10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2023

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _____to _____

Commission File Number: 001-38957

 

ADAPTIVE BIOTECHNOLOGIES CORPORATION

(Exact Name of Registrant as Specified in its Charter)

 

 

Washington

27-0907024

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

1165 Eastlake Avenue East

Seattle, Washington

98109

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (206) 659-0067

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common stock, par value $0.0001 per share

 

ADPT

 

The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of November 3, 2023, the registrant had 144,772,751 shares of common stock, $0.0001 par value per share, outstanding.

 

 


 

Table of Contents

 

 

Page

PART I.

FINANCIAL INFORMATION

4

Item 1.

Financial Statements (Unaudited)

4

 

Condensed Consolidated Balance Sheets

4

 

Condensed Consolidated Statements of Operations

5

 

Condensed Consolidated Statements of Comprehensive Loss

6

 

Condensed Consolidated Statements of Shareholders’ Equity

7

 

Condensed Consolidated Statements of Cash Flows

9

 

Notes to Unaudited Condensed Consolidated Financial Statements

10

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

23

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

34

Item 4.

Controls and Procedures

34

PART II.

OTHER INFORMATION

35

Item 1.

Legal Proceedings

35

Item 1A.

Risk Factors

35

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

35

Item 3.

Defaults Upon Senior Securities

35

Item 4.

Mine Safety Disclosures

35

Item 5.

Other Information

35

Item 6.

Exhibits

36

Signatures

37

 

 

 

 


Adaptive Biotechnologies Corporation

 

FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements that are based on management’s beliefs and assumptions and on information currently available to management. All statements contained in this report other than statements of historical fact are forward-looking statements, which include but are not limited to, statements about:

our ability to leverage and extend our immune medicine platform to discover, develop and commercialize our products and services, including further commercialization and development of products and services related to our Immune Medicine and Minimal Residual Disease (“MRD”) market opportunities, particularly in light of the novelty of immune medicine and our methods;
our ability to achieve and maintain commercial market acceptance of our current products and services, such as clonoSEQ and immune sequencing, as well as our ability to achieve market acceptance for any additional products and services beyond our current portfolio, if developed;
our collaboration with Genentech, Inc. (“Genentech”) and our ability to develop and commercialize cellular therapeutics, including our ability to achieve milestones and realize the intended benefits of the collaboration;
our ability to realize payments, such as milestone fees, based on our customers' use of our technologies in connection with their achievement of research or regulatory goals relating to their own products;
our ability to develop a comprehensive map of the interaction between the immune system and disease (the “TCR-Antigen Map”) and yield insights from it that are commercially viable; and
our expected reliance on collaborators and other third parties for development, clinical testing and regulatory approval of current products in new indications and potential product candidates, which may fail at any time due to a number of possible unforeseen events.

The forward-looking statements in this report also include statements regarding our ability to develop, commercialize and achieve market acceptance of our current and planned products and services, our research and development efforts and other matters regarding our business strategies, use of capital, results of operations and financial position and plans and objectives for future operations. In some cases, you can identify forward-looking statements by the words “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. These statements involve risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. These risks, uncertainties and other factors are described under “Risk Factors,” “Management's Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report and in other documents we file with the Securities and Exchange Commission (the “SEC”) from time to time. We caution you that forward-looking statements are based on a combination of facts and factors currently known by us and our projections of the future, about which we cannot be certain. As a result, the forward-looking statements may not prove to be accurate. The forward-looking statements in this report represent our views as of the date of this report.

We undertake no obligation to update any forward-looking statements for any reason, except as required by law.

Unless otherwise stated or the context otherwise indicates, references to “we,” “us,” “our” and similar references refer to Adaptive Biotechnologies Corporation.

 

3


Adaptive Biotechnologies Corporation

 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

 

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)

 

 

 

September 30, 2023

 

 

December 31, 2022

 

 

 

(unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

88,713

 

 

$

90,030

 

Short-term marketable securities (amortized cost of $282,669 and $412,282, respectively)

 

 

282,419

 

 

 

408,166

 

Accounts receivable, net

 

 

31,211

 

 

 

40,057

 

Inventory

 

 

19,490

 

 

 

14,453

 

Prepaid expenses and other current assets

 

 

13,404

 

 

 

9,440

 

Total current assets

 

 

435,237

 

 

 

562,146

 

Long-term assets

 

 

 

 

 

 

Property and equipment, net

 

 

76,749

 

 

 

83,447

 

Operating lease right-of-use assets

 

 

75,263

 

 

 

80,763

 

Restricted cash

 

 

2,921

 

 

 

2,398

 

Intangible assets, net

 

 

5,557

 

 

 

6,827

 

Goodwill

 

 

118,972

 

 

 

118,972

 

Other assets

 

 

2,983

 

 

 

2,064

 

Total assets

 

$

717,682

 

 

$

856,617

 

Liabilities and shareholders’ equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

4,483

 

 

$

8,084

 

Accrued liabilities

 

 

10,151

 

 

 

12,424

 

Accrued compensation and benefits

 

 

10,648

 

 

 

15,935

 

Current portion of operating lease liabilities

 

 

9,482

 

 

 

9,230

 

Current portion of deferred revenue

 

 

55,340

 

 

 

64,115

 

Current portion of revenue interest liability, net

 

 

3,194

 

 

 

 

Total current liabilities

 

 

93,298

 

 

 

109,788

 

Long-term liabilities

 

 

 

 

 

 

Operating lease liabilities, less current portion

 

 

91,824

 

 

 

98,772

 

Deferred revenue, less current portion

 

 

44,194

 

 

 

58,599

 

Revenue interest liability, net, less current portion

 

 

126,729

 

 

 

125,360

 

Total liabilities

 

 

356,045

 

 

 

392,519

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

 

Preferred stock: $0.0001 par value, 10,000,000 shares authorized at September 30, 2023 and December 31, 2022; no shares issued and outstanding at September 30, 2023 and December 31, 2022

 

 

 

 

 

 

Common stock: $0.0001 par value, 340,000,000 shares authorized at September 30, 2023 and December 31, 2022; 144,772,751 and 143,105,002 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

 

 

14

 

 

 

14

 

Additional paid-in capital

 

 

1,436,859

 

 

 

1,387,349

 

Accumulated other comprehensive loss

 

 

(250

)

 

 

(4,116

)

Accumulated deficit

 

 

(1,074,891

)

 

 

(919,082

)

Total Adaptive Biotechnologies Corporation shareholders’ equity

 

 

361,732

 

 

 

464,165

 

Noncontrolling interest

 

 

(95

)

 

 

(67

)

Total shareholders’ equity

 

 

361,637

 

 

 

464,098

 

Total liabilities and shareholders’ equity

 

$

717,682

 

 

$

856,617

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4


Adaptive Biotechnologies Corporation

 

Condensed Consolidated Statements of Operations

(in thousands, except share and per share amounts)

(unaudited)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenue

 

$

37,919

 

 

$

47,830

 

 

$

124,492

 

 

$

130,110

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

 

 

19,346

 

 

 

14,907

 

 

 

55,937

 

 

 

41,320

 

Research and development

 

 

28,533

 

 

 

35,658

 

 

 

93,371

 

 

 

110,534

 

Sales and marketing

 

 

20,493

 

 

 

21,513

 

 

 

66,673

 

 

 

71,887

 

General and administrative

 

 

20,075

 

 

 

20,755

 

 

 

63,208

 

 

 

66,099

 

Amortization of intangible assets

 

 

428

 

 

 

428

 

 

 

1,270

 

 

 

1,270

 

Total operating expenses

 

 

88,875

 

 

 

93,261

 

 

 

280,459

 

 

 

291,110

 

Loss from operations

 

 

(50,956

)

 

 

(45,431

)

 

 

(155,967

)

 

 

(161,000

)

Interest and other income, net

 

 

4,282

 

 

 

765

 

 

 

10,918

 

 

 

1,454

 

Interest expense

 

 

(3,652

)

 

 

(653

)

 

 

(10,788

)

 

 

(653

)

Net loss

 

 

(50,326

)

 

 

(45,319

)

 

 

(155,837

)

 

 

(160,199

)

Add: Net loss attributable to noncontrolling interest

 

 

26

 

 

 

38

 

 

 

28

 

 

 

136

 

Net loss attributable to Adaptive Biotechnologies Corporation

 

$

(50,300

)

 

$

(45,281

)

 

$

(155,809

)

 

$

(160,063

)

Net loss per share attributable to Adaptive Biotechnologies Corporation common shareholders, basic and diluted

 

$

(0.35

)

 

$

(0.32

)

 

$

(1.08

)

 

$

(1.12

)

Weighted-average shares used in computing net loss per share attributable to Adaptive Biotechnologies Corporation common shareholders, basic and diluted

 

 

144,704,868

 

 

 

142,928,654

 

 

 

144,208,940

 

 

 

142,334,342

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

5


Adaptive Biotechnologies Corporation

 

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

(unaudited)

 

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net loss

 

$

(50,326

)

 

$

(45,319

)

 

$

(155,837

)

 

$

(160,199

)

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

Change in unrealized gains and losses on investments

 

 

643

 

 

 

(171

)

 

 

3,866

 

 

 

(4,834

)

Comprehensive loss

 

 

(49,683

)

 

 

(45,490

)

 

 

(151,971

)

 

 

(165,033

)

Add: Comprehensive loss attributable to noncontrolling interest

 

 

26

 

 

 

38

 

 

 

28

 

 

 

136

 

Comprehensive loss attributable to Adaptive Biotechnologies Corporation

 

$

(49,657

)

 

$

(45,452

)

 

$

(151,943

)

 

$

(164,897

)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

6


Adaptive Biotechnologies Corporation

 

Condensed Consolidated Statements of Shareholders’ Equity

(in thousands, except share amounts)

(unaudited)

 

 

 

Common Stock

 

 

Additional

 

 

Accumulated Other

 

 

Accumulated

 

 

Noncontrolling

 

 

Total

 

 

Shares

 

 

Amount

 

 

Paid-In Capital

 

 

Comprehensive Loss

 

 

Deficit

 

 

Interest

 

 

Shareholders’ Equity

 

Balance at June 30, 2022

 

 

142,784,868

 

 

$

14

 

 

$

1,357,763

 

 

$

(5,800

)

 

$

(833,673

)

 

$

12

 

 

$

518,316

 

Issuance of common stock for cash upon exercise of stock options

 

 

131,802

 

 

 

 

 

 

846

 

 

 

 

 

 

 

 

 

 

 

 

846

 

Vesting of restricted stock units

 

 

70,457

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expense

 

 

 

 

 

 

 

 

14,142

 

 

 

 

 

 

 

 

 

 

 

 

14,142

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(171

)

 

 

 

 

 

 

 

 

(171

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(45,281

)

 

 

(38

)

 

 

(45,319

)

Balance at September 30, 2022

 

 

142,987,127

 

 

$

14

 

 

$

1,372,751

 

 

$

(5,971

)

 

$

(878,954

)

 

$

(26

)

 

$

487,814

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2023

 

 

144,645,118

 

 

$

14

 

 

$

1,421,506

 

 

$

(893

)

 

$

(1,024,591

)

 

$

(69

)

 

$

395,967

 

Issuance of common stock for cash upon exercise of stock options

 

 

20,000

 

 

 

 

 

 

17

 

 

 

 

 

 

 

 

 

 

 

 

17

 

Vesting of restricted stock units

 

 

107,633

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expense

 

 

 

 

 

 

 

 

15,336

 

 

 

 

 

 

 

 

 

 

 

 

15,336

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

643

 

 

 

 

 

 

 

 

 

643

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(50,300

)

 

 

(26

)

 

 

(50,326

)

Balance at September 30, 2023

 

 

144,772,751

 

 

$

14

 

 

$

1,436,859

 

 

$

(250

)

 

$

(1,074,891

)

 

$

(95

)

 

$

361,637

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

7


Adaptive Biotechnologies Corporation

 

Condensed Consolidated Statements of Shareholders’ Equity (Continued)

(in thousands, except share amounts)

(unaudited)

 

 

 

Common Stock

 

 

Additional

 

 

Accumulated Other

 

 

Accumulated

 

 

Noncontrolling

 

 

Total

 

 

Shares

 

 

Amount

 

 

Paid-In Capital

 

 

Comprehensive Loss

 

 

Deficit

 

 

Interest

 

 

Shareholders’ Equity

 

Balance at December 31, 2021

 

 

141,393,865

 

 

$

14

 

 

$

1,324,006

 

 

$

(1,137

)

 

$

(718,891

)

 

$

110

 

 

$

604,102

 

Issuance of common stock for cash upon exercise of stock options

 

 

1,361,891

 

 

 

 

 

 

7,562

 

 

 

 

 

 

 

 

 

 

 

 

7,562

 

Vesting of restricted stock units

 

 

231,371

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expense

 

 

 

 

 

 

 

 

41,183

 

 

 

 

 

 

 

 

 

 

 

 

41,183

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(4,834

)

 

 

 

 

 

 

 

 

(4,834

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(160,063

)

 

 

(136

)

 

 

(160,199

)

Balance at September 30, 2022

 

 

142,987,127

 

 

$

14

 

 

$

1,372,751

 

 

$

(5,971

)

 

$

(878,954

)

 

$

(26

)

 

$

487,814

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2022

 

 

143,105,002

 

 

$

14

 

 

$

1,387,349

 

 

$

(4,116

)

 

$

(919,082

)

 

$

(67

)

 

$

464,098

 

Issuance of common stock for cash upon exercise of stock options

 

 

367,405

 

 

 

 

 

 

2,158

 

 

 

 

 

 

 

 

 

 

 

 

2,158

 

Vesting of restricted stock units

 

 

1,300,344

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expense

 

 

 

 

 

 

 

 

47,352

 

 

 

 

 

 

 

 

 

 

 

 

47,352

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

3,866

 

 

 

 

 

 

 

 

 

3,866

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(155,809

)

 

 

(28

)

 

 

(155,837

)

Balance at September 30, 2023

 

 

144,772,751

 

 

$

14

 

 

$

1,436,859

 

 

$

(250

)

 

$

(1,074,891

)

 

$

(95

)

 

$

361,637

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

8


Adaptive Biotechnologies Corporation

 

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

Operating activities

 

 

 

 

 

 

Net loss

 

$

(155,837

)

 

$

(160,199

)

Adjustments to reconcile net loss to net cash used in operating activities

 

 

 

 

 

 

Depreciation expense

 

 

15,569

 

 

 

14,364

 

Noncash lease expense

 

 

5,491

 

 

 

5,423

 

Share-based compensation expense

 

 

47,352

 

 

 

41,183

 

Intangible assets amortization

 

 

1,270

 

 

 

1,270

 

Investment amortization

 

 

(6,225

)

 

 

1,825

 

Inventory reserve

 

 

931

 

 

 

2,638

 

Noncash interest expense

 

 

4,563

 

 

 

653

 

Other

 

 

165

 

 

 

(20

)

Changes in operating assets and liabilities

 

 

 

 

 

 

Accounts receivable, net

 

 

8,798

 

 

 

(9,139

)

Inventory

 

 

(6,815

)

 

 

(2,212

)

Prepaid expenses and other current assets

 

 

(3,964

)

 

 

601

 

Accounts payable and accrued liabilities

 

 

(10,746

)