In 2009, Harlan Robins, then the director of computational biology at the Fred Hutchinson Cancer Research Center, called his brother Chad, then in real estate finance, with news of “a pretty important discovery.”
After years of research, Harlan had developed a technique to efficiently “read” the genetic codes of the body’s disease-fighting T-cells. The breakthrough raised a tantalizing prospect: a suite of tools that could detect and treat a range of complex diseases, from autoimmune disorders to cancer, with unprecedented speed and precision. It also raised a tantalizing question. As Chad now recalls, Harlan then asked, “Do you want to start a business?”
A decade later, the answer to that question — Seattle-based Adaptive Biotechnologies — is about to make its debut in the stock market.
Adaptive’s 15 million-share offering was priced Wednesday night at $20 per share, meaning the IPO will raise $300 million before expenses — the second-largest U.S. biotech IPO of the year.
At that price, Adaptive’s total company valuation is about $2.5 billion. On Thursday, shares will start trading on the Nasdaq under the symbol ADPT, and other investors will render their verdict.
The Adaptive Biotechnologies IPO is the first IPO for a Seattle-area company since mid-2018. It’s also the largest IPO in Washington since Symetra Financial raised $365 million in 2010, and its market capitalization is the highest for a local company going public since a 2013 IPO valued e-commerce firm zulily at $2.9 billion, according to data from Renaissance Capital, which manages IPO-focused investment funds.
Adaptive is headquartered on Eastlake Avenue, not far from the Hutch, and has a new research and development center in San Francisco.
Neither the Robins brothers nor other executives at the company would comment on Thursday’s IPO, citing security regulations that limit public statements in the run-up to a stock offering.
Analysts say investors seem to be attracted not only by Adaptive Biotechnologies’ core technology — a system, dubbed immunoSEQ, for mapping the genetics of the immune system — but also by the careful, strategic way that technology has been rolled out.
Unlike many biotech startups, Adaptive Biotechnologies is already generating revenue: The 346-employee firm sells the use of its gene-sequencing technology to researchers and biopharmaceutical firms for their own genetics research, and to hospitals and doctors to help assess patients’ health after cancer treatments.
By selling its sequencing technologies to biotech and biopharmaceutical companies, Adaptive Biotechnologies is staking a claim in one of the fastest growing markets in the world, says Matthew Kennedy, a senior IPO market strategist for Renaissance Capital.
Another key attraction is that Adaptive Biotechnologies has two big-name partners: San-Francisco-based Genentech, which is helping turn Adaptive’s technology into potential treatments, and has already paid Adaptive an upfront licensing fee of $300 million; and Microsoft, a relative newcomer to the biotech market, which is using its expertise in artificial intelligence and cloud computing to help Adaptive Biotechnologies parse the immune system’s complex genetics.
Having such well-known partners “is good for Wall Street confidence when you want to go public,” said Luke Timmerman, founder of the Seattle-based biotech newsletter Timmerman Report.
That confidence was apparent this week. In response to stronger-than-expected investor interest, the anticipated price range had been raised from $15-$17 per share to $18-$19 before the offering finally was priced at $20. The size of the offering grew from 12.5 million shares to 15 million shares — both positive signs for an IPO.
“Backers don’t raise the price range without confidence that they can support it,” said Renaissance Capital’s Kennedy.
Adaptive Biotechnologies’ product platform rests on breakthroughs in the techniques to read the complex and unique genetics of an individual’s immune response, which deploys an army of disease-fighting cells, known as B-cells and T-cells, to identify and attack cancers and other diseases.
The company’s sequencing technology allows researchers to quickly “read” the genetic code of all the many variants of these disease-fighting cells. With the help of Microsoft’s computational power, Adaptive Biotechnologies then matches that genetic code to the specific disease the cell has evolved to fight and adds that match to a massive database.
This technology platform makes it possible to see what diseases an individual is currently dealing with or has encountered in the past. Such a capability can let hospitals and doctors more precisely gauge the effectiveness of a cancer treatment, or predict the likelihood of recurrence, by minutely monitoring whether an individual’s immune system is still reacting to the presence of the disease.
As important, the technology can be used to create treatments that are precisely targeted to a specific individual. And because Adaptive Biotechnologies’ platform can simultaneously map the genetics of all disease-fighting cells in a single blood or tissue sample, these personalized treatments could be much more rapidly developed.
If Thursday’s IPO goes well, it will mean more than affirmation for the 10-year-old company and the Robins brothers. It will mark an important new phase in collaboration between experts in biotech and experts in computational analysis, which will be critical as health research becomes more complex.
This will be the first health-related technology IPO in the Seattle-area since PhaseRx, a star-crossed biotech that raised $18.5 million in 2016 but went bankrupt just 19 months later.
A better post-IPO outcome for Adaptive Biotechnologies would be welcome not only for the startup itself but also for the broader Seattle-area biotech community, which has often been overshadowed by the region’s larger and far more visible tech sector.
“It’s great to have successes like Adaptive to show the way for other biotech startups,” said Matt McIlwain, chair of the Fred Hutchinson Research Center and a managing director at Madrona Venture Group.