MaxCyte, Inc. 2023 Q3 Form 10-Q Summary
Business context and reporting period
MaxCyte is a life sciences company providing cell engineering technology for cell therapy, gene editing, immuno-oncology, drug discovery and biomanufacturing. It sells and licenses instruments and technology and sells related consumables and processing assemblies. The filing covers the three and nine months ended September 30, 2023 and was filed November 8, 2023.
Key financial metrics
| Metric | Q3 2023 | Q3 2022 | 9M 2023 | 9M 2022 |
|---|---|---|---|---|
| Revenue | $8.0 million | $10.6 million | $25.6 million | $31.8 million |
| Gross profit | $7.2 million | $9.3 million | $22.5 million | $28.3 million |
| Gross margin | 90% | 87% | 88% | 89% |
| Operating loss | $(14.0) million | $(7.7) million | $(40.2) million | $(20.6) million |
| Net loss | $(11.3) million | $(6.4) million | $(32.6) million | $(18.8) million |
| Net loss per share | $(0.11) | $(0.06) | $(0.32) | $(0.18) |
| Cash used in operating activities | Not provided for the quarter | Not provided for the quarter | $(22.7) million | $(8.7) million |
At September 30, 2023, MaxCyte had $49.2 million of cash and cash equivalents, $141.1 million of short-term investments and $18.4 million of non-current investments, totaling approximately $208.7 million of cash and investments. Management separately reports cash and cash equivalents plus short-term investments of $190.2 million for liquidity planning.
The company had no debt obligations. Total liabilities were $33.4 million, including $16.1 million of operating lease liabilities. Stockholders’ equity was $233.4 million, and accumulated deficit was $170.5 million. Nine-month investing cash flow was positive $59.1 million, primarily reflecting investment maturities of $247.5 million less investment purchases of $185.6 million. Financing cash flow was positive $1.7 million from stock-option exercises.
Material changes versus the prior comparable period
- Q3 revenue declined 25% to $8.0 million; nine-month revenue declined 20% to $25.6 million.
- Q3 cell therapy revenue fell 40% to $4.7 million, while drug discovery revenue declined 5% to $1.9 million. Program-related revenue increased 86% to $1.4 million.
- Management attributed lower product revenue primarily to customer purchase timing and macroeconomic challenges affecting the cell therapy and drug discovery markets.
- Q3 gross margin improved to 90% from 87%, principally due to product mix. Nine-month gross margin decreased to 88% from 89%, reflecting initial scaling of in-house processing-assembly manufacturing.
- Nine-month research and development expense increased 30% to $18.0 million, sales and marketing expense increased 49% to $19.8 million, and general and administrative expense increased 9% to $22.0 million.
- Operating losses and net losses increased substantially as revenue declined while the company continued investing in personnel, commercial expansion, research and development, product development and infrastructure.
- Interest income increased to $7.6 million for the first nine months, from $2.0 million, due to higher interest rates and larger interest-bearing investment balances.
- Inventory increased to $12.5 million from $8.6 million at December 31, 2022, while accounts receivable declined to $8.2 million from $11.7 million.
- Shares outstanding increased to 103.5 million at September 30, 2023 from 102.4 million at December 31, 2022, primarily reflecting option exercises and restricted stock vesting.
Guidance, outlook, commentary and risks
Management did not provide quantitative revenue or earnings guidance in the filing. It expects total revenue to increase over time as customer programs advance, markets grow, the installed base under cell therapy license agreements expands, and additional Strategic Platform License agreements are signed. The company signed SPL agreements in 2023 with Catamaran Bio, Walking Fish Therapeutics, Lyell Immunopharma, Vittoria Biotherapeutics and Prime Medicine.
Program-related milestone revenue is expected to remain volatile because it depends on a limited number of customer-specific clinical events. Revenue may also fluctuate based on product and license purchase timing, partner program decisions and customer access to capital. Management expects continued near-term operating losses and increasing absolute research and development, sales and marketing and general and administrative expenses.
Management believes existing cash and investments will fund operating expenses and capital expenditures for the foreseeable future, but states that this assessment depends on assumptions that may prove incorrect. Additional financing could be required and may dilute shareholders or impose restrictive terms.
- Customer concentration is material: two customers represented 27% of Q3 revenue and 26% of nine-month revenue; two customers represented 46% and 10% of accounts receivable at September 30, 2023.
- Supplier concentration is material: three suppliers provided 75% of inventory purchases during Q3, and one supplier provided 55% during the first nine months.
- Competition, regulatory requirements, intellectual property protection, market acceptance, partner clinical progress and customer funding could affect results.
- The company relies on a long-term headquarters lease with approximately $29.6 million of incremental non-cancellable payments through August 2035.
- The filing reports no material legal proceedings and no material changes to the risk factors in the 2022 Form 10-K.
- Disclosure controls and procedures were evaluated as effective as of September 30, 2023, with no reported material changes to internal control over financial reporting.
Investor verification points
- Verify the timing and sustainability of recovery in cell therapy and drug discovery product sales.
- Track SPL milestones, license revenue and the timing and magnitude of future commercial payments.
- Assess whether elevated operating expenses and cash burn are translating into customer growth and recurring revenue.
- Monitor cash and investment balances, operating cash usage and the potential need for equity or debt financing.
- Evaluate inventory growth, customer and supplier concentration, and the impact of scaling in-house manufacturing on gross margins.
- Review dilution from stock-based compensation, option exercises and future equity awards; unrecognized stock-based compensation was $26.8 million at September 30, 2023.