for higher sensitivity, that's why all of our pharma companies are pushing us in Europe to make sure that we have a presence for higher sensitivity, and they're looking to switch over to kinda NGS or already have. Yeah, flow, there's a huge flow consortium in Europe, and there continues to be some usage. I mean, that's why, like, in general, the pharma business has a really nice growth trajectory. We've over time been switching pharma companies.
Originally, they started doing kind of MRD, looking at kind of really as a research tool and then doing a comparison versus flow, and now, it's really being used, you know, in the clinic and in clinical intervention, clinical trials, to a much, much higher degree than it ever has been.
Maybe we have about a minute left, so we'll try to nail the margin and then a final question. Margins are going in the right direction. I think you guys are, like, kind of cash neutral position, right? Just kind of walk through a little bit of the profitability ramp over the next couple years. You know, you're consolidating the sequencing to NovaSeq X. I think the sales force is in a good spot. How do we think about the next couple years on kind of profitability?
Well, just take a look at margin, right? We, about a year and a half ago, we were talking about, hey, we can get to 70% gross margins at scale, and then we kind of with the NovaSeq X and saying, hey, we're gonna get a 5% to 8% margin increase in the first kinda 12 months and double digits after that. That's kinda on the cost side and in addition to kinda operational enhancement. As we scale, we're not adding, you know, much on the direct labor side, so just all that's flowing to the bottom line. In addition, you're going to kinda ASP increases. Now we're talking about kinda 75% to 80% gross margins at scale.
If you look at kinda, you know, profitability margin or operating margins, you know, we're saying 20%-25% operating margins as well. Incredibly healthy business with a very strong ramp ahead of us.
Actually I was gonna ask, kind of a mixed question: Is anything going wrong? Maybe let's just sum it up on a positive note, obviously, given the conversation since we're out of time. Just, I don't know, what message would you leave investors with about Adaptive today?
Yeah. I would say, I'll just follow up on that part.
Yep.
Two things. The MRD business is going great. We've got a growth trajectory in front of us that is very, very significant. We're looking to double down on what we did last year with a very high margin business. I do think even though we're very low penetrated, you know, it's ramping well, but there's a long path ahead of us. Secondly, which we didn't even cover, the immune medicine business is a huge call option on the business, right? We're spending, you know, $20 million on developing probably one of the most important data sets in immunology. We'll do deals with pharma, which I consider a burn offset, but we're looking to develop additional products out of that, and those products could be as big or bigger than our MRD products.
Overall, Dan, I mean, of course, you know, things here and there are challenges within the business, but overall, there's not a lot going wrong. I mean, I'm gonna knock on wood here because I've been doing this a long time, and I feel very fortunate to be in the position we have. Operationally, we're just getting better. We're just figuring out how to operate, execute, allocate capital, and grow the business. I can't believe it went this fast.
Yeah. Yeah. That's an awesome story. A lot to talk about. Well, Chad, thanks for obviously being up here. Thanks everyone in the audience for participating as well.
Dan, thanks for having us.
Yeah. Thanks.
You're the man.