Adaptive Biotechnologies Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 9, 2023

There are 13 speakers on the call.

Operator

At this time, I would like to welcome everyone to today's Adaptive Biotechnologies 2023 Third Quarter Earnings Call. All lines have been placed on mute to prevent any background noise. Just know after the speaker remarks, there will be a question and answer I'd now like to turn the call over to Carina Calzadilla, Head of Investor Relations. Karina, please go ahead.

Speaker 1

Thank you, Greg, and good afternoon, everyone. I would like to welcome you to Adaptive Biotechnologies' 3rd quarter 2023 earnings conference call. Earlier today, we issued a press release reporting Adaptive financial results for the Q3 of 2023. The press release is available at www.adaptivebiotech.com. We are conducting a live webcast of this call and will be referencing 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.

Speaker 1

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. In addition, non GAAP financial measures will be discussed during the call and a reconciliation from non GAAP to GAAP metrics can be found in our earnings release. Joining the call today are Chad Robbins, our CEO and Co Founder and Tycho Peterson, our Chief Financial Officer. Additional members from management will be available for Q and A.

Speaker 1

With that, I will turn the call over to Chad Robbins. Chad?

Speaker 2

Thanks, Karina. Good afternoon, everybody, and thank you for joining us on our Q3 2023 earnings call. This quarter marks a pivotal moment in Adaptive's evolution. As we have previously shared, we have 2 compelling businesses in MRD and Immune Medicine. They are at disparate stages of maturity with different investment requirements, operating models and distinct value drivers.

Speaker 2

To maximize the full potential of each business, we have hired Goldman Sachs to assist with a review of strategic alternatives. We will provide clarity on the path forward by early next year. Why are we making this decision now? MRD is a pure play diagnostic business With strong moats supporting Clonoseek's established position as the gold standard in Heme MRD. Its continued momentum and success will require focused commercial execution to drive increased penetration in current and new indications as well as further investment in operational scale to solidify its path to profitability.

Speaker 2

In contrast, immune medicine is now fully focused on drug discovery supported by a major achievement this quarter with the discovery of a novel target in multiple sclerosis. These data validate our target discovery approach in autoimmunity with the ability to unlock additional novel targets in multiple autoimmune indications. The combination of our drug discovery platform with Genentech in oncology and the discovery of this first novel autoimmune target gives us a clear path to successfully build a broad and differentiated therapeutics business. We are confident in the value these businesses can deliver to patients and shareholders and expect that this ongoing strategic review will yield the best path forward to maximize their respective potential. In light of this process and the evolution of our immune medicine business into a dedicated drug discovery model with line of sight to long term value creation, We are updating total company revenue guidance for the year to exclude revenue from the immune medicine business.

Speaker 2

However, as you will hear from Tycho, we will provide you with MRD guidance for the remainder of 2023. Importantly, we continue to drive operational efficiencies throughout the organization. We completed the lab move this quarter, which is essential for future margin improvement and we maintain a healthy cash position with about $371,000,000 in cash on the balance sheet. Let's now take a closer look at our MRD business, Starting with clinical testing on Slide 4. Clonacy clinical testing continues to generate Record high volumes quarter over quarter.

Speaker 2

This quarter volume grew 10% sequentially and 56% versus prior year to over 15,000 tests delivered. Growth came from all marketed indications with multiple myeloma as the largest contributor and the main growth driver. Ordering accounts and ordering healthcare providers grew 30% 33% versus prior year respectively. Business in the Community segment grew 25% quarter over quarter, contributing 21% of ClonaSeq volume in Q3 versus 13% a year ago. Blood based testing increased in all indications and grew 14% sequentially, contributing 36% of all MRD tests.

Speaker 2

Included Among the many presentations highlighting clonoSeq data at ASH this year will be new evidence demonstrating the prognostic value of blood based clonoSeq testing in myeloma. Speaking of data, in Q3, we saw 2 important new ClonoSeq datasets published. 1 in mantle cell lymphoma, where ClonoSeq's Deep sensitivity of 10 to the 6 was shown to have prognostic power and 1 in PH positive ALL, where clonaSeq was favorably compared to the current PCR based monitoring standard. Last quarter, we saw downward pressure on our ASPs driven by well understood factors. Actions we have taken to address these pressures are already beginning to contribute to positive ASP trends as we saw consistent month over month increases in Q3 and 3% overall ASP growth versus Q2.

Speaker 2

These positive trends, I'm happy to say, are continuing into the 4th quarter. Our plan to further optimize ASP is focused on coverage expansion, growth in contracted lives, improvement in payer mix and operational enhancements to improve collections. Specifically, we have invested in resources dedicated to claims management, transitioned the majority of our commercial payers to the new unique Clonosix CPT code and closed additional payer contracts and policy gaps. We are confident these and other planned initiatives will accelerate ASP growth for the next several years. In addition, EPIC integration continues to progress.

Speaker 2

We launched our first site, UC Davis Health, this quarter and we have 4 more sites that we anticipate launching by the end of 2023. We also have a vetted list of interested accounts anticipate 20 to 25 sites integrated by the end of 2024. Revenue declined 4% in the quarter versus prior year due to broader macroeconomic factors. Now I'm actually looking at Slide 5 on MRD Pharma. Revenue declined 4% in the quarter versus prior year due to broader economic macroeconomic factors impacting the biopharma industry.

Speaker 2

Like many of our peers, we are seeing pressure from some studies pausing or slowing down, while companies reprioritized portfolios and specific assets. This has resulted in lower sample volume across our portfolio prospective trials. Despite these transitory headwinds, The overall health of the business is strong with over $190,000,000 in backlog anticipated by year end. We launched an updated version of our ctDNA assay for use by our pharma partners in research and clinical trials for DLBCL. We plan to leverage the updated assay in our upcoming DLBCL FDA submission and deploy it for clinical testing and studies and other heme malignancies.

Speaker 2

We also continue to add meaningful partnerships to our portfolio. This week, we announced a new translational agreement with BeiGene to measure MRD across its pipeline. In summary, the setup for MRD is solid. Execution to drive top line revenue growth while improving cost efficiencies is essential to drive this business towards profitability by 2025. Turning to Immune Medicine on Slide 6.

Speaker 2

As mentioned earlier, we achieved a key milestone in This target was discovered based on our unique ability to accurately identify a specific set of TCRs that are found only in MS patients. This MS target sheds light on potentially new T cell biology that may be the trigger to this devastating disease. It also validates our novel target discovery approach, which uses our established drug discovery platform. This discovery was accelerated by our ability to accurately identify T cell signatures of disease, which is enabled by combining our improved machine learning AI models that we built with our partner Microsoft and our existing TCR characterization capabilities. We're applying this exact same approach to discover novel targets and additional autoimmune disorders that we strategically prioritize.

Speaker 2

Regarding our cancer cell therapy partnership with Genentech, this quarter our early product development team has successfully built out Our personalized process workflow in South San Francisco under regulated conditions. With the key building blocks now in place, We're starting end to end testing that defines the foundation for future clinical readiness of our fully personalized process. In summary, we continue to make great progress in our target and drug discovery programs in cancer and autoimmunity. Our immune medicine business remains laser focused to execute on additional key R and D and future clinical proof points that drive meaningful value inflections for our partnered and wholly owned drug discovery pipeline. With that, I'll now pass it over to Tycho.

Speaker 3

Thanks, Chad. Turning to our financials on Slide 7. Total revenue in the 3rd quarter was $37,900,000 with 65% from MRD and 35% from immune medicine, representing a 21% decline from the same period last year. The MRD business overall has been strong, driven by high volume growth of Quimaseq. The total revenue decline in 3Q was primarily driven by a 61% reduction in Genentech amortization and a 14% decrease in MRD Pharma and Immune Medicine Pharma Services due to the biopharma headwinds that we previously discussed, partially offset by strong clonoC clinical performance.

Speaker 3

MRD revenue grew 24% from a year ago to 24,700,000 Cholomecy clinical was the main driver with test volume including international increasing 56% to 15,072 tests delivered from 9,649 tests in the same period last year. MRD Pharma declined 4% and no milestones were recognized in the quarter. Immune Medicine revenue was $13,300,000 down 52% from a year ago with lower Genentech amortization driving 85% of the decline. Immune Medicine Pharma Services which saw a 29% decline versus the prior year also experienced downward pressure from biopharma. Moving down the P and L on slide 8.

Speaker 3

Total gross margin for the quarter was 49%. The decline in gross margin versus the prior year was largely attributable to lower amortization of the Genentech upfront, which has 100% margin contribution and incremental one time costs from the lab move. Versus the Q2, the decline was mainly driven by no milestones compared to the Genentech milestone we realized last quarter in addition to product mix tied to reduced pharma services and incremental costs from completion of the lab move. We continue to focus on optimizing operations to further enhance margins. This includes the implementation of a new lens ecosystem by mid-twenty 24, which will allow us to reduce overhead and increase the productivity of direct labor in the lab.

Speaker 3

In addition, after completing a technical feasibility review, we'll be switching from NextSeq to NovaSeq sequencers next year. We expect completion by late 2024 brings significant savings and material costs in 2025. Importantly, other OpEx excluding cost of revenue declined 11% versus the prior year and 12% versus the prior quarter as we continue to be laser focused in driving operating leverage and efficiencies across the organization. Interest expense from a royalty financing agreement with OrbiMed was 3,700,000 which was offset by interest and other income of $4,300,000 Net loss for the quarter was $50,300,000 compared to $45,300,000 last year. We ended the quarter with approximately $371,000,000 in cash, equivalents and marketable securities.

Speaker 3

Now turning to updated guidance on Slide 9. As Chad mentioned, given the ongoing strategic review, we are updating total company revenue guidance for 2023 to exclude Immune Medicine revenue. Going forward, Immune Medicine will resemble a more traditional drug discovery biotech model and we want to ensure that we do not trade off short term revenues for long term value And accordingly, we will not be providing revenue guidance for that business going forward. For MRD, we continue to expect Clonaseq test volumes to grow over 50% for the full year versus 2022. ASPs in the 4th quarter are expected to grow mid single digits sequentially.

Speaker 3

We expect pharma services to continue experiencing downward Putting it together, we expect total MRD revenue for 2023 to be in the range of $100,000,000 to $105,000,000 As we continue to drive operating efficiencies, our total company full year OpEx target, including cost of revenue, is expected to be around $375,000,000 a decrease of approximately 3% from last year. Cash burn for the Q3 was $46,000,000 and higher than anticipated due to lower pharma service revenues, but we expect the 4Q burn to be more normalized at around $35,000,000 Q3 had important achievements in both businesses we remain focused on driving execution while managing our spending prudently as we close the year and complete the strategic review. I'll now turn the call back over to Jen.

Speaker 2

Thanks, Tycho. I'm confident in the potential value of MRD and immune medicine and we look forward to arriving at an optimal outcome that maximizes each business to best serve our patients and our shareholders. With that, I'd like to turn the call back over to the operator and then open up for questions.

Speaker 4

Thank you.

Operator

And our first Question today comes from the line of Mark Mazara with BTIG. Mark, please go ahead.

Speaker 4

Hey guys, thank you for the time and the questions. The first one is just, I guess, why now? I think there's been some discussion about synergies or lack thereof of the 2 businesses. Just curious why you're conducting this formal strategic review at this time and maybe just any comments you have about the 2 businesses and should we read into this that there are just not parallel synergies between the 2?

Speaker 2

Yes. Thanks, Mark. And we have been talking for the last kind of 18 months about having 2 distinct business opportunities. And we are evaluating all options with our partners at Goldman Sachs to maximize a valuable business. Really, it's a fact that we have 2 distinct businesses and there are different stages of maturity.

Speaker 2

They have different value drivers and they also have different investment requirements. I mean, if you look at the MRD business, And CLOSEAKS is a commercial stage diagnostic business. It's the gold standard in MRD, but that business is it's all about execution. And on the top line, 25. But I'm is a very different business.

Speaker 2

It's a very different business model. It's much more akin to a traditional biotech business or therapeutics business. The business takes more time. It's really valued on our on its high it has very high potential, but Revenue at present isn't the driver. It's about generating data.

Speaker 2

It's about developing assets and going through clinical trials and really about Showing additional proof points that are milestone and catalyst driven. And it's become increasingly clear Where each business is, it's really the natural point to look at a separation as MRD has now kind of achieved that scale. And at the same time, we've had really what we consider a really nice breakthrough discovery in our platform in MS that we think is going to apply to Multiple other kind of autoimmune disorders. So now is the time and we're ready to go.

Speaker 4

Okay, great. So obviously I understand they require different capital needs and investment. But as for why you're choosing to withdraw the immune medicine business from your guidance, I guess, can you maybe peel the onion back a little bit as for that reason?

Speaker 2

Yes. A lot of it is because, if you look at kind of MRD, which has a kind of very known trajectory, What we don't want to do, it's really different story in immune medicine where we don't want to trade off or mortgage Kind of the short term for long term value creation. There are a number of deals, which we could do that we want to make sure that we're doing in the right context to really maximize the potential kind of for the long term value of that business. And in some sense, like being forced to do deals under Kind of certain time pressures and constraints what I think give away value that would inured to our shareholders.

Speaker 4

Okay, great. And last one for me. I might have missed it, but can you just walk through the split between MRD revenue from clinical versus pharma? Obviously, you talked about the pharma having some headwinds, but and you certainly maintained your volume guide for 50% for the year. But maybe just any additional clarity on how you're thinking about the clinical versus pharma breakout?

Speaker 3

Yes. So I mean just for you're asking on the breakout in the 3rd quarter or what we're expecting for the Q4?

Speaker 4

Both would be great, but I'll take either.

Speaker 3

Yes. I mean, look, the Clinical business, if you kind of look so we didn't have any milestones there, right? If you kind of look at U. S. HomoSeq, It's about a sixty-forty split overall.

Speaker 3

It's kind of the right math for this quarter between clinical and pharma. We mentioned pharma was down a little bit sequentially versus the Q2. Clinical volumes had a nice sequential step up. And then for the Q4, it should be similar kind of sixty-forty split.

Speaker 4

That's really helpful. Thanks guys.

Speaker 2

Thanks Mark.

Operator

And your next question comes from the line of Dan Brennan with TD Cowen. Dan, please go ahead.

Speaker 5

Great. Thanks for the questions. Maybe the first one, just on the strategic review. Looks like there's a lot of options on the table. Is the idea that the immune medicine business, you'll look to sell that?

Speaker 5

Could that business come out as a standalone business and trade publicly? Or is there a potential that both businesses get sold? I'm just trying to think through, obviously, the press release discusses strategic options, things are on the table. Just what are the permeations that are being considered?

Speaker 2

Yes. Thanks, Dan. We are evaluating all options. They're all on the table that we think can maximize value. Obviously, we can't comment on any M and A at this time.

Speaker 2

All we can say, I mean, if you look at MRD, It's a differentiated business with a clear category leading position with real strategic value. And so that provides us a range of viable options to pursue. Same thing on the immune medicine business. It's we think we've got some very differentiated targets and are moving forward. And those could be standalone businesses and do very well as standalone publicly traded companies.

Speaker 2

But again, all options are on the table right now.

Speaker 5

Are there things without immune medicine on the MRD side that you guys would do differently in terms of you want to get the profitability, the balance sheet is in good shape. I don't know what but in terms of maybe you'd want to be more aggressive, maybe you'd want to get Maybe you want to add in other businesses. I don't know, when you think about MRD on its own operating like other strategically, how does that business look on its own?

Speaker 2

Yes. That's a really great question. And actually, if you kind of peel back the onion a little bit to use your term, One of the main reasons we're doing this is really that we have dedicated focus to kind of on each one of the businesses. So There is what we've found kind of over the last kind of 18 months or so is there's been kind of a competition for kind of resources. Software is a good example of that, competition for resources, competition kind of for mindshare, etcetera.

Speaker 2

So There are ways that we could potentially accelerate on the top line in MRD. And at the same time, I think there are additional ways that we can have got an operating leverage in the model, and that is certainly something we would kind of look to achieve by looking at these as a standalone business.

Speaker 5

Maybe I'll take one more in. Just in terms of you discussed Pricing and the benefits there, could you just give us a sense of where pricing could head to with all the initiatives that you're making On the KonaSeq side?

Speaker 2

It's Jud.

Speaker 3

I can just touch on the Q3 and then maybe I'll Hand it over, but we ended up just north of $1,000 September was the highest month. I can say based on trends in October, we're confident 4th But Susan, do you want to maybe touch on that a little more?

Speaker 6

Yes. We certainly see the opportunity for continued ASP increases and frankly Acceleration in the growth of ASP in 2024 and beyond. The ASP plan that Chad alluded to is focused again on coverage expansion, growth in contracted lives, shift in our payer mix and operational enhancements to improve collections. We've Undertaken already a number of initiatives with aligned to those categories and we have quite a few more planned for launch in January and beyond. And through that, We expect to see an acceleration of the growth rate on ASP in 2024 and beyond that we're not providing specific guidance, But we do certainly see potential for continued improvements.

Speaker 5

Maybe I'll sneak Final one, I'm sorry. MRD for 2024, any early look? I mean, pharma is so uncertain. You've called it out, others have called it out, but maybe we're Hopefully, near a bottom here, just any early way to think about 2024 on the Amerenity side of the business? Thank you.

Speaker 2

Yes, we're not providing specific guidance yet for 2024. I can tell you though From a clinical business standpoint, we continue to see, not only the ASP growth that Tycho and Susan just alluded to, but Our volumes continue to grow and we do expect another great year in terms of volume growth in 2024.

Speaker 3

It might be worth mentioning, we also had a significant backlog in MRD Pharma, dollars 190,000,000 so that bodes well for the future health of the business.

Speaker 5

Great. Thank you.

Operator

Thanks, Dan. And our next question comes from the line of Rachel Battenstall with JP Rachel, please go ahead.

Speaker 7

Hey, this is Noah on for Rachel. Thanks for taking my question. Just reframing some of the topics you've touched on here a little bit more specifically. Understand you're refocusing here on the MRD business. Can you give us a sense of the levers you can possibly pull to continue protecting and strengthening the balance sheet?

Speaker 7

It seems like the quarter had some decent bright spots. For example, excluding some one time costs in the lab, move completion gross margins in 3Q were 55% versus that 49%. And then also you've noted here at conferences that the switch from the NextSeq to the NovaSeq X project is ongoing and could be a meaningful cost saver. So could you give us any sort of quantitative sense as to how much some of these cost saving mechanisms could protect your margins and manage your cash burn? Heading into next year, assuming we're just looking at the MRD business and then if you want to loop in any updated thoughts and remind us of how that OrbiMed deal could play

Speaker 3

Sure. And hey, Noah, good to hear from you. So Couple of thoughts on margins this quarter. Milestones are a big factor. It's coming 100%.

Speaker 3

We didn't have any milestones this quarter, so that did weigh a little bit On margins, we had lower Genentech amortization also impacted us. But importantly, we finalized the lab move and that did have some one time cost in the quarter. If you The lab move costs, gross margins were closer to 55%. So just looking at it a little bit sequentially, the Genentech Milestone we saw in the Q2 was $7,500,000 Again, no milestone in the Q3. There was some product mix impact, pharma services is higher margin.

Speaker 3

And as we discussed on the call that's lower than expected. Going forward, we're fairly comfortable that that's business at scale is a 70 plus Margin Business and we've got a number of initiatives. We've got a LEMS overhaul we talked about. There'll be labor and workforce efficiencies on the back of that. You mentioned the switch to NovaSeq, that really will benefit us on 2025.

Speaker 3

We'll kind of implement it in the Latter part of 2024, but I would really think about that contributing in 2025. But like other CLIA lab businesses 70% plus at Scale is easily doable for our business overall.

Speaker 2

Yes. The other thing is, we as we move labs from one building to another, We continue to look at the real estate portfolio and we're looking at ways to kind of offload one of our buildings as well, which will provide kind of additional leverage.

Speaker 3

And we think the MRD business can no, just one follow-up, you asked about MRD specifically, we think that business can be profitable In 2025.

Speaker 7

That was my next question. So I was just thinking like if we're looking at just the core MRD business, like Do you think yes, so that would you like to sort of talk about the hitting potential growth rates of like the 2022 to the 2027 revenue CAGR of And then I have one last one.

Speaker 3

Yes. I mean, again, I think we think MRD can be profitable in 2025. We've kind of given you a number of the components Around how we're thinking about ASPs increasing and then volume growth over 50% this year and it should be sustainable. A lot of larger numbers obviously start to As you get further out, but we're very comfortable that this will continue to be high in the double digits in terms of volume growth overall.

Speaker 7

Awesome. Okay. And then related to that like law of large numbers thing, can you talk about if you Thought about any of the closest core MRD adjacencies that maybe you could move into or pull forward some of the investment in those to be in the near term as part of your like overall TAM story. Maybe not officially areas that you're definitively going into, but maybe some as you've considered as potential portfolio adjacencies that could be easy growth drivers as we sort of think about refreshing the long term growth story here?

Speaker 2

Sure. Susan, you want to take that?

Speaker 6

Sure. We have looked at a number of adjacencies. I mean, 1st and foremost, the most obvious ones are other lymphoid malignancies in We have not commercialized the assay. So additional non Hodgkin's lymphoma indications in particular and we do have plans in place to move forward with commercialization including securing reimbursement for Medicare and private payers over the next couple of years. Additionally, there are adjacencies in the myeloid malignancies and perhaps in other tumors.

Speaker 6

At this time, we are exploring opportunities in the myeloid space, very early stages to understand the feasibility of particular technologies and The opportunity and then in the solid tumor space we have done some review but have no plans at this time.

Speaker 7

Awesome. Thank you so much. Really appreciate taking the questions.

Operator

Thanks, Noah. And our next question comes from the line of Tejas Sawant. Tejas, please go ahead.

Speaker 8

Good evening, guys. This is Edmund on for Tejas. Thank you for taking my questions. I just wanted to touch upon EMR Integration, with some of your pilot sites now live, I know you guys have talked about volume contributions really inflecting in 2024, What have you seen so far in terms of volume inflection at these sites?

Speaker 9

Sure.

Speaker 6

Thanks for the question, Edmund. We only have one site live as of today and not quite 2 months of experience with that site. But what I can say is that we have Seeing growth in that account in that short time both in HCP users as well as in volumes. And additionally that site Positive feedback has led them to expand the scope of the integration, previously limited to the outpatient setting, now standing to inpatient and including the potential to place standing orders, which are new features they've added since the initial go live. We have 4 more sites scheduled to go live by the end of this year.

Speaker 6

So we'll be able to start getting more robust Albeit still anecdotal evidence to support understanding of how EPIC may contribute to growth in 2024 and beyond. And again, we expect to have as many as 25 sites live by the end of 2024 at which point I think we'll be more well positioned to comment on likely growth opportunities. But we do expect lift from EPIC. Other companies who have implemented EPIC have seen lift and we'll be eager to comment further when we have a little more

Speaker 8

Got it. That was super helpful. And then just wanted to clarify, I think you guys have just commented that you Pharma and SMIDs in the backlog and between retrospective and prospective trial mix?

Speaker 3

Did you say between pharma and what? Small caps. Small caps. Small caps. Sorry.

Speaker 3

Yes. Got it. Sorry.

Speaker 6

Well, I can't comment that majority of new studies that we book when you asked about prospective and retrospective, the majority are prospective studies And we expect that to continue to be a case.

Speaker 2

Yes. We don't have a mix, but I will also say kind of The majority of our client profile is kind of large cap pharma and not SMIDs and small cap, although we certainly do have I would say, kind of call it 15% to 20% that you would kind of traditionally classify as SMIDs, but The majority are large pharma.

Speaker 8

Got it. And then with the ASH conference just around the corner in December, Are there some key publications, presentations or data points that we should be watching out for?

Speaker 6

Yes, indeed. In particular, we are excited about some data that's going to be presented by investigators from University of Chicago on the use of our assay in blood. So in this particular study, ClonaSeq was used at early time points during first line therapy in multiple myeloma to assess response in both blood and bone marrow and to compare that assessment to the commonly used serum biochemical markers that are part of traditional myeloma response assessment criteria. The study will show that clono seeking blood is strongly prognostic of outcomes and provides greater insight than traditional blood based markers. And the authors have suggested in the abstract which is now available publicly that the insights that have been gained from this work could be useful in the future if validated to inform treatment intensification in MRD positive myeloma patients.

Speaker 6

So We expect to leverage that data to advance the adoption of our blood based testing in myeloma by using it to help guide use of interim from blood based testing as a complement to marrow and by showcasing the favorable prognostic comparison when you measure early response with clonoSeq in blood versus serum biomarkers in blood.

Speaker 8

Got it. Thank you for

Speaker 5

the time today. Thanks, Edmond.

Operator

And let's see here. And our next question comes from the line of Salveen Richter with Goldman Sachs. Salveen, please go ahead.

Speaker 9

Hi. This is Lydia on for Salveen. Thanks so much for taking our question. So we just have one on the immune medicine business. You noted that a novel target has been identified in MS.

Speaker 9

So what are the

Speaker 2

Yes. Sharon, I will turn it over to you to answer that.

Speaker 10

Yes. Hi. Thanks for the question. So yes, we're excited As we mentioned, we've been focusing on identifying novel targets in autoimmunity and multiple This is the first lead program where we've identified that novel target. We're actively confirming and continuing to validate both in in vitro and in vivo MS disease model, and ultimately building out a preclinical package to drive the target.

Speaker 10

So that's in MS. And now that we've unlocked and proven out this approach in MS, of course, In parallel, our pipeline includes other autoimmune disorders. And our goal overall is, of course, to eventually be able to bring therapies against these targets into the clinic either on our own or with a partner.

Speaker 9

Thanks so much.

Operator

Thanks, Lydia. And our next question comes from the line of David Westenberg with Piper Sandler. David, please go ahead.

Speaker 11

Hi. Thank you for taking the question. So, just had a question on the immune medicine business in terms of inbound interest or conversations that you've had with, what we could be considered strategic partners, but maybe could be customers right now. Like Have they desired any kind of like exclusivity on certain kinds of work you've done for a moment or any other kind of inbound or strategic conversations you've had? I know that some of that's sensitive, but any kind of color there would be great.

Speaker 2

Hi, David. The only thing I could say at this time is from In the discussions we've had under confidentiality, kind of showing the work we've done on the MS target, there's a tremendous amount of excitement to look at ways that we may partner. And as we said, going under a strategic review and part of the kind of rationale For not doing kind of a short term deal is we're assessing kind of what the kind of optimal partnership is if we go down that route versus kind of developing the asset further ourselves. And so I think just more broadly on the Immune business, Exclusivity, non exclusivity, really can't, not at liberty to comment on specific deal structures at this time.

Speaker 11

Got you. And sorry if I missed it, I've been in and out of Wi Fi connection and phone connection. Is there was there any kind of data with this that we had with DMS. And is there any kind of parameters we should look like in terms of I don't even know what they would be quantitatively like sensitivity, I'm a diagnostic guy. So you tend to think of things that way, but anything we should look for in the data that says this is going to be really, really exciting.

Speaker 11

Just help us frame that. Thank you.

Speaker 3

Sharon, if you can kind

Speaker 2

of take that, that would be great.

Speaker 10

Yes, absolutely. So, as you can imagine, we have a lot Data, which gives us confidence about the target we've identified and are continuing to generate that data to further validate, including in the preclinical setting. Our plan is to publish on these new findings. Importantly, because of this novel We've focused and have submitted this quarter a full of core patent applications that protect our findings in MS, but also or more broadly on differentiated target discovery approach in autoimmunity. And in addition, this Some attacks normal healthy cells and in the case of MS possibly triggers the disease.

Speaker 10

So, a lot of data

Speaker 11

Thank you for taking my questions.

Speaker 5

Thanks, David. Thanks, David.

Operator

And our final question today comes from the line of Derik De Bruin with Bank America. Derek, please go ahead.

Speaker 12

Afternoon. This is John on for Derek. Lots uncovered, but I wanted to ask on the macro, great to hear on the bookings, but in terms of the pharma The continuing pharma pressure, I was wondering if you think there would be some sort of a budget flush in 4Q, and what's your expectation there? And Do you see that turning around in the next couple of quarters? Or do you perhaps see that turning around maybe like in the second half of twenty twenty four?

Speaker 6

Thanks for the question, John. So typically in Q4, you're right that we do experience higher volumes and revenue That said, importantly, we still do have a very significant backlog and healthy bookings and we haven't seen a lot of studies being canceled. So our backlog has grown and we believe that most of the reprioritization is being completed. So we do expect The higher backlog that we built 20% higher than last year will fuel revenue growth in 2024 and beyond.

Speaker 12

Got you. Appreciate it. And then just wanted to ask you, you've talked about The moving pieces of the ASP, but the long term target of $1600 in 20.27, is that does that still stand?

Speaker 2

Yes. We're confirming kind of long term targets and are making great strides to get there.

Speaker 3

Operator, are there any other questions?

Operator

My apologies, it would help if I would talk unmuted. No, there are no further questions. Did you have any closing remarks folks?

Speaker 2

Thank you for joining the call.

Operator

Thank you. And ladies and gentlemen, that concludes today's call. Thank you all for joining and you may now disconnect. Have a great day everyone.

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Earnings Conference Call
Adaptive Biotechnologies Q3 2023
00:00 / 00:00