So this is Steven Mah here in the Tools and Diagnostics team, introducing our next company in the bioprocessing space. It's my pleasure to welcome Maher Masoud, CEO of MaxCyte, and Doug Swirsky, CFO. So let's keep it interactive as possible. If there's any questions, please ask me. Otherwise, email me at steven.mah@cowen.com. So Maher, take some time to give an introduction to MaxCyte for those that are kind of new to the story.
Yeah, absolutely.
That'd be great.
Yeah, let me give a bit of introduction. MaxCyte was founded in 1999 from, at that time, EntreMed. The founders were, it was John Holaday, Dr. John Holaday, Dr. Geoffrey Antoni, and Doug Doerfler. Actually, the concept of MaxCyte, believe it or not, came out from the Center for Blood Research right here in Boston. The concept behind the company was it was always that cells can be a therapy, but it was where they were thinking that they can treat red blood cells to allow it to diffuse oxygen into the blood. You can treat low oxygen levels in humans.
Obviously, from there, as the cell therapy field began to expand, you saw a different type of organization where they used that same flow technology for engineering cells for increasing oxygen levels, where they realized that cell therapy is expanding, specific gene editing cell therapy is expanding, that you can use that flow electroporation to do something that's novel, in the sense of if you use electroporation, the right parameters. So in the ex vivo non-viral market, if you use electroporation, the right parameters, the right pulsing parameters, the right electricity itself, you actually cause temporary permeability of the cell membrane, the lipid bilayer cell membrane. And you allow payloads to go into the cell, and this all happens in a matter of seconds.
Where at that point, once you basically stop electroporation, the cell membrane closes back up, and you, in essence, have inserted the gene editing payloads, we call them payloads or target molecules, into the cell itself. So over the last 20 years, the company has truly perfected that non-viral ex vivo cell engineering optimization that therapeutic developers need as they're editing cells to treat indications. Hopefully, that gives a good feedback on that.
Yeah, no, that's great. That's great. Yeah, and congrats on the Casgevy approval, which uses your ExPERT platform you're just describing. Maybe kind of dive into kind of the differentiating factors, viral versus non-viral, pros, cons.
Yeah, so let me give you a bit of a background. So viral versus non-viral, let me take a step back. For gene-edited cell therapies, you have roughly about 60% of the editing being done ex vivo, 40% being done in vivo. Where we place in the ex vivo space, where we utilize non-viral delivery of payloads into the cell. What we've seen over the last, I'd say, few years, you're seeing more of a trend towards the space heading into that non-viral delivery. The reason being is if you look at the first few autologous CAR-T therapies or like, Yescarta, Kymriah, these are all autologous CAR-Ts that are using retroviruses, specific lentivirus.
As the space is evolving, where it's requiring more edited editing of the genome, it's requiring higher persistence, higher durability of the T cells to reduce exhaustion, that lends itself to ex vivo non-viral editing. Really, the only way you can do non-viral editing is predominantly through electroporation. That's where we play into it. You have seen some in vivo, such as nanoparticles, exosomes, come to light. But as I mentioned, the space, if you look at what Casgevy brought and what you're seeing behind it, you're seeing that complexity of gene editing truly increase. The only way to do that is really through electroporation, from our perspective.
You're seeing some companies now; we have some partners that are doing four edits, four edits to the cell, to be able to increase the durability, the persistence, reduce the exhaustion, really to be able to overcome that tumor microenvironment that you see. So that's where you're seeing the trend shift. We think that trend will keep shifting there. I think non-viral lends itself exactly to where the space needs to go, especially as other modalities are coming about. So we're seeing many CAR-T therapies right now being repurposed for autoimmune diseases. You're seeing some therapies now coming about where they're also targeting solid tumors as well, which requires certain edits. You're seeing TCRs come about, where they're able to go after the overexpression of tumor antigens that you usually can't do with typical autologous CAR-Ts.
That's where it's lending itself to that non-viral ex vivo space that we play into.
Okay. All right, great. Fantastic. And maybe let's go into the business model a little bit. So you have your instrument. You have a razor, razor blade model there. You also have a strategic partner, licensed business. Maybe get into both those kind of business lines.
Absolutely. I'll speak to this, and I'll let Doug also speak to our financial model there. So we have a razor-razor blade model, where in early research, we truly are it's your typical razor-razor blade. We sell our systems for early research. So you have a purchase of a system, and then purchase of consumables or Processing Assemblies, as we call them. But as these therapeutic developers go from research to where they need to optimize their process, they're doing process development, they're getting ready for preclinical, our model is we sign licenses. We sign strategic platform licenses with all of these companies. We have 26 of them right now. And the way it works is, at that point, every time you're using our system in the clinic, you pay us an annual license fee.
You also have, obviously, consumables and processing assemblies you're purchasing for the indication as well. And then we have early milestones, and we have later milestones that are value-based. So once a therapeutic company goes through from a phase 1 to a phase 3 or phase 1 to a pivotal, we have milestones there. We have commercialization approval milestones as well. And then we have back-ended sales-based payments for each of these licenses. And it's a combination of three things. It's sales-based payments, either in the form of a royalty or the form of a sales payment based on meeting of a certain sales milestone. And then coupled with that, you have the recurring revenue of your annual licenses for each instrument, as well as the processing assemblies as well. I mean, Doug, anything else to add?
Yeah, I think you completely covered it. I think just to reiterate, the instruments are sold on a research-use-only basis. When people want to take it into the clinic, and obviously in a commercial setting, that requires the annual license per instrument.
Okay . Got it. I know some details are maybe more confidential with your partners on some of the SPL. But I think you publicly disclosed you did earn some milestones from Vertex, CRISPR on Casgevy approval. Maybe whatever publicly disclosed, just to give the audience a sense for kind of the upside potential in terms of actually getting stuff into approval.
Sure. I can give some. So obviously, we have some confidentiality under these agreements. But we have, in 26-27, roughly 7 approvals possibly that are sitting on our platform. So these are for various indications. That's where we see the next approval wave coming, so to speak. Anything else to add there, Doug?
No. I mean, obviously, last year, we had a good milestone realization from Casgevy approval. It was approved in the U.K. That triggered the European milestone. It also was approved here in the United States. That triggered another milestone, which is why 2023 was particularly strong in terms of SPL program-related revenue.
Okay. Just directionally, it was about like $8 million in total for U.S. and EU approval, roughly, just to give a sense.
You're in the ballpark.
Ballpark. Okay. Appreciate that.
It's good to have the CFO here next to me. I don't have to answer that.
All right. Try to get it out of you, but it's Okay. All right. And then maybe on the SPLs, yeah, I mean, you talked about kind of the downstream. But can you just give a general sense of what the royalty rate is on commercialized products?
Absolutely. I can give you a general sense of these SPLs as well. So in early clinical, you have low- to mid-six-figure milestone payments upon value-generating events. In later clinical to approvals, you have low- to mid-seven-figure. And then on the commercial side, you have low single-digit sales-based payments. And as I said, that's inclusive of the three things, which are the sales-based payments in the form of either royalties or milestones, including annual recurring license fees, as well as the consumables. That's low single digits on the back end. And that's representative across our 26 partners.
Okay, got it. And I know you guys have historically given guidance about signing 3-5 SPLs per year. I don't know if you guys are continuing to give that guidance. But you've already signed 3 to date. And it's early March. So a lot of runway to go. Can you give us some color of why you've signed 3 already?
Absolutely. So we're healthy with that 3-4, 3-5 guidance we've given. We've signed 3. Sometimes it depends where they are in the negotiation process. So you could have a bolus coming in a few months, where you might not have that bolus in the next few months after it. But I think it shows the healthiness of our pipeline there for SPLs. And I'll get into it. But it lends itself to exactly what we do and where we differentiate ourselves from the competition. But I'm comfortable with that 3-4, 3-5 a year, even with the 3 signed in the first few months. We're still comfortable there. Doug, anything else to add?
I think that's all right. Yeah.
Okay , got it. And maybe in terms of inbound business development opportunities, has Casgevy reaching commercialization, has that changed the tenor of your BD discussions?
Yeah, I think it has a bit, because it's the first ex vivo non-viral therapy that's been approved. And that's utilizing our platform to engineer the cells. So obviously, that gives us a different color when we're speaking with potential customers and partners. What it does also is, now our system is the first fully validated commercial system. In addition to that, the Master File that we have is the first Master File that's now used in ex vivo non-viral therapy. So it does give a different color. But I want to kind of point you back. So what we do that really differentiates us is, the relationship we have with our customers goes back not just from the time they see a Casgevy approval or other companies using our system. We're nurturing these things from research all the way until preclinical, until they went into the clinic.
We provide that scientific support, that scientific know-how around electroporation, and really around the cell therapy workflow pre and post electroporation as well. So we're nurturing these relationships for sometimes for a year, 18 months beforehand. So yes, Casgevy does give us that validation. But the validation we have is from the scientific support we've been providing customers for years before that. So it's not to minimize. I mean, Casgevy has validated really us. It's validated the industry, that ex vivo non-viral industry as well. But it plays into kind of why we're working with them is the same reason we work with other companies as well. It's the relationship we build over the years, even before you're in the clinic.
Okay. No, that's helpful. You mentioned your Master File you have with the FDA. Maybe I think it's worthwhile to spend a minute or two on it and how that kind of simplifies your partners' clinical filings and how that kind of is a differentiation for MaxCyte.
Absolutely. Absolutely, Steve. So our Master File, what it does is, it's a fully validated Master File, where we allow our customers and our partners to have a de-risk regulatory pathway. So when a customer wants to go into the clinic, and they want to be able to utilize our EP system, they're able to do it by referencing our Master File. And it's been referenced now in over 45, I think, clinical trials, including Casgevy, which was approved as well, referenced our Master File. And what it does is, it's unique in the sense of, it allows us to, when they reference our Master File, we update our Master File that's with the FDA to include that therapy that's now going to the clinic. And the information that we share with the FDA is done on a confidential basis.
So it allows us to share the information needed to support that therapy through the clinic on a confidential basis. It also de-risks that customer's regulatory pathway specific to EP, specific to that critical step in a manufacturing workflow. It's now something that's been utilized in over 45, as I mentioned, utilized by an approved product. In essence, you don't want to say anything is risk-free. But you've almost completely de-risked the regulatory pathway specific for that critical EP step.
Okay. No, that's helpful. And you remember saying your technology being used in a number of clinical trials now. Could you give us, in a directional way, what type of therapies are these? Are they CAR-T, TCR, Natural Killer cells? Maybe give us a sense. And if there's any increased interest in one cell type or another.
That's a great point. No, it's a mix. What we're seeing is, and I kind of touched upon it before, is the first therapies these were all viral editing, where it was autologous CAR-Ts. So we do have autologous CAR-T therapies. But we also are seeing TCR therapies. As I mentioned, TCRs allow you to really target the overexpression of antigens on tumor cells themselves. It kind of lends itself more to solid tumors. We are seeing also NK cells, where therapies it has, theoretically, a better safety profile than some CAR-T cells. But we're also seeing a lot of therapies where it's allogeneic CAR-Ts, where you're editing towards that tumor microenvironment. So it's to ensure that you can reduce the exhaustion of the T cells, increase the persistence, increase the durability. And you're also seeing HSCs come about. And you're seeing gamma delta cells as well.
The reason being is, again, the theory behind it is, you have a higher likelihood of targeting solid tumors, as well as even leukemia, blood cancers as well. You're seeing more specific targeting of the cancer overexpression of the antigens themselves. So it's really more specific to the markers within the tumor microenvironment rather than just the surface markers on the outside of cancer cells.
I'd also like to mention that, in addition to expanding the number of cell types that our platform is being utilized in, we're also seeing the scope certainly beyond cancer now. We're seeing rare diseases, autoimmune, and so utilization of the platform in many therapeutic areas.
Okay, got it. Actually, so to add to that, if you look at Lion TCR, who we entered into a license with this year, that's a great point. They're also going after infectious disease cancers, so hepatitis B virus-induced cancers. And they're using TCRs rather than T cells for that. So you're seeing more complexity in terms of the indications and then complexity in terms of the editing of the cells themselves, whether they're T cells, TCR cells, HSCs, gamma delta. You're seeing that broad range of indications and a broad range of cells being edited as well.
Okay, got it. And the ExPERT platform can work across all of these different cell types?
That's what we've done for the last 20 years. So our scientific support, both in the field and in the lab itself, we've built it where we can edit any cell with any payload, as we call it, CRISPR reagents and other editing reagents as well. Obviously, there's always going to be new modalities. And that's what we've built this team for, is to ensure that we stay ahead or current with the field as other indications and other cell types need to be edited as well.
Okay, got it. And then in terms of payload, we talked about it. I mean, there's certain advantages to using electroporation versus viral in terms of payload size, right?
It's a few things. That's exactly right. So viruses are notorious naturally for being able to get things into cells. The issue with viruses where that's why non-viral delivery lends itself, especially electroporation, is the payload constraints. The payload constraint for viruses is limited. And then the cost of manufacturing viruses are fairly high as well. And then, as we know, we've had some early I don't know if I call it guidance, but some early paperwork from the FDA, some concerns with viruses and off-target effects. So really, it's a combination of safety, the cost, and the payload constraints that viruses present that lends itself to the ex vivo non-viral delivery method.
Okay. All right, got it. All right. So let's maybe go back to 2024. And we'll talk about your guidance you just announced recently. So 2023, there was kind of a pullback generally in the cell and gene therapy space, where people were either cutting back the number of clinical trials or pausing clinical trials. Given kind of the current market environment, maybe talk about how that has impacted your business, both from the core revenues and then also signing new SPLs. I mean, obviously, it seems like it hasn't impacted signing new SPLs since you have 3 this year. But maybe just some higher-level comments in light of your recent guidance.
Did you want to take this one, Mr. CFO?
Sure. So I think I want to make sure I understand the question, Steve. Sort of more focused on understanding how we got through 2023 and some reflections on that? Or are you more focused on 2024?
Yeah, 2023 and how that kind of has shaped the guide. And trying to basically figure out, are you guys being conservative based on 2023? Or is your guidance based on what you're seeing maybe in the first quarter of this year?
So I think just philosophically on guidance, I notice this job is a lot more fun when we meet or exceed investor expectations. So I think we are trying to be appropriately conservative. And we are mindful that last year, we did have to restate guidance. We had to do it more than once. And so we've taken a fresh look at how we model our business and make sure we've got a good understanding of what the opportunities are in front of us. I think keep in mind, on core revenue, there's really the components of that. That includes the instrument sales. It includes the single-use disposables. And it includes the lease payments that we receive from the SPL relationships. Instrument, we have good visibility on the lease component of that. We have good visibility into what we believe is the opportunity set for instrument placements in 2024.
I think the piece that's a little bit hard to fully understand right now and appreciate is the pull through. What's the utilization of the instruments? How many PAs are we going to sell as a result? That's a little bit of an unknown. We've tried to be conservative with that, model it based on real-time trends here. And so last year, I think that it took us a while to really fully feel and absorb the impact and start to note it in our financials and accept the reality that the market had turned down. We do see signs of it improving. But we haven't built into the model significant upturn. So I think there's some upside from where we've guided. But I think that we're not sandbagging either. I think we've been appropriately conservative with the 2024 guidance that we announced.
Okay, got it. And then given kind of the people pull back and people just want to conserve cash, have you noticed on your SPL BD discussions? I know there's some puts and takes. We discussed some of the traction you've got. And it was Casgevy. And obviously, you've been talking to your partners for 18 to 18+ months. Has there been any color you can provide on kind of the SPL discussions?
I can. Yeah, absolutely. So let me add a little bit. So I think what you saw early on in the 2021-2022 time period, when there's a lot of funding in the industry, you saw many companies with the hopes of pursuing 5, 6, 7 therapies into the clinic. What we've seen is, and that's why it's still a healthy SPL pipeline, that's why we still signed 3 this year, we're seeing a reprioritization of programs, where if companies were thinking of taking 5 or 6 programs to the clinic, they're focusing more on 1 or 2. That's really what we're seeing. And I've said this. And I say to the team as well, in my mind, that's healthy. What we saw in 2021 and 2022, that's kind of you're spreading yourself a bit too thin.
So sometimes, when the funding environment becomes a little bit more realistic, you see companies truly look at the science of their programs and take the ones that they believe have the highest likelihood of success in the clinic through the clinical process. And that's why when we sign these SPLs with companies that have now refocused or focused themselves, prioritized themselves on the therapies that they want to take into the clinic, in a sense, you're signing now with something that has a higher chance of making it through the clinical process from phase one through registrational to approval. So I see it as a healthy sign of where the industry is going. So that's why it's healthy. And that's what we're seeing. It's more reprioritization than anything else, Steve.
Okay. So only the higher quality assets are kind of being pushed through.
Exactly. Exactly.
Anything else to add?
No, I think it's just important to recognize that we entered into these SPL relationships. And there is no one-size-fits-all approach. I think these companies, these customers, they have different pain points. Some of them, the absolute cash early in the program is precious. And they want to move some of it to the back end. Others, they want to be less encumbered on the back end and are willing to pay for it. Our goal is to realize a certain value from each relationship we get into. But the fact is, there's different ways to get there. And we want to be sensitive to our needs of our partner. I'd love to be able to tell people and be very transparent, with this partner, this is the arrangement, and go through that with the entire pipeline. And the reason we don't do that is really twofold.
One, we don't want to impact our competitive position, our ability to negotiate the best deal for the company. And then two, our customers don't necessarily want that level of transparency, depending on what the stage of the program is. So we do want to provide as much information as possible while retaining the flexibility to negotiate the best deal we can for the company.
Okay, got it. All right. No, that makes sense. And I guess, anecdotally, we've kind of heard the same thing from other people that are kind of in this kind of R&D tech-sharing economy, that larger partners, yeah, to your point, don't want to be encumbered, willing to pay more upfront, less on the back end. Is that sort of what you're seeing kind of just generally between potential big partners versus more merging companies?
I think we understand going in that that would be sort of their bias. Of course, they want to negotiate everything down. And our goal here is to do the best we can economically in each interaction and make sure that we at least have the discipline to say, if we're entering into a relationship, we feel that there's significant value that's going to accrue to MaxCyte from being in that relationship.
Yeah, I think, let me add to that as well. So these deals are like a balloon, in a sense. So if you're pushing on the front end, really, there's a different back end and vice versa. But the risk-adjusted net present value of these deals are roughly the same. So that's why it's that balloon. Whether you push upfront or on the back end, it's not really changing net present value from a risk-adjusted standpoint.
Yep. No, fair enough. Yeah.
All right. Well, maybe let's pivot over to your manufacturing facilities, new GMP facilities. Maybe spend a few minutes on that and maybe focus on the ability to scale. As you continue to add SPLs, are you going to have the capacity to really kind of serve your customers?
Absolutely. So part of the reason why we went public in 2021 was to ensure that we have the resources in-house to build up our infrastructure. What we did with part of the raise was we built out all manufacturing. So everything is manufactured in-house in our Rockville facility. That's the instruments themselves, the consumables as well. Then we also built out our quality and regulatory department. That was to get ready. It was to get ready for Casgevy and any other program in the clinic that was going to be commercialized to ensure that we can manufacture and support them. We're fully confident that everything we've done, we can leverage now for the foreseeable future for future therapies approved. I mentioned in 2026, 2027, there are potentially seven products also on the heels of Casgevy that could be approved utilizing our system.
We can fully leverage everything we've built right now to be able to support that from a manufacturing perspective. We've also used those proceeds to make sure that we've built up our scientific know-how as well. You mentioned earlier, as the field expands and there are other cell types being edited, other editing reagents, that's what we've also used the proceeds for. And I'm fully confident that and I think we're fully confident that what we have and what we've built up, we can leverage for multiple products for the foreseeable future without having to increase the spend in any significant manner to be able to support therapies.
Okay, got it. And yeah, I know when I visited your Rockville facility, I saw kind of the internal R&D teams where you kind of work with your partners to kind of optimize the electroporation parameters and whatnot. So you're saying that you have the capabilities then to scale as you continue to add new partners?
We do. So we have the capabilities to scale. We can leverage what we have now for the application scientific team, for the engineering, the quality, the regulatory to truly it's multiple partners all the way for the foreseeable future. Doug, anything else to add?
I mean, I think the word to scale and leverage. Clearly, we ramped up spending. It seems like maybe the wrong time to have done that. But we want to be in the best position to support our commercial partners and the companies that we're working with that we also hope will achieve regulatory approval down the road. So the expenditures we've got that are baked into that facility and the teams that we've built, we've got a significant opportunity ahead of us in the coming years to realize a lot of value from leveraging that investment.
Yeah. All right. Okay. And then you guys have talked also about expanding globally. Maybe you can spend a minute or two on kind of the initiatives to kind of expand your footprint and geographies.
Absolutely. And that's also what we did over the last few years, which is in addition to North America, we have a presence in Europe. We have a presence in Asia as well. So if you look in the past few years, we signed partnership agreements, licenses with LG Chem, with Curigin. We recently signed a license with Lion TCR in Singapore, LG Chem and Curigin in Korea. We're also seeing an expansion in Japan and China as well. And we have a footprint there. And that's what we built ourselves out, where we can scale. It's not just the engineering and the manufacturing of it. Also, our sales team, our commercial operations, is fully built out for the Asia expansion that we seem to be seeing.
We're seeing some funding in Asia that is, I'd say, in line maybe even a little bit more than what you see here in North America, specific to cell and gene therapies. We're fully capable. We've built out the team to support basically a global presence for where cell therapies are being developed.
Okay. All right. Fantastic. And then maybe in the last couple of minutes, let's talk about your cash position now. You have a pretty healthy balance sheet. What's your sense on kind of cash runway and if you're going to kind of leverage the balance sheet for any sort of tuck-in acquisitions or technology acquisitions?
Absolutely. I'll add to that. And then Doug, feel free to add. So obviously, we have a very healthy balance sheet. We're being very disciplined in how we run the organization. Reason being is we know that cash is an asset. Over the past few years, we've also built up our corporate development department to really understand the market, understand when a strategic opportunity arise, for us to be able to act on those should those opportunities arise. So that's why running the organization in a disciplined way, preserving that cash, when the opportunity arises, we're willing to act. And we'll make sure that what we do is always complementary to what we do now, which is really best in class electroporation system. And we're being disciplined. And I think anything else to add there, Doug?
Yeah. I mean, the goal with the cash is really to serve two purposes. One is if we find something from a corporate development point of view that we think, as you put it, a tuck-in acquisition or something that would fit, and we've been very disciplined. We've certainly evaluated a number of things. But if we find something that fits, we'll act. And we think it's going to bring value to the company. And then the other piece is, do we have the runway here to move this company towards profitability? Obviously, we can't. We're not providing guidance for what we think the revenue ramp's going to be beyond this year. But that's the goal. The goal here is to use the resources we have to build the company to profitability.
Yeah. And I would add, I mean, we have a very healthy business. So we're not going to purchase revenue for the sake of purchasing revenue. It needs to be strategic, as Doug mentioned, where we're confident in where cell therapy space is going. People say that maybe the infancy was 2021, where you saw the boom in funding. It's the opposite. I'd say this is the infancy of cell and gene therapy. So we want to ensure that as it expands, we're expanding with it. And that's why we won't buy revenue for the sake of revenue. But when we see strategic fits, we'll make sure that we act accordingly.
Okay. All right. Well, fantastic. Well, I want to thank you both for participating.
Thank you, Steve.
It's been a great run for you guys. Congrats. Looking forward to further successes.
Yeah. Thank you, Steve. Really appreciate it.
Really appreciate it.
Absolutely.