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2020-07-01 2020-07-31

 

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

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 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.

 

 

 

 

 

 

 

 

3


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.

 

4


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.

 

5


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.

 

6


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.

 

 

 

 

 

 

 

 

7


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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock option and restricted stock unit share-

   based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,048

 

 

 

 

 

 

 

 

 

11,048

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,482

 

 

 

 

 

 

1,482

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(64,938

)

 

 

(64,938

)

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.

 

8


Adaptive Biotechnologies Corporation

 

Condensed Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

Operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(64,938

)

 

$

(34,045

)

Adjustments to reconcile net loss to net cash (used in) provided by operating

   activities:

 

 

 

 

 

 

 

 

Depreciation expense

 

 

3,129

 

 

 

2,811

 

Noncash lease expense

 

 

1,344

 

 

 

 

Share-based compensation expense

 

 

11,048

 

 

 

6,378

 

Intangible assets amortization

 

 

847

 

 

 

842

 

Investment amortization

 

 

(651

)

 

 

(1,896

)

Fair value adjustment of convertible preferred stock warrant

 

 

 

 

 

2,266

 

Benefit from income tax

 

 

(1,804

)

 

 

 

Other

 

 

49

 

 

 

(78

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

4,746

 

 

 

(2,445

)

Inventory

 

 

(1,467

)

 

 

(166

)

Prepaid expenses and other current assets

 

 

4,206

 

 

 

(883

)

Accounts payable and accrued liabilities

 

 

(1,891

)

 

 

1,314

 

Deferred rent

 

 

 

 

 

(480

)

Operating lease liabilities

 

 

79

 

 

 

 

Deferred revenue

 

 

(17,165

)

 

 

288,714

 

Other

 

 

(215

)

 

 

1

 

Net cash (used in) provided by operating activities

 

 

(62,683

)

 

 

262,333

 

Investing activities

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(5,226

)

 

 

(5,354

)

Purchases of marketable securities

 

 

(107,747

)

 

 

(358,671

)

Proceeds from sales and maturities of marketable securities

 

 

433,224

 

 

 

96,500

 

Net cash provided by (used in) investing activities

 

 

320,251

 

 

 

(267,525

)

Financing activities

 

 

 

 

 

 

 

 

Proceeds from exercise of stock options

 

 

11,296

 

 

 

1,989

 

Payment of deferred initial public offering costs

 

 

 

 

 

(3,360

)

Other