Please ensure Javascript is enabled for purposes of website accessibility

1 Recent IPO to Add to Your Watch List

By Maxx Chatsko - Updated Apr 17, 2020 at 9:03AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This biotech is seeking to understand the immune system to develop insights and drug products for the most vexing health problems, including COVID-19.

The coronavirus pandemic has made it clear that, despite all of the cutting-edge technologies in healthcare, there's still much that scientists don't know about how the human immune system works. 

That's partly due to the complexity of biology and partly due to technical gaps. After all, scientists can only study what can be accurately measured -- and the diagnostic tools and sequencing processes required for quality research are still being invented and curated. 

In recent years, the combination of machine learning and novel sequencing technologies has begun to remove those obstacles to knowledge and measurement. One company on the frontier is Adaptive Biotechnologies (ADPT 4.08%), which has wasted little time throwing its technology platform at the coronavirus pandemic. The stock has been a little volatile since its initial public offering (IPO) in July 2019, but it still deserves a spot on your watch list. 

A man teaching a kid with a DNA model.

Image source: Getty Images.

What's the adaptive immune system?

It's called the immune system for a reason. It's a complex, dynamic collection of biological defenses. There's the innate immune system, which is present at birth and provides broad protection against foreign substances, called antigens, that enter the body. 

There's also the adaptive immune system, which is trained over a person's life span to create specific defenses to specific antigens. It can create trillions of unique T-cell receptors (TCR) to combat antigens ranging from pollen particles incorrectly labeled a threat to new viruses such as SARS-CoV-2, which causes COVID-19. 

The adaptive immune system remembers previous encounters so it can rapidly respond should antigens enter the body again (this is why vaccines work). But the genetic machinery required to create TCRs for trillions of possible antigens is incredibly complex. That's where Adaptive Biotechnologies comes into play.

A hand placing the last block on a pyramid of blocks, each with a medical industry icon on its face.

Image source: Getty Images.

Creating value from biological complexity

Adaptive Biotechnologies is trying to better understand the complexity of the adaptive immune system through a combination of machine learning, advances in sequencing technologies, and enormous amounts of biological data. Building that knowledge could lead to better research tools, enhanced diagnostic products for patients and doctors, and novel drug candidates. 

But crunching through vast amounts of biological data requires an incredible level of computing prowess. For that, Adaptive Biotechnologies has partnered with Microsoft (MSFT 1.07%), which is also a major shareholder. The pair is building tools to map specific TCRs in a patient's blood sample to specific antigens in a database. The goal is to develop clinical diagnostic products for detecting multiple diseases from a single sample, although the TCR-antigen maps and corresponding knowledge can be leveraged across the younger company's technology platform. 

Adaptive Biotechnologies has identified three end markets for its technology platform: life science research, clinical diagnostics, and drug discovery. It has already commercialized two products, including a test authorized by the Food and Drug Administration for detecting minimal residual disease (MRD) in certain types of blood cancers. 


Life Science Research

Clinical Diagnostics

Drug Discovery

Product or example



Drug discovery partnership with Roche subsidiary Genentech 


Used in academia and industry to understand the genomics of the adaptive immune system

Authorized by the FDA for detecting MRD of certain blood cancers 

Engineer cellular therapies to treat cancer

Noteworthy development

Used by over 2,200 researchers and in over 600 clinical trials

Covered by insurance programs representing 175 million individuals; used in over 190 clinical trials

Received $300 million up front; can receive up to $1.8 billion in milestone payments, and royalties on sales

Source: SEC filing, company presentation.

The fast rise of the technology platform might intrigue investors. Adaptive Biotechnologies reported full-year 2019 revenue of $85 million, compared with $55 million in 2018. The business reported an operating loss of $78 million last year, but it also began 2020 with $576 million in cash. In other words, the company is well positioned to invest in growth and to stomach moderate losses. 

Building open data for COVID-19

Adaptive Biotechnologies is also leveraging its technology platform to address the coronavirus pandemic. 

Together with Microsoft, LabCorp, Illumina, and others, the team of companies is trying to better understand how the adaptive immune system responds to SARS-CoV-2. They'll leverage population-level data -- including from individuals who have recovered from COVID-19 -- to build knowledge that could influence future testing protocols, antibody testing (to see which individuals are immune and can safely reenter society), and drug development. All findings will be made freely available. 

The young company has also formed an exclusive partnership with Amgen (AMGN 0.93%) to discover therapeutic antibodies in samples taken from recovered COVID-19 patients. The goal is to develop, test, and manufacture treatments to reduce the severity of infection. 

An intriguing biotech at an important time

Adaptive Biotechnologies is developing a technology platform that could have far-reaching applications ranging from basic research to disease detection to developing cellular-medicine drug candidates.

It's an ambitious mission. After all, the adaptive immune system is incredibly complex. But building the required knowledge could expand an important frontier of science, improve patient outcomes for a range of diseases, and build wealth for shareholders with a long-term mindset. This growth stock certainly deserves a spot on your watch list, if not in your portfolio.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Adaptive Biotechnologies Corporation Stock Quote
Adaptive Biotechnologies Corporation
$8.42 (4.08%) $0.33
Microsoft Corporation Stock Quote
Microsoft Corporation
$259.58 (1.07%) $2.75
Amgen Inc. Stock Quote
Amgen Inc.
$245.55 (0.93%) $2.25
Illumina, Inc. Stock Quote
Illumina, Inc.
$191.04 (3.62%) $6.68
Roche Holding AG Stock Quote
Roche Holding AG
$42.01 (0.72%) $0.30
Laboratory Corporation of America Holdings Stock Quote
Laboratory Corporation of America Holdings
$240.94 (2.81%) $6.58

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/04/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.