Adaptive Biotechnologies NASDAQ: ADPT reported second-quarter results marked by accelerating growth in its minimal residual disease, or MRD, business, improved margins and an increased full-year revenue outlook. The company also outlined further steps toward separating its Immune Medicine operation and strengthened its balance sheet through a $340 million convertible note offering.
Total revenue rose 30% year over year to $71.6 million in the second quarter, with MRD contributing 92% of company revenue. MRD revenue increased 33% to $66.2 million. Excluding $5.5 million in milestone revenue recognized during the prior-year quarter, core MRD revenue grew 49%, according to Chief Financial Officer Kyle Piskel.
“Q2 was an exceptional quarter for Adaptive and a clear validation of our strategy and execution,” Chief Executive Officer and Co-founder Chad Robins said. “We delivered excellent operating performance, took decisive strategic actions to unlock shareholder value, and strengthened our balance sheet.”
Clinical Testing Volumes and Pricing Advance
Clinical revenue increased 53% from a year earlier, supported by a 43% increase in testing volume and a 7% increase in average selling price. The company delivered more than 36,100 clonoSEQ tests in the quarter, up 11% sequentially.
U.S. average selling price increased to $1,382 per test, reflecting reimbursement gains and operational improvements from bringing certain revenue-cycle-management functions in house. Management said it remains on track to reach approximately $1,400 per test for the full year, citing contract price increases scheduled to take effect in the second half, expanded coverage in diffuse large B-cell lymphoma and mantle cell lymphoma, and ongoing discussions with two large commercial payers.
Growth was broad across reimbursed indications. Multiple myeloma, Adaptive’s largest indication and accounting for 44% of clinical testing volume, grew 15% sequentially. Robins said the company remains only 17% penetrated in multiple myeloma, leaving what he described as a long runway for further growth.
Blood-based testing continued to drive volume expansion. Blood-based clonoSEQ testing grew 68% year over year and 14% sequentially, reaching 51% of total testing volume for the first time. Blood testing represented 30% of MRD testing in multiple myeloma and 42% in acute lymphoblastic leukemia.
- Community testing represented 36% of clonoSEQ volume, exceeding the company’s full-year target and increasing 65% year over year.
- Nearly 5,200 clinicians ordered clonoSEQ during the quarter, a 40% increase from a year earlier.
- Adaptive said 75% of repeat orders were fulfilled through its Flatiron integration, up from 60% when the company initially measured the metric in the fourth quarter.
- The company completed its first Epic integration during the second quarter with a custom serial-testing interface.
Management said serial testing, EMR-enabled workflows and broader adoption of blood-based testing could provide additional upside beyond current guidance. The company is also discussing expansion of Medicare coverage for testing beyond the current number of tests per episode in multiple myeloma, while working on a recurrence-monitoring indication in chronic lymphocytic leukemia.
Pharma Business Builds Backlog
MRD pharma sequencing revenue rose 38% year over year excluding milestones. Adaptive ended the quarter with 189 active global clinical trials and approximately $245 million in backlog, up 12% from the prior year.
About 60% of active studies now use MRD as a regulated primary or secondary endpoint, compared with roughly 40% several years ago. Management said such studies generally carry higher economic value and could create opportunities for future milestone payments tied to regulatory approvals.
While multiple myeloma remains the largest part of Adaptive’s registrational portfolio, the company said it is also seeing growth in chronic lymphocytic leukemia and acute lymphoblastic leukemia studies. Management noted that pharma revenue can be uneven because it depends on trial enrollment and sample-arrival timing.
Guidance Raised as Margins Improve
Adaptive raised its full-year MRD revenue outlook to a range of $268 million to $278 million, from a previous range of $260 million to $270 million. The revised outlook assumes clinical testing volume growth of 38% to 40%, compared with the company’s prior forecast of 35% growth.
The outlook includes $9 million in MRD milestone revenue, all of which was recognized in the first quarter, and assumes no additional milestone revenue in the second half. At the midpoint, the guidance implies 29% year-over-year MRD revenue growth, or 37% growth excluding milestones.
Sequencing gross margin, excluding MRD milestones, was 72% in the quarter, compared with 64% a year earlier. Piskel attributed the improvement to lower assay costs following the NovaSeq X transition and operating leverage from higher volumes. MRD adjusted EBITDA rose to $9.1 million from $1.9 million in the prior-year quarter.
The company narrowed its full-year operating expense outlook to $350 million to $355 million, from $350 million to $360 million, reflecting lower expected spending in Immune Medicine. Adaptive said it remains on track to achieve positive adjusted EBITDA and positive free cash flow for the entire company by the end of 2026.
GAAP net loss was $39.9 million, including $26.4 million of debt-extinguishment expense and interest expense associated with the settled OrbiMed financing agreement.
Immune Medicine Separation Process Continues
Adaptive said it continues to evaluate strategic and structural alternatives to separate its Immune Medicine business and expects to identify a preferred path by year-end. Morgan Stanley has been retained as an adviser.
As part of the process, Harlan Robins is transitioning from his role as chief scientific officer to a consultant role. He will support MRD research and development initiatives while spending substantial time on the Immune Medicine separation, according to the company.
Adaptive also said it will wind down its research-use-only pharma services business, which management said operated around break-even but was not central to Immune Medicine’s differentiated assets. The remaining focus will be on proprietary T-cell receptor antigen data, artificial intelligence and machine-learning digital models, and autoimmune-disease target discovery.
The company plans to enter a trial agreement with Harrell Data Corp., an independent cloud-based marketplace founded by Harlan Robins, to explore a commercialization model for proprietary datasets and AI models. Adaptive also said its rheumatoid arthritis program with Pfizer remains an important Immune Medicine initiative.
During the quarter, Adaptive completed a $340 million zero-coupon convertible note offering, retired the OrbiMed agreement and ended the period with approximately $357 million in cash. The financing included a capped-call transaction and share repurchase intended to reduce potential shareholder dilution, management said.
About Adaptive Biotechnologies (NASDAQ:ADPT)
Adaptive Biotechnologies is a clinical-stage biotechnology company that focuses on harnessing the adaptive immune system to transform the diagnosis and treatment of disease. Through proprietary immune receptor sequencing and analysis, the company decodes the genetic information of T-cell and B-cell receptors to identify signatures of immune response. Its core technology platform provides insights into immune-driven conditions, enabling more precise monitoring and targeted therapeutic development.
The company's flagship product, immunoSEQ, offers high-throughput immune repertoire profiling for researchers and pharmaceutical partners.
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