MaxCyte, Inc. (MXCT) Earnings Call Transcript & Summary

[Audio Gap] And thank you for attending the MaxCyte presentation today. Been a long day, but I appreciate your interest, and hopefully make this an interesting discussion for you all. So MaxCyte is listed on both NASDAQ and the London Stock Exchange. I won't read this. I'm sure you've see them dozens of times. So our focus is on the engineering of cells. So we have a technology that we have developed over the years, and it's based on a technology called Flow Electroporation we invented. And we have over 500 platforms in the field. And this platform allows our partners to engineer virtually any cell at any scale with any engineering molecule. The technology was developed by MaxCyte. This company is a product story. We do not have a service. So everything we'll talk about today is based on our own technology, our own manufactured products and the revenues we receive from selling those products and licensing the technology. So we lead the industry in important performance characteristics, which include transfection efficiency, cell viability and scale and the ability for our partners to actually scale from a microliter -- 25 microliters of cells all the way up to a full liter of cells with the same performance characteristics. And I'll talk about why that's important in the development of the therapeutic. We have had a really nice growth run over the last 5 years of about 23% to 25%. 2021 was 30% over 2020. And we just announced yesterday, our first quarter was 78% revenue increase over the first quarter of 2021. We've been at this for a while, over 20 years now, and focused on the engineering of cells. And our technology is supported by an FDA master file. If you're not familiar with that, a master file is a confidential document between us and the agency. And when our partners -- when we move into the clinic with this technology, they can reference our master file, and we license that technology to our partners. And I'll talk a bit about why that's important. And we have a significant number of collaborations, both industrial calibrations, but also with leading academic centers around the world. The business model, I think, is also a bit unique. So we sell instruments and single-use disposables of a more typical razor/razor blade business. But when it's in cell therapy, we then license the technology to our partners. We licensed the technology for $250,000 per instrument per year. And then we also receive milestones upon success of our partners. And we also participate in the revenues -- the commercial revenues of our partners' products. So it's -- I think it's an interesting business model, one that has several layers of revenue and several areas of building value for the business, both near-term, mid-term and long-term with the receipt of royalties or sales-based payments. That's resulted in 16 strategic platform licenses. These are nonexclusive licenses with the leading players in the field. We'll talk about that a little bit. And if you look at the pre-commercial milestones, so these are milestones that we will earn based on our partners' progress, but pre-commercials exceeds $1.25 billion. Now this is not risk-adjusted, but these are embedded in contracts that we have with our partners. And we're also focused, as I mentioned, on building a business that has near-, mid-term and long-term value creation. We've been at this for a bit. My Cofounder and I were working on an area we think was quite important. My Cofounder was the Chief of Blood Products at U.S. FDA, and he believed that it was important to figure out a technology that could nonvirally engineer cells, blood cells to treat disease. So he was clearly ahead of our time. We put our interest together and we created the MaxCyte platform. Over the last 20 years, we perfected that technology by working with the leading developers in the field. People like Dr. Carl June, Dario Campana, Malcolm Brenner, and then eventually through a number of commercial partners to really pinpoint what the technology had to do to help cell therapy developers be successful. And that's resulted in our current product portfolio that we call the ExPERT brand, which includes small research use-only products as well as an instrument that can be used in cGMP for cell therapy, and a larger scale instrument that we just released at the end of 2021, which can be -- we think is going to be very disruptive for the cell -- for the protein bioprocessing market. We've also built an organization that's really focused on enabling our partners to be successful. So we have field application scientists, salespeople, applications laboratory process, development and a business development group that work hand in glove with our partners. We have about 120 employees, and we're headquartered in Gaithersburg, Maryland outside of Washington, D.C. This has resulted -- in this slide, this is -- if you take away anything from this business, I think the important part is that we're working with the leading cell therapy developers in the field. And we have over 16 partners. We have 16 partners rather. They include 95 programs to think of a program as a product. About half of those products are main, the other half are options. But all of these agreements, again, are nonexclusive, and they are very specific to a specific field of use. It might be I/O applications in oncology, in allogeneic cells. And then of those 95, more than 15 are currently in the clinic that have the potential of earning milestones for the company. As you see in the bottom half of this slide, our partners, they really do represent, I think, the leaders in the field. Many of these are developing next-generation allogeneic therapies and some are developing next-generation autologous therapies. One of note is CRISPR, which has enabled -- we enable their CTX001 product for the treatment of severe sickle cell disease and beta thalassemia. And we have been guided by CRISPR that they will be applying for their BLA at the end of 2022. So over the last several years, we've been thinking of that. This is a really a dream, but that dream is becoming a reality. These products become closer to the clinic. What's also important, I think, to note here is that we're working with a number of different cells, whether that be NK cells with Nkarta or special cells with Sana, placental-derived cells with Celularity. We're also working with different loading molecules, whether that be CRISPR, zinc fingers, meganucleases. We're, again, agnostic to the kind of cell that we engineer and the loading mechanism and the engineering mechanism. To give you a sense of the cadence by which we've been signing these deals, so in last year, we signed 4 deals. And this year, we signed our first deal in 2022 with Intima Biosciences. The prior year, we signed 3, and then pre-COVID, we signed 5 deals. And what you see here is that the hockey stick was actually the -- this isn't -- this is actually not a forecast. It's actually backward looking how the milestones have increased over the last several years. And so we're now sitting at above $1.25 billion. So the business model here on the left-hand side, we're selling instruments into mostly large pharma companies doing drug discovery and drug development. This is for protein manufacture, a small molecule discovery. So these are all very large, well-known companies. And here, we sell the instruments for about $120,000 a place, plus there's a single-use disposable that comes to it. So it's a razor/razor blade business. What's interesting, too, about this business is our gross margins are 90%. So it's an unusual business with very, very high margins. On the right-hand side, if a partner wants to use our technology for a cell therapy development program, that's when we license the technology to them, and we lease the system to them for $250,000 per instrument per year through clinical development and into commercialization. We also, as I mentioned, received potential milestones from our partner as they hit value-generating events, an IND clearance, they dosed our 10 patients, they do a pivotal -- eventually through a BLA approval, and that's where we get the $1.25 billion. We also received, upon commercialization, a portion of their top line revenue based either on a sales milestone or royalty plus the annual leases for the instruments. So we think, again, it's a very interesting long-term business model and the one we're spending quite a bit of time of trying to ensure that folks understand the future potential of this business. A little bit more about the milestones and the way that we look at the business. The green bit would be the instruments and processing assemblies throughout the course of the development program and then the commercialization. The blue would be the milestones themselves and how they ramp up through the process. And then the light blue bit would be the sales-based payments. So you see a rather -- I think rather interesting. This is proportional but a rather interesting way that we think we can build this business. And this is just the indicative of one program. If you look at these programs, we also looked at the net present value of these SPLs. And we assume that if you take the 16 divided by -- divide 95 by 16, it's about 6. 6 programs per SPL. They launched 1 year apart, 2 of those 6 failed preclinical, 4 into the clinic and 1 receives -- reaches commercialization. What you see on the left-hand side is the higher value partnership of -- NPV of about $165 million. And this is capped at about 5 years after commercial launch. And the $85 million would be the weighted average NPV for kind of the average program that we're seeing in our portfolio, with a $53 million estimate would be for the lower-value programs that we have. So a nice mix of high-value and mid- and low-value programs, with each of them are quite attractive from a valuation perspective. This -- a little busy slide. What we're trying to do here is show how MaxCyte compares to what's going on in the industry. So a lot of people talk about MaxCyte, they talk about MaxCyte being a company that is -- provides optionality across the whole engineering cell therapy space. So on the left-hand side, you see the cell approach, and these are different types of programs, whether it be CAR-T, stem cells, TCRs and how we align -- these are up -- MaxCyte partners in the clinic, and on the outside would be the market. And then the cell source is the middle, we're heavily directed toward allogeneic cell therapies because of the power of our technology. One of the key attributes of our technology is we can do very complex cell engineering, multiple pathways we can engineer in a single cell. We have cell partners that are engineering cells with 5 or 6 different pathways. And this is clearly the future of cell therapy as people move from -- as developers move from hematopoietic cancers into solid cancers. And again, you see a bit of a favoring of MaxCyte toward the next-generation allogeneic programs. On the far right-hand side, indication of the -- indications that we're working on with partners. Obviously, the larger part of that would be in solid tumors for us, AML, ALL. We're also seeing some new programs in autoimmune disease, neurodegenerative disease, stroke, infectious disease. So this whole field of cell therapy is really opening up, and MaxCyte is at the center of all these different pursuits by companies developing cell therapies. In terms of financial update, we announced this -- preannounced about a month ago, and then we announced our financial results on Monday. We did $11.6 million in the first quarter. That was a 78% increase over the same period in 2020. And our operating expenses were about $14.7 million in the first quarter. Again, 90% gross margins. And we started the year with close to $250 million. That $250 million will see -- certainly see us through to profitability. So we're -- I think the balance sheet is in great shape. We went public in the end of the second quarter of 2021. So we're quite well-positioned to really build the business and to be able to see us through without the necessity to raise additional capital. In terms of -- I think I went through the 2022 Q1 summary. Just in terms of guidance in the future, we had originally guided between 22% and 25% growth in 2022. We've updated that to at least 25%. So we beat expectations and we raised guidance on Monday. We also expect these milestone payments of approximately $4 million -- minimum of $4 million for 2022. We're moving into a new headquarters. One of the rationales for doing that is that we can dramatically increase our manufacturing capability. Again, we manufacture these instruments, we manufacture the disposables. So as our partners move closer to commercialization, we want to make sure that we are fully capable to support their commercial launches as they move closer to that approval. And then there are some additional products that are being developed by some of our partners that we also believe could be approvable in the '23, '24 time frame. We've completed the beta testing of our VLX, which is a large-scale system that's going to move us clearly into the bioprocessing segment where one can produce monoclonal antibodies, a clinical scale under cGMP system, in a matter of weeks versus 6 months to 2 years that's required for a stable cell line. We think that's going to solve some problems in terms of being able to go from a sequence to a monoclonal antibody very rapidly for public health. But also many of the biopharma companies are looking for ways of accelerating the dwell time it takes from the initiation of a preclinical study to get into the clinic. And we think we can move the industry so that we can actually start to see our partners move their programs into the clinic within, again, a period of months instead of years, where they would typically be required to produce a stable cell line. We continue to launch new PAs, and we're making -- we're looking at future investments in complementary technologies around our core cell engineering technology. So thank you for your interest. Thank you for attending today. And if you have any questions, please feel free to see me after the presentation, or please see Sean Menarguez, who's in our audience, who is our Director of IR. So thank you all very much for your interest in MaxCyte.Thank you.