Adaptive Biotechnologies Corp Q4 2025 earnings call

Thank you, Danielle, and good afternoon, everyone. I would like to welcome you to Adaptive Biotechnologies Fourth Quarter and Full Year 2025 Earnings Conference Call. Earlier today, we issued a press release reporting Adaptive financial results for the fourth quarter and full year of 2025. The press release is available at www.adaptivebiotech.com. We are conducting a live webcast of this call and will be referencing to a slide presentation that has been posted to the Investor section in our corporate website. During the call, management will make projections and other forward-looking statements within the meanings of federal securities laws regarding future events and the future financial performance of the company. These statements reflect management's current perspective of the business as of today.

Actual results may differ materially from today's forward-looking statements depending on a number of factors which are set forth in our public filings with the SEC and listed in this presentation. 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 Robins, our CEO and Co-Founder, and Kyle Piskel, our Chief Financial Officer. Additional members from management will be available for Q&A. With that, I'll turn the call over to Chad. Chad?

Thanks, Karina. Good afternoon, and thank you for joining us on our fourth-quarter and full-year earnings call. 2025 was a remarkable year for Adaptive, marked by strong execution and meaningful progress across the business. As shown on Slide 3, in the MRD business, full-year revenue grew 46% year-over-year, and we achieved profitability ahead of expectations. We also delivered several key catalysts in the year that positioned the business for sustained growth and continued margin expansion.

These include accelerated EMR integrations, including the integration of clonoSEQ into Flatiron's OncoEMR, expanding access across the community setting, the launch of NovaSeq X Plus to help scale operations and improve margins, our first Medicare coverage for recurrence monitoring in MCL, expanding the lifetime value of each MCL Medicare patient, updates in NCCN guidelines across all reimbursed indications, which continues to deepen clinical validation, and strong data generations, which was marked by an all-time high with over 90 abstracts presented at ASH, reinforcing MRD's growing role as an interventional tool in patient care. In the Immune Medicine business, we scaled our TCR antigen data and modeling capabilities, leading to our first two data partnerships, and we completed a preclinical data package for our lead TCR-depleting antibody program in ankylosing spondylitis.

Taken together, the strong MRD execution, the continued progress in immune medicine, and the disciplined spending across the organization drove 55% total company revenue growth and a 68% reduction in cash burn, leading to a strong cash balance of $227 million at year-end. Let's turn to Slide 5 for a closer look at the MRD performance and future expectations, starting with clinical testing. clonoSEQ clinical testing revenue grew 64% for full year 2025 and 59% in the fourth quarter compared to the prior year. As shown in the chart, volumes increased sequentially throughout the year, reaching a new record of 30,038 tests in the fourth quarter, up 43% year-over-year and 11% sequentially. Growth was broad-based across all reimbursed indications, with DLBCL, MCL, and multiple myeloma driving the majority of year-over-year growth.

Multiple myeloma represented 44% of U.S. clonoSEQ volume, followed by ALL at 30%, CLL and DLBCL both at 9%, and MCL at 5%. Volume growth throughout the year was driven by a combination of interrelated factors, including blood-based testing, community presence, EMR integrations, clinical guideline inclusion, and ongoing data generation. In the fourth quarter, blood-based testing accounted for 47% of clonoSEQ tests, up from 41% a year ago. In multiple myeloma, blood-based testing reached 27%, which is a 6-point increase year-over-year, which is particularly meaningful given the bone marrow-based nature of the disease. Community testing also continued to expand, with volumes up 18% sequentially and representing approximately 33% of total tests in the quarter. We further scaled our digital footprint, completing Epic integrations in eight accounts during the quarter, bringing the total to 173 integrated accounts, which now drive approximately 40% of ordering volume.

Finally, NCCN guideline updates and continued data readouts across marketed indications supported our commercial execution. Ordering HCPs increased 9% sequentially and 45% year-over-year, in Q4 with particularly strong adoption in the community setting. Taken together, these drivers continued to increase both physician adoption and testing frequency per patient across indications. Turning to Slide 6, in addition to volume, clinical revenue growth was also driven by continued ASP expansion. We ended the year with an average ASP in the U.S. of $1,307 per test, up 17% year-over-year, and we exited the fourth quarter at about $1,350 per test. ASP growth during the year was driven by strong execution from our reimbursement team across several initiatives.

These include the successful renegotiation of eight major payer contracts with national and regional payers, including Humana, Aetna, Horizon, and multiple Blue Cross plans, as well as the signing of new agreements with Anthem, Centene, Florida, and L.A. Care. We also expanded commercial coverage policies with new coverage wins in DLBCL and in CLL. In parallel, we delivered meaningful revenue cycle management improvements, including Medicaid collections, appeals, prior authorization processes, and time to cash. These operational enhancements, supported by AI-enabled workflows, are driving higher paid claim rates, more consistent realization, and improved commercial payer cash collections year-over-year by 74%. Looking ahead, we expect these initiatives, together with two additional large national payer contracts we anticipate closing this year to support our targeted average ASP of approximately $1,400 per test in 2026.

Turning to Slide 7, our MRD pharma business had a strong year, with revenue growth of 20% year-over-year, including $19.5 million in regulatory milestone revenue. Excluding milestones, pharma grew 11%, and we ended the year with approximately $210 million in backlog. Several important shifts in our pharma portfolio are worth highlighting. First, multiple myeloma remains the largest driver, accounting for roughly 70% of sequencing revenue and approximately 60% of backlog. Second, CLL and ALL bookings more than tripled in 2025, supported by emerging data underscoring the need for higher sensitivity MRD to differentiate therapies in both disease states, as well as updated NCCN guidelines for fixed-duration regimens in CLL. Third, MRD is increasingly embedded directly into regulated interventional trials, with approximately 60% of our portfolio, including MRD, as an endpoint, up from about 40% in 2024.

This shift has been driven by regulatory momentum, including the ODAC recommendation and, most recently, the subsequent FDA draft guidance supporting MRD as a primary endpoint in multiple myeloma accelerated approvals. Of note, registrational trials that incorporate MRD carry higher economic value and have a halo effect in the clinical business. Overall, we're encouraged by the expanding role of MRD across hematologic oncology trials, and we believe broader endpoint adoption, increased testing time points, and the need for greater sensitivity will continue to drive MRD pharma revenue growth. Turning to Slide 8, our focus this year is clear: continuing driving top-line growth while expanding margins, building on the same durable growth drivers that powered performance in 2025.

In 2026, we expect clonoSEQ test volumes to grow by more than 30% year-over-year, supported by a continued mix shift toward blood-based testing, which we expect to exceed 50% of total MRD volume, deeper penetration in the community setting, where we expect more than 35% of testing to originate, further scaling of our EMR integration effort, adding approximately 40 with a focus on high to mid-volume accounts, and continued generation of clinically meaningful data across multiple indications to further expand interventional use and support the guideline evolution. From a pricing standpoint, we expect to increase ASP to an average of about $1,400 per test based on the initiatives described earlier. In pharma, we plan to increase the number of registrational and primary endpoint studies across multiple myeloma, CLL, and DLBCL, leveraging growing regulatory and clinical endorsement of MRD.

We also expect continued margin expansion, driven by higher volumes flowing through the NovaSeq X Plus and operating leverage across our production and our commercial infrastructure. We believe these priorities position MRD as a scalable, durable, and increasingly profitable growth engine for Adaptive in 2026 and beyond. Now, let's turn to Slide 10 to discuss Immune Medicine. The premise of our Immune Medicine business is to generate large-scale, proprietary immune receptor data that allows us to understand how T-cell receptors bind to antigens and how those interactions drive immune responses across cancer, autoimmunity, and infectious diseases. Over the past year, we have continued to scale this data. We now have more than 5 million paired TCRs spanning over 20,000 antigens and nearly 50 HLA types, a dataset that is orders of magnitude larger than what is publicly available.

We believe this scale is sufficient to train predictive models of the adaptive immune response across diseases. In parallel, we are applying our platform to identify what we believe are likely disease-causing T-cell receptors and their antigens in certain autoimmune conditions, including type 1 diabetes, celiac disease, and multiple sclerosis. These insights have the potential for TCR-based target discovery to enable existing and future partners to develop immune-based therapeutics. Turning to Slide 11, I'll briefly review our 2025 achievements and how they set us up for our 2026 strategy. First, we began to monetize our data with two distinct licensing deals with Pfizer. One is a data licensing agreement in which Pfizer has access to a subset of our TCR antigen training data. Pfizer will use this data to develop and train its AI and machine learning models to accelerate research and drug discovery in multiple disease areas.

The second licensing deal focuses on target discovery in rheumatoid arthritis, or RA. Here, we are applying our IM platform and capabilities to identify the specific autoreactive T-cell receptors that are highly enriched only in RA patients. Pfizer will then use these data to accelerate its research and development of potential RA therapeutic candidates. Together, these partnerships continue to validate the strength of our differentiated platform and the value of our large-scale proprietary data. In addition, we completed a preclinical data package for our lead antibody program in ankylosing spondylitis. While potential next steps include initiating IND-enabling studies, we made the strategic decision to stop further investment in this program and instead prioritize capital toward data generation and AI modeling. These are key areas we believe leverage our core differentiation and represent the highest return on investment for immune medicine.

Thanks, Chad. Turning to our financials. First, I'll cover our reported results, which include the non-cash revenue recognized from the amortization of amounts previously received under our Genentech collaboration. As you know, following the termination of the collaboration in August, all remaining amortization was accelerated and recognized in the third quarter. As a result, there are no ongoing Genentech collaboration economics in our results after Q3. Total company revenue for the fourth quarter was $71.7 million, and for the full year was $277 million, representing 51% and 55% year-over-year growth, respectively. Total company adjusted EBITDA was $4.1 million in the fourth quarter, compared to a loss of $16.4 million a year ago. For the full year, adjusted EBITDA was $12.2 million, compared to a loss of $80.4 million in 2024.

Interest expense from our royalty financing agreement with OrbiMed was $3 million in Q4 and $11.8 million for the full year, while interest income was $2.1 million and $9.4 million for the same respective period. Net loss was $13.6 million for the quarter and $59.5 million for the full year. Now, turning to Slide 12, the revenue and adjusted EBITDA figures I'll discuss from here on forward are presented excluding all non-cash revenue from Genentech amortization in all periods shown. On this basis, fourth quarter revenue was $71.7 million, which increased 63% year-over-year with 86% contribution from MRD and 14% from immune medicine. MRD revenue was $61.9 million, up 54% year-over-year with clinical and pharma contributions of 67% and 33%, respectively. clonoSEQ test volume increased 43% to 30,038 tests, up from 20,945 in the prior year quarter.

Immune Medicine revenue was $9.8 million, up from $3.8 million a year ago, driven primarily by our data licensing agreement with Pfizer. For the full year, total revenue was $235.7 million, up 42% year-over-year. MRD revenue was $21.212 million, up 46%, including $19.5 million in milestone revenue. Excluding milestones, MRD revenue grew 45% versus 2024. Immune Medicine revenue was $23.4 million, representing a 17% increase from the prior year. Moving down the P&L, sequencing gross margin, which excludes MRD milestones, Genentech amortization, and the licensing revenue from Pfizer, was 71% in Q4, up 12 points year-over-year and 5 points sequentially. Full-year sequencing gross margin was 66%, up from 53% in 2024. Lower cost per sample were driven by production efficiencies, labor leverage, and the transition to NovaSeq X Plus.

Total operating expenses, including cost of revenue, were $84.5 million in Q4, up 4% year-over-year, primarily due to higher MRD sales and marketing investment, primarily from EMR and market access initiatives, partially offset by lower immune medicine R&D. Full-year operating expenses were $334.1 million, down 2% year-over-year. As shown in the segment table, MRD adjusted EBITDA was positive $15.2 million in 2025 compared to a loss of $41.2 million in 2024, driven by higher revenue. Immune medicine adjusted EBITDA loss improved to $31 million from $37.9 million, reflecting lower operating spend and increased revenue. As a result of strong top-line growth, improving efficiency, and disciplined spending, we ended the year with $227 million in cash, cash equivalents, and marketable securities. This amount excludes $13.1 million of cash held by Digital Biotechnologies. Now, turning to Slide 13 for our full-year 2026 guidance.

We expect full-year revenue for the MRD business to be between $255 million-$265 million. This includes $8 million-$9 million in MRD milestone revenue based on our current line of sight. At the midpoint, this guidance implies 22% year-over-year growth or 30% growth excluding milestones. We expect MRD revenue to be approximately 45% weighted to the first half of the year and 55% to the second half, as clinical volume and ASP growth compound with sequential clinical volume growth anticipated throughout the year. We expect full-year operating expenses, including cost of revenue, to be between $350-$360 million, representing 6% year-over-year growth at the midpoint. This reflects merit increases and additional targeted investments in MRD sales and marketing to support continued market expansion while leveraging our existing commercial and operational infrastructure.

In addition, we expect to achieve positive adjusted EBITDA and positive free cash flow for the whole company by the end of 2026. Of note, as in prior years, Q1 will be our highest quarterly cash utilization, primarily due to annual corporate bonus payments. I am pleased and encouraged by the strong results we delivered in 2025 and look forward to providing financial updates throughout the year as we execute towards our goals. With that, I'll hand it back over to Chad.

Thanks, Kyle. To bring it all together, 2025 was an outstanding year for Adaptive on all fronts. In MRD, we achieved profitability and grew the top line by 46%, driven by strong clonoSEQ volume growth. In IM, we scaled our TCR antigen data and began executing on targeted monetization opportunities that build long-term strategic value. And importantly, we maintained our strong cash position, giving us the flexibility to execute across both businesses. Looking ahead to 2026, we're focused on continuing to fuel MRD revenue growth, expand margins, and deliver company-wide profitability. We have a great playbook in place, and we're executing against it. We're encouraged by the momentum we are seeing and are confident in our ability to execute and deliver on these priorities. I'll now turn the call back over to the operator and open it up for Q&A.