Adaptive Biotechnologies

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-K

(Mark One)
☒

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2022

OR

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____to _____

Commission File Number: 001-38957

ADAPTIVE BIOTECHNOLOGIES CORPORATION

(Exact Name of Registrant as Specified in its Charter)

Washington
(State or other jurisdiction of
incorporation or organization)
1165 Eastlake Avenue East
Seattle, Washington
(Address of principal executive offices)

27-0907024
(I.R.S. Employer
Identification No.)

98109
(Zip Code)

Registrant’s telephone number, including area code: (206) 659-0067

Securities registered pursuant to Section 12(b) of the Act: 

Title of each class
Common stock, par value $0.0001 per share

Trading
Symbol(s)
ADPT

Name of each exchange on which registered
The NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None 
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☒ NO ☐

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.  YES ☐ NO ☒
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 
months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  YES ☒ NO ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of 
this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).  YES ☒ NO ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See 
the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer

Accelerated filer

   ☒

   ☐

Non-accelerated filer

   ☐

Smaller reporting company

  Emerging growth company

   ☐

  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial 
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting 
under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒ 
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of 
an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s 
executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, based on the closing price of the shares of common stock on The 
NASDAQ Global Select Market on June 30, 2022 (the last business day of the Registrant’s most recently completed second fiscal quarter), was approximately $899,000,000. 
As of February 9, 2023, the Registrant had 143,226,757 shares of common stock, $0.0001 par value per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III of this Annual Report on Form 10-K, to the extent not set forth herein, is incorporated herein by reference from the Registrant’s definitive proxy 
statement relating to the Annual Meeting of Shareholders to be held in 2023.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
   
 
 
Table of Contents

Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
[Reserved]
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services

Exhibits, Financial Statement Schedules
Form 10-K Summary

PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.

PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.

PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.

PART IV
Item 15.
Item 16.

SIGNATURES

Page

3
3
43
90
90
90
90

91
91
91
92
104
105
137
137
139
139

140
140
140
140
140
140

141
141
143
144

 
 
  
  
  
 
 
 
  
 
 
 
  
 
 
 
 
 
 
FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements that are based on management’s beliefs and assumptions and on information 

available to management. Some of the statements in the “Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition 
and Results of Operations” sections and elsewhere in this Annual Report on Form 10-K contain forward-looking statements. In some cases, you can 
identify forward-looking statements by the following words: “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” 
“estimate,” “predict,” “project,” “potential,” “continue,” “ongoing” or the negative of these terms or other comparable terminology, although not all 
forward-looking statements contain these words.

These statements involve risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to be 
materially different from the information expressed or implied by these forward-looking statements. Although we believe we have a reasonable basis for 
each forward-looking statement contained in this Annual Report on Form 10-K, we caution you that these statements are based on a combination of facts 
and factors currently known by us and our projections of the future, about which we cannot be certain. Forward-looking statements expressed or implied in 
this Annual Report on Form 10-K include, but are not limited to, statements about:

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

the success of our significant investments in our continued research and development of new products and services;

the success of developing, commercializing and achieving commercial market acceptance of clonoSEQ, immunoSEQ, T cell receptor 
(“TCR”)-based cellular therapies, antibody-based therapeutics products and additional products and services beyond our portfolio;

the potential for our identified research priorities to advance our proprietary immune medicine ("IM") platform or our future products and 
services;

the success, cost and timing of our research and development activities, preclinical and clinical studies and, in certain instances, clinical 
trials and clinical validations;

the potential benefits of collaborations, our ability to enter into collaborations or arrangements and our ability to attract collaborators with 
development, manufacturing, regulatory and commercialization expertise; 

the ability and willingness of our collaborators to continue development, manufacturing, distribution and commercialization activities 
relating to our jointly developed products and services;

our ability to identify research priorities and apply a risk-mitigated strategy to efficiently discover and develop products and services, 
including new targets in autoimmunity and neurodegenerative disorders;

our ability to obtain and maintain regulatory approval of our products and services;

the pricing and reimbursement of our products and services following approval where required;

our ability to obtain equipment and materials (including reagents or other materials that may also require additional internal validation) 
from our suppliers, and in some cases single suppliers;

our ability to generate revenue and obtain funding for our operations, including funding necessary to complete further development of our 
current and future products and services, and if successful, commercialization;

our ability to manage operating expenses;

the size and growth potential of the markets for our products and services, and our ability to serve those markets, either alone or in 
combination with others;

the rate and degree of market acceptance of our products and services;

our financial performance;

our expectations regarding our ability to obtain and maintain intellectual property protection for our immune medicine platform, products, 
services and related technologies and the direction of such protection;

regulatory developments in the United States (“U.S.”) and foreign countries;

the success of competing products or services that are or may become available;

developments relating to our competitors and our industry;

our ability to attract and retain key scientific or management personnel;

the impact of laws and regulations; and

1

•

our estimates regarding expenses, future revenue, capital requirements and needs for additional financing.

In addition, you should refer to the “Risk Factors” section of this Annual Report on Form 10-K for a discussion of other important factors that may 

cause actual results to differ materially from those expressed or implied by the forward-looking statements. As a result of these factors, we cannot assure 
you that the forward-looking statements in this Annual Report on Form 10-K will prove to be accurate. Furthermore, if the forward-looking statements 
prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard 
these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at 
all. The forward-looking statements herein represent our views as of the date of this Annual Report on Form 10-K. We anticipate that subsequent events 
and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we 
have no current intention of doing so except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements as 
representing our views as of any date subsequent to the date of this Annual Report on Form 10-K.

In this Annual Report on Form 10-K, unless the context requires otherwise, all references to “we,” “our,” “us,” “Adaptive” and the “Company” refer 

to Adaptive Biotechnologies Corporation.

2

Item 1. Business 

Overview

PART I

We are advancing the field of immune medicine by harnessing the inherent biology of the adaptive immune system to transform the diagnosis and 

treatment of disease. We believe the adaptive immune system is nature’s most finely tuned diagnostic and therapeutic for most diseases, but the inability to 
decode it has prevented the medical community from fully leveraging its capabilities. Our immune medicine platform applies our proprietary technologies 
to read the diverse genetic code of a patient’s immune system and aims to understand precisely how the immune system detects and treats disease in that 
patient. We capture these insights in our dynamic clinical immunomics database, which is underpinned by computational biology and machine learning, 
and use these insights to develop and commercialize clinical products and services that we are tailoring to each individual patient. We have launched 
multiple commercial products and services and a robust pipeline of clinical products and services that we are designing to diagnose, monitor and enable the 
treatment of diseases such as cancer and autoimmune disorders. Since our inception in 2009, we have characterized over 58 billion immune receptors, 
established partnerships and commercial relationships with 175 biopharmaceutical companies and launched multiple product lines. Our goal is to 
understand the adaptive immune system and translate it into new products with unprecedented scale, precision and speed.

Our immune medicine platform is the foundation for our expanding suite of products and services. The cornerstone of our platform and core 

immunosequencing product, immunoSEQ, serves as our underlying research and development engine and generates revenue from academic and 
biopharmaceutical customers. Our first clinical diagnostic product, clonoSEQ, is the first test authorized by the Food and Drug Administration (“FDA”) for 
the detection and monitoring of minimal residual disease (“MRD”) in patients with multiple myeloma (“MM”), B cell acute lymphoblastic leukemia 
(“ALL”) and chronic lymphocytic leukemia (“CLL”) and is also available as a CLIA-validated laboratory developed test (“LDT”) for patients with other 
lymphoid cancers, including diffuse large B-cell lymphoma (“DLBCL”). Leveraging our collaboration with Microsoft Corporation (“Microsoft”), we are 
creating a map of the interaction between the immune system and disease (our “TCR-Antigen Map”). We are using this map to identify and validate disease 
signatures to improve the diagnosis and treatment of many diseases. 

In 2022, we made key strategic and operational changes, including a reorganization into two main business areas – MRD and IM. The MRD 
business area focuses on the use of our highly sensitive, next-generation sequencing (“NGS”) assay to measure MRD in patients with hematologic 
malignancies. It is comprised of our clonoSEQ clinical diagnostic test, offered to clinicians, and our clonoSEQ assay, offered to biopharmaceutical partners 
to advance drug development efforts (“MRD Pharma”). We believe clonoSEQ is the test of choice in MRD testing for hematologic malignancies with 
industry leading sensitivity. With the use of clonoSEQ, we are transforming how lymphoid cancers are treated by working with providers, pharmaceutical 
partners, and payors. 

3

 
The IM business area leverages our platform’s proprietary ability to sequence, map, pair and characterize T cell receptors (“TCRs”) and B cell 
receptors (“BCRs”) at scale to drive research and clinical opportunities in our therapeutic areas of focus: cancer, autoimmune, infectious diseases, and 
neurodegenerative disorders. It is comprised primarily of two main growth areas: IM Pharma Services and drug discovery (“Drug Discovery”). Within IM 
Pharma Services, we use our core immunosequencing capabilities to deliver rich immune receptor data back to our biopharmaceutical and academic 
customers. These data are used to aid in understanding biomarkers of drug response which may accelerate our customers’ clinical development programs in 
our therapeutic areas of focus. Our portfolio is comprised of more than 140 active studies with more than 85 biopharmaceutical companies. We continue to 
scale the research use of our immune receptor data and to increase penetration in later stage, larger clinical trials, including more phase 3 trials. In Drug 
Discovery, we use our proprietary capabilities to discover new drug targets and leverage our validated TCR and BCR discovery approaches to develop TCR 
and/or antibody therapeutic candidates against these novel targets. Within Drug Discovery, our programs are focused on cancer and autoimmunity. These 
programs may be developed on our own or we may choose to work with partners. Our initial partnered pipeline includes the programs in development with 
Genentech, Inc. (“Genentech”) to advance TCR cellular therapies in oncology. 

In addition, part of our strategy within the IM business area is to develop a diagnostic test for many diseases from a single blood test, known as T-

Detect. In 2020 and 2022, we launched two diagnostic tests, T-Detect COVID and T-Detect Lyme; however, in 2022, we decided to defer further 
commercialization of T-Detect until we have multiple signals with strong enough data to impact physician behavior with a clear path to reimbursement.

Immune medicine is one of the largest global addressable markets in healthcare. We estimate the potential global market opportunity for our 
portfolio to be approximately $49 billion, including approximately $5 billion for product and services related to our MRD business area and approximately 
$44 billion for products and services related to our IM business area. We use multiple sources and assumptions to estimate the total addressable market for 
immune medicine. While we believe them to be reasonable, these sources and assumptions may be incorrect or subject to change due to any number of 
factors. Despite the novelty of this area, we believe we are uniquely positioned to develop and commercialize a pipeline of immune-driven diagnostic and 
therapeutic products across multiple disease states by leveraging the cumulative learning from our immune medicine platform.

Selected 2022 Results

In 2022, our revenue increased by 20% to $185.3 million, including double-digit percentage increases in both our MRD and IM business areas while 

operating expenses were significantly leveraged as a result of streamlined operations from the reorganization into two business areas during the year. 
Operating expenses increased from $363.3 million during the year ended December 31, 2021 to $385.5 million during the year ended December 31, 2022, 
representing a moderate increase of $22.2 million compared to an increase of $112.1 million from the year ended December 31, 2020 to the year ended 
December 31, 2021. In addition, we strengthened our capital position through a non-dilutive financing in September 2022, from which we added $124.4 
million to our balance sheet, net of expenses. As of December 31, 2022, cash, cash equivalents and marketable securities was $498.2 million.

In early 2022, we restructured around two business areas, MRD and IM, and streamlined our workforce. As part of the strategic decisions made in 

the restructuring, we paused sales of our first two T-Detect tests, T-Detect COVID and T-Detect Lyme. The commercialization process for individual 
indications required more time and higher costs than anticipated, and we therefore decided to defer commercialization for T-Detect until we have strong 
enough data in multiple disease states to impact physician behavior with a clear path to reimbursement. In late 2022, we announced our expected path to 
profitability. We estimate positive adjusted EBITDA by the end of 2025, and cash flow breakeven by the end of 2026. We estimate revenue to grow at a 
20% to 30% compound annual growth rate through 2027, while our operating expenses are expected to grow at a lower rate over the same period.

MRD Highlights

• We grew clonoSEQ test volume by 51% to 36,871 tests delivered. We increased the all-time number of unique patients tested by 53% to 

over 33,000 patients by the end of 2022, and nearly doubled the size of our fully-trained sales team. 

• We launched clonoSEQ as a CLIA-validated blood test for patients with DLBCL and secured clonoSEQ coverage with Medicare for 

DLBCL patients regardless of line of therapy, treatment regimen, or testing timepoint. clonoSEQ is the first and only MRD test to receive 
Medicare coverage in DLBCL.

•

In October 2022, we entered into an agreement with Epic Systems Corporation (“Epic”) to integrate the clonoSEQ® assay into Epic’s 
comprehensive electronic medical record ("EMR") system to enable easier test ordering and results access. 

• Our MRD Pharma revenue increased 15% from 2021, and our portfolio is continuing to expand. Our clonoSEQ assay is being used by over 
60 biopharmaceutical partners and in 187 active trials, representing about 21% penetration of industry sponsored clinical trials in lymphoid 
cancers. 

4

IM Highlights

•

In Drug Discovery, we made significant advances in connection with our worldwide collaboration and license agreement with Genentech 
(the "Genentech Agreement") with respect to both the shared and personalized products. For the shared product, we delivered three TCR 
fully characterized data packages against validated neoantigen targets, and Genentech selected the first neoantigen TCR to advance as a 
potential cell therapy product. For the personalized product, we successfully completed proof of concept for the identification and 
characterization of patient-specific TCRs specific to each patient’s unique tumor mutations.

• We have narrowed the focus of our target and drug discovery efforts to cancer and autoimmunity. Our approach is to discover and develop 
TCR or antibody therapeutics to targets that T cells hit naturally. These targets are known as HLA-presented disease specific epitopes, 
which we are discovering and validating using our immune medicine platform. We are also developing novel drug modalities against those 
targets by leveraging the TCR and antibody discovery capabilities. 

•

In IM Pharma Services, revenue increased 67% from 2021. We also saw continued portfolio expansion across partners, disease states and 
study phases, with over 85 partners and more than 140 active studies utilizing immune receptor data across our therapeutic areas of focus. 

Our Immune Medicine Platform 

The adaptive immune system is comprised of specialized cells, called T cells and B cells, which hold the instructions for diagnosing and treating 

most diseases. These instructions enable these cells to identify, bind and destroy pathogens or human cells presenting foreign signals of disease (“antigens”) 
using receptors on their cell surface. Unlike all other genes in the human genome, the genetic sequences of TCRs and BCRs rearrange over time creating 
massive genetic diversity. The resulting diversity of the adaptive immune repertoire, which consists of over 100 million different genes in a healthy adult 
compared to approximately 30,000 genes in the static human genome, gives the immune system the ability to detect and respond to millions of different 
antigens associated with human disease. 

Our immune medicine platform combines a suite of proprietary chemistry, computational biology and machine learning to generate clinical 
immunomics data to decode the adaptive immune system. It extracts and interprets insights from the adaptive immune system with the scale, precision and 
speed required to enable the design of clinical products tailored to the specific genetics of each patient’s immune system.

5

 
 
Our immune medicine platform performs the following key functions related to immune receptors: 

•

Sequence. immunoSEQ sequences single chains of “Y-shaped” TCRs or BCRs using NGS, enabling us to understand the quantity and 
diversity of T and B cells in a biological sample. This provides deep insights into individual and collective immune responses at a scale that 
is thousands of times greater than was previously possible. 

• Map. MIRA (Multiplexed Identification of T cell Receptor Antigen Specificity) maps millions of TCRs to thousands of clinically relevant 
antigens. Combined with immunoSEQ, MIRA elucidates what potential diseases a patient’s immune system has been exposed to or is 
actively fighting.

• Pair. pairSEQ builds on immunoSEQ by using a combinatorial strategy to accurately pair both chains of Y-shaped immune cell receptors at 
high-throughput, which is challenging to do at scale using other methods because the two chains of the Y-shaped receptors are located on 
different chromosomes. The ability to accurately pair both chains of the receptors in a sample enables us to reconstruct receptors for 
therapeutic purposes. 

• Characterize. Our platform characterizes binding, cytotoxicity and safety properties of antigen-specific, paired TCRs to identify a subset 
that is therapeutic-grade, enabling the discovery and development of optimal clinical candidates to be engineered into TCR-mediated 
cellular therapies. We also have a high-throughput antibody discovery process that enables the selection of potent, naturally occurring, full 
length antibodies for therapeutic or prophylactic development. 

The massive amount of data generated by our immune medicine platform is stored in our dynamic clinical immunomics database. We believe the 

application of machine learning, supported by our collaboration with Microsoft, has the potential to exponentially accelerate our ability to derive novel 
insights from this database and use them to inform our robust product development efforts. Further, our platform supports a robust portfolio of products and 
services, including commercial products and services in clinical diagnostics, and we have developed products and services in both the clinical diagnostics 
and drug discovery areas.

Our Products and Pipeline (MRD)

The MRD business area focuses on the use of our highly sensitive, FDA-authorized NGS assay to measure MRD in patients with hematologic 
malignancies. It is comprised of our clonoSEQ clinical diagnostic test, offered to clinicians, and our clonoSEQ assay offered to biopharmaceutical partners 
to advance drug development efforts. We believe clonoSEQ is the test of choice in MRD testing for hematological malignancies with industry leading 
sensitivity of 1 out of 1,000,000 cells, given sufficient sample input. By taking a baseline measurement prior to starting therapy and then tracking the 
number of cells at several time points following therapy initiation, hematologists can improve their ability to assess treatment response, predict long-term 
patient outcomes, monitor disease burden over time and detect potential relapse. With the use of clonoSEQ, we are transforming how lymphoid cancers are 
treated by working with biopharmaceutical partners, providers and payors. For instance, with the use of clonoSEQ we have the potential to accelerate the 
development of drugs in lymphoid cancers, assist physicians with critical clinical decisions, and enable treatment decisions which may lower payor cost 
through the discontinuation of costly drugs that are no longer needed.

6

 
clonoSEQ

Our clonoSEQ diagnostic test detects and monitors the remaining number of cancer cells that are present in a patient’s body during and after 
treatment, known as MRD. In September 2018, clonoSEQ was granted marketing authorization from the FDA, under the de novo process, for patients with 
MM and ALL to monitor their MRD from bone marrow samples. In August 2020, the clonoSEQ label was expanded to include patients with CLL from 
bone marrow and blood samples. clonoSEQ is also available for use in other lymphoid cancers as an LDT. In 2022, the assay was launched as a CLIA-
validated test to detect MRD in blood for patients with DLBCL by measuring circulating tumor DNA (“ctDNA”), which provides patients and clinicians 
with a powerful blood-based prognostic tool. Our strategy is to generate additional clinical data in DLBCL and file with the FDA to support clinical 
adoption and increase usage by our biopharmaceutical partners. We believe clonoSEQ has broad applicability across all lymphoid malignancies, as set forth 
in the figure below: 

1"CLIA-Validated" means tests available to order as a CLIA-validated LDT service: that use has not been cleared or approved by the FDA

In January 2019, clonoSEQ received Medicare coverage aligned with the FDA label and National Comprehensive Cancer Network (“NCCN”) 

guidelines for longitudinal monitoring in MM and ALL. Over the years, we secured additional payor coverage for clonoSEQ aligned with our FDA label 
with Medicare, national private payors and large regional plans for a total of over 245 million covered lives for ALL and MM, over 190 million covered 
lives for CLL and over 70 million covered lives for DLBCL. In November 2021, MolDX published its LCD for MRD testing. This LCD not only affirmed 
the importance of MRD and clonoSEQ coverage in ALL, MM and CLL in bone marrow and blood, but also provided a clear and efficient pathway for 
seeking expanded clonoSEQ coverage through technical assessments in Non-Hodgkin’s Lymphoma (“NHL”). In July 2022, coverage expansion continued 
as we secured Medicare coverage for DLBCL, the most common form of NHL. We secured clonoSEQ coverage with Medicare for DLBCL patients 
regardless of line of therapy, treatment regimen, or testing timepoint. clonoSEQ is the first and only MRD test to receive Medicare coverage in DLBCL.

clonoSEQ testing has been ordered by clinicians for over 33,000 unique patients and used by more than 60 biopharmaceutical companies in 187 

active clinical trials, representing approximately 21% penetration of active industry sponsored clinical trials in lymphoid cancers as of December 31, 2022. 
We continue to deepen our commercial investments to expand clinical adoption of clonoSEQ and have increased the strength of our specialized sales and 
customer support organization and supporting infrastructure in the United States. We have also successfully transferred the technology to seven labs in 
other parts of the world. 

In addition, we continue to develop product improvements for clonoSEQ. In 2021, we launched an enhanced version of our clonoSEQ B-cell 
Clonality (ID) reports, which now includes IGHV mutation status for patients with CLL. The presence of IGHV mutations have been proven prognostic of 
better outcomes in CLL patients. We believe that this improvement strengthens the clonoSEQ product by aiding clinicians in evaluating prognosis, 
simplifying diagnosis, and improving overall patient management by providing additional clinically valuable CLL information. In October 2022, we 
entered into a partnership with Epic to integrate clonoSEQ into Epic’s electronic medical record system, which we believe will enable easier test ordering 
and results access for the clonoSEQ test. 

7

 
We have a multi-pronged strategy to deepen penetration of clonoSEQ and improve our commercial and operational infrastructure. We are focused 

on utilization of blood-based testing to increase the number of tests per patient; expansion into new patient populations within NHL, starting with DLBCL; 
and demonstration of clinical utility at multiple points along the patient continuum of care. In parallel, we continue to enhance customer experience with 
EMR integration and optimize payor coverage to increase ASP and improve margins.

MRD Pharma

The MRD Pharma business area focuses on offering our clonoSEQ assay to biopharmaceutical partners to advance drug development efforts. Given 
the broad penetration of clonoSEQ, we believe there is a significant growth opportunity for our MRD Pharma business, as we aim to replicate clonoSEQ's 
success in other indications, especially in DLBCL where there is significant ongoing drug development activity. 

Evolving Clinical Utility Data

We believe that the value of clonoSEQ as a decision-making tool may enable clinicians to select the best patient treatment options based on MRD 

status. Two examples of recent expanded clinical use cases and drug development advances include: 

• Martinez-Lopez published a retrospective cohort analysis of 400 newly diagnosed myeloma patients in which MRD was used 

interventionaly to escalate, change, or stop therapy for 67 of those patients. Data showed that for MRD negative patients who stopped 
therapy, progression-free survival (“PFS”) was not negatively impacted. Also, for MRD positive patients in whom therapy was changed or 
intensified, PFS was significantly better than in patients who remained on the same course of therapy. This analysis supports the potential 
for use of MRD to modify treatment.

• DETERMINATION was a phase 3 trial evaluating a regimen of Revlimid, Velcade and dexamethasone (“RVD”) or RVD plus autologous 

stem cell transplantation (“ASCT”) in patients with newly diagnosed MM. Post initial therapy and prior to maintenance therapy, MRD was 
assessed by clonoSEQ in 108 patients in the RVD-alone group and 90 patients in the RVD + ASCT group. This study demonstrated the 
benefit of adding transplant to frontline triple therapy, however, an important result from the study showed that patients who achieved MRD 
negativity by clonoSEQ prior to maintenance had similar outcomes independent of whether they received transplant. Additionally, the 
authors stated that MRD negativity is of increasing importance in modifying treatment, in informing clinical care, and as a treatment goal 
given the relationship with better outcomes.

8

 
Additional prospective studies are underway, and many have shared interim data at industry conferences. As more studies read out, we expect there 

may be greater adoption of MRD in clinical decision making, which could result in more patients benefiting from clonoSEQ and greater frequency of 
testing for each patient helped.

Our Products and Pipeline (IM)

The IM business is comprised primarily of two main growth areas: IM Pharma Services and Drug Discovery. The core of our immune medicine 

platform is our immunoSEQ technology. immunoSEQ utilizes multiplex, bias-controlled PCR to accurately and quantitatively sequence millions of 
immune receptors at high-throughput directly from DNA. Since inception, immunoSEQ has been used for research purposes by academic researchers and 
biopharmaceutical companies to answer translational research questions relating to the adaptive immune system, monitor response to therapies and 
discover new prognostic and diagnostic signals. We offer computational services to assist our customers in realizing the power of their data and to compare 
their data to other publicly available datasets in our clinical immunomics database. The expanding database has led to over 650 peer-reviewed publications 
referencing immunoSEQ and potential clinical signals to explore.

IM Pharma Services

In IM Pharma Services we use our core immunosequencing capabilities to deliver rich immune receptor data back to our biopharmaceutical 
customers in order to potentially accelerate their clinical development programs in our therapeutic areas of focus, which are cancer, autoimmune disorders, 
infectious diseases and neurodegenerative diseases. A key application of our immune receptor data is the ability to annotate T-cell signatures of disease 
from patient samples to understand the cellular immune response to most past and present diseases. TCRs in blood may be used to determine the genes or 
peptides that are being targeted by the immune system and the strength of this disease-specific immune response. Potential clinical applications of this 
include:

•

•

•

•

patient selection or stratification;

understanding the mechanism of action for drugs;

efficacy and / or safety of drugs and monitoring; and

understanding immunity differences between responders and non-responders.

9

 
 
 
Other key applications of immune receptor data are graphically represented below.

We believe we can achieve sustainable growth from this business as we continue to expand our portfolio in various disease states and by study 

phase: our data is used in preclinical, phase 1, phase 2 and phase 3 trials. We plan to continue to scale research use of TCR and BCR data and to increase 
penetration in later stage, larger clinical trials, including more phase 3 trials.

10

 
Drug Discovery

In Drug Discovery, we use our proprietary capabilities to discover new drug targets and develop TCR or antibody therapeutic assets to those targets 

in commercially attractive indications. We are focusing our drug discovery programs mainly in cancer and autoimmunity, areas where we can pursue 
partnerships with others or pursue development on our own.

Our proprietary TCR therapeutics discovery process characterizes TCRs against antigens for use in the development of therapeutics. In December 
2018, we entered into an exclusive collaboration with Genentech to leverage this capability for the development of cellular therapies in oncology. We are 
pursuing two product development pathways for novel T cell immunotherapies in which Genentech intends to use TCRs screened by our immune medicine 
platform to engineer and manufacture cellular medicines: 

11

 
 
•

Shared Products. The shared products will use “off-the-shelf” TCRs identified against cancer antigens shared among patients (“Shared 
Products”). In 2021, we completed an assessment of efficacy and safety data to enable a decision to select our lead TCR candidate. 
Following review of this data in 2022, Genentech selected this TCR candidate to progress as a potential therapeutic product candidate. 
Also, by the end of 2022, we delivered two additional TCR fully characterized data packages against validated neoantigen targets to 
Genentech for their consideration. 

• Personalized Product. The personalized product will use patient-specific TCRs identified by real-time screening of TCRs against cancer 
antigens in each patient (“Personalized Product”). In the second half of 2020, we started screening blood from cancer patients to identify 
TCRs specific to a patient’s tumor mutations. During 2021 and 2022, we successfully completed proof of concept by identifying and 
characterizing patient specific TCRs to each patient’s unique tumor mutations. We also completed initial end-to-end test runs as a 
foundation for the private product process and our next steps are to complete the product prototype as we move towards IND readiness. 

In addition to our partnership in oncology cell therapy with Genentech, we are expanding our efforts in autoimmunity where we believe we are 

uniquely positioned to make important contributions. In autoimmune disorders, disease specific antigens are not well-known and treatment protocols are 
largely limited to general anti-inflammatory drugs, indicating a significant opportunity to develop therapeutics in this area to restore patient immune 
balance. Therefore, we are leveraging our unique capabilities to identify specific targets that are causative of the disease, particularly in multiple sclerosis 
(“MS”) and inflammatory bowel disease (“IBD”). Our expertise is based on our ability to find HLA presented, disease specific epitopes that T cells hit 
naturally. We are also developing novel mechanisms against those targets by leveraging the TCR discovery capabilities we developed for Genentech and 
the antibody discovery capabilities we built and confirmed for COVID-19. Our next step is to generate data that enable us to continue to develop these 
programs, either on our own or with partners.

Our Competitive Strengths

We aim to harness the inherent biology of the adaptive immune system to develop clinical products and services that improve human health by 

leveraging our core competitive strengths. 

• Our immune medicine platform is uniquely capable of supporting clinical products for us and our collaborators. We have developed a 

platform that is capable of reading and translating the massive genetic diversity of the adaptive immune system and its selective response to 
disease. Specifically, our platform sequences immune receptors and maps them to antigens for diagnostic applications, pairs receptor chains 
and characterizes antigen-specific, paired receptors to identify optimal clinical targets for therapeutic use. We believe that we have a 
differentiated ability to perform these functions at an unprecedented scale to develop novel clinical diagnostic and therapeutic products.

• Our clinical immunomics database provides a robust product development engine. Using the adaptive immune system as our product 

source-code, we are building a dynamic clinical immunomics database, now being annotated with antigens using machine learning, that 
drives our ability to rapidly discover and develop potential diagnostic and therapeutic applications. Our aim is to translate the natural 
capabilities of the immune system into the clinic by capturing the millions of diverse unique receptors present in a patient’s blood, then 
leveraging the resultant data set into multiple products and services.

• We are well capitalized and on a path to profitability. As of December 31, 2022, we had $498.2 million in cash, cash equivalents and 

marketable securities. In 2022, we focused on reducing our operating expense growth rate. We estimate positive adjusted EBITDA by the 
end of 2025, and expect to be cash flow breakeven by the end of 2026.

• Clinical applicability spans diagnostic and therapeutic product potential. Our ability to accumulate, synthesize and process billions of 

immunomic datapoints to generate multiple clinical diagnostic and therapeutic applications across disease areas provides optionality to our 
commercial pipeline. Each of our products also has broad applicability, enabling robust product lifecycle extensions. 

• Transformational collaborations with industry leaders validate our platform. Our collaborations with industry-defining leaders such as 

Genentech and Microsoft validate our unique approach to advancing the promise of immune medicine. We will continue to seek 
opportunities to optimize our ever-growing clinical immunomics database to drive product development and commercial success and 
facilitate efficient use of capital. 

• Expanding regulatory and reimbursement expertise will help inform future clinical product development. Having obtained FDA marketing 

authorization and expanded coverage for multiple indications of clonoSEQ from Medicare and several national private payors, as well as an 
EUA for T-Detect COVID in 2021 in response to the COVID-19 pandemic, we believe we have developed valuable core capabilities that 
will facilitate future product development through to regulatory approval and reimbursement. We believe this capability will inform future 
development of other clinical diagnostic and therapeutic products.

12

•

Strong intellectual property protects our immune medicine platform and its applications. As of December 31, 2022, we had filed 799 patent 
applications, 470 of which had issued as of that date, covering improvements in sequencing methods and new ways to leverage adaptive 
immune receptors for our MRD and IM business areas.

Our Strategy 

Our focus is to leverage our immune medicine platform and competitive strengths to develop transformative clinical solutions that are accessible to 

patients with a range of diseases.

• Powering the age of immune medicine. We facilitate the development of the immune medicine field by providing a platform to encourage 
generation of immunomics data to facilitate a deeper understanding of, and biological discovery from, the adaptive immune system. We 
leverage the unique capability of our platform to translate the genetics of a patient’s immune system with the scale, precision and speed 
required to enable the development of personalized products, including clinical diagnostic tests for disease monitoring and immune-based 
therapeutics.

• Entrench our products and services in clinical drug development with biopharmaceutical collaborators. Maintain our platform as the gold 
standard for the validation of potential immune-driven clinical discoveries in late-stage clinical trials. Since inception, our products and 
services have been used by 175 biopharmaceutical companies and incorporated into hundreds of clinical trials, and clonoSEQ has proven to 
be the MRD test of choice for select registrational trials. To deepen our established position as a partner of choice, we provide end-to-end 
support, including hypothesis-driven trial design, extensive data analyses, parallel regulatory support, compliant data transfers and novel 
target screening. These synergistic relationships advance the development and adoption of our own clinical products and inform drug 
development for our partners. 

• Leveraging foundational technology to generate revenue and address clinical diagnostic challenges in key disease states, such as 

autoimmune disorders, cancer, infectious diseases, and neurodegenerative disorders. We integrate proven chemistry into our own and our 
collaborators’ clinical products in development, avoiding the need to re-engineer new products for every clinical application. As our 
platform focuses on cancer, autoimmune disorders, infectious diseases, and neurodegenerative diseases, we believe we will benefit from 
economies of scale and drive margin improvement over time. 

• Drive the commercial adoption of our validated, reimbursed and regulated clinical products. Leverage the commercial infrastructure built 
for clonoSEQ to submit clinical data for regulatory clearance of our products and services, expand payor coverage and provide robust 
billing and patient access infrastructure for multiple clinical applications. 

• Maintain an entrepreneurial, scientifically rigorous, data-driven and inclusive corporate culture. Fuel the promise and potential that our 
platform offers to help patients better manage their disease by translating insights from our world-class team, which includes 147 people 
with medical or doctoral degrees with expertise in biology, chemistry, bioinformatics, software, drug discovery, development and 
commercialization, into clinical products and services. 

A Primer: The Adaptive Immune System 

Over millions of years, the adaptive immune system has evolved an elegant solution to keeping people healthy. It recognizes and responds to most 

antigens, whether they come from outside the body, such as a virus, or inside the body, such as mutations that drive cancer. 

The innate and adaptive immune systems both play a role in human immunity, but only the adaptive immune system provides a specific response to 

signals of disease, or antigens. These disease specific antigens are primarily fragments of proteins that are recognized as foreign, such as proteins from a 
virus. However, antigens can be recognized as foreign even if they are not from a pathogen. In cancer cells, antigens are generated from neoantigens, which 
are derived from mutations specific only to the cancer, or tumor associated antigens (“TAAs”), which are from aberrantly expressed normal proteins. For 
autoimmune disorders, the immune system mistakenly recognizes normal protein fragments as foreign antigens and attacks otherwise healthy tissue. 

The Adaptive Immune Response 

The key cells of the adaptive immune system that enable our bodies to mount responses against antigens are called T cells and B cells. T cells can 

destroy target cells directly, and B cells secrete antibodies, activating other parts of the immune system to destroy targets. 

13

Each T and B cell has a unique Y-shaped receptor, which can recognize one or a small number of the millions of antigens to which our bodies are 

continuously exposed. When an adaptive immune response is initiated against a particular disease, the T cells and B cells encoding the disease-specific 
targeting receptors rapidly multiply through clonal expansion, allowing for a powerful immune response. Some of these expanded cells directly attack the 
disease, and others form long-term memory to allow rapid recognition of the same antigens in the future and protect against reinfection. Unlike all other 
genes in the human genome, the genetic sequences of TCRs and BCRs rearrange over time through a complex biological process resulting in massive 
diversity. The diversity of these receptors is made possible by a unique reshuffling of their genetic code known as V(D)J recombination (V=Variable, 
D=Diversity, J=Joining). This recombination process only occurs in T cells and B cells, and it results in each cell clone having a unique receptor-associated 
deoxyribonucleic acid (“DNA”) sequence. This unique DNA sequence acts like a barcode that can be used to identify and track an individual receptor over 
time, as shown in the figure below:

14

 
The adaptive immune response requires millions of these unique receptors to be widely distributed and present in the blood at all times in order to 

have the ability to rapidly respond to many different diseases simultaneously. Even after a specific TCR binds to an antigen and clonally expands, the 
frequency of these expanded T-cell clones containing the TCR remains relatively low in relation to the estimated trillions of other T cells that are 
circulating. We have demonstrated this by sequencing thousands of healthy individuals for control cohorts for our research and development efforts. We 
now know that disease-specific TCRs that are clonally expanded in a patient’s blood are present, on average, at less than 1 cell out of 100,000 cells. Despite 
their relatively low abundance, disease-specific TCRs can mount a systemic, persistent response to most perturbations because of the highly specialized 
properties of the immune response summarized in the table below: 

In order to fully leverage these inherent properties of the immune system to develop clinical products, this enormous diversity and scale must be 

taken into consideration to be able to reliably and repeatedly measure the relative frequency of each disease-specific T cell in the blood. For example, 
cancer-specific TCRs circulating in the blood of a cancer patient are only present at 1 out of 100,000 cells. Auto-reactive T cells specific to any given 
autoimmune disorder circulating in the blood are only present at 1 out of 1,000,000 cells. Accordingly, the ability to detect disease-specific T cells requires 
a technology that can quantitatively probe a minimum of hundreds of thousands to millions of blood cells from each sample. 

Our Immune Medicine Platform

We built a platform that can reveal and translate these properties of the adaptive immune system with the scale, precision and speed required to 
enable the development of personalized products, including disease monitoring, clinical diagnostic tests for early detection and immune-based therapeutics. 
Our immune medicine platform combines a suite of proprietary chemistry, computational biology and machine learning to generate clinical immunomics 
data to decode the adaptive immune system and transform the diagnosis and treatment of disease. 

The massive amount of data generated by our immune medicine platform is stored in our dynamic clinical immunomics database. We believe the 

application of machine learning with Microsoft has the potential to exponentially accelerate the growth of novel insights from this database, which we 
expect will further inform our product development efforts, as demonstrated by the growing number of clinical signals we are generating, including signals 
for SARS-CoV-2, Lyme disease, Crohn’s disease, celiac disease, MS and IBD.

15

 
Sequence with immunoSEQ 

immunoSEQ sequences single chains of Y-shaped TCRs and BCRs using NGS. NGS generally describes several modern sequencing technologies 

that enable more efficient DNA and ribonucleic acid (“RNA”) sequencing than prior technologies. The key innovation in the development of immunoSEQ, 
pioneered by Dr. Harlan Robins and a team of leading immunologists at the Fred Hutchinson Cancer Research Center (“Fred Hutch”), was a novel 
approach utilizing PCR, hybridization and sequencing of rearranged TCRs to determine the sequences in millions of rearranged TCR genes, as shown in 
the figure below. We apply a similar approach for BCR sequencing. All of the data generated by immunoSEQ is uploaded to our clinical immunomics 
database and accessed through our proprietary cloud-based visualization and analytic tool called the immunoSEQ Analyzer.

One of the biggest challenges of any multiplex PCR technique is controlling for PCR amplification bias, which is critical for accuracy. We solved 

for this problem by creating a synthetic immune repertoire that mimics rearranged immune receptor loci for all V and J genes. By identifying specific 
primers that are either under or over amplified, titrating the primer concentrations and computationally adjusting residual bias, we optimize quantitation. 
The accuracy and reproducibility of our bias control methodology was demonstrated in our lab and independently in a multi-center, lab-to-lab concordance 
study using our immunoSEQ RUO kit. The ability to generate an unbiased TCR or BCR sequencing read-out is paramount for any clinical product and will 
be required for the utility and reliability of clinical kits. 

immunoSEQ enables us to observe the majority of receptors involved in a real human immune response, providing deep insights into a complex 

biological system that was previously challenging to understand. 

Map with MIRA 

Our proprietary MIRA technology enables the identification of TCRs specific to thousands of antigens simultaneously. The MIRA technology 

leverages a multiplexed, combinatorial approach to mapping TCRs to antigens in four steps: 

1.

Identify and query antigens of interest which can include neoantigens, tumor-associated, viral, infectious, autoimmune or other antigens. 

2. Pool the antigens of interest and incubate them with immune cells from multiple donors whereby antigen specificities are determined based 

on the antigen pool design. 

3. Sort T cells by marker of interest. 

4. Match T cell clones to specific antigens based on the presence of specific sequences in designated pools. 

16

 
Combined with immunoSEQ, MIRA elucidates what diseases a patient’s immune system has been exposed to or is actively fighting at a scale that is 

one thousand times more sensitive than standard immunological techniques such as ELISPOT, or enzyme-linked immunospot. 

Pair with pairSEQ

Our proprietary pairSEQ technology builds on immunosequencing by using a combinatorial strategy to accurately pair the two chains of Y-shaped 

immune cell receptors at higher throughput than can be achieved with single cell sequencing. Pairing is difficult because the two chains of the Y-shaped 
receptor are located on different chromosomes, which get separated when DNA is extracted from a cell for sequencing. By pairing TCRs or BCRs, we 
rapidly detect thousands of complete chain sequences to develop new TCR-mediated cellular therapies or to develop differentiated antibodies.

Characterize

Our proprietary TCR therapeutics process characterizes binding, cytotoxicity and safety properties of antigen-specific, paired TCRs to identify a 

select subset that are therapeutic-grade, enabling the development of optimal clinical candidates to be engineered into TCR-mediated cellular therapies. Our 
comprehensive TCR characterization process utilizes advanced cellular immunology to measure TCRs against a variety of metrics to determine the optimal 
clinical candidates. Antigen-specific, paired TCRs undergo evaluation for avidity, cytokine release, cytotoxicity and safety. Those TCRs that pass the first 
safety filter are then evaluated for TCR reactivity against T cell lines and primary cells. To date, we have identified and characterized to different stages 
more than 5,000 unique antigen-specific TCRs against 600 different clinically relevant targets, constituting our pipeline of possible clinical candidates. 
TCR characterization is summarized in the figure below:

In collaboration with Genentech, we plan to apply a similar process to screen, identify and characterize in real-time what we believe are the most 

promising patient-specific TCRs targeting the patient’s specific cancer antigens, advancing the next generation of cellular therapy in oncology.

17

 
Antibody Discovery 

Our platform enables the discovery and characterization of BCRs for use as therapeutic antibodies. Our key differentiator is the ability to tap into the 

massive diversity of the B-cell repertoire to identify naturally-occurring, fully human antibodies at unprecedented scale. In April 2020, we deployed our 
platform to identify neutralizing antibodies to the SARS-CoV-2 virus that causes COVID-19. We processed blood from more than 300 recovered and 
symptomatic COVID-19 patients. We then applied our high-throughput BCR pairing technology and paired more than 490,000 antibody heavy and light 
chains. We evaluated these BCR sequences in silico and selected more than 3,300 likely attractive antibody candidates for downstream functional 
characterization, including affinity binding and live virus neutralization. We believe these efforts represented a differentiated platform extension that will 
position us to pursue additional potential antibody discovery opportunities in a variety of disease states, including in autoimmunity where there is an unmet 
need.

Clinical Immunomics Database 

We are developing a large, dynamic clinical immunomics database. We use our proprietary software and core competency in computational biology 

to structure and store immune receptor data and to create tools for rapid analysis and easy visualization. All immunosequencing data is processed and 
uploaded to a secure cloud-based database. 

The diseases a person has encountered, both past and present, is recorded in their TCR repertoire. This comprehensive disease information is 
contained in the immunosequencing data that we generate from each sample, which we believe will be revealed over time by our TCR-Antigen Map. We 
plan to map, both directly and through machine learning, an estimated 1015 TCRs to thousands of clinically relevant antigens, which we believe will allow 
us to annotate this immunosequencing data with information about disease states, increasing the value of the data over time. 

We leverage our database to fuel our pipeline of immune medicine products. With over 58 billion immune receptors, our platform enables us to 

work with retrospective samples which serve as training sets to which our Microsoft collaborators apply machine learning and computational statistics to 
improve the accuracy of certain of our clinical products and services. 

Our Products and Services 

clonoSEQ: Detection and Monitoring of MRD

Our first diagnostic product, clonoSEQ, is an FDA-authorized NGS test for the detection and monitoring of MRD in bone marrow or blood samples 

in patients with select lymphoid malignancies in which the malignant cell is derived from a T cell or a B cell. MRD refers to the presence and number of 
these malignant T or B cells that may remain in a patient’s body during and following treatment. Because our technology quantifies the frequency of every 
T cell or B cell in a sample, we can monitor MRD accurately at a sensitivity of 1 out of 1,000,000 cells, given sufficient sample input. By taking a baseline 
measurement prior to starting therapy and then tracking the number of cells at several time points following therapy initiation, hematologists can improve 
their ability to assess treatment response, predict long-term patient outcomes, monitor disease burden over time and detect potential relapse. clonoSEQ is 
FDA-authorized for patients with MM and ALL from bone marrow samples and for patients with CLL from bone marrow and blood samples. clonoSEQ is 
also available as an LDT for use across lymphoid malignancies and sample types, including those which have not been authorized by the FDA. Most 
notably, in 2022, the assay launched as a CLIA-validated test to detect MRD in blood for patients with DLBCL by measuring ctDNA, which provides 
patients and clinicians with a powerful blood-based prognostic tool.

NCCN Guidelines recommend using a validated test to measure MRD to define the burden of disease and assess response to therapy in MM and 
ALL after each treatment stage. NGS MRD testing has been added to these guidelines and we plan to seek expansion of the recommendations to include 
additional time points in each disease state and to incorporate clonoSEQ specific data. In 2021, NCCN updated the adult ALL guidelines to emphasize the 
importance of achieving MRD negativity and incorporate recommendations on MRD actionability post-induction.

MRD monitoring is becoming increasingly important in the hematologic oncology field because highly effective new therapies are extending 
survival. This has created a need for more sensitive tools to monitor the disease status of patients over longer periods of time and has introduced the 
potential for MRD to be included as a surrogate or primary endpoint in registrational clinical trials. We believe we are uniquely positioned to benefit from 
these industry dynamics with both our clinical and biopharmaceutical customers. 

18

In the clinic, clonoSEQ testing has been ordered by clinicians at centers all around the country, including all 32 NCCN centers. We believe increased 

adoption of clonoSEQ will now be possible due to the extensive coverage policies granted by Medicare to assess MRD at multiple time points throughout 
therapy in MM, ALL and CLL. We believe clonoSEQ has broad applicability across all lymphoid malignancies. In 2022, we launched clonoSEQ in 
DLBCL, and secured clonoSEQ coverage in Medicare for DLBCL, with DLBCL patients covered regardless of line of therapy, treatment regimen, or 
testing timepoint. We are in active discussions with other large private national and regional payors. To further demonstrate the actionability of MRD 
monitoring, we launched a clinical registry in 2020 called The Watch Registry. This prospective, multicenter, observational study will include 
approximately 500 adult patients with lymphoid malignancies in the United States. To date, we have enrolled over 400 patients across 18 sites and expect to 
complete enrollment in 2023.

Among biopharmaceutical companies, we believe clonoSEQ remains the preferred commercial test for MRD monitoring in their registrational trials. 

clonoSEQ is now being used by more than 60 biopharmaceutical companies in 187 active clinical trials. To continue demonstrating clinical utility across 
disease settings and lines of therapy, clonoSEQ is also being used in 95 ongoing prospective investigator-led clinical trials, and our MRD data have been 
included in over 110 peer-reviewed publications.

We continue to deepen our commercial investments to expand clinical adoption of clonoSEQ and have significantly expanded the size of our fully-

trained specialized sales and customer support organization and supporting infrastructure. We have continued to expand our team of demand generation 
representatives who are hematology specialists and are focusing their efforts on expanding access to clonoSEQ in community oncology settings, which we 
believe will be facilitated by the recent launch of DLBCL blood testing via Streck tubes. In October 2022, we entered into a partnership with Epic to 
integrate clonoSEQ into Epic’s EMR system, which we believe will enable easier test ordering and results access for the clonoSEQ test. 

Outside of the United States, we have successfully transferred the technology to seven labs across France, Germany, Italy, UK, Spain, Australia and 

Japan which provide local testing options, primarily in support of collaborative group and investigator-sponsored studies, and secured reimbursement for 
ALL in Australia in 2022.

The Technology 

clonoSEQ is our FDA-authorized, NGS MRD technology that is designed to sequence all rearranged receptor sequences in a tumor in parallel to 

ensure accurate, sensitive and robust MRD monitoring. 

A summary of the steps for FDA-authorized usage is as follows: 

1. gDNA is extracted from bone marrow. 

2. Extracted DNA quality is assessed, and rearranged immune receptors are amplified using a multiplex PCR. 

3. Reaction-specific index barcode sequences for sample identification are added to the amplified receptor sequences by PCR. 

4. Sequencing libraries are prepared from barcoded amplified DNA which are then sequenced by synthesis using NGS. 

5. Raw sequence data are uploaded from the sequencing instrument to our analysis pipeline. 

6. Sequence data is analyzed in a multi-step process, where a sample’s sequence data is first identified using the sample index sequences and 

the data is then processed using a proprietary algorithm with in-line controls to remove amplification bias. 

7. Following completion of these data processing steps, a report is issued. 

Adaptive Assist: Patient support program 

Adaptive Assist is our patient support program to facilitate access to clonoSEQ testing services for patients who could benefit from the clinical 
insights provided by NGS MRD testing. Patients can call to discuss their individual circumstances with one of our dedicated patient support representatives 
in order to better understand their coverage prior to clonoSEQ testing and to navigate the insurance process, including appeals for denied claims. We also 
offer financial assistance for qualified uninsured and under-insured patients who cannot afford their patient financial responsibility for clonoSEQ. 

19

Clinical Validation in FDA Filing for MM, ALL and CLL 

Our clonoSEQ test has been shown to help better predict patient outcomes and add insight to the evaluation of disease response to therapy because 
we have clinically validated clonoSEQ’s ability to detect MRD at a sensitivity greater than the clinical standard for all lymphoid malignancies. clonoSEQ 
has demonstrated sensitivity of 1 out of 1,000,000 cells (10-6), given sufficient sample input, which is a deeper resolution than the current accepted standard 
of 1 out of 100,000 cells (10-5), 1 out of 10,000 cells (10-4) or 1 out of 10,000 cells (10-4) for MM, ALL and CLL, respectively. Based on these results, as 
further illustrated below, we believe clinical standards for MRD sensitivity may be increased to 10-6 to better predict patient outcomes. 

Clinical validation in MM was demonstrated in two studies. The first study, a 720 patient, randomized phase III trial conducted at the Dana Farber 
Cancer Institute (DFCI 10-106), evaluated the ability to predict PFS and disease-free survival in patients who achieved complete response (“CR”) and the 
ability to predict PFS in all evaluable patients. This study demonstrates that MRD negativity for patients in CR significantly predicts PFS. 

The second study, a 706 patient, randomized phase III trial sponsored by Janssen Biotech, Inc. (“ALCYONE”), evaluated Darzalex in patients with 
newly diagnosed MM who were transplant ineligible and served as the basis of the approval of Darzalex in combination with Bortezomib, Melphalan and 
Prednisone (“VMP”) in this patient population. This study provides evidence that our clonoSEQ diagnostic test is predictive of PFS, regardless of treatment 
received. Patients who were MRD negative at less than or equal to 10-5 had longer PFS and the group with persistent MRD negativity had the longest PFS 
overall. 

Clinical validation in ALL was demonstrated in two Children’s Oncology Group studies, AALL0232 (high risk) and AALL0331 (standard risk) by 

evaluating the ability of clonoSEQ to predict event-free survival (“EFS”) at a primary cutoff of 10-4 and across a continuous MRD measure. Results 
demonstrate that patients with the lowest levels of MRD have better outcomes than patients with higher disease burden regardless of risk stratification. 

20

 
Clinical validation in CLL was demonstrated in two studies. The first, a 337 patient randomized phase III registrational study in previously untreated 

CLL patients sponsored by Roche (CLL14), evaluated the ability of clonoSEQ to predict PFS at a primary cutoff of 10-5 and across continuous MRD 
measures from blood. The study demonstrates that MRD negative patients had significantly better PFS, independent of treatment regimen.

The second was a prospective, phase 2 clinical trial in previously untreated CLL patients in which MRD was assessed from both blood and bone 
marrow. MRD negativity at multiple cutoffs (10-4, 10-5, and 10-6) was significantly associated with better PFS. MRD was also prognostic of PFS when 
disease burden was assessed as a continuous measure (no MRD threshold). This study demonstrates that MRD is predictive of better PFS and can be 
assessed from either bone marrow or blood.

21

 
 
Evolution of MRD into Clinical Decision Making Tool

While clinical utility has been a barrier to adoption in the past, this is changing quickly as we see multiple studies reading out that clearly 

demonstrate the value of MRD testing for patients. 

• Martinez-Lopez published a retrospective cohort analysis (Journal of Clinical Hematology and Oncology 2021) of 400 newly diagnosed 
myeloma patients in which MRD was used interventionaly to escalate, change, or stop therapy for 67 of those patients. Data showed that 
for MRD negative patients who stopped therapy, PFS was not negatively impacted. Also, for MRD positive patients in whom therapy was 
changed or intensified, PFS was significantly better than in patients who remained on the same course of therapy. This analysis supports the 
potential for use of MRD to modify treatment, as pictured below:

• DETERMINATION was a phase 3 trial evaluating a regimen of RVD or RVD plus ASCT in patients with newly diagnosed MM. Post 

initial therapy and prior to maintenance therapy, MRD was assessed by clonoSEQ in 108 patients in the RVD-alone group and 90 patients 
in the RVD + ASCT group. This study demonstrated the benefit of adding transplant to frontline triple therapy, however, an important result 
from the study showed that patients who achieved MRD negativity by clonoSEQ prior to maintenance had similar outcomes independent of 
whether they received transplant. Additionally, the authors stated that MRD negativity is of increasing importance in modifying treatment, 
in informing clinical care, and as a treatment goal given the relationship with better outcomes.

• Additional follow up of the MASTER trial, presented at American Society of Hematology 2022 (abstract 3237), investigated the possibility 

of discontinuing maintenance therapy in patients with consecutive negative MRD results using the clonoSEQ assay. In this study, 84 
patients were able to stop maintenance therapy. At a median follow-up of 24.8 months, patients with zero or one genetic mutation 
associated with risk had 91% and 89% progression free survival, respectively. These results provide guidance around when and for whom 
discontinuation of therapy is appropriate.

22

 
Strategy to Achieve Market Leadership 

We aim to drive adoption and achieve market leadership for MRD monitoring with clonoSEQ for all lymphoid malignancies. To do so, we are 

executing upon the following strategic initiatives:

•

Increase blood-based testing in ALL, MM, CLL, and DLBCL. Testing with blood is less invasive for patients and less expensive as 
compared to MRD testing from bone marrow samples. Therefore, blood-based MRD testing may enable more frequent monitoring of 
patients over longer periods of time. Only 30% of all clonoSEQ testing is performed in blood; however, we believe continued validation of 
clonoSEQ in blood will increase usage, particularly by clinicians in the community setting who perform fewer bone marrow aspirations. We 
have nine ongoing studies focused on generating additional evidence to use peripheral blood. We have already received FDA clearance for 
clonoSEQ from blood samples for patients with CLL and made DLBCL blood testing available as a CLIA validated LDT via Streck tubes 
in 2022. We will continue to expand testing with blood to other indications over time.

• Validate clonoSEQ in additional indications and expand in NHL. With the end goal of clonoSEQ becoming a universal MRD test for all 

lymphoid malignancies, we have developed a robust lifecycle development plan to generate sufficient clinical evidence to support increased 
adoption across lymphoid malignancies. We are already cleared in ALL and MM from bone marrow and CLL from bone marrow and 
blood. At the same time, we are increasing marketing support for clonoSEQ usage as a CLIA-validated lab-developed testing service, 
where samples for any lymphoid cancer indication and a range of sample types (including blood) are acceptable, and payor coverage is 
already in place for blood-based testing in ALL, MM, CLL and DLBCL. Going forward, we will continue to evaluate the optimal 
commercial path (FDA or CLIA) for each additional indication, with an increasing focus on NHL. NHL represents 50% of all newly 
diagnosed patients with lymphoid malignancies in the United States, and DLBCL represents 30% of NHL patients. DLBCL is an 
aggressive disease with a high relapse rate and poor diagnosis. There are no established guidelines for MRD monitoring in DLBCL and 
current techniques like PET CT lack specificity and require interpretation. In 2022, we obtained Medicare coverage for all DLBCL patients, 
approximately 75% of which are Medicare aged, regardless of line of therapy, treatment regimen, or testing timepoint. We expect to file 
with the FDA for DLBCL with our maturing clinical data.

• Entrench clonoSEQ in biopharmaceutical clinical trials. We believe clonoSEQ is the preferred commercial test for MRD monitoring in 
industry sponsored clinical trials. As the industry pursues the inclusion of MRD as a potential surrogate or primary endpoint in clinical 
trials for lymphoid malignancies, having a standardized, highly accurate and sensitive method for MRD testing to guide clinical decisions 
in late-stage trials, including registrational trials, is valuable. 

• Demonstrate clinical utility. We are focused on continuing to generate clinical evidence that motivates clinicians to include MRD 

consistently in their treatment regimens. Understanding what to do with an MRD positive or negative result is fundamental for clonoSEQ’s 
use. To that end, clonoSEQ is being used in 95 ongoing prospective investigator-led clinical trials, and our MRD data have been included in 
over 110 peer-reviewed publications. As more studies read out, we expect there will be greater adoption of MRD in clinical decision 
making, resulting in more patients benefiting from clonoSEQ and greater frequency of testing for each patient helped.

•

Invest in commercial initiatives to increase awareness and usage in the clinic. In 2022, we completed an expansion and reorganization of 
our sales force. Our fully trained sales force nearly doubled in 2022, and the expanded sales force is structured in two distinct groups: key 
account managers and diagnostic hematology specialists. These groups serve two different customer segments with distinct sales strategies. 
Key account managers focus on penetrating deeper into our established institutions. Our diagnostic hematology specialist team targets 
driving adoption in community practice accounts. We also continue to build advocacy through a variety of patient educational initiatives 
and peer to peer programming about the impact of MRD status on clinical decision-making.

• Expand market access by increasing reimbursement with public and private payors. We are working with new payors to develop 

appropriate coverage policies, generate healthcare economic information and provide robust billing and patient access infrastructure. As of 
December 31, 2022, we secured Medicare and private payor coverage for clonoSEQ for a total of over 245 million covered lives for ALL 
and MM, over 190 million covered lives for CLL and over 70 million covered lives for DLBCL. 

23

  
•

Invest in product and customer experience improvements. We are making significant investments to support our field force, including 
providing enhanced selling direction, data and training. We are also making significant investments in improving our assay’s performance 
for evaluation of ctDNA in plasma, and, with respect to the process of ordering malignancies clonoSEQ testing and obtaining test results, 
aiming to continue to enhance our customer-facing software interface and user experience. In October 2022, we entered into an agreement 
with Epic to integrate the clonoSEQ® assay into Epic’s comprehensive EMR system, which we believe will enable easier test ordering and 
results access. 

IM

The IM business area leverages our platform’s proprietary ability to sequence, map, pair and characterize TCRs and BCRs at scale to drive research 

and clinical opportunities in cancer, autoimmune, infectious diseases, and neurodegenerative disorders. The core of our immune medicine platform is our 
immunoSEQ technology. immunoSEQ utilizes multiplex, bias-controlled PCR to accurately and quantitatively sequence millions of immune receptors at 
high-throughput directly from DNA. Since inception, immunoSEQ has been used for research purposes by academic researchers and biopharmaceutical 
companies to answer translational research questions relating to the adaptive immune system, monitor response to therapies and discover new prognostic 
and diagnostic signals. We offer computational services to assist our customers in realizing the power of their data and to compare their data to other 
publicly available datasets in our clinical immunomics database. 

IM Pharma Services 

In IM Pharma Services, we use our core immunosequencing capabilities to deliver rich immune receptor data back to our biopharmaceutical and 

academic customers. A key application of our immune receptor data is the ability to annotate T-cell signatures of disease from patient samples to 
understand the cellular immune response to most past and present diseases. TCRs in blood may be used to determine which gene or peptides are being 
targeted by the immune system and the strength of this disease-specific immune response. Potential clinical applications of this include:

• Patient selection or stratification;

• Understanding the mechanism of action for drugs;

• Efficacy and / or safety of drugs and monitoring; and

• Understanding immunity differences between responders and non-responders. 

Other key applications of immune receptor data are clone tracking, tracking TCRs and BCRs over time or between sample types, detection of clonal 

overlap between different samples or at different times, monitoring of changes in T-cells fraction over time or between samples, and identifying highly 
expanded clones and diversity of the repertoire.

Our current portfolio is comprised of more than 140 active studies with more than 85 biopharmaceutical companies. IM Pharma Services revenue 
grew 67% in 2022. We expect sustainable growth from this business as we continue to expand our portfolio in various disease states and by study phase: 
our data is used in preclinical, phase 1, phase 2 and phase 3 trials. We continue to scale research use of rich TCR and BCR data and to increase penetration 
in later stage, larger clinical trials, including more phase 3 trials.

Drug Discovery

In Drug Discovery, we use our proprietary capabilities to discover new drug targets and develop TCR or antibody therapeutic assets to those targets 
in commercially attractive indications. We are focusing our drug discovery efforts mainly on cancer and autoimmunity, and we are advancing programs to 
either partner or develop drug candidates on our own. 

Our proprietary TCR therapeutics discovery process characterizes TCRs against antigens for use in the development of therapeutics. In December 
2018, we entered into an exclusive collaboration with Genentech to leverage this capability for the development of cellular therapies in oncology. We are 
pursuing two product development pathways for novel T cell immunotherapies in which Genentech intends to use TCRs screened by our immune medicine 
platform to engineer and manufacture cellular medicines.

24

In addition to our partnership in oncology cell therapy with Genentech, we are expanding our drug discovery efforts in autoimmunity where we 

believe we are uniquely positioned to make important contributions. In autoimmune disorders, disease specific antigens are not well-known and treatment 
protocols are largely limited to general anti-inflammatory drugs, indicating a significant opportunity to develop therapeutics in this area to restore patient 
immune balance. Therefore, we are leveraging our unique capabilities to identify specific targets that are causative of the disease, particularly in MS and 
IBD. Our expertise is based on our ability to find HLA presented, disease specific epitopes that T cells hit naturally. We are also developing novel 
mechanisms against those targets by leveraging the TCR discovery capabilities we developed for GNE and the antibody discovery capabilities we built and 
confirmed for COVID-19. Our next step is to generate data that enable us to continue with these drug discovery programs either in partnership or on our 
own. 

TCR Discovery for Cellular Therapy 

We have developed a high-throughput TCR screening process that allows for the discovery of antigen-specific TCRs that occur in low frequencies in
healthy individuals. We believe this provides a set of naturally-occurring TCRs with a more favorable safety profile in comparison to engineered TCRs. We 
then further characterize these naturally-occurring TCRs for binding avidity and cytotoxic potency. To date, we have identified and characterized to 
different stages more than 5,000 unique antigen-specific, paired TCRs against 600 different clinically relevant targets, constituting our pipeline of possible 
clinical candidates. We complete a data package for each characterized TCR that we believe meets the thresholds for therapeutic evaluation. These 
thresholds are divided into a series of seven key steps covering antigen specificity, functional avidity, cytolysis and safety assessment. A package is 
considered complete when the TCR meets the rigorous criteria for all seven steps and the data are compiled to support an IND package. For the shared 
product, we delivered three TCR fully characterized data packages against validated neoantigen targets, and Genentech selected the first neoantigen TCR to 
advance as a potential cell therapy product. Our high-throughput screening technologies enable us to discover TCRs against any type of antigen which 
opens up the potential to develop novel TCR-mediated cellular therapies for any type of cancer. As compared to cellular therapies that target T cell surface 
antigens that are not specific to cancer, we believe our approach to TCR cellular therapies may mitigate the risk of off-target side effects. Therefore, we 
believe our approach may be applicable to the vast majority of solid tumors, even those where the tissue of origin is vital to survival such as lung or renal. 

In December 2018, Genentech selected our platform to develop, manufacture and commercialize novel neoantigen directed T cell therapies for the 

treatment of a broad range of cancers. Our ultimate goal is to harness the vast majority of therapeutically relevant, patient-specific TCRs against 
neoantigens and advance the next generation of cellular therapies in oncology. We believe our TCR discovery capabilities may also facilitate the 
development of cellular therapies in disease areas beyond cancer, which we can commercialize outside of the Genentech collaboration. 

25

 
Strategic Collaboration with Genentech 

Through our worldwide collaboration and license agreement with Genentech, we plan to develop, manufacture and commercialize novel neoantigen 
directed T cell therapies for the treatment of a broad range of cancers to advance the next generation of cellular therapies in oncology. We are pursuing two 
product development pathways for novel T cell immunotherapies in which Genentech intends to use TCRs screened by our immune medicine platform to 
engineer and manufacture cellular medicines: 

•

Shared Products. In 2021, we completed an assessment of efficacy and safety data to enable a decision to select our lead TCR candidate. 
Following review of this data in 2022, Genentech selected this TCR candidate to progress as a potential therapeutic product candidate. 
Also, by the end of 2022, we delivered two additional TCR fully characterized data packages against validated neoantigen targets to 
Genentech for their consideration. 

• Personalized Product. In the second half of 2020, we started screening blood from cancer patients to identify TCRs specific to a patient’s 
tumor mutations. During 2021 and 2022, we successfully completed proof of concept by identifying and characterizing patient specific 
TCRs to each patient’s unique tumor mutations. We also completed initial end-to-end test runs as a foundation for the private product 
process and our next steps are to complete the product prototype as we move towards IND readiness. We also believe our dedicated 
prototype lab in South San Francisco is well positioned to advance our collaboration goals with Genentech.

Under the terms of the agreement, we received a $300.0 million initial upfront payment in February 2019, and we may be eligible to receive 

approximately $1.8 billion in aggregate milestone payments upon achievement of specified development, regulatory and commercial milestones. 
Additionally, we may receive royalties on sales of products commercialized under that agreement. Genentech will be responsible for clinical, regulatory 
and commercialization efforts. We will be responsible for the screening and identification of TCRs that can most effectively recognize and directly target 
specific cancer antigens, including neoantigens. 

In parallel, we plan to evaluate an investment in additional facilities that would allow us to scale our end-to-end screening of patient-specific TCRs 
for potential future late-stage clinical trials and commercialization of the Personalized Product. We believe this investment would position us to potentially 
pursue additional opportunities outside of this collaboration, including developing and commercializing vaccines and cellular therapies in other disease 
states. 

Target Discovery

We believe we have the capacity to continuously discover new targets and develop TCR and antibody-based therapeutics against those targets. Our 
approach is to discover and develop TCR or antibody therapeutics to validated targets that T cells hit naturally. These targets are known as HLA-presented 
disease specific epitopes, which we are discovering and validating using our immune medicine platform. In autoimmune disorders, disease specific 
antigens are not well-known and treatment protocols are largely limited to general anti-inflammatory drugs, indicating there is a significant opportunity to 
develop therapeutics in this area to restore patient immune balance. 

Antibody Discovery: Neutralizing Antibodies 

Our antibody discovery process, similar to our TCR therapeutics process, leverages our high-throughput capabilities to screen millions of BCRs to 
identify unique antibodies from human blood. Our first proof of concept is for patients who are actively fighting or have recently recovered from COVID-
19. In just several months, we collected blood from over 300 patients and hundreds of thousands of antibodies, of which we synthesized and characterized 
over 3,300 antibodies to various parts of the SARS-CoV-2 virus. To date, we identified several candidates that neutralize live virus at very low 
concentrations, which means that a very small amount of each of these antibodies is able to block the virus from infecting cells. Using our antibody 
discovery method, we identified several lead antibody candidates that strongly bind to different parts of the virus. Our growing portfolio of novel antibodies 
includes candidates that bind to many parts of the virus, including the classic RBD region, S1, Trimer and S2.

26

Importantly, our antibody discovery approach is differentiated from other groups because of its scale and throughput, which allows us to identify a 

much broader set of naturally-occurring, fully human antibody candidates to select the best ones for clinical development. We are leveraging and 
optimizing our antibody discovery capabilities against a variety of disease states, including in autoimmunity, where there is an unmet need.

T-Detect 

We believe the adaptive immune system presents an ideal model for diagnostic tools for early or accurate detection of disease. In many cases, 

treatment is typically most effective early in the course of a disease, when there is a minimal amount of disease-specific antigen present. TCRs recognize 
this very small amount of antigen before it is detectable by conventional methods and then they expand exponentially. Given this large response in 
proportion to the small amount of antigen present, we believe we will be able to see this signal of disease much sooner than is possible with other available 
methods of early disease detection. Additionally, the ability to rapidly and accurately identify the cause of non-descript symptoms may increase efficiency 
and compress the timeline between symptom and diagnosis, thus reducing the diagnostic odyssey that patients often endure in the current diagnostic 
paradigm. Through iterative data generation efforts, we continue to improve the accuracy of the TCR signatures of each disease by running blood samples 
from healthy donors, collaborating on retrospective studies with control groups in select disease states, and leveraging our database for additional 
sequences to include in the TCR signatures.

To date, we have launched T-Detect for two indications, COVID and Lyme. We launched T-Detect COVID in December 2020. The T-Detect 
COVID test is a novel T-cell based assay that has demonstrated high percent positive and percent negative agreement (PPA and NPA) to identify or exclude 
prior SARS-CoV-2 infection in PCR-confirmed SARS-CoV-2 cases and lack of cross-reactivity to several viral and respiratory pathogens. In March 2021, 
the FDA issued an EUA for T-Detect COVID to confirm recent or prior SARS-CoV-2 infection. We believe the EUA was key to educating the FDA about 
the value of this new class of T-cell testing. We launched T-Detect Lyme in June 2022, primarily targeting symptomatic adult patients for early diagnosis. 
By making T-Detect Lyme available in our CLIA lab, we were also able to implement end-to-end and CLIA workflows. In 2022, we paused sales of both 
T-Detect indications. Our first two T-Detect tests represented validation of T-Detect's clinical testing capability in infectious diseases, but the cost is high to 
commercialize and improve signals one indication at a time through self-pay customers. Therefore, we decided to defer further commercialization until we 
have multiple signals with strong enough data to impact physician behavior and a clear path to reimbursement. Importantly, the underlying immune 
receptor data we have generated in many disease states is being leveraged to support our focused efforts on IM Pharma Services and in Drug Discovery. We 
continue to enhance these data as we advance our target and drug discovery efforts in cancer and autoimmune disease. 

27

 
 
Additional Developments

In response to the COVID-19 pandemic in 2020, we collaborated with Microsoft to create the ImmuneCODE program to map the T cell response to 

SARS-CoV-2 across the global population. We leveraged the existing capabilities of our high throughput platform to generate T cell data from over 9,000 
samples to understand the adaptive immune response to COVID-19. Another successful proof of concept for our platform is our licensing agreement with 
Nykode Therapeutics ASA (“Nykode”), in which virus-specific T cell epitopes identified by our platform were used to inform the design and development 
of SARS-CoV-2 vaccine candidates. In September 2022, Nykode announced positive clinical results from the Phase 1/2 open label, dose escalation trial of 
its vaccine candidate, which induced broad and strong T cell responses against both spike antigens and non-spike antigens, and it was safe and well-
tolerated at all three dose levels. We believe this study demonstrates an important proof of concept for our platform to identify T cells against selected 
antigens to induce a powerful immune response.

Our People and Culture 

Our employees, internally referred to as “Adapters,” are passionate about immune medicine, empowered by scientific discipline and fueled by our 

foresight and curiosity about the adaptive immune system.

As of December 31, 2022, we had 790 full-time employees of which 147 hold medical or doctoral degrees. None of our employees are subject to a 

collective bargaining agreement and we have not experienced any work stoppages. We believe relations with our employees are good.

Our talented employees drive our mission and share core values that both stem from and define our culture. This plays an invaluable role in our 

ability to execute at all levels in our organization. Our core values are used in candidate screening, rewards and recognition criteria, and in employee 
evaluations to help reinforce their importance in our organization:

• Make it happen. Individual ownership and accountability keep us moving forward. 

•

Innovate fearlessly. Push against boundaries and think boldly to achieve world-changing results. 

• Debate openly. Value discussions inspired by different points of view. 

• Work together. Demonstrate you care about the success of others. The same goes for our partners and customers—together we can achieve 

more. 

• Follow True North. Show up with integrity and do the right thing. 

• Have fun. Fun makes everything better. 

We believe our employees are highly engaged, and we were recognized consecutively from 2018 to 2022 by the Puget Sound Business Journal as 

one of Washington State’s Best Places to Work. We were also nationally certified as a Great Place to Work in 2021 and 2022.

Diversity and Inclusion

We pride ourselves on inclusive team building, product design and gender diversity at all levels of management. We are committed to creating and 

maintaining a culture of belonging. In 2022, we expanded and implemented several diversity and inclusion initiatives. We continued to provide quality DEI 
programming through Employee Resource Groups (“ERGs”) including Women@Adaptive, Adaptive PRIDE, Black Adapter Network and Asian Pacific @ 
Adaptive and Sustainability @ Adaptive, and in 2022, we launched the Veteran and Military Families ERG. We also brought in Neurodivergent training for 
Adapters. We continued to explore diversity sourcing programs and partnerships, and we expanded our diversity training to a growing population of hiring 
managers. We also integrated hidden bias training into our Leader of People Program. Our Equity Advisory Council of senior leaders maintained a strategic 
focus on clinical studies, commercial engagement, recruiting, and retention through a diversity and inclusion lens. In November 2021, we received a 
Corporate Equality Index (CEI) score of 95/100 from the Human Rights Commission. Our score of 95 is an increase of 20 points from 2020s CEI score. 
We successfully executed a second year of our STEM minority mentoring partnership with University of Washington. We also announced an internship 
program for SPIN Girls, a transformative local program that builds leadership and provides immersive STEM experiences for high school girls. 

28

Compensation and Benefits

We strive to provide compensation and benefits that are competitive to market and create incentives to attract and retain employees. Our 

compensation package includes market-competitive base pay, performance-based short-term incentives, health care, retirement benefits, paid time off and 
family leave. In addition, we offer employees the benefit of equity ownership in the Company through restricted stock unit awards. We also provide access 
to a variety of health and wellness resources, with special attention paid to post-pandemic mental health in 2022. This year also saw the winners of our 
annual Adaptive Leadership Awards announced, recognizing and celebrating those who best embody our Adaptive Leadership Principles.

Employee Development & Training

We prioritize employee development and training and have established programs to support a culture of employee development. Specifically, in 
2022, we offered multiple learning solutions, including DayOne our new Adapter onboarding program, our Leader Orientation Program, our Leader of 
People Program, our Leader of Leaders program and our L-re:combinator Fellowship Program. All of our leadership development programs are multi-
week, blended learning courses that feature self-paced online learning and live virtual training. DayOne focuses not just on HR and compliance orientation, 
but cultural onboarding with small group interactions with our Chief Executive Officer, cultural ambassadors and fellow new Adapters.

In 2022, 172 Adapters attended leadership development programs. 71% of Adaptive’s people leaders have attended at least one leadership training 

course. 253 Adapters completed DayOne. In our annual employee survey, Adaptive Listens, Adapters generally judged our managerial corps as one of 
Adaptive’s strengths for the second year in a row, a sign that investing in their development is translating into real-world results. 

Strategic Collaborations and Other Agreements 

Genentech Agreement 

In December 2018, we entered into an agreement with Genentech (“Genentech Agreement”) to develop, manufacture and commercialize novel 

neoantigen directed T cell therapies for the treatment of a broad range of cancers. Pursuant to the Genentech Agreement, we are responsible for the 
screening and identification of TCRs that can most effectively recognize and directly target specific neoantigens, while Genentech is responsible for 
clinical, regulatory and commercialization efforts. During the term of the Genentech Agreement, we have agreed to certain defined exclusivity obligations 
or restrictions with respect to the development and commercialization of certain cell therapies. 

In February 2019, we received a $300.0 million upfront payment from Genentech. We also may be eligible to receive approximately $1.8 billion 

over time, including payments of up to $75.0 million upon the achievement of specified regulatory milestones, up to $300.0 million upon the achievement 
of specified development milestones, and up to $1.4 billion upon the achievement of specified commercial milestones. Genentech will also pay us tiered 
royalties at a rate ranging from the mid-single digits to the mid-teens on aggregate worldwide net sales of the Shared Products and the Personalized Product 
arising from the strategic collaboration, subject to certain reductions, with aggregate minimum floors. For the year ended December 31, 2022, 2021 and 
2020, the Genentech Agreement accounted for 33.9%, 40.2% and 53.7% of our revenue, respectively.

The Genentech Agreement will continue until the expiration of all royalty payments, but may be terminated by mutual agreement, upon an uncured 

material breach by either party, upon insolvency of either party, or by Genentech for convenience upon prior written notice. 

Microsoft Agreement 

In December 2017, we entered into a strategic collaboration agreement with Microsoft (“Microsoft Agreement”) to map TCR sequences to the 

antigens they bind with the goal of developing diagnostic tests for early detection of many diseases from a single blood test. 

Pursuant to the Microsoft Agreement, Microsoft applies machine learning and computational statistics to our clinical immunomics data in order to 

produce predictive models that allow us to map TCR sequences to the antigens they bind. Under the Microsoft Agreement, we retain all rights to these 
predictive models and the data underlying our TCR-Antigen Map, including the right to commercialize clinical products using our TCR-Antigen Map. We 
and Microsoft have granted each other certain licenses to one another’s intellectual property rights and have agreed to certain defined exclusivity 
obligations with respect to collaborations and projects that are substantially similar to the Microsoft Agreement. 

29

During the term of the Microsoft Agreement, we have agreed to exclusively use Microsoft’s Azure cloud services at standard volume pricing with a 
minimum Azure consumption requirement. We have also agreed to host each diagnostic product developed as a direct result of the Microsoft Agreement on 
Azure throughout the term of the Microsoft Agreement and for a period of five years thereafter. In addition, we have agreed to exclusively use Microsoft’s 
immunomics artificial intelligence services for TCR-antigen mapping in connection with all of our technology, products and services developed as a direct 
result of our collaboration with Microsoft throughout the term of the Microsoft Agreement. 

The Microsoft Agreement has a seven-year term and may be terminated by mutual agreement or by either party upon an uncured material breach. 

Concurrently with entry into the Microsoft Agreement, Microsoft purchased shares of our Series F-1 convertible preferred stock which were converted into 
common stock upon the closing of our initial public offering in July 2019.

Revenue Interest Purchase Agreement 

In September 2022, we entered into a Revenue Interest Purchase Agreement (the "Purchase Agreement") with OrbiMed Royalty & Credit 

Opportunities IV, LP ("OrbiMed"), an affiliate of OrbiMed Advisors LLC, as collateral agent and administrative agent for the purchasers party thereto (the 
“Purchasers”). Pursuant to the Purchase Agreement, we received $124.4 million from the Purchasers (the "First Payment"), net of expenses. We will also be 
entitled to receive up to $125 million in subsequent installments as follows: (i) $75 million upon our request occurring no later than September 12, 2025 
(the “Second Payment”) and (ii) $50 million upon our request in connection with certain permitted acquisitions occurring no later than September 12, 2025 
(the “Third Payment”), in each case subject to certain funding conditions. To secure our obligations under the Purchase Agreement, we and our subsidiaries 
have granted OrbiMed a security interest in our core platform technology assets, subject to certain customary exclusions, as defined in the Purchase 
Agreement. 

As consideration for such payments, the Purchasers will have a right to receive certain revenue interests (the “Revenue Interests”) from us based on 
a percentage (the “Applicable Payment Percentage”) of all GAAP revenue (the “Revenue Base”). If only the First Payment has been made, the Applicable 
Payment Percentage shall be five percent of the quarterly Revenue Base. If both the First Payment and Second Payment have been made, the Applicable 
Payment Percentage shall be eight percent of the quarterly Revenue Base. If each of the First, Second and Third Payments have been made, the applicable 
payment percentage applied to the Revenue Interest shall be ten percent of the quarterly Revenue Base. Payments in respect of the Revenue Interests shall 
be made quarterly within 45 days following the end of each fiscal quarter (each, a “Revenue Interest Payment”). If OrbiMed has not received Revenue 
Interest Payments in the aggregate equal to or greater than the sum of its invested capital (the “Cumulative Purchaser Payments”) on or prior to September 
12, 2028, the revenue interest rate shall be increased to a rate which, if applied retroactively to our cumulative Revenue Base, would have resulted in 
Revenue Interest Payments equal to the sum of all Cumulative Purchaser Payments.

OrbiMed will be entitled to 100% of the Revenue Interest Payments until it has received a total cumulative value of 165% of the Cumulative 
Purchaser Payments (the “Return Cap”), unless full repayment of the amount of the Return Cap has not been made by September 12, 2032, in which case 
the Return Cap shall be increased to 175% of the Cumulative Purchaser Payments.

For the year ended December 31, 2022, we incurred debt issuance costs of $0.6 million and interest expense of $4.2 million under the Purchase 

Agreement. 

Processing and Manufacturing

We process both clinical and research use samples in our laboratory in Seattle, Washington. Our Seattle laboratory is CLIA-certified, CAP-
accredited and ISO 13485-certified. After we intake samples sent to us from healthcare providers or research and biopharmaceutical customers, we extract 
DNA from the sample if required, amplify it and otherwise prepare it for our sequencing and data analysis. Throughout our processes, we apply a rigorous 
quality management system, which is designed to comply with the Quality System Regulation (“QSR”) and the requirements of CLIA, CAP and other 
applicable state licensing and accreditation requirements. 

In order to process samples submitted to us using immunoSEQ or clonoSEQ, we utilize a combination of proprietary primer mixes and commercial 

materials, including a multiplex PCR master mix, enzymes, high throughput multi-cycle sequencing reagents and other materials, which we obtain and 
assemble as needed from various third-party vendors on customary terms. A number of our processing steps utilize automated equipment to help ensure 
consistency and efficiency. Sequencing is performed using the Illumina NextSeq System, which we have appropriately qualified for the intended uses of 
our products and services. We also work with a third-party vendor to manufacture our immunoSEQ RUO kit using our proprietary primer mix and other 
materials. We also use Illumina to develop IVD kits and provide related support for clonoSEQ, pursuant to a September 2019 development and supply 
agreement with a six-year term and payments to Illumina based on Illumina achieving milestones and revenue share payments ranging from a low to mid-
single digit percentage of future net sales, subject to customary reductions.

For our TCR-Antigen Map and drug discovery initiatives, we conduct our operations at our laboratories in Seattle, Washington and South San 

Francisco, California. These laboratories have cell sorting, tissue culture and other processing equipment. 

30

We use a limited number of suppliers, or in some cases single suppliers, for our laboratory equipment and materials. We manage this concentration 

risk by targeting or building to levels of surplus stock that, we believe, would allow us to locate alternative suppliers if needed. However, if one of our 
suppliers fails to perform adequately or fulfill our needs, we may be required to incur significant costs and devote significant efforts to find new suppliers 
and may face delays in processing samples or developing and commercializing our products and services. We have occasionally faced delays in the form of 
longer lead times for equipment that is subject to increased demand due to public health measures taken to combat the COVID-19 pandemic. In particular, 
we have purchased the Illumina NextSeq System, and Illumina also supplies us with reagents that have been designed for use solely with this sequencer. 
While we acquire these reagents from Illumina on customary terms, if we had to replace the reagents we use we may also need to acquire and qualify a 
replacement sequencer, validate the reagents and potentially revalidate aspects of our existing assays. 

Distribution 

We processed our first immunoSEQ samples in 2011 and issued our first clonoSEQ report in 2013. Since then, we have focused on expanding our 

customer base. We sell our products and services primarily through our own internal sales force. Our sales and marketing efforts are targeted at department 
heads, laboratory directors, principal investigators, core facility directors, clinicians, payors and research scientists and pathologists at leading academic 
institutions, biopharmaceutical companies, research institutions and contract research organizations. We seek to increase awareness of our products and 
services among our target customers through direct sales calls, trade shows, seminars, academic conferences, web presence and other forms of internet 
marketing. Our drug discovery efforts are focused on large biopharmaceutical companies.

Intellectual Property 

We have an extensive global portfolio of intellectual property rights to protect our immune medicine platform, the products and services that draw 

on it and our reputation in the industry. 

As of December 31, 2022, we owned or controlled 470 active patents and patent applications whose claims are intended to cover what we do, what 
we plan to do and what others might do to compete with us. From our earliest patent filings in 2009, our portfolio has been tailored to reflect our efforts to 
harness the adaptive immune system for research, diagnostic and therapeutic applications. Our patent claims extend to not only adaptive immune receptor 
molecules, but also to uniquely powerful techniques for sequencing immune cell receptors, determining clonality and immune competency, diagnosing 
disease, predicting responses to immunotherapy and identifying new drug candidates. Our granted patent protection generally expires in years ranging from 
2029 to 2040. 

Critical know-how we develop is protected by a trade secrecy program to ensure against inappropriate disclosure or use. Encompassed in our know-

how is our proprietary database of coding sequences, antigen reactivities and safety profiles for immune receptors, which is vast and growing. Even with 
collaborators, access to our immune medicine platform technology is limited and tightly controlled through contracts and careful communication. We own 
our immune medicine platform, including improvements we or collaborators make to it, and retain rights in data resulting from its use. 

We also pursue trademark registration for our product and service names and promotional slogans in our existing and projected markets. 

Intellectual Property Portfolio by the Numbers 

As of December 31, 2022, our intellectual property portfolio consisted of the following:

•

•

•

•

•

•

•

•

•

799 patent applications filed worldwide directly or in conjunction with a co-owner or licensor since 2009; 

40 pending patent applications;

429 issued patents across our immune medicine platform; 

24 patent families directed to methods and tools useful in our immune medicine platform for non-target specific immunosequencing and 
research, including immunoSEQ; 

17 patent families directed to methods and tools useful in diagnosis, prognosis and disease monitoring, including clonoSEQ, T-Detect and 
the TCR-Antigen Map; 

12 patent families directed to methods and tools useful in drug discovery, including TruTCR, MIRA and pairSEQ; 

1 patent family directed to therapeutic antibodies; 

1 patent family directed to SARS-CoV-2 vaccines;

3 patent families directed to gene sequencing technology; and 

31

•

28 trademarks registered and pending registration worldwide. 

Patent Portfolio 

We have developed an expansive patent portfolio in commercially important markets with claims to critical aspects of our technology, beginning 

with our first patent applications exclusively licensed from Fred Hutch in 2009. Our ongoing patent strategy is to generate a return on our patenting 
investments, which values substantive quality over volume to build a defensible moat around technology we use as well as what others might develop to 
design around our position. 

We prioritize pursuing patent claims with a reasonable likelihood of being granted. Where patentability for a particular invention is questionable, we 

often choose to protect it as a trade secret instead. In some instances, however, we may seek to push the patentability envelope when the state of the 
applicable patent laws are in flux, such as patent eligibility for naturally occurring molecules, including TCRs, in the United States. 

Methods of Measuring Adaptive Immunity 

In 2009, a U.S. provisional patent application was filed to pursue protection for immunosequencing by our co-founder, Dr. Harlan Robins. The 
invention broadly relates to methods for assessing the adaptive immune system status of individuals. Rearranged V and J segment genes of TCRs or BCRs 
are targeted as biomarkers for assessing the status of the immune system at one or more points in time. Granted claims extend to the use of particular sets of 
amplification primers, while pending claims are being pursued to capture additional assessment techniques. Licensed exclusively to us by Fred Hutch, the 
application has since spawned more than 31 additional patent applications, many of which have been granted as of December 31, 2022, including U.S. 
Patent No. 9,809,813. 

Optimizing Nucleic Acid Amplification Reactions 

Amplification of nucleic acids can result in over- or under-representation of the amplified molecules, misrepresenting the number present in the 

source material, such as a blood sample. Dr. Robins invented a method to correct for such bias, thereby improving the precision of PCR-based 
quantification of TCR and BCR coding sequences in a sample. The claimed approach utilizes synthetic templates, reflecting nucleic acid sequences for 
rearranged V and J receptor segments in the sampled cells. More than 28 related patent applications have since been filed, many of which have been 
granted as of December 31, 2022, including U.S. Patent Nos. 9,371,558 and 10,214,770.

Diagnosing and Monitoring Disease 

In connection with our acquisition (“Sequenta Acquisition”) of Sequenta, Inc (“Sequenta”) in 2015, we purchased Sequenta’s extensive patent 
portfolio. The portfolio includes 124 patent applications which disclose and claim methods to identify and quantify T cell-based immune responses to 
antigen exposure using NGS. TCR and BCR DNA, RNA or cell-free DNA from samples, including blood and bone marrow, are used to detect, prognose 
and monitor disease, including autoimmune disease, infection and cancer. More than 112 patents have been granted in the portfolio as of December 31, 
2022, including U.S. Patent Nos. 8,628,927 and 8,236,503. 

Our diagnostic methods also apply to the detection of MRD (the target of our B cell-based clonoSEQ diagnostic test for assessing how disease 

burden changes in response to treatment or during remission) and T-Detect (our T cell-based diagnostic tests). Multiple patents have been granted from 
additional applications relating to MRD assessment, diagnostic methods and diagnostically significant TCRs filed by us, including U.S. Patent Nos. 
9,824,179 and 11,047,008. Additional patent applications are pending to TCR-based diagnostic signals in specific indications, including COVID-19. 

TCR-Antigen Map 

In connection with our Microsoft collaboration, we are developing a diagnostic product to detect cancer and other diseases at their earliest stage by 

learning the signals and responses of the activated immune receptors in a patient’s blood. Pre-collaboration, we filed 10 related patent applications for 
methods to produce antigen-exposed enriched T cell populations and identify their antigen specificities by comparison to a pre-exposure population of cells 
or by use of an algorithm. We have filed additional patent applications relating to algorithmic-based methods to characterize antigen specificities and will 
continue to do so as our work proceeds with Microsoft. 

32

MIRA

We developed and are pursuing patent protection for bioinformatic-based methods to determine the antigen specificity of TCRs by exposing T cells 

to a panel of multiple antigens. Antigen exposure can be performed by incubation or presentation; for example, it can be performed via recombinant 
expression in another cell. These methods may also be used to pair the two TCR chains as well as to identify high avidity TCRs. Several patents have been 
granted as of December 31, 2022, including U.S. Patent No. 10,066,265. 

pairSEQ 

In nature, TCRs and BCRs exist as a heterodimer of paired chains, each of which is encoded on a different chromosome. Immunosequencing reveals 

the nucleotide structure of each individual chain, but not which chains match as cognate pairs. We developed and are pursuing patent protection for 
multiple bioinformatic-based approaches to pairing the two chains of TCRs and BCRs, including one deployed in our pairSEQ technique. Our methods also 
allow for identification of receptor chain pairs which are specific to particular antigen targets. Over fifty related patent applications have been filed, nearly 
half of which have matured into granted patents as of December 31, 2022, including U.S. Patent No. 10,077,478. 

Assessing Responsiveness to Immunotherapy 

Leveraging our immunosequencing technologies, we developed methods for predicting responses to immunotherapy, vaccines and infection. To 
those ends, rearranged TCR or BCR sequences are quantified and their levels or frequencies compared at different points in time. More than 20 related 
patent applications have been filed, most of which have been granted as of December 31, 2022, including U.S. Patent No. 10,221,461. 

Therapeutic Antibodies

We developed a therapeutic antibody discovery process called TruAB from which neutralizing antibodies to SARS-CoV-2 have been produced. A 

patent application to these antibodies was filed in 2020 and is pending.

Vaccines

Together with our partner Nykode, we filed a patent application which is pending and directed to COVID-19 vaccines, the development of which 

was informed by our immunosequencing-based drug discovery efforts.

Therapeutic TCRs

We have a granted patent application to TCRs responsive to WT-1 antigens with potential utility in cell therapy against WT-1 related cancers. We are 

also pursuing a patent application to TCRs responsive to other cancer antigens which are of interest in our collaboration with Genentech.

In-Licensed and Acquired Intellectual Property Rights 

While we have developed the majority of our immune medicine platform, products and services, we occasionally license or acquire third-party 

owned inventions to bolster the strength of our patent estate and ensure freedom to operate. 

Early work by Dr. Robins with Fred Hutch led to discoveries around immunosequencing methods and tools covered by 128 patents and patent 

applications in the United States and abroad which we exclusively licensed. Our rights are for all fields of use worldwide and are sublicensable. To the 
extent any licensed granted patent rights extend to products or services sold by us, we pay Fred Hutch a royalty rate of 0.75% of net sales on licensed 
products. 

Through our Sequenta Acquisition, we also obtained an exclusive paid-up license, with rights to sublicense, to patents filed in the United States, 

Europe, Australia and China owned by iRepertoire, Inc. The license is for worldwide use in diagnosis, prognosis, treatment and monitoring of any 
proliferative disorder for which rearranged nucleic acids capable of encoding an immune receptor, whether productive or unproductive, or functional or 
nonfunctional, of a cell, excluding tumor infiltrating lymphocytes, of the proliferative disorder can be used as markers for the disorder, including, but not 
limited to, lymphoid and myeloid proliferative disorders, such as ALL, CLL, acute myeloid leukemia, chronic myelogenous leukemia, Hodgkin’s and 
NHL, plasma cell neoplasms, such as MM, monoclonal gammopathy of undetermined significance, monoclonal B cell lymphocytosis and myelodysplastic 
syndromes. 

In addition to the patent estate acquired from Sequenta, we also acquired ownership of immunosequencing-related patent portfolios from Imdaptive, 

Inc. and ImmunID S.A.S. 

33

Trademarks 

We own various trademarks, applications and unregistered trademarks in the United States and other commercially important markets, including our 
company name, product and service names and other trade or service marks. Our trademark portfolio is designed to protect the brands for our products and 
services, both current and in the pipeline. 

Trade Secrecy Program 

We have a trade secrecy program to prevent disclosure of our trade secrets to others, except under stringent conditions of confidentiality when 

disclosure is critical to our business. Our trade secrets include the composition of certain reagents, assay protocols and immunosequencing-related data, 
such as immune receptor sequences. We protect trade secrets and know-how by establishing confidentiality agreements and invention assignment 
agreements with our employees, consultants, scientific advisors, contractors and collaborators. These agreements provide that all confidential information 
developed or made known during the course of an individual or entities’ relationship with us must be kept confidential during and after the relationship. 
These agreements also provide that all inventions resulting from work performed for us or relating to our business and conceived or completed during the 
period of employment or assignment, as applicable, shall be our exclusive property. In addition, we take other appropriate precautions, such as physical and 
technological security measures, to guard against misappropriation of our proprietary information by third parties. 

Although we take steps to protect our proprietary information and trade secrets, including through contractual means with our employees and 
consultants, third parties may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade 
secrets or disclose our technology. Accordingly, we may not be able to meaningfully protect our trade secrets. For more information regarding the risks 
related to our intellectual property, see “Risk Factors—Risks Related to Our Intellectual Property.”

Competition 

The biotechnology and pharmaceutical industries, including the fields of life sciences research, clinical diagnostics and drug discovery, are 
characterized by rapidly advancing technologies, intense competition and a strong emphasis on intellectual property. Given the breadth and promise of 
immune medicine, we face substantial competition from many different sources, including life sciences tools, diagnostics, pharmaceutical and 
biotechnology companies, academic research institutions and governmental agencies and public and private research institutions across various components 
of our platform and product and service offerings. Due to the significant interest and growth in immune medicine more broadly, we expect the intensity of 
the competition to increase. However, we believe our scale, precision and speed, and the resulting clinical applicability, distinguish us from our 
competitors. In life sciences research, immunoSEQ faces competition from a number of companies. 

In clinical diagnostics, clonoSEQ faces competition primarily from institutions performing flow cytometry in-house, particularly outside of the 

United States. We may also face competition from companies developing early cancer detection testing products for indications that do not currently 
compete with clonoSEQ.

In drug discovery, clinical trials in the field of immune medicine are being pursued by a number of industry and academic players. 

Immune medicine is being pursued by several biotechnology companies as well as by large-cap biopharmaceutical companies. Many of our current 

or potential competitors, either alone or with their collaboration partners, have significantly greater financial resources and expertise in research and 
development, manufacturing, regulatory approval and compliance, and sales and distribution than we do. Mergers and acquisitions involving life sciences 
research, clinical diagnostics or drug discovery companies in the immune medicine space may result in even more resources being concentrated among a 
smaller number of our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative 
arrangements with large and established companies. These competitors also compete with us in recruiting and retaining qualified scientific and 
management personnel and in acquiring technologies complementary to, or necessary for, our programs. 

Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize research or diagnostic products or 

services that are more accurate, more convenient to use or more cost-effective than our products or services. Competitor therapeutic products could also 
prove safer, more effective, more convenient to administer or more cost-effective than any therapeutic products we may develop with our collaborators. 
Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could 
result in our competitors establishing a strong market position before we are able to enter the relevant market. 

34

Government Regulation 

Life Sciences Research Use Only Technologies 

Our core research product, immunoSEQ, is a RUO tool in the United States that provides data to third parties such as biopharmaceutical companies 
that are themselves engaged in the research and development of potential diagnostic and therapeutic products and services for which they may later pursue 
investigation and clearance, authorization or approval from regulatory authorities, such as the FDA. 

RUO products belong to a separate regulatory classification under a long-standing FDA regulation. From an FDA perspective, products that are 

intended for research use only and are labeled as RUO are exempt from most regulatory controls, and are therefore not subject to the regulatory 
requirements discussed below for clinical diagnostic products. Thus, RUO products may be used or distributed for research use without first obtaining FDA 
clearance, authorization or approval. The products must bear the statement: “For Research Use Only. Not for use in diagnostic procedures.” RUO products 
cannot make any claims related to safety, effectiveness or diagnostic utility, and they cannot be intended for human clinical diagnostic use. Accordingly, a 
product labeled RUO but intended or promoted for clinical diagnostic use may be viewed by the FDA as adulterated and misbranded under the Federal 
Food, Drug, and Cosmetic Act (“FDCA”) and subject to FDA enforcement action. The FDA will consider the totality of the circumstances surrounding 
distribution and use of an RUO product, including how the product is marketed and to whom, when determining its intended use. If the FDA disagrees with 
a company’s RUO status for its product, the company may be subject to FDA enforcement activities, including, without limitation, requiring the company 
to seek clearance, authorization or approval for the products. If the FDA determines an RUO product is adulterated and misbranded, enforcement may also 
include a warning letter, seizure, an injunction and/or criminal fines for FDCA violations.

Clinical Diagnostics in the United States

Our first diagnostic product, clonoSEQ, was granted marketing authorization by the FDA for the detection and monitoring of MRD in bone marrow 

samples in patients with MM and ALL under the de novo process in September 2018, which classified clonoSEQ and future DNA-based tests to measure 
MRD in hematological malignancies as Class II devices, as explained further below. In August 2020, we received FDA clearance for clonoSEQ, following 
a 510(k) submission, for CLL in bone marrow as well as blood samples. We submitted a 510(k) premarket notification for ALL from blood samples in 
February 2021 and are actively advancing validation studies in certain NHL sub-types.

In the United States, medical devices are subject to extensive regulation by the FDA under the FDCA and its implementing regulations, and other 

federal and state statutes and regulations. The FDA regulates the design, development, preclinical, analytical and clinical testing, manufacture, safety, 
effectiveness, clearance, authorization or approval, record-keeping, packaging, labeling, storage, adverse event reporting, advertising, promotion, 
marketing, sales, distribution and import and export of medical devices. IVDs are a type of medical device and include reagents and instruments used in the 
diagnosis or detection of diseases, conditions or infections, including, without limitation, the presence of certain chemicals, genetic information or other 
biomarkers. Predictive, prognostic and screening tests can also be IVDs.

After a medical device is placed on the market, numerous regulatory requirements apply. These include:

•

•

•

compliance with the FDA’s QSR, which requires manufacturers to follow stringent design, testing, control, documentation, record 
maintenance, including maintenance of complaint and related investigation files, and other quality assurance controls during the 
manufacturing process;

labeling regulations, which prohibit the promotion of products for uncleared, or unapproved uses, or “off-label” uses, and impose other 
restrictions on labeling; and

obligations to investigate and report to the FDA adverse events, including deaths, or serious injuries that may have been or were caused by 
a medical device and malfunctions in the device that would likely cause or contribute to a death or serious injury if it were to recur.

Failure to comply with applicable regulatory requirements can result in enforcement action by the FDA, which may include sanctions, including but 

not limited to, warning letters; fines, injunctions, and civil penalties; recall or seizure of the device; operating restrictions, partial suspension or total 
shutdown of production; refusal to grant 510(k) clearance or premarket approvals (“PMAs”) of new devices; withdrawal of clearance or approval; and civil 
or criminal prosecution.

35

Position in the European Union 

In the EU, IVDs can be placed on the market by obtaining a “CE mark,” which demonstrates conformity via a self-certification with the In vitro 

Diagnostic Medical Device Directive (“IVDD”). clonoSEQ obtained a CE mark in May 2019 for all B-cell malignancies with blood and bone marrow. The 
requirements under the Directive include: 

• Essential Requirements. The IVDD specifies “essential requirements” that all medical devices must meet to demonstrate the product is safe 
and effective under normal conditions of use. The requirements are similar to those adopted by the FDA relating to quality systems and 
product labeling. 

• Conformity Assessment. The requirements to obtain a CE mark are risk-based, and follow a similar classification system as in the United 

States. However, unlike the United States, which requires virtually all devices to undergo some level of premarket review by the FDA, the 
IVDD currently allows manufacturers to bring many devices to market using a process in which the manufacturer self-certifies that the 
device conforms to the applicable essential requirements. 

• Vigilance. The IVDD specifies requirements for post market reporting similar to those adopted by the FDA. 

On May 26, 2017, the EU released a new regulatory framework, the In vitro Diagnostic Medical Device Regulation (“IVDR”), which will replace 
the IVDD. Our products in the EU will have to comply with the IVDR requirements by May 2026, subject to the applicable transitional provisions before 
full compliance is required. The IVDR is considerably stricter in regulatory oversight than the IVDD and will require more IVD devices to be reviewed by 
a notified body before being placed on the market. Until that time, our products must continue to meet the requirements of IVDD for commercialization in 
the EU.

U.S. Federal and State Regulation of Laboratories 

Given that aspects of our business at certain facilities involve acting as a clinical laboratory, we are required to hold certain federal and state 

licenses, certifications and permits to conduct our business. 

As to federal certifications, CLIA establishes rigorous quality standards for all laboratories that perform testing on specimens derived from humans 
for the purpose of providing information for the diagnosis, prevention or treatment of disease, or the impairment of, or assessment of health. As a clinical 
laboratory, we must obtain a CLIA certificate based on the complexity of testing performed at the laboratory, such as a Certificate of Compliance for high-
complexity testing. CLIA also mandates compliance with various operational, personnel, facilities administration, quality and proficiency requirements, 
intended to ensure that their clinical laboratory testing services are accurate, reliable and timely. CLIA compliance and certification is also a prerequisite to 
be eligible to bill for services provided to government payors and for many private payors. Furthermore, we are subject to survey and inspection every two 
years to assess compliance with program standards, and may be subject to additional unannounced inspections. Laboratories performing high-complexity 
testing are required to meet more stringent requirements than laboratories performing less complex tests. 

In addition to CLIA requirements, we elect to participate in the accreditation program of the CAP. The U.S. Centers for Medicare & Medicaid 

Services (“CMS”), the agency that oversees CLIA, has deemed CAP standards to be equally or more stringent than CLIA regulations and has approved 
CAP as a recognized accrediting organization. Inspection by CAP is performed in lieu of CMS inspections for accredited laboratories. Therefore, because 
we are accredited by the CAP Laboratory Accreditation Program, we are deemed to also comply with CLIA. 

CLIA provides that a state may adopt laboratory regulations that are more stringent than those under federal law, and a number of states have 
implemented their own more stringent laboratory regulatory requirements. Select states, including Washington, have laboratory regulations that have been 
deemed by the federal government to be at least as stringent as CLIA, and thus laboratories licensed under those state regimes are exempt from CLIA and 
the state Department of Health is permitted to issue a CLIA number, along with a state Medical Test Site license, rather than a certificate being issued by 
CMS. Our laboratory holds the required Washington license. State laws may require that laboratory personnel meet certain qualifications, specify certain 
quality control procedures, facility requirements or prescribe record maintenance requirements.

Several states additionally require the licensure of out-of-state laboratories that accept specimens from those states. For example, New York requires 

a laboratory to hold a permit which is issued after an on-site inspection and approval of each LDT offered by a laboratory, and has various, more stringent 
requirements than CLIA and CAP, including those for personnel qualifications, proficiency testing, physical facility and equipment and quality control 
standards. Our laboratory holds the required licenses for Maryland, Rhode Island, Pennsylvania, New York and California. 

From time to time, other states may require out-of-state laboratories to obtain licensure in order to accept specimens from the state. If we identify 

any other state with such requirements, or if we are contacted by any other state advising us of such requirements, we intend to follow instructions from the 
state regulators as to how we should comply with such requirements. 

If a clinical laboratory is found to be out of compliance with CLIA certification, CAP accreditation or a state license or permit, the applicable 
regulatory agency may, among other things, suspend, restrict or revoke the certification, accreditation, license or permit to operate the clinical laboratory, 
assess civil monetary penalties and impose specific corrective action plans, among other sanctions. 

36

Laboratory Developed Tests in the United States 

The FDA has historically exercised enforcement discretion to not regulate most LDTs. As such, LDTs have not been subject to FDA’s marketing 

clearance and approval processes, or post-marketing controls, for medical devices. LDTs are generally considered to be tests that are designed, developed, 
validated and used within a single laboratory. Laboratories certified as “high complexity” under CLIA may develop, manufacture, validate and run LDTs. 
clonoSEQ is available as an LDT for use in assessing MRD for other lymphoid malignancies, including NHL and use in other specimen types, at our 
Seattle, Washington laboratory.

In that respect, Congress introduced legislation to establish a framework for FDA to oversee marketing of in vitro clinical tests (“IVCTs”), such as 
test kits and LDTs (the Verifying Accurate Leading-edge IVCT Development Act, or “VALID Act”). Under the VALID Act, FDA would oversee IVCTs, 
requiring pre-market review for high-risk IVCTs which expose patients to serious or irreversible harm and novel IVCTs. As currently drafted, existing 
LDTs at the time of VALID Act passage would be grandfathered as approved. For new low risk IVCTs, developers would submit a representative IVCT to 
FDA for review and issuance of a technology certification for the specific IVCT reviewed and later developed test within the scope of the certification. It is 
not certain whether or in what form the VALID Act bill will pass Congress, but passage could increase the stringency of regulatory review required for our 
LDT products. If the VALID Act does not pass, the FDA may decide to exercise enforcement discretion for LDTs, especially if it perceives a LDT as 
posing a risk to patients. Therefore, the regulatory path for marketing of LDTs is subject to uncertainty given the FDA’s latitude in interpreting and 
applying its laws and policies.

Federal and State Privacy, Security and Breach Notification Laws 

Many state and federal laws govern the processing of personal information or individually identifiable health information. At the federal level, under 

the administrative simplification provisions of the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) and the Health Information 
Technology for Economic and Clinical Health Act of 2009 (“HITECH”), the U.S. Department of Health and Human Services (“HHS”) issued regulations 
that establish standards for protecting the privacy and security of “protected health information” used or disclosed by certain healthcare providers and other 
“covered entities” and their “business associates.” Three principal data protection-related regulations with which we are required to comply have been 
issued in final form under HIPAA and HITECH: privacy regulations, security regulations and security breach notification regulations.

The privacy regulations govern the use and disclosure of “protected” health information by covered healthcare providers, as well as health insurance 

plans. They also set forth certain rights that an individual has with respect to his or her protected health information maintained by a covered health care 
provider, including the right to access or amend certain records containing protected health information or to request restrictions on the use or disclosure of 
protected health information. The security regulations establish requirements for safeguarding the confidentiality, integrity and availability of protected 
health information that is electronically transmitted or electronically stored. HITECH, among other things, established certain health information security 
breach notification requirements. A covered entity must notify HHS and each affected individual of a breach of unsecured protected health information as 
well as the media if the breach involves more than 500 individuals. 

HIPAA violations are subject to civil and criminal penalties. Additionally, to the extent that we submit electronic healthcare claims and payment 

transactions that do not comply with the electronic data transmission standards established under HIPAA and HITECH, payments to us may be delayed or 
denied. 

Section 5(a) of the Federal Trade Commission Act (“FTCA”) has also been used to regulate data privacy and security at the federal level. According 

to the U.S. Federal Trade Commission (“FTC”), failing to take appropriate steps to keep consumers’ personal information secure or using or disclosing 
personal information in violation of a company’s privacy notice may constitute unfair or deceptive acts or practices in or affecting commerce in violation of 
the FTCA. The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer 
information it holds, the size and complexity of its business and the cost of available tools to improve security and reduce vulnerabilities. Although we 
have and maintain a system for compliance with privacy laws and regulations, failure to comply with them could expose us to potential FTC enforcement 
action and fines.

In addition, certain state laws govern the privacy and security of health information and personal information. Some of the state laws governing 

health information privacy and security are more stringent than HIPAA (including providing for patient enforcement of these state laws) and often differ 
from each other in significant ways and may not have the same effect, thus complicating compliance efforts. There has also recently been an influx of state 
privacy and security laws that introduce similar compliance complexities, including the California Consumer Privacy Act in combination with the 
California Confidential Medical Information Act and the California Privacy Rights Act, the Colorado Privacy Act and the Virginia Consumer Data 
Protection Act. In addition, there are state breach notification laws in every state, as well as in D.C., Guam and Puerto Rico. Failure to comply with these 
laws, where applicable, can result in the imposition of significant civil or criminal penalties and private litigation as further detailed in our Risk Factors.

37

General Data Protection Regulation in the EU and Internationally

The General Data Protection Regulation (“GDPR”) is a legal framework that sets requirements for the collection and processing of personal 

information of individuals within the European Economic Area (“EEA”). The GDPR sets out the principles for data management and the rights of the 
individual, while also imposing very significant fines that can be revenue-based. It applies to U.S. companies that process personal information of persons 
in the EEA in connection with the offer of products or services to those persons, or the monitoring of such persons’ behavior. It may also apply when a U.S. 
company processes personal information in the context of the activities of an entity established in the EEA. The GDPR became enforceable on May 25, 
2018. The regulation is a comprehensive privacy law, meaning that it applies to all types of personal information, including the human resources record of 
employees and even the Internet Protocol addresses of people using online services. 

Many other countries and regions also have privacy and data protection laws, some of which are modeled after the European framework. This 
includes countries within Europe that are not part of the EEA, such as the United Kingdom and Switzerland, and therefore operate under different privacy 
and data protection frameworks. 

In addition to laws that directly impose privacy and data protection obligations on companies, there is also a growing interest in laws and regulations 
that govern data areas that are related to, but not completely related to data privacy. One area of these laws relates to use and testing of genetic and genomic 
data. In addition to the federal Genetic Information Nondiscrimination Act, there are a number of state laws that have recently passed (e.g., the California 
Genetic Information Privacy Act) and that continue to make appearances on states’ legislative schedules. There have been similar draft bills at the state 
level that would regulate machine learning, artificial intelligence, the Internet of Things, and human specimen use. There have been similar trends 
internationally, such as ongoing public consultations in the European Union on the Digital Governance Act and an Artificial Intelligence Regulation. 

Federal, State and Foreign Fraud and Abuse Laws 

In the United States, there are various fraud and abuse laws with which we must comply and we are subject to regulation by various federal, state 

and local authorities, including CMS, other divisions of HHS, such as the Office of Inspector General (“OIG”), the U.S. Department of Justice (“DOJ”) and 
individual U.S. Attorney offices within the DOJ, and state and local governments. We also may be subject to foreign fraud and abuse laws. 

In the United States, the Anti-Kickback Statute (“AKS”) prohibits, among other things, knowingly and willfully offering, paying, soliciting or 

receiving remuneration to induce or in return for patient referrals for, or purchasing, leasing, ordering or arranging for the purchase, lease or order of, any 
healthcare item or service reimbursable under a governmental payor program. Courts have stated that a financial arrangement may violate the AKS if any 
one purpose of the arrangement is to encourage patient referrals or other federal healthcare program business, regardless of whether there are other 
legitimate purposes for the arrangement. The definition of “remuneration” has been broadly interpreted to include anything of value, including gifts, 
discounts, meals, travel, credit arrangements, payments of cash, consulting fees, waivers of co-payments, ownership interests and providing anything at less 
than its fair market value. Recognizing that the AKS is broad and may technically prohibit many innocuous or beneficial arrangements within the 
healthcare industry, the OIG issued a series of regulatory “safe harbors.” These safe harbor regulations set forth certain provisions, which, if met, will 
assure healthcare providers and other parties that they will not be prosecuted under the AKS. The failure of a transaction or arrangement to fit within a 
specific safe harbor does not necessarily mean that the transaction or arrangement is illegal or that prosecution under the AKS will be pursued. In those 
instances, arrangements will be evaluated on a case-by-case basis to determine whether enforcement will be pursued. Penalties for AKS violations are 
severe and can include imprisonment, criminal fines, civil monetary penalties and exclusion from participation in federal healthcare programs. The 
regulations establishing safe harbor protection are subject to change and could affect future operations. Many states also have anti-kickback statutes, some 
of which may apply to items or services reimbursed by any third-party payor, including commercial insurers as well as patient self-pay. A violation of the 
AKS may be grounds for the government or a whistleblower to assert that a claim for payment of items or services resulting from such violation constitutes 
a false or fraudulent claim for purposes of the federal civil False Claims Act. 

The civil monetary penalties statute is another potential statute under which a clinical laboratory may be subject to enforcement. Among other 

things, the civil monetary penalties statute imposes fines against any person who is determined to have presented, or caused to be presented, claims to a 
federal healthcare program that the person knows, or should know, is for an item or service that was not provided as claimed or is false or fraudulent. The 
civil monetary penalties statute also prohibits a person from offering or providing remuneration to any Medicare or Medicaid beneficiary that is likely to 
influence the individual to order or receive its items or services from a particular provider or supplier. 

38

The exclusion statute requires the exclusion of entities and individuals who have been convicted of federal-program related crimes or healthcare 
felony fraud or controlled substance charges. The statute also permits the exclusion of those that have been convicted of any form of fraud, the AKS, for 
obstructing an investigation or audit, certain controlled substance offenses, those whose healthcare license has been revoked or suspended and those who 
have filed claims for excessive charges or unnecessary services. If we were to be excluded, our products and services would be ineligible for 
reimbursement from any federal programs, including Medicare and Medicaid, and no other entity participating in those programs would be permitted to 
enter into contracts with us. In order to preserve access to beneficial healthcare items and services, the government may elect to exclude officers and key 
employees of manufacturers, rather than excluding the organization. Such enforcement actions would prohibit us from engaging those individuals, which 
could adversely affect operations and result in significant reputational harm. 

Congress has also enacted statutes that impose criminal liability for healthcare fraud and abuse. The Health Care Fraud Statute prohibits knowingly 
and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private payors. A violation of this statute 
is a felony and may result in fines, imprisonment or exclusion from governmental payor programs such as the Medicare and Medicaid programs. The false 
statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or 
fraudulent statement in connection with the delivery of or payment for healthcare benefit programs, items or services-public or private. A violation of this 
statute is a felony and may result in fines, imprisonment or exclusion from governmental payor programs. 

The False Claims Act imposes liability on any person or entity that, among other things, knowingly presents, or causes to be presented, a false or 

fraudulent claim for payment by a federal governmental payor program. The qui tam provisions of the False Claims Act allow a private individual to bring 
actions on behalf of the federal government alleging that the defendant has defrauded the federal government by submitting a false claim to the federal 
government and permit such individuals to share in any amounts paid by the entity to the government in fines or settlement. Qui tam complaints are filed 
under seal, and the cases may progress for a number of years before a complaint is unsealed and a healthcare provider or supplier becomes aware of its 
existence. When an entity is determined to have violated the False Claims Act, it may be required to pay up to three times the actual damages sustained by 
the government, plus civil penalties for each false claim. The False Claims Act is the federal government’s primary civil tool in healthcare fraud cases. 
False Claims Act liability is not limited to direct providers of health items or services. The government has asserted liability under the False Claims Act 
against manufacturers and other third parties who caused another party to file a false claim. 

In addition, various states have enacted false claim laws analogous to the federal False Claims Act, although many of these state laws apply where a 

claim is submitted to any third-party payor and not merely a governmental payor program. 

On October 25, 2018, the Substance Use-Disorder Prevention that Promoted Opioid Recovery and Treatment for Patients and Communities Act of 
2018 (“SUPPORT Act”) was enacted. The SUPPORT Act included the Eliminating Kickbacks in Recovery Act of 2018 (“EKRA”), which establishes an 
all-payor anti-kickback prohibition that extends to arrangements with recovery homes, clinical laboratories and clinical treatment facilities. EKRA includes 
a number of statutory exceptions, and directs agencies to develop further exceptions. Current exceptions in some cases reference and in others differ from 
the AKS safe harbors. Significantly, the prohibitions apply with respect to the soliciting or receipt of remuneration for any referrals to recovery homes, 
clinical treatment facilities, or clinical laboratories, whether or not related to treating substance use disorders. Further, the prohibitions cover the payment or 
offer of remuneration to induce a referral to, or in exchange for, an individual using the services of, such providers. This law creates additional risk that 
relationships with referral sources could be problematic. 

For anti-corruption legislation, the U.S. Foreign Corrupt Practices Act (“FCPA”) is the most widely enforced law. It is the first to introduce 
corporate liability, responsibility for third parties and extraterritoriality for corruption offences, meaning companies and persons can be held criminally and 
civilly responsible for corruption offences committed abroad. It was enacted for the purpose of making it unlawful for certain classes of persons and entities 
to make payments to foreign government officials to assist in obtaining or retaining business. With the enactment of certain amendments in 1998, the anti-
bribery provisions of the FCPA now also apply to foreign firms and persons who cause, directly or through agents, an act in furtherance of such a corrupt 
payment to take place within the territory of the United States. The FCPA also requires companies whose securities are listed in the United States to meet 
its accounting provisions, which were designed to operate in tandem with the anti-bribery provisions, require corporations covered by the provisions to (a) 
make and keep books and records that accurately and fairly reflect the transactions of the corporation and (b) devise and maintain an adequate system of 
internal accounting controls. 

39

In Europe, various countries have adopted anti-bribery laws providing for severe consequences, in the form of criminal penalties or significant fines, 

for individuals or companies committing a bribery offence. Violations of these anti-bribery laws, or allegations of such violations, could have a negative 
impact on our business, results of operations and reputation. For instance, in the United Kingdom, under the Bribery Act 2010, which came into effect in 
July 2011, a bribery offense occurs when a person offers, gives or promises to give a financial or other advantage to induce or reward another individual to 
improperly perform certain functions or activities, including any function of a public nature. Bribery of foreign public officials also falls within the scope of 
the Bribery Act 2010. Under this regime, an individual found in breach of the Bribery Act 2010 faces imprisonment of up to 10 years. In addition, the 
individual can be subject to an unlimited fine, if found to have committed an offense, as can commercial organizations that are found to have failed to 
prevent bribery. In 2016, France passed an anti-bribery and compliance law (“Sapin II”), and the French anti-corruption agency (“AFA”) was established. 
The Sapin II law makes it compulsory for companies within the scope of the law to implement internal procedures to fight corruption. One of the items that 
must be prepared is a corruption risk map, as well as an anti-corruption code of conduct. These documents are subject to investigation by the AFA and 
failure to comply with the requirements can lead significant fines for companies and executives.

In 2021, Adaptive expanded its European presence and hired employees within the UK and as such, has a potential for the UK Bribery Act to apply 

as it can be triggered by any act committed within the UK. Currently, we are not subject to the jurisdictional requirements of Sapin II as we do not have 
offices in France. If we were to have future growth in the European market, this law could potentially become applicable to us. 

U.S. Physician Referral Prohibitions

The Physician Self-Referral Law (“Stark Law”) prohibits physicians from referring patients to entities with which the physician or an immediate 
family member has a financial relationship, such as ownership, investment or compensation, for designed health services (“DHS”) payable by Medicare 
and Medicaid, unless the financial arrangement meets an applicable exception. DHS includes clinical laboratory tests. Penalties for violating the Stark Law 
include the return of funds received for all prohibited referrals, fines, civil monetary penalties and possible exclusion from federal health care programs. In 
addition to the Stark Law, many states have their own self-referral bans, which may extend to all self-referrals, regardless of the payor. See “Risk Factors—
Risks Relating to Government Regulation—We are subject to various laws and regulations, such as healthcare fraud and abuse laws, false claim laws and 
health information privacy and security laws, among others, and failure to comply with these laws and regulations may have an adverse effect on our 
business.”

Corporate Practice of Medicine in the United States 

Numerous states have enacted laws prohibiting business corporations, such as us, from practicing medicine and employing or engaging physicians 
to practice medicine, generally referred to as the prohibition against the corporate practice of medicine. These laws are designed to prevent interference in 
the medical decision-making process by anyone who is not a licensed physician. For example, California’s Medical Board has indicated that determining 
what diagnostic tests are appropriate for a particular condition and taking responsibility for the ultimate overall care of the patient, including providing 
treatment options available to the patient, would constitute the unlicensed practice of medicine if performed by an unlicensed person. Violation of these 
corporate practice of medicine laws may result in civil or criminal fines, as well as sanctions imposed against us or the professional through licensure 
proceedings. Typically such laws are only applicable to entities that have a physical presence in the state. 

Other Regulatory Requirements 

Our laboratory is subject to federal, state and local regulations relating to the handling and disposal of regulated medical waste, hazardous waste and 

biohazardous waste, including chemical, biological agents and compounds, blood and bone marrow samples and other human tissue. Typically, we use 
outside vendors who are contractually obligated to comply with applicable laws and regulations to dispose of such waste. These vendors are licensed or 
otherwise qualified to handle and dispose of such waste. 

Our partners in the development of therapeutic agents are responsible for developing and manufacturing those products. In so doing, they are subject 

to FDA and Medicare regulatory requirements related to, among other things, manufacture, promotion, price reporting and fraud and abuse laws. 

Our laboratories are subject to extensive requirements related to workplace safety established by the U.S. Occupational Safety and Health 

Administration. These include requirements to develop and implement programs to protect workers from exposure to blood-borne pathogens by preventing 
or minimizing any exposure through needle stick or similar penetrating injuries. 

40

U.S. Healthcare Reform 

In the United States, a number of recent legislative and regulatory changes at the federal and state levels have sought to reduce healthcare costs and 

improve the quality of healthcare. For example, in March 2010, the Affordable Care Act (“ACA”) became law. This law substantially changed the way 
healthcare is financed by both commercial and government payors, and it has significantly impacted our industry. 

We anticipate there will continue to be proposals by legislators at both the federal and state levels, regulators and commercial payors to reduce costs 

while trying to expand individual healthcare benefits. If enacted, some such proposals could expand or contract the insured population, increasing or 
decreasing demand for our products and services. On the other hand, some proposals could impose additional limitations on the prices we will be able to 
charge for our tests or on the coverage of or the amounts of reimbursement available for our tests from payors, including commercial payors and 
government payors. 

The federal physician payment transparency requirements (“Physician Payments Sunshine Act”) and its implementing regulations, which requires 
applicable manufacturers of covered drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the State 
Children’s Health Insurance Program, with certain exceptions, to annually report to HHS information related to certain payments or other transfers of value 
made or distributed to covered recipients, defined to include doctors, dentists, optometrists, podiatrists, chiropractors, physician assistants, nurse 
practitioners, clinical nurse specialists, certified registered nurse anesthetists and anesthesiologist assistants, certified nurse-midwives, and teaching 
hospitals, or to entities or individuals at the request of, or designated on behalf of, the physicians and teaching hospitals, as well as ownership and 
investment interests held by physicians and their immediate family members.

There are also state transparency and gift ban laws that require manufacturers to provide reports to state governments on pricing and marketing 

information. Several states have enacted legislation requiring medical device manufacturers to, among other things, establish marketing compliance 
programs, file periodic reports with the state, make periodic public disclosures on sales and marketing activities, and such laws may also prohibit or limit 
certain other sales and marketing practices. These laws may adversely affect our sales, marketing, and other activities by imposing administrative and 
compliance burdens on us. Although we have a system for tracking and reporting “sunshine” law required information, if we fail to do so as required, we 
could be subject to government enforcement action and potential penalties.

Coverage and Reimbursement Generally

Reimbursement and billing requirements of applicable laws and payors for diagnostic services are highly complex. Laboratories must bill various 
payors, such as private third-party payors, including managed care organizations (“MCO”), and state and federal health care programs, such as Medicare 
and Medicaid, and each may have different billing requirements. Depending on the reimbursement arrangement and applicable law, the party that 
reimburses us for our services may be a third party who provides coverage to the patient, such as an insurance company or MCO; a state or federal 
healthcare program; or the patient. Additionally, the audit requirements we must meet to ensure compliance with applicable laws and regulations, as well as 
our internal compliance policies and procedures, add further complexity to the billing process. As such, we are at risk of being paid less or no part of our 
price for our products for reasons including:

•

•

variability in coverage and information requirements among various payors;

patient financial assistance programs;

• missing, incomplete or inaccurate billing information provided by ordering physicians; 

•

•

•

billings to payors with whom we do not have contracts; 

disputes with payors as to which party is responsible for payment; and 

disputes with payors as to the appropriate level of reimbursement.

In addition, we may not be free to determine the price charged for our products. For instance, the No Surprises Act (“NSA”) was enacted on 
December 27, 2020 and took effect on January 1, 2022. One of the goals of the NSA is to protect patients from “surprise” medical bills resulting from gaps 
in coverage for services provided by out-of-network providers, such as laboratories, related to patient visits at in-network facilities. The NSA limits the 
amount out-of-network laboratories may charge a patient for laboratory services ordered during an in-network facility visit. In addition, the NSA 
establishes an independent dispute resolution process for determining the amount of reimbursement for the laboratory service in the event that the 
laboratory and insurer cannot agree on a rate.

Certain countries, including a number of member states of the EU, set prices and make reimbursement decisions for diagnostics and pharmaceutical 
products. Additionally, some countries require approval of the maximum sale price of a product before it can be marketed, and this price may be reviewed 
during the product lifecycle, or mandatory discounts or profit caps may be applied. In many countries, the pricing review period begins after marketing or 
product licensing approval is granted or the CE mark is obtained. We may therefore be constrained in our pricing strategies in markets outside of the United 
States.

41

For additional information on coverage and reimbursement in the United States, see “Risk Factors—Risks Relating to Government Regulation—

Future Medicare payment rates are uncertain.” 

Our Compliance Program 

Our compliance program is intended to prevent and detect violations of law or our policies. It was developed in view of both adopting the principles 

of the AdvaMed Code of Ethics and addressing the HHS OIG’s elements of a compliance program. We have designed our compliance program to fit the 
size, resources, market position and other unique aspects of our company. Our code of conduct is our statement of ethical and compliance principles that 
guide our daily operations. In addition, we have developed policies and procedures, and corresponding education and training, to effectively communicate 
our standards to employees as it relates to job functions and legal obligations under applicable state and federal healthcare program requirements, as well as 
those outside the United States. We regularly perform live and process monitoring activities on a risk-based approach, and audit capabilities are built into 
our transparency procedures. We maintain a hotline available via multiple channels to report any known or suspected compliance violations, and we have a 
strict non-retaliation policy for all claims brought forward in good faith. 

Corporate Information

We were incorporated in the State of Washington on September 8, 2009 under the name Adaptive TCR Corporation. On December 21, 2011, we 

changed our name to Adaptive Biotechnologies Corporation. In January 2015, we acquired Sequenta, Inc. (“Sequenta”), a San Francisco, California-based 
company that was also developing an NGS test for MRD (“Sequenta Acquisition”). Our principal executive offices are located at 1165 Eastlake Avenue 
East, Seattle, Washington 98109, and our telephone number is (206) 659-0067.

Available Information

We maintain a website at www.adaptivebiotech.com. The contents of our website are not incorporated in, or otherwise to be regarded as part of, this 

Annual Report on Form 10-K. We make available, free of charge on our website, access to our Annual Report on Form 10-K, our Quarterly Reports on 
Form 10-Q, our Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities 
Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after we file or furnish them electronically with the Securities 
and Exchange Commission (“SEC”). Investors and others should note that we announce material financial information to our investors using our investor 
relations website (http://investors.adaptivebiotech.com), SEC filings, press releases, public conference calls and webcasts. We use these channels as well as 
social media to communicate with our members and the public about our company, our services and other issues. It is possible that the information we post 
on social media could be deemed to be material information. Therefore, we encourage investors, the media, and others interested in our company to review 
the information we post on social media channels.

42

 
Item 1A. Risk Factors

Investing in our Company involves a high degree of risk. You should carefully consider the following risks and uncertainties, together with all other 

information in this Annual Report on Form 10-K, including our consolidated financial statements and related notes and the “Management’s Discussion 
and Analysis of Financial Condition and Results of Operations” section, before investing in our Company. Any of the risk factors we describe below could 
adversely affect our business, financial condition, results of operations, prospects or the trading price of our securities. The risks described below are not 
the only ones we face and additional risks that we currently do not know about or that we currently believe to be immaterial may also impair our business, 
financial condition, operating results, prospects and the trading price of our securities. 

Summary of Risk Factors

Generally, the risks described below relate to the following:

•

•

•

•

•

•

our significant net losses since inception, expected net losses in the future and need for significant investments in products and services, as 
well as our ability to manage operating expenses in light of profitability goals;

our ability to leverage our immune medicine platform to discover, develop, and commercialize additional products and services may not be 
successful;

our ability to develop our TCR-Antigen Map and yield additional insights from it that are commercially viable;

our collaboration with Genentech and ability to develop and commercialize cellular therapeutics, including our ability to achieve milestones 
and realize the intended benefits of the collaboration;

our expected reliance on collaborators for development and clinical testing of therapeutic product candidates, which may fail at any time 
due to a number of possible unforeseen events;

our laboratory operations, including errors or defects in our products or services and our reliance on a limited number of suppliers, and in 
some cases single suppliers, for our equipment and materials, some of which include reagents or other materials that may also require 
additional internal validation prior to use;

•

our limited experience with the development and commercialization of cellular therapeutics;

• market acceptance of our products and services, and our limited sales and marketing experience;

•

•

•

•

•

the effects of health epidemics in regions where we or third parties on which we rely have significant laboratory operations, manufacturing 
facilities, concentrations of clinical trial sites or other business operations;

our ability to increase our capacity, manage the evolution of our products and services, stay current in our rapidly changing industry, expand 
our workforce and otherwise manage our growth;

the loss of any member of our senior management team, or of the support of key opinion leaders;

the extensive regulation of our industry, including reimbursement coverage decisions; and

the validity of our patents, protection of our trade secrets and related intellectual property matters.

43

Risks Relating to Our Business 

We have incurred significant losses since inception, we expect to incur losses in the future and we may not be able to generate sufficient revenue to 
achieve and maintain profitability. 

We have incurred significant losses since our inception. For the year ended December 31, 2022, 2021 and 2020, we incurred a net loss of $200.4 

million, $207.3 million and $146.2 million, respectively. As of December 31, 2022, we had an accumulated deficit of $919.1 million. We have funded our 
operations to date principally from the sale of convertible preferred stock and common stock, including the sale of common stock in our initial public 
offering, and, to a lesser extent, revenue as well as entry into the Purchase Agreement. We expect to continue to incur significant expenses and operating 
losses as we continue to invest in the development of products and services utilizing our immune medicine platform to support the validation of additional 
clinical diagnostic and therapeutic products and services. We will need to generate significant additional revenue to achieve and sustain profitability.

If we are not successful in leveraging our immune medicine platform to discover, develop and commercialize additional products and services, our 
ability to expand our business and achieve our strategic objectives would be impaired. 

A key element of our strategy is to leverage our immune medicine platform to discover, develop and potentially commercialize additional products 
and services beyond our current portfolio to diagnose and treat various disease states. In particular, for clonoSEQ we are attempting to generate sufficient 
clinical evidence to support the utility of MRD in additional lymphoid cancers beyond ALL, MM, CLL, and DLBCL while also demonstrating the clinical 
utility of blood as a sample type for all lymphoid cancers. If we are unable to generate compelling evidence supporting clonoSEQ use in other indications 
or sample types, our platform may face a broader obstacle to using our immunosequencing data for commercially viable products and services.

Identifying new products and services requires substantial technical, financial and human resources, whether or not any products or services are 

ultimately developed or commercialized. We may pursue what we believe is a promising opportunity to leverage our platform only to discover that certain 
of our risk or resource allocation decisions were incorrect or insufficient, or that individual products, services or our science in general has technology or 
biology risks that were previously unknown or underappreciated. Our strategy of pursuing the value of our immune medicine platform over a long time 
horizon and across a broad array of human diseases may not be effective. In the event material decisions in any of these areas turn out to be incorrect or 
sub-optimal, we may experience a material adverse impact on our business and ability to fund our operations and we may never realize what we believe is 
the potential of our immune medicine platform. 

We expect to make significant investments in our continued research and development of new products and services, which may not be successful. 

We are seeking to leverage our immune medicine platform to develop a pipeline of future disease-specific research, diagnostic and therapeutic 
products and services. For example, we are developing our TCR-Antigen Map with a view toward continually generating signals and advancing target 
discovery. In addition, we are developing certain therapeutic product candidates under our collaboration agreement with Genentech by leveraging our 
platform to identify TCRs that can be engineered into personalized cellular immunotherapies. In 2022, we paused T-Detect commercialization efforts in 
individual indications after launching T-Detect COVID and T-Detect Lyme. Each indication of T-Detect required significant commercial and regulatory 
investments to bring to market. Other developments may also incur significant expenses to advance, and may not be successful, which may have a material 
adverse effect on our expenses or revenue.

44

Developing new products and services is a speculative and risky endeavor. Products or services that initially show promise may fail to achieve the 
desired results or may not achieve acceptable levels of analytical accuracy or clinical utility. We may need to alter our products in development and repeat 
clinical studies before we identify a potentially successful product or service. Product development is expensive, may take years to complete and can have 
uncertain outcomes. Failure can occur at any stage of the development. If, after development, a product or service appears successful, we or our 
collaborators may, depending on the nature of the product or service, still need to obtain FDA and other regulatory clearances, authorizations or approvals 
before we can market it. The clearance, authorization or approval pathways at the FDA and other regulatory authorities are likely to involve significant 
time, as well as additional research, development and clinical study expenditures. The FDA or other regulatory authorities may not clear, authorize or 
approve any future product or service we develop. Even if we develop a product or service that receives regulatory clearance, authorization or approval, we 
or our collaborators would need to commit substantial resources to commercialize, sell and market it before it could be profitable, and the product or 
service may never be commercially successful. Additionally, development of any product or service may be disrupted or made less viable by the 
development of competing products or services. 

Finally, we are attempting to leverage our immune medicine platform to discover and develop potential antibody therapies, which have been 

informed by our prior investments in producing, collecting and analyzing data related to COVID-19. Our efforts in this area are early and continue to 
evolve and mature continuously as we augment our databases and pool of knowledge. As we continue to collect and analyze additional data, we may find 
that our initial hypotheses regarding any disease state which is a target for antibody discovery is not supported by a larger data set or further analysis. If our 
beliefs regarding the effectiveness of our antibody discovery capabilities are incorrect, that could have a material adverse effect on the market for our 
products and services.

New potential products and services may fail at any stage of development or commercialization and if we determine that any of our current or future 

products or services are unlikely to succeed, we may abandon them without any return on our investment. If we are unsuccessful in developing additional 
products or services, our potential for growth may be impaired. 

Our efforts to develop products leveraging our TCR-Antigen Map may not be successful, and it may not yield the insights we expect at all or on a 
timetable that allows development or commercialization of new diagnostic and therapeutic products. 

We are leveraging our collaboration with Microsoft to develop our TCR-Antigen Map. Together we are using immunosequencing, proprietary 
computational modeling and machine learning to map TCR sequences to the antigens they bind. However, we may not be successful in developing a 
comprehensive TCR-Antigen Map for any number of reasons including difficulty accessing required sample sets to validate signals and complications in 
advancing algorithmic-based methods that accurately define TCR signatures to be validated. As a result, it may require significantly more time and 
resources for us to determine how to use machine learning to accelerate our mapping process, which could adversely impact our ability to develop or 
commercialize new diagnostic products or services. In addition, even with the aid of machine learning, we expect the TCR-Antigen Map to take us several 
years to fully develop. 

The TCR-Antigen Map we are developing may not yield clinically actionable insights on a timetable that is commercially viable, or at all. Our goal 

is to leverage the TCR-Antigen Map in connection with drug discovery and development as well as to enable early or accurate detection across a broad 
range of diseases. 

In pursuit of developing new diagnostic tests, we established proof of concept for use of TCRs in diagnosis by confirming signals for SARS-CoV-2, 

acute Lyme disease, Crohn’s disease, celiac disease and multiple sclerosis. We have also identified early signals in ulcerative colitis and rheumatoid 
arthritis and we will seek to confirm those signals in ongoing validation work. We will also seek to identify new signals in other select autoimmune 
disorders, neurodegenerative disorders, or other diseases. 

In pursuit of discovering and developing new drugs, we will leverage our immunomics database and further develop our TCR-Antigen Map through 

the discovery of potential new drug targets (antigens). Our focus is on identifying and validating targets in indications with high unmet medical need, 
including autoimmune disorders, cancer, infectious diseases, and neurodegenerative disorders. Once we have a validated target, we will use our immune 
medicine platform and our growing TCR-Antigen Map to support development of TCR-based, antigen-based, and antibody-based therapeutic modalities.

We have agreed to exclusively use Microsoft's immunomics artificial intelligence services for TCR-antigen mapping in connection with all of our 

technology, products and services developed as a direct result of our collaboration with Microsoft throughout the term of the Microsoft Agreement. As with 
many innovations, the use of artificial intelligence presents risks and challenges, including flawed algorithms or insufficient or biased datasets. Challenges 
inherent to the use of artificial intelligence or specific to Microsoft's artificial intelligence systems could adversely impact the reliability of our data and 
subject us to delays and competitive harm, regulatory action, or legal liability, as well as brand or reputational harm.

If our computational modeling and machine learning efforts do not accelerate the pace at which we can validate association of TCR sequences to the 
antigens they bind, the timetable for our business model may not be commercially viable. Even if we can accelerate this timeline, our products and services 
derived from our novel technologies may have product or service level errors. If we are unable to make meaningful progress in our TCR-Antigen Map and 
successfully use it to develop and commercialize new diagnostic and therapeutic products or services, our business and results of operations will suffer. 

45

We are exposed to risks associated with our agreement with Genentech, and we may not realize the advantages we expect from it. 

In December 2018, we entered into the Genentech Agreement with the goal of accelerating the development and commercialization of novel cancer-

specific antigen and neoantigen directed T cell therapies for the treatment of a broad range of tumor types. Under the terms of the Genentech Agreement, 
we received $300.0 million in an initial upfront payment in February 2019 and may be eligible to receive approximately $1.8 billion in additional payments 
over time upon achievement of specified development, regulatory and commercial milestones. In addition, Genentech will pay us royalties on sales of 
products commercialized under the agreement. We may not be successful in achieving these milestones, and products developed under the Genentech 
Agreement may not be commercialized in the timeframe we expect, achieve significant sales, or be commercialized at all. 

We are exposed to numerous risks associated with the Genentech Agreement, including sharing a measure of control over the operations of our 
research and development portions of the collaboration with Genentech and Genentech having sole control over the commercialization of any products 
developed via the collaboration. For instance, in 2021, Genentech suspended development of a drug against our first shared antigen target candidate in 
response to published data. The Genentech Agreement also prevents us from, among other things, developing or commercializing TCR-based cellular 
therapies outside the scope of the collaboration in the field of oncology on our own or with any third party. Our collaboration involves risks that are 
different from the risks involved in independently conducting operations, including that Genentech may: 

•

•

•

•

•

have or develop economic or business interests that are inconsistent with ours; 

take actions contrary to our instructions, requests, policies or objectives; 

take actions that reduce our return on investment for this collaboration; 

fail to distinguish itself from biosimilar competition; or 

take actions that harm our reputation or restrict our ability to run our business. 

Genentech’s degree of control over collaboration development and commercialization efforts may impact the amounts we receive under the 
Genentech Agreement. For example, Genentech may suspend development of product candidates or decide not to pursue commercialization of product 
candidates at all, or it may agree to pay royalties to third parties or adopt a pricing model that reduces the amount of royalties we might otherwise expect. It 
is also possible that effective cell therapies will not be developed under the Genentech Agreement or, if developed, approved by the FDA or comparable 
regulatory authorities outside of the United States. Genentech may also terminate the Genentech Agreement at its convenience, at any time and without 
cause. 

We may not be able to perform our product research, development and commercialization related obligations under the Genentech Agreement, 
including performing TCR screening activities for product candidates being developed and commercialized under that agreement. For example, in the event 
a product is commercialized under the Genentech Agreement, as the volume of product sales grows, we will likely need to continue to increase our 
workflow capacity for sample intake, customer service and general process improvements, and expand our internal quality assurance program to support 
TCR screening on a larger scale within expected turnaround times. We will likely need additional certified laboratory scientists and other scientific and 
technical personnel for the Personalized Product to identify and target therapeutically relevant, patient-specific neoantigens. We will likely also need to 
acquire additional laboratory space and equipment, which can take several months or more to procure, set up and validate. These process enhancements and 
increases in scale, expansion of personnel, laboratory space and equipment may not be successfully implemented, and we may not have adequate laboratory 
facilities or resources to accommodate all the requirements that we currently anticipate needing to be successful. If we cannot satisfy our obligations, 
Genentech is entitled to trigger a technology transfer of our TCR screening process (specific to the Personalized Product) or terminate the Genentech 
Agreement. In addition, due to our significant obligations under the Genentech Agreement, we may face challenges in meeting the needs of existing 
customers, collaborators and suppliers and securing new customers, including any biopharmaceutical customers that are actual or potential competitors 
with Genentech. 

If we support the commercialization of one or more products under the Genentech Agreement, we may need to incorporate new equipment, 
implement new technology systems and laboratory processes and hire new personnel with different qualifications. Failure to manage this growth or 
transition could result in turnaround time delays, higher product costs, declining product quality, deteriorating customer service and slower responses to 
competitive challenges. A failure in any one of these areas could make it difficult for us to meet market expectations for our products and could damage our 
reputation and the prospects for our business, both under the Genentech Agreement and otherwise. As a result, our relationship with Genentech may not 
result in the realization of its anticipated benefits. 

46

We have limited experience with the development and commercialization of cellular therapeutics, and future TCR-based cellular therapies may never 
be successfully developed and commercialized as part of our Genentech collaboration. 

We have limited experience with the development of cellular therapeutics, and no experience with the commercialization, marketing and distribution 

of cellular therapeutics. Our therapeutic product candidates are at an early stage of discovery and development under our Genentech collaboration, and we 
are continuing to develop our process being used under that collaboration to develop TCR-based cellular therapies for the treatment of cancer. Under our 
Genentech collaboration, Genentech has invested significant financial resources to develop future TCR-based cellular therapies, including conducting 
preclinical studies and other early research and development activities, and providing general and administrative support for these operations. Our future 
success is dependent on our and Genentech’s ability to successfully develop therapeutic product candidates and advance those product candidates into the 
clinic, and Genentech’s ability, where applicable, to obtain regulatory and marketing approval for, and then successfully commercialize, cellular 
therapeutics. We and Genentech have not yet developed and commercialized any cellular therapeutics, and we may not be able to do so. 

We currently use, and in the future expect to increase our use of, collaborators for several aspects of our operations as well as to commercially leverage 
our drug discovery platform, and if we cannot maintain current and enter new relationships with collaborators, our business will suffer. 

We have limited resources to conduct our operations in both the MRD and IM business areas, and have not yet fully established infrastructure for 

sales, marketing or distribution in connection with all of our products and services. We have entered into collaboration agreements under which our 
collaborators have provided, and may in the future provide, funding and other resources for developing and potentially commercializing our products and 
services. For example, we have entered into the Genentech Agreement, with the goal of accelerating the development and commercialization of T cell 
therapies for the treatment of a broad range of tumor types, and the Microsoft Agreement, which provides us with access to Microsoft’s research and 
machine learning technologies that we are using to develop our TCR-Antigen Map. 

We are pursuing several additional industry and academic collaborations to access patient cohorts that could accelerate our TCR-Antigen Map signal 

generation and validation for our immune-based diagnostics or drug discovery product or services pipeline. These collaborations may result in our 
incurring significant expenses in pursuit of potential products and services, and we may not be successful in identifying, developing or commercializing 
any potential products or services.

We are also pursuing additional drug discovery and development opportunities with our pharmaceutical services collaborators to develop and 
commercialize TCR-based, antigen-based, and antibody-based therapeutic modalities. Many of these collaborations provide us with upfront and milestone 
payments. We may not succeed in identifying therapeutic assets in these collaborations and our collaborators may not succeed in developing and 
commercializing such assets, which may cause us not to realize the expected monetary benefits of the collaborations. 

Our future success depends in part on our ability to maintain these relationships and to establish new relationships. Many factors may impact the 

success of such collaborations, including our ability to perform our obligations, our collaborators’ satisfaction with our products and services, our 
collaborators’ performance of their obligations to us, our collaborators’ internal priorities, resource allocation decisions and competitive opportunities, the 
ability to obtain regulatory approvals, disagreements with collaborators, the costs required of either party to the collaboration and related financing needs, 
and operating, legal and other risks in any relevant jurisdiction. In addition to reducing our revenue or delaying the development of our future products and 
services, the loss of one or more of these relationships may reduce our exposure to research, data, clinical trials or computing technologies that facilitate the 
collection and incorporation of new information into our clinical immunomics database and TCR-Antigen Map. All of the risks relating to product and 
service development, regulatory clearance, authorization or approval and commercialization described herein apply to us derivatively through the activities 
of our collaborators. 

We engage in conversations with companies regarding potential collaborations on an ongoing basis. These conversations may not result in a 
commercial agreement. Even if an agreement is reached, the resulting relationship may not be successful, and any products and services developed as part 
of the collaboration may not produce successful outcomes. Speculation in the industry about our existing or potential collaborations can be a catalyst for 
adverse speculation about us, or our products or services, which can adversely affect our reputation and our business. 

47

Significant additional research and development and, in certain instances, clinical trials or validation will be required before we or our collaborators 
can potentially seek regulatory clearance, authorization or approval for, or commercialize any of our products or services in development. 

We are developing a pipeline of immune-driven diagnostics and therapeutics, including cellular therapies in oncology, but significant additional 

research and development activities and clinical trials or validations could be required before we and our collaborators will have a chance to achieve 
additional commercially viable products. Our research and development efforts remain subject to all of the risks associated with the development of new 
products and services based on immune-driven diagnostics and immune-mediated therapies. Development of the underlying technology may be affected by 
unanticipated technical or other problems, among other research and development issues, and the possible insufficiency of funds needed to complete 
development of these products and services. Safety, regulatory and efficacy issues, clinical hurdles or other challenges may result in delays and cause us to 
incur additional expenses that would increase our losses. If we and our collaborators cannot complete, or if we experience significant delays in developing, 
our clinical diagnostics or therapeutics, including cellular therapies, T-cell based vaccines or antibody discoveries, particularly after incurring significant 
expenditures, our business may fail and investors may lose the entirety of their investment. 

Prior to obtaining regulatory clearances, authorizations or approvals for the commercial sale of any new therapeutic products or services, we must 

demonstrate that our products and services are both safe and effective for use in each target disease indication. Clinical studies may be necessary to 
demonstrate that a product or service is safe and effective. Clinical testing or validation is expensive and can take many years to complete, and its outcome 
is inherently uncertain. Failure can occur at any time. For therapeutics, the results of preclinical studies and early clinical trials of products and services in 
development may not be predictive of the results of later-stage clinical trials, and initial success in clinical trials may not be indicative of results obtained 
when clinical trials are completed. There is typically an extremely high rate of failure as therapeutic products in development proceed through clinical 
trials. Products in later stages of clinical trials or validation also may fail to show the desired safety and efficacy profile despite having progressed through 
non-clinical studies and initial clinical trials or validations. Any delays in the development of our products and services may harm our business, financial 
condition and prospects significantly. 

Errors or defects in our products or services could harm our reputation, decrease market acceptance of our products or services or expose us to product 
liability claims. 

We are creating new products and services, many of which are initially based on largely untested technologies. As all of our products and services 

progress, we or others may determine that we made product or service level scientific or technological mistakes or omissions. The testing processes utilize 
a number of complex and sophisticated biochemical, informatics, optical and mechanical processes, many of which are highly sensitive to external factors 
and variation between testing runs. Refinements to our processes may initially result in unanticipated issues that reduce the efficiency or increase 
variability. In particular, sequencing, which is a key component of these processes, could be inefficient with higher than expected variability thereby 
increasing total sequencing costs and reducing the number of samples we can process in a given time period, which may negatively impact customer 
turnaround time. Therefore, inefficient or variable processes can cause variability in our operating results and damage our reputation. 

In addition, our laboratory operations could result in any number of errors or defects. Our quality assurance system or product development 

processes may fail to prevent us from inadvertent problems with samples, sample quality, lab processes including sequencing, software, data upload or 
analysis, raw materials, reagent manufacturing, assay quality or design, or other components or processes. In addition, our assays may have quality or 
design errors, and we may have inadequate procedures or instrumentation to process samples, assemble our proprietary primer mixes and commercial 
materials, upload and analyze data, or otherwise conduct our laboratory operations. If we provide products or services with undiscovered errors to our 
customers, our clinical diagnostics may falsely indicate a patient has a disease or fail to detect disease in a patient who requires treatment. We believe our 
customers are likely to be particularly sensitive to product and service defects, errors and delays, including if our products and services fail to indicate the 
presence of residual disease with high accuracy from clinical specimens or if we fail to list or inaccurately indicate the presence or absence of disease in our 
test report. In drug discovery, such errors may interfere with our collaborators’ clinical studies or result in adverse safety or efficacy profiles for their 
products in development. This may harm our customers’ businesses and may cause us to incur significant costs, divert the attention of key personnel, 
encourage regulatory enforcement action against us, create a significant customer relations problem for us and cause our reputation to suffer. We may also 
be subject to warranty and liability claims for damages related to errors or defects in our products or services. Any of these developments could harm our 
business and operating results. 

48

Our current and future products and services may never achieve significant commercial market acceptance. 

Our success depends on the market’s confidence that we can provide immune-driven research, diagnostic and therapeutic products and services that 
improve clinical outcomes, lower healthcare costs and enable better biopharmaceutical development. Failure of our products and services, or those jointly 
developed with our collaborators, to perform as expected could significantly impair our operating results and our reputation. We believe patients, clinicians, 
academic institutions and biopharmaceutical companies are likely to be particularly sensitive to defects, errors, inaccuracies, delays and toxicities in or 
associated with our products and services. Furthermore, inadequate performance of these products or services may result in lower confidence in our 
immune medicine platform in general. 

We and our collaborators may not succeed in achieving significant commercial market acceptance for our current or future products and services due 

to a number of factors, including: 

•

•

•

•

•

•

our ability to demonstrate the clinical utility of our immune medicine platform and related products and services and their potential 
advantages over existing life sciences research, clinical diagnostic and drug discovery technologies to academic institutions, 
biopharmaceutical companies and the medical community; 

our ability, and that of our collaborators, to secure and maintain FDA and other regulatory clearance, authorization or approval for our 
products; 

the agreement by third-party payors to reimburse our diagnostics, the scope and extent of which will affect patients’ willingness or ability to 
pay for our diagnostics, even in markets that we expect to be primarily self-pay, and will likely heavily influence physicians’ decisions to 
recommend our tests; 

our ability to successfully integrate the clonoSEQ assay into the Epic's electronic medical records database or other data or records 
management systems which facilitate patient or clinician access; 

the rate of adoption of our immune medicine platform and related products and services by academic institutions, clinicians, key opinion 
leaders, advocacy groups and biopharmaceutical companies; and 

the impact of our investments in product innovation and commercial growth. 

Additionally, our customers and collaborators may decide to decrease or discontinue their use of our products and services due to changes in their 

research and development plans, failures in their clinical trials, financial constraints, the regulatory environment, negative publicity about our products and 
services, competing products or the reimbursement landscape, all of which are circumstances outside of our control. We may not be successful in 
addressing these or other factors that might affect the market acceptance of our products, services and technologies. Failure to achieve widespread market 
acceptance of our immune medicine platform and related products and services would materially harm our business, financial condition and results of 
operations. 

We rely on a limited number of suppliers or, in many cases, single suppliers, for laboratory equipment and materials and may not be able to find 
replacements or immediately transition to alternative suppliers. 

We rely on a limited number of suppliers, or in many cases single suppliers, to provide certain sequencers and equipment that we use in our 

laboratory operations, as well as reagents and other laboratory materials for our products and services. An interruption in our laboratory operations, kit 
distribution or technology transfer could occur if we encounter delays, quality issues or other difficulties in securing these sequencers, equipment, reagents 
or other materials, and if we cannot then obtain an acceptable substitute. In addition, we would likely be required to incur significant costs and devote 
significant efforts to find new suppliers, acquire and qualify new equipment, validate new reagents and revalidate aspects of our existing assays, which may 
cause delays in our processing of samples or development and commercialization of products and services. Any such interruption could significantly affect 
our business, financial condition, results of operations and reputation. Internal changes in processes or compositions of our reagents or other materials may 
also require validation efforts by us and supply of new materials from our suppliers which could impact timing of production and levels of inventory while 
such changes are being implemented. 

49

In particular, we have purchased and rely on the Illumina NextSeq System. Illumina supplies us with reagents that have been designed for use solely 

with this sequencer and Illumina is the sole provider of maintenance and repair services for the Illumina NextSeq System. We also license our laboratory 
information management software from Illumina and receive services from Illumina related to that software. We believe there are only a few other 
equipment manufacturers that are currently capable of supplying the equipment necessary for our laboratory operations, including sequencers and various 
associated reagents. The use of sequencers manufactured by a company other than Illumina would require us to alter our laboratory operations. 
Transitioning to and qualifying a new sequencer would be time-consuming and expensive, may result in interruptions in our laboratory operations, could 
affect the performance specifications of our laboratory operations or could require that we revalidate the reagents of our immunoSEQ kits, immunoSEQ 
services or clonoSEQ diagnostic testing services, and could require us to obtain additional clearance, authorization, approval, accreditation, or licensure for 
the changes. We may not be able to secure and implement alternative sequencers, associated reagents and other materials without experiencing 
interruptions in our workflow. In the case of an alternative supplier to Illumina, any replacement sequencers and various associated reagents may not be 
available or may not meet our quality control and performance requirements for our laboratory operations. If we should encounter delays or difficulties in 
securing, reconfiguring or revalidating the equipment and reagents we require for our products and services, our business, financial condition, results of 
operations and reputation could be adversely affected. In addition, Illumina is not obligated to meet all of our requirements for reagent supply. In the event 
Illumina ceases or slows its production of, or is otherwise unwilling or unable to continue to supply the sequencer reagents necessary for and currently used 
in our business at or near current pricing, we may be required to purchase different reagents from Illumina or to purchase from a different reagent vendor 
under terms and conditions which could be less favorable to us. Any disruption in Illumina’s operations or the suppliers of our reagents, materials or other 
equipment could impact our supply chain and laboratory operations of our immune medicine platform and our ability to conduct our business and generate 
revenue. 

We have limited experience in marketing and selling certain products and services, and if we are unable to expand our direct sales and marketing force 
or partner with collaborators in certain product areas and markets to adequately address our customers’ needs, our business may be adversely affected. 

We have no experience marketing and selling therapeutic products and services. Accordingly, we or our drug discovery and development 

collaborators may not be able to market and sell our current or future products and services effectively enough to support our planned growth. 

Our sales and marketing efforts are targeted at a large and diverse market with highly specialized segments, including department heads, laboratory 

directors, principal investigators, core facility directors, clinicians, payors and research scientists and pathologists at leading academic institutions, 
biopharmaceutical companies, research institutions and contract research organizations. As a result, we believe it is necessary for our sales representatives 
to have relevant, specialized market experience. Competition for experienced sales and marketing personnel is intense, and new members of our sales 
organization may require intense training to apply their experience and expertise to our products and services. We may not be able to attract and retain 
personnel or be able to build or adequately train an efficient and effective sales organization, which could negatively impact sales and market acceptance of 
our clinical diagnostics and limit our revenue growth and potential profitability. 

We established a collaboration with Genentech for the research, development, marketing, promotion, distribution and sale of TCR-based cellular 
therapies for the treatment of cancer. Under the Genentech Agreement, Genentech has the sole right and authority to commercialize products developed 
under that agreement. It will be Genentech’s responsibility to locate, qualify and engage distribution partners, clinicians and local hospitals with industry 
experience and knowledge to effectively market and sell products developed under that agreement. Genentech may not be able to engage distribution 
partners, clinicians or hospitals on favorable terms, or at all. If Genentech’s sales and marketing efforts with respect to products developed under the 
Genentech Agreement are not successful, we may not achieve significant market acceptance for our drug discovery services and platform, which would 
materially and adversely impact our business operations. We face similar risks in our pharmaceutical services collaborations where milestone payments to 
us are dependent on successful commercialization of drugs by our collaborators.

If we or our collaborators experience any of a number of possible unforeseen events in connection with clinical trials, our or their ability to conduct 
further clinical trials of, obtain regulatory clearance, authorization or approval of or commercialize future products and services or improvements to 
current products and services, could be delayed or prevented. 

We or our collaborators may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our or their 

ability to conduct further clinical trials or obtain regulatory clearance, authorization or approval of or commercialize future products and services or 
improvements to current products and services, including: 

Evolving Regulatory Requirements and Policies 

•

the area of “precision medicine” or “personalized medicine” and its regulation may be subject to ongoing changes in terms of regulatory 
requirements and governmental policies, in ways we cannot predict; 

50

Trial Design 

•

•

•

•

•

•

Testing 

•

•

•

•

regulatory authorities or ethical review boards, including IRBs, may not authorize commencement of a clinical trial or conduct a clinical 
trial at a prospective trial site; 

there may be delays in reaching or failure to reach agreement on acceptable clinical trial contracts or clinical trial protocols with 
prospective trial sites; 

the FDA or other regulatory authorities may disagree with a clinical trial design or a sponsor’s interpretation of data and may change the 
requirements for product clearance, authorization or approval even after they have reviewed and commented on the clinical trial design; 

differences in trial design between early stage clinical trials and later-stage clinical trials may make it difficult to extrapolate the results of 
earlier clinical trials to later clinical trials; 

the FDA or other regulatory authorities may disagree about whether study endpoints are clinically meaningful; 

the number of patients, or amount of data, required for clinical trials, or improvements to current products, may be larger than anticipated, 
patient enrollment in these clinical trials may be slower than anticipated or patients may drop out of clinical trials at a higher rate than 
anticipated; 

changes may be made to product candidates after commencing clinical trials, which may require that previously completed stages of 
clinical testing be repeated or delay later stages of testing, for example, we, or our collaborators, may pursue one or more different product 
development pathways for our T cell immunotherapies; 

clinical trials may fail to satisfy the applicable regulatory requirements of the FDA or other regulatory authorities responsible for oversight 
of the conduct of clinical trials in other countries; 

regulators may elect to impose a clinical hold, or governing IRBs, data safety monitoring board or ethics committees may elect to suspend 
or terminate our clinical research or trials for various reasons, including non-compliance with regulatory requirements or a finding that the 
participants are being exposed to unacceptable risks to their health or the privacy of their health information being disclosed; 

the cost of clinical trials of future products and services, or improvements to current products and services, may be greater than we 
anticipate; 

• we may not have sufficient capacity in our laboratories to perform testing as requested or volumes requested or with the requested 

turnaround times necessary for clinical trials; 

•

the supply or quality of materials or data necessary to conduct clinical trials of future products and services, or improvements to current 
products and services, may be insufficient or inadequate; 

Trial Outcomes 

•

•

•

•

•

the outcome of our collaborators’ preclinical studies and early clinical trials may not be predictive of the success of later clinical trials, and 
interim results of a clinical trial do not necessarily predict final results; 

product candidates may be associated with negative or inconclusive results in clinical trials, and we or our collaborators may decide to 
deprioritize or abandon these product candidates, or regulatory authorities may require us to abandon them or impose onerous changes or 
requirements, which could lead to deprioritization or abandonment; 

product candidates may have undesirable side effects which could lead to serious adverse events, or other unexpected characteristics. One 
or more of such effects or events could cause regulators to impose a clinical hold on the applicable trial, or cause us, our collaborators or 
their investigators, IRBs or ethics committees to suspend or terminate the trial of that product candidate; 

clinical trials may suggest or demonstrate that products or services are not as efficacious or safe as other similar diagnostics or therapies; 
and 

preclinical and clinical data are often susceptible to varying interpretations and analyses, and our products and services in development may 
fail to obtain regulatory clearance, authorization or approval, even if they perform satisfactorily in preclinical studies and clinical trials. 

51

Delays of this nature could also allow competitors to bring products to market before we or our collaborators do, potentially impairing our ability to 

successfully commercialize our products and services in development and harming our business and results of operations. Any delays in the development 
of our products and services or those jointly developed with our collaborators may significantly harm our business, financial condition and prospects. Many 
of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory 
clearance, authorization or approval of products and services in development. 

We will need to develop our workforce, commercial infrastructure and laboratory operations to support anticipated growth in demand for our products 
and services. We may encounter difficulties in managing this and in meeting fluctuations in this demand. 

We will need to develop our workforce, commercial infrastructure and laboratory operations to support anticipated growth in demand for our 
products and services. If we are unable to support fluctuations in the demand for our products and services, including ensuring that we have adequate 
capacity to meet increased demand as well as other customer requirements (such as turnaround time and service level), our business could suffer. As of 
December 31, 2022, we had 790 full-time employees and we may be required to increase the number of employees, including potential contingent 
employees as needed to address demand fluctuations. As we and our collaborators commercialize additional products and services, we will need to 
incorporate new equipment, implement new technology systems and laboratory processes and hire new personnel with different qualifications. Failure to 
manage this growth or transition could result in turnaround time delays, higher service costs, declining service quality, deteriorating customer service and 
slower responses to competitive challenges. A failure in any one of these areas could make it difficult for us to meet market expectations for our products 
and services and could damage our reputation and the prospects for our business. 

Due to our limited resources and the technical proficiency required from much of our workforce, we may not be able to effectively recruit, train, and 

retain additional qualified personnel. This may result in weaknesses in our infrastructure, operational mistakes, slower development of our products and 
services, missed or delayed milestone achievement, significant cost overruns, loss of business opportunities, loss of employees and contingent workers, 
inability to execute on hiring plans and reduced productivity among remaining employees and contingent workers. 

Our business could be adversely affected by the effects of health epidemics, such as the recent COVID‑19 pandemic, in regions where we or third 
parties on which we rely have significant laboratory operations, manufacturing facilities, concentrations of clinical trial sites or other business 
operations. Such epidemics could materially affect our operations as well as the business or operations of our manufacturers, contract research 
organizations or other third parties with whom we conduct business.

Our business could be adversely affected by global pandemics or health epidemics in regions where we have concentrations of clinical trial sites or 

other business operations, and such pandemics or epidemics could cause significant disruption in the operations of third-party manufacturers, suppliers, 
general contractors and sub-contractors related to capital projects and CROs upon whom we rely. The global pandemic of COVID-19 continues to evolve. 
We do not yet know the full extent of potential delays or impacts on our business, clinical trials, sales force expansion plans and other initiatives, or the 
impacts to healthcare systems or the global economy as a whole. 

Resumption of quarantines, stay at home orders and similar government orders, or the perception that such orders, shutdowns or other restrictions on 
business operations could occur, whether related to COVID-19 or other infectious diseases, could impact personnel at third-party manufacturing or supplier 
facilities in the United States and other countries, or the availability or cost of materials, which would disrupt our supply chain. 

 The ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change. However, these effects 

could have a material impact on our operations, and we will continue to monitor the COVID-19 situation closely.

Our operating results may fluctuate significantly, which makes our future operating results difficult to predict and could cause our operating results to 
fall below expectations or any guidance we may provide. 

Our financial condition and operating results have varied in the past and will continue to fluctuate from quarter-to-quarter and year-to-year in the 
future due to a variety of factors, many of which are beyond our control. Factors relating to our business that may contribute to these fluctuations include 
the following, as well as other factors described elsewhere in this Annual Report on Form 10-K: 

•

•

•

•

the timing of upfront payments from our collaborators; 

our ability and that of our collaborators to develop and successfully commercialize our products and services; 

our ability to achieve collaboration-based milestones on currently contemplated timelines, or at all; 

availability and extent of reimbursement by governmental and private payors for our products and services; 

52

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

the ability of our clinical sales teams to convert physicians from using incumbent products in the market to clonoSEQ and new diagnostic 
products and services we may develop; 

our ability to drive repeat usage of the clonoSEQ diagnostic test by physicians and get reimbursed for that repeat usage by commercial and 
government payors for monitoring of MRD; 

the outcomes of research initiatives, clinical trials or other product development or approval processes conducted by us or our collaborators; 

the level of demand for our products and services, which may vary significantly or be unknown for our newest products and services; 

our relationships, and any associated exclusivity terms, with collaborators; 

our ability to manage our growth and operating expenses; 

our contractual or other obligations to provide resources to fund our products and services and to provide resources to our collaborations; 

delays or failures in advancement of future products in clinical trials by us or our collaborators; 

risks associated with the future international expansion of our business, including the potential to conduct clinical trials and commercialize 
our products and services in multiple international locations; 

our ability and that of our collaborators to consistently manufacture our products; 

our dependence on, and the need to attract and retain, key management and other personnel; 

our ability to obtain, protect and enforce our intellectual property rights; 

our ability to prevent the theft or misappropriation of our intellectual property, know-how or technologies; 

our ability to obtain additional capital that may be necessary to expand our business; 

our ability to accurately report our financial results in a timely manner; 

business interruptions such as power outages, strikes, acts of terrorism or natural disasters; and 

our ability to use our net operating loss (“NOL”) carryforwards to offset future taxable income. 

The cumulative effects of factors discussed above could result in large fluctuations and unpredictability in our quarterly and annual operating results. 

As a result, comparing our operating results on a period-to-period basis may not be meaningful. Investors should not rely on our past results as an 
indication of our future performance. In any particular period, our operating results could be below the expectations of securities analysts or investors, 
which could cause our stock price to decline. 

While as a general matter we intend to periodically report on the status of our development initiatives, including anticipated next steps, we may not 
provide forward-looking guidance on the timing of those next steps. In addition, we do not control the timing of disclosure of any such milestones related 
to any of our products and services that are managed by our collaborators. Any disclosure by us or our collaborators of data that is perceived as negative 
may have a material adverse impact on our stock price or overall valuation. Our stock price may decline as a result of unexpected clinical trial results in one 
or more of our products and services, including adverse safety events reported for any of our products or services. 

53

We have estimated the sizes of the markets for our current and future products and services, and these markets may be smaller than we estimate. 

Our estimates of the annual addressable markets for our current products and services and those under development are based on a number of 

internal and third-party estimates, including, without limitation, the number of patients who have developed one or more of a broad range of cancers, the 
number of individuals who are at a higher risk for developing one or more of a broad range of cancers, the number of individuals who have developed or 
are at a higher risk of developing certain autoimmune or neurodegenerative disorders, the number of individuals with certain infectious diseases we or our 
collaborators are able to treat through our products and services, the proportion of patients in each market whose needs can be addressed by our or our 
collaborators’ products and services, the number of potential tests utilized per treatment course per patient and the assumed prices at which we can sell our 
current and future products and services for markets that have not been established. While we believe our assumptions and the data underlying our 
estimates are reasonable, these assumptions and estimates may not be correct and the conditions supporting our assumptions or estimates may change at 
any time, thereby reducing the predictive accuracy of these underlying factors. As a result, our estimates of the annual addressable market for our current or 
future products and services may prove to be incorrect. If the actual number of patients who would benefit from our products or services, the price at which 
we can sell future products and services or the annual addressable market for our products or services is smaller than we have estimated, it may impair our 
sales growth and have an adverse impact on our business. 

If we do not compete effectively with scientific and commercial competitors, we may not be able to successfully commercialize our products and 
services. 

The biotechnology and pharmaceutical industries, including the fields of life sciences research, clinical diagnostics and drug discovery are intense 

and highly competitive. These fields are characterized by rapidly advancing technologies and a strong emphasis on intellectual property. Given the breadth 
and promise of immune medicine, we face substantial competition from many different sources, including life sciences tools, diagnostics, pharmaceutical 
and biotechnology companies, academic research institutions and governmental agencies and public and private research institutions across various 
components of our platform and product and service offerings. Due to the significant interest and growth in immune medicine more broadly, we expect the 
intensity of the competition to increase. 

For instance, in life sciences research, immunoSEQ faces competition from a number of companies, including 10X Genomics, Inc., among others. 
In clinical diagnostics, our clonoSEQ MRD test faces competition from both conventional and next-generation flow cytometry performed either in-house 
by our target customers or by reference labs, as well as from labs and institutions advancing research-use-only MRD technologies for clinical applications 
and commercial-stage oncology diagnostics companies extending the application of their solid tumor (ctDNA) MRD products into the hematology MRD 
space. In drug discovery, clinical trials of immune medicines are being undertaken by a number of industry and academic players.

Our competitors may have or obtain the knowledge necessary to generate and characterize similar data to our known data for the purpose of 
identifying and developing products or services that could compete with any of our products or services. Further, immune medicine is being pursued by 
several biotechnology companies as well as by large-cap biopharmaceutical companies. Many of our current or potential competitors, either alone or with 
their collaboration partners, have significantly greater financial resources and expertise in research and development, manufacturing, regulatory approval 
and compliance, and sales and distribution than we do. 

We could be adversely affected if we do not develop our life sciences research, clinical diagnostic and drug discovery products and services, obtain 

required regulatory and other clearances, authorizations or approvals, obtain or enforce patents covering our discoveries and launch our products and 
services before our competitors. Moreover, our competitors may succeed in developing immunosequencing-based life sciences research, clinical 
diagnostics and drug discoveries that circumvent our technologies, products or services. Our competitors may succeed in developing and commercializing 
research or diagnostic products or services that are more accurate, more convenient to use or more cost-effective than our products or services or 
therapeutic products that prove to be safer, more effective, more convenient to administer or more cost-effective than any therapeutic products we may 
develop with our collaborators or that would render our technologies, products and services less competitive or obsolete. We expect competition to 
intensify in the fields in which we are involved as technical advances in these fields occur and become more widely known. For additional information 
regarding our competition, see the “Business—Competition” section of this Annual Report on Form 10-K. 

54

The life sciences industry is subject to rapid change, which could make our immune medicine platform and related products and services that we 
develop obsolete. 

Our industry is characterized by rapid changes, including technological and scientific breakthroughs, frequent new product and service introductions 

and enhancements and evolving industry standards, all of which could make our current and future products and services obsolete. Our future success will 
depend on our ability to keep pace with the evolving needs of our customers on a timely and cost-effective basis and to pursue new market opportunities 
that develop as a result of scientific and technological advances. In recent years, there have been numerous advances in technologies relating to life 
sciences research and the diagnosis and treatment of cancer, infectious diseases, autoimmune disorders, and neurodegenerative disorders. There have also 
been advances in technologies used to computationally analyze very large amounts of biologic information. If we do not update our products and services 
to reflect new scientific knowledge about immunosequencing, immunology, computational biology, software development, new disease diagnostics and 
therapies or the diseases we seek to treat, our products and services could become obsolete and sales of our current products and services and any future 
products and services we develop based on our immune medicine platform could decline or fail to grow as expected. 

The loss of any member of our senior management team or our inability to attract and retain highly skilled scientists, clinicians and salespeople could 
adversely affect our business.

Our success depends on the skills, experience and performance of key members of our senior management team, including our co-founders and 

executive officers. The individual and collective efforts of these employees will be important as we continue to develop products and services based on our 
immune medicine platform. The loss or incapacity of existing members of our executive management team could adversely affect our operations if we 
experience difficulties in hiring qualified successors. Our executive officers have signed employment agreements with us, but their service is at-will and 
may end at any point in time. 

Our research and development initiatives and laboratory operations depend on our ability to attract and retain highly skilled scientists, technicians 

and software engineers. We may not be able to attract or retain qualified scientists, technicians or software engineers in the future due to the competition for 
qualified personnel among life sciences and technology businesses, particularly near our headquarters located in Seattle, Washington and our laboratory 
facilities located in South San Francisco, California. We also face competition from universities and public and private research institutions in recruiting 
and retaining highly qualified scientific personnel. We may have difficulties locating, recruiting or retaining qualified salespeople. Recruiting, training and 
retention difficulties can limit our ability to support our research and development and commercialization efforts. We also employ a number of workers on 
work authorization visas. We may have difficulty recruiting and retaining these workers as immigration regulations continue to change and as a result of the 
backlog of processing of immigration applications at the federal level. All of our employees are at-will, which means that either we or the employee may 
terminate their employment at any time. 

In addition, we rely on consultants, contractors and advisors, including scientific and clinical advisors, to assist us in formulating our research and 

development, regulatory and commercialization strategy. Our consultants and advisors may provide services to other organizations and may have 
commitments under consulting or advisory contracts with other entities that may limit their availability to us. The loss of the services of one or more of our 
current consultants or advisors might impede the achievement of our research, development, regulatory and commercialization objectives. 

If we lose the support of key thought leaders, it may be difficult to establish products and services enabled by our immune medicine platform as 
industry standards, which may limit our revenue growth and ability to achieve profitability. 

We have established relationships with leading oncology, hematology, immunology, autoimmunity or inflammatory disease, transplantation and 
solid tumor thought leaders at premier academic and research institutions. If these key thought leaders determine that our immune medicine platform or our 
current or future products or services are not clinically effective, determine that alternative technologies are more effective or elect to use internally 
developed services, we could encounter significant difficulty validating our products or services, driving adoption or establishing our immune medicine 
platform as an industry standard, which would limit our revenue growth and our ability to achieve profitability. In addition, negative publications or 
reviews by clinicians, industry groups or other important stakeholders may negatively impact our revenue growth and ability to achieve profitability. 

We depend on our information technology systems and any failure of these systems could harm our business.

We depend on information technology and telecommunications systems, including third-party cloud computing infrastructure, operating systems 

and artificial intelligence platforms, for significant elements of our operations, including our laboratory information management system, clinical 
immunomics database, immunoSEQ Analyzer, TCR-Antigen Map, laboratory workflow tools, customer and collaborator reporting and related functions. 
We also depend on our proprietary workflow software to support new product and service launches and regulatory compliance. 

55

We use complex software processes and pipelines to manage samples and evaluate sequencing result data. These are subject to initial design or 
ongoing modifications which may result in unanticipated issues that could cause variability in patient results, leading to service disruptions or errors, 
resulting in liability. 

We have installed, and expect to expand, a number of enterprise software systems that affect a broad range of business processes and functional 

areas, including systems handling human resources, financial controls and reporting, contract management, regulatory compliance and other infrastructure 
operations. In addition to these business systems, we have installed, and intend to extend, the capabilities of both our preventative and detective security 
controls by augmenting the monitoring and alerting functions, the network design and the automatic countermeasure operations of our technical systems. 
These information technology and telecommunications systems support a variety of functions, including laboratory operations, test validation, sample 
tracking, quality control, customer service support, billing and reimbursement, research and development activities, scientific and medical curation and 
general administrative activities. In addition, our third-party billing and collections provider depends upon technology and telecommunications systems 
provided by outside vendors. 

In addition to the risks directly relevant to our vendors, systems, and information technology, there are risks associated with the outside vendors and 

third parties with whom they subcontract. For example, our third-party billing and collections provider depends upon technology and telecommunications 
systems provided by outside vendors. Subcontractors can be a vector of vulnerability, as any weaknesses in their organization’s technical and organizational 
controls could affect vendor operations as well as data management, in turn impacting our own operations and ability to safeguard critical data. 

Information technology and telecommunications systems are vulnerable to attack in a variety of forms and from a variety of sources, including 
telecommunications or network failures, malicious human acts (such as ransomware) and natural disasters. Moreover, despite network security and back-up 
measures, some of our servers are potentially vulnerable to physical or electronic break-ins, computer viruses and similar disruptive problems. Despite the 
precautionary measures we have taken to prevent unanticipated problems that could affect our information technology and telecommunications systems, 
failures or significant downtime of these systems or those used by our collaborators or subcontractors could prevent us from conducting our comprehensive 
immunosequencing analysis, clinical diagnostics and drug discovery, preparing and providing reports to researchers, clinicians and our collaborators, 
billing payors, handling physician inquiries, conducting research and development activities and managing the administrative aspects of our business. Any 
disruption or loss of information technology or telecommunications systems on which critical aspects of our operations depend could have an adverse 
effect on our business and our reputation, and we may be unable to regain or repair our reputation in the future. 

If our laboratory facilities become damaged or inoperable or we are required to vacate our existing facilities, our ability to conduct our laboratory 
processes and analysis and pursue our research and development efforts may be jeopardized. 

We operate laboratory facilities located in Seattle, Washington and South San Francisco, California. Our facilities and equipment could be harmed or 

rendered inoperable by natural or man-made disasters, including war, fire, earthquake, power loss, communications failure or terrorism, which may render 
it difficult or impossible for us to operate our immune medicine platform for some period of time. The inability to perform our laboratory processes or to 
reduce the backlog of sequences that could develop if our facilities are inoperable, for even a short period of time, or to replace or repair inventory such as 
reagents or customer samples may result in the loss of customers or harm to our reputation, and we may be unable to regain those customers or repair our 
reputation in the future. In addition, the expansion of our corporate headquarters, laboratory space and warehousing facilities in the Seattle, Washington 
area has increased the volume of material and sample transfers between and among local facilities, increasing risk to materials and customer samples.

Furthermore, our facilities and the equipment we use to perform our research and development work could be unavailable or costly and time-
consuming to repair or replace. It would be difficult, time-consuming and expensive to rebuild our facilities, to locate and qualify new facilities or license 
or transfer our proprietary technologies to a third party, particularly in light of licensure and accreditation requirements. Even in the unlikely event we are 
able to find a third party with such qualifications to enable us to conduct our laboratory processes, we may be unable to negotiate commercially reasonable 
terms. 

We carry insurance for damage to our property and the disruption of our business, but this insurance may not cover all of the risks associated with 

damage or disruption to our business, may not provide coverage in amounts sufficient to cover our potential losses and may not continue to be available to 
us on acceptable terms, if at all.

56

We may need to raise additional capital to fund our existing operations, develop additional products and services, commercialize new products and 
services or expand our operations. 

Based on our current business plan, we believe our current cash, cash equivalents and marketable securities will be sufficient to meet our anticipated 
cash requirements over at least the next 12 months. If our available cash and investment balances and anticipated cash flow from operations are insufficient 
to satisfy our liquidity requirements, including because of lower demand for our products and services as a result of risks described herein, we may seek to 
sell common or preferred equity or convertible debt securities, enter into a credit facility or another form of third-party funding or seek other debt 
financing. 

We may consider raising additional capital in the future to expand our business, to pursue strategic investments, to take advantage of financing 

opportunities or for other reasons, including to: 

•

•

•

•

•

•

increase our sales and marketing efforts to drive market adoption of our life sciences research, clinical diagnostics and therapeutics; 

fund development efforts for our current and future products and services; 

expand our products and services into other disease indications and clinical applications; 

acquire, license or invest in technologies; 

acquire or invest in complementary businesses or assets; and 

finance capital expenditures, such as our corporate headquarters expansion, and general and administrative expenses. 

Our present and future funding requirements will depend on many factors, including: 

•

•

•

•

•

•

•

•

our ability to achieve revenue growth; 

our rate of progress in establishing payor coverage and reimbursement arrangements with domestic and international commercial third-
party payors and government payors; 

the cost of expanding our laboratory operations and offerings, including our sales and marketing efforts; 

our rate of progress in, and cost of the sales and marketing activities associated with, establishing adoption of our immunoSEQ research 
services and kits, and reimbursement for our clonoSEQ diagnostic test and cellular therapies developed under the Genentech Agreement; 

our rate of progress in, and research and development expenses associated with, products and services in research and early development; 

the effect of competing technological, product and market developments; 

costs related to international expansion; and 

the potential cost of and delays in product development as a result of any regulatory oversight applicable to our products and services. 

The various ways we could raise additional capital carry potential risks. If we raise funds by issuing equity securities, dilution to our shareholders 

could result. Any preferred equity securities issued also could provide for rights, preferences or privileges senior to those of holders of our common stock. 
If we raise funds by issuing debt securities, those debt securities would have rights, preferences and privileges senior to those of holders of our common 
stock. The terms of debt securities issued or borrowings pursuant to a credit agreement could impose significant restrictions on our operations. If we raise 
funds through collaborations and licensing arrangements, we might be required to relinquish significant rights to our platform technologies or products and 
services or grant licenses on terms that are not favorable to us. 

57

Our ability to use our NOL carryforwards and certain other tax attributes may be limited.

We have incurred net losses since our inception and we may never achieve or sustain profitability. Generally, losses incurred will carry forward until 

such losses expire (for losses generated prior to January 1, 2018) or are used to offset future taxable income, if any. Utilization of our NOL carryforwards 
and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by Section 382 of the Internal Revenue Code 
of 1986 (“Section 382”) and similar state provisions. The annual limitation may result in the expiration of NOL carryforwards and credits before 
utilization. If there should be an ownership change, our ability to utilize our NOL carryforwards and credits could be limited. We have completed a Section 
382 analysis for changes in ownership through December 31, 2020 and continue to monitor for changes that could trigger a limitation. Based on this 
analysis, we do not expect to have any permanent limitations on the utilization of our federal NOLs. Under the Tax Cuts and Jobs Act, federal NOLs 
incurred in 2018 and future years may be carried forward indefinitely, but the deductibility of such federal NOLs is subject to an annual limitation. NOLs 
generated prior to 2018 are eligible to be carried forward up to 20 years. Based on the available objective evidence, management determined that it was 
more likely than not that the net deferred tax assets would not be realizable as of December 31, 2022. Accordingly, management applied a full valuation 
allowance against net deferred tax assets as of December 31, 2022.

We may experience ownership changes in the future as a result of shifts in our stock ownership, which may be outside of our control. As a result, if 

we earn net taxable income, our ability to use our pre-ownership change NOL carryforwards to offset such taxable income will be subject to limitations. 
Similar provisions of state tax law may also apply to limit our use of accumulated state tax attributes. As a result, even if we attain profitability, we may be 
unable to use a material portion of our NOL carryforwards and other tax attributes, which could adversely affect our future cash flows. 

We could be adversely affected by violations of the FCPA and other worldwide anti-bribery laws. 

As we expand geographically, commercialize our products and services, and attempt to obtain required clearances, authorizations or approvals 

required to offer products and services for sale, we or our collaborators may be deemed to do business outside the United States, including because 
international customers may be able to order our products and services. As a result, we or our collaborators would be subject to the FCPA, which prohibits 
companies and their intermediaries from making payments in violation of law to non-U.S. government officials for the purpose of obtaining or retaining 
business or securing any other improper advantage. In addition, our collaborators or any third-party distributors could be deemed to be our agents and we 
could be held responsible for their actions, including violations of the FCPA. Other U.S. companies in the life sciences industry have faced criminal 
penalties under the FCPA for allowing their agents to deviate from appropriate practices in doing business with non-U.S. government officials. We may 
also become subject to similar anti-bribery laws in the jurisdictions in which we may operate, including the United Kingdom’s Bribery Act of 2010, which 
also prohibits commercial bribery and makes it a crime for companies to fail to prevent bribery. These laws are complex and far-reaching in nature, and we 
may be required in the future to alter one or more of our practices to be in compliance with these laws. Accordingly, our expansion internationally will 
demand a high degree of vigilance, and any violations of these laws, or allegations of such violations, could disrupt our operations, involve significant 
management distraction, involve significant costs and expenses, including legal fees, and could result in a material adverse effect on our business, 
prospects, financial condition or results of operations. We could also suffer severe penalties, including criminal and civil penalties, disgorgement and other 
remedial measures. 

We may acquire other businesses or form joint ventures or make investments in other companies or technologies that could negatively affect our 
operating results, dilute our shareholders’ ownership, increase our debt or cause us to incur significant expense. 

We may pursue acquisitions of businesses and assets. We also may pursue joint ventures or investments that leverage our immune medicine platform 

and industry experience to expand our offerings or distribution. We have no experience forming joint ventures and limited experience investing in or 
acquiring other companies. We may not be able to find suitable joint ventures, investment or acquisition candidates, and we may not be able to complete 
such transactions on favorable terms, if at all. If we make any acquisitions, we may not be able to integrate the acquired company successfully into our 
existing business, and we could assume unknown or contingent liabilities, including regulatory violations such as the FCPA or similar laws. Any future 
acquisitions also could result in the incurrence of debt, contingent liabilities or future write-offs of intangible assets or goodwill, any of which could have a 
material adverse effect on our financial condition, results of operations and cash flows. Integration of an acquired company also may disrupt ongoing 
operations and require management resources that we would otherwise focus on developing our existing business. We may experience losses related to 
investments in other companies, which could have a material negative effect on our results of operations and financial condition. We may not realize the 
anticipated benefits of any acquisition, technology license, collaboration or joint venture. 

58

To finance any acquisitions or joint ventures, we may choose to issue shares of our common stock as consideration, which would dilute the 
ownership of our shareholders. Additional funds may not be available on terms that are favorable to us, or at all. If the price of our common stock is low or 
volatile, we may not be able to acquire other companies or fund a joint venture project using our stock as consideration. 

Unfavorable U.S. or global economic conditions could adversely affect our business, financial condition or results of operations. 

Our results of operations could be adversely affected by general conditions in the global economy and financial markets. Changes in these economic 
conditions can arise suddenly, such as in the case of the recent rise in inflation. A severe or prolonged economic downturn, as result of a global pandemic or 
otherwise, could result in a variety of risks to our business, including weakened demand for our products and services and our ability to raise additional 
capital when needed on favorable terms, if at all. A weak or declining economy could strain our collaborators, possibly resulting in supply disruption, or 
cause delays in their payments to us. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic 
climate and financial market conditions could adversely impact our business. 

We use biological and hazardous materials that require considerable expertise and expense for handling, storage and disposal and may result in claims 
against us. 

We work with materials, including chemicals, biological agents and compounds and samples that could be hazardous to human health and safety or 

the environment. Our operations also produce hazardous and biological waste products. Federal, state and local laws and regulations govern the use, 
generation, manufacture, storage, handling and disposal of these materials and wastes. Compliance with applicable environmental laws and regulations is 
expensive, and current or future environmental laws and regulations may restrict our operations. If we do not comply with applicable regulations, we may 
be subject to fines and penalties. 

In addition, we cannot eliminate the risk of accidental injury or contamination from these materials or wastes, which increase with the volume of 

material and sample transfers and could cause an interruption of our commercialization efforts, research and development programs, and business 
operations, as well as environmental damage resulting in costly cleanup and liabilities under applicable laws and regulations. Furthermore, environmental 
laws and regulations are complex, change frequently and have tended to become more stringent. We cannot predict the impact of such changes and cannot 
be certain of our future compliance. While our property insurance policy provides limited coverage in the event of contamination from hazardous and 
biological products and the resulting cleanup costs, we do not currently have any additional insurance coverage for legal liability for claims arising from the
handling, storage or disposal of hazardous materials. Accordingly, in the event of contamination or injury, we could be liable for damages or penalized with 
fines in an amount exceeding our resources and our operations could be suspended or otherwise adversely affected. 

If we were to be sued for product liability or professional liability, we could face substantial liabilities that exceed our resources. 

The marketing, sale and use of our products and services could lead to the filing of product or professional liability claims were someone to allege 
that our products or services identified inaccurate, incomplete or untimely information regarding the sequence or antigen specificities of TCRs, BCRs or 
antigens analyzed or the clonality characterized, or MRD or malignancy detected, or that our products or services otherwise failed to perform as designed 
or intended. We could also be potentially exposed to claims relating to therapeutic failures of products commercialized under our collaborations, such as a 
cellular therapy marketed by Genentech that is manufactured based on TCR-related sequences and data we provide. We may also be subject to liability for 
errors in, a misunderstanding of or inappropriate reliance upon, the information we provide in the ordinary course of our business activities. A product 
liability or professional liability claim could result in substantial damages and be costly and time-consuming for us to defend. Regardless of merit or 
eventual outcome, product liability and professional liability claims may result in: 

•

•

•

•

decreased demand for any products, services or clinical solutions that we have developed or may develop; 

loss of revenue; 

substantial monetary awards to patients or their families; 

significant time and costs to defend related litigation; 

• withdrawal of clinical trial participants; 

•

•

the inability to commercialize any products, services or clinical solutions that we have developed or may develop; and 

injury to our reputation and significant negative media attention. 

59

We maintain product and professional liability insurance, but this insurance may not fully protect us from the financial impact of defending against 

product liability or professional liability claims. Any product liability or professional liability claim brought against us, with or without merit, could 
increase our insurance rates or prevent us from securing insurance coverage in the future. Additionally, any product liability lawsuit could cause current 
collaborators to terminate existing agreements or potential collaborators to seek other companies, any of which could impact our results of operations. 

International expansion of our business exposes us to business, regulatory, political, operational, financial and economic risks associated with doing 
business outside of the United States. 

Our business is subject to risks associated with doing business outside of the United States, including an increase in our expenses and diversion of 
our management’s attention from the development of future products and services. Accordingly, our business and financial results in the future could be 
adversely affected due to a variety of factors, including: 

• multiple, conflicting and changing laws and regulations such as privacy, security and data use regulations, tax laws, export and import 

restrictions, economic sanctions and embargoes, employment laws, anticorruption laws, regulatory requirements, reimbursement or payor 
regimes and other governmental approvals, permits and licenses; 

•

•

•

•

•

•

•

•

•

•

•

•

failure by us, our collaborators or our distributors to obtain regulatory clearance, authorization or approval for the use of our products and 
services in various countries; 

additional potentially relevant third-party patent rights; 

complexities and difficulties in obtaining intellectual property protection and enforcing our intellectual property; 

difficulties in staffing and managing foreign operations; 

complexities associated with managing multiple payor reimbursement regimes, government payors or patient self-pay systems; 

difficulties in negotiating favorable reimbursement negotiations with governmental authorities; 

logistics and regulations associated with shipping samples, including infrastructure conditions and transportation delays; 

limits in our ability to penetrate international markets if we are not able to conduct our immunosequencing or clinical diagnostic services 
locally; 

financial risks, such as longer payment cycles, difficulty collecting accounts receivable, the impact of local and regional financial crises on 
demand and payment for our products and services and exposure to foreign currency exchange rate fluctuations; 

natural disasters, political and economic instability, including wars, terrorism and political unrest, outbreak of disease, boycotts, curtailment 
of trade and other business restrictions; 

regulatory and compliance risks that relate to maintaining accurate information and control over sales and distributors’ activities that may 
fall within the purview of the FCPA, its books and records provisions, or its anti-bribery provisions, or laws similar to the FCPA in other 
jurisdictions in which we may now or in the future operate, such as the United Kingdom’s Bribery Act of 2010; and 

anti-bribery requirements of several member states in the European Union (“EU”) and other countries, such as the United Kingdom’s 
Bribery Act of 2010, that are constantly changing and require disclosure of information to which U.S. legal privilege may not extend. 

Any of these factors could significantly harm our future international expansion and operations and, consequently, our revenue and results of 

operations. 

60

We could be adversely affected by violations of the FCPA and other worldwide anti-bribery laws. 

As we expand geographically, commercialize our products and services, and attempt to obtain required clearances, authorizations or approvals 

required to offer products and services for sale, we or our collaborators may be deemed to do business outside the United States, including because 
international customers may be able to order our products and services. As a result, we or our collaborators would be subject to the FCPA, which prohibits 
companies and their intermediaries from making payments in violation of law to non-U.S. government officials for the purpose of obtaining or retaining 
business or securing any other improper advantage. In addition, our collaborators or any third-party distributors could be deemed to be our agents and we 
could be held responsible for their actions, including violations of the FCPA. Other U.S. companies in the life sciences industry have faced criminal 
penalties under the FCPA for allowing their agents to deviate from appropriate practices in doing business with non-U.S. government officials. We may 
also become subject to similar anti-bribery laws in the jurisdictions in which we may operate, including the United Kingdom’s Bribery Act of 2010, which 
also prohibits commercial bribery and makes it a crime for companies to fail to prevent bribery. These laws are complex and far-reaching in nature, and we 
may be required in the future to alter one or more of our practices to be in compliance with these laws. Accordingly, our expansion internationally will 
demand a high degree of vigilance, and any violations of these laws, or allegations of such violations, could disrupt our operations, involve significant 
management distraction, involve significant costs and expenses, including legal fees, and could result in a material adverse effect on our business, 
prospects, financial condition or results of operations. We could also suffer severe penalties, including criminal and civil penalties, disgorgement and other 
remedial measures. 

We may never obtain approval in the EU or in any other foreign country for any of our products or services and, even if we do, we or our collaborators 
may never be able to commercialize them in any other jurisdiction, which would limit our ability to realize their full market potential. 

In order to eventually market any of our current or future products and services in any particular foreign jurisdiction, we must establish and comply 
with numerous and varying regulatory requirements on a jurisdiction-by-jurisdiction basis regarding quality, safety, performance and efficacy. In addition, 
clinical trials or clinical investigations conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory clearance, 
authorization or approval in one country does not guarantee regulatory clearance, authorization or approval in any other country. Approval processes vary 
among countries and can involve additional product testing and validation and additional administrative review periods. 

Seeking foreign regulatory clearance, authorization or approval could result in difficulties and costs for us and our collaborators and require 

additional preclinical studies, clinical trials or clinical investigations which could be costly and time-consuming. Regulatory requirements and ethical 
approval obligations can vary widely from country to country and could delay or prevent the introduction of our products and services in those countries. 
The foreign regulatory clearance, authorization or approval process involves all of the risks and uncertainties associated with FDA clearance, authorization 
or approval. We currently sell our RUO kits outside of the United States and have completed a technology transfer process for research use to international 
sites including France, Germany, Italy, the United Kingdom, Spain, and Australia, but have no experience in obtaining regulatory clearance, authorization 
or approval in international markets. If we or our collaborators fail to comply with regulatory requirements in international markets or to obtain and 
maintain required regulatory clearances, authorizations or approvals in international markets, or if those approvals are delayed, our target market will be 
reduced and our ability to realize the full market potential of our products and services will be unrealized. 

We or our collaborators may be adversely affected by natural or man-made disasters or other business interruptions, such as cybersecurity attacks, and 
our business continuity and disaster recovery plans, or those of our collaborators, may not adequately protect us from the effects of a serious disaster. 

Natural and man-made disasters and other events beyond our control could severely disrupt our operations, or those of our collaborators, and have a 
material adverse impact on our business, results of operations, financial condition and prospects. If a natural disaster, power outage, cybersecurity attack or 
other event occurred that prevented us from using all or a significant portion of our headquarters, damaged critical infrastructure, such as our laboratory 
facilities or those of our collaborators, limited our or our collaborators’ ability to access or use our respective digital information systems or that otherwise 
disrupted our respective operations, it may be difficult or, in certain cases, impossible for us or our collaborators to continue our respective businesses for a 
substantial period of time. The disaster recovery and business continuity plans we and our collaborators currently have in place are limited and are unlikely 
to prove adequate in the event of a serious disaster or similar event. Our cybersecurity liability insurance may not cover any or all damages, depending on 
the severity and extent, we or our collaborators could sustain based on any breach of our respective computer security protocols or other cybersecurity 
attack, including potential liability arising out of third parties’ negatively impacted data privacy rights. We may incur substantial expenses as a result of the 
limited nature of our respective disaster recovery and business continuity plans, which could have a material adverse impact on our business. 

61

Risks Relating to Government Regulation 

We conduct our business in a heavily regulated industry, and changes in regulations or violations of regulations may, directly or indirectly, reduce our 
revenue, adversely affect our results of operations and financial condition and harm our business. 

The life sciences industry is highly regulated, and the regulatory environment in which we and our collaborators operate may change significantly 
and adversely to us in the future. Areas of the regulatory environment that may affect our ability to conduct business include, without limitation, federal 
and state laws relating to: 

•

•

•

•

•

•

•

laboratory testing, including CLIA and state laboratory licensing laws; 

the development, testing, use, distribution, promotion and advertising of research services, kits, clinical diagnostics and cellular therapies, 
including certain LDTs, which are regulated by the FDA under the FDCA and the FTC; 

test ordering, documentation of tests ordered, billing practices and claims payment under CMS and the HHS OIG enforcing those laws and 
regulations; 

cellular therapies, medical device and in vitro diagnostic clearance, marketing authorization or approval; 

laboratory anti-mark-up laws; 

the handling and disposal of medical and hazardous waste; 

fraud and abuse laws such as the False Claims Act, the AKS, EKRA, and the Stark Law; 

• Occupational Safety and Health Administration rules and regulations; 

• HIPAA and other federal and state medical data privacy and security laws; 

•

•

the Genetic Information Nondiscrimination Act (“GINA”) and similar state laws; and 

coverage and restrictions on coverage and reimbursement for research services, kits, clinical diagnostics and cellular therapies and 
Medicare, Medicaid, other governmental payors and private insurers reimbursement levels. 

In particular, the laws, regulations and policies governing the marketing of RUO products, LDTs and clinical diagnostic tests and services are 

extremely complex and are subject to interpretation by the courts and governmental agencies. Our failure to comply could lead to civil or criminal 
penalties, exclusion from participation in state and federal health care programs, or prohibitions or restrictions on our laboratories’ ability to provide or 
receive payment for our services. We believe that we are in material compliance with all statutory and regulatory requirements, but there is a risk that one 
or more government agencies could take a contrary position, or that a private party could file suit under the qui tam provisions of the federal False Claims 
Act or a similar state law. Such occurrences, regardless of their outcome, could damage our reputation and adversely affect important business relationships 
with third parties, including managed care organizations, and other private third-party payors. 

The insurance coverage and reimbursement status of newly approved products and services, in a new category of diagnostics and therapeutics, is 
uncertain. Failure to obtain or maintain adequate coverage and reimbursement for current or future products and services could limit our ability, and 
that of our collaborators, to fully commercialize our products and services and decrease our ability to generate revenue. 

The availability and extent of reimbursement by governmental and private payors is essential for most patients to be able to afford the clinical 

diagnostic tests and cellular therapeutics that we and our collaborators currently or plan to develop and sell. In addition, because our clinical diagnostics 
and therapeutic products and services represent new approaches to the research, diagnosis, detection and treatment of diseases, we cannot accurately 
estimate how our products and services, and those jointly created with our collaborators, would be priced, whether reimbursement could be obtained or any 
potential revenue generated. Sales of our products and services will depend substantially, both domestically and internationally, on the extent to which the 
costs of our products and services are paid by health maintenance, managed care, pharmacy benefit and similar healthcare management organizations, or 
reimbursed by government health administration authorities, private health coverage insurers and other third-party payors. If reimbursement is not 
available, or is available only to limited levels, we may not be able to successfully commercialize some of our products or services. Even if coverage is 
provided, the approved reimbursement amount may not be high enough to allow us to establish or maintain pricing sufficient to realize a sufficient return 
on our investment in any of our products or services. If we adopt a self-pay strategy with respect to any products or services, we may experience similar 
difficulties in the establishment or maintenance of sufficiently high pricing. Changes in the reimbursement landscape may occur, which are outside of our 
control, and may impact the commercial viability of our products and services. 

62

There is significant uncertainty related to the insurance coverage and reimbursement of newly cleared, authorized or approved products and 
services. In the United States, many significant decisions about reimbursement for new diagnostics and medicines are typically made by CMS, an agency 
within the HHS, and its contractors. CMS and its contractors decide whether and to what extent a new diagnostic or medicine will be covered and 
reimbursed under Medicare. Private payors tend to follow CMS policies to a substantial degree. It is difficult to predict what CMS and its contractors will 
decide with respect to reimbursement for novel products and services such as ours. Additionally, reimbursement agencies in Europe may be more 
conservative than CMS. For example, a number of cancer drugs have been approved for reimbursement in the United States and have not been approved 
for reimbursement, or have been approved under restricted conditions, in certain European countries. 

Outside the United States, the reimbursement process and timelines vary significantly. Certain countries, including a number of member states of the 

EU, set prices and make reimbursement decisions for diagnostics and pharmaceutical products, or medicinal products, as they are commonly referred to in 
the EU, with limited participation from the marketing authorization or Conformité Européene (“CE”) mark holders, or may take decisions that are 
unfavorable to the authorization or CE mark holder where they have participated in the process. We cannot be sure that such prices and reimbursement 
decisions will be acceptable to us or our collaborators. If the regulatory authorities in these foreign jurisdictions set prices or make reimbursement criteria 
that are not commercially attractive for us or our collaborators, our revenues and the potential profitability of our products and services in those countries 
would be negatively affected. An increasing number of countries are taking initiatives to attempt to control the healthcare budget by focusing cost-cutting 
efforts on medicinal products, and to a lesser extent, medical devices, provided under their state-run healthcare systems. These international price control 
efforts have impacted all regions of the world, but have been most prominent in the EU. Additionally, some countries require approval of the sale price of a 
product before it can be marketed or mandatory discounts or profit caps may be applied. Further, after the sale price is approved, it remains subject to 
review during the product lifecycle. In many countries, the pricing review period begins after marketing or product licensing approval is granted or the CE 
mark is obtained. As a result, we or our collaborators might obtain marketing approval for a product or service in a particular country, but then may 
experience delays in the reimbursement approval or be subject to price regulations that would delay the commercial launch of our product or service, 
possibly for lengthy time periods, which could negatively impact the revenues we are able to generate from the sale of that product or service in that 
particular country. 

Moreover, increasing efforts by governmental and third-party payors, in the United States and abroad, to cap or reduce healthcare costs may cause 

such organizations to limit both coverage and level of reimbursement for newly cleared, authorized or approved devices and medicines and, as a result, they 
may not cover or provide adequate payment for our clinical diagnostics or the cellular therapies to be sold by us or our collaborators. For example, the U.S. 
government introduced the Lower Drug Costs Now Act of 2019 to reduce the cost of drugs. This blueprint contains certain measures that HHS is already 
working to implement. In addition, the No Surprises Act (“NSA”) took effect in January 2022. One of the goals of the NSA is to protect patients from 
“surprise” medical bills resulting from gaps in coverage for services provided by out-of-network providers, such as laboratories, related to patient visits at 
in-network facilities. The NSA limits the amount out-of-network laboratories may charge a patient for laboratory services ordered during an in-network 
facility visit and establishes an independent dispute resolution process for determining the amount of reimbursement for the laboratory service in the event 
that the laboratory and insurer cannot agree on a rate. To the extent the NSA limits the price charged for our diagnostic products or cellular therapeutics, the 
commercial viability of those products may be adversely affected.

At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological 
program pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and 
transparency measures, which are, in some cases, designed to encourage importation from other countries and bulk purchasing. 

We expect to experience pricing pressures on our clinical diagnostics and cellular therapies sold by us and our collaborators due to the trend toward 
value-based pricing and coverage, the increasing influence of health maintenance organizations and additional legislative changes. The downward pressure 
on healthcare costs in general, particularly prescription drugs and surgical procedures and other treatments, has become very intense. As a result, 
increasingly high barriers are being erected to the entry of new products. 

63

Our business could be harmed by the loss, suspension or other restriction on a license, certification or accreditation, or by the imposition of a fine or 
penalties, under CLIA, its implementing regulations or other state, federal and foreign laws and regulations affecting licensure or certification, or by 
future changes in these laws or regulations. 

Federal law requires virtually all clinical laboratories to comply with CLIA, which generally involves becoming certified by the federal and state 

government for the testing that will be performed and complying with various operational, personnel, facilities administration, quality and proficiency 
testing requirements intended to ensure that testing services are accurate and reliable. CLIA certification is also a prerequisite to be eligible to bill state and 
federal healthcare programs, as well as many private third-party payors, for laboratory research and clinical diagnostic testing services. As a condition of 
our CLIA certification, our Seattle, Washington laboratory is subject to survey and inspection every other year, additional random inspections and surprise 
inspections based on complaints received by state or federal regulators. The biennial survey and inspection is conducted by CMS, a CMS agent or, if the 
laboratory holds a CLIA certificate of accreditation, a CMS-approved accreditation organization, such as CAP. Sanctions for failure to comply with CLIA 
requirements, including proficiency testing violations, may include suspension, revocation or limitation of a laboratory’s CLIA certificate, which is 
necessary to conduct business, as well as the imposition of significant civil, administrative or criminal sanctions against the lab, its owners and other 
individuals. In addition, we are subject to regulation under certain state laws and regulations governing laboratory licensure. Some states, including 
Washington, have enacted laboratory licensure and compliance laws that are more stringent than CLIA. Changes in state licensure laws that affect our 
ability to offer and provide research and diagnostic products and services across state or foreign country lines could materially and adversely affect our 
business. In addition, state and foreign requirements for laboratory certification may be costly or difficult to meet and could affect our ability to receive 
specimens from certain states or foreign countries.

Any sanction imposed under CLIA, its implementing regulations or state or foreign laws or regulations governing licensure, or our failure to renew a

CLIA certificate, a state or foreign license or accreditation, could have a material adverse effect on our business. 

Changes in law relating to health insurance coverage and payment may adversely affect our business.

In the United States, there have been and continue to be a number of legislative initiatives to contain healthcare costs. For example, in March 2010, 
the ACA was passed, which substantially changes the way healthcare is financed by both governmental and private insurers, and significantly impacts the 
U.S. clinical diagnostic and biopharmaceutical industries. The ACA, among other things, increased the minimum Medicaid rebates owed by manufacturers 
under the Medicaid Drug Rebate Program, extended the rebate program to individuals enrolled in Medicaid managed care organizations, established annual 
fees and taxes on manufacturers of certain branded prescription drugs and medical devices, including laboratory kits, and promoted a new Medicare Part D 
coverage gap discount program. 

Some of the provisions of the ACA have been subject to judicial and Congressional challenges. It is also unclear how regulatory provisions and sub-
regulatory guidance, both of which fluctuate continually, may affect interpretation and implementation of the ACA and its practical effects on our business. 
In addition, changes in the number of patients that can look to third-party payment to help afford our products and services may affect the demand for these 
products and services. 

We cannot predict what healthcare reform initiatives may be adopted in the future. Further federal, state and foreign legislative and regulatory 
developments are likely, and we expect ongoing initiatives to increase downward pressure on drug and device pricing. Such reforms could have an adverse 
effect on anticipated revenues from our products and services, including those that we jointly develop with our collaborators, and may affect our overall 
financial condition and ability to develop or obtain regulatory clearance, authorization or approval for our products and services. 

Inadequate funding for the FDA and other government agencies could hinder their ability to hire and retain key leadership and other personnel, 
prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent those agencies from performing 
normal business functions on which the operation of our business may rely, which could negatively impact our business. 

The ability of the FDA to review and clear, authorize or approve new products can be affected by a variety of factors, including government budget 

and funding levels, ability to hire and retain key personnel, and statutory, regulatory and policy changes. In addition, government funding of agencies on 
which our operations may rely, including those that fund research and development activities, is subject to the political process, which is inherently fluid 
and unpredictable. 

Disruptions at the FDA and other agencies may also slow the time necessary for new drugs and devices to be reviewed and cleared, authorized or 

approved by necessary government agencies, which would adversely affect our business. For example, over the last several years, the U.S. government has 
shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical employees and stop critical activities. If a 
prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, 
which could have a material adverse effect on our business. 

64

We must maintain compliance with marketing authorization requirements of the FDA and equivalent foreign and state regulatory authorities for our 
products and services whose sale is subject to their authority and failure to maintain compliance with FDA requirements may prevent or delay the 
marketing of our products and services. 

Even after we have obtained marketing authorization, as we did for clonoSEQ and T-Detect COVID under an EUA, we must comply with the scope 

of that clearance, authorization or approval. Failure to comply with those limitations or the additional, extensive and ongoing post-marketing obligations 
imposed by the FDA or other regulatory requirements of other regulatory agencies, such as the Clinical Laboratory Evaluation Program for New York 
State, could result in unanticipated compliance expenditures, a range of administrative enforcement actions, injunctions and criminal prosecution. FDA 
post-market obligations include, among other things, compliance with the FDA QSR, establishing registration and device listings, labeling requirements, 
reporting of certain adverse events and malfunctions, and reporting of certain recalls. In addition, circumstances may arise that cause us to recall equipment 
used in connection with our products and services. Such recalls could have an adverse effect on our ability to provide those products and services, which in 
turn would adversely affect our financial condition. Our collaborators will also be required to maintain FDA clearance and possibly also other 
authorizations or approvals for the products and services that we jointly develop. Any failure by us or our collaborators to maintain such clearance, 
authorization or approval could impair or cause a delay in our ability to profit from these collaborations.

Products and services offered RUO may be subject to regulatory scrutiny. 

Certain of our products are currently labeled and sold for RUO and not for the diagnosis or treatment of disease. Because such products are not 

intended for diagnostic use, and the products do not include clinical or diagnostic claims or provide directions for use as diagnostic products, they are not 
subject to the same level of regulation by the FDA as medical devices. In particular, while the FDA regulations require that RUO products be appropriately 
labeled, “For Research Use Only,” the regulations do not subject such products to the FDA’s pre- and post-market controls for medical devices. Pursuant to 
FDA guidance on RUO products, a company may not make clinical or diagnostic claims about an RUO product or provide clinical directions or clinical 
support services to customers of RUO products. A product labeled RUO but deemed by the FDA to be intended for clinical diagnostic use may be viewed 
by the FDA as adulterated and misbranded under the FDCA and subject to FDA enforcement action. The FDA considers the totality of the circumstances 
surrounding distribution and use of a product labeled as RUO, including how the product is marketed and to whom, when determining its intended use. If 
the FDA were to disagree with our RUO classification or modify its approach to regulating products labeled for RUO, we could experience reduced 
revenue or increased compliance and other costs, which could adversely affect our business, prospects, results of operations and financial condition. In the 
event that the FDA requires marketing authorization of our RUO products in the future, the FDA may not ultimately grant any clearance, authorization or 
approval requested by us in a timely manner, or at all. 

Future changes in FDA enforcement discretion for LDTs could subject our operations to much more significant regulatory requirements. 

In addition to offering the cleared version of clonoSEQ as a test for MRD in certain blood cancers, we also currently offer LDT versions of this test 
for other indications. The FDA has a policy of enforcement discretion with respect to LDTs whereby the FDA does not actively enforce its medical device 
regulatory requirements for such tests. However, in October 2014, the FDA issued two draft guidance documents stating that the FDA intended to modify 
its policy of enforcement discretion with respect to LDTs in a risk-based manner consistent with the existing classification of medical devices. Although the 
FDA halted finalization of the guidance in November 2016 to allow for further public discussion on an appropriate oversight approach to LDTs and to give 
Congressional authorizing committees the opportunity to develop a legislative solution, it is unclear if Congress or the FDA will modify the current 
approach to the regulation of LDTs in a way that would subject our current or future services marketed as LDTs to the enforcement of FDA regulatory 
requirements. The FDA Commissioner and the Director of the Center for Devices and Radiological Health (“CDRH”) have expressed significant concerns 
regarding disparities between some LDTs and in vitro diagnostics that have been reviewed, cleared, authorized or approved by the FDA. If the FDA were to 
determine that NGS MRD tests offered as LDTs are not within the policy for LDTs for any reason, including new rules, policies or guidance, or due to 
changes in statute, our tests may become subject to extensive FDA requirements or our business may otherwise be adversely affected. If the FDA were to 
disagree with our LDT status or modify its approach to regulating LDTs, we could experience reduced revenue or increased costs, which could adversely 
affect our business, prospects, results of operations and financial condition. If required, the regulatory marketing authorization process required to bring our 
current or future LDTs into compliance may involve, among other things, successfully completing additional clinical validations and submitting to and 
obtaining clearance from the FDA for a premarket clearance (510(k)) submission or authorization for a de novo or approval of a PMA. Furthermore, 
recently introduced legislation, if passed, such as the VALID Act, could create new or different regulatory and compliance burdens on us and could have a 
negative effect on our ability to develop new products, which could have a material effect on our business. In the event that the FDA requires marketing 
authorization of our LDTs in the future, the FDA may not ultimately grant any clearance, authorization or approval requested by us in a timely manner, or 
at all. In addition, if the FDA inspects our laboratory in relation to the marketing of our FDA-cleared clonoSEQ test, any enforcement action the FDA takes 
might not be limited to the FDA-cleared clonoSEQ test and could encompass our LDT testing service. 

65

For each product and service we are developing that requires FDA premarket review or equivalent regulatory approval, the FDA or other regulatory 
authority may not grant clearance, authorization or premarket approval and failure to obtain necessary approvals for our future products and services 
would adversely affect our ability to grow our business. 

Before we begin to manufacture, label and market additional clinical diagnostic products for commercial diagnostic use in the United States, we 

may be required to obtain either clearance, marketing authorization or approval from the FDA and state regulatory authorities with jurisdiction over such 
products, unless an exemption applies or, in the case of the FDA, it exercises its enforcement discretion and refrains from enforcing its requirements. For 
example, the FDA currently has a policy of refraining from enforcing its medical device requirements with respect to LDTs, which the FDA considers to be 
a type of in vitro diagnostic test that is designed, manufactured and used within a single properly licensed laboratory. 

The process of obtaining PMA from the FDA is much more rigorous, costly, lengthy and uncertain than the 510(k) clearance process. In the PMA 
approval process, the FDA must determine that a proposed device is safe and effective for its intended use based, in part, on extensive data, including, but 
not limited to, technical, preclinical, clinical trial, manufacturing and labeling data. Conversely, in the 510(k) clearance process, the FDA must determine 
that a proposed device is “substantially equivalent” to a legally marketed “predicate” device in order for the product to be cleared for marketing. To be 
“substantially equivalent,” the proposed device must have the same intended use as the predicate device, and either have the same technological 
characteristics or if it has different technological characteristics as the predicate device, the proposed device must be as safe and effective as, and not raise 
different questions of safety or effectiveness than, the predicate device. Clinical data is sometimes required to support substantial equivalence. For lower-
risk devices that would otherwise automatically be placed into Class III, which require a PMA because no predicate device is available and the devices do 
not fall within an existing 510(k)-exempt classification, an applicant may submit a de novo request to down classify the device into Class II or Class I, 
which would not require a PMA. In the de novo process, the FDA must determine that general and special controls are sufficient to provide reasonable 
assurance of the safety and effectiveness of a device, which is low to moderate risk and has no predicate. In other words, the applicant must justify the 
“down-classification” to Class I or II for a new product type that would otherwise automatically be placed into Class III, but is lower risk. Clinical data 
may be required. For laboratory tests for which FDA clearance, authorization or approval is required, the FDA may also require data to support analytical 
and clinical validity. 

The 510(k), de novo and PMA processes can be expensive and lengthy and require the payment of significant fees, unless an exemption applies. The 
FDA’s 510(k) clearance pathway usually takes from three to nine months from submission, but it can take longer for a novel type of product. The FDA’s de 
novo classification pathway usually takes from six to 12 months, but for many applicants can take up to 18 months or more. 

The process of obtaining a PMA generally takes from one to three years, or even longer, from the time the PMA is submitted to the FDA until an 
approval is obtained. Any delay or failure to obtain necessary regulatory clearances, authorizations or approvals would have a material adverse effect on 
our business, financial condition and prospects. 

The FDA can delay, limit or deny clearance, authorization or approval of a device for many reasons, including: 

•

•

•

•

•

•

•

•

•

•

the inability to demonstrate to the satisfaction of the FDA that the products are safe or effective for their intended uses; 

the disagreement of the FDA with the design, conduct or implementation of the clinical trials or the analysis or interpretation of data from 
preclinical studies, analytical studies or clinical trials; 

serious and unexpected adverse device effects experienced by participants in clinical trials; 

the data from preclinical studies, analytical studies and clinical trials may be insufficient to support clearance, authorization or approval, 
where required; 

the inability to demonstrate that the clinical and other benefits of the device outweigh the risks; 

an advisory committee, if convened by the FDA, may recommend against approval of a PMA or other application or may recommend that 
the FDA require, as a condition of approval, additional preclinical studies or clinical trials, limitations on approved labeling or distribution 
and use restrictions, or even if an advisory committee makes a favorable recommendation, the FDA may still not approve the product; 

the FDA may identify deficiencies in our marketing application; 

the FDA may identify deficiencies in our or our collaborators’ manufacturing processes, facilities or analytical methods; 

the potential for policies or regulations of the FDA or applicable foreign regulatory bodies to change significantly in a manner rendering 
clinical data or regulatory filings insufficient for clearance, authorization or approval; and 

the FDA or foreign regulatory authorities may audit clinical trial data and conclude that the data is not sufficiently reliable to support a 
PMA. 

66

There are numerous FDA personnel assigned to review different aspects of marketing submissions, which can present uncertainties based on their 

ability to exercise judgment and discretion during the review process. During the course of review, the FDA may request or require additional data and 
information, and the development and provision of these data and information may be time-consuming and expensive. The process of obtaining regulatory 
clearances, authorizations or approvals to market a medical device can be costly and time-consuming, and we may not be able to obtain these clearances, 
authorizations or approvals on a timely basis, or at all for our products in development. If we are unable to obtain clearance, authorization or approval for 
any products for which we plan to seek clearance, authorization or approval, our business may be harmed. 

Modifications to our products with FDA clearance may require new FDA clearances, authorizations or approvals, or may require us to cease 
marketing or recall the modified clinical diagnostic products or future clinical products until clearances are obtained. 

Any modification to a 510(k)-cleared device that significantly affects its safety or effectiveness, or that constitutes a major change in its intended 

use, could require a new 510(k) clearance, a new de novo authorization or approval of a PMA. The FDA requires every manufacturer to make this 
determination in the first instance, but the FDA may review any manufacturer’s decision. The FDA may not agree with our decisions regarding whether 
new clearances, authorizations or approvals are necessary. 

For any product approved pursuant to a PMA, we would be required to seek supplemental approval for many types of modifications to the approved 

product. The FDA requires manufacturers in the first instance to determine whether a PMA supplement or other regulatory filing is needed or whether the 
change may be reported via the PMA Annual Report, but may disagree with a company’s assessment. 

If the FDA disagrees with our determination, which it may not review until we submit an annual report or the FDA conducts an inspection or other 

inquiry, and requires us to seek new clearances, authorizations or approvals for modifications to our previously cleared, authorized or approved clinical 
diagnostic products for which we have concluded new clearances, authorizations or approvals are unnecessary, we may be required to cease marketing or 
distribution of these clinical diagnostic products or to recall the modified products until we obtain clearance, authorization or approval. We may also be 
subject to enforcement action, including, among other things, significant regulatory fines or penalties. 

Our employees, principal investigators, consultants and collaborators may engage in misconduct or other improper activities, including non-
compliance with regulatory standards and requirements and insider trading. 

We are exposed to the risk of fraud or other misconduct by our employees, consultants and those of our collaborators. Misconduct by these parties 

could include intentional failures to comply with the regulations of the FDA and non-U.S. regulators, comply with healthcare fraud and abuse laws and 
regulations in the United States and abroad, report financial information or data accurately or disclose unauthorized activities to us. In particular, sales, 
marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent improper marketing, 
fraud, misconduct, kickbacks, bribery, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a range of pricing, 
discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Such misconduct could also 
involve the improper use of information obtained in the course of clinical studies, which could result in regulatory sanctions and cause serious harm to our 
reputation. We currently have a code of conduct applicable to all of our employees, but it is not always possible to identify and deter employee misconduct. 
In addition, our code of conduct and the other precautions we take to detect and prevent this activity may not be effective in controlling unknown or 
unmanaged risks or losses, or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these 
laws or regulations. If any such investigations or actions are instituted against us and we are not successful in defending ourselves or asserting our rights, 
those actions could result in the imposition of significant fines or other sanctions, which could have a significant impact on our business. We currently have 
a compliance program in accordance with the elements of an effective program outlined by the HHS OIG, which could help mitigate damages, but cannot 
prevent all misconduct. Whether or not we are successful in defending against such actions or investigations, we could incur substantial costs, including 
legal fees, suffer adverse publicity and reputational harm, and have the attention of management diverted in defending ourselves against any of these claims 
or investigations. 

67

If third-party payors, including private payors and government healthcare programs, do not provide coverage of, or adequate reimbursement for, our 
clinical diagnostic products, our commercial success will be negatively affected. 

Our revenue depends in part on achieving broad coverage and reimbursement for our diagnostic tests from payors, including both private and 

government payors. Certain large private payors have issued policies that decline to cover testing methods that they regard as experimental or 
investigational. Other payors may issue similar non-coverage policies. If payors do not provide coverage of, or do not provide adequate reimbursement for, 
a substantial portion of the price of our diagnostic tests, we may need to seek payment from the patient where this is not precluded by law or contract, 
which may adversely affect demand for our tests. Coverage determinations by a payor may depend on a number of factors, including, but not limited to, a 
payor’s determination that a certain diagnostic test is appropriate, medically necessary or cost-effective. If we are unable to provide payors with sufficient 
evidence of the clinical utility and validity of our diagnostic tests, they may not provide coverage, or may provide limited coverage, which will adversely 
affect our revenues and our ability to succeed. To the extent that more competitors enter our markets, the availability of coverage and the reimbursement 
rate for our tests and new diagnostic products may decrease as we encounter pricing pressure from our competitors. 

Each payor makes its own decision regarding coverage of our tests and the applicable payment rates, and payors may not provide adequate coverage 

or reimbursement for our current or future products. Although we may contract with certain payors, working with payors through contract or otherwise to 
assure reimbursement is time-consuming and costly and outcomes are uncertain. In addition, the determinations by a payor whether to cover our clinical 
diagnostic product and the amount it will reimburse for them are often made on an indication-by-indication basis. In cases where there is no coverage 
policy or we do not have a contracted rate for reimbursement as a participating provider, the patient is typically responsible for a greater share of the cost of 
the test, which may result in further delay of our revenue, increase our collection costs or decrease the likelihood of collection. Through our Adaptive 
Assist patient support program, we provide clonoSEQ diagnostic tests for reduced rates or without charge to eligible low-income patients that may result in 
payors requiring us to provide evidence of eligibility of such patients to pay reduced out-of-pocket amounts. 

Our claims for reimbursement from payors may be denied upon submission, and we may need to take additional steps to receive payment, such as 

appealing the denials. Such appeals and other processes are time-consuming, expensive and may not result in payment. Payors may perform audits of 
historically paid claims and attempt to recoup funds years after the funds were initially distributed if the payors believe the funds were paid in error or 
determine that our clonoSEQ diagnostic tests or other clinical diagnostic products were medically unnecessary. In addition, similar to federal payors, state 
and federal laws permit commercial payors to seek civil and criminal penalties against a manufacturer if they feel they have been defrauded. If a payor 
audits our claims and issues a negative audit finding, and we are not able to overturn the audit findings through appeal, the recoupment may result in a 
material adverse effect on our revenue. Additionally, in some cases commercial payors for whom we are not a participating provider may elect at any time 
to review claims previously paid and determine the amount they paid was too much. In these situations, the payor will typically notify us of their decision 
and then offset whatever amount they determine they overpaid against amounts they owe us on current claims. We do not have a mechanism to dispute 
these retroactive adjustments and we cannot predict when, or how often, a payor might engage in these reviews. 

Future Medicare payment rates are uncertain.

In January 2020, CMS revised the National Coverage Determination (“NCD”) for molecular diagnostic laboratory testing services utilizing a NGS 
methodology, which includes our clinical diagnostic products, for Medicare beneficiaries with advanced cancer. CMS revised the NCD to extend specific 
coverage for germline (inherited) testing. CMS stated that it is continuing to make other technical, clarifying and conforming changes in the NCD manual 
and they are also clarifying the existing policy related to diagnostic tests for Somatic (Acquired) Cancer. If CMS were to make material revisions to policy, 
this could potentially impact the scope of clonoSEQ coverage. 

Under Medicare Part B, payment for most diagnostic laboratory tests is made under the Clinical Laboratory Fee Schedule (“CLFS”), which assigns 

payment amounts to tests based on billing codes. Under the Protecting Access to Medicare Act of 2014 (“PAMA”), certain laboratories that receive the 
majority of their Medicare revenue from payments made under the CLFS or Medicare’s Physician Fee Schedule are required to report to CMS every three 
years, or annually for “advanced diagnostic laboratory tests,” commercial payor payment rates and volumes for tests they perform and that are assigned 
specific billing codes. PAMA has special provisions relating to “advanced diagnostic laboratory tests,” as defined by the statute, and these provisions affect 
the rate-setting at the time of launch and the periodicity of rate reporting and revision. Laboratories that fail to report the required payment information may 
be subject to substantial civil monetary penalties. If, in the future, clonoSEQ or any of our tests are assigned a specific code we would be required to report 
commercial payor payment data on those tests. Payments for tests billed under miscellaneous codes are determined by the MACs, which also have 
discretion to change those payment rates. 

68

CMS uses the data reported by laboratories to calculate a payment rate for each CLFS test, other than those coded with miscellaneous codes and 

certain others, based on the volume-weighted median of the private payor rates. These rates apply for three years, except that payment rates for advanced 
diagnostic laboratory tests apply for one year. If we offer tests with specific codes, this apparatus would apply. Under these circumstances, Medicare’s 
payment rates would be determined by the rates we and other laboratories, if any, with tests that share the specific codes we use, obtain from commercial 
payors. In that case, if we are unable to obtain and maintain adequate reimbursement rates from commercial payors, this may adversely affect our Medicare 
rates. 

In some circumstances, our tests may be furnished to hospital inpatients and paid by Medicare under different rules. For example, when a specimen 

is obtained from a patient who is at the time classified by Medicare as a hospital inpatient, Medicare would not make a separate payment for the test and we 
would have to look to the hospital for payment. We do not know how often this will occur or whether hospitals will resist paying us for our tests. In this 
situation, Medicare coverage would be determined by the MAC for the jurisdiction where the hospital is located, which may not cover our tests. 

Our RUO, clinical diagnostic and therapeutic products or services, and those jointly developed with our collaborators, may in the future be subject to 
product or service recalls. A recall of products or services, either voluntarily or at the direction of the FDA or another governmental authority, or the 
discovery of serious safety issues with our or our collaborators’ products or services, could have a significant adverse impact on us. 

The FDA has the authority to require the recall of commercialized products or services that are subject to FDA regulation. Manufacturers may, 

under their own initiative, recall a product or service if any deficiency is found. The FDA requires that certain corrections and removals, including recalls 
intended to reduce a health risk, be reported to the FDA within ten working days of initiating such correction or removal. For reportable corrections and 
removals, companies are required to make additional periodic submissions to the FDA after initiating the recall, and often engage with the FDA on their 
recall strategy prior to initiating the recall. A government-mandated or voluntary recall by us, one of our distributors or our collaborators could occur as a 
result of an unacceptable health risk, component failures, failures in laboratory processes, malfunctions, manufacturing errors, design or labeling defects, or 
other deficiencies and issues. Recalls of any of our commercialized products or services or those jointly developed with our collaborators would divert 
managerial and financial resources and adversely affect our reputation, results of operations and financial condition. We may also be subject to liability 
claims, be required to bear other costs or take other actions that may negatively impact our future sales and our ability to generate profits. Companies are 
also required to maintain certain records of corrections and removals, even if these do not require reporting to the FDA. We or our collaborators may 
initiate voluntary recalls involving our commercialized products or services in the future that we determine do not require FDA notification. If the FDA 
disagrees with our determinations, they may require us to report those actions as recalls. A future recall announcement by us or our collaborators could 
harm our reputation with customers and negatively affect our results of operations and financial condition. In addition, the FDA or other agency could take 
enforcement action for failing to report the recalls when they were conducted. 

If we or our collaborators initiate a recall, including a correction or removal, for one of our commercialized products or services, issue a safety alert, 

or undertake a field action or recall to reduce a health risk, this could lead to increased scrutiny by the FDA, other governmental and regulatory 
enforcement bodies, and our or our collaborators’ customers regarding the quality and safety of our products and services, and to negative publicity, 
including FDA alerts, press releases, or administrative or judicial actions. Furthermore, the submission of these reports could be used against us by 
competitors and cause customers to delay purchase decisions or cancel orders, which would harm our reputation. 

Any additional commercialized products and services or any future products and services that obtain regulatory clearance, authorization, approval, 
accreditation or licensure will remain subject to regulatory scrutiny and our failure to maintain our regulatory clearances, authorizations, approvals, 
accreditations or licensures could adversely affect our reputation, business and results of operations. 

Even if we or our collaborators obtain regulatory clearance, authorization, approval, accreditation or licensure in a jurisdiction for our products and 

services, the applicable regulatory authority may still impose significant restrictions on the indicated uses or marketing of our products and services, or 
impose ongoing requirements for potentially costly post-approval studies or post-market surveillance of our or our collaborators’ manufacturing and 
distribution. Advertising for certain devices and labeling, including promotional labeling, for all devices must comply with FDA requirements. In addition, 
device advertising and promotion may also be subject to other federal and state laws. For example, the FDA shares jurisdiction over the regulation of 
device advertising with the FTC. Advertising for devices characterized as restricted by the FDA is subject to specified FDA requirements, while advertising 
for non-restricted devices is regulated by the FTC. 

If we or our collaborators fail to comply with applicable regulatory requirements following clearance, authorization, approval, accreditation or 

licensure of any of our products and services, a regulatory agency may: 

•

•

initiate an inspection of our or our collaborators’ facilities; 

issue an untitled or warning letter asserting that we or our collaborators are in violation of law; 

69

•

•

•

•

•

•

•

•

•

•

•

seek an injunction or impose civil or criminal penalties or monetary fines; 

suspend or withdraw regulatory clearance, authorization or approval, or revoke a license or accreditation; 

suspend any ongoing clinical studies; 

delay or refuse clearance, authorization or approval of a pending regulatory submission or supplement submitted by us or our collaborators; 

impose restrictions on our or our collaborators’ cleared, authorized, approved, accredited or licensed products or services; 

seize or recall the product or service; 

partially suspend or entirely shut down our or our collaborators’ manufacturing or laboratory operations; 

issue advisories or other field actions; 

impose operating restrictions; 

refuse to allow us or our collaborators to enter into supply contracts, including government contracts; or 

refer matters to the DOJ or other enforcement or regulatory bodies. 

Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate 

negative publicity. The occurrence of any event or penalty described above may inhibit our and our collaborators’ ability to commercialize any cleared, 
authorized or approved products and services and generate revenues. 

If any of our diagnostic products or services cause or contribute to a death or serious injury, or malfunction in certain ways, we will be required to 
report such death, serious injury or malfunction under applicable medical device reporting regulations, and such events can result in voluntary 
corrective actions or agency enforcement actions. 

Under FDA medical device reporting regulations, medical device manufacturers are required to report to the FDA information that a device has or 
may have caused or contributed to a death or serious injury or has malfunctioned in a way that would likely cause or contribute to a death or serious injury 
if the malfunction of the device or one of our similar devices were to recur. If such a death, serious injury or malfunction were to occur, and we or our 
collaborators are unable to demonstrate that the adverse events were caused by factors other than our or our collaborator’s products and services, regulatory 
authorities could order us to cease further development of, or deny clearance, authorization or approval of, any of our or our collaborators’ products and 
services for any or all targeted indications. Even if we and our collaborators are able to demonstrate that any serious adverse events are not related to our 
products and services, such occurrences could affect patient recruitment or the ability of enrolled trial participants to complete the trial. Moreover, if we or 
our collaborators elect, or are required, to delay, suspend or terminate any clinical trial of any product in development, the commercial prospects of such 
product in development may be harmed and our ability to generate product revenues may be delayed or eliminated. Any of these occurrences may harm our 
and our collaborators’ ability to identify and develop future products and services, and may significantly harm our business, financial condition, result of 
operations and prospects. 

70

We are subject to various laws and regulations, such as healthcare fraud and abuse laws, false claim laws and health information privacy and security 
laws, among others, and failure to comply with these laws and regulations may have an adverse effect on our business. 

Healthcare providers, physicians, hospitals and third-party payors often play a primary role in the recommendation and prescription of any currently 

marketed products and services for which we may obtain clearance, authorization or approval. Our current and future arrangements with healthcare 
providers, physicians, hospitals and third-party payors, and our sales, marketing and educational activities related to our products and services, may expose 
us to broadly applicable fraud and abuse and other healthcare laws and regulations at the federal and state level that may constrain our business or financial 
arrangements, and the relationships through which we market, sell and distribute our products and services. In addition, our operations are also subject to 
various federal and state fraud and abuse, physician payment transparency, and privacy and security laws, including, without limitation: 

• The AKS, which prohibits, among other things, persons and entities, including clinical laboratories, from knowingly and willfully 

soliciting, receiving, offering or paying remuneration, whether directly or indirectly, overtly or covertly, in case or in kind, to induce or 
reward or in return for either the referral of an individual or the purchase, lease, order or recommendation of an item or service 
reimbursable, in whole or in part, under a federal healthcare program such as Medicare or Medicaid. The AKS has been interpreted broadly 
to apply to, among other things, arrangements between clinical laboratories and prescribers and purchasers of our tests. The term 
“remuneration” expressly includes kickbacks, bribes or rebates and has been broadly interpreted to include anything of value, including 
gifts, discounts, waivers of payment, ownership interests and any goods or services provided at less than their fair market value. There are 
several statutory exceptions and regulatory safe harbors protecting certain common activities from prosecution or other regulatory 
sanctions, however, these exceptions and safe harbors are drawn narrowly, and practices that do not fit squarely within an exception or safe 
harbor may be subject to scrutiny. The failure to meet all of the requirements of a particular statutory exception or regulatory safe harbor 
does not make the conduct per se illegal under the AKS. Instead, the legality of the arrangement will be evaluated on a case-by-case basis 
based on a cumulative review of the facts and circumstances to determine whether one purpose of the remuneration in the arrangement was 
to induce referrals or generate business that is payable by a federal healthcare program. A violation of the AKS may be grounds for the 
government or a whistleblower to assert that a claim for payment of items or services resulting from such violation constitutes a false or 
fraudulent claim for purposes of the False Claims Act. Moreover, certain AKS safe harbors currently protecting rebates paid by device 
manufacturers to third parties and other arrangements between device manufacturers and third parties may later be modified or repealed 
pursuant to a pending regulatory proposal, which could require us to revisit or modify our business practices. Our practices may not meet 
all of the criteria for safe harbor protection from AKS liability in all cases. A person or entity does not need to have actual knowledge of the 
AKS or specific intent to violate any AKS provisions to have committed a violation. In addition, renumeration may not be offered or 
provided to beneficiaries under the monetary penalty law provision prohibiting inducements to beneficiaries.

• Section 8122 of the SUPPORT Act, EKRA, which establishes an all-payor anti-kickback prohibition that extends to arrangements with 

recovery homes, clinical laboratories and clinical treatment facilities. EKRA includes a number of statutory exceptions, and directs agencies 
to develop further exceptions. Current EKRA exceptions in some cases reference, and in others differ from, the AKS safe harbors. 
Significantly, the EKRA prohibitions apply to the soliciting or receipt of remuneration for any referrals to recovery homes, clinical 
treatment facilities or clinical laboratories, whether or not related to the treatment of substance use disorders. Further, the EKRA 
prohibitions cover the payment or offer of remuneration to induce a referral to, or in exchange for, an individual using the services of such 
providers. EKRA creates additional risk that relationships with referral sources could be problematic. 

• Federal civil and criminal false claims laws and civil monetary penalty laws, including the False Claims Act, which prohibits individuals or 
entities from, among other things, knowingly presenting, or causing to be presented, claims for payment to, or approval by, the federal 
government that are false, fictitious or fraudulent, or knowingly making, using or causing to be made or used a false record or statement 
material to a false or fraudulent claim to avoid, decrease or conceal an obligation to pay money to the federal government. As a result of a 
modification made by the Fraud Enforcement and Recovery Act of 2009, a claim includes “any request or demand” for money or property 
presented to the federal government. The False Claims Act also permits a private individual acting as a “whistleblower” to bring actions on 
behalf of the federal government alleging violations of the False Claims Act and to share in any monetary recovery. In addition, AKS 
violations implicate the False Claims Act. Conduct that results in a False Claims Act violation may also implicate various federal criminal 
statutes. 

71

• The Criminal Health Care Fraud Statute, which imposes criminal and civil liability for knowingly and willfully executing, or attempting to 
execute, a scheme to defraud or to obtain, by means of false or fraudulent pretenses, representations or promises, any money or property 
owned by, or under the control or custody of, any healthcare benefit program, including private third-party payors, and knowingly and 
willfully falsifying, concealing or covering up by trick, scheme or device, a material fact or making any materially false, fictitious or 
fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Similar to the AKS, a person 
or entity does not need to have actual knowledge or specific intent to violate the Criminal Health Care Fraud Statute. 

• The Stark Law, which is directed at “self-referral,” prohibits, with certain exceptions, referrals for certain DHS, including laboratory 

services, that are covered by Medicare and Medicaid by physicians who personally, or through a family member, have an investment or 
ownership interest in, or a compensation arrangement with, an entity performing the tests. The prohibition also extends to payment for any 
testing referred in violation of the Stark Law. Because the Stark Law is a strict liability statute, proof of specific intent to violate the law is 
not a required element of a violation. Any person who engages in a scheme to circumvent the Stark Law’s referral prohibition may be 
subject to significant fines for each such arrangement or scheme. In addition, any person who presents or causes to be presented a claim to 
Medicare or Medicaid in violation of the Stark Law is subject to civil monetary penalties applied to each bill submission, an assessment of 
up to three times the amount claimed and possible exclusion from participation in federal governmental payor programs, and those claims 
are considered false claims for which the parties to the arrangement may be liable under the False Claims Act. Bills submitted in violation 
of the Stark Law may not be paid by Medicare or Medicaid, and any person collecting any amounts with respect to any such prohibited bill 
is obligated to refund such amounts. Many states have comparable laws that are not limited to Medicare and Medicaid referrals. The Stark 
Law also places an annual cap on the amount of non-monetary compensation, which consists of meal spend and educational items, that a 
company can spend on a physician in the aggregate. We occasionally enter into financial relationships, usually compensation relationships, 
such as a consulting arrangement, with physicians who refer patients for testing. If these arrangements do not meet the Stark Law’s 
requirements, any claims submitted to Medicare or Medicaid could violate the law and put both the physician referral source and us at risk. 

• The administrative simplification provisions of HIPAA, as amended and supplemented by HITECH, impose, among other things, 

obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of protected health 
information (“PHI”) held by certain healthcare providers, health plans and healthcare clearinghouses, known as covered entities, and their 
respective business associates. Among other things, HITECH made certain aspects of HIPAA’s rules, notably the “HIPAA Security Rule,” 
directly applicable to business associates, independent contractors or agents of covered entities that create, receive, maintain or transmit 
PHI in connection with providing a function on behalf of, or a service to, a covered entity. HITECH also created four new tiers of civil 
monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates and gave state attorneys 
general new authority to file civil actions for damages or injunctions in federal court to enforce the federal HIPAA regulation and seek 
attorneys’ fees and costs associated with pursuing federal civil actions. The HHS Office for Civil Rights (“OCR”) has increased its focus on 
compliance and continues to train state attorneys general for enforcement purposes. The OCR has recently increased both its efforts to audit 
HIPAA compliance and its level of enforcement, with one recent penalty exceeding $16 million. 

• GINA, which restricts employers and health insurance companies from requiring or using the results of genetic tests in specific contexts 

and does not provide a private right of action. A number of states have also adopted laws regarding genetic tests, some aligned with GINA 
and some with broader applicability, including granting broader rights to individuals and imposing strict obligations on organizations to 
safeguard genetic data and the results of any such testing. 

• The Physician Payments Sunshine Act created under the ACA, and its implementing regulations, which requires applicable manufacturers 
of covered drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the State Children’s 
Health Insurance Program, with certain exceptions, to annually report to HHS information related to certain payments or other transfers of 
value made or distributed to physicians and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, 
physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members. 
The Physician Payments Sunshine Act has been extended to payments and transfers of value to physician assistants, nurse practitioners and 
other mid-level healthcare providers for payments and other transfers of value made to these practitioners. In addition, certain state and 
local laws may impose additional transparency and healthcare compliance requirements on medical device manufacturers, as well as certain 
restrictions or limits on interactions with healthcare professionals. 

72

• The FTCA, which the FTC interprets to require taking appropriate steps to secure consumers’ personal information and considers the 

failures to do so to constitute unfair acts or practices in or affecting commerce in violation of Section 5(a) of the FTCA. The FTC expects a 
company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, 
the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities. Medical data is 
considered sensitive data that merits stronger safeguards, and the FTC’s guidance for appropriately securing consumers’ personal 
information is consistent with what is required by the HIPAA Security Rule. Some states, most notably Massachusetts and Nevada, also 
have adopted laws requiring the implementation of security measures to protect personal information, and all 50 states and the District of 
Columbia, Puerto Rico and Guam, have adopted breach notification laws. 

• Analogous state laws and regulations, such as state anti-kickback, self-referral and false claims laws, which may apply to items or services 
reimbursed by any third-party payor, including commercial insurers, and in some cases even in self-pay scenarios. In addition, some state 
laws require life sciences companies to comply with the industry’s voluntary compliance guidelines and the relevant compliance guidance 
promulgated by the federal government, or to impose transparency requirements or restrictions on marketing activities. 

• Various state, federal and foreign laws and regulations govern our ability to communicate, prospect, advertise and market our products and 

services through email, phone, text messages, facsimile and online methods. 

Because of the breadth of these laws and the narrowness of the exceptions and safe harbors available under them, it is possible that certain of our 

business activities could be subject to challenge under one or more of such laws. The scope and enforcement of each of these laws is uncertain and subject 
to rapid change in the current environment of healthcare reform, especially in light of the lack of applicable precedent and regulations. Federal and state 
enforcement bodies have recently increased their scrutiny of the ongoing interactions between healthcare companies and healthcare providers, which has 
led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry. Ensuring that business arrangements with third 
parties comply with applicable healthcare laws, as well as responding to possible investigations by government authorities, can be time- and resource-
consuming and can divert management’s attention from our business. 

If our operations are found to be in violation of any of the health regulatory laws described above or any other laws that apply to us, we may be 
subject to penalties, including, but not limited to, criminal, civil and administrative penalties, damages, fines, disgorgement, individual imprisonment, 
possible exclusion from participation in government healthcare programs, injunctions, private qui tam actions brought by individual whistleblowers in the 
name of the government and the curtailment or restructuring of our operations, as well as additional reporting obligations and oversight if we become 
subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, any of which could adversely affect 
our ability to operate our business and our results of operations. 

Our collection, use and disclosure of personal information, including health and employee information, is subject to state, federal and foreign privacy 
and security regulations, and our failure to comply with those regulations or to adequately secure the information we hold could result in significant 
liability or reputational harm. 

The privacy and security of personal information stored, maintained, received or transmitted, including electronically, is a major issue in the United 
States and abroad. While we strive to comply with all applicable privacy and security laws and regulations, including, in our case, our own posted privacy 
policies, legal standards for privacy, including but not limited to “unfairness” and “deception,” as enforced by the FTC and state attorneys general, these 
laws and regulations continue to evolve and any failure or perceived failure to comply may result in proceedings or actions against us by government 
entities or others, or could cause us to lose customers, which could have a material adverse effect on our business. Recently, there has been an increase in 
public awareness of privacy issues in the wake of revelations about the data-collection activities of various government agencies and in the number of 
private privacy-related lawsuits filed against companies (including a private right of action under the CCPA and other similar state laws, as described 
below). Concerns about our practices with regard to the collection, use, retention, disclosure or security of personal information or other privacy-related 
matters, even if unfounded and even if we are in compliance with applicable laws, could damage our reputation and harm our business. Additionally, we 
receive personal information, including PHI from third parties, and if such third parties breach their representations to us regarding their compliance with 
applicable privacy and security laws, we could be exposed to proceedings or actions by government agencies or others. 

Numerous foreign, federal and state laws and regulations govern the collection, dissemination, use and confidentiality of personal information, 

including genetic, biometric and health information, including state privacy, data security and breach notification laws, federal and state consumer 
protection and employment laws, HIPAA, GINA, the GDPR and other foreign data protection laws. These laws and regulations are increasing in 
complexity and number, may change frequently and sometimes conflict. 

73

The HIPAA privacy, security and breach notification regulations, including the expanded requirements under HITECH, establish comprehensive 

federal standards with respect to the uses and disclosures of PHI by health plans, healthcare providers, including laboratories, and healthcare 
clearinghouses, in addition to setting standards to protect the confidentiality, integrity and security of PHI. The regulations establish a complex regulatory 
framework on a variety of subjects, including: 

•

•

•

•

•

•

the circumstances under which uses and disclosures of PHI are permitted or required without a specific authorization by the patient; 

a patient’s rights to access, amend and receive an accounting of certain disclosures of PHI; 

requirements to notify individuals if there is a breach of their unsecured PHI; 

the contents of notices that must be provided to patients regarding our privacy practices for PHI; 

administrative, technical and physical safeguards required of entities that use or receive PHI; and 

the safeguarding of PHI. 

Penalties for violations of these laws vary. For instance, penalties for failure to comply with a requirement of HIPAA and HITECH vary 

significantly, and include substantial per violation civil monetary penalties for each provision of HIPAA that is violated up to a statutory cap and, in certain 
circumstances, significant criminal penalties with fines per violation and potential imprisonment. A single breach can result in findings of violations of 
multiple provisions, leading to possible penalties in excess of any applicable cap for violations in a calendar year. Any person who knowingly obtains or 
discloses PHI in violation of HIPAA may face a significant criminal penalty and up to one year of imprisonment. The criminal penalties increase if the 
wrongful conduct involves false pretenses or the intent to sell, transfer or use identifiable health information for commercial advantage, personal gain or 
malicious harm. In addition, responding to government investigations or related third-party private rights of action regarding alleged violations of these and 
other laws and regulations, even if they ultimately result in no findings of violations or no penalties imposed, can consume our resources and impact our 
business and, if public, harm our reputation. 

Computer networks are vulnerable to breach and unauthorized persons may in the future be able to exploit weaknesses in the security systems of our 

computer networks and gain access to PHI. Additionally, we share PHI with third-party contractors, and while they are contractually obligated under 
business associate agreements to safeguard and maintain the confidentiality of PHI, their indemnification of us would not insulate us from reputational 
harm. Unauthorized persons may be able to gain access to PHI stored in such third-party contractors’ computer networks. Any wrongful use or disclosure 
of PHI by us or our third-party contractors, including disclosure due to data theft or unauthorized access to our or our third-party contractors’ computer 
networks, could subject us to fines or penalties that could adversely affect our business and results of operations. Although HIPAA and the regulations 
promulgated thereunder do not provide for a private right of action, we could incur damages under state laws to private parties for the wrongful use or 
disclosure of confidential health information or other private personal information. 

Further, various states, such as California, New York and Massachusetts, have implemented similar privacy laws and regulations (such as the 
California Confidentiality of Medical Information Act, California Consumer Privacy Act and California Privacy Rights Act) that impose restrictive 
requirements regulating the use and disclosure of personal information, while other states are considering adoption of similar provisions. These laws and 
regulations are not necessarily preempted by HIPAA, but they have a wider scope and afford greater protection to individuals than HIPAA. Where state 
laws are more protective, we and our collaborators must comply with the stricter provisions where they apply. In addition to fines and penalties imposed 
upon violators, some of these state laws also afford private rights of action to individuals who believe their personal information has been misused. The 
interplay of federal and state laws may be subject to varying interpretations by courts and government agencies, creating complex compliance issues for us 
and our customers and potentially exposing us to additional expense, adverse publicity and liability. Further, as regulatory focus on privacy, security and 
data use issues continues to increase and laws and regulations concerning the protection of personal information expand and become more complex, these 
potential risks to our immune medicine platform and related products and services could intensify. Changes in laws or regulations associated with the 
enhanced protection of certain types of sensitive data, such as PHI, along with increased customer demand for enhanced data security infrastructure, could 
greatly increase the cost of providing our products and services, decrease demand for our products and services, reduce our revenue and subject us to 
additional liabilities. 

We currently operate in some and may eventually operate in additional countries outside of the United States whose laws may in some cases be 
more stringent than the requirements in the United States. For example, the EU has specific requirements relating to cross-border transfers of personal data 
to certain jurisdictions, including to the United States. In addition, some countries have stricter consumer notice or consent requirements relating to 
personal data collection, use or sharing, have more stringent requirements relating to organizations’ privacy programs and provide stronger individual 
rights. 

74

Moreover, international privacy and data security regulations are becoming more complex and may result in greater penalties. For instance, the 

GDPR governs the collection and use of personal data of data subjects in the EU and the EEA. The GDPR applies extra-territorially under certain 
circumstances and imposes stringent requirements on controllers and processors of personal data, including, for example, requirements to obtain consent or 
other legal bases from individuals to process their personal data, provide robust disclosures to individuals, accommodate a set of individual data rights, 
provide data security breach notifications after becoming aware of the breach, limit retention of personal information and apply enhanced protections to 
health data and other special categories of personal data. The GDPR also applies to pseudonymized data, which is defined as “the processing of personal 
data in such a way that the data can no longer be attributed to a specific data subject without the use of additional information,” and imposes additional 
obligations when we contract with third-party processors in connection with the processing of any personal data. The GDPR provides that EU member 
states may make their own further laws and regulations limiting the processing of personal data, including genetic, biometric or health data, which could 
limit our ability to use and share personal data, could cause our costs to increase and could harm our financial condition. Failure to comply with the 
requirements of the GDPR and the applicable national data protection laws of the EU member states may result in substantial fines in a lump sum or a 
percentage of our worldwide annual turnover of our preceding fiscal year, whichever is higher, and other administrative penalties. Compliance with the 
GDPR requires us to put in place and maintain additional policies, procedures and documentation as the law and updates to it require, which may result in 
other substantial expenditures. This may be onerous and adversely affect our business. Failure to comply with the GDPR and other countries’ privacy or 
data security-related laws, rules or regulations could result in material penalties imposed by regulators, affect our compliance with contracts entered into 
with our collaborators and other third-party payors, and have an adverse effect on our business and financial condition. 

The GDPR also imposes strict rules on the transfer of personal data out of the EU to the United States. These obligations may be interpreted and 

applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other requirements or our practices. 

In addition to the GDPR, we continue to expand our business into several countries that have or are developing data privacy laws. Compliance with 

such laws may be onerous and adversely impact expansion of our business.

Because of the breadth of these data protection laws and the narrowness of their exceptions and safe harbors, it is possible that our business or data 
protection policies could be subject to challenge under one or more of such laws. The scope and enforcement of each of these laws is uncertain and subject 
to rapid change in the current environment of heightened regulatory focus on data privacy and security issues. If our operations are found to be in violation 
of any of the data protection laws described above or any other laws that apply to us, we may be subject to penalties, including, but not limited to, criminal, 
civil and administrative penalties, damages, fines, disgorgement, individual imprisonment, possible exclusion from participation in government healthcare 
programs, injunctions, private qui tam actions brought by individual whistleblowers in the name of the government, class action litigation and the 
curtailment or restructuring of our operations, as well as additional reporting obligations and oversight if we become subject to a corrective action plan or 
other agreement to resolve allegations of non-compliance with these laws, any of which could adversely affect our ability to operate our business and our 
results of operations. 

In addition, within the United States, an increasing number of states and the federal government are considering or have proposed adoption of new 

data privacy laws. While not all of these bills become law, they add significant uncertainty about additional obligations or potential penalties which we may 
face in conducting our business. These uncertainties are confounded by parallel changes in laws adjacent to privacy, such as those impacting machine 
learning and artificial intelligence or data use, and we may incur substantial expense or experience disruption as related to compliance with these laws, 
which would adversely affect our ability to conduct our business. 

75

Security breaches, loss of data and other disruptions could compromise confidential, personal and sensitive information related to our business or 
prevent us from accessing critical information and expose us to liability, which could adversely affect our business and our reputation. 

In the ordinary course of our business, we and our collaborators collect and store sensitive data, including PHI, personal information, credit card and 

other financial information, intellectual property and proprietary business information owned or controlled by ourselves or our customers, third-party 
payors, our collaborators, government entities, insurance companies and other parties. We manage and maintain our applications and data through a 
combination of on-site systems and cloud-based data centers. We utilize external security and infrastructure vendors to manage components of our data 
centers. We also transmit sensitive data, including patient data, telephonically, through our website and pursuant to arrangements with multiple third-party 
vendors and their subcontractors. These applications and data encompass a wide variety of critical business information, including research and 
development information, patient data, commercial information and financial information. We face a number of risks related to protecting this critical 
information, including loss-of-access risk, unauthorized access, use, disclosure or modification, and the risk of our inability to adequately monitor, audit 
and modify our respective control over our critical information. This risk extends to the data we entrust to the third-party vendors and subcontractors that 
help us manage this sensitive data or otherwise process it on our behalf. 

The secure processing, storage, maintenance and transmission of this critical information are vital to our operations and business strategy, and we 

devote significant resources to protecting such information. Although we take reasonable measures to protect sensitive and proprietary data from 
unauthorized access, use or disclosure, no security measures can be perfect and our respective information technology and infrastructure may be vulnerable 
to attacks by hackers or viruses or breached due to employee error, malfeasance or other malicious or inadvertent disruptions. Any such breach or 
interruption could compromise our networks and the information stored there could be accessed by unauthorized parties, publicly disclosed, lost or stolen. 
Any such access, breach or other loss of information could result in legal claims or proceedings, liability under federal or state laws that protect the privacy 
of personal information, such as HIPAA or HITECH, and regulatory penalties. Notice of breaches may be required to be provided to affected individuals, 
the Secretary of HHS or other federal, state and foreign regulators, the media or state attorneys general. Such a notice could harm our reputation and ability 
to compete. Although we have implemented security measures and formal, dedicated enterprise security programs to prevent unauthorized access to patient 
and other personal data, such data is currently accessible through multiple channels and we may experience one or more data breaches. Unauthorized 
access, loss or dissemination could also disrupt our operations and damage our reputation, which could adversely affect our results of operations and 
financial condition. 

In addition, a growing number of states are considering or have adopted cybersecurity requirements for cloud-based provision of services which we 
may be required to comply with as a condition of doing business with government-affiliated organizations, such as state universities. Implementation of the 
controls required by such laws can be onerous and may affect our ability to provide services to government-affiliated organizations in such states, adversely 
affecting our results of operations.

No TCR-based cellular therapies have been approved in this new potential category of medicines and may never be approved as a result of efforts by 
others or us. TCR-based cellular therapy drug discovery has substantial clinical development and regulatory risks due to the novel and unprecedented 
nature of this new category of immune medicines. 

As a potential new category of medicines, no TCR-based cellular therapies have been approved to date by the FDA or other regulatory agency. 

Successful discovery and development of TCR-based cellular therapies by us and our collaborators is highly uncertain and depends on numerous factors, 
many of which are beyond our and their control. We and our collaborators have made and will continue to make a series of business decisions and take 
calculated risks to advance our development efforts and pipeline of immune-driven therapeutic product candidates, including those related to TCR-based 
cellular therapies, delivery technology and manufacturing processes, which may be shown to be incorrect based on further work by us, our collaborators or 
others. Our cellular therapeutics product candidates that appear promising in the early phases of development may fail to advance, experience delays in the 
clinic, experience clinical holds or fail to reach the market for many reasons, including: 

•

•

•

•

•

discovery efforts identifying potential TCR-based cellular therapies may not be successful; 

nonclinical or preclinical study results may show potential TCR-based cellular therapies to be less effective than desired or to have harmful 
or problematic side effects; 

clinical trials may fail to meet one or more endpoints, or results may show the TCR-based cellular therapies to be less effective than 
expected or to have unacceptable side effects or toxicities; 

adverse effects relating to any one of our therapeutic product candidates or adverse effects relating to our therapeutics discovery process 
may lead to delays in or termination of one or more of our products or services; 

the inability of our translational models to reduce risk or predict outcomes in humans, given that each component of our therapeutic product 
candidates may have a dependent or independent effect on safety, tolerability and efficacy, and that such effects may, among other things, 
be species-dependent; 

76

• manufacturing failures or insufficient supply of current good manufacturing practices (“cGMP”) materials for future clinical trials, or 
higher than expected cost, could delay or set back clinical trials or make TCR-based cellular therapies commercially unattractive; 

•

•

•

•

•

our collaborators’ improvements in the manufacturing processes for this new class of potential immune medicines may not be sufficient to 
satisfy the clinical or commercial demand of our jointly developed TCR-based cellular therapies or regulatory requirements for clinical 
trials; 

changes that we or our collaborators make to optimize manufacturing, testing or formulating of cGMP materials could impact the safety, 
tolerability and efficacy of our therapeutic products in development; 

pricing or reimbursement issues or other factors that delay clinical trials or make any TCR-based cellular therapies uneconomical or 
noncompetitive with other immunotherapies; 

failure to timely advance our or our collaborators’ therapeutic products or receive the necessary regulatory clearances, authorizations or 
approvals or a delay in receiving such clearances, authorizations or approvals due to, among other reasons, slow or failure to complete 
enrollment in clinical trials, withdrawal by trial participants from trials, failure to achieve trial endpoints, additional time requirements for 
data analysis, data integrity issues, Biologics License Application or the equivalent application, discussions with the FDA or the European 
Medicines Agency, a regulatory request for additional nonclinical or clinical data, or safety formulation or manufacturing issues may lead 
to our inability to obtain sufficient funding; and 

the proprietary rights of others and their competing products and services that may prevent our TCR-based cellular therapies from being 
commercialized or threaten future commercialization activities. 

77

Risks Relating to our Intellectual Property 

We may not be successful in obtaining or maintaining sufficient intellectual property protection for our products, services and technologies and uses 
thereof, and the scope of the intellectual property protection obtained may not be sufficiently broad. 

As is the case with other companies engaged in the life sciences industry, our success depends in large part on our ability to obtain and maintain 

protection of the intellectual property we may own solely and jointly with others, or license from third parties, particularly patents, in the United States and 
other countries with respect to our products, services and technologies. We rely on patent protection in addition to trademark, copyright, trade secret and 
other intellectual property rights protection and contractual restrictions to protect our proprietary technologies, all of which provide limited protection and 
may not adequately protect our rights or enable us to gain or maintain any competitive advantage. If we fail to protect our intellectual property, third parties 
may be able to compete more effectively against us. In addition, we may incur substantial litigation costs in our attempts to recover or restrict use of our 
intellectual property. 

To the extent our intellectual property offers inadequate protection, or is found to be invalid or unenforceable, we would be exposed to a greater risk 
of direct competition. If our intellectual property does not provide adequate barriers to competition, our competitive position could be adversely affected, as 
could our business. 

We apply for or in-license patents covering our products and technologies and uses thereof, as we deem appropriate. However, obtaining and 
enforcing patents is costly, time-consuming and complex, and we may fail to apply for patents on important products, services and technologies in a timely 
fashion or at all, or we may fail to apply for patents in potentially relevant jurisdictions. We may not be able to file and prosecute all necessary or desirable 
patent applications, or maintain, enforce and license any patents that may issue from such patent applications, at a reasonable cost or in a timely manner. It 
is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. We 
may not have the right to control the preparation, filing and prosecution of patent applications or to maintain the rights to patents licensed from third 
parties. Consequently, these patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business. 

As of December 31, 2022, we own or have rights to 799 active patents and patent applications filed in the United States, Europe and elsewhere. Of 

these, there are 40 pending patent applications and 429 granted patents. Our pending patent applications may not result in issued patents in a timely fashion 
or at all. Even if patents are granted, they may not provide a basis for intellectual property protection of commercially viable products or services, may not 
provide us with any competitive advantages, or may be challenged and invalidated by third parties. It is also possible that others will design around our 
current or future patented technologies. 

Some of our patents, licensed patents or patent applications may be challenged in the future, and we may not be successful in defending any such 
challenges. For example, we may be subject to a third-party pre-issuance submission of prior art to the U.S. Patent and Trademark Office (“USPTO”), or 
become involved in opposition, derivation, reexamination, inter partes review, post-grant review or interference proceedings challenging our patent rights. 
Any successful third-party challenge to our patents could result in patent claims being narrowed, or patents being invalidated or held unenforceable, in 
whole or in part, which could lead to increased competition to our business. Conversely, we may have to challenge the patents or patent applications of 
third parties. The outcome of patent litigation or other proceeding can be uncertain, and any attempt by us to enforce our patent rights against others or to 
challenge the patent rights of others may not be successful, or, if successful, may take substantial time and result in substantial cost, and may divert our 
efforts and attention from other aspects of our business. In addition, if the breadth or strength of protection provided by our patents and patent applications 
is threatened, regardless of the outcome, it could dissuade companies from collaborating with us to license, develop or commercialize current or future 
products or services. The patent positions of biotechnology companies can be highly uncertain and involve complex legal and factual questions for which 
important legal principles remain unresolved. Inconsistent policies regarding the eligibility for patent protection and the breadth of patentable claims in 
such companies’ patents has emerged to date in the United States or elsewhere. Courts frequently render opinions in the biotechnology field that may affect 
the patentability of certain inventions or discoveries, including opinions that may affect the patentability of methods and compositions of matter useful in 
relation to immunosequencing. 

78

The patent position of companies engaged in the development and commercialization of clinical diagnostic tests (like our clonoSEQ diagnostic test) 

and of biologic material (such as TCRs) are particularly uncertain. Various courts, including the U.S. Supreme Court, have rendered decisions that affect 
the eligibility and scope of patentability of certain inventions or discoveries relating to certain diagnostic tests, naturally-occurring molecules and related 
technology. These decisions state, among other things, that a patent claim that recites an abstract idea, natural phenomenon or law of nature (for example, 
the relationship between particular immune receptors and cancer) may not be patentable. Precisely what constitutes a law of nature is uncertain, and it is 
possible that certain aspects of our clinical diagnostics would be considered natural laws. The evolving case law in the United States may adversely affect 
our ability to obtain patents or defend patents we have obtained or have licensed and may facilitate third-party challenges to any owned or licensed patents. 
The laws of some foreign countries do not protect intellectual property rights to the same extent or for the same subject matter as the laws of the United 
States, and we may encounter difficulties in protecting and defending such rights in foreign jurisdictions. The legal systems of many other countries do not 
favor the enforcement of patents and other intellectual property protection, particularly those relating to biotechnology, which could make it difficult for us 
to stop the infringement of our patents in such countries. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs 
and divert our efforts and attention from other aspects of our business. 

We may not be able to protect our intellectual property rights throughout the world. 

Filing, prosecuting and defending patents on our products and services in all countries throughout the world would be prohibitively expensive. In 

addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States, and we may 
encounter difficulties in protecting and defending such rights in foreign jurisdictions. Consequently, we may not be able to prevent third parties from 
practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United 
States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own 
products and may also export infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United 
States. These products may compete with our products and our patents or other intellectual property rights may not be effective or sufficient to prevent 
them from competing. 

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal 

systems of many other countries do not favor the enforcement of patents and other intellectual property protection, particularly those relating to 
biotechnology, which could make it difficult for us to stop the infringement of our patents in such countries. Proceedings to enforce our patent rights in 
foreign jurisdictions could result in substantial cost and divert our efforts and attention from other aspects of our business, could put our patents at risk of 
being invalidated or interpreted narrowly and our patent applications at risk of not issuing, and could provoke third parties to assert claims against us. We 
may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our 
efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual 
property that we develop or license. 

Changes in patent law in the United States and other jurisdictions could diminish the value of patents in general, thereby impairing our ability to 
protect our products and services. 

Changes in either the patent laws or in interpretations of patent laws in the United States or other countries or regions may diminish the value of our 

intellectual property. We cannot predict the breadth of claims that may be allowed or enforced in our patents or in third-party patents. In addition, a third 
party that files a patent application before us could be awarded a patent covering an invention of ours even if we had made the invention before it was made 
by such third party. This will require us to be cognizant of the time from invention to filing of a patent application. Since patent applications in the United 
States and most other countries are confidential for a period of time after filing or until issuance, we cannot be certain that we or our licensors were the first 
to either file any patent application related to our products or services or invent any of the inventions claimed in our or our licensor’s patents or patent 
applications. 

Third parties may also submit prior art to the USPTO during patent prosecution to attack the validity of a patent and it is also possible in the United 
States and other countries for third parties to challenge granted patents through Patent Office proceedings such as, in the United States, post-grant review, 
inter partes review and derivation proceedings. In the United States, a lower evidentiary standard is imposed in USPTO proceedings compared to the 
evidentiary standard in U.S. federal courts necessary to invalidate a patent claim. As such, a third party could potentially provide evidence in a USPTO 
proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented 
in a district court action. Accordingly, a third party may attempt to use the USPTO procedures to invalidate our patent claims that would not have been 
invalidated if first challenged by the third party as a defendant in a district court action. The uncertainties and costs surrounding the prosecution of our 
owned or in-licensed patent applications and the enforcement or defense of our owned or in-licensed issued patents could have a material adverse effect on 
our business. 

79

Recent U.S. Supreme Court rulings have also narrowed the scope of patent protection available in certain circumstances and weakened the rights of 
patent owners in certain situations, including with respect to naturally occurring biological molecules such as the immune cell receptors which are a focus 
of our immune medicine platform. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events 
has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts and the 
USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce 
our existing patents and patents that we might obtain in the future. 

Issued patents covering our products and services could be found invalid or unenforceable if challenged. 

The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability and some of our patents or patent applications, 

including licensed patents, may be challenged, in courts or patent offices in the United States and abroad, in opposition, derivation, reexamination, inter 
partes review, post-grant review or interference. Additionally, if we and our licensing partners initiate or become involved in legal proceedings against a 
third party to enforce a patent covering one of our products or technologies, the defendant could counterclaim that the patent covering our product is invalid 
or unenforceable. In patent litigation in the United States, counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity 
challenge could be an alleged failure to meet any of several statutory requirements, including patent eligible subject matter, lack of novelty, obviousness or 
non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant 
information from the USPTO, or made a misleading statement, during prosecution. In addition, the United States now awards patent priority to the first 
party to file a patent application, and others may submit patent claims covering our inventions prior to us. The outcome following legal assertions of 
invalidity and unenforceability is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior 
art, of which we and the patent examiner were unaware during prosecution. A successful third-party challenge to our patents could result in the 
unenforceability or invalidity of such patents, which could have a material adverse impact on our business. Furthermore, if the breadth or strength of 
protection provided by our patents and patent applications is threatened, regardless of the outcome, it could dissuade companies from collaborating with us 
to license, develop or commercialize current or future products and services. 

We may not be aware of all third-party intellectual property rights potentially relating to our immune medicine platform, products and services. 

Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other 
jurisdictions are typically not published until approximately 18 months after filing or, in some cases, not until such patent applications issue as patents. We 
might not have been the first to make the inventions covered by each of our pending patent applications and we might not have been the first to file patent 
applications for these inventions. To determine the priority of these inventions, we may have to participate in interference proceedings, derivation 
proceedings or other post-grant proceedings declared by the USPTO. The outcome of such proceedings is uncertain, and other patent applications may have 
priority over our patent applications. Such proceedings could also result in substantial costs to us and divert our management’s attention and resources. 

We rely on licenses from third parties in relation to certain products and services and if we lose these licenses then we may be subjected to future 
litigation. 

We are a party to license agreements that grant us rights to use certain intellectual property, including patents and patent applications, typically in 
certain specified fields of use. Some of those licensed rights could provide us with freedom to operate for aspects of our products and services. We may 
need to obtain additional licenses from others to advance our research, development and commercialization activities. 

Our success may depend in part on the ability of our licensors to obtain, maintain and enforce patent protection for our licensed intellectual property. 

Our licensors may not successfully prosecute the patent applications we license. Even if patents issue in respect of these patent applications, our licensors 
may fail to maintain these patents, may determine not to pursue litigation against other companies that are infringing these patents or may pursue such 
litigation less aggressively than we would. Without protection for the intellectual property we license, other companies might be able to offer substantially 
identical products for sale, which could adversely affect our competitive business position and harm our business prospects. 

Any of the foregoing could have a material adverse effect on our competitive position, business, financial conditions, results of operations and 

prospects. 

Moreover, disputes may also arise between us and our licensors regarding intellectual property subject to a license agreement, including: 

•

the scope of rights granted under the license agreement and other interpretation-related issues; 

• whether, and the extent to which, our products, services, technology and processes infringe on intellectual property of the licensor that is 

not subject to the licensing agreement; 

80

•

•

•

•

our right to sublicense patent and other rights to third parties under collaborative development relationships; 

our diligence obligations under the license agreement and what activities satisfy those diligence obligations; 

the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors 
and us and our collaborators; and 

the priority of invention of patented technology. 

If we do not prevail in such disputes, we may lose any or all of our rights under such license agreements. 

In addition, the agreements under which we currently license intellectual property or technology from third parties are complex and certain 

provisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise 
could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology, or increase what we believe to be our 
financial or other obligations under the relevant agreement, either of which could have a material adverse effect on our business, financial condition, results 
of operations and prospects. Moreover, if disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current 
licensing arrangements on commercially acceptable terms, we may be unable to successfully develop and commercialize any affected products or services, 
which could have a material adverse effect on our business, financial conditions, results of operations and prospects. 

Absent the license agreements, we may infringe patents subject to those agreements, and if the license agreements are terminated, we may be subject 

to litigation by the licensor. Litigation could result in substantial costs to us and distract our management. If we do not prevail, we may be required to pay 
damages, including treble damages, attorneys’ fees, costs and expenses and royalties or be enjoined from selling our products or services, which could 
adversely affect our ability to offer products or services, our ability to continue operations and our financial condition. 

If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed. 

In addition to patent protection, we take steps to protect our intellectual property and proprietary technology by entering into agreements, including 

confidentiality agreements, non-disclosure agreements and intellectual property assignment agreements, with our employees, consultants, collaborators, 
academic institutions, life sciences research partners and, when needed, our advisers as well as other third parties. However, we cannot be certain that such 
agreements have been entered into with all relevant parties, and we cannot be certain that our trade secrets and other confidential proprietary information 
will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information 
and techniques. 

For example, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not 

be able to obtain adequate remedies for such breaches. Such agreements may not be enforceable or may not provide meaningful protection for our trade 
secrets or other proprietary information in the event of unauthorized use or disclosure or other breaches of the agreements, and we may not be able to 
prevent such unauthorized disclosure. If we are required to assert our rights against such party, it could result in significant cost and distraction. Monitoring 
unauthorized disclosure is difficult, and we do not know whether the steps we have taken to prevent such disclosure are, or will be, adequate. If we were to 
enforce a claim that a third party had illegally obtained and was using our trade secrets, it would be expensive and time-consuming, and the outcome would 
be unpredictable. In addition, courts outside the United States may be less willing to protect trade secrets. 

We also seek to preserve the integrity and confidentiality of our confidential proprietary information by maintaining physical security of our 
premises and physical and electronic security of our information technology systems. Besides the possibility that these security measures could be 
breached, such measures may not, for example, in the case of misappropriation of a trade secret by an employee or third party with authorized access, 
provide adequate protection for our proprietary information. Our security measures may also not prevent an employee or consultant from misappropriating 
our trade secrets and providing them to a competitor, and recourse we take against such misconduct may not provide an adequate remedy to protect our 
interests fully. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret can be difficult, expensive and time-consuming, and the 
outcome is unpredictable. In addition, trade secrets may be independently developed by others in a manner that could prevent legal recourse by us. If any of 
our confidential or proprietary information, such as our trade secrets, were to be disclosed or misappropriated, or if any such information was 
independently developed by a competitor, our competitive position could be harmed. 

Certain former employees have obtained employment with companies or academic institutions that could be considered competitive with us. This 

competition may be limited by contractual provisions which may or may not be enforceable by us in certain jurisdictions. In addition, we may not be aware 
of such competitive employment arrangements until after our trade secrets have been disclosed to potentially competitive companies. 

81

We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of 
third parties or that our employees have wrongfully used or disclosed alleged trade secrets of their former employers. 

We employ, and expect to employ in the future, individuals who were previously employed at universities or other companies, including our 

competitors or potential competitors. Although we try to ensure that our employees, consultants and independent contractors do not use the proprietary 
information or know-how of others in their work for us, we may be subject to claims that our employees, consultants or independent contractors have 
inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers or other third parties, or to claims that 
we have improperly used or obtained such trade secrets. Litigation may be necessary to defend against these claims. If we fail in defending such claims, in 
addition to paying monetary damages, we may lose valuable intellectual property rights or personnel, which could adversely impact our business. A loss of 
key research personnel work product could hamper or prevent our ability to commercialize potential products and services, which could harm our business. 
Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management and other 
employees. 

We may not be able to protect and enforce our trademarks. 

We have not yet registered certain of our trademarks in all of our potential markets, although we have registered Adaptive Biotechnologies, 
clonoSEQ, immunoSEQ, pairSEQ and other trademarks in the United States, the EU and a number of other countries and are seeking to register additional 
trademarks, including our new corporate logos and certain slogans. As we apply to register our unregistered trademarks in the United States and other 
countries, our applications may not be allowed for registration in a timely fashion or at all, and our registered trademarks may not be maintained or 
enforced. In addition, opposition or cancellation proceedings may be filed against our trademark applications and registrations, and our trademarks may not 
survive such proceedings. In certain countries outside of the United States, trademark registration is required to enforce trademark rights. If we do not 
secure registrations for our trademarks, we may encounter more difficulty in enforcing them against third parties than we otherwise would. 

We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property. 

We or our licensors may be subject to claims that former employees, collaborators or other third parties have an interest in our owned or in-licensed 
patents, trade secrets or other intellectual property as an inventor or co-inventor. Ownership disputes may arise, for example, from conflicting obligations of 
employees, consultants or others who are involved in developing our future products and services. 

Litigation may be necessary to defend against these and other claims by a third party challenging inventorship of our or our licensors’ ownership of 
our owned or in-licensed patents, trade secrets or other intellectual property. If we or our licensors fail in defending any such claims, in addition to paying 
monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, intellectual property that is important 
to our product or services. Alternatively, we may need to obtain one or more additional licenses from the third party which will be time-consuming and 
expensive and could result in substantial costs and diversion of resources and could have a material adverse effect on our business. Even if we are 
successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees. Any of the 
foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects. 

If we become involved in patent litigation or other proceedings related to a determination of rights, we could incur substantial costs and expenses, 
substantial liability for damages or be required to stop our development and commercialization efforts of our products and services. 

There is a substantial amount of litigation, both within and outside the United States, involving patent and other intellectual property rights in the 

life sciences, clinical diagnostics and drug discovery industries, including patent infringement lawsuits, declaratory judgment litigation and adversarial 
proceedings before the USPTO, including interferences, derivation proceedings, ex parte reexaminations, post-grant review and inter partes review, as well 
as corresponding proceedings in foreign courts and foreign patent offices. 

We are currently involved in appeals from Opposition Proceedings at the European Patent Office related to four of our patents: EP2364368, 
EP2387627, EP3059337, and EP3144673. We may, in the future, become involved with litigation or actions at the USPTO or foreign patent offices with 
various third parties. We expect that the number of such claims may increase as our industry expands, more patents are issued, the number of products or 
services increases and the level of competition in our industry increases. Any infringement claim, regardless of its validity, could harm our business by, 
among other things, resulting in time-consuming and costly litigation, diverting management’s time and attention from the development of our business, 
requiring the payment of monetary damages (including treble damages, attorneys’ fees, costs and expenses) or royalty payments. 

82

It may be necessary for us to pursue litigation or adversarial proceedings before the patent office in order to enforce our patent and proprietary rights 

or to determine the scope, coverage and validity of the proprietary rights of others. The outcome of any such litigation might not be favorable to us, and 
even if we were to prevail, such litigation could result in substantial costs and diversion of resources and could have a material adverse effect on our 
business, operating results or financial condition. 

As we move into new markets and expand our products or services offerings, incumbent participants in such markets may assert their patents and 

other proprietary rights against us as a means of slowing our entry into such markets or as a means to extract substantial license and royalty payments from 
us. In addition, future litigation may involve patent holding companies or other adverse patent owners who have no relevant product or service revenue and 
against whom our own patents may provide little or no deterrence or protection. 

Third parties may assert that we are employing their proprietary technology without authorization. Given that clinical diagnostics and drug 

discovery fields are intense and highly competitive areas, there may be third-party intellectual property rights that others believe could relate to our immune 
medicine platform, products and services. We have been approached on four occasions with an offer from a third-party patent owner or licensee to license 
rights to us under patents relating to immune medicine. We have been contacted by Invivoscribe, Inc. regarding U.S. Pat. No. 7,785,783 on March 24, 
2012; by Keygene NV regarding U.S. Pat. No. 9,453,256 on October 10, 2016; by MorphoSys AG regarding EP Patent 2243030 and U.S. Pat. No. 
9,404,929 on October 10, 2018; and by DName-iT NV regarding EP Patent 2201143 and U.S. Pat. No. 8,318,434 in December 2018. In each instance, we 
have declined to pursue licenses to the patents and the matters have not been pursued further. One or more of these or other third-party patent owners or 
licensees may pursue or threaten to pursue litigation against us to enforce one or more patents. It would be costly and time-consuming to defend such 
claims. 

Because patent applications can take many years to issue, there may be currently pending patent applications which may later result in issued patents 

that our current or future products, technologies and services may infringe. We cannot be certain that we have identified or addressed all potentially 
significant third-party patents in advance of an infringement claim being made against us. In addition, similar to what other companies in our industry have 
experienced, we expect our competitors and others may have patents or may in the future obtain patents and claim that making, having made, using, selling, 
offering to sell or importing our products or services infringes these patents. Defense of infringement and other claims, regardless of their merit, would 
involve substantial litigation expense and would be a substantial diversion of management and employee resources from our business. Parties making 
claims against us may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater 
resources. Parties making claims against us may be able to obtain injunctive or other relief, which could block our ability to develop, commercialize and 
sell products or services and could result in the award of substantial damages against us, including treble damages, attorneys’ fees, costs and expenses if we 
are found to have willfully infringed. In the event of a successful claim of infringement against us, we may be required to pay damages and ongoing 
royalties and obtain one or more licenses from third parties, or be prohibited from selling certain products or services. We may not be able to obtain these 
licenses on acceptable or commercially reasonable terms, if at all, or these licenses may be non-exclusive, which could result in our competitors gaining 
access to the same intellectual property. In addition, we could encounter delays in product or service introductions while we attempt to develop alternative 
products or services to avoid infringing third-party patents or proprietary rights. Defense of any lawsuit or failure to obtain any of these licenses could 
prevent us from commercializing products or services, and the prohibition of sale of any of our products or services could materially affect our business 
and our ability to gain market acceptance for our products or services. 

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of 

our confidential information could be compromised by disclosure during this type of litigation. In addition, during the course of this kind of litigation, there 
could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive 
these results to be negative, it could have a substantial adverse effect on the price of our common stock. 

In addition, our agreements with some of our customers, suppliers or other entities with whom we do business require us to defend or indemnify 

these parties to the extent they become involved in infringement claims, including the types of claims described above. We could also voluntarily agree to 
defend or indemnify third parties in instances where we are not obligated to do so if we determine it would be important to our business relationships. If we 
are required or agree to defend or indemnify third parties in connection with any infringement claims, we could incur significant costs and expenses that 
could adversely affect our business, operating results or financial condition. 

83

Patent terms may be inadequate to protect our competitive position on our products and services for an adequate amount of time. 

Patents have a limited lifespan. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years 

from its earliest U.S. non-provisional filing date. Various extensions may be available, but the life of a patent, and the protection it affords, is limited. Even 
if patents covering our products and services are obtained, once the patent life has expired, we may be open to competition from competitive products. 
Given the amount of time required for the development, testing and regulatory review of new products and services, patents protecting such products and 
services might expire before or shortly after such products and services are commercialized. As a result, our owned and licensed patent portfolio may not 
provide us with sufficient rights to exclude others from commercializing products similar or identical to ours. 

84

Risks Relating to our Common Stock and Capital Structure

The market price of our common stock is volatile and is likely to continue to fluctuate substantially. 

The market price of our common stock has been and is likely to continue to be highly volatile, with a 52-week high closing price of $28.90 and a 52-

week low closing price of $6.26 and may fluctuate substantially due to many factors, many of which are beyond our control. These factors include: 

•

•

•

•

the commencement or termination of our collaborations; 

the timing of achievement of specified milestones in the development of our products and services; 

introductions of new or expanded products or services or new pricing policies by us or by our competitors; 

changes in the status of our regulatory clearances, authorizations, approvals or applications, or those jointly developed with our 
collaborators; 

• where required, the results of clinical trials of our future products and services, those jointly developed with our collaborators or those of 

our competitors; 

the success of competitive products or technologies; 

announcements by us or our competitors of significant acquisitions, collaborators or divestitures; 

changes in governmental regulations and regulatory or legal developments in the United States and other countries; 

developments or disputes concerning patent applications, issued patents or other proprietary rights; 

the recruitment or departure of key personnel; 

actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts; 

variations in our financial results or those of companies that are perceived to be similar to us; 

changes in the structure of healthcare payment systems; 

•

•

•

•

•

•

•

•

• market conditions in the life sciences, clinical diagnostics or drug discovery industry; 

•

•

•

•

general economic, industry and market conditions; 

sales of our securities, including sales by our directors, officers or significant shareholders; 

speculation about our business in the media or the investment community; and 

other factors, including factors unrelated to our operating performance or the operating performance of our competitors. 

In recent years, the stock markets generally have experienced extreme price and volume fluctuations that have often been unrelated or 

disproportionate to the operating performance of listed companies. If the market for stock in our industry or the stock market in general experiences uneven 
investor confidence, the market price of our common stock could decline for reasons unrelated to our business, operating results or financial condition. The 
market price of our common stock might also decline in reaction to events that affect other companies within, or outside, our industry even if these events 
do not directly affect us. Any decline in the market price of our common stock may impair our ability to raise capital through the sale of equity securities. 

In the past, securities class action litigation has often been instituted against companies following periods of volatility in their stock price. This type 
of litigation, if instituted against us, could result in substantial costs to us and divert our management’s attention and resources, which could seriously harm 
our business, financial condition, results of operations and prospects. 

Our  Purchase  Agreement  with  OrbiMed  could  limit  cash  flow  available  for  our  operations  and  expose  us  to  risks  that  could  adversely  affect  our 
business, financial condition and results of operations.

Our obligations under the Purchase Agreement could have significant negative consequences for our security holders and our business, results of 

operations and financial condition by, among other things: 

•

requiring the dedication of a portion of our cash flow from operations to service the Purchase Agreement obligations, which will reduce the 
amount of cash available for other purposes, and if our cash inflows and capital resources are insufficient to allow us to make required 
payments, we may have to reduce or delay additional investments in our operations or seek additional capital;

•

increasing our vulnerability to adverse economic and industry conditions;

85

•

•

•

limiting our ability to obtain additional financing;

placing us at a possible competitive disadvantage with competitors that are less leveraged than us or have better access to capital; and

if we fail to comply with the terms of the Purchase Agreement, resulting in an event of default that is not cured or waived, the Purchasers 
could seek to enforce their security interest. 

In addition, the Purchase Agreement contains customary affirmative and negative non-financial covenants and events of default, including 

covenants and restrictions that, among other things, grant a first-position security interest in our core assets and restrict our ability to incur liens, incur 
additional indebtedness, make loans and investments, make certain restricted payments or transfer core assets. Additionally, the Purchasers under the 
Purchase Agreement have an option (the "Put Option") to terminate the Purchase Agreement and to require us to repurchase future Revenue Interests at a 
price of 120% to 175% of Cumulative Purchaser Payments, less the sum of all Revenue Interest Payments made by us to the Purchasers prior to such date, 
upon enumerated events such as a bankruptcy event, a material judgment against us, a material divestiture or a change of control. The triggering of the Put 
Option, including by our failure to comply with these covenants, could permit the Purchasers to declare certain amounts to be immediately due and 
payable. 

If securities analysts do not publish research or reports about our business, or we are the subject of negative publicity, the price of our stock could 
decline. 

The trading market for our common stock depends, in part, on the research and reports that securities or industry analysts publish about us or our 

business. We do not control these analysts. If one or more of the analysts who cover us downgrade our stock or publish inaccurate or unfavorable 
evaluations of our company or our stock, the price of our stock could decline. If one or more of these analysts cease coverage of our company or fail to 
publish reports covering our company regularly, our stock may lose visibility in the market, which in turn could cause our stock price to decline. In 
addition, if we are the subject of negative publicity, whether from an analyst, academic, industry group or the general or financial press, our stock price may 
decline.

If our estimates or judgments relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our operating 
results could fall below our publicly announced guidance or the expectations of securities analysts and investors, resulting in a decline in the market 
price of our common stock. 

The preparation of consolidated financial statements in conformity with generally accepted accounting principles in the United States of America 

(“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and 
accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the 
circumstances, the results of which form the basis for making judgments about the carrying values of assets, liabilities, equity, revenue and expenses that 
are not readily apparent from other sources. If our assumptions change or if actual circumstances differ from our assumptions, our operating results may be 
adversely affected and could fall below our publicly announced guidance or the expectations of securities analysts and investors, resulting in a decline in 
the market price of our common stock and potentially impair our ability to raise capital through the sale of equity securities.

86

Substantial future sales or perceived potential sales of our common stock or other equity securities in the public market could cause the price of our 
common stock to decline significantly. 

Sales of substantial amounts of our common stock or other equity securities in the public market, particularly by our directors, executive officers and 

significant shareholders, including upon the expiration of any lock-up periods entered into in connection with offerings of our common stock or other 
equity securities, or the perception that these sales could occur, could materially and adversely affect the price of our common stock and impair our ability 
to raise capital through the sale of equity securities. 

We are subject to financial reporting and other requirements for which our accounting and other management systems and resources may not be 
adequately prepared. 

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”), we are required to furnish a report by our management on our internal 

control over financial reporting, including an attestation report on internal control over financial reporting issued by our independent registered public 
accounting firm. Our compliance with Section 404 necessitates that we incur substantial accounting expense and expend significant management efforts. 
We will continue to dedicate internal resources, potentially engage outside consultants, and adopt a detailed work plan to assess and document the 
adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are 
functioning as documented, and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our 
efforts, there is a risk that neither we nor our independent registered public accounting firm will be able to conclude within the prescribed timeframe that 
our internal control over financial reporting is effective as required by Section 404. This could result in an adverse reaction in the financial markets due to 
a loss of confidence in the reliability of our consolidated financial statements.

We are also required to maintain disclosure controls and procedures. Disclosure controls and procedures means our controls and other procedures 

that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, 
processed, summarized and reported, within the time periods specified in the rules and forms of the SEC. We do not expect that our disclosure controls and 
procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. We believe a control system, no matter how well-
designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Due to the inherent limitations 
in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control 
issues and instances of fraud, if any, have been detected. The design of any system of controls is based in part on certain assumptions about the likelihood 
of future events, and any design may not succeed in achieving its stated goals under all potential future conditions. Over time, controls may become 
inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Accordingly, because of the inherent 
limitations in our control system, misstatements due to error or fraud may occur and not be detected. 

Evolving expectations around corporate responsibility practices, specifically related to environmental, social and governance (“ESG”) matters, may 
expose us to reputational and other risks.

Investors, shareholders, customers, suppliers and other third parties are increasingly focusing on ESG and corporate social responsibility endeavors 
and reporting. Certain institutional investors, investment funds, other influential investors, customers, suppliers and other third parties are also increasingly 
focused on ESG practices. In particular, third party proxy advisory services which focus on shareholder rights provisions, such as majority voting, annual 
election of directors, and overboarding of outside directors, have recommended against voting for our directors in past elections as a result of our 
governance profile. 

Companies that do not adapt to or comply with the evolving investor or stakeholder expectations and standards, or which are perceived to have not 

responded appropriately, may suffer from reputational damage and result in the business, financial condition and/or stock price of a company being 
materially and adversely affected. Further, this increased focus on ESG issues may result in new regulations and/or third-party requirements that could 
adversely impact our business, or certain shareholders reducing or eliminating their holdings of our stock. Additionally, an allegation or perception that we 
have not taken sufficient action in these areas could negatively harm our reputation.

Companies across all industries are facing increasing scrutiny relating to their ESG policies. If we are perceived to have not responded appropriately 

to the growing concern for governance issues, investors may reconsider their capital investment as a result of their assessment of our practices, and our 
reputation, business, financial condition, results of operations and cash flows may be adversely affected.

87

Provisions in our charter documents and Washington law could make an acquisition of our company more difficult and limit attempts by our 
shareholders to replace or remove our current management. 

Our amended and restated articles of incorporation (“Articles of Incorporation”) and our amended and restated bylaws (“Bylaws”), as well as 

Washington law, contain provisions that may have the effect of deterring takeovers or delaying or preventing a change in control of us or changes in our 
management that a shareholder might deem to be in his or her best interest. Our Articles of Incorporation and Bylaws contain provisions that: 

•

•

•

•

•

•

•

•

•

•

authorize “blank check” preferred stock, which could be issued by our board of directors without shareholder approval and may contain 
voting, liquidation, dividend and other rights superior to our common stock; 

create a classified board of directors whose members serve staggered three-year terms, with one class being elected each year by our 
shareholders; 

specify that special meetings of our shareholders can be called only by our board of directors, the Chairperson of our board of directors, our 
chief executive officer or our president; 

provide that a director may only be removed from the board of directors for cause and then only by the affirmative vote of our shareholders; 

provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even if less than a quorum; 

specify that only our board of directors may change the size of our board of directors; 

establish an advance notice procedure for shareholder proposals to be brought before an annual meeting of our shareholders, including 
proposed nominations of persons for election to our board of directors; 

specify that no shareholder is permitted to cumulate votes at any election of directors; 

expressly authorize our board of directors to modify, alter or repeal our Bylaws; and 

require supermajority votes of the holders of our common stock to amend specified provisions of our Articles of Incorporation and Bylaws. 

These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management or our board of 

directors. 

In addition, because we are incorporated in the State of Washington, we are governed by the provisions of Chapter 23B.19 of the Washington 

Business Corporation Act (“WBCA”), which prohibits certain business combinations between us and certain significant shareholders unless specified 
conditions are met. These provisions may also have the effect of delaying or preventing a change in control of our company. 

Any provision of our Articles of Incorporation or Bylaws or Washington law that has the effect of delaying or deterring a change in control could 

limit the opportunity for our shareholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are 
willing to pay for our common stock. 

Our Articles of Incorporation provide that the state courts located in King County, Washington and, to the extent enforceable, the federal district courts 
of the United States of America will be the exclusive forums for substantially all disputes between us and our shareholders, which could limit our 
shareholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees. 

Our Articles of Incorporation provide that, unless we consent in writing to the selection of an alternative forum, the state courts located in King 

County, Washington (or, if the state courts located within King County, Washington do not have jurisdiction, the federal district court for the Western 
District of Washington) shall be the sole and exclusive forum for commencing and maintaining any proceeding (1) asserting a claim based on a violation of 
a duty under the laws of the State of Washington by any of our current or former directors, officers or shareholders in such capacity, (2) commenced or 
maintained in the right of our corporation, (3) asserting a claim arising pursuant to any provision of the WBCA, our Articles of Incorporation or our Bylaws 
(as either may be amended from time to time) or (4) asserting a claim concerning our internal affairs that is not included in clauses (1) through (3) above, in 
all cases to the fullest extent permitted by law and subject to the court having personal jurisdiction over the indispensable parties named as defendants. 
These provisions would not apply to suits brought to enforce a duty or liability created by the Exchange Act, or any other claim for which the federal courts 
have exclusive jurisdiction. 

Our Articles of Incorporation provide that the federal district courts of the United States of America will be the exclusive forum for resolving any 

complaint asserting a cause of action arising under the Securities Act of 1933, as amended (“Securities Act”), subject to applicable law. 

88

Any person or entity purchasing or otherwise acquiring any interest in any of our securities shall be deemed to have notice of and consented to these 

provisions. Our exclusive forum provision will not relieve us of our duties to comply with the federal securities laws and the rules and regulations 
thereunder, and our shareholders will not be deemed to have waived our compliance with these laws, rules and regulations. These exclusive-forum 
provisions may limit a shareholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or our directors, officers or other 
employees, which may discourage lawsuits against us and our directors, officers and other employees or cause shareholders to incur additional costs to 
bring claims in the forums designated in our Articles of Incorporation. 

If a court were to find these exclusive-forum provisions in our Articles of Incorporation to be inapplicable or unenforceable in an action, we may 
incur additional costs associated with resolving the dispute in other jurisdictions, which could harm our results of operations. While the Delaware courts 
have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a jurisdiction other than 
those designated in the exclusive forum provision, and the provision may not be enforced by a court in that jurisdiction. It is unclear whether Washington 
courts would reach a similar conclusion under Washington law. Even if we are successful in defending against these claims, litigation could result in 
substantial costs and be a distraction to management and other employees. 

Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may 
reduce the amount of money available to us. 

Our Articles of Incorporation provide that we will indemnify our directors and officers to the fullest extent permitted by Washington law. 

In addition, as permitted by Section 23B.08.510 through Section 23B.08.570 of the WBCA, our Articles of Incorporation and our indemnification 

agreements that we have entered into with most of our directors and officers provide that: 

• We will indemnify our directors and officers for serving us in those capacities or for serving other business enterprises at our request, to the 
fullest extent permitted by Washington law. Washington law provides that a corporation may indemnify such person if such person acted in 
good faith and in a manner such person reasonably believed to be in or not opposed to our best interests and, with respect to any criminal 
proceeding, had no reasonable cause to believe such person’s conduct was unlawful; 

• We may, in our discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable law; 

• We are required to advance expenses, as incurred, to our directors and officers in connection with defending a proceeding, except that such 
directors or officers shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification; 

• The rights conferred in our Articles of Incorporation are not exclusive, and we are authorized to enter into indemnification agreements with 

our directors, officers, employees and agents and to obtain insurance to indemnify such persons; and 

• We may not retroactively amend our Articles of Incorporation provisions to reduce our indemnification obligations to directors, officers, 

employees and agents. 

Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole 
source of gain. 

We currently intend to retain all available funds and any future earnings to support operations and to finance the growth and development of our 

business, and do not anticipate paying any cash dividends on our common stock for the foreseeable future. In addition, the terms of any future debt 
agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the 
foreseeable future. 

89

Item 1B. Unresolved Staff Comments

Not applicable.

Item 2. Properties

Our corporate headquarters is located in Seattle, Washington, where we lease approximately 100,000 square feet. The lease expires in August 2033, 
subject to our option to twice extend the lease for five years. In a separate Seattle, Washington location, we lease approximately 65,500 square feet pursuant 
to a lease that expires October 2032, subject to two options to extend the lease for five years. Both of our Seattle, Washington locations contain office and 
laboratory space.

We also lease approximately 27,000 square feet of a warehouse in Bothell, Washington. The lease expires in October 2031, subject to an early 

termination option in 2028 and an option to twice extend the lease for five years.

Additionally, we lease approximately 33,300 square feet of laboratory and office space in South San Francisco, California, pursuant to an amended 

lease that expires March 2026, subject to our option to extend the lease for five years.

We also lease approximately 3,100 square feet of office space in New York City, New York, pursuant to a lease that expires November 2025, subject 

to our ability to exercise an early termination right in 2023.

Item 3. Legal Proceedings

From time to time, we may be subject to legal proceedings. We are not currently a party to or aware of any proceedings that we believe will have, 

individually or in the aggregate, a material adverse effect on our business, financial condition or results of operations. Regardless of outcome, litigation can 
have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

Item 4. Mine Safety Disclosures

Not applicable.

90

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information for Common Stock

Our common stock began trading on The Nasdaq Global Select Market under the symbol “ADPT” on June 27, 2019. Prior to that date, there was no 

PART II

public trading market for our common stock.

Holders of Record

As of February 9, 2023, there were approximately 96 holders of record of our common stock. Because many of our shares of common stock are held 

by brokers and other institutions on behalf of shareholders, we are unable to estimate the total number of shareholders represented by these record holders.

Dividend Policy

We currently intend to retain all available funds and any future earnings to fund the growth and development of our business. We do not intend to 

pay cash dividends to our shareholders in the foreseeable future. Any future determination to declare dividends will be made at the discretion of our board 
of directors and will depend on our financial condition, operating results, capital requirements, general business conditions and other factors that our board 
of directors may deem relevant. Our future ability to pay cash dividends on our common stock may also be limited by the terms of any future debt 
securities, preferred stock or credit facility.

Stock Performance Graph

The graph below compares the cumulative total shareholder return on our common stock with the cumulative total return on the NASDAQ 
Composite Index and the NASDAQ Biotechnology Index. The graph assumes $100 was invested in our common stock at the market close on June 27, 
2019, which was our initial trading day. Data for the NASDAQ Composite Index and the NASDAQ Biotechnology Index assume reinvestment of 
dividends. The offering price of our common stock in our initial public offering, which had a closing stock price of $40.30 on June 27, 2019, was $20.00 
per share. The stock price performance below is based upon historical data and is not necessarily indicative of, nor intended to forecast, future performance 
of our common stock.

This graph shall not be deemed to be “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Exchange Act or 

incorporated by reference into any filing of Adaptive Biotechnologies Corporation under the Securities Act or the Exchange Act.

Item 6. [Reserved]

Not applicable.

91

 
 
 
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial 
statements and related notes and the other financial information appearing elsewhere in this Annual Report on Form 10-K, as well as the other financial 
information we file with the Securities and Exchange Commission ("SEC") from time to time. Some of the information contained in this discussion and 
analysis or set forth elsewhere in this report, including information with respect to our plans and strategy for our business and related financing, includes 
forward-looking statements that involve risks and uncertainties relating to our future plans, objectives, expectations, intentions and financial performance 
and the assumptions that underlie these statements. As a result of many factors, including those factors set forth in the “Risk Factors” section of this 
Annual Report on Form 10-K, our actual results could differ materially from the results described in or implied by the forward-looking statements 
contained in the following discussion and analysis.

This section generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021. Discussions of 2020 items and year-

to-year comparisons between 2021 and 2020 may be found in Part II, Item 7 under the caption "Management's Discussion and Analysis of Financial 
Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 15, 2022.

Overview

We are advancing the field of immune medicine by harnessing the inherent biology of the adaptive immune system to transform the diagnosis and 

treatment of disease. We believe the adaptive immune system is nature’s most finely tuned diagnostic and therapeutic for most diseases, but the inability to 
decode it has prevented the medical community from fully leveraging its capabilities. Our immune medicine platform applies our proprietary technologies 
to read the diverse genetic code of a patient’s immune system and aims to understand precisely how the immune system detects and treats disease in that 
patient. We capture these insights in our dynamic clinical immunomics database, which is underpinned by computational biology and machine learning, 
and use them to develop and commercialize clinical products and services that we are tailoring to each individual patient. We have commercial products 
and services and a robust pipeline of clinical products and services that we are designing to diagnose, monitor and enable the treatment of diseases, such as 
cancer and autoimmune disorders. Our existing and future commercial products and services are aligned to two markets which we refer to as MRD and 
Immune Medicine.

Our current product and service offerings in MRD related to the MRD market are our clonoSEQ clinical diagnostic test, offered to clinicians, and 
our clonoSEQ or MRD assay, offered to biopharmaceutical partners to advance drug development efforts (“MRD Pharma”). Our first clinical diagnostic 
product, clonoSEQ, is the first test authorized by the Food and Drug Administration for the detection and monitoring of minimal residual disease (“MRD”) 
in patients with multiple myeloma, B cell acute lymphoblastic leukemia and chronic lymphocytic leukemia, and is also available as a CLIA-validated 
laboratory developed test for patients with other lymphoid cancers, including diffuse large B-cell lymphoma. With the use of clonoSEQ, we are 
transforming how lymphoid cancers are treated by working with providers, pharmaceutical partners and payors. 

Immune Medicine leverages our platform’s proprietary ability to sequence, map, pair and characterize TCRs and BCRs at scale to drive 
opportunities in cancer, autoimmune disorders, infectious diseases and neurodegenerative disorders. The cornerstone of our platform and core 
immunosequencing product, immunoSEQ, serves as our underlying research and development engine and generates revenue from biopharmaceutical and 
academic customers. Leveraging our collaboration with Microsoft Corporation, we are creating the TCR-Antigen Map. We are using the TCR-Antigen 
Map to identify and validate disease signatures to improve the diagnosis and treatment of many diseases. We are focused on expanding and growing our 
revenue and offerings in two areas of growth: IM Pharma Services and Drug Discovery. In IM Pharma Services, we deliver rich TCR and BCR sequencing 
data back to our biopharmaceutical and academic customers. These data inform biomarkers of drug response with the ability to accelerate our customers’ 
clinical development programs in four major therapeutic areas. In Drug Discovery, we use our proprietary capabilities to discover new drug targets and 
leverage our validated TCR and BCR discovery approaches to discover and develop TCR or antibody therapeutic assets. Drug Discovery includes the 
Genentech Agreement. Part of our strategy within Immune Medicine is to develop a diagnostic test for many diseases from a single blood test, known as T-
Detect. In 2022, we decided to defer further commercialization of T-Detect until we have strong enough data in multiple disease states to impact physician 
behavior with a clear path to reimbursement.

We recognized revenue of $185.3 million and $154.3 million for the year ended December 31, 2022 and 2021, respectively. Net loss attributable to 

Adaptive Biotechnologies Corporation was $200.2 million and $207.3 million for the year ended December 31, 2022 and 2021, respectively. We have 
funded our operations to date principally from the sale of convertible preferred stock and common stock and, to a lesser extent, revenue and proceeds from 
the revenue interest purchase agreement. As of December 31, 2022 and 2021, we had cash, cash equivalents and marketable securities of $498.2 million 
and $570.2 million, respectively.

92

Revenue Interest Purchase Agreement

In September 2022, we entered into the Purchase Agreement with OrbiMed. Pursuant to the Purchase Agreement, we received $125.0 million from 
the Purchasers at closing, less certain transaction expenses. We will also be entitled to receive up to $125.0 million in subsequent installments as follows: 
(i) $75.0 million upon our request occurring no later than September 12, 2025 and (ii) $50.0 million upon our request in connection with certain permitted 
acquisitions occurring no later than September 12, 2025, in each case subject to certain funding conditions.

As consideration for such payments, the Purchasers will have a right to receive Revenue Interests from us based on the Applicable Payment 
Percentage of the Revenue Base. If only the First Payment has been made, the Applicable Payment Percentage shall be five percent of the quarterly 
Revenue Base. If both the First Payment and Second Payment have been made, the Applicable Payment Percentage shall be eight percent of the quarterly 
Revenue Base. If each of the First Payment, Second Payment and Third Payment have been made, the applicable payment percentage applied to the 
Revenue Interest shall be ten percent of the quarterly Revenue Base. 

Revenue Interest Payments shall be made quarterly within 45 days following the end of each fiscal quarter. If OrbiMed has not received Revenue 

Interest Payments in the aggregate equal to or greater than the sum of its invested capital on or prior to September 12, 2028, the revenue interest rate shall 
be increased to a rate which, if applied retroactively to our cumulative Revenue Base, would have resulted in Revenue Interest Payments equal to the sum 
of all Cumulative Purchaser Payments.

OrbiMed will be entitled to 100% of the Revenue Interest Payments until it has received a total cumulative value of 165% of the Cumulative 
Purchaser Payments, unless full repayment of the amount of the Return Cap has not been made by September 12, 2032, in which case the Return Cap shall 
be increased to 175% of the Cumulative Purchaser Payments.

In addition, the Purchase Agreement contains various representations and warranties, information rights, non-financial covenants, indemnification 

obligations and other provisions that are customary for a transaction of this nature.

Reduction in Workforce

In March 2022, we began implementing a restructuring plan to reduce operating costs and drive future growth aligned with the strategic 

reorganization of our business around our MRD and Immune Medicine market opportunities. Under this restructuring plan, we reduced our workforce by 
approximately 100 employees. 

We incurred aggregate restructuring costs of $2.0 million, all of which was recognized during the year ended December 31, 2022. These costs 

primarily related to one-time termination benefits and ongoing benefit arrangements, both of which included severance payments and extended benefits 
coverage support and were contingent upon the impacted employees’ execution and non-revocation of separation agreements. Our aggregate restructuring 
costs also included certain contract termination costs.

The activities related to our reduction in workforce were primarily completed in March 2022 and the $2.0 million aggregate restructuring costs were 

paid as of December 31, 2022.

93

Revenue Reclassification and clonoSEQ Test Volume 

We previously disclosed revenue bifurcated into sequencing and development financial statement captions. In 2022, we changed how we classify 

revenue and now present total revenue on our consolidated statements of operations included elsewhere in this Annual Report on Form 10-K. We 
disaggregate revenue under our Immune Medicine and MRD market opportunities in Note 3 of the accompanying notes to our consolidated financial 
statements included elsewhere in this Annual Report on Form 10-K. 

The following tables present the amount of sequencing revenue and development revenue recognized under our Immune Medicine and MRD market 

opportunities for the periods presented (in thousands):

Immune Medicine revenue
Sequencing revenue
Development revenue

Total Immune Medicine revenue

MRD revenue

Sequencing revenue
Development revenue
Total MRD revenue

Total revenue

Immune Medicine revenue
Sequencing revenue
Development revenue

Total Immune Medicine revenue

MRD revenue

Sequencing revenue
Development revenue
Total MRD revenue

Total revenue

December 31,
2021

September 30,
2021

June 30,
2021

March 31,
2021

Three Months Ended

6,860     $
14,514    
21,374    

16,201    
355    
16,556    
37,930     $

8,170     $
15,445    
23,615    

13,936    
1,916    
15,852    
39,467     $

5,404     $
17,635    
23,039    

13,151    
2,315    
15,466    
38,505     $

4,048  
16,057  
20,105  

11,126  
7,211  
18,337  
38,442  

December 31,
2020

September 30,
2020

June 30,
2020

March 31,
2020

Three Months Ended

3,310     $
17,155    
20,465    

9,399    
321    
9,720    
30,185     $

3,691     $
12,438    
16,129    

7,585    
2,585    
10,170    
26,299     $

2,036     $
12,856    
14,892    

5,949    
147    
6,096    
20,988     $

3,170  
11,077  
14,247  

6,299  
364  
6,663  
20,910  

  $

  $

  $

  $

We also previously disclosed the number of clonoSEQ reports provided to ordering physicians in the United States, referred to as “clinical 
sequencing volume” or “clinical sequencing volume, excluding T-Detect COVID volume” in the “Management’s Discussion and Analysis of Financial 
Condition and Results of Operations” section of certain of our SEC filings. In 2022, we changed our disclosures related to volume metrics and now present 
the number of clonoSEQ reports and results we have provided to ordering physicians in the United States and international technology transfer sites, 
collectively referred to as “clonoSEQ test volume.” Our clonoSEQ test volume does not include sample results from our biopharmaceutical customers or 
academic institutions utilizing our MRD services.

The following tables present our clonoSEQ test volume for the periods presented:

Clinical sequencing volume, excluding T-Detect COVID volume
clonoSEQ reports or results provided to international technology transfer sites    

clonoSEQ test volume

Clinical sequencing volume
clonoSEQ reports or results provided to international technology transfer sites    

clonoSEQ test volume

94

December 31,
2021

September 30,
2021

June 30,
2021

March 31,
2021

Three Months Ended

6,356      
494  
6,850      

5,928      
413  
6,341      

5,475      
422  
5,897      

4,757  
543  
5,300  

December 31,
2020

September 30,
2020

June 30,
2020

March 31,
2020

Three Months Ended

4,509      
704  
5,213      

4,023      
375  
4,398      

3,136      
310  
3,446      

3,518  
238  
3,756  

  
 
 
 
 
 
 
 
 
 
   
 
 
 
   
 
   
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
   
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
   
 
   
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
   
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
   
   
   
   
   
 
 
 
 
 
 
 
 
 
 
   
 
   
   
   
   
   
 
Components of Results of Operations 

Revenue 

We derive revenue by providing diagnostic and research services in our Immune Medicine and MRD market opportunities. Our Immune Medicine 
revenue consists of revenue generated from (1) providing sample testing services for our commercial research product, immunoSEQ, to biopharmaceutical 
customers and academic institutions; (2) providing our T-Detect COVID tests to clinical customers; and (3) our collaboration agreements with Genentech 
and other biopharmaceutical customers in areas of drug and target discovery. Our MRD revenue consists of revenue generated from (1) providing our 
clonoSEQ report to clinical customers; (2) providing MRD sample testing services to biopharmaceutical customers and certain academic institutions, 
including investigator-led clinical trials; and (3) providing our clonoSEQ report or results to certain international laboratory sites through technology 
transfers. We disclose our clonoSEQ test volume, which includes the number of clonoSEQ reports and results we have provided to ordering physicians in 
the United States and international technology transfer sites. These volumes do not include sample results from our biopharmaceutical customers or 
academic institutions utilizing our MRD services. 

For our research customers, which include biopharmaceutical customers and academic institutions for both our immunoSEQ and MRD services, 

delivery of the respective test results may include some level of professional support and analysis. Terms with biopharmaceutical customers generally 
include non-refundable payments made in advance of services ("upfront payments"), which we record as deferred revenue. For all research customers, we 
recognize revenue as we deliver sequencing results. From time to time, we offer discounts in order to gain rights and access to certain datasets. Revenue is 
recognized net of these discounts and costs associated with these services are reflected in cost of revenue. In periods where our sample estimates are 
reduced or a customer project is cancelled and, in either case, we have remaining related deferred revenue, we recognize revenue using a cumulative catch-
up approach based on the proportion of samples delivered to date relative to the remaining samples expected to be delivered. Certain of our MRD revenue 
arrangements with biopharmaceutical customers include consideration in the form of regulatory milestones upon regulatory approval of the respective 
biopharmaceutical partners’ therapeutics. Such revenue is constrained from recognition until it becomes probable that such milestone will be achieved.

Under certain agreements with our biopharmaceutical customers who seek access to our platform to support their therapeutic development activities, 
revenues are generated from research and development support services that we provide. These agreements may include substantial non-refundable upfront 
payments, which we recognize over time as we perform the respective services. Revenue recognized from these activities relate primarily to the Genentech 
Agreement.

For our clinical customers, we primarily derive revenue from providing our clonoSEQ report to ordering physicians. We bill commercial, 

government and medical institution payors based on reports delivered to ordering physicians. Amounts paid for clonoSEQ by commercial, government and 
medical institution payors vary based on respective reimbursement rates and patient responsibilities, which may differ from our targeted list price. We 
recognize clinical revenue by evaluating customer payment history, contracted reimbursement rates, if applicable, and other adjustments to estimate the 
amount of revenue that is collectible.

For our clonoSEQ coverage under Medicare, we bill an episode of treatment when we deliver the first eligible test report. This billing contemplates 

all necessary tests required during a patient’s treatment cycle, which is currently estimated at approximately four tests per patient, including the initial 
sequence identification test. Revenue recognition commences at the time the initial billable test report is delivered and is based upon cumulative tests 
delivered to date. Any unrecognized revenue from the initial billable test is recorded as deferred revenue and recognized either as we deliver our estimate 
of the remaining tests in a patient’s treatment cycle or when the likelihood becomes remote that a patient will receive additional testing. 

We expect revenue to increase over the long term. Our revenue may fluctuate from period to period due to the uncertain nature of delivery of our 

products and services, the achievement of milestones by our customers, timing of expenses incurred, changes in estimates of total anticipated costs related 
to the Genentech Agreement and other events not within our control, such as the delivery of customer samples or customer decisions to no longer pursue 
their development initiatives.

Cost of Revenue

Cost of revenue includes the cost of materials, personnel-related expenses (including salaries, benefits and share-based compensation), shipping and 

handling expenses, equipment costs, allocated facility costs associated with processing samples and professional support costs related to our service 
revenue activities. Allocated facility costs include depreciation of laboratory equipment, as well as allocated facility occupancy and information technology 
costs. Costs associated with processing samples are recorded as expense, regardless of the timing of revenue recognition. As such, cost of revenue and 
related volume does not always trend in the same direction as revenue recognition and related volume. Additionally, costs to support the Genentech 
Agreement are a component of our research and development expenses.

95

We expect cost of revenue to increase in absolute dollars as we grow our sample testing volume and make investments in laboratory consolidation 

and facilities, but the cost per sample to decrease over the long term due to the efficiencies we may gain as assay volume increases from improved 
utilization of our laboratory capacity, automation and other value engineering initiatives. If our sample volume throughput is reduced, cost of revenue as a 
percentage of total revenue may be adversely impacted due to fixed overhead costs.

Research and Development Expenses 

Research and development expenses consist of laboratory materials costs, personnel-related expenses (including salaries, benefits and share-based 

compensation), equipment costs, allocated facility costs, information technology expenses and contract service expenses. Research and development 
activities support further development and refinement of existing assays and products, discovery of new technologies and investments in our immune 
medicine platform. We also include in research and development expenses the costs associated with software development of applications to support future 
commercial opportunities, as well as development activities to support laboratory scaling and workflow. We are currently conducting research and 
development activities for several products and services and we typically use our laboratory materials, personnel, facilities, information technology and 
other development resources across multiple development programs. Additionally, certain of these research and development activities benefit more than 
one of our product opportunities. We have not historically tracked research and development expenses by specific product candidates.

A component of our research and development expenses are costs supporting clinical and analytical validations to obtain regulatory approval for 

future clinical products and services. Additionally, the costs to support the Genentech Agreement are a component of our research and development 
expenses. Some of these activities have generated and may in the future generate revenue.

We expect research and development expenses to experience decreases in the short term and to decrease as a percentage of revenue in the long term, 

although the percentage may fluctuate from period to period due to the timing and extent of our development and commercialization efforts.

Sales and Marketing Expenses 

Sales and marketing expenses include personnel-related expenses (including salaries, benefits and share-based compensation) for commercial sales, 

product and account management, marketing, reimbursement, medical education and business development personnel that support commercialization of 
our platform products. In addition, these expenses include external costs such as advertising expenses, customer education and promotional expenses, 
market analysis expenses, conference fees, travel expenses and allocated facility costs. 

We expect sales and marketing expenses to remain relatively consistent in the short term. In the long term, we expect sales and marketing expenses 
to increase in absolute dollars as we increase marketing activities to drive awareness and adoption of our products and services. However, we expect sales 
and marketing expenses to decrease as a percentage of revenue in the long term, subject to fluctuations from period to period due to the timing and 
magnitude of these expenses.

General and Administrative Expenses 

General and administrative expenses include personnel-related expenses (including salaries, benefits and share-based compensation) for our 
personnel in executive, legal, finance and accounting, human resources and other administrative functions, including third-party clinical billing services. In 
addition, these expenses include insurance costs, external legal costs, accounting and tax service expenses, consulting fees and allocated facility costs. 

We expect general and administrative expenses to remain relatively consistent in the short term and to decrease as a percentage of revenue in the 

long term.

Interest Expense

Interest expense includes costs associated with our revenue interest liability and noncash interest costs associated with the amortization of the related 

deferred issuance costs. We impute the related interest expense using the effective interest rate method. We calculate an effective interest rate which will 
amortize our related obligation to zero over the anticipated repayment period. A significant increase or decrease in or changes in timing of forecasted 
revenue will prospectively impact our interest expense.

96

 
Statements of Operations Data and Other Financial and Operating Data

The following table sets forth our statements of operations data and other financial and operating data for the periods presented (in thousands, except 

share and per share amounts):

Statements of Operations Data:
Revenue
Operating expenses
Cost of revenue
Research and development
Sales and marketing
General and administrative
Amortization of intangible assets

Total operating expenses

Loss from operations
Interest and other income, net
Interest expense
Net loss

Add: Net loss attributable to noncontrolling interest

Net loss attributable to Adaptive Biotechnologies Corporation

Net loss per share attributable to Adaptive Biotechnologies Corporation common 
shareholders, basic and diluted
Weighted-average shares used in computing net loss per share attributable to Adaptive 
Biotechnologies Corporation common shareholders, basic and diluted
Other Financial and Operating Data:
(1)
Adjusted EBITDA

2022

Year Ended December 31,
2021

2020

  $

185,308     $

154,344     $

98,382  

57,909    
141,756    
95,603    
88,527    
1,699    
385,494    
(200,186 )  
4,056    
(4,238 )  
(200,368 )  
177    
(200,191 )   $

49,301    
142,343    
95,465    
74,502    
1,699    
363,310    
(208,966 )  
1,668    
—    
(207,298 )  
19    

(207,279 )   $

22,530  
116,072  
61,358  
49,536  
1,703  
251,199  
(152,817 )
6,590  
—  
(146,227 )
—  
(146,227 )

(1.40 )   $

(1.48 )   $

(1.11 )

142,515,917    

140,354,915    

131,216,468  

  $

  $

  $

(121,589 )   $

(151,743 )   $

(119,584 )

(1) Adjusted EBITDA is a non-GAAP financial measure that we define as net loss attributable to Adaptive Biotechnologies Corporation adjusted for interest 
and other income, net, interest expense, income tax (expense) benefit, depreciation and amortization expense, restructuring expense and share-based 
compensation expense. Please refer to “Adjusted EBITDA” below for a reconciliation between Adjusted EBITDA and net loss attributable to Adaptive 
Biotechnologies Corporation, the most directly comparable GAAP financial measure, and a discussion about the limitations of Adjusted EBITDA.

Comparison of the Years Ended December 31, 2022 and 2021

Revenue

(in thousands, except percentages)

Immune Medicine revenue

Service revenue
Collaboration revenue

Total Immune Medicine revenue

MRD revenue

Service revenue
Regulatory milestone revenue

Total MRD revenue
Total revenue

Year Ended December 31,

Change

Percent of Revenue

2022

2021

$

%

2022

2021

  $

31,777     $
66,387    
98,164    

7,295      
24,482     $
63,651      
2,736      
88,133       10,031      

81,144    
6,000    
87,144    

56,211       24,933      
10,000      
(4,000 )    
66,211       20,933      
  $ 185,308     $ 154,344     $ 30,964      

30 %   
4    
11      

44      
(40 )    
32      
20      

53 %   

57 %

47 %   
100 %   

43 %
100 %

The $10.0 million increase in Immune Medicine revenue was primarily due to a $13.6 million increase in revenue generated from our 

biopharmaceutical and academic customers and a $0.8 million increase in revenue generated from the Genentech Agreement due to increased collaboration 
expenses, which were partially offset by a $4.4 million decrease in revenue generated from our T-Detect COVID clinical customers largely related to our 
decision to defer commercialization of T-Detect COVID.

97

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
   
 
   
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
   
   
   
 
 
     
       
     
     
     
 
     
 
 
 
 
     
   
 
 
 
 
     
     
       
     
     
 
 
 
 
     
 
 
 
 
     
 
 
 
 
The $20.9 million increase in MRD revenue was primarily due to a $15.8 million increase in revenue generated from providing our clonoSEQ report 

to clinical customers and a $10.1 million increase in revenue generated from providing MRD sample testing services to biopharmaceutical customers. 
These increases were partially offset by a $4.0 million decrease in revenue recognized upon the achievement of certain regulatory milestones by our 
biopharmaceutical customers' therapeutics and a $1.3 million decrease in revenue generated from providing MRD sample testing services to investigator-
led clinical trials. Our clonoSEQ test volume increased by 51% to 36,871 tests delivered in the year ended December 31, 2022 from 24,388 tests delivered 
in the year ended December 31, 2021.

Cost of Revenue

(in thousands, except percentages)

Cost of revenue

Year Ended December 31,

Change

Percent of Revenue

2022

  $ 57,909     $

2021
49,301     $

$
8,608      

%

2022

2021

17 %   

31 %   

32 %

The $8.6 million increase in cost of revenue was primarily attributable to a $6.0 million increase in labor, overhead and facility costs, a $2.4 million 
increase in cost of materials related to mix to higher cost assays and a $2.0 million increase related to higher usage of our production laboratory to process 
revenue samples versus research and development samples. These increases were partially offset by a $1.3 million decrease in certain sample collection 
costs and a $0.5 million decrease in materials cost, both of which were driven primarily by decreased T-Detect sample volume largely related to our 
decision to defer commercialization of T-Detect COVID.

Research and Development

(in thousands, except percentages)

Research and development
* Decrease is less than 1%

Year Ended December 31,

Change

Percent of Revenue

2022

2021

  $ 141,756     $ 142,343     $

$
(587 )  

%

2022

2021

*%    

76 %   

92 %

The following table presents disaggregated research and development expenses by cost classification for the periods presented: 

(in thousands)
Research and development materials and allocated production laboratory expenses
Personnel expenses
Allocable facilities and information technology expenses
Software and cloud services expenses
Depreciation and other expenses

Total

Year Ended December 31,
2022

2021

Change

  $

  $

43,706     $
68,177    
8,856    
2,678    
18,339    
141,756     $

51,625     $
62,874    
6,363    
3,344    
18,137    
142,343     $

(7,919 )
5,303  
2,493  
(666 )
202  
(587 )

The $0.6 million decrease in research and development expenses was primarily attributable to a $7.9 million decrease in cost of materials and 
allocated production laboratory expenses, which was driven primarily by decreased investments in T-Detect and TCR-Antigen Map development activities, 
drug discovery and clonoSEQ. This decrease was partially offset by a $5.3 million increase in personnel costs, of which $0.7 million related to our 
restructuring activities, and a $2.5 million increase in allocable facility expenses. A $1.8 million increase in depreciation expense and a $1.3 million 
decrease in collaboration and medical advisory costs were the primary drivers of the change in depreciation and other expenses.

Sales and Marketing

(in thousands, except percentages)

Sales and marketing
* Increase is less than 1%

Year Ended December 31,

Change

Percent of Revenue

2022

  $ 95,603     $

2021
95,465     $

$

138    

%

2022

2021

*%    

52 %   

62 %

The modest increase in sales and marketing expenses was primarily attributable to $6.8 million in additional personnel costs, of which $0.9 million 
related to our restructuring activities, as well as a $1.4 million increase in travel and customer event related expenses. These increases were partially offset 
by an $8.0 million decrease in marketing expenses driven primarily by reduced clonoSEQ, T-Detect and corporate marketing activities.

98

 
 
 
 
 
   
 
 
 
 
 
 
   
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
   
 
 
 
   
 
   
 
   
 
   
     
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
   
 
 
 
 
 
 
   
 
   
 
   
 
   
     
 
 
General and Administrative

(in thousands, except percentages)

General and administrative

Year Ended December 31,

Change

Percent of Revenue

2022

  $ 88,527     $

2021
74,502     $ 14,025      

$

%

2022

2021

19 %   

48 %   

48 %

The $14.0 million increase in general and administrative expenses was primarily attributable to a $7.2 million increase in building, facility and 

depreciation related expenses, a $5.0 million increase in personnel costs and a $2.8 million increase in computer and software expenses. These increases 
were partially offset by a $1.3 million decrease in accounting and legal fees.

Interest and Other Income, Net

(in thousands, except percentages)

Interest and other income, net

Year Ended December 31,

Change

2022

2021

$

%

  $

4,056     $

1,668     $

2,388      

143 %

The $2.4 million increase in interest and other income, net was primarily attributable to an increase in net interest income and investment 

amortization resulting primarily from increased interest rates and related yields of our invested cash and cash equivalents and marketable securities.

Interest Expense

(in thousands, except percentages)

Interest expense

Year Ended December 31,

2022

2021

  $

(4,238 )   $

—     $

Change

$
(4,238 )  

%
(100)%

The $4.2 million increase in interest expense was attributable to the Purchase Agreement entered into during the year ended December 31, 2022.

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP financial measure that we define as net loss attributable to Adaptive Biotechnologies Corporation adjusted for 

interest and other income, net, interest expense, income tax (expense) benefit, depreciation and amortization expense, restructuring expense and share-
based compensation expense.

Management uses Adjusted EBITDA to evaluate the financial performance of our business and the effectiveness of our business strategies. We 
present Adjusted EBITDA because we believe it is frequently used by analysts, investors and other interested parties to evaluate companies in our industry 
and it facilitates comparisons on a consistent basis across reporting periods. Further, we believe it is helpful in highlighting trends in our operating results 
because it excludes items that are not indicative of our core operating performance.

Adjusted EBITDA has limitations as an analytical tool and you should not consider it in isolation or as a substitute for analysis of our results as 

reported under GAAP. We may in the future incur expenses similar to the adjustments in the presentation of Adjusted EBITDA. In particular, we expect to 
incur meaningful share-based compensation expense in the future. Other limitations include that Adjusted EBITDA does not reflect:

•

•

•

•

•

•

•

all expenditures or future requirements for capital expenditures or contractual commitments;

changes in our working capital needs;

interest expense, which is an ongoing element of our costs to operate;

income tax (expense) benefit, which may be a necessary element of our costs and ability to operate;

the costs of replacing the assets being depreciated and amortized, which will often have to be replaced in the future;

the noncash component of employee compensation expense; and

the impact of earnings or charges resulting from matters we consider not to be reflective, on a recurring basis, of our ongoing operations, 
such as our March 2022 restructuring and reduction in workforce.

In addition, Adjusted EBITDA may not be comparable to similarly titled measures used by other companies in our industry or across different 

industries.

99

 
 
 
 
 
   
 
 
   
 
 
   
   
 
 
 
 
 
 
 
 
 
 
   
 
 
   
 
 
 
 
 
 
   
 
 
   
The following is a reconciliation of net loss attributable to Adaptive Biotechnologies Corporation, the most directly comparable GAAP financial 

measure, to Adjusted EBITDA for the periods presented (in thousands):

Net loss attributable to Adaptive Biotechnologies Corporation
Interest and other income, net
Interest expense
Depreciation and amortization expense
Restructuring expense 
Share-based compensation expense 

 (1)

(2)

(3)

Adjusted EBITDA

2022

Year Ended December 31,
2021

2020

  $

  $

(200,191 )
(4,056 )
4,238  
20,920  
2,023  
55,477  
(121,589 )

  $

  $

(207,279 )
(1,668 )
—  
13,953  
—  
43,251  
(151,743 )

  $

  $

(146,227 )
(6,590 )
—  
8,472  
—  
24,761  
(119,584 )

(1) Represents costs associated with our revenue interest liability and noncash interest costs associated with the amortization of the related deferred issuance 
costs. See Note 11 of the accompanying notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for details 
on the Purchase Agreement.
(2) Represents expenses recognized in conjunction with restructuring activities. See Note 16 of the accompanying notes to our consolidated financial 
statements included elsewhere in this Annual Report on Form 10-K for details on our restructuring expense.
(3) Represents share-based compensation expense related to stock option, restricted stock unit and market-based restricted stock unit awards. See Note 14 of 
the accompanying notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for details on our share-based 
compensation expense.

Liquidity and Capital Resources

We have incurred losses since inception and have incurred negative cash flows from operations since inception through December 31, 2018, and 

again in the years ended December 31, 2020, 2021 and 2022. As of December 31, 2022, we had an accumulated deficit of $919.1 million.

We have funded our operations to date principally from the sale of convertible preferred stock and common stock, and, to a lesser extent, revenue 

and proceeds from the Purchase Agreement. Pursuant to the Purchase Agreement entered into with OrbiMed in September 2022, we received net cash 
proceeds of $124.4 million, after deducting issuance costs. We will also be entitled to receive up to $125.0 million in subsequent installments as follows: (i) 
$75.0 million upon our request occurring no later than September 12, 2025 and (ii) $50.0 million upon our request in connection with certain permitted 
acquisitions occurring no later than September 12, 2025, in each case subject to certain funding conditions. As of December 31, 2022, we had cash, cash 
equivalents and marketable securities of $498.2 million.

We believe our existing cash, cash equivalents and marketable securities will be sufficient to fund our operating expenses and capital expenditure 
requirements through at least the next 12 months. We may consider raising additional capital to expand our business, to pursue strategic investments, to 
take advantage of financing opportunities or for other reasons. 

If our available cash, cash equivalents and marketable securities balances and anticipated cash flows from operations are insufficient to satisfy our 

liquidity requirements, we may seek to sell additional equity or convertible debt securities, enter into a credit facility or another form of third-party funding 
or seek other debt financing. The sale of equity and convertible debt securities may result in dilution to our shareholders and, in the case of preferred equity 
securities or convertible debt, those securities could provide for rights, preferences or privileges senior to those of our common stock. The terms of debt 
securities issued or borrowings pursuant to a credit agreement could impose significant restrictions on our operations. This additional capital may not be 
available on reasonable terms, or at all. 

We plan to utilize the existing cash, cash equivalents and marketable securities on hand primarily to fund our continued research and development 

initiatives for our drug discovery initiatives, our ongoing investments in our immune medicine platform, our commercial and marketing activities 
associated with our clinical products and services and our continued investments in streamlining our laboratory operations. Cash in excess of immediate 
requirements is invested in accordance with our investment policy, primarily with a view to capital preservation and liquidity. Currently, our funds are held 
in money market funds and marketable securities consisting of United States government debt securities, corporate bonds and commercial paper.

While we may experience variability in revenue in the near term, as long-term revenue from sales of our current and future products and services is 

expected to grow, we expect our accounts receivable and inventory balances to increase. Any increase in accounts receivable and inventory may not be 
completely offset by increases in accounts payable and accrued expenses, which could result in greater working capital requirements.

100

 
 
 
 
 
 
   
   
 
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
Contractual Obligations

Our contractual obligations as of December 31, 2022 include operating lease obligations of $135.3 million, reflecting the minimum commitments 

for our office and laboratory spaces in Seattle, Washington and South San Francisco, California, our warehouse lease in Bothell, Washington and our office 
lease in New York City, New York. See Note 10 of the accompanying notes to our consolidated financial statements included elsewhere in this Annual 
Report on Form 10-K for more information, including the timing of cash payments related to these lease obligations. In connection with one of our lease 
agreements, we have an existing letter of credit of $2.1 million with one of our existing financial institutions.

Additionally, pursuant to the Purchase Agreement, the Purchasers will have a right to receive Revenue Interests from us based on the Applicable 

Payment Percentage of the Revenue Base. If only the First Payment has been made, the Applicable Payment Percentage shall be five percent of the 
quarterly Revenue Base. If both the First Payment and Second Payment have been made, the Applicable Payment Percentage shall be eight percent of the 
quarterly Revenue Base. If each of the First Payment, Second Payment and Third Payment have been made, the applicable payment percentage applied to 
the Revenue Interest shall be ten percent of the quarterly Revenue Base. Revenue Interest Payments shall be made quarterly within 45 days following the 
end of each fiscal quarter. If OrbiMed has not received Revenue Interest Payments in the aggregate equal to or greater than the Cumulative Purchaser 
Payments on or prior to September 12, 2028, the revenue interest rate shall be increased to a rate which, if applied retroactively to our cumulative Revenue 
Base, would have resulted in Revenue Interest Payments equal to the sum of all Cumulative Purchaser Payments. OrbiMed will be entitled to 100% of the 
Revenue Interest Payments until it has received the Return Cap, unless full repayment of the amount of the Return Cap has not been made by September 
12, 2032, in which case the Return Cap shall be increased to 175% of the Cumulative Purchaser Payments. As projected revenues change from our initial 
estimates, the amount of the obligation and timing of payment is likely to change. See Note 11 of the accompanying notes to our consolidated financial 
statements included elsewhere in this Annual Report on Form 10-K for more information.

We also have minimum commitments for laboratory material suppliers, which are generally fulfilled within one year, software and service license 

commitments, which are generally fulfilled within one to three years, and royalty commitments. 

Cash Flows

The following table summarizes our uses and sources of cash for the years ended December 31, 2022 and 2021 (in thousands):

Net cash used in operating activities
Net cash provided by investing activities
Net cash provided by financing activities

Operating Activities

  $

Year Ended December 31,

2022

2021

(183,945 )   $
2,905    
132,265    

(192,727 )
181,210  
27,146  

Cash used in operating activities during the year ended December 31, 2022 was $183.9 million, which was primarily attributable to a net loss of 

$200.4 million and a net change in our operating assets and liabilities of $71.5 million, partially offset by noncash share-based compensation of $55.5 
million, noncash depreciation and amortization of $21.7 million, noncash lease expense of $7.2 million, a research and development inventory reserve 
charge of $2.6 million and noncash interest expense related to the Purchase Agreement of $1.0 million. The net change in our operating assets and 
liabilities was primarily due to a $56.5 million reduction in deferred revenue driven largely by revenue recognized from the Genentech Agreement, an 
increase in accounts receivable, net of $22.6 million, $7.1 million of which was attributed to growth in receivables related to clonoSEQ with the remaining 
increase driven largely by growth in receivables from biopharmaceutical customers, and a $4.1 million decrease in operating lease right-of-use assets and 
liabilities. These changes were partially offset by a $7.1 million increase in accounts payable and accrued liabilities, a $3.6 million decrease in prepaid 
expenses and other current assets and a $0.8 million decrease in inventory.

Cash used in operating activities during the year ended December 31, 2021 was $192.7 million, which was primarily attributable to a net loss of 

$207.3 million and a net change in operating assets and liabilities of $56.8 million, partially offset by noncash share-based compensation of $43.3 million, 
noncash depreciation and amortization of $21.2 million and noncash lease expense of $7.0 million. The net change in operating assets and liabilities was 
primarily due to a $57.7 million reduction in deferred revenue driven largely by revenue recognized from the Genentech Agreement, a $7.4 million 
increase in accounts receivable, net and a $5.2 million increase in inventory, which were partially offset by an $8.5 million increase in operating lease right-
of-use assets and liabilities, a $3.9 million increase in accounts payable and accrued liabilities primarily related to our corporate bonus paid in 2022, and a 
$1.3 million decrease in prepaid expenses and other assets.

101

 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
Investing Activities

Cash provided by investing activities during the year ended December 31, 2022 was $2.9 million, which was primarily attributable to proceeds from 
maturities of marketable securities of $298.0 million, partially offset by purchases of marketable securities of $278.8 million and purchases of property and 
equipment of $16.3 million.

Cash provided by investing activities during the year ended December 31, 2021 was $181.2 million, which was primarily attributable to proceeds 

from maturities of marketable securities of $559.5 million, partially offset by purchases of marketable securities of $316.5 million and purchases of 
property and equipment of $61.7 million.

Financing Activities

Cash provided by financing activities during the year ended December 31, 2022 was $132.3 million, which was primarily attributable to $124.4 

million in proceeds from the Purchase Agreement, net of issuance costs, as well as $7.9 million in proceeds from the exercise of stock options.

Cash provided by financing activities during the year ended December 31, 2021 was $27.1 million, which was primarily attributable to proceeds 

from the exercise of stock options.

Net Operating Loss Carryforwards

Utilization of our net operating loss ("NOL") carryforwards and credits may be subject to a substantial annual limitation due to the ownership 
change limitations provided by Section 382 of the Internal Revenue Code of 1986 (“Section 382”) and similar state provisions. The annual limitation may 
result in the expiration of NOL carryforwards and credits before utilization. If there should be an ownership change, our ability to utilize our NOL 
carryforwards and credits could be limited. We have completed a Section 382 analysis for changes in ownership through December 31, 2020 and continue 
to monitor for changes that could trigger a limitation. Based on this analysis, we do not expect to have any permanent limitations on the utilization of our 
federal NOLs. Under the Tax Cuts and Jobs Act, federal NOLs incurred in 2018 and future years may be carried forward indefinitely, but the deductibility 
of such federal NOLs is subject to an annual limitation. NOLs generated prior to 2018 are eligible to be carried forward up to 20 years. Based on the 
available objective evidence, management determined that it was more likely than not that the net deferred tax assets would not be realizable as of 
December 31, 2022. Accordingly, management applied a full valuation allowance against net deferred tax assets as of December 31, 2022.

Critical Accounting Policies and Estimates

We have prepared our consolidated financial statements in accordance with GAAP. Our preparation of these consolidated financial statements 

requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities and related disclosures at the date of the 
consolidated financial statements, as well as revenue and expense recorded during the reporting periods. We evaluate our estimates and judgments on an 
ongoing basis. We base our estimates on historical experience and or other relevant assumptions that we believe to be reasonable under the circumstances. 
Estimates are used in several areas, including, but not limited to, estimates of progress to date for certain performance obligations and the transaction price 
for certain contracts with customers, imputing interest for the Purchase Agreement, the provision for income taxes, including related reserves, and the 
analysis of goodwill impairment, among others. These estimates generally involve complex issues and require judgments, involve the analysis of historical 
results and prediction of future trends, can require extended periods of time to resolve and are subject to change from period to period. Actual results may 
differ materially from management’s estimates.

While our significant accounting policies are described in more detail in Note 2 of the accompanying notes to our consolidated financial statements 

included elsewhere in this Annual Report on Form 10-K, we believe the following accounting policies are critical to the judgments and estimates used in 
the preparation of our consolidated financial statements.

Revenue Recognition

Our revenue arrangements may include upfront payments for the performance of services in the future, which have both fixed and variable 
consideration. Non-refundable upfront fees and funding for related development services are generally considered fixed consideration, while milestone 
payments are identified as variable consideration.

In determining the appropriate amount of revenue to recognize as we fulfill our obligations under these agreements, we perform the following steps 

to determine the amount of revenue to be recognized: (1) identify the contract or contracts; (2) determine whether the promised goods or services are 
performance obligations, including whether they are distinct in the context of the contract; (3) measure the transaction price, including the constraint on 
variable consideration; (4) allocate the transaction price to the performance obligations based on estimated selling prices; and (5) recognize revenue when 
(or as) we satisfy each performance obligation.

102

 
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in Accounting 

Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers. Our performance obligations include sequencing services and 
services associated with regulatory submission and approval processes. Significant management judgment is applied to determine (1) the measurement of 
the transaction price, including the constraint on variable consideration, (2) the allocation of the transaction price to the performance obligations and (3) the 
appropriate input or output based method to recognize revenue and the extent of progress to date.

We include the unconstrained amount of estimated variable consideration in the transaction price. The amount included in the transaction price is 

constrained to the amount for which it is probable that a significant reversal of cumulative revenue recognized will not occur. At the end of each subsequent 
reporting period, we re-evaluate the estimated variable consideration included in the transaction price and any related constraint and, if necessary, adjust 
our estimate of the overall transaction price.

To determine the allocation of the transaction price to the performance obligations, we apply the adjusted market assessment approach. Using this 

approach, we evaluate the market in which we sell the services and estimate the price that a customer in that market would be willing to pay for those 
services.

To select the measure of progress, we consider the expectations of the performance period which may be based on customer-dependent estimates of 
samples or internal estimates of the performance period based on both the customer and our expected development timeframes. For our collaboration with 
Genentech, we estimate the extent of progress using a proportional performance model that uses an input method based on costs incurred relative to the 
total estimated costs of research and development efforts to pursue both the Shared Products and Personalized Product pathways. These estimates are based 
on our internal estimates and development timeframes, which are subject to revision based on the potential outcomes for both product pathways, decisions 
made by Genentech, regulatory feedback or other factors not currently known. We regularly review our expectations of the extent of progress, including 
whether any variable consideration is no longer constrained, and, if any changes in estimates are made, we recognize revenue using the cumulative catch-
up method.

Revenue Interest Liability, Net and Related Imputed Interest

The revenue interest liability balance associated with the Purchase Agreement that we entered into in September 2022 with OrbiMed is presented 
net of unamortized issuance costs on our consolidated balance sheets. We impute our associated interest expense using the effective interest rate method. 
We calculate an effective interest rate which will amortize our related obligation to zero over the anticipated repayment period. The effective interest rate 
may vary during the term of the agreement depending on a number of factors, including changes in forecasted GAAP revenues. We evaluate the effective 
interest rate quarterly based on both achieved and forecasted revenues, utilizing the prospective method. The estimates of future revenues and resulting 
revenue interest payments are based on key assumptions including population, penetration, probability of success and sales price, among others. A 
significant increase or decrease in or changes in timing of forecasted revenue will prospectively impact our interest expense and the time period for 
repayment. As of December 31, 2022, a hypothetical ten percent increase in forecasted quarterly revenue would not result in a material change in projected 
annual interest expense.

Goodwill

Goodwill represents the excess of the purchase price over the net amount of identifiable assets acquired and liabilities assumed in a business 
combination measured at fair value. We assess goodwill for impairment annually on October 1 and upon any occurrence of triggering events or substantive 
changes in circumstances that could indicate a potential impairment.

We evaluate goodwill for impairment by first assessing qualitative factors to determine whether it is more likely than not that the fair value of our 

reporting unit is less than its carrying amount. We evaluate certain qualitative factors such as macroeconomic conditions, the market and industry in which 
we operate, cost factors, overall financial performance and other relevant entity-specific events to determine if there are any negative trends or events that 
could indicate impairment. Key assumptions in this analysis include anticipated demand for our products and services, including industry and regulatory 
changes, future revenue growth and cash flow trends. These assumptions are determined based on our historical performance and management’s forecasted 
results. Management’s estimates of forecasted results are based upon assumptions believed to be reasonable, but which are inherently uncertain and 
unpredictable and, as a result, actual results may differ from estimates. If we determine that it is more likely than not that the fair value of our reporting unit 
is less than its carrying amount, or if we choose to bypass the qualitative assessment, we perform a quantitative goodwill impairment test. If impairment 
exists, the carrying value of the goodwill is reduced to fair value through an impairment charge recorded in our consolidated statements of operations. To 
date, we have not recognized any impairment of goodwill.

103

Item 7A. Quantitative and Qualitative Disclosures About Market Risk 

Interest Rate Risk

We are exposed to market risk for changes in interest rates related primarily to our cash and cash equivalents and marketable securities. As of 

December 31, 2022 and 2021, we had cash and cash equivalents of $90.0 million and $139.1 million, respectively, held primarily in cash deposits and 
money market funds. As of December 31, 2022, we had short-term marketable securities of $408.2 million, held in United States (“U.S.”) government debt 
securities, corporate bonds and commercial paper. As of December 31, 2021, we had short-term and long-term marketable securities of $431.1 million, held 
in U.S. government debt securities and corporate bonds. Our primary exposure to market risk is interest income sensitivity, which is affected by changes in 
the general level of interest rates in the United States. As of December 31, 2022, a hypothetical 100 basis point increase in interest rates would have 
resulted in a $1.5 million decline in fair value of our available-for-sale securities, as compared to a $4.0 million decline as of December 31, 2021. This 
estimate is based on a sensitivity model that measures market value changes when changes in interest rates occur. The $2.5 million year-over-year 
reduction in the decline of fair value in this hypothetical scenario is primarily due to the short-term nature and smaller balance of the investments held at 
December 31, 2022 as compared to those held at December 31, 2021. Such losses would only be realized if we sold the investments prior to maturity. We 
do not enter into investments for trading purposes and have not used any derivative financial instruments to manage our interest rate risk exposure.

104

Item 8. Financial Statements and Supplementary Data

Adaptive Biotechnologies Corporation

Index to Consolidated Financial Statements

As of December 31, 2022 and 2021 and 

For the Years Ended December 31, 2022, 2021 and 2020

Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Loss
Consolidated Statements of Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements

105

106
108
109
110
111
112
113

 
 
 
 
Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Adaptive Biotechnologies Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Adaptive Biotechnologies Corporation (the Company) as of December 31, 2022 

and 2021, the related consolidated statements of operations, comprehensive loss, shareholders' equity and cash flows for each of the three years in the 
period ended December 31, 2022, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated 
financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its 
operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S. generally accepted accounting 
principles.

 We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 
Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued 
by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 14, 2023 expressed an 
unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s 
financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the 
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the 
PCAOB.

 We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain 

reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included 
performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures 
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial 
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the 
overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters 

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or 

required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) 
involved our especially challenging, subjective or complex judgments. The communication of a critical audit matter does not alter in any way our opinion 
on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions 
on the critical audit matter or on the accounts or disclosures to which it relates.

106

 
Description of the Matter

How We Addressed the Matter in Our 
Audit

Genentech Agreement

As more fully described in Note 3 of the consolidated financial statements, Genentech 
Agreement revenue is estimated to be recognized over a period of eight to nine years from 
the effective date. The non-refundable upfront consideration of $300.0 million is recognized 
using a proportional performance model through an input method based on costs incurred 
relative to the total estimated costs of research and development efforts. For the year ended 
December 31, 2022, total revenue recognized was $62.8 million and the related deferred 
revenue at December 31, 2022 totaled $87.3 million. 

Auditing management’s estimate of the total expected research and development costs at 
completion is complex and requires judgment as a result of the uncertainties of the ultimate 
progression of the customized product paths, timing and path of development and 
commercialization decisions, which are controlled by Genentech.

We obtained an understanding, evaluated the design, and tested the operating effectiveness 
of controls over the Company’s process to evaluate the progress of the collaboration and the 
likely path of future development based on significant decisions made by Genentech 
communicated through the joint committees and any resulting impacts on the total costs of 
research and development efforts for the collaboration. 

To test the estimate of total expected research and development costs, we performed audit 
procedures that included, among others, observing the quarterly meetings with accounting 
and the Company collaboration managers discussing the status of the collaboration and the 
future development for the customized product paths, and investigating any changes to the 
development path. We also reviewed supporting documentation to corroborate progress and 
status of the overall timeline, including meeting minutes from the joint committees.

/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2015
Seattle, Washington
February 14, 2023

107

 
 
 
  
  
 
 
 
Adaptive Biotechnologies Corporation
Consolidated Balance Sheets
(in thousands, except share and per share amounts)

December 31,

2022

2021

  $

90,030     $

Assets
Current assets

Cash and cash equivalents
Short-term marketable securities (amortized cost of $412,282 and $214,115, respectively)
Accounts receivable, net
Inventory
Prepaid expenses and other current assets

Total current assets

Long-term assets

Property and equipment, net
Operating lease right-of-use assets
Long-term marketable securities (amortized cost of $218,163)
Restricted cash
Intangible assets, net
Goodwill
Other assets

Total assets

Liabilities and shareholders’ equity
Current liabilities

Accounts payable
Accrued liabilities
Accrued compensation and benefits
Current portion of operating lease liabilities
Current portion of deferred revenue

Total current liabilities

Long-term liabilities

Operating lease liabilities, less current portion
Deferred revenue, less current portion
Revenue interest liability, net

Total liabilities

Commitments and contingencies (Note 12)
Shareholders’ equity

Preferred stock: $0.0001 par value, 10,000,000 shares authorized at December 31, 2022 and 2021; 
no shares issued and outstanding at December 31, 2022 and 2021
Common stock: $0.0001 par value, 340,000,000 shares authorized at December 31, 2022 and 2021; 
143,105,002 and 141,393,865 shares issued and outstanding at December 31, 2022 and 2021, 
respectively
Additional paid-in capital
Accumulated other comprehensive loss
Accumulated deficit

Total Adaptive Biotechnologies Corporation shareholders’ equity

Noncontrolling interest

Total shareholders’ equity
Total liabilities and shareholders’ equity

  $

  $

  $

408,166    
40,057    
14,453    
9,440    
562,146    

83,447    
80,763    
—    
2,398    
6,827    
118,972    
2,064    
856,617     $

8,084     $
12,424    
15,935    
9,230    
64,115    
109,788    

98,772    
58,599    
125,360    
392,519    

139,065  
213,996  
17,409  
19,263  
13,015  
402,748  

85,262  
87,678  
217,145  
2,138  
8,526  
118,972  
875  
923,344  

3,307  
9,343  
15,642  
5,055  
80,460  
113,807  

106,685  
98,750  
—  
319,242  

—    

—  

14    
1,387,349    
(4,116 )  
(919,082 )  
464,165    
(67 )  
464,098    
856,617     $

14  
1,324,006  
(1,137 )
(718,891 )
603,992  
110  
604,102  
923,344  

The accompanying notes are an integral part of these consolidated financial statements.

108

 
 
 
 
 
 
 
 
 
 
     
   
 
     
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     
   
 
     
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     
   
 
 
 
 
 
 
 
 
 
 
 
 
 
     
   
 
     
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
Operating expenses
Cost of revenue
Research and development
Sales and marketing
General and administrative
Amortization of intangible assets

Total operating expenses

Loss from operations
Interest and other income, net
Interest expense
Net loss

Adaptive Biotechnologies Corporation
Consolidated Statements of Operations
(in thousands, except share and per share amounts)

2022

Year Ended December 31,
2021

2020

  $

185,308     $

154,344     $

98,382  

57,909    
141,756    
95,603    
88,527    
1,699    
385,494    
(200,186 )  
4,056    
(4,238 )  
(200,368 )  
177    
(200,191 )   $

49,301    
142,343    
95,465    
74,502    
1,699    
363,310    
(208,966 )  
1,668    
—    
(207,298 )  
19    

(207,279 )   $

22,530  
116,072  
61,358  
49,536  
1,703  
251,199  
(152,817 )
6,590  
—  
(146,227 )
—  
(146,227 )

(1.40 )   $

(1.48 )

$

(1.11 )

142,515,917    

140,354,915    

131,216,468  

Add: Net loss attributable to noncontrolling interest

Net loss attributable to Adaptive Biotechnologies Corporation

Net loss per share attributable to Adaptive Biotechnologies Corporation common 
shareholders, basic and diluted
Weighted-average shares used in computing net loss per share attributable to Adaptive 
Biotechnologies Corporation common shareholders, basic and diluted

  $

$

The accompanying notes are an integral part of these consolidated financial statements.

109

 
 
 
 
 
 
   
   
 
 
 
   
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adaptive Biotechnologies Corporation
Consolidated Statements of Comprehensive Loss
(in thousands)

Net loss
Other comprehensive (loss) income

Change in unrealized gains and losses on investments

Comprehensive loss

Add: Comprehensive loss attributable to noncontrolling interest

Comprehensive loss attributable to Adaptive Biotechnologies Corporation

  $

2022

Year Ended December 31,
2021

2020

  $

(200,368 )   $

(207,298 )   $

(146,227 )

(2,979 )  
(203,347 )  
177    
(203,170 )   $

(2,030 )  
(209,328 )  
19    

(209,309 )   $

222  
(146,005 )
—  
(146,005 )

The accompanying notes are an integral part of these consolidated financial statements.

110

 
 
 
 
 
 
 
 
 
 
 
 
     
     
   
 
 
 
 
 
 
 
 
 
 
 
 
 
Adaptive Biotechnologies Corporation
Consolidated Statements of Shareholders’ Equity
(in thousands, except share amounts)

Balance at December 31, 2019

Issuance of common stock upon public offering, after 
deducting underwriters' discounts and net offering 
costs paid by us
Adjustments to accumulated deficit for adoption of 
guidance on accounting for leases
Issuance of common stock for cash upon exercise of 
stock options
Vesting of restricted stock units
Share-based compensation
Other comprehensive income
Net loss
Balance at December 31, 2020

Issuance of common stock upon exercise of common 
stock warrant
Issuance of common stock for cash upon exercise of 
stock options
Vesting of restricted stock units
Share-based compensation
Capital contributions for Digital Biotechnologies, Inc.
Other comprehensive loss
Net loss
Balance at December 31, 2021

Accumulat
ed
Other
Comprehen
sive
    Gain (Loss)    

Additional
Paid-In
Capital

Accumulate
d
Deficit

Noncontrol
ling
Interest

Total
Shareholder
s’
Equity

Common Stock

Shares
125,238,14

    Amount

2     $

12  

  $

935,834     $

671     $ (365,478 )   $

—     $ 571,039  

7,200,000  

1  

271,838      

—      

—      

—       271,839  

—  

5,204,254  
4,500  
—  
—  
—  
137,646,89

—  

1  
—  
—  
—  
—  

—      

—      

93      

—      

93  

21,538      
—      
24,761      
—      
—      

—      
—      
—      
—      
—      
—      
222      
—      
—       (146,227 )    

21,539  
—      
—  
—      
24,761  
—      
—      
222  
—       (146,227 )

6      

14       1,253,971      

893       (511,612 )    

—       743,266  

54,162      

—      

—      

—      

—      

—      

—  

3,674,057      
18,750      
—      
—      
—      
—      

141,393,86

—      
—      
—      
—      
—      
—      

26,484      
—      
43,251      
300      
—      
—      

—      
—      
—      
—      
(2,030 )    

—      
—      
—      
—      
—      
—       (207,279 )    

26,484  
—      
—  
—      
43,251  
—      
429  
129      
—      
(2,030 )
(19 )     (207,298 )

5      

14       1,324,006      

(1,137 )     (718,891 )    

110       604,102  

Issuance of common stock for cash upon exercise of 
stock options
Vesting of restricted stock units
Share-based compensation
Other comprehensive loss
Net loss
Balance at December 31, 2022

1,406,500  
304,637  
—  
—  
—      

143,105,00

—  
—  
—  
—  
—      

7,866      
—      
55,477      
—      
—      

—      
—      
—      
(2,979 )    

—      
—      
—      
—      
—       (200,191 )    

—      
—      
—      
—      

7,866  
—  
55,477  
(2,979 )
(177 )     (200,368 )

The accompanying notes are an integral part of these consolidated financial statements.

2     $

14     $ 1,387,349     $

(4,116 )   $ (919,082 )   $

(67 )   $ 464,098  

111

 
 
   
   
   
   
   
 
 
 
   
   
   
 
 
 
 
 
   
   
 
 
   
   
 
 
   
   
   
   
   
   
   
   
   
   
   
   
   
   
 
 
 
 
 
 
   
   
   
   
   
 
 
 
 
   
   
   
   
   
   
   
   
   
   
   
   
 
 
Adaptive Biotechnologies Corporation
Consolidated Statements of Cash Flows
(in thousands)

Operating activities
Net loss
Adjustments to reconcile net loss to net cash used in operating activities

2022

Year Ended December 31,
2021

2020

  $

(200,368 )   $

(207,298 )   $

(146,227 )

Depreciation expense
Noncash lease expense
Share-based compensation expense
Intangible assets amortization
Investment amortization
Research and development inventory reserve
Noncash interest expense
Other
Changes in operating assets and liabilities

Accounts receivable, net
Inventory
Prepaid expenses and other current assets
Accounts payable and accrued liabilities
Operating lease right-of-use assets and liabilities
Deferred revenue
Other

Net cash used in operating activities
Investing activities
Purchases of property and equipment
Purchases of marketable securities
Proceeds from sales and maturities of marketable securities
Net cash provided by (used in) investing activities
Financing activities
Proceeds from exercise of stock options
Proceeds from public offering of common stock, net of underwriting discounts and 
commissions
Payment of public offering costs, net
Proceeds from revenue interest purchase agreement, net of issuance costs
Proceeds from initial capital contributions for Digital Biotechnologies, Inc.
Net cash provided by financing activities

Net (decrease) increase in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of year
Cash, cash equivalents and restricted cash at end of year

Noncash investing and financing activities
Purchases of equipment included in accounts payable and accrued liabilities

  $

  $

Derecognition of lease financing arrangements upon adoption of guidance on accounting 
for leases
Supplemental disclosure of cash flow information
Cash paid for interest

  $

  $

19,221    
7,227    
55,477    
1,699    
741    
2,638    
985    
(19 )  

(22,648 )  
817    
3,551    
7,111    
(4,050 )  
(56,496 )  
169    
(183,945 )  

(16,349 )  
(278,778 )  
298,032    
2,905    

12,254    
7,028    
43,251    
1,699    
7,233    
—    
—    
(78 )  

(7,362 )  
(5,200 )  
1,286    
3,940    
8,522    
(57,727 )  
(275 )  
(192,727 )  

(61,746 )  
(316,544 )  
559,500    
181,210    

6,769  
3,266  
24,761  
1,703  
773  
—  
—  
71  

2,613  
(4,994 )
(1,362 )
7,495  
(886 )
(43,389 )
(276 )
(149,683 )

(18,803 )
(694,965 )
596,724  
(117,044 )

7,890    

26,717    

21,748  

—    
—    
124,375    
—    
132,265    
(48,775 )  
141,203    
92,428     $

—    
—    
—    
429    
27,146    
15,629    
125,574    
141,203     $

1,719     $

682     $

—     $

494     $

—     $

—     $

272,160  
(321 )
—  
—  
293,587  
26,860  
98,714  
125,574  

4,679  

36,607  

—  

The accompanying notes are an integral part of these consolidated financial statements.

112

 
 
 
 
 
 
   
   
 
 
     
     
   
 
     
     
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     
     
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     
     
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     
     
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     
     
   
 
     
     
   
 
Adaptive Biotechnologies Corporation
Notes to Consolidated Financial Statements

1.

Organization and Description of Business

Adaptive Biotechnologies Corporation (“we,” “us” or “our”) is a commercial-stage company advancing the field of immune medicine by harnessing 
the inherent biology of the adaptive immune system to transform the diagnosis and treatment of disease. We believe the adaptive immune system is nature’s 
most finely tuned diagnostic and therapeutic for most diseases, but the inability to decode it has prevented the medical community from fully leveraging its 
capabilities. Our immune medicine platform applies our proprietary technologies to read the diverse genetic code of a patient’s immune system and aims to 
understand precisely how the immune system detects and treats disease in that patient. We capture these insights in our dynamic clinical immunomics 
database, which is underpinned by computational biology and machine learning, and use them to develop and commercialize clinical products and services 
that we are tailoring to each individual patient. We have commercial products and services and a robust pipeline of clinical products and services that we 
are designing to diagnose, monitor and enable the treatment of diseases, such as cancer and autoimmune disorders.

We were incorporated in the State of Washington on September 8, 2009 under the name Adaptive TCR Corporation. On December 21, 2011, we 

changed our name to Adaptive Biotechnologies Corporation. We are headquartered in Seattle, Washington.

2.

Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The consolidated financial statements include the accounts of Adaptive Biotechnologies Corporation, Adaptive Biotechnologies B.V., our wholly-

owned subsidiary, and Digital Biotechnologies, Inc., a corporate subsidiary we have 70% ownership interest in. The remaining interest in Digital 
Biotechnologies, Inc., held by certain of our related parties and their related family trusts, are shown in the consolidated financial statements as 
noncontrolling interest. All intercompany transactions and balances have been eliminated upon consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 
(“GAAP”) requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the 
related disclosures at the date of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the periods 
presented. We base our estimates on historical experience and other relevant assumptions that we believe to be reasonable under the circumstances. 
Estimates are used in several areas including, but not limited to, estimates of progress to date for certain performance obligations and the transaction price 
for certain contracts with customers, share-based compensation, imputing interest for our revenue interest purchase agreement (the “Purchase Agreement”) 
that we entered into in September 2022, the provision for income taxes, including related reserves, and the analysis of goodwill impairment, among others. 
These estimates generally involve complex issues and require judgments, involve the analysis of historical results and prediction of future trends, can 
require extended periods of time to resolve and are subject to change from period to period. Actual results may differ materially from management’s 
estimates.

Segment Information

We have determined that our chief executive officer is the chief operating decision maker (“CODM”). The CODM regularly reviews operating 

results and other financial information presented on a consolidated basis. While revenue is reviewed at levels lower than the consolidated entity, resource 
allocation decisions are made by the CODM based on the results presented at the consolidated entity level, which is determined to be a single reporting 
unit. The consolidated entity operates as one operating segment and represents one reportable segment. We present disaggregated revenue from contracts 
with customers by market opportunity and type of arrangement. See Note 3, Revenue.

Reclassification 

We previously disclosed revenue bifurcated into sequencing and development financial statement captions. In 2022, we changed how we classify 
revenue and now present total revenue on our consolidated statements of operations. See Note 3, Revenue for additional disaggregation of revenue under 
our Immune Medicine and Minimal Residual Disease ("MRD") market opportunities.

113

 
Adaptive Biotechnologies Corporation
Notes to Consolidated Financial Statements (Continued)

Cash and Cash Equivalents

Cash and cash equivalents are stated at fair value. Cash equivalents include only securities having an original maturity of three months or less at the 

time of purchase. We limit our credit risk associated with cash and cash equivalents by placing our investments with banks that we believe are highly 
creditworthy and with highly rated money market funds. Cash and cash equivalents primarily consist of bank deposits and investments in money market 
funds.

Restricted Cash

We had a restricted cash balance of $2.4 million and $2.1 million as of December 31, 2022 and 2021, respectively. Our restricted cash primarily 

relates to certain balances we are required to maintain under lease arrangements for some of our property and facility leases.

Investments in Marketable Securities

Marketable securities are classified as available-for-sale, consist of U.S. government debt securities, corporate bonds and commercial paper and are 

reported at fair value. Unrealized holding gains and losses are reflected as a separate component of shareholders’ equity in accumulated other 
comprehensive gain (loss) until realized. Realized gains and losses on the sale of these securities are recognized in net income or loss. The cost of 
marketable securities sold is based on the specific identification method.

Fair Value of Financial Instruments

The Financial Accounting Standards Board (“FASB”) has defined fair value as the exchange price that would be received for an asset or paid to 

transfer a liability, or an exit price, in the principal or most advantageous market for that asset or liability in an orderly transaction between market 
participants on the measurement date. The FASB established a fair value hierarchy that requires an entity to maximize the use of observable inputs, where 
available, and minimize the use of unobservable inputs when measuring fair value. The hierarchy defines three levels of inputs that may be used to measure 
fair value:

• Level 1: Quoted prices in active markets for identical assets or liabilities.

• Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are 
not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or 
liabilities.

• Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or 

liabilities.

A financial instrument categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value 
measurement. In certain cases, where there is limited activity or less transparency around inputs to valuation, financial instruments are classified as Level 3 
within the valuation hierarchy. 

Our financial instruments consist of Level 1 and Level 2 assets and have included Level 3 liabilities in the past. The carrying amounts of certain 

financial instruments approximate fair value due to their short maturities. We did not have any nonfinancial assets or liabilities that were measured or 
disclosed at fair value on a recurring basis as of December 31, 2022 and 2021.

Concentrations of Risk

We are subject to a concentration of risk from a limited number of suppliers, or in certain cases, single suppliers, for some of our laboratory 

instruments and materials. This risk is managed by targeting a quantity of surplus stock. 

Cash, cash equivalents and marketable securities are financial instruments that potentially subject us to concentrations of credit risk. We invest in 
money market funds, United States (“U.S.”) government debt securities, U.S. government agency securities, corporate bonds and commercial paper with 
high-quality accredited financial institutions. 

Significant customers are those that represent more than ten percent of our total revenue or accounts receivable, net balances for the periods and as 

of each consolidated balance sheet date presented, respectively.

114

 
Adaptive Biotechnologies Corporation
Notes to Consolidated Financial Statements (Continued)

For each significant customer, revenue as a percentage of total revenue for the periods presented and accounts receivable, net as a percentage of total 

accounts receivable, net as of the dates presented were as follows: 

Customer A
Customer B
Genentech, Inc. and Roche Group
* less than 10%

Accounts Receivable

Revenue
Year Ended December 31,
2021

2020

2022

Accounts Receivable, Net
December 31,

2022

2021

*%  
11.6  
36.4  

*%  
*  
41.9  

*%  
*  
55.8  

15.8%  
19.5  
*  

*%
11.3
*

Accounts receivable consists of amounts due from customers for services performed. We review our accounts receivable for credit impairment and 

regularly analyze the status of significant past due receivables to determine if any will potentially be uncollectible to estimate the amount of allowance 
necessary to reduce accounts receivable to its estimated net realizable value.

Inventory

Inventory consists of laboratory materials and supplies used in lab analysis. We capitalize inventory when purchased and record expense upon order 
fulfillment for servicing revenue or utilization in our research and development laboratories. Inventory is valued at the lower of cost or market on a first-in, 
first-out basis. We periodically perform obsolescence assessments and write-off any inventory that is no longer usable. Long-term inventory of $1.4 million 
was included within the other assets balance on our consolidated balance sheet as of December 31, 2022.

Property and Equipment

Property and equipment consists of computer equipment, computer software, laboratory equipment, leasehold improvements, furniture and office 

equipment and assets under construction. Property and equipment are recorded at cost and depreciation is recognized using the straight-line method based 
on estimated useful life. Maintenance and repairs are charged to expense as incurred and costs of improvements are capitalized.

Useful lives assigned to property and equipment are as follows:

Laboratory equipment

Leasehold improvements

Computer equipment and software

Furniture and office equipment

 3 years to 7 years

 Shorter of estimated useful life or remaining lease term

 3 years to 5 years

 3 years to 10 years

We review long-lived assets for impairment annually or whenever events or circumstances indicate the carrying amount of an asset group may not 
be recoverable. Gains and losses from asset disposals and impairment losses, if incurred, are classified within our consolidated statements of operations in 
accordance with the use of the asset.

Intangible Assets

Intangible assets acquired in a business combination are recognized separately from goodwill and are initially recognized at their fair value at the 

acquisition date, which is regarded as their cost.

Intangible assets may also result from the purchase of assets and intellectual property in a transaction that does not qualify as a business 
combination. Intangible assets are amortized over their estimated useful lives on a straight-line basis which approximates their usage pattern. Intangible 
assets are reviewed for impairment at least annually or if indicators of potential impairment exist. We have not recognized any impairment losses on 
intangible assets.

115

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
 
Adaptive Biotechnologies Corporation
Notes to Consolidated Financial Statements (Continued)

Goodwill

Goodwill represents the excess of the purchase price over the net amount of identifiable assets acquired and liabilities assumed in a business 
combination measured at fair value. We assess goodwill for impairment annually on October 1, or more frequently if events or changes in circumstances 
would more likely than not reduce the fair value of our single reporting unit below its carrying value. We evaluate goodwill for impairment by first 
assessing qualitative factors to determine whether it is more likely than not that the fair value of our reporting unit is less than its carrying amount. If we so 
determine, or if we choose to bypass the qualitative assessment, we perform a quantitative goodwill impairment test. If impairment exists, the carrying 
value of the goodwill is reduced to its fair value through an impairment charge recorded in our consolidated statements of operations. To date, we have not 
recognized any impairment of goodwill.

Leases

We determine if an arrangement contains a lease at inception. We have operating lease agreements for the laboratory, office and warehouse facilities 

that we occupy. Operating lease right-of-use (“ROU”) assets and operating lease liabilities are recognized at the date the underlying asset becomes 
available for our use and are based on the present value of the future minimum lease payments over the lease term. ROU assets also include any initial 
direct costs incurred and any lease payments made at or before the lease commencement date, less lease incentives received. As our leases generally do not 
provide an implicit interest rate, the present value of our future minimum lease payments is determined using our incremental borrowing rate. This rate is 
an estimate of the collateralized borrowing rate we would incur on our future lease payments over a similar term and is based on the information available 
to us at the lease commencement date, or as of January 1, 2020 for commenced leases that existed as of our adoption of Accounting Standards Update No. 
2016-02, Leases (Topic 842) (“ASC 842”). 

Certain of our leases contain options to extend or terminate the lease; lease terms are adjusted for these options only when it is reasonably certain we 

will exercise these options. Our lease agreements do not contain residual value guarantees or covenants.

We have made a policy election regarding our real estate leases not to separate nonlease components from lease components, to the extent they are 
fixed. Nonlease components that are not fixed are expensed as incurred as variable lease expense. Our leases for laboratory, office and warehouse facilities 
typically include variable nonlease components, such as common-area maintenance costs. We have also elected not to record on our consolidated balance 
sheets a lease that has a lease term of twelve months or less and does not contain a purchase option that we are reasonably certain to exercise.

Lease expense is recognized on a straight-line basis over the terms of the leases. Incentives granted under our facilities leases, including rent 

holidays, are recognized as adjustments to lease expense on a straight-line basis over the terms of the leases.

Revenue Interest Liability, Net and Related Imputed Interest

The revenue interest liability balance associated with the Purchase Agreement that we entered into in September 2022 is presented net of 
unamortized issuance costs on our consolidated balance sheets. We impute our associated interest expense using the effective interest rate method. We 
calculate an effective interest rate which will amortize our related obligation to zero over the anticipated repayment period. The effective interest rate may 
vary during the term of the agreement depending on a number of factors, including changes in forecasted GAAP revenues. We evaluate the effective 
interest rate quarterly based on both achieved and forecasted revenues, utilizing the prospective method. A significant increase or decrease in or changes in 
timing of forecasted revenue will prospectively impact our interest expense and the time period for repayment. 

Revenue Recognition

For all revenue-generating contracts, we perform the following steps to determine the amount of revenue to be recognized: (1) identify the contract 

or contracts; (2) determine whether the promised goods or services are performance obligations, including whether they are distinct in the context of the 
contract; (3) measure the transaction price, including the constraint on variable consideration; (4) allocate the transaction price to the performance 
obligations based on estimated selling prices; and (5) recognize revenue when (or as) we satisfy each performance obligation.

116

 
Adaptive Biotechnologies Corporation
Notes to Consolidated Financial Statements (Continued)

We derive revenue by providing diagnostic and research services in our Immune Medicine and MRD market opportunities. Our Immune Medicine 
revenue consists of revenue generated from (1) providing sample testing services for our commercial research product, immunoSEQ, to biopharmaceutical 
customers and academic institutions; (2) providing our T-Detect COVID tests to clinical customers; and (3) our collaboration agreements with Genentech, 
Inc. (“Genentech”) and other biopharmaceutical customers in areas of drug and target discovery. Our MRD revenue consists of revenue generated from (1) 
providing our clonoSEQ report to clinical customers; (2) providing MRD sample testing services to biopharmaceutical customers and certain academic 
institutions, including investigator-led clinical trials; and (3) providing our clonoSEQ report or results to certain international laboratory sites through 
technology transfers.

For research customers who utilize either immunoSEQ or our MRD services, contracts typically include an amount billed in advance of services 

(“upfront”) and subsequent billings as sample results are delivered to the customer. Upfront amounts received are recorded as deferred revenue, which we 
recognize as revenue upon satisfaction of performance obligations. We have identified two typical performance obligations under the terms of our research 
service contracts: (1) the delivery of our immunoSEQ or MRD data for customer provided samples; and (2) related data analysis. We recognize revenue for 
both identified performance obligations as sample results are delivered to the customer. In periods where our sample estimates are reduced or a customer 
project is cancelled and, in either case, we have remaining related deferred revenue, we recognize revenue using a cumulative catch-up approach based on 
the proportion of samples delivered to date relative to the remaining samples expected to be delivered.

For agreements where we provide our clonoSEQ report to ordering physicians, we have identified one performance obligation: the delivery of a 

clonoSEQ report. We bill and receive payments for these transactions from commercial, government and medical institution payors. As payment from the 
respective payors may vary based on the various reimbursement rates and patient responsibilities, we consider the transaction price to be variable and 
record an estimate of the transaction price, subject to the constraint for variable consideration, as revenue at the time of delivery. The estimate of 
transaction price is based on historical and expected reimbursement rates with the various payors, which are monitored in subsequent periods and adjusted, 
as necessary, based on actual collection experience. 

Regarding our clonoSEQ coverage under Medicare, we bill an episode of treatment when we deliver the first eligible test report. This billing 
contemplates all necessary tests required during a patient’s treatment cycle, which is currently estimated at approximately four tests per patient, including 
the initial sequence identification test. Revenue recognition commences at the time the initial billable test report is delivered and is based upon cumulative 
tests delivered to date. We estimate the number of tests we expect to deliver over a patient’s treatment cycle based on historical testing frequencies for 
patients by indication. These estimates are subject to change as we develop more information about utilization over time. Any unrecognized revenue from 
the initial billable test is recorded as deferred revenue and is recognized either as we deliver our estimate of the remaining tests in a patient’s treatment 
cycle or when the likelihood becomes remote that a patient will receive additional testing.

117

 
Adaptive Biotechnologies Corporation
Notes to Consolidated Financial Statements (Continued)

The contract transaction price for agreements we enter into with biopharmaceutical customers to further develop and commercialize their 

therapeutics may consist of a combination of non-refundable upfront fees, separately priced MRD testing fees and milestone fees earned upon our 
customers’ achievement of certain regulatory approvals. Depending on the contract, these agreements include single or multiple performance obligations. 
Such performance obligations include providing services to support our customers’ therapeutic development efforts, including regulatory support for our 
technology intended to be utilized as part of our customers’ registrational trials, developing analytical plans for our data, participating on joint research 
committees, assisting in completing a regulatory submission and providing MRD testing services related to customer-provided samples for their regulatory 
submissions. Generally, the support services, excluding MRD testing services, are not distinct within the context of the contract and thus are accounted for 
as a single performance obligation. The transaction price allocated to the respective performance obligations is estimated using an adjusted market 
assessment approach for the regulatory support services and a standalone selling price for the estimated MRD testing services. When MRD sample testing 
services are separately priced customer options, we assess if a material right exists and, if not, the customer option to purchase additional MRD sample 
testing services is not considered part of the contract. We recognize revenue related to MRD testing services over time using an output method based on the 
proportion of sample results delivered relative to the total amount of sample results expected to be delivered, when expected to be a faithful depiction of 
progress. We use the same method to recognize the regulatory support services. When an output method based on the proportion of sample results delivered 
is not expected to be a faithful depiction of progress, we utilize an input method using a cost-based model based on estimates of effort completed. Selecting 
the measure of progress and estimating progress to date requires significant judgment. Except for any non-refundable upfront fees, the other forms of 
compensation represent variable consideration. At contract inception, we fully constrain any consideration related to regulatory milestones, as the 
achievement of such milestones is subject to third-party regulatory approval and the customers’ own submission decision-making. Variable consideration 
related to regulatory milestones is estimated using the most likely amount method, where variable consideration is constrained until it is probable that a 
significant reversal of cumulative revenue will not occur. Milestone payments for regulatory approvals, which are not within our customers’ control, are not 
considered probable of being achieved until those approvals are received. Determining whether regulatory milestone payments are probable is an area that 
requires significant judgment. In making this assessment, we evaluate scientific, clinical, regulatory and other risks, as well as the level of effort and 
investment required to achieve the respective milestone.

In 2021, we executed an intellectual property license agreement that includes variable consideration related to sales-based royalties. Any 
consideration related to such royalties will be recognized as revenue at the later of when (i) the related sales occur or (ii) the performance obligation to 
which some or all of the sales-based royalty has been allocated has been satisfied (or partially satisfied).

Contract Balances

In certain circumstances, billing may occur prior to services being performed. Upfront payments are recorded as deferred revenue, or contract 
liabilities. We classify deferred revenue as current when we expect our performance obligations will be completed within the next twelve months; however, 
we do not control the timing of customer provided samples. For service and collaboration activities, excluding those related to our worldwide collaboration 
and license agreement with Genentech, we assess the performance obligations and recognize deferred revenue as current or non-current based upon 
forecasted delivery times, which are customer coordinated. In certain circumstances, a customer project may be cancelled or terminated prior to the 
delivery of all related services covered by a customer’s upfront payment. In these circumstances, we recognize revenue when sufficient evidence is 
obtained that a reversal of revenue is not probable. We also recognize revenue when our estimate of total samples to be provided under certain of our 
agreements is reduced or, in the case of contract balances related to Medicare, when the likelihood becomes remote that a patient will receive additional 
testing. See Note 3, Revenue for our deferred revenue policy related to our worldwide collaboration and license agreement with Genentech.

Share-Based Compensation

Share-based compensation includes compensation expense for stock option, restricted stock unit and market-based restricted stock unit grants made 

to employees and non-employees. It represents the grant date fair value of the grants and is recognized over the requisite service period of the awards, 
usually the vesting period, on a straight-line basis, net of actual forfeitures. We estimate the grant date fair value of stock option grants and market-based 
restricted stock units using the Black-Scholes option-pricing model and the Monte Carlo valuation model, respectively. 

Advertising 

Advertising costs are expensed as incurred. Advertising expenses were $13.7 million, $22.4 million and $14.5 million for the year ended December 

31, 2022, 2021 and 2020, respectively.

118

 
Adaptive Biotechnologies Corporation
Notes to Consolidated Financial Statements (Continued)

Cost of Revenue

Cost of revenue includes the cost of materials, personnel-related expenses (including salaries, benefits and share-based compensation), shipping and 

handling expenses, equipment costs, allocated facility costs associated with processing samples and professional support costs related to our service 
revenue activities. Allocated facility costs include depreciation of laboratory equipment, as well as allocated facility occupancy and information technology 
costs. Costs associated with processing samples are recorded as expense, regardless of the timing of revenue recognition.

Research and Development Expenses

Research and development expenses consist of laboratory materials costs, personnel-related expenses (including salaries, benefits and share-based 

compensation), equipment costs, allocated facility costs, information technology expenses and contract service expenses. Research and development 
activities support further development and refinement of existing assays and products, discovery of new technologies and investments in our immune 
medicine platform. We also include in research and development expenses the costs associated with software development of applications to support future 
commercial opportunities, as well as development activities to support laboratory scaling and workflow. Additionally, a component of our research and 
development expenses are costs supporting clinical and analytical validations to obtain regulatory approval for future clinical products and services. 
Research and development costs are expensed as incurred. Upfront payments for goods or services that will be used or rendered for future research and 
development activities are deferred and capitalized, then are recognized as an expense as the goods are consumed or the related services are performed. 
Costs to support our worldwide collaboration and license agreement with Genentech are also a component of our research and development expenses.

Sales and Marketing Expenses

Sales and marketing expenses include personnel-related expenses (including salaries, benefits and share-based compensation) for commercial sales, 

product and account management, marketing, reimbursement, medical education and business development personnel that support commercialization of 
our platform products. In addition, these expenses include external costs such as advertising expenses, customer education and promotional expenses, 
market analysis expenses, conference fees, travel expenses and allocated facility costs.

Interest Expense

Interest expense includes costs associated with our revenue interest liability and noncash interest costs associated with the amortization of the related 

deferred issuance costs. We impute the related interest expense using the effective interest rate method. We calculate an effective interest rate which will 
amortize our related obligation to zero over the anticipated repayment period. A significant increase or decrease in or changes in timing of forecasted 
revenue will prospectively impact our interest expense.

Income Taxes

Income taxes are accounted for under the liability method. Deferred tax assets and liabilities are recognized for the future tax consequences 
attributable to the differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases, 
and the operating loss and tax credit carryforwards. Valuation allowances are established when necessary to reduce deferred tax assets to the amount 
expected to be realized.

Deferred tax assets and liabilities are measured at the consolidated balance sheet date using the enacted tax rates expected to apply to taxable income 
in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities due to a change in 
tax rates is recognized in the period such tax rate changes are enacted. Our net deferred tax assets are fully offset by a valuation allowance, because of our 
history of losses.

We recognize the effect of income tax positions only if those positions are more likely than not of being sustained upon examination.

119

 
Adaptive Biotechnologies Corporation
Notes to Consolidated Financial Statements (Continued)

Net Loss Per Share Attributable to Adaptive Biotechnologies Corporation Common Shareholders

We calculate basic net loss per share attributable to our common shareholders by dividing net loss attributable to us by our weighted-average 

number of shares of common stock outstanding for the period. The diluted net loss per share attributable to our common shareholders is computed by 
giving effect to all potential dilutive common stock equivalents outstanding for the period determined using the treasury stock method. For purposes of this 
calculation, outstanding common stock warrants, outstanding stock options, nonvested restricted stock units outstanding and the maximum nonvested 
market-based restricted stock units outstanding eligible to be earned are considered common stock equivalents but have been excluded from the calculation 
of diluted net loss per share attributable to our common shareholders, as their effect is anti-dilutive.

3.

Revenue

We disaggregate our revenue from contracts with customers by market opportunity and type of arrangement, as we believe this best depicts how the 

nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. 

The following table presents our disaggregated revenue for the periods presented (in thousands):

Immune Medicine revenue

Service revenue
Collaboration revenue

Total Immune Medicine revenue

MRD revenue

Service revenue
Regulatory milestone revenue

Total MRD revenue
Total revenue

2022

Year Ended December 31,
2021

2020

 $

 $

31,777     $
66,387    
98,164    

81,144    
6,000    
87,144    
185,308     $

24,482     $
63,651    
88,133    

56,211    
10,000    
66,211    
154,344     $

12,207  
53,526  
65,733  

30,149  
2,500  
32,649  
98,382  

During the year ended December 31, 2022, we recognized $0.7 million in Immune Medicine service revenue related to cancelled customer 

contracts. Additionally, during the year ended December 31, 2022, we recognized $5.2 million in MRD service revenue related to Medicare 
reimbursements resulting from our determination that the likelihood of additional testing for specific patients was remote, changes in estimates of total 
samples to be provided under certain of our agreements and cancelled customer contracts.

During the year ended December 31, 2021, we recognized $5.8 million in MRD service revenue related to changes in estimates of total samples to 

be provided under certain of our agreements, Medicare reimbursements resulting from our determination that the likelihood of additional testing for 
specific patients was remote, a change in our estimate of expected cumulative tests per patient for one of our covered indications and cancelled customer 
contracts.

During the year ended December 31, 2020, we recognized $1.4 million in MRD service revenue related to cancelled customer contracts and 

Medicare reimbursements resulting from our determination that the likelihood of additional testing for specific patients was remote.

As of December 31, 2022, we could receive up to an additional $368.5 million in milestone payments in future periods if certain regulatory 

approvals are obtained by our customers’ therapeutics in connection with MRD data generated from our MRD product.

120

 
 
 
 
 
 
 
   
   
 
 
     
     
   
  
 
 
 
 
 
 
 
     
     
   
  
 
 
  
 
 
 
 
 
 
 
Adaptive Biotechnologies Corporation
Notes to Consolidated Financial Statements (Continued)

Genentech Collaboration Agreement

In December 2018, we entered into a worldwide collaboration and license agreement with Genentech (the “Genentech Agreement”) to leverage our 

capability to develop cellular therapies in oncology. Subsequent to receipt of regulatory approval in January 2019, we received a non-refundable, upfront 
payment of $300.0 million in February 2019 and may be eligible to receive more than $1.8 billion over time, including payments of up to $75.0 million 
upon the achievement of specified regulatory milestones, up to $300.0 million upon the achievement of specified development milestones and up to 
$1,430.0 million upon the achievement of specified commercial milestones. In addition, we are separately able to receive tiered royalties at a rate ranging 
from the mid-single digits to the mid-teens on aggregate worldwide net sales of products arising from the strategic collaboration, subject to certain 
reductions, with aggregate minimum floors. Under the agreement, we are pursuing two product development pathways for novel T cell immunotherapies in 
which Genentech intends to use T cell receptors (“TCRs”) screened by our immune medicine platform to engineer and manufacture cellular medicines:

• Shared Products. The shared products will use “off-the-shelf” TCRs identified against cancer antigens shared among patients (“Shared 

Products”). 

• Personalized Product. The personalized product will use patient-specific TCRs identified by real-time screening of TCRs against cancer 

antigens in each patient (“Personalized Product”). 

Under the terms of the agreement, we granted Genentech exclusive worldwide licenses to develop and commercialize TCR-based cellular therapies 

in the field of oncology, including licenses to existing shared antigen data packages. Additionally, Genentech has the right to determine which product 
candidates to further develop for commercialization purposes. We determined that this arrangement meets the criteria set forth in Accounting Standards 
Codification (“ASC”) Topic 808, Collaborative Arrangements (“ASC 808”), because both parties are active participants in the activity and are exposed to 
significant risks and rewards depending on the activity’s commercial failure or success. Because ASC 808 does not provide guidance on how to account for 
the activities under a collaborative arrangement, we applied the guidance in ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”) to 
account for the activities related to the Genentech Agreement. 

In applying ASC 606, we identified the following performance obligations at the inception of the agreement: 

1. License to utilize on an exclusive basis all TCR-specific platform intellectual property to develop and commercialize any licensed products 

in the field of oncology. 

2. License to utilize all data and information within each shared antigen data package and any other know-how disclosed by us to Genentech 

in oncology. 

3. License to utilize all private antigen TCR product data in connection with research and development activities in the field of use. 

4. License to existing shared antigen data packages. 

5. Research and development services for Shared Products development, including expansion of shared antigen data packages. 

6. Research and development services for private product development. 

7. Obligations to participate on various joint research, development and project committees. 

We determined that none of the licenses, research and development services or obligations to participate on various committees were distinct within 
the context of the contract, given such rights and activities were highly interrelated and there was substantial additional research and development to further 
develop the licenses. We considered factors such as the stage of development of the respective existing antigen data packages, the subsequent development 
that would be required to both identify and submit a potential target for investigational new drug acceptance under both product pathways and the 
variability in research and development pathways given Genentech’s control of product commercialization. Specifically, under the agreement, Genentech is 
not required to pursue development or commercialization activities pertaining to both product pathways and may choose to proceed with one or the other. 
Accordingly, we determined that all of the identified performance obligations were attributable to one general performance obligation, which is to further 
the development of our TCR-specific platform, including data packages, and continue to make our TCR identification process available to Genentech to 
pursue either product pathway.

121

 
Adaptive Biotechnologies Corporation
Notes to Consolidated Financial Statements (Continued)

Separately, we have a responsibility to Genentech to enter into a supply and manufacturing agreement for patient-specific TCRs as it pertains to any 

Personalized Product therapeutic. We determined this was an option right of Genentech should they pursue commercialization of a Personalized Product 
therapy. Because of the uncertainty resulting from the early stage of development, the novel approach of our collaboration with Genentech and our rights to 
future commercial milestones and royalty payments, we determined that this option right was not a material right that should be accounted for at inception. 
As such, we will account for the supply and manufacturing agreement when entered into between the parties. 

We determined the initial transaction price shall be made up of only the $300.0 million upfront, non-refundable payment, as all potential regulatory 

and development milestone payments were probable of significant revenue reversal given their achievement was highly dependent on factors outside our 
control. As a result, these payments were fully constrained and were not included in the transaction price as of December 31, 2022. We excluded the 
commercial milestones and potential royalties from the transaction price, as those items relate predominantly to the license rights granted to Genentech and 
will be assessed when and if such events occur.

As there are potential substantive developments necessary, which Genentech may be able to direct, we determined that we would apply a 

proportional performance model to recognize revenue for our performance obligation. We measure proportional performance using an input method based 
on costs incurred relative to the total estimated costs of research and development efforts to pursue both the Shared Products and Personalized Product 
pathways. When any of the potential regulatory and development milestones are no longer fully constrained and are included in the transaction price, such 
amounts will be recognized using the cumulative catch-up method based on proportional performance at such time. We currently expect to recognize the 
revenue over a period of approximately eight to nine years from the effective date. This estimate of the research and development period considers pursuit 
options of development activities supporting both the Shared Products and Personalized Product, but may be reduced or increased based on the various 
activities as directed by the joint committees, decisions made by Genentech, regulatory feedback or other factors not currently known. 

We recognized $62.8 million, $62.0 million and $52.8 million in Immune Medicine collaboration revenue during the year ended December 31, 

2022, 2021 and 2020, respectively, related to the Genentech Agreement. Costs related to the Genentech Agreement are included in research and 
development expenses.

4.

Deferred Revenue

Deferred revenue from the Genentech Agreement represents $31.8 million and $55.5 million of the current and non-current deferred revenue 
balances, respectively, as of December 31, 2022 and $56.1 million and $94.0 million of the current and non-current deferred revenue balances, respectively, 
as of December 31, 2021. We expect our current deferred revenue to be recognized as revenue within 12 months. We expect the majority of our non-current 
deferred revenue to be recognized as revenue over a period of approximately four to five years from December 31, 2022. This period of time represents an 
estimate of the research and development period to develop cellular therapies in oncology, which may be reduced or increased based on various research 
and development activities.

Changes in deferred revenue during the year ended December 31, 2022 were as follows (in thousands):

Deferred revenue balance at December 31, 2021

Additions to deferred revenue during the period
Revenue recognized during the period

Deferred revenue balance at December 31, 2022

$

$

179,210  
42,866  
(99,362 )
122,714  

As of December 31, 2022, $77.3 million was recognized as revenue that was included in the deferred revenue balance at December 31, 2021.

122

 
 
 
 
 
 
 
 
Adaptive Biotechnologies Corporation
Notes to Consolidated Financial Statements (Continued)

5.

Fair Value Measurements

The following tables set forth the fair value of financial assets as of December 31, 2022 and 2021 that were measured at fair value on a recurring 

basis (in thousands):

Financial assets

Money market funds
Commercial paper
U.S. government debt securities
Corporate bonds

Total financial assets

Financial assets

Money market funds
U.S. government debt securities
Corporate bonds

Total financial assets

Level 1

Level 2

Level 3

Total

December 31, 2022

38,502     $
—    
—    
—    
38,502     $

—     $

9,969    
385,848    
12,349    
408,166     $

—     $
—    
—    
—    
—     $

38,502  
9,969  
385,848  
12,349  
446,668  

Level 1

Level 2

Level 3

Total

December 31, 2021

131,946     $

—    
—    
131,946     $

—     $

391,145    
39,996    
431,141     $

—     $
—    
—    
—     $

131,946  
391,145  
39,996  
563,087  

  $

  $

  $

  $

Level 1 securities include highly liquid money market funds, for which we measure the fair value based on quoted prices in active markets for 
identical assets or liabilities. Level 2 securities consist of U.S. government debt securities, corporate bonds and commercial paper, and are valued based on 
recent trades of securities in inactive markets or on quoted market prices of similar instruments and other significant inputs derived from or corroborated by 
observable market data.

6.

Investments

Available-for-sale investments consisted of the following as of December 31, 2022 and 2021 (in thousands): 

Short-term marketable securities

Commercial paper
U.S. government debt securities
Corporate bonds

Total short-term marketable securities

Short-term marketable securities

U.S. government debt securities
Corporate bonds

Total short-term marketable securities

Long-term marketable securities

U.S. government debt securities
Corporate bonds

Total long-term marketable securities

  Amortized Cost

    Unrealized Gain     Unrealized Loss

Estimated Fair 
Value

December 31, 2022

  $

  $

9,969     $

389,898    
12,415    
412,282     $

—     $
14    
—    
14     $

—     $

(4,064 )  
(66 )  
(4,130 )   $

9,969  
385,848  
12,349  
408,166  

  Amortized Cost

    Unrealized Gain     Unrealized Loss

Estimated Fair 
Value

December 31, 2021

  $

  $

  $

  $

186,752     $
27,363    
214,115     $

205,472     $
12,691    
218,163     $

4     $
—    
4     $

—     $
—    
—     $

(109 )   $
(14 )  
(123 )   $

(974 )   $
(44 )  
(1,018 )   $

186,647  
27,349  
213,996  

204,498  
12,647  
217,145  

All the U.S. government debt securities, corporate bonds and commercial paper designated as short-term marketable securities have an effective 

maturity date that is equal to or less than one year from the respective consolidated balance sheet date. Those that are designated as long-term marketable 
securities have an effective maturity date that is more than one year from the respective consolidated balance sheet date.

123

 
 
 
 
 
 
 
   
   
   
 
 
     
     
     
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
   
 
 
     
     
     
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
     
     
 
   
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
     
     
 
   
   
 
 
 
 
 
 
     
     
     
   
 
 
 
 
 
 
Adaptive Biotechnologies Corporation
Notes to Consolidated Financial Statements (Continued)

Accrued interest receivable is excluded from the amortized cost and estimated fair value of our marketable securities. Accrued interest receivable of 

$0.8 million and $1.4 million were presented separately within the prepaid expenses and other current assets balance on our consolidated balance sheet as 
of December 31, 2022 and 2021, respectively.

The following table presents the gross unrealized holding losses and fair value for investments in an unrealized loss position, and the length of time 

individual securities have been in a continuous loss position, as of December 31, 2022 (in thousands): 

U.S. government debt securities
Corporate bonds

Total available-for-sale securities

Less Than 12 Months

12 Months Or Greater

Fair Value

    Unrealized Loss

Fair Value

    Unrealized Loss

  $

  $

130,541     $

—    
130,541     $

(346 )   $
—    
(346 )   $

201,153     $
12,349    
213,502     $

(3,718 )
(66 )
(3,784 )

We periodically review our available-for-sale securities to assess for credit impairment. Some of the factors considered in assessing impairment 
include the extent to which the fair value is less than the amortized cost basis, adverse conditions related to the security, an industry or geographic area, 
changes to security ratings or sector credit ratings and other relevant market data.

As of December 31, 2022, we did not intend, nor were we more likely than not to be required, to sell our available-for-sale investments before the 
recovery of their amortized cost basis, which may be maturity. Based on our assessment, we concluded all impairment as of December 31, 2022 to be due 
to factors other than credit loss, such as changes in interest rates. A credit allowance was not recognized and the impairment of our available-for-sale 
securities was recorded in other comprehensive loss.

7.

Property and Equipment, Net

Property and equipment, net as of December 31, 2022 and 2021 consisted of the following (in thousands):

Laboratory equipment
Computer equipment
Furniture and office equipment
Computer software
Construction in progress
Leasehold improvements

Total property and equipment, at cost

Less: Accumulated depreciation
Property and equipment, net

December 31,

2022

2021

  $

  $

43,592     $
7,766    
5,342    
1,069    
7,625    
72,403    
137,797    
(54,350 )  
83,447     $

36,312  
6,988  
5,579  
992  
5,658  
65,959  
121,488  
(36,226 )
85,262  

Depreciation expense was $19.2 million, $12.3 million and $6.8 million for the year ended December 31, 2022, 2021 and 2020, respectively.

124

 
 
 
 
   
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adaptive Biotechnologies Corporation
Notes to Consolidated Financial Statements (Continued)

8.

Goodwill and Intangible Assets

There have been no changes in the carrying amount of goodwill since its recognition in 2015. 

Intangible assets subject to amortization as of December 31, 2022 and 2021 consisted of the following (in thousands): 

Acquired developed technology
Purchased intellectual property

Balance at December 31, 2022

Acquired developed technology
Purchased intellectual property

Balance at December 31, 2021

Gross Carrying 
Amount

December 31, 2022
Accumulated 
Amortization

Net Carrying 
Amount

20,000     $
325    
20,325     $

(13,304 )   $
(194 )  
(13,498 )   $

6,696  
131  
6,827  

Gross Carrying 
Amount

December 31, 2021
Accumulated 
Amortization

Net Carrying 
Amount

20,000     $
325    
20,325     $

(11,638 )   $
(161 )  
(11,799 )   $

8,362  
164  
8,526  

  $

  $

  $

  $

The developed technology was acquired in connection with our acquisition of Sequenta, Inc. in 2015. The remaining balance of the acquired 

developed technology and the purchased intellectual property is expected to be amortized over the next 4.0 years. 

As of December 31, 2022, expected future amortization expense for intangible assets was as follows (in thousands):

2023
2024
2025
2026
2027

Total future amortization expense

9.

Accrued Liabilities

Accrued liabilities as of December 31, 2022 and 2021 consisted of the following (in thousands):

Professional fees
Clinical and contract research organization costs
Travel and entertainment
Tax liabilities
Purchases of property and equipment
Computer and software
Other

Total accrued liabilities

125

$

$

December 31,

2022

2021

  $

  $

4,744     $
1,533    
233    
194    
1,680    
2,385    
1,655    
12,424     $

1,699  
1,703  
1,699  
1,699  
27  
6,827  

3,687  
1,646  
184  
391  
615  
1,776  
1,044  
9,343  

 
 
 
 
 
 
 
   
   
 
 
 
 
 
 
 
 
 
 
 
   
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adaptive Biotechnologies Corporation
Notes to Consolidated Financial Statements (Continued)

10.

Leases

We have operating lease agreements for the laboratory, office and warehouse facilities that we occupy in various locations. 

In July 2011, we entered into a non-cancelable lease agreement with an, at the time, minority shareholder for office and laboratory space in Seattle, 

Washington. The lease terms were subsequently amended multiple times, most recently in August 2019, when we expanded the existing premises to 
approximately 65,500 square feet. Cash payment for rent of the expanded premises commenced January 2020, four months after the landlord delivered the 
expanded premises to us for construction of certain tenant improvements, and the lease term for both the existing premises and the expanded premises ends 
October 2032, subject to our option to twice extend the lease for five years. The amended lease also requires us to pay additional amounts for operating and 
maintenance expenses.

In August 2019, we entered into an agreement to rent approximately 100,000 square feet in what was a to-be-constructed, new headquarters building 

in Seattle, Washington. In connection with the lease, we entered into a $2.1 million letter of credit with one of our existing financial institutions. The lease 
commenced in December 2020, when the landlord delivered the premises to us for construction of certain tenant improvements. We occupied the new 
building in 2021, cash payment for rent began in October 2021 and the lease term ends in August 2033, subject to our option to twice extend the lease for 
five years. In connection with this lease, the landlord agreed to fund $20.0 million in improvements, which was subsequently reduced to $14.8 million as a 
result of our change requests made during landlord construction of the building, net of an administration fee. As of December 31, 2022, we incurred $14.9 
million in certain tenant improvement costs, all of which has been reimbursed by the landlord. As of December 31, 2021, we incurred $14.9 million in 
certain tenant improvement costs, of which $10.9 million had been reimbursed by the landlord. The remaining $4.0 million is presented as a reduction in 
the cash flows used to measure our ROU asset and lease liabilities on our consolidated balance sheet as of December 31, 2021. The lease also requires us to 
pay additional amounts for operating and maintenance expenses.

In October 2019, we entered into an agreement to lease approximately 14,750 square feet in a separate Seattle, Washington location, pursuant to a 
lease expiring in October 2029, subject to our ability to exercise an early termination right after the third year, which we exercised during the year ended 
December 31, 2022. In connection with the lease, the landlord agreed to provide a tenant improvement allowance in the maximum amount of $0.7 million. 
The lease also required us to pay additional amounts for operating expenses.

In April 2018, we entered into a lease agreement to lease approximately 13,400 square feet in South San Francisco, California. The lease term is 
through March 2026 and provides for one five-year extension option. We are responsible for our share of allocable operating expenses, tax expenses and 
utilities costs during the duration of the lease term. In connection with the lease, the landlord funded agreed-upon improvements. The landlord was solely 
responsible for the $2.4 million cost of such improvements. The lease agreement was amended in February 2020 to lease approximately 19,900 additional 
square feet and provides for a $0.6 million tenant improvement allowance.

In December 2019, we entered into an agreement to lease approximately 3,100 square feet of office space in New York City, New York, pursuant to 

a lease that expires November 2025, subject to our ability to exercise an early termination right in 2023. The lease requires us to pay certain operating 
expenses.

In March 2021, we executed a lease to rent approximately 27,000 square feet of a warehouse in Bothell, Washington, which we classified as an 

operating lease upon commencement during the year ended December 31, 2021. Rent obligations commenced in October 2021 and the lease expires 
October 2031, subject to an early termination option after the seventh year and an option to twice extend the lease for five years. The lease requires us to 
pay certain operating expenses. Furthermore, the landlord agreed to fund $1.2 million in improvements in connection with this lease.

As of December 31, 2022, we were not party to any finance leases. Our leases have remaining terms ranging from 1.0 year to 10.7 years and include 
options to extend certain of the leases up to 10.0 years and terminate certain of the leases after 3.0 years of leasing. We adjust lease terms for these options 
only when it is reasonably certain we will exercise these options. As of December 31, 2022, it was reasonably certain that we would exercise our early 
termination right for one of our leases in 2023.

Other information related to our operating leases as of December 31, 2022 and 2021 was as follows:

Weighted-average remaining lease term (in years)
Weighted-average discount rate

126

December 31,

2022

2021

9.75  
4.6 %    

10.55  

4.6 %

 
 
 
 
 
 
 
   
 
 
 
   
 
 
 
Adaptive Biotechnologies Corporation
Notes to Consolidated Financial Statements (Continued)

The following table reconciles our undiscounted operating lease cash flows to our operating lease liabilities, less current portion balance as of 

December 31, 2022 (in thousands):

2023
2024
2025
2026
2027
Thereafter

Total undiscounted lease payments

Less: Imputed interest rate

Total operating lease liabilities

Less: Current portion

Operating lease liabilities, less current portion

$

$

13,964  
13,692  
14,098  
12,330  
11,944  
69,244  
135,272  
(27,270 )
108,002  
(9,230 )
98,772  

Operating lease expense was $12.4 million, $12.4 million and $5.5 million for the year ended December 31, 2022, 2021 and 2020, respectively. 

Variable lease expense for operating leases was $7.2 million, $3.5 million and $2.6 million for the year ended December 31, 2022, 2021 and 2020, 
respectively.

Cash paid for amounts included in the measurement of lease liabilities for the year ended December 31, 2022 was $9.2 million, net of $5.2 million 

of cash received for tenant improvement allowances. Cash paid for amounts included in the measurement of lease liabilities was $8.3 million and cash 
received for tenant improvement allowances was $11.5 million during the year ended December 31, 2021. Cash paid for amounts included in the 
measurement of lease liabilities for the year ended December 31, 2020 was $3.2 million, net of $2.5 million of cash received for tenant improvement 
allowances. For the year ended December 31, 2021, ROU assets obtained in exchange for operating lease liabilities was $5.4 million. For the year ended 
December 31, 2020, ROU assets obtained in exchange for operating lease liabilities was $109.1 million, inclusive of the $33.0 million recognized from the 
adoption of ASC 842.

11. Revenue Interest Purchase Agreement

Revenue Interest Purchase Agreement 

In September 2022, we entered into the Purchase Agreement with OrbiMed Royalty & Credit Opportunities IV, LP ("OrbiMed"), an affiliate of 

OrbiMed Advisors LLC, as collateral agent and administrative agent for the purchasers party thereto (the “Purchasers”). Pursuant to the Purchase 
Agreement, we received $125.0 million from the Purchasers at closing (the "First Payment"), less certain transaction expenses. We will also be entitled to 
receive up to $125.0 million in subsequent installments as follows: (i) $75.0 million upon our request occurring no later than September 12, 2025 (the 
“Second Payment”) and (ii) $50.0 million upon our request in connection with certain permitted acquisitions occurring no later than September 12, 2025 
(the “Third Payment”), in each case subject to certain funding conditions. To secure our obligations under the Purchase Agreement, we and our subsidiaries 
have granted OrbiMed a security interest in our core platform technology assets, subject to certain customary exclusions, as defined in the Purchase 
Agreement. 

Revenue Interest Payments 

As consideration for such payments, the Purchasers will have a right to receive certain revenue interests (the “Revenue Interests”) from us based on 
a percentage (the “Applicable Payment Percentage”) of all GAAP revenue (the “Revenue Base”). If only the First Payment has been made, the Applicable 
Payment Percentage shall be five percent of the quarterly Revenue Base. If both the First Payment and Second Payment have been made, the Applicable 
Payment Percentage shall be eight percent of the quarterly Revenue Base. If each of the First Payment, Second Payment and Third Payment have been 
made, the applicable payment percentage applied to the Revenue Interest shall be ten percent of the quarterly Revenue Base. 

Payments in respect of the Revenue Interests shall be made quarterly within 45 days following the end of each fiscal quarter (each, a “Revenue 

Interest Payment”). If OrbiMed has not received Revenue Interest Payments in the aggregate equal to or greater than the sum of its invested capital (the 
“Cumulative Purchaser Payments”) on or prior to September 12, 2028, the revenue interest rate shall be increased to a rate which, if applied retroactively to 
our cumulative Revenue Base, would have resulted in Revenue Interest Payments equal to the sum of all Cumulative Purchaser Payments.

127

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adaptive Biotechnologies Corporation
Notes to Consolidated Financial Statements (Continued)

Return Cap 

OrbiMed will be entitled to 100% of the Revenue Interest Payments until it has received a total cumulative value of 165% of the Cumulative 
Purchaser Payments (the “Return Cap”), unless full repayment of the amount of the Return Cap has not been made by September 12, 2032, in which case 
the Return Cap shall be increased to 175% of the Cumulative Purchaser Payments.

Put/Call Options 

Upon the occurrence of a Put Option Event (as defined in the Purchase Agreement), including material divestitures by us, a change in control, 

material judgments, or bankruptcy events, Purchasers representing at least a majority of the purchase commitments under the Purchase Agreement shall 
have the right but not the obligation ("the Put Option") to require us to repurchase all of the outstanding Revenue Interests at the applicable price (the 
“Put/Call Price”). Additionally, at any time following receipt of the First Payment, we may exercise a call option to repurchase all Revenue Interests at the 
applicable Put/Call Price. 

For all Put Option Events other than a change of control or a material divestiture, the Put/Call Price shall be an amount equal to the applicable 

Return Cap. For a change of control or a material divestiture, prior to March 12, 2024, the Put/Call Price shall be an amount equal to 120% of the 
Cumulative Purchaser Payments less the sum of all Revenue Interest Payments made by us to the Purchasers prior to such date, between March 12, 2024 
and September 12, 2024, the Put/Call Price shall be an amount equal to 125% of the Cumulative Purchaser Payments less the sum of all Revenue Interest 
Payments made by us to the Purchasers prior to such date, and after September 12, 2024, the Put/Call Price shall be equal to the applicable Return Cap.

Accounting Treatment

We evaluated the terms of the Purchase Agreement and concluded that the features of the Cumulative Purchaser Payments are similar to those of a 

debt instrument. Accordingly, we accounted for the transaction as long-term debt recorded at amortized cost using the effective interest rate method. We 
further evaluated the terms of the debt and determined that the Put Option that is exercisable by the Purchasers upon certain contingent events requires 
bifurcation as a derivative. However, the value of the Put Option was determined to be immaterial due to the remote possibility of exercise. We assess the 
value of the Put Option periodically.

To determine the amortization of the Purchase Agreement obligation, we are required to estimate the amount and timing of future Revenue Interest 
Payments based on our estimate of the timing and amount of future revenues and calculate an effective interest rate which will amortize the obligation to 
zero over the amortization period, taking into account the forecasted Revenue Interest Payments. The calculated effective interest rate as of December 31, 
2022 was 11.4%.

In connection with the Purchase Agreement, we incurred debt issuance costs of $0.6 million. Debt issuance costs have been recorded to long-term 

debt and are being amortized over the estimated term of the debt using the effective interest method, adjusted on a prospective basis for changes in the 
underlying assumptions and inputs. 

The assumptions used in determining the expected repayment term of the obligation and amortization period of the issuance costs requires that we 
make estimates that could impact the short- and long-term classification of these costs, as well as the period over which these costs will be amortized. We 
periodically assess the amount and timing of expected Revenue Interest Payments based on internal forecasts. 

To the extent such payments are greater or less than our initial estimates or the timing of such payments is materially different than our original 

estimates, we will prospectively adjust the amortization of the revenue interest liability and the effective interest rate.

The following table sets forth the revenue interest liability, net activity during the year ended December 31, 2022 (in thousands):

Revenue interest liability at inception

Capitalized issuance costs
Interest expense
Revenue interest paid
Revenue interest payable

Revenue interest liability, net at December 31, 2022

$

$

125,000  
(625 )
4,238  
(493 )
(2,760 )
125,360  

The revenue interest payable of $2.8 million was included within the accounts payable balance on our consolidated balance sheet as of December 

31, 2022.

128

 
 
 
 
 
 
 
 
 
 
 
 
Adaptive Biotechnologies Corporation
Notes to Consolidated Financial Statements (Continued)

12.

Commitments and Contingencies

Legal Proceedings 

We are subject to claims and assessments from time to time in the ordinary course of business. We will accrue a liability for such matters when it is 

probable that a liability has been incurred and the amount can be reasonably estimated. When only a range of possible loss can be established, the most 
probable amount in the range is accrued. If no amount within this range is a better estimate than any other amount within the range, the minimum amount 
in the range is accrued. We were not party to any material legal proceedings as of December 31, 2022.

Indemnification Agreements 

In the ordinary course of business, we may provide indemnification of varying scope and terms to vendors, lessors, customers and other parties with 
respect to certain matters including, but not limited to, losses arising out of breach of our agreements with them or from intellectual property infringement 
claims made by third parties. In addition, we have entered into indemnification agreements with members of our board of directors and certain of our 
executive officers that will require us to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. 
The maximum potential amount of future payments that we could be required to make under these indemnification agreements is, in many cases, unlimited. 
We have not incurred any material costs as a result of such indemnifications and are not currently aware of any indemnification claims.

13.

Shareholders’ Equity

Common Stock

Our common stock has no preferences or privileges and is not redeemable. Holders of our common stock are entitled to one vote for each share of 

common stock held. The holders of record of outstanding shares of common stock shall be entitled to receive, when, as and if declared, out of funds legally 
available, such cash and other dividends as may be declared from time to time.

As of December 31, 2022, we had reserved shares of common stock for the following:

Shares issuable upon the exercise of outstanding stock options granted
Shares issuable upon the vesting of outstanding restricted stock units granted and the maximum outstanding market-based 
restricted stock units eligible to be earned
Shares available for future grant under the 2019 Equity Incentive Plan
Shares available for future grant under the Employee Stock Purchase Plan

Total shares of common stock reserved for future issuance

13,520,997  

6,475,989  
14,581,975  
2,804,298  
37,383,259  

Our 2019 Equity Incentive Plan (“2019 Plan”) provides for annual increases in the number of shares that may be issued under the 2019 Plan on 
January 1, 2020 and on each subsequent January 1, thereafter, by a number of shares equal to the lesser of (a) 5% of the number of shares of common stock 
issued and outstanding on the immediately preceding December 31, or (b) an amount determined by our board of directors.

Furthermore, our Employee Stock Purchase Plan (“ESPP”) provides for annual increases in the number of shares available for issuance under our 

ESPP on January 1, 2020 and on each January 1, thereafter, by a number of shares equal to the smallest of (a) 1% of the number of shares of common stock 
issued and outstanding on the immediately preceding December 31, or (b) an amount determined by our board of directors.

Our board of directors determined not to increase the 2019 Plan and ESPP reserves in 2022. Effective January 1, 2023, our 2019 Plan and ESPP 

reserves increased by 7,155,250 shares and 1,431,050 shares, respectively.

129

 
 
 
 
 
 
 
 
 
 
 
 
 
Adaptive Biotechnologies Corporation
Notes to Consolidated Financial Statements (Continued)

14.

Equity Incentive Plans

2009 Equity Incentive Plan

We adopted an equity incentive plan in 2009 (“2009 Plan”) that provided for the issuance of incentive and nonqualified common stock options and 

other share-based awards for employees, directors and consultants. Under the 2009 Plan, the exercise price for incentive and nonqualified stock options 
were not to be less than the fair market value of our common stock at the date of grant. Stock options granted under this plan expire no later than ten years 
from the grant date and vesting was established at the time of grant. Pursuant to the terms of the 2019 Plan, any shares subject to outstanding stock options 
originally granted under the 2009 Plan that terminate, expire or lapse for any reason without the delivery of shares to the holder thereof shall become 
available for issuance pursuant to awards granted under the 2019 Plan. While no shares are available for future grant under the 2009 Plan, it continues to 
govern outstanding equity awards granted thereunder.

2019 Equity Incentive Plan

The 2019 Plan became effective immediately prior to the closing of our initial public offering in July 2019. The 2019 Plan provides for the issuance 

of awards in the form of stock options and other share-based awards for employees, directors and consultants. Under the 2019 Plan, the stock option 
exercise price per share shall not be less than the fair market value of a share of stock on the effective date of grant, as defined by the 2019 Plan, unless 
explicitly qualified under the provisions of Section 409A or Section 424(a) of the Internal Revenue Code of 1986. Additionally, unless otherwise specified, 
stock options granted under this plan expire no later than ten years from the grant date and vesting is established at the time of grant. Except for certain 
stock option and restricted stock unit grants made to non-employee directors, stock options and restricted stock units granted under the 2019 Plan generally 
vest over a four-year period, subject to continuous service through each applicable vesting date. As of December 31, 2022, we had 29,170,696 shares of 
common stock authorized for issuance under the 2019 Plan.

Changes in shares available for grant during the year ended December 31, 2022 were as follows:

Shares available for grant at December 31, 2021

Stock options and restricted stock units granted and the maximum market-based restricted stock units granted eligible to 
be earned
Stock options and restricted stock units forfeited or expired

Shares available for grant at December 31, 2022

Shares Available for Grant

22,299,923  

(11,556,509 )
3,838,561  
14,581,975  

Stock Options

Stock option activity under the 2009 Plan and 2019 Plan during the year ended December 31, 2022 was as follows: 

Stock options outstanding at December 31, 2021

Stock options granted
Stock options forfeited
Stock options expired
Stock options exercised

Stock options outstanding at December 31, 2022

Stock options vested and exercisable at December 31, 2022

Shares Subject to
Outstanding Stock 
Options
12,778,984     $
4,425,336      
(1,655,959 )    
(620,864 )    
(1,406,500 )    
13,520,997     $
7,568,858     $

Weighted-Average 
Exercise
Price per Share

Aggregate Intrinsic 
Value
(in thousands)

19.72  
11.67  
28.54  
32.60  
5.59  

16.88  

15.01  

  $

  $

6,651  

6,438  

The weighted-average remaining contractual life for stock options outstanding as of December 31, 2022 was 7.0 years. The weighted-average 

remaining contractual life for vested and exercisable stock options as of December 31, 2022 was 5.5 years. 

The total intrinsic value of stock options exercised during the year ended December 31, 2022, 2021 and 2020 was $7.6 million, $156.5 million and 

$190.4 million, respectively.

130

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
   
 
   
 
 
   
   
 
   
   
 
   
   
 
   
   
 
 
Adaptive Biotechnologies Corporation
Notes to Consolidated Financial Statements (Continued)

Of the $26.7 million proceeds from exercise of stock options included on our consolidated statements of cash flows for the year ended December 31, 

2021, $0.3 million related to stock options exercised during the year ended December 31, 2020 but settled during the year ended December 31, 2021. Of 
the $21.7 million proceeds from exercise of stock options included on our consolidated statements of cash flows for the year ended December 31, 2020, 
$0.5 million related to stock options exercised during the year ended December 31, 2019 but settled during the year ended December 31, 2020.

Restricted Stock Units

Restricted stock unit activity under the 2019 Plan during the year ended December 31, 2022 was as follows:

Nonvested restricted stock units outstanding at December 31, 2021

Restricted stock units granted
Restricted stock units forfeited
Restricted stock units vested

Nonvested restricted stock units outstanding at December 31, 2022

Restricted Stock Units
Outstanding

Weighted-Average Grant 
Date
Fair Value per Share

1,211,191     $
6,636,939    
(1,561,738 )  
(304,637 )  
5,981,755     $

37.41  
11.43  
16.20  
37.71  

14.11  

The total fair value of restricted stock units vested during the year ended December 31, 2022, 2021 and 2020 was $3.5 million, $0.8 million and $0.2 

million, respectively.

Market-Based Restricted Stock Units

In addition to the restricted stock units described above, our board of directors approved an award of market-based restricted stock units to our chief 

executive officer in March 2022. The shares of common stock that may be earned under the award, ranging from zero shares to 494,234 shares, are 
calculated based upon our total shareholder return during a three-year performance period as measured against that of the group of companies comprising 
the S&P Biotechnology Select Industry Index as of the grant date, subject to certain adjustments to such index group. Except as expressly provided in the 
terms of the award agreement, vesting is subject to our chief executive officer's continuous service through the end of the three-year performance period. 
These market-based restricted stock units were outstanding as of December 31, 2022.

Grant Date Fair Value of Stock Options, Restricted Stock Units and Market-Based Restricted Stock Units Granted

The estimated grant date fair values of stock options granted during the years ended December 31, 2022, 2021 and 2020 were estimated using the 

Black-Scholes option-pricing model with the following assumptions: 

Fair value of common stock
Expected term (in years)
Risk-free interest rate
Expected volatility
Expected dividend yield

Year Ended December 31,

2022

2021

$7.30 - $14.95    
5.27 - 6.08    
1.7% - 3.9%    
68.2% - 71.0%    

—  

$30.86 - $66.50    
5.27 - 6.08    
0.5% - 1.4%    
67.1% - 70.0%    
—      

2020

$17.68 - $55.23  

5.27 - 6.08  
0.4% - 1.7%  

70.5% - 73.3%  
—  

The determination of the grant date fair value of stock options granted using a Black-Scholes option-pricing model is affected by the fair value of 

our common stock, as well as assumptions regarding a number of variables that are complex, subjective and generally require significant judgment to 
determine. The valuation assumptions were determined as follows: 

Fair value of common stock—The fair value of each share of common stock is based on the closing price of our common stock on the date of grant, 

or other relevant determination date, as reported on The Nasdaq Global Select Market.

Expected term—The expected term of stock options granted to employees and non-employee directors is determined using the “simplified” method, 

as illustrated in ASC Topic 718, Compensation—Stock Compensation, as we do not have sufficient exercise history to determine a better estimate of 
expected term. Under this approach, the expected term is based on the midpoint between the vesting date and the end of the contractual term of the stock 
option.

Risk-free interest rate—We utilize a risk-free interest rate in the option valuation model based on U.S. Treasury zero-coupon issues with remaining 

terms similar to the expected terms of the stock options.

131

 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
 
 
 
 
 
   
   
Adaptive Biotechnologies Corporation
Notes to Consolidated Financial Statements (Continued)

Expected volatility—As we do not have sufficient trading history for our common stock, expected volatility is based on the historical volatility of 

our publicly traded industry peers utilizing a period of time consistent with our estimate of expected term.

Expected dividend yield—We do not anticipate paying any cash dividends in the foreseeable future and, therefore, use an expected dividend yield of 

zero in the option valuation model. 

The weighted-average grant date fair value per share of stock options granted during the year ended December 31, 2022, 2021 and 2020 was $7.36, 

$24.22 and $21.11, respectively. 

The grant date fair value of restricted stock units granted is based on the closing price of our common stock on the date of grant, or other relevant 

determination date, as reported on The Nasdaq Global Select Market. The weighted-average grant date fair value per share of restricted stock units granted 
during the year ended December 31, 2022, 2021 and 2020 was $11.43, $37.98 and $28.10, respectively.

The grant date fair value of the market-based restricted stock units granted in March 2022 is $18.89 and was determined using a Monte Carlo 

valuation model, which uses assumptions such as volatility, risk-free interest rate and dividend estimated for the performance period. The related share-
based compensation expense of $4.7 million is recognized on a straight-line basis over the three-year performance period, which is also the requisite 
service period. Attainment of the market condition and the number of shares earned and vested does not impact the related share-based compensation 
expense recognized. Share-based compensation expense will be reversed only if our chief executive officer does not provide continuous service through the 
performance period for reasons other than those expressly provided in the terms of the award.

The compensation cost related to stock options, restricted stock units and market-based restricted stock units for the years ended December 31, 

2022, 2021 and 2020 are included on our consolidated statements of operations as follows (in thousands): 

Cost of revenue
Research and development
Sales and marketing
General and administrative

Total share-based compensation expense

2022

Year Ended December 31,
2021

2020

  $

  $

  $

3,910  
17,689  
13,597  
20,281  
55,477     $

  $

2,100  
14,061  
12,312  
14,778  
43,251     $

817  
8,519  
6,627  
8,798  
24,761  

As of December 31, 2022, unrecognized share-based compensation expense and the remaining weighted-average recognition period were as 

follows:

Nonvested stock options
Nonvested restricted stock units
Nonvested market-based restricted stock units

15. Microsoft Collaboration Agreement

Summary of Agreement

Unrecognized Share-
Based
Compensation Expense
(in thousands)

Remaining Weighted-
Average
Recognition Period
(in years)

  $

64,881    
68,784    
3,382    

2.47  
3.07  
2.18  

In December 2017, we entered into a collaboration agreement with Microsoft Corporation ("Microsoft") (the “Microsoft Agreement”) to 

computationally derive a comprehensive TCR antigen map for purposes of developing a universal diagnostic based on a single blood test.

Contemporaneously with the Microsoft Agreement, we entered into a separate agreement to use Microsoft’s Azure cloud services at standard 
volume pricing with a minimum Azure purchase requirement of $12.0 million over the seven-year term of the Microsoft Agreement, which has been met.

In addition, contemporaneously with entering into the Microsoft Agreement, Microsoft made a preferred stock investment of $45.0 million as a part 

of our Series F-1 convertible preferred stock issuance.

132

 
 
 
 
 
 
 
   
   
 
   
   
   
   
   
   
   
   
   
 
 
 
 
   
 
 
 
 
 
 
 
 
 
Adaptive Biotechnologies Corporation
Notes to Consolidated Financial Statements (Continued)

Summary of Accounting

The terms of the Microsoft Agreement meet the criteria under ASC 808, as both parties are active participants in the activity and are exposed to 

significant risks and rewards dependent on the commercial success of the activity. ASC 808 does not provide guidance on how to account for the activities 
under the collaboration and we determined that Microsoft did not meet the definition of a customer under ASC 606. Accordingly, we looked to other 
guidance to determine the accounting for the respective elements.

We determined that the preferred stock issuance and commitment to use Microsoft’s Azure cloud services were made at terms consistent with 
market rates. All consideration received as part of the Series F-1 convertible preferred stock issuance was accounted for as part of the Series F-1 preferred 
stock issuance. Since the commitment to purchase Microsoft’s Azure cloud services was at market terms and we expect to meet the commitment in the 
ordinary course of business during the seven-year term, we record the expenses in the period in which the services are consumed. These costs are recorded 
in our consolidated statements of operations based on the underlying activities for which they support.

The remaining elements of the agreement were highly interrelated, so we evaluated them in the aggregate to determine the appropriate accounting 

application. Specifically, we determined that the transfer of license rights between the parties, our commitment to provide data and immunomics, diagnostic 
and bioinformatics expertise to Microsoft and Microsoft’s commitment to provide machine learning software and related development services to us were 
highly interrelated because they were necessary for the parties to perform the activities under the Microsoft Agreement and, therefore, should be evaluated 
as one unit of account.

We accounted for these collaboration activities by analogy to ASC Topic 845, Nonmonetary Transactions, and determined that major uncertainties 
exist about the realizability of the value that would be assigned to an asset received from or provided to Microsoft under the collaboration and, therefore, 
fair value could not be reliably measured. As a result, we did not recognize any non-monetary assets or corresponding non-monetary income or expenses 
pertaining to the rights provided to us or to be received by us under the Microsoft Agreement.

16. Restructuring

In March 2022, we began implementing a restructuring plan to reduce operating costs and drive future growth aligned with the strategic 

reorganization of our business around our MRD and Immune Medicine market opportunities. Under this restructuring plan, we reduced our workforce by 
approximately 100 employees. 

We incurred aggregate restructuring costs of $2.0 million, all of which was recognized during the year ended December 31, 2022. These costs 

primarily related to one-time termination benefits and ongoing benefit arrangements, both of which included severance payments and extended benefits 
coverage support and were contingent upon the impacted employees’ execution and non-revocation of separation agreements. Our aggregate restructuring 
costs also included certain contract termination costs.

The activities related to our reduction in workforce were primarily completed in March 2022 and the $2.0 million aggregate restructuring costs were 

paid as of December 31, 2022.

17.

Income Taxes

The components of loss before provision for income taxes for the periods presented are as follows (in thousands):

Domestic
Foreign
Total loss before provision for income taxes

Year Ended December 31,

2022

2021

2020

  $

  $

(200,427 )   $
59  
(200,368 )   $

(207,314 )   $
16  
(207,298 )   $

(146,227 )
—  
(146,227 )

133

 
 
 
 
 
 
 
   
   
 
 
 
   
   
 
Adaptive Biotechnologies Corporation
Notes to Consolidated Financial Statements (Continued)

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial 

reporting purposes and the amounts used for income tax purposes. 

The significant components of our deferred tax assets and liabilities as of the dates presented are as follows (in thousands):

Deferred tax assets

Net operating losses
Tax credit carryforward
Nonqualifying stock options
Operating lease liabilities
Deferred revenue
Capitalized research and development
Other

Total deferred tax assets

Less: Valuation allowance

Deferred tax assets, net of valuation allowance

Deferred tax liabilities

Tangible and intangible assets
Right-of-use assets

Net deferred taxes

December 31,

2022

2021

  $

  $

210,609     $
36,848    
23,885    
27,199    
26,170    
40,957    
5,859    
371,527    
(346,578 )  
24,949    

(4,897 )  
(20,052 )  

—     $

200,363  
31,200  
18,072  
30,401  
42,481  
—  
4,345  
326,862  
(297,020 )
29,842  

(7,310 )
(22,532 )
—  

ASC Topic 740, Income Taxes, requires that the tax benefit of net operating losses ("NOLs"), temporary differences and credit carryforwards be 

recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of the future tax benefits is dependent on 
our ability to generate sufficient taxable income within the carryforward period. Because of our history of operating losses, management believes that 
recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has 
provided a valuation allowance. The valuation allowance increased by $49.6 million and $99.5 million during the year ended December 31, 2022 and 2021, 
respectively.

Federal tax laws impose substantial restrictions on the utilization of NOL and credit carryforwards in the event of an ownership change, as defined 

in Section 382 of the Internal Revenue Code of 1986. Accordingly, our ability to utilize these carryforwards may be limited due to such ownership changes. 
We have completed a Section 382 analysis for changes in ownership through December 31, 2020 and continue to monitor for changes that could trigger a 
limitation. Based on this analysis, we do not expect to have any permanent limitations on the utilization of our federal NOLs. Under the Tax Cuts and Jobs 
Act (the "TCJA") federal income tax law, federal NOLs incurred in 2018 and future years may be carried forward indefinitely, but the deductibility of such 
federal NOLs is subject to an annual limitation. NOLs generated prior to 2018 are eligible to be carried forward up to 20 years. As of December 31, 2022, 
we had U.S. federal NOLs of $192.5 million and U.S. federal tax credits of $39.5 million that will begin to expire in 2028. We also had $616.5 million of 
NOLs as of December 31, 2022 that do not expire.

The TCJA was enacted on December 22, 2017 and includes the requirement to capitalize and amortize research and experimental expenditures 

beginning in 2022. Prior to 2022, we expensed these costs as incurred for tax purposes. The capitalization of the research and experimental expenditures 
resulted in a new deferred tax asset of $41.0 million, which was offset by a valuation allowance, resulting in no significant impact to income tax expense 
for the year ended December 31, 2022. This deferred tax asset will be amortized over five years.

134

 
 
 
 
 
 
 
   
 
 
     
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     
   
 
 
 
 
 
 
 
Adaptive Biotechnologies Corporation
Notes to Consolidated Financial Statements (Continued)

The effective tax rate of our provision for income taxes differs from the federal statutory rate for the periods presented as follows:

Statutory rate
State tax, net of federal tax benefit
Share-based compensation
Permanent items
Credits
Other
Change in valuation allowance

Total

Year Ended December 31,

2022

2021

2020

21.0%  
3.8  
(2.0)  
(0.2)  
3.0  
(1.2)  
(24.4)  
0.0%  

21.0%  
8.3  
14.1  
(0.1)  
4.7  
(0.3)  
(47.7)  
0.0%  

21.0%
13.8
25.2
(0.1)
5.7
0.5
(66.1)
0.0%

We account for Global Intangible Low-Taxed Income as period costs when incurred. 

We recognize, in our consolidated financial statements, the effect of a tax position when it is more likely than not, based on the technical merits, that 

the position will be sustained upon examination. We had unrecognized tax benefits of $8.1 million as of December 31, 2022. 

A reconciliation of the beginning and ending amounts of unrecognized tax benefits for the dates presented are as follows (in thousands):

Balance at December 31, 2019

Additions in 2020

Balance at December 31, 2020

Additions in 2021

Balance at December 31, 2021

Additions in 2022

Balance at December 31, 2022

$

$

2,052  
1,437  
3,489  
3,426  
6,915  
1,202  
8,117  

During the year ended December 31, 2022, 2021 and 2020, we recognized uncertain tax positions of $1.2 million, $3.4 million and $1.4 million, 

respectively, related to a reduction of the research and development credit deferred tax asset. Unrecognized tax benefits may change during the next twelve 
months for items that arise in the ordinary course of business. We do not expect a material change to our unrecognized tax benefits over the next twelve 
months that would have an adverse effect on our operating results.

We recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. We had no accrued interest or 

penalties related to uncertain tax positions as of December 31, 2022 and 2021.

We file federal and certain state income tax returns, which provide varying statutes of limitations on assessments. However, because of NOL 

carryforwards, substantially all tax years since inception remain open to federal and state tax examination.

18.

Net Loss Per Share Attributable to Adaptive Biotechnologies Corporation Common Shareholders

The following table sets forth the computation of the basic and diluted net loss per share attributable to our common shareholders for the years 

ended December 31, 2022, 2021 and 2020 (in thousands, except share and per share amounts): 

Net loss attributable to Adaptive Biotechnologies Corporation

  $

(200,191 )

  $

(207,279 )   $

(146,227 )

Weighted-average shares used in computing net loss per share attributable to Adaptive 
Biotechnologies Corporation common shareholders, basic and diluted
Net loss per share attributable to Adaptive Biotechnologies Corporation common 
shareholders, basic and diluted

142,515,917  

140,354,915    

131,216,468  

  $

(1.40 )

  $

(1.48 )   $

(1.11 )

2022

Year Ended December 31,
2021

2020

135

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
 
 
 
   
 
 
Adaptive Biotechnologies Corporation
Notes to Consolidated Financial Statements (Continued)

Given the loss position for all periods presented, basic net loss per share attributable to our common shareholders is the same as diluted net loss per 

share attributable to our common shareholders, as the inclusion of all potential shares of common stock outstanding would have been anti-dilutive.

The following weighted-average common stock equivalents were excluded from the calculation of diluted net loss per share attributable to our 

common shareholders for the years ended December 31, 2022, 2021 and 2020, as they had an anti-dilutive effect:

Stock options outstanding
Nonvested restricted stock units outstanding
Maximum nonvested market-based restricted stock units outstanding eligible to be earned    
Common stock warrant outstanding

Total

19.

Retirement Plan

2022
13,892,287  
4,799,850  
410,282  
—  
19,102,419  

Year Ended December 31,
2021
13,097,374      
693,173      
—      
8,570      
13,799,117      

2020
16,125,548  
38,125  
—  
56,875  
16,220,548  

We maintain a salary deferral 401(k) plan (“401(k) Plan”) covering employees who have met certain eligibility requirements. Employees may defer 

up to 100% of their compensation to the 401(k) Plan, subject to federal limits. We made $2.8 million, $2.5 million and $1.6 million in discretionary 
contributions during the year ended December 31, 2022, 2021 and 2020, respectively, which are fully vested after one year of employee service.

136

 
 
 
 
 
 
 
   
   
 
   
   
   
   
   
   
   
   
   
 
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we evaluated 

the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act as of December 31, 
2022. Based on that evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures were 
effective as of December 31, 2022. 

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) 

under the Exchange Act. Management conducted an assessment of the effectiveness of our internal control over financial reporting based on the criteria set 
forth in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). 
Based on that assessment, management has concluded that our internal control over financial reporting was effective as of December 31, 2022 to provide 
reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements in accordance with GAAP.

The effectiveness of our internal control over financial reporting as of December 31, 2022 has been audited by an independent registered public 

accounting firm, as stated in their report, which is included below.

Changes in Internal Control

There was not any change in our internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act, during 

the three months ended December 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial 
reporting.

137

 
Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Adaptive Biotechnologies Corporation

Opinion on Internal Control Over Financial Reporting

We have audited Adaptive Biotechnologies Corporation’s internal control over financial reporting as of December 31, 2022, based on criteria 

established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 
framework) (the COSO criteria). In our opinion, Adaptive Biotechnologies Corporation (the Company) maintained, in all material respects, effective 
internal control over financial reporting as of December 31, 2022, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 
consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, 
shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and our report dated February 
14, 2023 expressed an unqualified opinion thereon. 

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the 
effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial 
Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public 
accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities 
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain 

reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing 
and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered 
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Inherent Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial 

reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s 
internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, 
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded 
as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures 
of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance 
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the 
financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any 
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree 
of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Seattle, Washington
February 14, 2023

138

 
 
Item 9B. Other Information 

Not applicable.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

139

 
Item 10. Directors, Executive Officers and Corporate Governance 

PART III 

The information required by this Item 10 of Form 10-K will be included in our definitive proxy statement to be filed with the SEC in connection 

with the solicitation of proxies for our 2023 Annual Meeting of Shareholders (“2023 Proxy Statement”) and is incorporated herein by reference.

Item 11. Executive Compensation 

The information required by this Item 11 of Form 10-K will be included in our 2023 Proxy Statement and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 

The information required by this Item 12 of Form 10-K, including with respect to our equity compensation plans, will be included in our 2023 Proxy 

Statement and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence 

The information required by this Item 13 of Form 10-K will be included in our 2023 Proxy Statement and is incorporated herein by reference.

Item 14. Principal Accounting Fees and Services 

The information required by this Item 14 of Form 10-K will be included in our 2023 Proxy Statement and is incorporated herein by reference.

140

 
 
Item 15. Exhibits, Financial Statement Schedules 

(a)   The following documents are filed as part of this Annual Report on Form 10-K:

(1)    Financial Statements

PART IV 

See Index to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.

(2)    Financial Statement Schedules

All financial statement schedules have been omitted since the required information was not applicable or was not present in amounts 

sufficient to require submission of the schedules, or because the information required is included in the consolidated financial statements or the 
accompanying notes.

(3)    Exhibits

The exhibits listed in the following Index to Exhibits are filed, furnished or incorporated by reference as part of this Annual Report on 

Form 10-K.

Index to Exhibits

Filed/Furnished
With This
Report

Exhibit
Number
3.1

3.2

4.1

Exhibit Title

Amended and Restated Articles of Incorporation

Amended and Restated Bylaws

Seventh Amended and Restated Investors' Rights 
Agreement among the Registrant and certain of its 
shareholders, dated May 30, 2019

4.2

Description of Securities

10.1†

10.2†

10.3†

10.4

Strategic Collaboration and License Agreement between 
Genentech, Inc. and the Registrant, dated December 19, 
2018

Strategic Collaboration Agreement between Microsoft 
Corporation and the Registrant, dated December 11, 2017

Master Terms & Conditions of Sale between Illumina, Inc. and 
the Registrant, dated May 28, 2019

Amended and Restated Side Letter Agreement among 
Viking Global Equities LP, Viking Global Equities II LP, 
VGE III Portfolio Ltd., Viking Long Fund Master Ltd. and 
the Registrant, dated May 8, 2019

10.5*

Form of Amended and Restated Employment Agreement 
between the Registrant and certain of its executive officers

10.6*

10.7*

Form of Amended and Restated Employment Agreement 
between the Registrant and Francis T. Lo

Form of Restated Non-Employee Director Change in 
Control Agreement between the Registrant and each of its 
non-employee directors

10.8*

Form of Executive Severance Agreement between the 
Registrant and certain of its executive officers

141

Incorporated by Reference

Form
8-K

8-K

S-1

File No.
001-38957

001-38957

333-231838

Exhibit
3.1

3.2

4.1

Filing Date
7/1/2019

7/1/2019

5/30/2019

10-K

001-38957

S-1

333-231838

4.3

10.1

2/26/2020

5/30/2019

S-1

333-231838

10.2

5/30/2019

S-1/A

333-231838

10.3

6/17/2019

S-1

333-231838

10.5

5/30/2019

S-1

333-231838

10.7

5/30/2019

S-1

333-231838

10.8

5/30/2019

S-1

333-231838

10.9

5/30/2019

10-Q

001-38957

10.1

8/10/2020

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exhibit
Number

10.9*

10.10*

10.11*

10.12*

Exhibit Title

Form of Indemnification Agreement between the Registrant 
and its directors and executive officers

Filed/Furnished
With This
Report

Incorporated by Reference

Form

File No.

Exhibit

Filing Date

S-1

333-231838

10.13

5/30/2019

Adaptive Biotechnologies Corporation Non-Employee 
Director Compensation Policy

X

Adaptive Biotechnologies Corporation 2009 Equity 
Incentive Plan and form of award agreement thereunder

Adaptive Biotechnologies Corporation 2019 Equity 
Incentive Plan and form of award agreement thereunder

S-1

333-231838

10.15

5/30/2019

10-Q

001-38957

10.12

8/13/2019

10.13*

Form of Stock Option Agreement for Non-U.S. Participants

10-K

001-38957

10-K

001-38957

10.16

10.17

2/24/2021

2/24/2021

10-Q

001-38957

10.1

5/4/2022

S-1/A

333-231838

10.17

6/17/2019

8-K

001-38957

10.1

9/12/2022

S-1

333-231838

10.18

5/30/2019

8-K

001-38957

10.1

8/7/2019

8-K

001-38957

10.2

8/7/2019

10.14*

10.15*

10.16*

10.17

10.18

10.19†

10.20†

21.1

23.1

24.1

31.1

Form of Restricted Stock Unit Agreement for Non-U.S. 
Participants

Form of Performance Units Agreement and Notice of Grant 
of Performance Units

Adaptive Biotechnologies Corporation 2019 Employee 
Stock Purchase Plan

Revenue Interest Purchase Agreement, made and entered 
into as of September 12, 2022, by and among Adaptive 
Biotechnologies Corporation, the Purchasers from time to 
time party hereto, and OrbiMed Royalty & Credit 
Opportunities IV, LP

Lease Agreement between ARE-Seattle No. 11, LLC and 
Adaptive TCR Corporation, dated July 21, 2011, as 
amended by Amendment No. 1, dated August 26, 2011, 
Amendment No. 2, dated June 30, 2014, Amendment No. 3, 
dated November 5, 2015, Amendment No. 4, dated 
December 23, 2015, and Amendment No. 5, dated June 6, 
2016

Sixth Amendment to Lease Agreement between Adaptive 
Biotechnologies Corporation and ARE-Seattle No. 11, LLC, 
dated August 2, 2019

Lease Agreement between Adaptive Biotechnologies 
Corporation and ARE-Seattle No. 12, LLC, dated August 2, 
2019

List of Subsidiaries

Consent of Independent Registered Public Accounting Firm

Power of Attorney (included on the signature page)

Certification of Principal Executive Officer pursuant to 
Rule 13a‑14(a) or Rule 15d‑14(a) of the Securities 
Exchange Act of 1934, as adopted pursuant to Section 302 
of the Sarbanes-Oxley Act of 2002

142

X

X

X

X

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exhibit
Number

31.2

32.1

32.2

Exhibit Title

Certification of Principal Financial Officer pursuant to Rule 
13a‑14(a) or Rule 15d‑14(a) of the Securities Exchange Act 
of 1934, as adopted pursuant to Section 302 of the 
Sarbanes-Oxley Act of 2002

Certification of Principal Executive Officer pursuant to 18 
U.S.C. Section 1350, as adopted pursuant to Section 906 of 
the Sarbanes-Oxley Act of 2002

Certification of Principal Financial Officer pursuant to 18 
U.S.C. Section 1350, as adopted pursuant to Section 906 of 
the Sarbanes-Oxley Act of 2002

101.INS

Inline XBRL Instance Document – the instance document 
does not appear in the Interactive Data File because its 
XBRL tags are embedded within the Inline XBRL 
document.

101.SCH Inline XBRL Taxonomy Extension Schema Document

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase 

Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase 
Document

101.LAB Inline XBRL Taxonomy Extension Label Linkbase 

Document

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase 

Document

104

Cover Page Interactive Data File (formatted in Inline XBRL 
and included in Exhibit 101)

Filed/Furnished
With This
Report

Form

File No.

Exhibit

Filing Date

Incorporated by Reference

X

X

X

X

X

X

X

X

X

X

* Management contract or compensation plan or arrangement.
† Portions of this exhibit have been omitted pursuant to Item 601 of Regulation S-K promulgated under the Securities Act because the information is not 
material and would be competitively harmful if publicly disclosed.

Item 16. Form 10-K Summary

Not applicable.

143

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on 

Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Seattle, State of Washington, on February 14, 2023.

SIGNATURES

Adaptive Biotechnologies Corporation

By:        /s/ Chad Robins

Chad Robins
Chief Executive Officer

POWER OF ATTORNEY 

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Chad Robins, his 
attorney-in-fact, with the power of substitution, for him in any and all capacities, to sign any amendments to this Annual Report on Form 10-K, and to file 
the same, with exhibits thereto and other documents in connection therewith, with the SEC, hereby ratifying and confirming all that said attorney-in-fact, or 
his substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following 

persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature

/s/ Chad Robins
Chad Robins

/s/ Tycho Peterson
Tycho Peterson

/s/ Kyle Piskel
Kyle Piskel

/s/ Kevin Conroy
Kevin Conroy

/s/ Michelle Griffin
Michelle Griffin

/s/ Robert Hershberg
Robert Hershberg, PhD, MD

/s/ Peter Neupert
Peter Neupert

/s/ Katey Owen
Katey Owen, PhD

/s/ Michael Pellini
Michael Pellini, MD

/s/ Leslie Trigg
Leslie Trigg

Date

February 14, 2023

February 14, 2023

February 14, 2023

February 14, 2023

February 14, 2023

February 14, 2023

February 14, 2023

February 14, 2023

February 14, 2023

February 14, 2023

Title

Chief Executive Officer and Director
(Principal Executive Officer)

Chief Financial Officer
(Principal Financial Officer)

VP, Principal Accounting Officer
(Principal Accounting Officer)

Director

Director

Director

Director

Director

Director

Director

144

 
 
 
 
 
 
 
  
 
 
  
  
 
 
 
  
  
 
 
 
  
  
 
 
 
  
  
 
 
 
  
 
  
 
 
 
  
 
  
 
 
 
  
 
  
 
 
 
  
 
  
 
 
 
  
 
  
 
 
 
  
 
  
 
 
 
  
 
  
 
 
 
 
ADAPTIVE BIOTECHNOLOGIES CORPORATION

NON-EMPLOYEE DIRECTOR COMPENSATION POLICY

Last updated January 26, 2023

EXHIBIT 10.10

Adaptive Biotechnologies Corporation, a Washington corporation (the “Company”), believes that the granting of cash 

and equity compensation to the members of its Board of Directors (the “Board,” and members of the Board, the “Directors”) 
represents an effective tool to attract, retain and reward Directors who are not employees of the Company (the “Non-Employee 
Directors”).  This Non-Employee Director Compensation Policy (this “Policy”) is intended to formalize the Company’s policy 
regarding cash compensation and grants of equity to its Non-Employee Directors.  Unless otherwise defined herein, capitalized 
terms used in this Policy will have the meaning given such term in the Company’s 2019 Equity Incentive Plan (the “Plan”).  
Each Non-Employee Director will be solely responsible for any tax obligations incurred by such Non-Employee Director as a 
result of the cash payments paid and equity awards granted to such Non-Employee Director under this Policy.

1.

ANNUAL CASH COMPENSATION

Annual Cash Retainer

Each Non-Employee Director will be paid an annual cash retainer of $60,000.  There are no per-meeting attendance fees for 
attending Board or shareholder meetings.

Additional Chair and Lead Director Annual Cash Retainer

Each Non-Employee Director who serves as a lead director or chairman of a committee of the Board will be paid additional 
annual cash fees as follows:

Lead Independent Director:

Audit Committee Chair:

Compensation Committee Chair:

Nominating and Corporate Governance Committee Chair:

All cash compensation will be paid quarterly in arrears.

$35,000

$20,000

$15,000

$10,000

The Board in its discretion may change and otherwise revise the terms of the cash compensation granted under this Policy, 
including, without limitation, the amount of cash compensation to be paid, on or after the date the Board determines to make any 
such change or revision.

2.

EQUITY COMPENSATION

Non-Employee Directors will be entitled to receive all types of Awards (excluding Incentive Stock Options) under the Plan (or 
the applicable equity plan in place at the time of grant).  All grants of Awards to Non-Employee Directors pursuant to Section 2 
of this Policy will be 

 
 
 
 
automatic and nondiscretionary, except as otherwise provided herein, and will be made in accordance with the following 
provisions and subject to Sections 4.5 and 13 of the Plan:

a.

b.

c.

Initial Award.  Each individual who first becomes a Non-Employee Director after the most recent 
update to this Policy will be granted an Award (the “Initial Award”), which grant will be effective on 
the date on which such individual first becomes a Non-Employee Director, whether through election by 
the shareholders of the Company or appointment by the Board to fill a vacancy.  The Initial Award will 
have an estimated fair value of $400,000, using valuation methodologies deemed appropriate by the 
Compensation Committee of the Board or the Board from time to time, in light of commercial 
considerations deemed necessary to fulfill the goals set forth in this Policy and to align directors with 
shareholder interests.  Fifty percent (50%) of the estimated fair value target of the Initial Award will be 
comprised of Nonstatutory Stock Options, and fifty percent (50%) of the estimated fair value target of 
the Initial Award will be comprised of Restricted Stock Units.

Annual Award.  Each Non-Employee Director will be granted an Award (an “Annual Award”), on the 
same date annual awards are granted to Company executive officers  each calendar year (unless the 
Board determines to award them on a different date), beginning with 2023, following the election or 
appointment of such Non-Employee Director to the Board; provided that any Non-Employee Director 
who is not continuing as a Director during the calendar year following such Board meeting will not 
receive an Annual Award with respect to such meeting.  The Annual Award will have an estimated fair 
value of $250,000 using valuation methodologies deemed appropriate by the Compensation Committee 
of the Board or the Board from time to time, in light of commercial considerations deemed necessary to 
fulfill the goals set forth in this Policy and to align directors with shareholder interests. Fifty percent 
(50%) of the estimated fair value target of the Annual Award will be comprised of Nonstatutory Stock 
Options, and fifty percent (50%) of the estimated fair value target of the Annual Award will be 
comprised of Restricted Stock Units.  

Vesting.  Subject to Sections 2(d) and 5 below: (a) the Nonstatutory Stock Option portion of each Initial 
Award will vest over four (4) years, with 25% vesting on the one (1)-year anniversary of the vesting 
commencement date and monthly thereafter for thirty-six (36) months; (b) the Restricted Stock Unit 
portion of each Initial Award will vest annually over four (4) years following the vesting 
commencement date; (c) the Nonstatutory Stock Option portion of each Annual Award will vest 
monthly over one (1) year following the vesting commencement date; and (d) the Restricted Stock Unit 
portion of each Annual Award will vest 

 
 
 
entirely on the one (1) year anniversary of the vesting commencement date.

d.

Change in Control.  In the event of a Change in Control, each Non-Employee Director will fully vest in 
his or her Initial Award and/or each Annual Award provided that the Non-Employee Director continues 
to provide Service through such date.

3.

TRAVEL EXPENSES

Each Non-Employee Director’s reasonable, customary and documented travel expenses to Board meetings will be 

reimbursed by the Company.

4.

ADDITIONAL PROVISIONS

All provisions of the Plan not inconsistent with this Policy will apply to Awards granted to Non-Employee Directors.

5.

ADJUSTMENTS

In the event that any dividend or other distribution (whether in the form of cash, Stock, other securities or other 
property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, 
repurchase, or exchange of Stock or other securities of the Company or other change in the corporate structure of the Company 
affecting the Stock occurs, the Board, in order to prevent diminution or enlargement of the benefits or potential benefits intended 
to be made available under this Policy, will adjust the number of shares of Stock issuable pursuant to Awards granted under this 
Policy.

6.

LIMITATIONS

No Non-Employee Director may be issued in any fiscal year cash payments (including the fees under Section 1 above) 
and Awards (including Awards under Section 2 above) with aggregate value greater than $600,000, increased to $750,000 in the 
fiscal year of his or her initial service as a Non-Employee Director.  Any Awards or other compensation granted to an individual 
for his or her services as an employee, or for his or her services as a consultant other than a Non-Employee Director, will be 
excluded for purposes of the limitations under this Section 6.

7.

SECTION 409A

In no event will cash compensation or expense reimbursement payments under this Policy be paid after the later of (a) 

the fifteenth (15th) day of the third (3rd) month following the end of the Company’s fiscal year in which the compensation is 
earned or expenses are incurred, as applicable, or (b) the fifteenth (15th) day of the third (3rd) month following the end of the 
calendar year in which the compensation is earned or expenses are incurred, as applicable, in compliance with the “short-term 
deferral” exception under Section 409A of the Internal Revenue Code of 1986, as amended, and the final regulations and 
guidance thereunder, as may be amended from time to time (together, “Section 409A”).  It is the intent of this Policy that this 

 
 
 
Policy and all payments hereunder be exempt from or otherwise comply with the requirements of Section 409A so that none of 
the compensation to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any 
ambiguities or ambiguous terms herein will be interpreted to be so exempt or comply.  In no event will the Company reimburse a 
Non-Employee Director for any taxes imposed or other costs incurred as a result of Section 409A.

8.

REVISIONS

The Board or any committee designated by the Board may amend, alter, suspend or terminate this Policy at any time and 

for any reason.  No amendment, alteration, suspension or termination of this Policy will materially impair the rights of a Non-
Employee Director with respect to compensation that already has been paid or awarded, unless otherwise mutually agreed 
between the Non-Employee Director and the Company.  Termination of this Policy will not affect the Board’s or the 
Compensation Committee’s ability to exercise the powers granted to it under the Plan with respect to Awards granted under the 
Plan pursuant to this Policy prior to the date of such termination.

 
 
 
List of Subsidiaries of Adaptive Biotechnologies Corporation

Subsidiary
Digital Biotechnologies, Inc.
Adaptive Biotechnologies B.V.

Jurisdiction of Organization
Delaware
Netherlands

Exhibit 21.1

 
Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the following Registration Statements:

(1) Registration Statement (Form S-8 No. 333-232495) pertaining to the Sequenta Inc., 2008 Stock Plan, the Adaptive Biotechnologies 
Corporation 2009 Equity Incentive Plan, the Adaptive Biotechnologies Corporation 2019 Equity Incentive Plan and the Adaptive 
Biotechnologies Corporation 2019 Employee Stock Purchase Plan and

(2) Registration Statement (Form S-3ASR No. 333-239854) of Adaptive Biotechnologies Corporation; 

of our reports dated February 14, 2023, with respect to the consolidated financial statements of Adaptive Biotechnologies Corporation, and 
the effectiveness of internal control over financial reporting of Adaptive Biotechnologies Corporation, included in this Annual Report (Form 
10-K) for the year ended December 31, 2022.

/s/ Ernst & Young LLP

Seattle, Washington
February 14, 2023

 
 
 
 
 
 
 
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER 
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

Exhibit 31.1

I, Chad Robins, certify that:

1.

I have reviewed this Annual Report on Form 10-K of Adaptive Biotechnologies Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make 
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered 
by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects 

the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined 
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) 
and 15d-15(f)) for the registrant and have:

a) Designed  such  disclosure  controls  and  procedures,  or  caused  such  disclosure  controls  and  procedures  to  be  designed  under  our 
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to 
us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed  such  internal  control  over  financial  reporting,  or  caused  such  internal  control  over  financial  reporting  to  be  designed 
under  our  supervision,  to  provide  reasonable  assurance  regarding  the  reliability  of  financial  reporting  and  the  preparation  of 
financial statements for external purposes in accordance with generally accepted accounting principles;

c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about 
the  effectiveness  of  the  disclosure  controls  and  procedures,  as  of  the  end  of  the  period  covered  by  this  report  based  on  such 
evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s 
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is 
reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, 
to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are 
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s 

internal control over financial reporting.

Date: February 14, 2023

By:

/s/ Chad Robins

Chad Robins

Chief Executive Officer
(Principal Executive Officer)

 
 
 
 
 
  
 
 
  
  
 
    
 
   
 
 
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER 
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

Exhibit 31.2

I, Tycho Peterson, certify that:

1.

I have reviewed this Annual Report on Form 10-K of Adaptive Biotechnologies Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make 
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered 
by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects 

the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined 
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) 
and 15d-15(f)) for the registrant and have:

a) Designed  such  disclosure  controls  and  procedures,  or  caused  such  disclosure  controls  and  procedures  to  be  designed  under  our 
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to 
us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed  such  internal  control  over  financial  reporting,  or  caused  such  internal  control  over  financial  reporting  to  be  designed 
under  our  supervision,  to  provide  reasonable  assurance  regarding  the  reliability  of  financial  reporting  and  the  preparation  of 
financial statements for external purposes in accordance with generally accepted accounting principles;

c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about 
the  effectiveness  of  the  disclosure  controls  and  procedures,  as  of  the  end  of  the  period  covered  by  this  report  based  on  such 
evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s 
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is 
reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, 
to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are 
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s 

internal control over financial reporting.

Date: February 14, 2023

By:

/s/ Tycho Peterson

Tycho Peterson

Chief Financial Officer
(Principal Financial Officer)

 
 
 
 
 
  
 
 
  
  
 
    
 
   
 
   
 
 
 
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Exhibit 32.1

In connection with the Annual Report of Adaptive Biotechnologies Corporation (the “Company”) on Form 10-K for the fiscal year ended December 31, 
2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant 
to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1.

2.

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: February 14, 2023

By:

/s/ Chad Robins
Chad Robins
Chief Executive Officer
(Principal Executive Officer)

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 
18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or 
after the date hereof, regardless of any general incorporation language in such filing.

 
 
  
  
  
  
  
  
  
 
 
 
 
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Exhibit 32.2

In connection with the Annual Report of Adaptive Biotechnologies Corporation (the “Company”) on Form 10-K for the fiscal year ended December 31, 
2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant 
to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1.

2.

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: February 14, 2023

By:

/s/ Tycho Peterson

Tycho Peterson

Chief Financial Officer
(Principal Financial Officer)

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 
18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or 
after the date hereof, regardless of any general incorporation language in such filing.