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Adaptive Biotechnologies Q4 Revenues Fall 17 Percent Tempered by Increase in MRD Business

NEW YORK – Adaptive Biotechnologies reported after the close of the market on Wednesday that its fourth quarter revenues declined 17 percent year over year due primarily to an expected reduction in amortization of an upfront payment from Genentech.

For the three months ended Dec. 31, the Seattle-based immune sequencing firm tallied revenues of $45.8 million, compared to $55.2 million a year ago and below analysts' average estimate of $48.5 million. About 67 percent of Q4 revenues were from the company’s minimal residual disease (MRD) business while 33 percent were from the immune medicine business.

MRD revenue was $30.8 million for the quarter, up 10 percent from $28.1 million in the year-ago quarter. The increase was primarily driven by ClonoSeq testing and partially offset by a reduction in revenue from pharma services and regulatory milestones.

Immune medicine revenues were $15.0 million for the quarter, down 45 percent from $27.1 million a year ago. The revenue decline was due to a decrease in Genentech amortization, which declined 53 percent year over year. 

ClonoSeq test volume increased 49 percent to 15,680 tests delivered from 10,526 tests in Q4 a year ago.

At the end of Q3 last year, Adaptive initiated a strategic review with Goldman Sachs to reevaluate the company's MRD and immune medicine businesses, signaling an intent to separate the two businesses. Pending the strategic review, Adaptive updated its financial guidance to exclude revenues from immune medicine.

In a conference call with investors recapping Q4 financial results, Adaptive CEO and Cofounder Chad Robins said the company is "evaluating various alternatives to unlock the full potential of each business" and is "on track" to communicate the final outcome at the end of Q1.

During Q4, the company's R&D expenses dipped 8 percent to $28.7 million from $31.2 million a year ago. Its SG&A spending decreased 8 percent year over year to $42.6 million from $46.1 million.

The firm's Q4 net loss swelled to $69.5 million, or $.48 per share, from a net loss of $40.1 million, or $.28 per share, a year ago. On average, analysts had been expecting a Q4 net loss of $.33 per share.

For full-year 2023, Adaptive reported revenues of $170.3 million, down 8 percent from $185.3 million in 2022 and below analysts' average estimate of $172.9 million.

MRD revenues were $102.7 million for the year, rising 18 percent from $87.1 million in the prior year, driven by a 27 percent increase in MRD service revenue.

Immune medicine revenues were $67.5 million in 2023, down 31 percent from $98.2 million in 2022.

Adaptive's 2023 R&D expenses were $122.1 million, down 14 percent from $141.8 million in 2022, while its SG&A expenses decreased 6 percent to $172.5 million from $184.1 million.

The company's full-year net loss was $225.3 million, or $1.56 per share, compared to a net loss of $200.2 million, or $1.40 per share, in 2022, and under the consensus Wall Street estimate of a $1.41 loss per share.

Adaptive finished 2023 with $65.1 million in cash and cash equivalents and $281.3 million in short-term marketable securities. Excluding potential one-time costs from the strategic review, the company expects to spend an average of $35 million per quarter, CFO Tycho Peterson said on the call.

Adaptive Biotechnologies expects full-year MRD revenues of $130 million to $140 million. At the midpoint, the company anticipates a 65 percent and 35 percent revenue contribution from clinical and pharma services within MRD, respectively. The company did not provide revenue guidance for the immune medicine business.

In Thursday mid-day trading on the Nasdaq, Adaptive shares were almost flat at $3.96.