UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
|
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
(Exact Name of Registrant as Specified in its Charter)
|
|
|
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
|
|
|
|
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
|
Title of each class |
|
Trading Symbol(s) |
|
Name of each exchange on which registered |
|
|
|
|
|
|
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.
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).
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.
|
|
|
☒ |
|
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
As of April 29, 2022, the registrant had
Table of Contents
|
|
|
Page |
|
PART I. |
4 |
|
|
Item 1. |
4 |
|
|
|
4 |
|
|
|
5 |
|
|
|
6 |
|
|
|
7 |
|
|
|
8 |
|
|
|
Notes to Unaudited Condensed Consolidated Financial Statements |
9 |
|
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
22 |
|
Item 3. |
31 |
|
|
Item 4. |
31 |
|
|
PART II. |
32 |
|
|
Item 1. |
32 |
|
|
Item 1A. |
32 |
|
|
Item 2. |
32 |
|
|
Item 3. |
32 |
|
|
Item 4. |
32 |
|
|
Item 5. |
32 |
|
|
Item 6. |
33 |
|
|
34 |
||
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, T-Detect and immunoSEQ, 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 develop a map of the interaction between the immune system and disease (“TCR-Antigen Map”) and yield insights from it that are commercially viable as we expand the T-Detect product line with the goal of a multi-disease universal diagnostic test; |
|
|
• |
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; and |
|
|
• |
the potential effects on our business resulting from our March 2022 reduction in workforce and related restructuring, including our ability to realize expected cost savings, attract and retain personnel and meet our expansion initiatives and clinical development plans. |
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.
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)
|
|
|
March 31, 2022 |
|
|
December 31, 2021 |
|
||
|
|
|
(unaudited) |
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
|
|
|
Short-term marketable securities (amortized cost of $ |
|
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
|
|
|
|
|
|
|
|
Inventory |
|
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets |
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
|
|
|
|
|
|
|
Long-term assets |
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
|
|
|
|
|
|
|
Operating lease right-of-use assets |
|
|
|
|
|
|
|
|
|
Long-term marketable securities (amortized cost of $ |
|
|
|
|
|
|
|
|
|
Restricted cash |
|
|
|
|
|
|
|
|
|
Intangible assets, net |
|
|
|
|
|
|
|
|
|
Goodwill |
|
|
|
|
|
|
|
|
|
Other assets |
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
|
|
|
$ |
|
|
|
Liabilities and shareholders’ equity |
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
|
|
|
$ |
|
|
|
Accrued liabilities |
|
|
|
|
|
|
|
|
|
Accrued compensation and benefits |
|
|
|
|
|
|
|
|
|
Current portion of operating lease liabilities |
|
|
|
|
|
|
|
|
|
Current portion of deferred revenue |
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
|
|
|
|
|
|
|
Long-term liabilities |
|
|
|
|
|
|
|
|
|
Operating lease liabilities, less current portion |
|
|
|
|
|
|
|
|
|
Deferred revenue, less current portion |
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 9) |
|
|
|
|
|
|
|
|
|
Shareholders’ equity |
|
|
|
|
|
|
|
|
|
Preferred stock: $ |
|
|
|
|
|
|
|
|
|
Common stock: $ |
|
|
|
|
|
|
|
|
|
Additional paid-in capital |
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss |
|
|
( |
) |
|
|
( |
) |
|
Accumulated deficit |
|
|
( |
) |
|
|
( |
) |
|
Total Adaptive Biotechnologies Corporation shareholders’ equity |
|
|
|
|
|
|
|
|
|
Noncontrolling interest |
|
|
|
|
|
|
|
|
|
Total shareholders’ equity |
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders’ equity |
|
$ |
|
|
|
$ |
|
|
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 March 31, |
|
|||||
|
|
|
2022 |
|
|
2021 |
|
||
|
Revenue |
|
$ |
|
|
|
$ |
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
|
|
|
|
|
|
|
|
Research and development |
|
|
|
|
|
|
|
|
|
Sales and marketing |
|
|
|
|
|
|
|
|
|
General and administrative |
|
|
|
|
|
|
|
|
|
Amortization of intangible assets |
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
|
|
|
|
|
|
|
Loss from operations |
|
|
( |
) |
|
|
( |
) |
|
Interest and other income, net |
|
|
|
|
|
|
|
|
|
Net loss |
|
|
( |
) |
|
|
( |
) |
|
Add: Net loss attributable to noncontrolling interest |
|
|
|
|
|
|
— |
|
|
Net loss attributable to Adaptive Biotechnologies Corporation |
|
$ |
( |
) |
|
$ |
( |
) |
|
Net loss per share attributable to Adaptive Biotechnologies Corporation common shareholders, basic and diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
Weighted-average shares used in computing net loss per share attributable to Adaptive Biotechnologies Corporation common shareholders, basic and diluted |
|
|
|
|
|
|
|
|
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 March 31, |
|
|||||
|
|
|
2022 |
|
|
2021 |
|
||
|
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
Other comprehensive loss |
|
|
|
|
|
|
|
|
|
Change in unrealized gains and losses on investments |
|
|
( |
) |
|
|
( |
) |
|
Comprehensive loss |
|
|
( |
) |
|
|
( |
) |
|
Add: Comprehensive loss attributable to noncontrolling interest |
|
|
|
|
|
|
— |
|
|
Comprehensive loss attributable to Adaptive Biotechnologies Corporation |
|
$ |
( |
) |
|
$ |
( |
) |
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 Gain (Loss) |
|
|
Deficit |
|
|
Interest |
|
|
Shareholders’ Equity |
|
|||||||
|
Balance at December 31, 2020 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
|
|
|
Issuance of common stock upon exercise of common stock warrant |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Issuance of common stock for cash upon exercise of stock options |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Common stock option and restricted stock unit share-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Capital contributions for Digital Biotechnologies, Inc. |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
Balance at March 31, 2021 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2021 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
Issuance of common stock for cash upon exercise of stock options |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Vesting of restricted stock units |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Common stock option, restricted stock unit and market-based restricted stock unit share-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Other comprehensive loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Balance at March 31, 2022 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
Adaptive Biotechnologies Corporation
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
|
|
|
Three Months Ended March 31, |
|
|||||
|
|
|
2022 |
|
|
2021 |
|
||
|
Operating activities |
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
Adjustments to reconcile net loss to net cash used in operating activities |
|
|
|
|
|
|
|
|
|
Depreciation expense |
|
|
|
|
|
|
|
|
|
Noncash lease expense |
|
|
|
|
|
|
|
|
|
Share-based compensation expense |
|
|
|
|
|
|
|
|
|
Intangible assets amortization |
|
|
|
|
|
|
|
|
|
Investment amortization |
|
|
|
|
|
|
|
|
|
Other |
|
|
( |
) |
|
|
( |
) |
|
Changes in operating assets and liabilities |
|
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
|
( |
) |
|
|
( |
) |
|
Inventory |
|
|
( |
) |
|
|
( |
) |
|
Prepaid expenses and other current assets |
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
|
|
( |
) |
|
|
( |
) |
|
Operating lease right-of-use assets and liabilities |
|
|
|
|
|
|
|
|
|
Deferred revenue |
|
|
( |
) |
|
|
( |
) |
|
Other |
|
|
— |
|
|
|
( |
) |
|
Net cash used in operating activities |
|
|
( |
) |
|
|
( |
) |
|
Investing activities |
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
( |
) |
|
|
( |
) |
|
Purchases of marketable securities |
|
|
( |
) |
|
|
( |
) |
|
Proceeds from maturities of marketable securities |
|
|
|
|
|
|
|
|
|
Net cash provided by investing activities |
|
|
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
|
|
|
Proceeds from exercise of stock options |
|
|
|
|
|
|
|
|
|
Proceeds from initial capital contributions for Digital Biotechnologies, Inc. |
|
|
— |
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash, cash equivalents and restricted cash |
|
|
( |
) |
|
|
|
|
|
Cash, cash equivalents and restricted cash at beginning of year |
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash at end of period |
|
$ |
|
|
|
$ |
|
|
|
Noncash investing activities |
|
|
|
|
|
|
|
|
|
Purchases of equipment included in accounts payable and accrued liabilities |
|
$ |
|
|
|
$ |
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
8
Adaptive Biotechnologies Corporation
Notes to Unaudited Condensed Consolidated Financial Statements
(unaudited)
|
1. |
Organization and Description of Business |
Adaptive Biotechnologies Corporation (“we,” “us” or “our”) is a commercial-stage company advancing the field of immune medicine by harnessing the inherent biology of the adaptive immune system to transform the diagnosis and treatment of disease. We believe the adaptive immune system is nature’s most finely tuned diagnostic and therapeutic for most diseases, but the inability to decode it has prevented the medical community from fully leveraging its capabilities. Our immune medicine platform applies our proprietary technologies to read the diverse genetic code of a patient’s immune system and aims to understand precisely how the immune system detects and treats disease in that patient. We capture these insights in our dynamic clinical immunomics database, which is underpinned by computational biology and machine learning, and use them to develop and commercialize clinical products and services that we are tailoring to each individual patient. We have commercial products and services and a robust pipeline of clinical products and services that we are designing to diagnose, monitor and enable the treatment of diseases, such as cancer, autoimmune disorders and infectious diseases.
We were incorporated in the State of Washington on September 8, 2009 under the name Adaptive TCR Corporation. On December 21, 2011, we changed our name to Adaptive Biotechnologies Corporation. We are headquartered in Seattle, Washington.
|
2. |
Significant Accounting Policies |
Basis of Presentation and Principles of Consolidation
The unaudited condensed consolidated financial statements include the accounts of Adaptive Biotechnologies Corporation, our wholly-owned subsidiary and Digital Biotechnologies, Inc., a corporate subsidiary we have
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the condensed consolidated financial statements, as well as the reported amounts of revenues and expenses during the periods presented. We base our estimates on historical experience and other relevant assumptions that we believe to be reasonable under the circumstances. Estimates are used in several areas including, but not limited to, estimates of progress to date for certain performance obligations and the transaction price for certain contracts with customers, share-based compensation, including the fair value of stock, the provision for income taxes, including related reserves, and goodwill, among others. These estimates generally involve complex issues and require judgments, involve the analysis of historical results and prediction of future trends, can require extended periods of time to resolve and are subject to change from period to period. Actual results may differ materially from management’s estimates.
Unaudited Interim Condensed Consolidated Financial Statements
In our opinion, the accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information. These unaudited condensed consolidated financial statements include all adjustments necessary to fairly state our financial position and the results of our operations and cash flows for interim periods in accordance with GAAP. All such adjustments were of a normal, recurring nature. Interim-period results are not necessarily indicative of results of operations or cash flows for a full year or any subsequent interim period.
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 15, 2022.
Reclassification
We previously disclosed revenue bifurcated into sequencing and development financial statement captions and now present total revenue on the unaudited condensed consolidated statements of operations. See Note 3, Revenue for additional disaggregation of revenue under our Immune Medicine and MRD market opportunities.
9
Adaptive Biotechnologies Corporation
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
(unaudited)
Restricted Cash
We had a restricted cash balance of $
Concentrations of Risk
We are subject to a concentration of risk from a limited number of suppliers, or in certain cases single suppliers, for some of our laboratory instruments and materials. This risk is managed by targeting a quantity of surplus stock.
Cash, cash equivalents and marketable securities are financial instruments that potentially subject us to concentrations of credit risk. We invest in money market funds, United States (“U.S.”) government debt securities, U.S. government agency securities, commercial paper and corporate bonds with high-quality accredited financial institutions.
Significant customers are those that represent more than 10% of our total revenue or accounts receivable, net balances for the periods and as of each condensed consolidated balance sheet date presented, respectively.
For each significant customer, revenue as a percentage of total revenue for the periods presented and accounts receivable, net as a percentage of total accounts receivable, net as of the dates presented were as follows:
|
|
|
Revenue |
|
Accounts Receivable, Net |
||||||
|
|
|
Three Months Ended March 31, |
|
March 31, |
|
|
December 31, |
|||
|
|
|
2022 |
|
2021 |
|
2022 |
|
|
2021 |
|
|
Customer A |
|
*% |
|
*% |
|
|
|
% |
|
*% |
|
Customer B |
|
|
|
|
|
|
|
|
|
|
|
Customer C |
|
* |
|
|
|
* |
|
|
* |
|
|
Genentech and Roche Group |
|
|
|
|
|
* |
|
|
* |
|
|
* less than 10% |
|
|
|
|
|
|
|
|
|
|
Revenue Recognition
We recognize revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606 (“ASC 606”), Revenue from Contracts with Customers. Under ASC 606, for all revenue-generating contracts, we perform the following steps to determine the amount of revenue to be recognized: (1) identify the contract or contracts; (2) determine whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (3) measure the transaction price, including the constraint on variable consideration; (4) allocate the transaction price to the performance obligations based on estimated selling prices; and (5) recognize revenue when (or as) we satisfy each performance obligation.
We derive revenue by providing diagnostic and research services in our Immune Medicine and MRD market opportunities. Our Immune Medicine revenue consists of revenue generated from (1) providing sample testing services for our commercial research product, immunoSEQ, to biopharmaceutical customers and academic institutions; (2) providing our T-Detect COVID tests to clinical customers; and (3) our collaboration agreements with Genentech and other biopharmaceutical customers in areas of drug and target discovery. Our MRD revenue consists of revenue generated from (1) providing our clonoSEQ report to clinical customers; (2) providing MRD sample testing services to biopharmaceutical customers and certain academic institutions, including investigator-led clinical trials; and (3) providing our clonoSEQ report or results to certain international laboratory sites through technology transfers.
For research customers who utilize either immunoSEQ or our MRD services, contracts typically include an amount billed in advance of services (“upfront”) and subsequent billings as sample results are delivered to the customer. Upfront amounts received are recorded as deferred revenue, which we recognize as revenue upon satisfaction of performance obligations. We have identified two typical performance obligations under the terms of our research service contracts: (1) the delivery of our immunoSEQ or MRD data for customer provided samples; and (2) related data analysis. We recognize revenue for both identified performance obligations as sample results are delivered to the customer. In periods where our sample estimates are reduced or a customer project is cancelled and, in either case, we have remaining related deferred revenue, we recognize revenue using a cumulative catch-up approach based on the proportion of samples delivered to date relative to the remaining samples expected to be delivered.
For agreements where we provide our clonoSEQ report to ordering physicians, we have identified one performance obligation: the delivery of a clonoSEQ report. We bill and receive payments for these transactions from medical institutions and commercial and government third-party payors. As payment from the respective payors may vary based on the various reimbursement rates and patient responsibilities, we consider the transaction price to be variable and record an estimate of the transaction price, subject to the constraint for variable consideration, as revenue at the time of delivery. The estimate of transaction price is based on historical and expected reimbursement rates with the various payors, which are monitored in subsequent periods and adjusted as necessary based on actual collection experience.
10
Adaptive Biotechnologies Corporation
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
(unaudited)
Regarding our clonoSEQ coverage under Medicare, we bill an episode of treatment when we deliver the first eligible test report. This billing contemplates all necessary tests required during a patient’s treatment cycle, which is currently estimated at approximately four tests per patient, including the initial sequence identification test. Revenue recognition commences at the time the initial billable test report is delivered and is based upon cumulative tests delivered to date. We estimate the number of tests we expect to deliver over a patient’s treatment cycle based on historical testing frequencies for patients by indication. These estimates are subject to change as we develop more information about utilization over time. Any unrecognized revenue from the initial billable test is recorded as deferred revenue and is recognized either as we deliver our estimate of the remaining tests in a patient’s treatment cycle or when the likelihood becomes remote that a patient will receive additional testing.
The contract transaction price for agreements we enter into with biopharmaceutical customers to further develop and commercialize their therapeutics may consist of a combination of non-refundable upfront fees, separately priced MRD testing fees and milestone fees earned upon our customers achievement of certain regulatory approvals. Depending on the contract, these agreements include single or multiple performance obligations. Such performance obligations include providing services to support our customer’s therapeutic development efforts, including regulatory support for our technology intended to be utilized as part of our customer’s registrational trials, developing analytical plans for our data, participating on joint research committees and assisting in completing a regulatory submission and providing MRD testing services related to customer-provided samples for their regulatory submissions. Generally, the support services, excluding MRD testing services, are not distinct within the context of the contract and thus are accounted for as a single performance obligation. The transaction price allocated to the respective performance obligations is estimated using an adjusted market assessment approach for the regulatory support services and a standalone selling price for the estimated MRD testing services. At contract inception, we fully constrain any consideration related to regulatory milestones, as the achievement of such milestones is subject to third-party regulatory approval and the customers’ own submission decision-making. When MRD sample testing services are separately priced customer options, we assess if a material right exists and, if not, the customer option to purchase additional MRD sample testing services is not considered part of the contract. We recognize revenue related to MRD testing services over time using an output method based on the proportion of sample results delivered relative to the total amount of sample results expected to be delivered, when expected to be a faithful depiction of progress. We use the same method to recognize the regulatory support services. When an output method based on the proportion of sample results delivered is not expected to be a faithful depiction of progress, we utilize an input method using a cost-based model based on estimates of effort completed. Selecting the measure of progress and estimating progress to date requires significant judgment. Except for any non-refundable upfront fees, the other forms of compensation represent variable consideration. Variable consideration related to regulatory milestones is estimated using the most likely amount method, where variable consideration is constrained until it is probable that a significant reversal of cumulative revenue recognized will not occur. Milestone payments for regulatory approvals, which are not within our customers’ control, are not considered probable of being achieved until those approvals are received. Determining whether regulatory milestone payments are probable is an area that requires significant judgment. In making this assessment, we evaluate scientific, clinical, regulatory and other risks, as well as the level of effort and investment required to achieve the respective milestone.
Net Loss Per Share Attributable to Adaptive Biotechnologies Corporation Common Shareholders
We calculate basic net loss per share attributable to our common shareholders by dividing net loss attributable to us by our weighted-average number of shares of common stock outstanding for the period. The diluted net loss per share attributable to our common shareholders is computed by giving effect to all potential dilutive common stock equivalents outstanding for the period determined using the treasury stock method. For purposes of this calculation, common stock warrants, stock options outstanding, nonvested restricted stock units and the maximum nonvested market-based restricted stock units eligible to be earned are considered common stock equivalents but have been excluded from the calculation of diluted net loss per share attributable to our common shareholders, as their effect is anti-dilutive.
11
Adaptive Biotechnologies Corporation
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
(unaudited)
|
3. |
Revenue |
We disaggregate our revenue from contracts with customers by market opportunity and type of arrangement, as we believe this best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.
|
|
|
Three Months Ended March 31, |
|
|||||
|
|
|
2022 |
|
|
2021 |
|
||
|
Immune Medicine revenue |
|
|
|
|
|
|
|
|
|
Service revenue |
|
$ |
|
|
|
$ |
|
|
|
Collaboration revenue |
|
|
|
|
|
|
|
|
|
Total Immune Medicine revenue |
|
|
|
|
|
|
|
|
|
MRD revenue |
|
|
|
|
|
|
|
|
|
Service revenue |
|
|
|
|
|
|
|
|
|
Regulatory milestone revenue |
|
|
|
|
|
|
|
|
|
Total MRD revenue |
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
|
|
|
$ |
|
|
During the three months ended March 31, 2022, we recognized $
As of March 31, 2022, we could receive up to an additional $
Genentech Collaboration Agreement
In December 2018, we entered into a worldwide collaboration and license agreement with Genentech (the “Genentech Agreement”) to leverage our capability to develop cellular therapies in oncology. Subsequent to receipt of regulatory approval in January 2019, we received a non-refundable, upfront payment of $
|
|
• |
Shared Products. The shared products will use “off-the-shelf” TCRs identified against cancer antigens shared among patients (“Shared Products”). |
|
|
• |
Personalized Product. The personalized product will use patient-specific TCRs identified by real-time screening of TCRs against cancer antigens in each patient (“Personalized Product”). |
Under the terms of the agreement, we granted Genentech exclusive worldwide licenses to develop and commercialize TCR-based cellular therapies in the field of oncology, including licenses to existing shared antigen data packages. Additionally, Genentech has the right to determine which product candidates to further develop for commercialization purposes. We determined that this arrangement meets the criteria set forth in ASC Topic 808, Collaborative Arrangements (“ASC 808”), because both parties are active participants in the activity and are exposed to significant risks and rewards depending on the activity’s commercial failure or success. Because ASC 808 does not provide guidance on how to account for the activities under a collaborative arrangement, we applied the guidance in ASC 606 to account for the activities related to the Genentech Agreement.
In applying ASC 606, we identified the following performance obligations at the inception of the agreement:
|
|
1. |
License to utilize on an exclusive basis all TCR-specific platform intellectual property to develop and commercialize any licensed products in the field of oncology. |
12
Adaptive Biotechnologies Corporation
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
(unaudited)
|
|
2. |
License to utilize all data and information within each shared antigen data package and any other know-how disclosed by us to Genentech in oncology. |
|
|
3. |
License to utilize all private antigen TCR product data in connection with research and development activities in the field of use. |
|
|
4. |
License to existing shared antigen data packages. |
|
|
5. |
Research and development services for Shared Products development, including expansion of shared antigen data packages. |
|
|
6. |
Research and development services for private product development. |
|
|
7. |
Obligations to participate on various joint research, development and project committees. |
We determined that none of the licenses, research and development services or obligations to participate on various committees were distinct within the context of the contract, given such rights and activities were highly interrelated and there was substantial additional research and development to further develop the licenses. We considered factors such as the stage of development of the respective existing antigen data packages, the subsequent development that would be required to both identify and submit a potential target for investigational new drug acceptance under both product pathways and the variability in research and development pathways given Genentech’s control of product commercialization. Specifically, under the agreement, Genentech is not required to pursue development or commercialization activities pertaining to both product pathways and may choose to proceed with one or the other. Accordingly, we determined that all of the identified performance obligations were attributable to one general performance obligation, which is to further the development of our TCR-specific platform, including data packages, and continue to make our TCR identification process available to Genentech to pursue either product pathway.
Separately, we have a responsibility to Genentech to enter into a supply and manufacturing agreement for patient-specific TCRs as it pertains to any Personalized Product therapeutic. We determined this was an option right of Genentech should they pursue commercialization of a Personalized Product therapy. Because of the uncertainty resulting from the early stage of development, the novel approach of our collaboration with Genentech and our rights to future commercial milestones and royalty payments, we determined that this option right was not a material right that should be accounted for at inception. As such, we will account for the supply and manufacturing agreement when entered into between the parties.
We determined the initial transaction price shall be made up of only the $
As there are potential substantive developments necessary, which Genentech may be able to direct, we determined that we would apply a proportional performance model to recognize revenue for our performance obligation. We measure proportional performance using an input method based on costs incurred relative to the total estimated costs of research and development efforts to pursue both the Shared Products and Personalized Product pathways. When any of the potential regulatory and development milestones are no longer fully constrained and included in the transaction price, such amounts will be recognized using the cumulative catch-up method based on proportional performance at such time. We currently expect to recognize the revenue over a period of approximately
We recognized $
13
Adaptive Biotechnologies Corporation
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
(unaudited)
|
4. |
Deferred Revenue |
Deferred revenue from our Genentech Agreement represents $
Changes in deferred revenue during the three months ended March 31, 2022 were as follows (in thousands):
|
Deferred revenue balance at December 31, 2021 |
|
$ |
|
|
|
Additions to deferred revenue during the period |
|
|
|
|
|
Revenue recognized during the period |
|
|
( |
) |
|
Deferred revenue balance at March 31, 2022 |
|
$ |
|
|
As of March 31, 2022, $
|
5. |
Fair Value Measurements |
The following tables set forth the fair value of financial assets as of March 31, 2022 and December 31, 2021 that were measured at fair value on a recurring basis (in thousands):
|
|
|
March 31, 2022 |
|
|||||||||||||
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
|
Financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
U.S. government debt securities |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Corporate bonds |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total financial assets |
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
|
|
December 31, 2021 |
|
|||||||||||||
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
|
Financial assets |
|
|
|
|||||||||||||