Full Year 2023 MaxCyte Inc Earnings Call
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Good day, and thank you for standing by which in the fourth quarter earnings Conference call. At this time, all participants are no listen only mode. After the speaker's presentation there'll be a question and answer session.
Question Gerry session. Please press star one on your telephone you didn't hear it automated message advising you of Hermes race towards a question. Please press star one again.
Please be advised that this conference is being recorded I would now.
I'll hand, the conference over to your first speaker today Sean.
Alright.
Senior director of innovation and.
Please go ahead.
Well, thank you and good afternoon, everyone. My name is sharpened Argos and Im the senior director of innovation and business development you Air Max side. Thank you all for participating in today's conference call on the call from that site, we have <unk>, President and Chief Executive Officer, and demonstrates Schwartz Chief financial <unk>.
Officer earlier today <unk> released financial results for the fourth quarter and full year ended December 31, 2023, a copy of the press release is available on the company's website.
Before we begin I need to read the following statement statements or comments made during this call may be forward looking statements within the meaning of federal securities laws.
Statements other than statements of historical facts provided on this call, including statements regarding our future results of operations or financial condition business strategy and plans and objectives of management for future operations are forward looking statements. These statements about us or our industry involves substantial known and unknown risks uncertainties.
<unk> and assumptions, including those that are discussed in detail in our annual report on Form 10-K and elsewhere in our SEC filings that may cause our actual results performance or achievements to be materially different than any other future results performance or achievements expressed or implied by such statements.
These statements are inherently uncertain and investors are cautioned not to unduly rely on these statements. The company undertakes no obligation to publicly update any forward looking statements, whether because of new information future events or otherwise, except as required by law and with that I'll turn the call over to Mohan.
Thank you Sean good afternoon, everyone and thank you for joining <unk> fourth quarter and full year 2023 earnings call.
As you know I was appointed to the role of President and CEO of Max site effective as of January one of this year. It is an honor to lead <unk> through its next phase of growth after working closely with the executive team and board over the last seven years I.
I would like to thank our founder Doug Dover for his contributions to <unk> over the past 25 years.
In my first couple of months as Max Ico, we have continued to execute our core mission and strategy to expand our strategic platform licenses or SPL portfolio and support the next generation of cell based therapies with our expert orchestration platform.
Our top priority remains supporting our customer success throughout the lifecycle of research clinical development and commercial launch.
I believe we have substantial opportunities ahead of us in the cell therapy industry and I am committed to leading our organization with the high level of focus along with disciplined expense management and capital deployment.
2023 was a challenging but exciting year from X sight, we faced a difficult operating environment, along with many others in the industry as our customer base saw conservatism in capital spending lower than expected activity levels and prioritization of programs. Despite these challenges 2023 was a transformative year for Mac site, our technology support the approval of cash JV.
First non viral cell therapy product approved by the FDA developed by <unk> clients, CRISPR therapeutics and vertex pharmaceuticals.
<unk> extra platform is not the only electrification platform test supported a non viral therapy through FDA approval and is now the only electrification platform supporting commercial therapy we.
We believe this is just the first of many potential approvals by <unk> clients over the coming years, and we are working hard to remain the platform of choice when it comes to electric operation.
Mac, sorry reported $41 $3 million of total revenue for the full year of 2023 at the high end of the revenue range, we pre announced in January 2024.
Core business revenue was $29 8 million also at the high end of our pre announced range. We were pleased to see our business began to stabilize in the fourth quarter and with the strong execution of our team amid a challenging environment.
In 2023, we grew our instrument installed base to 683 as compared to an installed base of 616 at the end of 2022.
The instrument installed base expand this year, both instrument sales NPA sales declining 2023, compared to 2022 across cell therapy and drug discovery customers. As I mentioned, we are operating in a challenging environment, where early stage customers in cell therapy, and drug discovery have limited access to capital and some clinical customers have adjusted their spending and extend.
Project timelines this environment remained largely unchanged in the fourth quarter, though we are optimistic that the financing market for the cell therapy industry will improve overtime.
Non viral cell therapy market trends continue to bode well for Mac Sykes platform customers at various stages of development are pursuing different approaches and indications.
<unk> continued to move towards non viral cell engineered approaches that encompass multiple steps and complexity of edits innovation and complexity of cell therapy development drive demand for Mexican sites Electroporation technology.
While we are cautiously optimistic about near term market factors impacting our customers and non viral cell therapy opportunity and regulatory backdrop for cell therapies continues to improve.
Outside of core business, we generated $11 $5 million of SPL program related revenue for the full year of 2023, and $8 5 million during the fourth quarter.
Both our full year 2023, and fourth quarter of 2023 SPL program related revenue came in at the high end of our pre announced range driven primarily by BLA approval milestones from our clients in the fourth quarter of 2023 as a reminder, SPL program related revenue includes development and approval milestone payments as well as sales based payments and <unk>.
Royalties from commercial clients occur.
Across our 26 Spl's today, there are many nuances to the SPL contracts and the revenues associated with commercial products and Barry.
Generally we received what percent of product sales through either a royalty or sales based payments. In addition to receiving revenue from lease instruments NPA sales SPL customers, which is included in core revenue.
As stated by protecting their fourth quarter of 2023 earnings call. The commercial launch of cash Chevy has commenced.
As patients are screened and identified for treatment. They will enter the program at authorized treatment centers in which they will undergo pretreatment cell collection manufacturing and finally treatment infusion.
<unk> will only recognize revenue once the patient has been infused which can take a number of months the time, a patient enrollment therapy, our visibility to the timing of patient dosing is quite limited and we will rely on vertex provide us in the market with updates on patient enrollment status as they come.
At this time, we do not have enough information on the timing of patient dosing to forecast expected commercial royalty revenue from the sales cash abbvie for 2024.
At this time, we do not have enough information on the timing of patient dosing to forecast expected commercial royalty revenue from the sales cash abbvie for 2024.
As we move throughout the course of the year, we hope to have better insight into the patient journey and dosing timeline.
We remain very optimistic about the long term prospect for cash Chevy and look forward to many patients receiving the treatment is.
Just to come back.
As I mentioned earlier, we continue to lay the groundwork for long term growth and X sight, just as we did several years ago with CRISPR to support what is now cash JV in 2023, we signed five new SPL clients, bringing the total number of <unk> to 'twenty three at December 31st 2020.
These three SPL represent over 160 programs.
Our program development, along with one commercial program.
Total pre commercial revenue potential for ESCO programs now greater than 195 billion up from $155 billion at the end of 2022, an increase of over $400 million in potential milestone payments.
As you probably already seen thus far in 2024, we have signed three additional SPL is bringing our total assigned spl's to 26 as of today.
We believe the breath of our expanding <unk> portfolio continues to demonstrate the unique and valuable technology at Max site use across cell types and editing tools by way of example, Lion TCR one of our SPL customers, which we announced this year is a Singapore based clinical stage Biotechnology company focused on development of T cell receptor therapies are solid.
Tumors are life threatening viral infections or.
<unk> has allowed us to expand our global presence and to Asia to support the development of new therapies for patients with solid tumors.
We also signed <unk> imaging, a clinical stage immuno oncology company developing a range of nutrients that seek to activate the immune system in cancer patients to identify and eradicate tumors. Our platform technology was officially transferred from precision Biosciences when global rights for as yourselves are obtained by imaging in August of last year, and we look forward to supporting them.
Regina as they move towards a potential phase II registrational trial for <unk> cell cancer, and Allogeneic car T. Kennedy.
Our most recent sign SPL client is with Legion, a clinical stage biotechnology company developing allogeneic off the shelf cell therapies to treat a broad range of hematological and solid tumor malignancies.
And <unk> car T <unk> acid is coming in a global phase one two clinical trial for the treatment of relapsed or refractory T cell acute lymphoblastic leukemia, lymphoblast thick lymphoma in adolescent and adult patients and has received orphan drug fast track and rare pediatric disease designation from the FDA for the treatment of such.
Conditions.
We are encouraged by these recent npls and are excited to witness the clinical progress that we believe our clients may make in the upcoming months and years with the support of our platform.
The SPL agreements that were signed earlier this year have been many months or even years in the making our team worked very hard with customers to understand and optimize their research and development processes and objectives.
This relationship also starts in research, where our customers utilize our expert ATX and then seamlessly scaled to the gtx prior to entering the clinic.
As companies make progress towards entering clinical development.
Dynamic discussion around the SPL relationship that takes quarters to negotiate and arrive at the final agreement.
Following the success of our ability to enter into new Sps over the past couple of years, we are continuing to build and expand SPL pipeline as time progresses, we believe that having the only commercial non viral therapy, which utilize our platform to engineer the cells will generate additional interest in finalizing a number of new <unk> bill agreements, which have been in discussion for some time and that.
New discussions can begin to support continued SPL signings in the years to come.
We believe that there is opportunity for substantial clinical milestone in commercial revenue as our SPL clients' programs move towards late stage clinical development and commercialization as.
As we look ahead in 2024, we have a robust SPL pipeline, which we will continue to execute on.
Over the past few years <unk> has strategically invested to support the growth opportunity ahead of us, notably we have made investments to ensure that we have the strongest manufacturing regulatory and quality capabilities to support our customers throughout development and commercialization. We have added to our teams across the organization in order to scale the business and we have made targeted.
Product development enhancements, including development of the <unk>.
We have developed a disruptive technology in <unk> that will enable rapid production of <unk> Express proteins at large scale for preclinical and early clinical use that we believe will offer a much more efficient manner for research. We believe the commercial opportunity to buy a processing market is large but will take some time to develop.
Following feedback from industry and a more detailed evaluation of the opportunity for the <unk>. We are taking a more measured approach to developing applications and understanding customer needs before launching a robust commercial offering for the <unk>, we remain committed to taking the time necessary to deliver the most efficient platform for our customers starting with the evaluation of our beta customer feedback.
Throughout 2024.
In 2024 will be measured in our investments and focus on areas that we believe will deliver significant returns to our customers and maximizing the long term.
Key areas of moderate investment may include improvements to our best in class electrification systems building additional application Knowhow building capabilities to work with customers earlier in the continuum of development and selling into new applications for electroporation.
In summary, we have entered 2024, well positioned to deliver on our financial and strategic goals. This year Max I will continue to navigate the operating environment and methodically recognizing the challenges we experienced in 2023 work felt industry wide and staying vigilant of changing dynamics in our industry I firmly believe in the long term opportunity for Mac site as the prime.
Enabler of non viral cell therapies with that I will now turn the call over to Doug to discuss our financial results Doug.
Total revenue for the full year was $41 3 million compared to $44 3 million in 2022, representing a 7% decline.
Total revenue in the fourth quarter of 2003 was $15 7 million compared to $12 4 million in the fourth quarter of 2022, representing an increase of 26%.
In the fourth quarter, we reported core revenue of $7 2 million compared to $10 $6 million in the comparable prior year quarter, representing a 32% decline. This includes revenue from cell therapy customers of $5 5 million and revenue from drug discovery customers of $1 6 million, which declined 27% and 46%.
<unk> year over year, respectively.
Within core revenue instrument revenue was $2 3 million compared to $3 7 million in the fourth quarter of 2022 lease revenue was $2 4 million compared to $2 8 million in the fourth quarter of 2022 and processing Assembly for PAA revenue was $2 2 million compared to $3 7 million in the fourth quarter of 2020.
Yes.
We saw sequential improvement in instrument revenue and stabilization in <unk> revenue compared to the third quarter of 2023, the year over year declines in revenue were due to the challenging market for our customers, which resulted in conservatism of spend and pipeline prioritization.
For the full year of 2023, we reported core revenue of $29 8 million compared to $39 6 million in 2022, representing a 25% decline. This includes revenue from cell therapy customers declining 25% year over year and drug discovery revenue declining 23% year over year.
Within our core revenue instrument revenue was $8 3 million compared to $11 7 million in 2022.
<unk> revenue totaled $10 3 million compared to $10 9 million in 2022, and <unk> revenue totaled $10 3 million compared to $16 million in 2022.
Of note, 48% of our core business revenue was derived from SPL clients in 2023, which compares to 42% and 40% in 2022 and 2021, respectively.
The increase in revenue from SPL as a percentage of total core revenue highlights to the challenges that early stage preclinical customer space. During the course of 2023, which we have spoken to you throughout the year.
While our SPL clients, we're not immune to funding constraints and pipeline prioritization the magnitude of the decrease in core revenue from SPL clients was less substantial compared to our earlier stage customers. We recognized $8 5 million of SPL program related revenue in the fourth quarter of 2023 compared to $1 $9 million of that.
The old program related revenue in the fourth quarter of 2022.
The full year, we recognized $11 5 million in milestone revenues as compared to $4 6 million in 2022.
We exceeded our initial milestone guidance for 2023, which was a risk adjusted forecast for the year the approval milestones from our SPL client in multiple geographies drove the upside to our initial guidance.
Moving down the P&L gross margin was 90% in the fourth quarter of 2023 compared to 88% in the fourth quarter of the prior year driven by our mix between core and STL program related revenue.
Total operating expenses for the fourth quarter of 2023, or $22 2 million compared to $17 6 million in the fourth quarter of 2022.
The overall increase in operating expenses was primarily driven by compensation expenses related to headcount professional fees and lab in new product development expenses.
Moving forward the company plans to continue to make strategic targeted investments, while moderating our rate of Opex growth.
In 2024, we will be disciplined in our spending evaluating investments in business and corporate development commercial sales and marketing operations and build application scientists to drive long term growth.
We finished the fourth quarter with combined total cash cash equivalents and investments of $211 million and no debt.
Moving to our full year 2024 guidance, we provided initial guidance last week and we are reiterating that outlook today, we expect core revenue of flat to 5% growth as compared to 2023.
<unk> of our core business are anchored in lease revenue clinical and commercial instruments, new instrument placements and the sale of processing assemblies consumables used by our customers.
We are confident in our ability to grow the core business in 2024.
Not forecasting any substantial positive or negative change in the macroeconomic environment for our customers.
I will note that the capital raising activity by the industry and some of our customers has started off better than we expected time will tell whether that capital finds its way to R&D programs that will drive demand for <unk> products, but we are keeping an open ear to customers and the potential for updated plans as market conditions evolve.
We adapted to the difficult environment, we saw in 2023 and are confident in our ability to execute through a stabilizing environment in 2024.
SPL program related revenue is expected to be approximately $3 million in 2024.
This is a risk adjusted forecast that is achievable under a variety of potential outcomes across our SPL and their planned clinical progress at.
At the end of 2023, we recognized milestone revenue from one of our clients, which we had initially anticipated in 2024 are.
Our expectations for SPL program related revenue for 2024 reflect the timing of this milestone and the resulting difficult year over year comparison.
While we do not have visibility on the timing of cash Chevy patient infusions, we expect to begin to recognize royalty revenue from vertex later in the year.
However, we have not included royalty revenue from Hess JV in our initial 2024 outlook.
Finally, <unk> remains in a strong financial position and continues to expect to end 2024, with approximately $175 million in cash cash equivalents and investments and no debt on our balance sheet.
I would like to close by stating that we are confident in our 2020 for revenue outlook and believe that a modest cash burn and strong balance sheet will serve to support <unk> long term growth.
Now I'll turn the call back over to Margaret.
Thank you Doug overall, we believe our accomplishments in 2023 and further validate the importance of our expert electrification platform in the long term growth potential from X sight, we look forward to supporting our customers through their development stages and commercial activities to deliver new cell based therapies to patients in need maxa remains excited about the potential of our clients' assets as they progress.
Through clinical development, and we are committed to expanding our <unk> portfolio in 2024 and beyond I'd like to thank the <unk> team for their dedicated work, which has helped to solidify <unk> position as the premier enabler of non viral cell therapies with that I will turn the call back over to the operator for the Q&A operator.
Thank you and as a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please limit yourself to one question and one follow up please standby we compile the Q&A roster.
One moment for your first question.
Our first question comes from the line of Jacob Johnson from Stephens. Your line is open.
Hey, good afternoon, everybody thanks for taking the questions.
Maybe Doug just just first on the guidance I guess two questions one it doesn't sound like.
Like Youre, assuming any improvement in the end market can you just talk about <unk>.
Any guidance on kind of the recent.
Funding, maybe more positivity from your customer base and two I understand we're not including cash Chevy royalty in the program revenues if any of that contemplated in that.
Annie <unk>.
Or are any PAA sales contemplated in the core revenue guidance.
Great. Thank you Jacob so I'll take those questions. One at a time first with respect to the guidance that we're providing and how how we might be feeling about the macro environment, we've tried to be realistic instead.
Conservative achievable goals for ourselves this year.
We do believe that we'll possibly hit the trough in terms of.
The overall market and cell therapy, and our other end markets. So we're cautiously optimistic that things could improve this year, but this guidance does not really reflect an improving environment.
So I think that Theres, certainly some upside there if the market improves.
We've seen some early signs and we'll be encouraging some large financings done and we'll see how that.
The additional capital that's available that's.
Thats flowing into the space might benefit us.
But again, we're just being conservative the way we built out revenue has always been based on.
Buildup from specific identified opportunity based on the instrument placement side.
Using a run.
Run rate, that's where we were at the end of last year as opposed to expecting and building into the forecast that things would improve so again, I think a conservative and realistic forecast and if the market improves and we do see some reason to be optimistic then we could potentially benefit from that but it's not built into the forecast with respect to cash.
What we've done there is we're not.
Including in our guidance for SPL program related revenue were not including anything there is challenging to really look at that and also we don't want to get ahead of our partner in terms of predicting what sales would be some of the growth in core revenue again, we're projecting or guiding to zero to flat. So.
We assume there'll be some growth in that that growth is going to be sort of with and without additional uptake from cash heavy.
Got it thanks for that and then maybe my here you mentioned.
How important the support of our commercial therapy is that maybe it will help you close some additional FPL I'm just curious it's been a couple of months.
Since the approval of cash JV, just curious kind of what your business development team turned in those last couple of months in earnest here Youre getting more inbounds now that you support a commercial therapy.
Yeah. Thank you Jacob Nice Nice Nice Guinea question for me is always I guess.
Just wanted to take a step back obviously cash cerave has been validating as I've said before in terms of what it means for the company and also what it means for the non barrel axial space, but in terms of obviously, we signed three SPL this year to date already.
Definitely allows us to have that further compensation would the SPL partners that are already in the in the negotiation phase in or are those customers that are looking to transition to the clinic, but I think I'd step back here for a second.
If you look at how we've built our business development team over the last few years and really over the last six seven years.
More traction now.
The relationship we have with our customers really starts off in the early research right, where we're with them oftentimes four four for nine months 12 months, a year and a half working into early research helping them to.
To optimize our process and when they're ready to get into the clinic. That's when we enter into those negotiations. So cash gives us the ability to have those continued discussions and get it.
The ability to really help us with our increasing pipeline for SPL, but these relationships that we have is not just relying on.
Approval of commercial product, that's really relying on the team was built here over the last few years and Thats scientific relationship that we build with customers from from research all the way through past development into the clinic.
Hope that answers your question Jacob.
Thank you one moment our next question.
Our next question comes from the line of Dan Arias from Stifel. Your line is open.
Afternoon, guys. Thanks for the questions I just wanted to ask a follow up question on cash JV and in doing so.
I'll, probably just asking a broader question about the way that these commercialization events at your Sps benefit you now that we're in the early days of seeing that play out I mean, obviously you have the royalty revenues on the sales of the drug and I know you've said you don't have enough information there to make a call which seems fair but.
Jacobs point, I mean, I'm, just curious about the general ramp up in instrument utilization and activity that takes place at vertex, where CRISPR or wherever once they move into patient treatment mode. I mean, it seems like that should go up as they make more product post approval, but is that true.
They're a way of thinking about that it would just be kind of helpful to understand the way that the model could be impacted when we think about the us approval successes.
Yes, yes, so Dan Thanks for that question a great point. So obviously, we don't want we don't want to speak out of vertex but.
As as the patient enrollment increases as more patients more patients are screened.
<unk>.
Absolutely. So we will see that trajectory that what we hope is that the <unk>.
Hockey stick for adoption of cash 70% increases the revenue that we have on the backend as well. So obviously our net sales are either are or percentage of the backend is based on the net sales of cash JV and that would be for any commercial product that should prove that utilize our system. So yes, you can expect that ramp we can't speak to the numbers as to whether or not this big.
Does.
We'll let <unk> speak to what they are.
Speaking to the forecast for <unk> sales, but that's correct.
We have more more and more patient adoption youll have more utilization of consumables more utilization of our of our instruments, which adds to that recurring instrument license fees that we have on an annual basis. So.
So.
I hope that was helpful.
Yes, Okay, and then just as a follow up where do you think we are when it comes to drawdown on the inventory level. That's obviously been a factor it seems like there could maybe be a little bit more visibility. There then just say capital raise activity or pipeline progression. So just curious if you think that there is more visibility there and is that an element that may be is.
Looking a little bit better as we think about the next couple of quarters.
Thanks, Dan This is Doug So I think with respect to inventory drawdown I think a lot of that was completed last year.
We don't want to get ahead and speak too much about Q1, but I think we're off to a reasonable start this year and we are seeing some reasonable activity, particularly from SPL partners.
On pull through and so I don't think that we're going to see I don't think we have that same issue that we had last year about about folks really working through inventory that they have buildup in previous years.
Thank you one moment our next question.
Our next question comes from the line of Matt Larew from William Blair. Your line is open.
Good evening sort of following up on Dan's question there.
And thinking about the cadence throughout the year most.
Companies in the space have pointing to a much more back half loaded year.
You typically have done about I think 43% of.
Total revenue in the first half of the year.
So just wondering if the split anticipated as any different than your historical level.
And then if there's any discrepancies from a instrument versus a P. A utilization perspective, particularly early on in the year that we should be thinking about.
Thanks for the question. This is Doug so the way we have set our forecast for the year, we're not expecting any significant seasonality here. So in terms of back waiting versus the front end of the year.
We're not expecting any major.
Seasonality here, if you will typically there have been reasons why Q4, usually is a little stronger if people are getting to the end of the year, maybe deploy budget, but.
What's clear for us and maybe this speaks to that.
The conservative nature for how we set guidance. This year there is absolutely no sort of recovery built into our forecast right. This is the current market conditions, we're facing ta utilization for our for our guidance year based on where we sort of came out of 2023, So I can't speak to how other companies set their guidance, but we certainly have.
Baked in any component that requires the industry to significantly improve the macro environment for our client base. This year, if it does happen that represent some upside.
Okay, and then just on <unk>, obviously that.
The product was launched in fall of 2022.
The amount of data base.
And out there in the market with select customers for some time at this point.
You're sort of referencing just going back to drawing board or at least sort of reevaluating applications and commercial approaches.
Just wondering what particular you.
We need to be tweaked or added or subtracted.
To make that product market fit.
Yeah, absolutely. So this is myers, obviously, its not tweaking it we're taking approach in the sense of very similar to what we did the cell therapy space right, which is when we enter the cell therapy space, we truly at the time to understand the application needs of all of our customers and so we're doing the exact same thing the bioprocess space that we're working.
With a few early adopters truly understanding, whereas the utilization of the <unk> going to show the most promise in terms of the applications.
For which cell lines and how much in terms of the production needs are going to be needed for the BLA. So its not tweaking right. So the engineering on the <unk> really is it's something that's.
When we launched at the end of last year, we were able to showcase the ability to produce translate produce protein at a significant amount now it's ensuring that we're working with <unk> early adopters, where we truly understand the applications that will allow us to launch into a much bigger market. So, let's say tweaking, it's more learnings from our customers just like women's health.
Empty space.
And it's more learnings of the market itself to understand when we when we do more bus launch how do we how do we ensure that.
That happens in a fashion, where we're no longer work with early adopters that were working across our spectrum.
Of customers. So it's not tweaking, it's really understanding the market more than we have currently.
Thank you for a moment for our next question.
Our next question comes from the line of Mark Massaro from <unk> Energy. Your line is open.
Hey, guys. Thank you for the questions and congrats on a good start to the year with the new Spl's added.
I wanted to start on guidance, Doug I know you mentioned that your guide does not assume any improvement.
Or any end market improvement I, just wanted to double check that you're you're likely referring to improvement in capital and the capital raising environment.
And then related to that I believe you guys indicated that.
The capital raising environment is starting the year, a little bit better than you expected could you. Please elaborate on that and maybe any comments on.
Public companies versus private companies.
Anything that youre seeing would be helpful.
Or we can take that number of shorter in terms of capital markets.
If I go back to the first question when I when I said improvement in the macro I guess, we really are talking about the capital availability for our customer base and at the end of the day, we can't Untether ourselves from the market we serve.
And provide enabling technology too so.
Things are strong there for them in terms of having access to capital and that'll help us last year capital wasn't free flowing as much as it had been and you had companies rationalizing their pipeline you had people pausing some things and I think that there is some signs of life here. We've seen some I mean, we can talk about some specific financings that we've seen in the market, but I think.
You can you can certainly see what those work I'm, mostly referring to public company is we do know that private companies will have access to capital, but I think the way. This typically works is you need some of the public companies to.
Have some better results to do some financings that are viewed as successful by market participants.
And then perhaps that rolls back rolls down to some of the private company and so I think it's predominantly going to the public companies that we've been able to observe specific announcements regarding significant financings for companies in this space to start the year, we did not build into our forecast that the market will improve and while we've got some reasons to be encouraged based on.
What we are seeing it's still early days here in terms of how things are going to rollout for the year.
We've taken a very conservative tried to set achievable goal for ourselves with this guidance to make sure that we are again forecasting pull through for instance, based on what it looked like last year.
I think the best way to do it obviously.
We want to be in a position to.
Achieved what we set out to do this year.
Okay, Great and then maybe just another guy.
Guidance clarification question.
Obviously 2023 was a tough year.
For the full year of your car business was down 25%.
It was a little worse than that in Q4 down 32%.
So for 2024 for you to guide flat to plus five obviously does imply an improvement in trends.
I guess, what I'm trying to get at is.
What informs your assumption that you can come in flat to up this year can you just give us a sense of.
If you think a lot of the.
Yeah.
The business will come in through <unk> versus placements.
Related to that I think you placed.
67, new systems last year versus 114 in the prior year. So just give us a sense for how much of this growth or flat to slightly up will come from P. A consumption versus.
New system placements.
We typically we're not going to do they breakdown.
Pat.
<unk> in terms of the specific components, but let me just remind you how we build this up because again, it's I think it gives you some comfort or some understanding of how we're thinking about the market and how that might impact utilization of our platform. So the three main components of core revenue are the leases for the instruments that are under the SPL arrangements.
It is the instrument the instrument sales too.
The other markets we serve.
Of course.
The revenue is from.
As a pull through that we're basing that analysis again on where we ended the year. We're looking at specifically, what's the rate of <unk> that we were selling at the end of the year and we said, let's be conservative, let's look at that and roll that forward for 2024 now the instruments placements.
For 2024, we're building that up from specific identified opportunities that comes in through.
Our commercial team that will model out.
Determined what the likelihood of any particular opportunity coming through again, using what we think are improving assumptions about whats going ahead and thats, how we build up this revenue. So I cant specifically say how much of this is pierre utilization, but I can say that the PAA utilization that we're using to build that number is based.
On where we came out through the end of the year and I recognize Q4 was tough on a year over year basis.
Was certainly.
Better.
In many ways for that too.
Third quarter.
Thank you one moment for our next question.
Our next question comes from the line of Steven Mah from TD Cowen Your line is open.
Great. Thanks for taking the questions.
On the SPL numbers in 2024, and I don't think you guys are guiding to a number.
How should we think about <unk> in the year given.
Your historic three to five per year, especially that you've kind of already in that range with three already year to date and then also given your comments that the S. P.
Pipeline is robust.
Yes.
So obviously, we signed three this year.
We're confident in what we've done in the past, which is that 3% to 43% plus number.
The three this year doesn't mean that we're signing three every quarter.
The way it normally works on the <unk> that was mentioned earlier is when these relationships oftentimes four four in the nine months 12 months 18 months with the customer all the way through sometimes we have a bolus whereby the time that we've done the process development work for that customer where the rates become to go into the SPL negotiations.
I have a bullet for you of a few customers are signing around the same time, but overall, we're comfortable with the pipeline. We built that we can maintain the historical trend of that three to four plus number on an annual basis and that's what we're that's what we're guiding to right now as well.
The three number I wouldn't take us through every quarter.
But it's a healthy we're thoughtful of the pipe.
Yes, yes, no no.
<unk>.
And then maybe my hearing.
You talked about one $9 billion from potential value from the SPL partnerships.
In your portfolio.
Sure.
From $1 $5 billion last year.
Any internal changes to your NPV calculations.
Interest rates are trending down.
Maybe there's a better approval and regulatory environment.
Which might improve probability of success and therefore your discount rate.
How should we think about has there been any changes or are you guys being conservative in your calculations.
So to be clear.
That number that you referenced is non risk adjusted number so it's not discounted it's not risk adjusted in any way.
How do we think about NPV of our programs. We do factor in those are those factors. Both the metric that Youre that you mentioned and Steve does not include any discounting or risk adjustment. It's strictly what is available to us under the SPL agreed.
Agreements should every item in their hit.
Thank you once again as a reminder, that our one one for a question Star 111 moment for our next question.
Yeah.
Our next question comes from the line of Matt Hewitt from Craig Hallum. Your line is open.
Good afternoon, and thank you for taking the questions maybe to follow on one of the questions a couple ago.
I think you're acknowledging Q4 was tough when everybody knows that it was tough, but what are you seeing so far in the first quarter. Obviously, the funding seems to be improving a little bit but are you seeing that.
A slight improvement in funding translate into some slight improvement in the peer utilization in the discussions that youre, having with potential SPL customers.
Yes, Hi, Matt let me take that for US. So we are seeing that stabilization that we saw in Q4 really materialize in Q1, as well right and that's kind of the funding environment.
<unk> also been from our scale and our customers that we believe will begin to trickle down into non <unk> customers you saw a few of our customers.
Raising over $1 million recently and public offerings.
We're seeing that stabilization.
In terms of.
Peer utilization.
I'll, let Doug speak to that but obviously with the with the stabilization. We're hoping that that continues throughout the year does that you want to comment on that.
Just talk about where we are Q1 first off just to recall, what we're talking about in response to a previous question as.
It has been any seasonality here and the cadence of the business. So there's nothing built in here that says hey, as long as we have a big second half of the year, we're going to be able to achieve what we set out to do here. So given that we are sitting here.
Couple of weeks out from the end of the first quarter, we feel good about where we are today, we think we're on track.
Got it and then maybe a separate question.
Your partners have talked about.
There is it's a multi step process with kind of JV.
The patient enrollment.
The cell recovery all of that and its multiple months with each of those steps.
The I guess, the desire or the need to be conservative at least this first year, but is it your expectation that as we get through and as your partners get more comfortable with that process that that timeline shrink and so maybe you get a more normalized pattern of patient enrollment to patient treatment and the timeline.
Shrink, so maybe 25 and beyond become.
Hum.
More normalized if you will.
Yes, let me take that one Matt so the timeline won't shrink because thats the patient journey, whether it's now or in 'twenty five 'twenty six.
What will happen is as you have more patients.
That are having infusions it will normalize in the sense of if you have more patients now that are in any given month being being treated with <unk>. So it's not necessarily.
According to the timeline, it's more of a normalization in terms of the use of the pay usage for us.
Based on how many.
Patients are being dose, which we are hopeful.
Over the next year and then few years that Youll have more adoption of cash that we have more patients being treated on a monthly basis. So I hope that answers your question Matt.
Thank you.
All the time, we have for questions today.
I'd like to turn the call back over to modern Masoud CEO for closing remarks.
Yes, no. Thank you everyone.
Participating we look forward to speaking with everyone on our Q1 call.
Thank you for your participation in today's conference. This does conclude the program you may now disconnect everyone have a great day.
Goodbye.
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