Q1 2024 Earnings Summary
- The FDA's Oncologic Drug Advisory Committee (ODAC) voted unanimously in favor of the use of MRD as a primary endpoint to support the accelerated approval of new therapies for patients with multiple myeloma, which is expected to accelerate pharma partnerships, upgrade trials to primary endpoint status, accelerate realization of milestones, generate new bookings, and create a positive halo effect in clinical adoption.
- Adaptive Biotechnologies is confident in increasing the Average Selling Price (ASP) per test by $200 over the next two years, supported by the recent preliminary Medicare rate of $1,823 per test, and by operational improvements such as reducing out-of-policy claims and improving revenue cycle management, leading to improved revenues and margins.
- The company is making significant progress in EMR integration, with positive feedback from accounts; it has 9 active projects and expects 20 to 25 accounts integrated by the end of the year, including some of their largest accounts, which could represent 15%-20% of test volume, potentially driving volume growth and enhancing customer experience.
- The company's path to profitability may be uncertain, as adjusted EBITDA breakeven is projected for the back half of 2025, with cash flow breakeven not until 2026. Achieving these targets depends on increasing prices, reducing costs, and cutting operating expenses, which may be challenging.
- Revenue growth is partially dependent on milestone payments, the timing and amount of which are uncertain and not fully controlled by the company. This reliance on unpredictable milestones may impact overall revenue projections.
- There is uncertainty in achieving the anticipated $200 increase in Average Selling Price (ASP) over the next two years, as it depends on multiple factors such as reducing out-of-policy claims, improving revenue cycle management, and finalizing reimbursement rates with Medicare and commercial payers. Delays or difficulties in these areas could hinder revenue growth.
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FDA ODAC Vote Impact
Q: How will the FDA ODAC vote affect your MRD business?
A: The ODAC vote is a huge milestone for multiple myeloma, leading to MRD being used as a primary endpoint in studies, which provides potential upside for our business through accelerated milestones and new bookings. Clinicians are excited about the credibility this gives to MRD as a tool for individualized care. , -
MolDX Gap Fill Rate and ASP Increase
Q: How does the $1,823 MolDX gap fill rate impact your ASP targets?
A: The preliminary rate, scheduled to go live in January 2025, allows us to negotiate higher rates with commercial payers now, including large payers like Anthem. Combined with operational improvements, we are confident in achieving a $200 increase in ASP over the next two years, de-risking our path to profitability. , -
Path to Profitability
Q: How will you reach EBITDA breakeven by 2025?
A: We are raising the price per test, lowering delivery costs, and reducing operating expenses by $10 million. These efforts will help us achieve adjusted EBITDA breakeven in the back half of 2025 and cash flow positive in 2026. , -
Blood-Based Testing Growth
Q: What's driving growth in blood-based MRD testing?
A: Blood-based testing now represents 20% of our MRD sales in myeloma, making it easier for clinicians and patients. While pharma is interested, it's an area we haven't fully explored but see future opportunities, especially with MRD becoming a primary endpoint. , -
Segment Restructuring Progress
Q: How is the restructuring between segments progressing?
A: We've completed 90% of the work, aligning operations and R&D investments. Remaining tasks include separating our Immune Medicine Pharma Services lab from the MRD production lab. Overall, we're operating independently now. -
EMR Integration Advances
Q: How is EMR integration affecting customer adoption?
A: Positive feedback from accounts, with 9 active projects and over a dozen in discussions. We expect to integrate 20–25 accounts by year-end, representing 15–20% of our volume, accelerating adoption and ease of use for clinicians. -
Expanding MRD in Other Indications
Q: Will MRD be used as an endpoint in other cancers?
A: We anticipate FDA receptiveness to using MRD as an endpoint in other hematologic malignancies, especially CLL. We're engaging with investigators and pharma partners to leverage MRD across their portfolios. -
Q1 MRD Milestone and Guidance
Q: Does guidance include the $4.5 million MRD milestone from Q1?
A: Yes, we adjusted the low end of our MRD guidance to include the milestone. We remain conservative about future milestones, as we don't control the timing. -
Sensitivity Thresholds in Trials
Q: Are trials differentiating between 10⁻⁵ and 10⁻⁶ sensitivity?
A: Yes, studies are increasingly focusing on 10⁻⁶ sensitivity, which clonoSEQ uniquely provides. Key opinion leaders aim to move the standard threshold to 10⁻⁶, enhancing the depth of MRD detection.
Research analysts covering Adaptive Biotechnologies.