Personalized Dx / Rx Developer Adaptive Biotechnologies Raises $300M in IPO

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Adaptive Biotechnology executives ring the opening bell at the start of trading on NASDAQ yesterday, marking the company's initial public offering (IPO). The personalized diagnostics and therapeutics developer raised $300 million in gross proceeds, then saw its share price double as investors flocked to the stock. [Adaptive Biotechnologies]

Personalized diagnostics and therapeutics developer Adaptive Biotechnologies has raised at least $300 million in gross proceeds through an initial public offering (IPO)—the second-largest one for a biopharma company so far this year—then saw its share price double as investors flocked to the stock.

Shares of Adaptive debuted for trading June 27 on The Nasdaq Global Select Market under the ticker symbol “ADPT.” Adaptive offered 15 million shares of common stock at a public offering price of $20.00 per share.

At that price, Adaptive surpassed its initial price range for the stock of between $15 and $17, as well as a later estimated range of $18 to $19 a share.

In its S-1/A amended registration statement, filed on Wednesday, Adaptive predicted it would sell 17.25 million shares—a figure that included 2.25 million shares that the IPO’s underwriters have a 30-day option to purchase at the IPO price.

Adaptive upsized its IPO from the $230 million offering it initially planned when it filed its original S-1 registration statement on May 30.

Based in Seattle, Adaptive develops personalized diagnostics and therapeutics using a proprietary immune medicine platform designed to read and translate the genetic code of the adaptive immune system.

The cornerstone of Adaptive’s platform is its core immunosequencing product immunoSEQ. It includes a family of assays designed to identify millions of T- and B-cell receptors in a single sample using bias-controlled multiplex PCR amplification, high-throughput sequencing and sophisticated bioinformatics.

The platform has been used to look for dominant clones in certain lymphoid malignancies, and to subsequently monitor disease status. If the same tumor-associated clones in the blood expand when given an immunomodulatory agent, it may be likely that that those patients responded to the immunotherapeutic, Lanny Kirsch, MD, the company’s senior vice president of translational medicine, explained earlier this year.

“The more the repertoire is changing,” Kirsch said, “the more likely it is that clones that have been held at bay or sequestered are now being released by the intervention. And those are the patients may be more likely to have adverse events in terms of the immunotherapeutic.”

immunoSEQ’s namesake service and kit also features a suite of analytic tools such as immuneACCESS, which according to the company is the world’s largest open-access database of T- and B-cell annotated receptor sequences.

Clinical Diagnostic Launch

Adaptive has also launched its first clinical diagnostic product, clonoSEQ, granted marketing authorization by the FDA under the de novo process in September 2018 as the first test authorized by the agency for the detection and monitoring from bone marrow samples of minimal residual disease in patients with multiple myeloma and B cell acute lymphoblastic leukemia.

In January 2019, clonoSEQ received Medicare coverage, followed by coverage from three private payors representing approximately 68 million covered lives.

“We intend to file to expand the clonoSEQ FDA label to multiple additional indications, starting with chronic lymphocytic leukemia (“CLL”) in 2019, followed by non-Hodgkin’s lymphomas (“NHL”), to further expand its usage,” Adaptive stated. “Importantly, we are also generating data for submission to validate the use of clonoSEQ to monitor MRD from blood samples, which is less invasive than bone marrow samples, and may facilitate more frequent monitoring and broader physician adoption.”

Adaptive established clinical validation of clonoSEQ in part through a 706-patient study sponsored by Johnson & Johnson’s Janssen Biotech. The study assessed clonoSEQ as a companion diagnostic in ongoing and future clinical trials assessing Janssen’s Darzalex (daratumumab) in patients with multiple myeloma.

Using Microsoft machine learning capabilities accessed through a seven-year collaboration launched in December 2017, Adaptive is also developing immunoSEQ Dx, a diagnostic product designed to enable early detection of many diseases from a single blood test. The Microsoft partnership—whose value has not been disclosed—is intended to enable Adaptive to create a map of the interaction between the immune system and disease, called a “TCR-Antigen Map.”

“In 2019, we plan to confirm the first indications to bring to the FDA for review in2020 while continuing signal validation in several additional indications,” Adaptive said.

Partnering with Genentech, a member of the Roche Group, Adaptive is developing therapeutic product candidates designed to identify specific immune cells to develop into cellular therapies in oncology.

The Genentech collaboration, launched in January, gave Adaptive $300 million upfront and could generate for it more than $2 billion. Genentech is using Adaptive’s TruTCR process, designed to characterize T-cell receptors (TCRs) against shared antigens for use in the development of therapeutics.

“We believe this approach has the potential to be applicable to patients across a wide range of cancers,” Adaptive stated in its amended registration statement.

Personalized, Shared Therapies

Genentech aims to use TCRs screened by Adaptive’s immune medicine platform to engineer and manufacture cellular medicines. According to Adaptive, the companies are pursuing two product development pathways for novel T cell immunotherapies: Shared products that use “off-the-shelf” TCRs identified against cancer antigens shared among patients; and personalized products that use patient-specific TCRs identified by real-time screening of TCRs against cancer antigens in individual patients.

Also in its amended statement, Adaptive detailed how it intends to use its net proceeds from the IPO. The company estimated it will use:

  • $80 million to $110 million in net proceeds to fund commercial and marketing activities associated with its clinical products and services.
  • $70 million to $100 million toward continued R&D for its drug discovery initiatives, and
  • $40 million to $90 million to fund ongoing investments in its TCR-Antigen Map related activities.

“We expect to use the remainder, if any, to scale our laboratory operations with our anticipated growth, for working capital and for other general corporate purposes,” Adaptive stated. “The principal purposes of this offering are to increase our financial flexibility, obtain additional capital to support our operations, create a public market for our common stock and to facilitate our potential future access to the public equity markets.”

Adaptive will likely surpass its estimates of net proceeds ranging from approximately $253.9 million to $292.6 million—the latter if underwriters excerise in full their option to buy additional shares—since those estimates were based on a share price of $18.50.

Since each $1 increase in the share price would add approximately $14 million more in net proceeds, Adaptive’s net proceeds are likelier to be between $274.9 million for the initial offering, and $313.6 million if underwriters excerise in full their option to buy additional shares.

On its first day of trading yesterday, shares of Adaptive more than doubled in price, finishing the day at $40.30. That price surged again in early trading this morning, to $47.44 as of 11:57 a.m. before dipping to $43.25 as of 1:43 p.m.

The offering is expected to close on July 1, subject to the satisfaction of customary closing conditions, Adaptive added.

Goldman Sachs, J.P. Morgan, and BofA Merrill Lynch are acting as joint lead book-running managers for the offering. Cowen and Guggenheim Securities are acting as book-running managers, while William Blair and BTIG are acting as co-managers.

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