Business Context and Reporting Period
MaxCyte, Inc. is a life sciences company that provides cell-engineering instruments, processing assemblies, consumables, licenses and related services for cell therapy, drug discovery and biomanufacturing. This unaudited Form 10-Q covers the three months ended March 31, 2022, compared with the three months ended March 31, 2021.
Financial Performance and Position
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Revenue | $11.6 million | $6.5 million | Up 78% |
| Gross profit | $10.5 million | $5.8 million | Up 81% |
| Gross margin | 91% | 89% | Up 2 percentage points |
| Operating loss | $4.2 million | $6.4 million | Improved by $2.2 million |
| Net loss | $4.1 million | $7.1 million | Improved by $3.0 million |
| Basic and diluted loss per share | $0.04 | $0.09 | Improved |
| Net cash used in operating activities | $3.7 million | $4.6 million | Improved by $0.9 million |
Revenue comprised $7.4 million from cell therapy, $2.2 million from drug discovery and $2.0 million of program-related revenue. Product sales contributed $6.6 million, lease elements $4.7 million and other revenue $0.3 million. The approximately 91% gross margin benefited from milestone revenue, which carries no associated cost of goods sold; excluding program-related revenue, management stated that gross margin was materially unchanged.
Operating expenses were $14.7 million, including research and development of $3.8 million, sales and marketing of $3.8 million, general and administrative expenses of $6.6 million, and depreciation and amortization of $0.4 million. Stock-based compensation was $2.5 million, compared with $1.3 million in the prior-year quarter.
At March 31, 2022, cash and cash equivalents were $239.8 million and short-term investments were $6.5 million, for total cash and short-term investments of $246.3 million. Total assets were $291.0 million and stockholders’ equity was $262.2 million. The company had no indebtedness; its prior term loan was repaid in March 2021. Operating lease liabilities totaled $13.3 million, and the new facility lease carries approximately $29.6 million of incremental non-cancellable payments over its term.
Investing activities provided $194.8 million, principally from $200.8 million of short-term investment maturities, partially offset by $6.0 million of property, equipment and lease-related construction expenditures. Financing activities provided $0.9 million from stock-option exercises. The accumulated deficit was $118.4 million.
Material Changes Versus the Prior Comparable Period
- Revenue increased $5.1 million, driven by higher cell therapy instrument and license revenue, increased disposable sales and a $2.0 million increase in program-related milestone revenue.
- Cell therapy revenue rose 57% to $7.4 million; drug discovery revenue rose 23% to $2.2 million.
- Research and development expense declined 38%, primarily because CARMA-related activities were substantially wound down after March 31, 2021.
- Sales and marketing expense increased 38% as the company expanded its commercial organization.
- General and administrative expense increased 121%, reflecting public-company costs, higher compensation, stock-based compensation and occupancy expenses.
- Cash increased substantially because of maturities of short-term investments; the increase was not primarily generated by operations.
- Property and equipment increased to $13.2 million from $7.7 million, reflecting laboratory and facility investment. Operating lease right-of-use assets increased to $10.9 million from $5.7 million.
Guidance, Outlook, Risks and Unusual Items
Management expects revenue to increase over time as cell therapy markets develop, additional instruments and disposables are sold, the installed base under cell therapy license agreements grows and additional Strategic Platform License agreements are signed. The company signed an SPL agreement with Intima Bioscience during the quarter and expects to sign additional agreements, although timing is uncertain.
Management expects continued net losses and increased near-term spending for sales and marketing, research and development, product development, manufacturing scale-up and public-company infrastructure. Based on its current business plan, management believes existing cash and short-term investments will fund operating and capital requirements for the foreseeable future, but notes that assumptions may prove incorrect and additional financing could be required.
- Program-related milestone revenue is expected to remain volatile because it depends on a limited number of partner achievements and decisions.
- The company remains dependent on a limited number of products, partners and customers. One customer represented 33% of Q1 2022 revenue and 28% of accounts receivable at March 31, 2022.
- Supply-chain risk remains material; approximately 39% of inventory purchases came from one supplier during the quarter.
- COVID-19 may continue to disrupt manufacturing, supply chains, customer operations, installations, clinical trials and sales cycles, although the filing does not quantify its impact on revenue or expenses.
- The company faces competition, adoption risk, regulatory and intellectual-property risks, and uncertainty regarding partner milestones and commercialization.
- The new office and manufacturing lease is expected to run through August 2035, with Phase 3 estimated to commence in the first quarter of 2023.
- Chief Financial Officer Amanda L. Murphy resigned effective April 15, 2022 and was replaced by Ron Holtz as interim CFO. A subsequent severance agreement provides for $315,000 of cash severance, healthcare coverage and consulting fees of $35,000 per month for up to six months.
- No material legal proceedings were reported, and management stated that there were no material changes to the risk factors disclosed in the 2021 Form 10-K.
Facts Investors Should Verify
- Whether revenue growth and gross margins can be sustained without relying disproportionately on volatile milestone revenue.
- The timing, economics and commercial progress of additional SPL agreements and partner programs.
- Cash burn, capital expenditures and the duration of the company’s $246.3 million liquidity position as planned spending increases.
- Customer and supplier concentration, including the 33% revenue contribution from one customer and 39% of inventory purchases from one supplier.
- Execution of the new facility build-out, lease commitments and associated manufacturing-capacity expansion.
- The impact of COVID-19, supply-chain constraints, competition and regulatory developments on customer adoption and product delivery.
- The financial and operational effects of the CFO transition and related severance and consulting arrangements.