MaxCyte, Inc. 2022 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2022; filed March 15, 2023. MaxCyte is a commercial cell-engineering and life-sciences company that sells or licenses ExPERT Flow Electroporation instruments and sells processing assemblies, buffers and related consumables to cell-therapy, drug-discovery and biomanufacturing customers.
Business context and operating position
- The ExPERT platform includes ATx, STx, GTx and the newly launched VLx instrument, introduced in September 2022 for very large-scale cell engineering.
- The installed base exceeded 600 instruments at December 31, 2022, compared with more than 500 at December 31, 2021.
- MaxCyte had 18 active Strategic Platform License partnerships at year-end, covering more than 125 potential clinical programs; 16 programs were active in the clinic.
- Potential precommercial milestone payments under SPLs exceeded $1.55 billion if all licensed programs obtain regulatory approvals; this amount is highly contingent and is not a forecast of expected revenue.
- The Company had 125 full-time employees, compared with 84 at the end of 2021, and relocated to approximately 67,000 square feet of leased space in Rockville, Maryland.
Financial performance
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Revenue | $44.3 million | $33.9 million | Up 31% |
| Gross profit | $39.2 million | $30.2 million | Up 29% |
| Gross margin | 88% | 89% | Down 1 percentage point |
| Operating loss | $27.4 million | $18.2 million | Loss increased |
| Net loss | $23.6 million | $19.1 million | Loss increased 24% |
| Basic and diluted loss per share | $0.23 | $0.21 | Loss per share increased |
| Cash flow from operations | $(14.8) million | $(10.7) million | Greater cash use |
| Cash, cash equivalents and short-term investments | $227.3 million | $255.0 million | Decreased |
Revenue mix: Cell-therapy revenue was $30.5 million, up 33%; drug-discovery revenue was $9.1 million, up 8%; and program-related revenue was $4.6 million, up 83%. Product sales were $27.7 million and lease-element revenue was $15.5 million. One cell-therapy customer represented 23% of total revenue, and the six largest customers represented approximately 40%.
Expense profile: Research and development expense increased 27% to $19.5 million, sales and marketing increased 43% to $18.7 million, general and administrative expense increased 38% to $25.8 million, and depreciation and amortization increased 87% to $2.5 million. Stock-based compensation increased to $11.8 million from $8.0 million.
Other income: Interest and other income increased to $3.9 million from $0.2 million, primarily because of higher short-term investment balances and interest rates. Interest and other expense declined to $0.1 million after the Company repaid its $5.0 million term loan in March 2021 and settled its warrant in August 2021.
Liquidity, capital resources and debt
- At December 31, 2022, cash and cash equivalents were $11.1 million and short-term investments were $216.3 million.
- Management stated that existing cash, short-term investments and internally generated cash flows should fund operating expenses and capital expenditures for at least the next 12 months, subject to assumptions that could prove incorrect.
- The Company had no debt obligations at year-end. Operating lease liabilities totaled $16.1 million, and non-cancellable lease payments under the new headquarters lease were approximately $29.6 million over the lease term.
- Investing cash use was $24.8 million, including $18.5 million of property and equipment purchases, largely associated with the new facility and operating expansion.
- Financing cash inflow was $2.9 million from stock-option exercises; 2021 benefited from $236.1 million of equity proceeds, including the $184.3 million net U.S. IPO proceeds.
Material changes versus 2021
- Revenue growth was driven principally by increased instrument sales and licenses, higher processing-assembly sales, growth in cell-therapy customers and additional clinical milestones.
- Program-related revenue increased substantially but remains dependent on a small number of customer clinical progress events and is therefore volatile.
- Operating expenses grew faster than revenue, resulting in a larger operating loss and net loss despite higher gross profit.
- The Company substantially expanded its workforce, manufacturing capacity and facilities, and began in-house processing-assembly manufacturing in 2022.
- Cash and short-term investments declined by approximately $27.7 million during 2022, while operating cash use increased.
- The Company launched the VLx platform and additional processing assemblies, including products designed for larger-scale and closed-process workflows.
- There were no material legal proceedings reported, and management concluded that disclosure controls and internal control over financial reporting were effective at year-end. The external auditor was not required to provide an internal-control attestation because of the Company’s emerging-growth-company status.
Guidance, outlook, commentary and risks
Management did not provide a specific numerical revenue or earnings outlook in the filing. The Company expects continued net losses and expects research and development, sales and marketing, and general and administrative expenses to increase as it expands its commercial infrastructure, manufacturing capabilities, international operations and product portfolio.
- Growth depends on adoption of non-viral cell-engineering technologies, expansion of the installed base, increased processing-assembly utilization and additional SPL partnerships.
- Future milestone and commercial payments depend on partners’ clinical development, regulatory approvals and product commercialization; no commercial sales-based payments had been received through year-end 2022.
- The VLx strategy requires customer adoption, suitable upstream and downstream technologies, additional process-development capabilities and GMP-compliant processing assemblies; implementation cycles may be longer than expected.
- Revenue is concentrated among a limited number of customers and is exposed to lengthy sales cycles, customer funding conditions, program cancellations, clinical failures and partner termination rights.
- Supply-chain exposure remains material: approximately 34% of year-end inventory was purchased from one supplier, and certain instrument and processing-assembly components rely on single or limited sources.
- The Company faces competition from larger life-sciences suppliers, including Lonza, Thermo Fisher, Miltenyi Biotec, Bio-Rad and Harvard Bioscience.
- Key risks include continued losses, potential need for additional capital, execution risk in scaling manufacturing, product defects, regulatory changes, data privacy and cybersecurity incidents, intellectual-property disputes, foreign-exchange exposure and volatility associated with dual trading on Nasdaq and AIM.
Most important facts for investors to verify
- Whether revenue growth continues without increasing reliance on unpredictable milestone revenue or a small number of customers.
- Progress of the 16 clinical programs, the timing and probability of future SPL milestones, and whether any partner programs receive regulatory approval.
- Customer adoption, sales-cycle length and commercial traction for the VLx platform and related large-scale processing assemblies.
- Whether operating expenses and cash burn moderate as revenue scales, and how long the $227.3 million of cash and short-term investments will fund operations.
- Manufacturing capacity, quality performance and supplier diversification as in-house processing-assembly production expands.
- The Company’s ability to maintain an approximately 88% gross-margin profile amid product-mix changes, distributor expansion and higher labor and material costs.
- Potential dilution from outstanding equity awards and the effect of the 12.7-year headquarters lease commitment on future liquidity.