Q1 2024 Adaptive Biotechnologies Corp Earnings Call

May 7, 2024

Good day and thank you for standing by welcome to the adaptive Biotechnologies first quarter 2024 earnings call. Please note all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone you were there.

Operator: Good day, and thank you for standing by. Welcome to Adaptive Biotechnology's first quarter 2024 earnings. Please note that all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising that your hand is raised.

Operator: Here, an automated message advising that your hand is raised to withdraw your question. Please press star. One again, 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.

Operator: To withdraw your question, please press star 1-1 again. 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 Calandia, Head of Investor Relations.

Karina Calzadilla: Head of Investor Relations. Please go ahead.

Karina Calzadilla: Thank you Corey and good afternoon, everyone I would like to welcome you to adaptive Biotechnologies first quarter 2024 earnings conference call.

Karina Calzadilla: Thank you, Corey, and good afternoon, everyone. Biotechnology's First Quarter 2024 Earnings Conference. Earlier today, we issued a press release reporting our adaptive financial results for the first quarter of 2024. The press release is available at www.adaptivebiotech.com. We are conducting a live webcast of this call and will be referencing a slide presentation that has been posted to the investor section of our corporate website. During the call, management will make projections and other looking forward statements within the meaning of federal security laws regarding future events and the future financial performance of the company.

Karina Calzadilla: Earlier today, we issued a press release reporting financial results for the first quarter of 'twenty for the press release is available at Www Dot adopted biotechs Dot com.

Karina Calzadilla: We're conducting a live webcast of this call.

Karina Calzadilla: Referencing slide presentation posted to the Investor section in our corporate website.

Karina Calzadilla: During the call management will make protection and other looking forward statements within the meaning of federal securities laws regarding future events and the future financial performance of the company.

Karina Calzadilla: These statements reflect management's current perspective on the businesses of today. However, actual results may differ materially from today's four look-in statements, depending on a number of factors, which are set forth in our public filings with the FCC and listed in this presentation. In addition, non-GAAP financial measures will be discussed during the call and will be reconciliated in a non-GAAP-to-GAAP metric that can be found in the

Karina Calzadilla: These statements reflect management's current perspective.

Speaker Change: Okay excellent.

Karina Calzadilla: 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 listen to this presentation.

Karina Calzadilla: In addition, non-GAAP financial measures will be discussed during the call and the reconciliation.

Karina Calzadilla: non-GAAP to GAAP metrics can be found in the earnings release joining.

Karina Calzadilla: Joining the call today are Chad Robins, our CEO and co-founder, and Kyle Pisco, our chief financial officer. Additional members from management will be available for Q&A. With that, I'll turn the call over to Chad.

Karina Calzadilla: Joining the call today are Chuck Robbins, our CEO and co founder and physical our Chief Financial Officer.

Karina Calzadilla: Members of management will be available for Q&A with that I'll turn the call over to Charlie Chen.

Chad M. Robins: Thank you, Karina. Good afternoon, and thank you for joining us for our first quarter earnings. As communicated last month and shown on slide 3, moving forward, both our MRD and immune medicine businesses will remain under the Adaptive umbrella, each with its own dedicated resources and separate segment reporting. This will provide each business with the autonomy to execute on their respective focused strategies, which are, for MRD, Marching Towards Profitability with a Strengthened Financial Profile, and for Immune Medicine, translating science in cancer and autoimmunity into breakthrough therapeutic programs with clear guardrails to guide investment.

Chad M. Robins: Thanks Karina good.

Chad M. Robins: Good afternoon, and thank you for joining us on our first quarter earnings call.

Chad M. Robins: As communicated last month shown on slide three moving forward, both our MLP and immune medicine businesses will remain under the adaptive umbrella each with its own dedicated resources and separate segment reporting.

Chad M. Robins: This will provide each business with the autonomy to execute on their respective focused strategies, which are for NRT marching towards profitability with a strengthened financial profile and for immune medicine, translating science in cancer and autoimmune unity into breakthrough therapeutic program.

Chad M. Robins: Clear Guardrails to guide investment.

Chad M. Robins: Importantly, we continue to preserve our strong capital position with approximately $309 million as of March 31st, which enables us to bridge the R&D business to profitability and to support targeted investments in immune medicine. Our position is further strengthened by access to additional non-dilutive capital through our agreement with Orbital. Now let's take a closer look at the MRD business on slide 4. The NRG business had an impressive quarter, with $32.6 million in revenue representing 52% growth versus the prior year, driven by both clinical and pharma.

Chad M. Robins: Importantly, we continue to preserve our strong capital position with approximately $309 million as of March 31, which enables us to produce the R&D business and profitability and to support targeted investments and immune medicine.

Chad M. Robins: Our position is further strengthened by access to additional non dilutive capital through our agreement with all of it.

Chad M. Robins: Now, let's take a closer look at the MLP business on slide four.

Chad M. Robins: The NRG business had an impressive quarter with $32 6 million in revenue, representing 52% growth versus prior year, driven by both clinical and pharma.

Chad M. Robins: On the clinical side, volumes continue to grow quarter over quarter, with over 17,000 tests delivered in Q1, representing a 41% increase over the prior year and a 9% increase sequentially. Growth came from all market indications, and Multimiloma continues to be the largest contributor, representing approximately 40% of volume. The few slurred B-cell lymphoma is our fastest-growing indication, growing approximately 25% quarter over quarter and now contributing to 5% of total tests.

Chad M. Robins: Critical side volumes continued to grow quarter over quarter with over 17000 tests delivered in Q1, representing a 41% increase versus prior year and a 9% increase sequentially.

Chad M. Robins: Growth came from all marketed indications and multi myeloma continues to be the largest contributor representing approximately 40% of volume.

Chad M. Robins: <unk> T cell lymphoma is our fastest growing indication growing approximately 25% quarter over quarter and now contributing to 5% of total tests.

Chad M. Robins: We also continue to be laser focused on driving ASP growth by reducing auto policy of non contracted claims and improving revenue cycle management importantly.

Chad M. Robins: We also continue to be laser-focused on driving ASD growth by reducing out-of-policy and non-contracted claims and improving revenue cycle management. Importantly, we are encouraged to see the recent preliminary gap bill rate set by Medicare. Once finalized, this rate would go into effect beginning in 2025. This rate, which will have implications for both Medicare and commercial payer pricing, gives us further confidence in our ability to grow ASD for tests by $200 in the next two years. In addition, Clonaseq key indicators continue to trend positive in Q1.

Chad M. Robins: We are encouraged to see the recent preliminary capital rates set by Medicare of $1823 per test and increase from our current implied protest rate under the <unk> structure.

Chad M. Robins: Once finalized this rate will go into effect beginning of 2025, this rate, which will have implications for both Medicare and commercial payer pricing give us further confidence in our ability to grow ASP per test by $200 over the next two years.

Chad M. Robins: In addition, <unk> key indicators continued to trend positive in Q1.

Chad M. Robins: Blood-based testing represented nearly 40% of tests, with multiple myeloma in blood now at 20% following positive data presented at ASH in December. Tests in the community continue to grow sequentially, contributing about 25% of tests delivered. Ordering HDPs and ordering accounts grew 33% and 25% versus the prior year, respectively. Additionally, EMR integration remains central to our efforts to further enhance our customer experience and to solidify our market leadership position.

Chad M. Robins: Blood based testing represented nearly 40% of tests with multiple Loma and blood now like 20% following positive data presented at Ash in December.

Chad M. Robins: Testing the community continued to grow sequentially contributing about 25% of tests delivered.

Chad M. Robins: Ordering hcp's and ordering accounts grew 33% and 25% versus prior year respectively.

Chad M. Robins: Additionally, EMR integration remains central to our efforts to further enhance our customer experience and to solidify our market leadership position, we saw post integration quarter over quarter growth of 40% across the first four accounts are integrated at the end of 2023, and we now have nine additional active epic integration in motion.

Chad M. Robins: We saw post-integration quarter-over-quarter growth of 40% across the first four accounts we integrated at the end of 2023, and we now have nine additional active Epic integrations in motion. Looking at MRT Pharma on slide 5, our farmer business started the year strong with Q1 revenue growth of 71% versus prior year.

Chad M. Robins: Looking at <unk> pharma on slide five.

Chad M. Robins: Our pharma business started the year strong with Q1 revenue growth of 71% versus prior year sequencing revenue grew 17% and we recognize milestones from two drug approvals.

Chad M. Robins: Sequencing revenue grew 17%, and we recognized milestones from two drug approvals. Last month, the FDA's Oncologic Drug Advisory Committee, or ODAC, voted unanimously in favor of the use of MRD as a primary endpoint to support the accelerated approval of new therapies for patients with multiple myeloma. ODAC's recommendation, if accepted by the FDA, has the potential to accelerate myeloma patient access to novel therapies and to reduce drug development costs. In addition to ClonaC being the only FDA-cleared MRDE assay for patients with multiple myeloma, it is also the singular assay that can consistently deliver the sensitivity and standardization needed to meet FDA performance standards. This further solidifies clonazepam as the assay of choice for multiple myeloma drug development.

Chad M. Robins: Last month, the Fda's Oncologic drug Advisory committee or <unk> voted unanimously in favor of the use of MLP as a primary endpoint to support the accelerated approval of new therapies for patients with multiple enrollment <unk> recommendation is accepted by the FDA has potential to accelerate by Walnut.

Chad M. Robins: Patient access to novel therapies and to reduce drug development costs.

Chad M. Robins: In addition to currency being the only FDA cleared MRV assay for patient remote by Walmart and its also be singular assay that can consistently deliver a sensitivity at standardization needed to meet the FDA performance standards.

Chad M. Robins: Further solidifies <unk> as the assay of choice for multiple myeloma drug developers.

Chad M. Robins: So, what does this mean for Chronus? On the revenue recognition front, we can potentially accelerate the realization of revenue from existing studies. There is also potential to generate new bookings as companies re-prioritize their multiplied loanable programs to leverage a faster path to commercialization. On the milestone recognition front, we also have the opportunity to monetize our portfolio primary endpoints from existing MRV pharma contracts. In addition, this could represent a positive table effect for the continued acceptance of MRD as a standard measure of response in the clinic.

Chad M. Robins: So what does this mean for currency.

Chad M. Robins: The revenue recognition front, we can potentially accelerate the realization of revenue from existing studies. There is also potential to generate new bookings as companies re prioritize their multimodal programs to leverage a faster path to commercialization.

Chad M. Robins: On the milestone recognition front, we also have the opportunity to monetize our portfolio for a portfolio of primary endpoints from existing MRV pharma contracts.

Chad M. Robins: In addition, this could represent a positive halo effect for the continued acceptance of MRV is a standard measure of response in the clinic now.

Chad M. Robins: Now, let's turn to immune medicine on slide six. The IAM business is focused on developing differentiated, immune-driven therapies for cancer and Autoimmune. In Oncology, we continue to support and work closely with our Genentech colleagues in the development of TCR-based cell therapy products targeting tumor neoantibodies.

Chad M. Robins: Now, let's turn to of your benefit on slide six.

Chad M. Robins: The iam business is focused on developing differentiated appear driven therapeutics in cancer and autoimmune disease and oncology. We continue to support <unk> close we work closely with our genetic colleagues and the development of TCR based cell therapy products targeting tumor neo antigens.

Chad M. Robins: We're jointly working with Genentech on a holistic review of the programs to enable the development and delivery of the highest impact therapy for patients. Both companies are excited and committed as we move forward with these developments. We'll provide you with an update at the appropriate time. In our community, we narrowed our focus to select indications in multiple sclerosis and type 1 diabetes, where we believe there is still a high unmet need to develop better, more targeted therapies with a better side effect profile.

Chad M. Robins: Currently working with Genentech on a holistic review of the programs to enable the development and delivery of the highest impact therapy for patients. Both companies are excited and committed as we move forward with your development will provide you with an update at the appropriate time.

Chad M. Robins: And autoimmunity, we narrowed our focus to select indications in multiple sclerosis in type one diabetes.

Chad M. Robins: We believe there is still a high unmet need to develop better more targeted therapies with our <unk>.

Chad M. Robins: Better side effect profile.

Chad M. Robins: Our approach allows us to discover the specific T-cells that are attacking self. Therapeutically, our goal is to eliminate or block the activation of these problem T-cells and directly stop them from attacking healthy tissue. In MS and T1D, we've successfully identified the subset of autoreactive T cell receptors that are likely causing these devastating diseases.

Chad M. Robins: Our approach allows us to discover the specific T cells that are attacking yourself therapeutically. Our goal is to eliminate or block. The activation of these trials in T cells and directly stop them from attacking healthy tissue.

Chad M. Robins: <unk> and <unk>, we've successfully identify the subset of auto reactive T cell receptors that are likely causing these devastating diseases and in multiple sclerosis.

Chad M. Robins: And in multiple sclerosis, we've confirmed the specific self-antigen or target to which these T cell receptors bind. This quarter, we started our antibody discovery campaign in MS and T1D. Our goal in 2024 is to discover, make, and test select antibodies to generate preclinical data that informs further investment by the U.S. We continue to gauge our R&D investments based on expected data readouts throughout the year. In Q1, we aligned our resources to execute on these select 2024 programs and specific goals.

Chad M. Robins: The specific cell antigen or targets to which these T cell receptor binding.

Chad M. Robins: This quarter, we started our antibody discovery campaigns and MS. <unk>. Our goal in 2024 is to discover make and test select antibodies to generate preclinical data that informs further investment by year end, we continue to gauge our R&D investments based on expected data readouts throughout the year.

Chad M. Robins: In Q1, we aligned our resources to execute on these select 2024 programs and specific goals as a result of these changes we expect to reduce our immune medicine operating expenses in 2024 and more than 50% versus prior year.

Chad M. Robins: As a result of these changes, we expect to reduce our in-medicine operating expenses in 2024 by more than 50% versus the prior year. The IM business remains disciplined on its spend, and we continue to engage with strategic partners to help offset our cash burns.

Chad M. Robins: The items of business remains disciplined on it spend and we continue to engage with strategic partners to help offset our cash burn now I'm going to pass it over to Kyle to go through the key financials and provide detail on segment reported comp.

Kyle Pisco: Now I'm going to pass it over to Kyle to go through the key financials and provide detail on segment reporting. Thanks. Thanks, Chad. Let's start with revenue for the first quarter on the left side of the slide. Total revenue for the first quarter was $41.5 million.

Kyle Pisco: Thanks, Thanks, Chad, let's start with revenue for the first quarter on the left of slide seven.

Kyle Pisco: Total revenue in the first quarter was $41 $9 million of 78% from <unk> and 22% from immune medicine.

Kyle Pisco: 78% from MRD, and 22% from MRD. MRE revenue grew to $32.6 million. Up 52% from a year ago, with Clonaseq clinical testing and MRT-Pharma partnerships each driving a profit, 48% and 12% of the growth, respectively, along with a $4.5 million increase in regulatory. Excluding these milestones, MRT revenue grew 31%. Medicine revenue was $9.10, [inaudible] Treatment Largely As Expected By Lower Genetic Amortization. Degrees decreased 49% as well as decreases in IM Pharma services due to a shift in focus towards target indirect discovery. Moving down the P&L, total operating expenses, including cost of revenue, were $90.6 million, representing a 4% decrease.

Kyle Pisco: <unk> revenue grew to $32 6 million up 52% from a year ago with quality clinical testing, a marquee pharma partnerships, each driving approximately 48% and 12% of the growth respectively.

Kyle Pisco: Along with a $4 5 million increase in regulatory.

Kyle Pisco: Excluding these milestones at margin revenue grew 31% from a year ago.

Kyle Pisco: Let me add medicine revenue was $9 2 million down 43% from a year ago, driven largely as expected by lower <unk> amortization.

Kyle Pisco: <unk> decreased 49% as well as decreases in pharma services due to a shift in focus towards target and drug discovery efforts.

Kyle Pisco: Moving down the P&L total operating expenses, including cost of revenue were $90 6 million, representing a 4% decrease from last year.

Kyle Pisco: This decrease was mainly driven by the continued emphasis on driving leverage across functions and reductions in research and development. As we continue to prioritize our, Cost of Revenue decreased 3%, resulting in gross margin for the quarter of 57%, a 7 percentage point increase versus a year ago. This increase was mainly attributed to... and Marking Milestone Recognition Partially Offset by Lower Average [inaudible] Finally, interest expense from our royalty financing agreement with Orland was $3 million, which was more than offset by. Net loss for the quarter was $47.5 million compared to $57.7 million. Well, it just ended up with a loss of 28.

Kyle Pisco: This decrease was mainly driven by the continued emphasis on driving leverage across function and reductions in research and development expenses as we continue to prioritize our investments and our immune medicine.

Kyle Pisco: Cost of revenue decreased 3%, resulting in gross margin for the quarter of 57% a seven percentage point.

Kyle Pisco: Increase versus a year ago.

Kyle Pisco: This increase was mainly attributed to MRV milestone recognition, partially offset by lower amortization of the genentech upfront.

Kyle Pisco: <unk>.

Kyle Pisco: Finally interest expense from our royalty financing agreement with <unk> 3 million, which was more than offset by interest income.

Kyle Pisco: Net loss for the quarter was $47 5 million compared to $57 7 million last year, while adjusted EBITDA was a loss of $28 2 million compared to $37 1 million in Q1 of 2023.

Kyle Pisco: Compared to $37.1 million in Q1 of 2020. Now, turning to segment reporting on the right side of the screen. Structuring activities during the quarter align resources and operations, sales and marketing, and R&D towards either the MRD or mid-meta. Resources and Related Costs are dedicated to each business and are included within the operating spend of MRD and Indian Medicine, respectively. Other corporate functions, such as finance, legal, HR, and IT, continue to be managed centrally to avoid synergies from duplication.

Kyle Pisco: Now turning to segment reporting on the right side of the slide.

Kyle Pisco: Restructuring activities during the quarter align resources and operations sales and marketing and R&D towards either the MRP, our immune medicine businesses.

Kyle Pisco: These resources and related cost are dedicated to each business.

Kyle Pisco: Included within the operating spend of <unk> medicine, respectively.

Kyle Pisco: Other corporate functions, such as finance legal HR and it continue to be managed centrally to avoid.

Kyle Pisco: The synergies from duplication.

Kyle Pisco: We allocate the majority of these corporate expenses to each segment using direct headcount in MRD and immune medicine, which is approximately 75% MRD and approximately 25% immune medicine. However, certain expenses will remain unallocated, such as our corporate insurance costs, governance, audit fees, our EIDL facility, and interest income and expense, which are reflected under an unallocated corporate insurance policy. In addition to operating expenses per segment, we are also providing an adjustment which can be used as a proxy for cash burn per second, excluding CapEx and, Now turning to our updated full-year guidance on slide, we are updating our MRD Full-Year Revenue Guidance to $135,145,000.

Kyle Pisco: Yes ill keep the majority of these corporate expenses to each segment using direct head count in <unk> medicines, which is approximately 75% that Marty and approximately 25% higher.

Kyle Pisco: Certain expenses will remain unallocated such as our corporate insurance costs governance, Rfps are idled facility and interest income and expense, which are reflected under our unallocated corporate segment.

Kyle Pisco: In addition to operating expenses perspective, we are also providing adjusted EBITDA, which adjusting for certain income and expense line items can be used as a proxy for cash burn per segment, excluding capex and working capital.

Kyle Pisco: Now turning to our updated full year guidance on slide eight.

Kyle Pisco: We are updating our full year revenue guidance to $135 million and $140 million, bringing up the midpoint of the range to reflect the realization of milestones not previously included in the guidance.

Kyle Pisco: Bringing Up the Midpoint of the Range to Reflect the Realization of Milestones Not Previously Included in the Guide, with respect to trends throughout, We continue to expect MRT revenue to be about $45-55 weighted between the first and second half of the year. For the year, we are lowering the total company estimated operating revenue of $315,000,000 to 300,000,000.

Kyle Pisco: With respect to trend throughout the year, we continue to expect commodity revenue to be about 45 55 weighted between the first and second half respectively.

Kyle Pisco: For the year, we are lowering the total company estimated operating spend two to 359 to 369.

Kyle Pisco: $10 million reduction from our previous guidance as we continue to drive leverage across the businesses and manage investments.

Kyle Pisco: Of this total spend, approximately 70% sits within an MRD business and approximately 25% with no MRD. We will continue to be thoughtful about our past. Living One-Time Costs from Restructuring. Now expect the burn to average approximately $30 million for the remaining three quarters. This represents a 14% reduction in cash burn over full year 2020. Of note, approximately 50% of the cash burden this year is expected.

Kyle Pisco: Of this total spend approximately 70% sits within the RV business and approximately 25% with any medicine.

Kyle Pisco: We continue to be thoughtful about our cash position.

Kyle Pisco: I think one time costs for restructuring activity.

Kyle Pisco: I would expect the burn to average approximately $30 million for the remaining three quarters, which implies an annual cash burn of $130 million versus our previous estimate of 149.

Kyle Pisco: This represents a 14% reduction in cash burn over full year 2023.

Kyle Pisco: Of note approximately 50% of the cash burn this year is expected to come from the MRM business and approximately 40% from EMEA.

Kyle Pisco: Business, and approximately 40% from the Immune Medicine Business. The remaining 10% is due to the unallocated corporate. I look forward to providing you with further financial updates throughout the year as we continue to make progress towards our goals. With that, I'll hand it back.

Kyle Pisco: The remaining 10% is due to the unallocated corporate costs.

Kyle Pisco: I look forward to providing you with further financial updates throughout the year as we continue to make progress towards our goals with that I'll hand, it back over to Chad.

Chad M. Robins: Thank you, Kyle. As I think it's evident, we've made important decisions over the last couple of weeks. I'm confident we're taking the right steps as we move forward with our two business segments and execute on the priorities. Our cash position is strong, and we're disciplined in managing our capital to bridge the MRD business profitability while supporting measured investments in immune medicine to advance our key programs. With that, I'll turn the call back over to the operator and open up for questions.

Speaker Change: Thank you Kyle.

Speaker Change: So I think it's evident we have made important decisions over the last couple of months I'm confident we're taking the right steps as we move forward with our two business segments and execute on their priorities our cash position is strong.

Chad M. Robins: We're disciplined and manage our capital to bridge, the <unk> business to profitability, while supporting measured investments in immune medicine to advance our key programs with that I'll turn the call back over to the operator and open it up for questions. Thank you.

Speaker Change: Thank you Tom we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please stand by while we compile the Q&A roster.

Chad M. Robins: At this time, we will conduct a question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Operator: Please stand by while we compile the Q&A roster. Our first call comes from the line of Mark Massaro from BTIG. Mark, your line is open. Hey guys.

Operator: On our first call comes from the line of Mark Massaro from BT hygiene Mark Your line is open.

Mark Anthony Massaro: Hey, guys.

Mark Anthony Massaro: Congratulations on the quarter. Thank you for taking the question. I recognize it's only been about three or four weeks, but, you know, following the FDA ADCOM meeting or ODAC meeting where multiple myeloma was recommended to be a unanimous primary endpoint in clinical trials for multiple myeloma, can you just give us a sense for what you've been hearing in the marketplace? Any of your customers perhaps looking to pick things up a little bit on the clinical trial side?

Mark Anthony Massaro: Grant's on the quarter. Thank you for taking the question.

Mark Anthony Massaro: I recognize it's only been about three or four weeks, but following the FDA AD comm meeting or <unk> meeting.

Mark Anthony Massaro: Where multiple myeloma was recommended to be eight.

Mark Anthony Massaro: Adam as a primary endpoint in clinical trials for multiple myeloma can you just give us a sense for what you've been hearing in the marketplace.

Mark Anthony Massaro: And how do you envision this impacting your business over the next couple of years? Yeah, thanks Mark for joining the call. I'm going to pass it over to Susan who can provide quite a bit of color on that. Susan?

Susan: Any of your customers.

Susan: Perhaps looking to pick things up a little bit on the clinical trial side.

Susan: How do you how do you envision that impacting your business like over the next couple of years.

Mark Anthony Massaro: Yeah.

Susan: Thanks for joining the call.

Mark Anthony Massaro: Pass it over to Susan who can provide quite a bit of color on that too.

Susan Bobulsky: Health Chat, and thanks, Mark. Yeah, I mean, the ODAC vote is a huge milestone for the field of myeloma and, obviously, tremendous news for patients. We have been in active discussions with our pharma partners to discuss potential implications. And, you know, while many companies are waiting for the final FDA guidance, which we do expect to be shortly forthcoming, we already have a few studies that have been upgraded to primary endpoint as well as a few new studies where MRD is being used, and a few new studies where it's going to be used as a primary endpoint directly as a result of the ODAC In general, as Chad outlined, you know, we see some potential upside in a couple of areas.

Susan: Chad Thanks Mark.

Mark Anthony Massaro: Yeah.

Susan Bobulsky: So we think it's a huge milestone for the sale of miles online obviously tremendous needs for patients.

Susan Bobulsky: And in active discussions with our pharma partners to discuss potential applications and while many companies are leading to the final FDA guidance, which we can expect to be shortly coming the army has a few studies that have been upgraded to primary endpoint as well as the <unk> technique.

Susan Bobulsky: In a few new studies, where I'm right, it's going to be used as a primary end point directly as a result of the attack.

Susan Bobulsky: In general as chat outlined we see some potential upside in a couple of areas first of all acceleration of primary endpoint milestones that have already been established in these ongoing studies. Additionally.

Susan Bobulsky: First of all, acceleration of primary endpoint milestones that have already been established in ongoing studies. Additionally, upgrading, as I mentioned, trials that are currently secondary endpoints to primary endpoint status, which will both accelerate the realization of those milestones and also increase their value. And then potentially additional new bookings as pharma companies reprioritize their development programs to center more on BAP and myeloma. In the clinic, we've also had an opportunity to have quite a few conversations around this topic. Clinicians are universally very, very excited on behalf of their patients.

Susan Bobulsky: Additionally, upgrading as I mentioned of trials that are currently secondary endpoint. The primary endpoint that we spoke to us accelerate the realization of those milestones and all to increase their value and then potentially additional new bookings and find that companies re prioritize their development.

Susan Bobulsky: Our brands are two central App in myeloma in the clinic. We also had an opportunity to have cleanup to conversations around this topic.

Susan Bobulsky: Clinicians are universally very very excited on behalf of their patients.

Susan Bobulsky: And basically a tremendous remaining unmet need and they also acknowledge dee.

Susan Bobulsky: They see a tremendous remaining unmet need, and they also acknowledge the strengths that this recommendation coming directly from ODAC and, ultimately, likely from FDA provides to the credibility of MRD as a measure of clinical response and as a tool they can use in dialogue with their patients to individualize their care. We really do believe that there is potential for a halo effect in the clinic as well. Okay, that's great. And then it was nice to see the Moldex gap fill rate of 1,823 per test. I think that it is scheduled to go live, I think, January 2025.

Susan Bobulsky: To rank that recommendation coming directly from ONEOK and ultimately likely from SBA.

Susan Bobulsky: Provided that.

Susan Bobulsky: The ability of that market.

Susan Bobulsky: Azure as a clinical response.

Susan Bobulsky: And as a tool they can use and dialogue with their patients to individualize their care.

Susan Bobulsky: And that there is potential for a halo effect in the clinic as well.

Susan Bobulsky: Okay. That's great and then it was nice to see the mold ex gap fill rate of 1823 per test I think that is scheduled to go live I think January 2025.

Speaker Change: How are you thinking about commercial payors is that something that you can potentially initiate that dialogue.

Susan Bobulsky: Head of the go live date with mold X how should we think about that as an incremental driver to the business.

Susan Bobulsky: So you're correct that it will go live formally on January 1st after it's finalized later this year. However, we are already leveraging the published preliminary rate in conversations with commercial payers. So there are two implications.

Speaker Change: Yes, absolutely Mark.

Susan Bobulsky: You are correct that it will go live formally on January 1st after its finalized later this year and we are already leveraging the published preliminary rate in conversations with commercial parents and their acute implications in the short term we had several large non contracted payers who have been holding out leading for P&I priced.

Susan Bobulsky: In the short term, we have several large non-contracted payers who have been holding out, waiting for the PLA price to be published so that they can complete their negotiations on price with us. And so we've already engaged them to advance those negotiations. And of those of note and some, a particularly large one that we're working with utilizing the recently published price. Additionally, over time, we can use this price to re-approach existing contracted payers. [inaudible] That's great. And then there is one last one for me.

Susan Bobulsky: We published that they could complete their negotiations on price in the past and so.

Susan Bobulsky: And already in case that the Q2 examples negotiations and also of note and something is a particularly large one that we're working with utilizing the recently published <unk>. Additionally over time, we can use this price to re approach existing contracted parents to potentially bring up contracting.

Susan Bobulsky: And I think we've previously negotiated if they are below the line price.

Speaker Change: One other comment Mark worth noting.

Susan Bobulsky: As we've mentioned a couple of times as the preliminary pricing right.

Susan Bobulsky: No.

Speaker Change: No promise, we continue to work with <unk>.

Speaker Change: I'm kind of finalizing the price and the episodes structure. So.

Speaker Change: That's great and then one last one for me you took up the low end of the guide for MRV.

Kyle Pisco: You took up the low end of the guide for MRD. I assume that's just cycling in the four and a half million dollar milestone that you realized in Q1. Just clarifying that. And then how should we think about the total contribution to the MRD milestones for the full year? Yeah, Mark, this is Kyle.

Kyle Pisco: I assume that's just cycling in the $4 $5 million milestone that you realized in Q1.

Kyle Pisco: Just clarifying that and then how should we think about the total.

Kyle Pisco: Contribution.

Kyle Pisco: Mardi milestones for the full year.

Kyle Pisco: Yes, Mark this is Kyle yeah.

Kyle Pisco: Yeah, the beat and the low-end pull are fully related to the milestones. As it relates to the go forward, I'd say we continue to be conservative as we think about the milestones in our guide, and, you know, we're not necessarily anticipating anything. We don't control the timing, and we'll see how it plays out throughout the rest of the year. Okay. Thanks, guys. Thank you very much. One moment while we gather our next question.

Kyle Pisco: And the low end to pull its solely related to the milestones as it relates to the go forward.

Kyle Pisco: We continue to be conservative as we think about the milestones in our guidance.

Kyle Pisco: We're not necessarily anticipating anything you don't control the timing and we'll see how it plays out throughout the rest of the year.

Kyle Pisco: Still early.

Speaker Change: Okay. Thanks, guys.

Speaker Change: Okay, great. Thank you very much one moment.

Speaker Change: Our next question.

Kyle Pisco: Our next question comes from the line of David Westenburg Piper Sandler David Your line is open.

Kyle Pisco: Our next question comes from the line of David Westenberg of Piper Sander. David, your line is open. Hi, thank you for taking the question and giving us the progress on all the progress here. I mean, that's a really nice update. The 1823, it is higher than I remember it was 6870 for four.

David Michael Westenberg: So it was like $1700 for the test, which is about a little over $100. Now you said you think that you could have this be $200. So can you run us through the math that gets to $200 versus the other difference there? Also, I just want to clarify because the last payment was for four tests at that 6870 rate. With this new rate, does that imply that, you know, it's kind of an open end. I mean, no closed end after that fourth test.

Speaker Change: Thank you for taking the question and perhaps on all the progress here.

David Michael Westenberg: I.

David Michael Westenberg: I mean, that's a really nice update the 18 23, it is higher than I remember I think it was.

David Michael Westenberg: 6870 for four so it was like seven $700 a test.

David Michael Westenberg: Which is about a little over $100. Now you said you think that you can have this be $200. So can you run us through the math that gets to $200 versus the other difference. There also I just wanted to have a clarification because the last payment was for forecast at that 6870 right.

David Michael Westenberg: With this new rate does that imply that it's kind of no open and I mean, no close then after that fourth task night, just one more question. Thank you.

Speaker Change: Yeah, maybe I'll start and Susan if you want to.

David Michael Westenberg: And I just have one more question. Thank you. Yeah, maybe I'll start, and Susan, if you want to add color, you can add the word.

Speaker Change: As color afterwards, remember with $200.

Chad M. Robins: Remember, the $200 in ASP raised over the next two years is a combination of multiple factors. We talked about reducing out-of-policy claims and non-contracting claims, and we're doing a lot of work operationally on revenue cycle management, faster collections, and we're actually implementing AI in the appeals process. There's a whole bunch of things that we're doing just to collect money faster.

Chad M. Robins: Asps.

Chad M. Robins: <unk> raised over the next two years is a combination of multiple factors.

Chad M. Robins: We had talked about reducing auto policy claims and non contracted non contracted claims and we're doing a lot of work operationally on revenue cycle management faster collections, we're actually implementing AI in the appeals process, there's a whole bunch of things that we're doing just to collect money faster.

Chad M. Robins: So, as Susan just mentioned, having the new GAAP bill per price test will also allow us to use that dollar amount to go and close some of those non-contracted claims, and that will further enhance it. But if you look at the Medicare percentage of tests, this is, I would say, I'm going to call it right now a de-risking event to allow us to get to the $200, but it wasn't necessarily contemplated originally in that $200.

Chad M. Robins: And Susan just mentioned, having the new capital per price test will also allow us to kind of use that dollar amount to go and close some of those kind of non contracted claims gap that will further enhance it but if you look at kind of the Medicare percentage of test.

Chad M. Robins: This was.

Chad M. Robins: This is a I would say I'm going to call. It right now it would be risky event to allow us to get to the $200, but it wasn't necessarily contemplated kind of originally in that $200. So I want to be careful but could represent some potential upside, but certainly at least how we're looking at right. Now is there's at least two rich.

Chad M. Robins: So I want to be careful, but it could represent some potential upside, but certainly, what we're looking at right now is at least de-risking, and we're quite confident that we're going to be able to get that $200 increase over the next two-year period. I wasn't sure I totally understood your second question. David, if you could maybe ask it again. Yeah, if I'm not mistaken, your original rate was 6870 for four tests, and I wasn't sure after the fourth, or fifth test. Did you get 1750? I don't remember if you actually did. I kind of remember that you didn't, but I could be wrong.

Chad M. Robins: King and we're quite confident that we're going to be able to get the $200 increase over over the next two year period.

Speaker Change: The second I wasn't sure I totally understood. Your second question, David If you could maybe I'll ask it again if.

Speaker Change: If I'm not mistaken your original range was 6870 for four task and I wasn't sure.

Speaker Change: After the fourth like the fit test did you get <unk> 15, I don't remember if you actually did I kind of remember you didnt, but I could be wrong I mean, I my memory fails me from time to time. So I was thinking if there's any update in terms of being able to get paid.

Chad M. Robins: I mean, my memory does fail me from time to time. So I was wondering if there's any update in terms of being able to get paid, you know, in perpetuity versus if there's like a fixed number, rate number of tests. Yeah, so, okay. A couple of comments here, David. The Medicare episode structure, we don't get paid yet for what we'll call recurrence monitoring. That being said, we have a submission in right now for our first indication for mantle cell lymphoma where we have nice data on our first kind of recurrence monitoring test that could, essentially, once a patient goes into remission, kind of sets a new bar on a per test rate for Medicare. Separately, our commercial payers don't have a limitation on a per case basis, so we can get paid in perpetuity for as many tests as deemed medically necessary. You got it.

Chad M. Robins: In perpetuity versus if there's like a fixed number right number of tests.

Speaker Change: So okay.

Chad M. Robins: A couple of comments here, David I'm, the Medicare episodes structure, we don't get paid yet for what we'll call recurrence monitoring that being said we have a submission in right now in our first indication.

Chad M. Robins: So our mantle cell lymphoma that we have nice data on.

Chad M. Robins: First got a recurrence monitoring tests that could essentially once a patient goes into remission kind of sets a new bar on a per ton rate for Medicare.

Chad M. Robins: Separately, our commercial payers, we don't have that limitation on a per case basis. So we can get paid in perpetuity for as many trucks as deemed medically necessary.

Speaker Change: Got it okay.

Chad M. Robins: Thank you very much. And just as a follow-up, is there, I'm just one of the ODAC meetings, another really positive development here? Are there differences in behavior in the way MRD is used in clinical trials in pharma versus how it's used in clinical? And specifically, I'm kind of thinking about things like testing interval or, you know, testing in terms of timing and when the test is done.

Speaker Change: You very much and just as my follow up is there I'm just wondering if the O data meeting another really positive development here is there differences in behavior and the way <unk> is used in clinical trials in the pharma versus how its used in clinical and specifically I'm kind of thinking about things like testing interval.

Susan Bobulsky: And the reason why I'm asking you this question is, does this have a chance to change behavior in the clinic in terms of maybe test frequency and use cases following greater usage in clinical trials and after I'm done with that? Sure. Thanks David for the question. I mean, certainly, we see that there are synergies in both directions between the MRD pharma and clinical use cases, and depending on the setting in which the trial is being performed, depending on the type of patient who is eligible for the study, the time points and frequency of testing can vary and may also vary in the clinic for those exact same reasons. So while there are no definitive differences that I would call out between clinical and pharma-based use of the test, certainly, the use is customized to the particular needs of the investigator or the clinician and patient.

Chad M. Robins: Or.

Susan Bobulsky: Testing in terms of timing and when the test is done and the reason why I'm asking you. This question is does this have a chance to change behavior in the clinic in terms of maybe past frequency and use cases, following greater usage in clinical trial and after him.

Speaker Change: I'm done after that.

Speaker Change: Alright, Thanks, David for the question I mean, certainly we see that there are synergies in both directions between pharma and clinical use cases, and depending on the setting in which the trial is being performed depending on the type of patients who are eligible for the study.

Susan Bobulsky: The time points and frequency of testing can vary.

Susan Bobulsky: And May also vary in the clinic for those exact same reason so while there are no definitive differences that I would call out between clinical and pharma based use of the test.

Susan Bobulsky: Certainly be uses customized to the particular need or the investigators or the clinician and patient one thing, though that I would call out is back in the clinic a blood based testing has has gone to to really take shape with about 20% of our hammer detached now coming from blood in myeloma, that's something that farmers can create interesting.

Susan Bobulsky: One thing though that I would call out is that in the clinic, blood-based testing has begun to really take shape, with about 20% of our MRD tests now coming from blood and myeloma. That's something that pharma has great interest in, but we have not yet really explored in depth, and I certainly think that with the incorporation of MRD as an endpoint in myeloma, there will be quite a few additional opportunities that will open up exploration of deeper sensitivity testing in pharma studies, as well as potentially the use of blood down the road.

Susan Bobulsky: But we have not yet really explored in depth and I, certainly think that with the incorporation of R&D and then myeloma there'll be quite a few additional opportunities that will open up an exploration of deeper sensitivity testing and further studies as well as the potential use of blood down the road.

Speaker Change: Got it thank you and I forgot to give Uh huh Tyler.

Susan Bobulsky: And I forgot to give Kyle a congratulations on the new position. Thank you. I appreciate it. Thank you. Thank you very much. One moment for our next question. Our next question comes from the line of Tom Stevens of TD Cohen. Tom, your line is open.

Kyle Pisco: Congrats on the new position.

Tom Stevens: I appreciate it.

Tom Stevens: Thank you very much one moment for our next question.

Tom Stevens: Our next question comes from the line of Tom Stephens of TD Cohen, Tom Your line is open.

Tom Stevens: Hey, guys. Thanks for taking my question here.

Tom Stevens: Hey guys, thanks for taking the question here. Just one on kind of the EBITDA margins by segment and, you know, thank you for breaking that out. I guess it looks like today it's kind of negative 50 from about negative 100 last year, and it looks like quite a big lift on an incremental basis to get the break-even by the back half as kind of guided. You know, clearly, there's lots of tailwinds there, there's the pricing tailwind, there's the switch to the X, but could you break it out maybe in a more granular way for investors just how you get to that break-even by next year?

Tom Stevens: Just one on kind of the EBITDA margins by segment.

Tom Stevens: Thank you for breaking that out.

Tom Stevens: I guess it looks like today, it's kind of negative 50 from about negative 100 last year and it looks like quite a big lift on an incremental basis to get the to get to breakeven by back half is kind of guided.

Tom Stevens: Clearly, there's a lot of the talent that is the pricing tailwind.

Tom Stevens: To the X, but I guess could you break out maybe in a more granular way for investors just how you get to that breakeven by next year.

Tom Stevens: Yeah, I mean, I'll talk I mean broadly you know.

Tom Stevens: Yeah, I mean, I'll talk about, broadly, you know, obviously, the ASP initiatives are a big factor, margin improvements, you know, to reduce our kind of per volume test costs. And really, the biggest driver is the leverage throughout our operating expenses, both on the sales team and, and those, those margin profiles at the end of the day, as we continue to grow ASPs and the farm. Yeah, I mean, Tom, it's three things, right?

Tom Stevens: Obviously, the AFP initiatives are a big factor margin improvements.

Tom Stevens: To reduce our cost per volume test costs and really the you know.

Tom Stevens: Biggest driver is the leverage throughout our operating expenses both in the sales team and those those margin profiles at the end of the day as we continue to grow Isps in the pharma business, Yes, I mean, Tom it's three things right. It's raising the price per test that's lowering the costs that we deliver each test and its continuing to look at.

Kyle Pisco: It's raising the price per test, it's lowering the cost that we deliver each test, and it's continuing to look at operating expenses. And we're doing all three. And, you know, we've made improvements and kind of reduced the operating expense for the year by $10 million. And we continue to look at ways that we can kind of reduce expenses and gain leverage, and we will do so. Great. Yep. Go on. Sorry.

Kyle Pisco: Operating expenses and we're doing all three.

Speaker Change: You can see that we have.

Kyle Pisco: You made improvements.

Kyle Pisco: <unk> reduced the operating expense for the year of $10 million. We continue to look at ways that we can reduce or reducing expenses and gain leverage.

Kyle Pisco: We will do so.

Kyle Pisco: Great.

Speaker Change: Yes go ahead sorry.

Kyle Pisco: Just to reiterate you know back half of 'twenty, five and adjusted EBITDA breakeven and then the cash flow is not till 'twenty six so just just to make sure that we're clear on that.

Kyle Pisco: Just to reiterate, you know, the back half was 25, adjusted even, a break even, and then the cash flow is not till 25. Okay. Great. [inaudible] Yep, yep, definitely.

Kyle Pisco: And then just a question on blood type, you kind of mentioned it's now 20% of your multiple myeloma volumes. What reimbursement rate are you getting on blood versus your kind of more traditional bone marrow or spinal tap? Our reimbursement rates aren't distinguished by sample type, so our coverage policies both for Medicare and for the vast majority of private payers are sample-agnostic.

Kyle Pisco: Yes, yes definitely.

Kyle Pisco: And then just a question on kind of applaud you kind of mentioned its now 20% of your will be multiple multiple myeloma Williams.

Kyle Pisco: What we in Boston, where youre getting on blood buses youll kind of more traditional bone marrow spinal tap.

Kyle Pisco: Our reimbursement rates aren't distinguished by sample types, so or coverage policies, both for Medicare and for a vast majority of price per sample agnostic. So coverage applies to bone marrow and blood based testing for myeloma.

Susan Bobulsky: So coverage applies both to bone marrow and to blood-based testing for myeloma. wonderful. Thanks very much. I'll hop back in the queue.

Speaker Change: Wonderful thanks, very much I'll hop back in the queue.

Operator: Thank you very much. One moment for our next question. Our next question comes from Sung Jee Nam of Scotiabank. Sung, your line is open. Hey, this is Corey Rosenbaum. I'm on behalf of Sung Ji.

Speaker Change: Thank you very much one moment for our next question. Please.

Operator: Yes.

Corey Rosenbaum: Our next question comes from sung <unk> Nam.

Corey Rosenbaum: Scotiabank soon your line is open.

Operator: Yeah.

Corey Rosenbaum: Hi, This is Cory rosenbaum on for <unk>. Thanks for taking my question. So with the recent FDA recommendation during the meeting there was a big discussion around the 10 to the minus six sensitivity thresholds are in need.

Corey Rosenbaum: Thanks for taking my question. So, with the recent FDA ODAC recommendation, during the meeting, there was a big discussion around the 10 to the minus 6 sensitivity threshold. Are any of the existing trials using CLINIC-C currently differentiating between 10 to the minus 5 and 10 to the minus 6? I'm just wondering how the industry may be able to start evaluating the differences between these two sensitivity thresholds.

Corey Rosenbaum: The existing trials using clumsy currently differentiating between 10 to the minus five in terms of the minus six just wondering how the industry may be able to start evaluating the differences between these two sensitivity threshold.

Speaker Change: Yeah. Thanks for that question Corey.

Susan Bobulsky: Yeah, thanks for the question, Corey. Absolutely, a number of studies are being designed to differentiate between 10 to the 5th and 10 to the 6th sensitivity, and of course, Clonaseq is really the singular assay that can deliver that level of sensitivity consistently with a reasonable sample input and with standardization across patients. So what we are actually hearing from the investigators who were central to the preparations and the data that went into support for the ODAC meeting a couple of weeks ago, they acknowledged that most of the data historically that was able to be analyzed was at 10 to the negative 5th, but the group, the KOLs, have moved on to 10 to the 6th as the real important standard threshold, and they are already anticipating pursuing additional engagements with the FDA Thank you. That's all for me. I'll head back to the queue.

Susan Bobulsky: Absolutely a number are increasingly studies or are being designed to differentiate between 10 to the fifth intended to fix sensitivity and of course quality.

Susan Bobulsky: The singular assay that can deliver that level of sensitivity consistently with a reasonable sample in play.

Susan Bobulsky: With the standardization across our cost patient itself.

Susan Bobulsky: What we are actually hearing from the investigators who were central to the preparations and the data that went into support for the meeting couple of weeks ago. They are you know they acknowledge that most of the data historically and it was able to be analyzed was actually negative hit but that.

Susan Bobulsky: Group of Kols have moved on to kind of the sixth sense. The real important standard threshold and they are already anticipating pursuing additional engagements with the FDA over the coming months and years to move that threshold. She tended to think that over time.

Speaker Change: Awesome. Thank you that's all for me and I'll hop back to the queue.

Speaker Change: Thank you very much moments, where our next question. Please.

Susan Bobulsky: Thank you very much. One moment for our next question, please. Our next question comes from the line of Tejas Savant of Morgan Stanley. Tejas, your line is open. Hello, this is Yuko on behalf of Tejas Savant.

Susan Bobulsky: Yes.

Yuko: Our next question comes from the line of <unk> of.

Yuko: Morgan Stanley Your line is open.

Yuko: Hello. This is Hugo on for Ross. Thank you for taking our questions.

Yuko: Where are you in the restructuring and resource allocation process. The increased independence between the two reporting segments. Today are there any work that remains to be done heading into the back half or are they going to place operationally.

Yuko: Oh, I'd say, 90% of the work has been done in Q1, we realized the workforce and most of that was aligning operations and our R&D investments around each of the businesses that that work is complete we still have a little bit of transitory.

Kyle Pisco: I'd say 90% of the work has been done in Q1. We realigned the workforce, you know, and most of that was aligning operations and R&D investments around each of the businesses. That work is complete.

Kyle Pisco: We still have a little bit of transitory Processes in Extracting the Immune Medicine Pharmacoservices Lab from our production lab for the MRD business, but that's the only kind of remaining activity. So you know, by and large, everything's done, and we're operating in that vein today. Women. Are there, or are there particular features of MM trials? Yellow. Thank you for the question.

Kyle Pisco: Recessive and extracting the immune medicine pharma services lab from our production lab for Marty business, but that's the only kind of remaining activity.

Kyle Pisco: By and large everything is done and.

Kyle Pisco: We're operating in that vein today.

Kyle Pisco: Okay.

Speaker Change: I'm asking a question on the <unk>.

Kyle Pisco: Meeting following the AD com.

Kyle Pisco: How do you how do you see FDA receptor ability to discussing MLD as an endpoint in other heme indications are there or are there particular features of trials that may not lead to other heme indications like E. L. L. C. L. D. L D C L.

Speaker Change: Got it thank you for the question.

Susan Bobulsky: In fact, that's a question that was of great interest to us as well, and certainly, we do anticipate that this FDA decision following the ODAC vote will pave the way for further discussion with the FDA about MRD as an endpoint and other indications. And so we're already actively engaging with investigators to talk about how we might potentially support those efforts, providing data and supporting studies that are already being designed.

Susan Bobulsky: In fact, that's a question that was of great interest to us as well and certainly we.

Susan Bobulsky: We do anticipate that this desk at D. A.

Susan Bobulsky: We update decision following the iliac, though.

Susan Bobulsky: Will pave the way for further discussion with the FDA about it might be an endpoint other indication. The one that investigators have expressed an interest to lot about C. O L and that is one from which currently are the thresholds that are.

Susan Bobulsky: Timelines and if any trials of kind of the fourth.

Susan Bobulsky: Just like in myeloma interest in continuing to move that threshold further.

Susan Bobulsky: Tip to the benefit of patients and so we're already actively engaging with investigators to talk about how we might potentially support those efforts providing data and at some point things that are already being designed we've also had conversations with our pharma partners and interestingly many of those who we've talked to you.

Susan Bobulsky: We've also had conversations with our pharma partners, and interestingly, many of those who we've talked to with the intent of focusing on myeloma are actually taking a bigger picture view and looking across their portfolios to think about how they might proactively leverage MRD more. And more prospectively, in anticipation of the FDA potentially being more open to MRD data across hematologic malignancies in the forthcoming time. Thank you very much

Susan Bobulsky: Focusing on myeloma are actually taking a bigger picture view and looking across their portfolios to think about how they might proactively leverage MRP and already more.

Susan Bobulsky: More prospective week in anticipation of the FDA potentially being more open to MRV data across hematologic malignancies.

Susan Bobulsky: <unk> kind of time.

Speaker Change: Great. Thank you very much.

Susan Bobulsky: Okay.

Operator: One moment for our next question. Our next question comes from Andrew Brackmann of William Blair. Andrew, your line is open. Hi everyone, this is Maggie Bowie on for Andrew today.

Speaker Change: Thank you very much one moment for our next question.

Operator: Yes.

Operator: Okay.

Maggie Bowie: Our next question comes from Andrew Brandon William Blair, Andrew Your line is open.

Maggie Bowie: Hi, everyone. This is maggie on for Andrew today.

Maggie Bowie: I wanted to ask one on the progress of the EMR integration. I know you spoke earlier about some strong growth in the quarter from customers, but just wanted to know what the feedback has been for the accounts that you've recently added and then how many more accounts do you expect to be able to add this year and then how is this factoring into growth? Yeah, thank you for the questions, Maggie. We are hearing very positive feedback, as you might imagine, it makes the app better. We have nine active projects, as Chad mentioned, currently in motion with IT departments at those specific sites. We have dozens of additional sites that are in conversation, securing IT resources, going through various approval processes, and we are ready to go with any account that's ready to move.

Maggie Bowie: I wanted to ask one on the progress of the EMR integration I know you spoke to earlier.

Maggie Bowie: Strong growth in the quarter from customers, but just wanted to know like what feedback has been for the accounts did you recently added and then how many more accounts that can be able to add this year and then how is that factoring into your growth assumption.

Speaker Change: Yeah. Thank you for the questions I E.

Maggie Bowie: We are hearing very positive feedback as you might imagine it makes at the assay.

Speaker Change: Secondly easier to to use both from an ordering perspective and in terms of integrating the results directly into the patient chart for clinical use.

Speaker Change: We have nine.

Maggie Bowie: Nine active projects that Chad mentioned currently in motion with 19 departments at the specific sites. We have dozens of additional sites that are in conversation and securing I T researches going through various approval processes.

Speaker Change: We are at.

Maggie Bowie: Ready to go in with any account that's ready to Neil I'll note that some of the accounts that are in active.

Susan Bobulsky: I'll note that some of the accounts that are in active IT development are among our largest accounts, and in fact, 15 of our 20 largest accounts are Epic customers, so we're very eager to move those forward and to ensure that a meaningful portion of our volume goes through Epic over the next one to two years, and we do anticipate, by the end of this year, continuing to expect between 20 and 25 accounts to be integrated. That'll represent somewhere between 15 and 20% of our volume, we expect, and we expect to continue to increase the speed at which we can get these accounts up and running.

Susan Bobulsky: I T development are among our largest accounts and in fact and 15 of our 20 largest accounts aren't at the customer and so we're very eager to move this forward and to ensure that a meaningful portion of our volume goes through I think over the next one to two year. It can we do anticipate by the end of this year continued it.

Susan Bobulsky: Do you expect between 20 and 25 accounts to be integrated now represent somewhere between 15 and 20% of our volume we expect.

Susan Bobulsky: And we expect to continue to increase the speed whereby we can get these accounts up and running and our most recent projects are trending toward about a seven week timeline, which isn't really nicely aligns with industry standards for our integration.

Susan Bobulsky: Our most recent projects are trending toward about a seven-week timeline, which really, Great, thank you so much. And then I wanted to ask another question on improving growth margins, just as I know, that's one of the drivers to reach your profitability targets for MRRD. Can you talk about the progress of some of the initiatives there, such as the transition to NovaSeq and the LIMS overhaul, and how these are progressing? How should we be thinking about these driving improvements and growth margins over time?

Susan Bobulsky: Great. Thank you so much and then I wanted to ask another one on improving gross margins just because I know that one of the drivers to reach your profitability targets from our R&D can you talk about the progress of some of the initiatives there.

Susan Bobulsky: The transition to Nova Sea.

Susan Bobulsky: The lens overhaul and how these are progressing how should we be thinking about these driving improvements in gross margins over time. Thank you.

Kyle Pisco: Thank you. Yeah, I mean, I think first and foremost, on the gross margin ASP initiatives, we're starting to see kind of some of that pull through with some strong collections subsequent to the quarter. As it relates to the costing profile of the assay with the transition to NOVSEQ, I think of that as a 25 event. We're still undergoing the development aspects of that. Assessing that. So, you know, I view that as 25.

Speaker Change: Yeah, I mean, I think first and foremost on the gross margins I S. T initiatives, we're starting to see kind of some of that pull through with some strong collections subsequent to the quarter as it relates to the costing profile of the assay, what's the transition out of the CCAR I think of that as a 25 of that we're still undergoing the development aspects of that.

Kyle Pisco: In assessing that so.

Kyle Pisco: And then I think the other thing to just note is, you know, overall, as a company, we're going to continue to look at everything we can do to streamline operations and continue to gain leverage without increasing expenses to get to that profitability metric. So I think of leveraging our field force is just as important as what we do in the margin profile. Great. Thank you very much. At this time, I'm showing no further questions in the queue.

Kyle Pisco: I view that as 25, and then I think the other thing to just note is overall as a company we're going to continue to look at everything we can do to streamline operations and continue to gain leverage without increasing expenses.

Kyle Pisco: To get to that profitability metrics, so I think of leveraging our field force.

Kyle Pisco: Just as important as what we do on the margin profile of the business.

Speaker Change: Thank you so much.

Speaker Change: Thank you very much at this time Im showing no further questions in the.

Operator: This will conclude our question and answer session. Thank you for participating in today's conference. This does conclude the program. You may now disconnect. Thank you. [inaudible] A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music, Good day, and thank you for standing by.

Operator: This will conclude our question and answer session. Thank you for participating in today's conference. This does conclude the program.

Operator: Now disconnect.

Speaker Change: Thank you.

Operator: Welcome to Adaptive Biotechnology's first quarter 2024 earnings. Please note that all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising that your hand is raised.

Speaker Change: Thank you.

Operator: Okay.

Operator: [music].

Operator: Okay.

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Operator: Okay.

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Operator: Sure.

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Operator: Okay.

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Operator: Yes.

Operator: [music].

Karina Calzadilla: To withdraw your question, please press star 1-1 again. 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 Calandia, Head of Investor Relations.

Chad M. Robins: Joining the call today are Chad Robins, our CEO and co-founder, and Kyle Pisco, 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 M. Robins: Thank you, Karina. Good afternoon, and thank you for joining us for our first quarter earnings. As communicated last month and shown on slide 3, moving forward, both our MRD and immune medicine businesses will remain under the adaptive umbrella, each with its own dedicated resources and separate segment reporting. This will provide each business with the autonomy to execute on their respective focused strategies, which are, for MRD, marching towards profitability with a strengthened financial profile. And for Immune Medicine,

Chad M. Robins: Translating science and cancer and autoimmunity into breakthrough therapeutic programs with clear guardrails to guide investment. Importantly, we continue to preserve our strong capital position with approximately $309 million as of March 31, 2020, which enables us to bridge the MRD business to profitability and to support targeted investments in immune medicine. Our position is further strengthened by access to additional non-dilutive capital through our agreement with Orbital. Now, let's take a closer look at the MRD business on slide 4.

Chad M. Robins: The NRG business had an impressive quarter, with $32.6 million in revenue, representing 52% growth versus the prior year, driven by both clinical and pharma. On the clinical side, volumes continue to grow quarter over quarter, with over 17,000 tests delivered in Q1, representing a 41% increase versus the prior year and a 9% increase sequentially. Growth came from all market indications, and Multimiloma continues to be the largest contributor, representing approximately

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Chad M. Robins: The Fuselage B-cell Lymphoma indication is our fastest-growing indication, growing approximately 25% quarter over quarter and now contributing to 5% of total tests. We also continue to be laser-focused on driving ASD growth by reducing out-of-policy and non-contracted claims and improving revenue cycle management. Importantly, we are encouraged to see the recent preliminary gap bill rate set by Medicare, One Thousand Eight Hundred and Twenty-Three dollars per test, an increase from our current implied per test rate under the episode structure.

Speaker Change: Good day and thank you for standing by welcome to the adaptive Biotechnologies first quarter 2024 earnings call. Please note all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone you will then hear an automated manner.

Chad M. Robins: Advising that your hand is raised to withdraw your question. Please press star. One again. Please be advised today's conference is being recorded I would now like to hand, the conference over to your first speaker today Karina.

Chad M. Robins: Once finalized, this rate would go into effect beginning in 2025. This rate, which will have implications for both Medicare and commercial payer pricing, gives us further confidence in our ability to grow ASP for Tests by $200 over the next two years. In addition, Clonaseq key indicators continue to trend positive in Q1.

Chad M. Robins: <unk> head of Investor Relations. Please go ahead.

Chad M. Robins: Blood-based testing represented nearly 40% of tests, with multiple myeloma in blood now at 20% following positive data presented at ASH in December. Tests in the community continue to grow sequentially, contributing about 25% of tests delivered. Ordering HVPs and ordering accounts grew 33% and 25% versus the prior year, respectively. Additionally, EMR integration remains central to our efforts to further enhance our customer experience and to solidify our market leadership position.

Speaker Change: Thank you Corey and good afternoon, everyone I would like to welcome you to adaptive Biotechnologies first quarter 2024 earnings conference call.

Chad M. Robins: We saw post-integration quarter-over-quarter growth of 40% across the first four accounts we integrated at the end of 2023, and we now have nine additional active Epic integrations in motion. Looking at MRT Pharma on slide 5, our pharma business started the year strong with Q1 revenue growth of 71% versus prior year.

Chad M. Robins: Sequencing revenue grew 70%, and we recognized milestones from two drug approvals. Last month, the FDA's Oncologic Drug Advisory Committee, or ODAC, voted unanimously in favor of the use of MRD as a primary endpoint to support the accelerated approval of new therapies for patients with multiple myeloma. ODAC's recommendation, if accepted by the FDA, has the potential to accelerate myeloma patient access to novel therapies and to reduce drug development costs. In addition to Clonacy being the only FDA-cleared MRD assay for patients with multiple myeloma, it is also the singular assay that can consistently deliver the sensitivity and standardization needed to meet FDA performance standards. This further solidifies Clonoxate as the assay of choice for multiple myeloma drug development.

Chad M. Robins: Earlier today, we issued a press release reporting about the financial results for the first quarter of 24. The press release is available at Www Dot adopted biotech dot com.

Chad M. Robins: We're conducting a live webcast of this call.

Chad M. Robins: Be referencing a slide presentation that we posted to the investors section in our corporate website.

Chad M. Robins: During the call management will make protection and other looking forward statements within the meaning of federal securities laws regarding future events and the future financial performance of the company.

Chad M. Robins: These statements reflect management's time perspective today.

Chad M. Robins: 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.

Chad M. Robins: In addition, non-GAAP financial measures will be discussed during the call and the reconciliation of non-GAAP to GAAP metrics that can be found in the earnings release joining.

Chad M. Robins: Joining the call today are Chuck Robbins, our CEO and co founder and physical our Chief Financial Officer at.

Chad M. Robins: Additional members of our management will be available for Q&A.

Chad M. Robins: With that I will turn the call over to Charlie Chen.

Chad M. Robins: So, what does this mean for Chronis? On the revenue recognition front, we can potentially accelerate the realization of revenue from existing studies. There is also potential to generate new bookings as companies re-prioritize their multiplied loaner programs to leverage a faster path to commercialization. On the milestone recognition front, we also have the opportunity to monetize our portfolio primary endpoints from the existing MRV pharma contract. In addition, this could represent a positive table effect for the continued acceptance of MRD as a standard measure of response in the clinic.

Speaker Change: Thank you Karina good afternoon, and thank you for joining us on our first quarter earnings call.

Chad M. Robins: As communicated last month and shown on slide three moving forward, both our MRC and immune medicine businesses will remain under the adaptive umbrella each with its own dedicated resources and separate segment reporting this.

Chad M. Robins: Clear Guardrails to guide investment.

Chad M. Robins: Importantly, we continue to preserve our strong capital position with approximately $309 million as of March 31, which enables us to bridge, the R&D business and profitability and to support targeted investments and immune medicine or.

Chad M. Robins: Our position is further strengthened by access to additional non dilutive capital through our agreement with orbit.

Chad M. Robins: Now, let's take a closer look at the MLP business on slide four.

Chad M. Robins: The NRG business had an impressive quarter with $32 6 million in revenue, representing 52% growth versus prior year, driven by both clinical and pharma.

Chad M. Robins: Critical side.

Chad M. Robins: <unk> continued to growth quarter over quarter with over 17000 tests delivered in Q1, representing a 41% increase versus prior year and a 9% increase sequentially.

Chad M. Robins: Both came from all marketed indications and multi myeloma continues to be the largest contributor representing approximately 40% of volume.

Chad M. Robins: To use large b cell lymphoma is our fastest growing indication grown approximately 25% quarter over quarter and now contributing to 5% of total tests.

Chad M. Robins: We also continue to be laser focused on driving ASD growth by reducing auto policy of non contracted claims and improving revenue cycle management.

Chad M. Robins: Importantly, we are encouraged to see the recent preliminary capital rates set by Medicare.

Chad M. Robins: $1823 per test and increase from our current implied protest rate under the <unk> structure.

Chad M. Robins: In addition, <unk> key indicators continued to trend positive in Q1.

Chad M. Robins: Blood based testing represented nearly 40% of tests with multiple myeloma in blood now like 20% following positive data presented at Ash in December.

Chad M. Robins: Testing the community continued to grow sequentially contributing about 25% of tests delivered.

Chad M. Robins: Ordering hcp's and ordering accounts grew 33 at 25% versus prior year, respectively.

Chad M. Robins: Looking at MRV pharma on slide five.

Chad M. Robins: Our pharma business started the year strong with Q1 revenue growth of 71% versus prior year sequencing revenue grew 17% and we recognized milestone from two drug approvals.

Chad M. Robins: Last month, the Fda's Oncologic drug Advisory committee or <unk> voted unanimously in favor of the use of MRP as a primary endpoint to support the accelerated approval of new therapies for patients with multiple enrollment <unk> recommendation is accepted by the FDA has potential to accelerate by Walmart.

Chad M. Robins: Patient access to novel therapies and to reduce drug development costs.

Chad M. Robins: In addition to closely being the only FDA cleared MRP assay for patient remote by Walmart. It is also the singular assay that can consistently deliver a sensitivity at standardization needed to meet the FDA performance standards.

Chad M. Robins: Further solidifies <unk> as the.

Chad M. Robins: Assay of choice for multi myeloma drug developers.

Chad M. Robins: So what does this mean for <unk>.

Chad M. Robins: On the revenue recognition front, we can potentially accelerate the realization of revenue from existing studies. There is also potential to generate new bookings as companies re prioritize their multi volume progress to leverage a faster path to commercialization.

Chad M. Robins: On the milestone recognition front, we also have the opportunity to monetize our portfolio for a portfolio of primary endpoints from existing MRV pharma contracts.

Chad M. Robins: In addition, this could represent a positive halo effect for the continued acceptance of MRV is a standard measure of response in the clinic.

Chad M. Robins: Now, let's turn to of your benefit on slide six.

Chad M. Robins: The iam business is focused on developing differentiated immune driven therapeutics in cancer and autoimmunity and oncology, we continue to support and close we work closely with our genetic colleagues and the development of TCR based cell therapy products targeting tumor neo antigens.

Chad M. Robins: We are working with Genentech on a holistic review of the programs to enable the development and delivery of the highest impact therapy for patients. Both companies are excited and committed as we move forward with these developments will provide you with an update at the appropriate time and autoimmunity, we narrowed our focus to select indications and multiple sclerosis and type.

Chad M. Robins: One diabetes, where we believe there is still a high unmet need to develop better more targeted therapies with a better side effect profile.

Chad M. Robins: Our approach allows us to discover the specific T-cells that are attacking cells. Therapeutically, our goal is to eliminate or block the activation of these problem T-cells and directly stop them from attacking healthy tissue. In MS and T1D, we've successfully identified the subset of autoreactive T-cell receptors that are likely causing these devastating diseases.

Chad M. Robins: Our approach allows us to discover the specific T cells that are attacking self therapeutically. Our goal is to eliminate or block. The activation of these trials in T cells and directly stop them from attacking healthy tissue and EMS.

Chad M. Robins: <unk> and <unk>, we've successfully identify the subset of auto reactive T cell receptors that are likely causing these devastating diseases and in multiple sclerosis.

Chad M. Robins: And in multiple sclerosis, we can confirm the specific self-antigen or target to which these T cell receptors bind. This quarter, we started our antibody discovery campaigns in MS and T1D. Our goal in 2024 is to discover, make, and test select antibodies to generate preclinical data that informs further investment by the U.S. We continue to gauge our R&D investments based on expected data readouts throughout the year. In Q1, we aligned our resources to execute on these select 2024 programs and specific goals.

Chad M. Robins: Firm specific cells edited or target to which these T cell receptors.

Chad M. Robins: This quarter, we started our antibody discovery campaigns and MS. <unk> <unk>. Our goal in 2024 is to discover make and test select antibodies to generate preclinical data that informs further investment by year end, we continue to engage our R&D investments based on expected data readouts throughout the year.

Chad M. Robins: In Q1, we aligned our resources to execute on these select 2024 programs in specific goals as a result of these changes we expect to reduce our immune medicine operating expenses in 2024 by more than 50% versus prior year.

Chad M. Robins: As a result of these changes, we expect to reduce our immune medicine operating expenses in 2024 by more than 50% versus the prior year. The IM business remains disciplined on its spend, and we continue to engage with strategic partners to help offset our cash burn. Now, I'm going to pass it over to Kyle to go through the key financials and provide detail and segment reporting.

Chad M. Robins: Item business remains disciplined on our spend and we continue to engage with strategic partners to help offset our cash burn now I'm going to pass it over to Kyle to go through the key financials and provide a detailed segment reported comp.

Kyle Pisco: Thanks. Thanks, Chad. Let's start with revenue for the first quarter on the left slide. Total revenue in the first quarter was $41.3 million.

Kyle Pisco: Thanks, Chad, let's start with revenue for the first quarter on the left of slide seven.

Kyle Pisco: Total revenue in the first quarter was $41 $9 million of 78% from <unk> of 22% from immune medicine.

Kyle Pisco: 78% from MRD, and 22%. MRE revenue grew to $32.6 million, up 52% from a year ago, with ClonalSeq clinical testing and MRT-Pharma partnerships driving approximately 48% and 12% of the growth, respectively, along with a $4.5 million increase in regulatory. Excluding these milestones, MRT revenue grew 31%. Medicine revenue was $9.2 million. Deaf, 43%.

Kyle Pisco: Along with a $4 5 million increase in regulatory.

Kyle Pisco: Excluding these milestones and marketing revenue grew 31% from a year ago.

Kyle Pisco: Let me add medicine revenue was $9 2 million down 43% from a year ago, driven largely as expected by lower <unk> amortization, which decreased 49% as well as decreases in I am pharma services due to a shift in focus towards target and drug discovery efforts.

Kyle Pisco: Treatment Largely as Expected by Lower Genetic Amortization. Treatment decreased 49% as well as decreased IM Pharma services due to a shift in focus towards target and direct discovery. Moving down the P&L, total operating expenses, including cost of revenue, were $90.6 million, representing a 4% decrease.

Kyle Pisco: This decrease was mainly driven by the continued emphasis on driving leverage across functions and reductions in research and development. As we continue to prioritize our, Cost of Revenue decreased 3%, resulting in gross margin for the quarter of 57%, a 7 percentage point increase versus a year ago. This increase was mainly attributed to... MRD Milestone Recognition, Partially Offset by Lower Average Intercepts. Finally, interest expense from our Royalty Financing Agreement with Orlando was $3 million, which was more than offset by. Net loss for the quarter was $47.5 million compared to $57.7 million. Well, Justin Iveda with a loss of 28 points.

Kyle Pisco: Moving down the P&L total operating expenses, including cost of revenue were $90 6 million, representing a 4% decrease from last year.

Kyle Pisco: Cost of revenue decreased 3%, resulting in gross margin for the quarter of 57% a seven percentage point.

Kyle Pisco: Increase versus a year ago.

Kyle Pisco: This increase was mainly attributed to MRV milestone recognition, partially offset by lower amortization of the genentech upfront.

Kyle Pisco: Finally interest expense from our royalty financing agreement with <unk> was $3 million, which was more than offset by interest income.

Kyle Pisco: Net loss for the quarter was $47 5 million compared to $57 $7 million last year, while adjusted EBITDA was a loss of $28 2 million compared to $37 1 million in Q1 of 2023.

Kyle Pisco: Parents of 37.1 million and Q1 of Now turning to segment reporting on the right side of the screen. Structuring activities during the quarter align resources and operations, sales and marketing, and R&D towards either MRD or immune medicine. Resources, and Related Costs are dedicated to each business and are included within the operating spend of MRD and Immune Medicine, respectively. However, other corporate functions such as finance, legal, HR, and IT continue to be managed centrally to avoid synergies from duplication.

Kyle Pisco: Now turning to segment reporting on the right side of the slide.

Kyle Pisco: Restructuring activities during the quarter aligned resources and operations sales and marketing and R&D towards either the MRP, our immune medicine businesses.

Kyle Pisco: These resources and related cost are dedicated to each business.

Kyle Pisco: Within the operating spend of <unk> medicine, respectively.

Kyle Pisco: Other corporate functions, such as finance legal HR and it continue to be managed centrally to avoid dis synergies from duplication.

Speaker Change: Yes ill keep the majority of these corporate expenses to each segment, you think direct head count in <unk> medicine, which is approximately 75% MRV at approximately 25% higher.

Kyle Pisco: Certain expenses will remain unallocated such as our corporate insurance costs governance audit fees are idled facility and interest income and expense, which are reflected under our unallocated corporate segment.

Kyle Pisco: In addition to operating expenses per se, but we are also providing adjusted EBITDA, which adjusting for certain income and expense line items can be used as a proxy for cash burn per segment, excluding capex and working capital.

Kyle Pisco: We allocate the majority of these corporate expenses to each segment using direct headcount in MRD and immune medicine, which is approximately 75% MRD and approximately 25% immune medicine. However, certain expenses will remain unallocated, such as our corporate insurance costs, governance, audit fees, our EIDL facility, and interest income and expense, which are reflected under an unallocated corporate insurance policy. In addition to operating expenses per sex, we are also providing an adjustment, which can be used as a proxy for cash burn per second, excluding CapEx and Now turning to our updated full year guidance on slide, we are updating our MRD Full Year Revenue Guidance to $135,140,000.

Kyle Pisco: Now turning to our updated full year guidance on slide eight.

Kyle Pisco: Bringing Up the Midpoint of the Range to Reflect the Realization of Milestones Not Previously Included in the Guide, with respect to trends throughout, We continue to expect MRT revenue to be about $45-55 weighted between the first and second half. For the year, we are lowering the total company estimated operating revenue of $315,000,000 to 300,000.

Kyle Pisco: With respect to trend throughout the year, we continue to expect commodity revenue to be about 45 55 weighted between the first and second half respectively.

Kyle Pisco: Thanks.

Kyle Pisco: For the year, we are lowering the total company estimated operating spend $2 million to $350 million $360 million, a $10 million reduction from our previous guidance as we continue to drive leverage across the businesses and manage investments.

Kyle Pisco: 10 Million Dollar Reduction from our previous guidance as we continue to drive leverage across the businesses and management. Of this total spend, approximately 70% sits within an MRT business and approximately 25% with no MRT. We continue to be thoughtful about our past. Learning, One Time Costs from Restructure. Now expect the burn to average approximately 30 million for the remaining three quarters. Assistive Technology.

Kyle Pisco: The total spend approximately 70% sits within the RV business and approximately 25% with an immune medicine.

Kyle Pisco: We continue to be thoughtful about our cash position.

Kyle Pisco: Onetime costs for restructuring activity, we now expect the burn to average approximately $30 million for the remaining three quarters, which implies an annual cash burn of $130 million versus our previous estimate of $140 million.

Kyle Pisco: This represents a 14% reduction in cash burn over full year 2020. Of note, approximately 50% of the cash burden this year is expected to be from the Medical Device Business, and approximately 40% from the Immune Medicine Business. The remaining 10% is due to the unallocated corporate. I look forward to providing you with further financial updates throughout the year as we continue to make progress towards our goal. With that, I'll hand it back.

Kyle Pisco: This represents a 14% reduction in cash burn over full year 2023.

Kyle Pisco: Of note approximately 50% of the cash burn this year is expected to come from the NRT business and approximately 40% from EMEA.

Kyle Pisco: The remaining 10% is due to the unallocated corporate costs.

Kyle Pisco: I look forward to providing you with further financial updates throughout the year as we continue to make progress towards our goals with that I'll hand, it back over to Chad. Thank.

Chad M. Robins: Thank you, Kyle. As I think it's evident, we've made important decisions over the last couple of weeks. I'm confident we're taking the right steps as we move forward with our two business segments and execute on their priorities. Our cash position is strong, and we're disciplined in managing our capital to bridge the MRD business profitability while supporting measured investments in immune medicine to advance our key programs. With that, I'll turn the call back over to the operator and open up for questions.

Speaker Change: Thank you Kyle.

Chad M. Robins: I think it is evident we have made important decisions over the last couple of months I'm confident we're taking the right steps as we move forward with our two business segments and execute on their priorities. Our cash position is strong and we are disciplined and manage our capital to bridge the R&D business to profitability, while supporting measured investments in immune medicine to advance our key program.

Chad M. Robins: With that I'll turn the call back over to the operator and open it up for questions. Thank you.

Chad M. Robins: At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Speaker Change: Thank you.

Chad M. Robins: Conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

Chad M. Robins: Please standby, while we compile the Q&A roster.

Operator: Please stand by while we compile the Q&A roster. Our first call comes from the line of Mark Massaro from BTIG. Mark, your line is open. Hey guys, congrats on the quarter.

Chad M. Robins: On our first call comes from the line Mark Massaro from BTG Mark Your line is open.

Mark Anthony Massaro: Thank you for taking the question. I recognize it's only been about three or four weeks, but, you know, following the FDA ADCOM meeting or ODAC meeting, where multiple myeloma was recommended to be a unanimous primary endpoint in clinical trials for multiple myeloma, can you just give us a sense of what you've been hearing in the marketplace? Any of your customers perhaps looking to pick things up a little bit on the clinical trial side?

Mark Anthony Massaro: Hey, guys congrats on the quarter. Thank you for taking the question.

Mark Anthony Massaro: I recognize it's only been about three or four weeks, but following the FDA AD comm meeting or <unk> meeting.

Mark Anthony Massaro: Where multiple myeloma was recommended to be a unanimous.

Mark Anthony Massaro: Primary endpoint in clinical trials for multiple myeloma can you just give us a sense for what you've been hearing in the marketplace.

Mark Anthony Massaro: Any of your customers, perhaps looking to pick things up a little bit on the clinical trial side.

Mark Anthony Massaro: How do you how do you envision this impacting your business like over the next couple of years.

Mark Anthony Massaro: And how do you envision this impacting your business over the next couple of years? Yeah, thanks Mark for joining the call. I'm gonna pass it over to Susan who can provide, you know, quite a bit of color on that. Susan?

Mark Anthony Massaro: Yes.

Speaker Change: Thanks for joining the call.

Mark Anthony Massaro: Pass it over to Susan who can provide quite a bit of color to that too.

Susan Bobulsky: Health Chat, and thanks, Mark. Yeah, I mean, the ODAC vote is a huge milestone for the field of myeloma and, obviously, tremendous news for patients. We have been in active discussions with our pharma partners to discuss potential implications. And, you know, while many companies are waiting for the final FDA guidance, which we do expect to be shortly forthcoming, we already have a few studies that have been upgraded to primary endpoints, as well as a few new studies where MRD is being used, and a few new studies where MRD is going to be used as a primary endpoint directly as a result of the In general, as Chad outlined, we see some potential upsides in a couple of areas.

Susan Bobulsky: Thanks, Chad and thanks Mark.

Susan Bobulsky: Yes.

Susan Bobulsky: So we think it's a huge milestone for the field of miles online, obviously tremendous needs for patients and we have been in active discussions with our pharma partners to discuss potential applications and while many companies are leading to the final FDA guidance, which we do expect to be shortly forthcoming we already have a few studies that have been upgraded.

Susan Bobulsky: <unk> primary endpoint as well as the <unk> are have already is being used a few new studies, where I'm ready, it's going to be used as a primary end point directly as a result of the <unk>.

Susan Bobulsky: Additionally, upgrading as I mentioned of trials that are currently secondary endpoint to primary endpoint data, which will both accelerate the realization of those milestones and also increase their value and then potentially additional new bookings as pharma companies re prioritize their development program.

Susan Bobulsky: <unk> to central line F&I alone in.

Susan Bobulsky: In the clinic. We've also had an opportunity to have cleanup few conversations around this topic and clinicians are universally and very very excited on behalf of their patients.

Susan Bobulsky: And thank you for your tremendous remaining unmet need and they also acknowledge.

Susan Bobulsky: To rank that recommendation coming directly from <unk> and ultimately likely from SBA.

Susan Bobulsky: Provided to the credibility of that market.

Susan Bobulsky: Measure of clinical response.

Susan Bobulsky: And as a tool they can use and dialogue with their patients to individualize their care, we really do believe that there is potential for a halo effect in the clinic as well.

Susan Bobulsky: How are you thinking about commercial payers? Is that something that you can potentially initiate that dialogue ahead of the go-live date with Moldex? How should we think about that as an incremental driver for the business? Absolutely, Mark. So you're correct that it will go live formally on January 1st, after it's finalized later this year. However, we are already leveraging the published preliminary rate in conversations with commercial payers. So there are two implications.

Susan Bobulsky: Okay. That's great and then it was nice to see the mold ex gap fill rate of 1823 per test I think that is scheduled to go live I think January 2025.

Susan Bobulsky: How are you thinking about commercial payors is that something that you can potentially initiate that dialogue.

Susan Bobulsky: Head of the go live date with <unk>.

Susan Bobulsky: We think about that as an incremental driver to the business.

Speaker Change: Yes, absolutely Mark.

Susan Bobulsky: You are correct that it will go live formally on January 1st after its finalized later this year and we are already leveraging the published preliminary rate and conversations with commercial payors. So there are two implications in the short term we had several large non contracted payers who have been holding out waiting for the PMA priced.

Susan Bobulsky: In the short term, we have several large non-contracted payers who have been holding out, waiting for the PLA price to be published so that they can complete their negotiations on price with us. And so we've already engaged them to advance those negotiations. And of those of note, Anthem is a particularly large one that we're working with utilizing the recently published price. Additionally, over time, we can use this price to re-apply to existing contracted payers. The Center for Contemporary Art and Mark Massaro, whose work is really to help us potentially bring up contracted rates that we've previously negotiated if they are below the PLA price.

Susan Bobulsky: Published so that they could complete their negotiations on price with that and so on.

Susan Bobulsky: Already in case that the Q2 examples negotiations and uploads of note anthem is a particularly large one that we're working with utilizing the recently published.

Susan Bobulsky: Additionally over time, we can use this price to re approach existing contracted Paris to potentially bring up contracted rates.

Susan Bobulsky: We've previously negotiated if they are below the line price.

Susan Bobulsky: And one other comment, Mark, worth noting, this, as we've mentioned a couple of times, the preliminary pricing rate, obviously there's no promise that we will continue to work with Moldex on kind of finalizing the price and the episode structure. That's great. And then there is one last one for me.

Speaker Change: One other comment Mark worth noting.

Susan Bobulsky: As we've mentioned a couple of times that the preliminary pricing rate obviously.

Susan Bobulsky: No promise, we continue to work with <unk>.

Susan Bobulsky: I'd kind of finalizing the price and the episodic structure. So.

Susan Bobulsky: That's great and then one last one for me you took up the low end of the guide for MRV.

Kyle Pisco: I assume that's just cycling in the $4 $5 million milestone that you realized in Q1.

Kyle Pisco: Just clarifying that and then how should we think about the total.

Kyle Pisco: <unk> contribution.

Kyle Pisco: Mardi milestones for the full year.

Kyle Pisco: Yes, Mark this is Kyle.

Kyle Pisco: Yes.

Kyle Pisco: The b and the low end poll.

Kyle Pisco: Solely related to the milestones as it relates to the go forward.

Kyle Pisco: We continue to be conservative as we think about the milestones in our guide.

Kyle Pisco: We're not necessarily anticipating anything you don't control the timing and we'll see how it plays out throughout the rest of the year.

Kyle Pisco: Still early.

Speaker Change: Okay. Thanks, guys.

Kyle Pisco: Thank.

Speaker Change: Thank you very much one moment.

Speaker Change: And our next question.

Kyle Pisco: Our next question comes from the line of David Westenberg of Piper Sander. David, your line is open. Hi, thank you for taking the question and informing us of all the progress here. I mean, that's a really nice update. The 1823, it is higher than I remember.

Kyle Pisco: Our next question comes from the line of David Westenburg Piper Sandler David Your line is open.

David Michael Westenberg: I think it was 6870 for four. So it was like 1700 dollars a test, which is about a little over 100 dollars. Now, you said that you think that you can have this be two hundred dollars. So can you run us through the math that gets to two hundred dollars versus the other difference there? Also, I just want to have a clarification, because the last payment was for four tests at that six thousand eight hundred and seventy rate with this new rate. Does that imply that, you know, it's kind of like there is no open end? I mean, no closed end after that fourth test.

David Michael Westenberg: Thank you for taking the question and perhaps on all the progress here.

David Michael Westenberg: Hi.

David Michael Westenberg: That's a really nice update the 18 23, it is higher than I remember I think it was up 6870 for four so it was like 70 to $100 a test.

David Michael Westenberg: About a little over $100. Now you said you think that you can have this be $200. So can you run us through the math that gets to $200 versus the other difference. There also I just wanted to have a clarification because the last payment was for forecast at that 6870 right.

David Michael Westenberg: With this new rate does that imply that it's kind of no open and I mean, no closed then after that fourth task nights just one more question. Thank you.

Chad M. Robins: And there's just one more question. Thank you. Yeah, maybe I'll start, and Susan, if you want to add color, you can add the word.

Speaker Change: Yes, maybe I'll start and Susan if you want to add.

Speaker Change: Colored afterward, remember with $200.

Chad M. Robins: Remember, the $200 in ASP raised over the next two years is a combination of multiple factors. We talked about reducing out-of-policy claims and non-contracting claims, and we're doing a lot of work operationally on revenue cycle management, you know, faster collections. We're actually implementing AI in the appeals process.

Chad M. Robins: Asps.

Chad M. Robins: Raise over the next two years is a combination of multiple factors.

Chad M. Robins: There's a whole bunch of things that we're doing just to collect money faster. So, as Susan just mentioned, having the new kind of gap bill per price test will also allow us to kind of use that dollar amount to go and close some of those kinds of non-contracted claims gaps that will further enhance it. If you look at kind of the Medicare percentage of tests, this was, you know, this is, I would say, I'm going to call it right now a de-risking event to allow us to get to the $200, but it wasn't necessarily contemplated kind of originally in that $200.

Chad M. Robins: Susan just mentioned, having the new capital per price test will also allow us to kind of use that dollar amount to go and close some of those kind of non contracted claims gap that will further enhance it but if you look at kind of the Medicare percentage of test.

Chad M. Robins: This was.

Chad M. Robins: This is I would say.

Chad M. Robins: Im going to call. It right now is de risking event to allow us to get to the $200, but it wasn't necessarily contemplated kind of originally in that $200. So I want to be careful but could represent some potential upside.

Chad M. Robins: So I want to be careful, but it could represent some potential upside, but certainly, how we're looking at right now is at least de-risking, and we're quite confident that we're going to be able to get that $200 increase over the next two-year period. The second thing, I wasn't sure I totally understood your second question. David, if you could maybe ask it again. Yeah, if I'm not mistaken, your original rate was 6870 for four tests, and I wasn't sure after the fourth, or fifth test. Did you get 1750? I don't remember if you actually did. I kind of remember that you didn't, but I could be wrong.

Chad M. Robins: Certainly at least how we're looking at right now is at least de risking and we're quite confident that we're going to be able to get the $200 increase over over the next two year period.

Speaker Change: The second I wasn't sure I totally understood. Your second question, David If you could maybe ask it again.

Speaker Change: If I'm not mistaken your original rate. It was six to 870 for four task and I wasn't sure.

Speaker Change: After the fourth like the fit test do you get <unk> 50, I don't remember if you actually did I kind of remember you didnt, but I could be wrong.

Chad M. Robins: I mean, my memory is failing me from time to time. So I was wondering if there's any update in terms of being able to get paid, you know, in perpetuity versus if there's like a fixed number, rate number of tests. Yeah, so, okay. A couple of comments here, David. The Medicare episode structure, we don't get paid yet for what we'll call recurrence monitoring. That being said, we have a submission in right now for our first indication for mantle cell lymphoma where we have nice data on our first kind of recurrence monitoring test that could, essentially, once a patient goes into remission, kind of set a new bar on a per test rate for Medicare.

Speaker Change: My memory fails me from time to time, So I was thinking if there is any update in terms of being able to get paid.

Chad M. Robins: In perpetuity versus if there's like a fixed number right number of tests.

Chad M. Robins: So okay.

Chad M. Robins: A couple of comments here on the Medicare episodes structure, we don't get paid yet for what we'll call recurrence monitoring, but that being said we have a submission in right now in our first indication.

Chad M. Robins: So our mantle cell lymphoma that we have nice data on.

Chad M. Robins: First kind of recurrence monitoring tests that could essentially once a patient goes into remission kind of set a new bar on a per test rate for Medicare.

Chad M. Robins: Separately, our commercial payers don't have a limitation on a per test basis, so we can get paid in perpetuity for as many tests as deemed medically necessary. And as my follow-up, I just went to the ODAC meeting, another really positive development here. Is there differences in behavior in the way MRD is used in clinical trials in pharma versus how it's used in clinical? And specifically, I'm kind of thinking about things like testing interval or testing in terms of timing and when the test is done.

Chad M. Robins: Separately, our commercial payers, we don't have that limitation on a per case basis. So we can get paid <unk> for as many tests as deemed medically necessary.

Speaker Change: Got it okay.

Chad M. Robins: You very much and just as my follow up is there I was just wondering if the <unk> meeting another really positive development here is there differences in behavior and the way Mardi is used in clinical trials in pharma versus how its used in clinical and specifically I'm kind of thinking about things like testing interval.

Chad M. Robins: Or.

Chad M. Robins: Testing in terms of timing and when the test is done and the reason why I'm asking you. This question is does this have a chance to change behavior in the clinic in terms of maybe past frequency and use cases, following greater usage in clinical trial and after him.

Susan Bobulsky: And the reason why I'm asking you this question is, does this have a chance to change behavior in the clinic in terms of maybe test frequency and use cases following greater usage in clinical trials and after I'm done with that? Sure, thanks David for the question. I mean, certainly, we see that there are synergies in both directions between the MRD formula and clinical use cases, and depending on the setting in which the trial is being performed, depending on the type of patients who are eligible for the study, the time points and frequency of testing can vary and may also vary in the clinic for those exact same reasons.

Speaker Change: Im done after that.

Speaker Change: Alright, Thanks, David for the question I mean, certainly we see that there are synergies in both directions between <unk> pharma and clinical use cases, and depending on the setting in which the trial is being performed depending on the type of patients who are eligible for the study.

Speaker Change: The time points and frequency of testing can vary.

Speaker Change: And and May also vary in the clinic for those exact same reason so while there are no definitive differences that I would call out between clinical and pharma based use of the test.

Speaker Change: Certainly the use is customized to the particular need or the investigators or the clinician and patient one thing, though that I would call out is that in the clinic a blood based testing.

Speaker Change: Got you to really take shape with about 20% of our MRV has now coming from blood in myeloma, that's something that farmers have great interest in but we have not yet really explored in depth and I certainly think that with the incorporation of R&D and then myeloma there'll be quite a few additional opportunities that will open up.

Susan Bobulsky: That's something that pharma has great interest in, but we have not yet really explored in depth, and I certainly think that with the incorporation of MRD as an endpoint in myeloma, there will be quite a few additional opportunities that will open up exploration of deeper sensitivity testing in pharma studies, as well as potentially the use of blood down the road.

Susan Bobulsky: On exploration of deeper sensitivity testing and further studies as well as potentially use of blood down the road.

Kyle Pisco: Got it. Thank you. And I forgot to give Kyle a congratulations on the new position.

Speaker Change: Got it thank you and I forgot to give.

Speaker Change: Kyle Congrats on the new position. Thank you.

Kyle Pisco: Thanks, David.

Operator: Thank you. I appreciate it. Thank you. Thank you very much. One moment for our next question. Our next question comes from the line of Tom Stevens of TD Cohen. Tom, your line is open.

Speaker Change: Thank you very much one moment for our next question.

Tom Stevens: Our next question comes from the line of Tom Stephens of TD Cohen, Tom Your line is open.

Tom Stevens: Hey guys, thanks for taking the question here. Just one on kind of the EBITDA margins by segment and, you know, thank you for breaking that out. I guess it looks like today it's kind of negative 50 from about negative 100 last year, and it looks like quite a big lift on an incremental basis to get to break even by the back half as kind of guided. You know, clearly, there's lots of tailwinds there, there's the pricing tailwind, there's the switch to the X, but could you break it out maybe in a more granular way for investors just how you get to that break even by next year?

Tom Stevens: Hey, guys. Thanks for taking the question here.

Tom Stevens: Just one on kind of the EBITDA margins by segment.

Tom Stevens: Thank you for breaking that out.

Tom Stevens: I guess it looks like today, it's kind of negative <unk> from about negative 100 last year and it looks like quite a big bid ask on an incremental basis to get to get to breakeven by back half is kind of guided.

Tom Stevens: Clearly, there's a lot of the talent that is the pricing tailwind that is the switch to the <unk>, but I guess could you break out maybe in a more granular way for investors just how you get to that breakeven by next year.

Kyle Pisco: Yeah, I mean, I'll talk. I mean, broadly, you know, obviously, the ASP initiatives are a big factor, margin improvements, you know, to reduce our kind of per volume test costs. And really, the, you know, biggest driver is the leverage throughout our operating expenses, both on the sales team and, and those margin profiles at the end of the day, as we continue to grow ASPs and the pharma business. Yeah, I mean, Tom, it's three things, right? It's raising the price per test, it's lowering the cost that we deliver each test, and it's continuing to look at operating expenses. And we're doing all three.

Tom Stevens: Yes.

Kyle Pisco: I mean broadly.

Kyle Pisco: Obviously, the AFP initiatives are a big factor.

Kyle Pisco: Improvements.

Kyle Pisco: To reduce our cost per volume test cost and really the biggest.

Kyle Pisco: Biggest driver is the leverage throughout our operating expenses focus on sales came in at.

Kyle Pisco: So the margin profile at the end of the day as we continue to grow Isps in the pharma business.

Kyle Pisco: Tom It's three things right, it's raising the price per test that's lowering the costs that we deliver each test and its continuing to look at operating expenses and we're doing all three.

Kyle Pisco: And, you know, we've made improvements and kind of reduced the operating expense for the year by $10 million. We continue to look at ways that we can kind of reduce expenses and gain leverage, and we will do so. Great. Yep. Go on.

Kyle Pisco: You can see that we have.

Kyle Pisco: You've made improvements.

Kyle Pisco: <unk> reduced the operating expense for the year of $3 million. We continue to look at ways that we can kind of reduce it.

Kyle Pisco: Reducing expenses and gain leverage and we will do so.

Speaker Change: Great. Thanks.

Speaker Change: Yes, sorry, just to reiterate back half of 'twenty five adjusted EBITDA breakeven in the cash flow is not till 2006.

Kyle Pisco: Just to reiterate, you know, the back half was 25, adjusted even, a break even, and then the cash flow is not till 25. Okay. Great. Surveillance.

Speaker Change: So just just to make sure that we're clear on that.

Kyle Pisco: Yep, yep, definitely. And then just a question on blood type, you kind of mentioned it's now 20% of your multiple myeloma volumes. What reimbursement rate are you getting on blood versus your kind of more traditional bone marrow or spinal tap? Our reimbursement rates aren't distinguished by sample type, so our coverage policies both for Medicare and for the vast majority of private payers are sample-agnostic.

Speaker Change: Yes, yes definitely.

Kyle Pisco: And then just a question on kind of applaud you kind of mentioned its now 20% of your albeit multiple multiple myeloma volumes.

Kyle Pisco: What we in Boston, you're getting on blood buses youll kind of more traditional buying mimo, both spinal tap.

Kyle Pisco: Our reimbursement rates are distinguished by sample type so our coverage policy, both for Medicare and for vast majority of private payer agnostic.

Kyle Pisco: Optic sales coverage <unk> coupon morale and complexity testing for myeloma.

Susan Bobulsky: So coverage applies both to bone marrow and to blood-based testing for myeloma. wonderful. Thanks very much. I'll hold back in the queue.

Speaker Change: Wonderful thanks, very much I'll hop back in the queue.

Speaker Change: Okay. Thank.

Speaker Change: Thank you very much one moment for our next question. Please.

Operator: Okay.

Corey Rosenbaum: Our next question comes from sung <unk> Nam.

Corey Rosenbaum: <unk> Bank soon your line is open.

Operator: Hi, This is Cory Rosenbaum for sung <unk>. Thanks for taking my question. So with the recent FDA recommendation during the meeting there was a big discussion around the 10 to the minus six sensitivity threshold or any of the existing trials using currency currently differentiating between 10 to the minus five in terms of the minus six.

Corey Rosenbaum: Thanks for taking my question. So, with the recent FDA ODAC recommendation, during the meeting, there was a big discussion around the 10 to the minus 6 sensitivity threshold. Are any of the existing trials using CLINIC-C currently differentiating between 10 to the minus 5 and 10 to the minus 6? I was wondering how the industry may be able to start evaluating the differences between these two sensitivity thresholds.

Corey Rosenbaum: Wondering how the industry may be able to start evaluating the differences between these two sensitivity thresholds.

Susan Bobulsky: Yeah, thanks for the question, Corey. Absolutely, a number of studies are being designed to differentiate between 10 to the 5th and 10 to the 6th sensitivity, and of course, Clonaseq is really the singular assay that can deliver that level of sensitivity consistently with a reasonable sample input and with standardization across patients. So, what we are actually hearing from the investigators who were central to the preparations and the data that went into support for the ODAC meeting a couple of weeks ago, they acknowledged that most of the data, historically, that was able to be analyzed was at 10 to the negative 5th, but the group, the KOLs, have moved on to 10 to the 6th as the real important standard threshold, and they are already anticipating pursuing additional engagements Thank you. That's all for me.

Speaker Change: Yes, thanks for the question Corey.

Susan Bobulsky: Absolutely a number increasingly studies are being designed to differentiate between 10 to the fifth intended to fix sensitivity and of course quality.

Susan Bobulsky: The singular assay that can deliver that level of sensitivity consistently with a reasonable sample input.

Susan Bobulsky: With the standardization across across patient cells.

Susan Bobulsky: What we are actually hearing from the investigators who were central to the preparations and the data that went into support for the <unk> meeting couple of weeks ago.

Susan Bobulsky: They acknowledged that lowest at the data historically and it was able to be analyzed was at kind of negative hit.

Susan Bobulsky: Right.

Susan Bobulsky: <unk>.

Susan Bobulsky: Groups. The Kols have moved on to 10 to the sixth sense, the real important standard threshold and they are already anticipating pursuing additional <unk>.

Susan Bobulsky: <unk> with the FDA over the coming months and years to move that threshold tended to fix over time.

Speaker Change: Awesome. Thank you that's all for me and I'll hop back to the queue.

Speaker Change: Thank you very much where moments where our next question. Please.

Susan Bobulsky: Okay.

Susan Bobulsky: I'll head back to the queue. Thank you very much. One moment for our next question, please. Our next question comes from the line of Tejas Savant from Morgan Stanley. Tejas, your line is open. Hello, this is Yuko on behalf of Tejas Savant.

Speaker Change: Our next.

Speaker Change: Question comes from the line of <unk>.

Yuko: <unk> of Morgan Stanley Your line is open.

Yuko: Hello. This is Hugo on for Ross. Thank you for taking our questions.

Tejas Rajeev Savant: Thank you for taking our questions. Where are you in the restructuring and resource allocation process to increase independence between the two reporting segments today? Is there any work that remains to be done heading into the back half? I'd say 90% of the work has been done in Q1. We realigned the workforce, and most of that was aligning operations and R&D investments around each of the businesses. That work is complete.

Tejas Rajeev Savant: Where are you in the restructuring and resource allocation process to increase independence between the two reporting segments. Today are there any work that remains to be done heading into the back half or are they in place operationally.

Kyle Pisco: We still have a little bit of transitory, Processes, and Extracting the Immune Medicine Pharmacist's Lab from our production lab for the MRD business, but that's the only kind of remaining activity. So, you know, by and large, everything's done, and we're operating in that vein today. Women, Following the accident, I decided to do a video on the A-R-C-H-E-A-N-D-E-D-A-C-T-I-N-T-E-D. I'm not sure if you guys have heard of it, but it's a way to say that the A-R-C-H-E-A-N-D-E-D is a way to Are there or aren't there particular features of MM trials?

Tejas Rajeev Savant: I would say 90% of the work has been done in Q1, we realized the workforce.

Kyle Pisco: Most of that was aligning operations and our R&D investments around each of the businesses that that work is complete we still have a little bit of transitory.

Kyle Pisco: Processes and extracting the immune medicine pharma services lab from our production lab for MRV business, but that's the only kind of remaining activity.

Speaker Change: So bye.

Kyle Pisco: By and large everything is done and.

Kyle Pisco: We're operating in that vein today.

Kyle Pisco: Great.

Kyle Pisco: Then.

Kyle Pisco: Asking a question on the <unk> meeting.

Kyle Pisco: Following the outcome how do you how do you see FDA receptor ability to discussing <unk> as an endpoint and other heme indications are there or are there particular features of <unk> trials that may not lead to other heme indications like <unk> <unk> or <unk>.

Susan Bobulsky: [inaudible] Thank you for the question. In fact, that's a question that was of great interest to us as well, and certainly, we do anticipate that this FDA decision, likely FDA decision following the ODAC vote, will pave the way for further discussion with the FDA about MRD as an endpoint and other indications. The one that investigators have expressed the most interest in talking to us about is CLL, and that is one for which, currently, the thresholds that are utilized in guidelines and in many trials are 10 to the 4th, but just like in myeloma, there's interest in continuing to move that threshold further to the benefit of patients.

Speaker Change: Thank you for the question.

Susan Bobulsky: In fact, that's a question that was of great interest to us as well certainly.

Susan Bobulsky: We do anticipate that this FDA likely FDA decision following the iliac, though.

Susan Bobulsky: Will pave the way for further discussion with the FDA about an <unk> endpoint in other indication.

Susan Bobulsky: One that investigators have expressed an interest to last about CLO.

Susan Bobulsky: And that is one from which currently at the thresholds that are.

Susan Bobulsky: Guidelines and if any trials of kind of the fourth.

Susan Bobulsky: Just like in myeloma interest in continuing to move that threshold further.

Susan Bobulsky: To the benefit of patients and so.

Susan Bobulsky: And so we're already actively engaging with investigators to talk about how we might potentially support those efforts, providing data and supporting studies that are already being designed. We've also had conversations with our pharma partners, and interestingly, many of those who we've talked to with the intent of focusing on myeloma are actually taking a bigger picture view and looking across their portfolios to think about how they might proactively leverage MRD more. More prospectively, in anticipation of the FDA potentially being more open to MRD data across hematologic malignancies in the forthcoming time.

Susan Bobulsky: <unk> already actively engaging with investigators to talk about how we might potentially support those efforts providing data.

Susan Bobulsky: And the AD supported thank you said are already being designed we've also had conversations with our pharma partners and interestingly many of those who we've talked to you with the intent of focusing on myeloma are actually taking a bigger picture view and looking across their portfolio to think about how they might proactively leverage MRP MRP more.

Susan Bobulsky: More prospectively in anticipation of the FDA potentially being more open to MRV data across hematologic malignancies.

Susan Bobulsky: Forthcoming time.

Speaker Change: Great. Thank you very much.

Susan Bobulsky: Okay.

Operator: Thank you very much. One moment for our next question. Our next question comes from Andrew Brackmann of William Blair. Andrew, your line is open. Hi, everyone. This is Maggie Bowie on for Andrew today.

Speaker Change: Thank you very much one moment for our next question.

Operator: Yes.

Operator: Okay.

Maggie Boeye: Our next question comes from Andrew <unk> of William Blair, Andrew Your line is open.

Maggie Bowie: Hi, everyone. This is Matthew bouley on for Andrew today.

Maggie Bowie: I wanted to ask one on the progress of the EMR integration I know you spoke to earlier.

Maggie Bowie: Strong growth in the quarter from customers, but just wanted to know like what feedback has been for the account could you briefly added and then how many more accounts that can be able to add this year and then how is that factoring into your growth assumption.

Susan Bobulsky: Yeah, thank you for the questions, Heidi. We are hearing very positive feedback; as you might imagine, it makes the app better. We have nine active projects that Chad mentioned currently in motion with IT departments at those specific sites. We have dozens of additional sites that are in conversation, securing IT resources, going through various approval processes, and we are ready to go with any account that's ready to move. I'll note that some of the accounts that are in active IT development are among our largest accounts, and in fact, 15 of our 20 largest accounts are Epic customers, so we're very eager to move those forward and to ensure that a meaningful portion of our volume goes through Epic over the next one to two years, and we do anticipate, by the end of this year, continuing to expect between 20 and 25 accounts to be integrated.

Speaker Change: Yes, Thank you for your questions.

Susan Bobulsky: We are hearing very positive feedback as you might imagine it makes.

Susan Bobulsky: Yes, eight significantly easier to use both from an ordering perspective and in terms of integrating the results directly into the patient chart for clinical use.

Susan Bobulsky: We had.

Susan Bobulsky: Nine active projects that Chad mentioned currently in motion with it departments at the specific sites, we have dozens of additional.

Susan Bobulsky: <unk> that are in conversation securing resources going through various approval processes.

Susan Bobulsky: We are.

Susan Bobulsky: Ready to go as with any account that's ready to Neil I'll note that some of the accounts that are in active.

Susan Bobulsky: IP development are among our largest accounts and in fact.

Susan Bobulsky: 15 of our 20 largest accounts our epic customer excel, we're very eager to move this forward and to ensure that a meaningful portion of our volume goes through I think over the next one to two years and we do anticipate by the end of this year continue to do you expect between 20 and 25 accounts to be integrated now represent.

Susan Bobulsky: That'll represent somewhere between 15 and 20% of our volume, we expect, and we expect to continue to increase the speed whereby we can get these accounts up and running. Our most recent projects are trending toward about a seven-week timeline, which really, Great, thank you so much. And then I wanted to ask another question on improving gross margins, just as I know, that's one of the drivers to reach your profitability targets for MRRD.

Susan Bobulsky: Somewhere between 15, and 20% of our volume we expect.

Susan Bobulsky: And we expect to continue to increase the speed whereby we can get these accounts up and running and most recent projects are trending toward about a seven week timeline, which isn't really nicely aligns with industry standards for our integration.

Susan Bobulsky: Okay.

Susan Bobulsky: Great. Thank you so much and then I wanted to ask another one on improving gross margins just because I know that one of the drivers to reach our profitability targets from our R&D can you talk about the progress with some of the initiatives there.

Susan Bobulsky: Can you talk about the progress of some of the initiatives there, such as the transition to NovaSeq and the LIMS overhaul, and how these are progressing? How should we be thinking about these driving improvements and gross margins over time?

Speaker Change: Such as the transition to Nova Sea.

Susan Bobulsky: The linde overhaul and how these are progressing how should we be thinking about these driving improvements in gross margins over time. Thank you.

Kyle Pisco: Thank you. Yeah, I mean, I think first and foremost on the gross margin ASP initiatives, we're starting to see kind of some of that pull through with some strong collections subsequent to the quarter. As it relates to the costing profile of the assay with the transition in ODC, I think of that as a 25 event. We're still undergoing the development aspects of that. Assessing that. So, you know, I view that as 25.

Speaker Change: Yes, I mean, I think first and foremost on the gross margins Asps initiatives, we're starting to see kind of some of that pull through with some strong collections subsequent to the quarter.

Kyle Pisco: As it relates to the costing profile of the assay whats the transition out of the <unk> I think of that as a <unk> 25 of that we're still undergoing the development aspects of that.

Kyle Pisco: Assessing that so Ivy.

Kyle Pisco: I view that as 25% and then I think the other thing to just note is overall as a company we're going to continue to look at everything we can do to streamline operations and continue to gain leverage without increasing expenses.

Kyle Pisco: To get to that profitability metrics, so I think of leveraging our field force.

Kyle Pisco: Just as important as what we do on the margin profile of the business.

Operator: Great, thank you so much. Thank you very much. At this time, I'm showing no further questions in the queue. This will conclude our question and answer session. Thank you for participating in today's conference. This does conclude the program. You may now disconnect. Thank you.

Speaker Change: Great. Thank you so much.

Speaker Change: Thank you very much at this time Im showing no further questions in the queue. This will conclude our question and answer session. Thank you for participating in today's conference. This does conclude the program you may now disconnect.

Speaker Change: Thank you.

Operator: Yes.

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