Adaptive Biotechnologies Corporation — 2021 Form 10-K
Business context and reporting period. This filing covers the fiscal year ended December 31, 2021; it is an annual report, not a standalone fourth-quarter report. Adaptive develops immune-sequencing and mapping products for research, clinical diagnostics and drug discovery. Its commercial portfolio includes immunoSEQ, clonoSEQ and T-Detect COVID.
Key financial results
| Metric | 2021 | 2020 |
|---|---|---|
| Revenue | $154.3 million | $98.4 million |
| Sequencing revenue | $78.9 million | $41.4 million |
| Development revenue | $75.4 million | $56.9 million |
| Cost of revenue | $49.3 million | $22.5 million |
| Gross profit and margin | $105.0 million; 68.1% | $75.9 million; 77.1% |
| Operating loss | $209.0 million | $152.8 million |
| Net loss | $207.3 million | $146.2 million |
| Net loss per share, diluted | $1.48 | $1.11 |
| Adjusted EBITDA (non-GAAP) | $(151.7) million | $(119.6) million |
| Cash used in operating activities | $192.7 million | $149.7 million |
At year-end, cash, cash equivalents and marketable securities totaled $570.2 million, down from $806.8 million. Current assets were $402.7 million and current liabilities $113.8 million. The balance sheet does not show conventional borrowings; it reports $111.7 million of operating lease liabilities and $179.2 million of deferred revenue. The company reported $149.5 million of undiscounted operating lease payments.
Material changes and operating developments
- Revenue rose 57% year over year. Sequencing revenue increased 90%, with growth from research and clinical customers; development revenue increased 32%.
- Clinical sequencing volume, excluding T-Detect COVID, increased 48% to 22,516 tests. Research sequencing volume increased 42% to 32,146 sequences.
- Operating expenses increased 45% to $363.3 million, led by higher research and development, sales and marketing, and general and administrative costs. Cost of revenue grew faster than revenue, reducing gross margin to 68.1% from 77.1%.
- Development revenue included $62.0 million recognized under the Genentech collaboration and $10.0 million of regulatory milestone revenue. Genentech represented 41.9% of revenue in the customer-concentration disclosure; another section reports 40.2%, a difference investors may wish to reconcile.
- Cash used in operations increased to $192.7 million. Investing activities provided $181.2 million, principally from marketable-security maturities, while property and equipment purchases increased to $61.7 million.
Outlook, commentary and risks
- Management said existing cash, cash equivalents and marketable securities were expected to fund operating expenses and capital expenditure requirements for at least 12 months from the filing. No specific revenue, earnings or cash-flow guidance was provided.
- Management plans continued investment in commercial adoption of clinical products, research and development, drug discovery, the immune-medicine platform and laboratory capacity. It expects long-term revenue growth but notes that timing depends on customer adoption and usage.
- clonoSEQ test volume grew, and coverage had been secured for more than 240 million covered lives for multiple myeloma and ALL and more than 150 million for CLL. The company filed to expand the ALL blood-sample label and continued work on additional indications.
- T-Detect COVID received FDA Emergency Use Authorization in March 2021 and was ordered by more than 30,000 consumers and providers. Management anticipated a T-Detect Lyme CLIA-service launch during the 2022 Lyme season; autoimmune disease signals remained in development.
- Under the Genentech agreement, Adaptive may receive substantial development, regulatory and commercial milestones and royalties, but these are contingent. Genentech controls clinical, regulatory and commercialization efforts and may terminate for convenience. The filing also notes that Genentech suspended development of a drug against an earlier shared-antigen target in 2021; separately, it selected a TCR candidate to progress as a potential product candidate.
- Key risks include continued substantial losses and cash use; dependence on collaborations and milestone timing; uncertain clinical validation, regulatory authorization and reimbursement; intense competition; reliance on Illumina and other limited suppliers; and privacy, cybersecurity, COVID-19, intellectual-property and scaling risks.
- The independent auditor issued an unqualified opinion on the financial statements and internal controls. The auditor identified Genentech revenue recognition as a critical audit matter because estimating remaining research and development costs requires judgment and depends partly on development decisions controlled by Genentech.
Important facts for investors to verify
- Reconcile the 40.2% versus 41.9% disclosures of Genentech’s share of 2021 revenue and assess revenue concentration and deferred-revenue recognition assumptions.
- Track operating cash burn, investment balances, capital expenditures and whether the stated liquidity runway remains adequate as spending and commercial adoption evolve.
- Assess whether sequencing growth translates into improved unit economics, given the decline in gross margin and increased cost of revenue.
- Monitor clonoSEQ reimbursement and label-expansion progress, T-Detect Lyme launch and validation, and evidence supporting additional diagnostic indications.
- Follow Genentech program decisions, including progress of the selected candidate, potential milestone attainment, and any further changes to shared or personalized programs.