Q2 2022 Adaptive Biotechnologies Corp Earnings Call
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Good day, and thank you for standing by welcome.
Welcome to the adaptive Biotechnologies second quarter 2022 earnings conference call.
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Now I'd like to hand, the conference over to your speaker today Karina Khalsa deal.
<unk> of Investor Relations.
Please go ahead. Thank you Danielle Thank you Danielle and good afternoon, everyone I would like to welcome you to adaptive Biotechnologies second quarter 2022 earnings conference call.
Today, we issued a press release reporting adopted financial results for the second quarter of 2020 to the press release is available at Www Dot adopted biotech dot com.
Conducting the live webcast of this call I will be referencing slide presentation that has been posted to the investor section in our corporate website.
During the call management will make projections and other forward looking statements within the meaning of federal Securities law 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 todays forward looking statements depending on a number of factors, which are set forth in our public filings with the SEC and listed in his presentation.
Joining the call today are Chad Robbins, our CEO and co founder I'm, Tycho Peterson, our Chief Financial Officer.
In addition, Harlan Robins adaptive she Pontific officer uncle Ponder Nathan food at all.
In medicine.
In Charlotte.
In medicine that will.
It will be available for Q&A.
With that I'll turn the call to Scott.
Thanks, Karina good afternoon, everybody and thank you for joining us on our second quarter 2022 earnings call.
First a big thank you to all our adaptive employees for their continuous dedication and hard work in delivering another strong quarter.
We're halfway through the year, we're on track to achieve our 2022 goals in both our MLD and immune medicine businesses.
As outlined on slide three this quarter, we executed towards important milestones and deliver key results.
Revenue for the second quarter was $43 $7 million, representing strong growth of 13% versus prior year.
Our <unk> business comprised of Kronos seek critical testing and our pharma partnerships delivered strong performance.
Clinical volumes grew 53% versus prior year.
We secured a positive coverage decision from Medicare and diffuse large b cell lymphoma the.
The most common type of non Hodgkin's lymphoma.
<unk> is the first and only test to receive Medicare coverage for <unk>.
And our MLD pharma partnerships continue to grow.
This quarter, we entered into yet another pan portfolio agreement with a major pharma company.
Our immune medicine business comprised of pharma services drug discovery and clinical testing opportunities continues to grow as we diversify into multiple applications of our immune receptor data.
We experienced significant growth at 123% from.
From Farmer Pharma research partners are genetic partnership is on track with both our shared and private cell therapy programs.
We have made a business decision with respect to the commercialization of key detect rash.
Rather than launch diagnostic test disease by disease, we are deferring commercial commercialization until we had multiple signals with strong enough data to change physician behavior with a clear path to reimbursement.
The science is working in multiple diseases, and we are confident in our long term vision for <unk> as a single blood test for multiple indications.
However, as we look ahead, we are now focused on pharma partnering in drug discovery, while we generate strong clinical utility data around our key detect multi test panels.
Related to our corporate activities, we continued to manage expenses prudently, while exploring non dilutive financing opportunities that could extend our cash runway.
Moving on to the <unk> business on slide four.
As shown in the graph our currency critical testing growth is strong and accelerating quarter over quarter.
This quarter cash delivered grew 17% sequentially to nearly 9000 tests with double digit growth observed in all three marketed indications.
Multi myeloma and CLO.
All metrics are pointing in the right direction ordering hcp's or health care providers, and ordering accounts experienced significant growth of 53% and 44% versus prior year respectively.
<unk> patients tested grew 56%.
Slide five shows our strategies to solidify our leadership in MLD testing for patients with lymphoid malignancies.
First.
The team is focused on further penetrating existing institutional accounts and increasingly activation of new community accounts with our expanded field force, which is now fully trained and deployed.
72% of the volume growth this quarter came from established institutional accounts underscoring the potential to expand usage within existing accounts.
We also grew the number of newly activated community accounts by 20%, which is a positive indicator of our sales team expansion.
Another key driver of growth as blood based testing, which has the potential to both increased penetration of <unk> among among clinicians.
<unk> and increase the number of tests run per patient.
About 30% of all currency <unk> tests are performed using blood and importantly, multiple myeloma in blood increased 33% versus prior quarter.
We plan to expand into D. L. Bcl following our positive Medicare coverage decision. The policy is effective immediately and extend to all <unk> bcl patients, 75% of which are Medicare aged.
Cartilage of line of therapy treatment regimen or testing time point.
We continue to build our <unk> evidence base to support guideline inclusion.
Based on these efforts, we expect <unk> to contribute to closely growth in 2023 and beyond.
Data continues to emerge strengthening clinical utility and the value of <unk> testing for patients.
Slide six highlights data presented at <unk> from the phase III determination trial for newly diagnosed multiple myeloma patients.
This study was designed to assess the benefit of adding transplant to frontline triple therapy, followed by maintenance therapy until progression.
And important results from the study showed that patients who achieved <unk> negativity by colonial seek prior to maintenance had similar outcomes independent of transplant.
And the authors state that the elimination of MLD is of increasing importance in tailoring treatment and informing clinical care and as a treatment goal given its prognostic value for better outcomes.
Let's shift to our MLD final portfolio on slide seven.
Our currency Gasser is being used in 168 active trials, representing about 21% penetration among active heme pharma trials.
And multi myeloma, we are the gold standard almost almost 50% penetration our goal is to replicate our multi myeloma success in NHL in CLO.
This quarter, we signed a new Pan portfolio agreement with a major pharma partner, increasing our eligible milestones to over $355 million from ongoing and future studies.
Now turning to our immune medicine business on slide eight.
We have proven our ability to map T shirt receptors to antigens at scale and can leverage this data for multiple diagnostic and therapeutic opportunities.
To drive growth for our immune medicine business in the near to mid term, we will focus on pharma partnerships and drug discovery collaborations.
Clinical testing with T detected TD <unk> is expected to be a meaningful contributor to revenue in the long term once we establish T cell signatures in multiple indications that can be offered as a reimbursed differentiated diagnostic panel to patients with shared symptomatology.
On slide nine we provide an overview of our growing immune medicine business opportunities in pharma and drug discovery.
From a base level T cell and B cell receptor sequencing to inform research and development continues to expand and immuno seek as the gold standard.
Layering on our ability to map disease specific TCR is to antigens unlocks a valuable product offering called T. Map that is used to support our pharma partners and measuring the T cell response to various drugs, including vaccines.
We are partnering on Covid and RSV vaccine programs and expect to drive additional revenue revenue in infectious disease autoimmune city and oncology.
Moving up the R&D value chain immune response data can be also used as a regulated clinical endpoint with diagnostic applications.
In drug discovery, we further characterize antigen specific TCR for target <unk> drug discovery.
This is the basis of our partnership with Genentech, we are increasing our progress on additional high value drug discovery opportunities.
Turning to our key detect clinical testing strategy on slide 10.
We proved and validated our <unk> clinical testing capability in infectious diseases, specifically to detect COVID-19 achieved EUA and was key to educate the FDA about a new class of T cell based testing. We also made to detect lyme available in our CLIA lab, which enabled us to implement end to end and clear.
Workflows and to continuously improve the algorithm.
As mentioned previously our experienced showed us that the cost to commercialize and improved signals through self pay customers disease by disease is high. Therefore, we have decided not to launch <unk> test for <unk>.
<unk> has a clear path to reimbursement.
We believe we can improve this signals to drive clinical evidence for coverage and commercial uptake by focusing on internal R&D and pharma partnering.
This will allow us to drive near term revenue and generate more signals that support the vision of <unk>.
We are confident that this disciplined approach will enable us to achieve commercial success with <unk> as a differentiated high value clinical test.
We are excited about the multiple business opportunities that we discussed today and look forward to providing additional updates on our progress.
I'll now pass it over to Tyco for a financial update.
Turning to our financial results starting with revenue on Slide 11 total revenue in the second quarter was $43 7 million, representing a 13% increase from $38 5 million in the same period last year with 51% from immune medicine and 49% from MLD.
<unk> revenue, which is comprised of policy clinical testing plus revenues from our emerging pharma and research partnerships was $21 3 million, an increase of 38% from a year ago.
Policy clinical testing and emerging partnerships drove approximately 65% and 35% of the growth respectively.
Within our MLD pharma business, we recognized a $1 million regulatory milestone, while we continue to see milestones from our MLD partnerships materializing in accelerating over time these can vary quarter to quarter.
<unk> test volumes, which include tech transfer increased by 53% to 8998 tests delivered from 5897 in the same period last year.
We expect similar or higher volume growth trends to continue for the remainder of the year.
Immune medicine revenue was $22 4 million down 3% from a year ago the.
The change was driven by a $3 $7 million increase from pharma and academic customers using immuno seek and T map products as well as the $1 million decrease in revenue from <unk> and a $3 $4 million decrease from Genentech amortization, which as we have noted in the past varies from quarter to quarter.
Shifting to our operating costs on slide 12.
Total operating expenses were $96 2 million or 9% increase from $88 $3 million last year, and a 6% decrease from 102 million last quarter.
Cost of revenue was $13 2 million compared to $10 8 million last year, representing a 23% increase driven mainly by mix to higher cost assets.
R&D expenses were $37 million compared to 30, 789, a year ago, representing a 2% decrease which is partially attributable to reduced collaboration and medical advisory costs.
Sales and marketing expenses were $24 3 million compared to $23 2 million a year ago, representing an increase of 5% due largely to higher <unk> and increased personnel costs from the salesforce expansion, partially offset by a decrease in marketing expenses.
G&A expenses were $21 2 million compared to $16 1 million a year ago, representing an increase of 32%.
This was primarily driven by the expansion of our facility footprint with the opening of our new headquarters in the back half of 2021, as well as higher depreciation expenses and increased personnel costs.
Net loss for the second quarter of 2022 was $52 1 million compared to $49 3 million last year.
Now turning to full year guidance, we are reiterating our full year revenue range of $185 million to $195 million.
Both our <unk> and immune medicine businesses have great momentum and we expect them to still contribute to our full year revenues approximately 50 50 at the midpoint of the range.
For operating expenses, we now expect full year, our full year target to be between $410 million to $415 million as compared to our previous expectation of $425 million to $435 million.
This reflects our continuous efforts in managing investments and improving operating efficiencies beyond the restructuring activities that we announced at the beginning of the year.
Some of the operating efficiencies. We are exploring include real estate consolidation sequencing and workflow cost reductions and software optimization.
Importantly, we're being thoughtful about our cash and we expect to deploy capital off our balance sheet to support operations and we expect our quarterly burn rate to be approximately $55 million in the back half of the year.
Our capital position is strong we ended the quarter with about $450 million in cash and equivalents, which provides us around two years of runway.
As Chad mentioned given current market conditions, we are exploring non dilutive financing alternatives to extend our cash runway. While also working extensively on our long range plan and I look forward to providing you with further details on our path to profitability in the back half of the year.
I'll hand, it back over to Chad.
Thanks Tycho.
As outlined today, we are sharpening our focus and remain disciplined with our investments as we fine tune our path to profitability.
Both our immune medicine, and our <unk> businesses have great momentum and are on track to achieve achieved their respective catalysts listed on slide 13.
We're looking to a great second half of the year.
I'd like to turn it back over to the operator and open it up for questions.
As a reminder to ask a question you will need to press star one one on your telephone.
Please standby, while we compile the Q&A roster.
Our first question comes from.
Brian Weinstein with William Blair.
Please proceed with your question.
Hey, Thanks for taking the question at least I don't have to fight with Tyco. This year, it's going to get the first question any mortgage so.
Thats a positive.
Just a question for you on.
The sharpening of focus here with immune medicine understand prioritizing pharma partnering chug discovery opportunities.
So can you just talk about what led to doing this now what what really changed was it a cost thing was it.
Time that it was taking for R&D was at recognizing the commercial path was going to be a little bit more challenging can you just talk about why now and then can you also help us further understand the growth.
Growth profile of immune medicine absent to TD Tech portion.
Is it sort of my first question. Thanks.
Yes.
Yes. Thanks for the question, Brian just I, just want to kind of put out there that we remain committed to the vision of <unk> as a single blood test with multiple answers.
However, we realize that our near term path to commercializing disease by diseases.
It's challenging and cause costly and at the same time, we have this incredibly rich immune receptor data that will drive growth in our immune medicine business.
We kind of continue to strengthen the signals and as a matter of fact, we're able to in many of these pharma deals we're able to leverage that data to essentially get paid and increased our signals at the same time. So if you look at kind of the capital efficiency of being able to do that just as we're as we're developing our long range plan.
It just it really came into lightened and to sharpen our focus to say this is a much better path as we look towards profitability and if you take a look at it I mean big picture of pharma is actually the fastest growing segment of our immune medicine business has grown over 100%. So far this year and we expect it to continue to grow.
At very healthy rates, so while we're deferring the commercial commercialization of <unk>, we're going to continue to monetize what I'll call our higher margin profile opportunities from our pharma partners using kind of is really rich and unique immune receptor dataset.
I take it as a it's a much more efficient way to generate strong signals and essentially what we're doing is kind of replacing the revenue.
A higher higher margin profile in the near term.
Got it and you guys talked about having a number of high value drug discovery opportunities that you were working at I mean is there a way to kind of give us an idea about.
When we may hear about some of these newer opportunities are these things that you would be press releasing or these smaller types of deals that are kind of going on behind the scenes.
What does that kind of pipeline of opportunities to kind of co average this look like outside of what you've already disclosed.
Yes, Brian I think it'll be a combination of.
As it's warranted, we'll be we'll press release deals and quarter to quarter to quarter again as as appropriate we'll be in a fib filling in where we're our pharma partners allow.
Now for us for disclosure, we'll be talking more and more about the multiple opportunities that really if you look at that pipeline slide it's really across the spectra.
From everything from <unk>.
On the early research side, all the way up through kind of the target discovery drug discovery.
On the higher end side.
Okay, and then last one from me I wanted to confirm what I thought you said, we'll get some idea about profitability timeframes.
And maybe even some thoughts on some of these non dilutive options that you guys had over the last couple of quarters, what we should expect to hear something from you on that here in the back half of the year nothing to comment on.
Matt at this point.
Yes, so on profitability, it's incredibly important we're in the midst of our kind of three to five year long range plan planning kind of updating that and so we will communicate more around the past profitability in the back half of the year likely on the third quarter call.
Is how we're thinking about that and then on the financing front, yes, we publicly said and Chad reiterated today, we're looking at non dilutive financing opportunities to extend our cash runway starting from a position of strength, we've got over $450 million to begin with so two years of cash on hand, but we're looking to shore that up and we'll have more to talk about that when we can communicate.
So hopefully sooner rather than later, but I'm not going to put a timeline on that.
Got it okay. Thanks.
Thanks Ross.
Thank you.
One moment for our next question.
Our next question comes from Julia Chin with Jpmorgan. Your line is now open.
Hi, good afternoon, thanks for taking our question.
On the Colo business.
It's great to see that coverage.
PCL on.
We know it's a big market like you talked about how quickly do you think you can drive that penetration.
I think the uptake will mirror your historical experiences with the <unk> indications or do you think we could potentially see faster uptake may be benefiting from the extended shelf life.
Help us think through I think near term revenue ramp and how that may change.
Trajectory.
Sure Julio net net and you want to take a crack at that.
Yes, thanks for that question.
Yes look we're really excited about the <unk> coverage.
Most common subtype of non Hodgkin's lymphoma, and as you incurred Chad say, where the first and only MRI.
<unk> test.
<unk> receive Medicare coverage.
I view that as a clear validation that we continue to extend our leadership position in the party testing.
For lymphoid cancers in terms of <unk> contributed to growth. We expect this to happen in the second half of 2023.
We'll have to do the standard things that we do with all other disease types. We have to go out and educate the physicians will change physician behavior, we have to get into guidelines and.
I am very bullish that we will be able to do that and annualize the therapy landscape for four <unk> has significantly advanced in recent years and is a pretty large unmet need for monitoring disease progression and guiding.
Patient care similar to what we've seen happen in multiple myeloma recently.
And we have good data.
For example, recently we publish that.
Hey, Marty assessment, using <unk> post car T treatment can be more informative than X CD and identifying patients who are at high risk of relapse.
So overall I.
Expect the MRM business to continue to grow at or above.
The annual growth rate, we're going to see this year, but off of a higher base in the outer years, we'll continue this growth trajectory, but off a higher base and so in some ways we're adding.
Incremental tests every year going forward.
Great. That's helpful. And then one for Tycho on the non diluted financing I understand youre planning to save my detailed thus far when you're ready to talk about it on a very high level. I was wondering if you can give an update on the kind of.
Neotype for deal structure with you're currently exploring.
What kind of conversations are having right now and are they going to be closely tied to your increased focus on the heat map business with biopharma.
Yes. It is.
Fair question, so non dilutive, meaning equity is kind of off the table here and I'd say from a kind of high level were generally reluctant to issue debt just given the nature of kind of balloon payments. So we are exploring a potential royalty type deal.
Don't want to give much more detail than that but this is a well established model in the therapeutic world with companies that do these kind of type of royalty transactions. So those are the discussions we're having now.
And in process, So again no no firm updates.
Not specifically tied to the team at program I mean, these types of things will generally be done on kind of a basket of revenues total revenues overall.
Got you that's helpful and then a follow up on the long range plan I know you are currently working on it.
Getting into the specifics.
Can you maybe talk about whether there are any.
New components. This plan or new approaches you are thinking about I know visibility of Biopharma milestones is something you're working on maybe give us some color on how you approach it.
Yeah look I mean, we're.
The initial cut is kind of built build revenue, Matt and then and then kind of think about kind of the opex thats going to be required to get us there.
<unk>.
I don't envision it involves any kind of significant change in trajectory overall I mean, I think it's a lot of kind of continuation of stuff. That's in progress obviously continuing to build out the pharma portfolio.
For <unk>, while continuing to kind of penetrate the MRV market that further.
I don't know Sharon is there anything you want to add from kind of a pharma immune side that you would highlight number one range you highlighted exactly.
And of course, we have.
We take into account prior book.
Deals and studies and obviously continue our business development efforts as John indicated in the different researches as a regulated uses in the future target discovery and therapeutics that add up to the revenue component as we project three or five years out.
Okay.
Okay. That's helpful. Thank you.
Thank you.
Our next question comes from.
Eric <unk> with Bank of America. Your line is now open.
Hey, good afternoon. Thanks for taking my question. So I appreciate the fact that.
Yes.
Key detect landscape.
A little bit more complex, but can you give us some sense of timing on <unk>.
When you sort of think first products could start having some commercial benefit.
Had modeled some wine and some Gi and some stuff into our models.
Not a lot, but I mean.
Just need to know how much of that comes out and then also how should we think about that kind of it.
Is that also going to disappear next year.
Yes.
Eric why don't I take the first one first which is to take COVID-19.
We are going to keep to detect COVID-19 up.
We think it's.
It's important.
As a.
This is the first and only T cell tests authorized by the EUA and for cellular immunity. We continue to work closely with pharma partners on a correlate of protection study, which we think has the potential to to really impact the can a paradigm here.
But there was.
There wasn't a significant amount of revenue.
In the model we've talked about it.
As being a very small contributor from a from a financial standpoint that being said of the <unk>.
That data along with other data.
Sources of supporting our T map covered product, which we're partnering on pharma, which is a larger contributor to the revenue source. So heated that COVID-19 will be left up we have made the decision.
Two to take down the line offering and we made it available Ricardo what we set out to do we made it available on our CLIA lab, which enabled us to put in kind of all the building blocks and infrastructure software.
How we validate in our CLIA lab and to have a kind of a self improving diagnostic with the algorithm, which we checked all those boxes for future launches, but and again I think there should have been kind of as we guided to feel very very little kind of revenue.
Associated with that that being said.
Derek we are continuing to work on our Ptos D, which as opposed to even remind disease syndrome or chronic lyme because as part of a panel of shared symptomatology.
Chronic lyme could be confused with many other neurological disorders, including MFS, even even kind of long haul COVID-19.
So that work is that work is ongoing from an R&D perspective, and if the data is positive. The other thing we can do which is really goes for every single one of these singles that were generating is we're going to leverage that data kind of with pharma pharma with our pharma partners.
And there is and Theres kind of medicine, there is different programs going on kind of across the spectrum from kind of Gi to Lyme et cetera, where we can leverage our immune receptor data to potentially bring in near term revenue.
Okay.
And then just circling back, though but then when.
One would be a good time to start thinking about when complete attacked.
It starts to contribute to the top line right, that's sort of the revamp of the reset here.
Yes.
We're probably a couple years out Derek and we'll get back more on when we kind of rollout.
The three to five year long range plan.
In the November earnings.
But we will have a will have kind of a a more detailed view, but we are going to let the science to the talking here and kind of leverage that data near term and it's a revamp, but it's really a replacement strategy I mean in some assets, where we're kind of replacing those revenues.
Kind of a higher margin profile with kind of near term near term farmers choose a different strategy for kind of the R&D development. Okay, That's where I was going to I think do you sort of fee.
Are they enough to offset what you sort of have planned in the models for like these higher revenue wise or something that could drive.
Could actually be potentially higher.
In the near term.
Yes, I'm going to let I'm going to let Tycho agreeing to work with you on the models Derek but I think where we are we're certainly encouraged by what we're seeing in terms of kind of replacing kind of those revenues with.
Higher margin profile quality of revenue that is essentially what I'll consider at least paid for R&D are somewhat going to burn offset R&D from from our partnerships.
Pharma to develop those products and get to a panel approach that has multiple multiple indications for earlier detection at the same time.
Great. Thank you.
Sure.
Thank you.
And our next question comes from.
David Westenburg with Piper Sandler Your line is now open.
Hey, guys. Thanks.
Thanks for taking the question and congrats on the on some of the great Krona seek staff. So I'll stick with that because I think that was the biggest sequential increase and an AD that we've seen can you give a little bit more color on what exactly might have happened that you. Finally, how does this inflection this quarter on quarter inflection.
And I have a couple more on quality can I'll stop there.
You answered that.
Sure.
Sure Nick do you want to take that.
Yes, I'll take that.
There's multiple factors first our sales.
Sales team is fully trained and deployed out there and I think as.
We've talked about.
Where our strategy there was to increase penetration.
In our existing accounts and then also sign up new accounts in the community setting as well as drive penetration and blood.
So we're seeing all of those factors contribute in our existing institutional accounts. They are Australia driving growth, we saw sort of a 72% growth coming from institutional accounts, where we're also increasing our.
Contribution from our community accounts.
New accounts, we're signing up are many of them or most of them are in the community setting that's driving growth and then we continue to see increasing amounts of evidence com.
Come out we talked.
The determination trial I think one of the big <unk>.
Decision points for a physician treating multiple myeloma as to why they should do strengths stem cell transplant or not.
The deterioration trial really helped highlight the fact that.
It's an important decision and <unk> can be used to make that decision.
And I think there's general awareness.
The physician.
Community that the Golar lymphoid cancer treatment should be MRV negativity.
So we see that also contributing to growth. So I Wouldnt say theres. One one thing that's contributing growth there's a lot of things coming into play that is currently contributing growth.
We expect this robust growth to continue.
In the subsequent years as well.
Got it got it well I'll ask is I guess, a little more offline because it does seem like 8%, 8%, 12%, 17%. It just seems like there was a big inflection here.
So anyway.
Okay.
And then just a couple of questions.
On NHL can you remind us why why NHL is a little bit more PCL in that <unk> <unk>.
Rather than the whole noncancelable lymphoma, Im sorry, Im not an oncology neuroscience I just kind of remind me on that and then also can you.
We're talking about this as a 2023 contributor.
Yes.
These are the same oncologists that are ordering blood cancer tests, and we find plenty of our checks with oncologists finding the ones that are ordering even like T cell lymphomas, and yet youre not indicated for that so so why why is this a 2023 inflection point.
And I'll stop there after there yes.
Yes, so first of all.
Answering your first question.
DLP within non Hodgkin's lymphoma, there are multiple subtypes, which each subtype has a slightly different treatment paradigm and as a result of different evidenced.
<unk> acquired.
Theres follicular lymphoma, either as mantle cell lymphoma.
The <unk> is about 35% of non Hodgkin lymphoma. So we went after <unk>.
But we will.
Continuing to tackle the rest of non Hodgkin's lymphoma subtypes.
And.
We're feeling confident that we'll be able to get Medicare reimbursement for those.
So we wanted to do it step at a time because the evidence Cedric why fleets subtype is different.
And then talking about <unk>.
<unk> contributed to growth first of all.
Our current <unk> test.
Except plasma and in order to for it to be widely used we needed to accept whole blood in strict tubes. So that we've previously talked about that we're doing that work we launched the <unk> cube assay for <unk> later in this year.
And then we have to go through the whole education process of convincing physicians getting into guidelines and as a result, it's going to really kick in in the second half of 2023, even though its the same physician set.
We still need to do the education process and.
And the use of a blood test in MRV in non Hodgkin's lymphoma.
Is an established so we'll do all the work we have the evidence we have the studies, we have expanded sales team and the capability now to do that.
That's going to take time, and that's why we think.
The real growth is going to kick in in the second half of 'twenty Gregory.
Perfect. Thank you for the color.
Welcome back and congrats on the new post Dave.
Okay.
Okay.
Thank you our next question comes from.
Yeah.
Okay.
Dan Brennan with Cowen <unk> Company. Your line is now open.
Thanks, Thanks for taking the questions Tycho Congrats on first call here.
Maybe I'll start with you.
So on the balance sheet I guess, the burn guy that youre targeting in the back half of the year to $55 million. That's basically in line with the prior guide I believe but you have lower opex. So maybe just kind of help me think through that a little bit and if we were to plug in the forecast that you guys are giving where should we be landing at year end for cash is I think around $200 million is that the right Zip code.
Yes, so yes, we are guiding to $55 million burn quarterly Brian in the back half of the year as I mentioned, we took opex down to 410 to $4 15, so that kind of reflects the restructuring and some of the other efforts that I kind of highlighted around workflow and things like that.
From a cash position, yes, I don't think thats too far off in terms of where we'll be at year end what was the other part of it.
I'll now address.
I guess I guess, maybe some of the Opex cuts are noncash because I know that I think the prior burn guidance was 50 to 60 in the back half.
And for the Opex is coming down and I just wanted to ask the burn the burn reduction could coming out more and Thats all.
Look we're trying to get more efficient everyday right. We've got other efforts underway.
To bring down the opex, so that's ethanol going effort.
And part of our long range planning to right as we think about the three to five year plan, where we're generally trying to hold opex, if not bringing down annually.
Got it and then maybe on <unk> just a few questions asked already.
Can you just speak to what the access looks like today.
That changed much.
I know different diagnostic companies have discussed access really being stock.
But obviously you are in a more acute space with cancer. So maybe that's kind of continuing to improve so whereas access and I know it was touched upon earlier, maybe to daves question, but yes.
Are we at like where where are we at in terms of productivity of the expanded sales force.
Halfway there fully there was there is there a lot more to go.
Kind of in the field more.
Yes, just on the cash question earlier.
$3 50 at the end of the year I think you had 650, but announced recently.
Got it.
Alright.
<unk>.
Yes, so I think unfortunately, the access hasnt changed much in the last few months.
Yes, I think.
It seems to be.
A new normal, but but on the other hand, we are able to.
No.
Yes.
The physician.
Through other channels.
And.
So we expect that to.
<unk> not changed much.
Careers and.
In the second half of the year as well.
<unk>.
I'm sorry, what was your second question.
Or was this on the expanded commercial team just trying to get a sense of.
Kind of the rate of productivity enhancements, how far along the way with that team in place now.
Yes, so I think there's a long way to go in terms of increasing the productivity I think.
Yes. This is.
Yes, the first quarter, where the sales team is trained and deployed it still takes six to eight months for <unk>.
The individuals and neutral increase the developing territories to really understand what's going on in each of their territories and so I expect.
Our sales.
Productivity to increase continuously going forward, we're quite a way away from I would say at least 12 to 18 months away from increasing productivity side I don't expect.
US to increase our sales footprint going forward I think we can drive a lot of increase in business with the current footprint.
By increasing productivity.
And then maybe maybe just one more on <unk>. So.
For for Eliot Crohns and colitis, I know you've done a fair number of samples that fits the presentations.
With the idea that you need to have a broader signal across more indications in just something like that which I think will always where may be targeted to be maybe the first out of the chute.
Is the idea that the commercial impact of just having those isn't going to be agnostic to have a broader spectrum.
Kind of signals.
Or where the signals are strong enough Gary maybe just speak a little bit to the first indication you were initially targeting and kind of how those first indications would evolve into a bigger panel.
Sure Sharon you want to take that yes, absolutely. Thanks, Laura for the question to help clarify so IBD is still a top priority and in fact, we initiated our clinical study in IBD that covers both crohn's and ulcerative colitis.
And we are aiming as Chad mentioned in terms of this.
The shift in focus in <unk>.
Panel, which includes not just IBD crohn's ulcerative colitis, but also other Gi disorder.
Disorders, including enhancing our signal for example, potentially in Philly as disease.
And really having a panel.
For example, Gi symptomatology that <unk> can help differentially diagnose and items early and so that's one example of a panel and we are still pursuing MFS and new routes as a panel where as John indicated our signal and the strengthening of the signal in lines can also come into play to differentially.
Diagnose.
Those are the activities and again, we are continuing and are encouraged.
Encouraged by the signals that we've generated to date and that will continue.
Scale in multiple indications.
Got it and then maybe a final one just on kind of the outlook is could you help us think through in the context of the guidance for revenues I know you said 50 50 between MRV enemy medicine, but we think about some of the buckets within that would you.
Would you be willing to provide some color.
Across a clone of C clinical and <unk> pharma.
Already development the different buckets as you report, how we should think about kind of the trajectory of those businesses implicit in your guidance.
I don't know Dan I don't know if it was specifically break it down I mean, I think you can.
Frankly, probably back into it.
If you haven't had the ISP and the tests delivered numbers.
You can probably get close to that I think the first the first cut as you know this you are going to kind of immune medicine and <unk> those broad based bucket over time, we may provide kind of via.
Further resolution in into that but I think you can I think you can get.
Somewhat of a proxy.
Obviously, the milestones are kind of sitting out there and are probably harder to tell.
To quantify it but.
We'll work with you on the model.
Awesome, Okay, great. Thank you.
Yeah, you bet good talking to you.
Thank you.
And our next question comes from <unk> Richter with Goldman Sachs. Your line is now open.
Hey, guys. Thanks for taking our question. This is Lewis with <unk>.
This is on the drug discovery of vertical.
Just hoping you can help kind of frame the opportunity in target discovery and how much that contributes to the long term growth. Thank you.
Sure Sharon you want to take that yeah, absolutely. So on the heels of the signals that we are generating we mentioned auto immune disorders like IBD in MF.
There is a lot of opportunity that we and potential partners see there in terms of really validating in discovering novel target.
Then pursue.
Therapeutics in these in these diseases, where there's a high unmet.
Unmet need and so that's what we're exploring that is the heart and soul of the TCR antigen mapping effort with our Microsoft colleagues and so we're very excited to continue to pursue that and scale that and really get to these novel targets that we can structure deals around discovery and <unk>.
Consider that.
That could also enable some drug discovery opportunities for us in terms of TCR against those targets or even antibody.
Yeah.
Yeah.
Thank you.
And our next question comes from <unk> <unk> with Morgan Stanley . Your line is now open.
Hi, This is Hugo on the call for Tito. Thank you for taking our questions.
With da da Bcl expected to make a more meaningful contribution in back half of 'twenty three could you elaborate on the potential opportunities on the clinical research side, and whether you see that opportunity needs to be more near term.
Sure.
Yes good.
<unk>.
Absolutely so I think.
We are already.
Yeah.
<unk>.
Working towards increasing our penetration.
In <unk> with pharma companies.
And as I had mentioned therapy landscape for <unk> very rich, there's a lot of activity going on there and there's a large number of clinical trials going on in our penetration in those clinical trials and as an endpoint is very low. So we are working with all the major players in that space.
And we expect that to be.
Our near term revenue contributor.
We've already heard from a handful of our pharma companies that they view the Medicare coverage very positively.
The fact this test is going to be broadly available for patient management is viewed positively by them and we are already having some conversations about using DLT policy as an endpoint and DLP CF trials.
Great. Thank you for that color and then just as an unrelated follow up some of the some of your peers in the industry noted, they're seeing staffing shortages in hospitals and physician offices is that something you also run into and if so has it been a headwind for <unk>.
Yes, so I think we.
We are seeing something similar and we do actually see that we get sort of order spikes on a couple of days within a week.
Largely because I think electronic.
Late orders on two days out of a weak and.
And incentive gross orders, so we see that day to day variability.
And.
But despite that we saw some very strong performance.
This quarter and we hope to continue that.
In Q4 as well.
Great. Thank you so much.
Thank you.
And our next question comes from Mark Massaro with BTG. Your line is now open.
Hey, thanks for the questions.
Congrats on the reimbursement for non Hodgkin's lymphoma, I guess can you comment about whether or not you've received pricing on the test and how we should think about that.
I think in the past you've received sort of a bundle for four tests should we think about that as flat to what you already have and is it fair to think that high end.
NHL can be ordered somewhere around two to four times per patient in the blood.
Yes. Thanks for that question Mark Yes, so the pricing is identical to the historic pricing received for quality the bundle pricing.
And in terms of.
Usage I think that's going to grow over time I think our approach.
<unk> is to tackle the relapsed refractory setting of <unk> source, which is where we think theres greatest utility in the near term and then as we build the evidence and as we build our familiarity with.
Physicians are using <unk> will also move upstream into.
Frontline treatment and I think.
As more and more treatments come on online and as people live longer and longer with these diseases.
We expect the usage.
Usage.
To increase overtime.
Okay and I know you were asked this question earlier, but maybe just can you confirm that pricing I think is already effective immediately so.
I guess why won't this have more of an impact in the second half of 'twenty two.
I understand that it could be small numbers in the early days, but.
Given the size of your sales force and the fact that everyone knows what <unk>.
Are you just being conservative that the bigger uptake is in 'twenty, three or maybe just walk us through why you have low expectations for the initial uptake in the first six months.
Yes, So I think that's a very specific reason the current tests and I think we've talked about this in prior earning the current test is based on plasma.
And as you know in the community setting.
We feel is most frequently treated.
The physicians.
<unk> ability to take whole blood spin that down into plasma and plasma to us is limited.
So at the end of this year, we're launching.
Change to the product.
We will be able to accept a whole blood in strict tubes.
Which is very similar to others sort of liquid biopsy tests out there.
And that's happening at the end of the year and I think that's going to be the limiting factor for driving growth.
Second half.
So the real discrete reason why we think.
Growth in adoption for <unk> limited.
Emphasize that the Medicare coverage for all without limitations with color is ideal bcl throughout the treatment paradigm.
For the year this year, but given that strict limitation, which we're addressing.
We think the growth will come really in 2023.
Okay understood.
Okay.
Mark I'll add I'll add one comment to that because it's been set a couple of times, but just just to clarify.
Our largest penetration so far is in kind of the academic medical.
Medical Center, where there is a lot more specialization between the leukemias myeloma and then kind of lymphoma is a different category granted in the community. Some there is still some specialization in the community but.
In the community, where they do kind of treat treat all comers, it's much more lower lower penetration rates right now so theres kind of notion that our sales force and obviously thats where were trying to get to is that one Doc who treats all patient understands our test well, but that's a growing but smaller.
Smaller base right now.
Okay excellent and one last question on MLD.
Yes release on NHL.
Referred to.
The indication is being based on circulating tumor DNA and I think you've talked about how.
NHL or <unk> is almost a borderline heme disorder. So recognizing that you guys certainly are the dominant market leaders in heme.
Obviously solid tumors are also a big opportunity I guess have you learned anything through the development of NHL or <unk> that leads you to believe that this <unk>.
May be sort of a potential precursor into solid tumor development.
Yes, I'll address that I think.
The Cte DNA test that we've developed for <unk>.
Essentially uses the same underlying technology that you have for DNN it originates from wholesalers.
So.
In that sense.
Very similar Leverages the.
Years and years of development effort that we've put into that assay all the IP protection, we have all the.
The controls we have in manufacturing and all the operational excellence, we have around that test.
But at the same time. It also demonstrates that hey, we can leverage our technology and look at different analytes.
And in terms of looking at solid tumors.
No.
Something.
We can.
Larry talked about it.
Yes, yes, I'll take that one.
And Mark it's a good question, it's a natural question, especially as as is kind of the new technology, we're developing potentially.
Lends itself to being able to evaluate <unk> in solid tumors and from a corporate development perspective, we're continuing we continuously evaluate our opportunities and that's obviously something naturally we will evaluate amongst many other opportunities to expand our franchise.
Awesome, Thanks, very much for the color.
You bet. Thank you Mark.
Yes.
Thank you.
This concludes today's conference call. Thank you for participating you may now disconnect.
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