Q3 2023 MaxCyte Inc Earnings Call
Yeah.
Good day, and thank you for standing by and welcome to the Mack sites third quarter earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During this session you will need to press star one one on.
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I'd now like to introduce your host for today's call Shawn Managua's Senior director of innovation and business development. Please go ahead.
Well, thank you Justin and good afternoon, everyone. My name is Simon Argos I'm, the director of innovation and business development here Mac site. Thank you all participating in today's conference call on the call for Matt.
Our president and Chief Executive Officer, Douglas Swirsky, Chief Financial Officer earlier today, <unk> released financial results for the third quarter ended September 32023, 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.
Eating a federal securities laws.
Any statements contained in this call that relate to expectations or predictions of future events results or performance.
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.
The company has no obligation to publicly update any forward looking statements, but because of new information future events or otherwise and with that I'll turn the call over to Doug.
Sean Good afternoon, everyone and thank you for joining <unk> third quarter 2023 earnings call I.
I will begin with a discussion of our business and operational highlights during the quarter followed by a detailed financial review from Doug Swirsky DJ Our financial our Chief Financial Officer, We will then open the call for questions.
Max I reported $8 million in total revenue in the third quarter at the high end of our pre announced revenue range core revenue was $6 6 million also at the high end of our Korean else range.
Over the last months the business has performed in line with the expectations, we laid out on our call in October 4th and today, we are reiterating our revenue guidance for the full year of 2023.
The operating environment for our customers has largely remained unchanged from when we spoke in October.
Our primary focus remains on driving commercial execution to improve performance across our business and the commercial organization that Mac side is actively working to increase the expand sales opportunities for the balance of 2023 and into 2024.
I will briefly revisit some of the challenges we are facing that drove the pre announced reduction in our revenue guidance, which we pointed to in our call in October for us.
The primary driver of core business performance was softness in processing assemblies or <unk> sales. We continue to believe can be attributed to these three factors early stage customers in cell therapy, and drug discovery, conserving spend and reevaluating their pipeline portfolio and R&D initiatives custom.
Customers built up inventory in 2022, and due to the prioritization of programs and a reduction in spend the existing inventory has covered more of their needs.
And third clinical SPL partners delaying clinical timelines due to challenges in obtaining additional financing because their clinic cooperations.
Another factor in the weakness of our core business performance was early stage customers, becoming incrementally more conservative on capital expenditures as the year has progressed, which has impacted our instrument placements.
So we have seen the macroeconomic operating environment play out unfavorably. This year, we continue to see cell therapy industry trends that favor of Mac Sykes platform the.
The industry continues to move toward non viral cell engineering approaches that include multiple pathway engineering steps across many diseases.
Specifically, our partners continued to expand their cell therapy indications into new unmet needs, including autoimmune disease, providing us with the opportunity to support our partners as.
The scale up and scale out their manufacturing process.
Furthermore, developers are increasing the complexity of their cell therapy product with multiple edits on the cell, which positions <unk> well given the platforms high cell engineering performance occur.
Across a wide variety of gene editing and gene edited modalities.
Developers are also looking into multiple doses and or increased dosing regiments for complex indications, which further supports the market need for engineered large sell volumes.
Our customers and partners can leverage our scientific technical and regulatory support and capabilities to optimize the clinical manufacturing process for the growing set of cell therapy applications.
This year, we signed five SPL partnerships, which highlights the value that our platform brings to our customers.
We continue to see a healthy pipeline of potential partners.
All in all we are encouraged by the non viral engineered cell therapy trends. In addition to the potential for our partners to make an impact as they progress their programs through the clinic and reach commercialization.
We remain highly engaged with our customers both current and perspective and are excited by the opportunity to expand our SPL partnership portfolio and grow our revenue.
In the third quarter, we reported SPL program related revenues of $1 4 million.
And remain confident that we will at least meet our guidance of approximately $6 million this year.
We believe this high value revenue line will continue to be meaningful in the coming years as several waves of different therapies, we support potentially come to market.
We are excited by partners progress and look forward to the potential impact of therapies that utilize Mac Sykes platform.
Looking ahead, there is substantial clinical milestone in commercial revenue opportunity for Mac sites as our partners move towards late stage clinical development and commercialization.
And what would be the first commercially approved product enabled by our platform CRISPR vertex extra cell is nearing the producer date of December eight 2023.
In March 30, <unk> 2024 for sickle cell and beta thalassemia, respectively.
Just last week on October 31.
Felt an AD comm meeting to discuss the treatment.
Which highlights the therapeutic benefit of extra sell any important medical advance for the field and for patients.
As a reminder, we believe that all necessary investments in manufacturing and regulatory quality have been made on our end to support extra sales commercial launch well.
We look forward to the potential FDA approval of the first non viral engineered cell therapy product.
Validating validating Mac Sykes platform.
And which would also resulted in a significant milestone payment to us under our partnership with vertex.
We continue to be excited about the prospects of the <unk> platform and our expansion into the bio processing market.
To provide some context, we are looking to help our customers improve workflow efficiency and accelerate time for the preclinical and early stage manufacturer of monoclonal antibodies recombinant proteins and vaccines.
<unk> has a unique capability to enable rapid production of transit Lee expressed proteins at larger scale for preclinical and early clinical use and a much more efficient time horizon than the standard practice.
As a result customers will be able to evaluate more preclinical leads at an appropriate scale and derived conclusions from late stage preclinical research activities sooner than they normally would.
Enabling them to proceed with development in a much faster time frame.
The efficiency the BLS brings to the process can potentially accelerate important decisions on late stage preclinical development to enable developers to prioritize.
Their clinical investments to the most promising assets.
We believe that the current market opportunity for the Box's across approximately 3000 preclinical assets and <unk>.
Monoclonal antibody recombinant protein and vaccine development and we are optimistic about our opportunity in the coming years.
To lead this effort, we recently appointed Ali slowly man as odd as executive Vice President of Bio processing has been an important addition to the leadership team at Max site with almost 20 years of experience and bio manufacturing bio processing and bio analysis, including serving as executive Vice President.
For separation and purification.
Tokyo Biosciences prior to joining Mack site.
Firmly believe that he will guide the future of macro sites by our processing business, beginning with the growth of there'll be less platform.
For the remainder of 2023 and in the 2024, we are focused on supporting our customers and partners through targeted investments.
Already made substantial progress in enhancing our infrastructure and scientific and manufacturing capabilities to support customers pursuing complex cell therapies in the clinic as well as when they reach commercialization.
Overtime, we believe the investments, we're making today will drive substantial incremental value as we support multiple partners at various stages of development and commercial activity.
In closing, we continue to navigate the current operating environment with tax and flexibility matter.
<unk> remains committed to supporting our current SPL partners in their program development and further expanding our portfolio of partnerships.
With that I will now turn the call over to D. J to discuss our financial results D. J.
Thanks, Doug Hello, everyone total revenue in the third quarter of 2023 was $8 million compared to $10 6 million in the third quarter 2022, representing a 25% decline in.
In the third quarter, we reported core revenue of $6 6 million compared to $9 $9 million in the comparable prior year quarter, representing a 33% decline. This includes revenue from cell therapy customers up $4 7 million in revenue from drug discovery customers of $1 9 million, which declined 40% and 5% year over year respect.
<unk>.
The decline in revenues was primarily the result of softer sales as well as weaker instrument sales primarily in cell therapy due to the challenging funding environment revs.
Revenue from instrument sales were down 44% in the third quarter compared to the previous year and revenue from leased instruments declined 11% driven by the challenging operating environment.
Our customers continue to face.
We recognized $1 4 million of SPL program related revenue in the third quarter of 2023 as expected due to our partners' continued progress through the clinic compared to zero point $8 million of SPL program related revenue in the third quarter of 2022.
Moving down the P&L gross margin was 90% in the third quarter of 2023 compared to 87% in the third quarter of the prior year driven by our mix between core and SPL program related revenue.
Operating expenses for third quarter of 2023, or $21 2 million compared to $17 million in the third quarter of 2022.
The overall increase in operating expenses was primarily driven by R&D sales and marketing and manufacturing expenses.
The company continues to strategically invest in commercial sales and marketing operations innovative product development and field application scientists automated manufacturing capabilities as well as business and corporate development to drive long term growth.
We finished the third quarter with combined total cash cash equivalents and investments of $208 7 million and of course no debt.
Moving to our full year 2023 guidance, we updated our outlook on our third quarter preliminary results conference call on October four and we are reiterating that outlook. Today is we expect total revenue for 2023 to be approximately $34 million to $36 million.
Core revenue is expected to be approximately $28 million to $30 million for the year and SPL program related revenue expectations remain unchanged from our previous guidance at approximately 6 million for the year.
Our updated guidance incorporates cautiousness around the challenging funding environment and customer purchasing patterns for the remainder of 2023.
As we have discussed previously the timing of partnership revenue is dependent upon our customers clinical and regulatory progress is fundamentally more difficult to predict and our core revenues, which clearly has also been difficult to forecast this year due to the challenging operating environment discussed earlier.
Finally, <unk> remains in a strong financial position and continues to expect to end 2023, with approximately $200 million in cash cash equivalents and investments and no debt on our balance sheet.
Cash burn for 2023 is approximately $27 million in line with our 2022 cash burn of approximately $28 million. We have prudently managed our expenses and burn in 2023 and executed disciplined cost management in order to position the company to achieve our long term goals.
I would like to close by reiterating that we remain confident in our 2023 revenue outlook and we believe that our modest cash burn and balance sheet will support our future plans for long term growth now.
Now I'll turn the call back over to Doug.
Thank you P J.
Overall, despite the challenging operating environment. This year, we firmly believe in the long term outlook for Mac site. We're excited about the potential of our partnerships.
Progress their assets through the clinic and we remain committed to expanding our partnership portfolio to support the development of advanced cell based therapeutics, and the growing cell and gene therapy industry.
As always we thank our <unk> team as well as our board suppliers investors partners patients and the great industry that we have the honor of serving with that I will turn the call back over to Justin for the Q&A Justin.
Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced so withdraw your question. Please press star one again.
Please standby, while we compile the Q&A roster.
One moment please.
And one moment please.
And our first question comes from Dan areas. Your line is now open.
Hey, guys. Thanks for the questions here, Doug maybe just a couple on the instrumentation side, specifically on cell therapy do you expect to lease versus solid dynamic to change at all in light of the things that are going on in the industry at least has become a part of a bigger part of that mix.
And then on the <unk> system I. Appreciate your comments there anything quantitative that you might be able to add.
On the launch and then along those lines.
When we think about usage there I'm curious whether you think some of this program prioritization that taking place across the industry.
Could impact the adoption curve just in a sense that you know to your point, it's a good tool for evaluating pre clinic.
Nickel assets some of those are being back burner, right now or maybe a less of a need for that kind of horsepower you see that as a likely outcome or not really.
Thanks.
Two questions there.
I'm sorry.
Okay. Let me, let me talk about let me take two cuts at this and see if I answer all your questions.
On the kind of the business model instrument side, I mean, I made a comment about being tactful with our partners and I think it's it's really important that we understand the situation. They're in we look at our business model and we're going to we're going to make changes as we feel are appropriate for helping our partners.
We're seeing.
We're seeing the rationalization of these pipelines and I do foresee us real well.
<unk>.
So our approach for the business model, although I don't think theyre going to be major approaches will be around around the around the edges and again.
Thinking through.
Kind of the new use cases for the for our technology.
Moving into autoimmune disease, where you have large patient populations. So I think youre seeing the cell therapy industry moving from autologous blood blood center therapies, moving into solid tumors and autoimmune words, what's going to open up to serve certain population. So we're excited about that and that of course is going to have an impact on our.
Business model.
On the <unk> quantitatively, we put a slide in the deck that laid out the difference between what we believe our system and being able to produce a protein and a couple of months versus the traditional way, which could be six months plus.
I think that when theres more rationalization, I think theres going to be a lot more attention placed on on speed to market speed to decisions and I think that's that's exactly where we're focusing our attention on.
It's whenever we can do to reduce the debt.
The early stage preclinical development timeline for this.
These partners that could be big pharma that could be.
A relatively early stage ADC company, they're all looking to do the same thing and that's to get get better products into the market faster and if we can.
Cut six for six months a year off of that timeframe. We think that's pretty valuable. So we're excited we think there'll be elections coming out at the right time.
To address some of the problems I think.
We're seeing in the industry writ large.
Okay. I appreciate you picking through those there maybe.
Maybe just one quick follow up to your point, we are closing in on this extra trial decision here, obviously youll see how it ends up but if we were to assume approval I'm just curious about your expectation for a ramp in instrument utilization and consumables consumption is scale, presumably takes place their scale up presumably takes place there.
Well, we obviously cant give you any any guidance in terms of what 'twenty four it looks like this would be a 24 event.
That said, we have been investing and ensuring that we've got.
Instrumentation support.
From from vertex aside and CRISPR side in terms of manufacturing.
Ready to scale up I think we just saw an announcement they made I guess yesterday, a press release about getting.
Breakthrough therapeutic designation in Saudi Arabia, so it'll be interesting to see how this business develops and expands but be assured that we are prepared.
Fully to support them and execute against whatever plan.
They believe as it makes the most sense from them commercially.
Okay. Thank you Doug.
Thank you.
Thank you one moment please.
Our next question comes from Jacob Johnson with Stephens, Inc.
Hey, good afternoon. This is actually Hanna on for Jacob.
You talked about expanding your geographic reach is this still a priority in this environment.
That's a good question I think.
The world's changing of course.
We're I think we're all.
All focused on how we can navigate the China situation I think we are.
Frankly, I think this is more of an organic expansion.
Expansion.
The science the science around cell therapy is expanding well beyond the U S and Europe.
Moving into eastern Europe is going to be in the South American moving certainly the APAC.
And so we're following we're following where that where those hubs of hubs of.
Activity are.
And for us to enter into that new geography, it could be as simple as us, bringing a field application scientists and a salesperson into that account.
It could be.
His extensive as bringing in a new distributor or.
Building out more on on.
On land field applications people, so I think.
Our interest is always a follow the science always follow where the commercial cell therapy field is heading.
And then we will make decision what makes the most sense from an investment perspective for us.
Thanks, and then you are tracking ahead of your usual three to four SPL additions per year with five this year.
Any are you expecting to add total in 2023 and do you expect the annual rate of additions.
Continue to outpace three to four in the future.
Well talking about 24, one when we give guidance.
Talking about that.
I think we're pretty comfortable with the five we did this year.
Really I don't think we are in a position to.
Talking about anything additional in 2023.
Great. Thanks, I'll leave it there.
Thank you.
Thank you one moment please.
Our next question comes from the line of Matt <unk> with William Blair.
Good afternoon.
Earlier this year.
Seemed like around one of <unk>.
<unk> restructuring pipeline prior explanation and then it seems that over the last couple of months, we can maybe get around too.
A number of your SPL partners have.
<unk> been impacted by that in terms of rest of restructuring.
Just would be curious to hear your perspective.
How much potentially more there is to go just in Iraq, your interaction with SPL partners or <unk>.
Core revenue Corp customers.
How much that really cut down programs to true high priority assets, how much do.
Downer teams.
From a size perspective.
Just ask maybe a different way to gauge what inning of starting the drawdown in the industry right.
And I'm trying to.
What is the question that I'm trying to understand I agree with you that we're in a situation right now where we've got companies that are in partners, who are scaling back.
<unk> seen a couple of them just most recently Lyall for instance on it at another one.
So we're keeping pace with those customers with being close to those what were seeing is that when they are the focus and the rationalization is being drawn toward.
Our products that we're currently involved with them. So that's a good sign.
I think overall it's.
It's a strong point for Mac site that we're working on those lead assets.
I think it's important.
Very difficult for us to try to predict where the next.
Situation is green companies won't share that with us obviously there.
They're going to announce them when they announced it and we're going to we're going to we're going to.
React and hopefully manage with well with them as they make those decisions.
I'm not sure answer your question those or is there something more specific that you were looking for.
Just wanted to be responsive to you Matt.
No I guess it was maybe.
Unintentionally bank, but I think you addressed qualitatively what I was cut off so yes, the second one would be.
You referenced.
I think dan's question around.
Sales personnel and instruments.
And to make changes as appropriate to help partners.
So that may be an internal change in response to the macro environment have you noticed or are you aware of any sort of external changes yet.
Competitive behavior around.
Getting away instruments are cutting prices.
Any price pressure or additional competition.
Got it.
Changing macro environment.
We want to do one indication as our gross margins at 90% gross margins in the quarter and I think that.
Attributed to our ability to maintain pricing in the marketplace.
So just give me those kind of data points right now, we're feeling pretty comfortable with.
With where we are in terms of competition, we're not really seeing anything in.
Kind of in our in our area, we have mentioned <unk> in the past week.
We've seen loans would come in and out.
A lot of companies that are trying to get into the space kind of newer newer companies that are.
Try and trying to figure out how they can they can take us on.
I think thats, just a healthy environment.
To that point.
Points to the importance of non viral cell engineering in the future.
I would I would predict that after xsl gets approved there will even be more people interested in trying to figure out how big that market is and how they can participate.
We're in a great position with our partners and our technology and we're continuing to be the go to Premier company in this space.
Okay. The last one.
On the <unk>.
Earlier this year on the tour its credit call yes.
You mentioned that there was it was revenue generated in 2002 that that would grow in 2023.
We're now a little over a year and two the launch so I think it's just sort of an early access focused launch but.
Is there anything you can share with us.
How much would be Alex.
Moving to the financial model at this point or is that something that you may be able to start sharing that.
Sure.
I think we'll be much more comfortable sharing it next year at least.
On board he's doing a great job really.
Increasing the visibility of that.
The offering to high profile.
Clients and really just talking about how disruptive this technology is and how important is going to be for for early stage development.
These programs. So I think we'll be able to provide a much more fulsome.
Few of the strategy.
I'll provide some expectations when we do so in 'twenty four.
Alright, thank you.
Thank you one moment please.
And our next question comes from Steven Mah with TD Cowen.
Great. Thanks for the questions.
Maybe a follow up to Hanna questions on <unk>.
SPL ads, maybe I'll ask it a different way.
Listen.
With regards to the funnel of your SPL leads.
It has the potential success of excess al has it led to more business development in bounds or traction with potential partners.
I think the pipeline itself is continues to be really really strong and great. We're having excellent discussions with with folks some of them fall into the same count that we've been talking about where they have there.
They're early stage development companies and they really don't have the financial support to move into the clinic and so thats that can pause our Sps, although I think it's fair to say that we've got other companies that were working with that may not have that same situation and theyre moving moving forward.
I think we will.
My sense is that one extra sale gets approved I mean, I think you heard in the you heard it in the.
We heard it we did we heard it in the.
Meeting that there was very little concerned about the manufacturing of <unk>.
Product safety profile looks great.
And the clinical evidence was extraordinarily strong so.
Our sense is that once that product gets approved I think thats going to check a big box in the industry.
And theyre going to be looking upon us as the company, that's going to able to help accelerate and move those theres non viral cell therapy assets into the clinic and through the clinic and again as we've mentioned we continue to see an expansion of of cell therapies at a new indication areas like autoimmune for instance, we're seeing a lot of that.
Last few months.
And that will required no doubt.
More volume of sales to be delivered to the patients on a longer period more of a chronic therapy.
That fits well with the scale and the efficiency of our system.
Great Thanks for that color.
One more question.
When you brought the guide down in October you mentioned inventory destocking of process assemblies.
Some of the <unk> production companies recently sat on earnings.
We're seeing a bottom with regards to destocking headwinds.
Could you comment on what Youre seeing out there.
I mean, if you have any customer visibility that suggests maybe there could be an uptick.
As activity picks up.
This excess inventory gets used.
Thank you.
Thanks for the questions. This D J so.
Part of the challenge in answering that is we've got seven weeks left in the year, we don't want to start providing guidance for 2024 are talking about how we see that you are starting off well.
What we can say is that we've taken a very conservative view on sales just because.
We wanted to make sure that we would be comfortably provided this revised guidance and immediate and possibly exceed it.
We're very close to our customers. We've got a good sense that we've got a good number here for you and a big part of that is <unk>. So if you look at the breakdown of why we're confident with the revised guidance.
Very good visibility into the lease revenue, we've got seven weeks left in the year to execute against it.
A good number of opportunities of which only a fraction would need to close in order for us to be comfortable with our number and of course on the Ta side as we mentioned on the October call. We've really brought that down we haven't factored into any recovery, we haven't factored in any of the seasonality that we've seen where.
You do get some.
<unk> purchases later in the year were just basically going off the daily run rate that we saw in Q3, which was depressed.
Give us some comfort but to fully answer your question I think we need to delve into what happened seven weeks from now and entering 2024, and we're just not in a position to provide too much information there.
Okay fair enough thanks for the questions.
Thank you.
I am showing no further questions I will now hand, the call back over to Doug Doerfler for any closing remarks.
Thank you Justin and thanks, everyone for joining us today and your questions. We look forward to providing an update on the fourth quarter call. So thank you all very much have a great Thanksgiving. Thank you.
Ladies and gentlemen, thank you for participating. This concludes today's program you may now disconnect.
Goodbye.
Okay.
[music].
Yes.