Adaptive Biotechnologies Corp Aktie

Good day, and thank you for standing by. Welcome to the Adaptive Biotechnologies First Quarter Financial Results. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Karina Calzadilla, Head of Investor Relations. Please go ahead.

Thank you, Anton, and good afternoon, everyone. I would like to welcome you to Adaptive Biotechnologies First Quarter 2026 Earnings Conference Call. Earlier today, we issued a press release reporting Adaptive financial results for the first quarter of '26. The press release is available at www.adaptivebiotech.com. We are conducting a live webcast of this call and will be referencing to a slide presentation that has been posted to the Investors section in our corporate website.

During the call, management will make projections and other forward-looking statements within the meaning of federal securities laws regarding future events and the future financial performance of the company. These statements reflect management's current perspective of the business as of today. Actual results may differ materially from today's forward-looking statements, depending on a number of factors, which are set forth in our public filings with the SEC and listed in this presentation.

In addition, non-GAAP financial measures will be discussed during the call, and a reconciliation from non-GAAP to GAAP metrics can be found in our earnings release. Joining the call today are Chad Robins, our CEO and Co-Founder; and Kyle Piskel, our Chief Financial Officer.

Additional members from management will be available for Q&A. With that, I'll turn the call over to Chad. Chad?

Thanks, Karina. Good afternoon, and thank you for joining us on our first quarter earnings call. As shown on Slide 3, we're off to a strong start to the year with accelerating momentum in MRD and disciplined execution across the company. MRD revenue grew 53% year-over-year, reflecting broad-based strength across both clinical and pharma. We also recognized our first primary endpoint milestone this quarter, a meaningful proof point for MRD's expanding role in drug development. clonoSEQ clinical volumes increased 41% year-over-year, demonstrating strong continued adoption. We also delivered meaningful margin expansion with sequencing gross margin increasing 8 percentage points year-over-year to 70%, driven by scale and operational efficiency. At the same time, we maintained strong financial discipline, reducing cash burn and ending the quarter with approximately $222 million in cash. Given the strength we're seeing in the MRD business, we are raising our full year MRD revenue guidance to a range of $260 million to $270 million.

Kyle is going to provide more detail shortly. Let's now turn to Slide 4 for a deeper look at the MRD business. Our clinical business continues to deliver strong growth with revenue up 54% year-over-year. clonoSEQ tests reached another quarterly record of almost 32,600 in Q1, up 9% sequentially.

Growth was observed in all reimbursed indications, led by DLBCL at over 19% growth versus prior quarter. Importantly, we're seeing mounting traction across the key drivers that support durable long-term adoption. Blood-based testing reached 49% of MRD volume. In multiple myeloma, a traditionally bone marrow-driven indication, the contribution of blood-based MRD increased to 29%, up 8 percentage points year-over-year. This shift is closely linked to expansion of the community setting, where a promotion of favorable guideline updates and implementation of standardized testing protocols contributed to growth rates that outpaced the rest of the business.

Community volumes grew 67% year-over-year and now represent 35% of total testing. Growth in the community business was further supported by our EMR-enabled workflows, which are driving repeat utilization. Serial monitoring orders available to Flatiron integrated accounts are widely being utilized and strong initial pull-through rates have further improved with 72% of repeat orders due are being fulfilled.

Physician engagement also continues to expand with the number of ordering clinicians growing 43% year-over-year to nearly 5,000 in Q1, underscoring increasingly broad acceptance of MRD as part of routine clinical management. Finally, we continue to see increases in pricing with U.S. ASP growth of 11% year-over-year to $1,360 per test. Importantly, I'm excited to share that clonoSEQ is now listed in the Texas Medicaid policy manual.

clonoSEQ is one of only two specific tests included in the newly developed genetic testing section and patients may receive up to six tests per year. It's great to be pioneers in bringing advanced molecular testing to some of our most vulnerable patients.

Our scale, adoption and embedded workflows support clonoSEQ's sustained growth and continue to strengthen our leadership position as the market evolves. Let's now turn to Slide 5 to discuss our Biopharma business. We delivered one of the strongest quarters to date in MRD pharma with revenue growing 53% year-over-year or 33% excluding milestones. As mentioned, we also recognized our first milestone in the U.S. tied to MRD as a primary endpoint in the CEPHEUS trial in multi myeloma. New bookings were strong, driving backlog to approximately $254 million, up 24% year-over-year. Bookings came primarily from regulated studies, including several registrational trials where MRD will be used as a primary or co-primary endpoint in both multiple myeloma and CLL.

We continue to see increasing use of MRD to guide treatment. Today, we have approximately 20 ongoing interventional studies where MRD is used for enrollment, stratification or to guide therapy decisions. As these trials read out, they directly support our commercial business. For example, data from the PERSEUS trial helped establish sustained MRD negativity as a meaningful measure of deeper response in multi myeloma, which supports broader adoption of clonoSEQ in clinical practice. The momentum we are seeing in the pharma business is likely to be further supported by evolving regulatory trends.

The FDA recently introduced a new clinical trial model that incorporates real-time data submission with early proof-of-concept studies underway, including the TrAVeRse trial in mantle cell lymphoma, where MRD-negative complete response as measured by clonoSEQ is a key endpoint. While early, this emerging model for accelerating data review will reinforce the value of MRD endpoints that are objective, quantitative and longitudinal. These dynamics are particularly relevant in regulated and registrational settings, where data quality, reproducibility and regulatory credibility are critical and where clonoSEQ is well positioned as a clinically validated MRD assay.

Taken together, the trends we are observing support a reinforcing flywheel between biopharma and clinical testing as adoption of clonoSEQ in drug development generates evidence, strengthens clinical utility and drive demand in the clinic. To wrap up on MRD, as shown on Slide 6, we are well on track to deliver against our key priorities for the year. Starting with clinical volumes. We initially guided to over 30% growth for the year. Based on our first quarter performance and continued momentum, we now expect volumes to grow to at least 35% in 2026 with potential for upside.

Importantly, the underlying drivers of growth are already nearing our full year targets. Blood-based testing is rapidly approaching our goal of over 50% contribution and community contribution is already at 35%, in line with our full year expectations.

EMR integrations continue to advance with six new Epic accounts added year-to-date and five more expected to go live in the next month. In April, we went live with Epic in another of our top 10 accounts, bringing us to seven of our top 10 now being fully integrated.

On pricing, we remain on track to achieve our target of approximately $1,400 per test in 2026, supported by recent policy expansions in CLL and DLBCL, Medicaid payment traction and commercial payer negotiations. In biopharma, we have already exceeded our goal for new registrational studies with 10 signed in the first quarter alone.

Finally, strong top line growth, combined with continued operational efficiencies positions us to achieve over 70% sequencing gross margins and expand adjusted EBITDA. Overall, our progress across these MRD priorities is a testament to our continued momentum and strengthens our confidence in our ability to meet or exceed our full year commitments.

Turning now to Slide 7. Our immune medicine programs are progressing well against our 2026 key priorities. We continue to scale our TCR antigen data set and advance our AI/ML modeling work. We now have more than 6 million functional TCR antigen pairs with data that currently spans about 50,000 antigens and 50-plus HLA types. This proprietary data set enables us to understand TCR antigen interactions and their role in cancer, virology and autoimmunity. We recently confirmed that our digital AI model outperformed the accuracy of existing public benchmarks in predicting TCR antigen binding.

We published this work in proceedings of machine learning and research and presented the machine learning for Health Symposium. Our focus this year is to further improve these models to targeted applications that could be attractive to partners seeking to leverage our data and our digital capabilities.

In parallel, we are applying our AI-enabled immune medicine platform to identify the likely disease-causing T cell receptors and their antigens in select autoimmune conditions. This quarter, we kicked off our RA target discovery partnership with Pfizer. We received over 1,000 patient samples and are on track to deliver the RA data package in the second half of 2026. As we continue to make progress on the 2026 priorities, we're advancing discussions on additional data partnerships, maintaining a disciplined approach to capital allocation and operating within our expected IM cash burn range of $15 million to $20 million for the year.

I'll now turn the call over to Kyle, who's going to walk through our financial results and updated full year guidance. Kyle?

Thanks, Chad. Starting on Slide 8 with our first quarter results. Total revenue was $70.9 million, representing 45% growth year-over-year, driven primarily by continued strength in MRD, which accounted for approximately 95% of total revenue. Of note, amortization from the Genentech payments is excluded from all prior period comparisons. MRD revenue grew 53% versus prior year to $67.1 million, with clinical and pharma contributions of 65% and 35%, respectively. Immune Medicine revenue was $3.8 million, down 26% from a year ago, primarily due to timing of sample receipts and processing. Turning to margins. Sequencing gross margin, which excludes MRD milestones, was 70% for the quarter, up from 62% a year ago. This improvement reflects reduced assay costs due to efficiencies from our NovaSeq launch in the second half of 2025 and leverage in overhead as we support higher volumes as well as favorable pricing trends across both clinical and pharma. Total operating expenses, inclusive of cost of revenue was $90.1 million, up 10% year-over-year. This increase was mainly driven by continued investment in commercial infrastructure, including EMR integrations and reimbursement as well as higher personnel-related costs.

At the segment level, MRD continues to demonstrate strong profitability with adjusted EBITDA of $12.1 million compared to a loss of $4.1 million in the prior year, reflecting the impact of revenue growth, including milestone revenue and continued operating leverage. Immune Medicine adjusted EBITDA was a loss of $10.4 million. At the total company level, adjusted EBITDA was a loss of $2.5 million. Net loss for the quarter was $20 million, including approximately $2.9 million of interest expense related to our royalty financing agreement with OrbiMed.

I'll now turn to our updated full year guidance on Slide 9. We are raising our full year MRD revenue guidance to a range of $260 million to $270 million, up from our prior range of $255 million to $265 million. This increase reflects stronger-than-expected clinical volume performance in the first quarter and continued momentum across key growth drivers. This range includes $9 million of MRD milestone revenue, which was recognized in the first quarter, and we do not anticipate additional milestone revenue for the remainder of the year. At the midpoint of the guide, this implies approximately 25% year-over-year growth or 33% growth, excluding milestones. In terms of seasonality, we continue to expect MRD revenue to be weighted approximately 45% in the first half and 55% in the second half.

We are reiterating our full year total operating expense guidance, including cost of revenue of $350 million to $360 million. This reflects continued investment in MRD growth with approximately 75% of spend allocated to MRD, approximately 20% to Immune Medicine and the remainder to corporate unallocated.

Importantly, we remain on track to achieve positive adjusted EBITDA and positive free cash flow for the full company by the end of 2026. Overall, the quarter reflects strong financial execution supported by continued revenue growth, expanding margins and operating leverage.

With that, I'll turn the call back over to Chad.

Thanks, Kyle. We're executing well across the business, and the strength we're seeing, particularly in MRD, gives us confidence in both our plan and the opportunity ahead. As we move through the year, we expect to build on this performance and drive additional upside over time.

With that, I'll turn it over to the operator for questions.

[Operator Instructions] Our first question comes from Andrew Brackmann from William Blair.

I wanted to ask on community testing. Chad, as you sort of outlined here, I think you're already at the full year target for the mix that you want coming from the community. Can you maybe sort of compare and contrast for us just the nature of the conversations that you're having with those accounts in particular, maybe today versus a year or so ago? You've just got so much sort of tailwinds from the blood mix sort of increasing and then also the EMR integration. So how have those conversations sort of evolved over the last year or so?

Andrew, I can help answer that. I think a year ago, if you had asked me this question, I would have said, well, the conversations have shifted from what is MRD? -- why should I care? Why should I do this to okay, how should I do this? What patients, which indications, which use cases, help me understand more of the practical applications. And now a year later, the conversations are increasingly shifting toward practical implementation. We are increasingly getting traction with conversations around protocols and in fact, have established testing protocols in a number of large community centers and networks.

The goal is let's standardize testing so that all our patients have access to the best care. Let's ensure our clinicians aren't forgetting about this for their heme patients who in the community may not make up the lion's share of the patients they see every day. And so that sort of practical implementation-oriented conversation is more and more of the norm, and I think a really positive sign for the degree to which MRD is now becoming really entrenched as part of the standard of care in the community at large.

That's perfect. I appreciate all that color. And then I just wanted to sort of ask on the reimbursement front. Obviously, there's a lot of noise out there with respect to CMS and the CRUSH initiative. Can you maybe just sort of remind investors how clonoSEQ is positioned from a reimbursement profile and how you see your sort of rate as durable even if there are changes to things like FX nationalization or implementation of prior authorizations?

Yes. It's Chad, Andrew. We look extensively at this question. And after kind of internal and external evaluation with outside counsel, we've determined that we're currently not subject to PAMA reporting requirements for the cycle. there's actually very specific and defined requirements for PAMA reporting. That's actually by statute and your test kind of must not only fall under the CLFS or clinical lab fee schedule, it also has to account for over 50% of your Medicare revenue. And you know that CMS publishes a list of CP codes, CPT codes that fall under the CLFS.

And frankly, the clonoSEQ episode billing structure, it's not on it. Like if we kind of double-click and go one level deeper, CMS does not identify the MolDX code that we use for billing kind of the clonoSEQ episodic rate structure as being on the CLFS list. It's worth noting kind of as you all know that the vast majority of our Medicare revenues are generated through the episode rate structure billing under the MolDX program. CMS does consider the PLA code that we use to bill Medicare for MCL recurrence monitoring as being on the CLFS.

But we have Medicare revenues under the PLA code that are under that recurrence monitoring that are well below the 50% revenue threshold kind of set for PAMA for these purposes for this kind of initial data reporting period. Kind of separately, I think there are -- we're in process of really a multipronged strategy that not only includes kind of recurrence monitoring. This goes to your kind of durability question, but we're also in productive discussion with MolDX to increase the number of tests per bundle kind of under our episode structure, and there's other things that we're looking at. So kind of this is a super high importance and kind of we're all over it.

Our next question comes from David Westenberg from Piper Sandler.

Congrats on the great job here. So I want to talk about with MRD as a primary endpoint. Congratulations on that. How should we think about different things like CDx or on the label? And how should we think about pharma basically helping to push your product because of it be on the label? And lastly, I imagine there's a lot of power in being able to find patients that are recurring. Is there any potential reimbursement or strategic monetization of maybe getting these clinical patients into clinical trials that were not able to prior to maybe clonoSEQ and its incredibly high sensitivity.

David, I appreciate those questions, and I think interesting set of topics. First of all, with regard to the primary endpoint, as you've heard Chad's prepared remarks, we're seeing increasing use of the assay in the pharma setting in terms of regulated studies. And even more beyond that, seeing use in interventional studies where MRD is being used to stop or start therapy being used to actually qualify patients that should be enrolled in the study to begin with. And that particular trend is extremely favorable for our business because, of course, we're the only FDA-cleared assay in this space. We're extremely well positioned to capture these opportunities. We're also an assay that has extremely deep sensitivity and high specificity, which is really important in the context of interventions where you don't want to be giving patients therapies they don't need, right? So the question does then come up, well, is this a companion diagnostic? Should it be incorporated into studies?

And there are now the beginnings of studies that are exploring that use case for MRD, although up until this point, the FDA has not taken the position that MRD needed to be positioned as a companion diagnostic within the regulatory context. I imagine that, that will come up as time goes on. There will be some studies for which that may be appropriate, others not. But regardless of whether MRD becomes a companion or remains a complementary diagnostic for these studies and for these therapies, it's quite clear that the pharma companies are very interested in partnering to ensure that MRD uptake is maximized to support the adoption of their therapies.

We're already having numerous conversations actively with our biopharma partners who want to better understand MRD adoption dynamics from our point of view and want to think about how we can work together to expand MRD adoption, especially in the community setting. And to your question about, I think, essentially the concept of clinical trial matching, that is potentially an application of the data that we generate, and we have done some initial exploration, and there is, I think, some level of interest potentially in that, but more work to be done to be determined whether and how we may determine to pursue that.

Got it. And if I may, I'm going to ask just one more on -- sticking with the clonoSEQ business. DLBCL grew 19% quarter-on-quarter. That's great, particularly because there's a lot of noise with competition or competitor having a lot of different presentations. Do you think that you maybe saw benefits from all of the different presentations in ASH and that would be kind of a 1-, 2-quarter, 3-quarter benefit as all these physicians saw that at ASH? Or do you think like there's a sustainability for something beyond that?

I think that the strength we saw in the DLBCL business in Q1, first of all, was very pleased to see, but also we've seen very strong growth quarter-over-quarter prior to and since the entry of competition in the space. So I'm quite confident that the growth we're seeing quarter-over-quarter is driven by the sustainable moats that we've built and also the durable advantages that we have, the brand awareness, specifically as the heme MRD test, the technology and its advantages relative to other approaches to assessing MRD and the broad real-world clinical experience that we've built along with the coverage and the customer satisfaction that we've been able to deliver. All those things, I think, have contributed to clinician confidence in utilizing clonoSEQ. And as the noise around MRD and DLBCL continues to mount, we are disproportionately benefiting from that as the market leader.

I was just going to say, David, and just remember, it's really early days for MRD and DLBCL in general.

And Susan mentioned all the reasons that we're well positioned, but we see durable growth over kind of many quarters ahead. The general sentiment is getting doctors to incorporate MRD into clinical practice as a routine kind of measure. And we're -- yes, we're benefiting from really the noise across the industry, but also, as Susan mentioned, from the fact that we have what we believe is kind of the most sensitive and specific test out there.

Yes. And David, we do intend to continue to release additional data in this space, and I think particularly at ASH, we expect that you'll have the opportunity to see another round of significant data.

Our next question comes from Mark Massaro from BTIG.

Congrats on another beat and raise. I wanted to start on the pharma backlog, which increased 24% year-over-year. And like David said, it's great to see the first primary milestone come in. So I think in prior quarters, you've sort of broken out the secondary versus primary funnel. So I'm just curious if you could just speak to with just, of course, one primary milestone in the bank, what does that look like for you guys, say, over the next couple of years? Is this something that you think can continue? And then can you just remind investors the economics of the primary endpoint compared to like a secondary endpoint?

Sure, Mark. So to start out, I think I can kind of give you an overview of how the backlog is broken out. We have about 190 active studies. And of those, 111 are either primary or secondary endpoint studies, 23 are primary and the remaining 88 are secondary. And Kyle, maybe you want to speak to the economics.

Yes. On the economic front, I mean, I think deal by deal can have its own unique differences. And I won't go into specifics. Generally, primary endpoint milestones are higher than what you've seen historically in the past, which has been the vast majority of secondary endpoint milestones. They won't all be the same dollar amounts, et cetera, but they're typically a little bit higher.

Fantastic. And then maybe at a high level, can you just maybe give us a sense, this might be for you, Chad. Like what inning do you think you are in the EHR integration? I'm just basically trying to determine what type of upside you have as we think about getting to full maturity across the EMR systems?

Yes. I mean I think one of the kind of most important things is kind of prioritizing going after our largest accounts. And now we're kind of seven out of 10 of our top largest kind of academic accounts, but the community setting, in particular, is where we're targeting kind of the large network practices on EMR integrations. Obviously, Flatiron gives you kind of certain advantages that Epic doesn't and that you could turn on a lot of accounts at one time. So we have now kind of 150-ish on the community EMR integrations. But now the real point is once you have your accounts integrated, we have a very defined strategy about targeting those accounts and the pull-through and how you optimize the EMR.

And I would say we're early on those, but -- and the accounts that we've gone and really kind of put that muscle into it, we're seeing really, really strong results. So that's really the focal point right now is to say, okay, once we're integrated, how do we go in and optimize those accounts. So I would say early, but we've got a very strong playbook in place.

Our next question comes from Subbu Nambi from Guggenheim.

You've mentioned before having preliminary discussions on increasing the Medicare bundle of tests to over four. Can you give us the latest on the progress in those conversations? Is this a late 2026 or a 2027 opportunity? And what are the steps left in that process?

Yes. Subbu, it's really hard to predict timing of kind of government contractors and agencies. So I'm not going to go out of the limit and try to do that on this call. The only thing I can tell you is that we have a very strong relationship. We continue to develop very strong evidence, and we have had very productive discussions.

That's fair, Chad. Then can you talk about your progress so far this year related to the structure of milestone payments versus transitioning pharma to a more direct pay-for-service structure? How has that been received by partners? And is there a percentage of total customer numbers you're looking to have transition as we progress throughout the year?

Yes, Subbu, it's a long process. Many of our contracts are multiyear contracts and the renegotiations come up sort of as those contracts expire. So it's going to take some amount of time, a number of years for us to even get the opportunity to revisit the existing contract structures. What I will say is that in the situations that has come up, it's been a topic of conversation every time, and we haven't -- many of those conversations are still ongoing.

That's fair. And last one for me. For Kyle, maybe for sequencing margin, what is the ceiling this year? And what will be the gross margin progression look like this full year? Should we expect sequential increases each quarter? And will the full benefit of NovaSeq transition be realized this year? And what other levers do you have for gross margins?

Yes. I appreciate the question, Subbu. I'd say as it relates to feeling, we've talked about 75% kind of being the North Star. And I think it's a fair step up into that 75% gross margin throughout the year at the end of the day. The utility of the NovaSeq X, as we continue to drive volume, that's just compound value for us. And as we can continue to improve our price point, you'll see more margin improvement throughout the year. But I think it's probably fair to just state that as a linear step-up through to about that 75% range.

Sorry to nitpicky because honestly, the volume numbers are pretty impressive.

Our next question comes from Sebastian Sandler from JPMorgan.

My first question is on pharma MRD bookings and conversion expectations. So it looks like most of the guide change is on better volumes. So I'm just wondering if you expect any of the incremental bookings you saw in 1Q to convert to revenues in 2025. I think normally, there is a 20% release rate for in-year bookings. So I'm just wondering what's baked in there and if there could be any upside to the guide from that? And I have a quick follow-up.

Yes. Great to see the bookings in Q1 and the increased backlog exiting Q1. I'd say -- as it relates to the guide, we want to kind of -- pharma is lumpy quarter-to-quarter is a great start to the year. I think we just want to be prudent here in kind of managing expectations to keep it at that 11% to 12% year-over-year growth. But that being said, as the trajectory continues and the pace of bookings and pull-through of the backlog increases, I think could provide some opportunity to lift the guide in the back half of the year or even potentially next quarter.

Okay. And then just a follow-up. It looks like EBITDA for MRD stepped up around $2 million quarter-over-quarter despite a $9 million pharma milestone. So just were there any one-offs we should be aware of? It seems like it might have just been personnel and EMR costs. And then I know you have the total Co adjusted EBITDA guide positive by the end of the year. But just wondering if you can give us any more color on incremental MRD EBITDA margins for the balance of the year and just kind of pacing there?

Sure. As it relates to the sequential movement Q4 to Q1, there is a bit of seasonality in our business in Q1 where we have some increased costs that won't recur. And then Q4 also a little bit higher on the pharma revenue versus Q1. So that's the majority of the balance of the mix. As it relates to the EBITDA improvement on the MRD business. Again, if you focus on the base business, I think it's going to have a continued growth trajectory throughout the rest of the year. I don't want to put anything firm in terms of an EBITDA margin at this point, but sufficient to say it's going to continue to grow sequentially each quarter.

Our next question comes from Dan Brennan from TD Cowen.

Maybe just starting off with the 35% volume guide, like what do you think the puts and takes would be if you guys come in above that over the back half of the year, given I think we've been accustomed to these really strong volume numbers and now you just raised the bar again.

I will answer the question, Dan. We are very pleased with the performance in Q1. I think it's a great strong start to the year, and we do feel very confident in the 35% year-over-year growth. Could it be higher? I think the answer is yes, and there is high potential for upside. We're just early in the year. So we want to see how our key growth drivers continue to play out. But that said, it's the same thing that we've been talking about in EMR integrations and whether or not we can drive increased adoption of serial testing and increased pull-through, particularly on the Flatiron system, which allows us to really standardize that ordering approach.

We've seen really good results to date from that. The blood-based testing, you saw 29% of myeloma MRDs coming in this quarter in blood, and that was a nice step-up, and we'll continue to look for that as a potential area for upside because we do see increased testing frequency where we see increased use of blood. Community use. We achieved our goal, as Chad's prepared remarks indicated for the full year in Q1, we need to maintain that. We need to continue to see disproportionate growth in that segment.

And the guidelines that we've been promoting the favorable updates that came last year have been an important component of that. So if we can continue to build and continue to implement some of the pathways that I talked about earlier, these protocols that really dictate how testing will be done in a standardized fashion in large community practices, that's another source of upside. I think the takes are simply that we believe we're in a very strong position. We have the right strategy. We have the right team. We're a market leader, but we're going to remain attentive to new existing and to new emerging competition. But I think that's just why it makes it important for us to maintain a rapid pace of growth and invest appropriately and solidify all the moats that we've been talking about.

Great. Maybe just talking about the commercial organization. Just can you just remind us kind of the plan this year, kind of where you stand now, what the targets are by year-end in terms of commercial adds? And what's the balance you're trying to strike there with driving profitability while ensuring you have enough feet on the street to kind of stay ahead of any competition that's coming or to maximize on the opportunity ahead?

Sure. The short answer is that we think that the team we have is the right team to continue to prosecute the opportunity. We have 65 sales reps in the field. They're split half and half between account managers who focus on academic institutions and diagnostic hematology specialists who focus on community practices. Our reps have manageable index values. They're calling on a reasonable number of accounts and doctors. They have acceptable amounts of travel time. So we always look at the individual territory performance and potential and potentially we shift or add territories here and there to make sure that we're capitalizing on opportunities in specific geographies.

And we will, over time, continue to look at the option of new deployment strategies that could justify additional hiring, and we're watching the market dynamics carefully in that regard. But not expecting to invest in any significant expansions this calendar year.

I'll just say kind of some of the areas that we are continuing to deploy capital and invest behind is EMR integration just discussed, reimbursement and revenue cycle management and continued data generation to kind of demonstrate clinical utility across all of our indications.

[Operator Instructions] Our next question comes from John Wilkin from Craig-Hallum.

Just one quick one for me. I wanted to dig in a little bit deeper on the sequencing side of the pharma business. I know you guys have historically talked about that business being more like a high single-digit grower, and now we're in the second straight quarter where it's grown. I think Q4 was 24% this quarter over 30%. So if you could give a little detail on what's driving that acceleration and if you think that acceleration could be sustainable through the balance of the year?

Yes, John, I appreciate the question. I think we're seeing a lot of traction in the pharma MRD space. The bookings and backlog are really the drivers of that. The pull-through is also starting to happen is just additional pharma partners want to generate data and get readouts on their trial. So I think it's an opportunity, as I mentioned in one of the Q&As earlier. I think it's an opportunity for us to continue to go after, and we're going to be beneficiaries of it. It's just -- again, we're just going to hold the guide here right now. And I do anticipate it will grow throughout the year, but it can be lumpy quarter-to-quarter.

Thank you. This concludes the question-and-answer session. Thank you for participating in today's conference. This does conclude the program. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Adaptive Biotechnologies Fourth Quarter and Full Year Earnings Conference Call.

[Operator Instructions]

Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Karina Calzadilla, Vice President, Investor Relations. Please go ahead.

Thank you, Daniel, and good afternoon, everyone. I would like to welcome you to Adaptive Biotechnologies Fourth Quarter and Full Year 2025 Earnings Conference Call. Earlier today, we issued a press release reporting Adaptive financial results for the fourth quarter and full year of '25. The press release is available at www.adaptivebiotech.com. We are conducting a live webcast of this call and will be referencing to a slide presentation that has been posted to the Investors section in our corporate website.

During the call, management will make projections and other forward-looking statements within the meaning of federal securities laws regarding future events and the future financial performance of the company. These statements reflect management's current perspective of the business as of today.

Actual results may differ materially from today's forward-looking statements depending on a number of factors, which are set forth in our public filings with the SEC and listed in this presentation. In addition, non-GAAP financial measures will be discussed during the call, and a reconciliation from non-GAAP to GAAP metrics can be found in our earnings release. Joining the call today are Chad Robins, our CEO and Co-Founder, and Kyle Piskel, our Chief Financial Officer. Additional members from management will be available for Q&A. With that, I'll turn the call over to Chad. Chad?

Thanks, Karina. Good afternoon, and thank you for joining us on our fourth quarter and full year earnings call. 2025 was a remarkable year for Adaptive, marked by strong execution and meaningful progress across the business. As shown on Slide 3, in the MRD business, full year revenue grew 46% year-over-year, and we achieved profitability ahead of expectations. We also delivered several key catalysts in the year that position the business for sustained growth and continued margin expansion. These include accelerated EMR integrations, including the integration of clonoSEQ into Flatiron's Onco EMR, expanding access across the community setting. The launch of NovaSeq X+ to help scale operations and improve margins. Our first Medicare coverage for recurrence monitoring in MCL, expanding the lifetime value of each MCL Medicare patient, updates in NCCN guidelines across all reimbursed indications, which continues to deepen clinical validation and strong data generation, which was marked by an all-time high with over 90 abstracts presented at ASH, reinforcing MRD's growing role as an interventional tool in patient care.

In the Immune Medicine business, we scaled our TCR antigen data and modeling capabilities, leading to our first 2 data partnerships, and we completed a preclinical data package for our lead TCR depleting antibody program in ankylosing spondylitis. Taken together, the strong MRD execution, the continued progress in Immune Medicine and the disciplined spending across the organization drove 55% total company revenue growth and a 68% reduction in cash burn, leading to a strong cash balance of $227 million at year-end.

Let's turn to Slide 5 for a closer look at the MRD performance and future expectations, starting with clinical testing. ClonoSEQ clinical testing revenue grew 64% for full year 2025 and 59% in the fourth quarter compared to the prior year. As shown in the chart, volumes increased sequentially throughout the year, reaching a new record of 30,038 tests in the fourth quarter, up 43% year-over-year and 11% sequentially. Growth was broad-based across all reimbursed indications with DLBCL, MCL and multi myeloma driving the majority of year-over-year growth. Multiple myloma represented 44% of U.S. clonoSEQ volume followed by ALL at 30%, CLL and DLBCL, both at 9% and MCL at 5%.

Volume growth throughout the year was driven by a combination of interrelated factors, including blood-based testing, community presence, EMR integrations, clinical guideline inclusion and ongoing data generation. In the fourth quarter, blood-based testing accounted for 47% of clonoSEQ tests, up from 41% a year ago. In multi myeloma, blood-based testing reached 27%, which is a 6% -- 6-point increase year-over-year, which is particularly meaningful given the bone marrow-based nature of the disease. Community testing also continued to expand with volumes up 18% sequentially and representing approximately 33% of total tests in the quarter. We further scaled our digital footprint, completing Epic integrations in 8 accounts during the quarter, bringing the total to 173 integrated accounts, which now drive approximately 40% of ordering volume. Finally, NCCN guideline updates and continued data readouts across marketed indications supported our commercial execution.

Ordering HCPs increased 9% sequentially and 45% year-over-year in Q4, with particularly strong adoption in the community setting. Taken together, these drivers continue to increase both physician adoption and testing frequency per patient across indications.

Turning to Slide 6. In addition to volume, clinical revenue growth was also driven by continued ASP expansion. We ended the year with an average ASP in the U.S. of $1,307 per test, up 17% year-over-year, and we exited the fourth quarter at about $1,350 per test. ASP growth during the year was driven by strong execution from our reimbursement team across several initiatives. These include the successful renegotiation of 8 major payer contracts with national and regional payers, including Humana, Aetna, Horizon and multiple Blue Cross plans as well as the signing of new agreements with Anthem, Centene, Florida and LA Care. We also expanded commercial coverage policies with new coverage wins in DLBCL and in CLL. In parallel, we delivered meaningful revenue cycle management improvements, including Medicaid collections, appeals, prior authorization processes and time to cash.

These operational enhancements supported by AI-enabled workflows are driving higher paid claim rates more consistent realization and improved commercial payer cash collections year-over-year by 74%. Looking ahead, we expect these initiatives, together with 2 additional large national payer contracts, we anticipate closing this year to support our targeted average ASP of approximately $1,400 per test in 2026.

Turning to Slide 7. Our MRD pharma business had a strong year with revenue growth of 20% year-over-year, including $19.5 million in regulatory milestone revenue. Excluding milestones, pharma grew 11%, and we ended the year with approximately $210 million in backlog. Several important shifts in our pharma portfolio are worth highlighting: First, multi myeloma remains the largest driver, accounting for roughly 70% of sequencing revenue and approximately 60% of backlog; second, CLL and ALL bookings more than tripled in 2025 supported by emerging data underscoring the need for higher sensitivity MRD to differentiate therapies in both disease states as well as updated NCCN guidelines for fixed duration regimens in CLL.

Third, MRD is increasingly embedded directly into regulated interventional trials with approximately 60% of our portfolio, including MRD as an endpoint, up from about 40% in 2024. This shift has been driven by regulatory momentum including the ODAC recommendation and most recently, the subsequent FDA draft guidance supporting MRD as a primary endpoint in multi myeloma accelerated approvals.

Of note, registrational trials that incorporate MRD carry higher economic value and have a halo effect in the clinical business. Overall, we're encouraged by the expanding role of MRD across hematologic oncology trials, and we believe broader endpoint adoption, increased testing time points and the need for greater sensitivity will continue to drive MRD pharma revenue growth.

Turning to Slide 8. Our focus this year is clear: continuing driving top line growth while expanding margins building on the same durable growth drivers that powered performance in 2025. In 2026, we expect clonoSEQ test volumes to grow by more than 30% year-over-year, supported by a continued mix shift towards blood-based testing, which we expect to exceed 50% of total MRD volume, deeper penetration in the community setting, where we expect more than 35% of testing to originate, further scaling of our EMR integration effort adding approximately 40 with a focus on high to mid-volume accounts, and continued generation of clinically meaningful data across multiple indications to further expand interventional use and support the guideline evolution.

From a pricing standpoint, we expect to increase ASP to an average of about $1,400 per test based on the initiatives described earlier. In pharma, we plan to increase the number of registrational and primary endpoint studies across multi myeloma, CLL and DLBCL, leveraging growing regulatory and clinical endorsement of MRD. We also expect continued margin expansion driven by higher volumes throwing through the NovaSeq X+ and operating leverage across our production and our commercial infrastructure. We believe these priorities position MRD as a scalable, durable and increasingly profitable growth engine for Adaptive in 2026 and beyond.

Now let's turn to Slide 10 to discuss Immune Medicine. The premise of our Immune Medicine business is to generate large-scale, proprietary immune receptor data that allows us to understand how T cell receptors bind to antigens and how those interactions drive immune responses across cancer, autoimmunity and infectious diseases. Over the past year, we have continued to scale this data we now have more than 5 million paired TCRs spanning over 20,000 antigens and nearly 50 HLA types, a data set that is orders of magnitude larger than is one is publicly available. We believe this scale is sufficient to train predictive models of the adaptive immune response across diseases. In parallel, we are applying our platform to identify what we believe are likely disease-causing T cell receptors and their antigens in certain autoimmune conditions, including type 1 diabetes, celiac disease and multiple sclerosis. These insights have the potential for TCR-based target discovery to enable existing and future partners develop -- to develop immune-based therapeutics.

Turning to Slide 11, I'll briefly review our 2025 achievements and how they set us up for our 2026 strategy. First, we began to monetize our data with 2 distinct licensing deals with Pfizer. One is a data licensing agreement in which Pfizer has access to a subset of our TCR antigen training data. Pfizer will use this data to develop and train its AI and machine learning models to accelerate research and drug discovery in multiple disease area. The second licensing deal focuses on target discovery and rheumatoid arthritis or RA. Here, we are applying our IM platform and capabilities to identify the specific autoreactive T cell receptors that are highly enriched only in RA patients. Pfizer will then use these data to accelerate its research and development of potential RA therapeutic candidates.

Together, these partnerships continue to validate the strength of our differentiated platform and the value of our large-scale proprietary data. In addition, we completed a preclinical data package for our lead antibody program in ankylosing spondylitis. While potential next steps include initiating IND-enabling studies, we made the strategic decision to stop further investment in this program and instead prioritize capital toward data generation and AI modeling. These are key areas we believe leverage our core differentiation and represent the highest return on investment for Immune Medicine. Along with these key achievements, we also maintained a disciplined capital allocation, executing against our objectives while keeping annual Immune Medicine cash burn to around $30 million, as promised.

Looking ahead to 2026, we plan to continue advancing on our TCR antigen data sets and our AI/ML modeling work with a lower target net cash burn of $15 million to $20 million. We continue to focus on securing additional data partnerships, which we believe have the potential to drive meaningful long-term upside for Adaptive. Now I'm going to pass it over to Kyle, who's going to walk through the financial results and our 2026 full year guidance. Kyle?

Thanks, Chad. Turning to our financials. First, I'll cover our reported results, which include the noncash revenue recognized from the amortization of amounts previously received under our Genentech collaboration. As you know, following the termination of the collaboration in August, all remaining amortization was accelerated and recognized in the third quarter. As a result, there are no ongoing Genentech collaboration economics in our results after Q3. Total company revenue for the fourth quarter was $71.7 million and for the full year was $277 million, representing 51% and 55% year-over-year growth, respectively. Total company adjusted EBITDA was $4.1 million in the fourth quarter compared to a loss of $16.4 million a year ago.

For the full year, adjusted EBITDA was $12.2 million compared to a loss of $80.4 million in 2024. Interest expense from our royalty financing agreement with Orbimed was $3 million in Q4 and $11.8 million for the full year, while interest income was $2.1 million and $9.4 million for the same respective period. Net loss was $13.6 million for the quarter and $59.5 million for the full year.

Now turning to Slide 12. The revenue and adjusted EBITDA figures I'll discuss from here on forward are presented excluding all noncash revenue from Genentech amortization at all period shows. On this basis, fourth quarter revenue was $71.7 million, which increased 63% year-over-year with 86% contribution from MRD and 14% from Immune Medicine. MRD revenue was $61.9 million, up 54% year-over-year with clinical and pharma contributions of 67% and 33%, respectively.

ClonoSEQ test volume increased 43% to 30,038 tests, up from 20,945 in the prior year quarter. Immune Medicine revenue was $9.8 million, up from $3.8 million a year ago, driven primarily by our data licensing agreement with Pfizer. For the full year, total revenue was $235.7 million, up 42% year-over-year. MRD revenue was $21.2 -- $212 million, up 46%, including $19.5 million in milestone revenue. Excluding milestones, MRD revenue grew 45% versus 2024. Immune Medicine revenue was $23.4 million, representing a 17% increase from the prior year.

Moving down the P&L. Sequencing gross margin, which excludes MRD milestones, Genentech amortization and the licensing revenue from Pfizer, was 71% in Q4, up 12 points year-over-year and 5 points sequentially. Full year sequencing gross margin was 66%, up from 53% in 2024. Lower cost per sample were driven by production efficiencies, labor leverage and the transition to NovaSeq X+. Total operating expenses, including cost of revenue, were $84.5 million in Q4 up 4% year-over-year, primarily due to higher MRD sales and marketing investment, primarily from EMR and market access initiatives, partially offset by lower Immune Medicine R&D.

Full year operating expenses were $334.1 million, down 2% year-over-year. As shown in the segment table, MRD adjusted EBITDA was positive [ $15.2 million ] in 2025 compared to a loss of $41.2 million in 2024, driven by higher revenue. Immune Medicine adjusted EBITDA loss improved to $31 million from $37.9 million, reflecting lower operating spend and increased revenue. As a result of strong top line growth, improving efficiency and disciplined spending, we ended the year with $227 million in cash, cash equivalents and marketable securities. This amount excludes $13.1 million of cash held by digital biotechnologies.

Now turning to Slide 13 for our full year 2026 guidance. We expect full year revenue for the MRD business to be between $255 million and $265 million. This includes $8 million to $9 million in MRD milestone revenue based on our current line of sight. At the midpoint, this guidance implies 22% year-over-year growth or 30% growth excluding milestones. We expect MRD revenue to be approximately 45% weighted to the first half of the year and 55% to the second half as clinical volume and ASP growth compound with sequential clinical volume growth anticipated throughout the year.

We expect full year operating expenses, including cost of revenue to be between $350 million and $360 million, representing 6% growth year-over-year at the midpoint. This reflects merit increases in additional targeted investments in MRD sales and marketing to support continued market expansion while leveraging our existing commercial and operational infrastructure. In addition, we expect to achieve positive adjusted EBITDA and positive free cash flow for the whole company by the end of 2026. We -- of note, as in prior years, Q1 will be our highest quarterly cash utilization primarily due to annual corporate bonus payments. I am pleased and encouraged by the strong results we delivered in 2025 and look forward to providing financial updates throughout the year as we execute towards our goals. With that, I'll hand it back over to Chad.

Thanks, Kyle. To bring it all together, 2025 was an outstanding year for Adaptive on all fronts. In MRD, we achieved profitability and grew the top line by 46%, driven by strong clonoSEQ volume growth. In IM, we scaled our TCR antigen data and began executing on targeted monetization opportunities that build long-term strategic value. And importantly, we maintained our strong cash position giving us the flexibility to execute across both businesses.

Looking ahead to 2026, we're focused on continuing to fuel MRD revenue growth, expand margins and deliver company-wide profitability. We have a great playbook in place, and we're executing against it. We're encouraged by the momentum we are seeing and are confident in our ability to execute and deliver on these priorities. I'll now turn the call back over to the operator and open it up for Q&A.

[Operator Instructions]

Our first question comes from David Westenberg with Piper Sandler.

Congrats on a very strong volume quarter in Q4. So actually, I want to start with that, that sequential step up in clonoSEQ volume. Can you discuss how to think about that trend? Is there any seasonality there? And can you discuss some of the weather-related issues you might see in Q1? And one of the things I want to get at is you have a higher base now, so growing that sequentially up on a percentage basis might be a little bit more difficult, obviously, given how big your volumes are starting to get.

Sure. Thanks for the question, David. We were really pleased with the Q4 results. And certainly, I think it addressed any questions that folks had about whether there was deceleration in prior quarters. I think we like to see that Q4 number really as a testament to, I think, the long-term opportunity to grow this business at a strong rate. We are -- I think that we see seasonality at various points in the year. Typically, Q1 has been a strong quarter for us, and Q1 has been lighter just given holidays, weather, et cetera. We have seen some weather-related impacts, as you are well aware, in recent weeks, primarily on timing of sample arrival as opposed to volume, although some impacts, of course, on volume as well.

FedEx was not delivering for some number of days, hospitals and practices closed down. But good news is samples are starting to flow back in, in large volumes, and we had a very strong start to the beginning of Q1. So we remain confident in the guide for the year, I remain confident in the forecast for the quarter and that we'll show another strong sequential growth quarter-over-quarter in Q1.

And I'll just ask one more and I want to kind of ask this a little bit more directly since I think you have a really good tech and a good position in blood. So how should we think about the penetration rates in DLBCL? You have a first major advantage in a lot of the blood cancers particularly the multiple myeloma, how do you parlay that massive lead in multiple myeloma, for example, to [ DLBCL ] where your penetration of late is a little bit lower. And there is some concerns about incoming competition.

Sure. I mean, I think we've learned a lot from the myeloma experience. And as you noted, have established a really strong position there, 45% or so of our business comes from that indication and we've been able to post strong quarter-over-quarter growth repeatedly in that space, in part, thanks to the advancement of the assay in blood in addition to bone marrow. In DLBCL, I think the playbook looks similar in a lot of ways in the sense that we are starting with an underdeveloped market where people need to be convinced that MRD has a value. And that's been our major focus.

And we've seen strong results in Q4. We saw 14% quarter-over-quarter growth sequentially in DLBCL, I think, 115% versus Q4 of the prior year. But we're still, like you said, only at 3% of penetration of the patient opportunity. We do believe that increased noise in this space has potential to really help expand the market. And so we'll be continuing to focus on the things that we think are the major drivers, which are data generation with our enhanced ctDNA assay that we launched early last year further advancing the guidelines, which made some significant initial progress a year ago, broadening commercial payer coverage, which will help boost our ASPs and deepening penetration with pharma, where the interest in MRD guided trial designs in DLBCL is really ramping up.

And we'll continue to underscore the sensitivity of our assay, but also the specificity, which is really crucial both in the clinic and in interventional studies. We'll continue to rely on some of the other strengths and sort of head starts that we've built, including our reimbursement, our strong relationships with hematologists who are treating us both in the community and academia. And the data -- the head start in data that we've accomplished as other entrants come in and determine what their path forward will be.

Our next question comes from Subbu Nambi with Guggenheim.

A competitor came out with the flow cytometer pay positioning as competitive to NGS for myeloma and probably a significant price advantage. Would love to hear your thoughts on this product from both sensitivity and pricing perspective.

Sure. It's interesting to see that Quest has launched a product in the space. From our perspective, it's not particularly a new dynamic for us. There are competitors already offering next-generation flow products with similar sensitivity claims in our space. But what we know is that flow-based methods for MRDs are inherently less sensitive than clonoSEQ and they always will be for any given amount of sample material. Obviously, Quest hasn't published any data yet, but their claim that their sensitivity is comparable to clonoSEQ is hard for us to reconcile. Their stated sensitivity is [ 5x10 ] to the negative 6, which is equivalent to 1 in 200,000 with 10 milliliters of blood. And as you know, clonoSEQ can routinely achieve clinical sensitivity of 1 in 1 million, 5x higher with just 2 milliliters of blood, our validated sensitivity for our FDA label is even higher, around 1 in 1.5 million, and that's the same in both blood and marrow. So the assay that's being launched is at best 5 to 7x less sensitive in blood than clonoSEQ and I think there's 2 things to keep in mind with that.

One is the myeloma landscape is evolving in a direction that requires more sensitivity, not less. Treatments are driving really deep responses. Most patients now are negative in marrow at a depth of 100,000 and 200,000. And two, for myeloma, MRD sensitivity is especially important when you're testing in blood. The biology of myeloma is such that disease burden in blood is, on average, 100x less than in marrow. And physicians know this. So they want to use an assay in blood that's maximally sensitive. So remember, in the community, in Q4, over 60% of clonoSEQ/myeloma MRD testing was done in blood. And in that setting, we're also broadly reimbursed. 90-plus percent of patients have 0 out-of-pocket cost and we're broadly EMR integrated in the community with Flatiron and other large integrations.

So ultimately, we're talking about another next-gen flow assay that has some similar benefits as clonoSEQ, blood-based testing, turnaround time, broad availability, but with less sensitivity in a sample type where sensitivity is really key. So of course, there are a single-digit percentage of patients for whom a diagnostic marrow isn't available to run a clonoSEQ IP test. So that's a subset of patients, perhaps next-gen flow could be a backup option.

Super helpful. I have a question for Karl. I think as you think about ASP pacing this year. How should we face it just given the private figures are in advanced negotiation stage?

Yes. I mean I think at this time, it's best to think of it as a linear growth. There are some specific timing things that we've got it locked down as it relates to some of the key payer contracts, we're focused on on converting. But I think at this point, where we are in terms of the timing of the year, it's best to just think of it as a lending or growth.

Our next question comes from Dan Brennan with TD Cowen.

Maybe just first on the EBITDA guide for 2026. So I think you said EBITDA positive, maybe exiting '26. Can you just flesh it out a little bit. Is that Q3, Q4? Was that for the full year? And any help between where MRD versus immune medicine goes and kind of implicit in that, like are you making any changes to the sales force and puts into that? Is there any more sales force expansion in '26.

On the EBITDA guide, I'd say right now, it's an exit on Q4 for the entire company. MRD obviously positive adjusted EBITDA at this point, but we expect to see that continue to grow. And some of the initiatives across the business we're putting in place give us confidence to be able to achieve it across the whole company. And I'll let Susan take the field force.

Yes. Currently, we have about 65 reps in the field. They're split 50-50 between academic and community focus. And we believe this is the right number of reps for now as our territories are manageable in terms of potential. The reps are calling on the right number of accounts and HCPs. And most of the territories are reasonable size. So while I'm not saying we don't add a territory here or there opportunistically and also I will acknowledge that we will continue to evaluate new deployment strategies to address market dynamics as they evolve, which could justify additional hiring we're not anticipating in the plan for this year, any significant expansion in the sales team.

Terrific. And you rattled off a bunch of the progress you made on a lot of the volume drivers between blood community penetration and EMR. I'm just wondering, makes sense to not get ahead of yourselves, but I think blood really ramped, and I think you're only baking in a little bit of an increase in '26. Is that just because we're kind of capping out on what's realistic? Or is that -- is there a reason and some way, I think community, I think, really ramped in the fourth quarter, and it looks like you're baking in a little bit of an increase there. Just maybe speak to those 2 assumptions. And is there some reason why they wouldn't potentially increase further in '26.

Right. So I think in both cases, there is no -- we're not capping it out, and we don't believe that there is any reasons they couldn't potentially increase further, but we are sort of looking historically at what the pace has been of progress and then thinking about balancing the various drivers and sort of being prudent around what we set up as expectations at the beginning of the year. But on the blood-based testing front, we were at 47% in Q4 overall blood-based testing and 27% -- no, sorry, 45% and then 27% for myeloma specifically.

Myeloma is a really big opportunity to grow that. Additionally, if we continue to grow DLBCL and mantle cell in our lymphoma indications disproportionately to the rest of the business, we will see blood as a contribution to the total business continue to to ramp. So I think there is upside, but we are confident that we can get to above 50% in 2026. And same thing on the community side. The guide that we have is over 35% of the business coming from community. It was 31% in 2025, and we closed the year in Q4 at 33%.

So we hope to exit above 35% by the end of this year. And it will be a big area of focus, and it is a disproportionate area of investment for us. It's where our competitors are likely to focus and it's where things like the key data sets like Midas that came out multiple myeloma, helping inform the potential avoidance of transplant. That's a really big deal in the community, favorable guideline updates, guidelines matter a lot to community clinicians. So we'll continue to focus on those things. And also continue to drive new testing pathways in large community practice networks that help us standardize utilization of the assay across indications. And those things will -- again, the drivers, combined with our Flatiron integration and the serial testing that we can achieve through that, which have some potential upside in 2026.

[Operator Instructions]

Our next question comes from Mark Massaro with BTIG.

Congrats on a strong 2025. I wanted to start on gross margins. It looks like they came in at 66% sequencing for the full year, and you hope to expand that to over 70% in 2026. I guess there are a number of parts to this. And where I'm going with this is your ASPs are still rising. In fact, last month, you indicated a plan to get to 1,700 to 1,800 in ASPs by 2029. So I guess my question is, the over 70% level in 2026, my sense is that you're not fully loaded there of long term. So is there any way you could give me a sense that maybe 3, 4 years from now, you could be perhaps meaningfully above 70%? Or do you think that, that's a pretty good place to consider in the out years?

Yes, Mark, this is Chad. I'll start and then I can pass it off to Kyle, if you want to kind of double-click on anything that I'm saying. But first of all, at JPMorgan, we came out and kind of moved that number already, up from 70% to 75%. And so -- and you're absolutely right. We're not fully loaded in the sense that the transition to NovaSeq X+, if you recall, just happened in the back half of this year.

So we talked about a 5% to 8% percentage increase in the first 12 months and over a 10% increase just attributable to the NovaSeq X+ transition. So you're going to get a significant amount of additional uplift from that as you layer more samples on the same sequencing run. So that's a big one. The second, as you noticed, as you mentioned, as ASP. So as you continue kind of growing on the top line, along with better cost per sample, that margin continues to increase. So I think there's probably some even upside further from there, but we're going to, at this point, sequentially walk it up as we have from 70% to 75% but we are very confident in long-term durable high margin profile, both at the gross and the operating margin level.

That's super helpful. And then maybe just to drill into ASPs. I think you guys indicated that you exited 2025 at $1,350 a test, and you came in at $1,307 for the full year, which is up 17%. So can you maybe share why is $1,400 the right rate in 2026. That's a 7% growth. Are there any particular items you could point to that might sort of not create for a similar growth rate in '26 than '25.

Sure. Thanks for the question, Mark. Remember, in 2025, we saw a meaningful growth across a number of initiatives, but one of the biggest ones was the gap sell rate that went into effect right at the onset of the year for our Medicare business, our Medicare fee-for-service business. So that provided a decent amount of the growth in 2025. We're starting to get some traction on the commercial side as we've implemented contract rate renegotiations and new payer rates. I think as it relates to 2026, I think right now, hey, we want to be with where we are during the year. I want to be prudent around guiding around ASP. There are kind of 2 -- I'll say 2 major things we're really focused on. One is renegotiating with 2 large payers that kind of move a significant amount of our volume in upwards of 17% to 18% of our volume. And so getting those rates established at the appropriate rate is really important and the timing of that can drive variability and ultimately, the ASPs we realized for the full year.

The second piece, as Susan mentioned, we're anticipating growth in DLBCL and MCL, but to the extent that growth is even better than we thought. We've got to kind of navigate the coverage dynamics on the commercial payer front, and hopefully, we can continue to see positive coverage decisions with regards to those indications. But again, we would just want to be prudent in managing that and monitoring it over time.

Our next question comes from Sebastian Sandler with JPMorgan.

Great. Can you walk us through where you see upside to the ClonoSEQ volume guide in the year, I think it implies pretty healthy community volume growth, looks like around 50% year-on-year depending on what you assume more than 35% of total volume means. But where would you point to there being the most potential upside, whether that's NeoGenomics contribution, guidelines, incremental recurrence, monitoring coverage. Just walk us through that. I think that would be helpful to get a grasp of it.

Sure. I mean from a volume perspective, on the clinical business, I think one of the areas of upside just based on sort of early -- we're in early days and have limited experiences in terms of EMR integration. The Flatiron integration and the [ serial ] testing, which we've talked a little bit about over the last quarter or so, we're really just starting to see what the pull-through on serial testing looks like. And so far, we've been pleased to see that about 60% of serial tests are actually showing up as scheduled. And so we think there are opportunities to potentially continue to focus on that and see if we can improve it or at the very least, ensure that we continue to see strong contribution from serial testing, which could have upside to what we've forecasted and guided.

Additionally, on the EMR side, we've increased the focus on already integrated sites to what we call optimize those sites. This is things like standardizing order sets to increase testing consistency or further reducing friction and integrated workflows, which will improve order pull-through. Those kinds of initiatives are new, but the early results from pilots that we've completed have been very strong. And so I think there's a lot of promise there and source of upside. I talked about potential for upside on our anticipated contributions on blood and on the community, and those will be areas of continued focus.

The other thing is that on the ASP side, we have some key payer contracts that we're still in the process of renegotiating. So the timing of those can be a source of upside on revenue as can potentially the negotiations turning out more favorably than we think. But overall, I think we feel like this guide is very reasonable, and we are being prudent early in the year, but there are many different ways that this business can be driven and can be accelerated and all these things kind of work together. So it's one of the things that we like about this business and one of the reasons we're very confident that we can meet or exceed our goal.

Yes. And I kind of add a fine point to that because I mentioned kind of this playbook. And [indiscernible] common with all these things working together. There were 5 things last year that drove the business blood-based testing community data results -- data readouts guidelines and EMR integrations, and those are the 5 things we're reinvesting in this year, and those are the things that we are going to drive growth, not only drive growth, but also give us an opportunity to be extremely confident in our guide and hopefully outperform.

That's helpful. Maybe touching on the ASP guide for '26. It seems like $1,400 is dependent to some degree on those 2 contracts you called out. Can you give us a sense of any sort of execution risk there or whether those contracts are kind of locked down at this point? And then just if those contracts were less favorable than expected, can you quantify where ASP could land? And any sense on whether -- you said to keep ASP flat or kind of linear throughout the year, but any sense of whether this is more of a first half or a second dynamic -- first half or second half dynamic would be helpful.

Yes. I mean there's certainly some level of execution risk. Otherwise, I think we wouldn't be in the stage we're at. But we're confident in getting there in the long term, and we want to make sure we're establishing the right rate. That's really the priority with these payers. As it relates to the dynamics in terms of pacing, yes, I mean, it's probably more of a second half dynamic just given where we're at in January. But I think at the end of the day, if those things don't come in, it does represent some minor risk, but there's other levers within the business that we can pull on, but continue to grow ASP.

Yes. I mean just -- we're quite confident in the ASP guys, and we've got multiple levers to get there. One contract or another is not going to necessarily impact that we're going to get there.

And then our final question comes from Bill Bonello with Craig-Hallum Capital Group.

And I applaud you for the prudence. I'm going to go a different way here. But really -- given the pre-release, what really stood out to us were actually the comments on the IM business, which I know you don't talk about all that much, and you don't want people to get out over their skis. But clearly, the way you're positioning this is much less as a therapy development business and much more as a data and informatics business, and it was good to hear about a couple of big contracts. I know it's probably early days on this strategy, but would love to hear any thinking you have around sort of ways that you monetize this leading database that you've created and sort of ultimately how we might think about how a business like this could scale out over time.

Sure, Sharon, do you want to take that?

Yes. Thanks for the question. So as you alluded to, we're excited by the two distinct Pfizer deal, including both of which were data licensing deals, and we certainly look forward to continuing and believe that we can sort of rinse and repeat similar or even sort of differentiated additional data licensing deals. And really, this stems from the fact that we've generated this really massive differentiated data sets that certainly there's value across applying in different immunology applications and solving different immunology problems. So it's early days, but more to come as the year progresses, and we're super excited and enthusiastic in terms of where we are and where we're going.

Yes. And further, I think the Pfizer deal represented 2 types of different types of data deals. One is we're just kind of licensing data for AI modeling by pharma companies and the second, where we're using our unique set of capabilities to do target discovery work. And so there's kind of multiple different types of kind of opportunities that can provide monetization from this really a unique data set.

That's helpful. And maybe just as a follow-up, as you think of sort of how the data stands today, are there investments you need to make to sort of make it more accessible potentially to pharma clients and others and just to be able to sort of meet the kinds of demands you anticipate that they're having?

Yes, Bill, the investments we're making are [indiscernible]. Remember, there's revenue coming in from that business as well, which we consider a [ burn off offset ] to the investments that we're making. So all the investments we need to, we believe, generate kind of this robust data set are captured in that kind of $15 million to $20 million net burn of the investments that we're making this year.

Okay. I was just thinking more probably in terms of timing of when a business like this could inflect if it could.

Yes. Yes. And we'll come back at that point if there's kind of future investments to be made with a business case on a high risk-adjusted return on the capital based on what we're doing, we will come back and kind of share what the plans are at that time. I'm just -- I'm talking about for kind of the current path forward. We're looking at this as a kind of $15 million to $20 million net burn for the year for the business.

Thank you. I'm showing no further questions at this time. This concludes today's conference call. Thanks for participating, and you may now disconnect.

Great. Thanks, everyone, for joining us. I'm pleased to be joined by the Adaptive team. My name is Sebastian Sandler from Life Science Tools and Diagnostics team at JPMorgan. As usual, we'll have 20 or so minutes of presentation, followed by Q&A. And with that, I'll pass it off to Chad. Thanks, Chad.

Thank you, Sebastian, for the opportunity to present at JPMorgan once again. Happy New Year to all of you in the room, and welcome to those of you who are listening on the webcast. As a quick reminder, I will be making forward-looking statements during my presentation, and I and my team will be as well during the Q&A.

For those of you who are new to Adaptive, let me give you a quick refresher of who we are. My brother, Harlan and I founded the company 16 years ago at the Fred Hutchinson Cancer Research Institute, and we've been public since 2019. Today, we're about 620 employees. We've got more than $275 million in revenue and a strong cash position of approximately $227 million.

Adaptive was built on a simple but powerful premise that if we could read and translate the genetic source code of the adaptive immune system, T cells and B cells, we could fundamentally improve how diseases are diagnosed and understood.

So as our proprietary platform and underlying technology have continued to advance, we're today focused on two business opportunities that are underpinned by that same core foundation. The first is our minimum residual disease or MRD business, which is our commercial-stage diagnostic for patients with blood cancer, which is anchored on our clonoSEQ test.

The second is our Immune Medicine or IM business, which is focused on interpreting immune receptor data to drive insights across a broad range of immunology applications.

So I want to take a look at each one of these business outlets, starting with MRD. So we're focused on MRD in lymphoid malignancies, which represents a total global addressable market of approximately $5.5 billion, which spans both the clinical and the biopharma market opportunities.

Within clinical testing, our principal commercial focus is based in the United States. It's a market of roughly $1.8 billion. And we see a clear opportunity to expand that market over time. So this expansion is driven by increased frequency of testing across the continuum of care.

So as MRD becomes more deeply integrated into routine clinical decision-making, we believe that we can increase frequency of testing by 2.5 to 3.5 tests per patient per year. So that alone would expand the U.S. market by approximately $700 million. So it's important to understand the underlying biology that we use to capture this opportunity.

See, clonoSEQ measures MRD and the role that the MRD status plays in enabling highly specific clinically actionable MRD testing. So at its core, MRD testing is truly about separating true cancer signal from background noise. So as tests push sensitivity higher, assays that relies on signals that can be generated by error, so for example, if you're tracking a small number of mutations, inevitably start to generate false positives because the signal gets lost in the noise.

So our test in clonoSEQ largely avoids that problem by leveraging kind of that underlying biology of T and B cells. So if you -- in lymphoid malignancies, which are cancers of the immune system itself, T- or B-cell cancers, each cancer clone carries a patient-specific immune receptor DNA sequence.

Think of it essentially as a molecular barcode that is long and highly specific to that patient. At diagnosis, clonoSEQ identifies that barcode. And over time, we simply count the number of those exact sequences in the blood or bone marrow, and that is minimal residual disease testing.

But because that sequence or barcode, it's almost impossible to generate by accident. ClonoSEQ quantifies MRD with an exquisite level of high sensitivity and specificity, and we essentially have no false positives, allowing the detection of cancer cells in every 1 million healthy cells. So it's that biology-driven specificity that differentiate clonoSEQ in lymphoid malignancies.

But it's beyond the technology itself. We spent a decade building durable moats around clonoSEQ that reinforce our leadership across both clinical testing and biopharma.

First is the regulatory and clinical validation. ClonoSEQ is the only FDA-cleared MRD assay in lymphoid malignancies, reinforcing our sensitivity, reliability and reproducibility in routine clinical care. Second is performance and intellectual property, clonoSEQ delivers the deepest sensitivity backed by a strong IP position in more than 250 peer-reviewed publications.

The third is scale and access. We have coverage representing over 300 million covered lives now, which reduces friction for adoption across the care continuum. And finally, and importantly, it's workflow integration. ClonoSEQ is now integrated into EMR systems across both academic and community settings.

It's not any one of these things that drive our growth, but it's all these things that are taken together that makes it incredibly difficult to displace clonoSEQ both clinically and in the biopharma realm.

So I want to take a minute, if we look at kind of the financial evolution of the clonoSEQ business. MRD, I'm pleased to say, is now a profitable business. We achieved positive adjusted EBITDA in 2025, followed by positive cash flow. This was a super important inflection point for the business.

Revenue has scaled consistently over time with a 34% cumulative average growth rate from '21 to '25 and now surpasses $200 million. Within that, clinical revenue has grown at a 53% CAGR, reflecting strong adoption and increasing utilization.

But at the same time that we're growing the top line, we're also growing our margins. Gross margins have improved significantly. It's driven by our lab efficiencies and last year, our transition to the NovaSeq, and we've generated clear operating leverage across our entire commercial organization.

But importantly, although we've grown a lot, we see a path for continued improvement across all of these metrics into '26 and the years beyond. So now I want to -- I'll zoom into clinical testing first and the metrics that are going to continue driving this performance.

Clinical volumes have grown consistently year-over-year, delivering a 44% CAGR since 2021, driven by broader indication adoption, expanding access across the United States and EMR integrations. We've now surpassed 100,000 patients who have been tested with clonoSEQ to monitor their disease. And in 2025, over 50% of U.S. hem/oncs have used a clonoSEQ test.

Importantly, even with that momentum, penetration remains really relatively early. If you think about it, our largest indication, which is ALL, is only 35% penetrated. And all of our other indications are less than 15%, with several still in the single digits. So it's really that combination of our strong volume growth and this potential headroom is what kind of underpins the durability of our business moving forward.

So I'm going to walk through the factors that are going to contribute to our volume growth in the future. So clinical volume growth is driven by a combination of five interrelated factors that are shown on the slide. Those drivers are blood-based testing, expanding presence in the community, clinical guideline inclusion, ongoing data generation and very deep EMR penetration.

It's -- what's key is that no one single factor is driving our growth on its own. All of these factors reinforce each other, which increases our physician adoption and the testing frequency per patient across all of these indications. So I'm going to touch on each one of these growth drivers separately.

But as a matter of fact, the first two growth drivers are highly intertwined, which are blood-based testing and our increase in the community hospital setting. So as MRD increases in the blood, it becomes more accessible in the community setting, where the vast majority of testing is done in blood rather than the bone marrow. Blood testing is also less invasive and obviously easier for patients, which supports more frequent testing over time per patient.

So our focus on blood adoption has three components to it. The first is continued growth in blood-based indications like CLL, DLBCL and MCL. The second is ongoing data generation in blood, which reinforces clinical confidence. And the third is enhancing our assay in the blood, particularly in multi myeloma.

So today, about 45% of all clonoSEQ tests are already blood-based. We expect that number to increase to over 50% by year-end. Similarly, about 30% of clonoSEQ testing comes from the community setting today. We expect that to grow over the year to over 35%. So I mean, given that roughly over 60% of hem/onc patients -- sorry, hematology patients are treated in the community, increasing penetration in this setting will drive a broader adoption across all of our indications.

So the next driver is guidelines. And 2025 was really a fantastic year for us in guidelines. At a high level, these updates expand the role of MRD really from a supporting test to a test that's used as a clinical decision-making tool. So I'll just walk through a couple of them, although we had guideline updates in all five indications. But just to mention a couple.

In multi myeloma, the recommendation to obtain a clonality or ID testing at diagnosis was really strengthened this year in the guidelines. That matters a lot because it reduces the friction to completing the ID testing upfront, which is required for the downstream MRD monitoring. And it supports broader adoption, particularly as we mentioned, in the community setting.

So in CLL, MRD was elevated from a research assessment to a clinical decision-making tool with more explicit guidelines on serial testing, including assessments every 3 to 6 months. We see this as a meaningful step for clinical utility for clonoSEQ in the first time in CLL. So our medical team has been really great about actively engaging with the guideline committee, and we expect to have future guideline inclusions over this year and beyond.

And really, that brings us to the next topic, which is also interrelated, which is data generation. So data generation is a really powerful and meaningful tool for clinical adoption and 2025, again, marked an all-time high. At ASH this year, nearly 90 abstracts featured clonoSEQ data with a clear emphasis on MRD as an interventional tool. It's not just prognostic anymore, but it's actively guiding treatment decisions across indications and across the continuum of care.

So we're seeing MRD use being used to inform treatment decisions, intensity and frequency. And these decisions are included throughout the care continuum, including decisions around transplantation, consolidation therapy and in maintenance therapy.

So again, I'm not going to walk through all 90, but I'll give you a few examples to highlight kind of the practice-changing data.

So let's start again with our largest indication in multiple myeloma. The MIDAS study, it included nearly 900 patients and demonstrated that MRD-negative patients can safely forgo a transplant without compromising depth of response. So this represents one of the strongest prospective data sets supporting MRD-guided decision-making in myeloma, period.

In pediatric ALL, the [ NRAD ] study showed that patients who are MRD negative may be able to choose transplant approaches without radiation. Obviously, this is incredibly important for children and their families.

So if you take kind of all of these factors together, these data continue to strengthen clonoSEQ's role in MRD-informed patient management and drive sustained utilization over time.

So now that I've covered clinical volumes, I want to actually -- let's go to one last point, which is EMR integration, which is perhaps one of the most important factor to drive our growth.

So embedding clonoSEQ directly into EMR workflows, both across the academic and in the community settings, it materially lowers our friction and expands access and really supports repeat usage per patient. So -- but what is integration, if you look at it, what does it really deliver and how does it work?

So first is accelerated volume growth. In 2025, most integrated accounts grew roughly twice as fast as non-integrated accounts. As EMR integration becomes more widespread, we expect these to contribute more than 50% of our 2026 volume.

So second is if you think about using a test and then being part of a portal that kind of you wheel over to your -- that the physician wheels over, it has this durability and stickiness. Being embedded into the EMR makes clonoSEQ part of routine clinical care workflow, and it reduces disruption for provider turnover, and it's really a huge barrier to entry.

Third, operational efficiency. Within our 10 largest integrated Epic accounts, we've seen a reduction of about 40% in our order discrepancies, which really improves the order experience for both clinicians and for our lab in-house.

And finally, higher testing frequency. We're able to kind of preconfigure order sets now, particularly in Flatiron in the community to allow for repeat ordering of every 3, 6 or 12 months. And that makes it a lot easier to do repeat testing. And this is a number that I'm really thrilled to announce that over kind of 75% of community oncologists have placed orders using serial monitoring.

So again, now that we actually have covered all of the aspects of clinical volume growth, let's turn to the other side of the equation, which is average selling price or ASPs.

Again, brief refresher. At the start of 2025, the updated Medicare gap fill rate of $2,007 per test went into effect. That was up from $1,700 per test. So as that change kind of flowed throughout the year with continued improvement in reimbursement execution. Our average ASP reached approximately $1,310 in 2025, which represent a 17% year-over-year increase.

And I put this out now, we've talked about this before, but I'm going to reiterate that we see a clear path to $1,700 to $1,800 ASP by the year 2029. And this is really defined by a couple of different factors, which I'll again touch briefly on.

The first is policy expansion. So we're continuing to broaden our commercial coverage, particularly in CLL and in non-Hodgkin lymphoma. The second is contract negotiation and renegotiation. Kind of we're systematically updating our existing contracts, and we're closing new agreements at the updated rate. We had several wins in 2025 that will contribute to our 2026 ASP growth. And we're in a kind of late-stage negotiation with 2 large national payer contracts.

The third is this concept of recurrence monitoring. So this expands coverage beyond our single Medicare episode. In 2025, we received our first Medicare approval for recurrence monitoring in MCL, which created a clear pathway to expand this year, 2026 into CLL, followed by DLBCL. And ultimately, we expect to have recurrence monitoring in multi myeloma.

And finally, just kind of blocking and tackling, think revenue cycle management. So we've had ongoing improvements in Medicare Advantage billing and Medicaid collections, our appeals process, our prior authorization, and we've been really good on our turnaround times and it's time to cash. This is a cool area that's increasingly supported by our AI efforts.

So again, it's not one of these factors, but all these factors together support this continued ASP expansion give me a high degree of confidence in that $1,700 to $1,800 number by 2029.

So now that we covered the clinical side of the business, I want to turn kind of your attention to the MRD pharma business.

Our MRD pharma portfolio today is anchored in multi myeloma, where MRD has achieved formal acceptance as a clinical endpoint, and clonoSEQ is incorporated into most all pivotal trials. So as a result, in 2025, about 70% of our sequencing revenue and about 60% of our backlog came from multi myeloma studies. This reflects both the maturity of the indication, but also the depth of our biopharma partnerships, which we started kind of 10 years ago.

But at the same time and kind of meaningfully important, we're seeing a diversification beyond myeloma, particularly in CLL and DLBCL.

So in CLL, bookings in 2025 more than tripled year-over-year, and the pipeline continues to build. But this is supported by updated NCCN guidelines, which we talked about for fixed duration regimens and emerging data that highlights the need for higher sensitivity in MRD to differentiate between therapies.

In DLBCL, MRD remains a little bit earlier, but the pipeline opportunity is really very significant. It's increasing our companion diagnostic opportunities, and our registrational trial activities is driving demand for a standardized FDA-validated and globally deployable MRD assay. Our focus is on generating first-line post-treatment MRD data to accelerate our adoption curve.

So importantly, we've also seen our bio portfolio expanding towards registrational trials. So remember, in April 2024, following the FDA ODAC recommendation that supported MRD as a primary endpoint in myeloma for accelerated approvals, the number of clonoSEQ studies using MRD as a primary second endpoint, for the first time for us, has surpassed research-only studies. This is really, really important because this shift matters economically.

So if you think about it, for us, registrational trials, they carry a lot higher value because the average price per sample is higher and we get milestones based on the readouts of these FDA-approved drugs. So we expect this trend to continue as MRD is used more interventionally in trials across diseases and as our sponsors, the pharma companies are increasingly requiring higher sensitivity NGS assays to differentiate therapies.

So if you take all this together, kind of both across both the clinical and biopharma business, we've built a very durable MRD platform with multiple growth drivers that are now firmly in place, that will continue out into the future.

So with that foundation in place, let's look at some of our expectations for the MRD business in fiscal year 2026. First, we expect clinical testing volume to grow by more than 30% year-over-year. If you recall last year, we're kind of following the same playbook where last year, we came out with 25% plus and said circle the plus. So we do expect it to grow -- clinical volume to grow more than 30% this year.

Second, we expect fiscal year ASP of approximately $1,400, reflecting continued progress across coverage, contracting and our reimbursement execution. Third, we expect mid-single-digit millions in milestone revenue. Remember, as always, we conservatively guide on milestone revenue, given that really trials are ultimately out of our control for approvals.

And finally, we expect to see sequencing gross margins continue to improve, and we do expect to reach over 70% gross margin for fiscal 2026 that will be driven by scale and our ongoing operational efficiencies, including the NovaSeq implementation, which went live in the back half of 2025. So again, as always, we're going to provide kind of more full color, additional details on company guidance when we report our full year and audited Q4 in February.

So now that we've covered MRD, I want to switch to our other business unit, which is Immune Medicine. Again, so for those of you who are newer to Adaptive, we spent over a decade building technology and generating data to connect the adaptive immune system response to diseases.

At the center of that effort is a fundamental challenge, understanding how T-cell receptors bind to antigens and how those interactions drive the immune response against cancer, autoimmunity and infectious diseases. So this is like truly a problem that's defined by scale. There are billions of distinct T-cell receptor interacting with millions of clinically relevant antigens, which is a problem that makes it incredibly well suited for AI and machine learning.

So given our proprietary immune receptor platform and the magnitude of the data we've generated, Adaptive is uniquely positioned to address this challenge. So last year, we shared that we mapped roughly 2 million T-cell receptors to antigens. Today, that's grown to more than 5 million paired T-cell receptors, spanning over 20,000 antigens and nearly 50 HLA types, well beyond what's publicly available in all of the literature combined.

At this scale, we believe in coordination with many experts in the field that we've spoken to, that this data set is now sufficient to train predictive models of the adaptive immune response across many different diseases.

Importantly, we're also generating biological insights. So using this platform, we're identifying disease-causative T-cell receptors and their antigens in various autoimmune diseases, including type 1 diabetes, celiac disease, multiple sclerosis and enclosing spondylitis. So -- and now we're beginning to monetize that immune receptor data. The 2 recent agreements with Pfizer show two ways on how our data create value in distinct ways.

The first is data licensing. Pfizer is licensing a subset of our TCR antigen training data focused on specific HLA types to support the development of their AI machine learning models.

The second is in target discovery. In rheumatoid arthritis, Pfizer is using our immune medicine platform to identify disease-specific T cell receptors. So using these patient samples provided by Pfizer, we're applying our sequencing and immunology capabilities to identify those T cell receptors enriched in rheumatoid arthritis with the goal of informing future therapeutic development for Pfizer.

So -- and I want to kind of clearly state that these partnerships provide early validation of both the scale of our data and the strength of our platform, but ultimately don't necessarily represent the endgame. We look forward to deepening our work with Pfizer and advancing discussions with other partners that are interested in data, our mapping capabilities and our predictive models.

So like if you look at 2025, we're really quite pleased with the progress we delivered in immune medicine, but we did this with a very disciplined capital deployment and management with a cash burn of approximately $30 million.

So checking them off, during the year, we meaningfully scaled our TCR antigen data set to 5 million, as we said, paired sequences. We executed 2 data agreements with Pfizer, and we completed a preclinical data package for our lead TCR depleting antibody program in ankylosing spondylitis.

So while the next step in our antibody program would have been IND-enabling studies, we have made the decision to prioritize investment in data generation and predictive modeling, where our core expertise lies and where we see the highest return on adjusted capital.

So as we look ahead to 2026, we expect to execute on this strategy with a lower cash burn of between $15 million and $20 million while continuing to invest selectively in our TCR antigen data, which we believe represents meaningful long-term upside for Adaptive.

With that, I want to leave you with three key takeaways. The first is in MRD. We're continuing to strengthen and extend our leadership position in MRD testing for blood -- with clear momentum across volumes, ASPs and margin, our focus is on capturing market growth while we continue to expand our MRD profitability.

Second, immune medicine. Here, our priority, as I just mentioned, is advancing our immune receptor data platform and executed on targeted monetization opportunities that build long-term strategic value.

And third, and perhaps most importantly and perhaps exciting to folks in this room, is financial execution. Based on the progress we've seen around the business, we expect to achieve positive adjusted EBITDA and positive free cash flow for the entire company in the year 2026. So this obviously represents a major milestone for Adaptive, and it reflects the discipline and the durability of our model.

So with that, thanks for listening today, and I'll hand it back over to Sebastian for the Q&A.

Great. Thanks for that overview, Chad. Lots to dig into. Maybe we can start with the 4Q performance. So clonoSEQ volumes came in nicely at around 30,000 tests for the quarter. I think that's a record sequential step-up.

So maybe can you just dig into the performance seen there maybe across the different settings, so community versus academic? I'm curious how much of a role the Flatiron integration had? And then any color on blood testing and any indications that stood out would be really helpful.

Sure. Susan, do you want to take?

Sure. We were really pleased to see the Q4 performance, and I think it was really an intersection of all of the drivers that we've been focusing on for the last several years coming together in really an optimal way.

In terms of the Flatiron integration, I do think that with an additional 3 months of experience, as you remember, we launched in July, we were able to start really seeing some of the benefits of that, particularly in the serial testing element that Chad alluded to earlier. And as a result, we saw 18% quarter-over-quarter growth in the community setting. So it was an acceleration of growth in the community.

Blood-based testing also played an important role, both in expanding community use and in increasing testing frequency. We saw overall test contribution of blood-based testing increased to 47% in Q4. And in myeloma, which is a traditionally marrow-based indication, we saw it grow to 27%.

All of these factors, along with the strong guidelines updates that Chad alluded to, data generation between ASCO, ASH and other meetings and the other EMR integrations that we've done, I think, contributed to one of the best Q4s we've seen.

Just briefly, that's Susan Bobulsky, who runs our MRD business; Kyle Piskel, our CFO; and Harlan Robins, our Co-Founder and Chief Scientific Officer.

Maybe looking ahead to 2026 or not looking ahead, so nice starting out with at least 30% growth in clonoSEQ volumes. Can you walk through like what's embedded there from community versus academic? You've called out the Neo partnership as being a driver of future volumes. So maybe the latest there. And then how these -- maybe the guideline updates from 2025 could start flowing through and keep solid traction there?

You want to keep going?

Sure. So in terms of the 2026 guide, anticipating continued growth in both the community and academic settings, we do intend to further increase the contribution of community growing to 35% by the end of the year, as was noted in the presentation.

The NeoGenomics partnership, which we've been working very hard on over the last month or a year or so, has continued to generate insights through pilot work that we've done with selected accounts. We also did our first joint integration in a large community account, which contributed to some significant growth we saw there in Q4.

The next step here is to integrate insights from the pilot into our end-to-end workflow and then make a determination of when we're ready to go to a broader launch. And because we haven't made the final decision as to when we'll do that, we decided to rather than incorporate Neo into our guidance to rather treat it as upside. This will be the first time we're doing anything like this. And so we'll have more to say as we know more about timing and the full scope.

And then guidelines was the last thing you asked about, Sebastian. Guidelines, in 2026, will be largely a pull-through effort. There's a lot of education to do around the many updates that came through in '25.

And then also, we do anticipate potentially an update from the International Myeloma Working Group, which is a very influential global body. They have been working on updates for over a year and have signaled that they'll be publishing those in the near future. So keep an eye for those. I think there'll be some nice positive incorporation of MRD into treatment response criteria.

Great. Maybe sticking on the topic of educational efforts and sales and marketing, so 2025, milestone year for profitability in the MRD business. Looking ahead, how should we think about the framework for balancing profitability and top line growth? Can you talk about the operating leverage you think we could see on the business in 2026 and a cadence for maybe adjusted EBITDA margins as we progress through the year?

Kyle, do you want to take that?

Sure. Thanks for the question. As it relates to operating leverage, we continue to expect to see expanding operating leverage across the business. I think the -- while we may not hold our operating expenses flat like we have done in the last couple of years, we do expect to make additional investments to serve the existing business and to continue to grow the business, which we are very excited about, but we still expect to see significant uptake in operating leverage.

We'll get additional leverage, as we mentioned, around the sequencing margins through the NovaSeq X as we continue to add additional volume. We still think there's additional leverage in the sales and marketing line, even though we are going to make some additional investments to continue to grow and penetrate into the markets we're serving.

As it relates to adjusted EBITDA margins, we'll continue to provide some color around that in February when we give full results.

Okay. Maybe digging more into guidelines. There's a lot to cover, but I want to touch on CLL specifically since there's a nice addition there to look at MRD-guided regimens. I guess first question is, how should we think about the volume impact there in 2026?

And a company has submitted for FDA approval of the VENCLEXTA regimen with acalabrutinib. So what is the dynamic there with these guidelines coming out ahead of FDA approval? Like do you see that as a hurdle to get over? Or are you starting to see good traction there with the guideline update in place?

We're very excited about the guidelines update in CLL, particularly because it's the first time that any frequency recommendation has been incorporated. The suggestion is every 3 to 6 months during a therapy that could potentially be time limited.

The MRD-guided regimen component, as you noted, is a little in advance of a potential FDA approval of those regimens. But in academic settings, those regimens are already actively utilized, they are likely to be covered based on being included in NCCN guidelines. And the community is eagerly awaiting the opportunity to switch from a single oral forever therapy to a combination all-oral time-limited therapy.

So there's a lot of excitement and I think a lot of tailwinds coming through the treatment landscape in 2026. It will take time to educate on guidelines, but we will certainly be putting a lot of muscle behind that. And for the first time in a while, I think we feel CLL has some real opportunity to accelerate.

Great. Maybe touching on competitive dynamics in heme MRD, I think there's been a little more noise around that recently following an acquisition in the space. Adaptive has historically enjoyed limited NGS competition there. Has anything fundamentally changed in your view over the last couple of months? How do you view the competitive moat and the runway, especially as it relates to data generation?

Maybe I'll start and take kind of the broader perspective. And then, Susan, if you want to dig into any of the points, please do so.

But remember, in the area, and let's be specific, Natera acquired a company called Foresight Diagnostics. They play specifically in the area of DLBCL with a circulating tumor DNA assay. in general, in DLBCL, this is a nascent market. NGS MRD really isn't being done or it's just starting. And this represents a really large market opportunity. And so penetration of the market, we think, will disproportionately benefit Adaptive in our clonoSEQ test, right, because we have reimbursement in place.

And the biology of our test, which I alluded to or actually was pretty specific on during the presentation that we are specifically tracking the VDJ rearrangement, which leads to a very high specificity of the test and low false positive; we think that's a competitive dynamic that will play out in Adaptive's favor as data starts to emerge.

However, even without that, like I said, this is an area where kind of all boats are going to rise on the tide. But again, I think we're going to disproportionately benefit because the standard of care right now in DLBCL is actually PET scan. So they're not doing NGS MRD.

However, if you look at the competitive dynamic, what's changed and one of the reasons -- one of the many reasons, including our kind of overall financial performance, what we decided to announce early is because we had a 14% growth quarter-over-quarter and 114% growth year-over-year in DLBCL. So this is an area that we feel is extremely ripe to be able to capture -- really capture the market and over time, dominate market share.

Great. Very helpful. Maybe on ASPs and MRD. So you laid out the long-term target of $1,700 to $1,800. Maybe can you touch on which indication do you think have the most room for improvement? And then I saw you filed for recurrence monitoring coverage for CLL. So can you talk about how conversations are progressing there? And then is this embedded in the outlook for 2026 of ASPs around $1,400?

You can start?

Sure. I'll start. To clarify, we haven't filed for CLL. It's one of the objectives for 2026. But as it relates to the walk on ASPs in 2026, I think there's a couple of dynamics as it relates to indications. It's continuing to see expanded coverage on the commercial front in DLBCL and MCL. In particular, we'll see additional lift as we get to see additional coverage lift, whether that's coming from guidelines or directly from LBMs, who inform the decision of the commercial payer policy level.

The other piece, which is a dynamic that played out a lot through 2025, is recontracting efforts. We still have 2 large national payers, which Chad mentioned, who are continuing negotiations with in terms of getting a rate reset. And so that's a dynamic we're expecting to go in our favor at some point, but timing is a little difficult to predict on that. So that's kind of implicit in our guide.

And we're going to continue to see lift from some of the RCM initiatives we've put in place in 2025 that we continue to put in place in 2026 to drive ASPs forward.

Great. Maybe one more on MRD testing frequency. So I think currently, it's around 2 to 2.5 tests per patient. I think it looks like you think this could get up to 3, 3.5 tests over time. Can you talk about how this splits out by indication? Is this driven mostly by blood testing? Does that factor in recurrence monitoring? Just kind of what are the puts and takes there?

We do think there's an opportunity to increase testing frequency across all of our indications. Although to your point, it does depend to some extent on the type of sample that is typically utilized and also the aggressiveness or lack thereof of the disease.

So currently, we see the most frequent testing in ALL, which is an extremely acute disease, very serious and requires vigilance from day 1 of post diagnosis. There is an opportunity there to increase testing further based on the utilization of blood as a complement to bone marrow. And experts are increasingly rallying around that concept, and the NCCN recently incorporated that guidance to consider blood in addition to bone marrow.

On the flip side, CLL has historically been one of the least frequent testing because the disease is indolent, there wasn't as much urgency to monitoring. Although as I noted earlier, the landscape is shifting to support more frequent testing in the context of potentially time-limited and custom duration therapies driven by MRD.

Overall, we do believe that there's an opportunity to increase frequency of testing. We will be pursuing recurrence monitoring coverage across indications to support continued ASP expansion over time, particularly for Medicare patients. Our commercial payers importantly do cover single time points. So we don't have a limitation on the number of tests we can get paid for in the commercial setting.

And then I think the pharma utilization of CLL, which, as Chad noted, we saw a tripling of our bookings in 2025 versus prior year. That will be also synergistic in supporting the adoption of MRD testing in the clinic.

Great. Maybe one last one quickly on the IM business. I think a definitely shift to more focus on data licensing. You obviously announced the Pfizer agreement. Just looking ahead to 2026, could we see similar agreements with other pharma companies? Like what are you most excited about for that business looking ahead?

Harlan?

Sure. Thanks for the question. We're excited on the data side, both for potential other partnerships, but also what we're able to do in-house, which includes making progress on generating more of the training data, but also applying models to advance in our own right and then connecting them to disease. So I think both internal and external, we were hoping will be a really nice year for us.

Great. I think with that, we're out of time. Thank you to the Adaptive team, and thank you all for being here. Have a great rest of the conference.

Thanks, Sebastian.

Good day, and thank you for standing by. Welcome to the Adaptive Biotechnologies Third Quarter Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Karina Calzadilla, Head of Investor Relations. Please go ahead.

Thank you, Jacinda, and good afternoon, everyone. I would like to welcome you to Adaptive Biotechnologies Third Quarter 2025 Earnings Conference Call. Earlier today, we issued a press release reporting Adaptive financial results for the third quarter of 2025. The press release is available at www.adaptivebiotech.com. We are conducting a live webcast of this call and will be referencing to a slide presentation that has been posted to the Investors section in our corporate website.

During the call, management will make projections and other forward-looking statements within the meaning of federal securities laws regarding future events and the future financial performance of the company. These statements reflect management's current perspective of the business as of today. Actual results may differ materially from today's forward-looking statements, depending on a number of factors, which are set forth in our public filings with the SEC and listed also in this presentation.

In addition, non-GAAP financial measures will be discussed during the call, and a reconciliation from non-GAAP to GAAP metrics can be found in our earnings release. Joining the call today are Chad Robins, our CEO and Co-Founder; and Kyle Piskel, our Chief Financial Officer. Additional members from management will be available for Q&A. With that, I'll turn the call over to Chad. Chad?

Thanks, Karina. Good afternoon, and thank you for joining us on our third quarter earnings call. I'm pleased to share another quarter of strong execution and accelerating momentum across the business. We delivered meaningful wins, sustained growth and further strengthened our financial position.

Let's now turn to Slide 3 for a summary of this quarter's highlights. The MRD business delivered major profitability milestones. This quarter, adjusted EBITDA was $7 million, reflecting strong sequential growth. Also this quarter and ahead of plan, the MRD business became cash flow positive, a significant achievement that underscores the strength and scalability of our model. MRD revenue grew 52% year-over-year, driven by robust increases in clinical volume and ASP.

This growth reflects expanding clinical utility and broader integration of MRD testing into patient care. Clinical validation continues to deepen. The NCCN guidelines were updated again this quarter, this time in CLL, incorporating MRD-guided treatment options, providing more specific direction on testing frequency and supporting clonoSEQ ID testing at diagnosis.

Operationally, we're scaling efficiently. With clonoSEQ now running on the NovaSeq X Plus, we're realizing meaningful cost efficiencies and expanding gross margins. Total company sequencing gross margin improved 10 percentage points year-over-year to 66%, and our focus on operating discipline is paying off. Operating expenses remained stable sequentially, while cash burn continued to decline. Through the first 9 months of the year, we reduced cash burn by 51% versus last year, ending the quarter with a strong cash position of $217 million. Given this performance, we are again updating our full year guidance to reflect a higher MRD revenue range, lower operating expenses and a reduced annual cash burn. Kyle is going to cover the details shortly in his prepared remarks.

Let's now turn to Slide 5 for a deeper look at the MRD business. clonoSEQ clinical revenue had impressive growth of 83% year-over-year and 18% quarter-over-quarter. We saw broad-based volume expansion across all reimbursed indications, delivering over 27,100 tests, up 38% versus prior year and up 7% sequentially. By indication, multi myeloma remained our largest contributor, accounting for 42% of U.S. clonoSEQ volume, followed by ALL at 32%, CLL at 10%, DLBCL at 9% and MCL at 5%.

This volume growth continues to align with our strategic priorities. First, blood-based testing now represents 45% of volume, achieving our full year goal ahead of plan. And in multi myeloma, blood-based contribution reached 24%, up from 21% last year. Second, community-based testing represents 31% of total clonoSEQ volume with increasing contribution from Flatiron integrated accounts. Third, NHL testing expanded to 15% of total clonoSEQ volume, led by DLBCL and MCL sequential growth. Fourth, ordering HCPs grew 38% year-over-year to more than 4,100 with sequential growth of 9% in academic centers and 12% in community practices. And finally, we tested over 19,400 unique patients in the quarter, a 41% increase year-over-year and 8% sequentially.

In addition to volume growth, we saw continued improvement in ASP with U.S. clonoSEQ ASP increasing to over $1,340 per test, reinforcing our confidence to achieve full year average ASP of $1,300 or higher. During the quarter, we achieved several policy wins, including our first large commercial payer coverage in DLBCL and 2 major payers in CLL, bringing our total CLL covered lives to over 260 million. We continue to improve cash collections and expand our reimbursement footprint with new payer contracts. Overall, all ASP metrics and contracting initiatives are trending in the right direction, positioning us well to reach our long-term ASP target of $1,700 to $1,800 per test.

Let's now turn to Slide 6 to review progress on EMR integrations. Our EMR integration efforts continue to gain momentum across both academic and community settings. These integrations are a key driver of volume growth and support 2 other important strategic initiatives. The first is to build a scalable moat around clonoSEQ, protecting against new entrants and minimizing disruption from account turnover. And the second is to maximize clonoSEQ's usage across the care continuum by directly embedding into EMR-driven workflow, which translates into more tests per patient.

Since last quarter, we've completed 11 integrations, 7 academic and 4 community with 6 of our top 10 accounts now integrated. Among accounts integrated with Flatiron last quarter, volume in these accounts grew 17% sequentially and now represent 24% of our community volume, up from 20% prelaunch. We're also leveraging integration to enable serial testing plans with many ordering providers at Flatiron integrated accounts selecting recurring testing at 3, 6 or 12-month intervals. Importantly, nearly 40% of our commercial tests this quarter came from integrated accounts, which contributes to -- which continues to outpace growth from nonintegrated accounts.

Looking ahead, we plan to further expand our EMR footprint and expect continued acceleration from integrated accounts with fewer ordering discrepancies and deeper account retention.

Let's turn to MRD Pharma on Slide 7. Our MRD Pharma business delivered a solid quarter with revenue up 11% year-over-year, including $6.5 million in milestone revenue. Multi myeloma remains the largest contributor to our biopharma portfolio at over 60% of our active trials, followed by CLL at 17% and ALL at 9%. We ended the quarter with a backlog of more than $200 million, reflecting strong partner demand and sustained program activity. clonoSEQ is most well established as an endpoint in multi myeloma, where the ODAC and CHMP votes reinforce its role in assessing treatment response and supporting accelerated approvals, particularly in the frontline setting.

The momentum is now extending to other lymphoid cancers and driving diversification across our portfolio. Endpoint qualification efforts are underway in CLL and DLBCL, which are already translating into results. 2025 CLL bookings are more than twice what they were last year. Currently, the FDA is accepting MRD as an endpoint on a case-by-case basis in other lymphoid cancers. Of our 19 ongoing primary endpoint studies, 12 are in multi myeloma, 6 are in leukemia and 1 is in MCL.

While recent agency news views on surrogate endpoints have introduced some uncertainty, we remain confident MRD will gain broader acceptance as an endpoint for accelerated approval in other lymphoid cancers. As the first and only FDA-cleared MRD assay, clonoSEQ holds a distinct and durable position to capture this market. In summary, MRD is a strong growth engine with multiple levers to increase penetration.

Now let's turn to Immune Medicine on Slide 9. Our Immune Medicine business is executing across our 3 strategic priorities. First, we continue to generate large-scale, high-quality proprietary data to develop a digital TCR antigen prediction model. We're making good progress by using our data to train and improve the accuracy of our models. As we deploy these models, we see promising results in multiple immunology applications. One of these applications included the ability to select the best TCRs to use in cancer cell therapy products in partnership with Genentech.

Earlier this quarter, we announced the conclusion of our partnership with Genentech following its internal portfolio prioritization. As a result, Adaptive is released from exclusivity and any further obligations related to this partnership. Importantly, the scientific and technical progress we've made along the way allowed us to significantly accelerate both our data generation and our AI/ML modeling capabilities across multiple use cases. We are deploying our knowledge and infrastructure that we built towards multiple high-value partnership opportunities.

Second, for our T cell depletion antibody program, we are on track to establish a preclinical data package in our lead autoimmune indication. This quarter, we selected our lead antibody candidate. This key milestone is based on robust potency and other functional characterization data that we generated this year. We've also started planning for CMC tox work, which represents a key step towards IND-enabling studies for this lead T-cell depleting antibody in autoimmunity. As we continue to execute on these 2 focused R&D priorities, we remain financially disciplined and are on track to achieve our 2025 cash burn target between $25 million and $30 million.

Now I'm going to pass it over to Kyle to walk through the financial results and updated full year guidance. Kyle?

Thanks, Chad. First, I will go over the financial results, including $33.7 million of noncash revenue recognized this quarter from the remaining amortization of payments previously received from Genentech. Total company revenue for the third quarter was $94 million, representing a 102% increase year-over-year. Total company adjusted EBITDA was $28 million compared to a loss of $14.3 million a year ago.

Interest expense from our royalty financing agreement with OrbiMed was $3 million, which was $700,000 higher than interest income. Net income from the quarter was $9.5 million. Now and as shown on Slide 10, the revenue and adjusted EBITDA figures, which I will be discussing forward are presented excluding all noncash revenue from Genentech in all periods presented.

Looking at this quarter's performance on Slide 10. MRD revenue grew 52% year-over-year to $56.8 million, with clinical and pharma contributing 67% and 33%, respectively. clonoSEQ test volume, including international, increased 38% versus last year to 27,111 tests delivered. U.S. ASP grew 28% to over $1,340, reflecting continued strength in cash collections and improved pricing through our various contracting initiatives. MRD Pharma revenue grew 11% year-over-year, inclusive of $6.5 million in milestones. Immune Medicine revenue from pharma and academic services was $3.4 million versus $5.5 million a year ago.

Turning to gross margins and expenses. Total company gross margin, again, excluding Genentech revenue, was 70%. Sequencing gross margin, which excludes MRD milestones, was 66%, up from 56% a year ago. This improvement was driven by operating leverage in the lab from higher volumes, stronger pricing across both clinical and pharma and efficiency gains from the NovaSeq X implementation.

Total operating expenses, including cost of revenue, was $83.7 million, up 6% year-over-year and flat sequentially. The year-over-year increase was primarily driven by higher SG&A expenses related to our expected EMR and reimbursement efforts and higher cost of revenue from volume growth, partially offset by lower R&D expenses.

Turning to profitability. As shown on the segment reporting table at the bottom of the slide, the MRD business delivered positive adjusted EBITDA of $7 million compared to a deficit of $6.1 million a year ago. Immune Medicine adjusted EBITDA deficit, again, excluding the Genentech revenue, was $10 million versus $8.7 million in Q3 of last year. At the total company level, adjusted EBITDA, excluding Genentech, was a loss of $5.8 million compared to a $17.8 million loss a year ago. Total company net loss for the quarter was $24.2 million, again, excluding Genentech.

Turning to our full year 2025 updated guidance on Slide 11. We are raising our full year MRD revenue guidance to a range of $202 million to $207 million, up from the prior range of $190 million to $200 million. This increase reflects stronger-than-expected clinical revenue performance in Q3 and higher MRD milestone revenue for the year. With sustained clinical volume momentum, we now expect to deliver approximately 104,000 tests for the year, exceeding our prior growth target of 35% over 2024. We also expect MRD milestone revenue between $18 million and $19 million, up from our previous $14 million to $15 million range.

Overall, this outlook implies 39% to 42% total MRD revenue growth year-over-year and 38% to 42% growth for the MRD base business, which excludes milestones at the midpoint. We are also tightening and lowering the top end of our total company operating expense guidance, including cost of revenue to $335 million to $340 million from our previous range of $335 million to $345 million. We continue to expect roughly 69% of expenses from MRD, 23% from Immune Medicine and the remainder from unallocated corporate costs.

Further, we are also narrowing and lowering our full year company cash burn guidance to $45 million to $50 million from the prior $45 million to $55 million range, driven primarily by higher MRD revenue. We expect approximately 15% cash burn from MRD, still anticipate $25 million to $30 million from Immune Medicine and the balance from unallocated corporate costs. It's encouraging to see the MRD business generate positive cash flows, achieve positive adjusted EBITDA on the base business, all while continuing meaningful top line growth. With that, I'll hand it back over to Chad.

Thanks, Kyle. Our results this year highlight the strength of our strategy and the discipline of our execution. MRD is now a profitable scaling business that is delivering consistent growth and margin expansion and Immune Medicine continues to advance key R&D programs and unlock new partnership opportunities for future growth. We're confident in our trajectory and are well positioned to finish the year strong with a solid foundation for long-term value creation. With that, I'd like to now turn the call back over to the operator and open it up for questions.

[Operator Instructions] Our first question comes from Mark Massaro at BTIG.

On the strong beat and raise. Just a question maybe to start. It looks like your MRD pharma business is becoming a little more recurring in nature than it was maybe a year ago, and it's actually starting to look linear, increasing about $1 million a quarter. I'm not expecting this to continue in a linear way. But can you just give us a sense of the $200 million you have in the backlog, how should we think about that backlog being released, say, over the next several quarters?

Thanks for the question, Mark. Thanks, Chad. Thanks for the question, Mark. So I think first, I'd just say that we are pleased with the performance of the business, and we will reiterate our anticipated revenues for the year. We think that the ODAC, the CHMP decisions in multiple myeloma as well as our strong pipeline in NHL and CNR increased accelerated progress in leukemia this year, all point to a strong potential for 2026 and beyond. We do expect -- we haven't provided guidance next year, but we do expect continuing growth in a similar range to where we've been this year. And I think the backlog, which we will recognize generally over a 5 to 7-year time frame, it is a strong backlog going into the year. And our new bookings have also been quite strong, and we expect that to continue given the role of MRD potentially as an endpoint in additional indications beyond multiple myeloma in the coming years.

Okay. That's helpful. It's great to see the 38% growth in MRD volume. I guess as -- I'm not asking for hard guidance on 2026 or anything. But based on the fact that you've got Epic integrations, not just Epic, but other EMR integrations, you've got blood increasing, you've got community penetration increasing. You're testing a lot of new patients. There are a lot of drivers that are working in your favor. Is there any reason to think that perhaps a 30% bar is something that you can perform against in 2026 in terms of MRD volume growth?

Mark, thanks for your question. As you mentioned, we're not going to specifically yet come out with 2026 guidance. I can just say all of the kind of underlying factors that you mentioned give us great confidence in the trajectory of the business in 2026 and beyond, and we will provide more specific guidance shortly.

Our next question comes from Sabu Nambi at Guggenheim.

So again, in the spirit of just trying to model on clonoSEQ ASPs, can you help us think about next year? I know your long-term target is $1,800. But as we think about next year, it appears clonoSEQ is well on track to hit your target this year. How much should ASPs continue to lift from here?

Yes, [ Subu ], I appreciate the question. Look, I won't give a firm number yet on 2026. But what I can say is with the profile of the business and $1,340 in Q3, feel confident about the exit rate that we're going to exit the year at. With the momentum around coverage and not only CLL and what we're seeing in DLBCL as well, I think we're setting our foundation up fairly strong to go into 2026 to have meaningful growth in ASP. And that's where we think we are. And again, I reiterate that $1,700 to $1,800 long-range target, and we'll continue to grow for next year.

Perfect. And another one for me. Our mature EMR integrations remaining strong, what do those run rates look like? And if still accelerating for the more mature accounts, how long before some of them actually steady off?

Sure. I can answer that question, Subu. Thanks for asking. As you've seen, our EMR integrations have continued to progress well and to drive growth across really accounts of all sizes, both academic and community. And I'll just take a moment to mention that we don't just see the benefit of growth acceleration, but also we're protecting existing business from competition, and we're increasingly finding ways to utilize tools built within the EMR to help us increase the consistency and the frequency of testing, which will have long-term value for our growth in those accounts over time.

We do see that the more mature integrated accounts do continue to grow more quickly than non-integrated accounts. That can vary to some extent based on the size of the account. As you can imagine, more well-penetrated accounts can't sustain those significant accelerations that we see post integration long term, but we see a variety of benefits in those large accounts even if they go back to sort of more stable growth rates after some time. We see that the integration helps democratize ordering. So more HCPs can place orders that reduces the impact of staff turnover. We see reduced HCP workload, which sort of eases the effort we have to put in to maintain that business, and we see -- we're strengthening our competitive moats.

So even in those largest accounts, this has long-term benefits. in general, to give you some statistics, when we look at our integrated account commercial volumes this quarter -- in Q3 versus Q2, we saw 9% quarter-over-quarter growth across the entirety of the group, whether they were mature or newer and non-integrated accounts grew 6%. So a 50% increase in the growth rate just looking across the entire group. That group is getting bigger and the number of mature accounts is getting bigger over time, but it's still relatively small. Most of our integrations are less than a year old. So we'll have more to say as this continues, but we are confident that this is a real trend and that it's something that we can continue to build on with some of those tools I mentioned that the EMR offers us to optimize testing.

Fantastic. And given we recently initiated in most of our checks, we felt the competition was nonexistent almost or there was no close competitor, maybe a distant second. So when you refer to competitive moat, could you shed light on what kind of tests truly compete with clonoSEQ?

Sure, of course. So in many of our indications, what we're really competing against is sort of lack of testing or use of traditional methods for disease burden assessments that aren't really MRD. And in those cases, we're focused primarily on educating clinicians on the clinical data, the utility, the use cases and now increasingly the guidelines, which are strongly supportive of MRD adoption. There are technologies like you're aware of, like traditional and next-generation flow that are utilized in academic institutions in-house that we have to compete against in those settings. And our data strongly supports the advantage of clonoSEQ over both traditional and next-gen flow, and you'll see some data at ASH actually that will look at that on top of many existing data sets that will continue to be favorable to clonoSEQ.

The one indication where we are seeing emerging competition is, of course, in [ diffuse large B-cell lymphoma. And competitors have entered the market. We anticipate we will continue to enter the market in the coming year. But the great news is that we're very confident in our position. We've established strong credibility. We have robust clinical experience. We've run more than 7,000 DLBCL tests in the past 12 months and had more than 900 HCPs order the test. So we're way ahead from a clinical -- from an established clinical base, and we have a number of other established advantages, commercial footprint, relationships our Medicare coverage and now our expanding commercial payer coverage, which we've just started to see really secure a foothold and the fact that we can offer universal testing for all lymphoid cancers. So even in a space where we may have more emerging competition, we do still believe we are well positioned to maintain our market-leading position.

Our next question comes from Andrew Brackmann at William Blair.

Chad, I think you called out recent guideline wins this year and even in Q3. Obviously, we saw those throughout the year. But have you seen those sorts of changes to the guidelines start to impact utilization already? Or is that still something on the come? And then I guess bigger picture here, just on the commercial front, how are those updates perhaps maybe changing the conversation that your team is having with these docs?

Yes. Maybe I'll start and just kind of -- because we have had an impressive list of guideline wins this year, maybe I'll cover them and then I'll turn it over to Susan to talk about kind of the impact that we're seeing from a clinical standpoint.

So first, I mean, there's been several meaningful guideline updates in multi myeloma, the recommendation to obtain a clonality ID assessment was really strengthened this year. And this is key for clonoSEQ to help them to reduce the barriers to the initial ID testing. It's also relevant to our education and penetration of the community, which is obviously a key driver of our growth. Also in DLBCL MRD assessment was included in the NCCN and lymphoma guidelines for the very first time. We mentioned CLL in the prepared remarks, the first time that the guidelines include a recommendation for serial MRD assessment and specified a frequency of 3 to 6 months. And also provides additional reinforcement about NGS being an alternative to flow, which Susan just mentioned.

So this is really just a great opportunity for us to educate on the data that emphasizes that clonoSEQ can detect disease that's missed by flow below a threshold of 10 to the 4. This is definitely starting. I just want to be clear, these guidelines came out this year. That's certainly a helpful call point to go in with a strong data presentation, but I'll turn it over to Susan to talk about how it's impacting the clinical uptake.

Sure. Maybe I can just give you a couple of examples. So first of all, in multiple myeloma, we've been talking a lot about the [ MIDS ] data, which allows MRD-negative patients to potentially avoid a transplant. And in that setting, we can now, with the support of the guidelines, underscore the value of the ID test at diagnosis to make sure that no patient misses that opportunity. And that opportunity is particularly valued in the community setting where patients have to leave their local doctor to go get a transplant, neither the doctor nor the patient likes that. And so there's a lot of motivation and with the support of the guidelines to say that ID test is now -- there is a stronger recommendation around doing that, it ensures that more patients are accessible to this MIDS message that we're delivering.

In CLL, where the guidelines were very recently updated. We're really just getting started, but we are exposing community doctors to some of the potential benefits of limited duration therapy, which many of them haven't experimented as much with yet, but we'll do more and more with the -- we expect upcoming approval of some of the combination regimens that are being referenced in the guidelines now. And so we can talk now about testing frequency in the context of a limited duration therapy in a much more specific way, which is what the community doctors really want. They want us to tell them when to test, who to test and the support of the guidelines just tremendously strengthens our ability to deliver that message.

Susan, maybe a follow-up there. I think in an earlier question, you referenced tools in the EMR to increase the frequency of testing and getting that scheduled maybe. Just sort of practically, what are you referencing there? And I guess, how does that drive the increased utilization here?

Sure. Yes. A couple of things that I'm referencing are things like treatment plans and order sets. So there are ways within Epic, let's say, that a clinician or a department can set up specific sets of actions that they want to take for a given type of patient at a given point in time. And we are now talking to clinicians in our integrated accounts increasingly about how clonoSEQ might be incorporated into order sets, how do guidelines, existing data, well vetted clinical trial designs support specific time points, where are there places where you might want to make decisions? Would you want to have the clonality ID incorporated into the diagnostic workup.

All of those things can be facilitated by tools that are built into Epic. Additionally, there are tools that allow you to do essentially analytics and reporting on your patient population. And so for example, very easily and Epic you can pull up a list of all the patients who are within, let's say, 1 month of the end of a frontline induction regimen in DLBCL. And you can make sure that your staff has those patients on their radar to place a clonoSEQ order when they come in. So that kind of thing is incredibly powerful. And it's really where we're -- you're going to hear us talking a lot more in 2026 about those types of things because we're shifting from just get as many accounts integrated as possible. We'll continue to do that, but now we can also look at our integrated accounts and what are all the opportunities to use those tools.

Our next question comes from Sebastian Sandler at JPMorgan.

Congrats on the quarter. My first question is on community. I think that had another solid quarter. It seems to be continuing to accelerate. Can you just help us level set where we stand in penetration into the community, which is where most of the heme cancer patients are treated? And then do you have any color on whether the sequential increase in HCPs from these practices are coming from new accounts versus existing accounts? And I think you've kept your sales force headcount relatively stable. So I'm wondering if you have any plans to expand as you penetrate further into the community setting? And I have a follow-up.

Sure. Thanks, Sebastian. Let me see if I can touch on all of those. So first of all, our community penetration, while we've made substantial headway and now have about 30% of our volume coming from community settings, we still are underpenetrated certainly relative to academic settings and have a very high ceiling in that space. We are taking, as you know, specific steps to drive growth in that setting, one of which is the recent integration with OncoEMR via Flatiron Health. And we've been really pleased with the results we've seen in the Flatiron accounts.

I'll just briefly mention that we saw 17% quarter-over-quarter growth in Q3 in our Flatiron accounts. and we're only 1 quarter into our experience, but quite a lot of interest and opt into our serial testing offering in that interface, which we'll learn more about how we can pull those tests through in the coming months. But a lot of potential that I think we can build on with the option of serial test ordering in community settings.

In terms of the HCPs, where are they coming from, we have a lot of white space in the community still. And so we are -- while it takes time to break into new accounts, we continue to see new HCPs in both new and existing accounts. In the existing accounts, integration is a big driver of bringing new HCPs on board because, again, it democratizes the ability to order. And the new accounts will continue to penetrate. There are Flatiron accounts that don't yet use clonoSEQ, and so that's a big area of focus, but outside of that segment as well.

In terms of the sales force, we've looked at this carefully, and we are comfortable with the 65 reps that we have, of which about half are focused on the community setting. What I'd say is that this is the right number of reps based on what we can see in terms of potential in each territory, the number of accounts and HCPs each rep is calling on, the amount of windshield time that the reps have. We do look carefully at our alignment, and we will occasionally add a territory or collapse the territory when we see some specific opportunity. And over time, we will consider potentially new deployment strategies that could justify additional hiring, but we're not anticipating any significant expansion in the near term.

Got it. Very helpful. And then my second question is on sequencing gross margins. So those had a nice step up. Can you give us a little more granularity on the individual drivers of that improvement? I think more of the uplift from the X transition was expected to fall more in 4Q, but I'm wondering if that benefit was accelerated and had an outsized impact in 3Q? And then any color on how we should think about sequencing gross margins exiting the year would be helpful.

Thanks, Sebastian. Yes, I appreciate the comment. Sequencing gross margin was 66%, and that was up from 64% in Q2. I'd say if you drill in a little deeper on the MRD business alone, it was up 3 percentage points and NovaSeq X contributed 2 percentage points of that. So certainly taking out the [ Lion's ] share of the improvement. We were only integrated starting at the end of July, so really 2 months of benefit. So expect it to continue. And in terms of guidance as it relates to exiting the year, we said 5 to 8 percentage points post launch, still reaffirming that. And I think we'll see a continued step-up, especially as the volume continues to grow exiting the year.

Our next question comes from William Bonello at Craig-Hallum.

I just want to circle back to the question that Andrew was asking about the EMR tools. Did I hear you right earlier in the call that you said with -- and I need to be clarified whether it was Epic or OncoEMR, but that a physician now has the ability to essentially put in an order that would cover multiple testing time periods upfront. And then if I did hear that right, maybe you can talk a little bit more about how that works, if that's available for all indications, can a practice customize? Are they -- you mentioned some time points, but I don't know if those are fixed order points or a doctor has flexibility around that? And then maybe what kind of lift do you think you might be able to get from that capability in terms of test per patient?

Sure. I'd be happy to talk more about that, William. So the serial testing option is available to our Flatiron integrated accounts. So OncoEMR offers this as an option in their interface that we've taken advantage of. And what essentially happens is when you're placing an order, you have to select from a drop-down whether you'd like a single order or a serial cadence, which can vary from 1, 3, 6 or 12 months. And so it's as simple as selecting from the dropdown. And that is universal for all OncoEMR accounts that utilize their molecular precision NPI tool, which is what we use to provide integrated test ordering. It's across all indications. It isn't customizable in the sense that it looks the same for every practice, but it is up to the HCP what cadence they select. And so we do see variability depending on whether an HCP is going to do blood or bone marrow, depending on whether they're testing in DLBCL or CLL, et cetera.

We haven't quantified the specific lift associated with this yet because, as I mentioned, we're only 3 months in, and most clinicians are selecting a 3 or 6 month cadence. And so we are just now getting to the point where we'll be able to start measuring, do we pull those orders through or do the physicians elect to delay or not send the sample. So -- but we are confident based on the early results that we will get incremental test growth from that offering, and we are looking at whether there are ways to extend it to other parts of our business beyond Flatiron.

And so if a physician, for instance, selects a 3 month cadence, does that mean that for a period of time, every 3 months, another test is being ordered? I just want to make sure I understand that.

Correct. I mean it's essentially that way, but what happens is it's like a placeholder order. So the order is scheduled into the patient's calendar within the EMR system. And then when that due date comes up, it will sort of pop up for the staff in the clinic and say this patient is due for another blood draw for a clonoSEQ test. The staff still have to take the action to make that blood draw happen before it comes to us and officially count as an order. So none of these orders are appearing in our order numbers. But if we pull them through, which we are actively working to do by putting in place reminders and field-based tactics to ensure that our clinicians are aware that these orders are coming due, we'll be able to -- we expect, pull some number of those through and be able to provide more consistent testing to patients over time.

Okay. That's really helpful. And then just a completely different question for you guys. Where are we at in terms of blood today and uptick with blood as sort of a percent of what you're seeing? And what are your thoughts on that looking forward?

Sure. So overall, we have now reached 45% of all MRD tests being performed in blood. And that was actually our goal for the year. So we're pleased to have achieved that a quarter early was to exit the year at 45% was our expectation. We are seeing increases in blood-based testing in both myeloma and ALL, which are sort of traditionally marrow-based tests. We now are at 37% of ALL tests in blood and 24% of multiple myeloma tests in blood. That's each up about 3 to 4 absolute percentage points from a year ago. And we also have increased contribution from our primarily blood-based indications, which include DLBCL, MCL and CLL. DLBCL, in particular, is driving some of the growth in blood-based testing because it's simply becoming a larger portion of our total test base.

Sure. Okay. And then if I can, just one last question. You mentioned the national contract wins and just the way the bullet points were on the slide, I wasn't totally sure if you were saying those were related, if there were 2 distinct points, are the rate increases related to just DLBCL and CLL? Or are those across all modalities? And then secondly, did we see any benefit from that this quarter? Or is that all ahead of us?

Yes, I'll start and then, Kyle, feel free to jump on. First, there's a difference between kind of coverage and potentially rate increases, although those can sometimes be combined. What I mentioned in the prepared remarks is that we were -- we obtained coverage, our first commercial payer coverage in DLBCL and that for 2 CLL coverage policies, we obtained kind of further coverage. So those will hit -- those hit now and -- but then you'll see the impact come over time, not -- those wouldn't be reflected in this quarter.

Yes, that's right. And the contracting initiatives or wins we flagged were in effect in Q3. So some of that pull through in Q3. We still think there's some room to go just from an implementation perspective with some of those payers that we're still working some of the kinks through, but we'll get there on that front.

Just to give you a good example. Remember, we discussed a major payer win in terms of contracting kind of for Anthem last quarter and the implementation of -- actually probably 2 quarters ago and the implementation happened this quarter. So you do start seeing a lift in terms of your ASP from that. So there's a lag often between contracting and implementation and kind of the rate increase and/or the rate increase.

Okay. That makes sense. And when I go back and look at it, I see it's sort of 2 distinct points, right? [ You get ] coverage policy from the 2 plus I am reading that right, though, that there were 3 national payer price increases, like you're saying those -- Kyle, you're saying [indiscernible]

Correct.

That was in effect in Q3.

Our next question comes from David Westenberg at Piper Sandler.

So I want to maybe start with the contribution margin of MRD at this point. I mean I know you're maybe not going to give the exact number, but I'm just kind of thinking about how -- as we see growth in that, we see this move to cash flow breakeven and kind of our ability to kind of pace that. And then also, just given the fact that you do have a pretty solid competitive lead in MRD in blood at this point. How are you thinking about balancing investments in sales and marketing, et cetera, to really like push on that competitive advantage, maybe clinical studies or anything else there?

Yes. Thanks, David. On the contribution margin comment, certainly, we have control to be able to manage and pace the growth as long as we continue to see and expect to see the growth. Again, this quarter was a great accomplishment to see the cash flow positivity, which gives us some confidence going forward that the business will remain cash flow positive. That being said, we may choose to make some additional investments to press the gas and grow faster, either in volumes and/or in the reimbursement environment. So I think all of those things get combined give us a little bit of control. And as the volume continues to increase, we can decide whether or not we want to reinvest in the business and what areas we want to go after.

Maybe I'll add on to that and then Susan can as well. First, I think it's worth pointing out, even though we've had great growth, there's still a long way to go in penetration in order to fully capture this kind of large and expanding total addressable market opportunity. But particularly in terms of investments, we are continuing to invest in kind of blood-based testing, both in terms of assay improvements and in terms of clinical studies, in an addition to kind of blood-based testing, I think that's a key initiative for us overall is investing in clinical studies to continue to demonstrate the clinical utility of the assay as where a doctor can use our test to kind of improve patient care across the continuum, and we'll continue to make those investments.

Got it. Just real one quick one on the guide, and apologies, I've been jumping between 3 calls here. But is there any seasonality in the Q4 MRD number? I mean I think you've had sequential growth of, I think it was 10%, 10%, 7%. I realize you can't maintain that forever. But I think the guide would kind of imply that maybe the volumes or the ASPs might be a little bit lower than what you've gotten in the quarter-over-quarter. Just wanted to see if you can remind us on the seasonality there. And yes, I'll just stop there.

Yes. Yes. As it relates to guide, certainly something we are contemplating with respect to our guidance. Obviously, the volume growth has been phenomenal, and we expect it to continue to be phenomenal. But Q4 is one of the tougher periods with the amount of holidays and ordering. So I think that factored into some of our guide. But again, longer term and into '26, we think there's strong growth ahead of us. So there's a little bit of seasonality in that growth. It doesn't mean we can't beat it, but that is factored into our guide.

Got it. Maybe I'll just squeeze in one quick one. I might be at the end of the queue anyway. So just in terms of your thoughts on outside of multiple myeloma potential to see this as a primary -- or clonoSEQ as a primary endpoint, specifically written in is clonoSEQ or NGS clonality, et cetera? And how far away are we from that? I mean I'm guessing we're seeing a lot of speeding up of clinical trials and really seeing more promising drugs coming through the pipeline because of this. When can we see that advancement to other sorts of areas like CLL, ALL non-Hodgkin lymphoma, et cetera?

Sure. As I think Chad mentioned earlier, we have -- there are active efforts ongoing for both CLL and DLBCL to establish a similar designation as the ODAC provided for myeloma for MRD as an accelerated endpoint for approval. The CLL effort is being led by a number -- a couple of KOLs and in partnership with a broad coalition of pharma partners. We are actually getting engaged in that effort as well directly. And what the leaders of that initiative have said to us is that it took 10 years for multiple myeloma. It will not take 10 years for CLL. That's because we now have a blueprint for what the FDA is looking for.

Now that said, the FDA has evolved since the time of the ODAC vote, and so there are uncertainties around that. But the data collection is advancing rapidly. And I think all the participants are confident that current administration notwithstanding, we'll see those things come to fruition much faster than they did in multiple myeloma. And I think that other indications beyond CLL and DLBCL may have reason to explore this in the future as well.

And just one point in terms of quantifying this in terms of kind of bookings, our 2025 CLL bookings are more than twice what they were last year in the MRD pharma space.

Our last question comes from Dan Brennan at TD.

Maybe just on DLBCL, I mean, the mix ticked up pretty nicely in the quarter. I know you may have addressed it a little bit, but just speak to a little bit what you're seeing there and how we might think about the opportunity there as we go into '26 in terms of the pace of progress.

Sure. Thanks for the question, Dan. Yes, we are continuing to see a nice solid uptick in the contribution of DLBCL, rising from 6% a year ago -- 3 quarters ago to 9% this quarter. It's kind of poised to overtake CLL actually as the third largest indication probably in the next quarter or 2, although we'll certainly expect the CLL business to be buoyed by the recent guidelines update.

In DLBCL, I think a couple of things contributing. Certainly, one is the noise around MRD in the space, which is not just coming from us. There is a large amount of data generation ongoing. There is a lot of interest from pharma companies and how they can utilize MRD-guided treatment to optimize outcomes in this disease state, which is curable for a subset of patients and hopefully for a growing number of patients, proportion of patients over time.

So there are several companies that are currently advancing or considering trials that will include MRD-guided elements to them in the coming years. And that will -- in addition to the interest in the clinic as it is, that will contribute, I believe, to greater use cases for MRD in the clinic.

Great. And maybe just a follow-up. I know there's a few questions on margins. But just wondering as an early read, if we think about into '26 and the investments you're making, but yet the OpEx leverage path you're on, just can you remind us how we might think about the early look on OpEx leverage as we go into '26 and what are the key puts and takes?

Yes. I mean I think we will continue to see growth in investment areas like EMR. But at this point, we're not planning any major investments. That being said, we might change our mind. But at this point, I think we're going to continue to see meaningful leverage across the business and look at opportunities to take advantage of the position we're in, in the MRD business.

The other area that I mentioned earlier, Dan, continuing to invest in kind of data generation for clinical utility studies. But overall, we're looking to continue to get leverage out of the business.

Have you guys even -- like I forget, have you commented publicly at all about OpEx leverage for '26 in terms of where consensus is or no, not yet?

Not yet. Not yet.

This concludes the question-and-answer session. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Hi. My name is Yuko Oku, and I'm on the life science tools and diagnostics team here at Morgan Stanley. For important disclosures, please see Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales rep.

It's my pleasure to host Adaptive Biotechnologies. And speaking on behalf of the company, we have Co-Founder and CEO, Chad Robins; and CFO, Kyle Piskel. Thank you for joining us today.

So to set the stage, can you talk about the goals you set for the company entering 2025 and the key accomplishments that you're most proud of year-to-date?

Sure. First, Yuko, thank you for having us again at the Morgan Stanley conference. It's a pleasure to be back. Yes, we set out this year with some ambitious goals of getting to EBITDA profitability of implementing Flatiron EMR integration. And also, we're super excited about that. And the third on the cost side was getting NovaSeq X implemented and switched over from the NextSeq. And I'm happy to say we're 8 months into the year, and we've already accomplished all those goals ahead of schedule. If you ask me, I think what I'm most proud about, I think, is getting to EBITDA profitability is quite an achievement, especially in our industry, as you know. So we're really excited about that and the future looks bright.

So maybe to start with MRD, would you provide an update on market penetration for MM, ALL, DLBCL, MCL and CLL?

Sure. Yes, in that order, I'll try -- I'll just do it by -- in multiple myeloma is our largest indication, we're 12% penetrated into the market. ALL, because MRD has been used historically is our largest area of penetration, which is about 28% penetration. In MCL, we're at about 7% penetrated. CLL is about 5% and then DLBCL is about 3%.

Okay. Great, with that background. All right. So 60% of heme malignancy treated in the community setting and penetration in this setting is clearly an important driver of continuous clonoSEQ growth. With ordering with health care physicians now at 3,700, where does the community penetration stand today? And what efforts do you have underway to increase this penetration? And what does the slope of the curve look like over the next couple of years?

Yes. Of those 3,700 health care providers, about 1,500 are in the community, but we're still very kind of a low penetration in the community. Although I should point out it's the fastest growing. We had 10% quarter-over-quarter volume growth last quarter, but 16% quarter-over-quarter growth in the community setting. So we're growing faster in the community than our overall, although all segments of the business continue to be growing as well. But I will point out, it is a multipronged strategy for growing the community business. First, which I mentioned already, is EMR integration. The workflow is incredibly important to the community oncologists. You have to make it very easy to order the test. And so being integrated as they pull up their [indiscernible] is incredibly important.

The second initiative is blood-based testing. In the community setting, they're not doing bone marrow for the most part. So really increasing kind of blood-based testing is a huge initiative for us. The third, which is kind of an overlay on everything is data generation. And it's not only data generation, but this goes to simplifying the message. Remember, as a community oncologist that they're not steep in kind of data and publishing, they want to know specifically at what point in the patient care continuum do I treat the patient, why and how. So increasing dosage, taking a patient off therapy based on data is incredibly important. The fourth initiative is a partnership with NeoGenomics. That will go -- we're piloting 4 accounts.

Think about that as a '26 and '27 driver of kind of volumes, but the testing is going well. But we're being very methodical about how we're rolling that out. So it's really kind of all of these things together that are coming together. I'll point out one other kind of tactical thing that we're doing, which is about 2 years ago, we split the sales force into key account managers that focus on the academic medical center and then dedicated hematology specialists that focus on the community. And then on top of that, we've overlaid this national strategic account, this kind of small group that focused on the large network practices. So it's kind of all of these things together that kind of make us confident in really high volume growth kind of moving forward.

Right. And then one of the other drivers of volume would be increasing the frequency of testing. Average frequency of testing at the start of the year was about 2.5. Could you parse out the frequency between different indications, multiple myeloma, ALL, et cetera? And what are the factors that drive differences in frequency of testing between these cancer types?

Yes. No, it's a really good question and one that we're focused on as we look at blood-based testing, and I'll get to that in a minute. But just to answer the question first is right now, in ALL, which is our area of most frequent testing, you're at 3.5 to 4 tests per patient. In multi myeloma, it's more in the 2 to 2.5 tests per year per patient. As you look to kind of CLL, which is more of an indolent disease, you're looking at more of a kind of a 1 test per year per patient. And then in some of the newer disease states like mantle cell lymphoma, DLBCL, it's just early data, but it's more kind of on the 1 test per year per patient.

And then in terms of kind of increasing frequency of the test per year, a couple of things I'll point out. One is the move to blood-based testing. As you get to a less invasive test where patients come in and you can take a blood draw and get a test, that will increase the number of tests per year. The second thing is -- and this is not really well known yet, but I'm going to give some data into the Flatiron EMR, OncoEMR integration, we built in as the default, a serial testing option so that you can choose 3, 6, 9, 12 months or every time a patient comes in or you can default and opt out and say, I want to do it on an as medically necessary basis on my own choice.

What we're seeing from the early returns is that 80% of the community oncologists are clicking on a serial testing option. So really excited about that and increasing the frequency of testing. And then I go back to data. We have got multiple data studies we can talk about -- touch on now, but it's really about showing the clinical utility of being able to test throughout different points in the patient care to say exactly how you would treat a patient. And those studies are really increasing the frequency of test for patients.

Great. And then you touched on blood-based testing being an important driver of frequency of testing, too. Now that blood-based testing is about 44% of your MRD testing volume, up from 40% in second quarter of '24. Over what time frame do you see this replacing most of your bone marrow biopsy within your clinical volumes?

Yes. So it's never going to get to 100% of your testing volume because for a couple of different reasons. One, in the academic medical centers, they do bone marrow. That's part of kind of how their standard of care. And the second reason is depending on the disease, for example, in multi myeloma, the disease burden is greater in the bone marrow than it is in the blood. So there's always going to be kind of a room for marrow-based testing. And if you look at it, really, there's no difference in the assay sensitivity or specificity in the blood versus the marrow. It's just the disease concentration is actually higher in the marrow.

So we're working on different R&D initiatives, including applying our ctDNA assay in addition to our cellular assay to blood-based testing in addition to looking at a couple of other things to kind of increase the NPV or the negative predictive value of the test in the blood. So a lot of different work. Now contrast that with DLBCL and CLL, which are only done in the blood. So overall, as you have an increase in those indications as a total -- your total test mix, you're going to get along with more testing that's done in the community setting in blood, you're going to get a higher percentage of your tests that will be done overall in the blood, but you're never going to get to kind of 100% because of the aforementioned reasons.

Great. And when I listen to conferences and KOL presentations, there appears to be a consensus that 10 to the minus 5 isn't sensitive enough given that it's highly dependent on quality of the biopsy. Acknowledging that clonoSEQ sensitivity can go as low as 10 to the minus 6 and maybe even to minus 7 in some cases, what are other competitors such as those in multiparameter flow that can go down to these levels? And what does their adoption look like versus clonoSEQ?

Yes. Just a little bit about the landscape to answer that question. Multiparameter flow is potentially a competitor more in Europe than it is in the United States. In the United States, clonoSEQ has really taken on as the de facto standard for next-gen testing. But one of the things to point out from a practical matter is you need 20 to 30x the amount of material to get to 10 to the 6 in flow. And we really need only 2 mls of blood in the -- 2 mls in the blood and 1 mL in marrow to be able to get to 10 to the 6. So you're just -- we're just not seeing that competition of multiparameter flow in the United States. And we haven't really -- we're on kind of the early stages of international anyway. But what you'll see, I believe, when we go over there and do the head-to-head is it's just really not -- it's not going to be a fair fight.

Got it. And then you also had several NCCN guideline updates year-to-date, including strengthening recommendation for baseline clonoSEQ -- clonotype idea diagnosis of multiple myeloma patients. Can you help us contextualize what the recommendation means for your multiple myeloma volumes? And perhaps more importantly, are there any read-throughs from this guideline update into other indications?

Okay. So first of all, the guideline up there was awesome, right? Like it's super exciting to see the recommendation to take an ID prototype. This helps us for the long-term health of our business. We actually coined this term MRD enable every patient. We did this a couple of years ago. And this is ultimately what this guideline inclusion or recommendation does for us. It says and make sure that you can do the MRD test. Practically, it's a very low percentage of our patients, only a couple of percent where we're not able to retrieve the ID sample. But what it does, if you look at -- it's sometimes a 30- to 60-day -- we have a team that does pathology retrieval services. And it's really -- it's just a challenge going out and getting that sample to bring in.

So what this does and just from a business standpoint in terms of, a, time to cash, right? You're getting that -- you're getting 2 samples upfront because you're getting the ID and MRD sample potentially kind of right upfront. But third, some of those kind of pathology retrieval services that are -- some of that overhead, you can really look at how to optimize that overhead. So -- but net-net, in terms of the long-term health of the business, particularly in the community, particularly as you move to blood, it's extremely important to ID every sample. And in addition to kind of the data that's coming out and our messaging and the peer-to-peer education where your academic KOLs are going out to the community and saying, "Hey, make sure even if you referring to an academic medical center for a transplant, we need that ID sample." So these things kind of -- again, I keep talking about this layering effect, but all these things are working in conjunction to ensure kind of this volume trajectory well into the future.

You also announced CMS reimbursement for surveillance in mantle cell lymphoma, which increased clonoSEQ testing opportunity for patients. Although MCL is a relatively smaller indication, how does it open up the opportunity to establish reimbursement for surveillance in your other heme indications? And are there any particular heme malignancies where surveillance doesn't make sense due to lack of availability of treatment options?

So I'll say this. One is absolutely opens up the opportunity. But in the near term, I think we're going to have to go one by one because that's how the reimbursement paradigm and the MolDX program right now is structured that you're going to have to show data on an indication-by-indication basis. You're going to do -- the next one up is probably CLL, an indolent disease. There are patients that are off treatment. So basically, what you need is a disease setting where patients are off treatment and they can be surveilled to be able to catch the disease earlier from a molecular test like clonoSEQ before you can catch it on a scan, right? And so then get a patient on the right treatment earlier to kind of intervene on their disease course.

So multi myeloma, although our largest indication, it will probably go CLL, DLBCL, then multi myeloma. Why is that? It's not that we're not super focused on multi myeloma, but there's not a lot of off treatment because historically, that being said, one of the trials that we're doing in terms of the MASTER study is showing that for 2 successive MRD-negative tests, you can take a patient off of therapy. We're then going to go design a trial with those patients that are off therapy to see if we can intervene and get them earlier. But you need to wait for that outcomes data, so it would be longer. Now one other point to make on this is my goal -- and again, I'm not promising anything, but my goal would be to say, hey, if we get a couple of these, can we then get to kind of a pan disease recurrence monitoring kind of paradigm where you don't have to go one by one. And I say we've had some really productive discussions with the MolDX program, but I think it's going to take some time to get there, but that's kind of the long-term goal of kind of what we're trying to achieve.

And then on EMR integration, as of last quarter, you had Epic integration at 40 sites or live in 113 community accounts via OncoEMR. Looking at the remainder of the year, how should we think about number of EMR integrated sites to be added before year-end? And should we think of a similar number of sites added last quarter, i.e., 13 Epic sites to come online 3Q and 4Q? Or do you see it accelerating from here in second half?

Actually, probably the -- I mean, we continue to have a huge focus on EMR integrations, both in the academic medical center setting and in the community setting. I think last quarter was a pretty big quarter because we had a significant backlog. That said, our pipeline is extremely robust. We've done several since then, and we will continue to kind of focus on EMR integrations kind of moving forward. Notably, we had our first EMR integrations in a Cerner integrated account -- just over the past 2 weeks, Cerner integrated account and an ELLKAY integrated account. So those are interesting to us. But it's not necessarily the number of accounts. It's also the quality of account. I mean we're focused on our large accounts.

And what we're excited about is 4 of our top 10 largest accounts have been EMR integrated thus far, and we've got some kind of more on the docket as well. And of those accounts and just a little bit of data, the 3 months post integration have seen a 25% incremental growth from the 3 months prior to integration. So that's -- those are new integration for our top accounts. And overall, now we have a cohort that's kind of a year long -- a year since being integrated. And 12 months post integration on all accounts, kind of large accounts, small accounts across the board, we're seeing double the growth rate. So we're seeing an 84% growth rate versus a 46% growth rate on non-EMR integrated accounts on a year-over-year basis. So kind of really -- I mean, if you look at -- again, people ask me some of the things we're excited about. That to me, in looking at those numbers is pretty encouraging.

Great. And are you seeing difference between the volume uplift you see in the larger accounts versus the smaller accounts?

So I gave you some of those -- I think it's some of the accounts on the larger accounts have been newer implementations. So the only data that I want to -- I can share that's really meaningful is that so far, they've come out of the gate strong. In general, you would expect the overall nominal growth rate to be higher in the smaller accounts. So we're not -- I wouldn't expect kind of an 86% growth rate year-over-year on something like an MD Anderson just because of EMR integration because some of those smaller accounts hadn't been kind of power users of the test to date. So I wouldn't -- that being said, I mean, I think both on large accounts and small accounts, we're encouraged by the growth that EMR integration is providing.

Right. That makes sense. And then you touched on this earlier, but has the new serial monitoring feature on the EMR help to drive more consistent ordering patterns?

So all I can share so far is that 80% of -- in the community oncology setting of clinicians are clicking on the serial monitoring ordering. That being said, it's only been integrated for 2 months. So we haven't seen those tests yet arrive. But again, when you're talking about, hey, we're -- in 2025, we're talking about 35% growth. And obviously, we're not giving '26 numbers yet. But if you're talking about, okay, how do you -- the question is, how do you maintain even off a larger base, really strong growth numbers, that's one of the things that I think is quite encouraging.

Okay. And then you recently launched Phase I of the Neo collaboration, a collaboration that should help expand your presence in the community setting. Tell us why the goals in the first phase of the -- tell us the goals in the first phase of the collaboration and what experience you hope to gain ahead of the broader launch in early '26?

Yes. So it's been relatively recent. We're piloting with 4 different sites. And I want to be cautious on this in the sense that we are going slowly. We've had a lab-to-lab partnership in the past. It's hard to get these things right. So we are -- the first -- the goals of the first phase are to make sure that the pipes are connected, that the sample is going in the right place and that the field force is educated with the right messaging, right? That is like simply, can we properly get samples from an order from a COMPASS test on the ID workup from Neo into the house, into Adaptive process and return of test results in the right format. So if you look at a 3-year partnership, what I would kind of caution is we have put in really no incremental volume in 2025. It's really year 2 and year 3, which is 2026 and '27 that we're looking at kind of incremental volumes from this partnership.

Great. And then I think one of the underappreciated aspects of Adaptive is the recent progress you made in generating clinical utility data for clonoSEQ. Would you elaborate on how the clinical utility trials such as MASTER and MIDAS trials have helped to facilitate penetration of clonoSEQ in the market as well as open up the opportunity to increase the number of tests per patient. What are some key trials that we should be watching for in the near term as well?

Yes. So I'll touch again, MASTER trial, it says that if you are 2 successive MRD-negative tests that you can take a patient off of maintenance therapy with no difference in overall survival -- overall progression-free survival. So that's been a very, very important test. And just practically, what that means is if a patient is on a drug like REVLIMID and they're continually taking it, there -- this drug has some pretty significant side effects and patients really are looking for reasons or they're looking for evidence and a rationale for how they can go on a treatment holiday. And now a clinician has a tangible tool to say, "Hey, let's try it because you're MRD negative, go on a treatment holiday and then we'll continue to monitor that, okay? So that's MASTER.

In terms of MIDAS, MIDAS is a 796-patient trial that is looking at the impact of MRD status to transplant. And what essentially -- I don't want to go into detail, but what essentially it shows if you're MRD negative, that you're not going to benefit from a transplant. And that data is incredibly compelling because there's been a debate about kind of what are the true benefits of transplant. That's -- by the way, that is in the myeloma setting, but we also have really good data in the CLL setting as well and mantle cell setting about transplant. So this is really kind of across the board that says, why go through the pretty invasive procedure of getting a transplant if you -- there's no disease burden from a 1 in 1 million 10 to the 6 molecular level.

You should maybe wait at least at the very least to get a transplant. So that, again, goes to also the frequency of testing and to test and say, okay, are you still MRD negative? Are you still MRD negative? So let's not transplant the patient. We've got some really nice data coming up in ALL. We also have some good data coming up in blood-based testing in myeloma. The abstracts haven't been announced yet for ASH, but ASH is really our big conference where we kind of do get our data rollout. So keep your eyes filled for that.

Right. And then you've also been seeing pretty significant momentum in your biopharma business as well. So ODAC, given ODAC's support to incorporate MRD as a primary endpoint for accelerated approval of new therapies in multiple myeloma and a favorable CHMP opinion further solidifying that view, have most of studies now converted MRD as a secondary endpoint -- have converted MRD as a secondary endpoint into a primary endpoint?

Okay. So first, yes, super excited about the 12 to 0 vote on the ODAC decision last May. And then recently about 6 weeks ago, the CHMP decision in Europe. So this global kind of recognition of multi myeloma as a primary endpoint bodes extremely well for the importance of the assay in kind of global pharma trials. So let's just kind of set the stage for that, of which we have about 175 trials, 65 of which are in multi myeloma. Of those 65, 12 of which are primary endpoints, 3 of which have converted from secondary to primary and the rest of those, which is about 52, if I'm doing the math right, are secondary. And we're looking at some of them to convert from secondary to primary. And as new multi myeloma drugs kind of roll on, we're looking at incorporating them as primary endpoints.

And then the second kind of point of that is that impact into other indications on our pharma business has been real. It's been tangible, meaning at some point, we're hoping for other disease states such as CLL that clonoSEQ has a -- I shouldn't say clonoSEQ because the FDA actually does it as NGS-based MRD testing, of which we're the only approved one, will be the primary endpoint. So we will be designated as a primary endpoint. So we're starting to really see kind of that impact on pharma companies that are starting to do more trials, bank more samples, use clonoSEQ more.

And then the final point I'll make there is there's an amazing halo effect that we've always talked about these businesses between the clinical business and the pharma business being synergistic. But this is one where I can just tell you, it's incredibly tangible because we had clinicians who we've been trying to call on for many years that we couldn't get into their offices. And now the phone is ringing and saying, "Oh, I saw that your primary endpoint -- because remember, this is the first new primary endpoint in cancer in over 10 years. I saw that your primary endpoint, can we -- we're ready to talk about MRD. So that's been another kind of driver of volumes in the clinical setting.

Great. And then one of the things you called out in the past is the idea of converting a contract based on regulatory milestones, one based on higher ASP per sample to improve predictability of your revenue stream. Have you been able to discuss that with your pharma customers as they incorporate MRD as an endpoint in their trials or tweak their trial design? If so, what is your sense for their willingness to do that?

Yes, yes. It's a good question. I mean the answer is yes. We started to have this conversation. We've been successful on a couple of cases. Remember, some of these are multiyear contracts with kind of MASTER services agreements and each trial is a scope of work under that. So that MASTER service agreement has to kind of come up because the reality is like if you look at the purchasing department of pharma, they're already pretty busy. And if they don't have to do something, they're just probably not going to do something. So when those contracts come up is when we've started to have those conversations. We've been successful a couple of times. And the reality is pharma doesn't love -- the reason pharma doesn't want these milestones is they come to the FDA gets approval and they're like, okay, it's $5 million, and they're like, well, who's paying that?

And they're all looking at each other, trying to figure out what budget it's going to come out of, et cetera. So they'd rather move it to -- and obviously, I think we'd rather -- I know you guys and the investors in the audience would much rather be a kind of more predictable recurring revenue stream. That being said, I want to caution that this is -- well, 2 things. This isn't going to flip overnight. It's going to take some time to do so. And the other thing I'll say, yes, is unpredictable and challenging as milestones can be to guide to and to model, et cetera. They also come at 100% margin. So they're not like -- they're not all bad.

Shifting to Immune Medicine. You recently announced a termination agreement with Genentech. While it's not surprising given strategic shifts at many pharma companies with the evolving regulatory landscape, it does remove some upside opportunities that could have materialized in an event of a successful cell therapy approval. Can you comment on what you might be able to do now that you have the rights back for some of those assets, including the TCR antigen prediction model? And beyond the Genentech partnerships, how can you monetize the asset now that it's returned to you?

Yes. So first of all, I'd say, overall, I think this increases our upside and not removes it, particularly because I would doubt that I know that the analysts and most of our investors didn't have this anywhere in their models anyway. But what it does is it releases us from exclusivity. So we have the technology back for cellular therapy in cancer. But I would say the larger opportunity is beyond that. I mean we have -- we've been building this digital TCR antigen map over the course of many different years that we're looking to monetize in a variety of different areas. One is in different drug discovery opportunities and ultimately looking for our next S-curve in terms of T cell-based diagnostics.

I mean we've built this muscle and kind of machinery around reimbursement, regulatory kind of sales force expertise, EMR integrations. And ultimately, we've generated some amazing data. It's really the next frontier of immunology data. If you look at, again, kind of AlphaFold and the ability to essentially model kind of protein folding, the next big frontier is protein-protein interaction, which is the TCR antigen or peptide MHC kind of interaction with the T cell receptor. And we've been generating this data. Frankly, we generated it for personalized cell therapy as one of the applications for the Genentech deal, but there are many different applications of this technology.

And again, I think the data underlying kind of what we've built is incredibly valuable, and we're just now looking at monetization opportunities and have some good discussions. Again, this is one that I think that is important that we ring-fence the burn around this opportunity and protect really the MRD profitability. But we've been very clear about characterizing this as a low-cost call option and one that kind of we reiterate has really a high-value opportunity behind it that we're just looking to figure out the best way to monetize.

And I do want to touch on financials.

We want to...

You set a goal for clonoSEQ ASP to reach $1,300 in 2025, and you've already achieved over $1,290 in 2Q, which pretty much sets a clear path to that goal. Could you outline the drivers of upside to ASP from here? And what are the unknowns that keep you from getting too optimistic from raising that $1,300 ASP target for the year? And looking beyond 2025, what are the drivers of ASP growth from even there?

Yes. I think as it relates to the $1,300 target and the upside there, I think right now, we want to be prudent with our expectations regarding that. We have a number of contracts that go effective into the second half of the year at a higher rate. But we want to see evidence that those payers are paying at that rate. We're enforcing those payments and starting to pull that through. So I think that's just the prudence in the guide. What gives us confidence kind of in the exit value and ultimately getting to that $1,700 plus ASP target over time is the ability that we've had to continually execute in recontracting with existing payers up towards that gap fill rate of around $2,007 per test. We started the process. We've enabled a number of payers over the last 6 months. We have a number of going live in the second half. And then continuing to stack on to that is Medicaid penetration and coverage in that area, which will continue to grow over the course of the next 2 to 3 years.

And then you also begun to roll out NovaSeq X, which should equate to a 5% to 8% improvement in gross margins. How should we be thinking about cadence of that improvement in the second half?

Yes. I think the best way to think about it in the second half is this quarter, we're going through the implementation. We are only getting 2 months of benefit from it. And then in the fourth quarter, you'll see the majority of that impact. But effectively, literal interpretation of that 5 to 8 percentage point improvement over the next 12 months is probably the right way to model it.

Right. And then you continue to manage your expenses and even reduced your full year total company cash burn guidance while still driving 25% plus top line growth. But what are the most important growth drivers to execute successfully over the next couple of quarters in your view to achieve that cash flow breakeven in first half '26?

Yes. I think taking a step back, a number of things we've put in place. 2 to 3 years ago, we expanded the field team. About 24 months ago, we started the implementation around coordinating our laboratory operation logistics, including the NovaSeq X implementation. We've got a number of those initiatives behind us. We're gaining more leverage through the business in terms of volume. I think that's the most important driver here. And then just continued execution without having to kind of grow incrementally, which we have a number of the infrastructure in place. We need to make some targeted investments to continue to improve some efficiencies, but those aren't going to be outsized investments. And so I think at the end of the day, volume growth is the most important leverage we're going to gain and ASP initiatives in the coming 12 months.

Great. And then in the last minute here, just to wrap up, what are you most excited about heading into 2026?

I'm excited about a lot of things. First and foremost, I'm excited that the team is executing and firing on all cylinders. But particularly, I'm really encouraged by what we're seeing in terms of the Flatiron OncoEMR integration. Again, the early returns that I'm seeing bode well for volume growth kind of moving forward. I'm excited about the Neo partnership. I think that it's going to be interesting to see how that rolls on and continue to be excited about the kind of clinical utility data. Like if you think about it, and just to put this in perspective, right, you've got all these companies in MRD solid tumor that are now starting to talk about prognostic data. clonoSEQ has been prognostic since 2011, 2012, but what we're really seeing is clinical utility data that's demonstrating specifically how a doctor can treat a patient. So kind of that uptake, particularly that uptake in the community, it's what's going to drive the future growth of the business.

And then finally, I touched on it before, but I think we're building this incredibly powerful data set in immunology, and we're looking to kind of exploit that and look for kind of the next kind of revenue monetization opportunities. And I think, again, overall, we have -- if you look at the average tenure of our executive team now, it's like 8 years in place. Everyone is working extremely well together and pretty -- I would say, very excited about the business and our trajectory moving forward.

Great. Well, thank you very much.

Thank you, Yuko. Appreciate it.

Good day, and thank you for standing by. Welcome to the Adaptive Biotechnologies Second Quarter 2025 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Karina Calzadilla, Vice President, Investor Relations and FP&A. Please go ahead.

Thank you, Shannon, and good afternoon, everyone. I would like to welcome you to Adaptive Biotechnologies Second Quarter 2025 Earnings Conference Call. Earlier today, we issued a press release reporting Adaptive financial results for the second quarter of '25. The press release is available at www.adaptivebiotech.com. We are conducting a live webcast of this call and will be referencing to a slide presentation that has been posted to the Investors section of our corporate website.

During the call today, management will make projections and other forward-looking statements within the meaning of federal securities laws regarding future events and the future financial performance of the company. These statements reflect management's perspective of the business as of today. Actual results may differ materially from today's forward-looking statements, depending on a number of factors, which are set forth in our public filings with the SEC and listed in this presentation. In addition, non-GAAP financial measures will be discussed during the call, and a reconciliation from non-GAAP to GAAP metrics can be found in our earnings release. Joining the call today are Chad Robins, our CEO and Co-Founder; and Kyle Piskel, our Chief Financial Officer. Additional members from management will be available for Q&A. With that, I'll turn the call over to Chad. Chad?

Thanks, Karina. Good afternoon, and thank you for joining us on our second quarter earnings call. Our second quarter results demonstrate strong execution with outperformance on both the top and bottom line. In addition to delivering ahead of expectations, we're also tracking ahead of schedule on key milestones for the year as shown on Slide 3. Our MRD business achieved profitability this quarter, delivering approximately $2 million in positive adjusted EBITDA, which we anticipate to increase going forward. MRD revenue grew 42% year-over-year, driven by significant increases in clinical volume. We successfully integrated clonoSEQ into Flatiron's OncoEMR, expanding access in the community. We've begun processing clonoSEQ tests on the NovaSeq X, a major step in scaling operations and improving margins. NCCN guidelines for multiple myeloma were updated to strengthen support for ID testing at diagnosis, reducing barriers to MRD testing and helping drive volume. And we launched the first phase of our collaboration with NeoGenomics. Total company sequencing gross margin improved by 14 percentage points year-over-year to 64% and cash burn for the quarter was approximately $11 million, representing a 36% improvement over the same period last year, ending with a solid cash position of $222 million. Given these strong results, we are again raising our full year guidance to reflect a higher MRD revenue range and a lower annual cash burn. Kyle will share more details on this shortly.

Let's now dive into the MRD business on Slide 5. clonoSEQ revenue grew 57% year-over-year in the second quarter, driven by strong demand across all reimbursed indications. We delivered over 25,300 tests, up 37% versus prior year and up 10% sequentially, an increase of about 2,200 tests versus Q1. Multiple myeloma remains the largest contributor, accounting for 41% of U.S. clonoSEQ volume, followed by ALL at 33%, CLL at 10%, DLBCL at 8% and MCL at 5%. We continue to see positive momentum across several key growth indicators.

Blood-based testing represents 44% of MRD tests, up 40% from a year ago. In multiple myeloma, blood-based contribution rose to 23% compared to 21% last quarter. Community-based testing grew 16% quarter-over-quarter, reflecting our expanding footprint outside of academic centers. NHL volume rose to 14% of total, up from 11% last year, led by continued growth in DLBCL and MCL. Ordering health care providers grew 35% to over 3,700, reflecting strong provider adoption. And over 18,000 unique patients were tested in Q2, up 40% year-over-year and 10% sequentially. On the reimbursement front, ASP for clonoSEQ continued its upward trend, reaching above $1,290 per test, a 17% increase year-over-year. Year-to-date, we've closed or renegotiated 8 key agreements with major national and regional payers, with additional agreements anticipated to close in the back half of this year. We remain confident in achieving an average ASP of $1,300 per test for fiscal year 2025 with a solid growth trajectory well into the future..

Now let's take a look at the progress of EMR integrations on Slide 6. Integrating clonoSEQ into EMR systems across academic and community settings remains a key driver of volume growth. In the academic setting, we began Epic integration about 18 months ago, and we're now live at 40 sites, including 13 added since our last call. Epic accounts that have been live for over a year are growing on average about 2x faster than nonintegrated accounts. Among our top 10 accounts, 4 are now Epic integrated, and we're seeing acceleration in those accounts following integration. In the community setting, this quarter, we achieved a major milestone with the integration of clonoSEQ into Flatiron across 113 community account groups, many of which include multiple practice locations. This marks a significant advancement in our strategy to scale in the community oncology space. It also provides OncoEMR users with a more streamlined customer experience, enabling simplified ID/MRD ordering, and the option for serial testing directly through the EMR. Looking ahead, we plan to continue expanding EMR integrations over the coming years, further accelerating adoption, simplifying workflows, reducing order discrepancy and strengthening our competitive moats.

Looking at MRD pharma on Slide 7. Our MRD Pharma business had another strong quarter with revenue up 20% year-over-year with steady growth in sequencing revenue and $5.5 million in milestones. We ended the quarter with approximately 175 active global clinical trials and a $218 million backlog, up 21% from the prior year. This backlog is a strong leading indicator of future revenue. clonoSEQ is being used as a primary or secondary endpoint in 90 of these studies, many of which may trigger milestone payments upon regulatory approval.

On the regulatory front, momentum continues. Recently, the European Medicines Agency, CHMP, issued a positive opinion supporting the use of MRD testing as an early endpoint for conditional approval in multiple myeloma. This decision aligns with the ODAC recommendation and further cements the already strong case for pharma companies to make MRD a central element of their myeloma drug development strategy. As we continue to monitor developments at the FDA, we're optimistic about the growing global support for MRD to accelerate new treatments, not just in multiple myeloma but across all lymphoid malignancies.

Turning to Slide 8. I'd like to take a moment to highlight some clonoSEQ MRD data presented this quarter at various conferences. Starting with the MIDAS study in multiple myeloma. This 791-patient study is the first prospective randomized MRD-directed Phase III trial to assess the ability of clonoSEQ to guide myeloma transplant decisions. The study evaluated the use of consolidation therapy versus without transplants in patients who achieved MRD negativity by clonoSEQ at the end of induction. Data shows that patients achieve similar MRD outcomes regardless of whether they received a transplant, supporting the idea that transplant may not be needed for MRD-negative patients.

In CLL, promising interim data from Veneto-STOP, an ongoing Phase II study, demonstrated the potential to reduce duration of venetoclax-based therapy in patients who achieve an MRD-negative response. And in DLBCL, several studies presented at the ICML Conference in Lugano showed how clonoSEQ and ctDNA can effectively assess response and complement imaging across different lines and classes of therapy.

Q2 also marked an important milestone for the enhanced version of our clonoSEQ ctDNA assay in DLBCL as the FDA granted 2 investigational device exemptions for use in investigator-sponsored trials to assess escalation of therapy for patients who remain MRD positive at the end of frontline treatment. It's exciting to see the expansion of data and studies supporting the interventional use of clonoSEQ MRD in lymphoid malignancies to inform clinical decision-making, and we look forward to more key data readouts at the ASH Conference later this year. In summary, our MRD business is firing on all cylinders. As shown on Slide 9, we're only halfway through the year, and most of our key full year strategic goals have been achieved, including reaching MRD profitability this quarter, ahead of our second half target.

Now let's turn to Immune Medicine on Slide 11. Our Immune Medicine business is on track to meet 3 main goals. The first goal is to develop a digital TCR-antigen prediction model. As we scale the size and quality of our data generation, we aim to replace our validated TCR discovery cellular assays with this digital TCR antigen prediction model, which will significantly reduce both cost and time. We're starting to digitally model the ability to accurately select the best TCRs in our cell therapy application with Genentech. We're also making good progress in applying our large training datasets. This includes improving the accuracy of our TCR-antigen binding predictions and deploying our AI/machine-learning models to enable additional partnering opportunities with attractive future monetization potential.

The second goal is to build a robust preclinical data package for our lead T cell depletion program in autoimmunity. We are conducting functional and biophysical characterization of our top antibody candidates in our lead clinical indication. We also solidified our patient selection strategy in this indication. This will allow us to select only those patients who we confirm have the specific disease-causing autoreactive T cell receptors and who are at a higher likelihood to respond to our T cell depletion therapy. As we continue to execute on these 2 focused therapeutic strategies, our third goal is to achieve our 2025 cash burn target of $25 million to $30 million by scaling revenue generation from pharma partnering and continuing to thoughtfully gate R&D investments through year-end.

Now I'm going to pass it over to Kyle to walk through our financial results and our updated full year guidance. Kyle?

Thanks, Chad. Starting on Slide 12 with results for the second quarter. Total revenue was $58.9 million, representing 36% growth from the same period last year. 85% of the revenue came from the MRD business and 15% from Immune Medicine. MRD revenue grew 42% versus prior year to $49.9 million, with clinical and pharma contributions of 65% and 35%, respectively. ClonoSEQ test volumes, including international, increased 37% to 25,321 tests delivered versus last year. ASP in the U.S. grew about 17% to $1,290. The continued improvement in ASP is mainly driven by our contracting initiatives, improving our pricing and revenue cycle management activities, including aged collections.

MRD Pharma revenue grew 20% versus prior year, inclusive of $5.5 million in milestones. Immune Medicine revenue was $8.9 million, up 13% from a year ago. Moving down the P&L. Sequencing gross margin, which excludes milestones and Genentech amortization, was 64% for the quarter. This represents an improvement of 14 percentage points versus prior year as we continue to leverage lower labor and overhead costs with increasing volumes and higher pricing across both our clinical and pharma revenues. Total operating expenses for the quarter, inclusive of cost of revenue was $83.9 million, representing a 1% increase from last year, excluding the Q2 2024 asset impairment cost. This increase was mainly driven by higher sales and marketing spend attributed to EMR efforts and higher people costs, partially offset by lower cost of revenue and R&D spend.

As you can see from the segment reporting table at the bottom of the slide, the MRD business achieved positive adjusted EBITDA of $1.9 million, a massive improvement versus a deficit of $11.3 million a year ago. This is a significant milestone for the business, and we continue to expect positive MRD adjusted EBITDA going forward. Immune Medicine adjusted EBITDA loss also improved 14% versus Q2 of last year. Total company adjusted EBITDA was a loss of $7.2 million in the second quarter compared to a $21.4 million loss in the prior year. Interest expense from a royalty financing agreement with OrbiMed was $2.9 million, which was slightly higher than interest income. Net loss for the quarter was $25.6 million.

Now let's turn to our full year 2025 updated guidance on Slide 13. We are again raising our full year MRD revenue guidance to a range of $190 million to $200 million, up from our previous range of $180 million to $190 million. This increase is driven by stronger-than-expected clinical volume performance in the second quarter and higher MRD milestone revenue anticipated for the year. Given the strong clonoSEQ test volumes in the quarter and the momentum we are seeing, we now expect approximately 35% growth in fiscal year 2025 volumes versus 2024, and we anticipate sequential growth in both the third and fourth quarters. We also expect revenue from MRD milestones to be between $14 million and $15 million, up from our previous guidance of $8 million to $9 million. This updated MRD revenue guide represents significant growth of 31% to 37% versus fiscal year 2024 and 32% to 39% for the MRD base business, which excludes MRD milestones at the midpoint.

We are reiterating our full year total company operating expense guidance, including cost of revenue to be between $335 million and $345 million. We continue to expect approximately 69% of this to be driven by the MRD business and 23% from Immune Medicine, with the remainder attributed to unallocated corporate costs. Lastly, we are lowering our full year total company cash burn guidance to a range of $45 million to $55 million, down from the prior range of $50 million to $60 million. This improvement is primarily driven by the higher-than-expected MRD revenue. We now expect approximately 18% of this year's cash burn to come from the MRD business and still anticipate burn from Immune Medicine to be between $25 million and $30 million, with the remainder attributed to unallocated corporate costs.

The strong financial performance of the first half of the year has set up the MRD business to achieve recurring adjusted EBITDA profitability and a clear pathway to cash breakeven in the near term. Across the business, we will remain focused on this disciplined execution to drive continued sustainable growth while managing our investments appropriately.

With that, I'll hand it back over to Chad.

Thanks, Kyle. Our second quarter results are a clear testament to our disciplined execution and strategic focus across every part of the business. Achieving positive adjusted EBITDA in our MRD business marks a major milestone, one that reflects the strength of our model and the commitment of our team. We're confident in delivering on our raised full year guidance and remain focused on execution with the discipline, urgency and precision needed to deliver on our goals and create long-term value for our patients, our partners and our shareholders.

With that, I'd like to now turn the call back over to the operator and open it up for questions.

[Operator Instructions] Our first question comes from Dan Brennan from TD Securities.

Nice quarter, obviously. Maybe the first one, just on the volume side, really strong volume. Chad, you called out a lot of the vignettes about the success and the impact of Epic. I just wonder if you could speak a little bit on Flatiron. Obviously, you just did the rollout now. It's pretty massive. Are there any early things to note on what you're seeing so far? And can you just remind us how you're thinking about the volume growth guide that you've given for the back half of the year and how we might think about the benefits of the new accounts on Flatiron and how those might flow through in terms of volume shrink?

Sure, Dan. Thanks for the question. I'm going to have Susan jump in with some details on Flatiron.

Sure. Dan, so as you know, we went live nationally with OncoEMR on July 1. So we are in very early days of the integration. And remember that many of the OncoEMR accounts are accounts where we have little or no existing business. So this integration does represent a significant opportunity to expand in the community. Prior to the integration, these accounts made up about 6% of our total volume, about 20% of our community volume. We're very pleased with the initial results we are seeing, albeit it is very early, both in terms of the volume and the workflow, and we're receiving resoundingly positive feedback from our customers. We are also observing that a majority of the ordering HCPs at these accounts are opting to use the serial monitoring feature that Chad alluded to in his earlier remarks. And that's a new feature of our ordering process that's currently unique to OncoEMR. And we do expect that it will support more consistent ordering at clinically appropriate time points in the community. Now we did build the Flatiron launch into our guide as a growth driver, both for Q3 and Q4. But I do think there's potential for upside. We'll continue to gain insight into exactly what the pace and degree of acceleration that we can expect from this is as we gain a little bit more experience.

Terrific. Yes, there'd be a lot to unpack on that, which we can do later. Maybe just on the pricing side, just a second follow-up there in terms of pricing came in, nice success there. I know you mentioned, I guess, contracting and things. Could you unpack a little bit about what you saw on clonoSEQ pricing? I know you reiterated the full year guide. It seems like you have a lot of momentum there. I'm just wondering across different payer types, where are you seeing the biggest traction? And what do you assume for the back half of the year, which arguably could be conservative?

Yes. Thanks for the question, Dan. This is Kyle. On the pricing improvement, I think we're gaining the growth from the contracting efforts we implemented in the back half of last year, and we're starting to see that pull through across a number of the Blue Cross payers. Medicare, just a percentage of mix is mixing to the newer price point. And so we're seeing those effects. But as we look forward to the second half of the year, a number of our larger contracting implementations with the larger national payers come into play. So I think we're well set up into the second half of the year to continue to see some improvement. We did have some initial wins. It's a little early to say if it's going to continue at this rate with California and Medicaid as well in the second quarter. So that's giving us some momentum heading into the back half of the year.

If I can just sneak one more in. Just on the EBITDA side, really nice traction in the quarter. How do we think about as we look ahead and you're balancing investments in the business versus really seeing some of this EBITDA margin potential flow through. How might we think about where you can end the year and what that means as we look ahead to '26 on the MRD side?

Kyle, you start just in terms of numbers, and then I'll provide some further commentary.

Yes. A great milestone for the business to achieve positive adjusted EBITDA. I think in terms of back half of the year, we are set up with the right trajectory to continue to repeat adjusted EBITDA profitability. In terms of the magnitude of that, some of that will vary depending on the timing of milestones, et cetera. But we're thinking about this as the business is set up to continuously produce positive adjusted EBITDA, and we're seeing that for the longer term here.

Yes. And Dan, I would say this, look, for the MRD business, we're seeing, as evidenced by the last several quarters, a really nice acceleration. But there's still -- we're still in the very early innings, and there's a long growth trajectory ahead of us in blood-based testing in the community setting, additional data generation. So we'll continue to make investments in the MRD business. And then in the medium term, obviously there's international markets to explore additional capital allocations towards and potentially additional tests and blood-based measures to support the MRD business. So as we look forward, we'll balance out our capital allocation and investments going forward for our growth trajectory.

Our next question comes from Andrew Brackmann from William Blair.

Chad, maybe around your commentary around expanding the footprint into the community channel. Flatiron is obviously a major lever there. But can you maybe just talk about some of the other drivers there, which should help you drive growth here, not just in the second half, but even longer term, be that [indiscernible] indications or blood sample type.

Yes. One of the things that we highlighted in our prepared remarks was the NeoGenomics collaboration. And we're excited about that because 60% of the accounts that they're in, we're not in at all yet. So that's a really nice opportunity for us to increase our penetration. And Susan, do you want to come in on some other efforts that we're doing in the community in terms of putting together pathways, et cetera?

Happy to. Yes, Andrew, a couple of other things that are consistent in our strategy, one is a continued focus on the large national strategic accounts, these oncology practice networks that control a large proportion of the cancer patients in the community settings. So those, we have a separate sales team that focuses specifically on top-down strategy, engaging with the C-suite, et cetera, to ensure that we have a unified direction from their leadership and policies that we can advance that can be consistent across the entire network. The other key thing is engaging academic thought leaders to help us drive community adoption. They have the credibility with those providers. They have the referral networks that they can use to leverage their influence. And therefore, we've increasingly and particularly in light of the recent NCCN guideline update with multiple myeloma, we've been leveraging our thought leaders and partnering with them to deliver education to the community on things like why it's important to perform an ID test at the time of diagnosis. So in combination with our EMR strategy and our collaboration with Neo, those are some of the key things that are consistent in our community strategy. And you mentioned blood, that will always be a part of the conversation and a key adoption driver for community clinics.

And then as a follow-up here, Chad, just want to follow up to some of the comments you made to Dan's last question around additional investments here. clonoSEQ clearly has a long growth way ahead of it. But as you think about adding menu here, some other labs are trying to become more of a one-stop shop, what are some of the key sort of characteristics that you might consider as you're thinking about bringing on additional tests?

Yes. I look at it in 2 ways: one is brand and the other is channel. So how do you leverage your brand in MRD is one thing I look at. And then secondly is how do we leverage a really superior channel that we've built in the hem/onc space. So I would say those are the broad-based -- so that's broad-based from an MRD perspective. And then secondarily, I look at what is the infrastructure we've built to be able to both validate, support diagnostics more broadly. And as you know, we've been putting together for example this TCR-antigen prediction model. It could have some future applications in the diagnostic channels. Again, early on, but these are the things that we continue to explore.

Our next question comes from David Westenberg from Piper Sandler.

I actually wanted to tack on for Dan's question on profitability. And again, congrats on the profitability in the MRD business. But you also implied cash flow positive on a go-forward basis. Given the factors in terms of fluctuations in milestone payments and whatnot, do you have visibility on what the milestone payments look like maybe this quarter and next? And if you don't get [ me ] in the next couple of quarters, is there a chance for you to go below? And essentially, what I'm laying out with this question is the ability for you to not be held to a certain number if there is indeed milestones or not milestones.

Yes. Thanks, David. This is Kyle. As it relates to the back half of the year, we implied in our guide that there's about $4 million to $5 million to go in the back half of the year as we have $10 million altogether. So again, yes, could those be lumpy on a quarter-by-quarter basis? Certainly. I think as I think about cash flow positivity and where the business trajectory is headed, I'm trying to think about that on an annualized basis, just given quarter-to-quarter we can have variability in spend, investment, et cetera. But I think what we're set up to do is to continue to deliver that with the trajectory of the clinical business and the volume growth we're seeing there, strong performance in the pharma business as well. So I think we're not exactly there yet, but with the NovaSeq coming online, the trajectory of the business is set up to deliver that in the near term.

Appreciate that. And then I just want to talk about the clonoSEQ volumes. We're really seeing an acceleration, 37% year-over-year growth. You're already at a higher base and you got 10% sequentially. So obviously, things are going really well there. Can you talk rank-order some of the factors in terms of what's been driving the volume increases? I'm guessing a lot of this has been the integrations, but if there's anything we're missing in terms of new indications, for instance, DLBCL or anything like that? And if you can give us a flavor for how these integrations go and how you see volumes trickling out over the next quarters or so. I think you've mentioned you had double the amount of volume in -- or double the amount of volume growth in Epic integrated versus non-Epic integrated or maybe it was Flatiron. Does that expect -- do you expect to see a tail there for a number of years? And sorry to make this really long, but can you clarify the ordering -- the integration where you have multiple orders with specific timing? And I just want to basically clarify on that. Do you ever get timing -- or did you ever get more than 4 tests ordered on that? Hopefully, that was clear. That was a lot.

Yes, let me see if I can take those, at least the first couple one by one. So in terms of the volume growth, as you noted, we've seen a number of -- we've anticipated that there could be upside, and we've seen that upside realized in Q2. And I think we'll take advantage of the EMR integrations on an ongoing basis. I think some of the other things in Q2 that were important were, first of all, continued strong growth in mantle cell lymphoma, which we recently launched, as you know, as well as in diffuse large B cell lymphoma, which is one of our newer indications and one for which the data continues to build and the clinical use case continues to be, I think, made more clear. We also had the tailwinds of the NCCN guidelines update. We continue to see very strong support globally for MRD pharma, which has synergies and spillover to the clinical setting. So our blood testing increased overall, our blood testing increased in multiple myeloma. I think all the things that we're doing are all delivering and contributing to the growth. So it's not just one thing. And that will continue to be the story going forward.

With regard to integrations, we did see a significant increase in the pace of integrations through Epic that we were able to deliver in Q2, 13 a quarter was the most we've done, and we've doubled the number that we've completed in the last 6 months. So we went from 20 to 40 in 6 months. It's certainly on the account side. There are many dependencies that we have on our accounts to complete those integrations. So it's difficult to predict the pace going forward. But we do feel confident that we're on track for our goal of about 50% of our volume going through an integration, either Epic or otherwise by the end of the year. I do think that eventually, integrations will slow down, but we are not there yet. We have more ahead of us than we have behind us, and much more opportunity to optimize the integrations that are already in place so that we can see even better differentiation of the growth in those accounts versus the nonintegrated accounts. And then lastly, I think you asked about the episode. Kyle, I don't know if you want to take that one or if you'd like me to.

Yes, David, and Susan, feel free to chime in. From an ordering perspective, the clinicians are still ordering test by test effectively. They can, in certain integrations, place reminders for future orders. But really, we're just paid a bundle for Medicare, and that's specific to the Medicare coverage and Medicare line of business. So if we get an eligible test for Medicare, that is paid once for the effective 4 tests.

But David, I think you were asking specifically about sero testing and as it relates to the logistics of our integrations. One of the unique features that we've done for the first time in the Flatiron OncoEMR system, there's the. actual default is you can order a number of tests. So it's 3, 6, 9 tests as -- sorry, on a recurring basis of 3 months, 6 months, 9 months, every 12 months, or every time a patient comes in, or you can say, I want to order on a test-by-test basis. And I'm not going to give you statistics. I'll just say it's early, but we've seen a very nice uptake in clinicians that have clicked on a button to order on a cadence of a monthly 3-, 6-, 9-or 12-month cadence. And so that's what we're talking about in terms of the excitement around repeat ordering and the functionality that we can build into these EMR systems.

Our next question comes from Mark Massaro from BTIG.

Congrats on a strong quarter. I have a few questions on the EMR integrations. Looks like everything is going well. So you've got 40 on Epic, 13 were in Q2. So it looks like you had 27 heading into Q2. Would you define those 27 prior to this quarter as the mature integrated sites? And the reason I ask is I'm trying to get a feel for how long it takes you to get to a degree of maturity such that you're seeing, call it, 2x, growing twice as fast within mature Epic integration. And then I also wanted to ask about Flatiron. I recognize that, that was a lot of sites all at once, over 100 sites. Effectively, was that just pushing a button overnight? And then do you have a sense for -- do you have enough data that the Flatiron could see similar pull-through to the mature Epic sites?

I think I can take those questions, Mark. So first on Epic. So we're defining mature sites as those that have been live for at least a year. So not all of those 27. In fact, it's more like 6 at this point. And we are looking at those specifically because we wanted to understand if the early impact that we're seeing immediately post integration, which is generally pretty significant, can be sustained. So in fact, if I were to talk about the impact in the 3 months post integration, there's usually a larger impact. But over time, we wanted to see what that looked like, and we do see a consistent pace of increased growth. But it's still, because we've been doing this for about 18 months, and we have a smaller group that we started with, that has been live for at least a year, including a number of smaller accounts. Frankly, they're mostly smaller accounts in that initial group. We'll have to continue to learn more as we gain more data. But 6 months from now, we'll have a much larger group. We'll have about 20 that have been live for a year.

Okay. That's really helpful. So my second question is on the -- sorry, go ahead.

Oh, I'm sorry. Did you want me to go ahead on the Flatiron one? Sorry, I didn't....

Of course, keep going.

Thanks. Sorry. You're correct that Flatiron was essentially pushing a button. On July 1, all of those 113 account groups went live. We actually did a small pilot with 4 of them prior, but all of the rest went live on July 1. And it's, I think, too early to say whether we can anticipate similar patterns, but I will point back to what Chad was talking about, the serial testing option, which is easier to use in Flatiron's OncoEMR than it is to use a similar feature like standing orders in Epic. At least it's easier for us to have visibility into it and it's easier to schedule the patient. And so we do anticipate that we'll have a better ability to follow through on serial orders and help support clinicians in delivering appropriate testing frequency with Flatiron. So I do see some upside there, but it's very early to speculate beyond that.

Okay. And then my last question. I wanted to better understand the Neo collaboration. So it looks like you launched Phase I. Chad or maybe someone else on the team, can you expand on what Phase I consists of? And then what would Phase II be? And then I recognize this is a commercial partnership, so my understanding is that there's going to be Neo reps going out selling clonoSEQ to many of their customers. Just give us a sense for what type of lift we might be able to see. And I imagine this is more of a 2026 impact, but should we expect any impact in the second half of '26 -- excuse me, second half of '25?

Sure. So Phase I is our pilot effort with a very small handful of small accounts, again, with the intent of ensuring that we've worked through all the operational processes, the collaboration and handoffs between the 2 companies with accounts that are willing to do the process in a fairly manual manner. So it's really intended for us to learn and gather insights both from the customer and from our own processes as opposed to generate any material impact on volumes. And I would extend that expectation through the remainder of 2025. We do have the plan to bring on additional accounts during the course of the second half of this year, but I don't anticipate material impacts to our volumes beyond what we've already guided. 2026 and 2027 is where we will see that material lift when we launch nationally in the early part of next year.

And just one clarification, Mark. When you mentioned that Neo reps are going out and selling clonoSEQ tests. And I want to just be clear on how that works. They're going out and selling a COMPASS panel that will include as a part of a battery of ID tests done at diagnosis that will include the ID clonoSEQ test as part of the COMPASS workup. And then [indiscernible] effectively they're selling the COMPASS workup with MRD baked in as is. And then secondly, as part of their recurrence monitoring or the monitoring across the patient life cycle, they have an offering called CHART, and they'll be selling effectively clonoSEQ embedded into the CHART offering as the clonoSEQ MRD test.

Our next question comes from Rachel Vatnsdal from JPMorgan.

This is Sebastian Sandler on for Rachel. So I wanted to touch on the NCCN update for multiple myeloma, which recommended the baseline clonal ID testing to enable MRD testing later on. You called out the 10% sequential growth in unique patients. And since the update came in late June, I wouldn't think that 10% included any impact from the guideline update. I'm just wondering if you've seen any changes in ordering patterns, especially around that clonal ID testing and how that's been trending since the update. And then just how should we think about these unique IDs translating into MRD testing later on?

Thanks for the question, Sebastian. What I would say to start is that the NCCN guidelines update certainly is a tailwind for us and something that we've been actively leveraging, particularly in the community setting, in both our direct education of HCPs as well as the KOL-driven education that I mentioned earlier. It's helping us to deliver a message that we were already delivering, which is the importance of ensuring that each and every patient with multiple myeloma has the opportunity to be tracked by clonoSEQ and that opportunity is secured if you test at the time of diagnosis or if at least you make sure that you collect an appropriate sample for subsequent NGS MRD testing. So while certainly, it is, I think, a support to all of our goals, we are not projecting any specific increase in volumes as a result of that by itself. I think, again, it will contribute to the efforts that we already have ongoing. And I'm very optimistic that in the community setting, it will be compelling and credible as a reason for this to happen. We can anecdotally tell many stories of accounts that are currently evaluating, and I think seriously considering upfront ID testing protocols in the community. There are already accounts that are doing that today. It is not the majority of our ID testing. And so we've seen fairly consistently about 30% of our test volume come from IDs over the last several years. And I don't anticipate that dramatically changing, but the balance of indications where we have more mature indications like ALL, where many patients are ID'd and new indications, as well as myeloma where ID is becoming more of a -- there's more support for it, I think that we'll continue to see a strong contribution of ID testing over time.

Got it. And then just one on the backlog. Seemed like that's growing nicely, closing at around $218 million after ending 2024 a little over $200 million. It also looks like the primary endpoint stepped up to 17 from 10 ending 4Q last year. So just how should we think about the burn there translating to sequencing revenues? And is there any meaningful difference in the burn rate between these primary versus secondary endpoints? And then lastly, have you seen any recent change in pharma customer behavior in that segment, just given some of the headlines around tariffs and [ MFN ]? And do you anticipate any headwinds there going forward? I think some of your peers have called out a bit of bumpiness there. So just wondering if you're seeing any or building any into the guide.

Sure. Go ahead, Kyle.

Go ahead, Susan. All right. As it relates to the backlog, in terms of the burn profile, I think of it as we're continuously replenishing our backlog with new bookings, and that's what's highlighted by the improving backlog relative to exit value of 2024. I think the time frame of which that backlog converts into revenue is really unchanged. Maybe a little bit of a pull forward. But obviously, with the dynamics at the FDA and our pharma partners' investments, it's still contingent upon when their trials are reading out, how many patients are enrolling, and when we can enable some of that MRD testing. But broadly, don't think the profile has changed dramatically, and we're going to continue to grow bookings, and we're confident in the pipeline we have around the pharma business.

Yes. And as it relates to more general question about our MRD pharma business going forward and impacts of tariffs, NIH and the FDA. First, we'll start with the tariffs and the FDA. There's very -- excuse me, tariffs and the NIH. There's very little impact as we look through the portfolios. We're really not subject to NIH funding in terms of very little percentage of our business. As it relates to the FDA, I would just start by saying globally that there is really a growing global support for MRD to use as an endpoint for the acceleration of therapy in multiple myeloma. And even more broadly, there's coalitions forming in other indications as well. So we're very positive on the acceleration of MRD therapies based on MRD. So the ODAC recommendation last year, along with the CHMP positive opinion on MRD using MRD as an early endpoint, it's just continued in further validation of MRD as a predictor of response. So overall, we're very bullish on the MRD pharma opportunity.

Our next question comes from Yuko Oku from Morgan Stanley.

On CHMP opinion supporting the use of MRD as an early endpoint in multiple myeloma clinical trials. How important was that milestone for your pharma customers in order to further incentivize incorporation of MRD as an endpoint? And then also second part to that, and given the halo effect that ODAC recommendation had on physicians in the U.S., does this also bring OUS opportunity into greater focus for you?

I'll start out. Yuko, thank you for the question on CHMP. So I think that we saw this as further confirmation of what pharma had already come to believe based on the ODAC vote and recommendation a little over a year ago. The CHMP decision was anticipated. And in fact, among our pharma partners who are currently executing or planning global clinical trials, they had expected that they would be able to leverage primary endpoint status for MRD in those settings. So this was an important affirmation of that expectation and I think further supports the global acceptance of MRD as a key endpoint in clinical trials for myeloma as well as, frankly, other key malignancies. We're seeing growing support and growing utilization of MRD as a primary endpoint in other disease states. There are coalitions that have formed of pharma companies and investigators that are actively pursuing endpoint status for MRD, and we have signed a number of primary endpoint studies in diseases other than myeloma. So feel that, that's, again, very supportive of what was already considerable momentum that was building post ODAC.

And then as it relates to the halo effect you described that ODAC had on HCPs here in the U.S., I think the OUS impact could be similar. I will say that regardless of that, we had already been, as Chad alluded to, starting to think about international expansion and how that might look. There is a significant opportunity outside the U.S., particularly in Europe, that we can consider pursuing. And I believe that CHMP's opinion and the European KOL's alignment with that opinion does support the opportunity outside the U.S. as something that may be worthwhile to prioritize in the [ non-distant ] future.

And then the MIDAS trial was also an important milestone for you that demonstrated utility of clonoSEQ in aiding physician decision to transplant in MM. Could you share some of the feedback from the physicians post data readout and whether you're already seeing some volume influx as a result?

Sure. Feedback in general has been quite positive. This is the first time that a study that looked at this question was prospectively designed, randomized and therefore, I think the results are more compelling than perhaps some earlier studies that answered this question in an indirect way. It's also a very large study and was put forward by a very well-regarded and highly credible group of thought leaders from France. So we've been very eager to bring it into conversation. I think interestingly, in the community setting, it really resonates, particularly in combination with the NCCN guideline update, where we can say it is important to ID your patient at the time of diagnosis so that you can then obtain this post-induction MRD assessment, which may allow you to avoid a transplant for your MRD-negative patient. And in the community, what that means is you may not need to refer that patient away to an academic center for a transplant, which is a very appealing notion if it can be done in a safe way for the patient, which this data supports that it can.

There is some consideration of the fact that this data will continue to develop. MRD response was the primary endpoint in this study, and that's something that is relatively new, but now very common in a lot of study designs. And so some clinicians are interested to continue to see some of the longer-term follow-up on this study. But overall, very, very open, a lot of openness to this, a lot of discussion that it opens up, and the dialog with the patient is, I think, the thing that people are most excited about to have something they can share with the patient who is hesitant about transplant, which is an increasing proportion of patients.

[Operator Instructions] Okay. I am showing no further questions at this time. This does conclude the question-and-answer session. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Good morning, everyone. My name is Matt Sykes, life science tools and diagnostics analyst at Goldman Sachs. And this morning, I have the pleasure of welcoming Chad Robins, Co-Founder and CEO of Adaptive Biotechnologies. Chad, thanks very much for being here. Really appreciate it.

Thanks, Matt, for having us. Appreciate it.

Let's just maybe start with a quick recap of some of the progress you made to start this year. You had a really strong Q1 volume growth, margin expansion growth across the portfolio. Maybe give us some of the highlights and maybe talk a little bit about what you see as the most important piece of the Adaptive story for the balance of the year.

Yes. Yes. I mean, first, I want to kind of reiterate that. I mean, Q1 was probably the best quarter, certainly from an MRD perspective in Adaptive's history, really firing on all cylinders. So just cover that first. Clinical volumes are doing great. As you are well aware, first quarter, we started off the year saying we're going to do 25% plus in volume growth. We increased that number to 30% -- our ASPs are looking really, really strong. We're executing towards that $1,300 average for the year and are confident in that.

We had a great milestone, $4.5 million on the pharma side. Our EMR integrations are going really well. On the cost side, everything is on track. We'll talk about later. I'm sure the NovaSeq X transformation. And all that being said, I mean, things are just looking good already for the second quarter as much as I can say. And then on top of that, you've got this really nice call option for upside in the immune medicine business, which we'll kind of talk about some of the things we're doing. So, I guess, taken together, I couldn't be more pleased with the progress that we're making on all fronts.

Got it. Maybe let's pick off a few of those comments you made because I think those are all really important points. First, just on the EMR integrations. Diagnostic companies talk about them all the time. There's some level of like 10% uplift that everyone kind of references, but you've got a lot coming in the back half of this year. So maybe even though it's still in the early stages, just kind of remind us what you believe the benefit you're going to see there from an uplift either in volumes or maybe depth of relationships? And how much of a tailwind are these integrations could be for the remainder of this year?

Sure. Matt, maybe I'll start with what we've done so far and what we're seeing and then we can do some extrapolation. So far, we've integrated 33 accounts. 6 of our top 10 accounts have been integrated, the largest being MD Anderson, which was integrated in October of last year. We saw kind of 14% quarter-over-quarter growth 2 years in a row -- sorry, 2 quarters in a row for our largest account. In the first quarter of this year, we integrated Stanford, UT Southwestern. We just integrated City of Hope, so very large accounts.

We are expecting that by the end of the year, 50% of our order volume will come through EMR integration. So we're seeing in some of -- as a metrics on some of our smaller accounts that have been integrated for a year, we're seeing kind of a 30% lift. So it's really nice. But I want to caution a little bit smaller versus larger accounts. But overall, EMR integration, we believe, will really continue to drive this volume increase.

Flatiron is coming in the second half of this year. And as you know, or I'll just make sure for the sake of clarity, EMR integrations on Epic really focused on the academic medical center where Flatiron and the OncoEMR system is being pushed out to the community, and that's coming in the second half. So I'll say this, while we haven't exactly attributed volume growth directly to the Flatiron and EMR integrations per se, it's the combination of factors, including EMR integration, which makes us confident that we're going to hit the volume numbers that we put out.

Maybe talk about just a few others of those factors of driving volume growth that will help you get to that 30% growth target this year outside of EMRs.

Yes, sure. One is we -- I just mentioned the community, but community is incredibly important. 60% of patients -- blood cancer patients are treated in the community. We have significant efforts to kind of continue expanding into the community, blood-based testing is incredibly important in terms of increasing the number of frequency of time points per patient.

Data generation, we continue -- that really underpins everything that we do, continue to demonstrate how a clinician can make a decision on a patient using our test. That's another key metric. And then continued EMR integrations also on the Epic side because we mentioned Flatiron, but those are continuing to expand as well. So just efforts really across the board. The other thing is I'm sure we'll get into, but we've got new indications. I mean we have had growth in all of our indications, but it's great to see we launched MCL promotionally with Medicare coverage. And after first quarter launch, we're seeing really nice numbers there. Diffuse large B-cell lymphoma, we had a really nice uptake to the assay, which has taken hold, and we've got a nice uplift in DLBCL. So really, it's this combination of kind of many different factors. And like I said, right now, they're all green.

Got it. Yes. My next question is about the drivers of growth in DLBCL and MCL. We just kind of addressed that. But maybe drilling down on MCL. Sure. Let's talk a little bit about the recent surveillance coverage you've gotten for that indication, what it means, what it could kind of represent the volume growth in that indication. But also, could we start seeing surveillance coverage in other indications? And what is your sort of view on that progress?

Yes. Just to -- I'll go right into that. I just mention for MCL, one of the reasons it was -- has been successful is really had great data on whether or not to transplant. So again, when we talk about clinical use case, generally going to use it if they know how to use it, why to use it and it has true utility. And so that's why we're seeing that in MCL.

And then secondarily, to your point, we're thrilled to see -- to get our first recurrence monitoring coverage. So what that -- and just to lay this out in kind of simple terms, a patient is treated and goes through different MRD assessments to determine the disease burden during treatment. Then when a patient is in remission, that patient is kind of off that episode of care kind of bundling that we get from Medicare. In order to increase or to add to the number of time points a patient can be tested, we got what's called surveillance monitoring. So when a patient is in remission, you can by medical necessity, treat the patient.

Now what we've estimated is that 70% of MCL patients will go into remission and that they will be tested for 2 to 3 years at, call it, 2 time points, 2 to potentially 3 time points a year. So like net-net, I mean, it's -- we came up with about a $15,000 per lifetime value of each MCL patient. Now to temper that a little bit, MCL is one of our smaller indications, represents 5% of the volume. But to go to your bigger question, what does this mean for the business is I think it provides a nice template for us moving forward in other indications.

Now we have not yet submitted yet in other indications. We are generating data in other indications. The first will -- it really is kind of these treatment free. So like there are certain indications like multiple myeloma and ALL essentially monitoring in a treatment-free setting, although it's kind of interesting because we are working towards that, like, for example, in the MASTER study in multiple myeloma, these could very well work in conjunction where you use MRD negativity at subsequent points to determine a patient truly is in remission.

A patient would then -- sorry, a clinician would then take a patient off of therapy, patient would be in remission and then come back. So it's really -- but we will most likely kind of start in kind of the DLBCL and CLL phases before we get to multi myeloma and ALL. But all part of the long-term plan, all part of kind of the continued TAM expansion for heme MRD.

Got it. So on DLBCL and MCL, they're both blood-based indications, and they're helping to kind of drive the shift towards blood that you've seen in Q1 in particular. But your push for blood-based testing kind of spans across the portfolio. Can you maybe talk about the progress you're seeing in that initiative, any potential benefits to testing frequency? And you kind of addressed that a little bit. But just as you kind of move to blood across the portfolio, what kind of benefit should we see there in terms of potential volumes?

Yes. I mean, ultimately, right, a blood-based test is much less invasive. Some -- in some settings, it's the technology and more of the biology calls only for blood-based testing like DLBCL and CLL. In others, we call it more of a complementary test, for example, in multiple myeloma, certainly in the academic medical center and both for multi myeloma and ALL is used as a complementary test to bone marrow in between bone marrow draws. In the community setting, though, this is where it's -- where you don't do bone marrow testing, it's become incredibly important to be able to do a blood-based kind of multi myeloma test.

I will say we had great data, kind of a host of top KOLs in ALL earlier this year published on blood-based testing in ALL over PCR and flow cytometry as the test to do. And that's taken hold. We've used that to promote, and it's gone very, very well. Our increase in blood-based testing for ALL has gone from kind of 23% to 37% -- in multi myeloma, blood-based testing has remained at 21%. But remember, we've grown quite a bit. So on a nominal -- it's a 40% growth in multi myeloma. So on a nominal basis, you're looking at pretty significant blood-based growth. So it really is a focus and a long-term focus of ours to move as much as we can to blood-based testing.

Got it. And just following the increased Medicare rate for clonoSEQ at the beginning of this year, what progress are you making in updating contracts, signing new contracts with commercial payers at that new higher rate? Like how is that progress going?

Honestly, it's going great. We've had some key wins, key payer contracting wins for -- both for recontracting and new contracts. So I'd point to a few, some of the hard ones, like Anthem, some of the Blues, Humana, the key blue states, Humana all have either contracted new contracts or recontracted. We've had a bunch that have recontracted at or close to the Medicare rate. That's something that we protect preciously is to make sure that we're not discounting to make sure we're keeping the value and the price of the types high. So that's been -- it's been really good. And we continue -- it's a huge effort of ours. It's something I'm personally very involved with, with our -- both the government and our commercial payers on a weekly basis.

Okay. You talked a little bit about what drivers are pushing towards that $1,300 ASP target for the year. Just thinking a little bit longer term on ASPs, how high can they get over the longer term as you kind of reduce no-pays? Like what's sort of the ultimate goal do you think in the ceiling for ASPs?

Yes. I mean I'll just put out where we're at right now. Remember, kind of historically, we have said, hey, we can get to an ASP of $1,700. We actually raised that number to $1,800 based on the new gapfill pricing and kind of what we're seeing. So I think right now, we're comfortable with that number. And as I will also reiterate kind of executing towards that -- executing towards that $1,300 for this year on an average.

Got it. And then just moving over to some of the milestones. You talked about the $4.5 million in milestone payments in the first quarter, and you also talked about the funnel building following the ODAC decision. Like how should we think about milestone contribution in coming years? And how does that change as you try to shift towards more fee-for-service-based model?

Yes. I mean, look, milestones are a little bit of a double-edged sword. On the one hand, they're great. It's great cash. It comes at 100% margin. On the flip side, they're hard to predict timing. And so that's kind of hard to model out. So that being said, we've made a concerted effort to see if we -- and by the way, it's not just us. I mean pharma companies don't love them either. They kind of sign these deals and like then we send them an invoice, hey, your $4.5 million, whose budget is that coming from?

So I mean they're game too to renegotiate these contracts. When they come due, I mean, it's not going to happen overnight, but we have been successful in some new contracting and some renegotiation of existing contracts to more of a higher dollar or fee-for-service contract. So you just kind of a higher margin, more predictable revenue stream from that. And was there -- what was the second question? Was there -- did I answer that? Was there...

No, you did the shift towards fee-based. So one of the things that's been topical from a policy standpoint is the recent appointment of Vinay Prasad, Head of CBER. And he's been in the past, outspoken against MRD as a primary endpoint. Do you see any risk of slowdown in adoption due to this change in leadership? And have you had any discussions to educate, awareness, things like that?

Yes. I mean, look, we're always monitoring our business and evaluating the situation. A couple of things to point out. One is -- he is over CBER. So a lot of the other drugs that we are involved with that have primary endpoint milestones aren't going through CBER, are going through other areas. So that's to point out.

The second thing is he came from UCSF. I mean one of our largest growing accounts in clonoSEQ is UCSF. Third, just overwhelming evidence, not just in adoption from the clinical community, the pharma community. Again, I'm not -- of course, it's something that like interesting choice, and we're going to work with him and continue to educate. He's -- by the way, he is a knowledgeable and a fan of MRD. So I want to be a little bit careful. It's just in terms of kind of an endpoint. That being said, look, we'll continue to kind of work with our pharma and also convert some of these over to fee-for-service deals that aren't subject to milestones. So a lot of work going on there.

Got it. And then on the other side of that, have you seen any impact from your pharma customers and their willingness to start up new trials in light of uncertainty surrounding the new administration?

Again, while we are monitoring it, the answer is no. I mean we have not seen a slowdown, but we are being cautious. If you remember, when we raised our guidance in the first quarter, we didn't touch our pharma guidance because -- and we -- because of the potential impact from political environment, et cetera. So I think we're being prudent on it, but the reality is MRD, yes, maybe there's some slight forces against, but there are so many tailwinds that it's -- and the utility of it for pharma companies developing drugs, they get it, and they've been working with us for a long time. So now they're putting us on their new indications, et cetera.

Okay. Maybe moving to the partnership that you struck with NeoGenomics. I believe you're working towards a Phase I launch in the second half of this year. One, how is progress going there? And what benefits could you see from the combined offering, particularly in the community setting? You've already talked about some of the efforts you're doing in the community setting, but this obviously gives you better access to that setting as well. So maybe talk about, one, the progress you're having on launching; and two, what benefits could you see from this?

Yes. So first of all, it's going really well, maybe setting the stage here. They're heavily inundated in the community and -- we're not in 60% of the accounts that they're in. So the leverage that we're going to get being put on kind of the COMPASS and, CHART test is -- we believe we're pretty excited about that. One of the main benefits is the sample collection. So when they're doing a diagnostic workup and they're getting a sample.

For MRD, we have to go do what's called pathology retrieval and go find the sample. In this case, we don't have -- find the sample because we already have -- they already have the sample. That's where we're seeing kind of this huge benefit. I mean, look, we started working together like in earnest 4 months ago. We obviously announced a partnership. We've got the governance in place. We're going -- we both have had experience in kind of lab partnerships. So we want to make sure operationally that all the pipes are connected and everything works and that -- we probably could go faster, but I don't think -- I want to make sure we get this right.

And just to be clear, we will launch in some accounts and kind of pilot kind of third and fourth quarter, but we're really expecting when you see kind of that volume growth, and we'll talk about profiles and everything else, but that will become really in year 2 and year 3 of the partnership and beyond if we extend the partnership. So call it '26, '27 kind of uplift from volume from Neo.

Okay. And just sticking to the community setting, you saw over 40% growth here in Q1. Maybe talk about any commercial initiatives that are driving that strong growth and what you guys are doing to continue the momentum there?

Sure. It really breaks down to kind of 3 key initiatives. The first is national strategic accounts. We are focused on the accounts that matter. If you look at the community there, there's these kind of network accounts that are -- have a large portion of the treating clinicians that are in these accounts. And we've reorganized from a geographic model to a leader of those national accounts so that we're implemented -- implementing kind of these playbooks for these national accounts.

And it's been -- that mentorship and that kind of cross-pollination to say, okay, we're going to basically put the SWAT team to go after these key accounts. That's been incredibly impactful. The second, we have done -- we've focused a lot of our marketing budget and I would say, our intellectual budget, if you will, on peer-to-peer education. So we have peer-to-peer programming where academic KOLs are going in and doing programming to educate the community oncologists. Because remember, it's a little bit different of a treatment paradigm. The community oncologists, that doctor wants to know, okay, what do I do with this? How do I treat the patient? So we've not only educated and doing this program, we also simplified the messaging around that.

And then the third pillar of this, which we've already talked about, but you have to -- when you say, hey, what's the up to the community, it's Flatiron. I mean Flatiron is going live in the second -- we said the second half of this year, more to come on that. But those 3 things, plus we already mentioned Neo, which will come into play next year. So it's really those 4 things. And I mean, I just can't stress the importance of the community and also just getting that workflow into the community is just key.

Got it. Before we move on to Immune Medicine, any questions from the audience? Great. So moving to immune medicine. You have the work with Genentech in the cell therapy space. You're also working to generate preclinical data in your lead autoimmune indication. Maybe give us an update on the progress of both of these projects.

Yes. Just -- we'll start with Genentech. Obviously, the idea is to do kind of personalized cell therapy. In this case, we're moving it to what we're calling a digital TCR strategy where we can -- instead of physically sequencing the tumor and then doing our assay to pair up the T-cell receptors that are responding to the tumor, we've been generating these massive data sets that's going to allow us to do this essentially in vitro, like we're going to be at this in silico model where we can essentially sequence the tumor and know what TCRs are going to bind to that tumor, hand those over to Genentech and have them put those back in.

And it's -- that data is accelerating. It's looking really great. And why are we doing that? We're trying to reduce turnaround time and reduce cost to make a real viable product. So that's been going. It's interesting. This is kind of building on David Baker and like the guy from Google won the Nobel prize for AlphaFold 2. This is kind of really the next big problem in biology as protein-protein interaction of T-cell receptor to antigen binding. And so we're at the forefront of this, generating massive amounts of data. And I think as a side probably has some interesting applications outside of this partnership for another discussion. So that's what's going on with that.

And then secondly, our -- what I'll call our in-house program, our strategy is pretty simple to explain, which is we have been able to identify the autoreactive T cell receptors in certain autoimmune diseases, and they have certain families that we're blocking with an antibody. So we call V-beta families or V-alpha families that are the offending a T cell receptor in certain autoimmune disorders. And so we're developing -- as we mentioned, we've identified our lead asset. We're developing a preclinical package based on that. I think there's interesting optionality of what we do with that program. Again, stay tuned, but this is -- we're super excited about this. And just in general, how we've framed this business is, hey, this is a pretty low-cost call option for a high-value opportunity because we've really figured out how to ring-fence the burn around it, and I think that's resonated.

Got it. And then I'll ask you the unfair question. so you've guided and ring-fenced that cash burn to about $25 million to $30 million per year. How do you balance sort of that lower level of spend versus historical with continuing to advance the programs and move them forward? -- how do you calibrate the right balance of spend to make sure that you're focusing a lot on MRD, but at the same time, you're also realizing potential opportunities here?

Yes. It's a good and fair question. I mean the first thing to recognize, though, is that we actually have some revenue coming in from that business, and it's actually pretty high-margin revenue. So that $25 million to $30 million from Immune Medicine kind of bakes in kind of the revenue from that business, although we obviously don't guide to it, we do report on it. So kind of that's a net number. I will tell you this, we, in no way, shape or form, will won't invest in MRD. Anything we need to invest in MRD, we have the capital to invest in MRD. We have the capital to get to profitability. There's nothing that we're going to do to jeopardize it. And then kind of the second point is we really phase gate our investments.

So it's based on kind of what it is that we're seeing. And if there's something that we see that makes us confident that we can invest more money, we will continue to do so. If not, I think Adaptive and it's taken some time, and we've made, of course, over our lifetime, we haven't all done this perfectly. But I think we've demonstrated an ability to cut programs when we saw that they weren't going to have a positive ROI in a time frame that made sense to our shareholder base. So yes, that's how we think about it.

Got it. That's very helpful. Maybe moving to sort of the financials and path to profitability. You touched a little bit on the transition to NovaSeq X from your NextSeq instruments, and that is expected to be a pretty major driver of margin improvements. I think you've called out 5 to 8 percentage points in the first 12 months. Kind of what gives you, one, the confidence of that margin uplift; and two, a seamless transition as well. It's not easy to be kind of making this transition over.

Yes. So first of all, this has been a multiyear project, and we've had really dedicated leaders from a technical standpoint, from an asset standpoint, from a software standpoint, from an operations standpoint, really kind of this team scrum approach that has very carefully managed step-by-step this process. And what I can say is there's same thing I just mentioned with phase gate with capital. There are phase gates for every step of the way when you look at different metrics to make sure that you're on track. The good news I can say is the data is looking beautiful. We've got concordance data that's looking really good, really good.

And the final step is just kind of finishing off kind of the software pipeline, but we committed to kind of a second half of the year launch. We're on time, on track. We're confident in our ability to deliver it. And yes, I mean, the margin profile, what's going to drive it is volume. And so we can put more samples, a lot more on each flow cell.

I also should say we're still going to be smart about it. We're going to keep some NextSeqs around as backup. We're going to do a phased implementation where we're doing clinical first and then doing pharma. There's a whole bunch of things that we're doing to say, hey, yes, it's a big deal, right? And why are we doing it? Because 10% gross margin improvements at scale. You have 5% to 8% in the first 12 months. And then we do think that number is going to be double digits. I mean, so -- and look, I mean, we talk about kind of the long-term margin profile, that's one of the things that's going to get us there.

Got it. Yes. And I want to touch on that a little bit. Before we get there, maybe from an OpEx perspective, you guys have done a really good job leveraging your existing sales force and driving the growth that you have experienced. Is there any need for expansion in head count or any other commercial investments as you continue to grow? Like how do you feel you are from a commercial side?

Honestly, I feel pretty good. I mean like we've got 65 reps in the field right now, roughly split about 50-50. So 50 focused on academic medical centers that are our key account managers, 50 focused -- there are DHS that is focused on the community. I'm not to say we're going to add here and there, we're going to continue looking at kind of geographic optimization. There may be new selling strategies and things like that.

But if you look at kind of the windshield time and all the metrics we kind of track by account and kind of benchmark against our peers as to kind of what kind of optimal number of accounts per -- in clinicians per rep, we're tracking pretty good. I mean what we have done, we talk about leverage, like Neo is a great example of leverage, right? I mean we're leveraging a couple of hundred [ person ] sales force to be able to get ID sample in the door with limited -- pretty limited financial investment. Over time, once we're in those accounts, partnership, we'll see where it goes. But right now, we're -- we feel pretty good about the profile in the field.

Got it. And then maybe a similar question from an R&D perspective. What areas do you see as attractive to invest in? Do you expect to increase the spend above that $80 million to $90 million range in the coming years? It will scale with sales. I understand that. But just from sort of a percentage of sales basis, how are you thinking about it?

Yes. I mean just to be clear, that $80 million to $90 million spend on R&D is not for -- it's for the holdco. And more of the spend in R&D goes to IM than MRD. However, I do want to point out that like we will continue looking at R&D for assay enhancements for blood-based testing for new indications, things like that. I mean, NovaSeq was -- and things roll off over time. NovaSeq was a big R&D project. Also remember, at Adaptive, we put software in our R&D budget as well.

Yes. So net-net, I mean, we're kind of looking at kind of what -- we have, I believe, several years of really strong top line growth because of all the initiatives that I talked about. But as a team, as a Board, we continue to look at, okay, what's going to continue that growth into the future. How are we going to continue kind of leveraging our position in MRD, leveraging our position in hematology to continue to increase our TAM and our opportunity.

Got it. And as you approach adjusted EBITDA profitability in MRD, how are you thinking about the longer-term margin profile of that business specifically? Let's strip out IM and just talk about margins.

Yes. I mean that's very clear to me. I think we're going to be at 70% plus gross margins. And let's focus on the plus here and 20% plus EBITDA margins. Where that can go to is how much we continue to drive and execute on the business, but I think we can really focus on the plus in that 20%. But -- and I'd like to continue that top line growth that we've been achieving over the last couple of years.

Got it. And then just maybe to finish up, are there any important data readouts or catalysts that we should be looking for? Maybe like as you kind of talk to investors, what are some of the things that we should be looking out for over the balance of this year?

Yes. So first of all, a lot of our major data readouts are at ASH. That being said, we had great data at ASCO. The [ MIDAS-3 ] Study, which is 791 patients showed that you could use MRD interventionally to guide therapy decisions, in particular, the decisions on whether or not to transplant. That's an 800-patient study. For quadruplate therapy, there are 4 studies, CEPHEUS, PERSEUS, ISCO, I forgot the name the other.

Four different studies for dara, isatuximab that basically said that the depth and sensitivity of response is super important to measure using MRD based on a prognostic value. So I mean, there's data next week at EHA, VenetoSTOP. There's going to be another interim readout of that, saying that you can -- for CLL, you can take patients off of venetoclax. So I mean, for us, there's data that's just generating -- it's constant and it comes in. Some are the ones that are really interventional and show true clinical utility and we can just go to the community and say, here's what to do with it. These are the key ones. And that's also why you're seeing some of the growth in some of those indications.

And based on kind of this land and expand strategy, where, okay, you go in with a use case, they do it at that time point. They know the workflow. They understand how to read the report and they're like, wow, why aren't I doing this across the patient care continuum. It's so easy and makes so much sense. All I'm doing is counting cancer cells. And who wouldn't -- why as a doctor or a patient, you wouldn't want to know how many cancer cells are left in your body, both during and after treatment. Of course, you would. So that's how kind of we think about the business in simple terms.

Got it. With that, we are out of time. Chad, thank you so much.

Thanks, Matt.

It is great. Appreciate it.