Adaptive Biotechnologies Corporation Price & Performance (ADPT)

Actual results may differ materially from today's forward looking statements depending on a number of factors which are set forth in our public filings with the SEC and listed in this presentation. In addition, non GAAP financial measures will be discussed during the call and a reconciliation from non GAAP to GAAP metrics can be found in our earnings release. Joining the call today are Chad Robbins, our COO and Founder and Kyle Fiskol, our Chief Financial Officer. Additional members of the management team will be available for Q and A. With that, I'll turn the call over to Chad Robbins. Chad? Thanks, Karina.

Good afternoon, and thank you for joining us on our fourth quarter and full year earnings call. As highlighted on Slide three, 2024 was a year of key wins and strong execution on all fronts. In 42% versus 2023 driven by both clinical testing and pharma. Two major catalysts occurred in the year, which we believe will drive long term growth profile of the MRD business. First, we obtained a new gap fill rate for our Clonosic test of $2,007 which is about $300 higher per test than our previous implied rate. And second, the ODAC vote in favor of using MRD as a primary endpoint to support accelerated approval of multi myeloma therapies represents a paradigm shift in the development of heme cancer drugs. In immune medicine, we make significant progress in our autoimmune programs and recently nominated our lead clinical indication We are now focusing on the preclinical development of an antibody therapeutic candidate in this lead indication. In conjunction with driving MRD top line growth, and advancing our I'm programs we completed restructuring initiatives and yielded a 40% reduction in cash burn from 2023, concluding the year with a robust cash position of $256,000,000 Let's take a closer look at the MRD business performance and outlook starting with clinical testing on Slide five.

Full year Clonacy clinical revenue grew 40% versus prior year. As shown in the chart, volumes continue to increase quarter over quarter with a record high 20,945 tests delivered in the fourth quarter, representing a 34% increase percentage increase versus prior year and a 7% increase sequentially. Meaningful growth was observed in all reimbursed indications. Multiple myeloma contributed forty three percent of U. S. ClonaSeq volume in Q4 followed by ALL at 34%, CLL at 10%, BCL at 6% and MCL at 4%. Looking at some of the key indicators in the quarter, it's encouraging to see the positive trends versus the same time a year ago. Blood based MRD testing grew 55% and contributed forty one percent of MRD tests in The United States. Tests in the community grew thirty eight percent and represented about twenty five percent of tests delivered. Ordering healthcare providers grew thirty percent over 3,000. We successfully completed Epic integration in nine accounts during the quarter, including several of our largest accounts, We have now completed integrations in 19 accounts which together represented about 20% of our ordering volume in 2024. In January, we announced an exclusive strategic commercial partnership with NeoGenomics to cross promote our Clonaseq test along with Neo's Compass, and chart meta pathology services.

We expect this collaboration to expand our presence in the community and fuel our growth in this segment. In addition to the contribution from volume, clinical revenue growth was also fueled by an increase in Clonaseq ASP, as shown on Slide six. We ended the year in average ASP of eleven seventeen per test in The United States, which represents a 7% increase versus fiscal yield 2023. This increase was due to the ongoing execution of various initiatives to improve collections and expand coverage. We reduced the proportion of tests delivered for indications not covered by Medicare from 17% to 7% throughout the year. We obtained Medicare coverage for MCL at the new gap fill rate under the episode structure. We initiated agreements with several large previously uncontracted Blue Cross Blue Shield payers including Texas and Independence Blue Cross, and established our first Medicaid coverage in the key states of New York, and California. And we completed the transition of our payers to the new PLA code which improved our prior authorization success rate from 46% at the beginning of twenty twenty four to 69% at the end [indiscernible] will continue to drive these efforts which combined with the new GAAP bill rate give us confidence that we can reach an ASP of around $1,300 per test on average for fiscal year twenty twenty five.

Looking at MRD Pharma on Slide seven. [indiscernible] Our MRD Pharma business had a strong year. With revenue growth of 44% versus 2023, which included $12,500,000 in regulatory milestone revenue, Excluding milestones, Pharma sequencing revenue grew 14%. In addition, we ended the year with a healthy backlog of over $200,000,000 which is about 10% increase over 2023. [indiscernible] We've experienced significant momentum following the ODAC vote in April. We've closed 20 new myeloma studies in 2024, 15 of which closed post ODAC. We now have 10 multi myeloma studies using Clonosyq as a primary endpoint. Including three that were upgraded from secondary to primary post ODAC. We're seeing a positive impact for the continued acceptance of MRD in other disease states as our partners increasingly seek to incorporate MRD as a primary endpoint in both CLL and diffuse large B cell lymphoma. And we believe there's a halo effect in adoption in the clinic as pharma companies are starting to highlight the clinical utility of MRD testing and its relevance as a key measure of treatment response. In summary, we achieved great success in both the clinical and pharma MRD businesses in 2024. Which sets the stage for continued execution on our key priorities in 2025.

As shown on Slide eight, we intend to drive top line growth in 2025 by continuing to focus on a few key strategic priorities, including expanding blood based testing to contribute 45% or more of our total MRD volume by further growing our presence in the in the community and by generating more data in blood. Integrating additional Epic accounts and launching the Iron in the community by midyear so that greater than 50% of our test volume is integrated by year end. Third, increasing ASP to an average of $1,300 per test based on the initiative mentioned earlier and fourth, increasing the number of new pharma studies and primary endpoint studies across indications continuing to leverage momentum from last year's ODAC recommendation. Bottom line initiatives for the year include further reducing cost per sample in the lab by supporting volume growth with stable direct labor personnel and overhead. Completing the transition to the NovaSeq X the second half of the year, and finally maintaining similar operating spend levels as in 2024. Execution of these priorities will enable us to achieve our primary goal for MRD this year, becoming adjusted EBITDA positive in the second half of the year while maintaining a strong long term profile.

Now let's turn to immunomedicine on Slide 10. Our immune medicine business focus on two differentiated immune based therapeutic strategies: The first is in cancer with our partner Genentech, where the goal is to deliver highly effective TCR based cell therapies to treat patients with different solid tumors. And the second is in autoimmunity, based on our precision immunology approach our goal is to discover and develop antibodies that deplete or block the auto reactive T cell receptors that are causing disease. As shown on Slide 11, in 2024, we made significant progress in both therapeutic strategies. In oncology, our focus is to enhance the profile of our cell therapy product by improving turnaround time and reducing cost. As such, we've made progress in replacing our TCR discovery cellular assay with a digital or in silico TCR antigen binding model. We're making good progress in generating the necessary training data This digital TCR antigen prediction model should provide the foundation for TCR based cell therapy with Genentech and allow us to pursue additional high value applications beyond cancer cell therapy. Autoimmunity, we've successfully identified a subset of auto reactive or offender T cell receptors that are likely causing disease in patients with multiple sclerosis, type one diabetes and several other autoimmune indications.

We completed various antibody mouse immunization campaigns and successfully selected and functionally tested a subset of antibodies to a number of disease causing targets and prioritized indications. Based on these data we collected, we also recently nominated a lead indication and are focusing on the preclinical development of antibody therapeutic candidates in this first indication. As highlighted on Slide 12, the immune medicine business has three clear strategic priorities in 2025. The first is to continue to support our partner Genentech in the development of cell therapy products. The second is to generate a robust preclinical data package for our differentiated antibody program in our lead autoimmune indication. And the third is we are going to execute on these strategies with a targeted cash burn of $25,000,000 to $30,000,000 We will achieve this by gating our R and D investments and leveraging our pharma business revenue to offset the I'm spend. Now I'm going to pass it over to Kyle who's going to walk through the financial results and 2025 full year guidance. Thanks, Chad. Starting on Slide 13 with revenue for the fourth quarter and full year.

Total revenue in the fourth quarter was $47,500,000 with 85% from MRD and 15% from immune medicine. Representing 4% growth from the same period last year. MRD revenue grew to $40,100,000 up 31% from a year ago with clinical and pharma contribution of 6535% respectively. [indiscernible] ClonoCyq test volume increased 34% to 20,945 tests delivered from 15,680 tests in the same period last year. Immune medicine revenue was 7,300,000.0 down 51% from a year ago driven as expected by lower Genentech amortization, which decreased 56% and lower Pharma and Academic Services as I'm focused has centered around drug discovery efforts. Full year 2024 revenue was $107,179,000,000 representing a 5% increase over year. MRD revenue was $145,500,000 up 42% from a year ago. With $12,500,000 in milestone revenue recognized in the year.

Excluding milestones, MRD revenue grew 29% versus 2023. Immune medicine revenue was $33,400,000 Moving down the P and L, sequencing gross margin, which excludes Milestones and Genentech, Ameren was 59% for the fourth quarter This represents an increase of 11 percentage points versus prior year and three percentage points sequentially.

Full year sequencing gross margin was 53% compared to 41% in 2023.

Lower overhead costs from efficiencies in the production lab and direct labor leverage which combined drove lower cost per sample contributed to these Total operating spend for the quarter inclusive of cost of revenue was $81,300,000 which excluding the impairment charge from last year represents an 11% decrease from Q4 twenty twenty three.

This decrease continues to be mainly driven by our focus on driving leverage across options with R and D once again being the biggest contributor of the decline. Given more targeted investments in amusements.

Full year operating spend was $332,300,000 down 11% from 2023. Excluding the prior year's asset impairment charge. Total company adjusted EBITDA in Q4 was a loss of 16,400,000.0 compared to $24,700,000 in Q4 of twenty twenty three. Adjusted EBITDA loss for the full year was 80,400,000.0 versus $116,400,000 in 2023. As you can see from the segment reporting table at the bottom of the slide, the full year 2024 MRD adjusted EBITDA loss has been reduced by 54% in 2024 versus last year. Driven primarily by higher revenue and lower operating expense. Immunomedicine adjusted EBITDA loss for fiscal year twenty twenty four increased to $26,000,000 versus $14,100,000 in 2023. Interest expense from our royalty financing agreement with OrvMed was $3,000,000 in the fourth quarter. And $11,600,000 for the full year.

Which was offset by interest income of $3,100,000 for the fourth quarter and $14,500,000 for the full year. Net loss for the quarter was $33,700,000 and net loss for the full year was 159,600,000.0 As a result of strong top line performance, improving operating efficiencies and focused spending, we ended the year with $256,000,000 in cash, cash equivalents and marketable securities. Now let's turn to our full year 2025 guidance on Slide 14.

We expect full year revenue for the MRD business to be between $175,000,000 and 185,000,000 Guidance includes conservative MRD Pharma Services growth as we navigate through a new administration and monitor broader impacts from the Bio [indiscernible] It also includes MRD milestones of $6,000,000 to $7,000,000 which could have upside depending on regulatory decision making. At the midpoint, this guidance represents growth versus twenty twenty four of 2430% growth excluding milestones.

With respect to revenue trends throughout the year, we expect MRD revenue to be $40.60 weighted between the first and second half. As growth in clinical volumes and ASP compound Of note, given that our immune medicine efforts efforts are focused on drug discovery, revenue from our I'm pharma collaborations will continue to be used to offset R and D investments.

We anticipate around $15,000,000 in amortization from the Genentech collaboration. We expect full year operating expenses, including cost of revenue, to be between $340,000,000 and $350,000,000 This reflects similar levels of operating spend as in 2024 as we continue to leverage our commercial and operational infrastructure while supporting our higher volumes. Of this total spend, we expect about 69% to be driven by the MRD business and 23% from immune The remainder will come from unallocated corporate costs. Maintaining a strong cash position continues to be a key priority.

We expect our total cash burn for the year to be between $60,000,000 and $70,000,000 representing an annual reduction at the midpoint of the range of about 28% versus We anticipate approximately 30% of the burn this year to come from the MRD business and 40% from main medicine. The remaining is due to unallocated corporate costs. Of note, consistent with past years, the first quarter will be our highest cash utilization quarter, primarily due to the payout of our annual corporate bonus. I am encouraged by the strong results in 2024. We are growing our revenue, managing our operating expenses and have a strong capital position to continue to feel growth and execute on our goals. With that, I'll hand it back over to Chad. Thanks, Kyle. 2024 was a pivotal year of execution and we are looking forward to building on the success in 2025. In MRD, we are executing on our strategy and we are confident in reaching our profitability goal later this year with an enhanced growth and margin profile. In immune medicine, we are advancing our drug discovery efforts which we believe could have an enormous future potential. And importantly, we have a strong cash position that enables us to achieve our goals in both businesses.

We've got the people, the market position and the momentum to drive success in 2025 and beyond. I'd like to now turn the call back over to the operator and open up for questions. Thank you.

Thank you. And our first Hi, guys. Good afternoon. Thanks for taking the questions.

Maybe if I could start just on the underlying assumption of the guide here for the MRD business.

Obviously, a lot goes into this one, but maybe if I could just ask on pricing. That seems to be a pretty big lever this year. Can you just unpack for us that $1,300 assumed ASP for the year what's included there, what's not included and as you sort of think about some potential upside levers there, what could maybe drive something a little bit higher than Thanks. Sure, Andrew. Kyle, I'll have you answer that. Yes. Andrew, probably four important things to align on the ASP drivers. The first is the full year impact from the gap fill rate for our Medicare line of business. In 2024, that was only partially reflected in the last quarter of the year. So we're going to see the full year impact of that being in place. Second and probably most important is the pacing at which we're able to reach contract [indiscernible] existing contracted payers as well as cover as well as contract with the remaining kind of larger open payers that we have The third component is revenue cycle management. To some extent, we think this has some meaningful opportunity with the gap fill pricing being available not only in helping us to win appeals, but to win appeals at a higher price point.

So that we think can drive some meaningful improvements. And last is Medicaid, not only with having the Adaptive fill reference rate available even though they are traditionally a lower payer, we can start to gain some meaningful traction in the reimbursement environment and a bit organically as our volume mixes to the community, we'll see a mix away from that Medicare line of business, which has been historically a lower payer. So those are kind of four main things I'd focus on for ASP.

That's perfect. And then if I could for my follow-up here, obviously, a pretty big year in terms of Catalyst and sort of milestones to get to adjusted EBITDA positivity for the MRD business here. You just sort of talk to us about sort of the pacing of that margin progression throughout the year? And then specifically as it relates to the NovaSeq X transition, what sort of needs to get done in order for that to sort of be fully derisked at this point?

Yes. On the pacing, we exited Q4 at about 59% on the sequencing margin profile. I think that's probably a fair number for the first half of the year depending on the contribution mix from pharma. But that's probably the right ballpark to be in. I think the NovaSeq X in the second half of the year, we've said historically between five and eight percentage points lift there. Over twelve months. So you'll start to see an improving margin profile in addition to an improving revenue profile from the ASP drive that margin profile. So So on the longer term front, we see the no driving about 10 percentage points on the margin profile. But as it relates to the adjusted EBITDA profitability timeframe, it's it's really driving that and we're fairly confident in our ability to achieve this with the initiatives we've outlined.

Yes. I'll take it all together.

Yes, Andrew, just take it altogether, we're certainly confident in our ability to achieve EBITDA positivity in the second half of twenty twenty five. Our next question comes from Rachel Battenfeld of JPMorgan. Your line is open. Perfect. Good afternoon. Thanks so much for taking the questions. First up here, just on the NeoGenomics partnership, great to see that signed.

Can you walk us through what's contemplated in guidance currently in terms of contributions from that partnership and how should we see that trend throughout the year?

Sure. Susan, you want to take that? Sure. Thanks for the question, Rachel.

So the NeoGenomics partnership, we've already begun working in earnest with the team and we expect that it's going to take around four months for us to work closely to design and implement the customer experience and the supporting backroom operations that will facilitate delivering Clonaseq tests through NeoGenomics channels. Our goal is to start the cross promotion with an initial group of pilot accounts in the second half of this year. We're really planning to take a slow ramp on that to allow time to collect and implement customer feedback, make sure all the mechanics are in order. And so while we could go faster, both companies have experience with lab to lab partnerships and so we're intentional here. We're not rushing. We have the opportunity to jointly ensure that we implement all the best practices that we know will lead to longer term success. And so as a result, the guide this year really doesn't incorporate any material volume from NeoGenomics and it's really in 2026 and 2027 that we expect to see that all come through.

And that's to help us be prudent in kind of our outlook Additional uptake earlier, that's great for us.

Perfect. And then just on my follow-up, just in terms of the MRD guidance, I think I heard you say it's a forty-sixty weighting between the first half, second half on a revenue basis. But walk us through your assumptions in terms of the phasing of volume growth Should we assume a similar progression or more linear or more hockey stick in terms of the volume ramp throughout the year?

Thank you.

Yes. I think thinking about it linearly is probably right. I would say the back half of the year with the flat iron launch and the catalyst from continued Epic integrations might have a more profound impact But as it relates to our guidance, we're kind of thinking about it linearly while we watch the uptake from both Epic and Flatiron, which could drive us to the upside of the range.

Thank you.

Our next question comes from Martin Sero of BT Your line is open. Hey, guys. Thanks for taking the questions. [indiscernible] yes, it's great to see the progress in 2024 and my first question is, I recognize that you are not contemplating any material uptake with the Neo partnership in 2025. However, many of us do cover NeoGenomics and we're not super familiar with the size of the Compass and Chart offerings. So can you just give us a sense, maybe qualitative, quantitative about how significant of an opportunity is Compass and Chart as we think about 2026 and 2027 What type of attachment rate do you think a clonocycle could have as part of that product offering?

Yes. Thanks for the question, Mark. I want to start first by saying that I think the companies both view this as a win win collaboration that's going to potentially offer upside to both products.

Both to the Compass and Chart products on the Neo side and to ColonaSeq for Adaptive.

The estimated volumes, I'll leave it to NeoGenomics comment on their current business, but I will say that we think that it could have a material impact to our volumes and we're looking at sort of mid high single digits over time.

The deal is a three year deal with the opportunity to extend. And so again, you'll start to see more of that come through in the later years.

Okay, got it. And then as a follow-up, can you speak to any success that you're having with commercial payers who might recognize the higher $2,007 price on the Medicare side do you think that that is an opportunity for you in 2025 to kind of go back to some commercial health plans and negotiate a higher rate Yes, absolutely. We've already seen some nice conversion of recontracting with existing commercial payers and we're under late stage discussions with several uncontracted payers that are contracting at a higher rate So I do we absolutely believe that this will drive our ASPs or one of the components one of the core components that Kyle mentioned that will drive ASPs for the year. But certainly having that new PLA code in place has been extremely extremely helpful.

Okay, great. Congrats on the quarter. Thanks Mark.

Thank you.

Our next question comes from Sung Ji Nam of Scotiabank. Your line is open. Hi, thanks for taking the questions. Could you remind us in terms of your pipeline for MRD, the recent Medicare reimbursement for mantle lymphoma, Just remind us again kind of what's in the pipeline What are some of the next indications that we could look forward to over the next kind of twelve to twenty four months?

Sure.

So yes, as you noted, Mantal Cell and FOMO is our most recently Medicare covered indication, which we launched commercial promotion for in mid Q4 And I just want to note that that's an indication that we're already seeing significant enthusiasm around. There's a high unmet need and we had some really nice data coincide with our launch at ASH twenty twenty four which demonstrated the ability of Plunacy to get 10 to the negative six sensitivity to to inform the decision on whether or not to transplant the patient with natural clinical actionability data kind of right out of the gate, which is great. Going forward, we are anticipating submission of additional indications to Moldex for potential reimbursement. We're next going to see coverage for T cell ALL. And we're also exploring advanced stages of cutaneous T cell lymphomas CTCL, which is also known as [indiscernible] to get that T cell application in and utilizing data from the validation of our recently updated T cell assay, which we launched in the clinic in Q4. And for which we recently received additional approval from New York's CLEP as well. I do also want to mention that on the mantle cell front, we're not entirely done with our work in the sense that we'd like to continue to seek an additional reimbursement framework from MolDX, which is recurrent monitor So in addition to getting coverage under our current episode reimbursement structure, we'll look for incremental time points and we're in active discussions with MolDX on that.

Topic as well. And that will allow us to get coverage for testing for patients off therapy with over time.

Great.

Thank you so much for that.

And then just curious on the recent updated guidelines, NCCN guidelines for B cell lymphoma, specifically the PET positive DLBCL following first line therapy.

Just curious whether there might be opportunities for you guys for Adaptive I'm realizing this is very specific indication, but whether pretty, I think, significant in that the first ctDNA inclusion in the guidelines and in the NCCN guidelines. And so Just kind of curious what kind of your positioning is here for that? Thank you.

Absolutely. Yes.

The inclusion of MRD in then CXIN guidelines for diffuse large B cell is a positive step forward.

For the space in general and for providing access to patients for MRD testing. It's right in line with our strategy. Like most companies, we periodically submit proposals to NCCN as do us. Other companies in the space. And so it was great to see MRD get into the guidelines as a first step, although there's still more work to do. As this is a level 2b recommendation and relatively narrow in scope. So on an ongoing basis, we anticipate to NCCN to support expansion of those guidelines. And in the meantime, NCCN has generally been consistent about not set specifying particular ASCs in the guidelines and they'll mention classes or specified performance that they the current update is relevant to clonasek and to other ctDNA assays in the space. As recommended. And just to tack onto that, Sanjay, if you remember, we've already obtained Medicare coverage for diffuse large B cell lymphoma. And so any additional guideline inclusion also helps us in our efforts for contracting with commercial payers around that indication. So again, thrilled to see it, more work to be done, but we are in the clinic already with DLBCL.

Great. Thank you so much. Our next question comes from Tom Stevens of TD Cowen. Your line is open. Oh, hey, it's, sorry about that. It's Dan Brennan.

Apologies.

So first question, just congrats on the quarter. Maybe just back to the ASP bridge for 2025 to the 1,300. So for the commercial rate, we come up with around $12.80 in the fourth quarter this year. Is that right? Kind of what's assumed in '25? And then on Medicaid, since now you have two state approvals and I think that's 10% of volumes, how are you thinking about Medicaid contribution to that $1,300.25 Yes.

I mean, on your commercial rate, maybe a little high. Obviously got to pump something else up to get there. It might be on the Medicare front or our direct bill, direct to hospital ASPs, which we call roster. What was the second part of your question, Dan?

On the Medicaid front, yes, I think now that we have state approval, we at least at the very least have a rate to peg against. And you may have heard in other companies some people think of this as 50% to 60% of the kind of gap fill rate as being somewhat traditionally recognized. Obviously, we want to do better than that, but we acknowledge it will take time. But not only with those payers, but some of the managed care organizations for Medicaid, we think we can start to use this rate as a reference point to establish reimbursement. I think California is probably most notable where we can start to see some improvement in New York and then hopefully Florida over time too once we get coverage there.

Got it. Okay. And then maybe just on the Epic side, I think you said 20% of volumes are on Epic and 24% kind of what do you see in those accounts that adopt? Is there a meaningful difference in payment or volumes and kind of are you assuming in 2025?

Yes. So at this point, we have 19 accounts that are integrated with Epic that includes two of our largest accounts. And we are we've been actively monitoring these, although many of them, nine of them went live just in the last quarter of twenty twenty four. So we still have early days in terms of data, but we do see consistent [indiscernible] the growth in the rest of the business And additionally, that the growth seems to outpace on an ongoing basis for the accounts that we've had integrated for more than a a couple of quarters. We additionally to order volumes, we see significant numbers of new ordering providers, so it expands access to the test across the account versus what we saw prior to integration. And we get consistent positive feedback about the workflow improvements and the streamlining of the ability to get samples collected and out the door and into Adaptive's Adaptive.

So overall quite bullish on the opportunity to continue to accelerate growth with Epic integration and we expect to have eight out of our 10 top accounts integrated by the end of twenty twenty five.

And a total of 50% of our business flowing through an EMR integration, whether Epic, Flatiron or other community, by the end of this year. Got it. And maybe just a last one, just on [indiscernible] Obviously, targeting the adjusted EBITDA positivity in 2025.

Think you said flat OpEx. I think that's been consistent. But like is it there any view on maybe being too restrictive on the sales force? I mean penetration rates are still extremely low, volume growth is pretty healthy. Why not maybe look to expand the sales force further push into the community or others. Just kind of wondering on that sales force kind of level, what's the right number to think about Yes. I think we feel at this point pretty good about where we are with the sales team. They're clearly a very promotionally sensitive test. At the same time, we want to make sure that we're managing spend and we've been frugal with our ability to achieve our profitability goals.

Will say that the NeoGenomics deal is one of the ways that we're looking to expand access and touch points with over time if that feels the right use of capital.

Great. A lot. Thanks, Tim. Thank you.

Our next question comes from Matt Sykes of Goldman Sachs. Your line is open.

Hey, guys. This is Prashant on for Matt.

Congrats on the quarter. A lot has been covered already, but you've shown a consistent sequential improvement of around 1,200 clinical units for MRD for the past several quarters. Do you see that as a sustainable cadence going forward? Or do you anticipate any inflections at all in that growth Yes, I'd think we'll continue to see growth Aggregate volume and percentage volume. We've we're expecting around north of 25% volume growth for the full year relative to 2024. So that's kind of what's baked into our guidance assumptions for the midpoint of 01/1980. So So I think at the end of the day, we still got a lot of opportunity. We're still low penetrated in our core indication. So I think we've got long term durable growth for the coming three to five years.

In this business.

Got it. I'll keep it to one. Thank you.

Thank you. As a reminder, And our next question comes from Tejas Sabat of Morgan Stanley. Your line is open.

Hey, guys. Good evening. So maybe one quick housekeeping one for you Kyle and I have a couple of follow-up [indiscernible] on that $6,000,000 to $7,000,000 in Pharma MRD milestones, how are you thinking about it in terms of the first versus second half? Should we just assume that it all comes through in 4Q as a placeholder assumption?

I would just spread it evenly. I mean, we could try and get very precise with it, but I think just for practical purposes spread it evenly. We have line of sight to some earlier, some later, but it's really difficult to put it into a precise quarter. So I think just spreading it easily is the best way to do it.

Got it. Perfect. And then on that 5% to 8% margin improvement in the first twelve months of the NovaSeq transition, Chad. Just curious as to how should we think about the impact that will have on your Clonoxie turnaround time You need to batch your samples now to fully realize the COGS benefit?

Yes. So basically, one 40 to 42 next weeks. But ultimately, you do need to do some batching on it. But it should not impact our turnaround time given the volume profile that we have. Harlan, do you want to add that?

Yes. So the volume that we have right now takes up many next weeks per day.

So we're going to be able to load daily our entire clinical volume and we'll still have plenty of room for growth. So So that's why we're getting such a nice return on the NovaSeq. So in fact, one half of the NovaSeq takes up the equivalent of effectively like 30 next seeks in terms of our run. So if you think of it that way, we're only filling up portion right now. And so we'll continue to add more on that one half of the NovaSeq. So in other words, we'll it scales beautifully without having to increase a cost to us. We can just load more and more samples from the same machine.

Obviously, eventually, we'll hopefully hopefully in the not too distant future, we'll strip the threshold to to needing to run two halves of the one machine. But we're excited about this.

Got it. That's helpful.

And then the second question No, and I should say the timing is about [indiscernible] All. Just because the machine runs about the same [indiscernible] Got it. Okay. And then on the I'm side of things guys, just a quick clarification on the Genentech partnership. Chad, you talked about the switch to a digital or in silico model to reduce time and cost. To deliver that cell therapy product. So when you switch over to that new method, what additional data, if any, do you have to provide the FDA to deploy that approach in a clinical trial setting? Davis, to be honest, I'm not sure we're there yet.

And Genentech controls the regulatory component of this. We're providing all the we provide all the work and supporting documentation for that. But we're not there yet.

Okay, fair enough. And on that point around, if this effort were to succeed, how should can you just help us flesh out the broader potential of upside here, if this transition to the digital approach goes well, Sure.

You want to take it?

Yes. So I mean, I'm a scientist, so I'll give start with a scientific answer, which is one of the huge problems in immunology is trying to figure out what what T cells actually do, what do they bind to.

And so as part of this solution, what we're really doing is solving that bigger problem, which With the first of that just got the Nobel Prize this year on protein folding, but figuring out what how proteins interact with each other was that no one had the training data to be able to do that.

So So there's many, many applications, one of which is [indiscernible] cell therapy. And the real advantage is there's two big advantages. One is a massive time advantage, something that presently we've had do in our assay that takes multiple weeks we should be able to do it in a matter of a day or two, something like that. That's number one. And then number two is the cost Adaptive. We're where having any kind of personalized assay, you have to literally buy or make reagents for each patient. And then run your assay in a lab. So So the huge advantage there is that you don't have to do any of that. You're just using some compute. And then separate from that, like the other set of like the most direct other applications, the personalized cancer vaccines, for example, immune monitoring, There's tons. So we're excited about that potential. Got it.

That's super helpful. Thanks guys.

Thank you. That concludes our question and answer session and today's conference.

Thank you. [indiscernible]