BALTIMORE – Adaptive Biotechnologies said on Wednesday that it will curb the commercialization of its T-Detect franchise, pulling back the T-Detect Lyme test that was just released earlier this summer and scratching out the previously advertised plan to launch the T-Detect IBD test in 2023.
"Rather than launch diagnostic tests disease by disease, we are deferring commercialization until we have multiple signals with strong enough data to change physician behavior with a clear path to reimbursement," Adaptive CEO Chad Robins told investors during a conference call following the release of its second quarter 2022 financial results.
For the three months ended June 30, Seattle-based Adaptive reported total revenues of $43.7 million, a 13 percent increase from $38.5 million a year ago, beating analysts' consensus estimate of $42.2 million. The company's Q2 net loss swelled to $52.0 million, or $.37 per share, from a net loss of $49.3 million, or $.35 per share a year ago. On average, analysts anticipated a loss per share of $.43.
Investors reacted favorably to the results and T-Detect news, sending shares of Adaptive up around 11 percent to $10.98 in Thursday morning trading on the Nasdaq.
Robins said the decision to revamp T-Detect was made based on the company's realization that commercializing single-disease tests through self-pay customers is "challenging and costly." Therefore, Adaptive is now switching gears to generate T-cell signatures for multiple indications in order to develop T-Detect as "a reimbursed, differentiated diagnostic panel to patients with shared symptomatology."
To achieve that, Robins said the company will continue to monetize "higher-margin profile opportunities" from pharmaceutical partners by leveraging the resulting "incredibly rich" immune receptor data. According to him, such partnerships will not only drive near-term revenue growth in Adaptive's immune medicine business but also generate more signals to support the vision of T-Detect. "In many of these pharma deals, we are able to leverage that data to essentially get paid and increase our signals at the same time," he said.
As a result of the strategy change, Robins said the company is now rolling back the T-Detect Lyme test, which was just launched in June as a laboratory-developed test service through Adaptive's CLIA lab. "We accomplish what we set out to do," said Robins, referring to the company's previous target to release T-Detect Lyme during this year's Lyme season, while he added that the company’s experience setting up T-Detect Lyme will enable it to "check all those boxes for future launches."
Meanwhile, Adaptive will continue offering T-Detect COVID, the first commercialized test of its T-Detect franchise, despite the product's subsiding revenue as COVID testing demand fades. Given that T-Detect COVID is the first and only T-cell-based COVID test granted Emergency Use Authorization by the US Food and Drug Administration, Robins said, the company continues to work closely with pharmaceutical partners on a correlative protection study.
Beyond Lyme and COVID, the company previously also anticipated launching a T-Detect test for inflammatory bowel disease (IBD) in 2023. Toward that goal, Sharon Benzeno, Adaptive's chief commercial officer for immune medicine, said during the call that the company has initiated a clinical study in IBD that covers both Crohn's disease and ulcerative colitis. However, conforming to the plan change, the company now aims to develop a T-Detect test that not only covers Crohn's disease and ulcerative colitis but also other GI disorders, such as celiac disease, she said.
Robins said the company is confident that the "disciplined approach" for T-Detect will enable the franchise to become "a differentiated, high-value clinical test" with "a clear path to reimbursement," adding that the franchise is not likely to contribute to the company’s revenues in the next couple of years.
Of the total Q2 revenues, Adaptive reported that 51 percent were from the immune medicine business, which is spearheaded by Adaptive's T cell-based products, and 49 percent were from its minimal residual disease (MRD) arm, supported by the ClonoSeq diagnostic and research assays.
Specifically, Q2 immune medicine revenue was $22.4 million, representing a 3 percent year-over-year decrease from the same period last year. The change was driven by a $3.7 million increase from pharma and academic customers offset by a $1.0 million decrease in revenue from T-Detect COVID and a $3.4 million decrease from Genentech amortization, according to CFO Tycho Peterson.
Meanwhile, the company's MRD revenue was $21.3 million for the quarter, a 38 percent jump from Q2 2021, primarily driven by ClonoSeq clinical testing revenue.
"Our ClonoSeq clinical testing growth is strong and accelerating quarter over quarter," said Robins. According to the company, its ClonoSeq test volume in Q2 grew 53 percent compared with Q2 2021. Adaptive also said it has signed a new pan-portfolio agreement with a major undisclosed pharmaceutical partner this quarter for the use of ClonoSeq to measure MRD as a clinical endpoint.
Last week, Medicare contractor Palmetto GBA expanded coverage of Adaptive's ClonoSeq assay to include MRD monitoring in patients with diffuse large B-cell lymphoma (DLBCL), the most common type of non-Hodgkin lymphoma.
Despite the encouraging news, the company doesn’t expect the ClonoSeq DLBCL assay to contribute to its revenue growth until the second half of 2023, Nitin Sood, Adaptive's chief commercial officer for MRD, said during the call.
According to Sood, Adaptive's current DLBCL ClonoSeq test only accepts plasma, which can be a limiting factor for the immediate uptake of the assay. "In the community setting where DLBCL is most frequently treated, the physician's capability to take whole blood, spin that down into plasma, and send plasma to us is limited," he explained. To address that, Sood said that the company is launching a change to the product to accept whole blood in Streck tubes at the end of this year.
The firm's Q2 R&D spending dipped 2 percent to $37.0 million from $37.8 million a year ago, partially attributable to reduced collaboration and medical advisory costs. Its SG&A expenses grew 15 percent to $45.5 million from $39.3 million a year ago.
Adaptive finished the quarter with $76.4 million in cash and cash equivalents and $307.3 million in short-term marketable securities, which the company said will provide around two years of runway. Meanwhile, Peterson said, given current market conditions, Adaptive is exploring non-dilutive financing alternatives to extend the company's cash runway while also "working extensively" on its long-range plan.
For the full year, the company reiterated its 2022 revenue projection of $185 million to $195 million, with MRD and immune medicine revenues split evenly at the midpoint of the range.