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adpt-10q_20200630.htm

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 June 30, 2020

☐	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.

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 July 31, 2020, the registrant had 135,793,728 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	40
Item 3.	Defaults Upon Senior Securities	40
Item 4.	Mine Safety Disclosures	40
Item 5.	Other Information	40
Item 6.	Exhibits	41
Signatures		42

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 those related to COVID-19, particularly in light of the novelty of immune medicine and our methods;

•

our ability to obtain regulatory clearance, authorization and approval for such products and services;

•

our collaboration with Genentech, Inc. (“Genentech”) and ability to develop and commercialize cellular therapeutics, including our ability to achieve milestones and realize the intended benefits of the collaboration;

•

our ability to develop a map of the interaction between the immune system and disease (“TCR-Antigen Map”) and yield insights from it that are commercially viable;

•

our expected reliance on collaborators for development and clinical testing of potential diagnostic and therapeutic product candidates, which may fail at any time due to a number of possible unforeseen events; and

•

the potential adverse effect on our business, operations and plans or timelines (including those plans and timelines related to expansion initiatives and clinical development) resulting from the recent COVID-19 pandemic, including potential impacts to our supply chain.

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 (“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.

Adaptive Biotechnologies Corporation

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Condensed Balance Sheets

(in thousands, except share and per share amounts)

	June 30,			December 31,
	2020			2019
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	365,440		$	96,576
Short-term marketable securities (amortized cost of $203,765 and $479,791, respectively)		204,940			480,290
Accounts receivable, net		7,914			12,676
Inventory		10,536			9,069
Prepaid expenses and other current assets		10,691			14,079
Total current assets		599,521			612,690
Long-term assets
Property and equipment, net		26,833			60,355
Operating lease right-of-use assets		37,619			—
Long-term marketable securities (amortized cost of $56,405 and $105,263, respectively)		57,383			105,435
Restricted cash		2,138			2,138
Intangible assets, net		11,081			11,928
Goodwill		118,972			118,972
Other assets		1,275			784
Total assets	$	854,822		$	912,302
Liabilities and shareholders’ equity
Current liabilities
Accounts payable	$	3,686		$	4,453
Accrued liabilities		4,832			4,371
Accrued compensation and benefits		5,976			8,124
Current portion of deferred rent		—			371
Current operating lease liabilities		3,229			—
Current deferred revenue		75,699			60,994
Total current liabilities		93,422			78,313
Long-term liabilities
Deferred rent liability, less current portion		—			6,918
Operating lease liabilities, less current portion		42,503			—
Financing obligation		—			36,607
Deferred revenue, less current portion		187,462			219,332
Other long-term liabilities		1,496			93
Total liabilities		324,883			341,263
Commitments and contingencies (Note 9)
Shareholders’ equity
Preferred stock: $0.0001 par value, 10,000,000 shares authorized at June 30, 2020 and December 31, 2019; no shares issued and outstanding at June 30, 2020 and December 31, 2019		—			—
Common stock: $0.0001 par value, 340,000,000 shares authorized at June 30, 2020 and December 31, 2019; 128,233,842 and 125,238,142 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively		12			12
Additional paid-in capital		958,097			935,834
Accumulated other comprehensive gain		2,153			671
Accumulated deficit		(430,323	)		(365,478	)
Total shareholders’ equity		529,939			571,039
Total liabilities and shareholders’ equity	$	854,822		$	912,302

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

Adaptive Biotechnologies Corporation

Condensed Statements of Operations

(in thousands, except share and per share amounts)

(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Revenue
Sequencing revenue	$	7,985		$	11,865		$	17,454		$	17,948
Development revenue		13,003			10,273			24,444			16,856
Total revenue		20,988			22,138			41,898			34,804
Operating expenses
Cost of revenue		4,912			5,734			10,255			10,722
Research and development		25,992			16,527			49,927			29,010
Sales and marketing		14,332			8,897			28,339			16,714
General and administrative		12,238			6,662			24,059			13,666
Amortization of intangible assets		423			423			847			842
Total operating expenses		57,897			38,243			113,427			70,954
Loss from operations		(36,909	)		(16,105	)		(71,529	)		(36,150	)
Interest and other income, net		1,893			446			4,787			2,105
Income tax benefit		1,481			—			1,804			—
Net loss		(33,535	)		(15,659	)		(64,938	)		(34,045	)
Fair value adjustment to Series E-1 convertible preferred stock options		—			(710	)		—			(964	)
Net loss attributable to common shareholders	$	(33,535	)	$	(16,369	)	$	(64,938	)	$	(35,009	)
Net loss per share attributable to common shareholders, basic and diluted	$	(0.26	)	$	(1.23	)	$	(0.51	)	$	(2.68	)
Weighted-average shares used in computing net loss per share attributable to common shareholders, basic and diluted		127,383,582			13,279,324			126,720,986			13,074,692

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

Adaptive Biotechnologies Corporation

Condensed Statements of Comprehensive Loss

(in thousands)

(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Net loss	$	(33,535	)	$	(15,659	)	$	(64,938	)	$	(34,045	)
Change in unrealized (loss) gain on investments		(1,160	)		290			1,482			489
Comprehensive loss	$	(34,695	)	$	(15,369	)	$	(63,456	)	$	(33,556	)

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

Adaptive Biotechnologies Corporation

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

(in thousands, except share amounts)

(unaudited)

	Convertible Preferred Stock				Common Stock				Additional Paid-In		Accumulated Other Comprehensive			Accumulated			Total Shareholders’ (Deficit)
	Shares		Amount		Shares		Amount		Capital		Gain			Deficit			Equity
Balance at March 31, 2019		93,023,694	$	561,210		12,930,536	$	1	$	40,981	$	92		$	(314,548	)	$	(273,474	)
Issuance of common stock for cash upon exercise of stock options		—		—		794,845		—		1,847		—			—			1,847
Issuance of Series E-1 convertible preferred stock for cash upon exercise of Series E-1 convertible preferred stock options at fair value		16,043		11		—		—		—		—			—			—
Change in redemption value for vested Series E-1 convertible preferred stock options		—		710		—		—		—		—			(710	)		(710	)
Common stock option share-based compensation		—		—		—		—		3,332		—			—			3,332
Other comprehensive income		—		—		—		—		—		290			—			290
Net loss		—		—		—		—		—		—			(15,659	)		(15,659	)
Balance at June 30, 2019		93,039,737	$	561,931		13,725,381	$	1	$	46,160	$	382		$	(330,917	)	$	(284,374	)

Balance at March 31, 2020		—	$	—		126,621,829	$	12	$	945,026	$	3,313		$	(396,788	)	$	551,563
Issuance of common stock for cash upon exercise of stock options		—		—		1,609,763		—		6,698		—			—			6,698
Vesting of restricted stock units		—		—		2,250		—		—		—			—			—
Common stock option and restricted stock unit share- based compensation		—		—		—		—		6,373		—			—			6,373
Other comprehensive loss		—		—		—		—		—		(1,160	)		—			(1,160	)
Net loss		—		—		—		—		—		—			(33,535	)		(33,535	)
Balance at June 30, 2020		—	$	—		128,233,842	$	12	$	958,097	$	2,153		$	(430,323	)	$	529,939

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

Adaptive Biotechnologies Corporation

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

(in thousands, except share amounts)

(unaudited)

	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 at December 31, 2018		92,790,094	$	560,858		12,841,536	$	1	$	37,902	$	(107	)	$	(295,908	)	$	(258,112	)
Issuance of common stock for cash upon exercise of stock options		—		—		883,845		—		1,880		—			—			1,880
Issuance of Series E-1 convertible preferred stock for cash upon exercise of Series E-1 convertible preferred stock options at fair value		249,643		109		—		—		—		—			—			—
Change in redemption value for vested Series E-1 convertible preferred stock options		—		964		—		—		—		—			(964	)		(964	)
Common stock option share-based compensation		—		—		—		—		6,378		—			—			6,378
Other comprehensive income		—		—		—		—		—		489			—			489
Net loss		—		—		—		—		—		—			(34,045	)		(34,045	)
Balance at June 30, 2019		93,039,737	$	561,931		13,725,381	$	1	$	46,160	$	382		$	(330,917	)	$	(284,374	)

Balance at December 31, 2019		—	$	—		125,238,142	$	12	$	935,834	$	671		$	(365,478	)	$	571,039
Adjustments to accumulated deficit for adoption of guidance on accounting for leases		—		—		—		—		—		—			93			93
Issuance of common stock for cash upon exercise of stock options		—		—		2,991,200		—		11,215		—			—			11,215
Vesting of restricted stock units		—		—		4,500		—		—		—			—