Q4 2023 Adaptive Biotechnologies Corp Earnings Call
Participants
Karina Calzadilla; Vice President - Investor Relations; Adaptive Biotechnologies Corp
Chad Robins; Chairman of the Board, Chief Executive Officer, Co-Founder; Adaptive Biotechnologies Corp
Tycho Peterson; Chief Financial Officer; Adaptive Biotechnologies Corp
Susan Bobulsky; SVP, Diagnostics, clonoSEQ; Adaptive Biotechnologies Corp
Andrew Brackmann; Analyst; William Blair & Company, L.L.C.
Dan Brennan; Analyst; Cowen & Co., LLC
David Westenberg; Analyst; Piper Sandler & Co.
Presentation
Operator
Thanks for standing by and welcome to the Adaptive Biotechnologies fourth quarter and full year 2023 earnings conference call. (Operator Instructions) As a reminder, today's program is being recorded. And now, I'd like to introduce your host for today's program, Karina Calzadilla, Head of Investor Relations. Please go ahead.
Karina Calzadilla
Thank you, Jonathan, and good afternoon, everyone. I would like to welcome you to Adaptive Biotechnologies fourth quarter and full year '23 earnings conference call. Earlier today, we issued a press release reporting Adaptive financial results for the fourth quarter and full year of '23. The press release is available at www.adaptivebiotech.com. We are conducting a live webcast of this call and will be referencing to a slide presentation that has been posted in the Investors section on our corporate website.
During the call, management will be making projections and other forward-looking statements within the meaning of federal security laws regarding future events and the future financial performance of the company. These statements reflect management's current perspective of the business as of today. Actual results may differ materially from today's forward-looking statements depending on a number of factors which are set forth in our public filings with the SEC and listed in this presentation.
In addition, non-GAAP financial measures will be discussed during the call and a reconciliation from non-GAAP to GAAP metrics can be found in our earnings release. Joining the call today are Chad Robins, our CEO and Co-Founder, and Tycho Peterson, our Chief Financial Officer. Additional members from management will be available for Q&A. With that I'll turn the call over to Chad Robins. Chad.
Chad Robins
Thanks, Karina. Good afternoon, everyone, and thank you for joining us on our fourth quarter and full year earnings call. As you can see on slide 3, 2023 was a year of transformation for Adaptive. Key milestones were achieved for both MRD. and immune medicine. We executed OpEx reduction initiatives to drive efficiencies and reduce burn, and we initiated a strategic review process to maximize the value that MRD and immune medicine can deliver to patients and shareholders.
We ended the year with $170 million in revenue, including 60% from MRD and 40% from immune medicine. Cmrg business grew 27% versus prior year, excluding milestones, as we experienced outstanding growth from clonoSEQ test volumes. This growth from MRMRD. was offset by a decline in immune medicine, mainly due to the reduction in the upfront amortization of Genentech. As a reminder, last quarter, we updated total company guidance to exclude revenue from immune medicine. We made this decision based on a strategic shift in immune medicine to focus exclusively exclusively on target and drug discovery. Importantly, we ended the year with a strong cash position of approximately $346 million, which enables us to execute on the strategic priorities of both businesses and MRD. drive clonoSEQ penetration and revenue growth with the goal of reaching profitable profitability by the end of 2025. Immune medicine advance our target and drug discovery efforts in cancer and autoimmunity. This includes supporting a partnership with Genentech, validating a therapeutic candidate, multiple sclerosis and scaling to our target discovery and our other autoimmune disorders.
Before I go into the details of each business, I'll provide an update on the strategic review. In the third quarter of 2023. We retained Goldman Sachs to advise on a strategic review to maximize value to our shareholders. The MRD and immune medicine businesses have different value drivers, investment needs and talent requirements. We are evaluating various alternatives to unlock the full potential of each business, and we are on track to communicate a final outcome at the end of this quarter.
Let's now take a closer look at our MRT business.
Starting with clinical testing on Slide 6. Currency clinical revenue in the fourth quarter grew 56% versus prior year and 25% versus prior quarter, with growth coming from both volume and AST. volumes continue to grow quarter over quarter with 15,680 tests delivered in Q4, representing a 49% increase versus prior year with a 4% increase sequentially. As a reminder, Q4 is typically impacted by fewer business days. We are off to a great start this year with record high clonoSEQ orders year to date growth came from all marketed indications and multiple myeloma continues to be the largest contributor. In addition, the actions we put in place to improve collections and expand coverage are working. Asps in the fourth quarter grew double digits sequentially. We continued to be laser focused on driving ASP growth by reducing auto policy and non-contracted claims and further optimizing revenue cycle management. As such, we anticipate an increase of approximately $200 in ASP per test over the next two years is encouraging to see positive trends on clonoSEQ key indicators, as shown on slide 7, blood-based testing increasing all indications contributing 39% of clonoSEQ tests. We expect this percentage to grow as we generate more clinical data in blood and commercialization in non-Hodgkin's lymphoma. Blood-based testing is also a key driver of the quarter-over-quarter growth we are seeing in the community, which can now contribute nearly one for clonoSEQ test. Recent data presented at ASH showed evidence that clonoSEQ MRD from blood predicts progression free free free survival early in the treatment cycle. Multi myeloma patients also ordering health care providers and ordering accounts grew 33% and 29% versus prior year, respectively. Emr integration is a key element of our growth strategy and central to our efforts to further enhance our customer experience. We completed Epic integrations with our first five accounts and expect to complete 15 to 20 more this year include several several of our largest accounts. Last week, we signed an important new integration partnership with Flatiron Health, a leading provider of EHR software and services for community oncology. So we look forward to executing this partnership and expect to make clonoSEQ available to practices via deep molecular profiling integration and flat and onco EMR system in 2025.
Looking at MRD pharma on slide 8, full year revenue was essentially flat versus prior year due to broader macroeconomic factors impacting the biopharma industry, which resulted in lower sample volume across our portfolio of prospective trials. That said, we saw some recovery in the fourth quarter, which experienced 23% growth sequentially. Despite these transitory headwinds, we ended the year with a healthy backlog of about $185 million, and we signed two important patent portfolio collaboration with Takeda in Beijing 2023 was a great year for clonoSEQ, and we are well positioned to cement our leadership as the gold standard and MRD team for clinicians, patients, pharma partners and payers.
Looking ahead, as shown on slide 9 and 10, our priorities for MRD are clear. First, further increased penetration by growing blood-based testing expanding into new indications like MCL and CTCL, adding new use cases through data generation and enhancing the customer experience through EMR integrations. Second, improving margins through ASP increases and operating leverage with the primary goal of reaching positive adjusted EBITDA in the second half of 2025 and cash flow breakeven in 2026.
Turning to immune medicine on Slide 12. In 2023, our immune medicine business achieved two key milestones. One, FDA and the acceptance was secured for the first T cell therapy product candidate under our partnership with Genentech and two, we discovered a novel novel druggable target in multiple sclerosis, which sheds light on potentially new T cell biology that may be causative trigger to this devastating devastating disease. These immune medicine milestones, further sharpened our focus in Target and drug discovery, specifically in high value opportunities in cancer and autoimmunity.
And as shown on slide 13 in cancer, we continue to support Genentech in the development of two categories of TCR based cell therapy products on the first shared product were incurred were engaged with Genentech's development team as it gears up for our first-in-human trial for the fairly fully personalized program. We completed building our regulated regulated process workflow and this year were initiate end to end testing for future clinical readiness and the valuable immune receptor data that we have been generating for over a decade is a treasure trove of information that together with our partner, Microsoft, we used to develop and train AIML. models to help accelerate our target and drug discovery efforts in autoimmunity, our focus is to further validate the MS target in known disease models. In parallel, we are deploying our antibody platform to identify a therapeutic candidate that specifically binds to this self antigen and blocks of potential causative event in MS. In addition, we're applying the exact same approach that we used in MS to discover novel targets and additional prioritized autoimmune indications, including type one diabetes and rheumatoid arthritis.
As you can see on slide 14, in 2024 we will gauge our R&D investments based on key proof points that drive future value for both our partnered and wholly owned drug discovery pipeline. I'll now pass it over to Tycho.
Tycho Peterson
Thanks, Chad. Starting on slide 15, with revenue for the fourth quarter and full year, total revenue in the fourth quarter was $45.8 million, with 67% from MRD and 33% from a new medicine. Mod revenue grew to $30.8 million, up 9% from a year ago. Policy clinical performance was the main driver partially offset by a reduction in revenue from pharma services and regulatory milestones. Excluding regulatory milestones, energy revenue grew 18% from a year ago. Clonoseq test volume increased by 49% to 15,680 tests delivered from 10,526 tests in the same period last year. Immune medicine revenue was $15 million down 45% a year ago, driven as expected by lower Genentech amortization, which decreased 53% year over year. Full year 2023 revenue was $170.3 million, representing an 8% decrease year over year. Mid revenue was $102.7 million, up 18% from a year ago, driven by a 27% increase from MOD service revenue, partially offset by a lack of regulatory milestones. Immune medicine revenue was $67.5 million, down 31% from the prior year. As Chad mentioned, starting with our 3Q 23 earnings call, we opted to exclude immune medicine from revenue guidance. Given the shift in focus to target and drug discovery.
Moving down the P&L on the right-hand side of the slide, total gross margin for the quarter was 57%, representing an eight point increase versus the third quarter and a 13 point decline versus a year ago. The sequential increase was largely due to efficiencies from the lab move versus the prior year. The decline was driven by lower amortization of the Genentech upfront and a lack of milestones, which had 100% margin contribution. R&d sales and marketing and G&A operating expenses declined 8% in total versus a year ago. As we continue to place a strong emphasis on driving leverage.
Net loss for the quarter was $69.5 million compared to $40.2 million last year for the full year.
Operating expenses, excluding the $25.4 million onetime impairment charge in the fourth quarter, which was related to our legacy lab and headquarter space, were $371.9 million compared to $385.5 million in 2022, representing 4% decrease. This reflects our ongoing efforts to drive operating efficiencies, partially offset by higher cost of revenue.
Full year net loss was $295.3 million compared to $200.4 million in 2022, while adjusted EBITDA was a loss of $116.4 million compared to a loss of $121.6 million in 2022. We ended the year with approximately $346 million in cash equivalents and marketable securities.
Now turning to 2024 guidance on Slide 16. As mentioned in our last earnings call, revenue guidance will be provided only for the energy business since immune medicine resembles a more traditional drug discovery biotech model, and we want to ensure that we do not trade off short-term revenues for long-term value. We expect full year revenue for MRD to be between 130 and $140 million at the midpoint, we anticipate a 65% and 35% contribution from Clinical and Pharma Services, respectively. Guidance includes conservative MRD Pharma Services growth as we continue to monitor broader impacts from the biopharma industry. It also includes MRD milestones in the low single digit millions, which could have upside depending on clinical trial outcomes.
With respect to trends throughout the year, we expect MRD revenue to be 45% to 55% weighted between the first and second half, respectively. Of note, given that our immune medicine efforts are focused on target and drug discovery revenue from our IM. pharma collaborations will be used to offset R&D investments.
Finally, our collaboration with Genentech continues to advance, and we expect to recognize roughly $14 million in amortization of the upfront this year.
Moving down the P&L, we expect operating expenses, including cost of revenue to be between $360 million and $370 million for the year. This deceleration of this deceleration in spending reflects our ongoing efforts to optimize resources and drive operating efficiencies while supporting healthy top line growth. We continue to be thoughtful about our cash position, excluding potential onetime costs from the strategic review, we expect the burn to average $35 million per quarter, representing an annual reduction of 10% versus 2023. With that, I'll hand it back over to Chad.
Chad Robins
Thanks, Tycho. We're off to a running start. I'm confident in our ability to continue to grow our clonoSEQ MRD business and to just demonstrate our targeted drug discovery capabilities in immune medicine. I look forward to communicating with you an outcome of the strategic review, which will enable us to drive success and maximize value for all stakeholders. With that, I'll turn it back over to the operator and open it up for questions.
Question and Answer Session
Operator
Dan Brennan, Cowan.
Dan Brennan
Thanks for taking the questions. Maybe, Tycho, can you just walk through a little bit of how the OpEx kind of outlook for 2014, the revenue kind of what are we considering for burn? I know you touched upon it, but just kind of walk through the key drivers and where the burn goes?
Tycho Peterson
Yeah. yeah. We have been we talked about $35 million per quarter on. We're obviously continuing to drive efficiencies across the organization. So you're seeing leverage in sales and marketing, G&A and R&D on. So, you know, as we've kind of mentioned in prior calls, there's no stones unturned as we kind of go through the ongoing business review.
Dan Brennan
Got it. And then and then just on the MRD side of the business, the clinical and the pharma side on just on the clinical side. So how do we think about like the volume and the REALIZE price implicit in the 24 guidance?
Chad Robins
Yes. Susan, do you want to take that?
Susan Bobulsky
And so let's start with the, I guess, the volume and so on. And at the midpoint of the guidance, which we've issued represents over 30% growth for the overall business business.
And let's talk about the clinical on the pharma. So the clinical business, we expect to have a healthy growth trajectory. We are anticipating 50% revenue growth. The revenue growth will come from both volume growth and ASP., we are focused very closely on ASP. increases. And on the volume side, the consensus, I believe, is around 35% today, which we think is fair. And on farm side of the business, we are anticipating about 10% growth. And that's, I think, roughly based on the fact that we anticipate continued industry-wide headwinds and that we saw in the previous year. But we do have a strong backlog, a healthy backlog of over 185 million, which we believe will be able to continue to drop.
Tycho Peterson
And then maybe last one, just so we have made only now we just mentioned low single digit million in milestones for MRD pharma as well in the prepared comments.
Dan Brennan
Thanks, Tycho. And then maybe last one. So Chad or Tycho, just in terms of what we're going to hear at the end of the quarter in terms of the outcome of the strategic review. Maybe I know there's a couple of permutations here that could unfold kind of what can you share at this point and just kind of any color on some of the discussions how things have gone and you showed?
Chad Robins
Dan, I can't really comment on any specific structures or alternatives at the moment.
Dan Brennan
What I can tell you is in conjunction with our Board and with Goldman, where our goal is to maximize the value of to all stakeholders. We do have a very strong cash position, and I can ensure that any decision we make is a good a job jeopardize either part of the business and and we're committed to providing an update. So stay tuned.
Great. Okay.Thank you
Chad Robins
Sure
Operator
David Westenberg, Piper Sandler.
David Westenberg
Hi, thank you for taking the question. So I'm just on the on the MRD. business, kind of the visibility, can you walk through the MRD. revenue cadence expectations on in the year how should we should think about on some of the milestones or other kind of payments from pharma? And then I just noticed a slight decrease in the sequential growth rate. I noticed that same thing happened in Q4 of last year. Is there seasonality in the business that we haven't been modeling previously of just in terms of volume growth, it maybe what maybe I should say I haven't been modeling correctly.
Susan Bobulsky
So I did speak to the part about the recent sequential growth and also seasonality. So I think you're pointing to the 4% quarter over quarter growth for the clinical business in Q4. So I think one thing that we consider is that Q4 typically with fewer business days another quarter, we do typically see a lighter growth profile than in other quarters. But importantly in Q4, we continued to see all of the leading indicators of the business that we track moving favorably. Additionally, when we broke out the U.S. and ex U.S. clinical businesses. In Q4, we note that the US business grew at 7%, whereas the ex U.S. business, which is typically more lumpy from quarter to quarter grew more slowly contributing to the overall growth rate of 4%.
And then finally, we started 2024 off very strong with record average daily and monthly volumes in January, February to date is trending even more favorably. So we continue to feel very confident in the strong growth trajectory of that business. And I do think seasonality just based on number of business days can be a factor. And there are other aspects of seasonality that we typically see, for example, in certain summer months.
Tycho Peterson
But overall, probably nothing different than you might see in an average business of our industry because indeed, we mentioned in the prepared comments for guidance, should we expect memory revenue to be 45% in the first half 55 in the back half, a little more back-end weighted.
David Westenberg
Got it. Okay, that's great.
And then just as we looked at the drivers that drove growth in 2024, I mean, 2023. And as we start to cycle those drivers, I mean, how should we think about the impact that you had from Epic, what inning are you in the Epic integration, the DBCL. and integration or ordering pattern? And you know, that kind of kind of conversion of blood I mean, I know that's three different areas, but if you can give us three areas kind of what inning we're in, just to get a sense on on how much more growth or how much you can compound this growth in that business? Thank you, I'll stop there.
Susan Bobulsky
And yes, so I mean, I think you're right to think that the growth drivers in 2023 will continue to be the growth drivers in 24. And in some cases, we're in very early innings in some of those growth drivers for the previous calendar year, that will be we'll be able to advance further in 24. So for example, I think integration very early days in 2023, top of the first inning are we we only saw our first five accounts set up to utilize the integration by the end of Q4. And all of those went live just in one in September and the other four were completed in December. So we haven't yet seen significant lift, albeit anecdotally in those accounts, we are seeing really nice results. And so we continue to work toward additional Epic integrations. They are a one-by-one process. We anticipate having 15 to 20, as previously stated, by the end of the year, 15 to 20 additional. And I think then we will see growth in those accounts. But for the overall business, it's going to take some time for that to be a very meaningful impact on the material impact out. We as Chad noted earlier, we signed another agreement with Flatiron Health, which will really start to have impact on the business in the second half of 25.
And the second thing you asked about DLBCL. We saw a really nice growth trajectory in DLBCL, aligned with our internal expectations, and we continue to promote that very actively as well as focus on data generation. We have a number of studies that we are hoping to advance in 2024 that will continue to support and the frontline and surveillance setting use case for the assays was some nice real-world evidence that we'll see advancing in other NHL indications, which will continue to build the overall business and in non-Hodgkin's lymphoma more generally. So I do think DLBCL as combined with other indications like mantle cell lymphoma in NHL category will be growth drivers in 2024 and more meaningfully than they have been in previous years.
And then last thing you asked about blood as we had some very nice data at ASH 2023 at the end of last year, which we've been actively leveraging and promotional conversations for multiple myeloma in blood. We expect to expand the analysis of that data set early this year and see it published as well as presents some additional data from utilizing circulating tumor DNA in multiple myeloma, particularly in the setting of extramedullary disease. And we have enough number of other data sets that we're exploring, which we'll be able to utilize this year. And so I think this will be a continued data generation year after multiple myeloma normal. But that said, we've seen the blood-based percentage of blood-based test continually increased quarter over quarter, both for myeloma as well as for our business. More generally, we're up to nearly 40% of tests in blood MRD tests in blood today as of Q4, and we continue to expect to drive that, which will contribute to increased testing in the community and frequency of testing.
David Westenberg
Brian, that was a lot of great detail.
Thank you.
Dan Brennan
Thank you.
Operator
One moment for Art questions.
And our next question comes from the line of Mark Massaro from PTIG. Your question, please.
David Westenberg
Hey, guys. Thanks for taking the time. You've steadily increased the percentage of clonoSEQ testing in blood, I think it was 39% this quarter. Is there a point in time where you think blood can can become maybe the majority of your of your clonoSEQ volumes, is there a certain target that you have even if it's out like sites three to five years?
Dan Brennan
We will absolutely with a majority of our tests on blood-based testing is all related to the community as well. And as we continue to increase and bring on community counts, the percentage of tests that are done in blood will continue to increase. So I don't know if I can give you an exact date when this can become a majority, but that number is growing very rapidly, and we see it being a steadily increasing percentage of our overall test mix.
David Westenberg
Okay, excellent. I know at JPMorgan, you guys provided the 25% to 30% revenue kegger for MRD between 2023 and 2027. So obviously pretty solid top line growth. And then you maintained your expectations to hit D profitability in the second half of 25. I guess I'm asking on the cost side. So obviously, and you can get the profitability through revenue growth. But I'm just curious, are there certain costs that that might be able to come out of the clonoSEQ assay and maybe if you could speak to input costs or maybe some of the instrumentation or reagents that are used. I I'd just be curious to see what type of levers you might have on the COGS side?
Chad Robins
Yes.
Dan Brennan
So absolutely, as we've kind of previously mentioned, and I'll reiterate, we are looking, we've been testing the NovaSeq and we're looking at Switch Switzerland, obviously by the end of this year, and that will have a significant reduction in our cost of goods sold. But in addition to that movement at Tyco so no stone being left unturned. We're looking at our operating costs as well, and we can continue to refine the business to figure out how we can increase the profit profitability profile over time. So yes, the answer is yes, we are absolutely looking at the on the cost side of the equation.
Tycho Peterson
And there's another couple of things we've highlighted. We're doing a limit overhaul in the first half of the year that will have implications for overhead on reducing the number of extractions that we process. So there is a lot in terms of the workflow.
David Westenberg
Okay. And then my last question is just on mantle cell lymphoma. Can you just talk about maybe remind us the size of the market and timing of commercial launch and what you think that might do to expand sort of the portfolio?
Karina Calzadilla
I'm sure the mantle cell is a relatively smaller indication, more similar to perhaps PLLs in myeloma and in the context of our existing corporate indications. And that said, and it is an area of unmet need for monitoring and certainly an area of high interest for MRD based on our interactions with clinicians today. We already have significant existing volume with several KOLs in the space and anticipate that and Medicare coverage, which we are actively speaking today, will be the trigger for us to begin to actively commercializing that indication. And we're looking forward to continuing to interact with Neurodex and are actively engaged with them now. So we expect to have more information this year.
David Westenberg
Excellent. I'll keep my questions there. Thanks, guys.
Operator
Thanks for the Q. one moment for R&D question. And our next question comes from the line of Tejas Savant from Morgan Stanley. Your question, please.
Karina Calzadilla
And earlier this year you talked about potential for FDA to accept MRD as a primary surrogate endpoint in multiple models. Elaborate on what you're hearing and how quickly for MRI?
Chad Robins
Yes.
Dan Brennan
I mean what we've heard is through the Internet International Myeloma Working Group that several members of that committee had heard that the FDA was considering multi myeloma as a primary endpoint. So we are we are waiting. We are waiting for that decision. I don't have any more resolution into the timing of that, but but we're certainly hoping that that comes in in the first couple of quarters of this year. But again, it's hard to predict a government body in terms of acceleration. Obviously, we have we have deals I've written into the contract that upon approval of the drug, if our data is used as a primary endpoint that we there are payments do. So it would certainly be certainly beneficial to the business.
Karina Calzadilla
Follow-up, you talked about the we're whole under way. Could you quantify the the yes, you go ahead.
Tycho Peterson
I'm going to get that granular on what you can talk a little bit about pacing and lenses. First half of this year, we've been pretty clear. The NovaSeq really won't have an impact until 2025 on one thing we have said is at scale. The MRT business should easily be north of 70% gross margin. That includes both clinical and pharma, but kind of consistent with other clear labs, but we're not going break out contributions from wins versus the Nova transition specifically and ASP. will also help there by the way.
Dan Brennan
Yes, sorry, Gunther.
Karina Calzadilla
And maybe just one within one more one more question here. And in terms of the flat, yes, or an onco EMR agreement, additional accounts, what agreed.
Okay.
Karina Calzadilla
You mean in terms of access to accounts. And so Tesla is engaged with. They have access to about 40% of the community oncology community oncologists in the US for zero and day. They are also and they are currently implemented in 250 accounts, which is a bit of it, a number that's hard to interpret because it's Laura from these are very large accounts, but the business potential for us is tremendous. I mean, just the top 15 accounts that have and utilized onco EMR has 33,000 relevant patients for our disease indication.
Dan Brennan
And so I think I'll leave it at that you go at a high level, think about it. Why we do why we do this think about as Epic as evade being integrated into the academic medical centers and institutions and Flatiron being integrated into the community oncology and network practices. And so we're trying to cover all bases and they're one of the largest EHR providers within the community and gives us access one of the benefits on to flatter and that we don't have with Epic. It's a it's a faster and I mean it takes it takes a while to do the upfront setup costs and they are backlogged on timing, but we're looking at a fourth quarter of this year kind of implementation. But once they hit once they hit kind of a button, they can push it out to many of the sites all at the same time as opposed to having to go kind of one by one, the Epic integration until we're certainly excited about it and excited about what we're seeing kind of early on from the Epic integrations that we've already done. So continuing to invest in making it easier and easier for a doctor to order a test is something that we believe is going to lead to more tests being ordered.
Tycho Peterson
And it's just very simply it's a very simple equation and thank you so much for that color throughout you One moment for our next question.
Operator
Andrew Brackmann, William Blair.
David Westenberg
Yes, good afternoon. Thanks for taking the questions. I just want to circle back pricing here for a minute. I think in the past you've sort of talked about some improvements coming from reducing Medicaid and then also revenue cycle management. We'd just sort of get an update on where those initiatives stand and how you're thinking about those impacts 2024?
Chad Robins
Yes.
Dan Brennan
It's I'll just kind of reiterate some of the things I mentioned in my prepared remarks. We're really excited about the work that we put in and how it's kind of already starting to play out on SP. increases. So we're kind of reducing non-contracted claims, auto policy claims and and just working on a lot of the blocking and tackling on the appeals process prior off process, et cetera. So all those things are working in terms of Medicaid, it naturally as we continue to expand into going to a more indications of Medicaid as an overall percentage of our Texas tests test mix, excuse me, kind of winds up going going down a large percentage of Medicaid as it relates to ALL and so on.
Well, your overall overall the year, our initiatives are working. And what we've talked about just in terms of quantifying that is a $200 increase over the next two years, and we've already we're already starting to see that work.
Okay.
Karina Calzadilla
That's perfect.
Andrew Brackmann
And then I just want to go back to your comment around sort of gating of R&D investments for specific proof points within the new medicine side of things. Any color that you can give us with respect to some of the things you might be looking for as you're thinking about what level set spend you might be comfortable there. Thanks for taking the questions.
Dan Brennan
Yes, Andrew, I'm going to turn that over to Sharon Van Zeno who runs the IBM business?
Karina Calzadilla
Yes, thanks for the question on. So of course, on the heels of our discovery of the first novel target using our platform on is the target that we've identified in multiple sclerosis, obviously, a devastating disease. And this year, we're very focused on further validation of the target as being causative of multiple sclerosis for using both in vitro and in vivo animal disease model. And two to ensure that data on that front, we expect in the first half of the year.
And then in parallel, look, we're starting to think about what drug modality to use to be able to go after this target. And in parallel this year, we're also deploying and have already deployed our antibody discovery platform. We completed at the end of last year, a successful proof of concept in MS for our antibody discovery approach. And so we're pretty encouraged by parallel processing those two work streams with the goal to ultimately and we have antibody candidates that we can designate as therapeutic candidates to advance over them during the next two years into the clinic.
Great.
David Westenberg
Thank you.
Operator
Sung Ji Nam, Scotiabank. Your question, please.
Karina Calzadilla
Thanks for taking the questions. And maybe if I can probe a little further on the MRG pharma side, obviously, you know, solid backlog there, but could you maybe talk about the trends you guys are seeing that's specific to adaptive. Are you seeing any trial cancellations or are these mostly trial delays or kind of lengthening of the arm of the study?
Chad Robins
It should go?
Karina Calzadilla
I think probably one thing that's relevant to note is just the indications that we are in and the trends that we're seeing in the broader market.
With regard to investment in clinical trials over the last several years in multiple myeloma, which is the largest contributor to our pharma business in the US, the number of trials is steadily increasing. The number peaked in 2021 and since then it has been declining. And so I think one thing to be aware of is that for our specific business, we have a very strong position in that indication potentially maybe even stronger if and when the FDA accepts MRD as a surrogate for accelerated approval. But we are competing for a smaller subset of trials or drawing from much advanced draw a smaller subset of trials over time in other indications like in non-Hodgkin's lymphoma, the trends are different. The number of trials, it hasn't. It hasn't extreme hasn't started to decline. It seems to be relatively consistent over the last several years. And so and that's a big area of focus for us in terms of growth is driving increased penetration in the non-Hodgkin's lymphomas, whereas we have likely less growth opportunity just in the context of now there are a shrinking market in multiple myeloma over the longer term.
That's great. And then just going back to the question on the MCLTTCL. market opportunity, there are my understanding is that not DLBCL is roughly 25, 30% of NHL and then there's about 60% of the aggressive subtypes of NHL. So is the 60% of NHL kind of the potential addressable market do you think in the future? Or is it too early to tell. Just kind of curious how we think about.
Yes, the potential market size.
Yes, I think it's early to say we're still developing a lot of data in non-Hodgkin's lymphoma and indications beyond the first few. And so what percentage of that total addressable market we can ultimately tap into remains to be seen.
Dan Brennan
But I will say that the assay is technically is applicable in entity lymphoma, and it will just be a question of which evidence we have turning to invest in developing, but we have the same data as you do that, the DLBCL represents about 50 50 plus 50% to 60% of all NHL. So that is one area that as we mentioned, that we're aggressively focused on and the other two on yield that we're following. I'm with Medicare on this year are MTLNCTCL.
Karina Calzadilla
Got you. And then one quick one for Tyco, sorry if I missed it, but the 40 million amortization for Genentech this year is that should we model that ratable ratably throughout the year?
Tycho Peterson
Because I mean, it did I think that's right way to do it. I mean, in reality will shift around month-to-month. But yes, it's kind of ratably for the year's plan.
Great.
David Westenberg
Thank you.
Operator
Well, I can take you. As a reminder, ladies and gentlemen, if you do have a question at this time, please press star one one on your telephone. Our next question comes from the line of Salveen Richter from Goldman Sachs. Your question, please.
Karina Calzadilla
Hey, guys, good evening. This is Elizabeth on for Sal. I've two questions from us today. So the first is on your partnership with Flatiron Health. Can you provide some color just around how that partnership is structured and if that would include milestone payments? Or would it be more kind of a continuous and revenue recognition for clonoSEQ? And then second is on the Epic partnership. I'm just curious if you've and any feedback from users or physicians and what you're learning thus far in the early days about how this integration works and how it's being used? Thank you.
Dan Brennan
Yes, I'll go for the first one, Elizabeth, and then I'll kick it over to Susan to provide more color on the Epic integration early early day learnings as far as Florida and what I can't go into the specifics of the agreement to be able to protect flat, our position in the industry. What I can tell you is your question is it doesn't entail kind of milestone payments on. It's basically a setup fee and an annual annual fee is I think the most I can elaborate at this point. But Susan, you want to talk about Epic share?
Karina Calzadilla
Yes, the feedback has been very positive to date. And in fact, we've seen several of our early sites come back after just a short time of having experience with the integration and asked to expand the scope of the integration, for example, bringing on more physicians or increase expanding to the inpatient setting versus outpatient only. And we've seen increases in both the number of ordering physicians and the volumes that are flowing through in each of the accounts where we've integrated to date. And I think the most you know, the most important improvement is simply the reduction in manpower required to enter orders and to not only enter orders, but to receive the results from orders as they now lands directly into the EMR in the place where you would find other test results versus kind of having to be manually updated upload and search for the other benefit of Epic integration is discrete data delivery, which is going to enable more streamlined real-world evidence analysis, which more and more of our accounts are coming to us and expressing interest in performing. So I think it will be a tool not only for clinical and efficiency, but also for expanding research insights around MRD.
Tycho Peterson
Yes.
Karina Calzadilla
Got it. That's helpful. Thank you.
Operator
Thank you. One moment for Art.
Yes.
Operator
And our next question is a follow-up from the line of Rich Hill of S&L from JP Morgan Your question, please.
Karina Calzadilla
Perfect. Hey, good afternoon. Thanks so much for taking the questions. I want to follow-up on some of the AST. comments. Earlier you noted that you expect to lift ASPs by $200 over the next two years. So can you just talk about how should we think about the cadence of that step-up over the next 24 months will be linear and any comments there would be helpful.
Dan Brennan
Hi, Rachel. Yes, I would just point model it out as linear. I think the reality is as piece based on age collections and a variety of different factors. They can vary month to month even quarter to quarter. But we're seeing kind of all the leading indicators point to kind of a linear growth to over $200 ASP increases over the next two years.
Karina Calzadilla
Great. And then just as a follow-up, can you walk us through your updated? I'm thinking around the state biomarker bills, what type of impact could that really have on the business? And then do you have any of that benefit embedded in the guide for the 2024 years?
Dan Brennan
It's a great question and we don't have it, Joe specifically baked into the guide, but we are optimistic on what I would say. We're increasingly optimistic based on those discussions and conversations that we've been having that the enforcement of the state biomarker kind of laws are starting to take hold.
Just to give some context, I sit on the board of a coalition for 21st century medicine, and we're working hard on this initiative. And if you look at Avnet, Aqua and all the industry associations, it's a prominent area of focus on obviously, you're fighting the insurance company, lobbies on that are trying to not not pay. But net-net, I think from a national position that's coming down on the states you are seeing on incremental evidence of kind of positive trends that insurance companies are starting to comply with this legislation?
So again, I don't think it's going to be an overnight kind of success. And obviously, we're hoping more states enact the biomarker legislations. But but you will see kind of overtime incremental. And no, it's not it's not baked into the guide Great.
Karina Calzadilla
That's it for me. Thank you.
Operator
Thank you. This does conclude the question and answer session as well as today's program. Thank you, ladies and gentlemen, for your participation, you may now disconnect. Good day.
