Ideally placed to sustain growth
Update | 17 July 2019
MaxCyte is maintaining its momentum, delivering revenue growth of 21% during H119 and having grown at a CAGR of 24% over the last four years. This was driven in part by the number of licensed cell therapy programmes increasing by c 10 to over 80. As was highlighted at the Capital Markets Day last week, the demand for MaxCyte’s technology, especially from those companies developing cell therapies, is only likely to grow. Cell therapy companies are focussing more on gene-modified therapies and are increasingly looking for alternatives to viral methods, leaving MaxCyte ideally positioned to benefit. At the same time, development of MaxCyte’s CARMA platform advances as expected: data from the current Phase I/II trial are due in H120. We value MaxCyte at £195m or 341p per share.
|Year-end: December 31||2017||2018||2019E||2020E|
|Adj. PBT (US$m)||(9.9)||(8.9)||(14.5)||(14.9)|
|Net Income (US$m)||(9.9)||(8.9)||(14.5)||(14.9)|
17 July 2019
|Shares in issue||57.3m|
|12 month range||125.0-243.0p|
MaxCyte uses its patented flow electroporation platform to transfect a wide array of cells. Revenues arise from sale and lease of equipment, disposables and licence fees; with an impressive client list. Additionally, a novel mRNA mediated CAR technology, known as CARMA, is being explored in various cancers, including solid tumours.
Mick Cooper PhD
+44 (0) 20 3637 5042
+44 (0) 20 3637 5041
Table of Contents
MaxCyte is continuing to grow strongly with sales increasing by 21% to $8.4m during H119. The number of cell therapy programmes with commercial licences (that include milestone payments) also rose from >35 to >45; this should ensure the current sales momentum is maintained and could accelerate. Key to the company’s success is its leading position in the non-viral cell modification market. To maintain its leadership, MaxCyte launched a new product suite under the ExPERT brand; and the company continues to benefit from the rapid increase in cell therapies in development, and the switch to non-viral modifications of cells. We maintain our valuation at 341p/share.
MaxCyte already had developed a flow electroporation platform with the ability to insert any molecule into any cell, efficiently and reproducibly. This is important as different companies use alternative methods to modify their cell therapies, and MaxCyte’s instruments can serve all of their needs (Exhibit 1).
It was, however, important that MaxCyte’s systems kept pace with the demands of its clients, especially in the dynamic cell therapy field. The ExPERT range has the necessary extra capabilities (eg touch screen controls, bar code reader etc) and has also been designed with lifecycle management in mind. Thus, it can continue to evolve and, over time, MaxCyte intends on adding further platform improvements, such as upstream and/or downstream sample preparation capabilities.
A summary of the ExPERT range and its functionality is detailed in Exhibit 2. The GTx is designed for GMP manufacturing of clinical cell and gene therapies; the STx for drug discovery applications such as protein production and cell-based assay development; and the ATx for academic institutes initiating the development of cell and gene therapies. MaxCyte also produces the VLx for biomanufacturing. Importantly, it is possible to move seamlessly from one instrument to another as products move through the development cycle.
The rapid growth in programmes licensed to use MaxCyte’s systems reflects both the strength of the technology and the favourable market conditions. In 2018, companies developing gene and gene-modified cell therapies raised $9.7bn, an increase of 64% on the previous year. Analysis of clinical trials also showed there were 362 clinical studies being conducted with gene-modified cell therapies in 2018 compared to 259 in 2017 (+40%), while the number of clinical trials with unmodified cell therapies fell 25% to 263 (Exhibit 3).
Among those companies developing gene-modified cell therapies, there is also a move away from viral transduction, currently the most popular method of modifying cells. The reasons why companies are looking at alternatives include:
The switch towards alternative methods, and in particular the adoption of MaxCyte’s technology, is highlighted by Kite Pharma (a Gilead company). Kite is a leader in the field of CAR-T therapies and historically has solely used viral transduction. In November 2018, however, the company entered into a research agreement with MaxCyte to start developing cell therapies modified using flow electroporation; this relationship was expanded in March 2019 by signing a clinical and commercial agreement that covered the development of up to 10 therapies.
The number of cell therapy programmes covered by licences to MaxCyte’s technology has grown rapidly over the last few years, and we are now seeing many of the research agreements transitioning into commercial licences (Exhibit 4). The latter licences are considerably more lucrative to MaxCyte; for example, there is the potential to earn over $250m in milestones from the 35+ programmes, including those from the CRISPR Therapeutics and Precision Biosciences commercial agreements (Exhibit 5).
MaxCyte estimates that the NPV of each programme with a commercial license is on average c $10m at the start of clinical development, after considering the development and commercial risks. It should be noted that not all programmes covered by a commercial licence will enter clinical development. Also, in common with most licensing agreements, the deals are backend-weighted with the most significant potential payments to MaxCyte dependent on the programme becoming a marketed product, as illustrated in Exhibit 6.
The first products using MaxCyte’s systems as an enabling technology are now in clinical development and we expect several more to enter the clinic over the coming years (Exhibit 7). It is also likely that other companies have products that depend on MaxCyte’s technology already in the clinic, but many are cautious about disclosure due to the highly competitive nature of the space.
CARMA is MaxCyte’s proprietary autologous mRNA-based CAR therapy platform, and the lead therapy MCY-M11 entered the clinic in H218 (Exhibit 8). The Phase I trial with MCY-M11 has a dose escalation 3+3 design with intraperitoneal dosing and is progressing as planned. The 1 x 107 dose was well tolerated by the first cohort, which is reassuring for such a novel cell therapy, and the second cohort started enrolling in May (Exhibit 9).
The MCY-M11 Phase I trial is expected to complete in H120 and we also expect that first detailed data from the trial will be published during the same period, providing the first indication of the true potential of the CARMA platform. Having said that, at the Capital Markets Day, Christina Annanziata MD PhD, the Principal Investigator for the current trial, emphasised that CARMA is a true platform technology with broad opportunities, for example by producing CARMA therapies that target more than one protein expressed by tumour cells.
We continue to value MaxCyte at £195m or 341p per share as described in our Update note dated 24 April 2019. Throughout our valuation we use conservative assumptions, and we still value the company at £111m if we exclude the potential of CARMA. This compares to the current market cap of £73m, suggesting the market does not recognise the value of MaxCyte’s core flow electroporation technology, which is a key enabler for so many cell therapies currently in development.
There are no changes to our estimates. We continue to forecast that the company will grow at a CAGR of 21.6% over the next three years, while achieving a gross margin of 88%. We estimate that MaxCyte’s cash position at H119 was $21m following the capital raise of £10m (c $13m gross) in February, which provides a cash runway for operations into H220.
Trinity Delta Research Limited (“TDRL”; firm reference number: 725161), which trades as Trinity Delta, is an appointed representative of Equity Development Limited (“ED”). The contents of this report, which has been prepared by and is the sole responsibility of TDRL, have been reviewed, but not independently verified, by ED which is authorised and regulated by the FCA, and whose reference number is 185325.
ED is acting for TDRL and not for any other person and will not be responsible for providing the protections provided to clients of TDRL nor for advising any other person in connection with the contents of this report and, except to the extent required by applicable law, including the rules of the FCA, owes no duty of care to any other such person. No reliance may be placed on ED for advice or recommendations with respect to the contents of this report and, to the extent it may do so under applicable law, ED makes no representation or warranty to the persons reading this report with regards to the information contained in it.
In the preparation of this report TDRL has used publically available sources and taken reasonable efforts to ensure that the facts stated herein are clear, fair and not misleading, but make no guarantee or warranty as to the accuracy or completeness of the information or opinions contained herein, nor to provide updates should fresh information become available or opinions change.
Any person who is not a relevant person under section of Section 21(2) of the Financial Services & Markets Act 2000 of the United Kingdom should not act or rely on this document or any of its contents. Research on its client companies produced by TDRL is normally commissioned and paid for by those companies themselves (‘issuer financed research’) and as such is not deemed to be independent, as defined by the FCA, but is ‘objective’ in that the authors are stating their own opinions. The report should be considered a marketing communication for purposes of the FCA rules. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and it is not subject to any prohibition on dealing ahead of the dissemination of investment research. TDRL does not hold any positions in any of the companies mentioned in the report, although directors, employees or consultants of TDRL may hold positions in the companies mentioned. TDRL does impose restrictions on personal dealings. TDRL might also provide services to companies mentioned or solicit business from them.
This report is being provided to relevant persons to provide background information about the subject matter of the note. This document does not constitute, nor form part of, and should not be construed as, any offer for sale or purchase of (or solicitation of, or invitation to make any offer to buy or sell) any Securities (which may rise and fall in value). Nor shall it, or any part of it, form the basis of, or be relied on in connection with, any contract or commitment whatsoever. The information that we provide is not intended to be, and should not in any manner whatsoever be, construed as personalised advice. Self-certification by investors can be completed free of charge at www.fisma.org. TDRL, its affiliates, officers, directors and employees, and ED will not be liable for any loss or damage arising from any use of this document, to the maximum extent that the law permits.
Copyright 2019 Trinity Delta Research Limited. All rights reserved.