Great. Good afternoon, everyone. Thanks for joining us. I'm Salveen Richter, a biotechnology analyst at Goldman Sachs. We're really pleased to have the Adaptive team with us. We have Chad Robins, CEO, co-founder, and chairman. Tycho Peterson, CFO. Thank you, guys, for joining us. Thanks, Salveen, and Goldman, for having us. Appreciate it. Thank you. Maybe to start here, Tycho, you recently completed your first year as CFO of Adaptive and joining Chad and Chad, you've kind of implemented in conjunction with Tycho, this change in strategy here. When we take a snapshot of where we are today versus last year and your outlook for the forward, with regard to the changes that you've taken, you know, where are you from an implementation stage at this point, and are there any more changes left to be had with strategy? Sure. Maybe I'll start and then pass it over to Tycho and just say, yeah, we've made some changes, and there's a lot left to go. The first thing we did is we segmented the business into MRD and immune medicine, and each one of those business segments has very distinct and key deliverables, and I'm sure we'll get to what those are in a minute. But just at a high level, MRD is an execution strategy, it's a penetration strategy, and immune medicine is all about essentially unlocking the value of immune receptor data, both for our pharmaceutical clients and for our own programs. The second thing we did from a financial standpoint is short up the balance sheet, and I'll kind of pass it over to Tycho to talk about that. We did a royalty deal with OrbiMed last summer, $250 million. That gets recorded as an interest expense. Interestingly enough, our interest income more than offsets that, so you know, it's actually very attractive from a cost capital perspective. Still haven't seen another royalty deal in the diagnostic space. We were kind of the first ones to do it, but feel really good having done that. We only drew down half of it, and what we said when we laid out our path to profitability in the third quarter of last year, is that'll get us to profitable. We don't need to draw down the additional $125 million. We can do it if we want, but we don't need it. You know, we're doing a lot around OpEx. I'm sure we'll get into it over the course of this discussion, you know, we're heavily focused on, you know, driving, margins. You know, we've got a whole COGS initiative now, and then really just kind of looking at OpEx overall as well. You've seen over the last couple of quarters, year-over-year OpEx leverage, and that'll continue. Great. What do you think as you, as you sit here now with the changes that you've made and, you know, this path to profitability that investors may be overlooking with the story? Because it seems like you have very bifurcated investors that value one business or the other, but, like, how do you get them to understand the holistic situation here? I think that's pretty relatively true. I think the MRD business is well understood. It's really about execution, penetration, indication by indication, ASPs, kind of driving margin, driving coverage over time. I think that's understood. I think what's overlooked or not really well understood is the platform that we've built around really understanding the immune system, not only understanding immune receptors, but the antigens that they bind to, and the multitude of opportunities that can unlock. It's somewhat early days, yes, we had a little bit of a pivot, well, a big pivot in the strategy from looking at that as a diagnostic plan, T-Detect. Although the kind of signal generation is, you know, working really well there, we're pivoting that data to kind of stratification for our own trials and really looking at that immune receptor data to unlock opportunities in drug discovery and therapeutics. Right. Maybe a good start there on the therapeutic side or the. Sure approach here. Last month, you announced that the FDA accepted an IND application submitted by Roche Genentech on your TCR for solid tumors. Can you just help frame what this milestone means for your drug discovery vertical, and when we should expect clarity on the target and the indication and development plan here? First, we're thrilled that really that whole kind of side of the business has been activated. I'll say reactivated publicly, but we've been working on it for quite some time, but it was great to see the first IND filed. It really shows our strength in characterizing therapeutic-grade TCRs. What we can do, if you think about a funnel, is really work at scale to find naturally occurring T-cell receptors for cell therapy, and then characterize them exquisitely to find properties of how well they bind, how well they kill, and really, the safety profile, so they're not cross-reacting into anything else. Kind of moving to, from CAR-T to TCR, allows us to kind of hopefully penetrate efficacy in solid tumors. That's why it's a big deal, but it's really a validation of our approach in characterizing immune receptors more broadly, and we'll talk more about it as we look at our own programs. So that's the first thing. You know, it's a little bit unfortunate. There's not a lot we can say because we don't control the news flow and the commercialization. It's always going to be in Roche Genentech. When it'll hit ClinicalTrials.gov is when we go into humans, and this will, you'll see kind of what the target is, and the indications and what we're going after, the different tumor types. I should also mention that, you know, as this is our first in the shared product, there's two other programs that we're working on, where we've delivered fully characterized TCR packages against kind of shared tumor types, or shared antigens and that impact, you know, several different solid tumors. At the same time, we're progressing on the private product as well, and I'll talk more about that in a minute. When you, this target, which we don't know yet, should we assume that it's a validated target, and so therefore, when we look at, you know, the first data sets, that you're really validating your platform through that? Like, how did we? Yeah. Like, how did you pick these targets when Yeah. When you gave the first group? What we have said is a neoantigen target. It's a validated target, so you will have heard of the target before. We also think of it in two ways: as a product in its own right, but there's a ton of kind of training and learning that we're gonna get to, or that we'll learn from as we get to the private product, where we're essentially looking at patient-specific TCRs against patient-specific mutations. Getting, you, all the knock-ins that have to knock-ins and knockouts, is putting a T- cell receptor in a T- cell and putting it back into a patient in a compressed timeframe. You know, our goal is to have kind of a 30-day vein to vein turnaround on the private product. The shared product in itself is, there's a lot of learnings that are gonna help us get there. When you think, the personalized product ends up being more complicated, right? Because you have to use some kind of prediction on what these neoantigens are, and then create a cassette or a drug around it. I'm just trying to understand how you're thinking about it. Well, thank you, Salveen. It's actually cool that you mentioned that. I, the answer actually right now is no, but that is actually where we are hoping to go. We actually physically have an assay called MIRA, which maps T-cell to antigens, that essentially, we're doing a closed loop experiment on each patient. We're sequencing a patient's mutations in their tumor, at the same time, looking at their blood and mapping those T-cell. We can find from each patient. Now, every single patient, we're finding T- cell receptors that map specifically to that patient's kind of tumor antigens, and we're finding more and more of them, and then we'll hand those over to Genentech. They'll grow them up and put them back in the patient. Where we're going with this is an AI-driven approach, where exactly what you're talking about, that you can essentially do this in silico and be able to kind of map using very sophisticated AI/ML, based on data inputs that we've built up over the, like, really the past 9 to 10 years in mapping kind of T- cell receptors to tumor antigens in multiple different tumor types, to be able to go without having to do kind of the physical experiment, which should take a lot of time out of the, and cost out of the process. Would the AI/ ML capabilities be coming from Microsoft in the context of the mapping aspect? It's certainly, they've assisted in some of that work. Again, when we talk about, you know, the kind of what was commercially T-Detect as a diagnostic, a lot of that work in terms of mapping and signal validation and verification validation, kind of has gone into what ultimately will be a product here. Got it. How far is that from implementation? I'm not sure yet, the honest answer because. I will say this, the acceleration of AI in the past nine months and kind of what my brother I mean, he's very, very excited, because we've just seen massive increases in leaps in this. I think it will probably still start when we roll out the product. As you know, we've built an end-to-end facility in South San Francisco, and the original idea was that, you know, if, I want to say when, but if this works, you know, clinically and it shows efficacy, that we would kind of stamp out these kind of factories throughout the world, where we'd be responsible for kind of doing the mini MIRAs closer to the patient. We are hopeful, along with our partners at kind of Roche and Genentech, we are hopeful by the time that we get to that point, that we can actually go away with those kind of mini factories, if you will, and go right to in silico. I think we're sort of probably, you know, three to four years away from being able to do that and be able to compute it, impute it, if you will, rather than, you know, physically have to do kind of the chemistry. How aligned are you with Roche and Genentech? I know you give them these assets, but when you first did this partnership, and they laid out timelines, like, are they working in well, you know, in a timely fashion with regard to this portfolio? I'm gonna separate that question, because one, from a timing perspective, let's be real, we thought we would get our IND filed sooner than we did. That being said, I think we've made, in the background, progress on the private product, and it's not like linear, where you work on one and work on the other. The private product is now a lot closer to kind of the first filing of the IND. But as far as the relationship goes, it's, you know, tighter than ever. We have a joint research committee, a joint development committee. We spend, you know, hours and hours with them every week, and then, you know, have kind of management committees, that really formalize committees, that meeting, that are meeting on a quarterly basis. Our teams are together every week. I would say the relationship is really good. you know, timelines, let's just be clear, this is hard. A, it's cell therapy. Second, it's TCR-based cell therapy. It hasn't been done before. I mean, the reason, just the mechanism of and the biology of why theoretically this should work better, is that T-cell, T- cell receptors have the ability to see intracellular pathogens, which means they can see what's going on inside of a cell. that's why, I mean, CAR-T, in general, has been challenged to work in solid tumors, where we believe, based on the biology, that kind of a TCR-based approach has a much greater chance of efficacy in solid tumors, which is why we're doing it. Cell therapy is expensive, right? Ultimately, whether it'll be kind of a cell, I think cell therapy will probably morph into something else with T- cell receptors being the targeting molecule, but it's a really great start, it's expensive, but if it, if there's efficacy and, you know, hard to treat tumors that have really never been cracked before, I think, it's gonna be pretty special. Just jumping over to clonoSEQ here. You recently presented some data sets at ASCO, assessing the clinical significance of MRD testing. Can you just remind us of what was presented and the importance of this data set? Yeah. There were a few different studies that came. There's a bunch, but I'll highlight three in three different indications. I think that'll probably be most useful. The first, in myeloma, a continuation of data presented in the MASTER trial, which showed that with quadruplet therapy, that patients over a three-year period that were MRD negative, had no decrease in progression-free survival. You know, what the significance of that is, means that if you're on maintenance therapy and if you are MRD negative, you can go off of maintenance therapy. That means to the patient. I mean, patients on these therapies have pretty significant side effects, so being able to go on a treatment holiday, is awesome for the patient. It's also, you know, really great for the payer community who's paying, you know, some of these drugs, granted, are coming off patent, but it's still a pretty significant expense, so you really have that dual benefit. That's a MASTER trial, and that's been ongoing. The data keeps getting better and better and better, saying the significance of MRD matters in this particular setting. In diffuse large B-cell lymphoma, if after R-CHOP therapy, what it said for in conjunction with imaging, if you use MRD and showing kind of subsequent MRD negativity, led to a better progression-free survival as well. That was at diagnosis in an older population. That's the significance in DLBCL. In ALL, there was, you know, just another set of studies that just showed the comparison of MRD by clonoSEQ or NGS versus flow cytometry. There's been so many publications, but just another set that came out that said essentially 25% of patients that had cancer were missed by flow, that were kind of definite screaming MRD positive by clonoSEQ. Just goes to show sensitivity matters. These patients have cancer. You can inform their treatment decisions using NGS. There's no reason that you should be using kind of antiquated technology when NGS is available. Remind us of the levers you're using here to increase, you know, use in these various approved indications here. The levers we're using. There's really multiple levers we're using, you know, to show clinical utility. We continue to have additional studies and sponsor different ISTs. We have a real-world data project called the Watch Registry, where you have a health economics group that works with payer companies. On the sales force side, it's just driving kind of utility in the community hospital setting. It's moving to blood based testing. It's really if you look at overall sales force productivity, increasing the number of sales per each rep, and then driving payer coverage. I mean, it's, there's not kind of only one thing. Oh, I should also mention Epic integration, which, you know, we're rolling out, doing our beta testing on this quarter. Multiple different factors that really drive kind of penetration and utility. You're on track for this 50% test volume growth you've talked about this year? We are. We've talked about growing 50% in our volumes this year, and we are on track to hit that number. Just going back to this Epic integration setup When do you think that that will help contribute to growth? Is it more like a 2024 and beyond situation? Yeah, we've always talked about it as 2024. I mean, just to frame up, you've got to work on all the order sets. Epic is challenging on our side of the software kind of implementation, get all the order sets done. Then we have paid customer sites, over the third quarter, kind of work out the kinks, then we'll roll them out, you know, call it 5-10 sites in the fourth quarter. Then you really have to turn them on one by one. You need the attention of the IT department in each of these, it's mostly academic medical centers, that are. Some of the community, but that are kind of using Epic. We've talked about it as, in terms of really, kind of inflecting as a 2024 event. When you speak to the pharma partners with regard to using your product here, where, if any, do you get pushback on them integrating or using MRD testing? It's a good question. I mean, overall, as you've seen, most pharma companies that are developing hematologic malignancy therapies are using clonoSEQ, and we've kind of moved up the value chain from originally being used as research to being used as a surrogate endpoint, and now in some cases, being written in the contract as a primary endpoint, which we can get to in a minute. Some of the pushback on some of the newer indications, for example, in DLBCL, is, the necessity for a ctDNA assay that has greater sensitivity, and we've been developing that as well. Let's see. I would say that's really the area that we're getting pushed back. Other than that, I think our pharma business is, you know, pretty, there's some pretty strong moats around it. Just the quality, the amount of audits we've been through, the ability to generate in a very highly structured laboratory environment, good, clean, essentially collated data in exactly the format they want, you know, with integrity, has been a good differentiator for us. If you look out the next 2-5 years, you know, where do you see this business kind of grow? Like, how do you see the growth playing out over that period? In the pharma business, in the MRD? Just overall with the pharma business and with MRD as a, as a testing assay. Yeah, I mean, there's good growth right now in AML. I mentioned DLBCL. We'll crack that nut. You know, there's continued, there's continued growth in multiple myeloma as well. It's really, you know, I mean, AML, DLBCL, and continued in CLL as well. There's a lot of therapies being developed for CLL. One of the things we've done is we've, for a lot of these companies, like, Takeda is the most recent one, we've announced these portfolio agreements, where any of the hematologic drugs that these companies are working on, it's just essentially a new work order, a new project. We're the vendor of choice, if you will. I hate to use the word vendors, but we're the partner of choice for, you know, for these clinical trials. Yeah, we've got some good growth. You know, we also have a pretty nice milestone portfolio with most of these trials have a milestone associated when the, when the drug gets approved using our assay. That, you know, of the $400 million that are on our balance sheet right now, you have $200 million of those are available to us now, and then another half of those open up when the FDA, you know, allows for the assay to be used as a primary endpoint, which, yeah, we'll see when it's government, we're working on it. Yeah. You touched on the immune medicine vertical earlier. Could you just briefly describe what's encapsulated within that vertical? Sure. Yeah, there are two main kind of business lines within that vertical. The one is pharma services. We just talked about MRD pharma. Anything not captured in MRD pharma, this is looking essentially at immune receptor immune response to therapies, where pharma uses us, and academics use us for any research that they're doing on any type of immune-mediated disease, which you can imagine is many different diseases. You know, we're probably most penetrated in cancer, but now the kind of the growth areas are in, on kind of autoimmune disorders, infectious diseases, et cetera. That's essentially a kind of a fee, mostly a fee for service, you know, business that has revenue associated with it. That's one side. Probably the most exciting side and, you know, biggest upside potential is in what we call our drug discovery business. Genentech is housed in there. which we've already talked about Genentech, happy to answer further questions about that. We've got a bunch of exciting things happen in drug discovery. One is kind of target discovery around autoimmune disorders. We've kind of publicly disclosed we're working on multiple sclerosis and IBD, there are several other autoimmune disorders we're working on, too, where we believe we can use our technology to discover novel targets. Once we have those targets, we've already mentioned we have a T-cell platform, and we also have an antibody platform that we originally stood up during COVID, right? The idea is, if you have a target, depending on what the target is how you hit that, whether with an antibody or potentially with a T-cell, and whether that's cellular or whether it's soluble, we, you know, working on. What's interesting is that provides us a lot of optionality, you know, what will most likely happen is we'll probably partner out some of those, and as we kind of mature and learn more, we may take some of those assets kind of in-house down the road. If you were to use a T-cell approach in here, would you, would it fall under the Roche Genentech agreement, or that's kind of carved out the whole? It would not. Okay. Just to be, like, very specific, the Roche Genentech agreement is in cell therapy in cancer. Yeah only. Actually, we can do a lot outside of cancer as long as it's not cell therapy, and we also can do cell therapy outside of cancer as well. There's a lot that we can do, that's a very small piece of the world. You went back. I'll go back to your first question, Salveen, like, what's underappreciated is, you know, Roche Genentech's a pretty big deal. Granted, it's taken some time, but we're now starting to kind of hopefully prove that out. There's all these other areas where this kind of deep understanding of immunology and uncovering kind of mechanisms and targets, and then having developed these platforms to kind of essentially target having immune molecules that are kind of targeting these the assets that are hitting these targets, is where we kind of see a lot of the action and the upside. Have you discovered the targets already, or we're waiting for the targets to be disclosed? Just remind us of where you might get? We haven't. Okay. I would say we're pretty close. We're. Okay. I'll tell you, there's a level of excitement on a couple targets, novel targets, in some of the autoimmune spaces that we've been discussing. You'll disclose it to the street when you're ready, or you'll decide strategy? Yeah, we'll disclose that we have something, yeah, 'cause I think we've publicly said that we will have a target in an autoimmune disorder. in this fiscal year. We've got 6 months, but we're zeroing in. So when we look at the company right now, right, most of your revenue is driven from this testing kind of clonoSEQ situation, but you've got a lot of potential in immune medicine. How are you thinking about capital allocation to these two businesses? How are you thinking about kind of if you know, fast-forward four years, like, who is Adaptive? Do you want to take capital allocation? Yeah, start with the idea that, you know, we began the year fighting a $30 million headwind from the amortization of Genentech, right? Yep. You know, everything we do to grow this year is against that. We went through a very rigorous process on our 3-5 year long range plan last fall, and, you know, we're in the process of updating that now. You know, as part of that, we went through every R&D project, and, you know, there's a lot of stuff that dropped out. If it didn't map to revenue or margin or have, you know, big potential, we kind of de-emphasized it. You know, you've seen that in the R&D leverage over the last couple of quarters. You know, overall, we're doing a lot operationally to get more efficient, right, on this path to profitability we've laid out. EBITDA, you know, positive in 2025, cash flow breakeven in 2026. We're doing a lot around COGS right now, you know, separate to kind of the capital allocation, we're looking at, you know, our input costs on COGS. There's a lot of, you know, a lot we can do around workflow, about how we access the samples in the lab, how we do the DNA extraction, and then also, you know, what sequence rule we run. We're running everything on, you know, a fleet of 40 10-year-old NextSeq, we're doing an evaluation of the NovaSeq X now. We do have a real path forward on margins overall. Yeah, capital allocation is something we think about a lot. We ended last quarter with $441 million in cash. We don't want to raise additional capital. You know, we have the rest of the OrbiMed deal to draw down if we need to, but we don't envision having to do that on the path to profitability, so. On these autoimmune targets, let's just say you have these amazing novel targets, right? Do you have the capability to at least do development in-house to a certain inflection point, and then you decide, "Hey, we could partner this out, or we could do a co-commercialization, co-development type situation?" Like, how do you kind of retain that value, is what I'm trying to understand, like, you know, as you progress and you know, get a bigger part of the economics? Yeah. We certainly have the capabilities to get through preclinical validation, and we're building up the capabilities to kind of move further into phase I. Do we have the capabilities right now to fully commercialize a therapeutic? No. That's where I said we'd probably look at doing some partnering early on. A lot of it also depends on kind of what the indication is as well, but probably partners some early on, as we learn and are, you know, continue to get better capitalized, we will, you know, look. Frankly, and this is a little bit of kind of your last question, what the kind of appetite is to kind of fully fund and the risk appetite to fully fund kind of therapeutic program through different phases, you know, that we would look to essentially kind of what's the best way to kind of unlock shareholder value and match up kind of that set of shareholders with the risk appetite to kind of be able to fund those therapeutic programs. Yeah, it's certainly something we're building up the capabilities for. Questions from the audience? I think we have a question up front. Hi. Go. Afternoon. I just wanted to see, what's kind of driving your confidence in making such a large investment and kind of, putting a lot of capital towards that, cell therapy San Francisco plan, and just the overall kind of efforts there? A lot of it, if you look at the upfront payment that Genentech paid us, a lot of that was to build an end-to-end prototype, so we spent that capital. What's giving us the confidence to kind of move forward is, one, contractually, that's what we're obligated to do, but two, is the data that we're seeing. we now have the confidence that almost every single patient that goes through that end-to-end pipeline, that we are finding patient-specific T-cell receptors against patient-specific tumor antigens. Not only that, we're finding more per patient. The data is getting better, cleaner, and more robust over time. At the same time, Genentech is spending billions of dollars standing up kind of manufacturing facilities, the first one being in Oregon, to be able to support this program. It's not just the investment in Adaptive, but they've also made investments in other aspects of really the entire pipeline to be able to deliver a cell therapy product. If you look at iPSCs, you know, they did a deal with Adaptimmune. They've got, you know, deals around, kind of around the periphery with BioNTech. It's not just the targeting molecules. They've continued to invest, you know, billions of dollars to be able to do this and do this in the right way. What are you each most excited about within the business? I'll let you go first. I mean, there's, we've got a lot of big shots on goal, right? I mean, if the personalized product works with Genentech, we've effectively cured cancer, right? I mean, we're not supposed to use the cure word, but we, you know, I mean, that's huge, right? That's front page of the, you know, journal and every other paper. Look, I think MRD is a scale-up business. It's a scale-up story right now. We're doing all the right things to really kind of drive, you know, continued growth. You know, this 50% volume growth should be pretty durable over the next couple of years. The penetration, by the way, is, like, 5%. I mean, we have a long road to go there, in terms of additional penetration along with higher ASPs. You know, two different businesses at different stages of the revolution, and then, you know, back to immune medicine, everything we're doing in autoimmune, it's earlier, but, you know, these are big unmet needs in the market. There aren't targeted therapies right now for MS and some of these autoimmune disorders, and then there's, you know, diagnostic potential further down the road, too. Yeah, I mean, all three of those, Genentech, autoimmune, and then, you know, MRD are really interesting. Well, I'll play the yin to the yang. Usually, we play the opposite side of this answer. Yes, everything. He said the big, exciting things about, you know, where we're going on the immune medicine side is certainly, you know, where I think a lot of the action is. I'm excited that we're, I'll use a colloquialism, we're kind of growing up as a company, right? Learning how to execute, operate, making hard decisions, kind of doing the portfolio allocation, figuring out how to improve margins. That's not the sexy stuff, but ultimately, like, I think it allows you to do more sexy stuff when you have when you get to cash flow positivity, your options open up as to how much you can allocate to different, you know, shots on goal, which we're, again, we're still doing a lot because at the end of the day, I wanna make sure that we still have these super, kind of, high risk, high reward projects in the portfolio as we execute on the MRD business. There's been, I would just say, a long way to go. I wanna be clear, but there's just a focus on these really two opportunities that's crystal clear. We know where we have to go, and now we're starting to execute on that. There's some way to go. I know we're gonna get there. Maybe one last question. As you, as you build out immune medicine in a bigger way, how has it been to kind of bring in talent for that vertical? We've always punched above our weight in talent. I think the true science folks. I'll take it from a science perspective and then from a commercial perspective. From a science perspective, people recognize that we kind of essentially have the goods on the assays and the chemistry. From a computational biology, bioinformatics standpoint, you know, my brother came out of the Hutch, he was, you know, ran essentially comp bio there. From that, we've have this expertise in computational biology. This is before, like, AI/ML, and all that stuff even became, like, in the lexicon, right? We've really built up kind of some of the best data scientists, if you want to use that term, in the world. I think there are pockets. Just answering this truthfully, I think there are pockets that we're really, really good at on the talent side, and then there are gaps. You know, we have gaps. And you asked before, like, "Are you ready to take it further?" I mean, we don't yet have clin dev, a great clin dev, like, you know, expertise. Some of the regulatory requirements, I think we are really good on the diagnostic side. Haven't yet built that up on the therapeutic side. You know, overall, and a lot of that also, I would just have to say, it has to do with our culture. You know, I've been a huge champion of creating a phenomenal environment where people can bring their whole self to work, and work with really smart people on complex problems that are supported in a really strong way. If you look at our kind of management team and, kind of, permeating throughout the company, it's a good vibe. By the way, it's been tough, right? The last two years, you know, attracting, retaining talent in a down market, especially. It's gotten a little bit easier as the job market has loosened up over the past kind of 6-9 months, but it was really challenging where coming out of COVID, I mean, this is for everybody, right? Just coming out of COVID, where you had a lot of, you know, fluidity and people go anywhere, and our programmers, like, retaining your software folks when they could go literally walk out the door and make triple. We're in Seattle, right? You'd go, and that didn't even matter anymore either. A lot of that had to do with culture as to why people stayed and why people come. Net, net, we've got a great team, excited about the future and, excited about the kind of the team we've put in place. Great. Well, on that note, thank you so much. Really appreciate it. Thank you, Salveen Richter. Appreciate it.