Q1 2022 MaxCyte Inc Earnings Call

May 9, 2022

Good day, and thank you for standing by welcome to the math.

<unk> first quarter earnings conference call at this time, all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone. Please be advised that today's conference is being recorded if you require any further assistance. Please go ahead.

Star Zero I would now like to hand, the conference over to your speaker today, Sean <unk>.

<unk> Investor Relations. Please go ahead.

Good afternoon, everyone. My name is Simon Rguest and I'm, the director of Investor Relations here at Max site. Thank you all for participating in today's conference call on the call from that site, we have Doug Doerfler, President and Chief Executive Officer and that holds.

Interim Chief Financial Officer.

Earlier today <unk> released financial results for the first quarter ended March 31 2022.

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 maybe 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.

Press or implied in any forward looking statements due to a variety of factors, which are discussed in detail in our SEC filings. The company undertakes 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 Doug.

Thank you, Sean and good afternoon, everyone and thank you for joining <unk> first quarter earnings call I'll begin with a discussion of our business and operational headlines during the quarter.

All of that detailed financial review from Rod. We will then open the call for questions.

We are very pleased with our start to 2022.

Our team continued to deliver on all financial and strategic objectives at our plant in <unk> expert platform continues to be the premier So engineering technology, enabling the development of a growing set of advanced cell based therapeutics with our additional resources at hand, we continue to invest in our people and capabilities.

Measured but healthy rate as we seek to ensure the success of our partners.

Ron will provide more details later in the call, but I would note that we generated very strong first quarter 2022 results.

<unk> announced last month and outlined in the press release.

Today. These results are anchored and robust performance in our core cell engineering business, which was up 48% year over year, we generated significant SPL program related revenue in the quarter with revenue timing, one thing a little sooner than our internal plan and a forecasted yielding strong year over year growth in the quarter.

As you know we have very limited visibility into the timing of our partners from the progress.

As such it's a challenge for us to provide precise information regarding program related revenue beyond general expectations for the year.

First quarter revenue was a record $11 6 million up 78% over the first quarter of 2021 with a very strong growth in the core business growth in revenue to cell therapy customers was 57% year over year and to drug discovery customers was 23% year over year.

Cell therapy growth was primarily driven by both.

NPA sales, we're seeing expansion of our global customer base across all stages of development and encouraged by our traction with cell therapy customers at early development stage, which continues to strengthen our robust SPL pipeline.

SPL partners their clinical progress or their respective development programs. However, we remain excited about the progress our partners have been baking into clinic, we continued to sign new SPL partners and see additional SPL programs enter trials.

Further we have seen our existing clinical spo portfolio progress into later stage, including pivotal clinical studies, suggesting we may see.

Partners first commercial product as early as 2023.

Overall, our core business revenue growth in recognition of the SPL program related revenues are starting to both strong execution by our growing commercial team and robust customer demand. This strength seen in new sales and leases of instruments as well as strong sales.

The timing of customer purchases at least instruments as the prepare for pivotal trials and commercialization can be hard to predict and we would expect them to remain lumpy until our SBA portfolio and clinical progress with those partners is broad enough to smooth out the lumpiness from individual programs.

Given our strong performance, we wanted to highlight that we have not seen any weakness in the demand for our products and associated support from our customers. We have strong relationships with our partners and customers and believe <unk> expert platform as a core aspect of their therapeutic development strategy.

We continue to meet and exceed our customers' expectations for supply and scientific support and we continue to have a growing new business development pipeline.

SPL pipeline remains strong and we continue to expect additional SPL partnership announcements. This year are comparable economics to prior partnerships.

In the first quarter, we signed an agreement with Insulet Bioscience, which we highlighted on our last call. We now have 16, SPL partners covering more than 95 development programs in the aggregate.

More than 15% have entered the clinic.

In the near term, we are optimistic about the potential for SPL partners to generate meaningful and growing revenue from both our preclinical research and clinical progress as well as hopefully commercialization partner therapeutics over the next 12 months to 24 months and beyond.

We are making important investments to support our future revenue growth, including investing in our commercial teams developing expanding in house manufacturing.

In our in house bio processing and cell therapy applications and process development labs.

These investments will advance our ability to take advantage of expanding markets.

<unk> of new therapeutic development program certain companies and support our partners as they move toward and into commercial launch of therapeutic products.

This investment will come with continued growth in head count across most areas of the organization, particularly in R&D and sales and marketing, including Alliance management.

These kinds of investments have delivered strong growth of the day as we support our partners potential success and we continue to be upbeat about the value of these investments, we're making in 2022 and beyond.

In closing we have had an excellent first quarter for 2020.

As we continue to execute on our financial and strategic goals. We're very excited about our opportunity going forward, particularly in the cell therapy market and are making the right investments to drive growth across the business.

I will now turn the call over to Ron to discuss our financial results Brian .

Thanks, David Hello, everyone.

Mentioned, we realized record revenue of $11 6 million in the first quarter compared to $6 5 million in the prior year's quarter based on strong performance in both our core business and through the clinical progress milestones delivered by our SPL partners.

Core business revenue was $9 6 million in the first quarter of 2022 compared to $6 5 million in the first quarter of 'twenty one.

This includes revenue from cell therapy customers at seven $4 million growing 57% year over year, while revenue from drug discovery customers was $2 2 million growing 23% year over year, we saw a broad growth across the business with particular strength in instrument sales in cell therapy and in processing.

Assembly sales in both cell therapy and drug discovery during the quarter.

Recognized $2 million of SPL program related revenue in the first quarter of 2022 compared to immaterial program related revenue in Q1 2021.

Moving down the P&L gross margin was 91% in the quarter versus <unk> 89 per ton in the first quarter of the year. Prior the increase in gross margin was driven by the higher SPL program related revenues, excluding that SPL revenue gross margin was relatively unchanged.

Total operating expenses for the first quarter of 2022 were $14 $7 million.

Compared to $12 2 million in the first quarter of 2021 and recall that Q1 2021 included $3 $9 million.

Expense from winding down investments in our platform.

As Doug mentioned, our current strategy is to continue to make meaningful investments across the business to take advantage of the opportunities, we see to accelerate organic growth over the coming years.

Overall increase in operating expenses was primarily driven by increased headcount to support growth in field sales and field science manufacturing and lab teams.

Growth and public company related and stock based compensation expense also contributed to the higher level of expenses compared to the same period, a year ago as our NASDAQ listing did not occur until the third quarter of 2021.

We have a very healthy balance sheet with total cash and cash equivalents and short term investments of $246 million as of the end of the first quarter and no debt.

Note that in Q1, we began to see the first portion of cash investments in construction of our new facility total investments. This year in our new headquarters is expected to be approximately $12 million in 2022.

We are increasing our outlook for 2022, we now expect revenue from our core business, which includes sales and leases of instruments and sales of disposables to cell therapy, and drug discovery customers to grow at least 25% compared to 2021 core business revenue, we saw strong business momentum in the first quarter and <unk>.

Cautiously optimistic about the balance of 2022.

Turning to our SPL program economics, as we have discussed in previous calls the timing of SPL revenues is predicated on our customers clinical and regulatory progress, where we have limited visibility taking into account the earlier than expected Q1 program related revenue. We continue to expect 2022 SPL milestone revenue.

<unk> of approximately $4 million.

Doug.

Thank you Ron in summary, we remain excited about the opportunity to lead the industry forward as the Premier cell engineering platform technology supporting the development of advanced cell based therapeutics for patients that may not otherwise have treatment options.

Always we want to take this opportunity to thank our team board suppliers investors and the amazing industry that we have the other observing we are.

Pleased to report strong first quarter results and Mac site remains well positioned for growth and we are excited about the opportunities ahead.

We are now opening up the line for questions.

Thank you as a reminder to ask a question you will need to press star one on your telephone to withdraw your question. Please press the pound key please standby, while we compile the Q&A roster.

And our first question comes from Max Masucci from Cowen. Your line is now open.

Hi, This is Stephanie on for Matt. Thanks.

Thanks for taking the questions and congrats on a great quarter.

If you look broadly at some of the more recent therapy. Your SCR partners have launched in the clinic and compare them to the therapy. Upon us here into 2017 to 2020 timeframe.

This diversity of cell types of molecules that.

Are there any emerging trends to call out.

Good question, Stephanie and thanks for the question.

We are seeing quite a bit of movement since 2017.

First of all one of our first deals with CRISPR and we're seeing that continuing we're seeing multiple edits being done themselves, we're seeing companies move from.

T cells, and some T cell subsets of NK cells.

Lot of focus now on different sorts of gamma Delta T cells, and b cells. So the cell population the subsets or increasing.

Again, we're seeing more complex.

Which I just mentioned, we're seeing different tools being some of them have been around for quite some time like zinc finger nucleases.

Transposon Transposase and so we're just seeing a lot of different you'll also see some new indication areas principally it was in.

<unk> disease with CRISPR in sickle.

Cell program, obviously until till August .

I'll tell Ya stem cell also in allogeneic T cell treatments and we're also seeing for cancer and we're also seeing movements into autoimmune disease in some of our earlier stage customers are working in neuro degenerative disease and infectious disease. So we really think this whole field is just.

Beginning to explode as people become much more comfortable with.

These engineering tools.

Manufacturing methods.

Got it that's super helpful and also with the recent pullback in publicly traded Bob manufacturing peers and likely some degree of a pullback in private asset values have Erik Hirsch towards M&A changed at all are you leaning more towards tuck in complementary M&A or are you entertaining some later.

More transformational deals.

Yes, I think.

We're seeing some some movement in the private financing now.

It's reflected I think in a few months behind.

Increase in financings.

Public market I think just to put an exclamation point, we're not seeing any reduction in demand for our products with our with our partners. So thats good.

We've always thought about it.

Our corporate.

Corporate development group.

Our targets are confidential, but I think it's fair to say that we have talked about staying very close to our knitting staying close to the cell engineering space, not moving too far upstream and downstream and really looking for opportunities, where we can solve really big pain points that customers are having in the cell therapy field.

How we do that.

I think we're open to all the all the different opportunities but.

I think if we do a deal if we do several deals are going to be again around mid <unk>.

Solving these engineering problems for our customers.

Got it that's great Super helpful and if I could squeeze in one more.

During the last call you highlighted that you won't walk into several beta customers on the expert pls to build application data can you provide some more detail on the progression of the beta launch or share any additional milestones under the electric product roadmap.

Well sure so.

We released that product.

In the fourth quarter of this year.

Much of the focus at that point was really investing in the business and refining our strategic plan.

So we did the release in 2020.

2022, we think it is.

A very interesting marketplace and we think this is a highly disruptive technology in the large scale bio processing.

So we're working with these customers with the expert deal looks to build applications data to support support that movement.

We think the opportunity the opportunity is large it's going to take time to.

Volte opportunity with or without partners I think one of the areas that were.

Very excited about is the.

The rapid production of monoclonal antibodies.

Think there's immediate need for that in the marketplace.

I think it's a broad Tam expansion opportunity for the company and we're doing quite a bit of this is small scale with the SPX today. So it's a bit of a natural progression for us to move.

Move outs are companies are our partners when it moved kind of from the mid scale, which is the SPX up to larger volumes.

Again.

Work has to be done.

In this area and the applications. There is significant amount of work that's done pre and post electroporation engineering and process development.

What are the one of the areas that we've focused investments is to ensure that we have the ability to support our customers all the way through the process.

Got it thanks, so much for that color really appreciate it.

You bet. Thank you.

Thank you and our next question comes from Matt <unk> from William Blair. Your line is now open.

Hey, good afternoon.

For some customers, but just because it's been such an epic this earning season.

Often you have 6% to seven programs for customer and certainly would make sense that with lead assets there'll be no change just curious if you're seeing any re prioritization R&D prioritization of our pipelines from customers.

At all beyond sort of the medical either secondary assets.

Yes, Matt we're really not seeing it at this point I mean, I think that.

Our focus is typically on the lead asset or number two in the company like like you suggested and as far as we can see these companies are pulling back on those.

A lot of the work.

We are pulling back that maybe you're pulling back on some pre preclinical.

Programs, but again, that's pretty it's usually pretty confidential with our partners that we would have much vision on that.

The ability to see what's going on.

The other issue is that our business is growing quite a bit we had a very strong core business growth in the first quarter. So I think that's evidence that things continue to be.

Moving forward at a pretty pretty pretty good rate.

Okay, and then just in terms of.

Hiring just curious what youre seeing out there and if you've been able to hire at pace with what you are expecting I think.

On the Opex came in a little bit light of what we were we were thinking and just curious if that's any sort of efficiencies that you've built in or if you ever get scheduled on the hiring front.

Well I'll talk I'll, let Brian talk about the <unk>.

Expense side of it but we have a very active.

In Europe , we expanded our human resources and team building.

We're also.

I think we're being very creative in terms of.

How people work in the company.

Over the last couple of years as many of you know it's been primarily virtual we're still seeing that as a primary way of bringing in great people.

And of course.

As its own series of leadership and management challenges, but if you. If you I think if you find the right people you bring them in and provide them the tools that they need to work.

Virtually.

I think we're going to do.

Pretty well.

Brian would you like to talk at all about this.

Expense changes.

The first two.

<unk>.

We're being successful hiring the people that we want it's I think it's.

More competitive environment that we've seen.

In prior years that means where it might be a little bit behind what our plan was for ramping head count I don't think its material effect, but.

That competitive environment makes it take a little bit more time to find people we are.

Being successful hiring the people we want when we find a candidate more often than we've seen in the past. They have other offers in hand, but we are winning the people that we want so I think thats.

Going well.

Okay. Thanks, Rob last one would just be just about two months ago.

That competitive launch.

In this space.

Would just be curious of last couple of months.

You've been out and perhaps heard feedback on that device or had it compared to your own technology.

You would highlight.

What youre hearing or what you see as key differentiators, which have been maintained even relative to this newer launch.

Yes, so I'll.

I'll say, a couple of things, Matt, but obviously not going to give we're not going to give the playbook to the competition. This is a product that they've been talking about the terminal Fisher products for quite some time, they're showing it up it's showing up in.

And the major meetings.

We're not seeing it playing any role in the commercial a bake offs with customers. So we're not seeing the impact of that.

The thing that I think differentiates us as performance.

Flexibility and scale and cgmp.

Our focus on supporting our customers in the cell engineering space. So.

We welcome the competition and I think it just brings more more more.

More validation that this is pretty interesting.

In the area that is going to have a lot of a lot of future benefit.

Okay.

That makes sense. Thanks.

Thanks, Matt.

Thank you and our next question comes from Dan Arias from Stifel. Your line is now open.

Yes.

Afternoon, guys. Thanks for the questions. Doug you mentioned, some lumpiness that can arise with respect to the individual programs that you have in your prepared remarks, I'm just kind of curious whether if some of your partners are pushed into the later stages.

<unk> gotten comfortable with the purchasing around key milestone events in other words, how consistent are you finding the spending to be into a scale up to a new trial stage and then maybe out as well should we think about there being step ups ahead of a milestone and stepped down afterwards or is that something to be mindful of or is it more or less consistent.

I think the Lumpiness is really around the milestones themselves because we have.

We have a number of those but we have <unk> in the clinic I think at some point.

Larger number of and actually smooth that out none of mathematicians.

Get to that number.

I think there's still new to us and so we're seeing.

Ramp ups, obviously preclinical.

Preclinical into the clinic.

We're actually seeing quite a bit of non clinical work thats being going on with some of these products as well.

They don't come.

These I'll call it all preclinical they call it non clinical because theyre doing experimentations alongside the product that's been.

In clinical development so.

I think because of the relatively small number of programs.

Don't really have a good handle on what the man it looks like I think that's one of the reasons why we elected.

I'd like to start doing more in house manufacturing, we have the flexibility to support these customers and obviously, we want more of that once we start moving into a commercial.

Commercial launch of one of these some of these products in the next couple of years.

Hopefully that answered your question that you had a couple of things.

And Youre right and I think some of it.

It seems like it's naturally TBD on.

And what happens from here, maybe just on.

On a different topic, new business development and new account wins.

If I go back a year ago, when we were talking about the business at the time of the listing.

You guys had mentioned share within the clinical non viral delivery market.

It was like 40% or so and then there was another 15% that was in discussion as you put it which kind of felt like it had good conversion potential are you able to sort of update us on that chunk and how you've converted the business that looked like it was it was coming your way call. It six to 12 months ago.

Yes, I cant I cant update it quantitatively, but I can say qualitatively.

We're meeting all of our goals and we're winning that business and converting companies too.

Even in the early stage sonar technology.

So we've invested in.

We've invested a bit in and working in these translational medical centers, where you have the cgmp manufacturing suite within an academic setting.

We have begun to have a much more focused marketing effort.

Sales effort because at the end of the day.

Many of these companies are slowing from rates are coming out of an academic lab and once they get into the clinic or is about to go into the clinic.

Someone's, forming the company around them and so if we can get that.

Our technology embedded in that early enough.

We think thats going to just feed at SPL.

STL pipeline for the future.

Okay, maybe if I could just sneak one more in here since it feels like we have time here on the strategic plan that you were kind of touching on you had alluded to it I think in your comments with <unk>, but.

I think part of what you were trying to do this year or into this year was move upstream and downstream of where you are today in cell therapy or at least evaluating how you can do that and thats something we should keep an eye out for and if so would that be an organic effort or more on the inorganic side.

Yes.

We're building out our corporate development group, we've been spending a lot of time on strategy and where we want to play and I think.

I think we can win around again and then just with the first call around the sole generic step in steps. Some of these are it would be organically. We've already identified some opportunities that we can kind of build into what we do.

We do believe that there is a real need in the marketplace for.

Product consistency product characterization.

Ways of being able to control.

<unk>.

Probably potency, which has become more and more of an issue.

And we think theres some analytical techniques that we may be looking.

Two.

Become more basic in.

These opportunities will.

Most likely be in the manufacturing area not in the early stage discovery here.

So I think we think we've got it.

If you think about our company and the QUADRA and were up in the high value.

Proprietary manufacturing enablement, we want to stay up in that sector and really focus our team on that so there is a we think there is quite a bit of opportunity there technologies that may be being used in other other.

Other ancillary industries looking bioprocess and the important over and there's also a number of technologies and products were being developed by <unk>.

Smaller companies that have to make that decision.

Whether or not they want to make those investments in sales and marketing.

In today's environment, where capital isn't quite as couple.

A couple of markets are quite as robust as it was six or nine or 12 months ago, I think there's going to be.

Boards are smaller companies going to be thinking hard about what they're going to make that investment to take that risk is execution.

It is.

It can be very difficult in that marketplace, and I think we've been able to achieve a certain level successful.

Okay helpful. Doug Thank you.

Thanks, Dan.

Yes.

Thank you and our next question comes from Jacob Johnson from Stephens. Your line is now open.

Hi, this is back on for Jacob.

Quick ones from me on the drug development side can you talk about how much of the investments in R&D and sales and marketing.

Focused on this side of the business and how much do you think that's going to accelerate growth in this segment.

So some of the I think we'll.

Starting to see the benefits from some of the investments we've made over the last couple of years.

Prostate processing suddenly so we've got a.

We continue to have a rather robust voice of customer and voice of customers is focused on describing we've been talking about.

Because that market has been I think flat slightly slightly slightly growing and we wanted to really try to accelerate that a bit and I think we.

We're reasonably successful in the first year, the first quarter of picking that up it will.

We will continue to do that and I think the more we can do more.

We can focus use cases of drug discovery.

Which includes bio processing I think the better off we're going to be.

Able to build that business.

Alex is that launch initial launch when it happens we'll be proud of.

Over in the bioprocess excitement in cell therapy because.

Drug discovery would include.

The mid and large scale production of monoclonal antibodies, so I think youre going to see.

Hopefully quite a bit of growth in that sector as we continue to make investments in the drug discovery side.

Thanks.

Also last quarter you commented on.

Are you seeing interest outside the U S. How large of an opportunity or the European and Asia Pacific markets for you.

We've been in Europe for quite some time and there is continues to be strong growth throughout the EU and UK. So.

We're pretty basic in sales.

Marketing operations there.

So we think I think we're making the right investments to be there.

Sure.

We're seeing growth.

Cell therapy, certainly in China.

We are.

During that the best way of approaching that.

It's a tough market to.

I think be successful and I don't think it's particularly tough market to get into but I think it's a tough market to maintain some level of sustainability and thats what were really focusing our attention on we've had some success I think we've got a lot of success.

And Japan, and some extent Korea.

So I think.

We continue to see us focusing.

Our interest in Asia and of course in Europe , and Europe is.

One of the backbones.

So therapy.

Alright, Thanks, Doug.

Sure.

Thank you.

Thank you and as a reminder, if you would like to ask a question. At this time you May Press Star then the number one key on your Touchtone telephone.

And our next question comes from Mark Massaro from BTG. Your line is now open.

Okay.

Thanks for taking the question.

Portfolio.

And any detail on the split of your customers.

When I got pregnant are in later stage development.

Yes, so you'll need.

Sure.

<unk> said that there's 16 partners at the end of last.

Last year in 2021.

And of those 16 partners 95 programs are associated with those partners.

15% are in the clinic, and then I know theres been.

Quite a bit of I think.

<unk>.

And views by some elements in terms of what products we're supporting.

We have.

Publicly disclosed that.

Supporting the CTX.

Which is.

Obviously.

For sickle cell disease.

I think we've been a bit less forthright in some of the other programs because all these deals as we mentioned are confidential. So we believe.

I don't feel.

Feel comfortable talking about those.

You said it.

Okay Gotcha.

Can you just touch on the Sps.

I think you previously discussed.

Three to four STL peer and just any update there and how are the conversations.

Catherine.

Yes, so the <unk>.

<unk> continues to be very robust system had been larger we're just side. It's about the first quarter of this year, we continue to.

To guide to two I think three or four.

I'm talking about that specifically.

And we're building out.

Our business development group the Alliance management group. So we think that there is a tremendous amount of opportunity to that one and it has to do more with it with the progression of our partners and it does actually in our negotiations.

As they move from kind of preclinical IND, enabling studies.

That's the turning point, where they will.

Want to have access to.

Sure.

Our patents, our technology, our master file and those sorts of things.

Great. Thanks for taking the question.

Sure.

Thank you and Im showing no further questions at this time I'd like to turn the conference back over to Doug to floor for closing remarks.

Great well. Thank you all for the questions and your interest and your support of Mac side its been indeed.

Amazing 2021 of the great start to 2022.

Despite the.

Obviously, the investor sentiment in the industry.

Quite hopeful and I think we're.

We're very confident that we're going to see some real.

Amazing clinical data coming out of our partners over the next.

Several quarters, I think thats going to pretend well for.

Cell therapy industry in general in that setting in particular, so again. Thank you all for your support.

Look forward to any subsequent discussions we will have.

We'll be meeting with investors.

And the next several days and if you have any particular.

Questions you can certainly contact us at IR at <unk> Dot com. Thank you Sean. Thank you Ron and thank you all for and Gigi. Thank you as the operator for this call.

Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating and you may now disconnect.

[music].

Good day and thank you for standing by welcome to the Mack side first quarter earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and.

Answer session to ask a question during the session you will need to put star one on your telephone. Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to your speaker today, Sean Americas.

Rest of Investor Relations. Please go ahead.

Good afternoon, everyone. My name is Simon Rguest and I'm, the director of Investor Relations here at Max site. Thank you all for participating in today's conference call.

On the call from <unk>, Doug Parker, President and Chief Executive Officer, and that holds interim Chief Financial Officer.

Earlier today <unk> released financial results for the first quarter ended March 31, 2022, 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.

<unk> or implied in any forward looking statements due to a variety of factors, which are discussed in detail in our SEC filings. The company undertakes no obligation to publicly update any forward looking statements, whether because of new information future events or otherwise.

That I will turn the call over to Doug.

Thank you, Sean and good afternoon, everyone and thank you for joining back sites first quarter earnings call I'll begin with a discussion of our business and the operational headlines during the quarter.

All of that.

The Finance review from Rod, We will then open the call for questions.

We're very pleased with our start to 2022 as our team continued to deliver on all financial and strategic objectives at our plant in <unk> expert platform continues to be the premier So engineering technology, enabling the development of a growing set of advanced cell based therapeutics.

Our additional resources at hand, we continue to invest in our people and capabilities.

Measured but healthy rate as we seek to ensure the success of our partners.

Ron will provide more details later in the call, but I'd note that we generated very strong first quarter 2022 results.

<unk> last month and outlined in the press release published today. These results are anchored and robust performance in our core so engineering business, which was up 48% year over year, we generated significant SPL program related revenue in the quarter with revenue typing blending a little sooner than our internal plan at Ford.

Casted, yielding strong year over year growth in the quarter.

As you know we have very limited visibility into the timing of our partners' clinical progress and as such it's a challenge for us to provide precise information regarding program related revenue beyond general expectations for the year.

First quarter revenue was a record $11 $6 million up 78% over the first quarter of 2021 with a very strong growth in the core business growth in revenue to cell therapy customers was 57% year over year and to drug discovery customers was 23% year over year.

Cell therapy growth was primarily driven by both instrument NPA sales, we're seeing expansion of our global customer base across all stages of development and encouraged by our traction with cell therapy customers at early development stage, which continues to strengthen our robust SPL pipeline.

During the quarter, we recognized $2 million in clinical milestone revenues as we have previously indicated our partnership agreements are strictly confidential. So we will not be answering any specific questions relating to our SPL partners their clinical progress or their respective development programs. However, we.

Excited about the progress our partners have been baking in the clinic, we continue to sign new SPL partners and see additional SPL programs that for trials.

Further we haven't seen our existing clinical spo portfolio progress into later stage, including pivotal clinical studies, suggesting we may see.

Partners first commercial product as early as 2023.

Overall, our core business revenue growth in recognition of the SPL program related revenues are starting to strong execution by our growing commercial team and robust customer demand.

This strength seen in new sales and leases of instruments as well as strong ta sales.

The timing of customer purchases of leased instruments as they prepare for pivotal trials and commercialization can be hard to predict and we would expect them to remain lumpy until our SBA portfolio and clinical progress of those partners has brought enough to smooth out the lumpiness from individual programs.

Given our strong performance, we wanted to highlight that we have not seen any weakness in the demand for our products and associated support from our customers. We have strong relationships with our partners and customers and believe Max eights expert platform as a core aspect of their therapeutic development strategy.

We continue to meet and exceed our customers' expectations for supply and scientific support and we continue to have a growing new business development pipeline. Our SPL pipeline remains strong and we continue to expect additional SPL partnership announcements. This year are comparable economics to prior partner.

Ships in.

In the first quarter, we signed an agreement with <unk> Bioscience, which we highlighted on our last call. We now have 16, SPL partners covering more than 95 development programs in the aggregate of which more than 15% have entered the clinic.

In the near term, we are optimistic about the potential for rail partners to generate meaningful and growing revenue from both our preclinical research and clinical progress as well as hopefully commercialization partner therapeutics over the next 12 to 24 months and beyond.

We are making important investments to support our future revenue growth, including investing in our commercial teams developing expanding in house manufacturing.

In our in house bio processing and cell therapy applications and process development labs.

These investments will advance our ability to take advantage of expanding markets.

Merchant of new therapeutic development program certain companies and support our partners as they move toward and into commercial launch of therapeutic products.

This investment will come with continued growth in head count across most areas of the organization, particularly in R&D and sales and marketing, including Alliance management.

These kinds of investments that delivered strong growth of the day as we support our partners potential success and we continue to be upbeat about the value of these investments, we're making in 2022 and beyond.

In closing we have had an excellent first quarter for 2020.

I will now turn the call over to Ron to discuss our financial results Brian .

Thanks, Doug Hello, everyone as Ed mentioned, we realized record revenue of $11 6 million in the first quarter compared to $6 5 million in the prior year's quarter based on strong performance in both our core business and through the clinical progress milestones delivered by our SPL partners.

Core business revenue was $9 6 million in the first quarter of 2022 compared to $6 5 million in the first quarter of 'twenty one.

This includes revenue from cell therapy customers at seven $4 million growing 57% year over year, while revenue from drug discovery customers with $2 2 million growing 23% year over year, we saw broad growth across the business with particular strength in instrument sales in cell therapy and in processing.

Assembly sales in both cell therapy and drug discovery during the quarter.

We recognized $2 million of SPL program related revenue in the first quarter of 2022 compared to immaterial program related revenue in Q1 2021.

Moving down the P&L gross margin was 91% in the quarter versus 89% in the first quarter of the year. Prior the increase in gross margin was driven by the higher SPL program related revenues, excluding that SPL revenue gross margin was relatively unchanged.

Total operating expenses for the first quarter of 2022 were $14 7 million compared to $12 2 million in the first quarter of 2021 and recall that Q1 2021 included $3 9 million of expense from winding down investments in our Karma platform.

The overall increase in operating expenses was primarily driven by increased headcount to support growth in field sales and field science manufacturing and lab teams.

We have a very healthy balance sheet with total cash cash equivalents and short term investments of $246 million as of the end of the first quarter and no debt.

Main cautiously optimistic about the balance of 2022.

Taking into account the earlier than expected Q1 program related revenue. We continue to expect 2022, SPL milestone revenue of approximately $4 million.

Doug.

Thank you Ron.

Summary, we remain excited about the opportunity to lead the industry forward as the Premier cell engineering platform technology supporting the development of advanced cell based therapeutics for patients that may not otherwise have treatment options.

As always we want to take this opportunity to thank our team board suppliers investors and the amazing industry that we have the other observing we are very pleased to report strong first quarter results in may.

<unk> remains well positioned for growth and we are excited about the opportunities ahead.

We are now opening up the line for questions.

Thank you as a reminder to ask a question you will need to press star one on your telephone to withdraw your question. Please press the pound key please standby, while we compile the Q&A roster.

And our first question comes from Maxim <unk> from Cowen. Your line is now open.

Hi, This is Stephanie on for Matt.

Thanks for taking the questions and congrats on a great quarter.

If you look broadly at some of the more recent therapy. Your SCR partners have launched in the clinic and compare them to the therapy is appointed during the 2017 to 2020 timeframe.

This diversity of cell types of molecules that.

Are there any emerging trends to call out.

Good question, Stephanie and thanks for the question.

We are seeing quite a bit of movement since 2017.

First one of our first deals with CRISPR and we're seeing that continuing we're seeing multiple edits being done themselves, we're seeing companies move from.

T cells and some T cell subsets of the NK cells.

Lot of focus now on different sorts of gamma Delta T cells, and b cells. So the cell population the subsets or increasing.

Again, we're seeing more complex.

Which I just mentioned, we're seeing different tools being some of them have been around for quite some time like zinc finger nuclease, Susan transposon Transposase and so we're just seeing a lot of a lot of difference. We're also seeing moving some new indication areas principally it was.

The disease with CRISPR.

The sickle cell program, obviously, it's volatile August .

I will tell you stem cell also an allogeneic <unk>.

T cell treatments and we're also seeing for cancer and we're also seeing movements into autoimmune disease.

Some of our earlier stage customers are working in neuro degenerative disease and infectious disease. So we really think this whole field is just.

Beginning to explode as people become much more comfortable with.

These engineering tools.

Manufacturing methods.

Got it that's super helpful and also with the recent pullback in publicly traded bio manufacturing peers and likely some degree.

I'll back in private asset value.

Approach towards M&A changed at all are you leaning more towards tuck in complementary M&A or are you entertaining later more transformational deals.

Yes, I think well.

We're seeing some some movement in the private financing now.

That's reflected I think in a few months behind.

Decrease in financings.

Public market I think just to put an exclamation point, we're not seeing any reduction in demand for our products with our partners. So that's good.

We've always thought about it.

Our corporate.

Corporate development group.

How we do that.

I think we're open to all the all the different opportunities but.

I think if we do a deal if we do several deals are going to be again around mid.

Solving these engineering problems for our customers.

Got it that's great Super helpful and if I could squeeze in one more.

During the last call you highlighted that you are working with several beta customers on the expert pls to build application data can you provide some more detail on the progression of the beta launch or share any additional milestones under the <unk> product roadmap.

Well sure so we.

We released that product.

In the fourth quarter of this year.

Much of the focus at that point was really investing in the business of refining our strategic plan.

So we did the re leased in 2020.

2022, we think it is.

Very interesting marketplace and we think this is a highly disruptive technology in the large scale bio processing.

So we're working with these customers with the expert <unk> to build applications data to support support that movement.

We think the opportunity the opportunity is large it's going to take time to.

If you followed that opportunity with or without partners I think one of the areas where.

Very excited about is the.

The rapid production of monoclonal antibodies.

We think there's an immediate need for that in the marketplace.

I think it is a broad tam expansion opportunity for the company and we're doing quite a bit of this is small scale with the SPX today. So it's a bit of a natural progression for us to move.

Move as our companies our partners will move kind of from the mid scale, which is the SPX up to larger volumes.

Again.

Work has to be done.

In this area in the applications.

There is significant amount of work that's done pre and post electroporation engineering and process development.

One of the one of the areas that we've focused investments is to ensure that we have the ability to support our customers all the way through the process.

Got it thanks, so much for that color really appreciate it.

You bet. Thank you.

Thank you and our next question comes from Matt <unk> from William Blair. Your line is now open.

Hey, good afternoon.

So it's good to hear you loud and clear that no change in terms of demand.

Some customers, but just because it's been such a topic this earning season.

Often you have six to seven programs for customer and certainly would make sense that with lead assets there'll be no change, but just curious if you're seeing any relief.

Prioritization R&D prioritization of our pipelines from customers.

At all beyond sort of the maybe the leader second secondary assets.

Yes were not met.

We're really not seeing it at this point I mean, I think that.

Our focus is typically on the lead asset or number two on the calculator like you suggested and as far as we can see these companies are pulling back on those.

A lot of the work if they are pulling back that maybe you're pulling back on some pre.

Preclinical programs, but again, that's pretty it's usually pretty confidential with our partners that we would have much vision on that.

Their ability to see what's going on.

The other issue is that our business has grown quite a bit we had a very strong core business growth in the first quarter. So I think thats evidenced that things continue to be.

Moving forward in a pretty pretty pretty good rate.

Okay, and then just in terms of.

Hiring just curious what youre seeing out there and if you've been able to hire at paces that you're expecting I think.

On the Opex came in a little bit light of what we were we were thinking and just curious if that's any sort of efficiencies that you've built in or if you forget schedule at all on the hiring front as well.

Well I'll talk I'll, let Brian talk about the expense expense side of it but we have a very active.

In Europe , we expanded our human resources and team building.

We're also.

Being I think we're being very creative in terms of.

How people work in the company.

Over the last couple of years as many of you know it's been primarily virtual.

We're still seeing that as a primary way of bringing in great people.

And of course that has.

It has its own series of leadership and management challenges, but.

If you if you I think you find the right people you bring them in and provide them the tools they need to work.

Virtually.

I think I think we're going to do pretty well.

Brian would you like to talk at all about that.

Expense changes for the first two.

<unk>.

We're being successful hiring the people that we won it and I think that.

More competitive environment that we've seen.

In prior years that means where it might be a little bit behind what our plan was for ramping head count I don't think it is.

Material effect, but.

That competitive environment makes it take a little bit more time to find people we are.

Being successful hiring the people we want when we find a candidate more often than we've seen in the past. They have other offers in hand, but we're winning the people that we want so I think.

That's gone well.

Okay. Thanks last one Steve just about two months ago, and there was that competitive launch.

In this space.

Would just be curious over the last couple of months.

And perhaps heard feedback on that device or had a compared to your own technology does anything you would highlight.

What youre hearing or what you see is a key differentiator is which has been maintained even relative to this newer launch.

Yes so.

I'll say, a couple of things, Matt, but I'm, obviously, not going to give we're not going to give the playbook to the competition.

This is a product that <unk> been talking about in terms of official product for quite some time.

We're showing it up it's showing up in.

And the major meetings.

We're not seeing it playing any role in that.

Commercial or bake offs with customers. So we're not seeing the impact of that.

I think the thing that I think differentiates us as performance and flexibility.

Flexibility and scale and cgmp in.

Our focus on supporting our customers in the cell engineering space. So.

We welcome the competition and I think it just brings more more more.

More validation that this is a pretty interesting.

An area, that's going to have a lot of.

Lot of future benefits.

Anthony.

That makes sense. Thanks.

Thanks, Matt.

Thank you and our next question comes from Dan Arias from Stifel. Your line is now open.

And I think the Lumpiness is really around the milestones themselves as we have.

We have a number of those but we only have <unk> in the clinic I think at some point.

Larger number of vanda actually smooth that out none of that petition so they'll have a good day.

Get to that number.

I think there's still new to us and so we're seeing.

The ramp ups, obviously preclinical.

Preclinical into the clinic.

We're actually seeing quite a bit of non clinical work thats being going on with some of these products as well.

They don't come.

These I'll call all preclinical they called Nonpolitical, because theyre doing experimentation alongside the product thats been.

In clinical development so.

I think because of the relatively small number of programs.

Don't really have a good handle on what the man it looks like I think that's one of the reasons why we elected.

I'd like to start doing more in house manufacturers. So we have the flexibility to support these customers and obviously, we want more of that once we start moving into a commercial.

Commercial launch of one of these some of these products in the next couple of years.

Hopefully that answered your question I just had a couple of things.

And <unk>.

Youre right and I think some of it just it seems like it's naturally TBD on.

And what happens from here, maybe just on.

Different topic, new business development, and new account wins.

If I go back a year ago, when we were talking about the business at the time of the listing.

You guys had mentioned share within the clinical non viral delivery market that was like 40% or so and then there was another 15% that was in discussion as you put it which kind of felt like it had good conversion potential are you able to sort of update us on that chunk and how you've converted the business at <unk>.

Looked like it was it was coming your way call. It six to 12 months ago.

Yes, I cant I cant update it then quantitatively, but I can say qualitatively.

We're meeting all of our goals and we're winning that business and converting companies.

Even in the early stage sonar technology.

We're also we've invested.

<unk>.

We've invested a bit in and working in these translational medical centers.

Do you have the cgmp manufacturing suite within an academic setting.

We have begun to have a much more focused marketing effort and sales effort because at the end of the day, that's where many of these companies are slowing from rates are coming out of an academic lab and once they get into the clinic or the basketball into the clinic.

Someone's, forming a company around them and so if we can get that.

Our technology kind of embedded in that early enough.

We think thats going to just feed that spo.

STL pipeline for the future.

I think part of what you were trying to do this year or into this year was move upstream and downstream of where you are today in cell therapy or at least evaluating how you can do that because that's something we should keep an eye out for and if so would that be an organic effort or more on the inorganic side.

So we're building out our corporate development group, we've been spending a lot of time on strategy and where we want to play and I think.

Think we can win around again and then just with the first color around the solid generic step in step. Some of these are that would be organic where we've already identified some opportunities that we can kind of build into what we do.

We do believe that there is a real need in the marketplace for.

Product consistency product characterization.

Ways of being able to control.

Probably potency, which has become more and more of an issue.

And we think theres some analytical techniques that we may be looking.

Two.

Some more base again.

These opportunities will.

Most likely be in the manufacturing area not in the early stage discovery yard. So I think we think we've got a.

If you think about our company.

Quadrant were up in the high value.

Proprietary manufacturing enablement, we want to stay up in that sector.

We focus our team on that so there is a we think there's quite a bit of opportunity there technologies that may be being used in other.

Other ancillary industries looking bioprocess and the important over and there is also a number of <unk>.

Technologies and products were being developed by <unk>.

Smaller companies that have to make that decision.

Whether or not they want to make those investments in sales and marketing.

In today's environment, where capital isn't quite as sure.

A couple of markets are quite as robust as it was six or nine or 12 months ago I think.

There's going to be.

Boards are smaller companies going to be thinking hard about what they're going to make that investment to take that risk is execution.

Is it can be very difficult in that marketplace, and I think we've been able to achieve a certain level of success.

Yeah.

Okay helpful. Doug Thank you.

Thanks, Dan.

Thank you and our next question comes from Jacob Johnson from Stephens. Your line is now open.

Hi, This is Matt on for Jacob.

Quick ones from me on the drug development side can you talk about how much of the investments in R&D and sales and marketing.

Focused on this side of the business and how much do you think that's going to accelerate growth in the segment.

Yes, so some of the I think we're starting to see the benefits from some of the investments we've made over the last couple of years on a.

New processes processes that makes so we got a we continue to have a rather robust voice of customer and voice of customers is focused on Doug described that we've been talking about that because that market has been I think flat slightly slightly slightly growing and we wanted to really try to accelerate that a bit and I think we.

We're reasonably successful first shifts the first quarter of picking that up.

We will continue to do that and I think.

More we can do more we can focus.

Use cases, and drug discovery, which.

Which includes bio processing I think the better off we're going to be.

Able to build that business.

Alex is that launch initial launch when it happens we'll be proud of.

Over in the bio processing side not in cell therapy because.

Drug discovery would include.

Mid and large scale production of monoclonal antibodies, so I think youre going to see.

Hopefully quite a bit of growth in that sector as we continue to make investments in the drug discovery side.

Thanks.

Also last quarter you commented on.

So youre seeing interest outside the U S. How large of an opportunity or the European and Asia Pacific markets for you.

We've been in.

In Europe for quite some time and there is continues to be strong growth throughout the EU and the U K. So.

We're pretty basic and in sales.

Actually yes marketing operations there.

So we think I.

I think we are.

Making the right investments to be there.

We're seeing growth in cell therapy, certainly in China.

We are.

Figuring out the best way of approaching that.

It's a tough market to.

I think be successful and I don't think it's particularly tough market to get into but I think it's a tough market.

Maintain some level of sustainability and Thats, what were really focusing our attention on we've had some success I think we've got a lot of success.

In Japan, and some extent Korea.

So I think.

Continue to see us focusing.

Our interest in Asia and of course in Europe , and Europe is that one.

One of the backbones now.

Self therapy.

Alright, Thanks, Doug.

Sure.

Thank you.

Thank you and as a reminder, if you would like to ask a question. At this time you May Press Star then the number one key on your Touchtone telephone.

And our next question comes from Mark Massaro from BTG. Your line is now open.

Hey, guys. This is bill.

Thanks for taking the question.

Portfolio.

Any detail on does that what are your customers.

When I got pregnant and Orange.

ADC development.

Yes, so you'll need.

We do share and you've said that there's 16 partners at the end of last year 2021.

Of those 16 partners 95 programs are associated with those partners.

15% are in the clinic, and then I know theres been.

Quite a bit of speculation.

And views by some elements in terms of what products we're supporting.

We have.

We disclosed that we are reporting the CTX zero, one which is.

Obviously.

We are joined for sickle cell disease.

I think we've been a bit less forthright in some of the other programs because all of these deals as we mentioned there are confidential. So we believe.

Don.

Don't feel comfortable talking about those.

Got it.

Okay Gotcha.

Can you just touch on the STL.

PVC discussed right.

For FCS peer and just any update there and how are the conversations.

Yes. So the pipeline continues to be very robust system isn't larger we just say it's about the first quarter of this year, we continue to.

To guide to two I think three or four.

Talking about that specifically.

And we're building out.

As they move from kind of preclinical IND, enabling studies.

That's the turning point, where they will.

Want to have access to.

Our patents, our technology, our master file and those sorts of things.

Okay, great. Thanks for taking the question.

Sure.

Thank you and I'm showing no further questions at this time I would like to turn the conference back over to Doug to floor for closing remarks.

Great well. Thank you all for the questions and your interest and your support of Mac side its been indeed.

Amazing 2021 and a great start to 2022.

Despite the.

Obviously, the investor sentiment in the industry.

We're quite hopeful in.

Sure.

Very confident that we're going to see some really amazing clinical data coming out of our partners over the next.

Several quarters and that I think thats going to pretend well for.

The cell therapy industry in general in that setting in particular, so again. Thank you all for your support.

Look forward to any subsequent discussions we will have.

We will be meeting with investors.

And the next several days and if you have any particular.

Questions you can certainly contact us at IR at <unk> Dot com. Thank you Sean. Thank you Ron and thank you all for and Gigi. Thank you as the operator for this call.

Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating and you may now disconnect.

Q1 2022 MaxCyte Inc Earnings Call

Request a DemoDemo

MXCT

MaxCyte

Earnings