Adaptive Biotechnologies(ADPT) - 2024 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's unaudited financial statements, management's discussion, and disclosures on market risk and internal controls Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for the quarter ended March 31, 2024, reporting total revenue of $41,873 thousand, a net loss of $47,507 thousand, and $308,900 thousand in cash, cash equivalents, and marketable securities Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific points in time Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $71,233 | $65,064 | | Short-term marketable securities | $237,639 | $281,337 | | Total current assets | $374,034 | $410,188 | | Total assets | $620,323 | $661,134 | | Total current liabilities | $82,952 | $88,015 | | Total liabilities | $345,557 | $352,856 | | Total shareholders' equity | $274,766 | $308,278 | Condensed Consolidated Statements of Operations This section outlines the company's financial performance over a period, detailing revenues, expenses, and net loss Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Revenue | $41,873 | $37,647 | | Total operating expenses | $90,635 | $94,840 | | Loss from operations | $(48,762) | $(57,193) | | Net loss attributable to Adaptive | $(47,507) | $(57,699) | | Net loss per share, basic and diluted | $(0.33) | $(0.40) | Condensed Consolidated Statements of Cash Flows This section summarizes the cash inflows and outflows from operating, investing, and financing activities over a period Summary of Cash Flows (in thousands) | Activity | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(38,353) | $(59,152) | | Net cash provided by investing activities | $44,509 | $62,979 | | Net cash provided by financing activities | $44 | $672 | | Net increase in cash, cash equivalents and restricted cash | $6,200 | $4,499 | Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed disclosures supporting the financial statements, covering significant accounting policies, revenue recognition, segment information, collaborations, and other financial details - In 2024, the company realigned its business into two operating and reportable segments: Minimal Residual Disease (MRD) and Immune Medicine[23][84] - The collaboration with Genentech, aimed at developing cellular therapies in oncology, is a significant component of Immune Medicine revenue, recognized over an estimated nine-year period using a proportional performance model based on costs incurred[35][38] - The company has a revenue interest purchase agreement with OrbiMed, accounted for as debt, with an effective interest rate of 9.2% as of March 31, 2024[52][54] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the Q1 2024 financial results, highlighting an 11% year-over-year revenue increase to $41,873 thousand, driven by a 52% increase in MRD revenue, partially offset by a 43% decline in Immune Medicine revenue, and confirms $308,900 thousand in liquidity is sufficient for the next 12 months Results of Operations This section analyzes the company's revenue and expense trends, highlighting key drivers of financial performance Revenue by Business Area (in thousands) | Revenue Category | Q1 2024 | Q1 2023 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total MRD revenue | $32,626 | $21,427 | $11,199 | 52% | | Service revenue | $28,126 | $21,427 | $6,699 | 31% | | Regulatory milestone revenue | $4,500 | $— | $4,500 | N/A | | Total Immune Medicine revenue | $9,247 | $16,220 | $(6,973) | (43%) | | Service revenue | $4,559 | $7,102 | $(2,543) | (36%) | | Collaboration revenue | $4,688 | $9,118 | $(4,430) | (49%) | | Total revenue | $41,873 | $37,647 | $4,226 | 11% | - The increase in MRD revenue was driven by a 41% increase in clonoSEQ test volume (from 12,079 to 17,040 tests) and the recognition of a $4,500 thousand regulatory milestone payment from a biopharmaceutical customer[107] - The decrease in Immune Medicine revenue was primarily due to a $4,400 thousand decrease in revenue from the Genentech Agreement resulting from lower collaboration expenses[107] - Research and development expenses decreased by $2,400 thousand (7%) year-over-year, mainly due to reduced costs for collaboration studies and decreased investment in drug discovery efforts, including the Genentech collaboration and TCR-Antigen Map development[113] Liquidity and Capital Resources This section discusses the company's cash position, funding sources, and ability to meet short-term and long-term obligations - As of March 31, 2024, the company had $308,900 thousand in cash, cash equivalents, and marketable securities[123] - Management believes that existing cash, cash equivalents, and marketable securities will be sufficient to fund operating expenses and capital expenditure requirements for at least the next 12 months[123] - The company is entitled to receive up to an additional $125,000 thousand in subsequent installments under its Purchase Agreement with OrbiMed, subject to certain funding conditions[123] Cash Flows This section provides a detailed breakdown of cash movements across operating, investing, and financing activities - Net cash used in operating activities decreased to $38,400 thousand in Q1 2024 from $59,200 thousand in Q1 2023, primarily due to a lower net loss and a smaller net use of cash from changes in operating assets and liabilities[127] - Net cash provided by investing activities was $44,500 thousand, resulting from $99,500 thousand in proceeds from maturities of marketable securities, partially offset by $53,500 thousand in purchases of new securities[128] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk exposure relates to changes in interest rates affecting its cash, cash equivalents, and marketable securities, with no material changes to this risk profile since the end of 2023 - The company is exposed to market risk from changes in interest rates, primarily related to its cash and investment portfolio, and does not use derivative financial instruments to manage this risk[135] Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2024, with no material changes to internal controls over financial reporting during the quarter - Based on an evaluation as of the end of the period, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[136] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, and other miscellaneous disclosures pertinent to the company's operations Item 1. Legal Proceedings The company reports that it is not currently a party to any legal proceedings that it believes would have a material adverse effect on its business, financial condition, or results of operations - As of the reporting date, the company was not party to any material legal proceedings[137] Item 1A. Risk Factors This section states that there have been no material changes to the risk factors disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2023 - There have been no material changes to the risk factors described in the company's 2023 Form 10-K[138] Other Items (Items 2, 3, 4, 5) Items 2 (Unregistered Sales of Equity Securities and Use of Proceeds), 3 (Defaults Upon Senior Securities), 4 (Mine Safety Disclosures), and 5 (Other Information) are all reported as 'Not applicable' for this reporting period - Items 2, 3, 4, and 5 of Part II are not applicable for the quarter ended March 31, 2024[139] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications by the Principal Executive Officer and Principal Financial Officer as required by the Sarbanes-Oxley Act of 2002, and interactive data files - The report includes required certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[142][143][144][145]