Sustained FY21 growth with significantly more potential
Update | 6 April 2022
FY21 revenues were up 30% to $33.9m, demonstrating continued robust growth in MaxCyte’s core Cell Therapy and Drug Discovery businesses (+37% to $31.4m), with management guiding to 22-25% core business revenue growth for FY22. Programme-related revenues from Strategic Platform Licences (SPLs) are inherently lumpier ($2.5m received in FY21; c $4m expected for FY22) but should begin to smooth as the frequency and size of milestone receipts increase as the underlying programmes progress through the clinic, driving more significant potential revenue growth from 2023+. End-December 2021 cash of $255m provides ample resources for investment in consolidating and expanding MaxCyte’s leading position in non-viral cell delivery and engineering. Our valuation is £1.06bn ($1.39bn) or 1,050p/$13.64 per share.
|Year-end: December 31||2020||2021||2022E||2023E|
|Adj. PBT (US$m)||(11.8)||(19.1)||(32.7)||(37.0)|
|Net Income (US$m)||(11.8)||(19.1)||(32.7)||(37.0)|
|Adj. EBITDA (US$m)||(7.5)||(8.8)||(22.3)||(25.5)|
6 April 2022
|Price (UK share) (US share)||505.05p|
|Shares in issue||101.5m|
|12 month range|
MaxCyte’s partners use its patented flow electroporation platform to transfect a wide array of cells. Revenues arise from sale and lease of equipment, disposables and licence fees from an impressive client list. Key programmes with several clients are gaining greater visibility and approaching material value-inflections points. These will trigger a stream of milestone fees.
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Following FY21 results, we make a minor adjustment to our sum-of-the-parts valuation model for MaxCyte. Our model includes a three-phase DCF of recurring revenues (revised estimates for the core business impact this), an NPV of potential pre-commercial milestone revenues, and a pipeline rNPV of potential royalties from the most advanced programmes. The updated valuation is £1.06bn ($1.39bn) or 1,050p / $13.64 per share vs £1.06bn ($1.37bn) or 1,045p / $13.58 per share previously. Exhibit 1 provides an overview of our SOTP model: more detail on methodology and underlying assumptions is available in our March 2022 Outlook.
MaxCyte’s FY21 revenue was up 30% to $33.9m (FY20: $26.2m) mainly due to growth in sales and licence of instruments and high-margin disposable sales to cell therapy customers. Cell Therapy revenues grew 46% to $23.0m (FY20: $15.8m). Drug discovery also posted higher revenues, up 18% on FY20 (from $7.1m to $8.4m). Programme-related income from SPLs was $2.5m in FY21 vs $3.3m in FY20 highlighting the continued inter-period variability in individual milestone triggering events. Overall gross margin stood at 89.2% slightly down on FY20 (89.4%) revealing the importance of SPLs to gross margin contribution. Gross profit was $30.4m vs $23.4m in FY20, up 29%.
Operating expenses reflected increased headcount, increased share-based compensation (due to share price appreciation) and costs connected to the August 2021 NASDAQ IPO. Sales and marketing costs rose to $13.0m (+56%, FY20: $8.3m), with G&A up 153% to $18.7m (FY20: $7.4m). Conversely R&D investment reduced to $15.4m vs $17.7m, in a large part due to no material CARMA-related spend being incurred from March 2021 onwards (FY21: $4.3m vs FY20: $11.1m). FY21 net loss was $19.1m vs a net loss of $11.8m in FY20.
At end-December 2021 total cash, cash equivalents and short-term investments were $255m, including c $185m in net IPO proceeds. This provides ample funding for investment across several areas, including R&D, manufacturing, increased headcount, and general working capital and corporate purposes to consolidate and expand MaxCyte’s leading position as an enabling technology for next-generation therapies.
Management has provided initial FY22 guidance of 22-25% core business revenue growth over FY21, and programme related revenue of c $4m. We have updated our FY22 forecasts to reflect this, with changes shown in Exhibit 2.
From a revenue perspective, recurring revenues generated from instrument sales and leases and disposables sales in the core business (Cell Therapy and Drug Discovery) provide a high degree of visibility. MaxCyte has delivered a five-year CAGR (2017-2021) of c 23%, which we believe will be maintained over the coming years given the strong underlying demand for its enabling technologies.
The trend for high levels of capital investment by companies operating in MaxCyte’s target markets, and the development progress into and through the clinic at Cell Therapy partners, underpins our expectation of increased instrument placement and growing use of disposable processing assemblies as existing programmes move into later-stage clinical trials and ultimately are commercialised. Release of new processing assemblies, and planned commercial launch of the VLx large-scale processing platform (released under the ExPERT umbrella in 2021), provide access to new markets (eg bioprocessing), and increase the scalability and speed of manufacturing of clinical trial material for pivotal studies and future commercial supply. As MaxCyte is focusing on generating application data at present, we believe the potential for meaningful revenue generation from the VLx opportunity is from 2024 onwards.
Programme-related revenues will become an increasingly important and fast-growing revenue source in the medium-term. In our March 2022 Outlook we attempted to assess milestone potential over the next 24 months from identified pipeline assets based on SPL partner disclosures. Nevertheless, due to the lack of visibility on precise milestone trigger points and timing of receipts, plus the dependence on programme progress and decisions at SPL partners, we apply a risk-adjustment to these figures and forecast $4m and $7m of programme-related revenues for FY22 and FY23 respectively.
MaxCyte currently has 16 SPLs which represent >$1.25bn of potential pre-commercialisation milestones, with further potential for undisclosed downstream economics post-commercialisation (milestones, royalties, or equivalent). The most advanced SPL programme is CRISPR Therapeutics’ CTX-001, which is on track for first regulatory filings in late-2022 (implying potential for BLA approval in 2023). Thus, first post-commercialisation revenues to MaxCyte are not anticipated until 2024 at the earliest. We note that while pre-commercial SPL economics are broadly similar, post-commercialisation revenues are highly variable, depending largely on the indications addressed (as illustrated in Exhibit 3 overleaf).
MaxCyte has disclosed that approximately 20 SPL pre-milestone events were triggered during 2017-22. Milestone receipts have historically been lumpy, but as the number of SPLs and underlying assets have increased, and with the preclinical and clinical development progress of these pipeline programmes, we expect a smoothing of milestone receipts in future as the number of discrete trigger events grow in frequency. Indeed, management anticipates that the number of milestone events will be substantially higher over the 2022-24 period with total potential of approximately 50. We note that a greater proportion of these events will also trigger larger $ milestones, related to clinical success and/or regulatory approval. Exhibit 4 illustrates the evolution in the composition of total milestone events and our assessment of potential milestone value by stage between 2017-21 and 2022-24. The key take-home message is that MaxCyte is getting nearer to the point when the more significant milestones may start to accrue, and there is potential for meaningful milestone revenue over the coming 24 months.
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