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What's Behind Adaptive Biotechnologies' Q1 Earnings Miss

By Keith Speights – May 13, 2020 at 7:02AM

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Revenue skyrocketed in the first quarter. But so did Adaptive's spending.

Investors have probably pretty much forgotten that Adaptive Biotechnologies (ADPT 3.94%) shares sank more than 40% earlier this year. That's because the stock made a remarkable rebound and was up nearly 19% year to date as of Tuesday.

But Adaptive's momentum could be derailed at least somewhat going forward. The biotech announced its first-quarter results after the market closed on Tuesday. Here are the highlights from Adaptive's Q1 update.

Test tubes with images of DNA in them

Image source: Getty Images.

By the numbers

Adaptive Biotechnologies announced first-quarter revenue of $20.9 million, a 65% jump from the $12.7 million reported in the same quarter of the previous year. However, this result fell short of the average analysts' revenue estimate of $22.66 million.

The biotech reported a Q1 net loss of $31.4 million, or $0.25 per share, based on generally accepted accounting principles (GAAP). In the prior-year period, Adaptive posted a net loss of $18.4 million, or $1.45 per share. The consensus Wall Street estimate projected a net loss of $0.21 per share in the first quarter of 2020.

Adaptive ended the first quarter with cash, cash equivalents, and marketable securities of $655.8 million. The company's cash position stood at $576.9 million at the end of 2019.

Behind the numbers

Adaptive Biotechnologies' revenue growth in the first quarter stemmed from two sources. The company's sequencing revenue jumped 56% year over year to $9.5 million. Clinical tests for its clonoSEQ DNA assay for detecting and monitoring minimal residual disease (MRD) in bone marrow samples of patients with multiple myeloma and B-cell acute lymphoblastic leukemia increased by 75%. 

The company's development revenue related to its immune medicine platform soared 74% year over year to $11.4 million. This revenue includes services provided to biopharmaceutical customers and revenue from collaboration agreements.

Adaptive's net loss widened compared to the prior-year period for a simple reason: The company's spending growth outpaced its revenue growth. Operating expenses in Q1 totaled $55.5 million, up 70% year over year. Adaptive's sales and market expenses and research and development expenses nearly doubled from the prior-year period.

The company's cash position improved thanks to the sale of 8 million shares in a public stock offering in January.

Looking ahead

Because of the uncertainties created by the COVID-19 pandemic, Adaptive Biotechnologies withdrew its previous revenue guidance for full-year 2020. This wasn't a surprise, considering that many companies in the healthcare sector have made similar decisions in recent weeks.

However, Adaptive could also benefit from its COVID-19 efforts over the long run. The company announced a partnership with Amgen in April to develop a COVID-19 treatment. It also recently teamed up with Microsoft to map the immune responses of individuals who have either contracted COVID-19 or are likely to have done so.

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Keith Speights owns shares of Microsoft. The Motley Fool owns shares of and recommends Microsoft. The Motley Fool recommends Amgen and recommends the following options: long January 2021 $85 calls on Microsoft and short January 2021 $115 calls on Microsoft. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Adaptive Biotechnologies Corporation Stock Quote
Adaptive Biotechnologies Corporation
$7.12 (3.94%) $0.27
Microsoft Corporation Stock Quote
Microsoft Corporation
$232.90 (-1.94%) $-4.60
Amgen Inc. Stock Quote
Amgen Inc.
$225.40 (-1.32%) $-3.01

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