MaxCyte, Inc. (NASDAQ:MXCT) Q1 2024 Earnings Call Transcript

MaxCyte, Inc. (NASDAQ:MXCT) Q1 2024 Earnings Call Transcript May 11, 2024

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 First Quarter 2024 Earnings Conference Call. At this time all participants are in a listen-only mode. After the speakers presentation there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Erik Abdow, Investor Relations. Please go ahead.

Erik Abdow: Good afternoon, everyone. Thank you for participating in today's conference call. On the call from MaxCyte, we have Maher Masoud, President and Chief Executive Officer; and Douglas Swirsky, Chief Financial Officer. Earlier today, MaxCyte released financial results for the first quarter ended March 31, 2024. 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 contained in this call that relate to expectations or predictions of future events, results or performance are forward-looking statements. Actual results may differ materially from those expressed or implied in any forward-looking statements due to a variety of factors, which are discussed in detail on our SEC filings.

The company has no obligation to publicly update any forward-looking statements, whether because of new information, future events or otherwise. And with that, I will turn the call over to Maher.

Maher Masoud: Thank you, Erik. Good afternoon, everyone, and thank you for joining MaxCyte's first quarter 2024 earnings call. MaxCyte reported $11.3 million of total revenue in the first quarter, including core revenue of $8.2 million and $3.2 million of SPL program-related revenue. We were pleased with the results in our core business, which delivered in line with our plan, along with SPL program-related revenue, which came in above our expectations. We are also thrilled with our progress in signing new SPLs with 4 already signed 2024, including Be Biopharma most recently. Following the first quarter, we remain on track in our financial projections for the year and are confident in the trajectory of the overall business. The operating environment for our customers remained largely unchanged from our last earnings call.

We believe the funding environment has improved as evidenced by the capital markets activity during the first quarter. We have seen several existing and prospective SPL partners raise capital in recent months. Over the past couple of years, we saw cell therapy companies prioritize their lead programs and deprioritize other programs, resulting in variable levels of demand for our instruments and PAs in 2023. Though there are fewer new cell therapy programs throughout the industry today due to program reprioritization, we believe this has resulted in an industry focus on assets that are further along in their development or have a higher probability of making it to the clinic. Additionally, MaxCyte's late stage preclinical and early stage clinical customers, who have reevaluated their programs over the past couple of years, continue to utilize our platform for their lead programs.

We are becoming increasingly optimistic on the market outlook for cell therapy developers and continue to assess industry demand levels based on direct conversations with our existing and prospective customers. The time frame for when a customer secures funding to when they make research and clinical spending decisions can take time. And our business is not directly correlated with the level of funding in any given quarter. General trends in the non-viral cell therapy market continue to bode well for the use of our ExPERT platform. Companies continue to pursue more complex cell therapies across a variety of different indications with multiple engineering steps, which MaxCyte's electroporation technology is well equipped to deliver. Looking specifically at the quarter, the core business performed as expected across cell therapy and drug discovery.

We saw a return to growth in our cell therapy business compared to last year's first quarter, and we were relatively flat in drug discovery revenue compared to last year. Doug will cover that in more detail, but I will point out that our installed base of instruments expense of 708 as of March 31, 2024. We executed well against our pipeline of instrument opportunities in the first quarter and our position as planned for the remainder of the year. On PAs, revenue is up from the comparable prior year period and improved sequentially from the fourth quarter of 2023. The PA growth that we experienced was reflective of broad-based demand across the customer base, and we were very encouraged to see an uptick in our PA revenue compared to 2023. PA sales are always dependent upon the activity level of customers, stage of development programs and desired inventory levels at customers, all of which can result in demand that can be lumpy from one quarter to another.

Turning to our SPLs, we recognized $3.2 million of SPL program-related revenue in the first quarter of 2024. This included a regulatory pivotal milestone that we did not originally forecast for 2024. We have raised our guidance for the SPL program-related revenue line to account for this milestone, which Doug will address in more detail. Accomplishment of the previously non-forecasted regulatory pivotal milestone underlies the strength of our business model. As our therapeutic development customers move further into the clinic, we are positioned to receive revenue from milestone achievements on occasion, sooner than anticipated. So far in 2024, we have signed 4 SPLs, including Be Biopharma Wugen, Imugene, and Lion TCR. Our most recently signed SPL that we announced in April, Be Biopharma, is developing a proprietary class of engineered B cell medicines, BCMs, designed to produce therapeutic proteins specific to a certain disease.

MaxCyte's platform will support the development of Be Bio's BCM programs to address unmet needs of patients with genetic diseases, cancer and more. The addition of Be Biopharma brings the total number of SPLs in our portfolio to 27, which further showcases our position as the partner of choice with technology capability across multiple cell types to cell and gene innovators. Moreover, we remain excited about the commercial opportunity of CASGEVY. CASGEVY has been approved for certain indications in the United States, Great Britain, European Union, Saudi Arabia and Bahrain, with a new drug submission that has been accepted for priority review by Health Canada. As a reminder and as stated on our last earnings call, MaxCyte will only recognize revenue once the patient has been infused, which can take a number of months from the time a patient enrolls in the therapy program.

We do not have sufficient visibility into the timing of patient dosing, and therefore, continue to exclude any CASGEVY-related commercial milestone revenue in our updated 2024 outlook for SPL program-related revenue. We will provide updates on CASGEVY as they come from Vertex. The current and prospective client relationships that we have built and fostered are truly unique and reflective of our platform's value proposition. At MaxCyte, we pride ourselves not only on our proven electroporation technology, but on differentiated support that we provide to our customers. We are present throughout the entirety of our customers' programs once they begin utilizing our platform. Our support system includes scientific customer service from our 36-plus trained field sales and application scientists to provide customer research and development support.

As part of our SPL relationships, clients have access to our FDA drug master file, which can help with regulatory understanding of the manufacturing process required for approval and help derisk one part of the manufacturing process for our SPL customers. That's our platform and service that we offer to our clients is truly an all-encompassing end-to-end solution. We believe our value proposition has resonated well with existing customers and will drive substantial opportunity for MaxCyte over the long term. This quarter and over the course of 2024, we continue to deliberately evaluate and improve our business. We are focused on investing in our business to drive growth and to best support the programs of our current and future clients. Notably, we have invested in additional customer support for our SPL clients and are working towards ensuring we are working with customers early in the development and providing them with the best know-how application in the process.

In summary, we are very pleased with our first quarter results and believe that we remain in a strong position to deliver our 2024 plan. As the cell therapy industry continues to move towards non-viral cell engineering approaches, I am very optimistic about the opportunity for MaxCyte both in the near term and long term as the premier cell engineering platform. With that, I will now turn the call over to Doug to discuss our financial results. Doug?

Douglas Swirsky: Thanks, Maher. Total revenue in the first quarter of 2024 was $11.3 million compared to $8.6 million in the first quarter of 2023, representing an increase of 32%. We reported core revenue of $8.2 million compared to $7.8 million in the comparable prior year quarter, representing an increase of 5%. This includes revenue from cell therapy customers of $6.4 million, which increased 7% year-over-year, and revenue from drug discovery customers of $1.8 million, relatively flat year-over-year. Within core revenue, instrument revenue was $1.9 million compared to $2.2 million in the first quarter of 2023. Lease revenue was $2.6 million compared to $2.8 million in the first quarter of 2023, and processing assembly, or PA revenue, was $3.4 million compared to $2.6 million in the first quarter of 2023.

We are pleased with the strong performance of PAs, which was a little better than planned, which we will continue to monitor as we move through the course of the year. Please note, we have added an appendix slide to our corporate presentation with the new quarterly historical disclosure for these new metrics. We recognized $3.2 million of SPL program-related revenue in the first quarter of 2024 compared to $0.8 million of SPL program-related revenue in the first quarter of 2023. We exceeded our initial milestone expectations for the first quarter, driven by a regulatory pivotal milestone that we had not forecasted or anticipated in 2024 due to a positive timing development at one of our SPL customers. Moving down the P&L. Gross margin was 88% in the first quarter of 2024, which was comparable to 88% in the first quarter of the prior year.

Our margins came in lower than our historical levels over the past year when excluding SPL program-related revenue due to fixed overhead cost absorption. We believe that as we move closer towards previous revenue levels, margins should improve. Total operating expenses for the first quarter of 2024 were $22.2 million compared to $20.8 million in the first quarter of 2023. The overall increase in operating expenses was primarily driven by growth in sales and marketing expenses, as well as R&D expenses, with specific investments in product development and application know-how. Going forward, the company continues to be disciplined, making moderated and targeted investments to drive long-term growth, including an innovative product development and field application scientist and additional technological capabilities.

We finished the first quarter with combined total cash, cash equivalents and investments of $202.5 million and no debt. Moving to our full year 2024 guidance, we are reiterating our core revenue outlook and raising our initial SPL program-related revenue guidance. Core revenue is expected to be flat to 5% growth compared to 2023. As Maher discussed, our guidance assumes an operating environment for our customers that has remained largely unchanged from our prior earnings call. We now expect SPL program-related revenue to be approximately $5 million in 2024. The increase in our SPL program-related revenue outlook is a result of the unexpected regulatory pivotal milestone we achieved in the first quarter, which was previously not incorporated in our 2024 guidance.

As a reminder, our 2024 outlook also does not include royalty revenue on CASGEVY. Finally, MaxCyte has maintained a strong financial position and continues to expect to end 2024 with at least $175 million in cash, cash equivalents and investments and no debt on our balance sheet. I would like to close by reiterating that we remain well positioned to execute on our 2024 revenue outlook and remain laser focused on managing our spend and balance sheet to deliver long-term growth. Now I'll turn the call back over to Maher.

Maher Masoud: Thank you, Doug. Overall, we are very excited by our progress so far in 2024. We look forward to supporting our customers in their development stages as they progress through the clinic and remain committed to further expanding our SPL portfolio. We believe that we continue to be the premier enabler of non-viral cell therapies and would like to thank our MaxCyte team for their continued hard work. With that, I will turn the call back over to the operator for the Q&A. Operator?

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