In this battle, we pit the global leader in the field of DNA sequencing against an up-and-coming biotech that uses the former's research tools to gain insights into the immune system. Both companies aim to give researchers and physicians greater information to make better diagnostic and treatment decisions. But which one shines as a better investment?
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Illumina (ILMN 0.23%) develops and sells DNA sequencing machines and associated consumables that researchers and clinicians use to gain insights into diseases and help make better-informed treatment decisions. A relevant point today, many research labs, hospitals, and healthcare companies are now using Illumina's sequencing products to track the transmission and evolution of SARS-CoV-2, the coronavirus that causes COVID-19.
To support the global battle against COVID-19, Illumina announced on April 16 that it was making its software toolkit free for one year to researchers working on the novel coronavirus. "The toolkit," explained the company in a press release, "makes it easier for researchers to detect and identify the SARS-CoV-2 viral sequence in their samples and contribute their findings to critical public databases."
Holding strong
Illumina announced preliminary first-quarter results on April 14, and reported that sales had increased from the same period last year. Revenue came in at $858 million, driven by strong demand for consumable products. However, the company is not immune to the effects of the pandemic. It withdrew its guidance for the year and warned that it expects its second-quarter results will take a harder hit from the COVID-19 crisis.
With more than 15,000 of its sequencing machines installed worldwide, Illumina stands to flourish once countries start to ease their restrictions on business and social contact. In cancer care alone, Illumina sees substantial opportunities to help more than 115 million people. These include the use of its equipment for early detection of cancer, treatment selection, and monitoring. Add to that a recently launched non-invasive prenatal test which is available in 25 countries (though not in the U.S. yet). Illumina processed nearly 1 million of those tests last year, and expects to apply for Food and Drug Administration approval.
Adaptive decodes the immune system
While the human genome has approximately 33,000 genes, a healthy person's adaptive immune system can produce more than 100 million genetically different immune cells to attack a vast diversity of antigens. Adaptive Biotechnologies (ADPT -2.33%) set out to do something remarkable -- decode the genes of the immune system to enable individualized treatments based on each patient's immune system.
With bold goals, Adaptive drew the attention of powerhouse partners. First, Seattle neighbor Microsoft (MSFT -1.73%) teamed up with Adaptive, employing its machine learning and artificial intelligence tools to help the company create a T Cell Receptor Antigen map. Microsoft invested $45 million in Adaptive as part of the collaboration.
On the therapeutics front, Genentech, a subsidiary of Roche (RHHBY 0.20%), forged a broad global partnership with Adaptive to develop cancer-specific therapies. Adaptive received $300 million up front and could receive milestones of up to $1.8 billion, depending on the success of multiple products as they hit clinical, regulatory, and commercial milestones.
On April 2, Adaptive paired up with Amgen (AMGN -0.20%) to discover and develop antibodies to treat COVID-19. Adaptive will use its platform technology to screen the immune systems of individuals who have recovered from COVID-19. Then Amgen, relying on its expertise in antibody development and manufacturing, will seek to rapidly move drug candidates into testing. In a testament to the commitment of both companies, work on the joint project began immediately after a memorandum of understanding was signed. The more detailed collaboration and licensing agreements continue to be hammered out.
Adaptive also developed two test products. ImmunoSEQ Dx, currently only for research use, provides insight for researchers into the immune system. Adaptive plans to file for FDA clearance later this year for its proof-of-concept indication of Lyme disease.
ClonoSEQ, an FDA-cleared test, detects if cancer cells remain in the blood during and after treatment. Technically, the small quantities of cancer cells that can be found post-treatment even in a patient who's in remission are called minimal residual disease (MRD). Based on the information that ClonoSEQ provides, a doctor can take a patient off therapy or delay an intervention like a potential stem cell transplant.MRD has become a clinical endpoint in clinical trials for blood cancers like leukemia and multiple myeloma. Amgen, Johnson and Johnson (JNJ -0.36%), Sanofi (SNY 0.62%), AbbVie (ABBV -0.66%), and Roche have incorporated the test into their trial protocols.
In September 2019, Adaptive entered into a non-exclusive development and supply agreement with Illumina to help expand the reach for Adaptive's clonoSEQ and immunoSEQ Dx tests which utilize Illumina's equipment.
Who wins?
We're comparing an established equipment and tools company with billions in revenue to an ambitious biotech seeking to uncover previously unknown insights into the human immune system. In choosing between them, conservative investors should opt for Illumina with its established global footprint and customer base.
But Adaptive, while early in terms of its first research products, captivates me as a biotech investor. While the idea of personalized medicine is not new, no other company has set out to develop it based on the individual's own immune system. If Adaptive is successful, its platform could be transformative. Therefore, the company with greater long-term upside potential is Adaptive.
