Adaptive Biotechnologies (ADPT) Risk Analysis

Our strategy is to leverage our immune medicine platform to discover, develop and potentially commercialize additional products and services 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, DLBCL and MCL 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, we may not succeed in expanding our clonoSEQ product platform. In our immune medicine business, our focus on immune-repertoire sequencing, target antigen discovery, data licensing and TCR-antigen prediction models faces significant challenges in the identification, validation, development and adoption of products and services. If we are unable to discover novel targets for our collaborators or demonstrate the value in our datasets and models, we may not succeed in developing, offering and commercializing new products and services and growing our immune medicine business. 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 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; Trial Design - regulatory authorities or ethical review boards, including institutional review boards ("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; Testing - 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, or improvements to current products, 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, or improvements to current products, 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 our products 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 may fail to obtain regulatory clearance, authorization or approval, even if they perform satisfactorily in preclinical studies and clinical trials. 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 products and harming our business and results of operations. Any delays in the development of our products 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 in development.

We are using our immunosequencing capabilities, proprietary computational analyses and machine learning models to map and computationally predict at scale binding of TCR sequences to disease antigens, which we believe has multiple high-value therapeutic applications and is relevant to our drug discovery work. However, we may not be successful in developing a sufficiently comprehensive data set or the performance of our ‘digital' TCR-antigen prediction models may be insufficient for any number of reasons, which may include difficulty in validating signals and challenges in making progress toward algorithmic-based methods that accurately define TCR-antigen signatures of disease. In addition, we may not succeed in accelerating the development of a ‘digital' TCR-antigen binding prediction model that will allow us to achieve our business goals in a timetable that is commercially viable for our products or our collaborators' products, or at all. As we continue to grow our immunomics database and advance our prediction modeling activities, we may be unable to translate these efforts into commercialization opportunities. Moreover, as our collaboration activities under the Microsoft Agreement have concluded, we may be less successful in pursuing these opportunities in the future. If the performance of our computational and machine learning modeling efforts do not meet our expectations or our needs to accurately validate TCR to antigen associations in a reasonable timeframe, our business model may not be commercially viable. Even if we accelerate our efforts, products derived from our platform technologies may have product specific limitations. If we are unable to make meaningful progress in leveraging our prediction models to successfully develop and in the future commercialize new products or services, our business results will be negatively impacted.

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.