Picking up the pace

Update | 15 January 2019

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MaxCyte saw strong progress on all fronts in H218. There was a marked acceleration in revenues and in new cell therapy licenses, and the first patient was treated with MaxCyte’s wholly-owned CARMA therapy. Sales growth in FY18 was c19% compared to 14% in FY17 following an increase in revenues of c25% in H218. The number of licensed cell therapy programmes has risen by c15 to >70 over the last six months; and commercial licensing agreements were signed with two companies. On top of this, MaxCyte advanced its first CARMA therapy into the clinic; promising results from this trial could lead to the CARMA platform becoming the main value driver for MaxCyte. We have increased our valuation by 11p/share to 358p/share.

Year-end: December 31	2016	2017	2018E	2019E
Sales (US$m)	12.3	14.0	16.7	20.9
Adj. PBT (US$m)	(3.3)	(9.9)	(10.7)	(14.5)
Net Income (US$m)	(3.9)	(9.9)	(10.7)	(14.5)
EPS (USc)	(10.0)	(20.4)	(21.0)	(28.3)
Cash (US$m)	11.7	25.3	14.5	1.1
EBITDA (US$m)	(2.6)	(9.1)	(9.8)	(13.5)

Source: Trinity Delta Note: Adjusted numbers exclude share-based payments and exceptionals.

Acceleration in revenue growth MaxCyte’s trading statement reported that revenues grew by c19% to $16.7m in FY18, which compares to 14.0% in FY17 and 11.6% in H118, after sales increased by c25% in H218. The acceleration in top-line growth has been achieved while still controlling its cost base, with FY18 EBITDA expected to be better than market expectations. This stronger growth reflects the benefits of the marketing strategy evolving over the last 18 months, as well as the continued strong growth in the bioprocessing and cell therapy markets.
Growing base of cell therapy licences An important driver of the sales growth has been increased use in MaxCyte’s flow electroporation technology in cell therapy programmes, generating both license fees and product sales. There are now >70 partnered programmes in cell therapy (vs >55 at H118 and >50 at FY17), of which >35 are licensed for clinical use (vs >25 at H118 and >15 at H117). MaxCyte also signed commercial agreements with CRISPR Therapeutics and Precision BioSciences in H218. Existing cell therapy licences, which include potential milestones of >$250m from commercial licenses, should underpin MaxCyte’s future sales growth.
First clinical data with CARMA due in H119 MaxCyte achieved an important milestone in October 2018 when it dosed the first patient with its lead CARMA therapy, MCY-M11. The primary endpoint of the Phase I study in ovarian cancer and peritoneal mesotheliomas is tolerability, and the first data is expected in H119. However, MaxCyte has already validated that it can manufacture the CAR (chimeric antigen receptor) therapy within 24 hours; in comparison it takes one-to-two weeks for Novartis’ Kymriah and Kite’s Yescarta.
Valuation increased to 358p per share We increase our valuation of MaxCyte by 11p/share to 358p/share or £184m. We have similarly raised our estimates for the coming years to reflect the added momentum within the business and increase in licensed cell therapy programmes. MaxCyte had a cash position of $14.5m on 31 December 2018 and will publish its FY18 results in April 2019.

Update

15 January 2019


Price	189p
Market Cap	£97.0m
Enterprise Value	£87.6m
Shares in issue	51.3m
12 month range	186.5-280p
Free float	70%
Primary exchange	AIM
Other exchanges	NA
Sector	Healthcare
Company Code	MXCT.L

Corporate client	Yes

Company description

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.

Analysts

Mick Cooper PhD
mcooper@trinitydelta.org
+44 (0) 20 3637 5042

Lala Gregorek
lgregorek@trinitydelta.org
+44 20 3637 5041

Valuation and financials

It is clear that MaxCyte’s evolving marketing strategy, which has given the company a stronger presence in key markets and territories, is delivering results. There was the significant acceleration in revenue growth to c25% in H218. As importantly, the number of licensed cell therapy programmes increased by c15 to >70, about ten more programmes now have clinical licenses (>35 in total), and commercial licenses were also signed with CRISPR Therapeutics and Precision BioSciences during the period.

We believe that the broader and deeper base of cell therapy licences will now enable MaxCyte to sustain the 25% growth, seen in H218, into FY19 and maintain growth of over 20% in FY20. This has resulted in our revenue forecasts being updated as shown in Exhibit 1. We have also amended our FY18 estimates to bring them into line with the company’s guidance in its trading update.

Exhibit 1: Summary of changes to estimates

Source: Trinity Delta

As a result of these changes to our estimates, and the improved growth prospects for MaxCyte, we raise our valuation of the company from 347p/share or £177m to 358p/share or £184m. This is made up of 201p/share (£103m) for the core sales-generating business and 157p/share (£81m) for the CARMA platform.

This suggests that current market cap of £97m is more than supported by the sales-generating operations, with the market attributing no value to the CARMA platform. This situation could change quickly if the current Phase I trial with MCY-M11 delivers promising results. The EV of other comparable CAR companies is over $200m, and it is reasonable to believe that the CARMA platform could soon become the main value driver for MaxCyte.

Exhibit 2: Summary of financials

Source: Company, Trinity Delta Note: Adjusted numbers exclude exceptionals. No new commercial licensing deals are included in our forecasts. The short-term debt in FY20 is indicative of the company’s funding requirement.

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