Detailed Narrative
MRD Business Outperformance and Growth Drivers
The MRD business delivered an exceptional quarter, with core revenue, excluding milestones, increasing 49% year-over-year. This growth was fueled by a 43% rise in clinical testing volume, reaching over 36,100 clonoSEQ tests, and strong momentum in pharma sequencing. Key drivers include blood-based testing, which now constitutes 51% of total clonoSEQ volume and grew 68% year-over-year, and community adoption, accounting for 36% of volume with 65% year-over-year growth. The company also noted 75% fulfillment of repeat orders one year post-Flatiron integration.
Strategic Separation of Immune Medicine Business
Adaptive Biotechnologies announced plans to separate its Immune Medicine business, aiming to unlock its full potential by allowing it to pursue an independent growth strategy and access dedicated capital. Morgan Stanley has been retained as an advisor, with a preferred separation path expected to be identified by year-end. The Immune Medicine portfolio's focus has been sharpened to its proprietary TCR antigen data set, AI/machine learning models, and target discovery platform for autoimmune diseases, winding down the research use-only pharma services business.
Strengthened Financial Position and Profitability
The company successfully completed a $340 million 0-coupon convertible note offering, which enabled the retirement of the OrbiMed agreement, simplified the capital structure, and enhanced financial flexibility. Adaptive ended the quarter with approximately $357 million in cash. Operational efficiencies contributed to a significant expansion in MRD sequencing gross margin to 71%, up 9 percentage points year-over-year, and an increase in MRD adjusted EBITDA margin to 14%.
Clinical Adoption and Pricing Progress
Clinical revenue increased 53% year-over-year, driven by volume growth and a 7% increase in US ASP to $1,382 per test. Growth was broad-based across reimbursed indications, with CLL growing 16% sequentially and multiple myeloma, representing 44% of testing volume, growing 15% sequentially. The company is on track to achieve an ASP of approximately $1,400 per test for the full year, supported by ongoing reimbursement gains and improved revenue cycle management.
Pharma Business Momentum and Strategic Shift
MRD pharma sequencing revenue grew 38% year-over-year, excluding milestones, and the business ended the quarter with 189 active global clinical trials and a backlog of approximately $245 million, up 12% year-over-year. A significant shift is observed, with studies using MRD as a regulated endpoint now comprising about 60% of active studies, up from 40% a couple of years ago. This trend is expected to drive higher economic value and future milestone payments.
New Monetization and Collaboration for Immune Medicine
Beyond the separation, Immune Medicine is exploring new monetization avenues, including a trial agreement with Harell Data Corp., an independent cloud-based marketplace for proprietary data sets and AI models. The ongoing collaboration with Pfizer in RA, focused on sequencing patients to identify disease-specific T cell receptors for therapeutic development, remains a key focus for the Immune Medicine team.