Q3 2025 Adaptive Biotechnologies Corp Earnings Call
Speaker #1: Good day and thank you for standing by . Welcome to the Adaptive Biotechnologies third quarter earnings conference call . At this time , all participants are in listen only mode .
Speaker #1: After the speakers presentation , there will be a question and answer session . To ask a during the session , you would need to press star one one on your telephone .
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Speaker #1: I would now like to hand the conference over to your first speaker today , Karina Calzadilla , Head of Investor Relations . Please go ahead .
Speaker #2: Thank you . Jacinda , and good afternoon , everyone . I would like to welcome you to Adaptive third Quarter 2020 earnings Conference call .
Speaker #2: Earlier today , we issued a press release reporting adaptive financial results for the third quarter of 2025 . The press release is available at Adaptive Biotechnologies Corp .
Speaker #2: We are conducting a live webcast of this call and will be referencing to a slide presentation that has been posted to the investor section in our corporate website .
Speaker #2: During the call , management will make projections and other forward looking statements within the meaning of federal securities laws regarding future events and the future financial performance of the company .
Speaker #2: These statements reflect management's current perspective of the business as of today . Actual results may differ materially from today's forward looking statements depending on a number of factors which are set forth in our in our public filings with the and listed also in this presentation .
Speaker #2: These statements reflect management's current perspective of the business as of today . Actual results may differ materially from today's forward looking statements depending on a number of factors which are set forth in our in our public filings with the SEC
Speaker #2: In addition , non-GAAP financial measures will be discussed during the call . And a reconciliation of non-GAAP to GAAP metrics can be found in our earnings release .
Speaker #2: Joining the call today are Chad Robins , our CEO and co-founder and Kyle Piskel , our chief financial officer . Additional members from management will be available for Q&A .
Speaker #2: With that , I'll turn the call over to Chad . Chad .
Speaker #3: Thanks , Karina . Good afternoon , and thank you for joining us on our third quarter earnings call . I'm pleased to share another quarter of strong execution and accelerating momentum across the business .
Speaker #3: We delivered meaningful wins , sustained growth and further strengthened our financial position . Let's now turn to slide three for summary of this quarter's highlights .
Speaker #3: growth . Also this quarter and ahead of plan . The MRD business became cash flow positive , a significant achievement that underscores the strength and scalability of our model mirrored revenue grew 52% year over year , driven by robust increases in clinical volume and ASP .
Speaker #3: This growth reflects expanding clinical utility and broader integration of MRD testing into patient care . Clinical validation continues to deepen the NCCN guidelines were updated again this quarter , this time in CLL incorporating MRD guided treatment options , providing more specific direction on testing frequency , and supporting clonal seq ID testing at diagnosis .
Speaker #3: Operationally , we're scaling efficiently with Clonoseq now running on the Novaseq xl+ . We're realizing meaningful cost efficiencies and expanding gross margins . Total company sequencing , gross margin , improved ten percentage points year over year to 66% , and our focus on operating discipline is paying off .
Speaker #3: Operating expenses remain stable sequentially while cash burn continued to decline through the first nine months of the year . We reduced cash burn by 51% versus last year , ending the quarter with a strong cash position of $217 million .
Speaker #3: Given this performance , we are again updating our full year guidance to reflect a higher MRD revenue range , lower operating expenses and a reduced annual cash burn .
Speaker #3: Kyle is going to cover the details shortly . In his prepared remarks . Let's now turn to slide five for a deeper look at the MRD business .
Speaker #3: Clinical revenue had impressive growth of 83% year over year , and 18% quarter over quarter . We saw broad based volume expansion across all reimbursed indications , delivering over 27,100 tests , up 38% versus prior year and up 7% sequentially by indication .
Speaker #3: Multiple myeloma remains our largest contributor , accounting for 42% of us clonoseq volume , followed by all at 32% . HCl at 10% , DLBCL at 9% , and MCL at 5% .
Speaker #3: This volume growth continues to align with our strategic priorities . First , blood based testing now represents 45% of volume achieving our full year goal ahead of plan and in multiple myeloma .
Speaker #3: Blood based contribution reached 24% , up from 21% last year . Second , community based testing represents 31% of total clonoseq volume , with increasing contribution from Flatiron Integrated Accounts , third NHL testing expanded to 15% of total Clonoseq volume , led by DLBCL and MCL .
Speaker #3: Sequential growth . Fourth ordering HC grew 38% year over year to more than 4100 , with sequential growth of 9% in academic centers and 12% in community practices .
Speaker #3: And finally , we tested over 19,400 unique patients in the quarter , a 41% increase year over year and 8% sequentially . In addition to volume growth , we saw continued improvement in ASP with US Clonoseq ASP increasing to over $1,340 per test , reinforcing our confidence to achieve full year average ASP of $1,300 or higher during the quarter .
Speaker #3: We achieved several policy wins , including our first large commercial payer coverage in DLBCL and two major payers in CLL , bringing our total CLL covered lives to over 260 million .
Speaker #3: We continue to improve cash collections and expand our reimbursement footprint with new payer contracts . Overall , all ASP metrics and contracting initiatives are trending in the right direction , positioning us well to reach our long term ASP target of 17 to $1800 per test .
Speaker #3: Let's now turn to slide six to review progress on EMR integrations . Our EMR integration efforts continue to gain momentum across both academic and community settings .
Speaker #3: These integrations are a key driver of volume growth and support . Two other important strategic initiatives . The first is to build a scalable moat around Clonoseq , protecting against new entrants and minimising disruption from account turnover .
Speaker #3: And the second is to maximize clonoseq usage across the care continuum by directly embedding into EMR driven workflow , which translates into more tests per patient .
Speaker #3: Since last quarter , we've completed 11 integrations , seven academic and four community with six of our top ten accounts . Now integrated among accounts integrated with Flatiron .
Speaker #3: Last quarter volume in these accounts grew 17% sequentially . And now represent 24% of our community volume , up from 20% pre-launch . We're also leveraging integration to enable serial testing plans with many ordering providers at Flatiron Integrated Accounts , selecting recurring testing at three , 6 or 12 month intervals .
Speaker #3: Importantly , nearly 40% of our commercial test this quarter came from integrated accounts , which contributes to which continues to outpace growth from Non-integrated accounts .
Speaker #3: Looking ahead , we plan to further expand our EMR footprint and expect continued acceleration from integrated accounts with fewer ordering discrepancies and deeper account retention .
Speaker #3: Let's turn to MRD Pharma on slide seven . Our MRD Pharma business delivered a solid quarter with revenue up 11% year over year , including $6.5 million in milestone revenue .
Speaker #3: Multiple myeloma remains the largest contributor to our biopharma portfolio at over 60% of our active trials , followed by CLL at 17% and all at 9% .
Speaker #3: We ended the quarter with a backlog of more than 200 million , reflecting strong partner demand and sustained program activity . Clonoseq is most well established as an endpoint in multiple myeloma , where the ODAC and MP votes reinforce its role in assessing treatment response and supporting accelerated approvals , particularly in the frontline setting .
Speaker #3: The momentum is now extending to other lymphoid cancers and driving diversification across our portfolio . Endpoint qualification efforts are underway in CLL and DLBCL , which are already translating into results .
Speaker #3: 2025 CLL bookings are more than twice what they were last year . Currently , the FDA has accepting MRD as an endpoint on a case by case basis .
Speaker #3: In other lymphoid cancers of our 19 ongoing primary endpoint studies , 12 are in multiple myeloma , six are in leukemia , and one is in MCL .
Speaker #3: While recent agency news views on surrogate endpoints have introduced some uncertainty , we remain confident MRD will gain broader acceptance as an endpoint for accelerated approval and other lymphoid cancers .
Speaker #3: As the first and only FDA cleared MRD assay , Clonoseq holds a distinct and durable position to capture this market . In summary , MRD is a strong growth engine with multiple levers to increase penetration .
Speaker #3: Now let's turn to immune medicine on slide nine . Our immune medicine business is executing across our three strategic priorities . First , we continue to generate large scale , high quality proprietary data to develop a digital TCR antigen prediction model .
Speaker #3: We're making good progress by using our data to train and improve the accuracy of our models . As we deploy these models , we see promising results in multiple immunology applications .
Speaker #3: One of these applications included the ability to select the best Tcrs to use in cancer cell therapy products . In partnership with Genentech .
Speaker #3: Earlier this quarter, we announced the conclusion of our partnership with Genentech following its internal portfolio prioritization. As a result, Adaptive is released from exclusivity and any further obligations related to this partnership.
Speaker #3: Importantly , the scientific and technical progress we've made along the way allowed us to significantly accelerate both our data generation and our AML modeling capabilities across multiple use cases .
Speaker #3: We are deploying our knowledge and infrastructure that we built towards multiple high value partnership opportunities . Second , for our T cell depletion antibody program , we are on track to establish a pre-clinical data package in our lead autoimmune indication this quarter , we selected our lead antibody candidate .
Speaker #3: This key milestone is based on robust potency and other functional characterization data that we generated . This year . We've also started planning for CMC tox work , which represents a key step towards IND enabling studies for this lead T cell depleting antibody in autoimmunity .
Speaker #3: As we continue to execute on these two focused R&D priorities, we remain financially disciplined and are on track to achieve our 2025 cash burn target.
Speaker #3: Between $25,000,030 million . Now I'm going to pass it over to Kyle to walk through the financial results and updated full year guidance .
Speaker #3: Kyle thanks Chad .
Speaker #4: First , I will go over the financial results , including 33.7 million of non-cash revenue recognized this quarter from the remaining amortization of payments previously received from Genentech .
Speaker #4: Total company revenue for the third quarter was 94 million , representing a 102% increase year over year . Total company adjusted EBITDA was 28 million , compared to a loss of 14.3 million a year ago .
Speaker #4: Interest expense from our royalty financing agreement with Orbimed was 3 million , which was 700 K , higher than interest income . Net income from the quarter was 9.5 million .
Speaker #4: Now , and as shown on slide ten , the revenue and adjusted EBITDA figures , which I will be discussing forward , are presented excluding all non-cash revenue from Genentech in all periods presented .
Speaker #4: Looking at this quarter's performance on slide ten , MRD revenue grew 52% year over year to 56.8 million , with clinical and pharma contributing 67 and 33% , respectively .
Speaker #4: Clonoseq test volume , including international , increased 38% versus last year to 27,111 tests delivered . US ASP grew 28% to over $1,340 , reflecting continued strength in cash collections and improved pricing through our various contracting initiatives .
Speaker #4: MRD Pharma revenue grew 11% year over year , inclusive of $6.5 million in milestones . Immune medicine , revenue from pharma and academic services was 3.4 million , versus 5.5 million a year ago .
Speaker #4: Turning to gross margins and expenses , total company gross margin again , excluding Genentech , revenue was 70% . Sequencing gross margin , which excludes MRD milestones , was 66% , up from 56% a year ago .
Speaker #4: This improvement was driven by operating leverage in the lab from higher volumes , stronger pricing across both clinical and pharma , and efficiency gains from the Novaseq implementation .
Speaker #4: Total operating expenses , including cost of revenue , was 83.7 million , up 6% year over year , and flat sequentially the year over year increase was primarily driven by higher G&A expenses related to our expected EMR and reimbursement efforts , and higher cost of revenue from volume growth , partially offset by lower R&D expenses .
Speaker #4: Turning to profitability , as shown on the segment Reporting table at the bottom of the slide , the MRD business delivered positive adjusted EBITDA of 7 million compared to a deficit of 6.1 million a year ago .
Speaker #4: Immune medicine Adjusted EBITDA deficit again excluding the Genentech revenue , was 10 million versus 8.7 million in Q3 of last year at the total company level , adjusted EBITDA , excluding Genentech , was a loss of 5.8 million compared to a 17.8 million loss a year ago .
Speaker #4: Total company net loss for the quarter was 24.2 million . Again excluding Genentech . Turning to our full year 2025 updated guidance on slide 11 , we are raising our full year MRD revenue guidance to a range of 202 to 207 million , up from the prior range of 190 to 200 million .
Speaker #4: This increase reflects stronger than expected clinical revenue performance in Q3 and higher MRD milestone revenue for the year , with sustained clinical volume momentum , we now expect to deliver approximately 104,000 tests for the year .
Speaker #4: Exceeding our prior growth target of 35% over 2024. We also expect MRD milestone revenue between $18 million and $19 million, up from our previous $14 million to $15 million range.
Speaker #4: Overall , this outlook implies 39% to 42% total MRD revenue growth year over year , and 38 to 42% growth for the MRD based business , which excludes milestones at the midpoint .
Speaker #4: We are also tightening and lowering our top end of our total company operating expense guidance , including cost of revenue to 335 million to 340 million from our previous range of 335 million to 345 million .
Speaker #4: We continue to expect roughly 69% of expenses from MRD , 23% from immune medicine , and the remainder from unallocated corporate costs . Further , we are also narrowing and lowering our full year company cash burn guidance to 45 million to 50 million from the prior 45 million to 55 million range , driven primarily by higher MRD revenue .
Speaker #4: We expect approximately 15% cash burn from MRD . Still anticipate 25 to 30 million from immune medicine , and the balance from unallocated corporate costs .
Speaker #4: It's encouraging to see the MRD business generate positive cash flows , achieve positive adjusted EBITDA on the base business , all while continuing meaningful top line growth .
Speaker #4: With that , I'll hand it back over to Chad .
Speaker #3: Thanks , Kyle . Our results this year highlight the strength of our strategy and the discipline of our execution . MRD is now a profitable scaling business that is delivering consistent growth and margin expansion and immune medicine continues to advance key R&D programs and unlock new partnership opportunities for future growth .
Speaker #3: We're confident in our trajectory and are well positioned to finish the year strong with a solid foundation for long term value creation . With that , I'd like to now turn the call back over to the operator and open it up for questions .
Speaker #1: Thank you . At this time , we will conduct a question and answer session . As a reminder to ask a question , you would need to press star one one on your telephone and wait for your name to be announced .
Speaker #1: To withdraw your question , please press star one one again . Please stand by while we compile the Q&A roster . Our first question comes from Mark Massaro at Btig .
Speaker #5: Hey guys , thanks for taking the questions . Congrats on the strong beat and raise . You know , just a question . Maybe to start , it looks like your MRD Pharma business is becoming a little more recurring in nature than it was maybe a year ago .
Speaker #5: And it's actually starting to look linear , increasing about $1 million a quarter . I'm not expecting this to continue in a linear way , but can you just give us a sense of the 200 million you have in the backlog ?
Speaker #5: How should we think about that backlog being released ? You know , say , over the next several quarters ?
Speaker #2: Thanks for .
Speaker #6: The question mark . Thanks , Chad . Thanks for the question mark . So I think first I'd just say that we are pleased with the performance of the business , and we reiterate our , you know , anticipated revenues for the year .
Speaker #6: We think that the ODAC , the Chmp decisions in multiple myeloma , as well as our strong pipeline in NHL and and our increased accelerated progress in leukemias this year , all point to a strong potential for 2026 and beyond .
Speaker #6: You know , we do expect we haven't provided guidance next year . But we do expect continuing growth in the similar range to where we've been this year .
Speaker #6: And I think the backlog , which will recognize generally over a 5 to 7 year time frame , you know , it is a strong backlog going into the year .
Speaker #6: And our our new bookings have also been quite strong . And we expect that to continue given the role of MRD , potentially as an end point .
Speaker #6: In additional indications beyond multiple myeloma in the coming years .
Speaker #5: Okay . That's helpful . It's great to see the 38% growth in MRD volume . I guess as you know , I'm not asking for hard guidance on 2026 or anything , but you know , based on the fact that you've got epic integrations , not just epic , but other EMR integrations , you've got blood increasing , you've got community , community penetration increasing your testing , a lot of new patients , you know , there are a lot of drivers that are working in your favor .
Speaker #5: Is there any reason to think that perhaps a 30% bar is something that you can perform against in 2026, in terms of MRD volume growth?
Speaker #3: Hey Mark , thanks for your question . As you mentioned , we're not going to specifically yet come out with 2026 guidance . I can I can just say , can all of the kind of underlying factors that you mentioned give us great confidence in the trajectory of the business in 2026 and beyond , and we will provide more specific guidance shortly .
Speaker #5: Understood . Thanks , guys . For the time . .
Speaker #3: You bet .
Speaker #1: Our next question comes from Subbu Nambi at Guggenheim .
Speaker #7: Hey guys . Thank you for taking my question and so now again , in the spirit of just trying to model on Clonoseq ASPs , can you help us think about next year ?
Speaker #7: I know your long term target is 1800 , but as we think about next year , it appears Clonoseq is well on track to hit your target this year .
Speaker #7: How much should ASPs continue to lift from here ?
Speaker #4: Yeah , absolutely . Appreciate the question . Look , I won't give a firm number yet on 2026 , but what I can say is , you know , with the profile of the business and 1340 and Q3 feel confident about the exit rate that we're going to exit the year at with the momentum around coverage and not only CLL and what we're seeing in DLBCL as well , I think , you know , we're setting our foundation up fairly strong to go into 2026 to have meaningful growth in ASP .
Speaker #4: And that's where we think we are . And again , you know , reiterate that 17 to 100 , 1700 to $1800 long range targets .
Speaker #4: And , you know , we'll continue to grow the next year .
Speaker #7: Perfect . Thank you for that . And another one from me are mature EMR integrations remaining strong . What do those run rates look like .
Speaker #7: And if still accelerating for the more mature accounts, how long before some of them actually steady off?
Speaker #6: Sure , I can answer that question . So thanks for asking . You know , as you've seen , our EMR integrations have continued to progress well and to drive growth across really accounts of all sizes , both academic and community .
Speaker #6: And I'll just take a moment to mention that we don't just see the benefit of growth acceleration , but also we're protecting existing business from competition .
Speaker #6: And we're increasingly finding ways to utilize tools built within the EMR to help us increase the consistency and the frequency of testing, which will have long-term value for our growth in those accounts over time.
Speaker #6: We do see that the more mature , integrated accounts do continue to grow more quickly than Non-integrated accounts to that can vary to some extent based on the size of the account .
Speaker #6: As you can imagine , more well penetrated accounts can't sustain those significant accelerations that we see post integration long term , but we see a variety of benefits in those large accounts , even if they go back to sort of more stable growth rates after some time , we see that the integration helps democratize ordering .
Speaker #6: So more hcp's can place orders . That reduces the impacts of staff turnover . We see reduced HCP workload , which sort of eases the effort we have to put in to maintain that business .
Speaker #6: And we see we're strengthening our competitive moats . So , you even in those largest accounts , this has long term benefits in general to give you some statistics .
Speaker #6: When we look at our integrated account , commercial volumes this quarter in Q3 versus Q2 , we saw 9% quarter over quarter growth across the entirety of the group .
Speaker #6: Whether they were mature or newer and Non-integrated accounts grew 6% . So 50% increase in the growth rate . It just looking across the entire group .
Speaker #6: That group is getting bigger . And the number of mature accounts is getting bigger over time . But it's still relatively small . Most of our integrations are less than a year old , so we'll have more to say as this continues .
Speaker #6: But we are confident that this is a real trend and that it's something that we can continue to build on with some of those tools .
Speaker #6: I mentioned the EMR offers us to optimize testing .
Speaker #7: Fantastic and you can . We recently initiated in most of our checks . We felt the competition was nonexistent , almost , or there was no close competitor .
Speaker #7: Maybe a distant second . So when you refer to competitive mode , could you shed light on what kind of test are truly competes with Clonoseq ?
Speaker #6: Sure . Of course . So in many of our indications , what we're really competing against is , is sort of lack of testing or use of traditional methods for burden assessment that aren't really MRD .
Speaker #6: And in those cases , we're focused primarily on educating clinicians on the clinical data . The utility , the use cases . And now , increasingly , the guidelines , which are strongly supportive of MRD adoption , there are technologies like you're aware of traditional and next generation flow that are utilized in academic institutions in-house , that we have to compete against in those settings .
Speaker #6: And our data strongly supports the advantage of over both traditional and next gen flow . And you'll see some data at ash , actually , disease that will look at that on top of many existing data sets .
Speaker #6: That'll continue to be favorable to Clonoseq , the one indication where we are seeing emerging competition is , of course , in diffuse large B cell lymphoma .
Speaker #6: And , you know , competitors have entered the market . We anticipate will continue to enter the market in the coming year . But the great news is that we're very confident our position , we've established strong credibility .
Speaker #6: We have robust clinical experience . We've run more than 7000 DLBCL tests in the past 12 months , and had more than 900 Hcp's order the test .
Speaker #6: So we're way ahead from a clinical from an established clinical base , and we have a number of other established advantages commercial footprint relationships .
Speaker #6: Our Medicare coverage . And now our expanding commercial payer coverage , which we've just started to see really secure a foothold . And the fact that we can offer universal testing for all lymphoid cancers .
Speaker #6: So even in a space where we may have more emerging competition , we do still believe we are well positioned to to maintain our market leading position .
Speaker #7: Super helpful . Thank you so much , guys .
Speaker #1: Our next question comes from Andrew Brackman at William Blair .
Speaker #8: Hi , guys . Good afternoon . Thanks for taking the questions , Chad . I think you caught out recent guideline wins this year and even in Q3 .
Speaker #8: Obviously we saw those throughout the year . But have you seen those sorts of changes to the guidelines start to impact utilization already , or is that still something on the come and I guess bigger picture here , just on the commercial front , how are those updates perhaps maybe changing the conversation that your team is having with these docs ?
Speaker #8: Thanks .
Speaker #3: Yeah , maybe I'll start and just kind of because we had an impressive list of guideline wins this year , maybe I'll cover them and then I'll turn it over to Susan to talk about kind of the impact that we're seeing from a clinical standpoint .
Speaker #3: So first , I mean , there's been several meaningful guideline updates in multiple myeloma . The recommendation to obtain a Clonality ID assessment was really strengthened this year .
Speaker #3: And this is this is key for Clonoseq to help to reduce the barriers to the initial ID testing . It's also relevant to our education and penetration of the community , which is obviously a key driver of our growth .
Speaker #3: Also , in DLBCL , MRD assessment was included in the Lymphoma guidelines for the very first time . We mentioned CLL in the prepared remarks .
Speaker #3: You know, the first time that the guidelines include a recommendation for serial MRD assessment and specified a frequency of 3 to 6 months, it also provides additional reinforcement about NGS being an alternative to flow, which Susan just mentioned.
Speaker #3: So this is really just a great opportunity for us to educate on the data that emphasizes that Clonoseq can detect disease that's missed by flow .
Speaker #3: Below a threshold of ten to the fourth . You know , this is definitely starting . I just want to be clear , these guidelines came out this year .
Speaker #3: It's certainly a helpful call point . You know , to go in with a strong data presentation . But I'll I'll turn it over to Susan to talk about how the how it's impacting the clinical uptake .
Speaker #6: Sure . Maybe I can just give you a couple of examples . So first of all , in multiple myeloma , we've been talking a lot about the Midas data , which allows MRD negative patients to potentially avoid a transplant .
Speaker #6: And in that setting , we can now with the support of the guidelines , underscore the value of the ID test that diagnosis to make sure that no patient misses that opportunity and that opportunity is particularly valued in the community setting , where patients have to leave their local doctor to go get a transplant .
Speaker #6: Neither the doctor nor the patient likes that . And so there's a lot of motivation . And with the support of the guidelines , to say that ID test is now , you know , there is a stronger recommendation around doing that .
Speaker #6: It ensures that more patients are accessible to this Midas message that we're delivering in CLL, where the guidelines were very recently updated.
Speaker #6: We're really just getting started . But we are exposing community doctors to some of the potential benefits of limited duration therapy , which many of them haven't experimented as much with yet .
Speaker #6: But we'll do more and more with the we expect upcoming approval of some of the combination regimens that are being referenced in the guidelines .
Speaker #6: Now . And so we can talk now about testing frequency in the context of a limited duration therapy in a much more specific way , which is what the community doctors really want .
Speaker #6: They want us to tell them when to test , who to test . And the support of the guidelines . Just tremendously strengthens our ability to deliver that message .
Speaker #8: Susan , maybe to follow up there , I think in an earlier question , you referenced tools in the EMR to increase the frequency of testing and getting that scheduled .
Speaker #8: Maybe just sort of practically , what are your referencing there ? And I guess how does that drive the increased utilization here ? Thanks .
Speaker #6: Sure . Yeah . A couple of things that I'm referencing are things like treatment plans and order sets . So there are ways within epic , let's say that a clinician or a department can set up specific sets of actions that they want to take for a given type of patient at a given point in time .
Speaker #6: And we are now talking to clinicians in our integrated and accounts increasingly about how they might be incorporated into order sets . How do guidelines , existing data , you know , Well-vetted clinical trial designs support specific time points ?
Speaker #6: Where are there places where you might want to make decisions? Would you want to have the clonality ID incorporated into the diagnostic workup?
Speaker #6: All of those things can be facilitated by tools that are built into epic . Additionally , there are tools that allow you to do .
Speaker #6: Essentially analytics and reporting on your patient population . And so , for example , very can pull up a list of all the patients who are within , let's say , one month of the end of a frontline induction regimen in DLBCL .
Speaker #6: And you can make sure that your Epic staff has those patients on their radar to place an easy ClonoSEQ order when they come in.
Speaker #6: So that kind of thing is incredibly powerful . And it's really where we're you're going to hear us talking a lot more in 2026 about those types of things , because we're shifting from , you know , just get as many accounts integrated as possible .
Speaker #6: We'll continue to do that . But now we can also look at our integrated accounts and what all the what are all the opportunities to use those tools .
Speaker #1: Our next question comes from Sebastian Sandler at J.P. Morgan .
Speaker #9: Hey , thanks for taking my question and congrats on the quarter . My first question is on community . I think , you know , that had another solid quarter seems to be continuing to accelerate .
Speaker #9: Can you just help us level set where we stand in penetration into the community , which is where most of the cancer patients are treated .
Speaker #9: And then do you have any color on whether the sequential increase in HCP from these practices are coming from new accounts versus existing accounts ?
Speaker #9: And I think you've kept your sales force headcount relatively stable . So I'm wondering if you have any plans to expand as you penetrate further into the community setting ?
Speaker #9: I have a follow up . Thank you .
Speaker #6: Sure . Thanks , Sebastian . Let me see if I can touch on all of those . So first of all , our community penetration while we've made substantial headway and now have about 30% of our volume coming from community settings , we still are under-penetrated , certainly relative to academic settings .
Speaker #6: And have a very high ceiling in that space . We are taking , as you know , specific steps to drive growth in that setting .
Speaker #6: One of which is the recent integration with onco EMR via Flatiron Health . And we've been really pleased with the results we've seen in Flatiron accounts .
Speaker #6: I'll just briefly mention that , you know , we saw 17% quarter over quarter growth in Q3 in our Flatiron accounts . And , you know , we're only one quarter into our experience .
Speaker #6: But quite a lot of interest and opt in to our serial testing offering in that in that interface , which we'll learn more about how we can pull those tests through in the coming months .
Speaker #6: But a lot of potential that I think we can build on with the the option of serial test ordering in community settings in terms of .
Speaker #6: The HCP , where are they coming from ? We have a lot of white space in the community still , and so , you know , we are well , it takes time to break into new accounts .
Speaker #6: We continue to see new Hdps in both new and existing accounts and the existing accounts . Integration is a big driver of bringing new new hcp's on board because again , it democratizes the ability to order and the new accounts will continue to penetrate .
Speaker #6: There are Flatiron accounts that don't yet use Clonoseq . And so that's a big area of focus . But but outside of that , that segment as well , in terms of the Salesforce , you know , we've looked at this carefully and we are comfortable with the 65 reps that we have , of which about half are focused on the community setting .
Speaker #6: You know , what I'd say is that this is the right number of reps based on what we can see in terms of , you know , potential in in each territory , the number of accounts in HCP , each rep is calling on , the amount of windshield time that the reps have .
Speaker #6: We do look carefully at our alignment and we will occasionally add a territory or collapse a territory when we see some specific opportunity , and over time we will consider potentially new deployment strategies that could justify additional hiring .
Speaker #6: But we're not anticipating any significant expansion in the near term .
Speaker #9: Got it ? Very helpful . And then my second question is on sequencing gross margins . So those had a nice step up .
Speaker #9: Can you give us a little more granularity on the individual drivers of that improvement . You know I think more of the uplift from the ex transition was expected to fall more in for Q but I'm wondering if that benefit was accelerated and had an outsized impact in three Q and then any color on how we should think about sequencing gross margins exiting the year would be helpful .
Speaker #9: Thank you .
Speaker #4: Thanks , Sebastian . Yeah , appreciate the comment . Sequencing gross margin was 66% , and that was up from 64% in Q2 .
Speaker #4: I'd say if you drill in a little deeper on the MRD business alone , it was up three percentage points and Novaseq contributed two percentage points of that .
Speaker #4: So certainly taking up the lion's share of the improvement . You know , we were only integrated , you know , starting at the end of July .
Speaker #4: So you know , really two months of benefit . So expect it to continue . And in terms of guidance as it relates to exiting the year , you know , we said 5 to 8 percentage points post launch .
Speaker #4: Still reaffirming that . And I think , you know we'll see a continued step up , especially as the volume continues to grow .
Speaker #4: Exiting the year .
Speaker #9: Great . Thank you .
Speaker #1: Our next question comes from William Bonello at Craig-hallum .
Speaker #10: Hey guys . Thanks a lot . I just want to circle back to the question that Andrew was asking about the EMR tools .
Speaker #10: Did I hear you right ? Earlier in the call that that you said with with and I , I need to be clarified whether it was epic or .
Speaker #10: Anco EMR but that that a physician now has the ability to essentially put in , you know , an order that would cover multiple testing time periods up and then if I did hear that right , maybe you can talk a little bit more about how that works .
Speaker #10: If if that's available for all indications , can a practice customize or they , you know , fit ? You mentioned some time points , but I don't know if those are fixed or or you know , order points or you know , a doctor has flexibility around that .
Speaker #10: And then maybe what kind of what kind of lift do you think you might be able to get from that capability in terms of test for patient ?
Speaker #6: Sure . I'd be happy to talk more about that . William . So the serial testing option is available to our Flatiron Integrated accounts .
Speaker #6: So EMR offers this as an option in their interface that we've taken advantage of . And what essentially happens is when you're placing an order , you have to select from a dropdown whether you'd like a single order or a serial cadence , which can vary from one , three , six , or 12 months .
Speaker #6: And so it's as simple as selecting from the dropdown . And that is universal for all EMR accounts that utilize their molecular precision .
Speaker #6: MPI tool , which is what we use to to provide integrated test ordering . It's across all indications . It isn't customizable in the sense that it looks the same for every practice , but it is up to the HCP , what cadence they select .
Speaker #6: And so we do see variability depending on whether an HCP is going to do blood or bone marrow , depending on whether they're testing in DLBCL or CLL , etc.
Speaker #6: . We haven't quantified the specific lift associated with this yet because as I mentioned , we're only three months in and most clinicians are selecting a 3 or 6 month cadence .
Speaker #6: And so we are just now getting to the point where we'll be able to start measuring . You know , do we pull those orders through or do the physicians elect to delay or not send the sample .
Speaker #6: So but we are confident , based on the early , early results , that we will we will get incremental test growth from that offering .
Speaker #6: And we are looking at whether there are ways to extend it to other parts of our business beyond Flatiron . .
Speaker #10: And so if a physician , for instance , selects a three month cadence , does that mean that for a period of time every three months , another test is being ordered ?
Speaker #10: I just want to make sure I understand that .
Speaker #6: Correct . I mean , it's essentially that way . But what happens is it's like a placeholder order . So the order is scheduled into the patient's calendar within the EMR system .
Speaker #6: And then when that due date comes up, it will sort of pop up for the staff in the clinic and say, "This patient is due for another blood draw for a ClonoSeq test."
Speaker #6: The the staff still have to take the action to make that blood draw happen before it comes to us , and officially counts as an order .
Speaker #6: So none of these orders are appearing in our order numbers . But if we pull them through , which we are actively working to do by putting in place reminders and field based tactics to ensure that our clinicians are aware that these orders are coming due , you know , we'll be able to to we expect pull , pull some number of those through and be able to provide more consistent testing to patients over time .
Speaker #10: Okay , that's that's really helpful . And then just completely different question for you guys . Where are we at in terms of blood today .
Speaker #10: And uptick with blood and sort of a percent of what you're seeing and what are your thoughts on that . Looking forward ?
Speaker #6: Sure . So overall we have now reached 45% of all MRD tests being performed in blood . And that was actually our goal for the year .
Speaker #6: So we're pleased to have achieved that a quarter early to exit the year at 45% was our expectation . We are seeing increases in blood based testing in both myeloma and all , which are sort of traditionally marrow based tests .
Speaker #6: We now are at 37% of all tests in blood and 24% of multiple myeloma tests in blood . That's each up about 3 to 4 absolute percentage points from a year ago .
Speaker #6: And you know , we also have increased contribution from our our primarily blood based indications , which include DLBCL , MCL and CLL .
Speaker #6: DLBCL in particular is driving some of the growth in blood based testing because it's simply becoming a larger portion of our total test base .
Speaker #10: Sure . Okay . And then if I can just one last question , you mentioned the national contracts wins and just the way the bullet points were on the slide .
Speaker #10: I wasn't totally sure if you were saying those were related . If they were two distinct points or the or the , the rate increases related to just DLBCL and CLL , or are those across all modalities and then and then secondly , did we see any benefit from that ?
Speaker #10: This quarter or is that all ahead of us ?
Speaker #3: Yeah . I'll start . And then Kyle , feel free to jump on first . There's a there's a difference between kind of coverage and potentially rate increases .
Speaker #3: Although those can sometimes be combined . What I mentioned in the prepared remarks is that we were we obtained coverage , our first commercial payer coverage in DLBCL and that for two CLL coverage policies , we we we obtained kind of further coverage as .
Speaker #3: So those will hit those hit . Now and but then you'll see the impact come over time . Not necessarily that those weren't those wouldn't be reflected in this quarter .
Speaker #4: Yeah that's right . And the contracting initiatives or wins we flagged were in effect in Q3 . So some of that's the pull through in Q3 .
Speaker #4: We still think there's some room to go just from an implementation perspective with some of those players that we're still working some of the kinks through.
Speaker #4: But , you know , we'll get there on that front .
Speaker #3: Yeah . Just just to give you a good example , remember we we discussed a major payer win in terms of contracting kind of for anthem last quarter .
Speaker #3: And the implementation of probably two quarters ago. And the implementation happened this quarter. So, you do start seeing a lift in terms of your ASP from that.
Speaker #3: So there's a there's a lag often between contracting and implementation and kind of the rate increase and or the rate increase .
Speaker #10: Okay . That makes sense . And when I go back and look at it , I see it's sort of two distinct points right .
Speaker #10: Yeah . Coverage policy for the two . Plus I am reading that right though that there were three national payer price increases . But you're saying those you're saying .
Speaker #3: , yeah , separately . That's correct . Yeah .
Speaker #4: That was in effect in Q3 .
Speaker #10: Okay . Very helpful . Thanks a lot for taking all of those . .
Speaker #4: Thanks , Bill .
Speaker #3: Sure . Bill .
Speaker #1: Our next question comes from David Westenberg at Piper Sandler .
Speaker #11: Hi . Hi . Thank you for taking my question . So I wanted to maybe start with the the contribution margin of MRD .
Speaker #11: At this point . I mean , I know you're maybe not going to give the exact number , but I'm just kind of thinking about how , you know , as we see growth in that , we see this move to cash flow break even and , and kind of our ability to kind of pace that .
Speaker #11: And then also just given the fact that you do have a pretty solid you do have a pretty solid competitive lead in MRD in blood at this point .
Speaker #11: How are you thinking about balancing investments in sales and marketing , etc. , to really push on that competitive advantage ? Maybe clinical studies or anything else .
Speaker #11: There ? Thank you .
Speaker #4: Yeah . Thanks , David . On the contribution margin comment . You know , certainly we have control to to be able to manage and pace the growth as long as we continue to see and expect to see the growth again .
Speaker #4: This quarter was a great accomplishment to see the cash flow positivity , which , you know , gives us some some confidence going forward that the business will remain cash flow positive .
Speaker #4: You know , that being said , you know , we may choose to make some some additional investments to press the gas and grow faster , either in volumes and or in the reimbursement environment .
Speaker #4: So , you know , I think all of those things to get combined , give us a little bit of control . And , you know , as the volume continues to increase , we can decide whether or not we want to reinvest in the business and what areas we want to go after .
Speaker #4: So .
Speaker #3: Maybe I'll I'll add on to that . And then Susan , Susan can as well . First , I think it's worth pointing out , even though we've had , you know , great growth , there's still a long way to go in penetration in order to fully capture this , this kind of large and expanding total addressable market opportunity .
Speaker #3: But particularly in terms of investments , we are continuing to invest in kind of blood based testing , both in terms of assay improvements and in terms of clinical studies .
Speaker #3: In addition to kind blood based testing . I think that's a key initiative for us overall is investing in clinical studies to continue to demonstrate the clinical utility of the assay as where a doctor can use our test to to kind of improve patient care across the continuum .
Speaker #3: And we'll continue to make those investments .
Speaker #11: Got it . Just real . One quick one on the guide . And apologies , I've been jumping between three calls here , but is there any seasonality in the Q4 MRD number ?
Speaker #11: I mean , I think you've had sequential growth of I think it was 10% , 10% , 7% . I realize you can't maintain that forever , but I think the guide would kind of imply that maybe the volumes or the ASPs might be a little bit lower than what you've gotten .
Speaker #11: And the quarter over quarter just wanted to see if you could remind us on the seasonality there . And yeah , I'll just stop there .
Speaker #4: Yeah , yeah . As it relates to guide , you know , certainly something we are contemplating with , with respect to our guidance .
Speaker #4: Obviously the volume growth has been phenomenal and we expect that to continue to be phenomenal . But Q4 is one of the tougher periods with the amount of holidays and ordering .
Speaker #4: So I think that factored into some of our guide . But again , you know , longer term and into 26 , we think there's strong growth ahead of us .
Speaker #4: So there's a little bit of seasonality in that growth doesn't mean we can't beat it . But but that that is factored into our guide .
Speaker #11: Got it . Maybe I'll just squeeze in one quick one . I might be at the end of the queue anyway . So just in terms of your thoughts on outside of of multiple myeloma , potential to see this as a primary or clonoseq as a primary endpoint , specifically written in as as clonoseq or NGS Clonality , etc.
Speaker #11: , and how far away are we from that ? I mean , I'm guessing we're seeing a lot of , you know , speeding up of clinical trials and really seeing more promising drugs coming through the pipeline because of this .
Speaker #11: You know , when can we see that advancement to to other sorts of areas like CLL , A.l.l , NCL , non-Hodgkin's lymphoma , etc.
Speaker #11: ? Thank you .
Speaker #6: Sure . You know , as I think Chad mentioned earlier , we have there are active efforts ongoing for both CLL and DLBCL to establish a similar designation as the ODAC provided for for myeloma for MRD as an accelerated endpoint for approval .
Speaker #6: The CLL effort is being led by a number , a couple of Kols , and in partnership with a broad coalition of pharma partners , we are actually getting engaged in that effort as well , directly .
Speaker #6: And , you know what ? What the leaders of that initiative have said to us is that , you it took ten years for multiple myeloma .
Speaker #6: It will not take ten years for CLL . That's because we now have a blueprint for what the FDA is looking for . Now , that said , the FDA has evolved since the time of the vote .
Speaker #6: And so there are uncertainties around that . But the data collection is advancing rapidly . And I think all the participants are confident that current administration notwithstanding , will see those things come to fruition much faster than they did in multiple myeloma .
Speaker #6: And I think that other indications beyond CLL and DLBCL may have reason to explore this in the future as well.
Speaker #3: And just just one point in terms of quantifying this in terms of kind of bookings , our 2025 CLL bookings are more than twice what they were last year .
Speaker #3: In the MRD farmer space .
Speaker #12: Thank you .
Speaker #1: Our last question comes from Dan Brennan at TD .
Speaker #13: Great . Thanks for taking the question . Congrats on the quarter . Maybe just on DLBCL . I mean , the mix ticked up .
Speaker #13: The mix ticked up pretty nicely in the quarter . I know you may have addressed it a little bit , but just speak to a little bit what you're seeing there and how we might think about the opportunity there as we go into 26 .
Speaker #13: In terms of the pace of pace , of progress ?
Speaker #6: Sure . Thanks for the question , Dan . Yes , we are continuing to see a nice , solid uptick in the contribution of DLBCL .
Speaker #6: You know , rising from 6% a year ago , three quarters ago to nine 9% this quarter . It's kind of poised to to overtake CLL actually , as the third largest indication , probably in the next quarter or two , although we'll certainly expect the CLL business to be buoyed by the recent guidelines .
Speaker #6: Update in DLBCL . I think a couple of things contributing , certainly . One is the noise around MRD in the space , which is not just coming from us .
Speaker #6: There's a large amount of data generation ongoing . There's a lot of interest from pharma companies and how they can utilize MRD guided treatment to to optimize outcomes in this disease state , which is is curable for a subset of patients .
Speaker #6: And hopefully for a growing number of patients , proportion of patients over time . So there are several companies that are currently advancing or considering trials that will include MRD guided elements to to them in the coming years .
Speaker #6: And that will in addition to the interest in the clinic , as it is , that will contribute , I believe , to greater use cases for MRD in the clinic .
Speaker #13: Great . And maybe just a follow up . I know there's a few questions on margins , but just wondering , as an early read , if we think about in the 26 and , you know , the investments you're making , but yet the opex leverage path you're on just can you remind us how we might think about the early look on opex leverage as we go into 26 ?
Speaker #13: And what are the key puts and takes? Thank you.
Speaker #4: Yeah , I mean , I think we will continue to see growth and investment areas like EMR . But you know , at this point we're not planning any major investments .
Speaker #4: That being said , we might change our minds . But at this point , you know , I think we're going to continue to see meaningful leverage across the business and look at opportunities , you know , to to take advantage of the position we're in in the MRD business .
Speaker #3: The other area that I mentioned earlier , Dan , continuing to invest to invest in data generation for clinical utility studies , but overall , you know , we're looking to continue to get leverage out of the business .
Speaker #13: Have you guys even like I forget if you commented publicly at all about opex leverage for 26 , in terms of where consensus is or no , not yet .
Speaker #4: Not yet , not yet . Yeah .
Speaker #13: I got it . Okay , okay . Thank you .
Speaker #3: Thanks , Jim .
Speaker #1: This concludes the question and answer session . Thank you for your participation in today's conference . This does conclude the program . You may now disconnect .