Adaptive Biotech gets creative with financing
According to a September 14 2022 Puget Sound Business Journal report, the company inked a royalty financing agreement with health care investment firm OrbiMed. Adaptive is developing an immune system platform to build a data-driven, “clinical-product development engine”. With the immune system as the “source code”, Adaptive says it can develop diagnostics and therapeutics for almost any disease, according to the company.
Through the agreement, Adaptive will receive an initial $125 million in exchange for OrbiMed receiving 5% of Adaptive's revenue. Adaptive can receive an additional $75 million for 8% of its revenue and another $50 million, earmarked for potential merger and acquisition deals, for 10%.
"This was a really nice creative structure because for us, we didn't want to raise equity capital and dilute the shareholder base when our stock is trading significantly below historical levels," said Chad Robins, co-founder and CEO of Adaptive is quoted Puget Sound Business Journal. “Debt will have a balloon payment or an amortization where if for any reason the markets aren't there and you can't recapitalize or you can't repay that debt, that provides a lot of risk to a company."
Adaptive will have to pay OrbiMed back 1.65 times whatever it takes, but the rate decreases if Adaptive can pay the firm back in 18 or 24 months, Robins said. He added that although there is a $50 million tranche reserved for M&A, Adaptive isn't targeting anything specific right now. According to Robins, the company will lay out a path to profitability in its third quarter earnings, and this money will help Adaptive reach that goal without having to raise equity capital.