MaxCyte, Inc. 10-Q Summary
Business context and reporting period
MaxCyte is a life sciences company providing cell-engineering instruments, single-use processing assemblies, software protocols, licenses and related services for cell therapy, drug discovery and biomanufacturing. This unaudited Form 10-Q covers the three and nine months ended September 30, 2021, compared with the corresponding 2020 periods.
The company completed its U.S. initial public offering on August 3, 2021, issuing 15.525 million shares at $13.00 per share and receiving net proceeds of $184.3 million. As of November 5, 2021, 100.434 million common shares were outstanding.
Key financial metrics
| Metric | Q3 2021 | Q3 2020 | 9M 2021 | 9M 2020 |
|---|---|---|---|---|
| Revenue | $10.1 million | $6.8 million | $23.7 million | $17.7 million |
| Gross profit | $9.2 million | $6.0 million | $21.3 million | $15.8 million |
| Gross margin | 91% | 89% | 90% | 89% |
| Operating loss | $2.4 million | $2.8 million | $13.2 million | $8.7 million |
| Net loss | $2.7 million | $3.1 million | $14.2 million | $9.2 million |
| Net loss per share | $0.03 | $0.04 | $0.16 | $0.14 |
| Operating cash flow | Not separately provided | Not separately provided | $(9.7) million | $(6.9) million |
Q3 revenue consisted of $6.2 million from cell therapy, $1.9 million from drug discovery and $2.0 million of program-related revenue. Nine-month revenue consisted of $15.7 million from cell therapy, $5.5 million from drug discovery and $2.5 million of program-related revenue.
At September 30, 2021, cash and cash equivalents were $59.0 million and short-term investments were $196.9 million, for total cash, cash equivalents and short-term investments of approximately $255.9 million. Total assets were $277.7 million, total liabilities were $13.6 million and stockholders’ equity was $264.1 million. The company had no outstanding debt facility after repaying its $5.0 million MidCap term loan in March 2021.
Capital expenditures and other investing uses included $2.7 million of property and equipment purchases during the first nine months. Financing activities generated $233.5 million, primarily from the first-quarter equity raise, the IPO and stock-option exercises.
Material changes versus the prior comparable period
- Q3 revenue increased 50% to $10.1 million; nine-month revenue increased 34% to $23.7 million.
- Cell therapy revenue increased 38% in Q3 and 47% for the nine-month period, driven by instrument sales and licenses and higher disposable sales.
- Program-related revenue increased to $2.0 million in Q3 from $0.3 million and to $2.5 million for nine months from $2.0 million. Management expects milestone revenue to remain variable.
- Gross margin increased to 91% in Q3 and 90% for nine months, partly because milestone revenue has no associated cost of goods sold.
- Q3 research and development expense declined 39%, and nine-month research and development expense declined 6%, primarily because the CARMA platform was wound down. No material CARMA-related expenses were incurred in Q3; nine-month CARMA-related costs totaled $4.4 million, including $1.8 million of severance, legal and other cessation costs.
- Sales and marketing expense increased 58% in Q3 and 50% for nine months, reflecting higher headcount, compensation, commissions and stock-based compensation.
- General and administrative expense increased 144% in Q3 and 139% for nine months, driven by higher compensation, stock-based compensation, legal and professional fees and costs of being a U.S.-listed public company.
- Despite revenue growth, the nine-month net loss widened to $14.2 million from $9.2 million, and operating cash use increased to $9.7 million from $6.9 million.
Guidance, outlook, commentary and risks
Management expects continued revenue growth as cell therapy markets expand, additional instruments and disposables are sold, the installed base under cell therapy licenses grows and new Strategic Platform License agreements are executed. The company signed such agreements with Myeloid Therapeutics, Celularity and Sana Biotechnology during the first nine months of 2021 and cited potential for meaningful milestone revenue over the following 12 to 18 months, while emphasizing that timing and realization are uncertain.
Management expects continued operating losses and increased spending on sales and marketing, research and development, manufacturing scale-up, product development and public-company compliance. The company believes its IPO proceeds and existing cash resources will fund operating and capital requirements for the foreseeable future, but cautions that actual cash usage could exceed expectations and additional financing may be required.
- Revenue is exposed to quarterly volatility because of long sales cycles, limited product offerings and uncertain partner milestone timing.
- A limited number of customers and partners contribute materially to revenue. One customer represented 28% of Q3 revenue, 22% of nine-month revenue and 38% of accounts receivable at September 30, 2021.
- The company relies on single-source or limited-source suppliers; two suppliers represented approximately 60% of Q3 inventory purchases and one supplier represented approximately 39% of nine-month purchases.
- COVID-19 may continue to affect manufacturing, supply chains, customer operations, installations, demonstrations, shipments and clinical development timelines.
- Competition, technological change and potential pricing pressure could reduce market share or gross margins.
- The company has approximately $24.5 million of incremental non-cancellable lease payments related to new office, laboratory and manufacturing space, with the first phase expected to commence by the end of 2021.
- The company has incurred significant cumulative losses, with an accumulated deficit of $109.4 million, and may never achieve profitability.
- No material legal proceedings were reported, and management stated that there were no material changes to the risk factors in the IPO prospectus.
Important facts for investors to verify
- Whether revenue growth and milestone revenue continue without creating excessive quarter-to-quarter volatility.
- The conversion of the company’s large cash and short-term investment balance into sustainable operating growth, given continuing losses and negative operating cash flow.
- The timing, economics and clinical progress associated with Strategic Platform Licenses and partner milestones.
- Customer and partner concentration, including the material accounts-receivable exposure to one customer.
- Supplier concentration, component availability and the effect of supply-chain constraints on production and delivery.
- The financial impact of the new long-term facility lease, manufacturing expansion and expected public-company operating costs.
- Future stock-based compensation, dilution and the company’s ability to fund operations without additional equity or debt financing.