Adaptive Biotechnologies (Adaptive Biotechnologies (ADPT)) is making a big move to untangle its two main businesses, and analysts are already liking what they see. On Monday, the company announced plans to separate its Minimal Residual Disease (MRD) and Immune Medicine segments. The idea is to let each business stand on its own, and William Blair thinks that could be a game-changer for how investors value the stock.
In a note on Tuesday, analyst Andrew Brackmann said the separation should simplify Adaptive's investment story and give the MRD franchise more strategic flexibility. "Regardless, we like this move as it simplifies the thesis and adds flexibility, particularly for the MRD franchise," Brackmann wrote. William Blair maintained its Outperform rating on the stock.
The key question investors will be asking is what happens to the Immune Medicine segment. Management expects to identify its preferred path—whether a sale, spin-off, or something else—by the end of the year. But even in a worst-case scenario where a buyer doesn't materialize and a spin-off proves impractical, the company still wins. That's because Immune Medicine has been burning cash—$15 million to $20 million this year alone—and separating it would eliminate that drag from Adaptive's core financial performance.
According to William Blair, the Immune Medicine segment likely contributed little or even negative value in most investor valuation models. So its separation is at least neutral to Adaptive's valuation, and possibly a net positive. The analyst argued that Immune Medicine had been complicating the investment case for MRD by creating a financial overhang that investors had to account for, even though the segment wasn't a significant contributor to the company's worth.
With that overhang potentially removed, the MRD business could finally get the attention it deserves. And it's a business worth watching: volume growth has been exceeding 35%, and margins are expanding. That's the kind of story that could attract investors who were previously put off by the drag from Immune Medicine.
Adaptive isn't stopping there. On Wednesday, the company priced $300 million in 0% convertible senior notes due 2031. The proceeds will be used to repay its OrbiMed agreement and simplify its capital structure. In its press release, Adaptive also said it would use the remaining funds for opportunistic initiatives in the MRD business—a clear signal that the company is doubling down on its strongest hand.
As of Wednesday's publication, Adaptive shares were down 1.60% at $16.94, according to market data. But with a clearer story and a sharper focus, the long-term outlook may be brighter.
