Adaptive Biotechnologies Corporation (ADPT) Q2 2021 Earnings Call Transcript

Adaptive Biotechnologies Corporation (ADPT -4.43%)
Q2 2021 Earnings Call
Aug 04, 2021, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day and thank you for standing by. Welcome to the Adaptive Biotechnologies second quarter financial results conference call. [Operator instructions] Please be advised that today's conference is being recorded. [Operator instructions] I would now like to hand the conference over to your speaker today, Ms.

Karina Calzadilla. Please go ahead.

Karina Calzadilla -- Vice President, Investor Relations

Thank you, Delfin, and good afternoon, everyone. I would like to welcome you to Adaptive Biotechnologies second-quarter 2021 earnings conference call. Earlier today, we issued a press release reporting Adaptive financial results for the second quarter. The press release is available at www.adaptivebiotech.com.

We are conducting a live webcast of this call and will be referencing to a slide presentation that has been posted to the Investors section in our corporate website. During the call, management will make projections and other forward-looking statements within the meaning of federal securities laws regarding future events and the future financial performance of the company. These statements reflect management's current perspective of the business as of today. 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 this call, and a reconciliation from non-GAAP to GAAP metrics can be found in our earnings release. Joining the call today are Chad Robins, our CEO and co-founder; Julie Rubinstein, our president; and Chad Cohen, our chief financial officer. In addition, Harlan Robins, Adaptive's chief scientific officer and co-founder, will be available for Q&A. With that, I'll turn the call over to Chad Robins.

Chad?

Chad Robins -- Chief Executive Officer and Co-Founder

Thanks, Karina. Good afternoon, everybody, and thank you for joining us on our second-quarter 2021 earnings call. We had another strong quarter and momentum continues to build across our business areas. Results reflect our commitment to applying our immune medicine platform to transform disease diagnosis and drug discovery.

Adaptive's incredible employees are dedicated to the company and the patients we serve. It's been awesome seeing desks fill up and meeting new hires for the first time in person but we also realize that pandemic is an evolving situation. We'll continue to monitor our return to office initiatives. We are energized by our progress and the data emerging from our platform.

Moving to the slides. Starting on Slide 3. Our second-quarter results demonstrate solid performance. Revenue in the quarter was $38.5 million, representing a significant growth of 83% versus prior year.

We saw substantial progress across our product and our pipeline. Our COVID efforts continue to gain traction, especially in light of the Delta variant as more stakeholders act on the relevance of including T cells to understand the immune response to the virus and vaccines. Recent data to understand the AstraZeneca and J&J vaccine response to variants using immunoSEQ T-MAP COVID were published in the New England Journal of Medicine and in Nature, respectively. Also, we are pleased to announce we signed an agreement with Moderna in which immunoSEQ T-MAP COVID will be used to measure the T cell response to their second-generation COVID vaccine and their Zika vaccine.

In addition, we signed a license agreement in our drug discovery business with Vaccibody. This is the first time that our T cell data will be used to inform the design and development of a T cell-based SARS-CoV-2 vaccine. Importantly, Adaptive technology may inform the design of an entirely new class of vaccines that elicit a T cell response for many disease states. We are in active discussions with the FDA, NIH, CMS, CDC and the White House administration to include the T cell response in funded studies to answer critical questions related to vaccine durability, breakthrough infections and efficacy in immunocompromised patients.

Our view has been that this virus is endemic in the population and that T cells may answer many of these questions. We are making progress, and we will keep you informed on these discussions. Beyond COVID, our T-Detect franchise continues to advance. Results from our case-control data set with John Hopkins was just published as a preprint and serves as a basis for clinical validation.

In addition, our ImmuneSENSE study for T-Detect Lyme will complete enrollment in the fall. Together, these studies will support bringing the test online in our CLIA lab around year end. We continue to progress toward T-Detect IBD as a differential diagnostic with more than half of the 5,000 samples from Crohn's and ulcerative colitis patients already analyzed. We expect to share the data toward the end of this year.

We have also made significant progress in other autoimmune disorders, and we are encouraged by an early signal that we have in multiple sclerosis. For those of us who have friends and family suffering from this debilitating disease, we know firsthand that early blood-based diagnosis may alleviate years of uncertainty and more effectively guide the treatment path. Autoimmune disease diagnosis is a critical next step for Adaptive, and we are prioritizing our development efforts in this area. In addition, the overall value of our clonoSEQ brand continues to grow as evidenced by both strong clonoSEQ volumes and the signing of yet another major pharma MRD collaboration.

Importantly, our team has been building the case that measuring MRD regularly for patients with blood cancers is best practice. Last week, an international panel of multiple myeloma experts published a call to action in clinical cancer research to guide the use of MRD in the clinic for patients with multiple myeloma. Of note, the publication also builds the case for the use of MRD as a regulatory end point for which Adaptive has significant associated regulatory milestones. In our drug discovery efforts with Genentech, our collaboration continues to advance in both the shared and private products.

We remain on track to deliver the next shared candidate data package to Genentech and extend our proof of concept in the private product from 15 to approximately 60 cancer patients this year. In summary, we are delivering toward our 2021 goals, and we are enabling opportunities stemming from our platform. Before passing the call on to Julie on Slide 4, on Slide 4, I want to provide some color on how we are using our COVID efforts as a model to unlock multiple commercial opportunities from the same underlying immune receptor data set. By decoding the fundamental biological link between our immune system and the diseases with which they interact, Adaptive can create value in many disease categories across research, diagnostics and drug discovery.

In this case, we applied our ImmuneCODE data for a research product called immunoSEQ T-MAP COVID, which is now being used by vaccine developers, academic institutions and advocacy groups, leveraging the same data source we launched T-Detect COVID, the first indication for our clinical diagnostic T-Detect franchise. And we signed a drug discovery agreement with Vaccibody for the design and development of next-generation T cell-based vaccine. This concept of one data set stemming through multiple opportunities is an approach that we are pursuing in many of the disease states that we are mapping. So now I'm going to hand the call over to Julie.

Julie?

Julie Rubinstein -- President

Thanks, Chad. Moving to Slide 5 with T-Detect. T-Detect COVID trends continue to ramp up and now over 10,000 customers have ordered the test. We did observe downward pressure in orders in June and early July as the vaccines rolled out, but concerns with the Delta variant has renewed interest.

We expect to launch a COVID-immune response website later this month to enable customers to gain additional research insights about their T-Detect test results. To start, it will include a personalized comparison of the strength of an individual T cell response to that of others with confirmed SARS-CoV-2 infection. Next, we expect to add more information profiling a person's T cell response to vaccine. For T-Detect Lyme, as Chad mentioned, results from our case-control data set with John Hopkins have been published.

These case-control data demonstrate that our highly specific T cell test is three times more sensitive than standard two-tier serology in the first few days post infection and nearly two times more sensitive in the first one to two weeks. In addition, the data also supports that the T cell response precedes the antibody response to the Borrelia bacteria. ImmuneSense Lyme is enrolling nicely, which will enable us to complete validation and make the test available in CLIA around year end. During the first half of 2021, data emerging from our TCR mapping efforts have given us confidence in the ability of T cells to be used to detect a variety of autoimmune diseases.

These are diseases that afflict millions of patients and are challenging to diagnose and treat with highly specific clinical tools. In addition to the exciting data in IBD, we are encouraged by the signal we are seeing in multiple sclerosis because it appears to be strong not only in patients with later-stage disease, but also in patients at much earlier stages, which is where MS is particularly challenging to diagnose. We have more samples arriving in the next couple of months and look forward to improving the sensitivity of our MS signal later this year. The early sensitivity we are seeing in Lyme, MS and other diseases supports the premise that T cells are the first specific defense cells to see disease antigens and should be able to be leveraged for true, early and specific detection of many diseases from blood.

Switching gears to clonoSEQ on Slide 6. On the left side related to clinical testing, you can see clonoSEQ clinical testing volumes of 5,475 tests in the quarter grew 75% versus prior year and 15% versus the prior quarter. During the quarter, orders were placed by approximately 950 unique HCPs spanning 248 accounts for approximately 3,400 unique patients tested. And clonoSEQ has now been used to treat more than 18,500 unique patients.

Importantly, we observed double-digit growth quarter over quarter in tests delivered in each FDA-approved indication; ALL, multiple myeloma and CLL and within community accounts. This growth reflected recovery in the second quarter and was a result of our continuous sales, marketing and educational initiatives. That said, the spread of the Delta variant poses challenges to the back half weighted growth we had anticipated in two main ways: first, rep access to clinicians, and second, reduced clinical visits recommended to our specific blood cancer patient population who are immunocompromised. As such, it is now becoming unlikely that we will double our clonoSEQ volumes by year end but continue to expect healthy growth in the second half of the quarter.

The recent paper that Chad highlighted is a key indicator of the growing sentiment that MRD does make a difference in the treatment of multiple myeloma patients. These prominent international KOLs and FDA regulators state that quantitative, accurate, standardized and sensitive MRD testing may provide greater information relevant to tumor biology and likelihood of relapse when performed in a sequential fashion over multiple time points during the continuum of care. They go on to say that complete response provides a false sense of disease control. And at any given stage in the disease evolution, achievement of MRD negativity will predict a better outcome compared to patients at a similar stage who have not achieved the same depth of response with any given therapy.

Of note, the paper also aggregates information from almost 40 ongoing Phase 3 trials, more than half of which utilize ClonoSEQ that are evaluating MRD-directed therapy or MRD as an endpoint. Endorsements like this are a very important call to action to change behavior in the clinic. I also want to highlight a recent ClonoSEQ publication in the Journal of Clinical Oncology focused on DLBCL patients, which showed that ctDNA-based surveillance of patients with DLBCL undergoing CAR-T therapy with axi-cel may be a useful adjunct to radiologic assessment of disease status. This is one of many ongoing studies as we pave the path for future clonoSEQ testing in NHL.

On the right side of the slide, you can see the number of publicly disclosed pharma partnerships where clonoSEQ use in clinical trials continues to grow. This quarter, we signed another pan portfolio pan-indication MRD partnership with Janssen, which includes both sequencing and potential future development revenue. We also recognized an additional development milestone revenue based on use of MRD data as a clinical endpoint, which brings a total of $8.5 million in recognized revenue from development milestones year to date. Lastly, on Slide 7.

We are continuing to make good progress on our Genentech collaboration. As you can see in the chart, the shared and private product programs are complementary in many ways. There are significant learnings across T cell identification, engineering and manufacturing that we plan to leverage from our shared product to inform our private product approach. In fact, just this week, we had our quarterly JRC, and we are in lockstep toward both -- on both of our programs, and we look forward to sharing more details at the appropriate time.

I also want to highlight the relevance of our new license agreement with Vaccibody. Vaccibody is using Adaptive-identified viral antigenic peptides that are driving T cell responses to develop a second-generation T cell-based SARS-CoV-2 vaccine. This vaccine may provide more complete viral protection against known and future variants of concern. A Phase I/II trial is expected to start in Q4 of this year and will include testing in unvaccinated and fully vaccinated individuals to be able to assess the true potential of this vaccine candidate as a universal booster.

I'll now pass it over to Chad C. for financial updates.

Chad Cohen -- Chief Financial Officer

Thanks, Julie. Turning to our financial results on Slide 8. Total revenue in the second quarter was $38.5 million, representing an 83% increase from $21 million in the same period last year. Our revenue mix for the second quarter consisted of 48% of our revenues coming from our sequencing category and 52% coming from our development category.

Sequencing revenue in the second quarter was $18.6 million and increased 132% from the same period in 2020. Growth in sequencing revenue was driven by both significant ASP and volume increases over prior year in our pharma research business and also by volume growth in our clonoSEQ business. Research sequencing volume increased to 6,900 sequences, up 65% from 4,185 sequences delivered in the second quarter of 2020. Clinical sequencing volume excluding our T-Detect COVID volume, increased 75% to 5,475 clinical tests delivered in the second quarter of 2021, up from 3,136 clinical tests delivered during the same period in 2020.

Development revenue grew to $20 million in the second quarter, up 53% from the same period last year. The largest driver of our development revenue continues to be the amortization of our Genentech upfront. We also saw a $2.2 million increase over prior year and revenue generated from our MRD development agreements, which includes a $1.5 million regulatory milestone that was recognized in Q2 2021 from one of our biopharma partners. Even as the milestones materialize, we continue to replenish and grow the available milestones that we can participate in from ongoing demand for using MRD as a regulatory endpoint in clinical trials.

Shifting now from our revenue to our operating costs. Total operating expenses for the second quarter of 2021 were $88.3 million, representing a 53% increase from $57.9 million in the same quarter last year. Working down our operating expenses. Cost of revenue was $10.8 million during the second quarter of 2021 compared to $4.9 million for the second quarter last year, representing a 119% increase.

Higher cost of revenue was primarily driven by increases in labor and overhead costs as well as an increase in revenue sample volume, which drove higher consumption of materials and related items. We also saw growth in allocated facility expenses stemming from our new high throughput lab and office space under construction, which is quickly approaching completion. Research and development expenses for the second quarter of 2021 were $37.8 million compared to $26 million in the second quarter of 2020, representing a 45% increase. The growth was largely related to an increase in personnel costs, driven by innovation, South San Francisco Cellular lab, molecular product development and software engineering teams and increasing cost of materials and allocated production lab expenses.

Sales and marketing expenses for the second quarter of 2021 were $23.2 million compared to $14.3 million in the second quarter of 2020, representing an increase of 62%. The majority of this growth was due to increased personnel costs, particularly related to teams supporting our clinical diagnostic businesses and medical affairs as well as large marketing efforts to support our in-line products. General and administrative expenses for the second quarter of 2021 were $16.1 million compared to $12.2 million in the second quarter of 2020, representing an increase of 31%. The increase was primarily driven by growth in head count and personnel costs.

Net loss for the second quarter of 2021 was $49.3 million compared to second quarter 2020 net loss of $33.5 million. Adjusted EBITDA for the second quarter of 2021 was a loss of $35.6 million compared to a loss of $28.5 million in the same period of the prior year. We ended the quarter with approximately $690 million in cash, cash equivalents and marketable securities, and we had no debt. With respect to our outlook for the year, we are narrowing our full-year revenue guidance range to $148 million to $155 million, up from our prior range of $145 million to $155 million.

The increase in the bottom end of our range reflects the additional $1.5 million MRD milestone payment in the second quarter as well as strong execution year to date. We still anticipate sequencing revenues to represent between 50% to 55% of our total revenues for the full year. We are encouraged with our first half results and are confident in our ability to achieve our full-year commercial and development goals. We will continue to closely monitor any impact from COVID variants in the second half and look forward to providing you with further updates next quarter.

I will now turn the call back over to Chad Robins for final remarks.

Chad Robins -- Chief Executive Officer and Co-Founder

Hey, thanks, Chad. I'm very encouraged with the progress we are seeing across all business areas and looking forward to executing on the catalysts outlined in Slide 9. What I'm most excited about is the data emerging from our platform, which we expect to monetize for multiple opportunities in research, diagnostics and drug discovery. Before opening up for questions and answers, today, we announced an important addition to Adaptive's management team.

I want to welcome Nitin Sood as our new chief commercial officer, who will oversee our in-line product portfolio. Nitin will lead us through a critical next phase of commercial expansion, including multiple anticipated product launches and international growth. With that, I'd like to turn the call back to the operator and open it up for questions.

Questions & Answers:

Operator

[Operator instructions] And our first question is from Derik De Bruin of Bank of America. Please go ahead.

Derik De Bruin -- Ban

Hi. Good afternoon. Hey. Thank you for the updates.

Can you elaborate a little bit more on the Vaccibody agreement? And just what you're doing there specifically in just sort of what the terms that are and also the Moderna relationship. Just some incremental information on that would be helpful.

Harlan Robins -- Chief Scientific Officer and Co-Founder

Sure. Thanks, Derik. So, this is Harlan. So, to start with, the reason we partnered with Vaccibody is that they have a unique capability to truly target a T cell response, whereas the primary mode for how basically all vaccines that have ever been put on market work have been targeted toward generating an antibody response.

And as we're learning the virus as -- SARS-CoV-2 is quickly escaping antibody -- neutralizing antibody response and the T cell response is becoming of greater and greater importance. And so in order to generate a very broad overall protection, we think that a T cell response is vital. And since they have this unique capability, and to target T cell response, and we are able to determine kind of best-in-class what to target, we thought it was kind of a perfect marriage. And beyond that, love the management team there and the scientific team, and we've really well vetted them.

We've actually given them some sets of targets already, and they've already generated some vaccine response in animal models that has been nice and robust. They've been vetted by the Genentech as well. And then in terms of the deal, it's a royalty-based deal where we're sort of in it together and think there's huge long-term potential here. OK.

Sorry, what was the next question?

Derik De Bruin -- Ban

The Moderna relationship.

Harlan Robins -- Chief Scientific Officer and Co-Founder

Yes. The Moderna relationship. Yes. We've had a long-standing relationship with Moderna.

Obviously, the world has just seen how great a company they are. And we're really excited to -- really work with them to help understand the T cell response to their vaccine just in relation to what I just said a minute ago. They're taking advantage of our T-MAP product, which is our research-based product that gives considerable more information than our just straight diagnostic products on exactly what their -- what the specifics of their vaccine are inducing in terms of what part of the virus they're getting a T cell response to, how broad that response is, etc. And really, allowing them to understand.

And I think it wasn't even well understood. Their vaccine is proving to be efficacious even in cases with reduced -- neutralizing antibodies, and we think and -- that it's the T cells that are helping out that they're inducing from their vaccine.

Derik De Bruin -- Ban

Great. And then just one more. The comment that you're not going to be able to double clonoSEQ volumes this year. I'm just curious, are you already seeing drop offs in demand now? Or is this something that you're just anticipating happening because of the variants? I'm just curious in terms of what you're seeing in the markets right now and how that factors into year that is.

Is there still the potential to hit that number? Or are you just being cautious and -- right now?

Chad Robins -- Chief Executive Officer and Co-Founder

Yes. Derik, it's Chad. I'll put this in context. I mean, we had a good quarter.

We continue to expect strong growth in the second half, which is kind of back half weighted. We are continuing to grow here, and we haven't seen much of a drop off at all. Actually, it's just in light of the Delta variant and what we're seeing right now with limited access by kind of the field team. There are certain kind of uncertainties and uncertainties especially with kind of the impact on our patient population, which Julie had mentioned kind of in her prepared remarks.

So therefore, we really want to take a measured approach, and we're looking at taking a modest reduction. If helpful, just kind of what Julie closed with, I will reiterate that I want to kind of put in context that this is just one component of the overall kind of value of ClonoSEQ and the MRD kind of brand, which is growing across clinical, pharma, research and international. So yes, it's -- we want to take a kind of a measured approach here as we look at it.

Derik De Bruin -- Ban

Got it. Thanks.

Operator

And our next question is from Brian Weinstein of William Blair. Go ahead sir.

Brian Weinstein -- William Blair & Company -- Analyst

Hey guys. Good afternoon. Thanks for taking the questions. Maybe one just on the guidance here.

So, it was a good quarter, obviously. And you beat, I think, where most people were by like $7 million or something like that. And you raised the bottom end of the guide by just $1.5 million. So, can you just maybe talk through kind of the thought process there? Was there anything that was pulled forward in this quarter that was expected later in the year? Is the not raising by the full amount of the upside having to do with this ClonoSEQ more conservative stance? Just any color that you can give on kind of how you thought about the guidance.

Chad Cohen -- Chief Financial Officer

Yes. Maybe I'll start with that one. Brian, it's Chad Cohen. Yes, I mean we made a lot of progress in the second quarter, as you can see by our results.

We had strong sort of sequencing numbers. We grew those 132% year over year really delayed by our ClonoSEQ numbers, strong T-Detect COVID even contributed to some of that our research business sort of across the platform. We had a really strong quarter and continue to expect really nice growth in our sequencing sort of category through the end of the year. We're just south of 50% of our revenue is going to sequencing in the first half of the year and expect about close to about 60% in the second half, getting to that sort of 50% to 55% range for the full year.

So strong growth. I think just given the emergence of the variants, we at this time are just passing along really the $1.5 million milestone that dropped in the quarter that was outside of -- out of the guide. We have really strong conviction in the numbers that we're presenting as our full year guide, bringing up the bottom end of the range. But yes, as Chad said, we're being sort of measured or metered in response to what we're seeing with the variants.

Brian Weinstein -- William Blair & Company -- Analyst

Got it. Makes a lot of sense. Next question on the new signal that you guys are talking about in MS. So, it seems just in general that these signals are starting to come a bit more -- are coming a bit more regularly at this point.

Can you talk about the expected pace of being able to find these new signals? And then as you're finding those, do you have the proper resources right now to be taking multiple signals to the next phase here? And then I know I'm throwing a lot at you on this topic. But you've also talked a lot about infectious disease and now autoimmune. Is there any update on any of the progress on the oncology side? I know that was an area that you guys were clearly looking at before. I haven't heard much on kind of any signals on that side.

Sorry for all the questions, but thanks for the answers.

Chad Robins -- Chief Executive Officer and Co-Founder

Yes, Brian, maybe I'll provide some framing, then pass it to Harlan to take the first part of that, which is kind of the expediting signal generation and how we think about it across categories of infectious disease. Obviously, now we've got progress in -- accelerating progress in autoimmune and then kind of where we are in the cancer space. But as I think what you're pointing out is signal generation is one component of it, and then kind of at the back end is having a product on market. In between that, you have a significant amount of steps in terms of kind of clinical trial and analytical validation, health economic analysis, market access, work with the payers, kind of regulatory, all that goes into defining kind of product market fit and where the kind of clinical utility is for doctor treating patients.

All of those areas -- and this is such a kind of a massive opportunity, and we're investing and hiring a phenomenal team and putting resources into kind of really defining the buckets to go from signal generation to kind of ultimately products on market and then also thinking about how we leverage kind of what are kind of shared resources versus kind of where we need to hire kind of specific discrete kind of medical expertise in disease areas, and we put a lot of thought behind that. But maybe I'll turn it over to Harlan in respect to kind of how we're thinking about and expediting signal generation.

Harlan Robins -- Chief Scientific Officer and Co-Founder

Sure. Thanks, Chad. So, in terms of the research side and the development side, we're working hard to get an economy of scale by sort of standardizing our methodology. And so, for example, we're able to -- now each different disease class requires algorithmic development and chemistry.

The chemistry is united among all of our different assays right now. We literally have one delivery mechanism, which is just the same for T-Detect COVID that will be T-Detect everything. So same sample type, same chemistry, etc. The only thing that potentially can change is the algorithms.

And we're uniting at least within disease class those algorithms, which is why we've been able to really expedite on the infectious disease side. We have a few that are COVID on market. Lyme coming soon. We just published a paper on that.

And there's multiple other infectious diseases that we have really nice probably clinical-grade signals in already. Separately, in the autoimmune space, we're making progress across multiple different autoimmune spaces. We talked about IBD. We talked about MS.

We have some others that we're working on and in the same concept, right? We're uniting and trying to get cross learnings from one where we can then get much faster at the others. So, what does this require? This requires us to get a certain amount of samples with patients with those diseases. And we've been collecting those for quite a while now, and we have either sample sequenced already, as we told you already in multiple -- in MS as well as in IBD, but we have others coming in other autoimmune diseases and other infectious disease as we go. So, all of those are progressing really nicely, and we're very pleased with the direction they're going.

You asked about oncology. Oncology has a much broader set of questions, and we are working in the research setting. Here, the class of drugs is enormous and a number of companies working on them is huge. And so, we're working to help all those companies really understand how to use those drugs, etc., in terms -- and -- but that does feed on and stems from our connecting T cells to antigens at scale.

And the issue here is simply that the immune response to cancer is so broad because the potential antigenic space, the things that your immune system can see, is huge. So, it's just a harder problem. We are making progress, but it's going to be on a longer time frame just because of the scale of the project. So, we're moving, it's coming, but it's going to be a little while on that side.

We're going to have a more near-term successes that you'll see hit in infectious disease and autoimmune space.

Brian Weinstein -- William Blair & Company -- Analyst

That was awesome. Great. Thank you, guys, so much. I appreciate it.

Harlan Robins -- Chief Scientific Officer and Co-Founder

Thanks.

Operator

And our next question is coming from Doug Schenkel of Cowen. You may ask your question.

Doug Schenkel -- Cowen and Company -- Analyst

Good afternoon and thanks for taking my questions. My first one is, I guess, a guidance question. One of the key assumptions embedded in full-year guidance is that the commercial expansion that you're in the midst of takes hold and supports a material ramp in second half diagnostic revenue. I just want to see how you're thinking about that now.

Obviously, some nice growth sequentially in that category, maybe that's evidence enough that things are going well. But I'd love for you to expand a little bit more on what you're seeing and how comfortable you are with this high-level assumption that things will continue to ramp in this category as a result of the commercial build out over the balance of the year, especially keeping in mind, there might be some risk as it, I guess, related to the Delta variant in terms of physician office access.

Chad Robins -- Chief Executive Officer and Co-Founder

Julie, do you want to take that?

Julie Rubinstein -- President

Sure. Thanks. Yes, I think the way you just framed the question is exactly right. We're absolutely experiencing, as we mentioned in the remarks, double-digit growth in each of the indications for which we have an FDA label in clonoSEQ.

And we continue to see really nice growth in the back half of the year, borrowing some of the comments Chad made related to the Delta variant. But specifically, you're absolutely right. We've invested quite a lot commercially both in the sales force as well as on our medical team. And so we have a lot more focus on peer-to-peer education.

We're seeing the results of patient education, and we're really focused also on making sure that we ID all newly diagnosed patients as regularly as possible in our new accounts. We're growing the reach of our targeted account population quite a lot. I've talked a lot in the past about Tier 1 and Tier 2, about 250 accounts that were our target universe. We've really expanded that to over 900 accounts now that we're in the community with CLL, and we're seeing nice progress in penetration in the -- that broader universe of targeted accounts.

So that's just some of the types of initiatives we have underway that we're doing together with our commercial and our expanded medical team to grow usage of clonoSEQ in the clinic.

Doug Schenkel -- Cowen and Company -- Analyst

Excellent. And a quick follow up on that one specifically. I won't hold you to generating the same type of sequential growth you just did in that category moving forward because that was pretty impressive in the quarter. But fair to assume that you're expecting continued sequential growth over the balance of the year from diagnostics for all the reasons we just talked about?

Julie Rubinstein -- President

Yes. Yes.

Chad Robins -- Chief Executive Officer and Co-Founder

Absolutely.

Doug Schenkel -- Cowen and Company -- Analyst

OK. And then just a product question on T-Detect Crohn's IBD. And maybe I had it wrong, maybe I didn't. But before I was thinking of this as a single disease test, now it looks like it's designed to distinguish across multiple GI disorders, including UC and Crohn's.

Is this now should -- again, maybe I just had it wrong. But if I didn't, should we be thinking about this as essentially a panel test for that category?

Harlan Robins -- Chief Scientific Officer and Co-Founder

Yes. Thanks, Doug. So, the goal is definitely to create a panel test that include UC and Crohn's. Obviously, it will be dependent on the full signal and timing and everything else.

But that is the goal we're presently analyzing sets of samples in both Crohn's and UC, as well as a few other related indications. And the goal is both in the near term to create a differentiated diagnosis and then to continue to add more to the panel as we create additional signals.

Chad Robins -- Chief Executive Officer and Co-Founder

Yes. I should actually mention but I'll broaden that too. I mean that's our goal for each one of these tests is to have a differential diagnosis. But it starts with kind of getting a beachhead in one disease state and then getting a high-sensitivity level, fixing a very high-specificity level and then kind of moving across to other kind of diseases that have shared symptomatology, so that the very first thing we can do is kind of rule out other diseases.

But then the goal over time is to be able to definitively have not only ability to rule out but have sensitivity in each one of the diseases so that we can definitively diagnose each one of the diseases with shared set of symptoms.

Doug Schenkel -- Cowen and Company -- Analyst

Got it. Yes. Actually, as you're describing that and I think about your typical playbook, that makes a ton of sense. All right.

Chad Robins -- Chief Executive Officer and Co-Founder

Yes. Sure, Doug. Thanks.

Operator

And our next question is from Tejas Savant of Morgan Stanley. Please ask your question.

Yuko Oku -- Morgan Stanley -- Analyst

Hi. This is Yuko on the call for Tejas. In light of the emergence of the Delta variant questions about durability of vaccine response, could you comment on what you're seeing in terms of T-Detect COVID uptick? And what could an upside case look like?

Harlan Robins -- Chief Scientific Officer and Co-Founder

Yes, that's a great question and obviously, super important. We are seeing that the T cell response to the vaccines is long lasting. Now we've seen samples over a year. And certainly, at 11 months, we had good statistics to say that we at least by T-Detect standards, we could detect as positive over 90% at 11 months.

However, the -- at six months, the -- quantitatively, the number of T cells specific to the -- specific induced vaccine is waning at six months. So, there's some loss there. So we're working with certainly a variety of investigators and a set of vaccine makers to hopefully incorporate this as we move. I'll pass it to Chad to talk about the upside case.

Chad Robins -- Chief Executive Officer and Co-Founder

Yes. I mean, the upside case -- and again, I just want to make sure we're framing in the right context because you brought the term upside case. So, I'll talk specifically about the three areas which could have potential upside. One is in the research business.

If the government decides to kind of fund a large-scale study to truly understand the cellular immune response or the T cell response to the virus, there's potential upside for us in that. Well, actually, in the same vein, let's say, within research, and we're working on this, if the FDA kind of mandates that the vaccine manufacturers include a measure of T cell response in their clinical trials, that would be upside. Right now, they're opting in to do it as evidenced by kind of the most recent kind of signing with Moderna. So those are the two upsides of the research.

From a T-Detect standpoint, it would be if we could figure out how to get reimbursed for a T-Detect COVID test, that would be an upside. And the third is in the drug discovery category. If our partner Vaccibody shows that their vaccine, which is a DNA-based vaccine that doesn't have kind of the cold chain storage requirements proves to be effective on a stand-alone or as a universal booster, that would be a tremendous upside case. But again, just to characterize those all, it's upside and not in any way in our guidance assumptions for the year.

Yuko Oku -- Morgan Stanley -- Analyst

And then a quick follow up. Would you provide any thoughts on timing of potential milestones over the next 18 months from Genentech and any other collaborations?

Chad Robins -- Chief Executive Officer and Co-Founder

Yes. I think it's as we said, we're going to be delivering our data package to them in the fourth quarter of this year, but we've not yet kind of specified kind of timelines as to when we are going to be expecting milestones to hit. But we should hopefully be able to. As soon as we know, we will be able to provide an update to you guys.

Chad Cohen -- Chief Financial Officer

Yes. Any additional milestones in the year will be upside to the guide we're giving.

Yuko Oku -- Morgan Stanley -- Analyst

Thank you.

Operator

And our next question is from Tycho Peterson of J.P. Morgan. Please ask your question.

Tycho Peterson -- J.P. Morgan -- Analyst

Guys good afternoon. Wondering if you can comment a little more on the Moderna deal. How you're thinking about that opportunity? Is that something where you get back-end economics? If you could just touch on both the COVID piece and obviously, the Zika vaccine you mentioned as well in the press release.

Chad Robins -- Chief Executive Officer and Co-Founder

Yes. Tycho, with respect to Moderna, this is one that falls into kind of our research bucket of revenues and T-MAP COVID, where we're helping Moderna assess the cellular immune response or the T cell response to the vaccine, kind of what it's inducing outside of the antibody response. So there's no kind of back-end economics associated with that deal like there is with our drug -- with our Vaccibody deal where we're kind of part of the design and development.

Tycho Peterson -- J.P. Morgan -- Analyst

OK. And then on T-Detect, obviously, you mentioned the multiple sclerosis signal. Can you maybe just touch a little bit about how you're thinking about that opportunity and time lines?

Julie Rubinstein -- President

Sure. Tycho, so this is early days for us, obviously, and so it's an early signal. There's more work to be done, but we are beginning to explore that market. We understand the incidence isn't huge.

It's about 12,000 to 15,000 patients diagnosed annually in the United States. However, as you probably know, the process of getting there involves a lot. There's a whole variety of clinical scores that need to be met. There's MRIs that need to occur and lumbar punctures and some other relatively invasive and expensive tests that create a diagnostic odyssey that can be challenging.

So there's never been, as far as we know, a blood test to really be specific for MS. And that's what we're really most excited about is to be able to do that upon the earliest signs of symptomatology of MS, and that's really where we think there is a room for huge improvement with our potential T-Detect MS application.

Tycho Peterson -- J.P. Morgan -- Analyst

And maybe one last one. Julie, on the pharma side. You had another MRD partnership. How you're thinking about kind of the pipeline for the back half of the year for similar partnerships on the pharma side?

Julie Rubinstein -- President

Yes. I mean it continues at a pretty regular cadence all the time. Our pharma business, both actually, I should say, on the MRD side and the non-MRD side. So we're seeing a really nice come back to life of the T cell pharma work that we do.

And we're also broadening beyond oncology quite a lot as a lot of the data and the places we're going and the KOLs we're beginning to interact with are beyond oncology. So the totality of the pharma business right now for MRD testing as well as non-MRD testing is looking really bright for the back half of the year.

Chad Robins -- Chief Executive Officer and Co-Founder

And Tycho, one thing that Chad Cohen mentioned in his prepared remarks that I just want to kind of call out again is kind of the replenishing of the milestones that are associated with these deals. Even though we did draw down kind of some of the milestones this year, we're actually going to more than replenish those milestones. I think maybe next quarter, we'll put -- provide an update on what those numbers look like, but we more than replenish what we've been able to take out over this year through new deal signings and what I would call a very robust pipeline in the MRD pharma category.

Operator

And our next question is from Mark Massaro of BTIG. Please go ahead sir.

Mark Massaro -- BTIG -- Analyst

Hey guys. Thanks for the question. I guess I believe it was last quarter, you talked about having over $300 million of potential future milestones in MRD. Can you just talk about how the agreement with Janssen may have expanded that size? And I think it would be interesting to hear you pulled down $1.5 million this quarter, $7 million last quarter.

It feels like we're going to see a relatively steady cadence of these over the coming quarters. I think Julie just kind of alluded to that, but if there's any way you could provide any more clarity around that, that would be helpful.

Chad Robins -- Chief Executive Officer and Co-Founder

I'm going to start, and then I'll pass over to Chad Cohen to talk more about the numbers. But again, I want to highlight one -- another calls out from the prepared remarks, which is really call to action the multiple myeloma paper that was published in the CCR, it's Clinical Cancer Research, is that really called for the use of MRD as a regulatory endpoint. That -- when that happens, that would be a catalyst that would make a significant portion of those milestones on the balance sheet available to us. So that's kind of a catalyst-driven event that we've been -- well, the field has been working on for some time.

And I think we're making a significant amount of progress. With specifics regarding kind of the quantum of new dollars, Chad, do you want to comment?

Chad Cohen -- Chief Financial Officer

Yes. I mean I can just comment that we continue to grow almost quarter over quarter, the number of milestones that we can participate in. So, we're at a number that was greater than last quarter. We'll be thinking about how best to sort of provide you quantitatively with that going forward and at what sort of time points and milestones that we reach.

I'll just say that we're happy with the number of deals that we've been able to do. It validates our thoughts about the size of the market and how we can be instructive to our biopharma partners around using milestone and the clinical endpoints. The majority of our milestones relate to primary endpoints with the second category with secondary endpoints. And they cut across about a dozen different partners with multiple studies, sometimes within each of those partners within the U.S.

and EMA. So, they're quite varied, and I think they represent some really nice optionality for us that we are improving really delivers on our P&L from time to time, as you've seen for the past few years.

Mark Massaro -- BTIG -- Analyst

OK. And then congrats on the Vaccibody deal. I guess a quick three-part question. The first, I think I heard you say that this would be used as a universal booster.

Would that be, obviously, a booster for both Moderna and Pfizer? Or can you comment on that? And then secondly, I would imagine this is likely a non-exclusive deal. Can you confirm that? And then on the royalty side, should we think of this as like a low-single digit? Or could it be more lucrative than that?

Chad Robins -- Chief Executive Officer and Co-Founder

Yes. So, I'm going to try to make sure I got those all in, Mark. But -- the first question is -- the answer is yes. We do see this as a potential universal booster.

And the second point there is it also could be because of the lack of cold chain storage requirements to be able to disseminate to kind of around the world. There's some potential there, is number one. We're not able to kind of specify the financial arrangements in terms of kind of royalties, but I think you're thinking about it in the right way. And two, from a T cell design and development perspective, there's kind of a limited set of exclusivities around what we're specifically doing with them.

Mark Massaro -- BTIG -- Analyst

Thank you.

Operator

And here's our last question from Salveen Richter of Goldman Sachs. Please go ahead.

Elizabeth Webster -- Goldman Sachs -- Analyst

Hi, good afternoon and thank you for taking my questions. This is Elizabeth on for Salveen. I was just wondering if you had any thoughts about how the T cell-based SARS-CoV-2 vaccine differs from Gritstone Bio's approach where they're also trying to sort of develop a T cell-based vaccine. And then I have a follow-up question around the MS program.

Harlan Robins -- Chief Scientific Officer and Co-Founder

Sure. This is Harlan. I don't want to speak too much about Gritstone's approach because I'm not fully familiar with them. I know that one of the big difference is the reason that the Vaccibody wanted to partner with us is that our ability to basically use our chemistry and technology to establish immune response, not through an algorithmic approach but through a direct assessment of the immune response.

So, I think we're starting there. But also the one thing that's unique about Vaccibody is their ability to target the immune response directly to the antigen presenting cells of choice. So as far as we know, this is -- as far as I'm aware, this is a unique ability. And so, it's not to say that other vaccine players aren't attempting to induce a T cell response.

Obviously, from the primary -- as I'm sure you're well aware, the primary focus of vaccine development throughout history and with all the ones on the market right now were designed to generate antibody response, not a T cell response. But they, of course, would -- everybody wants. It's not like you're avoiding a T cell response. So anyway, the point being that this unique ability to target antigen presenting cells and Adaptive's proprietary ability to pick out truly the best immunogenic targets is what kind of sets this collaboration apart, I think.

But I can't comment directly on the ins and outs of Gritstone's approach.

Elizabeth Webster -- Goldman Sachs -- Analyst

Yes, that's really helpful. And then regarding T-Detect in MS, just wanted to know if there's anything sort of different about how you're thinking about the development of the program here or maybe a different clinical consideration versus some of the other indications, given there's an association of the viral origin, Epstein-Barr virus for MS versus other autoimmune diseases where there's not such a close sort of viral tie?

Harlan Robins -- Chief Scientific Officer and Co-Founder

Salveen, so there's actually pathogenic ties and/or confusion in a variety of these different autoimmune conditions. But certainly, I think some of the best studies, as you're saying, is in MS, where there's some direct connections, including some papers that we've been part of publications on. We're trying to fill out our diagnostic approach in viruses that are focused around -- let's say, around the space of the autoimmune diseases of interest. So for example, in IBD, we're looking at pathogens that are implicated and/or confused with the disease in the gut.

When we get to rheumatoid arthritis, we've actually got ahead of ourselves on the vaccines -- on the viral side, where we're looking at a set of viruses that can get confused with rheumatoid arthritis conditions and same with MS. So, we're trying to package these together where we can either look at causation and/or look at differential diagnosis where the disease itself can be confounded symptomatically. So absolutely, we're exploring these in various capacities, and that's really driven in a lot of ways, our developmental efforts on the viral and the rest of the pathogenic side.

Elizabeth Webster -- Goldman Sachs -- Analyst

Got it. Thank you.

Operator

And we have our last question from David Westenberg of Guggenheim. Please go head.

David Westenberg -- Guggenheim Securities -- Analyst

Hi. Thank you for taking the question.So I first want to talk about kind of way you were to think about pricing in T-Detect and what is a fair ASP? I think historically, I know T-Detect or immunoSeq, as you used to call it, has not really a major cost advantage versus competitors. But what do you think is actually a fair price as we bundle kind of certain diagnostics? I mean, what's kind of a bar? And I realize you probably can't give a specific price, but as we think about this test in the future and your ability to panel it or go after single indications, I just kind of want to think about how you might think about fair pricing. And I have one follow up after that.

Chad Robins -- Chief Executive Officer and Co-Founder

Yes. Hey David, so as we move from kind of single diseases to differentiated diagnosis to what the -- I would say, kind of the holy grail for us is kind of being part of an immunoscreen or checkup, how we think about price points along each one of those kinds of care of continuums, wind up kind of being different. Meaning, if you're going to have kind of a regular checkup cost at the end of the day, as part of an immune screen, that has to be at a lower price point. But as you look at kind of disease diagnostics, a lot of it has to do with kind of the market access landscape, the unmet medical need, the noninvasive nature of your test, etc.

And that usually -- why I brought up kind of market access in the payer landscape is payers essentially are willing to pay at least at this time kind of different price points for different levels of -- different types of tests. For example, it's kind of well-known that they're going to pay more for a cancer-based test or an autoimmune-related test right now than an infectious disease-related test. So, we continue to kind of work with the payer community and aren't yet -- we've talked preliminary in some of the disease categories that we're looking at or some of the disease indications, I should say, that we're looking at about kind of test points. But we really kind of ultimately want to be able to kind of hit that sweet spot at the end of the day of how much we can charge for it, and that will be kind of reimbursed broadly by the payer community.

Chad, do you want to?

Chad Cohen -- Chief Financial Officer

No. I agree with Chad's comments. I would say that additionally, from a margin perspective, the incremental cost of layering in additional signals within each test is going to be small. And so from that perspective, as we sort of move up the value chain from a market perspective, the gross margins -- the potential gross margins of the business for T-Detect just continue to grow in sort of concert of that.

So I think we're really excited about it and that T-Detect COVID was a beachhead and a stepping stone to a much bigger concept.

David Westenberg -- Guggenheim Securities -- Analyst

Got it. Thank you. And then one, switching gears to clonoSEQ. Just quick thinking in terms of other potential indications.

I don't think T cell diseases are as big markets. But is there any other off-label -- is there any off-label usage? Or is that any consequential part of overall in clonoSEQ? And I'll stop there.

Chad Robins -- Chief Executive Officer and Co-Founder

Yes. Well, there are. And I wouldn't say off label because they are brought up under our CLIA lab, under kind of the regulated CLIA environment. There's two of them.

I can say one is in cutaneous T-cell lymphoma or CTCL. And the second is, although most ALLs are B-cell derived, there's about kind of 8% to 10% that are T cell derived acute lymphoblastic lymphoma. And so both of those populations, we do service right now through our CLIA environment.

Operator

And that's it for our question-and-answer session. Now I would like to turn it over back to our presenters.

Chad Robins -- Chief Executive Officer and Co-Founder

That's all we have. Thanks, everyone, for joining today.

Operator

[Operator signoff]

Duration: 62 minutes

Call participants:

Karina Calzadilla -- Vice President, Investor Relations

Chad Robins -- Chief Executive Officer and Co-Founder

Julie Rubinstein -- President

Chad Cohen -- Chief Financial Officer

Derik De Bruin -- Ban

Harlan Robins -- Chief Scientific Officer and Co-Founder

Brian Weinstein -- William Blair & Company -- Analyst

Doug Schenkel -- Cowen and Company -- Analyst

Yuko Oku -- Morgan Stanley -- Analyst

Tycho Peterson -- J.P. Morgan -- Analyst

Mark Massaro -- BTIG -- Analyst

Elizabeth Webster -- Goldman Sachs -- Analyst

David Westenberg -- Guggenheim Securities -- Analyst

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