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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, 2019

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.)

1551 Eastlake Avenue East, Suite 200

Seattle, Washington

98102

(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 October 31, 2019, the registrant had 124,339,058 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 Balance Sheets

4

 

Condensed Statements of Operations

5

 

Condensed Statements of Comprehensive Loss

6

 

Condensed Statements of Convertible Preferred Stock and Shareholders’ (Deficit) Equity

7

 

Condensed Statements of Cash Flows

9

 

Notes to Unaudited Condensed Financial Statements

10

Item 2.

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

25

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

37

Item 4.

Controls and Procedures

37

PART II.

OTHER INFORMATION

38

Item 1.

Legal Proceedings

38

Item 1A.

Risk Factors

38

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

38

Item 3.

Defaults Upon Senior Securities

38

Item 4.

Mine Safety Disclosures

38

Item 5.

Other Information

38

Item 6.

Exhibits

39

Signatures

40

 


Adaptive Biotechnologies Corporation

 

SPECIAL NOTE REGARDING 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, including 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 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 Balance Sheets

(in thousands, except share and per share amounts)

 

 

 

September 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

 

 

(unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

74,941

 

 

$

55,030

 

Short-term marketable securities

 

 

498,487

 

 

 

109,988

 

Accounts receivable, net

 

 

9,257

 

 

 

4,807

 

Inventory

 

 

8,667

 

 

 

7,838

 

Prepaid expenses and other current assets

 

 

10,004

 

 

 

3,055

 

Total current assets

 

 

601,356

 

 

 

180,718

 

Long-term assets

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

46,542

 

 

 

19,125

 

Long-term marketable securities

 

 

135,306

 

 

 

 

Restricted cash

 

 

2,138

 

 

 

61

 

Intangible assets, net

 

 

12,356

 

 

 

13,626

 

Goodwill

 

 

118,972

 

 

 

118,972

 

Other assets

 

 

722

 

 

 

186

 

Total assets

 

$

917,392

 

 

$

332,688

 

Liabilities, convertible preferred stock and shareholders’ equity (deficit)

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

2,421

 

 

$

1,793

 

Accrued liabilities

 

 

3,381

 

 

 

2,562

 

Accrued compensation and benefits

 

 

5,982

 

 

 

4,641

 

Current portion of deferred rent

 

 

324

 

 

 

1,109

 

Current deferred revenue

 

 

61,269

 

 

 

12,695

 

Total current liabilities

 

 

73,377

 

 

 

22,800

 

Long-term liabilities

 

 

 

 

 

 

 

 

Convertible preferred stock warrant liability

 

 

 

 

 

336

 

Deferred rent liability, less current portion

 

 

6,258

 

 

 

6,102

 

Financing obligation

 

 

23,449

 

 

 

 

Deferred revenue, less current portion

 

 

228,339

 

 

 

704

 

Other long-term liabilities

 

 

44

 

 

 

 

Total liabilities

 

 

331,467

 

 

 

29,942

 

Commitments and contingencies (Note 8)

 

 

 

 

 

 

 

 

Convertible preferred stock: $0.0001 par value, no and 93,762,517 shares authorized at

   September 30, 2019 and December 31, 2018, respectively; no and 92,790,094 shares issued

   and outstanding at September 30, 2019 and December 31, 2018, respectively; aggregate

   liquidation preference of $0 and $572,866 at September 30, 2019 and December 31, 2018,

   respectively

 

 

 

 

 

560,858

 

Shareholders’ equity (deficit)

 

 

 

 

 

 

 

 

Preferred stock: $0.0001 par value, 10,000,000 and no shares authorized at September 30,

   2019 and December 31, 2018, respectively; no shares issued and outstanding at

   September 30, 2019 and December 31, 2018

 

 

 

 

 

 

Common stock: $0.0001 par value, 340,000,000 and 131,000,000 shares authorized at

   September 30, 2019 and December 31, 2018, respectively; 124,316,080 and 12,841,536

   shares issued and outstanding at September 30, 2019 and December 31, 2018,

   respectively

 

 

12

 

 

 

1

 

Additional paid-in capital

 

 

930,208

 

 

 

37,902

 

Accumulated other comprehensive gain (loss)

 

 

572

 

 

 

(107

)

Accumulated deficit

 

 

(344,867

)

 

 

(295,908

)

Total shareholders’ equity (deficit)

 

 

585,925

 

 

 

(258,112

)

Total liabilities, convertible preferred stock and shareholders’ equity (deficit)

 

$

917,392

 

 

$

332,688

 

 

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

 

4


Adaptive Biotechnologies Corporation

 

Condensed Statements of Operations

(in thousands, except share and per share amounts)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

(unaudited)

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sequencing revenue

 

$

11,683

 

 

$

8,463

 

 

$

29,631

 

 

$

22,524

 

Development revenue

 

 

14,375

 

 

 

8,725

 

 

 

31,231

 

 

 

15,947

 

Total revenue

 

 

26,058

 

 

 

17,188

 

 

 

60,862

 

 

 

38,471

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

 

 

5,601

 

 

 

5,360

 

 

 

16,323

 

 

 

14,393

 

Research and development

 

 

20,506

 

 

 

9,783

 

 

 

49,516

 

 

 

28,090

 

Sales and marketing

 

 

9,099

 

 

 

6,039

 

 

 

25,813

 

 

 

16,415

 

General and administrative

 

 

8,477

 

 

 

4,739

 

 

 

22,143

 

 

 

13,914

 

Amortization of intangible assets

 

 

428

 

 

 

428

 

 

 

1,270

 

 

 

1,271

 

Total operating expenses

 

 

44,111

 

 

 

26,349

 

 

 

115,065

 

 

 

74,083

 

Loss from operations

 

 

(18,053

)

 

 

(9,161

)

 

 

(54,203

)

 

 

(35,612

)

Interest and other income, net

 

 

4,103

 

 

 

869

 

 

 

6,208

 

 

 

2,436

 

Net loss

 

 

(13,950

)

 

 

(8,292

)

 

 

(47,995

)

 

 

(33,176

)

Fair value adjustment to Series E-1 convertible preferred stock

   options

 

 

 

 

 

(4

)

 

 

(964

)

 

 

(2

)

Net loss attributable to common shareholders

 

$

(13,950

)

 

$

(8,296

)

 

$

(48,959

)

 

$

(33,178

)

Net loss per share attributable to common shareholders, basic and

   diluted

 

$

(0.11

)

 

$

(0.66

)

 

$

(0.97

)

 

$

(2.67

)

Weighted-average shares used in computing net loss per share

   attributable to common shareholders, basic and diluted

 

 

124,285,686

 

 

 

12,620,010

 

 

 

50,552,389

 

 

 

12,430,535

 

 

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

 

5


Adaptive Biotechnologies Corporation

 

 

Condensed Statements of Comprehensive Loss

(in thousands)

 

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

(unaudited)

 

Net loss

 

$

(13,950

)

 

$

(8,292

)

 

$

(47,995

)

 

$

(33,176

)

Change in unrealized gain (loss) on investments

 

 

190

 

 

 

39

 

 

 

679

 

 

 

(35

)

Comprehensive loss

 

$

(13,760

)

 

$

(8,253

)

 

$

(47,316

)

 

$

(33,211

)

 

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

 

6


Adaptive Biotechnologies Corporation

 

Condensed Statements of Convertible Preferred Stock and Shareholders’ (Deficit) Equity

(in thousands, except share amounts)

 

 

 

 

Convertible

Preferred Stock

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Shareholders’

(Deficit)

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

(Loss) Gain

 

 

Deficit

 

 

Equity

 

Balance as of June 30, 2018 (unaudited)

 

 

92,790,094

 

 

$

560,667

 

 

 

 

12,546,844

 

 

$

1

 

 

$

31,958

 

 

$

(240

)

 

$

(274,154

)

 

$

(242,435

)

Issuance of common stock for cash upon exercise of stock

   options (unaudited)

 

 

 

 

 

 

 

 

 

174,583

 

 

 

 

 

 

62

 

 

 

 

 

 

 

 

 

62

 

Change in redemption value for vested Series E-1 convertible

   preferred stock options (unaudited)

 

 

 

 

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4

)

 

 

(4

)

Common stock option share-based compensation (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,553

 

 

 

 

 

 

 

 

 

2,553

 

Other comprehensive income (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

39

 

 

 

 

 

 

39

 

Net loss (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,292

)

 

 

(8,292

)

Balance as of September 30, 2018 (unaudited)

 

 

92,790,094

 

 

$

560,671

 

 

 

 

12,721,427

 

 

$

1

 

 

$

34,573

 

 

$

(201

)

 

$

(282,450

)

 

$

(248,077

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of June 30, 2019 (unaudited)

 

 

93,039,737

 

 

$

561,931

 

 

 

 

13,725,381

 

 

$

1

 

 

$

46,160

 

 

$

382

 

 

$

(330,917

)

 

$

(284,374

)

Proceeds from initial public offering, net of underwriters'

   discounts and commissions (unaudited)

 

 

 

 

 

 

 

 

 

17,250,000

 

 

 

2

 

 

 

320,848

 

 

 

 

 

 

 

 

 

320,850

 

Initial public offering costs (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,986

)

 

 

 

 

 

 

 

 

(4,986

)

Conversion of convertible preferred stock to common stock

   (unaudited)

 

 

(93,039,737

)

 

 

(561,931

)

 

 

 

93,039,737

 

 

 

9

 

 

 

561,922

 

 

 

 

 

 

 

 

 

561,931

 

Conversion of convertible preferred stock warrant to

   common stock warrant (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,602

 

 

 

 

 

 

 

 

 

2,602

 

Issuance of common stock upon exercise of common stock

   warrants (unaudited)

 

 

 

 

 

 

 

 

 

54,792

 

 

 

 

 

 

9

 

 

 

 

 

 

 

 

 

9

 

Issuance of common stock for cash upon exercise of stock

   options (unaudited)

 

 

 

 

 

 

 

 

 

246,170

 

 

 

 

 

 

318

 

 

 

 

 

 

 

 

 

318

 

Common stock option and restricted stock unit share-based

   compensation (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,335

 

 

 

 

 

 

 

 

 

3,335

 

Other comprehensive income (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

190

 

 

 

 

 

 

190

 

Net loss (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13,950

)

 

 

(13,950

)

Balance as of September 30, 2019 (unaudited)

 

 

 

 

$

 

 

 

 

124,316,080

 

 

$

12

 

 

$

930,208

 

 

$

572

 

 

$

(344,867

)

 

$

585,925

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


7


Adaptive Biotechnologies Corporation

 

Condensed Statements of Convertible Preferred Stock and Shareholders’ (Deficit) Equity (Continued)

(in thousands, except share amounts)

 

 

 

Convertible

Preferred Stock

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Shareholders’

(Deficit)

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

(Loss) Gain

 

 

Deficit

 

 

Equity

 

Balance as of December 31, 2017

 

 

92,656,029

 

 

$

561,333

 

 

 

 

12,208,731

 

 

$

1

 

 

$

24,972

 

 

$

(166

)

 

$

(249,423

)

 

$

(224,616

)

Adjustments to accumulated deficit for adoption of guidance on

   accounting for share-based payment transactions (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

140

 

 

 

 

 

 

(140

)

 

 

 

Issuance of common stock for cash upon exercise of stock options

   (unaudited)

 

 

 

 

 

 

 

 

 

512,696

 

 

 

 

 

 

885

 

 

 

 

 

 

 

 

 

885

 

Issuance of Series E-1 convertible preferred stock for cash upon

   exercise of Series E-1 convertible preferred stock options at fair

   value (unaudited)

 

 

134,065

 

 

 

100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vested Series E-1 convertible preferred stock option forfeitures

   (unaudited)

 

 

 

 

 

(767

)

 

 

 

 

 

 

 

 

 

476

 

 

 

 

 

 

291

 

 

 

767

 

Series E-1 convertible preferred stock option share-based    

   compensation (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

 

 

 

 

 

 

 

 

 

3

 

Adjustment to redemption value for vested Series E-1 convertible

   preferred stock options (unaudited)

 

 

 

 

 

3

 

 

 

 

 

 

 

 

 

 

(3

)

 

 

 

 

 

 

 

 

(3

)

Change in redemption value for vested Series E-1 convertible

   preferred stock options (unaudited)

 

 

 

 

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

(2

)

Common stock option share-based compensation (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,100

 

 

 

 

 

 

 

 

 

8,100

 

Other comprehensive loss (unaudited)