MaxCyte, Inc. (NASDAQ:MXCT) Q4 2023 Earnings Call Transcript
MaxCyte, Inc. (NASDAQ:MXCT) Q4 2023 Earnings Call Transcript March 12, 2024
MaxCyte, Inc. beats earnings expectations. Reported EPS is $-0.05, expectations were $-0.1. MaxCyte, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day and thank you for standing by. Welcome to the MaxCyte Fourth Quarter Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Sean Menarguez, Senior Director of Innovation and Business Development. Please go ahead.
Sean Menarguez: Well, thank you and good afternoon, everyone. My name is Sean Menarguez and I'm the Senior Director of Innovation and Business Development here at MaxCyte. Thank you all for participating in today's conference call. On the call from MaxCyte, we have Maher Masoud, President and Chief Executive Officer; and Douglas J. Swirsky, Chief Financial Officer. Earlier today, MaxCyte released financial results for the fourth quarter and full year ended December 31, 2023. A copy of the press release is available on the company's website. Before we begin, I need to read the following statement. Statements or comments made during this call may be forward-looking statements within the meaning of federal securities laws. Any statements other than statements of historical facts provided on this call, including statements regarding our future results of operations or financial condition, business strategy and plans and objectives of management for future operations are forward-looking statements.
These statements about us or our industry involve substantial known and unknown risks, uncertainties and assumptions, including those that are discussed in detail in our annual report on Form 10-K and elsewhere in our SEC filings that may cause our actual results, performance or achievements to be materially different than any other future results, performance or achievements expressed or implied by such statements. These statements are inherently uncertain and investors are cautioned not to unduly rely on these statements. The company undertakes no obligation to publicly update any forward-looking statements, whether because of new information, future events or otherwise except as required by law. And with that, I'll turn the call over to Maher.
Maher Masoud: Thank you, Sean. Good afternoon, everyone and thank you for joining MaxCyte's fourth quarter and full year 2023 earnings call. As you know, I was appointed to the role of President and CEO of MaxCyte effective as January 1 of this year. It is an honor to lead MaxCyte through its next phase of growth after working closely with the executive team and Board over the last 7 years. I would like to thank our founder, Doug Doerfler, for his contributions to MaxCyte over the past 25 years. In my first couple of months as MaxCyte CEO, we have continued to execute our core mission and strategy to expand our strategic platform licenses or SPL portfolio and support the next generation of cell-based therapies with our ExPERT electroporation platform.
Our top priority remains supporting our customer success throughout the life cycle of research, clinical development and commercial launch. I believe we have substantial opportunities ahead of us in the cell therapy industry and I am committed to leading our organization with a high level of focus along with disciplined expense management and capital deployment. 2022 was a challenging but exciting year for MaxCyte. We faced a difficult operating environment along with many others in the industry as our customer base saw conservatism in capital spending, lower-than-expected activity levels and prioritization of programs. Despite these challenges, 2023 was a transformative year for MaxCyte. Our technology supports the approval of CASGEVY, the first nonviral cell therapy product approved by the FDA, developed by SPL clients, CRISPR Therapeutics and Vertex Pharmaceuticals.
MaxCyte's ExPERT platform is now the only electroporation platform to have supported a nonviral therapy through FDA approval and is now the only electroporation platform supporting commercial therapy. We believe this is just the first of many potential approvals by MaxCyte SPL clients over the coming years and we are working hard to remain the platform of choice when it comes to electroporation. MaxCyte reported $41.3 million of total revenue for the full year of 2023, at the high end of the revenue range we preannounced in January 2024. Core business revenue was $29.8 million, also at the high end of our preannounced range. We were pleased to see our business be stabilized in the fourth quarter and with the strong execution of our team in a challenging environment.
In 2023, we grew our instrument installed base to 683 as compared to an installed base of 616 at the end of 2022. While our instrument installed base expanded this year, both instrument sales and PA sales declined in 2023 compared to 2022 across cell therapy and drug discovery customers. As I mentioned, we are operating in a challenging environment, where early-stage customers in cell therapy and drug discovery have limited access to capital. And some clinical customers have adjusted their spending and extended project timelines. This environment remained largely unchanged in the fourth quarter, though we are optimistic that the financing market for the cell therapy industry will improve over time. Nonviral cell therapy market trends continue to bode well for MaxCyte's platform.
Customers at various stages of development are pursuing different approaches and indications. Developers continue to move towards nonviral cell engineering approaches that encompass multiple steps and complexity of edits. Innovation and complexity in cell therapy development drives demand for MaxCyte's electroporation technology. While we are cautiously optimistic about near-term market factors impacting our customers, the nonviral cell therapy opportunity and regulatory backdrop for cell therapies continues to improve. Outside core business, we generated $11.5 million of SPL program-related revenue for the full year of 2023 and $8.5 million during the fourth quarter. Both our full year 2023 and fourth quarter 2023 SPL program-related revenue came in at the high end of our preannounced range driven primarily by BLA approval milestones from our clients in the fourth quarter of 2023.
As a reminder, SPL program-related revenue includes development and approval milestone payments as well as sales-based payments and/or royalties from commercial clients. Across our 26 SPLs to date, there are many nuances to the SPL contracts. And the revenues associated with commercial products can vary. Generally, we received 1% of product sales through either royalty or sales-based payments in addition to receiving revenue from leased instruments and PA sales to SPL customers which is included in core revenue. As stated by Vertex in their fourth quarter 2023 earnings call, the commercial launch of CASGEVY has commenced. As patients are screened and identified for treatment, they will enter the program at authorized treating centers in which they will undergo pretreatment, cell collection manufacturing and finally, treatment infusion.
MaxCyte will only recognize revenue once the patient has been infused which can take a number of months from the time that patient enrolls in therapy. Our visibility into the timing of patient dosing is quite limited. And we will rely on Vertex to provide us and the markets with updates on patient enrollment status as they come. At this time, we do not have enough information on timing of patient dosing to forecast expected commercial royalty revenue from the sale of CASGEVY for 2024. As we move throughout the course of the year, we hope to have better insight into the patient journey and dosing timelines. We remain very optimistic about the long-term prospect for CASGEVY and look forward to many patients receiving the treatment in years to come.
As I mentioned earlier, we continue to lay the groundwork for long-term growth at MaxCyte, just as we did several years ago with CRISPR to support what is now CASGEVY. In 2023, we signed 5 new SPL clients, bringing the total number of SPLs to 23 as of December 31, 2023. These 23 SPLs represent over 160 programs, of which 16 are programs in clinical development along with one commercial program. The total precommercial revenue potential for our SPL programs is now greater than $1.95 billion, up from $1.55 billion at the end of 2022, an increase of over $400 million in potential milestone payments. As you've probably already seen thus far in 2024, we have signed 3 additional SPLs, bringing our total assigned SPLs to 26 as of today. We believe the breadth of our expanding SPL portfolio continues to demonstrate the unique and valuable technology that MaxCyte use across cell types and editing tools.
By way of example, Lion TCR, one of our SPL customers which we announced this year, is a Singapore-based clinical-stage biotechnology company focused on the development of T-cell receptor therapies for solid tumors and life-threatening viral infections. Our SPL Lion TCR has allowed to expand our global presence into Asia to support the development of new therapies for patients with solid tumors. We also signed an SPL with Imugene, a clinical stage immuno-oncology company that is developing a range of new treatments that seek to activate the immune system of cancer patients to identify and eradicate tumors. Our platform technology was efficiently transferred from Precision Biosciences when global rights for azer-cel were obtained by Imugene in August of last year.
And we look forward to supporting Imugene as they move towards a potential Phase II registrational trial for azer-cel in cancer, an allogeneic CAR-T candidate. Our most recent signed SPL client is with Wugen, a clinical stage biotechnology company developing allogeneic off-the-shelf cell therapies to treat a broad range of hematological and solid tumor malignancies. Importantly, their WU-CART-007 lead asset is currently in a global Phase I/II clinical trial for the treatment of relapsed or refractory T-cell acute lymphoblastic leukemia, lymphoblastic lymphoma in adolescent and adult patients and has received Orphan Drug, Fast Track and Rare Pediatric Disease Designations from the FDA for the treatment of such conditions. We are encouraged by these recent SPLs and are excited to witness the clinical progress that we believe our clients may make in the upcoming months and years with the support of our platform.
The SPL agreements that were signed earlier this year have been many months or even years in the making. Our team works very hard with customers to understand and optimize their research and development processes objectives. This relationship often starts in research, where customers utilize our ExPERT ATx and then seamlessly scale to the GTx prior to entering the clinic. As companies make progress towards entering clinical development, there is a dynamic discussion around the SPL relationship that takes quarters to negotiate and arrive at the final agreement. Following the success of our ability to enter into new SPLs over the past couple of years, we are continuing to build and expand the SPL pipeline. As time progresses, we believe that having the only commercial nonviral therapy which utilizes our platform to engineer the cells, will generate additional interest in filing a number of new SPL agreements which have been in discussion for some time and then new discussions can begin to support continued SPL signings in the years to come.
We believe that there is opportunity for substantial clinical milestone and commercial revenue as our SPL clients programs move towards late-stage clinical development and commercialization. As we look ahead in 2024, we have a robust SPL pipeline which we will continue to execute on. Over the past 2 years, MaxCyte has strategically invested to support the growth opportunity ahead of us. Notably, we have made investments to ensure that we have the strongest manufacturing, regulatory and quality capabilities to support our customers throughout development and commercialization. We have added to our teams across the organization in order to scale the business. And we have made targeted product development enhancement, including development of the VLx. We have developed a disruptive technology in the VLx that will enable rapid production of transiently expressed proteins at large scale for preclinical and early clinical use that we believe will offer a much more efficient manner for research.
We believe the commercial opportunity in the bioprocessing market is large but will take some time to develop. Following feedback from industry and a more detailed evaluation and opportunity for the VLx, we are taking a more measured approach to developing applications and understanding customer needs before launching a robust commercial offering for the VLx. We remain committed to taking the time necessary to deliver the most efficient platform for our customers, starting with the evaluation of our beta customer feedback throughout 2024. In 2024, we will be measured in our investments and focus on areas that we believe will deliver significant returns to our customers and MaxCyte in the long term. The key areas of moderate investment may include improvements to our best-in-class electroporation systems, building additional application know-how, building capabilities to work with customers early in the continuum of development and selling into new applications for electroporation.
In summary, we have entered 2024 well positioned to deliver on our financial and strategic goals. This year, MaxCyte continue to navigate the operating environment methodically, recognizing that the challenges we experienced in 2023 were felt industry-wide and staying vigilant on changing dynamics in our industry. I firmly believe in the long term opportunity for MaxCyte as the premier enabler of nonviral cell therapies. With that, I will now turn the call over to Doug to discuss our financial results. Doug?
Douglas Swirsky: Thank you, Maher. Total revenue for the full year was $41.3 million compared to $44.3 million in 2022, representing a 7% decline. Total revenue in the fourth quarter of 2023 was $15.7 million compared to $12.4 million in the fourth quarter of 2022, representing an increase of 26%. In the fourth quarter, we reported core revenue of $7.2 million compared to $10.6 million in the comparable prior year quarter, representing a 32% decline. This includes revenue from cell therapy customers of $5.5 million, revenue from drug discovery customers of $1.6 million which declined 27% and 46% year-over-year, respectively. Within core revenue, instrument revenue was $2.3 million compared to $3.7 million in the fourth quarter of 2022.
Lease revenue was $2.4 million compared to $2.8 million in the fourth quarter of 2022. And processing assembly for PA revenue was $2.2 million compared to $3.7 million in the fourth quarter of 2022. We saw sequential improvement in instrument revenue and stabilization in PA revenue compared to the third quarter of 2023. The year-over-year declines in revenue were due to the challenging market for our customers which resulted in conservatism of spend and pipeline prioritization. For the full year of 2023, we reported core revenue of $29.8 million compared to $39.6 million in 2022, representing a 25% decline. This includes revenue from cell therapy customers declining 25% year-over-year and drug discovery revenue declining 23% year-over-year.
Within our core revenue, instrument revenue was $8.3 million compared to $11.7 million in 2022. Lease revenue totaled $10.3 million compared to $10.9 million in 2022. And PA revenue totaled $10.3 million compared to $16 million in 2022. Of note, 48% of our core business revenue was derived from SPL clients in 2023 which compares to 42% and 40% in 2022 and 2021, respectively. The increase in revenue from SPLs as a percentage of total core revenue highlights the challenges that early-stage preclinical customers faced during the course of 2023 which we have spoken to throughout the year. While our SPL clients were not immune to funding constraints and pipeline prioritization, the magnitude of the decrease in core revenue from SPL clients was less substantial compared to our earlier-stage customers.
We recognized $8.5 million of SPL program-related revenue in the fourth quarter of 2023 compared to $1.9 million of SPL program-related revenue in the fourth quarter of 2022. For the full year, we recognized $11.5 million in milestone revenues as compared to $4.6 million in 2022. We exceeded our initial milestone guidance for 2023 which was a risk-adjusted forecast for the year. The approval milestones from our SPL clients in multiple geographies drove the upside to our initial guidance. Moving down to P&L. Gross margin was 90% in the fourth quarter of 2023 compared to 88% in the fourth quarter of the prior year driven by our mix between core and SPL program-related revenue. Total operating expenses for the fourth quarter of 2023 were $22.2 million compared to $17.6 million in the fourth quarter of 2022.
The overall increase in operating expenses was primarily driven by compensation expenses related to headcount, professional fees and lab and new product development expenses. Moving forward, the company plans to continue to make strategic, targeted investments while moderating our rate of OpEx growth. In 2024, we will be disciplined in our spending, evaluating investments in business and corporate development, commercial sales and marketing operations and field application scientists to drive long-term growth. We finished the fourth quarter with combined total cash, cash equivalents and investments of $211 million and no debt. Moving to our full year 2024 guidance, we provided initial guidance last week and we are reiterating that outlook today.
We expect core revenue of flat to 5% growth as compared to 2023. The components of our core business are anchored in lease revenue, clinical and commercial instruments, new instrument placements and the sale of processing assemblies, the consumables used by our customers. We are confident in our ability to grow the core business in 2024. We are not forecasting any substantial positive or negative change in the macroeconomic environment for our customers, though I will note that the capital-raising activity by the industry and some of our customers has started off better than we expected. Time will tell whether that capital finds its way to R&D programs that will drive demand for MaxCyte products. But we are keeping an open ear to customers and the potential for updated plans as market conditions evolve.
We adapted to the difficult environment we saw in 2023 and are confident in our ability to execute through a stabilizing environment in 2024. SPL program-related revenue is expected to be approximately $3 million in 2024. This is a risk-adjusted forecast that is achievable under a variety of potential outcomes across our SPLs and our planned clinical progress. At the end of 2023, we recognized milestone revenue from one of our clients which we had initially anticipated in 2024. Our expectations for SPL program-related revenue for 2024 reflect the timing of this milestone and the resulting difficult year-over-year comparison. While we do not have visibility on the timing of CASGEVY patient infusions, we expect to begin to recognize royalty revenue from Vertex later in the year.
However, we have not included royalty revenue from CASGEVY in our initial 2024 outlook. Finally, MaxCyte remains in a strong financial position and continues to expect to end 2024 with approximately $175 million in cash, cash equivalents and investments and no debt on our balance sheet. I would like to close by stating that we are confident in our 2024 revenue outlook and believe that our modest cash burn and strong balance sheet will serve to support MaxCyte's long-term growth. Now, I'll turn the call back over to Maher.
Maher Masoud: Thank you, Doug. Overall, we believe our accomplishments in 2023 have further validate the endpoints of our ExPERT electroporation platform and the long-term growth potential for MaxCyte. We look forward to supporting our customers through their development stages and commercial activities to deliver new cell-based therapies to patients and needs. MaxCyte remains excited about the potential of our clients' assets as they progress through clinical development. And we are committed to expanding our SPL portfolio in 2024 and beyond. I'd like to thank the MaxCyte team for their dedicated work which has helped solidify MaxCyte's position as a premier enabler of nonviral cell therapies. With that, I will turn the call back over to the operator for the Q&A. Operator?
Operator: [Operator Instructions] Our first question will come from the line of Jacob Johnson from Stephens.
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