Q2 2024 MaxCyte Inc Earnings Call
Okay.
Ladies and gentlemen, thank you for standing by welcome to Max eight second 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 this session you will need to.
Press Star one on your telephone you will then hear an automated message of bites in your hands. It's right to withdraw your question. Please press star one one again please be advised that today's conference is being recorded I would like now to turn the conference over to Scott Feinberg Finance and Investor Relations Associate.
Please go ahead.
Good afternoon, everyone. My name is Scott Feinberg, and I'm responsible for Investor Relations here at Max eight. Thank you for participating in today's conference call. Joining me on the call from Mac side, we have my hair, Masoud, President and Chief Executive Officer, and Doug Swirsky, Chief Financial Officer.
Earlier today <unk> released financial results for the second quarter ended June 30th 2020 for a copy of the press release is available on the company's website.
Before we begin I need to read the following statement.
Statements or comments made during this call may be forward looking statements within the meaning of federal securities laws.
Any statements contained in this call that relate to expectations or predictions of future events results or performance are forward looking statements.
Actual results may differ materially from those expressed or implied in any forward looking statements due to a variety of factors, which are discussed in detail in our SEC filings.
The company has no obligation to publicly update any forward looking statements, whether because of new information future events or otherwise and with that I will turn the call over to my head.
Mack: Thank you Scott good afternoon, everyone and thank you for joining Mack <unk> second quarter 'twenty 'twenty four earnings call.
Our reported <unk> 4 million of toll revenue in the second quarter, including core revenue of $7 6 million and SPL program related revenue of $2 9 million where.
We are excited with the progress that we have made so far in 2024 afforded by our commercial execution and the continued demand for EXPAREL exploration platform and the efforts. We have made to continue to provide differentiated end to end support to our customers.
We're also encouraged by the five new SPL until we have signed this year, which includes the most recently signed legend biotech.
Our core business performance was solid in the second quarter were the result of cell therapy and drug discovery there were in line with our expectations.
Our performance remains tied to the funding environment for cell therapy developers, which remained stable in the second quarter, but has not significantly changed or improved since the first quarter or the time in which we provide initial guidance for 2024.
Amidst this current backdrop with the change to our customers operate with a cautious capital spending mindset.
Despite this the overall market optimism in cell therapy, and general scientific evolutions space leaves us incredibly optimistic about <unk> long term opportunities.
We continue to believe cell therapy will change the paradigm medicine over the years and we are in the early stages of the future growth of cell therapy.
The non viral cell therapy market continues to move towards engineering approaches.
More complex therapies across an expanding variety of selling disease types display.
This bodes well for Max like given that our technology can support the complexity of new cell therapies to be developed by current and prospective SPL customers and autologous and allogeneic settings.
We remain in a strong position to meet our outlook for 2024 and are very optimistic about the future of our business and a cell therapy industry as a whole.
To provide some context on our core revenue performance in the second quarter, which Doug will cover in more detail. We grew our instrument install base to 723 as of June 30th.
Instrument revenue continues to be impacted by cuts great caution on capital equipment purchases. However, we were pleased with <unk> revenue of $3 million in lease revenue of $2 6 million.
Speaker Change: Both declined slightly year over year, but remains stable from the first quarter of 2024, 54% of our core revenue. The second quarter of 2024 was derived from SPL clients speaking the contribution from both early stage customers and customers in the clinic.
Mack: As I mentioned before were reported $2 9 million or <unk> program related revenue in the second quarter, putting us at 6 million in the first half of the year.
Mack: We are encouraged by the SPL clients continued progress through the clinic, resulting in milestone revenue from oxide.
We're also continuing to expand our <unk> portfolio as evidenced by two new <unk> signed in the second quarter be Biopharma and legend biotech, bringing our total signed SPL. So far in 2024 to five or most recently signed a bill that we announced in May legend biotech as a global leader in the cell therapy industry, developing new cell therapies to target life threatening diseases.
Mack: We currently have one commercial asset and <unk> pipeline programs with revenue for marketed products partnerships and licensing.
Mack: <unk> platform provides legend biotech with technical scientific and regulatory expertise to support the development of the company's therapies across a variety of cell types and modalities.
Mack: Legend biotech brings our total number of <unk> in our portfolio to 28.
Speaker Change: It's important to remember these SPL relationships provide us with the opportunity to participate in the success of our customers' programs.
Speaker Change: With unparalleled access to our electrification technology trained field sales application assigned to support in our FDA Master file and regulatory Knowhow. We firmly believe that <unk> remains the platform of choice within our industry. We have strong relationships with our current is bill clients and a robust pipeline perspective S. Dell clients all of which are working vigorously to develop <unk> LNG.
Speaker Change: Therapies for patients in need.
Max: As you likely know Max I supported SPL customer vertex and the FDA approval of cash Debbie the first non viral cell therapy approved in the U S.
Speaker Change: Now midway through 2024, we are confident the commercial opportunity for <unk> remains strong with approval in the United States, Great Britain European Union, Saudi Arabia, and Bahrain cash JV has the capability to enable life changing treatment to patients worldwide.
Speaker Change: We are encouraged by the recently presented long term data for cash JV from global cocoa trials for over 100 patients with transfusion dependent beta thalassemia.
Max: Efficacy demonstrated consistency with primary and secondary endpoints from prior <unk> studies.
Speaker Change: Vertex recently reported they continue to see a growing number of patients begin to treatment journey and approximately 20 patients who've already had cells collected with patients initiated treatment journey in every region, where cash JV has approved the U S Europe and the middle East.
Speaker Change: There are now 35 activated centers and Bridgetex continues to expect to activate approximately 75 total centers globally with a view that cash every represents a multibillion dollar opportunity.
Speaker Change: Currently and as previously communicated we do not have visibility into the timing of patient dosing or completion of infusion given the lengthy process associated months patient all begins as such we continue to exclude cash every related commercial milestone revenue from our 2020 for outlook and plan to provide you with updates as they come from vertex we remain very excited by the potential cash salaries benefit.
Speaker Change: Patients as a first and only approved CRISPR gene editing therapy.
Speaker Change: Over the near medium and long term, we see significant revenue opportunity from SPL clients as they progress through the clinic and reach commercialization. The next wave of potential commercial opportunities includes approximately five programs across five spl's with large potential in 2027. These therapies has the potential to address solid tumors lymphoma leukemia.
Speaker Change: Sickle cell disease and beta thalassemia.
Speaker Change: Beyond this we see opportunity for tenable programs across additional indications in multiple myeloma and autoimmune disease between 2028 and 2030.
Speaker Change: As we continue to sign new Npls in our existing SPL is grow and expand the basket commercial opportunities in the future grows larger.
Speaker Change: For the remainder of 2024, we will remain focused on investing in areas of high growth to align with <unk> core competency advancing cell therapy innovations over the first half of this year. We have reviewed our portfolio of opportunities that are investments and reallocated resources towards high impact projects. They are promised the best return on investment and long term growth.
Speaker Change: Commensurate with our realignment, we are reducing our investment in and moderating our expectations for the <unk>, we will maximize the investments previously made in <unk> continuing to work with early adopters and future customers our portfolio realignment focused on prioritizing operational efficiencies and sales and marketing reach in cell therapy, which continues to be a large and sustainable growth opportunity.
Speaker Change: For Maxim.
Speaker Change: To wrap up we're pleased with our solid second quarter results and believe that we remain on track to deliver on our goals for 2024 maximize value proposition and the support that we provide to our customers and clients is truly differentiated and I continue to believe that we are the premier cell engineering platform of choice within the cell and gene therapy industry with that I will now turn the call over to Doug to discuss our financial results.
Speaker Change: Doug. Thank you might hear total revenue in the second quarter of 2024 was $10 4 million compared to $9 million in the second quarter of 2023, representing an increase of 15%.
Doug: We reported core revenue of $7 6 million compared to $8 $3 million in the comparable prior year quarter, representing a decline of 9%. This includes revenue from cell therapy customers, a $6 2 million, which declined 6% year over year and revenue from drug discovery customers of $1 4 million, which declined 18% year over year.
Speaker Change: <unk>.
Speaker Change: Within core revenue instrument revenue was $1 8 million compared to $2 1 million in the second quarter of 2023 lease revenue was $2 6 million compared to $2 7 million in the second quarter of 2023, and processing Assembly or <unk> revenue was $3 million compared to $3 $3 million in the comparable prior year quarter.
Speaker Change: <unk> <unk>.
Speaker Change: <unk> mentioned instrument revenue continues to be most impacted by the cautious capital spending environment for our customers.
Speaker Change: At the same time lease revenue has remained stable, indicating strength in our revenue from clinical SPL partners Ta revenue remained solid in both year over year and sequential performance, which we were pleased to see.
Speaker Change: We recognized $2 9 million of SPL program related revenue in the second quarter of 2024 compared to zero point $8 million of SPL program related revenue in the second quarter of 2023 year to date, we have achieved $6 million in SPL program related revenue.
Speaker Change: Moving down the P&L gross margin was 86% in the second quarter of 2024 slightly higher than 85% in the second quarter of 2023.
Speaker Change: Total operating expenses for the second quarter of 2024, or $20 9 million compared to $20 7 million in the second quarter of 2023. The overall increase in operating expenses was primarily driven by growth in sales and marketing expenses.
Speaker Change: Going forward the company continues to be disciplined, making moderate and targeted investments in high growth areas that offer long term returns.
Speaker Change: We finished the second quarter with combined total cash cash equivalents and investments of $199 8 million and no debt.
Speaker Change: We are increasing our expectations for year end cash equivalents and investments and now expect to end the year with $180 million up from our previous estimate of $175 million.
Speaker Change: This is a result of greater than expected SPL program related revenue in the first half of 2024 as well as disciplined expense management, including the realignment of resources that <unk> discussed.
Speaker Change: Continuing with our full year 2020 for revenue guidance we.
Speaker Change: We're reiterating our core revenue guidance and updating our SPL program related revenue outlook.
Speaker Change: We continue to expect core revenue to be flat to 5% growth compared to 2023.
Speaker Change: We now expect SPL program related revenue to be approximately $6 million in 2024, our SPL program related revenue is difficult to predict and subject to the timing of partner development programs. Our base case expectation for the year indicates we will not receive additional milestones in 2024 as a reminder, our two.
Speaker Change: 2024 outlook also does not include royalty revenue from cash Debbie.
Mike: To close <unk> it remains in a great position to execute on our 2024 outlook with a continued focus on exercising disciplined spend to deliver long term growth now I'll turn the call back over to Mike here. Thank.
Mike: Thank you Doug we are proud of our progress thus far in 2024 and look forward to supporting our customers as they progress through the clinic I would like to thank our <unk> team for their dedicated work to our company and customers each and every day with that I will turn the call back over to the operator for the Q&A operator.
Speaker Change: Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one one again.
Speaker Change: And the first question comes from Jacob Johnson with Stephens. Your line is now open.
Mike: Hey, its actually Hanna on for Jacob Thanks for taking my questions.
Speaker Change: Have you seen any benefit from commercial volumes on the PGA or lease revenue lease instruments side of things.
Mike: Benefit this is Martin's I'm sorry.
Speaker Change: Yes, I apologize can you repeat the question again it broke up there for a second.
Martin: Yes, as it relates to the base business have you seen any benefit from commercial volumes on the PGA or leased instruments side of things.
Speaker Change: So youre asking about whether or not cash JV as having a material impact on our core revenue.
Speaker Change: Yes.
Speaker Change: Yes, so I mean, we don't break that out separately.
Speaker Change: Keep in mind that.
Speaker Change: The components that we get from participating in the commercialization of that product to include potentially incremental lease revenue to include obviously the ph.
Speaker Change: In the commercial setting we do not really break that up.
Speaker Change: Best I can direct you to is that our customer concentration information that's in the 10-Q, but unfortunately, I'm really not in a position for a variety of reasons, including maintaining confidentiality since we only have one commercial stage partner at this point to break it out and talk about how many ph were used in the commercial setting is probably not something that.
Speaker Change: We are going to do at this point.
Speaker Change: Okay. Thanks, and then one more follow up.
Speaker Change: It looks like cell therapy, and drug discovery, both declined a little bit sequentially was it just seasonality is there anything else you'd call out about that.
Speaker Change: Let me take that one Doug let me take the on Hana. So obviously declined year over year, but over the course of the year. It's been very consistent so from Q1 to Q2 were very consistent unit sales for both in drug discovery and cell therapy drug discovery itself is a small revenue line for us it's tied more a bit to a few customer.
Speaker Change: Is that we might have some lumpiness with a few customers putting orders in certain quarters versus other quarters, but overall, we're very happy with the solid core that we have consistent with our Q1 as well.
Speaker Change: And not really comparing it to Q2 of last year, which is a bit of an abnormality.
Speaker Change: The one thing that we tried to make a point of earlier this year as we talked about sort of a lack of seasonality in our business going forward, we are going to see occasional lumpiness. That's just the nature of the business JC occasionally see customers, putting a big order and influence things, but in general we feel pleased where we are at this point with.
Speaker Change: On bulk drug discovery and cell therapy.
Speaker Change: Alright, Thanks, I'll leave it there.
Hanna: Thank you Hanna.
Speaker Change: And our next question comes from Julie's comments with Pam Mirror Liberum. Your line is now open.
Julie Simmonds: Hi, Thanks, so much for taking the question.
Julie Simmonds: A couple of things Firstly, just in terms of SPL agreements clearly you do have slight loss that you've done this year already.
Speaker Change: Now she is no more guidance on what you might do for the rest of this year, we really going to have to wait more than six months or another one.
Julie Simmonds: Good question Julien good to hear from you again.
Speaker Change: The way it has been historically is that because you're now doing the manufacturing in house and you've yet to get the volumes up to the point, where it starts to rebalance a little bit or should we be looking at this sort of level going forwards.
Speaker Change: That's certainly a big part of it truly so what we've established here is a manufacturing facility that can support multiple commercial stage customers and so with that much capacity ready to go to support our customer base. We do have some excess capacity. It does change some of the absorption rates. It does.
Julie Simmonds: Impact our margins to have that.
Julie Simmonds: Also we're manufacturing quite a bit last year and so.
Julie Simmonds: <unk>.
Julie Simmonds: I guess down here, we had last year, we definitely had manufactured more than we need we want to make sure that we maintain appropriate levels of inventory and so I think these are margins that have the potential to go back to where they are but again, we've said it before we feel really good about the margins, we're delivering even if they back down to this level because there is still very substantial and somewhat industry.
Julie Simmonds: Leading at this point and continue to be so.
Speaker Change: Can I add something there as well.
Julian: Julian when we bought it in manufacturing in house, we knew that we could potentially take a short term hit on margins, but that was a positive in our view because we can start controlling the quality and the capacity of how much we can produce on an annual basis. So in our mind that the short term hit that we're taking is well worth the long term benefit that we're getting out of bringing manufacturing in house both for US and then also for our customers.
Speaker Change: We believe that we have the greatest you know future growth potential.
Speaker Change: What that means for the bottom line I'll, let Doug speak to that.
Doug: I think I have said it perfectly the only thing I'd add is just to emphasize what we've already said here, which is that we've raised our expectations for how much cash equivalents in investments will end the year with just to reflect the fact that again, we've had some unexpected milestone revenue come in that we talked about in the previous call as well as the fact that we're being more prudent with our expenditures bolt.
Speaker Change: In terms of the election re prioritizing some of that spending but in other areas as well.
Speaker Change: Lovely thank you very much.
Speaker Change: Thank you Joe Thank you.
Speaker Change: And our next question comes from Steven Mah with TV Cowen. Your line is now open.
Steven Mah: Oh, great. Thanks for taking the questions.
Steven Mah: Maybe just a couple of follow up questions on Spl's.
Speaker Change: No.
Speaker Change: Notice that the five SPL signed this year or tend to be on the kind of the mid to smaller size companies.
Speaker Change: If you could give us a little bit of color on how BD discussions with larger players are going in.
Speaker Change: Maybe any color on how maybe BD discussions are evolving between maybe smaller companies midsize companies and larger companies.
Speaker Change: Maybe your thoughts on how that mix might change.
Speaker Change: We wanted to support as many of them as possible so that many of them can.
Speaker Change: Yes, yes, understood and then if I can squeeze one more in maybe on your instrument side of your business.
Speaker Change: Could you give us some color on what youre seeing in the marketplace.
Speaker Change: It sounds like maybe sales cycles or are lengthening or taking longer.
Speaker Change: And maybe if you could provide some color on how things are looking from the instruments. Some.
Speaker Change: <unk>.
Speaker Change: Given that you know some companies in the cell and gene therapy and ball processing as Jeff stated there is some signs of some green shoots or improve but maybe you can kind of square away, what what what others are saying with kind of what youre seeing in the marketplace and if he could add also perspective from maybe larger sized customers.
Speaker Change: Early stage customers, so how those discussions on an instrument sales or leasing.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Thank you, Steve so with regards to instruments clearly.
Speaker Change: Break out the difference between the larger companies and smaller companies a lot of the capital is Florida. That's come into the industry has been more focused on the larger companies have been more focused on the public company. So certainly some of the sales cycles have elongated.
Speaker Change: And so I think there is a difference there.
Speaker Change: For us the instrumentation is one area, where we're able to really build that forecast from the ground up this is sort of an opportunity by opportunity.
Speaker Change:
Speaker Change: Most of the R&D on the core platform at least the last several years has been.
Speaker Change: Yes, I would humbly I described but iterative NPA focused.
Speaker Change: What are the things that you can do if not be Alex to become a bigger company in this space and does that largely revolve around improvements to your system your consumables or does it involve creating new technologies or acquiring new technologies.
Speaker Change: Yes. Good question, Matt Let me, let me take that one so obviously, we've been working on product development internally over the past year, we actually have hired a new head of engineering and his name is Jeremy Coleman brand or he joins us from 25 plus years at formulates Ramon and then Soliris as well.
Speaker Change: Obviously, our focus is on ensuring that we begin to as you said.
Speaker Change: Focus on those new products that are complementary that provide complementary workflows to our current customers and provide tangential to the tangential needs that they need in terms of the cell therapy workflow that we can begin to provide those type of opportunities and solutions for them.
Speaker Change: And your mill rate.
We can hear you John absolutely.
Speaker Change: Alright.
Speaker Change: When looking at the overall macro environment. So far throughout Q2 earnings we kind of heard from others participating in the pharma and biotech industry that funding environment is improving could.
Could you just provide some more color from what Youre hearing from your customers I know in your prepared remarks that some of them are still being cautious with how they deploy their capital and just kind of interested what you guys are seeing or hearing thanks.
Speaker Change: I think the market's improving a little bit obviously, you have a day like yesterday makes you question that a little bit, but it's only one day for us.
Speaker Change: We're looking at our detailed forecast, we're feeling very good where we are versus the objectives, we set for ourselves and we're just not building in any.
Speaker Change: Any improvement in that significant improvement in the landscape for for the industry does that mean again theres not some green shoots out there are some reasons to be optimistic I think certainly, but it's anecdotal we're seeing some financings we are hearing some things but at this point our goal here is to execute against the plan that the market <unk>.
Speaker Change: Bruce and I think that we will raise the bar for ourselves yes.
Speaker Change: You may add something there as well so nothing has changed from the previous quarter and a sense of we're still seeing our customers rationalized their products in their pipeline.
Speaker Change: Focusing on what their lead assets and what they believe has the highest likelihood of going through the clinic and having commercial success.
Wait one or.
Yes, a little over six in the first half can you maybe just talk about the types of things that you might have pulled forward in Q2 and you know.
It's a little surprising that there's nothing in the back half should we consider that upside and maybe just walk me through what the potential opportunity could be you know as we think about 2025.
Speaker Change: No. Thank you so first off.
We're not in a position to provide guidance on 2025 are we expecting to receive milestones in 2025 and SPL program related revenue include both milestones and royalties absolutely. We're in a position to guide today no.
Speaker Change: Why we're suggesting that we wont have any of the rest of the year is there were some things that occur.
Occurred earlier in the year than we expected and in some cases, which we discussed on last earnings call. There are things that we didn't think would happen. This year really speaks to the lumpiness of this the difficulty to predict when these development milestones will occur one of the benefit of having a growing roster of SPL customers is that at some point that lumpiness can smooth out a little bit, but it can be very difficult to predict.
When a particular milestone is going to be achieved we're taking a conservative view here as we look at what could hit this year and we probability weight things, we say, let's assume that we've gotten done what we're going to this year and we're just going to focus on running our business.
That milestone money sort of mailbox money, we don't have to think about it we're not going to set guidance for 2025, something else gets pulled into 2024 at some upside, but we're not counting on it is not impacting how we're thinking about the business for the rest of the year.
Speaker Change: Okay got it appreciate that.
You guys talked about.