Adaptive Biotechnologies Corp Q1 2026 earnings call

Thank you, Anton, and good afternoon, everyone. I would like to welcome you to Adaptive Biotechnologies first quarter 2026 earnings conference call. Earlier today, we issued a press release reporting Adaptive financial results for the first quarter of 2026. 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 meaning of federal securities laws regarding future events and the future financial performance of the company. These statements reflect management current perspective of the business as of today. Actual results may differ materially from today forward-looking statements depending on a number of factors, which are set forth in our public filings with the SEC, unlisted 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 first quarter earnings call. As shown on slide three, we're off to a strong start to the year, with accelerating momentum in MRD and disciplined execution across the company. MRD revenue grew 53% year-over-year, reflecting broad-based strength across both clinical and pharma. We also recognized our first primary endpoint milestone this quarter, a meaningful proof point for MRD's expanding role in drug development. clonoSEQ clinical volumes increased 41% year-over-year, demonstrating strong continued adoption. We also delivered meaningful margin expansion, with sequencing gross margin increasing 8 percentage points year-over-year to 70%, driven by scale and operational efficiency. At the same time, we maintained strong financial discipline, reducing cash burn and ending the quarter with approximately $222 million in cash.

Given the strength we're seeing in the MRD business, we are raising our full-year MRD revenue guidance to a range of $260 million-$270 million. Kyle's gonna provide more detail shortly. Let's now turn to slide four for a deeper look at the MRD business. Our clinical business continues to deliver strong growth, with revenue up 54% year-over-year. ClonoSEQ tests reached another quarterly record of almost 632,600 in Q1, up 9% sequentially. Growth was observed in all reimbursed indications, led by DLBCL at over 19% growth versus prior quarter. Importantly, we're seeing mounting traction across the key drivers that support durable long-term adoption. Blood-based testing reached 49% of MRD volume.

In multiple myeloma, a traditionally bone marrow-driven indication, the contribution of blood-based MRD increased to 29%, up 8 percentage points year-over-year. This shift is closely linked to expansion of the community setting, where promotion of favorable guideline updates and implementation of standardized testing protocols contributed to growth rates that outpaced the rest of the business. Community volumes grew 67% year-over-year and now represent 35% of total testing. Growth in the community business was further supported by our EMR-enabled workflows, which are driving UP repeat utilization. Serial monitoring orders available to Flatiron integrated accounts are widely being utilized, and strong initial pull-through rates have further improved with 72% of repeat orders due are being fulfilled.

Physician engagement also continues to expand, with the number of ordering clinicians growing 43% year-over-year to nearly 5,000 in Q1, underscoring increasingly broad acceptance of MRD as part of routine clinical management. Finally, we continue to see increases in pricing, with a U.S. ASP growth of 11% year-over-year to $1,360 per test. Importantly, I'm excited to share that clonoSEQ is now listed in the Texas Medicaid Policy Manual. clonoSEQ is one of only two specific tests included in the newly developed genetic testing section. Patients may receive up to six tests per year. It's great to be pioneers in bringing advanced molecular testing to some of our most vulnerable patients. Our scale, adoption, and embedded workflows support clonoSEQ's sustained growth and continue to strengthen our leadership position as the market evolves.

Let's now turn to slide five to discuss our biopharma business. We delivered one of the strongest quarters to date in MRD pharma, with revenue growing 53% year-over-year or 33% excluding milestones. As mentioned, we also recognized our first milestone in the U.S. tied to MRD as a primary endpoint in the CEPHEUS trial in multiple myeloma. New bookings were strong, driving backlog to approximately $254 million, up 24% year-over-year. Bookings came primarily from regulated studies, including several registrational trials where MRD will be used as a primary or co-primary endpoint in both multiple myeloma and CLL. We continue to see increasing use of MRD to guide treatment. Today, we have approximately 20 ongoing interventional studies where MRD is used for enrollment, stratification, or to guide therapy decisions.

As these trials read out, they directly support our commercial business. For example, data from the PERSEUS trial helped establish sustained MRD negativity as a meaningful measure of deeper response in multiple myeloma, which supports broader adoption of clonoSEQ in clinical practice. The momentum we are seeing in the pharma business is likely to be further supported by evolving regulatory trends. The FDA recently introduced a new clinical trial model that incorporates real-time data submission with early proof-of-concept studies underway, including the TrAVeRse trial in mantle cell lymphoma, where MRD negative complete response is measured by clonoSEQ is a key endpoint. While early, this emerging model for accelerating data review will reinforce the value of MRD endpoints that are objective, quantitative, and longitudinal.

These dynamics are particularly relevant in regulated and registrational settings, where data quality, reproducibility, and regulatory credibility are critical, and where clonoSEQ is well-positioned as a clinically validated MRD assay. Taken together, the trends we are observing support a reinforcing flywheel between biopharma and clinical testing as adoption of clonoSEQ in drug development generates evidence, strengthens clinical utility, and drives demand in the clinic. To wrap up on MRD, as shown on slide six, we are well on track to deliver against our key priorities for the year. Starting with clinical volumes, we initially guided to over 30% growth for the year. Based on our first quarter performance and continued momentum, we now expect volumes to grow to at least 35% in 2026, with potential for upside. Importantly, the underlying drivers of growth are already nearing our full-year targets.

Blood-based testing is rapidly approaching our goal of over 50% contribution. Community contribution is already at 35%, in line with our full-year expectations. EMR integrations continue to advance, with six new Epic accounts added year to date and 5 more expected to go live in the next month. In April, we went live with Epic on another of our top 10 accounts, bringing us to seven of our top 10 now being fully integrated. On pricing, we remain on track to achieve our target of approximately $1,400 per test in 2026, supported by recent policy expansions in CLL and DLBCL, Medicaid payment traction, and commercial payer negotiations. In biopharma, we have already exceeded our goal for new registrational studies, with 10 signed in the first quarter alone.

Finally, strong top-line growth combined with continued operational efficiencies positions us to achieve over 70% sequencing gross margins and expand adjusted EBITDA. Overall, our progress across these MRD priorities is a testament to our continued momentum and strengthens our confidence in our ability to meet or exceed our full-year commitments. Turning now to slide seven, our immune medicine programs are progressing well against our 2026 key priorities. We continue to scale our TCR antigen data sets and advance our AI ML modeling work. We now have more than 6 million functional TCR antigen pairs with data that currently spans about 50,000 antigens and 50 plus HLA types. This proprietary data set enables us to understand TCR antigen interactions and their role in cancer, virology, and autoimmunity. We recently confirmed that our digital AI model outperformed the accuracy of existing public benchmarks in predicting TCR antigen binding.

We published this work in Proceedings of Machine Learning Research and presented the Machine Learning for Health Symposium. Our focus this year is to further improve these models in targeted applications that could be attractive to partners seeking to leverage our data and our digital capabilities. In parallel, we are applying our AI-enabled Immune Medicine platform to identify the likely disease-causing T cell receptors and their antigens in select autoimmune conditions. This quarter, we kicked off our RA target discovery partnership with Pfizer. We received over 1,000 patient samples and are on track to deliver the RA data package in the second half of 2026.

As we continue to make progress on these 2026 priorities, we're advancing discussions on additional data partnerships, maintaining a disciplined approach to capital allocation, and operating within our expected IM cash burn range of $15 million-$20 million for the year. I'll now turn the call over to Kyle, who's going to walk through our financial results and updated full-year guidance. Kyle?

Thanks, Chad. Starting on slide eight with our first quarter results. Total revenue was $70.9 million, representing 45% growth year-over-year, driven primarily by continued strength in MRD, which accounted for approximately 95% of total revenue. Of note, amortization from the Genentech payments is excluded from all prior period comparisons. MRD revenue grew 53% versus prior year to $67.1 million, with clinical and pharma contributions of 65% and 35% respectively. Immune Medicine revenue was $3.8 million, down 26% from a year ago, primarily due to timing of sample receipts and processing. Turning to margins, sequencing gross margin, which excludes MRD milestones, was 70% for the quarter, up from 62% a year ago.

This improvement reflects reduced assay costs due to efficiencies from our NovaSeq launch in the second half of 2025 and leverage in overhead as we support higher volumes as well as favorable pricing trends across both clinical and pharma. Total operating expenses, inclusive of cost of revenue, was $90.1 million, up 10% year-over-year. This increase was mainly driven by continued investment in commercial infrastructure, including EMR integrations and reimbursement, as well as higher personnel-related costs. At the segment level, MRD continues to demonstrate strong profitability with adjusted EBITDA of $12.1 million compared to a loss of $4.1 million in the prior year, reflecting the impact of revenue growth, including milestone revenue and continued operating leverage. Immune Medicine adjusted EBITDA was a loss of $10.4 million.

At the total company level, adjusted EBITDA was a loss of $2.5 million. Net loss for the quarter was $20 million, including approximately $2.9 million of interest expense related to our royalty financing agreement with OrbiMed. I'll now turn to our updated full year guidance on slide nine. We are raising our full year MRD revenue guidance to a range of $260 million-$270 million, up from our prior range of $255 million-$265 million. This increase reflects stronger than expected clinical volume performance in the first quarter and continued momentum across key growth drivers. This range includes $9 million of MRD milestone revenue, which was recognized in the first quarter, and we do not anticipate additional milestone revenue for the remainder of the year.

At the midpoint of the guide, this implies approximately 25% year-over-year growth or 33% growth excluding milestones. In terms of seasonality, we continue to expect MRD revenue to be weighted approximately 45% in the first half and 55% in the second half. We are reiterating our full year total operating expense guidance, including cost of revenue of $350 million-$360 million. This reflects continued investment in MRD growth, with approximately 75% of spend allocated to MRD, approximately 20% to Immune Medicine, and the remainder to corporate unallocated. Importantly, we remain on track to achieve positive adjusted EBITDA and positive free cash flow for the full company by the end of 2026. Overall, the quarter reflects strong financial execution supported by continued revenue growth, expanding margins and operating leverage.

With that, I'll turn the call back over to Chad.

Thanks, Kyle. We're executing well across the business and the strength we're seeing, particularly in MRD, gives us confidence in both our plan and the opportunity ahead. As we move through the year, we expect to build on this performance and drive additional upside over time. With that, I'll turn it over to the operator for questions.