MaxCyte Inc (MXCT) 2023 Q3 法說會逐字稿

Good day, everyone, and welcome to the MaxCyte third-quarter 2023 preliminary financial results conference call. Today's call is being recorded, and I would now like to turn the call over to Madar mid-August, Head of Investor Relations. Please go ahead, sir.

Thank you, Lisa, and good afternoon, everyone. My name is Sean Menarguez. I'm the Head of Investor Relations at MaxCyte. Thank you all for participating in today's conference call.

On the call for MaxCyte, we have Doug Doerfler, President and Chief Executive Officer; and Douglas J. Swirsky, Chief Financial Officer. During the call, management will review the preliminary third-quarter 2023 revenue results and updated full-year 2023 revenue guidance that we released at the close of the market today. After our prepared remarks, we will take questions. We plan to report our full financial results for the third quarter on November 8.

Before we begin, I need to read the following statement. Statements, 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 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'll turn the call over to Doug.

Thank you, Sean, and good afternoon, everyone, and thank you for joining us. This afternoon, we announced preliminary third-quarter total revenues expected to be in the range of $7.8 million to $8 million. Preliminary core business revenues for the third quarter is expected to be $6.4 million to $6.6 million, which is well below our prior expectations. SPL program-related revenue is expected to be approximately $1.4 million in line with prior expectations.

Based on our preliminary third-quarter revenue results and due to the ongoing broader operating and research environment, we have reassessed our outlook for the remainder of the year. We now expect total revenues for 2023 to be in the $34 million to $36 million range. This includes core revenue guidance in the range of $28 million to $30 million compared to our previous guidance of roughly flat versus 2022.

We are reiterating our SPL program-related revenue guidance of approximately $6 million for the full year. Our enthusiasm for expected milestone payments and commercial royalty revenue to become a meaningful contributor in the coming years is unchanged. We believe the development outlook for our SPL partners remain intact.

As you are likely aware later this month, Vertex and CRISPR exa-cel will have FDA advisory committee meeting. We are looking forward to the potential regulatory approval of this important therapy, which we view as necessary for patients. More specifically, we believe it's a welcome opportunity to discuss the clinical impact of CRISPR technology and non-viral delivery. And as previously discussed, we believe we have made the necessary and significant investments in manufacturing, regulatory, quality, and alliance management to support the commercial launch of exa-cel.

We scheduled today's call due to the high level of volatility in our operating environment for biotech companies in general and cell therapy companies in particular, and in order to update our shareholders on the current trends that are impacting our core business. The main driver of the revenue shortfall in the quarter and for the balance of the year in each case compared to our prior expectations is lower than expected processing assembly disposable sales.

We believe that the weakness in processing assembly or PAs can be attributed primarily to early-stage customers conserving spend due to the current challenging funding environment for them. This has led to lengthening timelines for preclinical and early clinical activities as customers reevaluate their pipeline portfolio and R&D initiatives and focus on their primary assets or to extend their cash runways.

PA sales weakness is evident in early-stage customers across cell therapy and drug discovery. Additionally, we believe that the continued PA softness is a result of customers drawing down on their inventory from prior year more than we originally anticipated. We saw a buildup of inventory in 2022, and some of our customers and partners may have anticipated a different operating environment in 2023 or had concerns about overall supply chain constraints that they saw across the market in 2022.

Throughout this year, we have seen customers and partners change the way they handle their own inventory as they are focusing on short-term inventory needs to preserve cash as opposed to long-term long-range planning we saw in the past. PA sales have been soft among our clinical SPL partners compared to earlier in the year. This has been the result of delayed clinical timelines due to challenges obtaining additional funding for their clinical operations. Some SPL partners continue to fund development programs while others require significant additional capital to complete the development, the full development of their pipeline assets.

Companies have been more conservative with their PA usage as a result of heightened capital cautiousness on early-stage programs as they await clinical development milestones for their lead assets, potentially support their fundraising activity. We are actively working to increase our visibility into customer PA patterns and inventory levels. However, this is a challenge because customer activity can change fairly quickly, especially in this funding environment.

In addition, when speaking with early-stage commercial customers, we have learned that they have become incrementally more conservative on large capital expenditures as the year has progressed, which has impacted our instrument sales. While some SPL partners have become more cautious with their capital, our lease revenues has remained fairly stable year over year, which points to less spending friction among customers that are active in the clinic. A number of our customers have important clinical milestones over the next 12 to 18 months, which we believe will continue to demonstrate the value of the MaxCyte platform and our business model.

Overall, we are disappointed in our core-business-performance year to date. The overall macro environment has been unfavorable, and as a result, we have less visibility than we would like. We believe it is imperative to drive commercial execution to improve performance at all stages of our business. The global commercial organization and MaxCyte is actively working to increase and expand revenue opportunities for the balance of 2023 and into 2024.

Despite our lower-than-expected revenue, our balance sheet remains strong. We believe our cash position is a competitive differentiator in the market as we have flexibility to continue to invest in our growth. Given the challenging operating environment, we have been prudent with respect to our own expenses in 2023 and still expect to end the year with approximately $200 million in cash.

Our year-end cash balance outlook has not changed throughout the year despite the expected decline in core revenues. We believe our adaptability with respect to our cost management reflects our commitment to shareholder value created over the long term.

In closing, we remain confident in our ability to support our current SPL partners and to further expand our portfolio of partnerships. We firmly believe in MaxCyte's business model and the value proposition that we deliver to cell and gene therapy innovators as the non-viral cell engineering technology of choice. Looking out over the next several years, we anticipate multiple waves of therapies will enter the market, which we believe will ultimately drive value for MaxCyte.

Now I'd like to open the call for questions.

Thank you. (Operator Instructions) Julie Simmonds, Panmure.

Good afternoon, guys. Obviously, slightly disappointing in terms of where you are. In terms of the PA revenue, the PA utilization, I know you say as I'm just trying to get a better feel of what's going on within customers.

In terms of the larger customers that you have, has it changed across all of them? Or is it one or two ways of seeing an issue? Or is it generally across everybody, the variation that's occurring?

Hi, Julie. Thanks for the question, this is DJ. So the PA sale weaknesses, we've seen it a lot in the early-stage preclinical customers. They've got the most funding constraints right now, so I don't -- I think the weakness is a little bit wide amongst the customer base, but I say it was predominantly or disproportionately would impact the earlier stage companies that have, again, funding or funding challenges.

Thank you. And is there -- I mean, is pricing any part of this falloff in revenue? Or is this purely volume related?

It's not pricing, it's volume related. Absolutely.

Lovely. Thank you. I'll let somebody else again.

Thanks, Julie.

Dan Arias, Stifel.

Afternoon, guys, thanks for the questions. Doug, can you just maybe give some granularity to project cancellation activity versus purchase delays and the extent that one or two of those is accelerating?

And then, as a follow-up, a natural next question for DJ would be three cuts and three quarters, not all of which were in your hands. But for the company, how confident are you that you've left yourself room in 4Q, just given that the situation here is clearly tough to characterize?

Yeah, thanks, Dan. We're seeing a slowdown in purchases. We've mentioned that we have a couple of customers, some are customers and the SPL clients that had built up inventory and they're depleting that inventory.

We got one one customer, one program that is on a pause right now as they look for partners. But generally, it's across the board, as DJ said earlier.

In terms of confidence level in this revised projection for full year, I think there's a high degree of confidence. We're a lot further along in the year. We are not making any assumptions about turnaround in the market in terms of the rate of PA sales and whether or not things are going to accelerate as we have seen typically in some fourth quarter.

So I think we're taking a fairly conservative view here. There's a lot less variables from this point forward that are going to impact whether or not that we can achieve the range we've set for ourselves.

Okay. And just maybe as a follow-up, Doug, can you just talk a little bit about what it is that you are able to do to increase that visibility into the customer activities that you referenced there?

Yeah, good question. So obviously, all hands on deck, all focused on getting back to a growth scenario. We just hired a head of bioprocessing. He has quite a bit of good strategic marketing experience.

We brought out Ali in about a month ago. We've been focusing some of our team in certain other market segments, so we can better understand how we can be more -- to get back to growth. We're looking at expanding some of our geography reach. So I think, all of the typical things one would expect when you're trying to get back to a growth scenario.

And just also, really, just getting much, much closer to our partners. I just have to -- Dan, I think you'll appreciate this because you've been concerned about the markets for quite some time. And I've said it this morning, that when you're in a rising tide, the boats all float. But when the tides' falling, it's much more difficult to figure out what's going on with customers.

Their behavior changes from maybe, greed to fear, they become a bit more close in terms of information. So there's -- I think, we're just trying to navigate through all those changes too. It's a different environment as you well know, and it's really impacting I think a lot of buyer behavior. And just overall, the attitude of our customers and clients.

That said, we still see quite a bit of good progress with a number of our SPL partners. You look at Caribou and at the 301, 433, those are all progressing towards Phase 2 right now. So we're seeing good uptake with partners that are in the clinic moving toward clinical milestones which they need to raise more money. Hopefully, that gives you a little bit more color to how we're thinking about this.

Yeah, it does. Thanks, Doug.

Matt Larew, William Blair.

Hi, this is actually Madeline on for Matt. Just thinking about the stocking impact and customers working down their inventory, how much of that do you think is from customers having overbought or stocked up during 2022? And how much of that is from customers maybe buying appropriately and now, having fewer programs or less use cases for the inventory they purchased?

I don't think we can parse that out specifically. I think you've identified two of the main reasons that are probably bringing down the level of PA sales that we expected. But in terms of parsing that out specifically, I think it's challenging to do that.

Got it. And then, following up on the Q4 question. I know you said you still feel a great deal of confidence in your ability to hit that, but it does look like there's going to be a bit of a ramp between Q3 and Q4. Just wondering what you anticipate is going to be driving that?

No, I mean, I think just do the math here on where we are after three quarters, and you'll see that we're not expecting a significant ramp here for the fourth quarter. So that's one of the reasons we feel relatively confident here. We had -- there were a lot of challenges in terms of how these numbers came together for Q3. And we're saying PA sales continue at the rate that they're doing it, this is the number we would expect to hit.

So we're not -- I don't -- there's not a real ramp baked in there for Q4, so the bar is at an appropriate level given where the markets are. We also obviously had pretty stable lease revenue throughout the year that gives us a little bit of a base support in terms of towards that fourth quarter number we need to hit. So I think for a lot of reasons, we feel comfortable that we are not baking in any market recovery.

We're not baking in any changes in customer behavior that would be positive for us. There are things that could help us exceed this range, but I think based on everything we know, and assuming that the market doesn't improve, assuming that their customer behavior patterns will be consistent between Q3 and Q4, we think that the target for Q4 is appropriate and it's conservative.

Great. Thank you.

Thanks, Madeline.

Mark Massaro, BTIG.

Hey, guy. This is Vidyun on for Mark, thanks for taking the question. Maybe just at a high level, do you expect to see any changes in biopharma preference away from non-viral cell engineering approaches? Or any change to competitive environment. Thanks.

Yeah, so two parts to that question. We're not seeing -- any change we're seeing to non-viral is actually acceleration. So we continue to see, certainly in the allo space and the autologous space, movement toward nonviral. There's no doubt about that.

Competitively, we're not seeing anything that's out of the ordinary. We always have competition in the field. We're not seeing anything that would indicate that there's anything that is elongating or causing us to not be able to be effective.

Okay. Great. Thanks for taking the question.

Steven Mah, TD Cowen.

Hi, thanks for taking the questions. A lot of ground already covered, so just do some incremental questions here. I know you guys mentioned that prior 2022 PA orders, is there any way to get any granularity on companies, again, that they -- are they really just delaying, or have they actually dropped programs?

Because some of the drug-discovery companies have actually announced that they're actually dropping program. But just wondering if you guys have any visibility on companies actually dropping program, and if that was really driving the reason behind?

Thanks, Stephen. Most -- as we mentioned before, most of the weakness that we saw or seeing is really with these early-stage preclinical customers. We signed five SPLs this year, and they're all preclinical. And so, what you're seeing there is their having funding challenges.

We're seeing slower progression from customers in the clinic, but there's very few programs that have been stopped with our portfolio. I did mention one on pause, which was one partner that's looking to do some business development partner around that one asset. But other than that, no.

Okay, I appreciate that. And then, last question for me. Seems like you're maintaining the $6 million SPL revenue guide. Again, just your level of confidence on hitting that $6 million. Thanks.

Sure. So we're pleased where we are year to date in terms of milestone. Further really of revenue, we do have a large item baked into Q4 which we've waited appropriately to come up with scenarios that would generate that $6 million. I think we've said before that we will not reach it if that program does not get approved, and there are opportunities to exceed that number.

So on a probability weighted average, we came down to $6 million. But again, just because -- as what we said before, we won't hit that number if there's not an approval.

Great. Thank you.

Thank you.

Jacob Johnson, Stephens.

Hey, thanks, good evening. Maybe just to follow up. One, just on the 4Q outlook, does that assume any -- I know DJ, you just talked about the program revenue from the large customer with potential commercial approval.

Did the 4Q revenue assume any pickup in PA demand associated with that launch? Or is that a similar backdrop as 3Q?

No, we've basically held the run rate. The daily rate of orders for PAs, we've just held constant. If we looked at our Q3 experience, we didn't take any -- make any assumptions that things would improve from here, and we think that that's the right assumption to make. So we're not baking in any additional for any large customer to come in and do things.

Things could come in and certainly improve the situation. We think we've appropriately covered the downside.

Got it. Thanks, DJ. And then, just on the PA stocking dynamic, there are ways to think about the shelf life of those broad products if this persists like how long until somebody would have to reorder if things remain muted.

And I'm just curious, obviously, you're assuming things are weak again in 4Q. I know it's too early to think about 2024, but what are you looking for in terms of customers for PA orders to maybe pick up? When could that happens? And what needs that?

So we're really -- because this product is a room-stable product, there isn't any concern about shelf life, so that's not an issue. Again, I think we're just pointing to some of our partners' programs in the clinic that we believe are progressing toward good clinical data. That should improve our PA uptake after the fourth quarter.

I really don't want to spend too much time on the '24 until we really get '23 under our belt right now. I think about what we're going to do about repositioning, what we need to do for the company.

Got it. Thanks, Doug.

Thank you.

And that does conclude today's presentation, and the end of the question-and-answer session. Thank you for your participation today, and you may now disconnect.