Executive Summary / Key Takeaways

• Adaptive Biotechnologies is successfully executing a focused strategy to drive growth in its core Minimal Residual Disease (MRD) business, leveraging its proprietary immune medicine platform and the FDA/ODAC momentum for clonoSEQ.
• Strong Q1 2025 results, including 34% MRD revenue growth and a 14% increase in clonoSEQ ASP, demonstrate accelerating commercial execution and improving pricing power.
• Raised full-year 2025 guidance for MRD revenue ($180M-$190M), lowered operating expenses ($335M-$345M), and reduced cash burn ($50M-$60M) signal increasing confidence in the financial trajectory.
• The company remains on track to achieve Adjusted EBITDA positivity for the MRD business in the second half of 2025, driven by revenue growth, ASP expansion ($1,300 target for FY2025), operational efficiencies (NovaSeq X transition in H2 2025), and disciplined cost management.
• Strategic initiatives like EMR integrations (targeting 50%+ volume by end of 2025), expanding blood-based testing, and the NeoGenomics partnership are expected to fuel future volume growth, particularly in the community setting.

Decoding the Immune System: Adaptive's Path to Precision Medicine

Adaptive Biotechnologies Corporation was founded with a bold vision: to unlock the vast potential of the adaptive immune system to transform how diseases are diagnosed and treated. Since its inception in 2009, the company has built a proprietary immune medicine platform designed to read the diverse genetic code of a patient's immune system – specifically, the T cell receptors (TCRs) and B cell receptors (BCRs) – to understand how the body detects and responds to disease. This foundational technology, underpinned by sophisticated computational biology and machine learning, captures insights in a dynamic clinical immunomics database, forming the basis for developing tailored clinical products and services.

Operating across two distinct yet synergistic segments, Minimal Residual Disease (MRD) and Immune Medicine, Adaptive leverages its platform to address critical needs in oncology and autoimmunity. The MRD segment is anchored by the clonoSEQ clinical diagnostic test, designed to detect and monitor residual disease in lymphoid cancers, while the Immune Medicine segment focuses on leveraging immune insights for drug discovery and development, notably through a significant collaboration with Genentech and internal autoimmunity programs.

In a competitive landscape that includes biopharmaceutical companies focused on rare diseases (like Ultragenyx Pharmaceutical (RARE)), cell and gene therapy preservation tools (Biolife Solutions (BLFS)), clinical development services (Fortrea Holdings (FTRE)), and life sciences instruments (Mesa Laboratories (MLAB)), Adaptive carves out a unique position. Its core technological differentiation lies in its ability to sequence, map, pair, and characterize TCRs and BCRs at scale with high precision. This provides tangible benefits, such as the ability to detect MRD at sensitivities far beyond traditional methods like flow cytometry, enabling earlier detection of relapse and more precise monitoring of treatment response. While some competitors may offer broader service portfolios or focus on different aspects of the biotech value chain, Adaptive's specialized focus on decoding the adaptive immune system provides a distinct competitive moat, particularly in areas where immune response is critical to disease understanding and treatment.

Recent technological advancements further underscore this differentiation. The launch of an enhanced clonoSEQ assay for DLBCL in March 2025, for instance, delivered a stated 7-fold increase in sensitivity by optimizing DNA extraction and maximizing sample input. This enhancement directly addresses the need for deeper MRD detection in this specific cancer type, potentially expanding the clinical utility and competitive advantage of clonoSEQ in DLBCL. Looking ahead, the planned transition to the NovaSeq X sequencing platform in the second half of 2025 is expected to significantly improve laboratory efficiency and reduce cost per sample, with management targeting a 5 to 8 percentage point improvement in sequencing margin in the first 12 months post-launch, and further expansion as volumes grow. This operational enhancement, driven by technological adoption, is crucial for improving the profitability profile of the MRD business. Within the Immune Medicine segment, R&D is focused on developing a digital TCR-antigen prediction model, aiming to replace cellular assays to rapidly and accurately predict TCR-antigen binding. This initiative seeks to meaningfully reduce the time and cost of selecting TCRs for cell therapies, highlighting the company's commitment to leveraging computational biology and AI/ML to enhance its platform's capabilities and create new therapeutic applications.

The MRD Engine: Accelerating Growth and Driving Towards Profitability

The MRD segment is currently the primary engine of Adaptive's growth and the focal point of its near-term path to profitability. The clonoSEQ test has demonstrated strong commercial momentum, particularly in the first quarter of 2025. MRD revenue grew by a robust 34% year-over-year to $43.7 million, contributing 83% of the company's total revenue. This growth was fueled by a significant increase in clonoSEQ test volumes, which reached a record high of 23,117 tests delivered in Q1 2025, representing a 36% increase compared to the prior year and a 10% sequential increase. Volume growth was observed across all reimbursed indications, with notable strength in lymphoma indications like DLBCL and MCL.

A critical driver of revenue expansion is the increasing average selling price (ASP) for clonoSEQ. In Q1 2025, ASP in the U.S. was north of $1,220 per test, a 14% increase year-over-year. This improvement is a direct result of strategic initiatives focused on enhancing payor coverage and optimizing revenue cycle management. Key wins include securing Medicare coverage for MCL in Q4 2024 and expanded coverage for MCL surveillance in April 2025. Furthermore, a new Medicare Clinical Laboratory Fee Schedule (CLFS) rate of $2,007 per test, effective January 2025, has provided significant leverage in negotiations with commercial payers. Management successfully closed or renegotiated agreements with six major national payers in Q1 2025 and is confident in achieving an average ASP of $1,300 per test for fiscal year 2025, setting the stage for continued future ASP growth.

Operational execution is also contributing to the improving financial profile. Sequencing gross margin, excluding milestones and Genentech amortization, reached 62% in Q1 2025, a significant 17 percentage point increase year-over-year. This margin expansion is attributed to lower overhead costs and stable direct labor supporting increased volumes, demonstrating improving operational leverage. The planned NovaSeq X transition in the second half of 2025 is expected to further enhance these efficiencies and margins.

Strategic initiatives are in place to sustain and accelerate volume growth. Expanding blood-based testing is a key focus, contributing 44% of MRD tests in the U.S. in Q1 2025, up from 39% a year ago. EMR integration is another critical lever, with 27 Epic integrations live as of Q1 2025, including five of the top 10 accounts. Management expects to have over 50% of total order volume flowing through an integrated EMR platform by the end of 2025, including the planned OncoEMR integration with Flatiron Health. The exclusive strategic commercial partnership with NeoGenomics (NEO), announced in January 2025 with a pilot launch planned for the second half of the year, is expected to significantly expand Adaptive's presence and drive volume growth in the community setting in 2026 and beyond.

The momentum from the ODAC recommendation in April 2024, supporting MRD as a primary endpoint for accelerated approval in multiple myeloma, continues to benefit the MRD pharma business. This has led to increased interest and adoption of clonoSEQ in clinical trials, including new study bookings and the conversion of existing studies from secondary to primary endpoints. With a healthy backlog of over $200 million at the end of 2024, the pharma segment is poised for continued growth, contributing regulatory milestone revenue ($4.5 million in Q1 2025) and sequencing service revenue.

The combined strength in clinical volume, ASP expansion, operational efficiency, and pharma momentum positions Adaptive to achieve a key financial milestone: Adjusted EBITDA positivity for the MRD business in the second half of 2025. This target is supported by the raised full-year guidance and reflects the successful execution of the company's strategy to drive sustainable growth while maintaining disciplined cost management.

Immune Medicine: Investing for Long-Term Therapeutic Potential

While the MRD business drives near-term growth and profitability, the Immune Medicine segment represents Adaptive's investment in long-term therapeutic potential. This segment leverages the company's core platform for drug discovery and development, primarily through its collaboration with Genentech in oncology and internal programs in autoimmunity.

Immune Medicine revenue in Q1 2025 was $8.7 million, a 6% decrease year-over-year, primarily due to an anticipated decrease in Genentech collaboration revenue amortization, partially offset by a 12% increase in pharma and academic service revenue. The Genentech collaboration, focused on developing TCR-based cellular therapies for solid tumors, continues to advance, with R&D efforts aimed at improving turnaround time and reducing costs, notably through the development of a digital TCR-antigen prediction model. This collaboration is accounted for as a collaborative arrangement, with revenue recognized over time based on proportional performance. Management estimates approximately $50 million to $60 million in remaining Genentech amortization at the end of 2024, with around $15 million anticipated in FY 2025.

In autoimmunity, Adaptive is pursuing a precision immunology approach, aiming to discover and develop antibodies that target disease-causing autoreactive T cell receptors. Progress includes identifying specific autoreactive TCRs in indications like multiple sclerosis and type 1 diabetes, completing antibody mouse immunization campaigns, and initiating functional testing of selected antibody candidates. The goal is to nominate a lead autoimmune indication and build a robust preclinical data package.

The Immune Medicine segment operates with a targeted cash burn of $25 million to $30 million, with R&D investments strategically gated and partially funded by pharma business revenue. While this segment is currently a cost center, it represents the potential for significant future value creation through novel therapeutic assets, leveraging the unique insights derived from Adaptive's immune medicine platform.

Financial Health and Outlook

Adaptive's financial performance in Q1 2025 reflects the positive momentum in the MRD business and disciplined cost control. Total revenue increased 25% year-over-year to $52.4 million. Total operating expenses decreased by 9% to $82.0 million, driven by lower R&D and general and administrative expenses. This resulted in a loss from operations of $29.6 million, a significant improvement from the $48.8 million loss in Q1 2024. Net loss attributable to Adaptive Biotechnologies Corporation was $29.9 million, or $0.20 per share, compared to $47.5 million, or $0.33 per share, in the prior year period. Adjusted EBITDA loss improved substantially to $12.7 million in Q1 2025 from $28.2 million in Q1 2024.

The company maintains a solid liquidity position. As of March 31, 2025, cash, cash equivalents, and marketable securities totaled $232.8 million. This is supported by the Revenue Interest Purchase Agreement with OrbiMed, which provided $125 million at closing in September 2022 and offers access to up to $125 million in subsequent installments, subject to conditions. Management believes the existing cash position provides ample runway to fund operations and strategic objectives through at least the next 12 months without the need to raise additional capital in the current market environment.

Net cash used in operating activities decreased to $28.5 million in Q1 2025 from $38.4 million in Q1 2024, primarily due to improved customer collections.

Based on the strong start to the year and continued momentum, Adaptive has raised its full-year 2025 guidance. MRD revenue is now expected to be between $180 million and $190 million. Total company operating spend is lowered to a range of $335 million to $345 million. Consequently, the total cash burn guidance is reduced to $50 million to $60 million. This updated outlook reinforces the company's trajectory towards achieving Adjusted EBITDA positivity for the MRD business in the second half of 2025, driven by anticipated sequential volume growth, ASP expansion, operational efficiencies, and controlled spending.

Risks and Challenges

Despite the positive momentum, Adaptive faces inherent risks. As a commercial-stage biotechnology company, market acceptance of its products, particularly clonoSEQ, remains crucial. Coverage and reimbursement decisions by payors, while improving, can fluctuate and impact revenue. Success in the Immune Medicine segment relies heavily on the progress and outcomes of collaborations like the one with Genentech and internal R&D programs, which are subject to significant scientific, clinical, and regulatory uncertainties. The pharma business, while benefiting from the ODAC decision, can experience quarter-to-quarter volatility based on study timing and regulatory approvals. Reliance on third parties for certain aspects of development and commercialization also presents risks. While management does not expect permanent limitations on federal NOLs based on analysis through 2023, future ownership changes could impact their utilization. The company is also exposed to market risk from interest rate changes and potential liabilities from legal proceedings and indemnification agreements, though no material issues were reported as of Q1 2025. The NovaSeq X transition, while promising, is a significant undertaking that requires careful execution.

Conclusion

Adaptive Biotechnologies is demonstrating strong execution on its strategy to leverage its unique immune medicine platform for both diagnostic and therapeutic applications. The MRD business is showing accelerating growth driven by increasing clonoSEQ test volumes, expanding ASP fueled by payor wins and favorable pricing, and momentum in the pharma segment following the ODAC recommendation. Operational efficiencies and disciplined cost management are contributing to improving margins and reducing cash burn. With raised full-year guidance and a clear path towards achieving Adjusted EBITDA positivity for the MRD business in the second half of 2025, Adaptive is strengthening its financial profile. While the Immune Medicine segment represents a longer-term investment, the focus on advancing targeted therapeutic programs, supported by a solid cash position, offers potential for future value creation. The company's ability to continue driving volume growth, expand ASP, execute on operational efficiencies, and navigate the inherent risks in the biotech landscape will be key determinants of its success in translating its technological leadership into sustained financial performance and realizing the full potential of immune medicine.